A Al — c/> 1 r - = 20 1 - = JO 1 5 : =^o 1 6 - 5 = — 20 1 1 — 3 m 4 1 4 HON. J. H. WALKER, OF MASSACHUSETTS. TEN YEARS MEMBER OF, EIGHT YEARS FIRST REPUBLICAN NAMED ON, AND FOUR YEARS CHAIRMAN OF COMMITTEE ON BANKING AND CURRENCY, NATIONAL HOUSE OF REPRESENTATIVES. 1898-99. UNIVERSITY OF CALIFORNIA AT LOS ANGELES HON. J. H. WALKER OF MASSACHUSETTS. TEN YEARS .MEMBER OF, EIGHT YEARS FIRST REPUBLICAN NAMED ON, AND FOUR YEARS CHAIRMAN OF COMMITTEE ON BANKING AND CURRENCY, NATIONAL HOUSE OF REPRESENTATIVES. 1898-99. • • * • . • i 4 . . . '. - • . \ • •« :\ • . • 4 5 INDEX. ^ Advisors, Hoard of in=, Agricultural States 140 Aggravated by Remedies Proposed 17 Agricultural States, Loss in 11 Aldrich, Senator 17 Alexander, Hamilton 143 Ambitions in Committee 8 Petty 51 Asset Currency, the People's Money [65 Asset Currency, Safe 143-159 Banks, Agents of Civilization [73 Banks, not Bondholders 104 Bank of England Currency Condemned 132 System 23-13; System bad for us 180 Currency makes panics [85 Prance [32 Germany, etc 45 Germany 23-24 Bank Capital and Cash : v s Money tone lowers interest rates 1 17 " 5% Redemption Fund 164 ' ' Complete in itself 36 ' ' Examinations 1 64 Money vs 4 . Government Money r4(S ' ' Notes made Legal Tender [6 ' " a Preserver of Capital 41 Banks, Wildcat 46 Country reduce Costs to Farmers 174 ' ' Commercial 151 in the Country are Safe ill in State Sound 46 only can legitimately redeem in specie 7 make normal coin redemption 1 1 and gold redemption 39 preserve and increase wealth 41 Saving 151 safe during transitiou [39 united but independent 50 union of necessary 25- 1 v 1 are now united in the U. S. Treasury 13 2 united 36 ' ' with branches 25 ' ' in war 1 55 Banking Bills proposed r Bill needed from 1866 to 1873 152 Complete in itself 36 bunds Deficient in Agricultural Sections 140 Funds in Cities 14' in Agricultural Sections 133 Law National Depopulates the Country districts 150 " office of Principles that are sound 27 Committee, Members, Object sought s System built up from the bottom J5 and Financial Journal, London, on Crisis of 1890 2; a Natural Development a Natural Right 1 45 Balance of trade and Gold , $9 of trade 54 215 ii INPI.X. Baltimore Plan 4 ard Bauki: in 22 Baring Brothers' Panic 23-24 Brothers' Bond 2 4 Bill Bridge in Sections • : > n " How Agreed upon 1 141 1, Wrongfully Referred -" Hili Fowler. 8 withdrawn 9 Bills Imperical — offend sound hanking principles and sound econom- ics 22-129-175 Board of Advise- - l6 5 Bond Issue of 1898 2 ° Bon Is, Price of and Currency 2 ' 8 U. S., Use of 44 Branch Banks '7- vas Back and Terrapin Facts '7 Champagne Arguments '7 Capital and Banking '5 1 Chain Endless 49 Challenge Criticism I 7~3 1 Change in Opinion 45 Chicago Banking and Financial Journal 23 City Banks favored in Bonds Required 170-172 Favored lftl vs. Country Banks '5° Cities Built up by the Country 15° City B j .nks Issue Little Currency '4 1 favored 44 cannot issue Currency 49~5° City and Country Banks 45 Clearing Houses ID2 in Worcester, Massachusetts 239 By-Laws, of 284 and Treasurv Conditions 167 New York . .' 131 International 53 Comptroller Kckles' Report 6 of Currency, Office of Abolished 168 Coinage, weights and measure Committee, pledged 22 Committee, Members of, Treated Unjustly 15 Pledged ' 14-16-22 Contraction of Currency 165 Connecticut Banking Law 149 Conant, Hon. Charles A 8 Congressional Wisdom, Prejudice and Ignorance 51 Country Banks reduce Costs 174 Discriminated against 170 safe 144 oppressed 44~49 Commerce and Gold 38 Currency issued in ratio to Capital in Germany, France, etc 45 issuing a natural right 145 not guaranteed 49 made legal tender 48 must be issued by Banks 7 Expansion 165 ami Deposits identical 44 Tries Banks 36 title to products 52 unsecured 47 Redemption 168 niel come to Judgment 13 eal of Walker 3 I defeating Congressmen by Hauna 11-12 ad Bank Currency Identical 44 Disaster and Panic 22 Division of Treasury Funds 47 IM> Ill Discussion, what the people say in 177 Doubt : 1" Dynamite political in Financial Questions 29 Economic Principles of, Violated (75 Economics Unsound '• • ■ ■ Eckles, Son. James II., 3 6 " Reports 5 England, Amount of Money in 37 Endless Chain 49-'59 Evils are Fundamental 47 Exporting Gold 5 2 Pairchilds, Hon. ('. S., Ex. Sec. of Treasury 36 A.sst 1 Currency the Best 210 Bank Currency as safe as Bond Currency 219 " loses Interest on Bond Secured Currency 217 Banks lose equivalent of interest on every dollar of our paper money 207 protect Borrowers in Panic 220-225 Sustain the Treasury 206 Banking Free 189 Bill so drawn as to regulate price of bonds 225 Bond Secured Currency uses up Bank Capital 213 Bonds, price of, Control volume of Currency 218 Changes as few as possible 1 89 Chain Endless 199 Currency against Assets as safe as Bond Currency 219 cheap 189 " Discrimination by the Government against any kind injurious 190 " Certificates of Deposit to the farmers 215 " secured by Bonds increase Interest rates, Hard- ships on Farmers Checks Enterprise 215 Present Bank, a freak currency 219 a first lieu on a set safe 221 our System worst in World 219 Tax on, Bad 217 End less Chain necessary 198-199 Farming Sections should be Considered 189 Gold in Banks is safe for current Redemption 198 " visible per capital 207-208 " cannot be gotten by the people 201 " " must be exchanged for silver 199-200 " Protected by depreciating the price of Bonds. . 195-196 " Redemption by Banks not Required 202 " Redemption required by Banks uuadvisable 190 " requi red 209 Government should not discriminate for Gold in the Law 190 " Inter-indebtedness of the people Evidence of Prosperity . 226 Interest Rates Reduced by Eliminating Bonds 217 Legal Tender Notes Assumed by Banks 203 Parity maintaining by Banks costs them Nothing an Expense to the Treasury 205 Redemption should be in any Lawful Money 190 Silver Certificates to be under ten dollars to Protect Gold " Silver will go into Banks and then into the Treasury ...202 True Bank Currency 210 Facts from Canvas Back and Terrapin 17 Failure, A Miserable Farmer Oppressed 4 ' Fear 210 Financial Chronical of New York 21 Financial 1 lynamite Wisdom of Hill-Fowler Bill Franco-Prussian War 155 France, Volume of Money in iv 1X1 '1 K. French Banking 23-132 Hank. Salvation of Prance in War '5° Free Banking 3» (.;r_r«', Hon. L. J., Secretary of Treasury. Agricultural Communities need Small Hanks 223 Agricultural Loans best in the World 223 Asset Currency the best -' '" Gold Redemption by Banks impracticable under present law 129 Banks in assuming greenbacks is actually redeemed by the borrowers 212 a title to products 21 ' Depositors would not object to first lien for asset currency. .224 Endless Chain necessary 198-199 Farming Sections should be favored ■ • • ■ ■ • 189 Gold must be controlled by the Treasury in order to maintain Parity, under present law ■' " Gold must be obtainable by the people 19° " is protected by depreciating the price of bonds 195-196 •• redemption immediate is necessary 196 " redemption is now by the Treasury either directly or indirectly i9 2 -'93 " Redemption by Banks not practical under present law . . 189 Legal tender notes assumed by Hanks cost them nothing 204 made Gold Certificates 200 Parity cannot be maintained unless Government controls gold, under present law '9" Products, Currency a little to 211 Redemption in silver by Banks is now lawful 194 Treasury always gets the poorest money in hard times. . . 193-194 cannot demand gold of Banks 191 must redeem all paper and silver money in gold, directly or indirectly '9 2 must control gold to maintain parity 190 must be ready to pay gold for silver or paper 191 True Bank currency the best 210 Walker Bill, the French and German system 213 " " scientific and safe 220 German Money, Volume of 37 Gold, Amount needed 4 2 " Export and Import 39 Excess of 35 I low protected 38 How used 5 ' Increased under Suspension I" Popular Theories of, Erroneous 55 Problem of the Future 54 Massed in one Place Necessary for Safety » • . 139 Measures Value, How " 55 Movement of, caused by, etc 55 in normal contact with currency 4° Reserve protected 166 Amount required excessive 169 Redemption would all be by country Banks 170 for Redemption 38 redemption by Banks 39 scarcely moves at all 52 standard, we have it now 35 Shipments 53 Amount visible 37~4 2 '69 ( .cr man Banking 23-24 .-eminent a Consumer of Wealth 41 Money, Amount of 42 [NDEX. V Go\ ernraent Money vs. Bank money i K> Money increases interest rates .147 Greenbacks to be destroyed 132 i 12 15 as a prophet 17 ( Guaranteed Currency 162 ( rutherage, Jules ,s Manila, H. II. 16 ch cular '" Hand not seen 11 Lobby 7-17 for Senator < 7 Hill, Hon. E. J., 9-20-18 Imagination of 20 Hill-Fowler Bill 8 " and Hanua 10 Asset-Currency [60 vs. Walker Bill 157-175 Bill unpopular [76 vs. Walker Bill, Analysis by subjects 256 Independent Local Banks, are Educators 17; Indianapolis Commission 6 " Lobby to ride the Republican Party 17 Imagination of Mr. Hill 20 Impossible Things (9 Imports of Gold 52 Industrial System Imperilled 40 Injustice to Country People 149 Interest Increase, How ■ 26 4 1 in Country'Districts now Double normal rates [34 Reduced.' 138 " rates lower 144 1 11 vestigation, patient 31 Knox, J. J., Ex-Comptroller 6 Legal Tender Notes 47 " Destroyed 132 Notes Retired 48 Kept 161 Tender Notes Assumed 171 " taken under W. & H.-E. Bills 227 Legislation bad, Resisted 50 Loans to Capital and Deposits [43 Letters to Committee 1 s Lobby, H. 11. Hauna 9—1 7 Loss to the People, how made 42 Local Independent Banks, Educators 17; Maine Banking Law 149 Massachusetts Banking Law [49 McClary, Hon. .T. T 9-10 Measuring Value done by Banks only .' 39 Members old do not pledge themselves without Examination 15 Minority Report Monetary Panics, how begun 52 Money, Volume of, in circulation New Hampshire banking Law i4u National Bank Act Oppressive 5 Natural Right, Banking a 145 Necessary, What is, to reform [29 ( tbstacles to Financial Reform 5 ( Oppresses the Parmer 11 < tpiuionsof National Banking Law changed IS Parity Maintaining by Banks 7-36 ran only be legitimately maintained by Banks 38 The Duty of Maintaining is Indivisible 40 41 Maintained 130 Party Pledges not Broken 50 Panic and Disaster 23 40 " of l8 93 24-155 v i i m > !■: X . Panic would b< I by 17 er Money, what is it 1° Amount of 1 5° People are educated t<> a guaranteed currency 161 Peril of our Industries 4° Petitions of [50 Republicans '4 Personal ('.lory seeking 3 1 Pet Bank Measure- Plain people helped '7 s Pledged the Committee before they were appointed 14-16 Pledges, Republican J " Popular Discussion, a -ample of '77 Products and paper money 4" Pi ejudices uot offended '74 Prologue vs. performance [ 75 sent Law and Walker Bill '45 Protecting Gold 3° Providence Journal 3 Rates of Interest 26 Reasons for Report 21-22 Redemption by Banks 7 in Specie by Banks a Natural Function 1 1 of Currency ' ,,s Referees, A Safe way of appointing ID Reform cles to 5 What is necessary to l2 9 in Sections 5° Remedy of Evils 4° Remedies that Aggravate the Situation 17 Report 1575. Minority ' 2 9 Republican, Petition to Speaker M Republicans to be Saddled with Hanna Lobby and Bill 17 Republican Measure, not a 21-22 Reserve, use of 1o 5 Resumption of Specie Payments unnecessarily delayed for 10 years. . 153 Rhode Island Bank Law 149 Robbery of the People 29 Ruling of Chairman, on Banking Bills 20 Safety of Bank asset Currency H3 Sergeant at Arms very useful 4 Savings Banks 15 1 Scientific System, not a 4 1 Sherman, lion. John 5 Silver, Amount of, needed 4 2 " " that would be paid into Banks 49 Demonetized 47 _r 33 Dollars redeemed in Gold 4^ " and Gold Redemption Hallucination 171 Redemption in < ".old 132 Sound Banking Principles 27 South and West Robbed of Banking Funds 174 Speaker Reed Criticised 15 Statesmanship 35 State Banks 46 Sub-Treasury system original, obsolete and already gone 153 Evils of '. 154 Suffolk Bank System 147 Table of Banking Examples, under each bill 135 " funds, items of 223 per capital i860- 1 897 234 lack of, in Agricultural States 235-237 Bank Losses in City and Country 143 Bonds, Price of and the amount of Currency influenced by ... 218 Capital, absorption of, by bonds 145-230 Country and City Banks 135 of loanable funds in bond currency 7 148 mi City and Country Hanks 143 Country Banks, against the 239 'KX. VII Table of Currency, Amount of, provided for 163 Existing '5 s Profit on Currency at 6% rates under various Hills 230 in Hill-Fowler Bill at \% to \<<\. 231 in McClary Bill, 4% to 10^ 232 in Walker Bill 230 U. S. Sub-Treasury 253 Census Valuation in [861 1 238 Taylor, Judge Robert S., Bond Secured currency tak «tal away from Banks Currency Certificates issued against coin contradicts the whole theory of coinage 222 Currency, How issued, a matter of indifference to the people. 223 Legal tender notes, the keeping of, is a patriotic instinct • • .223 Treasury must sell bonds for gold necessarily Taxes on Country Banks 49 Tax on Currency a hardship T 7 Ten dollar limit objectionable ! s Things that cannot be done 47 Toadstools vs. mushrooms Treasury funds divided '55 Division of 47 Embarrassment of, Increased I s in had Condition 155 must redeem all money 4°~48 and New York Clearing Mouse '3 T would not be relieved 166 How recouped '°- Sub-, list of 253 Transition of Ranks 139 " made in Safety 164 Trade, Balance of 54 Trust Com panies, etc ' 5 ' Unanimous consent granted 3 1 Union of Banks 36 Walker, an obstacle to Reform 4 vociferates in Committee when not in Washington 4 ' ' and the Comptroller 5 Bill when first introduced 5 protecting the present law 6 in Indianapolis Convention 6 Commendation of, forbidden 7 ready to accept any bill 7 Abused 7 Bill never formally considered in Committee 7 Defeat of ' 3 -11 Hour principles he stood for like a rock 8 ''.ill vs. Hill-Fowler bill " and Present Law '45 " not intricate r 53 " 10,339 240 " [0,333 2 4* " a popular measure 130 " and Hill Fowler bill compared by subjects 256 Walker's work in 51SI Congress 6 Walker liiil l o,;$.i!) 240 " Bank Examination, Section 4 241 Bonds taken out of Banking, Section 1 240 Parity penalty tax, Sections 2 and 3 241 Redemption fund in Specie, Section 2 240 l o,:v,i.i 211 Advisors to the Comptroller n 9 245 Appeals may be made from Comptroller to Advisors, Sec- tion 9 246 Banks of $25,000 allowed. Section 1 2|i Certificates, silver and gold, Cancelled, Section 8 245 Clearing Houses all Incorporated, Section 10 247 I louse, National, Section 10 246 vin IND1 X. Walker Hill Clearing House, Nation.il Board ol Directors of, Sec- : Clearing Houses \<< Redeem Bank Currency, Section ro • maybe Fiscal Agents, Section m 247 Comptroller. Who are his legal Advisors, Section 9 245 Currency. Amount of, Hanks may take. Serti"ii 3 first lien on Bank Assets, Section 15 251 Bxpert Advisors to Comptroller, Section ., 245 Gold set asi. .B. BSBB.L Page 20. IBun. J. T. W€(LEAK1 .Page 0. SPEECH OK HON. JOSEPH H. WALKER OF MASSACHUSETTS, ]\ THE HOUSE OF REPRESENTATIVES, FRIDAY, MARCH 3, 1899. WASHINGTON". 1899. Banking and Currency. SPEECH OF II OX. JOSEPH IT. WALKER, On the financial, banking, and currency question, the history and present iii ion, etc., of the reform of our Treasury— Mr. WALKER of Massachusetts said: Mr. Speaker: I must claim the indulgence of the House m re than ever before, for I have a cold so severe that I can hardly articulate, and am otherwise indisposed. I wish alter occupying thirty minutes to be notified, that I may yield twenty minutes to auyone who desires to reply; and then I will occupy the otherten minutes, making the hour, of course subject to interruptions at any time by privileged reports or questions. Mr. Speaker, the time has come when my own self-respect, a decent regard for the opinions of my associates on this floor, my duty to the House, to the country, and to the j>reat cause of Treas- ury, banking, and currency reform requires me to speak in the discharge of the great duties committed to me in the commissi n I received from the House through the Speaker in my appoint- ment as chairman of the Committee on Banking and Currency four years ago. and ten years ago as a member on that committee. It so happens that gentlemen with pet measures have been carried away by their enthusiasm to do and say many things wholly un- worthy of them, and many of them without any foundation in fa- t. I will send to the desk and ask to have read one or two extracts from newspapers. The Clerk read the extracts, as follows: [Worcester Gazette, January 86 1899.] AN OBSTACLE TO CURRENCY REFORM. [From the Providence Journal.] Now that the Hon. Joseph Walker, though a sound money man, is appearing in company with the silverites in opposition to cur- rency reform measures before the House committee, we may fi el a new satisfaction thai he was not returned to the next Congri — As a private citizen he may exploit his currency idiosync; without much harm to anybody; as a Member of the House he was an obstacle to the consummation of currency reform. [Now York Evening Pest, January 3, 1899. 1 Mr. Walker of Massachusetts is a man who is always "on the off side.*' A professed friend of currency reform, he has. by his "crankiness," done more to thwart progress than any silverite in the House, and it will be a great gain for the cause of sound legis- 3 lation when ho surrenders bis seat to the gold-standard Demo at him for reelection last fall. . York Evening Post, January :?t, 1899.] THE CURRENCY-REFORM MUDDLE— TWO HOUSE COMMITTEES NOW .1 im; FOR < "NTROL OF THE QUESTION — PROSPECTS FOR ARE VERY FAINT. Washington, January 28, 1S99. The currency reform situation in Congress is assuming a phase that is almost farcical. A meeting of the committee was called to consider Mr. Van Voorhis'sbill. The result was something like a ward caucus. Every tneml er who has a bill of his own began to aim npon its merits, while Chairman Walker vociferated that the Walker bill was the only currency measure worth considering, and that all the others were humbugs, brandishing meanwhile the report he made last session, and challenging the whole world to controvert its arguments. When the hour for adjournment was reached, it turned out that the whole session bad been consumed in a noisy debate, and that no action whatever had been taken. MR. WALKER NOT IN WASHINGTON. Now. Mr. Speaker, the last extract was not from a regular cor- respondent, but a visitor in Washington not specially favorable to the Indianapolis Commission or to the bill prepared by it, or to any hill in the committee. But it shows the atmosphere of this Capitol, pervading the whole of it, toward me and my attitude rd this great reform that I inaugurated ten years ago, and for four years was the only advocate of in this broad country until the Baltimore plan was formulated on October 11, 1894. That gentle- man simply observed this attitude toward me as he came into the atmosphere of the corridors and in the House. Not only was his statement untrue, but I was not even in the city at the time. I was in New York on the very day that he said I was guilty of the practices and of the things that are there de- scribed. It is not to me they should be ascribed. 1 do not call him to account; I do not say that he is not a thoroughly honest man. I believe that had I myself or my nearest friend come to Washington, as be did, to investigate the situation, I should have written practically the same libelous things. Let me call the attention of this House to the membership of the committee. They will remember that the gentleman from Connecticut [Mr. liu.i.) is a member of that committee; that the gentleman from Indiana [Mr. Johnson | is also a member, and the gentleman from Tennessee I Mr. Cox] is a member and wants his full rights, and this while it has no Sergeant-at-Arms, who renders such efficient assistance in debate to some members on this floor. Mr. COX. That is what I am going to have. Mr. WALKER of Massachusetts (continuing). I would like to know whether order can be maintained. There has been a purpose to make it appear that the reason why measures referred to that c niinittee have not succeeded was because the chairman of the imittee was the unreasoning obstacle. Let us review the situa- tion. FJItST STF.r.S FOB BANKING AND CURRENCY REFORM. I was elected to this House in 1888. I had written a little mon- ograph on '-Money, Trade, and Banking." When I found I was 1 took that up and read itcarefully, until I came to the de- scription of national banks. Remembering that I had struggled 3812 longer to justify the present organization of the national banks than any other thing in the" book,] looked it over again, and be- fore entering this House in December, i ss '.t. I had made up my mind that the national-bank law was more oppressive, unjust, and del( terious legislation to the country than all other laws on the national statute hook put together. After the committees were appointed in January. T weni to the chairman of the committee, the Hon. George W. E. Dorsey, of Nebraska, andstated my views on thequestion, and urged that the duty rested upon him to prepare a bill that should reform the in- equalities, that .should release us from the robbery that is being perpetrated, especially upon the farming and sparsely settled dis- tricts of the country. I talked with him several times, but failed to impr< ss him with the importance of the measure. I then went to the Hon. John Sherman, then a member of the Finance Committee of the Senate, whose acquaintance 1 had made. I had received fr mi him and sent him many articles and speeches on the question of banking and currency, and always visited him when in Wash- ington. I tried to interest him in this great reform. He replied that the bonds were being rapidly paid, and that it was a great task to legislate so as to still continue the great national banking sys- tem; that he saw no relief: that we probably must give up the national banking system and go back to State banks. I suggested to him that I did not think that was at all neces- sary; that the national system could be easily saved without bonds: but he declined, saying that he was unwilling to under- take that great task. And no wonder. The obstacles that con- fronted Alexander Hamilton and Albert Gallatin when we inau- gurated our Government, or John Locke and Sir Isaac Newton in England in reforming her money, etc.. were not a tithe of what confronts any man who wdl undertake the task here. We have a sound currency in that all the money is kept at i ar. Ours wascon- fessedly unsound in 1792, as was England's in Locke's time. Its fault is in being fearfully wasteful and also promotive of panics and industrial depressions. Therefore the first duty that this country i >ught to attend to, when the people will allow us to do it, is to reform its treasury, banking, and currency system. A REMEDY OFFERED. Upon the request of the chairman of the committee, Mr. Dorsey, I commenced this great ta-k alone and wrote a bill. I never yet, boy or man. have criticised any existing condition of things or measure without offering a remedy. And until I am ready to offer a remedy 1 will not do so. According to my notion, it is not honorable for a man to find fault who can not or will not under- take to suggest a remedy for the evil he deprecates. I introduced it in the House on April 1, 18110. From that day I have continued to study, work upon, change, and improve that bill to the present time, and it is now H. R. 1(J:J:J:!. GROWTH or Tin: REPORT or THE COMPTROLLER OF THE I URRENCT. Not only that, but I want to say to this House that I have not only worked night and day upon this great reform, but the day 1 entered Congress that [holding up a book] was the whole of the firsl volume of the Report of the Comptroller of the Currency :; o pages— and that had been very largely increased in size -iii»l in tin- Pacts presented by my solicitation of Eacts from the Comptroller of the Currency and of information on this great question long be- 3812 fore I was a mi mber of this House, which the Department then conhl nut furnish. It was through my solicitation and sugges- tion, writing to Hon. John J. Knox, that the first reports of the daily bank clearings were published some twenty or more years If there has been any additional information comprised in any of t ; ! nines that has not largely grown out of my sug- Lons I am not aware of it. The report for 1898 contains 812 pages. There are no reports published by any government on the face of the earth that ap- proach ours in fullness, accuracy, and importance. From the time Mr. Eckels came into the Department until he went out of it we were in continual conference. He held one report back for a month in order to furnish in it many pages of what I solicited that all other men interested in the subject might have the advantage of it. If Mr. Eckels claims every improvement that has been made in that report during the four years he was in office, it does not rest with me to say that he is not fully entitled to the credit; and if he should say that I am entitled to very much of it, it does not lie with me to deny it. When two men are in as close association in the study of great problems and in publishing the results as we were, a matter of this kind is of no importance, will not find me alluded to anywhere in these reports, for I have always requested that I he given no credit for anything, to avoid prejudice. I do not want any especial credit, but I do want the facts, and true, not bogus, reform in the interests of my coun- try. WORK IN THE FIFTY-FIRST CONGRESS. Mr. Speaker, what do you suppose has occupied the time of the chairman of the Committee on Banking and Currency'.'' During the whole of the Fifty-first Congress I rarely went to my bed till 1 or 2 o'clock in the morning, for I was also on the Committee on Coinage, Weights, and Measures, and the silver question was then rampant. I spent all my time, as everybody acquainted with me knows, either at my home or in the committee room or on this floor, engaged in the study and discussion of these questions, hardly allowing myself the slightest amusement, in my intense eagerness to work out some substantial results. The duty with which 1 was charged by the Speaker of this House and by this House was first of all to protect and preserve the laws we have-not to improve them, but to protect and pre- serve them — to see to it that no change wa3 recommended to this House by the committee which would not incontestably improve and not deteriorate the laws of my country. That has been my principal occupation for the whole ten years. From the time five years ago, when the public first became interested in these ques- tions, and up to now hundreds upon hundreds of communications have poured in upon me. I must read every one of them. I must give an intelligent answer. I must tell the why and where- fore if I would further this great reform. It was not enough to say I i i a man that his scheme was not practical. He should know why it was not practical, so that ho might be educated himself and educate his neighbors as to what was practical. TREATMENT BY THE INDIANAPOLIS COMMISSION. The real reason for the treatment I have received since the ap- point incut of the Indianapolis commission is known, I believe, to e bul myself. The convention met January 12, 1897. Mr. Speaker, I want to read here the words that I took down from the lips of a man who was sent to Washington to invi gate and report upon the prospects of currency reform, for tlie purpose of seeing what progress had been made and what the promise was for the future. Ho said he was instructed " not to send any matter in any way complimentary of what Mr. W \i.kf.r of Massachusetts might say or do in connection with it. for they did not approve of his course in not working with the Indianap- olis commission." I [e further said to me that I "might have had a great career as a financial reformer ou the floor of the House of Representatives if 1 had not been so strenuous in support of my own bill." WILL ACCEPT ANV SOUND BII.T,. Now, sir, I challenge any member on this floor to find a solitary word that 1 have ever said on the floor of the House, or in the committee, or in private conversation, or in the 'thousands upon thousands of letters that I have written or interviews given upon the subject, that did not go to the point absolutely, that I would support any hill that anyhody would prepare and present which would correct, in the first place, the injustice of forcing upon the 1 nitcd States Treasury the burden of maintaining parity of all of our currency and pul t lie maintenance of the parity between our metallic currency and paper money with gold, on the banks of the country where it is put in all other parts of the world and so re- lieve the people of its cost, which is a great injustice. This cost is some $70,000,000, directly and indirectly. This duty must be put upon the banks, the only power known to man that can main- tain parity without cost. Again, in the second place, the banks must be permitted to issue true bank currency that will be available for all purposes, and es- pecially a money f or use in the outlying farming districts of the country; and, thirdly, to place a small tax upon currency for the purpose of raising a fund to guarantee by the Government with- out loss, every dollar issued by the Government to the banks. Not only that, Mr. Speaker, but I have offered, and will offer here and now, to give §1,000 to any benevolent society in any part of the country if any man will write a bill that will be more com- prehensive, more thoroughly in accordance with true economic principles and sound banking principles, more easily understood, and that will accomplish the four things which I have suggested — viz, relieve the Treasury of maintaining parity by putting that duty on banks, unite all banks to do it, allow banks to issue true bank currency, and guarantee that currency by the < Jovemment— better than the bill that 1 present. As I have said hundreds of times, 1 have no pride of opinion in the matter. I was willing to accept a good bill, come from whore it might. I was willing to do this, not because I believe the bill I have presented is not a good one, but for the purpose of relieving myself of the abuse which had been heaped upon me for adhering to fundamental banking principles and trying to do what I believed to be right. In the four years that 1 nave been the chairman of i he Commit- tee on Banking and Currency I have not detained that committee, according to my remembrance, but a single day, and that inform- ally presenting the bill thai I had drawn, and in explaining it. I have never had it formally before the committee. mi;. ii \\ \ v ami i in: LOBBY. Mr, Speaker. I want to say a word or two in reference to the Indianapolis commission. 1 wish to speak freely upon it, and also 8812 with reference to the chairman of the committee, Mr. Ilanna, as well asof the extra persistent lobbyists they have employed about the Capitol. Let me say, to begin with, that I have never met a man who impressed me more favorably than Mr. H. H. Hanna, of Indiana. I do not think I have ever met one who impressed me more forcibly as to his integrity and intensity of purpose to ac- complish a form than he. I shall certainly indulge in no unnecessary personal criticism of him. I want to say, also, that the two gentlemen he employs about the Capitol to secure reform legislation in banking and cuiTency also impressed me most favorably. Mr. Jules Guthridge, one of the gentlemen to whom I refer, is one of the very best friends I have had from the time I came to Congress to the present time. He is a man who would knowingly do no injustice to anyone. The other gentleman, Mr. Conant.is of the same character" and what I have said of the other gentleman is true of him. He has the additional qualification of knowing a great deal on the question at issue. But Mr. Hanna has told me repeatedly that he knew absolutely nothing on the question personally as an expert. Mr. Guthridge makes no pretense to a special knowledge of finance or banking. Of course there has been no design upon their part to do me injustice, but as I have stood like a rock for the four principles fundamental to this great reform and in oppo- sition to every measure that did not recognize them, and have suc- ceeded in defeating them, it was inevitable that all adverse criti- cism should fall on me. WHAT HAPPENED IX TnK BANKING AXD CURRENCY COMMITTEE. Of course the frailties of human nature as well as its virtues have been recognized in the members of the committee, as they are in all bodies of men. Of the seventeen members of the Committee on Banking and Curr.-ncy five were of the minority and soon excluded. Four wanted no general legislation. Three were ready to vote for any general bill. Four sought places on the committee, each to ride his hobby to the front. One scon tumbled off; one finally got off. One more clambered on a hobby found for him, making three that were in at the death. The chairman consistently held to the four principles funda- mental to any legislation looking to any improvement in our finan- cial, banking, and currency situation, viz: First. To relieve the United States Treasury of any responsi- bility for current redemption of any form of paper money. Second. The putting of the maintenance of parity on the banks. Third. Uniting the banks in order to enable them to maintain parity. Fourth. Allowing the banks to issue true bank currency. Proclaiming his willingness to support any bill drawn" by any man that made sure the doing of these four things, he has as steadily refused to support any bill that would make confusion worse confounded, as every general bill the committee has yet formally considered surely would. II. R. 10280 KKPORTED WITHOUT AUTHORITY. The voting began on the bill (H. R. lOOS'J) that was finally y reported to the House on the 11th of May, but was never completed. On June 13 it was, without authority, re- ported to the House. Mr. HILL. Mr. Speaker, in order to relieve the gentleman from 9 Massachusetts from any embarrassment, I shall necessarily feel called upon to make a point of order that any proceedings of the committee are not to be revealed in the I louse. Now, I have not slightest objection to the < !hair overruling that point of order, because I want to violate it myself, if necessary. Mr. WALEEE of Massachusetts. I hope this will not come out of my time. The SPEAKER pro tempore. The gentleman from Massachu- setts lias the floor. Mr. WALKER of Massachusetts. The order under which I am speaking gives me authority to go into all the history of this re- form, in the committee and out. MR. M'CI.EAUY WANTED HIS NAME ON THE IULIj. Mr. Speaker, when H. R. 10389 was completed, against the earnest protest of the chairman, who tried his best to induce the Ci uiiniittee to allow the honorable gentleman from Minnesota | Mr. M< ( 'i.kary] to put his name on the bill, the committee, under the lead of the honorable gentleman from Connecticut [Mr. Hill] directed the chairman to introduce the bill into the House as an original measure and upon the ground that it was a committee bill. Some declared that they would not support the bill on the floor of the House if it had the name of the honorable gentleman from Minnesota [Mr. McCleary) upon it, giving as a reason that '•there was not a single substantive proposition in the bill origi- nated by him,"' so that not even the name of Mr. McCleary ap- pears, who very much desired that his name should go on the bill, but instead the name of Mr. Walker, who protested against his name going on the bill he was so much opposed to. The action of the honorable gentleman from Connecticut [Mr. Hill] and the honorable gentleman from Minnesota [Mr. Mo- Cleary], in forcing H. R. 10289 out of the committee and on to the Calendar of the House, on June 15, 1898, was so indefensible that the honorable gentleman from Minnesota himself made a motion at the meeting of the committee on June 24, 1898, that the bill be withdrawn from the House, which motion was adopted without a dissenting vote, but instead of doing so, by the advice of the honorable gentleman from Connecticut [Mr. Hill] and the lobby of Mr. Hanna, he did not withdraw the bill until again directed to do so seven months after, and again by a unanimous vote of the committee, passed on January 11, 1899. He then de- layed it as long as possible, until January 17. SIX SUPPORTERS OUT OP SEVENTEEN MEMBERS. On January 18 the friends of the bill could only rally votes out of 17 on the motion to favorably report the bill. The unwar- ranted action in reporting the bill to the House on June 1"), 1898, for which the gentleman from Connecticut [Mr. Hill] and the gentleman from Minnesota (Mr. McCleary | were principally responsible, together with the unwarranted statements or the Hanna lobby as to its being rightfully before the House and of its "having the support of a majority of the committee." determined those who were known to the lobby and to every member of the committee to be opposed to the bill, but who proposed to assist in g( i ting the bill before the House for discn i withdraw even that action, which left only the vote of its suppi irters, G out of 17, in favor of the bill. BBU 10 MEMDEIis who IMMORTALIZED THEIR NAMES ON BANKING BILLS. So this old world wags, and man suffers. By one of those unlooked-for and inexplicable but common disasters in the tide of human affairs, the honorable gentleman from Minnesota [Mr. M( < 'it \ky | is left solitary and alone. While the honorable gen- tleman fr-iin Connecticut [Mr. Hill' and the honorable gentle- man from New York [Mr. Mitchell' . by culling bills from those prepared by i ithermen, have attained their great ambition, and their onalities will stand foreverruore high in the temple of fame, by having their names written on the front of bills favorably re- ported to the House, to die on the Calendar with their merits un- sung, the honorable gentleman from Minnesota [Mr. McCleary], equally persistent and deserving, is compelled to return to his constituents with the embarrassments of the campaign of 1898 still attending him in being unable to say on the stump, " Now, ladies and gentlemen. I will address you a few words on a banking bill that hapj. ens to bear my name." This is not the fault of the chairman, for I struggh d hard to keep my name off and put his name on the bad bill that has been erroneously and unfairly called the McCleary bill. Mr. ( '< >X. Mr. Speaker Mr. WALKER of Massachusetts. I decline to be interrupted. Tin SPEAKER pro tempore. Does the gentleman from Massa- chusetts > it-id to the gentleman from Tennessee? Mr. WALKER of Massachusetts. I decline to be interrupted by the gentleman from Tennessee. Mr. C( )X. 1 should like to put a question to him. If he is go- ing to tell what the committee did, 1 want a chance to tell what committee did. Mr. WALKER of Massachusetts. I decline to yield. The gen- tleman made his speech yesterday. Mr. Speaker, I wish to say Mr. ('< )X. If the gentleman will pardon me Mr. WALKER of Massachusetts. No; I will not "pardon" him for a moment, if it is to come out of my time. If I can have the time gentlemen can interrupt me as much as they like, and I will then invite interruption. Every man who was a member of the Indianapolis commission knew within twenty-four hours after that bill was reported to this House that it was irregularly reported. They knew that a member of the committee [Mr. McCleary] was, by unanimous vote, di- rected to withdraw it from the House. They knew, furthermore, that it was not reported, even in the irregular manner in which it was reported, approved of by a majority of that committee. They knew that there were only 7 persons out of 17 who made any pretense of a purpose to support that bill on this floor. Knowing the fact, t he circular which I, with others who were in the Indianapolis convention, received makes the following state- ment: CIRCULAR I.l'.TTIK OP II. II. HANNA, JULY 16, 1808. " The result obtained in agreement < >n the part of the majority 7 of this committee was only accomplish! d after very thorough and austive labor. •Tin bill reported by the committee is a greater step in the right direction than the business men of the country had reason to ex- would be secured at this early stage in the progress of the work. 'To measure the present condition it is only necessary to say that very reasi m to believe that the President and all thelead- 11 ing Administration Republican Senators and Congressmen and the L50 m imbers of the Eouse who signed the petition qow stand united in support of the general principles of the committee's bill." This statement as to the President is very remarkable. Not the slightest warrant for any such statement has yet been presented to the people. Again Mr. Hanna says in his remarkable letter: Plans will lio formulated In due time in order that the busini >t the country may supplement the regular organization for work in the weak letr- islat i r Aha ! Why should not every member of Congress who desired reelection support the Hanna bill by adoption i II. I;. 10289) when theyknowtherewas$50,000,$l00,00 l.perha 000, behind their n'. j Chairman Walker's four principles of reform em- bodii din a bill had only "a conscience void of offense " in allegiance to solid truth, behind them. Mr. Hanna promises them not only the Congressional life that now is, but that which is to come, as a reward lor their vote; any supporter of Mr. Walker's bill, de- feat, perhaps. Where a man did not pledge himself to support the bill fH. R. 10289)", so far as my information goes, his defeat was desired by Mr. Hanna, as is shown by the extracts from the letters read. REJOICED IN WALKER'S DEFEAT. Furthermore, there was scarcely a paper in this country that was in the Bpecial interest of that commission but that was made to believe that my objection to the principles upon which bill 10289 was drawn was factious. Because I believed they would make confusion worse confounded, would make panics more intense and would bring them on faster, and would fasten the present iniqui- tous system on the country more securely than now, they were made to rejoice in my defeat . All over this country papers were rejoicing in my defeat. There is another fact that is very significant. Where there was one paper rejoicing in my defeat there were ten papers, fair and candid, that contained compliments to me such as I never expected to receive from my countrymen, in the expr< ssion of their regret that I was no longer to be a member of this House, and I take special pride in what was thus said of me. I received a letter from Mr. Hanna on this matter. 1 wrote him frankly a letter that I insert in the Record: LETTER TO MR. II. II. HANNA. Worcesticu, Mass., November '.'?, 1S9S. My Dear Sir: I was pleased to receive your letter of Novem- ber is. I have lived too long to concern myself with the newspaper stories written by the enterprising ''space men." 1 saw not the slightest hint of such a thing as you Sugg 1 presume by tins time you have received the documents T Bent, but should they fail to reach you please let me know and I will send other copies. Very truly yours, J. H. WALKER. Hon. H. H. Hanna. Indianapolis, Th<1. 1 did not see his hand in my district. I did not see it. because I did not look for or care for any "hand." I was defeated, and thai wasenough. No man ever knew me to undertake the care of dead horses. I prefer to feed live o 8812 12 Mr. OVERSTREET. Will the gentleman yield to me for an inquiry? Mr. WALKER of Massachusetts. Certainly. Mr. I >VERSTREET. I will ask the gentleman if Mr. Hanna did not teii.lt r his services in aid of his reelection? Mr. WALKER of Massachusetts. I have said he did, and he is a man who means what he says. Mr. < >VERSTREET. Did not he do it in a letter, and did not you reply thanking him and stating that you did not think that you would have any trouble? Mr. WALKER of Massachusetts. I paid no attention to my canvass, not making a speech in my district. I was in New Hampshire. I think" he did. I am not speaking especially of my own district. That very fact still further enforces the truth of my contention. Mr. OVERSTREET. I understood you stated it in a manner that left the impression that the organization of which he was the head had taken some steps toward your defeat. Mr. WALKER of Massachusetts. My point is this: Those who favored his bill l II. R. 10289) all over the country and the men in my district as well Mr. OVERSTREET. You do not pretend to say Mr. WALKER of Massachusetts. I do not pretend to say that he personally undertook to do anything against me in the district, but by my friends all over this country it was understood that those who were seeking reelection to seats in this House and were not in favor of the bill (H. R. 10289) were a hindrance to nion- etarv reform, as it is called, and I among the number. The SPEAKER pro tempore. The Chair will state to the gen- tleman from Massachusetts that he has consumed the first thirty minutes of his hour. ******* THE CAUCUS COMMITTEE OF ELEVEN. I will not delay the House much longer this morning, as I have the right to extend my remarks in the Record. I wish to be no- tified again, after ten minutes, so that I can yield to others a part of my time and save my last ten miniates to reply to them. Mr. Sneaker, a very peculiar thing has resulted in the attempt on the part of the Republicans of this House to secure a special committee to consider this great question during the vacation. It is hard 1o suppress a Roman virtue in a man like the gentle- man from Ohio [Mr. Grosvexor]. Listen to the prologue and then we will see the play: [Washington Post, February 3, 1899.] A CAUCUS OX FINANCE STRONG SHOWING FOB MONETARY LEGISLATION IX SOUSE -TO NAME A COMMITTEE OF ELEVEN. General Henderson made a strong speech in supportof the plan embodied in his resolution, and pointed out the advantage of hav- ing this important subject committed to a body serving both in this Congress and the next, and representing the various sections of the country, and. as far as possible, its diverse business and economic interests. CANNON IN DOUBTFUL MOOD. Mr. CANNON said he did not think any financial legislation could be carrie, i through until after the next Presidential election. I; presentative Payne said it would permit careful considera- tion of the question during the coming mouths, and the prepara- 3812 13 tion of such a well-matured plan as would commend itself on all hands. Resolved, That a committee of eleven members of the present House of Representatives, wBo are members of the Fifty-sixth Congress, shall be appointed by the chairman of this caucus for the purpose of considering monetary legislation and submitting their recommendations to a Republican caucus at the first session of the Fifty-sixth Congress, with authority to confer with a like committee from the Senate. Adopted. [Washington Evening Star, February 1G, 1899.] FOR CURRENCY REVISION- REPUBLICAN COMMITTEE SELECTED EY EEPRB" sr.vi'ATi vi: QROSVENOR Representative GROSVENOR, of Ohio, chairman of the Republi- can caucus, has announced the appointment of the following Re- publicans of the House as members of the committee provided by the resolution of the Republican caucus on currency legislation: Representatives Henderson, of Iowa; Payne, New York; Dal- 7.1:1.! . Pennsylvania; Kerr, Ohio; Hawxey, Texas; Lovering, jachusetts; Overstreet, Indiana; Curtis. Kansas; Loud, California; Babcock, Wisconsin, and MORRIS, Minnesota. It will be observed that no member of the Banking and Cur- rency Committee or the Coinage, Weights, and Measu: unit- tee is put upon this committee. Referring to this fact, Represent- ative Grosvenor said: "I made the appointments in that way after full and free con- ference with most of the members of the committees and with prominent members of the House. It must not be for a moment understood that the omission of members of these committees from the caucus committee was intended to in anywise reflect upon the distinguished gentlemen who compose these two great commit- and. on the contrary, the idea prevailed that inasmuch as any bill or bills which might be agreed upon by the Republican caucus would have to go to one or both of these committees for their final action and report, it would be unwise to ask these gentlemen to make any decision or take sides in any way upon any dispute of policy or detail, and it was deemed wisest and best that the com- mittees should remain wholly independent and noncommittal as to the details of the report, and be free to act independently, with the final judgment of each number iminnuenced and unaffected by the action of the caucus committee. In this way we will ulti- mately have the opinion of the caucus committee of 11 members of the House and of such committees as the Senate may see fit to provide, and then the deliberate judgment of the proper committee of the House." Mr. Speaker, so it appears that the caucus believed the committee of 11 wastoconsider monetary legislation— to permit careful con- sideration— to present a well-matured plan that would commend itself to all. "A DANIEL comk To JUDGMENT." Now as to how tbe gentleman [Mr. Grosvenor] succeeded, "I made the appointment (of the 11) in that way after full and free conference with most of the members of the commi * * * and it was deemed wisest and best * * * not tot dee sides in any way on any disputed policy or detail," and much more of the same sort. Verily, "a Daniel come to judgment." Now for the play. Mr. Speaker, of that committee of 11 that were appointed, G of 8812 14 tlie 11. a majoritv. have concluded the whole question. Of the 205 Republicans "in this House, it is reported by the Monetary Commission that 150 signed a paper requesting the consideration of bill 11. R. 10289 to present to the Speaker; 55 signed no paper. I have been over these papers very carefully, and 5? strongly I their unqualified support" on the floor of the House to ill 11. R. L0289. N<>\v. I believethat there has been some sug- ased, of course honorable, to conclude this ques- tion 1" fore it- c ation is begun, and that it emanates from the very enthusiastic but injudicious members of the Monetary Commission, Mr. Hanna, or men who are operating here for him. members of that committee have already pledged their un- qualified support to that bill. Curiously enough, out of the whole 93 that requested only "consideration'" of that bill, but did not "pledge support," not one is appointed on this committee of 11. Mr. < < M (PER of Wisconsin. What committee is the gentleman speaking of r PLEDGED IN ADVANCE. Mr. WALKER of Massachusetts. The committee of 11, which the honorable gentleman from Ohio [Mr. Grosvenor] appointed to consider the financial-reform question and to settle it during the recess. The question is thus concluded before it is begun. A rity of the 11 are already pledged to support the bill H. R. 10289. They are put on that committee, and not a man is put on out of the 93 Republicans who requested ••consideration." Mr. Grosvexor rose. Mr. WALKER of Massachusetts. The gentleman from Ohio had better wait, for I have considerable more to 3ay, and he may a- well reply to two or three things at one time. Mr. (4 R< )SVEN<)11. Oh, no; 1 shall not. Mr. \VA LKER of Massachusetts. Now, upon any doctrine of chances in the selection of these men, is it not conceivable that out of 205, 6 men of 11, from 57 pledged and not one out of 93 unpledged, should have been chosen, without it was by some one who had carefully examined these petitions and had selected these 6 men '-because they were pledged," and thus conclude this whole question by a pledge given over their written signature? I want to say with reference to the honorable gentleman from achusetts, my colleague [Mr. LoveringJ. who is one of the "pledged" men put on the committee, that there is no man in Massachusetts that is considered of higher honor than he, and when he givi s his word it is as good as his bond, and when he puts his name to a written promise to do a thing he will do it, and I be- ll' •vc that is true of the other 5 pledged men on the committee. The honorable gentleman from Ohio [Mr. Kerr], the honorable gentleman from Indiana [Mr. Overstreet], the honorable gen- i 'Man from Kansas | Mr. Curtis] . the honorable gentleman from Wisconsin [Mr. Babcock], the honorable gentleman from Minne- sota [Mr. Morris]. Mr. Hanna can surely rely on the honor of every one of these gentlemen to keep his written pledge to support bill H. R. 10289, with absolute confidence. SOME ONE WHO "KNEW HIS BUSINESS" SELECTED TnE COMMITTEE. By any doctrine of chance it is not conceivable, I again say, that these men should have been selected as they have been unless it was by some man who had carefully examined I petitions. This was not a matter of chance. Some one "knew his business like a book." This thing could not happen lance once in a million trials. 8812 15 Again, the names of those six men indicate, if they are leading members of this I [onse, what is occasionally claimed on this floor, viz, that there has been great unfairness upon the part of the Speaker of this House. If this committee was appointed from the leading members of the House, as it was supposed to be, ihey ought to have held chairmanships of or high places on committees. The average service of these gentlemen in this Houso is just two terms. The honorable gentleman from Iowa [Mr. Bendebson] is also understood to be one of the most enthusiastic supporters of H. R. 10289, makes seven. What becomes of the gentleman from Illinois [Mr. Cannon], as a leading member w 10 has served twenty-four years; of the gen- tleman from Illinois j Mr. Hitt], who has served eighteen years; of the gentleman from Illinois [Mr. Hopkins] . fourteen of the gentleman from Ohio [Mr. Burton], six years; of the gentleman from Minnesota [Mr. Tawney], who has served six years? And where is the gentleman from North Carolina [Mr. LlNNEY], who has served four years— who ought to be on to represent the South as well as the gentleman from Texas [Mr. Hawley]? The total service of these six supposed leaders is seventy-two years and an average of twelve years. Now, that shows that these six gentle- men appointed by the gentleman from Ohio [Mr. Geosvenob] have been painfully neglected by the Speaker of this House, for most of them have not been made chairmen nor are near the head of their committees. What is still more humiliating, they average to be in the sixth position on the committees on which they are placed. After taking the five leading men in the House — the honorable gentleman from New York [Mr. Payne], the honorable gentleman from Pennsyl- vania (Mr. Dalzell], the honorable gentleman from Texas [Mr. Hawley], and the honorable gentleman from California [Mr. Loud] — who average a service of ten years, the pledge to support H. R. 10289 seems to have been an inexorable condition requi- site in the other six of the committee of 11. The difficulty arose because few of the older members in the House are in the habit of pledging themselves to measures they do not fully understand. What I am trying to say is not that these gentlemen are not the leaders of the House, but that injustice has been done them in the distribution of chairmanships and high places on commit- tees of this House, as indicated by the honorable gentleman from Ohio [Mr. Gb< SVENOB ] . That is my contention. Mr. GROSVENOR. Mr. Speaker Mr. WALKER of Massachusetts. I yield to the gentleman, but I do not want it to come out of my time, because it is very short. Mr. GROSVENOR. I will be very brief. Mr. Speaker. I want to say first that I had no knowledge that any one of th n- tlemen named either did or did not sign any petition in n gard to any bill. Second, I did not ask anyone of all those gen tl ay Question as to how he stood upon any bill or any phase of the financial question. Third, no man outside of the members of the House suggested to me th" name of any man that I put upon that committee; and fourth, I say that my observation of the committers of this House leads /me to believe thai tin re i-~ n- ally a gentleman in the Bouse who is not a chairman of any com- mittee, but who knows asmucb as theaverage gentlemen who are chairmen of committees. [Laughter.] 8813 16 A SAFE METHOD OF APPOINTING P.EFEP.F.I < Mr. WALKER of Massachusetts. Now, Mr. Speaker, in reply to that I want to .say that my whole c mtention was, and is now, that the gentleman [ Mr. ( I-eosvenor] did not examine those sig- natures, but that somebody in interest did. That is sure. There is no man in this House who believes that those men could have 1 een appointed in this peculiar and wonderful manner unless somebody knew how they stood on those petitions. Mr. Speaker, was once a reference case of a friend of mine. After the referees were appointed; 1 went to the man who was instrumental in having the case referred and said. " What do you think about the decision? I am afraid it will go against my friend." "Oh,"' said the man to whom 1 was talking. •■ it is well enough when you have a reference to know how men will decide before you select them." | Laughter.] It must have been agreed upon before the caucus was called — it was agreed upon somewhere— who should be members of this committee of eleven. That is just as sure as anything can be that is unproven. MR. 1IANXA IS PLEASED. Mr. Speaker, Mr. H. H. Hanna is "'pleased," and that ought to settle it. He probably knew he was going to be pleased. He did not wait until the 16th of February, when the committee was publicly announced, but he was pleased on the 14th, two days before the committee was appointed, and in season to send the fol- lowing circular letter on that day: Indianapolis, February 14, 1899. Dear Mr. : You have undoubtedly seen in the papers the past few days a report of the action of the Republican caucus last :. This action was brought about at request of your corn- mil tee. * * * It is just and proper to say that the success of this caucus was made possible by the influence of the President and the Speaker of the House and Senator Aldrich, who is acting chairman of the Finance Committee of the Senate. * * * This step is taken in order to avoid delay incident to discussing and reporting of measures by the regular committees of both Houses in the next session. * :: " * The truth is, that the step taken is a very great one in the interest of monetary legislation. The work to this time has, of course, been continuously con- fronted with barriers that seemed extremely difficult to overcome. It is now probable that whatever is agreed upon by these committees and recommended to Congress in the next session, will be important features in the direction of laws for which your or- ganization has so earnestly appealed for the past two years. < Congratulating you upon the progress made in the work to this time. * ;: " * and with assurance of personal gratitude and re- gards of the writer. Faithfully yours, H. H. HANNA, Chairman. "Barriers" is good; "at the request of your committee" is still better, and enjoyed by all of us because it is so complimen- tary to us. MR. GROSVENOR'S GIFT OF FKOPHECY. Mr. Speaker, the key to the situation may be found in what the honorable and very distinguished gentleman from Ohio [Mr. ■ 'i:J tellsus — thatheconsulted only members of the House in making up his now famous committee of eleven. This infor- mation gives us a clue to learn, "Who am der pusson what put 3f 12 17 (1pm cheekine in the ge'man's hat." Nevertheless and notwith- standing, the honorable gentleman seems to have laid a fairly solid foundation upon which to rest his extraordinary gift of pr< »pkecy in foretelling win it his committee will do. Mr. Speaker, perhaps Si nator A.ldrii 'ii and the other members of the Senate Finance Committee will make a part of a great "finance, bank, and currency committee of tho two Houses" to approve bill H. R. 10289. On the other hand, perhaps they will wait until the eleven leading members of the House take their rightful places as distinguished Senators before they think' it ad- visable to saddle the Republican party of the country with the Indianapolis .Monetary Commission, the 11. H. Hanna lobby, and the bill IT. R. L0389. Again, by what authority does Mr. Hanna speak for the President, the .rot the II immiv for Senator A.LDRK b? They have the same means of making their views known to the public as has Mr. Hanna. I can not believe they are responsible for the report of them that Mr. Manna makes. I fear bis enthusiasm has again outstripped his discretion. Another thing: I was told that the reason why I was not called into the Speaker's room and consulted as to what was best for the party and best to be done for the country under the circumstances was." that I was not elected to the Fifty-sixth Congress. Was Mr. If. II. Hanna who was called in elected to the Fifty-sixth Congress? Is he even a member of the present Congress. I have never seen his name on the roll. Is he a sure member of the Fifty-sixth Con- gress? Mr. SULZER. He could not be elected on his HIGH REGARD FOB MR. II \ v ^ K. Mr. WALKER of Massachusetts. I am told that Mr. Hanna was urged to come here as Congressman by the unanimous senti- ment of the Republicans of his district, but he could not thus sac- rifice this great reform; that he was also wanted for Senator, but that bis position as a monetary reformer would have been com- promised if he had accepted. But I am grieved to notice that his candidate. Judge Taylor, was not elected Senator from Indiana, for he seemed to me a very able man. I say, in all frankness, that from what I have seen of Mr. Hanna, I believe he is sufficiently in- terested in this reform to refuse a seat on this floor or in the Senato to secure it. I am saying this because I believe it. I have the highest regard for Mr. Hanna, as I have for Mr. Gnth- ridge, but I have observed the mistaken way they have lobbied this House, taking men by the buttonhole and begging and pleading with them to support a bill neither the member nor themselves un- derstood. 1 spent a month of solid time tryingtound< rstand this bill H. K. 10289, at least six hours a day. and there were four ques- ts I could not myself solve. After my study of the bill 1 wrote to the authors of it the following letters, and not one of them at- tempted to meet the challenge. I say to this House, and i -; ecially those gentlemen clamoring for reform, as to my minority reporl No. L575 and as to the speech 1 madeon February 1 1, that l challenged any man living anywhere to successfully controvert a single state- ment of fact or a single argument therein submitted. 1 haveissued this challenge to members of the commit tee m t lie letters quoted and to all who are interested in bill H.R. 10289, and not one of them has ptedthe challenge. Yet they vote for a bill of whichitmaybe said that a large pari of their lads they use are derived from canvas- back and terrapin and their arguments from champagne, and tho 381»- 2 18 It of their bill if enacted would be to continue the robbery of a of our country. This is my statement of it to this and the country. Mr. HILL. I remember the gentleman having written a let- ter Mr. WALKER of Massachusetts. Let me finish this statement. I will put in the loiter. The gentleman from Connecticut [Mr. Hill] replied be was just startingfor Porto Rico and that he would attend to the matter when he got back, I believe, but he ably has never ••gotten back'' officially. Mr. il'iLL. The point I wanted to get at wasthia— -that at the time an wrote that letter he included in it the statement that we ought all to fully understand the measure, so that we might fairly consider it when it came up for discussion in the It .use. Is not that correct? Mr. WALKER of Massachusetts. Why, yes: the honorable ni from Minnesota [Mr. McCleary] had not then with- drawn the bill. I said Mr. HILL. Just let me proceed for an instant. I want to put in with the statement the gentleman has made that in twenty- four hours after that the l)ill was reported, although all knew that it was an illegitimate proposition, an impractical and improper re- port, and would not be considered by the House. Now, will the gentleman reconcile these statements? Mr. WALKER of Massachusetts. The gentleman's statement is entitled to credit, as all statements made by him are undoubt- edly accurate as he sees them Mr. HILL (interrupting). I will modify it and ask the gentle- man to explain the discrepancy in his own statement. Mr. WALKER of Massachusetts (continuing). And yet the gentleman from Connecticut is so constituted that everything that into his imagination is verity and he is willing to swear to it as the truth. [Laughh r. | Mr. HILL. Well, my imagination does not demand that 1 shall verify or even try to reconcile the statements of the gentleman from Massachusetts. (Laughter.] I ask him now to reconcile the statement he makes and the improper reporting of the bill. Mr. WALKER of Massachusetts. The gentleman is a little confused. I have said nothing needing "to be reconciled." Mr. Speaker, how much time have I? The SPEAKER. The gentleman has occupied ten minutes. Mr. WALKER of Massachusetts. I yield live minutes to the gentleman from Connecticut [Mr. HlLL. | Mr. 11 ILL. I do not care to use the time. Mr. WALKER of Massachusetts. Mr. Speaker. I will now put in the letters sent to each of the six who favored H. R. 10289. WK1TTKX TO HEHBEBS OF T1IK COMJIITIEE ON BANKING AND i I UKKNCY. New Hampton, N. H., September 1, 1S0S. My Dear Sir: I am employing my vacation in preparation for the discussion in the House of H. R. 1028'-). I am trying to make a very exhaustive analysis of the various propositions that have bee7i submitted to our committee that arc liable to come up in the Hon liing can be gained by any of us in failure to do justice to the propositions, or in finding ourselves in error as to any provision in any of the bills. 38U 19 Wp arc associated together to assist each other in thoroughly understanding the proposil inns submitted to us, not only in order to decide upon which is best, but to be able to enlighten the H in the discussion as well. I think 1 understand all the propositions in bill II. R. 10389 ex- cepting as to a lew items, as follows: Paged, lines 1 to 7: Under what sections and lines can United States notes and Treasury notes accumulate in the department of issue and redemption? Page 5, lines :! to '< : Under what sections and lines are such notes to get into the department of issue and redemption in order to be exchanged for gold then in the general Treasury? Page 6, lines 24 and 25, and page 7, lines 1 to 7: What amount Of United States notes and Treasury notes can be canceled under on 8 or any other Bection, provided all the existing national banks lake out the full amount of reserve notes required and no mi »re? Page 15, lines 9 to 18: What amount of United States notes will have been canceled and destroyed (or the probable amount), as herein provided, when no more of such notes are available as a basis for the issue of circulating notes? Page 16, lines 1 to 8: What funds are to be used for the with- drawal of reserve notes, and how do they get into the department of issue and redemption? Your full and frank replies, from your familiarity with the bill, will save me a great deal of work. I am, very truly, yours, J. II. WALKER. CJiairvian. Wor< ester, Mass.. November W, 1898. DEAR SIR: I send you to-day three papers that I hope will receive your most thorough and critical study. I went upon the Com- mittee on Banking and Currency ten years ago by no solicitation of mine. I had no pet t heory to force on the committee. I pro- posed no bill until requested to do so by the chairman, and after Bon. John Sherman not only had declined to prepare a bill and introduce it in the Senate, but had expressed to me a belief that the national system of banking must disappear as the United States bonds were paid off. I had made the subject a special study for many years. Since then I have given nearly my whole attention to it for ten years. The bill I first drew, it has been my constant study to improve the best possible form and substance to express the experience of the world in banking and to meet the habits, prejudices, and demands of our own people. I believe my investigations have been more in amount and thoroughness than those of all other men in utry put together. Either lam right or my errors of fact and conclusions can be readily shown. I have yet seen no evidence that any other mem- ber of the committee has made a careful study of the effect of his own bill or any other bill before the committee, by " trying it on " to the present banks that have been in operation more than thirty years. Several membi rs of the committee do not think anything n< to I).' done but to — First. Reduce the tax on currency one-half. Second. Allow cum ncy to be issued to the par of bonds. 8812 20 Third. Allow banks of $?.">,000 capital in small places. Such members are excused from investigating my general bill. Not so with others. I hope you will take t he time and do the work neci ssary to present to the committee as thorough and careful an exhibit of the two bills, H. R. 10333 and H. R. 10289, as you see them, as I have done to you, if you favor any general bill. Very truly, yours, J. H. WALKER, Chairman. MB. HILL'S BILL BEFORE THE COMMITTEE ON COINAGE. Mr. Speaker, I have several quite striking instances of the vivid imagination of the honorable gentleman from Connecticut [Mr. Hill], I will, however, give only one exhibit, and that from the hearings before the Committee on Coinage, Weights, and Meas- ures. The honorable gentleman introduced in the House, on January 5, 1899, a bill clearly belonging to the Committee on Banking and Currency, as it was all copied from bills before that committee, except two or three comparatively unimportant sec- tions. He had no compunctious of conscience in having it re- ferred to the Committee on Coinage. Weights, and Measures, of which he is also a very distinguished member. He verily believed at the time he was doing God's service in so framing its title as to carry it to the Committee on Coinage. Weights, and Measures un- less it read in full by the Speaker, which everyone knows he never does unless requested to do so. Scarcely any member of our committee knew the character of the bill, if there was one, until they saw in the papers the testi- mony of Secretary Gage upon it. None of the Committee on Banking and Currency supposed the Committee on Coinage, Weights, and Measures would act on such a bill belonging, as it did, to the Committee on Banking and Currency, and therefore did not call th^ attention of the House to the error of reference. In fact, nearly all of them were entirely willing that the honorable gentleman from Connecticut should transfer the field of his pecul- iar labors from our committee to that on Coinage, Weights, and Measures. When, however, the report of the hearings on the bill was published, and especially after talking with several members of that c< immittee, all was made plain. The favorable report from the Coinage, Weights, and Measures Committee on that bill, H. R. 11111. was made on three grounds. The first and conclusive rea- son to fully justify the committee in its seeming discourtesy to the Committee on Banking and Currency was furnished by the honorable gentleman from Connecticut, Mr. Hill, as follows: FROM THE REPORT OF HEARING BEFORE COMMITTEE ON COINAGE, ETC., JANUARY 12, 1899. "Mr. HILL. Mr. Chairman, my reason for introducing the bill was that several of these measures covering this bill were found in the monetary-commission bill that came before the Com- mittee on Banking and Currency, and it was ruled there, that they ■ were properly matters for the Coinage Committee and not for that committee. I have therefore formulated them very nearly they were in the monetary-commission bill. ' :: " * * At a hi: in the hearing I will be glad to give my reasons for introducing the bill at all." Mr. Speaker, there is not the slightest foundation in fact for this statement. Not only was there no such "ruling" by the chairman of the Committee on Banking and Currency, but there 8 12 21 was no such objection. The question was never raised. The chairman did remark with refer* nee to the Gage bill that it con- tained some matter that, taken by itself alone, would properly lto to the Committee on Ways and Means. It is impossible thai the gentleman from Connecticut should '•therefore formulate" the bill. Every one of the provisions copied from the bills before our committee by the honorable gentleman from Connecticut was care- fully and most exhaustively considered by our committee. Mr. Bill being very decidedly in evidence on such occasions. The first reason to justify the honorable and distinguished gentleman from Connecticut therefore falls without argument or further statement. The second reason was "to carry out the pledges made in the St. Louis Republican platform in 1896," and this also has no jus- tification in lact. REPUBLICAN PLATFORM OF II The platform of the Republican convention at St. Louis, passed June is, 1896, reads: " We arc opposed to the free coinage of silver excepting by in- ternational agreement with the leading nations of the world, which we pledge ourselves to promote, and until such agreement can be obtained the existing gold standard must be preserved." The Republican party can not afford to have such measures as H. R. 1 1411 or II. R. 10289 forced on it. They are not Republican measures in that they would retire and destroy the United States legal-tender notes. The following shows the folly of it at this time, even if it were desirable at any time: [New Yuri; Financial Chronicle, January 88, ISO!).] We have already once tried an experiment of the kind the Coinage Committee's bill proposes— that is, of supplying by bank issues the want for currency when contracting the legal tenders — and failed disastrously. Why should we be so forgetful or so venturesome as to assume we shall be any more successful now? To supply the place the legal-tender notes had filled Cong] then, as now, depended upon the national-bank notes. It was a1 that time as safe a reliance as it ever could be. for the law had been changed so that the State banks were tumbling over one another to get into the system, and taking out notes was very profitable. How the arrangements for substituting bank notes for legal tenders worked at that time is quickly told. In October. 1865, (the last bank return before the above resolution was 1 by ( longress I the national-bank notes outstanding were $171 ,321 ,90 ;. In January, 1866, the amount was $213,239,530. In January, 1868, the amount outstanding was $294,377,390. These figures show a much larger addition to bank notes concurrently with the with- drawal of legal tenders than is contemplated by the bill the present ( oiuaee Committee has proposed. The provision now made is only one bank-note dollar for each legal-tender dollar of those can- celed, and none to till the place of those retained in the Treasury uncanceled; whereas, from October, 1865, to January, 1868, the additions to bank currency were $123,000,000. Moreover, previous to October, L865, the new bank-note i- had been very rapid, for in January, 1865, there were only - 750,000 of bank notes outstanding, showing an enlargement of the 8812 22 volume of the bank notes afloat of $327,500,000 in the three years. An-1 vet in January, 1868, the sentiment of the people had changed eo absolutely through the canceling of STO.omi.i.oO i of legal-tender it th • cry went up to Congress from all over the country hal contraction, and stop it Congress did. In January. i\v was passed declaring that on and after that date the >rity given the Secretary to reduce the currency "by retiring or ca - United States notes" was suspended. That is the history of a very desirable but badly managed move- ment. It began with the country full of enthusiasm for it, and end< d in the short space of about two years with the people thor- usted at currency reform and with the effort for its attainment begun so auspiciously an absolute failure. What we want to guard against most of all now is a similar waste of our opportunity. It is a rare chauce we have. Shall we show our- selves capable of taking advantage of it'. J NOT A REPUBLICAN BILL. Second. It is not a Republican measure, in that it violates the :e of making an effort to secure international bimetalism; in that it distinctly, needlessly, and offensively puts up a "gold re- serve '" to redeem existing silver dollars, thus practically demone- tizing them. Third. It is not a Republican measure, in that it proposes to allow banks to circulate paper money, which is not " guaranteed by the United States Government." Fourth. It is not a Republican measure, in that it proposes to make purely bank notes a legal tender; and Fifth. It "is not a Republican measure, because it proposes to force on the Treasury of the United States an unwieldy, double- headed treasury system after the similitude of the Bank of Eng- land system, where it is a failure in every panic. BASTARD BANKING MEASURES. Those hills are bastard banking measures. They have no pride of ancestry, in that they are not justified by the banking system of any country in the world, and we could have no pride in their progeny which will be panic and disaster. The bills are alien to sound economic principles, and alien to true banking principles. In every one of these particulars they, in essence, if not in letter, violate the St. Louis platform. Another curious thing attracts our attention. Like the com- mittee of 11 appointed by the honorable gentleman from Ohio [Mr. •SVENOR], the Committee on Coinage, Weights, and Measures had practically decided the question before the bill was sent to them. Six out of the ten Republicans on that committee had given their pledge in writing, over their own signatures, that they would support bill H. R. 102S9, and the other four had signed the other petition to the Speaker, "requesting consideration" of the bill, and thus indicated they were favorable to it. The third reason for favorably reporting the bill is a very noble one. and committees in the House should always be encouraged in rviag it, namely, to show the House that the ten Republicans on the Coinage, Weights, and Measures Committee were suffi- ciently broad minded and accommodating to agree on a bill even if they did not understand it. and could not intelligently defend aprovisii a of it on the floor. "What's a little matter like the I ution between i'rinds," or truth even? 23 Till: BANKING LAWS OP ENG1 KVTD LND GERMANY. As to tin- unwisdom of trying to graft the Bank of England temontothi I aited States Treasury instead of thatof France or Germany, I wish to presenl the following from the Chic Banker and Financial Journal of January, L899: "The financial world has be a much interested and highly grat- iii, d at thr comparal ve \ a ©with which Germanypassed thr< its recent money crisis. The facts as presented bear emphatic testimony to the excellence of the German banking law. •• Under this law the imperial bank is able to issue notes to any amount for which there may be a public necessity. In the mar- velous industrial activity which has prevailed in the fatherland there is little doubt that* speculative enterprise had been c irried altogether beyond conservative lines. German banks had given altogether too much indulgence to speculators, promoters, and Others, without approved securities. In this way a very serious condi1i.ni of the money market came about, and Germany became indebted in very large sums to both Paris and London. Had it uo1 been for the* elastic currency provision in the imperial banking law a panic would doubtless" have ensued. The record to the present time, however, shows not a single important failure. " In London, no matter how grave the situation nor how urgent the public demand for money may be. the Bank of England can not issue notes beyond the amount of its authorized issue and the gold it holds, unless by the kind permission of the ministry to break the law. In Germany the imperial bank can issue notes beyond the gold actually held and the authorized issue to any amount that may be required, always provided that it pays the Government 5 per cent upon the excess issue. The way in which this system has worked ever since it has come into existence is worthy of the serious attention of our most ardent currency >nners. "Before our whole banking system is overhauled, as it seems likely to be, the authors of the different plans could not do better than to study the workings of the German banking law in the recent severe credit stringency. •■ Last year large sums of money were loaned in Berlin by New York and Chicago banks through the familiar operation of ster- ling investments. Germany has been meeting the situation in part by selling her American stocks in this market, thus influ- encing exchange prices sufficiently to prevent a further drain." BANK in ENGLAND. Also extracts from the Bankers' Magazine and Statistical R r, volume 4"). February, 1891. Article on " The London Crisis of November. 1890." page 595: •• We know finally that the legislation of 184 1 restricts the ex- pansion of the Bank of England's notes, and paralyzes it at crit- ical t uues." Page 600: "On Tuesday, November 12, 1890, the Bank of England's bn was able to rush to the stock exchange, where a panic was coming mi. and announce the speedy arrival of $7,500,000 in gold from Paris. In reality the advance agreed upon, as is known, by the Bank of France at 3 per cent, and renewable durii ral quar- ters on the security of English fcr< asury bonds, is $15, l: 2-1 Page GOO: '•The chancellor of the exchequer offered to the governor of the bank, if the latter made a formal request, to authorize him to violate the act of 1844, and that Mr. Lidderdale declined to have recourse to such exceptional means." Page 603: " The raising of the discount rate attracted gold, or on account of the profitable rate at which capital could- be used, or because tin- bankers of the Continent wanted to strengthen their position with their correspondents." And also the following extracts from the Bankers' Magazine, London, June and July, 1891, page 79: QUAE \NTEE FUND "BOND." '•Bank of England. November, 1S90. " In consideration of advances which the Bank of England have agreed to make to Messrs. Baring Bros. & Co., to enable them to discharge at maturity their liabilities existing on the night of the 15th of "November, 1890, or arising out of business initiated on or prior to the loth of November, 1890, '• We, the undersigned, hereby agree, each individual, firm, or company for himself or themselves alone, and to the amount only set opposite to his or their names respectively, to malce good to the Bank of England any loss which may appear whenever the Bank of England shall determine that the final liquidation of the liabilities of Messrs. Baring Bros. & Co. has been completed, so far as in the opinion of the governors is practicable. "All the guarantors shall contribute ratably, and no one indi- vidual, firm, or company shall be called on for his or their contri- bution without the like call being made on the others. "The maximum period over which the liquidation may extend is three years, commencing the 15th of November, 1890." PANIC OF 1893. Mr. Speaker, our panic of 1893 lasted only sixty-three days. On June 16, 1893, money was worth 9.3 per cent; June 29, discounts 73-J- per cent; average week ending June 30 it was 27.9 per cent; Octo- ber 20, 1893, it was worth If per cent. By referring to Table A and Table B it will be seen that the Imperial Bank of Germany in the industrial crisis of 1898 increased its currency in circulation by $48,000,000, while the Bank of Eng- land decreased its currency in the Baring Brothers crisis in 1890 by $5,000,000. No panic in Germany. A fearful panic in England. The Bank of England was compelled in that crisis to borrow $7,500,000 in gold from the Bank of France, with the option of as much more. Not only this, but the Bank of England was practi- cally forced to (because it could not issue currency) assume $100,- 000,000 of the Baring Brothers' obligations in ord6r to alleviate the financial distress in England, while the Imperial German Bank only had to increase its issue of currency, as I have said, of about $51 1,000,000 of notes to relieve the German situation. Furthermore, it will be seen in the above quotations that the English bank act would surely have been "suspended " in order that the bank might even up to $100,000,000 of additional circulating notes if .necessary had this gold not been borrowed from the Bank of I 'ranee, or had not the bank assumed the $100,000,000 of the debts ■ Baring Brothers instead. Is the Republican party of this coun- try ready to adopt a bank system that would tend to compel the 2o Treasury of the United States, in conjunction with the banks, to any such action? Ta 111.12 A.— Analysis of a part of the returns of the Imperial Bank of Germany, [London Economist and New York Financial Chronicle.] Discount rate on commuted year. < Join and bullion. Gold. Silver. Circula- tion. paper. Berlin. New York. 1898. Per ct. Per ct. .Tnn. 1") $206, r ♦$154,838,648 ►$51,61 $300,039,191 5 3* Feb. 15 .... 225, 3E 169,036,651 5,554 257,082,596 3i 4 Mar. l") as, 169 L75, 153,852 58,384,617 248,473,757 3 5 Apr. 1") — 210, 5i 157,91 13,364 295,381,957 51 May 15 156,02 52,0 1 6* L5 213,155,068 159,116,301 53 038,767 255,895,170 8* 16.... 196,771 147,582,696 49,194,232 55,118 4 An.;. 15 90,593 158,367,945 52, 1 267,730,229 3} 15 2 19,055,107 156,7) 52,263,777 258,805,337 4* 176,683,149 132,51 44,512,362 314,774,953 5 L5 .... 177,461,789 IS?, 096, 342 44,365,447 288,573,717 5* 1' c. 15 i'j-\ 577,13s 144,432,Soi 48, 144, 284 271,789,158 6 34 1899. Jan. 15 180,754,568 142,315,926 47,438,642 304,355,777 6 3J *Gold ami silver is not divided by the statistical bureau, but averages about one-quarter to one- third silver to two-thirds to three-quarters gold. Table B.— Analysis of Bank of England returns. [Bankers' Magazine, London, 1891.] Year. 1890. Jnly.2 August li tember 3 iber 1 November •"> November 12 December 3 1891. nary 7 February 4 March 4 April 1 i 6 June :s , 1 Gold in issue de- partment. $97,741,708 95,241,663 105,347,875 93 074,757 90,401,218 87,877,213 115,042,785 113,645,598 118,524,331 107,577,851 104,116, 11" ■ e, i '.to 5, 129 Notes in circulation. $121,611,088 124,806,332 121,270,698 66,427 I M 630,826 119,144,938 120,071,325 I'M. or,.",, 200 118,397,954 117,832,759 121,1 121,787,618 131,764,697 J11.340 Percent- afro of reserve to liabilities. a? 37 45 33 35 SI 45 40 46 3ti 33 33 44 43 Rate of dis- count. Per cent. 4 5 4 5 5 « 5 4 31 34 3* 4 4 24 NO MIDDLE GROUND. Mr. Speaker, we must not forget that there is no middle ground. Either a great National bank, with 6,000 to 20,000 bran< hes. which i.- the mosl scientific, ova quasi union of all the 6,000 to 20,1 00 inde pendent hanks, only touching rich other through clearing hoi w hich is more democratic and a thousandfold safer. The Walker bill is the latter. 3812 26 RATES OF INTEREST. Mr. Speaker. I wish now to call the attention of the House to Tables K. showing the disparity in the rates of discount between dif- ferent cities in this country, to say nothing- of the farming districts and the cities in the same States. It will be seen that while the average rate of discount on good commercial paper in New York during the year 1897 averaged 4 per cent, it averaged 8 per cent at St. Joseph. Mo.. 10 percent in Portland. Oreg., and 12 per cent in Denver, Colo. This unnecessary and cruel hardship it is pro- posed to perpetuate for four years, eight years, ten years, or for- ever, in the bills H. R. 11411 and H. R. 10289 which the Republican party is expected to make "party measures."' Tun r B. Average rate of discount in forty-three cities of the United States, .. and for the five years, not including days of panic, as reported weekly in "BradstreePs." Place. Borrowers of the highest credit- Lower rates— Per cent on commer- cial paper. 1893-7. 1893. 1894. 1895. 1896. 1897. 3.83 4.41 4.56 4.60 4.64 4.98 5 til 5.27 6.73 6. 1 1 6.09 6.15 6.12 5. 88 6. 49 5.94 7.01 6.65 6 6 6.11 7. 18 7.11 6. 98 7.15 i 7 7.61 8 7.03 5 . :>; 6.90 6.84 7.13 . : 7.96 7.01 7.78 8 8 8 8 8 8 8 8.07 8.78 10 10 10 2.76 2.90 4.62 3.43 3. 46 3.81 4.60 5. 24 5.28 4. 98 5.38 ti 6 6 5. 98 5.80 6. 1 1 6.69 6. 88 6.23 7.09 7.05 tl. to 6. 98 6. 26 7 7 7 7.01 7 8 8 8 8 8 8 8 8 8 7.57 9.36 10 10 3.19 3. 55 4 4. 06 4.31 4.65 4.83 5.33 5. 96 4.76 5. 25 6 6 6 5. 38 5.94 6 6 6 6 6 5.96 6. 78 6.50 6.53 7 7 7 7 i 8 S 8 8 8 8 8 8 8 8.42 9 10 10 4.92 5.40 4 5.72 5.57 6.(17 5. 61 0.54 6 6.50 6.23 6 6 6 6.25 6. <•>. 28 6 6 6. 84 6.34 6 6. 94 7.21 8 7 7 7 7.38 7. 53 8 8 8 8 8 8 8 8 8 8. 92 9 10 10 2.99 3. 46 4.(19 Hartford 3. 70 3.69 Providence - - 4.24 4 12 5. 74 5. 83 5.85 5.90 6 6 6.00 6.10 6. 21 6.23 6.36 6. 37 6 41 6 i.i) 6. 67 6. 82 6.90 6. 91 6.96 7 02 7.05 7. 25 7.31 7.95 7. 98 7.99 8 8 8 8 8 8.01 8.34 9. 27 9.96 10 5. 08 Pittsburg . - 6 New < >r leans 6 6 Portland. Me 6 Richmond. Va - 6 Buffalo 5.93 Memphis . - - 5. 42 San Francisco Milwauke - 6 Indianapolis -- 6 6 Del roit 6 SI Paul 5. 38 Nashville 5.75 Louisville - G 96 6. 25 Kansas City 6.84 St. Joseph 7 7 1 .< i Angeles 7 Duluth 6. 90 Galveston 8 Mobile 8 ( l:r.(|ia 7.90 Einnah 7.96 Atlanta 8 Birmingham 8 ton - 8 Porl land, ( ) r< -lt 8 Sail I iake i 8 LittleRock . 8 Dallas ... 8 Tacoma 9 i tie 9.84 Denver 10 3!: 12 27 Table B, >unt in forty-three cities, etc.— Continued. Place. i ;■ growers of avei idil Higher Per o iii <>ii commercial paper. 1894. 1893. 1 97. i; 6 i 6 63 7.01 (j go 6. 96 7.19 6. (6 7.01 7.74 G 7.78 8.03 8.48 7 8 7 7.19 8 8 : . 1 7 8 8 7.84 7.84 9. 28 9 8 8 8.80 8.03 9.46 8 10 10 1 1 . 69 12 10.38 3.77 3.63 1 33 . "i 4.83 5, 1 1 6.25 6 6 34 7.01 ii 7 7.65 7.96 6.78 6. 98 8 7 7.23 7.09 8 7.23 : 82 8 8 8 9 : . 88 8 8 10 111 8 10 8 10 10 9.84 9. 15 11 12 12 4.84 I :.M 4.61 5. 56 5 :,l 6 01 6 7 ! 86 7 8 7 0.09 ii 32 8 7 7.84 7.80 8 8 9 8 8 8 10 10 8 10 8 10 10 10 10 11 13 13 6 17 1 50 6 i; 6 92 7 6 7.94 8 6 7. L5 8 7 6.84 7.69 8 i; 96 7. '.iii 9.57 8 8 9 8.26 8 8 10 10 8 10 8 10 10 10 10 11 13 12 4 (0 5.16 6.01 5.7S 5. 81 6 6 I 7.66 5 . 85 ! 03 8 7 6. or 7. 11 7.70 7.05 7. Ml 8.38 7.96 7.96 8. 23 8 8 9.00 9.75 8 9.86 8 10 10 9. 09 11.13 11 96 11.07 4 4.64 ■.liia I 27 8.88 Provide] •■ Oinc :m:.ti I 96 5.17 I 6 07 7 . m s 0.88 St. Louis 7 6 ■ ! \'a 6 Buffalo 7.92 iptus 7.42 ukee 7 i 'land 8 7 :it ul 7.38 Nashville 0.53 7 Minneapolis 7.40 8.48 8 Charleston 8 Duluth 9 8 i Q 8 8 1 A 9.80 Savannah -. 9.96 8 Birmingham 9.88 'tin 8 land, ( >reg 10 i lity 10 i k 8.73 Dallas 10 .ua 11 11.84 12 Interest ral es are mucli higher in strictly country districts of the States in Which tlic above cities are la ated. FOUR SOUND PRINCIPLES. By the adoption into law of the four principles I have insisted •'. fur the last ten aid propose to insist upon with all the power I have while I have any influence in public affairs, in ■or out— namely, to relieve the Treasury from maintaining parity, to compel the banks to maintain parity se to rob the people of the capital th v wish to use in banking by compelling them to buy bonds to engage in banking, and to restore to the people their natural rights by allowing them rir own as money in the bills of the banks they own — will equalize : -• of discount all over the country. The people were I of this right in the uent of the 10 per cent tax on S bank currency in ISO i for a patriotic reason. It must □ 28 i • red in a sound nati »nal system. Then rates of discount Id Barely be very nearly the same all over this country, as they bsolntely the same now in Scotland and in France, and very rly the same all over Germany and in Canada. THE BOND 1SSIK 01 Again, Mr. Speaker, it will be seen by Table D. what I said in I louse while we were discussing the revenue measure of 1898 is true. More than $9,000,000 were absolutely wasted in the sale of the 3 per cent ten-twenties of 1898. I was treated with scant courtesv when I said in the House, when that measure was being 1. that it would lose the country from $30,000,000 to $30,1 that upon the price our bonds sold for during 1889 the saving on that $200,000,000 sold, as the table and footnotes show, would he s:J0. i 00,000. Upon the basis of what our bonds sold for in the three y< ars, L887, 1888, and L889 the loss was X'^, 000,000, and covering the' whole eight years ending 1892 at the price our bonds sold for the loss was s l s. 000.000, and at the price the identical 3 per cent ten-twenties of is 18 iu January. 1899, the loss was s!0, 000,000, as I have said. But what I then said has already come true. The Secretary of the Treasury was forced by the unwisdom of Congress to sell those bonds on the market at their face value and without the slightest justification. This is not a question of "foresight" and "hindsight." Every man of the slightest finan- cial experience knew it then as surely as he knows it now. TABLE D.— Ec c< ipts, etc., in Unit '• per cent ,'<<- i > bonds of 1S0S. Awards in— Amount. Market price. Market valu Treasury moneys national banks. Free moneys in Tri including deposits in national banks. Free mon- eys in Treasury less, that deposited in banks. 1898. June July Aug Si 1-1 Oct Nov Dec 1899. Jan 126,514,837 . M 57,623, 104 27,956,135 (4,897 2,470,284 959,203 219,893 * L04 Mill 105 105.4 105.6 105.5 107 108 827,575,430 77,864,844 6 I 504,259 i 9,192 371 2,606,149 1,026,40! 269,884 ',■:- 339,359 ; 795,631 58,266,108 65,968,461 80,888,712 95,014,909 94,041 001 94,860,916 h$195 754,815 205,657,51 1 254,844.215 294.487,085 307,557,501 300,238.275 r^ 790 294,764,695 $16; 575,456 166,861,940 178,107 228,578,618 226,668,792 205,223 306 197, 735, 789 lon,^.::.:;!) Total 199,318,450 208,505,100 * Estimated. t On the 1st day of the month. Appreciation of bonds, $9,156,64 f. On January 31, 1899, United Slates 10 20 year 3 per cent bonds of 1898 to yield 2.543 per cent must sell for 108, to yi sld 3 to per cent must sell Cor 109, Id :>.:,?.i per cent: must sell for 111$, to yield 2 per cent must sell for 110 to yield 2J per cent must sell for 1074;. There is no justification in selling bonds for a less price than they are worth on the market under the plea of a "popular loan." There can be no such thing as a popular loan in this country, as it is understood in France. Our people do not keep their savings on their persons, in their houses, or bury them in pots in their gardens. It is believed that not more than .j per cent of the $200,000,000 loan of 1898 is owned by persons who have property to the value of 810,000 or less. There is very nearly §50,000,000 of 20 that loan already in the Treasury, either as security for Treasury money deposited in bauks or for circulating notes taken out by banks. I inserl the following slip from tho Worcester, Mass., Evening Gazette, of August 8, LSI "now Till-: WAB BONDS wi;r RIBED FOR. "The Citizens' National Bank has received most of its subscrip- tion of $66,000 in Government war bonds, and has the assurance that the small balance will arrive in a short time. The bonds are all of the denomination of $500, and were subscribed for by 1 :.' friends Of the bank, each in his own name and under his own a 1- dress. The bank sent the money for tho lot by a single New "^ ork check, which was made possible from the fact that the in- stitution was one of those designated by the Government for i . i \ Lng subscriptions. •• The subscribers signed an agreement to hand over to the bank the bonds as soon as received, ami already the great part of the pi ecious papers are deposited in the vaults of the bank. The Quinsigamond National Bank expects to receive $10,000 in $500 bo] cured in much the same way as were those of the Citi- zens' bank. Word of the acceptance of the bid has already ar- rived. As the profit on these bonds is already $5, the investment is a good one. Other banks subscribed for the bonds in larger amounts, and consequently do not expect to be successful in get- ting them, as the issue will be consumed in bonds of the small denominations." THE PEOPLE BOBBED. Mr. Speaker, what is true of that loan which that bank took is true of nearly every dollar of that loan. It is not held in banks, but by bank officers and their friends. It is too gilt-edged at the price they paid for it to be put in public institutions for the interest of stockholders. It is held by private persons, by the bankers of this country, or by the banks themselves to an amount of at least $190,000,000 of the total $-200,000,000, and yet tho law still stands. If the Secretary of the Treasury is obliged to sell 100 more bonds he will be obliged to waste from .S15.000.000 b > $3< 1,000,000 more. The Republicans who are responsible for such foolish Legislation have the task before them of making the people believe from the stump that that law is the very acme of sound Republican financial wisdom. They are also to bring this wisdom to the indorsement of the bill II. R. 10289 and of the doings of the Indiana), olis Monetary Commission lobby. 1 yield live minutes to the gentleman from Indiana [Mr. JOHN- BONJ. Mr. JOHNSON of Indiana. I desire to occupy the time only for the purpose of asking the gentleman a question. He was talking a bit ago of a committee composed of the members of this I louse to take into consideration the currency question and devise a system of hanking and currency to be presented for the legislation of this House. Now, do you expect that the next C s,on theeveof the nexl general election, is going I banking and cur- rency Legislation at all? For my part i do not. POLITICAL DYNAMITE IN CURRENCY LEGISLATION. Mr. WALKER of Massachusetts. Neither do 1. [t would suit in the certain defeat of the Republican party if it did. more d . to the square inch in anything conni cted with the United Stat* s Treai ury and our banking and currency Bystem 30 than in any other subject that can be presented for legislation. The people who would lie benefited by the legislation to which the gentleman refers are now fooling with unlimited coinage of silver, and if you attack this question at all just before instead of just after election it is certain to swamp the party. The Speaker "of the House knows that that has been my opinion from the first. I was interested in having the committee educated now up to de- ciding on what should be done at the proper time— on what shall be dune in the future, when we are in a position where it will be possible for us to do anything. December, 1896, is not December, Mr. Speaker. I believe I have but five minutes remaining. Mr. COX. Will the chairman of the Committee on Banking and Currency yield now for one question? Mr. WALKER of Massachusetts. I will not yield under any circumstances to the gentleman from Tennessee [Mr. Cox], for I have not the time. The SPEAKER. The gentleman from Massachusetts declines to yield. THE CHAIRMAN'S DIFFICULTIES ILLUSTRATED ON THE SPOT. Mr. WALKER of Massachusetts. Mr. Speaker, I want to call the attention of the House to the difficulties the chairman of the Committee on Banking and Currency has labored under in the committee, as illustrated by what is taking place here and now. With reference to the treatment of the President's recommen- dations, the gentleman from Connecticut [Mr. Hill], and the gentleman from Indiana [Mr. Johnson] . on the floor of this House, labored indefatigably to defeat one of the most specific pledges given by the party at St. Louis, doing all they could against them here and in committee. The pledge had been given that the Re- publicans would do all that could be done to secure international bimetallism, and they did everything they could against making the onlv effort possible in providing a commission to visit Europe, absolutely oblivious of the pledges of their party. BANKING REFORM NEVER PROMISED BY PLATFORM OR PRESIDENT. The partv platform or the President never promised to reform the banking and currency and the Treasury system of this country, and are not responsible for it in any degree whatever. They have promised to continue to maintain the parity. It is true that this great reform in our Treasury— banking and currency— must come, in order to maintain parity without having it cost us from fifty million to seventy million dollars a year. But the people of this country are not vet ready for this banking and currency reform. They had rather still further sacrifice the fifty to seventy millions of dollars a year until they get good and ready. It is not our busi- ness, as Congressmen, to do it unsupported by the people. It is the business of the people to first demand it, then we can safely act, and not till then. Mr. JOHNSON of Indiana. Does not your bill contemplate a banking and currency reform? Mr. WALKER of Massachusetts. I donot yield; and. further, I want the Sergeant-at-Arms to appear, if necessary, to protect my time. , . , t The SPEAKER. The gentleman declines to be interrupted. Mr. WALKER of Massachusetts. A man has a right some- times to speak of himself. I think it is recorded somewhere that 3813 31 a man in speaking of himself s&id that he "had fonght a good fighl and bad finished his coarse." In my office of chairman of the Committee on Banking and Currency I have, in my speeches and writings, exhausted t Ins question as Ear as it ran be exhausted, npon the issues already raised, and finished my course. Bui my reports and speei hes, to the committee mostly, and on the floor of the Eouse, are ignored by nearly every man, so far as 1 know, in looking for his p srsonal glory. [Laughter. | No man has patiently investigated any point and come tome With proof that I was in error, as they were in duty bound to do to a man working day and night in pursuit of the truth on tins great reform, as 1 was compelled to do in my office. I again chal- lenge any man in this House and in the country to successfully Eoint out any error or successfully contradict a single position I taken. The facts I have given are facts taken from official public documents or compiled in the public offices for me and to which you can refer to see whether I am correct or not. Table Q shows how few bonds were taken in the South and West. UNIFORM COl RTESY of THE HOUSE. Finally, Mr. Speaker, I want to thank this House for its uniform courtesy to me during my ten years' service. I am not one who prophesies smooth things. I go for the truth direct, with but little regard for who stands between me and the truth as I see it. And yet never on this floor excepting on three occasions in my ten years' service has any gentleman objected when I asked unanimous con- sent—the gentleman from Massachusetts, my colleague [Mr. Bab- ki.tt], the gentleman from New York [Mr. BENNETT J, and the gentleman from Connecticut [Mr. Hii.i,|. Mr. BARTLETT. Nobody on this side. Mr. WALKER of Massachusetts. Nobody on that side. In fact the opposition party are entirely ready to listen to an inde- pendent man. whether he be Republican or Democrat [applause] — entirely ready. Thanking the House for its uniform and abundant courtesy, I yield the floor. [Applause.] ■3612 32 Oi g e c e? I c: i - ?? -r —•—>- — x - o-_ :c ic ;i :t is K N I < X " ! — i~ i* •" i" — — ■- ..- 1 - ~ ^ — -r -^ to it 3 oc — -c — < • 5 f 55 95? r-' .' - r- — *~ 55 2 "i ?! 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T! 7 • - . i — r. . - x r. . - i= ?! 1 ! — — — '.'. S5 1-4 <*> ' J d ; a C ! !•" ! ! ! ! C en £ - © o s O MOO'S S o - 5 ti ej ■3 'o bo a /. w -: ^— —-„•_— > '— a ^ -— -/. — .— ■* ~ a* 3 o 2 W DQ P « H M a a a K fa O a o >-i Eh o 381 . UNITED STATES TREASURY AND BANKING AND CURRENCY PROBLEMS. WE HAVE THE WORST FINANCIAL SYSTEM IN THE WORLD. DOUBT, FEAR, AND PANIC INHERENT IN IT. PANIC OF 1893 SURE TO BE REPEATED. SPEECH OF Hon. JOSEPH H.WALKER, OK MASSACHUSETTS, IN THE HOUSE OF REPRESENTATIVES, TUESDAY, FEBRUARY 14, 1899. WASHINGTON. I899. SPEECH OF HON. JOSEPH H. WALKER. The House being in Committee of the Whole on the state of the Union, and having under consideration the bill (H. R. 12008) making appropriations for sundry civil expenses of the Government for the fiscal year ending June 30, 1900, and for other purposes- Mr. WALKER of Massachusetts said: Mr. Chairman: In the time allotted to me I shall speak on the currency problems of the United States. Before proceeding with the discussion we must find some com- mon ground to stand upon, else our facts will be ignored and our conclusions impotent. All the data upon which I have formed what I shall say. and every fact and argument, are given more fully in part 2 of House Report 1575, Fifty-fifth Congress, second session. THE GOLD STANDARD. I do not second the cry for a new declaration for the gold standard, and thus admit that we were not put on a gold stand- ard by Jackson, Benton, and a Democratic Congress in 1S84, and have not had a gold standard ever since. Neither would I attempt to abolish any of our money, desirable as it may be to do so. That would be attempting to take a second step before the first. And this notwithstanding we have four hundred millions more of gold and four hundred millions more of silver than economic conditions justify our having. STATESMANSHIP. Furthermore, I am of the opinion that we do not compliment our statesmanship by unnecessarily offending a single prejudice or false opinion. SEVENTY MILLION DOLLARS WASTED. I am for making as few changes as possible, in order to make rational fear of maintaining parity impossible, to give the South and West banking facilities, and to save the §70,000,000 per annum now needlessly wasted in maintaining parity by the Treasury. BANKING AND CURRENCY CONDITIONS. "The currency problems of the United States "are clearly re- vealed in a plain statement of our banking and currency condi- tions, as compared with those of Fiance, Germany, England, and every other highly civilized nation. While the countries named have systems varying to some de- gree, all may be said to be normal. That of France is built d< >\vn from the top, having one bank, with branches extending into every community, like her government. Our people insist that our banking and currency system shall be built up of units at the bottom, each bank independent of all others, as are the men in a town who together make the body politic. 3742 38 30 FREE BANKING. Our free banking law, allowing any five reputable citizens any- where to form a bank by getting together the required capital, will never be abandoned, nor need it be. A system individual as to each bank, but united into one solid structure for all purposes where union is necessary, will give us a banking and currency system as much superior to the banking and currency system of France as our institutions are on a more solid foundation. BANKING COMPLETE IN ITSELF. All human experience proves — First. That it is not possible to have a sound banking and cur- rency system in this country, as there never has been in any other, while it is not complete in itself. It must be wholly separated from any organic connection with the Government Treasury, as is that of France, Germany, England, and every other first-class country, the United States alone excepted. UNION OF BANKS. Second. That it is not possible to maintain the parity between paper money and gold where a multitude of independent banks exist, excepting by restricting the legal-tender coin to gold alone, as in England. MAINTAINING PARITY. Third. That where there are two or more kinds of legal-tender money, each differing widely from the others in intrinsic value, as paper, silver, and gold, it is impossible to maintain parity with- out making a union of all banks sufficiently solid to make each one and all equally responsible for maintaining the parity of all moneys in circulation and practically making all banks act together as one whole for maintaining parity, as in France, Germany, etc. A MISERABLE FAILURE. Nearly every government has tried the banking and currency experiment the United States is now trying, and everyone trying it has miserably failed. There are no two opinions on our utter failure since 1893, es- pecially in view of the fact that we are wasting $70,000,000 annu- ally in trying the experiment. Up to 1893 it was the fashion to pronounce the financial and banking system of the United States the best the sun ever shone upon. IMMEDIATE REFORM DEMANDED. To-day there is scarcely a man in the country who has any in- terest in questions pertaining to economics, if there is even one who is not demanding its immediate reform. WORST FINANCIAL SYSTEM IN THE WORLD. Hon. James H. Eckels, ex-Comptroller of the Currency, in answer to a question by the chairman, said to the Banking and Currency Committee: "Yes; the United States has the worst financial and currency system of any leading nation." Upon the above being read to Hon. Charles S. Fairchild, ex- Secretary of the Treasury, and his opinion asked, he replied: " I think it is the worst," and Secretary Gage concurred in Mr. Fair- child's statement. NO TRUE BANK CURRENCY. In fact, all writers on finance, banking, and currency are a unit in condemning our system, those of Europe declaring that there is not a dollar of " true bank currency "or really sound cur- rency in the United States. 37 Abri«'f examination will justify as thoroughly intelligent the unfavorable opinion of it generally held. On January 1, 1890. we had of— United States legal-tender notes $846,681,016 Silver coin (when all bullion is coined) 60 1,000,000 ( 'nrrency certificates 20, 640, 000 National-bank notes 24:5,817,869 Total moneys required to be kept at a parity withhold ---- 1,211,138,885 Gold in the Treasury 282,174,906 Outstanding gold certificai es :3>. 201.939 Net gold in the Treasury 246,973,027 Other free moneys 44, 957, 520 Total free moneys in the Treasury 291,930,547 The stock of gold in national banks is 266, 464. 000 Other banks, trust companies, etc., about the same. 266. 000, 000 Gold certificates - 35,201.939 Visible gold in banks, etc. 567,665,939 Free gold in United States Treasury 246. 973, 027 Total visible gold 814.638,966 Gold hoarded and in circulation as currency 135, 061, 034 Total gold coin and bullion 949, 700. 000 Total gold in France 810, 600, 000 Total silver in France. 8119,800.000 Total currency in France . 741 . 000. 000 Total currency and silver 1 . 100. 800, 000 Gold in Bank of France 375 , 400, 000 Total gold in Germany 668,500,000 Total silver in Germany 8212, 800, 000 Currency issued by Imperial Bank.. 317,000.000 Currency issued by other banks 42, 220, 000 Total currency and silver 572. 020. 000 Gold in Imperial Bank $142, 000, 000 Gold in other banks 13, 930, 000 Gold held by banks. 155. 930, 000 Total gold in the United Kingdom 438. 000, 000 Gold in the Bank of England 192,680, Gold in the Bank of Scotland 27,500,000 Gold in the Bank of Ireland 14,880,000 Total 2 15,060,000 3742 21 38 REDEMPTION GOLD. It appears that France has gold in bank available for the cur- rent redemption of each $100 of her total of silver and paper a little over $32: Germany, $27; the United States Treasury, $19. Redemption gold in the United States Treasury, only $7. The Secretary of the Treasury reports only $100,000,000 as "re- demption gold," as he may well do, as the balance can be only ordinary money, in the Treasury, otherwise the Secretary would have only $45, 000,000 free moneys. This makes the percentage of gold to redeem $100 of silver and paper money only $7.70, instead of $19.70. All the visible gold in this country would be ' ' redemption gold " actually in the banks did the law require our banks to maintain parity. It would be $6:130 to each $100 of paper and silver money; double, instead of less than one-quarter, that of France. It would be nearly twice and a half that of Germany, instead of a little more than one-quarter as now. It would give us eight and one-fifth times the redemption gold we now have. What words can be too hot in condemnation of such a condition of our finances? But even this $100,000,000 of redemption gold in the Treasury, little as it seems as compared with the $800,000,000 we have in the country, would be ample for gold redemption were it legally liable for redemption purposes in the banking system of the country, instead of outside of it in the United States Treasury. CAPITAL AND CASH RESERVE. National and State banks of loan and discount have $560,000,000 of cash reserves and $1,350,000,000 of actual capital, a total of $1,910,000,000 to use in protecting $100,000,000 gold to maintain parity. They now have $532,000,000 of gold, more than twice as much as the total gold in the United States Treasury and more than five times as much gold as the Treasury has of gold to use in redemption, and yet they are under no legal obligation to re- deem in gold, a dollar of paper money. PROTECTING GOLD. The banks have six and one-half times more funds that they can use in protecting gold than the total moneys in the United States Treasury. They also have absolute power to protect every dollar of gold they have by raising the rates of discount, as is always done with perfect success in England, France, Germany, etc., while the United States Treasury is absolutely powerless to protect a dollar of its gold in good times or bad, from Israelite or Christian living in any part of the world. Why do not currency reformers recommend the imposition of a straight legal obligation upon banks to redeem in gold? The visible gold daily used is less than $10,000,000. Every em- pirical practice conceivable is recommended for a cure by the very men who know the only possible cure. This indubitable statement reveals what is really the most discouraging " banking and currency problem in the United States." ENGLAND AND FOREIGN COMMERCE. Only foreign commerce tests the " measure-of -value coin" in the banking system of any country that has a normal system. England, as the clearing house of the world, needs four times the gold that is needed in this country, and she has less than half as much. 39 HANKS 8HOULD HKHKEM IN GOLD. But of the $438,000,000 of gold in Great Britain, her visible gold, viz, $385,000,000, is in her banking system, where it can be protected by her immense banking capital and cash reserves, by raising discount rates. Her banks are required by law to bear the burden of redeeming in gold. Our banks are absolved from this duty, which is fundamental to sound banking. Germany has only §150,000,000 of gold in her banking system, which is protected by all the cash reserves held by banks plus their capital, and is also effectively protected by the power to increase rates on discounts. So with France. To raise the rate of discount on loans is a quick and sure protection of gold in banks. Then why hesitate as to a remedy'.-' The absolute confidence, not only of every man in England but of the world, in the certainty of parity being maintained with gold of every dollar of paper money, and all banking funds as well, is not because of the amount of gold in England, for it is relatively very small, but because every dollar of her visible gold is in her banking system. England has not one dollar in visible gold where we actually have three and a half; and. relatively to the demands on her gold, not one dollar where we have fourteen. So with France, and so with Germany, and wholly because the visible gold is in banks, and banks are compelled by law to main- tain parity by redeeming paper money in gold. BANKS ONLY CAN MEASURE VALUES IN COIN. There is no device known to man for legitimately using a " measure-of-value coin " excepting by banks, and that in exchang- ing evidences of debt, which again are titles to products; and there is no way of protecting gold in that function excepting in raising or lowering the rate of discount, a thing impossible to a public treasury. EXPORTING AND IMPORTING GOLD. There are hundreds of millions of dollars in the $2,500,000,000 of deposits in our banks waiting to be invested in bonds or stocks when they shall have been depreciated a little and to a price that will pay the buyer a larger income than normal. Millions of these funds are controlled in Europe, as there are millions in European banks controlled in this country, that await investment in stocks and bonds when rates of discount are raised, so as to slightly depress the price of bonds to a point that will pay a little more than a normal income. These stocks and bonds are always shipped from one country to another — gold only to a very slight amount. In 1891 the balance of exports over imports of gold, taking into account our gold pro- duction, only depleted our gold $700^000. In 1892 it depleted it $25,000,00Q. In the commercial agony of 1893 we actually gained $29,000,000 of gold. In 1894 our net loss was $41,000,000. Taking the bad years of 1893 and 1894 together, we lost only $12,000,OUO of gold. Balance of trade for or against a country is not a controlling influence in the movement of gold. No one wants gold excepting in times when he thinks he may not be able to get it. The certainty of getting gold "on demand,'' plus a higher rate 37 1! 40 of interest, will take gold to anyplace, regardless of whether that place has a sound or unsound currency and of every other cir- cumstance or condition. We increased our accumulations of gold by over $300,000,000 during suspension of specie payments. A doubt of getting gold on demand or a lower rate of interest will send gold away from anyplace regardless of every other con- dition, as is proved by all experience. DOUBT. FEAR. PANIC. The seeds of doubt, fear, and financial panic inhere in and are inseparable from any system of government treasury issuing or redeeming paper money. They may lie dormant, as they did in 1892, and as they do now, but we may be sure they are germinating. The fury of each succeeding financial storm will exceed the pre- vious one, even as that of 1893 did all that went before it. This is necessarily so. The manufacturing, trading, transporting, and banking inter- ests of the country are increasing with tremendous rapidity, and their delicacy and intricacy are increasing in a far greater ratio than their volume. OUR INDUSTRIAL SYSTEM IN PERIL. Every man that is so situated as to be compelled to study the situation can not help shuddering as he thinks of the peril to the whole industrial system of this country, involving billions on bil- lions of dollars: far past human comprehension. Their lifeblood is the two and a half billions of dollars of bank deposits, and these billions are made serviceable by $1,000,000,000 of currency, and that currency depends for its value on being in- stantty and certainly redeemable, and there is now only one hun- dred millions of gold legally liable for this redemption. Even that gold is not in normal contact with our currency in our banking system, but stored away in the United States Treas- ury. It is as much outside the financial and banking system of the country as though it were held by any one of a thousand indi- viduals, sole or corporate. Remember the United States is only a huge business individual enterprise, with no more banking resources than any other person. PAPER MONEY A TITLE TO PRODUCTS. The whole theory and practice of sound paper money is that the person receiving it from the bank gives the bank a title to products in his possession, in his time note, to an amount equal to the amount of paper money he receives. These products pay, cancel, and destroy the paper money he received for his time note when the note is paid. The banks in this country have in their possession $2 worth of property over and above all they owe to depositors with which to redeem each dollar of silver and paper money in the country, pro- vided they were responsible for such redemption. The United States Treasury has only 23 cents and 4 mills, supplemented by the power of taxation. TREASURY RESPONSIBLE FOR ALL PAPER MONEY. It will not do to replv that the (xovernment is responsible only for the $346,000,000 of legal-tender notes. When questioned before our committee, ex-Secretary of the Treasury Carlisle, ex-Secretary Fairchild, Secretary Gage, and Comptroller Eckles declared that, while the United States was re- 37W 41 sponsible for keeping the parity between any two kinds of money in general circulation, it was inevitably responsible, in the last analysis, for keeping every dollar of existing money at a parity by gold redemption. DUTY TO MAINTAIN PARITY INDIVISIBLE. Again, the duty of maintaining parity is not susceptible of divi- sion. Two parties can not by any possibility be equally responsible. NORMAL REDEMPTION ONLY POSSIBLE TO BANKS The very existence of sound paper money is only possible in a currency that has poteutial and actual daily gold redemption, and daily redemption is only possible in a "true bank circulating note," viz, a circulating note issued against their assets, and for which the bank receives the personal-property note (products) to a like amount with which to redeem the notes, such as are issued in England. France, Germany, and in every country excepting the United States. A government is a consumer and destroyer of every dollar's worth of products it receives for the currency it issues, and in the nature of the case can legitimately have nothing with which to redeem the currency it pays out. A bank is a preserver and increaser of every dollar's worth of products it receives in the time note of its customer for the cur- rency it issues, and in the nature of the case must have in its possession more dollars' worth of products with which to redeem every dollar of its currency than it had when it paid it out for the personal time notes of its customers. Currency issued by a bank is a certificate of actual deposit of products in the bank and their preservation. Currency issued by a government is a certificate of the con- sumption of products. UNSCIENTIFIC AND WASTEFUL. Not only is our financial system the most unscientific and inse- cure of any ever devised that maintained its paper money at a parity with gold, but it is the most wasteful. OPPRESSIVE TO AGRICULTURAL SECTIONS. It especially oppresses those sections of the country that most need the fostering care of the Government, and as a consequence they voted for free silver in 1896. Those States are nearly SoOO. 000.000 short in banking funds as compared with the per capita in those same States in I860, taking for a basis the nine oldest States in the group, while the New England, the Eastern, and the Middle States are overbanked by from .) to 20 per cent. The proof of this is found in the fact that some of the banks in the richer States are obliged to buy bonds to employ their funds in excess of what they might legitimately buy as a reserve. They now hold about §600,000,000 of United States and other bonds. Others are forced into reducing their capital, into consolidation or liquidation, by the savings banks and trust companies that own their stock. INCUKASI.S DISCOUNT RATES. In the strictly agricultural States discount rates on commercial paper are from one-quarter to one-third higher than normal, and far higher than in 1*60. Banks are practically prohibited in agricultural communities by the national banking law, and this because it compels abnormal banking. Finance and banking are as old as civilization. Their present art.' 42 form and substance are as much the result of natural law as that of anything in animate or inanimate nature. BANKING A NATURAL DEVELOPMENT. The banking and currency of all nations follow the natural lines of development, varying only in minor details, excepting that of the United Stat.-. ( >urs departs widely from fundamental prin- ciples, and is therefore insecure and wasteful, as will appear if we examine the kinds and amount of our various forms of money. We have of gold coin and bullion $950,000,000 Silver coin - - - 600,000.000 United States legal-tender notes 347,000,000 Currency certificates 20,000,000 Total money issued by the Government 1,917,000,000 National-banknotes 244,000,000 Total money in the country. 2,168,000,000 Of this $1,500,000,000 of coin every dollar our people have proved they need or desire by actual use we must have. Every dollar m< ire than that is actual waste. Where paper money is as satisfactory to the people, 5 per cent interest is lost on every dollar of gold or silver needlessly used. WASTEFULNESS ADMITTED. Every one admits that where a thing costing $100 is used where a thing costing nothing will do the work as well, or better, wear and tear and interest is lost on $100. A friend of mine used 22 hi irses to do the work around his factories and 2 miles to the sta- tion. He put in an electric railway to the station, and now keeps only 2 horses. For him to still incur the expense of the keeping, depreciation, and loss on the 20 horses discarded, because he once needed them, would be no more uneconomic and foolish than for this country to have a single dollar's worth of coin more than is necessary to make our currency sound plus what is demanded by our people to hoard or to use as currency, foolishly or wisely. AMOUNT OF SILVER AND GOLD NEEDED. We have only been able to keep in actual circulation, after spending thousands of dollars to get them into circulation, silver dollars to the amount of §05,000,000, and subsidiary silver, $70,- 000,000; a total of $135,000,000. Call our actual needs of silver money $200,000,000. We actually use $150,000,000 gold for hoard- ing and currency. One hundred million dollars redemption gold is in the Treasury, $250,000,000 only in daily legitimate use, thus leaving $700,000,000 gold absolutely out of reach of our banking system for a fundamental use, showing a chaotic condition in our banking and currency. England successfully conducted the ex- changes of the world for fortyyears on less than $150,000,000 visible _< ild, bnt it was in bank. The Bank of Englandnow has less than $200,000,000 with which to make the gold exchanges of the world. I l()W THE WASTE IS MADE. Assuming we need $300,000,000 of gold in the ' ' bank cash reserve held " in a sound banking system, we can safely have in addition • 000,000 United States legal-tender notes and 200.000,000 silver dollars, making up the $700,000,000 cash reserve that would be needed when the South and the Northwest have the same amount of banking funds per capita they had in 1860. The exhibit under ft i.' 43 our present system and under a scientific system would be as follows: Present gold in the country (950, Need for hoarding and currency $150,000, In cash bank reserves 800,000,000 450. 000, 000 Unnecessary gold 000,000,000 We have silver $600,000,hm> Can use legitimately only 400, 000, 000 Unnecessary silver 200,000,000 Legal-tender notes . $346, 000, 000 Can use legitimately only 200, 000, 000 Unnecessary legal tender 146,000. "no Currency certificates 30,000,000 National-bank currency 244, 000, ( 100 Total amount of the money that should be bank paper money 1,110,000.000 Not one dollar of this is now earning a cent to the banks or sav- ing one dollar of interest to the people by lowering discount rates. This is an anomaly never before seen in any country where parity was maintained between paper money, silver money, and gold. In Germany, in France, and in every other country, this 81,110,000,000 would be earning full interest by keeping the rate of interest on loans down by the proportion that this $1,110,000,000 bears to the whole volume of discounts in the country, a total sum at 5 per cent on it, or $55,500,000. LOSS OF INTEREST ON TREASURY BALANCES. But we are also carrying in the public Treasury $291,000,000, while England, France, and Germany average about $30,000,000, leaving $360,000,000 more than is necessary, provided we had a sound financial system. We must continue to carry this vast amount, as we have done for twenty years, in order to give the people confidence that the Treasury is able to maintain parity. This again is worth 5 per cent in the pockets of the people be- fore it was taken from them in taxes, or $13,000,000. LOSS IN TREASURY ADMINISTRATION. In addition to this it costs to administer our Treasury system, because of our violation of the principle of normal banking, about §1,500,000 more than it costs any other nation. These three items, aggregating $70,000,000, are utterly wasted. That these things are incontestibly true, is shown by the testimony of Secretary Gage. ex-Secretary Fairchild. given on incidental matters, and the other experts who came before our committee. AMOUNT OF PAPEK MONEY NEEDED. Assuming that there is a legitimate demand for the amount of money we have and that this $1,200,000,000 that requires gold re- dempion was issued by our banks, as the paper money of France and Germany is issued, our bank loanable funds would be in- creased by this $1,200,000,000. HIGHER DISCOUNT RATES COMPELLED. Interest rates now compelled in order to pay 6 per cent divi- dends on bank capital would then be reduced just as much as it o712 44 would be by adding §1,200,000,000 to the deposits, or as this sum is to about $1,000,000,000 capital and deposits and currency, less the reserve, three-tenths of 1 per cent, or from 5 per cent to 3£ per cent. REDUCTION IN INTEREST TO AGRICULTURAL STATES. This reduction of present rates of discount would not come to the over banked cities of the middle North and Northeastern States, but wholly to the agricultural sections of the country, where only currency can be used, and where the having of banks is impossi- ble, without the privilege of issuing " true bank currency." It would come especially in those States which voted for soft money in 1896 and which are now short of banking funds by nearly half a billion dollars. As it is to-day, not a dollar is added to the loanable funds of our banks by this $1,200,000,000 of redeemable money. CURRENCY AND DEPOSITS IDENTICAL. Deposits entered on the pass book of a borrower and currency issued by a bank to a borrower are identical in substance. In the case of deposits the check that draws out the deposit is made by the depositor. In the case of currency, which in substance is identical with the check, it is made by the bank and given to the borrower at the time the loan to him was made. The borrower uses currency at any time, as the check can be used at any time. The check can only be passed from man to man by each writing his name on the back of it, but, whoever holds it, it is his check on his funds in the bank. Currency passes from man to man without indorsement, but it remains a bank check of the man who holds it against his funds in the bank. USE OF UNITED STATES BONDS OPPRESSIVE. There is no more sense in requiring a bank to buy United States bonds to the amount of the obligations it assumes in accepting the proceeds of a man's time note that it discounts and gives him its own currency notes for. than there would be in compelling the bank to buy United States bonds to the amount of obligations it assumes in accepting deposits and allowing the man himself to make his own currency to draw it out, viz, his own check. When a bank discounts a time note for a customer for si. 000 and the proceeds are left on deposit, its funds are not depleted by one cent so long as the deposit remains. When a bank discounts a time note for a customer for $1,000 and tne proceeds are given the customer in '"true bank currency,'' such as banks issue in every country in the world excepting this, its funds are not depleted one cent so long as the currency is not returned to the bank for redemption. When the bank is obliged to surrender as many dollars in buy- ing bonds as it gets of currency, its capital is depleted by every dollar of currency it has in the bank. CITY BANKS FAVORED— COUNTRY BANKS OPPRESSED. Because city banks are allowed to do business by accepting the only form of deposits their customers can use. viz. bank deposits, and country banks are not allowed to do business by using the only form of deposits their customers can use, viz. currency in the hand of the borrower, interest is necessarily nearly twice as high in the country as in the central reserve ci ties. If the $650, 000, 000 deposits now in the banks in the central re- 3742 to serve cities were taken off their books by theissneto th< ir OUStonv ere of $650,000,000 of currency, and their customers were com- pelled to use this currency instead of their own checks and dra it would greatly inconvenience their customers, l>ut it would increase the risk of the banks by the Bmallesl traction. UNITED STATKS, H(\ KMANV This fact is recognized in every European country, and wis acted on in this country up to 1860. The national banks in the central reserve cities have $4.88 In de- posits and 12 cents in currency to each dollar of capital. Total, §4.45. The Imperial Bank of Germany has $4.59 in deposits and §10.83 currency to each dollar of capital. Total. $15.44. Bank of France has $3.64 in deposits and $21.05 currency to each dollar of capital. Total. $28.69. Can anyone be found so rash as to assert that the Imperial Bank of Germany is made any les cure than our banks for the reason that its deposit liability in the form of currency issued is 90 times that of our banks, or that the Bank of France is any less secure because it has a deposit liability in the form of currency issued 175 times as great as have our banks for currency issued? Banks in cities can not issue currency. Their customers can not use it. City business requires checks, drafts, etc.. identical in substance with bank currency. The customers of banks in strictly country districts can not use checks, drafts, etc. Their business requires currency. For this reason the national banking law practically discourages banks in all strictly agricultural districts and States. CITY AND COUNTRY RATES COMPARED. Banks in strictly agricultural States to-day would have to charge 7.34 per cent under precisely the same conditions as to loans that New York banks can loan for 2.98 per cent, each to pay G per cent dividend on stock. Under the European system, or under the best banking system the world ever saw. viz, the old New England Suffolk system. rates of discount on loans in the country districts to-day would be about 4.55 per cent. As I have before said, four-fifths of the $70,000,000 taxation, direct and indirect, falls on the people of the States voting for soft money in 1896, not in banks charging higher rates of interest, as the few that exist surely do, but in the oppressions arising from their lack of banks, being to-day about $500,01)0,000 short of bank- ing funds as compared with 1860. If this does not justify men in voting for free coinage, in their desperation, it certainly furnishes them some excuse. CHANGE IN SENTIMENT. Up to the date of my address before the department of com- merce and finance of the World's Fair at Chicago, on June 21, 1893. in exposition of the anomalies and hardships of our national banking law, I had always heard our banking and currency sys- tem extolled as the best the world had ever seen. In six years all this is reversed. To day there is no one well informed in the matter who does not think it the most unscientific and wasteful. Having the facts that show its shortcomings, we are brought to the question of what is the least change in the banking law that is necessary to remedy existing evils. ■67iU 46 SOURCE OF EXISTING EVILS. (1) The fundamental evil is in requiring the United States Treasury to redeem any part of the money used, in order to main- tain parity. (2) The prohibition to banks of the issuing of "true bank cur- rency," as banks do in every other country, by requiring them to buy bonds to the amount of the currency they issue, thus absorb- ing the capital invested in bonds. HKMEDY. Combine our banks through clearing houses, and make them legally responsible for the maintenance of parity, and allow each bank to issue currency to the amount of its capital, without rob- bing it of its paid-in capital in the purchase of bonds, and our banking and currency system will be transformed from the worst in the world to the best in the world. REMEDIES PROPOSED THAT WOULD NOT CURE. There have been considered in the Committee on Banking and Currency five general bills: (1) The Carlisle bill of December 11, 1894, H. R. 8149, Fifty- third Congress. In the hearings on this bill the "Baltimore plan " of October 11, 1894, was considered. (2) Gage bill of December 16, 1897, H. R. 5181, Fifty-fifth Con- gress. (3) Indianapolis commission bill of January 6, 1898, H. R. 5855, Fifty-fifth Congress. (4) McCleary bill of April 5, 1898, H. R. 9725, Fifty-fifth Con- gress. (5) Hill-Fowler bill of May 11, 1898, H. R. 10289, Fifty-fifth Congress. TRUE REMEDY. In addition to these, there is the Walker bill, introduced in 1889, which has been a constant study since, and modified from time to time to May 13, 1898, and is now H. R. 10333. I have held this bill back from formal consideration in order that all other bills might be first considered. The result is that it never has been formally considered by the committee. I will venture first to say a few words of that bill. First. It relieves the United States Treasury from all responsi- bility for the current redemption of any kind of money by putting it on the only organizations known to man that can legitimately maintain parity, viz, banks. Second. It takes the United States bonds out of the banking system and allows banks to issue "true bank currency." All currency is issued to banks by the Comptroller and guaran- teed by the Government in case of insolvency. A tax of one-fifth of 1 per cent is put upon the currency in actual circulation, which it is estimated will yield four times the amount necessary to the guaranty. Third. It saves sixty of the seventy millions now lost in direct and indirect taxation. These three things, and only these, does it propose to do, and it surely does them. It retains every real advantage of our national system. It makes national the old New England Suffolk bank system. BAD STATE BANKS. The memory of the wild-cat banks of Michigan, Illinois, and the Northwest, with a few swindling concerns in Mississippi and the 3742 17 extreme South west before IMS. together with the bond-secured sys- tem of New York, has closed the minds of out people to the i lenciesof the old State banks of New England, the Atlantic 81 and Louisiana. They were as sound and as well managed as our national banks, and with less insolvency. Of course we can not go back to State banks now, but we should incorporate into our national system all the good there w.i them. SCCCES8 A DUTY. Again, we must not forget that success in legislation is a duty in trying to secure reforms in our finances, as it is in everything else. THINGS THAT CAN HOI BH DONE. We must therefore ascertain what the people will not allow to be done, as well as what ought to be done, in order to know on what lines we can proceed in reform. First. They will not allow the United States 1>"_,'h1 -tender i to be retired either by selling bonds, using the surplus revenues, or by changing them into gold certificates; and Congressmen will not face defeat in voting for such propositions. Second. They will not allow a law to be passed that in term- demonetizes the silver dollar by setting aside a gold fund to re- deem them, and thus invite their presentation to the Treasury to be redeemed in gold. Third. The people will never consent to allow banks to put in circulation any currency not gotten of the Comptroller of the Currency and the payment of which is not guaranteed by the United States; and this because of the memory of the few bad State banks, which has tainted the memory of all State banks, good and bad alike. Every bill formally considered by the committee runs counter to all three of these settled convictions of the people. REMEDIES PROPOSED AGGRAVATE ADMITTED EVII - As every remedy proposed in each one of the five bills formally considered by the committee is incorporated in the Hill-Fowler bill, and as that bill was adopted by the Indianapolis convention as the final result of all financial wisdom, we need consider that only. DIVIDING TREASURY FUNDS. Its propositions are: First. To separate the money in the Treasury into two parts, the one part to be used for general purposes and the other part to be an " issue and redemption fund" set apart to redeem legal- tender notes and silver dollars, to be administered under rigid rules embedded in statute law. The proposed division is purely a matter of administration. It can be so done to-day without legislation. Nothing could be worse than to bind the hands of the Secretary of the Treasury in the use of any part of his funds by rigid law. Every business man knows that the financial manager ol a cor- poration, in an exigency, must have every dollar of its funds at his command. With part tied up out of reach, failure may lie inevitable, when the crisis might be tided over could the last dollar of its r< be used. The same is true of the United States Treasury. How. then, can two "tills" in which to keep the Government money instead of one avert or allay panio? 3742 4S There would be two funds to warch and to alarm the people in- ne. The division of Treasury funds, in essence, can be nothing more than a question of bookkeeping as far as liabilky is concerned. This ignis fatuus has its origin in the two departments of the Rink of England. That division of funds has never been approved by a single finan- cial institution anywhere by its example being followed. It has confessedly intensified every panic in England, and has been suspended in emergencies. It is condemned by every European financial writer and by jt of those in England. It is treated as a matter of bookkeep- by nearly all writers on finance. DESTROYING LEGAL-TENDER NOT- MAKING BANK NOTES LEGAL TENDER. Second. It is proposed to destroy the present United States legal- tender note and allow the banks to issue the same amount in a purely bank note, and make these bank notes legal tender. Is it conceivable that this operation can help our case? And this is to be done by compelling the banks to buy what are c: --rve bank notes" and pay United States legal-tender notes for them, the latter to be I -d. But the gold redemption of these reserve note- is not put on the banks that issue them, but is put on the United States Treasury. where in the bill is the responsibility for redeeming a dollar of paper money put upon the banks. How. then, can this scheme relieve the Treasury in the slightest degree: A GOLD RESERVE TO REDEEM SILVER DOLLARS. Third. It is proposed ultimately to retire all United States ^al-tender - " and these ''bank-reserve notes " as well, but stilfto leave the United States Treasury responsible for the main- tenance of parity. The bill requires a gold reserve equal to 5 per cent of our silver money to be kept in the Treasury. - retary Gage. ex-Secretary Fairchild. and all witnesses before oe - i that the Treasury was really liable for the gold redemp- tion of every dollar of the { of redeemable money. y also said that for every dollar of Government paper with- drawn or canceled this large sum would still be kept good by the issuing of additional bank currency. * . How. then, can the slightest relief come to the Treasury by retir- ing - of one "kind of paper money and adding" a like amount of another kind of paper money, when the Treasury is equally obliged to redeem all paper money; n it relieve the Treasury to withdraw the £346,000.000 legal-tender notes and pay out the $100,000,000 gold now held in the I - for the redemption of all moneys, and substitute by law g of silver for legal-tender notes as gold extractors . the Treasury, and depend upon §30,000.000 of gold instead of r :ae redemption of all moneys': It is true the bill proposes that no paper money shall be issued to banks un. : . - jut this is bad, and only bad/ It deprives the country banks of their rights to the tune of $374,000,000 of the §5-note money we now have and can be no relief to the situation. • are told that there will be such a demand for this : silver certificates that the banks can not get any of them to present to the Treasury for gold when we only have in 65, in all kinds of paper monev. a total of $377,000,000. 19 Let us see how this works out. Paper money in common use by the people- , be de- posited in banks five times a y< That shows that $25 I of these silver certificates m necessarily be deposited in banks by retail me: or they can not pay their debts. Is there any doubt about foreign bankers and • all the silver money they want to demand, any amount of the Treasury they choose to ask for? BANKS TO ISSUE TAXED PAPER MONEY WITHOUT QOTBBM Fourth. The next proposition is to allow all banks to issue cur- rency secured by bonds up to the amount of 40 per cent to capital; then they may issue 60 per cent against assets. This 60 per cent has no Government guaranty: th- la-- cent of this 60 per cent is to be taxed at the rate of 6 per ceir annum. Remember, city banks can not use currency, because it would come back to them the next morning through the clearing h This tax, therefore, all falls on country banks. Our $1,200,000,000 of redeemable money is 90 per cent of the actual capital of State and national banks. The country banks can average to circulate 80 per cent; minimum, 60; maximum, average, 80 per cent. Let us see how this bill works out as between one extreme, the central reserve city banks, and the other extreme, the strictly country banks. OPPRESSIVE TO COUNTRY BANKS. It requires the country banks, as a license fee to do business, to buy U nited States bonds to ten times the amount that the city banks must buy, and also to takeout twice the amount of re- notes the city banks buy, and pay for them in legal-tender n It fails to recognize that bank currency is identical with dep< - Why does not the bill require the central reserve city bani-: pay the same tax on their deposits in excess of - ar cent to capital: as the country banks are required to pay on their dei in the form of currency issued? The city banks are to pay nothing, while the country banks would have to pay §1.800,000. The Bank of Germany under this rule would be obliged to pay in taxes on the notes it issues siT. 000.000, and the Bank of France .s4-2.OjO.oim) per annum. If the central reserve city banks were treated the b jountry banks, they would have to pay in annual taxes (31,000,0 Need any more be said to show how unscientific as well as un- just to country banks such a provision would be? DEPRECIATES THE QUALITY OF OCR PAPER MONEY Fifth. The propositions, if enacted into law, would make p money no better by making it any more safe, freely issued, abun- dant, uniform, or elastic than now— in many of these respects not as good. TO BREAK THE ENDLESS CHAIN. Again, it is claimed that this bill, if enacted, will break the "endless chain." I really do not think, bad as it is. that the bill is as bad as that. We all know that the condition precedent to the e of the poorest kind of promise to pay that can be called money is that it is in its circulation an "endless chain."' When it really stops moving in potential and actual gold re- 3743—4 50 demption it is indeed very poor stuff. So much for the final effort at financial reform. CITY HANKS TAN NOT KEEP THEIR CURRENCY IN CIRCULATION. Because banks in large cities can not keep any considerable amount of currency in circulation in normal times is no reason why they should not take out true bank currency, as it would be no expense to them when not in circulation under a proper bank- ing law. Banks in cities doing a country business can probably keep m circulation an amount equal to 10 to 20 per cent to capital; but the average in all banks would be scarcely 5 per cent. It did not average 10 per cent in 1860, when far more could be used by city banks than now. This would leave about $200,000,000 of currency in the reserve cities that might be deposited in the clearing houses as an " emer- gency fund, ''being contributed to the clearing house in each city pro rata to capital. This fund could be loaned to banks to the amount of 75 per cent of face value of approved commercial paper deposited as security. Such an arrangement would not be open to the objections that lie against a " clearing-house currency." A LIMITED UNION OF ALL BANKS NECESSARY. To unite all banks of loan and discount under the sanction of law, through clearing houses, is fundamental to any relief to the situation so long as we have two or more legal-tender moneys. Let the United Kingdom wake up some fine morning and find in her legal-tender money one-half the amount of silver we have, and at 16 of silver to 1 of gold she would be on a silver basis in a week, unless her independent banks were in some way united into a solid union to maintain parity. Let the Bank of France be divided into as many independent banks as she has branches, and she could by no possibility main- tain parity between her paper money, silver, and gold. THE UNION OF ALL BANKS NOW EXISTS. We now do it, through the union of all the banks, in the United States Treasury, and by the Treasury being a member of the New York clearing house, but at an enormous expense and great daily peril, as I have shown. BAD LEGISLATION 8HOULD BE RESISTED. Can I be justly criticised for not favoring a scheme that would pile up several hundred millions more than there now is in the Treasury and increase expenses by ten to fifteen millions per annum, and then leave us in a worse plight than we now are? WHY NOT REFORM BY DEGREES? But why not reform our currency by degrees, allowing the people the- benefit of a part now? Yes; why not build a bridge across a river, requiring four arches, by installments, building one arch and let the people use that, and a few years later the second, and so on? No relief can come to travel without a completed bridge. So with banking and currency reform. Let me say again: First. To abolish reasonable fear and to prevent 1893 panics the United States Treasury must be relieved from the current redemp- tion of all paper money and of maintaining parity. Second. The maintaining parity must be devolved by law on the 51 only agency known to man that is capable of discharging that function, viz, banks. Third. Securely uniting all commercial banks through cleai houses, bylaw, to maintain parity, and leave them aa Lndependenl in all other things as now. Fourth. Restore to banks the right to issue currency their assets, enjoyed by all other banks the world over and by every bank in this country until the people were robbed of it iii l^ii:; in order to levy a forced loan upon them to make a ma for bonds. TnE DOMINANCE OF PETTY AMIilli Finally, no man or class of men have any moral right to force themselves between the people for their personal aggrandizement, insisting on any particular bill, and refusing to consider theai of official figures and facts conclusive in the matter that 1 have presented here and elsewhere. WISDOM, PREJUDICE, ETC. Neither must it be forgotten, as it has been thus far, that every form of wisdom, prejudice, and ignorance that pervades the mi of our people is represented in Congress, and must be reck with. Any bill drawn by any man that makes sure each of the four things necessary to complete the financial bridge should have the support of every one of us. Any bill that fails in any one of them would be an economic and political blunder equal to a crime. It would not compliment our statesmanship and should have our active opposition. STATEMENT OF USE OF GOLD ELABORATED. The misapprehension as to the use made of gold arises from the fact that the movement of gold is not studied upon the facts of its actual use and the ascertained facts brought to the test of in- ductive reasoning, but rather upon the assumption of error to be fact, and then deducing certain alleged facts from the errors and proclaiming them for truth. TWO REALMS OF WEALTH: HANKS OF LOAN AND DISCOUNT; Till >T COMPANIES. There are two realms of wealth, the borders of which are con- stantly changing and apparently intermingling, viz: Productive wealth, mostly real estate and its developments, and consumable wealth, mostly products and their making and handling. Gold coin (as coin) can not be consumed and can earn no income. It is neither productive wealth nor consumable wealth. It simply measures the value expressed in all paper obligations, Banks of discount, currency and coin, about s4. him, 000. 000, are inextricably mixed together, each being a part of the other. They handle only consumable wealth, valued at s-2.1,000,000.000. They are very slightly affected by the handling of or the movement of productive wealth. Saving banks, loan and trust companies, investment companies, building and loan companies, insurance companies, cooperate banks, benefit associations, etc., as well as individuals, unlike banks of discount and deposit, handle productive wealth, exclu- sively, valued at §40,000,000,000. Each class of moneyed Institu- tions fails in the sphere of the other. While wealth is always in process of being transferred from one realm to the other, the per- centage of transfers as compared with the whole volume, in Dor- mal conditions, is infinitesimal and of no appreciable influem ». ■4742 The balance in such movements only shows that the accumulations in one realm can be more profitably employed in the other. MONETARY CRISES OR PANICS. Monetary crises or panics always begin in the realm of consum- able wealth. Demands are then immediately made on the pro- ductive realm to supply any vacuum made by a panic in the con- sumable realm for stocks, bonds, etc.. for export, that otherwise would have to be answered by gold. Of course it is individuals embarrassed by the panic that have to furnish these so-called solid securities. The popular forms of expression are, as to par- ticular persons, "He has gone too deeply into real estate or rail- roading'* and "He tried to own his plant when he ought to have hired it," etc. GOLD SCARCELY MOVES. For the reason given gold never actually "moves" in large vol- umes. It is inevitable that millions of bonds and stocks take the place of gold, as all experience prove they do. The following tables establish and enforce these facts, as they show gold scarcely ever moves to any great amount. GOLD FREE TO MOVE. When currency and coinage laws leave gold free to move in compliance with the laws of trade, it is in accordance with all business experience that gold never moves from or into any coun- try to any amount greater or smaller than is necessary to restrain or induce to normal conditions the business activity of the coun- try, any more than the balls of the regulator of the engine describe a circle of more or less diameter than is necessary to keep the en- gine at its normal speed. IMPORTING OR EXPORTING GOLD. The importing or exporting of gold is regulated by the impera- tive demands of the foreign trade of a country, and is not actual to any extent but potential. The things really imported or ex- ported for gold, their price being forced up or down to cause the doing of it, are stocks and bonds, titles to productive wealth brought out of the realm of productive wealth into the realm of consumable wealth to be imported or exported, as the case may be, in place of gold. PAPER-MONEY OBLIGATIONS. Of course every money obligation known to finance in banking, as paper money, note, or draft, is a title to the whole or some part of consumable wealth. Whether it be near or at the anti- podes is wholly immaterial to the bank. The financier or banker takes no cognizance of the location or movement of products to which he has a title. He cares only for their value and safety. Therefore, whether the merchant in Chicago or Cincinnati buvs products in San Francisco, New York. Liverpool, Paris, China, Japan, or Mexico, obligations of ownership of which come into p<»session of a banker, their payment has no influence on the movement of the world's measure of value metal between countries, whether it be silver or gold, as payment is not made in gold, but in titles to products. NO TRADE BETWEEN COUNTRIES. There is no trade between countries. The ocean or national boundaries are not known to trade. All trade is between indi- viduals. The movement of gold across the ocean has no more significance than its movement across any parallel of latitude or 53 longitude. As the world's measure is now a grain of gold. I use the word gold for brevity. The ownership of products being In any country, or the movement of products theniselvi country to another, gives no hint of what the movemenl of gold will be. roi'l I.Alt IIKI.II'.K. The law of the movement of gold is as inexorable but different from the law governing the movement of other producl the popular belief as to how and why gold is required for ship- ment from one city to another, or from one country to another, has no foundation in fact is abundantly proven by the ann< tables. When, why, or how economic law. left free to act, as It is not in this country, will compel the actual shipment of gold is not easy of statement in a paper like this. MEN STBUOQLID Foil PBODU" A struggle for gold between individuals or nations is apparent rather than real. It is really the struggle of men for products and of titles to products to adjust the balances in exchange that is seen. When the point is reached for gold shipments, increased dis- count rates for business paper always depreciate stocks and bonds, and these titles to fixed property are shipped instead of gold. It is the same as the repression of and the struggle of steam for re- lease from confinement that gives power to the engine — gold act- ing in the movement of products as the regulator does to the engine. It is as objectionable, and no more so, as is the strug- gle of water to find its level that causes it to turn the water wheel that moves thousands of spindles. It is the duplicate in ethics of the struggle of conflicting truths to adjust themselves in practical and beneficent results in advancing civilization. Com- mercial gold is the "regulator" to commerce as surely as tin- engine regulator is to it. ACTUAL SHIPMENT OF GOLD. These tables show that an actual shipment or movement of gold does not depend upon and is not influenced by the fact that the balance of trade is for or against a city or country, or whether a city or country is a debtor or creditor city or country, but wholly upon the condition of the credit of the holder of gold, whether it is good or bad, and whether his credit is becoming better or getting worse. They also show that individuals and nations use less and less gold as they advance in intelligence, are more peaceful, and are richer. We now use only $6,000,000 or $8,000,000 of coin a day for domes- tic trade and to export. Let a proper banking bill become a law. with aproper clearing-house system, and not $2,000,000 a day would be used when all banks in the country are operating under it. INTERNATIONAL CLEARING HOUSB. With the establishment of an international clearing house, which is soon to come, scarcely more than that sum would be used each day in the whole world. In fact, as extremes always meet, and as there is nothing new under the sun. and all things come again, the time is soon corning when all the eleai ings of the world's com- merce will be made each day, by telephone and telegraph, at a single point. It will be simply the changing of gold at s point from one account to another in a clearing house, as in the days when the balances of the commerce of the world wei tied in the Bank of Venice, but little gold going in or coming of that bank, and by the simple transfer from one account to 3743 54 another of the final balance of each merchant in all countries in the world's commerce. THE GOLD PROBLEM. The difficulty economists and financiers now find in the use of silver is as sure to confront us as to gold, only with tenfold more difficulty, before fifty years are passed as anything not yet proved by actual occurrence Inventions and new methods are fast rele- gating nearly all the coin currency of commerce to innocuous desuetude. It is foreign commerce only that tests the " measure-of- value metal ''as to quantity in any financial system, according to the theory of those who fear gold depletion. Experience rightly set- tles all economic questions. England has maintained gold* pay- ments for eighty years by having from 5 to 6 per cent of visible gold to her total commerce. The United States has had for years from 16 to 18 per cent of visible gold to her foreign commerce. Again, the United States accumulated over $300,U00,000 of gold during the suspension of specie payments. India exports and imports her gold freely and in large quantities, as does Mexico, China, Japan, and all other silver countries— as to that matter, as do all gold-measure-value countries. These two facts alone confound the popular theory as to the demands for and movement of gold. The United States, again, exports gold averaging 24 per cent of gold to the balance in her favor of exports over imports of mer- chandise, while England does exactly the contrary. The United States produces from her mines 33 per cent more than her excess of exports. England, contra to the United States, imports from 4 to 8 per cent of gold to the excess of her imports over her exports. This again proves the popular theory of the movement of gold a delu- sion. The figures of production and accumulation of gold are exceed- ingly interesting, and confusing as well, excepting to those who "know it all." The world's production of 1891 to 1897, inclusive, was $1,254,922,600. In that time the visible gold in England increased $48,732,500 In that time the visible gold in France increased 118 752 900 In that time the visible gold in the United States increased 28,' 673,' 587 In that time the visible gold in Germany increased 32,250,300 Increase of visible gold in the four countries 228,409.287 Where the other §1,026,513,313 is, is only known to the wise ones who know all there is to know about the movement of gold. The world's production of gold is increasing with very great ra- pidity, going from $131,000,000 in 1891 up to $237,500,000 in 1897. Of course we have no means of ascertaining the amount of com- mercial gold in India or any other "silver measure of value" country, but India has exported more than she has imported from the years 1891 to 1894, inclusive, $22,000,000 in gold, and produces none. With a balance of trade in favor of India in 1891 of $183,000,000, she also imported $11,000,000 of gold. In 1892, with a balance of trade in her favor of $191,000,000. she exported $13,000,000 of gold. In 1893, with a balance of trade in her favor of $134,000,000. she imported $3,000,000. With exports over imports of merchandise m 1894 of $168,000,000, she exported $23,000,000 of gold. The United States from 1891 to 1897 has exported in excess of 3742 55 her imports of gold the enormous sum of $324,976,000, bnl shehaa increased in that time her store of visible gold by $78,715,00 she has produced $298,691,000 in gold. CAUSES OF THE MOVEMENT OF GOLD. What, then, do these gold tables and gold figures prove, espe- cially with the example of the Bank of England before OS? &b solutely nothing, excepting that the statements made as to tin- causes of the actual movement of gold have not the b! foundation in fact. Second. That just so far as the credit of banks is above the slightest suspicion and interest rates rise above the normal level will gold flow to them, and that just so far as there is a doubt of the future ability or inclination of bankers to pay gold, or as they reduce interest below the normal level, will gold How from them. Third. That trade is in no wise between nations, but is always between individuals, and knows no national boundaries, tarif; no tariffs, excepting as tariffs help or hinder trade between indi- viduals in one country and individuals in another country: thai it is arrant nonsense to talk of the boundaries of a country having any more relation to the movement of gold than do the lines of latitude or longitude. DISPUTE EVERY POPULAR THEORY. Space will not allow a thorough analysis of the gold tables. Studying them, any candid man will be convinced beyond ques- tion that they dispute every popular theory concerning gold and show it practically to stand still in every country, without regard to trade balances or whether the countries are what are called "debtor countries" or ''creditor countries,'' and that each most of necessity have the gold necessary to it to carry on the foreign commerce of the country, whether silver or gold measure of value countries. HOW GOLD MEASURES VALUE. Gold measures value in exchanging paper obligations, which are potentially products themselves, precisely as do scales and meas- ures in the warehouses of countries, and this regardless of whether the country is a gold measure of value country or silver measure of value country. About 187-4 every country found itself being overloaded with silver coin. Now every country is being overloaded with gold coin as well. The production of gold is also rapidly increasing, while the necessity for its use, especially in commercial transac- tions, is rapidly decreasing. New commercial devices, needing no coin, are very rapidly coming into use. It is therefore clear that the next generation will be confronted with a ' 'gold problem' - beside which the "silver problem" of this generation is child's play. 3742 56 a o c o M Q H H >— < gvi u-a t-^i t-_r ;_ - - - - - & - - 5 S u - - P t£ T = 2 £ ^ I ^ :*: » 5 R :- x 2 2 - l-'—' : :'.-'.- — ':- BO u- — ! ~ - t ! K 3 l-H 5 Percenl net ox- ports of K'>1«} 91 — X SSC3 .-" c M ~r X C -r i - ■ q r > ~ i - x' •£ ca •** ire ire cs ^p © cs — — — — 9!?> — i ©°~f > ^j'sS 01 - u a o a a M IS II ec >— < ire 99 — -*■ 9i 9J IS c sre ~ sc X <-■ ■>* -- :r .— i M >-i is SC CJ SS TI -* 91 OS x' 2 — ' cohJi-T 2f "S so S eo t- « c: ■* i- ere 9! 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CO •A 5C x — _■-='?' * t-'ootot-'xo" O ■■*• co _ ~ > fi C5 CC t- r- Ol l.O 01 X ;* 3 3 <* o5 t- >o x c- t- t— x en o CO id o M as a tt— jg co — io jC i^ B /: x X X x 5: x •a C W s o CX a! - o ! * i~ m $186,900 1 59,700 185,300 — 3 oi — -.r — — ■ o vr -c — — i-icOOilO I— 1 CO oi 16.04 22. 34 24. 18 29.87 27.68 26. 59 25.44 c? 3 E8S3SSS oo r* zc x o 35 1- cp c. »c c» m^- as *5 t *i«] IQ — — r- 1 t- <— " •■*< X »C OS X -. r Ci X O tO c-ico rococo coco uO — » x~ — « CO ph to 35 e* © *o »c i> !D irf x "i^ x ia 8 $115,380,043 90,201.444 81,612,153 109,845,107 96,163,484 118,064,507 82,085,915 1 o OS *--+ — i-co 3 n kQ Ol — CO rH CO CO t-~t- fflt— ' oo to i -" ».o ^- x — / ~ — < r-l Ol CO 01 O iS -# ro tc x'l-'cc: bTi-h c i- a co — -c x O -"*" CO CO CO CO ^* a s s si I CO u a o u V Q cx- .£x r a" W a X X > X — > s 6 « r. O «^H^- r f '■'. 1. /- J — c-i ji co co cd — ' ■£. i - s CO ^^ :" -t i-coio e — ^t" CO CO CO *f "& CO - r cj — :o i- c; _ CO x — ■ I- ~>>~ i -—.:-. — -■ — |x'o!x'-£— r'.;' c; — -^ x K id 'ri •^: - x 1 Si""' - - '- S 2 — — * - "" — S ! <~- — — co i - — ' — ' — — ' g f o co' 3 2 - r. r — 4 s r. CJ -- s - 7; '/. 3c 3 - = a = I i - r. - /. - : < - - - - z - - - - - - - - as 3742 58 S c - Q - — S3 i '( rcent- age of product i>f gold to ex porta over im- ports. age of product of gold to im portn over ex- ports. eccci © £-3 2*3 - ^ S X X X= X •3 xQ^CDG C < M 25 sS-Stls a skills Balance of gold exports over imports. co CO t- i-T 98 in I— Balance of merchandise exports over imports. Percent age of gold im- ] k irts over ex- ports to mer chandise imports over exports. COHOOOIS X — — X — i 5 ->* Balance of gold imports over exports. Xt-t-©© c: t- x 5 x set 55© in co"-* r'c: ■- N l- .- H — t-x c: c5oi C". 0» >-0 X -* JJCONiat- t— — co CO t— in CO X iH t-~ Balance of merchandise importsover exports. — ■- I! ~. •— X X t- ri c~i ro — co co NpHt-X X t- CO — co" ~" ■* — ' t- co rj =tf 85 i5«5 © 3s — -Z. CO 9 CO t- t- t- CI co --* o « to to > 1 co — 5 s .5 i - j ' 3 : - » - 1' 5 3 I c t a < s. ! 4 1 3 lO C l-O — — X CO t- SiaSH x eg HOCftlOCDOCO co co* ■ .-" ei 'co" co" t~T ci rf SB co ■* u5 in 9 £S t-coco o; — C! Ci X — — I i - X c:"oco"xj"co" co cr. 2 5 ! 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V / 3 3 - t" - 9 1 1 1 X : 3 i c £ o H SO < H CC 6a O b - - sa z M s B Q - \ - 3742 55th OonCxRESS, ) HOUSE OF REPRESENTATIVES, J Bbp'T 1575, 2d Session. ) ( Part 2. [Especially note pages 175 to 180.] TO SECURE TO THE PEOPLE A SOUND CURRENCY. June 23, 1898. — Committed to the Whole Bouse on the state of the Union aud ordered to be printed. Mr. Walker, of Massachusetts, from the Committee on Bankiug and Currency, submitted the following VIEWS OF THE MINORITY. [To accompany H. R. 10289.1 The undersigned respectfully dissents from the views of the signers of the favorable report on bill H. R. 10289, and recommends that all after the enacting clause be stricken out and the text of bill II. R. 10,333, introduced in the House by Mr. Walker and referred to the Committee on Banking and Currency, be inserted in its place. WALKER BILL THE ONLY REMEDY. I can see no conceivable relief from the present financial and banking conditions of the country, but on the other hand the certainty that it would be made worse by enacting any general bill referred to the com- mittee, excepting the Walker bill H. R. 10333, and the bills before the committee have steadily grown worse, culminating in the Hill-Fowler bill, H. R. 10289. Not one of the bills presented to the Committee on Banking and Currency, except the Walker bill, recognizes — much less fearlessly and closely follows — any known principle of economics or any recognized banking principle. Not one of them except the Walker bill safely and securely does any one of the four things absolutely necessary to be done to relieve the situation, viz, 1. To relieve the United States Treasury from the current redemption of every form of paper money and from any responsibility for maintain- ing the parity of our various kinds of money. 2. The devolving of the duty and responsibility of maintaining parity between all moneys upon the banks. 3. The allowing of banks to issue true bank currency — i. e., to issue currency against their assets. 4. The securely uniting all the commercial banks in the country through clearing houses into one strong body to maintain parity between all moneys. From the first section to the last section the two bills are antagonistic. b & a 9 VJl) 130 STRENGTHENING THE PUBLIC CREDIT, ETC. Prom the opening to the close it is the Hill Fowler bill, ) ...versus ( Walker bill, H. R'iom" 7 j VerSUS J U.K. 10333. The results of) vorsua C The results of ratiocination S * investigation. A putting into the present^ ( A putting into the present law things new, incon- I „___„ J law thiugs old, harmoni- gruons, and untried, or f " ' " vcl&Ub - ■ ■ ^ ous, and approved by ex- that have tailed J I perience. The Hill-Fowler bill (H. R. 10289) does not propose to and does not effect a solid union of the commercial banks of the country. It leaves each bank in its present inflexible, isolated, and panic condition. It thereby leaves out of its scope its avowed purpose and makes it impos- sible of being accomplished by the bill. The Walker bill, on the other hand, is written in accord with recog- nized economics, and adheres in every sentence to sound banking principles, it secures a solid union of all commercial banks into a log- ical system and provides for the safe and complete transition of every commercial bank in the country, were it done even during a panic, from its present inflexible, isolated, and panic condition into an elastic, cooperative, anti-panic system, and makes it an integral part of a sym- metrical and firmly constructed and completed whole, which is abso- lutely necessarv as a condition precedent to any substantial relief of the United States Treasury and banking conditions in any safe and wise financial and banking legislation. UNION OF ALL COMMERCIAL BANKS. The warp and woof of the Walker bill is the taking of every com- mercial bank in the country out of its perilous condition of isolation, which invites and contributes to such panics as have frequently visited them during their whole existence, by allaying antagonism and shut- ting out all injurious competition and rivalry between banks, induced by their isolation, through clearing houses that now exist. Thus it is made sure that the banks will maintain parity, by making it for the interest of each bank to assist all other banks in doing so, by uniting all banks in one symmetrical whole to enable them in combination to maintain parity successfully, which is impossible in isolation, i.e., main- tain the parity between silver coin and gold coin, and maintain the parity between all the various forms of our paper money and our coin money by making it profitable for the banks to do so, and forcing it upon unpatriotic and reluctant banks by a tax of one-half of 1 per cent per annum on deposits if the banks as a whole fail to maintain parity, and. unlike the Bill- Fowler bill, cutting the banks and individuals off from getting any gold out of the United States Treasury under any circumstances. MAINTAINING PARITY. The Hill-Fowler bill does the exact opposite of the Walker bill. Enacted into law it would call for more gold from the Treasury and heavier taxation to maintain parity under the present Treasury system, and make conditions worse than they now are. Its effect can be certainly predicted from the experience of the past, STRENGTHENING THE PUBLIC CREDIT, ETC. 131 not only of this country but of all others. Isolated banks, each inde- pendent of the other, in no country have found it possible to keep silver coin and gold coin at a parity and freely circulating side by side as it is assumed they can do in the Hill Fowler bill. Parity never lias been kept between gold and silver, excepting where the hanks were united to do it. Not an example can be found to justify the Hill-Fowler experi- ment. The experience of this country and of all others fails to justify it. The sharp rivalry between our independent hanks, prior to 1834, compelled every bank in the country to redeem its circulating notes in silver dollars, because the value of the bullion in the silver dollar was 3 to 4 per cent less than the bullion in the gold dollar. After 1834 not a silver dollar was paid in redeeming its circulating notes by any isolated bank in the country, because the bullion in the new silver dollar was worth from .'5 to -1 per cent more than the bullion in the gold dollar. Banks had silver dollars in their vaults, hut they always insisted ou a premium of 3 to 4 per cent in paying them out. NEW YORK CLEARING HOUSE. Parity is now maintained in this country by the United States Treas- ury, by the Treasury being a member of the New York clearing house, thus making the United States Treasury ultimately responsible for its transactions at an annual cost of scores on scores of millions of dollars taken from the people in taxes. To do this also requires that hundreds of millions of dollars shall at all times be in the Treasury, practically as a guaranty of its solvency, for maintaining parity. The national banking law has come to be one of the most oppressive legacies of the civil war, in its continued forced loans on the people in compelling the purchase of United States bonds. The Hill-Fowler bill proposes to continue it for eight years. It differs as much from the freedom and independence of normal and free banking and the issuing of normal bank currency as does martial law and the provost-marshal from normal liberty and the jury trial. BANK OF ENGLAND SYSTEM COPIED. But the most illogical, uneconomic, and indefensible proposition in the whole list of things proposed to be done, and a thing not consistent in a law drawn on true banking principles, is the proposal to create in the United States Treasury a department of issue and redemption. Such a department would be not only useless, but wholly vicious. If there is one thing more than another that is well settled in the management of banks, treasuries, corporations, and private linns, it is this, viz, that every dollar of what is designated "money funds" must be at the free use of the responsible manager of them, especially in times of panic. The avowed reason for creating this department is to destroy the United States legal-tender notes directly or indirectly, either by chang- ing them into a gold certificate or by canceling them outright. To resort to such a cumbersome device for that purpose could only have been sug- gested by the double-headed contrivance in the Bankof England. I; has been condemned, as to the Bank of Ihiglaud.hy nearly every writer on finance in Europe and by the best thought in England. It has never once been approved in the whole world by the only possible method of expressing a genuine upproval of a financial device, viz, by imitation. I shall treat further on this subject in closing this report. 132 STRENGTHENING THE PUBLIC CREDIT, ETC. The Hill-Fowler bill attempts the impossible feat of grafting on to the Government Treasury, which has no banking resources or banking machinery, the double headed Bank of England issue department and banking department system, winch is unworkable excepting by a bank with the immense resources and in the strong position of the Bank of England. It is believed by every European financier to be a source of the most grave embarrassment and peril to the Bank of England in times of monetary stringencies or panic. The bill proposes this without tak- ing cognizance of the conditions here as compared with the conditions in Great Britain, should (heat Britain wake up some fine morning and find in her coinage system $500,000,000 of silver as full legal tender at 16 of silver to 1 of gold, she would go to a silver basis in a week, unless all her banks were united, either voluntarily or under compulsion of law, into a solid and indestructible union, as is provided in the Walker bill. Should the Bank of France, with its hundreds of branches, be dis- solved to day into as many independent and isolated, antagonistic banks as it has branches, as our banks are now isolated and independent and antagonistic to each other, France would go to a silver measure of value in a week. Nothing keeps the paper money of France or Germany at a parity with specie and silver to the "gold measure of value" other than tiie union in each country of all the banks, practically if not actually branches of one bank and thus brought into a solid union, as is provided for the banks of this country in the Walker bill: and noth- ing keeps the money of the Empire of Great Britain to parity with the gold measure of value but her coinage conditions, in which there is no "primary legal tender silver money." Our banks are loosely held together to-day only through the sub- treasury, with its $200,000,000 to $300,000,000 idle surplus, and sale of bonds to maintain parity in times of panic, taxing the people millions upon millions to do it, instead of keeping a balance of only $20,000,000 to $30,000,000 in the Treasury, as is the case in France, Germany, and Great Britain at comparatively no cost in taxation. GOLD REDEMPTION OF SILVER. To provide that our $500,000,000 legal-tender silver dollars shall be redeemable in gold dollars by the Government, and for keeping an additional gold reserve for that purpose, is one of the most unnecessary, inconsistent, and remarkable, not to say ridiculous, provisions that could well be incorporated in a banking bill. Do they not know that this is demonetizing silver? This seems especially so in view of the ease with which France and Germany carry, at par with gold and as primary money, their great stocks of silver. But the objective claimed as of vital importance to be reached by the Hill-Fowler bill is the elimination of the United States notes from demanding gold of the Treasury, either by making them a part of the bank notes, viz, by sub- stituting for them the "national reserve notes" of the Hill-Fowler bill, to be issued in place of them, or by buying them up by the Gov- ernment with the taxes collected and then destroying them. The Hill- Fowler bill does not do this by inducing the banks to assume the identical United States notes by making it profitable for them to do so, as in the Walker bill, but by attempting to substitute a new "legal- tender bank note" for them. The reason given for proposing the destruction of the $340,000,000 of greenbacks is that they " menace our whole financial system in their power to extract gold from the Treasury." STRENGTHENING THE PUBLIC CREDIT, ETC. 133 SILVER DEMONETIZED. But the Hill-Fowler bill proceeds, in the same bill that would destroy them, to add $500,000,000 of silver dollars to their national reserve bank notes and other bank notes as abstractors of gold from the Treasury, and would have us believe that this is a cure for all our financial and banking ills. Having experienced the delights of the vision of seeing the United ►States notes destroyed and of resurrecting a bank note from their ashes, in the proposed " national reserve note," and having exercised the supreme power of making this '-national reserve note" the equal of gold as a legal tender, their power grows on what it feeds. Tiny then proceed to destroy the $500,000,000 silver dollars, as such, and to res- urrect them as abstractors of gold from the Treasury; that is to say, they destroy the United States notes in order to save the country from the perils of having $1,200,000,000 of currency, including the United States notes and resting upon them. In turn these $346,000,000 rest upon the $100,000,000 of gold in the United Stales Treasury. Then they immediately proceed to destroy these silver dollars as such and resurrect them. In addition to the paper money now in the country, and in addition to the bank currency, their bill will call for from $200,000,000 to $500,000,000 to add to our $1,200,000,000. Adding this $300,000,000 bank currency to the $500,000,000 silver dollars, and this to the $1,200,000,000 paper now out, makes $2,000,000,000. This 82,000,000,000 is to rest upon the $500,000,000 of the gold redeemable silver dollars, and these silver dollars in turn rest on only $25,000,000 of gold in the Treasury. FINANCIAL WISDOM OF THE HILL-FOWLER BILL. That is to say, we now have $100,000,000 of gold in the United States Treasury to redeem $1,200,000,000 of currency, or eight and one-third per cent of gold to each dollar of paper. The Hill-Fowler bill proposes to add from two to four hundred millions in bank paper and our $500,000,000 silver, as abstractors of gold from the Treasury, and rest that $2,000,000,000, more or less, ultimately on $25,000,000 of gold in the Treasury, or one and one-quarter per cent of gold to each dollar of paper. Of course this statement will surprise the authors of the bill more than anyone else who reads it. Their bills bear no internal evidence of any section of them having been brought to the practical test of be- ing carefully " worked out" by trying any one of them on to our present system as modified by them, while every section, paragraph, and line of the Walker bill shows it to have been subjected to that test. Should every dollar of the United States notes be destroyed by the working of the Hill-Fowler bill, all the gold would then be released from the United States Treasury except $25,000,000, which is set aside to redeem $500,000,000 of silver dollars. Is it wise to retire $34C,000,000 United States notes and $100,000,000 gold, and to substitute $500,000,000 in silver and $25,000,000 in gold in their identical olticet BANKING CONDITIONS IN RURAL SECTIONS. At this point the question will naturally be asked by those who live in sections of the country that have not felt the hardship of the pres- ent banking law: Why is there any need of amendments to relieve the present situation other than to ••reduce the tax on currency," and to 134 STRENGTHENING THE PUBLIC CREDIT, ETC. "allow banks to issue currency to the par of bonds," and to "allow national banks with as little as $25,000 capital in places of 4,000 people or less," as the bankers have been asking to have done for twenty years? First, under the present law banks of small capital, orof .$100,000 capi- tal, for that matter, can not exist where there are now no banking facili- ties, and the throe amendments proposed would in no way improve present conditions, so as to permit them to exist. On the other band, to "repeal half the taxes on circulation," and '•allow banks to issue currency up to the par of bonds," would still further reduce interest where it is now lowest and increase interest where interest is now the highest. It would have exactly the opposite effect of the rational amendment of the law provided in the Walker bill, viz. to halve the preseut rates in strictly country districts while not materially reducing or increasing interest rates in city districts. INTEREST DOUBLE NORMAL RATE. To-day interest on bank loans in country districts is nearly double the normal rate, and made so by the law, while they are at the same time made a small fraction lower to borrowers of city banks by the law. Under the present law, the normal rate of interest on the same secur- ity on the same time and on the same amount would be about 2.98+ per cent in the three central reserve cities, were no interest paid on deposits, as compared with 7.34 per cent in country districts, and these relative rates are compelled by the law; that is to say, they would be were there any strictly country banks, but there is not one strictly "country bank" today. They can not exist under the law as it stands. Under the Walker bill, with the currency provided therein, the rate would be 4.55 per cent in the country as compared with 2.98 per cent in the central reserve cities. BANK CAPITAL. Persons will hardly put their capital into a bank unless they are reasonably certain of receiving 6 per cent dividends on the bank stock, in order to show the rates of interest banks must charge under the present law, under the Hill-Fowler bill, and under the Walker bill to pay 6 per cent on the bank stock, I have worked out the following examples of the practical working of the three systems: In the case of No. 1, formed under the present law, a country bank would be compelled to charge 7.34 per cent on its loans to pay 6 per cent dividends on its stock, or 1.31 percent more than the stockholders could individually loan their money for and get 6 per cent, while a city bank could loan for 2.98+ per cent and pay 6 per cent dividends. In the case of No. 2 a Hill-Fowler bank in a central reserve city could pay per cent dividends on its stock and loan money at 3.03+ per cent. Hut it is shown in the case of No. 3 that a Hill-Fowler country bank must charge 0.0+ per cent to pay G per cent on its stock. A rate of interest of per cent would not make it an object to form a bank. But No. 4, a Walker country bank, could loan money at 4.55 per cent and pay per cent dividends. N<>. 5 shows a central reserve city bank can loan money at 2.98 per cent or at less rates under the Walker bill than under the Hill-Fowler bill. STRENGTHENING THE PUIJI.IC CREDIT, ETC. 135 No. 1. PRESENT LAW, 001 NTKY BANK. Capital $150, 000. 00 Deposits ."»7, 1 i.;. nit Circulation, 00 per cent of $37,500 bonds 33, 75o. on Total 240, 893. 00 Deductions: Paid for $37,500 bonds, at $113.55 $42, 581.25 5 per cent redemption paid on $33,750... L, 687. 50 15 per cent reserve on $57,143 deposits... 8,571. 15 20 per cent currency not in circulation 6, 750. 00 59, 590. 20 Possible loanable funds 181, 302. 80 Receipts: Interest on $42,581.45 paid for bonds, at 2.4 per cent. . 1 , 021 . 95 Interest on $181,302.80 loans, at 7.34+ per cent. 13. 315. 55 Exchange account 1, 000. 00 Total 15, 337. 50 Expenditures: Tax on circulation, 1 per cent $337. 50 Salaries, etc G, 000. 00 6 per cent dividend on $150,000 stock 9, 000. 00 $15,337.50 PRESENT LAW, CENTRAL RESERVE CITIES. Capital $150, 000. 00 Deposits 050, 000. 00 Total 800, 000. 00 Deductions: United States bonds, or 2.4 per cent capital, $3,000, cost $4, 087. 80 Reserve required 162, 500. 00 1 GG. 5S7. 80 Possible loanable fuuds 633, 412. 20 Eeceipts : Interest on cost of bonds $4,087.80, at 2.4 per cent. . . 98. 1 1 INTERESTON $633,412.20 LOANS, AT 2.08+ PER CENT. 18, 901. 89 Exchange account 2, 000. no Total 21,000.00 Expenditures: Salaries, etc $12,000.00 6 per cent dividends on $150,000 stock. . . 9, 000. 00 21,000.00 136 STRENGTHENING THE PUBLIC CREDIT, ETC. Fo.2. HILL- FOWLER, CENTRAL RESERVE CITY BANK. Capital $150,000.00 Deposits 050,000.00 T, ,tal 800, 000. 00 Deductions: United States bonds required, equal to 2. 4 per cent of capital, or $3,000; market price, 8113.55 ; cost of bonds $4, 087. 80 12.8 per cent of capital, or $19,200 of United States notes exchanged for ''re- serve note," $19,200, and 5 per cent re- demption fund 900. 00 Reserve required 162, 500. 00 167,547.80 Possible loanable funds 632, 452. 20 Receipts : ^ per cent paid on reserve notes taken 96. 00 Interest on cost of bonds, $4,087.80, at 2.4 per cent. . 98. 11 Interest on $632,452.20 loans, at 3.03+ per cent . 1 9, 180. 89 Exchange account 2, 000. 00 Total 21,375.00 Expenditures: Tax, £ per cent on $150,000 capital $375. 00 Salaries, etc 12, 000. 00 6 per cent dividend on $150,000 stock 9, 000. 00 21,375.00 No. 3. HILL-FOWLER COUNTRY BANK. Capital $150,000.00 1 deposits 57, 143. 00 Circulation 150, 000. 00 Total 357, 143. 00 Deductions: 5 per cent on $60,000 " reserve notes" $3, 000. 00 5 per cent on $60,000 " bank notes" 3, 000. 00 5 per cent on $90,000 "currency notes" ... 4, 500. 00 Paid for 40 per cent to capital bonds re- quired, at $113.55 68, 130. 00 Reserve required 8, 571. 00 Redemption fund on $90,000 1, 000. 00 20 per cent currency not in circulation 30, 000. 00 118. 201. 00 Possible loanable funds 238, 942. 00 STRENGTHENING THE PUBLIC CREDIT, ETC. L37 Receipts: £ per cent paid on reserve notes taken $187. 60 Interest on $68,130 paid for bonds, at 2.4 per eent 1,035. L2 Interest on $238,012 loans, at (5.0+ per cot.. 14,352. 38 Exchange account 1, 000. 00 Total 17, 175. 00 Expenditures: Tax of 6 per cent on $30,000 currency notes . $1, 800. 00 Tax of £ per cent on $150,000 capital 375. 00 Salaries, etc G, 000. 00 6 per cent dividend on $150,000 stock ..... 9, 000. 00 17,175.00 No. 4. "WALKER COUNTRY BANK. Capital 81 50. 000. 00 Deposits r.7. ] I.;. 00 Circulation 150, 000. 00 Total 357, 143. 00 Deductions: 5 per cent redemption fund, $120,000 cur- rency in actual circulation $6, 000. 00 15 per cent reserve on deposits 8, 571. 45 20 per cent currencv out of circulation 30, 000. 00 44,571.45 Possible loanable funds 312. 57 1 . 55 Receipts: Interest on $312,571.55 loans, at 4.55-1- per cent. 14, 2 10. 00 Exchange account 1 . (too. 00 Total 15, 240. 00 Expenditures: Tax on $120,000 in actual circulation 0.2 per cent 2 10. 00 Salaries, etc C^ 000. 00 6 per cent dividends on $150,000 capital . . 9, 000. 00 15, 210. 00 No. 5. WALKER CENTRAL RESERVE CITY BANK. Capital $150, 000. 00 Deposits 650, 000. 00 Total 800. 000. 00 Deductions: Reserve required 25 per cent of deposit 162, 500. 00 Possible loanable funds o;;7. 500. 00 138 STRENGTHENING THE PUBLIC CREDIT, ETC. Receipts: Interest on $(137,500 loans, at 2.98— per cent . . $10, 000. 00 Exchange account 2, 000. 00 Expenditures: Salaries, etc $12:000.00 6 per cent dividends on $150,000 stock ... 9, 000. 00 21, 000. 00 These examples of six banks show that country banks can be formed under the Walker bill and loan money at half to two-thirds the rates of interest charged by banks on loans at the present time, namely, at 4.55 per cent. They show also that the interest rates by county banks formed under the Hill-Fowler bill must be 31 per cent higher than under the Walker bill. It will be noticed in example No. 2 of a Hill-Fowler city bank, that the "reserve" required in cash in city banks is $102, 500 The ''reserve notes" the city bank must pay for in United States notes are about one-half what the country bank must buy, or $19, 200 The gold the bank must have in its own vaults is. . . 81, 250 100, 450 Balance 62, 050 Thus the city bank can keep all its "reserve notes" in its own vaults and with its gold still use any lawful money for 62, 050 It would not be possible for any one to make a demand upon this city bank for one dollar of gold. So it would be with every reserve city bank in the country under the Hill-Fowler bill. Take example No. 3 of a Hill-Fowler country bank and the situation is reversed. It will be seen that the "reserve" required is $8,571, while the bank must buy double the "reserve notes" the city bank buys. Only two fifths of this reserve is required to be in cash ; the other three fifths may be in amounts due the bank from other banks, and only one fifth or $1,714.20 in gold. It figures out as follows: The " cash reserve" required is $3, 428. 40 $1,714.20 to be in gold. The "reserve notes" the bank must pay for in United States notes are $37, 500. 00 The gold the bank must have in its own vaults is 1, 714. 20 39,214.20 Its "reserve notes" in excess of those it can use in its cash reserve are 35, 785. 80 It will also be observed that the country bank must invest $68,130 in United States bonds and take out bank notes more than sixteen times as much as the city bank with the same capital. The city bank is only required to invest $4,087.80 in bonds. The city bank will not bother with any currency. It cuts no figure in its business. But the country bank must pay out this $35,785.80 "reserve notes" and also its $37,500 "bank notes," a total of $73,500. This paper money always finds its way into the city banks to be by them exchanged for the gold of the country banks in redemption and then returned to the country banks. STRENGTHENING THE PUBLIC CREDIT, ETC. 139 The Hill'Fowler bill forbids the massing of gold to scenic in com- bination the maintenance of parity. The Walker bill carefully provides for massing all the commercial gold in the country in the National dealing House in New York and also in San Francisco in order to make sine the maintenance of parity as is now done under the present law. Not a dollar of gold can he bad to day, nor for thirty years, in redemption of a United States note, from the United States Treasury in Washington. Only in New York and in San Francisco can it lie had. Only by this massing of gold can parity in gold redemption lie maintained. The Hill how lei' hill, on the other hand, divides the gold Into driblets. In hanks of $25,000 there would he about $285.71 in gold and so on up. In a bank of $100,000 about $1,142.86. The $25,000 country hank is expected to redeem in gold over its own counter $26,250 paper money with $285.71 in gold, and the $100,000 country hank to redeem in gold $lOf>. 000 of its paper money with $1,142.86 in gold when some crank or combination of panic-stricken people makes a raid on the bank. The Walker bill provides for massing the gold. The amount the whole 10,000 banks are "required to keep" is from $200,000,000 to $400,000,000, in order to make the maintenance of parity absolutely secure, and leave the country banks to redeem the currency they issue as they choose in any kind of lawful money. There is no other possible way of safely maintaining parity with gold when large amounts of other "lawful money" are in circulation. Our whole monetary system would break down in the first panic under the Hill-Fowler bill, and the Government would be again selling bonds for gold. NO PROVISION FOR TRANSITION. Again, there is no provision made to insure safety during the tran- sition, were not the scheme absurd. The first country bank that trans- fers from the present system, under winch the United States Treasury maintains the parity, to the Hill-Fowler system, where the banks are to maintain parity, will have to support with its $280 in gold the whole §1,000,000,000 of our paper money or stop issuing its circulating notes. But they say no: the Treasury will still do it. Of course it will still do it; but because it will always have to maintain parity, as now, the Hill-Fowler bill is not worth the paper it is written on. If one bank organized under the bill does not assume the obligation to relieve the United States Treasurer of maintaining parity, will two, or two hundred, or two thousand, or ten thousand? Just how many will be required to organize under the bill to remove from the Treasury the obligation to support the banks as to parity instead of the banks reliev- ing the Treasury of maintaining parity? There is no possibility of the banks taking upon themselves that duty. The Treasury conditions are made worse by it. Under the Walker bill not a bank organized under it assumes the slightest obligation to assume the maintenance of parity and thus relic \ e the United States Treasury of that burden until a certain time arrives. decided on by the Secretary of the Treasury, and then in an instant, at a signal agreed upon, every commercial bank in the country is in the system in a flash. All commercial banks are instantly united to main- tain "parity,"' and the United States Treasury is as thoroughly relieved at once and forever from all responsibility as to paper money or coin money, other than police supervision, as is Smith, Brown, or any other citizen. 140 STRENGTHENING THE PUBLIC CREDIT, ETC. DEFICIENCY IN BANK FUNDS. Very carefully prepared tables are published in the appendix to this report which show that the total actual capital of both State and national commercial banks is about $1,400,000,000, that the actual cash reserve held by them is $560,000,000, and the total reserve held by those banks is about $1,000,000,000. All of these banks would be brought into the national system under the Walker bill. They also show that the deficiency in 1897 in national-banking funds in the nine Southern agricultural States in which banks were well developed in 1800, is about $284,000,000 — in those nine States alone. It is safe to assume that had national banking been as free in these States — Alabama, Georgia, Kentucky, Louisiana, Missouri, North Carolina, South Carolina, Tennessee, and Virginia — as in 1860, the national-banking funds now in use there, in excess of what they are, would have amounted to $371,000,000, and would be divided as follows: As the masses of the people in the South during the slave period used comparatively little currency, checks and drafts were employed out of all proportion to their use in the Middle States where slavery did not exist. The banking funds of the Middle States were, capital 42 per cent, deposits 16 per cent, and currency 42 per cent. Resolving the $370,933,761, estimated deficiency in banking funds in the above nine States, into the component parts of capital, deposits, and currency, the probable increase in each is shown: Probable increase in capital $155, 792, 680 Probable increase in deposits 59, 348, 401 Probable increase in currency 155, 792, 680 AGRICULTURAL STATES. Taking the fifteen additional agricultural States that supported cheap money in 1896 — Arkansas, California, Colorado, Florida, Idaho, Kansas, Mississippi, Montana, Nebraska, Nevada, Texas, Utah, Washington, Wyoming — the deficiency in banking funds would be fully $500,000,000. Under the Hill- Fowler bill the improved conditions for establishing banks are of such a trivial character that no perceptible increase in banks could be made, while under the Walker bill the chances of improvement, based upon the banking conditions existing in 1860, would be such that, in a brief period, banks would be established using addi- tional capital, deposits, and currency to the amount indicated. Of course the statement is made that this banking capital does not exist and can not be had at the South and in the other agricultural States, because of a lack of personal propeity in those States. This has not the slightest foundation in fact. There is not a single economic fict to justify that statement. Deducting the value of the slaves, the assessed value of personal propeity per capita in 1860 was $85.78; in L890 it was $85.44. It is thought by conservative men — students of economic conditions of the South— that since 1S90 the personal property lias increased certainly one-quarter, and some put it much higher. It is thought that the personal property per capita in 1900, in the Southern States named, will reach $125, or more. At any rate, what we know of the personal property in the South gives no justification for the state- ment that the lack of banking funds at the South is due to the poverty of the people there to-day, as compared with that of 1860, but rather it is due wholly to the oppressive national banking law. STRENGTHENING THE PUBLIC CREDIT, ETC. 141 CITY BANK FUNDS. The population of cities in the United States having 10,000 people or more is 20,781,474. The total banking fnnda of those Mime cities are $2,283,320,423. Assuming thai the banking funds in those cities serve half as many again people as live in those cities, it would bring the number of people served by that banking capital up to 31,172,21 1, ami would give s T.'!.L'o per capita. Places in the country of less than 10.000 people have a population of 41,840,776. Deduct from that population 10,390,737 served by the city banks, and it leaves 31,450,039 to be served by the banks in the places of less than 10,000 people, or $23.38 banking funds, or one third as much per capita. CITY BANKS CAN NOT ISSUE CURRENCY. The fact that the business of the city bank is such that it can not issue to a profit currency notes where currency is issued on the true banking principle, can not be too persistently insisted upon. Where currency is redeemed in the natural way by a city bank, it goes into the city clearing house the next morning with checks, drafts, and bills of exchange against the bank, and in a city where business is done by checks and drafts, and but a very small percentage of currency is nxd in proportion to the business done, the bank has no possible way of keeping currency in circulation. The only reason they have been able to do so in the last thirty years is because no genuine country banks could exist under the national banking law, and therefore compara- tively no currency was issued in the country, and the city banks occu- pied with their currency the country districts, the country districts paving interest on what they should have had for nothing. This state of things would end at once under the Walker bill. NEW YORK CITY BANKS IN 18G0. All the banks in New York in 185G only issued 15 per cent of cur- rency to their capital. It ran down to 11.42 per cent in I860, and that currency was issued by those banks that had a country business, although located in the city. The Bank of Commerce, with a capital of $0,000,000, had a circulation of only $2,000, one-tenth of 1 per cent of its capital. The City Bank, with $1,000,000 capital, $2,000,000 deposits, issued no currency, while the East Kiver Bank, whose name indicates the business of its patrons as with stevedores and with people who come into the city with boats, issued only 40 per cent to its capital. CHICAGO BANKS. The Chicago banks have only 2.5 per cent of circulation to their capital. They hold United States bonds to an amount entitling them to take out $1,215,000 in circulation and have taken out only 9616,365, of so little value is currency to city banks. If all the banks in Chicago were not forced to buy bonds as a license fee to do business probably not a dollar in currency would have been taken out. INJUSTICE OF 6 PER CENT TAX ON 20 PER CENT OF CURRENCY. The Hill-Fowler bill exhibits the result of minds exceedingly fertile in devising ways for depriving country sections of banking facilities, 142 STRENGTHENING THE PUBLIC CREDIT, ETC. one of which is to tax currency issued in excess of 80 per cent to capital. A.8 deposits to a city bank are to it what currency is to a country bank, if the currency in excess of 80 per cent to capital is to be taxed 6 per cent, then deposits in a bank in excess of 80 per cent to capital should be taxed at the rate of G per cent per annum to make the condi- tions between city banks doing- business by city methods and country banks doing business by country methods equal. Capital, surplus, and other profits in national hauls in the central reserve cities o/Neto York, Chicago, and tit. Louis, October 5, 1697. Capital, surplus, and profits $149, 796, 620 $045, 633, 469 119, 837, 296 Aggregate deposits The Hill-Fowler bill exempts currency from taxation to an amount equal to 80 per cent of capital Excess of deposits over 80 per cent of capital 525 796 173 Six per cent of deposits in excess of 80 per cent of capital— tax would be 31, 547. 770 Newly formed country banks, of $150,000 paid-in capital or less, aggregating $150,000,000 in capital, immediately upon getting into full operation, the items of their funds, taking the proportions of capital, deposits, and circulation from the condition of the banks in the Middle States in 1860, would run as follows: Capital paid in Deposits Circulation Currency to 80 per cent of capital Excess of currency over 80 per cent to capital Tax of 6 per cent on excess currency would amount to $120, 000, 000 30, 000, 000 $150, 000, 000 57, 143, 000 150, 000, 000 150, 000, 000 1, 800, 000 The tax of $31,547,770 on the city banks would be as onerous and unjust to them and no more so than the tax of $1,800,000 to the coun- try banks on any part of their currency, for currency is to country banks what deposits are to city banks. SAFETY OF BANKS ISSUING CURRENCY. The safety of country banks issuing a large percentage of currency to their capita] is questioned by the framers of the Mill-Fowler bill, but upon examinatioE it will bo found they are much safer than city banks with enormous deposit accounts. A comparison of example No. 2 with No. 4 will make the matter clear. STRENGTHENING THE PUBLIC CREDIT, ETC. L43 CITY BANK, NO. 2. K(*s( >nr(*os t Redemption fund »60. 00 United States bonds 4,087.80 Reserve held 162, 500. 00 Loans 632, 452. 20 Total 800, (too. 00 Liabilities: Capital 150, 000. oo Deposits C">(i, 000. 00 Total sot), 000. 00 (Paid-in capital, $76,700.) One-half of loans prove a total loss and the half collected amount to 316, 226. 10 Bedemption fund, United States bonds and reserve 167, 547. 80 Total assets 483, 773. 00 Owe depositors 650, 000. 00 Without stock assessment depositors lose 166, 226. 10 Collect the full assessment on the " paid-in" stock 70, 700. 00 The depositors still lose 13.1— per cent 89, 520. 10 COUNTRY BANK, NO. 4. Resources : Redemption fund $0, 000. 00 Reserve held 8, 571. 45 Loans 31U, 571. 55 Total 327, 143. 00 Liabilities: Capital 150. iKio. oo Deposits 57, 143. 00 Currency in circulation 120. 000. 00 Total 327, 143. 00 One-half of loans prove a total loss and the amount col- lected is 156, 285. 77 Redemption fund and reserve 14,571.45 Total assets 1 To. 857. 22 Pay holders of currency 120, 000. 00 Balance remaining 50, 857. 22 Due depositors 57.1 13. 00 1 tendency 6, 285. 78 Stockholders assessment 4.2— per cent 6, 285. - 8 144 STRENGTHENING THE PUBLIC CREDIT, ETC. In the case of the city bank the depositors lose 13.1 per cent of their deposits and the stockholders lose all their capital and are also assessed 100 per cent on the amount of it, aud in the case of the county bank no one loses a dollar, but the stockholders lose all their capital and are assessed about 4 per cent on the amount of their capital. FAILURES OF COUNTY BANKS. During thirty-three years, banks of $50,000 capital have failed for $8,000,000 and paid 51 per cent dividends. Banks with capital to above 850,000 and 8100.000 capital or less have failed for $17,000,000 and paid 57 per cent dividends. Banks of over $100,000 and $200,000 capital or less have failed for $10,000,000 and paid lil per cent dividends. Banks of over $200,000 and of $300,000 capital or less have failed for $18,000,000 and have paid 03 per cent dividends. Banks of over $300,000 and of $500,000 capital or less have failed for $29,000,000, and have paid 64 per cent dividends. Banks of over $500,000 capital have failed for $33,000,000 and paid 00 per cent dividends. These figures show there is no material difference in the dividends paid by the different classes of banks. Under the supervision provided in the Walker bill not one small bank would probably fail where three have failed under the law as it now is. LOW RATES OF INTEREST. A low rate of interest all over the country, as in other countries, is not possible with separate, isolated, unsupported, and antagonistic bond currency banks, such as the Hill-Fowler bill provides. Solitary banks in any country make interest rates abnormally high in the agricultural portions of it, or even by combining them under the bond currency pro- vision of the present law, with its prohibition of " true bank currency n or under the Hill-Fowler bill, which perpetuates the embargo on banks and "true paper money" to country districts and keeps up interest. When the Government issues paper money directly or robs the citi- zens of the capital they get together to form a bank and before the bank is allowed to issue currency, by compelling the bank to buy bonds to the amount of the paper money it issues, it makes it impossible for a bank to live in country districts, because to issue paper money by a country bank is the same to it as accepting deposits is to a city bank. ]STo one thing can be suggested that collects such an enormous tax; from the people in country districts in favor of cities. It ruins enter- prise in the country and drives small manufacturing into cities. How our national banking law cruelly robs and cruelly oppresses agricultural States can only be known by the most careful and pains- taking investigation. In so far as this prevails it puts the country at a tremendous disad- vantage and out of touch with cities. THE OFFICE OF BANKING. The existence and whole office of banking and the use of paper money is of civilized society and a contrivance to substitute the use of "credit paper obligations," which cost the people nothing in exchanging products for coin in the exchange of products, which costs 6 per cent per annum on all coin used. Using paper money reduces the neces- STRENGTHENING THE PUBLIC CREDIT, ETC. 145 sity for coin to the lowest practical point, and this economizes expense by using only so much coin as it is accessary to use, thus reducing expense in exchanging products to the lowest practical point. Banks and paper money are as necessary to modern civilization, in the transfer from man to man of the titles to products, as railways, steamships, canals, etc., are to the transfer of products themsel 768 from place to place. Banks and paper money are only used to transfer the titles to these products. Any hindrance to or increased cost in the u of paper money, or of hanks, by compelling an unnecessary amount of coin to be used, or by imposing taxes on paper money, works as much and even a greater injury to a community than a hindrance to or increased cost of the transportation of products. The small use of coin, in proportion to the use of banks and currency, by any people, is the Bure evidence of its attainment in integrity, ability, acuteness — in tact, in civilization. Coin to banks and currency, in transferring titles to prod- nets from man to man, is as crude as to use the back of man and of the donkey, instead of the railways and the steamship, to transport pro- ducts from place to place. RIGHT OF THE PEOPLE TO FREELY USE WRITTEN OBLIGATIONS TO PAY. At the very foundation of the right of men to life, liberty, and the pursuit of happiness lies the right of men to take and to give verbal and written "obligations to pay," to be satisfied on demand in the future. To make it wholly impossible for men to exercise this right would relegate the race to barbarism. The right of man to unite with his fellows to give their joint obligation as a corporate person, to be jointly satisfied by them on demand, has become an inextricable part of and is fundamental to the continued progress of modern civilization. The freely uniting of a certain amount of capital of live or more men and the uniting of those men into a corporate person, now called a bank, and to continue to them the right to give and to take "obligations pay- able on demand," has come to be recognized as a "right" of the citizen, little less sacred than the right of the "sole person" to do the same thing. In the national-bank act the Government absolutely overrides this great and fundamental right of the citizens of this country and con- fiscates to its use capital collected by our citizens without the aggre- gating of which "exchanges of products" can not be made. This pro- ceeding is never justifiably resorted to excepting in case of war, and this is the only modern nation that has continued or made such a forced war loan during peace. COMPARISON OF THE PRESENT LAW AND WALKER BILL. The following in a rough way still further illustrates the workings of a small bank under the present law and a bank under the Walker bill, leaving out the confusing elements of the previous examples: The present law bank has a capital of 81 00, 000 Buys of United States bonds 50, 000 Has left of its capital "'<>. 000 Gets of circulating notes 50. 000 Has to loan 100, 000 b & c 10 146 STRENGTHENING THE PUBLIC CREDIT, ETC. It then discounts notes running four months for $2,000 for $40 dis- count each for 50 men. Bach man takes a draft on New York, where he owes $1,000, for the 61.000 to pay his debt, and takes circulating notes for $ 1 ,000 to use in his neighborhood. This aggregates $100,000, all the bank has to loan. The bank must get interest at the rate of G per cent per annum on the fifty notes it discounts to pay per cent dividends on its stock. The Walker bank has a capital of $100, 000 It issues its own circulating notes to the amount of 100, 000 Has to loan 200,000 It then discounts the notes running four months of $2,000 each for $20 each (for double the number or) for 100 men. Each man takes a draft on New York for $1,000 to pay what he owes in New York, and the circulating notes issued by the bank for $1,000 to use among his neighbors. This aggregates $200,000, all the bank has to loan. The bank only needs to get interest at the rate of 3 per cent per annum on the 100 personal notes it discounts to pay G per cent on its stock. The premium on the United States bonds, taxes, sinking fund, etc., are so much that no money can be made on currency taken out on bonds. The Walker bank does the equivalent of this, viz, it charges 6 per cent on the amount of its own capital it loans to the farmer on his $2,000 note, say, $20 on the $1,000; and on the other $1,000 it charges no interest, but exchanges its own circulating notes for the four month note of the farmer in consideration of the $20 the farmer paid him on the whole loan. If the Government issued all the paper money we used, and all the coin money, and no checks or drafts were used, interest would have to be from one half more to double what it would be were we to use no Government paper money and as little coin money as we can get along with, but used instead all the "bank paper money " the people were will- ing to use, that the banks could keep at par with coin. Under the Walker bill interest would not be materially higher or lower in cities, so little paper money can be used in cities. City busi- ness is mostly done with checks and drafts. Country people can not use checks and drafts to any great extent. They can only use "bank circulating notes" currency, which is to them the same as transferable certificates of deposits. The longer banks exist in a town, the more checks and drafts are used. Bank notes are the "deposits" of the farmer in the banks as technical "deposits" are such to the city merchant. Under the Walker bill 3,000 country banks would soon be established where there are no banks now. The farmers can scarcely borrow a dol- lar now, in many sections of the country, on their crops of hogs, corn, wheat, cotton, hay, etc., soon to be marketed. They could borrow money of Walker banks for half what it could be borrowed for now of banks under the present law, could such banks be established under the present law, which is not possible. ISSUE OF PAPER MONEY BY GOVERNMENT AND BY BANKS. When the Government issues the money, greenbacks, Treasury notes, etc., or requires a bank to buy bonds to get it, a bank can only get it by parting with an amount of capital equal to the amount of such STRENGTHENING THE PUBLIC CREDIT, ETC. L47 money it gets into its vaults. The rates of interest arc not, reduced to the people by the use of Government money, whether it be paper money, silver money, or gold money. When all banks issue their own paper money, as under the Walker bill, and any live reputable citizens can make a bank in such a way that the Government can compel the banks themselves to keep this paper money at par with silver dollars and gold dollars, competition amoug banks will make interest charged by these country banks that make this money as much lower than when they use Government currency as the amount of this paper money they use bears to the total amount of the loans of these banks. That is to say, from one-third to one half lower rates of interest, after deducting what it costs the banks to keep their paper money at par with silver dollars and gold dollars, which is only a trifle. When banks issue their own circulating notes the bank gets current rates of interest on all of its notes that are out of its possession and is compelled by competition thereby to charge lower rates of interest. The amount of such total lessened interest is the interest earned by its notes when out. When such notes are in its own vaults it is losing nothing by having them, for they cost nothing. When the Government issues all money, say greenbacks, Treasury notes, etc., or silver dollars and gold dollars, the total interest on money loaned by banks that they are compelled to charge all custom- ers is as much more than under the Walker bill as current rates of interest on the whole amount of such money. A bank can only get Government moneys by having its capital depleted by every dollar it has of it in its vaults. Therefore the current rate of interest on it is lost while it is idle in the bank. The only way the bank can stop loss of interest on it is by "unloading it" on other banks or on the borrowers of the bank. When the borrower has it the bank is making no profit on it to enable it to reduce interest rates to the farmer. This is why more and more money is being used by clearing houses in paying balances. WALKER BILL CONFORMS TO THE SUFFOLK SYSTEM. The Walker bill conforms to the old Suffolk system of New England from 1840 to 1804 in issuing currency by banks and to that of all other countries except the United States. The truth of the statement made is shown by trying our system by the facts. We have an excessive amount of coin — certainly from $41)0,000,000 to $800,000,000 more than there is any economic demand for — but putting it at the lowest amount there is an excessive amount of coin of $ 100, 000, 000 We have paper money earning the banks nothing 1, 100, Olio. 000 Total 1, 500, 000, 000 Interest on national-bank loans is necessarily higher than normal, provided our paper money \vas "true bank currency" issued against the assets of the bank as paper money is issued in every other country, as $1,500,000,000 plus ai',000,000,000 loans = $3,500,000,000 is to $1,500,- 000,000, or 42.8 per cent. This shows that with the banks issuing currency and submitting the volume of coin to economic laws inter- est rates would be reduced from 6 to 3.43 per cent. This considers only national banks. 148 STRENGTHENING THE PUBLIC CREDIT, ETC. Adding the $700,000,000 loans of State banks it makes $4,200,000,000 to $1,500,000,000 earning no income. Including these the rate of inter- est would be reduced 35.7 per cent, or from 6 to 3.80 per cent. Of course this is only approximately correct, as no account is taken of "current redemption" and expenses of many kinds, or of the sums of paper money not in circulation, but these do not very materially affect the result. It still remains that by enacting the Walker bill, interest rates would be reduced in approximately the proportion indicated, and almost wholly in country districts. LOANS TO CAPITAL AND DEPOSITS. That the results shown in the six examples of banks under the pres- ent law. under the Hill-Fowler bill, and under the Suffolk system of the Walker bill are substantially correct is proven by the actual expe- rience of banks in the total loans by banks in proportion to their total capital and deposits in 1896 as compared with 1850. There are only two sources of loanable "funds" to a bank when it can not issue its own currency against its assets, viz, capital and deposits. There are three sources of loanable "funds" to a bank that can issue its own currency against its assets, viz, capital, deposits, and currency. All banks before 1801 freely issued currency against their assets with like results of low interest rates in all the States. I give only a few samples: Maine loaned to capital and deposits Vermont loaned to capital and deposits New York, outside of New York City, loaned to capital and deposits The six New England States, including Boston, loaned to capital and deposits North Carolina loaned to capital and deposits 1856. Per cent. 130 157 166 125 162 This is the inevitable result in all agricultural sections when a bank can issue its own currency. This shows that money can be borrowed at one third to one-half lower rates when banks can issue currency as provided in the Walker bill. On the other hand, the advantage given cities under the national banking law and under the Hill-Fowler bill, in oppression of farming districts, is conclusively proved by the fact that while New York City could loan only 88 per cent to her capital and deposits in 1856, she loaned 97 per cent in 1890, 10 per cent more in 1896 than in 1856; while Maine loaned 35 per cent less, Vermont, 99 per cent less; New York State outside New York City, 113 per cent less; North Carolina, 85 per cent less; and the six New England States, including the city of Boston, 43 per cent less than in 1856. Notwithstanding these facts, which were before them when the Hill- 1 Fowler bill was compiled, they propose to continue their oppression of the farming communities with little or no relief for four years, and then dribble out relief for four years more, were their bill workable, which it is not, STRENGTHENING THE PUBLIC CREDIT, ETC. 149 HOW MUCH CURRENCY SUFFOLK-SYSTEM BANKS ISSUED. No better banking system ever has been seen than that of New England from 18-40 to 1804, known as the "Suffolk system." It was precisely what is proposed for the whole country in the Walker bill. The specie held was 13 per cent to currency issued, and 8 per cent to currency and deposits. Provisions in the various States were as follows: IN MAINE. Banks not to issue currency in excess of their capital paid in, plus the specie in their vaults. Specie deposited in Suffolk Bank, Boston, to be counted as in their own vaults. Penalty tax of U4 per cent per annum on all currency in circulation during suspension of specie payments. NEW HAMPSHIRE. Nearly the same as Maine. VERMONT. Banks may issue currency to an amount double that of their capital. Penalty tax for suspension of specie payments of 12 per cent per annum on currency in circulation. Penalty tax of 1 per cent per annum on capital if bank fails to redeem its notes either in Boston or New York. Failure to redeem in one or the other of the cities for ten days incurs tax for the whole year. MASSACHUSETTS. Substantially the same as Maine and New Hampshire. RHODE ISLAND. * Substantially the same as Massachusetts. CONNECTICUT. May issue currency to amount of capital — must keep specie equal to 10 per cent of deposits and currency in circulation. Deposits of funds in a New York or Boston bank to be counted as specie against deposits and currency, when the currency is redeemed in Boston or New Voile. It will be seen that the provisions of the Walker bill are substan- tially the same as these. The Walker bill penalty tax for failure to maintain "parity" is one- half of 1 per cent per annum imposed on deposits in order to make the penalty fall equally on all banks. It is on deposits especially that specie should be maintained. It is depositors, not holders of currency, who ship specie abroad and who demand gold. If the penalty tax is put on currency the city banks would wholly escape the tax. The Hill-Fowler bill imposes no penalty for failure to maintain parity. INJUSTICE TO COUNTRY PEOPLE IN PRESENT LAWS. Our country people have been so outrageously abused in the banking laws of the country in being deprived of banking facilities during the past thirty years that the very knowledge of "true banking" and 150 STRENGTHENING THE PUBLIC CREDIT, ETC. "true currency" lias been lost out of the country. This most popular and useful agency known to civilization, viz, the bank, for loaning capital to the people, is hated and hissed, and justly so, were the banks themselves responsible for this outrageous banking system. It is hated for not doing what it is forbidden by law to do, and not for what it does. I stand by the country granger in his protest against his oppression rather than with the makers of Hill-Fowler bills, who, know- ing their oppression, "keep the word of promise to the ear and break it to the heart." "Four years hence we will begin substantial relief and you will get it in eight years." They aggravate the curse by saying to him, u Go and come again and to-morrow I will give, when thou hast it by thee," Wait, wait, wait, until four years hence, eight years hence, eleven years hence! We are here under oath to legislate for the relief of our people now, and not to legislate to take effect in the days when our children will wear the mantle of authority and we are in our graves. I know strong language is not argument, but there are times when men do not serve their fellowmen unless they use language strong enough to clearly characterize outrageous conditions and conduct. Even the Great Teacher characterized persons who bind heavy burdens grievous to be borne and lay them on men's shoulders and then do not touch them with so much as their little finger. RELATIONS OF CITY AND COUNTRY BANKS. Cities are built up by building up the country, and cities decay when the country districts decay. The country banks are as necessary to the city banks as the mountain springs, their streams, and branches are to great rivers, and the country bank is as essential to the prosperity of the country as the city bank to the prosperity of the city. The whole framework of every bill presented to the Committee on Banking aiud Currency, excepting the Walker bill, is drawn in despite of this axiom. The prosperity of the cities can only be in the prosperity of the agri- cultural — the country — districts of the nation. Every bill presented to the Committee on Banking aud Currency, excepting the Walker bill, denies this proposition. The oppressions, the rank injustice to the agricultural sections of the country perpetuated in the existing national banking law more than in the errors in legislation in all other national and State laws combined has contributed to the depopulation of the country and the uneconomic and undesirable swelling of city populations. Men can not borrow money of individuals or of the officers of a bank they do not know, do not meet in their homes, in their churches, in their lodge rooms, in their trading, in the daily walks of life, etc. It is so in the country as much and no more than in the city. Country people can not borrow in cities or in large towns twenty miles from home — in other words, where they are not intimately known — excepting those with rare and exceptional means of acquaintance. CITY BANK VERSUS COUNTRY BANK. A strictly city bank in a reserve city, satisfying the infinite variety of wants of its customers, with its large individual deposit account, complex business expedients, and many forms of money obligations, differs very widely Com a strictly country bank satisfying the limited STRENGTHENING THE PUBLIC CREDIT, ETC. L51 wants of its customers, with its large volume of circulating notes in the place of individual deposits, simple business expedients, and few forms of money obligations. They arc as much alike and unlike as a Broad- way omnibus and a McCormick reaper. Both arc drawn by borses and men ride on both. The city bank with its way ot doing business would be as useful in a rural community, or ;i country bank in a reserve city, as a reaper on Broadway or an omnibus in a wheat field. The Bill-Fowler bill provides only for the omnibus, and the making of the reaper under it is impracticable. Under the Walker bill both are kept constantly in view. Both ran be constructed, and each used with equal advantage in its proper place. RELATIONS OF CAPITAL TO BANKING. In proportion as communities are advanced in both wealth and cul- ture is capital aggregated in banks for the convenience of each and every citizen who, without capital, has sufficient integrity, ability, indus- try, and wisdom to make it reasonably certain that he will return the capital borrowed and what is agreed upon as interest or rent for its use. In modern society business can not be profitably done without nearly every doer of it has a partner in the enterprise, viz, the bank. Through borrowing of capital from a bank, and that only, it is made possible for the worthy poor boy of to-day to conquer to-morrow the place of the rich man of to-day. These aggregated banks are of two kinds, and each bears a certain proportion to the aggregate of wealth. 1. The commercial banks, or "banks of deposit, loan, and discount," have to do wholly with personal property, and have capital and cash to about 12,000,000,000 to $20,000,000,000 total of personal property. Their aggregate capital is about 8 per cent to the total of personal property in the country. Adding $2,680,367,000 deposits and $1,000,000,000 currency, it will carry the percentage of banking funds to total personal property up to about 22 per cent banking funds to total personal property. 2. Trust companies of various names and kinds, such as savings banks, loan and trust companies, life insurance companies, etc., have to do wholly with realties, and have a capital of about $8,000,000,000 to real estate property of $10,000,000,000, their aggregate capital being 20 per cent to the real estate in the country. Capital ceases to be capital wheu it ceases to afford an income. Cap- italists therefore are always hunting for young men of integrity, ability, and industry who will borrow capital of them and pay a small rental on it, while the borrower of this capital makes a new fortune for him- self in using the borrowed capital to develop the country. These reservoirs of capital are the only things in civilized society that enable the man owning no capital to compete with the capitalist. Any- thing that hinders or in any way prevents the aggregating of capital in any community for the purpose of devoting it to loans to the worthy man who has no capital or not sufficient capital for useful, safe, and legitimate business, or increases interest on capital, is a fearful curse to the country. Very careful and conservative estimates show that the agricultural and surburban sections of our country are deprived of $800,000,000 of banking funds, as compared with their per capita and city per capita bank funds, as compared with their bank lands to their personal property in 1800 and to day, or fully 15 per cent to the total bank funds in the country. The Hill-Fowler bill provides the begin- 1J2 STRENGTHENING THE PUBLIC CREDIT, ETC. ning of a modicum of relief to these people in four years, to be consum- mated in eight years. This final relief is so small at the best as to be unworthy of the effort, and this promise even is of very doubtful ful- fillment. Under the Walker bill the relief in the additional banking funds to the sections of the country now destitute would surely come, and at, once. ♦BILL H. B. 10339 AS COMTABED WITH BILL H. B. 10333. I am constantly met with the statement, "Your bill is too long; why don't you make it shorter and more simple?" as if a bill dealing with the most complex and worst financial and bank system any civilized nation ever had, and at the same time maintained parity, according to the testimony of writers on finance and of financiers of great experi- ence, such as lion. Lyman J. Gage, Secretary of the Treasury; the Hon. Charles S. Fail child, ex-Secretary of the Treasury; the Hon. James H. Eckels, ex-Comptroller of the Currency, and many others, could be "as simple as simple can be." Certainly bill H. R. 10339 is short and simple enough. I drew it to accomplish two things: To show how unreasonable is the remark quoted, and second, to show how simple a bill would have accomplished in 1866 to 1870 precisely what my bill will accomplish to-day. If it had been passed then it would have saved the country from a sea of troubles. Had such a bill as H. R. 10339 been passed on April 12, 18G0, with the bill of that date authorizing the Secretary of the Treasury to sell bonds t< > secure funds to cancel " United States notes not to exceed $10,000,000 in the first six months and $4,000,000 per month thereafter," our diffi- culties would have ended then and there. It was all the legislation needed then. It would be all the legislation needed to day had we no silver dollars, no United States notes, and no Treasury notes. The law of July 12, 18GG, authorizing the retirement of the United States notes, would not have been repealed, as it was in January, 1869. Walker bill H. R. 10339, in the conditions of 186G to 1873, is the financial and banking equivalent of Walker bill H. R. 10333 in the con- ditions of 1898. Had bill H. R. 10339 passed any time previous to January 14, 1875, the legislation of that date again passed to retire the United States notes would not have been again needed and again passed only to be again repealed on May 4, 1878. Had our statesmen of that time enacted such a bill the New England banks would have returned immediately to the Suffolk system of cur- rent redemption in Boston, a "large central commercial city," which the present law most foolishly and viciously forbids. New York would soon have joined New England, and every State bank in the country would have been brought into the system precisely as the Walker bill provides for to day, and New York would soon have taken the place for the whole country that Boston held for New Eng- land up to 1864. In fact, that bill at that time would have given the country, by the necessary but voluntary combination of the banks in the country, pre- cisely what the Walker bill would give the country to-day. There can be no doubt that the banks themselves, without any action of the *On pp. 240, 241. STRENGTHENING THE PU15LIC CREDIT, ETC. lf)3 United States Treasury under bill II. It. 10330, would have resumed specie payments long before 1870, when the premium on gold touched 14.0, and run down in 1871 to 11.7, etc., and up again to lo.l in L875. Had such a bill as II. K. 10339 passed any time between 1866 to 1878, every citizen would have had his " right to life, liberty, and the pursuit of happiness" in money matters restored to him. All business men, merchants, manufacturers, farmers, bankers — all classes — were clamoring for resumption of specie payments ever after 1866, and they directed and controlled the banks. The banks had two to three times the gold during the whole period from 1807 to 1879 that Secretary of the Treasury Sherman had in the United States Treasury when we resumed in 1870. As a matter of fact, to the banks belongs the credit of the conditions making resumption of specie payments by Secretary Sherman possible in 1870. While it is true that without the hearty and most active assistance of the banks Secretary Sherman could not, by any possibility, have resumed specie payments in 1870, it is also true that had the Govern- ment rendered no assistance whatever the banks could and would have resumed long before 1873 under such a bill as H. R. 10330 as surely as the banks can and will maintain parity between silver dollars and gold dollars and between all our paper money and specie to-day under Walker bill II. K. 10333 as law, for there is no conceivable relief except- ing under a law drawn on the lines of the Walker bill. The Walker bill is simplicity itself as compared with any other gen- eral bill that has been before the Committee on Banking and Currency. It is as unjust to criticise the Walker bill of to-day because it is long enough and none too long, and complex enough and none too compl< to meet all the chaotic and complex conditions that do exist to-day, and to surely settle, them, and without the slightest shock to our financial and banking conditions during the transition, even during a panic, as it would have been to have criticised the Walker bill, H. 11. 10339, offered before 1875, because it "was not long enough" and "complex enough" to meet conditions not then chaotic and not complex. A condition a hundredfold more difficult than confronted Alexander Hamilton and Albert Gallatin in this country or John Locke or Sir Isaac Newton in England can not be settled by ratiocination, as is attempted by the framers of the Hill-Fowler bill. To solve the problem, patient investigation and severe study are necessary to the brightest and ablest men. Late coiners are welcome, but the Hill-Fowler bill shows the result of their insisting on taking the front seats. What was the Republican party doing in this matter from 1800 to 1^3? What is it doing now 1 ? What was the Democratic party doing from 1S0G to 1873? What is it doing now ? THE STJBTREASURY SYSTEM. Never before was a practice continued so long after its substance had departed as our subtreasury system. The national snbtreasury system as now administered, violates every principle it was established to put into practical operation. When it was established the idea of Jackson was to keep the Gov- ernment Treasury entirely independent of banks and to be itself in antagonism to banks. To-day it has become the fundamental and responsible bank of all banks in ito connection with the New York Clearing House, the 154 STRENGTHENING THE PUBLIC CREDIT, ETC. guarantor of the value of all banking funds as well as paper money, and the reservoir from which is drawn, in times of monetary stringen- cies and panic, the gold for shipment and the gold that keeps the sol- vency of all banks. In fact, it has become the exact opposite of what Jackson made it and intended it to continue to be. The Hill-Fowler bill intensities its subserviency to banks as the guarantor of the value of their lands and the supplier of gold to banks and to brokers, both foreign and domestic. Under the Walker bill every one of these conditions would be reversed. The National Clearing House would be first of all the serv- ant of the Government and the guarantor of the Government funds and the receptacle of all gold and the guarantor of parity, and in turn the furnisher of all needed gold for domestic use or shipment, and this at a profit to banks, whose servant it would be. It would be able to protect the commercial gold in the country, as the banks of Eng- land, France, and Germany each protect its gold. It would also main- tain parity and pay out gold and silver, precisely as does the Bank of France and the Bank of Germany. EVILS OF SUBTREASURY SYSTEM. *' Whatever may have been the condition of the banks of the country which seemed to justify the establishment of the subtreasury, it is to-day the greatest curse that afflicts the finances of the country. It not only places duties, powers, and opportunities in the hands of the United States Treasurer such as no human being should ever be intrusted with, but it compels him to do what is made a misdemeanor, visited with severe penalties when done by a bank, and would not be submitted to for a day if done by an individual, namely, it locks up the money of the people. The making of any loan upon the security of United States or national-bank notes, or agreeing for a considera- tion to withhold the same from use; in other words, the "locking up" of money, is made a misdemeanor, and the bank committing the offense is punishable by a fine of $1,000 and a further sum of one-third of the money so loaned. The officers of the bank making the loan are also subject to a penalty equal to one-quarter of the money loaned. "This provision of law is not applied to individuals, because locking up money is an offense they do not commit without the assistance of banks. These severe penalties were provided because the locking up of money was an injury to the public; and furthermore, the injury is in exact proportion to the amount of money locked up, and is not made any greater or less by the 'locking up' being done by a bank, an indi- vidual, or by the United States Treasurer. "Yet, in the face of the enactment of a law by the United States Government severely punishing a bank for withholding currency from circulation, it maintains the subtreasury in violation of every sound maxim of finance, in violation of the laws governing the banks, and in the face of the damage to the industries of the country admitted to be done by it every day of its existence, now necessarily inflating and now necessarily curtailing the volume of the circulating medium by the accumulation in or the disbursements from the Treasury." — [Money, Trade, and Banking (p. 81), by J. H. Walker. Houghton, Mifflin & Co., Boton, 1882J The Hill-Fowler bill t ould perpetuate and intensify every one of these Treasury abuses. The Walker bill would correct every one of them, and that at once. STRENGTHENING THE PUBLIC CREDIT, ETC. 15.") TREASURY CONDITIONS. No one who knows them would make a comparison between Hon. John (1. Carlisle and Hon. Lyman .J. Gage to the detriment of either. Bach stands at the head of his profession, Hon. John G. Carlisle in integrity and as a lawyer and eminent parliamentarian, and Hon. Lyman J. Gage in integrity and as a financier and banker. Bach has held the Treasury portfolio under a condition of deficit in Treasury receipts to meet Treasury expenditures. One an eminent lawyerunder Hon. (iio\ er Cleveland, the other an eminent financier under William McKinley. The strictly "Treasury conditions" were identical under each. Cinder Carlisle confidence was destroyed by conditions entirely outside the Treasury proper. Because of these conditions we had thepanicof 1893, with ruined private credit, the sale of United States bonds at ruinous prices, and its millions and billions of dollars in shrinkage of values and the wrecking of fortunes and distress of the people. Under Mr. Gage, even in war, confidence is assured, and by conditions entirely outside the Treasury proper. The Hill-Fowler bill leaves us in exactly the same condition as Mr. Cleveland and Carlisle found, and the same results will follow the same conditions. The Walker bill completely separates the United States Treasury from our financial institutions immediately and forever, and makes the Carlisle-Cleveland condition of .1893 impossible. It is no answer to cite tariffs or financial theories of administrative officers. Assuming that losses would occur under one tariff and gains under another, under the Walker bill as law they could not materially affect the price of United States bonds or cause a panic originating in the condition or administration of the United States Treasury, for the Treasury would be eliminated from finance and banking. Opinions as to the changes or threatened changes in the management of the United States Treasury could not affect the business of the country, for Treasury conditions would be tixed by law, and unalterable by a Secretary. Our Treasury and banking conditions would be absolutely independ- ent of each other, each under the management of its own officers, and neither could control or materially affect the other. Our financial system would then be founded upon a rock like that of France. Our system then would be more like that of France than that of any other country, but superior to it as institutions built up from the bottom, like those of this country, are more enduring than those built down from the top, like that of France and its bank. When specie payments were suspended in 1870 gold went to a premium of only H percent in the paper money of France, and soon fell to 1 per cent. It did not rise again until the payment of the indemnity to Ger- many, and never rose above 2.+ per cent premium at any time, and \\ at that point only for a short time — and this with France conquered, its government destroyed, and lying helpless at the feet of Germany. With our inexcusably vicious Treasury system, and wholly because of the union of our banks with the quick assets of the Treasury and the making of the soundness of our currency dependent on the price of United States bonds, a gold dollar was worth during 1862 (1.13. It sold for $1.45 in paper money after Gettysburg on duly 8, and after Vicksburg fell on July 4, 1803, and when our final victory was assured. After Sherman captured Atlanta, September 2, 1864, a gold dollar averaged to sell all through 1864 for $2.03 in paper money. Then no doubt existed as to the stability of the United States Government. During Sherman's march from Atlanta to Savannah and up to Virginia 156 STRENGTHENING THE PUBLIC CREDIT, ETC. in the early spring and until Appomattox on April 8, 18G5, gold sold for $1.57 in paper. The salvation of France when her Government was utterly destroyed and a Committee of Safety was trying to make terms with her conquer- ors camped in her capital and Germany held her chief places, the Bank of France stood like a shaft of marble in surrounding chaos, a beacon of liberty to her people. Look again at this significant fact. A gold dollar during all that time could be bought for $1.01 in French paper money, excepting for a few months after peace it went up in price to $1.02£, in her paper money, for a brief time. The Hill-Fowler bill is potential only in such financial humiliations for the future as those from 1802 to 1879 and of 1893, as surely as under like conditions history will repeat itself. Under the Walker bill they would be impossible. It would correct every evil. As independent, self-sufficient, and even stronger than the Bank of France is its system of union of every commercial bank in the country into one whole. A system democratic to each bank and still a unit in a completed whole. WASTE OF THE PRESENT SYSTEM. The direct and inevitable waste in the present system demands imme- diate action. The Treasury has only kept its place in the New York Clearing Ilouse and kept the parity between silver coin and gold coin and between our paper money and specie by keeping in the Treasury an average available cash balance of $204,000,000, including "agency accounts," for the eighteen years from 1880 to 1897, inclusive — about $120,000,000 in free gold. Allowing for a " working balance" of more than England, France, or Germany averages to keep — say $35,000,000 — haves $170,000,000. Collected by taxes from the people and needlessly kept in the Treasury, $170,000,000, worth to the people, per cent $10, 200, 000 The needless expense of the subtreasury 1, 000, 000 Annual Treasury loss 11, 200, 000 It was stated by Secretary Gage and Ex-Secretary Fairchild, and is conceded by all writers on finance, that all currency that is issued, as it is in Great Britain, France, Germany, and all other nations except- ing the United States, and " kept out" by banks, is earning the banks the rate of interest charged its customers on loans, and that it inva- riably lessens the rates of interest charged in the same proportion that the average currency actually out in circulation bears to the total loans and discounts of banks. Under the present banking law there is practically nothing made on bank currency when banks are com- pelled to buy bonds to get it at the prices prevailing from 1800 to 1892, and in any prosperous times. There is over $1,000,000,000 of paper money in circulation in the couutry. At least $800,000,000 would be circulated by banks if the Walker bill was made a law; or if it was issued here as it is issued in all other countries, at 5 per cent, it equals 840,000,0(10. That would then be saved to the people in lower rates of interest on bank loans. At the very least estimate of the cost the direct and indirect tax on the people is $50,000,000 per annum. It is really many millions more, STRENGTHENING THE PUBLIC CREDIT, ETC. 157 mostly falling on the agricultural sections of the country, as large city banks buy United States bonds as an investment. Adding to this loss the premiums paid on United States bonds the Government was forced to buy with the taxes on the people accumu- lated in the Treasury, in order to save our whole banking system from wreck, and the losses from monetary stringencies and panics which are wholly chargeable to the system, it can he conclusively proven to any body of unprejudiced, plain men that hundreds of millions into the billions woidd not cover actual unnecessary and inexcusable loss in recent years. The conditions that prevailed in L893 are sure to recur again to a greater or less extent unless the bank act is wisely amended. Some aspects of the situation even now are more, threatening and por- tentous of evil than they were from 1880 to L892. In view of the incontrovertible tacts already stated it appears that the solution of our financial and banking ills is not possible by any bill drawn on the lines of the Hill-Fowler bill, or any bill yet presented to the Committee on Banking and Currency, excepting only the Walker bill, H. R. 10;;:;.;. COMPARISON OF niLL-FOWLER BILL AND "WALKER BILL. The Dill-Fowler bill is written in obliviousness of the fact that bank- ing is wholly a voluntary business and comparatively few of those engaged in it receive pay. Banking law should contain no mandatory provision that by any safe permissible form of application of small pressure can be avoided. The Hill- Fowler bill is fatally mandatory in several matters. The Walker bill, in this respect, is wholly different. It sets up only a very few very wide boundaries and allows banks to manage their own business in their own way as far as it is safe to the people who borrow money from them. The Hill-Fowler bill does not relieve the United States Treasury from the current redemption of every form of paper money and from any responsibility whatever for maintaining the parity of our various kinds of money. The Walker bill securely does both. The Hill-Fowler bill does not devolve these duties upou the banks of the country. The Walker bill securely does it. The Hill-Fowler bill does not allow banks to issue "true bank cur- rency," viz, currency against their assets, to any proportion that would foster country banks. The Walker bill allows its issue to the amount of the capital of the bank. The Hill-Fowler bill makes no attempt to securely unite all the com- mercial banking associations of the country into one compact system to securely and safely do the things it proposes. The Walker bill securely does it. The Hill-Fowler bill runs counter to all writers on finance and the judgment of practical financiers and bankers, who all agree in the fol- lowing as of the first importance in providing a paper money currency, viz, that it shall be — 1. Safe. 2. Freely issued. 3. Abundant. 158 STRENGTHENING THE PUBLIC CREDIT, ETC. 4. Uniform. 5. Elastic. The currency provided in that bill fails at every point. It is far from being as safe in being guaranteed by the Government as that of the Walker bill. It is neither as freely issued, as abundant, as uniform, nor as elastic. MONET IN EXISTENCE. The Hill-Fowler bill takes the six kinds of paper money: * 1. United States notes (legal tender) $346, 681, 016 2. Treasury notes - 101, 575, 280 3. Currency certificates 29, 130, 000 4. National-bank notes 228, 203, 926 5. Gold certificates 37, 466, 149 6. Silver certificates 398, 768, 504 Legal tender coin: . 8. Gold 760, 274, 281 9. Silver 461, 180, 422 and proposes to destroy three kinds of this paper money, United States notes and gold certificates and national-bank notes, and substitute three new kinds, all "bank currency" notes: National reserve notes, National-bank notes, National currency notes, leaving seven kinds of paper money afloat, as now. (The Treasury notes will be disposed of by coining silver bullion to pay them as the country grows.) WALKER BILL APPROVED. Every word that discusses general principles in the report accom- panying the Hill-Fowler bill approves the Walker bill and condemns that bill, and yet their bill continues the hardships of the present system. The report says: "The ideal condition will be reached when, the person having made the necessary deposit, the bank can furnish him either a check book or its notes with equal ease and at equal cost, leaving the customer to select the form of demand obligation which will best serve his legiti- mate business purposes. As a matter of fact, the same management of the bank which will render the check safe will make the note safe. But, as has been said earlier, the note is to go everywhere and be used by people unacquainted with each other or with the bank. To facili- tate its use, therefore, it must be issued under a system which can be readily understood and which will give to the people generally such assurance of the goodness of the note that it will be accepted without hesitation by everyone. • k it is obvious that the issue of a banking currency based purely upon assets, without either bonds or reserve notes, will involve no risk of undue i Dilation or of loss to the note holder. * "The people will have the use of nearly double the amount of coin and currency at about one-half the rate of interest they are now compelled to pay. Thus the capacity to make larger loans means the *In existence June 16, 1898, per Treasury report, i Estimate by Treasury Department for June 1, 1898. STRENGTHENING THE PUBLIC CREDIT, ETC. L59 capacity of the banks to reduce interest rates without loss of profits. It means that if any bank undertakes to resist the natural law of decreasing interest uuder increased facilities, new banks may be formed without sinking their capital in bonds purchased <>/ a premium, and may compete for the legitimate profits afforded by reasonable interest rates. More than this, a currency based upon commercial assets, and not rendered rigid in volume by the deposit of special security, (ponies Pack promptly to the issuing banks for redemption. * * * ••Mr. A. O. Eliason has examined all the bank failures whose accounts have been closed, numbering one hundred aud one, and found that had all the banks in the national system issued an amount of currency equal to their capital, or one hundred per cent, the assessment on the same to cover losses would have been infinitesimal, being only one-nineteenth of one per cent per annum." Alter thus approving most heartily and thoroughly the principles of the Walker bill, which provides the annual collection from the hanks of four times the amount necessary to make the Government safe in guaranteeing the currency notes banks would put in circulation, they present a bill which leaves 60 per cent currency to capital without the guaranty of the Government, and also compels the country banks to " sink their capital in bonds purchased at a premium " to the tune of 40 per cent to their capital, and furthermore discredits their currency issued against their assets by twelve disabilities. The lack of appreciation by the framers of the Hill-Fowler bill of true principle and practice in issuing and redeeming paper money is shown by their proposition to destroy the "endless chain," as follows: "Believing that this bill, if enacted into law, will relieve the Treas- ury by destroying the 'endless chain.'" Secretary Gage and ex Secretary Fairchild, as everyone knows is true, testifying in answer to the chairman, recognized the "endless chain" of currency redemption as an inherent aud necessary condition to sound paper money, as follows : The Chairman. Can you suggest a more apt illustration of the nec- essary inevitable constant How of currency in and out, coming in contact potentially with the specie it represents, than an endless chain which never ceases for an instant to move potentially or actually, and that any- thing that impairs any link of the chain does the currency system injury? Can either of you gentlemen suppose a more apt illustration? Secretary Gage. I think there are a dozen you might use. The Chairman. Will you suggest any one of the dozen? Secretary Gage. Say individual buckets. We have adopted the end- less chain as a figure of speech, which probably conveys nearly the idea involved, namely, that whoever has demands against the Government or anyone else can take those demands and have them realized in redemption money, in specie. If these obligations are again issued, the new holder can do the same, and so there is a sort of circle established, or, it maybe, on the one hand, the notes flow out, and in 1 he course of the movement of trade or commerce or distrust the notes come back in a circular movement. That is not a horrible thing; it is natural, rea- sonable, and proper, and the issuer should never complain. Let him meet his liabilities on demand. The Chairman. Is not that what will take place in making a redemp- tion fund? Secretary Gage. I think it is. The Chairman. Can you suggest anything further, Mr. Fairchild! Mr. Fairchild. No, sir; I think that is perfectly true. 160 STRENGTHENING THE PUBLIC CREDIT, ETC. CURRENCY PROVISIONS OF THE HILL-FOWLER BILL. The nill-Fowler bill puts the mark of Cain on its national currency notes. This money is for our country people. Not a dollar of this money will be issued by banks in redemption cities which have half the paid-up capital of national banks. Sec 30. (1) It is taxed 6 per cent per annum if issued above 40 per cent to capital. Sec. 30. (2) If in the vaults of the bank and not in use this excess over 10 per cent is still taxed <> per cent. Sec. 33. (3) In liquidation only gold coin can be deposited to cancel these notes. Sec. 23. (4) Must put up with the Government 5-per-cent gold "guar- anty fund" on them, in addition to the current redemp- tion fund it puts up. SEC. 22. (5) Has a separate " current redemption " from the other two kinds of bank money. Sec. 22. (G) Must be marked " plainly and prominently," so as to at- tract attention to its being a poorer kind of money, that it " belongs distinctively to someone clearing-house dis- trict." Sec. 22. (7) Can not be paid out by any bank out of its " redemption district." Sec. 22. ^8) Has a clearing-house district made especially for it. The district is not for and does not include the other two kinds of bank currency. Sec. 22. (9) No reserve 5-per-cent or other fund is provided for their current redemption in exception to the other two kinds of notes. Sec. 14. (10) No funds of an insolvent bank can be used to pay any of these notes until the other notes are paid. Sec. 15. (11) That the Government has no interest in making this "cur- page 13, rency note" good money is rightly made conspicuous line 11. in the bad form designedly given these notes by this provision. " It [note] shall also bear upon its face the statement that it is issued in accordance with the provi- sions of this act." These things will sufficiently damage these "national-currency notes." Under the Walker bill there is provided a currency note with as strong a Government guaranty as now. Only such notes are used in Canada, Scotland, France, Germany, England, and all other first-class nations. The Walker bill adds the guaranty of the United States Gov- ernment. The Walker bill provides that everyone of them shall be immediately paid by the United States Treasurer in case of the insol- vency of the association issuing them. The Walker bill makes an appropriation to pay these notes of every association in case of its insolvency. The Walker bill provides a way for the United States to collect of banks and have on hand several times more money than it can ever pay on this guaranty. The framcrs of the Hill-Fowler bill are not willing to have the circu- lating bank notes provided in their bill and issued by the Government as money, used to pay the "salaries and other debts on demand owing by the United States to individual corporations and associations within the United States," but finding such a provision in the law as to national-ban li notes, repeats it. STRENGTHENING THE PUBLIC CREDIT, ETC. 101 Under the Walker bill no such discrimination against any form of onr money is made. All kinds of paper money are made and kept as good as the best by the Government. GREENBACKS NOT DESTROYED BY THE WALKER BILL. Neither does the Walker bill destroy the United States notes. The Hill-Fowler bill does destroy them. The Walker bill keeps them exactly as they now are, and puts their current redemption on the banks. The Walker bill proposes to destroy all the gold certificates and silver cer- tificates and pay out to the people the gold and silver dollars in their place. Thus the Hill-Fowler bill provides six kinds of paper money in permanency, no one of them legal tender, in violation of sound bank- ing principles, while the Walker bill provides bnt one, viz, currency notes, in accord with common sense and sound banking. The Hill-Fowler bill does not make the United States Government as now responsible for the immediate payment of every dollar of the currency notes issued by it to a bank in case of insolvency and directly out of the United States Treasury, and without qualifications or delay and regardless of all contingencies. The Walker bill makes the Government of the United States the guarantor of every dollar of currency issued by it to a bank as now, and makes an appropriation from the Treasury in the body of the law to secure the immediate payment of such notes by the Treasurer as certain as it is to-day. The Hill-Fowler bill makes confusion in redemption by providing two distinctive redemption agencies for its three kinds of circulating bank notes, and one of them outside the banking system. The Walker bill provides one redemption for its one kind of bank notes, and that inside the banking system. The Hill-Fowler bill appears to be drawn in the interest of large city banks. It gives such banks every advantage and unfairly dis- criminates against country banks. The Walker bill is drawn in fairness to large banks and small banks, city banks and country banks, for farmers, for merchants, and for manu- facturers. The people having been thoroughly educated in the idea that no true bank currency, that is to say, currency issued against the assets of the bank and relying wholly upon them for payment in case of insolvency, can be safe for them to have in their pockets, therefore it becomes absolutely necessary to have all currency guaranteed by the Gov- ernment, as now. A guaranty may be given in five different forms — by a mortgage, by pledging bonds, by an agreement, by indorsement, and also by certifying to the genuineness of a paper and that the certifier is in possession of funds to pay it, like certifying a bank check. All but the note secured by mortgage depends wholly upon the sol- vency and amount of capital possessed by the party making the security in proportion to the amount guaranteed, whether it be a person or the United States Government. No one can deny that an appropriation made in the body of the banking law out of any moneys in the Treas- ury not otherwise appropriated to pay the notes ot an insolvent bank is as good a security and more easily availed of, and is tantamount to a Government bond. " To guarantee" is the synonym of " to secure," if made by the same party and without mortgage. To argue that a United States Government bond is a better guaranty or security than B & C 11 L62 STRENGTHENING THE PUBLIC CREDIT, ETC. an appropriation in money in a United States law is to argue that a "promise to pav" is better than "cash in hand." The compensation to the United States Treasury for guaranteeing the currency notes issued by the banks would run as follows: On $200,000,000 of United States notes carried by banks, at 2.i per cent $ 5 > 000 > 00 ° Maintaining parity on $500,000,000 of silver dollars, for which all the other bills propose to deposit 5 per cent gold in the Treasury, which would equal $25,000,000 at 2£ per cent 625 > °°0 One-fifth of 1 per cent tax on $600,000,000 of currency .... 1, 200, 000 Gain on that part of the currency destroyed and never presented for redemption, as proved by the thirty years' experience of the Treasury, two-fifths of 1 per cent on $000,000,000 is 2, 400, 000 9, 225, 000 Saving in cost in handling the United States Treasury 1, 000, 000 10, 225, 000 The necessity under present conditions of carrying an im- mense amount of money collected by taxation in the United States Treasury, $175,000,000 at 2 J per cent .... 4, 375, 000 Saving per annum to the United States Treasury . . 14, 600, 000 This at 2 J per cent. It should be reckoned at 5 per cent or more, $30,000,000 per annum at least. Not a farthing of this $30,000,000 of saving would become an expense on the banks. The provision in the Walker bill requiring every commercial bank to assume its equitable and proportionate part of the United States notes, according to its actual capital, and in a way to make them an advantage to the banks, is only one incident of the provisions of the Walker bill. It is necessary during the period of transition from that of their present isolated condition into the cooperative system provided for, and is in no sense essential to or necessarily a part of the Walker cooperative scheme. This is made unequal and a hardship in the Hill- Fowler bill. They are so small in the amount each bank is required to take and so equitably distributed by the Walker bill as to be an advantage and not a burden to any one bank, as the banks are allowed to issue an equal amount of currency. They remain as now, being issued under the same law and a United States legal-tender note, while the Hill-Fowler bill destroys them. The Walker bill provides for their continued existence and provides for their equitable annual redistribu- tion among all commercial banks in the country as long as the national banking system shall last. ADVANTAGE OF A NATIONAL CLEARING HOUSE. Did the New York clearing house or the national clearing house provided for in the Walker bill have a legal existence, it would not be at all necessary to require individual banks to specifically assume any amount of particular United States notes in the cooperative scheme provided in the bill. The thorough union of the banks and incorporat- STRENGTHENING THE PUBLIC CREDIT, ETC. 163 ing the clearing houses is the real substance of the Walker hill. Tin is not now an incorporated clearing house in the country to deal with in a banking law. ONE GOOD THING IN THE HILL-FOWLER BILL. The Hill-Fowler bill apparently, but not actually, disposes of the United States notes in something of the same method as the Walker bill, at the beginning, in devolving the United States notes on the hanks, but it surely and absolutely fails. It changes the essence of the present legal-tender United States notes as much as it does their name and equitable distribution. They become non legal-tender "national reserve notes." The Hill- Fowler method may, at first glance, look like the Walker method, but they certainly are as different in essence as the poisonous toadstool from the nutritious mushroom. Its method of distribution violates the principle of equity as between new banks and old banks, in devolving them upon the old banks in the beginning, now in opera- tion, and leaves them on these banks, a disproportionate burdeu for all time to come. CURRENCY NOT LESS THAN $10. The Hill-Fowler bill deprives banks, mostly country banks, of $274,000,000 of circulation in $5 notes by needlessly forbidding any bank to issue any currency under the denomination of $10. Under the Walker bdl the limit is $3 or under, practically allowing no bill under $5, thus allowing a circulation by banks in this one item $274,000,000 more than the Hill-Fowler bill, and reduces rates of interest to borrowers as $274,000,000 is to the total loans by banks. The Hill-Fowler bill provides a currency on more than half of which the rate of interest on loans in using it will have to be varied every day in the year to pay the same dividend on the stock of the bank, and the issuing and withdrawal of which will be governed by the price of United States bonds in the market and the time they run, as now, and not by the demands of business. The Walker bill provides a currency to pay the same dividends. The interest on loans in the use of it will be the same every day in the year. The Hill-Fowler bill only makes room for its bank cur- rency in addition to its substitution of reserve notes for United States notes by retiring gold certificates $37, 000, 000 National-bank notes 227, 000, 000 Total 204,000,000 The Walker bill pays out gold for United States notes. . . 140. 000, 000 Gold certificates retired 37, 000, 000 National-bank notes 2i'7, (too. 000 Silver dollars in reserves 200, 000, 000 Five-dollar notes, forbidden in Hill-Fowler bill 274, 000, 000 Total 884,000,000 $200,000,000 United States notes are to remain and can never be destroyed. 164 STRENGTHENING THE PUBLIC CREDIT, ETC. CURRENCY CONDITIONS. The Hill-Fowler bill changes present currency conditions by a very email degree, and would not effect a reduction of interest on loans sufficient to enable banks to be formed in country districts. The Walker bill provides for such a change as to allow banks to issue "true bank currency," viz, against their assets, and reduce interest in those districts from one-third to one-half. Under the Hill-Fowler bill a bank of $100,000 capital will have to surrender from 82.1,000 to $40,000 of its capital in the purchase of bonds as a license fee to do business, when it commences business The Walker bill does not require the bank to become a bondholder by a single dollar in order to do business, and not to surrender any part of its capital, excepting in case of insolvency. Under the Hill-Fowler bill the Comptroller can not know what the condition of a bank was, as shown by its books, on any given day, excepting the days on which the "bank examiner" went through it. The Walker bill provides for a daily report of its condition to the Comptroller, and the examiner will have before him the condition of the bank on every day to verify when he goes to the- bank. The Hill-Fowler bill isolates and makes peculiar each bank, and makes it liable itself alone to be called upon for gold for every note it issues and by every banker who gets one. This isolation makes it unsafe for any bank to pioneer in the system even if it would be safe when the system was in full operation, which it is not. This is true of all banks that go into it until all are in, and then the country bank will be in a perilous condition. Under the Walker bill every bank is absolutely safe during the tran- sition, as the condition of no bank entering the system is affected in its obligations or duties until a given time, when the system becomes instantly in full operation. No bank that enters into the system is affected by the provisions of the bill until all commercial banks in the country come under its provisions. Immediately upon that event, existing United States notes assumed by any bank lose their identity so far as they belong to any particular bank that has its name printed on the back of them as responsible for their current or ultimate redemption, gold being massed in the national clearing house to redeem all of them. They are then to the bank as the gold they hold, only appearing with gold in their cash reserves. CHARACTER OF NOTES. The Hill-Fowler bill not only compels the bank to buy "national reserve notes" of the Government (strictly a bank note) and pay United States notes for them, which provision may put them at a premium, but it requires the bank to put up a 5 per cent gold current redemption fund for them, so the bank only gets $05 for every $100 it pays out. The Walker bill keeps the identity of the present greenbacks and only prints the notes of the bank on the back of the identical green- back. It allows the banks to give nearly every kind of money for them excepting bank bills. All money can not be "cornered," as United States notes. The Walker bill requires the Government itself to put up the 5 per cent current redemption for its own notes. Thus the bank gets $100 legal- tender money in exchange for each $100 it pays in. STRENGTHENING THE PUBLIC CREDIT, ETC. 165 The Hill-Fowler bill continues the present law forbidding banks onder any circumstances to use their "reserves" for the very purposes for which they are kept. The Walker bill permits banks to use their "reserves" iu any legiti- mate way. Under the Hill-Fowler bill, as under the present law, every operation of the Treasury would expand or contract the currency to the serious injury of the business of the country. Witness the outcry all over the country that the Treasury is contracting the currency and injuring business in collecting the pay on any debt due the Government. Under the Walker bill whatever sum the Treasury had or failed to have available, would not affect the volume of the currency of the country by the smallest fraction. It would be in the national clearing house where the people could use it. Under the Hill-Fowler bill, as under the present law, national-bank eurrency notes, which are certilicates of deposit and the people's money, are a freak money. They are forced out of circulation when the credit of the Government is best, business most active, and the people need the most money; they are forced into circulation by the banks when the people do not need them and can not use them, and the Government is distressed, as in 1S!>3 and 1894. Under the Walker bill it would be for the interest of the banks to issue the most money when the people needed it, and to just as large an amount as the people could use. The competition between banks in forcing it out will make it just as cheap as money can possibly be issued under any system and kept "good" and honestly used by the people, and when they most need it. That part and only that part of the cur- rency which the people can not profitably use will be forced back to the banks. Under the Hill-Fowler bill, as under the present law, the United Slates will have the highest interest rates in the most expensive cur- rency system of any first-class nation. LOW INTEREST UNDER THE WALKER BILL. Under the Walker bill interest on loans will be as low, and this all over the country, as anywhere in the world. Gurrency will be issued to the i leople by the Government, not at 2 per cent interest, as the Populists want, but for nothing, to any five persons that get together capital enough to guarantee the safety of the currency they take and to the amount of their combined capital, as is done in every country, the Uniied States alone excepted. BOARD OF ADVISERS. Under the Hill Fowler bill, as under the present law, there is no way for the Secretary of the Treasury to avail himself of the expert assist- ance that is absolutely necessary to him to properly discharge his duties, and that every banker in the country has in his board of directors his clearing-house committee and banking associates, etc. To-day, if the Secretary seeks any advice he thereby inaugurates a panic — the very panic he may be seeking to avert. Under the Walker bill the reverse is true. It provides for the assist- ance of the Gomptroller, nominally, but really for the Secretary oi the Treasury, a board of seven men — men who have risen to the very highest eminence in their profession. They have not attained to their places 166 STRENGTHENING THE PUBLIC CREDIT, ETC. by favor, but have conquered them by bard, diligent, continuous work for years. Their position at the head of the greatest financial institu- tion of the world, developed in the Walker bill, uot by appointment, but by conquest, will place them in a position not only equal to that of the directors of the Bank of England, but far above them. Their attainments will rank in finance and banking with the justices of the Supreme Court of the United States in law. Their salaries will come to them naturally, as their duties are met, and from the banks, not from the United States Treasury. The prizes for party workers provided in the Hill-Fowler bill, at an expense of §23,000 to the Treasury in the triple-headed Comptroller, make more conspicuous by contrast the excellence of the provision in the Walker bill for this board of advisers. In the Walker bill the in- terests of the plain people of the country find protection in the hands of their special representatives, viz, the President, Secretary of the Treasury, and Comptroller of the Currency, who are given ultimate control. On the other hand, the highest efficiency and economy of service are secured to the banks by their officers and by the board of advisers. PROTECTION OF GOLD RESERVES. The Hill-Fowler bill affords no chance to the United States Treasury or to banks to protect its gold by banking methods, while united banks can protect themselves surely and safely. The Walker bill affords banks the same chance to protect themselves against unreasonable depletion of their gold as the banks of France, of Germany, of England, and other countries do. Under it no call for gold under any circumstances can be made on the United States Treas- ury. It would be of as much indifference to the country what the Government paid out as what John Jones, Sam Smith, or anyone else paid out. The Hill-Fowler bill provides no way of ending the liability of the United States Treasury to furnish to anyone demanding it all the gold needed by banks, or by domestic or foreign brokers, for speculation or to ship abroad. The Walker bill ends it the day it goes into operation. NO RELIEF TO THE TREASURY BY THE HILL-FOWLER BILL. The Hill-Fowler bill holds out no inducement in any form for the banks to assist in relieving the United States Treasury of the current redemption of one dollar of United States notes in addition to the amount their bill forces them to take, viz, $157,872,024— less than half of them. The Walker bill, in addition to what it requires banks to take, has so large an inducement to banks to assume them and wholly and immedi- ately relieve the Treasury of all of them, in allowing banks to issue an amount of currency equal to the amount of United States notes they assume the current redemption of, that the banks are restricted by the bill in the amount they can take. PROTECTING REDEMPTION GOLD. The Hill-Fowler bill, in full operation, makes the isolated and helpless country banks furnish to the isolated but powerful city banks not only all the gold they need but all the gold needed in the whole system. STRENGTHENING THE PUBLIC CREDIT, ETC. 1 b' 7 The country banks, in turn, would demand the gold they needed of the United States Treasury, making conditions worse than now — in the city banks putting the country hanks between them and disaster, while now the city bankers or brokers, or foreign brokers wanting gold to ship, go straight to the Treasury and not to city banks or country banks. The Walker bill combines all the commercial banks in the country into one whole to furnish gold ami maintain "parity," and masses all the gold in the country in two or three centers of trade to protect each and every bank with these masses of gold coin. The Hill-Fowler bill compels the division of gold in 3,000 to 10,000 small parcels and the isolation of a little gold in each bank. Kach bank is required to keep its gold in its own vault for itself alone and redeem its own notes in gold only. The country bank can not, in the nature of the case, keep enough gold to protect itself against a senseless scare among its customers or from being blackmailed by any powerful bank, broker, or any operator, either for revenge or for pelf. The Walker bill compels all the banks to combine to maintain parity and to protect the gold of each solvent bank. CLEARING-HOUSE CONDITIONS. The Hill-Fowler bill requires as for twelve years, from 1870 to 1801, the United States Treasury to take all the risk and be at all the expense of the clearing-house system and the current gold redemption of legal-tender and Treasury notes. Then, and it will be the same again, confidence could not be maintained in such empirical practices without a surplus in the Treasury as large as was then held — hundreds of mil- lions, a large part of it in gold. In every other country in the world the banks are required to assist and sustain the Government. The Hill- Fowler bill would, as now, compel the Government to support the banks. Under the Walker bill the United States Treasury would only touch the national clearing house as a fiscal agent and depository of public moneys, having as a guaranty of the safety of such deposits the whole $2,000,000,000 of cash reserves and banking capital of the country as a guaranty fund for its payment by the national clearing house. The Treasury could in no event incur any loss or be put to any expense, as it would be the only depositor of money in that association. Except in the Walker bill, or its equivalent, there is no possible way of avoiding the continuance of enormous loss to the people. It provides a more effective and far safer connection of the Treasury of the United States with the principal banking clearing house in the country, and relieves the United States Treasury from taking all the risks and being subject to all the losses that are involved in the clearing-house business of the country, which risk it carried from the resumption of specie payments in 1870 to about the middle of L891, at an expense to the people, incurred in taxation, of about $12,000,000 a year. The Hill-Fowler bill contemplates the continued use of theXew York clearing-house certificates, which are sure to prove at some time a most dangerous and unsatisfactory emergency currency, as compared with legal tender currency, to all excepting the banks which compose it. Banks in other parts of the country have already been brought into very great peril by their use. Under the Walker bill United States legal tender notes are the emer- gency currency issued to allay panics. Their advantage over "bank currency," as emergency money, is incalculable. 168 STRENGTHENING THE PUBLIC CREDIT, ETC. OPFICE OF THE COMPTROLLER OF THE CURRENCY. The Hill-Fowler bill abolishes the office of Comptroller of the Cur- rency and creates a "triple-headed" executive department, thus violat- ing every principle of prompt, efficient, and responsible executive action in the head of affairs, and still further by limiting their terms of office. It perpetuates this gross injury to the service at an increased expense of 820,000. Under the Walker bill the office of the Comptroller of the Currency remains as now, excepting the Comptroller is made many times more efficient. The Hill-Fowler bill assumes that a whole community can be arrested, tried, and punished, in providing that every bank in the country shall be put in liquidation immediately, if gold payments are suspended by banks, for any cause, or for any time, longer or shorter. If au earth- quake occurs in Charleston, S. C, the whole city shall be razed to the ground, because earthquakes thereafter may be normal to it. Such extravagant remedies overreach themselves, and are equivalent to no opposition to the thing deprecated, and no penalty at all. Under the Walker bill a penalty tax of one-half of 1 per cent on deposits in all commercial banks, amounting to $13,401,836 per annum, is imposed during the default. CURRENT REDEMPTION. The Hill-Fowler bill provides the most cumbersome, expensive, annoy- ing, and impracticable machinery for the current redemption of the three kinds of bank currency it creates that could be devised, and it makes it so inflexible by legal provisions with one class of notes redeemed in one manner and two kinds in another place and manner, as to create endless confusion. It provides for the division of the United States into territorial " cur- rent redemption districts." This division of the country into redemp- tion sections is made to apply to only one of the three kinds of bank- currency notes provided for in the bill—" national currency notes." It also provides that these notes shall be redeemed m one way and at one place, and the " national-bank notes" and the "national-reserve notes" shall be redeemed in another way and at another place— and much more of the same sort. It makes all three kinds of its bank notes a legal tender between banks, but provides that no bank shall pay over its counter on a check, etc., to a citizen or to other banks a " national-currency note" if the note is not in the same district that the bank issuing it is located in, unless its redemption in that district is provided for. Territorial divisions rigidly fixed and the notes to be issued in that division to be made for that division only, is as impracticable as to restrict the mail service of the country in the same way. I nder the Walker bill the banks are simply required to "do the tiling," and left absolutely free to do it in the cheapest, quickest, and safest way possible— in any way satisfactory to them and agreeable to the Comptroller. It is for them to decide and to change the way and place as often as a new railway, turnpike, or city road is built, or one town outstrips its rival. Banks must vary from time to time their ways of doing, in the nature of the case, always subject to the approval of the Comptr dler. STRENGTHENING THE PUBLIC CREDIT, ETC. 169 Under the Walker bill the one kind of bank note provided for, paid out by any bank anywhere will naturally, immediately, and instantly, after it has done its work, find its way back to the bank that issues it as a letter dropped in the post-office in any hamlet finds its way to its destination. Each bank bill will find its way back to the bank that issues it in precisely the same way and in the same package with the check, draft, bill of exchange, or other money obligation issued by the same bank after it or they have done their work and at a tithe of the expense in time and money of the Hill-Fowler plan. It never will occur to anyone to ask what they are redeemed in. They will be redeemed in " bank funds" that all banks agree on and that maintain parity, or all banks will incur the penalty tax. UNREASONABLE USE OP GOLD IN HILL-FOWLER BILL. The framers of the Hill-Fowler bill see only gold in our monetary system. They see little in it to preserve to the people who made it. They do not hesitate to assume the duties and exercise the right of the Committee on Coinage, Weights, and Measures. They demonetize sil- ver. They destroy the United States legal-tender notes. They reverse the policy of the country, not only as to gold and silver, but as to paper money, adding two more kinds to the present bank-note money. They remove the guarantee of the Government from a large part of the bank money used by the people. There is not the slightest excuse for such radical measures. In the Walker bill there can not be found a section, a paragraph, a clause, a line, or a word that makes the slightest discrimination between any two of the various forms of our coin and paper money, gold, silver, United States notes, Treasury notes, bank notes, etc. Its author sought only one end, viz, to compose the ills and to correct the injustice in existing conditions, created by law, and in doing so not to unnecessarily antagonize the views of a single citizen in the whole country. VISIBLE GOLD. There was in the country "visible gold" (that is to say, besides all the gold in private hoards and in the pockets of the people) in banks, in the United States Treasury, etc., in 1890, $421,236,388. It lias increased since to nearly $(500,000,000. Not a dollar of these millions of gold was available to our banking and currency system excepting that in the United States Treasury, and no one is responsible for "maintaining parity" but the Treasury. We have more gold in proportion to our requirements than any other country, only a fraction of it in touch to keep the parity of our $1,000,000,000 currency. The Hill-Fowler bill continues the same inexcusable policy and aggra- vates it. It requires an immense amount of gold, but still leaves the United States Treasury ultimately responsible for maintaining "parity" and to furnish to banks all the gold they demand of it. The bill requires the banks to carry one half the cash leserve required in gold $111, 000. 000 The United States Treasury to carry 136, 000. 000 Unvarying total amount required 1*80, 000, 000 Treating silver and United States notes simply as currency, it requires the banks to redeem their notes in gold on demand. •170 STRENGTHENING THE PUBLIC CREDIT, ETC. The allowing the use of "national reserve notes" in redemption is only nominal. Each bank stands alone to redeem in gold its notes. Assuming that country banks will take out GO per cent of currency to capital, it works out in this way: The reserve city banks keeping 50 per cent of this required cash reserve in gold and on notes will keep in gold $119, 282, 035 Country banks, 50 per cent of cash in gold 27, 466, 179 Country banks, on $267,913,749 bank notes, 5 per cent in gold 13, 395, 687 Total of 160, 143, 901 As currency and deposits are identical, this is equivalent to requiring 51.2 per cent of cash reserve in city banks to be in gold and an equiva- lent of 74.3 per cent of the cash in the country banks to be in gold. The $13,395,087 fund to be kept in the United States Treasury. HILL-FOWLER BILL FAVORS CITY BANKS. The city banks will escape all responsibility for maintaining "parity," for they will take out no currency. They will keep the " national reserve notes" they are required to take in their "cash reserve," changing them with each other for that purpose, the national reserve notes required in the central reserve cities being only 12 per cent to their cash reserve, in all other reserve cities only 53 per cent to their cash reserve. Not a dollar of their notes will ever be presented to the "gold current redemption fund" to draw out one dollar of gold. On the other hand, the national reserve notes country banks are required to take, being 182.6 per cent to their cash reserve, and the amount of bonds they are required to take for "national bank notes," will make 335.2 per cent to their cash reserve, they can use only 14.3 per cent of these notes in their cash reserve. They will therefore be compelled to "pay out" all the balance, the whole equaling about $158,000,000, besides the $100,000,000 bank notes. Under the old Suffolk system the total currency used averaged to be redeemed five times a year. CURRENCY FLOWS TO COMMERCIAL CENTERS. All currency flows to the commercial centers, to be returned to the country banks through "current redemption." The bill compels every dollar of this $158,000,000 each time it is presented for redemption to be paid in gold. It puts the gold redemption fund outside of banks and into the United States subtreasury. This is done to make sure that the mandate of the law compelling actual gold redemption is obeyed. The actual gold or gold drafts must be used in redeeming it. Five times a year on $158,000,000 makes about $70,000,000 of gold a month used in redemption and constantly flowing from country banks into city banks ; $800,000,000 each year if only $158,000,000 of national- bank currency and national-reserve currency is used. How do you like this bill, wholly in the interest of the city banks? Will a bank ever be organized under it? Where are the country banks to get their gold? Out of the United States Treasury? How is the Treasury to get this gold? Of course the city banks will kindly hand it over to the Government in pleasant times, when everything is balmy. How when it storms ? How about STRENGTHENING THE PUBLIC CREDIT, ETC. 171 1803? How about another Cleveland-Carlisle administration? It is as sure to come as history is to repeat itself. Sell bonds, of eoiusc! Bell $163,000,000 bonds at a loss of $40,000,000, as Cleveland did, or $1,000,000,(100, and just as many as unscrupulous bants or foreign brokers may determine. The Bill-Fowler bill leaves the United States Treasury absolutely unprotected, the sport of the most unscrupulous money changers and gold brokers that can be found anywhere in the world. A cablegram costs but little. The door of the United States Treasury opens, for the delivery of gold, into every European broker's ollice — Israelite or Christian. PROBLEM OF SILVER REDEMPTION. But one of the most remarkable hallucinations developed in the bill is the belief that with $500,000,000 silver in circulation, averaging to pass through banks in deposits from traders five times a year, or $200,000,000 a month, the people will pay the traders in certificates or in coin. If the banks can not get them to present to the United States Treasury for gold, all existing banking customs must be reversed. Kemember, the bill demonetizes silver dollars and provides for their gold redemp- tion at the Treasury. It provides only $25,000,000 gold, and that the Treasury must keep good, to redeem in gold all silver presented to it. The only way the country bank can get the gold to make the compul- sory gold redemption of the circulating notes is to get it out of the United States Treasury or beg it of the city banks. Problem: With $25,000,000 gold stock in the Treasury to redeem $200,000,000 a month of silver, how many bonds must the Treasury sell per month to do it? Or, how much gold must it buy directly or indirectly of the banks? Or, how will it run the New York clearing house as an adjunct to the United States Treasury? How long will Andrew Jackson lie quietly in his grave, or who cares whether he lies quietly or uneasily? ASSUMING UNITED STATES NOTES. Under the Walker bill not one of the present unjust or objectionable banking or Treasury conditions will remain. The city bank will have to assume the current redemption of United States legal-tender notes equal to 12£ per cent of its actual capital, and the strictly country bank, just formed, 124 per cent of them to actual capital. The central reserve city bank will not be let off with buying 2.4 per cent to its actual capital of bonds and 12.8 percent of national reserve notes, and the new country bank have to buy 25 per cent of both, as in the Hill-Fowler bill, and the othei central reserve cities only 5.5 per cent of bonds and also of 16.5 per cent of national reserve notes to new banks 25 per cent of both bonds and notes. It requires no bonds whatever, and serves every bank alike. The Hill-Fowler bill provides for the disposition of only $157,872,000 United States notes by banks. It only requires the taking of them by national banks. It holds out not the slightest inducement for banks to assume one dollar of them more than the law compels them to take. The Walker bill requires all commercial banks, national and State, to assume an amount equal to 12.j per cent of their actual capital, which would dispose of $108,071,000. From paying out the Treasury gold $140,000,000 would be disposed of. The losses are estimated at $12,000,000, leaving a balance of only $20,000,000 for banks to assume. 172 STRENGTHENING THE PUBLIC CREDIT, ETC. The Walker bill allows banks to issue currency against their assets at once for every dollar of United States notes they assume. This inducement is so great, that among the six thousand State and national banks and new banks there would be found enough to immediately take up many times this amount. The Walker bill immediately adjusts the holding of United States notes among all banks, so that any bank having an excess will be relieved of the excess immediately — as soon as any bank is in the system. The Hill-Fowler bill provides no protection to the specie of any single bank. Any excitement in its neighborhood is liable to wreck the most solvent isolated single bank. Under the Walker bill, the gold of all the banks is massed to defend the gold of each individual bank, by the combination of all banks, so that no " run "could possibly be made on anyone bank, and all the banks combined are too strong to meddle with. HILL-FOWLER BILL UNFAIR TO COUNTRY BANKS. The unfairness of the Hill-Fowler bill as between city banks and country banks is further illustrated by the percentage of bonds to their actual capital each is required to buy. The bill is carefully drawn in the interest of banks that are interested in speculation in bonds as much as it is in the interest of banks faithfully serving their business customers. It requires of the central reserve city banks, as a license fee to do a banking business, the buying of United States bonds to the amount of 2.4 per cent of tbeir actual capital. Newly formed banks must buy bonds to the amount of 25 per cent of their capital. Other reserve cities the amount of 5.5 per cent of their actual capital, against 25 per cent of capital of banks newly formed. This bill would not have gotten out of the committee if it had not been so drawn as to meet the wishes of those who were determined that no bill should be reported that did not first of all protect this bond privi- lege to banks, and this to the sacrifice of the legitimate commercial bank, and of the advantages of a true bank currency. Banks that bought bonds at 80 to 90 cents on the dollar of their value in prosperous times must have preserved to them the privilege of tak- ing out currency on the bonds while waiting for the 10 to L'O per cent profit, that they may loan the currency they take on these bonds to country districts that are prohibited from having their own banking funds by the national law. And this to add to the profits of banks in speculating in bonds or still more to favor banks in localities which have an excess of banking funds for commercial uses and are investing them in bonds. BRANCH BANKS. The Hill-Fowler bill authorization of branch banks is very bad economics as compared with encouraging the local independent bank, and still worse statesmanship. It linds no justification in the policy of our free banking system or in any amendment of it proposed in this bill. It is unwise to permit powerful city banks to establish branches in places of 4,000 inhabitants or less. The putting its local agent in a place with no interest in it other than the money he can make out of it for his nonresident employer, means that no independent local bank, STRENGTHENING THE PUBLIC CREDIT, ETC. 173 managed by its citizens, can be established in the town, and if one is there it must go out of business. In nine cases out of ten local banks in towns are formed by public spirited citizens to get a fair return on the capital they put in the bank', but still more to build up the town, by assisting other citizens to capital with which to do their business. The agent of the city bank may for a time loan money, in "good times," at rates to drive out the country bank, and in times of strin gency the funds with this country agent will be sure to be immediately returned to support the city bank. The customers of the country agency will be sacrificed to the necessities of the parent bank. Generally there are two stores in a town. Jn times of excitement each is the headquarters of one political party. The agent of the parent bank knows the politics of his city employer, and again the bestowal of his favors is liable to be influenced by his own politics. But our choice must be made between one great "United States Bank " with ten thousand branches, and ou the other hand ten thou- sand independent local banks, united together, that all in union may support each, and thus all together make each secure in times of Stringency or in threatened or actual panic, as in the Walker bill. There is no possible relief of the Treasury condition or any other way of saving to the people a loss now made of $50,000,000 to $00,000,000 annually in excessive interest charges. It can not be done by the isolated banks of the Hill-Fowler bill. INDEPENDENT LOCAL BANKS. Under the Walker bill independent banks will be formed in every considerable town by its leading citizens and in the immediate future. Each bank will necessarily have in its direction the two storekeepers. It will necessarily have Republicans, Democrats, and Populists in its management. There are not enough men in either party alone so situ- ated as to maintain the bank. The four chief agents in civilization are the home, the church, the school, and the bank. To-day every man, rich or restricted in his means — merchant, manufacturer, farmer, or what not — must at times have more or less assistance with money borrowed of banks, or suffer great loss in lower prices for his products or shrinkage of value of his property. Millions are thus lost every year by farmers and others in the United States because banks can not live in country districts under the law as it now is. But still more the bank is the greatest instrument of substantial progress, in helping forward wise schemes and advising against the unwise. It is in the directors' room of the country bank that talk never ceases as to how the progress of a town can be secured, property be made to increase in value, and a greater home market for the products of the farm secured; better and cheaper freight rates, better markets every- where for the home, shop, and factory; better county roads; a gas plant; better country and town buildings; better schoolhouses, better church edifices, better everything. When five or more reputable citizens of a town get their capital together to form a bank, it means that the town must take on new life and every citizen of the town will be more enterprising and successful. In the bank not only all theories of coinage, paper money, credit, and business methods are discussed by the directors and officers of the 174 STRENGTHENING THE PUBLIC CREDIT, ETC. bank, but by every business man and farmer in the neighborhood — by every man who goes into the bank — not only discussed, but tested in practice. The Walker bill conserves and magnifies all tbese forces for good in encouraging the formation of local banks. As compared with the good done by an independent country bank, with its immeasurable progres- sive influences for good, what can the single excellent individual and honest money lender do, who is sent into the town by the city bank? A bank established in a town serves the whole body of towns adjoin- ing, and would reduce prices on goods to the farmers very considerably. It is said goods are uniformly sold at retail, where cash is paid, from 5 to 10 per cent less than where payments are made only once or twice a year. The country merchant is now the farmer's banker, at a cost to the farmer in increased prices on all the farmer buys of from 5 to 10 per cent over what the prices would be were there a bank in his neigh- borhood. He could borrow money of the bank on his own note, which he could pay at the dates at which his hogs, or horses, cattle, wheat, corn, oats, rye, flax, or cotton, etc., were ready for market. CLEARING HOUSES. The Hill-Fowler bill undertakes the impossible in laying obligations on clearing houses having no legal existence. Under the Walker bill every clearing house in the country is made a body corporate to deal with under the law and brought into the system, and every commercial bank as well. The Hill-Fowler bill needlessly antagonizes, in very many of its pro- visions, nearly every notion, opinion, economic and political, and the experience of our 70,000,000 of people. WALKER RILL OFFENDS NO PREJUDICES. The Walker bill takes cognizance of every notion, opinion, preju- dice, etc., of gold men, silver men, greenbackers, Government sub- treasury men, and Government currency 2 per cent loan men. Not one of them can consistently vote against the Walker bill. Every one of them claims to desire that all paper money and coin money shall be kept at a parity, which the Walker bill provides for doing. The Hill-Fowler bill, with its restrictive features, and annulling their charters at the end of a year, could have only one outcome to all national banks, viz, to drive every one of them out of the national system and into reorganizing under State laws, or drive them out of business. The Walker bill, on the other hand, leaves banks far more freedom than now to safely conduct their business under it and brings every "commercial bank" into the national system and makes the position of every one of them absolutely secure in any event, excepting in making unsafe loans and from dishonesty among its officers. SOUTH AND WEST W'ULD DEVELOP BANKING UNDER WALKER BILL. Bank funds are now so abundant in the New England, the Eastern, and Middle States that they can not find employment in strictly com- mercial business. A large proportion of them are now invested in United States and other bonds. One hundred million dollars and more, because of their abundance, are now loaned in Europe on call. Pass the Walker bill and allow the Southern, Western, and Pacific States to STRENGTHENING THE PUBLIC CREDIT, ETC. 175 fully develop their banking and currency interests under the only law yet proposed that makes it possible to them to do so, and interest rates on loans made, on the same security, to the same amount, and on the same time, would be very nearly as low all over the country as in cities, and lower than in any European country, not excepting Great Britain. Europe could not keep gold unless her interest rates were as high or higher than ours. If, besides, a banking committee of the House could be appointed with suilieient wit to report and secure the passage of the interna- tional American bank bill, within a comparatively brief time the money center will be moved from London to New York or Chicago. HILL-FOWLER BILL NOT DRAWN ON ECONOMIC PRINCIPLES. Finally, the Hill-Fowler bill, like the existing national banking law, is not drawn on any recognized principles of economics and sound bank- ing principles. Its requirements, prohibitions, and penalties are not justified by experience. The Walker bill is drawn in accord with true economic law and sound banking principles, and every requirement, prohibition, and penalty is justified by the testing of every line of it by the experience of the good and bad State banks for years previous to 18(52, by the experience of our national system for thirty years, and by the experience of France, Germany, Great Britain, etc. If anyone will point out an excellence in the banking laws of any country not included in it, or a provision in it not consistent with experience and the very best results of financial and banking expe- rience of the world, when it is shown the bill will then be corrected accordingly, or abandoned. I only remark that one bank, with all other 1 tranches, or all banks as integral parts of oue whole, are only admissible. If any performance fell so far short of the announcement of the play on the bill boards as the various bills referred to the Committee on Banking and Currency, or prepared by some members of it, have of the commendations of them sent broadcast over the country by the Mone- tary Commission, the audience would do as much credit to their sense of justice as they would discredit to their patience, by mobbing the performers. RECAPITULATION. The Hill-Fowler bill does none of the following things, the doing of which is made certain by the Walker bill: 1. The Walker bill makes sure the maintenance of parity between all forms of our existing money by the banks. 2. Retains the actual use of gold and silver money by retiring all silver certificates and all gold certificates. 3. Does not impound, retire, or change the existing United States legal-tender notes. 4. It provides for only one kind of paper money, viz, a national-bank bill as securely guaranteed by the Government as the present national- bank notes. 5. It relieves our hazardous situation in case of panic or reverses in war. 6. It reduces interest rates on loans by country banks from one-third to one-half. 176 STRENGTHENING THE PUBLIC CREDIT, ETC. 7. It absolutely and forever relieves the United States Treasury of the current redemption of any form of paper money by putting it on banks. 8. It does not pile up vast sums of money in the Treasury to create discontent among the people. 9. It furnishes no needless opportunity or encouragement to the hoarding of gold. 10. It iurnishes a currency the hoarding or destroying of which makes lower the rate of interest by bauks and helps the United States Treasury. 11. It gives every dollar of currency as explicit and available a Government guarantee as now. 12. It unites all banks of the country in an organization to guaran- tee the parity of all United States notes, silver coin, gold coin, and national-bank notes, as solid and secure as the Bank of France, and more so than the banks of any other nation excepting France. 13. It builds up this fabric by units as separate, distinct, and inde- pendent as is the citizen in a town who, acting together with his fel- lows, makes a body politic. 14. It thus takes careful cognizance of every phase of political and economic thought among the people. The Hill-Fowler bill takes no cognizance of the political situation, and needlessly offends the great mass of the voters. Bryan's vote, 6,500,000; McKinley, 7,000,000. Bryan 2,000,000 crazy for silver. 2,000,000 frenzied by the present banking and currency situ- ation and care nothing for free coinage of silver. 2,500,000 care nothing as to what principles the Democratic platform preaches or for silver. They are for the "machine." 6,500,000 1,000,000 Republicans are earnestly for the unlimited coin- age of silver, but are more for what the Repub- lican party represents in other things than for silver. 6,000,000 voters are more or less suspicious or opposed to national banks, and almost wholly on account of the use of United States bonds by banks to get currency notes on. 15. The margin of 3£ per cent of sound-money voters is dangerously small. We must win from those among the people who want a better currency system enough votes to make sound money safe, and must also keep the 1,000,000 Silver Republican voters for maintaining parity. 16. How can we do it? Not by telling the people that we have changed the paper money they will hereafter carry in their pockets into bills not guaranteed by the Gov- ernment as the Rill-Fowler bill does. Not by giving the people anything any less secure than they now have. But that in changing the paper money and leaving out the bonds we have kept the Government guarantee. 17. Neither can we tell the people when we meet them face to face in their primary meetings that we have given them two kinds of paper money — one they can never lose a dollar on, however poor the bank issuing it may be, for the Government is behind it; and another that STRENGTHENING THE PUBLIC CREDIT, ETC. 177 they must look to the bank only to pay in case of insolvency. As a party measure, such a statement would be worse tlem to not/tint/. 18. We had better stop here; and now, and carefully examine our position as to all the bills before us, Fowler bill, Gii»o bill, .McClary bill, Hill Fowler bill, commission hill, Walker bill. The lirst section of my bill involves this question of what currency we shall provide. What inducements, what reason, can we give for the change from what now is? What are the charges made against national banks .' National banks, $100,000 capital. (1) Banks buy $100,000 of bonds, on which they get 1 and 5 per cent interest. Then they (2) take them to the Government Treasury and get $90,000 currency for the bonds, and loan the currency, getting (3) from 4 to 10 per ceut interest on this currency. Interest on the bonds averages 4A + 4= 8 percent. ^ 4i+ 0=104 percent. > gotten by banks. 4f+8=12| percent. ) The usual reply: (1) Every dollar of currency is secured by the pledge of a United States bond in the Treasury of the United States. (2) You can not have a safe curreucy unless its payment is made sure by the guarantee of the United States. (3) No holder of a currency note has ever lost a dollar on a note of an insolvent bank since we had national bauk notes. Unlike the old State banks. (4) We have the best banking system in the world, because our cur- rency notes have absolute security in the guarantee of the United States. Rejoinder: (1) Secured currency. What good does that do us? It may be secured, but we have no currency in our part of the country, and can not get it. (2) We can not borrow it at any price. (3) We have plenty of property — hogs, horses, cattle, sheep, hay, oats, corn, wheat, but no money. (4) We want, and will have, more money. (5) What good is it to us that currency is absolutely safe to the holder if we can not get auy to "hold?" Reply : (1) Money is plenty. There never was so much money. (2) The Treasury reports show double the money now for each man, woman, and child that there was before the war or after the war closed. (3) Anyone who has anything to sell can get money enough. (4) Anyone can borrow money that has anything to borrow it on. Rejoinder: (1) I know money is not plenty. I do not care what the Treasury or any other " reports show. 1 " (2) We are determined to have more money. (3) We never had any more things to sell, nor more of them, than now. (4) But we have to sell them immediately when they mature. (5) We can not borrow any money to hold them until we can get fair prices. b & c 12 178 STRENGTHENING THE PUBLIC CREDIT, ETC. (6) We sell them, and when the speculators have skinned us of all we have raised at low prices we hear that prices have gone up 5, 10, 15, or 20 per cent. (7) We will try the unlimited coinage of* silver if we can not get any- thing else. "Reply : (1) Unlimited coinage of silver will do you no good. How are you going to get the silver after it is coined? (2) The Government can only get it out by paying it out. (3) You can not get it unless you work for it or sell something for it which you have worked to raise, etc. (4) A 50-cent dollar can not help you. (5) Even that will not be given you, etc. Rejoinder : Yes ; I know that; but I can not be any worse off. The bankers and their friends and neighbors get all the money they want. I can borrow no money when I have as much property in hogs that will be marketed in three or four months. My wheat, com, oats, barley, horses, beef, etc., are as good as any man's property. I can not be any worse off, and I will try unlimited coinage of silver anyway, and take the chances. This is not argument or reason, but it is exactly the condition of mind 6,500,000 voters are in, or worse. Reply : What can be said on the stump — We are called gold bugs, gold-standard men, etc., etc. We are not single gold-standard men, if you mean by that that we have changed. We are now where we have been since the Government was born — for having the best money in the world ; and will keep each form of our money — paper, silver, and gold— at a parity with every other. HOW THE WALKER BILL HELPS THE PEOPLE. People ought to get paper money for the asking, if they will keep it as good money as the world ever saw, and not other ways. (1) Any of you five men can get together $25,000, which is as little capital as can be made to pay expenses in a bank and make it safe, and can go to the United States Government and get $25,000 of notes, pay- ing only the cost of printing. Then the five men can make the $25,000 of notes they get their own notes by having the president and cashier sign them. Then these five men can circulate them as money. But you say that is the way they used to do before the war, and we do not like that kind of money. (2) Yes; but the Government did not guarantee that money, and it does this money. The money I am talking of is guaranteed by the United States just as surely as it is now. It is exactly the same money as we now have. It has the Government guarantee, as we have always told you it must have, in order to be good money. The only difference is this: Now, the Government issues its bond, sells it to the bank, and the bank puts it back in the hands of the Government that made the bond, takes notes for it, goes home, and makes those notes its own, exactly as under our law, by signing them by the president and cashier of the bank, and uses them as money as now. But now the Government takes the capital STRENGTHENING THE PUBLIC CREDIT, ETC. 179 of the banks so the people can not borrow it, but pays the bank l or 5 per cent interest on the bonds, and the bank also gets Interest on the bank- note money it got on the bond. Under onr law the Governmenl pays the bank nothing. The Go\ eminent mates the notes we have provided you precisely the same money as to securities as the present Dotes, in ease the bank tails, by writing in the statutes that every one of the notes shall be immediately paid ont of the United States Treasury if the bank fails; and the Government shall then take all the property of the bank to pay itself with the property of the bank, and. besides t iiat, it makes all the banks pay a tax on all these notes all the time, and enough to make up any loss it could possibly make in paying these notes, and several times as much as any loss could be. (3) What, then, have we done? A. We have given you a paper money as much guaranteed and made secure by the Government in case the bank fails as now — the same as it has always been. 1>. The people have always complained that the banks got interest paid to them twice, once by the Government on the bonds put up and then by the borrower. We have stopped the Government interest to banks on the bonds by taking out of the law the right of only the bondholder, as you have said. You have always said "a man must become a bondholder to get paper money." Our law allows any five reputable citizens to get it without having to first buy bonds and then put up its $25,000 capital in the bonds as a guaranty to keep their bank notes as good as our greenbacks. C. We have done more. W r e have put upon the banks the duty of keeping all our money — greenbacks, silver dollars, gold dollars, and bank notes — each and all as good as the best money in the world by keeping all at a parity. Every greenbacker says that must be done. Every man favoring unlimited coinage of silver says that must be done. Every bank man says that must be done. Our law does exactly what all classes of people say they want done. D. It cost the United States Treasury from $12,000,000 to $20,000,000 a year to keep our money at par, which is taken out of you by taxation, in the last twenty years. We have stopped all that, besides the hun- dreds of millions in indirect taxation. It has been cheap at its cost, rather than not have it done by anyone; but now the banks must do it in future, as banks do in all other countries, and at no cost to you, or cost to them, as to that matter. E. We have also required in the bill that when a bank note gets into New York, Chicago, or any other city it shall be sent home, to be loaned there. They can not pile notes up in New York by the hundred million under our bill, as they do now. F. As any five of you can get together and form a bank, with the money to put up in order to make the bank notes you get secure and not be obliged to use tip your capital in first buying bonds, money can not be "cornered" or excessive interest charges be made on it by banks. G. Under our law you can borrow such money nearly one-third (cer- tainly one-fourth) less than the interest now is on our present bond money, for the reason that bond money uses up the capital you put up in buying the bonds. H. Under our bill the people have the $25,000 capital to borrow, and 180 STRENGTHENING THE PUBLIC CREDIT, ETC. $25,000 bills also, as they do in Canada, Scotland, France, Germany, and every other country, and can therefore loan money as cheap here as in Europe. Remember, in all this talk and in no talk ever made was the mind of a single one of the average voters, making three fourths of our voters, ever cleared up on the proposition that the banker did not get 4 to 5 per cent on his bonds, and 4, 6, 8, or 10 per cent interest in addition on the currency paid out by the banks. That belief remains; and that belief and the further fact that there is now no bank in many considerable centers of business throughout many sections of the country to make the people loans at reasonable rates of interest, and, still more, educating a body of citizens connected with banks to post up the citizens on the real facts, and thus steady public opinion with their knowledge and experience, has done more to prepare the minds of the people to receive the seed of the error of unlimited coinage of silver by our country, without the help of other countries, than its adherents have done to propagate that error. The only conceivable cure of it is in setting a back fire in increased free but sound bank currency. The people have a moral right to this free and " true bank currency," such as the people iu every other country have, such as is provided in the Walker bill, H. E. 10333. Not one of these statements can be truthfully made of the Hill-Fowler bill. BANK OF ENGLAND. In addition to what has been already said in objection to grafting on to our bad banking system the one bad feature of the otherwise most excellent Bank of England system, I wish to say that the belief of some sincere friends of reform — that we can correct admitted evils by a system of Treasury bookkeeping, as in the Bank of England, while $1,000,000,000 to $1,200,000,000 still remain as demands for gold on the United States Treasury — is the most fatuous of all. The Bank of England system of issuing currency could by no stretch of the imagination be thought by sound financiers to have any chance of adoption in England to-day were it an original proposition. If the Bank of England system was not urged on us ex cathedra, no one would think of adopting it. Nearly the whole body of European financiers, and English as well, believe the restriction of its note issue to be the one defect in the Bank of England system, with reference to the pretended greater security given to the business and commerce of Great Britain in preventing or allaying panics by its method of issuing currency, over and above the method pursued by the Bank of France, the Bank of Germany, or in New England under the Suffolk system, from 1840 to 1864, which lat- ter I believe to have excelled all others, excepting the Scotch. No one believes in it, and yet it is proposed to foist the semblance of this sys- tem, but in a far more objectionable form on our present chaotic system, or rather want of system. The claim that the internal arrangements of the Bank of England required by law, as to keeping its accounts and its gold (for that is the sum and substance of the whole contro- versy), gives any greater security to the creditors of the bank and to the business interests of Great Britain, or makes its currency any more secure than are the currency notes of the institutions named, is wholly STRENGTHENING THE PUBLIC CREDIT, ETC. 181 unfounded. The highest, and, in fact, the only substantial approval in finance is imitation, and the Bank of England system has been unanimously condemned in not being adopted by a single bank in the world during the titty-three years of its existence. The Bank of Eng- land is, first of all, the commercial, and still more the gold, clearing house of the world, rather than a hank proper. That it is managed with consummate ability, by "giants in the land," is not disputed, but its success is believed by nearly the whole body of the practical financiers in Europe to be not because of, but in spite of, its system of issuing currency. Its position is nniipie. It is proposed in the Hill-Fowler bill to go further even than the Bank of England in making our legal-tender notes purely gold certifi- cates. The Bank of England notes are not gold certificates in form or sub- stance, as distinguished from the notes of the Bank of Germany or the Bank of France. The issue department of the Bank of England held gold to the amount of only GG per cent of the currency it had outstanding on December !>, L896, as shown by the Bankers' Magazine, London, England. It is therein reported that in LS47 the bank held gold to 48.81 percent of its notes in circulation, 48.75 per cent in 1850. In 1857 it held gold to 41.23 per cent. In 1860 it held G5.21 per cent, on October 3, 1889, 73.37 per cent, etc., etc. To its total gold liabilities a comparatively small per cent, while not only English merchants, but the commerce of the world, looks to the $150,000,000, more or less, gold in the Bank of Eng- land for gold exchange. The Bank of England law gives no preference to its obligation in the form of a Bank of England note over any other form of its total obli- gations of $450,000,000 in the requirement that it shall pay gold on every demand. The provision of law requiring the bank to maintain two departments, one of issue and another of discount, is purely a matter of book- keeping, in that the same men are one and the same corporate person, managing its issue department and also its discount department, and invariably with the two departments as one corporate person does every customer deal. That is to say, the law recognizes only one cor- porate person in the Bank of England. This is incontestably true. The law simply defines how this person shall act. How, then, can it be said that each department has an autonomy of its own, or increases its ability to maintain gold payments, or that its security is increased or diminished by legal restrictions on its freedom of action in an emer- gency 1 ? In fact, in every crucial emergency this restriction has been suspended. It is impossible by a law, in provisions applying wholly to the man- ner in which a corporate person shall manage its internal affairs, and making parties of the second part in no way responsible for its doings, to change or modify or give preference in securing gold to one obliga- tion over any other obligation assumed by such corporation, when it is prescribed in the law that every obligation (of the Bank of England) is identical in this, viz, that they are each and all payable in gold ou demand. The testimony before the Committee on Banking and Currency was that the Government is responsible for maintaining parity in all forma of our money, keeping each at a parity with the other, directly or indi- 182 STRENGTHENING THE PUBLIC CREDIT, ETC. rectly, each dollar of it on a par with the other in demanding gold. The least reflection will convince anyone that, in the nature of the case, this must be true. Finally, the Bank of England was prohibited from giving any pref- erence to one of its creditors who held one of its obligations in the form of a Bank of England note over a creditor who had one of its checks, drafts, bills of exchange, or only a deposit in the bank subject to check. That we may understand the situation, I give its exhibit for December 9, 1896, in dollars, and in the form used by national banks : ASSETS. Government debt $53, 604, 984 Government securities *>6, 928, 823 Other securities 157, 353, 785 Loans aud discounts H7j 805, 579 Gold coin and bullion Id, 945? 829 Silver and gold coin H> 729, 88 1 Total 569,368,881 LIABILITIES. Proprietors' capital 70, 822, 174 Surplus and undivided profit 15, 350, 863 Public deposits 32, 113, 216 Other deposits 206, 686, 6l£> Seven days' and other bills 692, 984 Currency notes 243, 703, 029 Total 569,368,881 Liabilities to the Government 118, 2S6, 253 Liabilities to individuals 451, 082, 628 As not a dollar of this $570,000,000 has the slightest preference over any other dollar, from the Bank of England notes to deposits of indi- viduals, in being payable in gold or having the right to demand gold, how can anyone conceive that a rigid bank regulation or inexorable statute law in restriction of the freedom of the bank as to the mechan- ism of keeping its gold or issuing its currency or paying out its cur- rency as uuforseen emergencies arise can be any other than a promoter and intensifier of panics rather than a source of stability and confidence in the ever-expanding and contracting demand for currency and the complex and ever- varying and unknowable banking gold conditions? Shall this country, in the Hill-Fowler bill or at the request of any man or body of men, because of their eminent respectability and ardent patriotism, make our treasury condition ten-fold worse than it now is by adopting the currency system of the Bank of England, when, as I have said, it has received the most severe and unanimous condemnation in the practice of all the other banks of the whole world for the fifty-three years of its existence? The greatest, in fact the only, competent or tangible evidence of approval of any financial device is its adoption by those who approve it. Every bank in every country has in practice condemned the Bank of England machinery for keeping and paying out its gold and issuing its currency by refusing to adopt its system. STRENGTHENING THE PUBLIC CREDIT, ETC. \s;\ Furthermore, the whole body of the world's practical financiers, with few exceptions, condemn it in words, as they all do in practice, it is not abandoned by the Bank of England from the fact that the warp and woof, the success of moderate banking, is based on "confidence,^ and when eonlidence exists, rightly or wrongly, bankers are not war- ranted in disturbing the public mind by a change, however desirable in itself the change may be. The only justification for action here, bad as is our system, is that the people having come to ;i knowledge of the perils of our financial position, eonlidence is destroyed ami immediate reform is demanded on every hand. I could till a hundred pages with adverse criticism of the Bank of England system from the Leading financial writers of the world, but as I am appealing to the peat jury that must finally decide this question, viz, the plain people, I use my limited space in quoting the final verdict of those most competent to form right opinions, from authorities the people can consult, which are crystallized in encyclopedias. The Encyclopedia Britannica is content to give definitions and state facts as to subjects in other cases, but in that of the Bank of England it confesses judgment through page after page of special pleadings that command the respect of but few financiers, and disputes its own facts. It confesses that : "It must be admitted that the variations in the rate of discount charged by the bank have been much more numerous and violent since 1844 than they were before, and on these occasions it has been judged necessary to authorize the suspension of the act so far as to allow the bank directors the power to strengthen the banking department by recourse to the reserves in the issue department. In each case the suspension of the act arrested and allayed the panic prevailing up to the moment of suspension, and in 1800 it was not, in fact, found neces- sary to exercise the power to borrow from the issue department, which had been conceded to the directors." What is meant by the "suspension of the act" is the deliberate vio- lation of the plain letter and spirit of the law of the land "by the action of the executive government (of the bank) acting on the faith of a subsequent indemnity by Parliament." And this is the system of banking laws recommended to this country, badly as it serves the greatest bank in the world. On our Public Treasury, without a shred of banking business or banking powers to mitigate and hide its defects, this travesty of the true banking and true and safe currency principle and safe bank and currency practice is to be saddled with this excrescence. Again it says: "Again, it may be freely admitted that it is not improbable that changes (crises) have from time to time happened that might not have occurred supposing the separation of the hanking and issue depart- ments had not been established. * * * The repeated suspensions of the act of 1844 in time of trial do, prima facie, present a much stronger argument for the repeal of the statute. Legislation which breaks down upon critical (crucial) occasions discredits the legislature that decreed it. Sir Kobert Peel, in common with the earlier advocates of the policy of the act (separate departments), believed that it would prevent the recurrence of commercial crises, etc." The statement by it of the fundamental principles governing the issue of currency laid down by the article and accepted by all writers 184 STRENGTHENING THE PUBLIC CREDIT, ETC. on finance confounds it in every word of its defense of the abnormal provisions of the Bank of England act of 1844 as to its issuing cur- rency, viz : " ]So inference can be safely drawn from the number (amount) of notes or coins, or both, afloat in the country as to whether its currency be or be not in excess. That is to be learned by the state of the exchange, as by the intiux and efflux of bullion. If the imports of bullion exceed the exports, it seems that the currency is in some degree deficient, while if the exports exceed the imports it shows that the currency is in excess, and that no additions can be made to it without further depress- ing the exchange and increasing the drain of bullion. When the imports and exports of bullion are about equal, then, of course, the cur- rency is at about its par level. These are the only criteria by which anything can ever be correctly inferred in regard to the deficiency or excess of currency. Its absolute amount affords hardly even a basis for conjecture. Excepting in periods of internal commotion, or when we are disturbed by alarms of invasion, the state of the exchange is the only, as it is the infallible, test < of the sufficiency or insufficiency of the currency.' " If there is any one thing more than another that will establish in the mind of the banker a fear that begets a crisis and panic or that will intensify them, it is that he can not change the form of his obligations and that his fellow-bankers will not come to his assistance in case of unusual demands being made upon him in "rediscounting [his] bills that had been already discounted by him." See how the Bank of England is made to appear, whatever the facts may be, to play the Ishmaelite and intensify, if it is not a potent agent, in inaugurating crises, in a further significant quotation, viz: " Strict limitation in the number and class of customers with whom the bank would do business and a refusal to rediscount bills that had already been discounted by money lenders, make it possible to keep the bank rate below the rates of the open market without exposing the resources of the bank to an exhaustive demand.' 7 [And a government treasury has none of these devices or resources to assist it.] Financiers farther declare that the Sir Robert Peel scheme for mak- ing hard and fast lines for banks in their issue of currency was adopted because of his utter failure to appreciate the fact that the only legiti- mate and certain repressive device was to compel banks to certainly and instantly redeem their currency in specie in some commercial cen- ter, as well as at their own counters. Where proper redemption is required, overissue of currency has never, anywhere, in the history of banking, had any perceptible influence in inciting or intensifying a financial crisis. Note the history of the Suffolk system, as also that of Virginia and Louisiana from 1840 to 1864. A very wide latitude in issuing currency was allowed banks, even up to their actual paid-up capital, and in some States to double their capital. It is not the holders of currency that begin an unreasoning demand for specie from banks or from the United States Treasury. There is not an instance of panic or even monetary stringency being inaugurated by holders of currency, or a general demand for specie by holders of currency, until long after depositors were in panic and had done the mischief which reacted on the Treasury. It can not be shown that any normal bank has ever failed from the excessive issue of currency. The insolvency of banks is caused by the excessive or unwise extension of STRENGTHENING THE PUBLIC CREDIT, ETC. 185 loans, of which the issue of currency may boar an insignificant part, and our National Treasury to-day is the guarantor of every bank in the country, national or State, in its maintaining the gold standard. No contradiction of this statement is found in the fact that dishonest persons sometimes established or got possession of a State bank, stole its funds, or debauched its currency, as such persons have wrecked national banks. On the other hand, the free issue of currency, and in amounts that would not have been justified in normal conditions, has prevented or allayed many a threatened or incipient panic, especially by the Hank of England, and in violation of law. Had our banks the right, and had they freely exercised it, in 1803, to issue currency up to their paid-up capital, bad as were other financial conditions, it would have prevented or safely and immediately relieved that panic. It was a currency fam- ine caused by hoarding currency quite as much as of gold hoarding. Banking is a contest from start to finish, in a pressure for credits by the borrower, supported by a desire for profits on the loans by the banker, on the one side, and a demand, on the other side, of payment and larger security by the banker. It finds its duplicate in the bulls and bears of the stock exchange. Bankers must have their every available asset at command to meet any and every demand, and to use at their absolute discretion at all times, as well as in crises, in order to prevent or to curb crises. The Bank of England act of 1844 was passed to take away this al> a bill pro- viding * * * that the act providing two departments might be 186 STRENGTHENING THE PUBLIC CREDIT, ETC. suspended by order of the Government upon certain conditions * * * when the governor and deputy governor of the bank certified that panic had caused a portion of the bank notes nominally in circulation to be locked up and withdrawn from (actual) circulation. The authority of Mr. Gladstone's administration had declined when this bill was intro- duced * * * and, assailed from many quarters, was withdrawn without the opinion of Parliament being taken on its merits. It was contended that Mr. Low's attempt * * * to define beforehand the conditions of a panic was a logical contradiction. A panic has no laws; it has no fixed shape. It is precipitated we know not how, and we are in the midst of it before we are aware." This amendment proposed by Mr. Low proclaims the fact " that in a stringency the people lock up the currency of the Bank of England, and that the law locks up its gold, and in its helplessness a crisis is thus actually precipitated and continued by the very provision of law avowedly enacted with the sole purpose of preventing or allaying crises such as are now created by it." I repeat, the days of a run on a bank for specie, by presenting its currency for redemption, even in crises, are past, never to return, even under as liberal an issue of currency as was allowed by the old New England Suffolk system and that of Virginia and Louisiana (look at our experience in the currency famine and. gold craze of 1893), always provided that every bank is compelled to redeem its currency in some " reserve city," as well as at its own counter, and also that the Govern- ment requires a very small safety- fund tax, to recoup itself for any loss from guaranteeing every dollar of currency issued by any bank, and keeps the same supervision and control as now of all banks issuing currency. Of course, I shall be told of the suspension of specie payments by New England banks in 1857; but the fact is that they only nominally suspended specie payments at that time. Specie did not go to a pre- mium, and all that was legitimately demanded of them by their cus- tomers in the way of their legitimate business was paid to them " on demand," and the banks soon recalled their nominal suspension. They continued to supply their customers with specie through that crisis, precisely as France and Germany now furnish gold to their customers. They kept their currency at par with specie precisely as the Bank of France and the Bank of Germany now sustain the silver and currency of those countries at par with gold. The State banks of New England, Virginia, Louisiana, etc., made a better showing from 1840 through 1857 and up to 1SG1 than the Bank of England did in the same period, during which period the restriction on issuing currency by the Bank of England was suspended several times. Political and party rivalry, and that only, prevented the passage of the Low amendment by the British Parliament, and the safe removal of the hideous wart from the nose of the comely Old Lady of Thread- needle street, that looks so lovely to some, and that without leaving a scar. Again, normally low rates of interest can not prevail where the true bank-note currency is not issued. This country has not seen a nor- mally issued bank note since the State bank notes were taxed out of existence. It can be proven that the purchasing value of the wages or income of every man in this country is reduced by nearly one per centum per annum by our faulty banking, currency, and Treasury system. STRENGTHENING THE PUBLIC CREDIT, ETC. 187 1 will quote only one more opinion on the issue of currency system of the Bank of England, but it is the final jndgmenl of oneof tin- most careful and experienced investigators and financial experts and writers in Europe. He expresses practically their unanimous opinion. Pierre des Essarts, chief of the bureau of economics and statistics of the Bank of France, author of the History of Banking in All tlie Lead- ing Nations, etc., in an article published in the Journal of Commerce and Commercial Bulletin of New York, March 10, 1897 (which no one can afford not to read), says: " The true bank note is unknown in the United States. The bank note should be simply a means of transforming a debt into cash. As between individuals the note is cash; but as between the issuing bank and the holder it is a credit instrument, because the note holder has loaned to the bank the coin he has a right to demand. * * * When a bank of issue is properly managed, the circulation takes care of itself. * * * These notes are sufficiently guaranteed if the property and securities against which they are issued (the assets of the bank) are valid and of sufficient value. * * * England has adopted an automatic device for issuing currency notes which works well in ordi- nary times, but the insufficiency of which has often been demonstrated in critical times. We may note in addition that the bank's regulations for issuing currency notes, which are practically useless in normal situa- tions, become futile or even dangerous when the bank is called upon for unusual exertions." No man can suggest any substantial advantage in the division of the issue department from the discount department of the Bank of England over and above the law and practice of the Bank of Germany or the Bank of France or the New England Suffolk system as it existed before 1864, while its disadvantages are clearly stated by authorities beyond question. In fact, as I have said, in the Bank of England and nowhere else, excepting partially under our national bank act, is any approach to the English system in operation. It is patent to all that very nearly the universal opinion of European financiers is that the success of the Bank of England is in spite of — not because of — its thor- oughly abnormal internal machinery for issuing currency and handling gold. My excuse for this long paper is the strong effort that is being made not only to engraft upon our national banking system the cur- rency system of the Bank of England, but to divert the United States Treasury, as Washington, Hamilton, and Gallatin made it, still further from its legitimate functions, and make it a huge bank, modelled upon what European financiers believe to be one of the absurdities of the English bank act of 1844. Furthermore, the Bank of England is confessedly a monopoly, and its monopoly of currency the most excessive of its oppressive features. Our people demand all the freedom, the convenience, and the economy of the true bank-note currency of the old State banks, plus the security of national supervision and control of our national law, and also pins a small tax on currency to recoup the United States Treasury for its guarantee of every dollar of currency issued by the Government to the banks and put in circulation by them. They have repeatedly refused to give up the United States legal- tender notes. They probably would consent thai they be reduced to $200,000,000 by paying 1146,000,000 of them with the gold now in the Treasury. They demand that the old Suffolk system shall be national- 188 STRENGTHENING THE PUBLIC CREDIT, ETC. ized, that the only power that can keep the $200,000,000 legal tender notes and all other currency and coin put in circulation at par with gold, absolutely free of expense, viz, the bank, shall do so by assuming the current redemption of the greenbacks pro rata to their capital. Xo impartial investigator who will carefully examine the immense body of facts furnished by the Comptroller of the Currency, and those furnished by the chairman and published in the reports at the hear- ings before the committee, can come to any other conclusion than that no substantial relief can come to the United States Treasury by the enactment of any bill that is not drawn on the lines of the Walker bill (H. E. 10333). Eespectfully submitted. J. H. Walker, Chairman. APPENDIX. Not a single person has appeared before our committee who did not condemn the principle on which the Hill-Fowler bill (II. R. 101^89) is drawn, and who did not approve the principle upon which the Walker bill (H. R. 10333) is drawn. This is so patent, when dissevered from commendation or condemnation of any particular bill, and therefore given without prejudice, that I append the following extracts from the testimony given before our committee and published in the u Hearings :" NO GOLD PAID INTO THE TREASURY. The Chairman. What percentage of the present income of the Treasury is paid in gold ? Secretary Gage. Perhaps one-half of one per cent; something like that. It is so small that I have not looked into the matter. The Chairman. It cuts no figure? Secretary Gage. No ; it cuts no figure whatever. changes in the law should be few as possible. Mr. Walker. Should not the changes proposed, while being thor- ough, make banking as free and allow currency notes to be issued to the people as freely and at the lowest possible cost that is consistent with its sure current redemption in specie aud the sure and immediate payment of these currency notes in case of insolvency? Mr. Fairchild. That is my idea. Mr. Walker. The changes should allow those sections of the coun- try where interest is highest to make the same relative profit on the currency issued in those sections as is made in the lower-interest localities, should it not? Mr. Fairchild. I should think so, most decidedly. UNWISE TO ATTEMPT BY MANDATE OF LAW TO UNDERTAKE TO COM- PEL BANKS TO REDEEM IN GOLD. Mr. Stallings. Does your bill provide that the national banks shall redeem their notes in gold? Secretary Gage. It does not. Mr. Stallings. Do you think it ought to? Secretary Gage. After consideration I think it is indifferent whether it does or not. The reason I did not put it in was that I do not believe the Government, as an issuer of notes, ought to recognize any money on earth as better than its obligations, or discriminate against 189 190 STRENGTHENING THE PUBLIC CREDIT, ETC. itself or its obligations. If they say that greenbacks or any of the Government's obligations are not good enough for something, but gold is, they thereby cast a reflection upon their own notes. Besides, I think it would be purely immaterial. If you make the banks redeem in gold, then the banks must get the gold to redeem with. If they have the obligations of the Government, you may make it necessary for them to present the notes to the Government with which to get the gold to redeem their notes, * * * and therefore it does seem to me expedient from all points of view, practically and theoretically, not to put that in the law. The banks, if they find difficulty in main- taining other forms of legal money that will discharge debts, will have to carry gold. They have now in their possession in the country some $1140,000,000 of that kind of metal, which is a pretty fair supply to start with. Mr. Hill. * * * Do you believe that it would be a wise course to pursue to make all bank redemption specifically in gold coin, elim- inating the other legal tender of the country — silver and the lawful money, silver certificates'? Mr. Fowler. Limit it to the notes, of course, and not the deposits. Mr. Fairchild. My idea in all this was that the Government should not in its laws discriminate against any of the money which it had in circulation, because the tendency of so doing was to drive it into the Treasury. Mr. Hill. But that redemption should be in lawful money? Mr. Fairchild. That was my idea. GOLD REDEMPTION BY GOVERNMENT OF ALL PAPER MONEY — TREASURY REDEMPTION IN GOLD. Mr. Brosius. Now, how can we redeem the pledge we are under by existing law to maintain the parity of our money unless we afford some means for the people who hold paper to present those obligations for redemption in gold? Secretary Gage. We can not. I understand we have such a process now. Mr. Brosius. If we take $200,000,000 of the $346,000,000 out of cir- culation and hold it in the Treasury, that can not be presented? Secretary Gage. No, sir. Mr. Brosius. What kind of demand obligations will the people have to present to the Treasury to get their gold ? Secretary Gage. They will have $140,000,000 of greenbacks. They will have $100,000,000 or more of Treasury notes, and they will have $450,000,000 of national-bank notes. They could not present them to the Treasury, but they can present them to those who promise to pay. PARITY TO BE MAINTAINED. Mr. Brosius. I know that; but the Government has undertaken to maintain the parity of all our money. Secretary Gage. Yes, sir. * * * The ability of the Government of the United States to maintain the parity between the different forms of its money outstanding depends upon its ability to control gold. So far as it can reduce the obligations that are outstanding, so far it increases its strength to take care of those that are out. Mr. Brosius. Then the duty that we have undertaken, to maintain STRENGTHENING THE PUBLIC CREDIT, El 101 the i»:irity of gold and silver and all our money, requires that the people are afforded some means of getting gold with the other money 1 \'rE. The means 1 look at it. Mr. BllOSIUS. Are there any means left after the demand obligations of the Government are taken out of circulation 1 ould he if they were all out. Mr. BrosiUS. What way! retary Gage. The way would be for people to present their obliga- tions to the national bans UNDER GAGE BILL THE BA1 LD REDEEM THEIR 1 HELVE . Mr. BSOSIUS. The 'ill does not make it their du1 tary Gage. To do wha Mr. Brosius. To redeem in gold. * * * They would comply with the law if they redeemed in silver. iry ' rA'-K. They would. 2s'ow you have struck the point. i think that when the Go ent demand obligations are out it •will have no function in maintaining a parity. Jt will have about all the function it wants to perform in kee] 100,000 in silver money of the United States, and keeping that on a parity. Mr. BBOSIU& How? GOVERNMENT WOULD EXCHANGE GOLD FOR SILVER AND FOE BA] :.. r. tary Gage. By exchanging gold for it. Mr. BSOSIUS. A gold reserve would have to be provided for that pur 1 .GE. I think SO. Mr. Bi Then, all the paper obligations being issued by the banks, the redemption of that would be left entirely to the ban, -GE. i think Mr. BBOSIUS. And then, if the banks refused to redeem in gold, or were unable to redeem in gold, the whole :n would collapse, and • ould go to a silver ba retar\ .. I can not quite follow you. I thought you a a minute ago The Chairman. I think I can put a question right there that will ieartbis. The c of retiring th put it out of the power of anyone to ose tL |2 10,000 to ask for gold eruption. 1 rAGE. That is correct. The Chairman. It leaves out in circulation all ( I the Tre what Mr. Brosius how the Govern _ I if it proposes to redeem all th :y notes and Id. age. Well, that is another question. It makes little dit: how they do it. I provide how they can do it a great deal er than now. e Chairman. How! age. There would ; to take of. The Chairman. . < Jut of the i "A). 192 STRENGTHENING THE PUBLIC CREDIT, ETC. Mr. Prince. How many million dollars will the bank circulation reach at the same time? Secretary Gage. I think it will be something like $500,000,000. Mr. Prince. That, added to the $730,000,000, makes $1,230,000,000. So, if the banks have to redeem the gold, there are demand notes and in circulation, either against the Government or the banks, for which gold can be demanded, to the extent of $1,230,000,000? Secretary Gage. Yes, sir. GOVERNMENT TO REDEEM $1,230,000,000 PAPER MONEY. Mr. Prince. Now, you say that if the banks can not meet this and it is thrown back on the Government the Government will take pos- session of the banks, their assets, and property, and, to do its duty, it would redeem this $1,230,000,000 in gold? Secretary Gage. Yes, sir; until they wound up business. GAGE BILL DRAINS THE TREASURY OF GOLD. Mr. Hill. How have you released the Government of any liability of redemption in that exchange of the $200,000,000? It seems to, me you have made it still more easy to drain the Treasury of gold. For instance, if a company of men wish to get $200,000,000 of gold from the Govern- ment, instead of getting gold for greenbacks, why wouldn't they take bank notes and redeem them in lawful money, and then call for the gold with their lawful money? Secretary Gage. In the first place, they would have to get the lawful money. They have to find that lawful money. As fast as these notes are presented for redemption, the difficulty of finding the lawful money will increase. They must provide the lawful money. If they do find it, there is no way for the Government to escape payment of its lawful obligations. Mr. Hill. They will get notes or silver, will they not? Secretary Gage. From whom? Mr. Hill. From the banks; or else the bank fails. Secretary Gage. Yes, sir; and if the bank can not provide legal- tender notes, Treasury notes, or silver, it will have to provide gold. It will provide that which is easiest, of course, as anybody else will do. But I contemplate that under my bill I will diminish the lawful money $200,000,000. I will make it relatively scarcer than it is now. Mr. Cox. When the bank note follows its process along until it reaches its redemption in the Treasury of the United States, does your bill propose to redeem that bank note in gold or other money at the option of the holder of that note? Secretary Gage. In the case you suppose, the note is redeemed at the [bank] counter. Mr. Cox. No; they refused to redeem it. Secretary Gage. You supposed he redeemed it in a greenback, and he took the greenback and went to the Government. Mr. Cox. He takes the note, or a bundle of notes, to the bank, and the bank refuses to redeem them in gold. He still holds those notes. Now, under your bill, is not the process incorporated into this, that a man can have those bank bills redeemed by the Government? Secretary Gage. Yes; he could send to the Government and get those notes redeemed. STRENGTHENING THE PURLIC CREDIT, ETC. 193 Mr. Cox. I so understood it all the way through, Now, be could take the bank notes, the bank refusing to redeem them in gold, to the Government — take the same notes to the Government — and the Gov- ernment would be bound to redeem them in gold if he demanded it .' Secretary Gage. It would be bound to redeem them in greenbacks or gold; yes. He could take the greenbacks and turn around and draw the gold, so it would be practically a redemption in gold. Mr. Cox. In other words, he could take the notes of the bank and go to the Treasury of the United Stales and the Government, under this bill, would be obliged to redeem those notes in gold \ Secretary GAGE. Substantially, yes. Hut, miud you, the Government is not redeeming those notes on its own account. The Government is redeeming them on account of the bank. Mr. Cox. I understand that. Secretary Gage. Then the bank would have to account to the Gov- ernment and reimburse it. GOVERNMENT HAS NO CLAIM FOR GOLD ON THE BANKS. Mr. Cox. Certainly, and I take it that the Government would demand reimbursement in the same kind of money the Government had redeemed the notes in? Secretary Gage. No, sir. If the bank had satisfied its legal liability to the Government and recouped the Government with any form of money that the Government recognized — greenbacks, Treasury notes, gold, or silver — that, I think, would be sufficient. Mr. Cox. Then the Government, in the first step of redemption, redeemed the kind of notes I have spoken of in gold, and its obliga- tion is such that you think it necessary, to maintain the parity, to redeem them in gold if the holder desires gold; but when the bank, which has got from the Government the benefit of banking, comes to pay the Government the bank can pay the Government off in any kind of money? Secretary Gage. Whose fault is that? That is the situation the Government is in, and going deeper does not get it out. Mr. Johnson. What law is there to require the Government of the United States to redeem national-bank notes in gold? Secretary Gage. There is no law; but we have to redeem them in lawful money. We have to redeem them in something, and if it were so that a holder of these notes could go to another window and secure gold, it would be substantially as Mr. Cox says. GOVERNMENT GETS THE POOREST MONEY. Mr. Fowler. Under your plan, as I understand it, the banks of the country could deposit your reserve fund in either greenbacks, Treasury notes, or silver certificates, could they not? Secretary Gage. Yes, sir. Mr. Fowler. Would there not be, under the pressure now felt in this country, a tendency on their part to get rid of the poorest of tin-' three kinds of money and instinctively deposit silver certificates. "Would not that be the tendency? Secretary Gage. That would be the tendency unless their faith iu those notes is strengthened. B & c 13 194 STRENGTHENING THE PUBLIC CREDIT, ETC. Mr. Fowler. Let us assume, however, in going through this, that the banks would tend to pay into your reserve any legal-tender money, say in silver certificates. The result, then, is that there would be outstand- ing, mathematically, $346,000,000 of greenbacks, $115,000,000 of Treas- ury notes, approximately; and you have left 8136,000,000 of silver certificates in the place of the $200,000,000 of silver certificates which have been deposited by the banks and are not a legal tender and can not draw gold; and in place of that you would have $200,000,000 of national-bank notes, would you not 1 ? Secretary Gage. Outstanding? On your hypothesis; yes, sir. Mr. Fowler. 1 am not dealing with hypothetical questions, but a sad experience which we have had in the last three years. Let us go a step further. If it is true that you have added to the abstractors $200,000,000 of that money, which to-day makes drafts upon the Gov- ernment for gold, what defense has the Government against that draft? You have stated that whenever the Government attempts to recoup for that gold which it has paid out, the bank to which it sends its notes can then pay the Government in lawful money? Secretary Gage. If it has it. Mr. Fowler. Would it not be the most natural thing in the world for the banker — and I am asking you as a banker — to send in silver, Treasury notes, or certificates rather than to send in gold? Secretary Gage. It would depend, as I have said, upon two consid- erations — what relative supply he had of each and what respect he had for them; that is, his confidence in them. If he thought the gold was safer and better for him to have he would send the other if he had it PANIC OF 1893. Mr. Fowler. That is the point exactly. Now, is it not a fact that we are drafting a bill, not to cover normal conditions, but to cover crises, aud is it not true that whenever a crisis is on, such a crisis as we had in 1S93, practically no money at all passes between people; and if it were thought that there is a chance of the Government not being able to redeem its obligations, would not everybody press the Treasury for gold, and if it is true, is it not true also that every bank would reserve its gold and pay out its paper money? Secretary Gage. In such condition of distrust of the standard, yes, g j r# * * * I do not know how to avoid the risk of the Government's responsibility except to cancel its debts and not owe anything. Then there would not be any trouble of the kind you suggest. The Chairman. I wish to ask you whether it is possible to use paper money, and keep it at all times equal in purchasing power to the specie it represents, without having the coin sure of easy possession for the asking in exchanging it when the desire for it arises? Secretary Gage. I think not. STOPPING THE MOVEMENT OF TnE " ENDLESS CHAIN " PRODUCES PANIC. The Chairman. Then any device that hinders or in any way delays oi incites in the mind an apprehension that, upon desiring to exchange the paper money for the specie it represents, the specie may be refused or the obtaining of it delayed, tends to excite a desire to exchange the paper money for it and to incite a panic? STRENGTHENING THE PUBLIC CREDIT, ETC. l!>fi Secretary Gage. It would incite distrust — that is, panic — and lead to a pressure for specie. depreciating the price of bonds the only way to protect <;old. The Chairman. I prefer to use the word "specie," you understand. because I do not want to raise the question of coinage. Is it not a fact that there are scores and hundreds, and, in the ease of mortgages, slocks, bonds, and all things that easily and surely transfer wealth, thousands and millions of funds, that are quickly available, which are awaiting the depreciation of prices of such securities in order to pur- chase them at less than their normal price? Secretary Gage. I could not speak very authoritatively on that point. The Chairman. I will ask Mr. Fairchild if it is not a fact that there are millions upon millions of funds, quick assets in banks, that are awaiting the depreciation of securities to purchase them? Mr. Fairchild. Yes, sir; there are always plenty of persons willing to buy at a depreciated price. The Chairman. There is an immense number waiting to do so? Mr. Fairchild. I should think so. RAISING THE RATE OF DISCOUNT WORKS THE DESTRUCTION OF THE DESIRE FOR GOLD. The Chairman. The next question is, that the only principle upon which a safe and free issue of paper money redeemable in specie can be had is a principle that will work the destruction of a desire for specie, when it arises in the minds of the holders of the paper money that rep- resents the specie, by then making other things more desirable to them than the specie. Is not that the principle on which the Bank of Eng- land raises the rate of discount and protects its gold? Secretary Gage. I should say it is, by satisfying the desire rather than by destroying it. That is the only amendment I should make to your statement. It appears in the form of statement. The Chairman. How is it satisfied? Secretary Gage. Either with the gold itself or other things they prefer. The Chairman. Is it not a fact that they will insist upon having the gold unless the action of the bank is such as to depreciate what we call solid securities to a point where they will prefer to buy them — I do not » mean individually, but as a class — rather than take the gold? * Is it not a fact that the raising of the rate of interest, when conditions are such that the rate of interest is forced up, forces down the price of solid securities, and that solid securities are shipped from one country to another and are accepted by persons rather than specie) Mr. Faipciiild. * * * I think we are somewhat misled by the raising of the rate of interest by the Bank of England. It does' that specitically to protect the gold it has. The CnAiRMArs. My point is, how does it protect the gold by raising the rate of interest? Mr. Fairchild. Just as it diminishes the borrowing demand. The Bank of England raises the rate of interest because the borrowing increases, and the result of that is to diminish the call upon the funds of the Bank of England, and all of the funds of the Bank of England 196 STRENGTHENING THE PUBLIC CREDIT, ETC. being gold, the result is to diminish the call upon the gold in the Bank of England. Now. in this country the same thing takes place when a man borrows a million dollars to pay a debt abroad. It makes a dimi- nution of the loanable funds, and that of itself works an increase in the rate of interest, and when that rate of interest becomes large enough the seller of exchange, instead of meeting his remittances by the actual shipment of gold, finds a cheaper way to meet his bill of exchange. Secretary Gage. I agree with what Mr. Fairchild has said, but I do not think either of us yet has specifically answered your question. I am willing, for my part, to say the raising of the rate of interest tends to depress the price of securities and tends to depress the price of com- modities. BANKS RAISE THE RATE OF INTEREST BECAUSE COMPELLED TO DO SO. The Chairman. Then the raising of the rate of interest by the Bank of England, or the banks of New York, or of Chicago, taking large cities first, is compelled by the financial situation. It is not a matter that they control, but they are compelled to do so to protect their deposits and to protect the banks. Is not that so? Secretary Gage. That is undoubtedly so. The Chairman. That the bank officers do not by their own motion force up the rate of interest, but they defend themselves and defend their institutions from having their funds depleted by raising the rate of interest, and are compelled to do so by the situation ? Secretary Gage. Yes, sir; and it is operated upon by the law of supply and demand in regard to loanable funds. LEGAL RATES OF INTEREST. The Chairman. Is it not a fact that the rates are never put high enough to prevent the loan of the funds of the banks up to a safe limit, under existing conditions? Mr. Fairchild. It never will be high so long as there are funds which it is safe for a bank, or a number of banks (if there are a number in a place), to loan. RAISING THE RATE OF INTEREST PROTECTS GOLD. The Chairman. Is it not a fact, Mr. Fairchild, that the desire for taking gold or anything else for shipment is an economic desire — unless it is a miserly desire, which we do not consider in this discussion — and when the rate of interest is raised it depreciates the price of securities so that it checks the economic demand for gold, and, added to that, is it not a fact the raising of the rate of interest by the Bank of England has been effective through all these years in protecting its gold? Mr. Fairchild. The raising of the rate of interest in England by the Bank of England as an indication and exponent protects the gold in England. The Chairman. Is it not a fact that the raising of the rate of inter- est of the Bank of England in the last ten years has always protected the gold, for the reason men desire wealth for the income upon it, and that as the price of solid securities goes down the income increases or the securities are shipped and accepted in place of gold, and that is what protects the gold in the Bank of England? STRENGTHENING THE PUBLIC CREDIT, ETC. 197 Secretary Gage. I think that is correct. ]\Ir. BROSIUS. In the Bank of England tbe rate has been as high as 10 per cent? Secretary Gage. Twice in my lifetime. Mr. BEOSIUS. In nearly every State there is a legal rate of interest, and under our banking law no national bank in any Slate can exceed the legal rate of interest there, so that there must be considered as a maximum rate of discount a great many different rates in the different States of the Union? Secretary Gage. You are right, except as to the State of New York, where, I believe, on demand loans on securities there is no limit as to the rate of interest. Am I correct, Mr. Fairchild? Mr. Fairchild. On securities. Mr. Urosius. Let me understand that. Sec/\Ir. Fairchild. Exactly. The Chairman. Then you propose in your system to put the power of demanding the gold of the Government, the redeeming of money in gold, beyond the power of the people to reach; that is your point in the bill ! Mr. Hill. It puts it on the banks. The Chairman. No, sir; I beg your pardon. Mr. Fairchild. I do not understand your question. I do not under- stand the assumption. TO DEMAND GOLD PUT OUT OF THE POWER OF THE PEOPLE. The Chairman. Your answer to the question of Mr. Hill was that the silver would be so absorbed that it was not practicable to get the silver with which to demand gold I Mr. Fairchild. Certainly. 202 STRENGTHENING THE PUBLIC CREDIT, ETC The Chairman. That is your first proposition? Mr. Fairchild. Yes, sir. The Chairman. Now, your second proposition is that there is then nothing left in the community that they can get to bring to the Gov- ernment to secure gold? Mr. Fairchild. Nothing whatever left. Tbe Chairman. Then what institution of individuals is to keep all of our money at par, each with every other? Mr. Fairchild. The people who issue it. The Chairman. But where is the provision in law that anybody shall redeem it in gold? Mr. Fairchild. They can not redeem it in anything else. The Chairman. The gold is to be in the Treasury? Mr. Fairchild. It would not be in the Treasury. BANKS NOT REQUIRED TO REDEEM IN GOLD. The Chairman. Do you provide by law that the banks shall redeem in gold? Mr. Fairchild. Not at all. In lawful money. The Chairman. And your bill destroys the greenbacks? Mr. Fairchild. Yes, sir. The Chairman. And you claim that the silver dollars will not be stored by the banks so they can get gold, as they now store greenbacks. Why will not the desire and the practice of the banks be to keep the silver dollars to get the gold, precisely as they now keep the greenbacks ? Mr. Fairchild. Because the people must have them for use in their trade and business. The Chairman. That is, you propose to make the getting of small money so difficult that the banks can not hoard it — can not keep it to get gold for? * * * SILVER MUST GO INTO BANKS. The Chairman. Is it not a fact that this silver money, when it is paid in the natural course of retail trade, will be paid to the store- keepers for goods that the people buy? Mr. Fairchild. Yes, sir. The Chairman. That is the use that will be made of it? Mr. Fairchild. Yes, sir; paid for car fares and hotel bills, and all kinds of things. The Chairman. Then the answer to my question is that it will be paid by people in the retail purchases of the things they want? Mr. Fairchild. Yes, sir. The Chairman. Now, is it not the custom of all merchants, railroad companies, big merchants and small, to deposit that money in the bank? Mr. Fairchild. It is. The Chairman. Then is it not the custom to-day for the banks to accumulate the greenbacks, retaining them and paying out something else? Mr. FAiRcniLD. Yes, sir. The Chairman. Then will it not be the custom of the banks, under your proposed law, in order to have something that is the equivalent of gold tor which to secure gold to redeem their bills, to keep the silver certificates to demand gold for? Mr. Fairchild. It will not. STRENGTHENING THE PUBLIC CREDIT, ETC. 203 The Ciiatrman. Why? Mr. Fairchild. Because there will not be enough of it. The Chairman. Well, I am done. Mr. Hill. They will retain gold? Mr. Fairchild. Of course they will. The Chairman. Then you fix the tiling so that nobody can get any money on which to demand gold except bank notes? Mr. FAiRcniLD. That is absolutely the ease. Mr. Cox. Your theory, then, is, so far as the silver is concerned, that it will be put out in circulation and in the hands of the people, and con- sequently the banks can't concentrate it so as to draw gold from the Treasury? Mr. Fairchild. Yes, sir. REDEMPTION OF UNITED STATES NOTES — UNDER WALKER BILL BANKS ASSUME UNITED STATES NOTES EQUAL TO 12£ PER CENT OF THEIR CAPITAL. Mr. Fairchild. I do not get very clearly in my mind how you relieve the Government of the greenbacks and the greenbacks still remain, making the banks responsible for them. Where, then, do you differ- entiate them from the other notes, as to reserves and liabilities? How do you arrive at that? Mr. Walker. Arrive at their current redemption? Mr. Fairchild. Y'es. Mr. Walker. By requiring banks to deposit in lawful money in the Treasury a sum equal to 12i per cent of their capital and destroy the existing greenbacks to the same amount and issue to the banks a new print of the greenbacks with their own bill printed on the back of them, which they shall sign and execute as though it were only their own note, and it is legal tender to everybody as now — every bank and every individual — except to the bank that takes and issues them. They will be the same as a Bank of England note. They are legal tender everywhere except at the bank whose note is printed on the back of them. That takes $200,000,000, and the bill further provides that that amount shall never be increased, but that the percentage of 12* shall be reduced. It does not mention $200,000,000, but that is what it comes to. When that is once done, 12J per cent will never be increased, but on the contrary may be reduced. Mr. Fairchild. If I apprehend your question, it seems to me that that is making a legal tender again of somebody's credit, and while that is economical, or might be economical, and we might like to limit it, I am afraid of the idea. I do not know that I do comprehend the idea fully, but if I do, I am afraid of the idea of making anybody take anybody's promise to pay if he does not want to take it. That would be my objection to your idea, if I understand it. THE PEOPLE "WISH TO KEEP THE GREENBACKS. Mr. Walker. The point is that the people insist on retaining the legal-tender notes and refuse to withdraw them. Mr. Fairchtld. Under our bill they remain if the people do not want to have them paid. Mr. Walker. Do you mean all the people or the people who are the bankers? This becomes a political question. Mr. Fairchild. Anybody who holds them may refrain from present- 204 STRENGTHENING* THE PUBLIC CREDIT, ETC. ing them for payment in gold if they prefer to have them; and my opinion would be, as I have already expressed it, that having once established our principle they would be retained certainly during the ten years, and even after they cease to be a legal tender they would be performing a very large function. Secretary Gage. Mr. Walker, I would like to ask you a question or two on that point. Mr. Walker. Certainly. Secretary Gage. Your proposition is equivalent, as I understand it, to the banks loaning the Government of the United States 12J per cent of the amount of their circulating notes free of interest, substan- tially. NOT A LOAN TO THE GOVERNMENT, BUT A CONVENIENCE TO THE BANKS. Mr. Walker. No, not at all; because if it was to a greater amount it might be, but being at an amount so small, only one-quarter of the cash reserve that the law requires them to keep, and being all taken up in the reserve, and the coin reserve being ample without that, they being treated as coin and performing all the work of coin, it is equiva- lent to allowing banks the liberty of using their own paper in the place of gold. The bill is drawn upon that theory, and allows the bank with 50 per cent of greenbacks to take out 50 per cent of currency, but when- ever the bill gets into full operation, it may take 100 per cent the same as a bank with 12^ per cent, upon the theory that this was worth to the banks in practice as much as the gold. Secretary Gage. Still, it would remain true that the Government would get the advantage of $200,000,000 without interest? Mr. Walker. Certainly. COST BANKS NOTHING. Secretary Gage. The only difference is that it would be furnished by the banks without any sacrifice or cost? Mr. Walker. Yes. Secretary Gage. Since it would go into the bank reserves, being available to them in an ultimate case? Mr. Walker. It would never be circulated at all. It would take them from circulation as much as your system or Mr. Fairchild's. Secretary Gage. They probably would not be circulated, but if they were paid out the bank would have to redeem them and it would be as much a charge on them as if they were their own notes. Therefore, is it worth while to go through the machinery of those notes? Would it not be better for the banks to lend the Government $200,000,000 for the privilege of issuing their own notes? PARITY MAINTAINED BY BANKS. Mr. Walker. It absolutely relieves the United States Treasury from all responsibility for redemption, for my bill provides that all the banks shall pay a penalty tax of one-half of 1 per cent on their deposits if they fail to maintain the parity between the four kinds of money — the national-bank notes, the legal-tender notes, and the silver dollars, and the gold coin. STRENGTHENING THE PUBLIC CREDIT, ETC. 205 A NEW UNITED STATES NOTE. Mr. McCleary. I have been trying to picture this note that you have been describing'. Am 1 to understand that it is a United States note on one side and a bank note on the other ? Mr. Walker. Yes; it is the legal-tender note except to the bank that has its note printed on the back, and to that bank it is purely a currency note, like the rest of the notes it issues against its assets. Is it not a fact that neither the Government Treasury here nor any subtreasury can currently redeem paper with the current funds ;i I banks can do it? The Government can not do it without the actual presence of the legal redeemer? I address my remark to cither Secre- tary Fairchild or Secretary Gage, or to both. Mr. Fairchild. Will you repeat that? TREASURY REDEMPTION EXCHANGE. Mr. Walker. Can the United States Treasury or any of its sub- treasuries currently redeem paper money as freely, immediately, and economically as the banks can redeem the paper money themselves? Mr. Fairchild. Do you mean can the Treasury redeem bank notes as economically? Mr. Walker. Paper money of any kind — paper money that they issue — as easily as the banks can redeem money they issue. Mr. Fairchild. That I can not say. That is a matter of statistics. I could not say as to the cost. TREASURY REDEMPTION TO COST $27,000,000 A YEAR. Mr. Walker. For the cost of keeping the redemption of moneys — the whole system — the United States Government has held between $200,000,000 and 6300,000,000 of money for twenty years. It is a cost to the people who are taxed to keep it of G per cent interest on that sum of money. Now, it is proposed in both your bill and in Secre- tary Gage's bill to add $200,000,000 more, bringing the money in the United States Treasury up to $450,000,000, and the interest on that costs the people 6 per cent. That makes $27,000,000 a year for the privilege of the United States Treasury redeeming this paper money — that is, we have got to keep that amount on hand. Not only that, but the machinery of redemption, in the sense of products meeting products in the general funds of a bank, and their paper representatives, includ- ing currency notes, with its other obligations redeeming each other, not Treasury redemption, is not as convenient as it would be in a banking system outside the Treasury. Is not that a fact? Mr. Fairchild. That is a fact. .Mr. Johnson. Do you eliminate the United States Treasury in your scheme? Mr. Walker. Certainly. It is nothing to the public whether the Treasury receipts are more or less under my bill. My bill absolutely relieves the United States Treasury from having anything to do with the current redemption of any money of any kind, and puts it on the banks, and on the theory that the banks can do it at no cost, that gold freely Hows into the banks, and Hows out of them where they issue true currency notes — paper money. That absolutely relieves the Treasury. My claim is that my system would relieve the 206 STRENGTHENING THE PUBLIC CREDIT, ETC. United States Treasury of keeping $400,000,000, more or less, that your bills require to be kept in the Treasury. Mr. Fairchild. What is the $400,000,000? Mr. Walker. There is $280,000,000 now in the United States Treas- ury, more or less— some $240,000,000 to $288,000,000; $28S,000,000 it has averaged in some years. Mr. Xewlands. Of what? Mr. Walker. I mean of " free moneys," as reported. Call it Govern- ment working note redemption capital if you choose. England has a- working capital of about $20,000,00;); France a working capital of about $30,000,000, and Germany a working capital of about $20,000,000, and we have $280,000,000. PROPOSITION TO HAVE $350,000,000 IN THE TREASURY. Now, Mr. Gage proposes to take out $125,000,000 of this $28S,000,000; he proposes to add $200,000,000, making $325,000,000, which is equiva- lent to adding $200,000,000 to what we now have; while my bill relieves the Government of the necessity of keeping any money whatever except an ordinary exchequer balance, the same as any man keeps his business cash. Mr. Fairchild. Then somebody else is to take care of those things. Mr. Walker. It costs the Government interest on it and would not cost the banks anything. Mr. Fairchild. They do not make interest on the money in their vaults. Mr. Walker. That is true, but they would not have to keep any additional sum there under my bill. Mr. Fairchild. They would take care of the notes, and the banks would not have to do any more than now. Is that it? BANKS NOW SUSTAIN THE TREASURY, COSTING THE PEOPLE $50,000,000 A YEAR. Mr. Walker. The banks to-day sustain the Treasury and are at the expense of sustaining the $1,000,000,000 that are in circulation. That is my assumption. Now, if the $1,000,000,000 that is in circulation pays only 1 per cent, the people are in fact paying the difference between 1 and per cent on the whole $1,000,000,000 the way it is now issued — tli at is, $50,000,000 a year in higher rates of interest. I ask you if that is not a fact? Mr. Fairchild. I do not get at that. Mr. Walker. Suppose there was no paper money in existence except that issued by the banks, and suppose the demands of the people call for $1,000,000,000 of paper money, as now, and the banks issued it and kept that amount in circulation. We will put it in round numbers. The banks would make on that what their rates of loans and discounts were on their general business. Mr. Fairchild. Yes. UNITED STATES TREASURY TO PAY THE CURRENCY IN CASE OF INSOLVENCY UNDER THE WALKER BILL. Mr. Walker. If they are not making any money on that, then the banks are losing that much that they otherwise would make under the English or Scotch or French or German or Suffolk or State bank system, or under the Walker bill. Is not that true ? STRENGTHENING TIIE PUBLIC CREDIT, ETC. 207 Mr. FAiRcniLD. Of course; that is a mathematical statement; that if they do not loan the money then they are not making the interest on it. Mr. Fowler. Ultimate redemption, however, is thrown upon the Government. Mr. Walker. Yes, when a bank becomes insolvent, $200,000,000 of it; but there is a tax that more than covers it. Mr. Fowler. But there is no limit to the tax? Mr. Walker. Yes. Mr. Fowler. The Government is responsible absolutely? Mr. WALKEB. Certainly; but there i.< a tax that will pay for that. Mr. FOWLER. But if that tax doesn't happen to cover it the Govern- ment must take it up? Mr. Walker. Certainly; the Government guarantees in a statute the same as now, with a bond. Mr. Fowler. It is an absolute guarantee for all the banks may issue. Mr. Walker. Yes. The money is just as safe as the bonds, except it is written in the statute instead of being written in the bonds. Mr. Hill. There is a 5 per cent held by the Government of its own money against its own notes. Mr. Walker. Yes; it would amount to $10,000,000, and the bank also keeps with the Government an amount equal to 5 per cent of its currency, which it can not count in its reserve. Mr. Johnson. Are j t ou talking about your bill? Mr. Walker. I am talking about my bill. TRUE VISIBLE GOLD. Mr. Walker. Now I want to call your attention to another remark- able thing. In the whole of the United States there was specie in the old State banks, in 18G0, of $2.09 per capita. To-day there is gold in the national banks to exactly the same amount — 82.00 per capita. Mr. Fairchild. Does that include all the old State banks? Mr. Walker. All ; yes, sir. Mr. Fairchild. Then the gold in the national banks is equivalent to the gold in the State banks? Mr. Walker. It is fair to say that the gold in banks in 1860 per capita was $2.60 in this country. To-day it is the same per capita in the national banks alone. The amount in the State banks is not given to-day, but they hold of cash 44.7 per cent as much as the national banks. It is reasonable to suppose that there is $1.20 per capita of gold in State banks, which, added to the other, makes a specie, probably gold, to-day, per capita. $3.89, to $2.69 in I860. Now, $3.06 in gold to each of the 73,000,000 amounts to $272,300,000 in gold. The visible gold, as shown in the Comptroller's report, December 7, 1806, page 22, was $ 121,236,388. Visible gold not in banks of loan and discount then was $] 18,936,388. Total gold in the United States is $696,270,542, by t he report of the mint. I did not suppose it was anywhere near that amount, but my recent investigation, and the fact that gold is paid in for taxes in St. Louis and other cities by comparatively poor people, leads me to think that there is more than that. I should not be surprised if $800,000,000 devel- oped if we had a proper banking system that fully restored confidence. The visible gold per capita — not the gold in pockets, but the visible gold in the various institutions — is $.5.77, and the total gold in the country is $9.54 per capita that we know of, not counting thai which is hoarded. I take the statistics as they are given. 208 STRENGTHENING THE PUBLIC CREDIT, ETC. Mr. Newlands. Will you please state again what the per capita of visible gold is? Mr. Walker. Five dollars and seventy-seven cents. That was found by the investigation of Mr. Eckles, and was stated in his report of Decem- ber, 1896, page 26. My point is, that if we had a banking system that would establish confidence, such as is felt in Germany, France, Canada, and Scotland, would not a large amount of gold that is not now visible be visible by flowing into banks at once, or at least very soon? Mr. Fairchild. 1 think so. 1 think if there was entire confidence in our monetary condition that we would see a great deal more gold. SUFFOLK SYSTEM. Mr. Walker. The New England banking system — the Suffolk sys- tem — was understood to be about as safe a system as any country has ever had in its practical workings; so much so, that in 1857 scarcely a bank failed, and when they suspended specie payment (and then because New York had suspended and they were forced to do it for that reason) they paid, during the whole of that suspension to anybody that asked for it in the legitimate way of business, all the specie they wanted; and gold did not go to a premium by the smallest fraction during that nominal suspension. Mr. McCleary. When was that? Mr. Walker. In the panic of 1857. The statements that I have made are matters of history. Mr. McCleary. I do not doubt your statement, but was simply asking for information. Mr. Walker. Now, at that specie security we could issue to-day $1,454,075,000 of currency, with 13£ per cent gold back of it, as New England banks then had. Mr. McCleary. And have as good security? SUFFOLK SYSTEM NATIONALIZED IN WALKER BILL. Mr. Walker. Yes. And have the same amount of gold in the banks back of the currency now, as through the New England system for forty years — the Suffolk system. The Walker bill is the Suffolk system nationalized. It is absolutely and purely that, and nothing else; that is to say, essentially the same as the Scotch and the Cana- dian and the German and the French systems now. Issuing $800,000,000 of currency there would be visible gold in the banks within a small fraction of 24£ per cent, about double of what there was in the New England banks under the Suffolk system. The visible gold that would flow into the bank immediately would be 52 per cent, more than half, which is an unheard of percentage of gold to currency issued. In view of these facts, have you any doubt about the safety in the specie reserve to maintain the $800,000,000 currency that it is contem- plated would be issued in the near future ? Mr. Fairchild. I have no trouble on the specie question. I think there will be ample for that. IMMENSE AMOUNT OF GOLD. Mr. Walker. In view of this immense amount of gold that we now have in banks and the additions that would find their way into the banks, namely, 52 per cent now of gold to $800,000,000 of currency, if that is issued, is not the retaining of $200,000,000 of legal- tender notes that the STRENGTHENING THE PUBLIC CREDIT, ETC. 209 banks can keep in reserve a good and not an evil in furnishing a redemp- tion agent and a reserve? That is what I am getting at. I have intro- duced these facts, not with reference to the gold question, but to discuss this question: If the Government is relieved from current redemption, and it is put on the banks, and the banks have this immense amount of gold, is not the assumption of "current redemption" by the banks entirely safe? Assuming what 1 have stated is correct, is it not a good and not an evil to continue $200,000,000 of legal-tender notes so that they can be used as available funds by banks to supply and transfer balances rather than to be at the expense of transporting gold? Mr. Fairciiild. It would not be necessary to transport the gold any more than we do at New York at the present time. There they have to put the gold in charge of the clearing house, and they have simply a piece of paper to represent it. It is a mere matter of ingenuity. Mr. Walker. In the absence of this $200,000,000 of legal tender they would have to accumulate this $000,000,000 of gold? Mr. Fairchild. Yes. Mr. Walker. Now, if that is so, would it not be a good to the country not to require them to accumulate the $600,000,000, but be satisfied with $400,000,000, and let them hold $200,000,000 of greenbacks in the place of $200,000,000 gold? Mr. Fairchild. Who is behind the $200,000,000 in greenbacks? Mr. Walker. The banks. They have to redeem them the same as their own currency. Mr. Fairchild. Where do they get the gold for that? Mr. Walker. The same as to redeem any other currency notes of the banks— out of the $021,000,000 of gold. Mr. Cox. Where do they get the $421,000,000? Mr. Walker. It is "visible" in the country now. TOO MUCH GOLD REQUIRED. Mr. Walker. As I understand it, Mr. Fairchild, the bill of the com- mission would destroy all the Treasury notes and legal-tender notes; it would so use the silver dollars that they could not be had to use in the cash reserves of banks; and this for the purpose of making it impracti- cable for banks to get any other money but gold to redeem their notes with. That would be the effect of it ? Mr. Fairchild. That would be the effect of it. Mr. Walker. How much gold would it take to furnish all cash reserves now held by national banks? Mr. Fairchild. I have not figured on that. Mr. Walker. The report of the Comptroller of the Currency says that $389,000,000 in round numbers in cash reserve is held in the national banks, and that in the State banks there is $152,000,000 cash reserve, and he estimates then' is about 12.^ per cent of the State banks that do not report to the Comptroller. That would make the probable cash reserve now in the banks $562,883,000. The question is whether that amount in gold would not overload the banks, whether it is not an unreasonable expectation, and even if the expectation could be realized whether it would not be an exceedingly uneconomical procedure to compel the banks to keep $502,000,000 of gold, upon which the country must lose interest. That is to say, " a sufficiency is enough." The moment they get gold to more than what makes absolute safety the people are losing 6 per cent interest on the unnecessary surplus. B & c 14 210 STRENGTHENING THE PUBLIC CREDIT, ETC. Mr. Fairchild. Certainly. Mr. "Walker. We want enough, and have both gone on the idea that a sufficiency is enough; but is not what is provided for in the com- mission bill an unreasonable amount? Mr. Fairchild. Possibly it is. I do not think it is an unwise amount. "TRUE BANK CURRENCY" BETTER THAN "BOND SECURED CUR- RENCY "—GAGE BILL "TENTATIVE." The Chairman. Mr. Secretary, you say your bill (H. R. 5181), which you have drawn and presented to the committee, " is not final, but rather a tentative step;" and again you say, "it will lead to conditions ulti- mately desirable." In order to know the virtue and value of the bill and the desirability of entering upon its enactment, it is necessary for the committee to know what you have in view and what you would call the completed whole. Secretary Gage. It would be a condition of affairs where there was a system of bank notes issued in the United States made safe to the people without the deposit in the hands of a trustee of specific security therefor, wisely limited and restricted by law so as to reduce to the minimum the possible abuses which might grow out of such a respon- sible duty, and eliminating substantially or entirely the Government of the United States from its present method of paying its debts by giving another debt in payment. The Chairman. That completes the answer? Secretary Gage. I think it does. The Chairman. Mr. Gage, in reply to the question as to what your scheme was tentative to, and to what you looked as final, you made a statement which is in the record. Upon reading your answer to the question, are you satisfied with it ? [See above.] Secretary Gage. Yes, sir; it might be somewhat extended, but I think the idea is covered in that. The Chairman. Mr. Fairchild, you listened to the statement of Mr. Gage. Do you agree with his idea? Mr. Fairchild. Yes. TRUE BANK CURRENCY. The Chairman. I desire to ask a question or two as to a "true bank currency" for the purpose of getting it in the record, so the people reading the record will know what we are talking about. A bank keeps at all times, in the regular conduct of its business, assets more than equal to every obligation against it, including its currency notes? Secretary Gage. Yes, sir. The Chairman. Secondly, a bank pays out every dollar it puts in circulation upon the receipt from the person taking it of ample security for its redemption ? Secretary Gage. That is, in good practice and theory. The Chairman. Thirdly, the currency of a bank is redeemed at its place of redemption by its general "current funds" — which are titles to products, and which are in the hands of another bank that acts as its agent in redeeming its notes, and not in actual coin? Secretary Gage. What do you mean by "current funds?" The Chairman. I will put it differently. In the current funds that it has on deposit in its correspondent bank for the purpose of meeting all its obligations, including its currency notes? STRENGTHENING THE PUBLIC CREDIT, ETC. 2 1 1 Secretary Gage. Yes, sir; that is true. The Chairman. On the other hand, a (l) government gets nothing in the regular course of its business when it pays out its own currency, and (2) the coin must be constantly carted into the vaults to redeem, and carted ou*i in redemption of paper money. Secretary Gage. The first part of the statement is correct, that when the Government pays out it does not acquire anything which it keeps to serve as an ultimate redemption for the note it pays out. The note it pays out is in consideration for services already rendered or for goods and commodities already received and used. The Chairman. If you will turn to page 175 of the Treasurer's report for 1897 you will iind that there was redeemed at the Treasury last year $113,000,000, total redemption of national bank notes. In the second column of the table you will see there was $33,000,000 of money that was actually sent out by express — that is to say, about one-third. The rest of the redemption was in checks on the subtreasuries sent to banks, as I understand I Secretary Gage. Yes, sir. The Chairman. Now, it is equipped with funds, either greenbacks or coin ; if it was coin redemption, that coin had to be carted into the sub- treasury from some source in order to meet the balance of $80,000,000 redemption 1 ! Secretary Gage. That would be supplied in some manner. The Chairman. Then the answer to my question, of course, is in the affirmative — that is, essentially true. Secretary Gage. That is substantially correct. The Chairman. The currency issued by a government redeeming government currency can not be redeemed in general current funds — which are, of course, the titles to products — for it has none and can get none. The bank must send its specie to redeem its notes with, or the government must get specie by taxation or selling bonds — one or the other method ! Secretary Gage. I see no other avenues. The Chairman. I want to call your attention to the taxes proposed in the bill prepared by Secretary Gage and Ex-Secretary Fairchild. Mr. Brosius. I would like to ask if you mean that these propositions embody the theory of banking? The Chairman. And the practice. Mr. Brosius. Do you mean to say these propositions express the actual practice of banks always? The Chairman. I do. Mr. Brosius. I can not give my unqualified assent now, and at some time I would like some explanation of these propositions. The Chairman. Now is the time to record it. BANK ASSETS. Mr. Brosius. You say a bank keeps at all times, in the regular con- duct of its business, assets more than equal to every obligation against it, including currency notes. If that is so, no bank could ever break up, and banks are breaking up. The Chairman. 1 do not mean insolvent banks; I mean sound banks. Mr. Brosius. That is an exception to the proposition. The Chairman. It is implied in the questions. Mr. Brosius. In the second place, you saj the bank pays out every dollar it puts in circulation upon the receipt, from the person taking it, 212 STRENGTHENING THE PUBLIC CREDIT, ETC. of ample security for its redemption. If that is true there would be no bad debts. If all the money paid out is secured by ample securities, when are notes discounted by a bank not good at all? The Chairman. I am speaking of a sound bank. Mr. BROSIUS. Then, if it is the theory of banking, it is all right. The Chairman. No; it is not the theory only; it is the actual practice. Mr. Brosius. In the average of banks? SECURITIES TAKEN FOR BANK CURRENCY. The Jhairman. No; I mean to say that where a bank pays out its currency notes it always takes from the man who receives the currency what it considers to be sound securities — it may be mistaken, but what it considers are at the time sound securities — for more than it pays out in currency notes. Mr. Brosius. That is right, but that is a totally different proposi- tion. TRUE BANK CURRENCY REDEEMED BY THE MAN WHO TAKES IT. The Chairman. No, sir; the second proposition is that the man who borrows, as a matter of fact, in good banking, himself redeems the notes that he takes from the bank. That would come in a little later, but I put it in now: Namely, the banks take the personal time note of the borrower on ninety days, and if its currency is averaged to be redeemed once in every ninety-two days, four times a year, the man who took the currency for the proceeds of the discounted note actually deposits the funds in the bank which redeems that currency. That is not theoreti- cal, but practical, banking. These propositions are absolutely true, and can be found in the active banking of France, Germany, England, Scot- land, Canada, and every other country that has a sound and true bank- ing currency; and you can not have sound banking where the public Treasury is the redeemer. NORMAL CIRULATION. Mr. Newlands. Mr. Secretary, Mr. Fowler, in one of his questions, used the term "normal circulation." What do you understand by that? Secretary Gage. I do not understand anything by it. I do not know what is normal, and I do not believe anybody does or can tell; the law of supply and demand operates, and that determines what is normal. The Chairman. And whatever that shows is taken out is normal? Secretary Gage. I think so. Mr. Fowler. Then it does mean something? The Chairman. It means that whatever circulation averages to be taken out is thus shown to be normal. Secretary Gage. With that correction of my expression as to what the word meant, I should say yes. ELASTICITY OF CURRENCY. Mr. Newlands. It is expected that the circulation that these bills call for will have the element of elasticity? Secretary Gage. It is expected it will. Mr. Newlands. As a matter of fact, is not this bank circulation practically an extension of the check and deposit system? STRENGTHENING THE PUBLIC CREDIT, ETC. 213 Secretary Gage. That is what it is. Mr. ]S t ewlands. A practical extension of the check and deposit system? bank currency checks. Secretary Gage. Substantially; a bank note issued by a banker is nothing more than a memorandum check which will draw money from the bank at any time at the pleasure of the holder. Mr. Kewlands. It is a check payable to bearer? Secretary Gage. Yes, sir; it is, substantially. Mr. Johnson. Do I understand you to say that an elastic currency, one which would expand and contract with the varying needs of trade, is as readily obtained on bond security as under some other form of security — as under security issued against the assets of the bank with a guaranty fund? Secretary Gage. I do not say that the secured circulation is as useful as the unsecured; that is another side of the question. 1 do not think it is useful to tie up capital needlessly. Mr. Johnson. That is the point I wished to develop. WALKER BILL. The Chairman. I want to say to Mr. Fairchild and Secretary Gage that the bill prepared by myself meets exactly the conditions that you have suggested ought to be met in the banks you have designated in a proper banking system whenever you can get it. Suppose there was no paper money in existence except that issued by the banks, and suppose the demands of the people call for $1,000,- 000,000 of paper money, as now, and the banks issued it and kept that amount in circulation. We will put it in round numbers. The banks would make on that what their rates of loans and discounts were on their general business. Mr. Fairchild. Yes. BOND-SECURED CURRENCY ROBS A BANK OF CAPITAL. Mr. Walker. If they are not making any money on that, then the banks are losing that much that they otherwise would make under the English or Scotch or French or German or Suffolk or State bank system, or under the Walker bill. Is not that true? Mr. Fairchild. Of course; that is a mathematical statement; that it' they do not loan the money then they are not making the interest on it. SECURE ON GOLD STANDARD. Mr. Walker. Mr. Gage, do you understand that France is abso- lutely secure on the gold standard? Secretary Gage. Yes; I think so. Mr. Walker. Do you not think Germany is absolutely secure on the gold standard? Secretary Gage. I believe so; but it does not make so much differ- ence to me what Germany or France are on as it does what we are on, because our coutracts are domestic and relate to all the trade aud commerce which we get. Mr. Walker. I make the statement that the bill drawn by me puts us on precisely the same standard, in precisely the same manner, with 214 STRENGTHENING THE PUBLIC CREDIT, ETC. a little different machinery, as France or Germany, and if that is the fact, and that bill could be passed and this Monetary Commission bill could not, and mine accomplishes what you declare ought to be accomplished Secretary Gage (interrupting). Then it would be perfectly satisfac- tory to me in that particular. The Chairman. When a bank issues currency it has the right to take out against its assets to the limit of its capital. It secures currency to the amount of its capital, puts it in its vaults, and keeps out what it well can, having currency always in its vaults to put out whenever there is a call for it and they can get it out. It has, in addition to that, the capital, which is not depleted by a dollar in loaning currency. Secretary Gage. That is right. CURRENCY ISSUED AGAINST ASSETS. The Chairman. If they have to put up bonds they can buy at par and issue currency to the amount of the capital; it absorbs every dollar of their capital. Secretary Gage. That is right. BANK CURRENCY REDUCES INTEREST RATES. The Chairman. Then, if a bank can make loans of its deposits to an amount sufficient to make money enough to pay its expenses of every name and nature and they just balance (assuming that they can keep out all their currency) — then they can make loans at one-half the rate of interest they could if the capital was used up to take out currency secured by bonds. Secretary Gage. That is substantially true. The Chairman. Now, every dollar of currency, where the currency is issued against assets that remain in the vault of a bank, remains there without the slightest loss to the bank, except the printing of it. Secretary Gage. That is true. * * * Suppose that with a bank the same circular movement of gold goes on that was spoken of a little while ago. The probability is that every bank in every money center redeems every day from 10 to 15 per cent of its liabilities, creating new liabilities to someone else, and the next day liquidating again and again, always new creditors settling and satisfying former creditors. There is a substantial redemption of a bank's liabilities. A bank's notes are not different in their essential character from the bank's deposits. They are the same in their nature and are governed by the same general principles. BANK CURRENCY, THE FARMERS AND WAGE EARNERS' "CERTIFICATE OF DEPOSIT" AND BANK CHECK. Mr. Walker. Is it not the practice of merchants and manufacturers and those living in cities to leave the proceeds of a personal note dis- counted for them by a bank in the possession of a bank in the form of an "individual deposit," to be drawn out by checks, drafts, etc.? Mr. Fairchild. Yes. Mr. Walker. On the other hand, is it not the almost universal prac- tice of the people who live in sparsely settled sections of the country, and especially the farmers, to take home with them the currency notes STRENGTHENING THE PUBLIC CREDIT, ETC. 215 of the bank discounting their time notes rather than to leave the proceeds in the bank discounting or in another bunk? Mr. Fairchild. I understand that to be the case. BOND-SECURED CURRENCY OPPRESSIVE. Mr. Walker. Then is not a very great hardship worked to those sections of the country under a bankiug system which does not allow the free issue of paper on the true banking principle? Mr. Fairchild. I consider it so. Mr. Walker. Is not a currency note to the person holding it the equivalent of a certificate of deposit or a certified check in the bank? Mr. Fairchild. It is, except that it is more available for him. Mr. Walker. Better for his purpose? Mr. Fairchild. Yes. Wr. Walker. Then it follows, does it not, that any great expense put upon banks in getting currency notes to issue is a great expense, hardship — in fact, oppression — to those citizens who do not use checks, drafts, etc., in their transactions, and who are practically compelled to use currency or do without banking accommodations? Mr. Fairchild. Yes, sir. BOND-SECURED CURRENCY CHECKS ENTERPRISE. The Chairman. It follows, then, that a currency made expensive, or one that lessens the amount of loanable funds the bank has on any given amount of capital and deposits, checks enterprise by making production difficult and expensive to those people who naturally and inevitably are shut up to the use of currency in getting bank accom- modations instead of using checks, drafts, etc.? Mr. Fairchild. That is true. Mr. Hill. Do you mean by your answer to imply that there should be unlimited bank issues? Mr. Fairchild. No. Mr. Hill. Does not the question asked by Mr. Walker involve that? Mr. Fairchild. I did not so understand it. Mr. Hill. Will you kindly ask Mr. Walker to have that read again, and in the light of that repeat your answer? Mr. Walker (reading the question again). That does not involve quantity at all. Do you wish to change your answer? Mr. Fairchild. No. CURRENCY ISSUED FREELY LOWERS RATE OF INTEREST. Mr. Walker. It follows, then, that by issuing true bank currency a bank can make its loans to the people patronizing it at as much lower rate of interest than it could if it had only its capital and deposits to lend, and no currency, as the currency it lias in circulation bears to the whole amount of its loans and discounts, and pay the same dividends on its capital stock? Mr. Fairchild. I should say that by the amount its circulation increases its resources it is enabled proportionately to give a greater accommodation to its customers, and necessarily at a less rate. Mr. Walker. Compelling a bank to buy bonds at par to Becure its currency notes, even if the bank secures notes to the par of such bouds, 216 STRENGTHENING THE PUBLIC CREDIT, ETC. depletes its loanable funds, as compared with the "true bank currency " issued against its assets, by every dollar it pays for such bonds, does it not ? Mr. Fairchild. I think so. Mr. Walker. Then, compelling banks to use "bond- secured" cur- rency compels the people borrowing of such banks to pay a higher rate of interest as compared with banks issuing "true banking currency" against their assets — as is done in every other country — in proportion to the amount of such currency the bank uses in comparison to its whole loans and discounts ? Mr. Fairchild. It seems to me that is very much the same as the other question. I would repeat my answer to the other question. TRUE BANK CURRENCY ISSUED BY COUNTRY BANKS. Mr. Walker. Mr. Fairchild, the statistics collected by the Treasury Department show that in Vermont all the banks combined (not a single bank) kept in circulation an average of 103 per cent of the cur- rency to its capital. You will find the statistics on page 441 of the hearings before this committee in 1896. Old Virginia kept out 96 per cent; North Carolina 95 per cent. You will find by turning to page 458 that 55£ per cent of the country banks in Massachusetts — outside of Boston, which had the least currency — had over 64 per cent; Ocean bank, Newburyport, 91 per cent to capital; Powow River, Salisbury, 110 per cent; Brighton, 112 per cent; city of Cambridge, 96 per cent; Maiden, 87 per cent. This indicates, does it not, that the poorer sec- tions of the country, the agricultural districts, like Vermont and North Carolina and Virginia, can keep in circulation if they are allowed to do so, about 100 per cent of currency to capital? Mr. Fairchild. It shows that they did. The Chairman. Is it not a fact that the average of the banks in the country can keep in circulation nearly double the currency at certain seasons of the year over what they can at other seasons? Mr. Fairchild. I do not know the exact proportions. Mr. Walker. But usually much more? Mr. Fairchild. It is usually much more. BORROWERS GET THE ADVANTAGE OF "FREE CURRENCY ISSUE." Mr. Walker. Where the business of banking pays a larger profit than other business of like labor and risk, will not capital be invested in new banks in competition with existing banks until the profits in banking are reduced to the general average of incomes in other invest- ments? Mr. Fairchild. That is the natural law of such things, in banking as in anything else. Mr. Walker. Is it not within your knowledge that in Canada, Scot- land, Germany, and France the rates of loans and discounts all over those, countries are very nearly the same where the same risk is incurred and the same time and amount is involved? Mr. Fairchild. That is the case in Canada, and I understand in Scotland also. Mr. Walker. It is because the branches in the country allow them to circulate such an enormous amount of currency that it is possible. It is the currency privileges of banking that they could not exercise if they were strictly a city bank; but with branches out through the STRENGTHENING THE PUBLIC CREDIT, ETC 217 country it enables them to circulate their currency, which keeps the rates down in the country as compared with the city? Mr. Faircuild. I think that has a great effect upon it. INTEREST REDUCED ONE HALF. Mr. Walker. Assuming that the money made on its deposits by a bank with a capital of $100,000 was exactly equal to its expenses of every name and nature, including the current redemption of its cur- rency notes, if it has any, and assuming the bank has no currency notes to issue and has its $100,000 funds equal to its capital loaned to cus- tomers on notes, each having three months to run and discounted at the rate of per cent per annum, the net profit on its business would just equal per cent on its capital stock, would it not? Mr. Fairchild. Its deposits pays its expenses Mr. "Walker. Of every name and nature. It has $100,000 capital to loan and no currency? Mr. Fairchild. It will get 6 per cent, of course. Mr. Walker. If it can take out $100,000 currency and keep it in circulation, it can make loans at 3 per cent and make the same amount of profit! Mr. Fairchild. Exactly. CITY BANKS CAN NOT ISSUE CURRENCY. Mr. Walker. Is it possible for city banks without branches to cir- culate very much currency — those banks whose business is what might be called a strictly city business? Mr. Fairchild. It is not. Mr. Walker. Practically it can circulate none: it comes back in the clearing house the next morning? Mr. Fairchild. Yes. TAXING CURRENCY OBJECTIONABLE. Mr. Walker. Is not this 2 per cent tax on currency between GO per cent and 80 per cent, in view of what I have said about Vermont and Virgiuia, a restriction working a hardship, and does it not work exclu- sively to the expense and hindrance of the circulation in country dis- tricts, where they actually need considerably above the GO per cent? Mr. Fairchild. I think that is the objection to it. That is my objection. BANK LOSES INTEREST ON BOND-SECURED CURRENCY. Mr. Walker. Where currency is issued as it is to-day, does not the bank actually lose on each dollar of currency not in circulation an amount equal to its rates of loans and discounts, less the profit the bank would make were all its currency notes in circulation? Mr. Fairchild. Yes; that is true. Mr. Walker. Does not any system of currency that makes the cur- rency held in the vaults of a bank an actual loss to the bank under any circumstances compel the bank to increase the loan and discount rates to the people to an amount equal to the losses made on the currency that it holds in its vaults? Mr. Fairchild. It does. 218 STRENGTHENING THE PUBLIC CREDIT, ETC. UNITED STATES BOND-SECURED CURRENCY A " PER CENT RATE CURRENCY." Market price of United States 4 per cent bonds of 1907. June 30— 1881.. 1882.. 1883.. 1884. 1885. 1886. 1887. 1888. 1889. 1890. 1891. 1892. 1893. 1894. Quotations of market price of bonds. 1S95 New "fours" of 1925. February 5, 1896 117£ 118j 120 118t 119£ 118J 1191 123$ 126 127 125£ 127| 128£ 128* 129| 121} 122| 116* 117* llOj 117£ 109 110 113 114g 112 113* 112 E. C. E. C. E. C. E. C. Rate real- ized. E, C. E. C. E. C. E. 2 (d) Places under 10,000 population (12* per cent of the capital, $253,281,959) 31, 660, 620 Total "greenbacks" that would be exchanged 120, 780. 012 All State banks required to assume United States notes. 4 i . 290, 873 Total United States notes exchanged 1GS, 070. 228 STRENGTHENING THE PUBLIC CREDIT, ETC. Under the Hill-Fowler bill banks are required to buy and pay United States legal notes for purely a bank note to the amount of 25 per cent of their paid- in capital, and they get no right whatever to issue any notes other than those they buy. Amount as above $157, 872, 023 Under the Walker bill national banks and commercial State banks are required to exchange lawful money for a new issue of "greenbacks," with their own note printed on the back of them, to the amount of ll'i per cent of their actual capi- tal—total 1G8, 070, 885 And can issue currency against their assets to an equal amount 168, 070, 885 Total currency under Walker bill 336, 141, 770 STRENGTHENING THE PUBLIC CR€I IT, ETC. 229 © cc 1 © CO -^ ■<* rH lO © •* £ • • • • . o £ • NO "# t~ rH CI CS 4) SO © rH tH CO p° **.2 tH rH _h © '-W 2 — - «pH f 1 o Jfc. S5$ »o ■ t* ; CO »o ci • t-- ci 1 CO • rH ■ rH rH i »r c; 4a Phi-H 3 - 3 • CO ° P t> — U3 LO < t- O •XS cities 00 pop and o inclu< rve ci ci co ci (H <» co rH rH « 7s rH " o "cT.2 o S a 8 ih -4^ a3 m 03 S r^ ^5 CO 9 co oo CO © »C IQ ci rH no CO ci © co a ^ © CO rH rH IO o CO O ® cq ce J5J _ > ■4J p**i - "'H FM HH S3 CD CO o <** © a^ pjftft) (-. CQ 73 CO oo © OO lO CO © "# 00 • • • • »o © •«* © t— CI ■♦a o a © •» »-H CO c CC 2* ■*-> _ © a, -i-j _ — -t- r* o © H)J 9 O h P ►hOM P P Ps • • • • « • ri C » eo tji o © 230 STRENGTHENING THE PUBLIC CREDIT, ETC. CO 5^ «— -43 o c 3" © c > c > Q -- O M X C: O o 08 O >> • • • • • » # CS c r: u* rx u >S° WHt>lOi>HO P-Cfl-P HHHOHIOO —, © ° a o t. •- s ■ — C3 © S>-i 02 ~ « a o 1-3 O o • 00 1— t •iH ,fi to a _o *n e3 > U o "3 a a >> o a 09 (h H a o ^^ a O o IO 43 CO ca IO CO o H a X -fcaogeo — »o ^ © !§§££& .u^.S-Q £ © a w _ a © -2 g ^ ^ H ©OPhI> © ^ J£ © © © © © re o JJC* ti fc| h h fcl mR tl 4) J; J q) O — ^ 13 T5 « t3 ©r^ a a a a a £ PC (— - *— p - P p STRENGTHENING THE PUBLIC CREDIT, ETC. 231 C5 00 o « H O Em i >— i «9- S « e ■c i = .2 -CI = 8 © 3 o C ' s a a 2 C w ta — a ft -° 9 m to coo 1/5 OC ■ C l 'O cr — i- n 43 a 3 o 1 i-< i- cmco to •— i- : i ■*" to : i iri irt 00 Ti to Tl Interest on $100,000 capital. o o o o oo o o ^ to oo*o i-^ t- e i i CO --< t- CM m oo cm ce to ♦-. t-CM -*.> ON GO IS U a Pi M W o H oooo co 06 r~ ci Oi 00 00 t^ r H , f -!"iH*iH «9> bee - 3 a . B^l BS a a 3 - e « 2 33 =2 ^k^ CD tO r-< O <— t— CO CO -«* CO CO CM CO 0) p- oooo m in »n in CM CM CM CM co to to CO ^-T-^' t, co ep o t3 -3+s a a a o o o o o oooo CO CO co to to 3 cm':' e '*' a tJ g.g,2 j o*>% g- M *-5 ■- t- r- i^ r- o o o o C1C. C1C3 c o o o T. r. r. fi o o -•a •*- £ - ■ *- a r - CO i-l o o 00 O "9 /J GO d CD O o. u SO CO O ■D V a* CD i-i d a = CD ao o J- 232 STRENGTHENING THE PUBLIC CREDIT, ETC, « W PS H o o w a b o S3 p - — fcc § 3 O 3 « S-3 5 §§'3, »r os O) r^ es ■"* ^ r~ tt- . - . O © OO O o c: o o o o o *> p. J§8 1 s" «9. °0 "5 o s fic> C. ft M o H HOicn cs -* — t~ I-B&8 ° a - s § N*8«o r* to o CM t- OS l- C- -7" « 00 conot* C^ CM CN f* «3- Wc?ciNN > "nlS - CD -B O " E fe * §£.* O O O O ift m m co 00 X 00 00 5 © o o M © g © en *2 •O t"V ^ CD £ B CO "£*> a S x C ■OCOOOrt COiNCB OTrtH O © O o O = O o © © © O O B ■4S C3 B O ©© :g Si^tja EL •ij-'s «, 3 wo ^CfCCOOH CCIMCO CD ■*< ro ^ .3 CO c *©■ Oh t- l> t- c- r* r-t r^ r-i . a b II s is o © © © © o o o o o o o ««.vr ^3 B o ♦; o> >• * -■5b§ C » V a o u 03 -a a ea a 3 3 o a ® ei <0 oo OS oo 3 B 3 t ~ - - -- ° « - u t- ■- U s cd a STRENGTHENING THE PUBLIC CREDIT, ETC. 233 OS in ■** t© r 1 - r : ~> -.-. ia i-ii^ :i 1—1 I- © rH CO © © CO Q» 3 y-l . Oiil>- CO fc> i-O 9 CO © C s «^ — i -H e.5 © "H CO © 1- CO > J © ii 5 IO a* rv *x rv r> r* vs. #>. *v «v rv rv rv © © © i~ r- i CO £ 2 co co © e 1 ' " 1 t- » 2 "f WC3 © -i H © © .— CO "M rH CO C 5 t- -Tft CM © CO u 10 1 - r 1 ifl c: 3 ^^ S 10 « co a- 5 CO H ~* — 1 £ © r- H CO o e& _T r-T &> e « 3 IO CO iO CO -j < CM r* O C > r-( V i at Ci CO »0 CO C<" 5 fc- co © c . CO l£ 5 CO , © © rH co c- 3 © > ® . <0 — ©2 © © c 1 © ^ 3 CI r™< #S #v rs. », r\ rv. ys. W rv »v rv »x c3 x c- co CO OC > rH CM © C > (M C > CO a* 1 CO t- © CO a > -t co © c > CO t- 10 P< - CO c 5 CO cj yy «S (S ♦v rv •V, j-=a #v *s r^. •-- •V iN, o — CO CM CM C > © CO CO CM C . © O 5 © CO CI CO © c 1 r-i efi CO »0 r- < 1.0 c i © ©Me co e>" 1 rH O CO rH C J IQ r- ■< © €© •V, *» 5 i © © c > © C . 10 © Tj 1 -H > t- © c > I 1 ( CM CD ^ r\ »s S » rH © C rH C > CM co 2 ■«* op «c co c 1 © ^ 3 t-^c CM cr, ) © f-M C •■V «v r>. «v rv #v CO 9 t- CM (>■ t^ ) < ^H Ct h* CO rH r- r^ ~ > CM 1 < IO ; -fc3 ■u i- ©1 *- H Ph r- /** -)J •pi bo a bj G *F- s "J CO •*■ -« — a *- e3 a ^ O © • w - -|H © Fh — < co 1- GO 4 «M Cl •, . :i BE O © © 03 EB s — «3 X T. S » fe £.0 01 Total . ,ble inc "3 5 » s Total, ble inc "c3 O ■pa a 1— ( <4 — O c 0) c3 Eh - 02 - CD r— 4_, ~ — O K S ^j CC ,^ B8 00 r- ^1 =f — -3 .2 cp a «} ci !- 4J.S tl ©Ci ° = c i trig ^ ,a © +j -a a ■S *§'■*! — § ^ ® -O K 5 " — 00 J) cSj © H a a ■r. •4-2 Cw * — t>> - dc a — _f-2 "3 ^ 4J 55 9 O © — -* fcx w © hog- 3 •1— -^ a © a a rC — a, ^ a «> 05 "-5 _ © :" — > - •- -- - a © . c © 9 « O * i © -»- a a rr 08 — a ok a P; > r- © *© -D ■1— - — ~* O © © a •/. ra J3l /. a © -V - .a 234 STRENGTHENING THE PUBLIC CREDIT, ETC. <2> CO ^ s* e & r*» © 30 © Bo & e CO a a <"H j § > a &C «■«& ^ P j •t-i -1 •«& a £ >- CSJ •^> < 10 =C fcl to < *» P* 8 a; 8 a 00 z < pq 2$ s 8 •<* 8 z s H* • a «-* g rij fc ^» e <■© «l * « M 00 pa "a < H ©> S •«» s i*S so . », — o o o r_~ a *£ o (X, 1 p. p ■- . „ « x Q 53 r-l o ID o CO X o a © S o o P< 'EL o e8 e3 o ft Ci x c3 o o a e ki M 53 o x O Cm * t- ;i d n OCCOH^OCOCOiOl^ lOCOGOCOOCOWiO r-<* CO T* 1C r-i X* X* r-i X* r- I 3C N co' CO 6 H m t>COt-COOOCOOH t> x r." o 6 10' ^i o €& r-l rH r-l coxoco'-hOcmo-* i6"<*-^t^s0 H -^ t^ O H t^ O «&HHCO o t— o X ce • 1— 1 ft c3 o 5h 4> v. - a M rt c3 GQ CO O 1—1 CO fcJO CO > «1 STRENGTHENING HIE PUBLIC CREDIT, ETC. Table B. 235 Assuming that the use of banking funds in 1897, that is to say, capi- tal, deposits, and currency, would be one-quarter more in volume than in 1860, the slaves being free, the following sums should be added for each State named: State. Amount. State. Amount. Alabama $7, 478, 875 14, 933, 050 13, 067, 475 4, 054, 304 10, 348, 819 6, 144, 560 South Carolina Tennessee. . $13,916, L60 7, 767, 188 Georgia Kentucky Virginia 9, 282, 000 Louisiana Total Missouri 86.992 131 North Carolina Table C. Assuming that the slaves being free to-day would add one-quarter to the use of banking funds, the amount of such funds that would be in use in the following nine States, providing that the freedom of issu- ing currency enjoyed by State banks in 1860 had continued until to-day, would probably be as follows : State. Population in 1897. Actual loss in amount of hank- ing funds in 1897, at the per capita of 1860. Natural in- crease, with slaves free, should show one-quarter more. Total. Alabama Kentucky Missouri North Carolina . South Carolina . Tennessee 1, 675, 000 2, 090, 000 1, 887, 000 992, 000 2, 427, 000 1, 780, 000 1, 280, 000 1, 924, 000 1, 768, 000 $18, 396, 500 48, 864, 200 27, 946, 470 75, 233, 280 29, 026, 920 15,895,400 49, 830, 400 3, 559, 400 15, 191, 760 $7, 478, 875 14, 933, 050 13, 067. 475 4, 054, 303 10, 348, 819 6, 144, 560 13,916, 160 7, 767, 188 9, 282, 000 $25, 872, 375 63, 797, 250 41,013,915 79, 287. 584 39,375,739 22, o:;i>. 960 63, 746,560 11.326,588 24,473,760 Total 15, 823, 000 283, 944, 330 86, 992, 431 370, 933, 761 •_';i>; STRENGTHENING THE PUBLIC CREDIT, ETC. ~ £ — p. o > a> o a » 3 o a, a o O a a C5 50 2 *s o a o •a •n a « a as ^ © © a = 44 a a .t: cs 2 © £* "CO © 93 ~ ao S O £ ft «,2 © 02 ! c3 c3 © • © 02 N L* t^ 1^ O M I* t- CI O ■* O CC n X W S t- ccacoot-cot-CHO •^ t n C CO IQ L— iC t- X » N M lO ?1 t- N N — (M r-l CO r-( CN iH ttOlOHCOXCt-X r-T cf CO~rtTcO~"ci~ t-Tt-TqcT L* 00 O f. CO rH lO r^ C-- gj^ »V #V »^ »v #v »^ •-* CO O nCOHlOLO CN CO rH x c w h h r. ^ o o iQlOMOOJCO-^CqX cTt>^ cf co" oT -Sc^c-^iS 0^ w CO C^" CO CI CS *—"! ^H HHlOOCOiOHXOS ^©~cc~cfco~co~crr-rco~ OC1t(((0(ONK50N O^HCOCOXC5CCO COOOWOiOO^Cl ofo"^co~csr^co"t^cr CI C C 3 >0 -tCOt- © I— I "* t tOHr-lCO lO CI cq lO C3 tH CO 00 t> li t^ o o n >-i i> a O^LTXHXOCt' COCOCOC-OOt-lQrHCS tO'tOOt'O^t'X CO t* ?i c co c i> o c- 00 cc ?) CO lO W t- fc- CI i— M i-l CO rH CI rH c3 r- 1 4 c a P o — ~ •~ £ £ a '5 4 c 2 S CO co lO JO co co CO cnT CO CS OS o 1- o »o CO CO CI o cT co i-i co CI t- 00 r-i lrTcf rH ~* CS CO Tjrio - " cs »o CO t- !>■ O rl CO cfccT m ci ao os io^cT lO CO 1-H cs CS cs o o o of CO CO cT CO i-O CO lO co cq CO CI —+< CO >o o Oh-J^3 °o s s a •^ O (j; m- t3 02 CO OS CO OS CO r~* CO o r4 N o cs OS T5 =8 Cw — -a ft* C3 Jj o S ca •S -1-3 ■*5 c3 K02 r*» o 1=1 41 Eh Sh d o o> c3 a '-J3 02 <- 03 •^< — W -h F^i co ■8-s X! C3 H 02W CS — m o ^3 co bo ca CfH o 00 CO o +3 C3 — STRENGTHENING THE PUBLIC CREDIT, ETC. 237 Fifteen States in ichich hij>r 1,020 93,231, 7 12 359,546,444 78,219,946 162,504,020 89,887,380 239,069, los 208,700,236 Total 2, 718, 3S4 1, 359, 192, 000 2, 171, 501 , 4 lo 1 . 298, 711, 923 Census 1860, p. 294, Mortality and Miscellaneous Statistics. 'Census 1890, part 2, Wealth, Debt, and Taxation, p. 102. 238 STRENGTHENING THE PUBLIC CREDIT, ETC. Personal property per capita in 1860, deducting value of slaves. $85. 78 Personal property per capita in 1890, slaves free 85. 44 Population in 1860, 9,469,634. Population in 1890, 15,199,370. Total capital, surplus, and undivided profits in places under 10,000 population $253. 284, 959 Circulation 70, 427, 647 Deposits 411, 476, 864 Total banking funds 735, 189, 470 Capital actually paid in 180, 340, 570 Population in places under 10,000 41, 840, 776 Deduct people served by banks in cities of 10,000 popu- lation or more 10, 300, 737 31, 450, 039 National banking funds per capita, to serve people living in places of less than 10,000 population, $23.33. Total capital surplus and undivided profits in cities of 10,000 population or more $712, 955, 136 Circulation 128, 493, 023 Deposits 1, 441, 872, 264 Total national banking funds 2, 283, 320, 423 Capital actually paid in in cities of 10,000 population or more 451, 147, 525 Population in cities of 10,000 and over 20, 781, 474 One-half as many again served by banks in above cities . 10, 390, 737 Probable population served by such banks 31, 172, 211 Banking funds per capita for cities of 10,000 inhabitants or over, $73.25. CLEARING HOUSE OF WORCESTER, MASS. CONSTITUTION. The banks in the city of Worcester, having associated on March 5, 1861, for the purpose of effecting a more perfect and satisfactory set- tlement of the daily balances between them, deeming it advisable to adopt a more permanent and formal organization, hereby agree upon the following ARTICLES OF ASSOCIATION. Section 1. The name of the association shall be the Worcester Clearing ITouse. Sec. 2. The objects of the association are the effecting, at one place and one time, of the daily exchanges between the several associated banks, and the payment, at the same time and place, of the balances resulting from such exchanges; the promotion of a general uniformity STRENGTHENING THE PUBLIC CBEDIT, ETC. 239 of action among the banks; and the cultivation of honorable and friendly relations among the members. Seo. 3. Bach bank belonging to the association may be represented by its president and cashier, both of whom shall be entitled to vol. the members of the association, at all meetings thereof. Sec. 4. The annual meeting shall be held at the clearing house on the second Monday in October, in each year, when a chairman and secretary shall be chosen, by ballot, who shall hold their offices for one year, and until others are chosen in their stead; and whenever, at any meeting, either of them shall be absent, a chairman or secretary pro tempore shall be chosen. Sec. 5. At every annual meeting there shall also be chosen, by bal- lot, a standing committee of three (not more than one member of the committee from any one bank), to be called the clearing house com- mittee, who shall hold their offices for one year, and until others are chosen in their stead, whose duty it shall be to procure suitable accom- modations for the clearing; to provide proper books, stationery, and whatever else may be necessary for the convenient transaction of the business; to ascertain and advise the banks as to their duties and lia- bilities in case of any doubtful construction of the State or United States laws relating to banks and banking; to investigate and report to the association upon any matters affecting the banking interests, ami, generally, to supervise the whole business and interests of the association. Any vacancies which may occur in the committee duii the year may be tilled at any meeting of the association. Sec. 6. The cashier of the clearing bank shall be the manager of the clearing, and the settling clerks shall be under his direction while at the clearing house. The hour for making the exchanges shall be at IL' o'clock m. Errors in the exchanges and claims arising from the returns of checks or other cause, are to be adjusted directly between the banks which are parties therein and not through the clearing house. Sec. 7. Each bank belonging to the association shall deposit with the clearing house committee its proportion of a clearing fund. The proportionate deposit of each bank shall be decided by vote of the asso- ciation. The clearing fund shall be deposited with the clearing bank, free of interest, as a compensation for services rendered, and for the payment of all necessary expenditures of the association. On making its deposit each bank shall receive a certificate therefor, signed by I clearing house committee and countersigned by the manager. No bank shall make the clearings of a bank which is not a member of the asso- ciation. Sec. 8. No new bank shall be admitted to the association excepting on the recommendation of the clearing-house committee and by a vote of three-fourths of the members; and no bank shall withdraw without giving six months' notice of such intention to the manager of the clearing house. Sec. 9. Eor cause deemed sufficient by the associated banks, at any meeting thereof, any bank may be expelled from the association and debarred from all the privileges of the clearing house by a vote of three-fourths of the members. Sec. 10. These articles of association shall be signed by the members thereof and by new members hereafter admitted ; they may be amended by a vote of two-thirds of the members at any meeting of the associa- tion, provided that notice of the proposed amendment shall have been given in writing at a previous meeting and lodged with the secretary. Sec. 11. The secretary shall notify all meetings by giving notice 240 STRENGTHENING THE PUBLIC CREEIT, ETC. in writing to each of the associated banks; and be sball convene the association whenever requested to do so by any member. Note. — Population, 115,000; capital of clearing house, $10,500; banks of $250,000 capital or less loan the clearing house $1,000; those having over $250,000 capital loan the clearing house $1,500 free of interest. H. E. 10339.— FIFTY-FIFTH CONGRESS, SECOND SESSION. IN THE HOUSE OF REPRESENTATIVES, May 16, 1898. — J/r. Walker, of Massachusetts, introduced the following bill; which ivas referred to the Committee on Banking and Currency and ordered to be printed. A BILL To so change the national-hank act as to secureto the people in all sections of the country an equal opportunity to freely use paper money. Be it enacted by the Senate and House of Fepresentatives of the United States of America in Congress assembled, That hereafter banking associ- ations shall not be required, "preliminary to the commencing of the banking business," or in continuance thereof, to "transfer and deliver to the Treasurer of the United States," or as security for circulating notes, any United States bonds; and any national banking association that has transferred and delivered such bonds to the Treasurer may recover such bonds from the Treasurer upon complying with the con- ditions prescribed for the reassignment of such bonds to associations in liquid :tion; and the Treasurer of the United States is hereby author- ized and directed to reassign and deliver such bonds to the association from which he received them upon being notified by the Comptroller of the Currency that such association is in compliance with this section of this Act. Sec. 2. That any banking association organized under the laws of any State that shall place on deposit in any banking association in the largest commercial city in the State in which the association is located, or in any other place acceptable to the Comptroller of the Currency, an amount of specie equal to five per centum of its circulating notes that it averages to have in actual circulation for the redemption on demand of such notes, and shall also have in its own vaults, in addition to the amount hereinbefore mentioned, an amount of specie equal to five per centum of its average individual deposits, thereupon the imposition and the collection of the ten per centum tax on the circulating notes of banking associations organized under the laws of any State shall be suspended, so far as they relate to such banking association: Provided, however, That in case such banking association fails to keep good, as averaged for any month, any part of the total amount of specie as is herein required it shall be liable to and shall pay into the Treasury of the United States a tax equal to ten per centum per annum on an amount equal to the amount of the average deficit in such fund or funds for such month. Sec. 3. That whenever any association fails to pay on demand in specie the circulating notes signed by its officers and paid out by it, it shall be subject to and shall pay a duty at the rate of two per centum per annum, one-half on July first and one-half on October first, on a sum equal to the average amount of its circulating notes outstanding and of the individual deposits in such association during such failure STRENGTHENING THE PUBLIC CREDIT, ETC. 241 and until audi payment is resumed: Provided, "however, That in case any such association pays one half of the tax herein imposed on or before the day it is due and payable, the other half shall be, and is hereby, remitted. Sec. 4. That each association shall keep such records and send to the Comptroller of the Currency such reports and submit to such examinations by any agent of the Comptroller, to ascertain whether the association is in compliance with law and the amount of tax due and payable by it. as the Comptroller of the Currency shall from time to time direct, and the expenses of such examination shall be paid by such association. H. E. 10333.— FIFTY-FIFTH CONGRESS, SECOND SESSION. IN THE HOUSE OF REPRESENTATIVES. May 13, 1898. — Mr. Walker, of Massachusetts, introduced the following bill; ichich teas referred to the Committee on Banking and Currency and ordered to be printed. A BILL To so change the national-bank Act as to secure to the people in all sections of the country an equal opportunity to freely use paper money. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That hereafter banking asso- ciations shall not be required, "preliminary to the commencing of the banking business," or in continuance thereof, to "transfer and deliver to the Treasurer of the United States," or as security for circulating notes, any United States bonds: and any national banking association that has transferred and delivered such bonds to the Treasurer, upon depositing lawful money, in compliance with section two of this Act, may recover such bonds from the Treasurer upon complying with the conditions prescribed for the reassignment of such bonds to associations in liquidation ; and the Treasurer of the United States is hereby authorized and directed to reassign and deliver such bonds to the asso- ciation from which he received them upon being notilied by the Comp- troller of the Currency that such association is in compliance with section two of this Act; and in place of United States bonds, as hereto- fore required, banking associations shall deposit lawful money in amount sufficient to takeout the United States legal tender circulating notes described in section two; and the taking out of such notes is hereby required of such associations preliminary to the commencing of the banking business. In places of less than four thousand inhabitants, with the permission of the Compt roller of the Currency, banking associations may be organized with a paid-up capital of not less than twenty-live thousand dollars. The word capital as used in this Act shall be held to mean the sum of the nominal capital plus the surplus and undivided profits of asso- ciations, and as shown by the last published annual report of the < Vmp- troller of the Currency when such items concerning the bank in question are published in such report. SEO. 2. That upon the delivery of coin, coin certificates, or United States legal-tender notes, including Treasury notes, to the Treasurer of the United Stales in sums of one hundred dollars or any multiple thereof, and in amount equal as near as may be to twelve and one-half B &z C 1G "242 STRENGTHENING THE PUBLIC CREDIT, ETC. per centum of its capital, thereupon it shall be entitled to receive from the Comptroller of the Currency United States legal-tender notes of different denominations, having printed on their reverse side the cir- culating note of the association, in blank, registered and countersigned as provided by law, equal in amount to the coin, coin certificates, and United States legal-tender notes, including Treasury notes, delivered; and any association may at any time increase such delivery of such moneys to an amount equal to one-half of its capital, and receive such circulating notes thereon to the amount of such delivery of such money. The promise of the association receiving and issuing such notes to pay the same on demand shall be attested by the signature of the presi- dent or vice-president and cashier or assistant cashier before being issued by it. The Secretary of the Treasury is hereby authorized to issue United States legal-tender notes of the Act of March third, eighteen hundred and sixty-three, to the amount necessary to carry into effect the provi- sions of this Act. The lawful name and description of the notes issued under this sec- tion shall be greenbacks. Sec. 3. That the Comptroller of the Currency shall issue, in blank, circulating notes of different denominations, to any association, and the association may issue the same in addition to the greenbacks described in the preceding section equal in amount to the amount of the green- backs taken out by it until the setting aside of the gold in the Treasury of the United States to redeem certain legal tender notes as described in the section next succeeding. Thereafter he shall issue to any asso- ciation, and the association may retain and issue, the notes described in this section at his discretion, but not less in amount than the amount of the greenbacks taken out by such association, and not less in amount than twenty-five per centum in excess of the amount upon which a tax was assessed and paid in the two years next preceding, and not to exceed in amount the amount of its unimpaired capital. Each associa- tion taking out the notes described in this section shall add to its cur- rent redemption fund and keep therein a sum in lawful money equal in amount to five per centum of such notes it averages to keep in circula- tion as found from time to time; such five per centum, together with the five per centum mentioned in the next section, shall be held for the redemption of its greenbacks and notes issued to it under this section. That the lawful name and description of notes issued under this sec- tion shall be currency.* All currency shall have printed on its reverse * ISet assets of national and State banks, in capital, surplus, and undivided profits $1, 350, 000, 000 All kinds of paper money in circulation 1, 095, 377, 992 Profits to bank on currency under existing law and conditions, about one fourth of 1 per cent. Asalltaxesexceptone-fifthof 1 percent, safety fund tax, are removed, the average profit, taking the country over, under this bill, on the cur- rency kept out, would be about per cent. Nothing is gained on the greenbacks and 6 per cent on the reserve notes. The currency issued is not "reserve certificates." It is in no sense "issued against the reserve held." They hold exactly the same relation to the "reserve held" as any other liability of the banks. For each $95 of old issue of greenbacks that are redeemed and destroyed, $100 of new greenbacks are issued and $100 of currency, making $200 of currency for each $95 retired. STRENGTHENING THE PUBLIC CREDIT, ETC. 243 side the statement that it is to be finally redeemed and paid by the Treasurer of the United States. The Comptroller of the Currency may cause a supply of currency and of greenbacks to be printed for associa- tions in anticipation of immediate delivery to them. Sec. 4. That the Treasurer of the United States shall forthwith redeem and destroy existing United States legal-tender notes issued under Acts passed before July first, eighteen hundred and ninety, and put in circulation previous to the passage of this Act, in such manner as he may deem proper, equal in amount to ninety-five per centum of the aggregate of the coin, coin certificates, and United States legal- tender notes, including Treasury notes, received for greenbacks issued to banking associations; and the Treasurer shall set aside five per centum of such aggregate, which, together with the five per centum mentioned in the previous section, shall be held for the current redemp- tion of the greenbacks and currency of the association making such deposit. When there shall be no more in amount of United States legal-tender notes outstanding issued before July first, eighteen hundred and ninety, than the amount of the gold then held by the Treasurer that may be used for the redemption of such notes, the gold so held shall then be set aside by the Treasurer of the United States and used only to redeem such notes, which notes upon being so redeemed shall be destroyed;* and from and after thirty days from the setting aside of gold herein mentioned such notes shall not be used by any banking association in redeeming its notes, or be counted in the reserve fund of any national banking association, or be a legal tender for any debt due and payable in the United States excepting for duties due and payable on goods imported into the United States.! That upon the setting aside of the gold herein directed, a sum of money equal in amount to all moneys subsequently paid into the Treas- ury of the United States in exchange for greenbacks shall be held in the Treasury as a separate fund, out of which the Treasurer shall, from time to time, redeem greenbacks held by certain associations in amount aud manner as follows, to wit: When such funds shall amount to one per centum of the total amount of greenbacks taken out under this Act by associations before the set- outstanding United States legal-tender notes $340, 000, 000 Gold redemption fund in Treasury in February, 1806. . . 140. 000, 000 Total legal-tender notes to be assumed by banks . . 200,000,000 to relieve the situation. Thus, when the banks have assumed the cur- rent redemption of only $200,000,000 of legal-tender notes, the Treasury will be wholly relieved from paying gold on any form of paper money, and it will be a matter of as much indifference what the Government pays out as in the case of any private citizen. Visible gold on January 1, 1899: In United States Treasury $240, 973, <>•»" In national banks 266, 464,000 In State banks, trust companies, etc. (estimated) 266, <>00, 000 Total commercial gold 779. 437, 000 tThis provision is designed to bring legal-tender notes into the Treasury for redemption. 244 STRENGTHENING THE PUBLIC CREDIT, ETC. ting aside of gold and then held by them, or oftener, he shall call in, redeem, and cancel such greenbacks so held that are in excess of the total amount of such notes issued to banking associations and held by them, previous to the setting aside of gold, and in amounts of one hun- dred dollars or any multiple thereof. He shall first reduce the amount of such greenbacks to those associations which hold the largest amount of greenbacks in proportion to their capital, if requested by them so to do, and until the holdings of such greenbacks by all associations have been reduced to the sum required to be taken out by them; and he may require any association to increase its holdings of greenbacks in sums of one hundred dollars or any multiple thereof when the increase of its capital makes its holdings of greenbacks less in percentage than is required by this Act. Thereafter the taking out and the holdings of greenbacks by any association shall be reduced so as to keep the total amount of greenbacks held by the aggregate of all associations as near as may be at the aggregate amount of greenbacks so held by all asso- ciations at the time of the setting aside of gold herein mentioned. Two years from the day of the setting aside of the gold in the Treas- ury to redeem certain legal-tender notes any gold so set aside then remaining shall be free money in the Treasury. Sec. 5. That upon the expiration of the corporate term of any asso- ciation, if its corporate existence is not extended by the Comptroller of the Currency, or upon the insolvency of an association, or by the order or with the consent of the Comptroller, approved by the Secre- tary of the Treasury, the Treasurer shall redeem the greenbacks issued to the association, out of any moneys in the Treasury not otherwise appropriated. Any association may reduce its currency by surrendering it for de- struction to the Comptroller of the Currency, who shall destroy the currency so surrendered in the manner prescribed by law. The liabil- ity of any association for its currency shall neither be canceled nor reduced in any other manner. Sec. 6. That each association shall keep good with the Treasurer of the United States and he shall at all times keep and have on deposit in the Treasury of the United States, in lawful money, except as here- inafter provided, for the current redemption fund of each association during its solvency, a sum equal to the five per centum before men- tioned of the greenbacks and average outstanding currency of the asso- ciation, to be held and used for the current redemption of its green- backs and currency; and no part of such redemption fund shall be counted as a part of the reserve of any bank ; and when the notes of any association, assorted or unassorted, shall be presented for such redemption to the Treasurer of the United States, in sums of five hun- dred dollars, or any multiple thereof, or in sums equaling not less than one per centum of the total circulation of any association having less than fifty thousand dollars in greenbacks and currency, the same shall be redeemed. Eacli association shall redeem in lawful money its greenbacks and currency at its own banking house and at an agency approved by the Comptroller in some reserve city. The right to confer the duties and responsibilities of executing the provisions of this Act, or any part thereof, relating to the current redemption fund or the redemption of greenbacks and currency upou any reserve bank or other suitable agent, under such regulations as he may deem safe and proper, and to deposit any part of the current redemption fund or funds in any place he may deem proper, with the approval of the Secretary of the Treasury, is hereby conferred upon the Treasurer of the United States. STRENGTHENING THE PUBLIC CREDIT, ETC. 245 Sec. 7. That from and after thirty days from the netting aside of gold by the Treasurer of the, United states to redeem and cancel certain legal-tender notes as aforesaid the cash reserve required by law to be kept by banking associations shall be kept as near as may be in equal parts in greenbacks of other associations in silver coin and in gold coin of the United States. Each banking association may keep its coin and its bonds in such place and under such circumstances as the Comptroller of the I Surrency may approve, but the gold coin required to be kept in the cash reserve by each association shall be kept in a clearing house organized under this act. Any association that fails to so keep, use, and pay out its silver coin, gold coin, greenbacks, and currency as to keep each one and all four kinds of money at a parity each with all the others from and after the setting aside of gold herein mentioned shall be deemed to ha ve failed to pay on demand in coin or in United States legal- tender notes issued to other associations its greenbacks and currency. No association shall plead in defense, in any action brought against it, that any greenback or currency note signed by its officers and paid out by it is a United States legal-tender note. Sec. 8. That hereafter no certificates shall be issued or reissued by the Treasury of the United States upon the deposit of gold coin, silver coin, or any other money, and that all existing coin certificates and money certificates shall be canceled and destroyed upon being received into the Treasury, and the coin or money remaining upon which they were issued shall be free coin or money in the Treasury; and no circu- lating note authorized under existing law shall be issued or reissued to any banking association of a less denomination than three dollars,* and all such notes of less denomination than three dollars hereafter received for redemption shall be canceled when received in the Treasury, and like notes in blank of a larger denomination shall be returned in place of them; and no United States legal tender notes, including Treasury notes, of a less denomination than three dollars shall be hereafter issued or reissued, but those of a larger denomination shall be issued or reissued in place of them. Sec. 0. That there is hereby constituted and appointed a board of advisers to the Comptroller of the Currency, consisting of seven experts, to consult and advise with the Comptroller upon methods of executing existing law concerning banking, and changes desirable therein, over which board the Comptroller of the Currency shall preside, The president of the chief reserve bank in San Francisco. New. Orleans, and each of the other five chief reserve cities in the country, or such substitute as any one of them shall from time to time appoint, shall be a member of the board of advisers, which board shall meet once a year, or oftener if the Comptroller of the Currency or ;i majority of the board so determines, and at such time and place as the Comp- troller shall appoint. The recommendations of the board of advisers, or a synopsis thereof) and all votes, shall be entered in the records of the boat d. The deci- sion of the Secretary of the Treasury from time to time as to what 'Treasury report, February 28, 1898: $1 notes in ci renin t ion $107,730 $2 notes in circulation 81, 1 1 1. 0(H) Total outstanding notes under $5 138, 874, 205 $5 notes in circulation 273,971,710 246 STRENGTHENING THE PUBLIC CREDIT, ETC. person or persons are entitled to act as members of the board of advisers shall be final. Any association aggrieved by any action taken in its case by the Comptroller of the Currency may appeal to the board of expert advisers, and the decision of such board in such case by a yea and nay vote if no member votes in the negative, or when approved by the Secretary of the Treasury, shall be final. Sec. 10. That any five or more national banking associations are hereby authorized to unite in forming a clearing-house association. Uy adopting a constitution and by-laws not inconsistent with the provisions of this Act, the banking associations uniting to do so and certifying to the Comptroller of the Currency that fact shall in that act become a clearing-house association body corporate, upon such constitution and by-laws being approved in writing by the Comptroller of the Currency. An incorporated banking association may be admitted to membership in any clearing-house association incorporated under this Act; and the membership of any banking association of such clearing-house associa- tion may be terminated by any action of the clearing-house association approved by the Comptroller of the Currency. Any banking association may withdraw from any clearing-house association and any clearing-house association may withdraw from the national clearing-house association upon such conditions as the Comp- troller of the Treasury may approve. Each member of such clearing-house association shall share in its fees and other income, and in its assessments, expenses, and losses in the proportion that the amount of its capital bears to the total amount of all the capital of all the associations composing the clearing-house association and as shown by the annual report of the Comptroller of the Currency last made previous to the apportionment of the same, when the items of its capital are given in such report. Each clearing-house association may make sales or loans to or buy or borrow from other clearing-house associations, and banking associa- tions may make sales or loans to or buy or borrow from clearing-house associations. In all such buying, selling, loaning and borrowing clearing- house and banking associations shall be exempt from the usury laws of the States in which they are located. Any clearing-house association organized under this Act may estab- lish a department tor the clearing of the greenbacks and currency of banking associations in the current redemption thereof. Any changes in the constitution or by-laws of any clearing-house association, to become vali'i, must be consistent with this Act and must be approved in writing by the Comptroller of the Currency, and the Comptroller may annul any part of the same at any time after a hearing thereon, with the concurrence of a majority of the board of advisers. Five or more clearing-house associations organized under this Act may form a national clearing-house association and any clearing house organized under this Act may be admitted to and remain a member of the national clearing- house association upon the same terms and condi- tions as those governing in the case of associations constituting clearing- house associations composed of banking associations, and the persons who constitute the board of advisers to the Comptroller of the Currency provided for in section nine of this Act, shall constitute the board of directors of the national clearing-house association: Provided, however, That national clearing house associations may make sales or loans to and may buy or borrow from clearing-house associations and may buy and sell such bonds as are necessary or desirable to the conduct of its STRENGTHENING THE PUBLIC CREDIT, ETC. 247 legitimate business to any amount and of any kind approved of by the Comptroller of the Currency, and may provide for the coin redemption of circulating notes of banking associations, and may take and issue, under the provisions of this Act, the greenbacks described in this Act, but in denominations of not less than one thousand dollars.* Any clearing-house association organized under this Act maybe desig- nated by the Secretary of the Treasury as a depository of public moneys, and may also be employed as a financial agent of the Government. Any clearing-house or banking association organized under this Act may, with the approval of the Secretary of the Treasury, deliver to the Treasurer of the United States or to any assistant treasurer of the United Suites, for safe-keeping, any kind of money or bonds, and receive such a statement of the fact of their being in the Treasury of the United States as the Secretary of the Treasury may approve. Clearing-house associations shall be subject to like examination by national-bank examiners as national-banking associations, and shall make such reports to the Comptroller of the Currency as he may request. The meeting together of any persons who are officers, agents, or employees of any five or more associations in any one or more phi once in ten days or oftener for the purpose of exchanging, paying, or in any other way satisfying any obligations used in commerce among the several States by any two or more of such associations, shall con- stitute such associations represented in such meeting a clearing-house association for the purpose of the taxation herein imposed, and such associations represented shall be jointly and severally liable to pay, and shall pay, into the Treasury of the United States a tax in amount equal to one- fiftieth of one per centum on the aggregate amount of all such exchanging, paying, or in any way satisfying such obligations, at each and every meeting of persons acting for such associations: Pro- vided, however, That in case any such association pays one-half of the tax herein imposed on or before the day it is due and payable, the other half shall be, and is hereby, remitted: And provided further, That the tax herein imposed on associations herein described shall be wholly remitted to each one and all associations that are members of clearing houses incorporated" under this Act. Sec. 11. That the Comptroller of the Currency may issue to the National Clearing-House Association or other clearing-house associa- tion organized under this Act, or to any national banking association, greenbacks to any amount approved of in writing by the Secretary of the Treasury, in addition to the amount of greenbacks hereinbefore * The financial and banking system of the United States, as of every other nation, must be built from the top down, having a great national bank with myriads of branches, as are those of Europe, like Europeau governments, or it must be built from the bottom up. The independent individual bank, while retaining its independence, will be united with all other banks to form a democratic but strong and symmetrical Bys- tem, as our institutions are built up from the individual. There is no escape from it. This section accomplishes that purpose. It makes a. solid union of all the banks in the country into practically one bank, with all the advantages of a United States national bank, with 8,000 branches, now State and national, leaving each bank as tree as now and with none of the disadvantages of a United States national bank. It also gives to every country bank all the assistance ami support it could receive were it a branch of a United States national bank. 248 STRENGTHENING THE PUBLIC CREDIT, ETC. authorized : Provided, That the association applying for such additional greenbacks shall deliver to the Treasurer of the United States or to anj* assistant treasurer bonds* in kind and amount acceptable to the Secretary of the Treasury, as security for such greenbacks, and shall pay interest on the amount of such greenbacks so issued at the rate of six per cent per annum, such interest on such greenbacks to be paid at such time and in such manner as the Comptroller of the Currency may determine; but no more in amount than ninety per cent of the par value of any bond shall be issued in such greenbacks, and no bonds other than bonds of the Uuited States shall be accepted by the Secre- tary of the Treasury as security when there are three hundred millions or more of United States bonds outstanding. Any association depositing bonds and receiving greenbacks secured thereby may withdraw such bonds so deposited, after thirty days from the date of such deposit, upon paying the accumulated interest on the amount of greenbacks issued upon the deposits of such bonds and up to the date of their withdrawal, and in addition to such interest shall deposit with the Treasurer greenbacks or other lawful money to an amount equal to the greenbacks issued to the association as security for which the bonds were deposited; but no more than five per centum of the greenbacks issued to any association other than the one receiv- ing such greenbacks shall be accepted as a deposit for the withdrawal of such bonds. The money so deposited for the withdrawal of such bonds shall be immediately put in redemption, and the money received for it shall be kept as a special fund with which to redeem the amount of green- backs issued to the association ; and such greenbacks shall be redeemed, and when redeemed shall be destroyed to an amount equal to the green- backs issued to the association for the security of which the bonds here- inbefore mentioned were deposited. The Secretary of the Treasury shall publish once in seven days, or oftener, in the "Statement of the condition of the United States Treas- ury and the receipts and expenditures," a list of the securities and the amount of each kind accepted by him to secure greenbacks issued or proposed to be issued upon the deposit of bonds, or of bonds to secure any deposits of money made in any association. Sec. 12. That in order to enable the Secretary of the Treasury to carry into effect the provisions of the Act of January fourteenth, eighteen hundred and seventy-five, entitled "An Act to provide for the resump- tion of sj>ecie payments," and of this Act, the Secretary of the Treasury is hereby authorized to issue and sell from time to time, for the period, of four years, bonds as described in the Act of July fourteenth, eighteen hundred and seventy, entitled "An Act to authorize the refunding of the national debt," such bonds to be payable at the pleasure of the 1 oited States after one year from the date of their issue and upon the * United States bonds in national banks to secure circu- lation $227, 484, 000 Other United States bonds in national banks $17, 576, 925 Other bonds held by national banks (esti- mated) 125, 000, 000 Total bonds held in 1895 112, 57(3, 950 The total kecurities, aside from United States bonds, held by national banks, most of which are bonds 148, 5G9, 950 STRENGTHENING THE PUBLIC CREDIT, ETC. 249 expiration of three years, or bonds payable after three years and upon the expiration of seven years, or bonds due on a certain day within three years from the date of such bonds, as the Secretary of the Treas- ury may elect, such bonds to bear interest at a rate not exceeding three per centum per annum. Sec. 13. That when the amount of the daily total reserve held by any national banking association averages to be less for any month than the amount required, it shall pay into the Treasury of the United States a tax at the rate of six per centum per annum on the amount of the average deficiency for that month in such reserve. Whenever any association fails to pay on demand in silver or gold coin or iu United States legal-tender notes issued to other associations the greenbacks and currency signed by its officers and paid out by it, it shall be subject to and shall pay an additional tax, at the rate of one per centum per annum, on a sum equal to the average amount of the individual deposits in such association during such failure and until such payment is resumed: Provided, That in case any association pays one half the tax herein imposed on or before the day it is due and pay- able the other half shall be and is hereby remitted. And whenever it shall appear to the satisfaction of the Comptroller of the Currency that any one of the four kinds of money, namely, currency, greenbacks, silver coiu, or gold coin, of the United States is at a premium in any one of the central reserve cities in any other one or more of the other kinds of money herein named, it shall thereupon become his duty to declare and publish the same in the "Statement of the Condition of the United States Treasury aud its Eeceipts and Expenditures," and such publica- tion shall be held to be conclusive evidence that all the associations of deposit, loan, and discount as herein described in the Uuited States have failed to pay on demand in silver or gold coin of the United States their greenbacks and currency, and the tax herein imposed tor such failure shall be due and payable from each of such associations from and after the day the notice of such failure is published by the Comptroller of the Currency in the "Statement of the Condition of the 1 1 nited States Treasury and its Receipts and Expenditures," and so long as such failure continues, and until the day the Comptroller of the Cur- rency gives notice in like manner that such failure no longer continues. in addition to all other taxes imposed in this Act, each association organized under it shall pay into the Treasury of the United States a tax in each year, as the Secretary of the Treasury shall from time to time prescribe, equivalent to not less than one-fifth nor more than one per centum per annum* on the average amount of currency issued to it •Four-fifths of the present paper-money circulation would be $800,000,000; one-halt of 1 per cent per annum ou the currency would yield $4,000,000 per annum. The losses on the circulation to the ("nited States Treasury on notes of insolvent banks, as shown by thirty-two years' experience under the existing banking laws, were not $16,000,000 during the whole thirty-two years of the existence of the national banking system, about $500,000 per annum, had the national banks issued their notes under the provisions of this bill. The Government estimate for the bills lost and worn out past redemption, and to the advantage of the United States Treasury, is two-fifths of 1 per cent per annum on all circulation. Excluding the $1 and $2 bills, the loss might not be more than one-half, and the gain to the United States at one-tilth of 1 per cent on the $800,000,000 would be $1,600,000. For the last five years the 1 per cent tax now collected on circulation has averaged $1,582,443. The banks are now in effect carrying without 250 STRENGTHENING THE PUBLIC CREDIT, ETC. and in circulation and for the purpose of covering any loss which the Treasury may otherwise sustain by reason of the insolvency of any asso- ciation to which currency was issued under this Act : Provided, however. That such tax shall not be levied to exceed one-fifth of one per centum per annum at a time when the total amount of all moneys paid into the Treasury under the tax imposed in this clause exceeds by eight million dollars the total net amount paid out of the Treasary in redemption of the currency of insolvent associations in cases where the assets of such associations were not sufficient to pay such notes or sufficient to recoup the Treasurer of the United States for the payment by him of such notes. A tax equal in amount to one fifth of one per centum per annum is hereby imposed on the average amount of the individual deposits sub- ject to payment by check or draft or like instrument, whether payable on demand or at some future time, that are in each incorporated bank- ing association, trust company, insurance company, loan association, or other corporation doing a deposit and loan and discount business, by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security, when any part of the obligations bought or received or sold or issued by it are used in whole or in part in commerce among the several States: (1) Provided, That in case any association pays one-half the tax herein imposed on or before the day it is due and payable the other half shall be and is hereby remitted: (2) And provided further, That any association is hereby authorized to deposit in the Treasury of the United States an amount of lawful money equal to not less than twelve and one-half per centum of the amount of its capital, and to receive legal-tender notes of the United States to the amount of such deposit. Such notes issued to it shall have a circulating note of such associa- tion printed on the reverse side, which note, when the note of the asso- ciation printed on the reverse side is signed by the proper officers of the association, shall be known as a greenback, and may be paid out by it, but under the same liabilities, obligations, and restrictions as to redeeming such greenbacks in silver or gold coin or United States legal- tender notes, and of keeping such greenbacks at a par with the silver coin and the gold coin of the United States, as are imposed upon national banking associations when like notes are issued to national banking associations : * Provided, hoicever, That the securing such notes interest every dollar of the $1,000,000,000 paper money in circulation. The saving in interest to the people under this bill is estimated at from $30,000,000 to $50,000,000 per annum, ultimately making that much sav- ing per annum in lower rates of interest on the loans made to the people. Besides these items, J. S. McCoy, Government actuary, estimates the loss to the people in interest on the gold carried in the United States Treasury from 1879 to 181)5 at $144,241,556. It will be more, rather than less, in the next twenty-five years under the present system. * Cash reserve required in 1897 $2S7,742,000 Cash reserve held in 1897 388,883,000 Including State banks the cash reserve held could not be less than 503,000,000 Holding the cash reserve one-third in silver would equal $180,000,000, and one-third in gold would equal $180,000,000, one-third in greenbacks, $180,000,000; total, $563,000,000; so that the substitution of silver dol- lars for the $1 and $2 notes added to the $186,000,000 of silver dollars held in banks in the reserve fund would increase the actual coin silver dollar in constant use by $325,000,000. STRENGTHENING THE PUBLIC CREDIT, ETC. 25] by any association other than national banking associations shall con- fer upon it no authority to issue any other circulating notes. In case any association takes out circulating notes, as provided in tins section and named greenbacks in this Act, the tax imposed on such association in this section shall be wholly remitted; but in case such notes are taken out and such tax is remitted such association shall keep such record and make such reports to the Comptroller of the Currency and submit to such examinations by national-bank examiners as are now or may hereafter be required of national hanking associations. Bach deposit of money or funds made by any individual or by any association in any other association however organized doing the banking business defined in this section upon which the association receiving such deposit pays or agrees to pay any money or interest shall not be subject to withdrawal excepting on a day named in a notice given in writing to such association, and not less than thirty days before such withdrawal : Provided, That this section shall not apply to the total amount of all moneys or funds deposited within the seven days next preceding such notice, or to moneys or funds that banking associations are required to keep and are allowed to keep in other associations as a part of their reserve. This section of this Act shall take effect on the first day of the first calendar quarter next succeeding the four months next succeeding the day of the approval of this Act. Sec. 14. That all taxes imposed by this act shall be due and payable semiannually on the first day of April and the first day of October in each year. Any clearing-house association, when requested so to do by any banking association, and with the approval of the Comptroller of the Currency, may assume and may pay any tax imposed on such asso- ciation by this Act. All moneys received under this Act unless otherwise provided shall be covered into the Treasury as a miscellaneous receipt. The Treasurer shall keep an account of all moneys paid into the Treasury or paid out by him under each of the several sections of this Act and include a statement of the same in his annual report. Sec. 15. That upon the insolvency of any association, or whenever, in the opinion of the Comptroller of the Currency, the complete redemp- tion and retirement of the currency issued to and retained by any national banking association is then necessary for the protection of the United States Treasury or of the holders of such currency, the Comp- troller may take possession of all the assets of such association, which assets shall be held to include the liability to assessment of all stock- holders, and appoint a receiver, who is hereby authorized, under the direction and control of the Comptroller of the Currency, to create and deliver to the Treasurer of the United States a fund equal in amount to such currency; and the receiver, under the direction of the Comp- troller of the Currency, is hereby authorized to sell the whole or any part of the property of such association, or to pledge the whole or any part of its property or assets, at any time, as security for any loan he may elect to make in order to create such fund: and if there shall be any assets remaining after the above-mentioned fund is created the Comptroller of the Currency shall then proceed in like manner to create and deliver to the Treasurer of the United States a fund equal in amount to the aggregate of all deposits of moneys made in the associa- tion either directly or indirectly by the United States Treasurer, includ- ing those of any and all officers or agents of the United States Govern- ment; and the receiver, after the completion of such fund or funds or as much thereof as can be realized from the assets, and not before, shall 252 STRENGTHENING THE PUBLIC CREDIT, ETC. administer the remaining assets, if there be any, for the benefit of creditors and shareholders of the association; and the Comptroller of the Currency shall have like power and authority, and shall proceed in the same manner in the case of clearing-house associations organized under this Act. The five per centum reserved from the moneys deposited by the insolvent association for the current redemption of the greenbacks of such association shall be free moneys in the Treasury, and the five per centum on the currency taken out which was deposited for the current redemption of such currency shall be returned to the receiver of the insolvent association. The greenbacks and currency of an insolvent association shall be immediately redeemed and canceled by the Treasurer of the United States, out of any moneys in the Treasury not otherwise appropriated. Sec. 16. That the Comptroller may at all times know the condition of each national banking association, each association shall make such record at the close of each day as the Comptroller shall request, in a book kept for that purpose, which record shall show the total amount of its currency paid out and in circulation, and the amount of cur- rency received from redemption agents, and its total individual deposit account, and its total reserve account, as shown by its books at the close of each business day, and of what the reserve consisted, which daily record of deposits, reserve, and currency, and other matter requested by the Comptroller, shall be made up in duplicate for each month, and two copies or reports thereof transmitted to the Comp- troller of the Currency on or before the tenth day of the following month. Before making the record for the day, as required by the Comptroller, every transaction of that day pertaining thereto shall be duly entered in the books of the association. The records and reports herein provided for, and any other facts and data he may request of associations or any director or officer thereof, shall be in such form as the Comptroller may direct. Xational-bank examiners shall be held to be employees in the office of the Comptroller of the Currency while examining associations whose business is covered by this Act, and their fees for such examinations shall be paid out of the appropriation for the Bureau of the Currency. The operation of so much of all laws or parts of laws as are in con- flict with this Act is hereby suspended. ISTote. — The "visible gold" — gold in banks and in the United States Treasury — is reported by the Comptroller, on page 22, Report of 1896, to be $421,236,388. January 1, 1890, visible gold amounted to about '10,000,000. APPENDIX. INDEPENDENT TREASURIES. Boston, Mass ? ^- 01 ° New York. X. Y F >,J , 360 Chicago, 111 37,420 San Francisco, Oal 27 > ™ New Orleans, La 20, 490 St. Louis, Mo 22, JJO Cincinnati, Ohio lb > ' 00 Washington, D. oo'mn Baltimore, Md 38, 010 Philadelphia, Pa - • • 4J « 340 Total expenses 4U, ' ' l) EESERVE CITIES. Boston, Mass. New York, N. Y. Brooklyn, N. Y. Albany, N. Y. Cleveland, Ohio. Detroit, Mich. Chicago, 111. Milwaukee, Wis. Des Moines, Iowa. St. Paul, Minn. Minneapolis. Minn. Omaha, Nebr. Lincoln, Nebr. San Francisco, Cal. St. Joseph, Mo. Kansas City, Mo. St. Louis, Mo. New Oilcans. La. Houston, Tex. Savannah, < la. Louisville, Ky. Cincinnati, Ohio. Washington, D. 0. Baltimore, Md. Philadelphia, Pa. Pittsburg, Pa. 253 A COMPARISON OF THE HILL-FOWLER BILL, H. R. 10289, WITH THE WALKER BILL, H. R. 10333, BY SUBJECTS. PREPARED BY THE CHAIRMAN OF THE COMMITTEE. 255 256 HILL-FOWLER BILL, H. R. 10289. A comparison of the Rill-Fowler bill, H. R. 10289, P;ige. Lino. NO PROVISION MADE FOR TRANSITION PERIOD. No provision made for the assistance of men trained in the business — in transacting the business of banking for 75,000,000 people, and soon to be 200,000,000. No provision made for an appeal from the decision of the Comptroller in any case. NON-INCORPORATED CLEARING HOUSES. 17 18 to 22 Country divided into clearing-house districts by the Comptroller ^yhen clearing houses have no legal exist- ence. (How many.) 17 23 to 25 Clearing-house district printed on currency notes issued in it. 18 lto 4 Clearing house city? 18 2 to 4 Currency notes must be currently redeemed in some bank- ing association in a clearing-house eity in its clearing- house district. 19 4 to 9 Banking associations must provide for the "current redemption" of its currency notes in every clearing-house district in which its notes are paid out over the counter of banks. No issue of emergency "legal-tender notes" or other emergency "money" provided for. WALKER BILL, H. R. 10333. 257 with the WdlTcer bill, H. R. 10333, by subjects. DURING TRANSITION. Page. Line. 3 8 to 11 Banks may tame greenbacks to 50 per cent of capital. 3 22 to 25 The taking out of currency restricted to an amount equal 4 1 to 4 to the greenbacks taken. 6 2 to 8 Transition is completed [when $200,000,000 United States notes are assumed by banks and] when the Treasurer sets aside certain gold in the Treasury to redeem and cancel the balance of the outstanding United States notes [viz, $14C,000,0001. 9 21 to 24 After thirty days from the completion of the transition 10 1 to 3 the required "cash reserve" of banks to be kept, as near as may be, one-third each, in gold coin, silver coin, and greenbacks. COMPTROLLER OF THE CURRENCY THE EQUIVALENT OF THE PRESI- DENT, AND THE BOARD OF ADVISERS TO SEVEN DIRECTORS OF THE GENERAL BANKING BUSINESS OF THE COUNTRY, AS ONE HANK. BOARD OF SEVEN ADVISERS. 11 12 to 17 To Comptroller of the Currency. 11 18 to 22 Members are the president of the chief reserve bank in New Orleans, president of chief reserve bank in San Francisco, and the presidents of the chief reserve banks in the other five chief reserve cities. 12 1 to 3 Are to meet annually or upon the call of the Comptrollei or upon its own motion. 12 4 to 8 To keep a record of its doings. In case of doubt as to what persons are to act on the board the Secretary of the Treasury is to decide 12 9 to 14 Parties aggrieved at any action of the Comptroller may appeal to the board of advisers. Unanimous decision final. In case a minority dissents the decision of the Secretary of the Treasury final. 14 5 to 10 May annul by a majority vote any action of the Comp- troller proposing to change any by-law of a clearing house. INCORPORATED CLEARING BOUSES. FIVE OR MORE ASSOCIATIONS MAY FORM A CLEARING HOUSE. 12 15 to 22 The act of "approving the by laws" by the Comptroller constitutes the banks associated to adopt tlicm a " body corporate." 12 23,24 Any banking association may be admitted a member. 13 1 to 4 May exclude any association with approval of Comptroller 13 5to 9 Any association may withdraw with approval of Oomp troller. 13 lOto 17 Profits and loss to be shared by the associations making up the clearing house, in the proportion that the capital of each bank is to the total capital of all members. B & c 1 7 258 HILL-FOWLER BILL, H. R. 1028S*. Page. Line. ISSUE AND REDEMPTION DEPARTMENT. 2 23 to 25 To Issue and Redemption Department "is committed ALL 3 1 to 12 FUNCTIONS of the Treasury Department" (excepting receiving moneys due the Treasury Department from debtors, and making to creditors the disbursements provided for by law). SHALL HOLD all "Guarantee" and "Redemption" funds for circulating notes. Through it shall be conducted the operation of redeeming the ''circulating notes" of all associations. Shall be transferred to it all gold coin and bullion, silver bullion, silver coin and United States notes held against "certificates," and the "FUNDS" for the redemption of "CIRCULATING NOTES" and the funds for the retirement of circulating' notes. WALKER BILL, II. B. 10333. 259 Page. Line. 13 18 to 21 May bay, borrow, sell, or loan to other clearing houses or banks. 13 22 to 21 Usury laws not to apply to transactions of clearing houses. U 1 to 4 May establish a department to "CURRENTLY KE- I)EEM ,J the greenbacks and currency of bunks. 11 11 to 17 Five or more clearing houses may form a national clearing house. All provisions relating to banks in their relation to clear- ing houses shall apply to clearing houses in their rela- tion to the national clearing house. 11 18 to 22 National clearing house may deal in any bonds approved of by the Comptroller. 11 23 May provide for the '"current redemption" of " circulating notes." 15 1, 2 May take out emergency greenbacks in denominations of not less than $1,000, secured by United States bonds. Section 11. 15 3 to 6 May be designated as fiscal agents of the Government and as depositories of public moneys. 15 7 to 14 May keep their bonds and moneys with the United States Treasurer or any assistant treasurer with the approval of the Secretary of the Treasury. 15 15 to 18 Shall be subject to like examination by national-bank examiners as banks, and to make such reports as the Comptroller may request. 15 19 The meeting together of the employees of banking asso- 16 lto 20 ciations to make "clearings" shall constitute the banks employing such persons a "clearing house," and make the banks they represent liable to a tax of one-tenth of 1 per cent on all clearings unless they submit their by- laws for the approval of the Comptroller and become a "body corporate." 17 17 to 21 Emergency legal tender greenbacks taken by clearing 18 1 to 7 houses or banks may be surrendered and the bonds recovered, or any other greenback may be deposited to the amount of the greenbacks taken out, plus the accumu- lated interest, and the bonds recovered. So much of the duties named as are necessary are devolved on Secretary of the Treasury, the Treasurer of the dinted States or ou the Comptroller of the Currency. 260 HILL-FOWLER BILL, H. R. 10289. Page. LI 8- 3 13 {*> 14 (Such an amount of "subsidiary and minor coins" as the Secretary of the Treasury considers necessary for "the issue and exchange of such coins." 3 17 to 19 Accounts of Issue and Kedemption Department "SHALL be kept entirely .apart and distinct from the other divi- sions of the Treasury Department." 3 23 co 25 Eeserve fund SHALL be established in Issue and Re- 4 L co 6 demption Department of 25 per cent of 8316 mil. U". S. Notes. 104 mil. Gold. 450,000.000 = $112,500,000 and 5 per cent of $500,000,000 silver = 25,000,000 Total $137,500,000 4 7 to 10 $137,500,000 gold shall be held as a "common fund" and used exclusively to "redeem United States notes, Treas- ury notes, silver dollars and subsidiary and minor coins." (See page 3, lines 13 and 14.) 4 11 to 25 Gets its funds at the option of the Secretary of the Treas- 5 1 to 13 ury. 5 Sec. 6. TEN mandatory directions for doing its business. 6 24 & 25 SHALL "cancel" such amounts of notes "redeemed in 7 lto 4 gold" "as SHALL NOT EXCEED the NATIONAL RESERVE NOTES ISSUED SUBSEQUENT TO THE TAKING EFFECT OF THIS ACT." THREE COMPTROLLERS OF THE CURRENCY, AT A COST OF $23,000. Duties prescribed. First Comptroller a sort of "Assistant Treasurer." All action dependent on the Secretary of Treasury. Page 7, line 7. 1 6 to 11 Comptrollers do duty of present Comptroller. Manage Issue and Redemption Department. 1 12 Present office of Comptroller abolished. 2 1 & 2 Comptrollers appointed by President and Senate. 2 3 & 4 Comptrollers removed by President and Senate. 2 4 to 9 Appointed for 4, 8, 12 years; then for 12-year terms. 2 10 & 11 In a Comptroller's last four years he is to be First Comp- troller. 2 12 to 18 First Comptroller, practically Assistant Treasurer, has cus- tody of all funds. To give $250,000 bond. 12 6 to 14 To prepare three kinds of " circulating notes," etc. 14 6 to 13 After four years MAY reduce deposit of United States bonds. After eight years no bonds shall be required. 15 9 to 14 When no more United States notes are available as a basis for "CIRCULATING NOTES" THE deposit of such notes SHALL no longer be required (see page 16, lines 10 to 14), but the deposit of " gold coin " for them may be required. 15 15 to. 18 May issue reserve notes upon the deposit of gold coin. 16 10 to 14 WALKER BILL, U. K. 10333. 261 Tage. Lino. PRESENT COMPTROLLER OF THE CURRENCY AT PRESENT COST OF $5,000. 3 22 to 25 SHALL issue " CURRENCY " only to the amount of 4 1 to 4 greenbacks taken during transition. 4 5 to 11 Thereafter he SHALL issue " CURRENCY " to each bank not less in amount than its " greenbacks " and not less than 25 per cent in excess of its average circulation of " currency " during the two years next preceding, and MAY issue to the full amount of actual capital. 5 3 to 5 May print currency or greenbacks in anticipation of us.-. 8 5 toll May extend corporate limit of associations. Mav allow banks to reduce their greenbacks to required amount, with approval of Secretary of the Treasury. 8 12 toll Shall destroy currency surrendered to him. 10 4 to 6 May allow associations to keep their bonds and com in any suitable place. 11 12 to 17 Board of advisers to. 12 1 to 3 May call a meeting of board of advisers at any tune or place. 12 9 toll An appeal maybe taken from all decisions ffl the Comp- troller to the board of advisers. 12 15 to 22 Bylaws of clearing houses must be approved by comp- troller. 13 1 to 4 Clearing houses can not expel an association without the approval of the Comptroller. 262 HILL-FOWLER BILL, H. K. 10289. Page. Line. 15 19 to 25 When no more " reserve notes" are available, the taking out of" reserve notes" shall be no longer required. When "reserve notes" are "no longer available," bank- ing associations can issue " currency notes" under the restriction of page 11, lines 10 to 24, and page 14, lines 18 to 21. 1G 1 to 5 Gives unlimited power to withdraw from circulation "reserve notes" down first to 40 per cent to capital and finally using all the gold reserve, etc. (forcing the hands of the Secretary of the Treasury). 16 G to 8 Thereafter the Comptroller shall equitably " withdraw " " reserve notes." 16 24 & 25 Reserve notes withdrawn and canceled by the use of sur- plus revenue shall not be reissued (when " reserve notes n are withdrawn by the use of surplus revenue, no increase of such notes can thereafter be made). 17 5 to 12 May reduce " currency notes " of banks by depositing, etc., with the Assistant Treasurer. (Where is the "Assistant Treasurer" provided for?) 17 12 to 17 May reimburse banks for surplus of " bank notes," "REDEMPTION FUNDS," or " currency - note " " GUARANTEE FUND " above amount required to be held against " circulation." 17 18 to 25 To divide the United States into redemption districts for redemption of " currency notes." 18 19 to 25 In case of failure to redeem in " gold coin," they to imine- 19 1 to 21 diately put association into insolvency. 20 13 to 23 Shall assess each bank not exceeding 1 per cent on their " currency notes " in circulation to guarantee all " cur- rency notes." 20 24 &25 (See page 4, lines 7 to 10.) May invest "gold guarantee fund " in " United States obligations " at " not exceed- ing 6 per cent premium " ( ?) for benefit of the " fuud." 21 20 to 23 MAY provide for redemption of "reserve" and "bank" notes at subtreasuries. 22 12 to 23 When the circulating notes of any bank shall be presented for redemption in sums of $1,000, made up of reserve notes, bank notes, and currency notes, or any one of them, at the Treasury or subtreasury, the same shall be redeemed in gold coin. °3 w to 251 ^. - , "j. I Banks to report to the Comptroller. rOne-fourth of 1 per cent per annum tax on franchise, less 24 14 to 25 one-half per cent premium paid on reserve notes taken 25 1 to 3 out, to support Department of Comptroller of the Cur- [ rency. 26 12 to 15 May permit banks to establish "branches." 28 4 to 11 May get reports provided in Walker bill. (Very clumsy phraseology.) 28 20 to 25 May permit national banks to organize under the act. 29 15 to 24 May permit State banks to organize under the act. 31 8 to 11 May prepare "circulating notes" in anticipation of delivery to banks. WALKER BILL, H. R. 10333. 263 Page. Line. 14 5 to 10 Changes of by-laws of clearing houses to be valid must have the approval of the Comptroller. May annul any clearing house by-law with the concurrence of a majority of the board of advisers. 16 21 to 24 May issue to clearing houses, or banks, emergency green- banks secured by bonds in denominations not less than $1,000 to the amount of 90 per cent of such bonds, interest to be paid on such greenbacks by the associa- tion taking them, at the rate of G per cent per annum. 20 6 to 24 To decide when banks are to be taxed on their deposits for failure to maintain parity, and on the beginning and 21 1 ending of the period of taxation. 25 7 to 23 May take possession of the assets of unsound banks and — First. Create a fund to secure the payment of " currency notes." 25 24 Second. Create a fund to secure the payment of "Gov- 26 1 to 14 ernment deposits." 27 1 to 21 To have monthly reports of the daily condition of banks, and such other reports as he may request. 264 HILL-FOWLER BILL, H. K. 10289. Page. Line. A strictly " bank note," called " KATIONAL-RE SERVE NOTE," is substituted for United States notes and declared " legal tender." WALKER BILL, H. R. 10333. 2G5 Page Line. $200,000,000 UNITED STATES NOTES PRESERVED AS GREENBACKS. 2 4 to 10 Deposit " lawful money " for. 2 21 to 25 Deposit United States notes, Treasury notes, coin or coin 3 1 to 7 certilicates equal to 124 per cent of actual capital for new issue of " UNITED" STATES - LEGAL TENDER NOTES." 3 12 to 15 Tbey are made the "promise to pay" of the bank, by the signatures of its officers. 3 20 to 21 Name of United States legal-tender note, plus currency note, is "greenback." 5 14 to 18 Five per cent current redemption fund furnished by United States Treasurer as a common fund for " greenbacks " and "currency." 7 7 to 11 Holdings to be reduced to 12J per cent to capital to all associations from moneys paid for greenbacks after transition is effected. 7 12 to 15 Amount of greenbacks held by a bank may be increased by the Treasurer to amount required. 7 16 to 21 To be reduced below 12£ per cent to capital as banking capital increases so as to keep total amount uniform [viz., $200,000,000]. 8 1 to 4 May be reduced by banks to the amount required with the and approval of the Comptroller and the Secretary of the 8 to 6 Treasury. 8 5 to 11 Upon the expiration of corporate existence by insolvency, or by consent of Comptroller approved by Secretary of the Treasury, the Treasurer shall finally redeem green- backs. 8 18 to 25 Each bank to keep good its proportion of the 5 per cent redemption fund furnished by the Treasurer. 9 1 to 2 Current redemption fund can not becounted in the reserve of any bank. 9 3 to 8 Sums of greenbacks and currency aggregating $500 or 1 per cent to capital, of any association, to be redeemed. 9 9 to 11 Shall redeem in " LAWFUL MONEY."' its « greenbacks, - ' and "currency" at its own banking house and Atan agency approved by the Comptroller, in some reserve city. 10 7 to 13 Banks to maintain parity, or be in default. 10 14 to 17 Can not plead in defense, when in default, that its own "greenbacks" are "United states notes." 11 1 to 11 Not to be issued in denominations of less than $3. 15 1 to 2 Emergency greenbacks secured by bonds in denominations 16 21 to 24 of not less than $1,000 may be taken out by banks or 17 1 to 21 clearing house. 18 lto 7 26 15 to 17 Five per cent reserved for redemption fund to be free moneys in the Treasury in case of insolvency. 26 22 to 25 In case of insolvency 1<> be immediately redeemed by the Treasurer and canceled. 266 HILL-FOWLER BILL, H. R. 10289. Page i. Line. 8 16 to 25 9 20 to 24 10 lto 7 12 15 to 20 13 18 to 23 15 15 to 18 16 10 to 14 15 19 to 25 16 lto 5 16 6 to 8 16 8& 9 16 24&25 16 25 to 23 17 lto 4 21 14 to 20 19 2 to 4 20 21 22 21 22 23 lto 5 21 to 23 12 to 23 25 & 25 12 to 23 6 to 8 24 21 to 24 28 29 12 to 19 4 to 11 NATIONAL "RESERVE NOTES." Exchange of United States notes (only) for "reserve notes."' Redeemable in "gold coin" ONLY. May exchange United States notes for "reserve notes" equal to its paid-up capital. To imitate the present United States legal-teuder note and contain "promise of association" to redeem at office in gold coin. This bank note a "full legal-tender" excepting for duties on imports and interest on the public debt. May be "used in reserves of any association." Deposits of gold coin instead of United States notes for them, but not in excess of reserve notes destroyed. Comptrollers may dispense with their use. Withdraw holdings above 40 per cent to be first made. Thereafter such withdrawal SHALL be equitably made. Destroy all reserve notes "withdrawn." Once "surplus revenues" are used to cancel reserve notes, no more "reserve notes" can thereafter be issued. Surplus funds as "surplus revenue" (after United States notes and Treasury notes are destroyed) used to cancel "reserve notes." Reserve notes of any association decreased shall not lessen the "circulating notes" any banking association would otherwise be entitled to. (See page 15, lines 18 to 25.) Shall keep in Issue and Redemption Department a "re- demption fund" in "gold coin equal to 5 percent of its 'reserve notes'" (and bank notes). In case of insolvency to be redeemed from the general "reserve" in Issue and Redemption Department. Upon redemption, in case of insolvency, shall be destroyed. Shall be redeemable at "sub treasuries". Shall be currently redeemed in gold coin in amounts of $1,000, including all circulating notes. (Old law) 5 per cent gold redemption fund can be counted in reserve. Banks paid £ per cent per annum premium for taking out reserve notes. The takiug of "reserve notes" made compulsory. Banks shall be dissolved upon failure "to comply with any provision of this act." NATIONAL "BANK NOTES.' 9 1 to 3 Depositing United States bonds for "bank notes." 9 9 to 11 Can secure "bank notes" plus "currency notes" to an and 18 amount equal to its " paid up capital." 10 8& 9 May take "bank notes" equal to par of United States 10 14 to 27 bonds deposited, and to amount of capital, page 9, line 24, and page 11, line 17, but reduced by currency notes taken. WALKER BILL, H. R. 10333. 267 Page. Line. Has no corresponding note. Has no corresponding note. 268 HILL-FOWLER BILL, H. R. 10289. Page. Line. 11 5 to 9 If bonds depreciate below par, more bonds must be deposited. 12 23 to 25 To imitate present " NATIONAL BANK NOTES." 13 1 to 3 Contain promise of association to redeem at its office in gold coin or ''reserve notes." 14 1% 9} Legal tender "between banks." 14 3 to 5 Can not "count ITS OWN" bank notes or currency notes in its casli or "cash assets." 17 lto 4 Canceling reserve notes of any bank by use of "surplus revenue" not to lessen "circulating notes" of such bank. (See page 14, lines 18 to 21.) 17 5 to 12 Banks may reduce bank notes by depositing with the "ASSISTANT TREASURER" in charge of the Issue and Redemption Department a sum in gold coin equal to the amount of the reduction desired, or by redeem- ing its notes in gold and sending them to the Comp- trollers of the Currency. 21 14 to 20 Shall keep in Issue and Redemption Department a "re- demption fund" in gold coin equal to 5 per cent of its "bank notes." 19 4 to 9 Bonds deposited to be sold to redeem bank notes in case of insolvency. 20 1 to 5 Destroyed when redeemed, in case of insolvency. 21 21 to °3) 29 .ox oo| Redeemable at Treasury or "subtreasuries" only. 21 24 & 25) SHALL be ''currently redeemed" in gold coin in sums of 22 13 to 23J $1,000, made up of all kinds of circulating notes. 23 6 to 8 (Old law) Its 5 per cent gold redemption fund can be "COUNTED IN ITS RESERVE." "CURRENCY NOTES." NOT SECURED BY THE GUARANTY OF THE GOVERN- MENT. 9 4 to 8 Bank assets liable for "currency notes." 9 9 to 11 Can take out "currency notes" plus "bank notes" to an and 18 amount equal to its paid-up capital. 11 10 to 24 Restrictions not to exceed "reserve notes" taken; not to exceed bank notes taken; not to exceed 40 per cent to paid-up capital, but can take 20 per cent more, with 40 per cent of bank notes, equals 100 per cent by paying per cent per annum tax on last 20 per cent. 12 11 In denominations of $10, and multiples thereof for all cir- culating notes. 13 4 to 9 Shall contain promise of association to redeem at its office in gold coin or "reserve notes." 13 10 to 15 To state on its face issued under this act. 17 18 to 22 To state on its face its clearing-house district. 17 23 to 25 To state on its face the number of its clearing-house dis- trict. (How many clearing-house districts.) 14 1 & *> } Le £ al tender "between banks." 14 3 to 5 Can not count its own "currency notes" in its cash assets^ WALKER BILL, H. Ii. 10333. 269 raze. Llnfe. "CURRENCY." SECURED BY TIIE GUARANTY OF THE GOVERNMENT 4 5 to 11 SHALL be issued to banks equal in amount to 25 per cent more than the currency the bank averaged to have in circulation during the two years next preceding (to be determined by amount of currency a tax \v;is paid on . and the Comptroller may issue currency to a bank to the full amount of actual capital. 4 12 to 15 Current redemption fund equal to 5 per cent of currency in actual circulation. 4 16 to 18 A common redemption fund for currency and greenbacks. 4 19, 20 Lawful name "currency." 5 1, 2 To have printed on it that it is to be finally redeemed by the Treasurer of the United States. 5 3 to 5 Supply may be printed in advance of use. 8 12 to 17 May be reduced only by being surrendered to Comptroller. 8 l8to-5 Each bank* to keep good its 5 per cent current redemption fund on its currency and the 5 per cent redemption fund on greenbacks furnished by the Treasurer. 9 1, 2 Current redemption fund can not be counted in the reserve of any bank. 270 HILL-FOWLER BILL, H. R. 10289. Page. Line. 17 1 to 5 Withdrawal for cancellation of "reserve notes" of any bank not to lessen ''circulating notes" of such bank. 17 5 to 12 May reduce holding of "currency notes" by depositing with the "Assistant Treasurer in charge of the Issue and Eedemption Department" a sum in gold coin equal to the amount of the reduction desired, or by redeeming its notes in gold and sending them to the Comptroller of the Currency. (Where is the provision for an Assist- ant Treasurer?) 17 18 to 25 Shall be "redeemed" in their respective districts. 18 1 to 4 Shall be "currently redeemed" by some association in a clearing-house city of its own district. 18 19 to 25 Failure to redeem any circulating notes in gold an act of 19 1 to 25 insolvency, and bank is immediately put in liquidation. 18 5 to 10 Can not be paid out "over the counter" of all banks out- side its district, unless there is a redemption agency in all redemption districts. 18 11 to 18 Shall keep an amount in "gold coin" in the Issue and 23 17 to 21 Eedemption Department as a "guarantee fund" equal to 5 per cent of its currency notes "not returned to the Comptroller." 18 19 to 25 "Guarantee fund" used to redeem currency notes in case of insolvency. 19 10 to 12 Surplus over amount received on sale of bonds over that necessary to pay "bank notes" to be applied to the redemption of "currency notes" in case of insolvency. 20 1 to 5 Destroyed when redeemed in case of insolvency. 22 13 to 23 SHALL be currentlv redeemed in gold (as "circulating notes") at SUBTEEASURIES in sums of $1,000 for all notes. (See page 21, lines 14 to 20.) 23 6 to 8 Can not count its 5 per cent gold "guarantee" fund in its 9 to 17 reserve. 23 Six per cent tax per annum on "currency notes" exceed- ing 40 per cent to capital or plus bank notes exceeding 80 per cent to capital. 23 18 to 21 Tax on all the last 20 per cent of 60 per cent capital of currency notes to capital not returned to the Comptroller or "gold coin" deposited with Comptroller for their retirement. 23 2^ to 25 1 24 1 to 6 r" ax on currenc y notes collected each month. 25 13 to 20 Deposit of gold coin required equal to its " currency notes" in circulation, in case of insolvency. "CIRCULATING NOTES." (USED FOURTEEN TIMES.) 3 5 Means "reserve notes," "bank notes," and "currency notes." 3 16 Means "reserve notes," "bank notes," and "currency notes." 8 16 The words "circulating notes" defined as including "re- serve notes," "bank notes,"' and "currency notes." WALKER BILL, H. R. 10333. 271 Line. 9 2 to 8 Sums of greenbacks and currency aggregating $500, or aggregating 1 per cent to capital, of any association t<» be redeemed. 9 9toll Shall redeem in "LAWFUL MONEY" its "greenbacks" and currency at its own banking house, and also at an agency appointed by the Comptroller in some "reserve city." 10 14 to 17 Banks to maintain parity or be subject to penalty tax. 11 1 to 11 Not to be issued in denominations less than $3. L'l 3 to 17 Taxed not more than one-fifth of 1 per cent per annum when there is $8,000,000 in the Treasury, accumulated for this tax and in no ease over 1 percent per annum, at the discretion of the Secretary of the Treasury. 26 18 to 21 The 5 per cent redemption fund to currency to be returned to associations in case of insolvency. 26 22 to 25 In case of insolvency, currency to be immediately redeemed and canceled by United States Treasurer. "CIRCULATING NOTE." (USED POUB TIMES.) 3 4 Means " greenback." 3 10 Means "greenback." 9 6 Means "greenbacks" and "currency." 1-1 23 Means "greenbacks" and "currency.*' 272 HILL-FOWLER BILL, H. R. 10289. Page. Line. 9 2 Means " bank notes " received upon deposit of United States bonds. 10 19 Means " bank notes " in circulation when the act shall be passed. 12 10 Means "reserve notes," "bank notes," and "currency notes." 14 20 Means "reserve notes," "bank notes," and "currency notes." (When bonds are withdrawn " bank notes " are necessarily retired by the amount of bonds withdrawn, as "bank notes " are described as bond-secured notes. (See page 9, lines 1 to 3.) To keep up the amount of "circulating notes" the vacuum caused by the withdrawal of "bank notes " must be supplied, if at all, by taking out one- half " reserve notes " and one-half " currency notes," as provided in page 11, lines 10 to 24, subject to the pro- vision on page 17, lines 1 to 4.) 17 3 Means "bank notes" and " currency notes " which must supply the place of the withdrawn " reserve notes," one- half of each, as provided on page 11, lines 10 to 24, sub- ject to page 14, lines 18 to 21. 15 12 Means "reserve notes," "bank notes," and "currency notes" (and that the depositing of United States notes and the securing "reserve notes," as provided on page 11, lines 10 to 24, is a " basis" or condition precedent to securing either " bank notes " or " currency notes," and continues for all time, excepting as modified on page 10, lines 15 to 25, and page 17, lines 1 to 4). 17 3 Means "reserve notes," "bank notes," and "currency notes." 17 17 Means "reserve notes," "bank notes," and "currency notes." 18 24 Means "reserve notes," "bank notes," and "currency notes." 21 17 Means the present bank notes secured by bonds. 22 12 Means " reserve notes," " bank notes," and " currency notes." 29 9 Means "reserve notes," "bank notes," and "currency notes." SPECIAL FUNDS TO BE HELD IN TREASURY. A RESERVE FUND. A REDEMPTION FUND. A GUARANTEE FUND. 2 23 to 25 Issue and Redemption Department "shall redeem the cir- 3 1 to 12 circulating notes of banking associations," shall hold all "redemption funds" and all "guarantee funds "of banks. 3 23 to 15 To the Issue and Redemption Department shall be com- 4 1 to mitted $137,500,000 gold to redeem United States notes and Treasury notes. (Amount to be "kept" in this fund decided by the Secretary of the Treasury. Page 4, lines 11 to 18.) WALKER BILL, H. R. 10333. 273 Page. Line. SPECIAL FUNDS TO BE HELD IN TREASURY. ONLY A CURRENT REDEMPTION FUND. 1G to 18 Equal to 5 per cent of currency, it averages to keep in cir- culation held as a common " current redemption fund" for the current redemption of "greenbacks" and "cur- rency." 14 to 18 Filial to 5 per cent of greenbacks, held as a common ••cur- rent redemption fund" for the current redemption of "greenbacks" and "currency." B & C IS 274 HILL-FOWLER BILL, H. R. 10289. Page. Line. 17 12 to 17 Issue and Kedemption Department may return to Dauks any excess in the Guarantee Fund or Redemption Funds. 21 6 to 13 Issue and Redemption Department to add to Guarantee Fund and to Redemption Funds all receipts from invest- ments of such funds and all taxes on circulation. (See page 17, lines 12 to 17.) 21 14 to 20 Gives Issue and Redemption Division a basis for estimating the redemption fund of each bank, viz, equal to 5 per cent of " bank notes " and 5 per cent of " reserve notes." CANCELING UNITED STATES NOTES AND TREASURY NOTES. 6 24, 25 Issue and Redemption Department shall cancel an amount 7 1 to 4 of United States notes or Treasury notes, that gold coin has been exchanged for, as shall not exceed the amount of national "'reserve notes" issued subsequent to the taking effect of this act.* 7 5 to 12 Secretary of the Treasury may in his discretion from any fund in the general Treasury not otherwise appropriated, transfer to the Department of Issue and Redemption any United States notes or Treasury notes WHICH on such transfer COULD THEN LAWFULLY BE CAN- CELED * * * IF THEY HAD BEEN RE- DEEMED ON PRESENTATION; and when so transferred the same shall be canceled. 10 5 to 7 United States notes received in Issue and Redemption Department for "reserve notes" shall be canceled as received. 7 13 to 19 Whenever there may be United States notes including Treasury notes in the general Treasury NOT AVAIL- ABLE as "surplus revenue" they may be exchanged with the Department of Issue and Redemption for "gold coin" and such notes SHALL THEREUPON BE CANCELED. 7 20 to 24 United States notes including Treasury notes once re- deemed shall not be paid out except for gold. 7 25 United States notes or Treasury notes accumulated in the 8 1 to 7 Department of Issue and Redemption may be invested by the SECRETARY OF THE TREASURY in inter- est-bearing obligations of the Government for the bene- fit of the gold reserve in the Department of Issue and Redemption subject to sale by the SECRETARY OF THE TREASURY. ■' * Paying out . C, August 22,1898. Hon. J. II. Walker, Chairman Committee on Banking ami Currency: Statement showing the amount of expenses and taxes paid by the national hanks located in the central reservi cities of New York. Chicago, and St. Louis, as shown by the iemi- annual reports of earnings and dividends as made to the Comptroller of the Currency for the year ending September i. 1897. SEPTEMBER 1, 1896, TO MAIJCH 1, 1 >7 Exp< uses and taxi New York City $4,885,142.08 Chicago 1,185,791 St. Louis 477,888.58 $6, 548, 822. 54 MABCH 1. 1897. TO SEPTEMBEB 1, 1897. Expenses and taxes. New York City $4,515,200.63 Chicago 1,183,892.26 St. Louis 392,047.70 $6, 091, 236. 59 Total for year ending September 1,1897 12,040,059.13 Treasury Department, Office of the Comptroller of thf: Currency, Washington, I). C, July 29, 1S93. Hon. J. H. Walker, Netc Hampton, N. II. Sir: In compliance with your request of July 20, I inclose herewith a statement showing the expenses and taxes, during six months, often banks, "located in the smallest places in which there is a single bank, having capital, surplus, and undivided pronts of, approximately, $145,000 to $155,000." Very respectfully, Charles G. Dawes, Comptrolh r. Actual average capital £1 ! '• •_'"'; "" Average annual expenses 6,542.40 State. Bank. Popula- tion. Capital. l Surplus and profits. and ' last six months. [ndi vidua] depot repoi t ••( L896. Indiana Massachusetts .. New Jersey Do Mil ford First National Bank .. Rising Sun. National Bank of.. Natirk. National Bank of Medford, Burlington County .. NewPaltz, Hugenol National Bank. Pine Plains, Stissing National Bank. Warwick Fir--t National Bank. Ambler First National Bank .. Burgettstoii n. Burgettetow n National Bank. Kennett Square, National Bank of. 1,300 1,800 1,000 1,000 1,200 Tun 1,700 1. 100 1,000 1,500 $60, 000 Kin.OOO LO 1 100 100 90,000 100, 000 1 00 100,000 $96. "mo 4: 12, ooo M 41 52,000 50,( 55 45,000 $■_'. 866 4.4H1 1,776 4,016 2, 698 ;:.. :.. r . 323. 616. 47 L03.701. 19 IC 510.59 ])o 176 276. 33 Pennsylvania Do - • Do 930. IM.K) 543, 000 32,712 1,914- THE CLEARING HOUSES IN THE COUNTRY. [Statement prepared by the chairman of the committee.] The clearing house has become indispensable to the conduct of the business of banking. Each bank, large or small, country or city, is indissolubly connected with other banks, and through them, if not directly, with the clearing house. The efficiency of a bank is very largely dependent upon the clearing house. Only through clearing houses can the equality and independence of banks be preserved or their highest efficiency attained. It is as necessary to banks to have incorporated clearing houses as it is to business firms and corporations to have incorporated banks. The incorporation of neither is absolutely necessary. In fact, a large part of banking is done by private firms, but only by reason of the exist- ence of banking "corporations" are they successful. All the banking of the world, or of the country, could not be done outside of the obli- gations and responsibility imposed in fixed legal rules and the control of banks by positive corporation law. Whatever may be the appear- ances to the contrary, a bank can not exist by itself alone in this stage of commercial development, like a cotton or woolen factory, which is all the more reason for uniform regulation and control of banks by law. Of seventy-six clearing houses given on page 551 of volume 1, Report of the Comptroller of the Currency for 1897, I have examined the con- stitution and by-laws of fifty-five at hand, and herein indicate the main provisions of all taken together. I see no reason why each one of these clearing houses could not continue, if incorporated under the Walker bill (H. R. 10333), the doing of its business in such manner as it has chosen for itself and without any substantial alteration of its constitu- tion or by-laws. Of course, the advantages of a broader field and the security of more definite rules, by many of them, are so obvious, it is believed they would soon enter upon a broader and at the same time equally conservative action. There are no substantial provisions in the regulations of any of the fifty-five examined not given under the name of some one of them. None contains any substantial provisions not enumerated under the name of some one of those mentioned. Some forbid what others require, according.to the volume or kind of business they do. ST. LOUIS, MISSOURI. Article 1, section 1. "The object of the association shall be the effecting, at one place, of the daily exchanges between the several associated banks and bankers, * * * anil the fostering and pro- moting of sound conservative banking; * * * the regulating of exchanges, the fixing of minimum rates to be charged on outside drafts and collections," etc. Section 3. The committee of management shall have power to suspend any bank by unanimous vote * * * but shall forthwith call a meet- ing of the association to consider such suspension, etc. 284 STRENGTHENING THE PUBLIC CREDIT, ETC. 285 Section 8. The action of the clearing house is only thai of an agent, and iu no case shall this association be held responsible for any lo that may occur by reason of its action. Section 11. Whenever any member of the association shall send and receive through, the clearing house the exchanges of any bank in tin- city or vicinity who are not members, such sending and receiving shall ipso facto and without further notice constitute said member the agent for said bank at the clearing house, etc. Section L3. A standing committee of five bank officers or banker* shall be elected, to be called a committee of arbitration, whose duty it shall be to hear and determine all disputes that may be submitted to it by both parties thereto. * * * A majority decision shall be valid. Section 15. No member shall be added to this association haviup a paid-up capital of less than $500,000. Section 17. Shall pay an entrance fee of $1,000 and in addition its several assessments for expenses. Article 2, section 1. Each member of the association shall furnish the manager a sworn statement of its condition as often as live times each year * * * and at such other times and of such date as the clearing-house committee may require. * * * The following shall be regarded as cash reserve, viz: Balances due from other banks payable on sight draft, Silver, Gold, Legal tenders, National-bank notes, Gold and silver certificates, Amount due United States Treasurer, Clearing-house loan certificates. Section 2. Upon a vote of four-fifths of the members of this associa- tion a committee of five shall be elected by the association, who may receive from banks, members of the association, bills receivable and other securities to be approved by it, and shall be authorized to issue therefor to such depositing bank loan certificates to an amount not to exceed 75 per cent of the face value of the securities or bills receivable so deposited, etc. ROCHESTER, NEW YORK. Section 24. No member of this association shall clear for any other institution or banking linn not a member. 't> BUFFALO, NEW YORK. Section 7. Any bank, after one day's notice of a hearing before the association, may be expelled from the association and debarred from all the privileges of the clearing house by a four fifths vote of the whole number of associated banks. Section 8. The clearing-house committee, acting in concurrence with the arbitration committee, may cause an examination to be made of any bank member of the association * * * and shall have power to suspend any bank, etc. Section 19. Balances shall be paid in — United States Treasury certificates. United States legal tender notes. National bank notes. Gold coin. Gold certificates. Silver certificates. 286 STRENGTHENING THE PUBLIC CREDIT, ETC. Section 25. This association shall receive * * * on special trust such United States gold coiu as any member * * * may choose to seud to it for safe-keeping, for clearing-house purposes: * * * cer tificates in exchange for such coin shall be issued to the depositing bank in denominations of $5,000, etc., * * * negotiable only among banks, members of the association, etc. Section 20. Each bank member of the clearing-house association shall furnish the manager a weekly statement of its condition, signed by its officers, on uniform blanks provided by the association, * * * for the private use of each member, showing the average amount of — 1. Loans and discounts. 2. Deposits. 3. Due from banks. 4. Checks for next day's exchanges. 5. Clearing-house gold certificates. 6. All other currency. 7. Eediscounts. BALTIMORE, MARYLAND. Section 5. The executive committee are authorized to take into con- sideration and investigate any and all matters affecting and pertaining to the banking interests of the city which may be referred to them in writing by this association or any member thereof; to report to the association such recommendation in the case as they may deem wise and proper. Whenever they consider it for the interests of the associa- tion they are empowered to require from any member securities of such an amount and character as they deem sufficient for the protection of the balances resulting from exchanges at the clearing house. State banks, members of the clearing-house association, shall be examined in the same manner as national banks and by the national-bank examiner, etc. Section 6. Be a depository of such moneys as any associated bank may desire, shall remain a special deposit for safe-keeping, and issue therefor certificates in concurrent amounts, etc. Section 7. The compensation to the depositing bank shall be paid by the several banks in proportion to their respective capitals, at the rate of 30 cents per annum on each $1,000 of capital stock. SAN FRANCISCO, CALIFORNIA. Article 14. The debtor banks shall pay to the manager at the clearing house in ' Gold coin, Clearing-house certificates it has issued, or Gold certificates. CHICAGO, ILLINOIS. Section 20. All moneys paid in shall be in Gold coin, Legal-tender notes, Treasury certificates, National bank notes, its own clearing-house certificates. STRENGTHENING THE PUBLIC CREDIT, ETC. 287 WASHINGTON, DISTRICT OF COLUMBIA. Article 16. The clearing-house committee shall have full power and authority at any tunc to direct an examination, by any three of its members, into the affairs and condition of any member * * * for the use and information of the other memberB of t he association, but to be otherwise confidential. LEXINGTON, KENTUCKY. Article 11. No money shall pass through the clearing house in making the exchanges. [Persons unfamiliar with banking will find such "clearings" are fully described in a monograph on Money, Trade. and Banking, by J. H. Walker: Houghton, Mifflin & Co., Boston.] SALT LAKE CITY, UTAH. Article 3. The members are: Wells, Fargo & Co., The Deseret National Bank, W. 8. McCormick & Co., T. K. Jones & Co., The Union National Bank, The Commercial National Bank, Utah Commercial and Savings Bank, State Bank of Utah, National Bank of the Republic, Bank of Commerce, Utah National Bank. FORT WORTII, TEXAS. Section 8. Debtor banks shall pay to the manager of the clearing house the balances due from them either in Gold coin. United States notes, or National-bank bills. KNOXVILLE, TENNESSEE. Section 17. Applications for membership must state, if a bank, its capital; if a private banking house, names of individual partners, name of person authorized to sign, etc. NORFOLK, VIRGINIA. Section 12. The balances due the clearing house shall be paid in Currency or Gold coin, and shall be put up in packages of $500, etc. Section L3. The executive committee shall require from each member of the association securities of such amount and character as said committee may deem sufficient for the protection of balances resulting, etc.. or other satisfactory guaranties. Section 15. Be a depository to receive in special trust such currency as any of the members may choose to -end to it tor safe keepii 288 STRENGTHENING THE PUBLIC CREDIT, ETC. DAYTON, OHIO. Section 14. The expenses of the clearing house shall be paid equally by each member of the association. PORTLAND, MAINE. Article 13. The debtor banks shall pay to the manager of the clearing house in Gold coin, or in its own Clearing-house certificates, flip 1 vi 1 *i ti c* f * s duo etc Article 15. Gold coin of the quantities of §20,000, $10,000, and $5,000, for the payment of balances, shall be brought in sealed bags, etc. Article 17. Cleariug-house certificates payable in Gold coin. WILMINGTON, DELAWARE. Section 9. The character of the funds to be used in payment of bal- ances to or from the clearing house will be Philadelphia or New York exchange, excepting for amounts less than $1,000, which may be in currency, at the option of the payers. SYRACUSE, NEW YORK. Article 3, section 2. Private bankers * * * may be admitted to membership by a two-thirds vote. LOUISVILLE, KENTUCKY. Article 10. Each member of the association shall furnish the man- ager, on the first Monday of each month, a statement in tabular form of the averages for the month previous of its Capital, Surplus, Loans, Cash on hand, Eastern exchange, Due from banks other than Eastern, Bills payable, Rediscounts, Deposits, which shall be open to the principal officers of any member. KANSAS CITY. Section 7. May examine any bank belonging to the clearing house and require any and all members to deposit * * * securities of such an amount and character as shall be satisfactory to the clearing house for the purpose of securing any debt balance that may occur iu the adjustment of clearances against the member making such deposit, etc. * * * Shall receive bills receivable and other securities * * * and issue therefor * * * loan certificates to an amount not exceeding 85 per cent, etc. STRENGTHENING THE PUHLIC CREDIT, ETl 289 Section 15. For cause deemed sufficient by the associated banks, any bank maybe expelled from the association and debarred from all the privileges of the clearing house, bj a majority vote, ;it any meeting of the association. By laws, section 11. Each member of the association shall furnish ae often as five times ;i year a sworn statement of its condition, ;iml at such other times and of such dates as the clearing house may require, * * * oi»eii to t lie inspection of members only. M'.W YORK, M.W 5 ORK. Section 2. Acts as an agenl only. Sections. May examine any bank member of the association. May require security of such amount and character, etc. Section it;. Every bank member shall furnish a weekly statement of its condition, etc., for publication, showing the average amount of — 1. Loans and discounts. 2. Specie. 3. Legal-tender notes. 4. Circulation. 5. Deposits. Section 17. May receive by an appointed bant in special trust Coin or United States legal tender notes from any association for safe keeping, or may appoint the assistant treasurer of the United States at New York a depositary, etc. ; certifi cates to be issued in exchange for such deposit, negotiable among members only. Section 21. Standing committee may suspend any bank, but must immediately call a meeting of the association to act on the case, etc. Page 11, resolution of April 8, 1 STl'. That the (dealing house com mittee be. and is hereby, directed, whenever it appears, in its judgment, that legal-tender notes have been withdrawn from use through the agency of any bank, member of the association, to make an immediate examination of the bank in question, and should there appear to be complicity on the part of the bank or its officers, to suspend said bank from the clearing house until action of the association shall betaken thereon. Page 13. Adopted February 14, 1872. 1. The ISTew York Clearing House Association or any members thereof may unite for the purpose of clearing checks payable in gold. 6. The adoption of this system shall not prohibit any bank from pre- senting gold checks for payment to the banks on which they arc drawn, etc. b & c 10 UNIVERSITY OF CALIFORNIA AT LOS ANGELES THE UNIVERSITY LIBRARY This book is DUE on the last date stamped below DEC 2 1948 ?0\ Form L-9-15m-3 ,'34 - ad NAl UBRAW AA 000 565 134 i UNRERSIT1 aijfo NNU UMRJL&Y