silver coin: Provided, however, That in lieu of one-half of such coin reserve, cash on deposit in reserve cities, subject to check, may be held.

SEC. 12. That each bank organized under this act and doing business outside of a clearing-house city shall select some national bank in the clearing-house city of its own district through which it shall redeem its United States national-bank notes in gold, silver, or United States national-bank notes.

SEC. 13. That the United States Government shall not pay out or reissue any United States legal-tender notes from and after the first day of January, eighteen hundred and ninety-seven; but the same, when received, shall be canceled and destroyed; and further, that the United States Government shall not pay out or reissue any United States Treasury notes or silver certificates from and after the first day of July, eighteen hundred and ninety-seven, but the same shall be canceled and destroyed; and the United States may put out an amount of silver coin equal to the Treasury notes and silver certificates so destroyed.

SEC. 14. That in the event of the liquidation of any national bank organized under this act, the United States Government shall undertake as trustee, but shall not be responsible for the redemption of the outstanding notes; and the assets of said bank, including the assessment upon the shareholders, shall be distributed in the following order:

First. Sufficient gold coin, or its equivalent, shall be set aside and held by the Government for the redemption of the United States Government bond notes.

Second. Sufficient gold, silver, and United States Government bond notes shall be set aside and held by the Government for the redemption of the United States national-bank notes, with interest thereon at the rate of 6 per centum per annum from the date of suspension to the date fixed for the redemption thereof.

Third. That out of the proceeds of the United States Government bonds deposited with it and the guarantee fund created as aforesaid, the United States Government shall redeem, upon presentation, any of said United States Government bond notes, or said United States national-bank notes, reimbursing itself out of said assets.

Fourth. The assets remaining shall be distributed among the depositors and all others having claims in the same manner as now provided by law.

SEC. 15. That all acts or parts of acts inconsistent with the foregoing shall be, and the same are hereby, repealed.

Mr. Fowler addressed the committee as follows:

Mr. CHAIRMAN AND GENTLEMEN OF THE COMMITTEE: It will be comparatively useless to attempt to deal with the financial question unless the evils from which we are suffering are clearly understood.

As well might the physician attempt to treat a patient without diag nosing his case. It is generally admitted now, I think, that treatment is comparatively easy if you have discovered the cause and thoroughly understand the disease.

As the treatment of any case depends upon the diagnosis, and as treatment must diverge as opinion with regard to the difficulty diverges, our first effort should be to find as many causes of our trouble as possible upon which we can all agree, so that we can proceed along wellestablished and well-recognized lines of treatment.

In the first place, I think all agree that our deplorable condition is due to an organic weakness and a functional malady often reaching an acute form, and that during the past three years our condition has been chronically acute. Our trouble involves both our national finances and the currency system of our banking institutions. We may administer a few sugar-coated flour or dough pills, like increasing the circulation to par of the bonds, and allowing banks to organize with smaller capital in out-of-the-way places, and thereby allay the apprehensions for the afternoon; but unless we actually remove the organic difficulty on the one hand with an unequivocal measure of value, and reenforce the blood by infusing into the currency arteries the buoyancy and elasticity of our vast but rapidly exchanging wealth, this old malady will ever return in more and more malignant form, prey upon an ever weakening constitution, produce greater and greater anæmia, and end in disorder and ruin.

GREENBACKS FOOLISHLY PERPETUATED.

Let us inquire first, then, what the organic or constitutional weakness is. It began by the Government issuing its first paper money, possibly of necessity, but foolishly kept in circulation long after the necessity, if any ever existed, had disappeared; and it is no guaranty of wisdom simply because the Supreme Court has decided that Congress could make nothing but a piece of paper, that was always being redeemed and yet is never retired, a legal tender. There are a great many things that Congress can do and does do that are supremely and superbly foolish, and conspicuous among its acts of this character was the act perpetuating the existence of the greenback long after its purposes, if born of necessity, had been served. If a small portion of the money that was used in paying off the Government bonds which could not annoy us had been applied in liquidating our demand obligations, we would have been saved an immense amount of financial trouble and a vast amount of interest, too, before we have finished the greenback chapter. But we were not satisfied even with getting $346,000,000 for nothing throughout eternity, so we started out upon the silver scent; and while we were cunning enough in the act of 1878 to hide behind the coined dollar deposited, we had the hardihood in 1890 of increasing our demand obligations at the astounding rate of $50,000,000 a year, with no way of meeting them except the taxing power of the Government. We did not even assure the people and the world of our good faith by putting up a redemption fund corresponding with that lodged against the greenbacks.

What happened? We soon found that technically we had, including the national-bank notes, about $1,000,000,000 of demand obligations out, and only the same $100,000,000 we thought necessary to protect the $346,000,000 greenbacks, when, in fact, we ought to have had at least $300,000,000 of gold under the circumstances.

All classes of our people, to say nothing of the business men, and particularly the bankers, were looking each other mysteriously in the face and inquiring whether it might not be well to hide away some gold. The foreign broker, wanting to appear conservative and protect his client, and of course get another commission on an exchange of securities, advised extreme caution, pointing out that it would be impossible for the United States to maintain the gold standard, and that it was in a position, in fact, to slide from under when the crash came.

HOARDING GOLD.

What has been the result? The American people of every class have been hoarding gold, while the foreigners have been withdrawing their investments, and, what is quite as bad for an undeveloped country, withholding their inoney from us.

The large outstanding demand obligations of the Government enable those who want gold at home or abroad to force the Government to go on forever paying these greenback and silver demands over and over again, and yet they may never be retired. The only remedy left to the Government under the present circumstances is to sell bonds in advance and corner the $500,000,000 greenbacks and Treasury notes, about which there is no possible doubt as to what the Government has got to do, and then wait for a test case of a silver certificate, which must result in the same conclusion and the Treasury be confronted with $335,000,000

more of demand obligations, while the Government, which the unthinking call the richest in the world, in this very connection finds itself without any of those resources of a bank to meet its debts and literally stripped of every means of defense except its power to tax the people. Was there ever a more pitiable spectacle in the world?

From the foregoing we have discovered some of the disastrous effects growing out of our organic difficulties.

We have observed:

First. That on account of doubt gold is constantly leaving the Treasury and the country.

Second. That our people are nursing their gold, and the United States Treasury must furnish all the gold that is wanted for any purpose whatever, without having any resource except the power to tax the people, and yet must continue an unlimited amount of the paying business of a bank.

How shall we meet the first difficulty and turn the stream of gold now flowing from our country to it, and stop the drain on the Treasury by our own people?

UNEQUIVOCAL MEASURE OF VALUE NEEDED.

There is and will be but one cure, and that is an unequivocal measure of value approved and adopted by all the leading commercial nations of the world, and determined by all human experience to be best suited for settling the balances of trade.

So long as political parties straddle, and so long as it is possible for Members of Congress to declare that the bonds of the United States are in terms payable in silver as well as gold, and so long as one branch of Congress or the other shows its disposition by a vote to take advantage of the word "coin," so long will a most expensive, indeed possibly a runinous, doubt hang over this country.

Of those who declare that we are on a gold basis and are going to pay our obligations in gold I would like to inquire, Why do we not put it in black and white and save this country millions in interest every year, and secure hundreds of millions for investments to develop our vast resources? For there is no country on the face of the earth with our citizenship, civilization, well-established laws, and natural resources (which are the magnets that determine where capital goes), and therefore so assuring to capital, as our own, if the measure of value were only unalterably fixed.

GET THE GOVERNMENT OUT OF THE BANKING BUSINESS.

How shall we overcome the second difficulty that has made this great country ridiculous and may render it financially impotent because the people demand that this debt-doubling process shall cease, little dreaming of the consequences that must ensue. If we would escape the incomprehensible trouble in either event, we must cease the anomalous position of filling all the paying functions of a bank without any of its natural resources.

In other words, the two remedies for our organic difficulty are these: First. Refund our national debt in long-time 2 per cent gold bonds, furnishing a basis of circulation for our national banks and thereby giving to the people a money redeemable in gold over the counter of the bank of issue, thus utterly destroying the gold-hoarding habit at home and dissipating the last vestige of doubt and fear abroad.

Second. Get the Government out of the banking business by converting the greenbacks and Treasury notes into metal reserves of the national banks, and send the silver dollars whirling into the tills of our merchants, and over the counters of our banks.

This done, the credit of the nation can not be threatened in times of peace and ought to be maintained unimpaired in times of war. Its business would then be just what that of New York, Chicago, or San Francisco is the collection of money for the payment of current expenses-and every dollar of the $625,000,000 in gold in the United States would be free money, and would be taken from the safe-deposit boxes, drawers, and stockings and turned into the channels of commerce. So far as I have been able to discover there is but one other view entertained with regard to our organic weakness, and that has been entertained by my fellow-Republicans, indeed originated with them, but which is far more political than philosophical, and which wil Inot stand the test of fact established by investigation.

INCREASING THE RESERVE.

Beginning with President Arthur, we were warned continually of the danger that would grow out of expanding our demand obligations, and all recognized economic writers pointed out the danger long before President Harrison left his office. Even before there had been a deficiency, Secretary Foster was panic stricken and the Republican Administration had prepared and was ready to issue $50,000,000 of bonds for no other purpose than to build up the credit of the nation by increasing the reserve.

I think it will not be denied by anyone who will take the trouble to study the changes from 1878 to 1893, that had the Government begun -in 1878 to cover the depreciation of the silver coined with a proper reserve of gold and continued that policy down to 1890 and through all the operations of the Sherman Act to 1893, gradually increasing the reserve up to about $300,000,000, there would have been no apprehension with regard to the ability of the Government to meet its demand obligations, even though it was compelled to sell $150,000,000 of bonds to cover the deficit growing out of the lack of revenue.

If this be true, then it is clear that it was simply the expanded credit and not the lack of revenue.

After much honest and earnest investigation on my own part, I am satisfied that the lack of revenue has been in no sense the cause of the trouble, although I am of the opinion that it has served to scrape the scab off a most angry, violent, malignant, and festering sore and kept it a running one. The real trouble was in a lack of that prudence on the part of the Government that a good banker usually exercises in increasing his reserves as his demand obligations expand.

But what a frightful waste this prudent policy would have involved, the locking up of $300,000,000 of money for no other purpose than the safe conduct of a most unwise and foolish policy. Nor would the popular will of the country remain silent while so vast a sum was being withdrawn from the channels of trade and the currency correspondingly contracted. This inherent or constitutional evil from either point of view was to breed discontent and disaster.

INTERNATIONAL BIMETALLISM.

While discussing this fundamental difficulty, it may be well to allude to the objection, that has been urged to the gold cure here proposed, on

the part of the so-called bimetallist, but the more accurately described silver monometallist, and that is an international bimetallic arrange

ment.

To these so-called bimetallists I think we may confidently say that so far as the public sentiment of this country goes two things have been established beyond all peradventure

First. That the American people are unalterably opposed to the free and unlimited coinage of silver without an international arrangement. Second. That if this country hopes to secure an international arrangement for the free coinage of silver at any ratio, they will be far more successful in their endeavor to do so if they place themselves squarely upon the gold standard, showing to all the rest of the world that there is absolutely no possibility of this country adopting the free coinage of silver while the other great commercial nations of the earth take all the gold and leave us nothing but silver. The way to reason with the selfishness of nations is to exercise the power of compulsion, and the mere possibility that this great country may in some moment of aberration adopt the free-coinage fallacy stands in the way and will do more to defeat an international arrangement than all other causes combined. Then there is another class, who would sacrifice everything to convenience, instead of all convenience to principle, and who urge the inconvenience of using metal instead of paper money, when, as a matter of fact, the salutary effect of having the metal among our people offsets it tenfold. Among these are even those who would not propose to have anything but good paper money, and yet urge the inconsequen tial consideration of convenience while a great principle is involved, even the credit of the nation. The question of convenience can only be considered after the problem has been solved upon sound economic principles.

Having pointed out what seems to me to be the organic disorders, and dissipated the erroneous diagnosis of those who claim that all our woe is due to lack of revenue, and having pointed out that the very objection of the theoretical bimetallist is really his best if indeed not his only hope of success in securing an international arrangement, and having brushed away the dewy suggestion of convenience, I think we have clearly discerned the true organic weaknesses from which we are suffering.

These being the fundamental difficulties, there can be no question about the remedies that have been suggested.

Assuming that our measure of value has been placed beyond the reach of cavil and forever settled, and our Government has no connection whatever with the currency of our country except as trustee, let us proceed to inquire what the functional trouble is affecting our monetary system.

THE PRESENT BANKING SYSTEM.

I am one of those who believe that we have one of the best banking systems in the world in some respects, and who also believe that it is equally bad in others. All the superficial defects, all the apparent evils, like eruptions on the human body, which are due to disorders of the blood, are due either to too much or too little money to handle the commerce of this great country at any given time.

Any banking system like our own, which results in a currency panic in one city or several localities or possibly all over the United States every time there is the slightest commotion in any department of CUR- -8