Mr. ROYAI L. I recognize the compliment you pay me in asking for my opinion, and I will be very glad to comply with your request.

Mr. JOHNSON. You recognize the fact, don't you, that it is not a simple question of what is right to be done, but what it is possible to get through Congress?

Mr. ROYALL. It will give me the greatest pleasure to think of it. I have always thought that the best way was to issue bonds and pay interest on them and take them in.

Mr. JOHNSON. But you would not undertake to get such a measure through the Senate as now constituted?

Mr. ROYALL. No, sir; I suppose not, but I won't say so. I think possibly it might be done if properly managed. There is great room for hope in the case.

Mr. ALDRICH. In speaking of the rate of interest on such proposed bonds you mentioned 2 per cent, and the chairman spoke of 23 per cent. Could you issue them at par?

ISSUING BONDS TO TAKE UP GREENBACKS.

Mr. ROYALL. I could not answer that; but, whether they could be marketed at par or not, the bond ought to be a 2 per cent one and sold for what it will bring. It will sell for very near par, if not par. Here is a suggestion that might throw some light on the subject: The difficulty you have in taking in the greenbacks comes in the main from our part of the country. There is an idea there that there must be a great deal of Government money out. The people have been misled by seeing the Government put out this money. I believe the Southern people will agree to give up the greenbacks if they can have the repeal of the 10 per cent tax.

Mr. Cox. I am just in that fix. If they will give me State banks, I will be willing to have bonds issued to take up the greenbacks.

Mr. ROYALL. That is it. I believe the South will agree to this. But I fear the West will make a difficulty.

The CHAIRMAN. You are of the opinion that the people of the South will be sufficiently willing to issue bonds at 2 per cent interest to take up the Treasury notes and greenbacks so that their Representatives can feel that if they vote for that measure, provided it is coupled with the repeal of the 10 per cent tax on State banks, they can be reelected? Mr. Cox. If they can't, let them stay at home.

Mr. ROYALL. Yes, sir; I believe so. The Populist element of the Southern States will not agree to it, but the Populist element in my State is not the controlling element. All the old-time Democrats-I mean the men who were Democrats before the Chicago platform-will agree to it.

THE WHOLE SOUTH APPROVES REPEAL OF 10 PER CENT TAX.

The CHAIRMAN. The only point this committee wants to know is this: Whether you believe that the Congressmen throughout the South will be sufficiently certain that their constituents would approve this act so as to insure their reelection-you understand what the Congressman wants most is to be reelected-so as to vote for this measure looking to the retirement of the greenbacks and Treasury notes, provided we will first repeal the 10 per cent tax?

Mr. ROYALL. I believe the whole South will go for it. I believe there would be a universal uprising of the people.

The CHAIRMAN. Your paper could do something toward that. I

think we can carry it in the East. I believe they will do anything to get rid of these notes.

Mr. ROYALL. What is your opinion, Mr. Cox? How is it in Tennessee?

Mr. Cox. I will give you my idea in a word. It is just this: You have stated the proposition absolutely clearly. You would find the leaders of the Populistic party complaining of it, but you would find the masses of the people delighted with it. Your country and mine are almost exactly alike. All we want is that they turn us loose and we will take care of it.

Mr. ROYALL. Certainly.

Mr. HILL. How would this proposition strike you? That the banks of the country should take up and maintain the redemption of the Government paper money to the extent of one-half of their capital, with the privilege of issuing untaxed circulation of their own for the other one-half.

Mr. ROYALL. It would be a step in the right direction.

Mr. HILL. As a fair compromise of existing conditions, don't you think?

Mr. ROYALL. It would be a good step.

Mr. HILL. That is substantially Mr. Walker's plan. Mr. ROYALL. It is all right,, but it won't help us. currency, but it won't give us any.

Mr. HILL. Why not?

It will give you

Mr. ROYALL. Our Richmond banks would put out the untaxed circulation, but it would be secured by Government security

Mr. HILL. Oh, no! One-half of it will be secured, because the redemption of one-half of it will be provided for.

Mr. ROYALL. That would be splendid if there are to be no bonds put up to secure the notes. It is a step in the right direction.

The CHAIRMAN. The point is, the next step is to get the greenback out of the way. It will take twenty years to do that.

A SETTLEMENT CAN BE MADE.

Mr. ROYALL. My opinion is that if this committee will take this propositinn boldly by the throat the people are now in a humor to follow it. A settlement can be made by wisdom and courage.

The CHAIRMAN. The suggestion is made that if the South would support the bill there are a great many men who would take chances on the repeal of the 10 per cent tax, provided they can get the greenbacks out of the way. The proposition is made that certain Western States would oppose it. Now, if we can get the bond securities out of the way and limit the issue of legal-tender notes that the banks shall assume to $500,000,000, and then keep that pro rata and allow them to issue money freely in other respects, without limit-is not that the only solution of this difficulty that you can see?

Mr. ROYALL. Then you propose a national bank of Richmond may put out as many notes as it chooses and have no security?

The CHAIRMAN. None except the assets of the bank. I am putting an extreme case.

Mr. ROYALL. Have you got that far? You are nearly as far as we are. You are moving in the right direction.

The CHAIRMAN. I am not saying it would be without limit, but I am saying provided it was made so the banks could issue at their discretion.

Mr. ROYALL. Offhand the proposition seems attractive.

UNIVERSAL BANK NOTES.

Mr. JOHNSON. The people of the Middle States are wedded to the idea of universal bank notes. It will be exceedingly difficult to turn them away from it. If you get any relief from the plan you propose, you will get it under national control that will preserve the system of uniformity to which you object, for you say there can not be plenty of money if it is of uniform value.

Mr. ROYALL. I do not object to the charters for banks coming from the National Government, although it is wrong in principle, but I think the system of bank inspection is the greatest farce in the world. Mr. JOHNSON. But it might be made very effective.

Mr. ROYALL. I do not believe it is possible. When you bring politics in, you can not get good accounting.

The CHAIRMAN. I want to ask you one question, which is a crucial question: If this committee could devise a scheme that would immediately, by the working of the selfish interests and selfishness of the banks, send back into the locality and through the banks that issued them the bank notes that get away from that bank immediately, aren't you as well satisfied that that would keep them at home as to have a discount on those notes anywhere?

Mr. ROYALL. I ought to be; but I know when you do that by an act of Congress you are going to spoil the whole thing.

Mr. JOHNSON. You recognize the necessity of some law to restrain the issue of paper money?

Mr. ROYALL. None but by the State.

Mr. JOHNSON. A law restricting the issue by State authorities is as much a law as if enacted by the Federal authority.

Mr. ROYALL. I don't see much difference, but I am opposed to any State law. The thing should be left to the manager of the banks, though I know Virginia's legislature would provide very stringent restraints.

Mr. FOWLER. If there is a limitation you would just as leave have it national as State?

Mr. ROYALL. No, sir; for this reason. I do not care about your inspection business; it cuts no figure; but it is this provision that has to do with the national credit of the note.

Mr. JOHNSON. I asked you if you would not be willing to have national legislation on the subject.

The CHAIRMAN. He answered he did not care which.

STATE RIGHTS.

Mr. ROYALL. I see very well that you think because I came from the South I have a prejudice against a charter from Congress and some particular attachment to the State's-rights idea.

Mr. JOHNSON. No; not because you come from the South, but from what you have said-and very ably said.

Mr. ROYALL. I say this. While I don't care a straw for your bank inspectors, don't require me to secure my notes; let me put out my notes on my assets, and don't require me to secure them in such a way as that they are good in New York; and I had as soon take my charter under an act of Congress as under a State law.

Mr. JOHNSON. You would not think any less of your notes because they are good in New York?

Mr. ROYALL. I would, because that would make them leave me. Mr. FOWLER. If they were good in New York and still they would come back to you, you would prefer that?

Mr. ROYALL. I would like to see you devise such a scheme. I tell you the bankers in New York will beat all legislation you can pass, and will get our notes if they are good everywhere.

WHAT THE SUFFOLK BANK REQUIRED.

The CHAIRMAN. You will please pardon the suggestion, but I would be glad if you would bring your mind down to a period of twenty-five years. In the section of country where I have lived, notes have never circulated. They have been sent back at par nominally, but they have been sent back at the expense of the banks that issued them in this way: The Suffolk bank required a deposit from the bank whose notes they were going to redeem of a sum equal to a given percentage of the notes they issued as a constant permanent deposit, in order that they might redeem the notes out of that deposit, just as the Government does here, and when the notes struck a bank that bank was compelled by the other banks, virtually aside from law, to send their notes to the Suffolk bank, and the Suffolk bank immediately notified the country bank that they had a certain number of notes there and they had to keep that deposit good. That note never got a black eye, and it went back instantly to the bank that issued it. Now, that is what is proposed in one of the bills before us.

Mr. JOHNSON. In other words, Mr. Royall, under the Suffolk system the paper was kept out and was kept uniform, and it was the selfishness of the banks that led them to keep it out. There is an instance, sir, where the money was kept out and yet was kept good.

Mr. FOWLER. Every bank was interested in getting every other bank's money sent home.

NOTES ISSUED AGAINST ASSETS.

Mr. ROYALL. All I have to say about it is this, gentlemen: If you will let us put out as many notes as we please on our own assets and do not require us to give any security of any sort for those notes, I don't care how many things of that sort you may put on-I don't care how many provisions you may put on for driving the notes back. It is wrong in theory, but still we can get along then.

The CHAIRMAN. I want to call your attention to the fact that there is probably a State law that permits banks to issue notes against their assets only to the extent of the capital of the bank. I think there is a limit in every State. You have stated that in your own State there is a limit to the issue of notes-that not over $5 can be issued for each $1 of specie held by the bank, but that the banks have sometimes exceeded that limit. In view of this uniform practice of all the States, I do not believe that this committee would ever pass a bill that would not fix some limit. Now, what I want to ask you is this: Supposing the States were allowed to have an average circulation not exceeding a certain percentage of greenbacks or coin (and they might issue at times considerably in excess if they reduced it at other times, so that the average should be a certain amount), is not that determination by all the States to make a limit as far as this committee would be justified in going in expecting to get it through Congress?

Mr. ROYALL. You are your own judges as to what you may be able to get through Congress. I know how it is in my State, and Mr. Cox tells me how it is in his State-that the people are craving the liberty to put out notes on their own credit.

The CHAIRMAN. The point is that the earnings of those notes when

they are out are so much that ordinarily they will pay a heavy dividend, satisfactory to the stockholders, if they didn't make any more any other way. That is why your people want it put out.

Mr. MCCLEARY. In the summing up of this whole matter it seems to me that our friend who has honored us with his presence here desires as the end that he shall have money that will stay in the locality where it is issued, and I understand him not to be very particular as to the means, provided it is effective.

Mr. ROYALL. That is it.

Mr. JOHNSON. But he doubts the wisdom of any measure exceptMr. ROYALL. I deny the right of the Government, when we come to weigh the matter on the basis of the Constitution, to have anything to do with it. That is theoretical, though.

Mr. ALDRICH. I wanted to make a little statement, as Southern States were referred to. In regard to Alabama, I know the wants of the people there. They are similar to what Mr. Royall says as to farmers wanting more money, and the great objection to national banks has been, and is, that the security they have to offer is not acceptable to the national banks under the law.

Mr. JOHNSON. What security?

Mr. ALDRICH. Real estate and so on, and mortgages on their cotton. Mr. FOWLER. Do you mean on their bales?

Mr. ALDRICH. No, I mean on their crops.

WEDDED TO FREE SILVER.

In addition to that, they have been educated to the idea of the free coinage of silver, that that will give them more money-this additional money that will stay with them-and they are wedded to that idea, or to Government money, in my opinion. If you adopt a plan retiring the greenbacks and Treasury notes, the result will be an extra demand for the free coinage of silver, which most of you desire to avoid.

Mr. Cox. As all this record is being taken down, I want to call your attention to the banks reported "failed banks" in the list which has been referred to, in the State of Virginia. This is a list prepared by the Comptroller, from the 1st of July, 1811, to the 1st of July, 1830. This is not a list of banks that failed. This is a list of banks that discontinued business and failed, and there is nothing here that shows which failed.

Referring to my own State, allow me to say-for I want this record right-that there are reported on this list failures amounting to something over $2,000,000, and among them he has reported the old State Bank of Tennessee and its branches, when every dollar of that bank was redeemed and paid.

The committee adjourned at 1 p. m.

COMMITTEE ON BANKING AND CURRENCY, Washington, D. C., Saturday, January 16, 1897. The committee met at 10.30 a. m. Members present: The chairman (Mr. Walker) and Messrs. Brosius, Johnson, Fowler, Spalding, Calder head, Cox, Stallings, and Black.

The CHAIRMAN. Mr. Lancaster, who will address you, is a banker and broker of Richmond, Va., and was in the banking business nine years before the war.