purposes. These bonds have a quality of reconversion when the Treasury of the United States may be called upon to redeem the notes of failed banks or when a bank may desire to cancel its circulation, which must be presented in sums of $5,000 or more. (I suggest that the word "notes" be stricken out from the tenth line of this section.)

CURRENT REDEMPTION.

Section 7 provides for the redemption of the bank notes by the issuing bank, including the bank-note issues, and to relieve the Treasury Department of that business which involves a vast deal of labor and expense, it is made the business of the Secretary of the Treasury to create redemption districts and designate in each redemption district a central city, the banks in which shall act as the redeeming agents for the other banks in the district. These redemption agents shall be banks approved by the Comptroller of the Currency, as prevails now in regard to reserve agents. But this method of redemption agents shall not relieve the issuing bank from obligation to redeem at its own counter. The redeeming bank shall be made safe by a deposit equal to 5 per cent of the outstanding circulation of the issuing bank. It is left to the judgment of the redeeming bank whether this deposit shall be in legal tender or whether it shall be a deposit account of the bank, and it would be an injustice to suppose that the redeeming bank should surrender to the issuing bank its entire deposit on the surrender of any amount of notes less than its entire issue. This remark is made on account of some objections made against the 25 per cent free issue. Redeeming banks would be left to make their own arrangements with the issuing banks as to intervals at which they would return redeemed notes, whether daily or weekly, or at longer intervals.

The sorting out of notes received in the daily business of a bank would not be so difficult as may seem at first sight. From several years' experience at the sorting table I know it can be accomplished by the ordinary bank clerk, besides after the plan has been a short time in operation the notes of banks in the district will gravitate to the district and form the bulk of the notes in circulation.

The 25 per cent free circulation is made a first lien on all the assets of the bank. The first collections out of the assets of the bank are to be applied to the payment of the "free" circulation, whether the depos itors are paid or not. I can not conceive of a case, except with the grossest rascality of management, when the assets would not suffice to redeem the "free" circulation. The depositors would get what is left and what could be secured from the double liability of the stockholders, but I think the day of wild-cat banking is passed.

CASH RESERVE TO BE KEPT.

Section 8 says banks acting as redemption agents shall keep on hand at all times a cash reserve equal to 25 per cent of their liabilities, and other banks 15 per cent. All banks issuing circulation under this act shall make reports to the Comptroller of the Currency, and shall be subject to examination like existing national banks. This section contains an important provision, giving the Secretary of the Treasury, with the consent of the President, authority to suspend the provisions of this section for thirty days, as regards cash reserve. It is hardly necessary to speak of the importance of this proviso.

SCOTCH AND CANADIAN SYSTEMS.

There is a growing feeling in the community in favor of the Scotch and Canadian system of branch banks. This is provided for in section 9. It permits banks having sufficient capital to establish branch banks within their redemption districts. In the bill the capital is put at ten millions. At the public hearings by the Committee on Banking and Currency in 1894 the question was asked why the rate of interest was so low in large cities and high in other localities, which was not satisfactorily answered. The cause is competition. In large cities the competition under normal circumstances is between the lenders (fortunately there is no trust in that quarter), and the one who takes the lowest rate loans his money. In sparsely settled localities, where the borrowers are plenty and the lenders few, the competition is between the borrowers. It is the law of supply and demand. This to a large extent will be remedied if banks in central cities are allowed to have branches in newer localities. It will bring to the latter the means and credit of large institutions and be a benefit to the parent bank in keeping the rate of interest from going abnormally low at home.

REDEMPTION AGENTS.

Sections 10 and 11 merely provide how notes shall be signed and new notes substituted for mutilated ones, similar to the provisions in the national-bank act; also that public notice shall be given of redemption agents as they are appointed.

The closing sentence of section 11 reads:

All banks issuing circulation under this act shall receive on deposit, and may pay out at par, the circulating notes of any other banks.

I think it would be well to add another section: That all notes issued under the provisions of this act shall have the same legal-tender quality as notes issued under the national-bank act.

BANKING IS A HUGE CREDIT SYSTEM.

If time is given me, I would like to say that banking is a huge credit system, and consideration should always be given to the fact that bank credit has a large part in commercial transactions. In New York, through the operations of the clearing house, hardly more than 3 per cent of commercial transactions are settled with money. Possibly not more than 5 per cent are so settled throughout the country. I would call your attention to the last clearing-house statement, showing that the loans and discounts, which form part of the amounts due depositors, amounted to $491,116,200, while the deposits amounted to $548,038,200, showing that only a fraction of the amount credited to depositors was money.

A few weeks ago the item of loans and discounts was more than the amount due depositors, and this has happened before, in 1893.

LIMIT OF ISSUE OF CIRCULATING NOTES.

There is only one more point which possibly requires elucidation. By the first section of the bill the limit of issue of circulating notes is fixed at $500,000,000, exclusive of the amount of national-bank notes now issued. It is believed that this amount will be sufficient to meet

the wants of trade for years to come, as it has been shown that but a small percentage of money is used in commercial transactions; and besides, this amount will nearly absorb the entire issue of United States and Treasury notes, as is shown by the following calculation, based on the bank reports of October 6, 1896:

As given by Comptroller Eckels, 3,679 national banks, having a capital of $650,014,895, have a circulation of $209,944,019. To give them 50 per cent on capital they will be entitled to a circulation of $325,000,000, which is in excess of their present issue $116,000,000. There were 3,708 State banks with a capital of $240,133,805, and a 50 per cent secured circulation to them calls for $120,000,000.

These two requirements, amounting to $236,000,000, will leave outstanding only $110,000,000 of United States notes for bank reserves, for new banks, and for such national banks as may wish to substitute United States notes for their bonds with the Comptroller. Should all the banks take out the limit of circulation, 50 per cent secured and 25 per cent free, the 5 per cent reserve will absorb $28,000,000 and leave only $82,000,000 of United States notes and $119,000,000 of Treasury notes for the Treasury to cope with. The usual holding of United States and Treasury notes is $120,000,000, which would leave outside of the Treasury less than $80,000,000 to fill the bank reserves. The void would have to be supplied with coin.

. Mr. Ferris having concluded his remarks, the Chairman introduced Mr. Gamaliel Bradford, of Boston, Mass.

STATEMENT OF MR. GAMALIEL BRADFORD, OF BOSTON, MASS.

Mr. BRADFORD addressed the committee as follows:

Mr. CHAIRMAN AND GENTLEMEN OF THE COMMITTEE: Perhaps I should give a brief sketch of my personal history. I entered State street, Boston, a mere boy, and as a clerk, forty-one years ago; and my history runs back to the old financial system of 1857. I passed all through the war period, and you can imagine what my experience was while engaged in the management of an active foreign exchange account. I have had over thirty years' actual experience, and have been led naturally to enter the national fields of finance, although I have since asked myself, What is the use? Because in the matter of national finances almost every individual and newspaper has a different scheme to offer, and there is no means of distinguishing just which is the best.

The CHAIRMAN. Yes; I have found it a difficult thing myself to work out.

Mr. BRADFORD. Yes, sir; I have spent considerable time upon it ever since 1870 or 1871. Finally I came on to Washington to watch the proceedings of Congress and in order to study the subject from actual observation, but I found the same state of things to prevail here. Hence I have made up my mind that no progress can ever be made until it has been decided to try one plan and one man at a time. We have been at work now on different plans by different individuals for thirty years, and I can not see where we have advanced a single step. In fact, I think we have gone back.

Why not require the executive head of the finances to state and defend his own plan under a public fire of criticism? For example, allow the Secretary of the Treasury, who alone represents the whole country and the administration of the Government, to have at least as good an

opportunity to state before the country the wants of his Department as Members of Congress have.

GREENBACK CRAZE AND SILVER CRAZE.

Something must be done. Some ten or twenty years ago it was the greenback craze, just as it to-day is the silver craze. But how can you blame the people of the country when the Senate of the United States sets them the example? How can you blame the people for wanting free silver when that body goes so far as to refuse all financial legislation unless it is coupled with a law providing for the free and unlimited coinage of silver?

The CHAIRMAN. Now, Mr. Bradford, if you will only come to the point and tell us

Mr. BROSIUS. No; I rather enjoy his way of putting it.

Mr. BRADFORD. Now, the conviction on this subject, which came into my mind thirty years ago, is expressed in a Senate report, which was signed by eight Senators, dated February 4, 1881. I can not possibly add anything to the plan outlined in that report. It was presented to the Senate and signed unanimously by eight Senators of both parties in favor of admitting the members of the President's Cabinet to both Houses of Congress, with the right of joining in debate and the duty of answering questions relating to their Departments; and the report further set forth the changes in the rules suitable and necessary for carrying the proposal into effect. It is true that the report has never received a moment's attention from either House, but its existence shows that the measure now advocated is neither revolutionary nor fanciful.

CONSTANT RUSH OF SCHEMES.

As I have said, there has been a constant rush of schemes, backward and forward, but no means for arriving at any conclusion. Mr. Carlisle, for instance, is very earnest for the retirement of the greenbacks, but he has no definite systematic substitute to propose. If there is one thing absolutely certain, it is that neither Congress nor the country will consent to any extensive withdrawal of the Government paper till it is clearly set forth before them by what that paper is to be replaced. The chairman of this committee has what he believes to be an adequate scheme for meeting the occasion. I would ask him if, after years of strenuous exertion, he finds that he is any nearer to securing a serious consideration of it by Congress?

The business of this country has been thrown into panic and disaster through fear of a popular vote for the free coinage of silver. Can the people be blamed for being led away by such a fatal delusion when they are only following the example of the grave and dignified Senate of the United States?

INDIANAPOLIS MONETARY CONVENTION.

Last Tuesday there met together at Indianapolis a convention of delegates from commercial bodies in all parts of the country to devise a practical scheme of sound money. How far they have been successful in that is of minor importance. The real problem is, How can Congress be induced to pay any attention to it? A problem which seems to have received no consideration whatever. It is safe to predict that we may go on as we are now for another fifty years without coming one step nearer

to the end so ardently desired, the whole business of the country being left meanwhile in turmoil and fluctuation, tossing restlessly without relief from pain.

But who knows what the effect of all this would be? Nobody knows. Why not have the Secretary go before Congress and explain his scheme beforehand, so that its defects could be pointed out in advance? But as it is now you must just take his scheme and then explain it to the people afterwards. Why not reverse the order? I know it will be said that the Secretary can appear now before the committees and explain any proposition he wants enacted. But the difference between appearing before the committees and appearing before the whole House under the eyes of the country is too obvious to need comment. It is objected that it is a servile imitation of English practice. It is to be hoped that we are not so childish as to reject a measure desirable in itself because it contains a resemblance to the procedure of a nation from which the main principles of our institutions are confessedly derived.

With some inconsistency it is argued that the English system requires the resignation of a ministry upon an adverse vote in the House of Commons and that this is incompatible with our fixed terms. But it is not proposed to copy the English system. The English House of Commons creates the ministry and must have the power to destroy it. Our President, and therefore his Cabinet, derive their authority from the people, just as Congress does, and neither needs to be dependent on the other. There is no more reason why a Secretary should resign if he can not persuade Congress than there is now; he must do the best he can. It may be objected that such a change would be a departure from the practice of our Government from the beginning; but if that practice has led us to disaster and threatens still worse, the quicker we depart from it the better off we shall be.

Then your honorable chairman here has a scheme for banking and currency, and I ask him to-day if he has been able to get it before the country?

Mr. WALKER. No; I have not even been able to get it out of this committee.

NO ONE NATIONALLY RESPONSIBLE.

Mr. BRADFORD. But why is this? Not because it is not a good plan; but the reason is because there is no one nationally responsible for his scheme. There is no man in Congress to-day, no man in the House of Representatives, who can speak for the entire country on any matter. None of you gentlemen represents the entire country, but you only represent 356 fractions of the country. Each of you represents a fraction of the country only. It may be true in mathematics that the sum of the parts is equal to the whole, but it is not so in politics.

Mr. WALKER. You say the members work for their districts' interest. Is not that working for the country's interest?

Mr. BRADFORD. No, sir; not one of them is sent here to look after the national interest. No one of them can secure the attention of the House to speak for the entire nation on this or any other subject. Then, again, there is no one to speak for the Administration; no one of you gentlemen is responsible for the Admistration. Suppose Mr. Walker's bill is handed over to the Secretary of the Treasury when it is passed; who is to be made responsible if it is found that the plan is not a good one. Certainly not Mr. Walker. Then, too, the Secretary of the Treasury may not be in sympathy with the measure. You will excuse me for going out of the way a little, but let me say that there is