banks to the total of their capital and deposits was 115.7 per cent. To-day the loans and discounts to the total of their capital and deposits are only 79 per cent, showing that in 1856 the proportion to the capital and deposits of loans and discounts was 463 per cent more than to-day. Is there any doubt about that being a hardship?

Mr. ECKELS. I should think in Vermont, now, they are able to obtain all the money they can use.

The CHAIRMAN. That is not the question. The point I make is that rates are relatively one-third higher now than in 1856. Is it not a fact that all the money that is paid into the bank other than it issues itself, paper money, that its customers do not want, but want instead to use drafts and checks, displaces the amount of their capital, that is, if the customers want to use checks, etc., rather than currency?

Mr. ECKELS. I do not exactly understand, Mr. Walker, how you mean it displaces this capital?

The CHAIRMAN. I mean to say it has decreased the ability to loan. Now, in New York in 1856 the percentage of loans and discounts in proportion to its capital and deposits was 87.8. To-day it is 96.9, so they are loaning to-day 10.4 more on the same funds under the present system than in 1856. I bring this to your attention to show you the banking system we have is working very great hardship on the agricultural districts, while it is working a benefit to the cities as compared with the country.

FACILITIES OF BANKING IN CITIES.

Mr. ECKELS. That is probably so. As I have stated, the people send their money where they can make the most on it and consider the investment the safest. They apparently make the most in the cities, or at least they know that it can always be invested by those in the cities through the banking advantages which they possess.

The CHAIRMAN. But would not the money be sent back? Under the Suffolk system the money would have immediately gone back to the banks that issue it.

Mr. ECKELS. Undoubtedly that is so, if there was a properly adjusted banking system. Give to the country the facilities of banking which under proper restrictions they could maintain, and it would be found that a large proportion of the money which now goes to the cities to obtain a very small profit would remain in the sections of the country where a larger profit could be made. Money now goes to the cities for the same reason it goes anywhere else. It goes there because the people who own it know it can be employed at a certain rate of profit and because they have the means of knowing it can be so employed. If other channels are opened, giving the same means of information as to the ability of those who are going to use it to return that which is borrowed when it is wanted, those sections of the country will be provided with the money which is unnecessary and a burden to the great cities. The CHAIRMAN. New York has about $60,000,000 above its normal reserve. Is it not a fact that $60,000,000 is in legal tenders, Treasury notes, silver certificates, and that nothing can be done with it, there is no place to send them, but they must keep them in their banks? That is true, is it not?

Mr. ECKELS. Yes.

The CHAIRMAN. Now, if every dollar of currency was issued by the banks themselves, that accumulation never would occur, because the currency would have been sent back to the banks issuing it?

Mr. ECKELS. There is no question as to that.

The CHAIRMAN. So that under our present system there is no machinery by which to send this money back into the country where it is needed, because it is issued by the Government, and wherever it drifts there it must stay; whereas if it was issued by the banks, when paid into another bank it would be immediately sent back to the bank that issued it. Again, does it not follow necessarily that the banks, in order to make a profit on currency, would have to seek out and would seek out for their own self interest persons in their community to whom they could loan it, and who could use it, and thereby make a profit to the bank, which would in fact result in giving very much larger facili ties to secure loans in the neighborhood where the bank was located, because they are obliged to loan to people to make money on their currency, where they denied them under the circumstances suggested by Mr. Fowler.

CONGESTION OF CURRENCY IN NEW YORK.

Mr. ECKELS. I think that the banks would do so, but a distinction, too, must be drawn. These large sums of which complaint is made go to New York City, not because of the legal tenders themselves, and not wholly because of the present banking system. In some measure the fact that the Government furnishes the facilities for redemption of the legal-tender issues at New York adds to the drift of those issues there; but the great cause of congestion is in the lack of banking facilities elsewhere through which money could be used more profitably than in New York or other commercial centers. Under the present banking law, unamended, many communities can not have the benefit of banks, and not having them can not obtain needed money and credit.

The CHAIRMAN. Is it not a fact that the $60,000,000 of currency lying in these banks, of which I have spoken, is because they can not successfully loan it?

Mr. ECKELS. They can not loan it successfully now because of the general condition of the times, and at all times they are more or less embarrassed to keep it in active use.

The CHAIRMAN. Then if we had this old New England Suffolk system of issuing and redemption of this currency by banks, the volume of currency paid into banks would not deplete the power to loan by these banks. They would send it back to the country banks and it would be disposed of.

Mr. ECKELS. Yes. I am agreeing with you as to the bank issuing the notes that if they do issue the notes undoubtedly they would see to it that there was not an accumulation.

Mr. JOHNSON. Here is a point I want to make. If a banking and currency system can be devised whereby the issue of notes is less expensive than under the existing system, whereby the profit of the banks on the issue of notes is greater than it is under the existing system, will it not increase the probability that banks will be established in these agricultural sections?

Mr. ECKELS. I think that is undoubtedly true.

Mr. JOHNSON. I believe that there is a very just grievance upon the part of those living in these sections, when they say that they can not get money to meet either ordinary or extraordinary exchanges without much trouble and without paying exceedingly high rates of interest? Mr. ECKELS. There are many such communities suffering from the inconvenience you have stated. The remedy is, wherever any remedy is possible and conditions warrant the undertaking, to establish banks,

either independent banks or branch banks. These banks would rapidly increase if it was proven that there was a margin of profit in them.

Mr. JOHNSON. And the more the expense the less the margin of profit? Mr. ECKELS. Yes. Not the least benefit which would follow would be that through the establishment of these banks these communities have been afforded the means of bringing to the attention of the owners of loanable capital elsewhere that they have the things which justly entitles them to credit-facilities which they have not at the present time. In a great number of instances at present I have no doubt the want of these facilities, more than any other reason, keeps people who are justly entitled to credit from obtaining it.

Mr. NEWLANDS. Will you permit me—I just want to make an inquiry for the purpose of expediting business. At a convenient time I would like to ask Mr. Eckels a few questions, and now I want to know whether we are to go on with the hearing this afternoon or adjourn until to-morrow. I presume Mr. Eckels wants to get back to the office at some time.

The CHAIRMAN. That is for the committee to determine.

Mr. ECKELS. I must leave some time during the afternoon, as my deputy is absent and I must attend to some duties at my office.

The CHAIRMAN. Until what hour? Can we go on this afternoon? Mr. ECKELS. Until 3 o'clock.

Mr. NEWLANDS. I ask that the committee adjourn until half past 1 o'clock and then resume.

The CHAIRMAN. I think we had better proceed a little further.

Mr. NEWLANDS. Then I make the motion that we adjourn at 1 o'clock until half-past 1. I think some of the committee wish to go into the House during the morning hour.

Mr. FOWLER. I second that motion.

The question was put and the motion was agreed to.

CALL DEPOSITS COUNTED AS RESERVE.

Mr. SPALDING. Is not the congestion in New York City caused largely by the fact they pay interest on call deposits of the banks of the inte rior, and at the same time they are allowed to count that as their reserve; and is that not one of the causes of congestion?

Mr. ECKELS. Yes. Interest on deposits undoubtedly attracts much money there which is counted as a part of the banks' required reserves. Much of it, however, goes there because the owners have no means of knowing where else to invest it.

Mr. SPALDING. It is counted as the reserves of the banks in the interior and out West, and it is kept on call, and they pay 14 to 24 per cent? Mr. NEWLANDS. And in that way the Western banks utilize the reserve and get interest on it.

Mr. ECKELS. In connection with this, if we regulate or attempt to regulate the matter by not permitting them to count that as a part of their reserve, they would not have any more loanable capital at home, because they have still to carry their reserve, which could not be loaned. Mr. SPALDING. I am not combating it, I am simply stating that as one of the factors.

Mr. NEWLANDS. Do you propose that bank currency shall be legal tender?

Mr. ECKELS. No; I would not make bank currency legal tender. Mr. NEWLANDS. Suppose a depositor deposits money with such a bank and takes a certificate of deposit, and then demands payment of his certificate in legal tender, could the bank pay him with this currency?

Mr. ECKELS. It could pay in this currency, and the currency would be redeemable in gold.

Mr. NEWLANDS. That deposit calls for dollars, does it not?
Mr. ECKELS. Yes.

Mr. NEWLANDS. If he demands payment of gold or legal-tender money, would not he be entitled to it?

Mr. ECKELS. Yes; and he would undoubtedly get it, because no bank would permit itself to lose its credit. The competition between banks and the necessity of self-preservation through a maintenance of credit would regulate that.

Mr. NEWLANDS. The bank could not legally compel him to accept this currency in payment of a certificate of deposit?

Mr. ECKELS. I do not believe much in legal tenders, anyway.

Mr. NEWLANDS. Suppose the bank loans out its money upon the promissory note of its customer payable in dollars, would that customer pay bank notes in discharge of that note?

Mr. ECKELS. No; I think he would have to go to the bank and get his notes redeemed.

Mr. NEWLANDS. No; he would have to tender legal-tender money? Mr. ECKELS. Yes.

Mr. NEWLANDS. And the function, I understand, of this bank currency is that it would be practically simply a bank check payable to bearer to circulate in a community?

Mr. ECKELS. Say a promissory note on the part of the bank redeemable in gold.

Mr. NEWLANDS. Now, to what extent do you expect when greenbanks are retired bank currency will be issued in this country; how many millions?

Mr. ECKELS. I think it would be issued to the extent that there was a demand for it. Every dollar which could possibly be used profitably by the people would be issued by the banks, because in this way only would a profit on note issues accrue to those who are engaged in the banking business.

Mr. NEWLANDS. In your opinion, would the aggregate issue of the banks equal the aggregate issue of the United States banks and United States Government in the shape of greenbacks to-day?

PRESENT REDUNDANCY OF CURRENCY.

Mr. ECKELS. Probably not. I think to-day there is a great redundancy of currency, but if needed it would be issued.

Mr. NEWLANDS. I understand the issue of greenbacks to-day is approximately $300,000,000?

Mr. ECKELS. $346,000,000.

Mr. NEWLANDS. And of the national banks about $200,000,000 ?
Mr. ECKELS. More than that; about $235,000,000 now.

Mr. NEWLANDS. Making in all about $550,000,000. Your idea is that under this new system of national-bank currency that extent would not be issued, but it could be issued if it was needed?

Mr. ECKELS. Yes, if needed. I have no doubt, however, but that a great deal of gold would come in, which would lessen the necessity of bank notes.

UNCOVERED PAPER MONEY.

Mr. NEWLANDS. Do you know of any country in the world that supports so large an amount of bank paper redeemable in gold and maintains it at par with gold?

CUR- -17

Mr. ECKELS. Yes; I think the issue of the Bank of France is almost as large.

Mr. NEWLANDS. Uncovered paper money?

Mr. ECKELS. Oh, no; not uncovered.

Mr. NEWLANDS. What is the total amount of uncovered issue of the Bank of France?

Mr. ECKELS. I could not say definitely as to that. In England it is about £16,000,000.

Mr. NEWLANDS. About $80,000,000. And what is it in Germany? Mr. ECKELS. I do not know certainly, but about $60,000,000. It may be larger.

Mr. NEWLANDS. Do you know how large it is in France?

Mr. ECKELS. No, I could not state positively.

Mr. FOWLER. I would like to understand what you mean by covered and uncovered currency?

Mr. ECKELS. Covered paper is the paper which has the actual coin behind it for its redemption-a special deposit.

Mr. FOWLER. For its security?

Mr. NEWLANDS. I would not call money covered money that is simply secured by bonds, or assets, or anything else.

Mr. FOWLER. Do you not know there is not a dollar of the Imperial Bank of Germany that is not secured?

Mr. NEWLANDS. I was asking with regard to that.

Mr. ECKELS. I think at times, Mr. Fowler, notes are issued by the Imperial Bank regulated by a tax

Mr. FOWLER. And not covered by a single dollar, coin or collateral? Mr. NEWLANDS. I observe in the report of the Director of the Mint that the uncovered paper money of England is put at about $80,000,000— that accords with your statement; that the uncovered paper money of Germany amounts to about $125,000,000, I can not recollect the exact amount; and the uncovered paper money of France and the Bank of France amounts to less than $125,000,000. Now, is the report of the Director of the Mint correct in that statement? Have you ever examined it?

Mr. ECKELS. Yes, I suppose it is. He makes up those figures.

Mr. NEWLANDS. Do you know any other countries that are able to maintain their paper money at par with gold outside of such small countries as Belgium, Holland, and possibly Switzerland?

The CHAIRMAN. Do you know what portion of the money is covered by gold and silver in France?

Mr. ECKELS. No, I do not.

Mr. NEWLANDS. Russia, the Director of the Mint states, has about $500,000,000 uncovered paper money. Do you know whether or not it is kept at par with gold?

Mr. ECKELS. No, I think it is not at present.

Mr. NEWLANDS. How much of a discount?

Mr. ECKELS. Well, I do not know just the exact figures.

Mr. SPALDING. About 50 per cent compared with gold.

Mr. NEWLANDS. Austria has something less than $200,000,000 of uncovered paper money, according to the Mint Director's report. Is that money kept at a par with gold?

Mr. ECKELS. No, there is a discount now, as I remember.

Mr. NEWLANDS. Do you know how heavy a discount?

Mr. ECKELS. No.

Mr. NEWLANDS. Italy, according to the Mint Director's report, has quite a large amount of uncovered paper money. Do you know whether or not that is kept at a par with gold?