Your statement is correct-that the profits on currency vary from day to day with the variations in the prices of bonds. Your eighth statement is as follows:

PLACE OF REDEMPTION.

Under the present law practically every dollar of the $1,000,000,000 of our currency notes is redeemable in gold at the United States Treasury.

Under the proposed bill not a dollar of currency notes of any kind will be redeemable at the United States Treasury. It will give, practically, final gold redemption at the national clearing-house in New York and redemption in legal-tender notes and silver at country banks.

I think we agree that, as a matter of fact, under the provisions of the United States statute which says that the Government shall maintain the parity between the moneys, every dollar of the $1,000,000,000 or more of credit currency which is outstanding is based upon gold and redeemable in gold if so desired by the holders of it. Under your bill you propose the banks shall assume it.

Mr. HILL. No.

Mr. ECKELS. Except in the last analysis?

Mr. HILL. It provides for current redemption at the United States Treasury.

The CHAIRMAN. I beg your pardon. Not unless the Comptroller prefers it to be done there.

Mr. ECKELS. I may be mistaken, but, as I understand it, Mr. Walker's design is to place the current redemption upon the banks. But the ultimate redemption, if that point should be reached, is upon the Government through its guaranty, which amounts to a bond.

SAFETY PROVISIONS.

Your ninth statement is as follows:

Under the present law the money of the people is made safe by banks being obliged to deliver to the Treasurer of the United States an amount of capital equal to the amount of their currency notes when they commence business.

Under the proposed bill they will deliver the same amount of capital when they close business. Under both systems the Government guarantees every dollar of the paper money in circulation and at no cost to the Government. (See p. 603, Report of Comptroller of Currency, 1895; also see App. L., p. 56 [of this volume].)

That is simply a provision of your bill as against a provision of the national-bank act.

The CHAIRMAN. The statement is correct.

Mr. ECKLES. It is correct as to what you propose to do.

The CHAIRMAN. Is it not correct that the bill, if it were enacted into law, would do that?

Mr. ECKELS. Yes; because the bill provides that there shall be security. You propose under your bill that there shall be a certain percentage of security in the way of the demand obligations, and that there shall be in addition liens, etc., upon the assets, backed by the guaranty of the Government for unlimited redemption. This certainly would make the note holder safe. As to the provision for the banks depositing the security on the amounts issued against the assets of the bank, the only difference in effect between your proposition and the present law would be that possibly the note holder and the depositorunless you have a great many safeguards-may think it is better to have the deposit made before the bank commences business than to have it made when it winds up. But in regard to this feature of this bill, I suppose it ought to be remembered that while you are against

bond securities, you undertake to have virtually the same security by making the Government guarantor. The only difference is that it relieves the Government of this current redemption, which is the great source of its difficulty, and at the same time it does not compel the banks to tie up in securities a certain amount of loanable capital, which otherwise it might distribute among those who wish to borrow.

The CHAIRMAN. That would be a great source of loss in low-interest localities and a great gain in high-interest localities.

DAILY REPORTS OF CONDITION OF BANKS.

Mr. ECKELS. Your tenth statement is as follows:

Under the present law the Comptroller of the Currency does not know the exact condition of the banks except by occasional reports and occasional examinations by official bank examiners.

Under the proposed bill the Government will know of each day's condition of the banks and also by the same examinations as under present law.

Under the present law the Comptroller tries to know the condition of the banks by examination. Of course, any provision which would give him from day to day or from month to month a more complete knowledge would better enable him to discharge his duties.

The CHAIRMAN. Under the proposed bill he would have a daily report?

Mr. ECKELS. They are to keep, as I understand it, a daily report, but those reports would only be sent to the Comptroller once a month. The CHAIRMAN. You would not know on each day, but subsequently you would know the condition of the banks every day in the month at the end of it, and each year.

REDEMPTION FUND.

Mr. ECKELS. Your eleventh statement is as follows:

The present law takes out of the currency the banks are allowed the 5 per cent redemption fund the bank is required to keep.

The Walker bill provides that the Government shall furnish it by setting aside 10 per cent of the money the banks pay for the half of the currency they buy in the form of United States legal-tender notes.

That is simply a statement of a fact under the provision of your bill. Mr. HILL. Is it a fact?

Mr. ECKELS. It is a fact relative to the present law. It takes out of the currency circulation the 5 per cent.

The CHAIRMAN. My bill provides the Government shall furnish it. Mr. ECKELS. I think any provision of the law, any amendment to the law, or any provision in a new law-referring again to section tenwhich would give the Comptroller better information for the benefit of the people would be a good thing.

USE OF RESERVES.

Your twelfth statement is as follows:

The present law forbids, under severe penalties, the banks under any circumstances to use their reserves for the very purpose for which the banks are required to keep such reserves.

The Walker bill allows the banks to use their reserves in any legitimate way for the purposes for which they are required to keep a reserve.

I am under the impression, Mr. Walker, that either I have a misapprehension of the use of a reserve or you have a misapprehension. My

understanding of a reserve is that it is kept for the purpose of meeting the demands of depositors. That fact is emphasized by the change which was made in the law that discontinued or did away with the necessity of a bank keeping a reserve against notes and only compelled it to keep a reserve against deposits. For the purpose of accomplishing the thing which the reserve is kept for, a bank is justified, and, in fact, compelled to pay out the last cent of its reserve to meet the demands of depositors. It is only prohibited by the law from using that reserve to make new loans, except the meeting of bills of exchange or some such matter as that. But it can use it for the purpose for which it is created, and when it has used it for that purpose it is provided by the law that it shall have the succeeding thirty days in which to make its reserve good.

TREASURY DIVORCED FROM BANKING.

Your thirteenth statement is as follows:

Under the present law every operation of the Treasury expands or contracts 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 for the bonds recently sold.

Under the Walker bill whatever sum the Treasury bad or failed to have available would not affect the volume of the currency of the country by the smallest fraction.

I think the statement is correct, that under the present law every operation of the Treasury Department, so far as its handling demand obligations is concerned, does affect the volume of the currency.

The CHAIRMAN. The statement of paragraph 13 is correct then? Mr. ECKELS. Yes; because under your bill you design to completely divorce the Treasury from banking and therefore it would be a matter of perfect indifference to business people whether the Treasury was all right or the Treasury was all wrong, so far as they were concerned. The CHAIRMAN. So far as the currency is concerned?

Mr. ECKELS. Yes; if it didn't have any of these obligations to meet. Of course if it didn't have enough revenue to meet its current expenses it might cause an inconvenience to the people to whom the Government was indebted, but that would not in any wise affect the business of the people.

PROFIT ON CIRCULATION TO THE BANKS.

Your fourteenth statement is as follows:

Under the present law practically every dollar of the $1,000,000,000 currency in circulation is carried by the banks at not a cent profit to them or anybody else, but, on the other hand, at a great loss to them.

Under the Walker bill they would be relieved of $400,000,000 of this burden, and competition would soon reduce interest on their loans and discounts to the people by the legitimate profit they would get upon their currency.

I take it that the basis of your statement in that paragraph is that with the Government relieved of the current redemption of the demand obligations and the banks given the benefit of the issuance of currency against assets, bank currency could be increased $400,000,000 without any additional expense.

The CHAIRMAN. If the banks put it in circulation without having to buy bonds they would get the profit. Now they do not get the profit. Mr. ECKELS. Your idea is that except in times of storms and business depression and restriction of credit the banks do practically currently redeem all this credit money.

The CHAIRMAN. The point is that in other countries the banks are

issuing all the currency and the banks get the profit on the currency first, and the people get it finally in lower interest, while in this country a thousand million dollars is issued by the Government on which the banks get no profit, so that being deprived of the issuing of the currency it amounts to carrying this for nothing and higher interest accordingly. They have to carry it.

ELASTICITY.

Mr. ECKELS. Your fifteenth statement is as follows:

Under the present law national bank currency notes, which are 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.

use.

Under the proposed bill it would be for the interest of the banks to issue most money when the people needed it, and to just as large an amount as the people can 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 currency will be forced back to the banks that the people can not profitably use. 1

The statement is correct that the volume of the national-bank note currency is curtailed when the price of bonds is the highest because of the lack of profit in taking out circulation upon high-priced bonds.

CHEAPNESS.

Your sixteenth statement is as follows:

Under the present law the United States has the most expensive currency system of any first-class nation.

Under the proposed law the currency will cost them as little as it can possibly be issued for and maintain the circulation of the legal-tender notes, etc.

I think that the Government of the United States has the worst financial system of any first-class nation. It is the outgrowth in its different parts in every instance of an immediate necessity. The national-banking system sprang from the necessities of the war and since 1864, except in slight administrative matters, has remained practically unchanged. The redemption act was the best considered of any piece of financial legislation since the war and after it went into operation, to meet an apparent necessity, one of the best things in it was taken out and instead of the legal tenders being retired and carceled beyond $300,000,000, the additional amount thereof was reissued and a compulsory law compelling the Secretary to continue to reissue them after they had been redeemed was passed.

EFFECT OF THE BLAND-ALLISON ACT.

The first piece of silver legislation, the Bland-Allison Act, was experimental to the extent that it was designed to meet and put an end to the demands of those who asked for an increase of irredeemable currency issued by the Government. It was supposed by the provision of that bill the volume of currency would be enlarged and nothing more would be heard about fiat currency. That law created a dollar which differed from the one demanded by the fiatists of that time in degree only, and not in principle.

EFFECT OF THE SHERMAN ACT.

Then came the silver-purchasing act of 1890, which was experimental and which many in and out of Congress believed at the time of its enactment would certainly bring the people into trouble. All these things could not but give the country a thoroughly poor and expensive system of finance.

BOARD OF EXPERT ADVISERS.

Your seventeenth statement is as follows:

Under the present law there is no way for the Secretary of the Treasury to avail himself of the expert assistance that is absolutely necessary to him to properly discharge his duties and that every banker in the country has in 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 proposed bill the reverse is true. It is made to the interest of the banks to furnish to the Secretary of the Treasury as advisers, seven of the most experienced, public-spirited, and patriotic bankers in the country.

Unquestionably both the Secretary of the Treasury and the Comptroller of the Currency could be very much aided by the advice of men from different parts of the country who are conversant with the needs of those portions of the country, and an advisory board would undoubtedly be of great benefit.

CLEARING-HOUSE PROVISIONS.

Your eighteenth statement is as follows:

Under the present law the enormous expense of our financial and banking methods of itself alone, if there was no other disadvantage, puts us out of competition for the world's commerce. They are so expensive, as compared with the currency of Great Britain, that were we on precisely the same economic plane of Great Britain as to wages, machinery, skill, enterprise, ability, steamships, railroads, navy, diplomatic and consular agents, and established business at every point, duplicating that of Great Britain, the difference between the cost of money in this country as compared with that of Great Britain, France, or Germany would enable Great Britain to beat out and destroy our foreign trade in favor of her own, and wholly on account of our banking and Treasury redemption system.

During the whole period from 1879 to 1891 the United States Treasury took all the risk and was at all the expense of the clearing-house system of its 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, or very nearly $300,000,000, about half of it in gold, equal to half the national banking capital in the country. Every advantage accrued to the banks and every disadvantage, expense, risk, and loss to the people through the United States Treasury.

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 $1,000,000,000 of banking capital of the country as a guaranty fund for its deposit in 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 this enormous loss to the people. There is no conceivable way of resuming a safe Treasury coin redemption of paper money but in returning to the practice described by Mr. W. Dodsworth or enacting into law the Walker bill or its equivalent.

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 of being subject to all the losses that are involved in the clearing-house business of the country, which risk is carried from the resumption of specie payments in 1879 to about the middle of 1891, at an expense to the people, supplied by taxation, of over $12,000,000 a year.