the public creates a distrust and a disturbance. Now, would not that still be the case under Mr. Walker's bill; if the money-the gold-is to go from the banks into the Treasury, would not the public always know when there was a deficiency and when there had been a demand on the banks by the Treasury for gold?

METHOD OF REDEMPTION NOT CHANGED.

Mr. ECKELS. No; the difference is, in the one instance the Govern ment itself has to supply the gold by the limited means which the Government has in its power, and in the redemption which is provided for, while under Mr. Walker's plan the banks supply that gold. For example, there is no one ever disturbed now about the current redemption of bank notes, because the banks supply a fund to the Government and the Government simply acts as the agent, and I do not see any difference between the method of redeeming the bank notes under the provision of this bill and the present method of the redemption of bank notes. Under the present method the redemption of bank notes does not disturb the business of the country at all. It is the redemption of the notes for whose redemption the Government itself has to supply the gold that creates a disturbance.

TREASURY AS AN AGENT OF BANKS.

Mr. BROSIUS. Is it speaking correctly to say that the Treasury or the Government acts as the agent of the banks?

Mr. ECKELS. I think that is what it does.

Mr. BROSIUS. If there is an agency, that implies a principle with the power to constitute an agent; but in this case the law declares that the Treasury shall do so and so, and that the banks shall do so and so, and it does not seem correct to say that the Treasury is the agent or is inferior to the banks, and carrying out the banks' direction is an agency.

Mr. ECKELS. If technically it is not correct, it is in fact, because that is all the Treasury does. It takes this money which the banks supply and pays it out.

Mr. NEWLANDS. Are the banks under this act compelled to make redemption over their counters at all?

Mr. ECKELS. I think there is a provision to that effect. The provision is that notes shall be redeemed in lawful money at the bank counters. Mr. NEWLANDS. Let us refer to that section now.

Mr. HILL. On page 21, beginning at section 37, the subject of redemption and maintenance of reserve will be found. Section 39, I think, is the one you specially refer to-38 and 39.

Mr. NEWLANDS. Do you understand that under section 39 of the 'Walker bill the bank is compelled to make redemption of its notes? Mr. ECKELS. Yes; that is my understanding. I was under the impression that there was a distinctive provision on the subject.

Mr. FOWLER. There is some section that provides it shall be in silver or in these notes, but that is all there is to it.

MAINTAINING GOLD REDEMPTION OF NOTES.

Mr. ECKELS. Whether or not there is a provision, I think there should be a provision that the banks should hold themselves ready to redeem their own notes at their bank counters if necessary.

Mr. NEWLANDS. In what?

Mr. ECKELS. In gold.

Mr. NEWLANDS. In gold alone?

Mr. ECKELS. I would not permit any bank to issue notes if it did not stand ready to redeem in gold, if the man who held the note wanted gold.

Mr. NEWLANDS. But you are not prepared to say that this bill provides for such gold redemption?

Mr. ECKELS. I think it provides that the ultimate redemption shall be in gold, and there may be a current redemption in something else, but there is a provision that the bank at all times has to maintain the parity of the various forms of money, which is simply a way of indirectly saying that it must maintain gold payments.

Mr. NEWLANDS. I will bring you to that section-section 50, I believe that is. What is your construction of that section?

Mr. ECKELS. My construction of that section is that it means the maintenance of gold payments of notes.

Mr. NEWLANDS. Section 50 is as follows:

SEC. 50. That any national-banking association that fails to keep, use, and pay out its silver coin and gold coin and currency notes so as to keep all three kinds of money at a parity each with all the others shall be deemed to have failed to pay in coin or coin certificates on demand the greenbacks and reserve notes or other notes signed and issued by its officers.

Now, I ask you what your construction is there as to what would be required in order to maintain the parity?

Mr. ECKELS. My construction of that section would be the construction I place upon the present duties, under existing law, of the Secretary of the Treasury-that the parity of the moneys in circulation must be maintained, and that if anybody wants gold it is the duty of the Government to pay gold. What Mr. Walker's construction is I can not say, but that is the construction I would place upon it.

The CHAIRMAN. That is my construction. It means that the banks shall maintain it just as the Government does-take the place of the Government.

Mr. NEWLANDS. Then, according to your view, that would require gold redemption by the banks of silver coins, as well as of the notes of the banks, whether legal-tender or reserve notes, just as redemption is now made of the greenbacks by the Treasury Department?

Mr. ECKELS. Only to the extent, Mr. Newlands, that the banks had deposited and the Government had accepted these various forms of credit currency by the banks. It would never redeem any notes not issued by the banks.

Mr. NEWLANDS. Only its own notes?

Mr. ECKELS. Only its own notes.

Mr. NEWLANDS. And the Treasury Department has to redeem the notes of all banks in gold?

Mr. ECKELS. It would redeem all notes that the banks issued, but the redemption is to be made out of a fund provided by the banks, not by the Government-that is, the current redemption-and if there was a failure of the bank to provide that fund for current redemption purposes, then the bank would be declared insolvent and its assets taken to first pay its obligations to the Government, in the meantime the Government, under its guarantee, making these redemptions of the notes of the failed bank out of the Government's fund.

Mr. NEWLANDS. Do you understand that this action would give the holder of the bank note the option to demand from the bank the gold or silver, or would the bank have the option, assuming that in the

markets of the country they had an exchangeable value, and that one was not at a discount as measured in the other?

Mr. ECKELS. I think the holder of the note would have the option. I believe that would be an element entering into the contract between the bank and the holder of the note, just as that element enters into the contract between the Government now and the holder of the demand obligation of the Government, which reads payable in coin.

Mr. NEWLANDS. Is that correct, according to your idea, Mr. Walker? The CHAIRMAN. The holder of the note has a right under this contract to have his money kept at a par with gold, and he would not have the right to demand gold. That would be with the option of the bank; but if the bank refused gold in such manner as to put gold at a premium, then the bank would be insolvent; just as the Bank of France or the Bank of Germany do to day; you can not get gold there unless your business requires it.

Mr. ECKELS. Except as is paid a very slight expense, which it costs the Bank of France to collect it together. This payment is as an agency fee.

The CHAIRMAN. Certainly.

Mr. NEWLANDS. Then your construction differs from the author of the bill as to the meaning of this section?

Mr. ECKELS. To the extent that I do not think you do maintain the parity of the moneys unless you pay the money out that the man who holds the note wishes to be paid to him.

Mr. NEWLANDS. Whereas Mr. Walker contends that so long as gold and silver have an interchangeable value in the country and by the action of the banks silver is not put at a discount, the bank has the option of paying in either gold or silver; and if by its action silver is put at a discount or gold at a premium, then the bank must pay in gold or be guilty of an act of insolvency.

Mr. ECKELS. But the question of the exercise of the option could not arise as long as these dollars were at a parity and were interchangeable without loss to either party. If, however, circumstances did arise under which these dollars of gold and silver were not interchangeable without loss, the bank would not have an option under a proper system, but the note holder would have the right to demand the metal he desires. The CHAIRMAN. That is my position exactly.

Mr. ECKELS. That he would have a right to demand that those notes be paid in that metal which sustains itself, being gold.

Mr. NEWLANDS. But I understand you to contend that the same construction should be given to the parity clause of this bill as is given by the Secretary of the Treasury to the parity clause in the Federal law. Mr. ECKELS. That is the construction that I would place upon it. Mr. NEWLANDS. Then, according to that, redemption in silver or gold at the option of the holder would be required, even before they had parted as to interchangeable value, would it not?

Mr. ECKELS. Yes; if any man had a note and wanted it redeemed in gold, he ought to be entitled to demand of the bank that he be paid in gold.

Mr. NEWLANDS. So that would be your construction of this section? Mr. ECKELS. Yes.

Mr. VAN VOORHIS. In other words, refusal to pay gold would of itself work the differentiation.

Mr. NEWLANDS. Now, Mr. Comptroller, what construction do you put upon section 7, which reads as follows:

That no banking association shall plead in defense in any action brought against it that any note issued by it is a United States legal-tender note.

Mr. ECKELS. I suppose that is to prevent the bank from taking advantage of making a legal tender of its own notes, largely.

Mr. NEWLANDS. But that defense can be made by a bank as to a note issued by any other bank.

The CHAIRMAN. That is it exactly.

Mr. ECKELS. Yes.

EFFECT OF H. R. 171 ON SILVER.

Mr. NEWLANDS. Now, Mr. Eckels, we will assume that this law goes into operation-that it is accepted by the banking sentiment of the country-that the greenbacks, Treasury notes, and silver certificates are imprisoned, and that bank currency, either legal-tender notes or reserve notes, is issued. Where, under those conditions, would the silver in the country be-the silver that is now in the Treasury of the United States?

Mr. ECKELS. Well, if the silver certificates are used as a part of your basis of note circulation, it would be in the same position that it is now-the holders of the silver certificates would be entitled to the silver standing back of those certificates.

Mr. NEWLANDS. When you speak of holding silver certificates in reserve, you mean the reserves of the banks?

Mr. ECKELS. The bill provides that for the issuance of these greenback notes there shall be deposited coin, silver, and silver certificates, and the bank to comply with that provision must first obtain the silver certificates, and those silver certificates would transfer the ownership of so many silver dollars into the banks, which representatives of ownership would be deposited with the Government.

Mr. NEWLANDS. So, after such silver certificates go into the possession of the Government they are destroyed, under the provision of this act?

Mr. ECKELS. Yes, they are destroyed; but destroyed during the period of time in which they are there imprisoned, and after that, if I understand it, it is the design of the bill to substitute for so much of them as are deposited, gold coin, by the ultimate redemption of the

notes.

Mr. NEWLANDS. Substitute where?

Mr. ECKELS. To the holders of the certificates of the greenback notes issued.

Mr. NEWLANDS. But I understand the purpose of this act is to imprison first all this credit money of the United States excepting, perhaps, silver.

The CHAIRMAN. What do you mean by imprison?

Mr. NEWLANDS. That is the word used by Mr. Eckels.

The CHAIRMAN. After the bank takes it and pays it in circulation,

it is just the same as now.

Mr. ECKELS. The basis of your issue, Mr. Walker, as I understand it, is that you have the banks deposit so much of these notes with the General Government.

The CHAIRMAN. They destroy them and put new notes in circulation. It is not imprisoned at all.

Mr. NEWLANDS. Now, we will assume that all the greenbacks and the Treasury notes and silver certificates are gathered up in this way by the banks and are deposited with the United States Government as a basis of currency. Then I understand you to say that all that paper would be destroyed by the Government?

Mr. ECKELS. Yes; but other paper issued in lieu of it through the bank.

Mr. NEWLANDS. But paper issued in lieu of it would be bank paper. The CHAIRMAN. But legal-tender notes just the same.

Mr. ECKELS. But right there, Mr. Newlands, I take it the expecta tion of Mr. Walker is that that section of the bill which provides that no notes shall be issued below $3, by the banks or by the Goverment, will release a large amount of silver coin dollars which the people would be willing to carry around for use in daily transactions.

Mr. NEWLANDS. What amount would that release?

Mr. ECKELS. I suppose to the extent that one and two dollar bills are in circulation now.

Mr. BROSIUS. Under this bill, when it comes in to complete the effective operation, there would be no silver certificates.

Mr. NEWLANDS. Can you tell me to what extent the place of one and two dollar notes would be taken by silver?

Mr. ECKELS. Mr. Walker stated that the Treasury report of 1895 shows there were one and two dollar bills to the extent of $74,668,926 in circulation.

Mr. NEWLANDS. That would leave in the United States, in existence, about $400,000,000 of silver coin and bullion?

Mr. ECKELS. Yes.

SILVER FORCED INTO CIRCULATION.

Mr. NEWLANDS. Taking into consideration the silver now in actual circulation-the silver that would be forced into actual circulation by the retirement of the one and two dollar notes-we would have a balance of silver somewhere in the country of about $400,000,000?

Mr. ECKELS. Yes.

Mr. NEWLANDS. Where, under the provisions of this bill, would that silver be?

Mr. ECKELS. So much of it as is represented by Treasury notes and silver certificates in sums above $3 would, to the extent that the banks went into the system and took out circulation, be locked up, and instead these greenback issues provided for in Mr. Walker's bill would take their place.

Mr. NEWLANDS. Where would it be locked up?

Mr. ECKELS. It would be locked up in the Treasury, subtreasuries, or wherever provided.

Mr. NEWLANDS. Is there any provision

Mr. ECKELS. It provides that the banks shall deposit with the Treasury of the United States under section 5, page 8.

Mr. NEWLANDS. Shall deposit these silver certificates and Treasury notes-greenbacks-is that it?

Mr. ECKELS. Section 5 provides as follows:

SEC. 5. That every association organized under this act, before it shall be authorized to commence a banking business, shall deliver to the Treasury of the United States United States legal-tender notes, including Treasury notes, or coin, or coin certificates, or mixed, as provided in section six, in amounts as follows:

Section 6 provides what the percentage shall be of each.

Mr. NEWLANDS. That is true, so far as the Treasury notes, coin, coin certificates, or mixed that are surrendered by the banks as a basis of the issue of currency. Now, after that surrender takes place, and after the silver certificates and the Treasury notes and the greenbacks are destroyed, where is the silver which these silver certificates and Treasury notes represent?