Mr. ECKELS. It is just where it is now.

Mr. NEWLANDS. Where it is now-in the Treasury of the United States?

Mr. ECKELS. Yes.

Mr. NEWLANDS. Under this bill would it remain in the Treasury of the United States?

Mr. ECKELS. I think that it would. Such is my understanding, at least.

Mr. NEWLANDS. After the bill went into operation and its provisions were accepted by the banks, I understand Mr. Eckels to say that the silver now standing back of the Treasury notes and the silver certificates-which would be destroyed in case the bank bill goes into operation-would remain in the Treasury.

The CHAIRMAN. How, when the bill provides a note shall be paid out for every silver certificate and note destroyed?

Mr. NEWLANDS. I was asking Mr. Eckels his construction of this. Mr. ECKELS. I take it that the Treasury notes and the silver certifi cates and the coins, etc., that the bill provides as security for part of the circulation shall be given to the United States as security for greenback notes-shall remain with the Treasury of the United States.

The CHAIRMAN. No; it is paid in as free money in the Treasury, to be used in the Treasury.

Mr. ECKELS. It does not make any difference whether it is a special fund or among the free moneys; but it can only be gotten at by the redemption of something.

The CHAIRMAN. Oh, no; the silver is paid out when the silver certificates that were issued for it are destroyed.

Mr. NEWLANDS. Is that your understanding of the bill, Mr. Eckels, that this $400,000,000 of silver which formerly backed silver certificates and Treasury notes, will go into the general fund of the Treasury to be paid out in the payment of the current obligations of the Treasury Department?

Mr. ECKELS. Mr. Walker makes that explanation of the bill.

The CHAIRMAN. That is the text of the bill-not that the Treasury shall pay them out, but he shall destroy the certificates and pay out in dollars; that is, pay the silver right out.

Mr. ÉCKELS. But as I understand it, this stands back of the Treasury of the United States as a guaranty.

The CHAIRMAN. Not until it is paid right in. The silver certificates are destroyed and the gold certificates are destroyed. That pays the gold and silver out, instead of putting the certificates into circulation again. Every certificate that is paid in is destroyed and that leaves the money free in the Treasury to be paid out. That is what the bill says. It does not contain the words "free to be paid out," because that is not necessary.

Mr. NEWLANDS. So I understand that when the gold certificates and the silver certificates are surrendered to the United States Treasury the banks which enter those certificates take out the coin?

The CHAIRMAN. Yes, sir.

Mr. NEWLANDS. Then they also take out legal-tender notes and reserve notes in addition?

The CHAIRMAN. They take out legal-tender notes, $100 for every $100 of lawful money they pay in, simply for the purpose of identifying what bills each bank shall redeem.

Mr. NEWLANDS. Then you are mistaken in the statement that this $400,000,000 of silver would remain in the Treasury?

Mr. ECKELS. Under Mr. Walker's explanation, and he of course knows better the provision of the bill than I do.

Mr. NEWLANDS. I was asking your construction of this act, because we wanted to know your views with regard to it.

Mr. ECKELS. What section is that, Mr. Newlands?

Mr. NEWLANDS. Look at section 21, Mr. Eckels, if you please.
Mr. ECKELS. Yes.

Mr. NEWLANDS. Do you understand that under that provision the silver backing the silver certificates which are surrendered to the Treasury, and by the Treasury Department destroyed, is to be turned over to the banks surrendering the silver certificates, or is it to remain in the Treasury of the United States?

The CHAIRMAN. It is to remain free money in the Treasury, paid out on certificates or paid out for any dues.

Mr. ECKELS. My understanding was that it would remain in the Treasury, whether it went into a special fund or whether it went into a general fund-that it still remained as a security.

The CHAIRMAN. Have you read the language that is not it at all. Mr. ECKELS. For these greenback notes issued on which the Gov. ernment makes its guaranty?

The CHAIRMAN. They are destroyed and all the money that these certificates are issued for are free moneys in the Treasury.

Mr. ECKELS. But do they still remain, Mr. Walker, to be used for whatever purposes the Treasury sees fit?

The CHAIRMAN. Certainly; the coin-gold or silver.

Mr. ECKELS. What I am trying to say is upon the point of the deposit of the certificates-the silver or the gold for which those certificates are issued. Is it not turned over to the banks?

The CHAIRMAN. Oh no, unless they exchange it.

Mr. ECKELS (Continuing). But remains in the Treasury?
Mr. NEWLANDS. It remains in the Treasury.

Mr. ECKELS. Mr. Walker says that it is a provision of his bill that this is to remain as free money in the Treasury to be used for any purpose possible, but the banks do not have the greenbacks to which they are entitled under the bill, and also the gold or the silver for which those greenbacks stand, any more than they have the silver certificates now and the silver coin standing back of them.

Mr. NEWLANDS. But as to those greenbacks-their redemption is backed by the banks, is it not, and not the Government; that is, the bank is the obligor and not the Government.

Mr. ECKELS. The current redemption of them; yes.

Mr. NEWLANDS. Well, then, how, in that case, does the bank get an equivalent for the silver certificates which it has surrendered? The bank notes, as I understand it, are not Government notes; they are bank notes, and the bank is the obligor. Now, the bank, the owner of the silver certificates, surrenders those silver certificates and gets whatsimply its own notes?

Mr. ECKELS. I judge that the expected advantage to the banks under the plan would be this, that they deposit 100 cents worth of paper, gold or silver, and they get instead of that a bill calling for 100 cents. They obligate themselves to currently redeem that obligation in gold, because of the additional profit of having given to them 100 cents against a security worth 100 cents, instead of being as now, given 90 cents for a security in the shape of a bond worth 110 or 115 cents. In addition, for doing this they are permitted to issue a certain amount of notes against assets, without a deposit of security. I suppose that is the way the estimate has been made as to the profit upon these notes.

CURRENT AND FINAL REDEMPTION.

Mr. NEWLANDS. Do you distinguish at all between current redemption and ultimate redemption as to the obligor?

Mr. ECKELS. Yes.

Mr. NEWLANDS. With reference to the current redemption, the bank undertakes to do that; who undertakes the ultimate redemption of the notes?

Mr. ECKELS. The notes known as greenback notes are simply the substitution of an obligation which now rests upon the Government, and which the Government is bound to ultimately redeem, so that the Government is only compelled to redeem those notes when the banks go out of existence, instead of being compelled to redeem them both when it goes out of existence and currently. The reserve notes are currently redeemed by the bank and only ultimately redeemed by the Government in case the bank fails, at which time the guaranty of the Government intervenes, and the Government recoups itself for having taken care of the ultimate redemption of the reserve notes by hav ing the assets of the bank placed at its disposal for the payment of

such notes.

Mr. NEWLANDS. I understand you now.

Then there is a difference as to the ultimate redemption between the reserve notes and the ultimate redemption of the greenbacks under this act?

Mr. ECKELS. No; except

Mr. NEWLANDS. That is to say, that when the end of that note is reached, the Government itself redeems the legal-tender note without calling upon the bank in anyway, while as to the reserve notes the Government redeems them, but recoups itself with that redemption out of the bank assets.

Mr. ECKELS. It redeems the reserve notes only of banks which fail. The other notes the bank, if solvent when it goes out of business, redeems, or when it does not wish those notes to be in issue any longer it redeems them.

Mr. NEWLANDS. Does the bank redeem its legal-tender notes when it goes out of business?

Mr. ECKELS. Oh, no; as to the greenback notes, as I understand it, the ultimate redemption rests upon the Government.

Mr. NEWLANDS. Let us use the words legal-tender notes.

Mr. ECKELS. The legal tender notes, as I understand it, are currently redeemed by the banks and ultimately redeemed by the Government, because they are an already due obligation of the Government. The reserve notes are currently redeemed by the bank and ultimately redeemed by the bank, excepting in the case of the failure of the bank, when the Government intervenes and redeems these notes and recoups itself from the failed bank's assets.

Mr. NEWLANDS. So, by that process, the silver becomes and the silver certificate becomes free coin in the Treasury and can be paid out by the Government in its current expenses?

Mr. ECKELS. Yes; the benefit under Mr. Walker's explanation, I believe, is figured that what the Government receives outside of not having to make current redemption, it has this much fund of money to use for its current needs, whereas now it can not have any daily benefit of the bonds, which are deposited as security.

Mr. NEWLANDS. What would the effect of that process be; would the Government pay out this silver in its current expenditures, and

thus get it into circulation in the country, or would it be retained in the Treasury of the United States?

Mr. ECKELS. That would depend a great deal upon the condition of business and the manner in which the Treasury Department was conducted. There is now, for instance, deposited with the Secretary of the Treasury amounts of money which the banks put there, which are used as current funds, and I suppose it is paid out at times as needed. Mr. NEWLANDS. This silver, as I understand it, would be the absolute property of the Government by this changed process?

Mr. ECKELS. Yes; except

Mr. NEWLANDS. Instead of being the property of the holder of the silver certificates it-would be free silver in the Treasury, liable to be paid out at any time in its expenditures?

Mr. ECKELS. But with the Government's guarantee that it would take care of that upon the basis on which these notes are issued.

Mr. NEWLANDS. That would mean the Government guaranteeing to maintain the parity of that silver with gold; is that it?

Mr. ECKELS. No; the Government would simply guarantee ultimate redemption in gold, not its current redemption in gold.

Mr. NEWLANDS. Of the silver coin itself?

Mr. ECKELS. Yes.

Mr. NEWLANDS. In its current redemption?
Mr. ECKELS. In its current redemption.

Mr. NEWLANDS. How do you distinguish between current redemption and ultimate redemption? Suppose the Government of the United States owes me for service $100 and pays me $100 in silver coin. Do you regard it as current redemption or ultimate redemption if I take it to the Treasury and demand gold?

Mr. ECKELS. I regard it as ultimate if the notes are changed and issued.

Mr. NEWLANDS. It is not the end.

Mr. ECKELS. Take silver coin. If that is put in circulation again it is simply current redemption.

Mr. NEWLANDS. I do not think that we understand each other. We will assume now that the banks have surrendered the silver certificates and that the silver coin is free in the Treasury-$400,000,000 of silver— and that the Government would pay me $100 in silver for services rendered. Now, you say the Government does not have to make current redemption, but is to make ultimate redemption of that silver. I ask you what constitutes the difference. Suppose I take that $100 to the Treasury of the United States and demand gold. Do you call that current redemption or ultimate redemption?

Mr. ECKELS. Well, I suppose it would be ultimate redemption until the silver was issued again.

REDEMPTIVE MONEY DEFINED.

Mr. BROSIUS. Can there be any such thing as ultimate redemption of money that is itself redemptive money; in other words, is it correct speaking to say that a silver dollar has ultimate redemption where it is exchanged for gold, a silver dollar itself being redemptive moneyabsolute money?

Mr. ECKELS. Yes; it is a correct thing to say. As a matter of fact, it is not redemptive money, because it does not stand by itself—is not supported by itself. It obtains value from the gold with which the Government maintains it at a parity.

Mr. BROSIUS. If the law says it can be used for redeeming other money it is redemptive money, isn't it?

Mr. ECKELS. Yes; but if the law at the same time says the Government is obligated to maintain the parity of that metal with some other metal it is not, correctly speaking, redemptive money.

Mr. BROSIUS. That is effected by simply exchanging the gold dollar for the silver dollar; but the silver dollar takes the place of the gold dollar in the Treasury and goes out in the payment of the expenses of the Government. It is an exchange rather than a redemption. Redemption carries with it the idea that the thing redeemed is done for; but the silver dollar is not done for at all. It is absolute money.

Mr. ECKELS. I think the term current redemption is used, for instance, as Treasury notes are taken in aud reissued.

Mr. BROSIUS. I was referring more especially to ultimate redemption. I think, popularly speaking, for current redemption that would be all right.

SILVER REDEEMED IN GOLD.

Mr. NEWLANDS. Then your theory is that if the Government, in the payment of its current obligation or expenses, paid out this $400,000,000 in silver and got it into general circulation, and it was deposited in the banks, the banks could present that silver to the Treasury of the United States and demand gold?

Mr. ECKELS. I think the banks would deposit it and take out these, if they wanted to take out additional circulation on it.

Mr. NEWLANDS. They could take out additional circulation, there is no doubt of that, but could they not also present that silver to the Treasury and demand gold?

Mr. ECKELS. I have no doubt that if the metals were not maintained at a par the Government would be obliged to give them gold.

Mr. NEWLANDS. But apart from the question whether they would give them gold or not, under your construction of the parity act, would not the United States Treasury be compelled to redeem this silver coin in gold whenever the banks presented it?

The CHAIRMAN. They do not present it, they can not present it, under the bill.

Mr. ECKELS. I think it would be compelled to redeem it-that is, I think the Government would be compelled to redeem it in gold.

Mr. NEWLANDS. Then you would do away with this endless chain? The CHAIRMAN. How, under my bill, does the bank acquire any right to present silver when the bill itself makes it an offense if the bank does not keep it at a parity with gold? I do not see how they could take it from the Government.

Mr. NEWLANDS. I am assuming that parity is maintained; that there is no difference whatever in the value of gold or silver in the United States, and that the banks have so much silver and present it to the Treasury of the United States.

Mr. ECKELS. If the parity is maintained there is no danger of these dollars being presented to the United States Treasury, and they will be presented to the banks in the individual localities, instead of having to be sent to Washington or to San Francisco.

Mr. NEWLANDS. You say there will be no danger of this $400,000,000 in silver, or any part of it, being forwarded to the Treasury of the United States for redemption in gold. Assuming that, I ask you whether the banks would not have the right to present that silver to the Treasury of the United States and demand redemption in gold.