they do not need it all the time-that is true; but if they should have full circulation when it becomes to their interest, whenever the opportunity suggests itself they will put it in circulation.

Mr. BROSIUS. But they have the cost of keeping it?

Mr. Cox. If the banks are compelled to take out their full circulation I will vote for any tax sufficient to pay the expenses of getting the cir culation, because the tax on circulation is never paid by the bank; it is paid by the customers.

Here comes the ninth section. The ninth section gives the power of redemption of these legal-tender notes when there is a surplus in the Treasury.

Mr. ECKELS. That is virtually a reenactment of a measure which at one time was placed upon the statute books, providing for the redemp tion and cancellation of Treasury notes when a certain amount of national-bank notes had been issued.

Mr. Cox. You will find that section almost language for language in the resumption act.

Mr. ECKELS. Yes; it was designed to allay any fear of contraction, or to prevent any contraction in the retirement of the legal tenders.

GETTING SILVER COIN INTO CIRCULATION.

Mr. Cox. That ninth section also embraces the idea that this circulation furnished by the banks shall be in denominations of $10 up; it is easy to understand what that is for.

Mr. ECKELS. I was going to say, in regard to the ninth section, that it makes a change in the present banking act by prohibiting the issue of five-dollar bank bills.

Mr. Cox. Yes; that is in connection with another idea.

Mr. ECKELS. I suppose the idea of that is that by this provision the silver coin will be gotten into circulation.

Mr. Cox. That is it; that is certainly the idea.

Mr. ECKELS. In other words it is a method of forcing silver into the pockets of people whether they want to carry it or not. I hardly believe this can be done. So, too, I am not sure but that a great inconvenience is created by not permitting the five-dollar bills to be issued.

Mr. Cox. Well, of course that hangs distinctly on the idea that if the silver coin is as acceptable as $5 there will be no trouble about that.

RESERVE MONEY.

The tenth section goes further than we have gone. It is in relation to providing for the reserve-that this same character of note shall be held as a reserve.

Mr. ECKELS. The present law requires that the reserve shall be kept in lawful money. This is in line with the other provision of the act to get the legal tenders and Treasury notes out of the way and restrict ing the reserves held at least to the extent of one-half in this partic ular kind of currency?

Mr. Cox. Yes. Of course the great object of that is to try and stop these raiders.

Mr. ECKELS. The whole design of this bill is to relieve the Treasury by getting the legal tender and the Treasury notes out of the way of current redemption.

Mr. Cox. And escape the responsibility of issuing bonds for that purpose.

CUR- -24

THE ENDLESS CHAIN."

Mr. JOHNSON. If you will let me ask a question on that point, what per cent of the greenbacks and Treasury notes, which constitute what might be termed the "endless chain," would be imprisoned or impounded by this act if it should go into effect, in your opinion? Are you able now to make such an estimate?

Mr. ECKELS. No; I could not, because under the provisions of this act it makes it discretionary with the existing banks whether they will go into it, and you have no basis upon which to calculate.

Mr. JOHNSON. Suppose it leaves one-third in circulation; is not the Treasury just as much in danger as if all were out? Would it not result that those in circulation would be used up more rapidly?

Mr. ECKELS. I do not think the danger would be as great, but I think as long as a single one is out there is danger.

Mr. JOHNSON. One other question in that connection. In your opinion would the banks be willing to accept the provisions of this bill? Would not the safety fund requiring banks to guarantee each other's solvency be a deterrent?

BANKERS DESERTED THE BALTIMORE PLAN.

Mr. ECKELS. The only thing I know is that after a plan virtually embracing a good many provisions of this bill was approved of by a convention of bankers at Baltimore, they all deserted it when it appeared in Congress in the form of a bill.

Mr. Cox. You mean the committee?

Mr. ECKELS. No; not the committee, the bankers.

Mr. Cox. There was not a man on the committee who voted for it? Mr. ECKELS. They made the point that solvent banks, banks properly conducted, ran too much risk for banks which were not properly conducted. The expectation, of course, would be that under this bill we would have fairly well-conducted banks. It is probable that a very proper estimate of what the number of failed banks would be under it, with the same character of management, could be had by ascertaining the number we have had in the last thirty years in the same number of banks.

Mr. Cox. There is no provision in this bill anywhere that one bank shall guarantee the notes of another bank.

Mr. ECKELS. That was in the original, but it is left out in this bill.
Mr. Cox. We knocked that out.

Mr. NEWLANDS. Is that the reason the bankers objected to it?
Mr. ECKELS. That was one of the principal reasons.

Mr. Cox. You could not put such a banking system into effect at all.

INCREASE OF GOLD IN THE TREASURY.

Mr. HILL. With regard to the section here which provides for the imprisoning or impounding of greenbacks and Treasury notes, I want to call your attention to the fact that we have got $145,000,000 of gold in the Treasury and it is increasing, and that the Treasury notes and greenbacks in the Treasury are constantly decreasing, and I want to ask you if you think that the increase of gold under those circumstances is any evidence of a safe condition of the Treasury?

Mr. ECKELS. Not in the least.

Mr. HILL. It is an evidence of an unsafe condition, is it not?

Mr. ECKELS. It is certainly not an indication of a safer condition. It is simply an indication that for the time being people have quit presenting legal tenders for redemption.

Mr. HILL. But, of course, there is a great deal of liability for calls. on that, from the fact the Treasury notes and greenbacks are out in greater number.

Mr. ECKELS. Yes.

POSSIBILITIES OF ANOTHER PANIC.

Mr. BROSIUS. Does not an accumulation of gold in the Treasury indicate a return of confidence in our monetary conditions?

Mr. ECKELS. That, with other conditions.

Mr. HILL. Does it not also show that in the case of a sudden panic occurring the Treasury is far more exposed than if the greenbacks were entirely locked up?

Mr. ECKELS. Yes; if another attack is made upon the gold in the Treasury we would be in a great deal worse condition than we have been at any time during the last few years.

Mr. SPALDING. They have learned how.

POPULAR DELUSION CONCERNING LEGAL TENDERS.

Mr. ECKELS. That is just it; the people have learned how. It seems an absurd thing, but for a long period of time the public looked upon the legal tender notes as somehow an asset of the Government instead of a liability, and upon the man who held legal tenders as in the pos session of something which of itself had value. In the last four or five years everyone has come to know that instead of being assets they are liabilities, and that the legal tender is simply a promise to pay, which is made of value only when it is converted into gold by the promissor.

Mr. SPALDING. Let me ask if it is a fact that the Bank of England getting more gold into the bank, looked as though it was endangered and that the bank was in a worse condition than it was before?

Mr. ECKELS. Oh, no; because, outside of the uncovered paper there is an equivalent of gold back of every piece of paper issued by the Bank of England.

Mr. SPALDING. Is not that because for every dollar of greenbacks taken out of the Treasury a dollar of gold goes in for them? Is not that the way the increase is made, exactly the same as with the Bank of England?

Mr. ECKELS. No; there is not a dollar of gold coming in every time a dollar of greenbacks is issued, because greenbacks are issued to pay current expenses.

Mr. FOWLER. And with the expenses running behind about $12,000,000 a month?

Mr. SPALDING. Is it not true that $195,000,000 was paid into the Treasury during this Administration in exchanging greenbacks for gold? Mr. ECKELS. I do not know exactly the amount, but there was a great deal.

Mr. SPALDING. It was about that. Is it not true they recouped in a large measure the gold in the Treasury by issuing greenbacks, because they are better to carry than gold, and for various other reasons? There were $195,000,000 paid in, notwithstanding the action of this endless chain so much talked about?

Mr. ECKELS. Yes; there was a large amount of gold paid out. A great deal more than $195,000,000 was paid out.

Mr. SPALDING. That is largely because we are running short, I think. The statement of Mr. Hill is that the increase of gold in the Treasury endangers the condition of the Treasury.

Mr. ECKELS. It does not strengthen it unless you have both gold and greenbacks in the Treasury.

Mr. SPALDING. It could not strengthen the condition, because there is less than $346,000,000 of greenbacks in existence.

Mr. ECKELS. These notes and the Sherman notes would be about $450,000,000.

IMPRISONING THE GREENBACKS.

Mr. Cox. Now, I will go back to my line of thought. The question propounded by Mr. Johnson, in the consideration of this bill, is a very proper one. Of course, as you decrease the amount of greenbacks outstanding and put them into prison, as the term has come to be used, so to that extent you decrease the danger of a raid upon the Treasury. That is plain. Now, under this bill you redeem the ones and twos and fives that are outstanding. You redeem them with silver when they come in. Do you remember the amount of fives, twos, and ones? I had that statement here at one time.

Mr. ECKELS. About $75,000,000 of ones and twos.
Mr. FOWLER. They amount to about $250,000,000.

Mr. Cox. Just assume that sum for the point of my question. Now, say they are destroyed; you require 30 per cent of the circulation of the banks to be taken out on the basis of greenbacks. That would put in, I should say, if it were imperative, something like $150,000,000, would it not? I am running on these figures without having them fresh in my mind.

Mr. ECKELS. The present national-bank capital is about $650,000,000. If all the present national banks went into the system

Mr. Cox. Making it imperative.

Mr. ECKELS. If they were compelled to take ont 75 per cent of the amount of that capital in circulation, 75 per cent of $650,000,000 would be about $485,000,000, and then 30 per cent of that sum, if they all went into it, would impound about $145,000,000.

Mr. Cox. Now we add to the other.

Mr. ECKELS. To which other?

Mr. Cox. To the other where you have included the fives, twos, and ones; and it amounts to about $250,000,000.

Mr. ECKELS. But some of the fives are legal tenders.

Mr. Cox. Suppose we let the fives alone and cancel the ones and twos with silver. That is about $75,000,000, and then you get about $150,000 on the 30 per cent that is to be deposited for circulation of the legal-tender notes. Then you have got $180,000,000 and $75,000,000, which makes $250,000,000. I am running on rough figures now. When you come to the result you will find they are all impounded.

SILVER IN PLACE OF SMALL NOTES.

Mr. ECKELS. I do not understand by what method you say you cancel the ones and twos with silver. You do not intend to redeem in silver?

Mr. Cox. This act provides when they come into the Treasury in any shape whatever they are canceled and silver is issued in their place and it goes to the extent of the fives. The fives were put in there. The calculation is. to supply the ones and twos and put in their place the silver.

Mr. HILL. There are $5,000,000 greenbacks, $19,000,000 Treasury notes, and $43,000,000 of silver certificates-oues and twos-making $69,000,000 all told, of silver certificates, greenbacks, and Treasury

notes.

Mr. Cox. It is not imperative under this act that he shall issue actual silver in the redemption and cancellation of those notes. It is owing to what the man wants; but it supplies to these raiders upon the Treasury the ones and twos with silver out of the bullion.

Mr. ECKELS. I do not understand the Secretary of the Treasury is to redeem in silver anything except silver certificates.

Mr. Cox. Look at section 11:

That whenever there shall be received into the Treasury of the United States any legal-tender notes or Treasury notes issued under the act of July 14, 1890, of less denomination than $10, the same shall be canceled and silver dollars or silver certificates of like denominations shall be issued in amounts equal to such notes so canceled; and in order to put the provisions of this act into effect, the Secretary of the Treasury shall proceed to coin the silver bullion in the Treasury as rapidly as practicable, and he is hereby directed to issue silver certificates upon the silver bullion now in the Treasury for the purposes hereinabove stated.

Mr. JOHNSON. I suppose if any individual presented Treasury notes and demanded gold he would be entitled to receive it, but if he should present it in paying for customs it might be retired and silver issued in its place.

UTILIZING THE BULLION IN THE TREASURY.

Mr. Cox. That is exactly right. Of course the idea in that bill was to try and utilize the bullion which is in the Treasury.

Mr. JOHNSON. It puts the silver represented by the certificate in its place?

Mr. Cox. Section 12 gives discretionary power.

Mr. NEWLANDS. You get rid of the endless chain there.

Mr. Cox. You have made a point that is not in this bill. I do not want to go into that now. Section 12 is another thing which provides, for the purpose of getting control of these Treasury notes, that so much of the customs dues shall be paid in these notes. I am right in the construction of that?

Mr. ECKELS. Yes; it gives discretionary power. It all tends to attempting to do the same thing. The balance of the sections relate to State banks.

Mr. Cox. No; the thirteenth section was put into this bill before any bonds were issued by the present Administration and was an attempt to reduce the rate of interest. That is what that was put in there for.

STATE BANKS.

Section 14 refers to State banks. I want to ask you one question about that. You take all the provisions of that act that are made applicable to State banks, and the restrictions which are thrown around. State banks in this act, and I would like to have your judgment as to whether it would be possible for a State bank to issue notes which would not be perfectly good.

Mr. ECKELS. That would depend entirely upon how the authorities live up to the provision of the law. If around State-bank issues are thrown all the provisions which are thrown around national-bauk issues I am not able to see what advantage there is in not having State banks brought into the national system.