Mr. ECKELS. The note holder is the man who ought to have the option.

Mr. HILL. Why? Both are unlimited legal tender, and if he understands it in the beginning

Mr. ECKELS. It is the business of the banks to hold themselves responsible to redeem the notes in such money as the holders of them desire.

Mr. HILL. How can there be any objection to either, when the Government of the United States makes its silver and its gold equally legal tender?

Mr. ECKELS. But when the statute of the United States at the same time says that it is the established policy of the Government to maintain the two metals at a parity, it seems to me under that provision it is the duty of the Government.

Mr. HILL. But the Government is not redeeming these credit notes. Mr. ECKELS. But you cited the Government as an illustration, and say the Government under that provision must hold itself responsible to give a man go d if he wants it.

Mr. Cox. Will you allow me a question right there?

Mr. ECKELS (continuing). Because, if the Government does not do that it does not maintain the parity of the metals.

Mr. Cox. Now, you have your banks organized under that principle. The notes of the bank are issued, and the holder of the notes comes for redemption. If you confer the power upon the holder of the notes for redemption, naturally he will take the highest money. If you confer the power upon the banks, the bank will naturally pay the cheapest money. Now, will not that result in this: The holders of the notes will be in control of the highest currency for redemption, and you can not prevent it to save your life?

Mr. ECKELS. Undoubtedly they will ask for the best.

Mr. Cox. Of course they will, and they will demand the best.

The CHAIRMAN. We agreed not to ask questions until we got through. Mr. HILL. Mr. Comptroller, this is not a note of the Government; it is a note of the bank.

Mr. ECKELS. Yes.

Mr. HILL. Precisely the same as if an individual should give his note. So long as silver is legal tender is it not right and proper that this note should be redeemable in coin? The other is a guaranteed note of the Government for which gold has been paid and which by the terms of the contract is specifically redeemable in gold, but this is a credit note of the banks, issued against assets to a limited amount and redeemable in what? Is it not absolutely obligatory on these banks, if silver is called for to give silver, and if gold is called for to give gold; or, on the other hand, is it not optional for either party to do either, so long as both are unlimited legal tender?

Mr. ECKELS. I would not, Mr. Hill, in a new bank bill permit any bank note to be issued-whether it was a note against credit or a note guaranteed by the Government, if a bank did not hold itself responsi ble to redeem the same in gold. I would not have any "if or ands" about it.

Mr. HILL. I would not have any legal tender silver except subsidiary coin, if I could not control it myself. I would not have it legal tender. Personally I would limit it strictly to a gold basis, but I recognize the fact that we have got six hundred odd million dollars of legal tender silver. What are we going to do with it? My proposition is,

as covered by this bill, to withdraw the certificates, get it into circulation and make it a basis of redemption, equally with gold, so far as it is full legal tender, for the credit currency of the country. What can we do with it?

Mr. ECKELS. I do not know of anything that we can do with it except to go to whatever expense is necessary to maintain it at par with gold.

Mr. SPALDING. Suppose it was a five-dollar bill presented to the bank. If it was a subsidary coin, it would be redeemed in gold?

Mr. HILL. Yes. I would like to ask this question: Supposing the Ohio National Bank in the city of Washington should issue these two classes of bills, and should make the credit bills secure by their assets, and specify on their face that they are redeemable in coin in Washington and at the Chemical National Bank in New York, at the First National Bank in Chicago, and the First National Bank at San Francisco, would not that be entirely acceptable to the people of the United States, in your judgment?

Mr. ECKELS. No; I do not think the bank would run the risk of having two kinds of notes out redeemable in different kinds of money, because every time that a man got one of these reserve notes, or, as you call them, credit notes, he would go to the bank and have it redeemed, and he would insist on its being redeemed in the best money possible. It would follow that the public would be kept in constant doubt all the time as to whether the notes it had were good. I do not think there ought to be any notes in circulation where each is not interchangeable with the other without loss to anyone.

Mr. HILL. I agree with you there; but what will you do with our silver?

Mr. ECKELS. I am sure I do not know how to get rid of all that silver, Mr. Hill.

Mr. HILL. You would not say but such a note as this bill provides for, in your judgment, would be safe?

Mr. ECKELS. I would not say it would not be safe.

Mr. HILL. With coin redemption behind it?

Mr. ECKELS. I would not say that it would not be safe.

Mr. HILL. Will you say it would not be safe to this limited amount, with the first lien on the assets and secured by the double liability of the stockholder, and based on absolute coin redemption?

Mr. ECKELS. I would not say that; but I would not favor a bank note of any kind, whether it was a note issued against credit or issued on a guaranty from the Government, if it was not redeemable in gold. If we undertook to draw a distinction between the thing in which your credit note is redeemable and the thing in which your guaranteed note is redeemable at the outset, we endanger the prospect of making the credit note an acceptable note. There ought to be more safeguards placed around the credit note than around the guaranteed note.

Mr. HILL. You believe the silver certificates are strictly fiat moneysubstantially so?

Mr. ECKELS. I believe they are fiat money to the extent of the difference between the value of the bullion and the stamped value on the silver coin.

Mr. HILL. Do you believe it possible to maintain bank issues redeemable in gold, with the Government keeping silver certificates in circulation?

CUR- -25

Mr. ECKELS. I should expect the Government to take care of the silver certificates.

Mr. HILL. Then what are you going to do with silver?

Mr. ECKELS. I do not know.

The CHAIRMAN. That has been answered several times already, Mr. Hill.

Mr. HILL. That is all.

The CHAIRMAN. Mr. Brosius has the floor.

DISCUSSION OF H. R. 7247.

Mr. BROSIUS. By way of preliminary, I want to say that I have always been impressed with the idea that in legislating upon the money question or on the question of banking and currency we must take into consideration existing conditions. Whatever our theory may be, for instance, of the true relation of the Government to paper money, as practical legislators we must consider existing conditions, and whatever our theory may be as to the correct principle of banking and currency, in legislating upon that subject we must also take into consideration existing conditions. In other words, the existing system having been long ago planted and deeply rooted, we can not pull it up carelessly or recklessly, and the defects in the form of tares must be removed with great care so as not to disturb the system itself. Having made that preliminary statement, I have here some inquiries I desire to make, and for the sake of brevity

A MEMBER. What is the number of your bill?

Mr. BROSIUS. H. R. 7247. The bill is simple in its provisions, and for sake of brevity I will simply propound certain practical inquiries which will bring out the ideas incorporated in the bill.

The first one I will read.

The CHAIRMAN. This is bill H. R. 7247. [For text of H. R. 7247, see page 149.]

Mr. BROSIUS. Mr. Comptroller, in view of the extreme sensitiveness of the public mind and the ease with which it takes alarm in monetary matters at this time, is it not preferable, from the point of view of prac tical legislation, to increase the efficiency of the present banking system by amendments to the present law which will produce that result without creating alarm in the public mind rather than to revolutionize it by the introduction of new principles and methods in banking, the result of which in practice can only be conjectured? That is a very general proposition.

PEOPLE DEMAND NEW FINANCIAL LEGISLATION.

Mr. ECKELS. It is very unwise at any time to create any unnecessary alarm, and you are right in your statement that the public is very sensitive on the question of a radical change in banking and currency legislation. At the same time it seems to me there never was a better time for making necessary changes, even though they introduce a number of new elements, than the present, because there never was a time when there had been such a widespread discussion of the monetary question. I am sure the verdict at the last election was something more than a mere declaration that the voters did not want free coinage of silver. It was more, also, than a declaration that they were in favor of the gold standard as against the silver standard.

My intimation of that result was that they wanted some affirmative relief. It seems to me such affirmative relief can only be gained through

changes in existing banking law and in relieving the Treasury of the things which past experience has shown embarrass it, namely, the legal tender demand obligations. I think the public, even though it is necessary to introduce a number of new principles to do it, will go further to-day in sustaining departures in finance in this country than at any time within the last thirty years. It is not necessary to overturn the whole system. Nobody contemplates such a course; but there are certain things, even though they are radical, which ought now to be dealt with. I believe that the people expect it, and that that was the thing they had in mind when the result of the last election was brought about.

Mr. BROSIUS. Mr. Comptroller, the inquiry was very general and the answer has been equally general. I have no purpose to interpose my own views. I am simply eliciting the views of the Comptroller.

I pass to the second proposition, and that has been partly answered by what has been said already, anticipating the inquiry. Whatever may be your view, Mr. Comptroller, of the correct theory of the relation of Government to money, from the point of view of a practical legislator, taking into consideration the preponderance of the sentiment of our people in favor of retaining the greenbacks in circulation as money, would it not be wise to postpone for the time any legislation relating to the retirement of that portion of our currency by the conversion of it into interest-bearing indebtedness?

POSTPONEMENT NOT WISE.

Mr. ECKELS. I am certain it is not wise to postpone doing away with a thing which very frequently has demonstrated itself to be a source of business disaster to this country. I do not believe it is wise to assume that the public would not sustain legislators in a matter of this kind, if the legislators themselves stood up and gave reasons for the faith that was in them why the thing ought to be done. In the retirement and cancellation of legal tenders is to be found the only practical way of bringing relief to the Treasury. It will not come through mere increase in revenues. If a banking bill is enacted and no provision made for getting rid of the source of the trouble, the banking situation is improved and the business interests of the country in a measure aided, but there is still left fastened on the country a growth which is a cancerous one, and which in and of itself carries elements which must in the end bring a great deal of loss and at times almost destruction to business interests.

Mr. BROSIUS. Are you not aware that you have proceeded in your answer upon an assumption that the greenbacks were very dangerous, and that they caused us a great deal of trouble?

Mr. ECKELS. Yes.

Mr. BROSIUS. If I believed that I would agree with you perfectly. Mr. ECKELS. I know we differ upon the danger of them.

Mr. BROSIUS. Upon that point I want to ask you whether you are aware that not only a large majority of this Congress, but a large majority of the people of the United States, do not agree with you in the assumption you make?

Mr. ECKELS. There is probably a large majority in Congress and a greater or less number outside of Congress who believe it is not the politic thing to do, and possibly that it is not the practical thing to do, but I am sure there is a majority of Congress who believe it is the thing which ought to be done if it could be done.

NOTES ISSUED AGAINST ASSETS.

Mr. BROSIUS. The third proposition is, Whatever may be your view as to the theory of credit currency issued against the assets of the bank, inasmuch as our people for thirty years have been accustomed to a secured currency, would it not be wise, for the present at least, and under existing circumstances, to adhere to a secured currency rather than to authorize the banks to issue notes against their assets alone?

Mr. ECKELS. I have heretofore stated that I did not think it would be wise to permit the banks to issue all their notes against their assets, but I thought they might very safely issue a limited percentage of them in such manner. I do not think it would be wise-I think it would be unwise to permit them to issue all their notes against their assets, because that necessitates educating the people on one line and uneducating them on another, something which can not be done, except gradually.

PROPOSITIONS FOR RELIEF.

Mr. BROSIUS. The fourth proposition is, Assuming the impracticability of the retirement of the greenbacks and the issue of currency against the assets of the banks alone at this time, can we, in your judgment, do better than to first provide for the issue of currency up to par, or may be the market value, of the bond deposited to secure circulation; and, secondly, to provide for establishing banks with small capital in small towns, as we have already done; and, thirdly, to reduce the tax on circulation to about one-quarter of 1 per cent, so as to make the profits on the issue of notes sufficient to induce banks to supply the people with as much currency as they need?

Mr. ECKELS. I did not assume, Mr. Brosius, that it is an impracticable thing to retire the greenbacks.

Mr. BROSIUS. Upon that assumption I base the question.

Mr. ECKELS. I want it understood that I do not assume that, however. Mr. BROSIUS. I understand that.

Mr. ECKELS. But upon the other point, I certainly think it would be wise as a measure of legislation, pending these other things, which ought to come as rapidly as practicable, to permit the organization of smaller banks and to permit the establishing of branch banks. In this way the facilities of deposit and discount banking could be extended. I think at one point back there, Mr. Brosius, you said something about whether or not there was any danger in the legal tender.

Mr. BROSIUS. You are proceeding upon the assumption that there was danger.

CAUSES OF PRESENT DANGER.

Mr. ECKELS. I would like in this connection to state why I think the danger from the legal tenders is increased by circumstances which surround them. If the Government possibly had had nothing outstanding but the $346,000,000, it might have gotten along without a great deal of trouble in taking care of them; but enacted legislation has produced results which have augmented what might have been the small danger of the legal tenders into a very large danger. The legislative acts to which I allude were those pro viding that these notes should be reissued when once they were redeemed, the Bland-Allison Act, the adding the great amount of depreciated silver currency, and the Sherman silverpurchasing act, resulting in the issuing of the silver Treasury notes. All