these as contributing causes made a thing which of itself might not have been so harmful a source of recurring danger by placing a great additional burden upon the Government to maintain the parity of the moneys which it circulated. Mr. Cox. May I ask a question right there? Mr. BROSIUS. Yes. Mr. Cox. Now, Mr. Comptroller, is not your mind thoroughly made up and conclusively made up that no banking system can be successful unless the greenbacks of the Treasury are retired in some way or other? Mr. ECKELS. I do not believe any banking system can be of material benefit in relieving the Treasury Department unless provision is made for getting rid of the legal tenders and Treasury issues. Mr. Cox. Now, we have got one point from your conviction settled— that the Treasury can not be relieved unless those notes are retired. When we come to the next point in the investigation of this matter, it becomes a matter much more with the banks than it does with the Government. Is not that true? Mr. ECKELS. I do not know that I understand you, Mr. Cox. BANKING MUST BE MADE PROFITABLE. Mr. Cox. I mean this: That to induce the banks to go into the banking system there must be a reasonable assurance of profit to induce them to go in. You have cut off and intend to stop this Treasury-note system of redemption. Now then, do not you have to offer the banks some sort of encouragement in some way? Mr. ECKELS. No man will go into a banking system unless there is apparently a margin of profit in it. When the legal tenders are canceled, there has been removed from the channels of trade and commerce notes which to day are directly in competition with bank notes and thus is made a larger field for bank notes, with a corresponding increase in profit from the issue of them. Mr. Cox. Of course, that must depend upon the encouragement you give to banks for a reasonable profit. Is not that so? Mr. ECKELS. Certainly; the banks must have encouragement in the way of profit or they will not go into the system. But as I understand it, Mr. Brosius calculates that the increase in the amount of notes they can put out in issuing either to their par value or to the market value gives them an increase of profit. He would also permit the establishing of small banks. Mr. Cox. Does this bill contemplate the retirement of greenbacks and Treasury notes? Mr. ECKELS. No; Mr. Brosius's bill does not contemplate that. TWO CLASSES OF NOTES. Mr. HILL. You stated in criticism of my bill that it would make it a matter of doubt in the hands of the holder-the issuing of two classes of bills. Mr. Brosius has again referred to the possibility and the advisability of the issuance of credit currency, and you stated that you were not in favor of an issue of credit currency in excess above the secured currency-I think you stated the other day in excess of 25 per cent. I would like to ask you how you are going to issue any credit currency in conjunction with secured currency without having two forms of bills? Mr. ECKELS. Two forms of bills, but one kind of redemption money for both of them. Mr. HILL. You do not object to two classes of bills? Mr. ECKELS. No. Mr. HILL. But you do object to different kinds of redemption money? NOTES ISSUED AGAINST STATE AND MUNICIPAL BONDS. Mr. BROSIUS. My next inquiry is, If further relief should be needed in the South and West, where the capital is less abundant and the habit of depositing current funds in banks less prevalent, is there any insuperable objection to letting banks issue notes on deposit of State or municipal bonds, in lieu of Government bonds, under such conditions as will adequately safeguard the Treasury, limiting the issue, say, to 75 per cent of the securities deposited? Mr. ECKELS. The notes issued against these bonds would be just as good, undoubtedly, as those issued against any other bonds. The only possible danger in taking bonds other than Government bonds would be that it would encourage municipalities to issue bonds unnecessarily. But so far as the security of the notes is concerned the bonds of almost any municipality which is not distinctively what might be termed a boom town would be perfectly good. Mr. BROSIUS. The conditions and the restrictions to which I refer Mr. ECKELS. But, Mr. Brosius, the people in these sections who are making the demand for this bank-note currency do not want to deposit security. They claim that such method unnecessarily ties up capital. That is the point of their objection, and I do not know whether, unless they were given notes that were not secured, they would feel any better about it than they do now, or whether they would obtain any relief. Mr. BROSIUS. I am not inquiring so much about what these people want as to what is practical to give them. They complain, as the Comptroller is aware, that they can not get Government bonds, and unless they can bank on some other kind of securities they can not bank at all. Mr. ECKELS. Yes. Mr. BROSIUS. If they could bank on State securities which they already hold, they could issue their currency and it would not tie up their capital, because they would get interest just the same and simply deposit it as collateral security. They would be banking on their own capital, at the same time using the securities of the State as collateral securities. Mr. ECKELS. I do not see any objection to that, as far as the security is concerned. Mr. BROSIUS. Now, Mr. Comptroller, if these measures which I have suggested in these propositions were enacted into law, would not the banks now existing and those to be organized, in that event be able, and would not the profits of their issue induce them to supply commu nities with a suitable amount of currency which would be entirely secure and reasonably elastic? Mr. ECKELS. Under the measures suggested you would probably get as much currency as the country could use; but whether you could always get it when most needed is another thing. The objection to a note issue based entirely on bonded securities is that you have not the means at hand of getting out the currency when it is required. For instance, at a certain period of the year you have to have a large amount of currency, and before you can get it out on bonded securities you must procure and deposit the bonds, and it not infrequently happens that before you have done this the necessity has passed by. Mr. BROSIUS. Is there any other relief from that difficulty except to issue currency against their assets? Mr. ECKELS. None that I know of. Mr. BROSIUS. Then, if it is unwise to issue currency against the assets alone we must endure the difficulty to which you have just referred? Mr. ECKELS. I suppose we will have to put up with certain banking inconveniences; but understand me, Mr. Brosius, that the point I make is that it would not be wise at the outset to issue all bank notes without deposited security, but that it would be wise to undertake to issue a certain per cent against their assets. Mr. BROSIUS. In order to relieve the difficulty to that extent? Mr. ECKELS. To relieve the banking difficulty. Mr. BROSIUS. I am speaking of the banking difficulty. Mr. ECKELS. But issuing notes against the assets of a bank or issuing against bond security, with no further provision, would not relieve the Treasury difficulty at all. UTILIZING THE IDLE SILVER. Mr. BROSIUS. I would like to ask one more question. If these provisions to which I have referred were embodied in legislation, would it not relieve the Treasury situation to provide for utilizing the idle silver now lying in the vaults of the Treasury and the mints, not even available for the redemption of the paper that was issued in its purchaselying there absolutely idle-utilize that by placing it in the reserve fund and uniting it with the gold reserve, thus making a consolidated metallic fund for redemption purposes, with authority given to the Secretary of the Treasury to redeem greenbacks and Treasury notes, either in gold or in silver, to its gold value, or in silver dollars, at the option of the holder, thus doubling or practically doubling the amount of our reserve fund and making it all available for purposes of redemption, and that when the Treasury note or a greenback is redeemed in this way it shall be canceled and not reissued, except on the deposit of a corresponding amount of gold, thereby converting all those notes practically into gold certificates? Would not that strengthen our Treasury situa tion and help us out of the difficulty to a certain extent? Mr. ECKELS. I think that the way the silver could be of the most avail toward assisting the Treasury situation would be to sell it for gold and then make up the difference-let the Government accept a loss on it. I suppose, however, that if it was converted into gold and that gold put into the Treasury you might accomplish some relief after you had redeemed the legal tenders by not permitting them to go out, except on the deposit of gold in exchange therefor. Every legal tender would then be converted into a gold certificate. Mr. BROSIUS. Is not that a good idea? Mr. ECKELS. Well, it would be better than the present situation, but it is not wise for the Government to have out any paper currency at all. The issuing of paper currency is the province of banks. You still, by that method, bring an element in competition with the banks in their note-issuing functions. Mr. BROSIUS. You think that would be better than the present situation, but not so good as to entirely dispense with the paper money? Mr. ECKELS. I think it would be better than the present one. Mr. BROSIUS. The Comptroller will understand that these proposals bring out the ideas incorporated in my bill and I do not take up the bill to go through it in detail, but for the purpose of brevity I have submitted these propositions. Mr. ECKELS. In this bill you contemplate a further purchase of silver? Mr. BROSIUS. Yes. Mr. ECKELS. From time to time? Mr. BROSIUS. I think I would modify that provision. I made no inquiry about that. Mr. ECKELS. Your design would be to make the present silver available? Mr. BROSIUS. To make the silver that is now idle and utterly useless available to splice out the gold reserve that has been inadequate in the past. The CHAIRMAN. We have got about forty-six minutes left. I would like to take about five minutes myself in asking a few questions. Mr. Cox, have you any questions to ask? Mr. Cox. I want to get at that point clearly. The CHAIRMAN. Please remember that the time is short. Mr. Cox. I will be brief, Mr. Chairman. NOTES REDEEMED IN SILVER. The principle involved in that idea is that you utilize, or try to util ize, the silver you have in the Treasury, for the purpose of the first redemption, when these Treasury notes come in. Let us get the facts right. Mr. ECKELS. I take it that Mr. Brosius's idea is to take the silver bullion which is deposited there and unite it with the gold in the Treasury, both to be used as a redemptive fund. Whoever gets silver in redemption of his notes gets the quantity as measured by its gold value, and whenever a note comes in under those circumstances it is canceled and can only be gotten out again by a deposit of gold. It is not unlike the rule observed by the Bank of England. The plan is that in this manner every Treasury issue, legal tender or Sherman note, becomes a gold certificate. You do not design, Mr. Brosius, to permit these notes to be reissued on a deposit of anything but gold, do you? Mr. BROSIUS. No. Mr. ECKELS. Not with silver. THE TREASURY A BROKERAGE SHOP. Mr. Cox. That is the way I caught the point. Now, let us see how it works. I stop in there with one of the Treasury notes, and I say I will take so much gold for this note, or I will take so much silver, at a certain value for the silver compared with gold. Now, when I make that proposition, practically the Treasury decides which way they will pay me. For illustration, they pay me the silver, and I take the silver out and they have got the notes. Now, when I come back to redeem that note, I have got to pay in the gold? Mr. ECKELS. Yes. Mr. Cox. Now, then, watch. Does not that make the Treasury an absolute broker shop as to the price of silver and gold? Mr. ECKLES. It makes the man who presents his note a purchaser of silver of the Government. Mr. Cox. Yes, sir; and then when he wants to get rid of that silver he gives back and demands the gold. You have got a Treasury that is nothing in the world but a brokerage shop. Mr. ECKELS. That is what it has been, only the Government has been buying the silver instead of selling it. Mr. Cox. I agree with you, but that does not answer the question. Mr. ECKELS. The Government has been doing that thing. Mr. Cox. There is no question about that, and I think it the most erroneous thing in the world; but at last the man comes with his Treasury notes and he says, "I will take silver at a certain price," and he gets it. Conditions change, events turn around, and he brings that back and demands the gold. Does not the Treasury have to pay in the gold? Mr. ECKELS. He brings the silver back and demands the gold? Mr. ECKELS. He takes his certificate there in the first instance and gets silver. Mr. Cox. Pardon me there, for fear we will not understand each other. I am treating the certificate as a representative of silver. Mr. ECKELS. The certificate has gone into the Treasury and ras been canceled, so if he wishes to get it out again he must go and deposit gold for it. Is not that your purpose, Mr. Brosius? Mr. BROSIUS. Certainly. The CHAIRMAN. Is not that the Comptroller's answer? Mr. Cox. Probably it is to the chairman. Now, I have got the man there, and he says, "I will take the silver for it." Mr. ECKELS. He surrenders his certificate. Mr. Cox. Yes. Now, that is the silver; and afterwards he comes back with the silver and demands a gold certificate and the Government has to give it to him? Mr. ECKELS. No; the Government does it now. The Government does not do it under Mr. Brosius's bill. Mr. Cox. What does it do? Mr. ECKELS. It says: "You can have your certificate if you will bring me gold for it. But you can not get it with silver." Mr. Cox. If he can not work the silver out he can not get any redemption for his certificate. He can not get the gold. Mr. ECKELS. He gets the silver in place of it, if he wants silver instead of gold. Mr. Cox. The man gets his silver and he takes that out. Now he comes back to the Government with his silver. Mr. BROSIUS. He can not do it under my bill. If he takes the silver, he would dispose of it. He would only want it for export and he would have no motive to bring it back. Mr. Cox. Suppose he does not take that view of it? Mr. BROSIUS. He must take a correct view of it. Mr. Cox. Well, suppose he does not take your view of it, and he brings it back to the Government and says, "Here is my silver. I demand the gold." What is the Government going to do? Mr. ECKELS. The Government says that it is not issuing certificates except on a deposit of gold. Mr. Cox. Therefore the silver must stand its chance with the parity of gold? Mr. CALDERHEAD. And the gold would go to a premium at once. Mr. Cox. Of course it would; it would be at a premium in twenty minutes. Mr. FOWLER. I understand that Mr. Brosius's bill repeals the act whereby the Government has to maintain the parity of the metals. Mr. BROSIUS. Not at all. Mr. ECKELS. As I understand Mr. Brosius's bill, the silver is not |