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winter of 1893 and 1894 was caused by the currency famine of that year. The receipts of gold certificates and gold coin from the banks had fallen from about 95 per cent in February, March, and April, 1890, to 12 per cent in June, 1891, and thereafter continued to fluctuate, rising to 66 per cent in January, 1892, but rapidly falling thereafter to but 3 per cent in September, 1892; thence falling to nothing in May and June, 1893. It has continued at nothing since.

During the currency panic gold coin reached 58 per cent of the total receipts of customs duties in September, 1893, but practically ceased within five months thereafter.

It is thus evident that the suspension of payment of gold in settlement of clearing-house balances was the legitimate outcome of a situation caused by the drying up of gold receipts. These balances were paid in gold by the Government a long time after the banks had ceased to pay gold.

The last payment of gold coin was in February, 1894. It had at that time only paid gold coin for a period of eight months, which was after an interval of eight years. These gold payments resulted from the currency famine then being experienced.

Mr. CALDERHEAD. If the payment of these balances had continued to be made in gold from 1892 to 1895, would the Treasury have been exposed to danger of losing its reserve fund any more than it actually has been exposed during that time!

Mr. ECKELS. It might have been lost more rapidly, but the reason the United States stopped paying gold was because its gold income had practically ceased, and it was dangerously near the reserve limit. It had ceased because the banks and the banks' customers wished to hoard their gold, having doubt as to the financial credit of the country. This condition came about largely through the possibility of the Gov. ernment not being able to maintain gold payments.

Mr. CALDERHEAD. Would it not have been just as easy to maintain the reciprocal relations of the subtreasury with the clearing house of paying balances in gold and receiving revenue in gold as it was to maintain the Treasury during the last four years?

Mr. ECKELS. I do not see the exact relations between the various parts of this question. It seems to me immaterial whether the gold obtained by the Treasury was used to pay clearing-honse balances or to redeem outstanding notes of the Government. If the balances were paid in United States notes they could at once be presented for redemption in gold.

Mr. CALDERHEAD. If the revenue were sufficient now for the current expenses of the Government, what reason would prevent resuming that reciprocal relation between the subtreasury and the clearing house?

Mr. ECKELS. I do not look upon the volume of the revenue receipts as governing in this. It is the volume of receipts and payments of all kinds in all trade which governs, and not merely the Government's revenue receipts. If the banks again get a gold income from the ordi. nary course of business, which would indicate a cessation of hoarding, and they would make gold payments to the United States, the United States could then settle its balances in gold. But this must be through the natural course of business, and not forced. It can not come if confidence is lacking in the Government's credit.

Ordinarily, in the course of business the expense of handling gold coin, where there is no question of the paper being of equal and interchangeable value with gold coin, is such that the people, to save expense in handling, wish paper instead of gold. This causes the gold to go to the banks, and from the banks to the Treasury. The element

of confidence, of course, enters into this, as does the element of a wish to lessen the expense attendant upon monetary transactions.

Mr. CALDERHEAD. If this relation were resumed and maintained, is there any probability that national banks would increase their circulation, either under the present law or under either of the bills introduced by Mr. Walker, Mr. Hill, or Mr. Fowler?

Mr. ECKELS. The amount of currency taken out under any bank bill would depend on the margin of profit to the issuing bank. It would be controlled by the conditions of trade, the confidence which the notes issued enjoyed at the hands of the people, etc. It would not be governed by any one cause. I do not think the single factor stated would have a controlling influence, if any.

Mr. CALDERHEAD. If the revenue were sufficient for the current expenses of the Government, what present or future danger is there of a loss of gold from this country sufficient to prevent the subtreasury and the clearing house from making and receiving payments in gold?

Mr. EOKELS. The same danger that existed from 1888 to 1893, when the gold reserve fell from $219,059,232 to $80,891,600. The monetary system is at fault, and until it is remedied the banks will not get a gold income. The maximum of the gold reserve was the former figures, but on February 11, 1895, it had fallen to $41,340,181. Such a decline only could have been brought about by the Government undertaking to maintain a doubtful monetary system. It is a matter which is independent of revenue and can not be remedied by mere revenue receipts.

Mr. CALDERHEAD. If this relation were resumed and maintained without the purchase of gold except the procuring of it in the ordinary course of trade, would not the whole expense to our people of carrying our money be the interest upon the gold reserve fund and the cost of the national-bank currency?

Mr. ECKELS. I do not deem it possible to procure gold in the ordinary course of trade under present conditions. It certainly could not be so procured during the time when the expense of the system has been most manifest. Gold hoarding is always manifest at such times as there is a financial depression, growing out of doubt as to the stability of the monetary system. The result of this hoarding is to take gold out of the channels of trade, and it can not, therefore, be gotten into the Treasury. Extraordinary methods in the form of bond issues have to be resorted to, with attendant expense and doubt. The expense falls upon the people in the way of increased taxation, and the doubt effects them in disturbing all business relations with consequent loss. Of course, there is loss of interest on the gold reserve, and there is loss to business interests, otherwise, by depriving them of the volume of the reserve when that amount is needed in business. The direct and indirect loss to business through a false system, breeding as it does, panic and speculation, can not be calculated.

Mr. CALDERHEAD. What per cent on the whole stock of our money would this be?

Mr. ECKELS. It is impossible for me to answer the question as propounded.

Mr. CALDERHEAD. If the greenbacks and other Treasury notes were all retired this year, what amount of reserve would be necessary to maintain the silver and silver certificates at par?

Mr. ECKELS. That would depend largely upon the provision governing such coin and certificates. No percentage is large enough to protect under any and all circumstances issues which, when once redeemed, are reissued for any purpose without first requiring a return of the coin they represent.


Washington, D. C., Thursday, February 18, 1897. The committee met at 10.30 a. m. Members present: The chairman (Mr. Walker), and Messrs. Brosius, Johnson, Van Voorhis, Fowler, Spalding, Calderhead, Hill, Cox, Stallings, and Hendrick.


[Supplementary to his statement of February 17, 1896, for which see page 5 of this volume.

The CHAIRMAN. Gentlemen, before Mr. Eckels resumes his statement, I will submit to the committee the accompanying tables in exposition of the financial and banking condition of the country in further elucidation of the subject of an argument made by me on February 17, 1896—one year ago.

Not a statement then made has been called in question, nor any inference or argument then made questioned. In the figures given in Table SS, page 452, I have included all banks of deposit, loan, and discount in the country. I have redrawn House bill 171, striking out sections 14, 15, 16, and 55 of the old bill and inserting different provisions, and rewriting some others so as to limit the amount of greenbacks to those that are now in circulation, which average about $200,000,000. This change will permit a very much larger amount of purely bank cur. rency to be issued by the Government to the banks, to be put in circu. lation by banks. Undoubtedly there will be an average of $140,000,000 to $170,000,000 of gold in the Treasury under the tariff now being framed, which would leave about $200,000,000 of greenbacks for banks, the balance being taken up and canceled with the gold in the Treasury, after that amount was taken out by the banks. Turning to Appendix SS, page 452, it will be seen that the least cash reserve the total banks in the country keep is $632,915,047. They keep of their own motion $824,794,278. They believe it is for their interest to far exceed the requirements of the law in the cash reserve kept.

Under the rewritten bill the banks would be obliged to carry $316,457,523 in gold, which is only three-fourths of the gold they would have in their possession, as is shown by a footnote to that appendix. The balance of their cash reserve would take every dollar of the $200,000,000 of greenbacks and several million silver dollars, but they would actually have probably about $400,000,000 in gold, $200,000,000 in greenbacks, and $200,000,000 in silver, making up the $800,000,000 reserve they now carry; but banks would so rapidly increase that the silver dollars carried by them would soon include ail that would not be kept in the pockets of the people, for under the encouragement of House bill 171 banks would soon increase so as to carry cash reserves amounting to about $1,000,000,000.

This country or any other, never saw a sounder, more flexible, abundant, elastic, and inexpensive currency than that issued by the banks of the six New England States from 1840 to 1860, which were combined into one body by a system of redemption known as the “Suffolk system.” The bill (H. Ř. 171) as now written is the Suffolk system pure and simple. The fact that banks are required under it to carry, proportionately to their capital, legal-tender notes amounting to $200,000,000 does not militate against this statement. Divided among all the banks

of discount in the country, it would amount to only 11.2 per cent of the aggregate of their total real capital, namely, their

capital, surplus, and undivided profits, of $1,781,290,466. This percentage of holdings of greenbacks, under the operation of section 14 of the bill, would soon be very materially reduced by the rapid increase of banking capital in new banks, invited by the liberal provisions of the bill. New banks would be rapidly formed, soon carrying the banking capital of the country up to $2,500,000,000 and thereby reducing the volume of holdings of greenbacks of each bank down to an amount not exceeding 8 per cent of their real capital. The carrying of the greenbacks would not cost the banks a farthing, for every dollar of them would be held in the cash reserves” of the banks.

Turning to Appendix B B, page 441, it will be seen the currency in New England in the period from 1840 to 1860 was about $16 per capita. This would give $1,200,000,000 currency in the country besides all the cash reserves held in banks. The currency of all the New England banks was currently redeemed” in Boston. This caused it to sell all over the country at a premium, because of its certain and prompt redemption in a large commercial city. Their specie is shown by the appendix to have been 134 per cent to their currency. The banks in Virginia were really just as sound at their own counters, but having no current redemption in any large commercial city, in fact, in no place but over their own counters, their currency sold at a discount, as did the currency of nearly every other State in the Union, excepting Louisiana. Of course theirs were practically currently redeemed in New Orleans, which accounts for its also selling at a premium. And this notwithstanding Virginia carried nearly double the specie to its currency that was carried in New England-namely, 24 per cent.

It will also be seen that all the agricultural States in 1856 made very much larger loans on the same amount of capital and deposits than they can now make, because of their issuing currency freely– New York State and New England nearly one-half as much again as nowmaking interest one-third less then than now, to pay the same dividends on bank stock, while in New York City they are loaning to-day, on the same amount of capital and deposits, 10 per cent more than in 1856, and this for the reason that cities can not issue currency to a large amount and make it profitable, excepting under the oppressive conditions, fav. oring large cities, of the present national banking system. Appendix CC, page 442, shows that Virginia has more wealth per capita to-day than she had in 1860, and this is true of every Southern and Western State. It therefore can not be that their being short of banking funds and currency is because of the want of capital, but rather because there is no inducement to put capital into banking in competition with the large cities in the North and Northeast.

Appendix D D, page 442, shows that Virginia has to-day $11,037,665 banking capital, which is only $2,000,000 less than Virginia and West Virginia had in 1856, and Appendix B B, page 441, shows that the circulation in 1856 was $10.56 per capita, while to-day it is only $1.14.

Appendix G G, page 413, shows Virginia would have, instead of $1,891,145 in currency, $10,556,158 if she had the same percentage of currency to her banking capital that she had in 1856. The fact is that Virginia is practically robbed of the equivalent of from $12,000,000 to $15,000,000 live capital from what she would have under bill H. R. 171. And this because of our iniquitous national banking restrictions. And this is proportionately true of every other agricultural State in the Union, as is partially shown by Appendix G G, page 443.

The fear as to a short supply of gold is as groundless as any hallucination that ever possessed the human mind. The movement of gold referred to on page 31, “ Appendix Gold,” in my original argument is further shown in this, in Appendix H H, page 444. By comparing it with Appendix I I, page 445, it will appear to the dullest comprehension that the balance of trade being for or against any country is no indication of the probable movement of gold. My original argument, above referred to, and these appendices show that we shall give law to the movement of the gold of the world immediately on establishing a sound banking system, and that because of the greater wealth and higher rates of interest of this country over any other country in the world, providing the world is convinced that we have at last adopted and propose to adhere to, a rational and sound banking and financial system.

Appendix JJ, page 446, shows the total banking currency and total of all currency in the country for the ten years from 1860 to 1869, and also the enormous profit possible in taking out currency, under our present bond system of securing it, in those years. These enormous profits, then, are only equaled by the oppressiveness of the same system now, and for the last ten years, especially upon all the agricultural parts of the country.

The enormous waste of the people's money in our subtreasury system, and of finance, is almost past belief. Appendix K K, page 447, shows that Germany carries in Government funds an average of only $18,184,794. Appendix L L, page 448, shows that of France to be $38,930,756, while Appendix M M, page 448, shows that the United States carried for the ten years from 1882 to 1891 an average of $288,135,914. It carried an average of $294,156,697 free money in the Treasury during the year 1896, while the deficiencies in the revenue had been over $40,000,000 a year for several years preceding. During this time we sold $262,000,000 of bonds, and for $20,000,000 less than their normal price in prosperous times.

Appendix N N, page 449, shows not only how rapidly our funded debt was reduced after the war, but that had we a rational Treasury and banking system, allowing us to use our funds to reduce our debt instead of taxing the people in the vicinity of $17,000,000 a year to carry this enormous balance, we could have reduced our interest-bearing debt from $747,361,960, in 1895, when it was the lowest, to $459,002,816 and still had a working balance of $20,000,000 in the Treasury, or one-tenth more than Germany carries.

Appendixes o O and P P, page 450, show the specie held in the national banks in States using more gold for currency than any others. Only $1 in $15 of their specie is in silver dollars. It will be seen these States have only about $5,000,000 of currency. This table shows their loans to their “capital and deposits” to be only 52 per cent, while under the old Suffolk system in New England the loans to "capital and deposits” were more than double, or 125 per cent. This shows that the banks in the New England States could make their loans at less than one-half the rates of interest the banks are obliged to charge in these seven States and pay their stockholders the same dividends as now. If the banks in those States had been growing up under the New England Suffolk system during the last twenty years, instead of being cramped, confined, and oppressed in our present national system, quite a different result would be shown. The States of the South and West are abused by the national-bank act to a far greater degree than the States named. The oppressiveness, especially to the

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