HEARINGS BEFORE THE COMMITTEE ON BANKING AND CURRENCY. SUGGESTIONS SUBMITTED TO THE COMMITTEE BY THE CHAIRMAN AT A REGULAR MEETING ON DECEMBER 15, 1897. GENTLEMEN OF THE COMMITTEE: We can not hope to secure favorable action in Congress upon needed amendments to the national-bank act, whatever their substance, that are not presented in such form as to meet the approbation of the 70,000,000 people whose servants we are. therefore wish to call your attention to a few obvious facts. It is generally conceded that the banking and currency laws need amendment. What changes would do most to induce an equitable distribution of banking capital and currency notes over the whole country, according to the needs of each section, there does not seem to be any agreement of opinion upon. That under the law as it stands the agricultural and higher-interest sections of the country suffer very great and unnecessary hardship and loss in exorbitant interest charges forced upon lenders of capital by the bank law and present methods of issuing currency, is asserted by the experts in finance of this and other countries. The only safe and efficient remedy for this seems to be in allowing the people to have a currency issued on those sound banking principles upon which it is issued in all other countries. That the system of relieving bankers of all the responsibility, risk, and expense of maintaining specie payments upon all the currency notes in circulation, and devolving this redemption in specie on the Government Treasury, contrary to the practice and condemned by the experience of every country, has cost our people immense sums in direct loss and manifold more in indirect loss and suffering in intensifying monetary panics and industrial depressions, is believed by the great body of our people. The seed from which sprang the recent financial crisis and industrial depression was undoubtedly an insufficient revenue, but the soil that received it had been fully prepared to give it its fruitage of incalculable disaster to our people, by a financial system at variance with and condemned by all experience. Whatever remedies are needed we should diligently seek and immediately and fearlessly apply. We can not justify ourselves to the people if we wait for a repetition of the unhappy experience of the past. We are in duty bound to come to an early decision upon some form of amendments to the banking law that will preserve what is valuable, allow currency to be issued upon sound banking principles, and be a thorough and equitable solution of the whole problem. I will only add : First. That I am thoroughly convinced the people do not desire the retirement of the whole body of United States legal-tender notes. Second. That they do desire that their Government shall continue to control and issue all the currency notes used by the people. Third. That the banks only shall put the notes so furnished into circulation and be responsible for their redemption in specie. Fourth. That banks shall be required to keep each and every form of coin and paper money at a par with every other. Fifth. That the Government guarantee the final payment of every dollar issued. Sixth. To justify this guaranty and save the Government from loss it should collect a tax upon all currency notes supplied by it sufficient to guarantee the United States Treasury against loss, because of its guaranty of their final redemption. If we are to come to any valuable result of our labors in framing a bill, we must agree upon what our procedure shall be. To reach a proper recommendation to the committee I have consulted with the chairmen of the subcommittees and the honorable gentleman (Mr. Cox, of Tennessee) of the minority. In order that the committee may not seem to insist on a measure suggested or proposed by itself, we recommend First. To consider a bill including the three items upon which action is recommended at once by the President. Second. To take the sense of the committee as to whether it shall proceed immediately to frame or consider any bill making any considerable amendments to the national banking law. Third. If affirmative action is had on item No. 2, to adopt the following resolutions: Resolved, That the following bills shall be first considered as in committee of the whole: The bill of the Secretary of the Treasury shall be before the committee, and that the Secretary be given a hearing thereon, such hearing to be confined strictly to questions concerning the operation of the bill in practical banking and in its effects upon the United States Treasury, and that only interrogatories concerning matters over which the committee has jurisdiction when referred to it shall be in order. Second item to be considered, the bill to be prepared by the Monetary Commission, which shall be proceeded with in the same manner and under the same conditions, and that a representative of the Commission be given a hearing. Third bill to be considered, that presented by the chairman of the committee, and that shall be proceeded with in the same manner as the two bills first mentioned. That the meetings of the committee be called for 10.30 a m., and that after 11 a. m. no business shall be in order excepting the consideration of the bills mentioned until their consideration is completed. Then further action to be agreed upon. CHANGES IN THE CURRENCY SYSTEM. COMMITTEE ON BANKING AND CURRENCY, The committee met at 10.30 o'clock a. m., Hon. Joseph H. Walker in the chair. Present, Messrs. Walker, Brosius, Johnson, Van Voorhis, McCleary, Spalding, Hill, Prince, Mitchell, Capron, Cox, Newlands, and Stallings. The CHAIRMAN. Gentlemen, the Secretary of the Treasury has accepted the invitation of the committee to appear before it in explanation of a bill which he has prepared to carry out his recommendations to Congress, and he is now present. Following is the bill presented by the Secretary: [H. R. 5181. Fifty-fifth Congress, second session.] IN THE HOUSE OF REPRESENTATIVES, DECEMBER 16, 1897. Mr. Walker, of Massachusetts, introduced the following bill; which was referred to the Committee on Banking and Currency and ordered to be printed: A BILL to provide for the refunding of the national debt, for establishing a redemption fund and a division of issue and redemption in the Treasury of the United States, and to modify existing laws respecting national banks, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That there be established in the Treasury Department, as a part of the office of the Treasurer of the United States, a division to be designated and known as the division of issue and redemption, to which shall be assigned, under such regulations as the Secretary of the Treasury may approve, all records and accounts relating to the issue, redemption, and exchange as hereinafter provided of the several classes of United States paper money. There shall be transferred from the general fund in the Treasury of the United States and taken up on the books of said division as a redemption fund the sum of one hundred and twenty-five millions of dollars in United States gold coin and bullion, and such further sums of standard silver dollars and silver bullion purchased under the act of Congress approved July fourteenth, eighteen hundred and ninety, as shall equal the silver certificates and Treasury notes of eighteen hundred and ninety outstanding on the date when this act shall take effect. And thereafter the gold and silver coins and bullion transferred from the general fund in the Treasury as herein provided shall be increased or diminished, as the case may be, in accordance with the provisions of this act, and in no other way. SEC. 2. That all United States notes, Treasury notes of eighteen hundred and ninety, and silver certificates presented for redemption shall be redeemed from the redemption fund herein provided, in accordance with the terms of existing law; but the notes and certificates so redeemed shall be held in and constitute a part of said fund, and shall not be withdrawn from said fund nor disbursed except in exchange for an equivalent amount of the coin in which said notes or certificates were redeemed; but to enable the Secretary of the Treasury more thoroughly to carry out the provisions contained in this act, he is hereby authorized to exchange any of the funds in the division of issue and redemption for any other funds which may be in the general fund of the Treasury Department: Provided, That nothing in this act shall be construed as repealing that provision of the act approved July fourteenth, eighteen hundred and ninety, which provides that there shall be outstanding at any time no more and no less of the Treasury notes authorized by said act than the silver bullion and standard silver dollars coined therefrom then held in the Treasury purchased with said notes. SEC. 3. That the Secretary of the Treasury be, and he is hereby, authorized to receive at the Treasury any of the outstanding bonds known as the five per centum bonds of nineteen hundred and four and the four per centum consols of nineteen hundred and seven, issued respectively under the act approved January fourteenth, eighteen hundred and seventy-five, and the acts approved July fourteenth, eighteen hundred and seventy, and Jannary twentieth, eighteen hundred and seventy-one, and to issue in exchange there for coupon or registered bonds of the United States, in such form as he may prescribe, in denominations of fifty dollars or some multiple of that sum, bearing interest at the rate of two and one half per centum per annum, payable quarterly, and redeemable at the pleasure of the United States after ten years from date of their issue; and the bonds hereby authorized shall be payable, principal and interest, in United States gold coin of the present standard value, and shall be exempt from all taxation by or under State, municipal, or local authority: Provided, That none of the outstanding bonds shall be received at a valuation greater than their present worth to yield an income of two and one-half per centum per annum, and that the bonds hereby authorized shall be issued at not less than par. SEC. 4. That the bonds authorized by this act, and any other bonds of the United States, may be deposited with the Treasurer of the United States as security for the circulating notes of national banking associations; and any national banking association which may deposit the bonds herein authorized to be deposited as security for its circulating notes shall be entitled to receive from the Comptroller of the Currency and to issue such notes to an amount equal to the face value of such bonds: Provided, That the aggregate amount of bonds deposited by any national banking association, under any law, shall not exceed the amount of its capital: And provided further, That nothing herein contained shall be construed to modify or repeal the provisions of section fifty-one hundred and sixty-seven of the Revised Statutes, authorizing the Comptroller of the Currency to require additional deposit of bonds, or of lawful money, in case the market value of the bonds held to secure the circulating notes shall fall below the par value of the circulating notes outstanding for which such bonds may be deposited as security. SEC. 5. That any national banking association whose deposit of bonds is less than the amount of its capital may deposit with the Treasurer of the United States, under such regulations as the Secretary of the Treasury may approve, United States notes, Treasury notes of eighteen hundred and ninety, and silver certificates, and shall be entitled to receive from the Comptroller of the Currency and to issue an equal amount of its circulating notes; but the aggregate amount of bonds, United States notes, treasury notes of eighteen hundred and ninety, and silver certificates deposited by any national banking association shall not exceed the amount of its capital: Provided, That the total amount of United States notes, Treasury notes of eighteen hundred and ninety, and silver certificates deposited with the Treasurer of the United States under authority of this section shall not exceed the sum of two hundred millions of dollars. SEC. 6. That the Secretary of the Treasury shall issue from time to time, in his discretion, bonds of the same class and character as those authorized in the third section of this act, and shall substitute the same with the Treasurer of the United States for equal amounts of the United States notes, Treasury notes of eighteen hundred and ninety, and silver certificates deposited by national banking associations; and the bonds so issued and substituted shall be charged to the respective national banking associations and be accounted for by them at such prices, not less than par, as shall represent the market value of such bonds. And the United States notes, Treasury notes of eighteen hundred and ninety, and silver certificates released as herein provided shall become a part of the general redemption fund; and the Secretary of the Treasury is hereby authorized to exchange any of said Treasury notes of eighteen hundred and ninety and said silver certificates for a like amount of United States notes: Provided, That the amount of bonds issued under the authority of this section shall not exceed the sum of two hundred millions of dollars. centum SEC. 7. When any national bank now existing or hereafter organized shall have deposited such United States bonds, United States notes, Treasury notes of eighteen hundred and ninety, or silver certificates to an amount of not less than fifty per centum of its capital, it shall be entitled to receive from the Comptroller of the Currency and to issue national-bank notes, in addition to the fifty per thus provided, to the amount of twenty-five per centum of such deposits; but the circulation issued by any national banking association shall never be in excess of its paid-up capital stock, and the additional notes so issued shall not be secured by said deposit, but shall constitute a first lien upon all the remaining assets of the association issuing such notes. Upon the failure of any association to redeem its circulating notes above provided, whether the same are issued against deposited security or against general assets, the same shall be promptly redeemed by the Treasurer of the United States. To secure the United States against any loss arising from its |