many, and the seceders were called Locofocos. They are now called "Anti-snappers."

The Locotocos began by fighting against bank corruption and monopoly. As they progressed and gained strength, they enlarged their plan of campaign and attempted to reform the earth, and I honor them for it. They set the ball rolling for free trade, and whatever measure of success that doctrine gained in the North before the war was due chiefly to their impulse. They unhorsed the Democratic party in New York City, and although they did not get into the saddle themselves they produced so much alarm that the party took up the subject of bank reform seriously and passed a law to make banking free to everybody. In fact they rather overdid their job, for they allowed individuals as well as banks to issue circulating notes, and that law stands on the statute book of New York to day.

Now, bear in mind that the uppermost thought of the people in 1838 was not good banking but equal rights, and the wit of the legislature was exercised in devising a system which should meet a political rather than a financial exigency. The plan adopted was brought forward by Mr. Abijah Mann. It provided that circulating notes might be delivered by certain State officers to banks or individuals who should deposit with said officers certain securities, worth at the time of deposit something more than the par value of the notes. The system thus inaugurated had a checkered career, which it would take too much time to narrate. It harmonized so nicely with the American idea of equal rights and "a fair chance for everybody" that it spread like wildfire, and its effects in that part of the country where the chairman of this committee and myself lived in our younger days were very much like those of wildfire. They taught me the lesson that in securing equal rights in banking it is necessary to give some attention to the principles of banking. These were for the most part overlooked in the New York law, and they were wholly overlooked in the Illinois, Indiana, and Wisconsin imitations of it.

The principle of credit, which is the vital principle of banking, was expunged from bank-note issues. What was substituted for it? Simply this: That if a bank would drop a dollar and ten cents into a slot, a dollar would drop out, which the bank could then lend to its customers. In other words, the bank's usefulness was paralyzed, on its note-issuing side, at the start. But, you say, security for the note holder was gained in this way. Not exactly. Your chairman and I, who saw the notes of the free banks of Illinois sold at a discount of 60 per cent, and hardly any of them at a less discount than 10 per cent, know better than that.

The testimony of Azariah Flagg, comptroller of New York, shows that the safety-fund system, with its little tax of one-half per cent per annum, furnished as much protection to note holders as did the 110 per cent of deposited security under the free-banking system. Why was this? Simply because under the former system the bank had the 110 cents in its own vaults, i. e., employed in the discount of commercial paper, instead of being lodged in the State treasurer's vaults at Albany. The true fund for the re lemption of circulating notes is the sum total of the liquid assets of the bank, including its bills receivable. It is the same fund exactly as that out of which it pays the checks drawn upon it from day to day.

The Baltimore plan provides for a guarantee fund of the same percentage as under the Canadian law, and it makes the circulating notes a first lien on the assets of the bank. There is an outcry against this

last feature from some people, who say that the poor depositors will suffer. But what is the condition of the poor depositors now? Are not the notes a first lien on the assets? Are not the security bonds a part of the assets? Can any depositor get any part of this fund until the notes are paid in full? And, supposing that the bonds should ever fall short of paying the notes, could the depositor get any part of the remaining assets until the par value of the notes was deducted? Of course not. This outery about the poor depositors is loudest in Boston, and it comes from persons who are probably not aware that the law of Massachusetts now, and from the earliest times, has made circulating notes a first lien on the assets of banks. This law was reenacted by Massachusetts in her last revision, that of 1880. I venture to say that if the 10 per cent tax on State-bank notes were repealed, Massachusetts would cling to this provision more tenaciously than ever, as she ought to. The same provision exists in the State constitution of New York. I see no objection to the repeal of the 10 per cent tax on State-bank notes, provided the State banks comply with all the requirements of the national banking law, and provided the means of enforcing these requirements are lodged with the Comptroller of the Currency. But a mere power of observation, without the power of enforcement, I should consider unwise, unsafe, and sure to cause embarrassment and to end in disaster.

The Baltimore plan contemplates that the Government shall continue, as now, responsible for the redemption of bank notes. I consider this very desirable, although not indispensable. It is a provision in the interest of the public, not of the banks. The redemption clause of the present law was prompted by bitter experience of the losses incurred by delay in the redemption of failed-bank notes, even in cases where the security bonds were good and where redemption at par was reasonably certain. Of course the Government takes care that it shall lose nothing by the operation. It has the security bonds and the 5 per cent redemption fund in its hands, in addition to which it holds a first lien on the assets and on the shareholder's liability to recoup itself for any possible deficiency.

It is no

The redemption clause applies only to failed bank notes. advantage to a failed bank to have the Government redeem its notes and then recoup itself out of the bank's property. The only beneficiaries of the provision are the people of the United States, since all of them are holders, more or less, of the national-bank enrrency. It may be said that the redemption clause is an advantage to the banks, because it gives a wider and more lasting credit to their notes than they would otherwise enjoy. This is true, but this, too, is for the public advantage. It is an inestimable advantage that the public are not put to any trouble in deciding whether a bank note is good or bad. The whole raison d'être of a good banking system is a high state of credit-the higher the better. If this credit is promoted by Government redemption of the notes and without pecuniary loss to the Government that fact constitutes its sufficient justification.

The Baltimore plan simply takes the law as it finds it. It adds nothing to it in this respect. It makes a change in the manner of reimbursing the Government for the redemption of failed notes. The only question is whether the suggested change puts the Government to any greater risk. This is a question of mathematics. It is to be answered by the tables of bank mortality in the past thirty-one years.

It has been said that there is no more reason why the Government should guarantee the notes of a bank than those of a merchant, a manu

facturer, or a farmer. This would be true if the notes of the merchant, the manufacturer, and the farmer were allowed to circulate as money, but not otherwise.

The analogy fails because the latter do not pass from hand to hand, all over the country, with the express authority of the Government. The right to issue circulating notes has generally been under governmental control, and ought always to be so. It is a corollary from this proposition that the Government ought not to allow anything to circulate which is bad or doubtful. The steps which the Government takes to insure the goodness of the circulating medium are strictly in the public interest, and not in any private and corporate interest. To prove this it is only necessary to ask what would be the condition of affairs if it took no such steps. The history of the first half century of the Republic is full of mournful examples of unregulated or half-regulated banking.

It may be said that the Government ought to reap the profit of the paper circulating medium. Conceding this to be true, the question remains, how can this profit be best secured? Experience has shown that Government profits are best obtained by means of a tax, not by entering into business competition with citizens. There is no objection to a tax on bank notes for purposes of revenue purely. We have always had such a tax. Nobody would desire to impose an excessive tax. It would be absurd to create a new system and kill it by the same act. It is submitted that all the advantages in the way of revenue that can be gained by Government issues can be gained equally by taxing bank notes, while the disadvantages under which we now labor will be avoided. The disadvantages are found mainly in the inflexibility of Government issues. These are a fixed sum. We can not make it greater without paving the way to indefinite expansion, dependent upon political majorities solely.

Moreover, the existence of Government issues has thrown upon the Treasury the ungrateful task of maintaining the ultimate gold reserve of the country, and it has taught the people to look to the Government for relief in every case of monetary stringency. These evils are inseparable from Government note issues, and they are certain to increase as time goes on, since there will soon be nobody on the stage of action who has known any other system.

The retirement of the legal-tender notes was not included in the Baltimore plan. It was probably deemed best not to ask for too many things at once, but I am decidedly in favor of their retirement. When I say retirement, I mean cancellation and extinction, not temporary withdrawal.

Of course, cancellation implies either surplus revenue or funding into bonds; that is to say, it must be possible to meet the public expenses without paying out the legal tenders as they come in for taxes, or there must be authority to fund them as the floating debt of a railroad company is funded. I should prefer the latter course, because it is the most certain and expeditions. I do not perceive the wisdom of hiding them away for a longer or shorter time, and thus giving occasion for a demand to pull them out of their hiding places and put them in circulation again. My reason for desiring the extinction of the legal tender notes is that they are a constant menace to business interests.

Business men are in a chronic state of alarm lest the Government should not be able to redeem them in gold, or lest a political party should come into power on a platform of not redeeming them at all. You can not have any real business stability while such apprehensions exist.

Moreover, the greenbacks teach people to believe lies. They create the belief that the Government can make money, than which a more damaging lie never gained lodgment in the human brain. They have kept political parties in hot water for thirty years and have obstructed the pathway for all other reforms. They are an obstacle to the national progress, and ought to be put out of their misery without further delay. I thank you, gentlemen, for your kind attention. Now, if any gentlemen wishes to ask me any questions, I will answer them if I can. Mr. WALKER. I ask again that copies of Mr. White's bill be distributed if Mr. White has them.

The CHAIRMAN (to Mr. White). When would it suit your convenience to submit the bill which you have prepared?

Mr. WHITE. Probably now, if Mr. Hepburn and Mr. Homer agree. Mr. HOMER (a member of the Baltimore committee). I would like to state, in explanation of this matter, that at the meeting of the American bankers' convention, at which the Baltimore plan was acted upon, a committee was appointed for the purpose of having prepared a bill carrying with it the underlying principles of the Baltimore plan. The activity of this committee (the committee on banking and currency), and of the country, generally, on the question of currency, was, I must confess, rather a surprise to us, and it has caught us in the position of not being prepared, to-day, to present to you a bill in such form, and embodying those principles, properly worked out, such as the entire committee would like to submit. We are engaged in the preparation of such a bill.

I can see no objection to Mr. White's handing in to you now the measure which he has taken the pains to prepare. What my own judgment would be, that, with the existing multiplicity of bills and ideas on this subject, those bills that carry out only in part the general Baltimore plan and the indorsed idea of the entire committee appointed by the American Bankers' Association, might only add to the existing confusion. I have not the remotest objection to the scrutiny of Mr. White's bill, but it will be handed in by him as his individual bill, and not as the bill of the American Bankers' Association.

Mr. WHITE. That is all right.

The CHAIRMAN. The chair is of opinion that the members of the Baltimore committee having the matter in charge should submit their formulated plan in their own way. There is plenty of time. Mr. White can submit the formulated plan at any time.

Mr. WHITE (handing several copies of his bill to members of the committee). I submit this as an embodiment of my individual views. Mr. White's bill is as follows:

A BILL to amend the National Bank Act.

SECTION 1. From and after the passage of this Act, no banking association shall be required to deposit with the Treasurer of the United States any United States bonds, either as preliminary to the commencement of the banking business, or for the security of circulating notes to be hereafter issued.

SEC. 2. In lieu of the deposit of bonds as security for circulating notes hereafter to be issued, each national banking association shall be entitled to receive circulating notes from the Comptroller to the amount of fifty per centum of its paid-up unimpaired capital, as determined by the Comptroller of the Currency, upon paying to the Treasurer of the United States lawful money to the amount of two per centum of such circulating notes and thereafter a tax at the rate of one-half of one per centum per annum upon the average amount of its circulation outstanding for the year, which tax shall be additional to all other taxes whatsoever on bank notes. Said tax shall be collected in the month of January. The said two per centum and the proceeds of said tax shall constitute a guarantee fund for the redemption of the notes of insolvent national banks, and the tax shall be collected until the fund amounts

to not less than five per centum of the entire circulation issued under the provisions of this act. This fund shall be in addition to the five per cent redemption fund now provided by law. No association or individual shall have any claim upon any part of the money in said guarantee fund, except for the redemption of the circulating notes of any insolvent national banking association. Any surplus or residue of said guarantee fund which may be hereafter ascertained or determined by law shall inure to the benefit of the United States.

SEC. 3. In addition to the amount of circulating notes provided for in the foregoing section, each association shall be entitled to receive from the Comptroller circulating notes to the amount of twenty-five per centum of its paid-up unimpaired capital, upon paying to the Treasurer of the United States lawful money to the amount of two per centum of such additional circulation and a tax of one-half of one per centum per annum upon the average amount of the same outstanding for the year, payable as provided in section two, and an additional tax at the rate of four per centum per annum upon the average amount of such additional circulation outstanding for the year, all of which sums shall be a part of the guarantee fund aforesaid: Provided, however, That any excess in said guarantee fund over the five per centum aforesaid, resulting from the tax on said additional circulation, shall belong to the United States.

SEC. 4. The average amount of circulation outstanding, upon which the tax herein provided for shall be imposed, shall be the average amount of notes issued to the association and not held by, or in possession of, itself; and the highest amount outstanding in any month shall be taken in computing the average for the year.

SEC. 5. When the guarantee fund shall be equal to five per centum of the entire circulation of all the banks outstanding, the collection of the tax of one-half of one per centum per annum shall be suspended, but the same shall be resumed whenever the guarantee fund shall fall below five per centum, and it shall be continued until that amount is again accumulated. Said tax shall be collected in the manner now provided by law for the collection of the tax on the circulating notes of national banking associations.

SEC. 6. Whenever the insolvency of any national-banking association shall be ascertained in the manner provided by law, its outstanding circulating notes shall be redeemed by the Treasurer of the United States out of said guarantee fund, if the same shall be sufficient, and if not sufficient, then out of any money in the Treasury. As the proceeds of its assets, including the personal liabilities of shareholders, are paid into the Treasury by the receiver, in the manner now directed by law, before any dividend shall be paid to depositors or any other creditors of the bank, the guarantee fund shall receive a sum equal to the outstanding circulation of such insolvent national bank as far as the proceeds of such assets permit. And the United States shall be first paid out of said guarantee fund, when replenished, for all advances made in pursuance of this section.

SEC. 7. Associations applying for circulation after the first payments into the guarantee fund shall have been made may receive circulating notes from the Comptroller of the Currency upon paying into said fund a sum bearing the ratio to the circulation applied for and allowed which the guarantee fund bears to the total circulation outstanding, and shall be subject to the tax of one-half of one per centum per annum, as called for by the Treasurer of the United States for the creation and maintenance of this fund.

SEC. 8. The annual report of the Comptroller of the Currency to Congress shall embrace a statement showing the aggregate amount of money in the guarantee fund, the payments made into it during the year, the payments made out of it during the year, and the amounts, if any, advanced by the United States for the redemption of the notes of insolvent banking associations and the repayment thereof. It shall be the duty of the Treasurer of the United States to furnish the Comptroller such information as he may request, in writing, from time to time, for the purpose of preparing said statement.

SEC. 9. Whenever and so often as bank notes are issued to any association under the provisions of this act it shall be the duty of the Secretary of the Treasury to retire and cancel legal-tender United States notes and Treasury notes, to the amount of eighty per centum of the sum of bank notes so issued, as said legal-tender notes are received into the Treasury. And for this purpose he is authorized to use any surplus revenues from time to time in the Treasury not otherwise appropriated. If at any time the surplus revenues are not sufficient to enable the Secretary to carry ont the provisions of this section, he shall resume the cancellation as soon as possible and continue it until the said eighty per centum of United States notes shall have been extinguished. If at any time the amount of legal-tender notes in the Treasury shall not be sufficient to enable the Secretary to carry out the provisione of this act, he shall so report to Congress, and shall resume the cancellation in ths ratio aforesaid as soon as practicable.

SEC. 10. Any association may retire its circulation, or any part thereof, at any