emphasized by the provisions of these various bills which I have enumerated. If it was put to any one of the authors of these measures, I do not believe there is one of them, except Mr. Brosius, whose views, judging from his bill, are very decidedly the other way, but would say that the best thing to do, if it could be done without too great expense, would be the funding through a bond issue of these demand obligations. In this way the payment and cancellation of them could be had and the Government be put in a position where it would not be necessary for it, at great cost and worry, to maintain against them a gold reserve for their current redemption. But while all seem to agree that such course would be the best to pursue, there is apparently a difference of opinion as to whether it is at this time the most practical thing to do.

I am very free to say that my own judgment is that the practical thing in a matter affecting the public interest is always the best thing, and the best thing is always the practical thing. There may be, however, in this instance, some very good reasons known to those who take such view why, if the desired thing is to be accomplished in the end, the most direct way is not the best.

PROTESTS AGAINST RETIREMENT OF GREENBACKS.

I am aware that there is much protest and many objections urged against the refunding and cancellation of the Government's demand obligations, even on the part of those who believe they cause more or less loss. The main objection on the part of those who believe in the retirement of them, but not in funding them through an issue of bonds, is that the public would protest against the plan and the requisite legislation could not be passed. The error of the general public arises in the first instance from looking upon a legal tender demand obligation of the Government as a noninterest-bearing debt, and in the second because of a belief that their funding would tend to contract the country's volume of currency. It is not a noninterest-bearing debt, but instead is the most expensive debt the Government has to do with. As a direct money proposition the keeping idle and out of the channels of trade of a large sum of gold as a necessary reserve, with the consequent loss of interest on it, is one item of continued expense, while the interest upon and ultimate payment of the bonds to maintain the current redemption of the legal-tender obligations is a still larger item of cost to the people. Added to these things is the patent fact that these demand obligations are always, in a time of financial depression, a source of weakness not only to the Government but.to every business interest, thus making them immeasurably a greater burden than a bonded indebtedness for a definite amount and limited as to payment to a definite period of time.

WOULD NOT CAUSE CONTRACTION.

Turning to the suggested dangers of a contraction of the currency the assumption that such a result to a harmful extent would follow is erroneous. I do not believe that a contraction of the currency beyond that which is healthful is possible in this country, if this country's credit is unquestioned and unquestionable. I do not believe, if the legal tenders were retired gradually-you can not retire them all at one time, and I do not think anybody ever contemplated that they should beany contraction in the volume of our circulating medium would follow more than was needful to business interests.

If the plan which was entered on by Secretary McCulloch, under an act of Congress, had been continued to the end, the country would not have suffered from half the financial difficulties it has. There would also have been less financial heresies taught upon the subject of a Government-created money.

If these obligations should now be retired gradually, whether by funding or otherwise, it would be found wherever money was needed that either the banks would supply the necessary currency or else gold would come from other places where it was not needed to fill up any vacuum here.

The practical truth in currency matters is that there never is a vacuum permitted to exist which ought to be filled, and where reasons exist why it ought to be filled, but that it is immediately filled. The needed amount for this purpose comes from places where there is too much money to be profitably employed.

DANGER OF THE PRESENT SYSTEM.

If the legal tenders were retired, with the country possessed of a proper banking bill, whatever deficiency was created or increase in the circulation was needed would come through the banks, or else gold would come here from other countries. At present the business interests of the country do not suffer half as much in actual money loss from the present banking system as they do from the compulsory maintenance of the demand obligations of the Government, which are currently redeemed and which are never retired. It must be evident to any man of practical business experience on this committee that he would find himself financially embarrassed at the end of a reasonable period of time if he undertook to always keep out his own notes to a larger amount than it seemed he could redeem, and whenever he would pay one would reissue it again, whether or not it was necessary to so do. He would some time come up against a settling day which would break him.

This is just the case with the policy the Government is trying to make successful. It has recently been near a settling day, and only by a narrow margin escaped disaster. I hardly think it will be as fortunate again. It certainly ought not to run the risk with the attendant consequences that would fall upon all interests in case of failure overtaking it. If, as I have stated, the evil through which our financial system entails the greatest loss is these demand obligations, there will not come from a revision of the present banking system a practical, substantial benefit to the people unless it is provided in some way to get rid of them.

BANKS SHOULD ASSUME REDEMPTION OF NOTES.

A prominent feature, as I have said, in all of these different bills, is a provision to this end, and I think it may be said, so far as those who have introduced the bills with such provision are concerned, they recognize that the largest benefit to be obtained in a new banking law is to get the Government out of the business of issuing credit currency and bestow such power entirely upon the banks, making the banks maintain not only the current but the permanent redemption of their notes in gold. I think the banks are fully able to do this.

Mr. JOHNSON. I would like to have you amplify that-that the banks will be fully capable of sustaining the burden.

BANKING BEFORE THE WAR.

Mr. ECKELS. Up until the time of the war the banks of the country, which were not then either as strong in their financial condition or as well equipped in facilities of exchange and methods of transportation, wherever properly and honestly conducted upon safe banking princi ples and not as speculative enterprises, maintained not only the current and ultimate redemption of the notes which they issued, but were strong enough in their gold holdings to furnish all the gold that was needed for domestic trade and to settle international balances. They not only did this up to the time of the breaking out of the war, but for some time thereafter. Again, after the resumption of the specie payments they continued to maintain themselves strong enough in their gold holdings to furnish all the gold needed for all business purposes, but in addition so supplied it to those wishing it for any purpose that the demand obligations of the Government were not presented for current redemption.

Mr. HILL. And as a matter of fact we were more dependent upon foreign nations at that time than now?

Mr. ECKELS. Yes; very much more dependent.

The CHAIRMAN. At that point, if you want a suggestion as to the fact

Mr. ECKELS. I would be very glad, Mr. Chairman, at any time to have any suggestion any member of the committee may desire to make.

THE SUFFOLK SYSTEM.

The CHAIRMAN. In New England, under the Suffolk system, which is generally conceded to be the best banking system on the whole we had in this country before the war, the total specie held in those banks for circulation in New England was 13 per cent, and that would amount on $800,000,000 of circulation to $108,000,000. Their specie for loans. and discounts was 3.9 per cent, and that, on the $4,000,000,000 of discounts, $1,800,000,000 of national-bank loans and discounts and $2,200,000,000 of State bank loans and discounts, would amount to $156,000,000. I think we now have of visible gold $315,000,000. I thought I would give those figures.

Mr. ECKELS. Thank you. So the only thing to judge by, as to what can be done, is that which the history of the country shows has been done. There is the fact that before the war, under the then existing State banking systems, properly conducted institutions redeemed their notes in gold, and were always furnished the gold necessary for the business interests of the country. Of course there were a great many institutions which were wholly fraudulent, and there were great losses to note holders, but that was because of the bad banking laws and the reckless and dishonest manner in which the individual banks which failed to redeem their notes in gold were conducted.

Mr. CALDERHEAD. The Government obligations were at a discount the most of the time for several years before the war.

Mr. ECKELS. I do not think the Government ever had any such obligations out before the war except in the shape of a comparatively small amount of Treasury notes during a period shortly after the war of 1812.

The CHAIRMAN. How long were those out?

FINANCIAL LEGISLATION OF THE WAR.

Mr. ECKELS. Only a short while. It will be recalled by members of the committee familiar with the financial legislation of the war that in the discussion of the bill introduced by Mr. Spalding, which authorized the first issuance of Treasury notes, it was very strongly protested by those opposed to the measure that the Government was entering upon a policy which had never been known of before, which never had been suggested in any debate or embodied in any bill, and which was then only justified by those urging it upon the ground of the pressing necessity of an extraordinary condition of affairs, necessitating extraordinary expenditures. The measure only became a law under protest, the strongest advocates of it placing their advocacy of it upon the grounds of necessity, and emphasizing the fact that as a financial proposition it was unsound and repugnant to all of the country's previous financial policy. The disbelief in the soundness of it was emphasized by a provision in the first instance that the Treasury notes thus issued and thereafter issued should be, upon presentation in certain sums within a certain period, refunded into bonds.

All of those advocating the bill, including Mr. Sherman and others, promised that immediately upon the close of the war the notes should be retired. The present Senator, then Representative from Vermont, Mr. Morrill, not only refused to support the measure, but upon every occasion was strongly against it. His frequently expressed judgment to-day is that the expenses of the war were enormously increased by the issuance of legal-tender Government paper at that time, and that it was wholly unnecessary. It was the opinion of the New York bankers-and I suppose other bankers, but I speak particularly of the New York bankerswho, up until the time of the issuance of the Treasury notes, assisted the Government in maintaining the gold payments, that they could have continued to maintain gold payments, despite the strain of the war, if Congress had not passed the first act. Secretary Chase never thoroughly believed in it, and only after repeated efforts was dragooned into giving it sanction.

GOLD PAYMENTS DURING THE WAR.

The CHAIRMAN. Mr. Coe, of New York, and two other bankers made a proposition to Mr. Chase, so I was told by Mr. Coe, that they would maintain gold payments provided they allowed the banks, by some national legislation, to issue all the currency the Government needed. They would guarantee to maintain the gold payments, but Mr. Chase thought he possibly could not carry that through Congress.

Mr. COOKE. Looking back over the history of that period, do you believe it was possible to have maintained gold payments during the war?

Mr. ECKELS. Yes. I base my judgment largely upon the opinion of those who were then most familiar with the situation. Certainly the return to gold payments was greatly delayed after the war by the failure to fund these obligations.

The CHAIRMAN. Louisiana maintained gold payments clear up to Butler's capture of New Orleans.

Mr. SPALDING. Do you think that banks could have maintained specie payments during 1893, 1894, and 1895?

Mr. ECKELS. Yes.

Mr. SPALDING. Is it not a fact that they really suspended all payments and paid only through clearing-houses?

Mr. ECKELS. Yes; many banks paid through the clearing-house. Mr. SPALDING. Because they had no currency, much less gold?

PANIC OF 1893.

Mr. ECKELS. This thing has to be remembered in connection with the panic of 1893. There would not have been the panic of 1893 and its effect upon the banking institutions of this country if under the financial legislation of 1890 the Government's demand obligations had not been greatly increased without in anywise empowering the Secretary of the Treasury to increase the gold reserve to meet the new gold obligations. There was thus created a doubt as to whether the Government was able to maintain gold payments. If the legal tenders had not been outstanding the Government would not have put it in the hands of anybody to go to the Treasury of the United States and withdraw the gold from it.

Mr. COOKE. Then you make it a matter of national credit and not a matter of necessity. Is that the principle?

Mr. ECKELS. Largely that.

Mr. SPALDING. I do not like to interrupt you

Mr. ECKELS. I am perfectly willing to be interrupted.

Mr. SPALDING. You put it, as I understand your argument, that the demand for gold was a speculative demand largely, or fear, or something of that kind; not an actual demand as against the national obligations abroad?

Mr. ECKELS. I think the demand came through fear of a failure of the Government's ability to maintain gold payments. The policy of the Government under the resumption of specie payment act was that, as against $346,000,000 of demand obligations of the Government, a reserve fund of $100,000,000 of gold was sufficient for the current redemption of those demand obligations.

EFFECT OF THE SHERMAN LAW.

The act of 1890 increased the amount of those obligations by $152,000,000 without in any wise increasing the amount of your reserve, and while the holders of them might believe that $100,000,000 might be sufficient for the current redemption of $346,000,000 they doubted that $100,000,000 was sufficient to provide current redemption for almost $500,000,000.

The CHAIRMAN. The basis of that discrimination, however, is this: The people were educated to believe that $100,000,000 was sufficient and believed it was necessary to have $100,000,000 for $346,000,000 of obligations. They were convinced that $100,000,000 was not sufficient for $500,000,000 of obligations, and therefore a fear created the demand for gold.

Mr. SPALDING. Is it not a fact that until trade relations changed they had this demand for gold and it was a legitimate demand to pay our exchanges abroad, and since the change of current there was no demand for gold?

Mr. ECKELS. I think there were other causes entering into it. I do not think any of these great financial disturbances are produced by a single cause, but there is always one great cause which brings many to a culmination.