MONEY TRUST INVESTIGATION. SUBCOMMITTEE OF THE COMMITTEE ON BANKING AND CURRENCY, HOUSE OF REPRESENTATIVES, Washington, D. C., December 11, 1912. The subcommittee met at 11 o'clock a. m. Present: Messrs. Pujo (chairman), Stephens, Daugherty, Byrnes, Neeley, McMorran, Hayes, Guernsey, and Heald. Present also: Samuel Untermyer, Esq., counsel for the committee. TESTIMONY OF WALTER E. FREW-Continued. The CHAIRMAN. Mr. Frew, yesterday afternoon, just before the adjournment, you asked to make an explanation of matters relating to out-of-town collections? Mr. FREW. Yes, sir. The CHAIRMAN. After conference on the part of the committee and counsel, we have concluded that the question is germane to that which was brought out in the examination in chief, and therefore you will be permitted to make the explanation. Is that satisfactory? Mr. RUSHMORE. Yes. Mr. UNTERMYER. Will you please make such explanation as you desire, Mr. Frew? Mr. FREW. Yes, sir. Mr. UNTERMYER. I think your counsel has formulated a question for you, has he not? Mr. FREW. Yes, sir. Mr. UNTERMYER. Shall I put it as he has formulated it? Mr. FREW. Yes, sir. Mr. UNTERMYER (reading): Did the committee on inland exchange of the clearing house have a compilation made of the gross income of the members of the clearing house association from collection of exchange during the year 1911, and of the exchange cost, including proportionate share of the collection departments of postage, rents. stationery, and salaries for that year, and also the estimated loss of interest on collection items; and if so, please state the result of that compilation. Is that compilation in print? Mr. FREW. The results of the compilation are in print; yes. they not? Mr. FREW. Yes. Mr. UNTERMYER. And that report, I think, was published in the newspapers, was it not? Mr. FREW. A portion of it; yes, sir. Mr. UNTERMYER. It was given by the clearing house committee to the press and published? Mr. FREW. No, sir. Mr. UNTERMYER. It was published? Mr. FREW. Yes; it was published, but it was not given by the clearing house committee. Mr. UNTERMYER. Please produce that report. Mr. FREW. I have it here. Mr. UNTERMYER. Would you like to have it put in the record? Mr. UNTERMYER. Is there any explanation that you desire to make on that subject other than that contained in the report? Mr. FREW. No, sir. Mr. UNTERMYER. That completes all you wanted to say, does it? Mr. FREW. That completes all I wanted to say; yes. (The report referred to was marked "Exhibit No. 69, Dec. 11, 1912,” and will be found printed in the record at pages 821 et seq.) Mr. UNTERMYER. Suppose we take up this report now for a moment. Mr. FREW. Yes. Mr. UNTERMYER. Did you compile any of the figures? Mr. FREW. No, sir; that was done by the secretary of the committee. Mr. UNTERMYER. Is there any report showing the difference between what the customers are paying now, under this rule, and what it cost them before? Mr. FREW. No, sir; there are no such figures in existence to my knowledge. Mr. UNTERMYER. Do you not understand that the purpose of the committee is, first, to ascertain under what authority this rule is imposed on the members; and, secondly, how much more it costs the customers and the merchants throughout the country to have their checks collected under this arrangement than it cost when the banks were independent and could make their own arrangements? Mr. FREW. I so understand it, that there are no such figures in existence to make any comparison. The testimony, as given by a previous witness, indicated that the banks are making $16,000,000 or $17,000,000 a year out of this business some Mr. UNTERMYER. I do not think you are answering my question. My question simply goes to this, as to whether or not the clearing house or any clearing house committee has ever made an investigation or report to show what amount of tax this rule that you have passed imposes on the merchants of the country? Mr. FREW. They have made a report on what it imposes on the merchants of the country as of to-day; in New York City as of to-day-as to its membership; but not in 1899. Mr. UNTERMYER. In other words, you have not gone back to find out the difference between what it costs the merchants under this rule and how they fared before the rule went into effect? Mr. FREW. No, sir. Mr. UNTERMYER. According to this report, after making these charges and estimated loss, there is very little profit left. Mr. FREW. Comparatively little; $97,000. Mr. UNTERMYER. You have charged, though, besides the estimated loss of interest on the account. a part of your general office expenses and of your rent and of your postage and stationery and salaries? Mr. FREW. In that department, yes. Mr. UNTERMYER. You have charged all that against this account? Mr. FREW. The salaries of that department, you understand? Mr. UNTERMYER. Yes. And even after those charges it does not show a loss? Mr. FREW. With the exception of what might be considered a possible loss on money outstanding. Mr. UNTERMYER. Will you not answer my question? I say after making all those charges against these out-of-town checks it still shows a profit and not a loss? Mr. FREW. Yes; $97,000. Mr. UNTERMYER. Are you familiar with the letter that was written by Mr. Vanderlip to the chairman of this committee under date of June 10, 1912, after Mr. Sherer testified, and which was published at the time? Mr. FREW. I read it in the newspapers, yes, sir. Mr. UNTERMYER. I read from that letter: As a matter of fact, instead of New York banks making a profit of $50,000.000 from the collection of country checks, the work actually entails upon them a loss of from $2,000,000 to $3,000,000 per annum. That is quite inaccurate, is it not? Mr. FREW. No, sir; because he figures the loss of interest on the amount of money outstanding. Mr. UNTERMYER. Will you tell me whether that statement is accurate? Mr. FREW. I do not know, sir. Mr. UNTERMYER. Do you not know that it is inaccurate? Mr. FREW. It depends on how you figure that rate of interest. There is a great difference of opinion on that point. Mr. UNTERMYER. You have gone through all these figures, you say? Mr. FREW. I have gone through them in a general way; yes, sir. Mr. UNTERMYER. And you have figured the loss of interest, have you not? Mr. FREW. No, sir. Mr. UNTERMYER. Have you not figured $296,460 estimated loss of interest on interest-bearing accounts, where immediate credit is given for foreign checks, based on figures submitted by eight of the largest institutions in the clearing house? I ask you the simple question whether in this calculation you did not, therefore, figure loss of interest? Mr. FREW. No, sir. Mr. UNTERMYER. You did not? Mr. FREW. No. That is interest paid out on accounts. Mr. UNTERMYER. Yes. Mr. FREW. Not the interest on the money outstanding. That is a pretty hard thing to estimate, and for various reasons. The only way you can ascertain that is this: The New York banks had outstanding an average during 1911 of $67,000,000. That is a credit on a book to a man's account. The only way to ascertain how much you lose is to know how much is drawn on that amount. Mr. UNTERMYER. I think we can tell, and tell from your report. Mr. FREW. Let us see. Mr. UNTERMYER. Will you take a piece of paper and a pencil for a moment? Mr. FREW. Yes. |