55TH CONGRESS, Į HOUSE OF REPRESENTATIVES. 2d Session.

[Especially note pages 175 to 180.]

TO SECURE TO THE PEOPLE A SOUND CURRENCY.

JUNE 23, 1898.-Committed to the Whole House on the state of the Union and ordered to be printed.

Mr. WALKER, of Massachusetts, from the Committee on Banking and Currency, submitted the following

VIEWS OF THE MINORITY.

[To accompany H. R. 10289.1

The undersigned respectfully dissents from the views of the signers of the favorable report on bill H. R. 10289, and recommends that all after the enacting clause be stricken out and the text of bill H. R. 10,333, introduced in the House by Mr. Walker and referred to the Committee on Banking and Currency, be inserted in its place.

WALKER BILL THE ONLY REMEDY.

I can see no conceivable relief from the present financial and banking conditions of the country, but on the other hand the certainty that it would be made worse by enacting any general bill referred to the committee, excepting the Walker bill H. R. 10333, and the bills before the committee have steadily grown worse, culminating in the Hill-Fowler bill, H. R. 10289.

Not one of the bills presented to the Committee on Banking and Currency, except the Walker bill, recognizes-much less fearlessly and closely follows-any known principle of economics or any recognized banking principle. Not one of them except the Walker bill safely and securely does any one of the four things absolutely necessary to be done to relieve the situation, viz,

1. To relieve the United States Treasury from the current redemption of every form of paper money and from any responsibility for maintaining the parity of our various kinds of money.

2. The devolving of the duty and responsibility of maintaining parity between all moneys upon the banks.

3. The allowing of banks to issue true bank currency-i. e., to issue currency against their assets.

4. The securely uniting all the commercial banks in the country through clearing houses into one strong body to maintain parity between all moneys.

From the first section to the last section the two bills are antagonistic.

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The Hill-Fowler bill (H. R. 10289) does not propose to and does not effect a solid union of the commercial banks of the country. It leaves each bank in its present inflexible, isolated, and panic condition. It thereby leaves out of its scope its avowed purpose and makes it impossible of being accomplished by the bill.

The Walker bill, on the other hand, is written in accord with recognized economics, and adheres in every sentence to sound banking principles. It secures a solid union of all commercial banks into a logical system and provides for the safe and complete transition of every commercial bank in the country, were it done even during a panic, from its present inflexible, isolated, and panic condition into an elastic, cooperative, anti-panic system, and makes it an integral part of a symmetrical and firmly constructed and completed whole, which is absolutely necessary as a condition precedent to any substantial relief of the United States Treasury and banking conditions in any safe and wise financial and banking legislation.

UNION OF ALL COMMERCIAL BANKS.

The warp and woof of the Walker bill is the taking of every commercial bank in the country out of its perilous condition of isolation, which invites and contributes to such panics as have frequently visited them during their whole existence, by allaying antagonism and shutting out all injurious competition and rivalry between banks, induced by their isolation, through clearing houses that now exist. Thus it is made sure that the banks will maintain parity, by making it for the interest of each bank to assist all other banks in doing so, by uniting all banks in one symmetrical whole to enable them in combination to maintain parity successfully, which is impossible in isolation, i. e., maintain the parity between silver coin and gold coin, and maintain the parity between all the various forms of our paper money and our coin money by making it profitable for the banks to do so, and forcing it upon unpatriotic and reluctant banks by a tax of one-half of 1 per cent per annum on deposits if the banks as a whole fail to maintain parity, and, unlike the Hill Fowler bill, cutting the banks and individuals off from getting any gold out of the United States Treasury under any circumstances.

MAINTAINING PARITY.

The Hill-Fowler bill does the exact opposite of the Walker bill. Enacted into law it would call for more gold from the Treasury and heavier taxation to maintain parity under the present Treasury system, and make conditions worse than they now are.

Its effect can be certainly predicted from the experience of the past,

not only of this country but of all others. Isolated banks, each independent of the other, in no country have found it possible to keep silver coin and gold coin at a parity and freely circulating side by side as it is assumed they can do in the Hill-Fowler bill. Parity never has been kept between gold and silver, excepting where the banks were united to do it. Not an example can be found to justify the Hill-Fowler experiment. The experience of this country and of all others fails to justify it. The sharp rivalry between our independent banks, prior to 1834, compelled every bank in the country to redeem its circulating notes in silver dollars, because the value of the bullion in the silver dollar was 3 to 4 per cent less than the bullion in the gold dollar. After 1834 not a silver dollar was paid in redeeming its circulating notes by any isolated bank in the country, because the bullion in the new silver dollar was worth from 3 to 4 per cent more than the bullion in the gold dollar. Banks had silver dollars in their vaults, but they always insisted on a premium of 3 to 4 per cent in paying them out.

NEW YORK CLEARING HOUSE.

Parity is now maintained in this country by the United States Treasury, by the Treasury being a member of the New York clearing house, thus making the United States Treasury ultimately responsible for its transactions at an annual cost of scores on scores of millions of dollars taken from the people in taxes. To do this also requires that hundreds of millions of dollars shall at all times be in the Treasury, practically as a guaranty of its solvency, for maintaining parity.

The national banking law has come to be one of the most oppressive legacies of the civil war, in its continued forced loans on the people in compelling the purchase of United States bonds. The Hill-Fowler bill proposes to continue it for eight years. It differs as much from the freedom and independence of normal and free banking and the issuing of normal bank currency as does martial law and the provost-marshal from normal liberty and the jury trial.

BANK OF ENGLAND SYSTEM COPIED.

But the most illogical, uneconomic, and indefensible proposition in the whole list of things proposed to be done, and a thing not consistent in a law drawn on true banking principles, is the proposal to create in the United States Treasury a department of issue and redemption. Such a department would be not only useless, but wholly vicious.

If there is one thing more than another that is well settled in the management of banks, treasuries, corporations, and private firms, it is this, viz, that every dollar of what is designated "money funds" must be at the free use of the responsible manager of them, especially in times of panic.

The avowed reason for creating this department is to destroy the United States legal tender notes directly or indirectly, either by changing them into a gold certificate or by canceling them outright. To resort to such a cumbersome device for that purpose could only have been suggested by the double-headed contrivance in the Bank of England. It has been condemned, as to the Bank of England, by nearly every writer on finance in Europe and by the best thought in England. It has never once been approved in the whole world by the only possible method of expressing a genuine approval of a financial device, viz, by imitation, I shall treat further on this subject in closing this report.

The Hill-Fowler bill attempts the impossible feat of grafting on to the Government Treasury, which has no banking resources or banking machinery, the double-headed Bank of England issue department and banking department system, which is unworkable excepting by a bank with the immense resources and in the strong position of the Bank of England. It is believed by every European financier to be a source of the most grave embarrassment and peril to the Bank of England in times of monetary stringencies or panic. The bill proposes this without taking cognizance of the conditions here as compared with the conditions in Great Britain. Should Great Britain wake up some fine morning and find in her coinage system $500,000,000 of silver as full legal tender at 16 of silver to 1 of gold, she would go to a silver basis in a week, unless all her banks were united, either voluntarily or under compulsion of law, into a solid and indestructible union, as is provided in the Walker bill.

Should the Bank of France, with its hundreds of branches, be dissolved to-day into as many independent and isolated, antagonistic banks as it has branches, as our banks are now isolated and independent and antagonistic to each other, France would go to a silver measure of value in a week. Nothing keeps the paper money of France or Germany at a parity with specie and silver to the "gold measure of value" other than the union in each country of all the banks, practically if not actually branches of one bank and thus brought into a solid union, as is provided for the banks of this country in the Walker bill; and nothing keeps the money of the Empire of Great Britain to parity with the gold measure of value but her coinage conditions, in which there is no "primary legal tender silver money."

Our banks are loosely held together to-day only through the subtreasury, with its $200,000,000 to $300,000,000 idle surplus, and sale of bonds to maintain parity in times of panic, taxing the people millions upon millions to do it, instead of keeping a balance of only $20,000,000 to $30,000,000 in the Treasury, as is the case in France, Germany, and Great Britain at comparatively no cost in taxation.

GOLD REDEMPTION OF SILVER.

To provide that our $500,000,000 legal-tender silver dollars shall be redeemable in gold dollars by the Government, and for keeping an additional gold reserve for that purpose, is one of the most unnecessary, inconsistent, and remarkable, not to say ridiculous, provisions that could well be incorporated in a banking bill. Do they not know that this is demonetizing silver? This seems especially so in view of the ease with which France and Germany carry, at par with gold and as primary money, their great stocks of silver. But the objective claimed as of vital importance to be reached by the Hill-Fowler bill is the elimination of the United States notes from demanding gold of the Treasury, either by making them a part of the bank notes, viz, by substituting for them the "national reserve notes" of the Hill-Fowler bill, to be issued in place of them, or by buying them up by the Government with the taxes collected and then destroying them. The HillFowler bill does not do this by inducing the banks to assume the identical United States notes by making it profitable for them to do so, as in the Walker bill, but by attempting to substitute a new "legaltender bank note" for them. The reason given for proposing the destruction of the $346,000,000 of greenbacks is that they "menace our whole financial system in their power to extract gold from the Treasury."

SILVER DEMONETIZED.

But the Hill-Fowler bill proceeds, in the same bill that would destroy them, to add $500,000,000 of silver dollars to their national reserve bank notes and other bank notes as abstractors of gold from the Treasury, and would have us believe that this is a cure for all our financial and banking ills.

Having experienced the delights of the vision of seeing the United States notes destroyed and of resurrecting a bank note from their ashes, in the proposed "national reserve note," and having exercised the supreme power of making this "national reserve note" the equal of gold as a legal tender, their power grows on what it feeds. They then proceed to destroy the $500,000,000 silver dollars, as such, and to resurrect them as abstractors of gold from the Treasury; that is to say, they destroy the United States notes in order to save the country from the perils of having $1,200,000,000 of currency, including the United States notes and resting upon them. In turn these $346,000,000 rest upon the $100,000,000 of gold in the United States Treasury. Then they immediately proceed to destroy these silver dollars as such and resurrect them. In addition to the paper money now in the country, and in addition to the bank currency, their bill will call for from $200,000,000 to $500,000,000 to add to our $1,200,000,000. Adding this $300,000,000 bank currency to the $500,000,000 silver dollars, and this to the $1,200,000,000 paper now out, makes $2,000,000,000. This $2,000,000,000 is to rest upon the $500,000,000 of the gold redeemable silver dollars, and these silver dollars in turn rest on only $25,000,000 of gold in the Treasury.

FINANCIAL WISDOM OF THE HILL-FOWLER BILL.

That is to say, we now have $100,000,000 of gold in the United States Treasury to redeem $1,200,000,000 of currency, or eight and one-third per cent of gold to each dollar of paper.

The Hill-Fowler bill proposes to add from two to four hundred millions in bank paper and our $500,000,000 silver, as abstractors of gold from the Treasury, and rest that $2,000,000,000, more or less, ultimately on $25,000,000 of gold in the Treasury, or one and one-quarter per cent of gold to each dollar of paper.

Of course this statement will surprise the authors of the bill more than anyone else who reads it. Their bills bear no internal evidence of any section of them having been brought to the practical test of being carefully "worked out" by trying any one of them on to our present system as modified by them, while every section, paragraph, and line of the Walker bill shows it to have been subjected to that test. Should every dollar of the United States notes be destroyed by the working of the Hill-Fowler bill, all the gold would then be released from the United States Treasury except $25,000,000, which is set aside to redeem $500,000,000 of silver dollars. Is it wise to retire $346,000,000 United States notes and $100,000,000 gold, and to substitute $500,000,000 in silver and $25,000,000 in gold in their identical office?

BANKING CONDITIONS IN RURAL SECTIONS.

At this point the question will naturally be asked by those who live in sections of the country that have not felt the hardship of the pres ent banking law: Why is there any need of amendments to relieve the present situation other than to "reduce the tax on currency," and to