Hearings and Reports of the Committee ... Relating to Proposed Changes in the Currency System of the United States

The Hill-Fowler bill forbids the massing of gold to secure in combination the maintenance of parity.

The Walker bill carefully provides for massing all the commercial gold in the country in the National Clearing House in New York and also in San Francisco in order to make sure the maintenance of parity as is now done under the present law. Not a dollar of gold can be had to-day, nor for thirty years, in redemption of a United States note, from the United States Treasury in Washington. Only in New York and in San Francisco can it be had. Only by this massing of gold can parity in gold redemption be maintained.

The Hill-Fowler bill, on the other hand, divides the gold into driblets. In banks of $25,000 there would be about $285.71 in gold and so on up. In a bank of $100,000 about $1,142.86. The $25,000 country bank is expected to redeem in gold over its own counter $26,250 paper money with $285.71 in gold, and the $100,000 country bank to redeem in gold $105,000 of its paper money with $1,142.86 in gold when some crank or combination of panic-stricken people makes a raid on the bank.

The Walker bill provides for massing the gold. The amount the whole 10,000 banks are "required to keep" is from $200,000,000 to $400,000,000, in order to make the maintenance of parity absolutely secure, and leave the country banks to redeem the currency they issue as they choose in any kind of lawful money.

There is no other possible way of safely maintaining parity with gold when large amounts of other "lawful money" are in circulation. Our whole monetary system would break down in the first panic under the Hill-Fowler bill, and the Government would be again selling bonds for gold.

NO PROVISION FOR TRANSITION.

Again, there is no provision made to insure safety during the transition, were not the scheme absurd. The first country bank that transfers from the present system, under which the United States Treasury maintains the parity, to the Hill-Fowler system, where the banks are to maintain parity, will have to support with its $286 in gold the whole $1,000,000,000 of our paper money or stop issuing its circulating notes. But they say no; the Treasury will still do it. Of course it will still do it; but because it will always have to maintain parity, as now, the Hill-Fowler bill is not worth the paper it is written on. If one bank organized under the bill does not assume the obligation to relieve the United States Treasurer of maintaining parity, will two, or two hundred, or two thousand, or ten thousand? Just how many will be required to organize under the bill to remove from the Treasury the obligation to support the banks as to parity instead of the banks relieving the Treasury of maintaining parity? There is no possibility of the banks taking upon themselves that duty. The Treasury conditions are made worse by it.

Under the Walker bill not a bank organized under it assumes the slightest obligation to assume the maintenance of parity and thus relieve the United States Treasury of that burden until a certain time arrives, decided on by the Secretary of the Treasury, and then in an instant, at a signal agreed upon, every commercial bank in the country is in the system in a flash. All commercial banks are instantly united to maintain "parity," and the United States Treasury is as thoroughly relieved at once and forever from all responsibility as to paper money or coin money, other than police supervision, as is Smith, Brown, or any other citizen.

DEFICIENCY IN BANK FUNDS.

Very carefully prepared tables are published in the appendix to this report which show that the total actual capital of both State and national commercial banks is about $1,400,000,000, that the actual cash reserve held by them is $560,000,000, and the total reserve held by those banks is about $1,000,000,000.

All of these banks would be brought into the national system under the Walker bill.

They also show that the deficiency in 1897 in national-banking funds in the nine Southern agricultural States in which banks were well developed in 1860, is about $284,000,000-in those nine States alone. It is safe to assume that had national banking been as free in these States-Alabama, Georgia, Kentucky, Louisiana, Missouri, North Carolina, South Carolina, Tennessee, and Virginia-as in 1860, the national-banking funds now in use there, in excess of what they are, would have amounted to $371,000,000, and would be divided as follows: As the masses of the people in the South during the slave period used comparatively little currency, checks and drafts were employed out of all proportion to their use in the Middle States where slavery did not exist. The banking funds of the Middle States were, capital 42 per cent, deposits 16 per cent, and currency 42 per cent. Resolving the $370,933,761, estimated deficiency in banking funds in the above nine States, into the component parts of capital, deposits, and currency, the probable increase in each is shown:

Probable increase in capital

Probable increase in deposits

Probable increase in currency

$155, 792, 680

59, 348, 401 155, 792, 680

AGRICULTURAL STATES.

Taking the fifteen additional agricultural States that supported cheap money in 1896-Arkansas, California, Colorado, Florida, Idaho, Kansas, Mississippi, Montana, Nebraska, Nevada, Texas, Utah, Washington, Wyoming the deficiency in banking funds would be fully $500,000,000. Under the Hill-Fowler bill the improved conditions for establishing banks are of such a trivial character that no perceptible increase in banks could be made, while under the Walker bill the chances of improvement, based upon the banking conditions existing in 1860, would be such that, in a brief period, banks would be established using additional capital, deposits, and currency to the amount indicated.

Of course the statement is made that this banking capital does not exist and can not be had at the South and in the other agricultural States, because of a lack of personal property in those States. This has not the slightest foundation in fact. There is not a single economic fact to justify that statement. Deducting the value of the slaves, the assessed value of personal property per capita in 1860 was $85.78; in 1890 it was $85.44. It is thought by conservative men-students of economic conditions of the South-that since 1890 the personal property has increased certainly one-quarter, and some put it much higher. It is thought that the personal property per capita in 1900, in the Southern States named, will reach $125, or more. At any rate, what we know of the personal property in the South gives no justification for the statement that the lack of banking funds at the South is due to the poverty of the people there to-day, as compared with that of 1860, but rather it is due wholly to the oppressive national banking law.

CITY BANK FUNDS.

The population of cities in the United States having 10,000 people or more is 20,781,474. The total banking funds of those same cities are $2,283,320,423. Assuming that the banking funds in those cities serve half as many again people as live in those cities, it would bring the number of people served by that banking capital up to 31,172,211, and would give $73.25 per capita.

Places in the country of less than 10,000 people have a population of 41,840,776. Deduct from that population 10,390,737 served by the city banks, and it leaves 31,450,039 to be served by the banks in the places of less than 10,000 people, or $23.38 banking funds, or one-third as much per capita.

CITY BANKS CAN NOT ISSUE CURRENCY.

The fact that the business of the city bank is such that it can not issue to a profit currency notes where currency is issued on the true banking principle, can not be too persistently insisted upon. Where currency is redeemed in the natural way by a city bank, it goes into the city clearing house the next morning with checks, drafts, and bills of exchange against the bank, and in a city where business is done by checks and drafts, and but a very small percentage of currency is used in proportion to the business done, the bank has no possible way of keeping currency in circulation. The only reason they have been able to do so in the last thirty years is because no genuine country banks could exist under the national banking law, and therefore comparatively no currency was issued in the country, and the city banks occupied with their currency the country districts, the country districts paying interest on what they should have had for nothing.

This state of things would end at once under the Walker bill.

NEW YORK CITY BANKS IN 1860.

All the banks in New York in 1856 only issued 15 per cent of currency to their capital. It ran down to 11.42 per cent in 1860, and that currency was issued by those banks that had a country business, although located in the city. The Bank of Commerce, with a capital of $9,000,000, had a circulation of only $2,000, one-tenth of 1 per cent of its capital. The City Bank, with $1,000,000 capital, $2,000,000 deposits, issued no currency, while the East River Bank, whose name indicates the business of its patrons as with stevedores and with people who come into the city with boats, issued only 40 per cent to its capital.

CHICAGO BANKS.

The Chicago banks have only 2.5 per cent of circulation to their capital. They hold United States bonds to an amount entitling them to take out $1,215,000 in circulation and have taken out only $616,365, of so little value is currency to city banks. If all the banks in Chicago were not forced to buy bonds as a license fee to do business probably not a dollar in currency would have been taken out.

INJUSTICE OF 6 PER CENT TAX ON 20 PER CENT OF CURRENCY.

The Hill-Fowler bill exhibits the result of minds exceedingly fertile in devising ways for depriving country sections of banking facilities,

one of which is to tax currency issued in excess of 80 per cent to capital.

As deposits to a city bank are to it what currency is to a country bank, if the currency in excess of 80 per cent to capital is to be taxed 6 per cent, then deposits in a bank in excess of 80 per cent to capital should be taxed at the rate of 6 per cent per annum to make the conditions between city banks doing business by city methods and country banks doing business by country methods equal.

Capital, surplus, and other profit in national banks in the central reserve cities of New York, Chicago, and St. Louis, October 5, 1897.

Newly formed country banks, of $150,000 paid-in capital or less, aggregating $150,000,000 in capital, immediately upon getting into full operation, the items of their funds, taking the proportions of capital, deposits, and circulation from the condition of the banks in the Middle States in 1860, would run as follows:

Currency to 80 per cent of capital...... $120, 000, 000
Excess of currency over 80 per cent to

$150, 000, 000

57, 143, 000

150, 000, 000

capital

Tax of 6 per cent on excess currency would amount to....

30, 000, 000

150, 000, 000

1,800,000

The tax of $31,547,770 on the city banks would be as onerous and unjust to them and no more so than the tax of $1,800,000 to the country banks on any part of their currency, for currency is to country banks what deposits are to city banks.

SAFETY OF BANKS ISSUING CURRENCY.

The safety of country banks issuing a large percentage of currency to their capital is questioned by the framers of the Hill-Fowler bill, but upon examination it will be found they are much safer than city banks with enormous deposit accounts. A comparison of example No. 2 with No. 4 will make the matter clear.