capacity of the banks to reduce interest rates without loss of profits. It means that if any bank undertakes to resist the natural law of decreasing interest under increased facilities, new banks may be formed without sinking their capital in bonds purchased at a premium, and may compete for the legitimate profits afforded by reasonable interest rates. More than this, a currency based upon commercial assets, and not rendered rigid in volume by the deposit of special security, comes back promptly to the issuing banks for redemption. * * * "Mr. A. O. Eliason has examined all the bank failures whose accounts have been closed, numbering one hundred and one, and found that had all the banks in the national system issued an amount of currency equal to their capital, or one hundred per cent, the assessment on the same to cover losses would have been infinitesimal, being only one-nineteenth of one per cent per annum." After thus approving most heartily and thoroughly the principles of the Walker bill, which provides the annual collection from the banks of four times the amount necessary to make the Government safe in guaranteeing the currency notes banks would put in circulation, they present a bill which leaves 60 per cent currency to capital without the guaranty of the Government, and also compels the country banks to "sink their capital in bonds purchased at a premium" to the tune of 40 per cent to their capital, and furthermore discredits their currency issued against their assets by twelve disabilities. The lack of appreciation by the framers of the Hill-Fowler bill of true principle and practice in issuing and redeeming paper money is shown by their proposition to destroy the "endless chain," as follows: "Believing that this bill, if enacted into law, will relieve the Treasury by destroying the endless chain."" Secretary Gage and ex-Secretary Fairchild, as everyone knows is true, testifying in answer to the chairman, recognized the "endless chain" of currency redemption as an inherent and necessary condition to sound paper money, as follows: The CHAIRMAN. Can you suggest a more apt illustration of the necessary inevitable constant flow of currency in and out, coming in contact potentially with the specie it represents, than an endless chain which never ceases for an instant to move potentially or actually, and that anything that impairs any link of the chain does the currency system injury? Can either of you gentlemen suppose a more apt illustration? Secretary GAGE. I think there are a dozen you might use. Secretary GAGE. Say individual buckets. We have adopted the endless chain as a figure of speech, which probably conveys nearly the idea involved, namely, that whoever has demands against the Government or anyone else can take those demands and have them realized in redemption money, in specie. If these obligations are again issued, the new holder can do the same, and so there is a sort of circle established, or, it may be, on the one hand, the notes flow out, and in the course of the movement of trade or commerce or distrust the notes come back in a circular movement. That is not a horrible thing; it is natural, reasonable, and proper, and the issuer should never complain. Let him meet his liabilities on demand. The CHAIRMAN. Is not that what will take place in making a redemp tion fund? Secretary GAGE. I think it is. The CHAIRMAN. Can you suggest anything further, Mr. Fairchild? Mr. FAIRCHILD. No, sir; I think that is perfectly true. CURRENCY PROVISIONS OF THE HILL-FOWLER BILL. The Hill-Fowler bill puts the mark of Cain on its national currency notes. This money is for our country people. Not a dollar of this money will be issued by banks in redemption cities which have half the paid up capital of national banks. SEC. 30. (1) It is taxed 6 per cent per annum if issued above 40 per cent to capital. SEC. 30. (2) SEC. 33. (3) SEC. 23. (4) SEC. 22. (5) SEC. 22. (6) SEC. 22. (7) SEC. 22. (8) If in the vaults of the bank and not in use this excess over 40 per cent is still taxed 6 per cent. In liquidation only gold coin can be deposited to cancel these notes. Must put up with the Government 5-per-cent gold "guaranty fund" on them, in addition to the current redemption fund it puts up. Has a separate "current redemption " from the other two kinds of bank money. Must be marked "plainly and prominently," so as to at tract attention to its being a poorer kind of money, that it "belongs distinctively to some one clearing-house district." Can not be paid out by any bank out of its "redemption district." Has a clearing-house district made especially for it. The district is not for and does not include the other two kinds of bank currency. SEC. 22. (9) No reserve 5-per-cent or other fund is provided for their current redemption in exception to the other two kinds of notes. SEC. 14. (10) SEC. 15. (11) page 13, line 11. No funds of an insolvent bank can be used to pay any of these notes until the other notes are paid. That the Government has no interest in making this "cur rency note" good money is rightly made conspicuous in the bad form designedly given these notes by this provision. "It [note] shall also bear upon its face the statement that it is issued in accordance with the provisions of this act." These things will sufficiently damage these "national-currency notes." Under the Walker bill there is provided a currency note with as strong a Government guaranty as now. Only such notes are used in Canada, Scotland, France, Germany, England, and all other first-class nations. The Walker bill adds the guaranty of the United States Government. The Walker bill provides that everyone of them shall be immediately paid by the United States Treasurer in case of the insolvency of the association issuing them. The Walker bill makes an appropriation to pay these notes of every association in case of its insolvency. The Walker bill provides a way for the United States to collect of banks and have on hand several times more money than it can ever pay on this guaranty. The framers of the Hill-Fowler bill are not willing to have the circulating bank notes provided in their bill and issued by the Government as money, used to pay the "salaries and other debts on demand owing by the United States to individual corporations and associations within the United States," but finding such a provision in the law as to national-bank notes, repeats it. Under the Walker bill no such discrimination against any form of our money is made. All kinds of paper money are made and kept as good as the best by the Government. GREENBACKS NOT DESTROYED BY THE WALKER BILL. Neither does the Walker bill destroy the United States notes. The Hill-Fowler bill does destroy them. The Walker bill keeps them exactly as they now are, and puts their current redemption on the banks. The Walker bill proposes to destroy all the gold certificates and silver certificates and pay out to the people the gold and silver dollars in their place. Thus the Hill-Fowler bill provides six kinds of paper money in permanency, no one of them legal tender, in violation of sound banking principles, while the Walker bill provides but one, viz, currency notes, in accord with common sense and sound banking. The Hill-Fowler bill does not make the United States Government as now responsible for the immediate payment of every dollar of the currency notes issued by it to a bank in case of insolvency and directly out of the United States Treasury, and without qualifications or delay and regardless of all contingencies. The Walker bill makes the Government of the United States the guarantor of every dollar of currency issued by it to a bank as now, and makes an appropriation from the Treasury in the body of the law to secure the immediate payment of such notes by the Treasurer as certain as it is to-day. The Hill-Fowler bill makes confusion in redemption by providing two distinctive redemption agencies for its three kinds of circulating bank notes, and one of them outside the banking system. The Walker bill provides one redemption for its one kind of bank notes, and that inside the banking system. The Hill-Fowler bill appears to be drawn in the interest of large city banks. It gives such banks every advantage and unfairly discriminates against country banks. The Walker bill is drawn in fairness to large banks and small banks, city banks and country banks, for farmers, for merchants, and for manufacturers. The people having been thoroughly educated in the idea that no true bank currency, that is to say, currency issued against the assets of the bank and relying wholly upon them for payment in case of insolvency, can be safe for them to have in their pockets, therefore it becomes absolutely necessary to have all currency guaranteed by the Government, as now. A guaranty may be given in five different formsby a mortgage, by pledging bonds, by an agreement, by indorsement, and also by certifying to the genuineness of a paper and that the certifier is in possession of funds to pay it, like certifying a bank check. All but the note secured by mortgage depends wholly upon the solvency and amount of capital possessed by the party making the security in proportion to the amount guaranteed, whether it be a person or the United States Government. No one can deny that an appropriation made in the body of the banking law out of any moneys in the Treasury not otherwise appropriated to pay the notes of an insolvent bank is as good a security and more easily availed of, and is tantamount to a Government bond. "To guarantee" is the synonym of "to secure," if made by the same party and without mortgage. To argue that a United States Government bond is a better guaranty or security than B & C-11 an appropriation in money in a United States law is to argue that a "promise to pay" is better than "cash in hand." The compensation to the United States Treasury for guaranteeing the currency notes issued by the banks would run as follows: On $200,000,000 of United States notes carried by banks, One-fifth of 1 per cent tax on $600,000,000 of currency. Saving in cost in handling the United States Treasury.. im The necessity under present conditions of carrying an mense amount of money collected by taxation in the United States Treasury, $175,000,000 at 24 per cent $5,000, 000 625,000 1,200,000 2,400,000 9,225,000 1, 000, 000 10,225,000 4,375,000 Saving per annum to the United States Treasury .. 14,600,000 This at 23 per cent. It should be reckoned at 5 per cent or more, $30,000,000 per annum at least. Not a farthing of this $30,000,000 of saving would become an expense on the banks. The provision in the Walker bill requiring every commercial bank to assume its equitable and proportionate part of the United States notes, according to its actual capital, and in a way to make them an advantage to the banks, is only one incident of the provisions of the Walker bill. It is necessary during the period of transition from that of their present isolated condition into the cooperative system provided for, and is in no sense essential to or necessarily a part of the Walker cooperative scheme. This is made unequal and a hardship in the HillFowler bill. They are so small in the amount each bank is required to take and so equitably distributed by the Walker bill as to be an advantage and not a burden to any one bank, as the banks are allowed to issue an equal amount of currency. They remain as now, being issued under the same law and a United States legal-tender note, while the Hill-Fowler bill destroys them. The Walker bill provides for their continued existence and provides for their equitable annual redistribution among all commercial banks in the country as long as the national banking system shall last. ADVANTAGE OF A NATIONAL CLEARING HOUSE. Did the New York clearing house or the national clearing house provided for in the Walker bill have a legal existence, it would not be at all necessary to require individual banks to specifically assume any amount of particular United States notes in the cooperative scheme provided in the bill. The thorough union of the banks and incorporat ing the clearing houses is the real substance of the Walker bill. There is not now an incorporated clearing house in the country to deal with in a banking law. ONE GOOD THING IN THE HILL-FOWLER BILL. The Hill-Fowler bill apparently, but not actually, disposes of the United States notes in something of the same method as the Walker bill, at the beginning, in devolving the United States notes on the banks, but it surely and absolutely fails. It changes the essence of the present legal-tender United States notes as much as it does their name and equitable distribution. They become non-legal-tender "national reserve notes." The Hill-Fowler method may, at first glance, look like the Walker method, but they certainly are as different in essence as the poisonous toadstool from the nutritious mushroom. Its method of distribution violates the principle of equity as between new banks and old banks, in devolving them upon the old banks in the beginning, now in operation, and leaves them on these banks, a disproportionate burden for all time to come. CURRENCY NOT LESS THAN $10. The Hill Fowler bill deprives banks, mostly country banks, of $274,000,000 of circulation in $5 notes by needlessly forbidding any bank to issue any currency under the denomination of $10. Under the Walker bill the limit is $3 or under, practically allowing no bill under $5, thus allowing a circulation by banks in this one item $274,000,000 more than the Hill-Fowler bill, and reduces rates of interest to borrowers as $274,000,000 is to the total loans by banks. The Hill-Fowler bill provides a currency on more than half of which the rate of interest on loans in using it will have to be varied every day in the year to pay the same dividend on the stock of the bank, and the issuing and withdrawal of which will be governed by the price of United States bonds in the market and the time they run, as now, and not by the demands of business. The Walker bill provides a currency to pay the same dividends. The interest on loans in the use of it will be the same every day in the year. The Hill-Fowler bill only makes room for its bank cur- Total $37, 000, 000 227, 000, 000 264, 000, 000 The Walker bill pays out gold for United States notes... 146, 000, 000 Gold certificates retired.. 37, 000, 000 National-bank notes 227, 000, 000 Silver dollars in reserves 200, 000, 000 Five-dollar notes, forbidden in Hill-Fowler bill... 274, 000, 000 Total 884, 000, 000 $200,000,000 United States notes are to remain and can never be destroyed. |