on finance confounds it in every word of its defense of the abnormal provisions of the Bank of England act of 1844 as to its issuing currency, viz:

"No inference can be safely drawn from the number (amount) of notes or coins, or both, afloat in the country as to whether its currency be or be not in excess. That is to be learned by the state of the exchange, as by the influx and efflux of bullion. If the imports of bullion exceed the exports, it seems that the currency is in some degree deficient, while if the exports exceed the imports it shows that the currency is in excess, and that no additions can be made to it without further depress ing the exchange and increasing the drain of bullion. When the imports and exports of bullion are about equal, then, of course, the currency is at about its par level. These are the only criteria by which anything can ever be correctly inferred in regard to the deficiency or excess of currency. Its absolute amount affords hardly even a basis for conjecture. Excepting in periods of internal commotion, or when we are disturbed by alarms of invasion, the state of the exchange is the only, as it is the infallible, test 'of the sufficiency or insufficiency of the currency.'"

If there is any one thing more than another that will establish in the mind of the banker a fear that begets a crisis and panic or that will intensify them, it is that he can not change the form of his obligations and that his fellow-bankers will not come to his assistance in case of unusual demands being made upon him in "rediscounting [his] bills that had been already discounted by him." See how the Bank of England is made to appear, whatever the facts may be, to play the Ishmaelite and intensify, if it is not a potent agent, in inaugurating crises, in a further significant quotation, viz:

"Strict limitation in the number and class of customers with whom the bank would do business and a refusal to rediscount bills that had already been discounted by money lenders, make it possible to keep the bank rate below the rates of the open market without exposing the resources of the bank to an exhaustive demand." [And a government treasury has none of these devices or resources to assist it.]

Financiers further declare that the Sir Robert Peel scheme for making hard and fast lines for banks in their issue of currency was adopted because of his utter failure to appreciate the fact that the only legitimate and certain repressive device was to compel banks to certainly and instantly redeem their currency in specie in some commercial center, as well as at their own counters. Where proper redemption is required, overissue of currency has never, anywhere, in the history of banking, had any perceptible influence in inciting or intensifying a financial crisis. Note the history of the Suffolk system, as also that of Virginia and Louisiana from 1840 to 1864. A very wide latitude in issuing currency was allowed banks, even up to their actual paid-up capital, and in some States to double their capital.

It is not the holders of currency that begin an unreasoning demand for specie from banks or from the United States Treasury. There is not an instance of panic or even monetary stringency being inaugurated by holders of currency, or a general demand for specie by holders of currency, until long after depositors were in panic and had done the mischief which reacted on the Treasury. It can not be shown that any normal bank has ever failed from the excessive issue of currency. The insolvency of banks is caused by the excessive or unwise extension of

loans, of which the issue of currency may bear an insignificant part, and our National Treasury to-day is the guarantor of every bank in the country, national or State, in its maintaining the gold standard. No contradiction of this statement is found in the fact that dishonest persons sometimes established or got possession of a State bank, stole its funds, or debauched its currency, as such persons have wrecked national banks.

On the other hand, the free issue of currency, and in amounts that would not have been justified in normal conditions, has prevented or allayed many a threatened or incipient panic, especially by the Bank of England, and in violation of law. Had our banks the right, and had they freely exercised it, in 1893, to issue currency up to their paid-up capital, bad as were other financial conditions, it would have prevented or safely and immediately relieved that panic. It was a currency famine caused by hoarding currency quite as much as of gold hoarding.

Banking is a contest from start to finish, in a pressure for credits by the borrower, supported by a desire for profits on the loans by the banker, on the one side, and a demand, on the other side, of payment and larger security by the banker. It finds its duplicate in the bulls and bears of the stock exchange. Bankers must have their every available asset at command to meet any and every demand, and to use at their absolute discretion at all times, as well as in crises, in order to prevent or to curb crises.

The Bank of England act of 1844 was passed to take away this absolutely necessary discretionary power. I quote from the American Encyclopedia:

* * *

"An examination of the operations of the bank (of England) demonstrates the fact that Sir Robert Peel entirely misapprehended the causes of the fluctuations complained of, and that he applied the restrictions to that particular branch which varied but little (amount of currency issued). The real cause of trouble was to be found in the loans (not in its currency). * * * That this act (taking from the management their discretion in issuing currency) has had no effect in mitigating this crying evil will be clearly seen in the fact that these fluctuations have never been more violent than since its passage. * * * In its efforts (on May 11, 1866) to save itself and comply with the absurd provisions of the bank act, it (the Bank of England) spread ruin and desolation around it, and years were necessary to enable the country (Great Britain) to recover from the effects of the panic thus (itself) created."

Those who think the currency restrictions upon the Bank of England meet the approval of the whole body of England's most experienced financiers are greatly mistaken. Scarcely one of them would not have a sense of great relief should he wake up any fine morning and find them swept away.

I am in no sense deprecating the beauty, strength, or wisdom of the "Old Lady of Threadneedle Street." I am only protesting that it does not lie in what all her true friends recognize as an ugly wart upon her nose, as Samson's did in his hair. The Hill-Fowler bill would transfer that wart to the nose of Uncle Sam and develop it into a malignant cancer, poisoning his life blood.

Under the Gladstone administration, "Mr. Low, as chancellor of the exchequer, introduced into the House of Commons in 1873 a bill providing ** that the act providing two departments might be

suspended by order of the Government upon certain conditions * when the governor and deputy governor of the bank certified that panic had caused a portion of the bank notes nominally in circulation to be locked up and withdrawn from (actual) circulation. The authority of Mr. Gladstone's administration had declined when this bill was introduced * * * and, assailed from many quarters, was withdrawn without the opinion of Parliament being taken on its merits. It was contended that Mr. Low's attempt * * * to define beforehand the conditions of a panic was a logical contradiction. A panic has no laws; it has no fixed shape. It is precipitated we know not how, and we are in the midst of it before we are aware."

This amendment proposed by Mr. Low proclaims the fact "that in a stringency the people lock up the currency of the Bank of England, and that the law locks up its gold, and in its helplessness a crisis is thus actually precipitated and continued by the very provision of law avowedly enacted with the sole purpose of preventing or allaying crises such as are now created by it."

I repeat, the days of a run on a bank for specie, by presenting its currency for redemption, even in crises, are past, never to return, even under as liberal an issue of currency as was allowed by the old New England Suffolk system and that of Virginia and Louisiana (look at our experience in the currency famine and gold craze of 1893), always provided that every bank is compelled to redeem its currency in some "reserve city," as well as at its own counter, and also that the Government requires a very small safety-fund tax, to recoup itself for any loss from guaranteeing every dollar of currency issued by any bank, and keeps the same supervision and control as now of all banks issuing currency.

Of course, I shall be told of the suspension of specie payments by New England banks in 1857; but the fact is that they only nominally suspended specie payments at that time. Specie did not go to a premium, and all that was legitimately demanded of them by their customers in the way of their legitimate business was paid to them "on demand," and the banks soon recalled their nominal suspension. They continued to supply their customers with specie through that crisis, precisely as France and Germany now furnish gold to their customers. They kept their currency at par with specie precisely as the Bank of France and the Bank of Germany now sustain the silver and currency of those countries at par with gold. The State banks of New England, Virginia, Louisiana, etc., made a better showing from 1840 through 1857 and up to 1864 than the Bank of England did in the same period, during which period the restriction on issuing currency by the Bank of England was suspended several times.

Political and party rivalry, and that only, prevented the passage of the Low amendment by the British Parliament, and the safe removal of the hideous wart from the nose of the comely Old Lady of Threadneedle street, that looks so lovely to some, and that without leaving a

scar.

Again, normally low rates of interest can not prevail where the true bank-note currency is not issued. This country has not seen a normally issued bank note since the State bank notes were taxed out of existence. It can be proven that the purchasing value of the wages or income of every man in this country is reduced by nearly one per centum per annum by our faulty banking, currency, and Treasury system.

1 will quote only one more opinion on the issue of currency system of the Bank of England, but it is the final judgment of one of the most careful and experienced investigators and financial experts and writers in Europe. He expresses practically their unanimous opinion. Pierre des Essarts, chief of the bureau of economics and statistics of the Bank of France, author of the History of Banking in All the Leading Nations, etc., in an article published in the Journal of Commerce and Commercial Bulletin of New York, March 10, 1897 (which no one can afford not to read), says:

* ** *

"The true bank note is unknown in the United States. The bank note should be simply a means of transforming a debt into cash. As between individuals the note is cash; but as between the issuing bank and the holder it is a credit instrument, because the note holder has loaned to the bank the coin he has a right to demand. When a bank of issue is properly managed, the circulation takes care of itself. * * * These notes are sufficiently guaranteed if the property and securities against which they are issued (the assets of the bank) are valid and of sufficient value. * * * England has adopted an automatic device for issuing currency notes which works well in ordinary times, but the insufficiency of which has often been demonstrated in critical times. We may note in addition that the bank's regulations for issuing currency notes, which are practically useless in normal situations, become futile or even dangerous when the bank is called upon for unusual exertions."

No man can suggest any substantial advantage in the division of the issue department from the discount department of the Bank of England over and above the law and practice of the Bank of Germany or the Bank of France or the New England Suffolk system as it existed before 1864, while its disadvantages are clearly stated by authorities beyond question. In fact, as I have said, in the Bank of England and nowhere else, excepting partially under our national bank act, is any approach to the English system in operation. It is patent to all that very nearly the universal opinion of European financiers is that the success of the Bank of England is in spite of-not because of its thoroughly abnormal internal machinery for issuing currency and handling gold.

My excuse for this long paper is the strong effort that is being made not only to engraft upon our national banking system the currency system of the Bank of England, but to divert the United States Treasury, as Washington, Hamilton, and Gallatin made it, still further from its legitimate functions, and make it a huge bank, modelled upon what European financiers believe to be one of the absurdities of the English bank act of 1844.

Furthermore, the Bank of England is confessedly a monopoly, and its monopoly of currency the most excessive of its oppressive features. Our people demand all the freedom, the convenience, and the economy of the true bank-note currency of the old State banks, plus the security of national supervision and control of our national law, and also plus a small tax on currency to recoup the United States Treasury for its guarantee of every dollar of currency issued by the Government to the banks and put in circulation by them.

They have repeatedly refused to give up the United States legaltender notes. They probably would consent that they be reduced to $200,000,000 by paying $146,000,000 of them with the gold now in the Treasury. They demand that the old Suffolk system shall be national

ized, that the only power that can keep the $200,000,000 legal tender notes and all other currency and coin put in circulation at par with gold, absolutely free of expense, viz, the bank, shall do so by assuming the current redemption of the greenbacks pro rata to their capital.

No impartial investigator who will carefully examine the immense body of facts furnished by the Comptroller of the Currency, and those furnished by the chairman and published in the reports at the hearings before the committee, can come to any other conclusion than that no substantial relief can come to the United States Treasury by the enactment of any bill that is not drawn on the lines of the Walker bill (H. R. 10333).

Respectfully submitted.

J. H. WALKER, Chairman.