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essential in the construction of a currency system that there should be a presentation of the demand notes for redemption, but the evil lies in the fact that the Government does not possess the banking facilities to enable it to meet these demand notes without undue stress.

Mr. FAIRCHILD. Yes; the Government funds are constantly being depleted and never replenished in the ordinary course of its business, while with the bank transactions which call for the issue of its demand obligations contain the means for their paym nt.

GOVERNMENT CAN NOT SAFELY ISSUE PAPER MONEY.

Now, when the Government issues its demand obligations the transaction which issues them contains no means whatever for their payment.

Mr. JOHNSON. That is the very point I wanted to develop, wherein the work of the Government, as a bank issuing circulating notes, differs from a well-coustituted bank.

Mr. FOWLER. The counterpart of any credit note that is issued by a Government or a bank is that it shall be currently redeemed in something of real value as a measure, in order that its soundness may be tested every hour if necessary?

THE ENDLESS CHAIN GOOD AND NOT EVIL.

Secretary GAGE. In order that a condition of health may prevail. Suppose that with a bank the same circular movement of gold goes on that was spoken of a little while ago. The probability is that every bank in every money center redeems every day from 10 to 15 per cent of its liabilities, creating new liabilities to someone else, and the next day liquidating again and again, always new creditors settling and satisfying former creditors. There is a substantial redemption of a bank's liabilities. A bank's notes are not different in their essential character from the bank's deposits. They are the same in their nature and are governed by the same general principles.

SELL BONDS TO MAINTAIN PARITY.

Mr. BROSIUS. Do you think that the parity of all our money under all circumstances could be maintained without the direct interchange of gold for silver, in case the holder of the silver demands it, and does not your commission bill proceed upon the assumption that gold will be given for silver when demanded ?

Mr. FAIRCHILD. We provide in our bill that it shall be so given. Mr. BROSIUS. That is direct interchange, is it not? Mr. FAIRCHILD. That will be direct interchange; yes, sir. Mr. BROSIUS. Can the parity of silver and gold be maintained under all circumstances without that direct interchange?

Mr. FAIRCHILD. I should say not so surely, under all circumstances. Mr. BROSIUS. And therefore you have provided for that in your bill? Mr. FAIRCHILD. Yes.

Mr. TAYLOR. By the terms of this bill a bank has to pay its depositors in some kind of lawful money. It may pay greenbacks, and when they are gone it may pay them in silver. If it pays them in silver, the United States stands ready to exchange gold for the silver, so the currency of the country rests upon such a basis that men will not only be able to obtain gold when they want it, but they can compel it when they want it.

Mr. Cox. Here is a depositor in a bank who has a thousand dollars deposited. He calls upon the bank to make good that deposit. The bank has to make it good in gold or silver. If they make it good in gold, that is the end of it. If the bank pays him in silver, then the man can take the silver and go to the Treasury and get the gold. Is that correct?

Mr. TAYLOR. Yes, sir.

Mr. Cox. Now, he leaves the silver there in the place of the gold. The difficulty, in my mind, lies in this. With that kind of process where is the Government to get the gold to redeem that silver or exchange it?

Mr. TAYLOR. Just as it does now. By its revenues, when they are sufficient, and when that is not sufficient by borrowing.

UNITED STATES NOTES DESTROYED BY SECRETARY GAGE IN

MAKING THEM GOLD CERTIFICATES.

The CHAIRMAN. Mr. Secretary, you have said that if you had in the issue and redemption department $200,000,000 of greenbacks to-dayand I suppose you include the $125,000,000 of gold out of the general Treasury, making $325,000,000—that the banks would immediately, you think, bring gold to the Treasury for the greenbacks!

Secretary GAGE. I think so.

The CHAIRMAN. Why should they not bring the whole $200,000,000 they now have to take the greenbacks?

Secretary GAGE. Perhaps they would. I am naturally conservative in my estimates.

The CHAIRMAN. It would be to their interest to do so, would it not? Secretary GAGE. I think it would.

The CHAIRMAN. Then, assuming that there are $21,000,000 of greenbacks—I believe that is the estimate, somewhere from $15,000,000 to $25,000,000—destroyed, you would have either greenbacks in this issue and redemption fund or gold to make up the $325,000,000?

Secretary GAGE. Yes, sir.

The CHAIRMAN. Then that makes the greenback purely and absolutely a gold certificate?

Secretary GAGE. It makes it essentially so. I do not think it makes it purely and absolutely so.

EX-SECRETARY FAIRCHILD.

[Mr. Fairchild proposes to destroy legal tenders and have no paper money under $10, except $200,000,000 in silver certificates, and then banks can not get these certificates.

The CHAIRMAN. You propose a destruction of the greenbacks, and to substitute for the greenbacks drawing gold from the Treasury the silver dollar?

Mr. FAIRCHILD. Yes, sir.

The CHAIRMAN. Then you do not propose to have any means of reaching the gold in the Treasury after you have destroyed the greenbacks?

EXCHANGE GOLD FOR SILVER.

Mr. FAIRCHILD. We propose that the Government shall keep the silver dollars equal to gold.

The CHAIRMAN. How are you going to do that?
Mr. FAIRCHILD. By giving gold when anybody wants it; and we cal-

culate that an amount of gold kept in the Treasury equal to 5 per cent of the silver dollars in existence will suffice for that purpose.

The CHAIRMAN. If you propose to redeem the silver dollars in gold by the Treasury, you propose to redeem them on demand ?

Mr. FAIRCHILD. Yes, sir; on demand.

Mr. HILL. I would like to ask a question now in regard to the questions asked by Mr. Cox. When this bill is in operation and effect, we will have three kinds of currency-gold, silver, or silver certificates, and bank notes—and that is all?

Mr. FAIRCHILD. Yes, sir.

NO PAPER UNDER $10, EXCEPTING SILVER CERTIFICATES.

Mr. HILL. Now, as I understand the proposition of the commission, they think that the silver certificates under $10 taking the place of the present national bank notes under $5 in denomination, and Government currency, will be so firmly held that not even a panic will bring them to the Treasury for redemption?

Mr. FAIRCHILD. Yes, sir. Mr. HILL. So, practically, for redemption money, there will be gold ! Mr. FAIRCHILD. Yes, sir. Mr. HILL. Practically all ? Mr. FAIRCHILD. Yes, sir. Mr. HILL. It will be used for redemption of bank notes, and there will be less silver dollars in circulation, but more silver certificates in circulation as a matter of convenience?

Mr. FAIRCHILD. I could not say.

Mr. HILL. That will be the working of it. Now, I wanted to ask you this question: Suppose a war to come, or some great demand for gold, is there any possible way in which that demand could be brought to bear upon the Treasury?

Mr. FAIRCHILD. No, sir.

BANKS CAN NOT GET SILVER.

Mr. HILL. Being unable to accumulate any reasonable amount of silver certificates or dollars, must not that gold be secured by taking national-bank notes to the banks for gold redemption ?

Mr. FAIRCHILD. Yes, sir.

Mr. HILL. And they will regulate that matter by the operation of the rise and fall of interest, as is now done in England.

Mr. FAIRCHILD. Exactly. The CHAIRMAN. Then you propose in your system to put the power of demanding the gold of the Government, the redeeming of money in gold, beyond the power of the people to reach; that is your point in the bill ?

Mr. HILL. It puts it on the banks.
The CHAIRMAN. No, sir; I beg your pardon.

Mr. FAIRCHILD. I do not understand your question. I do not understand the assumption.

TO DEMAND GOLD PUT OUT OF THE POWER OF THE PEOPLE.

The CHAIRMAN. Your answer to the question of Mr. Hill was that the silver would be so absorbed that it was not practicable to get the silver with which to demand gold?

Mr. FAIRCHILD. Certainly.

The CHAIRMAN. That is your first proposition ?
Mr. FAIRCHILD. Yes, sir.

The CHAIRMAN. Now, your second proposition is that there is then nothing left in the community that they can get to bring to the Gov. ernment to secure gold?

Mr. FAIRCHILD. Nothing whatever left. The CHAIRMAN. Then what institution of individuals is to keep all of our money at par, each with every other?

Mr. FAIRCHILD. The people who issue it.

The CHAIRMAN. But where is the provision in law that anybody shall redeem it in gold?

Mr. FAIRCHILD. They can not redeem it in anything else.
The CHAIRMAN. The gold is to be in the Treasury!
Mr. FAIRCHILD. It would not be in the Treasury.

BANKS NOT REQUIRED TO REDEEM IN GOLD.

The CHAIRMAN. Do you provide by law that the banks shall redeem in gold?

Mr. FAIRCHILD. Not at all. In lawful money.
The CHAIRMAN. And your bill destroys the greenbacks?
Mr. FAIRCHILD. Yes, sir.

The CHAIRMAN. And you claim that the silver dollars will not be stored by the banks so they can get gold, as they now store greenbacks. Why will not the desire and the practice of the banks be to keep the silver dollars to get the gold, precisely as they now keep the greenbacks?

Mr. FAIRCHILD. Because the people must have them for use in their trade and business.

The CHAIRMAN. That is, you propose to make the getting of small money so difficult that the banks can not hoard it-can not keep it to get gold for?

*

SILVER MUST GO INTO BANKS.

The CHAIRMAN. Is it not a fact that this silver money, when it is paid in the natural course of retail trade, will be paid to the storekeepers for goods that the people buy?

Mr. FAIRCHILD. Yes, sir.
The CHAIRMAN. That is the use that will be made of it?

Mr. FAIRCHILD. Yes, sir; paid for car fares and hotel bills, and all kinds of things.

The CHAIRMAN. Then the answer to my question is that it will be paid by people in the retail purchases of the things they want!

Mr. FAIRCHILD. Yes, sir.

The CHAIRMAN. Now, is it not the custom of all merchants, railroad companies, big merchants and small, to deposit that money in the bank?

Mr. FAIRCHILD. It is.

The CHAIRMAN. Then is it not the custom to-day for the banks to accumulate the greenbacks, retaining them and paying out something else?

Mr. FAIRCHILD. Yes, sir.

The CHAIRMAN. Then will it not be the custom of the banks, under your proposed law, in order to have something that is the equivalent of gold for which to secure gold to redeem their bills, to keep the silver certificates to demand gold for?

Mr. FAIRCHILD. It will not.

The CHAIRMAN. Why?
Mr. FAIRCHILD. Because there will not be enough of it.
The CHAIRMAN. Well, I am done.
Mr. HILL. They will retain gold?
Mr. FAIRCHILD. Of course they will.

The CHAIRMAN. Then you fix the thing so that nobody can get any money on which to demand gold except bank notes?

Mr. FAIRCHILD. That is absolutely the case.

Mr. Cox. Your theory, then, is, so far as the silver is concerned, that it will be put out in circulation and in the hands of the people, and consequently the banks can't concentrate it so as to draw gold' from the Treasury?

Mr. FAIRCHILD. Yes, sir.

REDEMPTION OF UNITED STATES NOTES-UNDER WALKER BILL

BANKS ASSUME UNITED STATES NOTES EQUAL TO 124 PER CENT OF THEIR CAPITAL,

Mr. FAIRCHILD. I do not get very clearly in my mind how you relieve the Government of the greenbacks and the greenbacks still remain, making the banks responsible for them. Where, then, do you differentiate them from the other notes, as to reserves and liabilities? How do you arrive at that?

Mr. WALKER. Arrive at their current redemption ?
Mr. FAIRCHILD. Yes.

Mr. WALKER. By requiring banks to deposit in lawful money in the Treasury a sum equal to 12 per cent of their capital and destroy the existing greenbacks to the same amount and issue to the banks a new print of the greenbacks with their own bill printed on the back of them, which they shall sign and execute as though it were only their own note, and it is legal tender to everybody as now-every bank and every individual-except to the bank that takes and issues them. They will be the same as a Bank of England note. They are legal tender everywhere except at the bank whose note is printed on the back of them. That takes $200,000,000, and the bill further provides that that amount shall never be increased, but that the percentage of 124 shall be reduced. It does not mention $200,000,000, but that is what it comes to. When that is once done, 124 per cent will never be increased, but on the contrary may be reduced.

Mr. FAIRCHILD. If I apprehend your question, it seems to me that that is making a legal tender again of somebody's credit, and while that is economical, or might be economical, and we might like to limit it, I am afraid of the idea. I do not know that I do comprehend the idea fully, but if I do, I am afraid of the idea of making anybody take anybody's promise to pay if he does not want to take it. That would be my objection to your idea, if I understand it.

THE PEOPLE WISH TO KEEP THE GREENBACKS.

Mr. WALKER. The point is that the people insist on retaining the legal-tender notes and refuse to withdraw them.

Mr. FAIRCHILD. Under our bill they remain if the people do not want to have them.paid.

Mr. WALKER. Do you mean all the people or the people who are the bankers? This becomes a political question.

Mr. FAIRCHILD. Anybody who holds them may refrain from present

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