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and its bullion and specie nearly £52,000,000, or 62 per cent of its liabilities. Probably never since banking has become a trade, at least has taken its modern form of a receipt of deposits and an issue of promissory paper, has any bank held so large a proportion of cash reserve to its current liabilities as the Bank of France last year held. Most fortunately these strange and unprecedented political calamities attacked the bank at a period of exceptional strength, and therefore it has been able to surmount them so easily and to stand so well at last.

The next most remarkable point-indeed, in one sense the most remarkable of all, for it is quite new and has never been stated beforeis that the advances to the trading community of France have diminished. In September, in the last account which was published till now, the discounts had risen to £64,000,000, while they are now £36,317,000, showing a reduction of nearly half since September. Nothing can speak more conclusively for the substantial soundness, both of the business of the Bank of France and of French commerce in general, than that it should have been possible for the bank to obtain and for the community to make this immense repayment.

The immense augmentation in the paper circulation was obvious, was known before the publication of the accounts, and has therefore been much discussed. There is an important point on which it is desirable that opinions should be clear.

As yet the issue of bank notes by the Bank of France during the invasion has been like the issue of bank notes by the Bank of England in a panic and after the suspension of Peel's act. In such cases with us a great auxiliary circulation of checks is on a sudden rendered less efficient than usual and requires at the same moment a greater support of bank notes or coin than usual. Consequently at that moment of fear an issue of bank notes can occur without depreciation. Just so in France. The metallic circulation has lately been largely hoarded, and therefore the paper circulation is needed to take its place, and has taken it without being depreciated. But soon these hoarded sums of metallic money will come forth-some are now being sent forth on account of the loan—and it is not very easy to see how, if the metallic money comes out, the paper money can remain as large as it is without falling considerably in value.

The enormous augmentation of the loan by the Bank of France to the French Government was a necessity in their position. They obtained the means to make it partly by diminishing their bullion, but mainly by an augmentation of paper currency which they could not have obtained without the leave of the Government. And as the Government gave that leave they were right to obtain the principal benefit from it.

The Bank of France is an institution entirely opposed to all English ideas. The governor and deputy governor are appointed by the State, and they are, in fact, supreme in the bank. And the intervention of thé executive Government in banking is opposed to established opinion and to sound political economy. But this much, at least, may be said: If the State in any country begins to foster banking it should do so in such a manner as to have a perfect control over the banking which it fosters.

The French Government did not, like the Government of India with the old Bombay Bank, give the credit of its sanction to a bank over which it had no control. It took absolute authority over the bank, and by means of a council of skilled regents it is enabled to exercise this authority fairly. This may not be as good a system in which deposit banking, at any rate, is open to all the world, but it is the next best substitute for it. And at the moment of this disastrous invasion it has

enabled the State and the bank to cooperate and to aid one another in a singular and felicitous manner.

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The CHAIRMAN. Can you give me, and will you do so, either a copy of or information as to where I can find the speech of Mr. Goschen in January, 1890 or 1891, concerning the financial condition of the Bank of England ?

Mr. GILMAN. Yes, sir; Mr. Goschen's speech is discussed and quoted in a pamphlet written by S. F. Hopkinson, the Leeds proposal and the answer from London.

The CHAIRMAN. The securities, as you call them, that would be pledged by the bank to the clearing house for the currency that the clearing house furnishes the bank would be the ordinary securities or notes that it took in its regular way of business as a bank?

Mr. GILMAN. Yes, sir.

The CHAIRMAN. When a bank issues currency directly against its assets, as is done in France and Germany and was done under the old Suffolk system and under the old State bank system, it issues it against these very securities that under your system it issues ?

Mr. GILMAN. Yes, sir; the only difference being that in one case there is the actual pledge of the assets in the hands of a trustee to secure the clearing-house currency, and there is no such pledge when the notes are issued against the assets in their own hands. In France the privilege of note issue is given to one bank, and in Germany to about six. To give the same privilege in our country to 3,000 banks would not follow their example, and would invite disaster. Currency was not issued under the Suffolk system; that was only a method of redemption.

The CHAIRMAN. Then the only difference is in the distinction and positive pledge of specific assets of a bank placed in the bands of the second party, rather than the whole assets of the banks remaining in the hands of the banks as against the notes it issues when the law gives a first lien on all the assets of the bank and its stockholders and the liability of the assessment of the stockholders as security for the currency?

Mr. GILMAN. Yes, sir; that is the difference, and the liability to a lack of confidence. I will say the confidence comes in just at that point.

This describes the method. The object is to make the banks sustain their customers as well as derive a profit from them. This they do by turning to the clearing house to find the remedy for a bank crisis, instead of throwing the whole pressure on the mercantile community, to use the words of Nathan Appleton. The result is that cooperation is thus established, which prevents the interests of the banks from being at variance with the interests of the people. A secured currency with a cooperative system will produce stability, and an unsecured currency, whether under the Suffolk system or any other, will produce panics.

Thereupon the committee adjourned.

H. R, 9725.-FIFTY-FIFTH CONGRESS, SECOND SESSION.

IN THE HOUSE OF REPRESENTATIVES,

APRIL 5, 1898.--Mr. McCleary introduced the following bill, prepared by

the Special Subcommittee of the Banking and Currency Committee, consisting of Hon. James T. McCleary, Hon. George W. Prince, and Hon. John Murray Mitchell; which bill was referred to the Committee on Banking and Currency and ordered to be printed.

A BILL To provide for strengthening the public credit, for the

relief of the United States Treasury, and for the amendment of the

laws relating to national banking associations. Issue and re Be it enacted by the Senate and House of Representatives demption di. Vision estab: of the United States of America in Congress assembled, That lished. there is hereby created a division in the Treasury Depart

ment to be known as the Division of Issue and Redemption, under the charge of an assistant treasurer of the United States, who shall be appointed by the President, by and

with the advice and consent of the Senate. Funds in di SEC. 2. That to the division of issue and redemption and redemption shall be committed all functions of the Treasury Depart

ment pertaining to the issue and redemption of notes and certificates, and to the exchange of coins; and the said division of issue and redemption shall have the custody of the bank-note guaranty fund and of the redemption fund of the national banking associations, and shall conduct the operations of redeeming the circulating notes of national banking associations, as prescribed by law; and to this division shall be transferred all gold coin held against outstanding gold certificates, all silver dollars held against outstanding silver certificates, all United States notes held against outstanding currency certificates, and all silver dollars and silver bullion held against outstanding Treasury notes issued under the act of July fourteenth, eighteen hundred and ninety, and such amount of subsidiary and minor coins as the Secretary of the Treasury shall consider necessary for the issue and exchange of such coins, and the funds deposited with the Treasurer for the redemption or retirement of the circulating notes of national banking associations. All accounts relating to the business of this division shall be kept entirely apart and distinct from those of the other divisions of the Treasury Department; and the accounts relating to the national banking associations shall be kept separate and apart from all other

accounts in said division of issue and redemption. Reserve SEC. 3. That a reserve shall be established in the divinotes and silver: sion of issue and redemption aforesaid by the transfer to it

by the Treasurer of the United States from the general 42

reserve.

funds of the Treasury of an amount of gold, in coin and bullion, equal to twenty-five per centum of the amount, both of United States notes and Treasury notes issued under the act of July fourteenth, eighteen hundred and ninety, outstanding, and a further sum in gold equal to five per centum of the aggregate amount of the coinage of silver dollars. This reserve shall be held as a common fund, and used solely for the redemption of said notes and in exchange for said notes and for silver dollars and subsidiary and minor coins, as hereinafter provided.

SEC. 4. That it shall be the duty of the Secretary of the Duty of the Treasury to maintain the gold reserve in the division of Secretary of the issue and redemption aforesaid at such sum as shall secure maintain such the certain and immediate redemption of all notes and exchange of all silver dollars presented, as hereinafter provided for, and the preservation of public confidence; and for this purpose he may, from time to time, transfer to the division of issue and redemption any funds in the Treas. ury, not otherwise appropriated, in excess of cash balånce of fifty million dollars, said cash balance to be determined in the same manner in which it is now determined; and in addition thereto he is hereby authorized to issue and sell, whenever it is in his judgment necessary to the ends aforesaid, bonds of the United States bearing interest at a rate not exceeding three per centum per an. num, payable in gold coin at the end of twenty years, but redeemable in gold coin at the option of the United States after one year; and the proceeds of all such sales shall be paid into the division of issue and redemption for the purpose aforesaid.

SEC. 5. That the Secretary of the Treasury may, and he The Secretary is hereby authorized to exchange gold coin held in the of the Treasury

may transfer general cash of the Treasury for notes held in the division funds. of issue and redemption; and he is hereby further authorized to exchange notes of one denomination for a like amount in notes of another denomination, or notes of one of two classes for a like amount in notes of the other class, and may replace notes worn or unfit for circulation by new notes of the same class; but none of these exchanges shall at any time alter the amount of money to be held in the said division.

SEC. 6. That the division of issue and redemption shall, Duties of divi: at Washington and at such subtreasuries of the United sion of issne and

redemption. States as the Secretary of the Treasury. may from time to time designate, on demand:

First. Pay out gold coin for gold certificates;

Second. Pay out United States notes for currency certificates;

Third. Pay out gold coin in redemption of United States notes and Treasury notes of eighteen hundred and ninety;

Fourth. Pay out silver dollars for silver certificates of any denomination;

Fifth. Issue silver certificates of denominations of one dollar, two dollars, and five dollars in exchange for silver dollars and for silver certificates of denominations above fiye dollars;

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