the Bank of England fifty-three times, and by the Imperial Bank of Germany twentysix times, it was only raised by the Bank of France once. It is the policy of the Bank of France to let the French people have money at the unvarying rate of three per cent, believing that stability in the rate of interest gives stability to commercial enterprise and promotes the welfare of the 'commerce and industry of the country,' which is a chief duty of the bank.

"The very large surplus in coin of the Bank of France prevents the loss of confidence which leads to panic, and the bank has so large a margin of note issue, with disposition to extend every reasonable demand, and France itself has so large a supply of internal currency in circulation, and the banking deposits being relatively small, that there is no danger there of panic in times of peace.

THE BANK OF CANADA

"Even the banks of our nearest neighbor, the Dominion of Canada, have a method

which expands and contracts the circulation as much as twenty per cent during the three months in each year when the crops of forest and field are moving.

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Their notes may be issued to the extent of their unimpaired capital paid up.

"The notes form a prior lien on the assets and are secured by a five-per-cent guaranty fund. The notes must be redeemed at any part of the Dominion. No reserve is actually required by law, but the cash reserve for redemption has actually averaged in gold and legal tenders for some years ten per cent about. Under the law, forty per cent of the reserves must be in Dominion legal tenders, which, of course, take care of such paper to that extent. There is a double liability of stockholders, a special liability of directors, elaborate regulations, frequent printed reports, etc. The striking feature is that in the history of these banks the guaranty fund of five per cent for the security of their notes has never been depleted, and that this method offers a method which the United States might safely

use for expanding the currency.”—Cong. Rec., p. 2453.

The vital point of the English system was the issuance of legaltender bank notes by the Bank of England against securities and gold, and lending these notes at interest. This was permitted by a Ministerial Permit in 1847, 1857, and 1866, with the result that the panic in London in each case was instantly controlled (Hist. Bk. Eng., Andréadês, 336, 349, 350).

The German method, to which I called attention at that time (1899), consisted in issuing currency against securities under a penalty of a tax of five per cent on the issue to the extent it exceeded its fixed gold security, and lending these bank notes at interest, and I recommended at that time (1899) the following remedy:

THE REMEDY IN THE UNITED STATES

"The remedy for panics in the United States which suggests itself is:

"First, Establish Postal Savings-Banks, in which 'timid' depositors with inactive accounts may place their money, because at present by sudden hoarding in times of excitement they constitute the greatest danger to the stability of banks and therefore to the stability of commerce.

"Second, Issue to such depositors in the postal savings-banks, in lieu of their deposits, a bond, of long term, with liberal option as to period of redemption by the Government, bearing a low rate and issued in small denominations, available for currency, and make such bonds legal tender. In this way such deposits would become a source of strength instead of weakness.

"Third, Authorize the Treasury of the United States to issue Treasury notes to banks depositing bonds of a fixed character, Federal, state, or municipal, where the standing of such bonds is thoroughly assured, leaving the deter

mination of their character with the Secretary of the Treasury. In this case a charge should be made against the banks drawing the notes by a tax in excess of the amount of interest borne by such bonds, so as to secure the prompt redemption and repayment of the advances."-Cong. Rec., February 25, 1908; p. 2453.

Since this recommendation was made the principles I then proposed have been adopted by the United States:

First, The Postal Savings-Banks have been established to absorb the deposits of timid depositors. Act of June 25, 1910, 36 Stats., 814.

Second, The Aldrich-Vreeland Bill (May 30, 1908), recognizing the principle of

(a) Issuing bank notes,

(b) At interest,

(c) Against adequate securities,