ommendation so far as it relates to the issue of emergency currency without the deposit of bonds as security. In that dissent I was joined by Mr. CHARLES B. LAWSON and Col. F. L. HITCHCOCK.

Mr. LOGAN, of Pittsburg.-I would like to move that that resolution be adopted.

Mr. HARVEY.—Before action is taken upon that I would like to ask if the Secretary will not read the second resolution as embodied in the report of the committee.

Mr. NELSON. I will explain, if you will permit me. The only thing that the gentleman dissents to is in regard to the deposit of bonds to secure currency. If you will permit me to say, there is now a bill, as we all know, which has been reported to the Senate, and that bill provides that the banks can deposit not only municipal bonds, but certain railroad bonds, such as may be acceptable to the Comptroller of the Currency and the Secretary of the Treasury. I am convinced in my own mind, in the first place, that it is unscientific to issue currency secured by any bonds, because that does not meet the requirements and demands of trade and commerce, as I stated before. To substitute bonds other than Government bonds will only intensify that condition, and I feel would bring about a state of affairs which might in the course of time place us in a very uncomfortable position.

We all know that if the banks are encouraged to buy bonds, even you might say municipal bonds, they will do it. In fact, they have all done it already to too great an extent. We have seen the 3% per cent. bonds of New York fall from 103 to 87, and our Baltimore City 31⁄2 per cent. bonds have fallen from 110 to 90; and so it is all over the country.

I do not think it is either wise, scientific or safe to permit the banks to deposit any bonds other than those of the Government, because there is naturally a greater speculation in the bonds of municipalities. Not only that, but it encourages the bank to lock up their capital. They have already locked up $650,000,000, mostly of 2 per cent. Government bonds. If they are going to lock up their surplus in other bonds, they are simply converting their liquidated capital and surplus into

a fixed capital and surplus, which ought to be obnoxious to you, gentlemen, who want a commercial bank and not a bank which speculates.

Mr. HAMLIN, of Boston.—I want to say that it seems to me that a bill authorizing other than Government security would be very good for those who have these other securities and want to sell them, but I believe it to be a pernicious principle to permit any securities to be deposited other than Government bonds.

I could go farther than that, perhaps, but it is not necessary. It is well known that in the last few years other bonds have been taken as security for public deposits, and a report of the Treasurer of the United States justifies that action by stating that in the first few years of National banking that practice was followed and that other securities were taken in larger measure than Government bonds, in addition to individual notes. I took some pains to investigate that, and I can state now that the Treasurer of the United States officially told me that there never were any deposits whatsoever of Government funds in banks unless they were secured by Government bonds, in addition, oftentimes, to individual notes; that there is no authority whatsoever in the law or any precedent for taking any other deposits than Government bonds and individual notes, carrying out the words "or otherwise," according to the interpretation of the court.

I believe that it is not only an "entering wedge," but I believe it is contrary to the whole policy of the United States Government to permit a proposition of this kind, to force banks. to buy and put up collateral which they do not ordinarily have. I am not a practical banker, but I assume that banks do not ordinarily carry municipal and other bonds; that they have only to buy them when they want to utilize them. It seems that the only foundation for belief in the ability of a bank to pay its notes is to pay out of what assets it has, its bills receivable and its mercantile accounts; and that, of course, is its ultimate basis. But back of all the only way that a bank can meet its obligations is to meet them by payment in standard gold coin of the world as it is to-day, practically.

I thoroughly concur in that view and I rise to second the motion that this second resolution be adopted.

Mr. HITCHCOCK, of Scranton.-I think if Governor HAMLIN will look at the resolution carefully he will discover that he is really opposed to it, because this eliminates the power of the Government to issue circulation on bonds. ["No! No!"] It certainly does.

The PRESIDING OFFICER.-The Secretary will read it.

Mr. HAMLIN. The gentleman from Scranton has made two mistakes. In the first place he called me "Governor," and I have never been a governor; and I think his second mistake is that this eliminates the power of the Government to issue circulation on bonds.

Mr. HITCHCOCK.-I was one of the dissenting members of the committtee. The question is whether currency should be issued with bond security. This resolution, as I understand it, authorizes the issue of currency without bond security, and really takes it from the power of the Government to adopt anything else but a bond security. That is the very thing I am opposed to. We have now one of the best circulating mediums in the world, and while it is held that the Government may secure itself by requiring a certain reserve and also by imposing a certain tax which would pay the interest on all possible loans in currency, nevertheless I say the moment you start in without a bond-secured currency you are sailing upon an unknown For forty years we have been on that basis.

sea.

A DELEGATE.-This is only an emergency currency.

Mr. HITCHCOCK.-I don't care what it is.

Mr. HAMLIN.-I understand the gist of this is that a bank may issue, in a certain emergency, 140 per cent. of its bonds, instead of 100 per cent.

Mr. HITCHCOCK.-I would agree to that report if you take out the words "without the deposit of bonds," or "with bond deposit," as the resolution is worded.

Mr. HAMLIN.-A bank needs an emergency currency, but if you tax that and have a Government guaranty behind it,

the question will relate simply to the Government guaranty. The Government has guaranteed these notes, and they have ample protection. I believe that the security of Government. bonds means absolutely nothing. It was devised in the first place to market Government bonds; that was the only reason. If we had never had any such deposits of bonds as security for circulation, I think our currency would be sounder than it is to-day.

Mr. HITCHCOCK.-How is the Government going to be secured in making its guaranty if it has nothing to base that guaranty upon?

Mr. NELSON. I will be delighted to answer you. Experience has proved to us that it has not been absolutely necessary that a single Government bond should have been deposited to secure our present $600,000,000 of National bank currency. This National bank currency is taxed at present one-half of I per cent. per annum. I said one-fifth, but really, about onetenth of 1 per cent. tax per annum would have established a fund which would have paid all of the notes of the National banks that have failed since the National bank act was passed, and I am satisfied that the people will not consent to any currency which is not backed by the Government. They have become used to that and I do not believe that Congress would authorize, or that the people would be satisfied with any other currency. But this resolution provides for a properly safeguarded National bank circulation without the deposit of any bonds, under rules and regulations to be established by the Comptroller of the Currency, with the approval of the Secretary of the Treasury, such emergency currency to be guaranteed by the Government and taxed at a rate which will make its issuance practicable and yet be sufficiently high to insure its rapid. retirement as soon as the emergency conditions shall have subsided. That leaves it altogether with the Secretary of the Treasury, first to properly safeguard it; and, secondly, it leaves it with the Government to satisfy itself as to its guaranty by making such arrangements as it shall think best to secure itself.

The PRESIDING Officer.—You mean that that may be bonds or otherwise?

Mr. NELSON.-No I do not mean that it may be bonds or otherwise. I do not think that a bond-secured currency under any conditions or circumstances can be an elastic currency. It does not go out and come in according to the demands of trade and commerce. If you will look at the reports which have been published you will find that the National bank currency has gone up, up, up, all the time, and is to-day as high as it ever was, and it never comes down.

Look at the currency of Canada, of Scotland, of England or Germany, and you will find that it goes up and down, up and down, according to the demands of trade and commerce. In crop-moving times our currency goes up; in crop-growing times the currency goes down, so that very frequently it happens that when a crop-moving period comes the currency is retired. Why? Because it pays the bank to sell their bonds and retire their currency.

On the other hand, it frequently occurs that when the currency is not wanted they take it because they can buy Government bonds and draw interest. It is only because of the profits which banks make that induces them to take it all. They are much worse off commercially than they were before they took out bonds. Whenever a bank takes out $100,000 currency it costs the bank $110,000 to do it, so they lose $10,000 of available credits to loan to such men as you gentlemen represent.

For that reason I am opposed to the deposit of any bonds whatever. Of course we cannot change our present bondsecured currency under present conditions. We have to protect not only the banks, but the Government. But I think this resolution which we offer certainly ought to meet with your approval, because it provides for the safeguarding by the Comptroller of the Currency and the Secretary of the Treasury, and for the guaranty of the Government, the Government to make itself whole and good by any means which it shall determine to be best.

Mr. PEABODY.-I want to make this clear to the gentlemen present. This is out of harmony with the bill which in a crude form, I will say, has been presented by Senator Aldrich, the