States shall be paid into the Division of Redemption of the Treasury and credited and added to the reserve fund held for the redemption of United States and other notes.' "SEC. 10. That section 9 of the act approved July 12, 1882, as amended by the act approved March 4, 1907, be further amended to read as follows:

"SEC. 9. That any national banking association desiring to withdraw its circulating notes, secured by deposit of United States bonds in the manner provided in section 4 of the act approved June 20, 1874, is hereby authorized for that purpose to deposit lawful money with the Treasurer of the United States and, with the consent of the Comptroller of the Currency and the approval of the Secretary of the Treasury, to withdraw a proportionate amount of bonds held as security for its circulating notes in the order of such deposits: Provided, That not more than nine millions of dollars of lawful money shall be so deposited during any calendar month for this

purpose.

"Any national banking association desiring to withdraw any of its circulating notes, secured by the deposit of securities other than bonds of the United States, may make such withdrawal at any time in like manner and effect by the deposit of lawful money or national bank notes with the Treasurer of the United States, and upon such deposit a proportionate share of the securities so deposited may be withdrawn: Provided, That the deposits under this section to retire notes secured by the deposit of securities other than bonds of the United States shall not be covered into the Treasury, as required by section 6 of an act entitled "An act directing the purchase of silver bullion and the issue of Treasury notes thereon, and for other purposes," approved July 14, 1890, but shall be retained in the Treasury for the purpose of redeeming the notes of the bank making such deposit.'

"SEC. 11. That section 5172 of the Revised Statutes be, and the same is hereby, amended, to read as follows:

"SEC. 5172. In order to furnish suitable notes for circulation, the Comptroller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved, in the best manner to guard against counterfeiting and fraudulent alterations, and shall have printed therefrom, and numbered, such quantity of circulating notes, in blank, of the denomination of five dollars, ten dollars, twenty dollars, fifty dollars, one hundred dollars, five hundred dollars, one thousand dollars, and ten thousand dollars, as may be required to supply the associations entitled to receive the same. Such notes shall state upon their face that they are secured by United States bonds or other securities, certified by the written or engraved signatures of the Treasurer and Register and by the imprint of the seal of the Treasury. They shall also express upon their face the promise of the association receiving the same to pay on demand, attested by the signature of the president or vicepresident and cashier. The Comptroller of the Currency, acting under the direction of the Secretary of the Treasury, shall as soon as practicable cause to be prepared circulating notes in blank, registered and countersigned, as provided by law, to an amount equal to fifty per cent of the capital stock of each national banking association; such notes to be deposited in the Treasury or in the subtreasury of the United States nearest the place of business of each association, and to be held for such association, subject to the order of the Comptroller of the Currency, for their delivery as provided by law: Provided, That the Comptroller of the Currency may issue national-bank notes of the present form until plates can be prepared and circulating notes issued as above provided: Provided, however, That in no event shall bank notes of the present form be issued to any bank as additional circulation provided for by this act.' "SEC. 12. That circulating notes of national banking associations, when presented to the Treasury for redemption, as provided in section 3 of the act approved June 20, 1874, shall be deemed in lawful money of the United States.

"SEC. 13. That all acts and orders of the Comptroller of the Currency and the Treasurer of the United States authorized by this act shall have the approval of the Secretary of the Treasury, who shall have power, also, to make any such rules and regulations and exercise such control over the organization and management of national currency associations as may be necessary to carry out the purposes of this act.

SEC. 14. That the provisions of section 5191 of the Revised Statutes, with reference to the reserves of national banking associations, shall not apply to deposits of public moneys by the United States in designated depositaries.

"SEC. 15. That all national banking associations designated as regular depositaries of public money shall pay upon all special and additional deposits made by the Secretary of the Treasury in such depositaries, and all such associations desig

nated as temporary depositaries of public money shall pay upon all sums of public money deposited in such associations interest at such rate as the Secretary of the Treasury may prescribe, not less, however, than one per cent per annum upon the average monthly amount of such deposits: Provided, however, That nothing contained in this act shall be construed to change or modify the obligation of any association or any of its officers for the safe-keeping of public money: Provided further, That the rate of interest charged upon such deposits shall be equal and uniform throughout the United States. "SEC. 16. That a sum sufficient to carry out the purpose of the preceding sections of this act is hereby appropriated out of any money in the Treasury not otherwise appropriated. "SEC. 17. That a commission is hereby created, to be called the National Monetary Commission,' to be composed of nine members of the Senate, to be appointed by the presiding officer thereof, and nine members of the House of Representatives, to be appointed by the Speaker thereof; and any vacancy on the commission shall be filled in the same manner as the original appointment.

"SEC. 18. That it shall be the duty of this commission to inquire into and report to Congress at the earliest date practicable what changes are necessary or desirable in the monetary system of the United States or in the laws relating to banking and currency, and for this purpose they are authorized to sit during the sessions or recess of Congress, at such times and places as they may deem desirable, to send for persons and papers, to administer oaths, to summons and compel the attendance of witnesses, and to employ a disbursing officer and such secretaries, experts, stenographers, messengers, and other assistants as shall be necessary to carry out the purposes for which said commission was created. The commission shall have the power, through subcommittee or otherwise, to examine witnesses and to make such investigations and examinations, in this or other countries, of the subjects committed to their charge as they shall deem necessary.

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'SEC. 19. That a sum sufficient to carry out the purposes of sections 17 and 18 of this act, and to pay the necessary expenses of the commission and its members, is hereby appropriated, out of any money in the Treasury not otherwise appropriated. Said appropriation shall be immediately available and shall be paid out on the audit and order of the chairman or acting chairman of said commission, which audit and order shall be conclusive and binding upon all Departments as to the correctness of the accounts of such commission. "SEC. 20. That this act shall expire by limitation on the 30th day of June, 1914."

And the Senate agree to the same.

EDWARD B. VREELAND,
THEODORE E. BURTON,
JOHN W. WEEKS,

Managers on the part of the House.
NELSON W. ALDRICH,

W. B. ALLISON,

EUGENE HALE,

Managers on the part of the Senate.

Is a second demanded? Speaker, I demand a second.

The SPEAKER. Mr. PUJO. Mr. The SPEAKER. A second is ordered, under the rule. Mr. PUJO. I ask the gentleman from New York, in the interest of the orderly enactment of legislation, that we be allowed an hour on a side, at least, of debate, the gentleman from New York to control one half of the time and the ranking Member on the committee on this side to control the other half of the time. It is known to all Members that the bill just reached the desks about two minutes ago, and there is not a Member, not even the conferees, who have had an opportunity to make themselves familiar in the slightest degree with the provisions of this bill; and I ask the gentleman, in the interest of orderly legislation

Mr. VREELAND. I want to make a parliamentary inquiry. Does this come out of anybody's time?

The SPEAKER. No; the gentleman made a parliamentary inquiry somewhat extended, but the Chair does not take it out of the time of either gentleman. The gentleman from New York is entitled to twenty minutes and the gentleman from Louisiana is entitled to twenty minutes.

Mr. PUJO. Now, Mr. Speaker, I ask unanimous consent of this House that debate on the conference report upon what is known as the "national currency" legislation, proposed a few moments ago, be extended so as to allow one hour for each side, the time to be controlled by the gentleman from New York and the ranking Member on this side.

The SPEAKER. Is there objection?

tion. Banks which join these clearing-house associations and which own these public bonds may obtain circulation to the amount of 90 per cent as well through the association as if they presented them directly to the Treasury Department. The parts of the Senate bill which we have incorporated in the House bill are entirely free from the criticisms which were made against the Senate bill as it came to the House.

RESERVE.

Mr. Speaker, we have changed that portion of the House bill which provided that the same reserve should be kept against these emergency notes as is now provided by law against deposits. In my judgment, the bill is very much improved by the change. We provide in this bill that banks taking out emergency circulation shall keep a redemption fund of 10 per cent with the Treasurer of the United States to redeem these notes. This is double the amount required for the present bank-note circulation. It will also be remembered that banks do not carry reserves against existing circulation. I have always believed that the reserve feature of the House bill could not be justified. If these bank notes were to be redeemed over the counters of banks, as they are redeemed under the Canadian system, then a reserve should be kept against them and, in my opinion, such reserve should be a little larger than the ordinary reserve carried against deposits. But these bank notes are never presented at the counter of the bank which issues them and payment asked. I have put the question to more than a hundred cashiers of banks if they ever knew a single instance in which a note issued by a bank was laid down on the counter and payment demanded. I never received a reply in the affirmative. These notes are presented at the Treasury for redemption and there only. Therefore, any reserve kept by the banks for the payment of these notes should be kept at the point of payment, namely, with the Treasurer of the United States. Another reason for requiring reserves of banks against money is that the depositor selects the time when payment shall be made and not the bank. The bank must pay whenever the depositor demands his money, but in the payment of these notes the bank determines when payment shall be made. If a bank takes out this emergency circulation it stays out so long as the bank is willing to pay the increasing tax against it. When conditions are so improved and money becomes easy enough that the bank desires to stop the tax and retire the notes it sends money to the Treasurer of the United States for this purpose. Therefore, as the bank determines the time of payment it need not keep reserves on hand for unexpected demands which might be made. If the full amount of $500,000,000 of emergency circulation should ever be taken out $50,000,000 would have to be deposited by banks with the Treasurer of the United States in advance, so that the United States would not have to advance money in redeeming these notes. In my judgment, this section is an improvement upon the bill passed by the House.

TAXATION.

The rate of taxation against these notes is substantially the same as the House bill. The House bill required that the tax commence at 4 per cent. With the reserve which they were required to keep this would amount to 5 per cent. In this report we require that the tax shall commence at 5 per cent and increase at the rate of 1 per cent a month until it reaches 10 per cent, and it remains at that limit so long as the circulation shall stay out. We provide some limitations about commercial paper. There must be at least two names upon it. The paper must not run more than four months. It must be paper which represents actual commercial transactions. We have retained the provision that there must be, first, 40 per cent of United States bond-secured circulation taken out by any bank before it can take out emergency circulation. We provide that not to exceed 30 per cent of the capital and surplus of banks shall be issued against commercial paper alone. The effect of that would be, taking the whole country together, that $450,000,000, in round numbers, could be issued through these clearing-house associations, through the banks of the United States, against commercial paper alone. Above that figure any kind of securities could be used for the balance of emergency circulation up to the limit. We retain the provision that every State shall be entitled to the money apportioned to it of this $500,000,000 circulation. That means that New York or Chicago could not take out the circulation which belongs to Maine or Texas or California.

WHAT IS ASSET CURRENCY?

The singular objection is made to this bill by some gentlemen that it is asset currency. They certainly have not in their minds a clear definition of what asset currency means. What

is asset or credit currency? It it such a system as prevails, for example, in Canada, where bank notes are issued by the banks, are not guaranteed by the Government, and are redeemable only by the bank which issues them. All of the property-the assets of the bank-remain in its possession. If the bank should close its doors the holders of the notes issued by it would become creditors of the bank. The notes would cease to be money. They would become liquidated claims against the bank. The holder of these notes would be either a general creditor or a preferred creditor, as the law might provide. The holder of these notes would keep them until the affairs of the bank were liquidated and payment could be made. That is a credit system of currency. Since 1863 the United States has had a secured system of currency. We have had a system whereby the United States guarantees the payment of these notes issued by the banks and takes to itself security for its protection.

Under the present law every bank taking out circulation is required to buy a particular asset; that is, United States bonds. These bonds, a part of the assets of the bank, are then deposited with the United States as security for the guaranty of its notes by the Government. Under this proposed law we are not departing from the secured system of currency. We are not departing from the guaranty of these notes by the United States, but we are enlarging the class of securities which the United States will accept for such guaranty. Under a secured system of currency, such as we provide for in this bill, assets of a bank desiring circulation are taken out of its possession, and out of its control and are passed upon as to value and the quantity of the security by some authority provided by law. The securities are kept in the possession of an agent of the United States in trust for the United States as special security for the notes issued. It will be seen, therefore, that this is not a credit system of currency; that it is no departure from the secured system of currency which we have had for forty years except that we enlarge the class of securities which the Government will take to protect itself. The system is the same. The only question is, whether the United States is getting ample guaranty for its indorsement of these circulating notes. Upon that point I have heard no gentleman make serious question.

RAILROAD EONDS.

It is also suggested, in some quarters, that we are putting railroad bonds back into the bill. Some gentlemen say that the Senate bill originally provided that railroad bonds, with certain limitations, could be made the basis of bank-note circulation. They inquire if we are not putting them back in this bill so that they may be used as a basis for bank-note circulation. The statement that railroad bonds are put back in the bill is misleading and inaccurate. What were the objections to railroad bonds as a basis for circulation which led to their elimination from the Senate bill? Personally, I believe that railroad bonds of the class provided in the Senate bill, at 75 per cent of their cash value and not to exceed 75 per cent of their par value, are a perfectly safe basis for circulation, but many gentlemen considered that there were other ob. jections besides the question of value. They pointed out that railroad bonds are only semipublic in their nature. Railroads and railroad rates are subject to regulation by law. They are, to an extent, under the control of the Government. $500,000,000 of emergency circulation should be taken out with railroad bonds as a basis it is claimed that the United States might find itself in a position where it could not properly exercise its control of railroads and exercise its right over the rates or railroads without depreciating the value of the security which it held for guaranteeing these bank notes and might find itself in a position where, if it did exercise such control, it would mean the depreciation of their securities to such an extent as to make a loss for the Government.

It

It was objected further that it would be selecting out one class of property, only in part of a public nature, and giving it an enhanced value by law. It was contended that such advantages belong only to bonds of the United States or those issued by States or municipalities where all of the people would enjoy the benefits. It was contended that if banks must buy a large amount of railroad bonds in order to avail themselves of the privileges of this law, it would be giving them an undue preference by law over other classes of property. The mere statement of the case shows that none of these objections lies against the use of bonds under this proposed law. It provides no market for bonds of any kind. Banks are not obliged to buy bonds in order to take out circulation under this law. Railroad bonds, under this law, are not put upon a par with public bonds. State and municipal bonds can be used as a basis for circulation either directly or through the association provided for in

this bill at 90 per cent of their par value if the cash value is at or above par. Railroad bonds can be used only through these associations, and are put in the same class with commercial paper and can be accepted at not to exceed 75 per cent of their value. If we should except railroad bonds from the kind of securities owned by banks which may be used through these associations as a basis for circulation we would then be unjustly discriminating against a certain kind of property, and a kind of property which is very largely owned by savings banks and life insurance companies. If gentlemen wish to forbid national banks from owning railroad bonds they should pass a law for that purpose. They certainly would not expect us to discriminate against any kind of securities which national banks may now legally own.

SENATE AND HOUSE BILLS HARMONIZE.

I want to say that the Senate provision harmonizes perfectly with the House provision in this bill. There is no conflict between them whatever. It makes a broader base for this legislation. It gives banks which desire to purchase and hold public bonds the right to take out circulation direct. It gives those who do not wish to buy and hold this class of bonds the right to use the legal securities in their banks through these associations.

WHAT DO WE DO FOR THE DEPOSITORS?

Some gentlemen upon the other side who seem desirous of finding opportunities for criticism ask what we are doing for the depositors in this bill. It seems to me that such gentlemen fail to understand the provisions of this bill or else they do not want to understand them. The whole purpose and object of this bill is for the benefit of depositors. It is to enable banks to pay depositors upon demand. It is to prevent such a suspension of payment as took place throughout the United States last fall when depositors were unable to draw their money. It is a law to enable banks to do their duty by their depositors.

It

The panic last October was largely a bankers' panic. started as a local run upon the Knickerbocker Trust Company in New York City, but the bankers throughout the United States became alarmed and all tried to draw their money from New York at a time and, of course, were unable to do so. This resulted in a general suspension of bank payments in cash throughout the United States, and to my mind the most striking feature of the panic was the refusal of the American people, as a whole, to become frightened; although their business was disarranged and largely stopped, they waited with the utmost calmness for business to get back into its accustomed channels. If the law had been strictly followed the Comptroller of the Currency would have closed the banks of the United States which refused to honor the demands of their depositors. Why was it that the Comptroller did not so act, and why was it that public opinion did not compel him to close their doors? It was because the American people knew that nowhere on earth could the banks get additional money, except by the slow process of importing gold, and by the equally slow process of taking out additional circulation based upon Government bonds, which could not be had. The banks, and especially those of New York and Chicago, made the greatest efforts to import gold and to obtain additional circulation. It was the knowledge that these banks were doing everything possible under the law to obtain money to meet the demands made upon them that induced public opinion to acquiesce in this suspension of payment. The purpose of this law is to provide means whereby banks can obtain money under such circumstances.

Under this law we provide that immediately $500,000,000 can be taken out to pay depositors in case of need. When this law goes into effect public opinion will no longer sanction suspension of payment, although it may be considerable expense and trouble for banks to take out this money. Public opinion would require them to take it out and keep their engagements or close their doors. Some bankers tell us that they will neither join these associations nor buy bonds to avail themselves of the provision of this law in case of trouble; but those bankers greatly mistake the temper of the public mind. They would find that having the legal means provided for them of obtaining money, public opinion would compel the Comptroller of the Currency in case they did not obtain it to close their doors as insolvent institutions.

We are doing more than that for depositors in this bill. We are providing for a commission which shall take up and study not only the currency question, but a revision of our banking laws. We all know that the banking laws need revision. We know that they are weak and defective in many particulars. We know, for example, that the examinations of national banks are not what they should be. We know that they are greatly inferior to the examinations provided by some of the States.

Our examiners are paid according to the number and the size of the banks which they examine. We are putting a direct premium upon the slighting of their work. Along many lines the Comptroller of the Currency is clothed with insufficient power in dealing with national banks in compelling them to obey the letter and spirit of the law. We may confidently expect that the commission appointed under this bill will bring in a revision of our banking laws at the next session of Congress which will make the depositors of money much more safe in national banks and which will largely decrease the opportunity for illegal transactions by the officers of banks. Mr. Speaker, I reserve the balance of my time.

Mr. PUJO. Mr. Speaker, I will ask the Chair to inform me when I have used three minutes.

This is a composite bill. It incorporates the Aldrich bill and the Vreeland bill, and as presented is a composite measure here. It authorizes the issuance of five hundred millions of our circulating currency, should the bill be passed, to be based upon United States bonds, State bonds, county bonds, municipal bonds, all with a taxing power behind them. So far those are the main features of the Aldrich bill. Each political autonomy is vested with the power to levy a tax to protect the notes should the issuing bank fail to retire them when presented and the bonds deposited as security fail to realize a sufficient sum when disposed of. The other features of the bill are novel, and I am surprised and amazed to witness their adoption for the first time by the Republican party-an asset currency pure and simple, a subtreasury scheme practically.

I call attention to the language on page 4 of the bill. When uniting banks with a minimum capital of $5,000,000 form an association, they can have money issued by depositing certain securities with the Treasurer of the United States. Now, what is the character and what is the class of securities required to be deposited? I read, beginning on page 3:

The national currency association herein provided for shall have and exercise any and all powers necessary to carry out the purposes of the section, namely, to render available, under the direction and control of the Secretary of the Treasury, as a basis for additional circulation, any securities, including commercial paper, held by a national banking association.

A warehouse receipt issued for any agricultural product, an elevator receipt for wheat, for corn, for oats, held by a bank can be used for deposit with this association, and in turn with the Secretary of the Treasury, as the basis for circulation. [Here the hammer fell.]

I will use two minutes more of my time, Mr. Speaker. The ninety-day draft of a merchant in Kansas City who would ship hay to New York, or a ninety-day draft of a merchant in Kansas City who would ship a carload of mules to Louisiana, drawn by him, accepted by the buyer, and discounted at the bank, becomes commercial paper, with two names on it, a legal subsisting basis for this currency.

I want to congratulate the Republican party, being a soundmoney party (purely in a Pickwickian sense), for advocating a scheme like this. Evidently the political emergency must be great, otherwise they would not in a moment, without giving an opportunity to discuss the measure, try to force such a currency upon the American people. I now yield three minutes to the gentleman from Virginia [Mr. GLASS] and reserve the balance of my time. [Applause on the Democratic side.] Mr. GLASS. Mr. Speaker, the presentation of this conference report here at this time in this way, with all of its attendant circumstances, constitutes a distinctly partisan pretense. Whatever the design, the effect can only be to deceive the country into the belief that something of an effective nature has been accomplished in the direction of a reform in existing currency conditions. The gentleman from New York having charge of this report [Mr. VREELAND] has never undertaken to disguise the fact that he has considered this matter from a partisan standpoint He has seemed to regard it as of more importance that the Republican majority should be able to boast of having "done something" at this session than to defer action until the right thing can be done at another session, after full consideration and intelligent discussion. Of all the cloud of witnesses before the Committee on Banking and Currency, the gentleman from New York was the only one who ventured to obtrude partisanship into the consideration of the currency question.

SIGNED BY ALL, FAVORED BY NONE.

This report, Mr. Speaker, enjoys the unique distinction of having been signed by all of the Republican conferees, both of the Senate and the House, but not really approved by a single one of them. [Applause on the Democratic side.] There is scarcely one important provision of this composite bill which has not been severely condemned by the Republican leaders of Congress. Those features which appeal to Members of this House have been mercilessly criticised in the other Chamber,