Evening star. [volume] (Washington, D.C.) 1854-1972, 1894-12-11
CONTROLLER ECKELS
He Explains His Views on the Currency
Question at Length.
He and Secretary Carlisle Agree ms to
the General Principle, but Differ
as to Methods.

Dy the House banking ana currency coii-
mittee closed yesterday Controller Eckels
explained fully his proposition for re-
form OF the currency. The scheme which
he had suggested in his report, he said,
was intended to disturb as little as pos
sible the existing order of things. In order
to make any system successful the note is
sued must be Immediately, not ultimately,
convertible into coin. This was the fist
consideration. After this. If the banks
could be given the power to expand
the currency in times of stringency, the
two main objects OF a currency system
would be obtained. In his system he had
proposed a 30 per cent deposit upon which
notes should be issued. To the extent of
the deposit those notes were absolutely
safe. The ether % per cent would be Sc
cured by safety fund raised by proper
taxation. Frankly, he did not consider
such deposit necessary. Bat the exigencies
of the war made it necessary.
The Legal Tenders.
The legislation of that period had created
a currency which in, and of itself, in his
opinion could not have maintained itself had
not the government endowed it with legal
tender quality. Mr.. Eckels described at
length the legislation which created the
legal tenders, and he gave it as his opin-
ion that the legal tenders, ultimately, but
not Immediately convertible, made the war
much more expensive than it otherwise
would have Keen. The existence of those
legal tenders today was he thought, the
greatest danger to the credit of the United
States at home anu abroad. COMPARED to
it the defects of the banking system were
only an Inconvenience The legal tenders
called for gold and must by law be reS-
sued. The drain of gold could be made
continuous, and the confidence of the peo-
pie must be shaken both here and abroad.
AS long as trade relations between this and
other countries existed, our monetary laws
must be regardful of the system of other
countries The public credit abroad must
be maintained by the redemption of those
notes in gold. Undoubtedly, the manly
thing to do, he said, was to redeem and re-
tire those notes. The authority to do this
bad once been given Secretary McCulloch,
but 1t had been rescinded. 1t could be
done now out of the surplus revenues or BY
means of a funding bond. 1t was now
proposed to give the banks valuable
franc hiSe, and it was proper that they
should make a fair return. In order to Sc
cure the current redemption of those legal
tender notes, he thought IL proper that the
banks, for the privilege of issuing notes on
their capital stock against their assets,
should be made to deposit legal tenders
with the government as a reserve fund.
Today under the natiOral banking act S165,
OO0,000 of legal tenders held for reserve
fund were taken out of circulation. Under
the system he proposed 30 per cent of the
circulation would be deposited in legal
tenders fer which circulating notes would
be issued dollar for dollar. This would in
no wise decrease the volume of currency.
The operation of this plan would be to inn
mediately withdraw SS40,O00,Ooo of the legal
tenders from the $iSo,OO0,Oo8 of legal ten
ders now used to drain the treasury of
gold
This, Mr.. Eckels thought, should be done
by every bank for the privilege of a future
issue of notes against its assets. Now I'M
less there was sufficient profit in circula-
ton, banks would not take it out. 1t was a
plain business matter. The complaint TN
der the present system was that there was
no profit in circulation. About SPOT ,0U0, 900
in national bank circulation was outstand-
ing Certainly, under the proposed system,
there would be a considerable profit in the
present circulation, and, in times of de-
mand, the profits, by taking out notes
against assets, would materially increase.
The Question of Elasticity.
AS to the question of elasticity: Elasticity
was governed by two things-the demand
and the Immediately convertibility of the
note. Any dollar not needed in business
would. by law of trade, go back to the
bank for redemption, to be reissued when
demanded. To the extent of 30 per cent of
the notes, then, the currency would be
elastic. This plan would relieve The treas
ury of $}ioWO,OO of greenbacks and fur
nish an elastic currency for the people and
profitable currency for the banks. He
argued the inherent right of the govern
ment to make issues legal tender, but ques-.
toned its eXpediency. AS 20 the safety of
the notes, history would repeat itself. 1t
was safe to say that not holder Of "A
bank note would have suffered loss if gov
eminent bonds had not been deposited in
the treasury vaults here. The Feel act Of
1911 in England pretendS to have been en-
&C ted to make the note holder of the Bank
of England secure, yet. as matter of fact.
it an act to limit the circulation. The
f16,VB,OOO of uncovered notes of the bank
that is, those who had not pound f gold
behind them-were just as secure as those
covered by gold. The act of JS44, which
attempted to fix the amount of uncovered
notes, had to be amended three years later
to give the Bank of England authority to
issue above the amount fixed by the Peel
act. The notes issued by the Bank of Eng
land uncovered have always been as good
as others The best assets of any bank or
other financial institution were redeemable
paper. This was apparent during the panic
last year, when bonds were hard TO dispose
Of while convertible paper was acceptable
everywhere. The bank assets and credit
behind the uno overed notes 20 be issued
under the proposed system for his country
would make them entirely safe.
Replies to Questions.
Mr.. Eckels said in conclusion that while
Secretary Carlisle and he agreed as to
general principles they differed somewhat
as to methods. The members of the COM
mittee then propounded their interroga-
tories. In reply to Mr.. johnson he said
that in his opinion the dangers of state
hank circulation were overestimated. 1t
should be remembered that thirteen states
by law prohibited such issues. In reply
to Mr. Brosius as to whether with the
large amount of money in circulation out
standing there was any urgent necessity
for a change of the system Mr.. Eckels
replied in the negative, as far as the neces-
sity for a greater abundance of money
was concerned, but emphatically in the
affirmative when it came to the necessity
of putting the new system on proper
foot;pg and for relieving the treasury of