Evening star. [volume] (Washington, D.C.) 1854-1972, 1898-01-17
DISCUSSING PAPER MONEY
Hearing Before the Banking and Currency
Committee.
Secretary Gage and Ex-Secretary
Fairchud Give Their views and
Reply to Questions.

child were before the House committee .on
banking and currency today for further
discussion of the pending plans for cur
rency reform. After considerable contro-
versy among members as to how they
were to be questioned, Chairman Walker
made the interrogatories.
In response to questions by Mr.. Walker,
Mr.. Gage said he had been in the banking
business for forty years; for ten years he
was president of the First National Bank
of Chicago. with a capital Of $3.O00,OOO and
loans and discounts of S16OOO.OOO to s2O,-
100000. He assented to Mr.. Walkers ques-
tion that he appeared as a banker and
financier of long experience to aid the conl-
mittee.
The chairman asked if 1t was possible TO
Use paper money and keep it at an equality
with coin in purchasing power without The
coin on hand.
Mr.. Gage answered that he thought not.
Without the specie on hand there was
demand for specie.
Mr.. Walkers questions took a wide
range. going into the technicalties and
theories of monetary science; the effect Of
rise in interest, the diminishing of loans
etc. Mr.. Gage ard Mr.. Fairchild alter
mated In giving their views. which in the
main covered the general operations of
banking ana the conditions most conducive
Mr.. Gage said it would be impossible in
this country to have general rate Of in
terest, as prevailed in England, where the
Bank of England fixed the rate. Here it
varied IN the many states under statutory
law, and the banks of the country h.d
never been able to coalesce on a ruling
rate of interest.
Mr.. Fairchild. in turn, explained that the
rate of the Bank of England was govern
ed by the market rate, which compelled the
establishment of the bank rate To this
extent Lordon and New York were on the
same basis. each interest rate being re-
ply and demand.
Further questions brought from Mr. Fair
chlid the statement that one of the effects
OF rse In interest was to check the de-
Inanu Tor gold, and this was the experience
OF the Bank of England.
ME- Fowier asked if per cent rate of in
terest would not almost invariably stop the
flow of gold from this country Mr. Fair
child thought it would If the gold standard
was in opera ation.
Mr.. Gage responded to another extended
question that confidence depended on the
assurance of coin redemption
referring to the endless chain process
Mr. Gage said 1t was figure of speech ap-
plying to all financial operations where
oblsatiohs came in and went out, in
c!rcie. So long as the obligations were met
the operation was not IA horrible thing, but
was right and necessary.
MIR. Fairchild assented to this, SAYING
eiiiS CbCie Dy "Hlcn redemption was
compished was essential N banking but
that the evil lay in the fact that the gov
ernment had not the banking facilities 10
make this redemption absolutely regular
and certain. Lacking these facilities fear
was inspired and the demands for gold in
creased.
Mr.. Mitchell of New York called attention
to the provision of the Gage bill for the ac-
cumuiation Of greenbacks in the treasury
for the purpose CT preventing the endless
chain.''
Mr.. Gage said that as applied to the gov
ernirent the endless chain was prejudicial
because the demand liabilities of the gov
ernment were SO great that the theoretical
provision of gold is inadequate to reGeem
promptly and to give confidence of prompt
redemption, and that, said Mr. Gage is a
source of weakness.
Mr. Gage made general statement OF
What ne hoped to see ultimately ACCOM-
plisned as permanent financial system.
1t would be condition of affairs with
national bank notes, made safe to the peo-
PIE without specific security therefor wise
ly restricted by law SO to prevent such
evils as might arise and with the entire
elimination of the United States govern
ment from paying its debts by giving other
debts in payment"
why not accomplish this now?" asked
Mr. Walker.
Theoretically there is no reason why it
should not be done now; practically there
are many reasons. The prcdisposition of
the people is in favor of government notes
from this system, although unknown out
weighs the narrow advantages of the mere
saving of interest secured by these govern
ment notes. You cannot change the minds
of the people. They are timid and sus
picious of bank note issues. They disbe-
lieve that any one can uphold a system
such / have sketched without selfish
and sordid motives. They fear it involves
hazard and loss. They recall the period Of
wildcat banks. 1t is desirable, therefore
to make the first step SO simple as to show
the people that it involves no dangers. so
that in time the full development of the
plan would be responsive to public senti-
ment.''
The extent of gold shipments was gone
into. Mr.. Prince of Illinois brought out
the point that since Mr.. Gage had been in
the treasury the gold supply had increased
from S1JJ,GUo.0GU to SIG, 600, notWith-
standing the operations of the sreenbacks.
At 1890 Mr.. Cages hearing closed until
tomorrow when he will spend the day be-
fore the committee.
Mr.. Fairchild will proceed after the
noon recess.