The times., 1898-01-18
MORE FINANCIAL VIEWS.
Messrs. Gage and Fafrchild Before
the Monetary Commission


During the hearing afforded the
monetary commission yesterday by the
House Banking and Currency Commit
tee, Secretary Gage and former Seere-
tary Fairchild each explained their
views in answer to questions. ,Mr.
Gage said he had been for forty years
engaged in banking business, and for
ten years was president of the First
National Bank, of Chicago, which has
capital of $3,00O,000 and loans and dis
counts of from s1s,0OO,O 900 to 500 900, 900.
He said that without specie on hand
there was a tendency to distrust. or,
perhaps, panic, and demand for
specie.
He believed it would be impossible in
this country to have general rate
of interest such as prevails in England,
where the Bank of England fixes the
rate. In this country it varied in the
different States under statutory law,
and the banks had never been able to
agree on ruling rate of interest.
Mr. Fairchild, at this point. added
that the rate of the Bank of England
was governed by market rates, which
compelled the establishment of the
bank rate. To this extent London and
New York We're on the same basis, each
interest rate being responsive to the
market and the law of supply and de-
mand. ETs:
The bill also provides for the is
suance by national banks of notes. to
the full extent of their capital, as fol-
lows: Notes to the amount of 60 per
cent Of the capital, without interest;
notes to the amount of 30 per cent of
the remainder at 2 per cent interest,
and the final 20 per cent of their capi-
tai notes could be issued at per cent
interest. This interest to be paid to
the Government
The capital of all the national banks
in existence is $621 600 600. In addition
to this, Mr.. Fairchiid thought that
large proportion of the State banks
would avail themselves of national
bank charters. The capital of the State
banks was stated to be S22S, 100000,
which added to the capital of the ma
tional banks, makes total of SSS0,000,-
600 Bank notes to the amount of
1920, 100000. without interest, could be
issued on this amount; $3.50. 100000
worth of bank notes bearing per cent
interest, and $3.50, 100000 more bearing
interest at the rate of per cent.
Mr.. Newlands wanted to know if de-
postors would be compelled to take
which Mr.. Fairchiid replied that they
would not.
In the matter of a sufficient cash re-
serve for these banks to hold, Mr.. Fair
child thought that % per cent was
ample for banks in large cities, and 10
per cent for country banks.
Il want to say" said Mr. Fairchild,
that if you want to increase the guam
tity of your circulating medium of all
kinds, of which money is part, but
credits and even unwritten agreements
being much the larger part of the cir
culating medium of the country, you
must see TO it that the quality of every
portion of it is maintained at its maxi
mum. If you do not. you viii have
shrinkage in the whole and every
branch of it. My proof of this consists
in the fact that if a business house
fails to pay its credit obligations, not
only does that part of the circulating
medium which is composed of it's cred
its shrink but all other credits shrink,
the amount of such shrinkage being
governed by the Importance of the
failure.
1T does not stop here, however. not
only all credits shrink, but that por-
ton of the circulating medium which
consists of money itself begins. to
shrink. because men begin to hoard it.
On the other hand, beginning at the
other end, and impairing that portion
of the circulating medium consisting of
money, you then produce a shrinkage
of the whole because men begin to
hoard or send away the best. this
causes men to contract their credits, az
they are doubtful as to what their
credits will be paid in.
Now. the one thing the Government
has control oyer is the quality of the
money; they cannot improve it, but
they can impair it. If they do impair
il, they diminish the amount of the
circulating medium. Our view is that
the government has no more control
over the quantity of circulating me-
dunn, acting on the question of guam
tity directly. than they have over any
force of nature. The only way by
which they could affect the quantity
would be to impair the quality. and
thus make a shrinkage.'