MR. BANKER: Some reference may have already been made to this fact; however, it will do no harm to repeat it right here because of its force and great importance. Under the English Bank Act of 1844, permission was given to count silver as one-quarter or 25 per cent of the reserves of the Bank of England; but it has never done so, since it is regarded as an economic falsehood. The reason is obvious. If the bank today held $50,000,000 of silver and $150,000,000 of gold, the gold would not only have to carry the $50,000,000 of silver, which is nothing but another form of credit money, because actually worth only 50 cents on the dollar in bullion, but the gold would also have to carry $150,000,000 additional; that is, all the credit based upon this $50,000,000 of silver, a condition that is wholly misleading; for the silver instead of being a reserve at all, as it seems, or pretends to be, would actually be, so to speak, a bundle of dynamite under the whole structure of English credit.
So, in the United States our $346,000,000 of United States Notes, or greenbacks, instead of being an actual reserve to that extent, are not only a burden resting upon our gold, to the amount of their face value; but the burden our gold is carrying is multiplied to the extent of all the credit that is resting, or is based upon these United States Notes, which may be anywhere from one billion to three billion according to the per cent of the reserves the banks using them carry. They may be used as a 5 per cent reserve, and carry twenty times the amount of the reserves, or more than six billion; it is possible that they may be carried as a 17 per cent reserve, the average of all the National Banks, or only 7 per cent, the average reserves of all the other State Banks, excluding the Mutual Savings Bank.
MR. MERCHANT: What's that? Do you mean to say that the State Banks do not carry more than an average of 7 per cent reserve, and that the National Banks carry an average of two and a half times as much or 17 per cent cash?
MR. BANKER: I have the statement of the Comptroller right here, which shows that the average cash reserves of all the State Banks is 5 per cent, including the Mutual Savings Banks, but excluding them, only an average of 7 per cent, and that the average reserves of all the National Banks is 17 per cent.