8/7/2019 Mcadoo Report 1916 (1)

1/2HeinOnline -- 54 Cong. Rec. 1471 1917

1917. OONGRESSIONAL REOORD-SENATE. 1471pounded or may be impounded in the Tl'eusury so that the endless chain of wIthdrawing' gold from the Treasury may bestopped, That is not a danger in existence now; it has beenobviated.I have not any desire to antagonize the Senator's suggestionof an amendment, but it occurs to me that before we make itwe ought to be sure that the Federal reserve banks are Iu a po-sition to perform all the functions of the Tleasury .1I1r. OVERMAN . Mr. President, I mel'ely want to read alongthe line the Senator mentions exactly what is stated in the report of the Secretary of the Treasury. He says:

Since the Federal reserve bani,s are, as I have already stated, private corporations, just as are the national banks, the duty of providingthe necessary storage vaults and of assuming the custody an d controlof these trust funds could no t be imposed upon the Federal reservebanks by legislation. I t could only be accomplished by negotiation andagreement, involving, necessarily, compensation for the service performed. Whether or no t arrangements could be made with Federal'reserve banks, or any private institutions, for the cnstody of thesetrust funds upon terms and ~ l l l d e r conditions satisfactory to the Government, an d at a saving in cost over the Subtreasury methods, whilea t the same time providing all of the conveniences in hnndling thesefunds and the same measure of security as now a.ft'orded by the SubtreaRury system, is a matter upon which 1 am unable to express anopinion.He says he Iws $152,079,000 gold in the Subtreasuries. He .adds:I desire to repeat, however. my earnest conyiction that it wouM b('unwise to commit the custody of these trust funds to any prhateInstitution or Instlttltions.I t is a long report. I believe I will have it printed in tbeRECOllD. 'Vhen this matter was before the Senate committee it

was our disposition to take some action in r ~ g a r d to the Subtrea.':mries. We did not InlOW anything about tlle necessity forthem, and we began to inquire and had this report sent. to us.We made inquiries of the Treasury Department as to whetherthey could not be dispensed with. The Secretary of the Treasurysays finally in this report:I am of the opinion that It woul,l be inadvisable at this time tonbolish all, or . any, of the Subtrcusuri'!8. I t is an important matterand ~ h o u l d be considered deliberately. With th e test of further experience it may develop that the tunctions of the Subtteasurles, or some otthem, may be tranSferred to W a . ~ h i n g t o n or to some other agency, .butaction should no t be taken bastily or inadvisedly.Therefore, as the Senator flOlll Arlmnsas [Mr. llOBINSON] hasstated, In order to get all the information before us so ru; tounderstand the matter thoroughly we have provided in the billan appropriation for the purpose of investigating the subject sotllat we can act intelligently upon it at the next session of Con-gress.I ask that the report of the Secretary of the Treasury be

printed in the llECORD,The PRESIDENT pro tempore. Without objection, the reportwill be printed in the R':COIlD.The report of the Secretury of the T l " e r ~ s u r y refelTed to is asfollows: .TREASuay DEPARTMENT,OFFICE OF TIlE SECIIEXARY,Wa8hington, December lG, 101G.

The SPEAKER OF TH E HOUSE OF R E P l l E S E ~ X , I T I V E S . SIR: In the legislative, executive. and judicial appropriation actapproved May 10, 191G, it is provided t hn t - ... l'he Secretary of the Treasury is authorized a'od directel1 to reportto Congress at the beginning of it s next session which of the Subtreasuries. if any. should be continued after the end of tile fiscal year 1017,lIml !Y. In his opinion, any should be continued the reasons In full fo rsuch continuance; also, If any or all of said Subtreasuries may be discontinued, what legislation will he necessary in oruer to transfer the!rduties and functions to some other branch of the public service or tothe Federal reserve banks." .In accordance with the above authorization and direction, I have thehonor to report as follows:. There arc nine Subtrpasuries located, respectively,' in the cities ofBoston. Mass.; New York City. N. Y. ; Philadelphia, Pa.; Baltimore,Md.; Cincinnati, Ohio; Chicago. I l l . ; St . Louis, Mo.; New Orleans,La.; an d San Flant!sco, Cal. The Subtreasury system was authorizedby the ac t of August G, 184G. and subsequent acts amendatory thereof.The duties an d functions of the Subtreasuries may be stated generallyas follows:Issue of gold order certificates on gold deposits.Acceptance of gold coins for exchange.Acceptance of standard silver dollars fo r exchange.Acceptance of fractional silver for redemption.Acceptance of minor coins fo r redemption.Acceptauce of United States notes for redemption.Acceptance of l'reasury notes for redemption.Ac(:eptnnce of gold and silYer certificates for redemption.Cancellation (befpre shipment to Washington) of unfit currency.Lllundering of unfit eurrencv which permits of this process.EXcbange of various kinds 'of money for other kin(Js that muy berequested. .Rmnittances from United States depositary banks of their surplnsdpposits of internal-rel-enlle, customs, moncy-ortler, posta1, nnd similarfun(ls.D"posits of postal-saving_ funfls direct.Dl'posits of money-order' funds direct and indIrect.

-Deposits of post-office funds direct and indirect.Deposits on account of 5 pcr cent redemption fund.Deposits of interest on public deposits.Deposits of funds belonging to disbursing officers.Funds dcposited for transfer to some other point through a paymentby a Subtreasury located thcreat. .Encashment of checks warrants, and drafts drawn against th e 'l;rens-11I"er of the United Stafes and presented at the .Subtreasury for payment.The payment of United States coupons and interest checks.In addition to the foregoing the Subtreasuries haYe the custody of alarge part of the reserve and trust funds, conSisting of the gold coinan d bullion and silver dollars deposited to secure gold and sllyer certificates and greenbacks.The receiving of deposits and payment of checks has been a s ~ u m e < l to a large extent since the establishment of the Federal Reserve Systemby the designation of Federal reserve banks as Government depositariesIn those Subtreasury cities where Federal reserve banks are located.l ~ e d e r n l reserve banks ar e located in the Subtreasury cities of Boston,New York, Philadelphia, Chicago, St. Louis, and San Francisco. NewOrleans l u L ~ a hrancil of the Federal . reserv e bank of Atlanta, whileneither Baltimore nor Cincinnati has a Federal reserve bank,I t has always been deemed advisable to deposit th e gold reserve an dtrUBt funds of the Government in sevel'al places rather than to concentrate them in one, for reasons of security as well as public conyenience.The Federal reserve ac t docs not expressly, .or by implication, contcmplate th e substitution of the Federal reserve banks .for the Subtreasul"les, nor would it , in my opinion, be possible, or adYisable i fpossible, to attempt such a substitution. While the general o:r currentfund of the Treasury may, in the discretion of the Secretary, be deposited In the b'cderaJ reserve banks, the resen'c and trust 'funds 0 [th e Government, viz, gold coin and bullion and silver dollars held Int.l'U8t by tile Government against outstanding gold und sliver certificatesund greenbacks, nrc no t included in this authorization. ',rile gold eolnand bullion held against gold certificates, amounting at present tomore than $2,000,000,000. a considerable part of which is depositedIn the Subtreasuries, should not, in my opinion .. be committed to thecustody of any private corporations-and the l"ederal reserve bunks'are private corporations-but should be in the phYSical control of theGovernment itself. 'rills applies with equul force to th e $1(;2,979,025of gold reserve held against United States notes and Treasury notes of1890 and the silver dollars held against silver certificates. If , )IOWever, it silould be deemed advisable to transfer the custody of thesetrust fllniIB to l?ederlll reserve banks or to any other private corporation or corporations, it would be necessary to make a special deposit ofs.uch funds in vaults espeCially constructed for the purpose and ,tomaintain a Ji'ederal guard or some form of adequate Goyernment con-trol oyer such I'aults. . .. Since the Federal reserve banks are, as I have already stated, private corporations, just as are the national bani,s,. the duty of providingthe necessnry storage vaults and of assuming the custody and controlof these trust {undH could not he imposed upon the ],"ederal reserveban ts by legislation I t could ,only be accomplished by negotiation an dagreement. involving. n e ~ s s a r i l y , compensation for the service performeil. Whether or no t arrangements could be made with Federal reserve banks, or any private institutions, for th e custody of these trustfunds upon terms and under conditions satisfactory to the Government.and at a saving in cost over the subtreasury methods, while, at thesame time,. proviclinr; all of th e conveulences In handllng these fundsan d the .same mcasure of security as now afforded by the subtreasurysystem, IS. a matter upon which I am unable to express an opinion. Idesire to repellt, however. my earnest conviction that i t would be unwise to commit the custody of these trust funds to nny private Instl.tution 01' institutions. The custody of these trust fundS, their mnintenance, direction, control, and administration ar e distinctly a governmental function and should be exercised only by the Government.Aside from the custody of the trust funds of the Government, theSubtreasuries perform a highly useful service to the public in ' makingexchanges of money, supplying money an d coin where needed, an dreducing the cost anl1 el(pense of shipments of money and coin froma common center. I t Is necessary to maintain the facllities an d conveniences proyliled by the Suhtreasurles in the large centers of hus!ness in the country, such as tbe cities in which the Subtreasuries arenow located. J';v8n I f these particular functions could be transferrellto Federal reserve lianks where they exist, the services rendered bythe substituted agencies would ha,e to lie compensated for. Thiswoulcl inyolye cl(penses to the Government, while, a t the same time,th e faemtirs provide(1 might no t be as thorough and satisfactory asthose supplied by the Subtreasuries themselves.It . has ueen suggested that the Subtreasuries are merely conyCnlences and not necessities, and that their duties might be performedentirely by th e 'rreasury in Washington. This is in a sense true,bu t the cost of hanrlling all tbe business from a common center. ina country so extensive as the Unltell States, might be greater thanth e expense of the SUbtreasury system, whereas the delays anr} inconveniences which the public woulcl haye to suITer might prove a veryserious handicap upon business. It could with equal force be arguedthat internal-revenue ofilces throughout the United States could beabolished and all of the work done at Washington, and, In lilte mauner,that many of the customs omees throughout the country could beaboliShed and al l of the work done from Washington. It Is the autyof the Government to provide adequate facil1tles to meet the CODvenience and necessities of the pulllie In al l parts of the country. nndthe problem must be consillered as a whole anll no t merely in detail.

It Illay be possiule to reduce the expense of admin!stration of some,or all, of tile Subtreasuries. I t has been only one year since the Federal reserve banks were lilllde Government depOSitaries and fisc;tlagencies ana th e current or general funds of the Government In suchcities transferred to Federal reserve banks. About that time I appointed au impl'Q,'ement committee (llescribed in my annual report of1(15) to mak" a careful study of departmental methods in all (lirection" and to report upon the best means of improving the general administration

8/7/2019 Mcadoo Report 1916 (1)

2/2HeinOnline -- 54 Cong. Rec. 1472 1917

1472,' CONGRESSIONAL R,EOORD-SENATE. JANUARY 16,Subtreasury. Governmentfunds heldJuno 30, 1916.

Total transoo- E ~ ~ ~ ~ o ~ tions, fiscal year nance fiscal1916. yeRr'1916.Baltimore.. . . . . . . . . . . . . . . . . . . . . . . . . . $12,1>73, a7l. 07 $108,215,675.59 133,749.63Bostou . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,452,695.24 217,020,680.17 52,051.298 r ~ ~ f ~ ~ a t : i . . : : : : : : : : : : ::::: :::::: ::: I ~ N ~ ~ : ~ J , n ~ . r ~ ~ : ~ g g : g ~ U g ~ a i U : Now Orle:ms. . . . . . . . . . ....... . . . 31,917,751.13 .73, 990, 519. 44 . 27,481. 22Now York. . . . . . . . . . . . . . . . . . . . . . . . . . 329, '102, 485. 45 2,464,715,492.12 187,587.75l'hiludelphia . . . . . . . . . . . . . . . . ; . . . . . . . 26,183,266.27 473,623, 903. IS 57,792.76St. LOllis............................ 4S,62'J,847.19 193,370,692.54 37,385.63San Francisco........................ 99,088,010.01 291,058,033.63 25,812.27

Total. . . . . . . . . . . . . . . . . . . . . . . .1 -73-4 -1-73-,-67-1-.0-5-1-4-, 525-,-0-63-,-11-1-.8-2-:1:-63-5-,0-0-4-.63It wllI be seen that the cost of mnlntalnlng these Institutions, treating the Subtreasury ~ y s t e m as a whole, Is only one onehundredth of 1""1' cent, approximately, on the total transactions Involved-an inslgnlilcant sum compare!! with business done, the Important service performed, and the conveniences afforded to the public. Aside from NewYorl(, tile cost of maintaining the otller eight Subtreasuries Is $847,41U.88, which is a comparatively small sum to pay for th e service an dconvenience they provide. I f these Institutions were abolished, th etotnl cost of operating them would no t be saved, as a counter expendlture by the office of the Treasurer In Washington, resulting from theincreased worlt that would be thrown upon that office, would be entailed,I um of the opinion th"t I t would be Inadvisable at this time toahollsh nil, or any, of tile Subtreasuries. I t Is an important matterund should be considered deliberately. With the test of further experlence i t moy deyelop that th e functions of the Subtreasuries, orsome of them, may be trnnsferred to Washington, or to some other:lgency, bu t action should no t be taken hastily or Inadvlsedly.I regl'et exceedingly that my necessary absence from Washington, inconnection with the establishment of the Federal farmloan banks andother public business, made It Impossible to r me to submit this report to

the Congress at an earlle" date.Respectfully, W, G. lIIcADOO, Sce,ctary.Mr. WEEKS. Is there a motion before the Senate?'The PRESIDENT pro tempore. There is no motion in connection with the matter.Mr. WEEKS. I ask the Senator fl'om Minnesota if he is go-.iug to make a motion? . .Mr. NELSON, I huYe pointell out the path of duty to themajority of the body; I have shown them the true light, and Ithink I will leave it to them to say whether they will follow theputh I huve blazecl out for them nnd be ,as economical as theycun well be, If they so deSire, under the amendment I havesuggested. I f they have nQt sufiicient interest to offer amendnients themselves, I am sure I will not draw them out of theDemocratie slough of despond.. Mr. WEEKS. I will not take the time under those circumstances to discuss this proposition. I will merely say that Ithink the Senator from Minnesota Is probably right in the contention which he has been making. I um not sure about the detlli1s in the matter of Subtrellsuries and Federal reserve bunks,and I am not quite clear in fnct in my own mind to say that i tcan be done without any possible detriment to the service. I fthere is a provision in the bill, as I understand fl'om the Senatorfrom Arkansas, that this I11l1tter shall be investigated and a report made to Congress next December, I think that is the betterway to proceed, although I would vote, if the motion were made,to strUm out the appropriation for the Subtreasuries and' yotefor that proposition. I think , however, when the bill goes toconference, the proper Treasury ollicers should be brought before the conferees and full Imowledge obtained from them asto it s desirability or wllat reasons they may have for Hot tal,ingsuch action.The PRESIDliJNT pro tempore. The reading of the bill willbe continued.Mr. THOMAS. I ask permission to turn back to page 51,line 6. '1'here is a committee amendment on page 51, line 6,which reads, .. Private secretary for captain commandant,$1,400." I make against that amendment the same point oforder which was made by the Senator from Washington a fewmoments ago to the amendment on page 37.'J:he PRESIDENT pro tempore. '.rhe Chai!. did not understand to what.amendment the Senator referred.1\-[1'. ~ : H O M A S . The point to which I referred was madeagainst the amendment on pnge 37, beginning at line 13, providing for an assistant to the Secretary of the Treasury andfixing his salary. The point was made the amendment seeks toincorporate generlll legislation into an appropriation bill, andthe pOint of order was sustained. I make the same point oforder to a similar provision on p'age 51, line G.MI'. OVERMAN. -Mr. President, of course, this amendmenthas been adopted.~ : l I e PHElSIDElNT pro tempore. The amendment as statedby the Senatol' from North Carolina has been adopted.Mr. '.rHOMAS. Then I reserve the right to maIm a point oforder against the amendment when the bill reaches the Senate.

Mr. OVERMAN. I f the Chair was correct In his precedingruling, we might le t everything which is in the bill relative tothe fixing of salaries go out.Mr. THOMAS. I think everything which increases the number of employees ought to go out.Mr. NELSON. Mr. PreSident, at the iilstance of a numberof my colleagues and without taking more time than is absolutely necessary, I move to strike from the bill all under thetitle of .. Independent Treas"tll'y," pertaining to Boston, Chicago, New York, St. Louis, and San FranCisco, in five pluces.The language Is found on pages 63, 64, and 65; and I move tostrike out the language relative to Boston.Mr. OVERMAN. Does the Senlttor make the motion as toal l of those p ~ a c e s ? Mr. NELSON, No; I leave out foul' of them.Mr. OVERMAN. I shall not consent to that. I f the Senatorwill le t them all go out and If there is a necessity for any ofthem going out, the matter can go into conference and therebe considered. I shall not object to tliat.Mr. NELSON. Would the Senator ruther I should make themotion as to ull of them?Mr. OVERMAN. I would rather the Senator would make themotion as to all of them, so that if we make an investigationat all, we may investigate as to all of them.Mr. NELSON. Very well, then, I will move that they all goout. ' .Mr. GALLINGER. Mr. President, pending that motion, Isuggest the absence of a quorum.Mr. OVERMAN. That suggestion is not in order now underthe agreement under which we are proceeding.The PRESIDENT pro tempore. The Senator from NewHampshire suggests the absence of a quorum. The Chair, however, desires to cull the attention of the Senator from Minnesota[Mr. NELSON] and of the Senator fl'om North Carolina [MrOVERMAN] to the fact that we are proceec1lng by unanimousconsent, first, to consider amendments reported by the commlttee.Mr. OVERMAN. I myself made that pOint of order just nowand I was going to say to the-Senator from Minnesota that whenhe made this motion I wanted him to make it in accordance withthat agreement, and that he was proceeding out of order.The PRESIDENT pro tempore. The Chair did not hear theSenator from North Carolina when he made that point.Mr. NELSON. I was not aware of the situation. I f theSenator objec t s - -Mr. OVEJRMAN. I do not object, bu t we are proceedingunder a unanimousconsent agreement, and I was going to suggest that to the Senator when I was called down.

Mr. NELSON. Very well, I will wait .Mr. GALLINGER. Under those circumstances I shall 116tinsist upon my suggestion. I withdraw the suggestion.The PRESIDENT pro tempore. The Chair thought possiblythe Senatol' from New Hampshire woulll do so. The ClJair did.not want to control the action of the Senate, but he thoughtI t proper to call the attention of Senators to the fact.The reading of the bill was resumed. 1'he next amendmentof. the Comrllittee on Appropriations was, under the head of"'Val' Department," on page 71, line 7, before the worll "assistants," to strike:out "61" and to insert "40," so as to read

Adjutant General's Office: Chief clerk, $2,500; 10 chiefs Of dlvislo11sat $2.000 each; clerks-58 of class 4, 74 of class 3, 116 of class 2231 of class 1, 03 at $1,000 each; engineer, $1,400; assistant engineert,$000; 2 firemen; sldlled mechanic, $1,000; 11 messengers; 40 assistanmessengers; 4 watchmen.Mr. GALLINGER. Mr. Pres ident, it was at my instance inthe committee that that amenllment was placed in the bill. Ireceived a letter from a friend on the outside who called attention to the number of assistant messengers in the oftice ofThe Adjutant General, the bill, ns it came from the other House,providing for 11 messengers and 61 assistant messengers. Thestatement is made thut they did not require any such numberof messengers. Fo r the purpose of sending the matter to conference, I moved the amendment which was agreed to by the. committee. Since that time I have learned from Adjt. GenMcCain, one of the most accomplished ollicers in the Govern'ment, as I loolc upon him, that an injustice has been done to hisoffice by that amendment. I asked Adjt. Gen. McCain to muke awritten statement as to the matter, and, if Sepaors will listento me, I shoulc1like to read it. I t is not long.I will say, before reading the Jetter, Mr. President, that I wasluboring under the impression that The Adjutant General'softice, while'of great importance, yet did not include enough rooms'to require the assistance of such a number of messengers andassistant messengers-61 in nIl,. I believe-but The AcljutantGeneral writes nrguing to the contrary. He says: