acts down through the history of our country for monetary purposes. That is the purpose for which silver goes into the Treasury; it is not for commercial purposes nor for industrial purposes. Industrial and commercial purposes have always been served by the purchase of silver by private activity outside of the Treasury of the United States. I am going to deal with that later if I may. I am now reciting and leading up to the question that you have propounded and that the Senator from Connecticut has propounded. Mr. Donald Nelson, following Mr. Morgenthau, repeated much that Mr. Morgenthau had said, and other things, all leading to the one proposition: Would there be any objection to the use of silver for nonconsumptive industrial purposes in the war effort? None whatever. The unanimous voice of the Senators there was to the effect that that silver might be so used. Mr. Chairman, pursuant to that tentative agreement-call it "agreement" if you want to; it is more of an accord; it is a question that is noncontroversial now. In other words, we raised no controversy, and never will. Whatever may be the law, whatever may be the policy, it was necessary for the war's activity, and that necessity we propose to meet, and are meeting it immediately, to the extent that over 15,000 tons of that silver have already been removed from the Treasury. I am advised that it is a trifle in excess of 15,000 tons of that 47,000 tons that has been removed from the Treasury and is being placed in the place of copper bus bars and copper conductors throughout the country in war-essential plants. What was the remaining silver in the Treasury? Was 47,000 tons all the silver inside and outside the Treasury? Not at all. There were about 113,000 tons of silver inside and outside the Treasury. About 51 thousand tons stand behind and guarantee the outstanding silver currency of America. It guarantees the redemption of silver certificates; it stands behind silver certificates in this country. Now, Mr. Chairman, one could go off on this subject greatly at length, but I do not propose to do it; I do not need to do it because your splendid knowledge of the subject and of the money of this country beggars mine, indeed. We have two systems in this country that guarantee our circulating medium. One is the Federal Reserve, and the other is gold and silver in the Treasury of the United States. I shall get off the subject unless I watch myself a little bit carefully, because of your question. I want to go back and pick up the thread of my thought later on when I have answered your question, which deals with the subject of getting together with Senator Green. Fifty-odd-thousand tons of silver are in the Treasury of the United States standing behind an outstanding issue of currency that the people hold. All of that currency stands behind this pledge, which we find on every silver certificate: "This certifies that there is on deposit in the Treasury of the United States of America one dollar in silver payable to the bearer on demand." Senator BARKLEY. Can you give those figures in ounces? Senator MCCARRAN. I am dealing rather with tons, Senator. Senator BARKLEY. I know, but we frequently deal with silver in terms of ounces, and I just do not want to have to multiply so much myself if you have the figure there. SENATOR MCCARRAN. We have fifty-odd-thousand tons of silver that stand behind the outstanding silver currency. Senator BARKLEY. Yes. You have not reduced that to ounces? Senator MCCARRAN. Ounces. The CHAIRMAN. Ounces. Senator MCCARRAN. Remember that an American dollar carries 3714 grains of pure silver; that is, by law. That has been the law of this country since the passage of the first Coinage Act of April 2, 1792. It has never changed. We changed the gold content of the gold dollar on three subsequent occasions; and, if we had followed ratios, we would have changed the silver content or value of silver accordingly, but we did not do it. I am not going to deal with ratios here because if I did I would hold this committee too long and too tediously, and it is not a part of the main meat of the subject; so I will diverge from the question of ratios entirely. It does not belong in this discussion but the disparity in prices of silver in respect of ratios will require a grave explanation sometime in the not far distant future. Senator, did you want to interrupt me? The CHAIRMAN. I was going to say, when you talk about ratio there is a ratio with reference to gold and certificates, but there is not with reference to silver, is there? I mean that, in silver, for every certificate you have got to have a silver dollar in the Treasury? Senator MCCARRAN. That is right. The CHAIRMAN. In the case of gold it is about what? 30 percent? I think it is something of that kind, isn't it? 40 percent? Senator MCCARRAN. About 40 percent, my recollection is now. Senator MURDOCK. The Federal Reserve Act says it is 40 percent. Senator BARKLEY. According to the Federal Reserve Act it is 40 percent coverage. Senator MCCARRAN. I think that is right. The CHAIRMAN. Forty percent coverage, but in the case of silver it is a hundred percent coverage. Senator MCCARRAN. That is correct. I am going back now again to the question of trying to effect a compromise with Senator Green; I want Senator Green now for a while. I will go back again pretty soon as to what my proposition is when I get to it. The fifty-odd-thousand tons of silver in the Treasury have never been touched because they are pledged for the redemption of currency. Of the 47,000 tons of silver in the Treasury 15,000 tons up to date have been transferred to war plants. The Navy, by its representation here before the subcommittee, testified this was Rear Admiral Keleher; he said: At the moment there appears to be an adequate silver supply available for military production. The Army gave testimony to the same effect. The reason I make mention of that is that only 15,000 tons of the 47,000 tons have been utilized for nonconsumptive war-essential activities. There still remains back in the Treasury that which we agreed might be utilized: the difference between 15,000 tons and 47,000 tons still remaining available for nonconsumptive uses in war activities. Senator BARKLEY. The 47,000 tons you speak of are entirely different from the 51,000? Senator MCCARRAN! Entirely different. May I be frank with you, so as to make it just as clear as I can? The Treasury calls it free silver, and for convenience I adopt the term, but it is not free silver in the general sense of the word. It is silver that was purchased for monetary purposes and is in the Treasury, but represents the difference between the price paid for the silver at the door of the Treasury and the monetary value of silver established by law. In other words, to use the existing condition, it represents the difference between 71.11 cents and $1.29 in the case of domestic silver. Senator BARKLEY. Is that 47,000 tons earmarked in the Treasury so that it does not become amalgamated with the 51,000 you have been referring to, or is it all in a lump for bookkeeping purposes? Senator MCCARRAN. No. My understanding is that on the books of the Treasury it is all considered one way. Senator BARKLEY. All in one book, which would make 98,000 tons without any earmarking of the 51,000 tons or the 47,000 tons? Senator MCCARRAN. My understanding is, at the time the Secretary of the Treasury appeared before us it was 113,456 tons altogether. Senator BARKLEY. Whatever it is. Senator MCCARRAN. Whatever it is. Senator BARKLEY. It is not kept on the books of the Treasury as two separate items of silver? Senator MCCARRAN. Yes; I think it is. Senator BARKLEY. Is it? Senator MURDOCK. If I may interrupt, Mr. Chairman, the Treasury does keep it in two separate items; and unless I am mistaken, Senator McCarran, what is known as the free silver is the larger amount. That is, the 47,000 tons that you speak of is the silver necessary, under the Treasury's statement, to secure the outstanding certificates. Senator MCCARRAN. No; 47,000 tons is free silver. Fifty-odd thousand tons is pledged for the redemption of outstanding certificates. Senator MURDOCK. Well, you say the 47,000—— Senator MCCARRAN. Is not pledged; 51,000 tons is pledged. At this point I may say that the Secretary of the Treasury informed the Senate Silver Committee that as of April 30, 1942, the amount of silver held in the Treasury was 2,900,600,000 ounces (99,438 tons), and that the silver outside the Treasury at that time was 408,900,000 ounces (14.018 tons). This makes a total of 3,309,500,000 ounces (113,456 tons). The silver outside the Treasury consists of silver dollars, half dollars, quarters, and dimes. The silver held in the Treasury consists of 1.360.500.000 ounces of bullion silver (46.640 tons) to which the Treasury refers as "free" silver; also silver bullion held for silver certificates amounting to 1,160,400.000 ounces (39,780 tons); also silver dollars held in the Treasury against silver certificates amounting to 371.800.000 ounces (12,746 tons); also subsidiary silver coin in the General Fund amounting to 9,800,000 ounces (336 tons). Senator BARKLEY. Would not the amount pledged for the redemption of outstanding silver certificates fluctuate from time to time depending upon the number of outstanding silver certificates? Senator MCCARRAN. That is probably true. Senator BARKLEY. So that if there were enough silver certificates issued, it would require all the silver in the Treasury as a basis for the issue of that currency? Senator MCCARRAN. That is entirely correct. And I tried to touch on that a little while ago, and my discussion, I am sorry to say, has been a little broken into and I did not complete my statement. All the silver in the Treasury was purchased and acquired by the Treasury for monetary purposes, and the law says that the Treasury shall purchase silver until silver arrives at the price of $1.29 or until there is a ratio between the silver and the gold in the Treasury of one-fourth silver and three-fourths gold. Senator MALONEY. Can it ever happen, Senator? Senator MALONEY. No; can it ever happen under the existing situation? Senator MCCARRAN. It can, yes; because gold is now being sold. It can happen; yes, indeed. As the gold holdings diminish the disparity between the gold and silver stock values decreases. The CHAIRMAN. Are there not still about $20,000,000,000 in gold? Senator MCCARRAN. I do not have the figures right here. I think it is twenty-odd billion. Senator MURDOCK. Mr. Chairman, may I just interject here? Senator MCCARRAN. May I just finish that thought? In the interim the influx of gold, the incoming gold, has been so great, much greater than the influx of silver, or the acquisition of silver has been so curtailed, that the ratio did not work out as it was planned. Furthermore when the price of gold was increased from $20.67 to $35 an ounce it became necessary to acquire more ounces of silver than was originally anticipated, the monetary price of silver not having been raised commensurate with gold. Senator MURDOCK. Just in order to keep the record straight, if it will not interfere with the statement, I find that as of November 19, 1942, the silver ounces behind silver certificates are 1,171,775,992.9 ounces; that the ounces of silver which are carried at cost value, and which are the free silver as referred to by the Secretary of the Treasury, on that date are listed at 1,315,390,418.5 ounces. So, while I do not want to insist on my point, I think that the larger amount of silver in the Treasury, the larger item, is the free silver rather than that behind the silver certificates, according to this statement here. Senator BARKLEY. Let me ask you this Senator MURDOCK. I am giving it in ounces. Senator MCCARRAN. Pardon me, Senator Barkley. Senator BARKLEY. No; I do not want to ask the question. Senator MCCARRAN. Now, to answer the question of the Senator from Connecticut, he wants to know, Could we ever arrive at that point? If we had decreased the silver content of the silver dollar as we decreased the gold content of the gold dollar, we would have entirely accomplished the end sought by the law. It is not to be assumed that the present content of the gold dollar is perpetual. Let me go back to my thought again; otherwise I am going to hold this committee too long entirely. The Secretary of the Treasury was very frank, and will be very frank, if he comes before this committee; that the silver in the Treasury standing behind outstanding certificates. 78102-42-pt. 2——2 Senator MURDOCK. Mr. Chairman, we also have present this morning Mr. Brownell, of the American Smelting & Refining Co., which company, I think, handles the largest proportion of silver, both foreign and domestic, of any company in the United States. Mr. Brownell has very kindly agreed to take a few minutes of the committee's time this morning to give us the silver situation as it exists in the United States today. I have talked to him and am satisfied he has information on the supply of foreign and domestic silver that this committee would be very much interested in, and I am hopeful that before the hearing closes we may give him a few minutes of the committee's time. Senator MALONEY. I should like to say in that connection that another gentleman has spoken to me about a desire to be heard. I understand that he came down here at the invitation, or at least the suggestion, of Senator Taft, but Senator Taft is unavoidably absent from the meeting this morning. The CHAIRMAN. Do you mean Mr. Spahr? Senator MALONEY. I did not talk with Mr. Spahr but to a gentleman who represents Mr. Spahr. The CHAIRMAN. I think if we should hear these gentlemen it might open up a new subject. Senator MALONEY. Doubtless it would open up an entirely new subject, but if you hear Mr. Brownell I do not see how you could deny Mr. Spahr a hearing. I do not know that the statement of either of these gentlemen would be exactly directed to this bill. Senator MURDOCK. Although the statement I made the other day was rather ridiculed by one of my colleagues, yet I wish now to say that I think there is no legislation today pending before this Congress that is more far-reaching than this bill. I say that after having lived almost with the silver question for 10 years in the Congress. I do not want to deny any person the right to testify in favor of the bill, but I do think the bill is of such importance that we should not deny the right to speak on it by anybody who may have information that should be before the committee. Senator MALONEY. I hope the Senator from Utah does not think I intended to offer any such objection. Senator MURDOCK. No; I did not so consider what you said, but am merely stating my position. Representative WHITE. Mr. Chairman, I want to say that I am a member of the Foreign Affairs Committee of the House of Repre sentatives and have to leave Washington this evening. I should like the opportunity during this hearing to say a few words and to present a few facts. The CHAIRMAN. Do you think that will be necessary after Senator McCarran finishes his statement? Representative WHITE. Well, I would wish the opportunity to back him up. Senator MCCARRAN. I think it would be well, and I am entirely agreeable to having Mr. Brownell, Congressman White, and others heard ahead of me. I would be very glad to follow up and conclude the matter before the committee. I think time might be conserved in that way. I am entirely content that the hearing should be handled in whatever way may best suit the convenience of the chairman and other members of the committee. But I do want the chairman to |