Senator MALONEY. During your absence from a recent meeting of the committee one of the Senators, who may not have been speaking for you, stated that if we would delay consideration of the bill until you returned you had a proposal to make to Senator Green and that you felt confident the suggested legislation could be worked out to everyone's satisfaction.

Senator MCCARRAN. I believe it could be worked out.

Senator MALONEY. Are you going to make that proposal to this committee?

Senator MCCARRAN. No; and I am going to tell you why right now, which is aside from the subject. First, on yesterday the press carried an article that the leader of the Senate had said that no controversial matter will come before the Senate.

What I stated was

Senator BARKLEY. That is not quite accurate. that any bills which had not passed the other House and which were controversial had little chance to become laws because of the lateness of the session. That did not mean that no controversial matter could come before the Senate, because it might be such a statement would be inaccurate. But I did state the other day, and stated again yesterday, that controversial bills which have not passed the House and which would have to pass both Houses of the Congress, would have difficulty in being enacted into law.

Senator MCCARRAN. Perhaps your statement was misconstrued by the press.

Senator BARKLEY. If so, that would not be the first time.

Senator MCCARRAN. That is correct. And I know that it has been misconstrued by some people opposed to this bill, and

Senator BARKLEY (interposing). And I was about to say that even that statement would not preclude the possibility of legislation if it could be ironed out so that it would not be controversial.

Senator MCCARRAN. That is true. And I think it could be ironed out without being subject to any haphazard consideration of the subject.

Senator MALONEY. We were told the other day, Senator McCarran, that you had a proposal ready to submit, and that you felt it would meet with the approval of Senator Green.

Senator MCCARRAN. That is correct. But I can only hope so, because I had never presented it to Senator Green.

Senator MALONEY. But you will not submit it to the committee today?

Senator MCCARRAN. No; because I do not believe, in view of the attitude of the public, and the very last statement of the Senate leader, and the statement made before the steering committee, or rather the attitude of the steering committee as reported to our group yesterday, this bill can be enacted into law, it being a very controversial subject.

Senator BARKLEY. I will say that the steering committee only dealt with two bills that are already on the calendar. It did not undertake to preclude further legislation. If I may say so, I am not committed one way or the other on this bill, do not yet know how I am going to vote on it, but if the suggestion that you have a proposal to make to the committee along with Senator Green that would eliminate this as a controversial matter, then it would not come within the category of my statement.

Senator MCCARRAN. I will be very glad to talk with Senator Green and try to work out what I think would be a fair compromise. I want to state the nature of that situation and will be very frank about it. The nature of it is this-but it would be better stated at a later time in my presentation to the committee. I will say that I was working up to it.

Senator BARKLEY. I did not know about that.

Senator MCCARRAN. With that in mind if I might defer that particular subject to which the Senator from Kentucky and the Senator from Connecticut have addressed themselves, I will go along with my

statement.

The CHAIRMAN. But that would shorten the whole thing, would it not? I mean, if you and Senator Green, perhaps with the help of the committee, could agree upon some bill that would be noncontroversial. Senator MCCARRAN. Indeed it would.

The CHAIRMAN. Is not that the thing to strive for now?
Senator MCCARRAN. Indeed it is.

The CHAIRMAN. Won't you tell us in a general way what your proposal is?

Senator MCCARRAN. Yes. I wanted to take that up with Senator Green first, and intended later to present it to this committee. I would rather work it out with Senator Green if he is willing to work it out with me, and to then present it to the committee in the worked-out form. But I can give you the nature of it now.

The CHAIRMAN. All right, please do so.

Senator MCCARRAN. It is breaking in on my thought, but that is all right.

The CHAIRMAN. You never have a break in your thought.
Senator MCCARRAN. Oh, very often.

Senator BARKLEY. You do not mean that it runs on forever without a break?

Senator MCCARRAN. On this subject it does. This is my life. This is the life of America, and I am willing to say that it does run on forever. I have lived with the subject of silver so long and it has become so much a part of my being that it is even coming out of my hair, I am sorry to say.

Mr. Chairman, I should like to catch up now with my thought and go along.

The CHAIRMAN. Very well, please do so.

Senator MCCARRAN. In order now to break into the thought that I had: Some months ago Secretary Morgenthau called me on the phone and said he and Mr. Donald Nelson, the Chairman of the War Production Board, would like to have a conference with the silver group of the Senate. We arranged the hour of the day for the conference. The Secretary and his experts came before the conference. We met, as I recall it now, in the hearing room of the Committee on Indian Affairs, that being the committee room of Senator Thomas of Oklahoma, who is the chairman of the Silver Committee of the Senate. Mr. Donald Nelson and his experts were also present. My recollection is that Mr. William Batt, of the War Production Board, was there. There were a number of others present whose names do not come to my mind right now.

Secretary Morgenthau opened the subject by telling us there was in the Treasury of the United States 47,000 tons of silver, which he

chose to call "free" silver. My recollection is that he went on and designated that silver as that which was acquired by the Treasury and which represented the difference between the monetary value of silver of $1.29 an ounce and the price that had been paid by the Treasury to those who delivered silver at the mint.

That commercial price has varied during the years. For the past 10 years it runs all the way from 241⁄2 cents per ounce to 81 cents per ounce, for a short time, and then back up to a stabilized price of 71.11 cents. The difference between the monetary value of silver in the Treasury of the United States, which is $1.29 an ounce, and the price paid for it represented a margin or profit to the Treasury of the United States. It is in Treasury terms, or mint terms, called seigniorage. He stated that the silver thus acquired amounted to 47,000 tons, and it was in the Treasury, and that the War Production Board wanted to use this 47,000 tons of silver for nonconsumptive war essential purposes.

And then there was a discussion as to what were war-essential purposes. Quite a lengthy discussion took place in the presence of the silver group, and in the presence of Mr. Morgenthau and his experts, and in the presence of Mr. Donald Nelson and his colleagues. War-essential nonconsumptive purposes was then designated as, for instance, bus bars. A bus bar is a metal bar or strip that conducts high voltage electricity from the generator or intake to the point of distribution. That is the shortest way that I, not being an electrical · expert, can explain it.

May I say to you that it was stated there in very emphatic terms that there was necessity for copper due to war activity, and that this exchange of silver for copper in this particular facility would release more than 47,000 tons of copper for war purposes.

It was related to us that the silver would not deteriorate, would always be the property of the Treasury of the United States, and could at the end of the emergency be returned to the Treasury. To that the silver group of the Senate unanimously agreed. As to that particular silver, notwithstanding the fact that the law provides that silver certificates shall be issued against it and that that silver stands behind the money of this country, we agreed to raise no question whatsoever, and we raise no question now.

That silver, 47,000 tons, was purchased by the Treasury of the United States for no other purpose than for the money of this Government, and the law so provides. Silver in the Treasury has never been used for any other purpose. The silver group of the Senate agreed that that silver, although purchased for monetary purposes, might be used because of the war emergency.

The CHAIRMAN. At that time it was free silver still, was it not? It had not been used for monetary purposes?

Senator MCCARRAN. The term "free silver," Senator, is a convenient term but not an appropriate term. There is no free silver in the Treasury of the United States; it was all purchased for monetary purposes. If it were not purchased for monetary purposes it would not be purchased by the Treasury of the United States.

The CHAIRMAN. Is there not some foreign silver?

Senator MCCARRAN. Yes; foreign silver is in that also. Certainly there is some foreign silver in that, but it is all purchased for monetary purposes, because we set up the Silver Purchase Act and other

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.

Was 47,000 tons all

What was the remaining silver in the Treasury? 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. Well, it is 30,000 ounces to the ton.

The CHAIRMAN. Is it about 1,530,000,000?

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 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.