GOLD RESERVE ACT OF 1934 FRIDAY, JANUARY 19, 1934 HOUSE OF REPRESENTATIVES, COMMITTEE ON COINAGE, WEIGHTS, AND MEASURES, Washington, D.C. The committee met at 2:15 p.m., Hon. William L. Fiesinger presiding. Mr. FIESINGER. Gentlemen of the committee, we have with us this afternoon the distinguished junior Senator from Texas, Mr. Connally, who will expound this measure. STATEMENT OF HON. TOM CONNALLY, A UNITED STATES SENATOR FROM THE STATE OF TEXAS Senator CONNALLY. Mr. Chairman, I want to apologize to the committee for being late. I had a hearing before the Secretary of Agriculture, and just got out of it a few moments ago; and my material for this presentation is in my office. I want to apologize for appearing before the committee without more accurate and detailed preparation. First, I am strongly in favor of the President's program in connection with gold, as outlined in the proposed legislation. As early as January 24, 1933, I believe it was, having given a great deal of study to the demand for inflation, and to the fact that commodity values-lands, houses, agricultural products, manufactured products, and everything else had declined in value so radically compared to the gold dollar, I came to the conclusion that the only sound and safe process of inflation was to cut the gold content of the dollar. I made a speech in the Senate on January 24, 1933, while Mr. Hoover was still President, proposing that such be done. At that time I suggested a 65-cent dollar. It was such a radical move at that time, in the view of many, that I dared to be rather conservative in the amount of cut proposed. Again, on January 25, 1933, and on April 18, 1933, I made other speeches in the Senate along the same line; and when the inflation. amendment came along later in April I made an extended argument about the constitutional powers of the Government to cut the gold content of the dollar. In essence, the President's plan is entirely satisfactory to me. I do not think there is any question on earth but what, under the powers given to the Congress in the Constitution to coin money and regulate the value thereof-I do not say fix the value-the Congress may whenever it sees fit change the gold content of the dollar. The Constitution says that the Congress shall have power to coin money and regulate the value thereof; and if regulate means anything it means the power to change the standard of money; to change the gold content of the dollar whenever the Congress may see fit so to do. This is like any other great power confided to the Congress. The people simply have to trust to the Congress to do the fair, the just, the wise thing. For instance, the Congress has power to make war; and it may make an unjustifiable war or a terrible war; yet that is one of the things with which we have to take chances. Therefore when the Constitution gives to the Congress the power to regulate the value of money the Congress has that power subject to its own. discretion. There can be no doubt of that. Undisputably the Congress had the power to change the amount of gold in a dollar whenever the Congress may see fit to do so. If we do that, it would be unconscionable to allow the Federal Reserve System to get the profits on all gold in its vaults, because gold is charged with a public interest, it being a medium of money; and the Government, having control of monetary gold and money, it certainly has a right to demand of the Federal Reserve banks that they turn that gold over to the Government, not without compensation, but on the fair basis of dollar for dollar. In other words the Federal Reserve banks would get just as many dollars for their gold as they paid in dollars for it, or as they credited their depositors for it. If they have, say, 3 billions of gold in their vaults and turn it over to the Government, they will receive for it $3,000,000,000 in new money. Mr. COCHRAN. May I interrupt the gentleman? Mr. COCHRAN. Referring to the matter of gold in the Federal Reserve banks, that gold came from the member banks, did it not? Senator CONNALLY. Yes; part of it did. Mr. COCHRAN. And they obtained it from the people? Senator CONNALLY. Yes. Mr. COCHRAN. Therefore in the end if the provision were made that Federal Reserve banks should reap the benefit of profits due to inflation, would it not be just and proper that this money be passed to the people who put it in the banks? And there is no way to find who put it into the banks. Senator CONNALLY. That is right. Of course, every dollar of money in the United States belongs to somebody. The money the Federal Reserve banks have in their vaults does not after all belong to the banks, it belongs to the fiduciaries whoever they are. local banks received the money from their depositors, naturally. The If it is lawful to make an individual come in and surrender his gold to the Treasury or to the Federal Reserve banks, and have that individual take $20 in paper money for $20 in gold, why is it not fair to do the same thing with the Federal Reserve banks; that is, make them turn over their gold for so many paper dollars? Of course, the constitutionality of making individuals turn over their gold has not been determined; but we have gone ahead and acted and required that the people of the United States turn their gold over to the local banks or the Federal Reserve banks or the Treasury. They have surrendered their gold. Obviously, gold in the vaults of the Federal Reserve banks is gold turned over by the people of the United States, because the people were afraid not to turn it over, fearing prosecution. Would it not be an outrage to take |