I replied: "That is so."

The President then said: "I will try to find some other place for him,

and I will then ask him to resign."

The President went to Long Branch for the summer and nothing was done.

I had very early discovered that Samuel Ward was exercising a good

deal of influence over the commissioner. It was his policy to secure

influence by giving dinners and entertainments, and, as far as

possible, he obtained the attendance of influential members of Congress

and of the chief officers in the executive departments. He once said:

"I do not introduce my measures at these entertainments, but I put

myself upon terms with persons who have power."

On a time I received a report on the subject of refunding a cotton

tax amounting to about $600,000. It bore two endorsements--one by the

solicitor "Examined and disallowed, Chesley," and one by the

commissioner "Allowed, Pleasanton."

I placed the report in my private drawer with the purpose of delaying

action until I should ascertain where the propelling force existed.

Having occasion to go to Massachusetts I was absent about two weeks.

Upon my return Mr. Ward came into my office and inquired whether I had

received the report. I replied that I had received it. "Had I acted

upon it?" I said that I had not. He then proceeded to say that the

claim was a good one,--that Mr. Delano had examined it, and had

concluded to pass it, but as he left the office rather suddenly he had

neglected to act upon it. Finally, he expressed the hope that I would

act without delay. I had already decided the case adversely upon the

ground that the allowance was unauthorized. Therefore I had only to

endorse the word "disallowed" with my signature and to return the

report to the commissioner. I learned that the commissioner was

engaged through the agency of Ward in making a contract with a

Connecticut firm that was in my opinion at once improvident and

irregular. This act led me to determine to end the difficulty at once.

I went to the Executive Mansion and asked General Babcock to go to

Long Branch and say to the President that the business of the Internal

Revenue Office was in such a condition that immediate action was

necessary. As a result the President returned that night and early

the next morning he sent for me. I stated the facts, and he said he

would send for General Pleasanton and ask him to resign. At the

interview Pleasanton asked for the reasons. The President said: "The

Secretary is not satisfied with your administration." Pleasanton

replied: "I think I can make everything satisfactory to the

Secretary." The President replied, naturally: "If you can, I am

content." Then for the first time Pleasanton came to my office

without a request from me. I invited him into my private room, and

when he had related his interview with the President, I said:

"General, if this were a personal matter we might come to an

understanding, but your administration of the office has been a

failure from the first and you must resign." This ended the interview.

He refused to resign and the President removed him. He appealed to

the Senate in a lengthy communication, but without effect. Pleasanton

may have been, and probably was, a good military officer, but he did

not possess the qualities that are essential in the discharge of

important civil trusts.

Neither from my experience in Congress nor in the Treasury Department

can I deduce much support for the doctrines of the class of politicians

called Civil Service Reformers. From their statements it would appear

that every member of Congress was the recipient of an amount of

patronage in the nature of clerkships that he could and did control.

I can say for myself that as a member I never asserted any such right

and as the head of the Treasury I can say that no such claim was ever

made upon me by any member of Congress. The nearest approach to it was

by George W. Julian. During one of his canvasses for re-nomination,

a clerk named Smith, and a correspondent of a journal in Mr. Julian's

district, had advocated the nomination of Mr. Wilson (Jeremiah). When

Mr. Julian secured the nomination, Smith gave him his support.

Nevertheless when Julian returned to Washington he demanded Smith's

removal. After hearing all the facts I declined to act. Julian was

very indignant, and afterwards from the Astor House, New York, wrote me

a violent, I think I might say unreasonable letter.

The public mind has been much misled by the statements in regard to

removals and appointments. The employees in a department are of two

sorts. There is a class who are trained men in the places that they

occupy. They have been in the service for a long period. They are

familiar with the laws relating to their duties, and to the decisions

of the courts thereon, and they are the possessors of the traditions

of the offices. They are as nearly indispensable as one man can be

to another, or to the safe management of business. The head of a

department cannot dispense with the services of such men. All thought

of political opinions disappears. The responsibility of a change in

such a case is very great. No prudent administrator of a public trust

will venture upon such experiments. There is another class of clerks

who are employed in copying, in making computations in simple

arithmetic, in writing letters under dictation, and in other ordinary

clerical work.

The public interest is not very large in the retention of such persons.

The ordinary graduates of the high schools of the country are competent

for all those duties. But the clerks of this class are not removed in

mass, and they never will be, under any administration. Even a fresh

man at the head of a department will soon find that the fancied

political advantages are no adequate compensation for the trouble that

he assumes and the risk of error and fraud that he runs when he takes

new and untried persons in the place of those who have been tested.

As late as 1870 about thirty per cent. of the employees of the

Treasury in 1860 were in office, and this notwithstanding that the

Treasury furnished recruits for both armies. During my time and for

years afterward, the post of Assistant Secretary was held by Mr.

Hartley, a Democrat from the days of Pierce and Buchanan. He was

experienced, diligent and entirely trustworthy.

Of the first class of employees it is to be said that there is no

occasion to embalm them in their offices, and if their pay is adequate

there is no ground for placing them upon the pension rolls. Their

duties are not as exacting as the duties and labors of men in

corresponding stations in private life. As to the second class, their

relations to the public are such that no public obligation arises

except to pay them the stipulated salaries.

It is essential to a proper administration that the Secretary or the

President should have the power of removal, and it should never be

coupled with the duty of making a statement of the cause. Not

infrequently a statement would be the occasion of scandal and of

suffering by innocent parties. The power may be abused as every

power may be, in the hands of dishonest or corrupt men. This is one

of the perils to the public, a peril from which no government can

escape. With us a change of rulers is a remedy for political wrongs

that do not belong to the catalogue of crimes. It may be said,

however, that this power of removal gives to a dishonest administrator

of a department the opportunity to secure the appointment of his

political friends in the place of political opponents removed, and this

whatever may be the method of appointment. The candidates may pass

the competitive examination, and they may enter upon their duties, but

their chief in thirty or sixty days may find them lacking in practical

aptitude, and so on, until those of the true faith shall be sent

forward by the examining board.

Honest administrators of official duties are embarrassed by the system

and dishonest ones evade it. The system may become the enemy of

honesty and the shield of hypocrisy. Only this is needed. When the

appointing power has designated a person for an office, let that person

be examined by an independent board with reference to character and

those qualifications which seem to be a fit preparation for the

practical duties of the place. Whenever the power of appointment and

removal is abused the public has a remedy in a change of

administration. And herein is one reason why the Presidential term

should not be extended. There may be many evils of administration

which are not so flagrant as to warrant proceedings for impeachment.

Such evils may be borne for brief periods, when if the term of the

President were extended to six or eight years the dissatisfied elements

of society might be tempted to engage in revolutionary movements. Nor

is there wisdom in limiting the Presidential office to a single term in

the same person. The thought that one has a future is a great stimulus

to careful and energetic action in the performance of public duties.

For a President there is no future except a re-election, which is in

fact an approval by the country of his administration. A wise man will

strive to so conduct affairs as to merit that approval. A House of

Representatives already condemned by a popular verdict is but a poor

guardian of the rights of the people; and a defeated administration

performs its duties in the most indifferent manner. After a defeat

appointments will be made and acts done that would not have been

hazarded pending an election. It is true, probably, of every

administration, not excepting that of General Washington, that the

second term was less acceptable to the country than the first. Mr.

Lincoln had no second term, and it is useless to speculate upon its

probable character, if he had lived to perform its duties.

It was my habit to be at the Treasury every morning at nine o'clock,

and I usually sent immediately for one or more heads of division or

chiefs of bureau for conference upon some matter connected with their

duties. By frequent interviews I acquired such knowledge of their

duties and of pending questions that I always had a reason for those

interviews. By this course I maintained relations of familiarity with

the officers who constituted the department for administrative

purposes, and I also established a system of punctuality in the matter

of attendance. When the head of a division is tardy, the clerks soon

venture to follow his example, and if he is prompt they are ashamed

to be dilatory unless they have an adequate excuse. The same relation

exists between the bureau officers and the head of a department.

One of my first acts in the nature of a financial policy was to

establish the Sinking Fund, agreeably to the act of February 25, 1862.

Seven years had passed since the passage of the law and four years

since the end of the war and yet nothing had been done to provide for

the redemption of the public debt agreeably to the promise that had

been made when the Government was a large borrower of money and when

its credit was depreciated, seriously, in all the markets of the

world. In my first annual report, December, 1869, I advised Congress

of my action and I recommended the application of the bonds that I had

then purchased, amounting to about fifty-four million dollars, to the

Sinking Fund, until the deficiency then existing had been met. The

step that I then took was taken in obedience to the law, and not

from any great faith in the wisdom of the Sinking Fund policy, nor was

it from any fear that the Government could not pay its debts whether

a Sinking Fund was or was not created.

The faith of the Government had been pledged to a particular policy and

I thought that the observance of that policy was both wise and just. A

government cannot afford to disregard the terms of its undertakings

even if a violation or neglect does not work harm to anyone. The

payments to the Sinking Fund were made regularly during General Grant's

administration, and the credit of the Government was thereby somewhat

strengthened. The chief element of strength was in the fact that the

payments were such as to astonish the heavily taxed and debt burdened

States of Europe. In my four years of service as the head of the

Treasury the payments on the debt reached the enormous sum of three

hundred and sixty-four million dollars. No one of my successors has

paid an equal amount, nor has an equal amount been paid in any other

equal period of time by the United States or by any other government.

At the time I entered the Treasury the price of gold was at about

forty per cent premium and when I left the Treasury it was at about

twelve per cent premium. In the summer of 1869 I entered upon the

policy of selling gold and buying bonds. The sales and purchases

were made by the Assistant Treasurer in New York, but the bids were

reported to me and by me accepted or rejected. A leading criticism was

this: It was claimed that the simple method was to buy bonds in gold

and thus to secure the bonds by one transaction.

This policy would have limited the number of purchasers of gold to

those who could command bonds. By the policy pursued the sales of gold

were open to anyone who had money. The gold was sold for currency, and

the bonds were purchased with currency. When the Treasury announced

its purpose to purchase bonds the price advanced in the market. The

President remarked to me jocularly that he had suffered by not knowing

what the department was about to do, inasmuch as he had sold bonds a

few days too early and at a price below their then present value.

During my service as Secretary of the Treasury I carried two

questions only to the Cabinet discussions--and I have forgotten one

of the questions, but it had some political significance. The other

arose in this manner: My method of negotiating the sale of new bonds

under the Funding Act of July, 1870, had been severely criticized.

The Government was compelled to give ninety days' notice of its

purpose to redeem five-twenty bonds, and as we could not with safety

make a call until we had the funds, and as our chief source was the

proceeds of new bonds we could not call until a sale was made. As a

consequence the Government was a loser of interest on all called bonds

for the period of ninety days. I arranged with the subscribers for

new bonds, that they should have the interest for the ninety days

upon a deposit of old bonds as security for the new ones subscribed

and taken. The Government lost nothing, and the subscribers were

benefitted greatly, and thus the subscriptions were increased.

During the campaign of 1872 I had an opportunity to negotiate a new

loan upon the same basis. Knowing that the proceeding would renew

criticism, I thought it proper to lay the case before the President

and Cabinet. Upon their advice the negotiations were suspended.

Governor Fish on more than one occasion complained that the Cabinet

were as ignorant of the proceedings and purposes of the Treasury as

was the outside world. His complaints were well founded. Much of the

business aside from routine matters was secret. For example my orders

for the sale of gold and the purchase of bonds were never issued at

any other time than Sunday evening, and then always by myself. The

orders were sent to the Sub-Treasurer at New York, and given to the

Associated Press at the same time. Consequently, on Monday morning

all the country was informed, and under such circumstances that the

chance of some to speculate upon the ignorance of others were reduced

to the minimum. Moreover, the members of the Cabinet might divide. I

should then be compelled to act upon my own judgment, and against the

views of some of my associates. Again, if I had the support of the

President and Cabinet, I could not have used the fact as an excuse for

myself. The public knew no one but the Secretary. I chose to act upon

my own judgment knowing that there was no one else to share the

responsibility in case of failure.

In my report to Congress, in December, 1869, I set forth a system for

refunding the Public Debt. I had unfolded the scheme in a speech in

the House of Representatives, July 1868. I had already taken two

steps preparatory to the undertaking. First, in May, 1869, I

established the Sinking Fund under the Act of February 25, 1862.

Second, by the purchase of bonds the world had assurance that the debt

would be paid. The effect of these two measures was seen in the

increasing market value of the bonds. In other words the credit of the

country was improving. When the President was preparing his message of

December, 1869, he called upon me for my views in regard to the

Treasury, and I furnished him with a synopsis of my plan which he

embodied in his message. I retained a copy of the synopsis and that

copy is in the hands of my daughter. Simultaneously I prepared a bill

upon the basis of the report and caused the same to be printed upon the

Treasury press. Upon an examination of the papers on file in the

archives of the Senate I find that cuttings from my printed bill form

a part of the bill which was printed by the Finance Committee of the

Senate of which Senator Sherman was chairman. The bill was changed in

details but not in principle. The loan was in three parts as my bill

was prepared. A portion at 5 per cent, a portion at 4˝ per cent,

and a third portion at 4 per cent. The division was retained in the

statute, but the amount of the loan at each of the several rates was

changed. By my bill the interest could be made payable in Europe.

This feature was stricken out by the committees in the House or the

Senate. This change I overcame or avoided ultimately by a rule of the

department by which interest on registered bonds could be made payable

in checks of the Treasurer. These checks are now sent to all parts of

the world and through the banking facilities they are everywhere as

good as gold, subject only to the natural rates of exchange between

different countries. Since that time railroad companies and other

business corporations have accepted the system. My plan of making the

interest on the bonds payable in Europe was rejected under the lead of

gentlemen who thought it involved some sort of national degradation.

My object was to make the loan more negotiable in Europe and thus to

extend the demand, and consequently, to increase the value of our

securities.

The records of the Treasury Department show that on the 23rd day of

December, 1869, I sent to General Schenck of the House, a draught of a

bill for refunding the Public Debt. The same records show that on the

19th of January, 1870, I sent to Senator Sherman eight copies of a

bill. These bills were framed in conformity to the plan marked out in

my report of December, 1869. Previous to the preparation of that

report I had not any conference with any member of Congress nor with

any other person in regard to the details of the scheme.

On the 12th of July, 1870, Mr. Sumner introduced a bill for refunding

the Pubic Debt (Sen. S. 80). As might have been expected it was not

a practical measure, and on the 3rd day of the following February Mr.

Sherman reported the bill of Mr. Sumner in a new draught. A single

copy of that bill is on file in the office of the secretary of the

Senate, and no other copy can be found.

This bill conforms to my report, and upon my recollection it is the

bill as prepared by me. The division of the loan conforms to my

recommendation in the report, and it provides that the interest may be

made payable abroad. Subsequently these provisions were changed.

General Schenck had then recently returned from Europe and he was of

the opinion that the loan could all be negotiated at four or four and

one half per cent and it was this opinion on his part which led to

delays. The bill was not passed till July, 1870, at the very moment

when the Franco-Prussian War opened. Had the bill been passed in

March, quite large negotiations could have been made in April of that

year. But the sale of the new five per cent bonds was an undertaking

of great difficulty. It is now impossible to realize that a six per

cent bond was not worth par in 1869-'70. At that time the leading

bankers of the world were unwilling to engage in the undertaking. The

Rothschilds and Barings stood aloof. The Amsterdam bankers wrote

letters of inquiry, but they did nothing more. Mr. Morton, of the firm

of Morton, Bliss & Co., New York, was inclined to engage in the

business, but his partner, Mr. Bliss was doubtful of the success of

the scheme, and they therefore stood aside when the first negotiations

were attempted. Finally an arrangement was made with Jay Cooke & Co.,

by which they advertised what was called a popular loan, asking for a

subscription to the five per cent bonds.

Subsequently I advised Congress to issue four per cent fifty year bonds

as a basis of the banking system, coupled with an offer to the existing

banks of a preference, but in case any bank should refuse to exchange

the bonds then held by such bank, its charter after one year should be

annulled and its banking privileges should be open to any other

association that would purchase the four per cent bonds. This

proposition aroused the hostility of the national banks and forthwith

the city was invaded by bank officers and agents who succeeded in

defeating the bill.

I had early foreseen that the Public Debt could be paid without much

delay, and without a system of oppressive taxation. In July, 1863, in

the introduction to my volume on the tax system of the country, I had

predicted that the revenues would be equal to the payment of interest

on a debt twice as large as the Public Debt then was, together with

large annual payments of principal. I predicted also that these

payments would menace the national banking system. My scheme looked

for the perpetuation of that system for fifty years at least. The

banks looked upon the scheme as a hostile project and they were

therefore led to defeat a measure which in fact was liberal in the

extreme. At that time the capital of all the national banks was

limited to three hundred million dollars. Thus did the banks defeat a

measure which was designed to secure their perpetuity and calculated

to promote their financial interests. They acted upon the idea that

the credit of the country could never be so far advanced that a four

per cent bond would be worth par.

The success of the five per cent loan of 1871, of which I give a full

account elsewhere, should have ended the contest in regard to the

credit of the United States. A five per cent bond had been sold at par

in the London market. The principal of the Public Debt was undergoing

a monthly reduction and the gain in the interest account was sufficient

to guarantee the payment of the principal in half a century. From that

time forward, the leading bankers of Europe and American were ready to

co-operate in placing the remaining five per cents, and then the four

and a half and four per cents.

From that time forward the credit of the Government has been improving

constantly. It was no longer difficult to borrow money at the rate of

five per cent, and with the adjustment of our controversy with Great

Britain there remained no reason to question the rapid progress of the

United States in wealth and population. Indeed, it was then entirely

feasible for the Government to have resumed specie payments, as any

demand upon the Treasury for gold could have been met with proceeds of

bonds sold in Europe. It was my opinion, however, that it would be

wiser to delay resumption until the balance of trade should be so much

in our favor that specie payments could be maintained by our own

resources. And this was accomplished in less than six years. It is

with a state as it is with an individual. With an established credit,

or with a credit improving constantly and an income in excess of

expenditures, there is no difficulty in meeting all liabilities as

they mature. Such was the condition of the Treasury when I left it in

March, 1873. In March, 1869, the Government was paying interest,

measured at the gold value of its securities at the rate of seven per

cent. In 1873 the rate was five per cent or less. In that time the

net Public Debt had been reduced in the sum of three hundred and sixty-

four million dollars, and the interest account had been reduced about

thirty million dollars.

When I was engaged in placing bonds in Europe, a discussion arose among

bankers in regard to the conflict of statements as to the amount of the

Public Debt. By the reports of the Treasurer, which were the basis of

the monthly statements, the debt was represented by the securities

actually issued after deducting those which had been redeemed. By the

report from the Registrar's Office which once each year corresponded

in time to the monthly report, the balance was widely different. These

facts impaired our standing financially. Upon the register's books the

Government was charged with every issue that passed out of his office,

and it was days, usually, and not infrequently it was weeks, before the

securities passed from the Treasury into the hands of creditors or

purchasers of securities. On the other hand the Treasurer would be

entitled to credit for redemptions made days or weeks before the

evidence of such payments would appear on the register's books. An

analogous fact exists in the discrepancy between a depositor's account

with his bank and the account at the bank as long as there are

outstanding checks. The books would not agree and yet each might be

accurate. As it was a necessity of the situation that the business

of the Treasury should proceed day by day without interruption and it

was difficult to explain the discrepancy to the many inquirers, I

ordered Mr. Allison, the register, to accept for his annual reports the

statement of the Treasurer, as his statements conformed to the existing

facts on the days when the statements were made. The register

protested that the order was not justified by the law, and that was

the truth although there was no law forbidding such an act. The

transaction, including my order, was brought before a committee of the

House of Representatives, but as far as I know, the question of the

legality of the proceedings, was not canvassed, or if attention was

directed to the subject the committee may have treated it as an act in

the public interest and from which no injury had arisen. Upon these

facts, Senator Henry G. Davis, of West Virginia, made the charge that

the books of the Treasury had been altered by my direction and that it

was possible that some great fraud had been perpetrated which might be

discovered if a committee were appointed to investigate the Treasury.

A committee was granted, of which Senator Davis was a member. The

investigation was a failure from his standpoint. Indeed, the

alteration of the books of the Treasury would required the collusive

co-operation of many persons, and evidence of the fact of the

alteration would, of necessity, become known to hundreds of clerks.

Mr. Davis and some other Democrats implicated me in an analogous matter

which they tried to understand but did not. The Loan Accounts of the

Treasury Department showed that the payments on the Public Debt

exceeded the receipts from loans in the enormous sum of one hundred and

sixteen million dollars. I appointed a committee of clerks to examine

the account in detail for the purpose of ascertaining whether the

discrepancy was real or only apparent. The fact of the discrepancy was

reported to Congress and the progress made in the investigation was

noted in the appendix to the Annual Reports. It is probable, however,

that these reports were never seen by Mr. Davis, and hence his

suspicion that an investigation into the accuracy of the Treasury

accounts would show an alteration of Treasury books, and of course, for

some improper purpose.

The error began in Mr. Hamilton's time, and in consequence of the

assumption of the State debts. Bonds were issued for those debts but

there were no receipts paid into the Treasury, and consequently the

debit side of the account was a blank. When the bonds were paid the

payment became a credit on the loan account. In after times bonds were

issued and sold below par. The account was charged with the receipts

and upon payment the loan account was credited with the full amount

paid. In some cases the discrepancy was augmented by the purchase of

bonds and the payment of a premium, as was done in the second term of

General Jackson. The investigation showed that the discrepancy was

only apparent, and the criticisms and complaints ceased.

During my administration of the Treasury Department, the government of

the Territory of Alaska was in my hands. The legislation of Congress

was brief and indefinite and the only officers were collectors of

customs, treasury agents and the revenue cutter officials. The

principal topics of thought were the exclusion of liquors and firearms

and the protection of the fur seal fishery. During the session of the

Forty-first Congress a bill was passed which required the Secretary to

lease the seal fishery to the best bidder, with a preference to the

company which was then engaged in the fishery. On the question of the

nature of the preference I took the opinion of the Attorney-General in

advance of the contract. At that time I was opposed to any system of

leasing and I so advised the House of Representatives in a report upon

the subject. Congress, however, adopted the system of leasing and upon

experience that system was shown to be more advantageous to the

country. The value of the fur seal fishery depends upon the market for

the dressed furs, and the value of the dressed furs depends upon the

fashions, and the fashions are manipulated by the producers of the

varied competing goods. The Government could never engage in the

business of promoting fashions and training the markets. Fur seal

skins have only a moderate commercial value when the fashion is not

with them.

The question of the claim on Behring Sea was not then much considered.

By the law of nations it is difficult to maintain the position that

that vast body of salt water can be treated as a closed sea, but there

are peculiarities which distinguish it from other bodies of water as

the Mediterranean Sea and the Gulf of Mexico, which are partially

enclosed.

Russia for a long time was the possessor of the adjacent mainland and

of the islands which mark the limits and in a degree enclose the sea.

That country claimed jurisdiction over the water. That claim was

known and its validity was not disputed seriously. By the treaty

Russia ceded about one half of the sea to the United States. Russia

and the United States are the countries directly interested. England

has no territorial rights and therefore she has no interest that is

not common to other nations. The United States and Russia are

interested in the seal fishery which can be preserved only by the

protection of the animals in Behring Sea. It may be claimed fairly

that Russia and the United State have property in these animals due to

the fact that they gather upon the territory of the countries at

certain seasons of the year. At other seasons they roam over the water

as other animals roam over the land. They are, at least, partially

domesticated. They are accustomed to the presence of the inhabitants

of the islands which they occupy as breeding grounds and which they

visit annually. Moreover, England has an interest in the preservation

of the fishery. The skins are dressed in London, and thus far no one

has been found, either in Europe or in the United States, who can

compete with the London workmen. For the purpose of protecting and

preserving the seal fishery, Behring Sea ought to be treated as a

closed sea. For general commercial purposes it may be used as other

parts of the ocean are used.

At a time, while I was Secretary of the Treasury, when I was detained

at my lodgings by a slight illness, I received a visit from William E.

Dodge a New York merchant and an importer of tin, whom I had known some

years before when I was a member of Congress. He said that he had

called to see me in regard to charges against his house preferred by

the revenue officers relating to the importation of tin. I said, what

was true, that I had not heard of the charges and that I had never

suspected his house of any wrong-doing in their business. His

statement in reply was a great surprise to me. He said that if there

was anything which appeared to be wrong, or that was in fact a

violation of law, the error or wrong was unintentional--that he and his

partners intended to act always in good faith. He then stated that

the claim amounted to more than two hundred thousand dollars, and he

proposed then and there to pay the amount claimed, coupled, however,

with the condition that the payment should be kept secret. I replied

that I could not take the money upon such terms and that secrecy was

impossible. Upon his statement there were three persons besides

ourselves who had knowledge of the existence of the charges and the

payment of money must come to the knowledge of the Treasury officials.

I then said:

"Mr. Dodge, you cannot afford to pay this money. If you are innocent

you should contest the matter in the courts, and if you convince the

judge, even if you are technically wrong, that there was no intent to

defraud the Government the Secretary can remit all the penalty, leaving

you to pay the duty." His counsel, if they were competent, must have

given him similar advice and yet he paid voluntarily, about two hundred

and seventy-six thousand dollars to the officials in New York, of

which he and his friends proceeded to complain. There was a suit, but

it was the duty of the firm to contest the claim of the Government,

if they had a defence. And if they had had a defence they were in no

danger even if they had violated the law ignorantly, for no Secretary

would have allowed honest men to suffer for an ignorant violation of

the revenue laws. Senator Edmunds placed upon the records of the

Senate a full statement of the case.

XXXIV

THE MINT BILL AND THE "CRIME OF 1873"

Of the many measures of my administration of the Treasury Department,

the Mint Bill of 1873 is the only one which has been made a party

issue, and which has entered permanently into the policy of the

country.

In the month of March, in the year 1869, I came to the head of the

Treasury Department. At an early day my attention was directed to

the disordered condition of the mint service, which was then, as it

ever had been, without a responsible head. The proceedings at the

mints were unsystematic, and I resolved upon an attempt to codify the

laws and to place the administration in the hands of a recognized,

responsible officer. President Grant appointed John Jay Knox

comptroller of the currency. For many years Mr. Knox had held the

office of deputy comptroller. He had been a careful, constant student,

and he was already a recognized authority in financial matters.

I appointed Mr. Knox commissioner to codify the mint laws and to

suggest alterations. He was assisted by Dr. Linderman, then an eminent

expert in the theory and practice of coinage, by Mr. Patterson,

superintendent of the mint at Philadelphia, and by others.

When the codification of the laws relating to the mint service had been

completed the statute, as passed, contained seventy-one sections,

including a number of new provisions. The political and personal

controversy of twenty years and more was directed to a single section,

which was in these words: "No coins, either of gold, silver, or minor

coinage, shall hereafter be issued from the mints other than those of

the denominations, standards and weights herein set forth." The

coinage of the silver dollar piece was discontinued in the bill as

prepared by the commissioners and the purpose to discontinue its

coinage was thus announced in the report that was made to Congress:

"The coinage of the silver dollar piece, the history of which is here

given, is discontinued in the proposed bill. . . . The present gold

dollar piece is made the dollar unit in the proposed bill, and the

silver piece is discontinued."

In 1873 I had come to believe that it was wise for every nation to

recognize, establish, and maintain the gold standard. I was of the

opinion then, as I am of the opinion now, that nations cannot escape

from the gold standard in all inter-state transactions. The value of

every article is resolved finally by the ascertainment of its value

in gold. Silver or paper may be used for domestic purposes, but the

value of that silver or paper is determined by its value in gold.

In America, as in England, all the attempts to fix a ratio between

gold and silver coins and to maintain that ratio in business had

failed, and hence it was that I determined to abandon the idea of a

double standard, reserving in mind, however, the possibility that an

agreement by commercial countries might overcome the difficulty. That

possibility has now disappeared. The history of the United States is

an instructive history. The coin ratio between gold and silver was

fixed in Mr. Hamilton's time and with the concurrence of Mr. Jefferson.

In 1870 silver was at a premium upon the legal ratio between gold and

silver coins, and such had been the fact from the year 1837, and

probably from the year 1792. Indeed, there has never been a day,

from the organization of the government, when the actual standard was

silver. Until the act of 1878 was passed, silver coins had had no

appreciable influence upon the volume of currency or the business of

the country. The total coinage of silver dollars had been 8,000,000

pieces only. The coinage was suspended in 1805 or 1806, and the silver

dollars had been exported or they had disappeared in melting pots.

Such was the commercial demand for American silver coins that in 1853

Congress authorized the debasement of the subsidiary silver coins as

the only means of securing their circulation.

It is quite doubtful whether in the year 1860 there was a person living

who had seen an American silver dollar doing duty in the channels of

trade. From 1806 to 1873 the business standard of the country was the

gold standard. Silver had been recognized in the Coinage Act, but

practically it had not played any part in the financial policy or

fortunes of the country.

The choice of gold as the standard was not due to hostility to silver

or to the silver mining interests, but to the well grounded opinion

that gold was a universal currency, while in some countries, as in

England and Germany, silver coins were not a debt-paying currency.

These--within the limits of a statement--are the reasons for the

demonetization of the silver dollar and the adoption of the single gold

standard. The measure was in accord with my policy, and it was in

accord with the unbiased judgment of the commission.

It is a singular instance in legislative proceedings that a measure

that had no active support and that was free from opposition at its

enactment should be assailed vigorously after the lapse of years and

through a long period of time. The measure was soon followed by the

depreciation of silver and coincident with that change came the

attacks upon the Mint Bill, and the denunciation of the "Crime of 1873."

The charges were two:

First: The authors of the change had been corrupted by English gold

through one Ernest Seyd, a writer on economic topics. It was alleged

that Seyd came to this country at the time when the measure was under

consideration. Seyd was not living when the charges were made, but the

fact of a visit to this country was denied by his son. Hon. Samuel

Hooper was chairman of the Committee on Coinage. In the search for

information Mr. Hooper invited Mr. Seyd to give him his opinion. Seyd

was a writer, a man of good reputation, and a bimetallist. In a letter

to Mr. Hooper, which is still in existence, and which is printed in the

_Congressional Record,_ Seyd condemned the demonetization of the silver

dollar. His letter was dated at London, February 17, 1872.

The second charge was secrecy. The answer to this charge was to be

found in historical facts.

The evidence is this: Mr. Knox's report contained two specific

statements that it was a purpose of the bill to prohibit the coinage

of the silver dollar; the report of the Secretary of the Treasury for

the year 1872 made a specific recommendation to that effect; the bill

was printed six times; it was considered in each House during the

Forty-first and Forty-second Congresses; the precise question in

controversy was the subject of discussion, and two years and ten months

were given to the consideration of the bill.

The bill was discussed in the House of Representatives. Mr. Reed has

stated that the report of the debate covers one hundred and ninety-six

columns of the _Congressional Record_. Senator Jones, in his report

of 1876, as chairman of the Silver Commission, refers to the debate in

these words: "In the brief discussion on the bill in the House of

Representatives, the principal reason assigned in favor of those

sections which interdicted the future coinage of the silver dollar was

that its value was three per cent greater than the value of the gold

dollar." Thus Senator Jones admits that the debate in the House of

Representatives was upon the question of the abolition of the silver

dollar, and he recognizes his knowledge of the fact of the debate.

Finally the bill passed the Senate without one dissenting vote.

The downfall of silver has not been due to any legislation in America

or Europe, nor to any decrees or despotic policy in Asia, but to the

inventive faculties of one Charles Burleigh, of Fitchburg,

Massachusetts, the inventor of the power drill.

If through him many silver mines have been rendered valueless, so it

is to him that the world is indebted for a new application of force by

which mountains are penetrated and mining in all its forms is carried

on at one fourth part of the former cost. Every step in civilization,

every advance movement that we call progress, is a peril to many and a

ruin to some. By one stroke of genius, and limiting our thoughts to

one only of its many consequences we may say that Burleigh has made

gold so abundant and cheap that all substitutes for a currency from

wampum to silver must soon disappear.

There is historical evidence tending to show that the representatives

of the silver mining interest had sufficient and worthy reasons for

assenting to the suspension of the silver dollar. In 1872 silver was

at a slight premium as compared with gold. Therefore the privilege of

coinage of the dollar was of no advantage to the owners of bullion.

The Mint Bill had a new and attractive feature. It provided for the

coinage of a dollar that was to contain 420 grains of standard silver,

and was to be known as the trade dollar.

This passage may be found in my report to Congress for the year 1872:

"Therefore, in renewing the recommendations heretofore made for the

passage of the Mint Bill, I suggest such alterations as will prohibit

the coinage of silver for circulation in this country, but that

authority be given for the coinage of a silver dollar that shall be as

valuable as the Mexican dollar and to be furnished at its actual cost."

The dollar was coined and it was known as the Trade Dollar. It

contained 420 grains of standard silver.

The Mexican dollar which contained about 416 grains, was then sold at

a premium, and it was used extensively in the China and India trade.

It was my expectation and the expectation of all concerned, that the

trade dollar, from its added value, would take the place of the Mexican

dollar in the immense trade of the East. My own confidence was great.

Indeed, the thought of failure never occurred to me. Unfortunately,

the stolidity of the Chinese and the force of habit among that people

were not considered by us. From long use they had become accustomed

to the Mexican dollar. They refused our trade dollar, notwithstanding

its greater weight.

We coined and put into circulation, at home and abroad, about

36,000,000 pieces, many of which were afterwards recoined as legal

tender dollars under a special act of Congress.

With the failure of that undertaking came the crusade against the act

of 1873. Whether the two events sustained to each other the relation

of cause and effect, I cannot say.

The suggestion that Senator Stewart of Nevada was assenting to the

demonetization of the silver dollar derives support from the fact that,

in the month of February, 1874, he indorsed the gold standard in two

speeches, delivered, respectively, on the 11th and 20th days of that

month. On the 11th he said: "I want the standard gold, and no paper

money not redeemable in gold." On the 20th he added: "Gold is the

universal standard of the world. Everybody knows what a dollar in gold

is worth."

It is certain that in the month of February, 1874, when the contents

of the Mint Bill were in the public statutes, the demonetization of the

silver dollar, and the recognition of the gold dollar as the unit of

value, had not affected the judgment nor disturbed the sensibilities of

the advocates of silver.

I dismiss this branch of the subject with the observation that the act

of 1873 placed the United States in a commanding position in regard to

the use of silver. If that metal had continued to maintain its

supremacy upon the ratio then established between gold and silver coin,

there could have arisen no demand for the coinage of silver. If, on

the other hand, silver should depreciate, the government might, at

its pleasure, use, or it might decline to use, that metal as coin.

I now pass to a part of the history of the controversy not heretofore

considered in public discussions, from which it will appear that the

trusted representatives of the silver interest put aside the most

inviting opportunity, if not the only opportunity, for the adoption of

the bimetallic system by the commercial nations of the world.

The act of 1873 prepared the way for the use of silver by the

commercial nations of the world, upon an agreed ratio with gold, if

indeed, the possibility of such an arrangement ever existed. We were

upon a gold basis; the balance of trade, by groups of years, was in our

favor; we had a gold revenue from customs of about $200,000,000, and

the excess of Treasury receipts over expenditures was nearly

$100,000,000 a year.

If we had chosen to accumulate gold and postpone payments upon the

Public Debt, we could have brought the nations of the earth to our feet.

It was under circumstances thus favorable for negotiations for the use

of silver that the Silver Commission of 1876 was constituted, and

authorized, among other things, to inquire "into the policy of the

restoration of the double standard in this country, and if restored,

what the legal relation between the two coins of silver and gold,

should be."

This authority opened a way for the introduction of a policy on the

part of the United States looking to an arrangement for the use of

silver by the states of Europe, and on that authority the commission

dealt with the project of an international bimetallic system.

The commission consisted of eight persons. Senator Jones was the

chairman, and Mr. Bland, of Missouri, was an influential member. It

was my fortune to be of the commission and it was my fortune also to

be alone in opinion upon the main questions that were treated in the

reports.

The majority of the commission consisted of Messrs. Jones, Bogy,

Willard, Bland and Groesbeck. They favored the remonetization of the

silver dollar, and that without delay.

Of the points made in their report, I mention these. They said: "The

supply of gold is diminishing, being now but little more than one half

what it was in 1852, and is always so fitful and irregular from the

method of its production that it is ill-suited to be a sole measure of

value."

This statement as a statement of an existing fact was wide of the

truth, and as a prophecy it was as fallacious as are the prophecies

which predict the destruction of the world. From 1851 to 1855 the

annual gold product of the world was 6,410,324 ounces. From 1876 to

1880 the annual gold product of the world was 5,543,110 ounces. The

gold product of the latter period was eighty-six per cent of the gold

product of the former period.

Far wide of the truth were the predictions of the majority in regard

to the future product of gold. For the year 1894 the product was

8,737,788 ounces, or about thirty-seven per cent over the product of

1851-'55.

They, the majority, said: "No increase in the yield of silver in the

immediate future seems upon the whole to be probable." The commission

said further: "The exchanges of the world, and especially of this

country, are continually and largely increasing; while the supplies of

both the precious metals, taken together, if not diminishing, are at

least stationary, and the supply of gold, taken by itself, is falling

off."

Each of these two statements in regard to the precious metals was a

serious error, and in their controlling influence upon the judgment of

the commission they were fatal errors.

The gold product of the world in 1876 was 5,016,488 ounces. In 1894

the product had risen to 8,737,788 ounces, a gain of more than

seventy-four per cent in the short period of eighteen years.

In 1876 the product of silver was 67,753,125 ounces, and in 1894 it

was 167,752,561 ounces, a gain of about 147 per cent in eighteen years.

Upon these errors the majority of the commission based a policy by

which the only opportunity that the country ever had for the

establishment of a bimetallic system which should include the

commercial nations of Europe, was put aside and forever lost.

If, in 1876, I had anticipated the immense increase in the product of

silver, I might have hesitated, but in the view that I was then able

to command I had great confidence that a bimetallic arrangement might

be secured.

The majority of the commission favored bimetallism but they demanded,

first, the remonetization of the silver dollar. On the other hand,

I claimed that all thought of the further use of silver should be

postponed until the attempt to secure the co-operation of other

countries had been tried faithfully.

The policy of the majority of the commission prevailed, and it was

consummated by the Statute of 1878, which was passed over the veto of

President Hayes, and which authorized the coinage of the silver dollar.

When we had accepted silver, when we had abandoned the vantage ground

that we had occupied, it was in vain that we solicited the co-operation

of England, France and Germany. The adoption by the United States of

a silver-using policy led the statesmen of those countries to

anticipate the more extended and continuous use of silver leaving to

them a monopoly of gold, while we should sink financially to the level

of the degraded states of the world. That catastrophe we have escaped

after an experience of twenty-five years, and then only by the

combined efforts of the two great political parties.

I submit brief extracts from the report of the majority of the

commission and from my individual report of 1876, that our relative

positions may be understood.

The commission said: "We believe that the remonetization of silver in

this country will have a powerful influence in preventing, and probably

will prevent, the demonetization of silver in France and in other

European countries in which the double standard is still legally and

theoretically maintained."

Again the majority said: "It may be added that a legislative

remonetization on the relation to gold of 15.5 to 1 accomplishes

without delay all the objects of the proposition for an international

conference, which is urged from various quarters."

That I may place myself where I stood in 1876 I present brief extracts

from my report of that year.

First I said: "There can be but one standard of value in any country

at the same time, and a successful use of gold and silver

simultaneously can be effected only by their consolidation upon an

agreed ratio of value, and by the concurrence of the commercial nations

of the world.

"The undersigned is also of opinion that it is expedient for this

Government to extend an invitation to the commercial nations of the

world to join in convention for the purpose of considering whether it

is wise to provide by treaties and concurrent legislation for the use

of both silver and gold in all such nations upon a fixed relative

valuation of the two metals; and, finally, that until such an

agreement between this Government and other commercial nations can be

effected, the United States should pursue the existing policy in regard

to the resumption of specie payments."

Further I said: "It is to be apprehended that the remonetization of

silver by the United States at the present time would be followed by

such a depreciation in its value as to furnish a reason against the

adoption of the plan by the rest of the world, and that an independent

movement on our part would increase the difficulties rather than

diminish them."

These extracts shall suffice. I now repeat the assertion with which I

introduced this topic, viz.: That in 1876 the majority of the Silver

Commission put aside the most favorable opportunity, indeed the only

opportunity, that the country has ever had for the organization of a

universal system of bimetallism.

Of that majority, Senator Jones of Nevada, and Representative Bland, of

Missouri, were the leading members. If in defence or in extenuation

of the policy of the majority it shall be said that the United States

has not remonetized silver, and that, therefore, the policy of the

majority has not been tested, a partial rejoinder, if not, indeed, a

satisfactory reply, may be deduced from the facts that between the

years 1878 and the year 1893 the Government coined more than

400,000,000 silver dollars, and yet, in that period of time, silver

bullion fell from 1.15 plus per ounce to .65 plus per ounce.

It is worthy of notice that the product of silver in the United States

has increased with the demand for silver. Upon the passage of the

Sherman Bill the product advanced from 45,000,000 ounces in 1888 to an

average of 55,000,000 ounces from 1889 to 1893, inclusive. Upon the

repeal of that act the product fell to 49,000,000 ounces in 1894.

It is not only probable, it is certain, that with every increasing

demand for silver there will be an added supply. Consider what has

happened since the appearance of the inventions of which I have spoken.

The world's annual product of silver from 1493 to 1865, inclusive, was

16,887,157 ounces. The largest annual product was from 1861 to 1865,

when it reached 35,401,972 ounces. From 1866 to 1894 inclusive, the

annual average product was 114,326,397 ounces. In 1894 the product was

167,752,561 ounces, which, as will be observed, was about nine times

the annual product from 1493 to 1865.

From 1876 to 1894 the business of silver mining was increased 147 per

cent. Can any one name any other business or pursuit in which there

was a like increase? And is not the inference justified that the

profits have been large and tempting, notwithstanding the

demonetization of silver in some countries and the suspension of

coinage in other countries?

I turn now to the future, and first as to the possibility of the

further use of silver as currency.

I assume that in countries where the standard is gold there may be a

considerable use of silver, as in the United States to-day.

An international bimetallic system, binding nations to each other for

a definite term of years, is a proposition involving large

responsibilities.

If in 1885 it was not practicable to secure the adoption of the

bimetallic system, when silver was worth eighty-four cents per ounce,

what is the prospect of its adoption when silver is worth only sixty-

four cents per ounce, with an annually increasing product and a

diminishing price?

What remains? This, possibly: That the nations may agree to purchase

each a per cent of a fixed amount of silver as the product of each

year. This scheme might prove, and probably it would prove, to be only

a temporary expedient.

The enormous increase in the business of silver mining is evidence that

the profits are far in excess of the profits that are gained in other

pursuits. The increase in product is likely to be followed by a fall

in price. Such are the resources of the earth that an increase in the

demand for silver will be followed by an increase in the supply.

Gold mining is obedient to the same law. From 1876 to 1894 the product

increased 74 per cent. That ratio of increase is likely to continue.

The world is not in peril of a gold famine. Gold as a currency,

passing from hand to hand, will be used less and less. Substitutes,

for which gold can be obtained, will be preferred. The volume of

currency in a country is not limited by the amount of gold that a

country may possess. It may increase the amount of subsidiary coin

very largely, and it may add to the sum of paper money, provided that

that paper money is always redeemable in gold.

Nor does the quantity of gold in a country determine the price of

commodities, except as that gold is a part of the total volume of the

currency of the country. The volume of currency as a whole is the

force by which the salable value of commodities is affected.

In truth, gold plays a small part only in actual business. It is a

regulator of business rather than an active instrument for the

transaction of business. It is not an exaggeration to say that the

use of gold in business is limited to a small fraction of one per cent

of the aggregate transactions in countries where gold is the standard.

It is not improbable that in the near future the world is to meet a

surfeit of gold, as it is now meeting a surfeit of silver. Yet even

then its capacity as a standard will not be affected. History does

not carry us to a time when gold was not the recognized standard for

the measurement of every other kind of property, and that not by one

tribe or people only, but by mankind in every clime and in every stage

of savageness or of civilization.

As the Mint Bill and the demonetization of silver have occupied the

attention of the country for a third of a century, and as there may be

a revival of the controversy at a time in the future I have thought it

wise for me to make a record of the facts in the most enduring form at

my command.

At the end this is my claim for the Mint Bill of 1873: It established

the gold standard for the United States for all time. All the

subsequent legislation has rested upon the fact that the Statute of

1873 made the gold dollar the standard of value in the United States.

XXXV

BLACK FRIDAY--SEPTEMBER 24, 1869

So much time has passed since September 24, 1869, that there may be a

large public who may become interested in a review of the events of the

spring and summer of that year which culminated in Wall Street, New

York, in the transactions and experiences of the day known as "Black

Friday."

When the Forty-first Congress assembled in December of that year, the

House of Representatives directed the Committee on Banking and

Currency "to investigate the causes that led to the unusual and

extraordinary fluctuations of gold in the city of New York, from the

21st to the 27th of September, 1869." The committee made a report

which was printed under date of March 1, 1870, and which may be found

in a volume entitled "Garfield's Report on the Gold Panic

Investigation." From that report it appears that certain persons in

the city of New York entered into an arrangement, or understanding, or

combination, as early as the month of April, 1869, for the purpose of

forcing the price of gold artificially to a rate far beyond what might

be called the natural price. The committee, of which General Garfield

was chairman, characterized the combination as a conspiracy.

Technically and in a legal point of view the parties concerned could

not be treated properly as conspirators. It does not appear that they

contemplated the violation of any law, but only a policy by which gold

might be advanced from time to time, and out of which advance large

sums of money might be realized by those who were holders of gold.

Upon that theory Jay Gould and James Fisk, Jr., who were the leaders

and organizers of the combination, with their associates, made large

purchases of gold at prices varying from thirty to thirty-five per

cent premium. At the close of the month of April, the price of gold,

not then, as far as known, under the influence of any speculative

movement, was at a premium of about thirty-four per cent. The

indications were that, during the months of May and June, the parties

interested in the combination made large purchases. By the 20th of

May the price had reached a premium of forty-four per cent. From

that time onward, until the last of July, the premium diminished, and

at that date the rate was thirty-six per cent.

When I entered the Treasury Department in March, there had not been

sales of gold nor purchases of bonds by the Treasury Department as a

policy, and but few transactions on either side had been made by my

predecessors in office. As early as the 12th day of May I commenced

the purchase of bonds for the sinking fund and for the reduction of the

interest-bearing public debt. The total purchases during the year

1869 amounted to something more than $88,000,000, for which there was

paid in currency $102,000,000 and a margin over. At that time, the

customs receipts were in gold exclusively, and the purchase of bonds

could only be made by a sale of gold or by a direct purchase of bonds

to be paid for in gold. Suggestions were made by bankers and others

in the city of New York, and perhaps elsewhere, that the purchase of

bonds should be made in gold. This suggestion was not acceptable to

me, and upon the ground that the sale of gold would be limited to those

who had bonds, or who could procure bonds, for the payment of gold.

From the 29th of April, when the first sale of gold was made, until the

31st day of December, the sales amounted to something more than

$53,000,000, and the proceeds to something over $70,000,000. The

difference in the amount realized from the sale of gold and the amount

paid for bonds purchased was met by the excess of receipts over the

expenditures of the Government during that period.

As having some connection, and perhaps an important connection, with

what is to be said hereafter touching General Grant's action in the

days of September, when the speculation was going on, I think it proper

to make a statement of my relations to the President. I had declined

the office of Secretary of the Treasury, and on the morning of my

nomination to the Senate I wrote a letter to Mr. Washburne, through

whom the invitation of the President that I should accept the office

was made, requesting him and urging him to say to the President that

I was unwilling to accept the place. My nomination was sent to the

Senate and confirmed, and as there seemed to be no alternative for me,

I entered upon the duties of the office. Due in part to these

circumstances, as I think, the President accepted the idea that the

management of the Treasury Department was in my hands, and from first

to last, during the four years that I was in his Cabinet, his acts and

his conversation proceeded upon that idea. Moreover, he was influenced

by a military view that an officer who was charged with the conduct of

a business, or of a undertaking, should be left free to act, that he

should be made responsible, and that, in case of failure, the

consequences should rest upon him. It happened, and as a plan on my

part, that neither the President nor the Cabinet was made responsible

for what was done in the Treasury Department. Hence it was that I

presented to the Cabinet but two questions. One of these was of no

considerable consequence. The other related to the political effect

that might follow a loan that I contemplated making upon certain terms

in the year 1872, when the Presidential contest was pending. In the

line of these views, it happened that I announced my purpose to

purchase bonds in May, 1869, without conference either with the

Cabinet or with the President. When the announcement was made, there

was a slight advance in bonds. In order that the business interests

of the country might not be influenced by an apprehension that changes

might take place in the policy of the Department, I announced (as

stated in Chapter XXXIII) at the beginning of each month the sales of

gold and the purchases of bonds that were to be made during the coming

month. Those announcements were sent out on the evening of Sunday,

either the last Sunday of the closing month or the first Sunday of the

opening month. The despatches were written by myself Sunday evening,

and sent to the Assistant Treasurer at New York. A copy was given to

the agent of the Associated Press, that the public might be informed

in the morning of the policy for the ensuing month, and that there

should be no opportunity for speculation by persons who might obtain

information in advance of the general public. Unhappily, this policy

was made the basis of the proceedings in New York which culminated in

"Black Friday." The parties interested--I do not call them

conspirators--assumed that for thirty days the policy of the department

as to the sale of gold and the purchase of bonds would remain

unchanged, and on that basis they proceeded to make arrangements for

the advance in gold. Not satisfied with that policy, which was

designed to save the business community from unnecessary apprehensions,

an attempt was made to induce me to make an announcement for two or

three months. Such suggestions were made in letters that I received

from interested parties in the city of New York.

Speculation in gold was not all on one side. There were speculators

who were anxious to break down the price of gold, and between the lines

I could read the condition of the respective parties from whom I

received letters. Under date of September 23, I received a letter

from a prominent house in New York in which the writer said: "I am

actuated to again portray to you the state of financial affairs as they

now exist in this city. The speculative advance in gold has brought

legitimate business almost to a standstill, owing to the apprehension

of a corner, which from appearances may appear at any moment."

It did not follow that the writer of the letter was "short on gold," as

the phrase is. I had, however, in my possession at the time a list of

persons in New York who were supposed to be contestants, some for an

advance in gold and others for a fall. The writer of the letter was

among those whose names had been given to me as speculators for a fall

in gold. In this connection I may say that it was no part of my policy

to regulate affairs in Wall Street or State Street or Lombard Street.

Until it became apparent that the operations in New York affected

largely and seriously the business interests of the country, and until

it became apparent that the Treasury receipts were diminished by the

panic that had taken possession of the public, I refrained from any

interference with those who were engaged either in forcing up or

forcing down the price of gold.

Under date of the 24th day of September, I received a letter from my

special and trusted correspondent in the city of New York in which I

find this statement: "This has been the most dreadful day I have ever

seen in this city. While gold was jumping from forty-three to sixty-

one the excitement was painful. Old, conservative merchants looked

aghast, nobody was in their offices, and the agony depicted on the

faces of men who crowded the streets made one feel as if Gettysburg

had been lost and that the rebels were marching down Broadway. Friends

of the Administration openly stated that the President or yourself must

have given these men to feel that you would not interfere with them or

they would never dare to rush gold up so rapidly. In truth, many

parties of real responsibility and friends of the Government openly

declared that somebody in Washington must be in this combination."

The last sentence in this quotation unfolds the policy which had guided

Gould and Fisk and their associates from April to the culmination of

their undertaking, the 24th day of September. As far as I know, the

effort had been directed chiefly to the support of a false theory that

the President was opposed to the sale of gold, especially during the

autumn months, when a large amount of currency is required, or in those

days was supposed to be required, for "the moving," as it was called,

of the produce of the West to the sea coast for shipment to Europe.

They even went so far as to allege that the President had ordered the

Secretary of the Treasury to suspend the sale of gold during the

month of September, for which there was no foundation whatever.

Indeed, up to the 22d of September, when I introduced the subject of

the price of gold to the President, he had neither said nor done

anything, except to write a letter from New York City under date of

September 12, 1869, in the following words:

NEW YORK CITY, _September_ 12, 1869.

DEAR SIR: I leave here for western Pennsylvania to-morrow morning and

will not reach Washington before the middle or last of next week. Had

I known before making my arrangements for starting that you would be in

this city early this week, I would have remained to meet you. I am

satisfied that on your arrival you will be met by the bulls and bears

of Wall Street, and probably by merchants, too, to induce you to sell

gold, or pay the November interest in advance, on the one side, and to

hold fast on the other. The fact is, a desperate struggle is now

taking place, and each party wants the Government to help him out. I

write this letter to advise you of what I think you may expect, to put

you on your guard.

I think, from the lights before me, I would move on without change

until the present struggle is over. If you want to write me this week,

my address will be Washington, Pennsylvania. I would like to hear

your experience with the factions, at all events, if they give you time

to write. No doubt you will have a better chance to judge than I,

for I have avoided general discussion on the subject.

Yours truly,

U. S. GRANT.

Hon. GEORGE S. BOUTWELL,

_Secretary of Treasury_.

At a meeting, which was accidental, as far as the President was

concerned, on board one of Fisk and Gould's Fall River steamers, when

he was on his way to Boston, in June of that year, to attend the Peace

Jubilee, an attempt was made to commit General Grant to the policy of

holding gold. I was present on the trip with the President. What

happened on the boat may be best given in the language of Mr. Fisk and

Mr. Gould. Mr. Fisk, in his testimony before the committee, said:

"On our passage over to Boston with General Grant, we endeavored to

ascertain what his position in regard to the finances was. We went

down to supper about nine o'clock, intending while we were there to

have this thing pretty thoroughly talked up, and, if possible, to

relieve him from any idea of putting the price of gold down."

Mr. Gould's account before the committee was as follows:

"At this supper the question came up about the state of the country,

the crops, prospects ahead, etc. The President was a listener; the

other gentlemen were discussing. Some were in favor of Boutwell's

selling gold, and some were opposed to it. After they had all

interchanged their views, some one asked the President what his view

was. He remarked that he thought there was a certain amount of

fictitiousness about the prosperity of the country, and that the

bubble might as well be tapped in one way as another. . . . We

supposed from that conversation that the President was a

contractionist. His remark struck across us like a wet blanket."

The error of Fisk and Gould and their associates, from the beginning to

the end of the contest, was in the supposition that the President was

taking any part in the operations of the Treasury concerning the price

of gold. If he expressed any opinions outside in conversation, there

were no acts on his part in harmony with or in antagonism to the views

he entertained. As a matter of fact, with the exception of the letter

from the city of New York, he had no conference or correspondence with

me up to the 22d day of September, when I called upon him, and gave

him a statement of the price of gold in the city of New York, and of

the nature and character of the combination that existed there, as far

as it was understood by me. Their policy was directed to two points:

first, to influence the President, if possible, to interfere in a way

to advance the price of gold; and, second, to satisfy their adherents

and opponents that the President either had so interfered or would so

interfere.

Even Fisk and Gould may at a period of time have rested in the belief

that the President either had interfered or that he would interfere.

Their confidence was in Mr. A. R. Corbin, a brother-in-law of the

President, who, under the influence of various considerations, which

appear to have been personal and pecuniary to a very large extent, lent

himself to the task of influencing the President. As a matter of fact,

his attempts were very feeble and misdirected and of no consequence

whatever. Indeed, such is my opinion of the President, and such my

belief as to his opinion concerning Mr. Corbin, that nothing which Mr.

Corbin did say, or could have said, did have or could have had the

least influence upon the President's opinion or conduct. It is,

however, also true that Fisk and Gould employed Corbin and gave him

consideration in their undertakings out of which he realized some

money. I received information, also, which may not have been true,

that they suggested to him that he might become president of the Tenth

National Bank, which had a very conspicuous part in the events which

culminated in Black Friday.

An attempt to strengthen the impression that it was the purpose of the

President to prevent the sale of gold was made through an article

prepared by Mr. Corbin, probably under the direction of Mr. Gould and

others, which appeared finally, with some alterations and omissions, in

the New York _Times_ of the 25th of August. It appears to have been

the purpose of the parties interested to mislead the _Times_ as to the

authorship of the article, and they secured the agency of Mr. James

McHenry, a prominent English capitalist, who called at the _Times_

office, and presented the article to Mr. Bigelow, the editor, as the

opinion of a person in the intimate confidence of the President. The

article was put in type and double leaded. When so prepared,

suspicions were aroused, and the financial editor, Mr. Norvell, made

very important corrections, taking care to omit sentences and

paragraphs that contained explicit statements as to the purposes of the

President. Some of the phrases omitted were in these words: "It may

be that further purchases of bonds will be made directly with gold."

"As gold accumulates, the less would be the premium upon it. High

prices for gold before the sale of our products would cause lower

prices of gold after the sale of products."

Among the statements made which were preserved in the article as

printed finally were these: "The President evidently intends to pay

off the 5-20s as rapidly as he may in gold"; "So far as current

movements of the Treasury are concerned, until crops are moved it is

not likely Treasury gold will be sold for currency to be locked up."

Following the appearance of this article, I received a letter from Mr.

Gould, dated the 30th of August, in which this sentence appears: "If

the New York _Times_ correctly reflects your financial policy during

the next three or four months; namely, to unloose the currency balance

at the Treasury or keep it at the lowest possible figure, and also to

refrain during the same period from selling or putting gold on the

market, thus preventing a depression of the premium at a season of the

year when the bulk of our agricultural products have to be marketed,

then I think the country peculiarly fortunate in having a financial

head who can take a broad view of the situation, and who realizes the

importance of settling the large balance of debt against us by the

export of our agricultural and mining products instead of bonds and

gold."

Of my reply to that letter, the committee say: "The brief and formal

reply of the Secretary gave Gould no clew to the purpose of the

Government."

Under date of September 20, I received a letter from Gould to which I

made no reply. Aside from the topics to which he directed my attention

in the letter, it is the unavoidable inference from the context as a

whole that Gould had then no faith in the statements given to the

public that the President was in any manner pledged to interfere and

prevent the sale of gold. The following extracts from the letter of

September 20 are a full exposition of his policy and of the means on

which he relied to advance the price of gold during the month of

September:

"On the subject of the price of gold and its effect upon the producing

interests of the West, permit me to say that during the months of

September of the past two years the price has averaged about forty-

five. Gold must range this year at about that premium to enable the

export of the surplus crops of wheat and corn. We have to compete with

the grain-producing countries bordering on the Black and Mediterranean

seas, and it requires a premium of over forty per cent on gold to

equalize our high-priced labor and long rail transportation to the

seaboard.

"My theory is to let gold go to a price that we can export our surplus

products to pay our foreign debts, and the moment we turn the balance

of trade in our favor gold will decline from natural causes. In my

judgment, the Government cannot afford to sell gold during the next

three months while the crops are being marketed, and if such a policy

were announced, it would immediately cause a high export of bread-

stuffs and an active fall trade.

"P. S. In addition to the above, if gold were put upon the market,

government bonds would decline to at least fifteen, leaving the

purchases made by the Government in the past few months open to

criticism as showing a loss."

As early as the 20th of September, I had evidence satisfactory to me

that the Tenth National Bank in the city of New York was a party to the

speculation in gold, and that its assistance was rendered largely

through the certification of checks drawn by the brokers, and largely

in excess of the balances due them upon the books of the bank when the

certifications were made. It appeared from the evidence submitted

that these certifications of checks in excess of the balances due to

brokers amounted to about $18,000,000 on the 22d and 23d of September,

when the speculation was at its height.

For the purpose of arresting that process and checking the speculation

in gold, I detained the comptroller of the currency and three competent

clerks after the close of business on the 22d of September. The clerks

received commissions as bank examiners, and were instructed to go to

New York that night and to take possession of the Tenth National Bank,

at the opening of business in the morning, and to give directions that

the habit of certifying checks in excess of the balances due must be

suspended. It was my expectation that the enforcement of that rule

would, or might, end the speculation, inasmuch as the purchasers of

gold would be unable to meet their obligations, and therefore it would

be out of their power to create them. This expectation was not

realized. Whether the certification went on at the Tenth National

Bak in defiance of the order, or whether other banks were so

connected with the speculation that checks were certified elsewhere,

was not known to me.

I called upon the President after business on the 23d of September,

and made a statement of the condition of the gold market in the city

of New York, as far as it had been communicated to me during the day.

I then said that a sale of gold should be made for the purpose of

breaking the market and ending the excitement. He asked me what sum

I proposed to sell. I said: "Three million dollars will be sufficient

to break the combination."