BILL FOR THE RESUMPTION OF SPECIE PAYMENTS.
Decline in Value of Paper Money--Meeting of Congress in December,
1874--Senate Committee of Eleven to Formulate a Bill to Advance
United States Notes to Par in Coin--Widely Differing Views of the
Members--Redemption of Fractional Currency Readily Agreed to--Other
Sections Finally Adopted--Means to Prepare for and Maintain Resumption
--Report of the Bill by the Committee on Finance--Its Passage by
the Senate by a Vote of 32 to 14--Full Text of the Measure and an
Explanation of What It Was Expected to Accomplish--Approval by the
House and the President.
When Congress met in December, 1874, the amount of United States
notes outstanding was $382,000,000. The fractional notes outstanding
convertible into legal tenders amounted to $44,000,000, and the
amount of national bank notes redeemable in lawful money was
$354,000,000, in all $780,000,000. Each dollar was worth a fraction
less than 89 cents in coin. While these notes were at a discount
coin did not and could not circulate as money. The government
exacted coin for customs duties and paid coin for interest on its
bonds. If there was an excess of coin received from customs to
pay interest then the excess was sold at a premium. If the receipts
from customs were insufficient to pay the interest on bonds, the
government had to buy the coin and pay the premium. The people
who were demanding more money to relieve the stringency did not
see that the best way to get more money into circulation was to
adopt measures that would make United States notes and bank notes
equal to coin, when all three forms of money would enter into
circulation and thus give them more money and all kinds of equal
value.
While our paper money was depreciated the gold and silver bullion
from our mines went abroad and was converted into foreign coin,
while a large portion and perhaps a majority of our people demanded
more paper money, which declined in value in exact proportion to
its increase. During the war vast expenditures compelled us to
use paper money; the return of peace and the excess of revenue over
expenditures should have been promptly followed by coin payments
or notes payable in coin. We delayed this process so long that
the popular mind rested content with depreciated money, but the
panic of 1873, and the feverish speculation which preceded it,
convinced the great body of our business men that there was no
remedy for existing evils but a return to specie payments.
Another bill concerning currency and free banking was reported by
Horace Maynard, of Tennessee, on the 29th of January, 1874, from
the committee on banking and currency of the House of Representatives,
which provided for free banking and a gradual reduction and
cancellation of United States notes by the issue of notes payable
in gold in two years from the passage of the bill. This was fully
debated in the House of Representatives and amended and passed.
In the Senate it was reported by me from the committee on finance,
with a substitute which provided for free banking and that on and
after the 1st of January, 1877, and holder of United States notes
might present them for payment either in coin or five per cent.
bonds of the United States, at the suggestion of the Secretary of
the Treasury. This substitute was amended in the Senate by striking
out all provisions for the redemption of United States notes,
leaving the measure one for free banking alone. The House disagreed
to the amendments and a committee of conference was appointed,
which resulted in a measure fixing the amount of United States
notes outstanding at $382,000,000, and making no provision for
their redemption. It was a crude and imperfect measure. I voted
for it because it provided for a redistribution of national banks
among the states. I said: "Because I cannot get a majority of
both Houses of Congress to agree to specie resumption I ought not
therefore to refuse to vote for a bill on the subject of banking
and currency." The bill was approved by the President on the 20th
of June, 1874. This long struggle prepared the way for the result
accomplished at the next session.
When Congress met in December, 1874, the feeling that the remedy
for existing evils was the return to specie payments, was general
among Republican Senators and Members. The abortive efforts of
the previous session and the veto of President Grant of one of the
bills referred to contributed to it. At the first Republican
conference I called attention to the necessity of our uniting, if
possible, on some measure that would advance United States notes
to par in coin and moved that a committee of eleven Senators be
created to formulate a bill for that purpose. It was agreed to,
and, as the names of the Senators composing the committee have
already been published, I feel justified in repeating them: The
committee consisted of Senators John Sherman (chairman), William
B. Allison, George S. Boutwell, Roscoe Conkling, George F. Edmunds,
Thomas W. Ferry, F. T. Freylinghuysen, Timothy O. Howe, John A.
Logan, Oliver P. Morton, and Aaron A. Sargent.
When the committee met it was agreed that each member should state
how far he would go in the direction of specie resumption. When
these statements were made it was manifest that the divergence of
opinion was so great that an agreement was almost impossible. Yet,
the necessity of an agreement was so absolute that a failure to
agree was a disruption of the Republican party.
The first section of the act to provide for the resumption of specie
payments, which related to the coinage and issue of fractional
silver under the act of February 21, 1853, and the redemption of
an equal amount of fractional currency outstanding should be
redeemed, and was readily agreed to. This fractional currency was
so worn and filthy, and it cost so much to reissue, that by general
consent its destruction was agreed to, and its replacement by bright
new silver coin, which followed, was heartily welcomed.
The second section was an unjust concession to the miners of gold.
It repealed the coinage charge for converting standard gold bullion
into coin. This charge had been maintained, not only to cover the
cost of coining, but to prevent the exportation of American coins.
If the coins were of less value than the bullion of which they were
made, however small the difference, they would not be exported
while bullion could be had for exportation. The concession was
made and the charge for coinage of gold was prohibited.
The free banking provisions in the third section were not seriously
contested. The contraction of the volume of United States notes
as national bank notes increased, was one of the chief subjects of
disagreement. It was finally agreed that this contraction should
extend only to the retirement of United States notes in excess of
$300,000,000.
The most serious dispute was upon the question whether United States
notes presented for redemption and redeemed could be reissued. On
the one side it was urged that, being redeemed, they could not be
reissued without an express provision of law. The inflationists,
as all those who favored United States notes as part of our permanent
currency were called, refused to vote for the bill if any such
provision was inserted, while those who favored coin payments were
equally positive that they would vote for no bill that permitted
notes once redeemed to be reissued. This appeared to be the rock
upon which the party in power was to split. I had no doubt under
existing law, without any further provision, but that United States
notes could be reissued. It was finally agreed that no mention
should be made by me for or against the reissue of notes, and that
I must not commit either side in presenting the bill.
The date for general resumption of specie payments on all United
States notes was fixed on the first of January, 1879, four years
from the framing of this bill. The important and closing clause
of the bill was referred to Mr. Edmunds and myself. It provided
the means to prepare for and to maintain resumption. It placed
under the control of the Secretary of the Treasury all the surplus
revenue in the treasury, and gave him full power to issue, sell
and dispose of, at not less than par in coin, any of the bonds
described in the refunding act. We were careful to select phraseology
so comprehensive that all the resources and credit of the government
were pledged to redeem the notes of the United States, as fully
and completely as our Revolutionary fathers pledged to each other
their lives, their fortunes, and their sacred honor, in support of
the declaration of American independence.
After every sentence and word of this bill had been carefully
scrutinized, I was authorized by every member of the committee to
submit it to the committee on finance, and to report it from that
committee as the unanimous act of the Republican Senators. We
naturally expected some support from Mr. Bayard and other Democratic
Senators, who, no doubt, were in favor of specie payments, but they
perhaps thought it best not to share the risk of the measure.
I reported the bill from the committee on finance on the 21st of
December, 1874, and gave notice that on the next day I would call
it up with a view to immediate action. On the 22nd, after the
morning business, I moved to proceed to the consideration of the
bill, and gave notice that I intended to press it to its passage,
from that hour forward, at the earliest moment practicable. It
was well understood that the bill was the result of a Republican
conference. It was taken up by the decisive vote of 39 yeas to 18
nays.
It was not my purpose to do more than to present the provisions of
the bill. My brief statement led to a desultory debate, participated
in almost exclusively by Democratic Senators, the Republican Senators
remaining silent. Several votes were taken, each showing a majority
of more than two-thirds in favor of the bill and against all
amendments. It passed the Senate without change by the vote of 32
yeas to 14 nays.
I here insert the bill as introduced and passed, with my statement
in support of its provisions:
"AN ACT TO PROVIDE FOR THE RESUMPTION OF SPECIE PAYMENTS.
"_Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled_, That the Secretary
of the Treasury is hereby authorized and required, as rapidly as
practicable, to cause to be coined, at the mints of the United
States, silver coins of the denominations of ten, twenty-five, and
fifty cents, of standard value, and to issue them in redemption of
an equal number and amount of fractional currency of similar
denominations, or, at his discretion, he may issue such silver
coins through the mints, the sub-treasuries, public depositaries,
and post offices of the United States; and, upon such issue, he is
hereby authorized and required to redeem an equal amount of such
fractional currency, until the whole amount of such fractional
currency outstanding shall be redeemed.
"Sec. 2. That so much of section three thousand five hundred and
twenty-four of the Revised Statutes of the United States as provides
for a charge of one-fifth of one per centum for converting standard
gold bullion into coin is hereby repealed; and hereafter no charge
shall be made for that service.
"Sec. 3. That section five thousand one hundred and seventy-seven
of the Revised Statutes, limiting the aggregate amount of circulating
notes of national banking associations, be, and hereby is, repealed;
and each existing banking association may increase its circulating
notes in accordance with existing law, without respect to said
aggregate limit; and new banking associations may be organized in
accordance with existing law, without respect to said aggregate
limit; and the provisions of law for the withdrawal and redistribution
of national bank currency among the several states and territories
are hereby repealed. And whenever, and so often, as circulating
notes shall be issued to any such banking association, so increasing
its capital or circulating notes, or so newly organized as aforesaid,
it shall be the duty of the Secretary of the Treasury to redeem
the legal tender United States notes in excess only of three hundred
millions of dollars, to the amount of eighty per centum of the sum
of national bank notes so issued to any banking association as
aforesaid, and to continue such redemption as such circulating
notes are issued until there shall be outstanding the sum of three
hundred million dollars of such legal tender United States notes,
and no more. And on and after the first day of January, anno Domini
eighteen hundred and seventy-nine, the Secretary of the Treasury
shall redeem in coin the United States legal tender notes then
outstanding, on their presentation for redemption at the office of
the assistant treasurer of the United States in the city of New
York, in sums of not less than fifty dollars. And to enable the
Secretary of the Treasury to prepare and provide for the redemption
in this act authorized or required, he is authorized to use any
surplus revenues from time to time in the treasury not otherwise
appropriated, and to issue, sell, and dispose of, at not less than
par in coin, either of the descriptions of bonds of the United
States described in the act of Congress approved July fourteenth,
eighteen hundred and seventy, entitled 'An act to authorize the
refunding of the national debt,' with like qualities, privileges,
and exemptions, to the extent necessary to carry this act into full
effect, and to use the proceeds thereof for the purposes aforesaid.
And all provisions of law inconsistent with the provisions of this
act are hereby repealed."
I said:
"Mr. president, I do not intend to reopen the debate on financial
topics of last session. That debate was carried to such great
length that it was not only exhaustive, but it was exhausting, not
only mentally but physically. The Senate is composed of the same
persons who shared in that debate, and it is utterly idle for us,
in this short session, to reopen it and to invite the discussion
of the various topics presented in that debate. The Senate is now
within less than three months, a little more than two months, of
its adjournment, and there is a general feeling throughout the
country, shared by all classes of people, that this Congress ought
to give some definite notice to the people of this country as to
their purpose in the important topics embraced in this bill; and
I say to Senators on all sides of the House that this bill contains
enough to accomplish the important object declared by the title of
the bill, and this without reviving all the troublesome and difficult
questions which were discussed at the last session. It contains
a few simple propositions which may be separated from the mass of
financial topics discussed at the last session. Its purpose is
declared upon the title of the bill, 'An act to provide for the
resumption of specie payments.' Every word, every line, and every
provision, of this bill is in harmony with that title. It will
tend to promote the resumption of specie payments. It may fall
short in many particulars of the desire of some Senators; and it
does go further in that direction than some Senators were willing
to support at the last session. It is a bill which demands reasonable
concession from every Member of the Senate. If we undertake now
to seek to carry out the individual views of any Senator, we cannot
accomplish the passage of any bill to promote this object, and
therefore this bill has demanded of everyone who has consented to
it thus far a surrender of some portions of his opinions as to
measures and means to accomplish the great purpose. I will consider
my duty done, so far as this bill is concerned, by simply stating
its provisions and calling attention to the character of those
provisions, without entering into a single topic that gave rise to
the long discussion at the last session.
"The bill is intended to provide for the resumption of specie
payments. The first section of the bill provides for the resumption
of specie payments on the fractional currency. It is confined to
that subject alone. It so happens that at this particular period
of time the state of the money market, the state of the demand for
silver bullion, and more especially the recent action of the German
Empire, which has demonetized silver and thus cheapened that product,
enables us now, without any loss of revenue, without any sacrifice,
to enter the market for the purchase of bullion and resume specie
payments on our fractional currency. The market price of bullion
to-day will justify the government of the United States, without
any sacrifice, at a price about equivalent to, or perhaps a trifle
above, our fractional currency--scarcely a shadow above our fractional
currency--to purchase silver bullion in the money markets of the
world, mostly of our own production, perhaps entirely of our own
production. This bill simply directs that the Secretary of the
Treasury shall purchase this bullion and shall coin silver coin
and substitute that in the place of fractional currency. This
section is recommended not only by the Secretary of the Treasury
and the President of the United States, but I believe will meet
the general concurrence of every Member of the Senate, and we
fortunately are enabled to embrace the present time to commence
this operations without any loss to the government, except perhaps
the cost of the coinage of this silver may have to be paid out of
the treasury of the United States. That coinage may be done in
the ordinary course of business without any increase of expenditures.
The mints of the United States are now prepared, immediately upon
the passage of this bill, to resume the coinage of silver coins
of all the legal denominations. Therefore the committee has provided
that the Secretary of the Treasury shall proceed to coin the silver
coins, and in one of several ways to issue them in place of fractional
currency.
"I need not dwell further upon this section, because I believe it
will meet with the general assent of the Senate. It provides for
the immediate resumption of specie payments upon the fractional
currency, or at least as immediate as possible; that is, as soon
as the government of the United States can, in the mints of the
United States, coin the silver coin. That process may continue
one, two, or three years, how long we cannot tell, depending entirely
upon the force that may be employed in that direction. It takes
a much longer time to coin these small coins than gold coins, and
the operation will probably take more time than it would to coin
any considerable amount of gold coin."
Mr. Hamilton, of Maryland, inquired:
"I would ask the Senator if there is authority to reissue that
fractional currency?"
I said:
"I will come to that in a moment. The second section of this bill
simply removes an inducement that now exists to export our gold
bullion from the United States to Great Britain, where, by the long
established laws of that country, they coin money free of charge.
This section involves the surrender of about $85,000 a year of
revenue; that is, the government of the United States received last
year for coining gold coins, $85,000, or one-fifth of one per cent.
on forty-five millions of gold coined. The only sacrifice of
revenue, therefore, by the second section of the bill, is the
sacrifice or surrender of $85,000, which heretofore has been levied
upon those who produce gold bullion in order to convert it into
coin. In the opinion of many men, among them the Secretary of the
Treasury, the director of the mint, and perhaps a large number of
Senators heretofore, this will tend, in a slight degree at any
rate, to prevent the exportation of the gold of our own country
into foreign parts, because when the government of the United States
undertakes to put gold bullion in the form of gold coin without
additional charge the tendency will inevitably be for the gold
bullion to flow into the mints for coinage, and being put into the
form of American coin, it is thought by a great many people that
this will tend to prevent its exportation. To the extent it does
so it prepares us for specie payments. That is the whole of the
second section.
"The third section of the bill contains only two or three affirmative
propositions. The first is that after the passage of this act
banking shall be free. Perhaps there is no idea stronger in the
minds of the American people than a feeling of hostility against
a monopoly--a privilege that one man or set of men can enjoy which
is denied to another man or set of men. Under the law as it now
stands banking is substantially free in the southern and some of
the western states; but banking is not free in the great commercial
states, in the older states, where wealth has accumulated for ages.
This may be a mere sentimental point, but it is well enough to meet
it; and by the operation of this bill banking is made free, so that
there will be no difficulty hereafter for any corporation organized
as a national bank either to increase its circulation or for banks,
to be organized under the provisions of existing law, to issue
circulating notes to any extent within the limits and upon the
terms and provisions of the banking law. This section, therefore,
by making banking free, provides for an enlargement of the currency
in case the business of the community demands it, and in case any
bank in the United States may think it advisable or profitable to
issue circulating medium in the form of bank notes, under the
conditions and limitations of the banking law. Coupled with that
is a provision, an undertaking, on the part of the United States,
that as banks are organized or as circulating notes are issued,
either by old or new banks, the government of the United States
undertakes to retire eighty per cent. of that amount of United
States notes. In other words, it proposes to redeem the United
States notes to the extent of eighty per cent. of the amount of bank
notes that may be issued; and here is the first controversial
question that arises on this bill and the first that is settled.
"It may be asked if we provide for the issue of circulating notes
to banks, why not provide for the retirement of an equal amount of
United States notes. The answer is that under the provisions of
the banking act, by the law as it now stands, a bank cannot be
organized and maintained in existence unless the reserve which is
in that bank, or required for that bank in the ordinary course of
business, either on its deposits or circulation, is at least equal
to twenty per cent. of the amount of its circulating notes, so that
it was believed, according to the judgment of the best business
men of the country, and I may say with the comptroller of the
currency, that the retirement of eighty per cent. of the amount of
bank notes is fully equivalent to keeping the amount of circulating
medium in actual circulation on the same footing, so that this
provision of the bill neither provides for a contraction nor
expansion of the currency, but leaves the amount to be regulated
by the business wants of the community, so that when notes are
issued to a bank eighty per cent. of the amount in United States
notes is redeemed, and this process continued until United States
notes are reduced to three hundred millions."
Mr. Schurz asked:
"Will the Senator permit me to ask him a question in reference to
this section? When the eighty per cent. of greenbacks are retired
will they be destroyed and never used again?"
I replied:
"I will speak of that in a moment in connection with other sections.
Now, Mr. president, that is all there is in regard to banking in
this bill and also in regard to the retirement of the United States
notes until the time for the resumption of specie payments comes,
when this bill provides for actual redemption in coin of all notes
presented. It has always been a question in the minds of many
people as to whether it is wise to fix a day for specie payments.
That matter was discussed at the last session of Congress by many
Senators, and the general opinion seemed to be that if we would
provide the means by which specie payments would be resumed it
might not be necessary to fix the day; but, on the other hand, it
is important to have our laws in regard to the currency fix a
probable time, or a certain time, when everybody may know that his
contracts will be measured by the coin standard. We also know, by
the example of other nations which have found themselves in the
condition in which we are now placed, and by some of the states
when specie payments were suspended, that they have adopted a
specific day for the resumption of specie payments. In England,
by the bank act of 1819, they provided for the resumption of specie
payments in 1823, making four years. In our own states--in New
York, in Ohio, in nearly all the states--when there has been a
temporary suspension of specie payments a time has been fixed when
the banks were compelled to resume, and this bill simply follows
the example that has been set by the states, by England, and by
other nations, when they have been involved in a like condition.
"This bill also provides ample means to prepare for and to maintain
resumption. I may say the whole credit and money of the United
States is placed by this bill under the direction of the proper
executive officers, not only to prepare for but to maintain
resumption, and no man can doubt that if this bill stands the law
of the land from this time until the 1st day of January, 1879,
specie payments will be resumed, and that our United States notes
will be converted at the will of the holder into gold and silver
coin.
"These are all the provisions contained in this bill. They are
simple and easily understood, and every Senator can pass his judgment
upon them readily.
"Now I desire to approach a class of questions that are not embraced
in this bill. Many such, and I could name fifty, are not included
in this bill, and I may say this: That if there should be a
successful effort, by the Senate of the United States, to ingraft
any of this multitude of doubtful or contested questions upon the
face of this bill it would inevitably tend to its defeat. I am
free to say that if I were called upon to frame a bill to accomplish
the purpose declared in the title of this bill, I would have provided
some means of gradual redemption between this and the time fixed
for final specie payments. All these means are open to objection.
"There have been three different plans proposed to prepare for
specie payments, and only three. They are all grouped in three
classes. One is what is called the contraction plan. The simplest
and most direct way to specie payments is, undoubtedly, the gradual
withdrawal of United States notes or the contraction of the currency.
Now, we know very well the feeling with which that idea is regarded,
not only in this Senate, but all through the country. It is believed
to operate as a disturbing element in all the business relations
of life; to add to the burden of the debtor by making scare that
article in which he is bound to pay his debts; and there has been
an honest, sincere opposition to this theory of contraction.
Therefore, although it may be the simplest and the best way to
reach specie payments, it is entirely omitted from this bill.
"The second plan, that I have favored myself often, and would favor
now, if I had my own way, and had no opinion to consult but my own,
is the plan of converting United States notes into a bond that would
gradually appreciate our notes to par in gold. That has always
been a favorite idea of mine. There is nothing of that kind in
this bill, except those provisions which authorize the Secretary
of the Treasury to issue bonds to retire the greenbacks as bank
notes are issued; and it also authorizes the Secretary of the
Treasury to issue bonds to provide for and to maintain resumption.
I therefore have been compelled to surrender my ideas on this bill
in order to accomplish a good object without using these means that
have been held objectionable by many Senators.
"The third plan of resumption has been favored very extensively in
this country, which is the plan of a graduated scale for resumption
in coin or bullion; what I call the English plan. That is, that
we provide now for the redemption, at a fixed rate or scale or
rates, of so much gold for a specific sum of United States notes.
At present rates we would give about $90 of gold for $100 of
greenbacks, and then provide for a graduated scale by which we would
approach specie payments constantly, and reach it at a fixed day.
This may be called a gradual redemption. This, also, is objectionable
to many persons, from the idea that it compels us to enter the
money markets of the world to discount our own paper. It is an
ideal objection, but a very strong objection; an objection that
has force with a great many people. We have undertaken to redeem
these notes in coin, and it is at least a question of doubtful
ethics whether we ought to enter into the markets of the world and
buy our own notes at a discount. Although that plan has been
adopted in England and successfully carried into execution, yet
there is a strong objection to it in this country, and therefore
that mode is abandoned.
"Either of these plans I could readily support; but they have met
and will meet with such opposition that we cannot hope to carry
them or ingraft them in this bill without defeating it. We have
then fallen back on these gradual steps: First, to retire the
fractional currency; second, to reduce United States notes as bank
notes are increased; and then to rest our plan of redemption upon
the declaration, made on the faith of the United States, that at
the time fixed by the bill we will resume the payment of the United
States notes in coin at par. That is the whole of this bill."
On the 7th of January, 1875, the bill was considered in the House
of Representatives and, after a very brief conversational debate,
passed by the vote of yeas 136, nays 98.
On the 14th day of January, 1875, the President sent a message to
the Senate approving the bill but also containing recommendations
of further legislation upon matters that had been carefully excluded
from the bill. He added at the close of the message this paragraph:
"I have ventured upon this subject with great diffidence, because
it is so unusual to approve a measure--as I most heartily do this,
even if no further legislation is attainable at this time--and to
announce the fact by message. But I do so, because I feel that it
is a subject of such vital importance to the whole country, that
it should receive the attention of, and be discussed by, Congress
and the people, through the press and in every way, to the end that
the best and most satisfactory course may be reached of executing
what I deem most beneficial legislation on a most vital question
to the interests and the prosperity of the nation."
Thus, after a memorable debate, extending through two sessions of
Congress, a measure of vital importance became a law, and when
executed completely accomplished the great object proposed by its
authors. The narrative of the steps leading to resumption under
this act will be more appropriate hereafter.