RESUMPTION ACT RECEIVED WITH DISFAVOR.
It Is Not Well Received by Those Who Wished Immediate Resumption
of Specie Payments--Letter to "The Financier" in Reply to a Charge
That It Was a "Political Trick," etc.--The Ohio Canvass of 1875--
Finance Resolutions in the Democratic and Republican Platforms--R.
B. Hayes and Myself Talk in Favor of Resumption--My Recommendation
of Him for President--A Democrat Elected as Speaker of the House--
The Senate Still Republican--My Speech in Support of Specie Payments
Made March 6, 1876--What the Financial Policy of the Government
Should Be.
The resumption act was generally received with disfavor by those
who wished the immediate resumption of specie payments. It was
the subject of much criticism in the financial journals, among
others "The Financier," which described it as a political trick,
an evasion of a public duty, and as totally inadequate for the
purpose sought to be accomplished. I took occasion to reply to
this article in the following letter:
"United States Senate Chamber,}
"Washington, January 10, 1875.}
"Dear Sir:--As I am a subscriber to 'The Financier,' you will
probably allow me to express my surprise at the course you have
pursued in respect to the finance bill recently passed by Congress.
Claiming as you do to be a 'monetary and business' journal, you
might be expected to treat fairly a measure affecting so greatly
the interests you represent; but you have not done so. You have
treated it as a political trick, an evasion, a disgrace to Congress.
You complained that it was passed without debate and that its
inception and passage were shameful. But as you say in your last
number 'that it is well to examine it hopefully, to find _what good
may have been done, if any_, although from a _bad motive_,' I take
the liberty to correct errors even in your 'hopeful' view of the
law, so that you may be more hopeful still. You assume that the
Secretary of the Treasury is not authorized to issue five per cent.
gold bonds to prepare for and to maintain resumption, because the
amount of five per cent. bonds authorized in the act of 1870 is
nearly exhausted. This is an error. The secretary can issue either
four and a half or five per cent. gold bonds to an amount sufficient
to execute the law. The act of 1870 is only referred to for the
'description' of the bonds to be issued, and the only limit to
their amount is the sum necessary, and the only limit to their sale
is that they must not be sold at less than par in coin.
"You say that _one trick_ of the bill is 'that there is no provision
for carrying on the withdrawal of legal tenders after their maximum
reaches $300,000,000.' Now this 'trick' was advocated by you one
year ago; it was voted for by every specie paying Member of Congress
at the last session, and nearly every writer on the subject has
contended that if the legal tenders were reduced to $300,000,000,
and the treasury was supported by a reasonable reserve, specie
payments could be resumed and maintained. Besides, no one believes
that $100,000,000 of bank notes will be issued under this act, and
this provision only relieves some people from an idle fear of an
improbable event. You must have noticed that when banks retire
their notes, as they have done and will do rapidly, this is a
reduction of the currency, while every issue of notes to new or
old banks involves a retirement of a ratable amount of United States
notes. What you say about playing with a movable 'reserve' is
equally wrong. Neither the fractional currency nor the 'eighty-
two million' redeemed can be reissued, and I stated so when the
bill was pending under debate, and no lawyer could put a different
construction upon the bill. As to United States notes, a part of
the $300,000,000 redeemed after resumption of specie payments, we
did refuse to provide whether they could be reissued or not, and
we acted wisely. When the question is hereafter determined by
Congress, the controversy will be whether the notes _when reissued_
shall have the _legal tender_ quality, or be simple treasury notes
receivable for public dues.
"Last session the public press scolded at our long and fruitless
debate on finances, and I agreed with the press. This session the
same Senators, enlightened by the long debate and heeding the call
of the press, gave to the subject the most careful and deliberate
consideration, and agreed upon this bill without much debate, and
yet the press is not happy. The act does not go as far as I wished,
but everything in it is right in itself, and is in the right
direction. Its chief merit is that it establishes a public policy
which no political party or faction will be strong enough to
overthrow, and which if it had not been adopted now, the Democratic
party in the next Congress would have defeated. The pretense that
the Democratic party, as represented in the next House, would have
favored any bill for specie payments is utterly false. Therefore
the measure grants to the Secretary of the Treasury powers enough
to execute it, but if we can secure the aid of a Democratic House
we can make it certain and effective.
"Very truly yours,
"John Sherman.
"Editor of 'Financier.'"
In the Ohio canvass of 1875 the resumption act became the chief
subject of controversy. R. B. Hayes, after having previously served
for four years as governor of the state, was against nominated for
that office. William Allen, then governor, was renominated upon
the Democratic ticket, in opposition to the resumption act and in
favor of fiat money, upon which issue the election mainly turned.
The eighth resolution of the Democratic platform was as follows;
"That the contraction of the currency heretofore made by the
Republican party, and the further contraction proposed by it, with
a view to the forced resumption of specie payment, have already
brought disaster to the business of the country, and threaten it
with general bankruptcy and ruin. We demand that this policy be
abandoned, and that the volume of currency be made and kept equal
to the wants of trade, leaving the restoration of legal tenders to
par with gold, to be brought about by promoting the industries of
the people and not by destroying them."
The Republican convention in their second resolution declared:
"That a policy of finance be steadily pursued, which, without
unnecessary shock to business or trade, will ultimately equalize
the purchasing capacity of the coin and paper dollar."
Ex-Governor Hayes and I opened the state canvass in the county of
Lawrence on July 31, 1875, and took strong ground in favor of the
resumption act. At the beginning it appeared that the people were
not quite prepared for any measure looking to resumption, but as
the contest progressed and the subject was fully and boldly presented
by Mr. Hayes and myself, the tide of opinion ran in our favor and
Hayes was elected by a small majority. The ex-governor did not
evade the issue, but in every speech supported and urged the policy
of resumption as a matter of the highest interest.
In the approaching nomination for President, Governor Hayes was
frequently spoken of as a candidate to succeed General Grant, and
I also was mentioned in the same connection, but, feeling confident
that Mr. Hayes would be a stronger candidate than myself, and fully
determined not to stand in his way, on the 21st of January, 1876,
I wrote a letter to a personal friends, and the Member of the Senate
from the district in which I live, in which I urged the nomination
of Governor Hayes as the most available candidate in the approaching
presidential canvass. This letter no doubt contributed to his
strength and prevented any possibility of the division of the vote
of Ohio in the convention. The letter I give in full:
"Washington, D. C., January 21, 1876.
"Dear Sir:--Your letters of the 2nd and 10th inst. were duly
received, and I delayed answering the first sooner partly from
personal reasons, but mainly that I might fully consider the
questions raised by you as to the approaching presidential contest,
the importance of which cannot be overstated. The election of a
Democratic President means a restoration to full power in the
government of the worst elements of the rebel Confederacy.
"The southern states are to be organized, by violence and intimidation,
into a compact political power only needing a small fragment of
the northern states to give it absolute control where, by a majority
rule of the party, it will govern the country as it did in the time
of Pierce and Buchanan.
"If it should elect a President and both Houses of Congress, the
constitutional amendments would be disregarded, the freedmen would
be nominally citizens but really slaves; innumerable claims, swollen
by perjury, would be saddled upon the treasury, the power of the
general government would be crippled, and the honors won by our
people in subduing rebellion would be a subject of reproach rather
than of pride. The only safeguard from these evils is the election
of a Republican President, and the adoption of a liberal Republican
policy which should be fair and even generous in the south, but
firm in the maintenance of all the rights won by the war. Our
election in Ohio last fall shows that even under the most adverse
circumstances we can win on this basis.
"Every movement made by this Democratic House of Representatives
is an appeal to every man who ever voted with the Republican party
to rally to its support again, and to every man who fought in the
Union army to vote with us to preserve the results of his victory.
"All we need is such a presidential ticket as will give assurance
that we mean to stand by our principles, and that will administer
the government honestly and economically.
"As to candidates, the drift of public opinion is rapidly reducing
the list and has already settled adversely the chances of many of
them. Above all, it has positively closed the question of a third
term. The conviction that it is not safe to continue in one man
for too long a period the vast powers of a President, is based upon
the strongest reasons, and this conviction is supported by so many
precedents set by the voluntary retirement at the end of a second
term of so many Presidents that it would be criminal folly to
disregard it. I do not believe General Grant ever seriously
entertained the thought of a third term, but even if he did, the
established usage against it would make his nomination an act of
suicide.
"It would disrupt our party in every Republican state.
"Happily for us we do not need to look for the contingency of his
nomination.
"Among the candidates now generally named, I have no such preference
that I could not heartily support either of them. They are men of
marked ability, who have rendered important public services, but,
considering all things, I believe the nomination of Governor Hayes
would give us the more strength, taking the whole country at large,
than any other man. He is better known in Ohio than elsewhere,
and is stronger there than elsewhere, but the qualities that have
made him strong in Ohio will, as the canvass progresses, make him
stronger in every state. He was a good soldier, and, though not
greatly distinguished as such, he performed his full duty, and I
noticed, when traveling with him in Ohio, that the soldiers who
served under him loved and respected him. As a Member of Congress
he was not a leading debater, or manager in party tactics, but he
was always sensible, industrious, and true to his convictions and
the principles and tendencies of his party, and commanded the
sincere respect of his colleagues. As a governor, thrice elected,
he has shown good executive abilities and gained great popularity,
not only with Republicans but with our adversaries. On the currency
question, which is likely to enter largely into the canvass, he is
thoroughly sound, but is not committed to any particular measure,
so as to be disabled from co-operating with any plan that may
promise success. On the main questions, protection for all in
equal rights, and the observance of the public faith, he is as
trustworthy as any one named. He is fortunately free from the
personal enmities and antagonisms that would weaken some of his
competitors, and he is unblemished in name, character or conduct,
and a native citizen of our state.
"I have thus, as you requested, given you my view of the presidential
question, taken as dispassionately as if I were examining a
proposition in geometry, and the result drawn from these facts,
not too strongly stated, is that the Republican party in Ohio ought,
in their state convention, to give Governor Hayes a united delegation
instructed to support him in the national convention, not that we
have any special claim to have the candidate taken from Ohio, but
that in General Hayes we honestly believe the Republican party of
the United States will have a candidate for President who can
combine greater popular strength and a greater assurance of success
than other candidates, and with equal ability to discharge the
duties of President of the United States in case of election. Let
this nomination be thus presented, without any wire pulling or
depreciation of others and as a conviction upon established facts,
and I believe Governor Hayes can be and ought to be nominated.
But if our state is divided or is not in earnest in this matter it
is far better for Governor Hayes and the state that his name be
not presented at all. We have never sufficiently cultivated our
state pride, with every reason for indulging it, and thus our proper
influence has been wasted and lost. Now we have a good opportunity
to gratify it, and at the same time contribute to the common good.
Remember me kindly to personal friends in the Senate.
"Very truly yours,
"John Sherman.
"Hon. A. M. Burns."
The election of Members of Congress in 1874 resulted in the choice
of a large majority of Democrats in the House of Representatives
of the 44th Congress, the term of which commenced on the 4th of
March, 1875. A majority of the Senate being still largely Republican,
it became difficult to pass any measure of a political character
during that Congress. President Grant, on the 17th of February,
1875, issued his proclamation convening the Senate at 12 o'clock
on the 5th of March following, to receive and act upon such
communications as might be made to it on the part of the Executive.
The session continued until the 24th of March. It was largely
engaged in questions affecting the State of Louisiana, which had
been the scene of violent tumult and almost civil war. As these
events are a part of the public history of the country I do not
deem it necessary to refer to them at length. These disturbances
continued during the whole of that Congress, and, in 1876, approached
the condition of civil war.
The regular meeting occurred on the 6th of December, 1875, when
Thomas W. Ferry, of Michigan, was elected president _pro tempore_
of the Senate, and Michael C. Kerr, a Democratic Representative
from the State of Indiana, was elected by a large majority as
speaker of the House.
This political revolution was no doubt caused largely by the
financial panic of 1873, and by the severe stringency in monetary
affairs that followed and continued for several years. Many
financial measures of the highest importance in respect to the
public credit were acted upon, but were generally lost by a
disagreement between the two Houses. I do not deem it necessary
to refer to the political questions that greatly excited the public
mind during that session. Congress was largely occupied in political
debate on questions in respect to the reconstruction of the states
lately in rebellion, upon which the two Houses disagreed. Among
other measures which failed was the act amendatory of the acts
authorizing the refunding of the national debt, which passed the
Senate but was not considered by the House.
During this session of Congress all sorts of financial plans were
presented in each House, but all were aimed, directly or indirectly,
at the resumption act, although that act itself was adopted as a
remedy for existing financial evils, and especially to deal with
and prevent the recurrence of such a panic as that of 1873. I took
occasion, on the presentation of the resolution of the New York
Chamber of Commerce in favor of the resumption of specie payments,
at the time provided by the resumption act, to discuss the policy
of that measure more fully than I thought it expedient to do so
when, as a bill, it was pending in the previous Congress. This
speech was made in the Senate on the 6th of March, 1876. It was
the result of great labor and care, and was intended by me to be,
and I believe it is now, the best presentation I have ever been
able to offer in support of the financial policy of the government,
and especially in support of the resumption of specie payments.
I said:
"Mr. president, I have taken the unusual course of arresting the
reference to the committee of finance of the memorial of the Chamber
of Commerce of New York, in order to discuss, in an impersonal and
nonpartisan way, one of the questions presented by that memorial,
and one which now fills the public mind and must necessarily soon
occupy our attention. That question is, 'Ought the resumption act
of 1875 be repealed?' The memorial strongly opposes such repeal,
while other memorials, and notably those from the boards of trade
of New York and Toledo, advocate it. These opposing views are
supported in each House of Congress, and will, when our time is
more occupied than now, demand our vote.
"And, sir, we are forced to consider this question when the law it
is proposed to repeal is only commencing to operate, now, three
years before it can have full effect--during all which time its
operation will be under your eye and within your power--and while
the passions of men are heated by a presidential combat, when a
grave questions, affecting the interests of every citizen of the
United States, will be influenced by motives entirely foreign to
the merits of the proposition. And the question presented is not
as to the best means of securing the resumption of a specie standard,
but solely whether the only measure that promises that result shall
be repealed. We know there is a wide and honest diversity of
opinion as to the agency and means to secure a specie standard.
"When any practicable scheme to that end is proposed I am ready to
examine it on its merits; but we are not considering the best mode
of doing the thing, but whether we will recede from the promise
made by the law as it stands, as well as refuse all means to execute
that promise. If the law is deficient in any respect it is open
to amendment. If the powers vested in the secretary are not
sufficient, or you wish to limit or enlarge them, he is your servant,
and you have but to speak and he obeys. It is not whether we will
accumulate gold or greenbacks or convert our notes into bonds, nor
whether the time to resume is too early or too late. All these
are subjects of legislation. But the question now is whether we
will repudiate the legislative declaration, made in the act of
1875, to redeem the promise made and printed on the face of every
United States note, a promise made in the midst of war, when our
nation was struggling for existence, a promise renewed in March,
1869, in the most unequivocal language, and finally made specific
as to time by the act of 1875.
"And let us not deceive ourselves by supposing that those who oppose
this repeal are in favor of a purely metallic currency, to the
exclusion of paper currency, for all intelligent men agree that
every commercial nation must have both; the one as the standard of
value by which all things are measured, which daily measures your
bonds and notes as it measures wheat, cotton, and land; and also
a paper or credit currency, which, from its convenience of handling
or transfer, must be the medium of exchanges in the great body of
the business of life. Statistics show that in commercial countries
a very large proportion of all transfers is by book accounts and
notes, and more than nine-tenths of all the residue of payments is
by checks, drafts, and such paper tools of exchange.
"Of the vast business done in New York and London not five per
cent. is done with either paper money or gold or silver, but by
the mere balancing of accounts or the exchange of credits. And
this will be so whether your paper money is worth forty per cent.
or one hundred per cent. in gold. The only question is whether,
in using paper money, we will have that which is as good as it
promises, as good as that of Great Britain, France, or Germany; as
good as the coin issued from your mints; or whether we will content
ourselves with depreciated paper money, worth ten per cent. less
than it promises, every dollar of which daily tells your constituents
that the United States in not rich enough to pay more than ninety
per cent. on the dollar for its three hundred and seventy millions
of promises to pay, or that you have not courage enough to stand
by your promise to do it.
"Nor are we to decide whether our paper money shall be issued
directly by the government or by banks created by the government;
nor whether at a future time the legal tender quality of United
States notes shall continue. I am one of those who believe that
a United States note issued directly by the government, and
convertible on demand into gold coin, or a government bond equal
in value to gold, is the best currency we can adopt; that it is to
be the currency of the future, not only in the United States, but
in Great Britain as well; and that such a currency might properly
continue to be a legal tender, except when coin is specifically
stipulated for it.
"But these are not the questions we are to deal with. It is whether
the promise of the law shall be fulfilled, that the United States
shall pay such of its notes as are presented on and after the 1st
day of January, 1879, in coin; and whether the national banks will,
at the same time, redeem their notes either in coin or United States
notes made equal to coin; or whether the United States shall revoke
its promise and continue, for an indefinite period, to still longer
force upon the people a depreciated currency, always below the
legal standard of gold, and fluctuating daily in its depreciation
as Congress may threaten or promise, or speculators may hoard, or
corner, or throw out your broken promises. It is the turning point
in our financial history, which will greatly affect the life of
individuals and the fate of parties, but, more than all, the honor
and good faith of our country.
"At the beginning of our national existence, our ancestors boldly
and hopefully assumed the burden of a great national debt, formed
of the debts of the old confederation and of the states that composed
it; and, with a scattered population and feeble resources, honestly
met and paid, in good solid coin, every obligation. After the War
of 1812, which exhausted our resources, destroyed our commerce,
and greatly increased our debt, a Republican administration boldly
funded our debt, placed its currency upon the coin basis, promptly
paid its interest, and reduced the principal; and within twenty
years after that war was over, under the first Democratic President,
paid in coin the last dollar, both principal and interest, of the
debt. And now, eleven years after a greater war, of grander
proportions, in which, not merely foreign domination threatened
us, but the very existence of our nation was at stake, and after
our cause has been blessed with unexampled success, with a country
teeming with wealth, with our credit equal to that of any nation,
we are debating whether we will redeem our promises, according to
their legal tenor and effect, or whether we will refuse to do so
and repeal and cancel them.
"I would invoke, in the consideration of this question, the example
of those who won our independence and preserved it to us, to inspire
us so to decide this question that those who come after us may
point to our example of standing by the public faith now solemnly
pledged, even though to do so may not run current with the temporary
pressure of the hour, or may entail some sacrifice and hardship.
"What then is the law it is proposed to repeal? I will state its
provisions fully in detail, but the main proposition--the essential
core of the whole--is the promise, to which the public faith is
pledged, that the United States will redeem in gold coin any of
its notes that may be presented to the treasury on and after the
1st day of January, 1879. This is the vital object of the law.
It does not undertake to settle the nature of our paper money after
than, whether it shall be reissued again, whether it shall thereafter
be a legal tender, nor whether it shall or shall not supersede bank
notes. All this is purposely left to the future. But it does say
that on and after that day the United States note promising to pay
one dollar shall be equal to the gold dollar of the mint.
"The questions then arise--
"First. Ought this promise be performed?
"Second. Can we perform it?
"Third. Are the agencies and measures prescribed in the law
sufficient for the purpose?
"Fourth. If not, what additional measures should be executed?
"Let us consider these questions in their order, with all the
serious deliberation that their conceded importance demands.
"And first, ought this promise be fulfilled?
"To answer this we must fully understand the legal and moral
obligations contained in the notes of the United States. The
purport of the note is as follows:
'THE UNITED STATES PROMISES TO PAY THE BEARER ONE DOLLAR.'
"This note is a promise to pay one dollar. The legal effect of
this note has been announced by the unanimous opinion of the Supreme
Court of the United States, the highest and final judicial authority
in our government.
"The legal tender attribute given to the note has been the subject
of conflicting decisions in that court, but the nature and purport
of it is not only plain on its face, but is concurred in by every
judge of that court and by every judicial tribunal before which
that question has been presented.
"In the case of Bank vs. Supervisors, 7 Wallace, 31, Chief Justice
Chase says:
'But, on the other hand, it is equally clear that these notes are
obligations of the United States. Their name imports obligation.
Every one of them expresses upon its face an engagement of the
nation to pay to the bearer a certain sum. The dollar note is an
engagement to pay a dollar, and the dollar intended is the _coined_
dollar of the United States, a certain quantity in weight and
fineness of gold or silver, authenticated as such by the stamp of
the government. No other dollars had before been recognized by
the legislation of the national government as lawful money.'
"Again, in the case of Bronson vs. Rhodes, 7 Wallace, 251, Chief
Justice Chase says:
'The note dollar was the promise to pay a coined dollar.'
"In the Legal Tender Cases, 12 Wallace, 560, Justice Bradley says:
'It is not an attempt to _coin_ money out of a valueless material,
like the coinage of leather, or ivory, or cowrie shells. _It is
a pledge of the national credit_. It is a _promise_ by the government
to _pay dollars;_ it is not an attempt to _make_ dollars. The
standard of value is not changed. The government simply demands
that its credit shall be accepted and received by public and private
creditors during the pending exigency. . . .
'No one supposes that these government certificates are never to
be paid, that the day of specie payments is never to return. And
it matters not in what form they are issued. . . . Through whatever
changes they pass, their ultimate destiny is _to be_ paid.'
"In all these legal tender cases there is not a word in conflict
with these opinions.
"Thus, then, it is settled that this note is not a dollar, but a
debt due; a promise to pay a dollar in gold coin. Congress may
define the weight and fineness of a dollar, and it has been done
so by providing a gold coin weighing twenty-five and eight-tenths
grains of standard gold nine-tenths fine. The promise is specific
and exact, and its nature is fixed by the law and announced by the
court. Here I might rest as to the nature of the United States
note; but it is proper that I state the law under which it was
issued and the subsequent laws relating to it.
"The act of February 25, 1862, gave birth to this note as well as
the whole financial policy of the war. The first section of that
act authorizes the Secretary of the Treasury to issue, upon the
credit of the United States, United States notes to the amount of
$150,000,000, payable to bearer at the treasury of the United
States. The amount of these notes was subsequently increased during
the war to the maximum sum of $450,000,000, but the nature and
character of the notes was the same as the first ones. The
enlargement of the issue did not in the least affect the obligation
of the United States to pay them in coin. This obligation was
recognized in every loan law passed during the war; and to secure
the note from depreciation the amount was carefully limited, and
every quality was given to it to maintain its value that was possible
during the exigencies of the war. I might show you, from the
contemporaneous debates in Congress, that at every step of the war
the notes were regarded as a temporary loan, in the nature of a
forced loan, but a loan cheerfully borne, and to be redeemed soon
after the war was over.
"It was not until two years after the war, when the advancing value
of the note created an interest to depreciate it in order to advance
prices for the purpose of speculation, that there was any talk
about putting off the payment of the note. The policy of a gradual
contraction of the currency with a view to specie payments was, in
December, 1865, concurred in by the almost unanimous vote of the
House of Representatives, and the act of April 12, 1866, authorized
$4,000,000 of notes a month to be retired and canceled. No one
then questioned either the policy, the duty, or the obligation of
the United States to redeem these notes in coin.
"Why has not this obligation been performed? How comes it that
fourteen years after these notes were issued, and eleven years
after the exigency was over, we are debating whether they shall be
paid, and when they shall be paid? We may well pause to examine
how this plain and positive obligation has so long been deferred
by a nation always sensitive to the public honor.
"The fatal commencement of this long delay was in this provision
of the act, approved March 3, 1863, as follows:
'And the holders of United States notes issued under, and by virtue
of, said acts, shall present the same, for the purpose of exchanging
the same for bonds as therein provided, on or before the 1st day
of July, 1863, and thereafter the right so to exchange the same
shall cease and determine.'
"Thus, under the pressure of war, and the plausible pretext of a
statute of limitations, the most essential legal attribute of the
note was taken away. This act, though convenient in its temporary
results, was a most fatal step, and for my part in acquiescing in,
and voting for it, I have felt more regret than for any act of my
official life. But it must be remembered that the object of this
provision was not to prevent the conversion of notes into bonds,
but to induce their conversion. It was the policy and need of the
government to induce its citizens to exchange the notes freely for
the bonds, so that the notes might again be paid out to meet the
pressing demands of the war. It was believed that if this right
to convert them was limited, in time this would cause them to be
more freely funded; and Mr. Chase, then Secretary of the Treasury,
anxious to prevent a too large increase of the interest of the
public debt, desired to place in the market a five per cent. bond
instead of a six per cent. bond. The fatal error was in not changing
the right to convert the note into a five per cent. bond instead
of a six per cent. bond. This was, in fact, proposed in the
committee on finance, but it was said that a right to convert a
note into a bond at any time, was not so likely to be exercised as
if it could only be exercised at the pleasure of the government.
And this plausible theory to induce the conversion of notes into
bonds was made the basis, after the war was over, for the refusal
of the United States to allow the conversion of its notes into
bonds, and has been the fruitful cause of the continued depreciation
and dishonor of United States notes for the last five years, during
which, our five per cent. bonds have been at par with gold, while
our notes rise and fall in the gamut of depreciation from six to
twenty per cent. below gold.
"Notwithstanding that the right to convert notes into bonds was
taken away, yet, in fact, they were, during the war, received par
for par for bonds; and after the war was over all the interest-
bearing securities were converted into bonds; but the notes--the
money of the people--the artificial measure of value, the most
sacred obligation, because it was past due, was refused either
payment or conversion, thus cutting it off from the full benefit
of the advancing credit of the government, and leaving to it only
the forced quality of legal tender in payment of debts.
"Shortly after the war was over, and notably during the presidential
campaign of 1868, the question arose whether the bonds of the United
States were payable in coin or United States notes. Both notes
and bonds were then below par in coin, the notes ranging from sixty-
seven to seventy-five cents in coin; and five per cent. bonds from
seventy-two to eighty cents in coin. Here again the opportunity
was lost to secure the easy and natural appreciation of our notes
to the gold standard. Had Congress then authorized the conversion
of notes into bonds, when both were depreciated, both would have
advanced to par in gold; but, on the one hand, it was urged that
this would cause a rapid contraction, and, on the other, that the
right to convert the note into a bond was not specie payment; it
was only the exchange of one promise for another. It was specie
payment they very much favored, but did not have the wisdom then
to secure. If the advocates for specie payment had then supported
a restoration of the right to convert notes into bonds, they would
have secured their object with but little opposition. But all
measures to fund the notes at the pleasure of the holder were
defeated, and, instead, there was ingrafted into the act to strengthen
the public credit--
"First, a declaration 'that the faith of the United States is
already pledged to the payment in coin, or its equivalent, of all
the obligations of the United States not bearing interest, known
as United States notes, and of all the interest-bearing obligations
of the United States,' except such as by the law could be paid in
other currency than gold and silver.
"Second, 'and the United States also solemnly pledges its faith to
make provision, at the earliest practicable period, for the redemption
of the United States notes in coin.'
"Here again, the obligation of the government to pay these notes
in coin was recognized, its purpose declared, and the time fixed
'as early as practicable.' What was the effect of this important
act of Congress? Without adding one dollar to the public debt, or
the burden of the debt, both bonds and notes rose in value. Within
one year, the bonds rose to par in gold, making it practicable to
commence the refunding of six per cent. bonds into five per cent.
bonds. The notes rose under the stimulus of this new promise, in
one year, from seventy-six cents to eighty-nine cents in gold, but
no steps whatever were made to redeem them.
"The amount of bank notes authorized was increased fifty-four
millions. The executive department pursued the policy of redeeming
debts not due, and did, from an overflowing treasury, reduce very
largely the public debt, but no steps whatever were taken to advance
the value of our notes. The effect of the act of 1869 was exhausted
on the adjournment of Congress in March, 1870, when the United
States notes were worth eighty-nine cents in gold; and thereabouts,
up and down, with many fluctuations, they have remained to this
day. The bondholder, secure in the promise to him, is happy in
receiving his interest in gold, with his bond above par in gold.
The note holder, the farmer, the artisan, the laborer, whose labor
and production is measured in greenbacks, still receives your
depreciated notes, worth ten per cent. less than gold you promised
him 'at the earliest day practicable.' The one has a promise
performed and the other a promise postponed.
"Thus we stood when the panic of 1873 came upon us; with more paper
money afloat than ever circulated before in any country of the
world. Even then, had we stood firmly, the hoarding tendency of
the panic would have advanced our notes toward the gold standard,
and, in fact, did so during the months of September and October,
until the premium on gold had fallen to eight per cent. But, sir,
at this critical moment, the Secretary of the Treasury, acting, no
doubt, in good faith, but I think without authority of law, issued
twenty-six millions more United States notes--part of the notes
retired and canceled under previous acts. And now, notwithstanding
all the talk about the contraction of the currency, we have not
withdrawn one-half of this illegal issue. On the 1st of September,
1873, we had three hundred and fifty-six million notes outstanding.
Three months afterward, we had three hundred and eighty-two million;
and now we have three hundred and seventy-one million.
"Sir, it was under the light of these events, after the fullest
discussion ever given in Congress, of any question--after debate
before the people during the recess of Congress, and full deliberation
last winter--this act was passed. There was and is now great
difference of opinion as to the details, but the vital promise made
to the note holder to make his note as good as gold in January,
1879, was concurred in by a large majority of both Houses, and by
many who opposed the bill as too slow in its operation. This act
of honor and public faith was applauded by the civilized world and
concurred in by our constituents, the doubts only being as to the
machinery to carry it into effect. The time was fixed by those
who most feared resumption, and no one proposed a longer time. My
honorable friend from Indiana [Mr. Morton] truly said (in the recent
campaign in Ohio) that he participated in framing it; and he and
those who agreed with him fixed the time so remote as to excite
the unfounded charge that the bill was a sham, a mere contrivance
to bridge an election.
"And now, sir, to recapitulate this branch of the question, it is
shown that the holder of these notes has a promise of the United
States, made in February, 1862, to pay him one dollar in gold coin;
that the legal purport of this promise has been declared by the
Supreme Court; that we have taken away from this note one of the
legal attributes given it, which would long since have secured its
payment in coin--that when the note was authorized and issued, it
was understood as redeemable in coin when the war was over; that
our promise to pay it was renewed in 1869--'at as early a day as
practicable;' that by reason of our failure to provide for its
payment, it is still depreciated below par more than one-tenth of
its nominal value; that we renewed this promise, and made it definite
as to time, by act of 1875; that it is a debt due from the United
States, and in law and honor due now in coin. Yet it is proposed
to recall our promise to redeem this note in coin three years hence.
I say, sir, this would be national dishonor. It would destroy the
confidence with which the public creditor rests upon the promises
contained in your bonds. It would greatly tend to arrest the
process by which the interest on your bonds is reduced. It would
accustom our people to the substitution of a temporary wave of
popular opinion for its written contract or promise. It would
weaken in the public mind that keen sense of honor and pride which
has always distinguished the English-speaking nations in dealing
with public obligations.
"An old writer thus describes 'public credit:'
'Credit is a consequence, not a cause; the effect of a substance,
not a substance; it is the sunshine, not the sun; the quickening
_something_, call it what you will, that gives life to trade, gives
being to the branches and moisture to the root; it is the oil of
the wheel, the marrow in the bones, the blood in the veins, and
the spirits in the heart of all the negoce, trade, cash, and commerce
in the world.'
'It is produced, and grows insensibly from fair and upright dealing,
punctual compliance, honorable performance of contracts and covenants;
in short, it is the offspring of universal probity.
'It is apparent even by its nature; it is no way dependent upon
persons, parliament, or any particular men or set of men, as such,
in the world, but upon their conduct and just behavior. Credit
never was chained to men's names, but to their actions; not to
families, clans, or collections of men; no, not to nations. It is
the honor, the justice, the fair dealing, and the equal conduct of
men, bodies of men, nations, and people, that raise the thing called
credit among them. Wheresoever this is found, credit will live
and thrive, grow and increase; where this is wanting, let all the
power and wit of man join together, they can neither give her being
nor preserve her life.
'Arts have been tried on various occasions in the world to raise
credit; art has been found able with more ease to destroy credit
than to raise it. The force of art, assisted by the punctual,
fair, and just dealing abovesaid, may have done much to form a
credit upon the face of things, but we find still the honor would
have done it without the art, but never the art without the honor.
Nor will money itself, which, Solomon says, answers all things,
purchase this thing called credit or restore it when lost. . . .
'Our credit in this case is a public thing. It is rightly called
by some of our writers _national credit_. The word denominates
its original. It is produced by the nation's probity, the honor
and exact performing national engagements.'
"And, sir, passing from considerations of public honor, there are
many reasons of _public policy_ which forbid the repeal of the act
of 1875. That act was generally regarded as the settlement of a
financial policy by which at least the party in power is bound,
and upon the faith of which business men have conducted their
affairs and made their contracts. Debts have been contracted and
paid with the expectation that at the time fixed the gold standard
would measure all obligations, and a repeal of the act would now
reopen all the wild and dangerous speculation schemes that feed
and fatter upon depreciated paper money. The influence that secures
this repeal will not stop here. If we can recall our promise to
pay our notes outstanding why should we not issue more? If we can
disregard our promise to pay them, why shall we regard our promise
not to issue more than $400,000,000, as stipulated for by the act
of 1864? If we can reopen the question of the payment of our notes,
why may we not reopen the question as to the payment of our bonds?
Is the act of 1869 any more sacred than the act of 1875? And if
we can reopen these questions, why not reopen the laws requiring
the payment of either interest or principal of the public debt?
They rest upon acts of Congress which we have the power to repeal.
If the public honor cannot protect our promise to the note holder,
how shall it protect our promise to the bondholder? Already do we
see advocated in high places, by numerous and formidable organizations,
all forms of repudiation, which, if adopted, would reduce our nation
to the credit of a robber chief--worse than the credit of an Algerine
pirate, who at least would not plunder his own countrymen. And if
the public creditor had no safety, what chance would the national
banks--creations of our own and subject to our will--have in
Congress? It has already been proposed to confiscate their bonds,
premium and all, as a mode of paying their notes with greenbacks.
What expedient so easy if we would make money cheap and abundant?
Or, if so extreme a measure could be arrested, what is to prevent
the permanent dethronement of gold as a measure of value, and the
substitution of an interconvertible currency bond, bearing three
and sixty-five hundredths per cent. interest, as a standard of
value; and when it become too expensive to print the notes to pay
the interest, reduce the rate. Why not? Why pay three and sixty-
five hundredths per cent., when it is easier to print three? It is
but an act of Congress. And when the process of repudiation goes
so far that your notes will not buy bread, why then declare against
all interest, and then, after passing through the valley of
humiliation, return again to barter, and honor, and gold again.
"Sir, if you once commence this downward course of repudiation then
there is but one ending. You may, like Mirabeau and the Girondists,
seek to stem the torrent, but you will be swept away by the spirit
you have evoked and the instrument you have created. You complain
now of a want of confidence which makes men hoard their money.
Will you, then, destroy all confidence? No, sir, no; the way to
_restore_ confidence is to _inspire_ it by fulfilling your obligations.
You cannot make men lend you; you cannot make men sell you anything
--either bread, or meat, or wool, or iron, or anything that is or
that can be created--except for that which they choose to take.
You may depreciate the money which you offer, but it will only take
more of it to buy what you want. It is true that the creditor may,
by your laws, be compelled to take your money however much you
depreciate it, but he cannot buy back that which he sold, or its
equivalent in other necessaries of life, and thus he is cheated of
part of what he sold. During the war, when money was depreciating,
many a simple man gladly counted his gains as he sold his goods or
crops at advancing prices, but he found out his mistake when, with
his swollen pile, he tried to replace his stock in trade or laid
in his supplies. Sir, this policy exhausts itself in cheating the
man who buys or sells or loans on credit, who produces something
to sell on credit; whether that something be food or clothing;
whether it be a necessity or a luxury of life. Productive labor,
honest toil, whether of the farmer or the artisan, is deeply
interested in credit. It is credit that gives life and competition
to trade; and credit is destroyed by every scheme that impairs,
delays, or even clouds an obligation.
"Again, sir, an irredeemable and fluctuating currency always raises
the rate of interest on money, while a stable currency or an
improving currency always reduces the rate of interest. This is
easily shown by statistics, but the reason is so obvious that proof
is not needed. If a man lends his money he wants it back again
with its increase; but if the money, when it is to be paid back,
is like to be worth less than when he thinks of loaning it, he will
not loan it except at such rates as will cover the risk of
depreciation. He will prefer to buy land or something of stable
value. If money is at the gold standard, or is advancing toward
that standard, he will loan it readily at a moderate interest, for
he knows he will receive back money of at least equal value to that
he loaned. Again, sir, with a depreciated currency great domestic
productions are cut off from the foreign market; for it is impossible
that with such a currency we can compete on equal terms with rival
nations, whose industry rests upon a specie standard. As we approach
such a standard, we are now able, as to a few articles, to compete
with foreign industry; but it is only as to articles in the
manufacture of which we have peculiar advantages. Let us rest our
industries on that standard, and soon we could compete in the
markets of the world in all the articles produced from iron, wood,
leather, and cotton, the raw basis of which are our national
productions. And it must be remembered that all the countries with
which we compete are specie-paying countries.
"A country that does not rest her industry upon specie is necessarily
excluded from the great manufacturing industries of modern
civilization, and is self-condemned to produce only the raw basis
for advanced industry. Cheap food, climate, soil, or natural
advantages, such as cheap land, vast plains for pasture, or rich
mines, may give to a country wealth and prosperity in spite of the
evils of depreciated paper money; but when we come in competition
with the world in the advanced grades of production which give
employment to the skilled mechanic, we must rest such industry upon
the gold basis, or we enter the lists like a knight with his armor
unbound.
"Again, sir, a depreciated and fluctuating currency is a premium
and bounty to the broker and money changer. Under his manipulation
our paper standard of value goes up and down, and he gambles and
speculates, with all the advantages in his favor. Good people look
on and think that it is gold that is going up and down; that their
money is a dollar still, and trade and traffic in that belief.
But the shrewd speculator calculates daily the depreciation of our
note, the shortening of the yard stick, the shrinkage of the acre,
the lessening of the ton, and thus it is that he daily adds to his
gains from the indifference or delusion of our people.
"Sir, it is an old story, often repeated in our day, and most
eloquently epitomized by Daniel Webster in the often-quoted passage
of his speech, in which he said:
'A disordered currency is one of the greatest of political evils.
It undermines the virtues necessary for the support of the social
system and encourages propensities destructive of its happiness.
It wars against industry, frugality, and economy; and it fosters
the evil spirit of extravagance and speculation. Of all contrivances
for cheating the laboring classes of mankind, none has been more
effectual than that which deluded them with paper money. Ordinary
tyranny, oppression, excessive taxation, these bear lightly upon
the happiness of the mass of the community, compared with the
fraudulent currencies and the robberies committed by depreciated
paper. Our own history has recorded for our instruction enough,
and more than enough, of the demoralizing tendency, the injustice,
and the intolerable oppression of the virtuous and well-disposed,
of a degraded paper currency authorized by law or in any way
countenanced by government.'
"Sir, we must meet this question of specie payments, not only
because the public honor is pledged to do so, but also for the
lesser reason that it is our interest to do so. The only questions
we should permit ourselves to discuss are the means and measures
of doing so.
"And now, sir, let us examine the reasons that have been given for
the repeal of the resumption act by those who, though favoring
resumption, yet think the act should be repealed for one or other
of the following reasons:
"First. That it is not advisable to fix a day for resumption.
"Second. Or at least until the balance of trade is in our favor.
"Third. That it produces a contraction of the currency.
"Fourth. That it injuriously adds to the burden of existing
debts.
"Let us glance at these objections.
"First. As to fixing a day for resumption.
"If it was possible to agree upon measures that would secure
resumption without fixing a time, I agree it would not be indispensable,
though not unadvisable, to fix a time; but such agreement is utterly
impossible. Of the multitude of schemes that have been presented
to me by intelligent men trying to solve this problem, many could
have been selected that in my opinion would be practicable; but of
all of them not one ever has or is likely to secure the assent of
a majority of a body so numerous as Congress. One difficulty we
have encountered is that the Democratic party, though in the
minority, has never presented in any form, through any leading
member, a plan for resumption, but with widely differing opinions
has joined in opposing any and every measure from the other side.
I understand from the papers that our Democratic friends, through
a caucus, and through a caucus committee of which my colleague is
chairman, have been laboring to agree upon a plan for specie
payments. After his frequent speeches to us about secret conclaves,
about shams and deceptions, and such like polite and friendly
comments upon the work of the Republican party, I might greet my
colleague with such happy phrases about _his_ caucus; but I will
not, but, on the contrary, I commend his labors, and sincerely hope
that he and his political friends may agree upon some plan to reach
a specie standard, and not one to avoid to, to prevent it, to defer
it. Under color of intending to prepare for it, I hope they will
not make their measure the pretext for repealing the law as it
stands, which fixes a day for resumption and will secure the end
we both aim at.
"I frankly state for the Republican party that, while we could
agree to fixing the time for specie payments and upon conferring
the ample and sufficient powers upon the Secretary of the Treasury
contained in the law, we could not agree in prescribing the precise
mode in which the process should be executed. Nor, in my opinion,
was it at all essential that we should. Much must be left to the
discretion of the officer charged with the execution of such a law.
The powers conferred, as I shall show hereafter, are ample; and
the discretion given will be executed under the eye of Congress.
"And, sir, there is a strong force in the fact that in every example
we have of the successful resumption of specie payments, in this
and other countries, a fixed day has been named by legislative
authority, and the details and power of execution have been left
to executive authority. Thus, in Great Britain, the act of parliament
of July 2, 1819, fixed the time for full resumption at the 1st day
of May, 1823, and for a graduated resumption in gold at intermediate
dates; and for fractional sums under forty shillings to be paid in
silver coin; and the governor and directors of the Bank of England
were charged with its execution, and authorized at their discretion
to resume payment in full on the 1st day of May, 1822. France is
now successfully passing through the same process of resumption,
the time being fixed (two years ago) for January 1, 1878, and now
practically attained.
"In our own country many of the states have presented similar laws
in case of suspended bank payments, and in some cases the suspended
banks have, by associated action, fixed a time for general resumption,
and each bank adopted its own expedient for it. Sir, the light of
experience is the lamp of wisdom. I can recall no case of successful
resumption where a fixed future time has not been presented
beforehand, either by law or agreement; while the historical examples
of repudiation of currency have come by the drifting process, by
a gradual decline of value, by increased issues, and a refusal to
provide measures of redemption, until the whole mass disappeared,
dishonored and repudiated.
"This concurrence in the mode of resumption by so many governments
was the strongest possible instruction to Congress when fixing a
plan of resumption for the United States, and should satisfy
reasonable men of its wisdom.
"Besides, it would seem to be but fair that everyone should have
plain notice of so important a fact. If the measures only were
presented and no time fixed it would be a matter of speculation,
and the discretionary powers of the Secretary of the Treasury could
be exercised with a view to hasten or postpone the time to the
injury of individuals.
"As to the date selected, I can only repeat it was placed as remote
as any one suggested; far more so than is necessary to secure the
object, and so that the fluctuations of value will scarcely exceed
in four years what they have frequently been in a single year. It
allows ample time to arrange all the relations of debtor and
creditor, and to enable Congress to provide any additional measure
in aid of redemption, or, if events make it expedient, to postpone
the time."