SENIORITY OF SERVICE IN THE SENATE.
Notified That My Years of Service Exceed Those of Thomas Benton--
Celebration of the Sons of the American Revolution at the Washington
Monument--My Address to Those Present--Departure for the West with
General Miles--Our Arrival at Woodlake, Nebraska--Neither "Wood"
nor "Lake"--Enjoying the Pleasures of Camp Life--Bound for Big
Spring, South Dakota--Return via Sioux City, St. Paul and Minneapolis
--Marvelous Growth of the "Twin Cities"--Publication of the "Sherman
Letters" by General Sherman's Daughter Rachel--First Political
Speech of the Campaign at Akron--Republican Victory in the State
of Ohio--Return to Washington for the Winter of 1894-95--Marriage
of Our Adopted Daughter Mary with James Iver McCallum--A Short
Session of Congress Devoted Mainly to Appropriations--Conclusion.
CHAPTER XXXI.
EFFECT OF THE BLAND BILL ON THE COUNTRY.
An Act Passed by the House Providing for the Free Coinage of the
Silver Dollar--Mr. Ewing Makes an Attack on Resumption--Fear of
Capitalists Regarding Our National Credit--Four Per Cents. Sell
Below Par--Suspense and Anxiety Continued Throughout the Year--My
First Report as Secretary of the Treasury--Recommendations of a
Policy to be Pursued "To Strengthen the Public Credit"--Substitution
of $50,000,000 in Silver Coin for Fractional Currency--Silver as
a Medium of Circulation--Its Fluctuation in Value--Importance of
Gold as a Standard of Value--Changes in the Market Value of Silver
Since 1873.
The silver question was suddenly thrust upon the House of
Representatives on the 5th of November, 1877, by a motion, submitted
by Mr. Bland, of Missouri, that the rules be suspended so as to
enable him to introduce, and the House to pass, a bill to authorize
the free coinage of the standard silver dollar of 412½ grains, and
to restore its legal tender character. The motion to suspend the
rules cut off all amendments and all debate. Several members
demanded a hearing. Efforts were made to adjourn, but this was
refused. The previous question being ordered and the rules suspended,
a single vote would introduce the bill without a reference to a
committee, and would pass it without any power of amendment, without
the usual reading at three separate times. The motion was agreed
to by a vote of yeas 163, nays 34. So, two-thirds voting in favor
thereof, the rules were suspended and the bill was passed.
The first section of this bill provided that there shall be coined,
at the several mints of the United States, the silver dollar of
the weight of 412½ grains, troy, of standard silver, as provided
in the act of January 18, 1837, on which shall be the devices and
superscriptions provided by said act; which coins, together with
all silver dollars heretofore coined by the United States, of like
weight and fineness, shall be a legal tender at their nominal value
for all debts and dues, public and private, except where otherwise
provided by contract; and any owner of silver bullion may deposit
the same in any United States coinage mint or assay office, to be
coined into such dollars for his benefit, upon the same terms and
conditions as gold bullion is deposited for coinage under existing
law. Section 2 provided for repealing all acts and parts of acts
inconsistent with provisions of the act.
Thus this bill, of wide-reaching importance, was introduced and
passed by the House under the previous question, and a suspension
of the rules without debate on the same day of its introduction by
a vote of yeas 163, nays 34. It was sent to the Senate and referred
to the committee on finance.
On the same day Mr. Ewing moved in the House of Representatives to
suspend the rules and adopt the following resolution:
"_Resolved_, That the bill to repeal the third section of the
resumption law be made the special order, not to interfere with
any appropriation bills, for to-morrow at the expiration of the
morning hour, and from day to day thereafter until the following
Tuesday at three o'clock, when the previous question shall be
ordered on it and on any amendments then pending, all amendments
meanwhile to be in order, provided the time shall be extended, if
necessary, so as to allow five days after the morning hour for the
consideration of said bill and amendments."
This resolution passed by a vote of yeas 143, nays 47.
In consequence of this action of the House, the syndicate declined
to offer the bonds, and no further calls for six per cent. bonds
were therefore made.
On the 7th of November August Belmont wrote me from New York as
follows;
"I fear that the threatening position of the silver question will
check completely any demand for the four per cent. bonds here and
in Europe. The damage which the passage of this measure will do
to our public credit abroad _cannot be over estimated_. To remonetize
silver upon the old standard, and make it a legal tender for all
private and public debts, will be considered by the whole civilized
world as an act of repudiation on the part of the federal government,
and cast a stain upon our national credit, which has hitherto stood
as high and bright as that of any government in the world.
"It is just as much repudiation for the federal government to compel
its bondholders to accept the payment of their interest in silver,
which is at a discount of ten per cent., against the gold which
the government received for the bonds, as it would be if Congress
decreed that all the bonds of the United States should not bear a
higher interest than two per cent. per annum. To do such a thing
now as is contemplated by the Bland silver bill, when the federal
finances are in a flourishing condition, when the premium of gold
has been reduced two and a half to three per cent., and when our
funded debt sells equal to that of any other public security in
the world, is actually as if a man of wealth and position, who had
by a life-long course of strict honesty acquired the well-earned
confidence and respect of his fellow-citizens and of the outer
world, should in the midst of his affluence, and without the
palliating excuse of any temptation of want or necessity, commit
open theft.
"I am sure I do not over estimate the damaging effect which the
passage of the bill must have upon American credit. All my letters
from abroad, and conversations with people familiar with the English
and continental money markets, confirm my convictions on that point.
When you look back and find in the archives of your department the
proud records of a nation's faith kept inviolate with a most
punctilious and chivalrous spirit during a century, amidst all the
trials of foreign and civil war which strained the resources of
our country to the very verge of ruin, the task before you is
certainly a difficult and harassing one; but while the path of duty
is often narrow and difficult, it is always straight and so well
defined that it can never be mistaken.
"Sound financial policy and love of our country's fair name alike
demand from those to whom the administration of its affairs have
been intrusted the most uncompromising hostility to the _blind_
and _dishonest_ frenzy which has taken hold of Congress, and I
sincerely hope that you will be seconded in the task before you by
the hearty support of the President and your colleagues."
On the 9th of November I was advised that the four per cent. bonds
were selling at 99 and interest, in a small way only. The syndicate
had bought in the market about $750,000 of these bonds at less than
par in order to prevent a further depreciation. On the same day
I was informed by August Belmont & Co., as follows:
"After conference and careful consideration of the whole subject,
it is the conclusion of all the associates, in Europe and here,
that it is injudicious to undertake further negotiations of the
fours, during the pendency of the legislation proposing to make
silver a full legal tender, as the discussion has checked dealings
in the bonds by the public. To make a call in the face of a market
quotation (to-day 98¾ and interest) below the price fixed by law
would not convince the public that new business had been undertaken
at a loss, but that the call was connected with business previously
done.
* * * * *
"Further than this, we are satisfied that, holding the views
expressed in your letters mentioned, the President and all his
cabinet will agree with us that it would be wrong for us to ask
for another call at this juncture, as such action would be held by
those advocating the legislation in favor of silver as proving that
such legislation in our opinion was not prejudicial to the national
credit and the refunding of our national debt."
On the 10th of November Mr. Conant wrote me that our bonds had been
depressed by the rumors which had been circulated respecting probable
legislation which would depreciate their value, and that four and
a half per cent. bonds had fallen off three-fourths per cent. He
said: "If, in any legislation which may be enacted regarding
silver, provision could be made not only exempting the debt and
interest thereon from payment in silver, but declaring that payment
of the same shall be made in gold coin, it would aid us immeasurably
in placing our bonds."
Two days later I received a letter from F. O. French, of New York,
as follows:
"Our business people are very much alarmed at the rumored strength
of the silver people, and, as they apprehend the gravest disasters
from the success of the Bland bill, a committee of gentlemen
connected with insurance and trust companies, as well as with the
banks, go to Washington to-morrow to present their views to the
finance committee.
"Once dispatch this silver business--and I have faith that it cannot
live in the light of full discussion by the Senate--and we shall
renew funding, and by attaining resumption put an end to financial
discussions as we did to slavery."
And on the following day I wrote to August Belmont & Co.:
"Your letter of the 9th instant was received, and also a personal
letter from Mr. Belmont.
"I am watchful of the course of legislation in Congress and of the
current of public sentiment, both in our own and foreign countries,
on the silver question. I am not prepared at present to give any
assurance as to what will be done in Congress, nor of the action
of the executive department. It is better to let the matter stand
as it is, awaiting events without any committals whatever. I have
faith to believe that all will come our right so far as the public
credit is affected, and will write you again when anything definite
can be said."
On the 29th of November Belmont wrote me a long letter containing
the following statements:
"I need hardly assure you, at this late day, of my earnest solicitude
for the success of the funding and resumption operations, and of
my personal deep regret, apart from all pecuniary considerations,
as a member of the syndicate, to see this unfortunate situation of
the silver question put a complete stop to all further sales of
the four per cent. bonds at present, here and in England. The
capitalists and banks on both sides of the Atlantic will not buy
a bond at par _in gold_, when it is almost certain, from the
overwhelming vote in the House, and the known attitude of the
Senate, that a silver bill, making the old silver dollar a legal
tender for all private and public obligations, will pass both Houses
this winter. . . .
"The bonds are selling at ninety-nine and one-fourth in gold in open
market, and it seems to me very doubtful policy to offer bonds, by
us, to the public at this moment, and thus assist the advocates of
the old silver dollar by our apparent indifference to the injustice
and dishonesty of the Bland bill."
This condition of suspense and anxiety continued during the remainder
of the year.
My first annual report, as Secretary of the Treasury, was made to
Congress on the 3rd of December, 1877. The statement made of our
financial condition was a very favorable one, showing a surplus
revenue of $30,340,577.69. The receipts from different sources of
revenue were largely diminished, but the expenditures for the year
were reduced by an equal amount. The surplus revenue was applied
to the redemption of United States notes and of fractional currency,
and to the payment of six per cent. bonds for the sinking fund.
The report dealt with the usual topics of such reports, embracing
a great variety of subjects. What attracted the most attention
was, naturally, what was said about refunding the public debt and
the resumption of specie payments. The results of refunding during
the previous year have already been sufficiently stated. The plans
for the resumption of specie payments were fully explained. The
mode and manner of bringing this about was not specified in the
law, but the time for resumption was fixed and the means provided
for accumulating coin for that purpose were ample.
By the resumption act the Secretary of the Treasury was required
to redeem legal tender notes to the amount of eighty per centum of
the sum of national bank notes issued, and to continue such
redemption, as circulating notes were issued, until there was
outstanding the sum of $300,000,000 of such legal tender United
States notes, and no more.
By the same act it was provided that, on and after the 1st day of
January, 1879, the Secretary of the Treasury should 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," it continued, "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
14, 1870, 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."
In obedience to this provision I had sold at par, for coin,
$15,000,000 four and a half per cent. bonds, or $5,000,000 during
each of the months of May, June and July, and $25,000,000 at par,
in coin, of four per cent. bonds, or $5,000,000 for each of the
months of August, September, October, November and December. Of
the coin thus received $4,000,000 had been sold for the redemption
of United States notes, and the residue was in the treasury. The
surplus revenue had also, under the same authority, been applied
to the redemption of the residue of United States notes, not redeemed
by the sale of coin, and the balance was held in the treasury in
preparation for resumption.
These operations, aided greatly, no doubt, by the favorable condition
of our foreign commerce, had advanced the market value of United
States notes to ninety-seven and three-eighths per cent., or within
nearly two and a half per cent. of coin. They had also conclusively
demonstrated the practicability of restoring United States notes
to par, in coin, by the time fixed by law, and that without disturbing
either domestic or foreign trade or commerce. Every step had been
accompanied with growing business, with the advance of public
credit, and the steady appreciation of United States notes. The
export of bullion had been arrested, and our domestic supply had
accumulated in the treasury. The exportation of other domestic
products had been largely increased, with great advantage to all
industries. I said the course adopted under the resumption act,
if pursued, would probably be followed with like favorable results,
and a sufficient fund for the maintenance of resumption would
doubtless accumulate in the treasury at or before the date fixed
by law.
I strongly urged the firm maintenance of a policy that would make
good the promise contained in the United States note when issued--
a promise repeated in the act "To strengthen the public credit,"
approved March 18, 1869, and made definite and effective by the
resumption act, and asserted that dishonored notes, less valuable
than the coin they promise, though justified by the necessity which
led to their issue, should be made good as soon as practicable;
that the public credit was injured by failure to redeem them; that
every holder who was compelled by law to receive them was deprived
of a part of his just due; that our national resources being ample,
the process of appreciation being almost complete, and the wisdom
of the law having been demonstrated, it was the dictate of good
policy and good faith to continue the process of preparation, so
that, at or before the time fixed by law, every United States note
would have equal purchasing power with coin; that to reverse this
policy in the face of assured success would greatly impair the
public credit, arrest the process of reducing the interest on the
public debt, and cause anew the financial distress our country had
recently suffered.
The first section of the resumption act plainly provided for the
permanent substitution of silver coin for the whole amount of
fractional currency outstanding. Section 3 directed the permanent
reduction of United States notes to an amount not exceeding
$300,000,000. No distinct legislative declaration was made in the
resumption act that notes redeemed after that limit was reached
should not be reissued; but section 3579 of the Revised Statutes
of the United States provided that "when any United States notes
are returned to the treasury they may be reissued, from time to
time, as the exigencies of the public interest may require."
I expressed in my report the opinion that, under this section,
notes, when redeemed after the 1st of January, 1879, if the amount
outstanding was not in excess of $300,000,000, might be reissued
as the exigencies of the public service required. A note redeemed
with coin was in the treasury and subject to the same law as if
received for taxes, or as a bank note, when redeemed by the
corporation issuing it. The authority to reissue it did not depend
upon the mode in which it was returned to the treasury. But this
construction was controverted, and I thought should be settled by
distinct provisions of law. It should not be open to doubt or
dispute. The decision of this question by Congress would involve
not merely the construction of existing law, but the public policy
of maintaining in circulation United States notes, either with or
without the legal tender clause. These notes were of great public
convenience--they circulated readily; were of universal credit;
were a debt of the people without interest; were protected by every
possible safeguard against counterfeiting; and, when redeemable in
coin at the demand of the holder, formed a paper currency as good
as had yet been devised.
It was conceded, I said, that a certain amount could, with the aid
of an ample reserve in coin, be always maintained in circulation.
Should not the benefit of this circulation inure to the people,
rather than to corporations, either state or national? The government
had ample facility for the collection, custody, and care of the
coin reserves of the country. It was a safer custodian of such
reserves than a multitude of scattered banks would be. The authority
to issue circulating notes by banks was not given to the banks for
their benefit, but for the public convenience, and to enable them
to meet the ebb and flow of currency caused by varying crops,
productions, and seasons. It was indispensable that a power should
exist somewhere to issue and loan credit money at certain times,
and to redeem it at others. This function could be performed better
by corporations than by the government. The government could not
loan money, deal in bills of exchange, or make advances on property.
I expressed the opinion, that the best currency for the people of
the United States would be a carefully-limited amount of United
States notes, promptly redeemable on presentation in coin, supported
by ample reserves of coin, and supplemented by a system of national
banks, organized under general laws, free and open to all, with
power to issue circulating notes secured by United States bonds,
deposited with the government and redeemable on demand in United
States notes or coin. Such a system would secure to the people a
safe currency of equal value in all parts of the country, receivable
for all dues, and easily convertible into coin. Interest could
thus be saved on so much of the public debt as could be conveniently
maintained in permanent circulation, leaving to national banks the
proper business of such corporations, of providing currency for
the varying changes, the ebb and flow of trade.
I said that the legal tender quality given to United States notes
was intended to maintain them in forced circulation at a time when
their depreciation was inevitable. When they were redeemable in
coin this quality might either be withdrawn or retained, without
affecting their use as currency in ordinary times. But all experience
had shown that there were periods when, under any system of paper
money, however carefully guarded, it was impracticable to maintain
actual coin redemption. Usually contracts would be based upon
current paper money, and it was just that, during a sudden panic,
or an unreasonable demand for coin, the creditor should not be
allowed to demand payment in other than the currency upon which
the debt was contracted. To meet this contingency, it would seem
to be right to maintain the legal tender quality of the United
States notes. If they were not at par with coin it was the fault
of the government and not of the debtor, or, rather, it was the
result of unforseen stringency not contemplated by the contracting
parties.
In establishing a system of paper money, designed to be permanent,
I said it should be remembered that theretofore no expedient had
been devised, either in this or other countries, that in times of
panic or adverse trade had prevented the drain and exhaustion of
coin reserves, however large or carefully guarded. Every such
system must provide for a suspension of specie payment. Laws might
forbid or ignore such a contingency, but it would come; and when
it came it could not be resisted, but had to be acknowledged and
declared, to prevent unnecessary sacrifice and ruin. In our free
government the power to make this declaration would not be willingly
intrusted to individuals, but should be determined by events and
conditions known to all. It would be far better to fix the maximum
of legal tender notes at $300,000,000, supported by a minimum
reserve of $100,000,000, of coin, only to be used for the redemption
of notes, not to be reissued until the reserve was restored. A
demand of coin to exhaust such a reserve might not occur, but, if
events should force it, the fact would be known and could be
declared, and would justify a temporary suspension of specie
payments. Some such expedient could, no doubt, be provided by
Congress for an exceptional emergency. In other times the general
confidence in these notes would maintain them at par in coin, and
justify their use as reserves of banks and for the redemption of
bank notes.
As to the fractional currency I said the resumption act provided
for the exchange and substitution of silver coins for such currency.
To facilitate this exchange, the joint resolution, approved July
22, 1876, provided that such coin should be issued to an amount
not exceeding $10,000,000, for an equal amount of legal tender
notes. It also provided that the aggregate amount of such coin
and fractional currency outstanding should not exceed, at any time,
$50,000,000. That limit would have been reached if the whole amount
of fractional currency issued and not redeemed, had been held to
be "outstanding." It was well known, however, that a very large
amount of fractional currency issued had been destroyed, and could
not be presented for redemption, and could hardly be held to be
"outstanding." The Treasurer of the United States, the Comptroller
of the Currency, and the Director of the Mint concurred in estimating
the amount, so lost and destroyed, to be not less than $8,083,513.
As it was evident that Congress intended to provide an aggregate
issue of $50,000,000 of such coin and currency in circulation, I
directed the further issue of silver coin, equal in amount to the
currency estimated to have been lost and destroyed.
I recommended that the limitation upon the amount of such fractional
coin, to be issued in exchange for United States notes, be repealed.
The coin was readily taken, was in great favor with the people,
its issue was profitable to the government, and experience had
shown that there was no difficulty in maintaining it at par with
United States notes. The estimated amount of such coin in circulation
in the United States in 1860, at par with gold, was $43,000,000.
Great Britain, with a population of 32,000,000, maintained an
inferior fractional coin to the amount of $92,463,500, at par with
gold, and other nations maintained a much larger _per capita_
amount. The true limit of such coin was the demand that might be
made for its issue, and if only issued in exchange for United
States notes there was no danger of an excess being issued.
By the coinage act of 1873, any person might deposit silver bullion
at the mint to be coined into trade dollars of the weight of 420
grains, troy, upon the payment of the cost of coinage. This
provision had been made at a time when such a dollar, worth in the
market $1.02-13/100 in gold, was designed for the use of trade in
China, where silver was the only standard. By the joint resolution
of July 22, 1876, passed when the trade dollar in market value,
had fallen greatly below one dollar in gold, it was provided that
it should not be thereafter a legal tender, and the Secretary of
the Treasury was authorized "to limit the coinage thereof to such
an amount as he may deem sufficient to meet the export demand for
the same." Under these laws the amount of trade dollars issued,
mainly for exportation, was $30,710,400.
In October, 1877, it became apparent that there was no further
export demand for trade dollars, but deposits of silver bullion
were made, and such dollars were demanded of the mint for circulation
in the United States, that the owner might secure the difference
between the value of such bullion in the market and United States
notes. At the time the mints were fully occupied by the issue of
fractional, and other coins, on account of the government. Therefore,
under the authority of the law of 1876 referred to, I directed that
no further issues of trade dollars be made until necessary again
to meet an export demand. In case another silver dollar was
authorized, I recommended that the trade dollar be discontinued.
The question of the issue of a silver dollar for circulation as
money had, previous to my report, been discussed and carefully
examined by a commission organized by Congress, which had recommended
the coinage of the old silver dollar. With such legislative
provisions as would maintain its current value at par with gold,
its issue was recommended by me. I thought a gold coin of the
denomination of one dollar was too small for convenient circulation,
while such a coin in silver would be convenient for a multitude of
daily transactions, and in a form to satisfy the natural instinct
of hoarding.
I discussed the silver question to some length and said that of
the metals, silver was of the most general use for coinage. It
was a part of every system of coinage, even in countries where gold
was the sole legal standard. It best measured the common wants of
life, but, from its weight and bulk, was not a convenient medium
in the larger exchanges of commerce. Its production was reasonably
steady in amount. The relative market value of silver and gold
was far more stable than that of any other two commodities--still,
it did vary. It was not in the power of human law to prevent the
variation. This inherent difficulty had compelled all nations to
adopt one or the other as the sole standard of value, or to authorize
an alternative standard of the cheaper coin, or to coin both metals
at an arbitrary standard, and to maintain one a par with the other
by limiting the amount and legal tender quality of the cheaper
coin, and receiving or redeeming it at par with the other.
It had been the careful study of statesmen for many years to secure
a bimetallic currency not subject to the changes of market value,
and so adjusted that both kinds could be kept in circulation
together, not alternating with each other. The growing tendency
had been to adopt, for coins, the principle of "redeemability"
applied to different forms of paper money. By limiting tokens,
silver, and paper money, to the amount needed for business, and
promptly receiving or redeeming all that might at any time be in
excess, all these forms of money could be kept in circulation, in
large amounts, at par with gold. In this way, tokens of inferior
intrinsic value were readily circulated, and did not depreciate
below the paper money into which they were convertible. The
fractional coin then in circulation, though the silver of which it
was composed was of less market value than the paper money, passed
readily among all classes of people and answered all the purposes
for which it was designed. And so the silver dollar, if restored
to our coinage, would greatly add to the convenience of the people.
But this coin should be subject to the same rule, as to issue and
convertibility, as other forms of money. If the market value of
the silver in it was less than that of gold coin of the same
denomination, and it was issued in unlimited qualities, and made
a legal tender for all debts, it would demonetize gold and depreciate
our paper money.
The importance of gold as the standard of value was conceded by
all. Since 1834, it had been practically the sole coin standard
of the United States, and, since 1815, been the sole standard of
Great Britain. Germany had recently adopted the same standard.
France, and other Latin nations, had suspended the coinage of
silver, and, it was supposed, would gradually either adopt the sole
standard of gold, or provide for the convertibility of silver coin,
on the demand of the holder, into gold coin.
In the United States, several experiments had been made with the
view of retaining both gold and silver in circulation. The 2nd
Congress undertook to establish the ratio of fifteen of silver to
one of gold, with free coinage of both metals. By this ratio gold
was under-valued, as one ounce of gold was worth more in the markets
of the world than fifteen ounces of silver, and gold, therefore,
was exported. To correct this, in 1837, the ratio was fixed at
sixteen to one, but sixteen ounces of silver were worth, in the
market, more than one ounce of gold, so that silver was demonetized.
These difficulties in the adjustment of gold and silver coinage
had been fully considered by Congress, prior to the passage of the
act approved February 21, 1853. By that act a new, and it was
believed a permanent, policy was adopted to secure the simultaneous
circulation of both silver and gold coins in the United States.
Silver fractional coins were provided for at a ratio of 14.88 in
silver to one in gold, and were only issued in exchange for gold
coin. The right of private parties to deposit silver bullion for
such coinage was repealed, and these coins were issued from bullion
purchased by the Treasurer of the Mint, and only upon the account,
and for the profit, of the United States. The coin was a legal
tender only in payment of debts for all sums not exceeding five
dollars. Though the silver in this coin was then worth in the
market 3.13 cents on the dollar less than gold coin, yet its
convenience for use in change, its issue by the government only in
exchange for, and its practical convertibility into, gold coin,
maintained it in circulation at par with gold coin. If the slight
error in the ratio of 1792 prevented gold from entering into
circulation for forty-five years, and the slight error in 1837
brought gold into circulation and banished silver until 1853, how
much more certainly would an error then of nine per cent. cause
gold to be exported and silver to become the sole standard of value?
Was it worth while to travel again the round of errors, when
experience had demonstrated that both metals could only be maintained
in circulation together by adhering to the policy of 1853?
The silver dollar was not mentioned in the act of 1853, but from
1792 until 1874 it was worth more in the market than the gold dollar
provided for in the act of 1837. It was not a current coin
contemplated as being in circulation at the passage of the act of
February 12, 1873. The whole amount of such dollars, issued prior
to 1853, was $2,553,000. Subsequent to 1853, and until it was
dropped from our coinage in 1873, the total amount issued was
$5,492,838, and this was almost exclusively for exportation.
By the coinage act approved February 12, 1873, fractional silver
coins were authorized, similar in general character to the coins
of 1853, but with a slight increase in silver in them, to make them
conform exactly to the French coinage, and the old dollar was
replaced by the trade dollar of 420 grains of standard silver.
Much complaint had been made that this was done with the design of
depriving the people of the privilege of paying their debts in a
cheaper money than gold, but it was manifest that this was an error.
No one then did or could foresee the subsequent fall in the market
value of silver. The silver dollar was an unknown coin to the
people, and was not in circulation even on the Pacific slope, where
coin was in common use. The trade dollar of 420 grains was
substituted for the silver dollar of 412½ grains because it was
believed that it was better adapted to supersede the Mexican dollar
in the Chinese trade, and experiment proved this to be true. Since
the trade dollar was authorized $30,710,400 had been issued, or
nearly four times the entire issue of old silver dollars since the
foundation of the government. Had not the coinage act of 1873
passed, the United States would have been compelled to suspend the
free coinage of silver dollars, as the Latin nations were, or to
accept silver as the sole coin standard of value.
Since February, 1873, great changes had occurred in the market
value of silver. Prior to that time the silver in the old dollar
was worth more than a gold dollar, while it was worth then, in
1877, about 92 cents. If by law any holder of silver bullion might
deposit in the mint and demand a full legal tender dollar for every
412½ grains of standard silver deposited, the result would be
inevitable that as soon as the mints could supply the demand the
silver dollar would, by a financial law as fixed and invariable as
the law of gravitation, become the only standard of value. All
forms of paper money would fall to that standard or below it, and
gold would be demonetized and quoted at a premium equal to its
value in the markets of the world. For a time the run to deposit
bullion at the mint would give to silver an artificial value, of
which the holders and producers of silver bullion would have the
sole benefit. The utmost capacity of the mints would be employed
for years to supply this demand at the cost of, and without profit
to, the people. The silver dollar would take the place of gold as
rapidly as coined, and be used in the payment of customs duties,
causing an accumulation of such coins in the treasury. If used in
paying the interest on the public debt, the grave questions then
presented would arise with public creditors, seriously affecting
the public credit.
It had been urged that the free coinage of silver in the United
States would restore its market value to that of gold. Market
value was fixed by the world, and not by the United States alone,
and was affected by the whole mass of silver in the world. As the
enormous and continuous demand for silver in Asia had not prevented
the fall of silver, it was not likely that the limited demand for
silver coin in this country, where paper money then was, and would
be, the chief medium of exchange, would cause any considerable
advance in its value. This advance, if any, would be secured by
the demand for silver bullion for coin, to be issued by and for
the United States, as well as if it were issued for the benefit of
the holder of the bullion. If the financial condition of our
country was so grievous that we must at every hazard have a cheaper
dollar, in order to lessen the burden of debts already contracted,
it would be far better, rather than to adopt the single standard
of silver, to boldly reduce the number of grains in the gold dollar,
or to abandon and retrace all efforts to make United States notes
equal to coin. Either expedient would do greater harm to the public
at large than any possible benefit to debtors.
The free coinage of silver would also impair the pledge made of
the customs duties, by the act of February, 1862, for payment of
the interest of the public debt. The policy adhered to of collecting
these duties in gold coin, had been the chief cause of upholding
and advancing the public credit, and making it possible to lessen
the burden of interest by the process of refunding.
In view of these considerations, I felt it to be my duty to earnestly
urge upon Congress the serious objections to the free coinage of
silver on such conditions as would demonetize gold, greatly disturb
all the financial operations of the government, suddenly revolutionize
the basis of our currency, throw upon the government the increased
cost of coinage, arrest the refunding of the public debt, and impair
the public credit, with no apparent advantage to the people at
large.
I believed that all the beneficial results hoped for from a liberal
issue of silver coin could be secured by issuing this coin, in
pursuance of the general policy of the act of 1853, in exchange
for United States notes, coined from bullion purchased in the open
market, by the United States, and by maintaining it by redemption,
or otherwise, at par with gold coin. It could be made a legal
tender for such sums and on such contracts as would secure to it
the most general circulation. It could be easily redeemed in United
States notes and gold coin, and only reissued when demanded for
public convenience. If the essential quality of redeemability
given to the United States notes, bank bills, tokens, fractional
coins and currency, maintained them at par, how much easier it
would be to maintain the silver dollar, of intrinsic market value
nearly equal to gold, at par with gold coin, by giving to it the
like quality of redeemability. To still further secure a fixed
relative value of silver and gold, the United States might invite
an international convention of commercial nations. Even such a
convention, while it might check the fall of silver, could not
prevent the operation of that higher law which places the market
value of silver above human control. Issued upon the conditions
stated, I was of opinion that the silver dollar would be a great
public advantage, but that if issued without limit, upon the demand
of the owners of silver bullion, it would be a great public injury.
CHAPTER XXXII.
ENACTMENT OF THE BLAND-ALLISON SILVER LAW.
Amendments to the Act Reported by the Committee on Finance--Revival
of a Letter Written by Me in 1868--Explained in Letter to Justin
S. Morrill Ten Years Later--Text of the Bland Silver Bill as Amended
by the Senate and Agreed to by the House--Vetoed by President Hayes
--Becomes a Law Notwithstanding His Objections--I Decide to Terminate
the Existing Contract with the Syndicate--Subscriptions Invited
for Four per Cent. Bonds--Preparations for Resumption--Interviews
with Committees of Both Houses--Condition of the Bank of England
as Compared with the United States Treasury--Mr. Buckner Changes
His Views Somewhat.
The President's message supported and strengthened the position
taken by me both in favor of the policy of resumption and against
the free coinage of silver provided for in the Bland bill. The
comments in the public press, both in the United States and in
Europe, generally sustained the position taken by the President
and myself. I soon had assurances that the Bland bill would not
pass the Senate without radical changes. Even the House of
Representatives, so recently eager to repeal the resumption act,
and so hasty and united for the free coinage of silver, had become
more conservative and would not have favored either measure without
material changes. I conversed with Mr. Allison and wrote him the
following letter:
"Washington, D. C., December 10, 1877.
"Hon. W. B. Allison, U. S. Senate.
"Dear Sir:--Permit me to make an earnest appeal to you to so amend
the silver bill that it will not arrest the refunding of our debt
or prevent the sale of our four per cent. bonds. I know that upon
you must mainly rest the responsibility of this measure, and I
believe that you would not do anything that you did not think would
advance the public service, whatever pressure might be brought to
bear upon you.
"It is now perfectly certain that unless the customs duties and
the public debt--as least so much of it as was issued since February,
1873--are excepted, we cannot sell the bonds. The shock to our
credit will bring back from abroad United States bonds, and our
people will then have a chance to buy the existing bonds and we
cannot sell the four per cent. bonds. This will be a grievous loss
and damage to the administration and to our party, for which we
must be held responsible. You know I have been as much in favor
of the silver dollar as anyone, but if it is to be used to raise
these difficult questions with public creditors, it will be an
unmixed evil.
"I wish I could impress you as I feel about this matter, and I know
you would then share in the responsibility, if there is any, in so
amending this bill that we can have all that is good out of it
without the sure evil that may come from it if it arrests our
funding and resumption operations.
"With much respect, yours, etc.
"John Sherman.
The amendments to the Bland bill proposed by Mr. Allison from the
committee on finance, completely revolutionized the measure. The
Senate committee proposed to strike out these words in the House
bill:
"And any owner of silver bullion may deposit the same at any coinage
mint or assay office, to be coined into such dollars, for his
benefit, upon the same terms and conditions as gold bullion is
deposited for coinage under existing laws."
And to insert the following:
"And the Secretary of the Treasury is authorized and directed, out
of any money in the treasury not otherwise appropriated, to purchase,
from time to time, at the market price thereof, not less than
$2,000,000 per month, nor more than $4,000,000 per month, and cause
the same to be coined into such dollars. And any gain or seigniorage
arising from this coinage shall be accounted for and paid into the
treasury, as provided under existing laws relative to the subsidiary
coinage: _Provided_, that the amount of money at any one time
invested in such silver bullion, exclusive of such resulting coin,
shall not exceed $5,000,000."
These amendments were agreed to.
Sections two and three of the bill were added by the Senate. The
bill, as amended, was sent to the House of Representatives, and
the Senate amendments were agreed to. The bill as amended was as
follows;
"AN ACT TO AUTHORIZE THE COINAGE OF THE STANDARD SILVER DOLLAR,
AND TO RESTORE ITS LEGAL TENDER CHARACTER.
"_Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled_, That there shall
be coined, at the several mints of the United States, silver dollars
of the weight of four hundred and twelve and a half grains troy of
standard silver, as provided in the act of January eighteenth,
eighteen hundred thirty-seven, on which shall be the devices and
superscriptions provided by said act; which coins, together with
all silver dollars heretofore coined by the United States, of like
weight and fineness, shall be a legal tender, at their nominal
value, for all debts and dues, public and private, except where
otherwise expressly stipulated in the contract. And the Secretary
of the Treasury is authorized and directed to purchase, from time
to time, silver bullion, at the market price thereof, not less than
two million dollars worth per month, nor more than four million
dollars worth per month, and cause the same to be coined monthly,
as fast as so purchased, into such dollars; and a sum sufficient
to carry out the foregoing provision of this act is hereby appropriated
out of any money in the treasury not otherwise appropriated. And
any gain or seigniorage arising from this coinage shall be accounted
for and paid into the treasury, as provided under existing laws
relative to the subsidiary coinage: _Provided_, That the amount
of money at any one time invested in such silver bullion, exclusive
of such resulting coin, shall not exceed five million dollars:
_And provided further_, That nothing in this act shall be construed
to authorize the payment in silver of certificates of deposit issued
under the provisions of section two hundred and fifty-four of the
Revised Statutes.
"Sec. 2. That immediately after the passage of this act, the
President shall invite the governments of the countries composing
the Latin union, so-called, and of such other European nations as
he may deem advisable, to join the United States in a conference
to adopt a common ratio between gold and silver, for the purpose
of establishing, internationally, the use of bimetallic money, and
securing fixity of relative value between those metals; such
conference to be held at such place, in Europe or in the United
States, at such time within six months, as may be mutually agreed
upon by the executives of the governments joining in the same,
whenever the governments so invited, or any three of them, shall
have signified their willingness to unite in the same.
"The President shall, by and with the advice and consent of the
Senate, appoint three commissioners, who shall attend such conference
on behalf of the United States, and shall report the doings thereof
to the President, who shall transmit the same to Congress.
"Said commissioners shall each receive the sum of two thousand five
hundred dollars and their reasonable expenses, to be approved by
the Secretary of State; and the amount necessary to pay such
compensation and expenses is hereby appropriated out of any money
in the treasury not otherwise appropriated.
"Sec. 3. That any holder of the coin authorized by this act may
deposit the same with the treasurer or any assistant treasurer of
the United States in sums not less than ten dollars, and receive
therefor certificates of not less than ten dollars each, corresponding
with the denominations of the United States notes. The coin
deposited for or representing the certificates shall be retained
in the treasury for the payment of same upon demand. Said certificates
shall be receivable for customs, taxes, and all public dues, and,
when so received, may be reissued.
"Sec. 4. All acts and parts of acts inconsistent with the provisions
of this act are hereby repealed."
It was sent to the President, and was disapproved by him. His veto
message was read in the House on the 28th of February, and upon
the question whether the bill should pass, the objections of the
President notwithstanding, it was adopted by a vote of yeas 196,
nays 73. It passed the Senate on the same day, by a vote of yeas
46, nays 19, and thus became a law.
I did not agree with the President in his veto of the bill, for
the radical changes made in its terms in the Senate had greatly
changed its effect and tenor. The provisions authorizing the
Secretary of the Treasury to purchase not less than $2,000,000
worth of silver bullion per month, at market price, and to coin it
into dollars, placed the silver dollars upon the same basis as the
subsidiary coins, except that the dollar contained a greater number
of grains of silver than a dollar of subsidiary coins, and was a
legal tender for all debts without limit as to amount. The provision
that the gain or seigniorage arising from the coinage should be
accounted for and paid into the treasury, as under the existing
laws relative to subsidiary coinage, seemed to remove all serious
objections to the measure. In view of the strong public sentiment
in favor of the free coinage of the silver dollar, I thought it
better to make no objections to the passage of the bill, but I did
not care to antagonize the wishes of the President. He honestly
believed that it would greatly disturb the public credit to make
a legal tender for all amounts, of a dollar, the bullion of which
was not of equal commercial value to the gold dollar.
The provision made directing the President to invite the governments
of the countries composing the Latin Union, and of such other
European countries as he deemed advisable, to unite with the United
States in adopting a common ratio between gold and silver, has been
made the basis of several conferences which have ended without any
practical result, and the question of a single or double standard
still stands open as the great disturbing question of public policy,
affecting alike all commercial countries.
While this measure was pending in the Senate, a casual letter
written by me ten years previously was frequently quoted, as evidence
that I was then in favor of paying the bonds of the United States
with United States notes, at that date at a large discount in coin.
The letter is as follows:
"United States Senate Chamber,}
"Washington, March 20, 1868. }
"Dear Sir:--I was pleased to receive your letter. My personal
interests are the same as yours, but, like you, I do not intend to
be influenced by them. My construction of the law is the result
of a careful examination, and I feel quite sure an impartial court
would confirm it, if the case could be tried before a court. I
send you my views, as fully stated in a speech. Your idea is that
we propose to repudiate or violate a promise when we offer to redeem
the 'principal' in 'legal tender.' I think the bondholder violates
his promise when he refuses to take the same kind of money he paid
for the bonds. If the coin is to be tested by the law, I am right;
if it is to be tested by Jay Cooke's advertisements, I am wrong.
I hate repudiation, or anything like it, but we ought not to be
deterred from doing what is right by fear of undeserved epithets.
If, under the law as it now stands, the holder of the 5-20's can
only be paid in gold, then we are repudiators if we propose to pay
otherwise. If, on the other hand, the bondholder can legally demand
only the kind of money he paid, he is a repudiator and an extortioner
to demand money more valuable than he gave.
"Your truly,
"John Sherman.
"Hon. A. Mann, Jr., Brooklyn Heights."
On the 26th of March, 1878, I wrote the following letter to Senator
Justin S. Morrill, which was read by him in the debate, and, I
think, was a conclusive answer to the erroneous construction put
upon my letter to Mann:
"My Dear Sir:--Your letter of the 24th inst. is received. I have
noticed that my casual letter to Dr. Mann, of the date of March
20, 1868, inclosing a speech made by me, has been frequently used
to prove that I have changed my opinion since that time as to the
right of the United States to pay the principal of the 5-20 bonds
in legal tenders. This would not be very important, if true, but
it is not true, as I never have changed my opinion as to the
technical legal right to redeem the principal of the 5-20 bonds in
legal tenders, but, as you know and correctly state, have always
insisted that we could not avail ourselves of this legal right
until we complied, in all respects, with the legal and moral
obligations imposed by the legal tender note, to redeem it in coin
on demand or to restore the right to convert it into an interest-
bearing government bond. The grounds of this opinion are very
fully stated in the speech made February 27, 1868, referred to in
the letter to Dr. Mann, and in a report on the funding bill made
by me from the committee on finance, December 7, 1867.
"If my letter is taken in connection with the speech which it
inclosed and to which it expressly referred, it will be perceived
that my position there is entirely consistent with what it is now,
and time has proven that, if the report of the committee on finance
had been adopted, we would long since have reached the coin standard,
with an enormous saving of interest, and without impairing the
public credit. My position was, that while the legal tender act
made United States notes a legal tender for all debts, private and
public, except for customs duties and interest of the public debt,
yet we could not honestly compel the public creditors to receive
United States notes in the payment of bonds until we made good the
pledge of the public faith to pay the notes in coin. That promise
was printed on the face of the notes when issued, was repeated in
several acts of Congress, and was declared valid and obligatory by
the Supreme Court.
"From the first issue of the legal tender note, which I heartily
supported and voted for, I have sought to make it good, to support,
maintain and advance its value. It was in the earnest effort to
restore to the greenback the right to be converted, on the demand
of the holder, into a five per cent. bond and, as soon as practicable,
into coin, that I made the speech referred to, resisting alike the
demand of those who wished to exclude United States notes from the
operation of funding and the large class of persons who wished to
cheapen, degrade and ultimately repudiate them. In all my official
connection with legislation as to legal tender notes, I have but
one act to regret and to apologize for, and that is my acquiescence
in the act of March 3, 1863, which, under the pressure of war and
to promote the sale of bonds, took away from the holders of these
notes the right to convert them into interest-bearing securities.
This right might properly have been suspended during the war, but
its repeal was a fatal act, the source and cause of all the financial
evils we have suffered and from which we cannot recover until we
restore that right or redeem on demand our notes in coin.
"The speech referred to, and which I have recently read by reasons
of the reference to it in the letter to Dr. Mann, will clearly show
that I have not been guilty of inconsistency or a change of opinion
--the most pardonable of all offenses--but then insisted, as I now
insist, that no discrimination should be made against the note
holder, but that until we are ready to pay him in coin he should
be allowed, at his option, to convert his money into a bond at par.
Until then our notes are depreciated by our wrongful act, and we
have no right to take advantage of our own wrong by forcing upon
the bondholders the notes we refuse to receive. This is the precise
principle involved in the act to strengthen the public credit,
approved March 18, 1869. That act did not in any respect change
the legal and moral obligations of the United States, but expressly
provides that none of the interest-bearing obligations not already
due shall be redeemed or paid before maturity, unless at such time
as the United States notes shall be convertible into coin, at the
option of the holder. And the act further 'solemnly pledges the
public faith to make provisions, at the earliest practicable period,
for the redemption of United States notes in coin.'
"This is in exact harmony with the position I held when I wrote
the letter to Dr. Mann and that I now maintain, the primary principle
being that the United States notes shall first be brought to par
in coin before they shall be forced upon the public creditor in
payment of his bonds. This act is the settled law, and whatever
any man's opinions were before it passed, he would assume a grave
responsibility who would seek to evade its terms, weaken its
authority or change its provisions. It has entered into every
contract made since that time. It has passed the ordeal of four
Congresses and two elections for Presidents. It cannot be revoked
without public dishonor. So far as the bondholder is concerned,
it is an executed law. Over $700,000,000 of bonds have been redeemed
in coin under it, and the civilized world regards all the remainder
as covered by its sanction, and in their faith in it our securities
have become the second only in the markets of the world. This law
is not yet quite executed so far as the note holder is concerned.
His note is not yet quite as good as coin. Congress has debated
ever since its passage the best mode to make it good. The Senate
in 1870 provided, in the third section of the refunding act, as it
passed that body, that these notes might be converted into four
per cent. bonds, but the House would not concur. Everybody can
now see that if this had been done these notes would now be at par
in coin. Other expedients were proposed, and finally the resumption
act was passed, and, if undisturbed, is now on the eve of execution.
"The promise made in 1862, and so often repeated, is about to be
fulfilled. Agitation on collateral questions may delay it, but
the obligation of public faith, written on the face of every United
States note and sacredly pledged by the act to strengthen the public
credit, will give us neither peace nor assured prosperity until it
is fulfilled. Public opinion may vibrate, and men and parties may
array themselves against the fulfillment of these public promises,
but in time they will be fulfilled, and I think the sooner the
better. Pardon me for this long answer to your note, but I have
no time to condense it.
"Very respectfully,
"John Sherman."
Relief from the fear of the enactment of the Bland bill, and the
limitation of the amount of silver dollars to be coined, removed
the great impediment to the sale of four per cent. bonds, for
refunding purposes, and the progress toward specie payments.
As already indicated, I had concluded to terminate the existing
contract with the syndicate, and to make the sales directly through
national bank depositaries, and the treasury and sub-treasuries of
the United States. I therefore gave August Belmont & Co. the
following notice:
"Treasury Department, January 14, 1878.
"Messrs. August Belmont & Co., New York.
"Gentlemen:--In compliance with the second clause of the contract
between the Secretary of the Treasury and yourselves and associates,
of the date of June 9, 1877, for the sale of four per cent. bonds,
I give you notice that from and after the 26th day of January
instant that contract is terminated. It is the desire of the
President, in which I concur, to open subscriptions in the United
States to the four per cent. bonds in a different way from that
provided in our contract, and therefore this notice is given. I
sincerely hope to have your active co-operation in the new plan,
and am disposed, if you are willing, to continue in substance, by
a new contract with you, the sale of these bonds in European markets,
and invite your suggestions to that end.
"Very respectfully,
"John Sherman, Secretary."
I received from them the following answer:
"New York, January 15, 1878.
"Hon. John Sherman, Secretary of the Treasury, Washington.
"Dear Sir:--We beg to acknowledge receipt of your favor of the 14th
instant, notifying us of the termination of the contract of June
9, 1877, for the sale of four per cent. bonds, on the 29th of this
month, which we have communicated to the associates here and in
London.
"We have also communicated to our friends in London your willingness
to continue the contract for the sale of the four per cent. bonds
in Europe, with such modifications as may become necessary, and as
soon as we have received their views we shall take pleasure in
writing to you again for the purpose of appointing a conference on
the subject.
"In the meantime, we remain, very respectfully,
"Aug. Belmont & Co."
Notice was given to Mr. Conant of the termination of the contract,
but he was advised by me that we would probably agree to the
continuance of the syndicate in the European markets. He had
expressed to me a fear that a panic would occur about our bonds in
Europe, on account of the anticipated passage of the Bland bill,
but I was able to assure him that it would not become a law in the
form originally proposed.
Being thus free from all existing contracts, I published the
following notice inviting subscriptions to the four per cent. bonds:
"Treasury Department, }
"Washington, D. C., January 16, 1878.}
"The Secretary of the Treasury hereby gives notice that, from the
26th instant, and until further notice, he will receive subscriptions
for the four per cent. funded loan of the United States, in
denominations as stated below, at par and accrued interest, in coin.
"The bonds are redeemable July, 1907, and bear interest, payable
quarterly, on the first day of January, April, July, and October,
of each year, and are exempt from the payment of taxes or duties
to the United States, as well as from taxation in any form by or
under state, municipal, or local authority.
"The subscriptions may be made for coupon bonds of $50, $100, $500,
and $1,000, and for registered bonds of $50, $100, $500, $1,000,
$5,000, and $10,000.
"Two per cent. of the purchase money must accompany the subscription;
the remainder may be paid at the pleasure of the purchaser, either
at the time of subscription or within thirty days thereafter, with
interest on the amount of the subscription, at the rate of four
per cent. per annum, to date of payment.
"Upon the receipt of full payment, the bonds will be transmitted,
free of charge, to the subscribers, and a commission of one-fourth
of one per cent. will be allowed upon the amount of subscriptions,
but no commission will be paid upon any single subscription less
than $1,000.
"Forms of application will be furnished by the treasurer at
Washington, the assistant treasurers at Baltimore, Boston, Chicago,
Cincinnati, New Orleans, New York, Philadelphia, St. Louis, and
San Francisco, and by the national banks and bankers generally.
The applications must specify the amount and denominations required,
and, for registered bonds, the full name and post office address
of the person to whom the bonds shall be made payable.
"The interest on the registered bonds will be paid by check, issued
by the treasurer of the United States, to the order of the holder,
and mailed to his address. The check is payable on presentation,
properly indorsed, at the offices of the treasurer and assistant
treasurers of the United States.
"Payments for the bonds may be made in coin to the treasurer of
the United States at Washington, or the assistant treasurers at
Baltimore, Boston, Chicago, Cincinnati, New Orleans, New York,
Philadelphia, St. Louis, and San Francisco.
"To promote the convenience of subscribers, the department will
also receive, in lieu of coin, called bonds of the United States,
coupons past due or maturing within thirty days, or gold certificates
issued under the act of March 3, 1863, and national banks will be
designated as depositaries under the provisions of section 5153,
Revised Statutes of the United States, to receive deposits on
account of this loan, under regulations to be hereafter prescribed.
"John Sherman, Secretary of the Treasury."
After the publication of this notice inviting subscriptions to the
four per cent. bonds, I found that the chief impediment in my way
was the apparent disposition of both Houses of Congress to require
the called bonds to be paid in United States notes. This was not
confined to any party, for, while the majority of the Democrats of
each House were in favor of such payment, many of the prominent
Republicans were fully committed to the same policy. I was requested
by committees of the two Houses, from time to time, to appear before
them, which, in compliance with the law, I cheerfully did, and
found that a free and unrestricted statement of what I proposed to
do was not only beneficial to the public service, but soon induced
Congress not to interfere with my plans for resumption. My first
interview was on the 11th of March, 1878, with the committee on
coinage of the House, of which Alexander H. Stephens, of Georgia,
was chairman. I was accompanied by H. R. Linderman, Director of
the Mint. The notes of the conference were ordered by the House
of Representatives to be printed, and the committee was convinced
of the correctness of the statements in regard to the amount of
actual coin and bullion on hand, and where it was situated, which
had been previously doubted.
On the 19th of March, I had an interview with the Senate committee
on finance, of which Mr. Morrill, of Vermont, was chairman. I was
examined at great length and detail as to the preparations for
resumption, and the actual state of the treasury at that time.
The principal topic discussed was whether the four per cent. bonds
could be sold, Mr. Bayard being evidently in favor of the substitution
of the four and a half per cents. for the four per cent. bonds I
had placed on the market. The question of how to obtain gold coin
and bullion was fully considered in this interview, and here I was
able to convince the committee that a purchase of domestic gold
coin and bullion would meet all the requirements of the treasury,
and that no necessity existed for the purchase of gold abroad.
This interview, which covers over twenty printed pages, I believe
entirely satisfied the committee of the expediency of the steps
taken by me and their probable success. After this interview I
had the assistance of the committee of finance, without regard to
party, in the measures adopted by me. Mr. Bayard and Mr. Kernan
gave me their hearty support, and Mr. Voorhees made no unfriendly
opposition. The report of this interview was subsequently published,
and had a good effect upon the popular mind.
By far the most important interview was one with the committee on
banking and currency, of the House of Representatives, of which A.
H. Buckner, of Missouri, was chairman. A large majority of this
committee had reported a bill to repeal the resumption act, and
the members of the committee of each party were among the most
pronounced greenbackers in the House of Representatives. Perhaps
the most aggressive was Thomas Ewing, a friend, and by marriage a
relative of mine, a Member of ability and influence, and thoroughly
sincere in his convictions against the policy of resumption. I
was summoned before this committee to answer a series of interrogatories
furnished me a few days previously, calling for statements as to
the actual amount of gold and silver belonging to, and in the
custody of, the treasury department on the 28th of March, where
located and what deductions were to be made from it, on account of
actual existing demands against it. This interview, extending
through several days, and covering seventy-three printed pages,
embraced every phase of the financial condition of the United
States, and the policy of the treasury department in the past and
in the future. At the end of the first day the principal question
seemed to be whether it was possible that the United States could
resume specie payments and maintain them. This led to a careful
scrutiny of the amount of gold in the treasury, Mr. Ewing assuming
that a portion of the amount stated was "phantom" gold, and was
really not available for the purposes of resumption. I said that
the United States would be, on the 1st of January, in a better
condition to resume specie payments than the Bank of England was
to maintain them, and gave my reasons for that opinion. I saw that
Mr. Ewing regarded this statement as an exaggeration.
After the adjournment I understood that Mr. Ewing said that I was
grossly in error, and that he would be able to show it by authentic
documents as to the condition of the Bank of England. He said that
I was laboring under delusions, which he would be able to expose
at the next meeting. When we again met with the full committee
present, Mr. Ewing said:
"I ask your attention to a comparison of the condition of the
treasury for resumption with the condition of the Bank of England
in 1819 and now, with the Bank of France this year, and with the
banks of the United States in 1857 and 1861."
To this I replied:
"When I said the other day that I thought the condition of the
treasury, on the 1st of January next, would be as good as the Bank
of England, I had not then before the actual figures or tables,
but only spoke from a general knowledge of the facts. Since then
I have given the matter a good deal of attention, and now have some
carefully prepared tables, founded upon late information, giving
the exact comparison of the condition of the Bank of England, the
Bank of France, the Bank of Germany, the Bank of Belgium, the
national banks, and the treasury. These tables will show that
pretty accurately."
I handed the tables to the committee, and they are printed with
the report. I then proceeded to show in detail that while the Bank
of England had notes outstanding to the amount of £38,698,020, it
had on hand as assets: Government debt, £11,015,100; other
securities, £3,984,900; gold coin and bullion, £23,698,020; that
upon this it was apparent that in the issue department the Bank of
England was stronger than the United States; but in the banking
department, the bank was liable for deposits, the most dangerous
form of liability, and various other forms of liability, to the
amount of £46,277,277. To pay these it had government securities,
notes and other securities and £1,032,773 gold and silver coin, in
all amounting to £46,277,277. Combining these accounts it was
shown that the demand liabilities on the bank were £54,639,171,
while the gold and bullion on hand was only £24,730,793. Then I
said:
"Now, in regard to the United States, I have a statement here
showing the apparent and probable condition of the United States
treasury on April 1, 1878, and on the 1st of January next. The
only difference in these statements is that I add to the present
condition of the treasury the proposed accumulation of fifty millions
of coin and a substantial payment before that of the fractional
currency. I think it will be practically redeemed before that
time. The actual results show the amount of demand liabilities on
April 1, 1878, against the United States, as $460,527,374, and they
show the demand resources, including coin and currency, at
$174,324,459, making the percentage of resources to liabilities
thirty-seven. To show the probable condition of the treasury on
the 1st of January, 1879, I add the fifty millions of coin and I
take off the fractional currency, and deducted estimated United
States notes lost and destroyed, leaving the other items about the
same. That would show an aggregate of probable liabilities of
$35,098,400 and probable cash resources of $224,324,459, making
fifty-one per cent. of the demand liabilities. The ratio of the
Bank of England, at this time, is forty-five per cent.; the ratio
of the Bank of France, is sixty-five per cent.; the ratio of the
Bank of Germany, is fifty-eight per cent.; and the ratio of the
Bank of Belgium, is twenty-five per cent., all based upon the same
figures."
I gave the statistics as to the condition of the national banks,
showing their assets and liabilities, that they were not bound to
redeem their notes in gold or silver, but could redeem them in
United States notes, of which they had on hand $97,083,248, and
besides they had deposited in the treasury, as security for their
notes, an amount of United States bonds ten per cent. greater than
the entire amount of their circulating notes, and that these bonds
were worth in the market a large premium in currency. In addition
to the legal tenders on hand, they had five per cent. of their
circulation in legal tender notes deposited in the treasury as a
redemption fund, amounting to $15,028,340. They had also on hand
gold and silver coin and gold certificates amounting to $32,907,750,
making a total cash reserve of $145,019,338. The ratio of their
legal tender funds to circulation was 48.4; ratio of legal tenders
to circulation and deposits, 15.1.
In this interview I explicitly stated to the committee my purpose
to sell bonds, under the resumption act, at the rate of $5,000,000
a month, to the aggregate amount of $50,000,000; that I was satisfied
I could make this sale upon favorable terms, and could add to the
coin then in the treasury the sum of $50,000,000 gold coin, which
I thought sufficient to secure and maintain the parity of our notes
with coin. Mr. Ewing inquired:
"Where do you expect to get the additional fifty millions of gold
by January 1, 1879?"
My answer was as follows:
"You must see that for me to state too closely what I propose to
do might prevent me from doing what I expect to do, and therefore
I will answer your question just as far as I think you will say I
ought to go. I answer, mainly from the sale of bonds. Indeed, in
the present condition of the revenue, we cannot expect much help
from surplus revenue, except so far as that surplus revenue may be
applied to the payment of greenbacks and to the redemption of
fractional currency in aid of the sinking fund. To that extent I
think we can rely upon revenue enough to retire the United States
notes redeemed under the resumption act; so that I would say that
we can get the $50,000,000 of gold additional by the sale of bonds.
As to the kind of bonds that I would sell, and as to how I would
sell them, etc., I ought not to say anything on that subject at
present, because you ought to allow me, as an executive officer,
in the exercise of a very delicate discretion, free power to act
as I think right at the moment, holding me responsible for my action
afterward. As to what bonds I will sell, or where I will sell
them, or how I will sell them, as that is a discretionary power
left with the secretary, I ought not to decide that now, but to
decide it as the case arises."
Some question was made by Mr. Ewing as to the ability to sell bonds,
and he asked:
"I understood you to say in your interview with the Senate committee
that you would have to rely upon the natural currents of trade to
bring gold from aborad; that is, that there cannot be a large sale
of bonds for coin abroad. Is it on a foreign sale that you are
relying?"
I replied:
"Not at all, but on a sale at home. Perhaps I might as well say
that if I can get two-thirds of this year's supply of gold and
silver from our own mines, it will amount to a good deal more that
$50,000,000, so that I do not have to go abroad for gold. If we
can keep our own gold and silver from going abroad, it is more than
I want."
Mr. Buckner inquired:
"For this $50,000,000 additional I suppose you rely, to some extent,
on the coinage of silver?"
I said:
"To some extent; silver and gold we consider the same under the
law."
Mr. Ewing asked:
"Do you expect to pay out the silver dollar coined by you for
current expenses, or only for coin liabilities, or to hoard it for
resumption?"
I said:
"I expect to pay it out now only in exchange for gold coin or for
silver bullion. I am perfectly free and answer the question fully,
because on that point, after consulting with many Members of both
Houses, I have made up my mind what the law requires me to do. I
propose to issue all the silver dollars that are demanded in exchange
for gold coin. That has been going on to some extent; how far I
cannot tell. Then I propose to use the silver in payment for silver
bullion, which I can do at par in gold. I then propose to buy all
the rest of the silver bullion which I need, under the law, with
silver coin. As a matter of course, in the current course of
business, some of that silver coin will go into circulation; how
much, I do not know. The more, the better for us. But most of
it, I take it, will be transferred to the treasury for silver
certificates (that seems to be the idea of the bill), and those
silver certificates will come into the treasury in payment of
duties, and in that way, practically, the silver will belong to
the government again."
Some question arose as to the reissue of treasury notes under the
resumption act. I expressed my opinion that all notes not in excess
of $300,000,000 could be reissued under existing laws, but as to
whether notes in excess of $300,000,000 could be reissued was a
question which I hoped Congress would settle, that I considered
the law as doubtful. Congress did subsequently suspend the retirement
of United States notes at $346,000,000.
The sinking fund and many other subjects were embraced in this
interview, the importance of which would justify a fuller statement
than I have given, but, as the interview has been published as a
public document, I do not give further details. I stated frankly
and explicitly what I intended to do if not interrupted by Congress.
I felt assured, not only from the Senate, but from what I could
learn from Members of the House, that no material change of existing
law would be made to prevent the proposed operations of the treasury
department. From that time forward I had not the least doubt of
success in preparing for and maintaining resumption, and refunding,
at a lower rate of interest, all the public debt then subject to
redemption.
I think I entirely satisfied the committee that the government was
not dealing with shadows, but had undertaken a task which it could
easily accomplish, if not prevented by our common masters, the
Congress of the United States. It was said of Mr. Buckner that
before I appeared before the committee, he regarded me as a visionary
enthusiast, who had undertaken to do what was impossible to be
done, that after the first day of the examination he came to the
conclusion that I was honest in my belief that resumption was
possible, but he did not believe in my ability to do what was
proposed; at the end of the second day he expressed some doubts of
the ability to resume, but said that the object aimed at was a good
one, and he was not disposed to interfere with the experiment; and
on the third day he said he believed I had faith in the success of
resumption, and would not interfere with it, but if I failed I
would be the "deadest man politically" that ever lived.
CHAPTER XXXIII.
SALE OF BONDS FOR RESUMPTION PURPOSES.
Arrangements Begun for the Disposal of $50,000,000 for Gold or
Bullion--Interviews with Prominent Bankers in New York--Proposition
in Behalf of the National Banks--Terms of the Contract Made with
the Syndicate--Public Comment at the Close of the Negotiations--
"Gath's" Interview with Me at the Completion of the Sale--Eastern
Press Approves the Contract, While the West Was Either Indifferent
or Opposed to it--Senate Still Discussing the Expediency of Repealing
the Resumption Act--Letter to Senator Ferry--Violent and Bitter
Animosity Aroused Against Me--I Am Charged with Corruption--Interview
with and Reply to Letter of Peter Cooper--Clarkson N. Potter's
Charges.
The general results of these interviews, which had a wide circulation
at the time, I believe were beneficial, and at least assured the
public that a hopeful and determined effort was being made to
advance United States notes and national bank notes to par with
coin.
Before I had these interviews I had determined to sell $50,000,000
bonds at the rate of $5,000,000 a month for gold coin or bullion
for resumption purposes, and also to press the refunding operations
as rapidly as possible. I had at my disposal an unlimited amount
of five, four and a half and four per cent. bonds, with authority
to sell either kind to accumulate coin for the maintenance of
resumption, or for the payment of bonds that were at the time
redeemable, bearing a higher rate of interest. My printed
correspondence with banks and bankers shows the advancing value of
the four and four and a half per cent. bonds. The most active
agent for the sale of these bonds was the First National Bank of
New York, which had been the agent of the syndicate, and, though
having no privilege or facility that was not extended to all banks
and bankers alike, it evinced the utmost activity, intelligence
and success, and took the lead in the sale of bonds. The advancing
quotations furnished by it and other banks and bankers satisfied
me that the policy of an open loan, such as was provided for by
the notice of January 18, 1878, would be successful, if only we
could have the certainty of coin payments by the 1st of January,
1879. I knew of the sensitive jealousy between the banks and
bankers and between the old syndicate and prominent and wealthy
firms who wished to participate in any new syndicate, and were
jealous and suspicious of each other.
Offers were made to me by banks and bankers for special arrangements
for the purchase of bonds, but I put them all aside until after I
had written to all the parties a notice substantially similar to
the following, sent to Belmont & Co.:
"Treasury Department, April 5, 1878.
"Gentlemen:--It is my purpose to be in New York at four o'clock on
Monday afternoon, and I would like, if practicable, to meet the
members of the old syndicate at the Fifth Avenue Hotel that evening
at any hour convenient to them, to confer as to the best mode of
obtaining $50,000,000 gold coin or bullion prior to January 1,
1879, for resumption purposes, and to receive from the associates,
or any of them, or from new parties, offers for any of the description
of bonds I am authorized to sell for that purpose.
"I propose to accumulate this coin in either the treasury, the
assay offices, or the public depositaries throughout the United
States that will comply with the conditions of section 5153 Revised
Statutes.
"I will send a similar letter to this to the First National Bank,
and have to request that you will give notice to the other members
of the old syndicate, and, with their consent, to any others you
desire to participate in the interview.
"Very respectfully,
"John Sherman, Secretary.
"Messrs. August Belmont & Co., New York."
I sent General Hillhouse the following notice:
"Treasury Department, April 5, 1878.
"Sir:--You will please inform Messrs. H. F. Vail, president National
Bank of Commerce; J. D. Vermilye, president Merchants' National
Bank; George S. Coe, president American Exchange National Bank; B.
B. Sherman, Mechanics' National Bank, and James Buell, president
Importers and Traders' National Bank, that I desire an interview
with them at any hour on Tuesday next, at your office, or at such
other places as they may prefer, in respect to the purchase for
the Treasury for resumption of, say, $50,000,000 gold coin or
bullion, to be delivered monthly and before the 1st of January
next, either at your office or at the designated depositaries of
the United States, under section 5153 Revised Statutes, and also,
if practicable, to secure from them a bid for either of three
classes of bonds described in the refunding act to an amount
sufficient to purchase the coin stated. These gentlemen are
respectfully requested to select such others connected with national
banks as they may agree upon to join in the interview.
"Very respectfully,
"John Sherman, Secretary.
"General Thomas Hillhouse,
"Assistant Treasurer United States, New York."
Regarding the negotiation as one of great importance, I was
accompanied to New York by Hon. Charles Devens, Attorney General;
John Jay Knox, Comptroller of the Currency; Charles F. Conant,
Assistant Secretary; Daniel Baker, Chief of the Loan Division, and
E. J. Babcock, my Secretary.
On the 8th of April I, with the gentlemen named, had an interview
with the members of the old syndicate, Messrs. Belmont, Seligman,
Bliss, Fabri and Fahnestock.
I stated that the object of my visit to New York, and of my request
for an interview with the associates, was to obtain $50,000,000
coin for resumption purposes, and I would like to sell four per
cent. bonds to that amount.
Mr. Belmont did not think the four per cent. bonds could be sold
then, and the associates all concurred in the opinion that they
would prefer making a proposition for the four and a halfs, although
they were not prepared to make any definite offer. I said I would
like to get 103 for the four and a halfs, but the associates said
they would not consider that at all; they would communicate with
the Rothschilds and others, and might possibly be able to offer
101; they would come to some conclusion by next day.
On the following day, at the National Bank of Commerce, I met the
presidents of the national banks: Mr. Vail, Commerce; Mr. Vermilye,
Merchants'; Mr. Coe, Merchants' Exchange; Mr. Sherman, Mechanics';
Mr. Buell, Importers and Traders'; Mr. Moses Taylor, City; Mr. F.
D. Tappan, Gallatin; Mr. G. G. Williams, Chemical; Mr. F. A. Palmer,
Broadway; Mr. George I. Seney, Metropolitan; Mr. P. C. Calhoun,
Fourth National.
Mr. Vail said that this meeting was called at my request, that the
gentlemen present had no information as to the object of the meeting,
and had had no opportunity for consultation; that I would explain
more fully what I desired.
I said that I proposed to resume specie payments on the 1st of
January, in accordance with law, and that for this purpose I wished
to get $50,000,000 of gold, and, to accumulate this amount, would
if possible, sell four per cent. bonds.
Mr. Vermilye and Mr. Coe spoke at some length to the effect that
they were in full accord with me on the subject of resuming specie
payments, and they were willing to co-operate in any way to bring
it about. They said that although they had not consulted with the
other gentlemen present, they had no doubt they were all agreed
upon this subject. They thought, however, it would be utterly
useless to attempt to sell four per cent. bonds, and that as far
as such bonds were concerned there need be no more said.
I said this being so, I would like to have some propositions for
four and a halfs.
Mr. Coe said that no definite proposition could be made without
further consultation among themselves; that they were willing to
assist to the extent of their power to obtain resumption; that they
would place themselves at my service in any way I might wish without
compensation. He said that he thought an arrangement could be made
by which the national banks could be made my agents in the sale of
bonds. He thought the banks might take the $50,000,000 of four
and a half per cent. bonds, to be paid for by the 1st of January,
the government to receive whatever the banks could get for the
bonds.
I invited the gentlemen to confer among themselves, and, if
practicable, make me some definite proposition in the morning.
In the afternoon of the same day we met the members of the old
syndicate. Mr. Belmont read a cable from the Rothschilds offering
101 for $100,000,000 four and a half per cent. bonds, $50,000,000
for resumption and $50,000,000 for refunding purposes.
I said I was not prepared to accept, but would give a definite
answer next day.
On the following morning I met Mr. Vail, of the National Bank of
Commerce, and Mr. Vermilye, of the Merchants' National Bank, at
the sub-treasury.
Mr. Vail and Mr. Vermilye submitted a memorandum that if I would
indicate my willingness to receive a proposition for the negotiation
of $50,000,000 four and a half per cent. bonds at par in gold they
would recommend the national banks to unite in making it.
I then asked Mr. Vail and Mr. Vermilye whether, if a proposition
was made to me by bankers of acknowledged credit and responsibility
of 101 for four and a half per cent. bonds, payable in installments
and with the usual option, in their opinion, it was my duty to
accept it.
They both said decidedly, yes; that such an arrangement would be
far more advantageous than the acceptance of their proposition,
and besides, if they took the bonds, it might impair to some extent
their power to render the usual facilities to their commercial
customers.
The proposition submitted by Messrs. Vail and Vermilye, in behalf
of the national banks, was as follows:
"If the secretary will intimate his willingness to receive a
proposition from the national banks in New York, Boston, Philadelphia
and Baltimore for the negotiation of fifty millions four and a half
per cent. bonds at par in gold, for resumption purposes, we will
recommend our associates to unite in making it, with the belief on
our part that it can be accomplished as suggested. This special
loan to be the only bonds of this character offered, unless the
same parties have the option on any further sums required."
Afterwards, on the same day, I again met the members of the syndicate
at the sub-treasury, and said that I would sell only $50,000,000
four and a half per cent. bonds; that these must be paid for in
gold coin, for resumption purposes; that I would sell them for
101½, allowing one-half of one per cent. commission, the syndicate
to pay all expenses; but before signing the contract wished to
communicate with the President.
These terms were accepted by the syndicate upon condition that
their associates in London would consent, they reserving the right
to cable to London for such consent; and the meeting adjourned
until 1:30 o'clock, when, I having received a telegram from the
President, the details of the contract were then discussed, and
signature was delayed for an answer to the cable of the syndicate.
On the following day we again met at the sub-treasury, and Mr.
Lucke, of Belmont & Co., informed me that the English parties had
authorized them to close the contract, and it was therefore signed.
It was as follows:
"This agreement, entered into the 11th day of April, 1878, between
the Secretary of the Treasury of the United States, of the first
part, and August Belmont & Co., of New York, on behalf of N. M.
Rothschild & Sons, of London, England, and their associates and
themselves; Drexel, Morgan & Co., of New York, on behalf of J. S.
Morgan & Co., of London, and themselves; J. & W. Seligman & Co.,
of New York, on behalf of Seligman Bros. of London, and themselves;
Morton, Bliss & Co., of New York, on behalf of Morton, Rose & Co.
of London, and themselves; and the First National Bank of the city
of New York, witnesseth: That said August Belmont & Co., on behalf
of N. M. Rothschild & Sons, and their associates and themselves,
hereby agree to purchase from the Secretary of the Treasury $4,125,000
of the four and one half per cent. bonds of the United States,
issued under the acts of July 14, 1870, January 20, 1871, and
January 14, 1875, and that Drexel, Morgan & Co., on behalf of J.
S. Morgan & Co., and themselves, agree to purchase $1,625,000 of
said bonds, and that J. & W. Seligman & Co., on behalf of Seligman
Bros., and themselves, agree to purchase $1,625,000 of said bonds,
and that Morton, Bliss & Co., on behalf of Morton, Rose & Co., and
themselves, agree to purchase $1,625,000 of said bonds, and that
the First National Bank of the city of New York agrees to purchase
$1,000,000 of said bonds; making a total aggregate of $10,000,000
of said bonds on the terms and conditions following:
"First. The bonds covered by this contract shall be sold for
resumption purposes.
"Second. The parties of the second part shall have the exclusive
right to subscribe in the same proportion of each of the subscribers
for the remainder of the $50,000,000 of the four and a half per
cent. bonds of the United States authorized to be issued by the
acts of Congress aforesaid; but the amount to be so subscribed
shall not be less than $5,000,000 for each and every month after
the present month of April.
"Third. That the Secretary of the Treasury shall not sell, during
the continuance of this contract, any bonds other than such as by
act of Congress may be provided to be sold for the payment of the
Halifax or Geneva award, and the four per cent. consols of the
United States, and those only for refunding purposes, except by
mutual agreement of the parties hereto.
"Fourth. The parties of the second part agree to pay for the said
four and a half per cent. bonds par and one and a half per cent.
premium and interest accrued to the date of the application for
the delivery of said bonds, in gold coin or matured United States
gold coin coupons, or any of the six per centum 5-20 bonds heretofore
called for redemption, or in United States gold certificates of
deposit issued under the act of March 3, 1873, or in gold coin
certificates of deposit of authorized designated deposit, and that
have complied with the law.
"Fifth. The parties of the second part shall receive in gold coin
a commission of half of one per centum on all bonds taken by them
under this contract, as allowed by the act of July 14, 1870, and
shall assume and defray all expenses which may be incurred in
sending the bonds to London or elsewhere, upon their request, or
by transmitting the bonds, coupons, or coin to the treasury department
at Washington, including all cost of making the exchange. The
bonds shall also be charged with the cost of preparation and issuing
of the bonds.
"Sixth. No bonds shall be delivered to the parties of the second
part, or either of them, until payment shall have been made in full
therefor, in accordance with the terms of this contract.
"Signed by John Sherman, Secretary of the Treasury, J. & W. Seligman
& Co., Morton, Bliss & Co., August Belmont & Co., the First National
Bank of New York, Drexel, Morgan & Co.; and by Assistant United
States Treasurer Thomas Hillhouse and E. J. Babcock, as witnesses."
The importance of this contract and the open publicity of the
negotiation, created quite a sensation in the newspaper press,
which presented a medley of praise and censure. All varieties of
opinion from extravagant flattery to extreme denunciation were
visited upon me by the editors of papers according to their
preconceived opinions. I made no effort at secrecy, and no answer
to either praise or blame, but freely contributed any information
in respect to the matter to anyone, whether friendly or otherwise,
who applied to me. Perhaps as accurate a statement as any, of my
opinions, was made by George Alfred Townsend, over his _nom de
plume_ of "Gath," in the New York "Graphic" of April 12, 1878. He
said:
"At four o'clock yesterday afternoon John Sherman, the Secretary
of the Treasury, was sitting in Parlor No. 1, the ante-room of the
late Republican national committee, when I followed my card into
his presence. 'Ah!' he said, rising from an easy chair where he
was resting, like one recently wearied but now relieved. 'Come
in; it's all over now, and I don't mind telling you about it.'
'Yes, it's all over Wall street, and I think opinion was more
favorable to the syndicate getting the bonds than the bank
presidents.'
'The representatives of the banks were very polite and well-meaning,'
said the secretary. 'I sent word that I was coming to the city
and asked the national banks, as intimately related to the treasury
department, to select persons to meet me. I also notified the
members of the old syndicate that I had some propositions to suggest
to them.'
'This is your third visit on the general object of resumption? A
very eventful visit, isn't it, in the story of our finances?'
'Well, both my previous visits were important--in May, 1877, when
$200,000,000 of four and a half per cent. bonds were disposed of,
and again last June, when $75,000,000 of the four per cent. bonds
were subscribed for. The present visit is probably the last with
such an object. I feel glad and relieved.'
'You failed to get the bank philosophers to get you the $50,000,000
of gold?'
'I thought I could see that they did not mean to enter into the
subscription. They all said they wanted to see resumption achieved,
and would like to aid it, but spoke of their obligations to their
commercial customers. They said too, that they would have to rely
on brokers to get the gold and pay commissions for it, and were
afraid it might be run up on them. One or two, perhaps, expected
a more advantageous offer as to rates--indeed, wanted me to pay
them a commission for selling our bonds at par. I can excuse them,
because they will have to be looking after the redemption of their
own circulation.'
"I suggested to the secretary that some of the bank presidents had
discouraged resumption or treated it as a figment.
'When the congressional committee was over here,' he answered,
'there was something said about the advantage of getting priority
in the line on resumption day; but that is nothing. They were very
civil, but didn't see the proposition favorably.'
'Is there any disadvantage in negotiating through the syndicate?'
'No, there is an advantage in this respect; they sold the higher
bonds abroad, and taking these will also place a part of them there,
facilitating exchange in commercial settlements and interestedly
maintaining prices. A portion of these low bonds ought to locate
in Europe.'
'Speaking of exchange, Mr. secretary, the idea has been put forward
here, in the fiscal form, I believe, that a large, round balance
of trade in our favor indicates poverty and collapse. Is that good
political economy?'
'There are nations,' said the secretary, 'like England, which have
steady apparent balances of trade against them, yet show a great
prosperity. But that is only the product of English money invested
in foreign places and colonies; it is an apparent purchase, but
really their own harvest. No nation that is greatly in debt, as
we are, can observe real balances of trade overwhelmingly against
us and not feel alarmed.'
'Do you expect any opposition from Congress as the reply to this
negotiation and the near probability of specie payments?'
'No, I do not think Congress will interfere. The conservative
element of the inflation party was appeased by the reissue of
$300,000,000, and the candid way in which their silver legislation
was carried out. I do not anticipate that Congress can affect this
action.'
'May not the surprise of the news that you so readily negotiated
these bonds and secured your gold, enrage those who have cast their
political hopes upon preventing resumption?'
'I do not see why. General Ewing and the finance committee were
clearly apprised by me two weeks ago of the exact plan I have
followed out. They questioned me directly, and I told them. As
no attack has been made upon that programme, I look for no successful
resistance to its performance.'
'Do you consider the price paid by the syndicate for these bonds
as good?'
'It was the best that could at present be had. I wanted them,
first, to take $50,000,00 to $100,000,000 of the four per cent.
bonds at 103--bonds that I think preferable in some respects,
particularly for durable investment. These gentlemen, however,
thought those bonds not convenient for them for ready sale, and
they urged that I ought to let them have the four and a half per
cents. at par, as some had been put to the people at that. I
desired a premium of three per cent. They finally met me half way,
and gave one and a half premium. In short, we get a very little
scant of 103 currency for those bonds, for the syndicate pays over
to us the accrued interest.'
'You do not anticipate that they will take the $10,000,000 and
decline the other $40,000,000?'
'No; I think our economy, industry, exports, production, ready
resources and general physical and political superiority will expand
right onward, and protect everybody who puts faith in our national
securities.'
'How much gold have you absolutely got for resumption to-day?'
'Seventy-two millions clear net of our own. I have nearly $140,000,000
present due, or coming, not counting any liabilities on it. The
$50,000,000 I have secured to-day will give me, clear of everything,
$120,000,000 of gold, and that is plenty.'
'Have you read the views of Mr. Musgrave and other bankers, in "The
Graphic," on the theory that you have enough gold now and would
not have to redeem much with your gold? I heard a merchant say
this afternoon that you might not have $5,000,000 put at you!'
'That is more likely to be the case now,' said Mr. Sherman 'when
I am so well protected. There might be a dash made at my $72,000,000
--not at my $120,000,000.'"
As a flattering background to his interview Mr. Townsend gave the
following description of myself, which I hope it will not be egotism
to publish. There were so many descriptions of me of a different
character that I feel at liberty to quote one that was quite
friendly:
"John Sherman, as he sat before me, young looking, his air and
beard in perfect color, his manners gracious and indicating an easy
spirit not above enjoyment, and manners not abraded by application,
seemed to be a very excellent example to young public men. His
nature had not been worn out in personal contests, nor his courage
abated by the exercise of discretion and civility. He was the
earliest and best champion of the Republican party--its first
candidate for speaker of Congress, its last Secretary of the
Treasury. For twenty years he has been in the national center of
observation. He owes to temperance and study, exercise and natural
sense, his present proud position as the principal exponent of the
Republican party. Not in the Senate is that party seen at its
best, but in the executive, where the President's original
discrimination is approved by time and events; he chose John Sherman
first of the cabinet, and within thirteen months he has concluded
the last great treaty of the war--peace with the public creditor.
In our arising commerce and huge balances of trade, we observe
again 'Sherman's march to the sea.'"
The following statement in regard to the new loan and the national
banks appeared in the "Financial Chronicle" of April 13:
"Mr. Sherman has shown, in his interviews with the committees of
the House and Senate, not only his faith in the possibility of
executing the resumption act, but also his determination to do it;
and the disclosures of the past few days are the signs of the
progress he is making. In fact, the events of the week, culminating
in the successful negotiation with the syndicate bankers of a sale
of four and a half per cent. bonds, practically put at rest all
doubts with regard to the fact that on or before the 1st day of
January, 1879, anyone can, on application to the office of the
assistant treasurer in New York, obtain gold or silver for greenbacks,
in sums of not less than fifty dollars. The terms of the loan are
substantially set out in the following, which was posted, shortly
after one o'clock on Thursday, on the bulletin boards of the sub-
treasury, the parties composing the syndicate being Drexel, Morgan
& Co., and J. S. Morgan & Co., of London; August Belmont & Co.,
and through them the Rothschilds, of London; Morton, Bliss & Co.;
J. & W. Seligman, and Seligman Brothers, of London; and the First
National Bank:
'The Secretary of the Treasury and the members of the last syndicate
have entered into an agreement for the sale, for resumption purposes,
of $50,000,000 United States four and a half per centum 15-year
bonds at par and accrued interest, and one and a half per centum
premium in gold coin, $10,000,000 to be subscribed immediately,
and $5,000,000 per month during the balance of the year. The sale
of four per centum bonds will be continued by the treasury department
as heretofore, upon the terms and conditions of the last circular,
and the proceeds will be applied to the redemption of six per centum
5-20 bonds.'
"This certainly will be considered a very favorable negotiation
for the government."
Among the numerous letters received at this time, I insert the
following:
"Viroqua, Wis.,, April 14, 1878.
"Hon. John Sherman, Secretary of the Treasury.
"Dear Sir:--We have a Honest Money League started in Chicago, of
which you are probably aware. The secretary is the Hon. Thos. M.
Nichol, who aided us so materially in carrying the state last fall.
He is one of the ablest defenders of honest money that we have in
the northwest. Any information you can furnish him will reach the
people of the northwest. I see by the dispatches you have completed
arrangements whereby you will be able to resume by January 1, 1879.
I hope Congress will have the good sense not to throw any obstacles
in your way. I used to, when in the army, tell the boys to trust
in General Sherman and keep their powder dry, and now I feel like
trusting in Secretary Sherman to keep our money honest. I have no
fears of the result if Congress will let you alone.
"Yours truly,
"J. M. Rush."
The eastern press, almost without exception, gave its hearty approval
of the contract made, and the mode and manner of the negotiation.
The leading papers in New York, including the "Herald," "Tribune,"
and "Times," gave full accounts. In the west, however, where the
greenback craze or "heresy," as it was commonly called, prevailed,
the press was either indifferent or opposed to the contract and to
the object sought. It is singular how strong the feeling in favor
of an irredeemable paper currency was in many of the western towns
and among the farming people. United States notes, universally
called greenbacks, were so much better as money than the bank notes
were before the war, that the people were entirely content with
them, even if they were quoted at a discount in coin. They were
good enough for them. Any movement tending to reduce their number
was eagerly denounced.
At the very time when the negotiation was being made, the Senate
finance committee was discussing the expediency of agreeing to the
bill repealing the resumption act which had passed the House. The
indications were that the committee had agreed upon a time when a
final vote should be taken upon this bill and that it would be
favorably reported by a majority of one. It depended upon the vote
of Mr. Ferry, who was strongly in sympathy with the sentiment in
the House. It appeared quite certain that with a favorable report
the bill would pass. If passed it would no doubt have been vetoed,
but the moral effect of its passage would have been to greatly
weaken all measures for redemption. I had frequent conversations
with Mr. Ferry and appealed to him as strongly as I could to stand
by his political friends, and for the success of the negotiation.
He voted against reporting the bill. I wrote him the following
letter while the matter was still pending:
"Washington, D. C., May 1, 1878.
"Dear Sir:--The deep interest I feel in the pending legislation in
Congress, endangering as it does my hope of success in the great
object of resumption, will be my excuse for appealing to you again,
in the strongest manner, against the mandatory provision that,
under all circumstances, United States notes shall be receivable
in payment of customs duties.
"This provision may defeat the whole of our policy for which we
have been struggling so long and to which our party is so firmly
committed. Resumption on United States notes can be easily maintained
with a reasonable reserve and with a certainty that any considerable
run will be stopped by increased demand for United States notes,
but there is one essential prerequisite to our ability to resume,
and that is that we must have coin income enough to pay the interest
of the public debt and other current coin demands. To throw upon
the treasury the possibility of the necessity of buying coin to
pay the interest of the public debt, in addition to buying that
which is necessary to maintain resumption on United States notes,
is simply to overload the wagon and break it down at the very start.
Ordinarily the secretary would receive greenbacks for duties (and,
therefore, I have no objection to the discretionary authority being
conferred upon him), if he can use them also in payment of interest,
but as we must pay the interest in coin, and the slightest difference
in favor of coin making it certain that demand would be made for
it for interest, we cannot undertake to buy sufficient coin to pay
the interest in addition to what we would naturally, under like
circumstances, be required to pay such notes as are presented.
"I have thought so much about this, and am so much troubled about
it, that I would feel almost like giving up the ship rather than
to undertake the additional task which the bill as now reported
would impose upon me. Surely we are so near the end of our long
struggle that we ought not to assume a fresh load, and I assure
you that a mandatory provision requiring the secretary to receive
United States notes in payment of customs duties, without regard
to the time and circumstances, is simply a repeal of the resumption
act, and it had better be done openly and directly. Because we
have been so fortunate this far in the progress towards resumption
is no reason why we should assume an additional burden.
"Please state this to any others who you think would have any
respect for my opinions, as I do not wish to thrust them upon those
who would like to thwart them; and, if overruled in this, I trust
you will make this letter public, for I will not be responsible
for so serious a change in the whole plan of resumption. I said
to the committee on finance that if the discretion was conferred
upon me to receive United States notes for duties, I had no doubt
that I could do so on the 1st of October, but it was not then
supposed by anyone that such a provision would be mandatory.
"Very truly yours,
"John Sherman.
"Hon. T. W. Ferry, U. S. Senate."
While I was congratulating myself upon accomplishing an important
work for the people, I had aroused an animosity more bitter and
violent than any I ever encountered before or since. I was charged,
directly, by a correspondent of the "National Republican," published
in Washington, with corruption, and that I was interested in and
would make money through the syndicate. It was said that I "came
to the United States Senate several years ago a poor and perhaps
a honest man. To-day he pays taxes on a computed property of over
half a million, all made during his senatorial term, on a salary
of $6,000 a year and perquisites." My property at home and in
Washington was discussed by this letter, and the inference was
drawn that in some way, by corrupt methods, I had made what I
possessed. It is true that I found many ready defenders, but I
took no notice of these imputations, knowing that they were entirely
unfounded, for I never, directly or indirectly, derived any advantage
or profit from my public life, except the salary.
At one time it was alleged that a sub-committee, consisting of
Messrs. Ewing, Hartzell and Crittenden, had been in correspondence
with leading bankers, financiers and capitalists, and that information
had been obtained which led to the conclusion that I had derived
profit from the negotiation. It was said that the committee proposed
to interview me upon the subject of my recent syndicate operations,
that the syndicate would get about a $750,000 commission, which
could have been saved had outsiders been permitted to buy the bonds,
that the committee had summoned members of the syndicate and bankers
who were not admitted into the syndicate, but who wanted to be
allowed to buy bonds without any commission, that the allegation
was so well supported that a resolution was prepared authorizing
the committee to investigate, but that this was unnecessary, as
the resolution authorizing the banking and currency committee to
make inquiries concerning resumption conferred authority to inquire
into this matter. The only sign of the alleged investigation was
an inquiry from Mr. Ewing, which was answered by me as follows:
"Treasury Department, April 19, 1878.
"Hon. Thomas Ewing, Acting Chairman Committee on Banking and
Currency, House of Representatives.
"Sir:--In compliance with your request of the 18th instant, I
inclose herewith a copy of the contract recently made with a
syndicate of New York bankers for the sale of four and a half per
cent. bonds. The only previous correspondence on this subject was
a letter sent to said bankers and one to the presidents of certain
national banks, copies of which are inclosed.