that will be allowed to the syndicate at each payment on account
of such sales, I have to reply that no accrued interest is paid to
them, but, as you will see by the fourth paragraph of said contract,
they are to pay the United States the amount of interest accrued
on the bond up to the time of payment for it, in addition to the
premium of one and a half per cent. The interest on the four and
a half per cent. bonds accrued on the 1st of March, and therefore,
the interest is added from that date to the date of payment for
the bonds.
"The amount of commission to be paid is fixed by law at one-half
of one per cent., but out of this the associates are to pay all
expenses incurred by them in the sale, and reimburse the United
States all expenses incurred by it as stated by said contract in
paragraph 5.
"Very respectfully,
"John Sherman, Secretary."
No further action was taken by the committee on banking and currency.
Subsequently I wrote Mr. Ewing the following letter:
"May 21, 1878.
"Dear Sir:--I notice the crazy barkings of Buell in the 'Post'
about the syndicate, and favors granted to it by me.
"I wish to say to you that nothing would please me better than to
have the banking and currency committee examine into this matter,
and I am quite sure you will be gratified that the result will be
to my credit.
"I have no desire to dignify this by asking an investigation, but
only to say to you privately, as a personal friend, that I court,
rather than fear, such an inquiry.
"Very truly yours,
"John Sherman.
"Hon. Thomas Ewing, House of Representatives."
It was at this time that it was alleged that Mr. Tappan, a New York
bank president, said that he would pay $50,000 to stand at the head
of the line when the government began to pay out gold; that he
could put in $29,000,000 United States notes held by the New York
banks and break the government and take out all the gold. It was
said that Mr. Coe, a prominent banker in New York, was asked his
opinion whether I could resume, and that he said: "Well, yes, I
would let the government resume, but it must sell a certain number
of bonds to the banks at such a figure." Sensational reports were
sent out from Washington to discredit the contract lately made with
the syndicate. It was reported that the terms were concealed, that
only ten millions were contracted for, part of which it might be
necessary to take back, and that the banking and currency committee
had summoned me to explain the contract. So far from being true
the contract itself was printed in all the papers and the utmost
publicity was given to every step taken.
I had a very friendly acquaintance with Peter Cooper, for whom I
had the highest respect, but he had fallen into the general ideas
of the greenbackers. When in New York, early in April, I called
upon him and had a pleasant interview. Soon after I received from
him the following letter:
"New York, April 18, 1878.
"Hon. John Sherman, Secretary of the Treasury.
"Dear Sir:--In the brief interview which you did me the honor to
give me at my house a few days ago, I was impressed with your desire
to give all the information that would throw light upon the financial
policy of the government, and on the department of which you are
the executive head.
"But we had not the time to discuss fully some of those practical
questions that involve this financial policy, and I therefore now
take the liberty, in a more deliberate manner, to ask of you an
answer to questions, which might throw light upon the public mind
on these great interests, and allay the anxiety which pervades the
hearts of our people in reference to their future prospects of
business and employment, and show more clearly how the present
policy of the government in enforcing 'specie payments' by law and
carrying out the 'resumption act,' could be attended with any
_wholesome results to the financial interests_ of this country both
in the present and in the future.
"First. Can you resume in the presence of $645,000,000 of legal
tender and bank notes with what gold and silver you may have at
your command, without an actual shrinkage of this currency, either
on the part of the government or of the banks?
"Second. Can 'resumption' be maintained after the law has placed
a premium on coin, and virtually demonetized the paper, by rendering
its convertibility compulsory? In other words, can the present
'par value' of paper and coin be taken as an index that after the
law has thrown its whole weight in favor of coin, by making the
paper 'convertible,' the present equilibrium between the two can
still be maintained?
"Third. In connection with the fact that by purely commercial
laws, we have already arrived at specie payments, or the par between
coin and paper money, what good will it do to thrust the further
power of the law on the side of coin? How can we avoid placing
the paper at the mercy of those who will have control of the coin
--especially the paper of the national banks, whose chief credit
will consist in maintaining 'specie payments?'
"Fourth. After 'resumption,' how much money will the people have
with which to transact business, employ labor, enter into new
enterprises, and use 'cash payments' instead of 'inflating credit'
to a ruinous degree, as in times past, under the system of specie
payments, and convertibility by law?
"Fifth. It being the duty of Congress to make the necessary and
proper laws for carrying into execution a system of money, weights
and measures as the only means to regulate commerce with foreign
nations and among the several states, to provide as far as possible
an 'unfluctuating currency,' a steady measure of prices, how can
you prevent great and disastrous fluctuations in our 'convertible
money' and coin, arising out of the great demands for gold and
silver that may, at any time, be made upon us from the commercial
relations of this country with Europe over which the government
can have no direct control? With great respect I remain,
"Your obedient servant,
"Peter Cooper."
I made the following reply:
"Dear Sir:--Your letter of the 18th inst. is received. The questions
you ask me have been, in the main, answered to the committees of
the two Houses, and I might, perhaps, best reply to your letter by
sending these documents, printed by the order of the respective
Houses; but my sincere respect for you, and desire to allay any
doubts you may entertain of the success of the present plan of
resumption, induce me to answer your letter as fully as my time
will allow.
"As to your first question:
'Can you resume in the presence of $645,000,000 of legal tender
and bank notes, with what gold and silver you may have at your
command, without an actual shrinkage of this currency, either on
the part of the government or of the banks?'
"You must bear in mind that the aggregate amount of legal tender
notes and bank notes stated by you, may be gradually diminished,
so far as the legal tenders are concerned, to $300,000,000, and by
the banks to such sum as they find can be maintained at par with
United States notes. But, assuming that the aggregate should be
about the present amount, and remembering always that the bank
notes can be redeemed in legal tender notes, and are not required
to be redeemed in coin, I do express the opinion that resumption
in a country like ours can be maintained in the presence of the
existing volume of circulation; but if this should prove to be too
great, the reduction will be gradually of the bank notes, or, if
Congress so direct, of the legal tender notes.
"As to your second question:
'Can resumption be maintained after the law has placed a premium
on coin and virtually demonetized the paper, by rendering its
_convertibility compulsory?_ In other words, can the par value of
paper and coin be taken as an index that after the law has thrown
its whole weight in favor of coin, by making paper convertible,
the present equilibrium between the two can still be maintained?'
"I respectfully deny that the law places a premium on coin. One-
half of this circulation is not redeemable in coin at all, but in
legal tenders; nor does the law fix a premium on coin as against
legal tenders, but simply requires an equality. Its convertibility
is not compulsory. It is upon the demand of the holder. The holder
is as likely to deposit the coin, if he has it, as to deposit the
notes for coin. The currency would rest upon the presumption that
all paper money rests upon, that its use and convenience and
convertibility will always keep it at par with coin.
"To your third question:
'In connection with the fact that, by purely commercial laws, we
have already arrived at specie payments, or the par between coin
and paper money, what good will it do the thrust the further power
of the law on the side of coin? How can we avoid placing the paper
at the mercy of those who will have control of the coin--especially
the paper of the national banks, whose chief credit will consist
in maintaining specie payments?'
"I have simply to say that we have only arrived at our present
position approaching specie payments by the accumulation of coin
in the treasury and by the gradual and slow reduction of the volume
of notes; and the very measures which have enabled us to reach so
near the specie standard, are necessary to be continued to enable
us to maintain resumption. If resumption is desirable, it cannot
be maintained by a repeal of the law, which requires resumption
and grants the necessary powers to prepare for it and to maintain
it.
"As to your fourth question:
'After resumption, how much money will the people have with which
to transact business, employ labor, enter into new enterprises,
and use cash payments instead of inflating credit to a ruinous
degree, as in times past under the system of specie payments, and
convertibility by law?'
"It is answered, I think, by what I have said in reply to your
first question. We will have the United States notes, the bank
notes, and coin certificates, both gold and silver, together with
the gold and silver itself, all in circulation. The actual amount
of currency in circulation, I think, will be as large in specie
times as now, and its equality and convertibility will rather
increase than prevent the circulation of either. The depreciation
of paper money is not necessarily caused solely by its excess, but
by the uncertainty of its value and confidence in its redemption.
"In reply to your fifth question:
'It being the duty of Congress to make the necessary and proper
laws for carrying into execution a system of money, weights and
measures, as the only means to regulate commerce with foreign
nations and among the several states, to provide as far as possible
an unfluctuating currency, a steady measure of prices, how can you
prevent great and disastrous fluctuations in our convertible money
and coin, arising out of the great demands for gold and silver that
may at any time be made upon us from the commercial relations of
the country with Europe, over which the government can have no
direct control?'
"I have only to say that it is undoubtedly the duty of Congress to
provide for the possible contingencies that would make it necessary
to suspend specie payments, though, as the circumstances which
would compel suspension are necessarily unforeseen, unknown,
difficult to be defined or to be provided for, I am not sure but
it is better to leave the question of suspension to the necessities
of the case rather than to legislation which must be founded upon
uncertainty. When the treasury is actually unable to redeem its
notes in coin, suspension comes necessarily, but resumption would
come again from the absolute necessity of currency for our daily
wants, and Congress could provide better in view of the actual
facts than anticipated facts.
"I think the real difficulty that has stood in the way of resumption
is the nightmare of things that have existence only in the brain,
and not in fact. We can only deal with the current course of events
based upon probabilities, and cannot provide for unforeseen
contingencies.
"It is my earnest hope that you and gentlemen like you, who I know
are sincere in your convictions, may see your way to trust to the
policy that is now entered upon, which seeks to provide as much
paper currency as can be maintained at par in coin, and to secure
its active circulation in aid of industry and enterprise.
"I am, with great respect,
"John Sherman."
On the 13th of May, 1878, the charges against me assumed a different
form, by the adoption, in the House of Representatives, of a preamble
and resolutions offered by Clarkson N. Potter, of New York. Among
the recitals of this resolution was a charge that James E. Anderson
and D. A. Weber, supervisors of registration of the parishes of
East and West Feliciana, falsely protested that the election in
such precincts had not been fair and free, and that the returning
board thereupon falsely and fraudulently excluded the vote of said
precincts, and the choice of the people was annulled and reversed,
and that such action of said Weber and Anderson was induced or
encouraged by assurances from me. The charge was based upon the
following letter, alleged to have been written by me:
"New Orleans, November 20, 1876.
"Messrs. D. A. Weber and James E. Anderson.
"Gentlemen:--Your note of even date has just been received. Neither
Mr. Hayes, myself, the gentlemen who accompany me, or the country
at large, can ever forget the obligations under which you will have
placed us should you stand firm in the position you have taken.
From a long and intimate acquaintance with Governor Hayes, I am
justified in assuming the responsibility for promises made, and
will guarantee that you will be provided for as soon after the 4th
of March as may be practicable, and in such manner as will enable
you both to leave Louisiana, should you deem it necessary.
"Very truly yours,
"John Sherman."
The charge was without any foundation whatever, and excited my
resentment. On the 20th of May I wrote Mr. Potter the following
letter:
"May 20, 1878.
"Hon. Clarkson N. Potter, House of Representatives.
"Sir:--I observe that the resolution of the House, under which your
committee is organized, singles me out personally by name from
among twenty or more gentlemen who were present, at the request of
President Grant, or the chairman of the Democratic national committee,
to attend and witness the action of the returning board upon the
presidential election returns in the State of Louisiana in 1876,
and, in substance, charges that at that election in East Feliciana
parish the Republican vote was withheld and not cast, in pursuance
and execution of a conspiracy by such voters, that in furtherance
of such conspiracy, James E. Anderson, supervisor of registration
in that parish, and D. A. Weber, supervisor of registration in West
Feliciana parish, falsely protested that such election in such
parishes had not been free and fair, and that, therefore, the
returning board of said state falsely and fraudulently excluded
votes of such precincts, and 'by means thereof, and of other false
and fraudulent action of said returning board, the choice of the
people of the state was annulled and reversed, and that such action
by the said Weber and Anderson was induced or encouraged by the
assurances of Hon. John Sherman, now Secretary of the Treasury.'
"This resolution requires you to investigate these allegations,
and upon the result of these depends the accusations against me.
"First. That there was a conspiracy among the voters to withhold
and not cast the votes, with a view to make a false charge on the
election.
"Second. That in point of fact there was a free and fair election
in East and West Feliciana, which was falsely protested and returned
by said Anderson and Weber, by which the votes of those parishes
were falsely and fraudulently excluded by the returning board.
"Third. That the offense of Anderson and Weber was encouraged by
assurances by me.
"With the view, therefore, to meet this accusation, which, so far
as it affects me, I declare and know to be absolutely destitute of
even the shadow of truth, I respectfully ask, and now make formal
application, for leave to be represented before your committee in
the investigations of all charges affecting me personally. I tender
and offer to prove that, in point of fact, the election in East
and West Feliciana parishes was governed and controlled by force,
violence and intimidation so revolting as to excite the common
indignation of all who became conversant with it, and proof was
submitted to that effect, not only before the returning board in
evidence contained in ex. doc. No. 2, second session 44th Congress,
but also in the testimony taken by the committee of the Senate on
privileges and elections, report No. 701, second session 44th
Congress.
"I will, if allowed, furnish the names of witnesses whom I desire
to examine before you to prove the truth of this statement as to
said parishes, and that the protests referred to were true, supported
by the testimony and properly acted upon and sustained by the
returning board. To my personal conduct during this examination
I invite your fair and candid scrutiny, with entire confidence that
not only myself, but my associates of both political parties, acted
honestly and properly, from a sense of public duty. I have requested
Hon. Samuel Shellabarger to deliver this to you, and I respectfully
designate him as the gentleman I would desire, on my part, to be
present to cross-examine witnesses testifying in relation to charges
against me, and who will, as my counsel, tender evidence in proof
of this statement. The favor of an early answer is requested.
"Very respectfully,
"John Sherman."
It is not necessary to detail the history of this investigation,
of which so much was said or printed at the time. It was a partisan
committee organized to stir up the controversy that had been settled
by the decision of the electoral commission. The committee conducted
a long and expensive investigation. The result was that the
pretended letter was proven to be a forgery, and that my conduct
during the sittings of the returning board was shown to have been
that of a spectator, precisely like that of a score of other so-
called visitors, of both political parties. The investigation
proved to be a radical failure. The report was not made until
March 3, 1879, the last day of the 45th Congress. No action was
taken upon it.
During the investigation I specifically denied, under oath, that
I had ever written or signed such a letter. There was not the
slightest proof, direct or indirect, that I did so. The majority,
with great unfairness, instead of frankly stating that they were
deceived by a forgery, treated it as a matter in doubt. In their
report they do not allege or pretend that I wrote or signed such
a letter. The evidence of their own witnesses was conclusive that
it was written by a Mrs. Jenks.
The report of the minority of the committee commented with severity
upon the unfairness of the majority, in the following language:
"The majority seem to us to have come short of what we had a right
to expect from their candor, when they fail to report explicitly
whether the testimony on this subject sustains the charge that such
a letter as Anderson and Weber testified to was ever written by
the Hon. John Sherman. For our part, we report distinctly and
emphatically that it does not, and that the palpable perjuries of
both the witnesses named justify a feeling of deep disgust that
they should be treated as capable of creating a serious attack upon
the character of a man who has borne a high character in the most
responsible service of the country for five-and-twenty years.
"The charge, if it meant anything, was that of corruptly bribing
Anderson and D. A. Weber to perpetrate a fraud in the election
returns of the Feliciana parishes.
"We find nothing in the testimony to show that Mr. Sherman either
knew or believed that any such fraud was committed. We find abundant
evidence that he believed that the protests against the fairness
of the election were honestly and rightly made.
"We cannot follow the majority in their yielding to what we must
believe to be a prejudice of party spirit, which has carried then
even to the extent of intimating that the Secretary of the Treasury
was party to the pranks of an eccentric woman who dropped a parcel
of letters to set the local politicians of New Orleans agog--a
woman who was called before the committee a long time as a witness,
but who was neither called, examined, nor cross-examined by the
minority, who, however they might share the public amusement at
the performance, entirely declined to take part in it.
"A considerable number of gentlemen who visited New Orleans, either
at the request of President Grant or of the national or local
campaign committee, were called, and testified as to the purpose
of their visit and their procedure during it.
"Adhering to our purpose of leaving the majority to frame issues
on which they were willing to proceed in investigating, we did not
seek to examine into the particulars of the conduct of the Democratic
visitors in Louisiana. To let the testimony show the original
resolutions of inquiry to be both useless and mischievous, serving
no purpose but the spread of unjust scandal, seemed to us, in view
of all former inquiries in the same direction, the proper course
to pursue.
"Messrs. Sherman, Garfield, Hale, Kelley, and others were examined,
and their testimony was compared with that by which it was attempted
to impeach their motives and their conduct. Their account of their
action is consistent and frank. They believed that their party
had rightfully a good claim to the fruits of the election in that
state. They also believed that the notorious violence and intimidation
which had in former years disgraced that state had been again
practiced in the campaign of 1876. They approved the action of
the returning board in deciding, under the powers given them by
law, to declare null the pretended elections at precincts and polls
where evidence of such interference with the freedom of election
had occurred. We do not find that they attempted to control the
board or to dictate their action. We do not find that they attempted
to dictate to witnesses or to procure false testimony to place
before the board. We do not find that they were in any way more
partisan or less scrupulous than the similar party of gentlemen
who then represented the Democratic party. The attempt to single
out Mr. Sherman for special attack seems to us to have had no
original foundation but the testimony of James E. Anderson, and
the terms in which the majority, in their report, have characterized
that person, warrant us in declaring our opinion that when the
character of that witness and his testimony were discovered, it
was the duty of the majority of the committee frankly to abandon
their effort to discriminate between Mr. Sherman and the other
gentlemen who were associated with him."
Shortly afterward I wrote the following letter to E. F. Noyes, then
United States minister at Paris, whose name was mentioned in the
resolution of investigation:
"Washington, D. C., April 1, 1879.
"My Dear Sir:--Your letter of the 18th ult. is received.
"The report of the Potter committee, which you correctly pronounce
to be infamous, was received in silence and was scarcely printed
or noticed in the newspapers of the United States two days after
its presentation to the House. It was then severely handled by
the Republican press and treated with silence by the Democratic
press, and now it is not mentioned. I think that neither of us
should complain of any injurious result from the Potter investigation;
although it was annoying, it was fair and creditable both to the
committee and many of the witnesses. But for the expense and
trouble of the investigation, I am rather gratified that it occurred,
for the feeling of the Democratic party, over what they supposed
was a fraudulent return, would have deepened into conviction, while
the investigation tended on the while to repel this suspicion.
* * * * *
"Very truly yours,
"John Sherman.
"Hon. E. F. Noyes."
Another investigation into the conduct of the department was
inaugurated by J. M. Glover, of Missouri, who, on November 6, 1877,
introduced into the House of Representatives a resolution directing
the several committees of the House to inquire into the conduct of
the different branches of the public service coming under their
charge, and the committees on expenditures in the several departments
to examine into the state of the accounts and expenditures of the
respective departments submitted to them. This resolution in
substance was adopted January 11, 1878, and Mr. Glover was chairman
of the sub-committee to examine into the conduct of the treasury
department. He came to the department and every facility was given
him for examination. He was allowed experts to aid him in the
work, and continued the investigation for two years until the close
of the Congress. His committee incurred much expense, but was
unable to find that any of the public money had been wasted or
lost. His report, submitted in the closing days of Congress, was
not ordered to be printed. Subsequently, on the 15th of April,
1879, after Mr. Glover had ceased to be a Member of the House, a
petition from him was presented asking that his report be printed,
which was referred to a committee, but they did not seem to think
the report of much consequence, as they did not recommend it be
printed.
The only financial bill that became a law during that session was
the following, approved May 31, 1878:
"AN ACT TO FORBID THE FURTHER RETIREMENT OF UNITED STATES LEGAL
TENDER NOTES.
"_Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled_, That from and
after the passage of this act it shall not be lawful for the
Secretary of the Treasury, or other officer under him, to cancel
or retire any more of the United States legal tender notes. And
when any of said notes may be redeemed or be received into the
treasury under any law, from any source whatever, and shall belong
to the United States, they shall not be retired, canceled, or
destroyed, but they shall be reissued and paid out again and kept
in circulation: _Provided_, That nothing herein shall prohibit
the cancellation and destruction of mutilated notes and the issue
of other notes of like denomination in their stead, as now provided
by law.
"All acts and parts of acts in conflict herewith are hereby
repealed."
I recommended the passage of this law, as I believed that the
retirement of the greenbacks pending the preparation for resumption,
by reducing the volume of the currency, really increased the
difficulties of resumption.
The session of Congress closed on the 26th of June, 1878. During
the recess the business of the department proceeded in the ordinary
way, without any event to attract attention, but all that happened
tended in the right direction. The crops were good, confidence
became assurance, and all business was substantially based upon
coin.
In consequence of the sale of four and a half per cent. bonds for
resumption purposes the return of Mr. Conant to London became
necessary. His numerous letters advised the department of the
current of financial operations in Europe. There was some fluctuation
in the relative price of United States notes and coin, chiefly
caused by our demand for gold and the appearance in the market of
bonds of other countries. At one period the sale of four and a
half per cent. bonds became more rapid than the contract provided
for, and this rapid accumulation of coin tended to advance its
price, which I desired to avoid, and, therefore, strictly limited
the sale of the four and a half per cent. bonds to $5,000,000 a
month, thus preventing an unusual demand for coin. During this
period there was a constant effort of banks and bankers, chiefly
in New York, to have some exceptional privilege in the purchase of
four per cent. bonds. This was in every case denied. The published
offer of the sale of these bonds was repeated during every month,
and the terms prescribed were enforced in every instance without
favor or partiality.
On the 12th of July W. S. Groesbeck, one of the members of the
monetary commission about to assemble in Europe, applied to the
department for information that would enable the American conferees
to assure the conference that the United States would resume by
the time fixed, and should therefore be regarded by the conference
as not in a state of suspicion. I responded to his letter as
follows:
"Treasury Department, }
"Washington, D. C., July 15, 1878.}
"William S. Groesbeck, Esq., Cincinnati, Ohio.
"Dear Sir:--Your letter of the 12th instant was received during my
temporary absence, and I comply with your request with pleasure.
"Accompanying this I send you sundry documents, duly scheduled,
which contain in detail the law and my views on the resumption
question.
"Among these papers is a letter from the treasurer of the United
States, of date July 6, showing the exact coin on hand for all
purposes, a careful examination of which will prove to you our
ability to resume at the time fixed by law.
"It will be perceived that we have on hand in the treasury coin
enough to cover all our coin liabilities of every name and nature,
and also thirty five per cent. of the aggregate amount of United
States notes outstanding, with an excess of $2,474,822. We have
also $7,139,529 of fractional silver coin, which will be used for
current expenses.
"Of the United States notes outstanding, at least sixty millions
are held in the treasury, either as the property of the United
States or as special funds for purposes prescribed by law, which
cannot readily be diminished.
"In addition, the secretary is authorized to sell bonds for the
purchase of coin or bullion, and he may use United States notes
for the same purpose. Our revenue, both in coin and currency, is
more than sufficient to pay all current expenses covered by the
appropriations of Congress.
"Considering that the United States notes are scattered over a vast
country, are in great favor and demand, and extremely popular, I
feel entire confidence in the ability of the treasury to resume on
the 1st of January next, and the leading bankers and brokers of
New York are of the same opinion.
"I know of nothing that can prevent the United States from taking
its place among the specie-paying nations at this time, except the
possible repeal by Congress of the resumption act, and this I do
not anticipate.
"Very respectfully,
"John Sherman, Secretary."
CHAPTER XXXIV.
A SHORT RESPITE FROM OFFICIAL DUTIES.
Visit to Mansfield and Other Points in Ohio--Difficulty of Making
a Speech at Toledo--An Attempt to Break up a Meeting that Did Not
Succeed--Various Reports of the Gathering--Good Work of the Cincinnati
"Enquirer"--Toledo People Wanted "More Money"--Remarks Addressed
to the Cincinnati Chamber of Commerce--Visit to Lancaster, the
Place of My Birth--My Return to Washington--I Begin to Exchange
Silver Dollars for United States Notes--My Authority to Do So Before
January 1 Questioned--The Order is Withdrawn and Some Criticism
Follows--Instructions to the United States Treasurer and Others--
Arrangements with New York Clearing House.
In the latter part of August, 1878, I made a visit to Ohio, first
going to Mansfield where I was cordially received. In the evening
I was serenaded, and after the band had played several times I went
to the steps of the hotel and made a few impromptu remarks, reported
as follows by the local paper:
"Fellow Citizens:--I thank you heartily for the courtesy of this
serenade, and especially the members of the band who have favored
us with their excellent music. I will be here with you but for a
few days, and welcome with joy the sight of home, and the familiar
faces and scenes around me. I do not desire to say anything of
politics, or of matters upon which we do not agree, but prefer to
meet you all as old acquaintances and townsmen, having common
interests and sympathies as to many things as to which we do agree.
And I especially congratulate you upon the bountiful harvests,
fruitful orchards and reviving prosperity with which you are blessed.
I will be glad to shake hands with any of you, and to talk with
you free from all artificial restraints."
I went from Mansfield to Toledo, where I had agreed with the state
central committee to make a speech, and where the opposition to
resumption was stronger than in any other city in the state. Here
the so-called National party had its origin. I knew a great many
of the citizens of Toledo and the prevailing feeling on financial
topics. I, therefore, carefully prepared a speech, covering all
the leading questions involved in the campaign, especially all that
related to our currency. The meeting was held August 26, in a
large opera house, which would seat 2,500 people. I found it full
to overflowing. Every particle of space in the aisles was occupied
and it was estimated that 3,000 people were gathered within its
walls. I will give the narrative of a correspondent of the St.
Paul "Pioneer Press," who was an eyewitness of the scenes that
followed:
"Secretary Sherman was not received with that hearty greeting common
to a man of such prominence at first, while the organization that
had been picketed in different parts of the hall at once commenced
hissing at the first sight of the tall, slender form of the speaker.
Until his introduction the emotion was the same, and as soon as he
commenced to speak he was interrupted with jeers and insults from
what Nasby, in his paper, called the 'hoodlums of the city,' who
came organized and determined to break up the meeting without giving
the speaker a chance to be heard, by shouting at the top of their
voices such insults as 'You are responsible for all the failures
in the country;' 'You work to the interest of the capitalist;'
'Capitalists own you, John Sherman, and you rob the poor widows
and orphans to make them rich;' 'How about stealing a President;'
'Why don't you redeem the trade dollar?'
"These, with many other like flaunting sneers, were constantly
indulged in by the disorderly element, which had been distributed
with care throughout the hall. So boisterous and moblike was their
behavior that it was apparent several times that it would be
impossible to maintain order, and notwithstanding the speaker stated
that if any gentlemen wished to ask any question, upon any point
that he might discuss, in their order, he would be glad to answer
them, and invited criticisms, but one such question was asked by
Mr. F. J. Scott, one of the leading lights of the Nationals, who
wished to know the difference between 'fiat' money and greenbacks;
the speaker replied: 'Fiat money is redeemable nowhere, payable
nowhere, for no amount without security, at no time, and without
a fixed value; while greenbacks are redeemable in specie at par,
at a fixed time, and secured by the pledge of the government.'
"By this ready, pointed and satisfactory answer the speaker turned
the tide, and the applause was hearty in his favor. When answering
Judge Thurman the speaker alluded to the charge made by him that
the 'Republican party was the enemy of the country.' Then, after
calling attention to the war record of the Democratic party, the
speaker said: 'Who is the enemy of the country?' [A voice from
a 'hoodlum,' 'John Sherman.'] 'Why,' says the speaker; 'because
he has brought greenbacks up to par value, and is in favor of honest
money?' This was another cause for an outburst of applause and
approval to the speaker, although it was very doubtful, in the
beginning of the speech, whether he could carry enough of the vast
audience, with the large disturbing element opposing intermingled
among them, with him. But long before the closing of his discourse
it became apparent that John Sherman is able to defend his position,
even in the camp of the enemy, while the ungentlemanly acts of the
disorganizing element were disgusting to the better element of
their party. It also effectively revived the lukewarm Republicans
in this community, and it may be well said that John Sherman did
what no other man could have done, that is, to go to a place like
Toledo, stand before an organized party which was determined to
prevent his speaking, while his own party was lukewarm toward him
--it was frequently asserted here 'John Sherman had not a single
friend in the city'--and during his speech of two hours turn the
popular tide in his favor, as was evident he did from the hearty
applause he received as he proceeded in his remarks; and it is safe
to say that no man in these United States could have done the
Republican cause, in this place, the good that Secretary Sherman
did by his speech, and the 'Toledo National hoodlums,' in their
efforts to break up the meeting, 'gave the old man a reception,'
as was remarked on the streets; but throughout his speech he kept
his temper, kept cool and considerate, made remarks of cheer by
saying, 'This is only a love feast,' and 'We will feel better
natured after a while, as we become better acquainted,' etc., etc."
The narrative given by the correspondent is perhaps a little
exaggerated, but the general outlines are correct, as I very
distinctly remember. The result was that my carefully prepared
speech was knocked into "pi," and I had to depend upon the resources
of the moment to make a speech suitable to the occasion and the
crowd. The Cincinnati "Enquirer," to which, as to other papers,
a copy of the prepared address had been sent, had two stenographers
in Toledo to report the speech as made and telegraph it to the
paper. They did so and the speech as reported and published in
the "Enquirer" was so much more sensational and better than the
prepared speech that it was selected by the Republican state
committee for publication as a campaign document. This enterprise
of an unfriendly newspaper resulted to my advantage rather than my
detriment, for on account of the interruptions the speech reported
was much more readable than the other.
No doubt the feeling in Toledo grew out of the long depression that
followed the panic of 1873, that for a time arrested the growth
and progress of that thriving and prosperous city. The people
wanted more money, and I was doing all I could, not only to increase
the volume of money by adding coin to our circulation, but to give
it value and stability. I have spoken in Toledo nearly every year
since, and have always been treated with courtesy and kindness,
and many of my best friends now in Toledo are among those who joined
in interrupting me, and especially their leader, Mr. Scott.
From Toledo I went to Cincinnati. I have been for many years an
honorary member of the Chamber of Commerce of Cincinnati, a body
of business men as intelligent and enterprising as can be found
anywhere. It has been my habit to meet them once a year and to
make a short speech. This I did on August 28. The "Gazette"
reported my visit as follows:
"Secretary Sherman was on 'change yesterday, and, at the close of
the business hour, he was introduced by President Hartwell, and
was greeted with applause, after which he spoke as follows:
'Gentlemen:--It gives me pleasure to meet so many of the active
business men of Cincinnati, even for a brief period. In the office
which I hold I have a great deal to do with merchants, like these
engaged in the exchange of the products of our industries, and I
congratulate you, first of all, that this fall, by the bounty of
Divine Providence, you will have to market the largest crop we have
ever gathered in this country since the world was born.
'In every part of our country, with but few exceptions, and only
as to certain crops, are crops greater than ever before, and you
will have to buy and sell them.
'The only point of an unpleasant nature, that occurs to me, affecting
the industrial interests which you so largely represent, is the
misfortune which has befallen large portions of the south, where
yellow fever, one of the worst enemies of human life, now has spread
a pall of distress among our southern brethren. I am glad, fellow-
citizens, that you are doing something to contribute to the relief
of their sufferings, because business men, above all others, are
to be humane and generous to those who are in distress.
'That this will, to some extent, affect the business of gathering
cotton, I have no doubt will occur to you all, but you can only
hope that it will be but a brief season until the frost will
dissipate the distress of the south and the cotton crop may be
safely gathered.
'There is another thing I can congratulate you upon as business
men, that is--our currency is soon to be based upon the solid money
of the world. I do not want to talk politics to you, and I do not
intend to do so, but I suppose it is the common desire of all men
engaged in business to have a stable, certain standard of value,
and although you and I may differ as to the best means of obtaining
it, and as to whether the means that have been adopted have been
the proper means, yet I believe the merchants of Cincinnati desire
that their money shall be as good as the money of any country with
which we trade. And that, I think, will soon be accomplished.
'Now, gentlemen, I do not know that there is any other topic on
which you desire to hear from me. I take a hopeful view of our
business affairs. I think all the signs of the times are hopeful.
I think it a hopeful fact that, after this week, there will be an
end of bankruptcies, that all men who believe that they are not in
a condition to pay their debts will have taken the benefit of the
law provided for their relief, and, after Saturday next, we will
all stand upon a better basis--on the basis of our property and
our deserved credit.
'It has been the habit, you know, of one of your able and influential
journals to charge me with all the bankruptcies of the country.
If a grocer could not sell goods enough to pay expenses, and a
saloon keeper could not sell beer enough to get rich, and took the
short way of paying his debts, this paper would announce the fact
that he had "Shermanized." [Laughter.] And if a bank was robbed,
or the cashier gobbled the money in the safe and left for parts
unknown, this able editor announced that the bank had "Shermanized."
And thus this paper contributed largely to the very result it
denounced. You understand how this thing works.
'But we have passed through this severe crisis. It has been common
in all countries and all states that carry on extensive commercial
transactions with each other. I believe that we are through with
this one; a ray of hope has dawned on us, and we are certainly
entering upon a career of prosperity. Every sign of business is
hopeful. We have paid off immense amount of our debts. We do not
owe Europe anything of consequence. We have gone through the debt
paying process. A few years ago we were running in debt at the
rate of $100,000,000 a year, but lately we have been paying off
our debt at the rate of $100,000,000 a year. From this time on we
will be more prosperous. Take heart, you men of Cincinnati; you
men who represent the great interests in this great city; you who
live in the heart of the great west, take heart in the transaction
of your business, because I believe you have reached a solid basis
upon which to conduct your business profitably, the basis of solid
coin.'"
From Cincinnati I went to Lancaster, the place of my birth, and
where my eldest sister, Mrs. Reese, resides. I need not say that
the visit was a pleasant one, for it was necessarily so. A great
many among those whom I saw had been my associates in boyhood, and,
as a matter of course, the topics of conversation were mainly of
the past. A dispatch to the Cincinnati "Gazette" of the date of
August 30, briefly describes my visit and gives the substance of
a few remarks I was called upon to make by an impromptu gathering
in the evening at the residence of my sister:
"The Lancaster band serenaded Secretary John Sherman this evening,
at the residence of his sister, Mrs. General Reese. A very large
crowd assembled on the occasion, and, in response, Senator Sherman
made one of the neatest, pleasantest, and most satisfactory little
talks heard here for many a day. Of course he began by touching
upon his early boyhood, and some of the incidents of the same spent
here in old Lancaster, the place of his nativity; told of his
incipient struggles in life with the rod and chain on an engineer
corps in the Muskingum valley; how he was ushered into the sterner
vicissitudes of life, and how he drifted into politics; and then,
without using the occasion for party purposes, without making a
political speech, he explained in well selected language his position
as an officer of the government; what was the course prescribed
for him to do, how he was doing it, and concluding with a most
clear and intelligible exegesis of the resumption act; what it was,
its intent, purpose and meaning; and with convincing nicety and
clearness, and evident satisfactoriness, was his explanation given,
that he was frequently interrupted by spontaneous applause from
the crowd. He told how the credit of the country was advancing as
we near the solid foundation of hard money; how the American people
were the most favored, the greatest blest, the freest and most
prosperous people on the earth; how the signs of the times in busy
shops and abounding field told of the disappearing hard times, and
the dawning of an era of greater peace and prosperity."
I returned to Washington, and at once proceeded to arrange with
the treasurer and assistant treasurers of the United States to make
the change from currency to coin easy. I conferred with General
Hillhouse, assistant treasurer at New York, upon the subject and
had his opinions verbally and in writing. I conferred freely with
James Gilfillan, treasurer of the United States, and, as a result
of these conferences, on the 3rd of September, I directed the
treasurer of the United States, upon the receipt by him, from any
person, of a certificate, issued by any assistant treasurer, designed
depositary, or national bank designated as a public depositary of
the United States, stating that a deposit of currency had been made
to his credit in general account of the sum of one thousand dollars,
and any multiple thereof, not exceeding ten thousand dollars, to
cause a shipment to be made, from some mint of the United States
to the person in whose name the certificate was issued, of a like
amount of standard silver dollars, the expense of transportation
to be paid by the mint.
The sole purpose of this order was to facilitate the circulation
of standard silver dollars for all purposes as currency, but not
to issue them so as to be used directly in making those payments
to the government which were required to be made in coin. I wished
to avoid their deposit for silver certificates. Officers receiving
deposits of currency were expected, as far as practicable, to see
that the silver dollars were put in circulation. Shipments, however,
were to be made only to points in the United States reached through
the established express lines by continuous railway or steamboat
communication.
I regarded this as practically the resumption of specie payments
in silver dollars, but the chief object aimed at was to secure a
general distribution of these dollars throughout the United States,
to the extent of the demand for them, without forcing them into
circulation.
General Hillhouse recommended the payment of silver for all purposes,
not only for circulation, but for the payment of bonds and customs
duties. This I fully considered, but thought it best for the
present to get into ordinary circulation among the people, in points
remote from the ports of entry, as much silver coin as practicable,
before offering it freely in cities where it would be immediately
used for customs duties. I said: "If, within a month or so, we
are able to reduce our stock of silver to five or six millions, I
should not hesitate a moment to offer it then freely in New York
and elsewhere, and run the risk of doing without gold revenue for
awhile."
On September 7 I issued the following order:
"Treasury Department, September 7, 1878.
"Hon. James Gilfillan, Treasurer of the United States.
"Sir:--On and after the 16th day of this month you are authorized,
at the treasury in Washington, and at the several sub-treasuries
in the United States, to exchange standard silver dollars for United
States notes.
"Very respectfully,
"John Sherman, Secretary."
The question was raised in the public prints, and in the department,
whether I had legal authority, under the existing laws, to pay
silver dollars in exchange for United States notes before the 1st
of January. It was plausibly urged that the payment of this coin
in advance of the time fixed for resumption was the exercise of
authority not authorized by law. I, therefore, on the 13th day of
September, three days before the previous order would take effect,
directed the treasurer of the United States as follows:
"Treasury Department, September 13, 1878.
"Hon. James Gilfillan, Treasurer United States.
"Sir:--Some question has been made whether the issue of silver
dollars in exchange for United States notes, before January 1,
next, is in entire accordance with the legislation of Congress
bearing on the subject, and, therefore, you will please postpone
the execution of department order of the 3rd instant until further
instructions, and withhold from transmission to assistant treasurers
the order of the 7th.
"Silver dollars will be issued as heretofore, in the purchase of
silver bullion, in payment of coin liabilities, and in the mode
pointed out in your order of July 19, as modified.
"With a view to their payment on current liabilities, you will
request that each disbursing officer estimate the amount he can
conveniently disburse.
"Very respectfully,
"John Sherman, Secretary."
This change of my opinion was the subject of much criticism in the
public prints. Some complained that I was unfriendly to the silver
dollar and sought to prevent its use, and others complained that
its use before the 1st of January as a substitute for gold coin
was a violation of the law. My only purpose was to accustom the
people to the use of the silver dollar in the interior of the
country at places where it could not be used in the payment of
customs duties. These could only be paid in coin, and, in view of
resumption, I desired to strengthen the treasury as much as possible
by the receipt of gold coin. The charge that I was guilty of
changing my mind did not disturb me when I was convinced that I
had exceeded my authority in the issue of the first order.
At that time there was an evident reluctance to pay coin into the
treasury for four per cent. bonds sold, when, within a brief period,
United States notes could be paid for such bonds. I therefore
directed the treasurer of the United States: "Where deposits with
national banks on account of subscriptions to the four per cent.
loan have not been paid into the treasury within ninety days after
the deposit was made, you will at once draw for the amount of such
deposits, to be forthwith paid into the treasury, and as such
deposits accrue under this rule, you will make such withdrawals
until the whole is paid."
I also directed the chief of the loan division as follows:
"No doubt most of the depositaries will place coin to their credit
within the period of the call outstanding after subscriptions are
made, according to the circular of the 1st ultimo, but if this is
not done, the deposit must be withdrawn at the expiration of ninety
days from the date of subscription."
I also advised August Belmont & Co., that the department expected
that by the 1st of October the remainder of the coin then due upon
the four and a half per cent. bonds, both from the American sales
and those made in London, would be paid into the treasury; that it
was deemed best that this should be done, so that the account of
this loan might be closed as soon thereafter as the books could be
made up. This request was promptly complied with.
Early in October there were many rumors in circulation charging
that prominent capitalists and speculators were combining to defeat
resumption. Among them Jay Gould was mentioned as being actively
engaged in "bearing" the market. About this period I received from
him the following letter:
"578 Fifth Avenue, Oct. 17, 1878.
"Hon. John Sherman.
"Dear Sir:--Referring to recent newspaper statements that I have
been interested in movements either to tighten money or create a
scarcity of gold and thus interfere with natural and early resumption,
I beg to say that they are without the slightest foundation. On
the contrary I feel a very deep interest in your efforts, so far
eminently successful in carrying the country to a successful
resumption.
"_If resumption is made a real success it will be accompanied with
substantial business prosperity and do more to strengthen and retain
the ascendency of the Republican party than any and all other
reasons_.
"The real causes of the recent disturbances in the money market
are the following:
"First. Government bonds have come back from Europe faster than
investment orders would absorb them--the surplus are carried on
call loans and have absorbed several millions of dollars.
"Second. The financial troubles in England are retarding the rapid
movement of western produce. The elevators at Chicago and Milwaukee
are full of grain; at Chicago alone about 7,000,000 bushels. The
currency sent west to pay for this grain will not be released until
the grain is marketed.
"Third. A large amount of foreign capital usually lent on call in
Wall street has been transferred to London and Liverpool as money
commands (or has until recently) better rates there than in New
York.
"I remain, yours very truly,
"Jay Gould."
The purchase of four per cent. bonds sensibly increased in October.
As the six per cent. bonds could not be paid within ninety days
after the call, the purchasers of the four per cent. bonds claimed
the right to pay for such bonds in United States notes, which on
the 1st of January would be redeemable in coin. To this I replied
that as the sale of four per cent. bonds was solely for the purpose
of refunding the six per cent. bonds, the proceeds of the sale must
be such as could be lawfully paid for called bonds. "Under existing
law the treasury is required to and will redeem in coin, on and
after January 1, 1879, United States legal tender notes, on
presentation at the sub-treasury in New York, and will then receive
such notes in payment for four per cent. bonds. The department
does not anticipate any change in the law that would operate to
prevent this, but cannot stipulate against any act which Congress
in its judgment may pass."
Every facility which the law allowed to promote the easy change in
the basis of our currency was carefully considered and adopted.
The chief measure adopted was to promote exchanges in the clearing
house in New York, so that only the balance of debits or credits
would actually be paid. I requested Assistant Secretary French to
examine whether, under existing law, such an arrangement was in
the power of the department, and called his attention to previous
correspondence in 1875 in the department on this subject. He came
to the conclusion that the existing law would not justify such an
arrangement. John Jay Knox, comptroller of the currency, however,
favored the admission of the assistant treasurer of the United
States at New York as a member of the clearing house. He said:
"The proposition is favored by the banks generally, and it is
believed that the representation of the treasury department in the
clearing house will facilitate the transaction of business between
the department and the banks, and I therefore respectfully suggest
that application be made for the admission of the assistant treasurer
in New York to the Clearing House Association, provided it shall
be found that there is no legal objection thereto."
General Hillhouse also was strongly in favor of the plan proposed.
He said:
"The plan of going into the clearing house was proposed in
correspondence with the department several years ago, as a remedy
for the risk incurred in the collection of checks, and if there
are no legal impediments in the way, it would very much simplify
the business of the office if it could be adopted. The effect in
connection with resumption would also, I think, be good, as it
would place the banks and the treasury on the same footing with
respect to the use of United States notes in settlements, and thus
aid in maintaining them at par with gold in all the vast transactions
connected with our internal trade and commerce. I have not given
the question sufficient thought to speak with confidence, but it
seems to me a very important one, and well worthy of careful
consideration."
A committee of the clearing house called upon me and the subject
was thoroughly considered. Mr. Gilfillan wrote to General Hillhouse
as follows:
"Treasury of the United States.}
"Washington, November 9, 1878. }
"Sir:--By direction of the secretary, I have the honor to request
that you will submit to the Clearing House Association of the banks
of your city the following propositions, and, upon obtaining the
assent of the association to them and communicating that fact to
the department, you are expected to act in conformity with them.
"First. Hereafter, drafts drawn upon any bank represented in the
Clearing House Association in the city of New York, received by
the assistant treasurer in that city, may be presented to such bank
at the clearing house for payment.
"Second. Hereafter, drafts drawn on the assistant treasurer at
New York may be adjusted by him at the clearing house, and the
balances due from the United States may be paid at his office in
United States notes or clearing house certificates.
"Third. After the 1st of January next, payment of checks presented
to the assistant treasurer by any bank connected with the clearing
house may be made by him in United States notes.
"Very respectfully,
"James Gilfillan, Treasurer United States.
"Hon. Thomas Hillhouse, Assistant Treasurer United States, New
York."
General Hillhouse, on the 12th of November, advised me of the
receipt of this letter, and that the propositions of the treasurer
were referred to the Clearing House Association, that a meeting
would be held and there was little doubt but that they would be
accepted.
On the same day the Clearing House Association, fifty out of fifty-
eight banks, members of the associations, being present, unanimously
adopted the following resolutions:
"_Resolved_, That in order to facilitate the payment of drafts and
checks, between the treasurer of the United States and the associated
banks, the manager of the New York clearing house is authorized to
make such an arrangement with the assistant treasurer as will
accomplish that purpose through the medium of the clearing house.
"_Resolved_, That the reported interview between the members of
the clearing house committee and the Secretary of the Treasury,
with the views expressed by them to him in the paper presented to
this meeting upon the subject of the restoration of specie payments,
meets the cordial approbation of this association, and that the
practical measures recommended for the adoption of the banks in
respect to their treatment of coin in their business in the public,
and with each other, be accepted and carried into practical operation;
and, in pursuance thereof, it is hereby further
"_Resolved_, That the associated banks of this city, after the 1st
of January, 1879, will, first, decline receiving gold coins as
'special deposits,' but accept and treat them as lawful money;
second, abolish special exchanges of gold checks at the clearing
house; third, pay and receive balances between banks at the clearing
house, either in gold or United States legal tender notes; fourth,
receive silver dollars upon deposit only, under special contract
to withdraw the same in kind; fifth, prohibit payments of balances
at the clearing house in silver certificates, or in silver dollars,
excepting as subsidiary coin, in small sums (say under $10); sixth,
discontinue gold special accounts, by notice to dealers, on 1st of
January next, to terminate them.
"_Resolved_, That the manager of the clearing house be requested
to send copies of the proceedings of this meeting to clearing houses
in other cities, with an expression of the hope that they will
unite in similar measures for promoting the resumption of coin
payments."
I accepted in the following note:
"Treasury Department, }
"Washington, D. C., November 13, 1878.}
"George S. Cox, President American Exchange National Bank, New York.
"Sir:--Your letter of yesterday, advising me of the adoption by
the Clearing House Association of the result of our recent interview,
is received with much pleasure.
"The end we all aim at, a specie standard and a redeemable currency,
is greatly promoted by the judicious action of the banks, and I
will, with greater confidence, do my part officially in securing
the maintenance of resumption.
"John Sherman, Secretary."
This arrangement, entered into with care, proved to be a measure
of very great advantage to the government as well as to all business
men engaged in the great commercial operations of New York. The
necessary details to carry this agreement into effect were arranged
between General Hillhouse, for the United States, and W. A. Camp,
manager of the New York clearing house.
CHAPTER XXV.
INVESTIGATION OF THE NEW YORK CUSTOMHOUSE.
A General Examination of Several Ports Ordered--No Difficulty Except
at New York--First Report of the Commission--President Hayes'
Recommendations--Letter of Instructions to Collector C. A. Arthur
--Second Report of the Commission--Losses to the Government by
Reason of Inefficiency of Employees--Various Measures of Reform
Recommended--Four Other Reports Made--The President Decides on the
Removal of Arthur, Cornell and Sharpe--Two Letters to R. C. McCormick
on the Subject--Arthur et al. Refuse to Resign--The Senate Twice
Refuses to Confirm the Men Appointed by the President to Succeed
Them--Conkling's Contest Against Civil Service Reform--My Letter
to Senator Allison--Final Victory of the President.
At the beginning of the administration of President Hayes, and for
months previous, there had been complaints as to the conduct of
business in the principal customhouses of the United States. This
was especially called to my attention, and at my suggestion the
President directed an examination into the conduct of the customhouses
at New York, Philadelphia, New Orleans, San Francisco and perhaps
other ports. Examinations were made by intelligent business men
selected in the various ports, and full reports were made by them,
and printed as public documents. Many changes were made, and
reforms adopted, founded upon these reports, and there was no
difficulty except only at the port of New York, where more than
two-thirds of all the customs revenue was collected. Chester A.
Arthur was then collector of the port, A. B. Cornell was naval
officer, and George H. Sharpe was appraiser.
On the 23rd of April, 1877, I designated John Jay, Lawrence Turnure,
of New York, and J. H. Robinson, Assistant Solicitor of the Treasury,
as a commission on the New York customhouse. They were requested
to make a thorough examination into the conduct of business in that
customhouse. Full instructions were given and many specifications
were made in detail of all the points embraced in their examination.
On the 24th of May they made their first report, preferring to
treat the general subject-matter separately. This report related
chiefly to appointments upon political influence without due regard
to efficiency. I promptly referred it to the President, and received
the following letter:
"Executive Mansion, }
"Washington, May 26, 1877.}
"My Dear Sir:--I have read the partial report of the commission
appointed to examine the New York customhouse. I concur with the
commission in their recommendations. It is my wish that the
collection of the revenues should be free from partisan control,
and organized on a strictly business basis, with the same guarantees
for efficiency and fidelity in the selection of the chief and
subordinate officers that would be required by a prudent merchant.
Party leaders should have no more influence in appointments than
any other equally respectable citizens. No assessments for political
purposes, on officers or subordinates, should be allowed. No
useless officer or employee should be retained. No officer should
be required or permitted to take part in the management of political
organizations, caucuses, conventions, or election campaigns. Their
right to vote, and to express their views on public questions,
either orally or through the press, is not denied, provided it does
not interfere with the discharge of their official duties.
"Respectfully,
"R. B. Hayes.
"Hon. John Sherman, etc."
My answer to the commission was as follows:
"Treasury Department, May 26, 1877.
"Gentlemen:--Your first report on the customhouse in New York, of
date the 24th instant, has been received, and the reduction proposed
by you of twenty per cent. of the number of persons employed therein
is approved.
"So far as these offices are created by law, vacancies will be made
and left for the action of Congress. The reduction of the other
employees, the number of whom and whose compensation are not fixed
by law, will be made as soon as practicable.
"I am much gratified that the collector, the naval officer, and
the surveyor of the port, concur with you in the proposed reduction.
"The hours of employment, after the 31st of this month, will be
from 9 o'clock a. m. till 4 o'clock p. m., excepting where a longer
time is prescribed by law. This corresponds to the hours of clerical
service in this department. This rule will be strictly enforced,
and absence will be the cause of reduction of pay or removal.
Strict attention to duty will be required, and other business will
not be allowed to interfere with the full discharge of the duty
attached to the office.
"I notice that you do not suggest a mode of carrying into effect
the reduction of the force recommended, and I cannot, with due
regard to the remaining subjects of your inquiry, ask you to extend
your investigation into the _personnel_ of each employee, his
character, efficiency, and merits. This must be mainly left to
the collector, who, by law, is authorized to employ, with the
approval of the Secretary of the Treasury, proper persons as deputy
collectors, weighers, gaugers, and measurers, in the several ports
within his district. Thus, nearly all the officers of the customhouse
are appointed by the collector, and, with the approval of the
Secretary of the Treasury, may be removed at pleasure. He will be
promptly called upon, under special orders, to perform this delicate
and onerous duty. It is very important that it should be executed
with due regard to the efficiency and merit of the employees, and
so as best to promote the public service.
"In order that a rule might be furnished him, I called upon the
President for instructions to govern alike the collector and myself
in the execution of this duty. A copy of his answer is hereto
annexed. You will see from it that he approves your recommendations,
and that he wishes the customhouse conducted free from partisan
control, on a strictly business basis, with the same guarantees
for efficiency and fidelity in the selection of the chief and
subordinate officers that would be required by a prudent merchant;
that the public business should not be affected injuriously by the
interests or influence of party leaders or party struggles; and
that, while an officer should freely exercise his political rights
as a citizen, he should not use his power as an officer to influence
the conduct of others.
"I believe the opinions expressed by the President will meet with
your hearty approval, and they are in harmony with your report.
"Permit me to add the thanks of this department for your care,
ability and industry in conducting this inquiry.
"Very respectfully,
"John Sherman, Secretary.
"Messrs. John Jay, L. Turnure, and J. H. Robinson,
"Commission on Custom House, New York."
I inclosed a copy of the report of the commission to Collector
Arthur, with the following letter of instruction:
"Treasury Department, May 28, 1877.
"Sir:--Inclosed I send you a copy of the first report of the
commission on the New York customhouse, recommending a large
reduction of the employees in the various offices in your collection
district, and the approval and adoption of that report.
"It only remains now to execute this order, upon the principles
and in the spirit stated by the President. This task, always an
unpleasant one, when it requires the removal of employees, falls
mainly upon you, subject to my approval. It may not be amiss now
for me to state, in advance, somewhat in more detail, my views as
to the mode of reduction. The extent of the reduction is fully
stated in the report, and we are thus relieved from that portion
of the task.
"I notice by the report that you have an exceptionally large
proportion of experienced officers still in the service. You will
have no difficulty in selecting, from these, the more efficient
and trustworthy to fill the more important positions, and when
these are carefully selected, you will have secured for the duties
of greatest trust, active, efficient, and experienced officers.
It must happen that among those longest in service some are disabled
by age and infirmity. It is often the most painful, but necessary,
duty, to dismiss there, or reduce them to positions which they are
still able to fill. The government is fairly entitled to the
services of those who are fully able to discharge personally the
duties of their office, and who are willing to give their entire
attention to their official duty. If they cannot, or do not, do
this, it is no injustice to remove them.
"In the selection of inferior officers, the only rule should be
the one daily acted upon by merchants--to employ only those who
are competent for the special work assigned them, whose industry,
integrity, and good habits give guarantees for faithful services,
honestly rendered. This reduction will enable you to transfer
those now employed on work for which they are not fitted, to other
work for which they are competent, and to reward exceptional merit
and ability by promotion.
"It is impossible, in a force so large as yours, that you should
know the peculiar qualities and merits of each employee, and it is
important, in making selections, that you secure this information
through committees of trusted officers, and in proper cases to test
the intelligence, ability, and qualifications of an officer or
applicant for office by written questions or an oral examination.
In many cases the partiality and influence of relations secure
several persons of the same family in office, thus causing complaints
and favoritism. As a rule, it is best in all cases to have but
one of the same family under your jurisdiction, and no just complaint
can be made if this rule is impartially enforced.
"The President properly lays great stress on excluding from a purely
business office active participation in party politics. Naturally,
in a government like ours, other things being equal, those will be
preferred who sympathize with the party in power; but persons in
office ought not to be expected to serve their party to the neglect
of official duty, or to promote the interests of particular
candidates, or to interfere with the free course of popular opinion,
or to run caucuses or conventions. Such activity of office-holders
is offensive to the great mass of the people who hold no office,
and gives rise to complaints and irritation. If any have been
appointed for purely political reasons, without regard to their
efficiency, now is a good time to get rid of them.
"Where actual misconduct is proven, such as receiving gratuities
or bribes, or oppression or insolence in office, or even the want
of common courtesy, or drunkenness or other bad habits tending to
degrade the officer, or absence from or neglect of duty--in all
such cases I know it will be your pleasure to dismiss the employee.
"The payment of taxes is not pleasant at best, but if rudely enforced
by oppression or discreditable officers, it renders the tax as well
as the tax-collector odious.
"I do not fix any time within which this reduction must be made,
but shall expect it to be completed by the 30th day of June proximo.
So far as the reduction is specifically made by the adoption of
the report, it should be made by the 1st day of June, and it should
be made as to each particular division or department of the
customhouse as early as practicable.
"After all, the success of this movement for reform of old abuses,
which existed for many years before you became collector, will
depend mainly upon your good sense and discretion. I assure you
I will heartily sustain and approve any recommendation you may make
that appears to me to tend to make the New York customhouse--not
only what it now is, the most important, but what it ought to be--
the best managed business agency of the government.
"Very respectfully,
"John Sherman, Secretary.
"C. A. Arthur, Esq., Collector of Customs, New York."
When the inquiry commenced there was no purpose or desire on the
part of the President or anyone to make a change in the officers
of the New York customhouse. This is apparent from my letter to
Collector Arthur. The commission proceeded with their examination,
and on the 2nd of July made their second report. This contained
specific charges, but of a general character, against persons
employed in the customhouse. They found that for many years past,
the view had obtained with some political leaders that the friends
of the administration in power had a right to control the customs
appointments; and this view, which seemed to have been acquiesced
in by successive administrations, had of late been recognized to
what the commission deemed an undue extent by the chief officers
of the service. These gentlemen, on the ground that they were
compelled to surrender to personal and partisan dictation, appeared
to have assumed that they were relieved, in part, at least, from
the responsibilities that belonged to the appointing power.
The collector of the port, in speaking of the "ten thousand
applications," and remarking that the urgency for appointments came
from men all over the country, added, "the persons for whom it is
made bear their proportion of the responsibility for the character
of the whole force."
The surveyor had said:
"I had, within the last two weeks, a letter, from a gentleman
holding a high official position, in regard to the appointment of
an officer whom he knows had been dropped three times from the
service for cause. He has also been to see me about him, and the
last time he came he admitted to me that he had been engaged in
defrauding the revenue; and yet he writes me calling my attention
to the case, and requesting his appointment."
The collector, in his testimony before the commission, said that
"the larger number of complaints probably come from the surveyor
of the port," and, on being asked their character, said:
"Some are for inefficiency, some are for neglect of duty, some for
inebriety, and some for improper conduct in various ways; some for
want of integrity, and some for accepting bribes."
The commission further stated:
"The investigation showed that ignorance and incapacity on the part
of the employees were not confined to the surveyor's department,
but were found in other branches of the service--creating delays
and mistakes, imperiling the safety of the revenues and the interests
of importers, and bringing the service into reproach. It was
intimated by chiefs of departments that men were sent to them
without brains enough to do the work, and that some of those
appointed to perform the delicate duties of the appraiser's office,
requiring the special qualities of an expert, were better fitted
to hoe and to plow. Some employees were incapacitated by age, some
by ignorance, some by carelessness and indifference; and parties
thus unfitted have been appointed, not to perform routine duties
distinctly marked, but to exercise a discretion in questions
demanding intelligence and integrity, and involving a large amount
of revenue.
"The evidence shows a degree and extent of carelessness which we
think should not be permitted to continue. This point was illustrated
to some degree by the testimony of the chiefs of the appraiser's
department, the important duties of which would certainly justify
a reasonable exactness. The invoices, which are recorded in that
office, and which are sent out to the different divisions to be
passed upon and then returned to the chief clerk, are found to
exhibit, on their return, errors on the part of the several divisions
--according to one witness, nearly eight hundred errors a month--
although the number by the appraiser was estimated at a lesser
figure. A part of these errors may be assigned to a difference of
opinion as to the classification of the goods; but fully one-half
are attributed to carelessness. At the naval office it was stated
that the balance in favor of the government, of the many and large
errors which they discover in the customhouse accounts of the
liquidation of vessels and statements of refund, amounts to about
a million and a half of dollars per annum."
The commission entered into a full statement and details as to
irregularities, inefficiency and neglect of duties in different
departments of the customhouse, and recommended various measures
of reform, both in the laws regulating the customs service and its
actual administration. A copy of this report was immediately sent
to Collector Arthur and Naval Officer Cornell, with instructions
to recommend to me the number of each grade for each branch of his
office, with various details designated by me, and to carry into
execution the general recommendations of the commission. I added:
"You will please take your own way, by committee of your officers
or otherwise, to fix the number of each grade requisite to conduct
the business of your office, and make report as early as
practicable."
The third report was made on the 21st of July, and related to the
management of the department of weighers and gaugers.
The fourth report, made on the 31st of August, related to the
appraiser's office. In acknowledging the receipt of this report
on the 12th of September, I stated:
"The recommendations made by you will be fully examined in detail,
and be acted upon cotemporaneously with the proposed change in the
leading officers of that customhouse."
Two other reports were made, dated October 31 and November 1, 1877,
the latter containing suggestions as to the recommendations of
legislative amendments to various existing laws and usages.
After the receipt of the report of August 31 the President, who
had carefully read the several reports, announced his desire to
make a change in the three leading officers of the New York
customhouse. He wished to place it upon the ground that he thought
the public service would be best promoted by a general change, that
new officers would be more likely to make the radical reforms
required that those then in the customhouse. The matter was
submitted to the cabinet, and I was requested to communicate with
these officers, in the hope that they would resign and relive the
President from the unpleasant embarrassment of removing them. On
the 6th of September I wrote to Richard C. McCormick, Assistant
Secretary of the Treasury, who was then at his home near New York
on account of illness, the following letter. I knew that Mr.
McCormick was on friendly terms with Collector Arthur, and that he
might better than I inform him of the wish of the President to
receive the resignations of himself, and Messrs. Cornell and Sharpe:
"Treasury Department, }
"Washington, D. C., September 6, 1877.}
"Dear Governor:--After a very full consideration, and a very kindly
one, the President, with the cordial assent of his cabinet, came
to the conclusion that the public interests demanded a change in
the three leading offices in New York, and a public announcement
of that character was authorized. I am quite sure that this will,
on the whole, be considered to be a wise result. The manner of
making the changes and the persons to be appointed will be a subject
of careful and full consideration, but it is better to know that
it is determined upon and ended. This made it unnecessary to
consider the telegrams in regard to Mr. Cornell. It is probable
that no special point would have been made upon his holding his
position as chairman of the state committee for a limited time,
but even that was not the thing, the real question being that,
whether he resigned or not, it was better that he and Arthur and
Sharpe should all give way to new men, to try definitely a new
policy in the conduct of the New York customhouse.
"I have no doubt, unless these gentlemen should make it impossible
by their conduct hereafter, that they will be treated with the
utmost consideration, and, for one, I have no hesitation in saying
that I hope General Arthur will be recognized in a most complimentary
way.
"Things are going on quietly here, but we miss you very much. Hope
you will have a pleasant time and return to us in fresh health and
vigor.
"Very truly yours,
"John Sherman.
"Hon. R. C. McCormick."
On the next day I wrote him a supplementary letter:
"Treasury Department, }
"Washington, D. C., September 7, 1877.}
"Dear Governor:--Your note of yesterday is received.
"The action of the President on the New York customhouse cases
turned upon the general question of change there, and not upon
Cornell's case. It happened in this way: General Sharpe, in a
very manly letter, withdrew his application for reappointment as
surveyor of the port. In considering the question of successor
the main point, as to whether the changes in the New York customhouse
rendered necessary a general change of the heads of the departments,
was very fully and very kindly considered, and, without any reference
to Cornell's matter, until it was thought, as a matter of public
policy, it was best to make change in these heads, with some details
about it which I will communicate to you when you return. When
that was seen to be the unanimous opinion, it was thought hardly
worth while to single out Mr. Cornell's case, and act upon it on
the question that affected him alone. If he was allowed to resign
from the committee, it would undoubtedly be upon an implied
supposition that he would be continued as naval officer. I think
even yet he ought to do as he proposed to Orton, but we could not
afford to have him do it with any such implied assent, and, therefore,
it was deemed better to make the formal announcement agreed upon.
You know how carefully such things are considered, and, after a
night's reflection, I am satisfied of the wisdom of the conclusion.
"I want to see Arthur, and have requested him to come here. You
can say to him that, with the kindest feelings, and, as he will
understand when he sees me, with a proper appreciation of his
conduct during the examination by the commission, there should be
no feeling about this in New York. At all events, what has been
done is beyond recall.
"Very truly yours,
"John Sherman.
"Hon. R. C. McCormick."
Mr. McCormick complied with my request, and orally reported his
interview on his return to Washington. We were given to understand
that these officers did not wish to be removed pending the
investigation, as it would seem that they were charged with the
acknowledged defects and irregularities which they themselves had
pointed out. The President was quite willing to base his request
for their resignation, not upon the ground that they were guilty
of the offenses charged, but that new officers could probably deal
with the reorganization of the customhouse with more freedom and
success than the incumbents. I also saw General Arthur, and
explained to him the view taken by the President and his desire
not in any way to reflect upon the collector and his associates,
Cornell and Sharpe. I believed that at the close of the investigation
by the commission these gentlemen would resign, and that their
character and merits would be recognized possibly by appointments
to other offices.
Acting on this idea, on the 15th of October, I wrote the following
letter to Arthur:
"Washington, D. C., October 15, 1877.
"Dear Sir:--I regret to hear from Mr. Evarts that you decline the
consulship at Paris which I supposed would be very agreeable to you.
"As the time has arrived when your successor must be appointed, I
submit to you whether, though your resignation might be inferred
from your letters on file, it would not be better for you to tender
it formally before your successor is appointed.
"The President desires to make this change in a way most agreeable
to you, and it would be most convenient to have it announced to-
morrow.
"An early answer is requested.
"Very truly, etc.,
"John Sherman.
"General C. A. Arthur, Collector Customs, New York."
It soon became manifest that these gentlemen had no purpose to
resign, and that Senator Conkling intended to make a political
contest against the policy of civil service reform inaugurated by
President Hayes. On the 24th of October, 1877, the President sent
to the Senate the nominations of Theodore Roosevelt to succeed
Arthur as collector, Edwin A. Merritt to succeed George H. Sharpe
as surveyor, and L. B. Prince to succeed A. B. Cornell as naval
officer. All of them were rejected by the Senate on the 29th of
October. On the 6th day of December, during the following session,
Roosevelt, Prince and Merritt were again nominated, and the two
former were again rejected. Merritt was confirmed as surveyor on
the 16th of December.
This action of the Senate was indefensible. There was not the
slightest objection to Roosevelt or Prince, and none was made.
The reasons for a change were given in the report of the Jay
commission. Even without this report the right of the President
to appoint these officers was given by the constitution. To compel
the President to retain anyone in such an office, charged with the
collection of the great body of the revenue from customs, in the
face of such reasons as were given for removal, was a gross breach
of public duty. No doubt the Democratic majority in the Senate
might defend themselves with political reasons, but the motive of
Mr. Conkling was hostility to President Hayes and his inborn desire
to domineer. The chief embarrassment fell upon me. I wished to
execute the reforms needed in the collector's office, but could
only do it with his consent. The co-operation required was not
given, and the office was held in profound contempt of the President.
If the rejection of these nominations had been placed upon the
ground of unfitness, other names could have been sent to the Senate,
but there was no charge of that kind, while specific and definite
charges were made against the incumbents. Other names were mentioned
to the President, and suggestions were made, among others by Whitelaw
Reid, whose letter I insert:
"New York, March 29, 1878.
"My Dear Mr. Sherman:--Leaving Washington unexpectedly this morning,
I was unable to call again at the treasury department in accordance
with your polite invitation of last night. I have, however, been
thinking over the customhouse problem of which you asked my opinion.
It seems to me, more and more clear, that, if a new appointment is
to be made, it should be controlled by two considerations: First,
the appointee should be a man who can be confirmed; and, second,
he should be a man equal to all the practical duties of the place,
which are necessarily and essentially political as well as
mercantile.
"To nominate another man only to have him rejected would do great
harm, and the confirmation cannot, by any means, be taken for
granted. I believe it is possible to select some well-known man,
who has carefully studied the subject of revenue collection, and
could bring to the task executive skill, experience, and sound
business and political sagacity, and that such a nomination could
be confirmed. I assume, of course, that any movement of this sort
would be based upon the previous removal of the present incumbent,
for good cause--of which I have been hearing rumors for some time.
"Pray let me renew more formally the invitation to dine with me,
on the evening of the 10th of April, at seven o'clock, at the Union
League Club, to meet Mr. Bayard Taylor just before his departure
for Berlin. I sincerely hope you can arrange your movements after
the Chester visit so as to make it possible.
"Very truly yours,
"Whitelaw Reid.
"Hon. John Sherman, Secretary of the Treasury, Washington, D. C."
The President would not make other appointments during the session
of the Senate, as the implication would arise that the rejections
were based upon opposition to the persons named, and he, therefore,
postponed any action until the close of the session.
After the close of the session, on the 11th of July, 1878, the
President gave temporary commissions to Edwin A. Merritt as collector
to succeed C. A. Arthur, and Silas W. Burt to succeed Cornell as
naval officer, and these gentlemen entered upon the duties of their
respective offices.
On the following December it became necessary to send their
nominations to the Senate. I had definitely made up my mind that
if the Senate again rejected them I would resign. I would not hold
an office when my political friends forced me to act through
unfriendly subordinates. I wrote a letter to Senator Allison as
follows:
"Washington, D. C., January 31, 1879.
"My Dear Sir:--I would not bother you with this personal matter,
but that I feel the deepest interest in the confirmation of General
Merritt, which I know will be beneficial to us as a party, and
still more so to the public service. Personally I have the deepest
interest in it because I have been unjustly assailed in regard to
it in the most offensive manner. I feel free to appeal to you and
Windom, representing as you do western states, and being old friends
and acquaintances, to take into consideration this personal aspect
of the case. If the restoration of Arthur is insisted upon, the
whole liberal element will be against us and it will lose us tens
of thousands of votes without doing a particle of good. No man
could be a more earnest Republican than I, and I feel this political
loss as much as anyone can. It will be a personal reproach to me,
and merely to gratify the insane hate of Conkling, who in this
respect disregards the express wishes of the Republican Members
from New York, of the great body of Republicans, and, as I personally
know, runs in antagonism to his nearest and best friends in the
Senate.
"Surely men like you and Windom, who have the courage of your
convictions, should put a stop to this foolish and unnecessary
warfare. Three or four men who will tell Conkling squarely that,
while you are his friends, you will not injure our party and our
cause, would put a stop to this business. Arthur will not go back
into the office. This contest will be continued, and the only
result of all this foolish madness will be to compel a Republican
administration to appeal to a Democratic Senate for confirmation
of a collector at New York. It is a most fatal mistake.
"I intended to call upon some of the Senators this morning, but I
am very much pressed, and will ask you to show this in confidence
to Senator Windom, as I have not time to write him.
"Very truly yours,
"John Sherman.
"Hon. W. B. Allison, U. S. Senate."
I wrote to Senator Justin S. Morrill a much longer letter, giving
reasons in detail in favor of confirmation and containing specific
charges of neglect of duty on the part of Arthur and Cornell, but
I do not care to revive them.
Conkling was confident of defeating the confirmations, and thus
restoring Arthur and Cornell. The matter was decided, after a
struggle of seven hours in the Senate, by the decisive vote in
favor of confirmation of Merritt 33, and against him 24, in favor
of Burt 31, against 19. From this time forward there was but slight
opposition to the confirmation of Hayes' appointments. The reforms
proposed in the customhouse at New York were carried out.
This termination of the controversy with Arthur and Cornell was
supported by public opinion generally throughout the United States.
I insert a letter from John Jay upon the subject.
"N. Y. C. H., 24 Washington Square,}
"New York, February 3, 1879. }
"The Honorable John Sherman.
"My Dear Sir:--Allow me to thank you for the two papers you have
kindly sent me, in reference to the customhouse, the last of which,
the firm message of the President with your second conclusive
letter, reached me to-day.
"Whatever may be the result in the Senate, and I can scarcely
believe that, after so full an exposure, the nomination will be
rejected, the plain-thinking people of this country will appreciate
the attitude taken by the government as the only one consistent
with the duty of the executive and the general welfare.
"It will give new hope and confidence to the great body of Republicans,
and to many who can hardly be called Republicans, who look to the
administration for an unflinching adherence--no matter what the
opposition--to the pledge of reform on which the party was successful
in the last election, and on fidelity to which depends its safety
in the next.
"The country is infinitely indebted to you for redeeming its faith
by a return to honest money. A new debt will be incurred of yet
wider scope if you succeed in liberating the custom service from
the vicious grip of the immoral factions of office holders and
their retainers, who have made it a scandal to the nation with such
gigantic loss to the treasury and immeasurable damage to our
commerce, industry and morals.
"I hope that the President will feel that all good citizens who
are not blinded by prejudice or interest are thoroughly with him
in the policy and resolve of his message that the customhouse shall
no longer be 'a center of partisan political management.'
"With great regard I have the honor to be, dear Mr. Sherman,
"Faithfully yours,
"John Jay."
CHAPTER XXXVI.
PREPARATIONS FOR RESUMPTION OF SPECIE PAYMENTS.
Annual Report to Congress on Dec. 2, 1878--Preparations for Resumption
Accompanied with Increased Business and Confidence--Full Explanation
of the Powers of the Treasurer Under the Act--How Resumption Was
to Be Accomplished--Laws Effecting the Coinage of Gold and Silver
--Recommendation to Congress That the Coinage of the Silver Dollar
Be Discontinued When the Amount Outstanding Should Exceed $50,000,000
--Funding the Public Debt--United States Notes at Par with Gold--
Instructions to the Assistant Treasurer at New York--Political
Situation in Ohio.
The annual report made by me to Congress on the 2nd of December,
1878, contained the usual formal information as to the condition
of the treasury, and the various bureaus and divisions of that
department. It was regarded as a fair statement of public affairs
at a time of unusual prosperity. The revenue in excess of expenditures
during the year amounted to $20,799,551.90.
The statement made by me in this report, in respect to the resumption
of specie payments on the 1st day of January, 1879, is so closely
a narrative of what did happen before and after that date that I
deem it best to quote the language of the report. I then said:
"The important duty imposed on this department by the resumption
act, approved January 14, 1875, has been steadily pursued during
the past year. The plain purpose of the act is to secure to all
interests and all classes the benefits of a sound currency, redeemable
in coin, with the least possible disturbance of existing rights
and contracts. Three of its provisions have been substantially
carried into execution by the gradual substitution of fractional
coin for fractional currency, by the free coinage of gold, and by
free banking. There remains only the completion of preparations
for resumption in coin on the 1st day of January, 1879, and its
maintenance thereafter upon the basis of existing law.
"At the date of my annual report to Congress in December, 1877, it
was deemed necessary, as a preparation for resumption, to accumulate
in the treasury a coin reserve of at least forty per cent. of the
amount of United States notes then outstanding. At that time it
was anticipated that under the provisions of the resumption act
the volume of United States notes would be reduced to $300,000,000
by the 1st day of January, 1879, or soon thereafter, and that a
reserve in coin of $120,000,000 would then be sufficient. Congress,
however, in view of the strong popular feeling against a contraction
of the currency, by the act approved May 31, 1878, forbade the
retirement of any United States notes after that date, leaving the
amount in circulation $346,681,016. Upon the principle of safety
upon which the department was acting, that forty per cent. of coin
was the smallest reserve upon which resumption could prudently be
commenced, it became necessary to increase the coin reserve to
$138,000,000.
"At the close of the year 1877 this coin reserve, in excess of coin
liability, amounted to $63,016,050.96, of which $15,000,000 were
obtained by the sale of four and a half per cent., and $25,000,000
by the sale of four per cent. bonds, the residue being surplus
revenue. Subsequently, on the 11th day of April, 1878, the secretary
entered into a contract with certain bankers in New York and London
--the parties to the previous contract of June 9, 1877, already
communicated to Congress--for the sale of $50,000,000 four and a
half per cent. bonds for resumption purposes. The bonds were sold
at a premium of one and a half per cent. and accrued interest, less
a commission of one-half of one per cent. The contract has been
fulfilled, and the net proceeds, $50,500,000, have been paid into
the treasury in gold coin. The $5,500,000 coin paid on the Halifax
award have been replaced by the sale of that amount of four per
cent. bonds sold for resumption purposes, making the aggregate
amount of bonds sold for these purposes, $95,500,000, of which
$65,000,000 were four and a half per cent. bonds, and $30,500,000
four per cent. bonds. To this has been added the surplus revenue
from time to time. The amount of coin held in the treasury on the
23rd day of November last, in excess of coin sufficient to pay all
accrued coin liabilities, was $141,888,100, and constitutes the
coin reserve prepared for resumption purposes. This sum will be
diminished somewhat on the 1st of January next, by reason of the
large amount of interest accruing on that day in excess of the coin
revenue received meanwhile.
"In anticipation of resumption, and in view of the fact that the
redemption of United States notes is mandatory only at the office
of the assistant treasurer in the city of New York, it was deemed
important to secure the co-operation of the associated banks of
that city in the ready collection of drafts on those banks and in
the payment of treasury drafts held by them. A satisfactory
arrangement has been made by which all drafts on the banks held by
the treasury are to be paid at the clearing house, and all drafts
on the treasury held by them are to be paid to the clearing house
at the office of the assistant treasurer, in United States notes;
and, after the 1st of January, United States notes are to be received
by them as coin. This will greatly lessen the risk and labor of
collections both to the treasury and the banks.
"Every step in these preparations for resumption has been accompanied
with increased business and confidence. The accumulation of coin,
instead of increasing its price, as was feared by many, has steadily
reduced its premium on the market. The depressing and ruinous
losses that followed the panic of 1873 had not diminished in 1875,
when the resumption act passed; but every measure taken in the
execution or enforcement of this act has tended to lighten these
losses and to reduce the premium on coin, so that now it is merely
nominal. The present condition of our trade, industry, and commerce,
hereafter more fully stated, our ample reserves, and the general
confidence inspired in our financial condition, seem to justify
the opinion that we are prepared to commence and maintain resumption
from and after the 1st day of January, A. D. 1879.
"The means and manner of doing this are left largely to the discretion
of the secretary, but, from the nature of the duty imposed, he must
restore coin and bullion, when withdrawn in the process of redemption,
either by the sale of bonds, or the use of the surplus revenue, or
of the notes redeemed from time to time.
"The power to sell any of the bonds described in the refunding act
continues after as well as before resumption. Thought it may not
be often used, it is essential to enable this department to meet
emergencies. By its exercise it is anticipated that the treasury
at any time can readily obtain coin to reinforce the reserve already
accumulated. United States notes must, however, be the chief means
under existing law with which the department must restore coin and
bullion when withdrawn in process of redemption. The notes, when
redeemed, must necessarily accumulate in the treasury until their
superior use and convenience for circulation enables the department
to exchange them at par for coin or bullion.
"The act of May 31, 1878, already referred to, provides that when
United States notes are redeemed or received in the treasury under
any law, from any source whatever, and shall belong to the United
States, they shall not be retired, canceled, or destroyed, but
shall be reissued and paid out again and kept in circulation.
"The power to reissue United States notes was conferred by section
3579, Revised Statutes, and was not limited by the resumption act.
As this, however, was questioned, Congress wisely removed the doubt.
"Notes redeemed are like other notes received into the treasury.
Payments of them can be made only in consequence of appropriations
made by law, or for the purchase of bullion, or for the refunding
of the public debt.
"The current receipts from revenue are sufficient to meet the
current expenditures as well as the accruing interest on the public
debt. Authority is conferred by the refunding act to redeem six
per cent. bonds as they become redeemable, by the proceeds of the
sale of bonds bearing a lower rate of interest. The United States
notes redeemed under the resumption act are, therefore, the principal
means provided for the purchase of bullion or coin with which to
maintain resumption, but should only be paid out when they can be
used to replace an equal amount of coin withdrawn from the resumption
fund. They may, it is true, be used for current purposes like
other money, but when so used their place is filled by money received
from taxes or other sources of income.
"In daily business no distinction need be made between moneys, from
whatever source received, but they may properly be applied to any
of the purposes authorized by law. No doubt coin liabilities, such
as interest or principal of the public debt, will be ordinarily
paid and willingly received in United States notes, but, when
demanded, such payments will be made in coin; and United States
notes and coin will be used in the purchase of bullion. This method
has already been adopted in Colorado and North Carolina, and
arrangements are being perfected to purchase bullion in this way
in all the mining regions of the United States.
"By the act approved June 8, 1878, the Secretary of the Treasury
is authorized to constitute any superintendent of a mint, or assayer
of any assay office, an assistant treasurer of the United States,
to receive gold coin or bullion on deposit. By the legislative
appropriation bill, approved June 19, 1878, the Secretary of the
Treasury is authorized to issue coin certificates in payment to
depositors of bullion at the several mints and assay offices of
the United States. These provisions, intended to secure to the
producers of bullion more speedy payment, will necessarily bring
into the mints and treasury the great body of the precious metals
mined in the United States, and will tend greatly to the easy and
steady supply of bullion for coinage. United States notes, at par
with coin, will be readily received for bullion instead of coin
certificates, and with great advantage and convenience to the
producers.
"Deposits of coin in the treasury will, no doubt, continue to be
made after the 1st of January, as heretofore. Both gold and silver
coin, from its weight and bulk, will naturally seek a safe deposit,
while notes redeemable in coin, from their superior convenience,
will be circulated instead. After resumption the distinction
between coin and United States notes should be, as far as practicable,
abandoned in the current affairs of the government; and therefore
no coin certificates should be issued except where expressly required
by the provisions of law, as in the case of silver certificates.
The gold certificates hitherto issued by virtue of the discretion
conferred upon the secretary will not be issued after the 1st of
January next. The necessity for them during a suspension of specie
payments is obvious, but no longer exists when by law every United
States note is, in effect, a coin certificate. The only purpose
that could be subserved by their issue hereafter would be to enable
persons to convert their notes into coin certificates, and thus
contract the currency and hoard gold in the vaults of the treasury
without the inconvenience or risk of its custody. For convenience,
United States notes of the same denomination as the larger coin
certificates will be issued.
"By existing law, customs duties and the interest of the public
debt are payable in coin, and a portion of the duties was specifically
pledged as a special fund for the payment of the interest, thus
making one provision dependent upon the other. As we cannot, with
due regard to the public honor, repeal the obligation to pay in
coin, we ought not to impair or repeal the means provided to procure
coin. When, happily, our notes are equal to coin, they will be
accepted as coin, both by the public creditor and by the government;
but this acceptance should be left to the option of the respective
parties, and the legal right on both sides to demand coin should
be preserved inviolate.
"The secretary is of the opinion that a change of the law is not
necessary to authorize this department to receive United States
notes for customs duties on and after the 1st day of January, 1879,
while they are redeemable and are redeemed on demand in coin.
After resumption it would seem a useless inconvenience to require
payment of such duties in coin rather than in United States notes.
The resumption act, by clear implication, so far modifies previous
laws as to permit payments in United States notes as well as in
coin. The provision for coin payments was made in the midst of
war, when the notes were depreciated and the public necessities
required an assured revenue in coin to support the public credit.
This alone justified the refusal by the government to take its own
notes for the taxes levied by it. It has now definitely assumed
to pay these notes in coin, and this necessarily implies the receipt
of these notes as coin. To refuse them is only to invite their
presentation for coin. Any other construction would require the
notes to be presented to the assistant treasurer in New York for
coin, and, if used in the purchase of bonds, to be returned to the
same officer, or, if used for the payment of customs duties, to be
carried to the collector of customs, who must daily deposit in the
treasury all money received by him. It is not to be assumed that
the law requires this indirect and inconvenient process after the
notes are redeemable in coin on demand of the holder. They are
then at a parity with coin, and both should be received indiscriminately.