Recollections of Forty Years in the House, Senate and Cabinet Part 55

"My Dear Mr. Secretary:--Allow me to congratulate you on having been selected by President Hayes to administer the financial affairs of the nation.

"I deem it a happy augury that the President's choice of members of his cabinet has fallen upon men who have made their mark as statesmen, and whose advent to power will, I feel convinced, inaugurate an era of prosperity for our country.

"With yourself at the head of the treasury department, there is no fear of public credit being shaken and commercial interests imperiled by crude and experimental legislation.

"With great respect, I remain, my dear Mr. Sherman,

"Very truly your friend, "Cyrus W. Field.

"Hon. John Sherman, Washington."

"Consulate General of the United States for Great Britain and Ireland,} "London, E. C., March 12, 1877.} "The Hon. John Sherman, Secretary of the Treasury.

"My Dear Sir:--When I begin to write to you, I am reminded of what General Sherman said, in my hearing, to General Grant, after the latter was made General in Chief: 'I cannot congratulate you; the responsibility is too great.' You have certainly succeeded to the most difficult post in the government, one in whose successful administration Americans abroad feel an especial interest, for no department is more important to foreigners or more discussed by them.

"It may not be unsatisfactory to you to know that Americans--both those long domiciled here and those in transit--applaud the appointment of the new Chief of the Treasury.

"I beg to offer my best wishes and belief that the reputation he has already achieved in the Senate will be increased in the cabinet; and to say how glad I was that the unanimity of his late compeers showed that they were of the same mind.

"With great respect, I am, my dear sir,

"Very faithfully yours, "Adam Badeau."

CHAPTER XXIX.

I BEGIN MY DUTIES AS SECRETARY OF THE TREASURY.

Legislative Training of Great Advantage to Me in My New Position-- Loan Contract in Force When I Took the Portfolio--Appointment of Charles F. Conant as Funding Agent of the Treasury Department in London--Redeeming Called Bonds--Sale of Four Per Cent. Bonds Instead of Four and a Half Per Cents.--Popularity of the New Loan--Great Saving in Interest--On a Tour of Inspection Along the Northern Atlantic Coast--Value of Information Received on This Trip--Effect of the Baltimore and Pittsburg Railroad Strikes in 1877 Upon Our Public Credit.

When I a.s.sumed the office of Secretary of the Treasury I had the advantage of some of my predecessors in that I was acquainted with the organization and duties of the treasury department. Ever since 1859 my connection with the committee of ways and means in the House and with the committee on Finance in the Senate had brought me into official relations with the head of that department. This legislative training gave me a full knowledge of the several laws that were to be executed in relation to public revenue, to all forms of taxation, to coinage and currency, and to the public debt.

The entire system of national finance then existing grew out of the Civil War, and I had partic.i.p.ated in the pa.s.sage of all the laws relating to this subject. My intimate a.s.sociation with Secretaries Chase, Fessenden and McCulloch, and my friendly relations with Secretaries Boutwell and Richardson, led me, as chairman of the Senate committee on finance, to have free and confidential intercourse with them as to legislation affecting the treasury.

Secretary Bristow had not had the benefit of experience either in Congress or the department. He was a good lawyer and an able man.

He doubted whether resumption would be effective without a gradual retirement of United States notes, a measure that Congress would not agree to. Congress repealed even the limited retirement of such notes provided for by the resumption act. Secretary Morrill, of Maine, my immediate predecessor, was in hearty sympathy with the policy of Congress, of which he had been a useful Senator, and but for his failing health would have been an efficient secretary.

Upon my a.s.suming the duties of secretary, and for some time before, he had been confined by illness to his lodgings in Washington.

The treasury department was then well organized. Most of the princ.i.p.al officers had been long in the service. But few changes were made by President Hayes or by myself, and only as vacancies occurred or as incompetency was demonstrated. The following loan contract was in force at the beginning of my administration of the treasury department:

"This agreement, entered into this 24th day of August, in the year of our Lord, 1876, between the Secretary of the Treasury of the United States of America, of the first part, and Messrs. August Belmont & Co., of New York, in behalf of Messrs. N. M. Rothschild & Sons, of London, England, and a.s.sociates, and Messrs. J. & W.

Seligman & Co., of New York, for themselves and a.s.sociates, and Messrs. Drexel, Morgan & Co., on behalf of Messrs. J. S. Morgan & Co., of London, England, and Messrs. Morton, Bliss & Co., of New York, representing the First National Bank of the city of New York, the American Exchange National Bank of New York, the Merchants'

National Bank of New York, the Third National Bank of New York, Messrs. Kuhn, Loeb & Co., of New York, the Bank of New York National Banking a.s.sociation, and Messrs. Morton, Rose & Co., of London, and themselves, of the second part:

"Witnesseth, That the said Messrs. August Belmont & Co. of New York, on behalf of Messrs. N. M. Rothschild & Sons and a.s.sociates, hereby agrees to purchase from the Secretary of the Treasury sixteen million five hundred thousand dollars ($16,500,000) of the United States bonds known as the four and a half per cent. funded loan of 1891, issued under the acts of July 14, 1870, and January 20, 1871; and that Messrs. J. & W. Seligman & Co., for themselves and their a.s.sociates, hereby agree to purchase from the Secretary of the Treasury six million seven hundred and fifty thousand dollars ($6,750,000) of the bonds hereinbefore described; and that Messrs.

Drexel, Morgan & Co., on behalf of Messrs. J. S. Morgan & Co., of London, England, hereby agree to purchase from the Secretary of the Treasury six million seven hundred and fifty thousand dollars ($6,750,000) of the bonds hereinbefore described; and that Messrs.

Morton, Bliss & Co., of New York, representing the First National Bank of the city of New York, to the extent of four million dollars ($4,000,000); the American Exchange National Bank of New York, to the extent of one million and fifty thousand dollars ($1,050,000); the Merchants' National Bank of New York, to the extent of six hundred thousand dollars ($600,000); the Third National Bank of the city of New York, to the extent of seven hundred and fifty thousand dollars ($750,000); Messrs. Kuhn, Loeb & Co., of New York, to the extent of one million and fifty thousand dollars ($1,050,000); the Bank of New York National Banking a.s.sociation, to the extent of three hundred thousand dollars ($300,000); Messrs. Morton, Rose & Co., of London, to the extent of one million one hundred and twenty-five thousand dollars ($1,125,000), and Messrs. Morton, Bliss & Co., of New York, to the extent of one million one hundred and twenty-five thousand dollars ($1,125,000), hereby agree, to the extent severally for each as above stated, to purchase from the Secretary of the Treasury ten million dollars ($10,000,000) in the aggregate of the bonds hereinbefore described, making a total aggregate of forty million dollars ($40,000,000), upon the terms and conditions following, to-wit:

"First. Of the said aggregate amount, not less than ten million dollars ($10,000,000) are hereby subscribed for, the subscription to take effect on the 1st day of September, 1876, and the remaining amount, namely, thirty million dollars ($30,000,000), may be divided at the pleasure of the parties of the second part into several successive subscriptions of not less than five million dollars ($5,000,000) each, to be made prior to the 4th day of March, 1877.

"Second. The parties of the second part shall have the exclusive right to subscribe, in the same proportion to each of the subscribers, for the remainder, namely, two hundred and sixty million dollars ($260,000,000), or any portion of said loan authorized to be issued by the acts of Congress aforesaid, by giving notice thereof to the Secretary of the Treasury on or before the 30th day of June, 1877; but the party of the first part reserves the right to terminate this contract at any time after March 4, 1877, by giving ten days'

notice thereof to the parties of the second part.

"Third. That the Secretary of the Treasury shall, when subscriptions are made by the said parties of the second part, issue calls with even date with said subscriptions for the redemption of an equivalent amount of six per cent. 5-20 bonds of the United States, as provided by said act of July 14, 1870.

"Fourth. The parties of the second part agree to pay for said four and a half per cent. bonds par and interest accrued to the date of application for delivery of said bonds, in gold coin, matured United States gold coin coupons, or any of the six per cent. 5-20 bonds called for redemption, or in United States gold certificates of deposit issued under the act of March 3, 1863, with the understanding that payment to the extent of the amount of any call shall be made within the time during which such call shall mature: _Provided_, That, if the parties of the second part shall elect so to do, they may have the privilege of making any of said subscriptions payable specifically in uncalled six per cent 5-20 bonds of the United States, in which case the Secretary of the Treasury may, to the extent of such payments, omit the calls mentioned in condition No. 3.

"Fifth. The parties of the second part shall receive in coin a commission of one-half of one per cent. on all bonds taken by them, as allowed by the act of July 14, 1870, and shall a.s.sume and defray all expenses which may be incurred in sending bonds to London upon their request, or by transmitting bonds, coupons, or coin from there to the treasury department at Washington, including all cost of making exchange of bonds, and shall also be charged with the preparation and issuing of the bonds.

"Sixth. No bonds shall be delivered to the parties of the second part, or either of them, until payment shall have been made in full therefor in accordance with the terms of this contract.

"Seventh. During the continuance of this contract any sales of bonds ordered by the Secretary of the Treasury, by authority of law, except those that it may become necessary to sell to pay judgments of the Court of Commissioners of Alabama Claims, shall be made through the parties of the second part, who shall be allowed thereon a commission of one per cent. in gold coin. And it is provided that the amount of bonds so ordered shall not exceed in the aggregate $25,000,000, unless by mutual agreement of the parties.

"Lot M. Morrill, Secretary of the Treasury.

"Aug. Belmont & Co., On behalf of N. M. Rothschild & Sons, London.

"J. & W. Seligman & Co., On behalf of Seligman Brothers.

"Drexel, Morgan & Co., On behalf of J. S. Morgan & Co., of London.

"Morton, Bliss & Co., For themselves and a.s.sociates, as named above."

By its terms the contract provided for the sale of $40,000,000, four and a half per cent. bonds of the United States at par in gold coin. The contractors had the exclusive right to subscribe for all or any portion of the remainder of the four and a half per cent. bonds, amounting to $260,000,000. The right to terminate this contract at any time after March 4, 1877, after ten days'

notice, was reserved by the United States. The proceeds of the bonds sold were to be applied solely to the payment of the six per cent. 5-20 bonds of the United States. No provision was made in this contract for the acc.u.mulation of coin for the redemption of United States notes. The process of refunding under it progressed slowly.

I felt it to be important that I should have some personal representative in London, to protect the interests of the United States in the execution of this contract, and, therefore, on the 31st of March, 1877, I appointed Charles F. Conant, as the funding agent of the treasury department, and directed him to a.s.sume the general management and supervision of all business in London, arising from the funding of bonds. A letter of instructions prescribing his duties was given him. He was directed to pursue the same general plan under which former negotiations had been conducted, except as modified by these instructions, which were based upon the contract before mentioned. All bonds, money, or coupons received by him were to be securely kept in safes, furnished by the department for that purpose, to be deposited in the vaults of the Messrs. Rothschild. Combination locks were provided for each safe, and no safe could be unlocked except by three persons on distinct combinations, each person using a combination unknown to the others. He was to keep me fully advised as to the course of the market, of the price not only of American securities, but of foreign securities, and was to receive the new bonds and deliver them to the Rothschilds in exchange for the bonds redeemed. He proved to be a very competent and faithful agent, and furnished me important financial information, which aided me greatly in refunding operations. His compensation and allowances, as well as those of all persons sent to London in connection with the refunding of the public debt, were paid by the syndicate, so that no expense whatever was incurred by the treasury on this account.

I gave the following notice to the parties to this contract that I would, on the part of the United States, terminate it.

"Treasury Department, } "Washington, D. C., April 6, 1877.} "Gentlemen:--I received your friendly cable message of the 10th ultimo, and return my thanks and hearty good wishes.

"I am very solicitous to promote the funding of our six per cent.

bonds as rapidly as practicable, and feel indebted to you for the aid you have given in placing the four and a half per cent. bonds.

"I propose no change at present; but it is my desire, if practicable, to withdraw the four and a half per cent. bonds from the market and subst.i.tute in their place the four per cent. bonds authorized by the funding act.

"These bonds, as you know, are a very desirable investment, running thirty years from the date of issue, with every guard and security that has been given to any bond of the United States, and we think as safe and desirable as the securities of any other nation. It is probably the bond into which all the debt of the United States will in time be converted. I hope you and your a.s.sociates will be able to engage with me to place this bond on the market when $200,000,000 of the four and a half per cent. bonds have been sold.

"The public policy of the United States to resume specie payments on or before the 1st of January, 1879, is fully established by the law and by public opinion. It may be that the surplus revenue will be sufficient to enable me to carry out this policy without the sale of bonds. I am authorized by the resumption act to sell five, four and a half, or four per cent. bonds to prepare for resumption, and it may be desirable to sell through the syndicate, under that act, a limited amount of bonds, not exceeding, I hope, $30,000,000 a year. I do not wish in the execution of this duty to disturb the exchanges between Europe and this country. For this purpose I desire to sell only the four per cent. bonds and must sell at par in coin, but could receive in payment coin coupons maturing within a limited time. I invite from you and your a.s.sociates such suggestions and offers as you may think proper to make for the purchase of such bonds.

"The operations of the syndicate have become so important that I have deemed it proper to ask Mr. Charles F. Conant, late a.s.sistant Secretary of the Treasury, to take charge of the business in London in connection with the gentlemen already there. He is well informed as to our laws, and I trust his services may be of advantage to the government and agreeable to you.

"I will give my personal attention to this business, and will receive with pleasure any suggestions from you that will promote our common object.

"Very truly, "John Sherman, Secretary.

"Messrs. N. M. Rothschild & Sons, London, England."

I received the following letter:

"New York, April 12, 1877.

"Hon. John Sherman, Secretary of the Treasury, Washington.

"My Dear Sir:--I had an interview with Messrs. Drexel, Morgan & Co., and conveyed to them your wishes respecting limiting the sale of the four and a half and taking the four per cent. bond in hand with the co-operation of the Messrs. Rothschild.

"I told Mr. Drexel that you would be happy to see him and Mr. L.

P. Morton in Washington, whenever convenient for them to go, and that on receipt by you of favorable advices from Mr. Conant after his arrival in London, you desired that Drexel, Morton and I should repair to Washington, in company with other leading members of the syndicate, with a view of entering into a contract with the government, in conformity with your views as expressed to me, or perhaps with some slight modifications, which, if suggested by the London people, through Mr. Conant, you may deem proper to adopt.