Recollections of Forty Years in the House, Senate and Cabinet Part 65

Notice was given to Mr. Conant of the termination of the contract, but he was advised by me that we would probably agree to the continuance of the syndicate in the European markets. He had expressed to me a fear that a panic would occur about our bonds in Europe, on account of the antic.i.p.ated pa.s.sage of the Bland bill, but I was able to a.s.sure him that it would not become a law in the form originally proposed.

Being thus free from all existing contracts, I published the following notice inviting subscriptions to the four per cent. bonds:

"Treasury Department, } "Washington, D. C., January 16, 1878.} "The Secretary of the Treasury hereby gives notice that, from the 26th instant, and until further notice, he will receive subscriptions for the four per cent. funded loan of the United States, in denominations as stated below, at par and accrued interest, in coin.

"The bonds are redeemable July, 1907, and bear interest, payable quarterly, on the first day of January, April, July, and October, of each year, and are exempt from the payment of taxes or duties to the United States, as well as from taxation in any form by or under state, munic.i.p.al, or local authority.

"The subscriptions may be made for coupon bonds of $50, $100, $500, and $1,000, and for registered bonds of $50, $100, $500, $1,000, $5,000, and $10,000.

"Two per cent. of the purchase money must accompany the subscription; the remainder may be paid at the pleasure of the purchaser, either at the time of subscription or within thirty days thereafter, with interest on the amount of the subscription, at the rate of four per cent. per annum, to date of payment.

"Upon the receipt of full payment, the bonds will be transmitted, free of charge, to the subscribers, and a commission of one-fourth of one per cent. will be allowed upon the amount of subscriptions, but no commission will be paid upon any single subscription less than $1,000.

"Forms of application will be furnished by the treasurer at Washington, the a.s.sistant treasurers at Baltimore, Boston, Chicago, Cincinnati, New Orleans, New York, Philadelphia, St. Louis, and San Francisco, and by the national banks and bankers generally.

The applications must specify the amount and denominations required, and, for registered bonds, the full name and post office address of the person to whom the bonds shall be made payable.

"The interest on the registered bonds will be paid by check, issued by the treasurer of the United States, to the order of the holder, and mailed to his address. The check is payable on presentation, properly indorsed, at the offices of the treasurer and a.s.sistant treasurers of the United States.

"Payments for the bonds may be made in coin to the treasurer of the United States at Washington, or the a.s.sistant treasurers at Baltimore, Boston, Chicago, Cincinnati, New Orleans, New York, Philadelphia, St. Louis, and San Francisco.

"To promote the convenience of subscribers, the department will also receive, in lieu of coin, called bonds of the United States, coupons past due or maturing within thirty days, or gold certificates issued under the act of March 3, 1863, and national banks will be designated as depositaries under the provisions of section 5153, Revised Statutes of the United States, to receive deposits on account of this loan, under regulations to be hereafter prescribed.

"John Sherman, Secretary of the Treasury."

After the publication of this notice inviting subscriptions to the four per cent. bonds, I found that the chief impediment in my way was the apparent disposition of both Houses of Congress to require the called bonds to be paid in United States notes. This was not confined to any party, for, while the majority of the Democrats of each House were in favor of such payment, many of the prominent Republicans were fully committed to the same policy. I was requested by committees of the two Houses, from time to time, to appear before them, which, in compliance with the law, I cheerfully did, and found that a free and unrestricted statement of what I proposed to do was not only beneficial to the public service, but soon induced Congress not to interfere with my plans for resumption. My first interview was on the 11th of March, 1878, with the committee on coinage of the House, of which Alexander H. Stephens, of Georgia, was chairman. I was accompanied by H. R. Linderman, Director of the Mint. The notes of the conference were ordered by the House of Representatives to be printed, and the committee was convinced of the correctness of the statements in regard to the amount of actual coin and bullion on hand, and where it was situated, which had been previously doubted.

On the 19th of March, I had an interview with the Senate committee on finance, of which Mr. Morrill, of Vermont, was chairman. I was examined at great length and detail as to the preparations for resumption, and the actual state of the treasury at that time.

The princ.i.p.al topic discussed was whether the four per cent. bonds could be sold, Mr. Bayard being evidently in favor of the subst.i.tution of the four and a half per cents. for the four per cent. bonds I had placed on the market. The question of how to obtain gold coin and bullion was fully considered in this interview, and here I was able to convince the committee that a purchase of domestic gold coin and bullion would meet all the requirements of the treasury, and that no necessity existed for the purchase of gold abroad.

This interview, which covers over twenty printed pages, I believe entirely satisfied the committee of the expediency of the steps taken by me and their probable success. After this interview I had the a.s.sistance of the committee of finance, without regard to party, in the measures adopted by me. Mr. Bayard and Mr. Kernan gave me their hearty support, and Mr. Voorhees made no unfriendly opposition. The report of this interview was subsequently published, and had a good effect upon the popular mind.

By far the most important interview was one with the committee on banking and currency, of the House of Representatives, of which A.

H. Buckner, of Missouri, was chairman. A large majority of this committee had reported a bill to repeal the resumption act, and the members of the committee of each party were among the most p.r.o.nounced greenbackers in the House of Representatives. Perhaps the most aggressive was Thomas Ewing, a friend, and by marriage a relative of mine, a Member of ability and influence, and thoroughly sincere in his convictions against the policy of resumption. I was summoned before this committee to answer a series of interrogatories furnished me a few days previously, calling for statements as to the actual amount of gold and silver belonging to, and in the custody of, the treasury department on the 28th of March, where located and what deductions were to be made from it, on account of actual existing demands against it. This interview, extending through several days, and covering seventy-three printed pages, embraced every phase of the financial condition of the United States, and the policy of the treasury department in the past and in the future. At the end of the first day the princ.i.p.al question seemed to be whether it was possible that the United States could resume specie payments and maintain them. This led to a careful scrutiny of the amount of gold in the treasury, Mr. Ewing a.s.suming that a portion of the amount stated was "phantom" gold, and was really not available for the purposes of resumption. I said that the United States would be, on the 1st of January, in a better condition to resume specie payments than the Bank of England was to maintain them, and gave my reasons for that opinion. I saw that Mr. Ewing regarded this statement as an exaggeration.

After the adjournment I understood that Mr. Ewing said that I was grossly in error, and that he would be able to show it by authentic doc.u.ments as to the condition of the Bank of England. He said that I was laboring under delusions, which he would be able to expose at the next meeting. When we again met with the full committee present, Mr. Ewing said:

"I ask your attention to a comparison of the condition of the treasury for resumption with the condition of the Bank of England in 1819 and now, with the Bank of France this year, and with the banks of the United States in 1857 and 1861."

To this I replied:

"When I said the other day that I thought the condition of the treasury, on the 1st of January next, would be as good as the Bank of England, I had not then before the actual figures or tables, but only spoke from a general knowledge of the facts. Since then I have given the matter a good deal of attention, and now have some carefully prepared tables, founded upon late information, giving the exact comparison of the condition of the Bank of England, the Bank of France, the Bank of Germany, the Bank of Belgium, the national banks, and the treasury. These tables will show that pretty accurately."

I handed the tables to the committee, and they are printed with the report. I then proceeded to show in detail that while the Bank of England had notes outstanding to the amount of 38,698,020, it had on hand as a.s.sets: Government debt, 11,015,100; other securities, 3,984,900; gold coin and bullion, 23,698,020; that upon this it was apparent that in the issue department the Bank of England was stronger than the United States; but in the banking department, the bank was liable for deposits, the most dangerous form of liability, and various other forms of liability, to the amount of 46,277,277. To pay these it had government securities, notes and other securities and 1,032,773 gold and silver coin, in all amounting to 46,277,277. Combining these accounts it was shown that the demand liabilities on the bank were 54,639,171, while the gold and bullion on hand was only 24,730,793. Then I said:

"Now, in regard to the United States, I have a statement here showing the apparent and probable condition of the United States treasury on April 1, 1878, and on the 1st of January next. The only difference in these statements is that I add to the present condition of the treasury the proposed acc.u.mulation of fifty millions of coin and a substantial payment before that of the fractional currency. I think it will be practically redeemed before that time. The actual results show the amount of demand liabilities on April 1, 1878, against the United States, as $460,527,374, and they show the demand resources, including coin and currency, at $174,324,459, making the percentage of resources to liabilities thirty-seven. To show the probable condition of the treasury on the 1st of January, 1879, I add the fifty millions of coin and I take off the fractional currency, and deducted estimated United States notes lost and destroyed, leaving the other items about the same. That would show an aggregate of probable liabilities of $35,098,400 and probable cash resources of $224,324,459, making fifty-one per cent. of the demand liabilities. The ratio of the Bank of England, at this time, is forty-five per cent.; the ratio of the Bank of France, is sixty-five per cent.; the ratio of the Bank of Germany, is fifty-eight per cent.; and the ratio of the Bank of Belgium, is twenty-five per cent., all based upon the same figures."

I gave the statistics as to the condition of the national banks, showing their a.s.sets and liabilities, that they were not bound to redeem their notes in gold or silver, but could redeem them in United States notes, of which they had on hand $97,083,248, and besides they had deposited in the treasury, as security for their notes, an amount of United States bonds ten per cent. greater than the entire amount of their circulating notes, and that these bonds were worth in the market a large premium in currency. In addition to the legal tenders on hand, they had five per cent. of their circulation in legal tender notes deposited in the treasury as a redemption fund, amounting to $15,028,340. They had also on hand gold and silver coin and gold certificates amounting to $32,907,750, making a total cash reserve of $145,019,338. The ratio of their legal tender funds to circulation was 48.4; ratio of legal tenders to circulation and deposits, 15.1.

In this interview I explicitly stated to the committee my purpose to sell bonds, under the resumption act, at the rate of $5,000,000 a month, to the aggregate amount of $50,000,000; that I was satisfied I could make this sale upon favorable terms, and could add to the coin then in the treasury the sum of $50,000,000 gold coin, which I thought sufficient to secure and maintain the parity of our notes with coin. Mr. Ewing inquired:

"Where do you expect to get the additional fifty millions of gold by January 1, 1879?"

My answer was as follows:

"You must see that for me to state too closely what I propose to do might prevent me from doing what I expect to do, and therefore I will answer your question just as far as I think you will say I ought to go. I answer, mainly from the sale of bonds. Indeed, in the present condition of the revenue, we cannot expect much help from surplus revenue, except so far as that surplus revenue may be applied to the payment of greenbacks and to the redemption of fractional currency in aid of the sinking fund. To that extent I think we can rely upon revenue enough to retire the United States notes redeemed under the resumption act; so that I would say that we can get the $50,000,000 of gold additional by the sale of bonds.

As to the kind of bonds that I would sell, and as to how I would sell them, etc., I ought not to say anything on that subject at present, because you ought to allow me, as an executive officer, in the exercise of a very delicate discretion, free power to act as I think right at the moment, holding me responsible for my action afterward. As to what bonds I will sell, or where I will sell them, or how I will sell them, as that is a discretionary power left with the secretary, I ought not to decide that now, but to decide it as the case arises."

Some question was made by Mr. Ewing as to the ability to sell bonds, and he asked:

"I understood you to say in your interview with the Senate committee that you would have to rely upon the natural currents of trade to bring gold from aborad; that is, that there cannot be a large sale of bonds for coin abroad. Is it on a foreign sale that you are relying?"

I replied:

"Not at all, but on a sale at home. Perhaps I might as well say that if I can get two-thirds of this year's supply of gold and silver from our own mines, it will amount to a good deal more that $50,000,000, so that I do not have to go abroad for gold. If we can keep our own gold and silver from going abroad, it is more than I want."

Mr. Buckner inquired:

"For this $50,000,000 additional I suppose you rely, to some extent, on the coinage of silver?"

I said:

"To some extent; silver and gold we consider the same under the law."

Mr. Ewing asked:

"Do you expect to pay out the silver dollar coined by you for current expenses, or only for coin liabilities, or to h.o.a.rd it for resumption?"

I said:

"I expect to pay it out now only in exchange for gold coin or for silver bullion. I am perfectly free and answer the question fully, because on that point, after consulting with many Members of both Houses, I have made up my mind what the law requires me to do. I propose to issue all the silver dollars that are demanded in exchange for gold coin. That has been going on to some extent; how far I cannot tell. Then I propose to use the silver in payment for silver bullion, which I can do at par in gold. I then propose to buy all the rest of the silver bullion which I need, under the law, with silver coin. As a matter of course, in the current course of business, some of that silver coin will go into circulation; how much, I do not know. The more, the better for us. But most of it, I take it, will be transferred to the treasury for silver certificates (that seems to be the idea of the bill), and those silver certificates will come into the treasury in payment of duties, and in that way, practically, the silver will belong to the government again."

Some question arose as to the reissue of treasury notes under the resumption act. I expressed my opinion that all notes not in excess of $300,000,000 could be reissued under existing laws, but as to whether notes in excess of $300,000,000 could be reissued was a question which I hoped Congress would settle, that I considered the law as doubtful. Congress did subsequently suspend the retirement of United States notes at $346,000,000.

The sinking fund and many other subjects were embraced in this interview, the importance of which would justify a fuller statement than I have given, but, as the interview has been published as a public doc.u.ment, I do not give further details. I stated frankly and explicitly what I intended to do if not interrupted by Congress.

I felt a.s.sured, not only from the Senate, but from what I could learn from Members of the House, that no material change of existing law would be made to prevent the proposed operations of the treasury department. From that time forward I had not the least doubt of success in preparing for and maintaining resumption, and refunding, at a lower rate of interest, all the public debt then subject to redemption.

I think I entirely satisfied the committee that the government was not dealing with shadows, but had undertaken a task which it could easily accomplish, if not prevented by our common masters, the Congress of the United States. It was said of Mr. Buckner that before I appeared before the committee, he regarded me as a visionary enthusiast, who had undertaken to do what was impossible to be done, that after the first day of the examination he came to the conclusion that I was honest in my belief that resumption was possible, but he did not believe in my ability to do what was proposed; at the end of the second day he expressed some doubts of the ability to resume, but said that the object aimed at was a good one, and he was not disposed to interfere with the experiment; and on the third day he said he believed I had faith in the success of resumption, and would not interfere with it, but if I failed I would be the "deadest man politically" that ever lived.

CHAPTER x.x.xIII.

SALE OF BONDS FOR RESUMPTION PURPOSES.

Arrangements Begun for the Disposal of $50,000,000 for Gold or Bullion--Interviews with Prominent Bankers in New York--Proposition in Behalf of the National Banks--Terms of the Contract Made with the Syndicate--Public Comment at the Close of the Negotiations-- "Gath's" Interview with Me at the Completion of the Sale--Eastern Press Approves the Contract, While the West Was Either Indifferent or Opposed to it--Senate Still Discussing the Expediency of Repealing the Resumption Act--Letter to Senator Ferry--Violent and Bitter Animosity Aroused Against Me--I Am Charged with Corruption--Interview with and Reply to Letter of Peter Cooper--Clarkson N. Potter's Charges.

The general results of these interviews, which had a wide circulation at the time, I believe were beneficial, and at least a.s.sured the public that a hopeful and determined effort was being made to advance United States notes and national bank notes to par with coin.

Before I had these interviews I had determined to sell $50,000,000 bonds at the rate of $5,000,000 a month for gold coin or bullion for resumption purposes, and also to press the refunding operations as rapidly as possible. I had at my disposal an unlimited amount of five, four and a half and four per cent. bonds, with authority to sell either kind to acc.u.mulate coin for the maintenance of resumption, or for the payment of bonds that were at the time redeemable, bearing a higher rate of interest. My printed correspondence with banks and bankers shows the advancing value of the four and four and a half per cent. bonds. The most active agent for the sale of these bonds was the First National Bank of New York, which had been the agent of the syndicate, and, though having no privilege or facility that was not extended to all banks and bankers alike, it evinced the utmost activity, intelligence and success, and took the lead in the sale of bonds. The advancing quotations furnished by it and other banks and bankers satisfied me that the policy of an open loan, such as was provided for by the notice of January 18, 1878, would be successful, if only we could have the certainty of coin payments by the 1st of January, 1879. I knew of the sensitive jealousy between the banks and bankers and between the old syndicate and prominent and wealthy firms who wished to partic.i.p.ate in any new syndicate, and were jealous and suspicious of each other.

Offers were made to me by banks and bankers for special arrangements for the purchase of bonds, but I put them all aside until after I had written to all the parties a notice substantially similar to the following, sent to Belmont & Co.:

"Treasury Department, April 5, 1878.