Recollections of Forty Years in the House, Senate and Cabinet Part 66

"Gentlemen:--It is my purpose to be in New York at four o'clock on Monday afternoon, and I would like, if practicable, to meet the members of the old syndicate at the Fifth Avenue Hotel that evening at any hour convenient to them, to confer as to the best mode of obtaining $50,000,000 gold coin or bullion prior to January 1, 1879, for resumption purposes, and to receive from the a.s.sociates, or any of them, or from new parties, offers for any of the description of bonds I am authorized to sell for that purpose.

"I propose to acc.u.mulate this coin in either the treasury, the a.s.say offices, or the public depositaries throughout the United States that will comply with the conditions of section 5153 Revised Statutes.

"I will send a similar letter to this to the First National Bank, and have to request that you will give notice to the other members of the old syndicate, and, with their consent, to any others you desire to partic.i.p.ate in the interview.

"Very respectfully, "John Sherman, Secretary.

"Messrs. August Belmont & Co., New York."

I sent General Hillhouse the following notice:

"Treasury Department, April 5, 1878.

"Sir:--You will please inform Messrs. H. F. Vail, president National Bank of Commerce; J. D. Vermilye, president Merchants' National Bank; George S. Coe, president American Exchange National Bank; B.

B. Sherman, Mechanics' National Bank, and James Buell, president Importers and Traders' National Bank, that I desire an interview with them at any hour on Tuesday next, at your office, or at such other places as they may prefer, in respect to the purchase for the Treasury for resumption of, say, $50,000,000 gold coin or bullion, to be delivered monthly and before the 1st of January next, either at your office or at the designated depositaries of the United States, under section 5153 Revised Statutes, and also, if practicable, to secure from them a bid for either of three cla.s.ses of bonds described in the refunding act to an amount sufficient to purchase the coin stated. These gentlemen are respectfully requested to select such others connected with national banks as they may agree upon to join in the interview.

"Very respectfully, "John Sherman, Secretary.

"General Thomas Hillhouse, "a.s.sistant Treasurer United States, New York."

Regarding the negotiation as one of great importance, I was accompanied to New York by Hon. Charles Devens, Attorney General; John Jay Knox, Comptroller of the Currency; Charles F. Conant, a.s.sistant Secretary; Daniel Baker, Chief of the Loan Division, and E. J. Babc.o.c.k, my Secretary.

On the 8th of April I, with the gentlemen named, had an interview with the members of the old syndicate, Messrs. Belmont, Seligman, Bliss, Fabri and Fahnestock.

I stated that the object of my visit to New York, and of my request for an interview with the a.s.sociates, was to obtain $50,000,000 coin for resumption purposes, and I would like to sell four per cent. bonds to that amount.

Mr. Belmont did not think the four per cent. bonds could be sold then, and the a.s.sociates all concurred in the opinion that they would prefer making a proposition for the four and a halfs, although they were not prepared to make any definite offer. I said I would like to get 103 for the four and a halfs, but the a.s.sociates said they would not consider that at all; they would communicate with the Rothschilds and others, and might possibly be able to offer 101; they would come to some conclusion by next day.

On the following day, at the National Bank of Commerce, I met the presidents of the national banks: Mr. Vail, Commerce; Mr. Vermilye, Merchants'; Mr. Coe, Merchants' Exchange; Mr. Sherman, Mechanics'; Mr. Buell, Importers and Traders'; Mr. Moses Taylor, City; Mr. F.

D. Tappan, Gallatin; Mr. G. G. Williams, Chemical; Mr. F. A. Palmer, Broadway; Mr. George I. Seney, Metropolitan; Mr. P. C. Calhoun, Fourth National.

Mr. Vail said that this meeting was called at my request, that the gentlemen present had no information as to the object of the meeting, and had had no opportunity for consultation; that I would explain more fully what I desired.

I said that I proposed to resume specie payments on the 1st of January, in accordance with law, and that for this purpose I wished to get $50,000,000 of gold, and, to acc.u.mulate this amount, would if possible, sell four per cent. bonds.

Mr. Vermilye and Mr. Coe spoke at some length to the effect that they were in full accord with me on the subject of resuming specie payments, and they were willing to co-operate in any way to bring it about. They said that although they had not consulted with the other gentlemen present, they had no doubt they were all agreed upon this subject. They thought, however, it would be utterly useless to attempt to sell four per cent. bonds, and that as far as such bonds were concerned there need be no more said.

I said this being so, I would like to have some propositions for four and a halfs.

Mr. Coe said that no definite proposition could be made without further consultation among themselves; that they were willing to a.s.sist to the extent of their power to obtain resumption; that they would place themselves at my service in any way I might wish without compensation. He said that he thought an arrangement could be made by which the national banks could be made my agents in the sale of bonds. He thought the banks might take the $50,000,000 of four and a half per cent. bonds, to be paid for by the 1st of January, the government to receive whatever the banks could get for the bonds.

I invited the gentlemen to confer among themselves, and, if practicable, make me some definite proposition in the morning.

In the afternoon of the same day we met the members of the old syndicate. Mr. Belmont read a cable from the Rothschilds offering 101 for $100,000,000 four and a half per cent. bonds, $50,000,000 for resumption and $50,000,000 for refunding purposes.

I said I was not prepared to accept, but would give a definite answer next day.

On the following morning I met Mr. Vail, of the National Bank of Commerce, and Mr. Vermilye, of the Merchants' National Bank, at the sub-treasury.

Mr. Vail and Mr. Vermilye submitted a memorandum that if I would indicate my willingness to receive a proposition for the negotiation of $50,000,000 four and a half per cent. bonds at par in gold they would recommend the national banks to unite in making it.

I then asked Mr. Vail and Mr. Vermilye whether, if a proposition was made to me by bankers of acknowledged credit and responsibility of 101 for four and a half per cent. bonds, payable in installments and with the usual option, in their opinion, it was my duty to accept it.

They both said decidedly, yes; that such an arrangement would be far more advantageous than the acceptance of their proposition, and besides, if they took the bonds, it might impair to some extent their power to render the usual facilities to their commercial customers.

The proposition submitted by Messrs. Vail and Vermilye, in behalf of the national banks, was as follows:

"If the secretary will intimate his willingness to receive a proposition from the national banks in New York, Boston, Philadelphia and Baltimore for the negotiation of fifty millions four and a half per cent. bonds at par in gold, for resumption purposes, we will recommend our a.s.sociates to unite in making it, with the belief on our part that it can be accomplished as suggested. This special loan to be the only bonds of this character offered, unless the same parties have the option on any further sums required."

Afterwards, on the same day, I again met the members of the syndicate at the sub-treasury, and said that I would sell only $50,000,000 four and a half per cent. bonds; that these must be paid for in gold coin, for resumption purposes; that I would sell them for 101, allowing one-half of one per cent. commission, the syndicate to pay all expenses; but before signing the contract wished to communicate with the President.

These terms were accepted by the syndicate upon condition that their a.s.sociates in London would consent, they reserving the right to cable to London for such consent; and the meeting adjourned until 1:30 o'clock, when, I having received a telegram from the President, the details of the contract were then discussed, and signature was delayed for an answer to the cable of the syndicate.

On the following day we again met at the sub-treasury, and Mr.

Lucke, of Belmont & Co., informed me that the English parties had authorized them to close the contract, and it was therefore signed.

It was as follows:

"This agreement, entered into the 11th day of April, 1878, between the Secretary of the Treasury of the United States, of the first part, and August Belmont & Co., of New York, on behalf of N. M.

Rothschild & Sons, of London, England, and their a.s.sociates and themselves; Drexel, Morgan & Co., of New York, on behalf of J. S.

Morgan & Co., of London, and themselves; J. & W. Seligman & Co., of New York, on behalf of Seligman Bros. of London, and themselves; Morton, Bliss & Co., of New York, on behalf of Morton, Rose & Co.

of London, and themselves; and the First National Bank of the city of New York, witnesseth: That said August Belmont & Co., on behalf of N. M. Rothschild & Sons, and their a.s.sociates and themselves, hereby agree to purchase from the Secretary of the Treasury $4,125,000 of the four and one half per cent. bonds of the United States, issued under the acts of July 14, 1870, January 20, 1871, and January 14, 1875, and that Drexel, Morgan & Co., on behalf of J.

S. Morgan & Co., and themselves, agree to purchase $1,625,000 of said bonds, and that J. & W. Seligman & Co., on behalf of Seligman Bros., and themselves, agree to purchase $1,625,000 of said bonds, and that Morton, Bliss & Co., on behalf of Morton, Rose & Co., and themselves, agree to purchase $1,625,000 of said bonds, and that the First National Bank of the city of New York agrees to purchase $1,000,000 of said bonds; making a total aggregate of $10,000,000 of said bonds on the terms and conditions following:

"First. The bonds covered by this contract shall be sold for resumption purposes.

"Second. The parties of the second part shall have the exclusive right to subscribe in the same proportion of each of the subscribers for the remainder of the $50,000,000 of the four and a half per cent. bonds of the United States authorized to be issued by the acts of Congress aforesaid; but the amount to be so subscribed shall not be less than $5,000,000 for each and every month after the present month of April.

"Third. That the Secretary of the Treasury shall not sell, during the continuance of this contract, any bonds other than such as by act of Congress may be provided to be sold for the payment of the Halifax or Geneva award, and the four per cent. consols of the United States, and those only for refunding purposes, except by mutual agreement of the parties hereto.

"Fourth. The parties of the second part agree to pay for the said four and a half per cent. bonds par and one and a half per cent.

premium and interest accrued to the date of the application for the delivery of said bonds, in gold coin or matured United States gold coin coupons, or any of the six per centum 5-20 bonds heretofore called for redemption, or in United States gold certificates of deposit issued under the act of March 3, 1873, or in gold coin certificates of deposit of authorized designated deposit, and that have complied with the law.

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

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

"Signed by John Sherman, Secretary of the Treasury, J. & W. Seligman & Co., Morton, Bliss & Co., August Belmont & Co., the First National Bank of New York, Drexel, Morgan & Co.; and by a.s.sistant United States Treasurer Thomas Hillhouse and E. J. Babc.o.c.k, as witnesses."

The importance of this contract and the open publicity of the negotiation, created quite a sensation in the newspaper press, which presented a medley of praise and censure. All varieties of opinion from extravagant flattery to extreme denunciation were visited upon me by the editors of papers according to their preconceived opinions. I made no effort at secrecy, and no answer to either praise or blame, but freely contributed any information in respect to the matter to anyone, whether friendly or otherwise, who applied to me. Perhaps as accurate a statement as any, of my opinions, was made by George Alfred Townsend, over his _nom de plume_ of "Gath," in the New York "Graphic" of April 12, 1878. He said:

"At four o'clock yesterday afternoon John Sherman, the Secretary of the Treasury, was sitting in Parlor No. 1, the ante-room of the late Republican national committee, when I followed my card into his presence. 'Ah!' he said, rising from an easy chair where he was resting, like one recently wearied but now relieved. 'Come in; it's all over now, and I don't mind telling you about it.'

'Yes, it's all over Wall street, and I think opinion was more favorable to the syndicate getting the bonds than the bank presidents.'

'The representatives of the banks were very polite and well-meaning,'

said the secretary. 'I sent word that I was coming to the city and asked the national banks, as intimately related to the treasury department, to select persons to meet me. I also notified the members of the old syndicate that I had some propositions to suggest to them.'

'This is your third visit on the general object of resumption? A very eventful visit, isn't it, in the story of our finances?'

'Well, both my previous visits were important--in May, 1877, when $200,000,000 of four and a half per cent. bonds were disposed of, and again last June, when $75,000,000 of the four per cent. bonds were subscribed for. The present visit is probably the last with such an object. I feel glad and relieved.'

'You failed to get the bank philosophers to get you the $50,000,000 of gold?'