Reminiscences of Sixty Years in Public Affairs Volume II Part 14

(A reduced facsimile of the communication is shown below.) An attempt was made through the police and the secret service system to trace the authorship of the superscription. The attempt was ineffectual.

[Facsimile]

If gold does not sell at 150 within 15 days I am a ruined man. You will be the cause of my ruin! Your life will be in danger.

Wilkes Booth.

It appears in the review that Mr. Gould originated the scheme of advancing the price of gold and that Mr. Fisk was his princ.i.p.al coadjutor. It also appears that Mr. Fisk entered into the arrangement upon the basis of friendship for Mr. Gould, and not in consequence of an opinion on his part that the scheme was a wise one. Mr. Gould had two main purposes in view: first, the profit that he might realize from an advance in gold; and, second, the advantage that might accrue to the railroad with which he was connected through an increase of its business in the transportation of products from the West. As set forth in Mr. Gould's letter, he entertained the opinion, which rested upon satisfactory business grounds, that an advance in the price of gold would stimulate the sale of Western products, increase the business of transportation over the railways, and aid us in the payment of liabilities abroad. If the price of gold had not been advanced beyond a premium of forty or perhaps forty-five per cent, all these results might have been realized, without detriment to the public, while Mr.

Gould and his a.s.sociates would have realized large profits. When the price had advanced to forty or forty-five per cent, Mr. Gould or his a.s.sociates made calls upon those who were under contracts to deliver gold to make their margins good or else to produce the gold. These demands created a panic, and the parties who had agreed to deliver gold entered the market, and bidding against each other, they carried the price beyond the point that Mr. Gould had contemplated.

x.x.xVI AN HISTORIC SALE OF UNITED STATES BONDS IN ENGLAND

If there should be any considerable interest in the history of the funding system of the United States, the interest would be due to a sale of bonds some thirty years ago and certain incidents which could not have been antic.i.p.ated, which arose from the execution of the trust.

In the month of July, 1868, a bill for funding the national debt which had pa.s.sed the Senate of the United States was reported, without amendments, to the House of Representatives by the Committee on Ways and Means.

When the bill was under consideration in the House, I proposed a subst.i.tute. In the debate of July 21 I made a statement of the nature of my subst.i.tute, and I reproduce an extract which sets forth the first step in a policy which culminated in the Act for Funding the Public Debt, and which was approved by President Grant July 14, 1870:

"The amendment to which I wish to call the attention of the House provides for the funding of $1,200,000,000 of the public debt $400,000,000 payable in fifteen years @ 5 per cent interest, $400,000,000 payable in twenty years @ 4 per cent interest, and $400,000,000 payable in twenty-five years @ 3.65 per cent interest, the latter sum of $400,000,000 payable, princ.i.p.al and interest, at the option of the takers, either in the United States, or in London, Paris, or Frankfort."

At that time I had not entertained the thought that I might come to be the head of the Treasury Department. Indeed, I had no other purpose in public life than to remain in the House of Representatives.

I had had experience on the executive side of the Government and also on the legislative side, and I had a fixed opinion in favor of the latter form of service.

As Secretary of the Treasury, I proposed a bill in 1869 in the line of the subst.i.tute for the bill of the Committee on Ways and Means which I had challenged in July, 1868. The bill proposed an issue of three cla.s.ses of bonds, each of four hundred million dollars, which were to mature at different dates, and to bear interest at the rates of 5, 4, and 4 per cent. It was further provided that the princ.i.p.al and interest of the bonds bearing the lowest rate should be made payable either in the United States, or at Frankfort, Paris, or London, as the takers might prefer. The provision was rejected through the influence of General Schenck, who had then returned recently from Europe, and with the opinion that the concession involved an impairment of national honor. As a subst.i.tute for the feature so rejected, I originated a plan for the issue of registered bonds, upon the condition that the interest could be paid in checks to be forwarded by the mails to the holders of bonds at the places designated by them in any part of the world. This plan is far superior to the first suggestion, as it is susceptible of a much wider application.

I have received from Mr. Roberts, the Treasurer of the United States, the following letter and statement:

STATEMENT SHOWING THE PROPORTION OF UNITED STATES BONDS OUTSTANDING JANUARY 25, 1900, ON WHICH INTEREST IS PAID BY CHECK.

t.i.tLE OF LOAN. Total issue. Registered Percentage bonds on of bonds on which interest which interest is paid by is paid by check. check.

Funded loan of 1891 continued at 2 per cent . . . . . . . . .$ 25,364,500 $ 25,364,500 100.00 Four per cent funded loan of 1907 . . . . . . . . . 545,342,950 478,195,600 87.69 Five per cent loan of 1904 . . . . . . . . . 95,009,700 64,615,650 68.01 Four per cent loan of 1925 . . . . . . . . . 162,315,400 117,997,200 72.70 Three per cent ten-twenties of 1898 . . . . . . . . . 168,679,000 109,450,060 55.09

Totals . . . . . . . . $996,711,550 $795,623,030 77.49

TREASURY DEPARTMENT.

OFFICE OF THE TREASURER, WASHINGTON, D. C.

_January_ 25, 1900.

HONORABLE GEORGE S. BOUTWELL, Boston, Ma.s.sachusetts.

_My Dear Mr. Secretary:_ It gives me pleasure to enclose to you a table showing by cla.s.ses of bonds the percentage of interest paid by checks. The interest on all registered bonds is now so paid. Only the coupon bonds, by their nature, are differently treated.

Your plan has worked admirably, and the drift is slowly from the coupon to the registered form, and so to an increase of the payment of interest by checks.

With kind regards, Yours very truly, (Signed) ELLIS H. ROBERTS, _Treasurer of the United States._

The plan has been adopted by corporations that are borrowers of large sums of money upon an issue of bonds, and the use of the system is very general in the United States.

In my report to Congress in December, 1869, I made recommendation of the Funding Bill, and I placed copies of the bill that I had prepared in the hands of the Finance Committee of the Senate, and in the hands of the Committee of Ways and Means of the House of Representatives.

When the bill became a law, the authorized issue of five per cent bonds was limited to two hundred million dollars, and the issue of four per cent was raised to twelve hundred million. Simultaneously with the pa.s.sage of the Funding Bill of July, 1870, the war between France and Prussia opened, and the opportunity for negotiations was postponed until the early months of the year 1871. In these later years, when bonds of the United States have been sold upon the basis of their par value at two per cent income, it is difficult to realize that in 1869 the six per cent bonds of the United States were worth in gold only 83-5/10 cents to the dollar. The first attempt to dispose of the five per cent bonds was made by the Treasury Department through an invitation to the public to subscribe for the bonds, payment to be made in the currency of the country, or by an exchange of outstanding five-twenty bonds which bore interest at the rate of six per cent.

The subscriptions reached the sum of sixty-six million dollars, of which the national banks were subscribers to the amount of sixty-four million, leaving two million only as the loan to the general public.

A portion of the amount taken by the banks was for the account of patrons and clients. This experience justified the opinion that future efforts with the general public would be unsuccessful, while the credit of the country was not established and placed beyond the influence of cavilers and doubters.

It was under such circ.u.mstances that the aid of banks and bankers became important for the furtherance of subscriptions, in view of the fact that they could give personal service of a nature not possible in the case of salaried officers of the Government, nor compatible with their daily duties.

It is not easy, in this age of comparative freedom and power in financial affairs, to comprehend that in the year 1871 the long established bankers of New York, Amsterdam, and London, either declined or neglected the opportunity to negotiate the five per cent coin bonds of the United States upon the basis of their par value. It may not be out of place for me to mention Mr. Morton, of the house of Morton, Bliss & Co., as an exception, to the bankers of Europe and the United States.

It was in the same months of 1871 that I recommended the issue of a four per cent fifty-year bond as the basis of the currency to be issued by the national banks. This proposition, which would have been advantageous to the banks, in an increasing ratio as the value of money diminished, was defeated by the organized opposition of the banks through an effective lobby that was a.s.sembled in the city of Washington. Such was the public sentiment in the year 1871, even in the presence of these important facts, that in the month of December I was able to say in my annual report that the debt had been diminished during the next preceding year in the sum of ninety-four million dollars, and that the total decrease from March 1, 1869 to December 1, 1871, was over two hundred and seventy-seven million dollars.

It was in this situation of affairs that Messrs. Jay Cooke & Co.

proposed to undertake the sale in London, by subscription, of one hundred and thirty-four million five per cent bonds then unsold.

Authority was given to Cooke & Co. to proceed with the undertaking, and when the books were closed, September 1, I was informed that the loan had been taken in full. By the terms prescribed by Cooke & Co., the subscribers deposited five per cent as security for the validity of their subscriptions. The bonds were to be delivered the first day of December.

Upon the receipt of the information that the undertaking had been a success, the bonds were prepared, and the Hon. William A. Richardson, then an a.s.sistant secretary of the Treasury, was designated as the agent of the department for the delivery of the bonds. The bonds were placed in safes, on each of which there were three locks. The clerks were sent over in different vessels, and the keys were so distributed among them, that there were not keys in any one vessel by which any one of the safes could be opened.

The success of the subscription gave rise to an unexpected difficulty.

At that time there were outstanding one hundred and ninety-four million ten-forty United States bonds that carried interest at the rate of five per cent.

It was a singular coincidence, and a coincidence probably not due to natural causes, that some five per cent bonds, having fifteen years to run, should be at par, and that other five per cent bonds that might run thirty years should fall below par in the same market. In the three months from August to December, these ten-forties were quoted as low as ninety-seven, or even for a time at ninety-six. Cooke became anxious, if not alarmed, lest the rate should fall below ninety-five, and consequently lest the subscribers should refuse to meet their obligations. Early on the morning of the first Monday in December, I received the information that the bonds were taken as soon as the offices were open. I may mention in pa.s.sing that Cooke & Co. paid for the bonds as they were delivered, either in coin or in five-twenty bonds.

As bonds were taken, and as payments were made, a difficulty appeared which had been antic.i.p.ated, but not in its fullness. The proceeds from the sales of the five per cent bonds were pledged to the redemption of the six per cent five-twenty bonds, reckoned at their par value.

It was provided by the statute that whenever five-twenty bonds were called, a notice of ninety days should be given, when interest would cease. Thus it happened that whenever a bond was called it was worth par and interest to the end of the ninety days. Of the called bonds some were in America, and the owners did not choose to present them in London in exchange for five per cent bonds, nor for coin. Hence it happened that the total proceeds of the five per cent bonds, about twenty million dollars were paid in gold coin by Cooke & Co. This coin was deposited in the Bank of England, but upon such terms as were imposed by the governors:

(1) The deposits must be made in the name of William A. Richardson.

This was done, but a statement was made by Judge Richardson that the deposit was the property of the United States.

(2) The gold was not to be taken out of the country. This stipulation was in the line of our policy, which was to invest the entire sum in five-twenty bonds, whenever they could be bought at par. The opportunity came in a manner that was not antic.i.p.ated. The doc.u.ments referred to are of historical value, and they are therefore inserted as follows:

_(a)_ A declaration of trust by William A. Richardson, a.s.sistant Secretary of the Treasury, dated at London, December 28, 1871.

_(b)_ Letter of William A. Richardson, a.s.sistant Secretary of the Treasury, to John P. Bigelow, Chief of the Loan Division of the Treasury, dated also at London, December 28, 1871.

_(c)_ Letter of George Forbes, Chief Cashier of the Bank of England, to Judge Richardson, dated January 4, 1872.

_(d)_ Letter of Judge Richardson to George Lyall, Governor of the Bank of England, dated January 15, 1872.

_(e)_ Reply to the same by George Forbes, Chief Cashier, dated January 17, 1872.

_(f)_ William A. Richardson's report of January 25, 1872.

_(a)_ DECLARATION BY WILLIAM A. RICHARDSON

Whereas, I have this day deposited in my name, as a.s.sistant Secretary of the Treasury, U. S. A., in the Bank of England, two million five hundred and fifty thousand pounds sterling, and shall probably hereafter make further deposits on the same account: