CHAPTER XXXVII. REFUNDING THE NATIONAL DEBT. Over $140,000,000 of Gold Coin and Bullion in the Treasury January 1, 1879Diversity of Opinion as to the Meaning of Resumption- Effect of the Act to Advance Public Credit - Funding Redeemable Bonds Into Four per Cents.Letters to Levi P. Morton and Others - Six per Cent. Bonds Aggregating $120,000,000, Called During January, 1879- The Sale in LondonCharges of Favoritism - Further Enactments to Facilitate the Funding Difficulty of Making Sales of Four per Cent. Bonds Ο to English Bankers United States - One Subscription of $190,000,000 Rothschild's Odd Claim - Complimentary Resolution of the New York Chamber of Commerce. N the 1st of January, 1879, when the resumption act went into effect, the aggregate amount of gold coin and bullion in the treasury exceeded $140,000,000. United States notes, when presented, were redeemed with gold coin, but instead of the notes being presented for redemption, gold coin in exchange for them was deposited, thus increasing the gold in the treasury. The resumption of specie payments was generally accepted as a fortunate event by the great body of the people of the United States, but there was a great diversity of opinion as to what was meant by resumption. The commercial and banking classes generally treated resumption as if it involved the payment and cancellation of United States notes and all forms of government money except coin and bank notes. Another class was opposed to resumption, and favored a large issue of paper money without any promise or expectation of redemption in coin. The body of the people, I believe, agreed with me in opinion that resumption meant, not the cancellation and withdrawal of greenbacks, but the bringing them up to par and maintaining them as the equivalent of coin by the payment of them in coin on demand by the holder. This was my definition of resumption. I do not believe that any commercial nation can conduct modern operations of business upon the basis of coin alone. Prior to our Civil War the United States undertook to collect its taxes in specie and to pay specie for its obligations; this was the bullion theory. This narrow view of money compelled the states to supply paper currency, and this led to a great diversity of money, depending upon the credit, the habits and the wants of the people of the different states. The United States notes, commonly called greenbacks, were the creature of necessity, but proved a great blessing, and only needed one attribute to make them the best substitute for coin money that has ever been devised. That quality was supplied by their redemption in coin, when demanded by the holder. The feeling in the treasury department on the day of resumption is thus described by J. K. Upton, assistant secretary, in an article written at the close of 1892 : "The year, however, closed with no unpleasant excitement, but with unpleasant forebodings. The 1st day of January was Sunday and no business was transacted. On Monday anxiety reigned in the office of the secretary. Hour after hour passed; no news came from New York. Inquiry by wire showed all was quiet. At the close of business came this message: $135,000 of notes presented for coin $400,000 of gold for notes.' That was all. Resumption was accomplished with no disturbance. By five o'clock the news was all over the land, and the New York bankers were sipping their tea in absolute safety. "Thirteen years have since passed, and the redemption fund still remains intact in the sub-treasury vaults. The prediction of the secretary has become history. When gold could with certainty be obtained for notes, nobody wanted it. The experiment of maintaining a limited amount of United States notes in circulation, based upon a reasonable reserve in the treasury pledged for that purpose, and supported also by the credit of the government, has proved generally satisfactory, and the exclusive use of these notes for circulation may become, in time, the fixed financial policy of the government." The immediate effect of resumption of specie payments was to advance the public credit, which made it possible to rapidly fund all the bonds of the United States then redeemable into bonds bearing four per cent. interest. Early in January, 1879, I issued a circular offering the four per cent. funded loan of the United States at par and accrued interest to date of subscription in coin. It was substantially similar to the one issued on the 16th of January, 1878, but graded the commission, allowing from one-eighth of one per cent. to onefourth of one per cent., according to amount subscribed. Several letters written about this date will show my view better than anything I can say now: WASHINGTON, D. C., January 6, 1879. DEAR SIR: Your note of the 2nd was received upon my return from the west. Much obliged for subscription, and hope that you will soon get above the ten millions and thus be entitled to the additional one-tenth. I cannot, however, allow it on the first ten millions without adopting it as a rule, which would be impossible, by reason of the limitation of the entire cost to one-half of one per cent. I may be compelled to allow the one-eighth commission down to $1,000, but perhaps not, as I have to carefully husband the limited fund out of which all expenses must be paid. With the energy and hopefulness now exhibited, we can easily refund the 5-20's within this year and, perhaps, within six months. The more rapid the process the less disturbance it will create. I am hopeful and sanguine of improving business, not that greenbacks will be so abundant, but that employment will be ready for everyone willing to work. Thanks for your congratulations, which I heartily reciprocate, for the syndicate are entitled to a large portion of the merit now given to me. As I got more than my share of the abuse, it is probably thought that I should get more than my share of the credit. Very truly yours, HON. L. P. MORTON, New York. JOHN SHERMAN. WASHINGTON, D. C., January 8, 1879. R. C. STONE, Esq., Secretary Bullion Club, New York. DEAR SIR :-Your letter of the 5th inst., inclosing a card of invitation from the Bullion Club, to attend their dinner at their club house on Thursday evening, the 16th inst., is received. I regret that my official duties will not permit me, in person, to respond to the toast you send me, and I cannot do so, by letter, in words more expressive than the toast itself, 'To Resumption-may it be forever.' Irredeemable money is always the result of war, pestilence, or some great misfortune. A nation would not, except in dire necessity, issue its promises to pay money when it is unable to redeem those promises. I know that when the legal tenders were first issued, in February, 1862, we were under a dire necessity. The doubt that prevented several influential Senators, like Fessenden and Collamer, from voting for the legal tender clause, was that they were not convinced that our necessities were so extreme as to demand the issue of irredeemable paper money. Most of those who voted for it justified their vote upon the ground that the very existence of the country depended upon its ability to coin into money its promises to pay. That was the position taken by me. We were assured by Secretary Chase that nearly one hundred millions of unpaid requisitions were lying upon his table, for money due to soldiers in the presence of the enemy, and for food and clothing to maintain them at the front. We then provided for the issue of legal tender United States notes, as an extreme remedy in the nation's peril. It has always seemed strange that so large and respectable a body of our fellow-citizens should regard the continuance of irredeemable money as the permanent policy of a nation so strong and rich as ours, able to pay every dollar of its debts on demand, after the causes of its issue had disappeared. To resume is to recover from illness, to escape danger, to stand sound and healthy in the financial world, with our currency based upon the intrinsic value of solid coin. Therefore I say, may resumption be perpetual. To wish otherwise is to hope for war, danger and national peril, calamities to which our nation, like others, may be subject, but against which the earnest aspiration of every patriot will be uttered. Very respectfully yours, JOHN SHERMAN. January 10, 1879. H. C. FAHNESTOCK, ESQ., Vice President First National Bank, New York. SIR-Your unofficial letter of the 9th inst., suggesting the danger that may arise from the very large and rapid subscriptions to the four per cent. bonds, is received. The danger is apparent enough to all, and certainly to those who purchase without ability to pay at the time stipulated, but it is not one that the government can guard against, except only by taking care to have ample security for each subscription. In the face of the advertisement now outstanding, I could not withdraw the money from deposit with subscribing banks, until at or near the time of the maturity of the call, when they must be prepared to pay. It is not the interest of the government to force subscriptions beyond the ability of investors, but we cannot check subscriptions by any violation of the public advertisement or any public caution against the danger that is open to everyone. Very truly yours, JOHN SHERMAN. WASHINGTON, D. C., January 13, 1879. GEORGE KERR, ESQ., Janesville, Bremer Co., Iowa. SIR :—I have received your letter of the 6th instant inclosing a slip cut from the Bremer County Independent,' a weekly paper published in Waverly, containing a statement to the effect that the First National of New York is enjoying, from the department, special privileges in the matter |