Part 17

Mr. Wilson’s motion for a reference of the bill having been withdrawn, the Senate proceeded to vote on the various amendments offered. Mr. Edmunds’s Proviso was carried by Yeas 45, Nays 16. Other amendments, imposing “fundamental conditions,” to secure equality in suffrage, in eligibility to office, and in school rights and privileges, passed by small majorities. A Preamble, moved by Mr. Morton, declaring “good faith” in the framing and adoption of a republican State Constitution and in the ratification of the Fourteenth and Fifteenth Amendments to the National Constitution “a condition precedent to representation of the State in Congress,” was adopted by Yeas 39, Nays 20. The bill as thus amended then passed by Yeas 47, Nays 10. Mr. Sumner voted for all the amendments, but did not vote upon the bill itself,--it being his opinion, as shown by his speeches during the debates, that the admission of Virginia at that time, with its legislative and executive departments as then constituted, would endanger the rights and security of her loyal people.

FINANCIAL RECONSTRUCTION AND SPECIE PAYMENTS.

SPEECHES IN THE SENATE, JANUARY 12, 26, FEBRUARY 1, MARCH 2, 10, 11, 1870.

January 12, 1870, Mr. Sumner, in accordance with previous notice, asked and obtained leave to introduce the following bill:--

A Bill to authorize the refunding and consolidation of the national debt, to extend banking facilities, and to establish specie payments.

SECTION 1. _Be it enacted by the Senate and House of Representatives in Congress assembled_, That, for the purpose of refunding the debt of the United States and reducing the interest thereon, the Secretary of the Treasury be, and he is hereby, authorized to issue, on the credit of the United States, coupon or registered bonds, of such denominations not less than fifty dollars as he may think proper, to an amount not exceeding $500,000,000, redeemable in coin, at the pleasure of the Government, at any time after ten years, and payable in coin at forty years from date, and bearing interest at the rate of five per cent. per annum, payable semiannually in coin; and the bonds thus authorized may be disposed of at the discretion of the Secretary, under such regulations as he shall prescribe, either in the United States or elsewhere, at not less than their par value, for coin; or they may be exchanged for any of the outstanding bonds, of an equal aggregate par value, heretofore issued under the Act of February 25, 1862, and known as the Five-Twenty bonds of 1862, and for no other purpose; and the proceeds of so much thereof as may be disposed of for coin shall be placed in the Treasury, to be used for the redemption of such six per cent. bonds at par as may not be offered in exchange, or to replace such amount of coin as may have been used for that purpose.

SEC. 2. _And be it further enacted_, That the Secretary of the Treasury be, and he is hereby, authorized to issue, on the credit of the United States, coupon or registered bonds to the amount of $500,000,000, of such denominations not less than fifty dollars as he may think proper, redeemable in coin, at the pleasure of the Government, at any time after fifteen years, and payable in coin at fifty years from date, and bearing interest not exceeding four and one half per cent. per annum, payable semiannually in coin; and the bonds authorized by this section may be disposed of under such regulations as the Secretary shall prescribe, in the United States or elsewhere, at not less than par, for coin; or they may be exchanged at par for any of the outstanding obligations of the Government bearing a higher rate of interest; and the proceeds of such bonds as may be sold for coin shall be deposited in the Treasury, to be used for the redemption of such obligations as by the terms of issue may be or may become redeemable or payable, or to replace such coin as may have been used for that purpose.

SEC. 3. _And be it further enacted_, That the Secretary of the Treasury be, and he is hereby, authorized to issue, on the credit of the United States, from time to time, coupon or registered bonds, of such denominations not less than fifty dollars as he may think proper, to the amount of $500,000,000, redeemable in coin, at the pleasure of the Government, at any time after twenty years, and payable in coin at sixty years from date, and bearing interest at the rate of four per cent. per annum, payable semiannually in coin; and such bonds may be disposed of at the discretion of the Secretary, either in the United States or elsewhere, at not less than their par value, for coin, or for United States notes, national-bank notes, or fractional currency; or may be exchanged for any of the obligations of the United States, of whatever character, that may be outstanding at the date of the issue of such bonds. And if in the opinion of the Secretary of the Treasury it is thought advisable to issue a larger amount of four per cent. bonds for any of the purposes herein or hereinafter recited than would be otherwise authorized by this section of this Act, such further issues are hereby authorized: _Provided_, That there shall be no increase in the aggregate debt of the United States in consequence of any issues authorized by this Act.

SEC. 4. _And be it further enacted_, That the bonds authorized by this Act shall be exempt from all taxation by or under national, State, or municipal authority. Nor shall there be any tax upon, or abatement from, the interest or income thereof.

SEC. 5. _And be it further enacted_, That the present limit of $300,000,000 as the aggregate amount of issues of circulating notes by national banks be, and the same is hereby, extended, so that the aggregate amount issued and to be issued may amount to, but shall not exceed, $500,000,000; and the additional issue hereby authorized shall be so distributed, if demanded, as to give to each State and Territory its just proportion of the whole amount of circulating notes according to population, subject to all the provisions of law authorizing national banks, in so far as such provisions are not modified by this Act: _Provided_, That for each dollar of additional currency issued under the provisions of this Act there shall be withdrawn and cancelled one dollar of legal-tender issues.

SEC. 6. _And be it further enacted_, That the Secretary of the Treasury shall require the national banks, to whom may be awarded any part or portion of the additional circulating notes authorized by the fifth section of this Act, to deposit, before the delivery thereto of any such notes, with the Treasurer of the United States, as security for such circulation, registered bonds of the description authorized by the third section of this Act, in the proportion of not less than one hundred dollars of bonds for each and every eighty dollars of notes to be delivered; and the Secretary of the Treasury shall require from existing national banks, in substitution of the bonds already deposited with the Treasurer of the United States as security for their circulating notes, a deposit of registered bonds authorized by the third section of this Act to an amount not less than one hundred dollars of bonds for every eighty dollars of notes that have been or may hereafter be delivered to such banks, exclusive of such amounts as have been cancelled. And if any national bank shall not furnish to the Treasurer of the United States the new bonds, as required by this Act, within three months after having been notified by the Secretary of the Treasury of his readiness to deliver such bonds, it shall be the duty of the Treasurer, so long as such delinquency exists, to retain from the interest, as it may become due and payable, on the bonds belonging to such delinquent banks on deposit with him as security for circulating notes, so much of such interest as shall be in excess of four per cent. per annum on the amount of such bonds, which excess shall be placed to the credit of the sinking fund of the United States; and all claims thereto on the part of such delinquent banks shall cease and determine from that date; and the percentage of currency delivered or to be delivered to any bank shall in no case exceed eighty per cent. of the face value of the bonds deposited with the Treasurer as security therefor.

SEC. 7. _And be it further enacted_, That, whenever the premium on gold shall fall to or within five per cent., it shall be the duty of the Secretary of the Treasury to give public notice that the outstanding United States notes, or other legal-tender issues of the Government, will thereafter be received at par for customs duties; and the interest on the issues known as three per cent. legal-tender certificates shall cease from and after the date of such notice; and all such legal-tender obligations, when so received, shall not again be uttered, but shall forthwith be cancelled and destroyed. And so much of the Act of February 25, 1862, and of all subsequent Acts, as creates or declares any of the issues of the United States, other than coin, a legal tender, be, and the same is hereby, repealed; such repeal to take effect on and after the first day of January, 1871.

SEC. 8. _And be it further enacted_, That all the provisions of existing laws in relation to forms, inscriptions, devices, dies, and paper, and the printing, attestation, sealing, signing, and counterfeiting, as may be applicable, shall apply to the bonds issued under this Act; and a sum not exceeding one per cent. of the amount of bonds issued under this Act is hereby appropriated to pay the expense of preparing and issuing the same and disposing thereof.

SEC. 9. _And be it further enacted_, That all Acts or parts of Acts inconsistent with this Act be, and the same are hereby, repealed.

Mr. Sumner said:--

MR. PRESIDENT,--I have already during this session introduced a bill providing for the extension of the national banking system and the withdrawal of greenbacks in proportion to the new bank-notes issued,[202] thus preparing the way for specie payments. The more I reflect upon this simple proposition, the more I am satisfied of its value. It promises to be as efficacious as it is unquestionably simple. But it does not pretend to deal with the whole financial problem.

The bill which I now introduce is more comprehensive in character. While embodying the original proposition of substituting bank-notes for greenbacks, it provides for the refunding and consolidation of the national debt in such a way as to make it easy to bear, while it brings the existing currency to a par with coin. In making this attempt I am moved by the desire to do something for the business interests of the country, which suffer inconceivably from the derangement of the currency. Whether at home or abroad, it is the same. At home values are uncertain; abroad commerce is disturbed and out of gear. Political Reconstruction is not enough; there must be Financial Reconstruction also. The peace which we covet must enter into our finances; the reconciliation which we long for must embrace the disordered business of the country.

In any measure having this object there are two things which must not be forgotten: first, the preservation of the national credit; and, secondly, the reduction of existing taxation. Happily, there is a universal prevailing sentiment for the national credit, showing itself in a fixed determination that it shall be maintained at all hazards. Nobody can exaggerate the value of this determination, which is the corner-stone of Financial Reconstruction. On the reduction of taxation there is at present more difference of opinion; but I cannot doubt that here, too, there will be a speedy harmony. The country is uneasy under the heavy burden. Willingly, gladly, patriotically, it submitted to this burden while the Republic was in peril; but now there is a yearning for relief. War taxes should not be peace taxes; and so long as the present system continues, there is a constant and painful memento of war, while business halts in chains and life bends under the load.

The national credit being safe, relief from the pressure of existing taxation is the first practical object in our finances. But so entirely natural and consistent is this object, that it harmonizes with all other proper objects, especially with the refunding of the national debt, and with specie payments. As the people feel easy in their affairs, they will be ready for the work of Reconstruction. Therefore do I say, as an essential stage in what we all desire, _Down with the taxes!_

The proper reduction of taxation involves two other things: first, the reduction of the present annual interest on the national debt, thus affording immense relief; and, secondly, the spread or extension of the national debt over succeeding generations, for whom, as well as for ourselves, it was incurred. The practical value of the first is apparent on the simple statement. The second may be less apparent, as it opens a question of policy, on both sides of which much has been already said.

Nobody doubts the brilliancy of the movement to pay off the national debt,--calling to mind the charge of the six hundred at Balaclava riding into the jaws of Death, so that the beholder exclaimed, in memorable words, “It is magnificent, but it is not war.”[203] In other words, it was a feat of hardihood and immolation, abnormal, eccentric, and beyond even the terrible requirements of battle. In similar spirit might a beholder, witnessing the present sacrifice of our people in the redemption of a debt so large a part of which justly belongs to posterity, exclaim, “It is magnificent, but it is not business.” Unquestionably business requires that we should meet existing obligations according to their letter and spirit; but it does not require payment in advance, nor payment of obligations resting upon others. To do this is magnificent, but beyond the line of business.

President Lincoln, in one of his earliest propositions of Emancipation, before he had determined upon the great Proclamation, contemplated compensation to slave-masters, and, in order to commend this large expenditure, went into an elaborate calculation to show how easy it would be, if proportioned upon the giant shoulders of posterity. Dismissing the idea of payment by the existing generation, he proceeded to exhibit the growing capacity of the country,--how from the beginning there had been a decennial increase in population of 34.60 per cent.,--how during a period of seventy years the ratio had never been two per cent. below or two per cent. above this average, thus attesting the inflexibility of this law of increase. Assuming its continuance, he proceeded to show that in 1870 our population would be 42,323,341,--in 1880 it would be 56,967,216,--in 1890 it would be 76,677,872,--and in 1900 it would be 103,208,415,--while in 1930 it would amount to 251,680,914.[204] Nobody has impeached these estimates. There they stand in that Presidential Message as colossal mile-stones of the Republic.

The increase in material resources is beyond that of population. The most recent calculation, founded on the last census, shows that for the previous decade it was at the rate of eighty per cent.,[205] although other calculations have placed it as high as one hundred and twenty-six per cent.[206] Whether the one or the other, the rate of increase is enormous, and, unless arrested in some way not now foreseen, it must carry our national resources to a fabulous extent. What is a burden now will be scarcely a feather’s weight in the early decades of the next century, when a population counted by hundreds of millions will wield resources counted by thousands of millions. On this head details are superfluous. All must see at once the irresistible conclusion.

It is much in this discussion, when we have ascertained how easy it will be for posterity to bear this responsibility. But the case is strengthened, when it is considered that the war was for the life of the Republic, so that throughout all time, so long as the Republic endures, all who enjoy its transcendent citizenship will share the benefits. Should they not contribute to the unparalleled cost? Recent estimates, deemed to be moderate and reasonable, show an aggregate destruction of wealth or diversion of wealth-producing industry in the United States since 1861 approximating nine thousand millions of dollars, being the cost of the war, or, in other words, the cost of the destruction of Slavery.[207] If from this estimate be dropped the item for expenditures and loss of property in the Rebel States, amounting to $2,700,000,000,[208] we shall have $6,300,000,000 as the sum-total of cost to the loyal people, of which the existing national debt represents less than half. Thus, besides precious blood beyond any calculation of arithmetic, the present generation has already contributed immensely to that result in which succeeding generations have a stake even greater than theirs.

Assuming, then, that there is to be no considerable taxation for the immediate payment of the debt, we have one economy. If to this be added another economy from the reduction of the interest, we shall be able to relieve materially all the business interests of the country. Two such economies will be of infinite value to the people, whose riches will be proportionally increased. In the development of wealth, next to making money is saving money.

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Bearing these things in mind, Financial Reconstruction is relieved of its difficulties. It only remains to find the proper machinery or process. And here we encounter the propositions of the Secretary of the Treasury in his Annual Report,[209] which are threefold:--

1. To refund twelve hundred millions of six per cent. Five-Twenty bonds in four and a half per cent. Fifteen-Twenties, Twenty-Twenty-Fives, and Twenty-Five-Thirties.

2. To make our exports equal in value with our imports, and to restore our commercial marine.

3. To regard these as essential conditions of reduced taxation and specie payments.

Considering these propositions with the best attention I could give to them, I have been impressed by their inadequacy as a system at the present moment. I cannot easily consent to the postponement which they imply. They hand over to the future what I wish to see accomplished at once, and what I cannot doubt with a firm will can be accomplished at an early day. But besides this capital defect, apparent on the face, I find in the system proposed no assurance of success. Will it work? I doubt. Here I wish to be understood as expressing myself with proper caution; and I wish further to declare my anxiety to obtain the substituted loans at the smallest rate of interest, and also my conviction that within a short time, at some slight present cost, this may be accomplished.

Looking at this question in the light of business, I am driven to the conclusion that twelve hundred millions of six per cents. cannot be refunded either now or hereafter in four or four and a half per cents. without offering compensation in an additional running period of the bonds which is not found in the Fifteen-Twenties nor in the Twenty-Five-Thirties proposed by the Secretary. With such bonds there would be a practical difficulty in the way of any such refunding to any considerable amount, from the inability to command a sufficient amount of coin under the “option of coin,” which must accompany the offer; nor is there any fund applicable to the purchase of coin in open market, were such a course desirable. Obviously, to induce the voluntary relinquishment of bonds at a high rate of interest for other bonds at a less rate, the holders must be offered something preferable to the coin tendered as an alternative.

The time has passed when holders can be menaced with payment in greenbacks. Whatever we do must be in coin, or in some bond which will be taken rather than coin. The attempt at too low a rate of interest would cause the coin to be taken rather than the bond, if we had the article at command,--and would end in a deluge of coin, sweeping away the premium on gold. A return to specie payments, thus precipitated, would be of doubtful value, if not illusive, without other and sustaining measures.

In the suggestion that our exports must be augmented, and our commercial marine restored, I sympathize cordially; but I do not see how this can be accomplished so long as the present taxation is maintained, exercising such a depressing influence on all industry, making the necessaries of life dearer, adding to the cost of raw material, and generally enhancing the price of our products so as to prevent them from competing in foreign markets with the products of other nations.

The proposition to make the interest on the new bonds payable at various points in Europe, at the option of the holder, seems unnecessary, while it is open to objections. Such agencies would be onerous and cumbersome. At London, Paris, Frankfort, and Berlin, there must be a machinery, with constant complications, continuing through the lifetime of the bonds, to secure the transfers from point to point and the obligatory remittances in gold; nor am I sure that in this way foreign powers might not obtain a certain jurisdiction over our monetary transactions. But I confess that the ruling objection with me is of a different character. New York is our commercial centre, designated by Providence and confirmed by man. Already it has made a great advance, but it is not yet quoted abroad as one of the clearing points of the world. At New York quotations are obtained daily on London and Paris; but in these places no such recognized quotations can be now obtained on New York. That the agencies proposed will tend to postpone this condition is a sufficient objection.

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