CHAPTER XXXVI.

PREPARATIONS FOR RESUMPTION OF SPECIE PAYMENTS. Annual Report to Congress on Dec. 2, 1878--Preparations for Resumption Accompanied with Increased Business and Confidence--Full Explanation of the Powers of the Treasurer Under the Act--How Resumption Was to Be Accomplished--Laws Effecting the Coinage of Gold and Silver --Recommendation to Congress That the Coinage of the Silver Dollar Be Discontinued When the Amount Outstanding Should Exceed $50,000,000 --Funding the Public Debt--United States Notes at Par with Gold-- Instructions to the Assistant Treasurer at New York--Political Situation in Ohio.

The annual report made by me to Congress on the 2nd of December, 1878, contained the usual formal information as to the condition of the treasury, and the various bureaus and divisions of that department. It was regarded as a fair statement of public affairs at a time of unusual prosperity. The revenue in excess of expenditures during the year amounted to $20,799,551.90.

The statement made by me in this report, in respect to the resumption of specie payments on the 1st day of January, 1879, is so closely a narrative of what did happen before and after that date that I deem it best to quote the language of the report. I then said:

"The important duty imposed on this department by the resumption act, approved January 14, 1875, has been steadily pursued during the past year. The plain purpose of the act is to secure to all interests and all classes the benefits of a sound currency, redeemable in coin, with the least possible disturbance of existing rights and contracts. Three of its provisions have been substantially carried into execution by the gradual substitution of fractional coin for fractional currency, by the free coinage of gold, and by free banking. There remains only the completion of preparations for resumption in coin on the 1st day of January, 1879, and its maintenance thereafter upon the basis of existing law.

"At the date of my annual report to Congress in December, 1877, it was deemed necessary, as a preparation for resumption, to accumulate in the treasury a coin reserve of at least forty per cent. of the amount of United States notes then outstanding. At that time it was anticipated that under the provisions of the resumption act the volume of United States notes would be reduced to $300,000,000 by the 1st day of January, 1879, or soon thereafter, and that a reserve in coin of $120,000,000 would then be sufficient. Congress, however, in view of the strong popular feeling against a contraction of the currency, by the act approved May 31, 1878, forbade the retirement of any United States notes after that date, leaving the amount in circulation $346,681,016. Upon the principle of safety upon which the department was acting, that forty per cent. of coin was the smallest reserve upon which resumption could prudently be commenced, it became necessary to increase the coin reserve to $138,000,000.

"At the close of the year 1877 this coin reserve, in excess of coin liability, amounted to $63,016,050.96, of which $15,000,000 were obtained by the sale of four and a half per cent., and $25,000,000 by the sale of four per cent. bonds, the residue being surplus revenue. Subsequently, on the 11th day of April, 1878, the secretary entered into a contract with certain bankers in New York and London --the parties to the previous contract of June 9, 1877, already communicated to Congress--for the sale of $50,000,000 four and a half per cent. bonds for resumption purposes. The bonds were sold at a premium of one and a half per cent. and accrued interest, less a commission of one-half of one per cent. The contract has been fulfilled, and the net proceeds, $50,500,000, have been paid into the treasury in gold coin. The $5,500,000 coin paid on the Halifax award have been replaced by the sale of that amount of four per cent. bonds sold for resumption purposes, making the aggregate amount of bonds sold for these purposes, $95,500,000, of which $65,000,000 were four and a half per cent. bonds, and $30,500,000 four per cent. bonds. To this has been added the surplus revenue from time to time. The amount of coin held in the treasury on the 23rd day of November last, in excess of coin sufficient to pay all accrued coin liabilities, was $141,888,100, and constitutes the coin reserve prepared for resumption purposes. This sum will be diminished somewhat on the 1st of January next, by reason of the large amount of interest accruing on that day in excess of the coin revenue received meanwhile.

"In anticipation of resumption, and in view of the fact that the redemption of United States notes is mandatory only at the office of the assistant treasurer in the city of New York, it was deemed important to secure the co-operation of the associated banks of that city in the ready collection of drafts on those banks and in the payment of treasury drafts held by them. A satisfactory arrangement has been made by which all drafts on the banks held by the treasury are to be paid at the clearing house, and all drafts on the treasury held by them are to be paid to the clearing house at the office of the assistant treasurer, in United States notes; and, after the 1st of January, United States notes are to be received by them as coin. This will greatly lessen the risk and labor of collections both to the treasury and the banks.

"Every step in these preparations for resumption has been accompanied with increased business and confidence. The accumulation of coin, instead of increasing its price, as was feared by many, has steadily reduced its premium on the market. The depressing and ruinous losses that followed the panic of 1873 had not diminished in 1875, when the resumption act passed; but every measure taken in the execution or enforcement of this act has tended to lighten these losses and to reduce the premium on coin, so that now it is merely nominal. The present condition of our trade, industry, and commerce, hereafter more fully stated, our ample reserves, and the general confidence inspired in our financial condition, seem to justify the opinion that we are prepared to commence and maintain resumption from and after the 1st day of January, A. D. 1879.

"The means and manner of doing this are left largely to the discretion of the secretary, but, from the nature of the duty imposed, he must restore coin and bullion, when withdrawn in the process of redemption, either by the sale of bonds, or the use of the surplus revenue, or of the notes redeemed from time to time.

"The power to sell any of the bonds described in the refunding act continues after as well as before resumption. Thought it may not be often used, it is essential to enable this department to meet emergencies. By its exercise it is anticipated that the treasury at any time can readily obtain coin to reinforce the reserve already accumulated. United States notes must, however, be the chief means under existing law with which the department must restore coin and bullion when withdrawn in process of redemption. The notes, when redeemed, must necessarily accumulate in the treasury until their superior use and convenience for circulation enables the department to exchange them at par for coin or bullion.

"The act of May 31, 1878, already referred to, provides that when United States notes are redeemed or received in the treasury under any law, from any source whatever, and shall belong to the United States, they shall not be retired, canceled, or destroyed, but shall be reissued and paid out again and kept in circulation.

"The power to reissue United States notes was conferred by section 3579, Revised Statutes, and was not limited by the resumption act. As this, however, was questioned, Congress wisely removed the doubt.

"Notes redeemed are like other notes received into the treasury. Payments of them can be made only in consequence of appropriations made by law, or for the purchase of bullion, or for the refunding of the public debt.

"The current receipts from revenue are sufficient to meet the current expenditures as well as the accruing interest on the public debt. Authority is conferred by the refunding act to redeem six per cent. bonds as they become redeemable, by the proceeds of the sale of bonds bearing a lower rate of interest. The United States notes redeemed under the resumption act are, therefore, the principal means provided for the purchase of bullion or coin with which to maintain resumption, but should only be paid out when they can be used to replace an equal amount of coin withdrawn from the resumption fund. They may, it is true, be used for current purposes like other money, but when so used their place is filled by money received from taxes or other sources of income.

"In daily business no distinction need be made between moneys, from whatever source received, but they may properly be applied to any of the purposes authorized by law. No doubt coin liabilities, such as interest or principal of the public debt, will be ordinarily paid and willingly received in United States notes, but, when demanded, such payments will be made in coin; and United States notes and coin will be used in the purchase of bullion. This method has already been adopted in Colorado and North Carolina, and arrangements are being perfected to purchase bullion in this way in all the mining regions of the United States.

"By the act approved June 8, 1878, the Secretary of the Treasury is authorized to constitute any superintendent of a mint, or assayer of any assay office, an assistant treasurer of the United States, to receive gold coin or bullion on deposit. By the legislative appropriation bill, approved June 19, 1878, the Secretary of the Treasury is authorized to issue coin certificates in payment to depositors of bullion at the several mints and assay offices of the United States. These provisions, intended to secure to the producers of bullion more speedy payment, will necessarily bring into the mints and treasury the great body of the precious metals mined in the United States, and will tend greatly to the easy and steady supply of bullion for coinage. United States notes, at par with coin, will be readily received for bullion instead of coin certificates, and with great advantage and convenience to the producers.

"Deposits of coin in the treasury will, no doubt, continue to be made after the 1st of January, as heretofore. Both gold and silver coin, from its weight and bulk, will naturally seek a safe deposit, while notes redeemable in coin, from their superior convenience, will be circulated instead. After resumption the distinction between coin and United States notes should be, as far as practicable, abandoned in the current affairs of the government; and therefore no coin certificates should be issued except where expressly required by the provisions of law, as in the case of silver certificates. The gold certificates hitherto issued by virtue of the discretion conferred upon the secretary will not be issued after the 1st of January next. The necessity for them during a suspension of specie payments is obvious, but no longer exists when by law every United States note is, in effect, a coin certificate. The only purpose that could be subserved by their issue hereafter would be to enable persons to convert their notes into coin certificates, and thus contract the currency and hoard gold in the vaults of the treasury without the inconvenience or risk of its custody. For convenience, United States notes of the same denomination as the larger coin certificates will be issued.

"By existing law, customs duties and the interest of the public debt are payable in coin, and a portion of the duties was specifically pledged as a special fund for the payment of the interest, thus making one provision dependent upon the other. As we cannot, with due regard to the public honor, repeal the obligation to pay in coin, we ought not to impair or repeal the means provided to procure coin. When, happily, our notes are equal to coin, they will be accepted as coin, both by the public creditor and by the government; but this acceptance should be left to the option of the respective parties, and the legal right on both sides to demand coin should be preserved inviolate.

"The secretary is of the opinion that a change of the law is not necessary to authorize this department to receive United States notes for customs duties on and after the 1st day of January, 1879, while they are redeemable and are redeemed on demand in coin. After resumption it would seem a useless inconvenience to require payment of such duties in coin rather than in United States notes. The resumption act, by clear implication, so far modifies previous laws as to permit payments in United States notes as well as in coin. The provision for coin payments was made in the midst of war, when the notes were depreciated and the public necessities required an assured revenue in coin to support the public credit. This alone justified the refusal by the government to take its own notes for the taxes levied by it. It has now definitely assumed to pay these notes in coin, and this necessarily implies the receipt of these notes as coin. To refuse them is only to invite their presentation for coin. Any other construction would require the notes to be presented to the assistant treasurer in New York for coin, and, if used in the purchase of bonds, to be returned to the same officer, or, if used for the payment of customs duties, to be carried to the collector of customs, who must daily deposit in the treasury all money received by him. It is not to be assumed that the law requires this indirect and inconvenient process after the notes are redeemable in coin on demand of the holder. They are then at a parity with coin, and both should be received indiscriminately.

"If United States notes are received for duties at the port of New York, they should be received for the same purpose in all other ports of the United States, or an unconstitutional preference would be given to that port over other ports. If this privilege is denied to the citizens of other ports, they could make such use of these notes only by transporting them to New York and transporting the coin to their homes for payment; and all this not only without benefit to the government, but with a loss in returning the coin again to New York, where it is required for redemption purposes.

"The provision in the law for redemption in New York was believed to be practical redemption in all parts of the United States. Actual redemption was confined to a single place from the necessity of maintaining only one coin reserve and where the coin could be easily accumulated and kept.

"With this view of the resumption act, the secretary will feel it to be his duty, unless Congress otherwise provides, to direct that after the 1st day of January next, and while United States notes are redeemed at the treasury, they be received the same as coin by the officers of this department, in all payments in all parts of the United States.

"If any further provision of law is deemed necessary by Congress to authorize the receipt of United States notes for customs dues or for bonds, the secretary respectfully submits that this authority should continue only while the notes are redeemed in coin. However desirable continuous resumption may be, and however confident we may feel in its maintenance, yet the experience of many nations has proven that it may be impossible in periods of great emergency. In such events the public faith demands that the customs duties shall be collected in coin and paid to the public creditors, and this pledge should never be violated or our ability to perform it endangered.

"Heretofore, the treasury, in the disbursement of currency, has paid out bills of any denomination desired. In this way the number of bills of a less denomination than five dollars is determined by the demand for them. Such would appear to be the true policy after the 1st of January. It has been urged that, with a view to place in circulation silver coins, no bills of less than five dollars should be issued. It would seem to be more just and expedient not to force any form of money upon a public creditor, but to give him the option of the kind and denomination. The convenience of the public, in this respect, should be consulted. The only way by which moneys of different kinds and intrinsic values can be maintained in circulation at par with each other is by the ability, when one kind is in excess, to readily exchange it for the other. This principle is applicable to coin as well as to paper money. In this way the largest amount of money of different kinds can be maintained at par, the different purposes for which each is issued making a demand for it. The refusal or neglect to maintain this species of redemption inevitably effects the exclusion from circulation of the most valuable, which, thereafter, becomes a commodity, bought and sold at a premium. . . .

"When the resumption act passed, gold was the only coin which by law was a legal tender in payment of all debts. That act contemplated resumption in gold coin only. No silver coin of full legal tender could then be lawfully issued. The only silver coin provided was fractional coin, which was a legal tender for five dollars only. The act approved February 28, 1878, made a very important change in our coinage system. The silver dollar provided for was made a legal tender for all debts, public and private, except where otherwise expressly stipulated in the contract.

"The law itself clearly shows that the silver dollar was not to supersede the gold dollar; nor did Congress propose to adopt the single standard of silver, but only to create a bimetallic standard of silver and gold, of equal value and equal purchasing power. Congress, therefore, limited the amount of silver dollars to be coined to not less than two millions nor more than four millions per month, but did not limit the aggregate amount nor the period of time during which this coinage should continue. The market value of the silver in the dollar, at the date of the passage of the act, was 93¼ cents in gold coin. Now it is about 86 cents in gold coin. If it was intended by Congress to adopt the silver instead of the gold standard, the amount provided for is totally inadequate for the purpose. Experience not only in this country, but in European countries, has established that a certain amount of silver coin may be maintained in circulation at par with gold, though of less intrinsic bullion value. It was, no doubt, the intention of Congress to provide a coin in silver which would answer a multitude of the purposes of business life, without banishing from circulation the established gold coin of the country. To accomplish this it is indispensable either that the silver coin be limited in amount, or that its bullion value be equal to that of the gold dollar. If not, it use will be limited to domestic purposes. It cannot be exported except at its commercial value as bullion. If issued in excess of demands for domestic purposes, it will necessarily fall in market value, and, by a well-known principle of finance, will become the sole coin standard of value. Gold will be either hoarded or exported. When two currencies, both legal, are authorized without limit, the cheaper alone will circulate. If, however, the issue of the silver dollars is limited to an amount demanded for circulation, there will be no depreciation, and their convenient use will keep them at par with gold, as fractional silver coin, issued under the act approved February 21, 1853, was kept at par with gold.

"The amount of such coin that can thus be maintained at par with gold cannot be fairly tested until resumption is accomplished. As yet paper money has been depreciated, and silver dollars, being receivable for customs dues, have naturally not entered into general circulation, but have returned to the treasury in payment of such dues, and thus the only effect of the attempt of the department to circulate them has been to diminish the gold revenue. After resumption these coins will circulate in considerable sums for small payments. To the extent that such demand will give employment to silver dollars their use will be an aid to resumption rather than a hindrance, but, if issued in excess of such demand, they will at once tend to displace gold and become the sole standard, and gradually, as they increase in number, will fall to their value as bullion. Even the fear or suspicion of such an excess tends to banish gold, and, if well established, will cause a continuous drain of gold until imperative necessity will compel resumption in silver alone. The serious effect of such a radical change in our standards of value cannot be exaggerated; and its possibility will greatly disturb confidence in resumption, and may make necessary large reserves and further sales of bonds.

"The secretary, therefore, earnestly invokes the attention of Congress to this subject, with a view that either during the present or the next session the amount of silver dollars to be issued be limited, or their ratio to gold for coining purposes be changed.

"Gold and silver have varied in value from time to time in the history of nations, and laws have been passed to meet this changing value. In our country, by the act of April 2, 1792, the ratio between them was fixed at one of gold to fifteen of silver. By the act of June 28, 1834, the ratio was changed to one of gold to sixteen of silver. For more than a century the market value of the two metals had varied between these two ratios, mainly resting at that fixed by the Latin nations of one to fifteen and a half.

"But we cannot overlook the fact that within a few years, from causes frequently discussed in Congress, a great change has occurred in the relative value of the two metals. It would seem to be expedient to recognize this controlling fact--one that no nation alone can change--by a careful readjustment of the legal ratio for coinage of one to sixteen, so as to conform to the relative market values of the two metals. The ratios heretofore fixed were always made with that view, and, when made, did conform as near as might be. Now, that the production and use of the two metals have greatly changed in relative value, a corresponding change must be made in the coinage ratio. There is no peculiar force or sanction in the present ratio that should make us hesitate to adopt another, when, in the markets of the world, it is proven that such ratio is not now the true one. The addition of one-tenth or one-eighth to the thickness of the silver dollar would scarcely be perceived as an inconvenience by the holder, but would inspire confidence, and add greatly to its circulation. As prices are now based on United States notes at par with gold, no disturbance of values would result from the change.

"It appears, from the recent conference at Paris, invited by us, that other nations will not join with us in fixing an international ratio, and that each county must adapt its laws to its own policy. The tendency of late among commercial nations is to the adoption of a single standard of gold and the issue of silver for fractional coin. We may, by ignoring this tendency, give temporarily increased value to the stores of silver held in Germany and France, until our market absorbs them, but, by adopting a silver standard as nearly equal to gold as practicable, we make a market for our large production of silver, and furnish a full, honest dollar that will be hoarded, transported, or circulated, without disparagement or reproach.

"It is respectfully submitted that the United States, already so largely interested in trade with all parts of the world, and becoming, by its population, wealth, commerce, and productions, a leading member of the family of nations, should not adopt a standard of less intrinsic value than other commercial nations. Alike interested in silver and gold, as the great producing country of both, it should coin them at such a ratio and on such conditions as will secure the largest use and circulation of both metals without displacing either. Gold must necessarily be the standard of value in great transactions, from its greater relative value, but it is not capable of the division required for small transactions; while silver is indispensable for a multitude of daily wants, and is too bulky for use in the larger transactions of business, and the cost of its transportation for long distances would greatly increase the present rates of exchange. It would, therefore, seem to be the best policy for the present to limit the aggregate issue of our silver dollars, based on the ratio of sixteen to one, to such sums as can clearly be maintained at par with gold, until the price of silver in the market shall assume a definite ratio to gold, when that ratio should be adopted, and our coins made to conform to it; and the secretary respectfully recommends that he be authorized to discontinue the coinage of the silver dollar when the amount outstanding shall exceed fifty million dollars.

"The secretary deems it proper to state that in the meantime, in the execution of the law as it now stands, he will feel it to be his duty to redeem all United States notes presented on and after January 1, next, at the office of the assistant treasurer of the United States, in the city of New York, in sums of not less than fifty dollars, with either gold or silver coin, as desired by the holder, but reserving the legal option of the government; and to pay out United States notes for all other demands on the treasury, except when coin is demanded on coin liabilities.

"It is his duty, as an executive officer, to frankly state his opinions, so that if he is in error Congress may prescribe such a policy as is best for the public interests.

"The amount of four per cent. bonds sold during the present year, prior to November 23, is $100,270,900, of which $94,770,900 were sold under the refunding act approved July 14, 1870. Six per cent. bonds, commonly known as 5-20's, to an equal amount, have been redeemed, or will be redeemed as calls mature. This beneficial process was greatly retarded by the requirement of the law that subscriptions must be paid in coin, the inconvenience of obtaining which, to the great body of people outside of the large cities, deterred many sales. This will not affect sales after resumption, when bonds can be paid for with United States notes. The large absorption of United States securities in the American market, by reason of their return from Europe, together with the sale of four and a half per cent. bonds for resumption purposes, tended to retard the sale of four per cent. bonds. As, from the best advices, not more than $200,000,000 of United States bonds are now held out of the country, it may be fairly anticipated that the sale of four per cent. bonds, hereafter, will largely increase.

"Prior to May, 1877, United States bonds were mainly sold through an association of bankers. Experience proves that under the present plan of selling to all subscribers on terms fixed by public advertisement, though the aggregate of sales may be less, their distribution is more satisfactory. Under a popular loan the interest is paid at home, and the investment is available at all times, without loss, to meet the needs of the holder. This policy has been carefully fostered by other nations, and should be specially so in ours, where every citizen equally participates in the government of his country. The holding of these bonds at home, in small sums well distributed, is of great importance in enlisting popular interest in our national credit and in encouraging habits of thrift, and such holding in the country is far more stable and less likely to disturb the market than it would be in cities or by corporations, where the bonds can be promptly sold in quantities.

"The three months' public notes required by the fourth section of the refunding act, to be given to holders of the 5-20 bonds to be redeemed, necessarily involve a loss to the government by the payment of double interest during that time. The notice should not be given until subscriptions are made or are reasonably certain to be made. When they are made and the money is paid into the treasury, whether it is kept there idle during the three months or deposited with national banks under existing law, the government not only pays interest on both classes of bonds during the ninety days, but, if the sales are large, the hoarding of large sums may disturb the market. Under existing law this is unavoidable; and, to mitigate it, the secretary deemed it expedient during the last summer to make calls in anticipation of subscriptions, but this, though legal, might, in case of failure of subscriptions, embarrass the government in paying called bonds. The long notice required by law is not necessary in the interest of the holder of the bonds, for, as the calls are made by public notice and the bonds are indicated and specified by class, date, and number, in the order of their numbers and issue, he, by ordinary diligence, can know beforehand when his bonds in due course will probably be called, and will not be taken by surprise.

"The secretary therefore recommends that the notice to be given for called bonds be, at his discretion, not less than ten days nor more than three months. In this way he will be able largely to avoid the payment of double interest, as well as the temporary contraction of the currency, and may fix the maturity of the call at a time when the interest of the called bonds becomes due and payable."

Soon after the passage of the act authorizing the coinage of the standard silver dollar, and an attempt being made to procure the requisite bullion for its coinage to some extent at the mints on the Pacific coast, it was found that the producers and dealers there would not sell silver to the government at the equivalent of the London rate, but demanded in addition thereto an amount equal to the cost of bringing it from London and laying it down in San Francisco. These terms, being deemed exorbitant, were rejected, and arrangements were immediately made to bring the capacity of the mint at Philadelphia to its maximum, with a view to meet the provisions of law, which required two millions of silver dollars to be coined in each month, and the available supplies of silver from domestic sources being entirely insufficient for the coinage of this amount, the foreign market was indirectly resorted to and an amount sufficient to meet the requirements of law secured.

In July, 1878, the principal holders of bullion on the Pacific coast receded from their position and accepted the equivalent of the London rate, at which price sufficient bullion was purchased to employ the mints of San Francisco and Carson on the coinage of the dollar.

At the date of my report, United States notes were practically at par with gold. The public mind had settled into a conviction that the parity of coin and currency was assured, and our people, accustomed to the convenience of paper money, would not willingly have received coin to any considerable amount in any business transactions. The minor coins of silver, were received and paid out without question at parity with gold coin, because the amount was limited and they were coined by the government only as demanded for the public convenience. The silver dollar was too weighty and cumbersome and when offered in considerable sums was objected to, though a legal tender for any sum, and coined only in limited amounts for government account. Every effort was made by the treasury department to give it the largest circulation, but the highest amount that could be circulated was from fifty to sixty millions, and much of this was in the southern states. All sums in excess of that were returned to the treasury for silver certificates. These were circulated as money, like United States notes and bank bills. This was only possible by the guarantee of the government that all forms of money would be maintained at parity with each other. If this guarantee had been doubted, or if the holder of silver bullion could have had it coined at his pleasure and for his benefit at the ratio of sixteen to one, the silver dollar would, as the cheaper coin, have excluded all other forms of money, and the purchasing power of silver coin would have been reduced to the market value of silver bullion.

On the 3rd of December, 1878, I wrote the following letter:

"Hon. Thomas Hillhouse,

"United States Assistant Treasurer, New York. "Sir:--I have this day telegraphed you as follows:

'After receipt of this you will please issue no more gold certificates.'

"In compliance with the above instructions you will not, until further advised, issue gold certificates either in payment of interest on the public debt or for gold coin deposited.

"It is desired that you issue currency in payment of coin obligations to such an amount as will be accepted by public creditors.

"Very respectfully, "John Sherman, Secretary."

After resumption, United States notes were in fact gold certificates, being redeemable in coin. On the 4th, I again wrote to General Hillhouse as follows:

"Your letter of yesterday is received. The necessity of the recent order about coin certificates became apparent to the department, and the only doubt was as to the date of issuing it. After full consideration, it was deemed best to make it immediate, so that no more certificates could be asked for. By the 21st of this month the large denominations of greenbacks will be ready for issue to you, and after the 1st of January they will be received for customs duties and paid out for gold coin deposited with you. I am led to suppose that considerable sums of gold coin will be deposited with you soon after that date. It is important that the business men of New York should see the propriety of such a course, with a view to aid in popular opinion the process of resumption.

"I would be pleased to hear from you as to whether any additional force in your office will be necessary in view of resumption. Every reasonable facility should be given to persons who apply for coin, and we should be prepared for a considerable demand during the first month.

"I will be in New York some time this month, and will confer with you as to any matters of detail."

I received the following reply:

"Office of United States Assistant Treasurer,} "New York, December 5, 1878. } "Sir:--I have received your letter of the 4th instant. The issue of gold certificates, however convenient to the public, had long ceased to be of any advantage to the government, and in view of resumption it had become a positive injury, by enabling speculators to carry on their operations without the risk and expense of handling the actual coin. So far as I have discovered, the banks and the business community generally regard the withdrawal of the certificates as a wise measure. They may be put to some temporary inconvenience thereby, but they cannot fail to see that, in the use of this and all other legitimate means of making the great scheme of resumption a success, the secretary is really promoting their interests, and that in the end they will be greatly benefitted by the establishing of a sound and stable currency, which is the object in view.

* * * * *

"Very respectfully, "Thomas Hillhouse, "Assistant Treasurer United States."

On the 5th I wrote him as follows:

"In reply to your letter of the 4th instant, inquiring whether you are at liberty to pay out the standard silver dollars in exchange for gold coin, you are authorized to pay out the standard silver dollars to any amount which may be desired in exchange for gold coin.

* * * * *

"In reply to your letter of yesterday, I have to advise you that it was the purpose of the order referred to to prohibit the issue of gold coin certificates for any purpose, including the redemption of called bonds. It is believed that the reasons for issuing such certificates have ceased to exist, and that those outstanding should be redeemed and not reissued.

"No public end is subserved by receiving coin deposits for private parties to be held for their benefit, but gold will be received in exchange for United States notes of any denomination desired, and such exchange is invited."

On the 18th I wrote him:

"I have concluded to direct the prepayment of the coupons maturing January 1, in coin or United States notes, _as desired by the holder_, and interest on registered stock, as soon as you can receive the schedules, which will be about the 28th. While I wish no hesitation about paying gold to anyone desiring it, it is better to get people in the habit of receiving currency rather than coin."

On the 18th General Hillhouse wrote me:

"Since my letter of yesterday gold has sold at par, the prevailing rate being one sixty-fourth to three sixty-fourth premium. The indications now are that the combinations which were presumed to be operating to keep up the premium have failed so far in their object, and that, unless unlooked for circumstances should intervene, the premium will be more likely to fall below the present rate than to advance."

On the 27th I sent the following instructions to the treasurer:

"Treasury Department, December 27, 1878. "Hon. James Gilfillan, Treasurer United States.

"Sir:--In connection with the department's circular of the 14th instant concerning the resumption of specie payments, you are directed, on and after the 1st proximo, to keep no special account of coin with any public disbursing officer, and to close any account of that description at that time standing on your books, keeping thereafter but one money of account in your office.

"Similar instructions have this day been sent to the several independent treasury officers.

"Very respectfully, "John Sherman, Secretary."

On the 28th I wrote the First National Bank of New York:

"Your letter of yesterday is received. I do not see my way clear to issue another call until the one now outstanding is covered by subscription. There is still a deficit of about $4,000,000 on the 71st call. There is not, however, the slightest objection to your stating authoritatively, or, if desired, I will do so in response to a direct inquiry, that every dollar of the proceeds of four per cent. bonds sold during the present year had been applied on calls for refunding, and it is my purpose to continue this unless I give public notice to the contrary.

"I feel the more inclined to refuse to make a call by reason of the probable requisition that may be made for the Halifax award, and I do not wish by any chance to impair the resumption fund."

During the latter part of December the air was full of rumors of a combination in New York for a run upon the sub-treasury on the opening of the new year. The alarm was so great that the president of the National Bank of Commerce in that city, who was also chairman of the clearing house committee, at three o'clock p. m. on the 30th, with the advice of other bankers, sent me, by special messenger, an urgent request for the transfer to his bank, on the following day, from the sub-treasury, of $5,000,000 in gold, in exchange for a like amount in United States notes, to enable the banks, he said, to meet a "corner" in gold. To this there could be but one reply. The treasury had no power to make the transfer, even if it desired to do so. I therefore declined the proposition, and did not believe in a "corner."

During the exciting events connected with resumption and refunding I did not overlook the political condition in Ohio, and wrote a letter in regard to it, which I think proper here to insert, as it presents my view at its date:

"December 26, 1878. "My Dear Sir:--Much obliged for your kind letter of the 21st.

"My official duties engross my time so much that I scarcely catch a glimpse of home affairs by reading the newspapers, and your intelligent view is therefore the more interesting. It seems to me that the nomination of General Garfield for governor and Foster for lieutenant governor would be a very excellent arrangement, but I understand that it is not agreeable to them. Garfield has no desire for the position, while Foster feels that he ought to head the ticket. An understanding that Garfield is to be Senator might embarrass us in certain doubtful districts, where the chief contest would be upon that office. Still such a ticket would be universally conceded to be very strong and would inspire confidence, and would be entirely satisfactory to me. Indeed, I wish to be in a condition to support our political friends in anything they may do in the convention, without taking an active part in it.

"The contingency that you refer to with which my name is connected is still to remote to talk about. I never supposed that a person occupying my office, open to attack and compelled to say no to so many persons, could be sufficiently popular to justify any party in running him for the presidency, and, therefore, I have always dismissed such suggestions as the kindly compliments of the hour. Certainly it has not gained my mental consent, nor is it considered by me as one of the probabilities of the future. If I should get the maggot in my brain it would no doubt be more likely to hurt than help.

"The tendency of public opinion is evidently towards General Grant, whose absence and good conduct are in his favor, while the involuntary feeling of Republicans would be in favor of nominating him as a remonstrance against the violence in the south, and notice that it must end.

"However, a year hence will be time enough to settle this matter.

"I send my hearty greetings for the holiday season, and remain,

"Very truly yours, "John Sherman. "Hon. Richard Smith, Cincinnati, O."

About this time I received the following letter:

"United States Legation, } "Mexico, December 15, 1878.} "Hon. John Sherman, Washington, D. C.

"My Dear Sir:--Allow me to send you, as a New Years' greeting, my hearty congratulations on your successful management of our national finances and on the resumption of specie payments, which I have no doubt will be an accomplished fact when this letter reaches you.

"The nation owes you a great debt for your courage, persistence and wisdom in adhering to your policy for re-establishing and maintaining our government credit. To your conduct I attribute the present honorable position of the Republican party, more than to any other one influence. I believe that neither the country nor the party will forget your services.

"Very truly, "John W. Foster."