CHAPTER XXIV.

THE PANIC OF 1873 AND ITS RESULTS. Failure of Jay Cooke and Co.--Wild Schemes "for the Relief of the People"--Congress Called Upon for Help--Finance Committee's Report for the Redemption of United States Notes in Coin--Extracts from My Speech in Favor of the Report--Bill to Fix the Amount of United States Notes--Finally Passed by the Senate and House--Vetoed by President Grant and Failure to Pass Over His Objection--General Effect Throughout the Country of the Struggle for Resumption-- Imperative Necessity for Providing Some Measure of Relief.

During the first four years of General Grant's administration the financial condition of the United States was eminently prosperous. The total reduction of the national debt, from the 1st of March, 1869, to the 1st of November, 1873, was $383,629,783, the annual saving of interest resulting therefrom being $27,432,932. During this period the value of United States notes compared with coin steadily increased. The funding of the six per cent. bonds into five per cent. bonds, under the refunding act, continued at the rate of about $85,000,000 a year. The credit of the United States steadily advanced during this period, so that the Secretary of the Treasury, in his report of 1873, stated that it had not stood higher since the close of the Rebellion than it did at that time. This improvement of the public credit was accompanied with a large reduction of internal taxes and duties on imported goods. The business of the country was prosperous, the increase and extension of railroads and the development of new industries was marked, indicating great prosperity.

All this was subsequently changed by the happening of a panic in September, 1873. The cause of this was attributed to over-trading, to the expansion of credits, and to rash investment made in advance of public needs. This panic commenced by the failure of Jay Cooke & Co., of Philadelphia, an enterprising firm of high standing, then engaged in selling the bonds of the Northern Pacific Railroad Company. I was engaged at that time, with a committee of the Senate, of which William Windom was chairman, in examining many plans of public improvements, especially in the increase of facilities for water transportation at the mouth of the Mississippi river, and at the great lakes on our northern boundary, improvements since then made with great benefit to the commerce of the United States. Roscoe Conkling, of New York, was a member of that committee. We were at Buffalo when the failure of Cooke & Co. was announced. We all felt that for the present, at least, our duties as a committee were at an end. The panic spread so that in a month all industries were in a measure suspended. The wildest schemes for relief were proposed, in and out of Congress. The panic spread to the banks, which were compelled in self-defense to call in their loans, to withhold their circulating notes, and contract their business. As usual on the happening of such a panic, an appeal was made to the treasury for relief, a demand was made for an increase in the volume of the United States notes, and that the Secretary of the Treasury should use the money of the government to buy exchange.

The New York Produce Exchange applied to the Secretary of the Treasury on the 29th of September, 1873, in resolutions, as follows:

"Whereas, The critical condition of the commercial interests of the country requires immediate relief by the removal of the block in negotiating foreign exchange; therefore be it

"_Resolved_, That we respectfully suggest to the Secretary of the Treasury the following plans for relief in this extraordinary emergency:

"First, That currency be immediately issued to banks or bankers, upon satisfactory evidence that gold has been placed upon special deposit in the Bank of England, by their correspondents in London, to the credit of the United States, to be used solely in purchasing commercial bills of exchange.

"Second, That the President of the United States and the Secretary of the Treasury are respectfully requested to order the immediate prepayment of the outstanding loan of the United States due January 1, 1874."

This request had, as a matter of course, to be denied. But the secretary did purchase $13,000,000 of bonds for the sinking fund, to the full extent the condition of the treasury allowed. It is difficult to realize or to convey by description the wild ideas developed by such a panic. The government for the time being is expected to provide a remedy for a condition it did not create, but, instead of aiding, the government is most likely to need aid. The revenues from importations fell off and the value of United States notes declined.

When Congress convened in December, 1873, the wildest schemes for relief to the people were proposed. A large increase of United States notes was demanded. More than sixty bills, resolutions and propositions were introduced in the Senate in respect to the currency, the public debt and national banks, all bearing upon the financial condition of the country, expressing every variety of opinion, from immediate coin payments to the wildest inflation of irredeemable paper money. All these were referred to the committee on finance, then composed as follows: Messrs. Sherman (chairman), Morrill, of Vermont, Scott, Wright, Ferry, of Michigan, Fenton and Bayard.

The several measures referred to the committee were taken up and considered, but the same wide divergence of opinion was developed in the committee as existed outside of Congress among the people.

The majority of the committee reported to the Senate the following resolution:

"_Resolved_, That it is the duty of Congress during its present session to adopt definite measures to redeem the pledge made in the act approved March 18, 1869, entitled 'An act to strengthen the public credit,' as follows: 'And the United States also pledges its faith to make provision, at the earliest practicable period, for the redemption of United States notes in coin;' and the committee on finance is directed to report to the Senate, at as early a day as practicable, such measures as will not only redeem the pledge of the public faith, but will also furnish a currency of uniform value, always redeemable in gold or its equivalent, and so adjusted as to meet the changing wants of trade and commerce."

Mr. Ferry, of Michigan, a member of the committee, offered the following substitute for the pending resolution:

"That the committee on finance is directed to report to the Senate, at as early a day as practicable, such measures as will restore commercial confidence and give stability and elasticity to the circulating medium through a moderate increase of currency."

Upon these adverse propositions a long debate followed without practical results. I made a long speech on the 16th day of January, 1874, in favor of the resolution of the committee. I then said:

"At the outset of my remarks I wish to state some general propositions established by experience, and the concurring opinions of all writers on political economy. They may not be disputed, but are constantly overlooked. They ought to be ever present in this discussion as axioms, the truth of which has been so often proven that proof is no longer requisite.

"The most obvious of these axioms, which lies at the foundation of the argument I wish to make to-day, is that a specie standard is the best and the only true standard of all values, recognized as such by all civilized nations of our generation, and established as such by the experience of all commercial nations that have existed from the earliest period of recorded time. While the United States, as well as all other nations, have for a time, under the pressure of war or other calamity, been driven to establish other standards of value, yet they have all been impelled to return to the true standard; and even while other standards of value have been legalized for the time, specie has measured their value as it now measures the value of our legal tender notes.

"This axiom is as immutable as the law of gravitation or the laws of the planetary system, and every device to evade it or avoid it has, by its failure, only demonstrated the universal law that specie measures all values as certainly as the surface of the ocean measures the level of the earth.

"It is idle for us to try to discuss with intelligence the currency question until we are impressed with the truth, the universality, and the immutability, of this axiom. Many of the crude ideas now advanced spring from ignoring it. The most ingenious sophistries are answered by it. It is the governing principle of finance. It is proved by experience, is stated clearly by every leading writer on political economy, and is now here, in our own country, proving its truth by measuring daily the value of our currency and of all we have or produce. I might, to establish this axiom, repeat the history of finance, from the shekels of silver, 'current money with the merchant,' paid by Abraham, to the last sale of stock in New York. I might quote Aristotle and Pliny, as well as all the writers on political economy of our own time, and trace the failure of the innumerable efforts to establish some other standard of value, from the oxen that measured the value of the armor of Homeric heroes to the beautifully engraved promise of our day; but this would only be the hundred-times-told tale which every student may find recorded, not only in schoolbooks, but in the writings of Humboldt, Chevalier, Adam Smith, and others of the most advanced scientific authorities. They all recognize the precious metals as the universal standard of value. Neither governments, nor parliaments, nor congresses can change this law. It defies every form of authority, but silently and surely asserts itself as a law of necessity, beyond the jurisdiction of municipal law.

* * * * *

"Of late years much difficulty has grown out of the slightly varying value of silver and gold, as compared with each other, and the tendency of opinion has been to adopt gold alone as the standard of value. The United States has twice changed the relative value of these metals, and other modern nations have been driven to similar expedients. At the Paris monetary conference, held in 1867, which I had the honor to attend, the delegates of twenty nations represented agreed to recommend gold alone as the standard of value. The United States, and nearly all the commercial nations, have adopted this standard, and reduced the use of silver to a mere token coinage of less intrinsic value than gold, but maintained at par with gold by the right to be converted into gold at the will of the holder. So that for all practical purposes we may regard gold as the only true standard, the true money of the world, by which the value of all property, of all productions, of all credits, and of every medium of exchange, and especially of all paper money, is tested.

"Specie, in former times, was not only the universal standard of value, but it was the general medium of all exchanges. In modern times this is greatly changed. Specie is still the universal standard of value, but it has ceased to be even the usual medium of exchange. The failure to distinguish between the standard of value and the medium of exchanges occasions many of the errors into which so many fall, and nearly every Senator who has spoken on one side of the question has fallen into this error. Specie has lost a portion of its sovereign power, for with the enormous increase of exchanges it was found that, valuable as it is, it is too heavy to transport from place to place as a medium of exchange. The perils of the sea, the dangers of theft and robbery, led to devices to substitute promises to pay gold in place of the actual gold.

* * * * *

"Mr. president, thus far my remarks are founded upon the experience of ages, applicable to all countries and to all commercial nations of our time. I present them now as axioms of universal recognition. And yet I have heard these axioms denounced in this debate as 'platitudes,' useless for this discussion in the Senate of the United States. The wisdom of ages, the experience of three thousand years, the writings of political economists, are whistled down the wind as if we in the Senate were wiser than all who have reasoned and thought and legislated upon financial problems--that all this accumulated wisdom consists of 'platitudes' unworthy to influence an American Senate in the consideration of the affairs of our day and generation.

"Sir, I do not think so. If we disregard these 'platitudes,' we only demonstrate our own ignorance and punish our constituents with evils that we ought to avoid. I purpose now to pursue the argument further, and to prove that we are bound, both by public faith and good policy, to bring our currency to the gold standard; that such a result was provided for by the financial policy adopted when the currency was authorized; that a departure from this policy was adopted after the war was over, and after the necessity for a depreciated currency ceased; and that we have only to restore the old policy to bring us safely, surely, and easily to a specie standard.

"First, I present to you the pledge of the United States to pay these notes in coin 'at the earliest practicable period.' In the 'act to strengthen the public credit,' passed on the 18th day of March, 1869, I find this obligation:

'And the United States also solemnly pledges its public faith to make provision, at the earliest practicable period, for the redemption of the United States notes in coin.'

* * * * *

"The Congress of the United States, in order to put into form its sense of this obligation, passed the act 'to strengthen the public credit,' and the last and most important clause of this act is the promise which I have just read, that these notes should be paid, 'at the earliest practicable period,' in coin.

* * * * *

"On the day we made that promise, the 18th of March, 1869, the greenbacks, the notes of the United States, were worth 75¾ cents in gold; or in other words, gold was at a premium of thirty-two per cent. . . . What was the result? After you enacted that law-- the faith of the people of the United States that you would redeem this pledge--the value of your greenbacks advanced, not rapidly, but gradually, and in one year, to within twelve per cent. of par in gold.

* * * * *

"Mr. president, we see, then, the effect of this promise. And I here come to what I regard as a painful feature to discuss--how have we redeemed our promise? It was Congress that made it, in obedience to the public voice; and no act of Congress ever met with a more hearty and generous approbation. But I say to you, with sorrow, that Congress has done no single act the tendency of which has been to advance the value of these notes to a gold standard; and I shall make that clearer before I get through. Congress made this promise five years ago. The people believed it and business men believed it. Four years have passed away since then, and your dollar in greenbacks is worth no more to-day than it was on the 18th of March, 1870; and no act of yours has even tended to advance the value of that greenback to par in gold, while every affirmative act of yours since that time has tended to depreciate its value and to violate your promise.

* * * * *

"Every bond that was issued was issued only upon the sacred pledge contained in this act, that the interest of that bond should be paid in coin; and the principal should be paid, when due, in coin. The fifth section of the act provides that all duties on imported goods shall be paid in coin; and that this money shall be set aside as a special fund to pay the interest on the bonded debt in coin. Then, in order to secure the greenbacks, it authorized any holder of greenbacks to pay any government debt with them; it authorized the holder of greenbacks to pay any debt, public or private, with them; and every citizen of the United States was bound to take them. Then it authorized them to be converted into six per cent. bonds of the United States--those bonds payable, principal and interest, in gold. If the policy provided for by this act had been maintained, we would long since have been at specie payments, without any serious disturbance of our monetary affairs.

* * * * *

"Now, Mr. president, I come to show the Senate how this provision, the convertible clause of the act of February 25, 1862, was repealed. On the 3rd of March, 1863, Congress passed 'An act to provide ways and means for the support of the government.' This act was passed during the dark hours of the war. The currency of the country did not flow into the treasury rapidly enough to pay our army. I remember that at about the time this act was passed there were very large unpaid requisitions. The Secretary of the Treasury, instead of issuing any more six per cent. bonds, desired to float a 10-40 five per cent. bond; in other words, to reduce the burden of interest upon the public debt. At this time there were three hundred millions of circulation outstanding, and with all the rights, and all the privileges, conferred upon the greenbacks, they did not flow into the treasury fast enough to furnish means to carry on the operations of the war.

* * * * *

"In other words, the suspension of this convertibility clause was passed with a view to promote conversion; to encourage conversion; to induce conversion; and, if possible, to induce a conversion into a five per cent. gold bond instead of into a six per cent. bond. When the Secretary of the Treasury presented this view to Congress he was at once met with the pledge of the public faith; with the promise printed upon the back of the greenbacks that they could be converted into six per cent. bonds at the pleasure of the holder; and that we could not take away that right. This difficulty was met by the ingenuity of the then Senator from Vermont (Mr. Collamer). He said that no man ever exercised a right which could not properly be barred by a statute of limitations; and if this right was injurious to the people of the United States, and prevented the conversion of these notes into bonds, we might require the holder of these notes to convert them within a given time; that we could give them a reasonable time within which they could convert them into six per cent. bonds, and after that take away the right.

"The act of March 3, 1863, was amended by inserting this clause:

'And the holders of United States notes, issued under or by virtue of said acts, shall present the same for the purpose of exchanging the same for bonds, as therein provided, on or before the 1st day of July, 1863; and thereafter the right so to exchange the same shall cease and determine.'

* * * * *

"Now, Mr. president, I have shown you that the greenbacks were based upon coin bonds; that they had the right to be converted into coin bonds; that that right was taken away as to the 5-20 bonds; but that, in practice and in effect, the greenback was convertible into an interest-bearing bond of the United States up to 1866, and until the passage of the law to which I will now refer.

* * * * *

"If this act had contained a simple provision restoring to the holder of the greenback the right to convert his note into bonds there would have been no trouble. Why should it not have been done? Simply because the then Secretary of the Treasury believed that the only way to advance the greenbacks was by reducing the amount of them; that the only way to get back to specie payments was by the system of contraction. If the legal tender notes could have been wedded to any form of gold bond by being made convertible into it, they would have been lifted, by the gradual advance of our public credit, to par in gold, leaving the question of contraction to depend upon the amount of notes needed for currency. Sir, it was the separation of our greenbacks from the funding system that created the difficulty we have upon our hands to-day; and I say now that, in my judgment, the only true way to approach specie payments is to restore this principle, and give to the holder of the greenback, who is your creditor, the same right that you give to any other creditor. If he has a note which you promised to pay and cannot, and he desires interest on that note by surrendering it, why should you not give it to him? No man can answer that. It is just as much a debt as any other portion of the debt of the United States."

Finally, after more than three months study and debate, a majority of the committee agreed upon a measure and directed me to report it to the Senate. It fixed the maximum limit of the United States notes at $382,000,000. It provided for a gradual payment of these notes in coin or in five per cent. bonds, at the option of the Secretary of the Treasury, from the 1st of January, 1876. It was entitled "An act to provide for the redemption and reissue of United States notes and for free banking."

In obedience to the instructions of the committee, on the 23rd of March, 1874, I reported the bill as an original measure, and said:

"It is due to the members of the committee on finance that I should say that the bill which I have just reported, as it appears on its face, is in the nature of a compromise measure, which is more or less acceptable all around, but at the same time there are certain features of the bill which members of the committee on finance will feel at liberty to express their opposition to, and also to propose amendments to. It is due to them that I should make this statement. The bill itself, as appears on its face, is the result of great labor, long consideration, and the consequence of compromise. In many cases we were not able, however, to reconcile conflicting opinions; and on those points, of course, members of the committee will feel themselves at liberty to oppose certain features of the bill."

Mr. Thurman said:

"I should like to inquire of my colleague whether he proposes to- day or to-morrow, when he makes the motion that he indicated, to state what, in the opinion of the committee reporting this bill, will be its practical effect, so that we may have the views of the committee as to the workings of the bill should it become a law. I am sure I, for one, should like very much to know what the committee, who have devoted so much time to this subject, think will be the practical working of the measure, at any time that it suits the convenience of the chairman of the committee to make such statement."

I replied:

"When the subject is introduced, if it be convenient, to-morrow, I propose to make a very brief statement of the effect of each section, as we understand it; but I do not intend, by any long speeches or any remarks, to prolong this matter unnecessarily. I have expressed my own individual views, and each member of the committee, I suppose, stands to the opinion expressed by him in the speeches he has made in the Senate--speeches that were carefully considered, and by which the position of each Senator was stated; but undoubtedly I shall feel it my duty, when the bill is called up, to state what I regard as the actual practical effect of these different propositions; and some of them, I will now say, I assented to with great reluctance."

On the next day the bill was taken up in the Senate, and I then stated the general provisions of the bill. I insert extracts from my speech, which indicate the difficulties we encountered:

"Mr. president, some complaint has been made in the Senate and in the country at the delay in the presentation, by the committee on finance, of some bill covering the financial question; but a moment's reflection will, I am sure, convince every Senator that there has been no fault on the part of that committee. From the beginning of the session to this hour that committee, under the direction of the Senate, has been studying and discussing the various plans and propositions which were referred to the committee; and I may say that over sixty different propositions, either coming in the form of petitions or in the form of bills, have been sent to the committee, all of these suggesting different plans and ideas. It was impossible to consider all these and to agree upon any comprehensive measures until within a day or two.

"There was another consideration. The committee found itself divided in opinion, precisely as the country is, and precisely as the Senate is, into as many as three different classes of opinion. There were, first, those who desired to take a definite and positive step toward the resumption of specie payments. There were, second, those who desired an enlargement of the currency, or what we commonly call an inflation of the currency. There were, third, those who, while willing to see the amount of bank notes increased and the question of the legal tender settled in some form, were also desirous that some definite step should be taken toward a specie standard. There were these differences of opinion.

"For the purpose of ascertaining the views of the Senate, and not involving ourselves in reporting a bill that would be defeated as the bill of the last session was, we presented, early in the session, resolutions of a general character which stated these three ideas: First, the resolution of the majority of the committee that some definite step should be taken toward specie payments. Then there was the amendment offered by the gentleman who now occupies the chair [Mr. Ferry, of Michigan], that there ought to be an increase of the currency without reference to any plan of redemption. Third, there was the proposition made by the Senator from Delaware [Mr. Bayard], that measures should be taken at once looking to the resumption of specie payments.

"These propositions were discussed, and the committee were enlightened by that discussion; at least they obtained the opinions of Members of the Senate. Subsequently, in the course of our investigation, a question about the $25,000,000 section (section 6 of the act of July 12, 1870) came up, and the committee deemed it right, by a unanimous vote, to ascertain the sense of the Senate as to whether they wished this section carried into execution. As it stood upon the statute book it was a law without force. It was a law so expressed that the comptroller said he could not execute it. Therefore the committee reported a bill which would have provided the necessary details to carry into execution that section of the existing law. But in the present temper of the public mind, in the Senate and in the country, that bill was discussed, and has been discussed day after day, without approaching the question at all. During all this time the committee have been pursuing their inquiries, and finally they have reported the bill which is now before us.

"The measure that is reported is not a satisfactory one to any of us in all its details. Probably it is not such as the mind of any single Member of the Senate would propose. It is in the nature of a compromise bill, and therefore, while it has the strength of a compromise bill, it has also the weakness of a compromise bill. There are ideas in it which, while meeting the views of a majority, taken separately will be opposed by others. I am quite sure I say nothing new to the Senate when I say it does not in all respects meet my own views. But there is a necessity for us to yield some of our opinions. We cannot reconcile or pass any measure that will be satisfactory to the country unless we do so. Any positive victory by either extreme of this controversy will be an absolute injury to the business of the country. Therefore, any measure that is adopted ought to be so moderate, pursuing such a middle course, such a middle ground, that it will give satisfaction to the country. It must be taken as a whole; and therefore the effect of amending this proposition will be simply to destroy it. If an amendment in the direction of expansion is inserted, it will drive away some who would be willing to support it as is. If an amendment in the way of contraction is proposed and carried by a majority of the Senate, it will drive away those who might be willing to take this measure as a compromise. The only question before the Senate now is, whether this is a fair compromise between the ideas that have divided the people of this country and the Members of the Senate; whether it will surely improve our currency while giving the relief that is hoped for by a moderate increase of the currency. Now I ask the secretary to read the first section of the bill."

The chief clerk read section 1, as follows:

"_Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled_, That the maximum limit of United States notes is hereby fixed at $382,000,000, at which amount it shall remain until reduced as hereinafter provided."

I then continued:

"It is manifest to every Senator that the initial step in this controversy is to fix the aggregate limit of United States notes. The United States notes, although they are very popular, and justly so, in this country, are at this moment inconvertible; they are irredeemable, and they are depreciated. These are facts admitted on all hands. In making that statement I do not intend at all to deny that the United States notes have served a great and useful purpose; and though I was here at the birth of them and advocated them in all stages of their history, yet I am compelled to say at this moment, twelve years after their issue, that they are inconvertible; they are irredeemable; and they are depreciated this day at the rate of twelve per cent. They have been legally inconvertible since July 1, 1863, and practically inconvertible since the close of the war; that is, the government refuses to receive them, either in payment of customs or in payment at par of any bond of the United States offered by it. They are irredeemable on their very face. They have depreciated almost from the date of their issue, at one time being worth only forty cents in gold, and to-day only worth ninety cents. That is the condition of the United States notes.

"Now, there is another thing admitted by all Senators. I do not trespass on any disputed ground when I say that every addition to the volume of these notes, while they thus stand depreciated, irredeemable, and inconvertible, is as certain to further depreciate them, as it is that to pour water into an overflowing bucket will cause it still more to overflow; as certain as the law of gravitation; as certain as anything human or divine. It is equally true that any contraction of this currency, any withdrawal of the amount of it, is undoubtedly an appreciation of its value, making it nearer and nearer to the standard of gold.

"This is so plain a proposition that it is not necessary to discuss it; and the whole people of the country understand it; the plainest and simplest people understand it as well as the wisest. Those who desire to increase prices, to start and put in operation new enterprises, desire an increase of the currency without any plan of redemption. Those, on the other hand, who want to get back to the specie standard, to appreciate the value of these notes, desire to withdraw them, get them out of the way, or give new uses and new values to them so as to advance them nearer and nearer the standard of gold. Therefore it is that I say the very first step at the outset of this controversy is to settle what is the legal limit of these notes; how many are there now authorized by law; how many are there outstanding. And here it is a strange thing that on this very point, a purely legal question, the most important one in our financial discussion, there is a great difference of opinion. There ought not to be uncertainty or room for a difference of opinion upon a question of this kind. It ought to be settled. On the one hand it is insisted by Senators who compose the majority of the committee on finance that the legal limit of United States notes is $356,000,000; that the amount which has been already issued, of what is known as the $44,000,000 reserve, was unlawfully issued, although under great press of circumstances and without any intention on the part of the secretary to do more than he thought he had a lawful right to do. On the other hand it is insisted by other Senators that the legal limit of United States notes is $400,000,000; and here is a margin of $44,000,000 upon which there is a dispute of law as to the power of the secretary to issue it. That dispute ought to be settled at once. It is a question that ought not to be in doubt a moment, because the power to issue that $44,000,000 places it in the discretion of the Secretary of the Treasury either to advance or to lower the value of all property in the United States, of all debts in the United States, of everything that is measured by United States notes.

"Should we undertake to say that the secretary did wrong in exceeding the limit at $356,000,000? A majority of the committee believe that that is now the legal limit, and believe it conscientiously. But should be undertake to fix that as the legal limit? Twenty- six million dollars of the $44,000,000 are outstanding. They are now issued; they are now a part of the currency of the country. They are just as much the currency as that which was issued before. You cannot distinguish between them. You cannot say which of the $382,000,000 now outstanding is legal and which is illegal. So far as the United States are concerned, they are all debts of the United States which we are bound to pay, whether they have been issued legally or illegally. I do not understand even my friend from Delaware to dispute the duty and obligation of the United States to pay these notes, even if they have been illegally issued. There can be no question about it. It is impossible to distinguish between them. The only question is whether our agent exceeded his authority or not. Therefore, without raising the question as to the legality of this issue, reserving to each Senator his own opinion on the subject, we have adopted as the _status quo_ $382,000,000, the amount now outstanding; and we recognize that amount as the maximum legal obligation of the United States in the form of notes, and we propose upon that basis to erect our superstructure. We therefore say that we will raise no question as to the mode of retiring the $26,000,000; we will simply say that the amount now outstanding shall never be exceeded. That is a recognition, at least, that they are outstanding lawfully and properly; at any rate, so far as the obligation of the United States to pay them is concerned.

"Mr. president, a limit ought to be fixed. But there is a difference of opinion as to what should be the limit. If I had the power to fix this limit I should say that the limit which was fixed by the old law should remain at $356,000,000; and I would provide a mode and manner of issuing United States bonds to retire the $26,000,000 slowly and gradually, without disturbing the ordinary business of the country. I would thereby seek to recover the ground we have lost by what has occurred since the panic, and go back to the standard prior to that time. But I know that would be very difficult; that would involve an increase of the bonded debt. Our revenues are not sufficient to call in this $26,000,000. We have no surplus revenue now as we had a year or two ago. We could only do it by the issue of bonds, and the process itself would be a very hard one. Besides, it is probable that public opinion and the judgment of Congress would not sustain such a proposition; and therefore it is hardly worth while to recommend it. We assume, therefore, that the $382,000,000 is the present limit, and we say that shall be the maximum limit.

* * * * *

"I said it was a compromise by the committee. I speak of a majority of the committee. As a matter of course my friend is at liberty to dissent from any of its propositions. On question of this kind committees are very rarely unanimous; but I will say that on this point a very decided majority of the committee concurred in the section.

"To the second section I wish to invite the careful and earnest attention of the Senate. This section is an honest effort to deal with the great problem of redemption. Every Senator who has spoken contemplates that a time must come when all the United States notes must be redeemed in coin. The public faith of the United States is so pledged. The notes were issued with the understanding that they should be paid in coin. No man could survive politically in this country who would declare that it was his purpose never to pay these notes in coin. My friend who now presides [Mr. Ferry, of Michigan], speaks always of his measure of inflation as a means of bringing about at some time specie payments; and I will say that in the Senate I have not heard any Senator deny that it is the duty of the United States at some time to pay these notes in coin. In all this discussion there is at least that one point agreed upon. If I state this too strongly I hope I will be here corrected.

"Now, Mr. president, how shall it be done, and when shall it be done? I say that now, nine years after the close of our Civil War, twelve years after these notes have been authorized and issued, five years after the dominant party has declared its purpose to pay them at the earliest day practicable, there should be no longer delay. The United States ought to do something toward the fulfillment of that pledge and the performance of that duty. There must be something very peculiar in the condition of our country that will justify a longer delay; a longer procrastination in the performance of this solemn pledge, this public policy--our own political obligation.

"Mr. president, this section is the result of the patient consideration of the committee on finance as to how this result is to be brought about; and upon this very section there is most likely to be a contrariety and difference of opinion among Senators, because the mode and manner of redemption is the thing which has excited the public mind and upon which men all over the country differ. I wish, therefore, to deal with this question. We have got to pay these notes in coin. The time when is not defined by the law. Are we prepared now to fix a day when we will pay these notes in coin? If the condition of our country was such as to justify it, I would greatly prefer fixing the time when these notes should be paid in coin; but I am disposed to agree with what has been stated by the Senator from Indiana, and by other Senators, that in the present condition of our coinage, the present condition of our foreign trade, we are not prepared to fix a definite day when we will pay in coin. Why? I find, by reference to official documents, that we now have in gold and silver coin in this country about $140,000,000. This statement of Dr. Linderman does not include the bullion on hand. How much that is I am not prepared to state. The whole amount of gold and silver coin in the country, however, is about $140,000,000. Some of that is in circulation in the Pacific states, but the bulk of it is in the treasury of the United States, the property of individuals and the property of the United States. The total annual production of gold and silver in this country cannot be estimated at over $70,000,000; and heretofore, at least $50,000,000 of this has been exported over and above the amount that has been imported. The balance of trade has been against us; and although I do not regard that as entering much into the calculation, yet it is a fact that until recently, perhaps, the balance of trade has been against us. The annual coinage of the United States for the last year or two has been largely increasing, and last year the coinage of the United States was $38,689,183, besides stamping into fine bars, which operate as a kind of coinage, of $27,517,000. So that there has been in fact converted, of gold and silver, into coin, or bars stamped by the United States, $66,000,000 during the last year, showing a use and employment of gold in this country that is now rapidly increasing.

"But still this state of affairs would not justify us in saying that we are prepared to declare a resumption of specie payments absolutely upon the basis of $800,000,000 of paper money, including our fractional currency. I am, therefore, not prepared to say that the United States can, on a fixed day, within a reasonable time-- within such a time as would give confidence in our ability to perform it--say that we will absolutely redeem our notes in coin.

"I know that Senators here, for whose opinion I have the highest respect, who are probably more sanguine of our ability and capacity to do this than I am--many of those who have agreed with me and co- operated with me--think we are able and strong enough to fix the time for the absolute resumption of specie payments; but I have always doubted it. Indeed I have thought there was a better way to reach the great result. But if we cannot fix the time when we will redeem in coin, can we not give additional value to our United States noes, so as to gradually appreciate them to the coin standard, and thus advance toward specie payments if we cannot reach the goal? Because we cannot accomplish all that we have agreed to do in a given time, does that relieve us from the necessity of progressing in that direction? When we have before us a long journey that will take months to pass, perhaps years, shall we delay starting on that journey because we cannot reach the end of it in a year or two? Not at all. I therefore say that the time has arrived this moment when the United States ought to do something to advance its notes to the specie standard.

"Now what is that something? There are two propositions, and only two propositions, that have been made, aside from absolute coin redemption, that have had any strength whatever. One is to allow the United States notes to be received in payment of customs duties, the other is to allow United States notes to be converted into bonds. In regard to the first, I agree entirely that if the matter was open now to our choice and selection, one of the best methods we could adopt to advance our notes to par in gold would be by repealing that restriction which prevents the receiving of them for customs duties; but we are met there by the sacred pledge of the United States; we are met there by the fact that customs duties are, by the law of 1862, agreed to be collected in coin."

Mr. Bayard inquired:

"Does not the law provide that the customs duties shall be paid in coin or in notes of the United States? Is not the alternative given by the law?"

I replied:

"O, no. If the Senator will look at section 5 of the act of February 25, 1862--my friend from Vermont can turn to it in a moment--he will find that there is an express stipulation that the customs duties shall be collected in coin, and that this coin shall be set aside as a pledge--legal language is used--and shall only be applied, first, to the payment of the interest on the public debt, and, secondly, to the establishment of a sinking fund of one per cent. That was the basis of the obligation of the United States to pay in coin, and but for the fact that we collected our customs duties in coin during the war we could not have paid the interest on our public debt in coin, and therefore our bonds would have sunk out of sight. That pledge we cannot now violate; and I never have yet been able to bring my mind to the consideration of any proposition whatever which would ever shock or excite the fear of the public creditors in that respect. The safety of the public creditors consists in having a specific fund for the payment of their interest; the principal will take care of itself; and that fund has always been maintained in the darkest hours of the war. Except the propositions that have been made here and there to impair that fund by allowing a portion of the customs duties to be paid in currency, it has never been either invaded or threatened; but all such propositions have been voted down. I, therefore, while I see the policy and the expedience of allowing these notes to be used in payment of customs duties, simply say we are precluded from that remedy because we have mortgaged that fund, and we have no power to take them for any purpose except that which the mortgage stipulates.

* * * * *

"We then come to the redemption in bonds. There is the moral obligation, on the part of the United States, which has issued its notes payable in coin, but for reasons of public policy does not pay in coin, to give to its creditors its notes bearing interest in place of coin. The United States cannot plead inability to pay interest on its notes if it will not or cannot pay the principal. Why should not the United States give its obligation bearing interest just as any individual would have to do? There is a moral obligation which rests upon the United States every day of the year to every holder of these notes, because, although the United States has not said when it will redeem these notes in coin, yet it is bound to do what it can to give them additional value. Although it may not receive these notes for customs duties, why can it not receive these notes in payment of bonds? Why discriminate against these notes in the sale of bonds? The answer is, that during the war we were compelled to do it; and so we were. I very reluctantly yielded to that necessity. We were compelled to do it; but, sir, it was only expected that that would continue to the close of the war; and, practically, during the whole of the war these notes were received at par for bonds at par.

"If, therefore, we are to take any step toward specie payments, why not give to the holder of United States notes who demands it, a bond of the United States bearing a reasonable rate of interest in exchange for his notes? This should only be done after a reasonable time, so as to prevent any injury to the private contracts between debtor and creditor. When we cannot pay the coin, we are honorably and sacredly bound to pay in a bond of the United States, which in ordinary times would approximate to par in gold. In other words, this is a qualified redemption. The Senator from Indiana calls it a 'half-way measure.' It is a half-way measure in the right direction, and indeed it is practical specie payment."

The bill led to a long continuous debate which extended to the 6th of April, 1874. Several amendments were offered and adopted which enlarged the maximum of notes to $400,000,000, and greatly weakened the bill as a measure of resumption of specie payments. By reason of these amendments many of those who would have supported the bill as introduced voted against it on its passage, I among the number. The bill, however, passed the Senate by a vote of yeas 29 and nays 24. The title of the bill was changed to "A bill to fix the amount of United States notes and the circulation of national banks, and for other purposes." This change of title indicates the radical change in the provisions of the bill. Instead of a return to specie payments, it provided for an expansion of an irredeemable currency.

The bill, as it passed the Senate, was as follows:

"_Be it enacted, etc.,_, That the maximum amount of United States notes is hereby fixed at $400,000,000.

"Sec. 2. That forty-six millions in notes for circulation, in addition to such circulation now allowed by law, shall be issued to national banking associations now organized and which may be organized hereafter, and such increased circulation shall be distributed among the several states as provided in section 1 of the act entitled 'An act to provide for the redemption of the three per cent. temporary loan certificates and for an increase of national bank notes,' approved July 12, 1870. And each national banking association, now organized or hereafter to be organized, shall keep and maintain, as a part of its reserve required by law, one-fourth part of the coin received by it as interest on bonds of the United States deposited as security for circulating notes or government deposits; and that hereafter only one-fourth of the reserve now prescribed by law for national banking associations shall consist of balances due to an association available for the redemption of the circulating notes from associations in cities of redemption, and upon which balances no interest shall be paid."

The bill was taken up in the House of Representatives on the 14th of April, 1874, and, without any debate on its merits, was passed by the vote of 140 yeas and 102 nays.

On the 22nd of April, President Grant returned the bill to the Senate with his veto, and the Senate, upon the question, "Shall the bill pass notwithstanding the objections of the President of the United States," voted 34 yeas and 30 nays. I voted nay. The president of the Senate declared "that two-thirds of the Senators present not having voted in the affirmative the Senate refuses to pass the bill."

Thus, for that session, the struggle for resumption ended; but the debate in both Houses attracted popular discussion, and tended in the right direction. The evil effects of the stringency in monetary affairs, the want of confidence, the reduction of the national revenue, the decline of domestic productions, all these contributed to impress Congress with the imperative necessity of providing some measure of relief. Instead of inflation, of large issues of paper money by the United States and the national banks, there grew up a conviction that the better policy was to limit and reduce the volume of such money to an amount that could be maintained at par with coin.

During the canvass that followed I spoke in many parts of Ohio, confining myself chiefly to financial questions. The stringency of the money market which occurred the preceding year still continued, and great interest was manifested in the measures proposed during the preceding session, especially in the defeat of the bill to prevent the contraction of the currency. At the request of General Garfield I spoke in Warren in his Congressional district, where he met, for the first time, a decided opposition. I insert his autograph letter, the original being in his familiar hand writing:

"Hiram, Ohio, September 25, 1874. "Dear Senator:--In accordance with the arrangement which I made with you and with the central committee, we have posted you for a mass meeting at Warren, on Saturday afternoon, October 10. I hope I shall not embarrass you by suggesting that in your speech you take occasion to say a few words in reference to my standing and public service as a representative. It will do much to counteract the prejudice that a small knob of persistent assailants have created against me. I write also to inquire if you will be willing to speak at another place the same evening. If so, we are very anxious to have you do so. Please telegraph me to Garrettsville, Ohio, and oblige,

"Very truly yours, "J. A. Garfield."