Recollections of Forty Years in the House, Senate and Cabinet Part 64

The President's message supported and strengthened the position taken by me both in favor of the policy of resumption and against the free coinage of silver provided for in the Bland bill. The comments in the public press, both in the United States and in Europe, generally sustained the position taken by the President and myself. I soon had a.s.surances that the Bland bill would not pa.s.s the Senate without radical changes. Even the House of Representatives, so recently eager to repeal the resumption act, and so hasty and united for the free coinage of silver, had become more conservative and would not have favored either measure without material changes. I conversed with Mr. Allison and wrote him the following letter:

"Was.h.i.+ngton, D. C., December 10, 1877.

"Hon. W. B. Allison, U. S. Senate.

"Dear Sir:--Permit me to make an earnest appeal to you to so amend the silver bill that it will not arrest the refunding of our debt or prevent the sale of our four per cent. bonds. I know that upon you must mainly rest the responsibility of this measure, and I believe that you would not do anything that you did not think would advance the public service, whatever pressure might be brought to bear upon you.

"It is now perfectly certain that unless the customs duties and the public debt--as least so much of it as was issued since February, 1873--are excepted, we cannot sell the bonds. The shock to our credit will bring back from abroad United States bonds, and our people will then have a chance to buy the existing bonds and we cannot sell the four per cent. bonds. This will be a grievous loss and damage to the administration and to our party, for which we must be held responsible. You know I have been as much in favor of the silver dollar as anyone, but if it is to be used to raise these difficult questions with public creditors, it will be an unmixed evil.

"I wish I could impress you as I feel about this matter, and I know you would then share in the responsibility, if there is any, in so amending this bill that we can have all that is good out of it without the sure evil that may come from it if it arrests our funding and resumption operations.

"With much respect, yours, etc.

"John Sherman.

The amendments to the Bland bill proposed by Mr. Allison from the committee on finance, completely revolutionized the measure. The Senate committee proposed to strike out these words in the House bill:

"And any owner of silver bullion may deposit the same at any coinage mint or a.s.say office, to be coined into such dollars, for his benefit, upon the same terms and conditions as gold bullion is deposited for coinage under existing laws."

And to insert the following:

"And the Secretary of the Treasury is authorized and directed, out of any money in the treasury not otherwise appropriated, to purchase, from time to time, at the market price thereof, not less than $2,000,000 per month, nor more than $4,000,000 per month, and cause the same to be coined into such dollars. And any gain or seigniorage arising from this coinage shall be accounted for and paid into the treasury, as provided under existing laws relative to the subsidiary coinage: _Provided_, that the amount of money at any one time invested in such silver bullion, exclusive of such resulting coin, shall not exceed $5,000,000."

These amendments were agreed to.

Sections two and three of the bill were added by the Senate. The bill, as amended, was sent to the House of Representatives, and the Senate amendments were agreed to. The bill as amended was as follows;

"AN ACT TO AUTHORIZE THE COINAGE OF THE STANDARD SILVER DOLLAR, AND TO RESTORE ITS LEGAL TENDER CHARACTER.

"_Be it enacted by the Senate and House of Representatives of the United States of America in Congress a.s.sembled_, That there shall be coined, at the several mints of the United States, silver dollars of the weight of four hundred and twelve and a half grains troy of standard silver, as provided in the act of January eighteenth, eighteen hundred thirty-seven, on which shall be the devices and superscriptions provided by said act; which coins, together with all silver dollars heretofore coined by the United States, of like weight and fineness, shall be a legal tender, at their nominal value, for all debts and dues, public and private, except where otherwise expressly stipulated in the contract. And the Secretary of the Treasury is authorized and directed to purchase, from time to time, silver bullion, at the market price thereof, not less than two million dollars worth per month, nor more than four million dollars worth per month, and cause the same to be coined monthly, as fast as so purchased, into such dollars; and a sum sufficient to carry out the foregoing provision of this act is hereby appropriated out of any money in the treasury not otherwise appropriated. And any gain or seigniorage arising from this coinage shall be accounted for and paid into the treasury, as provided under existing laws relative to the subsidiary coinage: _Provided_, That the amount of money at any one time invested in such silver bullion, exclusive of such resulting coin, shall not exceed five million dollars: _And provided further_, That nothing in this act shall be construed to authorize the payment in silver of certificates of deposit issued under the provisions of section two hundred and fifty-four of the Revised Statutes.

"Sec. 2. That immediately after the pa.s.sage of this act, the President shall invite the governments of the countries composing the Latin union, so-called, and of such other European nations as he may deem advisable, to join the United States in a conference to adopt a common ratio between gold and silver, for the purpose of establis.h.i.+ng, internationally, the use of bimetallic money, and securing fixity of relative value between those metals; such conference to be held at such place, in Europe or in the United States, at such time within six months, as may be mutually agreed upon by the executives of the governments joining in the same, whenever the governments so invited, or any three of them, shall have signified their willingness to unite in the same.

"The President shall, by and with the advice and consent of the Senate, appoint three commissioners, who shall attend such conference on behalf of the United States, and shall report the doings thereof to the President, who shall transmit the same to Congress.

"Said commissioners shall each receive the sum of two thousand five hundred dollars and their reasonable expenses, to be approved by the Secretary of State; and the amount necessary to pay such compensation and expenses is hereby appropriated out of any money in the treasury not otherwise appropriated.

"Sec. 3. That any holder of the coin authorized by this act may deposit the same with the treasurer or any a.s.sistant treasurer of the United States in sums not less than ten dollars, and receive therefor certificates of not less than ten dollars each, corresponding with the denominations of the United States notes. The coin deposited for or representing the certificates shall be retained in the treasury for the payment of same upon demand. Said certificates shall be receivable for customs, taxes, and all public dues, and, when so received, may be reissued.

"Sec. 4. All acts and parts of acts inconsistent with the provisions of this act are hereby repealed."

It was sent to the President, and was disapproved by him. His veto message was read in the House on the 28th of February, and upon the question whether the bill should pa.s.s, the objections of the President notwithstanding, it was adopted by a vote of yeas 196, nays 73. It pa.s.sed the Senate on the same day, by a vote of yeas 46, nays 19, and thus became a law.

I did not agree with the President in his veto of the bill, for the radical changes made in its terms in the Senate had greatly changed its effect and tenor. The provisions authorizing the Secretary of the Treasury to purchase not less than $2,000,000 worth of silver bullion per month, at market price, and to coin it into dollars, placed the silver dollars upon the same basis as the subsidiary coins, except that the dollar contained a greater number of grains of silver than a dollar of subsidiary coins, and was a legal tender for all debts without limit as to amount. The provision that the gain or seigniorage arising from the coinage should be accounted for and paid into the treasury, as under the existing laws relative to subsidiary coinage, seemed to remove all serious objections to the measure. In view of the strong public sentiment in favor of the free coinage of the silver dollar, I thought it better to make no objections to the pa.s.sage of the bill, but I did not care to antagonize the wishes of the President. He honestly believed that it would greatly disturb the public credit to make a legal tender for all amounts, of a dollar, the bullion of which was not of equal commercial value to the gold dollar.

The provision made directing the President to invite the governments of the countries composing the Latin Union, and of such other European countries as he deemed advisable, to unite with the United States in adopting a common ratio between gold and silver, has been made the basis of several conferences which have ended without any practical result, and the question of a single or double standard still stands open as the great disturbing question of public policy, affecting alike all commercial countries.

While this measure was pending in the Senate, a casual letter written by me ten years previously was frequently quoted, as evidence that I was then in favor of paying the bonds of the United States with United States notes, at that date at a large discount in coin.

The letter is as follows:

"United States Senate Chamber,} "Was.h.i.+ngton, March 20, 1868. } "Dear Sir:--I was pleased to receive your letter. My personal interests are the same as yours, but, like you, I do not intend to be influenced by them. My construction of the law is the result of a careful examination, and I feel quite sure an impartial court would confirm it, if the case could be tried before a court. I send you my views, as fully stated in a speech. Your idea is that we propose to repudiate or violate a promise when we offer to redeem the 'princ.i.p.al' in 'legal tender.' I think the bondholder violates his promise when he refuses to take the same kind of money he paid for the bonds. If the coin is to be tested by the law, I am right; if it is to be tested by Jay Cooke's advertis.e.m.e.nts, I am wrong.

I hate repudiation, or anything like it, but we ought not to be deterred from doing what is right by fear of undeserved epithets.

If, under the law as it now stands, the holder of the 5-20's can only be paid in gold, then we are repudiators if we propose to pay otherwise. If, on the other hand, the bondholder can legally demand only the kind of money he paid, he is a repudiator and an extortioner to demand money more valuable than he gave.

"Your truly, "John Sherman.

"Hon. A. Mann, Jr., Brooklyn Heights."

On the 26th of March, 1878, I wrote the following letter to Senator Justin S. Morrill, which was read by him in the debate, and, I think, was a conclusive answer to the erroneous construction put upon my letter to Mann:

"My Dear Sir:--Your letter of the 24th inst. is received. I have noticed that my casual letter to Dr. Mann, of the date of March 20, 1868, inclosing a speech made by me, has been frequently used to prove that I have changed my opinion since that time as to the right of the United States to pay the princ.i.p.al of the 5-20 bonds in legal tenders. This would not be very important, if true, but it is not true, as I never have changed my opinion as to the technical legal right to redeem the princ.i.p.al of the 5-20 bonds in legal tenders, but, as you know and correctly state, have always insisted that we could not avail ourselves of this legal right until we complied, in all respects, with the legal and moral obligations imposed by the legal tender note, to redeem it in coin on demand or to restore the right to convert it into an interest- bearing government bond. The grounds of this opinion are very fully stated in the speech made February 27, 1868, referred to in the letter to Dr. Mann, and in a report on the funding bill made by me from the committee on finance, December 7, 1867.

"If my letter is taken in connection with the speech which it inclosed and to which it expressly referred, it will be perceived that my position there is entirely consistent with what it is now, and time has proven that, if the report of the committee on finance had been adopted, we would long since have reached the coin standard, with an enormous saving of interest, and without impairing the public credit. My position was, that while the legal tender act made United States notes a legal tender for all debts, private and public, except for customs duties and interest of the public debt, yet we could not honestly compel the public creditors to receive United States notes in the payment of bonds until we made good the pledge of the public faith to pay the notes in coin. That promise was printed on the face of the notes when issued, was repeated in several acts of Congress, and was declared valid and obligatory by the Supreme Court.

"From the first issue of the legal tender note, which I heartily supported and voted for, I have sought to make it good, to support, maintain and advance its value. It was in the earnest effort to restore to the greenback the right to be converted, on the demand of the holder, into a five per cent. bond and, as soon as practicable, into coin, that I made the speech referred to, resisting alike the demand of those who wished to exclude United States notes from the operation of funding and the large cla.s.s of persons who wished to cheapen, degrade and ultimately repudiate them. In all my official connection with legislation as to legal tender notes, I have but one act to regret and to apologize for, and that is my acquiescence in the act of March 3, 1863, which, under the pressure of war and to promote the sale of bonds, took away from the holders of these notes the right to convert them into interest-bearing securities.

This right might properly have been suspended during the war, but its repeal was a fatal act, the source and cause of all the financial evils we have suffered and from which we cannot recover until we restore that right or redeem on demand our notes in coin.

"The speech referred to, and which I have recently read by reasons of the reference to it in the letter to Dr. Mann, will clearly show that I have not been guilty of inconsistency or a change of opinion --the most pardonable of all offenses--but then insisted, as I now insist, that no discrimination should be made against the note holder, but that until we are ready to pay him in coin he should be allowed, at his option, to convert his money into a bond at par.

Until then our notes are depreciated by our wrongful act, and we have no right to take advantage of our own wrong by forcing upon the bondholders the notes we refuse to receive. This is the precise principle involved in the act to strengthen the public credit, approved March 18, 1869. That act did not in any respect change the legal and moral obligations of the United States, but expressly provides that none of the interest-bearing obligations not already due shall be redeemed or paid before maturity, unless at such time as the United States notes shall be convertible into coin, at the option of the holder. And the act further 'solemnly pledges the public faith to make provisions, at the earliest practicable period, for the redemption of United States notes in coin.'

"This is in exact harmony with the position I held when I wrote the letter to Dr. Mann and that I now maintain, the primary principle being that the United States notes shall first be brought to par in coin before they shall be forced upon the public creditor in payment of his bonds. This act is the settled law, and whatever any man's opinions were before it pa.s.sed, he would a.s.sume a grave responsibility who would seek to evade its terms, weaken its authority or change its provisions. It has entered into every contract made since that time. It has pa.s.sed the ordeal of four Congresses and two elections for Presidents. It cannot be revoked without public dishonor. So far as the bondholder is concerned, it is an executed law. Over $700,000,000 of bonds have been redeemed in coin under it, and the civilized world regards all the remainder as covered by its sanction, and in their faith in it our securities have become the second only in the markets of the world. This law is not yet quite executed so far as the note holder is concerned.

His note is not yet quite as good as coin. Congress has debated ever since its pa.s.sage the best mode to make it good. The Senate in 1870 provided, in the third section of the refunding act, as it pa.s.sed that body, that these notes might be converted into four per cent. bonds, but the House would not concur. Everybody can now see that if this had been done these notes would now be at par in coin. Other expedients were proposed, and finally the resumption act was pa.s.sed, and, if undisturbed, is now on the eve of execution.

"The promise made in 1862, and so often repeated, is about to be fulfilled. Agitation on collateral questions may delay it, but the obligation of public faith, written on the face of every United States note and sacredly pledged by the act to strengthen the public credit, will give us neither peace nor a.s.sured prosperity until it is fulfilled. Public opinion may vibrate, and men and parties may array themselves against the fulfillment of these public promises, but in time they will be fulfilled, and I think the sooner the better. Pardon me for this long answer to your note, but I have no time to condense it.

"Very respectfully, "John Sherman."

Relief from the fear of the enactment of the Bland bill, and the limitation of the amount of silver dollars to be coined, removed the great impediment to the sale of four per cent. bonds, for refunding purposes, and the progress toward specie payments.

As already indicated, I had concluded to terminate the existing contract with the syndicate, and to make the sales directly through national bank depositaries, and the treasury and sub-treasuries of the United States. I therefore gave August Belmont & Co. the following notice:

"Treasury Department, January 14, 1878.

"Messrs. August Belmont & Co., New York.

"Gentlemen:--In compliance with the second clause of the contract between the Secretary of the Treasury and yourselves and a.s.sociates, of the date of June 9, 1877, for the sale of four per cent. bonds, I give you notice that from and after the 26th day of January instant that contract is terminated. It is the desire of the President, in which I concur, to open subscriptions in the United States to the four per cent. bonds in a different way from that provided in our contract, and therefore this notice is given. I sincerely hope to have your active co-operation in the new plan, and am disposed, if you are willing, to continue in substance, by a new contract with you, the sale of these bonds in European markets, and invite your suggestions to that end.

"Very respectfully, "John Sherman, Secretary."

I received from them the following answer:

"New York, January 15, 1878.

"Hon. John Sherman, Secretary of the Treasury, Was.h.i.+ngton.

"Dear Sir:--We beg to acknowledge receipt of your favor of the 14th instant, notifying us of the termination of the contract of June 9, 1877, for the sale of four per cent. bonds, on the 29th of this month, which we have communicated to the a.s.sociates here and in London.

"We have also communicated to our friends in London your willingness to continue the contract for the sale of the four per cent. bonds in Europe, with such modifications as may become necessary, and as soon as we have received their views we shall take pleasure in writing to you again for the purpose of appointing a conference on the subject.

"In the meantime, we remain, very respectfully,

"Aug. Belmont & Co."