Recollections of Forty Years in the House, Senate and Cabinet Part 73

"Very truly yours, "Whitelaw Reid.

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

The President would not make other appointments during the session of the Senate, as the implication would arise that the rejections were based upon opposition to the persons named, and he, therefore, postponed any action until the close of the session.

After the close of the session, on the 11th of July, 1878, the President gave temporary commissions to Edwin A. Merritt as collector to succeed C. A. Arthur, and Silas W. Burt to succeed Cornell as naval officer, and these gentlemen entered upon the duties of their respective offices.

On the following December it became necessary to send their nominations to the Senate. I had definitely made up my mind that if the Senate again rejected them I would resign. I would not hold an office when my political friends forced me to act through unfriendly subordinates. I wrote a letter to Senator Allison as follows:

"Was.h.i.+ngton, D. C., January 31, 1879.

"My Dear Sir:--I would not bother you with this personal matter, but that I feel the deepest interest in the confirmation of General Merritt, which I know will be beneficial to us as a party, and still more so to the public service. Personally I have the deepest interest in it because I have been unjustly a.s.sailed in regard to it in the most offensive manner. I feel free to appeal to you and Windom, representing as you do western states, and being old friends and acquaintances, to take into consideration this personal aspect of the case. If the restoration of Arthur is insisted upon, the whole liberal element will be against us and it will lose us tens of thousands of votes without doing a particle of good. No man could be a more earnest Republican than I, and I feel this political loss as much as anyone can. It will be a personal reproach to me, and merely to gratify the insane hate of Conkling, who in this respect disregards the express wishes of the Republican Members from New York, of the great body of Republicans, and, as I personally know, runs in antagonism to his nearest and best friends in the Senate.

"Surely men like you and Windom, who have the courage of your convictions, should put a stop to this foolish and unnecessary warfare. Three or four men who will tell Conkling squarely that, while you are his friends, you will not injure our party and our cause, would put a stop to this business. Arthur will not go back into the office. This contest will be continued, and the only result of all this foolish madness will be to compel a Republican administration to appeal to a Democratic Senate for confirmation of a collector at New York. It is a most fatal mistake.

"I intended to call upon some of the Senators this morning, but I am very much pressed, and will ask you to show this in confidence to Senator Windom, as I have not time to write him.

"Very truly yours, "John Sherman.

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

I wrote to Senator Justin S. Morrill a much longer letter, giving reasons in detail in favor of confirmation and containing specific charges of neglect of duty on the part of Arthur and Cornell, but I do not care to revive them.

Conkling was confident of defeating the confirmations, and thus restoring Arthur and Cornell. The matter was decided, after a struggle of seven hours in the Senate, by the decisive vote in favor of confirmation of Merritt 33, and against him 24, in favor of Burt 31, against 19. From this time forward there was but slight opposition to the confirmation of Hayes' appointments. The reforms proposed in the customhouse at New York were carried out.

This termination of the controversy with Arthur and Cornell was supported by public opinion generally throughout the United States.

I insert a letter from John Jay upon the subject.

"N. Y. C. H., 24 Was.h.i.+ngton Square,} "New York, February 3, 1879. } "The Honorable John Sherman.

"My Dear Sir:--Allow me to thank you for the two papers you have kindly sent me, in reference to the customhouse, the last of which, the firm message of the President with your second conclusive letter, reached me to-day.

"Whatever may be the result in the Senate, and I can scarcely believe that, after so full an exposure, the nomination will be rejected, the plain-thinking people of this country will appreciate the att.i.tude taken by the government as the only one consistent with the duty of the executive and the general welfare.

"It will give new hope and confidence to the great body of Republicans, and to many who can hardly be called Republicans, who look to the administration for an unflinching adherence--no matter what the opposition--to the pledge of reform on which the party was successful in the last election, and on fidelity to which depends its safety in the next.

"The country is infinitely indebted to you for redeeming its faith by a return to honest money. A new debt will be incurred of yet wider scope if you succeed in liberating the custom service from the vicious grip of the immoral factions of office holders and their retainers, who have made it a scandal to the nation with such gigantic loss to the treasury and immeasurable damage to our commerce, industry and morals.

"I hope that the President will feel that all good citizens who are not blinded by prejudice or interest are thoroughly with him in the policy and resolve of his message that the customhouse shall no longer be 'a center of partisan political management.'

"With great regard I have the honor to be, dear Mr. Sherman,

"Faithfully yours, "John Jay."

CHAPTER x.x.xVI.

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 a.s.sistant 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 cla.s.ses 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 subst.i.tution 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 acc.u.mulate 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 antic.i.p.ated 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 const.i.tutes 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 antic.i.p.ation of resumption, and in view of the fact that the redemption of United States notes is mandatory only at the office of the a.s.sistant treasurer in the city of New York, it was deemed important to secure the co-operation of the a.s.sociated 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 a.s.sistant 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 acc.u.mulation 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 pa.s.sed; 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 antic.i.p.ated that the treasury at any time can readily obtain coin to reinforce the reserve already acc.u.mulated. 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 acc.u.mulate 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 princ.i.p.al 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 princ.i.p.al 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 const.i.tute any superintendent of a mint, or a.s.sayer of any a.s.say office, an a.s.sistant 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 a.s.say 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. .h.i.therto 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 h.o.a.rd 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 a.s.sured 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 a.s.sumed 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 a.s.sistant 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 a.s.sumed 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 unconst.i.tutional 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 acc.u.mulated 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 disburs.e.m.e.nt 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. . . .