Recollections of Forty Years in the House, Senate and Cabinet Part 79

The 5-20 bonds having been paid off or called, the department proceeded, as soon as practicable, to execute the laws of January 25 "to facilitate the refunding of the national debt," and February 26 "to authorize the issue of certificates of deposit in aid of the refunding of the public debt."

On the 16th of April I published the offer of $150,000,000 four per cent. bonds at one-half of one per cent. above par and accrued interest, and reserved $44,566,300 of these bonds for the conversion of ten dollar refunding certificates.

The following telegrams, addressed to the Secretary of the Treasury on the 17th of April, tell the result:

From the Bank of New York National Banking a.s.sociation, New York:

"Send two millions four per cent. bonds under terms of to-day's dispatch."

From Chase National Bank, New York:

"We have subscribed for half million dollars four per cent. bonds on terms just issued. Can we deposit our securities at the treasury here, as heretofore?"

From First National Bank, New York:

"Please enter subscription this date for ten million dollars, and reserve further amount of fifteen millions, awaiting our letter.

Please make no announcement of either to-day, for reasons will explain."

From Bank of New York National Banking a.s.sociation, New York:

"Send seventy-five certificates ten thousand each, fifty of five thousand each, four per cents., in name of I. & S. Wormser. Also four hundred bonds five hundred each, three hundred of one thousand each; in all, one million five hundred thousand. Certificate deposit by mail."

From Baltzer and Lichtenstein, New York:

"We subscribe to-day through the National Bank of the state for one million fours."

From National Bank of the State of New York:

"We confirm dispatch of Baltzer and Lichtenstein order one million four per cent. consols, and order, in addition to that and our previous dispatch, one million more, half each coupon and registered."

Bank of New York National Banking a.s.sociation, New York:

"We take two million more fours; particulars later."

From National Bank of the State of New York:

"Please forward immediately four million United States four per cent. consols."

"Please forward three hundred thousand registered and two hundred thousand coupons four per cent. consols. Particulars by mail."

"Please forward one million four per cent. consols coupons."

"Please forward immediately fifteen hundred thousand United States four per cent. consols additional to all former subscriptions."

From Bank of New York National Banking a.s.sociation:

"Send one hundred and twenty certificates, ten thousand each, in name of I. & S. Wormser; also eight hundred coupon bonds, one thousand each, in all, two million fours. Certificate by mail."

"We subscribe for four millions fours; this is in addition to all other telegrams. Certificates by mail."

From Continental National Bank, New York:

"We subscribe to-day two million four per cents., name Hatch & Foote. Particulars by mail."

From First National Bank, New York:

"Please enter our subscription under this date for one hundred and fifty million dollars four per cent. bonds and forty million dollars refunding certificates, in all, one hundred and ninety million dollars, under terms of your circulars of April 16 and March 7.

These subscriptions are for this bank and its a.s.sociates. Will see you to-morrow morning. This is repet.i.tion of dispatch sent to the department."

From National Bank, State of New York:

"Confirming previous dispatches covering subscriptions of seven million five hundred thousand dollars to four per cent. loan, please forward additional two millions coupon bonds."

From Bank of New York National Banking a.s.sociation:

"We subscribe for one million four per cents. Certificates of deposit by mail to-morrow."

From National Bank, State of New York:

"Please forward immediately one million more United States four per cent. consols, making a total, together with former subscriptions, of ten million five hundred thousand."

I sent the following telegram to the First National Bank of New York:

"Your telegram covering one hundred and ninety million consols staggers me. Your telegram for twenty-five million received, and entered at two o'clock. About thirty million from other parties were received and entered before your last telegram. Will wait till letters received. What is the matter? Are you all crazy?"

On the 18th the bids were carefully a.n.a.lyzed and accepted in the order in which they were received. The bid of the First National Bank was made on the behalf of an a.s.sociation of banks and bankers.

I declined their offer for refunding certificates and accepted their offer for $111,000,000.

I wrote to Conant, April 18, as follows:

"Since I wrote you the letters yesterday respecting the recent circular of April 16, I have sold the whole of the $150,000,000 of bonds offered therein; $39,000,000 were sold to sundry banks in the city of New York, and the residue, $111,000,000, were sold to an a.s.sociation of banks and bankers through First National Bank.

This unexpected and agreeable _denouement_ of our refunding operations will supersede much that I have written you. I received and answered your telegram of to-day. Arrangements will be made with the new a.s.sociates for delivery of four per cent. consols and the receipt of called bonds in London.

"Although I have given notice that I will feel at liberty to do so after the 4th of May, I prefer that you will postpone any new arrangement for delivery to other parties until the 10th; hoping that before that time Messrs. J. S. Morgan & Co. will be able to close out the balance of their last subscription."

On the same day I made a call for $160,000,000 10-40 bonds, being all of such bonds outstanding, except an amount that would be covered by the proceeds of ten dollar refunding certificates. The sale of these certificates gave the department a great deal of trouble. The object and purpose of the law was to secure to persons of limited means an opportunity to purchase, at par, certificates of indebtedness bearing four per cent. interest. As they could be converted at pleasure into 10-40 bonds of small denominations, it was thought they would be promptly taken by the persons for whom they were designed. They were sold in limited amounts to individuals at post offices, but as they were, when converted into bonds, worth a premium, bankers and others hired men to stand in line and purchase certificates. This was a practical fraud on the law, and was mainly conducted in the cities, and where done the sale was discontinued.

The great body of the certificates were taken by the cla.s.s of persons for whom they were designed. In a brief period they were sold, and the proceeds were in the treasury.

On the 21st of April I made the final call for all outstanding 10- 40 bonds. With this call the refunding operations were practically at an end for the time. A good deal of correspondence was had as to priority of bids and sales of refunding certificates, but this was closed, at the end of ninety days, by the full payment of the called bonds, and the subst.i.tution of bonds bearing a lower rate of interest. This was accomplished without the loss of a dollar, or, so far as I can recall, without a lawsuit.