290 



FINANCES OF THE UNITED STATES. 



paid shall cease at the expiration of three months 

 from the date of such notice. 



SEC. 4. That the Secretary of the Treasury is here- 

 by authorized, with any coin in the Treasury of the 

 United States which he may lawfully apply to such 

 purpose, or which may be derived from the sale of 

 any of the bonds the issue of which is provided for in 

 this act, to pay at par and cancel any six per cent, 

 bonds of the Unitea States of the kind known as 5-20 

 bonds which have become or shall hereafter become 

 redeemable by the terms of their issue. But the par- 

 ticular bonds so to be paid and cancelled shall in all 

 cases be indicated and specified by class, date, and 

 number, in order of their numbers and issue, begin- 

 ning with the first numbered and issued, in public 

 notice, to be given by the Secretary of the Treasury, 

 and in three months after the date of such public no- 

 tice the interest on the bonds so selected and adver- 

 tised to be paid shall cease. 



SEO. 5. That the Secretary of the Treasury is here- 

 by authorized, at any time within two years from the 

 passage of this act, to receive gold coin of the United 

 States on deposit for not less than thirty days, in 

 sums of not less than $100, with the Treasurer, or 

 any assistant treasurer of the United States author- 

 ized by the Secretary of the Treasury to receive the 

 same, who shall issue therefor certificates of deposit, 

 made in such form as the Secretary of the Treasury 

 shall prescribe, and said certificates of deposit shall 

 bear interest at a rate not exceeding two and a half 

 per cent, per annum ; and any amount of jjold coin 

 so deposited may be withdrawn from deposit at any 

 time after thirty days from the date of deposit, and 

 after ten days' notice and on return of said certificates : 

 Provided. That the interest on all such deposits shall 

 cease and determine at the pleasure of the Secretary 

 of the Treasury. And not less than twenty-five per 

 cent, of the coin deposited for or represented by said 

 certificates of deposits shall be retained in the Treas- 

 ury for the payment of said certificates ; and the 

 excess beyond twenty-five per cent, may bo applied, 

 at the discretion of the Secretary of the Treasury, to 

 the payment or redemption of such outstanding bends 

 of tlie United States, heretofore issued and known as 

 the 5-20 bonds, as he may designate under the pro- 

 visions of the fourth section of this act ; and any cer- 

 tificates of deposit issued as aforesaid may be received 

 at par, with the interest accrued thereon, in payment 

 for any bonds authorized to be issued by this act. 



SEC. 6. That the United States bonds purchased 

 and now held in the Treasury in accordanee with the 

 provisions relating to a sinking fund, of section five 

 of the act entitled " An act to authorize the issue of 

 United States notes, and for the redemption or fund- 

 ing thereof, and for funding the floating debt of the 

 United States," approved February 25, 1862, and all 

 other United States bonds which have been pur- 

 chased by the Secretary of the Treasury with surplus 

 funds in the Treasury, and now held in the Treasury 

 of the United States, snail be cancelled and destroyed, 

 a detailed record of such bond so cancelled and de- 

 stroyed to be first made in the books of the Treasury 

 Department. Any bonds hereafter applied to said 

 sinking fund, and all other United States bonds, re- 

 deemed or paid hereafter by the United States, shall 

 also in like manner be recorded, cancelled, and de- 

 stroyed, and the amount of the bonds of each class that 

 have been cancelled and destroyed shall be deduct- 

 ed respectively from the amount of each class of the 

 outstanding debt of the United States. In addition 

 to other amounts that may be applied to the redemp- 

 tion or payment of the public debt, an amount equal 

 to the interest on all bonds belonging to the aforesaid 

 sinking fund shall be applied, as the Secretary of the 

 Treasury shall from time to time direct, to the pay- 

 ment of the public debt, as provided for in section 

 five of the act aforesaid 5 and the amount so to be 

 applied is hereby appropriated annually for that pur- 

 pose out of the receipts for duties on imported goods. 



Approved, July 14, 1870. 



The outbreak of the war in Europe, soon 

 after the passage of this funding act by Con- 

 gress, rendered it impracticable to refund the 

 debt. A portion of the paper was manufac- 

 tured, and the preparation so far advanced that 

 whenever a favorable opportunity might arise 

 the loan may be offered and the bonds deliv- 

 ered without delay. The tendency of the war 

 to increase the demand for money in Europe, 

 and make it doubtful if the four and the four- 

 and a half per cent, bonds would be taken, in- 

 duced the Secretary of the Treasury to request 

 Congress, at its subsequent session, to authorize 

 the issue of three hundred millions additional 

 of bonds bearing interest at the rate of five per 

 cent., payable quarterly. 



With regard to the financial policy adopted 

 in connection with the proposed loan, and its 

 operation during the year, the Secretary of the 

 Treasury made the following explanation : 



In my annual report of last December (1869), I ad- 

 vised the COD tiauance of the existing system 01 taxa- 

 tion as an essential condition to the success of the 

 proposed loan. The circumstance that war was de- 

 clared between France and Prussia simultaneously 

 with .the passage of the loan bill put it out of the 

 power of the Department to make the negotiation, ns 

 had been expected. The largo revenues, however, 

 of the Government continuing without material 

 abatement until the present time, improved the 

 credit of the country, enabled the Treasury Depart- 

 ment, by weekly purchases, to reduce the amount of 

 surplus bonds offered for sale, and contributed to de- 

 preciate the market value of gold. 



I also expressed the opinion that the settled policy 

 of the country should contemplate a revenue sufficient 

 to meet the ordinary expenses of the Government, 

 pay the interest on the public debt, and from twenty- 

 five to fifty millions of dollars of the principal annu- 

 ally. The reduction of the public debt since the 30th 

 day of June last has been so great as to render it cer- 

 tain that the total reduction for the present fiscal year 

 will exceed $80,000,000. The natural increase of the 

 business of the country, during the next eighteen 

 months, is likely to be such as to show a surplus for 

 the fiscal year ending June 30, 1872, of about $40,- 



oea.000. 



The principal of the public debt, on the last day 

 of November, 1870, not deducting moneys on hand, 

 was $2,418,673,044.43. Of this amount $395,269,237.- 

 08 was represented by United States notes and frac- 

 tional currency, not bearing interest. The banks of 

 the country, acting within the authority of existing 

 lavrs, will require about $393,000,000 of bonds to be 

 placed on deposit as security for their circulation. 

 Should the present system of furnishing a paper cir- 

 culation for the country, partly by the Treasury and 

 partly by the national banks, be continued, or the 

 entire circulation be furnished bv the Treasury, or 

 by the banks, the credit of the United States will be 

 the security for the redemption of the notes. From 

 this view of the policy of the country it follows that 

 about $800,000,000 of the public debt will remain un- 

 paid, existing either in the form of Treasury notes in 

 circulation without interest, or in bonds owned by 

 the banks and held as security for the redemption of 

 their notes, and that only about $1,600,000,000 of the 

 principal or the debt is subject to payment. 



The financial prospect, although highly favorable, 

 is not such as to warrant important changes in the 

 revenue system at the present session of Congress ; 

 but should the result during the coming year meet 

 my expectations, it will be possible, at the December 

 session of the Forty-second Congress, to make a very 

 material reduction in the revenues without impairing 



