154 



CONGRESS. (THE PRESIDENT'S MESSAGE.) 



purchases of silver than had been required under 

 previous laws, and providing that in payment for 

 such silver Treasury notes of the United States 

 should be issued payable on demand in gold or 

 silver coin at the discretion of the Secretary of the 

 Treasury. It was. however, declared in the act to 

 be "the established policy of the United Slates to 

 maintain the two metals on a parity with each 

 other upon the present legal ratio, or such ratio as 

 may be provided by law." In view of this declara- 

 tion, it. was not deemed permissible for the Secre- 

 tary of the Treasury to exercise the discretion in 

 terms conferred on him by refusing to pay gold on 

 these notes when demanded, because by such dis- 

 crimination in favor of the gold dollar the so-called 

 parity of the two metals would be destroyed, and 

 grave and dangerous consequences would be pre- 

 cipitated by affirming or accentuating the con- 

 stantly widening disparity between their actual 

 values" under the existing ratio. 



It thus resulted that the Treasury notes issued in 

 payment of silver purchases under the law of 1890 

 were necessarily treated as gold obligations, at the 

 option of the holder. These notes on the 1st day 

 of November, 1893, when the law compelling the 

 monthly purchase of silver was repealed, amounted 

 to more than $155,000,000. The notes of this de- 

 scription now outstanding, added to the United 

 States notes still undiminished by redemption or 

 cancellation, constitute a volume of gold obliga- 

 tions amounting to nearly $500,000,000. These 

 obligations are the instruments which, ever since 

 we have had a gold reserve, have been used to de- 

 plete it. 



This reserve, as has been stated, had fallen in 

 April, 1893, to $97,011,330. It has from that time 

 to the present, with very few and unimportant up- 

 ward movements, steadily decreased, except as it 

 has been temporarily replenished by the sale of 

 bonds. 



Among the causes for this constant and uniform 

 shrinkage in this fund may be mentioned the great 

 falling off of exports under the operation of the 

 tariff law until recently in force, which crippled 

 our exchange of commodities with foreign nations 

 and necessitated to some extent the payment of our 

 balances in gold; the unnatural infusion of silver 

 into our currency, and the increasing agitation for 

 its free and unlimited coinage, which have created 

 apprehension as to our disposition or ability to 

 continue gold payments ; the consequent hoarding 

 of gold at home and the stoppage of investments of 

 foreign capital, as well as the return of our securi- 

 ties already sold abroad ; and the high rate of for- 

 eign exchange, which induced the shipment of our 

 gold to be drawn against, as a matter of speculation. 



in consequence of these conditions, the gold re- 

 serve on the 1st day of February, 1894, was re- 

 duced to $65,438,377, having lost 'more than $31,- 

 000,000 during the preceding nine months, or since 

 April, 1893. Its replenishment being necessary, 

 and no other manner of accomplishing it being 

 possible, resort was had to the issue and sale of 

 bonds provided for by the resumption act of 1875. 

 Fifty millions of these bonds were sold, yielding 

 $58,633,295.71, which was added to the reserve fund 

 of gold then on hand. As a result of this opera- 

 tion, this reserve, which had suffered constant and 

 large withdrawals in the meantime, stood, on the 

 6th day of March, 1894, at the sum of $107.446,802. 

 Its depletion was. however, immediately thereafter 

 so accelerated thafc on the 30th day of June, 1894, 

 it had fallen to x<> 1873.025, thus losing by with- 

 drawals more than $42.000,000 in five months, and 

 dropping slightly below its situation when the sale 

 of $50,000,000 in bonds was effected for its replen- 

 ishment. 



This depressed condition grew worse, and on the 

 24th day of November, 1894, our gold reserve being 

 reduced to $57,669,701, it became necessary to again 

 strengthen it. This was done by another sale of 

 bonds amounting to $50,000,000, from which there 

 was realized $58,538.500, with which the fund was 

 increased to $111,142,021 on the 4th day of Decem- 

 ber, 1894. 



Again disappointment awaited the anxious hope 

 for relief. There was not even a lull in the exas- 

 perating withdrawals of gold. On the contrary, 

 they grew larger and more persistent than eve'r. 

 Between the 4th day of December, 1894, and early 

 in February, 1895, a period of scarcely more than 

 two months after the second re-enforcement of our 

 gold reserve by the sale of bonds, it had lost by 

 such withdrawals more than $69,000,000, and had 

 fallen to $41,340,181. Nearly $43,000.000 had been 

 withdrawn within the month immediately preced- 

 ing this situation. 



In anticipation of impending trouble. I had, on 

 the 28th day of January, 1895. addressed a commu- 

 nication to the Congress, fully setting forth our 

 difficulties and dangerous position, and earnestly 

 recommending that authority be given the Secre- 

 tary of the Treasury to issue bonds bearing a low 

 rate of interest, payable by their terms in gold, for 

 the purpose of maintaining a sufficient gold re- 

 serve, and also for the redemption and cancellation 

 of outstanding United States notes and the Treas- 

 ury notes issued for the purchase of silver under 

 the law of 1890. This recommendation did not, 

 however, meet with legislative approval. 



In February, 1895, therefore, the situation was 

 exceedingly critical. With a reserve perilously 

 low and a refusal of congressional aid, everything 

 indicated that the end of gold payments by the 

 Government was imminent. The results of prior 

 bond issues had been exceedingly unsatisfactory, 

 and the large withdrawals of gold immediately 

 succeeding their public sale in open market gave 

 rise to a reasonable suspicion that a large part of 

 the gold paid into the Treasury upon such sales 

 was promptly drawn out again by the presentation 

 of United States notes or Treasury notes and found 

 its way to the hands of those who had only tempo- 

 rarily parted with it in the purchase of bonds. 



In this emergency, and in view of its surround- 

 ing perplexities, it became entirely apparent to 

 those upon whom the struggle for safety was de- 

 volved not only that our gold reserve must, for the 

 third time in less than thirteen months, be restored 

 by another issue and sale of bonds bearing a high 

 rate of interest and badly suited to the purpose, 

 but that a plan must be adopted for their disposi- 

 tion promising better results than those realized on 

 previous sales. An agreement was therefore made 

 with a number of financiers and bankers whereby 

 it was stipulated that bonds described in the re- 

 sumption act of 1875, payable in coin thirty years 

 after their date, bearing interest at the rate of 4 

 per cent, per annum, and amounting to about $62,- 

 000.000, should be exchanged for gold, receivable 

 by weight, amounting to a little more than $65,- 

 000.000. 



This gold was to be delivered in such install- 

 ments as would complete its delivery within about 

 six months from the date of the contract, and at 

 least one half of the amount was to be furnished 

 from abroad. It was also agreed by those supply- 

 ing this gold that during the continuance of the 

 contract they would by every means in their power 

 protect the Government against gold withdrawals. 

 The contract also provided that if Congress would 

 authorize their issue, bonds payable by their terms 

 in gold and bearing interest at the rate of 3 per 

 cent, per annum might within ten days be substi- 



