FINANCES OF THE UNITED STATES. 



253 



by the Government to contractors for the 

 necessary supplies of the army and navy were 

 sold at a discount of from ten to twenty per cent. 

 Under these circumstances the Treasury was 

 relieved by a loan of nearly $700,000,000 in 

 seven and three-tenths notes. This relief, 

 however, left the Government with $1,296,- 

 834,123 of the public debt, consisting of vari- 

 ous forms of temporary securities, $433,160,- 

 569 of United States notes, and $26,344,742 of 

 fractional currency. Of this temporary debt, 

 portions were maturing daily, and all of it, in- 

 cluding $18,415,000 of the funded debt, was 

 to be provided for within a period of three 

 years. The seven-thirty notes were, by law, 

 and the terms of the loan, convertible at matu- 

 rity, at the will of the holder, into five-twenty 

 bonds, or payable, like the rest of these tem- 

 porary obligations, in lawful money. Certifi- 

 cates of indebtedness were also maturing at 

 the rate of from $15,000,000 to $20,000,000 

 per month ; and in addition to the five per cent, 

 notes which matured in January following, 

 and the compound interest notes which were 

 payable at various times within a period of 

 three years, there were $830,000,000 of seven- 

 thirty notes, which would become due as fol- 

 lows: 



August 15, 1867 $300,000,000 



June 15, 1868 300,000,000 



July 15, 1868 230,000,000 



The course pursued by the Department in 

 this position of the debt is thus stated by the 

 Secretary : 



The policy of the Secretary was simply, first, to 

 put and keep the Treasury in such condition as 

 not only^ to be prepared to pay all claims upon 

 presentation, but also to be strong enough to pre- 

 vent the success of any combinations that might 

 be formed to control its management; and second, 

 to take up quietly, in advance of their maturity, 

 ^7 payment or conversion, such portions of the 

 temporary debt as would obviate the necessity of 

 accumulating large currency balances in the Treasury 

 and at the same time relieve it from the danger of 

 being forced to a further issue of legal-tender notes, 

 or to a sale of bonds, at whatever price they might 

 command. In carrying out this policy it seemed 

 also to be the duty of the Secretary to have due 

 regard to the interests of the people, and to prevent, 

 as far as possible, the work or funding from disturb- 

 ing legitimate business. As financial trouble has 

 almost invariably followed closely upon the termi- 

 nation of protracted wars, it was generally feared, 

 as has already been remarked, that such trouble 

 would be unavoidable at the close of the great and 

 expensive war in which the United States had been 

 for four years engaged. This, of course, it was 

 important to avoid, as its occurrence might not only 

 render funding difficult, but might prostrate those 

 great interests upon which the Government depended 

 tor its revenues. It was and constantly has been, 

 therefore, the aim of the Secretary so to administer 

 the Treasury, while borrowing money and funding 

 the temporary obligations, as to prevent a com- 

 mercial crisis, and to keep the business of the 

 country as steady as was possible on the basis of 

 a "redeemable and constantly fluctuating currency. 

 Whether his efforts have contributed to this end 

 or not he does not undertake to say, but the fact 

 is unquestioned that a great war has been closed, 

 large loans have been effected, heavy revenues have 



been collected and some thirteen hundred millions of 

 dollars of temporary obligations have been paid 

 or funded, and a great debt brought into manageable 

 shape, not only without a financial crisis, but with- 

 out any disturbance to the ordinary business of the 

 country. To accomplish these things successfully, 

 the Secretary deemed it necessary, as lias been before 

 stated, that the Treasury should be kept constantly 

 in a strong condition, with power to prevent the 

 credit of the Government and the great interests 

 of the people from being placed at the mercy of 

 adverse influences. Notwithstanding the magnitude 

 and character of the debt, this power the Treasury 

 has for the last three years possessed; and it has 

 been the well-known existence, rather than the 

 exercise of it, which has in repeated instances saved 

 the country from panic and disaster. The gold 

 reserve, the maintenance of which has subjected the 

 Secretary to constant and bitter criticism, has given 

 a confidence to the holders of our securities, at home 

 and. abroad, 'by the constant evidence which it ex- 

 hibited of the ability of the Government, without 

 depending upon purchases in the market, to pay 

 the interest upon the public debt, and a steadiness 

 to trade, by preventing violent fluctuations in the 

 convertible value of the currency, which have been a 

 more than ample compensation to the country for 

 any loss of interest that may have been sustained 

 thereby. If the gold in the Treasury had been sold 

 down to what was absolutely needed for the payment 

 of the interest on the public debt, not only would 

 the public credit have been endangered, but the 

 currency; and, consequently, the entire business 

 of the country would have been constantly subject 

 to the dangerous power of speculative combinations. 



One or two questions of importance in con- 

 nection with the national debt were presented 

 during the year, and attracted much attention. 

 The first related to the currency in which the 

 five-twenty bonds should be paid, whether in 

 gold or in Government's notes (greenbacks). 

 Those who advocated the payment of them 

 in Government notes, urged that the five- 

 twenty bonds were issued intentionally with- 

 out any provision in the acts requiring pay- 

 ment in gold, except as to the interest, and 

 with a reserved purpose that the Government 

 should be free to avail itself of the privilege of 

 redeeming them pending the suspension of 

 specie payments ; and that with this view, the 

 bonds were made payable, at the option of the 

 Government, on the expiration of five years 

 from the date of issue, in whatever might 

 then be the legal-tender money of the coun- 

 try. This option, it was argued, was provided 

 against by the probable contingency that, after 

 the conclusion of peace, the Government might 

 have an opportunity of taking up its obliga- 

 tions in the same depreciated paper for which 

 it issued them, and of renegotiating its loans 

 under the circumstances of the improved cred- 

 it resulting from the restoration of the national 

 authority. 



To counteract these views, the subject of 

 specie payments was brought forward and 

 extensively discussed both in Congress and 

 by the public press. No decisive action was 

 taken on either proposition during the year. 

 The following are the acts of Congress authoriz- 

 ing the issue of five-twenty bonds and also all 

 the acts of Congress authorizing the issue of 

 bonds or notes : 



