FINANCES OF THE UNITED STATES. 



325 



The process of refunding the debt has been 

 continued during the year, and the amount of 

 4 per cent, bonds sold prior to November 23d 

 was $100,270,900, of which $94,770,900 were 

 sold under the refunding act of July 14, 1870. 

 (Six per cent, bonds known as five-twenties to 

 an equal amount have been or will be redeemed 

 as calls mature. The large absorption of Uni- 

 ted States securities in the American market, 

 by reason of their return from Europe, to- 

 gether with the sale of the 4J per cent, bonds 

 for resumption purposes, tended to retard the 

 sale of the 4 per cents. It is estimated that 

 not more than $200,000,000 of United States 

 bonds are now held in Europe. Experience 

 has shown that the plan of selling bonds to all 

 subscribers on terms fixed by public advertise- 

 ment secures a more satisfactory distribution 

 for them, though their sales may be less. It 

 has been the desire to popularize the public 

 loans and bring them within easy reach of 

 every citizen who desires to invest his savings, 

 whether small or great, in these securities. 

 The popular loan of 1877, open to all alike by 

 public advertisement, absorbed $75,000,000 of 

 4 per cent, bonds, and during the present year 

 these bonds have heen sold in the same man- 

 ner. It is believed that without a change of 

 existing law the sale of these bonds will large- 

 ly increase, but it would appear advisable so to 

 modify the law that smaller sums may be in- 

 vested from time to time through popular sub- 

 scriptions, and that through the post-offices, 

 or other agents of the Government, the freest 

 opportunity may be given in all parts of the 

 country for such investments. The mode sug- 

 gested is, that the Treasury Department be au- 

 thorized to issue certificates of deposit of the 

 United States of the denomination of $10, 

 bearing interest at the rate of 3 '65 per cent, 

 per annum, and convertible at any time within 

 one year after their issue into the 4 per cent, 

 bonds authorized by the refunding act, and to 

 be issued only in exchange for United States 

 notes sent to the Treasury by mail or other- 

 wise. Such a provision of law, supported by 

 suitable regulations, would enable any person 

 readily, without cost or risk, to convert his 

 money into an interest-bearing security of the 

 United States, and the money so received 

 could be applied to the redemption of 6 per 

 cent, bonds. 



In anticipation of the resumption of specie 

 payments on January 1, 1879, the attention of 

 the Government has been directed to carry 

 out those measures designed in the act to fa- 

 cilitate it. These were the substitution of coin 

 for fractional currency by the coinage of free 

 gold, and by free banking. The action of the 

 Treasury Department in the way of preparing 

 and fortifying itself is thus described by the 

 Secretary: 



At the date of my annual report to Congress in 

 December, 1877, it was deemed necessary as a prep- 

 aration for resumption to accumulate in the Trea- 

 sury a coin reserve of at least 40 per cent, of the 



amount of United States notes outstanding. At 

 that time it was anticipated that under the provi- 

 sions 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 curren- 

 cy, 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. 

 On the principle of safety upon which the Depart- 

 ment was acting, that 40 per cent, of coin was the 

 smallest reserve upon which resumption could pru- 

 dently be commenced, it became necessary to in- 

 crease the coin reserve to $138,000,000. At the close 

 of the year 1877 this coin reserve, in excess of coin 

 liabilities, amounted to $63,016J050.97, of which 

 $15,000,000 were obtained by the sale of 4 per cent, 

 and $25,000,000 by the sale of 4 per cent, bonds, the 

 residue being surplus revenue. Subsequently, on 

 the llth 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 4* per cent, bonds for re- 

 sumption purposes. The bonds were sold at a pre- 

 mium of H per cent, and accrued interest, less a 

 commission of one half of 1 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 4 per 

 cent, bonds sold for resumption purposes, making 

 the aggregate amount of bonds sold for these "pur- 

 poses $95,500,000, of which $65,000,000 were 4* per 

 cent, bonds, and $30,500,000 4 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 23d day of November last, in excess of coin 

 sufficient to pay all accrued coin liabilities, was 

 $141,888,100, and constitutes the coin reserve pre- 

 pared for resumption purposes. This sum will be 

 diminished somewhat on the 1st of January, 1879, 

 by reason of the large amount of interest accruing 

 on that day in excess of the coin revenue received 

 meanwhile. 



In anticipation of resumption, and in view of the 

 fact that the redemption of United States notes is 

 mandatory only at the office of the Assistant Trea- 

 surer in the city of New York, it was deemed impor- 

 tant to secure the cooperation of the associated 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 As- 

 sistant Treasurer, in United States notes ; and, after 

 the 1st of January, United States notes are to be re- 

 ceived 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 accumulation of coin, 

 instead of increasing its price, as was feared by 

 many, has steadily reduced its premium in the mar- 

 ket. The depressing and ruinous losses that fol- 

 lowed the panic of 1873 had not diminished in 1875, 

 when the resumption act passed ; but every measure 

 taken in the execution or enforcement of this act has 

 tended to lighten these losses and to reduce the pre- 

 mium on coin, so that now it is merely nominal. 

 The present condition of our trade, industry, and 

 commerce, our ample reserves, and the general con- 

 fidence 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 



