760 



REFUNDING THE NATIONAL DEBT. 



evident that until the credit of the country 

 could be considerably advanced no successful 

 steps toward refunding under this law could 

 be taken. It will also be seen by that table 

 that, after the passage of the act of March 18, 

 1869, the market value of United States se- 

 curities uniformly and rapidly increased. So 

 rapid was this advance that, in February, 1871, 

 it was believed that sales of five per cents could 

 be made ; and, accordingly, on the 28th of that 

 month Secretary Boutwell gave public notice 

 that on and after the 6th of the following 

 March books would be opened in this country 

 and in Europe for subscriptions to the bonds 

 issued under the refunding act. All the na- 

 tional banks in this country, and a large num- 

 ber of bankers both here and in Europe, were 

 authorized to receive subscriptions. On the 

 1st of August following, the subscriptions to 

 the new five per cent, loan amounted to $65,- 

 775,550, mainly made by national banks, and a 

 like amount of six per cent, bonds was retired. 

 Early in that month an agreement was en- 

 tered into with certain bankers in Europe and 

 in the United States, by the terms of which 

 the parties subscribing had a right to subscribe 

 for the remainder of $200,000,000 of said bonds, 

 by giving notice thereof at any time previous 

 to the 1st of April next succeeding, and by 

 subscribing for $10,000,000 at once, and an 

 average of at least $5,000,000 of bonds per 

 month during the intervening time, subject to 

 the right of the national banks to subscribe 

 for $50,000,000 within sixty days from the 

 25th day of August. It was also agreed that 

 the subscriptions should be made through na- 

 tional banks, and that certificates of deposit 

 therefor might be issued by said banks to the 

 Secretary of the Treasury; that the bonds 

 should be lodged with the Treasurer of the 

 United States to the amount of the deposit ; 

 and that the banks should be made deposita- 

 ries for this purpose under the provisions of 

 the national banking act. Under this arrange- 

 ment was initiated the plan by which the Gov- 

 ernment paid interest on the bonds called in 

 and interest on the bonds issued for a period 

 not exceeding three months in any one case. 

 Secretary Boutwell, in his annual report to 

 Congress for 1871, explained the transaction 

 as follows : 



By the act establishing the national banking system 

 the Secretary of the Treasury was authorized to make 

 them depositaries of any public money, except receipts 

 from customs ; and the act authorizing the refunding 

 of the national debt directed the Secretary of the 

 Treasury to give three months' notice of the payment 

 of any bonds which, in such notice, might be speci- 

 fied and called for payment. In the same act it was 

 provided that the money received for the new bonds 

 should be used only in payment of bonds outstanding, 

 known as five-twenty bonds. The statute proceeded 

 upon the idea that the holders of five-twenty bonds 

 should receive three months' interest upon their bonds 

 after notice should be given by the Government. As 

 this notice could be given safely only upon subscrip- 

 tions already made or secured, the general necessary 

 result, even m case the money were paid into and held 



in the Treasury of the United States, would be a loss 

 of interest for three months. 



It was further agreed that the subscribers 

 should receive as commissions whatever might 

 remain of the half of one per cent, allowed by 

 law upon the $200,000,000 after paying the 

 cost of preparing and issuing the bonds. Un- 

 der this contract the remainder of the $200,- 

 000,000 offered was sold, and the transactions 

 were completed before the 1st of April, 1872. 



On January 23, 1873, Secretary Boutwell 

 made another contract with certain bankers, 

 in which they agreed to take at least $10,000,- 

 000 of the five per cent, bonds, with a right to 

 subscribe for the remaining $300,000,000. The 

 other conditions of the contract were substan- 

 tially the same as those of the agreement above 

 mentioned. 



Under the contract there were sold by Sec- 

 retary Boutwell $50,000,000 of the five per 

 cent bonds. 



This arrangement appears to have been 

 continued by Secretary Richardson, Mr. Bout- 

 well's successor, who during his term of office 

 sold under its provisions $51,494,700 of the 

 five per cents, and also sold in June, 1874, to 

 other parties, by special agreement, for one 

 fourth of one per cent, commission, an addi- 

 tional $6,000,000 of the five per cent, bonds, 

 the subscribers to pay the accrued interest to 

 date of the maturity of the bonds called against 

 their subscriptions, for all of which six per 

 cent, bonds were retired. He also, under the 

 act of December 17, 1873, issued of the five 

 per cents $13,957,000 in exchange for an equal 

 amount of the five per cent, loan of June 14, 

 1858. 



On the 2d of July, 1874, Secretary Bris- 

 tow, successor to Secretary Richardson, invited 

 sealed proposals for the balance of the five per 

 cents which remained unsold, $178,548,300, 

 and in response thereto received various bids 

 aggregating in amount $75,933,550. Of these 

 bids there were accepted $10,113,550, at par 

 and above. The proposition of an association 

 of bankers was also accepted for the negotia- 

 tion of $45,000,000 of the bonds, with an op- 

 tion for the balance of the loan ; the subscrib- 

 ers to pay par and interest accrued to date of 

 maturity of each call, the calls to be of even 

 date with the subscription, and a commission 

 of one fourth of one per cent, to be allowed 

 upon the amount taken, the parties subscrib- 

 ing to pay all expenses incurred in preparing 

 and issuing the bonds. The bonds were taken 

 in accordance with the contract. The contract 

 was renewed January 29, 1875, with conditions 

 slightly modified, so that the contracting par- 

 ties were allowed a commission of one half of 

 one per cent, instead of one fourth of one per 

 cent. ; and under its terms the balance of five 

 per cents was sold, and for the entire sales a 

 like amount of six per cents was retired. 



The entire amount of five per cents author- 

 ized by the refunding act having been thus 

 disposed of by Secretary Bristow, Secretary 



