REFUNDING THE NATIONAL DEBT. 



761 



Morrill, his successor, on the 24th of August, 

 1876, entered into & contract with certain bank- 

 era for the sale of the $300,000,000 of four and 

 a half per cents for refunding purposes, the 

 parties to he allowed one half of one per cent, 

 commission upon the amount they might take, 

 they to assume and defray all expenses incurred 

 in the preparation and issue of the bonds. Un- 

 der this arrangement there were sold np to 

 March 4, 1877, when Mr. Merrill's term of 

 office expired, about $90,000,000, for which 

 an equal amount of six per cent, bonds was 

 called. 



The credit of the country now rapidly ad- 

 vanced, and on April Gth Secretary Sherman, 

 who had succeeded Mr. Morrill, addressed a 

 letter to the associated bankers who had the 

 contract for four and a half per cent, bonds, 

 in which he announced that when the sales 

 reached $200,000,000 he proposed to withdraw 

 the bonds from the market. At that time the 

 four and a half per cents were somewhat be- 

 low par in Europe, and but little above par in 

 this country. They continued, however, to 

 appreciate, and before the 1st of July the 

 whole $200,000,000 were taken, of which 

 $185,000,000 were applied to refunding, and 

 $15,000,000, by the consent of the contracting 

 parties given on the llth of May, to resump- 

 tion purposes. 



On the 9th of June, 1877, a contract was 

 mode with certain bankers for the sale of four 

 per cent, bonds, with a proviso that the loan 

 should be open to public subscription for a 

 period of one month. This loan and the 

 method of selling it proved very popular, and 

 before the close of the thirty days during 

 which subscriptions were open to the public 

 at large, $75,490,550 of the bonds were sold, 

 of which $25,000,000 were reserved for re- 

 sumption and the remainder applied to refund- 

 ing purposes. 



The agitation by Congress of such measures 

 as a repeal of the resumption act, and the re- 

 establishing in the currency of the country of 

 the silver dollar, the issue of which had been 

 discontinued by the coinage act of 1873, some- 

 what alarmed investors, and retarded the fur- 

 ther sale of four per cent, bonds. The oppo- 

 nents of resumption, however, were not able 

 to repeal the resumption act, and the advo- 

 cates of remonetizing the silver dollar suc- 

 ceeded only in having the coin reissued in 

 amounts of not less than $2,000,000 nor more 

 than $4,000,000 per month on Government 

 account, the profit in its coinage to accrue to 

 the Government instead of to the holders of 

 bullion. On the 16th of January, 1878, Sec- 

 retary Sherman, having concluded all con- 

 tracts for the sale of four per cents, gave no- 

 tice that he would receive subscriptions from 

 the public at large for the sale of these bonds, 

 and efforts were again made to popularize them 

 and to facilitate their sale. The purchasers 

 were to be allowed a commission of one fourth 

 of one per cent, on the amount purchased in 



excess of $1,000, and all national banks were 

 invited to become depositaries for the purpose 

 of aiding in placing the loan. 



The process of refunding continued during 

 the calendar year 1878 with more or less suc- 

 cess, and at the close of the year there had 

 been sold of four per cents for this purpose 

 $173,085,450. The resumption act of Janu- 

 ary 14, 1875, provided for a return to specie 

 payments on January 1, 1879. As resump- 

 tion would remove the difference in value be- 

 tween the coin and paper currency of the 

 country, the banks belonging to the Clearing- 

 House Association of New York agreed with 

 the Treasury Department that on and after 

 that date they would take legal-tender notes in 

 payment of all obligations of the Government. 

 Under this arrangement payments for interest 

 on the public debt and for bonds called in for 

 redemption, which were theretofore made by 

 the check of the United States Treasurer issued 

 payable in New York, could be made after 

 the 1st of January in legal-tender notes. The 

 necessity for disbursing coin having thus been 

 practically removed, there was no longer any 

 need of requiring payments due the Govern- 

 ment to be made in coin. So on the 1st of 

 January, 1879, announcement was made that 

 payments for bonds issued might thereafter 

 be made in legal-tender notes ; and a system 

 of graded commissions was established, with 

 a view of encouraging banks to make their 

 subscriptions as large as possible. Under this 

 new arrangement subscriptions came in very 

 rapidly, and there was throughout the coun- 

 try unprecedented activity in the public stocks, 

 which greatly advanced in market value from 

 day to day. As many of the bonds called 

 were held in Europe, the payment of them 

 necessarily caused a drain of gold from the 

 country, and this was beginning to cause a 

 tight money market and embarrassment to the 

 financial operations of the country. To avoid 

 such embarrassment, Secretary Sherman on 

 January 21, 1879, made a contract with cer- 

 tain prominent foreign bankers, by which $5,- 

 000,000 a month of the four per cent, con- 

 sols were to be taken in England, that amount 

 being deemed sufficient to prevent the shipment 

 of gold from this country to pay for called 

 bonds. The plan resulted successfully. 



Meanwhile Congress, by an act approved 

 January 25, 1 879, authorized the exchange of 

 the four per cent, consols of 1907 for an equal 

 amount of any outstanding uncalled six per 

 cent, five-twenty bonds of the United States, 

 the Department to pay the holders of the bonds 

 exchanged the accrued interest and additional 

 interest for a period of three months. Under 

 this authority there were exchanged for five- 

 twenty six per cent, bonds $806,000. To fur- 

 ther facilitate the refunding operations of the 

 Government, Congress, by an act approved 

 February 26, 1879, authorized the issue of re- 

 funding certificates in sums of $10, bearing in- 

 terest at the rate of 4 per cent, per annum, and 



