CONGRESS, UNITED STATES. 



155 



of 5 per cents issued under the refunding act 

 will become redeemable on tbe 1st of May 

 next. 



" The duty of Congress, to my mind, is very 

 plain, and may be stated in half a dozen sen- 

 tences. 



' First, the bond to be issued should bear 

 the lowest possible rate of interest under which, 

 considering also the period of time fixed for 

 its payment, the Government would receive its 

 par value in exchange for it. 



"A3 per cent interest-bearing bond, having 

 forty years to run, with such earlier option on 

 the part of the Government, not less than ten 

 years from the date of issue, to pay it, would, 

 in my opinion, meet this requirement, and in a 

 short time command a premium. 



" In proof of this we need only point you to 

 the 4 per cent bonds, which were taken as a 

 speculation by a syndicate for a large commis- 

 sion less than the par value, and are to-day 

 sold in open market at such a premium as 

 scarcely makes them a more profitable invest- 

 ment than a 3 per cent bond at par. 



" Does it not also prove that should Con- 

 gress authorize a funding loan bearing 3^ per 

 cent, the bonds so authorized would, after pass- 

 ing into the hands of a syndicate, advance in 

 the market to a price at which they would not 

 yield over 3 per cent on the investment, and 

 that it would thus be demonstrated that the 

 Government might have saved the one half 

 p3r cent per annum which investors and specu- 

 lators had gained ? 



" Were it not for the lingering hope that the 

 predictions so freely made, which I regret to 

 say have not been dissipated by the Finance 

 Committee of the Senate, that a 3 per cent 

 bond would be offered at par, no doubt would 

 now be expressed in respect of the market value 

 of a 3 per cent bond. 



" With the vvhole bonded debt under the 

 conditions now existing, selling so nearly on a 

 3 per cent basis, no other arguments beyond 

 this simple fact seem to be required to sustain 

 the belief that a 3 per cent bond of the United 

 States can be negotiated at par. 



" Confronted by this fact, the Finance Com- 

 mittee of the Senate report in fav or of a 3$ per 

 cent bond, and virtually ask the Senate to join 

 it in a bear crusade upon the national credit. 

 I read from the report : 



" The Secretary of the Treasury is hereby authorized 

 to issue bonds to an amount not exceeding $400,000,- 

 000, of denominations of $50, or some multiple of that 

 sum, which shall bear interest at the rate of 31 per 

 cent per annum, payable semi-annually, redeemable at 

 the pleasure of the United States after five years, and 

 payable twenty year* from the date of issue ; and also 

 Treasury notes to an amount not exceeding $300,000,- 

 000, in denominations of $10 or some multiple of that 

 sum not exceeding $1,000, either registered or coupon, 

 bearing interest at a rate not exceeding 3t per cent 

 per annum, payable semi-annually, redeemable at the 

 pleasure of the United States after one year, and paya- 

 ble in ten years from the date of issue ; and no Treas- 

 ury note of a less denomination than $100 shall be 

 registered. 



"This report, taken in conjunction with the 

 facts heretofore stated, seems most extraor- 

 dinary. The four hundred millions of bonds 

 are to bear 3 per cent interest, although con- 

 fronted by the fact, supported by every-day 

 transactions, that said bonds could and would 

 be negotiated on much better terms. It is not 

 often the holder of a note thinks better of it 

 than the maker, and this has become so uni- 

 versal in practice a reversal of the principle 

 was never deemed possible. It seems, how- 

 ever, that axioms in financial practice, even 

 universal principles which a credulous people 

 believed admitted of no change whatever, may 

 be switched off out of the way at the will and 

 pleasure of a congressional committee. Out- 

 side of those immediately and directly inter- 

 ested in speculation in bonds and the number 

 of these is small when compared with the host 

 of actual investors there can not be found any 

 considerable number of financiers who believe 

 a 3 per cent forty-year bond can not be nego- 

 tiated at par. 



" These bond speculators, with untiring and 

 unflagging zeal, aided by a subsidized press, 

 seek to influence Congress by appeals to the 

 fears of its members that an unsuccessful fit- 

 tempt to negotiate a 3 per cent bond would 

 wound our credit and practically defeat re- 

 sumption. How, they do not tell us. Pend- 

 ing action by Congress upon this bill, these 

 same speculators have even attempted to de- 

 press the market by a free sale of 4 per cent 

 bonds as information which would naturally 

 influence Congress in favor of a higher and 

 against a lower rate of interest; but, as the 

 bonds have advanced 2 or 3 per cent, even un- 

 der these assaults, it furnishes additional proof 

 that to adopt the recommendation of the com- 

 mittee and issue a bond bearing 3 per cent 

 interest would be a national folly. 



" The committee further recommend an issue 

 of three hundred millions of Treasury notes, 

 bearing interest at a rate not to exceed 3J per 

 cent per annum, redeemable at the option of 

 the Government after one year, and payable in 

 ten years from the date of issue. 



" It will be remembered the bonds are to 

 bear interest at the rate of 3i per cent per 

 annum, arbitrarily fixed. Said bonds have 

 twenty years to run, with the reserved option 

 to pay them after five years, while the rate of 

 interest borne by the Treasury note shall not 

 exceed 3J per cent, implying that it might be 

 possible to negotiate the notes at a lower rate 

 of interest, notwithstanding the Treasury notes 

 have only ten years to run, with the option to 

 pay them after one year. 



" Here, again, the committee set at defiance 

 all laws which have ever governed commerce 

 in finance, by assuming that a short bond, 

 yielding to the purchaser at the discretion of 

 the Secretary of the Treasury at or under the 

 rate of 8$ per cent per annum, could be nego- 

 tiated at par, while the long-term, and there- 

 fore better, bond, bearing a fixed rate of 3$ per 



