292 



FINANCES OF TIIE UNITED STATES. 



tured bonds lawful money would be paid, but 

 to such a bank the Government would offer in 

 payment, instead of money, another of its ob- 

 ligations bearing a lower rate of interest, and 

 the banks would be obliged to accept it or to 

 go out of business. 



The objection was forcibly stated by Senator 

 Bayard, upon the adoption of the section in the 

 Senate, as follows : " I would here note that 

 section 5 of the House bill contains what I 

 have spoken of as the compulsory power of the 

 Government proposed to compel subscription 

 to its loans." (For further remarks of Mr. 

 Bayard, see CONGRESS, UNITED STATES, page 

 153, at bottom. ED.) 



Mr. Bayard further spoke as follows : " I 

 submit to the Senate that it is contrary and 

 derogatory to the spirit of the American Gov- 

 ernment, which is a popular Government, pro- 

 fessing to be based on the capacity of the peo- 

 ple to govern themselves wisely, that the prin- 

 ciple of compulsion for the reception of the 

 loans of the Government should be forced upon 

 any class of our people, or for any purpose. 

 You tried it with your legal-tender Treasury- 

 notes, and declared that they should be re- 

 ceivable in payment of all debts, public and 

 private. There are laws stronger than the 

 laws of Congress. You may possibly drive 

 men out of a business, but they will conduct it 

 as long as they remain in it by the light of 

 self-interest, and compulsion will ever prove 

 futile. Its attempt is a proof of conscious 

 weakness, and its failure will be inevitable and 

 speedy." 



This measure being vetoed at the closing 

 hours of the session. Congress adjourned with- 

 out further action with a view of refunding the 

 maturing debt. The only financial legislation 

 effected was embodied in a clause in the " Sun- 

 dry Civil" Bill, authorizing the Secretary of 

 the Treasury to apply surplus money in the 

 Treasury, not otherwise appropriated, to the 

 purchase or redemption of United States bonds. 

 This clause became necessary, as the surplus 

 revenues were likely to exceed the amount re- 

 quired for the purchase of bonds for the sink- 

 ing fund, and beyond that the Secretary had 

 no authority to apply any moneys in the Treas- 

 ury to the reduction of the bonded debt. The 

 adjournment of Congress loft the incoming 

 Administration with a maturing debt of about 

 $650,000,000, largely represented by coupon 

 bonds, with no means for its redemption. To 

 avoid the calling of an extra session of Con- 

 gress, a scheme was prepared and successfully 

 carried out by which the exigency was avoid- 

 ed, and a great saving of interest secured. 

 This plan and the operations thereunder were 

 fully set forth in a letter by Secretary Wind om 

 to the American Bankers' Association, dated 

 August 8, 1881, as follows : 



It may be stated, however, that when I entered upon 

 the duties of my present position, in March last, I 

 found that of the bonded indebtedness of the Govern- 

 ment, there .were of 5 per cent bonds, redeemable at 



the option of the Government after May 1, 1881, the 

 amount of $469,320,650, of which the amount of $146,- 

 101,UOO was represented by coupon bonds ; and of 6 

 per cent bonds redeemable at the option of the Gov- 

 ernment after July 1, 1881, the amount of $202,266,- 

 550, of which $45,391,000 were represented by coupon 

 bonds. 



Only the coupons for the quarterly interest falling 

 due on May 1, 1881, remained upon the coupon > per 

 cents, and none upon the coupon 6 per cents, the next 

 semi-annual interest on which would fall due on July 

 1, 1881. 



The refunding act, by which it was proposed to re- 

 tire all these bonds ? and to issue therefor bonds hear- 

 ing a lower rate of interest, with several years to run 

 before the Government had the option of payment, 

 after having received much consideration by Corurrem 

 during the last session, had failed to become a law ; 

 and the only resources of the Government to meet the 

 maturing obligations were the surplus revenues, an<l 

 the amount of $104,652,200 4 per cent bonds, being a 

 part of those authorized by the acts of July 14, 1870, 

 and January 20, 1871, and remaining unissued. 



These resources were not sufficient to provide for 

 all the maturing bonds, and, owing to the length of 

 time which such 4 per cent bonds had to run before 

 maturity, it was not deemed advisable to issue more 

 of the loan, if such issue could well be avoided. 



"While there was no imperative necessity for provid- 

 ing for the registered bonds of the maturing loans, 

 some plan was needed to meet the interest payments 

 on the coupon bonds, and there seemed to be no prac- 

 ticable method of meeting these payments without 

 considerable expense to the Government, as well as to 

 the holders of the bonds. 



Finally, to meet the demands of public creditors, 

 and at the same time to avoid the calling of an extra 

 session of Congress, which seemed to be the only 

 other alternative, the plan was matured which has 

 been put into operation, and lias proved successful. 



Under this plan, on April llth. there was called 

 for absolute payment on July 1, 1881, the small loan 

 of $688,200, bearing six per cent interest, and known 

 as the Oregon war debt, and at the same time, for 

 payment on the same date, the six per cent loans, 

 Acts of July 17th and August 5, 1861, amoxinting to 

 $140,544,650, and act of March 3, 1863, amounting to 

 $55,145,750 ; but to the holders of the bonds of the 

 two latter loans permission was given to have their 

 bonds continued at the pleasure of the Government, 

 with interest at the rate of 3i per centum per annum, 

 provided they should so request, and the bonds 

 should be received by the Treasury for that purpose 

 on or before the 10th day of May, 1881 ; and in case 

 of coupon bonds, registered stock of the same loan 

 should be issued therefor. 



The six per cent bonds to be continued were 

 promptly received in a large amount, and new regis- 

 tered ones issued therefor, with the fact of their con- 

 tinuance stamped upon their face ; but it was subse- 

 quently deemed advisable to extend the time for the 

 receipt of the old bonds to May 20, 1881. 



It was also found that foreign holders of the six per 

 cent bonds were inclined to dispose of their invest- 

 ments rather than to send them to the Treasury for 

 exchange ; and the immediate payment of so many 

 bonds abroad being likely to cause a drain of coin 

 from this country, and to disturb business, an agency 

 for the exchange of the bonds in London was estab- 

 lished. 



This plan for continuing the sixes has proved en- 

 tirely satisfactory j there having been presented in 

 due time for continuance at 3i per cent interest, the 

 amount of $178,055,150, leaving to be paid off from 

 the surplus revenues $24,211,400, for which the Treas- 

 ury had ample resources. 



Having succeeded in disposing of the six per cents, 

 on May 12th the department gave notice that the coupon 

 five per cent bonds of the loan of July 14, 1870, and 

 January 20, 1871, would be paid on August 12, 1881, 



