290 



FINANCES OF THE UNITED STATES. 



The redaction of interest on the public debt, 

 in consequence of further funding the debt at 

 a lower rate of interest, during the year had 

 been as follows : 



By the sale of $155,000,000 4* per cent, bonds. . . . $2,775,000 

 By the sale of $500,000,000 4 per cent, bonds. l,000,OiM) 



Aggregating $3,775,0 JO 



The approach of the date fixed by law for 

 a resumption of specie payments on all obliga- 

 tions of the Government has led the Secretary 

 to make a statement of the condition of the 

 Treasury, in anticipation of such resumption. 

 He says : 



By the resumption act approved January 14, 1875, 

 the Secretary of the Treasury is required to redeem 

 legal-tender notes to the amount of 80 per cent, of 

 the sum of national-bank notes issued, and to con- 

 tinue suoh redemption, as circulating notes are is- 

 sued, until there shall be outstanding the sum of 

 $300,000,000 of such legal-tender United States notes, 

 and no more. 



In obedienoe to this act, there have been issued, 

 since Marph 1, 1877, to national banks, $16.123,995 

 of circulating notes, and there have been redeemed, 

 retired, and canceled, $12,899,196 of United States 

 notes, leaving outstanding, on the 1st instant, the 

 sum of $351,340,288. 



By the same act it is provided that, on and after 

 January 1, 1879, the Secretary of the Treasury shall 

 redeem, in coin, the United States legal-tender notes 

 then outstanding, on their presentation for redemp- 

 tion at the office of the Assistant Treasurer of the 

 United States, in the city of New York, in sums of 

 not less than $50. " And, to enable the Secretary 

 of the Treasury to prepare and provide for tlie re- 

 demption in this act authorized or required, he is 

 authorized to use any surplus revenues, from time to 

 ti-ne, in the Treasury not otherwise appropriated, 

 and to issue, sell, and dispose of, at not less than 

 par, in coin, either of the descriptions of bonds of 

 the United States described in the act of Congress 

 approved July 14, 1870, entitled, ' An act to author- 

 ize the refunding of the national debt,' with like 

 qualities, privileges, and exemptions, to th.3 extent 

 necessary to carry this act into full effect, and to use 

 the proceeds thereof for the purposes aforesaid." 



In obedience to this provision, the Secretary has 

 sold at par, for coin, $15,000,000 4i per cent, bonds, 

 or $5,000,000 during each of the months of May, June, 

 and July last, and has sold $25,000,000 at par, in coin, 

 of 4 per cent, bonds, or $5,000,000, for each of the 

 months of August, September, October, November, 

 and December. Of the coin thus received, $4.000,000 

 have been sold for the redemption of United States 

 notes, and the residue is in the Treasury. The sur- 

 plus re venue has also, under the same authority, been 

 applied to the redemption of the residue of United 

 States notes, not redeemed by the sale of coin as 

 above stated, and the balance is held in the Treasury 

 in preparation for resumption. 



These operations, aided greatly, no doubt, by the 

 favorable condition of our foreign commerce, have 

 advanced the market value of United States notes to 

 971 per cent., or within nearly 2i per cent, of coin. 



The resumption act contemplates the reduction by 

 January 1, 1879, of the amount of United States notes 

 to $800,000,000, by the cancellation of such notes to 

 the extent of 80 per cent, of the circulation issued to 

 national banks. 



The amount of circulation so issued may not be 

 sufficient to accomplish the reduction contemplated ; 

 the Secretary, therefore, recommends that authority 

 be given to gradually fund into 4 per cent, bonds 

 all United States notes in excess of $300,000,000, the 

 bonds to be issued at par for coin or its market equiv- 

 alent in United States notes. This will be in har- 



mony with the declared object of existing law, and 

 will open an easy way by which the people may in- 

 vest their savings in a public security. Or the re- 

 duction of United States notes to the maximum of 

 $300,000,000 may be accomplished if Congress will 

 authorize the coinage of the silver dollar, to be ex- 

 changed for United States notes on the demand of 

 the holder, such notes to be retired and canceled. 



Existing laws do not clearly define whether United 

 States notes, when redeemed after January 1, 1879, 

 may be reissued. The first section of the resump- 

 tion act plainly provides for the permanent substitu' 

 tion of silver coin for the whole amount of fractional 

 currency outstanding. Section 3 plainly provides for 

 the permanent reduction of United States notes to 

 an amount not exceeding $300,000,000. No distinct 

 legislative declaration is made in the resumption act 

 that notes redeemed after that limit is reached shall 

 not be reissued ; but section 3579 of the Eevised Stat- 

 utes of the United States provides that " when any 

 United States notes are returned to the Treasury they 

 may be reissued, from time to time, as the exigen- 

 cies of the public interest may require." 



The Secretary is of the opinion that, under this 

 section, notes, when redeemed after January 1, 1879, 

 if the amount outstanding is not in excess of $300,- 

 000,000, may be reissued as the exigencies of the 

 public service may require. A note redeemed with 

 coin is in the Treasury and subject to the same law 

 as if received for taxes { or as a bank-note when re- 

 deemed by the corporation issuing it. The authori- 

 ty to reissue it does not depend upon the mode in 

 which it is returned to the Treasury. But this con- 

 struction is controverted, and should be settled by 

 distinct provisions of law. It should not be open to 

 doubt or dispute. The decision of this question by 

 Congress involves not merely the construction of 

 existing law, but the public policy of maintaining 

 in circulation United States notes, either with or 

 without the legal-tender clause. These notes are 

 of great public convenience they circulate readily ; 

 are of universal credit ; are a debt of the people with- 

 out interest ; are protected by every possible safe 

 guard against counterfeiting ; and, when redeemable 

 in coin at the demand of the holder, form a paper 

 currency as good as has yet been devised. It is con- 

 ceded tnat a certain amount can, with the aid of an 

 ample reserve in coin, be always maintained in cir- 

 culation. Should not the benefit of this circula- 

 tion inure to the people, rather than to corporations, 

 either State or national? The Government has am- 

 ple facility for the collection, custody, and care of 

 the coin reserves of the country. It is a safer custo- 

 dian of such reserves than a multitude of scattered 

 banks can be. The authority to issue circulating 

 notes by banks is not given to them for their bene- 

 fit, but for the public convenience, and to enable 

 them to meet the ebb and flow of currency caused by 

 varying crops, productions, and seasons. It is in- 

 dispensable that a power should exist somewhere to 

 issue and loan credit-money at certain times, and to 

 redeem it at others. This function can be performed 

 better by corporations than by the Government. The 

 Government cannot loan money, deal in bills of ex- 

 change, or make advances on property. 



The Secretary ventures to express the opinion, 

 that the best currency for the people of the United 

 States would be a carefully-limited amount of United 

 States notes, promptly redeemable on presentation in 

 coin, and supported by ample reserves of coin, and 

 supplemented by a system of national banks, organ- 

 ized under general laws, free and open to all, with 

 power to issue circulating notes secured by United 

 States bonds deposited with the Government, and 

 redeemable on demand in United States notes or 

 coin. Such a system will secure to the people a safe 

 currency of equal value in all parts of the country, 

 receivable for all dues, and easily convertible into 

 coin. Interest can thus be saved on so much of the 

 public debt as can be conveniently maintained in 



