"In other words, the suspension of this convertibility clause was pa.s.sed with a view to promote conversion; to encourage conversion; to induce conversion; and, if possible, to induce a conversion into a five per cent. gold bond instead of into a six per cent. bond.
When the Secretary of the Treasury presented this view to Congress he was at once met with the pledge of the public faith; with the promise printed upon the back of the greenbacks that they could be converted into six per cent. bonds at the pleasure of the holder; and that we could not take away that right. This difficulty was met by the ingenuity of the then Senator from Vermont (Mr. Collamer).
He said that no man ever exercised a right which could not properly be barred by a statute of limitations; and if this right was injurious to the people of the United States, and prevented the conversion of these notes into bonds, we might require the holder of these notes to convert them within a given time; that we could give them a reasonable time within which they could convert them into six per cent. bonds, and after that take away the right.
"The act of March 3, 1863, was amended by inserting this clause:
"And the holders of United States notes, issued under or by virtue of said acts, shall present the same for the purpose of exchanging the same for bonds, as therein provided, on or before the 1st day of July, 1863; and thereafter the right so to exchange the same shall cease and determine."
"Now, Mr. president, I have shown you that the greenbacks were based upon coin bonds; that they had the right to be converted into coin bonds; that that right was taken away as to the 5-20 bonds; but that, in practice and in effect, the greenback was convertible into an interest-bearing bond of the United States up to 1866, and until the pa.s.sage of the law to which I will now refer.
"If this act had contained a simple provision restoring to the holder of the greenback the right to convert his note into bonds there would have been no trouble. Why should it not have been done? Simply because the then Secretary of the Treasury believed that the only way to advance the greenbacks was by reducing the amount of them; that the only way to get back to specie payments was by the system of contraction. If the legal tender notes could have been wedded to any form of gold bond by being made convertible into it, they would have been lifted, by the gradual advance of our public credit, to par in gold, leaving the question of contraction to depend upon the amount of notes needed for currency. Sir, it was the separation of our greenbacks from the funding system that created the difficulty we have upon our hands to-day; and I say now that, in my judgment, the only true way to approach specie payments is to restore this principle, and give to the holder of the greenback, who is your creditor, the same right that you give to any other creditor. If he has a note which you promised to pay and cannot, and he desires interest on that note by surrendering it, why should you not give it to him? No man can answer that.
It is just as much a debt as any other portion of the debt of the United States."
Finally, after more than three months study and debate, a majority of the committee agreed upon a measure and directed me to report it to the Senate. It fixed the maximum limit of the United States notes at $382,000,000. It provided for a gradual payment of these notes in coin or in five per cent. bonds, at the option of the Secretary of the Treasury, from the 1st of January, 1876. It was ent.i.tled "An act to provide for the redemption and reissue of United States notes and for free banking."
In obedience to the instructions of the committee, on the 23rd of March, 1874, I reported the bill as an original measure, and said:
"It is due to the members of the committee on finance that I should say that the bill which I have just reported, as it appears on its face, is in the nature of a compromise measure, which is more or less acceptable all around, but at the same time there are certain features of the bill which members of the committee on finance will feel at liberty to express their opposition to, and also to propose amendments to. It is due to them that I should make this statement.
The bill itself, as appears on its face, is the result of great labor, long consideration, and the consequence of compromise. In many cases we were not able, however, to reconcile conflicting opinions; and on those points, of course, members of the committee will feel themselves at liberty to oppose certain features of the bill."
Mr. Thurman said:
"I should like to inquire of my colleague whether he proposes to- day or to-morrow, when he makes the motion that he indicated, to state what, in the opinion of the committee reporting this bill, will be its practical effect, so that we may have the views of the committee as to the workings of the bill should it become a law.
I am sure I, for one, should like very much to know what the committee, who have devoted so much time to this subject, think will be the practical working of the measure, at any time that it suits the convenience of the chairman of the committee to make such statement."
I replied:
"When the subject is introduced, if it be convenient, to-morrow, I propose to make a very brief statement of the effect of each section, as we understand it; but I do not intend, by any long speeches or any remarks, to prolong this matter unnecessarily. I have expressed my own individual views, and each member of the committee, I suppose, stands to the opinion expressed by him in the speeches he has made in the Senate--speeches that were carefully considered, and by which the position of each Senator was stated; but undoubtedly I shall feel it my duty, when the bill is called up, to state what I regard as the actual practical effect of these different propositions; and some of them, I will now say, I a.s.sented to with great reluctance."
On the next day the bill was taken up in the Senate, and I then stated the general provisions of the bill. I insert extracts from my speech, which indicate the difficulties we encountered:
"Mr. president, some complaint has been made in the Senate and in the country at the delay in the presentation, by the committee on finance, of some bill covering the financial question; but a moment"s reflection will, I am sure, convince every Senator that there has been no fault on the part of that committee. From the beginning of the session to this hour that committee, under the direction of the Senate, has been studying and discussing the various plans and propositions which were referred to the committee; and I may say that over sixty different propositions, either coming in the form of pet.i.tions or in the form of bills, have been sent to the committee, all of these suggesting different plans and ideas. It was impossible to consider all these and to agree upon any comprehensive measures until within a day or two.
"There was another consideration. The committee found itself divided in opinion, precisely as the country is, and precisely as the Senate is, into as many as three different cla.s.ses of opinion.
There were, first, those who desired to take a definite and positive step toward the resumption of specie payments. There were, second, those who desired an enlargement of the currency, or what we commonly call an inflation of the currency. There were, third, those who, while willing to see the amount of bank notes increased and the question of the legal tender settled in some form, were also desirous that some definite step should be taken toward a specie standard.
There were these differences of opinion.
"For the purpose of ascertaining the views of the Senate, and not involving ourselves in reporting a bill that would be defeated as the bill of the last session was, we presented, early in the session, resolutions of a general character which stated these three ideas: First, the resolution of the majority of the committee that some definite step should be taken toward specie payments. Then there was the amendment offered by the gentleman who now occupies the chair [Mr. Ferry, of Michigan], that there ought to be an increase of the currency without reference to any plan of redemption. Third, there was the proposition made by the Senator from Delaware [Mr.
Bayard], that measures should be taken at once looking to the resumption of specie payments.
"These propositions were discussed, and the committee were enlightened by that discussion; at least they obtained the opinions of Members of the Senate. Subsequently, in the course of our investigation, a question about the $25,000,000 section (section 6 of the act of July 12, 1870) came up, and the committee deemed it right, by a unanimous vote, to ascertain the sense of the Senate as to whether they wished this section carried into execution. As it stood upon the statute book it was a law without force. It was a law so expressed that the comptroller said he could not execute it.
Therefore the committee reported a bill which would have provided the necessary details to carry into execution that section of the existing law. But in the present temper of the public mind, in the Senate and in the country, that bill was discussed, and has been discussed day after day, without approaching the question at all. During all this time the committee have been pursuing their inquiries, and finally they have reported the bill which is now before us.
"The measure that is reported is not a satisfactory one to any of us in all its details. Probably it is not such as the mind of any single Member of the Senate would propose. It is in the nature of a compromise bill, and therefore, while it has the strength of a compromise bill, it has also the weakness of a compromise bill.
There are ideas in it which, while meeting the views of a majority, taken separately will be opposed by others. I am quite sure I say nothing new to the Senate when I say it does not in all respects meet my own views. But there is a necessity for us to yield some of our opinions. We cannot reconcile or pa.s.s any measure that will be satisfactory to the country unless we do so. Any positive victory by either extreme of this controversy will be an absolute injury to the business of the country. Therefore, any measure that is adopted ought to be so moderate, pursuing such a middle course, such a middle ground, that it will give satisfaction to the country.
It must be taken as a whole; and therefore the effect of amending this proposition will be simply to destroy it. If an amendment in the direction of expansion is inserted, it will drive away some who would be willing to support it as is. If an amendment in the way of contraction is proposed and carried by a majority of the Senate, it will drive away those who might be willing to take this measure as a compromise. The only question before the Senate now is, whether this is a fair compromise between the ideas that have divided the people of this country and the Members of the Senate; whether it will surely improve our currency while giving the relief that is hoped for by a moderate increase of the currency. Now I ask the secretary to read the first section of the bill."
The chief clerk read section 1, as follows:
"_Be it enacted by the Senate and House of Representatives of the United States of America in Congress a.s.sembled_, That the maximum limit of United States notes is hereby fixed at $382,000,000, at which amount it shall remain until reduced as hereinafter provided."
I then continued:
"It is manifest to every Senator that the initial step in this controversy is to fix the aggregate limit of United States notes.
The United States notes, although they are very popular, and justly so, in this country, are at this moment inconvertible; they are irredeemable, and they are depreciated. These are facts admitted on all hands. In making that statement I do not intend at all to deny that the United States notes have served a great and useful purpose; and though I was here at the birth of them and advocated them in all stages of their history, yet I am compelled to say at this moment, twelve years after their issue, that they are inconvertible; they are irredeemable; and they are depreciated this day at the rate of twelve per cent. They have been legally inconvertible since July 1, 1863, and practically inconvertible since the close of the war; that is, the government refuses to receive them, either in payment of customs or in payment at par of any bond of the United States offered by it. They are irredeemable on their very face. They have depreciated almost from the date of their issue, at one time being worth only forty cents in gold, and to-day only worth ninety cents. That is the condition of the United States notes.
"Now, there is another thing admitted by all Senators. I do not trespa.s.s on any disputed ground when I say that every addition to the volume of these notes, while they thus stand depreciated, irredeemable, and inconvertible, is as certain to further depreciate them, as it is that to pour water into an overflowing bucket will cause it still more to overflow; as certain as the law of gravitation; as certain as anything human or divine. It is equally true that any contraction of this currency, any withdrawal of the amount of it, is undoubtedly an appreciation of its value, making it nearer and nearer to the standard of gold.
"This is so plain a proposition that it is not necessary to discuss it; and the whole people of the country understand it; the plainest and simplest people understand it as well as the wisest. Those who desire to increase prices, to start and put in operation new enterprises, desire an increase of the currency without any plan of redemption. Those, on the other hand, who want to get back to the specie standard, to appreciate the value of these notes, desire to withdraw them, get them out of the way, or give new uses and new values to them so as to advance them nearer and nearer the standard of gold. Therefore it is that I say the very first step at the outset of this controversy is to settle what is the legal limit of these notes; how many are there now authorized by law; how many are there outstanding. And here it is a strange thing that on this very point, a purely legal question, the most important one in our financial discussion, there is a great difference of opinion. There ought not to be uncertainty or room for a difference of opinion upon a question of this kind. It ought to be settled.
On the one hand it is insisted by Senators who compose the majority of the committee on finance that the legal limit of United States notes is $356,000,000; that the amount which has been already issued, of what is known as the $44,000,000 reserve, was unlawfully issued, although under great press of circ.u.mstances and without any intention on the part of the secretary to do more than he thought he had a lawful right to do. On the other hand it is insisted by other Senators that the legal limit of United States notes is $400,000,000; and here is a margin of $44,000,000 upon which there is a dispute of law as to the power of the secretary to issue it. That dispute ought to be settled at once. It is a question that ought not to be in doubt a moment, because the power to issue that $44,000,000 places it in the discretion of the Secretary of the Treasury either to advance or to lower the value of all property in the United States, of all debts in the United States, of everything that is measured by United States notes.
"Should we undertake to say that the secretary did wrong in exceeding the limit at $356,000,000? A majority of the committee believe that that is now the legal limit, and believe it conscientiously.
But should be undertake to fix that as the legal limit? Twenty- six million dollars of the $44,000,000 are outstanding. They are now issued; they are now a part of the currency of the country.
They are just as much the currency as that which was issued before.
You cannot distinguish between them. You cannot say which of the $382,000,000 now outstanding is legal and which is illegal. So far as the United States are concerned, they are all debts of the United States which we are bound to pay, whether they have been issued legally or illegally. I do not understand even my friend from Delaware to dispute the duty and obligation of the United States to pay these notes, even if they have been illegally issued.
There can be no question about it. It is impossible to distinguish between them. The only question is whether our agent exceeded his authority or not. Therefore, without raising the question as to the legality of this issue, reserving to each Senator his own opinion on the subject, we have adopted as the _status quo_ $382,000,000, the amount now outstanding; and we recognize that amount as the maximum legal obligation of the United States in the form of notes, and we propose upon that basis to erect our superstructure. We therefore say that we will raise no question as to the mode of retiring the $26,000,000; we will simply say that the amount now outstanding shall never be exceeded. That is a recognition, at least, that they are outstanding lawfully and properly; at any rate, so far as the obligation of the United States to pay them is concerned.
"Mr. president, a limit ought to be fixed. But there is a difference of opinion as to what should be the limit. If I had the power to fix this limit I should say that the limit which was fixed by the old law should remain at $356,000,000; and I would provide a mode and manner of issuing United States bonds to retire the $26,000,000 slowly and gradually, without disturbing the ordinary business of the country. I would thereby seek to recover the ground we have lost by what has occurred since the panic, and go back to the standard prior to that time. But I know that would be very difficult; that would involve an increase of the bonded debt. Our revenues are not sufficient to call in this $26,000,000. We have no surplus revenue now as we had a year or two ago. We could only do it by the issue of bonds, and the process itself would be a very hard one. Besides, it is probable that public opinion and the judgment of Congress would not sustain such a proposition; and therefore it is hardly worth while to recommend it. We a.s.sume, therefore, that the $382,000,000 is the present limit, and we say that shall be the maximum limit.
"I said it was a compromise by the committee. I speak of a majority of the committee. As a matter of course my friend is at liberty to dissent from any of its propositions. On question of this kind committees are very rarely unanimous; but I will say that on this point a very decided majority of the committee concurred in the section.
"To the second section I wish to invite the careful and earnest attention of the Senate. This section is an honest effort to deal with the great problem of redemption. Every Senator who has spoken contemplates that a time must come when all the United States notes must be redeemed in coin. The public faith of the United States is so pledged. The notes were issued with the understanding that they should be paid in coin. No man could survive politically in this country who would declare that it was his purpose never to pay these notes in coin. My friend who now presides [Mr. Ferry, of Michigan], speaks always of his measure of inflation as a means of bringing about at some time specie payments; and I will say that in the Senate I have not heard any Senator deny that it is the duty of the United States at some time to pay these notes in coin. In all this discussion there is at least that one point agreed upon.
If I state this too strongly I hope I will be here corrected.
"Now, Mr. president, how shall it be done, and when shall it be done? I say that now, nine years after the close of our Civil War, twelve years after these notes have been authorized and issued, five years after the dominant party has declared its purpose to pay them at the earliest day practicable, there should be no longer delay. The United States ought to do something toward the fulfillment of that pledge and the performance of that duty. There must be something very peculiar in the condition of our country that will justify a longer delay; a longer procrastination in the performance of this solemn pledge, this public policy--our own political obligation.
"Mr. president, this section is the result of the patient consideration of the committee on finance as to how this result is to be brought about; and upon this very section there is most likely to be a contrariety and difference of opinion among Senators, because the mode and manner of redemption is the thing which has excited the public mind and upon which men all over the country differ. I wish, therefore, to deal with this question. We have got to pay these notes in coin. The time when is not defined by the law.
Are we prepared now to fix a day when we will pay these notes in coin? If the condition of our country was such as to justify it, I would greatly prefer fixing the time when these notes should be paid in coin; but I am disposed to agree with what has been stated by the Senator from Indiana, and by other Senators, that in the present condition of our coinage, the present condition of our foreign trade, we are not prepared to fix a definite day when we will pay in coin. Why? I find, by reference to official doc.u.ments, that we now have in gold and silver coin in this country about $140,000,000. This statement of Dr. Linderman does not include the bullion on hand. How much that is I am not prepared to state.
The whole amount of gold and silver coin in the country, however, is about $140,000,000. Some of that is in circulation in the Pacific states, but the bulk of it is in the treasury of the United States, the property of individuals and the property of the United States. The total annual production of gold and silver in this country cannot be estimated at over $70,000,000; and heretofore, at least $50,000,000 of this has been exported over and above the amount that has been imported. The balance of trade has been against us; and although I do not regard that as entering much into the calculation, yet it is a fact that until recently, perhaps, the balance of trade has been against us. The annual coinage of the United States for the last year or two has been largely increasing, and last year the coinage of the United States was $38,689,183, besides stamping into fine bars, which operate as a kind of coinage, of $27,517,000. So that there has been in fact converted, of gold and silver, into coin, or bars stamped by the United States, $66,000,000 during the last year, showing a use and employment of gold in this country that is now rapidly increasing.
"But still this state of affairs would not justify us in saying that we are prepared to declare a resumption of specie payments absolutely upon the basis of $800,000,000 of paper money, including our fractional currency. I am, therefore, not prepared to say that the United States can, on a fixed day, within a reasonable time-- within such a time as would give confidence in our ability to perform it--say that we will absolutely redeem our notes in coin.
"I know that Senators here, for whose opinion I have the highest respect, who are probably more sanguine of our ability and capacity to do this than I am--many of those who have agreed with me and co- operated with me--think we are able and strong enough to fix the time for the absolute resumption of specie payments; but I have always doubted it. Indeed I have thought there was a better way to reach the great result. But if we cannot fix the time when we will redeem in coin, can we not give additional value to our United States noes, so as to gradually appreciate them to the coin standard, and thus advance toward specie payments if we cannot reach the goal? Because we cannot accomplish all that we have agreed to do in a given time, does that relieve us from the necessity of progressing in that direction? When we have before us a long journey that will take months to pa.s.s, perhaps years, shall we delay starting on that journey because we cannot reach the end of it in a year or two? Not at all. I therefore say that the time has arrived this moment when the United States ought to do something to advance its notes to the specie standard.
"Now what is that something? There are two propositions, and only two propositions, that have been made, aside from absolute coin redemption, that have had any strength whatever. One is to allow the United States notes to be received in payment of customs duties, the other is to allow United States notes to be converted into bonds. In regard to the first, I agree entirely that if the matter was open now to our choice and selection, one of the best methods we could adopt to advance our notes to par in gold would be by repealing that restriction which prevents the receiving of them for customs duties; but we are met there by the sacred pledge of the United States; we are met there by the fact that customs duties are, by the law of 1862, agreed to be collected in coin."
Mr. Bayard inquired:
"Does not the law provide that the customs duties shall be paid in coin or in notes of the United States? Is not the alternative given by the law?"
I replied:
"O, no. If the Senator will look at section 5 of the act of February 25, 1862--my friend from Vermont can turn to it in a moment--he will find that there is an express stipulation that the customs duties shall be collected in coin, and that this coin shall be set aside as a pledge--legal language is used--and shall only be applied, first, to the payment of the interest on the public debt, and, secondly, to the establishment of a sinking fund of one per cent.
That was the basis of the obligation of the United States to pay in coin, and but for the fact that we collected our customs duties in coin during the war we could not have paid the interest on our public debt in coin, and therefore our bonds would have sunk out of sight. That pledge we cannot now violate; and I never have yet been able to bring my mind to the consideration of any proposition whatever which would ever shock or excite the fear of the public creditors in that respect. The safety of the public creditors consists in having a specific fund for the payment of their interest; the princ.i.p.al will take care of itself; and that fund has always been maintained in the darkest hours of the war. Except the propositions that have been made here and there to impair that fund by allowing a portion of the customs duties to be paid in currency, it has never been either invaded or threatened; but all such propositions have been voted down. I, therefore, while I see the policy and the expedience of allowing these notes to be used in payment of customs duties, simply say we are precluded from that remedy because we have mortgaged that fund, and we have no power to take them for any purpose except that which the mortgage stipulates.