Reduction of Currency, Increase of Debt

--- An Act to amend an Act entitled "An Act to provide Ways and Means to support the Government," approved March third, eighteen hundred and sixty-five.

Paulson debt to America Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the act entitled "An act to provide ways and means to support the Government" approved March third, eighteen hundred and sixty-five, shall be extended and construed to authorize the Secretary of the Treasury, at his discretion, to receive any Treasury notes or other obligations issued under any act of Congress, whether bearing interest or not, in exchange for any description of bonds authorized by the act to which this is an amendment;  and also to dispose of any description of bonds authorized by said act, either in the United States or elsewhere, to such an amount, in such manner, and at such rates as he may think advisable, for lawful money of the United States, or for any Treasury notes, certificates of indebtedness, or certificates of deposit, or other representatives of value, which have been or which may be issued under any act of Congress, the proceeds thereof to be used only for retiring Treasury notes or other obligations issued under any act of Congress;  but nothing herein contained shall be construed to authorize any increase of the public debtProvided, That of United States notes not more than ten millions of dollars may be retired and cancelled within six months from the passage of this act, and thereafter not more than four millions of dollars in any one month:  And provided further, That the act to which this is an amendment shall continue in full force in all its provisions, except as modified by this act.

Sec. 2.  And be it further enacted, That the Secretary of the Treasury shall report to Congress at the commencement of the next session the amount of exchanges made or money borrowed under this act, and of whom, and on what terms;  and also the amount and character of indebtedness retired under this act, and the act to which this is an amendment, with a detailed statement of the expense of making such loans and exchanges.

APPROVED, April 12, 1866.

Thirty-Ninth Congress
First Session
December 4, 1865 to July 28, 1866.

In the Senate
Monday, April 9, 1866.

Ways and Means.

Mr. Fessenden.  I move that the Senate proceed to the consideration of the bill (H.R. No. 207) to amend an act entitled "An act to provide ways and means to support the Government," approved March 3, 1865.

The motion was agreed to;  and the bill was considered as in Committee of the Whole.  It is proposed by this measure to enact that the act entitled "An act to provide ways and means to support the Government," approved March 3, 1865, shall be extended and construed to authorize the Secretary of the Treasury, at his discretion, to receive any Treasury notes or other obligations issued under any act of Congress, whether bearing interest or not, in exchange for any description of bonds authorized by the act to which this is an amendment;  and also to dispose of any description or bonds authorized by that act, either in the United States or elsewhere;  to such an amount, in such manner, and at such rates as he may think advisable, for lawful money of the United States, or for any Treasury notes, certificates of indebtedness, or certificates of deposit, or other representatives of value, which have been, or which may be, issued under any act of Congress, the proceeds thereof to be used only for retiring Treasury notes or other obligations issued under any act of Congress;  but it is not to be construed to authorize any increase of the public debt.  Of United States notes not more than $10,000,000 may be retired and canceled within six months, and thereafter not more than $4,000,000 in any one month.  The act to which this is an amendment is to continue in force in all its provisions, except as thus modified.  The Secretary of the Treasury is to report to Congress at the commencement of the next session the amount of exchanges made or money borrowed under this act, and of whom and on what terms;  and also the amount and character of indebtedness retired, with a detailed statement of the expense of making such loans and exchanges.

Mr. Fessenden.  I have simply to say that this bill is reported by the Committee on Finance without amendment as it came from the House of Representatives.  The Committee on Finance, on careful examination of it, came to the conclusion that the bill was well enough as it stood, and did not deem it advisable to make any amendment.  It has been before the Senate a considerable time, and I presume every Senator understands it.  I ask, therefore, for the question.

Mr. Sherman.  I regret very much that I differ from the Committee on Finance in regard to this bill.  This is the only bill on the subject of the public debt on which I have not been able to concur with that committee.  I do not perceive the necessity for conferring on the Secretary of the Treasury, in the present condition of our finances, the vast powers which are conferred by this bill.  It is true that the bill, as it now comes before its, is very different from the one first reported in the House of Representatives.  That bill contained a clause which authorized the Secretary of the Treasury, not only to sell the bonds of the United States abroad, but to make them payable in the currency of foreign countries.  Under it the Secretary could make our bonds payable in pounds, shillings, and pence, guilders, francs, or any of the various forms of currency known in any European country.  That provision was stricken out by the House of Representatives.  After the bill was defeated in the House a clause was added, on reconsideration, intended to limit the power of the Secretary of the Treasury over the legal tenders;  but this clause, although wise in itself, will not accomplish the purpose designed by the House.  It is on this ground, chiefly, that I object to the bill as it now stands.

If Senators will read this bill they will find that it confers on the Secretary of the Treasury greater powers than have ever been conferred since the foundation of this Government upon any Secretary of the Treasury.  Our loan laws heretofore have generally been confined to the negotiation of a single loan, limited in amount.  As the war progressed the difficulties of the country became greater, and we were more in the habit of removing the limitations on the power of the Secretary of the Treasury;  but generally the power conferred was confined to a particular loan then in the market.  This bill, however, is more general in its terms.  This bill authorizes the Secretary of the Treasury to sell any character of bonds without limit, except as to the rate of interest.  The authority conferred does not limit him to any form of security.  It may run for any period of time within forty years.  He may sell the securities at less than par, without limitation as to rate.  He may sell them in any form he chooses.  He may put them in the form of Treasury notes or bonds, the interest payable in gold or in paper money.  He may undertake, under the provisions of this bill, to fund the whole debt of the United States.  The only limit as to amount is the public debt, now $2,700,000,000.  The power conferred on the Secretary of the Treasury is absolute.  It is not only for this year, or during the current fiscal year, or for the next year, but it is for all time, until the act shall be repealed.  It gives him absolute power to negotiate bonds of the United States to the amount of $2,700,000,000 without limiting the rate at which they shall be sold, and only limiting the rate of interest inferentially.  The description of the bonds in the act of March 3, 1865, referred to here, would probably limit the rate of interest to six per cent. in coin and seven and three tenths per cent. in currency;  but with this exception there is no limitation.

It seems to me that in the present condition of our finances there is no necessity for conferring these large powers on the Secretary of the Treasury.  The people are not generally aware of the favorable condition of our finances.  The statement of the public debt laid on our tables the other day does not show fully the condition of the finances.  It is accurate in amounts, but does not give dates of the maturity of our debts.  But a small portion of the debt of the United States will be due prior to August, 1867, that will give the Secretary any trouble.  But little of the debt which he will be required to fund under the provisions of this bill matures before August, 1867.  The temporary or call loan, now over one hundred millions, may readily be kept at this sum even at a reduced rate of interest.  The certificates of indebtedness amounting to sixty-two millions, may easily be paid from accruing receipts, or, if necessary, may be renewed or funded at the pleasure of the Secretary.  None of the compound-interest notes or the seven-thirty notes mature until August, 1867.

It is idle, therefore, to say that there is now at this moment or will be within a year a pressing necessity to confer on the Secretary of the Treasury this enormous power.  It is only in view of a change of policy, either by a reduction of the currency or some other measure in the mind of the Secretary, that he can claim that this power is necessary.  Nor is there necessity to contract debt to pay current expenditure, because the present income exceeds our expenditures.  In his annual report he estimated that there would be a deficit of $112,000,000 at the close of the present fiscal your.  It is now admitted that there will be no deficit and that the amount on hand together with the current receipts will be amply sufficient to pay all the expenses of the Government up to the 1st of July next.  During the next year the estimated expenditures of the Government are stated by him at $280,000,000.  Those estimates have been reduced somewhat by the bills sent to us by the House of Representatives, and it is scarcely possible that the expenditures during the next year can reach $275,000,000 on the present basis.  We have a current revenue now of nearly $500,000,000 during this year.  The amount of the gold receipts during the first three quarters of the year were $140,000,000, and for this quarter will not fall below $20,000,000.  It is supposed that the internal revenue will yield during the current year not less than $320,000,000, so that including the profits realized on the sale of surplus gold we have an income of not less than $500,000,000 this year, and some authorities place it higher.  Thus it is evident that we have $200,000,000 more income this year than we will have expenditures next year.

No man can tell the future, and it is possible, perhaps probable, that during the next year three will be a considerable falling off in revenue.  I do not think the internal revenue will fall off materially, because there are many sources of revenue that will come in next year which we have not yet felt.  No one doubts that the tax on spirits will yield two or three times as much next year as it has during the current year.  No doubt, however, other taxes will be diminished.  I hope that the duties received from imported goods will be diminished by a diminution of importations.  But neither the Secretary of the Treasury nor the head of the Internal Revenue Bureau contemplates any very material reduction, and on the basis of the present law as it now stands we shall next year probably have a revenue of $400,000,000, or at least $100,000,000 more than the expenditure of the next year.

There is therefore no immediate necessity for these vast powers.  The question then naturally occurs, why grant them ?  I have carefully considered this question, and I do not think there is now any immediate necessity for granting these powers.  No debt is maturing that is likely to give the Government any trouble;  and yet we are now about to confer upon the Secretary of the Treasury powers that we cannot in the nature of things recall.  It is true we may repeal this law next year, but we know very well that when these large powers are granted they are very seldom recalled;  they are made the precedents of further grants of power and are very rarely recalled.  It seems to me that the whole object of the passage of this bill is to place it within the power of the Secretary of the Treasury to contract the currency of the country, and thus, as I think, to produce an unnecessary strain upon the people.  This power I do not think ought to be given to him.  The House of Representatives did not intend to give him this power.  They debated the bill a long time, and it was defeated on the ground that they would not confer on the Secretary this power to reduce the currency, and finally it was only passed with a proviso contained in the bill which I will now read:

Provided, That of United States notes not more than $10,000,000 may be retired and canceled within six months from the passage of this act, and thereafter not more than $4,000,000 in any one month.

The purpose of the House of Representatives was, while giving the Secretary power to fund the debt as it matured or even before maturity, giving him the most ample power over the debt of the United States, to limit his power over the currency, lest he might carry to an extreme the view presented by him in his annual report.  If this proviso would accomplish the purpose designed by the House of Representatives, I would cease all opposition to this bill;  but I know it will not, and for this very obvious reason:  that there is no restraint upon the power of the Secretary of the Treasury to accumulate legal-tender notes in the Treasury.  He may retire $200,000,000 of legal-tender notes by retaining them in his possession without cancellation, and thus accomplish the very purpose the House of Representatives did not intend to allow him to accomplish.  He may sell the bonds of the United States at any rate he chooses for legal tenders, and he may hold those legal tenders in his vaults, thus retiring them from the business of the country, and thus produce the very contraction which the House of Representatives meant to deny him power to do.  Therefore, this proviso, which only limits the power of canceling securities or notes, does not limit his power over the currency, and he may, without violating this bill, in pursuance of the very terms of the bill, contract the currency according to his own good will and pleasure.

My own impression is, that the Secretary of the Treasury, in carrying out his known policy, will do so.  He says he will not contract it unreasonably or too rapidly, but I believe he will contract the currency in this way.  He has now in the vaults of the Treasury $60,000,000 in currency and $62,000,000 in gold — a larger balance, I believe, than was ever before kept in the Treasury until within the last two or three mouths;  a larger balance than was ever found in the Treasury during the war.  What is the object of accumulating these vast balances in the Treasury ?  Simply to carry out his policy of contraction.  With this power of retaining in the Treasury the money that comes in, what does he care for the limitation put upon this bill by the House of Representatives ?  That says that he shall not retire and cancel more than $10,000,000 of United States notes within six months, and not more than $4,000,000 in any one month thereafter;  but why need he retire and cancel them when he can retain them in the vaults of the Treasury, and thus contract the currency ?

That brings me to the only material objection that I have to this bill.  I do not think it wise now to place in the power of the Secretary of the Treasury or any mortal man this absolute and extreme control over the currency of the country.  We have never done it before.  In the bills that were passed when my honorable friend from Maine [Mr. Fessenden] was Secretary of the Treasury and when Mr. Chase was Secretary of the Treasury, we authorized them to retire legal-tender notes, but only by issuing other notes of the same character.  That was the provision of the law of 1864.  Here we authorize the Secretary of the Treasury to retire $10,000,000 within six months and $4,000,000 a month thereafter.  That is all that the House of Representatives was willing to do after debate and after an extreme effort to pass this bill;  but, sir, under the general operations of the Treasury Department, without the power given him by this bill, he may contract the currency without limit at his pleasure.  If the Senate are willing to give him that power, I have nothing further to say.  They should do it with their eyes open.  I do not think the Secretary of the Treasury ought to have that power.

I do not doubt in the least either the integrity or the capacity of the present incumbent of the Treasury Department.  I have as much confidence in him as any one;  but this question of the currency is one that affects so intimately all the business relations of life, the property of every man in this country, his ability to pay taxes, his ability to earn food and acquire a living, that no man ought to have the power to vary the volume of currency.  It ought to be regulated by law, and the law ought to be so fixed and so defined that every business man may transact his business with full knowledge of the amount of the currency, with all its limits and qualifications.  I ask you, sir, how any prudent or judicious man can now engage in any important business in which he is compelled to go in debt with this large power hanging over him.  It would be unsafe for him to do so.  The amount of the currency ought to be fixed by law, whether much or little.  There ought to be a limit, and no man ought to have the power at pleasure to enlarge or contract that limit.

With the powers conferred by this bill the Secretary of the Treasury may at any moment put into the market a bond that will at once absorb all the legal tenders.  It may be said that he will not do it;  that it will not be his interest to do it.  Then why give him the power to do it when it is not necessary ?  If there was now an impending necessity resting upon him to raise a large sum of money within a short period of time I would be willing to give him this power as cheerfully as any one;  but there is no such necessity.  Why, then, place it in his power to contract or expand the currency at his pleasure, and thus make fluctuations, in all the business transactions of life ?  That this is not an idle fear I know from correspondence with some of the best business men of the country.  They are alarmed and refuse to go on and contract new obligations;  they refuse to go on with their business in the manner in which it has gone on;  the effect of the pendency of this bill has been to limit and contract the transactions in various operations of enterprise and business.  I presume there are few Senators here but have had complaints of this kind made from business men in different parts of the country, that the uncertainty of the amount of currency on hand, and the uncertainty as to the policy to be adopted by the Government and the Secretary of the Treasury, takes away from them all means of judging as to what amount of business they can transact.

With this power, the will or whim of the Secretary of the Treasury might destroy all the men of the country who are compelled to go into debt to carry on their business.  A sudden contraction or a sudden expansion might build up or tear down fortunes.  I think every citizen of the United States has the right to know how much currency, which is the blood of the whole system, shall be in existence for the time being.  There should be some limit over this power.  The House of Representatives intended that there should be a limit.  They proposed such a limit;  but as I said before, that limit, from the very nature of things, without further amendment is of no account what ever.  The passage of that limitation leaves the bill, in that particular, precisely as it was before;  because all the Secretary has got to do is to receive these legal tenders, put them in the hands of the Treasurer of the United States, Mr. Spinner, where they will be safely kept, and they will be retired from the business operations of the country, and produce the very results which the House of Representatives intended to prevent.

I do not think that this is the time or the occasion to enter into an elaborate discussion as to the amount of currency needed in this country, or as to the various financial subjects that may be brought before the Senate at different periods.  There are only two propositions in this bill.  One is to give the Secretary of the Treasury, without limit, the power to sell bonds of the United States, to retire any portion of the present debt of the United States at pleasure.  He may, with these bonds, as he is doing, retire notes that are not due for two or three years.  He may, with this power, at his discretion retire the five-twenties and ten-forties or any portion of the debt of the United States.  He may sell bonds without limit as to amount, without limit as to rate.  There is no limit upon him.  That power you may choose to give him, although I see no necessity for it.

Then there is the further power to reduce the currency, a power that has not heretofore been granted to any Secretary of the Treasury.  The amount heretofore has been fixed and limited by law.  By the first clause of this bill the Secretary is authorized to receive Treasury notes, or United States notes of any form or description, and there is no limitation to this power except the clause which I have read to you.  That limits his power to retire and cancel the United States notes, but not to accumulate the enormous balances on hand.  My own impression has been, and when this bill was before the Committee on Finance I believed it would be better for that committee to report to the Senate a financial project to fund the debt of the United States.  I believe that now is the favorable time to do it.  If a five per cent. bond, a long bond of proper description and proper guarantee, was now placed upon the market, with such ample powers to negotiate it as ought to be given to the Secretary of the Treasury, such a loan as was authorized two years ago, at a reduced rate of interest, to be exempt from taxation, I have no doubt whatever the Secretary of the Treasury could fund every portion of the debt of the United States as it matured.

The real difficulty of our financial position in the future grows out of the peculiar character of the seven-thirty notes.  By those notes the holder, when they mature, has the option to demand the money or a five-twenty bond.  It is manifest that as this option is out it cannot be recalled.  To recall that option would be a violation of the faith of the United States, that the holder of these notes may demand either the money or a bond.  It is therefore the interest of the United States so to preserve its credit that the five-twenties will be above par, and thus the seven-thirty notes when due will be converted into five-twenties, which will run for five years at six per cent.;  then I think the whole debt of the United States might be funded and reduced to five per cent.  I do not believe it would limit or cripple the power of the Secretary if we would grant him authority to put upon the market such a bond as I have mentioned and limit his power over the national currency by requiring him to pay out all over a reasonable balance in the Treasury toward the liquidation of the public debt, and thus prevent the very thing the House of Representatives intended to prevent by this proviso to the bill.

I do not like to embarrass a bill of this kind with amendments, because I know it is difficult to consider amendments of this sort requiring an examination of figures and tables.  I have prepared a bill very carefully, with a view to meet my idea;  but I will not present it now in antagonism to this bill passed by the House of Representatives and the view taken by the Finance Committee, because I know, in the present condition of the Senate, it would not probably be fully considered.  My only purpose now is to point out the fact that is perfectly clear to the mind of every sensible man who has examined this bill, that the bill as it stands does not carry out the manifest intention of the House of Representatives when they passed it, and that the proviso limiting the power of the Secretary over the legal-tender currency does not accomplish the purpose which they designed, and without which I know the bill never could have passed the House of Representatives.

Mr. Fessenden.  If the House of Representatives did not understand what they were doing when they passed this bill, it arises from the fact that they did not give the rein to their imagination, as the honorable Senator from Ohio seems to have done to his, and take it for granted that the Secretary of the Treasury had a purpose to accomplish, and that he would not hesitate to take any means in his power to accomplish it, improperly, against the manifest will of Congress, against the interests of the country, and against his own interests as Secretary of the Treasury.

Mr. Sherman.  I appeal to the Senator whether that is a fair statement of my argument ?

Mr. Fessenden.  That is the way precisely that I understand it.

Mr. Sherman.  That is precisely as no gentleman could have understood me.  I never said that the Secretary improperly would do so and so by any means.  It is one of the honorable Senator’s modes of stating propositions.

Mr. Fessenden.  I certainly did not mean to say that the honorable Senator supposed he designed to do so, but such seems to be the result of his argument — that the Secretary of the Treasury having the power, as he says, there is danger that he might abuse it in that precise way;  else his argument amounts to nothing at all as against the bill.  I certainly acquit my friend of any sort of desire or intention to throw any imputation on the Secretary of the Treasury.  That he did not mean to do.

I have been requested by a Senator to state precisely what this bill does.  By the bill that was passed at the last session permission was given to the Secretary to issue a certain description of bonds, and to dispose of those bonds in the maket, for the purpose of raising a revenue for the support of the Government.  The bonds were to run for a certain length of time, not to exceed forty years in duration, and they might be made redeemable after five years, &c.  It is unnecessary for me to read the description of the bonds.  The clause at the end of the bill provides:

"And any Treasury notes or other obligations bearing interest, issued under any act of Congress, may, at the discretion of the Secretary of the Treasury, and with the consent of the holder, be converted into any description of bonds authorized by this act," &c.

"Or other obligations bearing interest."  That bill was confined, the Senate will remark, to obligations bearing interest.  He might take up any of them, no matter what they were, provided they bore interest, and convert them into any description of bonds authorized by that act, and there was no limitation upon the mode or the terms upon which he might dispose of the bonds in the market.  After peace came, the idea of the Secretary of the Treasury was, and is, and I take it that it is the idea of everybody, pretty much, who has thought much on the subject — it certainly was mine, with my limited information on the subject;  it certainly was that of the former Secretary of the Treasury, Mr. Chase, and has been that of all other men who thought they knew something about financial matters — that the sooner we could return to the original condition of things in the country, that is, to a specie basis, safely, the better it would be.  The present Secretary of the Treasury, upon taking possession of the Department, stated that view.  He took occasion afterward to restate it in a more formal manner.  He alluded to it in his annual report;  and he asked Congress to give him power to exchange these bonds, not only for obligations bearing interest, but for what are called the greenbacks or obligations of the country that do not bear interest.  It was received with very great favor, almost universal favor, in the first instance;  but after a while it occasioned an emotion.  Certain people took very great pains to get up the idea that because the Secretary of the Treasury had developed such views, therefore, necessarily, his intention was to push that matter directly in the face of all that might be considered beneficial, and to devote himself exclusively to that idea, whatever might be the condition of business in the country;  and men calling themselves business men, who desired to have a very expanded currency, busied themselves, according to my observation, to create as much excitement as possible with a view to keep the currency expanded and to prevent the Secretary even from having the power to operate in relation to that subject.  That occasioned the very great contest that was carried on for so long a time in the House of Representatives;  and after a very considerable discussion and a recommittal of the bill once or twice it eventuated in the bill which is now before us, my objection to which is, not its strength, but its weakness.  It is as little of a bill, it strikes me, with reference to conveying the proper powers to the Secretary as could well be devised.

Mr. CLARK.  Homœopathic.

Mr. Fessenden.  "Homœopathic," my friend says.  It is rather a small dose.  Now, what does it do ?  It says simply that he may convert any of the existing obligations of the Government, not only those bearing interest, but those not bearing interest, into any description of bonds authorized by the act of last year — not Treasury notes, not seven-thirties, but bonds, and the bonds are specifically described.  They are not to run beyond a certain time;  they may be anywhere within that limit;  and they are to bear not more than six per cent. interest.  This proposition, as I said before, includes not only the conversion into bonds of the obligations bearing interest, but those not bearing interest.  But for fear that that power would be abused;  that the Secretary under it would proceed at once, like a man who had no sense and no discretion, to take up those which did not bear interest before he took up those which did, for the sake of creating a panic, and with the purpose of paralyzing his own action, tying his own hand, disorganizing the business of the country and preventing people from being able to pay taxes — that was about the argument — for fear that he might do all this, and in order to limit him a proviso was inserted in the bill that for six months to come after the passage of this act, carrying it to about the time that we shall meet again, he shall not retire more than $10,000,000 of United States notes, and after that not more than $4,000,000 a month.  With that limitation, which is not of the slightest consequence by way of limitation because he cannot retire a dollar of it, in my judgment, before that time arrives, the bill was satisfactory, and the House at last agreed to pass it.

---[well oh well, Culloch did do exactly just that;  in 24 months he eliminated $1,200 million notes that could have circulated as currency, and disorganized the business of the country, created panic and prevented people from paying taxes;  and by January 1868, it is recorded and admitted]

Now, the bill is of consequence in this particular, and it is about the only consequence I attach to it:  it recognizes the principle distinctly, as admitted and avowed, that soon, as soon as it can be done with safety to the interests of the country and the business transactions of the country as they may develop themselves — and every financier must look upon matters as they develop themselves from day to day to guide his action — as this proceeds Congress means that we shall get back at some time or other, and as speedily as the good of the country will admit, to the old system, to specie payments, the sound basis of our currency.  That is about all there is of it, so far as its practical effect is concerned.  It recognizes the principle as a correct one, and begins to carry it out.  What will be the effect of rejecting this bill ?  The effect of rejecting it is to say to everybody "that our idea is to keep an expanded currency, to keep paper in the market, to abandon the old system, to stretch out, and leave everybody who deals in money the advantage of trading upon such an uncertain and unfixed state of things;"  an idea which, according to my judgment, would be a calamitous one, and which we ought at once to discard.

That is all there is in the bill in reality except the idea which is advanced by the honorable Senator from Ohio as to what the Secretary can do.  The Senator says that we have got nothing to pay just now.  True, we have not.  We have got our certificates of indebtedness out, but the Senator says, we can renew them if necessary.  Would you renew them ?  Would you have this floating paper in the market bearing six per cent. interest payable in a year, coming due every month ?  Would you have the Government which is now in a state of peace embarrassed in its operations and embarrassing all other money operations by renewing that which we can well put into a definite shape, taking floating paper out of the market ?

---[dear, oh dear, and just why do you hate (government) floating paper so much ?  You yourself know it that you are lying when you are equating certificates that could circulate as currency with bonds sitting in someone’s vault collecting interest.  And why oh why do you not explain that the compound-interest notes —which could be used as currency or served as reserve in the vaults of private banks for their circulating notes— are coming due, and when they are replaced with long bonds the total currency in circulation will be reduced by a lot more than the greenback circulation allowed by this Act.  What need is there to reduce the amount of greenbacks by $44 million when next year (1867) $170 million of compound-interest notes will be taken out of existence ?]

Mr. Howe.  What is the amount of them now ?

Mr. Fessenden.  I do not know;  it is not very large; about sixty millions, I believe.

Mr. Sherman.  Sixty-two millions.  He has power under the present law to convert them into bonds bearing interest.

Mr. Fessenden.  Undoubtedly;  but I am talking now about that part of the Senator’s argument that the Secretary has nothing to pay or nothing that need embarrass him, because with regard to these certificates of indebtedness which are coming due every month he can renew them if he has not the money.  So he can;  but is it advisable that he should renew them ?  Is it not very much better, if he cannot pay them in cash, to convert them into standing obligations which do not go into the market in the way in which those certificates of indebtedness do, and which are not used as a species of currency ?

---[That is your problem !  you are objecting to their being "used as currency";  another $62 million reduction in the circulating medium of exchange with which to conduct business !]

It is true we have none of those seven-thirty notes coming due immediately;  but a large portion of them come due before many months, and a very considerable portion of them in the course of the next two years.  Nobody supposes they will all be paid in money as they mature.  No very large portion of this debt is to be extinguished for a considerable period of years.  Nobody thinks of it.  The question is, will the interest be promptly paid upon it, and can we have it reduced regularly, in reasonable amounts ?  Nobody thinks of laying so heavy a load on the country at once, burdened as it is now.  Therefore it will become necessary to substitute for it some other kind of security on longer time, and to be prepared to meet the interest which we may well be.  I know with regard to other loans the Secretaries have been obliged to begin beforehand to make their calculations, put out their advertisements, and begin to redeem;  and that must be done with reference to these interest-bearing obligations;  the compound-interest notes, seven and three-tenths notes, and others; and we must begin a regular system of funding our debt.  The question is, what are we to lose by it ?  The Senator believes we may borrow money at five per cent. interest.  It would be a very dangerous experiment to rely upon that belief.  You tie the Secretary down to long bonds at five per cent. interest, and the experiment we have tried heretorfore does not demonstrate that it is very likely that it would be successful.

---[And those 7-30s, $830 million of them, also serve as money, but the elimination of them and the replacement of them with non-currency long bonds you do not view as part of the reduction of currency !]

It is very much better in my judgment to leave something to the discretion of the Secretary (if you can trust him) as to the mode of doing it.  That he ought to have this power to exchange these different obligations in this way, I think no man on looking at the thing can doubt for a single instant, because it will not do to put off the time until the very day approaches.  It is a thing necessarily to be anticipated, necessarily to be provided for beforehand, to a very considerable extent.

Then, after you have disposed of that, comes the objection which my honorable friend states to the bill in the question, how can the Secretary act under this bill ?  In the first place he can put the bonds in the market and sell them for what he can get.  So he could before.  It would not be very much for his interest, as the financial officer of the Treasury, or for the interest of the country, to run down his own securities by flooding the country with them unwisely and at low prices.  It is not to be presumed that he would do that.  In the next place the argument of the Senator supposes (because it is the only way he can accomplish it) that he will force into the market immense amounts of these bonds, thus diminishing the value of the securities that are already out, running our securities down for the sake of accumulating a large amount of greenbacks, and holding those greenbacks against the will of Congress and against the interests of the country in the Treasury, and directly in the face of this act as to what he is to retire.

Is that supposable ?  It is the only way he can do it;  here the act of Congress says you may exchange for anything you please, but so far as these greenbacks are concerned you shall not retire over ten millions of them in the next six months and only four millions a month afterward for a given length of time;  but the Senator points to what he can do, and argues that he will use the power he possesses in that way.  It would be contrary to all common sense and the ordinary dealing of men;  and it is not to be supposed that he would so act.  The argument supposes the Secretary is so bent on getting non-interest-bearing obligations out of the market before he gets interest-bearing obligations out of the market, that he will dispose of large amounts of our bonds below par, lessen the market value of them as they stand, reduce their credit and the credit of the Government, for the sake of piling up in the Treasury millions and hundreds of millions of greenbacks against the will of Congress, over and above the amount which he is authorized to retire, for he cannot cancel them, as the Senator says he has no authority to cancel them.  Now, sir, it is to be supposed that the Secretary of the Treasury is a tolerably honest man, and it is to be supposed that he is a tolerably sensible man.  My own opinion is that he is a very honest man and a very sensible man, and understands what he is about.  What would be accomplished by overthrowing the business of the country and destroying it, if such would be the effect ?  In the first place by destroying business be would cut off all the resources of internal revenue, because people cannot afford to do business that breaks them up.  In the next place he takes out of the hands of the tax payers a currency by which alone they are able to meet the obligation upon them to pay taxes.  And thus, in order to carry out the favorite idea, according to the Senator, he may, and if the argument means anything he probably will, forget all that, and do precisely the thing which it is not intended he should do, and which it is against the interest of the country, and his own interest as the manager of !he Treasury, to do.

I suppose no such thing, and I do deem it wise to trust him with this power, in the first place because he would not exercise it in the manner supposed if he could, and in the next place because between this time and the meeting of Congress at the next session he can do at best but very little.  I do not believe he will retire a dollar.  He must have a certain amount of money on hand.  There is very much yet to be settled up.  He does not know, you do not know, nobody can tell what the business of this country is to require.  A short time ago an attempt was made to frighten us very much by the immense importations that were going on, which were to destroy the country unless we did something immediately.  Now, the importations are down, so much so that the revenue is failing off largely.  We cannot tell what the changes of business may produce, and even at this time, notwithstanding it is a time of peace, and notwithstanding the fair appearance of everything with regard to our revenue, a revulsion in trade, which is to be avoided if possible, may occasion to us most severe embarrassments with the large pressure which is upon us.  The Secretary of the Treasury, in this transition state, when it is necessary to make provision for the future, and especially with regard to these matters of currency, must necessarily have a pretty wide and broad discretion over it.  He should be limited if you think he has incorrect ideas, but I should be very sorry to base an argument upon the supposition that he will unnecessarily do that which the act intended he should not do, and which it is contrary to his manifest duty in the management of the Treasury and in the management of the affairs of the country, so far as depends on him.

I would give this power, more than all else, for the simple reason that while it can do no harm, I should regard it as a severe calamity to recognize the idea that the present state of things with regard to the currency is to become permanent, and that must be the result unless his policy — I begin to hate the word "policy" in any shape or form;  it is a very odious word — but unless his policy is to be recognized as a general principle as the true policy of the Government in this respect.  There is really so little in the bill itself, that it is really impossible to talk about it to any length.  It shows itself to every man’s mind.  I consider that the evils that my friend alludes to are purely imaginary, rather the result of an excited feeling occasioned by the flame that has been kindled in the country by this talk about the danger of destroying business, and creating pecuniary embarrassment, than anything else.  I hope the bill will pass.

Mr. Chandler.  Mr. President, during the continuance of the rebellion, when we had a million men in the field, and were spending seven or eight hundred million dollars a year, it was necessary to confer extraordinary powers upon the Secretary of the Treasury.  Money we must have;  without money we must give up our Government;  and we did confer extraordinary powers upon the Secretary of the Treasury.  We did right because the life of the nation was at stake.  But, sir, now that the rebellion is ended, I am unwilling to renew those extraordinary powers that we were compelled to grant to him during its continuance.  Under the act of March 3, 1865, which is continued by this bill, the Secretary has power to issue any class of bonds he sees fit, the interest not to exceed six per cent. in coin, and the time not to exceed forty years.  From the breaking out of the rebellion it was the policy of Congress not to issue long interest-bearing high-rate bonds.  I believe the Senator from Maine himself advocated the five-twenty bonds.  Those five-twenty bonds proved a success.  We have ascertained that we can run the Government on five-twenty bonds.  They have never failed us.  Now, why at this late day will you put it in the power of any man or set of men to issue long high-rate interest-paying bonds, forty-year bonds ?  English three per cents are to-day worth 88, and assuming that the credit of this Government is as good as that of Great Britain — and no man doubts it — that would make our forty-year six per cent. bonds to-day worth 176.

Mr. Fessenden.  There has never been a forty-year bond bearing six per cent. issued.

Mr. CHANDLER.  But you give the power.  Why give the power ?  I admit that the Secretary of the Treasury is able and honest;  but you have no assurance that he will live three years or one year.  You have no assurance who his successor will be, either.  You presume that he will be a good man.  But allowing that he is honest;  all financiers are not honest.  You take a Now York "ring" of brokers, and they have generally been smart enough to accomplish their purpose, and they would even convince a Secretary of the Treasury that it was for his interest honestly to do what would be greatly against the real interests of the Government.  I want to limit him to the issuing of six per cent. bonds for not over five years.  In no event would I permit him to issue a bond bearing six per cent. interest at over five years;  in other words, I am for five-twenties.

We have of five per cent. bonds, ten-forties, $198,000,000.  Those are out of the way, bearing five per cent. interest for forty years.  That cannot be changed except at the will of the Government.  True, if we can borrow money at the end of ten years at four per cent., you at your own option can pay them off;  but except at your option they stand for forty years.  You have of six per cent. bonds of 1881 $283,715,000.  Those are certainly out of the way for fifteen years.  Why grant the Secretary the power to take those up ?  He cannot take them up of his own will without paying the market price.  Why authorize him to go in and pay a premium for those bonds that are fixed, located for fifteen years ?  Then you have of six per cent. five-twenty bonds $679,000,000.  These are placed for twenty years except at the option of the Government.  If we can borrow money at less than six per cent., we shall of course go into the market, negotiate a loan, and pay off the five-twenties at the end of five years;  but if we cannot, they are fixed for twenty years.  Why grant authority to change that loan ?

Mr. President, I should like a little further time to examine this bill;  but it strikes me as being evil, and only evil;  as containing powers, dangerous powers, that no man would be willing to accept.  Certainly, if were Secretary of the Treasury, I should not be willing to accept the powers contained in this bill.  You absolutely authorize him to do what he pleases with the $2,700,000,000 of the public debt.  He can step into the market to-morrow, under this bill, and say, "I want to borrow $1,000,000,000 on forty-year six per cent. bonds, and a "ring" in New York may say to him, "We will give you 110 or 120 for forty year six per cent. bonds, with the assurance that no more of that kind of bonds will be issued."  They might afford to pay any amount if they had that assurance, for in comparison with any other Government securities on earth such bonds are worth more than 150, provided the credit of the Government of the United States is as good as the credit of Great Britain, or any other European Government.  There is no limit to the amount of speculation that may be inaugurated and carried out under the powers contained in the bill.

Mr. FESSENDEN.  It is only to exchange one species of security for another.

Mr. CHANDLER.  Certainly, to exchange one piece of paper for another;  in other words, the Secretary can take up your five-twenty bonds and issue forty-year six per cent. bonds in their place if he sees fit.  You give him that power.  Why give it to him ?  You say he will not exercise it.  I do not know that he will;  I hope he will not;  but the Senator, who was once Secretary of the Treasury, knows that all men who engage in monetary affairs are not to be trusted to the fullest extent when their interests are at stake.  If he does not exercise these powers, why give them to him ?  If he does, they are dangerous.

Mr. Fessenden.  The Senator is arguing the bill on a supposition;  he evidently has not read it.  It authorizes the Secretary of the Treasury to dispose of any species of bonds authorized by the act of March 5, 1865, how ?

In such manner and at such rates as he may think advisable.

For what?

For lawful money of the United States, or for any Treasury notes, certificates of indebtedness, or certificates of deposit, or other representatives of value which have been or which may be issued under any act of Congress, the proceeds thereof to be used only for retiring Treasury notes or other obligations issued under any act of Congress;  but nothing herein contained shall be construed to authorize any increase of the public debt.

I presume that under that authority nobody would dream of exchanging bonds or securities of one kind for another unless the latter bonds were coming due and must be met in some way or other.

Mr. Chandler.  Why give him the power ?

Mr. Fessenden.  Because it is necessary in order to meet those very things when they become due;  he must have the power.

Mr. Sherman.  My friend from Michigan will allow me to state that the second clause of this bill unquestionably gives the Secretary power to dispose of any class of securities described there, and the Secretary not only expects to pay them before they are due but he is now doing it every day.  He has the power under this bill to do it.

Mr. Fessenden.  He has as much as he can do to retire those absolutely due.

Mr. Sherman.  Under the present law he has the power to make an exchange.

Mr. Fessenden.  He has power to do that, but he cannot dispose of the bonds.  That is what he wants.

Mr. Chandler.  While I admit his honesty, fidelity, and integrity, I must say that in my judgment a man possessing these powers who was not honest could make more money than any one individual in these United States is worth.  We have no assurance that he will live forever, or that he will live one year, and another man may take his place who will not be as honest and as capable as he is.

Mr. Fessenden.  We must take it for granted that we must have honest men now, in that office especially.

Mr. Chandler.  I should like to have this bill lie over until to-morrow.

Mr. Fessenden.  I do not see why.  It has been on the table a fortnight.

Mr. CHANDLER.  I have never looked at it until this morning, and I should like to have it lie over until to-morrow.

Mr. Fessenden.  We shall have other matters for to-morrow.

Mr. Anthony.  It seems to me — if I am mistaken, those gentleman who have examined the matter more, and are better qualified to examine it, can correct me — that we make a mistake when we assume a prosperous condition of our finances from the redundant internal revenue.  A large portion of that revenue is derived from production, from manufactures of cotton, wool, leather, iron, rubber, &c., the excise duty on which is six per cent.  All those articles have within a few weeks fallen in price, an average, I Suppose, of forty per cent.  The falling off of the revenue will be much more than forty per cent.  The falling off in the excise alone will be forty per cent.;  but then where large incomes were returned from manufacturing districts last year, there will be no such incomes this year, and probably none at all.  I do not believe that this falling off in the price is to be made up by increased production, because the business of almost all the industrial pursuits is now very far from prosperous, and many of the mills will stop unless there is a change in prices.  It seems to me we cannot calculate upon anything like the internal revenue from these sources this year that we had last year.  How far that will be made up from the increased returns from the duty on spirits, I cannot pretend to say;  but I think the argument drawn from the present internal revenue is not a safe one to rely upon as to the future of our finances.

Mr. Fessenden.  We cannot calculate on the duty on spirits, because a great many distillers are shutting up their distilleries, saying they cannot compete with cheating.

Mr. Anthony.  I do not think it is safe to rely on such large receipts as we have had, especially if the taxes are to be reduced.

Mr. Sherman.  I shall detain the Senate but for a few moments in reply to one or two observations of the chairman of the Committee on Finance, and I shall confine myself mainly to the question of the necessity for this bill.  I think he substantially admitted in his argument that there was no necessity for it except to indorse the policy or theory of the Secretary of the Treasury.  In the present condition of our finances I do not think it wise to advance theories or to indorse them.  Perhaps it was not wise in the Secretary of the Treasury to be so open in the announcement beforehand of what he intended to do, and perhaps it would be just as unwise for Congress now to indorse that policy until we see the events that will come before us.

That this bill is not necessary for maintaining the public credit I think is clearly demonstrated.  It certainly is not necessary to meet current expenditures.  On all hands it is admitted that our receipts are in advance of our expenditures, and no possible or probable deduction will make our receipts fall below our expenses, so that the bill is not necessary as a loan bill to enable the Secretary to get money to carry on the expenses of the Government.  The honorable Senator from Maine admits substantially that it is not necessary for other purposes.  The only debt that is maturing during the coming year is $62,000,000 of certificates of indebtedness.  The balance now on hand, as reported and shown by the Treasury books, is $120,000,000;  but the actual balance on hand is some twenty or thirty millions more than the reported balance, growing out of the manner in which the books of the Treasury are kept.

A draft is drawn here on the Treasurer at New York, and it is immediately put to his credit though the money may not be drawn for some time, so that there is always more money in the Treasury than the books show, and that simple fact led to the controversy about which a good deal has been said in the newspapers, between the Comptroller of the Currency and the Secretary of the Treasury.  Deposits are made in the national banks all over the country, and it may be some time before they are so reported at Washington as to be entered on the books of the Treasury here, while if drafts are drawn here on New Orleans or anywhere else they are at once entered on the books of the Treasury to the credit of the proper Treasurer while the money may not be actually drawn out for a month or two months.  There is always that discrepancy;  there is always more money in the Treasury than is reported by the Treasury Department, not because they intend to deceive anybody, but simply from the nature of the transaction and the manner in which the accounts are kept.

I say there is no necessity for this bill to enable the Secretary of the Treasury to pay the current expenses or to meet accruing indebtedness.  The sixty-two millions of certificates of indebtedness can be paid out of the current receipts, or if they are not sufficient, as the Senator knows very well, the Secretary has now power to exchange for those certificates any of the bonds of the United States.  He may issue five-twenties in payment of those certificates under the existing law.  There is no necessity for the bill therefore for that purpose.

Mr. Fessenden.  Those people will not take them.

Mr. Sherman.  Then he can sell the five-twenties under the present law.  There is no necessity to pass a bill to meet that difficulty.  He can put them upon the market.

Mr. Fessenden.  He can only exchange.

Mr. Sherman.  He can sell substantially.  There is no trouble in regard to that.  I think the power given last year is ample for that purpose.  The truth is he has had more money than he has used for such purposes, as I shall show before I get through.

In regard to the seven-thirties, the honorable Senator agrees with me that it is not expected that they will be paid in money;  the holders undoubtedly will avail themselves of their privilege to convert them into five-twenties, so that they are not to burden the Treasury.  They will be converted into five-twenties, and that will postpone the payment of the principal of all of them five years more, and give the Government the option of paying them after any time within twenty years.  There is, therefore, no object in this bill to provide for the credit of the Government, because the credit of the Government is already provided for, and the Secretary of the Treasury has ample power for that purpose.

What, then, is the purpose of the bill ?  I think the Senator frankly stated it;  it is to declare the policy of the reduction of the non-interest-bearing legal tenders.  Under the present law, he has power to retire every dollar of the interest-bearing legal tenders by exchange;  he may redeem them when they become due, and no portion of them will be due until August, 1867, and then they mature gradually, and not in bulk.  He has power under the existing law to retire them by exchange of any securities for them, and with the present ease in the money market there is no difficulty in retiring them whenever he can get hold of them.  Whenever he can get hold of them he is now retiring them.  The trouble is that they are sought for and held by brokers and banks and bankers, and therefore he cannot reach them until they become due, when they will fall into the body of the national debt.  There is no object in passing this bill except to contract the currency, and the honorable Senator says the Secretary will not do that to an unreasonable extent.

Mr. Fessenden.  Cannot do it.

Mr. Sherman.  He says he will in his annual report.

Mr. Fessenden.  He says that is a matter that should be done as soon as it can be done safely and properly.

Mr. Sherman.  He says he will do it.  That is the whole theory of his proposition, and he is doing it.  He is doing it in the very way I have mentioned.  The Secretary of the Treasury accumulates large balances on hand.  Our friend here on my right [Mr. Fessenden] had no such balance in his hands when he was Secretary there;  he was very glad to have a much less balance;  and for the ordinary purpose of the Treasury Department, is there any occasion for the enormous balance now held there ?  What is that balance held there for ?  The balance has been so great that he actually has retired notes that are not due for two and a half years.

Mr. Fessenden.  That was merely to save interest.  How long will that continue ?  He cannot tell what demands there will be.

Mr. Sherman.  I say there is no necessity for this bill for funding the debt.  The limit that is put upon the use of his power over the currency is ample if it was only effective.  I would have no objection conferring on him the power to dispose of bonds to meet bills as they mature.  Indeed, I may say that was one of the amendments I proposed, but I do not intend to propose them to a Senate so thin as this is, that the power to sell bonds should be only to meet accruing indebtedness.  Give him one year if you choose to do it in, but no more.  I do not think it is wise to confer on the Secretary of the Treasury the power to meet the indebtedness not accruing for a year or two or three years.  I do not think it is necessary in our present financial condition to authorize him to go into market now and sell bonds at current market rates with a view to pay debts that do not mature in a year or two.  I have no doubt before the five-twenty loans are due we shall retire every dollar of them at four or five per cent. interest.  No one who heeds the rapid developments of new sources of wealth in this country, the enormous yield of gold now, the renewal of industry in the South, the enormous yield of cotton, the growing wealth of this country, and all the favorable prospects that are before us, doubts the ability of this Government before this debt matures to reduce it to four or five per cent. interest.  I therefore do not think it wise to place it in the power of the Secretary of the Treasury to sell six per cent. long bonds or any class of bonds, I even five per cent. bonds, except to meet accruing indebtedness.  This I am perfectly willing to do — the Secretary of the Treasury may sell bonds at any rate to meet debts as they accrue, but that is not the purpose of this bill.

Mr. Fessenden.  That is all the purpose there is in it.

Mr. Sherman.  Then there is no necessity for it.

Mr. Fessenden.  Yes, there is.  I differ from you.

Mr. Sherman.  We have here the tables before us.  The honorable Senator and I know when this debt matures.

Mr. Fessenden.  The Secretary has not power to sell bonds as the law now stands.

Mr. Sherman.  The power is clearly given in this section to dispose of any description of bonds for any certificates of indebtedness or for any Treasury notes due.

Mr. Fessenden.  Very well;  can he go and sell them and appropriate them to taking up legal tenders ?

Mr. Sherman.  Certainly.  I will state here that I have in my hands a table showing that the Secretary of the Treasury used a portion of the surplus revenue for the purpose of retiring the seven-thirties not due for two years and a half to come.  He has retired of the third issue of seven-thirties, $7,769,000; and of the second issue, not due until June and July, 1868, $4,402,000;  making an aggregate of $12,000,000 which he has retired in the very mode provided in this bill.

Mr. Fessenden.  But a question was raised as to the power to do that, and, on consideration, he had strong doubts about it.  That is the very power which he wants now conferred on him.

Mr. Sherman.  That is the power now given, and he will use the power.  He may think it to his interest to retire the whole of the seven-thirties or the ten-forties;  but is it wise for us to give him that power now, at the heel of the war and before things have settled down ?  I do not think it is.

I repeat, I do not wish to call in question the integrity of the Secretary of the Treasury.  The Senator interjects by saying we must look ahead.  There is just the difference between him and me.  I say the future for this country is hopeful, buoyant, joyous.  We shall not have to beg of foreign nations, or even of our own people, money within two or three years.  Our national debt will be eagerly sought for, I have no doubt.  I take a hopeful view of the future.  I do not wihs now to cripple the industry of the country by adopting the policy of the Secretary of the Treasury, as he calls it, by reducing the currency, by crippling the operations of the Government, when I think that under any probability of affairs in the future, all this debt will take care of itself.  I believe that if the Secretary of the Treasury would do nothing in the world except simply sit in his chair, meet the accruing indebtedness, and issue his Treasury warrants, this debt will take care of itself, and will fund itself at four or five per cent. before very long.  All that I object to in this bill is the power it gives the Secretary of the Treasury over the currency, to affect the currency of the country now, and to anticipate debts that are not yet due.

In my judgment, the amount of legal tenders now outstanding is not too much for the present condition of the country.  I expect to come back to specie payments, and I expect to see gold approach the level and standard of our paper money, without any material reduction of our currency.  Our currency now is less than the currency of England or France, according to the statistical tables we have.  Our whole currency now is $704,000,000, excluding the interest-bearing legal tenders, which do not enter at all into the currency, and which cannot be found.  Including bank circulation of every kind, and excluding interest-bearing legal tenders, our currency is $704,000,000.  Four hundred and fifty millions of it consist of United States notes and fractional currency.  Then, there are over $250,000,000 of bank currency, including the notes of outstanding State banks which are being rapidly retired.  The limit of the national bank currency is $300,000,000;  so that the whole currency cannot exceed $750,000,000.

Mr. Fessenden.  You do not consider the compound-interest notes as anything.

Mr. Sherman.  I do not, because they are not in circulation, and the Senator could not get them if he should try.

1868, January 9, Senator Sherman speaking:—
" a matter of course the compound-interest notes operated precisely like the legal tenders or United States notes, because the compound-interest notes were held by the banks as part of their reserve;  and when they were paid off the bank had either to substitute the three per cent. certificates or the United States notes in their place, and hold them as part of their reserve, so that the actual contraction is about one hundred and forty millions."
"Now, let me submit to the Senator that there will mature within the next six months $46,244,780 of compound-interest notes which are now a part of the currency, held by the banks as a portion of their reserve.  When they are paid off, as they must be during the spring and summer, that is so much contraction, just as if you destroyed $46,000,000 of United States notes."

Mr. ANTHONY.  What was the circulation circulation before the war ?

Mr. Sherman.  Two hundred and seven million dollars in paper, and perhaps $100,000,000 in gold.  It is difficult to tell how much gold there was in the country.  In the present condition of affairs I do not think it is necessary to retire any portion of the currency in order to get back to specie payments.  I do not think our currency is superabundant.  The reasons are obvious.  We are now developing the mining regions.  The gold is increasing with great rapidity.  The amount of gold in the country I believe in five years will approach the amount of our legal-tender currency, so that the one will be convertible into the other.  The proportion of gold to our legal-tender currency at this day is greater than it was at the beginning of the war.  Exchange with all countries is in our favor.  Bills on England can now be had for 106.  We have vast uses for the currency.  It is being absorbed in the southern States and held there.  They are glad to sell anything they have got for it.  Cotton, which was hardly counted, indeed, when the war ended, has yielded enormously.

Mr. McDougall.  Allow me to ask the Senator a question.  Is the rate of exchange on England of which he speaks, 106, the rate in gold or in currency ?

Mr. Sherman.  In gold.  That is two or three per cent. in our favor.

Mr. McDougall.  In gold ?

Mr. Sherman.  Certainly.  In regard to going back to specie payments, when did ever a nation travel toward specie payment as rapidly as this country has done without a reduction of the currency ?  Here is a significant fact, that when gold was 280 our currency was $550,000,000, and now, when our currency is over $700,000,000, gold is 130, and going down and down, and no power in this world can prevent it going down.  This fact shows that the mere amount of legal tender outstanding does not fix the rate of gold.  That is the result of the restored confidence of the people of this country and of all nations in the credit of the United States.  I believe that if the Secretary of the Treasury will keep out of the stock market, will just remain in his seat in the Treasury Department, and pay the debts as they become due, the people of the United States will take care of the currency of the country and of the credit of the Government, and it will not be necessary to buy bonds before they mature or do anything else except simply to meet the current indebtedness in order to bring us back to specie payments within twelve or eighteen months, and I do not believe any power can prevent it.

I do not wish the Senate to suppose that in these remarks I intend to criticise the conduct of the Secretary of the Treasury.  He takes a different view from what I do.  I am more hopeful than he is.  He probably, like a good banker, as he is, wants a very large balance on hand.  I have more confidence in the future, and am willing to trust the future.  I do not now see any imperative necessity for this bill, but at the same time I would make no opposition to the bill, no opposition to the vast power to sell bonds, because I think the power would not be abused, if the Secretary would not in this way undertake to carry out what he calls his policy, a contraction of the currency without any specific law.  That is what I am afraid of, his interference to contract the currency.  The honorable Senator from Maine, however, would seem to think that impute to him a wrong motive, and therefore I corrected him when he made the remark that I seemed to suppose the Secretary was doing this improperly.  I think not.  The Secretary of the Treasury informed us that he desired to reduce the currency, and he has been doing it as far as he could.  He has been accumulating large balances.  He was opposed to the proviso which has been inserted in this bill, and yielded to it only with reluctance.  That is admitted on all hands, and he is not precluded either in honor or propriety from carrying out his policy if you gave him the power to do it.

This is all I desire to say upon the bill.  The only reason why I spoke is because I cannot vote for it under the circumstances, I felt bound to state thus briefly the reasons that actuated me in coming to this conclusion.

Mr. CHANDLER.  I move to strike out in the eleventh line of section one, after the word "act" the word "either," and in the twelfth line, after "United States" to strike out "or elsewhere."  I am opposed to contracting a foreign loan under any circumstances.  We have gone through the war without borrowing one dollar from abroad.  If our bonds have gone abroad it is because the money was sent here to buy them and take them;  but I am opposed, now that the war is over, to applying to the English stock exchange or any foreign stock exchange, hat in hand, begging that they will, now that we do not need it, loan us a little money.  We have shown our capacity, our ability, to carry this debt, and I am opposed to contracting a loan anywhere out of the United States or in any currency but the dollars of the United States.

During the wars of Napoleon, while the English debt was rolling up to its enormous proportion, the people of Great Britain accumulated vast fortunes;  and it was that English debt, that enormous debt, more than perhaps any other agency, that made London the financial center of the world.  That center will change within your life, sir, and mine, if we live to old age;  the moneyed center of the world is to be the city of New York at no distant day.  London will be, as she is now, great already powerful, our and railroads to the Pacific;  the trade of China and the Indies is to pass through New York, and New York is to be the center at no distant day.

Now, sir, why should a great nation like this, that has shown its capacity to carry this enormous debt, and has carried it successfully and cheerfully, now negotiate a bond in francs, or pounds, shillings, and pence ?

Mr. Fessenden.  There is no power in this bill to do that.

Mr. Chandler.  What does "elsewhere" mean ?

Mr. Fessenden.  That is the question where you shall dispose of the bonds.

Mr. CHANDLER.  To make a foreign loan, it means.

Mr. Fessenden.  No;  it is a bond of the description authorized by this act, no other description.  It may be disposed of "elsewhere" than in the United States.

Mr. CHANDLER.  I am opposed to that, and therefore I propose to take away the power to negotiate "elsewhere" than in the United States.  I move to strike out "either" and "elsewhere;"  so as to read, "in the United States."

Mr. Fessenden.  This is the first time I have heard any objection to that phrase;  it has been in all the bills.  We have not had occasion to resort to it, and I trust we shall not.  It was first proposed to authorize a different description of bonds, one payable in a foreign currency, but that has been stricken out.  This phrase is simply that if he finds it necessary or advisable to go abroad (which I do not think he will) he may go there and dispose of them.  The object is simply that there shall not be a combination in this country, in Wall street or anywhere, to tie his hands, and if there is he maybe able to control it by going into another market.  It has been in all the bills.

Mr. Guthrie.  Mr. President, I have examined this matter as carefully and as considerately as opportunity has allowed me to do.  We owe a pretty large debt, $2,700,000,000, with additions yet to be provided for.  A large portion of it will mature in the course of a few years.  More than eight hundred millions of seven-thirty notes are to be provided for within three years.  There is a large amount of bonds due in a short time.  We have the interest on all to provide for as it becomes due;  we have to provide for the principal as it matures.  I suppose there is no gentleman on this floor that has greater confidence than myself in the ability of this Government to meet this debt, and, indeed, if necessity required it, to meet a larger debt than this;  but then I think prudence requires that we should timely provide, not only for the interest, but for the future payment or funding of the principal as it becomes due.

The Secretary of the Treasury, as the financial minister of this Government, is charged with the payment of the interest of this debt, charged also under our laws and the expectation of our people with the payment of the principal as it matures, and under the legislation of Congress we expect him to pay that debt as it becomes due.  It is due to this Government that it should be done, that a failure to pay fifty or one hundred millions of this debt when it matures shall not take place — a failure that would affect the credit of the Government and throw discredit on the intelligence of Congress all over the world.

I am not so sure as the Senator from Ohio [Mr. Sherman] is that this is not the proper time for providing for the payment of the maturing debt.  The eight hundred and odd millions he does not set down;  but it supplies the place of currency, and should be so regarded.  It ought to be provided for, and thus we come to the aid of that pressure in the money market which all men of experience and men of historical knowledge expected to follow the close of this war.  There has never been a great struggle in England that has not produced a monetary stricture between the high money prices of war and the reduced prices of peace.  I do not think it would be very wise hastily, suddenly, without the preparation of the country, to bring up the notes that we have paid out at a discount in the payment of our debts contracted during the war to a specie standard, and give their holders specie for them.  If I was managing the finances of the Government I do not think I would take in any of the ordinary legal-tender notes, particularly while I could get interest-bearing notes.

The Government has been almost the sole purchaser of the productions of this country for the last five years, and of a large portion of the labor.  By the use of legal-tender notes and other issues we paid the persons from whom we obtained our supplies of men, money, and means for carrying on the war.  Now, we are distributing it no longer, except to the extent of the interest and the maintenance of the civil Government and the reduced Army and Navy that we keep.  In the transition of the industry of the country and the sources of supply from the Government to individuals, the history of all nations and all times has shown where there is stricture in the money market.  The Government that has paid the laborers, the Government that has paid for the productions of the looms, the Government that has paid for the wheat and the corn and the oats and the productions of the forest and the production of the mine, ceases to buy them;  others must be found to purchase, and to make a new distribution of the relation of purchaser and seller is a slow process.

The Senator from Ohio says the amount of the currency ought to be fixed.  There would be some advantage in a fixed currency if there was no credit beyond that;  but in all the catastrophes that have happened to the currency of the country and in monetary strictures it has not been the amount of money, but the amount of available credit, that swelled prices and led to commercial fatalities.  At the period of our last commercial revulsion we had probably a paper currency in this country not exceeding $500,000,000, and yet $5,000,000,000 would not cover the mercantile and individual credits that swelled prices, increased debts, and aggravated the calamities of the commercial crisis.  We are now in a transition state;  the Government has been sole purchaser and sole distributor of money;  we are getting back to the slow process by which it falls into other hands and labor is paid and production is paid by others.  Such a state of things has always led to a commercial crisis;  and if we have one we shall have it within the two years which are coming, and during that time a wise financial policy, in my judgment, would provide for as much of our debt as it is possible to provide for.  If I were in the place of the Secretary of the Treasury I would do just exactly as he has been doing.  I would use the surplus money to take up the issues of interest-bearing notes and put them out of the way, if I had a surplus not necessary for the other demands of the Government.  I would put him in a situation to continue this, and I hope that he will be able to accomplish it, so that at no one period of time would so much of the public debt fall due as to create trouble and apprehension or combinations between moneyed men and the Government of the United States.

I have made up my mind that there is nothing in this bill that a wise man may not fairly confide to an officer of high character, and certainly of considerable financial ability, who has his reputation and his character before the nation and the world at stake on the manner in which he administers his duty.  If I were in that place I would prefer that you should lay down exactly what I should do, so that I should incur no risks, so that I should be able to say, "Here is the law;  I cannot sell your bonds and pay your debts in the way you pointed out;  it was impossible to do it;  you have taken the responsibility, and the credit of the nation has lost its prestige;  you have failed in the high obligation which every great people must show of meeting its debts punctually and properly and providing for them fairly;  it rests with you, gentlemen."  I would not like the responsibility of action.  Still, if I intended that the debt should be paid, I would allow this great officer intrusted with the payment of it some latitude and some discretion.

Some may say the liberties of the people, the prosperity of the nation, will be endangered if we delegate such vast powers to the Secretary of the Treasury.  When we call a man to the Presidency, when we put a general at the head of our armies, we intrust him with vast powers, vastly greater powers than we confide to the Secretary of the Treasury, and we have no choice.  We are obliged to confide in them;  these powers are necessary for great times and occasions.  I happen to know the Secretary of the Treasury individually, and have known him for some years.  He lived in the neighboring State of Indiana, and had character and reputation as a banker;  I met him in bank conventions between Indiana and Kentucky when we were consulting upon very interesting subjects, and I always found him to be an intelligent, honest, straight-forward, high-minded, and upright man, and I bear that testimony to him now.  I suppose it is not improper to mention Mr. Secretary Chase in this connection;  and I thought he was imbued with Mr. Secretary Chase’s grand notion of putting down the rebellion and being able to resume specie payments within sixty or ninety days.  I thought that he was a little imbued with that notion, and I took occasion to remark to him in the course of conversation, "Mr. Secretary, we have got first to put down this rebellion before we think of resuming specie payments;  that is an afterwork;"  and he turned to me very kindly and said, "I do not think of doing it before we put down the rebellion;"  and then I felt that I had done injustice to him in supposing that he had not looked at the whole ground.

Now, I have no doubt he is anxious to satisfy that portion of the country who are impatient about specie payments and the effect of a depreciated currency.  I think it is right that we should all steadily look forward to the propriety at the earliest practicable period, without any hazard to any great interest, and without making grand fortunes for individuals by the operation, of bringing up the paper money to the standard of specie.

When I was in the Treasury Department I had a surplus of money, and the difficulty was to know what to do with it.  I was running a race with Congress to see whether I could pay more of the public money than they would appropriate for private expenses as the law left it open to me to do.  I had no difficulty about money, but I could not keep my mind from running upon the thought, what will this Government do in the event of an internal struggle, or a contest with foreign nations in an arduous war ?  And I came to the conclusion that it would have to resort to exchequer notes, just as was done during the war.  My judgment is that you could not have lived through the war without them.  My judgment is that the confederates failed when their currency failed.  When it went down, and they could no longer pay their troops, there was no hope for them.  I considered then the rebellion substantially at an end;  it was but a question of a campaign after that.

Our people have borne taxation well — admirably well.  Many of them have large incomes, and would not advise that the income tax should be taken off.  They are the men who have money, and in appealing to the people for money I know of no better way of getting it than to call on those who have it.  But in the commercial relations of the United States, particularly in our foreign commerce, debts are created.  I have no objection to paying those debts with gold from the mines.  I have felt that the productions of the mines were a part of the national wealth just as much as the productions of the field or the forest, and that we had a right to look to them and use them in paying our balances with foreign nations.  In the transition state which generally follows a long and protracted war we may expect a diminution of commerce.  There may be a diminution in the production of our provision States, so that they will not be able to supply our manufacturers, and enable them to compete with the other manufacturing nations.  Our trade hitherto has been pretty well kept up, but there maybe a diminution of commerce, and then our people will be less able to pay.  We shall then have fewer large incomes to call upon.  There will be fewer products from the manufacturing districts, fewer from the agricultural districts;  there will be diminished ability to pay taxes.  Now is the time to do what this bill provides for, before that takes place, as, in my judgment, it must and will take place sooner or later;  for in the history of no country that has passed through the excitements of war and war prices, and come back to peace prices, is there a solitary instance where it has not occurred.

Sir, I believe we are able to pay our national debt.  I believe a repudiation of it would do more injury to this nation before the nations of the world than even the success of the rebellion.  We have now established our warlike character before the nations of the world;  let us take care that in winding up this war and restoring peace we leave no stain on the honesty and credit of the notion.  I do not believe there is a man within the sound of my voice, and there is no class of people in any portion of the country with whom I have spoken, that do not want to pay the debt, and that do not think we ought to pay it.  Occasionally you will hear men say, "When you restore specie payments, are you going to pay those men who only gave fifty or sixty cents to the dollar for their bonds the full specie face value of the bonds ?"  That was the great outcry in England when they resumed specie payments, and there was a strong party made against those who brought it about;  but still England resumed specie payments, and England has become the money center of the world and has engrossed a great portion of its commerce.  I am not one of those who believe that England’s moneyed superiority is to keep always as it is now or as it has been for the last fifty years.  If we are true to ourselves, true to the bequest made us by the framers of our Constitution, true to the large country that we govern, we shall bring the commercial center to New York and vie with England in commerce;  and I and believe we shall make another great city on the west, competing with her for the trade of the eastern world, and throwing into this country all its rich benefits and advantages, and that San Francisco will rise up a competitor of New York in the commercial business of the country;  and we shall all rejoice more and more with a restored Government with maintained credit, and with commercial prosperity, and shall all be proud of our portion and interest in this Government.

In this connection I cannot but in all honesty and candor express the regret which I feel that we have failed to bring back all the States to their places in the Union.  I have no doubt that many who have not been as anxious, and who perhaps would not have gone as far as I was prepared to go to accomplish that result, desire the achievement of it as I do;  but they have been here fighting these battles while I have been a looker on in another State.  I thought at the beginning of this war what I have since expressed -- I expressed it so early as in the Peace Convention -- that we were in danger of having two military despotisms.  There was one in the South, and I hope we shall take care, that having been put down, that there shall not be one erected here.

Now, I am sorry to differ from the Senator from Ohio.  I am not for increasing the paper money;  I think it ought to be reduced.  The paper of this country now is actually fifteen or sixteen hundred million dollars, because I think the compound-interest notes and the seven-thirties are substantially money, and take and occupy the place of money, and when we provide for paying them we increase the money capital of the country and its capacity for business.

---[If they are money, and even you say they are (everyone else is conspicuously silent on this matter), then exchanging them for bonds means the elimination of 75% of present volume of currency.  How will transactions of the country be facilitated with one quarter of currency ?  Will business activity be not reduced accordingly ?  How will you pay off $2,700 million debt with less than $1,000 million in existence ?  If all these Treasury notes had been gold/silver coins, would you still say the currency is redundant ?  would you still ask for the reduction of it ?
Years later, in 1890, Mr. Chittenden, Register of the Treasury during their issue, still acknowledged 7.30s as "paper money"]

I have made up my mind deliberately, after examining all the phases in which I could view this bill, that it is necessary and proper to intrust this power to the Secretary of the Treasury.  I think we ought to do it now.  The allegation that a power may be abused is not always a good argument with me, because there is much in the surroundings of the men who are to execute your law to prevent an abuse of granted powers.  Indeed, I think that rarely occurs among high officers of standing and character.

Mr. Howe.  Mr. President, I have looked at this bill this morning for the first time.  I do not know that I entirely comprehend it.  I agree with the chairman of the Committee on Finance and with others upon the propriety of getting back to what is called a specie basis as early as possible.  I agree with the Senator from Kentucky who has just taken his seat, that it will be a very glad day for this Republic when there will not be found a dollar of public, of corporate, or of personal credit that is not on demand convertible into a specie dollar.  How soon that time will come, I take it we are none of us prepared now to say.  I presume the first object to be aimed at by the Legislature should be to bring about that day when there shall not be a dollar of national credit which is not convertible into a specie dollar.  The great obstacle in the way of this conversion at the present time, I suppose to be the existence of this large amount of credit in the shape of Treasury notes which are made by our law a legal tender.  Until that paper is retired, I suppose we cannot look for the resumption of specie payments on the part of others.  No bank and no individual will redeem their notes in specie as long as they can be redeemed in this paper;  and they can be redeemed in this paper as long as this paper is extant.  How to get the paper out of the way, then, seems to be the question.  My idea was in the beginning that the only excuse for issuing this paper was the fact that the Government had an urgent necessity for the use of money which could not be borrowed.

Admitting the credit of the Government to be perfectly good -- and I never did vote for a law, and I never could vote for a law, which tolerated the idea that the credit of the Government was below par -- the fact was that we had occasion to disburse an amount of money which could not be collected in coin if the Government could demand every dollar there was in the nation.  The Government was driven, then, either to make paper of its own or to borrow paper from somebody else.  I always thought that the Government should place itself in the attitude of saying to the country;  "A certain amount of interest is fair to be paid;  we are willing to pay that;  whenever, therefore, individuals or corporations will loan us money at this fair rate of interest we will borrow it;  when we cannot borrow money at this rate of interest we will make it."  We never could say that we will not purchase wheat or meat, or hire soldiers or laborers because we have not the coin to pay them;  provisions and labor we must have, and we demanded of the country to supply them, and they did.  We were bound to pay them.  When we could not command the coin with which to pay them, we had to make them work for us on our credit.  If we made them take our credit in any form as an equivalent for their labor, for their meat, for their supplies, it was only fair to say that their creditors should take the same form of credit from them.  That necessitated the making of these notes a legal tender.  I always thought, having settled what was a fair rate of interest to be paid, the Government should just say, "When you loan us this money at that rate of interest, we will borrow it;  when you will not, we will issue our own notes."  We adopted first six per cent. as a fair rate of interest.  I thought it was a fair rate of interest, because by the legislation of nearly all the commercial States of the country that is the highest rate of interest individuals or banks are allowed to take, and having adopted six per cent. as a fair rate of interest, I always regretted that we should have issued any form of obligation which bore a different rate of interest.  There are several different kinds of these obligations out.

In 1865 it seems that an act was passed authorizing the Secretary of the Treasury to borrow a certain amount of money, I believe $600,000,000, and to issue among other things any kind of bond not less than fifty dollars in amount, and running any length of time, I believe not more than forty years, and varying in the rate of interest up to six per cent. in coin or seven and three tenths per cent. in currency.  Those are the kinds of bonds which the Secretary of the Treasury is authorized to issue by the act referred to in the first section of this bill.  The first clause of this bill now, as I understand it, authorizes the Secretary of the Treasury to issue any bond that comes within this description in exchange for any other form of indebtedness outstanding against the Government, whether it bears interest or whether it does not.  Any form of indebtedness outstanding against the Government he may take up and issue in lieu of it any kind of a bond authorized by the act of 1865.

Now, I suppose we would rather either have bonds out bearing six per cent. interest in coin or bonds bearing seven and three tenths per cent. interest in currency.  One of the two is preferable in the judgment of Congress to-day.  My own opinion is that it would be better for the Government if it had no seven and three-tenths bonds out, and if all its bonds were reduced to six per cent. interest and that payable in coin.  I think that would be the judgment of Congress to-day;  but this bill, while it proposes to authorize the Secretary of the Treasury to take up seven and three-tenths bonds and issue five-twenties for them, also authorizes him to issue five-twenty bonds in exchange for the seven-thirties;  and it also authorizes him, if I understand it, to take up the ten-forty bonds, the five per cent. bonds, and issue in their place either five-twenty six per cent. bonds or any other kind of bonds bearing not more than six per cent. interest in coin or seven and three tenths interest in currency.

---[You, too, Mr. Howe, consider the 7.30s currency !?]

Now, is it possible that the Secretary will want to do this thing ?  Is it possible that the interests of the country will demand the doing of this thing, making this kind of exchange ?  If not, why authorize it ?  If you deem it better to get these seven-thirty bonds all out of the way, why not authorize him to receive the seven-thirty bonds and issue in exchange for them bonds bearing six per cent. interest in coin, and let that be the extent of the authority you vest in him in the way of exchange ?

But coming to the next clause of the bill, which seems to be much more important, it is on that clause that I want some advice.  As I first read it, I thought it vested in the Secretary of the Treasury authority to make any amount of bonds coming within the description of the act of 1865, and to sell them anywhere upon just such terms as he pleased;  that he could sell them for ninety per cent., eighty per cent., fifty per cent. if he saw fit, but the last part of that clause provides that "nothing herein contained shall be construed to authorize any increase of the public debt."  Is that designed (I put the question for information) to deprive the Secretary of the authority to sell any of these bonds below par ?

Mr. Fessenden.  I do not suppose that was the intention of the clause.

Mr. Howe.  Would it not have that effect necessarily ?  If the Secretary issues one hundred millions of bonds and gets in but ninety millions of Treasury notes or certificates of indebtedness, does he not increase the public debt to the extent of $10,000,000.  Either he must disregard that last clause or he must sell not below par.  If this bill be designed to authorize the Secretary to sell bonds such as are described in the act of 1865 below par, I am utterly opposed to it.  I conceive there is no sort of necessity for investing him with such authority, and I cannot conceive that any policy can justify it, but I do think we should always allow any public creditor holding any of these notes which do not bear interest to exchange those notes for the obligations of the Government which do bear interest, and when we do so enable him, (I believe the laws now authorize that,) I do not see what other authority the Secretary wants for retiring those notes.  Then the holder of the notes who is the owner of them can determine for himself whether he would rather use them as money or turn them into the Treasury and take interest-paying bonds for them.

The proviso to this section, as I understand it, instead of making the bill less objectionable makes it more objectionable.  The proviso says to the Secretary that, although the holders of this money which does not bear interest may come forward and pay in one hundred or two hundred millions of it and take interest-paying bonds, he shall not retire those notes from circulation for a year.  It says to him, "You shall not retire more than thirty-four millions in the aggregate of these notes."  I conceive that in the regular course of business the country will seek and will want to retire a good deal more than thirty-four millions within a year.  The necessity for this very large and swollen circulation was abundantly explained by the Senator from Kentucky [Mr. Guthrie] just now.  Previous to this war all the use you had for circulation was, so to speak, to aid the exchanges of the agricultural products for the manufactured and imported products of the country.  When, as the Senator from Kentucky remarked, the Government became almost the sole purchaser of all those products there was nothing to do but just pay out money for them, and if they had paid gold for all these things the circulation would have been increased just about as much as it has been.  The Government, has done nothing but pay its debts;  that is all it has done, to increase the circulation.  The Government is done making those purchases;  its army is disbanded in the main;  it has done making the purchases which it was compelled to make throughout the whole course of the war.  Henceforth the old system of doing business is to be resumed;  but the arrearages are not yet quite paid up.  The Government is, therefore, disbursing largely to pay up those arrearages, and so this plethora is not so acutely felt at the present time as I take it it would be if those arrearages were paid up.  When those arrearages are paid and business assumes its old forms and shapes and courses, I do not understand why we should need a vast deal more money to do the business of the country hereafter than we did before the war.  At all events, I should be very unwilling to say to the Secretary of the Treasury, as this proviso does say, that no matter if one hundred or two hundred millions of this non-interest- paying paper be taken into the Treasury in exchange for bonds you must still keep it there in the form of circulation and disburse it in the regular disbursements of the Treasury.  I think when one hundred more millions of bonds are issued in exchange for one hundred millions of Treasury notes, we ought to cancel those Treasury notes and thenceforth they ought to cease to do the work of money.

---[Is the business of the country not "a vast deal more" than before the war ?]

But, as I said before -- and that is pretty much all I want to say -- certainly if it is the purpose of this bill to enable the Secretary of the Treasury to sell a bond of the United States now, in a time of peace, bearing any rate of interest that he puts upon it under the bill, at less than its face, I am opposed to it.  I agree, also, entirely with the Senator from Michigan, [Mr. Chandler] that although we cannot very well exclude the people of any country from coming here and buying our bonds, yet I am opposed utterly to putting any word into this bill which will seem like clothing the Secretary of the Treasury with authority to go to England, or to go anywhere outside of the limits of the United States, to peddle the credit of the United States.  If there ever was any necessity for that, that necessity has passed.  I am one of those who believe there never was a particle of necessity for it, and the result has verified this statement.

Mr. Morgan.  Mr. President, the main object of this bill is to enable the Secretary of the Treasury to provide for the maturing obligations of the Government, with a view to a return to specie payments at an early day.  We all agree that it is a duty of the Government to make Provision for its debts as they mature.  The only question is one of time, whether the present is the proper time to make provision for these maturing obligations.  Three hundred millions, in round numbers, will become due next year, in August.  It has been said here this morning that the Secretary of the Treasury should remain in his seat, do nothing until that debt matures, and then sell his bonds.  It seems to me that in order to maintain the credit of the Government those negotiations should be made a long way in advance;  and it seems to me, also, that the present is a very favorable time to commence those negotiations.  The money markets of the world are now easy, and the Secretary of the Treasury will have no difficulty in commencing to provide for those obligations at this time.  There may come a period before these debts mature when it may be extremely difficult for him to sell bonds at prices that would be satisfactory to the Government.

Our debt is unprecedentedly large;  we had never anything like it before;  we are experimenting to a certain degree;  and while these loans will be effected, as they have been effected before, in the principal cities of the United States, and the money will be loaned by our own people, probably all of it, yet I see no impropriety in leaving it optional to get it elsewhere if it can be obtained elsewhere on better terms.

A word as to the question of power.  Large discretionary power must be lodged with somebody;  and why not with the Secretary of the Treasury ?  He is the proper officer, the financial officer of the Government.  It is not a new thing to give large powers to the Secretary of the Treasury.  On the 3d of March, 1863, Congress passed a law by which it was provided:

"That the Secretary of the Treasury be, and he is hereby, authorized to borrow, from time to time, on the credit of the United States a sum not exceeding $300,000,000 for the current fiscal year, and $600,000,000 for the next fiscal year, and to issue therefor coupon or registered bonds, payable at the pleasure of the Government after such periods as may be fixed by the Secretary, not less than ten nor more than forty years from date, in coin, and of such denominations, not less than fifty dollars, as he may deem expedient, bearing interest at a rate not exceeding six per cent. per annum, payable on bonds not exceeding $100 annually, and on all other bonds semi-annually, in coin;  and he may, in his discretion, dispose of such bonds at any time, upon such terms as he may deem most advisable, for lawful money of the United States, or for any of the certificates of indebtedness or deposit that may at any time be unpaid, or for any of the Treasury notes heretofore issued or which may be issued under the provision of this act."

The power given under that law resulted in great good to the country;  I do not know that it is too much to say that it saved the credit of the Government at that time.  That was a very dark period in the history of the war;  and but for this authority, this large discretion, it is not at all certain but that we should have experienced embarrassment that we could not have overcome.

I am in favor of this bill just as it is.  I am in favor of it because I think the power must be given to some officer of the Government;  and of course it must be given to the Secretary of the Treasury.  I am in favor of his exercising that power now before the debts mature.  I am in favor of his keeping a very large amount of money on hand.  I am sure that the result of the revenues of the present year will be a serious disappointment to the expectations formed by some.  I see no harm at all in this bill.  I happened to be on the committee to which it was referred;  I favored it there, and I hope it will be passed by the Senate.

Mr. Cowan.  I am also in favor of this bill.  I really can see no possible objection to it.  It is exceedingly simple and obvious as a remedy.  We have a large number of debts falling due along at various times during the next eighteen months.  This bill simply proposes to exchange the securities now outstanding for those debts for others running a longer time.  That is the whole of it.  The debt is not to be increased by the operation.  The only thing that perhaps, might be liable to some objection is the fact that the Secretary is authorized to take up securities payable on demand not bearing interest;  but the proviso limits him so that he cannot retire more than ten millions of that kind of currency until within six months of the passage of the act and not more than $4,000,000 in any month after that time.  No possible objection can be made to the exchange of our short securities for long ones where the interest is the same.  However, it might be said it would be improper to take up notes not bearing interest and give bonds in exchange for them which the bill does;  but that mischief, if it be a mischief at all, can only be to the extent limited in the proviso;  it cannot go any further.

Mr. HOWE.  Will the Senator allow me to interrupt him ?  If he understands the bill aright, I do not.  Under this bill, has not the Secretary of the Treasury the right to dispose of three, four, or five hundred millions of bonds in exchange for Treasury notes and certificates of indebtedness ?

Mr. Cowan.  Unquestionably, and they are to be retired;  but if he receives in exchange for these bonds United States notes, that is, demand notes not bearing interest, he can only retire to the amount of $34,000,000 in the year, and those are to be retired and canceled and put out of existence.

Mr. HOWE.  Now, suppose that he sells $200,000,000 of new bonds in exchange for $200,000,000 of Treasury notes, $34,000,000 of the $200,000,000 will be retired.

Mr. Cowan.  They will all be retired if he receives Treasury notes.

Mr. HOWE.  Is that so ?

Mr. Cowan.  They will all be retired if he receives nothing but Treasury notes.  If he should receive $34,000,000 of demand notes he may retire $34,000,000.  If he receives $50,000,000 of demand notes he cannot retire more than $34,000,000;  he will still retain on hand the other $16,000,000.

Mr. HOWE.  Then the Government would owe that $16,000,000.  That would bean outstanding obligation.

---[dear Senator, the 1861 Treasury notes are NOT "owed" to anyone, any more than a government-issued silver coin is owed;  they were spent into circulation and are "receivable in payment of all public dues";  if you wish, you may purchase with them silver coins from the Government, then, at tax time, pay what is due with those coins, or simply pay your dues with the Treasury notes -- the rest of the Greenbacks are not even 'demand' notes, only notes, and will serve as medium of exchange for he next 40 years just as well as the notes of banks prior to the war, and interest free.  What will be "owed" (and owed for centuries) are the interest and principal of the bonds for which you so eagerly want to exchange these notes.]

Mr. Cowan.  The Government will have that in possession as cash on hand.

Mr. Howe.  But if it pays it out, the Government will still owe it.

Mr. Cowan.  Certainly, it will still remain in circulation.

Mr. Howe.  And the Government will owe the fifty millions of bonds.  Then will not the debt be increased ?  That is the question.

---[You are right on that, Sir, but not by the $16,000,000 greenbacks, but by the $200,000,000 bonds.  On this day the Federal bonded debt is ~$600 million;  in 24 months -- due to actions of Culloch, egged by this Act -- the bonded debt will be $1,600 million.]

Mr. Cowan.  It cannot possibly be increased, because the $16,000,000 will be cash on hand, and with that $16,000,000 you may buy Treasury notes or anything you please and retire them to the same extent.  It does not increase the debt a copper;  it is simply an exchange of securities.  It is to authorize the Secretary of the Treasury to exchange before they become due short-running securities for long ones;  that is the whole of it.

Mr. CHANDLER.  The Senator from Maine [Mr. Fessenden] says that there is very little in this bill, not much, not quite enough.  Sir, I say there is everything in it.  It is a surrender of the Treasury and all its safeguards into the hands of one man.  You say to the Secretary of the Treasury, "Do just what you will, when you please, and as you please, with all the indebtedness of this Government" -- a power which no one single man ever yet possessed on earth or ever will again if this bill does not pass, I presume.  If there was a present pressing necessity for giving this power or any other I would grant it;  but there is no necessity whatever.  Everyone of your seven-thirty Treasury notes is redeemable at the option of the holder at the end of three years in five-twenty bonds.  That is a part of the contract you made with every man who has taken one of your seven-thirty bonds, that at his option he can demand and receive a five-twenty bond for it.

Now, the Senator from New York [Mr. Morgan] says that there are $300,000,000 that will mature in the next year.  If the Secretary of the Treasury will step into the market to-day and say, "I will give you three hundred millions of five-twenty bonds," he will have nothing maturing next year, for the bonds would all be taken within thirty days.  He has that power now;  it is all the power he needs, and all he ought to have.  Then why, at this late day, step out of your own beaten track to give him an absolute control over all the indebtedness of the Government ?  The Senator says he will not use it;  it will not be his interest to use it.  I hope he will not;  I hope that the dangers which I fear are groundless;  but why give the powers contained in this bill to any one man ?  You authorize him to take up your 1881 bonds;  you authorize him to take up your five-twenty bonds;  you place the whole $2,700,000,000 in his hands to do just as he pleases -- a power which was never given to any one man, and never will be again.

What is our present condition ?  Our receipts are lessening our debt monthly;  the credit of the Government is appreciating daily.  To-day your bonds are more valuable than they were thirty days ago;  and they were thirty days ago more valuable than they were sixty days ago.  I agree perfectly with the Senator from Ohio, that if the Secretary of the Treasury should sit behind his desk and pay his interest, and let the credit of the Government take care of itself, it is the best thing he can do at this time.  If he is afraid that next year he cannot negotiate three hundred millions of seven-thirties, let him to-day step in the market and say, "I will exchange five-twenties for three hundred millions of seven-thirties," and in one week there will not be a dollar of them on hand.  We have carefully guarded against long loans during the whole war;  we have carefully guarded against high interest for a long period.  We have paid seven and three tenths per cent. interest because the necessities of the Government required it, and that was the lowest rate at which we could borrow our money for currency.  We have used five-twenties, used them successfully, and used them throughout.  Why not now today say to the Secretary of the Treasury, "You may issue five-twenties;  if you are afraid they will not be taken nest year, issue them this year;  negotiate two or three hundred millions, and be a year in advance ?"  I do not object to that, but I do object to the monstrous powers contained in this bill.

I hope that the bill will not pass.  I am sorry that the Senator from Maine is so anxious to press it to a vote to-day.  I desire that there shall be a full Senate when the vote is taken, for I consider it is the most dangerous bill that was ever passed by the Congress of the United States.  If the present Secretary should remain in office, and if he should withstand, not the temptations, but the designing and intriguing management of what are called "rings," he will be fortunate.  The powers contained in this bill no judicious financial man, in my judgment, would accept of if he could help it.  I think we should define -- the country ought to know precisely -- what we are going to do, and we should announce our policy, and not take his.  I move that this bill be recommitted to the Committee on Finance;  and I hope Senators will vote to recommit it.

Mr. McDougall.  I do not rise in my place, Mr. President, for the purpose of discussing this bill.  It is a measure that has been considered, I suppose, by all Senators for some considerable time past.  It belongs to the policy inaugurated by our present Secretary of the Treasury.  There seems to be great alarm at the idea of trusting the Secretary of the Treasury, the moneyed officer of the Government.  Perhaps it would be well to consider that in other classes of Governments, particularly in monarchical ones, men obey;  in all free Governments men must trust.  The Senator from Ohio is trusted here with a high commission;  and so the Senator from Michigan is trusted by the people of his State.  We have reposed confidence in men who under our system of government are selected for high offices.  We have needed a system of finance, particularly since the commencement of this war.  No system was inaugurated under the late Secretary of the Treasury, now Chief Justice.  He never had any established policy.  The present Secretary came in with financial skill and financial experience.  He has exhibited his information on these great subjects so as to satisfy the country and Congress.  I think confidence can be placed in his sound judgment.  What is sought here is to give him the privilege to inaugurate a policy.  We have had no financial policy except so far as it has been arranged sub modo without any special license.  We propose now to trust him, not with any large power, to handle our present indebtedness and to change its form so that it may be systematized.  I think the legislation is wise.  Again, I repeat, it is the feature of free Governments to trust, as it is the feature of monarchical Governments to compel obedience.  We must trust our public officers.

The PRESIDING OFFICER, (Mr. Pomeroy in the chair.)  The question is on the motion of the Senator from Michigan to recommit the bill to the Committee on Finance.

The motion was not agreed to.

The PRESIDING OFFICER.  The question now is on the amendment moved by the Senator from Michigan, in section one, line eleven, to strike out the word "either," and in line twelve after the words "United States" to strike out the words "or elsewhere;"  so that the clause will read:

And also to dispose of any description of bonds authorized by said act, in the United States, to such an amount, in such manner, and at such rates as he may think advisable, &c.

Mr. CHANDLER.  I should like to have the yeas and nays on that amendment.

The yeas and nays were ordered.

Mr. Cowan.  I do not see any conceivable reason why that amendment should be adopted.  If we have short securities anywhere, no matter where it is, whether in the United States, China, Great Britain, or anywhere else, what difference can it make that the Secretary has the right to exchange them for long bonds ?

Mr. JOHNSON.  That is not the amendment.

Mr. COWAN.  It is that he can only exchange in the United States.

Mr. JOHNSON.  To prevent him from exchanging except in the United States.

Mr. Cowan.  The effect of the amendment will be to confine the exchange to this country.

Mr. CHANDLER.  Certainly, that is the intention.

Mr. Cowan.  Then a foreigner who may happen to have our short paper, and may be willing to exchange it for long bonds, will not have the opportunity of doing so.

Mr. CHANDLER.  I suppose he will have to do it here, not there.

Mr. COWAN.  I suppose the paper will have to come here of course, but if the paper can come here and an exchange can be made with the foreigner, then the amendment can have no effect.  It is mere idle words.

Mr. CHANDLER.  The object of the amendment is perfectly well understood.  It is to prohibit the Secretary of the Treasury from going abroad to borrow money.  We have not permitted him to do it during the rebellion, and I object to his doing it now.  If Senators desire to send the Secretary of the Treasury all over the world begging somebody to take his evidences of debt, then they will vote against this amendment;  if they do not desire to have him do that they will vote for it.

Mr. FESSENDEN.  The Senator is very much mistaken as to the facts.  In the bill passed last winter, and in the bill passed the winter before that, he had authority to negotiate a foreign loan if he saw fit.  He always had that power.  The only question is whether, by being confined to a particular place, he shall be placed in the hands of people who might combine to render his operations nugatory.

Mr. CHANDLER.  If the Government of the United States proposes to place itself on a par with Turkey and the little German and South American States that send their loans into the English market and make them payable there, it is all right.  I object to it in toto.  I consider that we are now taking our place among the great Powers, and that it is humiliating for us to make the evidences of our indebtedness payable anywhere outside of the territory of the United States.  It never shall be done by my vote.

Mr. FESSENDEN.  The Senator does not understand what he has been talking so much about to this moment.  There is no proposition here to make it payable abroad.

Mr. CHANDLER.  You authorize him to do it.

Mr. FESSENDEN.  No, sir;  there is no such authority.

Mr. CHANDLER.  Then what are these words in here for ?

Mr. FESSENDEN.  They are in there to enable him, if he sees fit, to dispose of our obligations abroad.

Mr. CHANDLER.  Precisely, that is what I said.

Mr. Fessenden.  But that does not make them payable abroad.  There was such a proposition in the original bill, but it was stricken out in the House of Representatives.  There is no such thing in the bill now.  All that he has power to dispose of is "the bonds authorized by the act to which this is an amendment," and, that refers to the act of last year, and they are all payable in this country.

The question being taken by yeas and nays, resulted-- yeas 6, nays 35; as follows:

YEAS-- Messrs. Chandler, Howard, Howe, Norton, Sherman, and Wade --6.

NAYS-- Messrs. Anthony, Brown, Buckalew, Clark, Conness, Cowan, Cragin, Davis, Doolittle, Edmunds, Fessenden, Foster, Grimes, Guthrie, Harris, Hendricks, Johnson, Kirkwood, Lane of Indiana, McDougall, Morgan, Morrill, Nesmith, Nye, Poland, Pomeroy, Riddle, Saulsbury, Stewart, Sumner, Trumbull, Van Winkle, Willey, Williams, and Wilson --35.

ABSENT-- Messrs. Creswell, Dixon, Henderson, Lane of Kansas, Ramsey, Sprague, Wright, and Yates --8.

So the amendment was rejected.

The bill was reported to the Senate without amendment, ordered to a third reading, and was read the third time.

Mr. CHANDLER.  I desire to have an opportunity to record my vote against the bill, and I therefore ask for the yeas and nays on its passage.

The yeas and nays were ordered;  and being taken, resulted-- yeas 32, nays 7;  as follows:

YEAS-- Messrs. Anthony (R), Brown (R), Buckalew, Clark (R), Conness (R), Cowan (R), Cragin (R), Davis, Doolittle (R), Edmunds (R), Fessenden (R), Foster (R), Grimes (R), Guthrie, Harris (R), Johnson, Kirkwood (R), Lane of Indiana (R), McDougall, Morgan (R), Morrill (R), Nesmith, Nye (R), Poland (R), Pomeroy, Riddle, Sumner (R), Trumbull (R), Van Winkle, Willey (R), Williams (R), and Wilson (R) --32 [23 R].
NAYS-- Messrs. Chandler (R), Howard (R), Howe (R), Norton (R), Ramsey (R), Sherman (R), and Wade (R) --7.
ABSENT-- Messrs. Creswell, Dixon (R), Henderson (R), Hendricks (D), Lane of Kansas (R), Saulsbury, Sprague (R), Stewart (R), Wright, and Yates (R) --10.

So the bill was passed.

Little less than two years and a $1,000 million more gold bonds later:---
40th Congress, 2nd Session
In Senate
February 27, 1868.

The Senate, as in Committee of the Whole, proceeded to consider the bill (S. No. 207) for funding the national debt and for the conversion of the notes of the United States.

The Policy of Contraction.

---[Senator Sherman speaking] Mr. President, I believe that most reflecting men will now admit that if two years ago we had adopted some provision, comprehensive in its character, to fund the public debt and to provide for the redemption of the five-twenty bonds when they became redeemable, it would have been wiser.  At that time no portion of them were redeemable.  The first became redeemable about one year ago;  but the whole country was then filled with the idea of Mr. McCulloch, that the only safety was in contraction, to get back to specie payments before anything was done with the public debt;  and the policy was adopted of authorizing a contraction of the currency without any regard to funding whatever.  That policy was entered into;  and by the act of April 12, 1866, passed against my earnest protest, we gave to the Secretary of the Treasury almost unlimited power over the currency and over the public debt.  We authorized him to convert every form of indebtedness into any form of indebtedness provided for by previous acts.  There was no other limitation upon his power over the public debt or the currency except that he could only reduce the greenback currency at the rate of $4,000,000 per month.  In every other respect he had the most unlimited power.  I have no doubt that he exercised his power conscientiously;  I have never thought otherwise;  but what has been the result ?  Within two years he contracted the legal-tender currency $160,000,000, and the plain United States notes over forty million dollars.  He also converted all the floating-currency debt into gold-interest bonds.  At the time this law was passed, April 12, 1866, the total amount of five-twenty bonds was $666,000,000, and the great mass of the debt was in what are called currency obligations, the principal of which, undoubtedly, could have been paid in currency.  But conscientiously believing, as he did, that the best way to the resumption of specie payments was by a rapid and steady contraction of the currency, he entered upon the policy I have stated.

Now, what has been the result ?  Why, sir, in April, 1866, the price of gold was 125.  It had steadily declined from the close of the war until it had reached its lowest point, I believe, in April, 1866, the very time of the passage of this law.  What was the result ?  I do not attribute it all to that measure;  but what was the result ?  From that time to this gold has advanced, varying between 130 and 140, and has never from that day to this reached the price at which it stood at the passage of the act;  and are we any nearer specie payments now than we were then ?  Not at all.  We have converted our debt into a more oppressive form of obligation.  The interest of the great mass of it is now payable in gold at the high rate of six per cent., and the bonds are less valuable in gold than then.  I still think that if we had looked rather to the funding of the debt with the currency then afloat we could have passed the whole of it into a five per cent. instead of into a six per cent. loan.  The state of the money market from that day to this justifies the assertion that the whole of this maturing and redeemable debt might have been converted at par into a five per cent. ten-forty bond.  If the bill I refer to had passed two years ago a great part of our debt would have gone into the five per cent. loan provided for by it, and the country would have been saved many millions of gold per annum, and would have escaped the dangerous question now presented to us.

President pro tempore Lafayette S. Foster
President pro tempore Benjamin F. Wade

Senators were elected by the state legislatures every two years, with one-third beginning new six year terms with each Congress. Preceding the names in the list below are Senate class numbers, which indicate the cycle of their election. In this Congress, Class 1 meant their term began in the last Congress, requiring reelection in 1868; Class 2 meant their term began in this Congress, requiring reelection in 1870; and Class 3 meant their term ended in this Congress, requiring reelection in 1866.

Alabama 2. Vacant 3. Vacant

Arkansas 2. Vacant 3. Vacant

3. James A. McDougall (D) 1. John Conness (R)

3. La Fayette S. Foster (R) 1. James Dixon (R)

2. Willard Saulsbury, Sr. (D) 1. George Read Riddle (D)

Florida 1. Vacant 3. Vacant

Georgia 2. Vacant 3. Vacant

3. Lyman Trumbull (R) 2. Richard Yates (R)

3. Henry S. Lane (R) 1. Thomas A. Hendricks (D)

3. James Harlan (R) Samuel J. Kirkwood (R) 2. James W. Grimes (R)

3. Samuel C. Pomeroy (R) 2. James H. Lane (R) Edmund G. Ross (R)

3. Garrett Davis (D) 2. James Guthrie (D)

Louisiana 2. Vacant 3. Vacant

1. Lot M. Morrill (R) 2. William Pitt Fessenden (R)

1. Reverdy Johnson (D) 3. John A. J. Creswell (UU), from March 9, 1865

1. Charles Sumner (R) 2. Henry Wilson (R)

1. Zachariah Chandler (R) 2. Jacob M. Howard (R)
1. Alexander Ramsey (R) 2. Daniel S. Norton (R)

Mississippi 1. Vacant 2. Vacant

1. John B. Henderson (R) 3. B. Gratz Brown (R)

2. John M. Thayer (R), from March 1, 1867 1. Thomas Tipton (R), from March 1, 1867

1. William M. Stewart (R) 3. James W. Nye (R)

New Hampshire
3. Daniel Clark (R) George G. Fogg (R) 2. Aaron H. Cragin (R)

New Jersey
1. William Wright (D) Frederick T. Frelinghuysen (R) 2. John P. Stockton (D) Alexander G. Cattell (R)

New York
3. Ira Harris (R) 1. Edwin D. Morgan (R)

North Carolina 2. Vacant 3. Vacant

1. Benjamin F. Wade (R) 3. John Sherman (R)

3. James W. Nesmith (D) 2. George H. Williams (R)

3. Edgar Cowan (R) 1. Charles R. Buckalew (D)

Rhode Island
2. Henry B. Anthony (R) 1. William Sprague (R)

South Carolina
2. Vacant 3. Vacant

2. Joseph S. Fowler (UU), from July 24, 1866 1. David T. Patterson (U), from July 28, 1866

Texas 1. Vacant 2. Vacant

1. Solomon Foot (R) George F. Edmunds (R) 3. Jacob Collamer (R) Luke P. Poland (R)

Virginia 1. Vacant 2. Vacant

West Virginia
1. Peter G. Van Winkle (UU) 2. Waitman T. Willey (R)

1. James R. Doolittle (R) 3. Timothy O. Howe (R)