Suspend Further Reduction of the Currency

An Act to suspend further reduction of the Currency.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That from and after the passage of this act, the authority of the Secretary of the Treasury to make any reduction of the currency, by retiring or cancelling United States notes, shall be, and is hereby suspended; but nothing herein contained shall prevent the cancellation and destruction of mutilated United States notes, and the replacing of the same with notes of the same character and amount.

Schuyler Colfax,
Speaker of the House of Representatives
B.F. Wade,
President of the Senate pro tempore

Indorsed by the President: "Received January 23, 1868."

[Note by the Department of State. — The foregoing act having been presented to the President of the United States for his approval, and not having been returned by him to the House of Congress in which it originated within the time prescribed by the Constitution of the United States, has become a law without his approval.]

Fourtieth Congress
Second Session
December 4, 1865 to July 28, 1866.

Senate of the United States
Thursday, December 19, 1867.

Order of Business.

Mr. MORTON.  I move to take up House bill No. 213, to prevent the further retiring and contraction of the currency.  I think it very important that that question should be settled before the holidays.

Mr. Sherman.  I wish to call up the special order, the cotton tax bill, so that it may stand as the unfinished business for to-morrow.  I do not intend to press a vote on it to-night, as it is so late, but I want no controversy about the order of business to-morrow.

The PRESIDENT pro tempore.  The Senator from Indiana moves to take up the bill indicated by him.  The question is on his motion.

Mr. SHERMAN.  The cotton bill is now regularly pending, and is now before the Senate.  With that understanding I have no objection to any other business being now done that is desired.

The PRESIDENT pro tempore.  It is true that the bill is the unfinished business of yesterday, and was regularly in order at one o'clock to-day;  but it was suspended by the bill which has just been passed.

Mr. Sherman.  That was taken up by common consent.

The PRESIDENT pro tempore.  The Senator from Indiana now moves to take up the bill indicated by him.

Mr. SHERMAN.  But the cotton tax bill was pending, was the regular order of the day, and was only waived informally.  It could have been called up at any time.  I wish it understood that that bill is left as the unfinished business of to-day.  That being understood, the Senator can make any motion he desires.

Mr. CONKLING.  I am afraid there will be no quorum here to-morrow, or if there is it will be little more than a bare quorum, and I think when the cotton bill is voted upon, either on the motion to postpone or otherwise, there should be a full Senate.

Mr. SHERMAN.  I desire to take the sense of the Senate on that question, and as the cotton bill is now pending I hope we shall have it settled.

The PRESIDENT pro tempore.  The order of business is entirely under the control of the Senate.  The unfinished business of yesterday was the bill referred to by the Senator from Ohio, but that was passed over and superseded by the bill which has just been passed, and now the Senator from Indiana moves to postpone that and all other orders and take up the bill indicated by him, which motion is in order.

Mr. MORTON.  I am satisfied that we can not get a vote on the cotton bill.  There are four or five important amendments pending, and I am advised that other Senators who have not yet spoken intend to speak on that bill before the vote is taken.  There is, however, a great deal of anxiety throughout the country for the passage of the bill to prevent the further contraction of the currency.  Business men especially in the Northwest are awaiting the action of Congress on that subject with anxiety, and I think it demands with more urgency than any other measure the consideration and action of the Senate.  I therefore insist upon my motion.

Mr. Sherman.  I will state to the Senator that it is utterly impossible to consider before the holidays the bill in regard to contraction, because it will lead to debate and considerable division of opinion in the Senate.  Besides, I have a letter from the Secretary of the Treasury which I think, when read, will show the Senator the there is no necessity for its immediate consideration.  There will be no contraction during this month and next month, nor until further provision is made by Congress, and therefore there is no haste for taking up the anti-contraction bill.  I send the letter to the desk and ask to have it read, and then I hope the Senator will withdraw his motion.

The Secretary read the following letter:

December 18, 1867.

Sir:  Your favor of this instant is received.

It is not my intention to retire and cancel any United States notes this month, nor will the condition of the Treasury and of the country justify me in making the usual contraction in the month of January.

It may be proper for me further to say that while I entertain the opinion that an early return to specie payments is indispensable to the national prosperity, and that specie payments cannot be restored without a curtailment of the paper circulation of the country.  I shall not continue to exercise the power of reducing the circulation of United States notes conferred upon me by the act of April 12, 1866, unless I have reason to suppose that I shall be sustained in doing so by Congress, nor until Congress shall have a full opportunity for determining the future financial policy of the Government.  You can therefore say to your committee that there will be no contraction of the currency by the Secretary during the present month or the next.

I am, very truly yours,
Hugh McCulloch, Secretary.

Hon. John Sherman,
Chairman of Committee on Finance, United States Senate.

Mr. MORTON.  I certainly desire to have this bill taken up, and I wish to say, in answer to the Senator from Ohio, that the letter of the Secretary of the Treasury does not settle the policy of the country on this subject, which is the important matter.  He says he cannot retire any more notes this month or perhaps next month, on account of the condition of the Treasury, and he will not until the matter shall be discussed by Congress and he knows whether or not he will be sustained.  But that does not settle the policy of the country.  What the country wants to know is whether this contraction will be resumed in the course of a month or two or whether it is now to be finally stopped.  The business of the country for the coming year will depend much on the settlement of this question.  It is left in more doubt and uncertainty than ever if we shall stop at this point;  it will all depend upon the future action of the Senate, and what that may be after the holidays the people of the country cannot now tell.  That is what they want to know.

Mr. Sherman.  Let me ask the Senator a question.  Does he expect that this anti-contraction bill will be taken up and passed in one day ?  Does he suppose that is possible when it takes a whole day to decide on a question involving $125 worth of stationery and this covers a great financial question ?  Here we have a letter from the Secretary of the Treasury stating that he will not contract during this mouth or next.  That gives us nearly two months to discuss this question.  It is obvious, therefore, that we ought not to waste any time on it before the holidays.

Mr. MORTON.  In answer I can only say that this bill has been reported favorably by the Committee on Finance, and I have no reason to suppose there is to be any serious opposition offered to it in the Senate, and if there is not why should it not be passed ?  We cannot do better than spend the residue of our session before the holidays in settling this important question, because if we leave it in its present condition the policy of the country is more unsettled in the opinion of the people than it has been in the past.  If it be left as an uncertain thing whether this bill is to pass the Senate or not what are the business men of the country, or especially of the Northwest, to do ?  They are awaiting the action of Congress on the subject.  I think it is of much more importance to the country to settle this question, if possible, before we adjourn to-morrow than any other question before Congress.

Mr. ANTHONY.  I move that the Senate do now adjourn.

In the Senate
Wednesday, January 8, 1868.

Contraction of the Currency.

Mr. Sherman.  I desire to submit a motion, if there is nothing before the Senate.

The PRESIDENT pro tempore.  There is nothing before the Senate.

Mr. SHERMAN.  I move that the pending unfinished business be postponed with a view to take up the bill in regard to the contraction of the currency.  I do not propose to have it considered to-night, but to leave it as the unfinished business for to-morrow, so that the order of business may he settled for to-morrow without any confusion.

Mr. TRUMBULL.  I should like to inquire what has become of the motion of the Senator from Minnesota to go into executive session ?

The PRESIDENT pro tempore.  That was withdrawn.

Mr. RAMSAY.  Everyone importuned me to withdraw it;  but if it be in order I renew it now.

Mr. Sherman.  My motion will settle the order of business for to-morrow, and I hope it will be agreed to.

Mr. FESSENDEN.  I suggest to my friend from Ohio to put his motion in different shape;  just move that the further consideration of the subject which has been under discussion to-day be postponed until to-morrow, and let it go over, and when to-morrow comes it can be passed over with a view to take up his bill.  I shall not object to that.  I probably shall not see the remarks of the Senator from Illinois in time to answer them to-morrow.

Mr. Sherman.  The effect is the same.  Extending the usual courtesy here, as the Senator asks to see the remarks of the Senator from Illinois in print before he replies to them, we probably cannot continue to-morrow the discussion of the joint resolution now pending, and therefore I make this motion, so that the unfinished business may be the bill for suspending the contraction of the currency.  I think there is no objection to that course.

Mr. TRUMBULL.  I think we had better leave until to-morrow the settlement of these questions as to what is to come up.  If the Senator from Maine is in a condition to go on tomorrow I should like to see this joint resolution passed.

Mr. SHERMAN.  The Senator from Maine has already stated that he probably will not be prepared to speak to-morrow.

Mr. Trumbull.  If the Senator from Maine to-morrow asks to have it go over, of course the Senate will consent to the postponement;  but it will be time enough to do it then.

Mr. Sherman.  I hope this bill will be taken up now, so that the order of business for to-morrow will be settled now, and thus avoid the wasting of an hour upon it to-morrow.

Mr. Trumbull.  I renew the motion to go into executive session.  Let us dispose of the executive business on the table, and then to-morrow we can settle these other questions.

Mr. SHERMAN.  On that motion I call for a division, simply to get the sense of the Senate.

Mr. MORTON.  I hope the motion of the Senator from Ohio will prevail.  It seems to me there is no question before this Senate now so important to decide as the question of the farther contraction of the currency.

The PRESIDENT pro tempore.  The question now is on the motion to proceed to the consideration of executive business.

The motion was not agreed to— ayes six, noes not counted.

The PRESIDENT pro tempore.  The question recurs on the motion of the Senator from Ohio to proceed to the consideration of the bill (H.R. No. 213) to suspend further reduction of the currency.

The motion was agreed to.

In the Senate
Thursday, January 9, 1868.

Contraction of the Currency.

The PRESIDENT pro tempore.  The unfinished business of yesterday is before the Senate as in Committee of the Whole, being House bill No. 213, to suspend further reduction of the currency.  The question is on the amendment reported by the Committee on Finance.

The Secretary read the amendment, which is to strike out all of the bill after the enacting clause, and in lieu of the words stricken out to insert:

That so much of the act approved April 12, 1865, entitled "An act to amend an act entitled 'An act to provide ways and means to support the Government,' approved March 3, 1865," as provides that the Secretary of the Treasury may retire and cancel United States notes to the extent of $4,000,000 per month be, and the same is hereby, suspended until Congress shall otherwise provide.

Mr. Sherman.  I will make a very brief statement to the Senate of the law as it now stands and the proposed change, and a few facts which bear on the question.  On a preliminary measure of this kind, which is only intended to operate for a short time, I do not mean to make any extended remarks.

S.R. 43 March 13, 1866. The currency of the country now consists of United States notes, or lawful money, and the bank notes issued by the national banks.  The act of June 30, 1864, limits the amount of United States legal-tender notes to $400,000,000.  That act contains a provision in the nature of a compact by which it is provided that in no event shall the amount of United States notes issued or to be issued ever exceed $400,000,000.  That is made a part of the loan act of that date, and is in the nature of a compact so far as a provision, which is repealable like any other act of Congress, can be called a compact.

The national currency act of June 3, 1864, limits the amount of notes that can be issued under that act to $300,000,000, making the aggregate circulation $700,000,000;  but by the terms of the national bank act the banks are required to keep in reserve always in their vaults a certain portion of their deposits and circulation.  That amount never can be less than $150,000,000 under the provisions of the act.  From fifteen to twenty-five per cent. of both circulation and deposits must be held as a reserve and can only be used to pay the outstanding notes, so that that reserve must be maintained or can only be reduced by a reduction of the volume of national currency notes.

Under the act of April 12, 1866, the Secretary of the Treasury was authorized to retire and cancel any portion of the debt of the United States, including, as a matter of course, the United States notes, without limitation upon that power, except that the reduction of United States notes was not to exceed $6,000,000 for the next six months, and $4,000,000 a month thereafter.  Under the provisions of this act he has proceeded to reduce the volume of United States notes to about three hundred and fifty-six million dollars.

The act of March 3, 1867, passed at the close of the last Congress, authorized the Secretary of the Treasury to issue $50,000,000 of three per cent. certificates.  These are not legal-tender notes, but as they may be held by the banks as a part of their reserve they in effect take the place of that amount of legal-tender notes.

These are the only acts which bear on the question now before the Senate.  On the 1st of January, 1868, according to the statement that has been laid on our table within a day or two, the amount of legal tenders outstanding was $356,159,127;  the national bank notes, $299,103,196, making an aggregate of circulation on $655,263,123.  There was held, however, by the banks in reserve of United States notes, legal tenders proper, on the 1st of October, 1867, the date of the last bank statement furnished to us, $100,550,849, leaving the total circulation of the country of all kinds, except the old State bank notes, which are now so small as to he scarcely perceptible, $554,712,274.  That is the whole amount of legal-tender notes in the ordinary signification;  but there are certain other forms of outstanding securities, which are in the nature of currency and are legal tenders for certain purposes.  The compound-interest notes, the residue of which amounts to $46,244,780, are in this condition.  Then there is the fractional currency, amounting to $31,597,583, which may be converted at any time into United States notes.  Then there are the three per cent. certificates issued under the law I have referred to.  These three items make a total of qualified legal-tender notes, so to speak, of $101,107,363.  But of this, there is held by the banks as part of their reserve, which cannot be diminished except by a diminution of the amount of bank notes, the sum of $56,888,250, leaving $44,219,113 held by the people of this kind of securities, mostly compound-interest notes and fractional currency.  Adding to this the amount of United States notes and national bank notes, we have an aggregate circulation of legal tenders in every form of $598,931,387, or less than six hundred million dollars.

I have a statement which shows that since April 1, 1866, during which month the act authorizing contraction was passed, the amount of contraction is $140,122,898.

Mr. EDMUNDS.  How is that made up ?

Mr. SHERMAN.  On the 1st of April, 1866, as the Senator will find by reference to the reports that have been laid on the table recently contained in a paper printed on the motion of  my friend from Missouri, [Mr. Henderson] the United States legal-tender notes outstanding were $422,424,007.  Then there were $8,536,900 of one and two years Treasury notes, and $172,012,141 of three years compound-interest Treasury notes, which were legal tenders.  Then the fractional currency was $28,005,412.  The national bank circulation was $248,880,000, and the State bank circulation $32,800,865.  Adding together these various items the aggregate circulation then authorized and outstanding was $913,665,947, and the amount of bank reserve then was $193,543,649, leaving the aggregate of total circulation among the people $720,122,898.

On the 1st of January, 1868, as the Senator will see from the table he has before him, there were outstanding United States legal-tender notes to the amount of $356,159,127.  The one and two years Treasury notes were redeemed or else past due, and therefore considered as matured debt.  Of the compound-interest notes but little over forty-six million dollars remain.  The fractional currency had increased to $31,597,583.  The national bank circulation had increased to $299,000,000, and the State bank circulation decreased to $4,092,153;  so that on the 1st of January last the aggregate circulation was about seven hundred and thirty-seven million dollars, and deducting from that aggregate the bank reserve there was left $579,758,540, or a diminution of circulation since the act took effect of $140,122,898.

Mr. EDMUNDS.  How much of that was of legal tenders proper — United States notes ?

Mr. SHERMAN.  About sixty millions, but as 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.  These figures, I have no doubt, can be relied upon, because I have taken them from the official reports.

Under these circumstances the House of Representatives, on account of the alarm that was created by the contraction of the currency, passed a bill in these words:

" That from and after the passage of this act the authority of the Secretary of the Treasury to make any reduction of the currency by retiring or canceling United States notes shall be, and is hereby, suspended."

The amendment proposed by the Senate Committee on Finance does not change the legal effect of the House bill but as the language of that bill was so broad it was thought it might and probably would prevent the cancellation of defaced notes, because it forbids any reduction of the currency.  This general language might prevent the operation of destroying canceled notes or any operations of that kind.  The language proposed by the Finance Committee of the Senate is simply to repeal or to suspend until further legislation the authority conferred on the Secretary of the Treasury by the act of April 12, 1866, to cancel $4,000,000 of legal-tender notes per month.

Mr. President, I do not regard this bill as of the highest importance, because from the statement already made to us by the Secretary of the Treasury there can be for two or three months to come no further reduction of the currency.  His letter was read the other day at the desk and I will not trouble the Senate by reading it again.  It will be recollected that the Secretary states distinctly that until Congress takes some definite action on the subject he will not make any reduction, that the condition of the Treasury will not authorize him to do it.  Still, there is an uneasiness in the public mind upon this subject, which ought to be allayed by an act of Congress.  The committee, therefore, after full reflection, have thought it proper to recommend the passage of the bill of the House of Representatives in substance as they have sent it to us, only changing the phraseology.

Mr. Morgan.  A majority of the committee ?

Mr. SHERMAN.  Yes, a majority of the committee.  I will state that this bill contemplates further legislation during the present session.  That is understood by all.  Some more comprehensive measures must of course be adopted during the present session, and this bill contemplates that, because it provides that until further legislation there shall be no more contraction.

Mr. President, I will now state very briefly the reasons which, in my opinion, justify the passage of this bill:

First.  It will satisfy the public mind that no further contraction will be made when industry is in a measure paralyzed.  We hear the complaint from all parts of the country, from all branches of industry, from every State in the Union that industry for some reason is paralyzed and that trade and enterprise are not so well rewarded as they were.  Many, perhaps erroneously, attribute all this to the contraction of the currency — a contraction that I believe is unexampled in the history of any nation.  One hundred and forty million dollars have been withdrawn out of $737,000,000 in less than two years.  There is no example that I know of of such rapid contraction.  It may be wise, it may be beneficial, but still it has been so rapid as to excite a stringency that is causing complaint, and I think the people have a right to be relieved from that.

Second.  This bill will restore to the Legislature their power over the currency, a power too important to be delegated to any single officer of the Government.  I do not wish to renew the discussion that occurred here two years ago on the passage of the law of April 12, 1866;  but it is still my opinion, as it has been always, that the question of the amount of currency ought to be fixed by Congress.  We have the power to coin money and to regulate the value thereof.  We have coined money in the form of paper money, and certainly the power of Congress in this respect ought not to be delegated to any single officer.  If contraction ought to be established as the policy it should be by Congress, not by the Secretary of the Treasury, and it is not wise to confer upon any officer of the Government a power of this kind which can be and may be properly controlled and limited by Congress.

Third.  This will strongly impress upon Congress the imperative duty of acting wisely upon financial measures, for the responsibility will then rest entirely upon Congress and will not be shared with them by the Secretary of the Treasury.

Fourth.  It will encourage business men to continue old and embark in new enterprises, when they are assured that no change will be made in the measure of value without the open and deliberate consent of their representatives.

These considerations are amply sufficient to justify this measure, but it is only preliminary to others of far greater importance that must command our attention.  These involve—

1.  The existence of the banking system of the United States.

2.  The time and manner of resuming specie payments.

3.  The mode of redeeming the debt of the United States and the kind of money in which it may be redeemed;  and in this connection the taxes, if any, that may be levied upon the public creditors.

4.  Such a reduction of our expenditures and taxes as will relieve our constituents as far as practicable from the burdens resulting from the recent war.

These questions must all come here for solution, but a methodical consideration of them can only be had by deciding what we have before us.  Sufficient for the day is the duty thereof.  The pressure of the public business is so great that I do not on a preliminary question of this kind wish to be forced into the general discussion of financial measures.  The almost universal consideration of these matters and their public discussion among the people will bring out a great many many foolish ideas and some wise ones.  I have entire confidence that Congress will, in due time, provide such measures as will enable our people to pursue the industries of peace with all the energy and success with which they conducted war.  Now, it is our duty to relieve them from perhaps a groundless terror;  but whether groundless or not, it is one that checks and paralyzes all classes and kinds of industry.

With these remarks, Mr. President, so far as I am concerned, I submit the question to the Senate.

The amendment was agreed to.

Mr. Morrill, of Vermont.  Mr. President, I do not desire to debate this proposition, but I should be very sorry to have it pass and have it understood that it was the unanimous voice of the Senate of the United States.  It looks to me as though when we interfere with these financial questions that properly belong to an executive officer we are rather traveling out of our own jurisdiction.  I believe that before the close of the session we may find, as we have done in some other instances, that we shall have to retrace our steps.

Since this bill was introduced into the House of Representatives and has come here what has been the result ?  The price of gold has gone up from 133 to about 140 — above 139.  I do not think that that is desirable.

Mr. Nye.  It was 136 yesterday.

Mr. Morrill, of Vermont.  I read 139 as the quotation of yesterday;  it may have been 136;  there may have been a misprint.  At any rate it has gone up considerably.  Now can Senators desire to bring about a result that shall tend to create higher prices ?  I do not believe that that is the intention of Senators.  If we are ever to come to the point of a resumption of specie payments we ought certainly to keep the price of gold from going higher than it has been for the last month.  I think the effect of this bill will be to send gold dancing up to 140, and probably before the end of the session to 150.

Mr. Grimes.  Will the Senator allow me to inquire of him if at the beginning of the session gold was not 140, and when Mr. McCulloch was last contracting was it not at that point, and immediately after the passage of this bill by the House of Representatives did not gold go down to 133 ?

Mr. Morrill, of Vermont.  My own impression is that the public understood that there would be an adoption of a policy by which we would at some fixed time resume specie payments.  This postpones the idea indefinitely.  I am averse to it, and I have only risen so as to show at least that there is one Senator who is unwilling to give his vote for the present bill.

Mr. CORBETT.  Mr. President, I also desire to state that I believe the Secretary of the Treasury is acting wisely and has been acting wisely in the reduction of the currency up to the present time.  There may be financial difficulties pressing upon the commercial community at this time that should induce him to withhold the exercise of the power which he possesses to reduce the currency, and I have no doubt he will discontinue the exercise of that power as long as it may be necessary to do so for the ease of the money market and for the success of the financial policy of the Government in collecting its taxes.  But I think it would be very unwise to pass a bill here to permanently prevent the reduction of the currency, and thus give an opportunity for speculators to run riot again for another year or two with the currency inflated and enable them to run up the price of gold probably, as the Senator from Vermont states, to 140, or perhaps 150, as soon as the bill is passed.  The present amount of currency in the country and the large amount that has been afloat the past few years has raised the price of every kind of product to such an extent that it is impossible for us to export anything from the country.  We are using and consuming within ourselves our products.  Flour has advanced to such an enormous price by reason of the inflation of the currency that it is impossible to ship it out of the country and compete abroad with the foreign product of that article.  The inflation of the currency is acting as a protective tariff to foreign countries to produce this article, so important to our western States, so that foreigners are furnishing flour and grain to England and other countries instead of our producing it ourselves and exporting it to them in place of the gold and United States bonds that we have been sending out of the country.  We have sent within the past five or six years about six hundred million dollars of gold and United States stocks.  Let this continue for one or two years longer, and by this inflated policy all our United States stocks will have been sent out of the country, and we shall be paying a tribute of gold interest to foreigners, and we shall also have sent all our gold out of the country, and we shall perhaps be prevented from resuming specie payments for the next fifteen or twenty years.  It is alarming when you see $3,000,000 of gold a week going out of the country, and only $1,000,000 coming in.

The state of financial affairs is alarming to me, and it looks to me as though we had batter leave the matter entirely to the Secretary of the Treasury to govern the financial policy as he has heretofore done, wisely, in my opinion, and for the best interests of the country.  He is not going to adopt a policy that will cripple the Government or cripple the industrial interests of the country.  What he does will be for the advantage of the whole nation.  I hope and trust this bill will not be passed.  I therefore move its indefinite postponement.

The PRESIDENT pro tempore.  The question is on the motion of the Senator from Oregon to postpone the bill indefinitely.

The motion was not agreed to.

Mr. FESSENDEN.  Mr. President, I see that the general inclination is to let this bill go as a matter of course, and I suppose from the indications I see that it will go through by a very decided vote.  It is not my intention to debate it at length, but simply by word as well as by vote to express my entire dissent to the proposition which has been made by the Committee on Finance.  I see no possible good to result from it, and I anticipate that it may do a great deal of harm.

The Senator from Ohio [Mr. Sherman] has observed that the matter of currency is a question to be settled generally by Congress;  that Congress should regulate how much of it there should be and how much there should not be, and it should not be left entirely to the discretion of the Secretary of the Treasury.  To that extent I agree with him.  I think we should legislate upon the subject, and that that legislation should be well defined, so that the country can understand what the policy of Congress is and what the views of Congress are with regard to a question so important as this is.  It is undoubtedly true that it should be so; and it was expressly with this view that Congress should express its opinion upon this question of currency and the policy to be pursued in relation to it that the law placing this power in the hands of the Secretary of the Treasury and limiting his authority specifically with regard to it was originally passed.  There were two objects.  One was, as I have just stated, to express the views of Congress and to limit the authority of the Secretary of the Treasury in the process of reduction.  The next was, and the most important in my judgment, in view of the condition of the country, to express the opinion of Congress that there should be a steady reduction of this species of currency with a view to a return to specie payments and as soon as possible consistently with the interests of the country, and as the proper if not the only mode by which that object could be accomplished.  In my judgment it is the only mode in which that object can be accomplished.  I do not believe that specie payments can be resumed as long as as it is understood that so large an amount of the obligations of the Government which are a legal tender are outstanding.  It is, in I my judgment, only by a reduction of those obligations, by taking them in, that the object can be accomplished within any reasonable course of years.  The Treasury, under the present circumstances of the country, is not likely soon to be in a condition when specie payments can be resumed with all this currency liable to come back to the Treasury.  If the attempt should be made under present circumstances it would fail.

---[beloved, you are conspicuously silent on the circulating bank notes, almost equal in amount to the circulating Treasury notes;  your true colour is that you do not want specie payment, copper, silver and gold coins to circulate as currency;  you want ir-redeemable private bank-note currency based on a figment of imagination specie reserve]

I say the law was passed with a view to express an opinion and to settle the question as to the judgment of Congress upon this important matter, that the only true condition of the currency was that it should be founded upon a specie basis, and that that point should be reached as soon as it could be reached consistently with the good of the country.  It was so stated in debate;  it was so understood everywhere;  but further, inasmuch as Congress thought that it was well to express its opinions upon the degree of rapidity with which the result should be reached, it was deemed advisable by Congress to limit the power of the Secretary and say that he should not reduce any faster than in a specific mode and to the specific amount stated in the law.  It did not make it obligatory upon him to reduce to that extent, but left it at his discretion to exercise the power thus far and no farther.

Hitherto Congress has rested under that quietly;  the country has rested under that quietly, with the exception of the alarms that have been created by a certain set of people who entertain different views from those thus expressed by Congress.  By men who have multifarious schemes for having a currency in the country irredeemable, mere rags, after the necessity has ceased, with whom I do not in any degree coincide, this effort is made now to put an end in fact to that policy which Congress thus adopted, and to notify the country that Congress has specifically abandoned once and forever, (because it will necessarily be so,) or at any rate for an indefinite period of time, the policy which it once decided to be a wise one, and so decided with the approbation, I believe, of all the thinking men of the country upon such subjects.  That policy is to be now abandoned, and we are to stop precisely where we are, leaving the volume of the currency as it is until further legislation, that is, "until otherwise ordered," under the idea that it will not be otherwise ordered.

---[Oh the Unmitigated Audacity !!  Your single-farious plan has always been to establish a financial oligarchy, set up a currency-issuing private banking system in full control of the country's medium of exchange, and to saddle the people with a permanent national debt]

Well, sir, I fear the effect of it.  I fear that the country can place but one construction on it, and that is that the idea of returning to specie payments is to be abandoned for an indefinite period, and that our policy, instead of being that of returning to what I think the great majority of wise and thinking men suppose to be the true one, that our currency should be founded upon a specie basis and should be in fact specie, is to be anything but that.  I believe that this will be attended by all the evils which have been suggested by the honorable Senator from Oregon [Mr. Corbett] and by more.  What good is to be attained by it ?  I cannot conceive.  Is there any danger that the Secretary of the Treasury, especially after what he has written to us, and with his judgment what of the condition of things in the country requires at any specific time when Congress is not in session, will avail himself of that power against the interests of the country and the interests of business, to continue contraction when it is a matter of discretion with him ?  I think there is no such danger.  The idea of returning at once, by a single jump, perforce to a currency of specie no one now entertains, because it is now seen, as I have always supposed, that that must necessarily be a work of time.

After an experience of four or five years such as we have passed through, with everything in the country disordered, with the currency in the condition it was and business in the condition it was, the thing was impossible.  You could not do it without producing very great evils.  A return must necessarily be a work of time.  Congress said it was a work of time when it passed the act of 1866 originally, providing that the Secretary of the Treasury might reduce the currency of the Government in a certain ratio.  Going on at that rate it will be seen that it would take a considerable number of years to retire all this currency.  There would seem, then, to be no danger on that score.

---[once again, your unmitigated colour shows that you want to reduce Government-issued currency only, not currency in general]

Nor do I see anything in the idea of my friend from Ohio, that this measure is necessary in order to show that Congress has a policy and that Congress takes this matter into its own hands.  That is shown by the very act which it is now proposed to repeal.  That act contained a limitation imposed by Congress on the power of the Secretary of the Treasury.

Mr. GRIMES.  Has it been followed out by him ?

Mr. Fessenden.  Certainly it has been followed out by him.

Mr. GRIMES.  Has he never withdrawn more than $4,000,000 in one month ?

Mr. FESSENDEN.  Never, that I am aware of, and I never heard that he had, and I do not know that he has always withdrawn that amount regularly any month.  I am inclined to think he has not retired to the whole amount of the $4,000,000 in any month.  He could not retire more without violating the law.

Mr. SPRAGUE.  Will the Senator from Maine allow me to interrupt him a moment to state that it is the public opinion among business men that the Secretary of the Treasury has withdrawn at one time as much as $20,000,000, that he has abstained during four or five months from withdrawing the proportion that the laws of the country permitted him to withdraw, and has by one fell blow taken from the currency and from the property of the country to that extent.

Mr. FESSENDEN.  If the Senator from Rhode Island will tell me that he knows the fact, that he has ascertained it, and ascertained it at the Treasury Department or from any public document I will listen to the statement, but until he does that I must be excused for paying no attention to it.

Mr. Sherman.  With the permission of the Senator from Maine I will state that we have on our table a document that shows the precise diminution month by month.  While I am desirous to take away this power I am bound to say that there is no month within which the amount of United States notes has been diminished over four millions;  but I suppose I can tell what has given rise to the statement made by the Senator from Rhode Island.  At certain periods the compound-interest notes matured rapidly and were paid off as they became due, and they were considered as in the nature of currency, but the Secretary had no discretion in the matter;  he had to pay them.

---[But at the same time he did not have to eliminate greenbacks, he did it anyway, knowing full well what it will cause, and acknowledging that compound notes were currency, same as greenbacks — so much for Culloch's intentions and character]

Mr. FESSENDEN.  The law which it is now proposed to repeal did not apply to those notes.  We were bound to redeem them as they became payable.

---[the unmitigated law which ye nefariously so framed as to construe that outstanding Treasury notes (like the compound-interests and the 7-30s) are not currency, only the 1862 greenbacks are currency]

Mr. NYE.  Allow me to ask the Senator from Maine a question.

Mr. FESSENDEN.  I want to answer the Senator from Rhode Island first, and then with pleasure I will endeavor to answer anything the Senator from Nevada may ask.  I only wish to say to the Senator from Rhode Island that it is hardly fair to the Secretary of the Treasury, when all the information is within the Senator's reach and he can get it at any moment, for him to rise in his seat here and use as an argument a statement that it is the opinion of the country that at one fell swoop the Secretary has retired $20,000,000.

---[Mr. Sherman just said that Culloch did that, and you acknowledged that he did that;  except, in your audacity you are unwilling to see the forest from the currency, and become indignant if someone else is willing]

Now I will hear the question which the Senator from Nevada desires to ask me.

Mr. NYE.  I have a vague recollection of a law being passed authorizing the Secretary of the Treasury, as the compound-interest notes became due, to issue three per cent. certificates, or securities of some kind, to supply the deficiency thus created.  I was told in New York the other day that during the two months preceding the election there were $53,000,000 of compound-interest notes retired, together with $8,000,000 of United States notes, making $61,000,000, and at the same time a circular was issued to the banks to keep good their reserve.  The banks that had been holding these $53,000,000 of compound-interest notes had to get in legal tenders to supply their places.  The effect of this was to contract the currency some sixty-one million dollars at once, which raised the price of money in New York from five to eight per cent., and in Chicago to as much as sixteen per cent., and prevented the obtainment of the means for bringing forward the vast products of the West.  That is what I was told.

Mr. Fessenden.  If the Senator were as familiar with the utter worthlessness of the rumors and of the stories told in Wall street and elsewhere in New York about the operations of the Treasury Department as I am, he would have given no sort of credit to them whatever.  I suffered under them for eight months, and I know precisely what credence they are entitled to.  I was often applied to know how I would answer this and how I would answer that, and it was said to me "such and such rumors are going about," and "such and such things are said;  what have you to say to them ?"  My answer was:  "Nothing; I conduct my business here according to my views of what is right, and it would take all my time to answer the stories that are got up for certain purposes, party or otherwise, in New York and in other places."  I pay just as little attention to them as I do to the statement of my friend from Rhode Island, that the country believes so and so;  it believes for the time everything it is told.  Let proof be brought of any of these things before we censure the Secretary of the Treasury.  I have waited in vain to hear anything like proof, and it strikes me that it is hardly becoming grave legislators, Senators of the United States, to base their action upon out-door rumor in matters so important as this when the means of obtaining accurate information of the exact condition of affairs is at their hand at any moment.  I should not like to be judged so if I was at the head of the Department, and I do not think it is exactly fair;  but, however that may be, it does not at all affect the ground that I am taking.

I was stating that the Secretary's power had been specifically limited.  Congress has legislated;  it has said what it believed to be the true policy, based upon a general principle, upon which perhaps I may have more to say by and by, that it was expedient and desirable to return to specie payments just as soon as the condition of the country would allow, because that is the only safe condition, and to give that assurance to the people of the country and to the business of the country that, while Congress did not mean to proceed violently or allow anybody else to proceed violently in relation to the matter;  it still did intend to keep that idea steadily in view;  and that the business of the country might rely upon it as settled.

Now, sir, we have gone on to a certain extent in regard to these greenbacks, as they are called, the "lawful money," and it has been placed in the power of the Secretary of the Treasury to make a very small, a very limited, reduction from month to month, from which no harm has followed.  Are rumors of one description or another to influence Congress to repeal that, and substantially say to the country, "we have abandoned the idea which we put forth of a return to specie payments at the earliest practicable day ?"  That is precisely the declaration we make by repealing this authority for resumption cannot take place, in my judgment, so long as matters remain in their present condition.

---[liaring again, it was not 'a very small, very limited, reduction' you just nefariously declared that some reduction is not reduction, only the elimination of the '62 greenbacks is reduction]

Sir, I am not prepared to do this on any ground — either to meet or to avoid the fears that have been expressed outside.  They never will be avoided by a constantly shifting and changing policy on the part of Congress.  So long as Congress legislates one way to-day and another way to-morrow to meet outside rumors in Wall street or elsewhere, no matter where, the country will have no confidence in us;  and if the Secretary of the Treasury has lost in any degree the confidence of the country we shall be in as bad a condition as he is unless we have some firmness and some stability in the policy that we assume and agree upon.

As I said before, sir, there is no force that I can see in the position taken by the honorable chairman of the Finance Committee — that it is necessary to do this in order to show that Congress means to control this question — for Congress showed that when it passed the bill which he now proposes to repeal.  It adopted its policy then, and in my judgment the only safe way is to adhere to it.

Sir, I will make one other general remark before I sit down;  I have already said a great deal more than I intended when I rose.  I believe that all the trouble, all the difficulty we have arises from something that is unavoidable.  The country is in an anomalous condition in regard to the currency.  This arose out of a matter that we could not avoid — the enormous expenditures of the war.  We have got to a point where our currency is disordered;  we want to get back to a safe position, and as soon as we can.  But there are people in the country who are everlastingly scheming to get back by legislation, by this scheme and that scheme and another scheme to shorten the time or else to abolish time and say we will not go back at all.  Now, my idea is, that only time will accomplish it.  We cannot do it without suffering;  that must come.  Such a position as we are in we cannot get out of without suffering to the country in its business affairs, and the more you legislate to postpone that suffering, the more you legislate with schemes of one kind and another to tide over this time and tide over that time and the other, the more difficult, in my judgment, will it be to meet the crisis at last.  The only way, in my judgment, that you can possibly get along is to establish your principle that you will return to a safe condition, pass your law which looks to that return, adhere to it firmly and let the country understand that the consequences must come;  we will make them as light as possible, but the time must arrive or else the credit of this country is to stand for years and years far below anything that any true lover of this country would desire.  I do not wish to try to avoid it by saying to the country that we have no opinions on the subject in reality, for that is the amount of this bill.

Mr. Stewart.  Mr. President, I do not profess to be deeply skilled in finance.  There are some things, however, that are obvious to the outside world.  I am not initiated in the workings of the Treasury Department;  I am not initiated in all the reasons for this condition of things or for that condition of things;  but there are some things that I can see and that the world sees;  and one of those things which it seems to me is clearly understood by everybody is that the management of finances for a few years past has done much to produce the hardships under which the people now labor.  We have followed the estimates of the Secretary of the Treasury;  we have voted for the laws that he asked;  we have voted for the amount of taxation that he suggested;  but I do not think that many of us supposed that in so doing we were voting to pay off large amounts of the principal of the national debt.  I did not suppose we were levying these taxes with a view of destroying every industry in order to pay off the principal of the national debt before business had settled.  The inconsistencies that have appeared in his estimates, his over-estimates which we have followed, the difficulty in executing the laws asked by him which we have passed, have created a want of confidence in the minds of a great many honest men in regard to the Secretary of the Treasury.  Upon this point a remarkable letter is published in the Chronicle of this morning.  All the statements contained in it may not be accurate;  but it contains so much truth, as it appears to the outside world, that I send it to the desk and ask that it be read by the Secretary.

---[Then, based on what were you selected by the Congress in Nevada to represent the State in the General Congress ?  In any case, he did NOT "pay off large amounts of the debt", the bonded debt increased from ~$600 million to ~$1,600 million;  he retired "currency obligations" and called it reduction of the principal.]

The Secretary read as follows:

Detroit, December 26, 1867.

Dear SIR: Yours of the 23d, inviting me to attend the mass convention to be held in your city to-morrow, for some unaccountable reason was not received by me until nearly noon to-day. * * * *

In regard to the amount of revenue and the expectations of the Government I am entirely satisfied that there is constant, persistent, and willful mis-statement put forth in the "estimates" given to the public.  A charge of falsification even could be easily maintained against the Secretary of the Treasury.  In any other country, if the head of the Treasury should be so outrageously incorrect, he would be compelled by a deceived people to resign.

Let me give a few illustrations:  in 1865 he estimated the total receipts of the Government for nine months at $305,500,000.  The actual receipts for the same time were $395,405,905, showing an excess of receipts over his estimates for nine months of $89,905,905.

He "estimated" the expenditures for the same time at ...... $484,859,462
The actual expenditures were ........... 284,324,227
Excess of "estimates" .......... 200,535,235
Add excess to receipts, as above ........ 89,965,905
Actual surplus over the Secretary's estimates for nine months .... $290,501,140

And on the strength of such outrageous estimates sent to Congress he actually compelled them to levy taxes for $290,000,000 more than he wanted.

For the year 1867 he "estimates" that the taxes under the existing laws would produce only ... $396,000,000
They actually produced for that year ....... 490,684,000
Excess over estimates ............... $94,648,000

Again, in putting forth his estimates for the coming or present year, in 1866:

He estimated receipts ...... $436,000,000
Estimated disbursements .... 350,247,641
Thus estimating excess to apply to reduction of debt ... $85,752,359

In 1867, fearing that Congress would reduce the taxation, he changes his estimates for the same year so as to induce Congress not to reduce taxation.  He than reduces his "estimates" of receipts about $18,000 000, and increases his "estimates" of expenditures $43,000,000, making the sum total of difference $61,000,000, so as nearly to do away with his former estimated surplus of receipts.

So, for the first quarter of the present fiscal year, his actual returns show an excess of receipts over expenditures for the quarter of nearly twenty-three million dollars;  and yet he estimates for the remaining three quarters that his receipts will only exceed his expenditures $1,000,000.

In his last report the errors would seem to be so enormous as would seem to be corrupt.

Thus, for the year ending June 30, 1868, his expenditures for the first quarter and estimates for three quarters are as follows:

Civil list ........ $50,152,398
Pensions and Indians ...... 32,484,476
War Department ..... 130,537,056
Navy ...... 27,579,704
Interest on public debt ...... 152,575,640
Total .... $393,329,224

The estimate for civil list seems outrageous, and no reason is given.  For the year ending June, 1866, it was $12,300,000, and now it has swelled to $50,152,384.  It is too great by at least $25,000,000.  Pensions and Indians — this is estimated over last year the sum of $7,000,000.  War Department — General Grant estimates in his report $61,500,000;  the Secretary of the Treasury, $130,537,056;  making the Secretary of the Treasury's estimate over General Grant's $69,500,000.  Interest on the public debt — this is manifestly wrong;  he gives the debt bearing coin interest at $1,637,890,641 — interest, $96,000,000;  debt bearing currency interest at $625,803,905 — interest, $42,000,000;  total interest, $138,000,000.  The difference between this sum and his estimate is about fourteen million dollars;  here would seem to be manifest erroneous estimate of at least $115,500,000.  The Secretary also estimates the receipts for this year from internal revenue at $208,784,000;  the Commissioner of Internal Revenue at $225,000,000;  this is a difference of receipts of at least $16,000,000.  Total, $131,550,000.

Upon the Secretary's own estimates, then, here is a reduction of $131,500,000 that can be made in our taxes this year without difficulty.

The miscellaneous receipts will also be largely increased this year.

The Secretary of the Navy in his report says that on September 30, 1867, he turned over to the Treasury the large sum of $65,000,000 for sale of vessels, captured property, the sale of the Dunderberg, Miantonomoh, and unexpended appropriations.

It will be noticed that the Secretary of the Navy turns this over on September 30, 1867, and the Secretary of the Treasury closed his account of actual receipts on September 30;  but, as it takes a day or two for the transfers to be made, this large amount is lost from the account of the Secretary of the Navy, and does not appear in the accounts of the Secretary of the Treasury.  Again, it appears by the reports in Congress that there is lying in the hands of Treasury agents at least the sum of $34,000,000 for sale of cotton and abandoned property, which Congress is seeking to have turned over to the Treasurer.

Here, then, is to be added to the resources of the Government for the year at least $99,000,000.  The Secretary also had on hand at the commencement of this year nearly one hundred and thirty four million dollars.

Unless the logic of these figures can be met there can be no reason why a large amount of the internal revenue taxes, and especially the manufacturers' tax and income tax, should not be removed.

Years, truly, John S. Newberry,
Vice President Detroit Manufacturers' Association.
J.H. Dow, Esq., Secretary, &c.

Mr. STEWART.  I, of course, have not examined to see whether all these statements are correct;  but I understand that Mr. Newberry is a very accurate business man, and I take it for granted that he tells a great deal of truth, because all of us must know that we have been very much misled, and we are suffering to-day in consequence of it.  If I have voted to accumulate taxation for the purpose of paying off the national debt before the business interests of the country had settled down, before trade had revived and been put again upon a permanent basis, I have been voting for what I did not intend.  If that has been the policy of Congress, I did not understand the policy of Congress.  I have looked at the Secretary's estimates, and I have been told that it was necessary to put this burden upon the people, in order to preserve the public faith and pay the expenses of the Government;  and yet it seems that we have been paying off $260,000,000 of the national debt.  I believe we have destroyed industry so much that by paying that amount so far from lessening the real burden of the debt we have increased it.  I believe the debt to-day bears a greater ratio to the property of the country than it would if that $260,000,000 had been left in business, so that the people might have prospered.  We have taken it up at the wrong time, and in so doing we have destroyed many industries that would now contribute something, if they were in existence, to the prosperity of the country.  This is the result of our having been misled, so far as I am concerned, at least;  and having been thus misled, upon this very important question, I have lost confidence to some extent in the Secretary of the Treasury.

Again, we are told by the President, in his annual message, that "it is well and publicly known that enormous frauds have been perpetrated on the Treasury, and that colossal fortunes have been made at the public expense;"  and the responsibility for that state of things he attributes to Congress.  We have given the Secretary of the Treasury for the collection of the revenues all the laws he asked.  It is stated that a very large sum, variously estimated, by some put as high as $200,000,000, has been lost to the Treasury during the past year.  I should like to have the utmost faith in the Secretary of the Treasury.  He has enormous power.  No one doubts that the Administration have power to nearly ruin this country, to embarrass its finances.  They have power to squander nearly the whole revenue, and there is no redress.  It is a paltry plea on the part of the President to say that this condition of things is owing to the tenure-of-office law.  The tenure-of-office law is not in operation while Congress is in session, and it has been in session nearly all the time since the passage of that law except a few months, and then he only suspended two revenue officers.  Congress cannot be to blame because the revenue laws have not been executed.  I say the financial troubles we are now laboring under are owing, in the first place, to the overestimates of the Secretary of the Treasury imposing burdens on the people heavier than they could bear, and in the next place to corruption in office causing a failure to collect the revenue.  If Congress is to blame for these over-estimates and for this corruption in office, which has abstracted from the Treasury, according to the estimate of some, $200,000,000 a year — if Congress is responsible for these two things, the one a great mistake and the other a great crime, it is time that the President of the United States held us up to scorn and contempt, and it is time that the people hurled us from power.

Now, I am anxious to know where the responsibility rests for the administration of the revenue laws;  where the responsibility rests for the abstraction from the public revenues in the process of collection of $200,000,000 per annum;  I am anxious to know where the responsibility rests for overtaxing this people before their business interests could become settled after the war.  Being anxious to know these things I am willing to pass this or any other bill which shall indicate that Congress does not feel full confidence in the Secretary of the Treasury, for disguise it as you will this bill amounts to nothing more nor less than a reflection upon the Secretary of the Treasury.  It is a vote of want of confidence.  Nobody has risen here and proposed to change the policy of the law;  but it is stated that there is an apprehension in the public mind, that the public are disquieted, that they feel that something is going wrong, and they want repose for a time at least, and they want to be relieved for a time at least from the operations of the Secretary of the Treasury.  If that is a sufficient reason for changing our policy and passing a bill of this kind it is a sufficient reason for going further and investigating the causes of our trouble.  I believe that honest men in office can collect the revenue;  I believe that a reasonable estimate can be made as to the amount of revenue we ought to raise;  and I believe if those two things had been done the business interests of the country would to-day be prosperous.  We had an enormous debt when we emerged from the war;  the business interests were deranged by the contest;  and it is perfectly miraculous that we have succeeded at all in doing business with the accumulated taxation we have borne.  The taxation of those articles which would not have oppressed our business interests — I mean the taxation of whisky and tobacco — has been a failure, and the enormous burden of taxation which we have borne has fallen on those business interests which were ill prepared to bear it and on the necessaries of life.

Mr. Corbett.  I should like to ask the Senator whether the business interests of the country were ever more prosperous than they were during the war, and whether that was not the time when the heaviest taxes were levied.  Of course we could better afford to pay taxes when our business was prosperous, when we were all making money, than we can now.  I admit it, and now is the time to curtail the taxes.

Mr. Stewart.  That is what I say;  now is the time to curtail the taxes, and we should have commenced immediately after the war and raised no more money by taxation than was necessary to pay the expenses of the Government and maintain our credit until business could have been settled down and our people have got a fair start again.  That is what everybody says we ought to have done and what everybody says we ought to now.  Every business man, every one willing to pay the debt, says we ought until business revives relieve the people from taxation as far as possible, make it as light as it is in our power to do, and when business gets fairly started again then provide for a small sinking fund and commence paying off the debt.  That is wise policy.  What I complain of is, that when business affairs were distracted these enormous estimates were submitted to us and so large an amount of revenue was collected off the people, so that, notwithstanding we have been cheated out of the whisky and tobacco taxes, we have been paying off our national debt at the rate of $200,000,000 per annum.  It is no wonder that we see tight times when this has been done;  and at the same time we have gone on contracting the currency which increased the stringency of the money market.  We might have very well contracted the currency if we had not levied these heavy taxes;  but the two together have produced a financial prostration that ought to have been foreseen.

It was foreseen, you just didn't pay attention (Oh yes, you failed to show up even to vote against the contraction act):—
Thaddeus Stevens, in the House, March 16, 1866, during the debate of the contraction act:—

"Inasmuch as these compound-interest notes are a legal tender for their face, and inasmuch as he has the power under the law as it now stands, or will have at any rate under my amendment, to withdraw this very year the amount of $180,000,000 of the currency of the country by exchanging them for long bonds, ought not that to be satisfactory ?  But that is not satisfactory to the Secretary of the Treasury.  In his report I see that he thinks that in addition to the $180,000,000 he would probably not exercise the power, if it were given him, beyond $200,000,000 of greenbacks;  making a contraction of the currency, according to his own theory and desire, of $380,000,000 in one year.

"Now, gentlemen, if you have ever been upon the rack, (I hope none of you have,) pass this law, and you will have a worse rack than any you ever were on.  I do not believe there is a branch of business in this country that would survive it."

Pig Iron Kelly, in the House, March 23, 1866, during the debate of the contraction act:—

"Again, this bill proposes to empower him to do the absurd thing of taking up the non-interest-bearing debt of the Government by borrowing money at six per cent. for that purpose.  It will close your factories, stop your forges and your furnaces, and paralyze the business of the country, to contract your currency by borrowing money at six per cent. to retire it, or in other words to pay a debt that is carrying no interest, but which on the contrary is paying interest to the Government;  for every dollar note destroyed or lost is a dollar of gain to the country.  But it is not only proposed to borrow money at six per cent. to redeem a non-interest-bearing loan, but there is no limitation upon the price at which the Secretary of the Treasury may sell the bonds of the Government for that purpose.

"Sir, this bill is full of peril to the country.  Its tendency will be to retard the resumption of specie payment by producing uncertainty and alarm.  It may bring our laboring people to idleness, reduce the value of farm products, and close our mines and factories.  In that event many of our laboring people who are now liberal consumers of foreign and domestic goods, will be turned into paupers, and all of them be made close economists, as people always become when they cannot see a prospect of daily labor and wages before them."

But, we can't expect you to pay attention to what is said in the House.
Senator Sherman, in the Senate, April 9, 1866, during the debate of the contraction act:—

"There is therefore no immediate necessity for these vast powers. ... 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."


Mr. SPRAGUE.  Mr. President, I desire to disclaim any censure of the Secretary of the Treasury in relation to this subject.  For myself I can see no reason to condemn him.  At any rate I do not propose either to pass censure or commendation, but I do desire that my word shall be made good in relation to the amount of currency that has been contracted in fact.

The withdrawal of compound-interest notes contracted the currency to that amount, as the withdrawal of the compound-interest notes from the banks required the introduction of a similar amount of legal tenders to make that amount good.  It was in effect, therefore, a withdrawal of the currency to that amount.  Besides $4,000,000 a month that were authorized by law to be contracted of legal tenders, from November to December, 1867, the amount of $2,500,000 of compound-interest notes was retired.  From October 1 to November 1 we find by the report of the Secretary of the Treasury nearly fifteen million dollars were retired;  and from September 1, 1867, until October 1, 1867, $5,000,000 were contracted; and from August 1, 1867, until September 1, 1867, we find $23,000,000 were contracted.

Mr. FESSENDEN.  I should like to ask the Senator from Rhode Island a question.  I want to ask him whether he imputes that to the action of the Secretary of the Treasury ?

Mr. SPRAGUE.  To the law.

Mr. FESSENDEN.  The Secretary was bound to do it by law.

Mr. SPRAGUE.  Certainly.

Mr. FESSENDEN.  He had to redeem this paper and he had no authority to put it out again.

---[but he was not forced by any law to retire greenbacks, he just did it because he was that kind of a guy]

Mr. SPRAGUE.  I disclaim any censure on the Secretary.

Mr. FESSENDEN.  I wanted it understood that he was only obeying the law.

Mr. Sherman.  The fact turns out precisely as I supposed.  The compound-interest notes became due.  It was not the fault of the law or anybody else.  They became due and the Government had to pay them as a matter of course.  On payment they were retained and canceled and they could not be reissued.  The Secretary complied simply with the law;  hence he thought it right to reduce the currency $4,000,000 a mouth and did it;  he paid the compound-interest notes as they matured;  that he was compelled to do it because the notes matured and he had to pay them.

There has been a great deal of complaint made in regard to the exercise of this discretionary power.  I have never said a word on the subject and have no complaint to make.  I have no doubt the Secretary acted according to his understanding of the good of the country, but he may have made mistakes.  I believe when he contracted the currency one or two months last fall he made a mistake;  that he contracted at a time when the business of the country demanded rather more than less currency; but I have never found fault with him simply because he exercised a power conferred on him by law, and I have no doubt exercised it honestly.  But at the same time it is not a power that I think ought to be continued.

Mr. GRIMES.  I should like the chairman of the Committee on Finance to inform the Senate what is the number of compound-interest notes now outstanding and when they are redeemable.

Mr. Sherman.  On that very point I desire to make a statement in reply to the Senator from Maine.  The Senator from Maine properly says that we cannot resume specie payments, a thing that must come sometime, without some distress.  He agrees that the process must be gradual, that anything like a sudden shock would be injurious, and he himself opposes it.  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.  It is not possible that the good of the country and the safety of the business of the country can allow a greater contraction of the currency than this.  And there is no way to meet these $46,000,000 but by paying them off and canceling them, except by using the balance of the three per cent. certificates, which is about twenty-six million dollars;  so that there will be at all events a contraction of more than twenty million dollars before the 1st of August.  It seems to me that any authority in the Secretary of the Treasury to contract at a greater rate than that would be utterly futile;  he could not exercise it;  it had better be withdrawn.

To this the Senator from Maine replies forcibly:  "The Secretary says he will not exercise the power;  it is demonstrated that he cannot exercise it;  then why take it away from him?"  The answer is that this question of currency ought not to depend on the discretion of any one man, and if the public interest shows that he ought not to contract the currency the law ought not to allow him to have the power to contract the currency.  Although I believe Mr. McCulloch will exercise that power honestly, yet as I am satisfied that he should not exercise it now and for some considerable time.  I think it is wise for us to take from him an authority which, if exercised at all under present circumstances, will be abused.  I have no want of confidence in the Secretary;  I have never yet in my official or personal intercourse with him seen any disposition to violate law or do what he did not conceive to be right.  At the same time I say that a discretionary power of this kind conferred on him, which cannot be exercised without injury to the public, ought not to be continued on the statute-book.

When the compound-interest notes are paid and our circulation is reduced to $550,000,000 of legal tenders — I include in this the United States notes and the national bank notes — the currency of this country will be reduced very nearly to the standard of what it was before the war.  At any rate, when the compound-interest notes are paid off the entire currency of the country will be reduced to $550,000,000, as I have already shown, deducting the bank reserve from the aggregate.  Before the war the circulation was estimated at $200,000,000 of bank notes outstanding and $200,000,000 of gold, making $400,000,000.  I say, then, that when the compound-interest notes are paid off our currency will be reduced to very nearly the standard of what it was before the war.

---[You don't like to talk about the ($830 million) 7-30s which were, as you phrased in the Senate, on February 27, 1868, "what are called currency obligations".

Senator Guthrie, in your presence, on April 9, 1866, said:
"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,"

The Act authorizing the 7.30s states they are "legal tender to the same extent as United States notes"
In less than two years $1,000 million government-issued paper legal tender was eliminated;  is that gradual, not shockingly sudden and injurious ?  Oh yeah, you did call it 'rapid' but 'beneficial'.
And another question:  in your opening you stated that there are $299 million national bank notes in existence, as of January 1, 1868;  in October 1865 the National and State bank note circulation was $171 million + $78 million;  what happened, negative reduction ?
Yet another question:  was $400 million legal tender in 1861 optimal ?  has business activity in the past 7 years not increased ?  if $200million paper legal tender is enough to facilitate the people's transactions, why should banks issue them (for their own benefit, profit and purposes)?, why not the federal government issue them and keep them in circulation (free of interest, profit, debt, free from manipulation)?

The question is, how shall we approach specie payment ?  I say not by contraction any further, because you cannot approach specie payments by contraction except through a distress and a destruction of all the business interests of the country that our people will not tolerate and will not submit to.  You cannot approach specie payments by contraction alone, though you must contract somewhat.  Whenever money is easy it is right enough to contract, but when money is tight the contraction must cease.

Mr. FESSENDEN.  And more be put out immediately ?

Mr. SHERMAN.  Yes, sometimes more ought to be paid out.  I will adopt the suggestion of the Senator: at times there ought to be an increase of the currency.  So it is in England.  When times became very tight the Bank of England is authorized by law to issue an increased circulation, and sometimes the very authority to increase destroys the necessity for it;  and I have no doubt that if we could devise a way by which at times the currency might be increased temporarily it would be a wise provision.  After the war between Napoleon and Great Britain by act of Parliament the time for resuming specie payments was extended four different times.  They approached gradually the period fixed for specie payments;  hard times came on;  appeals were made to Parliament, and they extended the time one year, and again a year, and then a year more, and not until 1823, an interval of seven years, did they resume specie payments.  The period was extended from time to time according to the condition of the trade of the country.

Mr. EDMUNDS.  Allow me to ask my friend whether on the passage of the last act the bank and the speculators were not just as much opposed to coming to specie payments as they were the first time ?

Mr. Sherman.  There is always a class of the community opposed to the resumption of specie payments.  The debtors are always opposed to the resumption of specie payments and the creditors are always in favor of it.

Mr. FESSENDEN.  I should like to ask my friend a question in connection with the argument he has made in regard to currency.  Is it the intention of the Committee on Finance, with the view they take of the subject, to again assert the policy of contraction before Congress adjourns ?

Mr. Sherman.  I cannot speak for the Committee on Finance, because they have taken no action on that question.  All they have done is to report this bill now pending.

Mr. Fessenden.  If they take this one step in the other direction I want to know if they are to resume and sustain the policy which was agreed upon during the last Congress — a gradual contraction according to the means of the country in order to reach specie payments at as early a day as possible.

Mr. SHERMAN.  The Senator from Maine knows very well that I cannot answer that question until the committee act.  They have not yet acted on that question.  They have only acted on this proposition.

Mr. Fessenden.  I think the committee have acted, because they have reported what looks like the policy suggested by the Senator, of gradually increasing the currency when you want paper and reducing when you do not.  That is apparently their present position.

Mr. SHERMAN.  I am in hopes my friend from Maine, when that proposition is fairly discussed and considered, will agree with me that it is a very wise provision.  I trust he will not make up his mind until after we have discussed it.  But at present it is the opinion of the committee, and I believe it is the opinion of our constituents in all sections of the country without regard to party, that all discretionary power over the currency should cease, and let the country rest under the extraordinary contraction that has gone on the last two years until revived industry can lift the credit of the Government and carry on the business of the country upon the basis of the present circulation, looking, no doubt, to a time when we may further contract and resume specie payments.

---[explain this, beloved, you are acknowledging that due to 'extraordinary' reduction of currency the industry of the country is in shock and coming to a halt because $600 million paper currency doesn't seem to be enough;  do you think that the business of the country can be conducted with $400 million specie currency ?]

Mr. MORRILL, of Vermont.  I understand the chairman of the Committee on Finance to assert that the Bank of England is by law allowed to increase or diminish the amount of its circulation.  I desire to ask the chairman whether that is so or not.  I do not so understand it.

Mr. Sherman.  Up to a certain limit it may increase or diminish, and then it may raise or lower the rate of interest.

Mr. Morrill, of Vermont.  That is a very different question.  I know it has the power to increase the rate of interest, but its circulation is absolutely based upon fixed positive law, and that is to the amount of securities held by the Government and the amount of specie held in reserve.

Mr. FESSENDEN.  Pound for pound.

Mr. SHERMAN.  But it has a right to circulate up to a certain amount, and all circulation beyond that must be based upon gold deposits.  However, it is not necessary to pursue that argument.

Mr. HENDERSON.  I should like to ask the Senator from Vermont — perhaps he is more familiar with the question than myself — if the privilege of issuing paper upon the deposit of gold in the Bank of England is not often suspended in time of commercial distress, and paper issued without the deposit of gold ?

Mr. MORRILL, of Vermont.  It was in the crisis of 1857, and it has been since, and was once before.  The Government of England have authorized the directors of the Bank of England to disregard the law and have come into Parliament afterward to get an act to ratify the proceeding or to legalize it.

Mr. HENDERSON.  And it has been twice ratified by Parliament ?

Mr. Morrill, of Vermont.  I think it has been.

Mr. Henderson.  There is no doubt about it, I suppose.

Mr. Morrill, of Vermont.  But that was in times of great distress — a great crisis.

Mr. Henderson.  Mr. President, I shall not detain the Senate on this subject.  I desire to see the bill passed;  but, like the Senator from Ohio, I do not feel that it is absolutely essential that it should pass, provided the Secretary of the Treasury should remain of his present opinion and not undertake to further contract the currency.  It matters not to me what gentlemen may say about a return to specie payments.  I am very well satisfied that if a return to specie payments is attempted by stress of law and by contraction under the present state of affairs, and at the rate of $4,000,000 a month, or even at the rate of $2,000,000 a month, the country will be entirely bankrupted in less than six months from to-day — not the country, perhaps, but a great many business men will be bankrupted, and the law which we passed at the last session will be exceedingly beneficial in granting bankrupt certificates.  I do not stand here for the purpose of condemning the Secretary of the Treasury, because in many of his views and opinions I agree, and especially in that one which he so persistently urges, namely, a return to specie payments.  I differ with him in regard to the time of returning to specie payments.  Sir, the country is in no condition now to return to specie payments, and an effort on our part to do so, I say again, would simply end in bankruptcy.  On the 12th of April, 1866, Congress passed a law, which has been alluded to by other Senators, in which it was 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."

That act was passed on the 12th of April, 1866.  Now, sir, I hold in my hand a statement showing the monthly movement of the public debt from July 1, 1865, to December 1, 1867, which Senators can obtain from the document-room.  It is Senate miscellaneous document No. 13.  By referring to this document they will find that the greenback circulation on the 1st of May, 1866, was $414,892,156, and on the 1st of June, 1866, it had been reduced to $401,856,156.  There was a reduction of the greenback circulation from May 1, 1866, to June 1, 1866, of $13,000,000, whereas the law required that there should be a reduction within six months of only $10,000,000.

Mr. EDMUNDS.  The Senator will allow me to say that the law only prohibits the retiring and canceling of more than that amount in six months.  The Secretary of the Treasury might make use of the notes in the regular way at the Treasury, I take it.

Mr. Sherman.  There is another explanation.  Under the law of two years before, I will state to the Senator from Missouri, the amount of these notes was fixed at $400,000,000, which reserve had been encroached upon, and they retired that amount, of course, before the law of April 12, 1866, took effect.

Mr. Henderson.  That may be so;  but I call the attention of Senators to the fact that from November 1, 1866, after the expiration of the six months, when the greenback circulation was $397,927,428, there was a reduction of more than twelve million dollars to December 1, 1866.  How was that done ?  The amount reported on the 1st of December, 1866, is $385,220,167.  Here is an absolute reduction of the greenback circulation within one month after the expiration of the six months, and when the currency had fallen within the $400,000,000, of $12,700,000 — three times as much as Congress had authorized.  There is no explanation, certainly, for that state of affairs, because the contraction was to be limited to $4,000,000 per month.

Now, sir, I will refer to another fact.  It was ascertained by March 2, 1867, that this contraction was ruinous to the country.  The contraction was not only in greenbacks.  It will be remembered that the compound-interest notes were permitted to be held by the national banks in their reserve;  but, of course, upon the maturity of these six per cent. notes they were being rapidly retired, and in the process of their cancellation or funding they were taken from the vaults of the national banks, and as they were taken away the banks themselves must necessarily contract.  On the 2d of March, 1867, an act of this character was passed:

"That for the purpose of redeeming and retiring any compound-interest notes outstanding the Secretary of the Treasury is hereby authorized and directed"—

He was not simply authorized but directed — I suppose, of course, if it could be done, and I understand that it could be done — but the Secretary refused to do it, and hence the direction of Congress —

"To issue temporary loan certificates in the manner prescribed by section four of the act entitled 'An act to authorize the issue of United States notes and for the redemption or funding thereof, and for funding the floating debt of the United States,' approved February 25, 1862, bearing interest at a rate not exceeding three per cent. per annum, principal and interest payable in lawful money on demand;  and said certificates of temporary loan may constitute and be held by any national bank holding or owning the same, as a part of the reserve provided for in sections thirty-one and thirty-two of the act entitled 'An act to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof,' approved June 3, 1864."

I wish not to misrepresent the Secretary on this point.  I may be mistaken.  Perhaps the Senator from Ohio can correct me.  I understand he had authority to fund $50,000,000 of the compound-interest notes in these three per cent. certificates.

Mr. Sherman.  He has funded $23,000,000.

Mr. HENDERSON.  No, sir;  only about thirteen million dollars, as I understand.

Mr. Sherman.  Twenty-three million dollars, according to the statement of the 1st of January.

Mr. HENDERSON.  Then the additional amount must have been within a few days past.

Mr. EDMUNDS.  Will the Senator allow me to call his attention to the fact just alluded to with respect to the apparent excessive diminution of United States notes in October, 1866, which led him to infer that the Secretary had exceeded his authority in retiring more than four millions in that month ?  The Senator will notice that the statement that he holds in his hand is a statement of the outstanding public debt on those days.  Now, the way those statements are made up in connection with the statements that are furnished to us, as he will see by the paper he has on his desk, is this:  in stating the public debt, the amount of currency on hand in the Treasury treated as cash, which they may issue to pay debts the next day, and do, as it is wanted, does not enter into the statement of the public debt, and therefore if in October or November, 1866, it appeared from that statement that the public debt in United States notes had been diminished $10,000,000, the Senator will find, when he refers to the statement of cash balances on hand, it is accounted for by the fact that it is in the Treasury as cash to be issued.  He will see by this statement which I hold in my hand of the public debt on the 1st of January, 1868, that the amount of currency, that is to say, United States notes and other lawful money, in the Treasury is more than $25,000,000, and that he will find to be the explanation of the apparent excess of diminution.

Mr. HENDERSON.  I must confess that I am at a loss to understand the explanation.  It may be my own fault, however.  I understand that this is a statement of the public debt of the United States.  Then what had become of the remaining greenbacks ?  I understand that there was outstanding on the 1st of November, 1866, $397,927,428, and only $385,220,167 on the 1st of December, 1866.  What had become of the remainder ?  And there is a constant decline from that day to this.

Mr. EDMUNDS.  Very well.  The remainder in that particular month, taking one month at a time, if the Senator exercised the authority of retiring $4,000,000 is accounted for in this way: the Senator will find, when he looks at the cash balances in the Treasury on that day that the $8,000,000 was in the Treasurer's office as cash subject to draft, and he will find it so in this very statement.  ["Oh, no."]  If Senators will look at the papers, instead of saying "Oh no" they will find that the statement of the debt on the 1st of January is represented in this way: "debt bearing coin interest, $1,890,102,091.80;  debt bearing currency interest, $328,491,230;  matured debt not presented for payment, $15,871,640.83;  debt bearing no interest, United States notes — "that is outstanding" — $356,159,127;  fractional currency, $31,597,583 85;  gold certificates of deposit, $20,104,580," making $407,861,290.85; "total debt, $2,642,326,253.48."  Then comes "amount in Treasury, coin, $108,430,253.67;  amount in Treasury, currency, $25,770,349.71;"  which, deducted from the outstanding debt, leaves the amount of actual debt, less cash in the Treasury, so much.  Now I think the Senator will find when he looks at the cash settlements that the supposed violation of law will be represented by cash in the Treasury for the payment of the debts of the Government.

Mr. Henderson.  The Senator has referred to the statement of the public debt on the 1st of January, 1868.  I am seeking light.  I desire simply to be informed, for I have been misled by the statement from the Department if l am not correct.  Do l understand the Senator to say that in this statement of "United States notes $356,159,127" and "amount in the Treasury, currency, $25,770,349.71" the $25,770,349 must be deducted from the $356,159,127, or that it must be added to it, to show the entire greenback circulation now outstanding ?

Mr. Edmunds.  I intend to say that, if I understand this statement, the $356,000,000 does not embrace the $25,000,000 which are stated below.

Mr. HENDERSON.  The Senator is simply mistaken.  His correction of me certainly will not stand good, because there are but $356,000,000 of United States notes now outstanding, whether in the United States Treasury or anybody else's treasury.

Mr. EMUNDS.  That remains to be determined.  It appears in the way in which the statement is made up, as this statement appears on the face of it, the amount of currency in the Treasury is treated as cash representing just so much money, to diminish the amount of actual liabilities of the Government over and above its resources.  It may be that my suggested explanation is an error, because it may be the actual fact in the Treasury is the other way;  but speaking from these papers that would appear so to me.

Mr. HENDERSON.  I should like to ask the Senator, then, of what this currency item consists.  Is it greenbacks, or what is it ?

Mr. EMUNDS.  I suppose it is everything which is lawful money, which the Treasurer of the United States or any receiving officer is entitled to receive.

Mr. HENDERSON.  Then, of course, it destroys the Senator's correction of myself, because if there are $356,000,000 outstanding it will neither do to add or subtract the $25,000,000, because it may consist of something else than greenbacks.

Mr. EMUNDS.  The amount authorized to be issued by law is $400,000,000, which may be outstanding.  That is the limit.  Now, then, I understand this statement to mean that the Secretary of the Treasury has outstanding out of the Treasury so much;  he has in the Treasury so much, making the total amount of United States currency which may not be used passing in and out of the Treasury $356,000,000 plus the $25,000,000, making $381,000,000.

Mr. HENDERSON.  I may be mistaken.

Mr. EMUNDS.  I may be;  but that is the way it occurs to me.

Mr. HENDERSON.  This $25,000,000 may consist of national bank notes.

Mr. EMUNDS.  Certainly, and part of it does, undoubtedly.

Mr. HENDERSON.  Then there can be but $356,000,000 of greenbacks uncanceled on the 1st of January, 1868.

Mr. EMUNDS.  I do not see the consequence stated by the Senator.

Mr. HENDERSON.  That must be so;  or else how is the Senator to arrive at anything like a correct statement as to the amount of greenback circulation outstanding at any particular time ?  It means simply that it is that amount of United States notes uncanceled, and it may be in the Treasury of the United States.  There may be a large quantity of it in the sub-Treasury, at New York;  there may be a large quantity of it in the sub-Treasury at St. Louis;  it may be at Burlington;  it may be at different parts of the United States:  but it is not for the Secretary of the Treasury to determine where it is or where it is not.  It is easy for him to determine the amount of United States notes uncanceled, and that is what he reports to us.

Mr. EMUNDS.  The object of these statements is to show the public from month to month how we stand, just as a banker or business man would want to know how he stood;  and in order to do that the Secretary shows us how much he owes, and how much money, that is, lawful money, coin and currency, he has to diminish the apparent amount of the debit side of his balance-sheet ledger with, and therefore he states all that is outstanding that he is liable to pay, and gives us all he has got in the Treasury that he is lawfully authorized to pay with.  Therefore, although this $25,000,000 is undoubtedly composed in part of national bank notes and whatever else is lawful currency, he may state it in that way in order to show what his resources are.

Mr. Henderson.  The Senate, I suppose, will understand the position assumed by us both.  I think the Senator is mistaken.  However, I may be.

Mr. EMUNDS.  It is very possible I am.

Mr. Henderson.  But Suppose I am mistaken in regard to the greenback or United States note circulation;  I next come to the proposition that the contraction of the currency does not come from this point.  The great contraction of the currency comes from another point of view entirely, and that is the funding or the payment of the compound-interest notes, if I understand it properly.  If gentlemen will turn to this statement they will find that on the 1st day of March, 1867 — the day before the passage of the act of March 2, 1867, which I have read — there was $141,000,000 of compound-interest notes outstanding;  April 1, 1867, $139,000,000 — I use round numbers — May 1, 1867, $134,000,000, a contraction of $5,000,000;  June 1, 1867, $130,000,000, a contraction of $4,000,000;  July 1, 1867, $122,000,000, a contraction of $8,000,000 more;  August 1, 1867, $114,000,000, a contraction of $8,000,000 more;  September 1, 1867, $91,000,000, a contraction of $23,000,000 in one single month.  I say "a contraction."  It is a contraction simply because it renders the national banks less able to keep out their own circulation and forces them to the necessity of calling in their discount line and collecting from their customers that amount of money.  It forces them, of course, to put themselves in line, as bankers term it.  Therefore the mere withdrawal of the compound-interest notes, with nothing else outstanding to be held as a reserve, forces a contraction upon the national banks, just as a loss of coin in a bank forces the bank to a contraction in order to get into line.  Now, here is a contraction of $23,000,000 from the 1st day of August to the 1st day of September, 1867.  Up to the 1st of October there is another contraction of $5,000,000, the amount having been reduced to $86,000.000.  On the 1st of November there is a contraction of $15,000,000 on this line again, leaving the amount $71,000,000;  and on the 1st of December, 1867, there was a further contraction of $2,000,000, leaving the amount $69,000,000.

Now, Mr. President, what was there to relieve that thing ?  On the 2d of March, 1867, the provision was passed allowing the three per cent. certificates to be substituted and held by the banks as a reserve.  Did the Secretary use that authority ?  He certainly did not until November 1, 1867, because no three percents were issued until during the month of October.  There were never any reported until November 1, 1867, and then he reported $11,560,000.  Notwithstanding all this contraction at the rate of from fifteen million to twenty-three million dollars a month in compound-interest notes, which enabled the banks, of course, to keep their circulation out, none of the three per cents. were issued until the month of October, because on the 1st of November, 1867, we have $11,560,000 reported, and December 1, 1867, $12,855,000.  My friend from Ohio says there are $23,000,000 out.  I did not look at the last statement.  The statement for January 1, 1868, has been handed me, and I see the Senator from Ohio is correct, because between December 1, 1867, and January 1, 1868, there has been an issue of nearly eleven million dollars more.  There is $23,265,000 out now, and on the 1st of December, 1867, there was $12,855,000.  It is that contraction of which the people, in my section of the country, at any rate, complain.  That is really the contraction.

---[On March 19, 1866, during the debate of the contraction act, Representative Kelley introduced a bill to liquidate compound notes with newly-issued, interest-free legal-tender notes, and to fix the Treasury note circulation to $900,000,000, but it was not even considered and Kelley was scorned for it.  A year later, the bright idea of replacing compound notes with interest-bearing certificates was enacted, to relieve the banks from their reserve shortage;  and only $50 million in the place of $180 million.  (interest-free, baad !;  interest-bearing, goood !]

One word more, Mr. President, and I have done.  Our public debt was created with a circulating medium rising one thousand million dollars.  A large portion of the bonds were floated and sold at par.  We did not want to sell them beneath par, but we floated them on a circulation of from one thousand million to twelve thousand [sic twelve hundred] million dollars.  We passed laws declaring that we would not carry on the war with gold or the representative of gold, but we would adopt what we called a legal tender, and compel the creditors of the Government to take it.  The soldier was paid in it.  We had agreed to pay the soldier in coin, I suppose, if we agreed to pay anybody in coin.  We agreed to pay him in what was known as the dollar prior to 1862.  We paid him off, however, in the dollar fixed by the acts of 1862, 1863, and 1864.  In order to keep our bonds at par we floated them up just as we would put a canal-boat through locks.  We run into the first lock, and we must have water enough to raise it to the second lock.  We found a difficulty in floating our bonds.  We wanted to get up into the second lock.  We first issued $150,000,000 of greenbacks.  That was not satisfactory.  We issued $150,000,000 more, and then $100,000,000, making $400,000,000, or rather authorized it, and issued very nearly that amount.  We were not satisfied with that.  We issued hundreds of millions of six per cent. compound-interest notes.  We were not satisfied with that.  We issued what we called, not United States notes, because those are the greenbacks, but we issued what were called Treasury notes, bearing interest.  All these went into the circulation.  A great many of our bonds were bought by individuals at from forty to fifty cents on the dollar in gold, and we all know it.  There is not a man in the country anywhere who does not know it.  The debt was contracted with this bloated state of affairs.

Now, the very moment the war is over everybody looks to a resumption of specie payments.  I want to come to it, too.  We have now to bring our canal-boat down the locks, and gentlemen will not permit us to let the water in the lock, but we must butt it down and destroy the boat.  Sir, we went up by taking time and letting the water into the lock.  Now let us come down in the same way, and thereby preserve the boat.  If we undertake to come down otherwise we shall destroy the vessel.

Mr. Edmunds.  We shall not came down by letting water into the lock.  We must pour it out.

Mr. Henderson.  I may not understand canal-boating as well as my friend.  I believe we have no canals in my State;  but I undertake to say it would be well to leave the water in the lock and not draw it out before the boat comes upon it.

I may be allowed, perhaps, another illustration.  However, I cannot speak personally on that subject any more than I can in reference to locks and canals.  I have but little experience on either of these subjects.  It seems to me that to undertake to drive the country in this state of affairs to a resumption of specie payments by contraction is about as reasonable as it would be for a physician who should call upon a poor patient who had been laboring for some considerable length of time under delirium tremens to recommend that his liquor be stopped instantly.  The man has kept himself excited, perhaps, for three or four months with spirituous liquors.  The country, recollect, was excited during the whole period of the war.  We kept pouring in this stimulant of paper money; and why ?  To float the bonds.  We did not want to sell them below par.  We refused to sell our bonds at forty cents on the dollar in gold and carry the war on in money, as Napoleon did when he got rid of the paper money of France;  but we resolved to keep our bonds at par, and to issue paper money enough to drive them up to par.  Hence it was that the country labored under the effects of delirium tremens; and that was the condition of the country at the close of the war.  Now gentlemen say that the liquor must be stopped instantly, and that this poor, miserable wretch must not have another drink.  Perhaps a physician might say so;  but my impression is that the patient in that event would inevitably die;  he must have a stimulant.

Mr. FESSENDEN.  Nobody has said that we should come to specie payments instantaneously.

Mr. HENDERSON.  Perhaps I am wrong.  I thought somebody said so.

Mr. FESSENDEN.  Nobody has intimated anything of that kind.

Mr. HENDERSON.  You mean to say that you did not.

Mr. FESSENDEN.  Nobody in this Chamber has said so.

Mr. HENDERSON.  I have heard gentlemen assert that we are in a condition to resume specie payments to-day and that it ought to be done by a fiat of this Congress.

Mr. FESSENDEN.  I wish simply to say to the Senator that when I discuss these question and speak to what gentlemen say I mean the gentlemen who have the matter under consideration here and not what you may read in the newspapers or hear out of doors.  We are not responsible here for what A, B, C, or D may choose to assert outside.

Mr. HENDERSON.  I am not surely holding the Senator responsible, nor was I directing what I said to him; nor do I know why he should consider that I had any reference to him at all.  I certainly can refer to the fact that there is a sentiment prevailing, even with a few individuals it may be that the country must be driven to the resumption of specie payments all at once.  I am not inclined to think that it is going to benefit the community to undertake it.  Indeed I think it will almost destroy the country to do it.

Mr. FESSENDEN.  Nobody proposes to do it.

Mr. HENDERSON.  Why not, then, pass this bill ?

Mr. FESSENDEN.  The reason is that this abandons the idea even of any contraction and return to specie payments at all.

Mr. HENDERSON.  I do not think so.


Mr. HENDERSON.  I am in favor of returning to specie payments, but I am not in favor of leaving this power at present with the Secretary of the Treasury.  However much confidence I may have in his sagacity and his ability as a finance minister, I am not at the present time even willing to leave this power in his hands.  The country demands confidence, and that confidence can only be restored by Congress saying that the currency must be left as it now is at least.  If there is to be no expansion let there be no contraction.  The business men of the country demand it.  I speak for my own particular section, the western part of the country, and more especially for my own State, and I have no business going outside of it in all probability;  but I am satisfied that the business of that State demands that we shall not further contract the currency at present.

Mr. EDMUNDS.  Will the Senator allow me to ask him a question ?

Mr. HENDERSON.  Yes, sir.

Mr. EDMUNDS.  Does the Senator think we can return to specie payments so that we can pay these legal tenders in coin when presented for payment without same further contraction ?

Mr. HENDERSON.  That involves the whole question of finance, and at the appropriate time I may be disposed to go into that question, but surely not on this little bill today.

Mr. EDMUNDS.  I merely asked for the Senator's opinion;  that was all.

Mr. HENDERSON.  I have views, and perhaps fixed views, on that subject; but surely I would not go into that question to-day on a measure of this character — a measure which, in my judgment and the judgment of other Senators who have addressed the Senate, a majority of this body demand, and a majority, I am satisfied, of the people demand.  Therefore, I leave the question of the Senator to some more appropriate time.  I am satisfied the public debt can be paid.  Whether it or any part of it ought to be paid immediately is an other question.  I believe that no part of the principal ought to be paid at present, and that we ought to agree to pay this public debt in coin and reduce the rate of interest within the limit of the ability of the people of this country to pay.  That is my judgment about it;  and when that is done the country will go to work, business will revive, and they will determine to pay the interest and principal, and it will be done in the proper time.

Mr. MORTON.  Mr. President, I do not concur in the remark made by the chairman of the Committee on Finance, the Senator from Ohio, that he did not regard this bill as very important, because the Secretary of the Treasury had intimated that he would not retire any portion of the currency perhaps during this winter or until Congress had acted on the subject.  As long as the question of retiring the currency is left to the discretion of the Secretary of the Treasury or to any one man the policy of the country cannot be said to be settled.  What the business men of this country want to know is what the policy of this country is going to be for the coming year or two.  They want to know on what to calculate in the way of business.  The $4,000,000 that might be retired this month or next month, perhaps, might not be very important.  They want an established policy for the business of 1868 and the business of 1869.

Now, sir, there is much financial embarrassment and trouble throughout the country, and there is a general conviction on the part of the great body of business men, not only throughout the Northwest, but in the East, that this embarrassment is largely owing to the contraction of the currency.  For this large body of public opinion I have a great respect.  The concurrence of so many thousand intelligent men, who have devoted their time and attention to financial questions — many of them reading and thinking about these things quite as much as any Senator on this floor — the concurrence of so many thousand minds in the opinion that our financial embarrassment is largely due to the contraction of the currency is, in my opinion, entitled to great consideration;  and I think that that large body of public opinion is wiser than the opinion of any one man, be he who he may.

It was stated by the Senator from Maine, for whose opinion I have great respect, that if we resolve to discontinue the contraction of the currency it is the indefinite postponement of a return to specie payments.  I do not regard it in that light.  If I thought so I should not vote for this bill.  I am not one of those who believe that an irredeemable paper currency can be continued in this country indefinitely or for a generation.  I believe that an end must come to that, and that we shall be compelled, and we shall find it to our interest as soon as we can, to return to a healthy, sound specie basis.

The question was asked by the Senator from Vermont [Mr. EDMUNDS] whether it was necessary that we should further contract the currency in order to arrive at specie payments.  I do not hesitate to give my opinion, poor as it is, on that subject, that we can return to specie payments without the further contraction of the currency, and that we cannot return to specie payments simply by a contraction of the currency without producing almost universal commercial bankruptcy and ruin.  I should like to have the opinion of the Senator from Maine on this question, whether we are to return to specie payments by continuing to contract the legal-tender currency until it is all taken up — whether it is his idea of returning to specie payments to continue this contraction until all is gone.

Mr. FESSENDEN.  I do not suppose it is necessary to take up the last dollar of it, but I suppose it will be necessary to so reduce the obligations the Treasury may be called upon to pay that it will be ready at any time to meet the claims upon it with gold, which I think it will not be as long as it remains in its present condition.

Mr. MORTON.  I cannot say that the answer is very satisfactory.  I should like to know how far we are to contract, and how far we are to diminish the currency before we can probably return to specie payments, in the opinion of the Senator ?

Mr. FESSENDEN.  That would depend entirely on the condition and power of the Treasury at the time, which neither I can foresee nor the Senator.  It would depend on the condition of things in the country.  Nobody can now fix exactly the time nor say what amount of reduction should take place to bring about that result.

Mr. MORTON.  I believe that we cannot reason in regard to what it will require to return to specie payments now by the condition of the country before the war.

Mr. FESSENDEN.  I will ask the Senator a question.  Do you believe that the Treasury, at present, if we should by law say there should be specie paid at once, could do it ?

Mr. MORTON.  No, sir; I do not believe that is the method of returning to specie payments.  I was remarking that I believe we require more currency now to conduct the business of the country than before the war.  The enormous revenues that have to be collected, the increase of business, and the rapidity of the increase of our population, I believe, make it necessary that we shall have from two to three hundred millions more of currency than we had before the war.  When I see articles or read speeches in which the amount of currency prior to the war is referred to as being the basis to which we shall have to come back before we can return to specie payments I regard that argument as unsound.  We cannot return to specie payments at once.  I am of the opinion that there should be a definite time fixed in the future when the country will return to specie payments, so that the country may understand it and work upon it.  The period fixed should be such as to give reasonable time for a fair resumption of business North and South;  it should give time for good crops;  it should give time for reconstruction;  and if I had the fixing of the time I would not say a day earlier than the 1st of January, 1871, and perhaps that may be too soon;  but I believe that when we do return to specie payments it will be by fixing a time in the future, and that the value of our legal-tender notes will gradually appreciate to par.  It cannot be done at once;  but I believe it can be done in that way with the amount of gold on hand that is ordinarily supposed to be necessary for the purpose of meeting a paper circulation.

---[Which is not really specie payment, only a specie fractional reserve.  The question is, who should issue the circulating notes based on this fractional reserve which "is ordinarily supposed to be necessary for the purpose of meeting a paper circulation".  In your century there had been one money panic for each decade, when private banks declared that their notes were false promises and suspended specie payment.  So far this had not happened to Treasury notes;  there had not been a run on Treasury notes.]

I believe this can be done without a further contraction of the currency; that the further contraction of the paper currency of the country can be deferred until the time when we do return to specie payments, and it will then take place by the act of return.  To-day gold and silver are not a part of the currency any more than horses and cattle.  They are articles of merchandise.  But on the day that we return to specie payments we shall add all the gold and silver in the country to the currency of the country;  and we shall inflate it to the amount of from two hundred and fifty to three hundred and fifty millions on that very day.  We shall on that day add all the gold and silver in the country to the currency of the country, and increase the volume of currency to that extent, whatever it may be;  and then we can retire a portion of our paper currency, and still maintain an equilibrium as to the volume of currency, a part of it then consisting of gold and silver.

But, sir, in my judgment the country will not now bear the further contraction of the currency.  We have not recovered from the effects of the war.  We cannot be governed simply by theory, but we must recognize the facts of the case.  One great cause of the present depression in the business of the nation arises from the fact that we have paid nearly five hundred million dollars of the national debt since the 1st of August, 1865.  Nearly five hundred million dollars have been extorted from the people by way of taxes in payment of the national debt, a policy that has been most ruinous and disastrous in my opinion.  We should be in far better condition to-day if we had simply paid the interest on that amount or had only paid a small portion of it.  But, sir, when we came to take $500,000,000 from the people — exhausted from the war, worn out;  to take $500,000,000 from the loyal States over and above the vast amount required to carry on the Government, to keep up the Army and the Navy, to pay pensions and bounties, and all the current expenses of the country — it was more than the people could bear;  and when we propose to add to that the continued contraction of the currency at a time when the people demand relief, we need not expect anything but commercial distress and perhaps ruin.  The country demands that we shall suspend the further contraction of the currency.  The great body of business men, in whose opinions I have the utmost confidence, far more than I have in my own;  men who have studied finance for years, far more than I have, or perhaps any Senator on this floor engaged in general politics — the great body of those men concur in the opinion that we ought at once to stop the contraction of the currency.  Sir, we should heed that opinion.  We should take into consideration the circumstances of the country.  We should look to the present as well as the future, and to the practical operation of what may in theory be good, and not allow practical evil to flow from theoretical good.

It was said by the Senator from Nevada that the passage of this bill would be regarded as a vote of censure against the Secretary of the Treasury.  I do not regard it in that light.  We have a right to curtail the discretionary power of any officer without reflecting upon that officer.  We have a right to fix the administration of the finances by law without reflecting upon the integrity or the capacity of the Secretary of the Treasury.  The Secretary of the Treasury is wise in financial matters, but he is not wiser than all the business men of this country, and they protest almost with one voice against having the further administration of the currency left absolutely in the hands of one man.  I think, therefore, sir, it is due to the country that we should pass this bill without any further delay.

Mr. HOWE.  Mr. President, I do not know when I ever attempted to say anything upon a I question pending before the Senate with more reluctance than I now rise to say a few words on this bill.  I had no intention of participating in the debate, and I should not do so now but for the very peculiar reason that the Senator from Maine has stated here so emphatically and so irresistibly to my mind the real, fundamental principle upon which I believe the finances of the country should be administered, that I cannot allow myself to be put in the attitude of dissenting from anything he said;  and yet while I subscribe with my whole heart and with my whole mind and with my best judgment to the principle he has laid down.  I feel compelled to vote for this bill.

Mr. President, if I regarded this bill as nothing more than a bill to prevent the contraction of the currency, in which light it is spoken of almost exclusively, I might hesitate whether I would go for it or not;  but I regard it as something very much more than that.  The law which this bill proposes to repeal or to suspend the operation of I look upon very differently from a law just to authorize a contraction of the currency.  It seems to me, on the contrary, to be a law authorizing the levy of a large tax annually upon the people of to-day to discharge the public debt;  and I do not think the people of to-day are equal to meeting that taxation or able to bear it.  This country can, in case of necessity, yield very large revenues even upon the system on which your revenues are assessed and collected, which I think unequal and unjust.  In case of necessity they can return, and have returned, an immense revenue to the country;  but I think it must be manifest to every man of common sense that they can pay a great deal more into the Treasury under a system of laws which disburses it again to the country than they can under a law which authorizes it to be destroyed in the Treasury.  The trouble with this act which you now propose to suspend the operation of seems to me to be that it authorized the collection of a very heavy tax, and authorized the Secretary of the Treasury to destroy the proceeds of that tax to wipe it out.  You did not release or lessen taxation, but were drying up the very means and resources out of which taxes are to be paid, thus imposing a double burden upon the people at the same time.

I do not think that the people of this year or of the next, just issued as they are from a terrible struggle, a most exhausting struggle, ought to be called upon to pay any large proportion of the existing debt.  I do not think they ought to pay a dollar more than the interest of that debt for this year, for the next year, or possibly for several years to come.  When business has again resumed its normal condition then it will be time enough to take measures to reduce the principal of the public debt.  If we of to-day can pay the interest on what we owe and honestly discharge the current expenses of the Government I think that is all we ought to do.  But in addition to that we have, under the bill which we now propose to repeal, authorized the payment of about fifty million dollars a year;  and in addition to that we have required the payment of a large amount of the accruing debt in the shape of compound-interest notes.

Mr. MORRILL, of Vermont.  Funding the notes would not pay the debt.

Mr. Howe.  No, of course not;  but we have not funded those notes.

Mr. MORRILL, of Vermont.  I merely desire to say to the Senator from Wisconsin that the provision of the law proposed to be repealed does not authorize the payment of any portion of the public debt;  that retiring the $4,000,000 a month of these notes can be accomplished without paying a dollar of the public debt, for there is a right on the part of the holders of these notes to obtain bonds for them, and they could obtain bonds for them, and thus be retired.

Mr. Howe.  Mr. President, I am really taken by surprise at the remark made by the Senator from Vermont, for I have looked upon that act as an act which practically required the payment of the public debt and did extinguish these notes.  I have not had tine to read the act, but I do not understand that it authorizes the holders of these notes to convert them into interest-paying bonds.

Mr. MORRILL, of Vermont.  No;  not that act.

Mr. Howe.  Nor that any act authorizes the holders of these notes to convert them into interest-paying bonds, but that the Secretary of the Treasury may at the current rates of bonds change them for notes.  Is that so ?

Mr. MORRILL, of Vermont.  The Secretary of the Treasury can pay for these notes by bonds, if he chooses.

Mr. HOWE.  But at the current rates ?

Mr. MORRILL, of Vermont.  Yes.

Mr. Howe.  Not at the par of bonds ?

Mr. MORRILL, of Vermont.  No, I think not.

Mr. HOWE.  No, Mr. President;  and that is my difficulty with the act.  Sir, the only financier, the only master of finance under whom I ever studied was Wilkins Micawber, Esq. [Laughter.]  Mr. Micawber had a remarkable facility for contracting debts.  That has characterized the United States for the past few years.  Mr. Micawber had but a limited faculty for paying debts.  That is another characteristic that I have noticed in the United States for several years past.  Mr. Micawber was an honorable man, an honorable debtor.  So I hope the United States will turn out to be, as so far it has appeared to be.  When Mr. Micawber met his creditor, without any of the coin of the realm in his pocket, he met him like a man and gave him his IOU, and discharged the debt ! The United States has practiced upon the same principle so far.  We were obliged to contract debts that we could not discharge in anything like money.  We had got to employ something that was not money, somebody's credit, and we did as Micawber did — we gave our creditors our IOU.  We gave them our notes of hand;  and every note that every one of you holds in his pocket, and I hope your pockets are full, [laughter,] is a certificate of the United States that you have advanced the amount of that note to the United States Government over and above the proportion that was required of you under the tax laws of the country.  But Mr. Micawber lacked one facility, for circulating his paper, which the Government possessed.  His creditors were perfectly willing to take his notes because they could get nothing else.  Our creditors were willing to take our notes for the same reason.  But Mr. Micawber could not enable his creditors to circulate his notes as money.  We did effect that.  We enabled our creditors, whom we compelled to take our notes, to pass them to their creditors and use them as money.

Mr. President, I thought the United States were acting upon a sound principle;  I thought the course they took was the only course open to them;  but it will be borne in mind that when they first commenced the issuing of this paper the amount was controlled by one idea, and that was that they never would issue a dollar of legal-tender notes when they could borrow the notes;  in other words, that all the notes they issued should be convertible into interest-paying bonds.  If the country were ready at any time to loan the Government the means to meet its engagements at a fair rate of interest the Government was willing to borrow;  but when the country could not loan at a fair rate of interest the country would do like Micawber and issue its notes.  That was a fair principle, and if we had kept sight of it until this time I do not think our finances would be in so embarrassed a condition as they are to-day.  But unfortunately, to use the figure recently employed by the Senator from Missouri, although we did commence by floating the bonded debt of the country on to the country, we did not stop floating when we had reached the highest lock, so to speak.  We kept on issuing these notes after the country preferred not to take them and after the country wished to loan them to the Government, when we might have borrowed them at a rate of interest which we agreed it was fair to pay.  Hence, and from this cause you see to-day that it takes from one hundred and eight to one hundred and twelve dollars of the national notes which do not bear interest to buy $100 of the national notes which do bear interest.  I do not think that is fair.  If this law which you now propose to suspend had authorized every man holding these notes to turn them into the interest-paying bonds of the Government I think it would have been a just and honest thing;  but that of itself would be a destructive measure while you have another statute upon your books which restricts by an iron rule the amount of paper circulation which can come from your banks.

The Senator from Ohio said that he thought the Secretary of the Treasury ought not to be authorized to restrict or to control the amount of circulation.  I agree with him, but I think that Congress ought no more to be authorized to do it than the Secretary of the Treasury.  Neither of them should do it.  The law, in my judgment, ought to fix the condition upon which the first dollar of paper should be issued;  but having fixed those conditions, having determined in its wisdom upon what conditions it was safe to let one dollar of paper be issued, every man who should comply with those conditions should have the same right to issue a dollar.  This restriction upon the amount of bank circulation or of paper circulation, therefore, is open to two objections.  First, I have this objection to urge:  that I think there is no body of men in the United States of equal intelligence but what is just as competent to determine the amount of money which the country wants to use at any particular time as the Congress of the United States;  and the same number of business men, as my friend from Missouri [Mr. Henderson] suggests, are much more competent to determine it.  We know less about it.  We are not capitalists;  at least I can speak with the utmost confidence for one, [laughter;] and we have no necessary connection with capital;  we are not engaged in the business of the country;  and we are the last men, in my judgment, to know just how much money the business of the country wants.  Men who have money to loan, men who have money to operate with, know, it is their business to know, to keep run of the course of business, and know when it is safer to buy property with their money or safer to loan it at the current rates of interest.

Mr. EDMUNDS.  How is it with men who have to borrow to pay their debts with ?

Mr. Howe.  My friend asks how it is with men who have to borrow money.  It is a bad thing to borrow money.  I have always noticed that it was a disadvantage.

Mr. CONNESS.  To which side ?

Mr. HOWE.  To the party who has to borrow money.  I heard a remark once from a neighbor of mine, a very sensible one, and I subscribed to the truth of it at once, and I believe in the truth of it to-day.  He said it had been more than fifty dollars damage to him being poor. [Laughter.]  I think it is a serious, positive disadvantage to men to be poor and have to borrow money.  But, Mr. President, I do not believe it is the business of the Legislature of the nation to provide for men who are poor and have to borrow money.  I think, being one of the class myself, it is the business of men who have to borrow money to go to men who have money to lend and borrow it like men and pay for it if they agree to do so, and when they agree to do so, and the nation cannot by law provide for their necessities.  That is my answer to that inquiry.

Mr. CONNESS.  Will the Senator give way for a motion to go into executive session ?

Mr. HOWE.  I will give way in one moment.  Now, Mr. President, it is because this act which we now propose to suspend simply authorizes the Secretary of the Treasury to sell bonds for these notes and provides nothing to take the place of the notes in circulation that I feel bound to vote for the repeal or suspension of the law.

I am not in the habit of discussing these questions, and I am not at all sure that I have said precisely what I wished to say.  I rose more for the purpose of saying that I did not mean to be classed with those, if there are any in this country, who insist upon keeping afloat a large amount of irredeemable paper money;  and I do not mean that my vote for this bill shall be construed into such a purpose.

Mr. President, I said when your first Treasury-note bill was pending here what I repeat to-day, that, in my judgment, there never ought to have been a note issued by the Government promising to pay specie on demand, because we knew the Government could not pay specie on demand;  and I say now that there ought not to be a piece of paper circulated under the protection of law by anybody, either by the Government or a bank, which is not convertible into something that the world recognizes as money, whatever that is.  The Government cannot do it without bearing the brand of a bankrupt on its brow.  I cannot do it without subjecting myself to the same penalty;  and a bank cannot do it.  I have said that we were justified in using this paper while the war was upon us;  but I believe with the Senator from Maine, that that necessity has passed by, and we must get rid of this paper as soon as we can;  but it must not be taxed out of the pockets of the people and burned;  and it must not be taken from the circulation of the country unless you allow the capital of the country the option of putting something in its place.

Mr. FESSENDEN.  How is the debt to be paid without taxation ?

Mr. HOWE.  You can never pay anything except by taxation, but you cannot collect taxes when you have taken the whole circulation of the country out of the country.  If you will destroy this kind of paper you must put something in its place if the business of the country and the exigencies of the country demand it;  and we cannot tell, I say, how much is demanded.  But take off the restriction upon the issuing of bank paper, take off the restriction from the circulation of your bank notes, determine the conditions upon which, as I said, the first dollar may be issued, and let every man issue who will comply with those conditions;  place your banking circulation on the footing that it was before the war commenced and before the Government entered into the business of banking, and then you can go on and allow these notes to be funded into the interest-paying bonds of the Government just the principle upon which the first issues of these notes were authorized.  But that will subject us to one disagreeable thing — the people will have to pay interest on these new bonds.

Gentlemen tell us that the country can carry three, four, or five hundred millions of this paper and we save the interest.  Sir, we pay the interest three times over in the increased price put upon every commodity the country deals in;  in other words, in the depreciation of paper or in the appreciation — I think that is about as correct an expression — of that which is the true representative of values, the coin of the country.  While you have that system of finance which makes gold a merchantable article the price of gold is not regulated by the law of supply and demand.  The price of gold is regulated by those men there in Wall street, New York, who buy and sell their millions and millions every day without seeing a dollar of it;  and while it is a merchantable commodity and stands as the representative of all other commodities, when gold goes up under the manipulations of these gentlemen everything else goes up.  So they have in their hands the price of every commodity.

Mr. President, I have occupied more time than I intended when I rose, and I will now give way to the motion to go into executive session.

Mr. Conness.  I desire to inquire of the chairman of the Committee on Finance whether he wishes a vote to-night on this measure, and whether he thinks he can get one.  If so I will govern my conduct accordingly.

Mr. Sherman.  I cannot tell, as a matter of course.  I have no power over the matter.  If Senators desire to debate it much further we cannot reach a vote to-night.

Mr. CONNESS.  My purpose is to elicit the sentiment of the Senator on the question.

Mr. Sherman.  I should like to get a vote, because I understand that the Senator from Maryland desires to-morrow to call up the case of his colleague.  If we can have a vote at a reasonable hour to-day I should like to obtain it.  It is a question for the Senate to decide.

Several Senators.  Let us vote.

Mr. Conkling.  There are several Senators who wish to speak.

Mr. Conness.  Then I move that the Senate proceed to the consideration of executive business.

Mr. MORTON and others called for the yeas and nays;  and they were ordered.

Mr. CONNESS.  If there is any general disposition to come to a vote, or if a vote can be reached this evening, I will withdraw the motion to go into executive session;  but I have inquired and find that several Senators desire to speak for a short time upon the bill.

Several Senators.  Let the call for the yeas and nays be withdrawn.

Mr. Sherman.  I did not call for the yeas and nays;  the call was made by Senators around me who desire to reach a vote.  If any Senator desires to make a speech of course that is the end of all chance of reaching a vote to-night;  but I inquired of several and they disclaimed any purpose to do more than say a word or two.

Mr. HENDERSON.  I understand that the Senator from California desires to be heard on this subject.

Mr. CONNESS.  For a few moments only.

Mr. Henderson.  I suppose we might as well go into executive session.

Mr. Sumner.  I hope the call for the yeas and nays will be withdrawn.

Mr. JOHNSON.  My friend from Ohio was under the impression that I proposed to call up to-morrow the case of my colleague-elect.  It is not my purpose to call it up until the Senator from Indiana, who is not now in his seat, [Mr. Hendricks] shall return here.  He is one of the members of the Judiciary Committee, and I know desires to be heard on the questions which that case involves.  I am told now that there is no probability of his being here before Monday.  In that event I shall not call up the case to-morrow morning.

Mr. Sherman.  That being so, I have no objection to letting this matter go over.

Mr. MORTON.  I withdraw the call for the yeas and nays so far as I am concerned.

The PRESIDENT pro tempore.  The yeas and nays have been ordered, but the order may be recalled by common consent.  The Chair hears no objection to that being done.

Mr. Buckalew.  Before the Senate goes into executive session I desire to state that when this bill comes up again I shall move to amend it so as to limit the suspension to the 1st of July next, instead of leaving it indefinite.

The PRESIDENT pro tempore.  The question is on the motion of the Senator from California, that the Senate proceed to the consideration of executive business.

The motion was agreed to;  and after some time spent in executive session, the doors were reopened and the Senate adjourned.

In the Senate
Monday, January 13, 1868.

Procedure, ~10 minutes

Tuesday, January 14, 1868.

Debate (for the sake of debate); amendments (ditto);  procedure;  ~4 hours of talk.

Wednesday, January 15, 1868.

1-hour speech by Sprague; long talk by Sherman; another ~4 hours of talk;  finally a vote:— 33 yeas, 4 nays, 16 absent
So the bill was passed.  Not the final bill, but the one the Senate would have liked;  now reconciliation with the House (are they dragging their feet, as much as they can ?).

January 21, 22, 23:  back and forth reconciliation;  a text is accepted and the bill sent to the President.  Mr. Johnson didn't much care to look at it;  the Congress was in the process of trying to impeach him.  The Act became law by default, on February 4, 1868.

Appendix to the Congressional Globe
40th Congress, 2d Session
page 104

Contraction of the Currency.
Speech of Hon. William Sprague,
of Rhode Island,
In the United States Senate,
January 15, 1868.

The Senate, as in Committee of the Whole, having under consideration the bill (H.R. No. 213) to suspend further reduction of the currency—

Mr. SPRAGUE said:

Mr. President, I have a great interest in the principles involved in this bill, but little interest in the bill itself.  It is a temporary measure, and essentially deceptive.  If the receipts going into your Treasury are greater than your expenditures to the extent of the deficiency, contraction continues.  As the $46,000,000 compound-interest notes fall due, the last in October, contraction to that extent continues, less, perhaps, $20,000,000 three per cents. heretofore authorized yet unsold, provided Government can make sales of them, but which, in the present condition of trade and finance, I doubt its ability to do.  I wish the Senate realized as I do the exact condition of the disturbed condition of the people's interests.  It is no flimsy or temporary difficulty, that without congressional action will speedily pass away;  and the important question, what is the real difficulty and what is its cure, must now be answered.  In the wise disposal of the currency much will depend of[n] our measure of prosperity or adversity.  Matters of taxation and expenditure must be adjusted to the lowest sum compatible with our obligations, and the strictest economical administration of public affairs.  The power to increase the currency up to the requirements of the Government and the demands of business is indispensable.  By it we may yet save our remaining resources, and through it arrive at a more speedy resumption of specie payments.  You cannot, however, expand your currency through increased issues of Treasury notes.  These notes to-day are, as I will show, the great enemy of resumption.

Contraction of Treasury notes reduces the means of general speculation.  The evil of contraction here is that it is capital that is reduced, when it costs so much to procure it.  Treasury notes of themselves have no life, and must be forced to be active.  There must be an attraction to the source of issue for currency to benefit trade or industry;  for no issue can arrive at this condition unless by the instrumentality of the people, and then only through their industries.  One dollar of active currency is better than five dollars or even any larger sum that, from its nature or otherwise, is inactive.  An active currency spreads throughout and is beneficial to whole communities.  An inactive currency benefits the one only who uses it as an operating power;  and not that one unless his use of it bring profit to himself.  One has constant life-giving properties, the other exhausts itself after the first operation.  The real object of currency is to represent capital, and to promote movement among material things.  The capital represented is not gold exclusively, but gold if you have it, and houses, barns, factories, public improvements, or national possessions.  It is peculiarly an American necessity when we consider that we have more property and less money.  That is, capital in the form of property and not in the form of money.  By means of currency, or capital represented by paper, we are to bring our capital in property equal to other peoples' capital in money.  By means so simple and safe we are to secure a representative of our capital, which is the presence of capital itself, and by which we will be able to build more houses and factories, clear more farms, and thus continue to give employment to labor.  If, like greenbacks, with no return power and no life, and tending to centralization, it has no value as a currency or a representative of capital.  It is capital itself, the same as houses and lands are capital.  We try to create a distinction between Treasury notes and five-twenty, ten-forty, and other interest-paying securities, by classing the first as currency, the other as property.  There is no such distinction, in fact;  all are property;  and the difference is, one pays no income to the holder, while the others do.  In my judgment you may issue a million Treasury notes to-day, and sell them in our market without Government or people deriving but a temporary relief.  In fact, the issue becoming property a surplus and an overstock would reduce its value, and through it the value of every other public or private security;  besides, it is the poorest kind of property.  You cannot get an income from it so long as you hold it;  hence you are tempted constantly to speculation to obtain that which you cannot obtain without.  Like chaff in a bed, every stir up sets it floating in the air, to settle again lifeless and useless.  Not so a currency performing its legitimate office of an active and distributive circulation.  This I cannot easily place my hands on;  the other I can buy.  I then operate with it as rapidly as possible, otherwise, and as long as I hold it, I lose interest on my money.  The seller feels as I do.  He also makes an effort to relieve himself of them, and everybody avoids holding Treasury notes.

Concentration takes place when they are again brought into operation, where the chances favor profitable returns.  Pay off, if you will, your national debt in greenbacks.  Let the present holders of your securities take your issues.  He will hold them so long and no longer than to turn them into interest-bearing securities or property.  Whose securities or property ?  The people's property, of course — yours and mine;  because it is only here in this country that the issues would pass at all.  Here, then, we have a measure that is advocated in the interest of the people that first takes their property, through which a living was procured, and leaves with them a property that pays nothing.

How long, I ask, would a property retain its value, or any value, that pays no income and which nobody wants ?  If such a measure was proposed by a tyrant the outrage would appear plain to all, as it is advocated in the interest of the people, and though their property is to be the sacrifice the deceitfulness of the proposition is not discovered.

Here, again, the people are true to themselves;  they seek relief from impending servitude;  they accept the defense that appears best, seek the same object through a cheaper and safer method, more honorable and certain of success.

The people, through their industries, is the only power that can promote general distribution of capital or its representative currency.  When, from the prostration of those industries, the power ceases to act, concentration of capital prevails, then speculation begins.  This is the condition of your monetary affairs, to-day.  When there is insufficient capital, or when it is scattered as ours is, money if generally distributed becomes cheap.  When general distribution prevails, outside calls for capital become of course less and less frequent.  In proportion to this decrease more and more favorable propositions are made from those who command capital to those who employ it.  This comes in form of lower rates of interest and less valuable securities.  This, for the time being, gives money to a whole country at a lower rate of interest on the principle of the action of a tiller.  Its slightest motion changes the course of the largest vessel.  How important, therefore, for the whole country, to wisely and firmly control in the people's interest this sensitive and controlling point.

The absence among the people of this distributive machinery and the neglect of Government to concentrate its scattered resources and to operate them in its own defense, is one of the real causes of our present difficulties.  The banker, the broker, and the operator will not give this counsel, for if such should prevail his occupation is gone.  Hence, from the beginning until now, he has given the opposite and false direction to your monetary affairs.  The absence of distribution, which is the character of the greenbacks, renders resumption of specie payment through their agency clearly impossible.  Your determination to resume it at a stated time would bring the whole issue upon you for gold payment, because it is a commodity waiting purchase and in any sums.  Here, at just this point the Treasury policy has rested all its hopes of resumption to be utterly and irretrievably blasted, and carrying down with those fond hopes most of the people's industries.

The circulation that has been most useful to this or any country, in my judgment, is that which rests on property.  It is steadier and less liable to fluctuation than coin.  If coin, you are liable to lose it in the process of trade, and again it accumulates.  The accepted opinion favors coin.  The currency as well as the capital that has built up and sustained the industries of my State has had no coin as a basis for its solvency.  The currency came from banks having for capital the obligation of the people, property-owners, in form of notes, acceptances, drafts, and the like.  These banks were but departments of the industries of the State, tributary to, dependent on, and useful only as they promoted those interests.  Few of those interests would have had being except through the agency of these institutions.  There never was more than one to two per cent. of coin in their vaults.  I have come to this conclusion: that gold, as a basis of currency, is as the middleman to the trade of a country, exacts tribute, increases cost to the consumer, but adds no value or safety for the cost.  While it is idle interest is lost, and that is the people's loss.  Besides, you employ two representative mediums.  This is false economy: The gold may be stolen.  It certainly fluctuates.  Property — or its paper representative, in the form of notes, &c., of the people — is not so easy to take to itself wings and to fly away.

Currency is to capital in banks what banks are to property, the industrial interests and the trade of a people — the motive power;  and, like all those powers — steam or water for instance — when acting under direction and control, is performing wonders unknown and unthought of in past ages;  but when that direction and control are lost there is a common ruin for all.  Let financiers pause here and consider.  The assertion that the bank issues of Great Britain are all based on coin is an error.  The Bank of England alone issues one hundred million of our values on property other than coin, and so, also, is the case with her other banks.  Besides, and in addition, every deposit of coin calls for a corresponding issue in paper.  I would not speak of this point as a defect did I imagine my words would influence a change.  I hope through this very defect my country will one day command the money market of the world, as you will presently see how unsafe and crude it is to place your reliance on gold.

When, through the process of trade, the drain of gold is into England these issues commence and continue as the drain continues, producing an increasing ease on the market when the market is, perhaps, perfectly easy.  On the other hand, the drain is out, the issues are at once called in, no matter how occupied, and a scarcity calls for still greater scarcity.  If the drain continues long enough every pound goes out and every issue is canceled, and the public must break, unless through the action of Government additional issues are authorized and gold purchased.  As an illustration, a few months since a condition of things existed as I have stated.  The people of England were on the eve of general bankruptcy.  New issues were authorized and gold was purchased by the bank of the Treasury of the United States at thirty per cent.  Thus England was saved by the gold in our Treasury, as the suddenness of the difficulty gave no time to purchase elsewhere;  and as a reward for our magnanimity she forced gold up on us to fifty per cent. not a week after.  Who, I ask, counseled this blunder ?  We, saving from failure our greatest rival, and the depreciation of our securities, and at a cost of twenty per cent. in gold.  Bear in mind just here that I condemn our policy with but one view, and that is to inaugurate a new policy that will save our people, so they may have heart to continue the great work God has called them to perform.

So long, therefore, as our intimate monetary relations exist with Great Britain we shall be controlled by their ruinous gold system, and suffer when they suffer.  Every interest throughout the world is unsettled through its shifting character.  We are still asked to rest our currency on coin where it never has been done and never can be done.  Do not forget that currency has but a representative value and a motive power, and that it cannot represent a security at par when that security is below par.  The financiers' clamor for payment of all our securities in gold at par is a paramount cause of our present prostration, because it prevents a safe and easy method of creating capital, the collecting of our resources, and issuing thereon a representative, which otherwise is lost to us as capital.  We shall begin to learn something when we can understand that a nation, like an individual, must fail if without capital it attempts to compete with one that has an abundance.  Unless, therefore, you act upon the idea of resorting to the power to create and collect, and the will to employ your capital in protecting your own and the people's interests, the business prostration of 1837, 1847, 1857, and 1861 will have no parallel in that which is before us.  Perhaps it is my fortune to understand more directly from those who now suffer or from those who know of sufferings in the country than those about me.  I am not myself influenced by panics.  I feel calmer always when the disaster is upon us than in its anticipation;  but, as I have contemplated this question, I am astonished that business has held up as long as it has.  Now, if there are any who read my words let them pause in their operations and await a change, for if that change does not take place the longer you go on the more difficult it will be to extricate yourself in the end.  We may not have a violent and sharp prostration, but, like the sinking of a foundering ship, none the less certain or disastrous.  Its violence may pass away to-day, but you cannot escape the effect of the exhausting process, through the constant drain of your securities, public and private, that meets you at every turn.

I do not contemplate the question of finance from any one interest point of view.  No one here can charge me with this;  my wish is that the manufacturer shall have such facilities and profits only as will enable him to devote his whole time and ability to the perfection of his production.  I ask for him nothing that will tempt him into other channels of occupation.  So of commerce, agriculture, trade, and the professions.  Such, sir, in times gone by has not been the condition of our industrial interests.  These have failed in consequence of the skill that should have been devoted to the perfection of production being forced into, and almost exclusively devoted to procuring capital for those operations, leaving to unskilled hands and unlettered heads the perfection of the interest itself;  we thus bore failure on the face of all our efforts.

Does Government succeed in the object of its establishment when it fails to afford to the people reasonable protection to their industries ?  No, sir, I want no more quackery to procure a healthy restoration of our finances, either through financiers, manufacturers, traders, demagogues, and the like.  I want a skillful physician who will carefully consider the disease, and, in lieu of remedies applied to the irritated and diseased parts, which at best but adds irritation to irritation, will furnish soothing remedies and careful nursing, then strengthen the healthy parts, to enable nature to work on and itself expel the parts diseased, or an abandonment once and for all time of the false practice of forced resumption, and give life and strength to all your industries — absolute abandonment of the curative processes that kill your patient.  In other words, I want a statesman who will cut off the hacks who have given counsel to our injury and to their own increase;  and, while looking for commissions and exchanges, pray God to save the country and the cause, when they know, or ought to know, that they are its real impediments.

The two great objects is to place our debt at home among our own people, and to place it at a low rate of interest amid unusual plenty of money, notwithstanding your Treasury and your committee have other views.  The rates of interest and taxes for your business operations following those established for Government, will thus enable me to carry every American product into the markets of the world and to compete successfully.  With the present extraordinary rates I must at no distant day abandon even the home market, notwithstanding your tariff.  The law of force has been entirely overlooked in our management of finances.

When attacked by hostile Powers we organize armies and oppose force to force, or surrender.  At this moment from every quarter comes up hostile attack against your finances to procure your securities at the least possible cost.  To meet this force you have first scattered your own, then permitted yourself to be besieged in your main works, leaving your scattered bands to be cut up in detail, and your country laid open to his ravages and plundering expeditions.  In other words, you have withheld your means, which otherwise would have enabled your people to have held on to their own property, to have defended the Treasury, and kept the national debt at home.  You established no point on which the people could rally, either to assist you or protect themselves.  You studiously and angrily withheld every assistance, and when you surrendered you prostrated and humiliated them.  These charges are severe.  Contradict them he who can.  What would be thought of any other Government that acted thus toward its people ?

Again, to my mind your present position may be likened to a lion caught in a net and the time for the approach of the hunters drawing near.  A mouse can release him.  Who has the courage to approach and extend that relief in our case.  Our securities are buffeted about by the poorest and the meanest among us, as well as the richest and most honorable, who possess or can borrow, beg, or steal a dollar with which to operate upon them.  No one has yet seen a well-directed blow given in defense either of Government or people's securities, but all have witnessed their utter abandonment.

When England in 1694 established her bank, (Bank of England) her debt was owned abroad, selling fifty per cent. below par, with interest at from fifteen to twenty per cent., the Government and people of course growing poorer every day.  Bankers, brokers, financiers, merchants, and all who represented fixed interest, including the Tory, the then opposition party, exhibited the bitterest hostility, sarcasm, ridicule, and venom in opposing its establishment.  The necessities of the people demanded its existence, and it has existed from that day to this.  How similar is our position regarding our finance, and as to our attempt to establish a similar system.  Who but those just named would be in the Opposition ?  Now, as to the result.  In less than sixty years England's debt was at par, bearing but three per cent. interest, and all held by her people.  All this took place during years of exhausting war and civil commotion.  Then a second or third rate Power, having but insignificant resources, limited population, large debt, appreciating the resources of the people and exhibiting the ability to organize them, did establish and maintain a mammoth system of industrial interests, enormous Government enterprises, and succeeded also in commanding the money and the markets of the world.  How long, in face of these facts, will our people pay fifteen per cent. interest and be content with a thirty per cent. depreciation, and increasing in that direction daily ?

It is interesting to observe the political effect by the bank's operation.  Through the creation of varied industries a wealthy and an intelligent middle class, laborers of numerous grades, and their employers, has sprung up from out of the poor and depressed tenantry, and who are now about to assume control of England's future destiny.  Thus aristocratic privileges of a thousand years' standing will give way before the resources of the people when organized in the people's interest.  The absence of this controlling and directing influence has given rise in this country to your Vanderbilts, Astors, Cooks, Jeromes, and Stewarts, who, possessing the monopoly of capital, compel every interest to pay them tribute.  The people of England checkmated their aristocracy and will subdue it in thus creating a power superior to it.  I would perform at this time a like service for the people of this country.

The Secretary of the Treasury holds power given him by our acts, which if granted under the recommendation of an English king, and if used as our Secretary has used his, would cost the king his crown, the Cabinet their portfolios, and Parliament their seats.  What sense is there in our reluctance to confer power to organize the means of our people while we continue an enormous trust in irresponsible hands without a restriction or reservation ?  We cannot control or remove the Secretary.  What reason for any complaints against him when he but executes our acts.  I am not here to point out the features even of the measures I would ingraft on your financial system.  It is not my business, except to present the case to you exactly as it is.  It is the business of your committee to act.  It is for every Senator to become familiar with its general features.  But that which is in greater demand than any other thing is for a statesman to have the courage to advocate any new plan.  Timid men may hesitate.  The opposing elements are big with hostile power, and Senators about me look at innovations with suspicion.  I know the great humiliation that awaits on a change of your policy;  but are not the people deserving even of our humiliation ?  Remember a suffering country, ready to take the character of an indignant people, awaits our action.  Again, the absence of an organized system to control and direct our resources has this year cost $100,000,000 on the cotton crop alone.  England's organization depressed our money market and compelled us to part with our crop for half its value.  She has operated thus many times in my remembrance.  Shall we continue to scatter our resources so as to always fall an easy prey to her and her capitalist operations ?  It is estimated the people of this country have lost otherwise $1,500,000,000 from the operations of capital on our weak condition, brought on by our own neglect of the simplest principle of self preservation.  Why not have financial protection as protection to home industry ?  On the same grounds I advocate protection to one as the other, and capitalist in England can appreciate all that this means.  In fact, protection to our finance is primary to home industries, as without a favorable and healthy state of the first the other languishes and dies.

Our national debt is sacred to every loyal heart.  What a feeling response comes up from every holder, foreign and domestic !  It has, indeed, performed a sacred work.  We are mindful of the means that obtained such ends.  You that hold it now did not furnish us the means in our great extremities.  The loyal people did that work.  You have so depressed our market, reduced the value of our property, that we have been compelled to part with the debt we held for one half its value.  I suppose your king or queen looks upon a debt created to perpetuate their power as sacred, that they may create a new one for the same purpose.  A people whose debt has worked out great principles and secured as large possessions as ours has, is reverenced as means to an end.  If, however, we are in danger of losing that which caused the creation of the debt, what then ?

We love our guns when in our possession and doing good work against the enemy;  but when he captures them and turns them on us, what then ?  Who would not lead an attack, and such a one as might be necessary, to recapture them ?

Our Treasury has played into the hands of those who have depressed our market and depreciated our securities by acting in the interest of banks, bankers, and the like, and our national banks, willingly or otherwise, have followed in the train.  We pay on capital national banks say twelve to fifteen per cent. in this wise:  Government pays interest on bonds deposited eight and one half per cent., and people purchase the circulation at a rate of interest which would amount to seven per cent.  On a similar amount we pay, perhaps, eight and a half per cent.  The people lose interest on greenbacks, which is the same as if they paid the interest.  These rates obliged the people to pay higher rates, as Government securities will be held by capitalists at less rate than the people's obligations.  We cannot carry our debt, private and public, at less than ten per cent.;  it may reach twelve per cent.  We may rest just here for an answer as to why is the drain of our gold and securities to Europe ?  The people and Government owe five billions.  The interest is from five to six hundred millions.  Money comes from the cheapest market.  London loans at one and a half per cent.  Cut the sum down as much as you may, then add the cost of our purchases and expenditures otherwise, and the startling sum must confound the most thoughtless.  Is not a protective measure necessary here ?

Let us examine a moment as to the $100,000,000 gold in your Treasury.  This property is available to the purchaser, as has been shown.  Will anybody deny that the locking up of this sum has not cost the people its best securities.  For the want of capital we have been forced to sell our securities, and that want has been created by our Treasury.  As our wants continue we are subject still more to the screw, until we are screwed out of property, hope, and life by the criminal process.  What can we do with gold ?  Certainly not to pay interest.  Current receipts will meet all such demands;  if not, can we not borrow on our expected receipts, as all nations have done before us ?  No, it is not that;  we have piled it up to resume through its agency, when resumption is as far off as the north pole is from the south.  No one will deny, then, that the $134,000,000 now hoarded in your Treasury has compelled the business of the country to pay an increased rate for money, for when capital is drawn from a distance to meet a demand it always receives increased compensation, and the process has, of course, compelled many interests to do without money, as it had not the credit to procure the means from abroad.  The doing without process is failure to all such.  Has not the retention of gold out of the market carried up its price and pull resumption afar off, as you would not be quite so weak as to think of resumption when so largely depreciated, and you cannot hope to bring greenbacks to par by hoarding gold, for it is clear the opposite result is produced;  and, besides, it ruins your business, for it is only when your business is prosperous can you expect to resume.

Thus the Treasury policy has caused a scarcity of capital and money, depreciated securities by its operations in gold in increasing its value and causing its drain.  Therefore the charge I make is, the Government has become the most extensive speculator in gold and also the greatest depreciator of its own securities.  You have also left national bank reserves in hands of operators on your securities, and again created a scarcity of money.  You have also before hoarding scattered your incoming receipts and made them available to the banker, and again created a scarcity by its withdrawal from the people without redistribution.

Thus a loyal people have been sacrificed by a loyal representation under a mistaken policy and on a mere theory.  We have placed our honor at the disposal of the usurer, and have met the fate we might have expected.  It is, of course, too late to prevent the wounds;  many have died through them.  Hundreds are nigh unto death, and all are demoralized.  We must not longer stand idly by and permit this thing, having the power to prevent it.  We must act now without a moment's delay.

Nowhere have we been more culpable than to have gone on so long neglecting to obtain the coöperation of the people by a proper use of their resources, which for their own safety they would have loaned you, and especially when the war on finance is more extensive and more bitter than the battles of armies;  single-handed you have attempted to stand against a world banded against you.  To save you an appeal must be made to the people, and they will extricate you as they did from your exhausting war.  Let the rallying point be a financial point;  around it create strength in capital;  concentrate it, and make it available to act at all times promptly in the people's interests.  When a position of strength is once taken the cowardly hordes that have shackled you will drop away in mortification and chagrin.  How will this be done ?  Do the easiest thing.  Establish a capital of $134,000,000;  take the stock for the Government;  then sell it to the people;  receive your national bank deposits, your bank reserves, the deposits of the people, your taxes and income from all sources, and pay out no funds to lay in any one's hands one day longer than the necessity of the case demands;  loan all to the people;  issue circulation on your capital and on deposits, or on any other property you choose;  and if you will not loan it all direct to the people let your national banks furnish you paper with their indorsements;  especially pay a stated sum to the institution for the work it does for the Government, either for paying interest on your obligations or in paying your other indebtedness, whether in securing you a new loan or one more favorable.  The corruptive influence growing out of commissions for financial service has been ruinous in the extreme;  for besides the speculation and monopoly of the business it has promoted, it has prevented any other financial plan from being adopted than one that would perform the same service to the managers that the old plan had performed.

By this simple process you deprive money operators of the use of your money and make it available for the general public interests, and you produce an easy money market that will stop the drain and aid your specie payment in a way that you will become indifferent whether you pay specie or not.  What do you care about specie payment when your securities are at par ?  This is the one great point to be obtained.  Certainly depreciating the value of the property of the people will not appreciate the value of Government securities.  The contrary is the fact.

When you will send a ship to sea without a rudder, manage your finances without a head to direct them, or, if you please, continue to manage as you have for the past three years.

A word here as to forced resumption of specie payments.  Certainly we have had the scare constantly before us in the form of $100,000,000 gold in the Treasury.

We have gone on with the idea that a sleight-of-hand movement, without the coöperation of the people, was to produce the desired result.  Have you added anything anywhere else in form of property through a prosperous trade or employment and profit on the people's labor ?  Nothing, as the thirty per cent. depreciation of our property and the high rate of interest show.  When England first proposed resumption her securities were very near par and every business interest prosperous.  Can you do better than to imitate her policy ?

Mr. President, we are told that it is a confidence that is required to carry us safely through our dilemma.  Yes;  but must not that confidence have a foundation of real property and values for its support ?  Can you cheat the people into paying specie on a mere sentiment — for it is the people only who are to pay specie in the end, not Government or banks, not they — until the people's property has appreciated to a gold value ?  It is constantly instanced that in the height of panics in England the moment it is determined to increase issues of bills panic ceases, because confidence is restored.  How fallacious is this doctrine !

Here is a question of superior force operating on an inferior one.  The weaker force, those whose fears kept back their means, are forced out of their position by a desire to be first to avail themselves of advantageous investments, fearing the others would thus act if they did not.  The protection that the presence of superior force gives, acted on the people in promoting a closer union when before an abandonment of the field was clearly imminent.  These results were many times obtained with no additional issues or increase of capital.  Finances are, therefore, in my judgment, but questions of force.  If superior, and handled with energy and skill, you conquer.  It is such a force I desire to bring into our finances, and at the same time to crush out the small quaker force we have heretofore supported in our Treasury.  For, during the past three years, it has been a contest of opposing forces, as much as that of the Union and rebel armies during the war.  In that contest our first experience was defeat, as has been the case as to our finances.  We then brought an additional and a discarded element into the field, and only through its means conquered.

We may hesitate.  Hesitation is constant and disgraceful financial defeat.  In the end we will accept the discarded and unpopular national bank, and with its aid conquer.  But in this I do not mean to institute a power I cannot control or which will work otherwise than in the interest of the Government, because the Government's interest has become the people's interest.

Mr. President, I have been surprised to see how we have avoided the precedents of the past by the effort to work out a new system of finance, Government debt, and taxation.  The only explanation is that those who are accumulating fortunes by the commission obtained in exchanging a seven-thirty for a five-twenty bond, and the use of your securities pending sales and the deposits afterwards, have now the control of your finances.  This is, I believe, the wise and comprehensive plan now before the country.  The plan I urge is no new one;  not one that has failed of its object, but one that is triumphant;  one that has given liberty and prosperity to a great people.  I believe, in conclusion, it is wisest to rely on the integrity of the people, and to believe that their impulses are right.  Had we so acted we should have sent our soldiers home to profitable employment with less burden to the people.  The people cannot, however, blame their representatives, unless blame is to follow failure, no matter how brought about.  Their representatives desired to act in your interest, and they thought they were carrying out your views.  Remember, first, last, and all the time, that rebellion is the first cause of our troubles, and also that political restoration of the southern States is very far from obtaining material prosperity for the country.

Senator John Sherman, on January 15, 1868, responded to Senator Sprague's idea:--

"My friend [Mr. Sprague] proposes again to establish a United States bank.  I cannot but commend his courage, though I cannot speak so well of his prudence.  Before he and I entered on the stage of life this was supposed to be a defunct question, which, under the fightings of Andrew Jackson, had passed away from among possibilities of the time.  He would be a bold man now who would propose to organize a United States bank, to be governed by a president and board of directors to control the operations of the Treasury Department; to regulate the rate of interest; to mold and control all the business of this great country.  It is impossible.  Whether the present system of national banks shall be perpetuated or not is a question for the future to determine, but there is one thing which is settled, and that is that all the great powers of this Government connected with finance cannot be concentrated into any private corporation, however pure it may be, however well-managed it may be.  The temper of the people will not tolerate it.  As to the idea of my friend, that he is now embarking in an effort to reestablish a United States bank, I am afraid that neither he nor I will live long enough to see him succeed in accomplishing it."