rf- 
 
CORNELL 
 
 UNIVERSITY 
 
 LIBRARY 
 
Cornell University 
 Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924032544813 
 
SELECTED 
 
 SPEECHES AND REPOETS 
 
 ON 
 
 FIKAICE AND TAXATION, 
 
 FROM 1859 TO 1878. 
 
 BT 
 
 JOHN SHERMAN 
 
 ITEW YORK: 
 D. APPLETOlSr AND COMPANY, 
 
 549 AND 661 BROADWAY. 
 1879. 
 
 I r 
 
OOPTEIGHT BT 
 
 D. APPLETON AND COMPANY, 
 1879. 
 
 jU)SI 
 
 t 
 
PREFACE. 
 
 Tit accordance witli the erpressed wish of friends and for con- 
 venient reference, I have selected for publication the following speeches 
 and reports made by me on the finances and taxation of the Govern- 
 ment since 1859. 
 
 Most of the topics mentioned are stiU debated in Congress and 
 before the people. Many of the speeches were made on the passage of 
 Acts of Congress now forming the body of existing laws relating to 
 the issue of United States notes and coins, and the circulating notes of 
 national banks. The few explanatory remarks are deemed necessary 
 to enable the reader to better understand the subject under discussion, 
 and no revision has been attempted except to correct verbal inaccu- 
 racies. 
 
 If this work shall contribute in any way to throw light upon the 
 important problem of securing a stable currency of paper money re- 
 deemable in coin, it will have accomplished its purpose. 
 
 John Shbkmam'. 
 
CONTENTS, 
 
 On the Moeeill Tariff Bill 
 
 In the House of Bepresentativea, Moa/ 7, 1860. 
 
 On the Issue op Teeasuet Notes 
 
 In the Souse of Representatwea, December 10, 1860. 
 
 On the Loan of Twenty-five Million Dollaes 
 In the Souse of Bepresentatkes, February S, 1861.. 
 
 Issue of United States Notes 
 
 In the Senate, February 13, 1862. 
 
 Taxation of Bank Bills .... 
 In the Senate of the United States, January 8, 1863. 
 
 National Cueeenoy .... 
 
 In the Senate, February 9, 1863. 
 
 National Bank Cueeency 
 
 In the Senate of the United States, February 10, 1863. 
 
 On the Genbeal Financial Policy of q:HE Goveenment 
 In the Senate of the United States, February j27, 1865. 
 
 Ways and Means . 
 April 9, 1866. 
 
 Funding the National Debt 
 
 In the United States Senate, May SS, 1866. 
 
 The Taeifp .... 
 In the Senate, January S3, 1867. 
 
 The Public Debt . 
 
 In the Senate, December 17, 1867. 
 
 The Funding Bill . 
 
 In the Senate, February ^, 1868, 
 
 Inteenational Monetaey Standaed 
 In the Senate, June 9, 1868. 
 
 a « 
 
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SELECTED SPEECHES AND KEPOETS 
 
 FINANCE AND TAXATION. 
 
 ON THE MORiliLL TAEIFF BILL. 
 
 ZAT TEE HOUSE OF BEP RESENT AT IVES, MAY 7, 1860. 
 THIRTY-SIXTH CONGRESS. 
 
 This speech was made with a view of securing additional revenues to strengthen 
 the Treasury, which, since the first year of Mr. Buchanan's administration, then in 
 power, had suffered unusual depletion. On June 30, ISSV, the public debt was only 
 $29,060,386.90, against which the Treasury held of cash in its vaults $17,710,114.27. 
 To set free the increasing balance, and thereby to relieve if possible the commercial 
 and other interests of the country, which were then struggling to ward off the 
 revulsion which finally came upon them, the Secretary of the Treasury, Howell 
 Cobb, purchased before the middle of November, of stock not due, an amount of 
 $4,878,377.33, paying thereon a premium of $688,977.78. The revulsion affecting 
 the trade and business of the country more severely than was anticipated, the cur- 
 rent revenues of the Treasury were suddenly decreased more than one half in 
 amount, and, upon the opening of the first session of the Thirty-fifth Congress in 
 December, the Secretary was compelled to ask for a loan of $20,000,000. Prompt 
 response was made, and on the 2Sd of that month Congress authorized the issue of 
 $2,000,000 Treasury notes, payable one year from the dates of their issue ; and 
 before the adjournment of the session, on the 23d of June following, it authorized 
 an additional issue of $20,000,000 of bonds, payable in fifteen years. 
 
 At the close of the fiscal year (June 30, 1858), there was in the Treasury a cash 
 balance of only $6,398,316.10, but none of the notes or bonds authorized had then 
 been sold. 
 
 During the next year the expenses of the Government were increased, but no 
 steps with a view of increasing the revenue from taxation appear to have been 
 taken. To meet current expenses during the year, the Treasury realized from issue 
 of notes of December 23, 1857, $9,667,400, and from the bonds authorized by act 
 of June 14, 1858, $18,620,000, increasing the debt to $58,754,699.33, but still leav- 
 ing the Treasury at the close of the year, June 30, 1859, with a balance of only 
 $4,339,275.54. 
 1 
 
2 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 The Thirty-sixth Congress assembled December 6, 1859, and the Honse organ- 
 ized after a struggle over the election of Speaker of about two months. The 
 opposition finally succeeded, and Mr. Sherman was placed at the head of the Com- 
 mittee on Ways and Means. 
 
 Mr. Sherman said : 
 
 Mr. CHAiEMAiir : The revenue act of March 3, 1857, which it is 
 now proposed to repeal, has proved to be a crude, ill-advised, and ill- 
 digested measure. It was never acted upon in detail in either branch 
 of Congress, but was the result of a committee of conference in the 
 last days of the session, and was finally passed by a combination of 
 hostile interests and sentiments. It was adopted at a time of inflated 
 prices, when the Treasury was overflowing with revenue. When that 
 condition of affairs ceased, it failed to furnish ordinary revenue, and 
 by its incidental effects operated injuriously to nearly every branch of 
 industry. 
 
 It went into operation on the 1st of July, 1857. At that time 
 there was in the Treasury of the United States a balance of 817,710,- 
 114. The amount of the public debt then remaining unpaid — none of 
 which was then due — :was a little over $29,000,000. So t hat there, was 
 in the Treasu ry of the United States, when the tariff act of 1857 went 
 into~opCTaio'nraBagg;;moT[^^ 
 
 debt. WiliEinbng year ?rom tEaTlime the public deBt was increased 
 t ol^$?f;giD,777. On the 1st of July, 1859, tiKe pub1ic'"debniag''in- 
 creSiOOF8^754,699. i)n the 1st of May, 1860, as nearljjs I can 
 ascertain, the public debt had jisen to $6 5,681,999. The balance in 
 the Treasury on the 1st of July next, as estimated by me, will be 
 $1,919,349. _ 
 
 Thus it is shown that, under the operation of the tariff of 1857, the 
 deficit in the revenue in three years is over $52,000,000. It may be 
 stated thus : 
 
 Balance in the Treasury July 1, 1867 llViVlO.ll* 
 
 Balance in the Treasury July 1, 1860, estimated 1,919,849 
 
 Decrease llSjTgO.fefi 
 
 Amount of public debt May 1, 1860 $65,681,199 
 
 Amount of public debt July 1, 1857 29,060,886 
 
 36,620,818 
 
 Increase $52,411,678 
 
 It is impossible to ascertain from the report of the Secretary of the 
 Treasury the condition of our finances for the fiscal yeai- ending June 
 30, 1860. I have prepared a statement of receipts and expenditures, 
 based upon the actual sums received and paid for three quarters of the 
 year, and the Secretary's estimate for the last quarter. 
 
 The total expenditures will be $67,702,818, and the receipts from 
 all sources will be $58,950,445, thus shoM-ing a deficit for this fiscal 
 year of $8,852,373. It thus appears that during the present fiscal year, 
 a year of great commercial prosperity, the ordmary receipts have been 
 insufficient to pay the expenses of the Government by over $8,000,000, 
 and that too at a time when the expenses of the Government have 
 
ON THE MORRILL TARIFF BILL. 3 
 
 been largely reduced below wliat they were biit one year ago. It is 
 very easy to see, if this system of finance is persisted in, that the debt 
 of this G-overnment in a few years will approach the debt of some of 
 the European governments. It is impossible that any government can 
 be properly carried on under such a system. It is perfectly clear, 
 therefore, that unless a different state of facts exists in the future, the 
 present tariff bill will be wholly insufficient to pay the ordinary ex- 
 penses of the Government. 
 
 This deficit is not merely temporary, but it is permanent. During 
 the present fiscal year the importations into this countrywill SmStnit 
 t:o_ov er $412,000,0 00, or iSUlm^(M'mare'Wajir^^S^^^^aji. 
 ever b elore. Xithougli ffiFini]^OTtatio'ns ha^^^^gfie^^g^^ffiusj^hey Save 
 no tunder the'^^esent^Tmffpro3uced~"sufficient revenue" to pay" the 
 ordmary expenses'lorT lienji weiBme'nt" "We must, therefore',- coisider 
 one of threepfoposTKons'.'~*W'e '''inus|"either diminish the expenses, 
 increase the public debt. orJn£rea,se the revenue. X take 'itthafrBo-en©- 
 in our day desires to increase the national ^dlW The idea that a 
 national debt is a national blessing is an absurd one, which should 
 never have been tolerated ; and I believe that no respectable political 
 party proposes that the Government should go on, as it has for three 
 years past, on the public credit, I do not suppose that any other 
 Administration than the present one would tolerate the practice for 
 three years. 
 
 Now, can we diminish the gxpenditures ? That is the first question 
 to which I desire to direct the attention of the Committee. I have 
 before me a table, which has been carefully prepared, showing that the 
 estimates of the Secretary of the Treasury for the next fiscal year, for 
 ordinary purposes, reached $46,278,893. Including the interest on the 
 public debt, and the expenses of collecting the revenue, and other per- 
 manent appropriations, amounting to $8,173,582, the total amount 
 estimated for is $54,452,475. But, sir, to this are to be added a vast 
 number of appropriations asked for by the several Departments, but 
 which the Secretary of the Treasury totally ignores. He declares that 
 he asks but for $54,452,475 ; yet other Departments of the Govern- 
 ment estimate for other appropriations to the amount of $9,606,250. 
 I wish to warn my political friends that, if they vote these appropria- 
 tions, they will be placed precisely in the same position that they were 
 in the Thirty-fourth Congress. They will be told that these appro- 
 priations were the extravagance of a Republican House, and were 
 made in the face of the report of the Secretary of the Treasury, 
 although the appropriations were asked for by the appropriate De- 
 partments of the Government. For the purpose of showing the char- 
 acter of these estimates, I have prepared a statement of most of them, 
 as f oUows : 
 
 Estimates of the Secretary of the Treasury for the service of the year 1861. . SiSiZVSiSQS 66 
 
 Interest on the public debt $3,386,621 34 
 
 For expenses collecting revenue from imports 2,000,000 00 
 
 Other permanent appropriations 2,786,961 14 
 
 8,173,582 48 
 
 The following estimates not embraced in those of the Secretary of the 
 
4: SPEECHES AND REPORTS OP JOHN SHERMAN. 
 
 Treasury, and amountu embraced in bills now before both Houses of Con- 
 gress : 
 
 Estimates for public works in the course of construction $2,282,400 00 
 
 Completion Washington aqueduct 600,000 00 
 
 Public buildings and grounds 44,418 47 
 
 Estimate Third Auditor of the Treasury, payment of Oregon 
 
 and Washington war debt 2,714,808 65 
 
 Enlargement of public grounds 168,260 00 
 
 Texas regiment. Senate amendment to Military Academy bill. . 779,392 03 
 
 Lighthouse bill, reported by Committee on Commerce 663,000 00 
 
 Eestoring mail service, in Post Office bill, 1860 600,000 00 
 
 Restoring mail service, in Post Office bill, 1861 1,539,221 00 
 
 Mail routes established in 1858 and Kansas 425,160 00 
 
 9,606,250 05 
 
 Total 864,058,726 09 
 
 Among them are estimates for continuing public buildings in tbe 
 course of construction. Tbese are mostly for the Charleston and New 
 Orleans custom houses, and for the Treasury extension. These appro- 
 priations are asked for ; and gentlemen here, who will vote against this 
 or any other tariff bill, yet urge the pressing necessity of these apjDro- 
 priations. But the Secretary of the Treasury, who should take a view 
 of the whole field of expenditures, totally ignores them in his estimates. 
 The Washington aqueduct, the Oregon and Washington war debt, the 
 enlargement of the public grounds, and the Texas mounted regiment, 
 have Deen, or will all be, pressed upon us, and yet neither is included 
 in the estimates. These expenditures will.be voted for by the friends 
 of the Administration, who all know that there are no means provided 
 for their payment, and who will thus create the necessity for new reve- 
 nue, and then generally vote against increasing the revenue, and go 
 before the people clamoring about new taxes and tariffs. Charged with 
 the administration of the Government, yet they expect the Opposition 
 to vote them supplies for all sorts of demands, to furnish them revenue 
 against their votes, or they will pay the salaries of their officials by 
 increasing the public debt. 
 
 As an example, take the proposed regiment of volunteer for Texas, 
 which measure is now pressed by the representatives of Texas. The 
 proposition was voted for by every member of the other side, and per- 
 haps by some members on this side of the House. If this be granted, 
 then here is an addition to the expenditures of the Government of 
 nearly $1,000,000 ; and we on this side of the House, who are desirous 
 of raising the revenue sufficiently to meet the expenses of the Govern- 
 ment, will be charged with having appropriatea this large sum, not 
 estimated for, although nearly all of us will vote against it ; and those 
 who do vote for it will, in the main, oppose all measures to raise reve- 
 nue to meet it. tu^Hy-jadgHi^Trtf-tfee-best-medeto meet tins new sys- 
 tem.,X)f .iinaiiciaLtaeties-is to refuseall appropriations for all new objects 
 of expenditure until -some proper revenue is prox-ided. 
 
 Mr. Chairman, there is also a lighthouse bill, which has been or will 
 be reported, and which asks for an appropriation of $653,000. There 
 is a proposition for the restoration of the mail service, which eveiybody 
 seems to be in favor of, and which will require over $2,000,000. Let 
 
ON THE MORRILL TARIFF BILL. 6 
 
 me call your attention to tlie cost of that measure. Althougli our con- 
 stituents in all parts of the country have called upon us to increase or 
 restore the mail service, yet I believe that the Postmaster General did 
 right in reducing it. It is the only reform instituted by this Adminis- 
 tration. Gentlemen upon this as well as upon the other side should 
 remember that their mandatory restriction will increase the expenses 
 of the Post OflBce Department over $2,000,000. 
 
 I desire now to say that the Committee on "Ways and Means, who 
 have had charge of appropriation biUs, have endeavored faithfully and 
 honestly, without regard to party divisions — and all parties in this 
 House are represented in that committee — to cut down the appropria- 
 tions to the lowest practicable point, and thus to reduce the expenses 
 of the Government. I have before me a table, showing that, upon the 
 estimates submitted to us by the Secretary of the Treasury for the 
 ordinary expenses of the Government, we have been able to reduce 
 the amount about $1,230,000. It is as follows : 
 
 Statement of tltje variom bills reported by the Committee of Ways and Means, First Session 
 Thirty-sixth Congress, for the service of the year 1861, showing tlie estimates of the Secre- 
 tary of the Treasury, with the reductions made therein, with the amounts reported by said 
 committee. 
 
 Estimates, Secreta- 
 ry 'of Treasury, 
 year 1861. 
 
 Amounts reported 
 by Committee on 
 ways and Means. 
 
 Eeduction on Es- 
 timates, 
 
 Invalid pensions, &c 
 
 Military Academy 
 
 Indian 
 
 Consular and diplomatic 
 
 Fortifications 
 
 Army 
 
 Legislative, executive, and judicial. . . . 
 
 Sundry civil 
 
 Naval 
 
 To supply deficiencies in revenues, Post 
 Office Department, year 1861 
 
 $849,000 00 
 
 183,892 00 
 
 1,918,602 38 
 
 1,137,120 00 
 
 678,000 00 
 
 14,623,603 72 
 
 5,995,109 97 
 
 3,663,396 82 
 
 11^244,845 63 
 
 6,988,424 04 
 
 46,278,893 56 
 
 $849,000 00 
 
 180,392 00 
 
 1,907,002 38 
 
 1,082,120 00 
 
 605,000 00 
 
 13,984,126 12 
 
 5,870,316 53 
 
 3,491,414 32 
 
 11,182,283 63 
 
 5,897,221 75 
 
 $3,500 00 
 
 11,500 00 
 
 55,000 00 
 
 70,000 00 
 
 639,470 60 
 
 124,794 44 
 
 171,981 50 
 
 62,662 00 
 
 91,202 29 
 
 45,048,875 73 
 
 1,230,017 83 
 
 Estimates Secretary of the Treasury $46,278,893 56 
 
 Reductions made by Committee of Ways and Means 1,230,017 83 
 
 Amount in bills as reported by committee , $45,048,876 73 
 
 Add permanent appropriations, excluding interest on the public debt, amount- 
 ing to 4,786,961 00 
 
 Add interest on public debt. 
 
 $49,835,836 73 
 3,386,621 00 
 
 Total $63,222,457 73 
 
 If the House will take the bills as reported by the Committee of 
 Ways and Means, instead of the estimates of the Secretary of the Trea- 
 sury, they will save the Government about $1,500,000. But I cannot 
 say that I expect they will do so, because I have no doubt that the very 
 items which, upon the fairest examination, we have found to be too 
 large or unnecessary for the public service, and have therefore reduced, 
 
6 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 will be put upon the bills, either by tliis House or in the Senate ; and, 
 no doubt, the bills will be overloaded with Senate amendments of four 
 or five millions more, as has been the case during every Congress since 
 I have been a member of this House. If, however, the estimates of 
 the Committee of "Ways and Means and their reductions are sanctioned, 
 the ordinary appropriations for the Government will be reduced to 
 $45,048,875, aside from the .public debt and the permanent appropria- 
 tions. And, in my judgment, if we would devote our time to a fair 
 investigation of the ordinary operations of the Government, we might 
 reduce our aggregate expenses to $50,000,000 annually ; but as long aa 
 sectional controversy is the chief employment of our time, as long as 
 no debate is allowed here except that which involves the safety of sla- 
 very,' we never can accomplish a radical reduction of the expenses of 
 the Government. 
 
 No permanent or substantial reductions can be made without an 
 earnest cooperation between the executive and legislative branches of 
 the Government. We can limit appropriations, but we cannot, except 
 by the process of impeachment, prevent the misapplication of the pub- 
 lic money. We may appropriate for officers and clerks, but if the 
 President or a head of Department will detail them to edit a party 
 newspaper, or pension them for party services by appointing them to 
 offices whose duties they never perform, we cannot prevent it. If the 
 head of each Department shall, without fear or favor, administer his 
 Department, applying to services rendered there precisely the same 
 rule, as to fitness, industry, and compensation, as would be applied by 
 any prudent private citizen in his own affairs, all the abuses we now 
 hear so much of would soon cease. 
 
 There are several branches of expenditure which, in my judgment, 
 Congress could by wise legislation reduce without injury to the public 
 service ; and as I do not desire to debate the several appropriation bills, 
 I propose to state here three or fojir branches of expenditure where 
 material reductions might be made. The first is the expenditures in 
 the naval service. I was unfortunately in the minority of the Com- 
 mittee upon the appropriations in the Navy bill. I have no doubt 
 that the amount recommended to be appropriated for the construction 
 and repair of vessels could be decreased fuUy $,1,000,000 with benefit 
 to the public service. In the bill, we have reported $3,500,000 for the 
 construction, repair, and equipment of vessels, in ''accordance with the 
 estimates sent in by the Secretary of the Navy. I am opposed to that 
 appropriation ; and when the time comes for the consideration of that 
 biU, I shall move an amendment to it in that respect. Last session 
 Congress adopted some substantial reforms, but those reforms have not 
 been regarded in the present Navy bill. 
 
 There are other reforms which ought to be made, and which can 
 only be effected by careful legislation. One of these is in the Post- 
 Office service. The deficiency in that Departniont is now $6,000,000 
 annually ; and if you restore the postal service to what it has hereto- 
 fore been, as is now asked, you wiU have a deficiency of $8,500,000, 
 and that sum has to be paid out of the public Treasuiy. I have no 
 doubt that the expenses of the Postal Department could be paid out of 
 
ON THE MOERILL TARIFF BILL. 7 
 
 its ordinary receipts. In tlie State of Ohio, according to the tabular 
 statement sent to ns by the Department, the postal service costs more 
 than the receipts ; and yet there are contractors in that State — men of 
 the highest respectability and responsibility — ^who are ready to engage 
 to perform all the postal service in Ohio for one half of the receipts. 
 Why, sir, $3,243,974 is paid to railroad companies for transporting the 
 mails, and yet these very mails are usually carried in the same cars in 
 which express companies carry private property for one third of the 
 expense. If this mail matter was now carried by express companies, 
 route agents could be abolished. If the whole postal service was let 
 out, as it should be, to private enterprise — ^to express companies — I 
 have no doubt that the Post-Office business would be better managed, 
 its duties better performed, and a large amount of money saved to the 
 Government. 
 
 As a general rule, I take it, we have in the post offices an inferior 
 class of men — ^generally partisan editors, who have to be rewarded for 
 their services, or men who have distinguished themselves by devotion 
 to their party in their several localities. They are not such men as any 
 private company of individuals would employ to perform the same 
 duties. 
 
 You also upon many routes require coaches to be run for the beneiit 
 of passengers, while there is no connection between that business and 
 the carrying of mail matter for distribution among the people of the 
 United States ; $3,134,094 is paid for coach service alone. I have no 
 doubt, if the tJnited States were divided into postal districts, bounded 
 as far as practicable by State lines, and the business of carrying all mat- 
 ter over all the postal routes established by law, and its delivery at the 
 different post offices were let out under a judicious management of the 
 Department, the expenditures would be decreased at least to the amount 
 of the deficit. 
 
 There is another matter in which there should be a reform. We 
 are appropriating a million dollars every year to pay the ordinary judi- 
 cial expenses of the Government other than the salaries of judicial 
 officers ; all sorts of abuses have grown up in the disbursement of that 
 fund. I need not speak specially of the matters connected with the 
 offices of your district attorneys and your marshals ; for all gentlemen 
 must be conversant with the abuses connected with those places. Men 
 are selected, summoned, and kept as jurors and witnesses, because of 
 their political opinions, and as a reward for political service, and all 
 sorts of constructive fees and charges are made and allowed. 
 
 But I am taking up more time with these details than I intended. 
 If we could only manage these matters as intelligent business men man- 
 age theirs,' there would be an end to all these abuses. This we cannot 
 do, because parties look to the public money as the reward of party suc- 
 cess. If the Republican party be charged with the administration of 
 the Government next year, as I trust it will, it may oppose all reform ; 
 it may follow the example of the Democratic party, in parceling out 
 money and patronage among its partisans, without regard to the public 
 service ; but if so, it will surely lose the confidence of its supporters. 
 The Republican party could not stand for a moment, if it were con- 
 
8 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 victed, as this Administration has been, of the corrupt practices and 
 abuses disclosed by committees of this House. The difference between 
 the Democratic and Kepublican parties is that the disclosure of corrupt 
 abuses by Democratic officials does not seem to excite censure or induce 
 removals, while the Kepublican party has shown a readiness to punish 
 such of its agents as have violated their trust. Many of these abuses 
 have grown out of the necessity imposed upon the sectional interest 
 controlling the Democratic party, to preserve more stren^h in the 
 Northern States ; and therefore offices are given, spoils divided, and 
 newspapers pensioned and edited in Northern States. These coiTup- 
 tions and abuses have gone so far as to bring discredit and reproach 
 upon popular institutions. 
 
 I have shown, Mr. Chairman, that we will have to raise sixty-five to 
 seventy millions for the next fiscal year. "Where is it to come from ? 
 What sources of revenue have we ? First, we have the public lands. 
 I have here a table which presents some singular facts in regard to 
 these lands. In the year 1859 the Government disposed of 13,540,262 
 acres of public lands, from which it received $1,628,18T, or about a 
 shilling an acre. What became of these lands ? Why, 5,106,015 acres 
 went to railroad companies, to form their capital stock ; and that, not 
 by the action of one party, but of aU parties. I am glad that I never 
 voted for such grants. By the natural operation of business, all these 
 lands go into the hands of non-residents, of foreigners, who furnish 
 railroad iron on the security of these lands. We granted as swamp 
 lands 1,530,966 acres, and m bounty land warrants 2,941,700 acres. 
 The receipts paid into the Land Office were but $1,628,187, while the 
 expenses of the land offices, of clerks, registers, and receivers, land sur- 
 veys, etc., amounted to $1,310,758 ; so that the net proceeds of the 
 revenue from public lands was but $300,000. 
 
 I trust, there fore, that the idea of looking to the public lands as a 
 8Qurce_pf revenuewiirbe at once abandoned. Let us,"1^"a'wise'system 
 of preemption!" laws, or by a homestead bill, invite every man who de- 
 sires to locate on Western lands, to go there and make for himself a 
 home. That is the only honest, the only noble, the only manly system 
 of disposing of the public lands. There is no reason in the world why 
 Western settlers should pay the Government for the lands they occupy. 
 They were of no value to the Government or anybody else while they 
 lay there uncultivated. It is the labor of the hardy men of the West- 
 ern States that gives to these lands all their value ; and yet they have 
 paid millions on millions for the public lands. The history of each 
 new State, for the first ten years of its existence, has been a struggle 
 with poverty and debt. All the new States are laden down with debts 
 contracted in paying for the public lands, either to the Government or 
 speculators. It is idle to look to the public lands as a source of revenue. 
 
 To show you how so distinguished a gentleman as the Secretary of 
 the Treasury may make mistakes in these matters, 1 have here a table 
 which presents this curious state of facts. Mr. Secretary Cobb estima- 
 ted the receipts from public lands in 1858 at $6,000,000. They turned 
 out to be $3,513,715 ; and the great bulk of that was paid for expenses. 
 In 1859 he estimated the receipts from public lands at $5,000,000. They 
 
ON THE UOEEILL TARIFF BILL. 9 
 
 turned out to be $1,Y56,687. In 1860 he estimated them first at 
 $5,000,000, and afterward at $2,500,000. They have realized and will 
 realize less than $2,000,000. He estimates the receipts from the sales 
 of public lands in 1861 at $4,000,000. In my judgment they wiU not 
 reach $500,000, because I hope this Congress will pass a preemption 
 and homestead law, and that will settle the question of the public lands. 
 
 The miscellaneous items found in the estimates are merely receipts 
 from consuls, fines, forfeitures, and matters of that kind, which amount 
 to about $1,000,000. The only practical source of revenue for the 
 jS"ational Government isdutiBson impoHa^mdT'Eis is aniple~and exclu- 
 sive. JN o country InTt neworldTiaraflnerTourc of rev^ue than ±his.,., 
 VVe irnport $400,000,500 wort£""of foreign pr'oiKcte annually. A. duty 
 of ten per cent, on that would amount to $40,000,000. It was the 
 boast of an English Chancellor of the Exchequer that an income tax of 
 a shilling in the pound would produce £10,000,000. A duty of ten 
 per cent, on our imports would, at the present rate of importation, pro- 
 duce $40,000,000; and importations are constantly increasing. All 
 our internal governments — State, municipal, town, and village — are 
 supported by direct taxation; but the National Government, which 
 protects us all alike, looks naturally to the duties on imports for 
 revenue. If required, we might raise a revenue from this source of 
 $100,000,000. If a tax of twenty-five per cent, were imposed on im- 
 portations, it would produce that sum. I trust such a tax will not be 
 imposed, because it is unnecessary. But I speak of it as an ample 
 source of income. If the Government were reduced to narrow straits, 
 if we were engaged in war, or if anything occurred requiring a great 
 drain on our resources, we could raise that amount of money Irpm that 
 source of revenue alone, without resorting to direct taxation. 
 
 Gentlemen talk about free trade. Sir, no project for free trade has 
 ever been submitted to us with a hope of passage. I believe that, if a 
 project for free trade were to be carried through Congress, it would 
 lose every member who voted for it his seat in the House. Why, sir, 
 the people of this country would not allow the raising of $10,000,000 
 by direct taxation. If you were to put upon the State of Ohio a direct 
 tax of $1,000,000, the people of that State might become almost as bad 
 as the people of some of the Southern States now are — they would al- 
 most be in favor of secession. The only questions for us to consider 
 in this connection are, how much revenue is to be raised, and how shall 
 we levy it ? I say that it is necessary for us to raise $66,000,000. 
 Will the present tariff furnish that amount of revenue ? Every man 
 answers " No." The Secretary of the Treasury estimates that the tariff 
 of 185T wiU yield $60,000,000 for the next fiscal year. Why, sir, to 
 produce a revenue of $60,000,000 a year, under the tariff of 185Y, it 
 wiU require an importation of $448,641,000. If the prophecy of the 
 Secretary of the Treasury should turn out to be true, it would bring 
 about a commercial revulsion. To establish or continue a tariff which 
 would induce an importation of $500,000,000, would be to destroy the 
 manufactures of the country. It would limit our industrial and pro- 
 ducing power to agriculture alone, when every one knows that diversity 
 of pursuits is essential to the prosperity of a people. 
 
10 SPEECHES AND REPORTS OF^ JOHN" SHERMAN. 
 
 To import the amount of $448,000,000 amiually, with a population 
 of thirty million inhabitants, would give an importation of about $15 
 per head, or $Y5 per family, throughout the United States. _ Now, the 
 highest rates of import we have ever had prior to the tariff of 1857 
 were in 1836, when importations reached the amount of $10.93 per 
 head; and in 1857, when they reached $11.82 per head; and it is a 
 remarkable fact that the importations of these two years preceded the 
 greatest commercial revulsions of our time. It took ten years of econ- 
 omy and industry to recover from the troubles of 1836. And now, 
 Mr. Chairman, if, by the financial policy of the Secretary of the Treas- 
 ury, an importation of $15 per head is produced; what will be the effect 
 of it ? All experience teaches that no people can afford to pay for 
 foreign productions $15 per head, or $75per family ! 
 
 Four hundred and fifty millions ! When gentlemen add to this 
 amount freight, insurance, the loss by false invoices, by forgery and 
 perjury^ — and I tell them that under our present ad valorem, system 
 there is a great deal of both — when, in addition, you take into compu- 
 tation the debt due in this countiy to Europe, by States, cities, coun- 
 ties, and railroad companies, amounting to some $500,000,000, upon 
 which they are paying an interest of about seven per cent., you wiU 
 have an amount of specie, or its equivalent, going out of the country, 
 of something like $550,000,000 — enough to bring the country to the 
 verge of banlcruptcy. Therefore it is that I say that, if the prophecy 
 of the Secretary of the Treasury should turn out to be tme, it would 
 prove a national misfortune, second only to his practice of living upon 
 the public credit. 
 
 The commercial disaster and revulsion in England and Europe in 
 1857 a;[5pear to a very considerable extent to have been caused by the 
 wars then being carried on. There were, however, many causes which 
 I do not propose now to go into a discussion of. Our own commercial 
 revulsion occurred first, when our people were in the midst of profound 
 peace. 
 
 Mr. Chairman, if I have succeeded in what I have desired, I have 
 Bh o_wn that the t ariff of 1857 will_ not produce a suflScient reve nue to 
 meet the wants of th eUovemment. will the tariff measure now pre- 
 sented to us^— that reported frum-ihe Committee of "Ways and Means 
 — prove sufficient for that pumose ? In my ]u<igment;-it-will; I do 
 not approve all the details of that bill; but, in my opiniouj-if it shall 
 become a law, it wiU prove the best considered tarLEE that has ever been 
 presented to the Congress of the United States. It is the result of two 
 or three years' deliberation by two committees ; and, as finidly agreed 
 on, it is based upon the experience of the country for the last fifty or 
 sixty years. It changes substantially the tariff of 1857, by the substi- 
 tution, as far as practicable, of specific for ad valorem duties ; and that 
 change is in accordance with tne views and wishes of the President, 
 though not in accordance with tliose of the Secretary of the Treasury. 
 By this change, frauds upon the revenue of the Government will in a 
 great measure be guarded against. Why, sir, when in Europe last 
 summer, I heard alleged frauds upon our revenue frequently spoken 
 of, and generally admitted. In some cases the grossest frauds are prac- 
 
ON THE MOREILL TABIFF BILL. H 
 
 ticed by importations by foreign firms to the same firms under other 
 names m this country. The Trench returns of exportations to this 
 country show a large excess over our own returns. Nearly every 
 French and English house has agents here, to whom they send consign- 
 ments of goods, purporting to have been sold at specified rates, upon 
 which ad valorem duties are paid ; but, as soon as they go into the or- 
 dinary commerce of the country, the prices are very much enhanced. 
 With specific duties equal to the average ad valorem rates, the revenues 
 of the Government would be increased ten per cent, beyond those now 
 received, simply by the suppression of fraud. 
 
 As nearly as I can ascertain , I think the bill will_be_li]sfi]y-to pro- 
 duce about fg .^jOOOjOOO of rpvfirmp^ fcannot, of courseTtell precisely, 
 since the Secretary of the Treasury did not come within $15,000,000 
 or $20,000,000. In 1858 the Secretary of the Treasury estimated that 
 the receipts from customs would be $60,000,000, when we realized but 
 $38,671,242. In 1859 he estimated that the receipts would be $69,- 
 500,000, when they were in reality but $48,869,879, showing a discrep- 
 ancy of only $20,000,000. For 1860 the Secretary has approached near 
 the mark. For the current fiscal year he estimated that the revenue 
 would be $56,000,000. We cannot tell what it will be, but I judge 
 that it will reach $54,000,000. I cannot say exactly, because the last 
 quarter's return cannot yet be known. 
 
 From the nature of things, neither Mr. Secretary Cobb nor any 
 other Secretary can, under a system of ad valorenii duties, come within 
 millions of the actual receipts. An English Chancellor of the Ex- 
 chequer would consider himself disgraced if he did not estimate within 
 £500,000 of the revenue, because there the duties are specific, except, 
 I believe, about £188,000, which is the extent of the ad valorem 
 duties. It is the very nature of ad valorem, duties that they are un- 
 certain, and they can never be estimated by any Secretary of the 
 Treasury, however intelligent. Therefore it is, I say, that the present 
 bUl is of great importance. It prevents fraudulent valuation. It 
 gives our own importers a fair chance to import goods and to compete 
 with the foreigner. Nearly all the goods imported into our country 
 are by foreigners. Xtg-Xo^y^ig <ieUils^pf_tliis._biU, are an Jin^r^^ 
 laent on the tariff bill of 1857. It irmoreggj^^^^jiia^mQiELjiefiflile. 
 It gives specific"HuEie^"^ TEe tariff of 1857 is made up of complex and 
 inconvenient tables. The number of tables is too great ; and in some 
 cases the same article is in two tables. Thus flaxseed comes with a 
 duty of ten per cent. ; and yet linseed, the same thing, yielding the 
 same product, the same oil, is admitted duty free. 
 
 This bill, on the other hand, fixes three ad valorem ta)iAeB, one a t 
 ten per~cenT;^"oneat twenty, and. .thj. other at thirty. There are a 
 nurnber 6i specific duties, and then there is the free-list. It coniOTms 
 to^ur "dfeeimal currCTtcy",- and the duties uiider it^are easily calculated. 
 There can be but little dispute about home and foreign valuation under 
 it. It will yield a revenue sufficient to pay the expenses of the Grov- 
 emment. For these reasons, it is obvious it ought to receive the sanc- 
 tion of law. 
 
 I might rest with the reasons already assigned, but there is another 
 
12 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 reason why J desire .to have this bill passed, and that is, becaus e it is 
 fiaa ied upon the idea that it is the duty oi the U-over nmeuL, in impos- 
 ing taxe s, to do as~little ininry to the industry ot tne'cSPiitr)' an 'possi- 
 
 Vle : "-^t they are to be le VledGQ.-MJi Q.exteM ^g^^gpp^^-f'Q^fa^ 
 ta^in)r anches of America n industry.- JEveiy President of tlie. United 
 States.TrftTn W'afi'hing tnn to this time, has recognized that principle. 
 Including Mr. Buchanan. I admit that, as a general rule, duties oper- 
 ate to a greater or less degree as a tax upon the people ; and when 
 the duty is levied upon articles we cannot produce, the people have, 
 directly or indirectly, to pay that tax. But, sir, in levymg that tax, 
 you may so proceed as to make it oppressive. You may make a tariff 
 to raise the sum of $40,000,000, and break up every industrial interest 
 of the country. The Committee of Ways and Means report a tariff 
 which will produce $65,000,000, and wUl do no injury to any indus- 
 trial interest. I believe that it wiU give a reasonably fair protection 
 to the great interests of agriculture, manufacture, and commerce, which 
 lie at the basis of the prosperity of the country. 
 
 Mr. Chairman, there is no reasop why this bill should be considered 
 a party measure. It is not, and it should not be so considered. The 
 present tariff, from the circumstances attending its passage, cannot 
 fairly be charged to any party exclusively. It was based upon a state 
 of facts that in six months passed away. At that time, March 3, 
 1857, most vacant lots in Iowa were worth about $1,000 each. If a 
 man inquired about the lot, the owner would raise the price to $1,500, 
 and if two men inquired about it, he would raise it to $5,000. At 
 that time everything was inilated, North, South, East, and West. 
 
 In six months the bubble burst. In 185T, when the tariff law was 
 passed, it was believed it would produce a revenue sufficient for the 
 Government. The average duty which has been realized upon all 
 articles, including the free list, is fourteen and four tenths per cent., 
 while the gentlemen who passed the act believed that the average duty 
 would be about twenty per cent. ; so that it turned out that the average 
 duty paid did not amount to three fourths of what was expected. The 
 tariS has involved us in a large debt. And yet the Secretary of the 
 Treasury, and gentlemen on the other side of the House, do not seem 
 to be willing that a sufficient amount of money shall be rnsed for 
 Government purposes by wise and well-considered legislation. It is 
 strange that an Administration that has run the Government into debt 
 at the rate of $1Y,000,000 a year should resist an increase ■ of revenue, 
 at least to the extent of meeting the expenses of the Government. It 
 will go out on the 4th of March next, having loaded down its successor 
 with a debt of $50,000,000 or $60,000,000, witliout passing a single law 
 in the interest of the people ; without providing revenue to meet the 
 expenses of the Government, with a general load of discredit, almost, 
 if not entirely, without precedent in our history. 
 
 [The bill passed the House, but the Senate postponed its consider- 
 atiorwuntil the next session.] 
 
 The bill passed the House, but the Senate postponed its consideration until 
 the next session. 
 
ON THE ISSUE OF TREASURY NOTES. 13 
 
 ON THE ISSUE OF TKEASUEY NOTES. 
 
 HOUSE OF REPBE8ENTATIVE8, DEOEMBER 10, 1860. 
 
 Atjthoeitt to convert the Treasury notes of 1857 into bonds having fifteen 
 years to run was given by an act approved Jfune 22, 1860 ; and Congress adjourned 
 its session without taking any steps to strengthen the Treasury either by loans, 
 increase of taxation, or reduction of expenses. 
 
 On the 8d of the following December the second session of this Congress con- 
 vened. By the election of Mr. Lincoln to the Presidency the country had been, 
 thrown into an intense excitement, and political tumult was already swelling 
 throughout the South. 
 
 On the 4th Mr. Buchanan transmitted to Congress his last message, in which he 
 declared that, whUe Congress possessed many means of preserving the Union by 
 conciliation, the sword was not placed in their hand to preserve it by force. 
 Accompanying this message was the report of Secretary Cobb, showing the debt 
 on June 30, 1860, to be $64,769,703, and a balance in the Treasury of only 
 $3,629,206. 
 
 On the 10th Mr. Cobb resigned as Secretary of the Treasury — "his duty to 
 Georgia required it " ; and on the 12th Philip P. Thomas of Maryland was ap- 
 pointed his successor. 
 
 Since the beginning of the fiscal year the current receipts had been less than 
 the expenditures, and, while the small balance in the Treasury was diminishing, 
 there stUl remained unpaid appropriations to the amount of more than $10,000,000. 
 In this condition of affairs, Mr. Sherman, on the 10th, reported from the Com- 
 mittee of Ways and Means a bill authorizing an issue of Treasury notes, not to 
 exceed at any time the amount of $10,000,000, and, upon reporting the bill to the 
 House, made this speech : 
 
 Me. Speaker : It is not nny purpose to engage in this debate, but it 
 is necessary to pass to-day a Treasury-note bill in order to relieve the 
 pressing necessities of the Government. I hope, therefore, that, wij;h- 
 ont objection, we may put upon its passage a bill for that purpose 
 which I am instructed to report from the Committee of "Ways and 
 Means. 
 
 The House wiU perceive that the bill now before us is a mere tem- 
 porary expedient to provide for the pressing demands upon the Treas- 
 ury. Most 'of the members are aware that the Government has not 
 been able to pay, for the last week or two, our own salaries, and many 
 other demands at New York and other places. The revenues have 
 fallen short during the last week, amounting, I believe, to but $250,- 
 000. Most of the revenues are now paid in Treasury notes. This bill 
 only provides a mode of paying outstanding Treasury notes, the amount 
 of which now outstanding is indeed in excess of the amount proposed 
 to be authorized ; so that the bill provides for no increase of the public 
 debt. 
 
 I might here rest what I have to say about the bill ; but it is proper 
 
14 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 for me to add that it will be necessary for the House very soon and 
 promptly to consider some other measures of relief. On the 1st of 
 July last there was in the Treasury $3,629,206, a balance entirely too 
 small to carry on the ordinary operations of the Treasury. During the 
 iirst quarter of the fiscal year the expenditures exceeded the receipts 
 some two hundred thousand dollars, and there are now unpaid appro- 
 priations to the amount of ten or fifteen millions. 
 
 The receipts during the current quarter will probably fall short sev- 
 eral millions of the necessary expenditures ; and if we are to judge 
 from the temper of the times, the distress in the country, and the po- 
 litical diflSculties that surround us, it is probable that during the remain- 
 ing three quarters of this fiscal year there will be a deficiency of from 
 ten to fifteen million dollars. This is not the fault of this House, but 
 it is the fault of our revenue laws. For the last three years we have 
 been living upon the credit of the Government. I have a paper before 
 me showing that since the 1st of July, 1857, we have gone into debt to 
 the extent of nearly fiity million dollars. In the fiscal year ending 
 30th June, 1858, the deficiency, or excess of payments over revenue, 
 amounted to $27,162,188. In the next fiscal year it amounted to $15,- 
 902,932. During the last fiscal year it amounted to the sum of $6,725,- 
 000 ; and, accordmg to the statement already made, during the present 
 fiscal year the deficiency has been not less than from fifteen to twenty 
 million dollars. 
 
 I have prepared a statement which shows at a glance the changed 
 condition of the state of our finances in three years. 
 
 On the 1st day of July, 1857, the entire debt of Government, after deducting the balance 
 then in the Treasury, was $11,360,272.63, as follows : 
 
 Public 3ebt $29,060,386 90 
 
 Balance in Treasury 17,710,114 27 
 
 $11,360,272 63 
 
 On the 1st day of July, 1858, the amount of the entire funded debt was $25,165,977 66 
 
 Treasury notes 19,754,800 00 
 
 Total debt $44,910,777 66 
 
 Baljtace in Treasury 6,398,316 10 
 
 $38,612,461 56 
 
 On the 1st day of July, 1859, the amount of the entire funded debt was $43,601,037 69 
 
 Treasury notes 16,158,661 64 
 
 Total debt $68,764,669 S3 
 
 Balance in Treasury 4,339,276 54 
 
 $54,415,393 79 
 
 On the 1st day of July, 1860, the amount of the entire fVinded debt was. . . . $45,079,203 00 
 Treasury notes 19,690,600 00 
 
 Total debt $64,769,703 00 
 
 Balance in Treasury 3,629,206 00 
 
 $61,140,497 00 
 
 It is manifest, therefore, that the House, in order to preserve the 
 
ON THE ISSUE OF TEEASUEY NOTES. 16 
 
 credit of the Government, ought to make some change in the revenue 
 laws, or decrease the expenditures. We must either, by a bold stroke, 
 reduce the expenditure to fifteen or twenty million dollars or contract 
 new loans or raise new revenues. The bill now pending in the Senate, 
 I need not inform the members of the House, authorizes a loan of some 
 twenty millions, and in addition to that provides for increasing the 
 revenue. If that bill should pass, and the present disturbed poutical 
 condition of the country should be healed, the annual revenue would 
 amply cover our expenditures upon the basis of existing laws and sala- 
 ries ; but with the present difiiculties, and with our present revenue 
 laws, it is manifest that this biR will not be the last loan bill or the last 
 Treasury-note bill that the Committee of. "Ways and Means will have to 
 report to the House. The provisions of the bill are similar to thpse of 
 the act of 185Y. It simply authorizes a temporary loan, and provides 
 that that part of the loan authorized by the act of the 22d of June last 
 not already contracted for shaU be applied to the redemption of out- 
 standing Treasury notes. This is all the statement that I desire to 
 make. 
 
 The bill, after some modification, became tbe act of December 17, 1860, and 
 the Secretary immediately advertised the loan. Of the amount authorized, bids 
 were received for $10,010,000, at par, with interest from six to twelve per cent. 
 per annum. Additional offers were received at interest varying from fifteen to 
 thirty-six per cent., but were refused. 
 
 LETTEE OP JOHN A. DIX. 
 
 CONDITION OF THE TEEASUEY, JANTJAET 18, 1861. 
 
 On the 2d of January, 1861, Mr. Sherman addressed inquiries to the Secretary 
 of the Treasury concerning the debt, and also the condition and resources of the 
 Treasury. On the 11th Secretary Thomas resigned, differing from the President 
 and the members of the cabinet, especially in reference to the authority to enforce 
 the collection of customs at the port of Charleston ; and on the same day John A. 
 Dix of New York was appointed his successor. On the 14th Mr. Sherman called 
 his attention to the unanswered inquiries, and on the 18th the following reply was 
 made. 
 
 Treasury Department, January 18, 1861. 
 
 SiE : I have the honor to acknowledge your letter of the 14th instant, asking 
 my attention to the letter of the 2d instant to my predecessor ; and beg leave to 
 answer its several points of inquiry in their order. 
 
 " What amount of accounts, debts, or claims against the Government has been 
 allowed and passed by the proper accounting officers, which remain unpaid? " 
 
 In reply to this inquiry, I beg leave to state that, except sundry small claims 
 presented and settled through the Department of the Interior, amounting to $33,- 
 152.94, and certain claims presented and allowed through this department, amount- 
 ing to $82,163.54, all claims duly allowed and passed by the proper accounting 
 officers have been satisfied by warrants on the Treasurer ; and that ofiicer has re- 
 mitted his drafts on the various depositories to pay the same. Within the last few 
 days the amount of over-due Treasury notes presented for redemption has exceeded 
 the power of the Treasurer to place drafts in payment on the Assistant- Treasm-er 
 
16 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 at New York, where the holders desired the remittances to be made ; and an ac- 
 cumulation of warrants, to the amount of about $480,000, has occurred on this 
 account in the Treasurer's hands, which he has been unable to pay. 
 
 "What amount of salaries, compensation and other dues, not embraced in the 
 foregoing, which are due and payable on or before the Ist day of January, 1861 ? " 
 
 In reply to this inquiry, I beg leave to state that for all the salaries paid direct- 
 ly from the Treasury warrants have been drawn on the Treasury and drafts re- 
 mitted accordingly. But it is proper to suggest that officers and soldiers of the 
 army, ofBoers, seamen, and marines in the navy, and a large portion of the persons 
 employed in the civil offices of the United States, are not paid directly from the 
 Treasury, but through disbursing officers, to whom money is advanced from time to 
 time for that purpose, as well as for other authorized charges, upon the requisition 
 of the proper Department. Requisitions from the Secretary of War in favor of dis- 
 bursing officers of that Department, amounting to $912,905.90 ; from the Secretary 
 of the Navy, in favor of disbursing officers of that Department, amounting to $615,- 
 487.21 : from the Secretary of the Interior, in favor of disbursing officers of that 
 Department, amounting to $124,866.87 ; and from the proper authorities of the 
 Treasury Department, amounting to $255,435.07, in favor of disbursing officers and 
 contractors; making an aggregate of $1,908,695.05, for which warrants have not 
 been issued. 
 
 The periods when the sums thus called for were actually due and payable can 
 .only be ascertained by special investigation into the several cases ; but it is sup- 
 posed that the whole amount was due on or before the 1st instant. Beside these 
 requisitions received by this Department, it is understood that the War and Navy 
 Departments have calls for large amounts for which their requisitions have been 
 delayed on account of the exhausted condition of the Treasury. 
 
 Besides these claims, the bounties payable by law to vessels employed in the 
 cod fishery during the last season were due and payable on the 31st ultimo. De- 
 tailed estimates of these bounties, so far as proofs have been presented to the col- 
 lectors of the several districts, have been received, showing the amount due and 
 payable on that day to have been $447,201.89. This Department has been unable 
 to make any provision for paying these bounties, for want of sufficient money in 
 the Treasury. Adding this sum to the foregoing, the aggregate of sums due and 
 payable on or before the 1st instant may be taken to be $2,355,896.94. 
 
 " The facts connected with the negotiation of the recent sale of Treasury notes, 
 and how the proceeds thereof were applied ? " 
 
 In answer to this inquiry, I have the honor to state that, under the notice 
 issued on the 18th ultimo, inviting proposals for the exchange of five millions of 
 dollars for Treasury notes, offers at twelve per cent, interest or less were made 
 only to the amount of $1,831,000. Offers to exchange $465,000, for notes bearing 
 interest at rates ranging from fifteen to thirty-six per cent., were also received. 
 
 The offers at twelve per cent, and less were accepted ; those above that rate 
 were rejected. 
 
 Previously to the issue of the notice, the Assistant Treasurer at New York 
 was informed that the exchange of five millions was the smallest amount that 
 would enable the Department to protect the public credit by the redemption of 
 Treasury notes falling due and paying interest on the 1st of January, 1861, on the 
 stocks of the United States. From the preliminary deposits of one per cent, made 
 with him, under the terms of the notice, that officer became aware tliat not one 
 half of the sum required had been offered in New York ; .and he probably endeav- 
 ored to induce the banks and capitalists of that city to exchange the residue of the 
 sum called for at twelve per cent, interest, which was the rate at which the bulk 
 of the offers had been made. 
 
 Immediately after the decision of the Department on those offers had been 
 made, that officer advised the Department that certain pai-tios would take the resi- 
 due, through the Bank of Oommorce, nt twelve per cent. This proposition was 
 accepted, on condition that tho amount required to make up the five millions should 
 be deposited without delay. Tlie wholo amount has been applied to the payment 
 of over-due Treasury notes and other pressing demands on the Treasury. 
 
 Presuming that you desired only the material facts of this negotiation, I have 
 not sent the correspondence in regard to the offers for Treasury notes, or an ex- 
 
ON THE ISSUE OF TEEASUEY NOTES. 17 
 
 hibit in detail of the receipts and payments by the Assistant Treasurer at New- 
 York, from the 28th ultimo, when the proposals for the Treasury notes were 
 awarded. Should these particulars be desired, they will be cheerfully furnished. 
 
 Your letter further asks " whether any defalcation of either of the present 
 depositories of public money is known to the Department ? " 
 
 In answer to this inquiry, I have the honor to state that, so far as is known 
 to this Department, the depositories have promptly paid the Treasurer's drafts on 
 them, and no defalcation or refusal of the present depositories has been reported. 
 
 " The receipts of the Government from all sources, from the date of the last 
 annual report of the Secretary of the Treasury up to January 1, 1861, so far as 
 known to the Department ? " 
 
 I beg leave to suggest that the date up to which the receipts into the Treasury 
 are given in the last annual report of,this Department was the 30th of September 
 last, being the close of the first quarter of the current fiscal year. 
 
 The aggregate receipts from all sources, during the quarter from October 1 
 to December 31, 1860, so far as returns have been received, appears, by the Treas- 
 urer's exhibit of current receipts, to have been $17,181,783.93. 
 
 " What amount of means, in addition to the Treasury notes authorized by law 
 and the current revenue, will he required to pay outstanding current and accruing 
 dues before the close of the current fiscal year? " 
 
 The first element for an answer to this inquiry is the amount required to be 
 paid for carrying on the public service during the remainder of the current fiscal 
 year. To ascertain this amount, we must refer to the estimated expenditures for the 
 various branches of the public service during the three quarters of the fiscal year 
 from October 1, 1860, to June 30, 1861, as stated in the last annual report of this 
 Department. They will be found on page 3, and are $46,935,232.58. From this 
 sum deduct the amount expended during the quarter ending December 31, 1860, 
 which, by the Eegister's statement, is, exclusive of Treasury notes, $12,069,107.95, 
 leaving the sum of $34,866,124.63 to be provided for, besides the Treasury notes 
 maturing on and before June 30, 1861 : which, on the 1st day of January, 1861, 
 amounted to $11,795,600, making the amount required to be paid from January 1 
 to June 80, 1861, $46,661,724.63. 
 
 Of these outstanding Treasury notes there have been redeemed, between the 
 1st and 14th of January instant, $2,584,200, reducing the current liabilities of the 
 Treasury to that extent. 
 
 The amount required, therefore, to meet the outstanding current and accruing 
 dues before the close of the current fiscal year, besides any additional charges on 
 the Treasury created by legislation during the present session of Congress, is 
 $44,077,524.63. 
 
 The existing means for meeting this amount are : 
 
 1. The balance of the loan of $21,000,000 authorized by act of June 22, 1860, 
 for redeeming Treasury notes. Of. this loan $7,022,000 only has been negotiated 
 and paid into the Treasury, leaving $13,978,000 to be realized from that source. 
 Should the present disturbed condition of the country continue, some modification 
 of the terms prescribed by the act may possibly be necessary to make the residue 
 of this loan available. 
 
 It may not be improper to add that when the estimates before referred to were 
 submitted, no difiBculty was apprehended in meeting the outstanding Treasury notes, 
 as fast as they fell due, by the proceeds of this loan. As this resource has failed, 
 to the extent of the above stated balance of $18,978,000, to preserve the credit of 
 the United States, it has become indispensable to pay these notes out of the revenue 
 from other sources. During the last quarter about eight millions of Treasury notes 
 were redeemed ; which, with the two and a half millions redeemed since the 1st 
 instant, make ten and a half millions. The amount received from the loan, being 
 a small fraction above seven millions, threw upward of three and a half millions of 
 these notes on the other resources of the Treasury for redemption. This is one of 
 the principal causes of the delay and difficulty which have recently existed in pro- 
 viding for other demands of the public service. 
 
 2. Eeceipts from the ordinary sources of revenue. The Annual Eeport of 
 this Department estimated the receipts from customs during the three quarters of, 
 the current fiscal year from October 1, 1860, to June 30, 1861, at $40,000,000. 
 
 2 
 
18 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Probably, in view of the great abundance of exportable products, had the affairs of 
 the country continued in their usual condition, this estimate would have been re- 
 alized. In October last the prospect justified very liberal estimates of the consump- 
 tion of dutiable merchandise. Since that time so sudden and great a change has 
 occurred in the financial, commercial, and political relations of the several States as 
 to rendea: any well-grounded estimate of the amount of dutiable merchandise which 
 will be entered for consumption before the 80th of June, 1861, entirely imprac- 
 ticable. Although the amount of merchandise entered for consumption wiU 
 for long periods of time be governed by permanent causes, it may for short 
 periods depend almost entirely on public confidence, which fluctuates with every 
 disturbance of the ordinary political or commercial condition of the country. This 
 has been strikingly exemplified in the revenue from customs during the quarter 
 ending December 31, 1860. Instead of amoupting to fifteen millions, as was reason- 
 ably and confidently expected in October, the returns, so far as received, indicate 
 that it fell below eight millions. At the port of New York alone more than six 
 millions of the merchandise imported during the single month of December, instead 
 of being entered for consumption, were placed in warehouse, and nothing was re- 
 alized upon them to the Treasury. 
 
 So greatly is the amount of our customs revenue dependent on political and 
 monetary changes, on which at the present time no reliable calculation can be 
 made, that the receipts from this source during the remainder of the fiscal year 
 must be, so far as regards this department, the subject of conjecture. At present, 
 from all the light that I am able to obtain, it would seem that sixteen millions wiU 
 be a liberal estimate for the revenue from customs between January 1 and June 30, 
 1861. This, with the amount received'from that source during the quarter ending 
 December 31, 1860, will make more than one half the aggregate receipts estimated 
 in the annual report. 
 
 The receipts from the public lands for the three quarters from October 1, 1860, 
 to June 80, 1861, were estimated in the Annual Report at $2,250,000. So far as 
 Returns have been received for the quarter ending December 31, 1860, the amount 
 realized from that source appears to have been about $250,000. Should no change 
 be made during the present session of Congress in the existing laws in regard to 
 acquiring public lands by individuals, the amount that may be expected from that 
 source may, between January 1 and June 30, 1861, reach $1,000,000. This would 
 be one half of the amoimt estimated in the Annual Report, and at this time will 
 probably be regarded as a large estimate fi'om that source, and to be realized only 
 under favorable circumstances. 
 
 The receipts from miscellaneous sources for the three quarters between Octo- 
 ber 1, 1860, and June 80, 1861, were estimated in the Annual Report at $760,000. 
 For the quarter ending 3ist ultimo, these receipts fell short of $200,000, and cannot 
 be expected to realize more than $400,000 during the remainder of the current fiscal 
 year to June 80, 1861. 
 
 Under the views herein set forth, the aggregate receipts from ordinary sources 
 of revenue, during the half year from January 1 to June SO, 1861, may be thus 
 stated : 
 
 From customs $16,000,000 00 
 
 From public lands 1,000,000 00 
 
 From miscellaneous sources , 400,000 00 
 
 $17,400,000 00 
 Adding to these the balance of Treasury notes, authorized by Act of December 
 
 17,1860 6,000,000 00 
 
 Makes the amount of means for the half year $22,400,000 00 
 
 The estimated demands on the Treasury, under oxistinp; laws, during the lialf 
 year, as before stated, including the redemption of $0,211,400 of Trea- 
 sury notes, is. 44,077,524 68 
 
 Showing the amount reriuired, in addition to the five millions of Treasury 
 notes and the current revenue, to pay outstanding, current and accruing 
 duos before the close of the current fiscal year, to be $21,677,524 63 
 
ON THE LOAN OF TWENTY-FIVE MILLION DOLLARS. 19 
 
 This amount may be reduced to $7,689,624.68, if the balance of the loan author- 
 ized by act of June 22, 1860, being $13,978,000, should be made available to the 
 Treasury. 
 
 Allow me to state that the materials of this letter were prepared under the 
 direction of my predecessor; and the presentation of them to you in their present 
 form is among my first official acts. 
 
 Before closing this communication, I wish to call your attention to the fact that 
 there are deposited with twenty-six of the States, for safe keeping, over twenty- 
 eight millions of dollars belonging to the United States, for the repayment of which 
 the faith of these States is pledged by written instruments on file in this Department. 
 
 The annual statements of receipts and expenditures for the year ending June 
 30, 1860, represents this amount as a part of the "balance in the Treasury" on that 
 day. It was subject when deposited to the draft of the Secretary of the Treasury, 
 whenever required " for the purpose of defraying any wants of the public treasury," 
 as will be seen by the 13th section of the act of June 23, 1836, entitled, " An Act to 
 regulate the deposits of the public money; " but by tiie act of Oct. 2, 1887, chap. I., 
 the deposit remains with these States " until otherwise directed by Congress." 
 
 I refer to this financial resource as an available one, should the public exigencies 
 demand it. It is not doubted that the greater portion of the amount so deposited 
 would be promptly and cheerfully repaid, should an exigency arise involving the 
 public honor or safety. If, instead of calling for these deposits, it should be deemed 
 advisable to pledge them for the repayment of any money the Government might 
 find it necessary *o borrow, a loan contracted on such a basis of security, superadding 
 to the plighted faith of the United States that of the individual States, could hardly 
 fail to be acceptable to capitalists. 
 
 I have the honor to be 
 
 Your obedient servant, 
 
 JOHN A. DIX. 
 Secretary of Treasury. 
 
 Hoir. John Shebmajj, Chairman Committee of Ways and Means, 
 House of Eepresentatives. 
 
 ON THE LOAN OF TWENTT-FIYE MILLION DOLLAES. 
 
 IN THE E0V8E OF BEPBJE8ENTATIVES, FEBRUARY 2, 1861. 
 
 Osr the 2d of February Mr. Sherman introduced a bill authorizing a loan of 
 $25,000,000, to pay ordinary expenses and to redeem Treasury notes, the stock to 
 bear interest not to exceed six per cent, per annum, and to be redeemed in not less 
 than ten nor more than twenty years. The bill coming before the House for con- 
 sideration, February 2, 1861, Mr. Phelps spoke briefly in opposition to it, and Mr. 
 Sherman replied as follows : 
 
 Me. Speaker : I am somewhat surprised that my friend from Mis- 
 souri should oppose a measure intended to pay ofE the existing debts 
 made by this Adnainistration. I have here a communication from the 
 Secretary of the Treasury, stating that' there will be an actual deficit 
 in the revenue of $21,677,524 ; the deficiency bill appropriates between 
 two and three million dollars ; so that there is an admitted deficiency 
 of about $24,000,000 to be now provided for. The amount in the 
 Treasury on the first day of January was $2,233,220, while it requires 
 at least $5,000,000 in the Treasury to carry on the daily operations 
 
20 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 of the Treasury Department. So that a deficiency of not less than 
 $25,000,000 exists, now to be provided for by loan. Now, Mr. Speaker, 
 tinder these circumstances, while the Opposition side of the House 
 brings forward a bill to place in the power of the Secretary of the 
 Treasury money to pay off all the existing liabilities, it seems strange to 
 me that any opposition shoidd come from the other side of the House. 
 AH of this money will be required to pay oflE existing liabilities. By» 
 the law of the 22d of June last, we authorized a loan of $20,000,000. 
 A portion of that loan was taken. The balance could not be sold under 
 the terms of the law. In last December, at the pressing instance of 
 Mr. Secretary Cobb, we authorized the issue of $10,000,000 Treasury 
 notes, with the specific pledge of the balance of the loan of June 22d 
 for the redemption of these Treasury notes. And now it is proposed 
 to take that loan, thus specifically pledged for the redemption of these 
 notes, and apply it to the current expenses of the Government. I say 
 that it would be a violation of the public faith for this Congress to 
 pass the law now proposed by the gentleman from Missouri. The 
 moneyed men of New York would say the credit of the Government 
 had been violated, because, when they took the Treasury notes under 
 the law of December last, it was with a specific pledge, with a mort- 
 gage in fact, upon the loan of the 22d June last, for their redemption. 
 
 The public lands were pledged for the redemption of a very small 
 portion of the, public debt, and nearly all that to which it applied 
 has been paid on. But here is a specific pledge, made only a little 
 more than a month ago, that the balance of the loan of June last 
 should be applied to the redemption of these Treasury notes ; and now 
 it is suggested that we take the loan thus set aside for a particular 
 purpose and apply it to the ordinary current expenses of the Govern- 
 ment. 
 
 Why, Mr. Speaker, the plain English of this matter is, that there 
 is $25,000,000 of debts due, and no money, no revenues, to pay them 
 with. "We have got to resort to the credit of the Government. I 
 suppose the $25,000,000 provided for in this bill wiU be sufficient to 
 settle up the accounts of this Administration. 
 
 The tariff bill, if it becomes a law, wiU probably not take effect 
 until July next, when it will become necessary to provide bv law for a 
 deficiency that wiU accrue in the next fiscal year. That tai'iJi bill wiU 
 probably contain a provision for a temporary loan, necessary to meet 
 the deficiencies for the next fiscal yeai-. This loan bill is for a present 
 deficiency, and therefore its necessity will not be obviated even if the 
 tariff bill becomes a law. 
 
 If the tariff bill provides a revenue sufficient to meet the current 
 expenses of the Government, it will not become necesisary to negotiate 
 the loan provided in it. I certainly hope that the tariff" biU will pro- 
 duce a revenue sufficient to meet all the expenses of the Government. 
 If so, the loan bill which accompanies that law will lapse, and that 
 will be the end of it. The ordinary revenues of the Government 
 should always be sufficient to meet its expenses, except in time of war. 
 For the last three years, and during every session, the Chaii-man of the 
 Committee of Ways and Means has been compelled to come in here 
 
ON THE LOAN OF TWENTY-FIVE MILLION DOLLAES. 21 
 
 witli a loan bill, to supply the deficiencies in the revenues of the Gov- 
 ernment for current expenses. I trust such an event may never occur 
 again in a time of peace. But it is necessary now that we should 
 make provision to pay off existing liabilities. 
 
 "Whether these liabilities have accrued through maladministration 
 of the Government, or through other causes, no man can doubt our 
 obligation to make provision for paying them. And here let me say 
 a word to my friends on this side of the House. I ask them, when we 
 are compelled to come in here with loan biU after loan hiU to enable 
 the Goverment to meet its expenses, if it is not time to pause in the 
 appropriations we are making : certainly those made for the benefit of 
 moonshine speculations, for rights within the jurisdiction of a foreign 
 Government ? 
 
 I now move the previous question upon this biU. 
 
 The motion was seconded, and the bill passed the Honse. In the Senate an 
 amendment was added providing for the repeal of the loan act of June 23, 1860 
 On the concurrence of the House in this amendment Mr. Sherman said : 
 
 , Me. Speaxee: I hope the amendment of the Senate will not be 
 concurred in ; and if I can have the attention of the House for two 
 minutes, I think I can give ample reasons why it should not be con- 
 curred in. 
 
 This seems to be to some extent a party measure, an attempt to 
 throw upon the incoming Administration all the indebtedness incurred 
 by this, if possible. Now, all I ask is, that this Administration shall 
 pay off its own debts, or provide for the payment of tfiem, and not 
 throw them over upon the incoming Administration. I do believe 
 that, under the tariff act now pending in the other branch of Congress, 
 if it becomes a law, the revenues of this Government will be sufl&cient 
 to meet the expenses under the incoming Administration. I believe 
 that it is the duty of that Administration to reduce the expenses of the 
 Government to the standard of the revenues of the Government. 
 Now, what is the condition of the Treasury at this time ? The Secre- 
 tary of the Treasury says he shall need a loan of $25,000,000 to meet 
 the expenses of the Government up to the 1st of July next. This 
 bUl provides a loan to that amount to pay off the debts of the present 
 Administration up to that time. Then, in addition to that, there is 
 another debt to pay. This Administration, in December last, issued 
 $10,000,000 of Treasury notes, at twelve per cent. Those notes are 
 due next December. For the redemption of those Treasury notes the 
 remaining portion of the loan of June last was specifically pledged. 
 Tet it is now proposed to repeal that loan of June last, in express 
 violation of the law of December last, in pursuance of which' the faith 
 of the Government was directly pledged to apply that loan to the 
 redemption of Treasury notes, leaving no means for the retirement of 
 the Treasury notes of last December. Now, that is the condition in 
 which the matter stands. If the amendment of the Senate be con- 
 curred in, then, in December next, when the $10,000,000 of Treasury 
 notes become due, there will be no means provided whatever for their 
 retirement. They will go on bearing interest at the rate of twelve 
 
22 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 per cent., to the disgrace of the Government. No government, and 
 indeed no individual, can afford to pay twelve per cent, interest for any 
 length of time. 
 
 • The effect of the course proposed would be to throw the burden of 
 providing the means for the payment of these Treasury notes, when 
 they become due, on the incoming Administration, ana to leave it 
 with the responsibility of providing the means of paying its current 
 expenses together with $10,000,000 of the debts of the present Ad- 
 ministration. 
 
 But, sir, the gentleman refers to the Pacific Kailroad biU. I do not 
 know whether that bill will pass or not ; but if it does pass, no money 
 will have to be paid under it probably for years to come. No money can 
 be paid, or liabilities incurred, until fifty miles of the road are completed. 
 
 If the tariff bill passes, I believe revenue enough will be raised 
 under it to defray the ordinary expenses of the Government. The loan 
 bill attached to it is only intended to provide for some unforeseen 
 emergency. By the terms of the tariff bill, the money to be raised 
 under it cannot be applied to a redemption of Treasury notes. On the 
 contrary, it is specifically provided that the loan shall be devoted to 
 the meeting of any deficiency in the current revenues of the Govern- 
 ment. It is true that that may be changed. In the next place, if we 
 should only give place to one loan by another, then we might reduce 
 the loan provided in the tariff bill to $10,000,000. 
 
 I do not anticipate any deficiency ; but I do say that it is wise to 
 provide against any contingency which may arise. The sum we have 
 here to do is*not beyond the capacity of the youngest boy in an arith- 
 metic class. Here we have a debt of $25,000,000, and how are we 
 going to pay it ? Tou have $10,000,000 of Treasury notes, bearing 
 twelve per cent, interest, which are due next December. How are 
 you going to pay them ? By the loan in the tariff bill ? But there is 
 already a loan bill upon our statute-books under which these Treasury 
 notes can be withdrawn when they become due. Wliy, then, repeal 
 one law, to give place to another, unless it be to show that the new 
 Administration has borrowed $21,000,000 to pay the liabilities of the 
 Government ? I say to you, gentlemen on the other side, pay your 
 own liabilities, or pledge the Government credit for enough money to 
 pay them. I hope the incoming Administration wiU comorm its ex- 
 penses to the revenues raised from the ordinary soui'ces. If the reve- 
 nues shall fall short, and be reduced to even less than the amount now 
 realized, it will be the duty of the incoming Administration to reduce 
 the expenses to that extent. 
 
 Now, Mr. Speaker, I do hope gentlonion on both sides of the House 
 will permit us to make provision for paying the debts of the present 
 Admmistration, and not saddle those debts upon the incoming Admin- 
 istration. I repeat that the $25,000,000 loan in-ovidod for in this bill 
 is req^uirod to pay tlie debts of the Government up to July next; and 
 that if this amendment of the Senate is concurred in, there M'iU still 
 remain the sum of $10,000,000 of outstanding Treasury notes for which 
 no provision will have been made. We aslc for nothing more than 
 that this Administration sliould make pwvision for the settlement of 
 
ISSUE OF UNITED STATES NOTES. 23 
 
 its own accounts ; and it seems to me that nothing less than that should 
 be granted. 
 
 The bill became a law February 8, 1861, and the session closed on the 3d of the 
 following month. Of this loan, bearing six per cent, interest and having twenty 
 years to run, the Secretary sold as soon as possible |18, 416,000 at the rate of 89.10 
 per $100. 
 
 ISSUE OF UNITED STATES NOTES. 
 
 IN THE SENATE, FEBBUABY 13, 1862. 
 
 The first session of the Thirty-seventh Congress convened July 3, 1861. Mr. 
 Chase, Senator from Ohio, having been called to the Treasury by President Lincoln, 
 Mr. Sherman succeeded him in the Senate. The first session closed August 6, 1861, 
 and the second session convened December 2, 1861, Mr. Sherman serving upon the 
 Finance Committee, of which Mr. Fessenden was chairman. 
 
 The Senate, as in Committee of the Whole, resumed the consideration of the 
 bill to authorize the issue of the United States notes, and for the redemption and 
 funding thereof, and for funding the floating debt of the United States. Mr. Sher- 
 man said : 
 
 Me. Peesident : The general views of the Committee on Finance 
 have been so ably stated by its chairman, that it wiU not be necessary 
 for me to discuss the features of this bill, upon which we agree. As it 
 came from the House it was evidently imperfect; but the amend- 
 ments adopted, on the recommendation of the Committee on Finance, 
 have so improved it as materially to change its character. 
 
 The motion of the Senator from Yermont now for the first time 
 presents to the Senate the only question upon which the members of 
 the Committee on Finance had any material difference of opinion, and 
 that is, whether the notes provided for in this bill shall be made a legal 
 tender in payment of public and private debts. Upon this point I will 
 commence the argument where the Senator from Maine left it. 
 
 He says he is not satisfied that this provision is necessary, and until 
 so satisfied he will not support it. He does not present the constitu- 
 tional question, but doubts whether it is necessary to give these notes 
 the sanction of a legal tender. I agree that this measure can only be 
 justified on the ground of necessity. I do believe there is a pressing 
 necessity that these demand notes should be made a legal tender if we 
 want to avoid the evils of a depreciated, dishonored paper currency. 
 I do believe we have the constitutional power to pass such a provision, 
 and that the public safety now demands its exercise. Is there such a 
 necessity ? 
 
 In the first place, I will say, almost every recognized organ of 
 financial opinion — if that is a correct expression — in this country agrees 
 
24 SPEECHES AND EEP0ET8 OF JOHN SHEKMAN. 
 
 that there is such a necessity in case we authorize the issue of demand 
 notes. You commence with the Secretary of the Treasury, who has 
 given this subject the most ample consideration. He declares not only 
 m his oflScial communications nere, but in his private intercourse with 
 the members of the committee, that this clause is indispensably neces- 
 sary to the security and negotiabilitjr of these demand notes. "We all 
 know from his antecedents, from his peculiar opinions, that he would 
 be probably the last man among the leading politicians of our country 
 to yield to the necessity of substituting paper money for coin. He has 
 examined this question in aU its length and breadth. He is in a posi- 
 tion where he feels the necessity. He is a statesman of admitted 
 ability, and distinguished in his high position. He informs us that 
 without this clause the attempt to circulate as money the proposed 
 amount of demand notes of the United States will prove a fatal ex- 
 periment. 
 
 In addition to his opinion we have the concurring opinion of the 
 Chamber of Commerce of the city of New York. With almost entire 
 unanimity they have passed a resolution on the subject after full debate 
 and consideration. That resolution has been read by your Secretary. 
 You have also the opinion of the Committee on Public Safety of the 
 city of New York, composed of distinguished gentlemen, nearly all of 
 whom are good financiers, who agree fully in the same opinion. I may 
 say the same in regard to the Chambers of Commerce of the city of 
 Boston and the city of Philadelphia. They have said to us in the 
 most solemn form that this measure was indispensably necessary to 
 maintain the credit of the Government, and to keep these notes any- 
 where near par. In addition, we have the deliberate judgment and 
 vote of the House of Eepresentatives. After a full debate, in which 
 the constitutionality, expediency, and necessity of this measure were 
 discussed, in which all the objections that have been made here and 
 many more were urged, the House of Representatives, by a large vote, 
 declared that it was necessary to issue demand notes, and tJiat this 
 clause was indispensable to their negotiation and credit. 
 
 Now, Mr. President, I know very well that the Senate is not gov- 
 erned by authority ; nor should it be. As a high political body, our 
 opinions ought not to be affected entirely by the opinions of otliere. 
 But allow me to repeat what is admitted by all, that very few members 
 of this body are familiar with financial subjects ; very few of us have 
 been called upon to study such questions ; and therefore it is that, when 
 a question of this kind is before the Senate, the opinion of men who 
 have devoted their lives to this subject ought to be fairly considered. 
 Upon the question of the constitutionality of this measure the opinion 
 of the Senator from Vermont and other Senators ai-ound me is worth 
 much more than that of commercial men ; but upon tlie question of 
 the necessity of this measure, to give your demand notes negotiability, 
 security, value, in the money mai-ket, their opinion is worth more than 
 that of any individual Senator. 
 
 But I do not intend to rest here. I desire to show the necessity of 
 it from reason. "We have to I'aise and pay out of the Treasury of the 
 United States before the 1st day of July next, according to the esti- 
 
ISSUE OF UNITED STATES NOTES. 25 
 
 mate of the Committee of "Ways and Means, tlie sum of $343,235,000. 
 Of this sum, $100,000,000 is now due and payable to your soldiers ; to 
 contractors ; to the men who have furnished provisions and clothing for 
 your Army ; and to your officers, judges, and civil magistrates. Where 
 will you get this money? A question of hard necessity presses you.- 
 We "know very well that it cannot be obtained of the banks. They 
 have, with a patriotic feeling not usually attributed to money corpora- 
 tions, which are supposed to have neither souls nor bodies, already ex- 
 hausted their means. The aggregate capital of the banks of the three 
 principal cities of the United States is but $105,000,000, and they have 
 taken more than their capital in the bonds of the United States. It is, 
 therefore, idle to look to them for relief. They can lend you no more 
 money. You must look to other sources. The men who have thus loaned 
 you money, and enabled you to carry on the war thus far, are the very 
 men who now beg you for this measure of financial aid. They ask 
 this currency to enable them to assist you further in carrying on the 
 Government. Among others, the cashier of the Bank of Commerce, 
 the largest bank corporation in the United States, and one that has 
 done much to sustain the Government, appeared before the Committee 
 on Finance, and stated explicitly that the Bank of Commerce, as well 
 as other banks of 'New York, could not further aid the Government 
 unless your proposed currency was stamped by and invested with the 
 legal form and authority of lawful money, which they could pay to 
 others as well as receive themselves. 
 
 Another thing must be considered. We cannot get the needed sum 
 by taxation for six months at least. "We are to pay out over three 
 himdred millions before next July with but small revenue. The 
 Committee of "Ways and Means of the House of Eepresentatives have 
 already been two months in framing a tax bill, and it is not yet done. 
 It has to go through the ordeal of the House of Representatives ; it 
 has to come here, and pass through all the forms of legislation. If it 
 should assume the form of law by the 1st day of June next, it will be 
 as much as we can expect, so that it is useless to look to taxation for 
 any portion of this money. 
 
 i ask you, then, Mr. President, where will you get it ? You must 
 borrow it. The most direct way would be to put your bonds, based 
 upon the credit of the United States, in the money markets of the 
 world, and sell them for what they will bring. This has been done by 
 the most powerful Government in Europe. In the struggle of Great 
 Britain with Napoleon that power sold £420,000,000 of securities for 
 £2(i0,000,000. She contracted a debt of £173 for every £100 received 
 by her. It was only by such sacrifices that she was able to cope with 
 and eventually overcome her adversary. Biit even such enormous sac- 
 rifices would not have produced the money needed had she not adopted 
 a national currency of paper money — practically, if not legally, made a 
 legal tender — and had not used this currency as a medium of exchange 
 with which she facilitated the payment of taxes and the negotiation 
 of loans. You are compelled by your necessities to pursue the same 
 course. It is not claimed by any one that these demand notes wiU 
 satisfy your wants. Yon here provide only for $100,000,000, and have 
 
26 SPEECHES AND EEP0BT8 OF JOHN SHERMAN. 
 
 yet large sums to provide for. After these notes are exhausted we 
 must sell the bonds of the United States. 
 
 But suppose you put the bonds now on the market, what will they 
 bring ? It is said to us by the leading financiers of this country, whose 
 . opinions are entitled to respect, whose patriotism cannot be questioned, 
 that these bonds, if now forced upon the market in large quantities, 
 would be depreciated to something Uke sixty cents on the dollar ; and 
 why ? Not because financiers do not consider them good, not because 
 any one doubts that they wiU be paid eventually, but because there is 
 no money with which to buy them. By the laws of the United States, 
 the Secretary of the Treasury can receive nothing in payment for 
 bonds but gold and silver coin. Where will the purchaser of your 
 bonds get the gold and silver coin ? It is now driven out of circula- 
 tion. There is no such thing as gold and silver coin circulating in the 
 country to any large amount. It is stowed away. The very moment 
 the banks suspended in the city of New York, that moment gold and 
 silver ceased to be the circulating medium of this country. There is 
 not now in active circulation nearly enough gold to pay your exifiting 
 debt. It is therefore clear you cannot sell your honas for gold and 
 silver under existing circumstances. If any man, however patriotic, 
 desired to purchase them, he could not pay you in the only coin that 
 you dare take, because he cannot get it. He must go to a broker first 
 and buy the gold before he can find a medium of exchange with which 
 he can legally pay for them. 
 
 It may be said, and I know the Senator from Khode Island said, 
 that there is an easy remedy for this difficulty. He would repeal the 
 Sub-Treasury law, and receive the paper money of the banks. In other 
 words, he would at once install as the national currency, as the standard 
 of values, the infiated currency of all the local banks in the United 
 States : banks over which we have no control, which we cannot regulate 
 or govern in the slightest degree. "We should have, then, the circula- 
 tion of these banks substituted for gold ; and what would be the effect ? 
 Suppose such paper money issued by banks in every State, by banks 
 that would have every inducement to inflate, because they do not pre- 
 tend to pay specie, were received for bonds, and paid out to our sol- 
 diers, how long would it be before we should have all the evils of an 
 inflated currency, of an irredeemable currency of the woi-st character, 
 and in the most dangerous form ? 
 
 It is easy to criticise this bill. I dislike to vote for it. I prefer 
 gold to paper money. But there is no other resort. We must have 
 money or a fractured Government. If Senators can show me how they 
 can raise money except in the way proposed, I will join them in de- 
 nouncing paper money. I listened with great attention to the remai'lcs 
 made by the Senator irom Vonuont ; but when he got througli, I should 
 have been glad to have him inform inc, if we cannot issue these demand 
 notes, what we shall do. Shall we surrender the Government '( shall 
 we refuse to pay our soldiers ? shall wo rofuse to pay our contractore ? 
 No, Mr. President, we have agreed to pay our debts in money. The 
 chairman of the Committee on Finance jjnve us a very handsome lec- 
 ture, a very able discourse upon the importance of preserving the pub- 
 
ISSUE OF UNITED STATES NOTES. 27 
 
 lie faith ; and he desired to impress upon us — and did impress upon me 
 — ^the necessity of not affecting the obligation of contracts. We must 
 not in any emergency, under any stress of circumstances, affect the ob- 
 ligation of contracts between private individuals. Did that Senator 
 overlook the first contract, the contract between the Grovernment and 
 the soldier, the Grovernment and the man who feeds and clothes your 
 armies ? We must pay the soldier in money ; we must pay the con- 
 tractor in money. There is a contract, an obligation between the con- 
 tractor and the soldier and the Government that must be observed. 
 The obligation of good faith rests upon us to pay every dollar that is 
 due from us to our own creditors, as well as not to impair the obliga- 
 tion of contracts between others. How can we do it ? I have shown 
 that we cannot do it in gold ; 1 have shown that we ought not to do it 
 in the inflated paper money of the country. How else can we do it ? 
 There is no other way, except to issue to our creditor the note of the 
 United States, in such form, with such sanctions, as will enable hira to 
 use it as money. If we can believe the testimony of others and the 
 light of reason, the only way we can do this is by stamping it with the 
 same national sanction as that with which we stamp our gold and silver 
 coin. 
 
 Having thus stated the necessity of this measure, I must consider 
 our constitutional power to pass it. The Senator from Vermont, whose 
 opinion is certa,inly entitled to the highest consideration, and who sup- 
 ports it with an able argument, contends that this measure is uncon- 
 stitutional. I confess, if i did not feel its necessity, I would shield my- 
 self behind his conviction and vote against it. But, sir, the more I re- 
 flect upon the subject the more I am convinced that Congress can 
 authorize the issue of paper money, stamped as a national currency, as 
 a medium of exchange. Such a currency is a necessary and proper 
 means to enable the national Government to exercise its expressly dele- 
 gated power to borrow money, to regulate commerce, to support armies 
 and navies. It may be a power subject to abuse ; it may be a danger- 
 ous power, only to be resorted to in extreme cases ; but when I am 
 convinced its exercise is necessary and proper to enable Congress to 
 execute its high powers, I cannot shrink from assuming my share of 
 the responsibility. 
 
 The Senator from Vermont has read extracts from the debates in 
 the National Convention and from Story's " Commentaries," tending 
 to show that Congress cannot authorize the issue of bills of credit. But 
 I submit to him that this question has been settled by the practice of 
 the Government. We issued such bills during the war of 1812, during 
 the war with Mexico, and at the recent session of Congress. We re- 
 ceive them now for our services ; we pay them to our soldiers and our 
 creditors. These notes are payable to bearer ; they pass from hand to 
 hand as currency ; they bear no interest. If the argument of that Sen- 
 ator is true, then all these notes are unauthorized. The Senator admits 
 that when we owe a debt and cannot pay it, we can issue a note. But 
 where does he flnd the power to issue a note in the Constitution? 
 Where does he flnd the power to prescribe the terms of the note, to 
 make it transferable, receivable for public dues ? He draws all these 
 
28 SPEECHES AND EEP0KT8 OF JOHN SHERMAN. 
 
 powers as incidents to the power to borrow money. According to Ms 
 argument, when we pay a soldier a ten-dollar demand bill we borrow 
 ten dollars from the soldier ; when I apply to the Secretary of the Sen- 
 ate for a month's pay, I loan the United States $250. This certainly 
 is not the view we take of it when we receive the money. On the 
 other hand, we recognize the fact that the Government cannot payus 
 in gold. We receive notes as money. The Government ought to give 
 and has the power to give to them all the sanction, authority, and value 
 necessary and proper to enable it to borrow money. The power to 
 fix the standard of money, to regulate the medium of exchanges, must 
 necessarily go with, and be incident to, the power to regulate commerce, 
 to borrow money, to coin money, to maintain armies and navies. AH 
 these high powers are expressly prohibited to the States, and also the 
 incidental power to emit bills of credit and to make anything but gold 
 and silver a legal tender. 
 
 But Congress is expressly invested with all these high powers, and, 
 to remove all doubt, is expressly authorized to use all necessary and 
 proper means to carry these powers into effect. Congress is not pro- 
 hibited from emitting bills of credit or from making a standard of 
 value, nor are these powers expressly conferred. Congress has repeat- 
 edly issued bills of credit ; it has fixed gold and silver as the standard 
 of value, and made them a legal tender. Certainly gold and silver 
 coin is the best standard of value, for it has inherent value in all com- 
 mercial countries ; but if, in the course of events, gold and silver can- 
 not be had in quantities sufficient to form a medium of exchange for 
 the increased wants of the country, then Congress may establish an- 
 other medium of exchange — another standard of value. This was 
 twice done by establishing a Bank of the United States. I much pre- 
 fer the credit of the United States, based as it is upon all the produc- 
 tions and property of the United States, to the issues of any corpora- 
 tion, however well guarded and managed. 
 
 The Senator from Vermont says that we may issue our notes, and 
 of course onr creditor must take them ; but we must not make his 
 creditor take them — ^the loss must fall entirely upon our creditor. I 
 have shown that by yielding the power to issue a note at all, and 
 especially to issue a note payable to bearer without interest, he has 
 yielded his constitutional argument. But, I ask, is not his proposition 
 manifestly unjust ? He will compel our immediate creditor to take 
 the note or get nothing. It is a moral compulsion, it is true, but it is 
 effectual. It is that or nothing. If we can compel one citizen to take 
 this paper money, why not another and another 'i Is it any less the 
 violation of contract in the one case than in another ? Do not all citi- 
 zens hold their property subject to our iinlimited power of taxation 'i 
 Do not all share in the blessings of government, and should not all 
 share in its burdens ? Shall we inflict a loss only on those who trust 
 and labor for the Government, and relieve the selfish, avai'icious, idle, 
 unpatriotic citizen, who will neitlier fight for, lend to, nor aid the 
 Government ? Sir, to miiloi all these share in tlie burden of the war, 
 and to relieve; those who rink life and property in its defense, I would 
 waive a constitutional doubt. 
 
ISSUE OF UNITED STATES NOTES. 29 
 
 But, sir, the Senator from Maine, as well as tlie Senator from Ver- 
 mont, alleges that it is unjust to insert the legal-tender clause, because 
 it will impair the obligation of contracts. He says, if a man holds my 
 note for $1,000, it is unjust for Congress to pass a law that will enable 
 him to pay it with less. I confess that it would be unjust and uncon- 
 stitutional for Congress to compel him to take a less sum of money. 
 But Congress every day passes laws that affect the value of property 
 and of money, and therefore incidentally the value of contracts. The 
 other day the Senator from Iowa [Mr. Grimes] introduced a bill to 
 establish a street railroad in the city of Washington. We were all in 
 favor of it ; but did any Senator dream th'at by doing that he was 
 impairing the obligation of contracts ? And yet we affected the value 
 of the omnibuses that now run on the streets of Washington. Every 
 act that you pass, almost every event in our political history now, 
 impairs the value of property. Although it may not change the terms 
 of a contract. Congress every day changes the value of money, the 
 value of property. 
 
 The Senator from Tennessee [Mr- Johnson] has been distinguished 
 for urging forward the homestead bill ; and yet everybody knows that 
 the effect of the passage of that bill would be to change largely the 
 value of one class of property^ The Senator from Iowa owns a large 
 amount of wild land in the West. If that bill should pass, this land 
 will be worth fifty per cent, less than it is now. He may have sold 
 some of that land to another at high prices, but we know very well 
 that if the homestead bill passes, it might prevent the purchaser of 
 that land from paying for it. It might almost destroy the value of 
 his purchase, and yet we never stop for considerations of this kind. I 
 submit, therefore, that the argument of injustice to creditors should 
 not defeat this measure. 
 
 On the other hand, Mr. President, I believe that if we fail to pass 
 this bill, in the present critical condition of public affairs, we do gross 
 injustice to our public creditors. Let us look for a moment at the 
 practical effect of it. If you now issue to your creditors paper money 
 which has no sanction, which every man may refuse to take, what will 
 be the result ? In every bank in the United States it will at once be 
 rejected, not because the banks are not patriotic, but because they 
 cannot afford to take it. I have here a letter from a banker in 'New 
 York, addressed to the honorable Senator from Maine, in which the 
 writer states : 
 
 My acquaintance with that class of men [bankers] here is quite extensive, and 
 the view of all, almost without exception, is that it will he fatal to pass the bill 
 without making the notes a legal tender. Views differ widely as to the expediency 
 of this mode of meeting the present wants of the Treasury. Though I think a 
 lar^e majority are opposed in theory to the use by the Government of a large 
 amount of demand notes, they are nevertheless satisfied that this is the least of 
 several evils which threaten ; but all, however differing upon the original question, 
 unite upon this, that if we have the notes, we must have the benefit of a provision 
 that they shaU be a legal tender in payment of debts. This, I know, is the opinion 
 of a number of persons. 
 
 He proceeds to name them, but I need not do so. He says that 
 this is the opinion of " the leading bank men, and also of the most 
 
30 SPEECHES AND KEP0ET8 OF JOHN SHERMAN. 
 
 earnest financiers connected with the banks." The reason is that with- 
 out such provision, the banks in New York, Boston, and Philadelphia 
 cannot take them, and they cannot take them simply because they can- 
 not use them if they do. It is not a question of willingness or of de- 
 sire to sustain the Government. They cannot pay out these notes to 
 those who are not obliged to receive them, however they might wish 
 to do so. 
 
 If you strike out this legal-tender clause, you do it with the knowl- 
 edge that these notes will fall dead upon the money market of the 
 world ; that they wiU be refused by the banks ; that they will be a dis- 
 
 f raced currency, that will not pass from hand to hand ; that they will 
 ave no legal sanction ; that any man may decline to receive them, and 
 thus discredit the obligations of the Government. I ask again if that 
 is just to the men to whom you have contracted to pay debts ? When 
 you issue demand notes, and announce your purpose not to pay any 
 more gold and silver coin, you tender to those who have furnishedpro- 
 visions and services this paper money. What can they do ? They 
 cannot pay their debts with it, they cannot support their families with 
 it, without a depreciation. The whole, then, depends upon the promise 
 of the Government to pay at some time not fixed on the face of the note, 
 and you bring about an era of irredeemable, depreciated paper money. 
 Not only justice to our creditors demands this measure, but I anti- 
 cipate from it very beneficial effects in regulating our currency. If 
 you issue $150,000,000 of Treasury notes, you then for the first time, 
 at least since the Bank of the United States, have a national currency 
 stamped with all the credit, with all the power of the Government of 
 the United States. It is a national currency that cannot be abused. 
 It is not controlled by a coi-poration ; it is not controlled by inter- 
 ested parties ; it is not controlled by men who desire to make money 
 out of the circulation ; but it is a national circulation, for the redemp- 
 tion of every dollar of which the national credit and all the prop- 
 erty of all the people of the United States are pledged. If you issue 
 these $150,000,000 of currency, it will permeate this whole coun- 
 try ; it will be the blood of the whole system ; it will enable men to 
 carry on their business and make their exchanges all over the country. 
 But that is not all. The circulation of this large amount of demand 
 notes will enable capitalists to buy our bonds. If it were not for this 
 reason, I would not vote for this bill myself. Now they cannot do it, 
 because there is no currency in which they can pay for them. You 
 refuse to take the circulation of the banks, and they cannot get you 
 gold, and so cannot buy your bonds. If you give them a circulating 
 medium, ample and not too great, well secured, sanctioned by all the 
 power of the Government, you may then be able to reach the pui-se of 
 the capitalist, you may bo able to reach the stocking of the poor but 
 patriotic (titizen, you may be able to gather in from all this broad extent 
 of country the savings of your people. But you cannot do it other- 
 wise'. Ah long as you have your ])reseiit .system, without any medium 
 of cxcliango except gold and silver, you cnnnot reach the real capital of 
 this country, because the people cannot pay you in that which circulates 
 among tliem, and they ciuinot get gold and silver. 
 
ISSUE OF UNITED STATES NOTES. 31 
 
 The only objection to this issue of paper money is that too much 
 may be issued. There is the only danger in it. I do not believe the 
 issue of $150,000,000 will do any harm ; but if you continue to issue 
 other sums, you will at once depreciate the credit of these demand 
 notes and destroy their value. If you confine it to the amount limited 
 by this bill, I believe the effect will be healthy in all the business rela- 
 tions of the country. 
 
 After all, Mr. President, this is a mere temporary expedient. It is 
 manifest that we must rely upon some other source of obtaining money. 
 We dare not repeat this experiment a second time. If we do, we enter 
 on the same course that was followed in the French Revolution, and 
 also by our American ancestors. But if in our Kevolutionary War the 
 amount of Revolutionary scrip, and if in the French devolution the 
 amount of assignats, had been confined to a small sum in proportion to 
 the wealth of the country, if for instance it had been limited to less 
 than one tenth of the annual production of the country, there would 
 have been no danger. It is idle to attempt to alarm me by saying that 
 this will expand the currency of the country too much. The annual 
 productions of this country are over nineteen hundred millions of dollars. 
 I have on my desk a carefully-prepared table made by the Superinten- 
 dent of the Census, showing the aggregate production of all the States 
 of the Union, and it amounts to over nineteen hundred millions of dol- 
 lars. By this bill you propose to furnish a currency to the extent of 
 less than one tenth of your annual production. Do you tell me that 
 this wiU create an inflation of prices ? I do not think so. If you 
 should follow this issue by another, you might create a disturbance in 
 your financial operations ; but I think this will not. 
 
 The only true way, it seems to me, to establish a financial system in 
 this country — and I do not believe we ever shall establish one until the 
 necessity of the hour drives us to it — is, first, to ascertain how much 
 money we can afford to expend in the prosecution of this war, and then 
 collect at least one half of that by taxation, and the other half by 
 loans. It seems to me that while your expenditure amounts to $600,- 
 000,000 a year you will be driven to all sorts of expedients. If gentle- 
 men want to get at the true measure of reform, if they do not want 
 simply to adopt the expedients that are forced on us, they must reduce 
 the public expenditures to a point at which the Government can main- 
 tain itself. If the amount were fixed at $400,000,000, it would be 
 easy to collect one half of that by taxation, anticipating the taxation 
 by an issue of demand notes, never to be exceeded under any circum- 
 stances, and the other half by the sale of bonds. Many financiers have 
 told me that the capital of the large cities could easily absorb $200,- 
 000,000 of Government bonds from the annual interest now paid 
 there. I have no doubt the Government could readily collect $200,- 
 000,000 more by taxation. By doing this, and anticipating taxation by 
 the issue of demand notes, we should have no difficulty in. getting 
 money. As it is now we have no fixed system ; we go along without 
 any fixed lights or guides. 
 
 I have thus, Mr. President, endeavored to reply to the constitu- 
 tional argument of the Senator from Vermont. Our arguments must 
 
SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 submitted finally to the arbitration of the courts of the United 
 ites. When I feel so strongly the necessity of this measure, I am 
 
 be 
 
 States, When I feel so strongly the necessity ' 
 
 constrained to assume the power, and refer our authority to exercise it 
 to the courts. I have shown, in reply to the argument of the Senator 
 from Maine, that we must no longer hesitate as to the necessity of this 
 measure. That necessity does exist, and now presses upon us. I rest 
 my vote upon the proposition that this is a necessary and proper meas- 
 ure to furnish a currency — a medium of exchange — to enable the Gov- 
 ernment to borrow money to maintain an army and to support a navy. 
 Believing this, I find ample authority to authorize my vote. We have 
 been taught by recent fearful experience that delay and doubt in this 
 time of revolutionary activity are stagnation and death. I have sworn 
 to raise and support our armies ; to provide for and maintain our navy ; 
 to borrow money ; to uphold our Government against all enemies, at 
 home and abroad. That oath is sacred. As a member of this body, I 
 am armed with high powers for a holy purpose, and I am authorized — 
 nay, required — to vote for all laws necessary and proper for executing 
 these high powers and for accomplishing that purpose. This is not the 
 time when I would limit these powers. Kather than yield to revolu- 
 tionary force, I would use revolutionary force. Here it is not neces- 
 sary, for the framers of the Constitution did not assume to foresee all 
 the means that might be necessary to maintain the delegated powers of 
 the national Government. Kegarding this great measure as a neces- 
 sary and proper one, and within our power to enact, I see plain before 
 me the path of duty, and one that it is easy to tread. 
 
 This bill became the act of February 25, 1862. 
 
 TAXATION" OF BANK BILLS. 
 
 m THE SENATE OF THE UNITED STATES, JANUARY 8, 1863. 
 
 The Senate having proceeded to the consideration of the bill taxing bank bills 
 and all fractional currency, Mr. Sherman said : 
 
 Me. Peesident : I know it is diflScult in the midst of exciting events 
 to gain the attention of the Senate to a dry question, full of difficulty 
 and details ; jet Everything affecting the currency of the country is 
 now so sensitively felt, and involves so intimately the safety and wel- 
 fare of the country, that I know the Senate will pardon me for dis- 
 cussing the policy of taxing the circulation of bank bills. Tlie subject 
 has been twice submitted to us by the Secretary of tlie Treasury. He 
 regards the measure as of the highest importance. In his annual report 
 one year ago, and also in his recent report, he has stated his view of it. 
 Ho oelievos that the existing bank circulation prevents or emban-asses 
 the process of funding, by which alone the bonds of the United States 
 can be absorbed, and by which alone money can now be obtained from 
 the people. I will not read the extracts from his report, because they 
 are familiar, no doubt, to Senators. 
 
TAXATION OF BANK BILLS. 33 
 
 At the last session of Congress I submitted a measure somewhat 
 similar to this, in the form of an amendment to the revenue bill, but 
 it was postponed rather than defeated. The bill I now introduce con- 
 tains but two sections : the first proposes to levy a tax of two per cent, 
 on the circulation of all bank bills ; the second provides for a tax of 
 ten per cent, on all fractional currency under one dollar, issued by cor- 
 porations or by individuals. I propose, in the first place, to examine 
 this proposition purely as a question of taxation, before stating its 
 effect upon the currency of the country. 
 
 In the outset, it is necessary for us to remember the distinction 
 between the ordinary process of banking and the issuing of bank bills. 
 The business of banking proper consists in loaning money, discounting 
 bills, facilitating exchanges of productions by the agency of commer- 
 cial paper, and in receiving and disbursing the deposits of individuals. 
 The issue of bank bills is an exclusive privilege, conferred only upon 
 comparatively few corporations. It is a privilege that an individual 
 cannot enjoy. No person can issue his bills in the form of paper money 
 without an express coi-porate franchise, granted to him either by a gen- 
 eral banking law or by an act of incorporation. All the business of 
 banking may be exercised by private individuals, except this franchise. 
 There is no reason why any one may not carry on all the business in- 
 cident to banking, except this one of issuing bills to circulate as money. 
 Indeed, the largest banking houses in this countrj%and in the world do 
 not exercise the privilege of issuing bills. We know that the Koth- 
 schilds, the Barings, Mr. Peabody, one of oar own distinguished citi- 
 zens in England, and our heaviest banks in this country, d.o not exer- 
 cise it. The Bank, of Commerce of New York, with a capital of 
 $9,000,000, has now less than $2,000 of circulation ; and nearly all the 
 leading banks of the city of New York, comprising the majority of the 
 banking capital of the State of New York, issue a comparatively small 
 amount of bills. It is also true that the strongest banks issue the least 
 number of bills, and the weakest banks support themselves and make 
 profit by issuing the largest quantity of bills. Mr. Chase, in his report, 
 states this proposition very plainly. I will read an extract from it : 
 
 Circulation commonly is in the inverse ratio of solvency. Well-founded insti- 
 tutions, of large and solid capital, have in general comparatively little circulation ; 
 while weak corporations almost invariably seek to sustain themselves by obtaining 
 from the people the largest possible credit in this form. Under such a system, or 
 rather lack of system, great fluctuations and heavy losses in discounts and exchanges 
 are inevitable ; and not unfreqnently, through failures of the issuing institutions, 
 considerable portioES of the circulation become suddenly worthless in the hands of 
 the people. 
 
 In the "West, where capital is not abundant, we have suffered more 
 from a system of banking operations than from any other financial 
 cause. Banks have been founded often upon no capital, or upon ficti- 
 tious capital ; sometimes upon bonds purchased on credit ; and then, 
 after they have spread their notes all over the country, filling the pock- 
 ets of the people with a worthless currency, they suddenly explode, 
 and the note-holders suffer the entire loss. It is true that in the older 
 States, where capital is more abundant, they have a better system of 
 3 
 
34 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 banking ; but, after all, it will be found that the weakest banks issue 
 the most notes. The strongest banks do without this privilege, or use 
 it lightly. All the leading banks in this country which have ample 
 capital may dispense with the privilege of issuing bank bills with but 
 little inconvenience ; while those of small capital, dependent upon their 
 circulation, may very properly give way to private bankers, who carry 
 on their operations entirely with other currency and upon individual 
 responsibility. 
 
 The business of banking proper is very heavily taxed by our excise 
 law. It will be found by reference to the tax bill that all commercial 
 paper — checks, drafts, orders, bills of exchange, foreign and inland, 
 protests, certificates, bonds, powers of attorney — every mstrument that 
 is used in the ordinary process of banking — is heavily taxed, while 
 bank bills are not taxed at all. This is a discrimination, it seems to 
 me, that is very unjust. 
 
 When a private banker undertakes to do business, he has first to 
 apply for a license to carry on the ordinary operations of banking, and 
 for that license he pays $100. But a bank of circulation is expressly 
 exempted from the .necessity of procuring a license. While aU the 
 ordinary functions of banking, all those that are useful to the people, 
 and which are purely voluntary — the operations of loans, discounts, 
 exchanges, and deposits — are taxed for license, the business of issuing 
 paper money, which, may alone be done by corporations chartered un- 
 der general or special laws, pays no license. I will read the clause : 
 
 Bankers shall pay $100 for each license. Every person shall be deemed a 
 banker within the meaning of this act wlio keeps a place of business where cred- 
 its are opened in favor of any person, firm, or corporation, by the deposit or col- 
 lection of money or currency, and the same or any part thereof shall be paid ont 
 or remitted upon the draft, check, or order of such creditor, but — 
 
 Mark you — 
 
 but not to include incorporated ta/nka or other tanlca legally authorised to issue 
 notes as circulation. 
 
 All other banks and bankers, whether they are incorporated or not, 
 whether they are associated together or not, have to get a license ; and 
 there is an express reservation and exception in favor of banks author- 
 ized to issue paper money. Now, why is this ? Is there any reason 
 for it ? I think there is none. 
 
 Again, sir, take the stamp taxes. Every commercial instniment must 
 be stamped. If I issue my note for $100, I must place on that note a 
 stamp in order to make it valid. I then must pay interest on that note. 
 If I invest the proceeds in any kind of business, "1 must pay a tax upon 
 that business, first in the form of a liconse, and then in tile form of a 
 tax upon tlie production. After that, I must pay a tax upon my profit. 
 The stamp tax attaches to every form of commercial instrument. Why 
 should it not attach to a bank bill '{ And yet, by another provision of 
 the rcveinio law, which 1 will read, banks of issue are expressly ex- 
 empted from this tax. In the section providing for stamp duties 
 occurs this clause : 
 
TAXATION OF BANK BILLS. 35 
 
 BiU of exchange (inlancl), draft, or order for the payment of any sum of money 
 exceeding twenty and not exceeding one hundred dollars, otherwise than at sight 
 or on demand, or any promissory note, except bcmk notes issued for owoulation, for , 
 a sum exceeding twenty and not exceeding one hundred dollars, five cents ; exceed- 
 ing one hundred dollars and not exceeding two hundred dollars, ten cents, etc. 
 
 Now, why should there be this discrimination ? I, as an individual, 
 must pay these stamp duties ; a banlier doing business must pay them ; 
 a person who has embarked his- credit in the most necessary pursuit, 
 having no special privileges whatever, must attach a stamp to his note 
 when he issues it in any form, whether in the- form of a certificate, a 
 promissory note, a bill of exchange, or in any of the multiplied forms 
 of commercial paper. There is no way in which he can issue his note, 
 whether bearing interest or not, whether payable on demand or not, in 
 which it is not taxed by the Government ; and yet a note issued by a 
 bank incorporated with special privileges is expressly exempted from 
 the operations of this law. Why is this, Mr. Presidej^t ? There is no 
 reason for it. 
 
 The only tax levied by this act on banks of circulation is the tax of 
 three per cent, on the net income, and that tax is deducted from the 
 dividend to the stockholders. I venture the assertion that there is no 
 interest in this country so lightly taxed as banks of circulation. Three 
 per cent, on the net income : how much is that ? It is only fifteen 
 cents on $100 of circulation. Contrast the tax imposed on an ordinary 
 manufacturer with the tax imposed on a bank. A man is engaged in 
 the business of production, that which adds to the wealth of the coun- 
 try; he is converting the raw material into something necessary to 
 sustain life : what process of taxation is he subjected to (and very 
 properly, for I do not object to the taxes) ? He first has to get a 
 license for his employment ; he then invests his capital in real estate 
 or machinery, which is taxed. If he issues his note, check, or other 
 commercial paper, he must attach a stamp to it ; he must then pay 
 three per cent, on the entire product of his business — not three per 
 cent, on his profits, but three per cent, on his entire production, often 
 greater than his capital ; and if he should make any profits, he must 
 pay three per cent, on his profits. That is the process of taxation to 
 which we compel a manufacturer to submit. 
 
 How is it with the bank of circulation ? The bank of circulation 
 carries on its mammoth business without paying any license ; it issues 
 its note without paying any stamp-duty ; it circulates that note without 
 interest ; it does not pay that note in specie ; it does not pay three per 
 cent, on its production, its manufactured article of paper money. It 
 only pays three per cent, on its profits. Nor is that all. It is not three 
 per cent, on the gross profits of the bank, but three per cent, on the net 
 profits of the bank ; after every expense that may be conjured up, sala- 
 ries; fees, employments, is deducted from the profits, the balance is 
 subjected to the insignificant tax of three per cent. This is all the 
 revenue paid by such banks on their exclusive franchise. Even that 
 little tax, by the express provisions of the law, may be deducted from 
 the dividend of the stockholder ; and the stockholder does not pay the 
 tax twice, because this is deducted from his own income tax. 
 
36 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Mr. President, I can run this comparison further, and show that in 
 all the employments of life there is a discrimination in favor of the 
 banlc of circulation. It is not in favor of corporations, because corpo- 
 rations are heavily taxed by this law. Let us look. Eailroad compa- 
 nies pay three per cent, on the gross receipts from passengers. The 
 receipts of a road for passengers are sometimes one-fifth of its capital 
 stock. Eailroad companies pay three per cent, on the gross receipts 
 from passengers, without any deduction. Insurance companies pay one 
 per cent, on their gross receipts, and, as was stated in debate here last 
 spring, the annual receipts of an insurance company are often equal to 
 the capital out of which they have to pay their losses. So here is a 
 tax on insurance companies, confessedly among the most useful institu- 
 tions in the country, of one per cent, on their gross receipts, which is 
 equivalent to ten per cent, on their profits. Then how is it as to sala- 
 ries ? We, as Senators, receive $3,000 a year, and we pay a tax of 
 three per cent, oji our gross salary ; and there is no deduction made for 
 our very necessary expenses, though I suppose most of us have none of 
 the $3,000 left when we go home. The tax is levied on the gross 
 salary. 
 
 Now, how is it with a private citizen ? After payment of the taxes 
 assessed upon property and employments, the taxes on stamps and 
 licenses, there must stiU be paid a tax of from three to five per cent, 
 on gross incomes over $600. And yet, although all classes of the com- 
 munity — corporations, citizens, men, women, and children — ^bear with 
 patience this heavy rate of taxation, banks of circulation having exclu- 
 sive privileges, having the franchise of making money and issuing 
 promises to pay without paying interest upon them, pay but three per 
 cent, on their net profits from circulation, and even that is deducted 
 from dividends to the stockholders. This is an unequal, unjust system 
 of taxation, and should be corrected. 
 
 There are reasons which, to my mind, are very potent why the taxes 
 on banks of circulation should be heavier" instead of lighter than those 
 on other employments. The force of them, I think, will be pereeived 
 when I state them. "We know very well that the profits on the issue 
 of bank notes are now vastly increased. I have a statement before me 
 which shows that the average profits of the banks of the State of New 
 York in the last year were twelve and a half per cent. — a very heavy 
 profit. This profit is this year greater than usual. We all know that 
 the business created by the war, the unusual activity in commercial 
 credits, has been very profitable to the banks. 
 
 But that is not all. The burdens imposed upon the banks by their 
 charters have been lessened by the suspension of specie payments. 
 When a bank had to keep in its vaults coin to the amount of one third 
 of its circulation in order to redeem that circulation, when it was liable 
 at any day to be called upon for the redemption in gold and silver of 
 every dollar of it, that was a burden which very much lessened the profits. 
 But now there is no such liability, and there is no such responsibility. 
 Whether right or wrong, we know that all these banks have suspended 
 specie payments, and now practically put upon the jieople their currency 
 without paying either principal or interest. I say, therefore, they ought 
 
TAXATION" OF BANK BILLS. 37 
 
 to be taxed more heavily than other employments in life. Why, sir, I 
 remember yery well — and some of the Senators here remember it also 
 — an interview which was sought by the bankers of our chief commer- 
 cial cities — aU. of them intelligent and patriotic men — with the Secre- 
 tary of the Treasury, to which they invited the financial committees of 
 the two Houses to hear their proposition for carrying on the financial 
 operations of this Government. We all went to the office of the Sec- 
 retary of the Treasury, and the proposition was there made that the 
 United States should issue no paper money whatever ; that the specie 
 clause, as it is called, of the Sub-Treasury law should be repealed ; and 
 that we should carry on the war upon the basis of the paper money of 
 the bants, legalizing the suspension of specie payments, and that the 
 Government should issue no paper except upon an interest of six per 
 cent., or higher, if the money markets of the world demanded more. 
 That was their plan of finance — the plan substantially adopted in the 
 war of 1812, and which has been condemned by every statesman since 
 that time — a plan of carrying on the operations of this great Govern- 
 ment by an association of banks over which we had no control, and 
 which could issue money without limit so far as our laws affected it. 
 That was the scheme presented to us by those very intelligent gentlemen. 
 
 But, Mr. President, what are the objections to this tax ? for this sub- 
 ject has been conversed about, and I bring the matter to the attention 
 of the Senate now, in order that we may anticipate these objections, 
 and excite others, if they exist. It is objected that this tax interferes 
 with vested rights. If I understand it, all the taxes that are now levied 
 by the Government are to maintain vested rights in property, liberty, 
 and life. They are not to interfere with vested rights. Why, sir, 
 every private citizen holds his property subject to the power of taxa- 
 tion, and Congress must designate the objects of taxation. When, after 
 a man buys a farm, a new tax is imposed upon it, as a matter of course 
 that impairs to some extent the value of the farm. And is the franchise 
 of a corporation more sacred property than the franchise of an indi- 
 vidual, the right which he possesses under the laws to hold his land as 
 property ? Not at all. All these corporate franchises are held subject 
 to the power of taxation in Congress, which is sometimes necessa^ to 
 be exercised in the most potent manner in order to maintain the Gov- 
 ernment. The States cannot by an act of incorporation place their 
 property beyond the j)ower of Congress. A State may, by law, make 
 a contract with individuals which it cannot impair by taxation ; but it 
 cannot thus affect the power of Congress. 
 
 But it is said this tax discriminates against banks. Every tariff and 
 revenue act discriminates in the objects of taxation. The law that we 
 passed at the last session discriminates between the various employ- 
 ments of life ; it has a multitude of taxes, some higher, some lower. 
 The only limitation upon the power of Congress on that subject is, that 
 the taxes must be umf orm ; that is, a tax that applies in Vermont must 
 also apply in Louisiana ; a tax that is imposed on the people of Ohio 
 must also be imposed on the people of New York ; but the objects of 
 taxation may be selected by Congress according to its wisdom, and 
 taxes may be higher on one business and lower on another. 
 
38 SPEECHES AND KEPORTS OF JOHN SHERMAN. 
 
 The only question with me in this matter is what rate of taxation 
 ought to be adopted. Is two per cent, too high ? I think it is not, be- 
 cause it is only one third of the profit derived from the issue of pajjer 
 money without interest, the principal of which is not now paid in coin. 
 The tax on fractional currency is upon a different basis. By an act 
 passed at the last session it was made a crime for individuals _ and cor- 
 porations to issue fractional currency, and yet we know this statute 
 cannot be enforced. It ought to be repealed. One of the judges of 
 the Supreme Court of the United States has cast doubts upon its con- 
 stitutionality. I will not discuss that question now, but certain it is 
 that a law which is openly violated with impunity by all classes of citi- 
 zens ought not to remain upon the statute book. Yet how are we to 
 check the issue of this fractional currency except by taxation ? Every- 
 body knows that the issUe of shinplasters, as they are commonly and 
 ignominiously but very properly called, is injurious in every sense and 
 ought to be abohshed. Now, however, all kinds of corporations are 
 issuing them. We ought to get rid of them, but how can it be done 
 except by taxation ? The tax proposed by this biU is ten per cent, on 
 fractional currency, which is probably about as much as or more than 
 any one can make out of it, and will amount really to a prohibition. 
 This is a tax that can easily be collected. Fractional currency is issued 
 either by corporations or by wealthy bankers scattered over the coun- 
 try. If they violate the law by issuing it, they usually have prop- 
 erty, for without property their shinplasters would not be taken; 
 and, if they have property, we can very easily, through the machinery 
 we have now organized, collect the tax, even if it is a high one. Un- 
 der the operations of this bill you will have a simple remedy, and I 
 think an efficient one, to cure the issue of fractional currency, and at 
 the same time to levy a reasonable contribution on banks of circula- 
 tion. 
 
 Mr. President, I have thus stated this question simply as a question 
 of taxation ; but I should not be candid, I should not state my real 
 purpose, if I did not say frankly that I have another and a much high- 
 er object than this to accomplish. The purpose of this bill is to induce 
 the banks of the United States to withdraw their bank paper, in order 
 to substitute for it a national currency, or rather the national cuiTency 
 we have already adopted. This, sir, is not a new object. I might 
 read to you from volumes of speeches of our greatest statesmen, from 
 the foundation of this Government, to show you that the establishment 
 of a national currency, based upon the laws of Congress, cither of gold, 
 or silver, or in some other form, has ever been regarded as indispensa- 
 ble to the prosperity of the country. When the currency can be regu- 
 lated by a number of States, and under a multitude of laws, it is impos- 
 sible to have it uniform, stable, and sound. The fii-st Bank of the 
 United States was expressly advocated upon this ground by Mr. Hamil- 
 ton and all those who supported it ; as was also the second IBank of 
 the United States by Mr. Madison, from whose message of December 
 5, 1815, I will read a short extract to show you that the statesmen of 
 that time regarded the establishment of a uniform national currency as 
 the highest object of legislation. Mr. Madison said : 
 
TAXATION OP BAJJK BILLS. 39 
 
 It is, however, easential to every modifloation of tlie finances tliat the benefits 
 of a uniform national currency should be restored to the community. The absence 
 of the precious metals will, it is believed, be a temporary evil ; but, until they can 
 again be rendered the general medium of exchange, it devolves on the wisdom of 
 Congress to provide a substitute which shall equally engage the confidence and 
 accommodate the wants of the citizens throughout the Union. 
 
 This is a statement of the whole matter. When coin, the best 
 national currency, is driven out of circulation by the existence of war 
 or extraneous circumstances, then it is the duty of Congress to provide 
 a substitute. Congress did at that time provide a substitute by estab- 
 lishing the Bank of the United States. All the State banks shortly 
 afterward exploded, and almost the entire issue outstanding at the time 
 this message was written fell as a loss to the people of the United 
 States. The Bank of the United States did furnish, for a while, a 
 stable currency. After its charter expired, the controversy was between 
 gold and silver as a national currency and paper money. Nearly all 
 the statesmen of that time believed that it was necessary to have a 
 national currency in some form, but there was a party in the country 
 that believed the only true national currency was bullion — gold and 
 silver coin. After a controversy that I will not review, because it is 
 familiar, we know that the Sub-Treasury system was finally adopted. 
 The Government had no occasion to appeal to the people for credit ; 
 its debt was paid off, and there was a large surplus in the Treasury, 
 which was distributed among the States. The agency of a United 
 States Bank was no longer necessary to sustain the public credit. The 
 object then was to establish a stable national currency. The State 
 banks had failed to accomplish the purposes for which they were in- 
 tended ; their notes were mostly lying dead in the hands of the people, 
 entirely worthless, useless either as a currency or as an investment. 
 Therefore, I think wisely, the Stfb-Treasury system was adopted, and 
 gold and silver coin was made the only national currency. I believe 
 that is the true policy. If peace were restored to this country, we 
 ought as soon as possible to go back to the basis of gold and silver coin ; 
 but, in the mean time, we must meet the exigencies of the hour. Paper 
 money is now a necessity. Gold and silver are hoarded. War always 
 has led, and always will lead, to the hoarding of the precious metals. 
 Gold and silver nee from a state of war. Every nation in modem 
 times, since paper money has been recognized as an agency, has resorted 
 to it in times of trial. It was the old continental currency that carried 
 our fathers through the Revolution; and, although it was afterward 
 depreciated and dishonored, I could show you, by the opinions of the 
 eminent statesmen of the time, that but for that paper money the colo- 
 nies would have been entirely overwhelmed by the British power. It 
 was only by the use of paper money that England maintained her 
 ^gantic wars with ISTappleon. At several periods during the wars of 
 England with Napoleon, gold and silver were at a greater premium in 
 England than they are now in this country. It was only by paper 
 money issued substantially by the Government, or by the Bank of 
 England, which is but an agent of the Government, that those wars 
 were maintained. 
 
40 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 There can be no doubt about the power of Congress on this sub- 
 ject ; and, in order to fortify my opinion and show that the whole 
 question has been examined by much wiser men, I will read an extract 
 from the report of Mr. Dallas, in December, 1815. I read this short 
 extract to show that never was the exclusive power of Congress over 
 the currency denied even by those gentlemen who were in favor of 
 gold and silver as the standard of all values. Mr. Dallas, in his famous 
 report made in December, 1815, says : 
 
 By the Constitution of the United States, Congress is expressly vested with 
 tlie power to coin money, to regulate the value of domestic and foreign coinsin 
 ciroulatioD, and (as a necessary implication from positive provisions) to emit hills 
 of credit; while it is declared hy the same instrument that "no State shall coin 
 money, or emit bills of credit." . . . The Constitutional authority to emit bills 
 of credit has also been exercised in a qualified and limited manner. During the 
 existence of the Bank of the United States, the bills or notes of the corporation 
 were declared by law to he receivable in all payments to the United States; and 
 the Treasury notes, which have been since issued for the services of the late war, 
 have been endowed with the same quality. . . . 
 
 The constitutional and legal foundation of the monetary system of the United 
 States is thus distinctly seen ; and the power of the Federal Government to insti- 
 tute and regulate it, whether the circulating medium consist of coin or of bills of 
 credit, must, in its general policy, as well as in the terms of its investment, be 
 deemed an exclusive power. It is true that a system depending upon the agency 
 of the precious metals will be affected by the various circumstances which diminish 
 their quantity or deteriorate their quality. The coin of a State sometimes vanishes 
 under the influence of political alarms, sometimes in consequence of the explosion 
 of mercantile speculations, and sometimes by the drain of an unfavorable course of 
 trade. But, whenever the emergency occurs that demands a change of system, it 
 seems necessarily to follow that the authority which was alone competent to estab- 
 lish the national coin is alone competent to create a national substitute. 
 
 These extracts from a document of great ability state the whole 
 question in a few words. Congress has the power to regulate com- 
 merce ; Congress has the power to borrow money, which involves the 
 power to emit bills of credit ; Congress has the power to regulate the 
 value of coin. These powers are exclusive. When, by the force of 
 circumstances beyond our control, the national coin disappears, either 
 because of war or of other circumstances, dongress alone must furnisli 
 the substitute. No State has the power to interfere with this exclu- 
 sive power in Congress to regulate the national currency, or, in other 
 words, to provide a substitute for the national coin. 
 
 I think, Mr. President, it is possible that the specie standard 
 might have been maintained in this country ; but, in order to do it, we 
 should have had to resort to very desperate measures. This wai- might 
 have been carried on with such a standard ; but, in order to do it, it 
 would have been necessary 'to reduce every expense to the lowest possi- 
 ble amount. Instead of raising the pay of our soldiers, we should nave 
 had to reduce it. We should Taave had to depend upon conscription 
 laws. Eecognizing the great difficulties that surrounded us, we should 
 have had to regard the whole property of the people of the United 
 States and all their physical energy as the proper means to put down 
 the rebellion, and we should have had to seize them by force. I am 
 not sure now but that it would have been better to meet this struggle 
 at the outset by the use of these strong measures — by a frank appeal 
 
TAXATION OF BANK BILLS. 41 
 
 to the people ; liy the passage of a strict conscription law, founded 
 npon just principles, something after the model of the French law ; by 
 the reduction of all salaries ; by an appeal to force ; and by hurling the 
 vast power of the loyal people of the United States against the rebels 
 in arms against their authority. 
 
 But, Mr. President, we know that that was not in accordance with 
 the sense of our constituents ; it was not in accordance with the sense 
 of either House of Congress. They preferred, on the other hand, to 
 pay liberally to all ; and instead of reducing, in almost every case they 
 increased the salaries of officers of the Government, and wasted, I fear 
 lavishly, much of the money of the people at the outset of this war; 
 We were driven to the use of paper money ;^we have to resort to it 
 now ; we must depend upon it ; we cannot get along without it. All 
 we can do is, in making use of it, to throw around it every guard and 
 check, to make the amount issued as small as possible, and to drive out 
 of circulation that which tends to depreciate and destroy its value. 
 
 The question then, Mr. President, is not between coin and paper, 
 because I have shown that we cannot reSort to coin. The question is 
 between a national currency and a currency issued by State coi-porar 
 tions, or a mixture of both. 
 
 I^ow, I wish to state very briefly the objections to local banks, 
 which are obvious. Senators will recognize them and feel their force 
 when I state them. 
 
 The first is the great number and diversity of bank charters. There 
 are sixteen hundred and forty-two banks in the United States, estab- 
 lished by the laws of twenty-eight difEerent States, and these laws are 
 as diverse, I was about to say, as the human countenance. They are 
 established upon difEerent bases. We have the State bank system with 
 its branches. We have the independent system, sometimes secured by 
 bonds, sometimes State bonds, sometimes by real estate, sometimes a 
 mixture of both. We have every diversity of the bank system in this 
 country that has been devised by the wit of man, and all these banks 
 have the power to issue paper money. With this multiplicity of banks, 
 depending upon different organizations, it is impossible to have a uniform 
 national currency, for its value is constantly affected by their issues. 
 There is no common regulator ; they are dependent on different sys- 
 tems. The clearing-house system adopted in the city of New York 
 applies only to that city. There is no check or control over these 
 banks. There is a want of harmony and concert among them. When- 
 ever a failure occurs, such as that of the Ohio Life Insurance and Trust 
 Company, it operates Kke a panic in a disorganized army ; all of them 
 close their doors at once and suspend specie payments. 
 
 There is another objection to these local banks, and it is one which 
 we cannot disregard, and that is their unequal distribution among the 
 States. In !N"ew England the circulation of the banks is now about 
 $50,000,000, while in Ohio, a State with three-fourths of the popula- 
 tion of all New England, it is but $9,000,000. When you make the con- 
 trast with other States, it is still more marked. According to a recent 
 statement, which I have before me, the circulation of banks in the 
 Eastern States has now reached about $130,000,000; and of that 
 
4:2 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 amount one-tliird is computed to be in the western country. I have no 
 doubt that we are now circulating in the West $40,000,000 of paper- 
 money issued by the banks of the East ; and we are paying to the Last 
 the interest on this $40,000,000, which we would much rather, in these 
 times of difficulty, pay to the United States. The western people 
 would be better satisfied now if they had the notes of the United States 
 instead of these eastern bank bills. Much of this money seeks the 
 West as a medium of exchange for our agricultural productions, and 
 the banks are deriving a profit of the interest on it. If this paper were 
 driven out of circulation, and United States notes were substituted, it 
 would make a contribution to the Treasury of the United States of 
 $2,400,000, for the mere interest of a currency which we do not prefer, 
 but are now compelled to use. Losses to the people by counterfeiting 
 can never be avoided when you have such a multitude of banks. It 
 requires experts now to detect counterfeits. People have made this 
 business of counterfeiting so perfect that it is difficult for the best ex- 
 perts to detect a counterfeit. When a stranger presents a bank bill, the 
 person about to receive it looks rather at the man who presents it to 
 see whether his face is honest, than at the bill to detect whether it is 
 counterfeit or not ; so that more depends on the general apjpearance of 
 the person presenting a bill, than on the appearance of the bill itself, as 
 to its genuineness. It is impossible to prevent counterfeiting. Bank 
 experts may save the banks, but loss still falls upon the people. You 
 cannot prevent the people from sufEering largely from counterfeiting 
 when you have sixteen hundred different banks, issuing each of them 
 several different kinds of bills, under the laws of twenty-eight different 
 States. On the other hand, by the substitution of the national cur- 
 rency we substantially lose nothing by counterfeiting. When the notes 
 are few in kind, only three or four of them, all issued by the United 
 States, all of a uniform character, they cannot be counterfeited, because 
 their faces wiU become so familiar that every man will laiow a genuine 
 note ; he will detect it in a moment as the countenance of a familiar 
 friend. But, when he has to decide on the issues of sixteen hundi"ed banks, 
 how is it possible for an ordinary citizen to detect the counterfeit i 
 
 The loss to the people of the United States by bills of broken banks 
 is computed to be equivalent to five per cent, of all the bills issued. 
 Every twenty years, it is supposed, the entire bank circulation ceases 
 to exist or deteriorates. Some banks pass through the storm and their 
 notes are good, but probably two or three are successively scattered as 
 wrecks along the wayside, until it is now computed bv intelligent 
 bankers that the loss to the people of the United States, over and above 
 the loss of interest, by broken bank bills, is five per cent, per annum. 
 This cannot be guarded against by laws. Why, sir, when the system 
 of free banking was established in the western country, those who were 
 friendly to banks said : " Now wo have a stable issue ; we have bank 
 bills based upon the bonds of the States, and it is not possible that 
 these bonds will ever deteriorate in value and the people lose money." 
 And yet, sir, within two years from the establishment of the system, 
 by the depreciation of the bonds, or by fraud, these notes became de- 
 preciated, and in sonic cases entirely worthless. In some cases the 
 
TAXATION OF BANK BILLS. 43 
 
 bonds were abstracted ; in. some cases frauds were committed by bank 
 officers. From some cause or other the value of these notes that we 
 all supposed to be upon a stable basis disappeared like snow before the 
 summer's sun. The people are constantly losing by them, and you can- 
 not by the wisdom of man guard against the frauds and peculations, 
 the genius of rascality to which men engaged in this business sometimes 
 resort. I wish to cast no reflection whatever on persons engaged in 
 banking, but rogues will naturally resort to this business, because it is 
 one in which they may sometimes by deception issue worthless prom- 
 ises to pay without punishment or exposure. 
 
 The loss of exchange by local currency is very great. Ordinarily, 
 the exchange from the West to the East is one per cent. This loss is 
 usually made a gain to themselves by the bankers and shavers. In the 
 western country you cannot buy a draft without paying this exchange ; 
 and I have known it as high as ten per cent. This difference of ex- 
 change is a common cover for usurious intferest. Plain farmers wishing 
 to borrow money are required to draw drafts on New York, by which 
 contrivance they pay usurious interest. All this is a loss to the people. 
 Even in the most favorable time, in a favorable state of trade between 
 the East and the "West, an exchange of one per cent, is demanded for 
 drafts and bills of exchange, simply because the notes of the East are 
 worth more than those of the W est. With a national cui-rency, uni- 
 f onn and equal throughout the country, this cost of exchange to the 
 people would not exist. 
 
 There is a still more serious objection to this paper money. With 
 a system of local banks there is no power to control over-issues and 
 consequent depreciation of currency. By enlarging the volume of cur- 
 rency, the value of United States notes is depreciated ; and even now, 
 when the United States have issued $250,000,000 of notes, the banks 
 have increased their circulation. 
 
 I have before me a table which has been carefully prepared, show- 
 ing that on the 1st of January, 1862, in the loyal States, there was a 
 circulation of $129,000,000. Now it is $167,000,000. What power 
 have you over this ? How can you prevent this increase ? You cannot 
 do it except by taxation. The banks are governed by the local laws of 
 the States in which they are situated. Those local laws are beyond 
 your power; you have no way to reach them except by a system of 
 taxation. They may go on making this increase from $167,000,000 to 
 $500,000,000, until all the values in this country are destroyed, depend- 
 ing upon a baseless issue, the redemption of which you cannot guaran- 
 tee. I have here, from the " Bankers' Magazine," a statement showing 
 where this large increase has occurred. In the city of New York, since 
 the 1st of January, there has been an increase of 19^^^^ per cent, ; in 
 the State of Massachusetts there has been an increase of H^-^ per 
 cent. ; in the State of New Hampshire there has been an increase of 
 ^'^TUTT P^^" cent. ; in the city of Philadelphia there has been an increase 
 of 138^^^ per cent., until the sagacity of the bankers began to notice 
 the increase and suspected the money of the banks issuing the large 
 increase. In the western country, for local reasons that I need not 
 mention, on account of the existence of the limitations in the charters 
 
44 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 of the banks of Ohio and Indiana, this increase has not gone on so 
 rapidly ; but even in Ohio there has been an increase, and a considerar 
 ble one, of the paper money. 
 
 And, sir, the system of local bank paper destroys all hope of a 
 national currency, and defeats a plain provision of the Constitution. 
 It is difficult to resist the conviction that notes issued by State corpora- 
 tions are bills of credit prohibited by the Constitution of the United 
 States. I know that these banks have existed for long years, have been 
 acquiesced in, and have been regarded as established constitutionally 
 by the States. I therefore shall not give my own opinion merely, but 
 shall fortify it by the history of the clause of the Constitution forbid- 
 ding States to emit bills of credit ; I shall show you that it was the 
 intention of the framers of the Constitution to destroy absolutely aU 
 paper money, except that issued by the United States. In the Consti- 
 tution as originally framed, the States had power to emit bills of credit 
 and to make them a tender in payment of debts if Congress wovM 
 consent. The prohibition was not absolute. That was the condition 
 of the draft of the Constitution on the 28th of August, 1787, when it 
 appears from the " Madison Papers " that 
 
 Mr. Wilson and Mr. Sherman moved to insert, after the words " to coin money," 
 the words, " nor emit bills of credit, nor maie anything but gold and silver coin a 
 tender in payment of debts ; " making these prohibitions absolute, instead of making 
 the measures allowable, as in the thirteenth article, with the coment of the Legulor 
 ture of the United States. 
 
 Mr. Gorham thought the purpose would be as well secured by the provision 
 of article thirteen, which makes the consent of the General Legislature necessary, 
 and that in that mode no opposition would be excited ; whereas an absolute prohi- 
 bition of paper money would rouse the most desperate opposition from its partisans. 
 
 Mr. Sherman thought this a favorable crisis for crushing paper money. If the 
 consent of the Legislature could authorize emissions of it, the friends of paper 
 money would make every exertion to get into the Legislature in order to license it. 
 
 The question being divided — on the first part, " nor emit biUs of credit " : 
 
 New Hampshire, Massachusetts, Connecticut, Pennsylvania, Delaware, North 
 Carolina, South Carolina, Georgia, aye — 8 ; Virginia, no — 1 ; Maryland, divided. 
 
 The remaining part of Mr. "Wilson's and Mr. Sherman's motion was agreed to, 
 nem. con. 
 
 Now, Mr. President, I show you here that this prohibition was made 
 absolute after consideration and debate, and upon the distinct ground 
 that it was important to crush paper money ; and therefore the States 
 were forbidden, under any circimistances, to emit bills of credit. The 
 same debate shows that it was considered that the United States had 
 the power to emit bills of credit under the general authority to borrow 
 money. That is undoubtedly true. Where an authority is conferred 
 to borrow money, the securities for that money may be "issued in any 
 form that the Legislature prescribes ; and the States, under their gen- 
 eral authoritjr to borrow money, could emit bills of credit but for the 
 ?ositive prohibition contained m the Constitution against that emission, 
 'hus I show you, sir, that in the outset of this conti-oversy it was the 
 intention of the framers of the Constitution to pi-ohibit all paper 
 money, and to allow none whatever unless it was issued by Congress 
 under the power of boiTOwing money. 
 
 I will read also an extract from Story on the Constitution, to show 
 
TAXATION OF BANK BILLS. 45 
 
 his view of this subject. In tlie third volume of his " Commentaries," 
 in discussing this provision of the Constitution, Mr. Story says : 
 
 The prohibition to "emit bills of credit" cannot, perhaps, be more forcibly- 
 vindicated than by quoting the glowing language of the "Federalist," a language 
 justified by that of almost every contemporary writer, and attested in its truth by 
 facts from which the mind involuntarily turns away at once with disgust and indig- 
 nation. " This prohibition," says the " Federalist," " must give pleasure to every citi- 
 zen in proportion to his love of justice, and his knowledge of the true springs of 
 public prosperity. The loss which America has sustained since the peace from the 
 pestilent effects of paper money on the necessary confidence between man and man, 
 on the necessary confidence in the public councils, on the industry and morals of 
 the people, and on the character of republican government, constitutes an enormous 
 debt against the States chargeable with this unadvised measure, which must long 
 remain unsatisfied ; or rather, an accumulation of guilt, which can be expiated no 
 otherwise than by a voluntary sacrifice on the altar of justice of the power which 
 has been the instrument of it. In addition to these persuasive considerations, it 
 may be observed that the same reasons which show the necessity of denying to the 
 States the power of regulating coin prove with equal force that they ought not to 
 be at liberty to substitute a paper medium instead of coin." 
 
 Again he says : 
 
 It was, therefore, the object of the prohibition to cut up the whole mischief by 
 the roots, because it had been deeply felt throughout all the States, and had deeply 
 affected the prosperity of all. The object of the prohibition was not to prohibit 
 the thing when it bore a particular name, but to prohibit the thing whatever form 
 or name it might assume. If the words are not mere empty sounds, the prohibition 
 must comprehend the emission of any paper medium by a State government for the 
 purposes of common circulation. 
 
 I have one or two other authorities to show that it was the inten- 
 tion of the framers of the Constitution to destroy entirely this system 
 of paper money issued by States ; but the general principle is laid down 
 sufficiently by Mr. Story. 
 
 Now, the question occurs, if the States cannot emit bills of credit, 
 can the States authorize corporations to do it ? Can a State authorize 
 that to be done by another which it cannot do itself ? Is not paper 
 money issued by a State corporation a bill of credit ? Certainly it is a 
 promise to pay on demand, issued, and intended to be issued, as paper 
 money, to be circulated as money. Its whole existence is based upon 
 the authority of the State government. It only claims this exclusive 
 franchise by virtue of an act of the State Legislature. Now, I ask, can 
 a State authorize a corporation of its citizens to do that which it cannot 
 in its own power do itself ? Why, sir, the thing is absurd ; but by uni- 
 versal acquiescence — a phrase which I catch from the honorable gentle- 
 man from Maine \M.r. Fessenden] — this infringement has been passed 
 along sub silenUo, until these banks have grown into a formidable 
 power, and now wield, in conjunction with the United States, the dan- 
 gerous power of making paper money. In ordinary times, when the 
 national currency was gold and silver, and all the operations of the 
 Government were carried on in gold and silver, and these banks were 
 mere agencies of the people to carry on their private transactions, it 
 would not have been wise to interfere with them ; but now, when it is 
 necessary for Congress to resort to all the powers conferred upon it, 
 when the country is involved in a war which may task its energy and 
 
46 SPEECHES AND EEPORTS OF JOHN SHEEMAN. 
 
 resources for years, when it is necessary to use every power to the very 
 verge of the Constitution, I ask, shall we allow our currency and our 
 national system to be deranffed and disorganized by that which the 
 framers of the Constitution believed they had guarded against by a 
 positive prohibition ? 
 
 Mr. President, I read from orthodox authorities. I wiU now read 
 from Mr. "Webster to show his opinion on this subject ; and I think 
 there is no language anywhere, by any writer, stronger than his upon 
 this subject. Mr. Webster discusses this whole question of the national 
 currency at great length, in a speech delivered by him in the Senate on 
 the 25th of May, 1832 — a speech I need not say of wonderful power, 
 because he never made one of any other character, so far as I have read 
 any of them. He says, in the first part of his speech : 
 
 A sound currency is an essential and indispensable security for the fruits of 
 industry and honest enterprise. Every man of property or industry, every man 
 who desires to preserve what he honestly possesses, or to obtain what he can hon- 
 estly earn, has a direct interest in maintaining a safe circulating medium ; such a 
 medium as shall be a real and substantial representative of property, not liable to 
 vibrate with opinions, not subject to be blown up or blown down by the breath of 
 speculation, but made stable and secure by its immediate relation to that which the 
 whole world regards as of a permanent value. A disordered currency is one of the 
 greatest of political evils. It undermines the virtues necessary for the support of 
 the social system, and encourages propensities destructive of its happiness. It wars 
 against industry, frugality, and economy; and it fosters the evil spirits of extrava- 
 gance and speculation. Of all the contrivances for cheating the laboring classes of 
 mankind, none has been more effectual than that which deludes them with paper 
 money. This is the most effectual of inventions to fertilize the rich man's field by 
 the sweat of the poor man's brow. Ordinary tyranny, oppression, excessive taxa- 
 tion, these bear lightly on the happiness of the mass of the community, compared 
 with a fraudulent currency and the robberies committed by depreciated paper. 
 Our own history has recorded for our instruction enough, and more than enough, of 
 the demoralizing tendency, the injustice, and the intolerable oppression on the vir- 
 tuous and well disposed, of a degraded paper currency, authorized by law, or in any 
 way countenanced by Government. 
 
 That is what he says speaking of the ordinary bank circulation then 
 afloat in the country. He says further, on the very point I am now 
 discussing : 
 
 It is further to be observed that the States cannot issue bills of credit; not 
 that they cannot make them a legal tender, but that they cannot issue tliem at all. 
 Is not this a clear indication of the intent of the Constitution to restrain the States, 
 as well from estabhshing a paper circulation as from interfering with the metallic 
 circulation ? Banks have been created by States with no capital whatever, their 
 notes being put into circulation simply on the credit of the State, or the State law. 
 What are the issues of such banks but bills of credit issued by the State ? I confess," 
 Mr. President, that the more I reflect on this subject, the more clearly does my 
 mind approach the conclusion that the creation of State banks, for the purpose and 
 with the power of circulating paper, is not consistent with the grants and prohibi- 
 tions of the Constitution. 
 
 "With this authority, 'sustained by the history of this clause, I am 
 willing to stand upon the affirmation, notwithstnnding the long acqui- 
 escence of our people, that banks of circulation authorized by the States 
 arc unconstitutional, and should be dispensed with. But wliether this 
 is so or not, even if the long acquiescence of our people has oiven them 
 the sanction of legal authority, there is no doubt that these banks hold 
 
TAXATION OF BANK BILLS. 4,7 
 
 their franchise upon the same tenure that people hold their property, 
 and that all of them are subject to the power of taxation in Congress, 
 which should now be exercised to maintain and support the Grovern- 
 ment in this, the darkest hour of its history. Therefore, as I can see 
 that the gradual reduction or withdrawal 01 this paper money, accom- 
 plished in a way least to injure the interests of the bants and of private 
 citizens, may strengthen the arm of this Government, may give us a 
 sound national currency, may promote the national weal, I cannot hesi- 
 tate a moment. I have shown you that Congress has guarded the 
 interest of the banks ; that it has exempted them from the heavy taxa- 
 tion imposed on the people ; that they have been selected rather as fa- 
 vored daughters of the revenue law than as those who have gradually 
 usurped the powers conferred only on Congress. Now, sir, it is neces- 
 sary to tax these banks ; to warn them that their circulation must not 
 be increased, but must be withdrawn. If they do not heed that warn- 
 ing, then I am willing to put their issues on the same footing as frac- 
 tional issues — illegal issues, confessedly so, by the laws of the States 
 and of the United States. I would prohibit them entirely by a taxa- 
 tion which would suspend their franchise. I do not think, as legisla- 
 tors, we ought to do that by hasty acts ; but we can and should make 
 the process gradual. A tax will indicate the policy adopted by Con- 
 gress. 
 
 I know it has been said that if you drive bank bills out of circula- 
 tion you will disturb all the business relations of the States. I do not 
 think so. The whole bank issue, as I have shown you, was $167,000,- 
 000 in November. That is not two sevenths of the loans of the banks. 
 This circulation could be gradually withdrawn, and its place fiUed with 
 United States notes, without creating a ripple upon the surface. Ey 
 this withdrawal you would get rid only of those banks which are 
 weak and unable to carry on the banking business without circulation. 
 Why, sir, if you take from these banks the power to issue notes for 
 circulation, do you not leave them all their property ? Have they not 
 their capital intact ? Have they not the power to carry on the business 
 of exchange and deposit, and all the ordinary and usual functions of 
 bank agencies ? Do you take anything away from their property ? 
 Not at all. You merely take away from them a franchise, in the na- 
 ture, it is true, of property ; but a franchise the deprivation of which 
 will be of more service to them, and certainly to the General Govern- 
 ment, than its value can be. If they would put their business upon 
 the same footing as private individuals, they would gain more than 
 they would lose. If I owned any bank of issue in this country I 
 would at once withdraw its circulation, and stand upon the same privi- 
 leges and the same business relations that private individuals do, claim- 
 ing nothing from corporate privileges. Then the business of bankers 
 would stand like the business of other people. It is easy now to excite 
 a prejudice against banking. Why? Simply because the business 
 itseK is in the nature of an exclusive privilege granted only to a select 
 few, always sought for under acts of the State Legislature ; but, if jou 
 put it on the same footing as you do manufacturing, the same footing 
 as you do the practice of the law, or any other business — ^leave it open 
 
48 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 to all, and confine it to its legitimate operations — you remove all preju- 
 dice against it. Then banks would do here as they do in Europe ; 
 they would carry on the exchanges of the country ; they would_ issue 
 certificates and commercial paper ; they would aid commerce without 
 usurping or exercising any of fliat authority which can safely be con- 
 ferred only upon the Government. 
 
 It is sometimes said that the experience of other countries has 
 shown that banks of issue are necessary. That is not so. _ The Bank 
 of England consists of two distinct departments — as distinct as two 
 departments can be. The one does the business of banking proper, 
 buys and sells notes, discounts bills, issues bills of exchange and certifi- 
 cates of deposit, receives deposits, and carries on all the operations of 
 the bank ; the other department, distinct and separate, controlled by 
 law, issues notes of circulation; and those notes of circulation are 
 based entirely upon Government securities and gold and silver. It is 
 nothing more nor less than this : that one department of the Bank of 
 England is an agency of the people of that great kingdom to issue the 
 notes of the Government ; and that is aU they are. Every Bank of 
 England note is the note of the Government, for it is based upon the 
 credit of the Government and upon gold and silver coin. It is regu- 
 lated, controlled, and altered by the Government. The bank is me 
 agency of the Government. In most of the other countries of Europe 
 at present, gold and silver are the basis of all transactions, and there is 
 no difficulty of carrying on the largest operations. It is only when 
 people are compelled to use unusual resources, when they are compelled 
 to resort to their credit in a time of great national emergency, that 
 paper money is resorted to in Europe or is justified in this country. 
 
 There is a still more potent reason, Mr. President, why this bill 
 should be adopted. We should all of us look forward to the time 
 when peace shall again bless us. Although this war must be continued 
 to maintain the national honor, and I trust the flag will never be 
 lowered while there is a rebel in any part of this country, yet we all 
 hope for peace ; we look forward to that good time when our friends 
 and kindred shall again resume the ordinary occupations of life at 
 home, and in peace. When that good time comes, if there ai-e no 
 notes outstanding except the notes of the United States, they would be 
 converted into bonds, and we should have again the national currency 
 of gold and silver coin. But, sir, if you allow your country during 
 this war to be flooded with this paper money, when peace comes it will 
 be like the peace with Great Britain in 1815 : it will only bring to us 
 a commercial war, in which all our interests ^nll be involved ; the 
 people will be left with this immense paper issue upon their hands 
 without remedy, and they will be compelled, to lose the whole of it. 
 
 If there was no money in this country but United States bank bills, 
 the process of funding would be going on day by daj'. Whenever 
 there was too great an accumulation of tnese bills, they would be con- 
 verted into bonds ; the operation M'ould go on quietly and silently. 
 Sir, I say, by the authority of the Secretary of the Treasury, that it is 
 his deliberate judgment, after watching this process with all his con- 
 ceded ability, that but for the influence of tliis local bank paper he 
 
TAXATION OF BANK BILLS. 49 
 
 would be able to carry on this war without the issue of more paper 
 money ; that the currency now outstanding, and that which by law he 
 is authorized to issue, would be sufficient to cany it on. Such a cur- 
 rency would lead to the conrersion of the notes into bonds, and by this 
 process the people would absorb a national loan and enable him to 
 carry on the Government without any sacrifice to them. 
 
 Mr. President, you can see that the effect of local paper money is 
 to prevent this process. "What are the United States notes? They 
 are based upon the credit of the whole people ; they are of general 
 authority ; they are receivable in payment of all public debts ; they 
 are made a legal tender in payment of private debts ; they may be 
 converted at any time into six per cent, bonds ; they may be tempo- 
 rarily deposited on interest. They have all the privileges, all the 
 securities which the faith of a great nation can give to them. They 
 are eagerly sought for, everywhere taken. They are only driven out 
 of circulation by the superabundance of an inferior issue. We know 
 it is a principle in finance, that wherever there is an inferior currency, 
 it will fill aU the channels of circulation, and the superior wiU be 
 hoarded. Why are gold and silver now hoarded ? Because they are 
 worth more than paper money. Why is United States paper money 
 hoarded ? Because it is worth more intrinsically than the local paper 
 of the banks, which, after all, has only a local security and a local 
 value ; and now all the channels of commerce are filled by this cur- 
 rency, which the laws of the United Spates forbid the Secretary of the 
 Treasury from taking in payment of public dues. If a patriotic citizen 
 now desired to aid the Government with a loan of $5,000, he would 
 have to sell at a discount or exchange the local currency which he has 
 in his hands for United States paper, in order to enable him to loan 
 that paper to the Government. I give it as my conviction, aided and 
 supported by that of the Secretary of the Treasury, that but for this 
 intermediate currency the gradual absorption of the national debt by 
 the common people — the farmers, the men scattered all over our coun- 
 try — would go on rapidly and satisfactorily, sufficiently so, I think, to 
 carry on the operations of the Government. 
 
 It may be supposed that the conflict between local bank paper and 
 United States notes is imaginary, or of modem origin. ISTow, sir, to 
 prove that I am not either original or peculiar in the views expressed, 
 I wish to read from the writings of an eminent statesman, who certain- 
 ly was not in favor of paper money. My idea upon this subject .is ex- 
 actly according to his, years ago ; and when I read these extracts from 
 Mr. Jefferson, you will perceive that he, who during his whole life was 
 so mindful of the rights of the States and so jealous of paper money, 
 in brief and terse language designated the only way in which our coun- 
 try could carry on war, and that is the very way I have indicated in 
 my remarks. I will read two or three extracts from the writings of 
 Mr. Jeiierson. In his letter to Mr. Cooper, dated September 10, 1814, 
 just at the close of the war, he says : 
 
 The banks have discontinued themselves. We are now without any medium, 
 and necessity, as well as patriotism and confidence, will make us all eager to receive 
 Treasury notes, if founded on specific taxes. 
 
 4 
 
50 SPEECHES AND KEPOETS OF JOHN SHERMAN. 
 
 Congress may now borrow of the public, and without interest, all the money 
 tliey may want, to the amount of a competent circulation, by merely issuing their 
 own promissory notes of proper denominations for the lai'ger purposes of circula- 
 tion, but not for the small. Leave that door open for the entrance of metallic 
 money. . . . Providence seems, indeed, by a special dispensation, to have put down 
 for us, without a struggle, that very paper enemy which the interest of our citizens 
 long since required ourselves to put down, at whatever risk. 
 
 The work is done. The moment is pregnant with futurity, and if not seized 
 at once by Congress, I know not on what shoal our bark is next to be stranded. 
 The State Legislatures should be immediately urged to relinquish the right of estab- 
 lishing banks of discount. Most of them will comply, on patriotic principles, under 
 the convictions of the moment ; and the non-complying may be crowded into con- 
 currence by legitimate devices. 
 
 Eemember, this was written at a time when this local bank paper 
 had become almost worthless ; when it was worth far less than any 
 local bank paper now is. 
 
 Again, in a letter dated March 2, 1815, he says : 
 
 But the circumstances of the war draining away all our specie, all these banks 
 have stopped payment, but with a promise to resume specie exchanges whenever 
 circumstances shall produce a return of the metals. 
 
 Some of the most prudent and honest will pussibly do this ; but the mass of 
 them never will or can. Yet, having no other medium, we take their paper, of 
 necessity, for purposes of the instant, but never to lay by us. 
 
 The Government is now issuing Treasury notes for circulation, bottomed on 
 solid funds, and bearing interest. The banking confederacy (and the merchants 
 bound to them by debts) will endeavor to crush the credit of these notes ; but the 
 country is eager for them, as sometliing they can trust to, and as soon as a con- 
 venient quantity of them can get into circulation, the bank notes die. 
 
 I will also read another extract to show that this matter filled the 
 mind of Mr. Jefferson. He says : 
 
 Put down the banks, and if this country could not be carried through the 
 longest war against her most powerful enemy, without ever knowing the want of a 
 dollar, without dependance on the traitorous classes of her citizens, without bearing 
 hard on the resonrces of the people, or loading the public with an indefinite burthen 
 of debt, I know nothing of my countrymen. Not by any novel project, not by any 
 charlatan erie, but by ordinary and well-experienced means; by the total prohibition 
 of all private paper at all times, by reasonable taxes in war, aided by the neces- 
 sary emissions of public paper of circulating size, this bottomed on special taxes, 
 redeemable annually as this special tax comes in, and finally within a moderate 
 period — even with the flood of private paper by which we were deluged, would the 
 Treasury have ventured its credit in bills of circulating size, as of five or ten dol- 
 lars, etc., they would have been greedily received by the people in preference to 
 bank paper. 
 
 Mr. President, I have shown you that under circumstances very 
 similar to ours, when the banks had suspended specie payments, when 
 the disparity between gold and silver and paper money was getting 
 marked, Mr. Jefferson, in his retirement at Monticello, in private cor- 
 respondence with his friends, with groat siigacity pointed out the very 
 mode to which we must now resort if we would maintain a national 
 currency. We have ali-endy our United States notes precisely of the 
 fharactor stated by liiui, based upon taxes, based upon the credit of 
 the United States. We have thrown around them all the guards pos- 
 sible. We have dune jnst as he says we ought tt) have done. All tliat 
 remains for us is by wise measures to induce the withdrawal of the 
 
NATIONAL OUBRENOY. 51 
 
 local circulation of tlie banks of tlie country, not by an arbitrary edict 
 striking them dead or deranging the currency of the country, but by a 
 ' tax, reasonable and moderate in itself, to be increased if policy dic- 
 tates ; and by a tax to drive at once out of circulation all fractional 
 currencjr. This poKcy wiU confine the banks to that ordinary business 
 of banking known among all the commercial nations of the world. 
 If this is done by moderate and wise legislation, as Mr. Jefferson truly 
 says, we may maintain this war until our flag floats from Louisiana to 
 Maine, in every portion of our beloved country. 
 
 JSTATIOJSTAL CUEEENCY. 
 IN THE SENATE, FEBRUARY 9, 186S. 
 
 The bill to provide a national currency secured by a pledge of United States 
 stocks, and for the circulation and redemption thereof, being before the Senate, the 
 following amendment was offered as an additional section by Mr. Powell : 
 
 And he it furtJier enacted, That each and every banking association organized 
 under this act shall be, and is hereby, required to keep in its vaults in gold and 
 silver coin, at all times, an amount equal to at least one fourth of the amount of 
 the notes it is authorized to issue. 
 
 After explanation of the section by Mr. Powell, Mr. Sherman said : 
 
 Me. President : When this bill was drawn, I did not expect that 
 my friend from Kentucky would vote for it ; nor did I expect that he 
 would vote for any bill which required the banks which might be 
 organized under it to pay specie from this moment, because, as he 
 knows, that would be futile. His amendment would require these 
 banks to keep twenty-five per cent, of gold and silver in their vaults. 
 The bill as reported provides that they shall keep twenty-five per cent, 
 in lawful money of the United States in their vaults. If the courts 
 shall decide, as the Senator says they will, that the paper money of 
 the United States is worthless trash, illegal aiid unconstitutional, then 
 the phrase " lawful money of the United States " wiU mean gold and 
 silver ; and the bill will suit him as it is now. 
 
 Bat, Mr. President, while we are in war specie payments are natu- 
 rally suspended, as they always will be and always have been in every 
 country involved in a great war. They were suspended in England 
 during her wars with ISapoleon. Would it not have been singular if 
 some man had stood up in the British Parliament, when during a long 
 war specie payments were suspended, and the Bank of England notes 
 were made the basis of currency, and had denounced the Bank of Eng- 
 land paper as worthless trash ? It would have been considered a very 
 remarkable thing; and yet that is done now. The United States 
 money, to which the faith of the United States is pledged, to which 
 the faith of every State in the Union is pledged, to which aU the prop- 
 erty of the United States is pledged, is here denounced, in the Senate 
 
52 SPEECHES AND REPOBTS OF JX)HN SHERMAN. 
 
 of the United States, as worthless trash. And yet without this " worth- 
 less trash " we must submit to be overrun by armed confederates who 
 are seeking to subvert the Government, and every man knows it. 
 Every man knows— none better than the Senator from Kentucky — 
 that without the issue of paper money it would be impossiljle to carry 
 on the operations of the Government, and there would be nothing to 
 
 firevent JeflEerson Davis from encamping within sight of New York city, 
 t is by the use of just such money that armies are formed in the South. 
 Is it not very strange that the Senator should denounce this paper 
 money, necessary to be used to carry on this war, as worthless trash, 
 and discredit the Government of the United States? It is very singu- 
 lar. As a matter of course, the amendment cannot be offered with any 
 hope that it will be adopted. If it were adopted, it would be a defeat 
 of the bill. None of the banks of the United States now pay gold and 
 silver, nor can they ; it is impossible ; and therefore the amendment 
 was moved, I think, not with much expectation that it would prevail, 
 but to enable the Senator to announce as his opinion that the money of 
 the United States — ^the notes issued by this Government — is wortmess 
 trash, unconstitutional and unlawful, and that therefore all the banks 
 which might be founded upon it would be unlawful. 
 
 Sir, the very moment this war is over, the very moment our credit 
 is good, the very moment the bonds of the United States are worth 
 above par, that moment all these banks will be specie-paying banks, 
 and every one of them will then be required to keep the very amount 
 of specie in their vaults that the Senator provides for — that is, twenty- 
 five per cent, of the lawful money of the United States. My hope is 
 that Congress will never authorize the issue of more than $400,000,000 
 of United States notes, and that these will be made the basis, during 
 the war, of the cuiTcncy of the country, and that by this bill the money 
 of the people, through their banking associations organized all over the 
 country, may be combined in support of the credit of the United States 
 to make a safe and stable currency which will give us dm-ing time of 
 war the best substitute possible for gold and silver. That, I believe, 
 will be done. There are but two species of lawful money — one gold 
 or silver coin, and the other the United States greenbacks, as they are 
 called. During the war the greenbacks are necessary to carry on the 
 Government, and necessary as lawful money. They are made so by 
 the Government. 
 
 Mr. Oollamer of Vermont gave his views in relation to the general character 
 of the bill, and pointed out somewhat at lengtli his objections to it. Mr. Sherman 
 then said : 
 
 I shall detain the Senate but a few moments in replying to some of 
 the observations of the honorable Senator from Vermont. There is 
 no member of this body who is more attentively listened to, or whose 
 opinions are entitled to more respect, than that honorable Senator. I 
 always give to them the deference due to his position and his character, 
 and I am always very sorry to find myself differing from him in opinion 
 upon any point. 
 
 The Senator has commented upon the remark I made as to the opin- 
 ions of the Cabinet. I simply said that the Secretary of the Treasury, 
 
NATIONAL OUEEENCY. 53 
 
 who had. examined this bill in all its details, and who is charged with the 
 administration of the Treasury Department, approved of it heartily ; 
 and that I also believed it had the hearty assent of every member of the 
 Cabinet, and also that it had the assent of a great body of the people ; 
 that it was assented to by a large number of the banks whose interests 
 might be affected by it, and that it was assented to by the great body 
 of the people in the portion of the country from which I come. I merely 
 alluded to them as a part of the people of the United States. The hon- 
 orable Senator, however, seems, from the whole course of his argument, 
 to have had only in view the interests of local banks and bankers. If 
 he can refer to their interests, and appeal to us in eloquent terms to 
 protect them from the doom that the sons of Jacob believed was about 
 to fall upon Benjamin, and almost excite our sympathy to tears' in view 
 of the afflictions we are about to put upon them ; if he can cite the 
 opinions of those who have charge of them, surely I may cite the opin- 
 ions of grave and honorable men who are charged with the responsibili- 
 ties of administering the Executive Departments of the Government. 
 It was not done with any view to influence our feelings, but simply to 
 show that those men who had fuUy considered the subject gave this 
 bill their hearty approbation. 
 
 The honorable Senator also tries to prove that under this system the 
 banks cannot make any money. If that is so, the whole system wiU 
 faJI to the groimd. 
 
 Mr. Collamer : I said they could not make money in my section. 
 
 Mr. Sherman : I think I could prove to the honorable Senator, if 
 I should take the time to do so — ^but I will not — that they can make 
 money. But if his argument is true, what then? This mammoth 
 scheme, which is going to carry distress into the mountains and valleys 
 of Vermont, will fall dead and harmless, impotent from the outset. 
 That bankers can make a reasonable profit under this bill I have no 
 doubt. They have the benefit of four per cent, on the bonds deposited 
 by them. They have the benefit of interest on the notes given them 
 for circulation. They have the benefit of exchange — not the rates of 
 exchange formerly paid, but that incidental exchange which every 
 bank charges in drawing a draft, probably a quarter or a half of one 
 per cent. They have the profits they can make from deposits. They 
 have other profits from the ordinary incidents of banking. I have no 
 doubt that from all these various profits they will make what banks in 
 ordinary times under specie payments could make — ^that is, seven -or 
 eight per cent, a year. The banks of the State of New York last year 
 made twelve per cent. I have produced the official table to show it. 
 They did it under the suspension of specie payments ; and one haK of 
 the additional profits made by the banks during the suspension of specie 
 payments would pay the onerous tax about which the honorable Sena- 
 tor complains. I say, therefore, if his argument is true, this "whole 
 banking system will fall to the ground, and no harm will be done ; but 
 I do not believe it to be true. 
 
 I will not now discuss the question of the taxation of the existing 
 banks. That, the honorable Senator states, is the real objection he has 
 to this whole scheme. He stated in the outset that but for that he 
 
54 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 would not speak on the bill. That proposition to tax the existing 
 banks is in another bill. "We have two propositions, one coming to us 
 from the House of Kepresentatives, to which the Senator does not 
 object ; but the Committee on Finance thought it proper to propose as 
 an amendment to that bill that a tax should be imposed on the old 
 banks the same as is provided for the new. If the Senate deem that 
 tax onerous, as a matter of course they will change it ; but that bill is 
 not now under consideration. I believe . the tax of two per cent, is 
 light enough ; but that is for the Senate to determine. It has, how- 
 ever, no connection with this bill. 
 
 But, sir, the principal point made by the honorable Senator, and 
 one most likely to influence the judgment of Senators, ,is this : he asks 
 what benefit the United States derives from this arrangement, and he 
 endeavors by argument to show that the United States derives no 
 benefit. I would put to him this simple proposition : There are now 
 $167,000,000 of local bank circulation in the country. Suppose we 
 can induce through their interests — I do not propose to do it by any 
 arbitrary mode — ^the retirement of $100,000,000 of this circulation, 
 taking the smallest sum that wiU probably be used in the course of a 
 year ; suppose we can induce the banks to withdraw $100,000,000 of 
 their circulation, is it no benefit to the United States ? ISTow, the 
 United States get no benefit whatever from their circulation. The 
 United States cannot receive it in their ordinary business transactions. 
 It fills the channels of circulation to the exclusion of the greenbacks. 
 Suppose we can induce the banks to withdraw $100,000,000 of their 
 circulation, and invest that much money in our bonds, and receive 
 United States circulation, does not the honorable Senator see that we 
 should derive a great advantage from it ? That is the object of this 
 bill. The object is, by appealing to the patriotism and the interests of 
 the people and the banks, to induce the banks to withdraw their local 
 circulation and convert it into a national circulation. If it fails, as a 
 matter of course it does no harm. But suppose it succeeds, does not 
 the United States derive a benefit from it ? Certainly ; because at once 
 a demand is created for the purchase of $100,000,000 of United States 
 bonds. We are anxious to sell these bonds. They aj"e now below par. 
 The creation of a demand for $100,000,000 will, as I showed yesterday, 
 by the well-known and recognized laws of trade, probably create a de- 
 mand for $500,000,000. There is the benefit, there is the advantage 
 we seek to derive. We shall make a market at once for the sale of 
 $100,000,000 of our bonds, and .the additional market M'hit-h is always 
 created by making a demand for a particular commodity, which is equi- 
 valent at least to five times the amount of the real demmid. The G ov- 
 ernment of the United States is willing to borrow money from the 
 honoral)le Senator at six per cent., and pay tlie interest in gold coin. 
 Any ]ierson who desires to loan money to the United States may re- 
 ceive six ])er cent, interest on it, and wo are very glad to sell our bonds 
 at that r;i,te in this time of war ; but to those A\ho avail themselves of 
 the i)rivilege8 of this law we only pay four per cent., so that we save 
 one third of tlio interest on the amount of our bonds used for banking ; 
 and more than that, wo get a circulation which, by the laws of the 
 
NATIONAL OUERENOY. 55 
 
 United States, may be used in the collection of our dues ; and, in the 
 ordinary operations of our Government, these banking agencies may 
 be made useful and beneficial as depositories. 
 
 I have already stated the benefits to the Government ; I stated them 
 more fully yesterday, and will not enlarge on them now. The benefit 
 derived to the Government is by making a market for its bonds, by 
 having fiscal agencies throughout the United States, so that it may the 
 more readily collect its debts, and by saving one third of the interest on 
 the payment of its bonds, and by securing to the people of the country 
 a uniform national currency which can be passed from hand to hand in 
 all parts of the country without loss by exchange, deterioration, or al- 
 teration. 
 
 But the honorable Senator says that the power granted by this bill 
 would render the Secretary of the Treasury a very dangerous person, 
 or a very powerful person ; probably that is the meamng. He says 
 that this bill would create a dangerous political power. According to 
 all experience, if you invest in any particular person the power to ap- 
 point men to office, or the power to manage banks or control a scheme 
 of this kind, it rather weakens him by the well-known law that he dis- 
 appoints more than he benefits. Sir, it will be a dangerous power in 
 one sense — not to the American people, but it will be dangerous to the 
 individual who exercises the power. If you confer upon the Secretary 
 of "War or the Secretary of the Treasury the power to appoint twenty 
 clerks, as we did the other day, there are five hundred applicants at 
 oiice ; and you disappoint four hundred and eighty and makd them 
 enemies for the sake of gaining twenty friends. No, sir ; the adminis- 
 tration of patronage, the power to select depositories, all the power con- 
 ferred by this bill, the power of visitation — all these are powers which 
 tend rather to decrease the influence of the Secretary of the Treasury, 
 because they are more likely to make him enemies than friends. But 
 the Senator says that the Secretary of the Treasury has power by dis- 
 tributing the stock to exercise great influence. 
 
 It is true that the bill is not so specific as it might be. One half 
 must be distributed according to population, the other half according 
 to bank capital and resources. I have before me now a table showing 
 the distribution that is made to each State by the terms of the bill as it 
 is undersfood and construed. There is no discretion about it, and the 
 clause was put in for the purpose of taking away from the Secretary of 
 the Treasury discretionary power. Under the bill as it originally stood 
 there was no limit ; the $300,000,000 could be assigned to any State or 
 to any portion of the country ; but in order to secure to every State 
 and to eveiy Territory and to this District its fair and iust allotment of 
 this banking capital, if there is any benefit to be derived from it, the 
 principle was introduced by the Committee on Finance that one half 
 was to be apportioned according to population, and the other half ac- 
 cording to the present banking capital and resources. Why was this 
 done ?. In a new State, or even in a State so old as Ohio, our capital is 
 far less, in proportion to our population, than the capital of the New 
 England States ; they are older and richer. The accumulation of ages 
 has gathered wealth in 'New England, and has not yet gathered it in 
 
56 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 Ohio. Therefore we did not apportion this banking capital among the 
 States according to population merely, but one haK according to popu- 
 lation, so as to secure all something, and one half according to the pres- 
 ent banking capital. It was done for the very purpose of placing it in 
 the power of the local banks, about which so much complaint has been 
 made, to absorb a portion of this capital and convert their State agencies 
 gradually into national agencies. 
 
 To go back again — for I have answered nearly all the objections I 
 desire to answer — the honorable Senator says that this bill destroys the 
 State banks, and he endeavors to excite our sympathies for them. It 
 does not affect the right of a single bank. It does not impair its prop- 
 erty ; it does not affect it in the least. Under the provision offered by 
 the honorable Senator from New York [Mr. Harris], and also under 
 the amendment reported from the Committee on Finance, there is not 
 the slightest difficulty to hinder any of the existing banks, without any 
 collection of debts, from gradually putting themselves under the opera- 
 tions of this law ; and, indeed, under the amendment offered by the 
 Senator from New York, they can avail themselves of the benefit of 
 this law without surrendering their State organization, if only the State 
 will consent ; but, even if they will not do that, they are perfectly free 
 to go on in the banking business. The banks of the State of Vermont 
 may yet aid her volunteers ; they may do all they have done to the 
 good people of that State ; they may help to cariy on the operations of 
 the Government just as they have done, except this — ^that in considera- 
 tion of the fact that during this time of war they do not pay specie for 
 their notes, we think they should pay a portion of their excess of profits 
 to the United States, and we propose to levy two per cent. If the 
 honorable Senator can show to the Senate that that is too high, as a 
 matter of course he will have his own way ; it will be lowered ; and if 
 he makes many pathetic speeches — as pathetic as that he made to-day 
 — perhaps he will carry his point. I think two per cent, is little enough 
 under the circumstances, when banlcs do not pay their notes in gold 
 and silver. It is believed that this two per cent, can be put on the 
 new banks, because, as it is said, they derive privileges from the United 
 States, and can afford to pay two per cent., and therefore I was in 
 favor of imposing that tax on them. This does not destroy tlie State 
 banks. I hope, however, that in the end all those banks will be in- 
 duced, by the benefits conferred by this general system, by the national 
 objects to be obtained by it, by the well-known patriotism of the people 
 among whom the banks are located, to gradually change their local 
 system, so that we may have one national currency, based on the public 
 faith and on the security of private individuals". There are no com- 
 pulsory features about this bill ; it is nothing but a voluntary offer to 
 any one, who chooses to engage in banking. 
 
 But — this is the first objection with which the honorable Senator 
 starts out, and it is the last I will answer — he says the operation of this 
 bill will withdraw capital from the operation of State taxation. So it 
 will ; and to that extent it will be of great national service. By the 
 present laws, and by the Constitution indeed, a State has no power to 
 tax money invested in United States bonds. "We have a right to 
 
NATIONAL CUEEENOY. 57 
 
 borrow money, and a State cannot interfere with that right by taxa- 
 tion. We have that clear right to borrow money, and a State cannot 
 interfere with it. Under our laws, the State of Vermont cannot now 
 levy a tax upon the capital in Yermont invested in the bonds of the 
 United States. I cannot state how much, but I have no doubt that the 
 very loyal people of Vermont have already purchased a large amount 
 of these bonds ; I do not know to what extent. The banks themselves 
 and individuals, I have no doubt, are the holders of these very bonds. 
 That capital is not taxable by the State of Vermont. We only propose 
 that they shall hold a certain portion of it in proportion to their circu- 
 lation, and deposit it with the Treasurer here, and upon it receive Uni- 
 ted States notes. The exemption of money invested in bonds of the Uni- 
 ted States from State taxation is one of the inducements we hold out to 
 the people to buy the bonds, and is not an objection to the system. The 
 bonds will be free from State taxation, whether they are deposited here 
 or whether they are among the people. If they are deposited here, the 
 United States takes two per cent. off. If they are among the people, 
 we do not tax them at all. The operation of this bill is to bring the 
 tax into the National Treasury without taking a dollar from the States. 
 
 Sir, I do not believe that there is anything in this scheme so mis- 
 chievous and dangerous as the honorable Senator seems to think. It 
 may, although I do not think it will, affect a little the operations of 
 local banks, if they should attempt to come into it too hastily. The 
 new associations may be, and probably will be, first organized in the 
 large cities. I know, sir, from the position I have occupied in connec- 
 tion with the bill, that many capitalists who are now holders of the 
 United States bonds, and who will purchase other bonds, wiU go into 
 this scheme of banking in the large cities, in the State of Ohio, and in 
 several other States. I have no doubt, and I venture my prediction 
 with great diffidence against that of the honorable Senator, that within six 
 months from this time, during which we are certainly not likely to have 
 peace, fully $50,000,000 of the bonds will be withdrawn from market, 
 and deposited here at the Treasury, thus making way for another 
 $50,000,000 ; and to that extent United States notes will be issued, in 
 place of the local bank currency. This currency will gradually, quiet- 
 ly supersede the local money, without effecting or deranging any of 
 the ordinary operations of life. 
 
 The honorable Senator seems to think that the winding-up of these 
 State banks will be a direful calamity. Every twenty years they are 
 wound up. The experience of this country has shown that in twenty 
 years the whole banking circulation is lost m the hands of the people ; 
 statistics show it. In 1815 nearly the whole of it was swept away. 
 How many banks survived the panic in those times ? They are wound 
 up by the losses and by the incidents of the banking business and by 
 bankruptcy ; but ordinarily they are wound up hj the States. In Ohio 
 our banking laws extend to but twenty years. I do not know whether 
 that is the case in ISTew England or not ; but in Peniisylvania,_E'ew 
 York, and I believe in many of the States, the dm-ation of a bank is but 
 for twenty years. It cannot live longer. Here we provide a way by 
 which these banks may, at their own pleasure, taking their own time 
 
58 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 as they choose, gradually pass from one system into the other without 
 disturbing or deranging any of their relations. Thej need not collect 
 their loans, they need not change their discounts ; their ordinary opera- 
 tions may go on. 
 
 I again appeal to the Senate to show me a better system^ before this 
 is destroyed. I endeavored to prove yesterday that there is no power 
 to limit the issue of the paper money of the Government unless by the 
 sale of bonds and furnishing a market for them ; and you cannot con- 
 vert them into money rapidly enough to carry on the Government 
 without the benefit of some such agencies as are provided by this biU. 
 The advantage of this whole system is that if it fails no harm is done. 
 If it succeeds it cannot succeed except by securing the purchase of 
 United States bonds, and that is just the very thing we wish now to 
 accomplish. I therefore do regard this measure as of the highest im- 
 portance to maintain the national credit, furnish a market for our 
 bonds, furnish our people with a national currency ; and I see in it none 
 of the dangers to which the honorable Senator adverts. 
 
 This bill became a law February 25, 1863. 
 
 NATIONAL BANK CDKRENCY. 
 
 m TEE SENATE OF THE UNITED STATES, FEBRUARY 10, 1863. 
 
 The special order of the day being the bill to provide a national currency, 
 secured by a pledge of United States stocks, and to provide for the circulation and 
 redemption thereof, Mr. Sherman said : 
 
 Me. Peesident : The importance of the subject under consideration 
 demands a fuller statement than has yet been made of the principles 
 and objects of this bill. I wished to avoid the labor of discussing the 
 subject ; but its discussion seems to be necessary. I shall endeavor to 
 condense what I have to say, for I know the time of the Senate is pre- 
 cious, and I desire to get a vote on this bill, if practicable, to-day. 
 
 It is the misfortune of war that we are compelled to act upon 
 measures of grave importance without that mature deliberation secured 
 in peaceful times. We are now to act upon a measure that will affect 
 the property of every citizen of the United States, and yet our action 
 for good or evil must be concluded Avithin the few days or weeks of 
 this session. "We are about to choose between a permanent system, 
 designed to establish a uniform national currency based upon the pub- 
 lic credit, limited in amount, and guarded by all the restraints ■n^iich 
 the experience of men has proved necessary, and a system of paper 
 money without limit as to amount, except for the growing necessities 
 of war. In the consideration of such a (]uestion we surely should sacri- 
 fice all local interests, all ])ride of opinion ; and, while acting promptly 
 under the pressure of events, we should bring to our aid all me wisdom 
 of united counsels, and all the light which the experience of former 
 generations of men can give us. ' 
 
NATIONAL BANK CURRENCY. 59 
 
 It is fortunate that tlie sclieme presented is not novel either in its 
 principles or details ; nor is it presented to ns at this session for the 
 first time. In December, 1861, the Secretary of the Treasury briefly 
 but clearly stated the outlines of the system proposed, and a bill similar 
 in its main provisions to the one under consideration was introduced 
 in the House of Kepresentatives at the last session. It was not then 
 much discussed, because of the greater demand for military and naval 
 measures, and the necessity of an extensive and novel law of internal 
 taxation. 
 
 But while we were thus engaged, this system was discussed among 
 those whose business made them conversant with finance and currency ; 
 and, sir, I may safely say that, though it ran counter to the local inter- 
 ests of those engaged in the business of banking, it has steadily gained 
 in favor with all classes of our citizens. 
 
 The subject was again presented to us at greater length and with 
 more urgency by the Secretary of the Treasury in his recent annual 
 report, in which the arguments for and against the system are ably dis- 
 cussed. The bill has been published in various forms and extensively 
 circulated, so that opinions on the subject have been canvassed and 
 weighed by aU those who take an interest in it. It only remains for 
 Congress to determine whether it shall become a law. 
 
 It must be remembered that this bill is taken up when our financial 
 condition is not the most favorable. Gold is at a premium of between 
 fifty and sixty per cent., and is substantially banished from circulation. 
 We are in the midst of war, when the necessities of the Government 
 require us to have large sums of money. "We cannot choose as to the 
 mode in which we shall get that money. If we pursue the ordinary 
 course, the course that has been sufiicient in times of peace to raise 
 money, of putting our bonds into market and selling them for what 
 they wiU bring, it woiild be at a great sacrifice. We know this from 
 the history of other nations and from our own experience. We, there- 
 fore, must look to some system of finance that will give us all the aid 
 possible either in the form of paper money or by the agencies of asso- 
 ciated banks. We know very well that after this war is over, the Gov- 
 ernment will still be largely in need of money ; that when the rebellion 
 is subdued, the condition of society in the Southern States wiU be dis- 
 turbed ; that it will be necessary to maintain for sometime considerable 
 armies in order to preserve peace ; and that in any aspect of affairs this 
 Government must undertake responsibilities and,incur debts and liabil- 
 ities of which we have had no example in our previous history. 
 
 The financial measures heretofore adopted are necessary to be con- 
 sidered before I proceed to examine thcifeatures of this bill. After 
 the war broke out we were able to borrow money upon the credit of 
 the United States until December, 1861. The , amount of demand 
 notes previously issued was comparatively small. - In December, 1861, 
 by the suspension of specie payments gold was withdrawn from circula- 
 tion, and there was nothing left but the paper of local banks, which by 
 the laws of the United States could not be used in Government trans- 
 actions. We were then in the peculiar condition of a nation involved 
 in war without any currency whatever which by law could be used in 
 
60 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 the ordinary transactions of the public business. Gold was withdrawn 
 by the suspension of specie payments ; the money of the banks could 
 not be used because the laws of the United States forbade it ; and we 
 were without any currency whatever. 
 
 Under these circumstances Congress wisely authorized the issue of 
 a considerable sum of United States notes. That this measure was 
 wise but few will controvert. We were compelled by a necessity as 
 urgent as could be imposed upon any legislature to issue these notes. 
 To the extent to which they were issued they were useful. They were 
 eagerly sought by our people. They were taken by our enemies in the 
 South, by our'friends in the North. They were taken in the East and 
 in the West. They furnished the best substitute for gold and silver 
 that could then be devised ; and if we would limit the United States 
 notes to the amount now authorized by law, they would form a stable 
 and valuable currency. 
 
 But, sir, we know, not only by our own experience, but by the ex- 
 perience of other nations, that when a government issues paper money 
 in very large amounts, and without connecting it in any way with the 
 private operations of the people, it inevitably depreciates, and, if car- 
 ried to excess, deranges the values of all property. Still necessity- 
 presses us for money, and most of the great nations of modem times 
 have during war been compelled by necessity to resort to some form of 
 paper money. It has always been the most difficult problem of war to 
 maintain the Government s credit and yet to procure the very large 
 sums indispensable for its prosecution. We have but four expedients 
 from which to choose : first, to repeal the Sub-Treasury act, and use 
 the paper of local banks as a currency ; secondly, to increase largely 
 the issue of United States notes ; thirdly, to organize a system of na- 
 tional banking ; or, fourthly, to sell the bonds of the United States in 
 the open market. 
 
 Some three or four weeks ago I discussed at some length the pro- 
 priety of a repeal of the Sub-Treasury clause, as it is called, and en- 
 deavored to show that local banks cannot be made to fiu-nish a national 
 currency. The losses in various ways from the use of their money, its 
 deterioration in value, the want of security, the want of uniformity, 
 and many other objections to that paper money, make it inexpedient 
 to resort to it. United States notes are in every respect a better form 
 of cuiTency than bank paper ; but we have to examine now the objec- 
 tions that may be made to the further use of Govei-nment paper money. 
 These objections are briefly but very plainly stated by the Secretary of 
 the Treasury. I will read them : 
 
 The principal objections to such a circulation as a permanent system are: 1, 
 the facility of excessive expansion when expenditures exceed revenue; 2, the dan- 
 ger of lavish and corrupt expenditure, stimulated by facility of expansion ; 8, the 
 danger of fraud in management and supervision; 4, the impossibility of providing 
 it in suflaoient amounts for the wants of the people whenever expenditures are re° 
 duced to equality with revenue or below it. 
 
 The danger of nvcr-issuo is constantly pressing upon us. It is 
 shown by the oxporionco of other nations, and its effect in inflating 
 values is felt by every one. The mere introduction of a bill in the 
 
NATIONAL BANK OtJREENOT. 61 
 
 House to authorize the issue of $300,000,000 additional United States 
 notes operated like magic. I have here a statement showing the ejBEeet 
 of this proposition. On the day that bill was introduced gold com- 
 manded a premium of thirty-six and a half per cent. The next day 
 it rose to thirty-eight ; within three days it rose to forty-one ; on the 
 15th of January, six days afterward, it rose to forty-eight and a half ; 
 and from that time to this it has been continually rising. It did not 
 suffer a decline until there was a disposition evinced in the Senate to 
 check the over-issue of this kind of paper money. We have here a 
 striking illustration of the effect of even a proposed over-issue of this 
 paper money. In one week it changed values over ten per cent., and 
 in three or four weeks it changed them nearly thirty per cent. The 
 proposition of the Senate to check this over-issue at once reduced it 
 some four or five per cent. I have no doubt the passage of the bill re- 
 ported from the Committee on Finance will still further reduce the 
 relative value of gold. • 
 
 Another effect of an over-issue of paper money is to increase the 
 compensation of employees. The expense of living is now considera- 
 bly greater than before the war. We h,ave had more propositions 
 within the last month to increase the salaries of .officers than we had 
 within the two years preceding. It is now said by nearly every clerk 
 in the Departments, by nearly every officer in "Washington, by nearly 
 every officer of the Government, that his salary is inadequate to pay 
 his expenses. We find our expenses are largely increased by the de- 
 terioration of paper money. This deterioration will go on as it has 
 gone on in the history of other nations, unless Congress check it by 
 stopping further issues. Over-issue increases the expenses of the Gov- 
 ernment in various ways. The price of provisions and clothing is in- 
 creased ; and aU the money that we now borrow to defray the expenses 
 of the Government, and aU the increased expense occasioned by this 
 inflation of prices, must be paid eventually by the people of the United 
 States with compound interest in gold. 
 
 Another practical objection to these United States notes is, that 
 there is no mode of redemption. They are safe, they are of uniform 
 value; but there is no mode pointed out by which they are to be re- 
 deemed. No one is bound to redeem them. They are receivable, but 
 not convertible. They are debts of the United States, but they cannot 
 be presented anywhere for redemption. No man can present them, 
 except for the purpose of funding them into the bonds of the United 
 States. They are not convertible ; they lack that essential element of 
 any currency. 
 
 Another objection is, that they can only be used during the war. 
 The very moment that peace comes, all this circulation that now fills 
 the channels of commercial operations will be at once banished. They 
 will be converted into bonds ; and then the contraction of prices will 
 be as rapid as the inflation has been. The issue of Government notes 
 can only be a temporary measure, and is only intended as a temporary 
 measure to provide for a national exigency. 
 
 Another serious objection to these notes is, that they are made the 
 basis of bank issues. Under the operation of the act declaring them 
 
62 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 to be a legaltender, the bank circulation has increased from $120,000,- 
 000 to $167,000,000. The banks have sold their gold at a large pre- 
 mium, and placed in their vaults United States notes with which to 
 redeem their own notes. That 'cannot be avoided. As we have made 
 them a legal tender, banks are bound to take them in payment of debts 
 due to them, and they therefore have the right to hold them to pay 
 their debts with. The consequence has been that, while the Govern- 
 ment has been issuing its paper money, some of the banks have also 
 been inflating the currency by issuing paper money on the basis of 
 United States money. This inflation may be illustrated by the state- 
 ment of a bank in Pennsylvania, sent to me with a view to show how 
 much tax it would have to pay under the bill reported from the Com- 
 mittee on Finance. It has a capital stock of $200,000, and a circula- 
 tion of $589^600 ; there was due to depositors $55,125 ; profit and loss, 
 $36,294; and to other banks, $23,959. The circulation is .$589,600. 
 Now, what have they got to pay -< it 'with? Gold and silver coin, 
 $18,326, not one thirtieth part of the circulation ; bills and cheeks, 
 $27,128 ; banking house and lot, $4,000 ; due from other banks, 8146,- 
 879. The assets on hand, would but little more than pay depositore 
 and current debts to banks, leaving the whole circulation secured by 
 loans and discounts. The whole of that circulation has no other basis 
 except loans and discounts, and the circulation is three times the 
 amount of the capital stock. 
 
 It is very easy to prove that such a system of banking is a bad one, 
 and would destroy and demoralize any country. There is no basis for 
 it except loans and discounts ; and we know by experience that they 
 cannot be drawn in rapidly enough to redeem a circulation. I have no 
 doubt that the statement sent me of this bank is only an illustration of 
 many more. Indeed, I have looked at the published statements of 
 some of the banks of New York, Pennsylvania, and other States, and 
 many of them show the same inflation — a bank circulation without any 
 basis whatever except loans outstanding, which cannot be called in 
 rapidly enough to liquidate it. 
 
 The practical difficulty is, how to check inflation by banks. The 
 attempt to do so by taxation has given rise to nearly all the objections 
 to this banking system. How can over-issues by banks be checked ? 
 If Senators can point out any way in which this can be done, I should 
 be very glad to adopt it. But there is no way. It has been proposed 
 to tax them two per cent., or one third of their profits on the circula- 
 tion ; and we know what an opposition this has created, although I be- 
 lieve that the tax is entirely defensible. There is no tax in this bill 
 on local banks'; local banks are not mentioned in it, except that they 
 are required to make certain i-eports, which they can readily do without 
 any trouble. 
 
 There is but one other mode proposed to chock this increase, but I 
 would not assent to it because it is too harsh. Under the provisions of 
 0111- lawn, United States notes are made a legal tender in the payment 
 of debts. We miglit, if we choose, except banks from the operation of 
 that proviHioii ; but 1 believe that would be hai-sli and unjust, because, 
 as -wu require them to receive these notes in payment of debts due to 
 
NATIONAL BANK OUERENOY. 63 
 
 them, it would be very unjust for us to require them to pay out any- 
 thing else but United States notes for their own notes ; so that the issue 
 of United States notes by the Government and the making them a 
 legal tender, both of which measures were clearly necessary, have been 
 the encouragement and basis of an inflated bank circulation in the 
 country, and there is no way to check this except by uniting the inter- 
 est of the Government,- the banks, and the people together by one 
 uniform, common system. 
 
 ■ It would be very easy for me to prove that during war local banks 
 are the natural enemies of a national currency. They were in the war 
 of 1812. Whenever specie payments are suspended, the power to issue 
 a bank note is the same as the power to coin money. If you give to 
 an individual or a corporation the power to issue his note as money at 
 a time when he is not restrained by the necessity of paying in gold and 
 silver, you give him practically the power to coin money. ISTapoleon, 
 in the midst of his campaign at Austerlitz, complained that this power 
 existed in the Bank of France, and insisted that it should be restrained. 
 I may say that there is not a single difficulty we are now encountering 
 in the finances of this Government that has not been discussed and en- 
 countered in France and England during the long wars of the French 
 Eevolution. Napoleon, in a letter which I find in the fifth volume of 
 Bignon, in speaking of the power granted to the Bank of France to 
 issue paper money when specie payments were suspended, says : 
 
 The evil originates in the bank having transgressed the law. What has the 
 law done? It has given the privilege of coining money in the form of paper to a 
 particular company. But what did it intend by so doing ? Assuredly that the cir- 
 culation thus created should be based on solid credit. The bank appears to have 
 adopted a most erroneous principle, which is to discount to individuals, not in pro- 
 portion to their real capital, but to the number of shares of its capital stock which 
 they possess. That, however, is no real test of solvency. How many persons may 
 be possessed-of fifty or a hundred such shares, and yet be so embarrassed that no 
 one would lend them a single farthing! The paper of the bank is thus issued in 
 many, perhaps a majority of cases, not on real credit, but on a delusive supposition 
 of wealth. In one word, in discounting after this manner the bank is coining false 
 money. So clearly do I see the dangers of such a course, that, if necessary, I would 
 stop the pay of my soldiers rather than persevere in it. I am distressed beyond 
 measure at the necessities of my situation, which, by compelling me to live in camps 
 and engaging me in distant expeditions, withdraw my attention from what would 
 otherwise be the chief object of my anxiety, the first wish of my heart — a good 
 and solid organization of all that concerns the interest of banks, manufactures, and 
 commerce. 
 
 Surely, when l^apoleon was so jealous of the power of the Bank of 
 France, as William Pitt was of the Bank of England, which were insti- 
 tutions of a national character, under the control of the national legis- 
 lature, and carefully watched by executive power, to coin mone;^, or, 
 which is the same thing when . specie payments are suspended, to issue 
 paper money, we should be jealous of the power exercised by a multi- 
 tude of local banks chartered by twenty-eight States, whose issues are 
 not secured by any uniform standard and are not restrained by the 
 obligation to redeem in coin. 
 
 This idea expressed by Napoleon Bonaparte embodies the real ob- 
 jection to bank paper money issued in time of war when specie payments 
 
'64 SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 are suspended. It is a power that ought never to be exercised except 
 by the Government, and only vs^hen the State is in_ danger. _ It is the 
 power to coin money ; because when a bank issues its bill without the 
 restraint of specie payments, it substantially coins money, and false 
 money. Sir, this is a privilege that no nation can safely surrender to 
 individuals or banks. 
 
 Mr. Burke says that the revenue of the State is the State, and the 
 currency affects and controls the revenue. Now, sir, under our present 
 system we cannot receive the reveime in the currency common among 
 the people. Local banks beyond our power regulate the currency estab- 
 lished by the Government. We cannot have a good currency until 
 these banks are reduced to a common system. Upon this point, I ven- 
 ture to refer to an authority which I do not like to quote, because it is 
 not friendly to our country ; yet it is a paper conducted with eminent 
 ability — ^the " London Times." In a recent article on the subject of 
 this bill, it says : 
 
 By the want of a paper currency that would be taken in every State of the 
 Union at its nominal value the Americans have suffered severely. The different 
 States were, as to their bank notes, so many foreign nations, each refusing the paper 
 of the others, except at continually varying rates of discount. Frequently there 
 was a greater loss on paper taken or sent from an Eastern to a Western State than 
 on English bank notes converted into Austrian money in Vienna. Only adepts and 
 regular money-changers could teU whether a note was current or not, the paper of 
 broken or suspended banks remaining in circulation long after their value had de- 
 parted. The Federal Government avoided loss by refusing all paper of every kind. 
 Its import duties were taken only in gold, and inland revenue it had none. The first 
 appearance of a department for collecting that kind of taxation is in the present bill 
 proposed by Mr. Chase. But the difficulties of the Government have compelled it 
 to issue a paper that will pass current in any part of the territory. Through the 
 evils of war the people will at least gain that deliverance from the previous confu- 
 sion of their currency which to Europeans appeared a barbarism. If the social 
 storm sweeps away the " wild-cat " and " bogus " banks of the Union, it will have 
 left sgme small compensation for the wreck of better things. The best part of Mr. 
 Chase's plan is the suggestion that will probably excite the least attention. 
 
 Sir, while I believe that no system of paper money should depend 
 alone upon banks, I am far from objecting to their agency. They ai*e 
 useful and necessary mediums of exchange, indispensable in all com- 
 mercial countries. The only power they derive fi-om incorporation, 
 not granted to all citizens, is the power to issue notes as money, and 
 this power, is not necessary for their business or essential to their proiit. 
 Their business connects them with the currency ; and whether it be 
 gold or paper, they are deeply interested in its credit and value. Is it 
 not then possible to preserve to the Government the exclusive right to 
 issue paper money, and yet not injuriously affect the interests of the 
 local banks ? 
 
 This is the object of this bill. But it is asked, why look at all to 
 the interests of the banks ? why not directly issue the notes of the Gov- 
 ernment, and thus save to the people the interest on the debt repre- 
 sented by tlie notes in circulation ? 
 
 The only answer to this question is, that history teaches us that the 
 public faith of a nation alone is not sufficient to maintiiin a paper cur- 
 rency. Tliero must be a combination between the interests of private 
 
NATIONAL BANK CUKEENOT. 65 
 
 individuals and tlie Government. As this is an important principle, I 
 venture to refer more fully to examples of depreciated Government 
 paper money. 
 
 Our Kevolutionary currency, Continental money, depreciated until it 
 became worthless. I have here a table showing its gradual deprecia- 
 tion. "When it was first emitted, June 23, 1T75, it was at par with gold. 
 The last issue of $10,000,000 on the 29th of ISTovember, 1T79, sold for 
 $259,743, or as one to thirty-eight and a half, and afterward it went 
 down in the hands of the people. Over $380,000,000 of Continental 
 scrip were issued. The first issue was good. If our Revolutionary 
 fathers had been able to confine the amount to something like ten or 
 twelve millions, which would have been about the same proportion as 
 $500,000,000 to our present condition, it would have maintained its 
 credit, and would have been redeemed by the United States. So it 
 was with the assignats of France. They were issued at first based upon 
 the national domain, amply secured, but they declined at a fearful rate 
 as the issue increased. I will read a short extract to show the precise 
 history of those Government assignats, to warn Senators against tread- 
 ing the same downward course : 
 
 In April, 1790, when tlie assignats were first circulated, their amount was stip- 
 ulated at 400,000,000 francs (between fifteen and sixteen millions sterling) ; in 
 September following their issue was extended to 1,200,000,000 ; in January, 1793, 
 they amounted to 3,626,000,000 ; in September, 1794, to 8,817,500,000 ; in 1795, 
 9,699,500,000 ; and lastly, in September, 1796, to 45,579,000,000 francs, a sum far 
 too enormous to be expressed even in British money, were not all degrees of com- 
 parison lost in the extent of the amount. At the period of their ceasing to constitute 
 part of the currency of France, an assignat of 100 francs (about £4) was exchanged 
 for three and a half sous (about l^d. sterling) in specie. 
 
 The issue of assignats was sustained by the same arguments that we 
 hear now in favor of a continuous and unlimited issue of paper money. 
 Precisely the same kind of arguments were enforced with all the power 
 and eloquence of Mirabeau ; and yet all these assignats depreciated 
 from the very date of his speech, day after day ; and on every fresh 
 issue they went still further downward and downward. The very 
 moment you pass beyond the amount necessary for a circulating 
 medium, at that very moment the depreciation will commence, until it 
 destroys the standard of values and all the rights to property. 
 
 In Austria the same effect was produced. The Wiener Wahrwng of 
 that country passed through the same history of depreciation as the 
 assignats of France, showing an invariable law which cannot be disre- 
 
 farded by any nation. This country can maintain an issue of about 
 400,000,000 of United States demand notes, and no more ; and when 
 you go beyond the proper limit — a limit fixed by the laws of finance, 
 which are irrep^alable — ^that moment^you endanger your whole system. 
 As a matter of course, you must during a time of war issue a certain 
 amount of paper money as the basis of circulation or banking ; but that 
 amount must be limited by the demand for a circulating medium. 
 
 Mr. President, I have thus endeavored to show that Government 
 paper money, unsupported by private capital, cannot be maintained as 
 a currency in time of war. I have also endeavored to show, and did 
 5 
 
QG SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 show on a former occasion, that the issuing of notes by a diversity of 
 private banks under State authority, and unchecked by S]3ecie payments, 
 is inexpedient, destructive, and, in my opinion, unconstitutional. The 
 two systems cannot exist together. They will inevitably induce infla- 
 tion and ultimate bankruptcy. A good national currency as a substitute 
 for gold and silver can only exist by combining the two systems ; so 
 that the Government may issue notes of uniform nature properly secured, 
 and the banks may redeem and maintain their credit. 
 
 I have a very curious diagram here that can only be instructive by- 
 being seen. It purports to be a diagram showing the progress of bank 
 capital, bank circulation, bank deposits, and bank loans in different 
 periods of our national history, it shows very clearly that the very 
 moment the circulating medium of the country passes beyond the true 
 boundary line, that very moment everything else is inflated in propor- 
 tion — loans, discounts, and deposits ; and this inflation goes on rapidlj^ 
 until some sudden unforeseen event checks the whole system, and it 
 falls like a bubble to the ground. We were instructed in our boyish 
 days by diagrams showing the height of mountains and the length of 
 rivers ; but this diagram is more instructive than any of that cla.ss. It 
 shows that in 1837, the first period of inflation in this country since 
 1815, the loans and discounts rose to the enormous sum of 8540,000,- 
 000 ; the bank circulation rose to something like $340,000,000. This 
 was after the Bank of the United States had ceased to exist. Every- 
 thing else became inflated ; and within one year from that time there 
 was a general collapse and disaster all over the whole country ; the 
 price of everything fell ; and the great body of this currency fell dead 
 on the hands of the people and was lost. Much of the deposits of 
 individuals in the hands of the banks was also lost ; and more than 
 one half of all the paper money then in circulation was substantially 
 worthless to the community. The rapid change from a high period of 
 inflation to a serious depression was almost as rapid as the rise of 
 prices. In 1857 the same rise occurred, but to a limited extent. The 
 loans and stocks had then risen to $740,000,000, mostly on railroad 
 securities. The collapse of a bank in the State of Kew York, the 
 Ohio Life Insurance and Trust Company, at once created a derange- 
 ment in all financial matters, and there was then a term of great de- 
 pression; so that within a single year the loans of the banks were 
 reduced from $740,000,000 to about $620,000,000, aiid the circulation 
 and everything else accordingly. 
 
 Mr. President, we are already in a period of great inflation. The 
 Government of the United States has either in circulation or has au- 
 thorized now nearly $400,000,000 of United Stntea notes. Wo have a 
 bank circulation of from one hundred and sixty to one hundred and 
 seventy millions. If we adopt the proposition which is sent to us 
 from the House of llcjiresentativos to <;o on increasing our circulation 
 by the issue of three hundred millions more, it will oroate an inflation 
 that will inevitably lend to the doningement of all the business affaii-s 
 of the ciiimtry. Wc must check it ; avo must put a stop to it. "What- 
 ever may be the hiiziirds, wo must check tliis ovov-expansion and over- 
 issue. If you authorize that issue of United States notes, it will be 
 
IfATIONAL BANK OUREENOT. 67 
 
 at once followed by an issue of more bank paper, and tben we shall 
 have the wildest speculation. Hitherto the iniiation has not extended 
 to many articles. Eeal estate has not yet been much aifected by it ; 
 clothing is somewhat higher, but most articles of provisions still main- 
 tain their equilibrium. The wild lands of the West, which in 1837 
 were worth from fifteen to twenty dollars an acre, were one year after- 
 ward reduced to Government prices. They will again become inflated, 
 and every kind of business will be damaged and disorganized. I say 
 it is a danger before which a lost battle sinks into insignificance ; and 
 if we permit this inflation to go on, we shall do our country a greater 
 harm than the Confederates can possibly do by defeating any one of 
 our armies. 
 
 The question then occurs — ^the only one, indeed, which is at all 
 practical to this discussion — whether the bank bill proposed by the 
 Secretary of the Treasury, and introduced by me in the Senate, will 
 tend to secure us a national currency beyond the danger of inflation. 
 The amount of circulation limited by the terms of this bill is $300,- 
 000,000. I think any one who will read this bill with candor will find 
 that beyond all contingency the currency proposed to be issued under 
 it is safe. It is first secured by the bonds of the United States ; a 
 margin of ten per cent, is left for depreciation ; and then in case of 
 further depreciation the Secretary is authorized to call for the deposit 
 of a greater amount of bonds. While the depreciation under par ex- 
 ists, no interest can be paid upon these bonds, but it is held in the 
 hands of the Secretary of the Treasury for redemption. Besides that, 
 the banks have to keep on hand twenty-five per cent, in lawful money. 
 It is proposed to make that gold and silver ; but that ^ perfectly futile 
 and impossible now. The bank bill requires that twenty-five per 
 cent, of the deposits and the circulation shall be kept on hand, so that 
 the note-holder will first have the security of the bonds of the Gov- 
 ernment and a margin for depreciation ; he will have twenty-five per 
 cent, of the amount of circulation always on hand in the bank ; and, 
 in addition to that, the first lien on all property of the bank. The 
 Government would have a lien for all the deficiency upon all the prop- 
 erty of the bank ; and in addition to that it would have the responsi- 
 bility of the banker himself to the amount of twice the capital stock. 
 There is not in this country any scheme of banking which secures the 
 note-holder more perfectly than this. First, he has the credit of the 
 United States by its bonds and by its guarantees ; to guard against de- 
 ficiency he has the deposit of one fourth the amount in bank ; he has 
 the individual liability of the stockholders to a limited extent ; and he 
 has the first lien on all the property of the bank, including the deposits. 
 It is impossible, therefore, to make a system more safe than this will be. 
 
 Will this money be convertible ? The United States notes are not 
 convertible ; that is, there is no one to pay them on demand. These 
 bank bills are convertible. When they are presented at the counter, it 
 is the duty of the banker at once to pay them promptl;^ in lawful 
 money of the United States ; and that money is to be restricted to the 
 amount of the present issues, or to the $50,000,000 additional author- 
 ized in this bill. They are convertible at any time. 
 
68 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 This currency will be uniform. It will be printed by the United 
 States. It will be of uniform size, shape, and form ; so that a bank 
 bill issued in the State of Maine will be current in California ; a bank 
 bill issued in Ohio will be current wherever our Government currency 
 goes at all ; and a bank biU issued in the State of Connecticut will be 
 freely taken in Iowa or anywhere else. There is no limit to its con- 
 vertibility. I have no doubt these United States notes will, in the 
 end, be taken as the Bank of England note now is all over the world, 
 as a medium, and a standard medium, of exchange ; not, it is true, 
 during the war, but after peace shall again bless us. These notes will 
 then be the very best currency that can be issued. They will be safe ; 
 they will be uniform ; they will be convertible. Those are all the re- 
 quisites that are necessary for any system of currency or exchange. 
 
 Now, Mr. President, let us see and examine a little more accurately 
 the advantages the Government will derive from this system ; because, 
 unless it is to derive some benefit, the system ought not to be pressed. 
 I take it as an axiom that the United States should not issue notes to 
 an amount greater than suflBcient to fill the vacuum created by the 
 withdrawal of gold, the amount of present issues. What benefit, then, 
 does the United States obtain from this system ? The first benefit is, 
 there is a market furnished for the bonds. These banks must furnish 
 ten per cent, more of the bonds of the United States than they receive 
 in paper money. This at once, if the full amount is issued, which I 
 do not anticipate within a year, will furnish a market for over three 
 hundred and thirty milKon dollars of bonds ; and we know very well, 
 by the laws of demand and supply, that where a demand is made for a 
 given article th^ demand extends far beyond the particular want. For 
 instance, if there is a demand in England for ton million bushels of 
 wheat, that demand affects the price of one hundred million bushels in 
 this country ; so that the increase in the price of wheat growing out of 
 this unexpected demand for wheat is more than twice or threefold the 
 value of the wheat that is demanded. You make a fixed and perma- 
 nent demand for United States bonds used for banking pui-poses, and 
 you give a credit to $1,000,000,000 of bonds. That is the law of 
 demand and supply. The very demand for these bonds, owing to the 
 necessity for capitalists to keep them to- base their banking upon, will 
 make them a desirable security. When a banker wishes these bonds, 
 other persons will wish them. Every demand you make for them 
 increases largely the value of the security. 
 
 I have no doubt — indeed I know — that within a vevv short time 
 after this system is in operation, banks will be started. I know that 
 then there will be a demand for bonds. Many of the bonds tliat are 
 now outstanding will be absorbed for banking purposes, and othoi-s will 
 be demanded. Sir, you cannot cari-y on this M;>r except by the sale of 
 your bonds. Any ingeniously cont]-i\cd system to t-nrry it on by paper 
 money in the form of currency will be futile. Then you can only 
 carry on your operations, as an individual or a nation, by the sale of 
 your bonds or the use of your credit. If you liaNo not got the money, 
 you must borrow it ; and all other schemes are idle. You may, it is 
 true, furnish a limited amount iii paper currency. When you go one 
 
NATIONAL BANK CUERENOY. 69 
 
 step beyond tliat limit fixed by the laws of finance dnd commerce, then 
 you destroy the value of that which you use as currency. Your power 
 to borrow goes on indefinitely. Your business, therefore, is to make a 
 demand for your Government securities, and thus induce the invest- 
 ment of the money of the people in the bonds of the United States. 
 
 Why, sir, there is in this country an arniple supply of capital for all 
 pui-poses. Our annual productions are shown by the census to be 
 $1,900,000,000 a year. The aggregate wealth of this people is over 
 $12,000,000,000. The actual capital that is now in the hands of the 
 people, seeking and begging for investment, would carry on this war 
 for years. There is no want of 'capital. It is a want of confidence, a 
 want of system ; a fear that that which the people have will fall sud- 
 denly on their hands utterly worthless. That is the real danger. This 
 bill furnishes a market for your bonds and your securities — that credit 
 by which alone you can carry on a Government in time of war. 
 
 But, sir, that is not all. It wiU furnish a medium by which the 
 State bank paper may be gradually absorbed — not by any harsh meas- 
 ures. Some of the friends of local banks think this is a great scheme 
 to break down local banks. Why, sir, as I shall show you before I am 
 through, it is clearly the interest of every local bank of the United 
 States to avail itself of the provisions of this law. It will no doubt 
 operate gradually to absorb the local banks, to retire their issues by 
 substituting in their place an issue that will be safe, uniform, and con- 
 vertible in all parts of the country. I believe this system, if it has a 
 fair trial, a fair experiment, will gradually absorb all the State banks, 
 without deranging the currency of the country or destroying the value 
 of the property of stockholders in banks. 
 
 ISTot only that. ' This scheme will furnish a convenient agency for 
 the collection of taxes. You have now in this country collectors and 
 assessors scattered all over the country, in every district, and the people 
 are compelled to pay taxes. What is the medium by which they are 
 to be paid ? At present the only one is what are called greenbacks. 
 United. States notes, and these notes are forced out of circulation by 
 the superabundance of bank paper; so that a person who desires to 
 pay taxes is compelled to go into the market to obtain first United 
 States demand notes by the sale or conversion of his bank paper. This 
 will furnish a convenient medium by which the taxes may be pq,id ; 
 and as these banks will gradually extend themselves all over the coun- 
 try, they win be made the convenient depositories of the public money. 
 As it is now, every collector is bound' to take what paper money he- 
 gets, and hold it in his hands subject to all risks. He dare not, under 
 our laws, deposit it with banks. He runs all the risk of fire and acci- 
 dent ; and all the money he may have on his hands he is responsible 
 for. Pie has no safe where he can deposit it. The United States Gov- 
 ernment does not furnish a safe, and it forbids him to deposit in banks. 
 Under this system all the money of the United States may be safely 
 deposited in banks, and the deposit will be secured by Government 
 bonds, so that there can be no loss. 
 
 But there is another reason in favor of this measure. It wiU make 
 a community of interests between the stockholders of banks, the people, 
 
70 SPEECHES AND EEPORTS OF JOHN" SHERMAN. 
 
 and the Government. At present there is a great diversity of inter- 
 ests. The local banks have one interest, and the Government has 
 another. They are brought into conflict. But, sir, by the passage of 
 this bill you will hannonize these interests ; so that every stockholder, 
 every mechanic, every laborer who holds one of these notes will be in- 
 terested in the Government — not in a local bank, but in the Govern- 
 ment of the United States — whose credit he wiU be anxious to uphold. 
 If this system had been spread all over this country, and these banks 
 had been established as agencies upon the basis oi national credit, I 
 believe they would have done very much indeed to maintain the Fed- 
 eral Government and to prevent the great crime of secession. 
 
 But, sir, there is a stiU higher motive for the passage of this bill. 
 It will promote a sentiment of nationality. There can be no doubt of 
 it. The policy of this country ought to be to make everything nation- 
 al as far as possible ; to nationalize our country, so that we shall love 
 our country. If we are dependent on the United States for a currency 
 and a medium of exchange, we shall have a broader and a more gen- 
 erous nationality. The want of such nationality, I believe, is one of 
 the great evils of the times. This doctrine of State rights, which sub- 
 stitutes a local community — foi", after all, the most powerful State is 
 but a local community — instead of the United States of America, has 
 been the evil of the times ; and it is that principle of State rights, 
 that bad sentiment that has elevated State authority above the great 
 national authority, that has been the main instrument by which our 
 Government is sought to be overthrown. 
 
 But, Mr. President, I say that this system will be a benefit to the 
 banks themselves, as well as to the Government. The similarity of 
 notes all over the United States will give them a wider circulation. A 
 note issued by a bank in Maine will have upon it precisely the same 
 engraving, the same form, the same character, as a note issued in Iowa. 
 They will both rest on the same basis and the same security. This 
 very fact wiU give them a broader circulation. Now, when a note is 
 issued in Ohio, if it straggles as far as "Washington, it is discounted two 
 per cent., although it is just as good as any other note, and is di-iven 
 back by the very fact that it is at a discount. If that note bore the 
 similitude of the United States of America, and the stamp and the guai"- 
 antee which the United States gives it, it would go everywhere ; and a 
 note-holder would not care whether it were issued in Ohio, Connecti- 
 cut, or California. That very similitude would give it a broader circu- 
 lation, and, consequently, a more profitable circulation to the bank ; it 
 would not be returned so quickly. I have been told by gentlemen 
 from New England that the average period of circulation in New Eng- 
 land is about thirty days ; in New York, in tlio citi(.\*, it is much less ; 
 in the "West it is said to be sixty days. But, sir, those notes all being 
 the same, they may have an indefinite circulation, and tlie average may 
 extend to years, instead of months or days. 
 
 There is another important advantage which the banks would derive 
 from this system. They would be guarded nuainst all fraiids and alter- 
 ations. There would be but five or six kinds of notes in the United 
 States, instead of the great diversity that there now is. This would be 
 
NATIONAL BANK OUEEENOY. 71 
 
 a great guard. I have here a table showing the mimber of counterfeit 
 notes in this country, to which I will reier. It is a curious and in- 
 structive eawose, by a friend of mine, who took the pains to examine 
 into the subject : 
 
 The notes of over twelve hundred banks have been coanterfeited or altered. 
 There are in existence over three thousand kinds of altered notes, seventeen hundred 
 varieties of spurious notes, four hundred and sixty varieties of imitations, and over 
 seven hundred of other kinds ; this arising from the great variety of bank notes, 
 there being, at a moderate estimate, over seven thousand various kinds of genuine 
 bills — some executed by good artists, and many in an indifferent manner. 
 
 The following statistics are from reliable data as to the years 1856 and 1862 : 
 
 1856. 1862. 
 
 Number of banks 1,409 1,500 
 
 Number whose notes are not counterfeited 463 253 
 
 Number of kinds of " imitations " 1,462 1,861 
 
 Number of kinds of "alterations" .- 1,119 3,039 
 
 Number of kinds of " spurious " 224 1,685 
 
 I ask you, sir, how is it possible to have a currency — ^how is it pos- 
 sible for any honest man to detect the genuine from, the counterfeit, 
 when he has to select from seven thousand different kinds of bank bills, 
 and the bills of those banks have been counterfeited ; when so large a 
 portion of them are spurious and counterfeit ? It is impossible. Under 
 this system, the banks will be saved from aU this difficulty. There will 
 be but six or seven kinds of notes. They wiU become familiar to us, 
 so that every man will be a counterfeit detector in himself, and will 
 not be compelled to look through a long list to ascertain whether a bill 
 is genuine or not. This very fact will give a credit and currency to 
 bank circulation which it has not now. 
 
 There is another advantage these banks would have. They ar^ 
 made by this law depositories of the public money. All the money 
 collected by the collectors and various other Government officers would 
 be deposited in the bank convenient to the collector ; and these deposits 
 are the most abundant and profitable source of revenue. They would 
 be more stable than individual deposits. They would be paid out in 
 the form of checks and drafts, and would be there in the banks per- 
 fectly safe, secured to the Government by bonds ; and yet they would 
 be a legitimate source of banking profit. Under the present system the 
 laws forbid such a thing. The experience of the past has shown that 
 local banks are not, and cannot be made, safe depositories ; and, there- 
 fore, this would be an advantage which th^new banks would have over 
 the old. 
 
 There is still another advantage. These notes are to be receivable 
 for taxes due to the United States. This would be again another prof- 
 itable source of circulation. The notes of the State banks cannot be so 
 received. They are dishonored and disgraced from the beginning by 
 being refused by the ISTational Government. 
 
 Under this system, Mr. President, there could be no object for 
 brokers, who are the natural enemies to banks, to " run " upon a bank ; 
 because the notes will be uniform in face and value, and exchange will 
 be equalized all over the country. I think, therefore, it could be 
 proved to the satisfaction of every man who is interested in these bank- 
 
72 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 ing associations, that it is for their interest to convert their local systems 
 into the national system, by filing with the Government the security 
 required by the law, and thus aiding the Government at the same time 
 that they aid themselves. 
 
 It may be thought that I am hostile to State banks. I am not and 
 never have been. I have always been friendly to them. But, sir, I 
 think that everything ought to be subordinate now to wliat is necessary 
 for the good of the country. All private interests, all local interests, 
 all bankmg interests, the interests of individuals, everything, should be 
 subordinate now to the interests of the Government ; and whenever I 
 see anything whatever standing in the way of what I believe is de- 
 manded by the good of the United States at large, I will seek, if pos- 
 sible, without doing them any injury, to make them harmonious with 
 the system adopted by the Government. I believe that by the adop- 
 tion of this system you will harmonize the interests of the local banks 
 with the interests of the Government of the United States. 
 
 Now, sir, what benefits would the people derive from this system ? 
 Those benefits m^y be inferred from what I have already stated. In 
 this way the people would have a currency combining the national 
 faith with the private stock and private credit of individuals. They 
 would have a currency that would be safe, uniform, and convertible. 
 They would have all that can be desired in any community : a currency 
 limited in amount, restrained by law, governed by law, checked by the 
 power of visitation, checked by the limitation of liabilities, safe, uni- 
 form, and convertible in every part of the country. When I see that 
 the people of the United States can derive these advantages, when I 
 see that the Government of the United States can derive these advan- 
 tages from this system of banks, I will not hesitate for a moment, even 
 if I am compelled as a part of the system to induce the withdi-awal 
 of local bank paper, the surrender of the power to issue or to coin 
 money. 
 
 Mr. President, I do not wish to pursue this argument much fur- 
 ther ; but I could show, by reference to our own history, that I seek to 
 accomplish only what all the statesmen of our country have sought to 
 accomplish. Every party that has been organized in this country, from 
 the foundation of the Government to this time, has, at some period of 
 its history, sought to accomplish this object of a unifomi national 
 currency. The Federalists, under the lead of Alexander Hamilton, 
 brought order out of chaos after the Eevolutionary War by the adoption 
 of the United States Eank. They gave us for twenty yeara a stable 
 currency ; and without that currency the funding system, which secured 
 the credit of the United States, could not have been adopted. It was 
 only through the agency of the Bank of the United States, organized 
 in some respects upon a foundation like this, upon the basis of Govern- 
 ment secunties, that our fathers were enabled to pay off the Eevolu- 
 tionary debt — to establish that wise system by which it was gradually 
 diminished and finally paid off. When that bank expired we had a 
 period of confusion and!^ disorder. We had the issues of local banks 
 for four or five years, when the Ivepublicim pai-ty, the rivals of the old 
 Federalists, then in power, passed a bank bill under the lead of Mr. 
 
NATIONAL BANK CUERENOY. Y3 
 
 Madison^ and Mr. Dallas. The arguments at those times in this very 
 body, and in the House of Eepresentatives, in 1815 and 1816, show 
 that the same difficulties by which we are now surrounded then ex- 
 isted — a depreciated and disordered paper currency, which could only 
 be remedied by the substitution of one national currency. That object 
 was acconiplished by the Eepublican party of Mr. Madison, by the 
 incorporation of the second Bank of the United States ; and for twenty 
 years that went on in a career of almost uninterrupted prosperity. ISIo 
 one lost by it. However, at the expiration of the charter of the second 
 bank, there was no longer any debt of the United States ; there was 
 no object, so far as the Government was concerned, in having any kind 
 of paper money. All the motive for paper money had ceased, so far 
 as the Government was concerned. The debt was paid off. It was 
 the object then not to contract any further debt ; and, upon the basis 
 of the facts then existing, I beheve the adoption of the Sub-Treasury 
 scheme was a wise and judicious plan. I was too young to take part 
 in the political disputes of that time. Probably at that time, with my 
 natural predilections, if I had taken part, I should have been opposed 
 to the Sub-Treasury scheme ; but looking on it now without any feel- 
 ing, I believe its adoption was wise, and in times of peace it was 
 ample ; gold and silver were abundant enough for a national currency, 
 and formed the best national currency ; and were it not now necessary 
 by the operations of war to substitute some other for it, I should not 
 be in favor of overthrowing any portion of that system. 
 
 The Democratic party, from 1837 to 1845, upheld the Sub-Treasury 
 scheme. We now, surrounded by difficulties, surrounded by war, and 
 in the midst of great troubles, are compelled to resort to some scheme 
 by which to nationalize and arrange upon a secure and firm basis a 
 national currency. ' Every commercial country in the world has adopted 
 it, and it is a remarkable fact that every nation of modern times that 
 has attempted to base its currency solely upon Government paper has 
 utterly failed, and has eventually repudiated that currency ; but when 
 its currency has been supported, aided, and combined with local banks, 
 when the interests of private individuals have been combined with 
 those of the Government, the issues succeeded. The Bank of England 
 is a striking example. The Bank of England grew out of the loan by 
 
 {)rivate individuals to the Government of Great Britain of something 
 ike a million pounds. From that time it has been increasing, never 
 failing, and yet the Bank of England is but a Government machine. 
 AH the paper issued by that bank is based upon the bonds of the Gov- 
 ernment. Not a dollar of notes is issued by that bank but what is 
 represented either by gold or silver, or by Government securities ; usu- 
 ally the Government securities are largely in excess of the circu- 
 lation. 
 
 It is not necessary to resort to the history of the Bank of England 
 or the Bank of France to show that no Government can borrow large 
 sums of money from the people except through the agency of some 
 kind of fiscal corporation or of individuals. There must be some in- 
 termediate link between the people who loan the money and the Gov- 
 ernment who borrows it ; and that link, according to the experience of 
 
7i SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 nations, must be some corporation authorized to issue, upon the credit 
 of the people, paper money. Every Bank of England note, every note 
 of the Bank of France, is really a note of England or of France._ In 
 all the troubles that have occurred since the foundation of those insti- 
 tutions, they have been mainly instrumental in supporting and sustain- 
 ing the credit of tlie country. 
 
 Sometimes, I know, we are told that unless we issue this large 
 amount of paper money we shall have to pay interest, and the national 
 debt will accumulate. Why, Mr. President, a national debt, although 
 it is not a blessing, is yet not so dangerous and troublesome a thing as 
 many Senators think. The power of paying off a national debt by the 
 means of a sinking fund exists at any time. The amount of tax levied 
 by this bill wiU in forty years pay off every dollar of the national debt. 
 That may seem to be a striking proposition, but yet it is absolutely 
 true. A sinking fund of $1,000,000 a year, at five per cent, per annum, 
 will amount to $100,000,000 in thirty-five years ; at six per cent, it will 
 be $100,000,000 in thirty-two years ; and the yeiy tax levied by this 
 bill upon these banks, if applied as a sinking fund and set apart for 
 that purpose, would in thirty-five years at five per cent., or thirty-two 
 years at six per cent., pay off $600,000,000 of the national debt. A 
 sinking fund of $10,000,000 annually, commenced to-day, would in the 
 lifetime of a single man pay off $2,000,000,000. Sir, I do not, there- 
 fore, fear a national debt if we only have a wise system of finance by 
 which it may be maintained ; because the operation of the sinking 
 fund, as proved by actual experiment, is so striking that in the life- 
 time of a single man an annuity of $10,000,000, as I have stated, would 
 pay off the largest possible debt that it is anticipated can occur in our 
 generation — that is, $2,000,000,000. I may here say that it was the 
 intention of the Committee on Finance to report as part of this scheme 
 a permanent sinking fund ; but on reflection, as it was a great sub- 
 ject, we thought it better to defer it until the next session of Con- 
 fress, when no doubt it will be presented for the consideration of both 
 louses. 
 
 The operation of a sinldng fund teaches us a lesson of economy. 
 One hundred thousand dollars that you may now waste by cai-eless 
 legislation, before it is paid off wUl, by the accumulation oi interest, 
 amount to a very large sum, which will have to be paid off in gold and 
 silver. An annuity of $10,000 — an amount easily spent uselessly and 
 foolishly — would, if set aside, in thirty-five years pay off $1,000,000 of 
 debt. This fact should teach us a lesson of economy. I Icnow Sena- 
 tors sometimes complain of efforts made to restrict expenditures ; but 
 when you remember that the money now paid out in an inflated cur- 
 rency must ultimately be redeemed in gold and silver coin, with all 
 the accumulated interest that may gather in a period of thirty or forty 
 or fifty years, it furnishes us a lesson and a warning. 
 
 Mr. President, I think T have now stated all I \losire to state in re- 
 gard to the merits of this bill. I know that many ai"e disposed to take 
 a gloomy view of our finnncial condition. I do not. Every nation 
 has encountered the same difficulty which is now presented to us. In- 
 deed, no nation in the world has the spirit that ours has evinced in 
 
NATIONAL BANK CUERENOY. 75 
 
 this war. Why, sir, if any man will go back and read the simple state- 
 ments of history in regard to other wars in other countries, he wiU see 
 that our financial condition is wonderful when compared with that of 
 other nations in similar circumstances. I will ask your attention to 
 one or two authorities on that point, to show you to what straits the 
 wealthiest countries of modern times haye been reduced. The finan- 
 cial condition of Great Britain in 1797 presents an instructive lesson, 
 and I hope it will be a lesson of encouragement to us all. I read from 
 Alison : 
 
 The aspects of public affairs in Britain had never been so clouded since the 
 commencement of the war, nor, indeed, during the whole of the eighteenth cen- 
 tury, as they were at the opening of the year 1797. The return of Lord Malmes- 
 bury from Paris had closed every hope of terminating a contest in which the 
 national burdens were daily increasing, while the prospect of success was continu- 
 ally diminishing. 
 
 Party spirit raged with uncommon violence in every part of the empire. In- 
 surrections prevailed in many districts of Ireland, discontents and suffering in all ; 
 commercial embarrassments were rapidly increasing, and the continued pressure on 
 the bank threatened a total dissolution of public credit. 
 
 The consequence of this accumulation of disasters was a rapid fall of the pub- 
 lic securities ; the three per cents were sold as low as fifty-one, having fallen to 
 that from ninety-eight, at which they stood at the commencement of the contest. 
 Petitions for a change of ministers and an alteration of Government were presented 
 from almost every city of note in the empire, and that general distrust and depres- 
 sion prevailed which is at once the cause and effect of public misfortune. 
 
 There, sir, at the beginning of a great war, waged by the people 
 of Great Britain against her rival, France, the Government securities 
 sank to fifty-one per cent. Again, at the same time, you will re- 
 member that there was a mutiny m the fieet, which created great con- 
 fusion, and led to a stiU. further decline in the public securities. Ali- 
 son says : 
 
 At the intelligence of this alarming insurrection, the utmost consternation 
 seized all classes in the nation. Everything seemed to be failing at once''; their 
 armies had been defeated, the bank had suspended payment, and now the fleet, the 
 pride and glory of England, seemed on the point of deserting the national colors. 
 The citizens of London dreaded a stoppage of the colliers and all the usual supplies 
 of the metropolis ; the public creditors apprehended the speedy dissolution of Gov- 
 ernment, and the cessation of their wonted payments from the treasury. 
 
 Despair seized upon the firmest hearts; and such was the general panic that 
 the three per cents were sold as low as forty-five, after having been nearly one 
 hundred before the commencement of the war. Never, during the whole contest, 
 was the consternation so great, and never was England placed so near the verge of 
 destruction. 
 
 This is a far gloomier view than even the most despondent has ever 
 taken of our financial condition. Our securities, running but a short 
 time, have always been at from eighty to one hundred and ten per 
 cent., never below eighty. The securities of Great Britain, which had 
 been accumulating for years, in the face of and in the beginning of a 
 great war, fell at once to forty-five per cent. Not only that, but dur- 
 mg the whole continuance of that war, for over twenty years, the pub- 
 lic securities ranged all the time below what they are at this moment in 
 this country. I have before me Cohen's " Compendium of Finance," 
 which gives a summary of the British debt from the beginning of the 
 
76 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 war till 1816 ; but I will only refer to the loans made by Great Britain 
 from 1803 to 1815. She sold her bonds, some three per cents, some 
 long annuities, some four per cents, some five per cents, at various rates. 
 The aggregate of bonds sold between those periods was £420,905,400, 
 or over $2,000,000,000. The proceeds of those bonds were only £266,- 
 800,000 ; so that, taking the whole of the war, the debt of England did 
 not bring on an average sixty-five per cent.; and yet people in this 
 country become discouraged because the Government cannot borrow 
 at par. Never, in the midst of those great difficulties, did the people 
 of that country falter in the purpose they had in view. They waged 
 that war against their powerful rival for twenty years, selling tneir pub- 
 lic debt below par, and carried it on with manly spirit ; and what has 
 been the consequence ? They maintained their Government ; they suc- 
 ceeded in the end ; and now their national debt is not felt by them as 
 a serious burden. Suppose they had succumbed to the financial diffi- 
 culties that gathered around them in 1Y9Y ; suppose the opposition in 
 Parliament had then fulminated the decrees that are now fulminated 
 here ; suppose that disorder had spread over the country and broken 
 out in open war and mutiny, that ancient power might have been over- 
 thrown. Her condition then was far worse then ours has ever been. I 
 believe that there is that spirit in the American people that will carry us 
 through these difficulties. It is wise for us to look to the lessons of his- 
 tory and see that other nations involved in a less holy cause have strug- 
 gled unfalteringly through difficulties greater one hundred fold than 
 ours. 
 
 In 1805, just before the battle of Austerlitz, the securities of France 
 could not be sold at any price ; the Emperor could not get money to 
 pay for his breakfast ; everything was deranged ; the Government 
 securities were so depreciated that they were of no fixed value ; the 
 assignats had disappeared or been converted into what they called 
 mcmdats, and they had depreciated and disappeared ; the Government 
 credit was gone, and the ordinary expenses of the household of the Em- 
 peror could not be cai-ried on except by indirection. Did the French 
 succumb ? Did that brave and warlike people give way to the difficul- 
 ties which surrounded them, and make what was considered by their ru- 
 lers a dishonorable peace ? No, sir. They appealed to the conscription 
 law, and gathered the young men of France around the standai-d of tlie 
 empire ; they carried on their Government as best they could, living 
 from hand to mouth ; and it was not long before the smi of Austerlitz 
 spread its beams all over France, and victory perched upon her ban- 
 ners. 
 
 Sir, I ask you whether that example does not f^irnish us some en- 
 couragement and hope ? Every nation, like an individual, muf^t have 
 its trials and troubles. Ours has not suffeTed yet as it will. I believe 
 yet that this is to be a war longer than many of my friends tliink. I 
 am willing to look the difficulties in the face and 6ght it out. I want 
 at the commcnceiiiont to secure a stable financial system by which we 
 can appeal to the peo])lo for money upon which they can rely, so that 
 the fanricrri aiul the laboring men, the common people of this country, 
 can lend to tliu Government their money through these financial organs, 
 
NATIONAL BANK CUEEENOY. 7Y 
 
 and tliTis maintain and uphold the Government. Sir, we must subor- 
 dinate all these interests. How could England have carried on her 
 great war except by the agency of the Bank of England ? She did not 
 resort to Government paper money ; but she borrowed money upon 
 the sale of her bonds, and used the Bank of England — ^which was but 
 one of her instruments, guided wisely by the wisdom of Pitt — as a 
 financial agent, just as these banks may be used under this system. 
 
 France, at the commencement of her revolutionary war, when the 
 revolutionary fervor was upon her, issued in unlimited quantities the 
 notes of the people, her assignats, against the warnings of the wise men 
 of France. The debates show that such men as Necker, all those men 
 who knew something about finance, warned the people of France 
 against the fatal effect of an over-issue of assignats ; but the eloquence 
 of Mirabeau carried it ; the demagogues carried it — the men who ap- 
 pealed rather to the temporary interests of the moment than to the 
 permanent interests of the nation at large. The consequence was that 
 in a short time all values in France were deranged ; everything was 
 destroyed ; and it was only the genius of E^apoleon, after innumerable 
 victories, that could reconstruct upon the broken foundations of finan- 
 cial credit the superstructure which finally carried France through that 
 war, and which is now the basis of the French financial system. 
 
 Sir, I am not discouraged by our difficulties. We are surroimded 
 by them. Every individual, in the course of his lifetime, is surrounded 
 by them. If he, with unmanly fear, gives way, he is submerged ; but 
 if he meets the difficulties boldly, and faces them honestly, he will 
 come out in the end. So with this country. We have the wealth, 
 we have the resources, we have the physical power. All we want 
 is wisdom to guide our counsels, and courage and energy to lead our 
 soldiers. 
 
 Under the system now proposed with the sanction of the Secretary 
 of the Treasury, the Government of the United States pays but four 
 per cent, on the amount of bonds filed in the Department, and these 
 banks provide a market for a greater quantity of bonds. The banks 
 under this system will be the means and the medium by which the 
 Government can reach the money in the hands of the people. Those 
 who take the responsibility of defeating a measure of this kind, unless 
 they can substitute something better in its place than the unlimited 
 issue of paper money, will take a responsibility that I would not 
 for my life assume. I had doubts about this system ; I examined 
 them carefully ; I weighed them all ; and on my responsibility I feel 
 bound to say that, all things considered, it is the best that can be 
 adopted under the circumstances to avoid that which will be inevita- 
 ble destruction. 
 
 If this bill is defeated, and we go on upon the system proposed by 
 the House of Eepresentatives, to issue an indefinite quantity of paper 
 money, without restraint or limitation, the price of everything wiU 
 rise ; the produce that we use will rise, and the expenses of the Govern- 
 ment will be largely increased. ISTothing now restrains the speculative 
 spirit except the Senate. Unless we can devise some permanent basis 
 for a national currency, some wise financial scheme, our people will be 
 
78 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 embarked in reckless speculation, and a wild and eager chase after 
 foolish things. 
 
 But, sir, when your United States notes depreciate, they carry down 
 with them United States bonds. Some Senators think we ought to go 
 on issuing these notes until the mere operation of the law of .supply 
 and demand will compel the people to convert them into bonds. Why, 
 sir, it is the history of such operations that as the United States notes 
 go down so the bonds go down. Stocks that I know to be worthless — 
 inflated stocks of broken railroad corporations — are now selling in New 
 York for more money than the six per cent, bonds of the United 
 States, with interest payable in gold and silver coin. It is one of the 
 tendencies of the times, and the more you inflate your currency, and 
 derange and disorder matters by the issue of Government paper money, 
 or bank paper money based upon it, the more you derange values, 
 and give an impetus to the speculation now going on. But if, by a 
 wise system, you induce the local banks gradually to assume as the 
 basis of their circulation the United States notes, and limit the amount 
 of those notes (for that is indispensable), you will furnish a market for 
 your bonds, by which alone you can hope to carry on the operations of 
 this war. 
 
 I may be like other men who have thought a great deal on a par- 
 ticular subject. I may give to this question an undue importance ; but 
 with me it is all-important. The establishment of a national currency, 
 and of this system as the best that has yet been devised, appears 
 to me all-important. It is more important than the winning of a 
 battle. In comparison with this, the fate of three million negroes 
 held as slaves in the Southern States is utterly insignifica,nt. I would 
 see them slaves for life, as their fathers were before them, if only we 
 could maintain our nationality. I would see them free, disenthralled, 
 enfranchised, on their way to the country from which they came, or 
 settled in our own land in a climate to which they are adapted, or 
 transported anywhere else, rather than to see our nationality over- 
 thrown. I regard all those questions as entirely subordinate to this. 
 Sir, we cannot maintain our nationality unless we establish a sound and 
 stable financial system ; and as the basis of it we must have a uniform 
 national currency. So it seems to me. I may be wrong ; but so strong 
 is my conviction on this subjecj; that I believe the passage of this bUf, 
 by which our financial system may be harmonized, and by which we 
 shall have what has always been desired by the statesmen of America, 
 a sound national currency, is more important than any measure that 
 we can pass. 
 
 I may say to my political friends that it receives the sanction of 
 every member of the Administration, and pai'ticularly the earnest sanc- 
 tion of the gentleman who is placed in charge of the Treasury Depart- 
 ment. I will say to my political advorsiU'ies thiit it has no connection 
 witli party politics. It has been framed, I believe, without reference 
 to any political dispute, simply to accomi)lisli that which we all desire 
 — to place our national credit on the surest and safest foundation. I 
 ask them, before they record their votes against it, at least to furnish 
 us a better. It is easy to find objections to this, although it has been 
 
NATIONAL BANK OUREENOT. 79 
 
 carefully prepared, but tell us a better. Shall we go on issuing paper- 
 money, disordering and deranging the value of 'everything? Shall we 
 sell our bonds in the market for what they wiU bring ? That we can 
 do. Great Britain did it ; but she established a sound national currency 
 through the agency of the Bank of England before she did it ; she re- 
 moved the restrictions from the Bank of England before she com- 
 menced that system of selling her public securities. Then she did it. 
 Unless you can tell me a better system, I appeal to friends and oppo- 
 nents to vote for this bill ; because, whatever differences there may be 
 as to the mode of administering the Government, whatever differences 
 there may be as to political questions growing out of the war on the 
 much disputed matter of the condition of the African race in this 
 country, there can be no doubt that we all alike are interested in pre- 
 serving our national honor, our national predit, our national existence. 
 If these are lost, what a sea of troubles is before us ! If our credit is 
 gone, if our nationality is destroyed, who among us now can see the 
 end of the difficulties that loom up in the future ? "Who can see the 
 difficulties that will arise if a boundary line is attempted to be drawn 
 across this continent between two hostile sections ? Who can see the 
 difficulties before us if, by the progress of time, our paper currency 
 becomes what my friend from Kentucky yesterday said it was — " worth- 
 less trash " ? Then, sir, the Government will be subverted. 'No people 
 can carry on a long war except with money, and you cannot get money 
 unless you have public faith, unless you have the means of borrowing, 
 and unless the jneans of paying at least the interest shall by a wise and 
 uniform system be provided. 
 
 I believe that if the financial bill reported from the Finance Com- 
 mittee, and this bill, a necessary supplement, together with a just system 
 establishing a sinking fund, be passed, we can carry on this war even 
 with the enormous burdens that are thrown on our people. Then let 
 us, in addition to this system, practice economy. 1 know that some- 
 times Senators have thought I have been very captious on that subject. 
 Perhaps I have been ; but I have felt that there was a necessity for it. 
 If I know my own heart, I have not been actuated by any unworthy 
 spirit, but simply by a desire to save and husband the resources of the 
 people of this country, to enable .them to meet the great national diffi- 
 culties that exist. If we can only get through this strait, if we can see 
 our way out of this war upon the basis of a preservation of the Union, 
 there is nothing that can be said too highly of the future of this country. 
 "With boundless resources, with an enterprising population, placed m 
 the center of a great continent, in a temperate climate, history does not 
 afford, and cannot furnish, a parallel of our capacity. Our example of 
 success will not only establish our republican form of government, but 
 it will spread the spirit of our republican institutions over lands that 
 are yet living under kings and nobles and despots. Sir, I do therefore 
 press upon the attention of the Senate this important bill. 
 
80 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 ON THE GENEEAL FINANCIAL POLICY OF THE 
 GOVERNMENT. 
 
 m THE SENATE OF THE UNITED STATES, FEBRUARY Tt, 1865. 
 
 Mr. Peesident : I desire to make some general observations to the 
 Senate in regard to the financial condition of the country, and especial- 
 ly as to the details and merits of this bill. I may as well avail myself 
 of the present occasion to do so. 
 
 The late period of the session at which the House of Kepresenta- 
 tives sent us this bill precludes full discussion upon any of the impor- 
 tant questions presented in it. The House is jealous of its exclusive 
 prerogative of originating revenue bills, but it ought at least to give 
 us an opportunity to exercise our undoubted power to amend them. 
 This important measure, affectiag every industrial interest of the 
 country, declaring in its title that it is to provide revenue to support 
 the Government and pay interest on the public debt, containing iifty 
 pages of printed matter, every line of which demands an examination 
 of the previous law, was sent to us within two weeks of the close of 
 the session. The Committee on Finance have worked diligently to 
 prepare it for the consideration of the Senate, and now, during the 
 closing week, with all the hurry incident to the closing days of the 
 session, with the appropriation bills still pending between the two 
 Houses, we must urge the Senate to pass judgment upon the nimierous 
 provisions of this bill rather than to discuss them. 
 
 After the first careful reading of the bill, considering the many 
 important changes proposed in it, I was inclined to recommend that 
 the Senate postpone it until the next session rather than by hasty legis- 
 lation to run the risk of new eiTors ; but the necessity of the Govern- 
 ment for new sources of revenue, the loss of revenue caused by defects 
 in the present law, the construction put upon parts of it by revenue 
 ofiicers, and the palpable failure to enforce the present law, especially 
 as to incomes, induced your Committee to report it back with several 
 important amendments, and especially to provide for such an examina- 
 tion of the whole subject of intei"nal taxation as would enable u# to 
 legislate in the future with fuller information. It may expedite our 
 action to submit at the outset a few general remarks as to the necessity 
 which compels us to impose upon our constituents the system of inter- 
 nal taxation provided for by this bill and the act of the last session. 
 
 Under the practice of Congress of dividing financial measures into 
 numerous bills, all of which are considered separately, without any con- 
 nection with each other, there seems no appropriate time to consider 
 the " budget," or the general financial estimates and plans of the Gov- 
 ernment. Yet it is obvious that since it is the cliicf duty of Congress 
 to provide ways and means to cnrry on the Govornment, some general 
 principles ought to bo adopted and iippliod to all our financial measures. 
 When at peace the United States had an anijile source of revenue in a 
 moderate rate of duty on imported goods. This tax was so light as 
 
THE GENERAL FINANCIAL POLICY OF THE GOVERNMENT. 81 
 
 never to be felt by our people, and its incidental effect in protecting 
 our domestic industry made this tax a blessing rather than a burden. 
 But the rebellion changed all this. We had either to submit to have 
 our existence as a nation destroyed by a haughty, but base, ignorant, 
 and defeated oligarchy, or we had to assume with war its unavoidable 
 incidents, taxation and debt. 
 
 The people of the United States having definitely determined to 
 prosecute war, it only remained for Congress to provide the ways and 
 means to carry it on. It is manifest now, as I then urged, that it would 
 have been better at the first session in 1861 to have reduced to the low- 
 est possible standard all expenditures, and to have provided a system of 
 internal taxation. It is easy now to see the errors of the past. None 
 of us appreciated the magnitude of the contest — the enormous armies 
 demanded and the vast sums required for the contest. I still think 
 that with the closest economy and heavy taxes from the beginning, we 
 might have borrowed money enough on a specie basis to have avoided 
 a suspension of specie payments; but when the war came we were 
 without a currency and without a system of taxation. Gold disap- 
 peared and was hoarded by banks and individuals. It flowed in a 
 steady stream from our country. By the Sub-Treasury act we could 
 not use the irredeemable biUs of State banks ; and, with the terrible 
 lessons of 1815 and 1837 staring us in the face, no one was bold enough 
 to advise us to adopt as a standard of value the issues of fifteen hun- 
 dred banks, founded upon as many banking systems as there were 
 States. Under these circumstances we had but one resource. We had 
 to borrow vast sums, and as a means to do it we had to make a curren- 
 cy. This was done by the issue of United States notes. Subsequent- 
 Ij, to unite the interests, of private capital with the security of the 
 Government as a basis of banking, we established a system of national 
 banks, and upon this currency, as a medium for collecting taxes and 
 borrowing money, have waged a war unexampled in the grandeur of 
 its operations, and, as I trust, soon to be crowned with unconditional 
 success. 
 
 Such a war has not been conducted without vast expenditures. 
 Our actual expenditure during the fiscal year ending June 30, 1864, 
 was $865,234,087. The estimated expenditure for the current fiscal 
 year is $895,729,135, upon the basis of the present laws. Much more 
 than one half of this sum has been already expended. To this amount 
 you must add every dollar you provide for by new laws, and this grim 
 fact must not be overlooked for a single moment when you are making 
 new appropriations. Every dollar of this must be paid in the form of 
 taxes ; and that is not the worst of it — ^it must be paid now. 
 
 We must get the money either by making it, by borrowing it, or by 
 collecting it from our people. If we ■.could postpone the borrowing 
 until after the war is over, it would be easy ; but we must have it now, 
 and we must devise the means of getting it before we can sympathize 
 with the poor clerk, the brave soldier, or the needy contractor. Until 
 then your sympathy is mockery. Your very measures of relief may 
 add more to the distress of all whose livelihood depends upon a fixed 
 salary. 
 
 6 
 
83 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 I repeat that there are but three modes of raising this money : one 
 is by printing notes, calling them money, and compelling the people to 
 take it ; another is by issuing bonds or promises to pay in the future ; 
 and another is to collect the money by taxation. That all these modes 
 may be resorted to is proven by the history of all modem nations when 
 involved in war. As the first is the easiest, it is apt to be resorted to 
 first ; but it is a doubtful expedient at any time, always dangerous, and 
 soon exhausted. If pressed too far, it destroys loans and taxes, and 
 national banknrptcy is the inevitable result. A limited amount of this 
 money was indispensable to us as a medium of exchange. It is like 
 some medicines, necessary in certain cases and in moderate quantities, 
 but when taken in excess sure death. 
 
 Paper money issued by a government is called a loan, but it has 
 none of the elements of a loan except the promise to pay. There can 
 be no loan without a lender, and his act must be volimtary. In the 
 middle ages governments resorted to " forced loans," a contradiction of 
 terms. A forced loan was merely an unjust and unequal tax. I choose 
 to regard United States legal-tender notes not as a loan merely, but as 
 money, lawful money, which the citizen is compelled to receive, and 
 which now fixes the standard of value. Whether the power to issue it 
 is derived from the power to coin money or to borrow money, or 
 whether it is inherent in any government clothed with the attributes 
 of sovereignty, are questions we need not now discuss. "We have exer- 
 cised the power. It is now the currency of the country, the measure 
 of value ; and we can only regulate its form and amount, and provide 
 for its redemption. 
 
 While we can make and have made our paper money the measure 
 of value, we can not fix the price or value of any commodity, whether 
 gold, silver, or food. The attempt has been made by many govern- 
 ments in different ages, and has uniformly failed. The standard of 
 value may be fixed by the government, but a higher law fixes the rela- 
 tive value of all commodities as measured by this standard. We may 
 by our tariff or tax law affect the relative value of commodities, but we 
 can not by direct legislation fix the value of any commodity either in 
 
 fold or paper money. When the attempt has been made, the result 
 as usually been to advance rather than to decrease values. All our 
 efforts to fix the value of gold as measured by our cun-ency have failed. 
 We may make penal the purchase and sale of gold ; we may deny the 
 use of our courts to enforce contracts for such purchases or sales ; we 
 may prohibit the exportation of gold ; we may deter sales of gold by 
 heavy taxation ; yet, after all, the price of gold rises or falls as our 
 national credit rises or falls. So far as our legislation produces reve- 
 nue or strengthens our army, it produces a fal^of gold as measured by 
 our standard. So far as it merely discourages trade in gold or any 
 othei- commodity, it increases its market value. We may as well recog- 
 nize ii8 an axiom of political economy, proven by the experience of all 
 nations, by everv form of government — despotic, monai-chic, or repub- 
 lican — that the nxing of the values of commodities is beyond the power 
 of leifiBlation. We may fi\ the etaiului-d of value, we may fix the tax 
 upon the commodity, and there our power ends. And especially is this 
 
THE GENERAL FINANCIAL POLICY OF THE GOVERNMENT. 83 
 
 SO of gold, wMch has vahie in all civilized nations of the world, and, 
 except with nations for a time involved in war, is everywhere the stan- 
 dard of value. 
 
 It is therefore manifest that the first duty of Congress is to keep 
 our lawful money, as a Standard of value, as near as possible to the 
 standard of gold ; and this can only be done by limiting the amount 
 and by makmg it valuable to pay taxes or loans. It can only be re- 
 deemed by the Government by taxes or duties, and every tax or duty, 
 however oppressive to the individual, which withdraws for a time our 
 paper money, brings it nearer the standard of gold. The power to 
 make money by issuing legal-tender bills is now exhausted. More 
 than enough is now outstanding to supply a currency. The issue of 
 $100,000,000 more would not only increase our debt to that amount, 
 but would add even a greater sum to our expenditures by the increased 
 price of commodities consumed by the war ; while the imposition of an 
 equal amount of taxes gives value to our currency, and thus reduces the 
 price of commodities we are compelled to buy. An increase of paper 
 money benefits the tax-payer now at the expense, of the soldier. It re- 
 duces the purchasing value of the pay of the soldier, while by debasing 
 the currency it is easier for the tax-payer to pay a specific sum. In 
 the end, however, the tax-payer loses by the increased cost of food and 
 clothing and transportation, which must finally be paid for in gold. 
 
 I assume, then, that while the necessity for raising these vast sums 
 is still imperative, yet one mode of doing it, and that the easiest, is ex- 
 hausted. Loans and taxes are our only resource. A loan must be 
 voluntary. It may, to some extent, be induced by patriotism. In this 
 contest thousands of patriotic people — women, children, poor and rich 
 alike — ^have loaned their savings to the Government from the purest 
 of motives. The admirable system of distributing this loan by going 
 out from the money centers to the remote hamlets and villages, gather- 
 ing from the small savings of the people rather than from the garnered 
 treasures of the rich, has proved a wonderful success. Yet, after all, 
 to borrow money you must appeal to the self-interest of the lender. A 
 great nation borrowing money will be tried by the interested tests ap- 
 phed by the pawnbroker to his shivering victim. The more it wants 
 to borrow, the more it must pay. The terms upon which we now bor- 
 row prove that we have pressed this resource as far as is expedient. 
 Tested by the present standard of gold, we now pay seven and three 
 tenths per cent, for three years, and twelve per cent, afterward until 
 the debt is paid in gold. We promise to pay $1,000 in gold at ttfe end 
 of eight years, with interest for five of these years at six per cent, in 
 gold, and for three years at seven and three tenths in currency ; and we 
 receive for this promise, which must be fulfilled to the uttermost, 
 $1,000 in currency, which will buy our soldiers no more food than 
 $500 in gold. But this is not all. We stipulate that this property 
 lent us shall be exempt from all the burdens which this war casts upon 
 all other property, of State, county, and municipal taxes. This simple 
 statement shows that this process of borrowing is exhausted ; that we 
 dare not extend it except for the highest object of national existence. 
 
 When I see the money thus borrowed expended on trivial objects, I 
 
84 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 can not but look forward to the slow and hard process by which it must 
 all be repaid in gold, with interest accumulated and accumulating, 
 through tne agency of collectors, by the inquisitorial process of this 
 bill, and from the labor of the poor. And if, Senators, you have 
 thought me hard and close as to salaries and* expenditures, I trust you 
 will do me the justice to believe that it is not from any doubt of the 
 ability of our country to pay, or from a base and selfish desire for cheap 
 reputation, or from a disinclination to pay my share, but because I see 
 in the dim future of our country the same uneasy struggle between cap- 
 ital and labor — ^between the rich and the poor, between fimd-holders 
 and property-holders — ^that has marked the history of Great Britain for 
 the last fifty years. I do not wish our public debt increased one dollar 
 beyond the necessities of the present war ; and the only way to prevent 
 this increase is to restrict our expenditures to the lowest amount couBis- 
 tent with the public service, and to increase our taxes to the highest 
 aggregate our industry will bear. 
 
 These general principles induce me to support many of the taxes 
 proposed in this bill. I regard the proposed tax on sales as indefensi- 
 ble in principle ; yet, as a temporary expedient to raise revenue, I wiU 
 vote for it. The increase of the postage on letters is only to make the 
 Post-Office Department self-supporting, and to preserve the proportions 
 between the old rate and the price of labor and commodities. The 
 changes in the income tax are necessary to prevent a repetition of the 
 shameless and wholesale evasions of the special income tax. This is 
 the only tax imposed on accumulated property, the only tax on money 
 invested in State and Government securities. It is the one that should 
 have been paid most cheerfully, but its assessment and collection was a 
 disreputable farce. 
 
 A still more important feature of this bill is the section to compel 
 the withdrawal of the State-bank notes. As the volume of cuiTency 
 affects the price of all commodities, I have no doubt the amount of 
 such paper money now outstanding adds to the cost of our purchases 
 $50,000,000. The refusal of Congress at the last session to pass i-e- 
 strictive measures to compel its redemption has seriously affected the 
 value of our currency. The national banks were intended to supersede 
 the State banks. Both can not exist together ; yet, while the national 
 system is extending, the issues of State banks have not materially de- 
 creased. Indeed, many local banks have been converted into national 
 banks, and yet carefully keep out their State circulation. They exact 
 intertst from the people on it, and yet avail themselves of the benefits 
 of the new sjj'stem. They transfer their capital to national banks, issue 
 new circulation upon it, and yet studiously keep out the old. They 
 issue two circulations upon the same capital. It is far better at once to 
 abandon the national banking system than to leave it as a cloak for 
 outstanding State issues. 
 
 If the State banks have power enough in Congress to prolong their 
 existence beyond the present year, we had better suspend the organiza- 
 tion of national banks. As the first friend of this measure in the Sen- 
 ate, I would vote to-day for its repeal rather than allow it to be the 
 agency undoi' which State banks can inflate our currency. And the 
 
THE ge:nlral financial policy of the government. 85 
 
 power of taxation can not be more wisely exercised than in harmonizing 
 and nationalizing and placing on the secure basis of national credit all 
 the money of the country. 
 
 Mapy of the taxes proposed by this bill are not in accordance with 
 established rules of political economy founded upon the experience of 
 European countries. "We are new beginners in the science of taxation. 
 The object now is less to equalize taxation than to increase revenue. 
 All other questions must await the necessity put upon us by war to 
 levy in the most expeditious mode the largest 'possible taxes, and to do 
 this we must extend it to nearly all articles of production and con- 
 suniption. 
 
 It may be truly said of some of these taxes that they are unequal. 
 We can only reply that we need the money now, and must look chiefly 
 to the result of the tax in revenue, leaving to the future to make such 
 changes as experience proves to be just and proper. Taxes levied now 
 must be paid by those at home who do not fight, while if postponed 
 they win fall in a measure upon those who have fought. Taxes col- 
 lected now can be paid in a depreciated currency, while if postponed 
 they must be paid in gold. Taxes paid now not only tend to reduce 
 the present price of commodities, but by reducing the sum to be bor- 
 rowed enable us to borrow on better terms, while taxes withheld now 
 largely increase the sum to be levied hereafter. What we pay now we 
 pay without interest ; what we postpone for the future we pay three- 
 fold in accumulating interest. The war has given vast activity to all 
 classes of industry, and has yielded enormous profit to those who are in 
 busiaess. It is proper that now they pay to the Government their full 
 tax on these profits before they are consumed by expenditure. A tax 
 system fully enforced now will enable us to relieve our people from 
 many taxes when the reaction of peace shall lessen the profits of in- 
 dustry. We can not increase our taxes after war.; we must be prepared 
 to reduce them. Taxes are more cheerfully paid now in view of the 
 mountain of calamity that would overwhelm us if the rebellion should 
 succeed ; but when we reach the haven of peace, when the danger is 
 past, you must expect discontent and complaint. The grim specter of 
 repudiation can never disturb us if we do our duty of tax-paying as 
 well as our soldiers do theirs of fighting. I therefore conclude that 
 every dictate of policy, every sentiment of patriotism, demand of us the 
 largest taxation now, to be fearlessly assessed and impartially collected. 
 
 But it is impossible to consider the subject of internal taxation with- 
 out some reference to our tariff laws. Though this bill does not change 
 the present duties on imported goods, yet the same general principles 
 must be applied to tariffs as to excises. The object now of our tariff 
 laws should be to raise revenue. In times of peace we may discrimi- 
 nate in favor of our industry, we may abandon taxes to increase our 
 commerce. ISTow our industry is sumciently protected by requiring 
 customs duties to be paid in gold, and we are in no condition to pro- 
 tect our commerce from foreign competition, because our vessels are 
 the prey of English pirates. Our immediate want is revenue, and es- 
 pecially revenue payable in gold. We are committed to the payment 
 of near sixty millions in gold annually, and must rely upon customs 
 
86 SPEECHES AND EEPOKTS OF JOHN SHERMAN. 
 
 duties to pay this sum. "We can not forego this revenue without de- 
 stroying the national credit, the value of our bonds, the basis of our 
 currency. We can not affect these without seriously impairing our man- 
 ufactures and our commerce. I repeat that we must now frame our 
 tariff laws solely with a view to revenue. All incidental protection or 
 benefit to any industry must now give way during this war to the im- 
 mediate and pressing need of revenue. 
 
 A different principle prevails in Great Britain, and in her present 
 position of peace, with all her great wealth employed in commerce and 
 manufactiire, it is founded upon the highest wisdom. The principle 
 adopted by her is thus stated by Sir Morton Peto : 
 
 If a customs duty, however moderate, imposed for a financial object, prevents 
 iJade with a country which would otherwise receive your goods in exchange for its 
 products, it is surely better to remove the duty which imposes the obstacle to com- 
 mercial intercourse than, for the sake of a small revenue, to preclude the possibility 
 of commercial exchange. . . . 
 
 But the first object of legislation in regard to customs duties should be, not to 
 tax all articles which do not come within the class of raw materials or food, but on 
 the contrary to tax those articles alone which can be taxed without injuriously af- 
 fecting our trade with other countries, and to tax such articles only to such an ex- 
 tent as will not injuriously affect their consumption by our own people. 
 
 Upon this principle, and another equally simple, not to impose 
 duties on the raw materials of industry and the first articles of food, 
 was based the policy of Sir Kobert Peel, which reduced the number of 
 articles charged with duties from 1,163 in 1841 to 44 in 1862 ; and, 
 sir, if we were at peace, with our currency restored to its normal con- 
 dition, I should be veiy willing to discriminate in favor of our own 
 commerce and manufactures. Although representing an interior State 
 chiefly engaged in agriculture, yet I have always felt that the prosperity 
 of one industry and section finally inured to the benefit of the whole 
 nation and of every part. I therefore have supported the present tai-iff 
 law, framed with a distinct view to discriminate in favor of our home 
 industry, and I would now only so far modify the present duties as to 
 increase the revenue. If by lowering the duty we can increase the 
 revenue, it should be done. If by increasing the duties on any article 
 we can increase the revenue without diminishing in a greater degree 
 the consumption of that article, it ought to be done. During wai', 
 when our industry is fully employed in repairing the waste of war, in- 
 creased importation may become a vast injury by exhausting us of gold 
 and food, which must then be sent to pay for luxuries. Then we send 
 abroad that which we most need, and receive that which we can do 
 without. The true principle for a nation in our condition, struggling 
 for its existence, is so to frame its tai-iff laws as to produce the greatest 
 revenue from the least importation. When the war ceases, our armies 
 will be disbanded and our soldiers will return to the ordinary pm-suits 
 of industry ; then tlie English rule should be applied of levying the 
 requisite duties on the fewest articles, and with a view to increase our 
 commerce and protect our industry. 
 
 With this general statement, I approach the consideration of this 
 bill. I am not entirely satisfied with it, but I am sure it will improve 
 the present law and add some new sources of revenue. When the 
 
THE GENERAL FINANCIAL POLICY OF THE GOVERNMENT. SY 
 
 macMnery of collecting is perfected, which can only be done by experi- 
 ence, the whole of these taxes wiU be revised. They will be arranged 
 into classes and schedules, and simplified. Its success will depend 
 mainly upon the Commissioner of Internal Kevenue. If he will per- 
 form his duty, and require his subordinates to da theirs, we shall realize 
 during this calendar year $300,000,000 of internal revenue, which will 
 be an ample basis of public credit, and wiU go far to reduce the public 
 debt. If our military and naval forces complete their great duty with- 
 in this year, our present system of national finance wm, I confidently 
 trust, very soon enable us to commence the permanent reduction of our 
 national debt, and to resume specie payments within a period equal to 
 that required in Great Britain after her wars with Napoleon. We have 
 resources in this country, when united and at peace, far greater than 
 those of any nation of modern times. Our accumulated wealth is not 
 to be compared with that of Great Britain and France, but a bountiful 
 Providence has given us sources of wealth far greater than either of 
 these powerful nations ever had. The cotton now coming through our 
 lines already affects the price of exchange. Petroleum is already ex- 
 ported to the amount of thirty-one million gallons a year. Our mineral 
 resources are scarcely touched. Our young sister Nevada is exciting 
 our fancy with mountains of gold and silver ; and dry statistics inform 
 us of a product there of gold and silver equal to the product of the 
 world fifty years ago. The South is to be opened to new industry, and 
 millions of laborers from Europe and from Asia are meeting on our 
 favored shores to help develop our resources. We have taken our 
 place among the geeat nations ; but as we have attained our military 
 position only after hard, exacting toil of military discipline, after de- 
 feats and discouragements, we can maintain our financial position only 
 by the hard processes of taxes and economy: I wish to see the evil 
 predictions of our enemies, at home and abroad, all belied. They 
 prophesied disunion ; we will show them Union. They prophesied 
 baniruptcy ; we will see them begging for our bonds, our cotton, pe- 
 troleum, and gold. Then we can provide for our public debt. Then 
 we can restore our commerce on the high seas, now driven by British 
 pirates to take refuge under foreign flags. Then we may revive old 
 doctrines about the American continent being no longer the home 
 of European kings. Now our duty is dry, hard, exacting ; but it will 
 be the more cheering when in the future our self-sacrificing patriotism 
 in this great crisis shall have enabled our country to enter upon its 
 new career without a stain upon its financial honor. 
 
88 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 WAYS AND MEANS. 
 APRIL 9, 1866. 
 
 The Senate proceeded to the consideration of the bill (H. E. No. 207) to amend 
 an act entitled " An act to provide ways and means to support the Government," 
 approved March 3, 186D. 
 
 Mr. Sherman said : 
 
 I EEQEET very much that I differ from the Committee on Finance ia 
 regard to this bill. This is the only bill on the subject of the public 
 deot on which I have not been able to concur with that Committee. I 
 do not perceive the necessity for conferring on the Secretary of the 
 Treasury, in the present condition of our finances, the vast powers 
 proposed to be conferred in this bill. It is true that the bill, as it now 
 comes before us, is very different from the one first reported in the 
 House of Eepresentatives. That bill contained a clause which author- 
 ized the Secretary of the Treasury, not only to sell the bonds of the 
 United States abroad, but to make them payable in the currency of 
 foreign countries. Under it the Secretary could make our bonds pay- 
 able in pounds, shillings, and pence, guilders, francs, or any of the 
 various forms of currency known in any European country. That 
 provision was stricken out by the House of Eepresentatives. After 
 the bill was defeated in the House a clause was added, on reconsidera- 
 tion, intended to limit the power of the Secretary of the Treasmy over 
 the legal tenders ; but this clause, although wise in itself, will not ac- 
 complish the purpose designed by the House. It is on this ground, 
 chiefly, that I object to the biU as it now stands. 
 
 If Senators will read the bill, they will find that it confers on the 
 Secretary of the Treasury greater powers than have ever been con- 
 ferred since the foundation of this Government upon any Secretarjr of 
 the Treasury. Our loan laws heretofore have generally been confined 
 to the negotiation of a single loan, limited in amount. As the war 
 progressed the difiSculties of the country became greater, and we were 
 more in the habit of removing the limitations on the power of the 
 Secretary of the Treasury ; but generally the power conferred was con- 
 fined to a particular loan then in the market. This bill, however, is 
 more general in its terms. It authorizes the Secretary of the Treasiiry 
 to sell any kind of bonds without limit, except as to the rate of intei'- 
 est. It does not limit him to any form of security. The security may 
 run for any period of time within forty years. He may sell the secu- 
 rities at less than par, without limitation as to rate. He may sell them 
 in any form he chooses. He may put them in the form of Treasury 
 notes or bonds, the interest payable in gold or in paper money. He 
 may undertake, under the provisions of this bill, to fund the Avhole 
 debt of the United States. The only limit as to amount is the debt 
 itself, now $2,700,000,000. The power conferred on the Secretary of 
 the Treasury is absolute, and is to continue until the act shall be re- 
 pealed. The description of the bonds in the act of March 3, 1866, re- 
 ferred to here, would probably limit the rate of interest to six per cent. 
 
WAYS AND MEANS. 89 
 
 in coin and seven and three tenths per cent, in currency ; but with this 
 exception there is no limitation. 
 
 The people are not generally aware of the favorable condition of 
 our finances. The statement of the public debt laid on our tables the 
 other day does not show it fully. But a small portion of the debt of 
 the United States wiU be due prior to August, 1867, that will give the 
 Secretary any trouble. But little of the debt which he will be required 
 to fund under the provisions of this bill matures before that time. 
 The temporary or caU loan, now over one hundred millions, may readi- 
 ly be kept at this sum even kt a reduced rate of interest. The certifi- 
 cates of indebtedness, amounting to sixty-two millions, may easily be 
 paid from accruing receipts, or, if necessary, may be renewed or funded 
 at the pleasure of the Secretary. None of the compound-interest 
 notes or the seven-thirty notes mature until August, 1867. 
 
 It is idle, therefore, to say that there is now at this moment, or will 
 be within a year, a pressing necessity to confer on the Secretary of the 
 Treasury this enormous power. It is only in view of a change of 
 policy, either by a reduction of the currency or some other measure in 
 the mind of the Secretary, that he can claim that this power is neces- 
 sary. Nor is there necessity to contract debt to pay current expendi- 
 tures, because the present income exceeds our expenditures. In his 
 annual report he estimated that there would be a deficit of $112,000,- 
 000 at the close of the present fiscal year. It is now admitted that 
 there will be no deficit, and that the amount on hand together with the 
 current receipts will be sufficient to pay the expenses of the Govern- 
 ment up to the 1st of July next. The estimated expenditures during 
 the next year are stated by him at |280»000,000. Those estimates 
 have been reduced somewhat by the bills sent to us by the House of 
 Kepresentatives, and it is scarcely possible that the expenditures dur- 
 ing the next year can reach $275,000,000 on the present basis. We 
 have a current revenue now of nearly $500,000,000 during this year. 
 The amount of the gold receipts during the first three quarters of the 
 year were $140,000,000, and for this quarter will not fall below $20,- 
 000,000 ; it is supposed that the internal revenue will yield during the 
 current year not less than $320,000,000 ; so that, including the profits 
 realized on the sale of surplus gold, we have an income of not less than 
 $500,000,000 this year, and some authorities place it higher. Thus it 
 is evident that we have $200,000,000 more income this year than we 
 will have expenditures next year. 
 
 No man can tell the future, and it is possible, perhaps probable, 
 that during the next year there will be a considerable falling off in 
 revenue. I do not think the internal revenue will fall off materially, 
 because there are many sources of revenue that will come in next year 
 which we have not yet felt. No one doubts that the tax on spirits will 
 yield two or three times as much as it has during the current year. 
 No doubt, however, other taxes will be diminished. I hope that the 
 duties received from imported goods will be diminished by a diminu- 
 tion of importations. But neither the Secretary of the Treasury nor 
 the head of the Internal Eevenue Bureau contemplates any very mate- 
 rial reduction, and on the basis of the present law as it now stands we 
 
90 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 shall next year probably have a revenue of $400,000,000, or at least 
 $100,000,000 more than the expenditure. 
 
 There is therefore no immediate necessity for these vast powers. 
 It is true we may repeal this law next year, but we know very well 
 that when such powers are granted they are seldom recalled ; they are 
 made precedents for further ^ants. It seems to me that the whole 
 object of the passage of this bill is to enable the Secretary to contract 
 the currency, and thus, as I think, to produce an unnecessary strain 
 upon the people. The House of Eepresentatives did not intend to 
 give him this authority. They debated the bill a long time, and it was 
 defeated on the ground that they would not authorize him to reduce 
 the currency ; and finally it was only passed with a proviso contained 
 in the biU, which I will now read : 
 
 Provided, That of United States notes not more than $10,000,000 maybe retired 
 and canceled within six months from the passage of this act, and thereafter not 
 more than $4,000,000 in any one month. 
 
 The purpose of the House of Eepresentatives was, while giving the 
 Secretary the most ample power over the debt by funding it as it ma- 
 tured or even before maturity, to limit his power over the currency, 
 lest he might carry to an extreme the view presented by him in his an- 
 nual report. If this proviso would accomplish the purpose designed 
 by the House of Eepresentatives, I would cease all opposition to the 
 bill ; but I know it will not, and for this very obvious reason : that 
 there is no restraint upon the power of the Secretary to accumulate 
 legal-tender notes in the Treasury. He may retire $200,000,000 of 
 legal-tender notes by retaining them in his possession without cancella- 
 tion, and thus accomphsh the very thing the House of Eepresentatives 
 did not intend to permit. He may seU the bonds of the United States 
 at any rate he chooses for legal tenders, and he may hold those legal 
 tenders in his vaults, thus retiring them from the business of the coun- 
 try, and producing the very contraction which the House of Eepresen- 
 tatives meant to prevent. Therefore, this proviso, which only limits 
 the power of canceling securities or notes, does not limit his power 
 over the currency ; and he may, without violating this biU, in pui-su- 
 ance of the very terms of the bill, contract the currency accordmg to 
 his own good will and pleasure. 
 
 My own impression is that the Secretary of the Treasury, in carry- 
 ing out his known policy, will do so. He says he wiU not contract it 
 imreasonably or too rapidly, but I believe he will contract the currency 
 in this way. He has now in the vaults of the Treasury $60,000,000 in 
 currency and $62,000,000 in gold — a larger balance, I believe, than 
 was ever before kept in the Treasury until within the last two or three 
 months ; a larger balance than was ever found in the Treasury during 
 the war. What is the object of accumulating these vast balances in 
 the Treasury ? Simply to carry out his policy of contraction. With 
 this power of retainmg in the Treasury the money that comes in, what 
 does he care for the limitation put upon this bill by the House of Eep- 
 resentatives ? That says that he shall not retire and cancel more than 
 $10,000,000 of United States notes within six months, and not more 
 
WAYS AND MEANS. 
 
 91 
 
 than $4,000,000 in any one month thereafter ; but why need he retire 
 and cancel them when he can retain them in the vaults of the Treasury, 
 and thus contract the currency ? 
 
 That brings me to the only material objection that I have to this 
 bill. I do not think it wise now to place in the power of the Secretary 
 of the Treasury or any mortal man this absolute and extreme control 
 over the currency of the country. We have never done it before. In 
 the bills that were passed when my honorable friend from Maine [Mr. 
 Fessenden] was Secretary of the Treasury, and when Mr. Chase was 
 Secretary of the Treasury, we authorized them to retire legal-tender 
 notes, but only by issuing other notes of the same character. 
 
 I do not doubt in the least either the integrity or the capacity of 
 the present incumbent of the Treasury Department ; I have as much 
 confidence in him as any one ; but this question of the currency is one 
 that affects so intimately all the business relations of life, the property 
 of every man in this country, his ability to pay taxes, his ability to earn 
 food and acquire a living, that no man ought to have the power to vary 
 the volume of currency. It ought to be regulated by law, and the law 
 ought to be so fixed and so defined that every business man may trans- 
 act his business with full knowledge of the amount of the currency, 
 with all its Hmits and qualifications. 
 
 With the powers conferred by this bill the Secretary of the Trea- 
 sury may at any moment put into the market a bond that will at once 
 absorb aU the legal tenders. It may be said that he will not do it ; 
 that it will not be his interest to do it. Then why give him the power 
 to do it when it is not necessary ? If there was now an impending ne- 
 cessity resting upon him to raise a large sum of money within a short 
 time, I would be willing to give him this power as cheerfully as any 
 one ; but there is no such necessity. Why, then, place it in his power 
 to contract or expand the currency at his pleasure, and thus make fluc- 
 tuations in all the business transactions of life ? That this is not an 
 idle fear I know from correspondence with some of the best business 
 men of the country. They are alarmed, and refuse to go on and con- 
 tract new obligations ; they refuse to go on with their business in the 
 manner in .which it has gone on ; the effect of the pendency of this biU 
 has been to limit and contract the transactions in various operations of 
 enterprise and business. I presume there are few Senators here but 
 have had complaints of this kind made from business men in different 
 parts of the country, that the uncertainty of the amount of currency 
 on hand, and the uncertainty as to the policy to be adopted by the Gov- 
 ernment and the Secretary of the Treasury, take away from them aU 
 means of judging as to what amount of business they can transact. 
 
 I do not think that this is the time or the occasion to enter into an 
 elaborate discussion as to the amount of currency needed in this coun- 
 try, or as to the various financial subjects that may be brought before 
 the Senate at different periods. My own impression has been, and 
 when this bill was before the Committee on Finance I believed it 
 would be better for that Committee to report to the Senate a financial 
 project to fund the debt of the United States. I believe that now is 
 the favorable time to do it. If a five per cent, bond, a long bond of 
 
92 SPEEOIIES AND REPORTS OF JOHN SHERMAN. 
 
 oper description and proper guarantee, was now placed upon the 
 meet, with such ample powers to negotiate it as ought to be given to 
 
 pror 
 
 marli ^ ^ ^ 
 
 the Secretary of the Treasury, such a loan as was authorized two years 
 
 ago, ^t a reduced rate of interest, to be exempt from taxation, I have 
 
 no doubt whatever the Secretary of the Treasury could fund every 
 
 portion of the debt of the United States as it matured. 
 
 The real difiSculty of our financial position in the future grows out 
 of the peculiar character of the seven-thirty notes. By those notes the 
 holder, when they mature, has the option to demand the money or a 
 live-twenty bond. It is manifest that as this option is out it can not be 
 recalled. To recall it would be a violation of the faith of the United 
 States, that the holder of these notes may demand either the money or 
 a bond. It is therefore the interest of the United States so to preserve 
 its credit that the five-twenties will be above par, and thus the seven- 
 thirty notes when due will be converted into five-twenties, which wiU 
 run for five years at six per cent. ; then I think the whole debt of the 
 United States might be funded and reduced to five per cent. I do not 
 believe it would Emit or cripple the power of the Secretary if we would 
 grant him authority to put upon the market such a bond as I have men- 
 tioned, and limit his power over the national currency by requiring 
 him to pay out all over a reasonable balance in the Treasury toward 
 the liquidation of the public debt, and thus prevent the very thing 
 the House of Representatives intended to prevent by this proviso to 
 the bill. 
 
 I do not like to embarrass a bill of this kind with amendments, be- 
 cause I know it is difiicult to consider amendments of this sort requir- 
 ing an examination of figures and tables. I have prepared a bill very 
 carefully, with a view to meet my idea, but I will not present it now 
 in antagonism to this bill passed by the House of Representatives and 
 the view taken by the Finance Committee, because I know that, in the 
 present condition of the Senate, it would not probably be fully consid- 
 ered. My only purpose now is to point out the fact, that is perfectly 
 clear to the mind of every sensible man who has examined this bill, 
 that as it stands it does not carry out the manifest intention of the 
 House of Representatives when they passed it, and that the pro^-iso 
 limiting the power of the Secretary ovfer the legal-tender currency does 
 not accomplish the purpose which they designed, and without which I 
 know the bill never could have passed the House of Representatives. 
 
 Mr. Fessanden, Mr. Chandler, and others briefly discussed the question, and it 
 was tlien resumed by Mr. Sherman. 
 
 The chairman of the Committee on Finance has substantially ad- 
 mitted in his argument that there was no necessity for this bill except 
 to endorse the policy or theory of the Secretary of the Treasurv. In 
 tlie present condition of our finances I do not tliink it wise to at'lvance 
 theories or to endorse them. Perhaps it was not Avise in the Secretary 
 of the Treasury to be so o])en in the announcement beforehand of what 
 he intended to do, and perhaps it would be just as unwise for Congress 
 now to endorse that policy until we see the events that Avill come 
 before us. 
 
WATS AKD MEANS. 93 
 
 That this bill is not necessary for maintaining the public credit I 
 think is clearly demonstrated. It certainly is not necessary to meet 
 current expenditures. On all hands it is admitted that our receipts are 
 in advance of them, and no possible or probaUe deduction will make 
 our receipts fall below them ; so that the bill is not necessary as a loan 
 bill to enable the Secretary to get money to carry on the expenses of 
 the Government. The honorable Senator from Maine admits substan- 
 tially that it is not necessary for other purposes. The only debt that 
 is maturing during the coming year is $62,000,000 of certificates of in- 
 debtedness. The balance now on hand, as reported and shown by the 
 Treasury books, is $120,000,000 ; but the actual balance on hand is 
 some twenty or thirty millions more than the reported balance growing 
 out of the manner in which the books of the Treasury are kept. 
 
 A draft is drawn here on the Treasurer at New Y ork, and it is im- 
 mediately put to his credit though the money may not be drawn for 
 some time, so that there is always more money in the Treasury than 
 the books show ; and that simple fact led to the controversy, about 
 which a good deal has been said in the newspapers, between the Comp- 
 troller of the Currency and the Secretary of the Treasury. Deposits 
 are made in the national banks all over the country, and it may be some 
 time before they are so reported at "Washington as to be entered on the 
 books of the Treasury here ; while if drafts are drawn here on New 
 Orleans or anywhere else, they are at once entered on the books of the 
 Treasury to the credit of the Treasurer, while the money may not be 
 actually drawn for a month or two months. There is always that dis- 
 crepancy ; there is always more money in the Treasury than is reported 
 by the Treasury Department, not because they intend to deceive any- 
 body, but simply from the nature of the transactions and the manner 
 in which the accounts are kept. 
 
 I say there is no necessity for this bill to enable the Secretary of 
 the Treasury to pay the current expenses or to meet accruing indebted- 
 ness. The sixty-two millions of certificates of indebtedness can be paid 
 out of the current receipts ; or if they are not sufficient, as the Senator 
 knows very well, the Secretary has now power to exchange for those 
 certificates any of the bonds of the United States. He may issue five- 
 twenties in payment of those certificates under the existing law. Ther6 
 is no necessity for the bill therefore for that purpose. 
 
 In regard to the seven-thirties, the honorable Senator agrees with 
 me that it is not expected that they will be paid in money ; the holders 
 undoubtedly wiU avail themselves of their privilege to convert them 
 into five-twenties, so that they are not to burden the Treasury ; and 
 that win postpone the payment of the principal of all of them five 
 years more, and give the Government the option of paying them after 
 any time within twenty years. There is, therefore, no object in this 
 bin to provide for the credit of the Government, because the credit of 
 the Government is already provided for, and the Secretary of the 
 Treasury has ample power for that purpose. 
 
 "What, then, is the purpose of the bill ? I think the Senator frankly 
 stated it ; it is to declare the policy of the reduction of the non-interest- 
 bearing legal tenders. Under the present law, he has power to retire 
 
94 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 every dollar of tlie interest-bearing legal tenders by exchange ; lie may re- 
 deem them when they become due, and no portion of them wiU be due 
 until August, 1867, and then they mature gradually, and not in bulk. He' 
 has power under the existing law to retire them by exchange of any securi- 
 ties for them, and with the present ease in the money market there is 
 no difficulty in retiring them whenever he can get hold of them. 
 Whenever he can get hold of them, he is now retiring them. The 
 trouble is that they are sought for and held by brokers and banks and 
 bankers, and therefore he can not reach them until they become due, 
 when they wiU faU ifito the body of the national debt. There is no 
 object in passing this bill except to contract the currency, and the hon- 
 orable Senator says the Secretary will not do that to an unreasonable 
 extent ; but in his annual report he says he will do it. That is the 
 whole theory of his proposition, and he is doing it, and in the very 
 way I have mentioned. The Secretary of the Treasury accumulates 
 large balances on hand. Our friend here on my right [Mr. Fessenden] 
 had no such balance in his hands when he was Secretary there ; he was 
 very glad to have a much less balance ; and for the ordinary purposes 
 of the Treasury Department, is there any occasion for such an enor- 
 mous balance ? What is it held there for ? The balance has been so 
 great that the Secretary actually has retired notes that are not due for 
 two and a half years. 
 
 I would have no objection to conferring on him the power to dis- 
 pose of bonds to meet bills as they mature. Indeed, I may say that 
 was one of the amendments I proposed, that the power to sell bonds 
 should be only to meet accruing indebtedness. Give him one year, if 
 you choose, to do it in, but no more. I do not think it is wise to con- 
 fer on the Secretary of the Treasury the power to meet the indebted- 
 ness not accruing for a year or two or three years. I do not think it is 
 necessary in our present financial condition to authorize hun to go into 
 market now and sell bonds at current market rates with a view to pay 
 debts that do not mature in a year or two. I have no doubt befoi"e 
 the five-twenty loans are due we shall retire every dollar of them at 
 four or five per cent, interest. No one who heeds the rapid develop- 
 ments of new sources of wealth in this country, the enormous yield of 
 gold now, the renewal of industry in the South, the enormous yield of 
 cotton, the growing wealth of this country, and all the favorable pros- 
 pects that are before us, doubts the ability of this Government before 
 this debt matures to reduce it to four or five per cent, interest. I 
 therefore do not think it wise to place it in the power of the Secretaiy 
 of the Treasury to sell six per cent, long bonds or any class of bonds, 
 even five per cent, bonds, except to meet accruing indebtedness. This 
 I am perfectly wilKng to do : the Secretary of the Treasury may sell 
 bonds at any rate to meet debts as they accrue, but that is not the pur- 
 pose of this bill. 
 
 I will state here tliat I have in my hands a table showing that the 
 Secretary of the Treasury used a portion of the surplus revenue for the 
 purpose of retii'ing the seven- thirties not due for two years and a half 
 to come. Ik; lias rotirod, of the third issue of seven-thirties, $7,T69,- 
 000 ; and of the second issue, not due until June and July, 1868, 
 
WATS AND MEANS. 95 
 
 $4,402,000 ; making an aggregate of $12,000,000 which he has retired 
 in the very mode provided in this bill. That is the power now given, 
 and he will use the power. He may think it to his interest to retire 
 the whole of the seven-thirties or the ten-forties ; but is it wise for us 
 to give him that power now, at the heel of the war and before things 
 have settled down ? I do not think it is. 
 
 I repeat, I do not wish to call in question the integrity of the Secre- 
 tary of the Treasury. The Senator interjects by saying we must look 
 ahead. There is just the difference between him and- me. I say the 
 future for this country is hopeful, buoyant, joyous. We shall not have 
 to beg of foreign nations, or even of our own people, money within 
 two or three years. Our national debt will be eagerly sought for, I 
 have no doubt. I take a hopeful view of the future. I do not wish 
 now to cripple the industry of the country by adopting the policy of 
 the Secretary of the Treasury, as he calls it, by reducing the currency, 
 by crippling the operations of the Grovernment, when I think that, 
 under any probability of affairs in the future, all this debt wiU take 
 care of itself. I believe that if the Secretary of the Treasury would 
 do nothing in the world except simply sit in his chair, meet the accru- 
 ing indebtedness, and issue his Treasury warrants, this debt will take care 
 of itself, and will fund itself at four or five per cent, before very long. 
 
 In my judgment, the amount of legal tenders now outstanding is 
 not too much for the present condition of the country. I expect to 
 come back to specie payments, and I expect to see gold approach the 
 level and standard of our paper money, without any material reduction 
 of our currency. Our currency now is less than the currency of Eng- 
 land or France, according to the statistical tables we have. Our whole 
 currency now is $T04,000,000, excluding the interest-bearing legal ten- 
 ders, which do not enter at all into it, and which can not be found, and 
 including bank circulation of every kind. Four hundred and fifty 
 millions of it consist of United States notes and fractional currency. 
 Then, there are over $260,000,000 of bank currency, iucluding the 
 notes of outstanding State banks, which are being rapidly retired. The 
 limit of the national-bank currency is $300,000,000 ; so that the whole 
 currency can not exceed $750,000,000. I do not consider the compound- 
 interest notes as anything, because they are not in circulation. The 
 circulation before the war was $20T,000,000 in paper, and perhaps 
 $100,000,000 in gdd. It is difficult to tell how much gold there was 
 in the country. vVe are now developing the mining regions. The 
 production of gold is increasing with great rapidity. The amount of 
 gold in the country I believe will in five years approach the amount of 
 our legal-tender currency, so that the one will be convertible into the 
 other. The proportion of gold to that currency at this day is greater 
 than it was at the beginning of the war. Exchange with all countries 
 is in our favor. Bills on England can now be had for 106 in gold. 
 That is two or three per cent, in our favor. We have vast uses for the 
 currency. It is being absorbed in the Southern States and held there. 
 They are glad to sell anything they have got for it. Cotton, which 
 was hardly counted indeed when the war ended, has yielded enor- 
 mously. 
 
96 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 In regard to going back to specie payments, M-hen did ever a nation 
 travel toward specie payment as rapidly as this country has done with- 
 out a reduction of the currency ? Here is a significant fact, that when 
 gold was 280 our currency was $550,000,000 ; and now, when our cur- 
 rency is over $700,000,000, gold is 130, and going down and down, and 
 no power in this world can prevent its going down. This fact shows 
 thait the mere amount of legal tender outstanding does not fix the rate 
 of gold. That is the result of the restored confidence of the people of 
 this country and of all nations in the credit of the United States. I 
 believe that if the Secretary of the Treasury will keep out of the stock 
 market, will just remain in his seat in the Treasury Department, and 
 pay the debts as they become due, the people of the United States will 
 take care of the currency of the country and of the credit of the Gov- 
 ernment ; and it will not be necessary to buy bonds before they mature 
 or do anything else except simply to meet the current indebtedness in 
 order to bring us back to specie payments, and I do not believe any 
 power can prevent it. 
 
 I do not wish the Senate to suppose that in these remarks I intend 
 to criticise the conduct of the Secretary of the Treasury. He takes a 
 different view from what I do. I am more hopeful than he is. He 
 probably, like a good banker as he is, wants a very lar^e balance on 
 hand. I have more confidence in the future, and am willing to trust 
 to it. I do not now see any imperative necessity for this bill, but at 
 the same time I would make no opposition to it, no opposition to the 
 vast power to sell bonds, because I think the power would not be abused, 
 if the Secretary would not in this way undertake to carry out what he 
 calls his policy, a contraction of the currency without any specific law. 
 That is what I am afraid of — ^his interference to contract the currency. 
 The honorable Senator from Maine, however, would seem to think that 
 I impute to him a wrong motive, and therefore I corrected him when 
 he made the remark that I seemed to suppose the Secretary was doing 
 this improperly. I think not. The Secretary of the Treasury informed 
 us that he desired to reduce the currency, and he has been doing it as 
 far as he could. He has been accumulating large balances. He was 
 opposed to the proviso which has been inserted in this bill, and yielded ' 
 to it only with reluctance. That is admitted on all hands, and he is 
 not precluded either in honor or propriety from carrying out his policy 
 if you give him the power to do it. 
 
 This is all I desire to say upon the bill. The only reason why I 
 spoke is because I can not vote for it under the circumstances ; I felt 
 bound to state thus briefly the reasons that actuated me in coming to 
 this conclusion. • 
 
 The bill was further discussed and passed. 
 
FUNDING THE NATIONAL DEBT. 97 
 
 FUNDING THE NATIONAL DEBT. 
 
 IN TEE UNITED STATES SENATE, MAY ^2, 1866. 
 
 The Senate having under consideration thcr bill (S. No. 300) to reduce the rate 
 of interest on the national debt, and for funding the same, Mr. Sherman said : 
 
 Mb. Peesident : This bill came to us in the usual mode from the 
 Secretary of the Treasury, and its purpose is to facilitate the negoti- 
 ation of a five per cent. loan. I have had an earnest desire during the 
 present session of Congress to see the interest on the debt of the 
 United States reduced to a rate not exceeding five per cent. ; but the 
 Secretary of the Treasury, as will be gathered from his public docu- 
 ments, hesitated somewhat as to wheSier he could negotiate a loan 
 bearing that rate of interest. After full consideration, however, he 
 presented this bill as containing the terms upon which, in his judg- 
 ment, this loan could be negotiated. It came to us, and by general 
 consent was reported to the Senate, printed for the purpose of at- 
 tracting attention and criticism, and was subsequently considered by 
 the Committee, and reported. Its history is now known to the 
 Senate. 
 
 Before considering the specific terms of the bill, it will be neces- 
 sary for me to state the condition of the public debt. By the state- 
 ment laid on our tables on the 1st of May, it appears that the ascer- 
 tained debt of the United States at that time was $2,827,676,871 ; and 
 from that may be properly deducted the amount of money (coin and 
 curi'eney) on hand o $137,987,028.82. To this aggregate must neces- 
 sarily be added quite a number of items, some of which have been 
 acted upon at the present session of Congress, and some of which will 
 be acted upon before our adjournment, the mere statement of which 
 will show the Senate the probable condition of the public debt within 
 the next year or two. The largest sum that will be required is by the 
 bill introduced from the Committee on Military Affairs for the equal- 
 ization of bounties, which will require, if passed, near $200,000,000. 
 What will be the fate of that measure I have no means of knowing. 
 The Pacific Bailroad, now being constructed, will probably cost in the 
 course of the next five years something like $50,000,000. 
 
 In the settlements with the States foi* expenses incurred for the 
 military service in an irregular way, we have already appropriated, I 
 think, about $10,000,000 to the States of Missouri, Kansas, Penn- 
 sylvania, and West Virginia ; and there are other claims of the same 
 character which will be presented by other States. I am told that In- 
 diana, Kentucky perhaps, and Ohio will have such claims. Ohio has a 
 claim of that kind growing out of the Morgan raid. The probability 
 is that this class of claims, now unadjusted but not disputed, the prin- 
 ciple having been settled, will take $20,000,000. The largest yet al- 
 lowed was to the State of Missouri, which I think amounted to some 
 $7,000,000. Then there is the measure presented by a prominent 
 member of the House of Representatives, which I hope will not pass 
 7 
 
98 SPEECHES AND KEP0ET8 OF JOHN SHEKMAN". 
 
 — ^the proposition to assume a portion of the expenses of the States in 
 raising men during the rebellion, and which, should it receive the sanc- 
 tion of Congress, would take,' by its terms, $116,000,000. As I have 
 seen but very little eflEort to pass that bill, I lay that aside as not a 
 probable burden upon the Treasury. 
 
 Then there are classes of large private claims growing out of the 
 war, many of which are being constantly pressed upon us, and which 
 will take probably millions of dollars, but the precise amount of which 
 no man can estimate. The bill passed the other day for the relief of 
 the contractors for the iron-clads, and the claims made by the States of 
 Kentucky and Tennessee and the various border States for damages 
 caused by the war, and claims for property used by the army, are speci- 
 mens of this class of claims, amounting, I might say, to fifties and 
 hundreds of milhons. I take it the great body of these claims will 
 be rejected upon the general principles of public law ; and therefore, 
 in estimating the probable burden on the Treasury, I do not put this 
 item very large, especially as I see a disposition in Congress to criticise 
 very accurately this class of claims. 
 
 It therefore is very certain that in the most favorable SBpect of 
 affairs the public debt of the United States might fairly now be esti- 
 mated at $3,000,000,000. That is the amount stated by the Secre- 
 tary of the Treasury in his annual report, and I think it is not over- 
 stated. With the strong probability of passing the bill for the equali- 
 zation of bounties, it may be understated ; but I take it as a correct 
 estimate. 
 
 It will be observed that this debt is of the most diverse character. 
 It consists not only of the unliquidated claims that I have specified, 
 but the pubhc debt which is ascertained is provided for by twenty- 
 seven different laws and as many as forty different forms of securities. 
 The report on the finances, which was laid on your table at the com- 
 mencement of the present session, contains a list of these various loans, 
 covering six^or seven pages. Under some of these laws there is a great 
 diversity of issues. For instance, under the seven-thirty law there are 
 three different series of notes, and under the five-twenty law there are 
 five different series, containing somewhat different provisions. The 
 seven^thirties vary somewhat, although it is very difficult pi-eciselv to 
 state the difference. The difference arises from the dates of issue partly, 
 but in the seven-thirties it exists also in the terms of the bond. The 
 principal difference is that in one class of those bonds the interest may 
 be at the pleasure of the Government paid in gold at six per cent. I 
 merely allude to this diversity to show that the natural idea of every 
 one connected with the finances of the Go\'ornment would be, as early 
 as possible, to consolidate the piiblic debt of the United States. It is 
 now difficult for the people of the United States to undei-stand any but 
 two or three of these loans, and none but a skillful financier, engaged 
 in the purchase and sale of stocks, can tell the various differences in 
 value of the different securities, and the reasons therefor. It is obvi- 
 ous, therefore, that for public conx-enience it is necessary to consolidate 
 these loans as soon as possible into one distinct form, so that we shall 
 liavc nothing to provide for but the interest of the debt and such por- 
 
FUNDING THE NATIONAL DEBT. 
 
 99 
 
 tion of the principal as tlie policy of the United States may require us 
 to pay off. 
 
 There is another reason for funding our public debt. It is not a 
 question of policy, but it is a question of necessity. A large portion 
 of this debt matures very soon, and it must be either renewed or paid 
 off. It can only be paid off by selling other bonds, and consequently 
 there is necessity of prescribing the terms of these new securities. I 
 have here a table showing when this public debt matures : 
 
 CHAEACTEE OF ISSUE. 
 
 Amount outstanding. 
 
 When redeemable. 
 
 Temporary loan, four per cent 
 
 $612,227 98 
 21,664,710 65 
 67,266,168 47 
 65,921,000 00 
 32,686,901 00 
 
 Due 
 
 
 Due. 
 
 
 Due. 
 
 Certificates of indebtedness, six per cent 
 
 One- and two-year notes, five per cent 
 
 Due. 
 Due. 
 
 
 $178,001,008 10 
 
 
 
 
 Six per cent, bonds (five-twenties) 
 
 Six per cent, bonds 
 
 $514,780,600 00 
 
 9,415,250 00 
 
 167,012,141 00 
 
 234,400,000 00 
 
 After May 1, 1867. 
 After Dec. 31, 1867. 
 
 Six per cent, compound-interest notes 
 
 Seven and three tenths Treasury notes 
 
 After Dec. 31, 1867. 
 After June 30, 1867. 
 
 Total maturing in 1867 
 
 $925,607,891 00- 
 
 
 
 
 Six per cent, bonds, . ....,.,.. 
 
 $8,908,341 80 
 
 66,600,000 00 
 
 300,000,000 00 
 
 230,000,000 00 
 
 After July 1, 1868. 
 
 Seven and three tenths Treasury notes ....... 
 
 a (( (( t( 
 
 It U 4t u 
 
 After March 3, 1868. 
 After March 3, 1868. 
 After March 3, 1868. 
 
 Total maturing in 1868 
 
 $604,608,341 80 
 
 
 
 $100,000,000 00 
 
 After Nov. 1, 1869. 
 
 
 
 
 $50,590,300 00 
 
 After Nov. 1, 1870. 
 
 
 
 
 $7,022,000 00 
 
 After Jan. 1, 1871. 
 
 
 
 Five per cent, bonds..' 
 
 . $20,000,000 00 
 172,770,100 00 
 
 After Jan. 1, 1874. 
 
 Five per cent bonds (ten-forties) 
 
 After March 1, 1874. 
 
 
 
 Total maturing in 1874 
 
 $192,770,100 00 
 
 
 
 $18,415,000 00 
 
 After Dec. 31, 1880. 
 
 
 
 Six per cent, bonds 
 
 $50,000,000 00 
 
 1-92,252,430 00 
 
 76,000,000 00 
 
 1,016,000 00 
 
 After June 80, 1881. 
 
 Sis per cent, bonds 
 
 After June 30, 1881. 
 
 Six per cent bonds . 
 
 After June 30, 1881. 
 
 
 After July 1, 1881. 
 
 
 
 Total maturing in 1881 
 
 $318,268,430 00 
 
 
 
 
 Six per cent, bonds (IT. P. R. R. Co.) 
 
 Six per cent, bonds (C. P. R. R, Co.) 
 
 $640,000 00 
 1,898,000 00 
 
 After Nov. 1, 1895. 
 
 Total maturing in 1896 
 
 $2,538,000 00 
 
 
 
 
 
 It will thus be seen that, while the pressure of the principal of the 
 public debt is not very great now, yet $1Y8,000,000 is within the reach 
 of the Secretary, and that next year and the year following both the 
 seven-thirties and iive-twenties come within his reach for payment or 
 
100 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 conversion. The Government may have a longer time for payment 
 if it chooses, by paying six per cent, interest in gold. But I wish 
 simply now to show ithat it is within the power of the Government, if 
 it can reduce the rate of interest, to do so consistently with the stipu- 
 lations of the bonds. 
 
 But there is another argument for consolidating the debt derived 
 from another table that I nave before me. All modem nations who 
 are now dealing very largely in public debt have afl a matter of policy 
 reduced their public debt to some simple form, so that in every coun- 
 try there is a speciiic debt known to the people of that country, with 
 a iixed rate of interest prescribed by law ; and the whole of the public 
 debt is generally put in that form as soon as possible. England had 
 formerly the same diversity of securities that we now have ; but it has 
 been the policy of English statesmen, from William Pitt down to this 
 time, to reduce the debt into one simple form, so that there should be 
 nothing but the interest to be provided for ; and the result has been 
 that the whole of the public debt of England is reduced to a three 
 per cent, debt, except about one million pounds. The total amount 
 of the public debt of Great Britain is £799,802,139, and the whole of 
 this may now be said to be a three per cent, annuity, the principal, 
 however, redeemable at the pleasure of the Government. In France I 
 find the same thing has occurred. The term rentes generally describes 
 the great mass of the public debt. I think all the debt, except a few 
 technical annuities, given probably for specific purposes, one called 
 obligations trentenaires, and some floating debt, is now funded in the 
 form of rentes. The debt of Russia, also, is now funded into three, 
 four and a half, and five per cent, stocks — ^the great body of it in the 
 form of five per cent, foreign loans. The same statement holds good 
 in regard to all European countries. Every nation in Europe, where 
 a public debt has existed in some cases for centuries, has adopted it as 
 a principle to reduce that debt to as simple a form as possible, so that 
 the interest alone would be a charge upon the treasury, and that a 
 sinking fund should pay off gradually such portion of the principal of 
 the public debt as the policy of the Government would allow. 
 
 It is manifest that if the debt of the United States was now i"e- 
 duced to one simple form of a five per cent, stock or bond, so that the 
 United States need look only to the payment of the interest, and to 
 the payment or purchase of such portion of the principal as its policy 
 might dictate, much of our financial difficulty would be removed. 
 What is now the trouble with us ? Why can not this project be adopted 'i 
 The answer is that a very large portion of the principal of the public 
 debt becomes due in a short time, and the Secretary must provide for 
 the payment of it ; and this very necessity of going constantly into the 
 market to I'ciicw tliese loans imposes upon him nearly all the burdens 
 of his office. And yet I do not arraign the iwlicy that was adopted 
 during the war of making short loans. It was proper to do it, it was 
 necessary to do it. It was not proper for this Government to stipu- 
 late to pay these high rates of interest for a long period of time, and 
 tlierofore during tln^ war it was necessary to make snort loans at a high 
 rate of intoi-cst ; but it was always (k)ne in view of reducing the rate 
 
FUNDING THE NATIONAL DEBT. 101 
 
 of interest after the war was over, and witli a view of consolidating 
 the whole debt. The pohcy, so far as I know, of those connected 
 with the finances of the country, has been to keep ever in view the 
 principle of redeemableness in every form of security issued during 
 the war. Therefore the five-twenty bond was payable or might be 
 paid after five years. The seven-thirties and the various forms of 
 securities that have been issued are within the reach of the Govern- 
 ment in a short time. Why was this idea so carefully kept in view? 
 Simply to enable the United States to retain the advantage of paying 
 the principal after the war when loans could be negotiated on more 
 favorable terms. And now we may properly reap the benefit of this 
 wise policy. We may now enter the money market with the laureis 
 of victory and peace. We need no longer compete with the industrial 
 interests of our citizens in borrowing money, but may prescribe our 
 own terms and renew our debts on conditions consistent with our vast 
 power and resources. 
 
 Now, Mr. President, the only additional question I need present in 
 this connection is. Is this the time to fund the public debt ? I say 
 emphatically it is. I believe we have wasted four or five precious 
 months already. I believe that the process would have been easier at 
 the beginning of this session than it will be now ; and why ? In or- 
 der to fund the public debt of the United States, a large amount of 
 currency is necessary ; but it is necessary for us to reduce our currency 
 as soon as possible. We can not get back to specie payments without 
 some reduction of the currency. Every one desires to resume specie 
 payments, but before we do so the debt ought to be funded. It can 
 not be funded on as favorable terms after we return to specie pay- 
 ments. The very abundance of the currency obviously enables us to 
 fund the debt at a low rate of interest ; and as the debt was contracted 
 upon an inflated currency, it is just and right that upon that same cur- 
 rency it should be funded in its permanent form. The efEect of the 
 superabundance of paper money is to reduce the rate of interest ; that 
 is obvious. At the time of the celebrated John Law excitement, the 
 rate of interest in France was reduced to one and a half, per cent, by 
 the overwhelming amount of paper money. I say that now, above all 
 others, is the time to fund this debt in some form of security. If we 
 postpone it six months or a year, it wUl only add to our difiiculties. 
 The longer we postpone it, and the longer we leave this amount of 
 floating indebtedness upon the market of the United States, the less 
 win we be able to fund it at a low rate of interest and on favorable 
 terms. And, sir, we have no choice about it. We have got to do it, 
 because this debt is maturing, and we have got to put it in some other 
 form unless we intend — to use a very expressive phrase — ^to shin it, 
 and go into the market to renew short loans. This debt matures, and 
 it must be paid. It can be paid, not by taxes, but by selling new bonds 
 and new loans ; and therefore we must determine upon some form of 
 funding it as soon as practicable. 
 
 And this brings me to the main question, what rate of interest the 
 United States ought to pay on the pubhc debt. Upon $830,000,000 
 we are now paying interest at the rate of seven and three tenths per 
 
102 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 cent., higher than we allow our citizens to exact from each other. 
 Upon the great part of our debt we pay six per cent, in gold, equiva- 
 lent at present rates to seven and eight tenths per cent, in the currency 
 for which the bonds were sold. We exempt our public creditors from 
 the burdens of taxation. The question is now whether we are willing 
 to continue to pay such interest, and whether we are unable to meet 
 our obligations on more favorable terms. 
 
 And, sir, in considering this question, I wish it distinctly under- 
 stood that I would not ai-bitrarily change anj contract with a public 
 creditor. Public faith is the most precious jewel of a nation, and I 
 would not tarnish ours by any violation of promise or contract. So 
 far as we have stipulated we must pay ; our credit demands it. An 
 old writer says : 
 
 This is the great thing called credit. Credit is a consequence, not a cause ; the 
 effect of a substance, not a substance ; it is the sunshine, not the sun ; the quicken- 
 ing something, call it what you will, that gives life to trade, gives being to the 
 branches and moisture to the roots. It is the oil to the wheel, the marrow in the 
 bone, the blood in the veins, and the spirits in the heart of all the negoee, trade, 
 cash, and commerce of the world. 
 
 Credit is based not only upon a strict compliance with contracts and 
 ability to perform them, but also upon great care in making them. 
 We must have prudence in making a contract, honor in observing it, 
 and ability to perform it. These are the elements of pubKc as well as 
 private credit. Our history as a~nation has shown that we have the 
 means and will to fill our contracts. It is for us to show our prudence 
 in making them in the future. In private dealing we will not tmst a 
 man who nas great means and ample property, if he is reckless in mak- 
 ing engagements ; but we do trust a prudent man who has no resources 
 but his prudence and probity. As a nation we ought not to impair 
 our credit by making engagements more onerous than other nations do, 
 unless we are compelled to do so by stem necessity. Now, sir, I can 
 not but think that it is discreditable to us as a nation that we are now 
 issuing our bonds at a higher rate of interest than any Christian nation 
 of the world ; that we now continue to issue, at a coin value of seventy- 
 five cents on the dollar, six per cent, bonds, principal and interest pay- 
 able in gold. I do think that the fact that European nations, M-ith 
 their complicated relations and expensive forms of government, can 
 sell their securities at a more favorable rate than we, is an unpleasant 
 fact no longer justified by the relative condition of the several coun- 
 tries. While we were in war, our Government in discredit, and our 
 own people fearing the result of the struggle, we were forced bv neces- 
 sity to pay high rates ; but to do so now is a confession of Nvoalcness 
 that I see no foundation for. 
 
 Let us test this question by a more detailed comparison of the rates 
 of interest paid by this and other countries, and of the resources of 
 each. I have a table showing the debt, population, and annual interest 
 paid by leading nations : 
 
FUNDING THE NATIONAL DEBT. 
 
 103 
 
 Sia'.ement shinning the aggregate indebtedness of the several European and American nations, 
 and its average per capita on the popxdation thereof ; the aggregate interest per annum, and 
 its average per capita on the population thereof. 
 
 COUNTI^IES. 
 
 Great Britain,, 
 United States.. 
 
 France 
 
 Russia 
 
 Austria 
 
 Spain 
 
 Holland 
 
 Prussia 
 
 Portugal 
 
 Belgium 
 
 Bavaria 
 
 Brazil. ...... 
 
 Denmark .... 
 
 Saxony 
 
 Hanover 
 
 Wurtemberg . 
 Hamburg .... 
 Greece 
 
 Total debt. 
 
 Population. 
 
 Per 
 
 capita. 
 
 $4,000,000,000 
 
 80,000,000 
 
 $138 33 
 
 3,000,000,000 
 
 36,000,000 
 
 85 71 
 
 2,000,000,000 
 
 36,500,000 
 
 54 79 
 
 1,165,000,000 
 
 79,000,000 
 
 14 62 ■ 
 
 1,125,000,000 
 
 35,000,000 
 
 32 14 
 
 535,000,000 
 
 16,000,000 
 
 83 44 
 
 465,000,000 
 
 3,000,000 
 
 166 00 
 
 210,000,000 
 
 18,000,000. 
 
 11 66 
 
 150,000,000 
 
 4,000,000 
 
 37 50 
 
 130,000,000 
 
 4,600,000 
 
 28 88 
 
 130,000,000 
 
 4,600,000 
 
 28 88 
 
 114,000,000 
 
 7,700,000 
 
 14 80 
 
 60,000,000 
 
 2,600,000 
 
 23 08 
 
 48,000,000 
 
 2,000,000 
 
 24 00 
 
 40,000,000 
 
 1,800,000 
 
 22 24 
 
 26,000,000 
 
 1,700,000 
 
 14 70 
 
 23,000,000 
 
 222,000 
 
 103 60 
 
 20,000,000 
 
 1,000,000 
 
 20 00 
 
 Annual 
 interest. 
 
 $132,000,000 
 
 139,000,000 
 
 78,000,000 
 
 38,000,000 
 
 58,000,000 
 
 13,000,000 
 
 11,400,000 
 
 11,600,000 
 
 5,200,000 
 
 8,000,000 
 
 5,660,000 
 
 5,720,000 
 
 3,129,000 
 
 2,050,000 
 
 1,760,000 
 
 1,470,000 
 
 1,360,000 
 
 230,000 
 
 Per 
 
 capita. 
 
 $4 40 
 3 97 
 2 14 
 
 48 
 1 66 
 
 81 
 8 80 
 
 64 
 1 30 
 1 77 
 1 25 
 
 74 
 
 1 20 
 
 1 02 
 
 ' 98 
 
 86 
 6 12 
 
 23 
 
 But this table, whOe it presents us in an unpleasant aspect, does 
 not show all the facts. Of our debt only $2,200,000,000 is on interest. 
 The residue is not funded or is ia the form of currency ; but on the 
 sum of a little more than $2,000,000,000 we pay $139,000,000 of inter- 
 est, while Great Britain pays a less sum of interest by some millions of 
 dollars on nearly double the debt. The rate of interest on her consols, 
 at their present market value, is three- and a third per cent. One hun- 
 dred dollars of her bonds, bearing interest at three per cent., will sell 
 in any money market of the world for eighty-six dollars in gold, equal 
 to ninety-four dollars in our coin ; while one hundred dollars of tJnited 
 States bonds, bearing six per cent, interest, will sell in Europe at from 
 sixty-five to seventy doUars in sterling gold, and in the market at New 
 *York for about seventy-six dollars in our coin. Is there such a differ- 
 ence between the condition of affairs in this country and in Great 
 Britain ? Is there anything in our public credit, the nature of our in- 
 stitutions, or the character of our laws, or in the uncertainty of pay- 
 ment, that compels this exorbitant difference ? I do not think so. In 
 France the rate of interest is about four per cent, and a fraction; 
 sometimes a little less than four. In Eussia it is five per cent. In 
 Austria it is five per cent. Five per cent, is the highest rate paid, ex- 
 cept during an emergency, by any of those countries ; and their re- 
 sources are not to be compared with ours. This table shows that, 
 tested by the public debt of any nation of modern times, the amount 
 paid by the United States is entirely exorbitant, and therefore the first 
 duty is to reduce the rate. In my judgment, it will be a public dis- 
 credit if the Secretary of the Treasury is compelled to issue any more 
 six per cent, gold-bearing bonds. 
 
 "When you examine onr resources and compare them with the 
 amount of our public debt, the latter seems insignificant. It is shown, 
 not only by our official tables, but by the actual exhibition of our 
 
104 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 industry and strength in tlie last three or four years, that we have 
 more elements of strength and more resources in money than any na- 
 tion in Europe. England has but thirty million people upon whom 
 her public debt rests ; we have thirty-five million people, and our pop- 
 ulation increases at a ratio without exajmple, maintaining that ratio for 
 sixty years. We have the broadest agricultural field of any nation in 
 the world, not excepting Eussia, because the greater part of Eussia is 
 either too cold or too dry for agricultural productions. We have a 
 territory of compact form but varied climate, and productions greater 
 in amount than all Europe. We have 2,044,077 separate farms, each 
 occupied by the owner, and in the main tilled by his own labor. Our 
 coal fields are estimated to be thirty-six times the size of those of Great 
 Britain and Ireland, and are distributed throughout allportions of the 
 country. As coal is the basis of the wealth of Great Britain, and ac- 
 tually yields seventy-two million tons, while we now consume but fif- 
 teen millions, we have in coal a bank that will never break, a mine of 
 jewels more valuable than all the gold of the world. And our mineral 
 resources are greater than those of any two countries of the world. 
 California has furnished to the mints of the United States for coining 
 over $360,000,000 in gold, and probably a greater amount in bullion 
 exchanged for foreign productions. Mountains of rich iron ore are 
 scattered over most of the States. We have more actual wealth 'per 
 capita than any nation in Europe. The price of labor here is twice 
 what it is in Europe. All the elements which enter into the computa- 
 tion are in our favor. For us to pay this rate of interest, it seems to 
 me, is an acknowledgment that there is some defect in our fonn of 
 government, some insecurity, or some unreasonable demand for the use 
 of money, that I can not explain. 
 
 The vast disproportion between the rates of interest we pay and 
 our resources has excited the intelligent observation of an Englishman 
 recently among us, who has written a book upon the resom'ces and 
 prospects of America, a copy of which I have before me. I refer tq^ 
 Sir Morton Peto, and I am sure every Senator who hears me will 
 deeply regret that gne so friendly to our country seems, by the advices 
 we have this morning, to have been involved in financial emban-ass-, 
 ments at home. This intelligent writer, who is familiar with tlie 
 whole system of finance and taxation in England, has presented in this 
 volurne the results of his study and observation of our resom-ces in a 
 manner that must attract the attention of every reader. The book is 
 a careful collection of facts admirably arranged, but without attempt 
 at concealment or exaggeration, and he closes it by saying that, after 
 the completion of our Pacific railroad — 
 
 We shall he called upon to regard America as the greatest nation of the world. 
 She will be entitled to take that rank by reason of her extent, her diversity of soil 
 and climate, the character of her oomfflunieations, the variety of her resources, her 
 vast mineral riches, and the abundant field which she presents for labor and for the 
 employment of capital and enterprise, ^fany among us are accustomed to smile 
 when we hear the Americans 9i)cak of the United States, in their accustomed man- 
 ner, as a " great nation." But there is no more boast in that description. Em- 
 phatically, America is a "groat nation." Whore can wo find her equal in geo- 
 graiihical and natural advantages, in material profiross, or in general prosperity?' 
 
FUNDING THE NATIONAL DEBT. 105 
 
 As a united people, the Americans present to the ■world a spectacle that must 
 excite general admiration. Eegarding them as of the same race and ancestry with 
 ourselves, as a people using pur language, governed by our laws, united by the 
 same religion, influenced by kindred sentiments, their progress is a spectacle which 
 should kindle our admiration and enthusiasm. 
 
 And, sir, in this connection we must remember that while our 
 resources are so great, they are not locked up in the bosom of Mother 
 Earth, but may be touched by the power of taxation. The actual ex- 
 periment has been tried, and the result has been far greater than any 
 of us estimated. "We are now collecting a revenue greater than any 
 modern nation. A recent official statement made to us by the Rev- 
 enue Commissioners shows that during the current year the result of 
 our taxes is over $500,000,000 dollars, a sum greater than France 
 or Great Britain ever collected in any one year. We are now en- 
 gaged in the happy duty of repealing many of these taxes, but will 
 still retain $30,000,000 to apply annually on the principal of our debt ; 
 a fact that has forcibly impressed the mind of Mr. Gladstone, who, 
 after yeai's of peace, is fortunate in being able in Great Britain to pro- 
 pose a plan of slightly reducing the debt of that country by changing 
 a portion of it into terminable annuities. 
 
 Another element of credit is that under our system of government 
 our national expenses are far less than those of other nations. Sir Mor- 
 ton Peto says : " In proportion to population, the United States in 1860 
 had, I apprehend, the smallest expenditure and the smallest national 
 debt of any country in the world." And, sir, even under the increase of 
 our expenditure since the war, our actual expenditure, other than on ac- 
 count of the public debt, will be in the future far less than that of the 
 same population in Europe. Here war expenses cease with the war. 
 No standing army swells exorbitantly our estimates. Our heroes who 
 saved the country by war are now enriching it by their labor. Our 
 current expenses next year will be considerably less than two hundred 
 millions. So that whatever view we 'take of our financial position, 
 whether we consider our resources, our receipts, our expenditure, or 
 the varied industry of our people, we must conclude that we are not 
 justified in paying rates of interest so far in excess of other nations. 
 
 Again, sir, the present rate of interest is a war rate, and the distinc- 
 tion between a war rate and a peace rate is recognized by all writers 
 on the subject. England was compelled to sell many of her three per 
 cent, annuities at some sixty cents on the dollar ; but even England 
 when she was involved in the great war with Napoleon never paid any- 
 thing like the rate of interest that we pay. It seems from the report 
 of one of the Revenue Commissioners, which is very full of facts and 
 details on this subject, that the average rate of interest paid by Great 
 Britain during her war of eight years with the French Eepublic was 
 £4 lis. per £100, a little less than five per cent. ; that during the year 
 1802 it was reduced to £4 4*. ; that during the war with the French 
 Empire it was £4 15s. ; that from the end of the war until 1821 it was 
 £4 5s., or four and one fourth per cent. ; and that the average rate 
 during the whole period of the war was four and three fifths per cent., 
 reduced to a specie standard ; and yet we have paid, uniformly, six per 
 
106 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 cent, in gold, while we receive paper for our bonds. At orie time dur- 
 ing the war we paid at the rate of thirteen or fourteen per cent, on 
 money, counting the difference between gold and paper. Such a thing 
 as that would exhaust any country except ours. We are able to bor- 
 row and get it from the people ; but it is plain that at the very earliest 
 moment we must go back to something lite a reasonable rate of inter- 
 est. We must not tear from our people the results of their labor and 
 pay it for purposes of this land when there is no necessity. I take it, 
 therefore, as an axiom with which to set out, that we ought to reduce 
 the rate of interest. I expect to live to see the time when the rate of 
 interest in this country will not be over three or four per cent., and 
 now we propose to reduce it on new loans to five per cent. 
 
 There are one or two collateral views that Senators mght reflect 
 upon with great propriety. First, there is the influence of these high 
 rates of interest on the industry of our country. I have a letter here, 
 which probably presents this point as clearly as I can, from a very in- 
 telligent citizen of New York. I wiU read a short extract. He speaks 
 of the efi'ect of the high rates paid by the Government in the city of 
 New York. He says : 
 
 A powerful cause whicli exposes the poor and persons of limited means to such 
 high rents is found in the rates of interest established by national and State laws, 
 and the increased value given to money by such legislation. During the rebellion 
 the Government offered a higher rate of interest than the laws of New York and 
 the seaboard States generally had established as legal ; hence investments in United 
 States securities now realize more than two per cent, over bonds and mortgages in 
 New York. Capitalists have therefore been withdrawing money from real estate 
 loans to invest them at higher rates in Governments. This policy aifects scores of 
 millions of capital. It has a direct tendency to limit and retard building and dis- 
 courage all State developments. It has entirely unsettled the whole system of the 
 demand and supply of money for private enterprises. Every day an unprecedented 
 number of houses and lots are thrown on the market, either from the inability of 
 the borrower to pay off his mortgages or debts in any other way, or from the im- 
 perative necessity of raising money to prosecute old Ijusiness or start new. These 
 enforced real estate sales benefit the capitalists alone, who in return demand at least 
 fifteen per cent, on their new property ; and those who are obliged to rent are thus 
 held at their mercy. 
 
 Before the war capitalists and corporations were ready to loan from fifty to 
 seventy per cent, on real estate securities. With from two to five thousand dollars 
 on hand, a man could buy and build with a certain reliance on a loan, while his fu- 
 ture earnings, with the gradual advance of property, would ultimately give him a 
 clear title to a home for himself. In this way many thousands of good dwellings 
 were constructed in New York ; but the arrest of this system has put our popula- 
 tion into the hands of the landlords, and they will hold the power tUl the system is 
 clianged. If the poor became rich they would do the same. 
 
 The effect of these high rates paid by the Government is not only 
 to absorb the floating capital of the country, but to deter men from en- 
 gaging in enterprise ; and therefore all over cities of the United States 
 it 18 a common remark, " It is impossible to get houses." In the "West 
 the cry is distressing. In all the cities it is impossible to get a house 
 at a fair rent. The rent absorbs all a man's little earnings. The re- 
 sult is, the people are crowded into tonenieuts, half a dozen families in 
 a house — in Kew York, in some cases, two or three families in a room ; 
 and all this grows out of the advance in rents, together with tlie high 
 
FUNDING THE NATIONAL DEBT. 107 
 
 prices of the necessaries of life. By paying this high rate of interest 
 we compete with every industry : with the railroad companies in the 
 sale of their bonds ; with the manufacturers in the building of new 
 warehouses ; with all classes by offering a higher rate of interest than 
 we allow the courts to enforce for them. During the war that was 
 necessary ; we could not avoid it ; but it is not necessary now. 
 
 The leading objects of this bill are to fund the public debt and 
 to reduce the interest ; but there is another object proposed by it which 
 I think is peculiarly an American one, and upon which I ought to say 
 something before I proceed to ^ examine the details of the bill; and 
 that is the providing of a method of payment of the debt by apply- 
 ing a specific sum every year to the cancellation of bonds under laws 
 to be hereafter framed. The origiaal funding act framed by Alexan- 
 der Hamilton was based upon the idea that a public debt should be 
 temporary, and this idea is ingrafted upon American finance. In 
 view of this, ia the first loan law of 1862, if I remember aright, we 
 provided that one per cent, of the amount of the loan should be set 
 aside as a sinking fund with a view to pay off the principal of the 
 debt. That pledge has never been redeemed, nor during war was it 
 possible or proper to redeem it. A sinking fund can properly be ac- 
 cumulated only during peace. It would be bad economy to take a 
 portion of the money borrowed at high rates of interest dui'ing war and 
 invest it in securities purchased in the market, and then lay them aside 
 and accumulate the interest for the purpose of paying off a debt dur- 
 ing peace. Great Britain tried that for nearly one hundred years, and 
 finally abandoned it. The old form of a sinking fund, which was the 
 favorite theory of Robert Walpole and William Pitt, was abandoned, 
 then resumed, and finally abandoned in 1819. I have an interesting 
 book here, the preface of which was written by the celebrated Mr. 
 McCuUoch, in which he speaks of the abandonment by Great Britain 
 and by all other nations of the old form of a sinkiag fund. I will 
 read an extract from it : 
 
 Neither must it be supposed tliat the notion of the wonder-working effects of 
 sinking funds has been a mere harmless error. On the contrary, few delusions 
 have been practically so mischievous. 
 
 Dr. Hamilton, of Aberdeen, has the merit of having dissipated the delusion in 
 regard to the sinking fund. ... He showed that, instead of reducing, the sinking 
 fund had increased the debt. And he proved to demonstration that the excess of 
 revenue over expenditure is the only fund by which any portion of the public debt 
 can ever be discharged. 
 
 But since Dr. Hamilton's work appeared, more correct s»ccounts have been ob- 
 tained of the expenditures, loans, etc., during the great struggle terminated in 
 181S ; and from these it may be easily shown that the sinking fund was not a 
 clumsy only, but a costly, imposture. In proof of this we beg to state that the 
 loans contracted in each year from 1794 to 1816, both inclusive, amounted in all 
 to £584,874,657, at an annual charge to the public of £30,174,364. Of these loans 
 the Commissioners of the Sinking Fund received £188,522,350, the proportional 
 annual charge on such portion being, of course, £9,726,090. But it further appears 
 from the accounts referred to, that the stock which the Commissioners purchased 
 with this sum of £188,522,350, transferred to them out of the loans, only yielded 
 an annual dividend of £9,168,232. On the one hand, therefore, an annual charge 
 of £9,726,090 was incurred, to enable the Sinking Fund Commissioners to go to 
 market; and, on the other, they bought stock which yielded £9,168,232 a year: 
 
108 SPEECHES AND EEPORTS OF JOHN SHEEMAN. 
 
 so that, on the whole, their operations during the war occasioned a direct dead 
 loss to the oouptry of no less than £557,857 a year, equivalent to a three per cent, 
 capital of £18,696,283, exclusive of the expenses of the office, which amounted to 
 above £60,000. Such was the practical result of Mr. Pitt's famous sinking fund, 
 so long regarded as the palladium of public credit, and the sheet-anchor of the 
 nation ! 
 
 Notwithstanding Dr. Hamilton's book was published, as already stated, in 1813, 
 the statute for the suppression of the sinking fund, 10 George IV., c. 27, was not 
 passed tilH829. It enacted that in time to come the sum to be applied to the re- 
 duction of the national debt should be the actual annual surplus of revenue over 
 expenditure. 
 
 The old form of sinking fund adopted in England, and also in 
 this country, was to invest through certain persons named in the law 
 specific funds, and authorize them with those funds to buy any por- 
 tion of the public debt. That plan of accumulating a sinking fund 
 has been abandoned, and now, as this author says, the only proper way 
 is to apply a iixed sum raised by taxes and from surplus revenue to 
 the payment of the public debt. Instead of endeavoring to keep the 
 debt alive by sinking fund commissioners, the application of a specific 
 sum to the payment of the principal and interest of the debt every 
 year would have the same effect in extinguishing the public debt as if 
 invested by sinking fund commissioners, and without the loss and ex- 
 pense of management. 
 
 I have thus stated, I fear with too much detail, that any plan should 
 embrace these ideas : the funding of the debt, the reduction of interest, 
 and the ultimate payment of principal. And here a difference of opin- 
 ion has arisen whether this plan should be prescribed by Congress or 
 whether it should be left mainly to the Secretary of the Treasury. I 
 objected to the law passed here a month or two ago, and I stiU think I 
 was right. My objection did not arise from any want of confidence in 
 the Secretary, for I know the present Secretary will not abuse this trust. 
 But it grew out of what I considered the right of the people to know 
 precisely the terms of the loan. That bill authorized the Secretary to 
 sell a bond, principal and interest payable in gold, running not to exceed 
 forty years, and bearing an interest not to exceed six per cent., to be 
 free from State and local tax, and which he might sell under par. Xow, 
 I did not wish to admit for a moment, in the form of a law, the possi- 
 bility of any Secretary selhng such a bond even at par, and certainly 
 not under par. It was a cheapening of the public credit to provide for 
 such a loan. And without renewing the controversy, I ask, is it not bet- 
 ter in legislating on this important question, involving ii3,00(),00(>,()00, 
 to put in the form of law and on the face of the statiite the terms and 
 conditions upon which our public agents shall sell om- bonds i It seems 
 so to me, and therefore, if this bill contained no new provisions, I should 
 think it highly important that the terms finally agreed upon and fixed 
 by tlie Secretary of the Treasury, after full consideration, should be 
 embraced in the form of law so as to be binding upon him and his suc- 
 cessors, and so that no change should be made" without the consent of 
 Congress. I do not propose, however, nor do I ask, the repeal of that 
 law ; but I think that when a pliin of funding is agreed upon, it should 
 assume the form of law, leaving, however, the general provisions M-hich 
 
FUNDING THE NATIONAL DEBT. 109 
 
 passed a short time ago to stand to meet emergencies and exigencies 
 now unforeseen. 
 
 The further question which I now desire to submit to the Senate 
 is, whether this bill presents a plan by which these objects can be ac- 
 complished. • If it were left to my own hopeful view of things, I would 
 strike out two or three clauses. I would not extend the exemption of 
 the bonds from taxation to the income tax. I would preserve the form 
 of our laws in regard to the convertibility clause, vesting the power in 
 the United States to pay off this debt after a certain time, say ten years. 
 I would insert a proviso which was in the old law of 1T95, authorizing 
 the United States to pay off the principal. But the Secretary of the 
 Treasury, who is to execute this law, is of opinion that he can not nego- 
 tiate a nve per cent, loan upon these terms, and therefore he would not 
 undertake it. He has the power under the general law we have passed 
 to negotiate a loan at six per cent., or one at a less rate, but he thought 
 he could not negotiate a five per cent, loan without additional legisla- 
 tion. I am not sure of that. I believe that if you pass a bill of this 
 kind fixing the rate of interest at five per cent., with the general stipu- 
 lations contained in this bill, we shall be able, though perhaps with some 
 difficulty and after some time, to save the one per cent, without giving 
 any additional benefits. He thought not, however. The question now 
 is, not whether we shall give him this law, but whether we shall compel 
 him to issue a six per cent, rather than a five per cent, loan, unless we 
 give him the terms and privileges contained in this bill. If I was called 
 upon to prescribe the form, being probably a more hopeful man than 
 he or many of those around me, i would insist that the Government 
 of the United States should not pay in any event over five per cent, 
 interest, and that a clean loan should be negotiated for that amount ; 
 and that it should be something like the ten-forty loan, within easy 
 conversion, so that, if in ten years we could negotiate a loan at ajess rate 
 of interest, we might have power to do it. But he thought that in 
 order to enable him to negotiate a five per cent, loan he must have two 
 provisions ; one giving him authority to issue a thirty-year loan, to 
 postpone tlje payment of the principal not to exceed thirty years ; and 
 the other to exempt these securities from the income tax of the United 
 States. 
 
 Those were the two conditions upon which he thought he could 
 negotiate a five per cent. loan. "When I came to examine them, I found 
 that these two conditions could amount to but very little loss. The 
 income tax levied by the United States now upon national securities 
 pays to us less than one tenth of one per cent, of 'the public debt. By 
 the terms of the tax law the holders of these bonds are compelled to 
 pay income tax as upon other property ; but all the bonds that are 
 held by persons whose aggregate income is less than $600 go free of 
 tax ; all the bonds that are held abroad are free of tax ; all the bonds 
 that are held by banks, insurance companies, and corporations are held 
 free from this income tax. No corporation pays an inconie tax ; the 
 income tax is levied only upon individuals. The result is that the 
 bonds of the United States, you may say the great mass of them, are 
 held in such a way that they pay no income tax. 
 
no SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 The Secretary says : " If you will surrender the trifling amount you 
 collect from incomes derived from Government securities, I may be 
 enabled to save you one sixth of all the interest paid upon the public 
 debt." When that proposition was made, it seemed to me that we 
 ought to adopt it. There is another reason for its adoption. The in- 
 come tax is, in its nature, temporary. There is scarcely a doubt but 
 what that tax will disappear, like many of the other taxes, in a short 
 period of time. The time, in my judgment, is- not far distant when 
 a tax on a few articles of luxury will pay the interest on the public 
 debt and pay our expenses. I have no doubt we shall go through the 
 same process of legislation that our ancestors did after the war of the 
 Eevolution, and as those who went before us did after the war of 1812. 
 All these taxes will disappear in a short time, and perhaps a tax on 
 whisky and tobacco and on imported goods, a few simple taxes, may 
 be able to pay the interest on the public debt and the expenses of the 
 Government. Therefore the only question is whether we should sur- 
 render this small matter in order to accomplish a great object. It seems 
 to me we ought to do it. If the Secretary of the Treasury can nego- 
 tiate this loan by surrendering this small income tax, and thus effect a 
 saving of interest equivalent to twenty per cent, of all the interest paid 
 by the United States, it is certainly a very good bargain, and it does 
 not require a very shrewd man to see it. 
 
 The other provision was that there ought to be a fixed period before 
 which the principal should not be paid. That was a point upon which 
 I myself long hesitated; and I agreed to it for the reason that but 
 a very small portion of the public debt can be converted now into a 
 five per cent, loan, because but a small portion of it is due. The hold- 
 ers of the seven-thirties will avail themselves of the privilege to con- 
 vert them into five-twenties. There is not very much pressing upon 
 the Secretary of the Treasury, but whatever it is, he must pay it, and 
 he must issue a loan of some form ; and the only question is whether 
 it shall be a five or a six per cent. If you do not pass this bill, he is 
 compelled to issue a six per cent, loan because he can not negotiate 
 any other. He says he can not, and that is the general judgment. It 
 is the general judgment of gentlemen who oppose this bill that he can 
 not negotiate a five per cent, loan of any kind even with this bill, and 
 therefore that he will be compelled to issue a six per cent. 
 
 The very fact that he is not compelled to borrow a large sum of 
 money enables him to go into the market now like a rich man who has 
 a boundless inheritance, a large estate, on which he wants to borrow a 
 very small sum of money ; he can get it on good terms, but he savs he 
 can not get it unless the payment of the principal is postponed for 
 twenty or thirty years. Suppose he does issue two hundred million 
 or five hundred million five per cent, bonds under this bill ; the objec- 
 tion is that we may want to pay o£E the principal sooner. Surely we 
 would pay oil the six per cent, bonds first, and we cannot expect to 
 "3ay off all this enormous debt within thirty yeai-s. All the bonds that 
 le could ])r(»I)ably issue within a year or two would fall very far short 
 of the amount tliat would still remain unpaid under the most favorable 
 circumstances in thirty j'cara from this time. Next year, after he has 
 
 f 
 111 
 
FUNDING THE NATIONAL DEBT. HI 
 
 established a five per cent, loan under this bill, it may be that he can 
 ffo into the market and get a better loan still, a better bond, on more 
 favorable terms, and thus reduce the rate of interest on the balance of 
 the debt as it matures. I have no doubt he can do it. 
 
 I now come to consider an objection to this bill made with a good 
 deal of force, especially by my Democratic friends, that the loans of 
 the United States are exempt from State taxation. Although this is a 
 ven^ important question, it has never been discussed in the Senate ; and 
 I thiuk that unless Senators have been required to examine the deci- 
 sions of the courts of the United States, they probably have not seen 
 how far the courts have gone in settling it. I lay it down as a premise 
 that, in the absence of all stipulations about taxation in a law, no State 
 can tax a Government security ; it is entirely inconsistent with the 
 supreme power of the National Government to borrow money. This 
 question is settled more clearly than almost any question of constitu- 
 tional law which has ever been mooted in this Government. The first 
 case involving it that came before the Supreme Court of the United 
 States was the celebrated case of McCulloch vs. The State of Mary- 
 land, in which the principle was decided that no tax could be levied by 
 a State upon any agent employed by the National Government in the 
 execution of its vested powers. That case, however, did not reach the 
 particular point that I am now discussing ; but subsequently the case 
 of Weston vs. The Qity Council of Chaneston arose in 1829, and is 
 reported in 2 Peters, page 449, and upon the very point now in discus- 
 sion. Chief Justice Marshall was still upon the bench, the same judge 
 who had decided the case of McCulloch vs. The State of Maryland. 
 The city of Charleston, under the authority of a law of- the State of 
 South Carolina, levied a tax upon bonds of the United States held by 
 a citizen of Charleston. The question was submitted to the Supreme 
 Court of the State of South Carolina, and it was decided there' by a 
 majority that the State had a right to tax a Government security or 
 the income derived from it. A dissenting opinion was given by one of 
 the judges of that court which is highly creditable to him, and I think 
 presents the case very clearly. I will read a short extract from that 
 opinion before I read anything from the decision of Chief Justice Mar- 
 shall. This case arose at the beginning of the nullification crusade, and 
 the very principles subsequently involved in the contest through which 
 we have recently passed were then under discussion in South Carolina. 
 
 Judge Huger, in giving his dissenting opinion, said : 
 
 I am imwiUing, on so important a question, merely to express my dissent from 
 the judgment of the court. It is now for the first time agitated, and ought to be 
 fully discussed, that it might be better understood. It affects the use of a power, 
 as essential to the General Government in periods of difficulty and danger, as any 
 other which the people have delegated to it. If the City Council of Charleston 
 can tax the stock of the United States, eo nomine, the States can ; and if the States 
 can, it is impossible- not to perceive4hat the fiscal operations of the General Gov- 
 ernment may be completely frustrated by the States. It will be in vain for Con- 
 gress to pass acts authorizing the Secretary of the Treasury to borrow money, if 
 the holders of their stock can be taxed for having done so by the States. Congress 
 may offer ten per cent, for loans, but who will lend, if the States can appropriate 
 the whole to their own use ? 
 
112 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 He then proceeds to show that the power to tax at all involves the 
 power in the States to nullify by taxation the power of the National 
 ■ Grovernment to borrow money, and says : 
 
 No Government, not revolutionary, has ever attempted to tax its own stock, 
 nnd, among others, ior two very satisfactory reasons : 
 
 1. Because such a tax must necessarily operate injuriously upon all future loans; 
 and 
 
 2. Because there is in fact a violation of contract in so doing, and therefor^ 
 immoral and impolitic. 
 
 Under the influence of these reasons, the Legislature of this State has refused to 
 tax the stock of the United States ; but it appears that the City Council of Charles- 
 ton have thought differently, and have taxed it. ... ' 
 
 If they can do so at all, they may do so to any extent ; it is equally within their 
 power to tax twenty per cent, or one hundred per cent, as one half per cent. What 
 shall govern their "discretion it is impossible to foresee. A State or a few States 
 may concur in a policy at variance with that of the Government, nay, in hostility 
 to it. This, unfortunately, has been already witnessed. 
 
 He prophesies the very case that occurred a few years afterward 
 in that State : 
 
 They may, indeed, be indisposed to dissolve the Union and declare war, when 
 they might have no objection to counteract Congress, and control its measures by 
 the exercise of a power strictly constitutional. Seven tenths of the stocks of the 
 United States are owned in the cities of Boston, New York, Pliiladelphia, Balti- 
 more, and Charleston. 
 
 And then he proceeds to discuss the power of cities and States to 
 tax the Government stock, and shows that, if it were conceded, the 
 single State of New York might have it in its power to destroy the 
 Government of the United States by preventing it from borrowing 
 money. 
 
 The case was brought up to the Supreme Court of the United 
 States, where it was elaborately discussed by Mr. Hayne and Mr. 
 Legar6, then among the ablest counsel in the country. I will read 
 from the decision of Chief Justice Marshall : 
 
 This brings us to the main question. Is the stock issued for loans made to the 
 Government of the United States liable to be taxed by States and corporations? 
 
 Congress has power "to borrow money on the credit of the United States." 
 The stock it issues is the evidence of a debt ci-eated by the exercise of this power. 
 The tax in question is a tax upon the contract subsisting between the Government 
 and the individual. It bears directly upon that contract while subsisting and in 
 full force. The power operates upon the contract the instant it is framed, and must 
 imply a right to affect that contract. 
 
 If the States and corporations throughout the Union possess the power to tax a 
 contract for the loan of money, what shall arrest this principle in its application to 
 every other contract? Wliat measure can Government adopt wliioh will not be 
 exposed to its influence? But it is unnecessary to pursue this principle through its 
 diversified a[)plication to nil the contracts and to the varions operations of Govern- 
 ment. No one can be selected which is of more vital interest to tho community 
 than this of borrowing money on the credit of the United Stntos. No power has 
 been conlurrcd by the American people on their Government, the free and unbur- 
 dened exercise ol' which more deeply iifTects every member of our republic. In 
 war, when the honor, the safety, the independeni'o of the nation are to be de- 
 fended, wlion all its resources nro to be sti'iiiiieci to the utmost, credit must be 
 brought in aid ol' taxation, and the abundant revenue of pence and prosperity must 
 be anticipated to supply the exigences, the urgent demands of the moment. 
 
FUNDING THE NATIONAL DEBT. 113 
 
 Then he goes on to discuss the question at great length, and conies 
 to the conclusion, in which the Court was unanimous, that in the ab- 
 sence of all stipulation on the subject no State could be allowed to tax 
 a Government security, simply because to do so would enable the States 
 to destroy the power of the Kational Government, to prevent it from 
 prosecuting war, and from maintaining the authority of the United 
 States. This principle has never been controverted and never been 
 doubted by any judge on the bench of the Supreme Court of the 
 United States. It has been acquiesced in by every judge who has sat 
 upon that bench. It has never since been controverted by any State 
 of the Union. It has never been attempted by any party in the Union 
 to set aside that decision. This exemption is so clear a principle of 
 constitutional law, in my judgment, that it cannot be assailed or gain- 
 said. The same question was again brought before the Supreme Court 
 of the United States in a case from the State of Pennsylvania, when 
 Chief Justice Taney sat upon the bench — the case of Dobbins vs. The 
 Commissioners of Erie County. The Court reaffirmed the principle, 
 referring to this case, repeating it, and applying this doctrine to a tax 
 levied by the State of Pennsylvania on a Government officer. Again 
 the question was brought before the Supreme Court of the United 
 States during the recent war, in a case reported in 2 Black — ^the case 
 of The Bank of Commerce vs. The Tax Commissioners of New York 
 city, where the opinion was given by Mr. Justice Nelson. The ques- 
 tion arose there as to the power of the State of ISTew Tork to tax Gov- 
 ernment securities in the possession of the Bank of Commerce, a cor- 
 poration of that State, and the Supreme Court unanimously decided 
 that a tax could not be levied in any form, from the very nature of the 
 case, on a Government security. It should be remembered, too, that 
 up to the time of this last decision no provision had been contained in 
 any loan law expressly declaring that the Government securities should 
 be exempt from State and local taxation. It was decided upon the 
 general principle involved, and without regard to any stipulation made 
 by Congress. This last decision was in 1862, and it was that winter, 
 for the first time, that we put in the stipulation in one of our loan 
 laws. 
 
 I might add, if it was necessary to add to these authprities, that 
 the same question was up again during the last term, and again decided 
 in the same way, in the case I now hold in my hand. This case was 
 the taxation by the State of New York of the shares of a national 
 bank ; and a majority of the Court drew a distinction between a tax 
 upon a share in the bank and a tax upon a Government security ; and 
 they also based their decision upon the express declaration of Congress 
 that these shares should be taxed. The Chief Justice, however, and 
 Judge "Wayne and Judge Swayne differed, and. held that from the 
 nature of the security itself, in any form or shape, the Government 
 security could not be taxed. The majority of the Court drew the dis- 
 tinction between the shares in the bank and the bonds held by the 
 bank, and allowed the shares to be taxed. In my judgment, such was 
 the intent of Congress. It was a subject that was very much dis- 
 cussed here at the time, and, although I was opposed to the tax, yet it 
 8 
 
11-i SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 was finally carried. The distinction made by the Court was taken by 
 Senators, that the taking of shares in a bank was a reinvestment of the 
 funds and a change of the form of security. 
 
 The question may be asked, Why put in this stipulation if the law 
 was so clear ? The answer is just as conclusive, that, as we were com- 
 pelled to borrow money, it was important to inform all who chose to 
 loan it, in the most authentic manner, of their rights and privileges 
 under the Constitution. No doubt many a man, upon the faith of the 
 direct pledge of Congress, superadded to the decision of the Supreme 
 Court, loaned us his money in time of war, when he would not have 
 done it if it was to be subject to local taxation. 
 
 I say, then, that no Senator should vote against this bill, or any 
 bill of a similar character, on the idea that it is not now wise to ex- 
 empt Government securities from State taxation. This is the settled 
 principle of constitutional law, whether it is put in the laws or not ; 
 and the only question is whether by omitting to put it in you will give 
 the lenders the power to make a better bargain with you. 
 
 I have no doubt that Congress may, as a part of the contract, and 
 before the loan is issued, say that the States may tax the security. 
 But, Mr. President, what effect would that have ? Could you sell 
 such bonds ? "Would you allow the Southern States now to tax Gov- 
 ernment securities ? Would you allow them to have the power over 
 your public credit which would be involved in their power to destroy 
 the income from Government securities ?— because, as Judge Huger 
 says in the first decision made, if you give them the power to tax one 
 mill you cannot restrain it. No, sir, the contract between the United 
 States and all the citizens of the world is a contract higher than any 
 imposition levied by a State ; and we ought no more to tolerate the 
 idea of levying a tax upon the securities of the United States, except 
 by the United States itself, than Great Britain would allow any for- 
 eign Power to levy in Great Britain a tax on British securities. 
 
 It must be remembered that, by express provision inserted in all the 
 acts passed daring the recent war, United States bonds are exempt 
 from Stg,te taxation. All the debt now outstanding is exempt. Even 
 the bonds issued under the recent acts will be so exempt. Suppose 
 you refuse in this bill to so exempt a bond bearing but five per cent, 
 interest, or actually provide that they shall be taxable. Who would 
 buy them ? Who would surrender their present securities i How 
 could you fund your debt ? No device could be more perfect to con- 
 tinue the present high rates of interest. And what good would result 
 to State or nation? None whatever. The State could not tax the 
 present bonds, and the holders would not take your new ones. The 
 only way is to stand by the inviolability of the bonds as declnvcd by 
 the Supreme Court and upheld by every party or president to this time. 
 
 I now wish to meet the argument so often and forcibly made, that 
 it is unjust to exempt United States securities from local taxes. And, 
 sir, I admit tliat if this in regarded as a privilego to the holder it is 
 indefensible ; but it is the ]irivilego of the Government, not of the 
 fund-holder. It is the supreme power of the whole people to borrow 
 money on the most fa\'orablc terms that is taxed and limited by a tax 
 
FUNDING THE NATIONAL DEBT. 115 
 
 in the contract. Such an exemption is only justifiable on the ground 
 that it enables the Government to borrow money on better terms. In 
 the contract of borrowing the lender considers the rate of interest, the 
 security of the principal, and the burdens of taxation. If no taxes are 
 to be deducted from his interest, and the principal is. absolutely sure 
 and easily convertible into money, he is willing to part with his money 
 at a low rate of interest. This is the reason of the exemption, and the 
 Government is presumed to receive the taxes in the more favorable 
 terms of the loan. 
 
 But, sir, when the tax-payer sees that the Government is paying a 
 higher rate of interest than the law allows to a citizen, the exemption 
 wul be felt to be wrong. "With the present rate of interest there will 
 be a constantly growing jealousy between the bond-holder and tax- 
 payer. The latter will complain that his property is burdened with all 
 the expense of Government while his neighbor enjoys his full income 
 free from all burdens. This feeling is founded upon so clear a sense 
 of what is right that no wise legislator will disregard it. It is true that 
 a contract once made can not be violated, whether it costs much or lit- 
 tle ; public faith demands an exact and specific performance ; but an 
 adjustment of this difficult problem ought to be made that will, while 
 it preserves intact the rightful power of the Government to borrow 
 money free from local taxes, require property in the funds to aid in 
 the support of the Government. I have shown that this can not be 
 done with safety to the United States by allowing States to tax our 
 securities. Two other modes have been suggested : first, to tax direct- 
 ly by act of Congress the public securities at a rate equal to local taxa- 
 tion ; and secondly, to reduce the rate of interest. 
 
 A proposition has been made by Mr. Hayes, one of our Tax Com- 
 missioners, to levy a direct tax on all United States bonds held in this 
 country of one per cent, on the principal of the bond, or to reserve one 
 sixth of the interest payable on a six per cent. bond. Such a tax ap- 
 plied to our present securities would be a breach of public f^ith. 
 Congress may have the power to do it, using the word power in its un- 
 restricted sense ; but it would be unjust, a fraud upon our creditors, 
 and would forever impair our public credit. It is an indirect violation 
 of a contract made in good faith. It is true the United States did not 
 stipulate that it would not tax the bonds, and the United States may 
 properly levy an income tax upon public securities of any amount, as 
 it may upon other incomes ; but, when the United States selects this 
 particular kind of property as the only kind of property upon which it 
 will levy a specific tax, it is a violation of public faith. To levy the 
 same tax on this kind of property that you levy upon other property 
 would not be unjust ; but to select it out and put upon it exclusively 
 an income tax of sixteen and two thirds per cent., in order to defeat m 
 this way the stipulated exemption from State taxation, would be a vio- 
 lation of the public faith. 
 
 This question of taxing Government securities is far from being a 
 novel one. It has been resorted to in arbitrary governments many 
 times. In France in the time of Louis XIV. and Louis XV., and 
 especially during the regency that intervened, forced taxes on public 
 
116 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 funds were resorted to, until the credit of that country was entirely 
 destroyed. It was proposed in England in 171Y, but was firmly re- 
 sisted. I have here a paper attributed to the celebrated Henley, Earl 
 of Oxford, written in that year, on the inviolable nature of public 
 securities, and the arguments have not lost their force by time. He 
 says : 
 
 Your project of raising money for this year's service, or of paying debts by 
 taxing or lowering the interest of the funds, meets, I think, with too much appro- 
 bation among some people who look no further than themselves and consider only 
 the present diftioulty, regardless of the consequences of their proceedings. The 
 importance of the case seems to require that everybody should contribute what 
 they can to set this matter in a true light, and examine without prejudice how 
 much the interest of our country, its reputation and honor, its future good or evil, 
 may be affected by it. ... I can not but think that conscience is concerned, and 
 natural honesty and public justice and the credit of the nation — everything that is 
 sacred and inviolable in property is nearly affected ; all obligations will be in a way 
 of being canceled, and, in a word, an indelible character of injustice cast upon 
 us. . . . 
 
 To support and maintain a man's private credit, it is absolutely necessary that 
 the world have a fixed opinion of the honesty and integrity as well as ability of a 
 person. If there be good reason to object against the one or the other of these, his 
 credit sinks ; no one chooses to deal with Mm, nor does any one care to trust 
 him. ... 
 
 This true, this only foundation of credit takes in all cases and all persons, public 
 as well as private, national as well as personal. Just and honorable practices, fair 
 and open dealings, a strict performance of contracts, a steady observance of engage- 
 ments, will necessarily gain credit everywhere ; and common experience teaches us 
 that a breach in these as necessarily destroys it. . . . And, indeed, a readiness and 
 willingness to perform one's engagements is such a fundamental of credit that all 
 the affluence of money and the most immense riches are of no consequence if there 
 be ground for the least suspicion of disingenuity. The ability of a person without 
 natural justice rather makes a man cautious than forward to deal with him. 
 
 If, therefore, the legislature of any country should decline standing to its con- 
 tracts or endeavor to impose other conditions than what at first were stipulated, I 
 ask, would not such a conduct as necessarily impair the pnblic credit as it would 
 the credit of a private person ? Has it not the same tendency to make the lenders 
 jealous of their security ? Who will venture to lend the public a second time if 
 ever they find themselves not treated according to their contract? May there 
 never be emergencies which may again oblige the public to borrow money? And 
 if such case should happen, upon what foundation must they proceed if an instance 
 can be produced, an act of the legislature which can never be forgot nor ever be 
 repaired, to show that legal security is not a security, and that engagements are not 
 to be understood literally? What is the natural consequence of this but that no 
 man will lend the Government for the future, but at such interest and such ad- 
 vancements as are fuU equivalents to the hazards people may run in lending i 
 
 The whole of this very able paper has a close application to the 
 questions before us, and would well repay the reading ; and the remedy 
 he proposes is the one I propose. He says : 
 
 If the lender be left at his liberty to receive his money or lot it lie at lower 
 interest (in case where funds are redeemable), no cause can be given of complaint. 
 No injury is done, no hardship is offered. Tlie integrity and honesty of the bor- 
 rower is ovidunt, and orodit is in(lis]nitiible. But if the borrower bo his own judge 
 and his own cause, and flies to on ai't of power because he can do it, it as necessa- 
 rily sinks liis credit as it takes away its foundntiou. 
 
 And, Hir, this brings mo to the plniu and just remedy for nil com- 
 plaints of unequal taxation. Let us, in strict accordance M'ith our en- 
 
FUNDING THE NATIONAL DEBT. 117 
 
 gagements, sell our improved credit. Let us go into the market, and, 
 with our resources fully shown, our honor unimpaired, our securities 
 free from aU burdens, sell our bonds on the most favorable terms ; and 
 thus we shall receive in advance all the taxes we could levy upon our 
 securities. We will soon get more than the one per cent, which Mr. 
 Hayes proposes to levy. This policy, adopted in. England, has reduced 
 the rate of interest on public securities from six to three per cent., and 
 has made the British consol the highest standard of credit in the civil- 
 ized world. 
 
 Fortunately, our loans are now just in a condition when we can 
 commence this reduction of interest. I showed awhile ago that we had 
 $1T'7,000,000 of public debt within our reach now, and if it was known 
 that no other but a five per cent, loan could be had, and that aU matur- 
 ing bonds were to be paid off in money by the sale of five per cent, 
 bonds, pubKc creditors would quickly convert their securities into such 
 a loan. Large institutions, among them one of the largest in the State 
 of New York, have made a proposition to convert their five-twenty 
 bonds, maturing in May next, into this five per cent. loan. If I had 
 my own way, I would not give them a thirty-year five per cent, boaad ; I 
 would give a ten-forty five per cent, bond, retaining the principle of 
 redeemableness, with a view to still lower interest ; but the Secretary 
 thinks he can not now negotiate such a loan as that, and therefore, for 
 the present, I would give those the most ready to adopt the reduction 
 policy the most favorable form of loan, but as soon as possible would 
 reserve the power to reduce the rate of interest by the payment of the 
 principal as soon as a bond without these exemptions, or at a lower rate 
 of interest, would seU at par. This process must be gradual. It will 
 not do for Senators to vote against this bill because they think five per 
 cent, free of taxes is .too hi^. We must get it down first to five per 
 cent., then to four, and then to three, all the while faithfully observing 
 our contracts ; and we can do it. 
 
 It is not probable, if this bill passes, that during the present year 
 more than $100,000,000 of five per cents will be sold, because more 
 than that would not be needed to meet the accruing indebtedness, 
 unless it should be necessary to sell more to pay bounties to soldiers or 
 some extraordinary expenditure. Next year the Secretary would have 
 the power to pay off f600,000,000 of the five-twenties if he could sell 
 these five per cent, bonds. But it is important to pass the law this 
 session in order to give him ample time to meet the obligations that 
 are imposed upon him. 
 
 I say, therefore, that in every view which I can take of this bill it 
 is a wise -measure, intended to save interest upon the public debt, to 
 adjust on correct principles equality of taxation, and to lighten the 
 enormous burdens upon our people. And there is another feature 
 which commends it to my favor. If this bill passes in the form in 
 which it now stands, the fund-holders will themselves pay off the prin- 
 cipal of the public debt. The one per cent, saved on the rate of in- 
 terest will pay off every dollar of this debt in thirty-six years. When 
 this matter is dragged into politics, as it will be, and the tax-payer says 
 to the fund-holder " Your property is exempt and free from all tax," 
 
118 SPEECHES AND EEPOETS OF JOHN SHEPvMAN. 
 
 the fund-liolder may say, "No, my friend, it is not. Your money you 
 can loan to your neighbor at six per cent, interest, and the law enables 
 you to collect the principal at pleasure ; I have already paid for this 
 privilege by deducting one sixth of my income ; I have surrendered 
 the principal sum loaned by me for an annuity for thirty-six years, and 
 my share of the taxes will pay off every dollar of the debt within one 
 generation." He may refer to the report of Mr. Hayes showing that 
 uie average tax in the United States is one per cent., and that sum, an- 
 nually applied with the consent of the fund-holder, and paid by him 
 alone, would pay the debt. 
 
 I accept the justice of the principle. I say that we can not go before 
 the people and preserve the exemption from local tax unless we show 
 that the United States will get some benefit from it ; and by surrendering 
 this one per cent, the fund-holders wiU be stronger and more secure than 
 they were before. They will feel safer in the payment of the principal ; 
 they will know that the one per cent, thus saved is laid aside under the 
 operations of this law and applied to the payment of the principal of 
 the public debt ; that it will pay off the principal of that debt in due 
 time and without any danger of the misapplication of the fund, for it 
 will be applied each year, thus adding to the value of the remaining funds. 
 
 The passage of this bill is now an imperative necessity. It is not 
 my bill ; it is not my idea. I think it is too favorable to the fund- 
 holders. I think that a ten-forty five per cent, loan might be put upon 
 the market at par ; but the Secretary of the Treasury says that, without 
 the two stipulations to which I have referred, he does not .think that he 
 can, to use the ordinary language of the day, float a five per cent. loan. 
 I am therefore willing to give these stipulations to hmi, hoping that 
 next winter we can repeal the clause exempting the bonds from income 
 tax, and then let him issue a clear five per cent. loan. I do not think 
 he will be able to issue over a hundred millions Before that time. Per- 
 haps next winter we may shorten the period during which the piincipal 
 may be redeemable ; and perhaps in a few years, if our country goes 
 on prospering as it is now prospering, we may reduce the rate of in- 
 terest as England has done, first one half per cent., then another half, 
 keeping the body of the bonds always within our reach. The position 
 of our public debt is just in that condition now, under the established 
 policy of those who have regulated our finances, that it is within our 
 reach, so that we can soon fund the whole of the public debt and re- 
 duce the rate of interest on all or nearly all of it. 
 
 There is another collateral advantage Avhich will be derived from 
 this bill. I refer to tlie provision in the fourth section. It wiU be re- 
 membered that the holders of the seven-thirty notes have the right by 
 the terms of the option printed on the back of those notes to convert 
 them into five-twenty six per cent, bonds at maturity, or to demand 
 the money. Two hundred and forty millions of these' notes come due 
 in the month of August next year, and six hundred millions in the 
 May following. Under the condition of the present laws, the Secre- 
 tary of the Treasury will bo compelled to accumulate and hold in hand 
 two hundred and forty millions in order to meet the possible option of 
 the holders of the seven-thirties. 
 
FUNDING THE NATIONAL DEBT. 119 
 
 What would be the efEect ? The withdrawal of $240,000,000 of 
 money from the circulation of the country, when it is now being re- 
 duced under the operations of the recent law, would be disastrous. It 
 would be withdrawing one half of the circulating medium in order to 
 meet an obligation when every particle of that money is necessary for 
 the use of the people. Section four of this bill provides that the 
 holders of the seven-thirty notes shall give a reasonable notice of their 
 choice to take either the money or the bonds. They have the right to 
 make that choice, and nobody proposes to abridge that right. They 
 have the right to do it at the time stated, and nobody proposes to de- 
 prive them of it. What is proposed is simply to require them to give 
 a reasonable notice of their choice of the alternative which they have, 
 and that is put at six months. Some think that is too long and may 
 complain of it. I do not think it is, for the large amount involved, it 
 works no injury, because the bill provides that, in case they do not give 
 their notice of the option, they get their money and the Secretary can 
 provide for it. The probability is that the great mass of those notes 
 will be converted into five-twenty bonds without cost ; and one effect 
 of having a five per cent, loan upon the market would be to float this 
 large, mass of indebtedness into the five-twenties as the holders have a 
 right to do, while if you issue six per cent, bonds none of these holders 
 wiU avail themselves of the option until the last moment, and then by 
 demanding the money will greatly embarrass the Govemment. 
 
 It has been said in some of the public prints that this provision is 
 a violation of the contract. It is no more a violation of the contract 
 than the notice which is required by law in the case of a tenancy from 
 year to year. If I am renting a house for a year or more, I am bound 
 to give notice of my intention to retain it. It is a power, substantially, 
 that Governments have always exercised. Take the original converti- 
 bility clause ; we did not repudiate that clause, but we provided that 
 the right of conversion should be exercised before a given time. There 
 was some complaint made in the New York papers that this was a vio- 
 lation of the public faith, that we were repudiating our obligations ; 
 but it was not general. There are several precedents for this provision ; 
 but the most striking case was the one just alluded to, which was 
 adopted after full debate and consideration. The United States notes 
 originally issued, and still outstanding, had printed on the face of them, 
 " The holder of this note may convert it into a bond bearing six per 
 cent, interest in coin, and payable after five years and within twenty 
 years." It was found that this privilege or option attached to the 
 notes prevented the sale of the bonds, because no one would avail him- 
 self of that option, having the right to do it at any time ; and there- 
 fore we provided that he should exercise that option by the 1st of July 
 following or he should cease to have it. I have now one of these notes. 
 The privilege printed on the face of it does not now exist ; yet no one 
 complains, as the right was not exercised at the time stated. It is a 
 general principle of law that, wherever a party has a right to do or not 
 to do a particular thing, a reasonable notice of his choice may be re- 
 quired. That is a principle of municipal law as well as of public law. 
 It is required by nations generally, and inserted in many treaties. 
 
120 SPEECHES AND REPORTS OF JOHN SHERMAN". 
 
 And now, Mr. President, I have thus, without any preparation ex- 
 cept the few figures and papers before me, presented the reasons for 
 my earnest support of this bill. This is like most financial questions, 
 which attract but little attention though they deeply afEect the nearest 
 interest of every citizen, his food, his clothing, his home, and, more 
 important than all else, the honor of his country. Our attention has 
 been so occupied with political questions affecting more keenly the in- 
 terests of parties and partisans, that all the complicated problems of 
 finance thrust upon us by the war have not occupied as much of the 
 time of this Senate as some unimportant political measures. I alnjost 
 owe you an apology for occupying your time so long, but I trust in a 
 short time the waves of the recent war will settle in peace and quiet, 
 and that all of us will look to the material interests of a great country, 
 all of which are in our hands. I am so hopeful of the future, after 
 escaping all the perils of the past, that I may not see the clouds that 
 others see. War is apt to be followed by financial distress, and we may 
 be affected by the impending war in Europe. Our bonds now held 
 abroad may, and no doubt will, come back to us, and for a time will 
 depress our securities. But war in Europe will open to us new mar- 
 kets. It will restore our commerce. We can well afford to redeem 
 our bonds with the superabundant produce of the West. Our cotton 
 crop will yield us exchange enough to absorb all the securities held 
 abroad. Who can say that after the first panic the timidity of money 
 may not cause it to flee from war in Europe and seek safety in our nar 
 tional securities ? 
 
 Sir, what we need now is confidence in ourselves, in our resources, 
 and in our destiny. Our country has been for years the refuge of the 
 laboring man, where he has found employment, independence, and free- 
 dom. It will soon be the refuge of capital. It may become the place 
 of deposit of the wealth of the world. Why should it not be ? We as 
 a nation have always observed our obligations. We have twice paid off 
 a national debt. We have unexampled resources in men, in land, in 
 iron, gold, coal, and in all the elements of wealth. Why, then, should 
 we talk about taxing our national debt ? Why place it in the power of 
 every village corporation to affect our national cj-edit ? Why enter the 
 money market offering usurious interest ? Why pay now more than 
 any good merchant in New York will pay ? Wliy traffic our loans, a 
 mortgage on all our industry, on worse terms than bankrupt nations of 
 Europe offer ? Go, backed by your resources, your unclouded and un- 
 disputed empire, the love and faith of your people, the respect of all 
 nations — ^go, I say, with all these, and with confidence in youreelves, 
 to the people, who hold your bonds, and you will be able to borrow 
 money at five per cent., yea, before long, at four per cent. Go not to 
 the money-changers. If _ they are allowed to fix the rate of your inter- 
 est, they will continue it as it is witli all its exemptions, until the 
 people, fired at an injustice, Avill do wrong to Correct it. I conclude 
 as i commenced, that to compel tlio Sc-crL'tury of the Treasury, by de- 
 nying him this legislation, to issue more six "per cent, bonds is a politi- 
 cal crimu. 
 
THE TAEIFF. 121 
 
 THE TAEIFF. 
 
 IN TEE SENATE, JANUARY 23, 1867. 
 
 The Senate having under consideration the bill to provide increased revenue 
 from imports, Mr. Sherman said : 
 
 Mr. President : Before the vote is taken on tlie amendment of the 
 Senator from Ehode Island, I think it. right that I should state the gen- 
 eral views which have controlled my action as a member of the Com- 
 mittee on Finance, and which will control my vote on this and the 
 various propositions of amendment that will be submitted to the Senate. 
 
 I listened yesterday with great pleasure to the speech of my honor- 
 able friend from New Jersey [Mr. Cattell], and was generally pleased 
 with its tenor and scope. It sounded like a good old-fashioned Whig 
 protective speech — the school in which I was educated, the faith in 
 which I was taught, and in which I yet have confidence. But, sir, it 
 seems to me that the Senator from iNew Jersey, in his zeal for protec- 
 tion, forgets that we are now legislating under peculiar circumstances, 
 and are compelled to look at a state of facts far different from those 
 that existed before the recent war. 
 
 In considering so complicated a subject as a tariff, nothing can be 
 more deceptive than the application of such general phrases as a " pro- 
 tective tariff," a "revenue tariff," a "free-trade tariff." Every law 
 imposing a duty on imported goods is necessarily a restraint on trade. 
 It imposes a burden upon the purchase and sale of imported goods and 
 tends to prevent their importation. The expression a " free-trade 
 tariff " involves an absurdity. Free trade implies a trade without re- 
 striction, while any tariff is a restriction on trade. A duty of ten per 
 cent, is a limitation on trade as well as a duty of one hundred per cent., 
 and they differ only in degree. So the phrase a " protective tariff " 
 may be Jipplied to every bill imposing duties on imported goods. 
 
 The first tariff act, passed soon after the formation of the Constitu- 
 tion, was called a "protective tariff." One of its leading objects, as 
 declared by Washington, was to foster and protect American manufac- 
 tures, and yet the general rate of duties was but ten per cent, ad valorem. 
 On the other hand, the tariff of 1846 is commonly known as a "free- 
 trade tariff," and yet the rate of duty levied by it averaged twenty-four 
 and a haK per cent. Every duty on imported merchandise gives to the 
 domestic manufacturer an advantage equal to the duty, and to that 
 extent every tariff is a protective tariff. When the duty is so high as 
 to prevent importation it ceases to be a " tariff " and becomes a " com- 
 mercial regulation." So the general term a " revenue tariff " as descrip- 
 tive of a tariff is deceptive, and is simply tautology. Every tariff bill 
 is a " revenue tariff." The word " tariff " implies revenue, and means 
 a rate of taxation on imported goods. It is simply a mode of taxation 
 adopted by all commercial nations as the most certain, convenient, and 
 least expensive form of taxation. The common meaning attached to 
 the phrase a " revenue tariff " is a general ad valorem tax on imported 
 
122 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 goods, without regard to domestic manufacture. Sucli a tariff has 
 never existed in any commercial country, least of all in Great Britain, 
 where the duties are carefully levied to encourage their own manufac- 
 tui'es. They do not now levy duties on manufactures, for the same 
 reason that we do not care to levy a duty on anthracite coal. By a 
 vast accumulation of capital, and by severe commercial restrictions 
 maintained for one' hundred years, they have a substantial monopoly 
 of certain important branches of industry. They do not levy duties on 
 such goods because none are imported into Great Britain, and the tariff 
 on them would produce as little revenue as your duty on anthracite 
 coal. 
 
 These general phrases, if not always deceptive, are totally inappli- 
 cable to any tariff law that any one would propose for the United States 
 now. Free trade, if it means a mutual exchange of commodities with 
 foreign nations without restrictions, is impossible. Our necessities 
 compel us to tax every form of property or production. Every hour 
 of domestic labor contributes some portion of its product to the wants 
 of the nation. Under these circumstances it is the plainest principle 
 of political economy that we should so frame our tariff laws as to pro- 
 duce the largest possible income from imported goods. Revenue is 
 the first, highest, and most pressing want, and it must be so levied as 
 to do the least harm to our own mdustry. It is in the application of 
 this obvious principle that all the difficulty in framing a tariff law 
 exists. This can not be done by. applying any general rate or rule to 
 all articles. We must discriminate between articles of luxury and 
 articles of necessity ; between articles that may be produced in our 
 country and articles mainly produced abroad ; between raw materials, 
 necessary to domestic manufacture, and completed products of industry. 
 The rate of duty must be modified by a multitude of circumstances as 
 varied as human knowledge, and with details far more difficult than 
 any subject of legislation. 
 
 Nor can we consider the question now as we should have done be- 
 fore the war. Then we had an opportunity to choose between imported 
 articles ; we might have thrown off the duty upon necessities, such as 
 coffee and tea and various articles, because such duties were not neces- 
 sary for revenue nor useful for protection ; but now we are compelled 
 to levy high duties upon everything, not only upon articles of absolute 
 necessity, the duty upon which will undoubtedly add to the cost of the 
 articles, but also upon all articles of American production, and even 
 upon raw materials that are indispensable as the basis of our manufac- 
 tui'cs. We cannot now regard the subject in tlie same light or from 
 the same stand-point that we did in olden times when the tariff was the 
 great controversy between parties in this country. We have now to 
 consider it in the light of facts created by tlie war. The fii-st and 
 obvious inquiry of every Senator in di^ussing the question is, how 
 much is it necessary to raise by a tariff on importod goods 'i And here 
 I may say that all the revenue tliat we are required to raise in gold 
 must be raised l)y duties on imported goods. While we have a depre- 
 ciated curroncv it would be idle to require domestic taxes to be paid in 
 gold. It would be to legalize a paper currency and then to repudiate 
 
THE TARIFF. 123 
 
 it. In regard to imported goods the case is different. All imported 
 goods are bought with gold ; all transactions in imported goods are 
 based upon gold. Imported goods, the product of foreign countries, 
 can be purchased only by the money known in the commerce of the 
 world. Therefore, in imposing duties upon imported goods, it is no 
 hardship to levy them in gold, for thus the whole cost of an article of 
 that description, when it enters into consumption, represents so much 
 in gold. But if an attempt were made to levy in gold our domestic 
 taxes, it would be very difficult to collect them, for it would impose on 
 our people a burden they could not bear. It is manifest- that we must 
 raise all the gold we require for Government purposes by means of 
 duties on imported goods. 
 
 By the financial policy adopted during the war — it is not necessary 
 for me now to discuss the propriety or expediency of that policy — we 
 are required to raise a very large sum of money in gold. The ailnual 
 interest upon the outstandmg gold bonds of the United States, accord- 
 ing to a statement furnished me from the Treasury Department 
 brought down to the 1st of January, 1867, is $82,048,531. By the 
 terms of all the outstanding notes bearing interest in currency, except 
 the compound-interest notes, they are convertible into gold bonds 
 bearing six per cent, interest. That conversion must be made in about 
 a year. "When those notes are converted the amount of annual inter- 
 est that will be required of the Treasury of the United States will be 
 $131,353,977.40. To this must be added the amount needed to pay 
 the expenses of our foreign intercourse, and our other gold liabilities, 
 partly growing out of treaties, which it is estimated wUl amount to 
 $6,000,000 per annum. ^ The expenditures for foreign intercourse, 
 which are disbursed in foreign countries principally, must necessarily 
 be paid in gold, the currency of the world. When we have added 
 enough for this item, it will be evident that the amount of gold required 
 to carry on the operations of the Government for the present fiscal 
 year wiU not be less than $140,000,000 in gold. 
 
 In addition to this there are bonds which, by the policy of the 
 Government, are to be paid in gold, and which will mature before the 
 end of the next fiscal year, amounting to nearly sixteen million dollars, 
 namely, on the 31st of December, 1867, $7,613,000, and on the 1st of 
 July, 1868, $8,169,000. These must be paid in gold ; but probably 
 they can be provided for out of the large amount of gold on hand, and 
 need not be considered in this calculation. But at any rate it wiU be 
 necessary to raise $140,000,000 in gold. 
 
 It is therefore simply an absurdity to talk now about a free-trade 
 tariff; and to talk about a protective tariff is unnecessary, because the 
 wit of man could not possibly frame a tariff that would produce $140,- 
 000,000 in gold without amply protecting our domestic industry. To 
 the extent that the duties are levied upon articles that may be pro- 
 duced in this country the tariff operates as a protection. It is very 
 clear that upon an ordinary year's importation the rate of duty that 
 would have to be levied upon importations in order to produce $140,- 
 000,000 would not be much less than fifty per cent, ad valorem, even 
 if we could prevent all undervaluation or smuggling. 
 
124 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 I assume, then, Mr. President, that the necessary object of this bill 
 is to produce $140,000,000 in gold, and that we may properly leave 
 the question of protection to be settled as a matter of detail, with the 
 certamty that any tariff which will yield the necessary revenue will 
 sufficiently protect American industry. The degree of protection on 
 different articles can only be determined by a careful inquiry into a 
 multitude of details, while the paramount object — ^to raise revenue to 
 the amount of $140,000,000 in gold — must always be kept in view. 
 
 It is sometimes said that, as this is the great object, it is not neces- 
 sary to change the present tariff, which will produce that amount, and 
 has in fact during the last fiscal year yielded $179,046,630. The 
 answer is, that during the last fiscal year our importations were swollen 
 beyond any former experience of this country, and can not be relied on 
 as a basis for the future. Under the very same law the year before the 
 amount of gold revenue was only $84,928,260. It is manifest, there- 
 fore, that we can not depend for the next fiscal year upon the present 
 tariff to produce anything like the amount that it did in the last fiscal 
 year, and even during the current fiscal year the estimated receipts 
 from customs are far less than they were in the last. 
 
 The peculiar circumstances by which we were then surrounded 
 show that no estimate of future receipts can be based on the amount of 
 the receipts during the last fiscal year. "When the war closed the 
 Southern States were entirely destitute of domestic or foreign fabrics. 
 They were not only without clothing, but they were without the articles 
 necessary to human life, of domestic and foreign manufacture. The 
 stock on hand in the Northern States was largely reduced. Hence the 
 moment the war was over large importations fiowed in, and of neces- 
 sity still larger demands were made for our domestic manufactures. 
 But now that cause has ceased ; the vacuum has been supplied. ISTot 
 only so, but by the sudden faU of gold, which fell much more rapidly 
 than the prices of labor or of other commodities, goods manufactured 
 abroad became cheaper in proportion than American goods. The 
 American manufacturer could not adapt his prices to the fall of gold 
 because of the high prices of labor and material, and these could not 
 be reduced owing to the high rate of taxation and the increased cost of 
 food and of all the elements which enter into production. If the 
 American manufacturer could have reduced the cost of his production 
 in the same ratio that gold was reduced he would not have been dis- 
 turbed by the fall of gold. The valuable statistics presented to us by 
 Mr. Wells show that while gold at times went down to thirty and even 
 to twenty-five per cent, premium, during all that time the ordinary 
 addition to the cost of food was from ninety to one hundred and forty 
 ler cent., and the addition to the usual cost of manufacturing was 
 rom seventy to ninety per cent. ; so that the fall in the price of for- 
 eign goods, which were paid for in gold, was far greater uian the fall 
 in the prices of domestic commodities. The domestic manufacturer 
 was suddenly culled upon to compete with the foreign market when 
 the advantage was some thirty or forty per cent, in favor of the for- 
 eigner. 
 
 It was evident under these circumstances that domestic fabrics 
 
 E 
 
THE TAKIFF. 125 
 
 must fall o£f, and that large quantities of foreign goods would flow in 
 to take tlieir place. This led to .enormous importations, and it pro- 
 duced a very large gold revenue during the last year. But such a 
 revenue can not exist longer without utter destruction to our producing 
 interests. It is also clear that if the present relative condition of the 
 prices of labor, commodities, and food, is maintained, nearly all our 
 domestic manufactures must cease to exist. It is impossible under the 
 present rates to maintain domestic manufactures unless one of two 
 things occurs : either the price of labor must fall, or the price of gold 
 must rise. The numerous gentlemen who submitted the result of meir 
 observations to the Committee on Fiaance admitted that if they could 
 reduce the price of labor they could also reduce the price of their fab- 
 rics, and without additional duties compete with the foreign manufac- 
 turers ; but they all said that was impossible ; the laborer now was get- 
 ting barely enough to maintain life ; there were indeed strikes all over 
 the country ; some peculiar branches of industry were able to pay very 
 large prices for labor, but in many cases, especially with the woolen 
 and some other interests, the price of labor had not advanced in pro- 
 portion to the price of food, so that the laborer was really receiving 
 less now than he did before the war, although nominally he had dou- 
 ble the wages he had before. The reason was that the prices of food, 
 of clothing, and of all the commodities he consumed, have not declined 
 sufficiently to enable him to live upon a less sum of nominal money. 
 
 If the present tariff law be continued in force we cannot expect it 
 to yield more than . one hundred and twenty-iive to one hundred and 
 thirty million dollars. It is clearly necessary, then, looking at this 
 subject simply in a revenue point of view, to increase the duties on 
 imported goods and to receive a larger amount of duties in gold. 
 
 It is not necessary for me to picture the disastrous consequences 
 that would result to this country if we failed to pay our interest in 
 gold — failed to meet our obligations. The absolute necessity that 
 weighs upon us is, scrupulously to observe the public faith. iDuring 
 the war we were compelled to make contracts that may appear to our 
 people to be onerous ; and yet any man of ordinary patriotism feels 
 that we must observe those contracts to their fullest extent. It is evi- 
 dent, therefore, that an absolute necessity rests upon us to raise, by 
 some mode of taxation, an amount of money sufficient to enable us to 
 meet our public engagements. The weight of these engagements has 
 never yet rested on the people of this country. The reason has been 
 that the interest on half the public debt was payable and paid in paper ; 
 but by the very terms of our obligations the whole of that interest will 
 soon be payable in gold ; and then we must meet the burden that will 
 come upon us of paying it in gold. 
 
 If your tariff should yield but $120,000,000 in gold when we have 
 to pay $140,000,000 in gold, the Sectary of the Treasury will be 
 compelled to go into the open market and buy $20,000,000 of gold to 
 meet the deficiency. "What would then be our financial condition ? 
 If, instead of selling gold now day by day, he were compelled to borrow 
 or buy it in the open market to meet the interest on the public debt, 
 what would be the consequence ? The price of gold would rise. The 
 
1-26 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 public engagements could be met only by a sale of our securities in a 
 foreign market. That would be the saddest spectacle that could possi- 
 bly be presented. It is manifest, therefore, that we must levy such 
 duties upon imported goods as will place us beyond all danger of fail- 
 ing to meet our obligations. 
 
 Then, Mr. President, when yoil come to apply the diities to the 
 various articles of importation, it becomes a simple matter of routine. 
 I shall not waste much time in going into the various details now, be- 
 cause the questions will come up from time to time, as they are pre- 
 sented ; but there are certain matters upon which the Committee have 
 acted that it would be well to state in general terms. 
 
 The most obvious sources of revenue in a tariff bill are items usually 
 classed as luxuries. In levying duties upon these articles there is but 
 one rule laid down^ not merely by the English and French writers, but 
 by every nation that attempts to raise a revenue from imports, and that 
 is to levy as high a rate as possible on them without reducing their 
 consumption. The luxuries are mostly contained in three items : 
 spirits, wines, and tobacco. These are undoubtedly the first objects 
 which should be taxed ; and in most countries, but especially in Eng- 
 land and France, they yield a very large portion of the revenue. "We, 
 however, are unhappily placed in regard to these articles, as we produce 
 them ourselves. vVe make our own whisky and produce our own 
 tobacco ; and therefore we do not and can not look to these items as so 
 great a source of revenue as they do in other countries, where they 
 produce no tobacco, but import all they use, and where it consequently 
 can be taxed at the custom-house. 
 
 The rates of duty prescribed by the Senate amendment on these 
 articles are substantially the rates of duty prescribed by the House bill, 
 except in one important particular — in the article of wine. It was 
 found on examination, and it is shown clearly by Mr. "Wells's report, 
 that wine of a cheap quality, really inferior to our ordinaiy cider, is 
 imported in enormous quantities at the valuation of less than twenty 
 cents a gallon, and pays a duty of some twenty or thirty cents, and is 
 sold to our people in many cases at four dollars a dozen bottles, or 
 about one dollar a gallon. This is really not the wine of France, or 
 the wine of the country from which it purports to come, but an adul- 
 terated article prepared for the American market, having no mai'ket 
 value in the country of its production, and sent here at a merely nom- 
 inal price. It is found that, b;^ the operation of the present tariff, the 
 Government gained comparatively little revenue from it. Last year 
 the revenue from wines amounted to about four millions. The Com- 
 mittee have proposed to substitute a uniform tax of fifty cents a gallon, 
 which, in my opinion, is rather too sniiiU, but which -will yield a much 
 lai'f^er sum than the present crd valorem (luty. I am inclined to think 
 that while a larger rate of duty would probably prevent the importa- 
 tion of a considerable portion of tlio wine, the amount of revenue 
 received would be greater oven on a smaller quantity. The Commit- 
 tee tlioiiglit proper to adopt a s])ocific duty of fifty cents a gallon, and 
 I am willingto try the experiniont. lu regard to tobacco the laM' is 
 loft substantially as it is, except in regard to the single item of cigars. 
 
THE TARIFF. 127 
 
 on which the rate is somewhat reduced because it was found that the 
 present rate tended to prevent importation and to promote smuggling. 
 
 The next items which are always regarded in framing a tariff bill 
 are such articles of common use as are called comforts, or perhaps lux- 
 uries — in this countiy they are the comforts of all classes of the people 
 — sugar, tea, and coffee. The House of Representatives, I think with- 
 out carefully examining the subject — certainly it was done without the 
 sanction of the Committee of Ways and Means — threw off one half 
 the duty on tea and coffee, on the ground that, as tea and coffee were 
 used by all classes of our people, we ought not to tax them so high. 
 
 The truth is that the ad valorem tax on both coffee and tea is far 
 below the general average of our tariff laws, six cents a pound on cof- 
 fee and twenty-five cents a pound on tea, amounting to about from 
 thirty to fifty per cent, ad valorem. If we had no need of revenue, 
 if we were in a position to throw off taxes, if we had no system of in- 
 ternal taxation, if we had no taxes naore oppressive and more burden- 
 some than those on tea and coffee, they would be the first we should 
 throw off ; but it is manifestly improper now to dispense with a revenue 
 of eight or ten million dollars merely to relieve our people from paying 
 a tax that does not weigh heavily upon them. By doing so we would 
 compel the imposition of $12,000,000 in paper money upon our domes- 
 tic productions. The Committee on Finance, therefore, thought it 
 wise to restore the old rate of taxation, and that yields on the articles 
 I have already named — wines, tobacco, spirits, sugar, tea and coffee^ — 
 from fifty-five to sixty million dollars, or about two fifths of all the 
 revenue that is necessary to be produced from imported goods. These 
 articles are more staple in their yield, more uniform in their consump- 
 tion than any other articles on the list. Although used to some extent 
 by all the people, the great body of them are used by those who are able 
 to pay for them. Besides, the duties on these articles are more easily 
 and more surely collected. The duties are specific, and there can be 
 under this bill no undervaluation. Besides, the articles are heavy ; 
 they can not be smuggled in ; their quantity is easily ascertained. 
 They are articles that in all countries are looked upon as the main 
 sources of revenue. We cannot afford to throw off now a certain 
 revenue of $10,000,000. At a time when we are compelled to ' levy 
 internal taxes upon every branch of our industry, when the widow 
 and the orphan, when the farmer and the manufacturer, when the 
 laboring man and all classes of our citizens are compelled to pay large- 
 ly increased prices for their food and clothing by our system of inter- 
 nal taxation, we certainly ought not to throw off this, the easiest and 
 best form of taxation. 
 
 We come now, Mr. President, to the duties on manufactures, and 
 that for the first time presents the question of protection. In regard 
 to the articles I have already discussed, although we do produce to- 
 bacco and wine in this country, the question of protection is not neces- 
 sarily involved, and we regard simply the question of revenue. 
 
 It is necessary in levying duties to discriminate in favor of our own 
 industry on all articles that can be produced in this country by the or- 
 dinary application of skill and labor. It is manifestly the duty of the 
 
128 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 country to protect American industry to that extent, not simply on ac- 
 count of the old-fashioned argmnent that we used to have before the 
 ■war, that as a policy it is better to diversify our industry, and manufac- 
 ture all that is necessary for our own consumption, but on other grounds. 
 We must now protect American manufactures, not merely against for- 
 eign competition, but also against the effect of our own laws. This is 
 really all the protection they now need. 
 
 If you converse with intelligent men engaged in the business of 
 manufacturing, they will tell you that they are willing to compete with 
 England, France, Germany, and all the countries of Europe, at the old 
 rates of duty. If you reduce their products to a specie basis, and put 
 them upon the same footing they were on before the war, the present 
 rates of duty would be too high. It would scarcely be necessary for 
 any branch of industry to be protected to the extent of the present 
 tariff law. They do not ask protection against the pauper labor of Eu- 
 rope, but they ask protection against the creation of our own laws. 
 These are our paper currency and our internal taxation. 
 
 Foreign capital in Canada, and elsewhere, is not compelled to carry 
 on business under- the depressing influences that surround us. Manu- 
 facturers abroad pay no internal taxes ; they do not have to buy with 
 paper money at the inflated prices always produced by paper money. 
 Take the case of the manufacturer of iron. If he were at liberty to hire 
 his labor, buy his provisions, and the articles which enter into the pro- 
 duction of iron, upon the gold basis, he could compete with the labor 
 of Europe. The advantages of freight and other advantages would 
 enable him to do it. But if you compel him to pay two hundred per 
 cent, for his food — and more than half the cost of all the iron produced 
 in this country is food — if you compel him to pay largely increased 
 prices for clothing for his laborers ; if you add largely to the cost of 
 everything that enters into the elements of his production, as a matter 
 course he can not compete with those who are not subjected to similar 
 burdens. It is not British or foreign competition that produces distress 
 among the manufacturing interests of this coimtry at tliis time ; it is 
 the effect of our laws. 
 
 The chief evil arises from a depreciated currency. The inevitable 
 effect of paper money is to advance prices far beyond the difference 
 between paper and gold, and indeed it is sometimes held to be one of 
 the virtues of paper money that it does advance prices and give higher 
 wages to labor. I do not wish now to enter into an argument on that 
 question ; but we know that the existence of paper money does tend to 
 raise the prices of commodities in this country, and that the American 
 manufacturer can not, with paper money and with high prices caused 
 by taxation, compete with foreign productions. What, then, has he a 
 right to ask ? He has a right to ask that, if the laws impose upon him 
 additional bu.rden8, they should give him additional protection. That 
 is the demand made, and it is impossible to resist it. 
 
 It may be asked then, why continue our present paper money; why 
 continue our internal taxation ? I wish M-e could dispense with them ; 
 but certainly it is now impossible. If we could come back to-morrow to 
 the specie standard, and remove all the taxes that we have imposed upon 
 
THE TARIFF. 129 
 
 our labor, we sliould all be glad to do it. I suppose there is not a Sen- 
 ator within the sound of my voice who will not admit that a specie 
 basis is the natural condition of trade ; that for a currency there ought 
 to be something stable and intrinsically valuable, made so by the labor 
 necessary to produce it. Everybody admits that gold and silver are the 
 only real standard of value ; that that which regulates exchanges must, 
 be the production of labor. Gold and silver are the product of labor 
 in its most permanent, convenient, and unchanging form, and constitute 
 therefore the best standard of currency. But, Mr. President, we were 
 driven to the use of paper money : we could not have carried on the 
 war without it ; the circumstances by which we were surrounded com- 
 pelled us to resort to it ; and I believe that every sensible man who ex- 
 amines our affairs must admit that without the free use of our credit, 
 coined into money, we could not have carried on the operations of the 
 war, because we should not have had a circulating medium with which 
 to pay our soldiers for their services, and to feed their wives and chil- 
 dren while they were away from them. 
 
 It is sometimes said the foreigner has to pay his duties in gold, 
 while the manufacturer pays his taxes in paper money, and also pays 
 the additional cost of labor in paper money, and they say the difference 
 between gold and paper money is a sufficient protection. That argu- 
 ment would be valid but for this important fact, that the price of labor 
 and of commodities is far more advanced than the price of gold. Gold 
 is the cheapest commodity in the market. The importer has the bene- 
 fit of that condition of affairs ; he has a discrimination in his favor, be- 
 cause while the cost of American manufactures has increased about a 
 hundred per cent., the price of gold is only about thirty-six per cent, 
 above that of paper. It is apparent, then, that the system of paper 
 money is a discrimination in favor of the importer of foreign • goods. 
 That discrimination was made manifest in its effects by the enormous 
 importations made during the past year ; and by the fact that when 
 gold went down twenty-five per cent., importations increased, while 
 flie prices of domestic commodities and of labor did not materially fall 
 during that time. While gold went down from two hundred to one 
 hundred and twenty-five, the price of labor was not materially affected. 
 The large demand for foreign and domestic supplies kept up the mar- 
 ket. Thus the manufacturer met a competition, not growing out of 
 foreign labor, but resulting from our own laws, which prescribed cur- 
 rency for him and gold for the importer. 
 
 I do not know that I have made myself understood ; but this is the 
 leading reason why it is necessary to give to the American producer, in 
 all the different stages of production, some countervailing protection to 
 balance the effect of paper money. 
 
 Another reason is, that the system of internal taxation which our 
 necessities compelled us to adopt, throws upon the American producer 
 an enormous burden which the foreigner does not have to bear. Take 
 the case of a shop or a mill in Canada, on our frontier, where labor is 
 one half what it is here : do you suppose that an American producer 
 can compete with the Canadian manufacturer? Take the case of Eng- 
 land, which is more striking yet, where by a long existing system they 
 9 
 
130 SPEECHES AND REPORTS OF JOHK SHERMAN. 
 
 have reduced the cost of production to the lowest possible limit, where 
 by their plan of taxation they favor all manner of production, where 
 the cost of labor is reduced and the duties imposed amount to but little, 
 and where the manufacturer gets his raw material free : is it possible 
 for the American to compete with the English manufacturer when he 
 has to contribute to $310,000,000 internal taxation? It is impossible. 
 "We were compelled by the necessities of war to levy directly a tax of 
 five per cent, on his productions ; we levy a tax of five per cent, on his 
 income ; we levy a large tax upon every element which enters into the 
 cost of his labor. It has been estimated, and I think correctly, that the 
 actuartaxes upon American manufactures, direct and indirect, amount 
 to about twenty per cent, on the capital employed. Mr. "Wells, in his 
 report, clearly shows that the various taxes levied upon cotton manu- 
 factures amount to about twenty-two per cent, upon the capital em- 
 ployed. 
 
 Is it possible for American manufactures to be maintained, for 
 American workshops to be continued, unless the Government is willing 
 to give some protection against its own laws ? Can the manufacturer 
 pay these enormous taxes upon the basis of paper money, and yet com- 
 pete with labor in Europe, where the manufacturer pays no taxes, 
 where he has his raw material free, where every element is in his 
 favor ? I think it is impossible. If, therefore, we would protect our 
 American industry against our own laws, we must make the duties on 
 foreign goods commensurate with the taxes imposed upon our manu- 
 factures, and thus enable them to continue the competition that has 
 been carried on for years. 
 
 It is not necessary for me to go into familiar facts to show that the 
 effect of domestic competition is to cheapen the price of products. 
 Under the stimulus of our laws great numbers of American manufac- 
 tures have grown up with a rapidity unexampled in the history of- any 
 country. England was more than one hundred years in building up 
 her system of manufactures. Ours have been built up since 1823. At 
 that time New England was a mere commercial community : now it is 
 a manufacturing community. At the time when the great friend of 
 America, the Earl of Chatham, said that the laws of England should be 
 so framed that no shoe-nail could be made in America, we could scarcely 
 make one. We imported everything. There was scarcely a factory in 
 America ; and so it continued, with but slight progress, for fifty years. 
 American manufactures took their birth m ISiSunder the heavy re- 
 strictive duties of the tariff law of that year. Since that time they 
 have grown to amazing proportions, until" they are now in value ten 
 times the importations of the country. 
 
 I was somewhat surprised at the tables produced by my friend from 
 New Jersey yesterday, and especially the table preixireit by Mr. Del- 
 mar, show that in 1800 the annual productidus of tliis country — 
 agricultural, mechanical, etc. — iiniouuted to $6,700,000,000. in gold. I 
 thought it was pretty large, and 1 should like to see the elements of 
 Mr. Deliiuir'B figures; but he foots up $('>,755,r)S7,0r)7. A large pro- 
 portion of these pr(i(hictious wei-o iu manufactures which have been 
 built up within the last thirty or Forty years. 
 
THE TARIFF. 131 
 
 Of the $310,000,000 of taxes levied upon productions in the form 
 of internal revenue, about $170,000,000 is paid directly or indirectly 
 by manufactures. True it is finally collected again from the consumer ; 
 but, as it is added to the price of the commodity, the manufacturer 
 must reduce his price to compete with the foreigner, or he must aban- 
 don the market. 
 
 Under these circumstances it is apparent that the present rates of 
 duty, although higher than they have ever been before, must be in- 
 creased, or there must be a reduction in the price of labor in this coun- 
 try, or an increase in the price of gold.. I think we have thoroughly 
 tried the last experiment. Then, unless we give to the American 
 manufacturer some increased protection against our laws, the price of 
 labor must fall and the price of food rise. The people will have to 
 meet the internal taxes with less daily pay, and the result will be 
 that we shall have distress and complaints : not repudiation, I know, 
 but dissatisfaction with the laws. While imported goods, the products 
 of foreign industry, are flo'wdng into this country in great quantities, 
 our own industry is being depressed, our manufactures broken down, 
 our shops shut up. 
 
 Now I come to a part of this bill which is the only one which in- 
 duced me to engage in this discussion, and that is the part relating to 
 the proposed duties on agricultural products. Here there is a conflict 
 of interest between agricultural and manufacturing industry, or at least 
 there is supposed to be ; but I believe there is not and ought not to be. 
 The manufacturer generally looks upon everything he has to buy as a 
 raw material, and everything that he has to sell as a finished product. 
 The revenue commissioner has fallen into the same error, and he calls 
 wool a raw product. Wool is not a raw product to the farmer, though 
 it may be to the manufacturer, because to the farmer it is the completed 
 prodact of his industry. So of the cereals ; wheat, fiaxseed, rye, barley 
 are not raw materials to the farmer, but they are raw materials to the 
 manufacturer who consumes them. They are the result of labor ; they 
 are the complete product of the labor of the farmer. His raw material 
 is his land and his labor, while his product is wool, wheat, barley, etc. 
 
 Mr. President, if in the present condition of- affairs we levy duties 
 on imported goods so as to give the farmer no protection against com- 
 peting labor, we do an act of gross injustice, and such a tariff cannot 
 be enduring. We very well know that the great body, I believe four 
 fifths, perhaps five sixths," of our people, are engaged in agriculture. 
 They usually, on account of the weight and bulk of their articles, do 
 not require anything like the protection that other industries do, be- 
 cause the very bulk of their products gives them an advantage in the 
 home market. But if they are compelled, on ordinary articles of their 
 production, to compete on equal terms with the cheap labor of other 
 countries they will naturally be dissatisfied. 
 
 How do you maintain the doctrine of protection in a tariff ? You 
 say to the farmers, " Protect our industry, build up our manufactures, 
 and we will start shops in your neighborhood and consume your prod- 
 ucts ; we will give you the benefit of a home market." That is all very 
 weU and very plausible, and it has induced the great body of the farm- 
 
132 SPEECHES AND REPORTS OF JOHX SHERMAN. 
 
 ing community in this country to be what are called protectionists. 
 Ohio, always an agricultural State, was a protectionist State, and the 
 farmers were probably as much protectionists as any other class. "Why ? 
 Because they believed that by building up manufactures in this country 
 they would have the benefit of the home market. But if a manufac- 
 turer in Rhode Island who consumes a million pounds of wool, after he 
 has got the benefit of all the protection he wants on his woolen goods 
 and nas raised the price of them to the farmer who has to buy them, 
 says, " I can buy my wool cheaper in South America, and am opposed 
 to duties upon wool, because it is a raw material," you will find that 
 the farmer will be discontented. You must extend protection to every- 
 thing that is made up by labor, and you cannot stop short of it. If 
 wool is a raw article to the manufacturer, cloth is a raw article to the 
 tailor. The principle is correct as to wool, or it is wrong as to cloth. 
 
 In ordinary times protection is not necessary to the farmer, because 
 with the advantage he possesses in a rich soil and cheap land he can 
 compete with the products of other countries. Our agricultural indus- 
 tries do not often want protective duties and have rarely called on 
 Congress for them ; but now, when the prices of all commodities are 
 raised by high extraordinary prices, the farmer has a right to demand 
 and does demand that the same protection should be extended to him 
 as to other industrial interests. 
 
 I wish in this connection to make some reference to the report of 
 Mr. Wells on wool, and I do it with sincere respect for him, because I 
 know from personal observation that he is not only industrious and 
 able in the discharge of the duties imposed upon him by law, but I be- 
 lieve that he is as weU qualified from his experience and intellect to 
 discharge those duties as any man in the United States ; but at the same 
 time, in regard to some interests that affect my own constituents, he has 
 fallen into many errors. 
 
 He is opposed to the proposed increase of the duty on wool, and 
 has supported his opinion with all the reasons that can possibly be 
 given, and he bases it mainly upon the assertion that every cent added 
 to the duty on wool costs the consumer of the wool §6,000,000, and 
 therefore that a duty of ten cents a pound would add to the cost of the 
 wool and woolens consumed in this country some sixty million dollars. 
 There is a great deal of fallacy in this mode of reasoning. Suppose 
 you were to apply that principle to another protective duty. Suppose 
 we should turn round to the iron men and Say, " Here, your diities on 
 iron add to the cost of all the iron produced in this country the full 
 amount of duty, and the consumer has to pay that additional value, and 
 all this costs the people of the United States too much." If that is the 
 mode of reasoning, there is an end of all protection. You must show 
 that all classes of the community got the benefit of this principle or you 
 must abandon it altogether, "i'ou cannot maiiitiun that it is a hardship 
 for the wool interest to demand protection any more than the iron or 
 other interests. Talco the ciise of cotton manufactures, the duties on 
 which are fixed in this bill at from fifty to sixty per CLMit. Undoubt- 
 edly to a considerable extent these duties are added to the cost of the 
 articles to the consumer; and I miglit make a formidable array of 
 
THE TARIFF. I33 
 
 figures to show that, in order to sustain the manufacturers who are the 
 constituents of my friend from Ehode Island, the people of Ohio are 
 compelled to contribute out of their pockets a number of millions of 
 dollars. That would not be a fair mode of argument, and yet it is 
 precisely the mode of argument with which we are met in regard to 
 the duty on wool. It is strange that the manufacturers, who have been 
 aided by protective duties, should resort to free-trade arguments when 
 the farmers demand a far less rate of protection than they have received. 
 
 But there is an element of error in the computation itself as well as 
 in the principle of the computation. The Commissioner, without 
 giving us the basis of his computation, declares that there are one hun- 
 dred and seventeen million pounds of woolen goods manufactured and 
 consumed in this country, and that there are imported thirty-three 
 million pounds of woolen goods. He thus puts the whole quantity of 
 woolens consumed in this country at one hundred and fifty milKon 
 pounds. Then he says, as it takes four pounds of raw wool imported 
 into this country to make one pound of woolen cloth, therefore the 
 amount of wool consumed in this country must be six hundred million 
 pounds. That is absurd. The largest quantity of foreign wool im- 
 ported into this country in one year was never over eighty-four million 
 pounds, and the average is about sixty millions ; the largest clip of wool 
 ever grown in this country, and that was last year, was one hundred 
 million pounds, while the average is eighty millions ; showing but an 
 aggregate of one hundred and eighty^four million pounds, or enough 
 to make forty-six million pounds of cloth instead of one hundred and 
 seventeen million pounds. 
 
 What is the use of taking a computation of this kind in the face of 
 plain, palpable facts ? The wool imported in the form of woolen goods 
 I leave out of view, because the computation is that one hundred and 
 seventeen million pounds of woolen goods, aside from those imported, 
 are consumed in this country. That would show a production of wool 
 here amoimting to about four hundred and sixty-eight million pounds. 
 
 The wool-growers never pretended, and no one that I have ever 
 seen pretended, that the clip of this country was over a hundred million 
 pounds. It is generally estimated at eighty-four or eighty-five millions, 
 while the highest quantity of wool ever imported into this country was 
 but eighty-four millions, and the average but sixty millions. Two 
 years ago it was only forty millions, and last year eighty-four million 
 pounds were imported, the highest importation ever made. 
 
 Let us examine the reasoning upon which the Commissioner bases 
 his estimate. He says : 
 
 The number of sets of woolen machinery or series of cards employed in the 
 United States, reported to the Wool-Mamifactnrers' Association in Ootoher, 1865, 
 was 4,100, consuming 2,252,546 pounds of scoured wool and substitutes for wool per 
 week; but these returns, it was stated, did not probably indicate more than three 
 fourths to four fifths of the sets then in actual operation. 
 
 Upon a statement that in a certain week in October the quantity 
 •consumed in the woolen factories, then driven to their extreme, was so 
 much and then multiplying that by fifty-two we have the basis of the 
 computation. That is an msufficient mode of reasoning. I have no 
 
134 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 doubt that the duty on wool will add somewhat to the cost of the 
 woolens consumed by the people of the United States. To what extent 
 it is difficult to say, because it is always difficult to estimate how much 
 of the duty will be paid by the importing merchant, how much by the 
 foreigner who raises the wool, how much by the consumer, and how 
 much of it will be cheapened hj the increased manufacture or by the 
 increased competition in domestic products. These are unknown quan- 
 tities about which men may theorize as much as they choose. I take 
 it though as a general principle, and admit beforehand that every duty 
 adds to the cost to the consumer. 
 
 There is another statement here made in regard to this matter in 
 which I think the Commissioner must have fallen into an error, and I 
 intend to call his attention to it this morning. He endeavors to show 
 that the wool interest is a prosperous one ; that the growth of wool is a 
 prosperous and profitable branch of industry in this country, and he 
 quotes from a gentleman who is highly esteemed by men engaged in 
 tbis business, Mr. Eandall, who wrote a book called the "Practical 
 Shepherd." He quotes from Mr. EandaU, who says : 
 
 How very striking is the fact that, 'during thirty-eight years [ending January 1, 
 1862], and with all the disturbing causes to the wool market, there has not been a 
 single year in which the average price (42'8) for the wool marked " medium," would 
 not now pay the actual cost of producing our heavy-fleeced American merino wools. 
 ... Of the production of how many other of our great staples of industry can as 
 much be said ? 
 
 In this Mr. Kandall says that the average price they have received 
 for their wool, according to statements up to a certain time, was forty- 
 two and eight tenths cents per pound. Mr. KandaU's statement was 
 written in 1863, and was based upon calculations made prior to January, 
 1862, and prior to any increase on the price growing out of the war. 
 The computation made by him was literally true, that at forty-two and 
 eight tenths cents per pound for wool, the average rate, the business of 
 sheep-growing would be a remunerative one. If the wool-grower now 
 had forty-two and eight tenths cents per pound in gold for his wool — 
 and that was what Mr. KandaU was talking about — it would be all he 
 wants, all he could ask. But now. this same report goes on and says : 
 
 The present prices of New England, New York, and Ohio unwashed wools (New 
 York price current, November 3, 1866) range from thirty to forty-six cents per 
 pound, and at these rates it is claimed that the business of wool-growing, particu- 
 larly in the States of New York, Pennsylvania, and Oliio, is very far from remu- 
 nerative. 
 
 This report shows that, while for a period of years before 1S02 the 
 price of wool was forty-two and eight tenths cents in gold, it is now 
 less than that in currency. Is it possible that the wool-growei-s can 
 continue their industn^ upon this basis ? Does it not appear from the 
 very facts here stated that the cost of that wool, and of the labor of 
 its production, has been increased by the paper currency and internal 
 taxation, while the price of the product has not increased ? Can you 
 suppose the men thus engaged in an industry which yields one hundred 
 million pounds of wool, or at the old rates $'12,()00,000, can carry 
 it on without some protection ? The manufacturer in South America 
 
THE TARIFF. I35 
 
 can buy Lis wool cheaper than he can in Ohio. The cost of freight 
 from Ohio is as great as the cost from South America — the precise 
 rates I can not tell — water transportation is so much cheaper. Is it 
 possible for the wool-grower thus to compete ? Unless you give him a 
 protection equivalent to the advance of prices since we have substi- 
 tuted paper money for gold, can you expect him to be satisfied ? The 
 wool-growers of this country, as a rule, are among the small farmers of 
 the country. Most of the sheep are owned in small flocks of from one 
 hundred to two hundred. Very few of the farmers, comparatively, 
 have large flocks. When they see that their product, upon which they' 
 rely to help pay internal taxes, has not advanced in price one cent be- 
 yond what it was at the beginning of the war, and that they are now 
 with insufficient protection called upon to compete with South Amer- 
 ica and all the cheap wool-producing countries, you must expect them 
 to be dissatisfied. 
 
 The average duty, as shown by the tables here, paid on South 
 American wool, is a little over four and a half cents a pound. Certain 
 wools are brought in at three cents ; certain wools at six cents ; certain 
 wools at twelve cents. The average as shown by the tables is four and 
 • a half cents. The gold value of the wool, according to this statement, 
 was before the war forty-two and eight tenths cents ; so that the actual 
 protection which the farmer now gets to compensate for the derange- 
 ment of the currency, for his share of internal taxes, is only one tenth 
 of the cost of wool in 1862. 
 
 "When these two rival interests met together in a convention called 
 by the manufacturers themselves, and the whole matter was there dis- 
 cussed, it was agreed between them, after full discussion, that the rates 
 of -duty reported by the Senate bill should be given them, and they 
 were satisfied with them, and have never called them in question. The 
 manufacturers then made the claim that if the duty was put on wool 
 they ought to have a corresponding duty on the cloth. That was freely 
 yielded. The principle is proper ; that is, if a duty is levied upon the 
 rg,w article, an equivalent amount should be added to the duty on the 
 product in order to enable the American manufacturer who converts 
 that wool into cloth to compete with the foreign manufacturer. I trust 
 that in the present tariff the arrangement between the wool-growers 
 and the wool-manufacturers will be carried out. I would prefer myself 
 to take it in the very words they have given us, so that if they are not 
 satisfied hereafter they cannot complain of the proper Committees of 
 Congress for any mistake. I would take them at their word. I think 
 their demand is a reasonable one, and I would be willing to give it to 
 them as they ask it, so that if there is anything wrong in the practical 
 working of their scheme they themselves may have the responsibility 
 of it. 
 
 It is said, I know, that there was a very important class of our peo- 
 ple not consulted when this arrangement was made. That is true : the 
 consumers were not consulted, and the consumers have to pay the in- 
 creased cost ; but all other branches of industry in which these same 
 consumers are interested are sufficiently protected by the duties imposed 
 by this bill. The duties on wool and the duties on all agricultural 
 
136 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 products provided for in this bill are less per cent, ad valorem than the 
 duties on manufactures. This is properly so, because they are so bulky 
 that they protect themselves in .great measure, and because on account 
 of ,the cheapness of our land we have the advantage over foreigners 
 and have less need for protection. 
 
 Here, in order to save me from addressing the Senate again, I may 
 say that there is another agricultural interest in which the people of 
 Indiana and Ohio are very largely interested, and that is flaxseed. By 
 the present tariff, with which they are much dissatisfied, the duty on 
 flaxseed is a little less than eleven cents a bnshel. There is a nominal 
 duty of sixteen cents, but a reduction is made from that duty, of the 
 drawback on the cake made from imported seed, which reduces the 
 duty in favor of the farmer to about ten and a half cents. The effect 
 of that drawback is that cake made from American seed is not worth 
 as much in New York by five cents a bushel as the foreign cake of the 
 same quality. That discrimination is made against our own industry. 
 The duty then is really less than eleven cents a bushel, and at present 
 prices it is only about five per cent, ad valorem ; while on the other 
 hand, on flaxseed oil, which is nothing but the expressed juice of the 
 flaxseed imported from India, there is a duty of twenty-three cents a 
 gallon, or what is equivalent to a duty of about flfty-one cents on a 
 bushel of seed, so that the discrimination made against the agricultur- 
 ist is about forty cents a bushel. There is great complaint about this. 
 That the crusher ought to have some protection there is no doubt, 
 though I think myself the crushing of the India seed is one of those 
 forced unnatural trades that can only be sustained by a very high rate 
 of taxation, but as it is in existence I am willing to give it a fail* pro- 
 tection. That is one point of difference between the House and Sen- 
 ate bill, and as I do not intend to enter into the discussion of the 
 question hereafter I wUl simply say that the House had the subject 
 before them a long time, and after much controversy settled it, I think, 
 on a proper basis, by giving thirty cents duty on the seed and thirty 
 cents a gallon on the oil,, which is equivalent to a protection of thirty- 
 seven and a half cents per bushel to the crusher of imported seed. If 
 the oil is imported in the seed it will pay a duty of thirty cents a 
 bushel, which will produce two and a quarter gallons of oil or fourteen 
 cents a gallon. If imported as oil it will pay a duty of thirty cents a 
 gallon, giving to the crusher a protection of sixteen cents a gallon for 
 Sie simplest form of mechanical labor. Surely this is enough. 
 
 Mr. President, there is but one other part of this bill to which I 
 wish now to call the attention of the Senate, and that but for a few 
 moments. The Secretary of the Treasury in his annual report states 
 that the extent of the undervaluations and fraudulent importation of 
 foreign goods amounts to about twenty per cent, of the whole. That 
 this is true is known to every one in trade. In certain articles, which 
 are solely manufactured for the American market, the invoice prices 
 are merely nominal, and as most of the duties ai'e ad valorem they 
 pay merely nominal amounts. The loss from this source and from 
 smuggling, according to the report of the Socretaiy, is $35,000,000 a 
 year. It is manifest that this ought to be corrected. It is said that on 
 
THE TARIFF. 137 
 
 account of this system of undervaluation many branches of our foreign 
 trade have got into the hands of unprincipled men. Merchants who 
 have their chief office abroad invoice their goods and consign them to 
 an agent here, so that we have no responsible person to punish for a 
 violation of our laws. The present remedy is to seize the goods and 
 go through a long litigation. 
 
 In England custom-house oaths are not recognized, and the value 
 of imported goods is ascertained by inspection. If in the opinion of 
 the proper appraisers the goods are undervalued, the Government sim- 
 ply says to the importers, " I will take these goods at your price, and 
 allow you a reasonable profit on them," and they are sold for public 
 use. The result has been in England, I am told, that all systems of 
 undervaluation have been broken up. The same plan has been adopted 
 in the treaty between France and Italy, a copy of which I have before 
 me, so that goods imported from Italy to France, or vice versa, and 
 when received at the custom-house ascertained by inspection to be 
 undervalued to the extent of five per cent., are seized and sold for the 
 Government. The importer receives his own valuation for the goods 
 together with a profit of five per cent. If he complains he is suffi- 
 ciently answered by saying, " We took your goods at your own price, 
 at your own valuation; if there is an error you made it yourself." 
 The result has been that undervaluation is too dangerous to be practiced. 
 
 This device has been applied in many cases in both England and 
 France with great advantage. The Committee on Finance have there- 
 fere introduced into the biU a provision somewhat similar to the English 
 regulation, except that the EngKsh law, where the goods sell for more 
 than ten per cent, in addition to the valuation, allows the custom-house 
 oflicers one half of the" excess. The Committee on Finance thought it 
 best not to insert that feature, for the present at least, until the system 
 was tried. The section contained in this bill authorizes the custom- 
 house officers, in the case of undervaluation to the extent of ten per 
 cent., to seize the goods as the property of the United States and sell 
 them. If the importer complains about it he is paid at his own value, 
 and ten per cent, allowed him for profits and for expenses of importa- 
 tion and sale. 
 
 "With these general observations I leave this bill. Although some 
 portions of it do not meet my views, and I shall probably vote for 
 modifications, yet I beheve the bill as a whole will be beneficial. The 
 bill of the House, in my judgment, was defective in several important 
 particulars. In the first place, by throwing off half the duty on tea 
 and coffee, it reduced the duties on those articles more than we can 
 bear. Another objection to the House bill was, that on many articles 
 the rates of duty were made so high as absolutely to prohibit their im- 
 portation, and consequently to utterly destroy the revenue from them. 
 The present bill, founded upon Mr. Wells's bill, but very materially 
 modified by the Committee on Finance, will give every industry of the 
 country a fair and reasonable protection. It will not reduce the aggre- 
 gate revenue from manufactured goods. From the statements made to 
 us I believe that under it every industrial interest in our country can 
 be prosecuted with reasonable success under favorable circumstances, 
 
138 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 and yet at the same time there will be such a competition between the 
 foreign and domestic producer as to yield us a fair revenue on imported 
 goods. 
 
 Nor am I alarmed by the statement made by my friend from New 
 Jersey yesterday, that the amount of goods imported into this country 
 was the enormous sum of $305,000,000. We must import goods to 
 get revenue ; and, when I reflect that $305,000,000 is only five per cent, 
 of the magnificent production he shows we have annually made in this 
 country, I do not think we need be frightened at the amount of imported 
 goods. We can not entirely break up the importation of goods without 
 surrendering our revenue. We dare not do that. The necessity rests 
 upon us of raising $140,000,000 of gold. We must not, therefore, ma- 
 terially affect the trade between foreign countries and our own. All 
 that our own people can ask is, that such reasonable protection shall be 
 given to them that our currency and our system of internal taxation 
 shall not operate injuriously to their interests. 
 
 THE PUBLIC DEBT. 
 
 IN TEE SENATE, DECEMBER 17, 1867. 
 
 Mr. Sherman made the following report : 
 
 The Committee on Finance, to whom was referred so much of the 
 President's message as relates to the public debt, and the report of the 
 Secretary of the Treasury on the state of the finances, is called upon 
 to report upon three important subjects necessarily connected with 
 each other : 
 
 First. The funding of the public debt, and, as an incident to it, 
 the redemption of the bonds commonly known as the five-twenty 
 bonds ; 
 
 Second. The taxation, State and national, of the public secui'ities ; 
 and -^ 
 
 Third. The redemption and conversion of the United States notes 
 or legal-tender currency. 
 
 Questions are presented in regard to each of these, the solution of 
 which ought not to be delayed. There are disputes as to the mode of 
 the payment of the public debt seriously affecting the ]iublic credit ; 
 there is wide-spread complaint as to the exemption of public securities 
 from taxation ; and the evils of a depreciated and unconvertible cur- 
 rency are so manifest, both in public and pri\-ate business, that the 
 early attention of Congress is properly called to them by the executive 
 authorities. 
 
 It should bo the effort of Congress not meroly to declare and obey 
 the oxistiiifjf law, but to adopt a comprehensive policy that will preserve 
 the public faitli, restore confidence to the people and stability to our 
 business interests, and yet appeal to the sense of justice of our constitu- 
 
THE PUBLIC DEBT. I39 
 
 ents if it is unhappily drawn into the arena of party politics. Finan- 
 cial matters ought not to be in any sense partisan, but they may become 
 so. Unless Congress can adopt a policy meeting all the requisites 
 named, the contest on these most delicate and difficult questions may 
 be transferred to the polls, where the heat of party strife may lead to 
 dangerous results. 
 
 It is impossible to overstate the importance of these questions. 
 ISext to the existence of government itself, and the security of per- 
 sonal rights, come the protection of property, the preservation of the 
 public credit, the adjustment of taxes, and the regulation of the cur- 
 rency. Nearly all the legislation of peace is the legislation of finance. 
 The action of Congress on these subjects afifects the value of all prop- 
 erty in the United States ; the reward of all labor ; the income of the 
 rich ; the wages of the poor ; the pension of the widow ; the enter- 
 prise and industry of aU classes of our people ; and thus touches the 
 home and heart of every person in the United States. Therefore, in 
 reporting upon these questions, your Committee appeal to the gener- 
 ous forbearance of each Senator not to condemn until he is convinced, 
 to criticise with kindness, and to lend us the aid of his intellect and 
 experience in making the measure proposed such a one as wiU accom- 
 pHsh the great objects we all have in view. 
 
 Before examiniug the several provisions of the bill, your Commit- 
 tee begs leave to state the present condition of the public debt. It 
 consists of numerous forms of public securities, nearly all of which 
 grew put of the urgent necessities of the late war. The calls for money 
 to maintain the army and navy were so imperative that many different 
 forms pf loan were resorted to, and, as a means to enable the Govern- 
 ment to reach the resources of the people, a currency was improvised. 
 This currency now forms a part of the public debt, and, being a legal 
 tender in the payment of debts, is in the nature of a compulsory loan 
 without interest. It has proved so convenient a currency that, apart 
 from the advantage the G-ovemment derives from it by the saving of 
 interest, it has been and now is of great importance in promoting en- 
 terprise and the exchange of domestic products. It only remains, either 
 by reducing -the amount or by other means of increasing its value to 
 the standard of gold, to make it not only the most favorable f onn of 
 loan, but the best national currency yet devised. During the war the 
 residue of the public debt could only be contracted at high rates of in- 
 terest and upon onerous conditions, caused by the uncertainty of our 
 ultimate success, and by the efforts of a portion of our people to de- 
 preciate the public credit. For this reason those who were charged 
 with the national finances constantly kept in view the principle of " re- 
 deemability " of the principal of the debt within a short time, with 
 the confident expectation that the close of the war and the success of 
 the national cause would enable us to redeem it by a loan on more 
 favorable terms. The necessity of funding the public debt, as soon as 
 possible after the war closed, into one clearly defined loan, at as low a 
 rate of interest as possible, has been conceded by every one. The only 
 questions are as to the most favorable time and manner. 
 
 When this subject was under discussion a year or two ago, two 
 
140 SPEECHES AND KEPOETS OF JOHN SHEEMAN. 
 
 chief difficulties were alleged to lie in the way. One was the com- 
 pound-interest notes, now either paid 6flE or provided for ; the other 
 was the option of the holders of the three-year seven-thirty notes to 
 demand payment in money, or to convert them at their maturity into 
 five-twenty bonds. These are now either converted or in such a state 
 of conversion that, for onir purposes, we may estimate the $285,587,100 
 of seven-thirty notes now outstanding as a part of our five-twenty 
 bonds, into which it is the option, the interest, and no doubt the pur- 
 pose of the holders to convert them. 
 Our public debt is stated thus : 
 
 Statement of tlie Public Debt of the United States on December 1, 1867. 
 
 DEBT BEAKING COIN INTEREST. 
 
 Five per cent, bonds, ten-forties, and old fires $205,532,850 00 
 
 Six per cent, bonds of 1867 and 1868 14,690,941 80 
 
 Six per cent, bonds, 1881 282,731,550 00 
 
 Six per cent, five-twenty bonds 1,324,412,550 00 
 
 Navy pension fund 13,000,000 00 
 
 $1,840,367,891 80 
 
 DEBT BEARING CURRENCY INTEREST. 
 
 Six per cent, bonds $18,601,000 00 
 
 Three-year compound-interest notes 62,249,360 00 
 
 Tliree-year seven-thirty notes 285,687,100 00 
 
 Three per cent, certificates 12,855,000 00 
 
 379,292,460 00 
 
 MATURED DEBT NOT PRESENTED FOR PAYMENT. 
 
 Three-year aeven-thirty notes, due August 15, 1867. . . $2,855,400 00 
 Compound-interest notes, matured June 10, July 15, 
 
 August 15, and October 15, 1867 7,065,750 00 
 
 Bonds, Texas indemnity 260,000 00 
 
 Treasury notes, acta July 17, 1861, and prior thereto. 163,011 64 
 
 Bonds, April 15, 1842 54,061 64 
 
 Treasury notes, March 3, 1863 868,240 00 
 
 Temporary loan 2,880,900 55 
 
 Certificate of indebtedness .■ 31,000 00 
 
 14,178,363 83 
 
 DEBT BEARING NO INTEREST. 
 
 United States notes $356,212,473 00 
 
 Fractional currency 30,929,984 05 
 
 Gold certificates of deposit 18,401,400 00 
 
 405,848,867 05 
 
 Total debt $2,639,382,672 68 
 
 Amount in treasury, coin $100,690,646 69 
 
 Amount in treasury, currency 37,486,176 24 
 
 138,176,820 93 
 
 Amount of debt less cash in treasury f 2,501 20r),7.'il 76 
 
 HUGH McCULLOCTT, 
 
 Si'civtanj of the Treasvrij. 
 
 A portion of this debt may be dismissed from our view. The 
 ads commonly known as the long bonds of 1881, §282,731,520, were 
 
THE PUBLIC DEBT. 141 
 
 negotiated on the gold basis, and are neither redeemable nor payable 
 until 1881. The ten-forty bonds, about $200,000,000, also are neither 
 payable nor redeemable until 1874, and both principal and interest are 
 payable in gold. The smaller items of debt, amounting to $122,574,675, 
 will be paid from the funds on hand or current receipts, and may be dis- 
 missed from our consideration. This leaves the five-twenty bonds, inclu- 
 ding with them the seven-thirties, in the aggregate amounting to $1,610,- 
 000,000, which, with legal tenders and fractional currency amounting 
 to $387,142,457, compose the body of the public debt of the United 
 States. A large portion of this debt is now redeemable at the pleasure 
 of the United States, and the whole of it will become so in a compara- 
 tively short time. Your committee are of the opinion that now is the 
 time to provide for the redemption of these bonds, as they become re- 
 deemable, by a new loan on more favorable terms to the United States, 
 and also to secure to the holder of the United States notes, as soon as 
 practicable, their full value in gold. Such a currency, convertible into 
 gold, with a public debt bearing as low a rate of interest as practica- 
 ble, with the right again to redeem the principal when more favorable 
 terms can be had, with a moderate provision to diminish the principal 
 annually, supported by a system of taxes levied as far as practicable on 
 imported goods, luxuries, and incomes — these are elements of a finan- 
 cial system which your Committee seek to establish. 
 
 Before examining the precise terms of this debt, and the measures 
 proposed by your committee, it is proper to inquire whether this com- 
 prises the whole of the public debt. It is sometimes asserted that an 
 unhquidated debt of a vast and uncertain amount exists, not included 
 in the statement of the public debt. Upon this point the most vague 
 and indefinite opinions prevail, not only in this country, but in Europe. 
 Nothing can have a more injurious effect upon the public credit than 
 the supposed existence and concealment of any portion of the debt. 
 If o comprehensive financial policy can be adopted that does not em- 
 brace every portion of it. Tour Committee have therefore sought to 
 ascertain the extent and amount of unadjusted claims likely to be estab- 
 lished against the Government. The amount of claims pending which 
 have arisen under existing law, and are likely to be allowed by the ac- 
 counting officers, is less than $40,000,000, and this will be scattered 
 through several years, and paid out of funds already or hereafter to be 
 appropriated from current receipts. This is exclusive of bounties under 
 the act of the last Congress, the estimated amount of which yet to be 
 paid is $45,000,000. These are estimated for as a part of the current 
 expenditure, thus swelling the estimates for the current and next fiscal 
 year far beyond the sums needed for the ordinary current expenses 
 for the year. And so, since the war, large sums, amounting to over 
 $200,000,000, properly chargeable as a part of the public debt, have 
 been paid from the current receipts as a part of the current expendi- 
 ture, and this sum should properly be added to the $267,000,000 of the 
 liquidated debt paid since the 1st of August, 1865. A more detailed 
 statement of the unhquidated debt will be submitted to the Senate at 
 a later period of the session ; but for present purposes this debt may 
 be regarded as a part of the current expenditure, and need not be 
 
142 SPEECHES AND EEPOBTS OF JOHN SHERMAN. 
 
 considered in any plan for funding the public debt, and will depend 
 entirely upon the future action of Congress. This fact wiU restrain 
 Congress from adopting principles which will swell its amount. Every 
 new bounty bill, every new railroad subsidy, every new and unusual 
 expenditure for internal improvement, every new principle adopted in 
 the settlement of claims growing out of the war, will involve new taxes 
 or new loans. Therefore, as an incident to every such measure, there 
 should be a new tax levied or a new loan made. The vague and indefi- 
 nite appropriations of money by Congress, growing out of the vast 
 expenditure during the war, can no longer be continued without the 
 utter destruction of the national credit, or such an increase of our taxes 
 as wiU bring back to these halls new faces and new names. It is idle 
 to disguise the fact that the increase of our extraordinary expenses and 
 the weight of taxes have alarmed the people. 
 
 Dismissing the unliquidated debt as depending entirely upon the 
 future prudence of Congress, we come to consider the present condition 
 of the five-twenty loans. 
 
 As all of these are of the same legal character, differing only in 
 their dates and time of redeemability, it will only be necessary to ex- 
 amine the laws under which the original bonds were issued. These 
 bonds were issued under the act of Congress passed February 25, 1862, 
 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." 
 
 The notes to be issued are provided for by the first section, and 
 were limited to the sum of one hundred and fifty millions of dollars, 
 fifty millions of which were to be exchanged for that amount of what 
 were known as demand notes. These new notes were declared to 
 " be receivable in payment of all taxes, internal duties, excises, debts, 
 and demands of every kind due to the United States except duties on 
 imports, and of all claims and demands against the United States of 
 every kind whatsoever, except for interest upon bonds and notes, which 
 shall be paid in coin, and shall be lawful money and a legal tender in 
 payment of all debts, public and private, within the United States, ex- 
 cept duties on imports and interest as aforesaid." 
 
 This act does not rest the value of these notes solely upon the 
 clauses making them a legal tender, and receivable for all public dues ; 
 but it further provides, as an additional and the highest inducement 
 for the people to take them, that the holder of any of them may de- 
 posit them with the Treasui-er of the United States, and " shall receive 
 in exchange therefor duplicate certificates of deposit, one of which 
 may be transmitted to the Secretary of the Treasury, who shall there- 
 upon issue to the holder an equal amount of bonds ot" the United States, 
 coupon or registered, as may by said holder be desired, bearing interest 
 at the rate of six per centum per annum, payable semi-annually, and re- 
 deemable at the pleasure of the United Stat'os after five years, and pay- 
 nble twenty years after the date thereof." Thus these notes were in- 
 vested witli every possible security and value that could be given to 
 them, except only that tlio holder'eould not demand their payment in 
 coin. In lieu of such payment, the holder had the right to pay them 
 
THE PUBLIC DEBT. I43 
 
 for taxes, and for all public or private debts ; and, coin not being at- 
 tainable, he might demand for them at their face the highest form of 
 national security with interest at six per centum, payable in coin. The 
 second section of this act provides " that, to enable the Secretary of the 
 Treasury to fund the Treasury notes and floating debt of the United 
 States, he is hereby authorized to issue on the credit of the United 
 States coupon bonds or registered bonds to an amount not exceeding 
 $500,000,000, redeemable at the pleasure of the United States after 
 five years, and payable twenty years from date, and bearing interest at 
 the rate of six per cent, per annum, payable semi-annually." 
 
 On the 11th of July, 1862, before any of the five-twenty bonds 
 were negotiated. Congress authorized the further issue of $150,000,000 
 of the United States notes, with a like provision to convert them into 
 . bonds at par. 
 
 On the 3d of March, 1863, before any considerable amount of the 
 five-twenty bonds were negotiated, Congress authorized the further 
 issue of $150,000,000 United States notes, and by the same act pro- 
 vided that the holders of United States notes issued under and by 
 virtue of said- acts should present the same for the purpose of exchang- 
 ing the same for bonds, as therein provided, on or before the 1st day 
 of July, 1863, and that thereafter the right so to exchange the same 
 should cease and deternoine. The same act provides for the issue of 
 $400,000,000 of Treasury notes, bearing interest at six per cent., which 
 " for their face, excluding interest," were made " a legal tender to the 
 same extent as the United States notes." This act provides "that the 
 interest on said Treasury notes, and on certificates of indebtedness and 
 deposit, shall be paid in lawful money." Ifothing was said in this act 
 as to how the principal was payable, but all have been redeemed in 
 lawful money. 
 
 After these acts took effect the five-twenty bonds were negotiated. 
 These several acts form the contract under which they were issued. 
 ^0 subsequent act of Congress can vary that contract without the con- 
 sent of. the holder of the bond ; and the contract must be construed ac- 
 cording to the intention of the parties at the time, gathered from the 
 words of these laws, and from the previous construction put by the 
 Government upon similar words, and from the authorized declarations 
 of the agents of the Government in negotiating the bonds. Your Com- 
 mittee may go a step further, and say that, as there is no court high 
 enough to sit in judgment upon the acts of the Government to its pub- 
 lic creditors, those who act for the Government are bound in honor to 
 observe the strictest faith. In dealing with this question, Congress 
 does not act as the mere judge or jury confined by the written law. 
 We are chancellors to administer equity, or rather we are arbitrators, 
 chosen by the people of the United States, both debtor and creditor, 
 and are under the highest obligation to do what is just and right. 
 There is no appeal from our decision, and no power can reverse our 
 judgment, except that popular opinion which, sooner or later, in a re- 
 publican government becomes the established law. 
 
 In construing this contract no pressure of necessity should induce 
 us to violate any provisions of it, even if its execution is difiicult or its 
 
14:4 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 terms hard. Public credit is the most sacred property of a nation, 
 its reliance in war or danger, which, once inipaired or tarnished, entails 
 upon the nation an irreparable loss. The Government of the United 
 States has always faithfully observed its promises to. the public creditors, 
 and will not now sanction any violation of them ; but justice to its peo- 
 ple, who must, from their earnings and by taxes, make good these 
 promises, demands that we should not impose burdens upon them not 
 required by a fair construction of public engagements. 
 
 The question now arises whether these five-twenty bonds are re- 
 deemable at the expiration of five years from their date in any other 
 money than the coin of the United States ? 
 
 If tliis question rested solely upon the act of February 25, 1862, and 
 the bonds had been negotiated under that act alone, it would be mani- 
 festly a breach of faith to redeem the bonds with the present United 
 States notes. They are very different from the first legal-tender notes, 
 which, from the limited amount authorized, and the privilege to con- 
 vert them into bonds, could not have had a less market value than the 
 bonds. But it was found that with such restrictions upon the notes 
 the bonds could not be negotiated, and it became necessary to depreci- 
 ate the notes in order to create a market for the bonds. The limit of 
 notes was trebled and the right to convert them taken away. The 
 amount of United States notes in circulation when the bonds were ne- 
 gotiated was equal to the amount now outstanding ; so that the ques- 
 tion arises whether by the terms of these several acts the bonds may be 
 redeemed with notes of the precise character paid for the bonds when 
 negotiated by the United States. 
 
 The law does not expressly provide that the principal is payable in 
 coin, but does provide that the interest " shall be paid in coin," thus 
 raising the implication that the principal may not be. To meet this 
 implication it is shown that by the established policy of the Govern- 
 ment the principal of the public debt has always been paid in coin 
 without any stipulation to that effect. Your Committee have examined 
 the various loan acts of the United States, and find no express stipula- 
 tion to pay in coin ; but coin has always been paid, not only for the in- 
 terest, but for the principal, both funded and unfunded— both for bonds 
 and Treasury notes. This establishes the presumption that all public 
 debts are payable in coin, unless the law under which they are issued 
 expressly provides that they may be paid in a different mode ; and this 
 stipulation must be made before the loan is negotiated. 
 
 The act under which the five-twenty bonds were issued also pro- 
 vides for the issue of United States notes, and declares that these notes 
 " shall be lawful money and a legal tender in payment of all debts, 
 PUBLIC or private." These notes were issued to an amount of $400,- 
 000,000 before the bonds were negotiated. It is claimed that this 
 provision negatives tlie implication drawn from the payment of pre- 
 vious loans in coin, especially as when previous loiins M'oro made and 
 paid no other kind of money existed, or could hiwo been contem- 
 plated. 
 
 It is said, liowever, that the distinguished Secretary of the Treasury 
 who negotiated the five-twenty loan gave a construction to this act at 
 
THE PUBLIC DEBT. I45 
 
 the time the loan was offered ; that this was announced to the people, 
 and upon the faith of this the loan was taken. Tour Committee can 
 find no official declaration made by the Secretary on this subject until 
 after the loan was negotiated. On the 18th of May, 1864, he writes to 
 Mr. Hooper that 
 
 It has been the constant usage of the Department to redeem all coupon and 
 registered bonds forming part of the funded or permanent debt of the United States 
 in coin, and this usage has not been deviated from during my administration of its 
 affairs. 
 
 ■ The five-twenty sixes, being payable twenty years from date, though redeemable 
 after five years, are considered as belonging to the funded or permanent debt ; and 
 so also are the twenty-year sixes, into which the three-year seven-thirty notes are 
 convertible. These bonds, therefore, according to the usage of the Government, are 
 payable in coin. 
 
 It is claimed that this language, used long after the bonds were 
 negotiated, can not show the understanding of the parties when the 
 bonds were taken, and that it does not amount to a construction of the 
 law, but it simply affirms an admitted fact that the usage of the Gov- 
 ernment had been to pay all its bonds in coin. The same declaration 
 might have been made as to all issues of Treasury notes, compound- 
 interest notes, or certificates of indebtedness, all of which are now 
 paid in lawful money. Again, it is said that the agent employed by 
 the Secretary did, in his advertisement, affirm that the principal and 
 interest were payable in coin ; that this construction was acquiesced in 
 by Congress, and induced thousands to take these bonds who would 
 not otherwise have done so. To this it is replied that such a promise 
 is not in accordance with the plain language of the law, and is not a 
 binding construction of the law. No doubt the agent supposed that 
 before the five years expired specie payments would be resumed. No 
 one supposed that two years after the war was over greenbacks would 
 still be depreciated. The advertisement was a supposition of a state 
 of facts to occur five years afterward, rather than a legal construction 
 of a public law accessible to all men. 
 
 And it is contended that, conceding that the agents of the Govern- 
 ment construed the law as binding the United States to pay the princi- 
 pal of this debt in coin, yet this construction was not so generally 
 acquiesced in and adopted by both parties to the contract as to create 
 a moral obligation which the IJnited States is bound to execute to pre- 
 serve its faith. Is it true that this construction was so generally ad- 
 mitted' as to make it a part of the contract ? Congress uniformly 
 refused to declare this construction as to the five-twenty bonds, but 
 did do so as to the ten-forty bonds. And it is a further and very sig- 
 nificant fact that every State in the Union, with, perhaps, the excep- 
 tion of Massachusetts, put a different construction on this act. _ Every 
 State had a public debt, which stood in precisely the same position as 
 the national debt. Their bonds had uniformly been paid, principal 
 and interest, in coin ; and yet under the law they held that their pubHc 
 faith was complied with when they paid either principal or interest in 
 legal-tender notes, and this construction was acquiesced in by their 
 creditors. So corporations and private citizens who had contracted 
 debts which by law and custom had been previously paid in coin con- 
 10 
 
146 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 sidered themselves released, and were released, by pajmient in legal 
 tenders. Now, by a well-established principle of the law of contracts, 
 when it is sought to vary the meaning of the words of a contract by 
 a cotemporaneous construction, it must be shown that both parties 
 acquiesced in it, and understood and acted upon it in precisely the 
 same sense, otherwise tlie words of the contract must govern. When 
 a general rule is laid down, and an exception is made, it implies that 
 there are no other exceptions. 
 
 Duties on imported goods and interest on the public debt are ex- 
 cepted from the legal-tender clause. This implies that the principal of 
 the debt is not excepted. The construction drawn from the payment 
 of previous loans in gold is answered by the fact that the act under 
 which this loan was issued expressly declares that a note shall be law- 
 ful money as well as gold, and shall be receivable in payment of public 
 debts. 
 
 Your Committee have deemed it their duty thus to present the 
 argument in favor of redeeming the bonds in legal-tender notes, for it 
 can not be concealed that this construction has been adopted by many 
 who disclaim all purpose of evading the public engagements. Still the 
 admitted facts remain that these bonds were generally taken ujDon the 
 supposition that they would be paid in coin ; that this was explicitly 
 declared by the authorized agents of the Government in negotiating 
 the loan ; that such declaration must have been known by Congress 
 and was not negatived ; that it was sanctioned by three successive 
 Secretaries of the Treasury ; that upon the faith of it the bonds have 
 been continually higher in market value than the notes ; and that a 
 public sentiment both in this country and in Europe would, regard it 
 as a breach of public faith. Public credit is so sensitive a quality that 
 time can not restore it when impaired. It is bettfer far to forego a 
 doubtful privilege if, in the judgment of impartial men, we have no 
 right to exercise it. But the doubt should be promptly removed. The 
 discussion of the question manifestly impairs the public credit. Until 
 it is settled no new loan can be negotiated. The public mind becomes 
 accustomed to the idea of repudiation, and the wildest schemes of 
 paper money worthy of the days of John Law poison the fountains of 
 public and private credit. 
 
 It has been proposed that Congress, by joint resolution, declare 
 that the five-twenty bonds are redeemable only in gold. This, instead 
 of settling the question, will only create divisions and pai-ties, and the 
 resolution, when passed, will be subject to agitation and repeal. 
 
 These considerations induce your Committee, without deciding the 
 question, to propose a substitution of new bonds, clear and exphcit in 
 tlicir terms, for the five-twenty bonds as they become redeemable. 
 This exchange must depend upon the voluntaiy consent of the holder, 
 but it is believed that the great body of thein will readily make the 
 exchange, and that the Government will be able to sell the new bonds 
 at a rate that will redeem or purchase an equal amount of the five- 
 twenty bonds. It is the manifest interest of the bond-holder, as well 
 as of the tax-paver, to have his rights clearly defined and settled by 
 Congress after full consideration, so that they will not be affected by 
 
THE PUBLIC DEBT. 147 
 
 any uncertainty as to the manner of payment. If this exchange is 
 refused by the bond-holder, it will be time enough to determine 
 whether by the condition of his bond he may not be paid in lawful 
 money. 
 
 Will this proposition operate harshly upon the public creditor? 
 He holds a security now redeemable. No one can affirm that his right 
 to receive gold is clear and unquestionable. The doubt now does im- 
 pair the value of his security, and may lead to measures that will 
 seriously affect it. The security substituted is of equal intrinsic value 
 to that he surrenders ; it is explicit in its terms, and secures a reason- 
 able rate of interest, free from all taxes. He has already received the 
 interest in coin, according to the stipulation of the bond, thus securing 
 a higher rate of interest on the money invested than is allowed by 
 the policy of our laws to private creditors. Still, if your Committee, 
 after a careful examination of the law, were convinced that it clearly 
 required the payment of coin, they would advise that it be paid in 
 coin. The meaning of the contract, and not its profit or loss, is the 
 true rule of construction. To give more than js stipulated to the 
 public creditor is to do injustice to the tax-payer ; to give less is to 
 violate the public faith ; and we, as the representatives of both bond- 
 holder and tax-payer, are not at liberty to do either. 
 
 Your Committee have heretofore considered this question as involv- 
 ing only the application of the present ITnited States notes, limited as 
 they are to $400,000,000, to the redemption of the bonds. 
 
 The question now arises, Can the United States in good faith avail 
 itself of the depreciation of its notes to issue a greater amount of them 
 than was provided for when the five-twenty bonds were sold, and with 
 them to pay the bonds ? What is a United States note ? It is a prom- 
 ise by the United States to' pay a specified sum on deniand. E'o legal- 
 tender clause applies to this note. It is conceded that the money of 
 the world, gold or silver coin, is the only money that can redeem this 
 note. 
 
 During the war this was impracticable, and therefore the United 
 States gave to the note every valuable quality possible. It was made 
 lawful money and a legal tender for other debts. Eut the obligation 
 to pay this note in coia at the earliest moment practicable is a continu- 
 ous obligation. Our failure to do it is the standing reproach of our 
 financial system. It is the cause of all the discussions that have arisen 
 in regard to our bonds. Until our promise is made good to pay the 
 United States note in coin or its equivalent, on demand, we must suffer 
 the reproach of partial repudiation. This does not consist merely in 
 proposing to redeem our bonds in lawful money, but does consist in 
 allowing our " lawful money," or promises to pay on demand, to con- 
 tinue to be less valuable than gold or silver coin. 
 
 Payment of the bonds in existing notes would not materially affect 
 the market value of the bonds, for that value, increased as it would be 
 by the provisions of this bill, would make both notes and bonds ap- 
 proach nearer the standard of gold. The present issue of notes is held 
 by the people, and can not be drawn into the Treasury except by taxa- 
 tion. We hav^ already largely diminished internal taxes, and can not 
 
148 SPEECHES AND KEP0ET8 OF JOHN SHERMAN. 
 
 hope to receive over $30,000,000 in currency in excess of our expendi- 
 tures. It is manifest that such a surplus revenue is insufficient to re- 
 deem our bonds unless aided by a further issue of notes or a new 
 loan. 
 
 To pay off the original five-twenty loan, the only one now redeem- 
 able, will require $500,000,000 more of paper money, to be stiU further 
 increased as other loans become redeemable. The alarming proposition 
 to do this has been made on the ground as a justification that the bond- 
 holders bought these bonds with United States notes when gold was 
 high, and are compensated by repayment in legal tenders. It is true 
 that some of the later loans were paid for when legal tenders were 
 largely depreciated by their excessive issue and the uncertain result of 
 the war, but the first loan of $500,000,000 now to be redeemed was 
 sold at par when gold averaged about thirty-five per cent, premium. 
 By reference to the market price of gold in New York during the 
 summer and fall of 1863, it appears that this loan was sold at an aver- 
 age price of seventy-four cents in gold. The same bond can now be 
 bought in the market in New York at seventy-six cents in gold. If 
 you pay these bonds in legal tenders, limited in amount as they are 
 now to less than $400,000,000, and with the privileges' conferred by 
 this bill, the holder of the bond will realize seventy-six cents in gold, 
 and will have the advantage of a rapid approximation of his notes or 
 bonds to the gold standard. If we increase our paper money to an 
 amount sufficient even to pay the first loan, he wUl not receive over 
 thirty in gold, if, indeed, this act of injustice and repudiation does not, 
 by destroying the pubhc credit, utterly destroy that in which yon pro- 
 pose to pay a debt contracted when the enemies of the country were 
 confident of its overthrow, when foreign nations and a large portion of 
 our own people anticipated the permanent division-of the Union. This 
 course once entered upon, the first debt thus paid, the rest wiU follow ; 
 confidence thus destroyed, all values affected, the distress of the peo- 
 ple will compel them to resort to barter and gold, and to the utter re- 
 pudiation of the mass of paper money. So it was with the continental 
 money ; so it was with the French assignats. Our forefathers had the 
 excuse of a revolutionary struggle, on the result of which evervtliing 
 was staked ; while the French revolution was a volcano whose excesses 
 are acknowledged by all as the reproach of mankind. If we enter 
 upon a similar career, we have no excuse. "We have accomplished all 
 we fought for, and more than we hoped. No one doubts now our 
 ability to meet the interest of our debt, and rapidly to pay the princi- 
 pal. Our creditors are chiefly our own citizens, or those M-ho trusted 
 and confided in us and in our cause. It is not our enemies we owe 
 abroad, but our friends. Our debt is not only the capital of the rich, 
 but it is the savings of the poor, the widow, and the orphan. 
 
 Our " greenback," whicli it is proposed to depreciate, is not only 
 the standard of value for tlio capitalist, but fixes the pension of the 
 wounded soldier, the value of the workman's labor and of the ai'tisan's 
 skill. The capitalist may raise his rent or his price as we depreciate 
 the standard, but the laborer can not increase his wages. The poor feel 
 more severely all inflations of the currency, while the rich often urge 
 
THE PUBLIC DEBT. I49 
 
 them in order to add to the prices of their commodities and to evade 
 the payment of taxes. Now, this policy is desired to float upon the 
 people large stocks of goods at high prices. It is to shift the loss from 
 those who hold the goods to those who buy and consiime them. Your 
 Committee know that a demand often comes to us to make money easy 
 by increasing the amount. We need not refer to writers on poKtical 
 economy to show that an increase of paper circulation does not add to 
 the wealth of a community ; it only adds to the prices of commodities 
 at the expense of the consumer. The wages of labor do not rise with 
 the price of food and of rents. Paper money convertible into gold 
 promotes exchanges and adds to production. Paper money not con- 
 vertible is a device to lessen wages, to increase capital, to add to the 
 value of accumulated wealth. When it perishes by failure or repudia- 
 tion, it is mainly in the hands of the poor, received as wages, or of the 
 middle classes engaged in active business, while the capitalists by in- 
 vesting in property escape all loss. War and great public necessity are 
 held to justify the coining of public credit into money, but the device 
 should cease as rapidly as possible after the necessity passes away. 
 
 Tour Committee are therefore of opinion that no legal-tender notes 
 beyond the amount now authorized by law should be issued under any 
 pressure of financial or political necessity until they are convertible 
 into gold and silver. Our duty is to elevate the "greenback," the 
 standard of national credit, to the standard of gold, the money of the 
 world. Until then we are not on a substantial foundation. Let us 
 make the dollar of our promise in the pocket of a laboring man equal 
 to the dollar of our mint. The rapidity of the process is a question of 
 public policy. It may be by gradually diminishing the volume of cur- 
 rency, or by leaving it at its present amount until increased business or 
 improved credit brings the currency up to the specie standard. The 
 discretion left with the Secretary to diminish it may be withdrawn, 
 Hmited, or extended as public policy dictates; but no necessity, no 
 plausible pretext, to diminish the burdens of taxation can justify us in 
 increasing the volume of legal tenders. E^ow that the war is over, we 
 should look squarely and' hopefully to the time when we shall pay gold, 
 not only to the holder of our bonds, but to all persons in public or pri- 
 vate business. 
 
 Not only is this obvious public policy, but it is the express agree- 
 ment with the public creditors. On the '30th of June, 1864, at the 
 darkest period of the war, when it was feared that the amount of legal 
 tenders would destroy our ability to borrow money, we provided, in the 
 second section of the loan act of that date, " nor shall the total amount 
 of United States notes issued, or to be issued, ever exceed $400,000,- 
 000, and such additional sum, not exceeding $50,000,000, as may be 
 temporarily required for the redemption of temporary loan." This 
 stipulation is a part of the terms upon which the seven-thirty loan was 
 issued, and is as binding upon the United States as any other part of 
 the contract. It received the unanimous vote of Congress, so far as 
 the journals show, and was plainly demanded by public policy at the 
 time, and was a pledge of the public faith. Shall this -be violated 
 under pretense of diminishing the public burdens ? Every increase of 
 
150 SPEECHES AND REP0ET8 OF JOHN SHERMAN. 
 
 legal tenders impairs the value of our public securities. If we may 
 violate this, we may violate any other part of the contract. Your 
 Committee therefore dismiss as inconsistent with the public faith any 
 scheme of paying the public debt in legal tenders by increasing their 
 volume beyond the sum of $400,000,000. ' The surplus revenue can 
 readily be applied to the payment of the five-twenties, as is now daily 
 done by the purchase of our securities in the open market. Your 
 Committee are satisfied that this fund, with the aid of such a loan as 
 is provided in the bill herewith submittedj will redeem the five-twenty 
 loans as they become redeemable, with a large saving to the public 
 treasury, and in strict accordance with the public engagements. 
 
 It now remains to consider the terms of the proposed loan, and the 
 proper means to restore the notes of the United States to a specie 
 value. In the new loan your Committee deem it essential to adjust 
 the question of taxation. State and national, of the public securities. 
 The exemption of these securities from State and local taxes has been 
 the subject of wide-spread complaint and irritation. It is difficult to 
 reconcile the duty of the United States to preserve unimpaired its un- 
 doubted power to borrow money on the public credit with the reason- 
 able demand that aU property should bear its just proportion of the 
 burdens of taxation. Your Committee can only claim that they have 
 given the subject the most careful consideration, and submit a plan as 
 free from objection as any that has been proposed. 
 
 The exemption of public securities is not the result of any act of 
 Congress. It grows out of the provision of the Constitution of the 
 United States which secures to Congress the power to borrow money, 
 and out of the supreme nature of that power, which cannot be affected 
 or limited by the act of any State or local government. In the ab- 
 sence of any legislation, the Supreme Court have repeatedly held that 
 no State can levy upon money invested in any public security any tax 
 or assessment whatever, on the ground that such a tax is inconsistent 
 with the power of Congress to borrow money. If a State may tax a 
 security of the United States, it may entirely defeat a power essential 
 to the existence of the Government. These' decisions have been so 
 often repeated, and are founded upon reasons so conclusive and ob\-i- 
 ous, that they may be considered as settled constitutional law. It is 
 true. Congress may, in negotiating a loan, reserve to the State the ex- 
 press power to levy taxes on public securities held within the State. 
 This reservation would become a part of the contract, and would be a 
 valid stipulation. 
 
 The effect of State taxation would be that, in many of the States 
 where the taxes are high, no public securities would "lie held. This 
 would be especially so m largo cities, now the best market for our 
 securities, and where local taxes often amount to three per cent. With 
 such a pT'ovision, no loan could be negotiated except at such rates of 
 interest as would add largely to the puolic burdens. It has been pro- 
 posed to limit State taxes to one per cent. ; but this is a discrimination 
 as liable to objection as an entire exemption, and yet would add to the 
 public burdens one per cent, of the entire loan. It would not meet 
 the local demand for taxes for local purposes. Your Committee are 
 
THE PUBLIC DEBT. 151 
 
 therefore of opinion tliat it would not be wise in a loan law to waive 
 the constitutional right of exemption pf Government securities from 
 State taxes. 
 
 But that all property protected by State or local laws should bear its • 
 share of taxation is so plainly the demand of justice and public policy, 
 that your Committee deem it wise to reserve, in lieu of local taxes, a 
 specihc rate on the entire debt hereafter negotiated, and to distribute 
 this among the States according to their population. The amount thus 
 reserved will, in the aggregate, equal the probable amount that would 
 be collected by the States from the capital loaned to the Government. 
 From the nature of public securities being easy of concealment, readi- 
 ly transferred or deposited out of the "State, it is probable that but a 
 small portion would be reached by taxation ; while the mode suggested 
 would secure each State a fixed sum', collected without expense and 
 without surrendering the power of the National Government over its 
 loans, or of impeding the ready transfer of the public securities. 
 
 If it is objected that the distribution proposed is not just to the 
 States whose citizens hold a larger proportion of the bonds, it may be 
 replied that no better rule of distribution can be proposed, and the ad- 
 vantage, if any, will accrue to the younger and poorer States, where any 
 taxation is more severely felt. 
 
 This adjustment will relieve the bond-holder from the reproach of 
 enjoying State law and local privileges without contributing to the pub- 
 lic expenses, and will increase the demand for public securities, and thus 
 enable the Government to sell them at more favorable rates. The ob- 
 vious payment by the bond-holder of one sixth of his income for taxes, 
 and the great relief the distribution of so large a sum to the States will 
 give them, in the payment of State debts and the means of lessening 
 taxes, will satisfy the well-founded complaint now made by the owners 
 of real and personal property. 
 
 The same adjustment is proposed in regard to national taxes. It 
 has often been contended that a nation had no right to levy taxes upon 
 money loaned to it by its own or foreign citizens. This view was main- 
 tained with great ability by Alexander Hamilton in his celebrated re- 
 port on public credit, made January 16, 1Y95 ; but the practice of sev- 
 eral European nations, as well as of the United States during the war, 
 has established a different rule. The income tax of Great Britain and 
 of the United States extends to incomes derived from Government se- 
 curities ; but in practice this tax does not prove a productive source of 
 revenue. So many incomes fall below $1,000, the minimuiji of taxable 
 incomes, so many bonds are held abroad or by corporations who are 
 taxed in a different way, and so much income is concealed, that the in- 
 ternal revenue reports show that but a small sum is collected as the rev- 
 enue from incomes from public securities. 
 
 It has been suggested that a special tax be levied by Congress on 
 Government securities. Such a tax would be a palpable violation of 
 public faith, unless extended to all other securities, as State, corpora- 
 tion, or personal securities. To select any one class of securities from 
 other securities producing a fixed income, and to levy upon it a special 
 burden, would not only be an unjust taxation, condemned by all writers 
 
152 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 on political economy, not practiced by any other nation, but, as your 
 Committee believe, would be inconsistent with the Constitution of the 
 United States and likely to be defeated by the courts. And the injus- 
 tice of such a tax is more marked when the security selected is a pub- 
 lic security, to the payment of which the faith of the nation is pledged, 
 and when the admitted purpose of such a tax is to neutralize a consti- 
 tutional and legal exemption. 
 
 As an adjustment of the income tax now levied, your Committee 
 propose a like reservation as for the States, the proceeds, with such 
 other funds as Congress may provide, to be directly applied to the pur- 
 chase or payment of the principal of the debt. 
 
 The other provisions in regard to the loan are similar to those in 
 existing acts. Tour Committee deem it important to retain the prin- 
 ciple of redeemableness after a short period, thus enabling the Govern- 
 ment to avail itself of a favorable state of the money market by stiU 
 further reducing the interest. This loan will secure to the bond-holder 
 a net five per cent, annuity, payable — principal and interest — ^in coin, 
 and redeemable after ten years. Such a loan, upon the basis of the 
 present circulation, it is believed, can promptly be negotiated. 
 
 Your Committee deem it proper to provide for a foreign loan, to 
 be negotiated at the discretion of the Secretary of the Treasury. It 
 is computed that the amount of our securities held abroad exceeds 
 three hundred millions of dollars. These are mainly coupon bonds of 
 the first issue of the five-twenty loan. The interest is payable in New 
 York, by reason of which the holders are at considerable expense in 
 collecting their coupons. The nature of these bonds is such that they 
 are liable to be thrown suddenly upon our market by war, panic, or 
 other causes. For this reason our markets are unduly affected by fluc- 
 tuations, caused by events in which we have no part. It is believed a 
 loan can now be made, sufficient to redeem all the five-twenty bonds 
 held in Europe, at a rate of interest not exceeding five per cent., and 
 registered in London or Frankfort, so that it can not be thrown upon 
 our market at periods of alarm and stringency. The exchange is fixed 
 at a rate which wiU more than cover all expense of transferring funds, 
 and in harmony with the great system now proposed by the continental 
 nations, by which the gbld coin of equal value of all Christian nations 
 wi-U be convertible and exchangeable without loss or discount. 
 
 Your Committee regard the provisions of the bill designed to give 
 increased value to the United States note as of the greatest importance. 
 When the United States failed to meet its engagements in coin, it sub- 
 stituted its notes and gave to them every vdue possible. When the 
 legal-tender act of February 25, 1862, took effect, gold was at a pre- 
 mium of three per cent. That act not only made the United States 
 notes legal tender for public and private debts, but made them con- 
 vertible, at the pleasure of the holder, into bonds of the United States. 
 This provision was regarded as of the highest importance, without 
 which your Committee are satisfied the legal-tender clause could not at 
 that time have passed Congress. It was founded upon the manifest 
 principle that, when we coukl only pay in our notes and compelled all 
 our citizens to receive them, we ought to receive them for our bonds. 
 
THE PUBLIC DEBT. I53 
 
 The note is a contract no less sacred than the bond. By any equitable 
 rule it should bear interest. All former notes issued by the United 
 States bore interest^those during the war of 1812 at the rate of 5f 
 per cent., those during the Mexican war not exceeding six per cent. 
 So the exchequer bills of England forming a national currency bear 
 interest. This incident to a United States note past due was only 
 waived by making them convertible into an interest-bearing security. 
 This right was plainly printed on the face of the note ; but it was 
 found to embarrass the Treasury in negotiating its loan when under 
 the pressure of war, and therefore, by the act of March 3, 1861, it was 
 provided " that the holders of United States notes, issued under and 
 by virtue of said act, shall present the same for the pui-pose of exchang- 
 ing the same for bonds, as therein provided, on or before the first day 
 of July, 1863, and thereafter the right so to exchange the same shall 
 cease and determine." This device to suspend the right of converti- 
 bility attached to the note was suggested by our late distinguished 
 colleague. Judge Collamer, and was only justified by the necessity 
 then resting upon us of forcing upon the. market all forms of pub- 
 lic securities. The necessity no longer exists, and your Committee 
 think the right ought to be restored. If we cannot pay our note in 
 coin, let us pay it in the next best commodity, a bond of the United 
 States. The value of the note now rests solely upon the compulsory 
 value given it by the legal-tender clause ; then it will be anchored on 
 the solid basis of an annuity payable in coin. This measure alone will 
 give the " greenback " the market value of a bond, while heretofore, 
 Qiough made the legal standard of value, it has been and now is the 
 least valuable form of Government security. 
 
 Another highly important effect of this provision is to take from the 
 Secretary of the Treasury his power to control the currency. 
 
 Under existing law he is authorized, at his discretion, to contract 
 the currency at the rate of four millions of dollars per month, and 
 there is no provision to adapt the volume of currency to the ever- 
 changing demands of trade and commerce. This power, though no 
 doubt exercised by the Secretary with the sole view of promoting the 
 public interests, is one not properly invested in any officer constantly 
 engaged in official duties, and it is the cause of widespread complaint. 
 1^0 one engaged in business can base his calculations upon a currency 
 depending not on supply and demand, but upon the discretion of a 
 single officer. If currency is scarce, the Secretary is blamed ; if it is 
 redundant, he is charged with inflating prices. The Government 
 should have no power over the currency except to stamp it with the 
 highest credit, and by general rules, known to all men, to limit its 
 amount. All fluctuations of the currency, affecting, as they do, the 
 prices of all commodities, should be left solely to the laws of demand 
 and supply. Upon these business men base their transactions, and 
 should have the beneflt of their sagacity without being affected by the 
 arbitrary discretion of the Government. 
 
 The plan proposed establishes the maximum of currency at the 
 amount fixed by law, and it may be diminished by payment for taxes 
 and its conversion into .bonds. These processes would, it is believed, 
 
154 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 rapidly restore our currency to the standard of gold without the severe 
 disturbance and uncertainty caused by the present system. When the 
 restored credit of the Government advances the market value of our 
 bonds to the eold standard, specie payrnents may be resumed and 
 maintained. This plan is in accordance with the uniform practice of 
 our Government prior to July 1, 1863, and of Great Britain during 
 the long period of the suspension of specie paymentSj from 1797 to 
 1823. The holder of paper money was allowed at any time to convert 
 it into a bond or annuity. The note forced upon the people during a 
 suspension of specie payments was never allowed to be of less value 
 than other securities held by public creditors. 
 
 It may be alleged that this plan would contract the currency too 
 rapidly ; that, when trade was inactive and money plenty, it would be 
 converted into bonds ; and when active business operations were re- 
 sumed, as by the movement of crops or similar fluctuations of trade, 
 the currency would be insufficient and money too scarce, causing great 
 stringency and depression of prices. Such would undoubtedly be the 
 effect, and it is mainly to fm*nish this fluctuating currency that banks 
 of issue are established by most commercial nations. The usefulness 
 of the national banks is now impaired by the suspension of specie pay- 
 ments. Their currency is now not a fluctuating one, but a permanent 
 one. Their issues are not returned when trade is idle, and therefore 
 they are unable to relieve a sudden stringency in the money market. 
 
 It is to avoid this difficulty that during the suspension of specie 
 payments your Committee proposethat any holder of the five-twenty 
 bonds, or the consolidated bonds, may, under suitable regulations, and 
 within the limit of $400,000,000, present them at the Treasmy and 
 receive in exchange United States notes. 
 
 This would make a currency convertible into bonds, and M-ithin 
 proper limits a debt convertible into currency, and its fluctuations 
 would depend entirely upon the wants of trade and commerce, and not 
 in any respect upon the discretion of the Secretary. The money paid 
 into the Treasury for taxes or bonds would be a bank, or reserve, suffi- 
 cient for the negotiation of the new loan, for the redemption of the 
 flve-twenty bonds, and for exchange for bonds. 
 
 It may be objected that this would continue indefinitely the suspen- 
 sion of specie payments. Your Committee, being sincerely desii'ous 
 of avoiding this result, have given this objection the most careful con- 
 sideration, and are of the opinion that experience, the only test of such 
 a proposition, will show a contrary effect. 
 
 The holder of an annuity yielding five per cent, in gold, free from 
 all taxes, will not surrender it for a note only valuable as a currency, 
 unless the demand for currency is urgent and sti'ingeut, and then "it 
 ought to be relieved. It will happen that in one pai-t of the country 
 bonds will bo exchanged for notes, and in another ]iart notes for bonds"; 
 at one season money, being idle, will bo converted into bonds, to be 
 returnable ngain for money when it is needed. This process will give 
 increased value both to the notes and bonds, and enable the Govern- 
 ment eventually to restore both to the standard of gold, when the vast 
 productions of our mines and the accumulated gold now hoarded by 
 
THE PUBLIC DEBT. I55 
 
 OTir people will take its place as the best and the only true currency. 
 Then the banks, restrained by the necessity of redeeming their notes 
 in coin, will perform their appropriate function of furnishing a valuable 
 currency convertible into coin. 
 
 If in practice it is found that the conversion of bonds into money 
 needs further limitation, either by reducing the maximum limit or by 
 charging a percentage, it may be provided for by Congress. The con- 
 version IS not a right secured to the bond-holder as a part of his con- 
 tract, but is simply a privilege designed to regulate the currency, and 
 may be modified or withdrawn according to the judgment of Con- 
 
 Your Committee are of the opinion that the time is not distant 
 when it will become the duty of Congress to repeal so much of existing 
 laws as makes the United States notes a legal tender in payment of 
 debts, either public or private. This provision was adopted with ex- 
 treme reluctance and unde;r the pressure of overwhelming necessity. 
 The debates in Congress at the time this measure was adopted show 
 conclusively, that it was universally regarded as a temporary expedient. 
 It is inconsistent with sound financial principles, and was never re- 
 sorted to since the commencement of the present Government until 
 February 25, 1862. The evils produced by continental money were so 
 fresh in the minds of the founders of the Government that during the 
 financial difficulties that followed the adoption of the Constitution no 
 one proposed such an expedient. During the war of 1812, when finan- 
 cial embarrassments had impaired the revenue and destroyed the public 
 credit, a limited-tender Treasury note was proposed, but was promptly 
 rejected. Mr. Dallas, in a communication to the Committee of Ways 
 and Means, declared " that the extremity of that day can not be anti- 
 cipated when any honest and enlightened statesman will again venture 
 upon the desperate expedient of a tender law." We were driven to 
 that extremity, but should hasten to abandon so desperate a remedy at 
 the earliest day practicable. The moment at which we can restore our 
 notes to a specie standard should be signalized by a return to correct 
 principles, and our United States notes should stand like aU other paper 
 money, receivable only at the pleasure of the creditor. 
 
 Tour Committee, having thus stated their views upon the different 
 propositions of this biU, beg leave to add that they do not consider this 
 measure as embracing all the financial measures demanded by the pub- 
 lic interest ; but they present it in the hope that it may not be embar- 
 rassed by other financial problems now exciting general discussion. 
 
 Yarious propositions relating to the national banking system are 
 under consideration by your Committee, and will be carefully examined. 
 Whatever view may be taken by Congress as to the continued existence 
 of this system, it .is manifest, from the report of the Comptroller of the 
 Currency, that a more equitable distribution of the banks among the 
 States, and new provisions for reports and for the redemption of their 
 notes, must be made. It is equally manifest that further provision 
 must be made for the collection of certain internal taxes, and the re- 
 mission of others. It is only by relieving our industry, and applying 
 our taxes as far as practicable to articles the consumption of which may 
 
156 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 be dispensed with, that we can hope to establish our system on a satis- 
 factory basis. We may justly boast of the manner our constituents 
 have heretofore borne tne vast aggregate of accumulated taxes caused 
 by the war. They have cheerfully paid a greater amount in the aggre- 
 gate, or per capita, than any other nation before ; and, if necessary to 
 preserve the public engagement, they would continue to do so, but the 
 necessity no longer exists. It is happily our duty to select from among 
 the great number of articles now taxed such as may now be relieved, 
 and to simplify the mode of collecting the tax on the residue. This 
 your Committee, in connection with that of the House of Representa- 
 tives, are prepared to do ; but, as preliminary to all these important 
 subjects, it is necessary to relieve the public mind from anxiety as to 
 the action of Congress on the subjects embraced in this bill. 
 
 THE FUNDING BILL. 
 
 IN THE SENATE, FEBRUABT 27, 1868. 
 
 The Senate having under consideration the bill for funding the national debt 
 and for the conversion of the notes of the United States, Mr. Sherman said : 
 
 Mr. PEEsroENT : The attention of the Senate has been so long occu- 
 
 fied with grave political questions deeply exciting the public mind, that 
 have no doubt it will appear a duU change in our debate to turn to ques- 
 tions purely of a financial and economic character ; yet, as our constitu- 
 ents are laboring under the burdens of taxation and the acknowledged 
 evils of a depreciated cmTency, and demand relief from us, it becomes 
 the imperative duty of Congress to give attention to this subject. The 
 House of Eepresentatives is now engaged in the performance of its 
 constitutional duty of diminishing taxes ; and your Committee on Fi- 
 nance deem it their duty to lessen, if possible, the burdens of the public 
 debt, and to give increased value to the United States notes, now made 
 the compulsory basis of our circulation. We have, therefore, reported 
 this bill after careful consideration. In advocating it, I do not appeal 
 to any political bias ; I do not appeal to any sectional interest ; nor 
 ha,ve I any pride of opinion ; and I shall only appeal to those consider- 
 ations which actuate us all alike, the desire to relieve our people from 
 all the burdens of taxation consistent with the public faith. 
 
 The Committee on Finance acknowledge that it is the fii-st and 
 highest duty of a Government to maintain "inviolate the public credit. 
 A strict compliance with public engagements is the fii-st (hity of every 
 legislative body. Public credit is the highest property of a nation, its 
 sure reliance in time of danger and war; it is a more valuable property 
 than any other, and is not to he tnrnished or soiled by anv consMeration 
 whatever. But, subordiniito to this great in-inciple, it'is our duty as 
 legislators to relieve our constituents from every exaction not demanded 
 by the national safety or the public interests. We have a right to take 
 
THE FUNDING BILL. 15 7 
 
 from our people their money to the extent necessary to carry on the 
 ordinary expenses of the Government and maintain the public faith, 
 but not one cent further. The great mass of mankind have nothing to 
 protect except the reward of their daily labor. This is their only capi- 
 tal. In every community — and ours is more favored than most in this 
 particular — =the majority of men depend only iipon their daily labor, 
 and enjoy nothing of the blessings of civil government except in the 
 protection of the result of that labor. It is, therefore, our duty not to 
 take one cent from them unless it is demanded by the public exigencies. 
 
 It is with this view, and actuated by this principle, that the Com- 
 mittee on Fiaance have endeavored to make this bill a bill of relief, 
 reducing, if possible, consistently with the public faith, the interest of 
 the public debt, and giving increased value to United States notes. We 
 have endeavored in this bill to accomphsh three results : first, to reduce 
 the rate of interest with the voluntary consent of the holders of our 
 securities ; second, to make a distinct provision for the payment of the 
 public debt ; and third, to give increased value to United States notes, 
 and to provide for a gradud resumption of specie payments. All these 
 are objects admitted to be of the highest importance. The only ques- 
 tion is, whether the measure proposed tends to accomplish them. 
 
 The body of our public debt consists mainly of securities commonly 
 known as the five-twenty bonds. ]S"early all of the debt of the United 
 States is either reduced already to that form of security, or is reducible 
 within a very short period of time. I have prepared a statement from 
 the official documents showing the amount and time of maturity of the 
 five-twenty bonds. There are of the first issue, which became redeem- 
 able on the 30th of April, 1867, how outstanding $514,780,500. Of 
 the second issue there wall be redeemable on the 31st of October of 
 next year $129,443,800 ; there will be redeemable on the 30th of June, 
 1870, $301,880,250, and on the 31st of October, 1870, $181,427,250. 
 There are of the seven-thirties, which have either been funded into 
 five-twenties or are in process of being funded, something over $480,- 
 000,000, making an aggregate of what might now be regarded as five- 
 twenty bonds of $1,613,442,650, of which a little over $200,000,000 is 
 yet in the form of seven-thirties, and will be funded before the 1st day 
 of July next. In addition to this, there are of debts that are now 
 matured, or which will mature this summer, an aggregate of $106,042,- 
 949, consisting chiefly of compound-interest notes and three per cent, 
 certificates, makiag with the bonds mentioned $1,719,485,599, all of 
 which are either redeemable now or will become so within five years 
 from this time; the great body of them, however, are redeemable 
 within the present and the next year. 
 
 The first question that arises, Mr. President, is whether it is wise 
 now to provide for the redemption of these bonds. "We are compelled 
 to consider this question. It is already made the subject of political 
 disputes. While it is being considered by us in Congress it is being 
 considered by the people, and there is a daily discussion all over this 
 broad country as to how and when the five-twenties shall be redeemed. 
 Especially in the West this has been made the subject of political con- 
 tention. I might show you by the resolutions of political parties, both 
 
158 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Eepublican and Democratic, that we cannot avoid or evade this issue. 
 We must meet it. I have here the resolutions of both political parties 
 in the State of Indiana, both declaring that these bonds ought to be paid 
 in greenbacks, and differing only as to the limit of greenbacks. I have 
 also resolutions adopted in different parts of the country. The tenden- 
 cy of the Democratic party is to drift into a political declaration that these 
 bonds shall be paid in greenbacks ; and great masses of patriotic men aU 
 over the country of the political faith to which the majontv of the Senate 
 belong have come to the same concluBion. We are, thereiore, compelled 
 to consider the question. It will be made the basis of every election 
 next fall in nearly all the northwestern States. No man can be elected 
 to Congress unless he commits himself for or against this proposition. 
 
 Sir, it was the first topic that was introduced into this session of 
 Congress in both Houses. My honorable friend from Vermont [Mr. 
 Edmunds], in a very elaborate speech, and altogether the best one yet 
 presented on his side of the case, introduced it on the first or second 
 day of the session. The same subject was presented in the House of 
 Representatives by a distinguished^ Representative from the same por- 
 tion of the country, taking the opposite view. It is now more dis- 
 cussed than any other question except the question of reconstruction. 
 It must be met by us here, and in anticipation of the movements of 
 political parties. If other Senators have not, I certainly have been 
 overwhelmed with propositions of all kinds from every part of the 
 country, proposing various schemes of finance affecting the very ques- 
 tion proposed to be dealt with by this biU. 
 
 My own conviction is that the question ought to have been settled 
 two years ago, at which time I addressed the Senate on the subject. 
 Mr. President, I believe that most reflecting men wiU now admit that 
 if then we had adopted some provision, cotiiprehensiye in its charac- 
 ter, to fund the public debt and to provide for the redemption of the 
 five-twenty bonds when they became redeemable, it would have been 
 wiser. At tliat time no portion of them was redeemable. The first 
 ones became redeemable about one year ago ; but the country was then 
 filled with the idea of Mr. McCulloch, that the only safety was in con- 
 traction, to get back to specie payments before anything was done ■with 
 the public debt ; and the policy was adopted of authorizing a contrac- 
 tion of the currency without any regard to funding whatever, by tlie 
 act of April 12, 1866, passed against my earnest protest, in which we 
 gave to the Secretary of the Treasury almost unlimited power over the 
 currency and over the public debt. We authorized him to convert 
 every form of indebtedness into any form of indebtedness provided for 
 by previous acts. There was no limitation upon his powers except that 
 he could reduce the greenback currency oi\ly at the rate of $-l:,000,000 
 per raontli. I have no doubt that he exorcised his power conscien- 
 tiously ; but what has been the result ? Within two years he contracted 
 the legal-tondcr currency $160,000,000, and the plain United States 
 notes over $40,000,000. Ilo also converted all the floating-currency 
 debt into gold-interest bonds. At the time this law was passed, April 
 I 'J, 1S(;6, the total amount of five-twenty bonds was $666,000,000, and 
 the great mass of the debt was in what are called currency obligations, 
 
THE FUNDING BILL. ' 159 
 
 the principal of which, undoubtedly, could have been paid in currency. 
 But, conscientiously believing, as "he did, that the best way to the re- 
 sumption of specie payments was by a rapid and steady contraction of 
 the currency, he entered upon the policy I have stated. 
 
 In April, 1866, the price of gold was 125. It had steadily declined 
 from the close of the war until it reached its lowest point, I believe, in 
 April, 1866, the very time of the passage of this law. From that time 
 to this gold has advanced, varying between 130 and 140 ; and are we 
 any nearer specie payments now than we were then ? Not at all. We 
 have converted our debt into a more oppressive form of obligation. 
 The interest of the great mass of it is now payable in gold at the high 
 rate of six per cent., and the bonds are less valuable in gold than then. 
 I still think that, if we had looked rather to the funding of the debt 
 with the currency then afloat, we could have passed the whole of it into 
 five per cent, ten-forty bonds at par, instead of into a six per cent. loan. 
 The state of the money market since then justifies this opinion. If the 
 bill I refer to had passed two years ago, a great part of our debt would 
 have gone into the five per cent, loan provided for by it, and the coun- 
 try would have been saved many millions of gold per annum, and would 
 have escaped the dangerous question now presented to us. 
 
 Let us now consider the legal meaning of the contract between the 
 United States and the holders of the five-twenty bonds. 
 
 Mr. President, this form of debt contains one feature that was con- 
 sidered its chief virtue, and that is the right of redemption after five 
 years. We all remember the time when this first five-twenty loan was 
 introduced. Up to that moment the bonds that had been sold were 
 long bonds, payable twenty years after their date, now called the bonds 
 of '81 ; but in February, 1862, Congress for the first time, upon the 
 recommendation of the then Secretary of the Treasury, introduced the 
 idea of retaining the right to redeem the bonds after five years. This 
 right was considered the most favorable feature of that loan. The 
 Secretary of the Treasury, in his report to Congress, said it was im- 
 portant to retain the right to redeem the principal of the debt with a 
 view at any time to take advantage of the money market and reduce 
 the rate of interest ; and he proposed, and upon his recommendation 
 Congress concurred in the idea, that in future loans a short time should 
 be fixed after which the debt might be redeemed, while a longer time 
 was fixed within which the debt must be paid. This was a valuable 
 privilege reserved by the United States for a valuable purpose. We 
 were then engaged in war, and by the experience of nations it was 
 Imown that during war we must submit to hard and exacting terms in 
 order to borrow money ; but the right to get better terms at the end of 
 five years was reserved. 
 
 Sow, the question arises, how may these five-twenty bonds be re- 
 deemed? Four different modes have been suggested, in regard to 
 each of which I intend to make a few observations ; these plans are : 
 
 First. That these bonds may be paid, the principal in gold, at any 
 time after five years. 
 
 Second. That these bonds may be paid by a new issue of legal ten- 
 ders similar in character to the kind issued when they were sold. 
 
160 SPEECHES AND KEPORTS OF JOHN SHERMAN. 
 
 Third. That either by selling a new bond or by levying taxes we 
 may draw into the Treasury existing United States notes, and with 
 those pay off or redeem the five-twenties. 
 
 Fourth. The plan suggested by the Committee of giving to the 
 holder of the bond at his option the right to take another bond bearing 
 a less rate of interest. 
 
 Mr. President, let me briefly present the vie.w taken of these dif- 
 ferent propositions. Is the United States bound in law or equity to 
 postpone the redemption of the five-twenties until the;^ rise to par in 
 gold ? My friend from Vermont discussed this question with great 
 ability, and he' aflSrmed that we were so bound ; that we had no right 
 to redeem these bonds until the bonds rose to par in gold. That is his 
 position, and he maintained it with great force. 
 
 ISTow, I confess that this would undoubtedly be the rule as to the 
 bonds issued ))efore the act of February 25, 1862 ; and the Secretary 
 of the Treasury has always properly decided that bonds issued before 
 the legal-tender act took effect must be so paid in gold; and why? 
 The bonds issued in 1861 were issued when no one contemplated any 
 other mode of payment, when there was no money in which to pay 
 except gold and silver coin. This question was first presented to Sec- 
 retary Chase and decided by him when a portion of the Texas loan 
 matured in the fall of 1862. A small portion of that debt matured, 
 and he paid it in gold. His decision, to which I shall have occasion 
 to refer in discussing another point of this subject, was not based at 
 all upon the question of legal tender ; it did not raise the question ; 
 but it was decided upon the ground that as gold was paid for those 
 bonds, gold must be returned to the bond-holder. 
 
 A Government may, as a matter of paramount authority, compel 
 its citizens as between each other to receive and pay out its notes as 
 money on preexisting contracts ; but it has no right to debase its money 
 to make the payment of its own debts easier, we may, if there is no 
 stipulation to the contrary, pay in that kind of coin or money which 
 existed when the debt was created ; but, after we have created a debt 
 and have received gold or good money, we cannot then debase the coin 
 and pay the debt in inferior coin. Although we may change contracts 
 between individuals, we have no right to do it as between ourselves 
 and public creditors. A nation in dealing with a public creditor stands 
 on a different footing from what it does in regard to transactions be- 
 tween individuals of that nation. The only rule is the contract, and 
 we can not change that without being guilty of repudiation. I there- 
 fore assume that all the old bonds issued bejfore the legal-tender act are 
 payable in coin. 
 
 But the question is, whether the bonds issued since the legal-tender 
 act took effect may be paid in legal tenders. Upon this question, I 
 may as well state now, the Committee on Finance do not pass any 
 opinion ; and in the observations I make on this point I speak for my- 
 self, not for them. They deem the occasion a proper one to offer an 
 exchange to the public creditor, leaving for the future to settle the re- 
 sult of a refusal. The act which provided for the legal tenders al?o 
 provided for the five-twenty bonds. However, the notes were issued 
 
THE FUNDING BILL. 161 
 
 before the bonds ; tbe notes were all outstanding before a single bond 
 was issued. Now, the legal-tender clause provides that : 
 
 Such notes herein authorized shall be receiyahle in payment of all taxes, inter- 
 nal duties, excises, debts, and demands of every kind due to the United States, 
 except duties on imports, and of all claims and demands against the United States 
 of every kind whatsoever, except for interest upon bonds and notes, which shall be 
 paid in coin, and shall also be lawful money and a legal tender in payment of all 
 debts, public and private, within the United States, except duties on imports and 
 interest as aforesaid. 
 
 Does not this act, in so many words, declare that while coin shall 
 be paid "for the interest of the public debt, yet the notes provided by 
 this act shall be a lawful tender in payment of all public debts? 
 
 It is admitted that if the matter stood on the legal-tender clause 
 there would be no doubt, th^ere could be no resisting the conclusion, 
 that the legal contract between the G-ovemment and bond-holder was 
 that the interest should be paid in coin, and the principal should be 
 paid in the kind of legal tenders specified by this act. The act further 
 provides that the amount of legal tenders shall be limited to $150,000,- 
 000. It also provides that the holder of these legal tenders may at 
 any time convert them into five-twenty bonds ; and the second section 
 provides for the issue of those bonds. If the bonds had been issued 
 and negotiated solely under the act of February 25, 1862, it would 
 have been irresistible logic that it was not contemplated that the $500,'- 
 000,000 authorized by the act should be paid with $150,000,000 legal 
 tenders, themselves convertible into bonds. But no bonds were issued 
 under that act. Every one of the restrictions as to the amount of legal 
 tenders was repealed before the bonds were negotiated. In July fol- 
 lowing, before a single bond was sold, the limitation as to the amount 
 of legal tenders was increased to $300,000,000. In December follow- 
 ing the Secretary had failed to negotiate the five-twenty loan ; and in 
 his report, to which I will now refer, he' says that it is impossible for 
 him, under the restrictions contained in these acts, to sell the bonds ; 
 that after all his efforts he has sold only a few millions ; that the loan 
 has been a failure, and he asks for additional legislation. I now ask 
 attention to that report. He states the failure to negotiate the five- 
 twenty loan, and then says : 
 
 The act of last session [the one to which I have already referred] authorized the 
 Secretary to issue bonds of the United States, already often mentioned as five- 
 twenties, to the amount of $500,000,000, and to dispose of them for coin or United 
 States notes at the market value thereof. In the same act authority was given to 
 issue $150,000, OOO'in United States notes, which authority was afterward enlarged 
 to $360,000,000 ; and it was provided that any holder of such notes to the amount 
 of fifty dollars, or any multiple of fifty, might exchange them for five-twenty bonds 
 at par. 
 
 The effect of these provisions was to make negotiations of considerable amounts 
 impossible ; for considerable amounts are seldom taken, except with a view to re- 
 sales at a profit, and resales at any profit are impossible under the law. 
 
 Then he goes on to say : 
 
 The Secretary respectfully recommends the repeal of both these provisions. The 
 first imposes, it is believed, a restriction which Congress did not intend ; and the 
 second has been followed by the inconveniences which were feared rather than by 
 the benefits which were expected. 
 11 
 
162 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Then he goes on to say : 
 
 Should Congress, however, be of opinion that these clauses should be retained, 
 it will be necessary to provide for other laws, at rates more favorable to the takers 
 than convertibility into five-twenties. This can be done either by authorizing bonds 
 at longer time or by increasing the rates of interest offered. The Secretary can not 
 recommend either course except as an alternative to no provision at all. 
 
 When we were called upon to consider this question we had to 
 choose between three alternatives : the repeal of the restrictions which 
 prevented the sale of five-twenty bonds, or the sale of the bonds at a 
 higher rate of interest, or their sale below par. After long considera- 
 tion — for the subject was debated over and over again — the Committee 
 on Finance agreed upon the act of March 3, 1863. That act repealed 
 the limit as to the amount of circulation and raised it to $i50,000,000 ; 
 it also took away the right to convert, which the Secretary said was the 
 other restriction that prevented the sale of the bonds, and limited the 
 right of the holders to convert the outstanding greenbacks to the 1st of 
 July then next. By this legislation the limitations which prevented 
 the sale of the first five-twenty *bonds were repealed, and then, for the 
 first time, this loan was taken. Then it was that an agency was organ- 
 ized and means were taken to spread the bonds over the country, and 
 they were sold ; but they were not sold until these restrictions were 
 removed, and they were sold upon a basis of $450,000,000, without the 
 right of redemption, with no privilege whatever except that of being 
 receivable in payment of taxes. That was the state of the law upon 
 which the legal right of the holders of the five-twenties rests. People 
 refused to buy these bonds upon the terms of the act of February 25, 
 1862. They did buy tKem under the act of March 3, 1863 ; and it is 
 idle to rest their claims upon restrictions repealed before the bonds 
 were issued. 
 
 I wish to read a little further, to show that the Secretary of the 
 Treasury, Mr. Chase, a year afterward, in December, 1863, in his report, 
 again stated that Congress, having relieved him from the restrictions of 
 the act of 1862, enabled him to sell the five-twenty bonds. He says : 
 
 On that day, March 3, 1863, the act to provide ways and means for the support 
 of the Government received the approval of the President and became law. In ad- 
 dition to various provisions for loans, it contained clauses repealing the restrictions 
 affecting the negotiation of the five-twenties, and thus disengaged that important 
 loan from the embarrassments which had previously rendered it almost unavailable. 
 
 Then he goes on and says that every dollar of the loan \fas sold in 
 a short time, presenting a remarkable case of success ; but it wiis not 
 sold under the act of Febmary 25, 1862. On the contrary, there was 
 an utter failure to sell the loan under that act. It was sold under the 
 subsequent law which repealed the restrictions of the act of 1862, and 
 it was sold upon a basis of currency amounting to $450,000,000, and 
 wlien the notes had been so depreciated by our legislation, intentionally, 
 for wise purposes, when the right to fund was taken away, and no right 
 WHS given to the notes except to be paid to the Government in the way 
 of taxes. 
 
 It is true that the various agents of the Government stated that 
 these bonds would be paid in coin, and that creates the embarrassment 
 
THE FUNDING BILL. 163 
 
 in regard to this matter that has alwajs affected my mind more than any 
 legal difficulty in the way ; because I think the nation is not only bound 
 to observe the law, but it is bound to pay a reasonable degree of re- 
 spect to the representations made at the time these bonds were sold. 
 It is true, as matter of law, that no agent could vary the contract ; that 
 every man who bought these bonds bought them upon the face of the 
 law, and not upon the' mere advertisements of agents. Still every wise 
 legislator would consider the extent of those representations, and how 
 far they affected the public mind. 
 
 It has been sometimes said that Congress silently acquiesced in them, 
 but that is not true. Congress was not in session when any portion of 
 this loan was sold. "We adjourned on the 4:th of March, 1863, and did 
 not convene imtil the December following, and within that time all the 
 bonds were sold. The silence of the subsequent Congress could not 
 change the contract which was made in March, 1863, and had no effect 
 upon the case. 
 
 It has been suggested that the Treasury Department has decided 
 that the bonds were payable in gold, reference being made to the deci- 
 sion of Secretary Chase on the payment of the Texas bonds in Decem- 
 ber, 1862. It is claimed that the Secretary of the Treasury then decided 
 that the legal-tender clause did not apply to Government securities. 
 Now, I wiU read the decision of the Secretary. I read from his letter 
 of January 5, 1863, in reply to a resolution of the House of Represen- 
 tatives. He states that he concluded to pay this loan in coin for these 
 reasons : 
 
 My judgment was determined in favor of payment in coin, not merely by the 
 weigMy considerations growing out of its beneficial influences on public credit, but 
 by the circumstance that I found myself able to obtain the needed specie at a cost 
 so small that payment in coin was, in fact, a less inconvenience to the Treasury and 
 a less interference with payments to and for the army and navy than payment in 
 notes would have been. 
 
 A letter signed by George Harrington, Assistant Secretary, dated 
 May 26, 1863, and a letter of Mr. Field, also Assistant Secretary, have 
 also been referred to. Mr. Harrington said in his letter : 
 
 The flve-twenty sixes, payable twenty years from date, though redeemable after 
 five years, are considered as belonging to the funded or permanent debt ; and so 
 also are the twenty-year sixes, into which the three-year seven-thirty notes are 
 convertible. These bonds, therefore, according to the usage of the Government, 
 are payable in coin. 
 
 The letter of Mr. Field, when he was Assistant Secretary, simply 
 stated as a fact that the bonds would be paid in gold.- There was no 
 reference to the law, no decision upon the terms of the law, but a 
 mere reference to the custom of the Department as to old bonds issued 
 before the legal-tender' act ; and no doubt it was made upon the com- 
 mon expectation that long before the five years expired specie pay- 
 ments would be resumed, and no doubt they would have been if our 
 arms had been victorious during that summer ; but certainly none of 
 these letters can be regarded as a formal construction of the legal-ten- 
 der act, which is not even referred to. 
 
 Mr. President, I will not follow this matter further, because it is 
 
164 SPEECHES AND KEP0ET8 OF JOHN SHERMAN. 
 
 not necessary for my argument that I should do so ; but I submit to 
 Senators whether the presentation of the law and the facts in regard 
 to the five-twenty loan does not at least raise a reasonable doubt upon 
 which honest men may disagree. All that is necessary for my ar^- 
 ment is to show that there is such a doubt as to the manner of paying 
 these bonds. If such a doubt exists it ought to be removed, or some 
 other bond substituted, in order that this unsettled question may not 
 poison the public credit. 
 
 The second mode of paying off the five-twenty bonds is proposed 
 by partisans, and consists m a new issue of greenbacks. This is a 
 plausible and a dangerous device. No man can justify it. Wh;^? 
 Because the very acts under which these bonds were issued contain 
 limitations which we can not and dare not exceed. These limitations 
 were put in every loan act, and finally embodied in the form of a guar- 
 antee in the act of June 30, 1864:, to which I will now refer. The 
 limitation contained in the last preceding act, that of March 3, 1863, in 
 force when the five-twenties were negotiated, was $450,000,000. The 
 act of June 30, 1864, modified and repeated this limitation, as follows : 
 
 Nor shall the total amount of United States notes issued or to he issued ever ex- 
 ceed $400,000,000, and such additional sum, not exceeding $50,000,000, as may be 
 temporarily required for the redemption of temporary loan. 
 
 This limitation upon the amount of greenbacks was always a part 
 of the loan laws, and why ? Because the amount of those notes issued 
 would regulate and fix the value of the bonds themselves. In all the 
 loan acts, therefore, the amount of greenbacks issued from time to time 
 was Hmited by law, and that limitation was a part of the contract under 
 which the bonds were issued ; and hence any proposition which looks 
 to an increase of the legal tenders with a view by this increase to pay 
 off the five-twenties^ would be a plain, palpable violation of a public 
 engagement, just as much as would be a clipping of the coin, or, to 
 follow the example of the middle ages, a debasement of the coin. 
 Every additional greenback issued tends to depreciate the value of the 
 security ; and therefore, as the law itself limits the amount, it must be 
 complied with, whatever is the consequence. 
 
 I take it, then, that no proposition will ever receive the sanction of 
 Congress in the face of this law, providing that the five-twenties shall 
 be redeemed with any other notes than those in existence at the time 
 they were sold ; that any proposition of that kind would be dishonor- 
 able to the country and dishonorable to any one who seriously proposed 
 and advocated it. It would be to create a depreciated currency in 
 order to evade the payment of an honest debt. 
 
 But, sir, aside from that, as an act of public policy, it would be in- 
 jurious. It would impair all values ; it would affect all prices. None 
 would suffer from such a debasement of the currency so much as the 
 laboring man. Labor is the last thing except real estate to feel the 
 effect of a change in the currency, because labor is more abundant 
 than any other commodity. Labor feels List the advance caused by 
 the inflation of paper money. I trust this proposition when discussed 
 by the people will be generally repudiated, and I believe it wiU be. I 
 regard this limit upon the amount of greenback currency as a sheet 
 
THE FUNDINa BILL. 165 
 
 anchor of public safety; that in no event whatever is it to be vio- 
 lated. 
 
 It is sometimes said, why will not the proposed increase of banking 
 circulation have the same effect as the increase of greenbacks ? This, 
 question is put in regard to the bill reported by my friend from Mis- 
 souri [Mr. Henderson] to repeal the limitation upon the amount of 
 banking circulation. I answer that the effect is very different. The 
 amount of bank notes may be left free without any legal hmit, if only 
 the right to present the note for redemption is always enforced. Re- 
 demption must be at present in legal tenders, but we all look to an 
 early resumption of specie payments. There is no check on banking, 
 there is no use in banks, unless you have specie payments. Bank notes, 
 unless they are based on the payment of specie or something that is or 
 will soon be equivalent to specie, are injurious, and therefore I am not 
 in favor of any increase of the bank-note circulation unless it is in view 
 of the speedy resumption of specie payments. Eut, sir, if bank notes 
 are based on coin, or if they are redeemable in coin, their amount may 
 be left to the demands of trade, to the wants of the community. The 
 power to present them for payment at any time is a sufficient check on 
 the amount. That is shown by the experience of many countries. In 
 England the hmit is very rarely reached. In ISTew York they had a 
 very good State system, which, if it had been extended all over the 
 United States, under the control of the General Government, would 
 have been a wise one. That was a system of free banking under which 
 any man might bank who would keep up the specie standard, and give 
 the requisite security to the public and redeem his notes in specie. 
 
 I come now to the third mode that has been suggested, and that I 
 have necessarily discussed as I have proceeded. I here again desire to 
 repeat that, in what I have to say in regard to the manner of paying or 
 redeeming the bonds, I do not speak for the Committee on Finance, 
 because, in the view which they took of it in the bill which they re- 
 ported, they did not decide that question. I merely present the argu- 
 ment. 
 
 Equity and justice are amply satisfied if we redeem these bonds at 
 the end of the five years in money of the same kind and of the same 
 intrinsic value existing at the time they were issued. Senators are 
 sometimes in the habit, in order to defeat the argument of an antago- 
 nist, of saying that this is repudiation. "Why, sir, every citizen of the 
 United States has conformed his business to the legal-tender clause. 
 He has collected and paid his debts accordingly. Every State in this 
 Union, without exception, has made its contracts, since the legal-tender 
 clause became law, in currency, and paid them in currency. Indeed, 
 every State in this Union except Massachusetts and California, has 
 gone further, and, as I think, improperly, and has paid in legal tenders 
 either principal or interest of preexisting debts contracted on the basis 
 of gold. Connecticut pays her interest in paper on debts contracted 
 since the passage of the legal-tender act. There is a wide distinction 
 as to preexisting debts between the right of a citizen to pay a debt 
 under the legal-tender act and the right of a State or a Government to 
 do it ; but as to debts contracted since the legal-tender law took effect, 
 
166 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 they were contracted in currency, and upon the express stipulation in 
 the law that their principal should be paid in legal tenders and the 
 interest in coin. Ii that stipulation was not in the law, the right to 
 redeem would only rest upon the general principle that a debt may be 
 paid in the kind of money in which it was contracted. 
 
 But public as well as private debts contracted since the legal-tender 
 act do not rest upon inference, buj upon the express stipulation in the 
 law ; and it is equitable and right that the United States should avail 
 itself of this part of the contract. 
 
 Sometimes this bill has been regarded as a threat. We do not 
 so intend it. We say to the holders of our public securities, except 
 the existing ten-forties, " We will give each of you, at your option, 
 this form of security in exchange for that which you now have; 
 if you accept this offer by the 1st of November next, we will give 
 you certain exemptions ; if not, you stand upon your existing right, 
 and all questions aSecting it shall be postponed until the next session 
 of Congress." It is said that this is a threat. I do not so regard it. 
 The committee has provided no alternative in case the bond-holders do 
 not accept. Their bonds still stand, and no one proposes the alterna- 
 tive adopted by the English Government, which I intend to refer to in 
 a moment, of stopping the interest, or the alternative adopted by our 
 ovra Government under Hamilton's plan of reducing the interest. We 
 leave the bond-holders to stand precisely as they are, and they wiU be 
 paid their six per cent, interest in gold until their bonds are redeemed, 
 and they can not be redeemed under existing laws without further leg- 
 islation. All that the Committee on Finance do in this biU — and, 
 perhaps, in discussing the other points I have gone beyond the neces- 
 sity of the case — is to offer to all the public creditors these new bonds 
 for the old, the exchange to be made without expense to the Govern- 
 ment, without sacrifice by any one, leaving every man to judge for 
 himself whether his interest and substantial equity wiU not be pro- 
 moted by it. If he does not accept he stands by his bond, and Con- 
 gress must decide whether the redemption of these bonds shall be 
 postponed to some indefinite future when we may be able to pay gold 
 for what we received in depreciated paper. We do not decide it, and 
 do not undertake to, but we simply submit the option. 
 
 Even if Senators do not agree in the view that I take of this mat- 
 ter, it is necessary to provide this new loan for this reason : we must 
 provide for the funding of some one hundred and odd millions of loan 
 that is maturing ; we must provide for the redemption of the com- 
 pound-interest notes ; we must provide for the conversion of the green- 
 backs, which we do in another section ; we must provide somd bond 
 into which even the floating debt may go ; and it is advisable in mak- 
 ing that bond to select, if possible, a bond into which the whole mass 
 of tlie public debt may from time to time be converted according to 
 our future laws. 
 
 These obligations are convertible into five-twenties as the law now 
 stands, but would any Secretary now convert any more of our currency 
 debt into five-twenty bonds bearing six per cent, interest in gold ? As 
 I shall show hereafter, there is no such burdensome loan negotiated by 
 
THE FUNDING BILL. 167 
 
 any civilized nation in the world as our five-twenty loan, if it is to be 
 paid in gold. Therefore, I would say, as I said two j^ears ago, that I 
 never would issue another five-twenty bond, because it is the most ex- 
 pensive form of loan. Just consider it : seventy-six dollars of gold 
 wiU buy a five-twenty bond bearing six per cent, interest in gold, and 
 that bond cannot be redeemed, according to one construction, until the 
 United States are ready not only to pay six per cent, on one hundred 
 dollars for the use of seventy-six dollars, but also to pay one hundred 
 dollars in gold for what now costs seventy-six dollars. That is the 
 proposition, and I say I never would issue another five-twenty bond. 
 I think our great mistake has been that we have funded a great mass 
 of our floating debt already into five-twenties, and given to the public 
 creditors the right to demand this large rate of interest for so long a 
 time. 
 
 Now, I wish to show, as we are governed in a great measure by 
 example, that the proposition made by the Committee on Finance is in 
 exact accordance with the course that has been pursued in England six 
 or seven times, and once in our own country. In England, prior to 
 1715, the rate of interest was six per cent., which was reduced by an 
 act of Parliament to five per cent., and without negotiation. In 1725, 
 after the explosion of the South Sea bubble, the rate of interest on the 
 mass of the public debt was reduced from five per cent, to four per 
 cent. This was done mainly by negotiation through the great corpora- 
 tions of London, the Bank of England, the South Sea Company, and 
 one of the India companies. They reduced the interest by issuing four 
 per cent, annuities in payment of live per cents, paying off what were 
 called the dissentients. 
 
 In the middle of the eighteenth century the rate of interest all over 
 Europe became lower than ever was known before. It fell to three 
 per cent. In 1737 it was proposed in England to reduce the interest 
 on the public debt from four to three per cent. This passed the 
 House of Commons two readings, and was lost on the third. In 1742 
 a similar attempt was made to reduce the rate of interest, and in 1749, 
 under the administration of Mr. Pelham, it was carried into execution ; 
 and we have in Hansard's Debates, and also in the biography of Mr. 
 Pelham, an exact account of this transaction. Mr. Pelham was warned 
 before he made this proposition of the - effect upon himself ; but he 
 persisted in it, and finally carried it through, after quite an extended 
 argument. His proposition, in short, was that any holder of any se- 
 curity bearing four per cent, interest might, within a given time, pre- 
 sent it, not for redemption, but to receive in exchange a security bear- 
 ing three and a half per cent, interest for four or five years, and after 
 that bearing three per cent, interest. Nothing was said about redemp- 
 tion ; but it was understood, no doubt, that in case holders did not 
 accept it their securities would be redeemed. The result w;as an angry 
 debate, in which it was alleged that this was a violation of the public 
 faith. I read a note in Hansard's Debates, taken from Tindal. Tin- 
 dal says : 
 
 This was generally looked upon to be a very bold measure in the minister, and 
 some of his best friends, even the day before the vote passed in the House of Oom- 
 
168 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 mons, endeavored to persuade him against it. But he appeared determined, and in 
 a few weeks they approved of his steadiness as much as before they blamed his 
 obstinacy. 
 
 I read from Mr. PeUiam's biography wliat is there said on the sub- 
 ject : 
 
 Duly impressed with the importance of his financial plan, Mr. Pelham suffered 
 no avoidable delay to intervene before he submitted it to the House. By this 
 promptitude he manifested the decision of a great minister, for the proposal was at 
 hrst so unpopular or so little understood that even on the very day before the 
 resolutions were brought forward some of his friends endeavored to dissuade him 
 from his purpose ; but their remonstrances were ineffectual. He persevered in his 
 determination, and the event fully justified his expectations. On the 28th of No- 
 vember a motion was made for a committee of the whole House, to take that part 
 of his Majesty's speech into consideration which related to the national debt. The 
 expediency of reducing the interest had been so clearly demonstrated by Mr. Pel- 
 ham that his plan was unanimously approved. 
 
 The great corporations which had aided in the former reduction in 
 the interest of the public debt combined against it, and for two years, 
 defeated it. The House of Commons was firm, and threatened to re- 
 peal some of their priyileges, and finally compelled them to acquiesce. 
 
 There is a still more interesting case, and one more applicable to 
 our present condition, which occurred in England in 1822. During 
 the wars which probably tested the power of England more than any 
 other event in her history — her wars with Napoleon — she was com- 
 pelled to resort to great sacrifices. She issued all manner of securities ; 
 she sold her bonds at one time at fifty or sixty cents on the dollar ; she 
 issued five per cents, four per cents, and three per cents, and all other 
 fonns of security. After the war was over, before the resumption of 
 specie payments, Mr. Vansittart, then Chancellor of the Exchequer, 
 proposed to fund the public debt by a proposition very similar in lan- 
 guage to the one submitted now by the Committee on Finance. The 
 great mass of their fioating debt consisted of five per cent, exchequer 
 bills — navy bills, as they were commonly called — which were very 
 much such bills as our five-twenty bonds. They bore five per cent. 
 interest. Mr. Yansittart introduced his bill on the 25th of I^bruary, 
 1822 ; and we have the whole debate in Hansard. His proposition "is 
 in substance like our own. It simply declared that the holdei-s of those 
 five per cent, bills might present them at such a time for exchange for 
 a four per cent: annuity. If they did not present their securities, their 
 assent was implied. There was some opposition to the measure. It 
 was alleged to be a violation of the public faith ; it was before specie 
 payments were resumed in England, when all payments were made in 
 Bank of England notes. It was finally carried, after debate, and ac- 
 quiesced in. 
 
 There is also one case in our own history, and that is the funding 
 system adopted by Alexander Ilmnilton. The Constitution of the 
 United States declared that the public debt of the United States should 
 be inviolate, and the new (Tovemment assumed the debt of the old 
 ConfediTacy ; but, as a matter of course, it was in a condition of great 
 uncertainty ; the interest had been unpaid for a long time, and Siere 
 were disputes as to tlie amount. Alexander Hamilton, as fii-st Secre- 
 
THE FUNDING BILL. 169 
 
 tary of tlie Treasury, proposed a plan of funding and grouping together 
 all this mass of indebtedness. His report on the public credit was re- 
 garded by his friends, and has been regarded by the whole world, as a 
 remarkable production ; and yet what was Alexander Hamilton's fund- 
 ing plan ? He proposed, first, to ascertain the amount of the national 
 debt, which was finally computed to be and was settled at $54,000,000, 
 foreign and domestic. Did he propose to pay that off in precise con- 
 formity with the terms on which the debt was contracted ? Not at all. 
 He also ascertained the amount of the State debts ; nearly all the States 
 were overwhelmed with debts that grew out of the revolutionary war, 
 and they were ascertained and apportioned ; the general aggregate of 
 all was $75,000,000. How was this funded ? By offering the fund- 
 holders six per cent, bonds for two thirds of their debt, and the other 
 third was paid, some of it, by three per cent, bonds, some by four 
 per cent, bonds, some by public lands, and some by annuities. The 
 plan of Alexander Hamilton embraced various forms of loan, and all 
 was submitted to the voluntary will of the fund-holders. Some of 
 them refused to agree. What did he do then ? He only paid them 
 In accordance with the stipulations made as to the rest of the loans. I 
 will read a short paragraph or two from this document of Mr. Ham- 
 ilton to show how he regarded the public debt : 
 
 The interesting problem now occurs: Is it in the power of the United States, 
 consistently with those prudential considerations which ought not to be overlooked, 
 to make a provision equal to the purpose of funding the whole debt, at the rates of 
 interest which it now bears, in addition to the sum which will be necessary for the 
 current service of the Government ? 
 
 The Secretary wiU not say that such a provision would exceed the abilities of 
 the country ; but he is clearly of opinion that to make it would require the exten- 
 sion of taxation to a degree and to objects which the true interests of the public 
 creditors forbid. It is therefore to be hoped, and even to be expected, that they 
 will cheerfully concur in such modifications of their claims, on fair and equitable 
 principfes, as will facilitate to the Government an arrangement substantial, durable, 
 and satisfactory to the community. The importance of the last characteristic will 
 strike every discerning mind. No plan, however flattering in appearance, to which 
 it did not belong, could be truly entitled to confidence. 
 
 He provided for four per cent, interest to be paid to those who did 
 not agree to the offer, two per cent, less than they were entitled to 
 under the law creating the debt. After speaking of those who might 
 refuse the offer, he proceeds to say : 
 
 Hence, whatever surplus of revenue might remain, after satisfying the interest 
 of the new loans and the demand for the current service, ought to be divided among 
 those creditors (if any) who may not think fit to subscribe to them. But, for this 
 purpose, under the circumstance of depending propositions, a temporary appro- 
 priation will be most advisable, and the sum must be limited to four per cent., as 
 the revenues wiU only be calculated to produce in that proportion to the entire 
 debt. 
 
 The Secretary confides for the success of the propositions to be made on the 
 goodness of the reason upon which they rest; on the fairness of the equivalent to 
 be offered in each case ; on the discernment of the creditors of their true interest ; 
 and on their disposition to facilitate the arrangements of the Government, and to 
 render them satisfactory to the community. 
 
 I say the plan now proposed by the Committee on Finance is in 
 accordance with precedent, holds out no threats, and deals with all 
 
170 SPEECHES AND KEPORTS OF JOHN SHERMAN. 
 
 alike, holders of five-twenty bonds, greenbacks, and all. It gires them 
 a proposition to fund their debt at tneir own option by the 1st of No- 
 vember next ; or if they do not choose to do it, then, as a matter of 
 course, the question is to be decided at the neit session of Congress 
 whether or not Congress, will redeem the five-twenty bonds in the cur- 
 rency in which they were contracted or postpone their redemption, 
 paying the interest at six per cent, in gold, until we can redeem the 
 principal in gold. Whatever view Senators may take of this, they can 
 not avoid making some provision by some loan less onerous than five- 
 twenties for funding the greenbacks and the floating debt of the United 
 States ; and into that loan, whatever it may be, the whole debt may 
 eventually be funded. 
 
 ]S"ow, Mr. President, the question is whether the terms of the pro- 
 posed loan are reasonable and fair, such as we ought to propose to our 
 own citizens, and such as our constituents may reasonably hope to 
 
 The first question that arises is the exemption from State taxation. 
 No Government that I have been able to find ever allowed its bonds or 
 securities to be taxed. The United States never did. In the absence 
 of stipulations to the contrary, the courts have always held that no 
 State or subordinate authority could tax the national securities. It 
 may, it is true, be made a part of the loan that the States shall have a 
 power to tax them, but who would buy such bonds ? I never would 
 vote for such a provision. I never would allow a subordinate authority 
 to thus control the public credit of the United States, or have a voice 
 in the matter. The effect in time of war would be disastrous. Such 
 a power would prevent the citizens of a State where the power was 
 exercised from loaning money upon Government securities. I take it 
 therefore as an axiom, that in no event shall we allow subordinate au- 
 thorities to tax the national securities. I need not refer to the authori- 
 ties on this subject. I have done that before. * 
 
 The next provision is the exemption from any discriminating prop- 
 erty tax. Men who do not understand the question have proposed to 
 tax Government securities specially, like a special tax on manufactures ; 
 and the proposition has been, pei-haps, broached in Congress to tax 
 Government securities one or two per cent, in lieu of all other taxes. 
 Such a provision would be a clear and palpable violation of the Consti- 
 tution and of the law. It would be worse than repudiation ; it would 
 be the meanest kind of repudiation. Why ? Eecause it would be a 
 special discriminating tax on property. A tax on manufactures is a tax 
 on consumption. The manufacturer may add that tax to the cost of 
 the article, and the consumer who finally uses the article pays the tax. 
 That is the principle upon which it rests. A special tax on property is 
 a diminution of tlie property. It cannot be collected from any one 
 else, or shared with any one. It is a direct tax — as much so as if levied 
 on farms ; and, being a direct tax, it is unconstitutional, unless appor- 
 tioned among the States according to population. 
 
 One of tlie curliest cases which came before the Supreme Court was 
 the well-known cnse involving a tax on carriages. There the Court 
 held that it was the use of the carriage which was taxed, and that was 
 
THE FUNDING BILL. 171 
 
 a j)roper tax, because it was a tax on the use of a luxury. It was the 
 enjoyment or use of the carriage that was taxed, not the property in 
 the carriage. No special tax can be levied on property. If this princi- 
 ple once prevailed, that we might select any kind of property and levy 
 a discriminating tax on it, the time might come when snipping might 
 be selected as the subject of a special tax ; when property in lands, 
 plainly against the intention of the Constitution, might be selected for 
 the levying of a discriminating tax. We purpose, therefore, in order 
 to avoid all controversy, to put a stipulation in the new loan law ex- 
 empting these bonds from all discriminating taxation by Congress, but 
 leaving them subject to the same income tax that other income is sub- 
 ject to. 
 
 There is some difference of opinion as to the rate of interest of the 
 new bonds. The Committee on Finance took great care in deciding 
 this question. "We believed that we could not hope to negotiate a losrci 
 at a rate lower than five per cent. It is the lowest rate of interest ever 
 provided for in any loan act of the United States, except in the fund- 
 ing scheme of Alexander Hamilton, already referred to, where a certain 
 portion of the debt was funded at three per cent. I have looked with 
 care into recent foreign loans, and I find that no Government in Europe 
 has recently sold its bonds at a less rate of interest than five per cent. 
 When the nominal rate was lower, they were sold at a di^ount. The 
 English loans during the Napoleonic war yielded the lender a rate of 
 interest averaging over five per cent. I have on that subject a number 
 of authorities, and I will refer to one or two of them. 
 
 In the compendium of finance which I have before me there is a 
 statement of the amount of the various loans negotiated by the English 
 Government during the second French revolutionary war. The whole 
 amount of loans negotiated was £420,905,400 sterling, or over two 
 . thousand million dollars. The amount actually received from those 
 loans by the Government was £266,800,000 sterling, or at the rate of 
 about sixty per cent. The securities were mainly three per cents, 
 though large sums bore four and five per cent., so that the rate of in- 
 terest actually paid was over five per cent. In 1815, after Boilaparte 
 had left the island of Elba, when it became necessary for the English 
 Government to negotiate a large loan, they sold £66,000,000 of three 
 and four per cent, consols for £36,000,000 sterling, or about fifty-six 
 cents on the dollar. 
 
 • So it is in France. We have all heard about the popular loan in 
 France during 'the Crimean war, and it was regarded as a remarkable 
 success in its time. It was undoubtedly very popular in France. The 
 first loan, on the 14th of March, 1854, was for 250,000,000 francs. It 
 was sold at the rate of one hundred francs of three per cents for sixty- 
 five francs and twenty-five centimes, and at the rate of one hundred 
 francs at four and a half per cent, for ninety-two francs and fifty cen- 
 times, making really a little over five per cent. 
 
 The ordinary legal rate of interest in most of the States is seven 
 per cent., and the actual rate among merchants often amounts to ten. 
 We have by the discrimination made in favor of these bonds reduced 
 the rate to five per cent., and it seems to me that that is as low as it is 
 
172 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 possible to negotiate this loan. As a matter of course, if I believed it 
 was in the power of the Government without adopting measures injuri- 
 ous to the public interest to negotiate a bond at a less rate of interest, 
 I would gladly have it done ; but after full examination of this ques- 
 tion the Committee on Finance came to the conclusion that the loan 
 could not be negotiated at a lower rate. 
 
 There are various reasons why the rate of interest all over the world 
 is now higher than it was one hundred years ago. The artificial wants 
 of society have been very much increased. We have railroads, steam- 
 boats, and telegraphs, vast avenues, sources, and demands for wealth 
 and capital, that one hundred years ago Benjamin Franklin and Dr. 
 Johnson never thought of. The railroads in this country at this time 
 are worth more than all the country was worth at the time of the revo- 
 lutionary war. All these new elements of social progress make de- 
 njands for money, and therefore raise the rate of interest. There is 
 another remarkable fact which causes a general advance of the rate of 
 interest all over the world in this as compared with the last century, 
 and that is the vast addition made to the coinage of the world. The 
 discovery of gold and silver has caused an advance in the rate of inter- 
 est, why ? Because every man who loans money now, especially on 
 long time, knows that he will be paid off at the end of the period in a 
 commodity ydth less productive, purchasing power than that he loans. 
 The actual depreciation in gold and silver coin for a number of years has 
 been a little over one per cent, per annum, so that if a man now lends 
 $1,000, payable in gold twenty years hence, he will get back his $1,000 
 at the end of twenty years with one fifth of its purchasing power shorn 
 off by the additions in the mean time to the value of the gold and sil- 
 ver of the world. The truth is now that while real estate is advancing 
 money is depreciating. AU productions are advancing, while the rela- 
 tive value of gold and silver coin to other commodities is diminishing. 
 A productive four per cent, investment in real estate is a more profita- 
 ble investment than six per cent, in the best bonds in the world. 
 "Why ? Because those bonds in the future will be paid off in gold and 
 silver Coin when it has less purchasing power than it has now, while the 
 lands, by the gradual increase of the country, are increasing in value. 
 The one diminishes at the rate of one per cent, per annum, according 
 to the best statisticians, and the other increases m this country at the 
 rate of one and a half per cent, per annum. 
 
 I say, Mr. President, we cannot negotiate a bond bearing a less rate 
 of interest than five per cent, except, first, by increasing and depreci- 
 ating the greenbacks, and that certainly we ought to oppose to the 
 utmost ; or second, by the English plan of selUng the loan below par, 
 to which our people are not accustomed, and to \vhieh they would not 
 submit. That resort would increase nominally the public debt. Even 
 if the rate of interest should be more favorable, the popular judgment 
 would condemn it, because they look upon a debt as a tempoiWy thing 
 to be paid oi? in full, and not, as in England, a permanent thing, o^ 
 which tho principal is never to bo ])aid, nnd only the interest to be pro- 
 vided for. 
 
 There is this great difference between our system and the English 
 
THE FUNDING BILL. 173 
 
 system. In England they sell their credit below par. Tliey fix the 
 rate of interest, and they sell securities in open market at what they 
 will bring. In this country we fix the price of our bonds at par, and 
 ask money-lenders at what rate of interest they will loan us money. 
 That is the difference. Why is it so ? Because in England they do 
 not anticipate the payment of the principal. 
 
 There is another way in which I suppose we might negotiate a bond 
 at a low rate of interest ; and that is, by postponing the payment of 
 the principal to an indefinite period. That, however, is against the A mer- 
 ican notions of finance. Our people have always looked upon a debt 
 as a burden to be paid off as rapidly as possible, and public opinion and 
 good policy would not tolerate the making of a very long loan ; and I for 
 one would not, under any circumstances, vote for one which it would 
 not be within the power of the Government to redeem within twenty 
 years. 
 
 A bond at four per cent, or any other less rate of interest would 
 be looked upon as confiscation ; you could not negotiate it ; five per cent, 
 is now about par, and we can sell a five per cent, bond without increas- 
 ing the greenbacks a single doUar. I do not desire to see the greenbacks 
 increased beyond their present amount. There is no necessity for it. 
 We can reduce the rate of interest from six to five per cent, without 
 increasing the volume of greenbacks, and we can thus save to the peo- 
 ple of this country $17,000,000 in gold per annum without deranging 
 the currency, disordering the money market, or depreciating our credit. 
 I do not desire to force upon the market a loan bearing a lower rate of 
 interest, which will require more greenbacks to float it, or require us 
 to sell it below par, or to postpone the time of payment. We can ne- 
 
 fotiate a five per cent, loan now in the present state of the money mar- 
 et, disordered as it is by political complications, maintaining, however, 
 the right within a reasonable time, say ten years, to make a further re- 
 duction to four per cent, if we can, and after that to three per cent, or 
 whatever public credit will allow ; but an attempt now to reduce the 
 rate of interest to four per cent, would be regarded in this country and 
 abroad as a species of confiscation. 
 
 The section of this bUl in regard to the payment of the principal of 
 the debt only establishes the general idea that the debt itself shall be 
 paid at some time. The Committee on Finance, after much reflection, 
 agreed to fix the amoimt which should be annually applicable to the 
 payment of the principal and interest of the debt at $135,000,000. 
 The amount of the interest now is $129,500,000, so that we appropriate 
 about five and a half millions to the payment of the principal ; but, as 
 a matter of course, this sum being applied annually, while both the 
 principal and the interest of the debt are being reduced, partly by 
 funding, partly by payment, partly by the operation of this law, the 
 interest will gradually be decreased, and the amount applicable to the 
 principal will thus annually increase. If all our debt is funded into a 
 five per cent, loan except the long bonds of 1881, and the amount 
 should be $2,200,000,000, leaving outstanding the present amount of 
 greenbacks and no more, the interest on the debt would cease to be a 
 burden, and the difference between the amount appropriated and the 
 
174 SPEECHES AND EEPOKTB OF JOHN 8HEKMAN. 
 
 amount required. to pay the interest would gradually pay off the prin- 
 cipal of the debt. I have a table, prepared at the Treasury Depart- 
 ment, showing the precise operation of this plan, by which it will 
 appear that it would pay off the debt by 1909. 
 
 Mr. President, I desire now to make a few observations in regard 
 to the sections of the bill relating to the United States notes ; and 
 these I consider as vitally important. We propose to restore to the 
 holder of United States notes the right to fund them at pleasure into 
 the new bonds. There is more just ground of discontent and more 
 real discontent, among the people of this country because of the dis- 
 crimination made between the bond-holder and the holder of the green- 
 back than from any other cause. You compel every citizen of this 
 country to take the greenback as money, willing or unwilling ; it is the 
 measure of the value of his labor ; and yet it has no purchasing power 
 except from the hope that in some future time the United States will 
 redeem it. It may be forced upon another man in payment of a debt ; 
 it may be apphed to pay taxes ; but it can not be converted into in- 
 comS except at a discount. 
 
 A man can not take United States notes payable on demand to a 
 broker and receive in exchange any security issued by the United 
 States. In 1863 we were compelled for wise purposes to take away 
 the right of the holder of the greenback to fund it, because we wished 
 then to force our loans upon the market, and while that right was out- 
 standing we could not do it. Now that the war is over, and the whole 
 process of funding is intended to be at the will of the note-holder, we 
 ought promptly to restore this right to allow the note to be converted 
 at any time into some kind of bond ; and we propose also to allow the 
 bond to be converted into notes, keeping within the limit of notes fixed 
 by law. Then there is no discrimination ; the bond-holder and the 
 note-holder are both pubhc creditors ; both depend upon the public 
 faith. The note-holder may go to the Treasury of the United States 
 and demand his bond ; the bond-holder may go also and demand his 
 note. They are put on a basis of equality, and will be of equal value. 
 This destroys all speculation in Government securities. The note- 
 holder may at liis option draw interest in gold by converting his notes 
 into bonds, and'the popular cry of demagogues that we have provided 
 gold for the bond-holder and notes for the people will be silenced ; 
 and there is no reason why the note issued to the laboring man should 
 now be less valuable than any other form of Government seciuity. 
 An important effect of this provision will be to furnish money to re- 
 deem the bonds or any other securities that offer, and without resorting 
 to a sale of bonds. I do not propose, nor do the Committee conteni- 
 plate, the issue of any new greenbacks. We suppose that tlio process 
 of funding these notes will furnish ample moans to redeem all the •out- 
 standing bonds and securities as they become redeemable. I have no 
 doubt trie same process will go on here tliat occurred in Europe : a 
 small amount of money will jiny a large amount of bonds. The mass 
 of bonds will be exchiinged without money. The transactions paid by 
 money compared with tlie transactions paid by checks and other forms 
 of paper are as one to a thousand. Tlie daily balances in the exchanges 
 
THE FUNDING BILL. 175 
 
 in the New York clearing-house amount to many millions, and yet the 
 amount of currency to pay these balances is often less than one per 
 cent, of their nominal amount. 
 
 Other reasons may be given for the new feature of this bill giving 
 the holder of bonds the right to convert them into notes. It is indis- 
 pensably necessary to guard against sudden contraction and panic. 
 There are times when the notes will float into bonds so rapidly as to 
 contract the currency, and thus derange business and prevent the move- 
 ment of crops. This privilege will give flexibility and movement to 
 the currency of the country. Every exchange will be a beneflt to the 
 Government. If the holder of a Government security bearing inter- 
 est surrenders it to the Treasury for a note without interest, the United 
 States saves the interest. If, on the contrary, the notes are funded for 
 a bond, the notes may be used in the redemption of other bonds bear- 
 ing a higher jjate of interest. If the money market becomes stringent, 
 if currency becomes scarce, the holder may be willing to surrender his 
 bond bearing five per cent, interest in gold, in order to get currency 
 with which to pay his debts ; and why not give him that privilege ? 
 It is a benefit to the United States, and it is the only mode by which, 
 during the suspension of specie payments, we may make a flexible cur- 
 rency. 
 
 And, sir, this loan will be the great savings fund of the people of 
 the United States. Every man having money for a time idle will float 
 it into these ten-forty bonds ; and wmle we have the money we shall 
 pay off bonds bearing a higher rate of interest. When he desires it 
 again, he can come back and get the bond ; and so this operation may 
 be carried on with perfect safety. ISTow the deposits in the savings 
 banks amount to over five hundred million dollars. Why should not 
 this money be deposited in the Treasury ? Why should not these little 
 streams of the savings of the laboring man help to float the public credit ? 
 The Government of the United States ought not to feel too high to ac- 
 knowledge the services of such a fund. It will be useful. The bond 
 will enable the depositor to get the full value of his money. Now he 
 deposits in savings banks, where he gets four or five per cent, interest 
 in paper money. 
 
 In every view we could take of this proposition, after the most am- 
 ple consideration, we thought it was a wise provision, and would work 
 well. The printing and exchanging of these bonds will be carried on 
 at the Treasury Department or at the depositories, or other proper 
 places of exchange, and the only cost will be that of printing. This 
 method of exchange is adapted to the wants of trade, and will tend to 
 give increased value to the notes ; and my firm conviction is that both 
 notes and bonds will gradually rise, until they reach the standard of 
 gold, when the whole process will cease according to the provisions of 
 the bill. I look upon this provision as the most rapid way to specie 
 payments. 
 
 The only section of the bill to which I have not alluded is that which 
 legalizes contracts in gold. That is right in itself. I always supposed 
 that the legal-tender act was not intended to affect the right of the peo- 
 ple to negotiate, buy, and sell gold, if they chose. Some of the courts. 
 
176 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 however, have decided otherwise. Whatever the law may be, there is 
 no objection to unlocking the hoards of gold, and allowing the people 
 to deal in it as they choose. It makes another addition to tne currency, 
 and will gradually make our people become accustomed to deah'ngs and 
 transactions in gold, thus tending in the right direction. Where one 
 man lends gold to another man, it is equitable that he should have gold 
 back in payment ; and it is very inequitable for the debtor in such a 
 case to refuse to pay it, and commit a fraud by means of the law. I 
 think it will be beneficial to insert this provision, because dealing in 
 gold will have a tendency toward specie payments. 
 
 , I have thus, Mr. President, presented the leading provisions of this 
 bill. I appreciate the difficulties of the subject, and the personal re- 
 sponsibility I assume in advocating a measure that may fail of its pur- 
 pose. It is far easier to sit quiet, to propose nothing, and criticise the 
 measures of others ; but such I do not understand to be the duty of 
 your Committee on Finance. We are actuated by an earnest desire to 
 reduce the burdens of the people without injury to the public credit or 
 injustice to the public creditor ; by a firm conviction that the offer here 
 made to the bond-holder is equitable and honorable, and that its accep- 
 tance will not only save an annual expenditure of $17,000,000 in gold, 
 but wiU settle upon a proper basis the mode of payment of the public 
 debt, and still leave open, after a reasonable time, a further reduction 
 of interest if practicable. Further than this the Committee does not go. 
 It does not provide for a rejection of the offer ; but I repeat that, if the 
 offer is rejected, I will not hesitate to vote to redeem maturing bonds in 
 the currency in existence when they were issued and with which they 
 were purchased, carefully complying, however, with all the provisions 
 of law as to the mode of payment and as to the amount of currency 
 outstanding. This conclusion I have arrived at against the earnest ar- 
 guments of personal and political friends, and against my own personal 
 and pecuniary interests. 
 
 But, sir, I saw two years ago — and we all see clearly now — ^that the 
 existing relation between the public creditor and the tax-payer is one 
 by which the former enjoys all the blessings of a Government without 
 cost, receives without diminution a higher rate of interest than your 
 courts would enforce between citizens, and may demand payment of 
 the principal in gold for paper lent, while your courts refuse to enforce 
 a special contract for the return of gold for gold. Such a system can 
 not endure in a Government not entirely despotic without creating dis- 
 content that may endanger the performance of the public engagements. 
 You can not disguise your knowledge of this growing discontent. The 
 unavoidable effect of approaching specie payments in reducing prices 
 and shrinking values will increase this discontent. In that painful pro- 
 cess the people will see that the untaxed productive annuities of tlie 
 bond-holder alone will be increased in value, while all other forms of 
 property will be reduced. It is not the interest, nor do I think it will 
 be the desire, of the public creditor to invite this discontent. The same 
 motive that induced him to trust the Government in its hour of peril 
 will induce him to accept equity from those who are willing to do equity. 
 And, sir, his patriotism will not be lessened when he reflects that while 
 
THE FUNDING BILL. 177 
 
 his money aided in the good cause it has been the most profitable in- 
 vestment of capital he could have made. 
 
 Senators often tell us that we must not be influenced by public dis- 
 content or clamor. I agree with this when the discontent is not founded 
 upon substantial equity ; but, when it is so founded, it will make itself 
 felt t^hrough you or over you. And Senators must remember that this 
 is a government of the people, for the people, and by the people. It 
 is not, like the government of Great Britain, a despotic oligarchy, 
 where the rights of property override the rights of persons ; where 
 the laws are made to add to the accumulations of the rich, though 
 hxmdreds of thousands may thereby be pinched with poverty. That 
 is the land of entails, where the offices of the church are bought and 
 sold as property, and where all that is good in life — office, honor, prop- 
 erty — is confined to less than one-tenth of the population ; where the 
 laws are studiously framed to exclude the poor from political rights! 
 We borrow from these people of kindred blood many of the best 
 guards of liberty, but we must take care not to ingraft on our repub- 
 lican system the leading feature of their present government, the su- 
 premacy of property over labor. 
 
 Their wealth consists of vast accumulations of property produced 
 by ages of labor. A generation adds but little to tlus aggregate of 
 wealth ; therefore their laws protect property at the sacrifice of labor. 
 Here all the acquisitions of the past, all the accumulations up to this 
 hour, are only equal to the accumulations that will be made by labor 
 during the next ten years. Our wealth is in the energy and sinews of 
 30,000,000 free people, all equal, each working for himself, with no 
 privileged hand to press him down in the race of life. It is this that 
 has made our history like the tales of Arabian fiction. Our railroads 
 alone, built since we were all young, are worth $1,600,000,000, or more 
 than the property of the United States when she took her place among 
 the nations of the earth. The property of the State of Ohio is now 
 worth more in gold than that of all the colonies when they proclaimed 
 independence ; and yet Ohio was then a pathless wilderness where no 
 white man dwelt. 
 
 The entire debt of the Revolution, which Alexander Hamilton ap- 
 proached with terror, which our ancestors debated over for years, upon 
 which parties were formed and dissolved, was $75,740,111.30, including 
 over $17,000,000 of State debts assumed ; and yet now we appropriate 
 one half of that sum for pensions, and will this year reduce our current 
 expenses more than that sum. All this vast progress is the result of 
 labor. To encourage, maintain, and reward labor must be the principal 
 object of our legislation. Capital can take care of itself. It has many 
 advantages in competition with labor. It may be idle ; labor can not 
 be. It does not grow hungry ; it does not become cold or sick ; while 
 labor must be supported by food and clothing, and awaits sickness and 
 death. Capital is only useful to the country as it gives employment to 
 labor, as a means to further development, while all labor tends to create 
 new wealth. 
 
 "When capital is invested in Government bonds, it is useful, so far 
 as further development is concerned, only in supplying the wants of 
 12 . 
 
178 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 the owner. When employed in most other pursuits, it adds to the 
 national wealth. Certainly it is not the public interest to make this in- 
 vestment so profitable and attractive as to draw into it the capital of 
 the country, or to make it so permanent as to create a privileged aris- 
 tocracy. No privilege should be granted to the bond-holder that is not 
 granted to the note-nolder. Both are public creditors, and both can 
 equally appeal to the public faith. The whole public debt should be 
 made to assume such form that it may be a part of the circulating 
 capital of the country, bearing as low a rate of interest as practicable, 
 and only with such exemptions as will maintain it at par with gold. 
 Whether this bill will promote these objects it is for the Senate to say. 
 I confidently believe it will. I do not appeal to any party for the sup- 
 port of this measure, for it affects all alike. All must contribute to 
 the public taxes, and all will share in the benefits of any relief. 
 
 But while we trust our political adversaries may support this as a 
 measure of relief to our constituents, yet the fate of the bill must rest 
 mainly upoiv the Republican party. It is my pride and hope that this 
 powerful political organization, having conducted the country with 
 safety and honor through the most memorable scenes of our history, 
 may, still retaining the confidence of the people, gradually guide them 
 back into the channels of peace, reduce their burdens, relieve them 
 from oppressive taxes, and start again in productive labor the millions 
 now waiting to develop the greatest country God ever gave to man. 
 
 Now distrust seizes upon every one. Wild schemes have been pro- 
 
 Sosed, which drive capital from its moorings. Taxes are bearing heav- 
 y upon unprofitable industry, and complaints are made of the burden 
 and distribution of these taxes. Sectional divisions are already show- 
 ing their hydra heads, and disputes as to the tenns of public engage- 
 ments cast doubts upon the public faith. It is in such a time that 
 Congress is able to perform its highest duty — ^that of an arbitrator. 
 Upon questions involving the public debt, it is only the arbitrator. It 
 can not shrink from this duty. I trust, sir, before this session closes, 
 that Congress will provide for the redemption of our maturing bonds, 
 thus saving ultimately $17,000,000 a year; that it will adopt such 
 measures as will gradually make the dollar in greenback in the hands 
 of the laboring man equal to a dollar in gold ; that it will throw off 
 the great mass of our internal taxes, and reduce our ordinary expenses 
 to the lowest practicable limit. These measures adopted, we may safely 
 leave to our constituents the renewal of trade, the restoration of con- 
 fidence, and the development of industry. 
 
INTERNATIONAL MONETAEY STANDARD. I79 
 
 INTEENATIONAL MONETAEY STANDAED. 
 
 m THE SENATE, JUNE 9, 1868. 
 
 Mr. Sherman made the following report : 
 
 The following doctiments have been referred to the Committee on 
 Finance : 
 
 1. S. 217, in relation to the coinage of gold and silver. 
 
 2. S. 412, to promote uniformity of coinage between the moneys 
 of the United States and other countries. 
 
 3. The proceedings of the International Monetary Conference, 
 held at Paris in Jnne, 1867. 
 
 4. The report of Samuel B. Euggles, Esq., delegate from the United 
 . States in the International Monetary Conference at Paris, November 
 
 7, 1867. 
 
 5. Sundry memorials relative to changes in our system of coinage. 
 
 These documents present to the Committee of Finance the interest- 
 ing question of international coinage, and in considering them we neces- 
 sarily inquired : 
 
 Pirst. Whether the object proposed was of sufficient importance to 
 justify a change in the coinage of the United States. 
 
 Second. Whether the plan proposed by the Paris Conference was 
 the best mode to accomplish the end desired. 
 
 Third. What legislation was necessary on the part of the United 
 States to adapt our coinage to the plan proposed. 
 
 Fourth. What provision should be made for existing public and 
 private contracts. 
 
 Your Committee, after a partial consideration of these questions, 
 direct that the bill first named be reported with amendments, sup- 
 ported by the following report, and that Mr. Morgan, of the same com- 
 mittee, be authorized to submit a report adverse to the bill, and that these 
 reports be printed, and that the bill be postponed until the next session, 
 with a view to elicit a fuller discussion by the people of the several 
 questions embraced' in the bill. 
 
 First. The importance of a common monetary standard among 
 commercial nations has always been conceded. It has been the hope 
 of philosophers and statesmen and the demand of writers on political 
 economy for centuries, but has been as strongly opposed by the jeal- 
 ousies of locality and 'the interests of rival nations. Commerce and 
 peace have steadily approximated different standards of exchange to- 
 ward each other, while local interests and war have as steadily caused 
 them to diverge from each other. In all ages local and generally 
 despotic authority has endeavored to make more money out of a given 
 amount of gold and silver by clipping or aUoy, while the general laws 
 of trade and commerce have soon after reduced the current value of 
 the money as it was reduced in weight and fineness. Formerly, not 
 only each nation, but each province, duke, bishop, or municipality, 
 made its own separate and distinct coin, often of the same name but 
 
180 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 different values. The effort to unitize the different moneys of a nation 
 was but a part of the process by which the modem nations of Europe 
 have been formed, and in this process the original money was debased 
 in a remarkable way. The pound sterling of England was, at the time 
 of William the Conqueror, equivalent to a pound weight of silver ; it 
 is now 3 oz. 12 dwt. 16 grs. The German florin was originally a gold 
 coin, worth about $2.40 ; it is now a silver coin, worth about 40 cents. 
 The French livre originally contained a pound of silver, worth about 
 $18.50 ; it is now worth about 19 cents. The Spanish maravedi in the 
 year 1220 was worth $3.20 of our money ; it is now worth about a 
 quarter of a cent. The result of these changes has been to secure to 
 all parts of each leading nation a common unit of money — of fixed 
 value. The pound sterlmg is the unit in Great Britain ; the franc in 
 France, Italy, Switzerland, and Belgium; the florin in South Ger- 
 many ; the thaler in North Germany ; the dollar in the United States ; 
 and various other units in other nations. These units are purely 
 arbitrary, based upon local law, and diverse in weight, value, and alloy. 
 They are, in some nations, of gold only ; in some, of silver only ; and 
 in some, a compound standard of gold and silver, differing materially 
 in the amount of alloy, and in the relative value of the two metals. 
 
 For local purposes it is not very material which metal is the standard, 
 nor of what weight and fineness the standard may be, if only it is of 
 fixed and invariable value ; for the value of property and all internal 
 commerce adapts itself to the intrinsic value of the gold and silver in 
 the prescribed standard. 
 
 The inconvenience of different standards of value arises mainly in 
 foreign commerce, in the exchange of commodities among nations. 
 The intercourse between modern Christian nations is now more inti- 
 mate and exchange more rapid than it was between provinces of the 
 same country two nundred years ago. The annual trade between the 
 United States and Great Britain is now greater in bulk and value than 
 the aggregate annual trade between all the nations of Europe two 
 hundred years ago. The same reasons for adopting an international 
 standard of value now exist, as induced the American colonies less than 
 one hundred years ago to abandon their diversified standards of value, 
 and adopt as a common unit the American dollar. Every advance 
 toward a free exchange of commodities is an advance in civilization ; 
 every obstruction to a free exchange is bom of the same narrow despotic 
 spirit which planted castles upon the Ehine to plunder peaceful com- 
 merce. Every obstruction to commerce is a tax upon consumption ; 
 every facility to a free exchange cheapens commodities, increases trade 
 and production, and promotes civilization. Nothing is woi-se tluin sec- 
 tionalism within a nation, and nothing is better for mo peace of nations 
 than unrestricted freedom of intercourse and commerce with each other. 
 No single measure will tend in this direction more than the adoption 
 of a fixed international standard of value, by which all products may 
 be measured, and in conformity with which the coin of a country may 
 go with its flag into every sea, and buy the products of every nation, 
 without being disconcerted by the money changes. 
 
 This has been the wisli of American statesmen since the revolu- 
 
INTERNATIONAL MONETARY STANDARD. 181 
 
 tionary war. The Spanish milled dollar was adopted as the basis of 
 our coinage before the Constitution was framed, and with the hope, 
 expressed by Mr. Jefferson, that it would lead to an international unit. 
 Mr. Hamilton and Mr. Gallatin each desired the same result, but the 
 French war postponed all efforts in that direction. Mr. John Q. 
 Adams, in his remarkable report to Congress of February 22, 1821, 
 upon the kindred but more comprehensive subject, " the uniformity of 
 weights and measiires," says : 
 
 This system approaches to the ideal perfection of uniformity applied to weights 
 and measures, and, whether destined to succeed or doomed to fail, will shed un- 
 fading glory upon the age in which it was conceived and upon the nation hy which 
 its execution was attempted and has heen in part achieved. 
 
 If man upon earth he an improvable being ; if that universal peace, which was 
 the object of a Saviour's mission, which is the desire of the philosopher, the long- 
 ing of the philanthropist, the trembling hope of the Christian, is a blessing to which 
 the futurity of mortal man has a claim of more than mortal promise ; if tlie spirit 
 of evil is, before the final consummation of things, to be cast down from his domin- 
 ion over men and bound in the chains of a thousand years, the foretaste here of 
 man's eternal felicity, then this system of common instruments to accomplish all 
 the changes of social and friendly commerce will furnish the links of sympathy 
 between the inhabitants of the most distant regions ; the metre will surround the 
 globe in use as well as in multiplied extension, and one language of weights and 
 measures will be spoken from the equator to the poles. 
 
 Several efforts have been made by negotiation to secure uniformity 
 of coinage, especially with Great Britain. 
 
 In 1857, in compliance with an act of Congress, passed upon the 
 report of the Committee on Finance of the Senate, Prof. Alexander 
 was sent as a special commissioner to that country to secure a unity of 
 coinage between the two countries ; but, after various conferences, the 
 mission failed from an indisposition of the English Government to 
 modify their pound, shilling, and penny. 
 
 In his report of December, 1862, Mr. Secretary Chase invited the 
 attention of Congress to the importance of uniform weights, measures, 
 and coins, and recommended that the halfrcagle of the United States 
 be made equal to the gold sovereign of Great Britain in weight and 
 fineness. 
 
 The Berlin International Statistical Congress, held in 1863, com- 
 posed of representatives of fourteen countries, and at which the 
 United States was ably represented by Mr. Euggles, agreed to the 
 following resolutions : 
 
 Ist. That the Congress recommends that the existing units of money be reduced 
 to a small number ; that each unit should be, as far as possible, decimally subdi- 
 vided; that the coins in use should all be expressed in weights of the metric sys- 
 tem, and should all be of the same degree of fineness, namely, nine tenths fine and 
 one tenth alloy. 
 
 2d. That the different governments be invited to send to a special congress dele- 
 gates, authorized to consider and report what should be the relative weights, in the 
 metrical system, of the gold and silver coins, and to arrange the details by which 
 the monetary system of different countries may be fixed according to the terms of 
 the preceding propositions. 
 
 This led to the recent Paris Conference, and to the adoption by 
 Congress, in 1866, of several measures for the use of the metric system 
 of weights and measures. At the Paris Conference nineteen nations 
 
182 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 were represented, comprising a population of 320,000,000 European 
 and American and 190,000,000 Asiatic. 
 
 The Conference agreed with great unanimity upon the plan here- 
 after stated, and the delegates from the United States were active and 
 influential in harmonizing conflicting views and in securing the result 
 arrived at. Upon the first part of their inquiry, your Committee 
 therefore conclude that the object proposed is of the highest import- 
 ance, constantly sought for at every period of the government, and 
 that the United States is fully committed to its support if the plan 
 proposed is practicable and just. 
 
 Aside from the general advantages which we will share with the 
 civilized world in attaining a uniform coinage, there are special reasons 
 why the United States should now adopt the system. 
 
 1. The United States is the great gold-producing country of the 
 world, now producing more than all other nations combined, and with 
 a capacity for future production almost without limit. (See reports of 
 Mr. Euggles and J. Ross Browne.) Gold with us is like cotton — a 
 raw product. Its production here affects and regulates its value 
 throughout the world. Every obstruction to its free use — such as the 
 necessity of its recoinage when passing from nation to nation — dimin- 
 ishes its value, and that loss falls upon the United States, the country 
 of production. 
 
 2. The United States is a new nation, and therefore a debtor na- 
 tion. By placing ourselves in harmony with the money units of 
 creditor nations, we promote the easy borrowing of money and pay- 
 ment of debts without the loss of recoinage or exchange, always paid 
 by the debtor. This is necessarily so where the debt is payable abroad ; 
 and, if payable here, the creditor discounts the exchange and difference 
 in coinage in advance. 
 
 3. The technical rate of exchange between the United States and 
 Great Britain, growing out of the different nominal values of coin, is 
 a standing reproach which can be got rid of only by unifying the coin- 
 age of the two countries, when both the real and technical rate of ex- 
 change will be at par, with only such slight variations as will indicate 
 the course of trade. 
 
 4. Gold is now demonetized as a currency, and the great bulk of it 
 in the United States is now held in the Treasury, so that it is not possi- 
 ble to select a time when this great international change of coinage 
 could affect the interests of our people less. From inquiries made of 
 the officers of the mint we find that the cost of remintmg the present 
 coin would be less than one twentieth of one per centum. The fine- 
 ness of the proposed coin being the same as the old, there will be no 
 assav, and the cost of the change would not be perceptible to the 
 holder of the coin, and scarcely so to the Government. 
 
 Second. TJie second inquiry of your Coiumittce was whether the 
 plan proposed b.y^ tlie Tiiris Conference was the best mode to accom- 
 plish the end desired. 
 
 It proposed : 
 
 1. A single standard, exclusively of gold. 
 
 2. Coins of equal weight and diameter. 
 
INTEENATIONAL MONETAKY STANDARD. 183 
 
 3. Of equal quality or fineness — ^nine tenths fine. 
 
 4. The weight of the present five-franc gold piece to be the unit. 
 
 5. The coins of each nation to bear the names and emblems pre- 
 ferred byeach, but to be legal tenders, public and private, in all. 
 
 The single standard of gold is an American idea, yielded reluct- 
 antly by France and other countries, where silver is the chief standard 
 of value. The impossible attempt to maintain two standards of value 
 has given rise to nearly all the debasement of coinage of the last two 
 centuries. The relative market value of silver and gold varied like 
 other commodities, and this led first to the demonetization of the more 
 valuable metal, and second to the debasement or diminution of the 
 quantity of that metal in a given coin. In a short time the cheaper 
 metal would by a diminished supply become the dearer metal, and then 
 it would be debased and cheapened in the same way. This process re- 
 peatedly occurred in Europe, and has twice occurred in the United 
 States within the life of the present generation. By the act of June 
 28, 1834, our gold coin was reduced from 270 grains of standard gold 
 to 258 grains, or 4-4 per centum, in order to make it correspond with 
 the market value of silver. In consequence of the discovery of gold 
 in California that metal was cheapened, and silver became relatively 
 more valuable and was hoarded or exported. To avoid this, the weight 
 of our silver coin was reduced by the act of January 21, 1853, from 
 206 grains of standard silver to 192 grains, or 6*7 per centum. 
 
 This subject early excited the attention of financiers. Mr. Gorham, 
 in his report of May 4, 1830, as Secretary of the Treasury, forcibly says : 
 
 Amidst all the embaiTassments which have surrounded this subject since the 
 adoption of metallic standards of property, it is remarkable that governments have 
 so tenaciously persevered in the effort to maintain standards of different materials, 
 whose relation it is so diificult to ascertain at any one time, and is so constantly 
 changing; and more especially when a simple and certain remedy is within the 
 reach of all. This remedy is to be found in the establishment of one standard 
 measure of property only. The evil of having two or more standards arises, as 
 already observed, from the impossibility of so fixing their relative values by law 
 that one or the other may not, at times, become of more value in market than esti- 
 njated by regulation ; and, when this happens, it will be bought and sold according 
 to its market value, regardless of the law. 
 
 The proposition that there can be but one standard in fact is self-evident. The 
 option of governments charged with this duty is therefore between having property 
 measured sometimes by gold and sometimes by silver, and selecting that metal 
 which is best adapted to the purpose for the only standard. "Why the latter course 
 has not been universally adopted it is not easy to explain, unless it may be attrib- 
 uted to that prevalent delusioh which seeks to secure the possession of gold and 
 silver by restraining their exportation, and avoiding the payment of debts rather 
 than improving the public economy by giving every facility to it. 
 
 The opportunity is now offered to the United States to secure a 
 common international standard in the metal most valuable of all others, 
 best adapted for coinage, mainly the product of our own country, and 
 in conformity with a policy constantly urged by our statesmen, and 
 now agreed to by the oldest and wealthiest nations of the world. 
 Surely we should not hesitate for trifling considerations to secure so 
 important an object. 
 
 The equal weight and diameter of coins will guard against adulter- 
 
184 SPEECHES AND REPOKTS OF JOHN 8HEEMAN. 
 
 ation .and counterfeiting, and will familiarize our people with the metric 
 system of weights and measures. This system is already used in some 
 of our coins, and is permitted by our laws, and will by gradual means 
 become adopted as the only international system. The provision made 
 that each nation shall retain its own emblems will not impair the ready 
 currency of coin, but wUl induce care in coinage. 
 
 All the provisions of the plan proposed are in harmony with the 
 American system of coinage. They are either already adopted or may 
 be without inconvenience. The only point upon which a diversity of 
 opinion may arise is as to the unit of value, and here the chief difficulty 
 was not as to what particular quantity of gold was the best unit, but 
 upon what quantity all the nations represented could agree. The unit 
 recommended is the existing five-franc gold piece, 620 of which weigh 
 a kilogramme. 
 
 For the reasons that induced the adoption of this unit of value, 
 reference is made by your Committee to the report of Mr. Euggles. 
 They may be summed up as follows : 
 
 1. The coin proposed is the smallest gold coin^n use, and therefore 
 the most convenient unit of value. 
 
 2. It approximates more nearly to the existing coinage of the great 
 commercial nations than any other proposed. The doUar reduced mree 
 and a half cents at the mint becomes the unit of value, and its decimal 
 divisions and multiples enable us to retain all our well-known coins, 
 both of gold and silver. 
 
 A very slight reduction of the English sovereign makes it conform 
 to the multiple of the dollar and franc, so that five francs are a doUar, 
 and five dollars are a sovereign, or a half -eagle. The same unit is easily 
 adapted to existing coinage of other nations. 
 
 3. The franc is already in use by 72,000,000 of the most industrious 
 and thrifty people of Europe — France, Belgium, Italy, Switzerland, 
 and Holland. 
 
 i. The actual gold coinage in francs from 1793 to 1866 was 81,312,- 
 220,814, while the gold coinage in dollars during the same period was 
 $845,536,591, and m sovereigns was $935,341,450 ; thus showing that 
 in France alone the existing gold coinage on the proposed standard is 
 greater than upon any other that could be adopted. 
 
 It must be remembered that the great body of our coin and bullion 
 has been exported, and is now in foreign coin ; that a lai'ge part of the 
 remainder is held in the treasury ; and that less gold is in actual circu- 
 lation in the United States than in any other great commercial nation. 
 It is unreasonable, in view of these facts, for the United States to de- 
 mand that our dollar, composed of 1,671 '50 milligrammes of gold, 
 should be the standard of value. As the nation most mterested in inter- 
 national coinage, we should be ready to yield something to secure that 
 object. By the plan proposed we yield nothing except the very small 
 reduction of the weight of our standiird, and witliout any other change 
 in our coins, multiples, divisions, devices, or alloy. 
 
 5. France, whose standard is adopted, makes a new coin similar to 
 our liall'-oagle. She yielded to our demand for the sole standard of 
 g(»Id, and during the wliolo conference evinced the most earnest wish 
 
INTERNATIONAL MONETARY STANDARD. 185 
 
 to secure the cooperation of the United States in tlie great object of 
 unification of coinage. Her metric system is by far the best yet de- 
 vised, and is in general harmony with our own ; while Great Britain 
 has refused even to negotiate with us for unity of coinage, and main- 
 tains the most complex system of weights, measures, and coinage now 
 in use among Christian nations. The decimal system, the basis of all 
 our computations, she rejects, and adheres to the complex division of 
 pounds, shillings, and pence, which we rejected with colonial depend- 
 ence. 
 
 These reasons induce your Committee to earnestly urge the adop- 
 tion by the United States of the general plan of the Paris conference. 
 
 Third. — ^What le^slation is necessary on the part of the United 
 States to adapt our comage to the plan proposed ? 
 
 On this point your Committee have consulted the Secretary of the 
 Treasury and the Director of the Mint. The bill herewith reported is 
 the result of this conference, and is all that is needed to secure the 
 object proposed. The provisions in regard to silver coinage are urged 
 6y the Director of the Mint to secure harmony between the present 
 market value of gold and silver; but this coinage can be regulated 
 hereafter by the varying values of the two metals, and without dis- 
 turbing the sole legal standard of value for large sums. The general 
 provisions of existing law relating to coinage are preserved. 
 
 Fourth. — What provisions, if any, should be made for existing 
 contracts ? Shall they be discharged in the money made a legal tender 
 at the date of the contracts, or in the money provided for by this biU ? 
 
 In determining this question, a distinction must be made between 
 public and private debts. All private contracts are made in view of 
 the power of Congress to regulate the value of coins. This power has 
 been repeatedly exercised by Congress, and in no case was any provi- 
 sion made for enforcing existing contracts in the old rather than the 
 new standard. All property and contracts may be affected by legisla- 
 tion, but it is not presumed that in the exercise of its legislative power 
 Congress will be controlled by either the debtor or creditor, but only 
 by the general good. To continue a distinction between the old and 
 the new coin in the payment of private debts would result in great 
 inconvenience, while making the new coin a legal tender for aU debts 
 after a reasonable time would enable our citizens to conform the great 
 body of their contracts to the new standard. Such has been the prac- 
 tice not only in the United States but in other countries, where from 
 time to time the standard of coin has been changed. Such was the 
 principle adopted in the passage of the present legal-tender act, which 
 if made appHcable only to future contracts would have bankrupted a 
 large portion of the active business men of the country, whose busi- 
 ness compelled them to contract debts. 
 
 It must be remembered that all private debts are now on the basis 
 of legal-tender notes, of far less intrinsic value than the proposed coin. 
 The depreciation of legal tenders had the effect to diminish the value 
 of aU debts and the property of all creditors to the extent of the de- 
 preciation, and was only justifiable by the highest considerations of 
 national safety. The resulting process of returning to a specie basis 
 
186 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 will be far more severe on the debtor class. The lessening of the 
 burden of debt is a loss to a class generally benefited bv the increased 
 value of fixed property, and better able to bear the diminution of their 
 capital ; but an increase of the burden of the debt to the debtor class, 
 by requiring payment in coin instead of in depreciated paper money, 
 often produces absolute rain without fault in the debtor. AU con- 
 tracts are now on the legal-tender basis. Every private creditor would 
 now take the new coin, and would be largely benefited by the changed 
 medium of payment. The small relief of the debtor by the slightly 
 diminished standard of coin will tend tathat degree to lessen the un- 
 avoidable hardship to him of a return to specie payment. This relief 
 would be especially just on the payment of long bonds issued by rail- 
 roads and other corporations during or since the war, which were al- 
 most uniformly sold for depreciated paper money. Your Committee 
 therefore conclude that, as to all, private debts or contracts, the only 
 provision necessary in this bill is to postpone the operation of its legal- 
 tender clause for a reasonable time after the passage of the act. 
 
 Does not a different principle prevail as to public debts ? As to 
 public debts, the contract of loan is the only law that ought to affect 
 the creditor until his debt is fully discharged. Congress, as the au- 
 thorized agent of the American people^ is one party to the contract, 
 and it may no more vary the contract by subsequent acts than any 
 other debtor may vary his contract. As to the public creditor, no le- 
 gislative power stands between him and the exact performance of his 
 contract. Public faith holds the scales between liim and the United 
 States, and the penalties for a breach of this faith are far more severe 
 and disastrous to the nation than courts, constables, and sheriffs can be 
 to the private debtor. These penalties are national dishonor and inabil- 
 ity to borrow money in case of war or public distress, and the ultimate 
 result is the sure and speedy decline of national power and prestige. 
 When changes in our coin were made in 1834 and 1853, the United 
 States had no public debt of any significance, and the precedents then 
 made do not apply to the present time. Now the public debt is so 
 large that a change of three and one half per cent, in the value of our 
 coin is a reduction of the public debt of $90,000,000. So much of 
 this debt as exists in the form of legal-tender notes will be received 
 and disbursed as money ; and, as its value for some time will be less 
 than that of the new coin, no provision need be made for it ; but of so 
 much of the debt as is payable, principal or interest, in coin of a spe- 
 cific weight and value, provision ought to be made for the exact dis- 
 charge in that coin or its equivalent in the new. Your Committee, 
 therefore, propose an amendment to that effect. 
 
 Your Committee have been led to inquire whether, if the United 
 States adopt the plan of the Paris Conference, it will be adopted by 
 other nations so_ as to accomplish the object proposed of an interna- 
 tional currency, of universal circulation tliroughout the civilized world. 
 Upon this point we have tlio most satisfactory assurances. Since the 
 Paris Conference it has been adopted by Austria, and will in all 
 human probability bo adopted by the North German Confederation. 
 A strong party in Great Britain, including many of her ablest 
 
PUBLIC DEBT AND OUKEENOY. 187 
 
 statesmen and the great body of her commercial classes, has urged 
 the adoption of the plan, even in advance of the United States ; and 
 they concur in the opinion that, if adopted by the United States, 
 Great Britain will be induced by her interests to modify her sovereign 
 to, the international standard. We have the highest authority for say- 
 ing that Canada stands ready to adopt the plan the moment it is adopt- 
 ed by the United States. Different representatives of the South 
 American States say those States will readily adopt it. So that upon 
 Congress now rests the fate of a measure that, according to the opin- 
 ion of emiaent American statesmen, will shed unfading glory upon 
 the age of its adoption, that will give to international law an interna- 
 tional coinage, and wiU lead to a vast extension of the objects of inter- 
 national law common to Christian and civilized nations, thus binding 
 the whole family of man by the same ties that are uniting and con- 
 solidating neighboring states. Your Committee recommend the adop- 
 tion of this measure with certain amendments, with the conviction that 
 it will not only promote the local interests of the United States, but 
 will subserve the general interests of all the nations who have already 
 joined or may hereafter join in its adoption. 
 
 PUBLIC DEBT AND CURRENCY. 
 
 Zar TEE SENATE OF THE UNITED STATES, JANUARY 27, 1869. 
 
 The Senate having nnder consideration tlie bill in relation to the public debt 
 and tbe currency, Mr. Sberman said : 
 
 Mr. PnEsroENT : I suppose it is expected of me to state in general 
 terms the reasons that influenced the Committee on Finance to report 
 this measure, and also to state why other measures of a financial char- 
 acter referred to the Committee have not received its sanction. 
 
 And, in the first place, it is but right to recall the embarrassments 
 of the Committee, not only from the intrinsic difficulties of the sub- 
 jects referred to us, but from the great diversity of opinion that exists 
 in all parts of the country as to the proper measures to be adopted. I 
 appeal to no party to sustain this measure, yet we must all recognize 
 the difiiculty of harmonizing the great diversities of opinion that exist 
 on financial measures, except by a partial surrender of individual 
 opinion and something like a party support of any measure that may 
 be agreed upon. 
 
 In order to consider this measure properly, we must have a clear 
 perception of what is sought to be accomplished. The object we have 
 in view is to appreciate our currency to the standard of gold as rapidly 
 as the public interest will allow. Our present currency or " lawful 
 money " consists of notes of the United States, and these are a legal 
 tender in payment of all debts. Based upon them, and of equal value 
 with them, is a subsidiary currency of notes of national banks, and 
 these are redeemable in United States notes, and are receivable in pay- 
 
188 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 ment of taxes. "We have also a form of demand notes, convertible at 
 the wiU of the holder into lawful money, called three per cent, certi- 
 iicates. "We have also a f ractionalpaper currency which is convertible 
 into lawful money on demand. These four species of notes compose 
 the paper currency of the country, and the amount of each is stated as 
 follows : 
 
 United States notes $356,021,073 
 
 National-bank notes 299,806,665 
 
 Three per cent, certificates 66,865,000 
 
 Fractional currency 34,216,'716 
 
 In all $745,908,353 
 
 All this currency is by law at par. By law it is either made the 
 standard of value or may at pleasure be converted into the standard of 
 value. It is the legal measure of all commodities and of all debts, 
 except for duties on imported goods and interest of the public debt. 
 But in truth and in fact it is not at par in the standard money of the 
 world. One dollar of it has only the same purchasing power as seventy- 
 four cents in gold. Gold, which is real money — ^not the representa- 
 tive of money, but money itself, of intrinsic value, recognized as such 
 by every man in all civilized countries and in all ages of the world — 
 
 f^old is demonetized by the law, cannot be collected in the courts, and, 
 ike cotton or wheat, is treated as a commodity whose value is meas- 
 ured by what we call " lawful money." 
 
 N'ow, it seems to me that the first step in our investigation should 
 be to abandon the attempt to reason from a false standard. We must, 
 to begin with, recognize the immutable law of currency ; and that is, 
 there is but one true standard, and that standard is gold. Since the 
 earliest records of humanity gold and silver have been employed as 
 the equivalent for effecting exchanges. From Solon to our day innu- 
 merable attempts have been made to substitute something else as 
 money, but in spite of all gold and silver have maintained their exclu- 
 sive dominion as the money of mankind. The gold in the shield of 
 Achilles, the shekels that bought the field at Machpelah, the pieces of 
 silver that were the price of the blood of our Saviour, will be cun-ent 
 coin when the completed history of nations now rising into greatness 
 shall be folded away among the records of time. 
 
 No nation can permanently adopt a standard of value that will not 
 be controlled and regulated by the standard of gold. No degree of 
 isolation, no expedient of legislation, can save any nation which main- 
 tains any intercourse with foreign nations from the operation of this 
 supreme law. Like the tides of the ocean or the movements of the 
 planets, it is beyond our jurisdiction. This higher law of the standard 
 of values will sooner or later govern and regulate all prices, even of 
 commodities that do not enter into foreign exclianges. ' It is utterly idle 
 for a commercial people like the United Statos,^with a foreign com- 
 merce of $800,000,()()() annually, with citizens trading in every port of 
 the world, and receiving annually four hundred thousand immigrants, 
 to attempt to escape from the operation of this primary law of trade. 
 Different nations liavc tried various expedients to evade it, and have 
 
PUBLIC DEBT AND OUEEENOY. 189 
 
 always failed. For centuries gold and silver coins were clipped and 
 alloyed, but it only took more of them to buy a certain commodity. 
 In modern times paper money or credit has been substituted for real 
 money. Laws compelled the people to take paper as money. As long 
 as this money did not exceed the amount of real money in the country, 
 it operated well._ It promoted exchanges and gave great activity to 
 enterprises, and its nominal value was the same as its real value. "But 
 when the paper money was increased or the gold exported, the paper 
 money depreciated ; it had less purchasing power, prices rose, and either 
 the paper money became demonetized, was rejected and repudiated, or 
 the false standard was advanced in value to the gold standard. 
 
 The most successful attempt to substitute paper money for real 
 money took ^lace in Great Britain in 1797. The Bank of England, 
 then having in circulation $55,000,000 of notes, was forbidden by an 
 act of Parliament to pay its notes in coin, and they were in effect made 
 a legal tender. By 1810 the amount of them was gradually increased 
 to $110,000,000. It was observed that, though gold was demonetized 
 and its export prohibited, yet its market value bad risen near twenty 
 per cent., or from £46 14s. 6d. to £56 for a pound of gold. An emi- 
 nent writer on political economy called attention to this fact as conclu- 
 sive evidence of the depreciation of the paper currency. A committee 
 of the House of Commons, of whom were several of the most eminent 
 statesmen and financiers of England, gave the subject a careful exami- 
 nation, and the result was the famous " bullion report." A majority 
 of this committee agreed that in spite of the act of Parliament gold was 
 still the true standard of value, and, measured by this standard, the 
 currency was depreciated by an excess of Bank of England notes. 
 They say "that no safe, certain, and constantly adequate provision 
 against an excess of paper currency, either occasional or permanent, can 
 be formed, except in the convertibility of all such paper into specie." 
 
 Still driven by the pressure of war, the bank issued more notes, 
 and their depreciation continued until the close of the war. The bank 
 slowly entered upon the hard task of appreciating its notes to the gold 
 standard. 
 
 During our brief national history we have made several efforts to 
 siibstitute paper money for real money. Continental money was a 
 revolutionary effort to coin paper into money. General Spinner has 
 had occasion recently to inform some Kip Van Winkle, who wished 
 continental money re'deemed in lawful money, that provision had been 
 made to redeem it at the rate of one dollar in coin for one hundred 
 dollars continental money, but even this poor privilege expired in 1793. 
 
 During the war of 1812 the United States undertook to treat State- 
 bank bills as lawful money. They soon became depreciated ; and when 
 the war was over, and it became necessary to appreciate them to the 
 gold standard, notes, banks, and debtors were swept into general bank- 
 ruptcy, and the people commenced again upon the solid basis of gold 
 and silver coin. 
 
 So, during our civil war, both the United States and the rebels 
 undertook to make paper not merely the representative of money, 
 but real money. The paper money of the rebels followed the course 
 
190 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 of continental money and French assignats. Ours, car&fuUy limited 
 in amount, supported by heavy taxes and by great resources, is stiU 
 called lawful money ; but, after all, its value is daily measured by the 
 gold standard. It is only the substitute of money, to be paid at a 
 future day, and is not real money. 
 
 Even silver, long the standard of value among civilized nations, is 
 now demonetized in some of them from the impossibility of maintain- 
 ing a double standard. It was found by experience that the market 
 value of these two precious metals varied as the production of one or 
 the other increased in amount, thus creating confusion and compelling 
 alterations in the coinage. The result is that silver in Great Britain 
 and the United States is a legal tender for but small amounts, while 
 gold is the universal standard of value. Even the stamp fixed by a 
 Government in the process of coining does not make it money or change 
 its value. It only certifies to its weight and fineness as a matter of 
 convenience and not as an addition of value. Indeed, the mechanical 
 process of coining has frequently reduced the market value of the gold 
 by making it necessary to recoin it when exported. 
 
 Let us, then, recognize as an axiom that nothing but coin is real 
 money before we undertake to deal with our currency. Senators may 
 think I consume too much time in dealing with an apparent truism ; 
 but it will be foimd that the denial of this truism, both in Congress 
 and among the people, is the cause of most of the confusion in the pub- 
 lic mind as to our currency. It affects our minds as it affected the 
 Englishman in 1810. When told that the Bank of England note was 
 depreciated, he said : " Is not this pound note worth twenty shilKngs, 
 and you tell me it is only worth sixteen ? " Or like- the reasoning of 
 the learned priests in the time of Galileo, who saw the sun moving 
 around the four corners of the earth, and knew that Galileo was an 
 impostor. So we reckon our paper money at par, and, having made a 
 god with our own hands, compare all -other gods by it. We must, then, 
 abandon the false standard, set up again the true one, and compare our 
 money, our productions, our wealth, and our resources by it, or we shall 
 be led by false premises into the most erroneous conclusions. 
 
 And yet this does not impugn the wisdom of a paper curi-ency 
 founded upon the credit of a nation, or of its being made in times of 
 great public danger a legal tender in payment of debts. Such paper 
 money has exercised a powerful influence in ancient as well as modem 
 history. It saved Eome in her fierce conflict with Hannibal. It en- 
 abled Great Britain to maintain her wars against Napoleon. Without 
 paper money, and, as I beheve, without mailing it a legal tender, we 
 could not have mustered and maintained our immense armies during 
 the recent war. Gold was banished by the Avar. The quantity was 
 too small for the vast expenditure required. We had then no legal 
 paper representative of value. The State-bank notes were wisely ex- 
 cluded from national circulation. We then cautiously issued our legal- 
 tender notes, carefully limiting their amount, and only increasing the 
 amount when we could not borrow them back at a reasonable rate of 
 interest. We called them lawful money, and as a measure of the high- 
 est necessity (-(jnipelled our citizens to receive thorn as such ; but after 
 
PUBLIC DEBT AND OUERENOY. 191 
 
 all they were only a forced substitute for money, the promise to pay 
 money, and not real money. Though they were made the legal stand- 
 ard of value, their own value was daily fixed in gold in the open mar- 
 ket in New York. "We watched their depreciation during the dark 
 days of the war, and tried to arrest it. We utterly failed. The effort 
 was patriotic, but it was impossible. England did the same in her 
 wars. She passed laws forbidding the purdiase and sale or exportation 
 of gold, but, like ours, her efforts were abortive. I am not ashamed to 
 confess my part in all the efforts made during the war to maintain our 
 paper money as the true standard of value, and I confess it was impos- 
 sible. Every intelligent business man watched daily the gold barome- 
 ter, which with unerring certainty fixed the value of our greenbacks, 
 of our public credit and bonds, as it did the value of our cotton and 
 com. 
 
 A distinction between the standard of value and the actual- agent of 
 exchange must always be' kept in view. One must be gold, and the 
 other ought to be paper money convertible iato gold. Such paper cur- 
 rency, with proper measures to meet panics or extreme drains of specie, 
 is proven by all experience to be the best possible currency that has 
 yet been devised by man. An unmixed coin currency cannot exist in 
 a commercial country, for necessity will compel, merchants wiU devise, 
 and the people will use some representative of money, whether it be 
 bankers' bills of exchange, certificates of deposit, or bank or Govern- 
 ment paper money. And one unbending, unrelaxing rule that compels 
 payment in coin at all times, during panics, distress, or war, as well as 
 in peace, will periodically produce disaster and bankruptcy. The requi- 
 sites of a good currency are : 
 
 1. That it be a paper currency. 
 
 2. That it be amply secured either by the credit of a nation or by 
 unquestioned collaterals. 
 
 3. That except in extreme cages of panic it be convertible into coin. 
 
 4. That provision be made for a suspension of the right to demand 
 coin during such panics. 
 
 And the only legislative questions that can arise on these points 
 are whether the paper money should be issued by the nation or by cor- 
 porators, and what relief should be provided in case of a necessary sus- 
 pension of specie payments. As to the first question, both England 
 and the United States have settled upon a bank currency secured by 
 the public credit. As to the second, they have tried various devices, 
 as the raising of the rate of interest, a temporary suspension of pay- 
 ments, making the paper a legal tender ; but all these expedients are 
 merely temporary to bridge over a war, a panic, a period of starvation, 
 or an unnatural adverse balance of trade. They are remedies in sick- 
 ness, to be discarded the moment that health comes again. "Whatever 
 theorists may suggest, however sugar-coated the remedy may be, there 
 is but one test of a healthy paper currency, and that is its convertibiUty 
 into gold coin. 
 
 If, then, gold only is the true standard of money ,_ why shall we not 
 commence our financial measures by restoring it to its place as a legal 
 standard of money ? "Why not allow our citizens to base their future 
 
192 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 contracts on gold ? Why not enforce these contracts in the courts as 
 legal and valid ? There are difficulties in applying a new standard to 
 existing contracts made upon a different standard ; but this difficulty 
 does not apply to future contracts. We wish to restore specie pay- 
 ments, and yet we forbid all men from dealing in specie. Such con- 
 tracts are put upon the sapie legal footing as gammg contracts. It 
 would seem that, if we are at all smcere in wishing specie payments, we 
 should not only allow specie contracts, but should encourage them. 
 
 Contracts to a vast amount are now from necessity made upon the 
 gold basis. All our foreign commerce, exports and imports, amounting 
 annually to over eight hundred million dollars, are based upon gold. 
 The price of all public securities is fixed by the gold standard of Lon- 
 don and Frankfort. The sale of aU imported goods by the importer to 
 the jobber is by the gold standard. The daily transactions in gold in 
 New York often amount to $100,000,000. On the Pacific slope gold 
 is the only standard of value. We cannot alter this if we would. 
 Why not recognize the fact, legalize these contracts, and conform our 
 measures to the gradual adjustment of existing contracts, including 
 paper money, to the standard of gold ? And, sir, let us also recognize 
 the general principle that it is wiser and more in accordance with the 
 spirit of our Government to leave this adjustment to the voluntary 
 contracts of the people, than to undertake it by arbitrary rules of law. 
 If our people are left free, they can do this without injury to debtor or 
 creditor, without confiscation of propei'ty, and without any change in 
 its intrinsic value. 
 
 For these reasons the Committee on Finance regard the first section 
 of this bill, which legalizes gold contracts, as an indispensable prelimi- 
 nary to any plan for appreciating our currency to gold. This section 
 has twice received the sanction of the Senate, and its primary impor- 
 tance has generally been admitted in popular discussions. ■ 
 
 The objections to this section are stated by the Senator from Indi- 
 ana [Mr. Morton] as follows : 
 
 The means he suggests for returning to specie payments are twofold. The first 
 is to legalize specific contracts to be executed in coin. I voted for a bill for that 
 purpose last session without much consideration, and have since become satisfied it 
 was an error. The unwary would be enticed into such contracts by the crafty, and 
 those in straitened circumstances or under heavy pressure would be forced into 
 them. No man can safely make a contract to be executed in coin while the cur- 
 rency is depreciated and the financial condition of the country is fluctuating. Such 
 contracts, where not brought about by coercion and fraud, would be in the nature 
 of gold gambling — the one party trusting that gold would be at a large premium 
 when the contract was due, and the other that it would oommaud little or none. 
 It could hardly be distinguished from a contract for the delivery of gold at a future 
 time. 
 
 This whole objection is based upon the theory that contracts cannot 
 be safely left to the free assent of the parties thereto ; tliat the parties 
 cannot be trusted to make their own contracts, lest the creditor oppress 
 the debtor. Sir, the time is not likely to come in our day when the 
 crafty will not have the advantage of the unwaiy. If we were legis- 
 lating to protect tlie unwary, we should not for a day permit the exist- 
 ence of inconvertible paper money. Mr. Webster said that, " of all the 
 
PUBLIC DEBT AND OUEEENOT. 193 
 
 contrivances for cheating the laboring classes of mankind, none has 
 been more effectual than that which deludes them with paper money." 
 The chief reason is- that such paper money is so fluctuating that none 
 but the intelligent and crafty can estimate its fluctuations, while the 
 unwary assume that it is ecjuivalent to gold. If we, then, legislate to 
 protect the unwary, we should require all contracts to be on the gold 
 basis ; but experience shows that the true basis of contracts is the assent 
 of the parties. We can leave the interest of parties to regulate equiva- 
 lents, and we can protect a gold contract against usury and fraud much 
 more easily than a contract payable in currency. 
 
 The Senator from Indiana proposes to add to the burden of existing 
 contracts an annual interest equivalent to twelve per cent, by requiring 
 gold payment in two and a half years. If the parties are left to adjust 
 this matter by contract, they are not likely to adopt a more severe 
 measure to the debtor than that. If it is unsafe to allow parties to 
 make a contract in coin, how can they be allowed to make contracts in 
 currency to be appreciated to coin in two and a half years ? If coin 
 contracts are brought about by coercion and fraud, the courts will not 
 enforce them ; and, if gold is required as a consideration for payment 
 of a currency contract, it is usurious and will not be enforced. Practi- 
 cally, any law requiring a resumption of specie payments is a law add- 
 ing to the amount of a currency debt the full depreciation of the cur- 
 rency, unless you either scale the debt or allow the parties to adjust 
 the matter between themselves. The former proposition is indefensible, 
 and the latter is the only way by which the creditor and debtor may 
 by mutual agreement adjust a currency contract by equivalent coin. 
 All contracts to pay money are contracts for the dehvery of gold ; and 
 a contract in currency is only a contract to pay an indefinite amount of 
 gold, depending upon the uncertain depreciation of the currency at the 
 time of the payment. Why may not the parties fix for themselves the 
 amount of gold to be paid, rather than leave it to be fixed by the bulls 
 and bears ? When contracts are authorized in gold, all the provisions 
 of the municipal law which, protect contracts from fraud, usury, or 
 coercion, apply to them as well as to contracts in currency. And the 
 reason why such contracts were ever forbidden was because public 
 policy demanded for a time the suspension of specie payments ; while 
 now the very fact that we are providing for specie payments is conclu- 
 sive in favor of the policy of specie contracts in the future. 
 
 Every such contract smooths the way to a general resumption. If 
 they become general, gold now hoarded will be let loose. This wiU 
 produce an expansion of the currency. When during specie payments 
 we estimate the aggregate of currency, we add the amount of specie to 
 the amount of convertible jjaper money. So, when specie payments 
 are suspended, if specie can be made to perform some of the functions 
 of currency, it adds so much to the volume of the currency ; and, when 
 specie contracts become general, the process of resumption is complete. 
 
 Again, while specie is the best standard of currency, it is not the 
 most convenient for transportation, even from hand to hand. To obvi- 
 ate this, commercial paper, bills of exchange, drafts, and certificates of 
 deposit have been devised for distant exchanges, and paper money cour 
 
 13 
 
194 SPEECHES AND BEP0RT8 OF JOHN SHERMAN. 
 
 vertible into coin has been used for exchanges from hand to hand. 
 When yoti authorize contracts in gold and make a demand for gold, 
 you at once unlock for daily use the coin now hoarded in private hands. 
 You can then provide the most important agency of modem times — a 
 convertible paper currency, always equal in value to gold, its true rep- 
 resentative, easy to guard, conceal, and transport. It is only by restor- 
 ing gold contracts that you can safely avail yourself of all the multiplied 
 uses of paper money. When this is done, gold now lying idle in the 
 Treasury may be utilized, made to produce an interest by the issue of 
 coin notes based upon it, and gradually to perform all the uses of money 
 now performed by a depreciated currency. This is the basis of the 
 fourth section of the bill, which utilizes the gold by the issue of gold 
 notes based upon it, and their application to the purchase of bonds and 
 the reduction of interest. 
 
 And the right to make contracts in gold may now safely and prop- 
 erly be extended to banks organized under the national banting system. 
 Upon a deposit of bonds, banks may be authorized to issue gold notes 
 equal to sixty-five per cent, of the value of United States bonds de- 
 posited to secure their circulation. Their payment vrill be in coin, but 
 in all other respects they may be subject to the general provisions and 
 limitations of the banking act. Many of the banks, especially in com- 
 mercial cities, will gladly avail themselves of such a provision to with- 
 draw their present circulation and substitute gold notes convertible on 
 demand into coin. With such a provision and on such a basis the sys- 
 tem may be free, and thus aU the embarrassing questions about the 
 inequality of the distribution of banking circulation will be avoided. 
 A right conferred upon all, without limit as to amount and upon regu- 
 lations applicable to all, would at once secure to the South and West 
 new banking facilities, and would rapidly tend to substitute coin or its 
 equivalent for legal-tender notes, and without the severe process of 
 contraction. The objection made, that this would create two currencies 
 of unequal values, applies as well to the present state of the currency, 
 for we have now two currencies of unequal value — gold and legal 
 tenders. 
 
 If we are sincere in wishing specie payments, we must not only 
 increase the demand for coin, but we must encourage coin conti-acts, 
 and authorize the issue of coin notes, both by the United States and by 
 the banks, and thus without contraction dispense with the use of the 
 inferior and depreciated currency. 
 
 The superior value of coin notes, their use in commercial cities, their 
 convenience in the gold-producing States, will soon give them higher 
 credit, and secure them in every part of the country. I am confident 
 that under such a system the national banlis will, if allowed, and before 
 specie payments are resumed, substitute coin notes for their present 
 circulation, and that, too, without diminishing the aggregate of circula- 
 tion. Many of them luive now reserves and profits enough to make the 
 requisite deposit of additional bonds ; and the gold certificates now 
 issued from the Treasury might be used for their coin reserves without 
 creating new demands for coin. 
 
 There is but one other consideration I wish to urge in favor of the 
 
PUBLIO DEBT AND CUREENOY. 195 
 
 sections of this bill relating to gold contracts and gold notes, and that 
 grows out of the doubt that rests upon the validity of the legal-tender 
 act. ■ "We must not forget that currency contracts depend not upon the 
 agreement of parties, but entirely upon the validity of that act. This 
 has always been doubted, and is now contested before the Supreme 
 Court. I remember very well the discussions in the Senate when this 
 act passed. Its validity was then denied by Judge Collamer and other 
 able jurists, and it was only maintained by myself and other Senators 
 from the imperative necessity of supporting armies then in the field. 
 This necessity has long since ceased. There can be no pretense that as 
 to future contracts there is any necessity that the public credit should 
 take the place of real money. The legal-tender act is only material as 
 it affects existing contracts. Is it wise to continue a measure only jus- 
 tified by a grave public necessity when the necessity has passed ? It 
 may be that the Supreme Court will deny the validity of the legal-ten- 
 der act, or limit its operation to existing contracts made since its passage. 
 It may subject currency contracts to enforcement in coin. Is it not 
 wiser to bridge over this uncertainty by authorizing the adjustment of 
 this matter between the creditor and debtor ? 
 
 Again, sir, the law as it now stands is prodiictive of gross injustice. 
 You require nearly one half of your taxes to be paid in gold, and yet 
 you will not enforce a contract by which the merchant buys the gold 
 for you. Cargoes of tea, coffee, and merchandise can only be bought 
 in gold, and yet, if property is delivered upon a promise to pay gold, 
 it cannot be enforced. Gross and palpable injustice may be done in a 
 multitude of transactions necessarily based upon gold by appealing to 
 the legal-tender act. 
 
 I conclude, then, this branch of the subject by the earnest opinion 
 that it was a good policy three years ago, and it is good policy now, 
 to allow all parties to stipulate the time, the amount, and the me- 
 dium of payment, subject to the general laws relating to fraud, usury, 
 and force. Free trade ia domestic productions, liberty to contract and 
 be contracted with, has never been restrained before. Let us restore 
 these rights ; and, having also provided a paper representative of the 
 coin in the Treasury of the United States and a bank currency con- 
 vertible into gold and founded upon the highest securities, let us now 
 deal with the much more diiScult question — the appreciation of the 
 present currency to the standard of gold. 
 
 If this question affected alone the Government of the United States, 
 we might resume specie payments very soon. By funding a portion 
 of the united States notes, by requiring the banks to maintain their 
 fun reserves in legal tenders, by withdrawing the three per cent, cer- 
 tificates, and by the use of the gold in the Treasury, we could resume 
 at once. This process might increase the bonded indebtedness of the 
 United States $100,000,000 and the interest $5,000,000 ; but our rev- 
 enues are ample in gold to pay the increased interest, and the actual 
 saving in the current expense of the Government by the reduction of 
 prices to the gold standard would be double and perhaps quadruple the 
 increased interest. The body of our expenditure, the interest of the 
 public debt, is now payable in gold ; and its burden would not be in- 
 
196 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 creased by specie payments, while the saving in expenditure and the 
 
 {)robable saving by the funding of the debt at a lower interest would 
 argely exceed any interest we would have to pay on notes withdrawn 
 from circulation. 
 
 And, if the burden of resumption fell alone upon the national banks, 
 the task would be an easy one,. Their securities, deposited with the 
 Treasurer of the United States, are now nearly equal in gold to the 
 amount of their circulation. A call under the banking act of ten per 
 cent, additional security could be easily met by the great body of them, 
 and thus enable them to resume whenever the United States is prepared 
 to do so. Their profits in the past have been large. Those not now 
 strong enough to perform the gi-eat object of their organization, namely, 
 to furnish a uniform currency convertible into gold, may well give way 
 to other banks ready to take their places. 
 
 But redemption by the banks means redemption by all their debtons 
 — ^by tlje merchants, manufacturers, and traders of the country. And 
 we are therefore compelled to deal with this question, not as it afiects 
 the United States and the banks merely, but as it affects all the people 
 of the United States. How will the appreciation of the currency affect 
 their interests ? A person entirely out of debt and possessed of pro- 
 ductive property would not be affected by the change. His property 
 would be of less nominal but of the same intrinsic value ; its producing 
 capacity would be undiminished, and it would buy the same food, cloth- 
 ing, and necessaries of life. 
 
 If the currency is depreciated, it will take more of it to purchase 
 an article ; if it is appreciated, it will take less ; but the appreciation 
 or depreciation of the currency does not affect the value of other com- 
 modities relative to each other. This can only be affected by supply 
 and demand, and ultimately by the cost of production. 
 
 So a man without property and not in debt, but who depends upon 
 his labor for his support, is not in the end affected merely by an appre- 
 ciation in the currency. His wages may be less, but what he receives 
 of the appreciated currency has the same purchasing power as the higher 
 wages received before. The change does affect him for a time, for land 
 and labor are the last commodities to feel a change in the cmTcncy. 
 The immediate effect of a depreciation in the currency is injm-ious to 
 him, for his food and clothing rise in price more quickly than liis labor ; 
 but appreciation of the currency is immediately beneficial to him, for 
 the reason that his labor does not fall as quickly as food and clothing. 
 The value of labor, however, may be disastrously affected by the mode 
 of appreciation. If it is brought about by a sudden contraction, the 
 result will be a suspension of work, of enterprises, and consequently a 
 reduction in the price of labor. 
 
 Persons of fixed salaries and incomes are benefited by an apprecia- 
 tion of the currency to the full extent of tlie appreciation. Their in- 
 comes have increased purchasing power, and they are enabled to extend 
 their purchases, supply new wants, and add to their capital. Deprecia- 
 tion of the currency produced the opposite effect during the war, carry- 
 ing distress and ])overty into many comfortable homes. It fell with 
 severe effect upon preachers, widows, and old men, who saw the pur- 
 
PUBLIC DEBT AND CURRENCY. 197 
 
 chasing power of their annuities melt away, and a condition of inde- 
 pendence destroyed. They will, by an appreciation of the currency, 
 be restored to their own again. 
 
 Merchants, dealers, traders, and bankers will be affected by an ap- 
 preciation of the currency according to the proportion their debts and 
 credits bear to each other. If they owe more than they can promptly 
 coUect on debts due to them, they must lose to the fuU extent of the 
 appreciation. As a general rule, any appreciation of the currency is 
 injurious to all these classes, for they are generally in debt ; and even 
 where enough is due them to pay with, yet the delay in payment or 
 the failure of their debtors almost always embarrasses them. Commer- 
 cial and banking usage compels promptness, so that a . merchant or a 
 banker, however prudent he may be, is often compelled to sacrifice his 
 asset's to meet a sudden appreciation of the currency. 
 
 But the distress caused by an appreciation of the currency falls 
 mainly on the debtor ; others suffer only by reason of his inability to 
 pay. What does specie payment mean to a debtor ? It means the pay- 
 ment of one hundred and thirty-five dollars where he has agreed to pay 
 one hundred, or, which is the same thing, the payment of one hundred 
 dollars where he has agreed to pay seventy-four. Where he has pur- 
 chased property and paid for one fourth of it, it means the loss of the 
 amount paid ; it means the addition of one fourth to all currency debts 
 in the United States. A measure to require a debtor now to pay his 
 debt in gold or currency equivalent to gold requires him to pay one 
 hundred and thirty-five bushels of wheat when he agreed to pay one 
 hundred ; and, if this appreciation is extended through a period of three 
 years, it requires him to pay an interest of twelve per cent, in addition 
 to the rate he has agreed to pay. When we consider the enormous in- 
 debtedness of a new country like ours, where capital is scarce, and 
 where credit has been substituted for capital, it presents a diflBculty 
 that may well cause us to pause. We may see that the chasm must be 
 crossed, but it wiU make us wary of our footsteps. Good faith and 
 public policy demand that we appreciate our currency to gold ; but in 
 the process we must be careful that bankruptcy, distress, and want do 
 not result. The debtors of this country include the active, enterprising, 
 energetic men in aH the various employments of life. It is a serious 
 proposition to change their contracts so as in effect to require them to 
 pay one third more than they agreed to pay. They have not paused in 
 their business to study questions of political economy. They have based 
 their operations upon this money, which has been declared to be lawful 
 money. Its relative value may be changed, but a reasonable opportu- 
 nity should be given them to change their contracts so as to adapt them 
 to the new standards of value. 
 
 Before discussing the measure proposed by the Committee, which 
 Senators may consider not specific or rapid enough, let us look to his- 
 tory for lights to guide us in a most diflEicult and dangerous passage. 
 
 The appreciation of the currency is a far more distressing opera- 
 tion than Senators may suppose. Our own and other nations have 
 gone through it before, and always with the sorest distress. Some- 
 times they have repudiated the depreciated currency, to the utter de- 
 
198 SPEEOriES AND REP0ET8 OF JOHN SHERMAN. 
 
 struction of credit and trade, and, from the necessity of the case, fallen 
 back upon barter and gold. As I have already stated, such was the 
 case with the continental money,- with the French assignats, and with 
 Confederate scrip. We have also to guide us several examples of the 
 appreciation of a debased currency. 
 
 At the revolution of 1688 in England, the silver coin, then a legal 
 tender, had become so depreciated by wear and by clipping as to be 
 worth only seventy-five per cent, of the mint standarcf, and this was 
 practically the only currency. As all prices and obligations of debt 
 had become adjusted to the lowered value of the existmg coin, it was 
 proposed either to reduce the mint standard to the current standard, 
 or to issue new shillings of fuU value. The latter proposition was ad- 
 vocated by Isaac !N^ewton and John Locke, the two " foremost men of 
 all the world," who contended that if the loss of recoinage was thrown 
 upon the mint it would not afEect individuals at all. This view was 
 strongly opposed by practical merchants, but new shillings of full 
 value were issued and exchanged for the old depreciated ones at par. 
 As between the mint and the holder of the old shillings this was aU 
 right ; but the effect was immediately disastrous upon all prices. It 
 took one third more commodities to get the new shillings, but the same 
 number of shillings as before was required to pay a debt. Merchants, 
 traders, and debtors were ruined. The Bank of England, then in its 
 infancy, only escaped failure by issuing its notes payable in install- 
 ments. A rival bank was utterly wrecked. Small capitalists found 
 themselves ruined, and laborers and artisans deprived of employment. 
 Hence the unpopularity of William III. and the prevalence of general 
 discontent during his reign. 
 
 A condition of currency similar to our own existed in Great Brit- 
 ain after the general peace of 1815. For eighteen years the notes of 
 the Bank of England were practically a legal tender, and upon them, 
 as upon our greenbacks, was based a cuiTency issued by the country 
 banl^. Though the aggregate of all this paper circulation never 
 amounted to $250,000,000, yet at times it depreciated from twenty to 
 thirty per cent. When the war waa over measures were slowly adopted 
 for its appreciation to the gold standard. These measures resulted in 
 a reduction of the paper currency from $231,000,000 in 1815 to $152,- 
 000,000 in 1821. Commercial paper, discounted at the Bank of Eng- 
 land, fell from $75,000,000 in 1815 to $13,000,000 in 1821. It is only 
 necessary to appeal to the histories of the time to sl\ow the disastrous 
 effect. The purchasing value of capital was increased fifty per cent. 
 A thousand dollars in 1821 would buy more than eighteen hundred 
 dollars in 1815. Small traders, debtors, and laborei-s were reduced to 
 the sorest distress. The loss to them was far greater than the actual 
 depreciation of the currency, for all confidence and trust were lost. 
 The only compensation to Great Britain was the rapid fall in the rate 
 of interest from the abundance of idle capital, which enabled her to 
 reduce the interest of her public debt within a short period to three 
 per cent. 
 
 If Senators wish other examples of the severe process of passing 
 from a depreciated currency to a gold currency, or to a paper currency 
 
PUBLIC DEBT AND CUEKENOY. 199 
 
 convertible into gold, let them read the story of the times after the 
 Revolntion and the war of 1812, and after the revulsion of 1837, aU 
 of which were periods of transition from a depreciated paper currency 
 to a convertible paper currency. Sir, it is not possible to take this 
 voyage without sore distress. To every person except a capitalist out 
 of debt, or to the salaried officer or annuitant, it is a period of loss, 
 danger, prostration of trade, fall of wages, suspension of enterprise, 
 banEruptcy, and disaster. To every rauroad it is an addition of at 
 least one third to the burden of its debt ; and more than that, deduc- 
 tion from the value of its stock. To every bank it means the neces- 
 sity of paying one hundred and fifty dollars for one hundred of its 
 notes and deposits, except so far as the bank may transfer this to its 
 debtors. It means the ruin of all dealers whose debts are twice their 
 capital, though one third less than their property. It means the fall 
 of all agricultural 'productions without any very great reduction of 
 taxes. To attempt this task suddenly, by a surprise upon our people, 
 by at once paralyzing their industry, by arresting them in the midst 
 of lawful business and applying a new standard of value to their prop- 
 erty, without any reduction of their debt or giving them an opportu- 
 nity to compound with their creditors or distribute their loss, would be 
 an act of folly without example in modern times. 
 
 It is sometimes said that we did this in the passage of the legal-ten- 
 der act ; that we inflicted the same loss on the creditor that we now 
 deprecate for the debtor. This is not true. The effect of the legal- 
 tender act was undoubtedly to depreciate our notes, but the process was 
 very slow and gradual. For more than a year it scarcely operated as a 
 depreciation, and during all that time the capital paid off by depreciated 
 notes was invested in bonds, bank stocks, railroads, and manufacturing 
 pursuits created by the war, which yielded as much in gold as the capi- 
 tal produced before the war. Capital lost nothing by the war even 
 when paid in greenbacks, for the demands for capital during the war made 
 ample amends for the loss by the depreciation in greenbacks. It is 
 estimated that the interest-bearing capital of this country now is, upon 
 the gold basis, more than double that of 1860. And, if it were true 
 that appreciation now would only work the same injury to the debtor 
 that depreciation did to the creditor, we should not be justified in in- 
 flicting in peace the injuries which were justified by war ; and the 
 creditor, who is usuallv the holder of property, is better able to bear 
 the loss of a portion of the money due him than the debtor is to bear 
 an addition to his burden. Our power over the creditor is unlimited ; 
 we may levy taxes upon him to any amount ; but we have no power to 
 vary a contract or add to the burden of an existing debt. 
 
 The question then remains. What mode of appreciation of the value 
 of greenbacks will operate least injuriously to the varied business in- 
 terests of our constituents? And upon this point your Committee, 
 after the most careful consideration, have come to the conclusion that 
 the only and best plan is to allow the legal-tender notes to be funded at 
 the pleasure of the holder into interest-bearing bonds of the United 
 States. 
 
 In designating the bond, we have selected that now familiar to the 
 
200 SPEECHES AND REPORTS OF JOHN" SHERMAN. 
 
 people, the ten-forty bond. Its market value is now but slightly above 
 that of the legal tenders, so that the process of appreciation of the 
 notes will be slow, and their value will advance only with the improv- 
 ing credit of the country. This bond bears as low a rate of interest 
 as we are likely to negotiate, but is of such intrinsic value that we may 
 hope to see it at par with gold within a short period. It will enable 
 us after ten years to take advantage of the money market to reduce the 
 interest still further. Its credit is supported by a permanent appropri- 
 ation from- a fund suflBcient without further act of Congress to pay off 
 every dollar of the debt in twenty-five years. 
 
 Again, sir, this provision of the bill is right when tested by the 
 moral sense. "When for sufficient reasons we cannot pay the note in 
 coin, we are bound to give to the holder our note with interest. Such 
 from the beginning was the policy of the Government. When the 
 notes were first issued under the act of February 25, 1862, they were 
 convertible at will into bonds. We, with a questionable device, by the 
 act of March 3, 1863, took away that right, and should now restore it. 
 During the war a greenback would purchase an equal amount of bonds 
 of any character offered in the market. It paid at par for the live- 
 twenties, the ten-forties, and the seven-thirties. It is now less valuable 
 than these bonds only because it is dishonored paper, which though due 
 is not paid, and is valuable only as a forced currency, which we compel 
 our citizens to take in payment of their debts, but refuse to take for 
 our own bonds except at a discount. We' give the bond the benefit of 
 the improving credit of the country, but deny it to the note. The sim- 
 plest and plainest rule of equity requires us, if we cannot pay the note, 
 to give in exchange for it a bond bearing interest. And here, sir, a 
 difficulty presents itself that forms the basis of all, or nearly all, the 
 division in the Committee as to this measure. What shall be done with 
 the United States notes received into the Treasury in the process of 
 funding ? One contends that they should be retired as they are re- 
 ceived ; another, that they should not be retired, but should be reis- 
 sued ; and still another wishes to limit the funding of greenbacks to a 
 specific sum each month ; and amendments are pending for these pur- 
 poses. No doubt similar differences as to details will occur in the Sen- 
 ate. My own conviction is, that the notes and ten-forty bonds should 
 be convertible and reconvertible within certain limits until both rise to 
 the par of gold. Such a provision was reported at the last session, and 
 is still approved by the Committee ; but the opposition to it by those 
 who widely dififered from eacb other as to its effect, some insisting that 
 it would produce contraction and others expansion, caused it to be de- 
 feated. The proposition in this bill to substitute coin notes for legal- 
 tender notes, as the latter are retired by voluntaiy conversion into 
 bonds, is an attempt of the Committee on Finance, in deference to the 
 vote of the Senate at the last session, to guard against a too rapid con- 
 traction of the currency. I must, however, insist upon ray conviction 
 that the true way to guard against both undue expansion and contrac- 
 tion while specie payments are susjiended is to allow the public cred- 
 itor, whether note-nolder or bond-holder, to exchange one for the other, 
 without any limitation except that the aggregate of circulation should 
 
PUBLIC DEBT AND ODERENOY. 201 
 
 not exceed the United States notes now outstanding ; and tMs aggre- 
 
 fate may be gradually reduced as specie payments are resumed. I? the 
 enate agrees with this opinion, then some changes will have to be 
 made in the fourth section. If, however, the Senate still opposes this 
 mutuality of conversion, the substitution of coin notes should precede 
 the cancellation of the greenbacks, or a reserve of legal tenders should 
 be maintained by the Secretary of the Treasury, to be issued at his 
 discretion. 
 
 Such, sir, are the general provisions of this bill. It seeks to substi- 
 tute gradually, by the voluntary action of the people, coin contracts, 
 coin notes, and convertible bank bills for currency contracts and irre- 
 deemable and inconvertible paper money. It seeks to secure to the 
 public creditor the prompt payment of his interest in coin, and to the 
 
 Sieople the like payment in coin of the depreciated notes held by them, 
 f the process is slow it is safe, and the danger of a more rapid process 
 is great. Let no man deal with this question with the hasty impulse of 
 fii-st impressions. Let no man be confident of his own opinions until 
 he has examined those of others. He will find that many have traveled 
 this path before him ; but no man yet has found an easy road to the 
 resumption of specie payments. 
 
 It now remains for me very briefly to state why other propositions 
 submitted to the Committee have not been approved. Your patience 
 will not allow me to examine any of the multitude of suggestions that 
 have been made in the public prints, though many of them are worthy 
 of careful study. I wiU only allude to some propositions that have 
 been referred to the Committee. The suggestion of the President to 
 pay the interest for sixteen years if the creditor will surrender the prin- 
 cipal has already been disposed of. The plan of the Secretary of the 
 Treasury to contract the currency until we reach the specie basis has 
 already been incidentally referred to. The proposition of the Senator 
 from ikassachusetts [Mr. Sumner], though not formally referred to the 
 Committee, yet, having the sanction of his great name, was carefully 
 considered, and so much of it as was approved was embodied in the 
 bill reported ; but its principal feature, the repeal of the legal-tender 
 act after the 1st of July next, would be far too sudden in its effects, 
 and, if I am correct in the views already expressed, disastrous to the 
 great body of the active business men of the country. 
 
 The plan of the Senator from Indiana [Mr. Morton], supported by 
 an able speech, was carefully considered by the Committee. It rests 
 upon two leading ideas : 
 
 1. The accumulation of gold in the Treasur;^ ; and 
 
 2. The fixing a specific day for the resumption of specie payments. 
 ]S"ow, in most of his speech I heartily concur. All that he says of 
 
 the necessity of resuming specie payments, of the effect of contraction, 
 and the unjust discrimination that now exists between the note-holder 
 and the bond-holder, meets my hearty approval. It is the remedy he 
 suggests we have to deal with. Would not the effect of his measure 
 be that the Government would hoard the gold and the people the 
 greenbacks, and thus make the contraction he fears ? What more prof- 
 itable investment could any man make than to take this dollar, now 
 
202 SPEECHES AND KEP0RT8 OP JOHN SHEEMAN. 
 
 having a purcliasing power of seventy-four cents in gold, and lock it in 
 his safe with a certainty that in two years it must be worth one dollar 
 in gold, an annual advance of seventeen and a half per cent. ? "Would 
 not every bank sharply contract its currency and hoard greenbacks as 
 the best investment it could make ? "What prudent man will dare 
 build a house or factory, a railroad or bam, with the certain fact before 
 him that the greenbacks he puts into his improvement wiU be worth 
 thirty-five per cent, more in two years than the improvement ? "Would 
 he not hold his money for two years until his building would cost him 
 one third less ? When the day of resumption comes every man, as the 
 sailors say, will be close-reefed ; all enterprise wiU be suspended ; every 
 bank will have contracted its currency to the lowest limit; and the 
 debtor, compelled to meet in coin a debt contracted in currency, wiU 
 find the coin hoarded in the Treasury, no representative of coin in cir- 
 culation, and his property shrunk not only to the extent of the appre- 
 ciation of the currency, but still more by the artificial scarcity made by 
 the hoarders of gold. 
 
 All the historical precedents show that fixing the day for resump- 
 tion inevitably leads to a contraction of the currency by the banks, so 
 that when the day comes the scarcity of currency shall prevent a de- 
 mand for coin. This process of contraction both in England and the 
 United States produced the sorest distress ; and this distress was only 
 relieved in England by the Parliament requiring the loan of exchequer 
 bills and the issues of new notes by the Bank of England. At the be- 
 ginning of our Government the Continental bonds were a species of cur- 
 rency. ; and as a part of the funding system of Alexander Hamilton, he 
 provided for a new paper currency convertible into coin, to be issued by 
 the Bank of the United States, without which he declared his funding 
 system would be a failure. So, sir, after the war of 1812 the sore dis- 
 tress caused by the failure of the State banks was only relieved by a 
 new paper currency issued by the second Bank of the United States, 
 which Mr. Madison, yielding his constitutional objections, approved. 
 "We therefore think that the general objects sought for by the Senator 
 from Indiana [Mr. Morton] can be better attained by legalizing specie 
 contracts, by utilizing the coin in the Treasury, by the gradual substi- 
 tution of coin. United States notes, and bank bills for the present cur- 
 rency, rather than by the accumulation of gold and the fixing of a day 
 for resumption. 
 
 And now, sir, a multitude of collateral topics present themselves — 
 questions affecting the construction of contracts and the public debt, 
 questions of funding, of the reduction of the rate of interest, of taxa- 
 tion and protection, of banking and the distribution of bank circulation. 
 All these have been considered, and no doubt will be presented to the 
 Senate ; but we have not embraced them in this bill, for the manifest 
 reason -that by attempting too much we should be likely to defeat any 
 measure tending to the resumption of specie payments. 
 
 This primary duty accomplished will solve many of these questions 
 and prepare tlio way for other measures. I submit to Senators who 
 favor this bill whether it is not wiser' to leave to time, to the progress 
 of events, and to the next Congress, to deal with other matters not vital 
 
THE PUBLIC CREDIT. 203 
 
 f 
 
 to this measure. It i8 only in tMs way that, with the confused and 
 scattered opinions in the public mind, we can hope to accomplish any- 
 thing. A.11 these questions will be resolved wisely if we are content to 
 follow the example set by Mr. Lincoln and by Congress during the war, 
 to make haste slowly. 
 
 Sir, you and I and many of our associates have been here during all 
 the great events of our civil war. We have seen Senators from meir 
 places openly proclaim in safety their intended infamy and perjury. We 
 have seen our only army broken and demolished, filling the streets of 
 this city, and the rebel flag floating within sight of the dome of the Cap- 
 itol. We have seen a vast section of our country fiUed with armed men, 
 bold, defiant, and confident, engaged in fierce war for the overthrow of 
 our Government. We were deserted by nearly all the Governments of 
 Chi'istian Europe. We have seen four hundred thousand of our coun- 
 trymen slain in battle or falling by disease. We have met defection 
 and doubt at home, and suffered disaster again and again. But all this 
 has passed away. The long-vacant seats are nearly all filled, and new 
 States then in wilderness are now represented here. Our fiag floats in 
 undisputed authority over every part of our territory. AU the ques- 
 tions of debate that have risen from time to tiine in this Senate cham- 
 ber have been so decided that authority has been vindicated and liberty 
 been made universal. We are soon to see the great hero of the war 
 clothed with the executive authority of the nation, and bearing with 
 him into his high office the hearty good will of nearly all the people 
 of the United States. But one thing more is to be accomplished, and 
 that is to place our public credit on a firm, enduring foundation, so 
 that the world may say that this republic is not wanting either in valor 
 or honor. We may then give way to those who are rapidly treading 
 in our footsteps with a consciousness of having performed our full duty 
 to our country. 
 
 THE PUBLIC CKEDIT. 
 
 IN TEE SENATE, FEBBUABY S7, 1869. 
 
 The biU to strengthen the public credit being before the Senate, Mr. Sherman 
 said: 
 
 I THOtTGHT nothing in the world could tempt me at this late hour of 
 the night to say a word upon this bill ; but the remarks made by the 
 honorable Senator from Indiana are so extraordinary that I deem it 
 my duty to reply, and if it were night or morning I would do it alike. 
 
 The Senator seems to attack with great violence the Committee on 
 Finance ever since it had the misfortune to disagi'ee with him in regard 
 to his plan to promote the public credit and resume specie payments. 
 iN'ot being able to report in favor of his plan, we reported against it, 
 and ever since that time everything that we do seems to meet his dis- 
 favor. He says the bill reported by us is dead. I dispute it. , The 
 bill is not only not dead, but it liveth and will be the law of the land ; 
 
204: SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 and you here in this bill will make one of its most important and fun- 
 damental provisions, the first section of that bill, the law of the land, 
 and I have no doubt that every section of it will be hereafter made so. 
 Now, in justice to the Committee on Finance, let me state what those 
 sections are, because one of the organs of this body can not hear its 
 measures thus arraigned and sit here quietly at any time, in the night 
 or in the morning, without a reply. What are the measures of that 
 bill ? The first is that gold contracts shall be legalized. Here it is in 
 this bill. The second is that $140,000,000 shall be set aside to redeem 
 the public debt, and that will be done unquestionably. Now, more 
 than that is already set aside, but it is not applied because the law is 
 not put in force. The third is to tie the fate of the greenbacks to the 
 fate of the bonds. That is done here by the amendment proposed by 
 the Committee on Finance, so as to put the bond and the note on pre- 
 cisely the same footing, both to be paid in gold, both to be treated 
 alike ; and I have no doubt whatever that at the next session of Con- 
 gress the demand of the public as well as the sense of justice of Con- 
 fress will compel us to authorize the holder of the greenback to receive 
 is bond, dollar for dollar, for his paper money ; there is no doubt of 
 it. What else ? The other section of the bill, the only material one, 
 is a section which provides for free banking. The Senator himself 
 professed to be in favor of it. He himself desired and voted to with- 
 draw from all the Eastern States more than one half of their circular 
 tion with a view to place it in the South, and then to compensate the 
 East by free banking. Those were the provisions of the bill from the 
 Committee on Finance, and there was not one of them that I think 
 the honorable Senator himself would not approve. 
 
 But now this bill came to us from the House of Representatives, 
 and I will state very briefiy what it is, for I know it is wrong for me 
 to delay the action or vote of the Senate upon it. What is the first 
 section of this bill ? It is simply a solemn pledge of the United States 
 that all the obligations of the United States, notes and bonds, shall be 
 paid in gold and silver coin, except only those where the law expressly 
 provides that they shall be paid in lawful money. But my honorable 
 friend says, why the exception ? The question shows that he has not 
 examined this matter with his usual care, or he would not have asked 
 it. Why, sir, there are some fifty or sixty million dollare of three per 
 cent, certificates expressly payable in currency. But for this exception 
 they would to-morrow be payable in coin on demand at the Treasury 
 of the United States. There are also bonds issued to the railroads, ex- 
 pressly payable in currency. But for this exception they would be 
 paid principal and interest in gold. The interest on those bonds is 
 semi-annually paid in lawful money. It is necessary to except obliga- 
 tions expressly payable in currency. But we say that with regard to 
 all other obligations, pa])er money and bonds, they shall be paid m gold 
 and silver com. 
 
 Now, sir, the first part of this section I should like to see the Senate 
 strike out, because it nmkes the declaration cleaver, stronger, and more 
 emphatic than I wish. Wliy 'i I do not believe, and I never could 
 reason myself into the belief, that the laws which authorized the issue 
 
THE PUBLIC OEEDIT. 205 
 
 of these bonds made a discrimination against the lawful tender money 
 of the United States. I do believe that by a fair and reasonable con- 
 struction of those laws the bonds of the United States might be paid 
 in lawful money issued within the limits and according to the terms of 
 those laws. But do we propose to pay those bonds in lawful money ? 
 Certainly not. ,We have not the money to pay them. "We dare not 
 increase the taxes for this purpose, 'and so we must postpone the pay- 
 ment of the bonds. I repeat that under the condition of our finances 
 it is impossible to pay any considerable sum of the principal of this 
 public debt either in lawful money or in gold. Our people do not and 
 will not ask us to levy more taxes upon them in order to avail them- 
 selves of the legal privilege or right which they have to pay in lawful 
 money. . 
 
 They desire to pay of the principal of this public debt not more 
 than one per cent, per annum, a small amount, and to adopt a policy 
 which will in the end pay the whole of it. But what shall we do in 
 1^ mean time ? Shall we suspend specie payment until we can pay 
 tuB whole of this debt by taxes ? Is the payment in specie to be post- 
 poned indefinitely ? My friend from Indiana says only for two years, 
 and then he would bring it about by hoarding gold and by hoarding 
 greenbacks. 
 
 Do our Democratic friends propose to postpone the resumption of 
 specie payments until this debt matures, until we can gather in a suffi- 
 cient amount of taxes to pay off the principal of the debt in lawful 
 money ? IS^o, sir. The honor of the country, the good faith of the 
 nation, the interest of the laborer, of the rich and the poor, and of all 
 classes, demand that we should resume specie payments as early as pos- 
 sible, and place all the obligations of the people of the United States 
 upon the solid basis of gold and silver coin. "We can not delay that 
 primary duty ; and therefore I look upon this first section as simply a 
 declaration that we will now perform our primary duty of making our 
 notes equal to coin, and I have no doubt that if that policy is pursued 
 and adopted the bondholder will be glad to get the lawful money of 
 the United States in payment of his bond. All that this first section 
 does is to declare as a matter of public policy that the notes and the 
 bonds shall alike be paid in gold ; the bonds as they gradually mature, 
 and the notes long before any of the bonds ijiature. Why, sir, none 
 of these bonds mature until 1881, and we can not get the lawful money 
 to redeem them even at the end of five years, when we have the right 
 to redeem them, except by taxes. We can not draw; in the lawful 
 money of the United States except by taxation. We can not adopt the 
 repudiating scheme of our Democratic fellow citizens of the United 
 States of issuing broadcast in violation of law a large amount of legal 
 tenders, and thus repudiating our debt. I never could see how honest 
 men could propose that. Then, the only way we can get lawful money 
 to pay this debt is by taxation, and our people will endure no more 
 than now exists. They have no desire to assume the burden of paying 
 the public debt at once. They are willing to see a portion of the pay- 
 ment postponed, but in the mean time we can not prolong this. suspen- 
 sion of specie payments until we can avail ourselves of that privilege. 
 
206 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 I Bay, then, that the primary duty of the United States is to resume 
 specie payments as quickly as possible, and make the lawful money of 
 the United States equivalent to gold. I look to see the bonds of the 
 United States advancing step by step with the money of the United 
 States until their par value in coin is reached. Sir, it gave me a thrill 
 of pleasure when I saw that the bonds of the United States were 
 worth eighty-nine cents in gold in the markets of London. I do not 
 care who made money by the advance ; God knows I did not. I had 
 no interest in it directly or indirectly. I was glad to see our bonds ap- 
 preciate in the market, and the holders get the benefit of that apprecia- 
 tion ; and I trust that in three or four or six months, or a year, these 
 bonds will reach par value in gold. 
 
 But it is said, now can you fund the public debt? We will do it 
 just as England and just as every other country did that reduced the 
 rate of interest. Whenever the bonds of the United States rise above 
 par in gold, then we can place in the money market of the world a 
 bond bearing a lower rate of interest. If our bonds this day ]|[|d 
 reached the par of gold we could put in the market without question 
 or difficulty a bond bearing a lower rate of interest. Sir, I believe 
 that if we would now wisely and persistently, firmly and boldly, march 
 to the resumption of specie payments in such a way as not to distress 
 our people, not by increasing taxes, but by steadily appreciating our 
 public credit until the five per cent, bonds rise to par in gold, the 
 whole of the six per cent, bonds could be paid oflE. There is now only 
 about fifteen per cent, difference between the market value of the ten- 
 forty bonds and gold. If we can wipe out that fifteen per cent, by an 
 appreciation of the public credit, then funding wiU go on with, rapid 
 speed ; the whole of the five-twenty bonds will be paid off. 
 
 why, sir, when the bonds of England rose to one hundred and thi-ee 
 per cent., then the rate of interest was reduced one per cent, by put- 
 ting a bond at a lower rate of interest in the money market. That is the 
 only way that you can carry out a process of funding. If we were able 
 to levy upon our people a larger amount of taxes and apply fifty or one 
 himdred million dollars to the payment of the principal of the debt, 
 we could carry on the process of reducing the interest just so much the 
 more rapidly, but we dare not extend our system of taxation for fear 
 of losing the confidence of the people. The only other resort is to 
 advance our public credit, to elevate our bonds trom the slough of 
 despond in which they were cast by the burden of the war, to elevate 
 our public credit to where it was before the war, and then the burden 
 of this interest will pass away, and we may hope to see our bonds beai"- 
 ing in the money market of the world, in the hands of the rich and the 
 poor, the foreign and the native, all the credit that now clusters round 
 the three per cent, consolidated debt of England. Then it may be that 
 we will not satisfy ourselves by reducing the rate of interest to five 
 but to four and a half or four yvv cent. ; and probably within twenty 
 or thirty years we may stand as Great Britain does, M-itli our credit such 
 that we can got par for our bonds at three and a half per cent, interest 
 in gold. 
 
 But, sir, in the mean time wo nmst not be diverted from the diffi- 
 
NATIONAL BANKS. 207 
 
 CTilties that stand in our way. In my judgment tlie plan reported at 
 this session by the Committee on Finance is the best, the most rapid, 
 and the most effectual way to bring about this state of affairs. I am 
 not discouraged by the reluctance of the Senate to assume it. I know 
 that such propositions are always of slow growth. But I assure my 
 honorable friend from Indiana that if he supposes that any section or 
 line or word of that currency bill is dead, or even that it sleeps, he is 
 very much mistaken. He will find it either in whole or in part meet- 
 ing him at every stage of this progress until every word of it is in- 
 grafted in the laws of the United States. 
 
 I know that my friend, for whom I have the utmOst kindness and 
 the greatest good feeling, did not intend any unkindness in the remarks 
 he made ; but when he attacks a committee of this body, and speaks of 
 me as the chairman of that committee, and accuses us of being guilty 
 of vacillation and mutations and changes in our reports .and buls, as a 
 matter of course he naturally excites a feeling which will not submit in 
 quiet to such an imputation. 
 
 Sir, I myseK came with slow reluctance to the declaration made in 
 the first section of this bill. I declare now to you that my construc- 
 tion of the law under which these five-twenties and under which the 
 greenbacks were issued stiU remains unchanged ; but I do assert, as a 
 question of public policy, that it is wise now for us to declare in the 
 language of this bill that the bonds and greenbacks alike shall be paid 
 in gold as rapidly as we can do so ; that these greenbacks and these 
 bonds may be linked together in every law that is passed ; that every 
 privilege that is given to the bond-holder shall be given to the holder 
 of the greenback ; that both together shall rise gradually to par in gold, 
 when the bond-holder may be paid off by bonds bearing a lower rate 
 of interest with a large saving to the people of the United States. I 
 think this question has been fully considered, and I hope, therefore, 
 that without any more debate on the subject to-night we may have a 
 vote upon it. 
 
 The bill, after being amended, became the act of March 18, 1869. 
 
 NATIONAL BANKS. 
 
 m THE SENATE, MARCH 29, 1869. 
 
 Thk Senate having under consideration the bill supplementary to an 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, Mr. Sherman said : ' 
 
 If I can get the attention of the Senate, at the request of several 
 Senators who have become members of the body since the subject was 
 under debate at the last session I will state very bi-iefly the purport of 
 this bill. Although the Senators who Kstened to the debate at the last 
 session will not need the information, still, as the bill contains several 
 
208 SPEEOEIES AND EEPOETS OF JOHN SHERMAN. 
 
 important changes in the existing law, it is right that all should under- 
 stand it. 
 
 The first section of the bill is a modification of the currency act so 
 far as it relates to deposit banks. It requires in all cases deposit banks 
 to give security in United States bonds equal to the amount of the de- 
 posits. Under the present law the security is fixed by the Secretary of 
 the Treasury. This section fixes it by law ; so that in no case shall the 
 Government deposits in a national bank exceed the amount of security 
 furnished. 
 
 The second section is intended to cure an evil that has sprung up 
 mainly in the State of New York, where banks organized under the 
 national banking system have given notice of their intention to wind 
 up their affairs, and have thus relieved themselves from the restrictions 
 and limitations of the national banking act, but have in fact not wound 
 up their business, and have got the benefit of the circulation without 
 any of the burdens imposed by the currency act. It is for the purpose 
 of compelling banks that have given notice of their intention to wind 
 up to do what they give their notice to do — -to require them to redeem 
 their notes, or in case of a failure to redeem their notes to authorize 
 their bonds to be sold with a view of canceling an equal amount of 
 United States notes. That is very plain. 
 
 The third section of the bill is to limit and greatly reduce the fees 
 allowed by the courts to receivers of banks. In sevefal cases that I 
 cited at the last session the fees allowed to receivers and officers of 
 banljs by the district courts and circuit courts of the United States 
 were very large indeed, much larger than they ought to have been, 
 thus absorbing a portion of the money that belonged to the creditors 
 of the bank. The third section limits the amount of fees to what we 
 conceive to be a reasonable rate. These three sections I believe have 
 always passed without objection. 
 
 The fourth section presents a very difficult problem. Under the 
 existing distribution of bank circulation the Eastern States, where capi- 
 tal mainly accumulates, have a very large excess over their proportion 
 of banking circulation. This was caused by the fact that State banlvs 
 had been organized in those States, and by an amendment offered by 
 the gentleman who now occupies the chair, in the summer of 1804, the 
 existing State banks were allowed a preference in going into the na- 
 tional banking system. "The result is that the distribution provided for 
 by the national currency act was substantially defeated ; and the State 
 banks bein^ very numerous in the older States they went into the na- 
 tional bankmg system, and thus absorbed the banking circulation, leav- 
 ing none for the "Western and Southern States when the rebellion was 
 subdued. The result is, as will appear from the table which I have 
 before me, and which Senators can find in the report of the Comptroller 
 of the Currency at the last session of Congress, that the distribiition of 
 banking circulation is very largely dispi-ojiortionate. In Massachusetts 
 I believe it is some fifty-four dollars an inhabitant ; in Rhode Island 
 about sixty dollars an inhabitant ; in Connecticut some forty or fifty 
 dollars an inhabitant ; while in some of the States it is less than one 
 dollar, and in the State of Illinois, a very prosperous and thriving com- 
 
NATIONAL BANKS. 209 
 
 munity, it is only three or four dollars. Consequently great complaint 
 exists on account of the disproportion of circulation. As business re- 
 vives in the South there is a necessity for establishing new banks, but 
 the amount of $300,000,000 having already been exhausted no national 
 banks can be started in those States. 
 
 Yarious plans have been proposed and discussed from time to time 
 to relieve this difficulty ; and finally, the fourth section of the bill, as 
 reported from the Committee on Finance at the last session, we thought 
 was the most equitable to provide a general rule by which one half of 
 the circulation should be distributed according to population, and the 
 other half according to wealth and property, and to require that redis- 
 tribution to be made gradually. This section confines the redistribution 
 within one year to $20,000,000 upon certain rules that are fixed by the 
 section. 
 
 The next section authorizes the existing banks in any of the older 
 States where they have an excess of banking circulation to remove 
 themselves bodily with their capital and circulation to the Southern or 
 Western States that have less than their proportion. There are many 
 banks within my knowledge in New England and in New York, and 
 perhaps some in Ohio, that will avail themselves of the privilege of 
 this section to remove from their present location to the South and 
 West, thus supplying to some extent the want that is complained of ; 
 while the $20,000,000 withdrawn from circulation according to the 
 mode provided by this bill wiU be withdrawn from those States having 
 the largest excess of circulation in accordance to the rule prescribed 
 here, and that also will be made up by banks to be established hereafter 
 in the South and extreme West. 
 
 The section provides that the circulation is to be given wpjpro rata. 
 Suppose for instance that after making the statement provided for by 
 the fourth section it becomes necessary to withdraw from the banks in 
 the State of Massachusetts ten per cent, of their circulation, it is done 
 ^0 rata ten per cent, upon the circulation issued by the difEerent 
 banks. 
 
 My own impression is that this arrangement will give to the South 
 and West all the banking circulation and capital they can absorb within 
 one or two years ; and I suppose that at the end of that time we shall 
 probably establish a free banking system. I have no doubt that as 
 soon aa we resume specie payments a free banking system will be estab- 
 lished, which will avoid all this controversy about mstributing bankiag 
 circulation. 
 
 There is only one further point to which I wish to call the attention 
 of the Senate ; and that is, to assure them that in my judgment and 
 the judgment of the Committee on Finance it is not wise now to pass 
 a more radical measure than this. At the last session a proposition to 
 redistribute the entire banking circulation of the country was proposed 
 here, and, without much debate, was almost carried. It seems to me a 
 proposition of that kind would derange and tear up the business of this 
 country to an extent that would be very injurious. We had better ac- 
 complish this redistribution by slow and gradual means. After we 
 have resumed specie payments there will be no contest about it. If 
 14 
 
210 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 the proposition should now be made to increase the amount of $20,- 
 000,000 to $30,000,000, or any higher sum, I should feel bound to 
 oppose it. 
 
 My constituents, I may say, are entirely impartial in this matter. 
 We neither lose nor gain by this bill. We have about our proportion, 
 a little less than our proportion, and I do not wish for any more ; and 
 under this bill we shall lose nothing and gain nothing. I would not be 
 willing to vote for a general redistribution of the banldng circulation, 
 which would disturb aU the business of the New England and Middle 
 States, merely to secure a nominal equality in the distribution of circu- 
 lation. It is better, in my judgment, to take this measure, which wUl 
 supply the South and West in a partial degree with banking circula- 
 tion, depending on future legislation and upon the resumption of specie 
 payments for a settlement of the question upon a more general basis. 
 
 Mr. Morrill having moved to amend tlie fourth section, so that it should read 
 " banks having a capital exceeding |100,000," Mr. Sherman said : 
 
 This amendment has been thought of and discussed before. It 
 was offered in committee at the last session, but I am not sure whether 
 it was offered in the Senate or not. It confines the withdrawal of the 
 circulation to banks exceeding $100,000 of capital. I can see no rea- 
 son why a strong bank with $200,000 capital should be discriminated 
 against in favor of a small bank with $50,000 capital. One object of 
 the currency act was to discourage very small banks. Unless the Sen- 
 ate can see some good reason why the reduction should apply to a 
 large bank and not to a small one the amendment ought not to prevail. 
 It seems to me that if we are going to make this reduction it ought to 
 be done by one uniform rule applicable to banks of all kinds, condi- 
 tions, and degrees. The Committee on Finance considered various 
 plans of making a discrimination between banks of large capital, and 
 therefore la^e circulation, and banks of a small capital and small cii- 
 culation. We found we could apply no such rule which would be just 
 or equitable. If by this withdrawal you take from a bank having 
 $50,000 circulation only three or four thousand dollars it would be 
 easier for that bank to withdraw that amount than for a bank with 
 $500,000 to withdraw $50,000. There is no reason why the same rule 
 should not apply to one as to the other. I prefer to see whatever rule 
 is adopted applied equally to all banks without regard to their capital 
 or their circulation. 
 
 The second amendment suggested by the Senator from Vermont 
 proposes to introduce as an element into this computation the former 
 State banli circulation in cities. The effect of that undoubtedly woidd 
 be to- withdraw more from the city of New York than would be done 
 otherwise, because New York under the present system has largely 
 increased its circulation. But sucli a rule as this is not of universal 
 application, because in Illinois they had no State bank circulation when 
 the national currency act went into effect. It so happened that in 1857 
 all their banks broke up and they had no State banks, and other States 
 had none. Therefore the rule proposed would be a rule applicable 
 only to the condition of things in New York City and other lai'ge cit- 
 
NATIONAL BANKS. 211 
 
 ies. I do not see any object in changing or varying the rule, or refer- 
 ring to the state of the banking circulation before the national bank 
 act took effect. It is better, in my iudgment, to adopt a rule and apply 
 it to all cases, all banks, and all sections alike. The Senator, no doubt, 
 can give some reason why a bank with a small circulation, doing a 
 small business in a country neighborhood, ought not to be affected by 
 the rule, but after all, when you come to apply it, I can not see any 
 weight in it. 
 
 I am asked by what right we take from the State of Massachusetts 
 $13,000,000 of its circulation. It is a fair question and I will give it a 
 fair answer ; but in order to do so it is necessary for me to refer to one 
 or two well-established facts known to the public records of the coun- 
 try. I hold in my hand the last report of the Comptroller of the Cur- 
 rency, from which it appears that the amount of circulation of national 
 banks in the State of Rhode Island, having between two and three 
 hundred thousand inhabitants, is $12,491,480, and. the circulation in 
 Massachusetts is almost the same in proportion to its population. There 
 are in thirteen States of the Union about ten million people, and in 
 those thirteen States the amount of circulation is $5,851,000. The cir- 
 culation of all the "Western and Southern States combined, including 
 Ohio, is less than the combined circulation of Massachusetts and Khode 
 Island. Why is this ? Is it because the South and West have no need 
 of banking capital, no occasion for banking facilities, no business, no 
 enterprise, no industry, nothing to demand banking circulation ? Not 
 at aU. It is simply because an iron rule of law, passed during the civil 
 war, prevents the South and West from having that which these States 
 enjoy. Now, the question is : Will you relax that rule ; wiU you allow 
 this standing evil, this standing complaint made in every household in 
 the West and South, to remain without any attempt to correct it, or 
 will you try to apply a remedy ? How shall it be corrected ? You may 
 enlarge the limit of circulation. Would the Senator from Massachu- 
 setts vote for a proposition to enlarge the present limit of $300,000,000 
 before the resumption of specie payments ? Two or three years ago 
 the Committee on Finance reported a proposition to add to the amount 
 of circulation $20,000,000. Simply to avoid the difficulty of withdraw- 
 ing any portion of the then existing circulation it was thought better 
 to remove this inequality, to some extent at least, by adding to the 
 amount of circulation. After a long debate it passed the Senate, but 
 was defeated in the House of Eepresentatives, and so that measure 
 failed. 
 
 What then ? It is proposed to withdraw the greenbacks on which 
 the people of the United States are paying no interest, and issue bank 
 circulation in their stead before specie payments are resumed. We 
 know that such a proposition, although very plausible on its face, can 
 not be adopted. How can we withdraw $50,000,000 of notes that are 
 now outstanding? Have you a surplus revenue with which to pay 
 them ? Not at aU. There is no pretense of that kind. Will you con- 
 tract your currency now at a time when we have contracted it two or 
 three hundred million dollars ? or wiU you issue bonds and thus in- 
 crease the permanent funded debt of the country in order to settle 
 
212 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 this question of the distribution of circulation ? What kind of bonds 
 ■will you issue ? "What rate of interest will you pay ? Will you tax 
 the bonds ? 
 
 The proposition of the Senator from Massachusetts brings into this 
 debate all these difficult questions — questions that I pressed last winter 
 upon the Senate time and time again, and utterly failed to secure 
 attention because there was a disposition everywhere to delay the mat- 
 ter. The Senate did not want to consider and decide these questions ; 
 and yet it is now proposed to bring them all up and attach them as an 
 amendment to this bill. Here is a proposition to withdraw greenbacks 
 and issue more bonds without giving any authority to issue the bonds, 
 without declaring the kind of bonds, without fixing any of the details 
 that are necessary. Such a proposition is only one of those riders very 
 commonly attempted to be put on a bill as a means of defeating it. 
 
 When you propose to reduce the volume of greenbacks and add to 
 the burdens of interest of this country at this time, you do introduce a 
 question that affects all of us alike, and I say that whenever we fund 
 the greenbacks it must not be for the purpose of giving bank circular 
 tion ; it must be for reducing our cuiTency so as to get back to specie 
 payments. The question of the reduction of the greenbacks is a ques- 
 tion of public policy. This is simply a question of equality among the 
 States, of a fair distribution of the banking circulation. 
 
 Is it right and fair to withdraw from Massachusetts, Connecticut, 
 and Ehode Island a portion of their circulation ? I say it is right. 
 They are now, on account of the peculiar circumstance that surrounded 
 them during the war, enjoying a legal privilege under an act of Con- 
 
 f;ress that is denied to the Southern and the Western States. They 
 lave a circulation out of proportion to their population, out of propor- 
 tion to their business and their resources — a circulation that is a source 
 of profit not only to individuals but to States. 
 
 Now, my friend from Ehode Island and my friend from Massachu- 
 setts say that an increase of circulation is no advantage to the South ; 
 that if these banks were to move there they would do the South no 
 
 food. If they would do them no great good they would contribute 
 y taxation to help pay the expenses of the Southern States, and we 
 know very weU that local banks furnish great facilities for business to 
 the districts where they are located. It would be impossible to locate 
 any one of the New England banks in a Southern city without con- 
 tributing largely to that city by the amount of business and the facili- 
 ties therefor which it would afford, and also to the State in taxes as 
 well as business facilities. But if it is of so little advantage to the 
 South to have these banks, what is the objection to allowing them to 
 go there ? There can be none whatever. 
 
 It seems to me that it is right — to respond to the qiiestion put to 
 me — it is fair, it is .just to withdraw circulation from tlie States that 
 have an excess ; and I assure my friend from Massachusetts that if 
 Ohio was in the same prodicanumt, or if by any fair and just rale of 
 withdrawing bank circulation a ^lortion of it might be withdrawn from 
 the State of Ohio, I would vote lor tlie witlidrawal with great pleasure, 
 because it is not for the interest of any State in this republic to enjoy an 
 
NATIONAL BANKS. 213 
 
 advantage in legal privileges over any other State. If its industry is 
 superior, if its climate is better, if its soil is richer, those are the gifts 
 of God ; but no State has a right to enjoy a privilege by law which is 
 not conferred upon another, and no State and no individual in a State 
 has a right to enjoy any privilege conferred by law that is not fairly 
 and equally shared by every other citizen and every other State. It is 
 because the New England States in this distribution of banking cur- 
 rency have an advantage, that it is right, it is just, and it is proper to 
 make a partial redistribution. I do not wish to disturb the business re- 
 lations of those States. I think it would be wrong to do it, and I have 
 frequently publicly and privately begged Senators not to make this 
 withdrawal more than is absolutely necessary to secure some reasonable 
 banking facilities in the South. I should dislike very much indeed to 
 see the amount of withdrawal so large as to impair or derange the 
 business of l^ew England, because I know that our country is so inter- 
 linked and bound together that everything that affects the interests of 
 that section wiU affect the interests of the South. I would only pro- 
 pose this as a temporary measure to meet a temporary exigency until 
 we can have the resumption of specie payments and can provide a free 
 banking system. 
 
 But pending the present anomalous state of affairs we are bound at 
 least to render reasonable facilities to the South by some kind of bank 
 circulation. If it is proposed to go back to specie payments, they can 
 not be reached in a day or a month or a year. I am as willing to adopt 
 measures to that end as any Senator ; and resumption of specie pay- 
 ments will settle aU these questions ; but meanwhile it is only fair and 
 right that this accidental advantage in the distribution of the banking 
 capital should be removed to a reasonable extent. 
 
 I ought to say that this act does not affect my constituents in the 
 least. Although the State of Ohio has somewhat less than its fair pro- 
 portion of banking circulation, I do not know of any application, cer- 
 tainly none that I would heed, from that State for more circulation. 
 This bill wiU not either take from or add to its circulation. I there- 
 fore feel that in pressing this act of partial justice, even though it may 
 be an inconvenience to our friends in the Isew England States, we are 
 doing what is right and proper, and that we should not in doing it 
 open up the question of the increase of the banking circulation in any 
 way whatever. With my present convictions, I never will vote for the 
 increase of the circulation of the national banks until we get back to 
 specie payments, and then, in my jiidgment, the amount now outstand- 
 ing is amply sufficient for all the purposes of this country. Before the 
 war the whole bank circulation was only $168,000,000 ; now it is $300,- 
 000,000 ; and certainly I would vote for no proposition to increase in 
 any form the paper money, either greenbacks or national-bank notes, 
 until we get back to the standard of gold and silver coin. 
 
 A proposition to increase the national-bank notes and decrease the 
 greenbacks, attached to this bill, will not meet the sanction of Con- 
 gress, and will defeat the entire bill. The only effect of that proposi- 
 tion, should it become a law, would be to add to our national burdens 
 the.interest on $50,000,000 of new bonds, merely to secure a more just 
 
E 
 
 214 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 distribution of banking circulation; while if the bill as it stands is 
 passed, the effect will be to give to the South and a few of the new 
 States of the "West in the next year an opportunity to get a little bank- 
 ing circulation, and to give to banks in the old States an opportunity to 
 move themselves bodily to the South, and this will relieve a political 
 and sectional complaint that is founded in substantial justice. 
 
 One or two observations have been made to which I wish briefly to 
 reply. One is that this is a ease of extreme hardship and violation of 
 faith. In my judgment, according to the law the apportionment to 
 these States of the large amount they have is in violation of law, and 
 is a ease of great hardship. "What is the case ? Allot to Massachusetts, 
 Connecticut, and Khode Island twice their proper proportion of this 
 banking circulation, give that to them on account of their manufactur- 
 ing business, and they stiU have $59,5T3,837 more than their share 
 under, existing laws. We propose to take $20,000,000 of that, and dis- 
 tribute it among those States that have not any. That is the whole 
 proposition. 
 
 But it is said that they have the pledge of the public faith, that 
 they acted in accordance with law, upon our invitation, and got this 
 >roportion of circulation, and now it is not fair for us to withdraw it. 
 f that argument were true in point of fact it would have some weight 
 in equity, not in law, because the law expressly provides that the act 
 itself may be repealed, changed, or modifaed at the pleasure of Con- 
 gress. Ii in pursuance of our policy persons had entered into this 
 banking business and got more than their proportion of circulation, it 
 would not be exactly fair to withdraw it. But, sir, this is in violation 
 of law, and it is only necessary for me to recite certain well-known facts 
 to show it. 
 
 By the original banking act, passed February 25, 1863, an appor- 
 tionment of circulation was provided by which one half was to be di- 
 vided according to population and the other half according to resources. 
 Massachusetts, Connecticut, and Rhode Island — ^f or those are the only 
 three States affected — -got their full proportion under that law, every 
 doUar of it ; and the State of New "Y ork also got its proportion. It 
 was found that the limit of $300,000,000 prevented some of the State 
 banks from coming into the system, and in June, 4864, an act was 
 passed to allow State banks, without regard to the limitation, to come 
 into the system. Under the operation of that law, from June, 1864, 
 to March, 1866, certain banks in the States of Massachusetts, Connecti- 
 cut, Rhode Island, and New York came in, thus exceeding the propor- 
 tion allotted to them by the law ; but they had not very far exceeded 
 the proportion up to March, 1865. They had in no case gone over 
 thirty dollars an inhabitant, because the banks were slow. 
 
 lam asked how did it happen that the law was violated and there 
 was so much of an excess. I will explain in a moment. On the 3d of 
 March, 1865, Congress passed a law which, after making certain other 
 provisions, reads as follows : 
 
 And that $150,000,000 of tho entire amount of oironlating notes anthorized to be 
 issued shall be apportioned to associations in tlie States, in the" District of Columbia, 
 and in thu TerritorioH, according to representative popuhition, and the remainder 
 
NATIONAL BANKS. 215 
 
 shall be apportioned by the Secretary of the Treasury among associations formed in 
 the several States, in the District of Columbia, and in the Territories, having due 
 regard to the existing banking capital, resources, and business of such States, Dis- 
 trict, and Territories. 
 
 This section restored the old provision of apportionment and re- 
 pealed the act of June, 1864, which authorized existing banks to go 
 beyond the limit of $300,000,000. It has never been dianged, modi- 
 fied, or altered, except as I shall hereafter show. 
 
 Unfortunately, alter this section had passed, as I supposed, into a 
 law, although it was not finally approved until the 3d of March, 1865, 
 an amendment was attached to an internal revenue bill which became 
 law on the same day (March 3, 1865), in words as follows : 
 
 That any existing bank organized under the laws of any State, having a paid-up 
 capital of not less than $75,000, which shall apply»before the 1st day of July next 
 for authority to become a national bank, under 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, and shall comply 
 with all the requirements of said act, shall, if such bank be found by the OomptroUer 
 of the Currency to be in good standing and credit, receive such authority in prefer- 
 ence to new associations applying for the same. 
 
 Now, one construction of this amendment would seem to be that if, 
 in the State of Rhode Island, any portion of their share under existing 
 law remained to be distributed, it should be given to an old bank rather 
 than to a new bank. The amendment did not change the rule of ap- 
 portionment. It said nothing about it except who was to get the allot- 
 ment, and that the old banks should have the preference therein ; and 
 in the State of New York the thing actually existed ; the old banks 
 and the new banks were coming in, and this provision was intended to 
 give the old banks the preference. But the Comptroller of the Cur- 
 rency, as I think in violation of law, construed the amendment as a 
 repeal of the section first mentibned, and disregarding that section en- 
 tirely allowed the old banks to come in. 
 
 Let me say that up to the close of the war there was no very great 
 inequality of circulation. Up to that time the banks of Massachusetts 
 had not come into this system to the extent that they afterward did ; 
 but availing themselves of this privilege after the war was over, when 
 everybody saw that it was a great advantage to have national banking 
 circulation, when the difficulties had passed away, adopting the con- 
 struction of the Comptroller of the Currency, they rushed in and got 
 this enormous aggregate of circulation. So that, upon what I conceive 
 to be an erroneous construction of the law, they now claim to hold an 
 unfair advantage of the rest of the people of the United States. 
 
 In the apphcation of a general rule like this for withdrawing circu- 
 lation, I have no doubt there will be some inconvenience, perhaps some 
 injustice. I certainly do not desire to injure any banks or any citizen 
 of those States. But now, when we are compelled to do what is right, 
 is it not just that we should give some circulation to the States that 
 have none, even if we have to withdraw that which is held, I think 
 without law, in other States ? 
 
 Mr. President, the question after all comes down to this — ^for I do 
 
216 SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 not think we ought to bring into this debate the subject of funding the 
 debt — shall there be a redistribution of banking circulation ? 
 
 We were very careful in touching this question not to do anything 
 that was harsh or injurious. It would be only even-handed justice to 
 withdraw from these States in excess under a general rule tne whole 
 160,000,000. I have not proposed and do not intend to propose such a 
 thing, because a general interference with the business of the people 
 of those States to the extent of enforcing a fair and equal rule would 
 work injury to them and work injury to the whole country; but, in 
 my judgment, the transfer of a reasonable amount of this circulation, 
 while it may give local advantages to the Southern States, would not 
 materially injure the business of these older States. At any rate, it is 
 just and fair, and, as I said yesterday, if my own State were in excess 
 I should still feel disposed fo vote for the withdrawal. 
 
 . All that there is in this bill, and all that is proposed by this biU, is 
 to secure a partial redistribution of the banking circulation until we 
 can adopt some permanent financial measure looking to free banking 
 and . specie payments. It is temporary in its character ; and I must 
 confess that the great objection I have to this measure is that it is tem- 
 porary in its character. I would not press this bill now to secure this 
 partial justice to the Southern States but for the fact that the bill re- 
 ported from the Committee on Finance, or some bill of that kind look- 
 ing toward specie payments and free banking, would not be adopted 
 during the present session of Congress. The redistribution of f20,- 
 000,000 of circulation will give temporary relief, will probably be all 
 that can be absorbed in those States for the next year or so, and, in my 
 judgment, wiU not do any considerable injury to the people of tlie 
 States whose currency will be decreased. 
 
 I hope, without any further prolonged debate — and I beg pardon 
 for occupying so much time now in replying to the observations that 
 have been made this morning — ^that we may have a vote on this bill 
 and get it out of the road. 
 
 THE CUKEENCY. 
 
 IN THE SENATE, JANUARY U, 1870. 
 
 The regular order being the bill to provide a national currency of coin notes and 
 to equalize the distribution of circulating notes, Mr. Sherman said : 
 
 Me. Peesident : I do not propose in opening tlie debate on this bill 
 to make any elaborate financial speech. What I desire to say will be 
 addressed solely to the Senate, and bear entirely upon the points pre- 
 sented by_ this bill. The bill proposes to deal with two questions : first 
 the equailization of the national currency, and second the establishment 
 of banks to issue coin notes ; and these two propositions are the only 
 Hubjects on which I shall sa;^ anything. I shall speak as briefly as pos- 
 sible, and present the questions involved as clearly as I can, so as to 
 
THE OUEEENCy. 217 
 
 confine the debate, if possible, to these two questions. There are a 
 OTeat multitude of financial questions now agitating the public mind 
 that are somewhat connected with these two. The enlargement of the 
 discussion by introducing them would, I think, rather obscure the ar- 
 gument than make it plain. 
 
 The first two sections of this bill provide for a partial equalization 
 of the bank circulation of the United States. The present circulation 
 is distributed with such gross inequality as to be revolting to the sense 
 of justice. Three States whose people are among the most enterprising 
 and active of our countrymen, containing a population of 1,865,833, or 
 one fifteenth of the population of the United States, have an aggregate 
 circulation amounting to $96,890,4:98. These States are Massachusetts, 
 Khode Island, and Connecticut. With a population of less than two 
 millions, they have one third of the whole national circulation, so that 
 one fifteenth of the population absorbs and monopolizes one third of 
 the national circulation. The Southern States, with a population of 
 about eleven millions, have scarcely any circulation, perhaps a few 
 millions. I have here the tables in detail, but I can not give the aggre- 
 gate. It is probably not one fourth as much as the State of MassaSiu- 
 setts alone. The Western States, all of them rapidly growing com- 
 munities, with cities and towns and business springing up with amaz- 
 ing rapidity, some of them formed into States within a few years, have 
 practically no circulation. The Pacific coast is practically excluded 
 from our banking system, simply because there coin alone is used in 
 circulation and our currency is sold at a discount. 
 
 Thus the present system, which ought to be a national one equally 
 and fairly diffused through the United States, is confined in its bene- 
 ficial effects to the Eastern and mainly to the New England States. 
 This gross and palpable injustice has grown out of a violation of law by 
 the Comptroller of the Currency and the Secretary of the Treasury. 
 This fact I stated at the last session, and I wish now to call the atten- 
 tion of the Senate distinctly to the law under which this grossly un- 
 equal distribution was made. The first national bank act contained a 
 provision for the (iistribution of the banking circulation. The act of 
 February 25, 1863, contained this clause : 
 
 That the entire amount of circulating notea to be issued under this act shall not 
 exceed $300,000,000, $150,000,000 of which sum shall he apportioned to associations 
 in the States, in the District of Columbia, and in the Territories, according to repre- 
 sentative population ; and the remainder shall be. apportioned by the Secretary of 
 the Treasury among associations formed in the several States, in the District of Co- 
 lumbia, and in the Territories, having due regard to the existing banking capital, re- 
 sources, and business of such States, District, and Territories. 
 
 Under this act each State would have been entitled to a little more 
 than five dollars for each inhabitant, according to the census of 1860, 
 out of the first $150,000,000, and then the other $150,000,000 should 
 have been distributed according to business, capital, and resources. 
 The Eastern States, being much wealthier than the Southern and West- 
 em, as a matter of course would have received much the larger portion of 
 the last $150,000,000 ; but under the other provisions of this act each 
 State would have at least five dollars for each inhabitant. The revised 
 
218 SPEECHES AND REPORTS OF JOHlir SHERMAN. 
 
 banking act of June 3, 1864, omitted this provision for a distribution, 
 for the reason that the old State banks and new banks formed under 
 the national banking system very slowly. The disposition was to en- 
 courage the old banks to form under the new banking system as rapidly 
 as they could. Section forty-four of that, revised act contained this 
 provision : 
 
 That any bank incorporated by special law, or any banking institution organized 
 under a general law of any State, may, by authority of this act, become a national 
 association under its provisions, by the name prescribed in its organization cer- 
 tifloate. 
 
 This gave to each existing bank, without regard to the rule of dis- 
 tribution, the right to organize under the national banking system. It 
 was supposed that when this act took effect these banks would rapidly 
 go into the new system, but that the amount of $300,000,000 would 
 stiU be amply sufficient to secure to each State its proper proportion. 
 So matters went on. In the fall of 1864 the old banks were rapidly 
 going into the new system. Then it was found necessary to reenact 
 the old provision requiring a distribution. After a considerable debate 
 in the Senate, in the session of 1864-'65, Congress by an amendment 
 to the national banking act restored in the same words the old provision 
 of the act of 1862. I wiU read it again. By the act approved March 
 3, 1865, it was provided : 
 
 And that $160,000,000 of the entire amount of circulating notes authorized to 
 be issued shall be apportioned to associations in the States, in the District of Colum- 
 bia, and in the Territories, according to representative population, and the remainder 
 shall be apportioned by the Secretary of the Treasury among associations formed in 
 the respective States, in the District of Columbia, and in the Territories, having 
 due regard to the existing banking capital, resources, and business of such State, 
 District, and Territory. 
 
 According to the last report before that time there was only $65,- 
 000,000 of circulation outstanding, so that this old provision or banier 
 against unequal distribution was restored to the law long before there 
 was any large amount in circulation. The amount outstanding on the 
 1st of October, 1864, according to the official statement, which I have 
 in my hand, was $65,864,650. 
 
 When the war closed, and as the credit of the country revived, 
 banks were rapidly organized under the national banking system. 
 Then it was that this privilege, which for a long time had gone a-beg- 
 ging, was eagerly sought for by old and new banking associations; 
 and as the capital of the country was accumulated mainly in the older 
 States, immediately after the war was over there was a great rush to 
 organize national banks there. The Comptroller of me Currency 
 utterly disregarded the law that I have read, and authorized banks to 
 be formed without any reference whatever to that rule of distribiition. 
 He did not even, refer to such a law in his next report. JSTow he justi- 
 fies himself by a provision of an act passed on the same day, the 3d of 
 March, 1865, an amendment made to an internal revenue act, thrust 
 into a place where it did not belong, and offered and adopted with 
 scarcely any consideration, in the last hours of the session. It is a 
 striking evidence of the eiJects of tacking legislation on appropriation 
 
THE OUEEENCY. 219 
 
 and otlier bills during the last hours of a session. Under that amend- 
 ment the Comptroller sought to excuse or justify his disregard of the 
 provision passed after debate! on the same day. I will read that amend- 
 ment. It was inserted on motion of the Senator -from Ehode Island 
 [Mr. Anthony], I think at midnight, or at a very late hour : 
 
 That any existing bank organized under the laws of any State, having a paid-up 
 capital of not less than $75,000, which shall apply before the 1st day of July next, 
 shall have authority to become a national hank under the act entitled " An act to 
 provide a national currency secured by a pledge of United States bonds, and to pro- 
 vide for the circulation and redemption thereof," approved June 3, 1864, and shall 
 comply with all the requirements of said act, shall, if such bank be found by the 
 Comptroller of the Currency to be in good standing and credit, receive such au- 
 thority in preference to new associations applying for the same. 
 
 That is, it continued the old privilege in favor of the old banks up to 
 the 1st of July then following. Now, it seems to me that an execu- 
 tive officer, in construing these two laws together, both being of the 
 same date, would give effect to both. He would naturally say that the 
 distribution would be made under the act of March 3, 1865, first read 
 by me, and then that in availing themselves of that distribution the 
 existing banks within the State might under the second act I read have 
 the priority within the limits assigned to that State under the distribu- 
 tion. That was undoubtedly the true construction of the acts; but 
 even this limited operation of the amendment of Mr. Anthony expires 
 on the 1st of July, 1865 ; and yet on that day the whole amount of 
 banking circulation was less than one hundred and fifty million dollars ; 
 and the other $150,000,000 was issued in plain disregard of law, with- 
 out any pretense of justification, and that has created all this difficulty. 
 
 I have in my hand the report of the Comptroller of the Currency, 
 showing that on the 1st of October, 1865, three months after this priv- 
 ilege had exhausted itself, the whole amount of circulation then out- 
 standing was $190,847,055, leaving $110,000,000 yet to be distributed ; 
 and yet this $110,000,000 was issued to banks in the old States, not 
 only in violation of the act of March 3, 1865, which I have read, but 
 in violation of the act under pretense of which it was done. That act 
 expired by its own limitation on the 1st of July preceding. I call at- 
 tention to this matter simply to show that this whole difficulty grew 
 out of a disregard of the law ; .that it was not the defect of the law, 
 but a violation of the law. 
 
 'Now, Mr. President, this unequal distribution creates an iron mo- 
 nopoly, which is the'source of sectional complaint in this country, and 
 which, as sure as fate, will overthrow this system of banking unless it 
 is corrected in some way. You can not maintain in this country a sys- 
 tem which is bound within limits beyond which it can not go ; a system 
 which is now regarded as a profitable privilege, the chief benefits of 
 which have been absorbed by a single section of the country. When 
 you add the fact that this unequal distribution was brought about by a 
 plain and palpable violation of law, you have a case of injustice that 
 will not be submitted to. It will be overthrown even if the whole sys- 
 tem mufet be overthrown. From the very time this inequality was 
 ascertained, at the very next session of Congress, bills were introduced 
 
220 gPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 both in the Senate and in the House to provide for a redistribution of 
 the currency. Complaints were made Ijhat the new States, where 
 credit is needed, where money is needed, where more than anywhere 
 else the convenience of banking is necessary, were utterly excluded ; 
 that they were allowed no banks, no means of borrowing ; while the 
 older States, where credit was less needed, where capital had been 
 accumulated by ages of labor, had a superfluity of circulation. Then 
 it was that in the West there arose a great cry for more currency. 
 Every Western State demanded of its Kepresentatives and Senators 
 more currency, while the Eastern States, who had a surplus of it under 
 the law and under the distribution, rather demanded contraction. Yet 
 when the Western States called on the Eastern States to render a por- 
 tion of this circulation, difficulties occurred. They then claimed that 
 these banks had vested rights ; that they had received the circulation 
 in good faith, in accordance with law ; that it would be wrong to take 
 it away from them ; that it would derange their business, call in debts 
 and loans, and would be very embarrassing. 
 
 So strong was the necessity felt of equalizing this distribution that 
 during the last Congress both Houses passed biUs withdrawing from 
 the New England States their excess of circulation and distributing it 
 among the Western and Southern States ; but the Senate and House 
 differed as to the extent and manner of the redistribution. The House 
 demanded a general revision and tearing up, you may say y- of the old 
 banking institutions in the Eastern States and the distribution of that 
 circulation in the West. The House bill was so general in its charac- 
 ter that I felt the force of the argument of the Senators who opposed 
 it, that it would derange business so as to do more harm to the inter- 
 ests of the whole country than good to the Western States. In the 
 Senate we proposed to limit the redistribution to twenty, thirty, or forty 
 million dollars, and to that extent we did provide for it ; but the dif- 
 ference between the two Houses caused both propositions to fail, and 
 now the circulation continues unequally distributed as before. 
 
 The question now is, what remedy ought to be provided ? There 
 are but two. The first is to carry out the plan, proposed at the last 
 Congress, to recall from the banlts in the Eastern States their excess of 
 circulation and distribute it to the West and South, maintaining the 
 limit of $300,000,000 of national bank circulation. The objection to 
 that has already been stated by me, and will no doubt be made by 
 others if the debate should go so far, that it would derange business 
 more in the East that it would help the West and South ; that although 
 the officers of the Government may have done wrong, jet, as these 
 banks have a kind of vested right m the privilege granted to them 
 for a certain length of time, it would be hard to take it away from 
 them. That argument was felt here in the Senate, and I presume 
 will now prevent anything like a general redistribution of the national 
 banking circulation. 
 
 The only other way is to increase the limit of banking|^circulation. 
 It is now limited to $300,000,000. The Committee on Einance pro- 
 posed to raise the limit to $345,000,000 and allow this increase of $45,- 
 000,000 to be distributed in the West and South. Here at once objec- 
 
THE CURRENCY. 221 
 
 tion is made that this is an inflation of the currency. For one I 
 must say that, with my views of what is best for the public interests, I 
 can not support any measure, pending the present condition of affairs 
 and the suspension of specie payments, that will increase the volume of 
 paper currency in this country, until we get down to the solid basis of 
 gold and silver coin. And yet at the same time I see the vital necessity 
 of repairing this unequal distribution of banking circulation. We must 
 do that or else be prepared to see the whole system of national banking 
 overthrown and replaced by the old system ol State banks. 
 
 The national banking system is infinitely preferable to any State 
 banking system. I do not think any intelligent man who examines this 
 question will hesitate on that point. The old State banks were gov- 
 erned by a diversity of laws ; they were bound in a diversity of securi- 
 ties, and in many cases without any. The notes were as multifarious 
 in form, color, and dies as the skill of bank-note-engi-avers could make 
 them. Under the national system we have absolute security to the bill- 
 holder. We have uniformity in the notes. There are but a few forms 
 of notes, so that any plain man carrying on the ordinary business of life 
 can teU whether a note is good or not. They are all printed with the 
 g-eatest care by the Government. The Government is the guarantor. 
 The Government holds in its hands absolute security for their redemp- 
 tion. They are a uniform currency, floating all over the United States, 
 as good in one place as another ; while under the State banking system 
 the notes were good only within the limits of the State. The national 
 banking system is much better, much more secure, but at the same 
 time it can not be maintained as a sectional monopoly. This is the 
 fatal weakness of the system, which if removed would leave us the 
 best paper currency yet devised.' 
 
 JNow, Mr. President, in order to avoid any expansion of the cur- 
 rency there were two courses open to the Committee on Finance, and 
 on this there was some difference of opinion. One was as the new 
 bank notes were issued to withdraw the United States notes, or, as they 
 are commonly called, the greenbacks. This proposition, even if it 
 should receive the assent of the Senate, would probably not receive 
 that of the House. The greenbacks are a great favorite of the people. 
 They were the agency and means by which our country was carried 
 through the war. They are a convenient form of currency. During 
 the suspen^on of specie payments they are the best form of currency. 
 Any contraction of the amount of greenbacks, except as a means of ap- 
 proaching specie payments, would be met by a strong popular opposi- 
 tion. Even if our reason should convince us that it is wiser and better 
 to withdraw them, in order to give place to national-bank notes and 
 gold and silver coin, the opinions of our constituents would prevent us 
 from doing it. 
 
 This feeling is the great obstacle to specie payments. If we should 
 attempt it, it will cause a contraction of the currency more severe and 
 stringent than any we have yet felt. Heretofore any contraction that 
 has gone on has been made good by some other form of circulation. 
 We have already retired flf ty or sixty million dollars of greenbacks, 
 but during that process we issued over one hundred million dollars of 
 
222 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 national-bank notes. If now the process of contraction should go on, 
 if we should withdraw greenbacks merely to equalize the distribution 
 of bank circulation, we should create a stringency in the money market 
 and prevent the formation of new banks, leaving the present distribu- 
 tion a festering sore of sectional irritation. The payment of the ^een- 
 backs or the funding of them into bonds should be treated as a distinct 
 measure of financial policy — as a measure of resumption, and not at all 
 as a means of distributing bank circulation. But this is a subject that 
 is scarcely worth discussing now, because in view of the general senti- 
 ment in all parts of our country a retirement now of greenbacks to 
 give way to national-bank notes would not receive the approval of our 
 constituents, and no financial measure ought to pass Congress unless it 
 receives the assent of the substantial people of the country. 
 
 The only alternative, then, was the withdrawal of what are called 
 the three per cent, certificates. These certificates are a demand loan 
 by the United States, payable in greenbacks on demand or after ten 
 days' notice. They draw three per cent, interest. They are held by 
 the banks as a portion of their reserve in the place of greenbacks. They 
 are, therefore, the most dangerous form of Government indebtedness, 
 because we are liable to be called for the amount of them at a time 
 when it is most inconvenient to pay them. We are liable to be called 
 upon to pay them in the midst of a panic. As we apraoach specie pay- 
 ments we may be called upon to pay them in coin. They were issued 
 only under the pressure of necessity. Senators around me wiU remem- 
 ber very well their history. The banks held a large amount of matur- 
 ing compound-interest notes. Those were in the nature of currency, 
 and were presented for payment as they became due. The Secretary 
 of the Treasury had no means to pay them except by issuing a new 
 form of certificates or more bonds. He did not desire to increase the 
 bonded debt of the United States, and therefore called upon Congress 
 to authorize him to issue these temporary loan certificates. The only 
 reason why they were taken at all, bearing as they did so low a rate of 
 interest as three per cent., was because we gave the banks who hold 
 them the privilege of counting them as a part of their reserve. They 
 may at any time by a contraction of the currency be forced out of the 
 banks upon the Treasury for payment. This form of indebtedness 
 ought to be paid off as rapidly as possible. 
 
 But the payment of these three per cent, certificates operates as a 
 contraction of the currency. As they are paid ofiE and retired their 
 place must be supplied by the same amount of greenbacks in the vaults 
 of the banks. They are in every essential particular except actual cir- 
 culation among the people a currency precisely to the same extent as 
 the United States notes. The very moment they are paid oft' their 
 place must be supplied bv United States notes. If they are presented 
 for payment they must be paid in United States notes or coin. The 
 bill therefore proposes to retire $45,000,000 of three per cent, certifi- 
 cates, all that are now outstanding, as these new bank notes are issued. 
 
 Under tlie first and second sections of the bill, therefore, $45,000,- 
 000 of circulating notes will bo apj)ortioned among the several States, 
 in accordance with existing law, mainly to the people of the South, and 
 
THE OUEEENOY. 
 
 223 
 
 as the banks are organized from month to month the Secretary of the 
 Treasury is required to pay ofE the three per cent, certificates. 
 
 Each Senator will be interested in the question how much his own 
 State will get of this $45,000,000, and Senators have inquired of me 
 how it will be divided. There has been some criticism as to whether 
 or not the terms of the bill were clear and specific enough to secure a 
 distribution according to existing law ; and I have, therefore, caused to 
 be prepared by the Comptroller of the Currency a statement showing 
 what States will receive this $45,000,000. In answer to a communica- 
 tion of mine the Comptroller of the Currency says : 
 
 TrEASTJET DEPAKTMElfT, 
 , OFriOE OE COMPTEOLLEB OF THE CtIKKENOT, 
 
 Washingtoit, D. C, January 20, 1870. 
 
 See : I have the honor to acknowledge the receipt of your communication of the 
 17th instant, and to state in reply that my construction of the last clause of section 
 one of a hill to provide a national currency of coin notes, and to equalize the dis- 
 trihution of circulating notes (S. No. 378), is that those States having less than their 
 proportion according to population would he entitled to priority over other States 
 in the supply of hank circulation. 
 
 I inclose herewith a statement showing the amount to which each of the South- 
 ern States would he entitled under the apportionment of the first $150,000,000, the 
 amount which has already heen furnished to those States, and the amount neces- 
 sary to hring those States upon an equality under such apportionment with the 
 other States of the Union, from which you will observe that it will require $25,- 
 289,570 to supply the per ca/pita apportionment of those States, leaving something 
 over nineteen million dollars to be apportioned according to business, banking capi- 
 tal, resources, etc., or to be retained until a new apportionment can be made under 
 the census of 1870. 
 
 If it should seem proper to the committee to direct which of these courses should 
 be pursued, I shall, of course, acquiesce in their judgment. 
 
 Very respectfully, 
 
 H. E. HULBUED, Oomptroller. 
 Hon. John Sheeman, Chairman Finance Committee United States Senate. 
 
 Statement slmwing tlie amount of circulation to which each of the Southern States would he 
 the ajyporlionment of the first $160,000,000, iAe amount which has already 
 'i and the amount necessary to bring these States upon an eqvMity with the 
 
 other States. 
 
 STATES. 
 
 Virginia and West Virginia. , 
 
 Missouri 
 
 Kentucky 
 
 Tennessee 
 
 Louisiana 
 
 Mississippi , 
 
 Georgia 
 
 North Carolina 
 
 South Carolina 
 
 Alabama 
 
 Texas 
 
 Arkansas 
 
 Florida 
 
 Amount entl- 
 
 
 Amount 
 
 apportion- 
 ment. 
 
 received. 
 
 equalize. 
 
 $6,032,457 
 
 $4,129,600 
 
 $1,902,857 
 
 6,823,061 
 
 4,218,630 
 
 1,604,431 
 
 5,076,106 
 
 2,371,620 
 
 2,704,486 
 
 4,551,585 
 
 1,265,470 
 
 3,286,115 
 
 2,053,838 
 
 1,245,000 
 
 808,338 
 
 1,935,456 
 
 66,000 
 
 1,869,456 
 
 3,247,395 
 
 1,234,000 
 
 2,013,396 
 
 3,610,149 
 
 383,400 
 
 3,226,749 
 
 1,644,205 
 
 218,000 
 
 1,426,205 
 
 2,887,413 
 
 353,026 
 
 2,534,388 
 
 2,300,938 
 
 407,535 
 
 1,893,403 
 
 1,769,896 
 
 179,600 
 
 1,690,396 
 
 429,361 
 
 
 429,351 
 
 $41,361,350 
 
 $16,071,780 
 
 $26,289,570 
 
224 SPEECHES AND REPOETS OF JOHN SHEEMAN. 
 
 It appears from the statement that the Southern States, in order to 
 make up their share of the first $150,000,000, will receive $25,289,570. 
 That will leave $19,000,000 of this additional circulation to be dis- 
 tributed under the second clause of the apportionment ; that is, to the 
 States according to resources, banking circulation, etc., giving first to 
 those now having the least circulation. This will give to the Western and 
 Southern States, under the rule of apportionment provided by existing 
 law, some nineteen million dollars. Precisely tow much it will give to 
 each State would be difficult to tell at present, without a careful ex- 
 amination and comparison of their resources, business capital, etc. At 
 any rate, $25,289,570 of this amount would first be distributed to those 
 States having no circulation at all, or very little ; and the remaining 
 $20,000,000 would be distributed to the Southern and Western States. 
 
 This is all I desire to say in regard to the first branch of the bill. 
 The last three sections of the bill relate entirely to the coin notes. 
 The committee were of .the opinion that it was better in this biU to 
 establish a simple general rule by which associations might organize 
 under the banking system in any part of the country to issue coin 
 notes without any limitation as to circulation. The objection may be 
 made that advantage will not be taken of this privilege ; but we are 
 assured by the highest authorities that banks would at once be organ- 
 ized under this system in the States of California and Oregon, and in 
 the cities of New York, Charleston, and E"ew Orleans. No banks 
 would be organized upon a coin basis with authority to issue coin 
 notes unless coin or coin notes were in general circulation at the place 
 of location of the banks. As a matter of course, where the ordinary 
 circulation of the country is supplied by our national currency notes 
 or greenbacks, gold notes would not have a ready circulation ; but it is 
 to be remembered that the whole Pacific coast is now using gold and 
 silver coin, and is eager and anxious to avail itself of the benefit of 
 banking upon a gold basis. 
 
 We have assurances that banks will be organized at once under this 
 system on the Pacific coast, with a very large amount of circulation, 
 thus unlocking, if you please, a portion of the gold that must necessa- 
 rily be used now for the ordinary purposes of circulation. In the city 
 of New York there is now going on a commerce of more than six hun- 
 dred million dollars, all of which is conducted on the gold basis ; and 
 so great is the necessity for paper- money to represent this gold busi- 
 ness that those who transact it actually deposit $50,000,000 of gold coin 
 in the Treasury of the United States, and receive gold notes without 
 interest, merely to facilitate the ordinary transaction of this great com- 
 mercial business. I suppose the transactions between the first and 
 second dealers in New York based upon gold notes, upon gold, and 
 upon gold values, amount to more than one thousand million dollars 
 per annum. The speculative transactions upon gold and gold notes 
 nave in some cases amounted to three or four hundred million dollars 
 a day ; but those are mere representative operations that we do not re- 
 gard. The actual business transactions in gold now being carried on 
 in tlio city of New Yorlc represent an aggregate annual business of not 
 less than $1,000,000,000. The whole foreign commerce in the city of 
 
THE OUERENOY. 225 
 
 New York, exports and imports, is about six hundred million dollars ; 
 and allowing that merchandise exported and imported passes through 
 two hands before its value is quoted in our paper currency, the amount 
 of business transactions is probably more than one thousand million 
 dollars. 
 
 So in the cities of Charleston and New Orleans, where cotton is 
 measured by the gold standard, these coin notes can be very readily 
 used, and they will there be a very convenient agency of exchange for 
 marketing the great staple of cotton. These banks may be organized 
 in these places, and to the extent that they are organized they will fur- 
 nish to the people a safe currency based upon coin, payable in coin, 
 and having all the qualities required by the best national currency. 
 
 I take it, without extending my argument on this point — for I did 
 not intend to speak very long, biit merely to present these outlines — 
 that these coin notes when issued will present the four essential requi- 
 sites of a good currency : first, the absolute protection of the note-holder 
 by the United States ; second, the agency of private corporations or 
 banks to give flexibility to the currency, and to meet the ebb and flow 
 of exchanges ; third, its redemption in gold coin on demand ; fourth, 
 its freedom from monopoly or restrictions, except such as are necessary 
 to protect the creditors of the banks. 
 
 These are the only points that are essential for the consideration of 
 this bill. I might now mention a multitude of other topics that may 
 be drawn into this discussion which are now being considered by the 
 Committee on Finance. It seems to me this bill ought to be confined 
 to these two distinct propositions. If you attempt, for instance, to 
 regulate the character of the bonds that should be deposited as security 
 for the coin notes or the circulating notes, you trespass upon another 
 great domain, the funding system. Therefore we have provided for 
 the organization of these banks upon existing bonds ; and if any law 
 should hereafter be enacted requiring banks now in operation to buy 
 a new kind of bonds as the basis of their circulation, its provisions 
 would apply to them. 
 
 So there are a multitude of other questions that might be drawn 
 into this discussion. The question of a choice between greenbacks and 
 bank notes might be drawn into it ; but we have avoided any reference 
 to it because I believe the judgment of the country is gradually settling 
 down to the conviction that a note issued by a Government can not be 
 a proper agency of circulation. Other nations as well as our own have 
 often tried the experiment of maintaining a circulating note issued by 
 the Government, and they have uniformly found it to fail. It is im- 
 possible to give a currency issued by a Government the fiexibiKty ne- 
 cessary to meet the movement of the exchanges ; and therefore experi- 
 ence has shown that a note issued by a Government, and maintained 
 upon the guarantee of the Government alone, does not form a good 
 circulating medium except during a suspension of specie payments. 
 It must have a flexibility which will enable it to be increased in certain 
 periods of the year, and to flow back again into the vaults of the banks 
 at others. I am convinced, although it is unnecessary to discuss that 
 point here, that in time it will be wise to retire our United States notes 
 15 
 
226 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 aud all forms of Government circulation and depend upon notes issued 
 by private corporations, amply secured beyond peradventure, so that in 
 no case can the note-holder lose, and to subject the banks to regula- 
 tions applicable to all parts of the "country, making them free, so that 
 the business of banking will be like the business of manufacturing, 
 blacksmithing, or any other ordinary occupation or business of life, 
 governed only by general law. 
 
 I have thus, I trust, Mr. President, directed the attention of the 
 Senate to the points involved in this bill. I will not prolong the dis- 
 cussion any further, but will endeavor to answer such questions and 
 furnish such information as may be necessary to throw light on the 
 bill. I only beg of Senators not to encumber this bill, on which we 
 desire the action of the Senate, so that we may have it out of our way 
 in order to reach the much more difficult questions involved in the 
 funding biU and the various propositions that are now under considera- 
 tion by the Committee on Finance. 
 
 Mr. Sumner moved to do away with the whole bill, and had his substitute read, 
 when Mr. Sherman said : 
 
 I will state frankly to the Senate that the bill which is now pending 
 —not the amendment that is offered, because that is a funding bil^ 
 which subject is now under the consideration of the Committee on 
 Finance — is confined to two subjects. An increase of the banking 
 currency to the extent of $45,000,000, with authority to issue coin notes 
 to certain States, for it can only be in certain States, is a preliminary 
 measure, and the Committee on Finance are very anxious to have the 
 Senate act upon it before they proceed to the consideration of other 
 bills now pending. I hope the bill will not excite much debate. It 
 plainly, to a certam extent at least, so far as it goes, tends to relieve a 
 great inequality in the distribution of banking circulation. It does not 
 go so far as some Senators desire, but certainly it goes in the right di- 
 rection. It does not contract the currency, nor does it expand the cur- 
 rency, but leaves matters just as they are. 
 
 The amendment now offered by the Senator from Massachusetts in- 
 troduces a great variety of topics. The very proposition that he offers 
 as an amendment is before the Committee on Finance, ai\d is being 
 daily considered in connection with other measures of a similar chai"- 
 acter. It has no relation to the subject matter of the bill mider con- 
 sideration. The first section of his amendment, it is true, does relate 
 to the subject matter, and it is in the same line. He proposes to in- 
 crease the limit of banking circulation to $500,000,000 upon a retire- 
 ment of greenbacks. The committee have reported this bill to increase 
 the volunie of $45,000,000 upon the retirement of the three per cent. 
 certificates. If the Senator from Massachusetts is not content to take 
 the action of the committee and await the repoi't of the committee on 
 his bill, which is now being fairly and fully considered, and desires to 
 precipitate a general discussion upon the funding system, upon the sub- 
 stitution of bank notes for greenbacks, and upon the character of the 
 bonds to be the basis of our banking system, as a matter of course this 
 'liscussion will be very much prolonged. But I appeal to him, and I 
 
THE CUERENOY. 227 
 
 appeal to all the Senators around me, whether it is not better to pass 
 this bill in the form reported by the Committee on Finance, leaving all 
 the other questions which must necessarily come up to be provided for 
 in a bill to be hereafter reported, and soon to be reported, I trust, after 
 it has been fully and maturely considered, when every Senator will have 
 an opportunity to present his financial views in extenso. 
 
 The present bill does nothing in the world except to extend the 
 limit of the present bank circulation $45,000,000, for the benefit of 
 the Southern States mostly and partly for the benefit of the "Western 
 States, without changing any existing provision of law, and in order to 
 avoid the question of the expansion of the currency to retire $46,000,- 
 000 of three per cent, certificates. It ought not to open any general 
 discussion, and therefore I am very much surprised to hear a motion 
 made to postpone this biU and take up any other. I trust we may have 
 the action of the Senate on the pending proposition without its being 
 complicated with the great variety of matters which will necessarily 
 be involved in a financial discussion. If the Senate are disinclined to 
 pass this bill, let us have the benefit of that determination, and get it 
 out of the way entirely and forever, so that we may go on with the 
 consideration of other questions. 
 
 I have heard the discussion on both sides of the chamber, from 
 both parties, for three or four years, and I believe there is not a Senator 
 here of any party or of any section who does not concede that some 
 provision must be made for the redistribution of bank circulation at 
 this session. For the present we propose a partial remedy ; and the 
 plan suggested of retiring the three per cent, certificates now meets 
 the approval, I may say, of almost every branch of the Government. 
 The Secretary of the Treasury recommends it in his j-eport ; the Presi- 
 dent of the United States recommends it in his annual message. I do 
 not know that any objection has been made to it even in the public 
 prints. It seems to be conceded that this is the most innocent way in 
 which this now pressing necessity of a partial redistribution of bank 
 circulation can be brought about. 
 
 The proposition for free banking on a coin basis, I believe, also re- 
 ceives the general assent of our constituents in all parts of our country. 
 The only doubt that has been suggested in the consideration of the sub- 
 ject is whether such banks would be organized ; but that doubt has 
 been answered by the actual offer of large corporations and wealthy 
 individuals on the Pacific coast and in New York to organize them 
 upon the basis of existing law. I trust, therefore, we shall proceed 
 with the consideration of this bill, adopt such amendments to it as the 
 Senate think proper, and then pass it. 
 
 I assure the Senator from Massachusetts that the friends of this 
 measure for the equalization of the bank distribution are not to be di- 
 verted' from their purpose. At the last session of Congress we were to 
 some extent prevailed upon to yield a measure of substantial justice ; 
 but I tell him now, candidly and fairly, that at this session of Congress 
 the gross and palpable injustice of the present distribution of the cur- 
 rency, brought about by a violation of the law in the interest of a few 
 States, will be and shall be corrected. I say that authoritatively, be- 
 
228 . SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 cause the representativeB of three fourths of the States on this floor and 
 more than four fifths of the members of the other House of Congress 
 feel that in this their constituents are suffering daily and personally a 
 gross injustice. We are not to be diverted from the purpose of cor- 
 recting this gross inequality by any plausible and illusive amendments 
 or pretexts. 
 
 When the Senator offered this amendment I characterized it as a 
 funding bill, and said he threw into this discussion a vast multitude of 
 topics. Why, sir, his own speech shows clearly that what I said was 
 true. What does he mean by talking about taxation, reduction of in- 
 terest on the public debt, funding the greenbacks, and a great variety 
 of subjects ? The bill he introduced yesterday as an amendment to 
 this me£|.sure provided for a new class of bonds, four per cent, bonds. 
 Not only that, it repudiated the obligation of the existing bonds. The 
 amendment offered by him contains the most striking act of repudisr 
 tion that I have ever yet seen offered in Congress except by one of my 
 colleagues in the House, and he had only a single vote ; and that is, a 
 
 Eroposition that in case the banks will not take the new bonds we shall 
 old in the Treasury the excess of interest and deny the obligation to 
 pay the interest on the bonds now deposited with the Government of 
 the United States. 
 
 A proposition contained in the amendment offered by the Senator 
 from Massachusetts expressly declares *hat if a bank does not do so and 
 so, the Treasurer of the United States shall retain in his hands one 
 third of the interest on its bonds without any provision to give the 
 bank an opportunity to withdraw them. " You must take this new 
 bond, or I will withhold one third of the interest on your bond." That 
 is the provision. I will read it : 
 
 And if any national bank shall not farnisli to the Treasurer of the United 
 States the neiv bonds, as required by this act, within three months after having 
 been notified by the Secretary of the Treasury of his readiness to deliver such bonds, 
 it shall be the duty of the Treasurer, so long as such delinquency exists, to retain 
 from the interest as may become due and payable on the bonds belonging to such 
 delinquent banks, on deposit with him as security for circulating notes, so much of 
 such interest as shall be in excess of four per cent, per annum on' the amount of 
 such bonds, which excess shall be placed to the credit of the sinking fund of the 
 United States. 
 
 In othei* words, it confiscates one third of the interest on the bonds. 
 The amendment proposed by the Senator fi'om Massachusetts i"aises 
 every question! that is raised by a funding bill. There is the exemption 
 of the bonds from taxation, national. State, and municipal ; there is the 
 exemption of the bonds from even the income tax ; there is every ques- 
 tion presented in this amendment that can be presented in any fimding 
 bill. Now, the Senator from Massachusetts need not be informed that 
 no person on this floor certainly has shown himself more anxious than 
 myself to reduce the public debt, to devise some way to fund it at a 
 lower rate of interest ; but it never occurred to me that we had the 
 power to take these bankers and bond-holders by the throat and say to 
 them, " You shall surrender your bonds or wo will take off and reserve 
 in the Treasury of the United States one third of yoiir interest." That 
 never occurred to mo ; and yet that is the effect of the proposition ori- 
 
THE OUREENOT. 229 
 
 ginally submitted yesterday. It is, true that the Senator now modifies 
 it. The remarks I made were upon the proposition then pending ; but 
 it is now modified ; and yet it is a funding bill. 
 
 The Senator now proposes to withdraw $200,000,000 of greenbacks, 
 the favorite circulation of the people of the United States, and issue in 
 their place bank notes. He knows very well that if the Senate should 
 be prevailed upon in an evil hour to adopt this amendment, it would 
 be the end of all measures for the redistribution of the banking circu- 
 lation. Such a proposition can not be adopted in the House of Kepre- 
 sentatives. But I ask the Senator how will he retire and redeem the 
 $200,000,000 of greenbacks that he proposes to retire by the operation 
 of his amendment as now offered ? He withdraws $200,000,000 of 
 greenbacks before the bank notes are issued, or as they are issued.. 
 Where does he propose to get the money with which to pay $200,000,- 
 000 of greenbacks ? Out of surplus revenue ? Not at all. He must 
 do it by issuing new bonds, by increasing the bonded debt. What 
 kind of bonds ? What shall be their nature, what their rate of interest, 
 when shall they be payable, and how taxable ? The very amendment 
 now offered by him raises inf erentially every question that is presented 
 by a fimding bill. 
 
 The Senator's proposition is a proposition to ingraft on this bill for 
 immediate reHef a funding biU, raising a multitude of questions which 
 will probably be debated here for two or three days. This is part of 
 the very bill introduced by the Senator that is now being considered 
 by the Committee on Finance, every section of which has been care- 
 fully gone over word for word, together with a multitude of other 
 projects sent not only from the Executive Departments, but from other 
 members of the Senate. We are now considering those questions in 
 the Finance Committee, and, the Senator seeks to complicate this bill 
 by throwing open all this wide field of discussion on this simple bill to 
 provide a partial remedy for a great injustice. 
 
 Mr. President, we may as well talk plainly in regard to this proposi- 
 tion. That some measure for the distribution of the banking circular 
 tion wiU pass this Congress I have no doubt. The strength of the 
 votes is here. The Senator from Massachusetts himself admits the 
 necessity of it, the absolute justice of it, and there are but two modes 
 of doing it. One is the plan proposed by 'the Senator from Kentucky, 
 to make the distribution according to existing laws. If the Senator 
 from Massachusetts wants a thorough measure, one that is just and 
 right and thorough, going to the bottom as he says, let him take that. 
 jfe objects to ours as timid. If he wants a thorough measure, one 
 that is just and defensible and right from beginning to end, let us do 
 what is right, and let the representatives from the States which have 
 an excess come forward and say, "We. will concede that the law shall 
 be carried out and that the advantage' which we hold in violation of 
 law, in disregard of law, shall not any longer be held by us." If he 
 wants what is called root-and-branch work without any regard to the 
 interest of his constituents or the business relations of the country, if 
 he wants what is called a radical measure, I am wilKngto support it 
 and to provide according to existing law for a redistribution of the 
 
230 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 bank circulation. That will draw from the three States of Massachu- 
 setts, Connecticut, and Rhode Island $56,000,000 of bank circulation, 
 more than enough to supply all the present wants of the West and South. 
 ■ Why should not this be done ? Why should we not vote for the 
 
 fropositions of the honorable Senator from Kentucky ? Here perhaps 
 am touching upon what the Senator from Massachusetts calls our 
 timidity. He says we timidly approach this question. Why are we 
 timid ? Simply because we do not wish to do injustice to his constitu- 
 ents. We do not wish to disturb the business relations that have 
 grown up out of a practical violation of law. We do not wish to 
 compel the banks of New England to sue their debtors and call in all 
 their credits. We timidly approach a question where the rights and 
 interests of his constituents are concerned. If the question were to be 
 decided according to the rights and interests and wishes of my con- 
 stituents, I should vote for the proposition of the Senator from Ken- 
 tucky to make thorough work of this, and not be arraigned here by 
 the Senator from Massachusetts for proposing a timid measure when 
 the only timidity of our proposition is that we have declined to do 
 justice, even against his own constituents. 
 
 Now, Mr. President, let us go a little further. It is said that this 
 measure is not sufficient. That objection is well taken. Forty-five 
 million dollars is probably not enough ; but it is enough for the present 
 purpose ; it is enough for two years. The Comptroller of the Curren- 
 cy says, in his official report, that $45,000,000 will probably be all that 
 can be absorbed by the South and West. My own impression is that 
 the whole amount of $45,000,000 will not be absorbed ; that there will 
 be verge enough in the $45,000,000 to supply the wants of aU the 
 cotton States and of all the Western States, because banks can not now 
 be organized so readily and so easily as they could a few years ago. 
 The bonds, which are the basis of the bank circulation, are very high 
 in the market. Men will think a great many times before they wiU 
 pay from ten to twenty per cent, premium for bonds in order to make 
 them the basis of circulation. The operation of banking will go on 
 with much more difficulty. During the war the profits of banking 
 were very high. Now they are not so high. I have no doubt, there- 
 fore, that the measure proposed by the committee, while it may not be 
 sufficient for all time, is yet sufficient for two or three yeai-s, during 
 which we shall be approaching specie payments. It is ample for our 
 present purpose, and therefore the amount ought not to be increased. 
 Even if $45,000,000 is not enough for all time it is enough for one 
 year at least, and we shall be in session again next December, an.d can 
 then provide, if necessary, for a further distribution. 
 
 But the Senator asks why withdraw the three per cent, certificates. 
 I will tell him. Because it is a currency upon which we are now pay- 
 ing to his constituents three per cent, interest. The banks of his sec- 
 tion hold it in their vaults as part of their reserve. Nearly all those 
 three per cent, certificates are hold in the State of New York and in 
 New England ; very few of them are held anywhere else. Those 
 banks hold them as part of their reserve, and they are now actually 
 drawing three per cent, interest on United States currency. 
 
THE OURRENOY. 231 
 
 But the Senator, wliile stating correctly in the main, has not stated 
 with exact accuracy the history of the three per cent, certificates. No 
 one desired to issue the three per cent, certificates. If he will look 
 back to the debate on the subject he will find that I, for one, took the 
 ground that it was the most oppressive form of indebtedness ; but we 
 then had a choice only between the three per cent, certificates and 
 more five-twenty bonds. 
 
 When the compound-interest notes became due the Government 
 paid off as many as it could ; but there were some sixty or seventy 
 million doUars that it had not means to pay. The only question then 
 was whether we should authorize an increase of the bonded debt or 
 the issuing of these three per cent, certificates. It was supposed that 
 the three per cent. CQf tificates would be a temporary loan, kept out for 
 a short time ; and rather than increase the bonded debt bearing an in- 
 terest of six per cent, in gold, we authorized the issue temporarily of 
 three per cent, certificates, which are now held ^entirely by the banks. 
 Probably no individual in the United States holds a three per cent, 
 certificate unless as the agent of a bank. They are locked up in the 
 safes of the banks. While they are there they perform all the func- 
 tions of a currency except actual circulation among the people. They 
 do not pass from hand to hand, but they are held oy the banks in the 
 place of greenbacks, and the very moment they are paid oif, green- 
 backs must flow in and take their place. 
 
 Now, what advantage is derived from calling them in and issuing 
 new bank circulation ? The Government saves the payment of three 
 per cent, interest on the certificates, and the banks are compelled to 
 hold greenbacks drawing no interest, so that we save by the substitu- 
 tion of greenbacks in the bank vaults for these three per cent, certifi- 
 cates the interest we now pay upon the latter. But that is not all. If 
 these certificates are made the basis of new banks, we tax the new 
 banks about three per cent., so that in this way we gain by increased 
 taxation on new banks three per cent., and we also save three per cent, 
 interest on the certificates, thus making a gain to the United States of 
 at least six per cent. 
 
 It is therefore an object for the Government to retire these three 
 per cent, certificates ; and if upon that retirement we can base a reason- 
 able increase of bank circulation in the Southern and Western States so 
 as to satisfy, at least for a time, a just and well-founded complaint, it 
 seems to me instead of acting timidly and foohshly we are acting wisely 
 and for the best interests of the Government and the people. But if 
 the States we have been endeavoring to protect, whose people came to 
 us last winter and begged us not to disturb their business relations, 
 think it is better to go down to the foundation of this matter, to go 
 back to the old law and enforce that, let it be so, and let us adopt the 
 amendment of the Senator from Kentucky. I do not think it would 
 be best. I think that, without disturbing any existing bank, or derang- 
 ing affairs anywhere, we may supply all the wants of the South and 
 West, for at least two years, by an increase of banking circulation 
 through the substitution of bank notes for the three per cent, certifi- 
 cates. 
 
232 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 In regai'd to the other branch of this bill, the sections providing for 
 free banking upon a coin basis, I have no doubt that they will be the 
 basis of all the banks of the United States within a very short time. 
 Indeed, by the adoption of a funding bill, and of measures that look to 
 the reduction of the interest on the public debt, by an increase of our 
 revenue, by our improved credit, by our enlarged production, by our 
 growing commerce, by measures that may be adopted from time to 
 time, we shall gradually approach specie payments, and in that way all 
 banks will be upon a coin basis. 
 
 My honorable friend from Indiana, whose opinions I always respect, 
 seemed to think that banks organized upon a gold-coin basis under this 
 bill could not be maintained. Why, sir, they nave always been main- 
 tained. They were maintained before the suspension of specie pay- 
 ments and can be maintained now. jSTo bank ever held enough coin in 
 its vaults to pay off its notes ; and we have provided now in this biU 
 larger securities for the payment of these coin notes than were provided 
 for bank notes issued by any bank that I ever read of. We have pro- 
 vided for an actual reserve of twenty-five per cent, in coin. We Imve 
 provided for the deposit of bonds, payable principal and interest in 
 gold, for twenty per cent, more than the amount of the new notes. 
 There is absolute safety unless the Government of the United States 
 itself perishes. 
 
 But the Senator says these banks will not be organized. Then what 
 harm is done ? We shall at least have given to the Pacific coast (where 
 long experience has shown that they can not introduce the legal-tender 
 currency of the United States, and where gold now circulates and is the 
 basis of all transactions) the opportunity of forming banks upon the 
 national banking system. Why deny them that privilege ? The Sena- 
 tor from Indiana is afraid of contraction ; and yet he read from the 
 report of the Secretary of the Treasury that if we do not adopt this 
 system greenbacks will flow into the Pacific States and thus create a 
 conti'action in the East. Why, sir, if you let the people of California, 
 Oregon, and I^evada follow the bent of their own inclinations, they will 
 not have paper money at all except it be paper money based upon coin. 
 I know, and their representatives are here to speak for them, that they 
 are anxious to adopt a system of banks based upon coin. Why not give 
 them the opportunity ? If they are organized and supplied with these 
 coin notes, as a matter of course it leaves more greenbacks to circulate 
 among us, and prevents the very evil my honorable friend seems to 
 contemplate with terror. 
 
 But he made another great mistake. He said that coin notes 
 were not in circulation. Why, sir, there are more coin notes than 
 
 f'eenbacks in circulation among the people of New York City to-day. 
 hey are called gold certificates, but they are in the form and simili- 
 tude of bank notes, circulating from hand to hand; and they now 
 actually transact a larger amount of the business of the city oi New 
 York tnan the greenbacks. My honorable friend can not be ignorant 
 that the great commercial transactions of this country are based upon 
 gold and settled in gold, and that these coin notes, from the necessity 
 of the case, are used as a substitute for gold. The very fact that pn- 
 
THE OUERENOY. , 233 
 
 vate persons are willing to deposit their gold in the Treasury of the 
 United States and receive therefor a certificate or a note without inter- 
 est, and to hold that note from month to month and from year to 
 year, shows that there is a commercial demand for this kind of paper, 
 and that these coin notes are equivalent to coin and have not the 
 uncertain fluctuating value of paper currency. They are demanded 
 now at the great commercial centers of our country. They are de- 
 manded in Oregon and California, as is sufficiently shown in this de- 
 bate, and as I know from correspondence with a great many persons 
 there. They would also be a convenient currency in the city of JSTew 
 York. 
 
 But my honorable friend says that if a bank on this basis were 
 started in the city of New York it would break. How could it 
 break ? Only in the same way that any other bank could break ; but 
 it could not break to the injury of the note-holder unless after ex- 
 hausting the twenty-five per cent, of gold on hand the bonds in the 
 Treasury were not sufficient to redeem its notes, and that is not a 
 supposable case. If there were any doubt about that, the amount of 
 notes to be issued ought to be restricted stiR further. Banking oper- 
 ations are conducted upon the basis of confidence. The very moment 
 you give to a bank that confidence which alone will maintain it, its 
 notes, whether payable iu currency or gold, will circulate in the com- 
 munity until a suspicion is cast upon its credit. Then they will 
 flow back to the vaults of the bank ; and if a part of them be promptly 
 met, confidence is restored. 
 
 Sir, there is more safety and security in this system of coin notes 
 than there is in the paper dollar. Last year the fiuctuation in paper 
 money amounted to forty-five per cent. Gold, however, remained as 
 stable as the eternal hills, because it was not only the product of labor, 
 but it was labor and value itself. Your paper money fluctuates 
 among the bulls and bears of New York. The operations of three 
 or four men there almost produced a catastrophe, and nothing set- 
 tled the matter except the gold in the money market. The throwing 
 of a kittle gold upon the market ended that great panic. 
 
 I believe that these coin notes, if banks are organized under the 
 provisions of this bill, without any sudden change in our banking 
 law, wiU gradually take the place of greenbacks and also of the ordi- 
 nary bank notes, and that as we approach specie payments the banks 
 will base their operations entirely on gold and silver coin. But if the 
 Senator is correct, if this expectation of mine is delusive, what harm 
 can the provision do ? None whatever. It will at least give to the 
 Pacific coast an opportunity of having a stable and fair currency. It 
 can do no harm anywhere. It will give to the great commercial cen- 
 ters, where they propose to carry on their operations in gold, an oppor- 
 tunity to establish gold banks with ample security. 
 
 Sir, there is no possible objection to this bill except the one stated 
 by the Senator from Massachusetts, and that is that the bill does not 
 go to the root of the difficulty. I confess that that is an objection ; 
 but if we have timidly approached this question it has been out of 
 regard for his constituents. If he is not satisfied, and those for whom 
 
234 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 he speaks are not satisfied, then let us go to the root of the matter. 
 For myself I do not desire to see any injury inflicted on any portion 
 of our people. I believe that the measure proposed by the commit- 
 tee, giving to the South and "West a small increase of their banking 
 currency, which will enable them to get on for two years without any 
 cause of complaint, is a sufficient measure for the present. It will not 
 furnish the equalization that is desirable ; but the West and South will 
 have no reasonable cause to complain so long as banking facilities are 
 open to them, even if New England has more than her share. The 
 South can not complain when she may go to the Treasury of the 
 United States and receive banking circulation upon the same terms 
 and conditions as New England. 
 
 If the system is free to the extent provided there can be no ground 
 for objection, although one portion of the country has more than 
 another. It is only when it is bound round by an iron monopoly that 
 there is objection to it. If $45,000,000 is not enough for the demand, 
 even that would not destroy the monopoly ; but from the best infor- 
 mation that the committee had, from the statement of the Secretary 
 of the Treasury, from the statement of the Comptroller of the Cur- 
 rency, from whom we have an official document that $40,000,000 or 
 $35,000,000 will cover all the applications made from the Southern and 
 Western States, we thought this measure would be a useful one, and 
 concluded not to propose anything more radical. Besides, this timid 
 measure that my honorable friend comments upon is the one suggested 
 by the President of the United States, who is not a very timid man ; 
 and this very bill meets the hearty approval of the Secretary of the 
 Treasury, who is from his own State. 
 
 It seems to me that for the Senator to characterize as wrong every- 
 thing which does not come up to his standard of what is right is 
 going rather too far. The truth is that my honorable friend has in- 
 troduced a bill that has a great many good things in it. I have read 
 that bill probably as often as he has, and probably know its origin as 
 well ; and most of it I can support. It looks in the right direction. 
 It looks to specie payments. It looks to the reduction of the interest 
 on the public debt. It contains many good things ; but it is not a spe- 
 cific for aU the ills of life. Pie must not offer it as an amendment to 
 every bill that is proposed, no matter what its character. He must 
 not drag the discussion of that bill into the debate upon every mea- 
 sure that is proposed here. 
 
 When the Committee on Finance, after careful consideration and 
 with almost entire unanimity, perhaps I may say with entire unanimity, 
 present a measure here to cure a palpable evil, to remedy an injustice 
 that will not be endured any longer, without inflicting anv injury on 
 his constituents, which is only beneficial to the South and AVest where 
 this evil is complained of, instead of receiving his denunciation, instead 
 of having amendments thrust upon it to drag in various other topics, 
 we ought to have met with his cordial support ; he ought to have come 
 to us and said, " Gentlemen, you have done justice to the West and 
 South, at least for a year or two, without doing injustice to us." But 
 if he is dissatisfied with it, then, as a matter of course, the Senate if 
 
THE OURKENOY. 235 
 
 they are moved by his arguments will go to the foundation, tear up aU 
 the distribution made in violation of law, and give to each State and 
 section of this country its fair and just share of the circulating medium. 
 
 My own opinion is. Senators, that it is better to adopt this measure 
 as it is, imperfect as it is, timid as it is, and leave all the other questions 
 which have been involved in this debate — the interest on the public 
 debt, the funding of the public debt, the taxing of the public debt, 
 what bonds banking shall be based upon — all the multiplied forms of 
 complicated questions growing out of our finances, to be discussed and 
 decided, on bills that will be reported to you looking to that end. 
 Then, if the Senator from Massachusetts or any other Senator has any 
 favorite financial theories or documents that he wishes to present, that 
 wiU be time ; but now, when we are dealing with a small matter, and 
 yet a pressing matter, it seems to me it is not the proper time to do all 
 these things. 
 
 I therefore repeat that I think this bill ought to be confined to the 
 objects proposed. If Senators do not agree with the committee on the 
 measure reported, let them offer amendments bearing upon those par- 
 ticular questions. The amendment of the Senator from Massachusetts 
 is not of that kind. It proposes to withdraw the greenbacks and en- 
 large the limit of banking circulation, without any provision for a re- 
 distribution. It proposes to do what he must be satisfied the House 
 of Kepresentatives will not agree to do, at least at this session of Con- 
 gress. I know that the greenbacks are the great stumbling-block in 
 the way of specie payments, and I hope that they will be gradually re- 
 tired and funded ; but they must be withdrawn by funding them into 
 bonds bearing a low rate of interest. 
 
 As I do not wish to occupy the attention of the Senate again, I' de- 
 sire now to reply to one or two other points made by my friend from 
 Indiana. He says that there are a great many abuses growing out of 
 this system of national banks. I agree with him in that respect ; and 
 you never had a system of banking or a system of any other kind so 
 extensive as this that was not subject to abuse. All we can say is that ex- 
 perience has shown that this is the best banking system which has yet 
 been devised. He says the banks charge too high a rate of interest. Ad- 
 mit it ; the law allows every State to regulate that matter to suit itself. 
 Would the Senator drag into this discussion of a measure intended to 
 benefit his constituents and the whole South and West a controversy 
 about our interest laws ? The general sentiment is coming to be that 
 money, like every other commodity, ought to be left free to bear as 
 high or as low a price as the parties can agree upon ; and experience 
 in European countries has shown that where the rate of interest is left 
 free it is lowest as a general rule. But that question ought not to be 
 drawn into this discussion, because by the banking law every State may 
 fix the rate of interest within its limits. JSTo bank can charge more than 
 is allowed by the laws of the State to the citizens of the State. I sup- 
 posed that in Indiana they had a law which allowed ten per cent, inter- 
 est on a contract to pay ten per cent. If so, the banks can charge no 
 more ; and if they do, they forfeit their charters, they forfeit the whole 
 interest on the debt, and they are liable to be wound up on complaint. 
 
236 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 That is not all. A severe provision was introduced into the banking 
 law, if I remember aright, by which the debtor may at any time within 
 two years sue for and recover the unlawful interest charged. It is said 
 to be a dead letter. The reason is that no honorable man having made 
 a fair contract will go and sue to recover back the money paid. It is 
 like the case of a man who is addicted to gambling ; he will submit 
 to his loss rather than appeal to the courts for redress. . That is not 
 the fault of the law. If there is any fault about it, it is the fault of the 
 people. 
 
 But the Senator says the banks pay interest on deposits. Why, sir, 
 at the last Congress the Committee on Finance reported here a bill to 
 prohibit the payment of interest on deposits. My friend from Penn- 
 sylvania [Mr. Cameron] and most of the Senators around him opposed 
 it with great warmth, and it was defeated. Now we do not propose to 
 put on this bill a proposition like that, which would bring about inevi- 
 table defeat, although I agree with the Senator that the banks ought 
 not to be allowed to pay interest on deposits. The Comptroller of the 
 Currency has several times recommended to us to pass a law prohibit- 
 ing the payment of interest on deposits, and the Committee on Finance 
 is m favor of it, but the Senate is not. Would my honorable friend 
 load down this bill with an amendment that has already been voted 
 down by the Senate 1 Ton can not correct all these abuses and accom- 
 plish all the ends you desire by a single measure. If the aim and ob- 
 ject of this measure is a good one, if its tendencies are correct, then it 
 ought to be adopted without regard to the multitude of other questions 
 that may be thrust into this debate. 
 
 I suppose it is not unreasonable for a committee of this body to ask 
 that the order in which they present the various questions submitted to 
 them shall be somewhat regarded. Il^ow, the Committee on Finance 
 on all these difficult questions raised as to the condition of the currency, 
 the condition of the banks, etc., have had some experience. Last year 
 we reported a bill that we considered a very comprehensive one, because 
 it embodied the views of the Committee on Finance on all the different 
 
 ? questions in dispute. I beheve it was praised by my honorable friend 
 rom Massachusetts as a comprehensive bill, and on the whole it re- 
 ceived his approval. He gave it the weight of his support. But it 
 was found when we came to debate the bill that Senatora here and 
 there differed as to particular sections, and refused to vote for the en- 
 tire bill because certain features of the bill disagreed with their opinions. 
 The result was that it was impossible to get the concurrence of the ma- 
 jority of the Senate on any bill, although everybody can see now that 
 it would have been much better and much wiser to pass almost any 
 proposition that was introduced. 
 
 If ow, the Committee on Finance, after the most careful considera- 
 tion of these various questions, intend to take them up separately and 
 present them to the Senate in their order, keeping them, if possible, 
 detached from each otlior. What is the first and most obvious and most 
 necessary measure? Here is a measure for the equalization of cur- 
 rency. The inequality of the distribution of circulation creates fierce 
 and bitter sectional feeling, and has been complained of for yeaa-s. We 
 
THE OUEEENOY. 237 
 
 undertook to rectify that; but there was one fundamental principle 
 wMch guided us, and that was that we would in no event increase 
 the amount of paper money issued in this country. How, then, could 
 this distribution take place ? We had various modes proposed to us, 
 and finally we settled upon a plan to retire a form of indebtedness 
 called the three per cent, certificates, which the Government was pre- 
 pared to redeem, and we proposed to fill that vacuum by issuing cur- 
 rency to the various Western and Southern States. Here was a simple 
 proposition that we thought would meet with no practical objection. 
 The Government of the United States had the means from siirplus 
 revenue, according to information given to us by the Secretary of the - 
 Treasury, to retire these three per cent, certificates. All classes of peo- 
 ple except those who hold them desire to have them retired. They 
 were in the way of specie payments. Until they were redeemed we 
 could not move toward specie payments ; and therefore it was an ob- 
 ject to get them out of the way ; and if in doing that we could fill up 
 the vacuum in the South and the West so as in time to supply the sec- 
 tional demand upon us-^a demand admitted on all hands to be founded 
 in jnstice — we thought that was a simple proposition that would re- 
 ceive the assent of every one. 
 
 But it was claimed, on the other hand, that on the Pacific coast, 
 after long experience, they could not get their people to take our pres- 
 ent paper money. They therefore wanted some form of paper money 
 to aid them in the ordinary operations of business. We could see no 
 objection to banks being organized on the basis of the national banking 
 law with a provision for the issue of coin notes. So in the same bill 
 we provided another measure to reheve the Pacific coast, which tended 
 also to equalize the distribution of banking circulation, because if the 
 Pacific coast should not use the present paper circulation of the country, 
 and we could supply the vacuum there by coin notes, then more was 
 reserved for the South and West. These two simple propositions, 
 which must commend themselves to the good sense of every Senator, 
 were considered by themselves and reported. 
 
 ISow, what is the condition of affairs ? After a long and wearisome 
 discussion my honorable friend from Michigan endeavors to throw into 
 this debate the funding bill'. So my friend from Massachusetts en- 
 deavors to thrust in a veiy comprehensive proposition embracing a 
 great variety of subjects. Why do I say they wish to thrust the fund- 
 ing bill into this discussion ? For this simple reason : if we attempt to 
 retire the greenbacks, we can retire them only by issuing new bonds. 
 There is no surplus revenue with which we can pay them. We have 
 enough, or probably shall have in the course of the next six months, to 
 retire the three per cent, certificates ; but no one contends that we shall 
 have enough to retire the greenbacks. My honorable friend frora 
 Michiganproposes to retire $55,000,000 of greenbacks by issuing 
 bonds. What kind of bonds shall they be ? Shall they bear four, five", 
 or six per cent, interest ? Shall they be taxable or not? Thus_ every 
 question involved in the funding bill is brought at once into this con- 
 troversy upon a biU for the redistribution of bank circulation. 
 
 It is manifest that, with the diversity of opinion that would at once 
 
238 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 appear on hia next amendment to provide for a mode of retiring the 
 greenbacks, we should embark upon a wide sea of debate, and we should 
 have a proposition before us that had never been considered by a com- 
 mittee. On the other hand, if the Senate will take this bill and make 
 such amendments to it as they may deem proper, they have the assur- 
 ance that in a short time a bill comprehensive in its character, so far as 
 the funding of the public debt and of the greenbacks is concerned, wiU 
 be reported, and they will have ample ground for debate. I ask Sena- 
 tors, if possible, to keep that question of funding the public debt, both 
 the greenbacks and the bonds, separate, so that they may consider that 
 subject and let the Senate arrive at a conclusion on it alone. Then, in 
 due time, it will be followed by other provisions in regard to all of the 
 existing banks, old and new, and measures of revenue, tariff, and taxes. 
 I appeal to Senators whether it is not wiser to keep these questions 
 separate, to decide them one by one in the order of their coming rather 
 than to mingle them into a hotch-potch and then finally lose them all. 
 
 There is another proposition offered by the Senator from Indiana 
 [Mr. Morton], and I wish to say what I have to say in regard to it 
 now, so that I may not trespass on the time of the Senate further, as I 
 am anxious to have a vote. He proposes to increase the amount from 
 $45,000,000 to $52,000,000. That is inflation of the currency pure 
 and simple to the extent of $7,000,000. I will not vote for any propo- 
 sition that will inflate the currency. We must get back to specie pay- 
 ments, and yet the proposition of my friend from Indiana, upon a 
 false theory I think, proposes to retire $45,000,000 of one kind of paper 
 currency and to issue $52,000,000 of another kind. 
 
 This is inflation to the amount of $7,000,000. It is true it is not 
 one of those terrible calamities that will be so very injurious ; but it 
 does inflate the currency. My honorable friend makes his proposition 
 upon what I consider a delusive idea ; that is, he says the retirement of 
 $45,000,000 of three per cent, certificates would contract the currency 
 as much as the issue of $52,000,000 of bank circulation would expand 
 it ; that on account of the reserves which these banks would be com- 
 pelled to hold in their vaults the retirement of $45,000,000 of three 
 per cent, certificates is fully equivalent to the issue of $52,000,000 of 
 bank circulation. 
 
 The delusion of that idea is proved by this : when a bank is organ- 
 ized there is a circulation springing out of the very organization of the 
 bank which more than counteracts all the amount of the reserve. My 
 friend from Pennsylvania [Mr. Cameron], who is a banker, knows that 
 the oi-ganization of a bank in any community draws from the pockets 
 of the people, in the form of deposits, idle capital which may be idle 
 but for a few days, which is usually, on the average, equal to the amount 
 of capital pf the bank. These deposits in the bank are made the 
 basis of circulation, not, it is true, of paper money, but of drafts, loans, 
 certificates of deposit, and various forms of circulation ; so that the 
 establishment of banks to the amount of $40,000,000, in my judg- 
 ment, will create more circulation than the retirement of $45,000,000 
 of three per cent, certificates. The ai-gument would be rather the 
 other way. 
 
FUNDING BILL. 239 
 
 I have no doubt that if banks are established in the South and 
 West with circulation to the amount of $45,000,000, the actual increase 
 of circulation, that which transacts business and pays debts, will be 
 much larger than $45,000,000. By absorbing the little deposits of 
 merchants and business men, and even of the freedmen of the South, 
 they will largely increase the currency and give facilities for transacting 
 business. But it is a delusion, as every practical banker must know, to 
 say that $46,000,000 of three per cent, certificates is only equivalent to 
 $52,000,000 of new banking circulation. 
 
 The whole theory of the honorable Senator from Indiana is based 
 on the idea that the deposits of a bank will not exceed its reserve. It 
 would be a very poor bank, indeed, the deposits in jvhich were not 
 three or four times the amount of the reserve. The idea of banks 
 being organized in a community where the deposits, which are circula- 
 tion, do not largely exceed the reserve, is a delusion. 
 
 Therefore I say we ought to confine the operation of this bill to the 
 identical sum that we propose to retire and cancel ; and when we pay 
 off $45,000,000 of indebtedness, which we are now prepared to pay, 
 and which ought to be got out of the road in order to prepare for specie 
 payments, let us also provide for the other difiiculty in the South and 
 West by giving them the same amount, and not a dollar more, of cur- 
 rency in the form of bank notes, and in that way confine our measure 
 to its true purpose, the equalization of the circulation of the country, 
 and the provision of temporary facilities for the Pacific coast in the 
 form of coin notes. 
 
 Mr. President, I am sorry that I have occupied so much time ; but 
 I again express the hope that this bill, which certainly in its present 
 form is a simple one, confined to the questions I have stated, may be 
 brought to a vote to-night, and thus give way for other important bills 
 which are now pressing upon the attention of Congress. 
 
 FUNDING BILL. 
 
 IN TEE SENATE, FEBRUARY S8, 1870. 
 
 The Senate having under consideration tlie bill to authorize the refunding and 
 consolidation of the national debt, to extend banking facilities, and to establish specie 
 payments, Mr. Sherman said : 
 
 Me. President : I do not deem it necessary, in opening this de- 
 bate, to invoke the attention of the Senate to the importance of the 
 subject embraced in this bill. It is unnecessary to discuss the public 
 policy of reducing the interest of the national debt and returning to 
 specie payments. These subjects I have had occasion frequently to 
 discuss in the Senate, and I could add nothing to what has been already 
 said. The question is whether the public debt is in such a condition 
 as to justify us in undertaking the task of reducing the interest upon 
 it, and whether our financial condition is such as to enable us to take 
 
240 SPEECHES AND KEPORTS OF JOHN SHERMAN. 
 
 another step toward specie payments. These questions, and the practi- 
 cal one whether this bill will tend to accomplish the object proposed, are 
 the only questions which I mean to discuss at this stage oi the debate. 
 
 The first six sections of the bill that has been read prescribe the 
 form of bonds into which it is proposed to fund the entire debt of the 
 United States, and the necessary agencies by which they may be dis- 
 posed of. The seventh section provides for the reduction and the ulti- 
 mate payment of the public debt, not only of the old debt, but of the 
 new one created under this act. The remaining sections of the bill, 
 three in number, contain important changes in our banking laws, by 
 which the national banks are required to aid in funding the public debt, 
 and by which the banking system will become free and specie pay- 
 ments will be resumed. 
 
 In order to understand the effect of this bill, it is necessary to recall 
 the history of the public debt and the precise condition of the existing 
 laws ; and I shall perhaps weary the patience of the Senate by a recital 
 of necessary facts in order to present the question fairly for this debate. 
 
 Under the loan laws of July 17 and August 5, 1861, gold was bor- 
 rowed in the same mode and on the same principles that had been usual 
 in the loans of the United States from the time of the formation of the 
 Constitution to that time. Bonds running twenty years, principal and 
 interest payable in gold, were sold in the money markets of the world 
 for what they would bring. In addition to such bonds there were issued 
 Treasury notes bearing seven and three tenths per cent, interest, and 
 also demand notes not bearing interest, payable in coin and receivable 
 for all classes of public dues. The whole were on a specie basis, and 
 the discount on the bonds sold represented the depreciation of the pub- 
 lie credit. After the sudden suspension of specie payments, however, 
 in the fall of 1861, at a time when the Government was raising from 
 two to three hundred thousand men, when its daily wants were from 
 one to two million dollars, when the people for the first time began to 
 see that they were involved in a great war that would task the utmost 
 resources of the country, when specie had disappeared from circulation, 
 the Congresfe of the United States was compelled to adopt a new finan- 
 cial policy. 
 
 After a long and memorable debate of over two months in both 
 Houses of Congress, the act of February 25, 1862, was adopted. That 
 was a revolutionary act. It was a departure from every principle of 
 the financial policy of this Government from its foundation. It over- 
 threw not only the mode of borrowing money, but the character of our 
 {)ublic securities, and was the beginning of a new financial system un- 
 ike anything that had been ventured upon by any people in the world 
 before. This new policy was adopted under the pressure of the severest 
 necessities, and was intended to meet a state of affuirs never foreseen 
 by the framers of the Constitution. 
 
 Now, sir, it is important to understand the principles of this act; 
 for it was the foundation of all the financial measures adopted during 
 the war. It was upon the basis of this act, enlarged and modified from 
 time to time, that we were enal)lod to borrow $3,000,000,000 in three 
 years, and to Y>nt down the most formidable rebellion in modern his- 
 
FUNDING BILL. 241 
 
 tory. This act was based upon three distinct provisions or fundamental 
 conditions. 
 
 First, extraordinary power was conferred upon the Secretary of the 
 Treasury to borrow money in almost any form, at home or abroad, 
 practically without limitation as to amount, or with limits repeatedly 
 enlarged. Every form of security which the ingenuity of man could 
 devise was provided for by this act or the acts amending it. Under 
 these acts bonds were issued payable in twenty years, Treasury notes 
 were issued, certificates of indebtedness, compound-interest notes, and 
 other forms of indebtedness, with varying rates of interest. 
 
 There were, however, distinct limitations upon the nature and 
 character of these loans. It was stipulated, first, that more than six 
 per cent, interest in gold should not be paid on the bonds issued, nor 
 more than seven and three tenths interest in currency on the notes is- 
 sued ; and second, that all the loans should be short loans, redeemable 
 within a short period of time at the pleasure of the United States. 
 Thus the gold bonds were redeemable after five years, the Treasury 
 notes after three years, and all the securities were within the power of 
 the United States to redeem at the end of five years at furthest. And 
 third, no securities were to be sold at less than par. Their unavoidable 
 depreciation was measured, not by the rate of their discount, but by 
 the. depreciation of the currency. We held our bonds at par in paper 
 money, though at times they were worth only forty per cent, of gold. 
 
 The second leading feature of the act of February 25, 1862, was 
 the pledge of our customs revenue, collected in gold, for the payment 
 of the interest, and not less than one per cent, annually of the prin- 
 cipal of the public debt. The third and most important provision of 
 that act was the clause making a legal-tender currency of United States 
 notes, convertible at the pleasure of the holder into bonds bearing gold 
 interest. Upon these three fundamental conditions the act of February 
 25, 1862, and all the subsequent acts were founded. They provided 
 f OK short loans, payment of interest in coin, and legal tenders. 
 
 Now, Mr. President, it may be proper to state the reasons for this 
 policy. "We recognized the existence of a great pressing necessity that 
 would tend to depreciate the public credit ; and we took care, there- 
 fore, not to make loans for a long period, so as not to bind the future 
 to the payment of such usurious rates as we were then compelled to 
 pay. 
 
 "We provided for gold interest and gold revenue, to avoid the ex- 
 treme inflations of an irredeemable currency. "We wished to rest our 
 paper fabric on a coin basis, and to keep constantly in view ultimate 
 specie payments. I believe that but for that provision in the loan act 
 of February 25, 1862, in 1864 our financial system would have been 
 utterly overthrown. There was nothing to anchor it to the earth ex- 
 cept the collection of duties in coin and the payment of the interest on 
 our bonds in coin. 
 
 If the interest on our bonds had not been payable in coin during 
 the war, it is probable that in the terrible depreciation of 1864 our 
 paper money would have disappeared, and the people would have re- 
 sorted again to barter in gold, in disregard of our legal-tender curren- 
 16 
 
242 SPEEOI-IES AND REPORTS OF JOHN SHERMAN. 
 
 cy. As it wafl, the depreciation at one time was such that $286 of our 
 paper money was required to purchase $100 in coin. This simple pro- 
 vision for the collection of duties on imports in gold and the payment 
 of interest in coin was the only conservative security of our paper sys- 
 tem. Without that, the paper balloon might have exploded, as it did 
 in the revolutionary war in the time of our fathers, as it did in the 
 French revolution by the issue of assignats and mandats, and as it did • 
 in the Southern Oonfederacy, where it ended in the entire destruction 
 of the public credit of the Confederacy, at one time higher in the 
 money market of Great Britain than our own. 
 
 But, sir, the most important and the most revolutionary principle 
 of the act of February 25, 1862, was the legal-tender clause. This 
 was a measure of imperious and pressing necessity. I can recall very 
 well the debates in the Senate and in the House of Representatives 
 upon the legal-tender clause. "We were then standing in the face of a 
 deficit of some $70,000,000 of unpaid requisitions to our soldiers. 
 Creditors in all parts of the country, among them the most powerful 
 corporations of this country, had refused our demand notes, then very 
 slightly depreciated. "We were under the necessity of raising two or 
 three million dollars per day. We were then organizing armies un- 
 heard of before. "We stood also in the presence of defeat, constant 
 and imminent, which fell upon our armies in all parts of the country. 
 It was before daylight was shed upon any part of our mihtary opera-" 
 tions. "We adopted the legal-tender clause then as an absolute expedi- 
 ent. Eemembering the debate, I know with what slow steps the 
 majority of the Senate came to the necessity of adopting legal tenders. 
 A majority of the Committee on Finance, as then organized, was op- 
 posed to the le^al-tender clause, the Committee standing four against 
 to three for. However, the bill was reported without striking it out, 
 and then a proposition was made to strike out the legal-tender clause. 
 After a long debate this motion was voted down by a very small vote 
 indeed, and thus the legal-tender clause was retained in the bill and 
 finally passed. If the legal-tender clause had been stricken out, wtat 
 would have been the result God only knows. 
 
 At that time Mr. Chase was Secretary of the Treasury. I remem- 
 ber the constant, urgent, and repeated requests made by this distin- 
 guished citizen, who was certainly one of the ablest financial ministers 
 that any country ever enjoyed in time of trouble, upon this very qiies- 
 tion of the legal-tender clause, " in season and out of season." I find, 
 upon referring to a book recently published by Mr. Spalding, then a 
 member of the House of Eepresentatives, that when the bill was pend- 
 ing on the 5th of February, 1862, Mr. Chase wrote this letter to liim 
 in reference to the legal-tender clause : 
 
 " Such mon as Natlianiol Thayer of Boston, Alexander Dnnoan of Duncan, Sher- 
 man & Oo., Shepard Knapp, and John D. Wolf, tod numerous able and leading 
 financial men, have told me witliin two days that you were perfectly right, and they 
 are deeply anxious that the legal-tender clause should stand in the bill. They say 
 that the country is lost without it." 
 
 Tbhasbet Dbpabtment, Feh-uary 5, 1862. 
 Mr Dbab Sib : I make the above extract from a letter received from the Colleotoi 
 
FUNDING BILL. 243 
 
 of New York this morning. It is very important the bill should go through to-day, 
 and through the Senate this week. The public exigencies do not admit of delay. 
 
 Yours truly, S. P. CHASE. 
 
 Hon. E. G. Spalding, Rouse of Eepresentatwes. 
 
 Still earlier, on the 3d of February, 1862, there is this letter, sent 
 by Mr. Chase to a member of the House of Bepresentatives ; and these 
 are private letters : 
 
 My Dbae Sie: Mr. Seward said to me on yesterday that you observed to him 
 that my hesitation in coming up to the legal-tender proposition embarrassed you. 
 I am very sorry to observe it, for my anxious wish is to support you in all respects. 
 It is true that I came with reluctance to the conclusion that the legal-tender clause 
 is a necessity, but I came to it decidedly. I support it earnestly. I do not hesitate 
 when I have made up my mind, however much regret I might feel over the neces- 
 sity of the conclusion to which I have come. 
 
 Then he goes on in regard to the details of the bill. But, sir, that 
 is not all. In the debate on the legal-tender clause in the Senate I 
 supported it warmly and earnestly ; and in opening my remarks on that 
 occasion I referred to the Secretary of the Treasury, and the words 
 uttered by me then were fresh from personal and official interviews 
 with him. I said, speaking of the necessity of the measure : 
 
 In the first place, I will say, every organ of financial opinion — if that is a correct 
 expression — in this country agrees that there is such a necessity, in case we authorize 
 the issue of demand notes. You commence with the Secretary of the Treasury, who 
 has given this subject the most ample consideration. He declares not only in his 
 official communications here, but in his private intercourse with the members of the 
 Committee, that this clause is indispensably necessary to the security and negotia- 
 bility of these demand notes. We all know from his antecedents, from his peculiar 
 opinions, that he would be probably the last man among the leading politicians of 
 our country to yield to the necessity of substituting paper money for coin. He has 
 examined this question in all its length and breadth. He is in a position where he 
 feels the necessity. He is a statesman of admitted ability, and distinguished in his 
 high position. He informs us that without this clause to attempt to circulate as 
 money the proposed amount of demand notes of the United States will prove a fatal 
 experiment. 
 
 '"' And then I went on to speak at some length as to the necessity of 
 the legal-tender clause, and. as to the concurring opinions of public men 
 and private citizens throughout the country on that point. Finally, by 
 the close vote I have mentioned, the clause was carried. I repeat and 
 read these declarations to show that^ at the time the legal-tender clause 
 was adopted, it was adopted as a pressing military necessity, to which 
 we were compelled to resort in order to save our country in the most 
 terrible of exigencies. And, sir, I never have seen the day from that 
 hour to this when I regretted yielding to that necessity, and, by that 
 extraordinary proceeding, mortgaging to the cause in which we were 
 engaged all the property of our people and all the existing debts within 
 the United States. 
 
 There has since been a question whether the legal-tender clause 
 applied to preexisting debts ; but there can be no doubt of the intention 
 of Congress, because there were no other debts to which it could apply. 
 Unless it had been made to apply to preexisting debts, it would have 
 utterly failed of its object ; and the debate shows that the reason why 
 it was pressed was because certain corporations and leading citizens 
 
244 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 were then refusing to take in payment, of their debts the demand notes 
 of the United States, receivable even for customs dues, and we felt that 
 it was necessary by a legal-tender clause to mortgage all the credits of 
 the United States, in order to secure the free and undisputed circulation 
 of our notes. When a proposal was made to make the legal-tender clause 
 applicable only to subsequent debts, it was voted down by an almost 
 unanimous vote and without a division. Sir, the legal-tender clause was 
 only useful as a means of compelling the creditors to the extent of the 
 depreciation to suffer the loss. It was only done as a measure of war, 
 and it ought and could only have been resorted to in dire necessity. 
 
 Mr. President, it is true that the Supreme Court has this winter 
 decided that clause to be unconstitutional. I do not believe it uncon- 
 stitutional. I believe that this Congress or any Congress representing 
 the people of the United States should, under similar circumstances, 
 adopt the same policy; and it is very strange indeed that the able 
 Judge who pronounced the opinion concurred as Secretary of the 
 Treasury in passing the law, and uttered his opinion in its favor in the 
 strong language I nave read you. 
 
 Sir, it is not for the Supreme Court of the United States to pass 
 upon the necessity of any measure. I have the decision in the case of 
 Hepburn vs. Griswold before ine, and find that the whole basis of the 
 decision is, that this clause was not a necessary or appropriate means 
 to carry out an express grant of power. 
 
 Why, sir, if the Congress of the United States has not the power 
 to pass upon thfe necessary means to carry out its plainly granted powers, 
 who has ? Are not we under oath, under the same impressive obliga- 
 tions that rest upon the Supreme Court? I do not believe in the 
 theory of this decision. I believe that when this legal-tender clause 
 was adopted we were in such a condition of aiiairs as justified it, and 
 that Congress would have been derelict in its duty if it had failed to 
 exercise that power at that time. Such was the opinion of almost 
 every business man in private life, and without it we should have been 
 driven to insolvency before victory could lend us more paper and 
 credit. It was only the vitalizing power given to the notes of the 
 United States, by making them the basis of our financial system, and 
 the right to present them in payment of every debt or obligation, that 
 
 fave us ability to borrow money during the dark days of the wai-. 
 'herefore, I do not, for one, like to see another department of the 
 Government endanger this power, which, if we are again involved in a 
 war under similar circumstances, ought to be and M'ill be resorted to 
 by Congress. 
 
 But it must be remembered tliat this clause was justified only by 
 the exigencies of war. It was not intended as a measure of peace. 
 The legal tenders were only the instniments of battle ; they were 
 musketry and cannon ; and when peace camo, they should have been 
 rapidly retired. 
 
 There was another provision incorporated in the act of February 
 25, 18(!2, that gave to the legal-tender notes their chief value. That 
 was the right to fund them at any time into a bond of the United 
 States bearing interest in gold ; and this was upon the principle that 
 
FUNDING BILL. 246 
 
 while we could not redeem these notes in coin, we would redeem them 
 in the very best thing we could offer — our bonded debt, secured by a 
 pledge of all the public revenue. This right to fund was afterward, 
 as I will show, repealed ; and the great error of our financial legislation 
 was that this right was not promptly restored the moment the war was 
 over, and then we would have had what was provided by the act of 
 February 25, 1862, a self-adjusting currency, always redeemable in 
 bonds, until bonds were at par in gold. That at least would have been 
 honest ; that at least would have made good the obligations printed 
 upon the back of those notes when we issued them and compelled all 
 the people of the United States to take them in the payment of privtite 
 debts. 
 
 Mr. President, some important changes were made in the act of 
 February 25, 1862, to which it is necessary for me now to refer in 
 order to present the question clearly. By the original act the amount 
 of legal tenders was hmited to $150,000,000. By the act of July 11, 
 1862, the limit was enlarged to $300,000^000, and $150,000,000 more 
 legal tenders of the same character as under the act of February 25, 
 1862, were issued. By the act of March 3, 1863, there was a still 
 greater enlargement of the legal-tender notes ; $150,000,000 more were 
 authorized, $50,000,000 of which, however, were to be kept for a speci- 
 fic purpose, to pay maturing obligations, making an aggregate of $450,- 
 000,000 of legal-tender notes authorized up to that time. Then, by 
 the act of June 30, 1864, when the paper money of the country had 
 become alarmingly redundant and was flooding all channels of business, 
 the United States entered into a solemn pledge, which I will now read : 
 
 Nor shall the total amount of United States notes issued or to he issued ever 
 exceed $400,000,000, and such additional sum, not exceeding $50,000,000, as may 
 he temporarily required for the redemption of temporary loan; nor shall any 
 Treasury note hearing interest, issued under this act, he a legal tender in payment 
 or redemption of any notes issued hy any hank, hanking association, or hanker, 
 calculated or intended to circulate as money. 
 
 But there was another change, a much more important modificar 
 tion, made of the currency provided by the original act. By the act 
 of March 3, 1863, the right to convert into bonds was taken away by 
 this clause : 
 
 And the holders of United States notes issued under and hy virtue of said acts 
 shall present the same for the purpose of exchanging the same for honds, as therein 
 provided, on or hefore the 1st day of July, 1863, and thereafter the right so to ex- 
 change the same shall cease and determine. 
 
 At the date of this act $300,000,000 of United States notes were 
 outstanding, with the distinct right printed on the face of them that 
 they might be converted into bond? bearing six per cent, interest in 
 gold. Why was this right taken away from them ? Was it because 
 we did not wish them converted into bonds ? On the contrary, this 
 provision was adopted to induce their conversion. All our bonds, even 
 six per cent, gold bonds, were then below the par of United States 
 notes ; and in order to aid and expedite the conversion of the notes into 
 bonds, we depreciated the notes. It is a grave question whether this 
 measure was not a breach of public faith. It was clearly so, unless we 
 
246 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 regard it as simply a limitation of the time within which the right to 
 convert should be exercised. It was inserted in the Senate with grave 
 doubts, and the error was, that it was not so framed as to be a mere tem- 
 porary suspension of a right, and not a permanent denial ; a stay law, and 
 not an absolute repudiation under pretense of a short act of limitation. 
 
 But although the provision was adopted, and accomplished the ob- 
 ject designed, there never was an hour up to the close of the war when 
 these notes were not received at par for the bonds then in the market 
 of the United States. This clause was deemed to be necJessary in order 
 to depreciate the notes and draw them back into the Treasury ; but 
 until after the war was over, practically they were received at par in 
 payment of the five-twenty, ten-forty, and seven-thirty loans, and for 
 every form of indebtedness contracted during the war. 
 
 I have thus stated our general financial history during the war. I 
 will not go into details. lonly wish to bring these matters, that per- 
 haps have passed from the attention of Senators, back to their recol- 
 lection. After all, our financial operations during the war were a 
 wonderful success. We borrowed from our own people a larger sum 
 of money than ever was borrowed in the world before in the same 
 length of time. We levied larger taxes than were ever collected from 
 any people before. We submitted willingly to sacrifices without a par- 
 allel in history. Taking them altogether, when we come to review our 
 financial measures, I must say that their success is as wonderful as 
 were our military operations. ' Providence seems to have been on our 
 side. After the legal-tender clause was passed we never needed money 
 to pay our soldiers that was not forthcoming. No soldier ever begged 
 for his pay when it was justly due to him after these measures had 
 been matured and adopted, and the enormous sum of $3,500,000,000 
 was expended by the iJnited States in a war of four years ; and at the 
 end of the war the country was stronger, greater, and more powerful 
 in physical resources and in moneyed means than ever before. The 
 contribution by foreign nations to our population, and the enormous 
 wealth accumulated by the activity given to all business operations 
 during the war, more than repaired the immense sacrifices involved in 
 the operations of the war. Thus we may safely say that our financial 
 operations during that time were a success. 
 
 The organization of the national banks, although subsidiary, yet 
 performed a useful function in our financial operations. They ab- 
 sorbed the State-bank paper, which at the beginning of the war was a 
 dangerous currency of local circulation, excluding the national cur- 
 rency. They furnished a market for our bonds, and now hold three 
 hundred and fortj^-odd million dollars of Government bonds. They 
 were useful financial agents in the negotiation of loans, and rendered 
 a vast amount of service during the war in collecting our revenues 
 and in selling our bonds. They are to be the ultimate means of re- 
 suming specie payments. By the agency of the banking system alone 
 we can, without retiring our entire amount of greenbacks, come back 
 to specie payments. The national banks were merely subsidiary to 
 these great measures. The financial policy of the war was contained 
 in the act of Febraary 25, 1862, and the acts amendatory thereof. 
 
FUNDING BILL. 2iY 
 
 Now, Mr. President, there is no doubt that during and since the 
 war we made some errors, and were guilty of some departures from 
 true financial principles. I say this in all kindness, because I do not 
 mean to evade my share of the responsibility ; and I now wish to point 
 out some of those errors. 
 
 In the fall of 1864 a security of new character was issued that I 
 think was not authorized by law. I refer to the seven-thirty bonds, 
 which were issued running three years, with the right on the part of, 
 the holder at the end of three years to convert them into five-twenty 
 bonds, payable, principal and interest, in gold. At the time I thought, 
 and I still think, that by a fair construction of the law as it then stood 
 there was no power in the Secretaiy of the Treasury to give the hold- 
 ers of those seven-thirties the right to fund them into five-twenty 
 bonds. It was a departure from the financial policy of the Govern- 
 ment to provide only for short loans. The result was, at the close of 
 the war, to continue a loan bearing six per cent, in gold for a longer 
 period than was authorized by law. By referring to the act of June 
 30, 1864, under which this loan was made, you will see that the option 
 was given to the Secretary of the Treasury to issue either five-twenty 
 bonds or seven-thirty Treasury notes. Either of those securities might 
 be issued at his option, but mere is no authority in the law of June 
 30, 1864, allowing their exchange by holders of the notes. The 
 amount of notes issued in the fall of 1864 was $234,000,000. The 
 aggregate amount of gold bonds outstanding on the 1st of July, 1864, 
 was only $700,780,250 ; all the rest of our indebtedness at that time 
 was in currency securities. 
 
 The next error which affected our financial operations, and which 
 affects them now, is the error made after the war was over by the 
 Secretary of the Treasury, of continuing this form of oppressive se- 
 curities. After the war was over, and after the last rebel had laid 
 down his arms, there were issued about six hundred million dollars of 
 seven-thirty notes, convertible at the pleasure of the holder into five- 
 twenty bonds. There is now no doubt that if immediately after the 
 war was over a loan bearing a smaller rate of interest payable in gold 
 — a five per cent, ten-forty bond, for instance — ^had been put on the 
 market, all the floating debt of the United States might have been con- 
 verted into it. On the 1st of March, 1865, when the war was practi- 
 cally at an end, the amount of gold-bearing bonds did not much exceed 
 $1,000,000,000, and all the rest of our indebtedness was in currency 
 securities ; but by this mistaken action the currency securities were 
 converted into a six per cent, five-twenty bond, and the period of pay- 
 ment was postponed eight years by allowing their conversion at the 
 end of three years. 
 
 But, Mr. President, Congress itself was guilty of some errors, and 
 one or two very great omissions in financial legislation, after the war 
 was over. The most unfortunate one was the act of April 12, 1866. 
 By this act Congress authorized the Secretary of the Treasury to fund 
 all the fioating indebtedness of the United States, the compound-inter- 
 est notes, the five per cent, notes, the temporary loan certificates, and 
 •all the then floating debt, into six per cent, gold bonds, or into any 
 
2i8 SPEEOIIES AND REPOETB OF JOHN SHERMAN. 
 
 form of bond authorized by previous acts, which covered, as a matter 
 of course, the six per cent, five-twenty bonds. 
 
 Thus by a general sweeping provision contained in this act we legal- 
 ized and authorized the conversion of the whole currency debt, except 
 United States notes, into five-twenty bonds, thus swelling largely the 
 volume of five-twenties. Whatever opinion may have been entertained 
 as to the state of our finances in the year 1865, there can be no doubt 
 that on the 12th of April, 1866, it was not wise or politic to fund the 
 debt into a six per cent. bond. The effect of this legislation was at 
 once to sever the bond from the note. All forms of indebtedness 
 except the notes were allowed to be funded into bonds. This at once 
 checked the appreciation of the notes. Gold had greatly lowered in 
 price, till in April, 1866, when this act was paesed, it was only worth 
 twenty-five and one half per cent, premium ; but from the passage of 
 this act it immediately rose, and in July averaged fifty per cent. For 
 years afterward gold never reached the minimimi of twenty-five per 
 cent., but advanced, fluctuating backward and forward. Paper money 
 was then entirely detached from the rest of the debt of the United 
 States, and became of less market value than any other form of our 
 securities. During the past year, under a different policy, the currency 
 has reached much nearer the par of gold than before. For three years 
 after the passage of the act of April 12, 1866, gold, or rather our paper 
 money, was subject to daily fluctuations and derangements, the inevi- 
 table effect of its passage. This act and the failure of Congress to pro- 
 vide any mode for redeeming or retiring the greenbacks, and afterward 
 the repeal of even the limited authority granted to the Secretary of the 
 Treasury to retire greenbacks, undoubtedly kept our notes depreciated 
 from day to day, fluctuating in value. 
 
 Mr. President, another great error which I think we must all admit 
 Congress has been guilty of is the long delay in passing a biQ to pro- 
 vide for the funding of the public debt. There has been no time 
 during the past three years when large masses of the existing debt 
 could not have been funded into a flve per cent, bond, and the actual 
 saving by this operation for several years would have been very large 
 indeed. But, sir, it was one of the misfortunes of the administration 
 of Mr. Johnson that, when he abandoned the Eepublican party and 
 joined our adversaries, he created such a state of feeling between the 
 executive and legislative branches of the Government that it was im- 
 possible to secure the public attention or the attention of Congress to 
 important financial matters. 
 
 The first funding bill was introduced in the Senate in Apiil, 1866. 
 It proposed to fund the debt in a five per cent, ten-forty bond. It was 
 debated here at considerable length, and was practically defeated by 
 amendments. 
 
 The second funding bill was introduced in December, 1867. It 
 provided for a domestic loan at five per cent., and a foreign loan at 
 four and a half per cent. It ])rovided for funding United States notes 
 and for a sinking fund. This was debated and somewhat mutilated in 
 the Senate, but passed the Senate iu an amended shape, passed the 
 
FUNDING BILL. 249 
 
 House of Eepresentatives, and was finally defeated by the pocket veto 
 of President Johnson. 
 
 The history of the funding bill of the last session, which proposed 
 a ten-forty loan, is sufiiciently known, and I need not refer to it. It is 
 sufficient to say that at the close of an old Administration, before the 
 new Administration came into power, there was so great a diversity of 
 opinion, among the friends of the bill, that it was impossible to agree 
 on anything. 
 
 The time now is more favorable. The executive and legislative 
 branches of the Government are in harmony. There are no political 
 objections to trusting the Secretary of the Treasury with sufficient 
 power. No doubt exists now as to the payment of our bonds in gold. 
 Whatever doubt there was has been removed by the " act to strengthen 
 the public credit," passed on the 18th of March, 1869. The difference 
 between United States notes and coin is now redxiced to from fifteen 
 to twenty per cent., fluctuating slightly from day to day. Gold is lower 
 now than it has been at any time since ^the close of the war. The dif- 
 ference between our bonds and coin is now very small. To-day, while 
 I speak, the bonds of 1881 are above, the five-twenty bonds are very 
 near, and the ten-forty bonds are not more than four per cent, below, 
 par in gold ; so that there can scarcely be a doubt that under a favor- 
 able state of the money market the existing bonds may be paid off with 
 the proceeds of bonds bearing a lower rate of interest. 
 
 Again, sir, more of the debt is now redeemable. During the cur- 
 rent year over eleven hundred million dollars of the public debt, more 
 than half of that which bears coin interest, is redeemable at the plea- 
 sure of the United States. It is within the power of the Secretary of 
 the Treasury to pay them off at par in gold, if he can sell at par an- 
 other bond bearing a lower rate of interest. 
 
 Under these favorable circumstances the Committee on Finance had 
 before them several plans. They had the several bills reported from 
 that Committee previously. They had the plan submitted by the Sen- 
 ator from Massachusetts [Mr. Sumner], a carefully considered plan, 
 looking to the rapid resumption of specie payments. They had also a 
 plan submitted by the Secretary of the Treasury, and were aided by 
 consultation with him and by such information from time to time as he 
 could give them, and the result of the whole, after the most careful 
 analysis of these various propositions, and after patient consideration of 
 all the objections made, is the bill that has been read at the table of the 
 Secretary. 
 
 Mr. President, I am here bound to say at the outset that it does not 
 meet my views in all particulars. I could, as every Senator who hears 
 me could, propose. various amendments, and support them, I think, with 
 plausible reasons ; but in a measure of this kind, where there is a great 
 diversity of opinion, all of us must yield somewhat. This bill substan- 
 tially meets my views. It is reported by the unanimous vote of the 
 Committee on Finance, with only one exception, and meets the ap- 
 proval of the Secretary of the Treasury. It is only necessary for me 
 now briefly to look at its leading provisions. 
 
 The first point is ia regard to the duration of the bonds : how long 
 
250 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 sliall they run ? We have provided for three classes of bonds, all pay- 
 able within forty years and redeemable within ten, fifteen, and twenty 
 years respectively. We had to look at the established policy of our 
 Government never to issue a veiy long bond. Our Government has 
 reversed the financial policy of European governments, and especially 
 of the Government of Great Britain. In England securities are in the 
 form of annuities, where the amount of interest is specified, and no 
 time is fixed for the payment of the principal. Ever since the foun- 
 dation of our Government under the lead of Alexander Hamilton we 
 have followed a different policy, looking always to the payment of the 
 principal of the bond within the generation that created the debt. 
 This is the established policy of our country, and I trust it will never 
 be departed from. 
 
 It may be that a bond running an indefinite period of time, a per- 
 petual annuity, might bear a higher price in the money markets of the 
 world than a bond payable at a fixed time ; and yet it seems to me it is 
 more important to reserve the right to pay the principal without paying 
 a premium than it is to avail ourselves of a lower rate of interest on a 
 bond interminable in time. We have several times paid off our na- 
 tional debt. We paid off the debt of the Revolution ; we paid off the 
 debt of the war of 1812. We have always paid our debts before we 
 agreed to pay them ; and, whenever we entered the money markets of 
 the world to buy our bonds, we were always compelled to pay a large 
 premium. I have before me a table showing the amount of premium 
 we have paid for debts that have been redeemed from time to time. 
 Take the loan of 1842. We desired to redeem it before it became 
 due, and we paid fourteen and fifty-four hundredths per cent, premium. 
 On the bonds of 1847 we paid eighteen and eighty-five hundredths per 
 cent, premium, and they only ran a few years ; but money was lying idle 
 in the Treasury, and it was deemed best by those having charge of our 
 finances to pay them off, even at this high rate. The loan of 1S48 
 was paid off at twenty per cent, premium. The loan of 1850, called 
 the Texas indemnity, was paid off at a premium of nineteen and nine- 
 ty-five hundredths per cent. So with other loans paid off at different 
 times at a premium of from fourteen to twenty per cent. Many of 
 the bonds I speak of, which were redeemed at this high premium, were 
 sold originally below par. 
 
 I have shown, therefore, that it is important to us to reserve the 
 right to redeem these bonds within a limited period of time, so that 
 we may not in the future be compelled to pay high rates of premium. 
 
 The next question, on which there was a great deal of practical 
 difficulty and great diversity of opinion, was the rate of interest. As 
 a matter of course, we desire to have these bonds bear as low a rate of 
 interest as is possible, but not to put them so low as to prevent their ne- 
 gotiation ; and here an erroneous opinion prevails from a mistake of 
 the facts as to the rate of interest paid by other governments. We ai-e 
 constantly told that Great Britain pays but three per cent, interest, and 
 that her three per cents are worth eighty-five cents on the dollar. So 
 they are ; but what did Great Britain get for those three per cents ? 
 The average rate of depreciation when the three per cents were sold 
 
FUNDING BILL. 251 
 
 was some thirty or forty per cent. ; and, if the interest was now com- 
 puted upon the amount received by Great Britain for these bonds, the 
 rate of interest would be found to be between five and six per cent. 
 So with other nations. 
 
 The rate of interest now paid by European powers is, on the aver- 
 age, about five per cent. I have tables here, and I might go into elab- 
 orate explanations of the various loans now in the money markets of 
 the world ; but it is sufficient to say that some of the strongest govern- 
 ments in the world are now selling their five per cent, bonds at a dis- 
 count. We by this bill limit the Secretary of the Treasury to selling 
 these bonds at par ; he must get dollar for dollar in gold. All other 
 governments in the world, in negotiating bonds, sell their bonds at a 
 fixed limit of discount. Many of the English three per cents were 
 sold as low as 66, and premiums were given besides in the nature of 
 gratuities, lottery tickets, exchequer bills, and in various other forms ; 
 but we seU our bonds at par in gold, and therefore can not undertake 
 to fix the rate of interest so low as gentlemen think we should. It is 
 said we ought to borrow money at four per cent. I wish we could ; but 
 we know that practically it would be unavailing, futile, to enter the 
 markets of the world in competition with all the enterprises of our 
 time, attempting to borrow money at any such rate of interest. 
 
 Why, sir, altnough money has largely increased in quantity of late, 
 although the gold of the world is perhaps double or treble what it was 
 only a few years ago, the rate of interest has been constantly advanc- 
 ing. It is because modem nations are engaged in vast enterprises, 
 creating more demands for capital. The railroads, telegraphs, and steam- 
 boats of this land of ours now absorb more capital than the business 
 of the whole country did in 1820, the railroads alone absorbing over 
 sixteen hundred million dollars. There are demands for money in 
 this day and generation that our forefathers never conceived of. Time 
 and space have been annihilated. All these circumstances tend to ad- 
 vance the rate of interest. When a merchant can send to Calcutta or 
 to China and within a few days receive goods, he can afford to pay on 
 his enterprises or his business a higher rate of interest than when he 
 had to wait months for his orders to be executed. The railroads of the 
 country are now selling their seven per cent, bonds payable in gold — 
 among the best securities in the country — at a discount. 
 
 We must not forget these facts when we undertake to fix the rate 
 of interest on our public securities. The only fear I have as to the 
 success of this measure is on account of the rate of interest fixed. I 
 should be very glad indeed to see our whole debt funded at five per 
 cent. The Secretary of the Treasury was of the opinion that he could 
 negotiate bonds bearing a less rate of interest for a portion of the pub- 
 lie debt ; but he is satisfied now that he can not negotiate a loan at less 
 rates than those fixed in the bill. Any one who examines this question 
 in the light of experience, in the light of modern facts, must be satis- 
 fied that a reduction of the rate of interest proposed in this bill is prac- 
 tically to defeat it, and we would better defeat it at once rather than 
 undertake so futile a task. 
 
 The purpose for which these bonds are negotiated is coextensive 
 
252 SPEECHES AND REPORTS OF JOHN SHEKMAiS. 
 
 with the whole debt of the United States. Although the amount is 
 fixed at $1,200,000,000, yet there is authority to issue four per cent, 
 bonds to an amount equal to the whole amount of the public debt, 
 with no limitation whatever, except that the pubUc debt shall not be 
 increased. The proposition of the Senator from Massachusetts con- 
 iined the operation of his bill to the first five-twenty bonds. But those 
 five-twenty bonds have no claim upon us stronger than any other five- 
 twenty bonds. It is true that thev were the first issued, but they are 
 no more burdensome upon us. A^e pay upon them six per cent, inter- 
 est, and so do we upon the others. There is therefore no necessity, no 
 object in discriminating in favor of these bonds, except to give the 
 holders of them a monopoly of the new five per cent, bonds. This we 
 did not think was wise, and hence we have proposed to put them all 
 on the same footing. 
 
 We allow the tlnited States notes to be converted into four per 
 cent, bonds ; and here is a question that no doubt will give rise to 
 much contrariety of opinion. My own opinion would be that in jus- 
 tice and equity the IJnited States notes ought to be converted into any 
 of these bonds. Why ? Because the notes are a debt of the highest 
 obligation. They are due, they are payable, and no discrimination 
 ought to b3 made against them. I can give no reason why the holder 
 of a note should not have just as much for his note as the holder of a 
 bond for his bond. But tlie result of such a provision would be rapid- 
 ly to contract the currency, to withdraw the notes as a circulating me- 
 dium, to derange business, to disorder the relations between debtor and 
 creditor. Therefore, to avoid any contraction of that kind, we have 
 provided that the notes may be funded into four per cent, bonds, and 
 may be paid out again by the Secretary of the Treasury in the ordi- 
 nary operations of the Government. To avoid even a possible but not 
 probable undue and hasty contraction of the currency, we authorize 
 him only to allow this conversion when in his judgment the public 
 interest may be promoted by it. I have no doubt that it would be 
 wiser to make it arbitrary, and give to the holder of the note the right 
 at any time to demand a bond ; but we have in that respect yielded to 
 the Secretary's desire, that he may not be embarrassed by notes accu- 
 mulating in the Treasury, or by any question or fear of the contraction 
 of the currency. 
 
 Pacific Railroad bonds are excluded from the operation of this bill 
 simply because they are not the bonds of the United States in one 
 sense. We guarantee them, but we have no right to redeem them 
 until the railroad company itself is a defaulter in paying not only the 
 interest, but the principal of the bonds. They are left to stand on the 
 basis of existing laws. We have no right to fund them, nor can they 
 be embraced in this funding scheme. 
 
 The bonds of 1881 and the ten-forty bonds may be converted into 
 these bonds at the discretion of the Secretary of the Treasury. As a 
 matter of course, it will be for the interest of the TTnited States to 
 convert tliem. It is not likely that they will bo fiinded into these new 
 securities, but tlicy will probably bo paid off by the operations of the 
 sinking fund when they mature. The only limitation upon the amount 
 
FUNDING BILL. 253 
 
 authorized in this bill is the present debt of the United States. That 
 can not in any event be exceeded. 
 
 Mr, President, there is another question of great difficulty, the 
 question of taxation. The exemption of these bonds from State taxa- 
 tion is not a legislative question. If there was no provision in this 
 bin about State taxation, they would not be taxable by the States, be- 
 cause by the Constitution of the United States itself, according to the 
 decisions of the Supreme Court in many cases, no State can tax a 
 Government security. This has been settled from 1819 down to this 
 time by the concurrence of every judge who has sat upon the Supreme 
 bench, in a series of decisions all speaking to the same effect, that 
 under no possible circumstances can a State levy any tax upon a secu- 
 rity of the Government of the United States. Why? Simply be- 
 cause the power to borrow money is necessary to our national exist- 
 ence, and if a State could tax the power of the United States to bor- 
 row money, it might just as well tax the soldiers of our army, our 
 funs, and our gunpowder. It is a principle of constitutional law that no 
 tate can tax an agency of the Government necessary for its existence. 
 I know that in modern times, and within the last three or four 
 years, demagogues have endeavored to make capital out of the exemp- 
 tion of our bonds from State taxation. But the fact is that they have 
 always been so exempt, from the foundation of the Government to 
 this hour. E"o State has ever bean allowed to tax a Government se- 
 curity ; and yet there was never any provision in any loan law prior 
 to the war exempting them. They are exempted from the nature of 
 things ; and the first provision expressly exempting them was put 
 into the act of 1862 merely as a notice, and not as the enunciation 
 of a new principle. There is, therefore, no question upon the ex- 
 emption of the bonds from State taxation. 
 
 Whether they should be exempt from national taxes is a much 
 more difficult question. In equity there is no reason why the holder 
 of a bond, enjoying in this country the interest derived from it, 
 should not pay the income tax of the United States ; and the only 
 question was whether we could make more for the United States by 
 discounting in advance this right to tax the income than we could 
 by reserving the power to tax. I think it can be demonstrated as 
 clearly as any proposition in arithmetic can be, that it is largely for 
 the interest of the United States to make these bonds free and clear 
 of all taxes, both State and national. Why? The bonds of the 
 United States can not be subjected to national taxation except in 
 one form, and that is the tax on income. ISTo discriminating tax can 
 be levied on United States bonds that would not be equally applicable 
 to aU other bonds in the country, because all taxes must be uniform 
 throughout the United States ; and it is impossible to tax a Govern- 
 ment bond unless you tax also the bonds of railroad companies, of 
 States, of all sorts of corporations, and all the various forms of in- 
 debtedness. Besides, there may be some question whether any tax upon 
 property of this kind, fixed and acquired, is not a direct tax within the 
 meaning of the Constitution ; bat I will not debate that question. 
 It is certain that no tax can be levied on these national securities 
 
254 SPEE0I-IE8 AND REPORTS OV JOHN SHERMAN. 
 
 except the income tax, which is an indirect tax upon the income derived 
 from Government securities. Now, if we reserve the power to tax 
 the incomes on these $1,200,000,000 of bonds, what do we gain hj it? 
 In the first place, all those that are held abroad in foreign countries are 
 free from the operation of the tax. Not only that, but by our general 
 law we exempt the income of all persons whose incomes are less than 
 $1,0U0 from taxation, whether they are derived from national securi- 
 ties or from any other source. All the bonds that are held by the 
 national banks as the basis of their banking operations are now taxa- 
 ble, and will be in the future, in another way ; so that practically we 
 now do not receive from the tax upon income from Government bonds 
 exceeding eight hundred thousand dollars aU told. There are no defi- 
 nite returns made of internal revenue showing exactly the amount of 
 the income tax derived from the interest upon Government securi- 
 ties ; but the amount is very small, and probably does not exceed what 
 I have just stated. Therefore the Committee, after a patient examinar 
 tion of the matter, deemed it to be for the interest of the United 
 States, as a mere financial question, to discount in advance the right of 
 the nation to tax the Government securities, in order that we might 
 induce people to lend us money on bonds at a lower rate of interest, 
 free from all taxes whatever. It is, however, a question for the Sen- 
 ate to determine. 
 
 Now, sir, with regard to the manner of the negotiation of these 
 bonds, the bill leaves that substantially to the discretion of the Secre- 
 tary of the Treasury. When you put upon him a great task like this, 
 involving, if he succeeds, the saving of from eighteen to thirty-four mil- 
 lions per annum in gold, you can not hamper him with conditions. If 
 you can not trust him, some one else ought to take his place. You 
 must give him the necessary agencies and the necessary powers to carry 
 on the operations of a great task like this. Therefore in this bill we 
 have inserted the usual powers, which before and during the war were 
 given to every Secretary of the Treasury, but which there is a con- 
 tinual disposition to carp at. I recall with pleasure the language of 
 Mr. Fessenden, in his report to us in 1864, when Secretary of the 
 Treasury, upon this very question of discretionary authority conferred 
 upon the Secretary : 
 
 A wide discretion should be intrusted to the officer charged with the duty of 
 negotiating loans, in order that he may be enabled to avoid unexpected difficulties 
 occasioned by possible conditions of the money market. This delicate and responsi- 
 ble duty must necessarily be intrusted to somebody, and the people can have no 
 other reliable security for faithfulness than may be found in the established charac- 
 ter of the individual charged with so important a trust, whoever lio may be. 
 
 Now, sir, what are the discretionary powers conferred on the Secre- 
 tary of the Treasury? First, we authorize him to employ private 
 agents ; and it is proposed, to avoid t'liis, to require all the operations 
 01 negotiating this loan to be done l)y the Treasury Department. Why, 
 sir, tliis is practically impossible. Every nation in Europe, and our own 
 nation in three memorable [WTiods, have found it to be so. The ma- 
 chinery of the Treasury De]xirtment is not adapted for the negotiation 
 of these loanp. Even the powerful governments of Great Britain, of 
 
FUNDING BILL. 255 
 
 Eussia, of France, resort to private bankers or agents to carry on the 
 operations of funding their debts. All railroad corporations and all 
 associations seeking to borrow money in the money markets of the world 
 must seek these intermediate agencies. 
 
 Three times during the war we tried to avoid it. Mr. Chase, when 
 Secretary of the Treasury, tried to negotiate the five-twenty loan 
 through the Treasury Department, and failed utterly for more than a 
 year, until finally he, under similar authority to that conferred in this 
 bill, employed private agents, who within six or eight months from that 
 time sold the whole loan. So Mr. Fessenden, when Secretary of the 
 Treasury, undertook to carry on a negotiation by the aid of the national 
 banks and the Treasury Department, and he finally in his report said 
 that he found himself unable to get the requisite money in that way, 
 and was compelled to resort to private agencies. So with Mr. McCul- 
 loch under similar circumstances. Here the authority is conferred to 
 employ agents with limited power and with limited pay ; and if you 
 will not trust the Secretary of the Treasury with these discretionary 
 powers, of course you may so cripple and tie up his hands as to prevent 
 him from negotiating the loan. 
 
 There is another difiiculty presented, I think, for the first time in 
 this bill. There is authority granted in this bill to employ foreign 
 agents, or bankers in foreign countries. Although in some of the loan 
 laws passed during the war the authority was granted to negotiate 
 bonds in Europe, yet I do not find in any of the loan laws express 
 authority to employ agents in foreign countries, although such agents 
 have often been employed. But here the authority is expressly given. 
 The reason for it is that the great mass of our public debt which can 
 be funded at a low rate of interest is now held abroad. Mr. Wells, in 
 his annual report, made here recently, estimates the amount held in 
 Europe at $1,000,000,000. I believe he has overstated it ; but at the 
 same time I believe it approaches $1,000,000,000, and is about one 
 half the funded debt of the United States. The rate of interest in 
 foreign countries is lower than in this country, and it is therefore proba- 
 ble that we can negotiate bonds on more favorable terms abroad than 
 here. All this is left to the discretion of the Secretary. He is author- 
 ized to negotiate bonds at home and abroad, and to do it either through 
 the Treasury Department or private agents here or in Europe. He 
 may also print on the face of the bond the authorization of the pay- 
 ment of interest in the coin of the country in which they are negotiated. 
 He is authorized to pay the interest in thalers, in francs, in sterling, in 
 order to avail himself of the lowest possible rate of interest. 
 
 I hope that this part of the measure will finally lead to what has 
 been so eagerly sought for by the honorable Senator from Massachu- 
 setts and myself, an international coinage. It is very easy now, if we 
 could approach this question as practical business men, to adopt a coin- 
 age unit as the standard for all the civilized nations of the world. 
 
 It has been a theme for poets and statesmen now for more than a 
 generation. There is a concurrence of opinion in Europe and in Amer- 
 ica in favor of the adoption of a system of international coinage, which 
 I believe will now lead to practical results. A very slight change in 
 
256 SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 the coinage of Germany, France, England, and our own country will 
 enable us to make our national coins convertible one into the other 
 without loss by exchange ; and I have the hope that this measure, now 
 for the first time transferred to our diplomatic service, wiU be brought 
 about by the common consent of the different nations affected. It will 
 be one of the greatest reforms in modern times when five francs will be 
 a dollar, five dollars a pound sterling, ten florins a pound, and the eagle 
 of America the international imit of the civilized world. Then the coin 
 of all modern nations may travel anywhere in the pockets of the citi- 
 zens of all nations, interchangeable in every country, its value fixed 
 upon its face, and of universal circulation. I have no doubt that this 
 measure will tend eventually to the adoption of such a system of inter- 
 national coinage, and in that aspect will be a scientific as well as a 
 financial benefit. 
 
 I wish now, Mr. President, to call the attention of the Senate very 
 briefly to the sinking-fund section of this bill. Section seven provides 
 for the appropriation from the duties on imported goods of $150,000,- 
 
 000 in gold per annum, applicable first to the payment of the interest 
 and then to the payment of the principal. The amount of the interest 
 on the public debt is now about $125,000,000, so that this is an appro- 
 priation of $25,000,000, or one per cent, of the principal, to be kept as 
 a perpetual sinking fund, the operation of which will pay off every 
 dollar of our indebtedness, old and new, in from twenty-five to thirty 
 years, depending somewhat on the changes in the value of our bonds. 
 
 This is not only a wise financial policy, but it is the result of an ex- 
 press stipulation in the law. In the act to which I referred a while ago, 
 of February 25, 1862, we stipulated that until the debt was paid we 
 would appropriate one per cent, of its amount every year to form a 
 sinking fund for the extinguishment of the principal. This bill or- 
 ganizes the sinking fund on a new plan, which, without any risk of 
 misapplication, will extinguish the debt within the period stipulated in 
 the bonds. The United States has in substance faithfully and hon- 
 estly observed this stipulation. During the war it could not do it ; it 
 was idle to attempt it. During war a sinking fund is a delusion ; it 
 can not operate except from a surplus revenue. AH the theories tliat 
 have grown out of the experiment in England have been shown to be 
 delusive, except in a state of peace, and when there was a surplus rev- 
 enue. Then the application of a sinking fund is like Aladdin's lamp, 
 it works wonders. 
 
 I said that the United States had constantly maintained the integrity 
 of the sinking fund, not in the form provided by the law, but bv aii 
 actual payment of a greater amount of the debt than was stipulated. 
 
 1 have in my hand a table, showing the amount paid each year since 
 the close of the war on the principal of the public debt. 
 
 On the 1st of March, 1866, our debt reached the highest figure. It 
 then amounted to $2,823,92+,!»51» ; or, deducting the cash in the Trea- 
 sury, to $2,707,906,000. From the 1st of March, 186(5, to the 1st of 
 March, 1867, we paid of the principal of tliis debt $190,064,110; from 
 the 1st of Marcli, 1867, to the 1st of March, 1868, we paid $20,482,- 
 266 ; from tlio Ist of March, 18^8, to tlie 1st of March, 1869, wo paid 
 
FUNDING BILL. 257 
 
 $5,959,918 ; from the 1st of March, 1869, to the 1st of March, 1870, 
 to-morrow, estimating for a few days, we have paid $86,695,620 of our 
 bonded indebtedness ; maJiing an actual payment in four years of $303,- 
 201,725, or an average annud payment on the ascertained debt during 
 the last four years of $75,800,431. 
 
 ISTot onljikthat, but we have paid in addition a large mass of un- 
 liquidated debt. I have in my hand a statement or estimate prepared 
 by the Secretary of the Treasury, showing that during four years we 
 r have paid $777,540,634 of unliquidated debt, in addition to the $303,- 
 201,725 of the principal of the liquidated debt ; making the total pay- 
 ments on the debt, besides interest, over $1,000,000,000 in four years. 
 This unliquidated debt consisted of supplies furnished, of unpaid re- 
 quisitions, of bounties and back pay, and other debts in various forms 
 outstanding, not entered on the books of the Treasury, but just as much 
 the debt of the country as :five-twenty bonds. All these have been 
 paid from the ordinary revenues of the Government in addition to the 
 $303,000,000 of bonds. It is believed that it is high time the people 
 of the United States should be somewhat relieved from such large pay- 
 ments, and that the policy requiring them should be suspended ; but we 
 should faithfully carry out the obligation of the contract, and pay at 
 least one per cent, annually. 
 
 Mr. President, I have shown above that during the 'present year, 
 the first year of General Grant's admioistration, we mve paid $86,000,- 
 000 of the public debt ; and that during the last year of Mr. Johnson's 
 administration there were only five or six millions of the public debt 
 paid under the same revenue laws. This presents a favorable aspect 
 for the party to which the great majority of the Senate belong. I 
 wish to carry the comparison a little further. I have a table here show- 
 ing the receipts and expenditures of the last year of Mr. Johnson's ad- 
 mmistration compared with the receipts and expeiises of the first year 
 of General Grant's administration, and the result is highly favorable to 
 the EepubHcan party. Although I do not intend to drag into this dis- 
 cussion anything like political controversy, yet it is due to the Adminis- 
 tration that these official figures should be put on record, so that it may 
 have the benefit of the credit due to its management of our public 
 finances. The income of the Government from March 1, 1868, to 
 March 1, 1869, was as follows : 
 
 From customs $176,200,692 79 
 
 From internal revenue 155,138,168 99 
 
 From other sources 36,929,656 99 
 
 Total $368,268,518 77 
 
 The income from March 1, 1869, to March 1, 1870 (estimating for 
 
 the last six days of the year, from February 22 to February 28), will be : 
 
 From customs $179,956,743 85 
 
 From internal revenue 175,467,141 04 
 
 From other sources 39,636,213 93 
 
 Total $394,959,098 82 
 
 Income in 1868-'69 368,268,518 77 
 
 Increase in favor of 1869-'70 $26,690,580 05 
 
 17 
 
258 SPEECHES AND BEPORTS OF JOHN 8HEEMAN. 
 
 This statement is not absolutely correct, because the accounts of the 
 Department are kept by quarters and not by months, but it is very 
 nearly so, and may be relied on for any ordinary purposes of com- 
 parison. 
 
 The total expenditures from March 1, 1868, to February 1, 1869, were $327,067,284 53 
 
 The total expenditures from March 1, 1869, to February 1, 1870, were . ^ 271,927,303 09 
 
 Decrease in expenses $66,139,981 44 
 
 Increase of income 26,690,680 05 
 
 Balance in favor of Grant's administratiou $81,830,561 49 
 
 Actual payment of the public debt since March 1, 1869, to February 1, 1870. $80,649,971 09 
 Estimated payment in February, 1870 6,000,000 00 
 
 Total $86,649,971 09 
 
 Reduction of public debt from March 1, 1868, to March 1, 1869 5,959,718 46 
 
 Amount of public debt paid in first year of Grant's administratiou in 
 
 excess of last year of Johnson's administration $80,690,252 63 
 
 The last year of Mr. Johnson's administration diminished the prin- 
 cipal of the public debt but a little over five millions, while, as I have 
 already shown, there has actually been paid upon the public debt du- 
 ring the first year of this administration $86,649,971 ; and nearly all 
 the money that has been paid upon the public debt in the past year has 
 been derived from the saving in expenditures and the increased collec- 
 tion of revenues under the same laws. These are simply facts derived 
 from ofiicial sources, and inure greatly to the benefit of the present 
 administration. I only hope it will go on and do better in the future. 
 
 Mr. President, the three remaining sections of this bill apply to the 
 national banks. That is much too great a theme for me to enter upon 
 at this stage of the debate ; but I will explain in a very few words the 
 theory of those sections. The national banks are mere creatures of law. 
 They hold their existence at the pleasure of Congress. We may to- 
 morrow, if it promotes the public interests, withdraw their authority. 
 Their franchise has been valuable to them. "We think it right that 
 they should aid us in funding the public debt. They hold of our secu- 
 rities $346,000,000. Nearly all of these bear six per cent, interest in 
 coin. We will not deprive them of any of them ; we will not take 
 from them the property they enjoy ; we will not deny them even the 
 payment of six per cent, gold interest as long as they ai'e the ownera of 
 these bonds. But they hold the franchise of issuing paper money guar- 
 anteed by the United States, which constitutes the circulation of our 
 country ; and we say that, enjoying that franchise, we now stipulate with 
 them for the reduction of interest on the bonds they hold. The pro- 
 visions of this bill are not arbitrary ; they are not hai-sh ; they do not 
 take from the national banks any right which they enjoy, except one 
 confessedly at our pleasure. If they are not content to enjoy their 
 franchise on the terms proposed, they can retire. 
 
 As to new banks which may be organized under the free-banking 
 section, it is easier for them to engage in banking under this bill than 
 under the old law, because they can go to the Treasury and buy bonds 
 at par in currency, and upon these receive circulating notes, and a cor- 
 
FUNDING BILL. , 259 
 
 responding amount of legal tenders will be then canceled. The new 
 banks may issue in circulating notes four fifths of the amount of their 
 bonds under the terms and conditions of the banking act, while, if they 
 were now required to go into the market to buy bonds with which to 
 start new banks, they would be compelled to pay a premium of from 
 ten to twenty per cent, for the existing bonds, and then could issue 
 only ninety per cent, of the amount of the principal of the bonds. 
 
 I think it is very clear that under the last section of the bill the 
 banking system becomes free, and old and new banks are on an equal 
 footing ; but if it is not clear, it ought to be made so. The section is 
 intended to be a free-banking law, opening wide the door for the or- 
 ganization of banks to any extent, only upon condition that an equal 
 amount of greenbacks shall be retired as the new notes are issued. 
 That is the purpose. The only limitation on it is the amount of green- 
 backs now outstanding ; and when they are exhausted, it will be for 
 Congress.to determine whether we shall go further. 
 
 Such, sir, are the general provisions of this bill. The great object 
 is the reduction of the interest of the public debt. If the 11,200,000,- 
 000 proposed is taken, it will be a reduction of our annual taxes of 
 $18,000,000 of gold, representing a capital at five per cent, of $360,- 
 000,000 ; and the incidental results of this measure wiU be as beneficial 
 as the direct saving of the public treasure. A policy will be adopted, 
 by fixing the minimum to be applied to the payment of the public 
 debt, that will enable us to ascertain precisely the amount of necessary 
 taxes. The public debt will be represented by an annuity of $150,- 
 000,000, which will pay every dollar of it within thirty years. Our 
 taxes can then be measured by our appropriations, with the constantly 
 pressing lesson that every new appropriation is a new tax, and every 
 saving of appropriation is the repeal of a part of the most burdensome 
 of existing taxes. And, sir, the tendency^of the measure is to the re- 
 turn of specie payments. We now again restore to the United States 
 note its quality of redeemableness, a quality which was taken from it 
 under the pressure of the war, and which when restored to it will give 
 it value and stability, will place it beyond the range of mere gamblers, 
 and will firmly anchor it upon the credit of interest-bearing securities, 
 so that while specie payments are suspended the note will not fall in 
 market value below the value of the bonds. Having thus fixed a mode 
 of redemption and a limit of depreciation, you may hope soon to see 
 these broken promises redeemed and their places supplied with paper 
 money, convertible at pleasure into gold or silver coin. 
 
 And, sir, the beneficial effect of this measure wiUbe seen in the re- 
 duction of the rate of interest on capital employed in private enterprise, 
 which by the usurious rates paid by the Government during the war 
 has been forced to an average in the United States of ten per cent. 
 This unnatural rate has tended to deter new enterprises, to accumulate 
 capital, and to increase prices ; for interest is a large element in the 
 cost of all commodities. 
 
 The national banks will be required to aid us by some sacrifices on 
 their part, but even this is voluntary with each bank. If any of them 
 do not choose to enjoy a privilege conferred and held at the pleasui'e 
 
260 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 of Congress, they are at liberty to take their property and retire. 
 Otliers will gladly avail themselves of the privilege of buying these 
 bonds, with the right to issue four fifths of their amount in paper 
 money iipon their security. If bankers, whose profits have been largely 
 increased by the high premium in gold received of the Government, 
 will not now aid us to reduce our interest, let them take their money 
 and try other investments if they will. I would not violate in the 
 slightest degree any promise made to them ; but the probable effect of 
 this measure in reducing their dividends does not excite my sympath;y, 
 nor do I believe it will deprive us of any of the banks or banking capi- 
 tal necessary to the good of the people. Under this system, as it will 
 remain under this bill, these bonds will be the most remunerative and 
 attractive investment for idle capital managed in the interest of those 
 not willing or able to manage it by personal care. 
 
 And, sir, another beneficial effect of this measure, if adopted, is 
 that we will have a financial policy. The broken threads made by the 
 revolutionary expedients of the war will be tied again. Business men 
 can know what to rely upon. They will not have to look daily to the 
 Treasury Department for its bulletin of the sale of gold or of bonds ; 
 they will not have to depend upon an inflexible and arbitrary limit of 
 a currency which is not measured in value by gold, bonds, or anything, 
 which is redeemable in nothing but taxes, and the price of which may 
 at any time be affected by speculation ; they will not have to compete 
 with the United States in the money markets to borrow at a usurious 
 interest. No longer will there be doubts as to the terms of our out- 
 standing bonds. The danger, I trust a remote one, of a political party 
 coming into power pledged to repudiation, will be put to rest. No one 
 could raise the question of taxing bonds bearing so low a rate as these, 
 on which the taxes are so plainly discounted and reserved in advance 
 by the United States. 
 
 As to the practicability of this measure, the only doubt I have upon 
 it rests upon the ability of the Secretary of the Treasury to negotiate 
 a bond having a less rate of interest than five per cent. ; but as he is 
 confident that he can do so, I am willing that he should try, and am 
 willing to give him every aid and power that will tend to make his 
 effort a success. If he succeeds, he will deserve the higher credit. 
 That he can fund the debt at five per cent. I have not a doubt. If he 
 does better, he will have the thanks of his countrymen, and should re- 
 ceive from Congress every aid and facility it is possible for us to give 
 him. 
 
 To the extent that these bonds are made the basis of banking, their 
 sale is practicable and just. Beyond that it will do]icnd upon the con- 
 fidence of capitalists in the public faith, in the development of our re- 
 sources, and in the willingness of our ]H'ople to bear for a while the 
 burden of taxation. Nothing can aid so much as strict economy and a 
 surplus revenue. Money saved or colloctod now will be saved to our 
 people many times in the lessoning of the taxes in the future. 
 
 riiis is not the time to discuss the question whether, while the 
 funding ]irocess is going on, it is wise to reduce our taxes. That ques- 
 tion will be distinctly presented when the tax and tariff bills come to 
 
FUNDING BILL. 261 
 
 us from the House. It is clear enough that in a short time we shall be 
 able to reduce largely our internal taxes and confine their operation to 
 a few articles. I hope we shall not complicate this bill by a premature 
 discussion as to the kind of taxes to be first repealed. We know well 
 that, if this measure is a success, we can go much further in the repeal 
 of taxes than if we continue to pay six per cent, interest on our debt. 
 The question of taxation is subordinate to and should be dealt with so 
 as to promote the success of this measure. If by maintaining our 
 present taxes for a year we can seciire the permanent reduction of our 
 interest, it would be an act of statesmanship to do so, even though the 
 taxes are heavy.- 
 
 A surplus revenue is the most effective agency to employ for the 
 reduction of the interest of the debt; but it is equally clear that 
 diminished expenditure and postponement to the future of bew objects 
 of expenditure will promote the success of this measure. If we are 
 now wise enough to act in harmony with the policy of the President, 
 if we will now reduce expenses and maintain taxes, we can by the suc- 
 cess of this measure pave the way for a very large reduction the 
 moment our debt is funded. With a surplus of $100,000,000, with the 
 increased value given to our bonds by a postponement of the payment 
 of the principal, with power to borrow and pay money when money is 
 the cheapest, and, above all, with the confidence that wiU be inspired 
 by a fixed financial policy, I am confident that the whole $1,200,000,- 
 000 provided by this bill may be placed at par within a reasonable 
 time. 
 
 And, sir, one of the most effective agencies in the success of this 
 measure is the information now universally diffused throughout the 
 civilized world of our great power and resources. Before the war the 
 power claimed for the several States kept us in the money market as a 
 confederacy of States, and not as a nation. Slavery threatened us with 
 a perpetual civil war ; it mingled in all our poHtical contests, arrayed 
 us into sectional parties, and in the judgment of sagacious statesmen 
 was to tear the fabric of republican government from turret to founda- 
 tion stone. All this is happily ended. No interest or faction threatens 
 the national authority. Forty-two milKons of free people, confessedly 
 among the most enterprising and intelligent of the hiunan race, with a 
 Government tested in civil and foreign war, securing to aU the equal 
 benefit of the laws, the privilege of free education and religion, the 
 protection of property, and equality in every field of enterprise, in- 
 habiting a vast region in the fairest portion of a great continent filled 
 with xmdeveloped resources, furnish a guaranty of public credit as 
 strong as any human government can offer. With such advantages, 
 now universally appreciated, we may with reasonable confidence hope 
 to sell our bonds on as favorable terms as any nation of the world. 
 
 But, sir, whether we succeed in negotiating all the bonds provided 
 for in this bill, or fail in some of them, we can assure the Senate that 
 this measure, to any extent to which its provisions can be enforced, 
 will tend to the pubKc interests. 
 
 This bill does not undertake arbitrarily to fix a day for the resump- 
 tion of specie payments. Human wisdom can not foresee a guard 
 
262 SPEECHES AND EEP0RT8 OF JOHN" SHERMAN. 
 
 against the numberless contingencies that affect our power to resume. 
 The attempt to fix a day win only invite a severe contraction or a 
 hoarding of currency, and thus make more difficult actual resumption. 
 Nor does this bill provide for an arbitrary contraction of the cur- 
 rency. To the extent that currency flows into the Treasury in pay- 
 ment for four per cent, bonds, and is not paid out for ordinary wants, 
 its volume will be reduced, but only when its exchange for such bonds 
 shall absolutely demonstrate its redundancy. 
 
 As bank notes are issued, United States notes will be retired, thus 
 changing the burden of resumption from the United States to the 
 banks by their volimtary consent. There is no possible inflation of 
 the currency, and I can not conceive a state of facts that would induce 
 me to enlarge its volume until it is redeemable in gold and silver coin. 
 All we can say is that this bill, so far as it affects our paper currency, 
 will increase its value and bring it nearer and nearer to the gold staoa- 
 dard. 
 
 Sir, we have seen many changes in the progress of the great events 
 through which we have passed. We have seen our country nobly 
 passing through the greatest civil war of modem times. We have seen 
 slavery abolished, and liberty and political rights secured to all our 
 citizens. We have passed through financial difficulties without taint 
 of dishonor. If we can now restore our suspended notes, the favor- 
 ite currency of our people, by a gradual process of appreciation, to 
 the constitutional standard, we shau have witnessed from the begin- 
 ning to the end the most remarkable era in the history of any people. 
 
 With the firm faith that this measure will tend to this result, I 
 ask for it the considerate judgment of the Senate. 
 
 FUNDING BILL. 
 
 IN THE SENATE, MARGES, 1870. 
 
 The bill to authorize the refunding and consolidation of the national debt, to 
 extend banking facilities, and to establish specie payments, being before the Senate, 
 Mr. Sherman said : 
 
 I WOULD like to inquire of the honorable Senator from Massachu- 
 setts why it is that he desires to give the holdera of the firet five-twenty 
 bonds a monopoly of this five per cent, loan ? Is the obligation of a 
 five-twenty bond of 1862 any stronger, or is it more oppressive to the 
 United States, than any other five-twenty bond ? Is there any greater 
 obligation to pay the first issue of $500,000,000 of five-twenty bonds 
 than any others ? Is it more advantageous to the United States to re- 
 deem it than any other loan ? It is now hold abroad idmost entirely, 
 in masses in a few hands. Why give to the holders of that loan the 
 monopoly of the new five per cents., and refuse them to any other class 
 of creditors ? I never could make up my mind to accept that. 
 
 The Senator gives us a poetic reason : somebody has opposed the 
 
rUNDING BILL. 263 
 
 old five-twenties and threatened to pay them ofE in greenbacks ; and in 
 order to resent that insult on the pubuc credit he is determined to give 
 them a monopoly and the advantage of an annuity of one half per cent, 
 per year in order to wipe out that stigma. I do not think there is any 
 occasion to do that. AH the five-twenties stand on the same footing. 
 They are all issued under the same law, the act of February 25, 1862. 
 They are all equally burdensome. One thousand million dollars of 
 them are now redeemable. It is no more the interest of the United 
 States to redeem one than another ; it is its interest to redeem them 
 all ; and why give five per cents to the holders of the first five-twen- 
 ties, and probably only four and a half per cents to the holders of the 
 others, unless the poetical idea of my honorable friend is a sufficient 
 reason ? I can not answer the question myself. Perhaps he can. In 
 regard to the other points I may as well answer the honorable Senator 
 now while I am up. 
 
 In spite of the dread of which the Senator from Massachusetts com- 
 plained as having hung over the five-twenties of 1862, they have, until 
 within a year past, taken the lead in the market, and sold higher than 
 any bonds we have had, even the long loan of 1881. 
 
 The talk about paying them ofE in that way has not injured them. 
 It seems to me if we pay them off with ^ gold at par, when most of them 
 were sold by the United States at about seventy or eighty cents on the 
 dollar, we wipe out any stigma that may have been cast on them'. 
 
 But I may as well now reply to one or two other points made by 
 the honorable Senatof, so that I need not recur to them again. He 
 says that the amount of five per cents should be $500,000,000 instead 
 of $400,000,000. The answer to that, as I stated the other day, is that 
 the Secretary is of opinion, which he has now repeated in the most 
 solemn form, that with $400,000,000 of five per cents he can redeem 
 all the debt that is now desirable to redeem. I have always had doubts 
 about his abihty to redeem the mass of the six per cent, debts with any 
 bonds at a less rate of interest than five per cent. I am rather disposed 
 to concur in the opinion expressed by the honorable Senator from Con- 
 necticut on that point ; but when the oflicer of the Government who 
 is called upon to discharge this duty tells us distinctly that this is all 
 he wants of five per cent, securities, it seems to me that it is idle and 
 wrong for us to force on him a greater amount at that rate of interest. 
 That is the only answer. Four hundred million dollars at the higher 
 rate will be sufficient; and the total $1,200,000,000 will be probably 
 all that will be necessary to fund the six per cents. 
 
 The Senator from Massachusetts says that we have reduced the 
 time for the payment of these bonds from forty to twenty years. I do 
 not regard that as very material. If we reserve the right to redeem 
 after ten years, I do not deem it important whether the absolute pay- 
 ment of the debt is fixed at twenty, forty, or one hundred years. The 
 right to redeem after ten years is all that is necessary, and that should 
 be reserved in every form of loan. But we wish to hold out to the 
 world, in the negotiation of these bonds, the fact that we do not intend 
 to abandon the American system of paying our debt within the genera- 
 tion that contracted it. That is the idea. We therefore stipulate to 
 
264: SPEECHES AND KEP0KT8 OF JOHN SHERMAN. 
 
 pay each of these classes of bonds absolutely within twenty, thirty, or 
 forty years. That was the idea first advanced by Alexander Hamilton, 
 and maintained by this Government without exception to this hour ; 
 and now, when we are about to fund the debt, I do not wish to surren- 
 der the idea that we shall absolutely pay it all within forty years, and 
 that we shall absolutely pay off these five per cent, bonds m twenty 
 years. Does any Senator doubt our ability or our disposition to do it ? 
 No one can doubt it. The operation of the sinking fund alone will 
 probably pay off the debt before the time that the bonds are payable. 
 Therefore, I think it is well to maintain in this bill the affirmation of 
 the distinct policy of the Government to pay the principal of the whole 
 debt within forty years. 
 
 The only other point to which I wish to reply is as to the rapid 
 payment of the public debt. The honorable Senator objects that the 
 seventh section provides for its too rapid payment. It simply provides 
 what we agreed to pay. "We are just as much bound to pay each year 
 one per cent, of the principal of the debt contracted under the act of 
 February 25, 1862, as we are bound to pay six per cent, interest on the 
 five-twenty loans. But the Senator says that now we can make a new 
 bar^in, we can change the terms of the act of February 25, 1862. 
 
 The fifth section of the act of February 25, 1862, providing for the 
 payment of this one per cent., applies to all the debt ; and every five- 
 twenty bond now outstanding in the market is issued under the original 
 act of February 25, 1862. The amount only is enlarged ; but all the 
 subsequent issues are of the same character and description, having the 
 same rates and the same qualities as those issued under the original act. 
 So it has been regarded by all departments of the Government. The 
 one per cent, clause applies to the whole public debt, most of which 
 was created under the act of February 25, 1862. 
 
 So this is a stipulation ; it is what we have agreed to do. "We agreed 
 in that act that we would apply one per cent, of the principal of the 
 debt to the payment of the debt. The debt is now $2,500,000,000. 
 One per cent, is $25,000,000, and that must not only be applied every 
 year, but it must be applied in the nature of a sinking fund ; that is, as 
 the principal decreases the amount applied should be increased ^ari 
 passu f so that this is but the organization of a sinking fund. It 
 was not organized before for the reason stated by the Secretary of the 
 Treasury, but the United States has always paid the $25,000,000 a year, 
 and more too. Now, the question is whether, when we were about to 
 repeal taxes, we shall not keep in view the obligation incurred by us 
 during the war, and, pay at least $25,000,000 in the natm-e of a sinking 
 fund on the principal of the public debt. 
 
 The objections made by both these Senators to the payment of the 
 Interest of the new bonds abroad, and especially to the employment 
 of foreign agents, have a great deal of force in them. The answer is, 
 however, that by the employment of foreign agouts, especially by the 
 employment of leading bankers abroad, we can place our loans at a 
 lower rate of interest. One thousand millions of this debt are now 
 scattered all over Europe, a considerable part of it in the remotest parts. 
 It is i^roposed now to employ agents scattered all over Europe to help 
 
FUNDING BILL. 265 
 
 us place it. If by doing so we can save money, it is better for us to 
 do it. It is true it shocks a little my American pride to pay interest 
 abroad ; but other nations do it ; and if we can reduce the interest to 
 the low rates proposed by this bill bjy^ paying a portion abroad, I see no 
 objection to it. 
 
 There is no cost about it. It costs nothing, except the possible loss 
 of interest from the time of transmitting coin or exchange up to the 
 date of the payment of the interest, because there is probably not a 
 banker in Europe who would not be very glad to keep this account 
 without charging anything, and even perhaps allowing us interest on 
 the balances from time to time. Now, and for years past, an account 
 has been kept by the American Government with a leading banking- 
 house in London on these terms. They pay drafts drawn by the Gov- 
 ernment of the United States on Europe without cost to the United 
 States, and allow, I believe, a small rate of interest on the amounts 
 accumulated from time to time for that purpose. 
 
 I prefer to say first what I have to say in regard to the last clause 
 of the sixth section, which appropriates not exceeding one per cent, of 
 the amount of bonds herein authorized to pay the expenses of prepar- 
 ing, issuing, and disposing of them. 
 
 This clause is taken from several of the loan laws passed during 
 the war. Indeed, this clause, with some modifications, has been con- 
 tained in all the loan laws passed from 1862 to this time. The same 
 clause, different in form however, was in the old laws from the founda- 
 tion of the Government. Sometimes the loan laws limited the amount 
 of commissions allowed to agents to one eighth, sometimes to one tenth, 
 and sometimes to one fourth of one per cent., and made direct appro- 
 priations for the other expenses of the various loans. "When the Fi- 
 nance Committee reported this bUl we inserted this usual clause of the 
 loan laws. Here a very strange thing occurred, to which I wish to in- 
 vite the attention of the Senate. 'So sooner was this bill reported 
 than it was proclaimed all over the United States that the Senator from 
 Massachusetts [Mr. Wilson] had a plan to submit to the Senate by 
 which this appropriation of one per cent, was to be saved, and it was 
 intimated in the public prints and by telegrams that this one per cent, 
 was a vast corruption fund, or something of that kind, of $12,000,000, 
 and that the Senator from Massachusetts was to propose an amendment 
 or modification to it. About the same time the other Senator from 
 Massachusetts [Mr. Sumner] introduced three or four or five sheets of 
 amendments, touching almost every line and 'clause of the bill except 
 this. This particular clause was contained in his funding bill, also sub- 
 mitted to the Committee on Finance. 
 
 As this was the ordinary discretionary power heretofore conferred, 
 it excited my surprise somewhat to find a contest made on it, especially 
 when it was sought to create a false impression in regard to the appro- 
 priation of one per cent. I was induced, therefore, to examine a little 
 more carefully into this enormous, as was alleged, discretionary power 
 given to the Secretary of the Treasury. When I came to examine the 
 old laws I found that the same discretion had been conferred on Secre- 
 tary Chase, on Secretary Fessenden, and Secretary McOulloch, in pre- 
 
266 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 cisely the same language. The present Secretary of the Treasury, a 
 citizen of Massachusetts, is a comparative stranger to me, but known 
 to me as a distinguished Kepresentative of that State in the House of 
 Kepresentatives, and as a gentlemp,n who has earned a good deal of 
 credit, and I think deservedly, for his management of our finances 
 during the past year. 
 
 Mr. President, the loans negotiated during the war did not throw 
 upon the Secretary anything like the difficult task that is thrown upon 
 Mr. Boutwell by the operation of this bill. The original five-twenty 
 loan, the law authorizing which contains the same clause and empowers 
 Secretary Chase to negotiate $500,000,000 on certain terms, was not 
 so difficult a task as is now to be imposed upon Secretary Boutwell. 
 Why ? Because that loan was to be sold at par for paper money, and 
 before we undertook to sell the five-twenty loan we depreciated the 
 paper money by issuing first $150,000,000 of legal tenders, then 
 another $150,000,000, and then another $150,000,000 ; and it was not 
 until $450,000,000 were outstanding and largely depreciated in the 
 money market that we undertook to sell the bonds at par in paper 
 money, or at about seventy-five cents on the dollar in gold. That was 
 a much easier task than the task of selling $1,200,000,000 bonds bear- 
 ing a much lower rate of interest, for gold at par. 
 
 So with the task thrown on Secretary Fessenden. At that time 
 paper money was worth but fifty cents on the dollar ; and we author- 
 ized him to sell six per cent, bonds at par in this paper money, and 
 gave him, without a single objection in either House, the discretionary 
 authority to use as the cost of negotiation an amount not to exceed one 
 per cent. That is all the discretion contained in this bill. His task 
 was comparatively an easy one. So with Mr. McOuUoch. By the act 
 of July, 1866, we continued this one per cent, on the loans and ex- 
 changes authorized by the act of April, 1866. 
 
 In all those cases this authority was carefully and wisely used. I 
 hold in my hand a letter of the Secretary of the Treasury, transmitting 
 a full account of all the sales of bonds of the United States from the 
 beginning of the war until 1867, which shows precisely what each of 
 those three gentlemen did, how much commission they paid on the 
 sale of gold, the sale of bonds, and all the various transactions of the 
 Treasury carefully analyzed. Here is the correspondence also of those 
 Secretaries, showmg who were employed, the time and circumstances 
 of the employment, and the amount paid ; and it will be perceived 
 that they each discharged this duty with great care and fidelity. 
 
 It seemed, therefore, natural to the Committee on Finance that, in 
 imposing on Mr. Secretary Boutwell a task far more difficult, requiring 
 him to sell these bonds at par in gold at low rates of interest, five, four 
 and a half, and four per cent., to the amount of $1,200,000,000, we at 
 least ought to be willmg to give him the ordinary means and facilities 
 with which previous Secretaries had boon intrusted, and by which they 
 executed their trust ; but it seems that there is objection all at once to 
 granting the necessary power. Tlie honorable Senator from Pennsyl- 
 vania [Mr. Cameron] even proposes to strike out nil appropriations for 
 expenses ; in other words, the Secretary must print these bonds at his 
 
FUNDING BILL. 267 
 
 own expense ; lie must negotiate tliem at his own expense ; he must 
 engrave them at his own expense ; no provision is to be made for car- 
 rying on the vast operations of this great task. He is to employ agents 
 at home and abroad. Our present bonds are scattered as far as 
 Christian civilization goes. They are now, according to the documents 
 I have on my table, spread aU over Europe, in its remotest parts. He 
 is expected to gather up all these bonds, prevail on the holders of them 
 to surrender their six per cent, bonds, and take a bond bearing a less 
 rate of interest, without cost to the Treasury, without any facilities, 
 without money to employ agents, without even money to purchase the 
 paper on which the promise of the United States is printed ! That is 
 not the way we ought to treat our executive officers. We ought to 
 trust them with ordinary discretionary power, and hold them strictly 
 and rigidly responsible for the execution of the trust. 
 
 As soon as I saw this opposition to giving to the Secretary of the 
 Treasury the ordinary necessary facilities for carrying on the loan, I 
 addressed a letter to him calling his attention to the fact, and asking 
 him whether he could not take less and accomplish the task. It is true 
 that for every $100 of these bonds he sells he saves to us an annuity 
 of not less than one doUar until the whole debt is paid, and at a cost 
 not to exceed one dollar, which is equivalent to at least twenty times 
 the amount we pay. No bond will be sold at an expense beyond one 
 per cent. That is the saving of one year in the rate of interest. Thus, 
 ofE the sale of the first $400,000,000 of five per cent, bonds he saves 
 $4,000,000 per annum until the whole of the debt is paid, at an ex- 
 pense -of $4,000,000. Off the sales of the second $400,000,000 he 
 saves $6,000,000 per annum at an expense of $4,0Q0,000. Off sales 
 of the third $400,000,000 he saves $8,000,000 per annum at an expense 
 of $4,000,000. 
 
 Here is his reply to my letter, which I send to the desk to be read. 
 
 The Secretary read as follows : 
 
 Teeastiet Depabtmext, March 2, 1870. 
 
 SiE : In reply to your communication of this date I have the honor to say that 
 it is impossible for me to estimate with a reasonable degree of accuracy the probable 
 expense of negotiating the proposed loan — preparing, printing, issuing the bonds, 
 and negotiating the same in the United States and Europe. I have no doubt that 
 the one per cent, named in the hill will exceed the aggregate charges, but I should 
 not consider it wise to reduce the appropriation, as any deficiency under the existing 
 general laws would put it out of the power of the Secretary of the Treasury to pro- 
 ceed in the negotiation, and thus the object of the proposed legislation would be 
 defeated. 
 
 In reply to your suggestion, that a proposition will be made to impose the work 
 upon the ofiicials of the Treasury Department exclusively, I have the honor to say 
 that that proposition, if adopted, would put it out of the power of the Department 
 to place the new loan. A large amount of our bonds are held in Europe, and the 
 holders of them can only be reached through bankers of reputation and influence 
 in various countries, and I presume it will be found necessary to employ them to 
 negotiate the loan upon a commission. That commission will, of course, be a small 
 fraction only of the one per cent, proposed as the total expense. 
 
 I have not entered into negotiations for the purpose of ascertaining at what rate 
 they would undertake the business ; but I may say that it will be accepted by the 
 leading bankers at the lowest rates at which such business is ever done. 
 
 Very respectfully, GEORGE S. BOUTWELL, Secretary. 
 
 Hon. JoHN^ Shekman, Chairman Committee on Finance, United States Senate. 
 
268 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 After tlie receipt of that letter, not entirely satisfied yet, I made an 
 examination of the cost of various loans by the United States and by 
 European nations. I found that the first five-twenty loan cost us three 
 eiffhtns of one per cent, for agents ; the second, the large loan made by 
 Mr. Fessenden in 1864, cost three fourths of one per cent. I have 
 here a very instructive letter by Mr. Fessenden, which I will not now ask 
 to have read, showing the reason why he finally employed the agents 
 he did employ on the 28th of January, 1865. The amount paid by 
 him was three fourths of one per cent., far more than is necessary now ; 
 but the circumstances under which it was paid, I think, clearly justified 
 him in making that allowance. So Mr. McOulloch, according to the 
 reports on the table, paid one eighth of one per cent. 
 
 In conversation with the Secretary I suggested that all that part of 
 the loan to be taken by the national banks might be negotiated without 
 cost. Undoubtedly no commission would be paid in a case of that 
 kind ; so far as the loan might be taken as a domestic loan, it might 
 possibly be sold to some extent by the officers of the Treasury Depart- 
 ment, although they have not the ordinary means and facilities for doing 
 that business. No private persons would attempt to sell a loan of this 
 kind without employing the ordinary banking agencies of the world. 
 It must be remembered that $1,000,000,000 of our bonded debt is held 
 in Europe. All of these bonds must necessarily be sold in Europe, ex- 
 cept probably the five per cents, or a portion of them, and those that 
 are absorbed by the banks. "We know very well that an attempt to put 
 a loan upon the American market now at four and a half or four per 
 cent, would be utterly idle. 
 
 This bill is based on the idea that we may place the four and four 
 and a half per cents abroad, and thus get gold to redeem the six per 
 cent, bonds which are scattered all over Europe. How can the Secre- 
 tary do it ? He must employ bankers and agents, and pay them. He 
 has no agent of the Treasury Department in Europe, where the loan 
 must be negotiated. How can he expect persons to engage in this 
 business without the ordinary facilities and profits ? If you can sell 
 the bonds at the rates proposed it is because $1,000,000,000 of our six 
 per cent, bonds are held abroad ; and by the sale of a loan there at a 
 smaller rate of interest, extending the time, we may get money to pay 
 them off. Therefore we must make the terms of this law so that the 
 Secretary can have the means and facilities for negotiating them abroad. 
 When I came to examine into the cost of foreign loans I found that 
 the cost of the Eussian loan was two and a half per cent, for commis- 
 sions. The long loans of various governments of Europe have cost 
 from one to five per cent., and even the cost of the loans of England 
 through the Banlc of England has been very nearly the rate proposed 
 in this bill. 
 
 Under these circumstances the attempt to reduce the power of the 
 Secretary of the Treasury, and to take away the discretion necessary to 
 be placed upon him in the negotiation of this loan, is an attempt to 
 defeat this bill and to cast a discredit upon him. 
 
 I have addressed him a second letter, expressing the hope that he 
 
FUNDING BILL. 269 
 
 miglit be able to see bis way clear to lower tbe rate of commission, and 
 have received tbe following letter in reply : 
 
 Teeascbt Depaktment, March 7, 1870. 
 
 Sir: I take the liberty of inclosing to you two extracts from letters received 
 from the United States consul at Sonneberg, under date of February 10, 1870, and 
 from the United States consul at Amsterdam, dated February 12, 1870, relating to 
 the bonds and credit of the United States in Europe. 
 
 I am unable to ascertain the cost to European governments of negotiating loans 
 made by them ; but I understand that the recent Eussian loan cost that Govern- 
 ment about two and a half per cent. This statement, however, can not be regarded 
 as authentic. I find from an examination of Executive Document No. 265 of the 
 Fortieth Congress, second session, printed by the House of Eepresentatives, that 
 the commissions allowed to bankers have generally been at the rate of one eighth 
 of one per cent, upon the amount negotiated. In some instances a larger amount 
 has been paid. The correspondence commencing on page 151 of that document 
 contains further information upon the subject. I also refer in this connection to 
 Executive Document No. 52, second session Thirty-ninth Congress ; No. 34, second 
 session Fortieth, Congress; No. 265, second session Fortieth Congress; and No. 26, 
 third session Fortieth Congress. 
 
 I have had a careful estimate of the expense of the engraving, paper, and 
 printing made, and find that it is not likely to exceed one eighth of one per cent. 
 of the amount of the bonds issued. It will be necessary to make some allowance, 
 perhaps, in addition to this, as the average cost will depend materially upon the 
 amount of the several denominations issued. It wiU be necessary also to make 
 some allowance for advertising and other incidental expenses. It, however, seems 
 to me certain that the entire expense of placing the loan will not exceed one half 
 of one per cent. 
 
 Ton wiU recollect that the appropriation named in the bill now before the Sen- 
 ate was in accordance with the previous practice of the Government, and was not 
 the result of any investigation either upon my part or on the part of the Committee 
 as far as I know. If it shall seem desirable to the Committee or to the Senate to 
 limit the appropriation to one haK of one per cent. I think it safe to do so ; and 
 yet I am prepared to say that the expense will not be increased by allowing the ap- 
 propriation to remain at one per cent. Very respectfully, 
 
 GEOEGE S. BOUTWELL, Secretary. 
 
 Hon. John Sherman, Chairman Committee on Finance, United States Senate. 
 
 Tbe Senate is now in possession of tbe facts, and will do as it 
 deems best. Tbe expense figured witbin tbe lowest limit, in tbe bounds 
 of reason, is reduced to one balf of one per cent. ; so tbat we can save 
 $18,000,000 a year at a cost of $6,000,000. Now, wbat ougbt to be 
 done by sensible men under tbe circumstances ? I say we ougbt to 
 give to tbe Secretary of tbe Treasury, wbo is to perform tbis difficult 
 task, tbe same discretion tbat was conferred upon previous Secretaries 
 under circumstances mucb less difficult. 
 
 With these facts before us, with the statement that he may possi- 
 bly be able to confine tbe expenditures for tbis loan to one balf of one 
 per cent., we ongbt to deal with him in a manly way ; treat him with 
 confidence and respect; give him the discretion to expend not to 
 exceed one per cent., and then bold him to a strict responsibilitv for tbe 
 accurate and proper expenditure of this public money. Why, sir, 
 every day in tbe appropriations made by law in our ordinary appropri- 
 ation bills, in the usual progress of our daily administration, we intrust 
 such discretionary powers to high officers of the Government. We 
 certainly can confide for the faithful execution of the trust in the pres- 
 ent Secretary of tbe Treasury. We ougbt not now to dishonor this 
 
270 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 loan or to dishonor this attempt, and tie up his hands and weaken him 
 in the slightest degree by any limitation of the ordinary discretionary 
 power conferred on the Secretary of the Treasury under such circum- 
 stances. If he can accomplish the task at one per cent, he will have 
 achieved one of the greatest wonders of modei-n finance. If he should 
 fail because his hands are tied, then you are responsible, not he. 
 
 It may be that in many cases it will cost nothing ; in many cases 
 but one eighth of one per cent. ; but in some cases — for instance, in 
 remote countries in the negotiation of the four or the four and a half 
 per cent, loans, where the amounts held are comparatively small, as say 
 in a single district in a remote part of Germany — it may cost the full 
 amount of one per cent. Suppose it does ; we gain far more than we 
 lose. My opinion, then, is that it is better on the whole to let the bill 
 stand as it is in this respect ; but if Senators wish to tie the Secretary 
 down to what he now says is the lowest Kmit within which it is possi- 
 ble for him to undertake to negotiate the loan, one half of one per 
 cent., then I do say that if there is any fault or any failure it is yours, 
 not his. 
 
 Now, Mr. President, in regard to the appointment of agents. I 
 need not here argue the question that agents are necessary, and that 
 the Treasury Department is not so organized as to perform this duty. 
 In all the loan laws from the foimdation of the Government, which I 
 have before me, the employment of agents has been provided for, ex- 
 cept in a few cases where the loans were awarded upon advertisement. 
 Sometimes in years of peace a small loan has been given out upon 
 ordinary advertisement ; but it was shown in those cases that the bonds 
 after they were sold advanced, and the bankers who bought them made 
 two, three, or four per cent, profit, resulting from the fact that in the 
 sale of bonds by public advertisement the bankers have a monppoly of 
 the market. Hence it has been customary in our loan laws to author- 
 ize the employment of agents in Europe and in the United States to 
 any number that the Secretary might deem proper. 
 
 In the fifth section of the bill, which is the one immediately before 
 the Senate, there is a question of great difficulty. It is simply a ques- 
 tion of dollars and cents, not one of national pride. This Government 
 has several times heretofore authorized foreign loans, and has paid them 
 in guilders, francs, and in sterling money. Many of the States of this 
 country, some of them in the highest credit, as for instance the State 
 of Massachusetts, have negotiated foreign loans in sterling. Many of 
 the leading railroad companies of the United States negotiate their 
 loans abroad in sterling. Why ? Because they can save money by it. 
 I have no doubt that you could sell a four per cent, bond payable in 
 francs in the valley of the Rhine or in France at as high a rate as you 
 can sell a four and a half per cent, bond payable in American coin, be- 
 cause the holders of these bonds in Europe are generally small capital- 
 ists. The correspondence M'hich is submitted to me here shows that 
 American bonds are now held in sums of from one hundred to five 
 tlionsand dollars by the peasantry, by the small farmei-s, by the people 
 of limited means scattered iill through Europe. The question with 
 them is, what tenns can you make ? 
 
FUNDING BILL. 271 
 
 "When you propose to pay them off in gold the queBtion is, what 
 kind of bonds will they be willing to take ? If you offer them a bond 
 payable in a kind of currency that they know all about — francs, thalers, 
 or sterling — they will take it at a less rate of interest ; they can afford 
 to do it. The coupons are now sold by these proprietors to the banker 
 in Frankfort ; they then go to Amsterdam, and finally come to New 
 York, and are cashed in American gold. But if you could pay ojBE the 
 small bolders in the remote portions of Europe or in the centers of 
 European capital with four per cent, in gold of their own coinage, they 
 would much prefer it, and it would be much better for them to have 
 such a bond than even a five per cent. bond. There is no difficulty in 
 paying the money abroad. The rate of exchange never varies more 
 than one or two per cent. We can place the money in the European 
 money markets almost without cost. Sometimes exchange is against 
 us ; sometimes it is for us ; but the general average varies very little. 
 The cost would be trifling. The cost of the agencies in Europe would 
 be nothing. There is not a banker in Europe who would not do all 
 that is necessary to be done under the provisions of this bill without a 
 single dollar of cost to the Treasury, because the very fact that a bank- 
 ing house in Europe was selected by the American Government for the 
 purpose of paying the interest on a portion of its debt would give that 
 house credit, and it would not only be glad to do the busmess for 
 nothing, but would pay interest on the amount remaining on credit 
 from day to day. That is now the ordinary course of business. It is 
 the means by which we pay all the expenses of our foreign intercourse. 
 I think, therefore, this fifth section may enable the Secretary of the 
 Treasury to sell a good many four per cent, bonds in Europe at par. 
 At any rate, it will enable him to sell four and a haK per cent, bonds 
 there at par ; but without it I very much fear he will not be able to 
 sell any bonds in Europe bearing a less r9,te than five per cent. 
 
 The difference between four and four and a half per cent, will be 
 lost to the owner of the bond by the exchange he has to pay in various 
 forms before the coupon is sent to New York, there cashed, and the 
 money remitted to him. All this is done at his expense. If, by trans- 
 mitting the money for interest in bulk, say $1,000,000 or $2,000,000 at 
 a time, to a recognized banker in Europe, who can secure the Treasury 
 Department by the deposit of bonds, or in some other way, because all 
 this is left to the Secretary, we can save interest in the negotiation of 
 our loans, we shall be very unwise not to do it. 
 
 Sometimes, in answer to this argument of saving money for the 
 Government, the American flag is flaunted in our faces. Why, sir, it 
 is not any dishonor to the Government of the United States to pay 
 wherever it agrees to pay. In the original loan law of Alexander 
 Hamilton we provided for interest on the old foreign loan. So in the 
 war of 1812 and in 1819 we provided for the negotiation of foreign 
 loans. We saved one half of one per cent, in interest on a considerable 
 amount of our foreign debt by paying it abroad, and our fathers did 
 not consider it a disgrace to do so. The Kussian Government does it. 
 
 It is said that France and England do not do it, and perhaps Prus- 
 sia does not do it. Why ? Because those three countries are located 
 
272 SPEECHES AND REPORTS OE JOHN SHERMAN. 
 
 just in the center of the money of Europe and there is therefore no* 
 occasion for their doing it ; and besides, their debts are held at home. 
 I wish that our debt was all held here, and that our citizens were re- 
 ceiving the interest. I would rather pay a little more to our own 
 citizens than to foreigners. But the fact is that we are now paying 
 six per cent, interest in gold to foreigners, and bankers are discounting 
 our coupons at a loss of three, four, or five per cent, to the holders of 
 the coupons in some cases. 
 
 We sometimes glory in our American coin. The five-dollar half 
 eagle is worth more than twenty-five francs, more than a pound ster- 
 ling ; and yet let any American traveler go" abroad with a haK eagle in 
 his pocket and he will find that it is not worth as much as twenty-five 
 francs or a pound sterling. The pound sterling is worth but $4.84 of 
 our money, and a twenty-five-franc piece is worth considerably less 
 than five dollars ; but the actual exchange made by the discount of 
 bankers makes the American lose always when abroad. Now, if we 
 can get the benefit of this difference by paying a portion of our public 
 debt abroad in foreign currencies, why should we not do it ? 
 
 But after all this matter is left to the discretion of the Secretary of 
 the Treasury. No one can say how much of the loan wiU be nego- 
 tiated abroad ; but if a portion of it is issued under the fifth section of 
 this bill it will only be because a considerable sum of money can be 
 saved to the people of the United States. My opinion, therefore, is 
 that it is wise to leave this discretion with the Secretary of the Trea- 
 sury. It has been left in almost every loan law. In the laws that 
 were passed during the war the same authority was conferred upon 
 Secretary Chase, Secretary Fessenden, and Secretary McCulloch. They 
 were authorized to negotiate bonds in Europe as well as in America. 
 
 In the first loan law of the war, under which the bonds of 1881 
 were issued, we authorized the Secretary to make the interest payable 
 in any country in Europe. The Secretary thought it was best not to 
 pay it abroad at that time ; but the matter was left to his discretion in 
 the law. I have before me the act of July 17, 1861 ; and the fifth 
 section of that act provides — 
 
 That the Secretary of the Treasury may, if he deem it advisable, negotiate any 
 portion of said loan, not exceeding $100,000,000, in any foreign country, and paya- 
 ble at any designated place either in the United States or in Europe, and may issue 
 registered or coupon bonds for the amount thus negotiated, agreeably to the pro- 
 visions of this act, bearing interest, payable semi-annually either in the United 
 States or at any designated place in Europe ; and he is further authorized to ap- 
 point such agent or agents as he may deem necessary for negotiating snch loan 
 under Ids instructions, and for paying the interest on the same, and to fix the com- 
 pensation of such agent or agents, and shall prescribe to them all the rules, regula- 
 tions, and modes under which such loan shall be negotiated, and shall have power 
 to fix the rate of exchange at which the principal shaJl be received from the con- 
 tractors for the loan ; and the exchange for the payment of the principal and inter- 
 est in Europe shall be at the same rate. 
 
 This section gave to Secretory Chase far more power, so far as a 
 foreign loan was concerned, than is conferred by the fifth section of 
 this act. Now, shall we take away from the present Secretary that 
 discretion ? II o may not exercise it. The very fact that he has the 
 
FUNDING BILL. ' 273 
 
 power to go into a foreign market and negotiate a loan may be a lever 
 by which he can negotiate the domestic loan. He may decline to ne- 
 
 fotiate the loan, but the very fact that he has the power to go to 
 lurope, and place a bond payable there, principal and interest, may 
 enable him to negotiate a bond at a less rate of interest. 
 
 Mr. President, there is not a single thing in this bill, from begin- 
 ning to end, conferring a discretion on the Secretary of the Treasury, 
 which has not been conferred heretofore in repeated laws ; and the 
 question is whether you will put upon him a task that he may be 
 unable to execute with all the power you can give him, and deny to 
 him the ordinary facihties and powers that have been conferred re- 
 peatedly upon other Seeretai-ies ? If you do, you will defeat this bill 
 by indirection, and thus prevent the saving to the people of the United 
 States of a large sum of money and the reduction of the interest on 
 the pubhc debt ; and the responsibility will not rest on him ; it will 
 rest on you. 
 
 The bill was further discussed, when, in reply to Mr. Conlding, Mr. Sherman 
 said: 
 
 No Secretary of the Treasury would undertake to issue new bonds 
 for the purpose of funding any of the existing debt of the United 
 States on the authority of the act of April 12, 1866. That act was 
 desimed for a limited purpose, that of enabling the Secretary of 
 the Treasury to fund the floating debt of the tmited States which 
 was then in the form of five per cent, certificates and various other 
 forms of floating indebtedness, and that purpose has been accom- 
 plished ; the seven-thirty notes then outstanding have been converted, 
 in pursuance of the authority conferred on the holdere of the notes, 
 into five-twenty bonds, and all the floating debt of the United States 
 at that time has been converted into five-twenty bonds, so that the 
 functions of the act have ceased and determined. The act in its nature 
 was a temporary one, and merely extended the provisions of the act of 
 March 3, 1865, for the purpose of funding the floating debt of the 
 United States. That act refers to, and the only bonds to which it 
 could refer are, the five-twenty bonds authorized by the act of Febru- 
 ary 25, 1862, and the ten-forty bonds authorized by the act of March, 
 1864. They were authorized to be issued for the purpose of funding 
 the fioating debt, and that has been accomphshed. No one would 
 undertake to execute this great task under the authority of that act. 
 No Secretary would dare do it. No person would buy the bonds on 
 an authority of that kind. The attempt to issue $1,000,000,000 under 
 the authority of that act would at once be arrested by legal objections 
 and denial of the authority ; and no Secretary would undertake it. 
 
 The Senator states the case a little too strongly, it seems to me, 
 when he makes the allegation that no debt of the United States has 
 ever been payable in foreign coin. The original debt of the revolution 
 which existed at the time of the framing of the Government was pay- 
 able in French coin, and was so paid. The first act on the subject, 
 known as the great act for the support of the public credit, contains a 
 provision protecting the old foreign debt and requiring it to be paid. 
 18 
 
274 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Under the act which provided for the payment of the stock for the 
 purchase of Louisiana I find this provision : 
 
 Tliat the annual interest accruing on the said stock, which may be in conformity 
 with the convention aforesaid be payable in Europe, shall be paid at the rate of four 
 shillings and sixpence sterling for each dollar if payable in London, or at the rate of 
 two guilders and one half of a guilder, current money of Holland, if payable in Am- 
 sterdam. 
 
 It is true that this was the purchase money of Louisiana ; but there 
 is also a provision authorizing a foreign loan in the act of 1819, though 
 my impression is that no debt was actually created under that act. 
 Also, in the act of 1861, under which the bonds of 1881 were issued, 
 there is the fullest possible authority to issue a foreign loan. It is true 
 that that loan was never issued because Secretary Chase found he could 
 not negotiate it on favorable terms. Indeed, at the time of the passage 
 of that act Confederate bonds were worth more in the London market 
 than our own, and the attempt to negotiate a foreign loan failed. 
 
 Mr. President, the question before us is simply this : whether in 
 order to save about one fourth or one fifth of the interest paid upon 
 the public debt we are willing to pay the coupons abroad. The small 
 property-holders who hold our bonds abroad would greatly prefer a 
 loan payable in their own currency ; and not merely the Secretary of 
 the Treasury, but many intelligent men who are familiar with this 
 business believe that a four per cent, bond payable in the currency of 
 foreign countries, where the debt is now held, would sell as readily as 
 a five or a four and one half per cent, bond payable in American coin,' 
 if the coupons have to be sent to the United States to be collected. 
 The saving to the United States is illustrated by the simplest sum in 
 arithmetic, which any schoolb9y can cipher out. If we negotiated a 
 $1,000 bond at four per cent, the annual interest would be forty dollars, 
 and the cost of transmitting that interest from New York to any port 
 in Europe would not exceed forty cents or one per cent. The average 
 rate of exchange is f roni one fourth of one per cent, to one per cent. ; 
 taking the highest rate, it would cost forty cents to remit that forty 
 dollars to Amsterdam, in Holland. Thus the cost to the Government 
 of the payment of the interest on a $1,000 bond would be $40.40. If 
 on the other hand a domestic bond of $1,000 is issued, it will cost in 
 United States coin paid at our Treasury fifty dollars at five per cent. ; 
 or if a four and one half per cent, bond is issued, the cost of paying it 
 in New York will be forty-five dollars. 
 
 Then if a foreign loan is negotiated under the provisions of the sec- 
 tion as I have now amended it, we shall save at least one tenth of the 
 interest on the foreign debt, and perhaps one fifth of the interest on 
 so much of the debt as is payable abroad. 
 
 This question of striking out the eighth section has been constantly 
 pressed upon us since the opening of this debate. I do not intend to 
 discuss it at any length, simply because each Senator must have made 
 lip liis mind by this time upon the subject. No injustice is done to 
 the banks. The right to amend the bankmg law M*as carefully reserved. 
 Many changes have been made from time to time, and many changes 
 must be made in tlie future. The right to change, and to require them 
 
FUNDING BILL. 2T5 
 
 to change, their securities is expressly reserved. There are many pro- 
 visions of the banking law by which they can be required to increase 
 the amount of securities now held by them. They may withdraw or 
 change their securities at pleasure, and under the provisions of the act 
 we may require them to increase the securities deposited. 
 
 Now, what is the hardship complained of ?. We are about to resume 
 specie payments. "We are about to negotiate our bonds at par in gold 
 bearing interest at five per cent. "We all know from the state of the 
 money market that we can do so. All the bonds held by these banks 
 are redeemable at our pleasure, except $59,000,000 ; $280,000,000 of 
 their bonds are now practically redeemable at the pleasure of the Uni- 
 ted States. They hold, it is true, a large amount of ten-forty bonds, 
 but they are payable at a lower rate of interest. There is no trouble 
 or difficulty about them. Only $59,000,000 of all the bonds held W 
 the banks are bonds that would bear a premium in the market. "We 
 do not deprive them of that premium., We leave them the right to 
 sell the bonds and receive the premium. We do not even require them 
 to exchange their five-twenty bonds. Th^ can if they choose sell them, 
 or they can retain them in their vaults. But we do require that, as the 
 basis of a privilege the most extensive that has ever been granted to 
 any set of private corporations in the wide world, they shall give as se- 
 curity the bonds of the United States which we are now about to oiier. 
 
 What do we give them in exchange ? We give them upon purchas- 
 ing these bonds the right to issue four fifths of their amount in money, 
 and we give them the monopoly of that right. We are about to with- 
 draw from circulation the greenbacks of the country. We are about to 
 retire and cancel our notes by the provisions of this act. We are about 
 to give them the monopoly of the circulation of this country, the sole 
 and exclusive privilege of issuing paper money. We have destroyed 
 the State banks. And now what do we require in return ? That they 
 shall join us in reducing the burdens of the public debt ; that they shall 
 bear some little of their share of the loss of income which every holder 
 of the public securities must suffer. 
 
 Sir, national banks would be very unwise, indeed, to make an issue 
 on this question. If any man here is a friend of the national-bank 
 system I certainly can claim to be. I was here at its cradle, introduced 
 the original banking bill and advocated it, and also introduced the 
 amendment to it, conducted it, and saw it passed. But if I believed 
 now that the banks of the United States were unwilling to aid us in 
 reducing the rate of interest on the public debt to the extent of the 
 limited sacrifices they are called upon by this bill to make, I should 
 certainly change very much my opinion of them and of the whole sys- 
 tem, t do not believe there is any practical difficulty in the way ; nor 
 do they lose by it if five per cents are worth par in gold. Wnat do 
 they lose by taking one thu-d of these bonds at five per cent., another 
 third at four and a half per cent., and another third at four per cent. ? 
 They possibly lose one half of one per cent, of the interest on the 
 bonds ; that is all. But before this scheme can succeed at all it must 
 be on the basis that five per cent, bonds are worth at least par in gold. 
 We require them when we surrender to them the privilege of issuing 
 
276 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 all the paper money of this country to reduce the rate of interest on 
 their bonds one half of one per cent, on the average. Is that a hard- 
 ship ? I think not. 
 
 W hen my honorable friend from Maine was complaining that we 
 were taking these banks by the throat and forcing them to do a great 
 many things that were wrong, he forgot that the privilege we conferred 
 upon them, and which they hold at our favor, is one of the most im- 
 portant franchises ever granted to private corporations. I did not 
 expect that this section of the bill would be attacked from the quarter 
 that it has been, but I expected that it would be attacked from another 
 quarter on a political point, on the ground that we were about to with- 
 draw the favorite currency of the people and fund it, and get it out of 
 the way and give to the national banks so important a franchise. That 
 was the point upon which I was prepared to show that the national 
 bank currency was the best that could possibly be devised.. But I did 
 not suppose that in the interest of the national banks, or rather because 
 of the alleged hardships to the national banks of a slight reduction of 
 one half of one per cent, of the interest on their bonds, any complaint 
 would be made. Why, sir, $92,000,000 of bonds now deposited aa 
 security bear but five per cent. I have the report before me showing 
 that the ten-forty bonds are now the basis of this circulation and are 
 filed to the amount of $91,579,000. The banks, if they make the ex- 
 changes provided by this bill, will lose one half of one per cent, of the 
 interest on their bonds, and they will receive a bond exempt from all 
 income tax, with many privileges, as the Senator from New York 
 showed yesterday, that the ten-forty did not have. 
 
 When they surrender their ten-forty bonds, which are redeemable 
 in 1874, they receive a bond which runs fifteen years without the possi- 
 bility of redemption, a bond entirely free from income or other tax by 
 State or national authority. For all that and for the monopoly of the 
 privilege of issuing paper money they yield us one half of one per cent, 
 on the interest of their bonds. To call that a hardship it seems to me 
 is to use a misnomer. When we give them a bond beaiing five per 
 cent, interest in gold, we give them a bond that is worth pai' in gold ; 
 and when we pay their six per cent, bonds off in gold, we onl}' do what 
 we have a right to do under the very terms of the bond. 
 
 There is not now a bond filed by the banks as a security for their 
 circulating notes that is not redeemable at the pleasure of the United 
 States, except the bonds of 1881 and the ten-forty bonds ; and we pro- 
 pose either to let them sell their bonds in open market or aid us in this 
 freat scheme to reduce interest on the public debt, by a sacrifice of one 
 alf of one per cent. It seems to me that to defeat this bill, or the 
 portion of it which provides for the funding of $400,000,000 of the 
 new loan, on the plea of injustice to the national banks, would endan- 
 ger the banking system ; it would be an act of injustice to the people 
 of this country. And I have this to sny as to the bankei-s of my own 
 State, that to this hour, altliough tlii'y are affected by the operations of 
 thin bill, and I should be the person above all others to whom they 
 would address tlieir complaints, not one of them has complained of the 
 operation of the bill ; but as far as I know they have given it their 
 hearty assent. 
 
FUNDING BILL. 2V7 
 
 Sir, the only objection made to this section of the bill is that it is 
 a hardship to the banks. It is no hardship, it is a great benefit to them. 
 It secures the national banking system from ultimate overthrow, in my 
 judgment, and will give us a stable currency, bring us back rapidly to 
 specie payments, withdraw from the currency the now dishonored United 
 States notes, fund them, and retire them to give place to a circulation 
 founded on Government securities. All the sacrifice that is required 
 of these banks is the possible surrender on the average of one half of 
 one per cent, of the interest upon their bonds. They will enjoy on an 
 average upon these bonds four and a half per cent. ; and no one can 
 doubt that in three, four, five, or six years after this process of funding 
 has been completed, after the first class of bonds has been sold at par 
 in gold, after the banks have exchanged their bonds and funded them 
 to the amount of $345,000,000, the quantity now held by them, that 
 the four and a half per cent, bonds will be at par in gold. 
 
 But there is another important thing to be remembered, that the 
 provisions you are now about to apply to the old banks are also applica- 
 ble to the new. You do by this bill substantially incorporate banks to 
 the amount of $356,000,000, if people desire to go into the banking 
 business. You open the system, make it free to the extent at least of 
 the amount of legal tenders, and there you furnish another market for 
 the bonds provided for in the bill, taking the old banks and the new, 
 for if new banks are organized on the greenbacks now outstanding, 
 you will have a banking basis of some $655,000,000, furnishing a mar- 
 ket for at least this amount of bonds. 
 
 Now, Mr. President, it seems to me that so important a measure as 
 this ought not to be sacrificed merely on the plea of hardship to the 
 nation^ banks, who of all classes have during the last six or seven years 
 certainly received a reasonable and fair profit on their investments and 
 their enterprise. They ought not to obstruct this measure. ^ Their in- 
 terest is promoted by it. And I was a little surprised at a remark made 
 by my honorable friend from Connecticut, who I know is as just a man 
 as lives. After declaiming against this section because of the hardship 
 to the national banks, he said he could not vote for any proposition 
 that would make a national bank take a bond bearing five, four and a 
 half, or four per cent, interest ; and then, without reflecting upon the 
 position in which that placed him, he said he would be very willing to 
 see here the system adopted in England, by which every trustee would 
 be required to invest his trust funds in Government securities, and in 
 these very securities. That is, he woidd require trustees to invest the 
 funds of the widow and the orphan in these bonds bearing a low rate 
 of interest ; and yet he would not compel the national banks to take 
 this same class of bonds. 
 
 Mr. President, it is my belief that the national banks ought to and 
 will heartily assent to this new arrangement. A defeat of this propo- 
 sition is the substantial defeat of the whole funding scheme, because if 
 we may not require the banks which enjoy the benefit of a privilege 
 granted by the Government, and held at our pleasure, to take these 
 bonds within one year, with what face can we go into the market and 
 ask the people to give us gold at par for them ? It is said that the 
 
278 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 theory of the pending bill is that it will succeed, that the bonds can be 
 floated at par, and that then the Government will be in possession of 
 the avails of the bonds ; and it is suggested that all the bonds belonging 
 to the banks being redeemable, except the ten-forties and the 1881p, 
 these avails might be used to redeem the bonds belonging to the banks, 
 leaving the banks, like individuals, free to pursue the business of bank- 
 ing or not as they please ; and if they do pursue it, of course the laws 
 of trade as well as the laws of Congress would require them to possess 
 themselves of the only bonds then to be had for the purpose. 
 
 My answer to this is very simple. So far as the five per cent, 
 bonds are concerned we do not thank the banks or anybody else to take 
 them. They will be taken in any money market of the world. But 
 we do require them to take a portion of the four and a half and a por- 
 tion of the four per cent, bonds which can not now be sold at par in 
 gold. That is the only advantage and the only aid the banks render 
 to this whole funding scheme. We compel them, as we have a right 
 to do, to purchase one third of these bonds at four per cent, which we 
 can not now probably sell in the market, and one third of the four and 
 a half per cents, and in that way we do ask them substantially to sac- 
 rifice one half of one per cent, on the amount of bonds they purchase, 
 the average rate being four and a half per cent. ; and in this way we 
 give the bonds circulation, give them a credit they would not other- 
 wise have. What is the' cost of that ? What do we give them in re- 
 turn for this ? The right of issuing all the paper money of the United 
 States ; the right to draw interest, not only upon the bonds deposited 
 with us belonging to them, but the right to draw interest on four 
 fifths of that amount in paper money. And the honorable Senator 
 who now occupies the chair complained that this enormous privilege 
 was given to them too cheaply. He proposed to make all their bonds 
 four per cent, bonds ; in other words, to require them to surrender one 
 per cent, interest instead of one half of one per cent. 
 
 Mr. President, under these circumstances I do think this bill is as 
 favorable to the banking system as it could possibly be. We require 
 the banks to surrender nothing but the small margin of one half of 
 one per cent, on the amount oi the bonds held by them. The taking 
 by them of these three new classes of bonds will tend vastly to pro- 
 mote the credit and the value of the bonds. It will furnish a market 
 for them, and in return for that the banks enjoy the privilege of fur- 
 nishing paper money printed at the expense of the United States, is- 
 sued at our cost, printed by us, guaranteed by us, and of using and cir- 
 culating this paper money and loaning it to their customer. It seems 
 to me, therefore, that any opposition to this section ought not to come 
 from those who represent the national banks ; but if there is any ob- 
 jection to it it ought to be that this privilege should not be given to 
 them so readily, but that they ought to surrender a little more in return 
 for so valuable a franchise. 
 
 The subject has been so often debated that I will consume only a 
 few moments of time in presenting distinctly the question which I 
 think is the most important one embraced in this bill. My honorable 
 friend from Indiana, ever since he has been an able and honored mem- 
 
FUNDING BILL. 279 
 
 ber of this body, has been continnally haunted by the fear of contrac- 
 tion. It is a word with him of evil import. 
 
 Now, Mr. President, I do not want to contract the currency one 
 dollar, but I want to resume specie payments, and to avail ourselves 
 of the favorable state of the money niarket and of the condition of 
 the times with that object in view. This is a bill not only to fund 
 the public debt, but to bring jbout specie payments without material 
 contraction. We know very well that a proposition to retire the whole 
 mass of greenbacks would be met here not only by my friend from 
 Indiana but by a general public sentiment, and therefore we have in- 
 serted in this bill the smallest modicum of provision toward specie 
 payments. 
 
 There is in this bill only one clause that does look toward resump- 
 tion. "What is it ? We give to every holder of a greenback, which is 
 the dishonored promise of the nation,. the right to present it at the 
 Treasury of the United States and convert it into a bond bearing four 
 per cent, interest in gold. 
 
 My honorable friend thinks that will contract the currency. Does 
 he suppose that in the present state of the money market everybody 
 holding greenbacks wiU be eager to rush to the Treasury for four per 
 cent, bonds ? I do not believe that greenbacks wiU be funded into 
 bonds to the extent of $5,000,000 in the course of a year. The sec- 
 tion is so framed as to be the most moderate proposition of the kind 
 that could be made. If I had my own way in the matter I would treat 
 the note-holder precisely like the bond-holder ; I would say to the note- 
 holder, "You can convert your note into any form of bond provided 
 for in this bill." That would at once provide for a mode of retiring 
 greenbacks and provide another circulation in their place. But that is 
 not the proposition. The proposition is simply to give to the holder 
 of our dishonored promise the right to convert it into a bond. Why 
 should we not ? Is it not honest ? Clearly so. We are bound to pay 
 the note in gold. Nobody has disputed that proposition. Why do we 
 not do it ? Is it said we can not do it ? My honorable friend from In- 
 diana will hardly say we can not pay the note now. With our improved 
 credit we are able to pay it. 
 
 Sir, we are bound in honor and honesty if we can not pay the note 
 in gold to do the next best thing. We can give note-holders at least a 
 bond bearing interest in gold; and now we give them the smallest 
 bond, the bond least burdensome, one at the lowest rate of interest 
 ever proposed in the United States of America, in payment of a debt 
 past due, that is daily dishonored. It seems to me that so simple a 
 proposition ought not to startle or alarm any one. The Senator him- 
 self, I suppose, will admit that the process of contraction under this 
 bill will be very slow. The holders of the greenbacks wiU not hurry 
 to the Treasury to convert them into four per cent, bonds. The ques- 
 tion may be asked, what is the benefit, then, in the provision ? The 
 benefit is that in no possible state of the money market will the green- 
 back be depreciated below the market value of a four per cent. bond. 
 It is the virtue of this provision in the bill, together with a favorable 
 turn in the money market, that has now brought us to the condition 
 
280 SPEECHES AND REP0BT8 OF JOHN SHERMAN. 
 
 of affairs when our note is within ten per cent, of gold. It is only 
 the manifest purpose on the part of Congress to redeem and give addi- 
 tional value to the greenback that makes the money market favorable. 
 
 Why, sir, since the time when we suspended the right to contract 
 the currency or retire the greenbacks until the beginning of this ses- 
 sion the depreciation in our currency was from thirty to sixty cents on 
 the dollar. It is only when we are again talking about restoring to the 
 greenback the privilege of being funded into a bond, giving it an ad- 
 ditional value in this way, that we can approach within sight of specie 
 payments. It is the very propositions pending in the Senate, the very 
 propositions contained in this bill, that have brought us so near now to 
 this end. Why should we refuse to the holder of the greenback the 
 right to convert it into a bond? We give the holders of all our inter- 
 est-bearing obligations that right. We give the holder of the five- 
 twenties and ten-forties on the terms prescribed in this bill a chance to 
 exchange, provided we make something by it. Why should we dis- 
 criminate against the favorite debt of the people ? Why should we not 
 give it an additional value ? I never could answer the question myself 
 except by raising the phantom of contraction which disturbs the brain 
 of the honorable Senator from Indiana. But to meet that we have 
 provided that there need be no contraction. For every dollar of green- 
 backs converted into bonds or surrendered, one dollar of bank currency 
 may take its place. Under the tenth section of the biU anybody can 
 present these greenbacks and get national currency and organize new 
 banks, and then the greenbacks are canceled. 
 
 If the greenbacks float into the Treasury under the third section of 
 the bill they are not canceled ; they are held in the Treasury, and may 
 be paid out in the ordinary operations of the Government, with this 
 condition only, that by it the amount of the debt shall not be increased. 
 Our surplus revenue now is a gold revenue. That surplus revenue can 
 be applied to the payment of bonds or the purchase of bonds in the 
 open market, as has been done almost daily for some time past. We 
 have no surplus revenue in greenbacks. Indeed, we have not enough 
 revenue in greenbacks to pay the ordinary expenses of the Government 
 in greenbacks. The surplus is gold, and we sell the gold and convert 
 it into greenbacks, and with the proceeds buy in our bonds. If the 
 money floats into the Treasury in exchange for bonds, that money may 
 be used in the ordinary operations of the Government if there* is oc- 
 casion to use it ; but if, on the other hand, there is no occasion to use 
 it, if there is more money in the Treasury than is necessary to carry on 
 the operations of the Government, it may be retired. Contraction will 
 take place only when the greenback is worth less in market value than 
 a four per cent, bond ; then, and then only, will it come into the Trea- 
 surer. Until tlien there can be no contraction of the cnn-ency, and no 
 retirement of the greenbaclcs. It is to guard against possible deprecia- 
 tion, to give the greenbacks steadiness in the money market, that this 
 measure is so vitally necessary. Wliy, sir, if this provision had been 
 contained in the law last September wjicn the stock gamblers were en- 
 deavoring to break up the business men of the country they would 
 have been defeated at tlie outset, when they ran greenbacks down to_ 
 
FUNDING BILL. ;' 281 
 
 about seventy cents on the dollar, or sixty cents, which I think they 
 reached. If they had undertaken such a movement as that in the face 
 of this provision of law the greenbacks would have had the market 
 value of four per cent, bonds, and those speculators would have been 
 broken long before the Government gold was thrown on the market. 
 
 Mr. President, all there is of specie payments in this bill is con- 
 tained in these simple words ; and if the Senate is not willing to do 
 thus much to give value to the security of the note-holder, the nagain 
 the note will drift off, valuable only for the payment of taxes. Eow, 
 the United States Government refuses to take this note for any pur- 
 pose except for taxes. Tou do not give it any value; you do not 
 promise to pay it ; you do not fix a time when you will pay it ; you do 
 not authorize it to be received for customs dues ; you do not authorize 
 it to be received in payment of bonds ; you will not take it at all ; you 
 dishonor it ; you stamp it with infamy by refusing it in almost every 
 form possible. And now, when we propose to give to it the additional 
 value of making it at least equal to a four per cent, bond, we are met 
 by a phantom fear. 
 
 Mr. President, I would not regard it as a misfortune if fifty or one 
 hundred million dollars of greenbacks should float into these four per 
 cent, bonds. We 'can never redeem them so cheaply again. The Sen- 
 ator is willing to sell four per cents, even five per cents, at par in 
 gold. Why does he not give the holders of greenbacks now four per 
 cent, bonds if they are willing to take them ? If we were now back 
 to specie payments, an object we all desire, but few seem really to 
 wish to come to, the holder of a greenback could present it and de- 
 mand his gold and silver coin. We are now offering to borrow the 
 gold and silver coin at five per cent., giving oiir bonds for it. Why 
 not, then, shorten the process by dealing at once with the holder of our 
 legal tenders, and give him a bond payable at four per cent., and thus 
 save the difference ? 
 
 It is idle to talk about specie payments either now or in the future, 
 when you refuse to give for the greenbacks an obligation of the Gov- 
 ernment bearing four per cent, interest in gold. Sir, this measure, as 
 far as this point is concerned, is a weak one. The note-holder ought to 
 have more privileges than are conferred by this bill ; but the fear of 
 contraction, of a disturbance of the business relations of the country, 
 as an effect of a sudden return to specie payments, must be guarded 
 against, as we have endeavored to do. 
 
 We have, then, given to the greenback some productive value, the 
 least productive value that has ever been proposed in this country since 
 its formation ; that is, the right to be converted into a bond bearing 
 four per cent, interest. If you are not willing to do that much to 
 strengthen the market value of the greenback, then you proclaim that 
 it is good for nothing except to pay a small portion of the taxes of the 
 United States ; not good to pay duties on imported goods ; not good 
 to pay interest on the public debt ; not good for anything untu in 
 some distant future the United States may hoard enough gold in the 
 Treasury to resume specie payments. 
 
 Mr. President, this question is simple, although very important in 
 
282 SPEECHES AND REPOETS OK JOHN SHERMAN. 
 
 its effects. The vote of the Senate on this question will have far more 
 effect on the resumption of specie payments than any vote that has 
 been taken at the present session. If we now again dissever the con- 
 nection between the note and the bond, we allow the note to float on 
 the market a mere toy for speculators, to be raised or lowered at their 
 pleasure. But if we now tie it to our public credit, tie it to the mar- 
 ket value of the bonds, we shall have anchored it to a sure foundation, 
 where it may rest in the hands of the people, to be floated into the 
 Treasury in payment of bonds until all that are left — and nearly all 
 will be left — will be paid in gold and silver coin when we resume spe- 
 cie payments. To avoid the possible evils of withdrawing the cur- 
 rency, or any portion of it, from the circulation of the country, we 
 have providea for free banking. Any association of individuals may 
 present these greenbacks, or the bonds provided for by this act, to the 
 Treasurer of the United States, and receive and issue circulating notes, 
 and then and only then an equal amount of greenbacks is canceled 
 under the operation of this act. This measure, simple as it is, I think 
 will have a beneflcial effect. But if this is stricken out, the effect of 
 the bill as far as specie payments are concerned is destroyed. 
 
 After which the bill was furtlier debated, amended, and passed. 
 
 The bill as passed by the Senate was disagreed to by the House, and a committee 
 of conference appointed, whose report was not concurred in, and a second com- 
 mittee of conference agreed to, and their report was submitted by Mr. Sherman, 
 who made the following brief explanation : 
 
 I desire the attention of the Senate while I make a brief statement 
 in regard to this very important bill. The controversy between the 
 two Houses as to the funding bill related principally to three matters : 
 first, as to the description of ihe bonds ; second, as to the mode of 
 negotiation ; and third, as to their operation upon national banks. The 
 House of Representatives provided for a four per cent, thirty-year bond. 
 The Senate provided for three classes of bonds, at five, four and a half, 
 and four per cent. We have adjusted that matter by providing for 
 three classes of bonds of the description provided for in the Senate bill, 
 but have limited the amount of five per cent, bonds to $200,000,000, 
 of four and a half per cent, to $300,000,000, and the residue, §1,000.- 
 000,000, must be four per cent, bonds running for thirty yeai-s. 
 
 The second question was as to the mode of negotiation. The House 
 provided for no means of negotiation, no agencies and no facilities. 
 The Senate had opposed the appointment of agents, and the adver- 
 tising of the loan, etc., and limited the expenditure to one half of one 
 per cent. We have agreed to a modification which places the one half 
 of one per cent, at the disposal of the Secretary oi the Treasury for 
 the negotiation of the loan ; so that in substance it is the proposition 
 of the Senate. 
 
 As to the national banks, wc had a great 'deal of trouble. The 
 original section in the funding bill, as it passed the Senate, required 
 that nil the national banks should substitute thcnew bonds for the old. 
 Tlusro was, as I think, a very unreasonable and unnecessary clamor 
 raised by the banks against that provision. I was sorry to see it. In 
 
FUNDING BILL. 283 
 
 the House bill there was no provision made in regard to the national 
 banks. But when we came into conference the House cojnferees them- 
 selves proposed that the new banks to be organized under the currency 
 act which recently passed should be upon the new description of Jbonds ; 
 a provision which was manifestly just in itself and not unjust to the 
 banks. That was a proposition made by the conferees of the House, 
 and we agreed to it. When the bill went back to the House, it seems 
 that some of the very gentlemen who were so much opposed to our 
 section about the national banks attacked the report of the committee 
 on the ground that it did not extend this provision in regard to the new 
 banks to the old ones. The contest thus sprang up on the proposition 
 proposed by the House conferees, and the bill was defeated, after de- 
 bate, upon this proposition. 
 
 The second committee of conference, being composed of the same 
 gentlemen, had but one of two courses to pursue : either to restore the 
 section proposed by the Senate originally, which we thought was the 
 better way, or to omit all reference to national banks in the bill. In 
 view of the action of the House we concluded that it was better to 
 strike out the seventh section of the bill entirely, leaving the old and 
 new banks upon the same footing, and leaving the national banks en- 
 tirely at hberty to help or to mar the funding of the public debt. 
 
 1 wish now to record my deliberate judgment that in this conclu- 
 sion, to which we have been compelled to arrive by the action of the 
 House, we are doing the national banks a great injury, which will im- 
 pair their influence and power among the people, and that the oppo- 
 sition of the national banks to this provision, which would have re- 
 quired them to aid in the funding of the public debt, wiU tend more 
 to weaken and destroy them than anything that has transpired since 
 their .organization. I do not see how we can go before the people of 
 the United States and ask them to lend us gold at par for our bonds, 
 when we refuse to require agencies of our own creation to take them ; 
 when we even refuse to require new banks not yet organized to take 
 the new bonds, and when we refuse to require old banks, which have 
 made on the average from fifteen to twenty per cent, annually upon 
 the franchise derived from the United States, to aid us to this extent 
 in funding the public debt. 
 
 But, sir, the vote of the House shows the power of the national 
 banks. It is so great, at least in the House, that in order to secure a 
 funding bill we have been compelled to abandon all provisions in regard 
 to the national banks ; but I give notice that in the future I for one 
 shall be prepared at all times to require the national banks to take that 
 class of bonds which we propose in this bill, and I have no doubt this 
 will be the result. But for the present, in deference to the wishes of 
 the House, we have withdrawn the section in regard to national banks. 
 
 This bill became the Refunding Act of July 14, 1870. 
 
284 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 EEOEIPTS AND EXPENDITUKES— EEDUOTIOIS"- OF 
 
 TAXATION. 
 
 IN THE SENATE, MAY S3, 1870. 
 
 The Senate, as in Committee of the Whole, having under consideration the bill 
 making appropriations for the legislative, executive, and judicial expenses of the 
 Government for the year ending the 80th of June, 1871, Mr. Sherman said : 
 
 Me. Peesident : This appropriation bill is the first of a series that 
 will bring before us every branch of the expenditures of the National 
 Government. It may be well before we enter into their details to take 
 a general view of our expenditures, and of such measures of taxation 
 as will be necessary to raise the vast sums about to be appropriated. 
 Taxes and appropriations are inseparably associated. They are the 
 pleasing and painful sides of financial legislation. If to appropriate 
 money was the " end all and be all " of this and kindred billfi, it 
 would be the most gratifying employment in the world. We could 
 indulge in the luxuries of art and the fancies of statesmanship; we 
 could erect temples for custom-houses, and cover the ocean with our 
 subsidized steamers ; we could increase our salaries, and buy all the 
 islands adjacent to our continent. But unhappily we can only appro- 
 priate what we first collect by taxation, and taxation is a painful pro- 
 cess at best, in its nature unequal, and generally inflicting more injury 
 to the individual than it confers benefit upon the people. Every ap- 
 propriation bill is a tax bill, and every item added is a draft upon the 
 earnings and labor of our citizens, to which is superadded the cost of 
 collection. If the money is borrowed, then interest is added, and 
 interest is as consuming to the resources of a nation as it is to an 
 individual. It never rests or sleeps. 
 
 The estimates upon which these appropriation bills are founded 
 are made annually by bureau clerks nearly one year before the com- 
 mencement of the fiscal year for which they are made, and by law 
 are submitted to us at the beginning of each session. A general re- 
 sume of these for tlie year may be found on pages 240 to 244 of the 
 book of estimates, as follows : 
 
 Legislative department 8^,833,891 40 
 
 Executive department 21,321,804 00 
 
 Judicial department 1,576,990 00 
 
 Military department ' 8S,845,T47 76 
 
 Naval department 24,698,277 37 
 
 Indians 6,048,334 61 
 
 Pensions 30,490,000 00 
 
 Miscellaneous 6,531,267 83 
 
 Public worlts 24,625,178 66 
 
 Postal appropriations (deficiency) ". 6,427,131 21 
 
 Annual appropriations $165,297,617 62 
 
 Permanent appropriations, mainly collection of customs and postal service.' 5,110,000 00 
 Other indefinite permanent appropriations, as drawbaclta, excess of duties, 
 
 bounties, etc 9,031,300 00 
 
 Interest of public debt 129,077,815 00 
 
 Total $298,516,782 62 
 
RECEIPTS AND EXPENDITURES. 285 
 
 A palpable error occurred in tlie postal estimates, but this I have 
 corrected in the statement read. The great mass of these estimates 
 is to carry into effect existing laws, and can only be reduced by a 
 change of the law. All the appropriations for public works, and some 
 of the appropriations for other heads of expenditure, amounting in the 
 aggregate to more than iifty million dollars, depend upon, and may be 
 increased or diminished in, the annual appropriation bills. The amount 
 estimated by the Secretary of the Treasury in his annual report for 
 the service of the next fiscal year is $291,000,000, made up as follows : 
 
 Civil service and misoellaneoua $60,000,000 
 
 Pensions and Indians 36,000,000 
 
 War Department 60,000,000 
 
 Navy Department 18,000,000 
 
 Interest on the public debt 127,000,000 
 
 Total $291,000,000 
 
 The difference between the two estimates is readily explained, and 
 consists mainly of his reduction of estimates for public works; but 
 the actual appropriation will depend upon the economy or liberality 
 of Congress. I shall be gratified if the appropriations are kept within 
 the estimates of the Secretary of the Treasury. 
 
 l^ow, in these estimates there are elements of uncertainty growing 
 out of other causes than the action of Congress ; and some of these de- 
 mand an immediate legislative remedy. Under the law and the prac- 
 tice of the departments unexpended balances of appropriation for one 
 year are carried over to the credit of that fund in the next year. Thus 
 we may appropriate a specific sum for the pay of transportation in the 
 army, enough in the judgment of Congress for that purpose; yet a 
 much larger sum may be expended by adding to the new appropriation 
 the balances of former appropriations. It is at this moment difficult to 
 estimate what balance of unexpended appropriations will remain on 
 the 1st of July next, and it Was much more difficult to estimate such 
 balance in October last. The actual balance of unexpended appropria- 
 tions on the 1st of July last was $102,390,159.3T, of which $41,548,- 
 477.30 were for the War Department, and $26,532,453.94 for the In- 
 terior Department, or more than one full year's appropriations for each 
 of those departments. Indeed, their " balances " were nearly as large 
 as the whole appropriations for the present fiscal year, thus giving the 
 departments two years' supplies for one. I refer Senators for further 
 information upon this subject to Executive Document No. 155, House 
 of Kepresentatives. 
 
 Here we have an element of uncertainty, which explains why the 
 appropriations are not the limit of expenditures. The only way to cor- 
 rect this is by carrying all the balances of appropriations at the end of 
 the fiscal year to the surplus fund ; then the expenditures can never 
 exceed the appropriations for that year. This reform has been adopted 
 by the Senate in an amendment reported by the Committee on Finance 
 to this bill, by confining these balances to expenditures included in the 
 fiscal year for which they are appropriated. If unforeseen wants should 
 arise, they can be provided for by deficiency biUs ; but with the present 
 practice there is not sufficient check upon expenditure. I know of 
 
286 SPEECHES AND REPORTS OF JOHN" SHERMAN. 
 
 heads of appropriations kept alive in this way ever since the war, that 
 would not for a moment be authorized in an annual appropriation biU 
 now. 
 
 Another element of uncertainty grows out of the authority during 
 the war to transfer appropriations from one head of expenditure to an- 
 other. This ought not now to be allowed in any case. The history of 
 these transfers is a curious one. The Constitution of the United States 
 provides that no money shall be drawn from the Treasury but in con- 
 sequence of appropriations made by law. This highly important and 
 fundamental provision has frequently been evaded under the specious 
 device of a transfer of appropriations, authorized from time to time by 
 different acts of Congress. This was cured by the deficiency biU of 
 February 12, 1868, which repeals all acts authorizing such transfers, 
 and provides that no money appropriated for one purpose shall here- 
 after be used for any other purpose than that for which it was appro- 
 priated. We had a case in point last summer, when our adventurous 
 Admiral of the Navy, without consulting Congress, embarked in a vast 
 sea of expenditure for building a navy, and his reliance was in the un- 
 expended balances accumulating from appropriations under various 
 heads during and since the war. This law, which must have been 
 overlooked, guarded these balances from a transfer and checked an al- 
 most unlimited expenditure. 
 
 Sometimes we have bills authorizing transfers; but the word when- 
 ever used ought to be regarded as an indication of fraud ; it ought to 
 excite distrust and suspicion. Annual appropriations for specific pur- 
 poses, and for a specific time, are the only guards for expenditure. If 
 then we have extravagance, it can only be the extravagance of Congress 
 and not of executive officers. 
 
 Another element of uncertainty in our estimates is the demand for 
 public works, amounting this year to the sum of $24,625,173, against 
 $5,493,000 appropriated last year. Upon the action of Congress on 
 this branch of expenditure it will depend whether we have to provide 
 for $280,000,000 or $305,000,000 ; and what I say in regard to the re- 
 duction of taxes will be affected by this uncertainty. Certain great 
 works of improvement demand liberal appropriations, but they are 
 often compelled to carry a multitude of appropriations for objects of 
 minor importance. 
 
 Another uncertainty arises from the manner in which tlie estimates 
 and appropriations are made. We are asked to appropriate §100,000 
 for the erection of a custom-house ; then a plan is adopted which re- 
 quires $1,000,000 ; the money appropriated is sunk in the foundation, ^ 
 and this is made the basis for future appropriations. No public work 
 should be authorized until its completed cost is ascertained and fixed by 
 law or contract ; and I am happy to see that this plan lins been adopted 
 in the bills of this session. 
 
 The amount of claims that nro provided for by Congress is also an 
 indefinite sum. If the proposition which was supported the other day 
 with a very able, eloquent, and elaborate speech sliould pass, it will cost 
 from thirty to fifty million dollars to meet that demand for next year ; 
 and we must provide for it. As a matter of course, if the proposition 
 
EEOEIPTS AND EXPENDITUEES. 287 
 
 should be adopted, and we should concede the principle that we must 
 pay all the damages incui-red and sustained by loyal people in the 
 Southern States during the war, it would add to our expenditure an 
 enormous sum, an amount which even the Senator from Indiana did 
 not venture to state. It would amount to perhaps fifty million dollars, 
 perhaps double that ; I do not know how much. 
 
 Besides that, there are judgments of the Court of Claims. In this 
 estimate of the aggregate of expenditure, $1,000,000 is estimated for 
 the payment of the judgments of the Court of Claims. But last year 
 they were over $1,250,000, and this year wiU probably largely exceed 
 that, as many cases are now pending on appeal in thS Supreme Court, 
 as well as in the Court of Claims originally. Then the action of Con- 
 gress on private claims that come to us is very uncertain. We some- 
 times see, without attracting much attention, a claim of $50,000, or 
 $100,000, or even $250,000, go through. That swells the vast aggre- 
 gate of our public expenditures without our scarcely perceiving it. 
 
 A still more dangerous element of uncertainty grows out of our 
 Indian service. The conduct of the United States to the Indian tribes 
 is infamous. It is in its results as cruel and heartless as the worst 
 chapters of English domination in India under Hastings and Clive. It 
 has been so for years. But two years ago we undertook to make a 
 great reform. We undertook in the most solemn manner to gather 
 our Indian tribes into reservations, to feed them, and adapt them to 
 civilized life. We authorized a board of oflacers of the highest rank 
 in military and civil life to make treaties with them. This was done 
 with much ostentation, and the treaties were ratified and confirmed by 
 the Senate. We guaranteed them reservations, food, shelter, assist- 
 ance, and clothing, in obligations as sacred as the public debt. We 
 have openly and knowingly violated these obligations. We even gath- 
 ered bands of Indians on the reservations promised them, and left 
 them to starve. Our people invaded the very reservations set apart 
 for them, and Congress refused last year, and still refuses, to make 
 appropriations to carry the treaties into effect. 
 
 The Indians- resorted to the only remedy for savages or civilized 
 people for violated treaties ; but their warfare is the warfare of bar- 
 barians. They steal and rob, burn, murder, and mutilate their victims. 
 What else can they do ? You have invaded their territory ; you have 
 cut off their food. They are starving. You promised them food, and 
 you have sent them Quakers without money. They flaunt your vio- 
 lated treaties in your faces. You talk about Indian massacres ! What 
 death is more terrible than starving ? What crime is greater than this 
 Congress commits daily in violating these treaties ? With them it is 
 the crime of desperation ; with you it is the crime of listlessness and 
 indifference. I fear it is now too late to repair our error. We may 
 be startled any day by a Fetterman massacre, to punish which our sol- 
 diers may be compelled to commit another. In any event, very large 
 additional appropriations must be made, and these wiU be either in 
 money for food, or in supplies and transportation for the army. 
 
 Then there is another thing. The House the other day passed a 
 ^bounty bill, which, in my judgment, if carried into a law, will cost us 
 
288 SPEECHES AND KEP0ET8 OF JOHN" SHERMAN". 
 
 about two hundred million dollars. It allows one hundred dollars a 
 year, if I remember aright, for every year's service by any soldier in 
 the war. Two or three years ago I examined into it thoroughly, and 
 the estimates then of the Department, which I have now in my hand, 
 showed that the whole amount to pay the bounties provided for by it 
 would be from three to four hundred million dollars. As a compro- 
 mise we provided for a mode of paying a certain amount of bounties 
 that has cost the Government eighty millions, and this new bill pro- 
 poses to make up the difference, as I understand. "When the original 
 House proposition came to us, the estimate was that it would cost 
 more than three or four hundred million dollars, and the House bill 
 as passed now allows a deduction of the amount of bounties already 
 paid. I feel as grateful to the soldiers as any one ; we have done what 
 we agreed to do for them ; but I must present these facts and sober 
 statistics to the members of the Senate, so that, if they pass that biU, 
 they may know precisely what they are doing. 
 
 I state the facts to show the difficulty of accurately estimating our 
 future expenditures. An English statesman felt himself called upon 
 to apologize' at great length for-a discrepancy of £500,000 between his 
 estimates and the actual expenditures ; but under our system it would 
 require more than human sagacity to guess within $5,000,000 of our 
 expenditures for the next year. We can only take the hopeful esti- 
 mate of the Secretary of the Treasury of $291,000,000 and try to keep 
 the appropriations within that limit. To this amount we must add the 
 amount required for the sinking fund under the act of February 25, 
 1862, of one per cent, of the entire debt, or $24,000,000, making the 
 sum to be provided for $315,000,000. 
 
 I omit from the view I present of our financial condition the sur- 
 plus gold on hand, which, according to the statement submitted to us, 
 on the 1st of May amounted to $115,525,213 ; but that is subject to a 
 deduction of $33,840,400 of gold belonging to private parties, leaving 
 of gold belonging to the Government $81,684,813. This gold was 
 collected under the act appropriating and setting apart the gold rev- 
 enues for the interest and principal of the public debt. It might now 
 be safely used for funding the debt. But I avoid all discussion of the 
 funding bill and all measures that look to the reduction of the rate of 
 interest. These subjects we have elaborately discussed in the Senate ; 
 and although the action of the House is long delayed, I hope we shall 
 
 ?et agree upon some measure that will enable the Seeretarv of the 
 'reasury to reduce this burden of interest. I look to the gold held 
 by the Treasury as the basis of any funding system that can be pro- 
 posed, because the Government when it engages in the operation of 
 funding must be very strong indeed. 
 
 Then it is also necessary to provide for the three i^cr cent, certifi- 
 caten, which, under the currency bill as it passed the Senate, must be 
 retired. They can be provided for out of the aecunuilated gold and 
 the surplus revenue that will accrao before the meajsures I propose to 
 indi(!ate shall operate. This gold will form also the basis of a resump- 
 tion of specie payments. Therefore we can not count as an element or 
 source of revenue the amount of money we have on hand. That money 
 
RECEIPTS AND EXPENDITURES. 289 
 
 is specifically pledged for other purposes, and can only be used either in 
 the retirement of the three per cent, certificates or of greenbacks, or in 
 the payment of a certain portion of the bonded debt of the United 
 States. The only resources we have for the large sum that is necessary 
 to be appropriated this year, estimated by me at the lowest calculation at 
 $315,000,000, are the taxes collected in various forms from the people. 
 
 And here, when we approach this question, I am glad to say that we 
 are able to estimate with a great deal more accuracy. It is much easier 
 to estimate the result of taxation than it is the process of expenditure. 
 There are four different heads of receipts under our Government. The 
 first and least of ail is the public lands, which yield, say, $5,000,000 — 
 more than formerly. I beg leave to differ from my colleague, who made 
 a very able speech some weeks ago to show that the grants of public 
 lands to railroads tended to impair the money revenue of the Govern- 
 ment from the proceeds of the public lands. The facts, if examined into, 
 will show directly the reverse. Whenever we grant land to a railroad, 
 we raise the price of the reserved sections, and those reserved sections 
 are at once brought into market, so that we sell the same atoount of land 
 at double the price ; and the rtserved sections, instead of being settled 
 under the homestead act or under the preemption laws, are in many 
 cases sold for money. The result is, that last year we received from 
 the proceeds of the public lands in money $5,000,000 ; and that has 
 been the operation of all the grants of lands for railroads. I do not 
 now mean to go into the general subject of the disposition of the public 
 lands ; I merely speak of it as a source of revenue. It is most proba- 
 ble, therefore, that we may rely upon the same amount from public 
 lands next year, and that is the amount estimated by the Treasury 
 Department. , 
 
 There are sources of revenue, to the amount of $28,000,000, which 
 are in every sense of the word miscellaneous. The principal items 
 are : the premium on the sales of coin ; the fees from United States 
 consuls (the consular system now being self-sustaining), storage, rent, 
 labor, and drayage, under the administration of the customs laws ; fines 
 and penalties for violations of the customs laws ; the fees on letters- 
 patent, which were $650,000, or more than the expenses of the Patent 
 Office; the taxes levied on the circulation and deposits of national 
 banks, say $6,000,000 (which is not collected through the Internal 
 Kevenue Office, but directly by the Treasurer of the United States) ; 
 the homestead fees, which yielded us $300,000, going far toward de- 
 fraying the expense of surveying the public lands, and perhaps paying 
 the whole expense ; steamboat fees under the steamboat law, which 
 yield us $200,000 ; and various unenumerated items, $3,300,000 ; mak- 
 ing an aggregate of $28,000,000 from miscellaneous sources. 
 
 One item in this account is perhaps overestimated. The amount of 
 $16,000,000 estimated as the premium on the sales of gold is larger 
 than we shall probably receive next year. The estimate was made in 
 October last, when gold was bearing a much higher premium than to- 
 day. I think, therefore, there will be a reduction in that item on 
 account of the fall in the premium on gold ; but it will be amply made 
 19 
 
290 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 up by other sources, so that we may rely at least upon $28,000,000 
 from these various incidental sources of revenue. 
 
 We then have the customs duties and the internal revenue. The 
 customs duties are estimated for the next fiscal year at $185,000,000 ; 
 and I think this is an underestimate rather than an overestimate. The 
 actual receipts of the last three quarters of the present fiscal year are 
 $140,639,000. Estimating an equal amount for the present quarter, 
 the amount of customs duties this year will be about $186,000,000. 
 Next year they will probably be as much ; but the Secretary estimates 
 them at $185,000,000. 
 
 The internal revenue, if maintained at its present position and with- 
 out any diminution or change, will yield not less than $175,000,000. 
 The actual receipts during the last calendar year were somethang over 
 $174,000,000. They have been gradually increasing since this Ad- 
 ministration came into power, and now, instead of $157,000,000 or 
 $158,000,000 annually, they are $174,000,000 or $175,000,000; and 
 next year, if the law remains unchanged, they will be over the amount 
 estimated, $175,000,000. This makes an aggregate of $393,000,000. 
 Deduct the amount estimated by the Secretary of the Treasury for ex- 
 penditures, and it leaves a surplus of $78,000,000 upon the basis of 
 existing law. 
 
 Now, the question arises, "What shall be done with this surplus ? Is 
 it better to repeal and diminish the taxes, or to maintain them at their 
 present position with a view to the reduction of the public debt? 
 Upon that I believe there is a unanimity of sentiment in this country, 
 in which I most heartily concur. I can see no object in maintaining 
 our revenue at its present position, no object in a more rapid payment 
 of the public debt than is provided for in the sinking fund of Februa- 
 ry, 1862, or the funding bill as wl sent it to the other House, which 
 will pay off the whole debt in twenty-five or thirty years. I see no 
 object in accumulating surplus funds, because they are always a temptar 
 tion to extravagant expenditures, and many of the items which will be 
 put on this appropriation bill will be put there because we have a sur- 
 plus revenue. 
 
 A surplus revenue could only be used for the more rapid reduction 
 of the public debt. It might strengthen the power of the Secretar}"^ of 
 the Treasury to reduce the interest of the debt. These are objects 
 of high public importance, but in my opinion it is now more im- 
 portant to relieve our people from burdensome taxation. The money 
 is more valuable to the tax-payers in the multiplied business of a new 
 and vast country like ours, than it is to the National Government. The 
 large surplus now on hand, together with the fixed provision for the 
 reduction of the debt contained in the funding bill, will enable us to 
 reduce the rate of interest and gradually to pay the principal, without 
 continuing the drain of taxation upon our people. AVe point with 
 pride to the vast sums they have freely and voluntaj'ily paid, levied by 
 themselves during and since tlie war. They have borne, not only with 
 patience, but with patriotic alacrity, a burden of taxation without ex- 
 ample in history. The object of this taxation has been attained, and 
 even the disturbing waves of civil war have almost subsided, and friend 
 
REOEIPTS AND EXPEJSTDITUEES. 291 
 
 and foe, master and slave, are industriously adding to the national re- 
 sources and contributing^ to the national taxes. Under these circum- 
 stances we ouffht to limit our demands upon them to the smallest sum 
 consistent with the national credit and the proper maintenance of the 
 different departments of the National Government. 
 
 Assumiag, then, that our surplus revenue is to be disposed of by a 
 reduction of taxes, we are enabled, for the sixth time since the close of 
 the war, to perform this pleasing duty. We have already reduced 
 taxes as follows : 
 
 By the act of July 13, 1866 $66,000,000 
 
 By the act of March 2, 1867 • 40,000,000 
 
 By the act of February 3, 1868 23,000,000 
 
 By the act of March 31, 1868 ) 
 
 By the act of July 20, 1868 \ 45,000,000 
 
 Making a total of 1173,000,000 
 
 The real question is, What taxes ought to be repealed ? which 
 among them bear most upon the industry of our people? We have 
 two systems of taxation, entirely distinct in their origin, in the laws 
 governing them, and in the oflScers administering them. Our internal 
 revenue system is the product of the war. It was improvised to meet 
 a sudden exigency. The taxes imposed under it are immediately felt ; 
 they are direct ; they fall upon our own industry. Our customs duties, 
 though largely increased during and since the war, have been in force 
 since the formation of the Government. They are levied mainly at 
 five large cities. They are indirect. They are mainly upon' articles 
 of luxury or consumption, so well distributed that the taxes fall fairly 
 and in just proportion to ability to pay. To the extent that they are 
 levied upon articles similar to our own productions, the taxes foster 
 and protect home industry. Though we may differ very much about 
 mere theories, yet it is likely under any administration that the chief 
 burden of taxation will rest upon imported goods. These now yield 
 us $185,000,000 in gold, and this revenue is not likely to diminish. 
 The question is, whether it is not better to retain this revenue, retain 
 this system of customs duties, and for the present confine our reduc- 
 tion of taxes to the new and direct laws of internal taxation. 
 
 If we examine the details of our customs duties, it will be found 
 that they are as well distributed as any taxes on consumption can be. 
 The real objection to them is that they fall entirely on consumption. 
 Property does not pay any portion of them. If, in fact, the consump- 
 tion of taxable goods used by the poor bore the same proportion to 
 their property or income that the consumption of the rich does to their 
 property or income, then the tax would be as equitable as any tax can 
 be ; but this is not so. This fact ought to be borne in mind in adjust- 
 ing other taxes on property or income. Nearly one third of all our 
 customs duties fall upon articles of food, the products of tropical cli- 
 mates, such as sugar, tea, cofiee, and the spices. Duties on these arti- 
 cles are purely revenue duties. They are stable, for their consumption 
 does not much diminish by increase of price. They are as generally 
 diffused and as lightly felt as any portion of our taxes. 
 
 We levy not less than thirty millions upon raw articles, the basis of 
 
292 SPEECHES AND EEPOETS OF JOHN 8HEEMAN. 
 
 our domestic induBtry, whicli is not only added to the cost of the do- 
 mestic product, but also tends to prevent domestic production. The 
 tariff is commonly denounced as a high protective tariff, in order to 
 arouse old political controversies ; but jn fact it is so framed as to pro- 
 duce the largest revenue upon the smallest importations. The average 
 rate of duty levied extends to nearly all articles imported into this 
 country. It would be a more protective tariff if the duties on prod- 
 ucts of tropical climates were repealed. It would be stiU more pro- 
 tective if the duties on raw products were repealed. 
 
 The true distinction between a protective tariff and a revenue 
 tariff is that a protective tariff consists of high duties on articles of 
 foreign production that come into competition with domestic produc- 
 tions, and low duties on all other articles. A purely revenue tariff 
 consists of high duties on articles of foreign growth that we can not 
 produce, and low duties on articles that we do produce. The latter en- 
 courages importations and swells revenues. The present tariff levies 
 high duties on nearly all the productions of foreign countries, both raw 
 and manufactured productions, both such as we can not produce and 
 such as we can produce. It is, therefore, the best revenue tariff we 
 have ever had, yielding the largest revenue possible. Its protective 
 features are very much modified by the duties on raw materials and on 
 the tropical food which enters into the cost of domestic labor. The 
 general effect of the present tariff has been largely beneficial to our 
 industry ; and I am not anxious for its reduction until we have largely 
 reduced our internal taxation. When the tariff is reduced there will 
 be a struggle of opposing interests. It should be done with great de- 
 liberation. When done, it should be upon some general priuciple of 
 financial policy, such as guided Sir Robert Peel in 1842, and by the 
 application of general rules not to be departed from by the demand of 
 isolated interests. 
 
 If the purpose is to reduce revenue duties, it can easily be accom- 
 plished by enlarging the free list, or reducing the duties on tropical 
 fruits. It it is to reduce the protective duties on metal and textile 
 fabrics, it should be by a fixed percentage. The mere reduction of a 
 small amount of either class of duties will not give the country that 
 relief that will be given by an equal amount of redaction of internal 
 taxes. I make these general observations without any desire to pre- 
 judge a revision of the tariff when the subject is presented by the 
 Souse of Representatives, but only that I may present to you the great 
 relief that our surplus revenue enables us to give our people by 
 the repeal of internal taxes. Indeed, I hope that the tariff bill now 
 pending in the House of Representatives may pass at this session in the 
 form deemed best by the House, and then that it may be subject to the 
 scrutiny of the people, so that at the next session the Senate may pro- 
 pose such amendments as a full and patient investigation may show to 
 be necessary. It is manifest that at this period of the session such an 
 investigation is impossible ; and that if a greater reduction of revenue 
 than I will propose is deemed prudent, it sliould be done by enlarging 
 the free list, or by reducing the duty on a few products, such as sugar, 
 coffee, and tea. 
 
KEOEIPTS AND EXPENDITURES. 293 
 
 Tlie question then recurs, "What internal taxes ought to be repealed ? 
 How can we within the limits of our surplus give most relief to our 
 constituents ? And here the Committee on Finance were met with a 
 difficulty growing out of the necessity, in our opinion, of continuing 
 the income tax in a modified form. 
 
 We are restrained by the constitutional provision which declares 
 that the House of Representatives alone can " originate bills for raising 
 revenue." The question occurred, whether or not a committee of the 
 Senate ought to undertake to introduce a bill reducing revenue. It is 
 the general sense of the Senate that we have a right to originate a bill 
 reducing revenue. We introduce appropriation bills every day. It is 
 the established law and practice that the Senate has the right to origi- 
 nate appropriation bills, funding bills, loan bills, and all other forms of 
 financial legislation except a tax bill " raising revenue." 
 
 I can show precedents without number on this point. The ques- 
 tion whether or not the Senate can originate a bill which reduces rev- 
 enue has never been made, because the occasion has never arisen. I 
 have no doubt of the power of the Senate to do it ; but while we are 
 throwing off revenue, we propose to renew and continue some portion 
 of the income tax, which by existing law expires with this year. The 
 Committee had some doubt whether it was wise for them to present 
 any bill reducing taxes, as we wished to make no controversy or ques- 
 tion with the House ; and the only reason why it was done was because, 
 in the then condition of affairs, there seemed to be a probability of so 
 great delay in the redaction of taxes, that we thought it our duty to 
 bring the subject before the Senate promptly. 
 
 If two or three months ago a bill had been introduced and passed 
 repealing all special taxes which are levied on the first day of this 
 month, it would have given a vast deal of relief to our people. We 
 are entirely able to do it. These taxes are mainly levied in the month 
 of May, and consequently will be assessed for the present year. Be- 
 cause of the long delay in these measures of relief, the Senate Commit- 
 tee thought it proper to introduce and report a bill to reduce taxation, 
 which we believed to be within our constitutional power. 
 
 I am rather inclined to think that it is not within the power of the 
 Senate to introduce a bill to continue a tax that has expired or will ex- 
 pire by its own limitation. There is no doubt about our power to re- 
 duce taxation, but there is doubt of our power to continue the income 
 tax after its expiration. In my judgment it is necessary to maintain, 
 for a time at least, the income tax ; and therefore I agree that it is bet- 
 ter to postpone action on the Senate bill to reduce taxation, until we 
 have the action of the House on the bill for that purpose since reported 
 to the House. 
 
 It now only remains to point out those taxes which, in the opinion 
 of the Committee on Finance, ought to be repealed, and those that 
 ought to be retained. I have had prepared for the benefit of the Sen- 
 ate a statement, now on your tables, showing the precise taxes that are 
 proposed to be repealed and those proposed to be retained. 
 
 The first and most oppressive form of taxation, in my judgment 
 most indefensible in principle, most unusual in practice — indeed, I 
 
294 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 know of country that levies it except our own, and certainly it was 
 levied very mucli against my opinion, and, I may say, also of other 
 members of the Committee on Finance — is the tax on sales, which 
 yielded us last year $8,206,839.03. There is no objection to any kind 
 of tax that is not applicable to this. It is a tax on mdustry ; it is a tax 
 on the most careful, the most prudent, and the most energetic of our 
 people ; it is a license tax, a tax on employments. It is a tax that re- 
 quires espionage, because it is estimated by the amount of sal^, and 
 every merchant's books must be liable to be investigated by the tax- 
 gatherer. It is a tax that, in my judgment, ought to be the first of all 
 repealed. It applies to dealers and manufacturers of all kinds. 
 
 The tax on gross receipts is also a most oppressive form of taxation. 
 It applies to the gross receipts of corporations, transportation companies, 
 railroad and insurance companies. If this tax was paid out of the ac- 
 cumulated profits of those corporations, it might be, in the prosperous 
 condition of our country, right enough to continue it ; but this tax is 
 at once charged over to the individual. Every passenger that travels 
 on a railroad pays this tax. The law so provides in words ; and, in- 
 deed, in some cases individuals pay several times the amount. The 
 street railroad companies, in order to cover the small fraction of a cent 
 tax levied on them, have added one cent to their fare. ]^early all the 
 street railroads in the United States have done so. So with insurance 
 companies. They always add the amount of the tax to the premium 
 on insurance. This tax on gross receipts is, therefore, a tax on insur- 
 ance and on the transportation of persons. It yielded $6,300,998 last 
 year, and is proposed to be repealed. 
 
 The taxes on legacies and successions have always been invidious 
 and odious, and very imperfectly collected. If they were taxes only upon 
 collateral inheritances, as upon a grand-nephew who acquired an inheri- 
 tance by the death of a remote uncle, there would be no great sympa- 
 thy for the subjects of the tax ; but the great body of these taxes is 
 levied on the son who inherits from the father, the lineal issue, or an- 
 cestor, the brother or sister. So w^ propose to repeal these taxes. 
 They yielded about two and a half million dollars last year. 
 
 The articles in schedule A, as it is called, billiard tables, carriages, 
 gold plate, watches, etc., are next proposed to be relieved from tax. In 
 principle and theory it would be well enough to collect that tax, but it 
 yields us less than a million dollars. It throws upon assessors a vast 
 amount of work, and does not compensate for the expenses of collec- 
 tion. We propose to repeal that, and leave the watches and gold and 
 silver plate, which yield us very little, to the State authorities. 
 
 The tax on passports, which is continued in the Houi^e bill, yields 
 but $29,453. It is an invidious tax, and there is no occasion for con- 
 tinuing it ; it is too small. 
 
 The tax on salaries of United States employees is a grossly unequal 
 tax, as it is now levied, because a clerk who is employed in the depart- 
 ments here does not get the benefit of a deduction for the rent, taxes, 
 and other exemptions allowed to other incomes. It denies to our own 
 officers the exemptions iillowed to all other persons on their income tax. 
 It is proposed, therefore, by the Senate bill to repeal this tax by name, 
 
KE0EIPT8 AND EXPENDITUEE8. 295 
 
 and to require the person receiving an income from tlie Government in 
 the way of salary to include it in nis general return, so that if he pays 
 an income tax he pays it on his salary at the same time that he pays it 
 on other income. 
 
 The tax on banks and bankers, and all the special taxes, I may say, 
 amounting to nearly ten million dollars, it is proposed to sweep entirely 
 out of existence. 
 
 The chief difference between the Senate bill and the House biU to 
 reduce taxes is, that the House bill preserves a considerable number of 
 the special taxes. The House biU proposes to retaia the tax on banks 
 and bankers, billiard rooms, bowling-alleys, brokers, claim agents, and 
 a vast number of others. The Finance Committee, however, were of 
 opinion that it was better to strike out the whole list of special taxes, 
 excepting the taxes on whisky and tobacco. The result of this will be 
 a reduction of revenue of about ten million dollars, but it gives vast 
 relief to every branch of industry. There is no tax so unequal, with 
 perhaps the exception of the tax on sales, as this tax called the special 
 or license tax. It levies the same rate on the poor lawyer who travels 
 twenty miles for a fee of ten dollars, as it does on the lawyer of the 
 highest rank in the profession. It is impossible to continue this system 
 of taxation without continuing gross inequality. .The Finance Com- 
 mittee, therefore, propose to repeal the whole mass of these taxes. The 
 result will be, in our judgment, to dispense with the services of nearly 
 two thirds of the assistant assessors and deputy collectors, diminishing 
 largely the machinery for collection, and abolishing at one stroke nearly 
 aR the taxes that come home to the people of the United States. We 
 propose, also, to modify the income tax, which I will explain more fiiUy 
 hereafter. 
 
 The reduction, according to the plan proposed by the Committee on 
 Finance, is, upon the basis of last year's returns, $43,597, YH, but upon 
 the basis of the actual receipts for the current year would be $46,000,000. 
 My own impression is that to this there ought to be added the repeal 
 of the tax on gas, which yielded $2,000,000, and the repeal of the stamp 
 tax on receipts, and various forms of minor stamps, amounting to about 
 two million dollars more, making an aggregate reduction of about fifty 
 million dollars. This would then sweep out of existence aU the taxes 
 levied by the internal revenue service upon everything except spirits, 
 tobacco, fermented liquors, larger stamps, and a small income tax, leav- 
 ing unrepealed taxes to the amount of $116,441,000. 
 
 The tax on spirits yields us about $50,000,000 a year ; and in my 
 judgment it ought to be made to yield $60,000,000, and gradually in- 
 crease as frauds are cut off and consumption goes on. The tax on 
 tobacco is constantly increasing in its yield ; it is now $30,000,000. 
 And these two taxes on spirits and tobacco, together with the tax on 
 fermented liquors, over six million dollars, are paid without complaint 
 in every part of the United States. I have no doubt the system of 
 collecting these taxes can be simplified. My own judgment, after care- 
 ful examination of the whole subject, is that, while the rate of taxation 
 ought not to be increased, the manner of taxing can be simplified and 
 changed very much indeed. But at any rate the Committee do not 
 
296 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 propose to interfere with any tax now levied on whisky, tobacco, or 
 beer, leaving them to stand on the present system until we can have 
 time to make a careful and full revision of the whole system. 
 
 The tax on spirits is now levied in four diflEerent forms : first, a tax 
 of fifty cents a gallon ; next, a tax of four dollars a barrel ; next, a 
 special tax on sales ; and again, on liquor-dealers ; yielding on the 
 average about seventy cents a gallon. It may be that, after a short 
 experience, it may be found better to combine all these taxes and levy 
 them at once. 
 
 The bill of the Committee on Finance strips the revenue service of 
 the vast machinery which in the nature of things interferes with the 
 daily business of life, and it disbands or removes from sight the army 
 of revenue officers. The taxes on spirits and tobacco will be collected 
 at the distilleries and manufactories ; the stamp tax collects itself ; and 
 the income tax is an annual assessment, similar to the annual tax on 
 personal property levied by the States. The appearance of the tax- 
 collector will only be necessary in the few special subjects of taxation 
 still retained. The income tax will be acquiesced in as the tribute of 
 property for the services and sacrifices of the brave men who saved our 
 country. 
 
 There has been a great deal of clamor against the income tax. It 
 is the same clamor that induced the Parliament of England in 1816 
 and 1817 to repeal the income tax. I have stated that when the proper 
 time came I would show that this tax was sustained by wineiple, by 
 writers on political economy, by the experience of Great Britain, and 
 that it was the most just and equitable tax levied by the United States. 
 I propose to make good that promise. 
 
 Mr. President, what is the basis of taxation ? As laid down by the 
 great author of political economy, Adam Smith, it is that a man ought 
 to pay exactly according to his income. That axiom was laid down be- 
 fore the income tax was devised by William Pitt; Every man ought 
 to pay according to his income. All the distinctions that are endeavored 
 to be made now wore then pointed out. The first time the income tax 
 was levied in England was in 1797. William Pitt, when driven by the 
 sad necessities of the war with France, was called iipon to devise new 
 systems of taxation. There was a vast deficit, and the credit of that 
 powerful nation was staggering. He first proposed in 1797 what is 
 called assessed taxation, taxes on land and property — to take what a 
 man was worth and levy a tax on that. It was found after one or two 
 years' experiment that it entirely failed, for gross frauds were com- 
 mitted, and it was impossible to ascertain the exact value of a man's 
 property ; and the system was abandoned. 
 
 Then it was, after an elaborate speech, which meets and answers 
 every objection that haa since been made to the income tax in practice, 
 that he proposed a tax of ten per cent, on all the incomes of Great 
 Britain. After a debate running through days and weeks the incpme 
 tax was adopted. For years such a tax was levied by Great Britain, 
 falling alono upon the wealthy people of that kingdom. For two years, 
 I believo, it was maintained at that rate, and then lowered about the 
 time of the peace of Amiens, and then raised again ; imd during the 
 
RECEIPTS AND EXPENDITURES. 297 
 
 whole war, with very little variation, tliere was an income tax levied of ten 
 per cent, on all the incomes of Great Britain ; and during that time, 
 as history shows, there was vast and unequaled prosperity in England. 
 
 After the war was over, a great clamor for the repeal of the income 
 tax came from the property-holders of Great Britain. They said that 
 during the war they had paid the income tax willingly, because they 
 feared the aggressions of the French democracy more than taxation. 
 They were willing to pay an income tax to preserve their privileges 
 and immunities. After the war was over, they insisted upon piling all 
 the burdens of Government on consumption, which is a tax on the 
 poor. They repealed the income tax, and assessed nearly all taxes on 
 excises and imports. They said the true subject of taxation was not 
 property or income, but consumption. Well, what is a tax on con- 
 sumption ? Why, sir, you or I use as much tea, coffee, and sugar as 
 the wealthiest man in the United States. It takes just as much to 
 satisfy om* wants and the wants of the poorest of our citizens as those 
 of the richest. A tax on consumption, therefore, is in its nature an 
 unequal tax ; you can not make it equal. It takes a greater proportion 
 of the earnings or income of the poor man than of the rich man to 
 pay taxes for the absolute necessaries of life. 
 
 The only discrimination in our tax laws that will reach wealthy 
 men, as against the poorer classes, is the income tax. There is no 
 other tax on property levied by the United States. The tax on legacies 
 and successions, which was in the nature of a property tax, is about to 
 be repealed by the agreement of the committees of both Houses ; 
 and the income tax is the only tax levied by us that bears upon prop- 
 erty in any shape or manner. AH the rest of our taxes, both internal 
 and external, are taxes on consumption. 
 
 Now, according to every true theory of taxation, a large portion of 
 the taxes ought to fall upon property or income derived from property. 
 We can not levy a property tax under our system, because the Consti- 
 tution requires the property tax to be apportioned among the States 
 according to population. As this would be grossly and manifestly un- 
 equal to the new States and new communities, the only mode in which 
 we can reach property is by an income tax ; and therefore it is that the 
 income tax is paid by comparatively few persons in the large cities. I 
 do not find fault with them because they complain of it ; but if they 
 would see that it was their property and their rights and their income 
 that were saved by the operation of the war, and that most of the 
 people who pay the taxes on consumption necessarily pay nine tenths 
 of all the taxes, the property-holders and wealthy people of this country 
 ought not to complain if we deem it necessary to maintain this tax 
 even at five per cent., instead of, as we propose, at three per cent. 
 
 The aggregate of our taxes, as I have^ shown you, is $393,000,000; 
 and we levy only $37,000,000 of that upon property, or the income 
 from property. We levy nine tenths of all our taxes upon food and 
 clothing, and those things which are consumed by the use of them. 
 For property-holders, wealthy people, those who derive a large income 
 from their profession or employment, from their brains or intellect, to 
 complain of this tax, it seems to me, is very unjust. 
 
298 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 It has already been decided by the Supreme Court that direct taxes, 
 within the meaning of the Constitution, are taxes upon land and slaves ; 
 60 that I say an income tax, although always in the books laid down as 
 a direct tax, is, in the language of our Constitution, an indirect tax, an 
 " excise." 
 
 Now, I propose to read a few extracts from some of the debates in 
 Parliament, and these extracts will be a sufficient answer to the alleged 
 hardships of the income tax, and what are called its inequalities and 
 difficulties of collection. I will first read what Mr. Pitt said in regard 
 to this tax when he first proposed it, which goes back to the very origin 
 of it, December 14, 1798 : 
 
 As to the criterion of the general tax, it has likewise been objected to the details 
 that th6 application is unequal in respect to the nature of income, its duration, etc. 
 
 The honorable gentleman says that if two persons have each £500 per annum, 
 one of whom derives his income from land and the other from industry, they ought 
 not to be both taxed equally at £50. [That was the ten per cent.] He assumes that, 
 each having £450 a year left, the impost is unequal. "What does the new tax do ? 
 Are they not left in relation to each other precisely as they were before ? The tax 
 creates no new inequality. The justice or injustice remains precisely as it was. To 
 complain of this inequality is to complain of the distribution of property ; it is to 
 complain of the constitution of society. 
 
 Again, Mr. Pitt says : 
 
 To think of taxing these two species of incomes in a different ratio would be to 
 attempt what the nature of society will not admit, what has never been practiced in 
 the course of four thousand years. But on what foundation does this principle, 
 which the honorable gentleman has broached, rest? Where is the clear inequality 
 on which he so vehemently insists ? Is the industry of the artist, the manufacturer, 
 the mechanic, less the creature of the protection of law, less involved in the great 
 contest in which we are engaged, less likely to be overthrown in any disastera of 
 the State, than the income which arises from land? 
 
 Mr. Pitt further says : 
 
 It is objected still that it is unjust that the man who has an annuity, or an income, 
 the fruit of his labor, should pay in the proportion of a man who has the same revenue 
 from fixed property. This objection is altogether a fallacy. A permanent estate, 
 which is represented as never dying, and, as it were, the property of a man after his 
 death, contributes on every exigency which may occur. The income from labor and 
 industry is extinguished ; it contributes but once ; it is no longer the property of the 
 same person ; while the other, which is considered as the same property, is subject 
 to renewed demands. 
 
 A permanent income is subjected to a permanent yearly tax, while 
 a perishable income is only subjected to one tax. 
 
 This reasoning may be thought refined, but the answer is justly applicable in 
 the case where the reason why fixed property should contribute more is founded on 
 its supposed permanency in opposition to the fleeting charncter of the other. How, 
 then, is it possible to discriminate between the various kinds of property, or to enter 
 into the details which could alone enable you to apply any scale of exemption with- 
 out an investigation more oppressive, a disclosure more extensive tlian anything which 
 the bill permits? How much safer is it to submit to those inequalities which are the 
 lot of man, and which it is not the business nor is it in the power of schemes of finance 
 to correct! Oould we even indulge the wish to corree^ these inequalities which arise 
 out of the very nature of society, is this the legislative remedy ? Let us then forbear 
 to attempt what is perhaps beyond the power of human legislation to correct. 
 
 This is a sufficient answer to the objection made that tlie income 
 derived from professional employment ought to pay a less tax than an 
 
, . EECEIPTS AND EXPENDITUKES. 299 
 
 income derived from land. Income derived from land is perpetually 
 taxed year after year in the land itself, while the income derived from 
 personal profits or from professional employment perishes by the pay- 
 ment of one tax. 
 
 I stated that after the close of the war with France the English in- 
 come tax was repealed ; and it was not till 1842, when England had 
 been drifting always to leeward, with her debt always increasing, when 
 there was an actual deficiency of some £2,000,000, and it became neces- 
 sary to revise the whole system of taxation, that Sir Eobert Peel had 
 the courage, in two houses of Parliament which represented nothing 
 but property (for property is enthroned in Parliament), to come forward 
 and propose an income tax, and stake his political life on it. He turned 
 his back, as is well known, on his political friends, and proposed a re- 
 newal- of the income tax, in order to relieve the masses of the people 
 from the weight of taxes upon consumption — corn, food, etc. From 
 the speech wmch he made upon that occasion I wiU read brief extracts. 
 Sir Eobert Peel said in the House of Commons, March 11, 1842 : 
 
 I will now state what is the measure which I propose, under a sense of public 
 duty and a deep conviction that it is necessary for the public interest, and impressed 
 at the same time with an equal conviction that the present sacrifices which I call 
 on you to make will be amply compensated ultimately in a pecuniary point of view, 
 and much more than compensated, by the effect they wUl have in maintaining pub- 
 lic credit and the ancient character of this country. Instead of looking to taxation 
 on consumption, instead of reviving the taxes on salt or on sugar, it is my duty to 
 make an earnest appeal to the possessors of property for the purpose of repairing 
 this mighty evil. I propose, for a time at least — and I never had occasion to make 
 a proposition with a more thorough conviction of its being one which the public 
 interest of the country required — I propose that, for a time to be limited, the income 
 of this country should be called on to contribute a certain sum for the purpose of 
 remedying this mighty and growing evil. 
 
 Again he says : 
 
 In 1798, when the prospects of this country were gloomy, the minister had the 
 courage to propose and the people had the fortitude to adopt an income tax of ten 
 per cent. The income tax continued to the close of the war in 1802 ; and in 1808, 
 after th^ rupture of the peace of Amiens, a duty of five per cent, was placed upon 
 property. It was raised in 1805 to six and one quarter per cent., and in 1806 again 
 to ten per cent. ; and so it continued to the end of the war. I propose that the 
 duty to be laid upon property shall not exceed three per cent., or, as I said before, 
 exactly £2 18«. id., being seven pence in the pound. Under the former tax all 
 incomes below £60 were exempt from taxation, and on incomes between £60 and 
 £150 the tax was on a reduced rate. I shall propose that from the income tax I 
 now recommend all incomes under £150 shall be exempt. 
 
 The objection which Sir Eobert Peel was answering at the close 
 of this extract was that the income tax was only a war tax ; and he 
 answered it precisely as I answer in regard to our tax, that the income 
 tax is still a war tax. But for the war no internal duties would be ne- 
 cessary. The whole of them are war taxes. It is one of the misfor- 
 tunes of war that taxation continues long after the war has ended. _ If 
 the property of this country would simply agree to pay the pensions 
 incurred by the war, I should be perfectly willing to compromise in, 
 that way. If a sufficient income tax was now levied on property to 
 pay what is paid by the Government to the maimed and diseased sol- 
 diers of the country, their widows and orphans, it would be the least 
 
300 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 that the property of the country could do. The answer of Sir Robert 
 Peel in that case was, that all taxes for the payment of the interest on 
 the public debt were war taxes. The taxes of peace are very light. 
 Sir Henry Goulburn, in answer to that objection, said in the House of 
 Commons, March 18, 1842 : 
 
 But the right lionorable gentleman said the income tax ought never to be im- 
 posed except under the condition of war. What, however, was this fanciful dis- 
 tinction as to war ? The tax was not imposed because they were at war, but be- 
 cause they were involved in difflciilty in respect to raising a revenue, because they 
 were involved in debt, and because they were bound to extricate themselves from 
 debt. 
 
 But there is another argument often used against the income tax, 
 that it operates unjustly upon different classes. Upon that point let 
 me read another extract ftom the same speech of Sir Henry Goulburn, 
 which I think covers that matter very well : 
 
 Then the right honorable gentleman had talked about the injustice of the pro- 
 posed tax, as not pressing in the same way on different classes. " Unjust, unequal," 
 cried the right honorable gentleman. Why, this was the very language which he 
 had seen in the streets ou the placards of some low weekly papers. " No income 
 tax, no inequality, no injustice." It was impossible not to be sensible that taxation 
 must be necessarily an evil. It was impossible, in the present state of society, to 
 impose any tax (so complicated and so artificial were the relations and the interests 
 of the community) without pressing with greater force on one class or on another. 
 Nor would he say that an income tax was exempt from this objection, applying as 
 it did equally to all taxes. But look at the articles of taxation which the right 
 honorable gentleman himself proposed. How did they operate ? Did they press 
 equally on all classes ? Did they not press more heavily on the lower and the mid- 
 dle classes, to whom they were necessary ? Was it not in the power of the higher 
 and richer classes often to relinqnish articles which their inferiors in society must 
 consume ? Was it, then, fair to tax equally articles necessary to one class, luxurious 
 to another ? ' 
 
 The excise duties, for instance, appeared in some respects oppressive or unequal 
 in their operations, with a considerable degree of domestic inquisition, all of which 
 had been and would be characterized as exceedingly vexatious. All the eloquence 
 which the right honorable gentleman had used against the income tax had been 
 used in former times by those who had pointed out the excise duties as containing 
 every possible vice ; and of this the right honorable gentleman might be assured, 
 that all the accusations which he had brought against the property tax would be 
 repeated from time to time against any tax that might be invented, certain as it 
 must be to affect some particular interests. Let not the House suppose that in 
 bringing this measure forward as essential to the interests of the country the Gov- 
 ernment had not been fully sensible of the difficulties under which they would have 
 to labor, had not been quite aware that when they struck at the incomes of tlie 
 country they should excite a feeling to a considerable extent against the measure 
 and the administration. But they knew enough of the patriotism of the country 
 to believe that, whatever might be the feelings of individuals, there was yet abun- 
 dantly sufficient of respect for national honor, of .iffootion for our constitution, and 
 of determination to uphold it, to couhteract particular objections, and to induce the 
 people to sustain cheerfully a tax levied on the principles of burdening as little as 
 possible the poorer and the working classes. 
 
 I will now read another extract from Sir Robert Peel's second 
 speech, because this debate is memorable, not only in point of time, 
 but in point of influence upon English politics. In his speech of 
 Marcli IS, 184'J, lie. said: 
 
 If in a time of peace — a time oC European peace — you have a large deficiency 
 to supply, and consider it more just that the nffluent classes shall supply it, rather 
 
RECEIPTS AND EXPENDITURES. 301 
 
 than pressing upon the poor by taxing articles of consumption, adopt that course, 
 and do not be afraid of what foreign countries may thiuk of your resources. 
 
 One argument against the income tax in England was that to levy- 
 it would be a confession of weakness by Great Britain. Again he 
 
 With such a deficiency as I have pointed out, is it better, then, to call upon the 
 income of the country to supply it, or to tax articles of general consumption? . . . 
 Mr. Pitt, wishing to affect the property of the country, produced a plan by which 
 the assessed taxes paid at a preceding period should be considered the test of prop- 
 erty. He tried to obtain a ten per cent, income tax by that criterion ; but he was 
 obliged to abandon it, and my belief is that a house tax would be much more unjust 
 in its operation than an income tax. The objection to tlie income tax is that it is 
 inquisitorial. I do not deny tbe objection ; but apart from that, I feel it to be one 
 of the best taxes that can be imposed. Three per cent, in the present conditipn of 
 the country is absolutely necessary to procure the supply, and I make the proposi- 
 tion from a firm conviction that it will be infinitely less onerous and more just tlian 
 any other tax. . . . My settled opinion is that the burden will be less than that 
 arising from any other tax we could devise. ... I do trust, however, that this tax 
 wiU not be condemned upon individual cases of hardship, but that the House will 
 rather attend to general results, and fairly consider whether any other tax equally 
 just can be found which will be equally effectual in raising the required supply for 
 the public exigency. ... If there is to be an income tax at all, it must be uniformly 
 laid upon all income, and in no case whatever can I allow a distinction to be 
 drawn. . . . 
 
 The more I look at this question, the more I consider the amount of the sum to 
 be raised, the more confident am I that the best measure now to be adopted is to 
 resort to a tax upon income, rather than to impose a tax upon those articles of excise 
 and customs to which I have referred. ... I believe that such an attempt would far 
 more disturb the application of capital and the operations of active industry than 
 will a caU upon each individual to pay three pounds out of every £100. I have a 
 strong conviction that the great mass of the lower classes will consider the voluntary 
 determination of Parliament to accept for themselves and to impose upon the wealth 
 of the country this tax for the purpose of relieving its burdens — I have a strong con- 
 viction that it wiU be generally hailed on the part of the country as a strong proof 
 of the determination of the upper classes to bear their fair share of taxation. 
 
 Again, Sir Kobert Peel says : 
 
 The first objection of that honorable gentleman, the member for Liskeard, was a 
 curious one. He objected to the tax because the people would be enabled to see 
 what was taken out'of their pockets. Now, this is exactly so. An income tax is 
 very sensibly felt in its operation. Taxes on articles do not come home so directly. 
 
 You say that income derived from fixed property ought to be made subject to 
 the tax I propose, but that income drawn from professional exertion and the opera- 
 tions of trade ought not to be taxed, partly owing to the inquisitorial nature of the 
 tax itself and partly from the nature of such property. But is it meant that the 
 oflScer on half pay should contribute to the tax, and that the physician of £9,000 or 
 £10,000 a year should not? Yon say that terminable annuities ought not to pay the 
 same rate as landed proprietors ; but would you say that a widow who has a join- 
 ture, a fixed sum per annum, which terminates with her life, would you say that she 
 should pay the same amount ? .- . . 
 
 Then, sir, I am told that another great objection to this tax is that it encourages 
 perjury and fraud ; but I should like to know what is the tendency of indirect taxa- 
 tion. I should like to know what is the tendency of excise duties. I should like to 
 know what is the tendency of all the excise regulations as to distilleries. Taxation, 
 I take it, is inevitable. Taxes we must have. Sir, I perfectly agree with the hon- 
 orable and learned member for Bath that nothing can be more frivolous^ or absurd 
 than the extreme sensitiveness as to what a man's income may be. I believe that a 
 very good estimate is usually formed of the state of men's circumstances by those 
 who care about inquiring into other men's property and the state of their credit. 
 
302 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 . . . And as to the terrors of the inquisition which I propose into men's private 
 affairs, it is mere folly, if men will only act honestly and make tonafde returns. . . . 
 
 For my own part, I entertain a higher opinion of the integrity and fair dealing 
 of the people of this country than to suppose that an advantage of such an amount 
 as £2 18». in the £100 could operate as a temptation to perjury and fraud. 
 
 The measure which I now propose is founded on reason and justice. 
 
 Again, Sir Robert Peel said that " a tax upon income was the basis 
 of his financial policy, and he meant to defend that principle to the 
 utmost." 
 
 On this occasion the income tax was again renewed at three per 
 cent. ; and from that time to this, a period now of nearly thirty years, 
 the income tax has been retained by a vote of Parliament, renewed 
 from time to time, and is now a part of the fixed financial policy of 
 Great Britain. Sir, it was the income tax imposed at the time by the 
 proposition of Sir Kobert Peel that enabled England to repeal her com 
 laws, her tax on food. It was the beginning of the great prosperity she 
 has had for the last twenty years. This tax was carried, as 1 said be- 
 fore, in the House of Lords, and in the House of Commons, where 
 every member represented property rather than persons, and all the 
 members of which were elected by about one million voters, instead of 
 as in this country, where we have seven million voters. 
 
 My honorable friend from California referred me the other day to 
 Sir Robert Peel and Mr. Gladstone as being against the income tax ; 
 and yet" they have supported it and maintamed it. Sir Robert Peel 
 and Mr. Gladstone, being at the head of the British Government in 
 different periods of time, have sustained it throughout. I have here 
 copious extracts from speeches made by Mr. Gladstone on the subject. 
 In the debate in the House of Commons on the 23d of May, 1853, Mr. 
 Gladstone said : 
 
 I only wish to remind the committee that the main objects which the Govern- 
 ment have in view in proposing the renewal of the income tax for a considerable 
 time are these two : in the first place, to give stability to our system of finance ; and 
 in the second place, to put the tax upon such a footing, and so regulate its provisions 
 by a progressive descent of the rate, as may bring it to a point in which it will prob- 
 ably be in the power of Parhament to part with it altogether, if so disposed. 
 
 Speaking of the inequality of the income tax, he said : 
 
 In the main I admit what is stated with respect to those inequalities. I think, 
 however, that upon a minute and careful- examination we shall find that other taxes 
 have likewise many gross inequalities in their operation, which, however, are veiled 
 and concealed in a very considerable degree, while those of the income tax have, 
 at any rate, the merit of being tolerably patent on an examination of the case. 
 
 Mr. Gladstone again said, as to the idea that an equal rate of income 
 tax is unjust : 
 
 I have always felt that that sentiment is not supported by reason; and such has 
 been the opinion of much greater men who have had to deal with this tax. 
 
 Mr. Gladstone, on the 23d of April, 1803, speaking on a resolution 
 to the effect that the tax on precarious incomes should be lower than 
 that on permanent incomes, said : 
 
 If a ruan is not able to pay his income tax, neither can he afford the duty on tea 
 and sugar. Tho two stand exactly on the saiiio footing, and the same argument ap- 
 plies to each. Tho tax is objectionable because it leads to fraud, a charge which, I 
 
RECEIPTS AND EXPENDITURES. 303 
 
 am sorry to say, experience convinces me can not be exaggerated in its gravity and 
 extent. But with all these disadvantages it is after all a tax, as the country feels, 
 which is founded on principle ; and the fact that it has existed so long with equal 
 rates is of itself a great advantage. 
 
 Two committees of tlie House of Commons, one in 1850 and 
 another in 1861, who spent a long time in investigations of proposi- 
 tions for amending the income-tax law, made no report, having con- 
 cluded that the law as it stood was as good a one as could be framed. 
 
 In 1864: the House of Commons voted down the following resolu- 
 tion : 
 
 Besohed, That the inequalities and injustice attending the operation of the ex- 
 isting property and income tax disqualify it for being continually reimposed in its 
 present form as one of the means for levying the national revenue. 
 
 The present Chancellor of #ie Exchequer, Hon. K. Lowe, said in 
 the House of Commons, March 16, 1869 : 
 
 The real evil of the income tax, in my judgment, is not that it is levied in a par- 
 tial manner on land or realized property or profits of trade, but that, from the 
 necessity of the case, persons having such income as that included in schedule D are 
 judges in their own cause, and that this in many instances holds out a temptation to 
 those persons to give too favorable an interpretation of the amount of their liability. 
 But to say that there is an objection to income tax is only to say that this tax is a 
 tax ; for the ingenuity of the human mind never did and never will devise a tax to 
 which there are not objections more than plausible, and which would be absolutely 
 convincing and irresistible if taxation were not a necessity. 
 
 Again, in presenting to the House of Commons the budget on 
 Monday, April 11, 1870, he said : 
 
 I have received many deputations respecting the income tax, and I concede that 
 a good deal may be said against this tax ; but as I am not prepared with a substi- 
 tute for it, I must continue the tax at such a moderate rate as will make it tolerable 
 to those who pay it, preferring to give them a little uneasiness and discomfort rather 
 than to strike out so great and useful a branch of revenue. 
 
 I might also read from various writers on political economy on this 
 subject, John Stuart MiU among the rest. In the second volume of 
 his " Political Economy," page 398, speaking of the conditions neces- 
 sary for making this tax consistent with justice, he says : 
 
 1. That incomes below a certain amount should be altogether untaxed. 
 
 We exempt $1,000. 
 
 2. That incomes above the limit should be taxed only in proportion to the sur- 
 plus by which they exceed the limit. 
 
 "We allow the same deduction of $1,000 from all incomes. 
 
 3. That all sums saved from income and invested should be exempt from tax. 
 
 That also is provided for in our proposition. Then he proceeds : 
 
 An income tax fairly assessed on these principles would be, in point of justice, 
 the least exceptionable of all taxes. The objection to it in the present low state of 
 public morality is the .impossibility of ascertaining the real incomes of the con- 
 tributors. The supposed hardship of compelling people to disclose the amount of 
 their incomes ought not, in my opinion, to count for much. . . . Notwithstanding, 
 too, what is called the inquisitorial nature of the tax, no amount of inquisitorial 
 power which would be tolerated by a people the most disposed to submit to it could 
 enable the revenue oflScers to assess the tax from actual knowledge of the circum- 
 stances of contributors. 
 
304 SPEEOHES AND EEPOKTS OF JOHN SHERMAN. 
 
 Here we have the testimony of this distinguished writer on politi- 
 cal economy, broadly in favor of the continuance of the income tax ; 
 and he has repeatedly, as a member of the House of Commons, voted 
 for it. 
 
 But, to come back to some of our own authors, Mr. Amasa Walker, 
 lecturer on political economy in Amherst College, has written a very- 
 good work on the " Science of Wealth," in which he says, at page 
 322: 
 
 It is unnecessary to say that this tax is in perfect accordance with the first 
 maxim laid down by Adam Smith, " that every man should be taxed according to 
 the revenue he derives under the State," and also consistent with every other prin- 
 ciple we have stated. It is "clear and plain" to the contributor and every other 
 person. The income-tax-payer knows when and how much he pays, and it can be 
 collected as conveniently and economically ^as any other. ... Of all modes of 
 taxation this is the moat just and equitable. Every man can afford to pay according 
 to his income, and ought to do so. There is no other perfect standard of taxation ; 
 none other which does not inflict more or less hardship and injustice. . . . Were 
 it to supersede all other forms of taxation, perfect equality would be established. 
 Property and labor would bear each its just share of the public burdens. 
 
 Sir, if we could devise a system of taxation that levied upon the 
 aggregate income of all the people of the United States a fair and 
 rigJatful tax, it would be, as Mr. Walker says, the best of our taxes, 
 lie says further : 
 
 The objection to this form of taxation is the difficulty of ascertaining what a 
 person's actual income is. In the first place, it is said that many do not know their 
 own affairs so as to be able to state their true income. There is doubtless much of 
 truth in this ; but the very fact that such a tax is certain to be enforced every year 
 will, in a short time, remove this difiiculty to a considerable extent, because men 
 will be compelled so to keep their accounts as to know what they gain or lose. The 
 operation of the law in this respect therefore is favorable to private interest. . . . 
 Secondly, it is said that some men will be dishonest in their disclosures and state- 
 ments, and therefore a correct result can not be reached. That many men are dis- 
 honest there can be no doubt ; but when the law taxing incomes is regularly en- 
 forced from year to year, the difflonlty of concealment on the part of the tax-payer 
 is constantly increasing. His neighbors and competitors in business have an eye 
 upon him if they believe he is making false statements, and he can not long escape 
 detection. . . . The immense difference between the reported incomes of the 
 United States in 1864 and those of 1863, even after allowing for the general rise of 
 prices, serves to give an idea of the advance that wiU naturally be made in the ap- 
 plication of the income tax. 
 
 And I may say here that under the same law every year the income 
 tax is increasing, although the actual income of the country is dimin- 
 ishing. Every year that the law is enforced we ai-e getting nearer to 
 an accurate income tax. 
 
 Mr. Walker says further : 
 
 The third objection made is that men do not always like to have their incomes 
 known, liut why should they not? We have already said that in the matter of 
 taxation all are copartners, having a pro rata interest; what one does not pay an- 
 other must. All therefore may rightfully demand such information as shall furnish 
 the means of assessing a correct tax. . . . 
 
 Our purpose is to show that so far as practicable it (the income tax) is tlje most 
 just and economical mode of raising a revenue. 
 
 Under the head of " State Taxation," Mr. Walker says : 
 
KEOEIPTS AND EXPENDITURES. 305 
 
 That mucli hardship may often result from taxing credits as well as property is 
 undoubtedly true ; but that only affords additional evidence that the income-tax 
 principle is the only correct one. 
 
 And again : 
 
 The income-tax principle, if universally adopted, while it would doubtless re- 
 lieve poll-tax-payers, of their present taxation, would at the same time bring their 
 interests into harmony with those of property-tax-payers, and thus promote the 
 general welfare of the public. 
 
 I might also read from another author, a citizen of Massachusetts, 
 Mr. A. L. Perry, professor in Williams College, who says, in his " Po- 
 litical Economy," page 44:4 : 
 
 An income tax, if the exact amoimt of income could in all cases be ascertained, 
 would be a perfectly unexceptionable torm of taxation. 
 
 Again : 
 
 The income law at present in force in the United States has perhaps been 
 subject to less complaint than the manufacturers' tax and other forms of indirect 
 taxation ; and it is becoming more and more productive every year, as the forms 
 are perfected, 
 
 Mr. President, if Congress now repeals the only tax that rests upon 
 property, the only tax that is drawn from the income of the rich, if we 
 higgle about the tax that is paid by the 273,000 people who pay our 
 income tax, and yet keep upon the people the taxes upon their sales, 
 the special taxes upon their employments, and all the burdens that now 
 rest upon every article consumed by the poor, it will be a sorry spec- 
 tacle. An English Parliament, when appealed to under circumstances 
 much less diflScult, maintained for twenty years in war a tax approach- 
 ing ten per cent, on incomes. After the war was over they tried the 
 other policy. They then renewed the tax, and levied it at the rate of 
 from one to three or four per cent, for nearly thirty years more. And 
 now, when we are paying $30,000,000 to our pensioners, when we are 
 paying $126,000,000 as interest upon the public debt, to complain of a 
 tax of three per cent, upon incomes above $1,000, on the ground that 
 it is inquisitorial, unjust, and unequal, does not speak well for the 
 patriotism of those who do it. 
 
 Most of the daily papers in the countrjr seem to be united in the 
 general complaint against the income tax. It is a good evidence that 
 they are doing well and paying well, and they ought to be willing to 
 pay their portion of the tax. 
 
 I repeat that the maintenance of the income tax is an absolute 
 necessity for any system of internal taxes. If the Senate and House 
 determine after full consideration to repeal the income tax, I shall 
 favor the repeal of all the taxes upon consumption that bear upon the 
 great masses of the people. If I had my way, I would retain the in- 
 come tax at five per cent, on all incomes above $1,000, making such 
 modifications as would afford the proper exemptions, and then throw 
 off these taxes upon consumption that oppress the poor, and take cop- 
 pers out of the dollars of people who earn them by their daily work. 
 
 Complaints have been received from widows and children whose 
 incomes are less than $1,000, who have had to pay an income tax upon 
 20 
 
306 SPEECHES AND EEP0BT8 OF JOHN SHERMAN. 
 
 the dividends and interest received from their stocks and bonds. Now, 
 the operation of the law in this respect is unjust, and ought to be cor- 
 rected by the proposed measure. The operation of the income tax 
 upon Government employees is uniust, because it does not put their 
 income on the same footing as other incomes. The income derived 
 from corporations is now subject to tax without the deductions allowed 
 to other incomes. Why is that ? It is because it is more convenient 
 for the Government to collect the tax from corporations, and yet in 
 that way we do levy an income tax upon the income of the widow and 
 the poor derived from corporations, and do an injustice. If the Senate 
 is willing to go that far, I should be very glad to see this corrected, 
 and to allow all incomes, whether derived from corporations or from 
 interest on bonds, to go into the general income return and to be col- 
 lected directly from the person who receives it, giving all an equal ex- 
 emption. 
 
 It is proposed in the House bill to increase the exemption from 
 $1,000 to $1,500. I do not think that is right. It may be popular. 
 There are now 270,000 people who pay income tax. If the exemp- 
 tion is raised to $1,500, only about 170,000 will pay the tax, and 100,- 
 000 people will probably be relieved from it. But should they be ? 
 Is it just ? Is it right ? There is no reason for any exemption, except 
 the fact that the mcomes of those who receive less than $1,000 per 
 annum are necessary for their daily wants. They pay taxes on con- 
 sumption which fully make up their share. When you go above 
 $1,000 you reach a region where persons are " passing rich," as Gold- 
 smith's vicar says, " on £40 a year." They are independent when 
 they have $1,000 net income, after paying taxes and after deducting 
 the exemptions provided by the income law. I do not, therefore, see 
 any justice in raising the exemption, although I can see it would be 
 very popular with the hundred thousand well-to-do people who would 
 thus be relieved, throwing the whole burden upon those who are of 
 the wealthier class. 
 
 If the income tax is maintained at the rate proposed by the Com- 
 mittee, of three per cent, on all incomes above $1,000, including in- 
 comes derived from 6orporations and from all other sources, the people 
 will gradually become accustomed to the tax, and those who are called 
 upon to pay it will pay it cheerfully. It will be a mode of equalizing 
 incomes from different sources, and will yield us from thirty to forty 
 million dollars annually, probably enough to pay the pensi'onei-s who 
 are now dependent upon our bounty. 
 
 I have thus stated, I know very imperfectly, the general ideas that 
 influenced the Committee on Finance in reporting this bill. The sub- 
 stance of the whole is contained in the table which has been laid on 
 the desks of Senators, and which I will add to my remarks. We pro- 
 pose to repeal about two thirds of the number of internal taxes, leav- 
 ing nothing but the taxes on whisky, tobacco, fermented liquore, in- 
 come, and stamps ; repealing all the rest, and modifying the income 
 tax and reducing it $14,000,000. This will leave in" force about one 
 hundred and fifteen millions of internal revenue, which will be ample, 
 with the amount we collect from the duties on imported goods, to 
 
COINAGE LAWS. 307 
 
 carry on the operations of the Government, pay the sinking fund, and 
 leave us a surplus of from twenty-five to thirty millions annually. 
 
 This is margin enough for an equal reduction in other taxes during 
 the next session of Congress, and this process of reduction will, I 
 trust, continue until all the burdens of the war are lifted from the 
 industry of our people ; and all that will be left of a painful struggle 
 wiU be the increased strength and power and glory of our country, 
 compared with its condition before the war, when internal faction con- 
 tinually threatened its overthrow. 
 
 COINAGE LAWS. 
 
 IJr THE SENATE, JANUARY 9, 1871. 
 
 The bill (S. No. 859) revising the laws relative to tJie mints, assay oflSces, and 
 coinage of the United States, being before the Senate as in Committee of the Whole, 
 on the amendment of the Committee on Finance to charge three tenths of one per 
 cent, for coinage, Mr. Sherman said : 
 
 On a question of this kind, which involves rather a matter of busi- 
 ness detail, it is somewhat difficult to secure the attention of the Sen- 
 ate, but I hope I shall secure it sufficiently to show that this amend- 
 ment is vital to the passage of this bill. Without this amendment I 
 certainly would not vote for it, and I imagine that a majority of the 
 Senate would not if they understood the subject as thoroughly as most 
 of the Committee on Finance, who have examined it. 
 
 The original bill, introduced by me at the last session of Congress, 
 retained the old mintage charge of one half of .one per cent, on the 
 gold coin of the United States. That bill was submitted . to all the 
 experts of the United States on. the subject of mintage, and received 
 the hearty approval of nearly every one of them, and generally (I think 
 without any exception but the officers of the mint in San Francisco) 
 they were in favor of retaining the minting charge, as it is called. I 
 have before me the testimony of Mr. Patterson, who, I presume, is 
 regarded as the best expert in the United States in the minting busi- 
 ness, and he speaks of the retention of the mintage charge in the bill 
 introduced at the last session of Congress in these words : 
 
 The present one half per cent, coinage charge is retained. -The only mint where 
 coinage is free is the British, and the political economists and statesmen are so 
 unanimous in recommending a seigniorage that the Chancellor of the Exchequer 
 proposes to introduce it into Great Britain. It would be strange if we, by retro- 
 grading, while she is advancing, should become the sole exemplars of an exploded 
 system. It would, in view of an international coinage, be especially inopportune 
 to abandon a seigniorage, for it is recognized on all hands that under such a code 
 there must be a tax, and a uniform tax for coinage. (See section 25 of revised bill ; 
 also English coinage act, 1879, section 8, Senate Miscellaneous Document 132, Forty- 
 first Congress, second session, page 34.) 
 
 The theory of the coinage charge is this: that every process of 
 
308 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 minting should be self-sustaining ; that the mints of the United States 
 are estSilished for the benefit of the people, to stamp the coin, and 
 that the owners of the metal which is coined should pay the expense 
 of minting. That has been the theory upon which the Mint of the 
 United States has always existed, and the theory that has been adopted 
 also in every other country except Great Britain, where it was departed 
 from for a special reason. Therefore, in the original bill introduced 
 last session, the mintage charge was maintained at one half of one 
 per cent. 
 
 In the amended bill, which was sent to us by the Department after 
 examination, this mintage charge was omitted ; not for the purpose of 
 expressing an opinion against the mintage charge, but for the purpose 
 of submitting that question again to the Committee on Finance and 
 the Senate of the United States. The Committee on Finance, after a 
 careful consideration of the question, decided to restore it, but to 
 reduce it to three tenths of one per cent., for the following reason : 
 Under the old system, when the amount of gold coinage was much less 
 than it is now, the expense of coining gold was about one half of one 
 per cent., and therefore for many years the mintage charge was retained 
 at that rate ; but now, on account of the largely increased quantity of 
 gold to be manufactured into coin, and also on account of the cheapen- 
 ing of the various processes of the Mint, the cost of minting is much 
 less. I ascertained as nearly as possible the actual cost of converting 
 standard bars into gold coin, and the concurrent testimony of nearly 
 all is that it is about three tenths of one per cent. At that rate we 
 propose to leave the mintage charge. 
 
 Mr. President, there are two questions that must be considered in 
 deciding this matter : first, a question of revenue. It is proposed now 
 by the Senator from California that the whole expense of the Mint, as 
 far as gold coinage is concerned, shall be thrown on the Government 
 of the United States ; that the owners of the gold, whose property is 
 to be benefited by passing through the Mint, shall bear no portion 
 of it. 
 
 As a question of revenue, I submit to you, sir, whether, when we 
 are taxing almost everything that is consumed, when our system of 
 taxation has extended further than ever before, it is now wise to 
 abolish a charge which yields us at the present rate §150,000 a year, 
 and which will yield us at the rate proposed by this amendment about 
 one hundred thousand dollars a year ? Is it worth while for us now, 
 when we are seeking objects of taxation, to do this duty without any 
 charge whatever, and thus render it necessary to malce up the defi- 
 ciency of revenue from other sources ? 
 
 But this is not all. It must be viewed as a question of political 
 economy. Now, as a question of political economy, the testimony in 
 its favor is overwhelming. I could produce here every writer on 
 political economy in Engknd and in the United States to show that 
 the coinage c.liarge is defensible and it is maintained by every one of 
 them as proper in itself. Tlio general proposition may be made that 
 the Government ought not to confer additional value upon the prop- 
 erty of individuals without receiving compensation. This Govern- 
 
COINAGE LAWS. 309 
 
 ment is not establislied for the purpose of promoting the interests of 
 private individuals simply, and the mintage system is not established 
 for the mere purpose of inducing people to go into the manufacture or 
 digging of gold. The mints are established for the purpose of secur- 
 ing the coin of the country from debasement and deterioration ; and 
 we charge to those persons whose coin is stamped with our insignia 
 only the mere cost of the process, seeking to make no money out of 
 them, but not giving them a benefit at the expense of the people of 
 the United States. 
 
 No country in the world has ever established a system of free coin- 
 age but England, and England has maintained it for one hundred and 
 fifty years against the judgment of every writer, on political economy 
 that has written during that time ; and within the last year a proposi- 
 tion has been made in Parliament to restore the charge on coinage, 
 which has been postponed for the present on the ground that negotia- 
 tions are in progress to establish an international coinage, on the estab- 
 lishment of which all nations will probably adopt a common rule of 
 seigniorage. I have here the debates in Parliament a year ago last 
 summer on this subject. The Chancellor of the Exchequer, Mr. Lowe, 
 in referring to the peculiar position of England on the subject, quotes 
 the opinions of several well-known writers on political economy ; and 
 I will read some of them. Sir Dudley North says : 
 
 The free coinage is a perpetual motion found out, whereby to melt and coin 
 without ceasing, and so to feed goldsmiths and coiners at the public charge. 
 
 Adam Smith, the founder of the science of political economy, says : 
 
 When the tax upon a commodity is so moderate as not to encourage smuggling, 
 the merchant who deals in it, though he advances, does not properly pay the tax, 
 as he gets it back in the price of the commodity. The tax is iinally paid by the last 
 purchaser or consumer. But money is a commodity with regard to which every 
 man is a merchant. Nobody buys it but in order to sell it again, and with regard to 
 it there is in ordinary cases no last purchaser or consumer. When the tax upon coin- 
 age, therefore, is so moderate as not to encourage false coining, though everybody 
 advances the tax, nobody finally pays it, because everybody gets it back in the ad- 
 vanced value of the coin. 
 
 Our mintage charge is simply the net cost of the process, no more. 
 Again, Adam Smith says : 
 
 The Government, when it defrays the expense of coinage, not only incurs some 
 small expense, but loses some small revenue, which it might get by a proper duty ; 
 and neither the bank nor any other private persons are in the smallest degree bene- 
 fited by this useless piece of public generosity. 
 
 So Mr. McCulloch, a well-known English writer on political econ- 
 omy, says : 
 
 Coins charged with a seigniorage equal to the expense of coinage do not pass at 
 a higher value than what naturally belongs to them, but at that precise value ; 
 whereas, if the expense of coinage be defrayed by the State, coins pass at less than 
 their real value. 
 
 Because it only passes at the value of bullion. 
 
 A sovereign is of greater utility and value than a piece of pure unfashioned gold 
 bullion of the same weight ; because, while it is as well fitted as bulhon for being 
 used in the arts, it is, owing to the coinage, better adapted for being used as money. 
 
310 SPEECHES AND REP0ET8 OF JOHN SHERMAN. 
 
 or in the exchange of commodities. On what principle, then, should Government 
 decline to charge a seigniorage or duty on coins equal to the expense of coinage ; 
 that is, to the value which it adds to the coins ? 
 
 Eicardo expresses his opinion in still stronger terms. So Mr. Mill, 
 in his "Principles of Political Economy," at great length comments 
 upon it. I will read a short extract from Mr. Mill : 
 
 If Government, however, throws the expense of coinage, as is reasonable, upon 
 the holder, by maljing a charge to cover the expense (which is done by giving back 
 rather less in coin than has been received in bullion, and is called levying a seignior- 
 age), the coin will rise to the extent of the seigniorage above the value of the bul- 
 lion. If the mint kept back one per cent, to pay the expense of coinage, it would 
 be against the intei-ests of the holders of bullion to have it coined tintil the coin was 
 more valuable than the bullion by at least that fraction. The coin, therefore, would 
 be kept one per cent, higher in value, which could only be by keeping it one per 
 cent, less in quantity than if its coinage WM-e gratuitous. , 
 
 So I might go on through the whole catalogue. While England is 
 the only nation which has ever coined the gold of private individuals 
 at the expense of the public, every writer on political econoroy in Eng- 
 land has always denounced the system as unwise ; and Mr. Lowe says 
 that when international coinage is accomplished Great Britain will im- 
 doubtedly charge the same seigniorage that is charged by other nations. 
 In France the seigniorage is one fourth of one per cent. ; in Germany it 
 is rather more than oar own ; it varies in different countries, depending 
 on the cost of minting ; and we propose now to reduce the coinage 
 charge from one half to three tenths of one per cent. 
 
 Mr. President, what do we gain by throwing away this revenue ? 
 Nothing whatever. Suppose we convert all the bullion made in the 
 United States into coin, into twenty-dollar gold pieces, and it is put up 
 in packages and exported in coin instead of in bullion, do we gam any- 
 thing? When it reaches Great Britain it at once goes to the mint 
 there and is melted into English sovereigns, and we gain nothing ; but 
 we lose our labor. When bullion is changed into coin, its exporta- 
 tion is not prevented ; it is more convenient to export ; and the veiy 
 object which the Senator from California wishes now to attain is de- 
 feated by his proposition. He says he wishes to prevent om* gold coin 
 from being exported. Well, sir, if he makes the gold into coin with- 
 out cost, so that it represents simply the value of so much bullion, it 
 wiU be exported in coin and will be remelted in foreign mints, because 
 foreign coin never passes current at its full value ; the TJnited States 
 wiU therefore lose the expense of coinage of this bullion -^vithout bene- 
 fiting any one. It is no advantage to us to give additional value to 
 gold coin to be exported, and remelted in the mints of foreign coun- 
 tries. We get the full value of the gold in our foreign conimerce when 
 it is exported in the form of bullion, and to convert it into coin will 
 not prevent its going abroad. On the contrary, the charge that we 
 make for minting prevents it from going abroad, because it makes the 
 coin a little more valuable than bullion. The United States, in assay- 
 ing gold, charges for the expense of assaying and refining gold. This 
 very bill provides that from time to time the Secretary of the Treasury 
 shall regulate the amount of these expenses, and shall charge the owners 
 of the gold deposited with the net cost. We propose to apply the same 
 
OOIFAGE LAWS. 311 
 
 rule to coinage that we do to assaying or any other process in the 
 Mint. 
 
 I do not think it is necessary for me to pursue this argument. The 
 subject has been critically examined. The officers of the mint at Phila- 
 delphia, and, as far as I know, the officers connected with this subject 
 generally, are in favor of retaining this charge, except only the officers 
 of the mint at San Francisco, who desire to enlarge their business at 
 the expense of the people of the United States. 
 
 This bill has been carefully framed. It considerably increases the 
 expense of the mints of the United States, and it lowers the mintage 
 charge. I believe, on the whole, it is a careful and safe revision of the 
 mintage laws ; and even though the Senator from California and per- 
 sons who are interested in the question are not satisfied with the large 
 benefits conferred on their particular region by its terms, I do not think 
 it is wise for the people of the United States to assume what they have 
 never assumed heretofore, the expense of coinage. The mints are not 
 entirely self-supporting under the present law, although nearly so, and 
 probably will not be under this bill ; but we may make enough profit 
 in coining nickel and silver to cover the expenses of the mints. Further 
 than that we should not go. 
 
 We do not carry people's letters for nothing, although that would 
 be a great convenience and would increase the number of letters to be 
 carried. We do not coin silver without charging for it ; on the con- 
 trary, we get a profit of about two per cent., and on the nickel coinage 
 we get a much larger profit. We do not propose to do anything for 
 private citizens unless we are reimbursed for the expenses ; and there 
 is no justice, no propriety in taxing the farmers of the United States, 
 or the merchants of the United States, or the people of the United 
 States generally, for this expense of one hundred or one hundred 
 and fifty thousand dollars for maintaining our mints, merely for the 
 purpose of giving a fancied benefit to the diggers of gold in Cali- 
 fornia. I Slink it could be easily demonstrated, if time would al- 
 low and the interest in the subject would justify the attempt, that the 
 miners themselves would not receive a particle of benefit from this 
 abolition of the coinage charge, and that the only result would be that 
 all the gold of California would be forced into the Mint of the United 
 States, there to go through an expensive process at the cost of the peo- 
 ple, without conferring on it any additional value for exportation or 
 use. I think the Senators from the Pacific coast ought to be satisfied 
 with the liberality of the terms of this bill, and I hope they will not 
 press their resistance to this amendment, because I assure them its de- 
 feat, by throwing upon the United States the cost of minting gold, 
 would unquestionably defeat the bill. 
 
 I have but very few observations to make in reply to the arguments 
 that have been made for the abolition of the coinage charge. The 
 Senator from California [Mr. Casserly], in common with his colleague 
 [Mr. Cole], has fallen upon the idea that the coinage charge is a tax. 
 Nothing is more absurd than this. The coinage charge is simply a. 
 charge by the Government of the United States for a service actually 
 performed to a particular citizen. The Government of the United 
 
312 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 States should not undertake to do this service for nothing, and it sim- 
 ply asks a reimbursement of the cost. This coinage tax, as gentlemen 
 now call it, was imposed in the administration of Mr. Pierce, in 1853, 
 when it was no obiect to seek new sources of taxation. It was then 
 put at one half of "one per cent., not for the puraose of taxation, but 
 for the purpose of reimbursing to the United States the exi)ense of 
 coinage. Up to 1848 the United States produced no considerable 
 amount of gold or silver bullion. We were then importers of the pre- 
 cious metals, instead of exporters. In 1853, however, after several 
 years' working of the mines in California, this matter was fully dis- 
 cussed by some of the most eminent men then members of the Senate 
 of the United States ; among the rest by Mr. Hunter. 
 
 Why was this one half of one per cent, tax, as it is now called, or 
 charge, put upon coinage ? It was simply done to prevent the expor- 
 tation of the gold coin of the United States. That was the main and 
 leading object. It was argued, with a great deal of force, by eminent 
 gentlemen then in this Chamber, that if a charge was put upon the 
 coinage, as was done by all the nations of the world except England, 
 gold, which would then be more valuable a& coin than as bullion, would 
 not be exported until the balances of trade were settled by our com- 
 modities ; that until bullion, wheat, cotton, and all the other products 
 of nature were exported, gold and silver coin would not be exported, 
 because they were more valuable, made so by their greater cost. The 
 prevention of their exportation, and not the imposition of a tax, was 
 the object of levying a charge of one half of one per cent, upon gold 
 coinage. A much higher rate is levied on silver and other coinage, but 
 one haK of one per cent, was the tax levied on gold coinage, for this 
 reason : a reason of political economy, justified by the history of other 
 nations. 
 
 My friend from Oregon [Mr. WiUiams] speaks of Great Britain as 
 having derived a great advantage from free coinage. On the contrary, 
 it can be demonstrated by the .clearest figures that Great Britain has 
 lost largely. Whenever money is coined in France, where the seignior- 
 age is only one fifth of one per cent., it never leaves France, because if 
 it should leave France that one fifth of one per cent, would become 
 dead capital ; it can not be exported to England for recoining, and there- 
 fore there is now more than five times as much French coin in existence 
 as there is of English coin ; the statistics show that there is between 
 five and six times as much. The British sovereign is exported from 
 England because the British Government puts lai)or on gold bullion 
 without charge, and the result is that the most convenient form to ex- 
 port gold from Great Britain is in British sovereigns. They go off to 
 different nations, and are recoined by other governments, which charge 
 a seigniorage. The result is that there is now less than one fifth as 
 much English coin in existence as there is of French coin. The coin 
 of Germany in existence, I believe, also largely exceeds the amount of 
 English com. 
 
 Now, Mr. President, I say that as a question of political economy 
 it is not wise U>r us to put jidditional labor upon bullion and convert it 
 into coin free of charge without regard to tlie revenue ; because the 
 
COINAGE LAWS. 313 
 
 unavoidable effect of thus bestowing labor on gold bullion, and putting 
 it in a more convenient* shape for exportation, is, at the very first re- 
 versal of trade, to cause our coin to flow abroad, instead of other com- 
 modities. That is the experience of nations, and has been for more 
 than a hundred years. 
 
 But it is said that, notwithstanding all the arguments and opinions 
 of political economists, England has insisted upon free coinage. I have 
 already suflGiciently explained the reason of that. They adopted it, I 
 believe, in the reign of King WiUiam III. ; and, having adopted it, they 
 have kept to it with the natural tenacity of the English people, while 
 their writera have condemned the policy. I read here from Adam 
 Smith, from McCulloch, from Mill, from nearly all those men who are 
 recognized authorities the world over on questions of political economy, 
 who nave said over and over again that it was a foolish system. Here 
 is the opinion of the present Chancellor of the Exchequer, a man of great 
 ability, who quotes these authorities, reads them to the British Parlia- 
 laent, and says that England has persisted in this thing too long, and to 
 her injury. It is true also that he said at the time when they were 
 codifying the mint laws, that it was better to postpone a change until 
 the question of international coinage should be settled. 
 
 Now, there is one thing to be considered by our friends from the 
 Pacific coast. This is a bill to codify the mintage laws of the United 
 States. It does not adopt new principles ; it makes but few changes 
 in the general laws, except in transferring the head of the Minting Bu- 
 reau to Washington, instead of leaving the system in the incongruous 
 position of making the Director of the Mint in Philadelphia the super- 
 intendent of all the mints in the United States. This bill is rather a 
 modification of the existing laws ; and the Committee on Finance have 
 therefore refused to ingraft on it many ideas that they have developed 
 and would like very well to see in the form of law. For instance, we 
 are strongly in favor of an international coinage, of assimilating our 
 coinage to that of other nations, and making a common metric standard 
 of international coins by which the gold doUar, the sovereign, and the 
 franc may be interchangeable without recoinage. We have not ven- 
 tured to put our opinion on that point into this bill, because it is not in 
 the existmg law, but would be a radical change. 
 
 K'ow, I ask Senators whether it is vsdse in this bill to repeal the ex- 
 isting law which, for reasons of political economy, has fixed a mintage 
 charge upon gold coin, and to make an effort to make this codification 
 bill carry such important changes? I agree with the Senator from 
 California, that it is not necessary to look at this matter as a question 
 of tax. The law now levies upon the labor done for the miner of Cali- 
 fornia the trifling charge of one half of one per cent., a little more than 
 the cost. We charge the national banks one per cent, for printing their 
 bank notes ; we charge every citizen three cents for carrying letters in 
 the mail ; and we levy taxes in every form upon various articles of con- 
 sumption — on tea, coffee, sugar, and the other necessaries of life. Now, 
 I say that even if we were about to throw off these charges, whether 
 you call them taxes or not, we ought not to throw off, first, that which 
 is not a tax at all, but is only a charge for a service actually rendered. 
 
314: SPEECHES AND REPORTS OF JOHN SHERMxVN. 
 
 I trust that this effort to force through this proposition to abolish 
 the mintage charge, in a bill to codify the mint laws, to simplify and 
 make consistent the laws which regulate the various mints of the United 
 States, will be abandoned ; because Senators must perceive that the at- 
 tempt to make any radical change in the existing system in this biU 
 will only endanger it. It is necessary to pass the bill promptly in the 
 Senate in order that it may receive the necessary attention in the other 
 House before adjournment. It is perfectly manifest that the attempt 
 to make an utter change of our policy on the question of the mintage 
 charge, and to follow the example of Great Britain, would simply de- 
 feat the biU, which has already been so long delayed. 
 
 The whole debate in England upon this subject, which I now have 
 before me, shows that every person who participated in the discussion, 
 without exception, agreed that the system of free coinage was wrong 
 in principle and in theory, and ought to be abolished ; but in the re- 
 vision 01 the law — it was then under the charge of Mr. Lowe as Chan- 
 cellor of the Exchequer — ^the matter was left as it stood, and the reason, 
 as stated by Mr. Lowe himself, was that it was better to postpone any 
 change as to the rate of seigniorage until the settlement of the question 
 of international coinage, when, as a matter of course, the laws of the 
 different nations would have to conform to it. Mr. Lowe, in his 
 speech advocating his views on the subject, quoted all the authorities 
 from which I read yesterday, and a great many others, showing that ex- 
 perience, political economy, and philosophy had concurred in establish- 
 ing the necessity of a seigniorage. 
 
 Let me state another fact. It is shown, I think, in the debate in 
 Parliament, that while England possesses nearly twice the» wealth of 
 France, and certainly nearly twice the commerce, yet the gold and sil- 
 ver coinage in England is only about one fifth of that in France ; and 
 this was attributed in a great measure to the fact that, as Great Britain 
 coined gold without charge, therefore gold was the cheapest product to 
 export, while the French coin, which secured a local habitation by a 
 seigniorage of only one fifth of one per cent., remained in France ; and 
 so of Germany. 
 
 Now, sir, I will add another fact, and that will be all I desu-e to sav 
 in reply to the letter of Mr. Ealston, who is cashier of the Bank of Cal- 
 ifornia. I have read that letter. It contains nothing new, except one 
 very remarkable statement, which he did not make with a fuU knowl- 
 edge of the facts, or certainly he would not have made it. He says 
 our profit on coinage is four million and some hundred thousand dol- 
 lars ; that is, that the difference between the cost of our nickel or sub- 
 sidiary coinage and its actual nominal value is $4,000,000. That is 
 very true ; but we must redeem that coinage at pai", and this bill pro- 
 vides for its redemption. We might just as well say that on the green- 
 backs which we publish and print we make a profit of $340,000,000, 
 because it costs us only $1,000,000 to print $341,000,000. But we 
 must redeem them at par in gold ; so that all the profit from our sub- 
 sidiary coinage disappears when the day of redemption comes, and that 
 is coming nearer constantly, day by day. 
 
 There is one other fact. A great deal of stress was laid by the Sen- 
 
COINAGE LAWS. 315 
 
 ator from Califoriiia [Mr. Casserly] on the fact that the mint cnarge in 
 this country was a recent one. w ell, sir, up to 1849, I thini it was, 
 the Mint of the United States bought gold of foreign countries in the 
 form of bullion, precisely like any other commodity, and coined it at 
 the Mint. Having a monopoly of the coinage, it practically had a mo- 
 nopoly of the bullion trade of this country. The discovery of gold in 
 California changed the whole condition of things, and this country be- 
 came the great gold-producing country of the world. Then the Con- 
 gress of the United States first turned its attention to the necessity of 
 estabhshing a seigniorage charge, and regulating the difference between 
 the value of gold and silver ; and I have here the report of the Secre- 
 tary of the Treasury, Mr. Corwin, under Fillmore's administration, call- 
 ing attention to the large loss suffered by the United States by this 
 changed condition of affairs, and by the fact that, bullion was presented 
 for coinage at the mints, not imported from abroad as a commodity and 
 purchased at the market price, but presented by our own miners, and 
 that the law made no provision at all for the disposition and manage- 
 ment of this gold bullion or coinage. He therefore recommended that 
 a change be made in the relative value of gold and silver bullion and 
 coin, so as to conform to the standards adopted in England and in 
 France, and recommended that a seigniorage be put upon gold coinage 
 sufficient to pay the expense of it. That recommendation was referred 
 to the Committee on Finance of this body, of which Mr. Hunter was 
 then chairman. I hold in my hand a very elaborate and interesting re- 
 port, of many pages, made by Mr. Hunter, in which the subject is fully 
 discussed, giving many tables. The conclusion arrived at after two 
 years' discussion, by the unanimous vote of both Houses, was, first, that 
 on account of the discovery of gold in Cahfornia it was necessary to 
 change the relative value between gold and silver, by reducing the pro- 
 portion of silver to gold, and, second, that it was necessaiy to establish 
 a seigniorage charge on gold. There had always been a seigniorage 
 charge on silver in this country, but as gold was not produced to any 
 considerable extent — I believe nowhere except a little in JSTorth Caro- 
 lina — there was no seigniorage charge upon it. A seigniorage charge 
 was then established of one half of one per cent. Mr. Hunter states 
 the case very strongly. He says : " If we do not establish a seigniorage 
 charge, the United States may be compelled, at an enormous expense, 
 to convert the whole gold produced in this country into cfin, merely 
 to enable people to export that coin ; and we shall have to go through 
 the same process with other nations." The subject was then fully con- 
 sidered, fully debated'a.nd acted upon, and that seigniorage was adopted. 
 The result is that since that time about one haK of the gold produced 
 in this country has been converted into coin. 
 
 I will allude to a remark made by the Senator from Delaware [Mr. 
 Bayard] a while ago, which shows that upon one point he is mistaken 
 in regard to the relative value between bullion and coin. I have stated 
 the fact that a charge of one half of one per cent, was put upon gold 
 coinage. By the gradual improvement of machinery we find that gold 
 can be coined for less, and the concurring authority of all with whom 
 I have conversed upon the subject is that three tenths of one per cent. 
 
316 SPEECHES AND REPORTS Olj' JOHN SHERMAN. 
 
 will pay the mere cost of making the requisite assay, refining, and re- 
 ducing it to. standard gold, and stamping it as Government coin. Three 
 tenths is the lowest ; and even then there is upon the Government the 
 expense of the officers of the mint, the expense of building mints, and 
 a large amount of other expenses. 
 
 But the Senator says it will not be exported in the form of coin, 
 but rather in the form of bullion. 
 
 On the contrary, there is no form in which gold can be put so con- 
 venient for exportation as in rouleaux of twenty pieces of twenty dol- 
 lars each, both for purposes of exchange and for purposes of merchan- 
 dise ; because when reduced to gold coin of the standard, it is nine 
 tenths fine precisely, and is in the shape that it is used by every nation 
 in Europe, except England, for recoining, while bullion may be in 
 various forms and conditions, and of various finenesses. The Govern- 
 ment of the United States is called upon, without cost, at its own ex- 
 pense, to convert the whole gold product of the United States, at the 
 expense of the people of the United States, into a form most conve- 
 nient for the goldsmiths and mints of foreign countries. In England, 
 gold coin is ninety-two hundredths fine, and all that is necessary to 
 convert our gold coin into English sovereigns is to add one two-hun- 
 dredth part of refined gold, melt it in a crucible, and stamp it with the 
 British insignia. The result is that, if the balance of trade should turn 
 against us, the most valuable form in which gold could be exported 
 abroad would be in the form of coin. 
 
 The reason why I oppose the abolition of this charge so strenuously 
 is not because it involves the loss of $100,000 a year, although there is 
 no reason why we should put this labor on the gold product of private 
 individuals, at our own cost ; but it is because I believe it will have an 
 injurious effect in regulating the balance of trade, and take from us, at 
 the time when it is most needed, the actual coin, the life-blood of the 
 country, instead of bullion. The exportation of bullion has an effect 
 upon our commercial relations very different from the effect of the 
 exportation of our coin. 
 
 The immediate result of the abolition of this charge will be to force 
 all the gold produced in this country into the mint at San Francisco, 
 to be there reduced, at the expense of the United States, to nine tenths 
 standard fine in the form of gold coin. 
 
 The gold will flow into the nearest mint. "Why should it not be 
 left to be governed like the trade in other commodities ? This bullion 
 is not the bullion of the United States. It is the property of private 
 persons. Mr. Ralston, whose letter has been re*i nere, handles more 
 of this bullion than probably all the people of two of the greatest States 
 of the Union — I believe he is cashier of the Bank of California. And 
 yet we are required, at the expense of the United States, to reduce all 
 the gold product of this country into a convenient form for exporta- 
 tion, so that the mints of foreign countries may talte our gold coin and 
 melt it over without cost, loss, or wastage. 
 
 It seems to me tliat this will be a bad commercial operation. It 
 may be of some benefit in a local way, by buildhig up a large manufac- 
 ture in one locality, but in its effect upon the commerce of this country 
 
INCOME TAX. 31Y 
 
 it must be injurious. It has been injurious in England. The opposite 
 policy has been beneficial in France. We have tried the opposite policy 
 ±or twenty years, and no complaint has been made except as to the rate. 
 Mr. Knox, who sent this bill to us, complained only of the rate of seign- 
 iorage as being too high ; and I think myself it was too high. As far 
 as I was concerned I was willing to adopt the French standard of one 
 fifth, or the German standard, which, I believe, is one fourth ; but the 
 Committee thought it was better to cover the cost, which is three tenths 
 of one per cent. 
 
 INCOME TAX. 
 
 m THE SEKATE, JANUARY SB, 1871. 
 
 The Senate having under consideration the bill (S. No. 1083) to repeal so much 
 of the act approved July 14, 1870, entitled " An act to reduce internal taxes, and 
 for other purposes," as continues the income tax after the 31st day of December, 
 A. D. 1869, Mr. Sherman said : 
 
 Me. Peesident : The proposed repeal of the income tax necessarily 
 involves the consideration of our whole financial policy, and can not 
 be hurried through upon the interested clamor of the comparatively 
 few persons affected by it. Nothing is more pleasing than to repeal 
 taxes, and it would be easy to show that the repeal of any tax now 
 levied would give relief. The income tax is now only levied upon 
 those whose good fortune it is to enjoy large property, or whose sala- 
 ries or profits lift them far above the pressing wants that rest upon the 
 great mass of our people. The possession of large property and the 
 ability to earn large income necessarily give to those enjoying this in- 
 come great influence over public opinion. They speak through the 
 daily press, from high ofiicial stations, from great corporations, from 
 cities where wealth accumulates, and with the advantage of social, per- 
 sonal, and delegated influence. I know the power of this influence. 
 
 Besides, the income tax is subject to some objections which touch 
 the pride and feelings of the influential class upon whom it is levied. 
 From the nature of the tax it must authorize some espionage into the 
 private affairs of individuals, especially if fraud is suspected ; but in 
 this respect it has been greatly modified. It now stands as a tax of 
 two and a haK per cent, on gross incomes over two thousand dollars. 
 If this income is capitalized at $33,333, which at six per cent, would 
 yield $2,000, it stands as the equivalent of a property tax on one and 
 a half mill on the dollar on property in excess of $33,333. It is the 
 only tax levied by the United States that falls upon property or ofiice, 
 or on brains that yield property, and in this respect is distinguished 
 from other taxes levied by the United States, all of which are upon 
 consumption, the consumption of the rich and the poor, the old and 
 the young. I make this the simplest division of taxes — ^taxes upon 
 possessions and taxes upon consumption. As the income tax now 
 stands, it is estimated that it will yield $12,833,000 out of an aggre- 
 
318 SPEECHES AND REPOKTS OF JOHN SHERMAN. 
 
 gate revenue of $320,000,000, or about four per cent, or one twenty- 
 tifth part of our aggregate revenue. And it must be remembered that 
 the income tax by its terms expires in two years, while we can not 
 hope that the other taxes will be either short-lived or greatly dimin- 
 ished. 
 
 And now, sir, it is proposed to single out this tax from all others 
 — this tax that bears most severely upon us and upon those best able 
 to pay — and to repeal it, leaving undisturbed all the taxes that bear 
 upon the consumption of the necessaries of life. Now, sir, if I con- 
 sulted my own interest, my own ease, my own advancement, I would 
 yield without resistance to what is the evident current of opinion here, 
 and let the income tax go ; I would yield to the impulsive feeKn^ of 
 the Senator from Massachusetts [Mr. Sumner], who, when the subject 
 was mentioned on Friday, demanded that the income tax be repealed 
 that night, before we went home ; I would no longer contend with 
 personal friends who regard this tax as odious and oppressive ; but my 
 own conviction is so clear that its repeal now is wrong, both in policy 
 and justice, that it becomes my imperative duty to state the facts and 
 reasons fully and clearly upon which this opinion is founded. 
 
 And, sir, it is due to the Committee on Finance, to whom this biU 
 was referred, and who fully and fairly considered it, to submit to the 
 Senate the considerations which induced them to report against it. 
 That committee is charged with the broad subject of our public finances, 
 embracing in its range not only this tax but all the other taxes levied 
 by the National Government, and the still more important subject of 
 our currency and public debt. They are expected to look with more 
 care than others into the effect of a proposed measure upon our gen- 
 eral financial system. The cries of the few who complain of the in- 
 come tax easily reach the ears of all of us ; but we must inquire wheth- 
 er we can grant their wish without doing injustice and wrong to the 
 whole mass of our people ; whether we can disturb the present adjust- 
 ment of the burdens of taxation without danger to other interests more 
 important, or by shifting the load upon others less able to bear it. 
 
 The members of that committee are no more in favor of taxes than 
 other Senators ; but we have to keep our eyes constantly on the ex- 
 penditures of the Government, and when you direct these expenditures 
 taxes must follow upon the track of your appropriations with as much 
 certainty as the waves of the ocean seek their level. And not only 
 must we follow your appropriations, but must constantly consider the 
 effect of a surplus or deficient revenue upon the value of the currency 
 and the public debt. If it is of primary importance to approach specie 
 payments and fund the debt at a lower rate of interest, we must main- 
 tain our revenue and our reserves on a stronger basis than if we had only 
 to meet our current expenditure. In the debates we have had on this 
 income tax Senators seem to think that we could save enough in some 
 way to enable us to repeal it ; and perhaps, if the Committee on Finance 
 had power to limit appropriations, it could bo done. AVe take your 
 action as the basis of our labor, propose taxes only as demanded to 
 meet your appropriations and the laws relating to the public debt, and 
 only seek to maintain such a margin and such reserves as are de- 
 
mOOME TAX. 319 
 
 manded by tlie highest considerations of public policy. When those 
 objects are secured we are glad to be able to repeal taxes, and especially 
 those that bear most heavily upon the people. No man elected by the' 
 people is likely to retain taxes when unnecessary, while many may be 
 tempted to repeal them when prudence forbids it. 
 
 I think I can demonstrate : 
 
 First. That it is not wise to disturb the financial measures of the last 
 session, except to remove ambiguities or meet new facts developed since 
 then. 
 
 Second. That the state of our revenue and expenditures will not now 
 justify the repeal of any taxes. 
 
 Third. That the modification or repeal of the income tax should be 
 postponed until, by a general revision of our whole revenue system, we 
 can determine what taxes bear most heavily upon the people, and dis- 
 tribute the reduction so as to give them the greatest relief. 
 
 Fowrih. That the repeal of this tax will affect injuriously the higher 
 objects, namely, the funding of the public debt and the resumption of 
 specie payments. 
 
 I know, Mr. President, that this is a broad task ; but I believe that 
 if Senators will give attention to the facts I shall submit to them, I can 
 make at least an honest effort to demonstrate each of these proposi- 
 tions. 
 
 The income tax was an essential element of the financial legislation 
 of the last session. It was fuUy debated in both Houses, and formed 
 a part of a series of measures that was and ought to be regarded as a 
 whole. I insist that we should not disturb these financial measures 
 except to remove ambiguities or to meet new facts developed since they 
 were adopted. The facts now submitted to us by the Secretary of the 
 Treasury show that our estimates last summer were accurate. Some 
 portions of these measures are not yet in force. The entire reduction 
 of taxes made will not occur until after May 1st. Why then exhibit the 
 feebleness of uncertainty ? 
 
 Not only were these measures fully discussed here, but they were 
 approved by our constituents at the last election. Wherever the Ee- 
 publicans succeeded, it was in consequence of these measures and of the 
 general financial policy of the Administration. Wherever we lost, it 
 was in spite of them, and mainly by local dissensions. Our financial 
 measures strengthened us everywhere, and were a weakness nowhere. . 
 These measures were the currency biU, the funding bill, and the bill to 
 reduce taxation. The currency bill, by enlarging the limit of banking 
 circulation, satisfied a local grievance, by giving to the West and South 
 an opportunity to estabhsh banks upon the same footing as in the East- 
 ern States. And yet a little time has proven that there is no great 
 demand for new banks, no idle capital to invest in them, and no need 
 of more circulation. A right withheld is a grievance, even if when 
 granted it is not used ; and I trust that this right will be reserved to 
 the States in the West and South until they can absorb the circulation 
 granted. I consider it fortunate that it is not too rapidly absorbed ; 
 but this could not be the pretext for enlarmng the circulation in other 
 States until we reach specie payments, in a short time I hope the 
 
320 SPEECHES AND KEP0ET8 OF JOHN SHERMAN. 
 
 specie sections of that bill will be tlie basis of our whole banking sys- 
 tem, needing only one center of redemption and a prohibition against 
 the payment of interest on deposits, to make it the best banking sys- 
 tem in the world. 
 
 The funding bill, had it been promptly passed in the form reported 
 to the Senate, would have led to the conversion of at least five hundred 
 millions of our six per cent, bonds into five per cent, bonds before the 
 war in Europe, thus saving $5,000,000 per annum. But the refusal 
 of the Senate to grant the Secretary of the Treasury indispensable 
 facilities in negotiating the exchange greatly impaired the bill, and the 
 delay in the House, and their limitations on the rate of interest, so 
 crippled the loan that, even if the war in Europe had not occurred, 
 its success must have been partial. The enlargement of the five per 
 cent, loan to $500,000,000, authorized at this session, may enable the 
 Secretary of the Treasury to take advantage of a favorable state of the 
 money market to redeem the first loan of five-twenties with new bonds, 
 and thus save $5,000,000 of annual interest. The funding bill is now 
 very much as the Senate passed it, but without the sections as to the 
 banks. 
 
 The bill to reduce taxation was the largest measure of relief from 
 taxes ever passed in a single measure by any legislative body in the 
 history of mankind. It was a repeal of taxes to the amount of $81,- 
 266,748. It swept away the taxes on employments and sales — the 
 most indefensible and unequal of all taxes — and it reduced to one third 
 the tax on income, and to one half the taxes on such prime necessaries 
 of life as are imported from tropical countries. Every tax that was 
 retained was carefully scrutinized, and only one of them, the tax on 
 income, is a tax on the property of the rich, as distinguished from the 
 consumption of the poor. The precise effect of that act can only be 
 tested by time. It is not yet in full force. And now we are met, in 
 season and out of season, with a demand that the only tax on property, 
 estimated to yield $13,000,000, shall be repealed. N"o new facts are 
 given us ; no petitions are presented ; no official statement is made ; 
 no other tax is complained of ; but we are urged to repeal the only tax 
 that bears hardly upon each of us. I submit whether it is not better 
 to leave well enough alone, and bear as well as we may our share of 
 taxes ; to stand by the measures so lately adopted by us, and turn our 
 attention to the measures before us that affect the gi'eat mass of our 
 people. 
 
 Now, Mr. President, after these preliminary observations, I come 
 to test this question by sober facts and figures ; and I shall not rely 
 upon mere cursory estimates made as the Senator from Pennsylvania 
 made his, but upon ofticial documents, each one of which is printed 
 and laid on our tables. Now, for the fii'st time for many yeai-s, we are 
 able to present exact estimates of our expenditures. On account, in 
 the old mode of Ivceping tlie books in the Treasury Department, of 
 lappinf,^ and transferrmg appropiiations, wo were not enalued to state 
 spetiifically what sum was needed for the expenditures of the Govern- 
 ment within a given year ; but now fortunately the law of the last 
 session is in full operation, by which all the old balances arc transferred 
 
INCOME TAX. 321 
 
 to tlie general funds in the Treasury. The Secretary of the Treasury 
 now gives us a statement by departments of the probable expenditures 
 of the Government for the next fiscal year, ending the 30th of June, 
 18Y2, which is as follows : 
 
 Legislative establishmfcnt $3,263,966 34 
 
 Executive establishment 17,238,165 60 
 
 Judicial establishment 2,348,760 00 
 
 Military establishment 28,488,194 00 
 
 Naval establishment 20,046,417 77 
 
 Indian affairs 6,021,569 03 
 
 Pensions 30,000,000 00 
 
 Public works 22,838,278 37 
 
 Postal service 4,694,383 00 
 
 Miscellaneous 14,305,428 60 
 
 Permanent appropriations 132,628,234 00 
 
 Sinking fund 24,600,000 00 
 
 Interest upon the capital of the sinking fund 4,866,933 00 
 
 Total $309,639,319 61 
 
 Thus the statement of total estimates of expenditure is $309,639,- 
 319.61 ; but it must be remembered that of these estimates the greater 
 part, nearly two thirds of them, are beyond our control to limit. There 
 is provided in the nature of permanent and fixed appropriations, for 
 the payment of interest on the public debt and the expenses of collect- 
 ing the customs, $132,528,234. There is provided for the sinking fund 
 and interest on it, under the act of February 25, 1862, and the act of 
 the last session, $29,366,933. There is also provided for pensions 
 $30,000,000, making an aggregate of $191,865,167 that is beyond our 
 reach, leaving a balance of $11T,Y44,152 to cover all the expenses of 
 the Government. That includes 'the army, the navy, and the legisla- 
 tive and judicial establishments. All the departments of the Govern- 
 ment must be maintained out of the $117,000,000. 
 
 It must be remembered that the Secretary of the Treasury expects 
 us to carry out our pledges of economy to reduce the expenses of the 
 Government. If the Government can be conducted upon an expendi- 
 ture of $117,000,000, it will be an economical administration ; it will 
 be no more per head than in the time of James Buchanan. If you 
 make a due allowance for the difference between gold and paper, it 
 will reduce the expenses of our Government to less than they were be- 
 fore the war. But iu order to maintain these estimates we have to 
 keep our expenditures within the limit allowed us of $117,000,000. I 
 ask you, sir, with your familiarity with the course of legislation this 
 winter, whether tins is hkely to be done ? We can not reduce this 
 amount in any item except one. This $117,000,000 includes appropri- 
 ations for public works amounting to $22,338,000. That may be dimin- 
 ished by the action of Congress ; but is there much probabihty of it ? 
 That covers all the class of expenditures called public works, filling 
 some thirty pages of our annual estimates, including the harbor and 
 river improvements, fortifications, arsenals, navy-yards, custom-houses, 
 court-houses, and an infinite variety of expenditures. 
 
 If this item is reduced to a considerable extent, it will be more than 
 made up by other causes of expenditure. Already the session has de- 
 21 
 
322 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Teloped a tendency to embark in new enterprises, or rather to carry on 
 old schemes now renewed. It has been proposed to increase the pen- 
 sion list by $6,000,000, and the bill for that purpose passed the Senate 
 with scarcely any debate. "We have also passed a biU increasing the 
 expenses of the mints $150,000, or throwing away, as I think causeless- 
 ly, about one hundred thousand dollars. This does not include any 
 amount for claims that may be allowed by the Committee on Claims, 
 and the various committees of Congress. There is a bill for the pay- 
 ment of interest to the States, which can not cost less than $7,000,000 
 if it should pass. Objection was made to my postponing the Sutro 
 Tunnel biU until a more favorable opportunity. This is a scheme to 
 bore through the mountains under the Comstock lode at an expense of 
 $3,000,000. "We have subsidies proposed for every conceivable object 
 in the world — ^buUding telegraphs and railroads, and assisting steam- 
 ships — ^now pending on the calendar. "We have San Domingo, which 
 at any rate, if it is acquired, will take from fifteen hundred thousand 
 to two million dollars, perhaps more. We have innumerable plans for 
 the increase of salaries. "We have propositions to add to the expenses 
 of the Government as multifarious as the plagues of Egypt, but not a 
 single proposition, so far as I know, to reduce the estimates made by 
 the Secretary of the Treasury. 
 
 If, therefore, I assume that this Congress will not increase the esti- 
 mates proposed by the Secretary, I assume a very doubtful proposition. 
 I should be very glad indeed to compromise on a moderate increase 
 upon his estimates of expenditure. Here is, therefore, the sum of 
 $309,000,000 that must be raised. How can you do it ? How is this 
 money to be collected from the people but by taxes ? Let us look at 
 our sources of revenue and see where they stand. In the same report 
 I find the receipts estimated by the Secretary of the Treasury, as fol- 
 lows: 
 
 Estimated receipts for the year ending June 30, 1872 : 
 
 From customs $175,000,000 
 
 From internal revenue 126,418,000 
 
 From sales of public lands 3,000,000 
 
 From miscellaneous sources 16,000,000 
 
 Total $320,418,000 
 
 Including the income tax, which is a part of this aggregate, the 
 Secretary estimates that we may receive from all sources $320,418,000. 
 Now, let us look at that for a moment. How are these estimates made 
 up ? The estimates from customs are made up first by taking the re- 
 ceipts of the last fiscal year, allowing for a reasonable increase, about 
 three or four per cent., which experience shows the gi-adual growth of 
 our country would authorize to be added to the former returns, and 
 then deducting from that aggregate the amount of duties that have 
 been repealed ; that gives the oasis of the estimate, $175,000,000. 
 
 It must be remembered that this estimate was made on the basis of 
 receipts in a very fortunate and hapjiy year, under circumstances which 
 favored the increase of our commerce and trade. Any fiuctuation in 
 that trade will at once reduce the reeci])ts. I remember that we were 
 
INCOME TAX. 323 
 
 legislating in 1857 in the House of Eepresentativee to scatter the money 
 in the Treasury, and the very next year there came a revulsion which 
 swept away our surplus, and we were compelled to borrow money, be- 
 fore we got through with it, at the rate of ten per cent, per annum. I 
 take the estimate from customs to be practically correct. This month 
 the receipts are largely in excess of the estimate, simply because large 
 numbers of cargoes have been landed, and put in warehouse, to be re- 
 tained there till the new law takes effect, in order to obtain the benefit 
 of lower duties. But the most sanguine can not expect that the estimate 
 of the Secretary can be increased, and I doubt very much whether now, 
 in the present stringent state of the money market, his estimate would 
 be maintained by any officer of the Government. 
 
 In regard to the internal revenue, I have here an official statement 
 showing the items of the probable receipts for the next fiscal year, and 
 we will see how they are likely to be affected by the present condition 
 of trade : 
 
 Tbeasurt Depaetkent, Office op Iktebnai. Kevenue, 
 Washington, December 27, 1870. 
 
 Estimated annnal receipts from the several sources of revenue under act of July 
 14, 1870, on the basis of the returns of the fiscal year ended June 30, 1870 : 
 
 Spirits |55,682;000 
 
 Tobacco 31,361,000 
 
 Fermented liquors 6,319,000 
 
 Banks and bankers 3,020,000 
 
 Income 12,833,000 
 
 Gas 2,313,000 
 
 Stamps 15,000,000 
 
 Total $126,418,000 
 
 Even these estimates, made 'bj the Department, are now wfbhin the 
 last two months overthrown. They allow here for an increase of the 
 income from spirits. I have now the official statement, made within a 
 few days, showing that the manufacture of spirits has fallen off nearly 
 one third. I have a statement showing the number of distilleries, their 
 capacity, and their production on the 1st of January, 1870 and 1871. 
 It shows that the number of distilleries in operation on the Ist of Janu- 
 ary, 1870, was 410 ; the number in operation on the 1st of January, 
 1871, 231. The daily capacity for consumption of grain on the 1st of 
 January, 1870, was 87,351 bushels of corn ; the daily producing capa- 
 city in 1870 was 293,858 gallons of whisky. That has now fallen off 
 so that the com daily consumed is 55,271 bushels, and the daily capacity 
 of whisky production is 192,169 gallons, showing a falling off of nearly 
 one third. 
 
 I have also another elaborate table, showing that the amount of 
 whisky on hand in the market, of which some is in bond and some has 
 already paid tax, amounts to 45,637,933 gallons, showing an overstock 
 on hand ; and that probably explains the depression of the price of 
 whisky. Most of this has already paid the tax, and is npw in the mar- 
 ket as whisky on hand. The whole amount of it is 45,637,000 gallons, 
 of which about two million gallons are foreign and the remainder do- 
 mestic spirits. 
 
 The Senator from Pennsylvania seems to think that this is a very flat- 
 
324 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 tering statement, because if the quantity of whisky consumed diminishes 
 the other taxes will increase. So they will, if you do not repeal them ; 
 but they are nearly all repealed, and now we have no internal revenue 
 tax, except on spirits, tobacco, fermented liquors, gas, and a few other 
 articles ; and you propose to repeal the great item of the income tax. 
 
 Upon this statement of our receipts and expenditures, which is cer- 
 tainly as favorable as any man engaged in business would make, is it 
 wise for us either to increase our expenses or diminish our revenue ? 
 
 The difference upon this showing would be a surplus in the Trea- 
 sury of $10, 778,680, with the chances all against, us that the estimate 
 on spirits is too high, with a certainty that the expenditures we have 
 to meet will be increased ; and now, witn a margin only of $10,778,680, 
 you ask us to repeal a tax which yields $12,833,000, and to face the 
 new Congress, and perhaps the people in a presidential election, with 
 an absolute deficit. 
 
 Mr. President, as a matter of course, when these facts and figures 
 were presented to the Committee on Finance, we said, even those of us 
 who were in favor of repealing the income tax, that we certainly would 
 not vote in favor of its repeal until we could substitute some other. 
 This is upon the plain showing of our expenses for the next fiscal year. 
 I think myself these facts ought to settle this controversy as far as the 
 income tax is concerned now. But I wish to go a little further. I 
 promised to show the effect of this repeal upon other financial ques- 
 tions of deep and abiding interest. 
 
 I say that the repeal of the income tax ought to be considered in 
 connection with the revision of our whole system of taxation; that 
 you should not single out such a tax as this, the only one that bears 
 upon the wealthy as against the poor, upon property as against con- 
 sumption, upon sixty thousand people rather than upon thirty or forty 
 millions, i ou must revise the whole system of taxation with a view, 
 if you have surplus revenue, of distributing the saving so that all may 
 have the benefit of some little relief. It must be remembered that of 
 this income tax, which was levied during and since the war, we have 
 repealed two thirds, taking off a larger proportion than we have of 
 other taxes. We could only afford to throw off one third of the taxes 
 upon the necessaries of life, but we have relieved the income tax from 
 over two thirds at least of its burdens. Now we are called upon to 
 revise our work in this particular, and sweep away this tax without con- 
 sidering the effect upon other classes of citizens who are compelled to 
 pay taxes. 
 
 Mr. President, when I come to contrast the income tax with other 
 taxes, while I concede that there are objections to it — and I will state 
 them presently — I must say that there are other taxes which the ISTational 
 Government is now levying that are far more oppressive. Take the 
 tax, for instance, on the necessaries of life, sugar, tea, and coffee. 
 "What objection can be made to the income tax that does not apply to 
 this tax, except one, and that is, that the income tax is from its nature a 
 tax of espionage, while the tax on tea, c(5ffee, and sugar is not ? But 
 the tax on tea, coffee, and sugar takes from the little lump of sugar 
 dealt out in charity, or to penury, as well as from the confections of 
 
INCOME TAX. 325 
 
 the ricli. There is no argument of injustice or hardship that can be 
 mentioned against the income tax to be compared to the tax upon tea, 
 coffee, and sugar. Take also the tax on salt, an article -of prime neces- 
 sity ; and yet we levy on that article $2,000,000. So upon lumber. 
 So on the stamps, which reach every man's business and every man's 
 transactions, and yet nobody proposes 'to repeal the stamp tax. That 
 yields about the sum the income tax does, and a little more. Take the 
 special tax on beer shops. "We collect $1,'700,000 by a special tax on 
 the sale of spirits and beer, and the collection of that, as I will show 
 you hereafter, costs about one third as much as the collection of the 
 income tax, yielding seven times the amount. 
 
 Now, when you are compelled to levy such taxes as these, is it hard, 
 is it unjust that the wealthier men of our community should at least 
 be required to pay twice as much as the drinkers of beer, as much as 
 the people who drink tea, one third of the tax levied upon sugar, as 
 much as that which is levied on coffee ? Is there something so in- 
 herently vicious in the income tax that, after we have gone over this 
 whole subject, have reduced the taxes to the extreme limit, have dared 
 to take off $82,000,000, we should now at the closing hours of this ses- 
 sion go back to reconsider our action and single out this tax alone, leav- 
 ing undisturbed the others I have mentioned? I do not think so. 
 With all the desire I have had to approach this subject without being 
 influenced by my previous views, with every desire to remove com- 
 plaint, I can not gay, as a Senator, that it is politic or right to relieve the 
 few comparatively who pay this income tax while we are ^compelled to 
 levy these other taxes. And, sir, when this question was debated year 
 after year in the British Parliament, where every man was the repre- 
 sentative of property, the income tax, after a suspension of twenty 
 years, was restored ; and it has been maintained from that time to this, 
 and wiU be maintained until the English people can repeal the taxes 
 upon the prime necessaries of life. 
 
 Many objections have been made against the income tax. I have 
 not often sought to answer them, because I thought they would answer 
 themselves, ^ut let us look at them. I think 1 have grouped them 
 fairly ; but if I omit any, I am willing to pause and consider it. 
 
 The first objection is that it authorizes espionage into a man's busi- 
 ness. Well, sir, so do all taxes. Your whisky tax authorizes the most 
 searching espionage, and assumes that fraud is inevitable in the produc- 
 tion of whisky. Ah, but the answer is, a man who makes whisky must 
 be judged by a very different rule from a man who has a large income. 
 Why ? Whisky is a lawful trade, although whisky produces a great 
 deal of misery ; and yet no one complains that we send a ganger, a de- 
 tective, a spy to watch the whisky-distiller ; but if we send a man of 
 respectable presence to inquire into a rich man's income, it is espion- 
 age! 
 
 Mr. President, we must not refine too greatly upon these things. 
 So take the case of tobacco. Take the case of custom-house duties. 
 On landing at the city of New York, as I have done once or twice, 
 what is the first thing you meet ? A custom-house officer. What does 
 he demand ? He wants to look at your trunks ; he wants to spy into 
 
326 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 your baggage. The first feeling is one of resentment. I think no 
 man can arrive at a port from a foreign country where he first meets 
 the custom-house oflScers without feeling angry that the law authorizes 
 a private inspection of his coats and pantaloons. But no custom-house 
 laws can be enforced unless this espionage is allowed. It is not allowed 
 for the purpose of interfering with men or women engaged in ordinary 
 travel, but the espionage must extend to them in order to reach the 
 fraudulent importer or the smuggler. 
 
 Another thing. There is not a State in this Union which does not 
 authorize more espionage into a man's private affairs than the income- 
 tax law of the United States. In reframing that law we struck out 
 nearly all its, offensive provisions, and perhaps somewhat weakened its 
 force by this anxiety to avoid the charge of espionage ; but even yet it 
 does authorize an inquiry into a man's income. If the assessor has 
 reason to believe that a man is fraudulently concealing his income, he 
 has a right to take measures to ascertain it, the mildest that were ever 
 put into a customs or a tax law, and yet you complain of that espionage. 
 Why, sir, every State does it. The State in which I live authorizes 
 espionage into a man's property ; they compel him to swear how much 
 
 {)ersonaT property he has, what it is composed of, and they put a long 
 ist of questions to ascertain it. Is there any complaint made about 
 that ? And yet it is done in every State, and the espionage under this 
 income-tax law will not compare to that authorized by the laws of most 
 of the States with which I am familiar. 
 
 Another objection has been made, that the income-tax law does not 
 distinguish between income from land and income from trades or pro- 
 fessions. It is said, with a good deal of plausibility, that where an 
 income is derived from a permanent source, it may properly pay an in- 
 come tax ; but when it is derived from a trade or profession, the in- 
 come perishes with its consumption, and ought not to be taxed. That 
 is rather more plausible than real, because, after all, the permanent in- 
 come coming in year in and year out is taxed year in and year out, 
 while the income that comes but once and perishes in its use is taxed 
 only once. 
 
 Sir, this subject has been carefully analyzed in the British Parlia- 
 ment for more than forty years past. They commence by analyzing or 
 classifying incomes into nv-e great divisions, and maldng deductions 
 from certain classes. For instance, incomes derived from professions 
 were put upon a certain list, and a deduction was made from them be- 
 fore the tax was applied, while permanent incomes were taxed at their 
 full amount. Experience, however, after a number of yeare of experi- 
 ment, showed that this was not founded upon correct principles. This 
 subject is discussed in tomes in the British debates, and also in their 
 works on political economy, until finally they settled down substantial- 
 ly upon the ground that there was only one rule of equity, and that 
 was the rule of equality, to put the same tax upon the same amount of 
 income, however derived, and however brief might be its duration ; 
 on the principle that an income derived from a profession like that of 
 a lawyer was taxed once and perished, unless it was invested in real 
 estate and became the foundation of other income. We have followed 
 
INCOME TAX. 327 
 
 in this country not the original idea of tlie English law, but its final 
 idea. 
 
 But, sir, we are told that this is an odious and unpopular tax. I 
 never knew a tax that was not odious and unpopular with the people 
 who paid it. I think if the Senator from Pennsylvania would go into 
 some places in Philadelphia he would find that the whisky tax, which 
 is so popular with us, is unpopular there. I know that in Brooklyn 
 people have organized armed resistance to the collection of the whisky 
 tax, and we have had to caU out nine hundred troops of the United 
 States to go there and enforce it. Those people denounce it as unjust 
 and unequal. We do not think so. Sir, if you would levy only taxes 
 which in the opinion of everybody, or even of a majority, are not un-, 
 equal and unjust, you would have such a tax law as I have never yet 
 seen. 
 
 "When you come to examine the income tax you will find that it ap- 
 plies, it is true, to only about sixty thousand people ; but they do not 
 pay their proper share of other taxes. Why ? Can a rich man with 
 an overflowing revenue consume more sugar or cofice or tea, or drink 
 more beer or whisky, or chew more tobacco, than a poor man? You 
 tax tobacco at the same rate per pound, whether it is tobacco for the 
 wealthiest or for the poorest. Here is a case of inequality admitted 
 by all ; and so all taxes produce inequality. But when in a system of 
 taxation you are compelled to reach out to many objects, you must en- 
 deavor to equalize your general result by reaching all sources of taxa- 
 tion, and do the best you can to equalize in that way. 
 
 Therefore, when it is complained that the tax on an article con- 
 sumed is unjust upon the poor, because the poor have to consume a 
 greater proportion of their income in its purchase than -the rich, we 
 answer that to countervail that we have levied a reasonable income tax 
 upon sjich incomes as are above the wants and necessaries of life. That 
 is the only answer, and it is a complete answer ; because, if you leave 
 your system of taxation to rest solely upon consumption, without any 
 tax upon property or income, you do make an unequal and unjust 
 system. 
 
 I admit that there are isolated cases of hardship. My friend from 
 Pennsylvania stated very strongly the worst of them, which is that by 
 our tax laws we levy the tax upon the whole income of the corporation 
 without allowing a deduction ; and as a corporation is but the repre- 
 sentative of a great many persons, it may be that we levy that tax 
 upon the income of a poor widow who has not had the benefit of the 
 exemption. That is something that can not be helped. We levy the 
 income tax upon a corporation as upon a single body, because that is 
 the legal nature and character of a corporation. It is true that the tax 
 is deducted from the interest and dividend paid to the individual. If 
 it was practicable to follow the income derived from a corporation to 
 the various beneficiaries of the income, every man would say that in. 
 justice each of them should be entitled to the exemption ; but it is not 
 practicable. No tax law can be so framed as to do exact justice. 
 Therefore we regarded these corporations, precisely as the law regards 
 them, as persons, and levied the tax on them, and authorized them, in 
 
328 SPEECHES AND REPORTS OF JOHIiT SHERMAN. 
 
 the adjustment of the tax among their stock-holders, to deduct the 
 proper proportion from each one. The very diflSculty of adopting any 
 other scheme compelled us to pursue that course. The idea that every 
 stock-holder ought to have the right to deduct this from his income is 
 impracticable, known to us all when tried. 
 
 But it is said this tax is unconstitutional, and an opinion has been 
 produced here which I have before me, signed by one lawyer that I 
 know and another that I do not know. If I could not get a better 
 opinion than this, one that showed more consideration, for fifty dollars, 
 from the best lawyer in the United States, I should consider him ex- 
 orbitant in his charges. I do not question the reputations of these 
 gentlemen at all ; but it is the first time I ever heard in the Senate of 
 the United States a paid opinion of an attorney — and we all like the 
 profession very well — quoted upon a question of constitutional law in 
 regard to a law that has been upon the statute book seven years. 
 
 It is enough to say that the income tax has been levied by the 
 United States since 1863 ; and there is no court, so far as I know, that 
 has pronounced the law unconstitutional — certainly no United States 
 court. No decision has been made of that kind. No dictum of a 
 judge can be quoted to that effect, so far as I know. The fact that 
 the question has not been presented, and that we have collected under 
 this tax $150,000,000 from aU kinds of people, is a pretty good evi- 
 dence that there is not much in the pomt ; but if you look at the 
 Constitution of the United States, I think that settles it clearly. The 
 Constitution gives to Congress more power over the subject of taxa- 
 tion than almost any other. "We have the power to levy taxes almost 
 without limit. The only limit is that we dare not levy " a capitation 
 or other direct tax " except in a particular way, and we can not levy a 
 tax on exports. Now, is an income tax a capitation tax ? It falls upon 
 some individuals, but is not levied by the head, and therefore it is not 
 a capitation tax. Is it a direct tax ?/ I think the decision of the Su- 
 preme Court in the early case of the carriage tax — I have forgotten 
 the name of the case — practically settles the question. The only direct 
 tax is a tax on real estate and slaves. But it is not necessaiy for me 
 to discuss a question of this kind which is thrown in, as almost every 
 law that is proposed is said to be unconstitutional. 
 
 Now let us go a little further. , The opinion of the present Com- 
 missioner of Internal Revenue is quoted as favoring a repeal of this 
 tax. There is no officer of the Government to whom I would more 
 willingly yield on a mere question as to the mode and machinery of 
 collecting the internal revenue taxes ; he has had great experience, and 
 so far as I know has considerable ability in that way ; but if he ever 
 expressed an opinion to a committee of this body or of the other 
 House as to the necessity of this tax, it certainly was extra-official and 
 extra-judicial. If, as it is said by some of the newspapers, he stated 
 that this tax was totally unnecessary, that is only his opinion ; it is not 
 the opinion of the officer of the (tovi'rnment chai-ged with our tinances. 
 As to the mode of collecting spoi'ific internal taxos, his opinion is en- 
 titled to the respect due to that of any gentleman. As to what money 
 wu want, how much we want, how much other sources of revenue 
 
INCOME TAX. 329 
 
 ■will yield, what our expenditures are or are likely to be, I should be 
 ashamed to say that every member of the Senate has not more ample 
 facilities of ascertaining than he. 
 
 This is a question not as to whether the income tax is just or not. 
 If the newspapers report correctly that he said it was not, I think we 
 can judge ol that better than he can, because we have a broader view, 
 with greater responsibiKty. I suppose the whole of it was that he said 
 that he would be glad to see the income tax repealed, and I have no 
 doubt he is in favor of its repeal ; but that he undertook to say what 
 the newspapers reported of him I do not believe at all. Besides, these 
 newspapers make him speak in behalf of and in the name of the Presi- 
 dent. That certainly can not be true. The President of the United 
 States has two modes of communicating with us, either directly by his 
 Secretary, or indirectly by the Secretary of the Treasury ; and he never 
 undertook, and never sought, I am quite sure, to influence Congress or 
 any committee by his private opinion, conveyed in this informal way, 
 and no man was authorized to speak for him in that way. 
 
 But the Senator from Pennsylvania seems to follow in the line of 
 the newspaper argument, that this is a very expensive tax to collect. 
 Sir, the income tax, from its very nature, is the cheapest tax levied, 
 except one. I have here a statement made even by so creditable a 
 paper as the New York " Evening Post," in which, speaking of this 
 tax and u^ing its repeal, it says : " Add to all this that the Commis- 
 sioner of Internal Revenue himself is convinced that the collection of 
 the tax wiU do no good to the Treasury, because it will cost, under the 
 present law, almost as much as it will yield." Such a wild statement 
 as that was made in an editorial article in one of the most excel- 
 lent papers in the United States. I have here also an extract from 
 the " Brooklyn Union," making the same general statement. The 
 " New York Tribune " has made the same statement. If it were 
 necessary to reply to so foolish a statement, I could do it in a moment. 
 Why, sir, the whole expense of collecting the internal revenue, whisky 
 tax and all, is estimated at only between five and six million dollars. 
 It is only about an average of four per cent., or a little more ; while 
 this income tax as now reduced will yield $12,833,000. 
 
 Instead of this being an expensive tax, it is the cheapest tax col- 
 lected by the National Government from internal revenue, except the 
 tax on banks. The tax on banks is collected from sixteen hundred 
 corporations by the Treasury of the United States without costing the 
 Government one cent. The income tax, from its very nature, is the 
 next cheapest tax on the Kst. This fact is shown in an ofBeial report 
 made by the Secretaiy of the Treasury three years ago. "While the 
 general average of collecting taxes was then between three and four 
 per cent., the estimated expense for collecting the income tax was not 
 over two per cent. "Why is that ? The income tax is collected from 
 corporations in large masses. Take, for instance, the Pennsylvania 
 Railroad Company. The income tax on their dividends is collected in 
 a single sum, in great masses, at a cost of comparatively nothing. All 
 the tax on corporations is collected with scarcely any perceptible ex- 
 pense, except by swelKng the sum paid to the assessors and collectors. 
 
330 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 The tax on salaries is collected without cost by disbursing oflBcers ; 
 and the personal tax on incomes is collected from a few prominent, 
 well-known persons, to whom any assessor can go. It is collected only 
 in wealthy districts. 
 
 The Senator from Pennsylvania himself said that it was collected 
 mainly in twenty-three districts ; that all the income tax collected out- 
 side of twenty-three districts amounted to an inconsiderable sum. It 
 is collected in districts where, from the nature of the case, we must 
 have revenue officers to collect other special taxes, on whisky and beer 
 shops, and various other taxes. The income tax is collected in weal- 
 thy communities where, as long as our internal revenue system stands, 
 we must necessarily have assessors and collectors. Why, sir, the repeal 
 of the income tax would not result in the dismissal of a single assist- 
 ant assessor, because there is no district in which the income tax is 
 paid to any considerable amount where there are not whisky and beer 
 shops, and where the whisky and tobacco and other internal taxes are 
 not levied. By law you must estabhsh in every county of the United 
 States a place where stamps can be sold ; and the actual commission or 
 cost of selling stamps, although the most convenient form of revenue, 
 is five per cent., while the collection of the income tax costs only from 
 two to four per cent. In my judgment the whole of this $12,833,000 
 will be brought into the Treasury at an expense not to exceed three or 
 four hundred thousand dollars, or from two to three per cent. 
 
 There is only one other topic in this connection to which I wish to 
 allude. While those who have large incomes complain of this tax — 
 and I know they have complained of it to me bitterly — it must be re- 
 membered that the result of the war has enormously increased the value 
 of all investments. I have now in my mind a single corporation,' the 
 stock" of which before the war might have been bought for from twenty 
 to forty cents on the dollar, and now it is worth two hundred. Why 
 this increase in values? Because of the strength of our country. 
 Every man buys and sells land in the United States with confidence in 
 its value. The holders of property, those whose good fortune it is to en- 
 joy large incomes, have been benefited by the effect of the war, not only 
 m enhancing business, in furnishing us paper money and facilities for 
 negotiating business, but in the actual addition to the value of aU the 
 reS estate in the land ; and this is a reason why they should aid by a 
 small income tax to raise the necessary money to meet the expenses 
 growing out of the war. This income tax is just as much a war tax 
 now as when it was levied during the war, because it is now levied to 
 pay expenses incurred in the war. I think, therefore, that in whatever 
 way you view the income tax, whether as a question of right and jus- 
 tice in the distribution of taxes among men, or on grounds of principle, 
 the property-holders of this country ought to be willing that it sliould 
 stand upon the statute book until we can malce a generS review of the 
 whole subject of taxation ; and then, if we find that we can receive 
 from other sources the money that is now provided by the income tax, 
 let lis repeal it, giving at the same time relief to other classes. 
 
 Perhaps the most "difficult subject that the next Congress will have 
 to meet is the subject of the general reduction and revision of taxation.. 
 
INCOME TAX. 331 
 
 I know that in speaking one year in advance of the time I am liable to 
 commit many errors, which I will not consider myself to be bound by. 
 My argument as to this bill exhausts itself in the simple proposition 
 that we ought not to deal with the income tax now as a separate propo- 
 sition, but leave it to be settled when we come to revise and systema- 
 tize our whole system of taxation. That at the next session of Congress 
 it wiU be necessary to bring about a general reduction of taxation is 
 admitted on all hands ; and if the state of our finances then authorizes 
 us reasonably to hope for a surplus, I for one shall be wilhng to direct 
 my attention, and join with others in directing the general attention, 
 to the entire revision of the whole system. This can only be brought 
 about by adopting certain general principles : 
 
 Fi/rst. By a searching reduction of expenses. 
 
 Second. By availing ourselves of our experience in administering 
 the tax on whisky and tobacco, and, if possible, increasing the revenue 
 from those sources. 
 
 Third. By a reduction of the interest of the public debt, which can 
 result, only after we have raised the value of our five-twenty bonds 
 above par in gold. 
 
 The principles upon which this reduction is to be founded must in- 
 clude : 
 
 1. A comprehensive review of our internal and customs taxes as an 
 entire system, with a view to repeal or modify those that bear ' most 
 heavily upon the people. 
 
 2. We must dispense as far as practicable with internal taxes, and 
 confine them solely to articles the consumption of which is not :^eces- 
 sary or useful, and to such surplus income as will tend to equalise taxes 
 between capital and consumption. My conviction is that after this 
 year we may and ought to repeal every internal tax except on spirits, 
 tobacco, and beer, and such a modified income tax as will reach only 
 the product of capital not needed for the necessaries of life. 
 
 3. Such a reduction of the duties on imported goods as will cheapen, 
 as far as is consistent with the absolute wants of the Government, the 
 price of such goods as can not be produced in this country, and are in 
 general use as necessaries of hfe, or as the basis of our domestic indus- 
 try. Upon such goods as enter into competition with domestic industry 
 I would levy specific duties equal to, but no more than, the average 
 rate of duty demanded by our financial wants upon imported goods. 
 This is ample protection to all domestic industry not unnatural or forced 
 by a hot-house process. 
 
 I have carefully studied the application of this rule, and have now 
 on my table the result of it, showing the application of it to all the 
 great domestic productions of cotton, wool, iron, copper, and steel, and 
 can show that this rule of equity and equality will give to all these in- 
 dustries the measure of protection that they can reasonably ask, and 
 with which I know most of them wiU be content. It is the only rule 
 that will give our home industry such stable and incidental protection 
 as will enable them to compete with foreign labor. If under it any 
 branch of industry can not survive foreign competition, that is the 
 highest evidence that" such industry is forced and foreign to our soil, 
 
332 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 climate, or condition. Such a rule fairly applied, without yielding to 
 local or interested clamor, and without making distinctions between the 
 productions of different forms of industry, would remove the details of 
 our tariff laws from the demagogism of party politics, would give them 
 stability, and tempt capital and labor into those fields of industry where 
 we can compete with all nations. 
 
 As to articles known as luxuries, such as spirits, cigars, jewelry, and 
 some fabrics of silk, the only limit in the rate of duty should be the 
 limit which experience may show will prevent smuggling. Whatever 
 increased revenue we may be able to derive from these sources above 
 the average should be applied to the reduction of duties on necessaries 
 of life and on raw products. 
 
 There is a topic introduced here very often by the honorable Sen- 
 ator from Illinois. It has rather been a favorite of his. He is con- 
 tinually talking to us_ about the enormous mass of gold in the Treasury. 
 Whenever an effort is made either to prevent the repeal of a tax or to 
 caution the Senate against any-extravagant appropriation, we are always 
 told that there is a great mass of gold in the Treasury, and wb can 
 draw on that to make good any deficiency. In my opinion, that mass 
 of gold, of which I shall now show the precise nature and purpose, 
 ought not to be considered in this connection ; but as the subject is 
 brought in by others, it becomes necessary for me to answer them. 
 
 We are told that the surplus of gold in the Treasury will make 
 
 food all deficiencies in the revenue. The surplus gold ought not to 
 e considered in the question of the repeal of taxes, but should be 
 maintained as the basis of the resumption of specie payments, as the 
 steadying governor of our finances, and ultimately for the payment of 
 such of our notes as may be presented for redemption. The resump- 
 tion of specie payments should be the result of the gradual apprecia- 
 tion of the public credit without a forced contraction of the currency, 
 and, above all, should not be hastened by a forced and unforeseen sale 
 of the gold in the Treasury. 
 
 The immediate effect of the sale of gold on business is to decrease 
 the price of the gold. As a matter of course, the more of this commodity 
 you throw upon the market the lower the price will be. The effect of 
 that at once is to disturb values, as between the creditor and debtor. 
 If an officer of the Government, without reflecting upon the conse- 
 quences, were to throw upon the market a large amount of gold, he 
 would bear the market down, and perhaps bring ruin and devastation 
 upon the debtors of the country by changing the value of the standaixi 
 in which their debt was contracted ; and if this amount of gold is 
 diminished to too great a degree, the other effect is produced. Un- 
 doubtedly the Secretary of the Treasury might force down gold nearly 
 to par in paper, and might in thirty days compel the resumption of 
 specie payments by the exhaustion of all the gold on hand ; but what 
 would be the effect ? If the resumption of spopie payments is forced 
 bv the depletion of the Treasury, by the sale of all the gold in the 
 Treasury, how can specie payments be maintained ? The whole weight 
 iiiid burden of specie payments will fall upon the Government when- 
 ever the Government resumes. Why? Because the greenbacks them- 
 
INCOME TAX. 333 
 
 selves are the basis of our bank circulation ; and if this gold is forced 
 into sale, the effect of that forced sale may bring the price of gold to 
 the paper standard ; but the inevitable result would be that we could 
 not for a moment maintain the resumption of specie payments, because 
 we would have no specie on hand to redeem the notes that would be 
 presented. 
 
 Now, Mr. President, there is a very exaggerated idea of the amount 
 of gold in the Treasury. I have here an official statement made within 
 a day or two, which shows the precise nature and character of this 
 " enormous mass of gold." If Senators will look at the last statement 
 of the public debt, they will find that on the 1st of January, 18T1, the 
 coin in the Treasury amounted to $10Y,802,280.95, and there were out- 
 standing coin certificates to the amount of $26,149,000 ; showing a re- 
 mainder, the actual property of the Government, of $81,653,280.95. 
 The gold certificates are merely deposits of private individuals, and by 
 the very terms of the certificates the gold must be kept on hand. There 
 was a coin hability at that date (January 1, 1871), for interest previously 
 due and unpaid, of $6,32T,196.16 ; and the interest becoming due on 
 that day amounted to $28,479,635. There remained unpaid and due 
 on the 1st of January, 1871, on the principal of the loan of 1860, $4,- 
 119,000, and interest thereon amounting to $107,775 ; showing a net 
 balance in the Treasury of $42,619,674.79. That is the precise amount. 
 This does not include either accruing interest or notes and bonds. It 
 is complained that while this $42,000,000 of gold is lying idle in the 
 Treasury we lose the interest on it. So we do ; but why is it main- 
 tained there ? If it was not there, we would soon find out the reason. 
 That gold is the only steadying balance-wheel of our whole financial 
 system. It is remarkable that our paper money how varies scarcely the 
 shadow of a shade. The gradual appreciation in the value of our paper 
 money has been almost imperceptible, but as sure as the falling of the 
 snow upon the earth'. Suppose that $40,000,000 of surplus gold had 
 not been on hand ; the buUs and bears of New York could at any mo- 
 ment toss the value of all commodities upon the waves of speculation. 
 There is no power in the Government to prevent at any moment a 
 combination, either for the hoarding of greenbacks or for forced sales 
 of gold, except that fulcrum resting in the vaults of the Treasury, by 
 which any attempt to interfere with the natural order of things and 
 the business of this country may at once be put a check to. 
 
 "Why, sir, the Secretary of the Treasury saved more to this country 
 in September, T869, by the mere threat to sell $3,000,000 of gold, than 
 all the gold in the Treasury. The business men of this country and 
 its business interests would have been sacrificed by that speculation to 
 a greater extent by far than all the gold in the Treasury. It is only 
 that great balance-wheel that enables the Secretary to keep those spec- 
 ulators in check. 
 
 But it is said we lose the interest on this gold. So we do. Does 
 not a bank lose interest on its reserves ? It is illogical for us to com- 
 plain of the loss of interest on this gold when we are by means of that 
 gold maintaining at a reasonable price over three hundred and ninety 
 million dollars of forced paper money. The only reserve now on hand 
 
334 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 to maintain the credit of that $390,000,000 is the gold in the Treasmy, 
 after paying the balances that are chargeable against it. We require 
 of eveiy bank in the United States to maintain a reserve of from fif- 
 teen to twenty-five per cent., not only on its circulation but on its 
 deposits. Why do we do that ? Why do we compel them to hoard 
 idle in their vaults one fourth of their entire capital, deposits, and cir- 
 culation ? Merely in order that they may be able to redeem, if they 
 are called upon for redemption. There is no right to maintain paper 
 money in circulation, either by banks or individuals, unless there is an 
 absolute, demonstrable ability at any time to redeem that circulation. 
 The only reserve that has been retained by the Grovemment to steady 
 the market price of this paper money, to appreciate its value, and ulti- 
 mately to reach specie payments, is that $42,000,000 of gold lying idle 
 in the Treasury ; and that gold does not bear so large a proportion to 
 our circulation as the feeblest and most insignificant bank in the most 
 remote Western State is compelled to maintain day by day, to guard 
 against the uncertainty of the redemption of its notes, although they 
 may be secured by United States bonds. Therefore, I say it is illogi- 
 cal to complain about the hoarding of this gold merely because we lose 
 interest on it, when we gain interest on $390,000,000 of paper money. 
 We gain $32,0.00,000 and we lose $2,500,000. 
 
 The true policy of specie payments, in my judgment, is to offer in 
 exchange for our notes such a bond as can probably be maintained at 
 par with gold, and with such an ample reserve of gold that dissentients 
 can be paid in coin if demanded. In this way the United States can 
 cease to make money, except the standard coin at the mints, and the 
 business of banking, like any other business, may be left to private in- 
 dividuals under general law. The United States can protect the note- 
 holder with the most absolute security, and the amount of paper money 
 may be left to the laws which limit the amount of other productions ; 
 and each producer and consumer will, in an imperceptible way, affect 
 its quantity just as he does the quantity of wheat, corn, or cotton pro- 
 duced and consumed. The vast benefit conferred upon the United 
 States by the national banking system will then be fuUy realized. It 
 combines private capital and enterprise with Government security and 
 uniform value, and will never be jeopardized by State banks or the 
 impracticable idea of an exclusive metallic currency. 
 
 Mr. President, the financial success of this Administration has 'been 
 wonderful indeed, and we who are its agents to some extent can with 
 pride congratulate ourselves upon the beneficial effects of the Adminis- 
 tration upon the finances of our country. Let us look at it for a mo- 
 ment. When General Grant came into power a paper dollar was worth 
 only seventy-one cents in gold ; to-day it is worth ninety-one cents in 
 gold, or an advance of nearly twenty-seven per cent., without any dis- 
 tress and without any contraction. The same amount of greenbacks is 
 now afloat, and yet the steady, advancing credit of our country has 
 appreciated their value twenty-seven per cent. Our five-twenty bonds 
 when Genera] (3 rant camo into power were worth oifjlity-three cents 
 in gold ; now they a)-c woi-tli ninety-seven in gold, without any con- 
 sidunible diminution of their amount, and by the simple appreciation 
 
INCOME TAX. 335 
 
 of our public credit ; and, in my judgment, within a very short time 
 they will be at par, and will be paid off. 
 
 The banks nave not been disturbed in their loans to the people, but 
 have increased them. Everybody believed that when we approached 
 specie payments the banks would be compelled to contract ; and yet, 
 during afl. this time, while we are approaching specie payments so 
 rapidly, the banks have enlarged their loans. On the 1st of March, 
 1869, they were $658,000,000, and now they are $712,000,000. 
 
 Not only that ; the debt has been reduced, not by an increase of 
 taxes, but by a saving in expenditures of nearly two hundred million 
 dollars. I admit that much of the expenditure incurred during Mr. 
 Johnson's administration was for floating and unsettled debts of the 
 late war. I am not now making any political allusion at all, nor seek- 
 ing to arraign that Administration. I only speak of it as a fact that, 
 with diminished taxes, increased value of our paper money, and in- 
 creased value of our bonds, we have paid off nearly two hundred mil- 
 lion dollars of indebtedness, and are now within a few cents of specie 
 payments. 
 
 While this process was going on we were able at the last session to 
 reduce our taxes over eighty-two million dollars a year, by a carefully 
 adjusted system, in which nearly all the obnoxious taxes, and two thirds 
 of the income tax, about which we are now talking, were swept away. 
 We confidently expect at the next session not only again largely to re- 
 duce taxes, but to so adjust them that those that remain will fall more 
 lightly on our people. These things may play but a small part in the 
 political debates of the day, but they ace the strength of this Adminis- 
 tration. 
 
 This tax affects, it is true, about eight hundred office-holders of the 
 United States — certainly not over a thousand, including officers of the 
 army. It is said that it affects some officers in some of the States. 
 How many ? How many officers of States have salaries of over $2,000 
 after their taxes and other things are paid ? Yery few indeed. If they 
 want to appeal to the constitutionality of the law, let them do it, and I 
 have no fear of the results It affects some fifty or sixty thousand 
 people who are able to pay it. To say that this is a discriminating tax 
 against them, is to say that the EngKsh Government, in the adjustment 
 of their taxes, have levied upon themselves the same kind of tax since 
 the time of Sir Robert Peel. 
 
 'Mr. President, I have been threatened in every way about this mat- 
 ter. I will read what the " Brooklyn Union " has to say about those 
 who insist on maintaining the income tax — a paper published in the 
 very town where the population is in arms against the whisky tax, I 
 am told; Here is what the editor of the " Brooklyn Union " — who is 
 also the editor of the IS'ew York " Independent," and no doubt has an 
 excellent income, and I am glad of it — says : " The people mean to have 
 this tax out of the way, even if they have to put the men out of the 
 way who are responsible for its continuance." 
 
 Sir, there are sixty thousand, all told, who have to pay this tax. 
 We are all in that favored sixty thousand, because the people of the 
 United States give us over $2,000 a year. We are compelled to pay 
 
336 SPEEOriES AND KPPORTS OF JOHN SHERMAN. 
 
 this tax. And now every man who thinks it is better to retain this tax 
 a while longer is threatened with the indignation of the people. I am 
 inclined to think that we shall be able to endure and survive it. 
 
 Sir, the same threats were made against Sir Eobert Peel when he 
 proposed to renew the income tax. The politicians of that day de- 
 nounced him, and were able after a while to punish him to some extent ; 
 but it did not deter him. It was the reorganization and reinstitution 
 of the income tax in England that led to that revision of taxes which 
 changed the whole current of affairs in England ; and I believe now 
 that if the property-holders of this country, who are compelled to pay 
 the income tax, will bear with it a little while longer, for the two years 
 during which it is to exist, they will never have cause to regret it. 
 
 So far as my own State is concerned, I am impartial in this matter. 
 The State of Ohio pays her full proportion of the income tax according 
 to her population. I have here the statement. Most of the Western 
 States pay but little income tax, but Ohio pays dollar for dollar, accord- 
 ing to her population. The old tax was just about a dollar an inhabi- 
 tant. Ohio pays her share ; and I have it to say, for the men of Ohio 
 who pay this income tax, that, with very rare exceptions, such as I do 
 not wish to name, they have not corhplained of the tax, but are willing 
 to bear their share of it. But, impelled by a sense of duty, in the in- 
 terest of the whole people, I feel bound, without any regard either to 
 my own interest or that of my State, to maintain this and all other 
 taxes until I can see daylight ahead and a better time to repeal them. 
 
 INTEENAL TAXES AND TAKIFF. 
 
 m THE SENATE, MARCH 15, 187S. 
 
 The Senate, as in Committee of the Wliole, Ijaving resumed the consideration of 
 the hill (H. E. No. 173) to repeal the duties on salt, Mr. Shferman said : 
 
 Me. Pbesident : I am sorry that, even for a moment, the evil 
 shadows of our long political debates are cast upon a purely business 
 discussion, which affects the interests of all the people of the United 
 States, and yet need not excite any political feeling, or any division 
 of opinion except upon questions of dry political economy. I take it 
 that it will be most agreeable to Senators if I confine my remai'ks this 
 morning to a general statement of the condition of the country, to such 
 facts as in my judgment authorize us to enter, for the sixth time since 
 the close of the w^ir, upon a repeal of taxes, and also to state the gen- 
 eral principles upon which this reduction is proposed, rather than to 
 burden you with elaborate details. Those will be more properly stated 
 ■ as the debate progresses. 
 
 The taxes already repealed yielded $233,000,000. But our revenues 
 still largely exceed our expenditures, and we ai-e justified by several 
 reasons in continuing the repeal of taxes. Those which remain yield 
 
INTERNAL TAXES AND TARIFF. 337 
 
 largely more tlian in former years, and more than was estimated by 
 the most sanguine person. The production of the country has greatly 
 increased. Lidustry in almost every department has been activSy em- 
 ployed. The consumption of our people, which under our system of 
 revenue is chiefly the basis of taxation, has by the prosperity of our 
 industry been also largely increased. At the same time the national 
 expenditures are diminishing. Our financial condition is improving in 
 every particular. "We are slowly but siu-ely, without contraction or ex- 
 pansion, but by the increasing uses of our paper money, approaching a 
 specie standard. The interest of our debt is daily diminishing, through 
 the diminution of the principal and the reduction of the rate on that 
 which remains. All these favorable circumstances enable us to ap- 
 proach the question' of the further reduction of taxes with more system 
 and better information than formerly, and, I trust, with the sincere 
 desire to make the reduction in such manner as to yield the largest 
 possible relief to our people. 
 
 The only questions to be considered are, how much and what taxes 
 ought to be repealed ? 
 
 Let me first state how the subject now comes before us. On the 
 14th of March, 1871, the House of Kepresentatives passed three bills : 
 A bill to repeal the duty on coal ; a bill to repeal the duty on salt ; 
 and one to repeal the duty on tea and coffee. The duties thus proposed 
 for repeal yielded last year $21,000,000. • The Committee on Finance 
 was of the opinion that it was not wise to consider these bills, except in 
 connection with the whole subject of revenue reduction. On the 12th 
 of April, 1871, the Senate passed the following resolution : 
 
 Sesohed, That the Committee on Finaiice is hereby instructed, during the re- 
 cess of Congress, to carefully examine the existing system of taxation by the United 
 States, with a view to propose such amendments to the bills of the House of Repre- 
 sentatives repealing certain taxes, now pending in the Senate, as wiU simplify, re- 
 vise, and reduce both the internal taxes and the duties on imported goods now in 
 force ; and so that the aggregate of such taxes shall not exceed the sums required 
 to execute the laws relating to the public debt, and to pay the current expenditures 
 of the Government, administered with the strictest economy; and so that such 
 taxes may be distributed as to impose the least possible burden upon the people. 
 
 In obedience to these instructions the Committee on Finance did 
 during the recess examine in detail the laws imposing taxation, and 
 agreed upon amendments to both the tari£E and internal revenue laws. 
 But in reporting to the Senate our action, we had to consider the power 
 of the Senate over revenue bills. The powers of the two Houses in 
 this respect are regulated by article one, section seven, clause one, of 
 the Constitution of the United States, as follows : 
 
 All hills for raising revenue shall originate in the House of Representatives, but 
 the Senate may propose or concur with amendments, as on other bills. 
 
 This provision has often been the subject of controversy between 
 the two- Houses. We had before us three bills of the House, with the 
 unquestioned power to propose amendments to either of them. It was 
 clear that, if the House proposed to repeal or modify certain taxes, the 
 Senate could propose instead to repeal or modify other taxes. But as 
 aU the taxes proposed for repeal by the House were customs duties, 
 22 
 
338 SPEECHES AND KEP0ET8 OF JOHN SHERMAN. 
 
 ■the question arose whether we could, in the way of amendment, pro- 
 pose the repeal of internal taxes. The parliamentary law, as well as 
 the practice heretofore, settled this question in the affirmative. The 
 subjects are germane to each other. They are both " bills for raising 
 revenue." The distinction is only as to the subjects and mode of taxa/- 
 tion. The House has itself repeatedly connected the two in one bill, 
 and notably so in the act passed two years ago. The modification of 
 one compels the modification of the other. The logic of the subject 
 matter compels us to consider the whole revenue, when proposing to 
 reduce either form of taxes. Still, to avoid all possible dispute, the 
 Committee on Finance thought it advisable, while considering the 
 whole subject of taxation, to confine their amendments to customs 
 duties, and to offer these amendments to one bill rather than to three. 
 The amount of customs revenue proposed for repeal by the House sub- 
 stantially conforms to that proposed by the Senate. The House will 
 no doubt in due time pass a bill to reduce internal taxes, when the Senate 
 can propose its amendments. In debate, however, we must consider 
 the subject as a whole, and must therefore consider how much revenue 
 we can dispense with, and what taxes ought to be repealed or modified. 
 
 Since the close of the war it has been the highest public policy to 
 maintain our revenue at a point largely in excess of our expenditures ; 
 for a large surplus revenue has been not only useful in paymg unliqui- 
 dated debt, but also of great ■ importance in reestablishing the pubKc 
 credit, in improving our currency, and in reducing the rate of interest 
 to be paid. But the time has now arrived when we can safely reduce 
 our revenues to barely enough to pay the expenses of the Govern- 
 ment, economically administered, the interest on the public debt, and 
 such additional sum as it may seem to be good policy to apply on the 
 principal. 
 
 The expenditures during the fiscal year ending June 30, 1871, 
 including interest, were $292,177,188.25 ; for the current fiscal year 
 (partly estimated), $293,403,382.92 ; for the next fiscal year (estimated), 
 $273,025,773.99. These sums exclude the sinking fund and all pay- 
 ments on the principal of the debt. The net receipts of the Govern- 
 ment during the last fiscal year were $383,323,944.89 ; for the current 
 fiscal year (partly estimated), $365,198,374.60 ; for the next fiscal year 
 (estimated), $359,000,000. The actual surplus revenue for the "year 
 ending June 30, 1871, was $91,146,776.64 ; for the current fiscal year 
 (partly estimated), $71,794,991.68 ; for the next fiscal year (estimated), 
 $85,974,226. 
 
 The question arises, how far the estimates of expenditure will be 
 increased by additional appropriations by Congress. It is not probable 
 that any material change will be made in the abrogate appropriations 
 for the current fiscal year, while our current receipts are largely in 
 excess of the estimates. The increase is caused, to some extent, by the 
 importation of goods in place of duty-paid goods destroyed by the fire 
 at Chicago. The estimate of the Secretary of the Treasury contem- 
 plates a reduction of expenditure for the next fiscal year, as compared 
 with this year, of more than twenty million dollars, or, as compared 
 with last year, of more than nineteen million ; but this is explained. 
 
INTEENAL TAXES AND TARIFF. 339 
 
 mainly by the exclusion from the estimates of the premium paid on 
 bonds and the premium received on gold, which balance each other. 
 
 The estimates are based upon appropriations required by existing 
 laws. They can be, and ought to be, diminished in several important 
 branches of the public service. The abolition of the franking privilege, 
 the reduction of public printing, the reduction of the internal revenue 
 service, a close scrutiny of the pension list, a careful limitation of ap- 
 propriations for public buildings, and a general cutting off of expendi- 
 tures that grew out of the war, but which have survived the war, 
 would enable us to repeal other taxes without injury to the public service. 
 
 On the other hand, the wants of a great and growing country like 
 ours, exercising new powers, extending daily its influence into new 
 regions within our own limits, and into far-distant countries whose 
 civilization is more and more influenced by commerce with us — all 
 these compel a gradual increase of just and proper expenditure. Such 
 an increase does not indicate extravagance, but it does indicate growth, 
 health, and strength. 
 
 There is another cause of a nominal increase of expenditure, which 
 operates slowly and silently, but as surely as the march of invention 
 and civilization. It is in the changing purchasing power of money. 
 The dollar of to-day may contain as many grains of gold as does the 
 dollar of a year ago, but its purchasing power is diminishing year by 
 year, at a rate not less than one per cent, per annum. This change 
 is partly caused by the increased production of the precious metals, 
 and by the diminution of labor required, and the new inventions ap- 
 plied, to produce them. But, more than by all else, it is caused by the 
 new device of modem finance which substitutes paper and credit, in 
 innumerable forms, in the place of gold and silver ; so that these met- 
 als are not now, as formerly, the active agencies of commerce, either 
 foreign or domestic, but the mere standard or gauge of value. Even 
 paper money, so called, the greenback and bank note, are crowded from 
 their old use, and the check, draft, acceptance, and bill are the coin 
 of exchanges, great and small, foreign and domestic, to an extent never 
 before known. These facts make less coin necessary than formerly, 
 and, coupled with the actual increase of gold and silver, slowly and 
 surely depress their purchasing power, and make a greater sum neces- 
 sary, not only to buy marketing or pay for labor, but to conduct a 
 government. 
 
 This obvious tendency of a diminution in the value of money not 
 only increases our expenditures, but adds to our revenues by the in- 
 creased value of production. . It also largely diminishes the burden of 
 debt, and especially of a national debt running for a long period of 
 years. It is also obvious that, as nearly one half of our expenditures 
 are on the basis of paper money, they have been increased to at least 
 the extent of the depreciation of that money. Salaries have been from 
 time to time increased, to cover this depreciation, the increase in some 
 cases being several times as great as the amount of the depreciation. The 
 cost of all supplies for the army and navy, and of all labor for the civil 
 service, has been enhanced in the same way. As our paper money ap- 
 proaches to a specie standard, we may expect a corresponding reduction 
 
340 SPEECHES AND EEP0KT8 OF JOHN SHERMAN. 
 
 in tlie cost of supplies, but can hardly hope for a general reduction of 
 salaries. 
 
 Again, we may reasonably hope that expenditures growing out of 
 the war will diminish as time passes. My colleague in the House, Gen- 
 eral Garfield, made an interesting and accurate statement, showing that 
 out of the $291,564,44:1.43 of aggregate expenditures for the last fiscal 
 year, $175,543,140.27, or sixty and one half per cent, of the whole, 
 was paid directly for the expenses growing out of the late war. The 
 Secretary of the Treasury has estimated for a probable diminution of 
 these expenses ; but we must remember the vast mass of unKquidated, 
 war claims which are now under examination, large amounts of which 
 wiU unquestionably be allowed, and will enter into our expenditures 
 for some years to come. The great mass of our expenditures, probably 
 over eighty per cent, of the whole, is settled by laws which are practi- 
 cally, if not theoretically, beyond the action of Congress. The public 
 debt, the permanent appropriations, the salaries of public officers, the 
 pay of the army and navy, Indian treaties — all these are in effect be- 
 yond probability of diminution. Still, as I have already stated, there 
 are reforms which, if adopted by Congress, would enable us to propose 
 a greater reduction of taxes than it is prudent for us now to do. 
 
 I wish to call the attention of the Senate for a moment to some re- 
 marks made in the House of Kepresentatives by one of its most distin- 
 guished members, on this very point, which I think are apt to mislead 
 the public at large, as well, perhaps, as the Senate and the House. The 
 chairman of the Committee of ways and Means, in cautioning the 
 House against a too extravagant expenditure of the public money, has 
 estimated for new items of appropriation, in addition to the sum of 
 $273,000,000 which I have already given, and which he says were 
 omitted from the estimates. But this is, by a careful examination, 
 easily explained. He says : 
 
 Now, I want to call the attention of the House to what the officers of the De- 
 partment have added to this amount : 
 
 Estimates for 1872-"78, not including pay toward public debt $2'78,026,773 
 
 To be added : 
 
 Omissions from estimates $1,500,000 
 
 Deficiency bill 6,200,000 
 
 Buildings in Chicago ; . . . 4,000,000 
 
 Buildings in Hartford 800,000 
 
 Buildings in St. Louis 250,000 
 
 Buildings in Albany 850,000 
 
 Buildings in Indianapolis 100,000 
 
 Buildings in Quinoy 160,000 
 
 Buildings in Trenton 260,000 
 
 Corporation tax to be refunded 2,600,000 
 
 Pensions dated back up to and including 1878 10,664,686 
 
 Washington treaty 810,000 
 
 26,674,665 
 
 Total 8299,600,458 
 
 On a careful analysis of tliis statement I find that his fears are en- 
 tirely unfounded, and that tlie estimates already given by me include 
 every item of expenditure, with but few exceptions, that are necessary 
 
INTERNAL TAXES AND TARIFF. 341 
 
 to be provided for by law. Tbey are rather over- than under-esti- 
 mated. For instance, as to omissions from the estimates, stated by 
 him at $1,500,000, I can find none such. The deficiency bill he puts 
 at $6,200,000 ; but that is a deficiency for this year, not for the next 
 year. It does not so into the expenditures of next year at all, and 
 will be paid out of the large surplus revenue of the present year. 
 Then he speaks of " buildings in Chicago, $4,000,000." It is true that 
 we may expend $4,000,000 for buildings in Chicago, but our receipts 
 have been increased more than twice $4,000,000 by the destruction of 
 duty-paid goods in that city ; and all the expenditures necessary to be 
 incurred by the United States in the reconstruction of buildings in 
 Chicago will be more than counterbalanced by the gain upon duty-paid 
 goods, which must be imported to supply the place of those destroyed 
 by the fire. 
 
 Another item is, " Corporation tax to be refunded, $2,500,000." In 
 the first place, the bill for the refunding of taxes has not yet passed ; 
 but, if it does pass, it will only take so much money out of the current 
 receipts for this year, of which there is a large surplus. 
 
 The " pensions dated back to and including 18T3 " are estimated by 
 him at $10,664,685. It is enough to say that the House of Eepresen- 
 tatives, probably without a careful examination of the subject, passed 
 that biU ; but I am assured there is not the slightest probability that it 
 wiU pass the Senate, or be even reported. The chairman of the Com- 
 mittee on Pensions informs me that there is no probability or possibil- 
 ity of such a biU passing at this session. 
 
 So I find that, of afl the items of increase to be provided for ac- 
 cording to this statement, there is but $1,710,000 left, while on the 
 other hand the Committee on Appropriations in the House has already, 
 to its credit, largely reduced the estimates of the Secretary of the 
 Treasury. For instance, the fortification bill, which is estimated at 
 $3,219,000, is reduced in the House of Eepresentatives to $1,985,000. 
 The appropriations for public works, instead of being $19,468,000, 
 will, I am told, in the single item for rivers and harbors, be reduced 
 about six million dollars ; and there is scarcely a possibility, certainly 
 no probability, that Congress will authorize, all told, for public build- 
 ings, the amount of $19,468,000 estimated by the Secretary of the 
 Treasury. It is likely that certain public buildings will be erected, but 
 it is not probable that the amount named for them in the annual esti- 
 mates will be expended for that purpose. 
 
 I assume, then, upon the estimate of the Secretary of the Treasury, 
 that the sum of $273,025,773.99 will be required to meet the interest 
 on the public debt, the pension list, and the other proper expenditures 
 of the Government. To this must be added such further sum as, by a 
 wise public policy, ought to be applied to the reduction of the debt. 
 So much of this sum as is set apart as a sinking fund, under the acts of 
 February 25, 1862, and July 14, 1870, is not open to discussion. This 
 fund consists of two items, to wit : one per cent, of the aggregate debt, 
 or $22,895,930, and the interest upon the capital of the sinkmg fund, 
 which next year will be $5,783,333 ; making together an aggregate of 
 $28,679,263. This sum, increasing year by year, is specifically pledged 
 
342 SPEECHES AND REPOETS OF JOHN SHEEMAN. 
 
 to the reduction of the debt ; and its regular pajrment is as much a 
 part of the public obligation as is the payment of mterest. 
 
 Whether a greater sum shall be applied to the reduction of the 
 debt is purely a question of public policy. There is not now the same 
 motive as formerly for its rapid extinction. Since the close of the war 
 we have been paying interest at the rate of seven and three tenths per 
 cent, annually. We could sell our six per cent, bonds for coin only at 
 a large discount. We had a vast unliquidated floating debt, whicn it 
 was clearly the public policy to pay off rather than to swell the funded 
 debt. Even our liquidated debt was largely in demand, or other short- 
 time liabilities. Our currency was so far depreciated as to affect the 
 public credit in all the money markets of the world. At the present 
 time the change is wonderful. Since the commencement of General 
 Grant's administration the improvement in our financial condition has 
 been unexampled. We can borrow readily at five per cent., and are 
 now negotiating for a still lower rate. All of our six per cent, bonds, 
 which include the great mass of our indebtedness, are above par in 
 gold, and await our pleasure as to the iime of payment. The floating 
 debt is all paid, save that which is litigated and disputed. All om* de- 
 mand liabilities are discharged, except a balance of the three per cent, 
 certificates, and these are being gradually redeemed. Our currency 
 approximates in value to the specie standard, and the Government is 
 strong enough to resume at any moment, the time being only a question 
 o f domestic policy, as it affects debtor and creditor, producer and consumer. 
 The banks in the national system are so generally distributed that they 
 furnish a uniform currency, and they only await the mandate of the 
 Government to maintain that currency at par with gold and silver. 
 
 Every element which forms the basis of public credit, our strength, 
 our resources, and our fidelity to public engagements, has been demon- 
 strated. No unnatural strain upon our resources is now necessary to 
 enable us to fulfill our public engagements, to resume specie payments, 
 or rapidly to fund our debt at lower rates of interest. But we have a 
 traditional national policy, uniformly maintained in time of peace, 
 founded upon good reasons, and supported by the advice of all the 
 eminent statesmen of our country, that such provision ought to be 
 made as will, if not interrupted by war, pay off the public debt within 
 the life of a single generation, or in about thirty yeai-s. This we can 
 now easily do, and yet at each Congress repeal and reduce taxes. The 
 Committee on Finance concluded that $50,000,000, including the sink- 
 ing fund provided by law, should be annually applied to the reduction 
 of the debt, and that this sum, added to the $273,025,'r73.99 of appro- 
 priations, or a total of $323,025,773.99, should be the basis for detei^ 
 mining our revenue reduction. 
 
 In estimating the revenue for the next fiscal year, especially from 
 customs duties, we have several elements of uncertainty. Internal 
 revenue, based upon consumption, and customs duties on such articles 
 as tea, sugar, and coffee, may be estimated with reasonable accuracy ; 
 but tlio results of any given rates of duty on the great body of textile 
 and metallic fabrics are proverbially uncertain. An overflowing 
 Treasury, l)eing itself evidence of excessive importations, may within 
 
INTERNAL TAXES AND TARIFF. 343 
 
 a single year become the indireet cause of a deficiency of revenue. 
 The results of any system of duties can only be conjectured by a care- 
 ful study of trade, and the most sagacious merchants have sometimes 
 vwecked their fortunes by a mistake in this matter. 
 
 One illustration I remember very well. In March, 1857, we were 
 legislating to reduce the revenue, because we had such an overflowing 
 Treasury.- My honorable friend from Vermont [Mr. Morrill], then, 
 like myself, a member of the other House, said that he would vote for 
 almost any bill which would reduce taxes, in order to get rid of the 
 surplus revenue. At the very next session we were met with a de- 
 ficiency, and were compelled to borrow money from the beginning. 
 The occasion of this was the revulsion of 1857, which paralyzed all 
 trade — the revenues of the country being then derived entirely from 
 imported goods. A long period of time shows, as a general result, an 
 annual increase of revenue of about four per cent, per annum from the 
 same taxes. This increase has been less subject to violent fluctuations 
 with our paper currency than with specie payments. 
 
 Again, the effect of the repeal and reduction of taxes has always 
 been over-estimated. The decrease of a tax rarely produces a correspond- 
 ing decrease of the revenue. In some cases it causes an increased im- 
 portation of the foreign and a falling off in the domestic fabric, while 
 in others it induces an increased consumption of the article. Since the 
 1st day of July, 1867, to this time, the receipts from customs have 
 gradually risen, as follows : 
 
 In the fiscal year 1868 |164,464,B99 56 
 
 In the fiscal year 1869 180,048,426 63 
 
 In the fiscal year 1870 194,5S8,3T4 44 
 
 In the fiscal year 1871 206,270,408 05 
 
 This is an annual increase of nearly fourteen millions ; and yet, dur- 
 ing this period, customs duties were repealed which yielded $20,000,- 
 000 per annum. It is now evident that the customs duties for the cur- 
 rent year will largely exceed those for last year, and there is no appar- 
 ent reason why this increase shall not continue during the next flscal 
 year. The r6ceipts from customs from the 1st day of July, 1871, to 
 the 1st day of March, 1872, a period of eight months, are $146,721,- 
 000. If they continue at the same rate for the residue of the fiscal 
 year, the aggregate receipts will be $220,061,500. 
 
 Four months ago the ■ Secretary of the Treasury estimated the re- 
 ceipts from customs for next year at $212,000,000 ; but upon the basis 
 of existing law we may fairly estimate them at $226,000,000. The 
 internal revenue for the next fiscal year, upon the basis of existing 
 law, is estimated at $119,500,000, as follows : 
 
 Spirits $50,000,Q00 
 
 Tobacco 36,000,000 
 
 Fermented liquors , 8,500,000 
 
 Banks and bankers 6,000,000 
 
 Gas t 3,200,000 
 
 Adhesive stamps 16,000,000 
 
 Penalties 600,000 
 
 Articles and occupations formerly taxed, but now exempt 300,000 
 
 Tot^l $119,600,000 
 
344 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 This estimate does not include the residuum of the income tax on 
 
 Sersonal incomes for 1871, a part of which will come into the Treasury 
 uring the next fiscal year, and will make 'fuUy good the estimate of 
 the Secretary of the Treasury, of $126,000,000. "We have then the 
 proceeds of the sale of public lands, and miscellaneous sources of reve- 
 nue, estimated at $21,000,000, making an aggregate revenue for the 
 next fiscal year of $373,000,000, as follows : 
 
 Customs 1226,000,000 
 
 Internal revenue 126,000,000 
 
 Public lands 8,000,000 
 
 Miscellaneous _ 18,000,000 
 
 Total $373,000,000 
 
 This will create a surplus of $100,000,000 over my estimate of $273,- 
 000,000, or of $86,000,000, over that of the Secretary of the Treasury. 
 The general balance-sheet is as follows : 
 
 Estimated receipts and expenditures for the year ending June 30, 1873. 
 
 BEOEIFTS. 
 
 From customs $226,000,000 00 
 
 From internal revenue as follows : 
 
 Spirits $50,000,000 00 
 
 Tobacco 36,000,000 00 
 
 Fermented liquors 8,500,000 00 
 
 Banks and bankers 5,000,000 00 
 
 Gas 3,200,000 00 
 
 Adhesive stamps 16,000,000 00 
 
 Penalties 500,000 00 
 
 Articles and occupations formerly taxed, but now exempt 300,000 00 
 
 Residuum of income tax 6,600,000 00 
 
 — 126,000,000 00 
 
 Fiom sales of public lands 8,000,000 00 
 
 Fees from United States consuls $566,563 24 
 
 Fees on letters patent 620,819 11 
 
 Tax on circulation, deposits, etc., of national banks 6,303,684 32 
 
 Repayment of interest by Pacific Railroad companies 813,284 75 
 
 Homestead and other land fees 646,923 17 
 
 Unenumerated 9,051,226 41 
 
 18,000,000 00 
 
 Total $378,000,000 00 
 
 EXPENDITURES. 
 
 Legislative establishment $3,421,812 40 
 
 Executive establishment 17,448,631 38 
 
 Jndicial establishment 8,883,360 00 
 
 Military establishment 81,422,509 88 
 
 Naval establishment 18,946,088 96 
 
 Indian affairs 6,446,617 97 
 
 Pensions , 80,480,000 00 
 
 Public works under Treasury Department $3,104,500 00 
 
 Public works under Interior Department 244,800 00 
 
 Public works under War Department 14,609,662 97 
 
 Public works under Navy Department 1,488,100 00 
 
 Public works under Agricultural Department 26,500 00 
 
 J9,468,662 97 
 
 Postal service 6,474,001 00 
 
 Miscellaneous 11,258,826 44 
 
 Permanent appropriations 126,281,974 00 
 
 Carried forward, $278,026,778 99 
 
INTERNAL TAXES AND TARIFF. 345 
 
 Brought forward |2'?3,026,'7Y3 99 
 
 Sinking fund $22,895,980 00 
 
 Interest upon capital of sinking fund B,'783,333 00 
 
 Eeduction of debt in excess of sinking fund 21,S20,'73'7 00 
 
 50,000,000 00 
 
 Total $S23,025,'773 99 
 
 Receipts in excess of expenditures. 49,974,226 01 
 
 Total 1373,000,000 00 
 
 I wish, also in this connection, as this is a matter of public informa- 
 tion, to refer again to the remarks made by the honorable member of 
 the House of Representatives to whom I alluded a moment ago. He 
 seemed to think that the estimates of our receipts which I have pre- 
 sented are overstated ; and, in order, no doubt, to deter the House from 
 passing too large appropriations, or increasing the expenditures of the 
 Government, he endeavored to warn them against the possibility of a 
 deficiency of the revenue. He said : " The other source of revenue is what 
 is known as miscellaneous revenue. In its nature it is a very uncertain 
 item to rely upon." Then he proceeded, after some discussion, to re- 
 duce the miscellaneous item from $19,384,000, as I gave it, to $12,181,- 
 ■ 3T9. But when I come to examine the various items which compose 
 this miscellaneous revenue, I find they are not uncertain. They vary 
 very much, it is true, from year to year, but they are among the most 
 certain- sources of revenue; and there is scarcely a doubt that the esti- 
 mate given by me is an under- rather than an over-estimate. Among 
 the other items included in what are called " miscellaneous " is the tax 
 on the capital, circulation, and deposits of national banks, which is in- 
 creasing year by year. Last year the tax was between five and six 
 millions, and this year it is estimated at $6,303,000. It is one per cent, 
 on the amount of circulation, one half of one per cent, on the amount 
 of deposits, and a like rate on the amount of capital not invested in 
 United States bonds ; and the whole tax can not be less than from six 
 to eight million dollars. 
 
 The other matters which come under the miscellaneous head are 
 permanent items of revenue. For instance, the " repayment of interest 
 by the Pacific Railroad." That road, by its improved condition year 
 by year, is able to repay more and more of the interest due. Then we 
 have " consular fees," " homestead and other land-office fees," " tax on 
 seal-skins," " reimbursement of the TJnited States for salaries of store- 
 keepers of internal revenue bonded warehouses " — as stable as anything 
 can be — $557,000; "parting charges, refining gold and silver coin, 
 $200,000 " ; " direct tax," vmich is still coming m ; and so of the va- 
 rious other items which compose this " miscellaneous " item. My honor- 
 able friend to whom I have alluded has undoubtedly fallen into an error 
 as to the character and nature of these sources of revenue. I have no 
 doubt they will exceed rather than fall short of the estimates that have 
 been given. 
 
 Again, he says that the income tax is estimated to yield $13,000,000, 
 but that, as the tax expired with the last year, as a matter of course, 
 that source of revenue fails ; but he is in error in regard to that. The 
 amount of income tax estimated to be collected during the next fiscal 
 
346 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 year is $6,000,000 only, a part of the whole estimated tax being collected 
 during the present iiscal year, and going to swell its large surplus. Only 
 $6,000,000 was ever estimated for the next fiscal year. 
 
 He also says : " The Secretary of the Treasury, taking last year, 
 and so much of the present year which has passed, estimates the 
 amount to be received from customs, for the purpose of estimating the 
 public expenses, at $212,000,000." If the rate of duties received 
 during the eight months of the current fiscal year shall continue for 
 the next four months, which months are equally as favorable for the 
 importation of goods, the actual receipts for the current year will not 
 be less than two hundred and twenty-odd million dollars ; and, making 
 the ordinary allowance for an increase, the same duties will, during the 
 next year, unless we have a financial revulsion, produce not less than 
 $226,000,000, and probably as high as $230,000,000, instead of $212,- 
 000,000. 
 
 I will not pursue this matter further, because I think I can see very 
 clearly that the object of the remarks of the honorable gentleman to 
 whom I referred was rather to caution the House against imnecessarily 
 increasing expenditures, by telling the very true and very sober fact 
 that every increase of appropriation compels us either to continue a tax- 
 we might otherwise repeal, or to levy a new tax, in case the expendi- 
 tures should greatly exceed the amount of our revenue. 
 
 It thus appears, upon the principles which I have stated, and upon 
 estimates which necessarily involve uncertainty, that, after applying 
 $50,000,000 upon the public debt, we shall still have a surplus revenue 
 of $50,000,000. Fifty millions, then, is the extent of our revenue re- 
 duction for this session. How shall this reduction be distributed among 
 the objects of taxation ? In what mode will the greatest relief be giv^en 
 to the people of the United States ? Shall this large reduction be made 
 the occasion of the entire revision of the principles upon which our 
 revenue laws ai-e based, or shall we simply repeal or reduce the most 
 burdensome taxes, leaving undisturbed the general principles of om* 
 system ? 
 
 Since the passage of the act of March 2, 1861, commonly known as 
 the " Morrill tariff," our domestic industry has been protected from 
 foreign competition by duties on foreign fabrics, mainly specific, but, 
 when reduced to ad valorem rates, rangmg from twenty to eighty per 
 cent. Under this protection all branches of manufacture have increased 
 in an unparalleled degree. Old industries have been multiplied and 
 new ones established. In the conduct of our military and naval opera- 
 tions we have relied mainly upon the products of home industry. We 
 now produce nearly all the metallic and textile fabrics necessary for the 
 use 01 man, and the superior invention and intelligence of our mechanics 
 is largely making good the difference between the cost of labor here 
 and in iJurope. 
 
 The actual cost of the leading jM-oductions of industry is now, under 
 domestic competition, nearly, and in some cases quite, as low as before 
 the war. The market value of all agricultunil products has, by the 
 diversity of our industry and the rapid extension of our railroads, been 
 maintained as high proportionately as that of mechanical fabrics, while 
 
INTERNAL TAXES AND TARIFF. 347 
 
 the increasing use of agricultural macliines of home manufacture has 
 lessened the labor of production. Wages of every kind, whether for the 
 skilled labor of the artisan or for the rudest form of manual labor, either 
 on the farm, in the mine, the workshop, or upon the railroad, have been 
 maintained at rates which more than compensate for the increased cost 
 of mechanical and agricultural productions. 
 
 Our protective system has drawn to our country a vast army of in- 
 dustrious laborers. Even the high taxes we have been compelled to 
 impose on domestic industry have not diminished our production, for 
 they are accompanied by increased taxes on foreign products. We may 
 theorize as we wiL, but the actual condition of the country is the best 
 evidence that the industrial policy steadily maintained by us during the 
 war, and siace the war, has been consistent with the most rapid progress, 
 has enabled us to meet unexampled difficulties, and yet has mcreased 
 our imports, our exports, and our revenue. 
 
 The fear that high duties would lessen our foreign commerce is met 
 by the steady growth of it. Our imports were : 
 
 In 1869 $414,256,243 29 
 
 In 1870 452,876,665 68 
 
 In 1871 618,759,518 32 
 
 Our exports were : ' 
 
 In 1869 $413,961,115 
 
 In 1870 499,092,173 
 
 In 1871 562,618,651 
 
 These figures show a steady increase in our foreign commerce, with a 
 growing balance of trade in our favor. 
 
 We have not the statistics to demonstrate the annual growth of our 
 internal commerce, but we know that its increase has been much greater 
 than that of our foreign commerce, and it is now estimated at the enor- 
 mous sum of $4,000,000,000. The falling off in our merchant marine 
 on the ocean is caused by the substitution of iron for wooden vessels, 
 while, for internal commerce, railroads are rapidly taking the place of 
 water navigation. If foreign-built vessels were admitted to American 
 registry at a reasonable rate of duty, both for internal and external 
 commerce, it would not only encourage the building of American iron 
 ships, but would secure a healthy competition in our internal and coast- 
 ing trade, now absolutely protected by our navigation laws. 
 
 If, then, the wisdom of our protective policy is to be tested by ex- 
 perience, I insist that it is proved to have been a wise policy in the 
 actual condition of our country. No doubt changes are demanded by 
 the improved and improving condition of our finances. Our taxes must 
 be reduced to correspond with the reduced wants of the public service ; 
 but every industry that has been called into existence by our policy, 
 every skilled laborer whom we have invited to our shores or encouraged 
 to devote himself to a special employment, every capitalist who has 
 been induced by our laws to invest his mone;jr in industrial pursuits, 
 every hamlet, village, and city that has been built by reason of our pro- 
 tection laws, every community of farmers, or laborers, or shop-keepers, 
 whose industry has been employed by reason of our policy, may demand 
 of us that any changes in our laws shall be made Avith careful reference 
 
34:8 SPEECHES AND REPOETS OF JOHN SHERMAN. 
 
 to the industry, capital, and skill that have been thus encouraged, in- 
 vested, or employed in the development of our policy. 
 
 All laws that affect the industry of the people should be as stable as 
 
 fossible, consistent with the inevitable changes that attend human wants, 
 hope, therefore, that in making the reduction of our revenue we will 
 all agree that it shall be so done as to give the greatest measure of re- 
 lief, and do the least possible injury, to any industry fostered by our 
 laws. 
 
 In the reduction of duties since the close of the war, it has been 
 conceded that internal taxes should first be repealed. They were the 
 product of the war, were new, inquisitorial, reaching every county and 
 hamlet, and were collected by officers of the law brought to the door 
 of every household. The worst of these taxes have been repealed ; but 
 there stiU remain many special taxes which make it necessary to keep 
 revenue officers in every county of the United States. These special 
 taxes are imposed on wholesale and retail dealers in spirits, tobacco, and 
 beer, on banks and bankers, and on gas. Many of the stamp taxes are 
 imposed on the production of such articles as matches, medicines, and 
 the like ; others are on the sale of property and on commercial paper ; 
 while all of them involve the employment of a multitude o f ag ents for 
 the sale of stamps, at a cost of five per cent, on their sales. While pro- 
 ductive, they are annoying, expensive in collection, and in a multitude 
 of cases easily evaded. If the special taxes on spirits, tobacco, and beer 
 can be consolidated with the tax now levied on the manufacture of these 
 articles at the distillery, brewery, and manufactory, and the special tax 
 on gas and bankers be repealed, we can then dispense with the vast 
 army of revenue officers, and concentrate the attention and surveillance 
 of the internal revenue office upon the places where whisky, tobacco, 
 and beer are made. If we can dispense with the stamp taxes, the whole 
 system of internal taxes will disappear, except the excise taxes on 
 whisky, tobacco, and beer, which, by the common consent of both pro- 
 ducer and consumer, are recognized as proper objects of taxation. 
 
 The taxes on the circulation and deposits of national banks do not 
 enter into our internal revenue system. They are rather regarded as 
 the fund from which to pay the expenses of printing the notes and 
 maintaining the system. The excess collected from this tax over these 
 expenses may properly be regarded as a return payment for a franchise. 
 The tax is collected directly by the Treasurer of the United States, and 
 should be retained. If it be deemed best to retain this tax as against 
 other banks and bankers, it may be collected in the same way and by 
 the aid of bank examiners. 
 
 In advance of a definite measure dealing with internal revenue, I 
 am prepared to say, without committing any one else, that Ave can and 
 ought now to repeal all internal taxes except those on whisky, tobacco, 
 and beer, and to consolidate and simplify tiiese last. 
 
 The income tax expires with the collection of the tax of 1871, which, 
 on personal incomes, is assessed during the present month. The public 
 mind is not yet prejiarod to apply the only key to a genuine revenue 
 reform. A iew years of further experience will convince the body of 
 our people that a system of national taxes which rests the whole burden 
 
INTERNAL TAXES AND TARIFF. 349 
 
 of taxation on consumption, and not one cent on property or income, 
 is intrinsically unjust. While the expenses of the ITational Government 
 are largely caused by the protection of property, it is but right to re- 
 quire property to contribute to their payment. It will not do to say 
 that each person consumes in proportion to his means. This is not 
 true. Every one must see that the consumption of the rich does not 
 bear the same relation to the consumption of the poor as the income of 
 the one does to the wages of the other. As wealth accumulates, this 
 injustice in the fundamental basis of our system will be felt and forced 
 upon the attention of Congress. Then an income tax, carefully ad- 
 justed, with proper discriminations between income derived from prop- 
 erty and income from personal services, and freed from the espionage 
 of our present law, will become a part of our system, just as such a law 
 proposed by Sir Kobert Peel, after a disuse of twenty-five years, was 
 the basis of the revolution in the tax system of Great Britain. 
 
 If these changes in our internal revenue laws be made, it will re- 
 duce internal taxes $31,500,000, or from $126,000,000 to $94,500,000. 
 But this reduction of taxes will be accompanied by a reduction of our 
 expenditures of not less than $2,500,000 ; and if the new regulation as 
 to the whisky tax should prove practicable, the reduction of expenses 
 will be much greater. This wiU leave us a net loss of revenue of 
 $29,000,000, and with a margin of $21,000,000 , for the reduction of 
 tariff duties. 
 
 Upon what articles and upon what principle shall this reduction be 
 made ? The House of Eepresentatives proposes to repeal the duties 
 on coal and salt, articles largely produced in this country, and on tea 
 and coffee, which are not produced in this country. The aggregate 
 duties collected on these articles last year were : 
 
 On coal $638,375 82 
 
 On salt 1,175,587 37 
 
 On tea 8,322,994 67 
 
 On coffee. . . ; 10,969,098 77 
 
 In all $21,006,056 63 
 
 or just the amount we are able to repeal. Why single out these arti- 
 cles for special repeal ? 
 
 The whole quantity of coal imported last year was 431,108|- tons. 
 The amount of bituminous coal produced in this country last year is 
 estimated at 15,000,000 tons, and of anthracite at 19,000,000 tons, or 
 an aggregate of 34,000,000 tons ; so that the imported coal equals less 
 than one and a half per cent, of the amount consumed. The whole 
 benefit of this repeal will inure to Nova Scotia, and not to any part of 
 our oountiT. The cost of production of domestic coal fixes its price, 
 and the only effect of the repeal will be to raise the price of foreign coal 
 for the benefit of Nova Scotia miners and land-owners, or more espe- 
 cially for the benefit of American speculators in coal mines in Nova 
 Scotia. ' It will not appreciably inure to the benefit of our consumers. 
 To the precise extent that the repeal increases the importation of for- 
 eign coal, it will diminish the mining of our own. Finding our vast 
 market open and free to them, they will force the production in Nova 
 
350 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Scotia, and divide the profits between their land-owners, their minera, 
 and their sailors. Our industry will be diminished to the same extent, 
 withoiit benefiting our consumers. 
 
 Again, free coal will have the same effect upon Nova Scotia that 
 the reciprocity treaty had in Canada. It will give to its people the 
 benefit of our markets without the burden of our taxes on home pro- 
 ducers. It will make the annexation of those kindred countries impos- 
 sible. 
 
 Again, it is gross injustice not only to our miners, but to our ship- 
 pers. By the settled policy of our navigation laws, no foreign vessel 
 can carry our coal from Philadelphia to Boston ; but under this repeal 
 they can carry it from Nova Scotia to Boston. It is said that a foreign 
 vessel can carry more cheaply than ours. Thus you discriminate in 
 favor of Nova Scotia, by allowing their products to be carried in the 
 cheapest vessels in the world, while our miners must ship in an Ameri- 
 can vessel. You must repeal your navigation laws before you can 
 make coal free. The same vessel that carries coal from Nova Scotia 
 to Boston can not carry domestic coal there ; and yet Boston at the 
 same moment insists upon the navigation laws and upon the repeal of 
 the duty on coal. 
 
 Moreover, so far as the duty on coal is concerned, it is only claimed 
 that its repeal may slightly reduce the cost of coal consmned northeast 
 of New York. It can not affect the price elsewhere, because, even 
 without a duty, foreign coal wiU not be used south or west of New 
 York. Now, New England has the benefit of our navigation laws 
 and our duties, protecting their industries. Coal is the finished prod- 
 uct of the miner as much as cloth is of the manufacturer. How can 
 you convince the miner that he should not have the benefit of a duty 
 on coal when you demand it on cloth ? 
 
 So with salt. Salt is largely produced in this country. It is chiefly 
 the product of interior sections, where other manufacturing industries 
 do not exist. The chief sources of supply are at Syracuse, New York, 
 at Saginaw, Michigan, and at Pomeroy, Ohio. It employs fifteen 
 thousand persons and twenty millions of capital. It is an absolute 
 necessity of life. This industry must be maintained in wai", for our 
 foreign supply would be imperiled in case of hostilities between this 
 country and any maritime power. 
 
 The domestic supply is ample, and the product is cheap. It is 
 sold in every home market at less that one cent per pound. Oar fish- 
 ermen, who must compete with foreigners, have their salt, in effect, 
 duty free, for they are paid a drawback of the duty on all they use. 
 It is a Western commodity, and its production, transportation, and use 
 represent labor. Every part of it is labor. The raw brine costs no- 
 thmg but the labor of pumping. It is labor in the form of salt. If 
 labor is to be protected, why should labor producing salt be excepted ? 
 There is now a duty on salt of eighteen cents per hiindred pounds, or 
 less than one fifth of one cent per pound. If all textile and metallic 
 fabrics must be protected, why not salt ? If you look for revenue, it 
 yields over one million, with little cost and absolute certainty. If you 
 look to protection to labor, what duty gives protection more properly 
 
INTERNAL TAXES AND TAEIFF. 351 
 
 tlian the duty on salt ? The duty does add to the cost of the article on 
 the seaeoast, but does not affect the price in the "West ; but if duties 
 are to be levied only on articles which are the manufacture of the 
 East, how long will they stand ? 
 
 The revision of the tariff must be treated as a whol^ General 
 principles must be applied. If special exemption from duty is applied 
 to one article of domestic product, it must be applied to all. We may 
 stand upon exemptions from duty on articles that we can not produce, 
 but we can not stand upon a special exemption on any article that we 
 can and ought to produce. Free coal and free salt mean free iron and 
 free woolens. . You may discriminate in rate of duty by reason of cost, 
 bulk, capacity of production, and for other causes, and for them you 
 may properly reduce the duty ; but you can not make the article free, 
 whether you adopt the theory of a revenue or a protective tariff. 
 
 It is said that coal and salt are raw articles. Every article is the 
 finished product of one industry — coal of the miner, salt of the boiler. 
 Every commodity is only the raw basis of other industries — cloth for 
 the tailor, tools for the larmer, machinery for the manufacturer ; and 
 all of them are the raw articles of the merchant. I therefore conclude 
 that, whether we regard the duties on coal and salt as revenue or pro- 
 tective duties, they ought not to be entirely repealed, and therefore 
 the House bills ought not to pass. 
 
 As to the duties on tea and coffee, their repeal is simply a question 
 of revenue. We can not produce them. They are of such general use 
 as to enter into the consumption of nearly every family in the United 
 States. The duties on sugar, tea, and coffee are among the most stable 
 and unchangeable sources of revenue. The quantities consumed vary 
 less than those of any other chief articles imported. They are bulky, 
 and can not be easily smuggled. The duty is specific, and is rarely 
 evaded by fraud. Still, they are regarded as necessaries of life. The 
 repeal of the duty will lessen the cost to the precise extent of the 
 duty. Dealers will not at first lower the price, but competition will 
 soon reduce it ; so that the repeal of either of these duties will, in some 
 degree, cheapen the daily meals of nearly every family. The House 
 of Kepresentatives has shown its desire to make tea and coffee free, by 
 twice passing bills for that purpose ; but it is manifest that if this is 
 done we must postpone for the present all other reductions of duty. 
 We are compelled to consider whether other duties ought not to be 
 modified before this purely revenue duty is entirely repealed. 
 
 I come now briefly to consider the measure proposed by the Com- 
 mittee on Finance. Instead of repealing entirely the duties on coal, 
 salt, tea, and coffee, we propose a large reduction of them. We reduce 
 the duties on lumber, rice, lead, and other articles, the rawer products 
 of industry, on which the present rates are excessive. We add largely 
 to the free list, and propose a reduction of ten per cent, of the duties 
 on most textile and metallic fabrics. The reduction proposed is $22,- 
 507,323.26 ; but we may fairly anticipate such lessening of expenses 
 and such increase of importation as will reduce the loss of revenue to 
 $21,000,000. 
 
 This is not the time for stating in detail the reasons for the great 
 
352 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 reduction on certain specific articles. As the debate progresses each 
 article will be separately considered, and if we err a& to details the 
 Senate will correct us. I have now only to consider the general prin- 
 ciples involved. 
 
 We are^net by opposing theories of political economy, by theories 
 of protection and theories of free trade. The object of protection is 
 to secure to home industry the benefit of the markets of our own coun- 
 try. The means proposed are high duties on foreign fabrics which 
 compete with our own, and low duties, or none at all, on foreign articles 
 used in manufacturing. The object of free trade is to secure an article 
 at the lowest price, without regard to its place of production. A 
 revenue tariff is inconsistent with the extreme theories of both the 
 free-trade and protection schools ; for if a foreign article is excluded 
 by rates of duty so high as to give the home producer the entire mar- 
 ket, the revenue is destroyed as absolutely as if no duty at all were 
 imposed. This obvious truth reduces a revenue tariff to a matter of 
 details ; and in determining the rate of duty on any article, due weight 
 must be given to the nature of the article — whether it can or can not 
 be produced in this country, and whether the duty should be higher 
 or lower than the average rate requisite to produce the revenue needed. 
 This principle is admirably stated in the report of Eobert J. Walker, 
 made in 1846. While I do not agree with all the details of that report, 
 it contains some excellent general principles. 
 
 In the course of the innumerable discussions on this subject by dif- 
 ferent commercial nations, it has become obvious that theories and 
 maxims adopted by one nation in fixing the rates of duty are totally 
 inapplicable to another nation, by reason of the differences of climate, 
 soil, productions, labor, and age. This is especially true of Great 
 Britain and the United States. In all the essential elements which 
 determine a tariff policy we are the exact antipodes of Great Britain. 
 Their chief occupation is that of manufactures ; ours of agriculture. 
 Their chief commerce is foreign ; ours is domestic. They produce 
 but little raw material ; we produce more than any other nation. Their 
 extent is small ; ours is vast. They are very rich ; we are not. In 
 Great Britain capital yields the smallest interest ; here it yields the 
 highest. There labor is low in price and abundant ; here it is very 
 high. The industry of Great Britain could not survive without foreign 
 raw materials ; here we have, undeveloped, the necessary raw material 
 for all products which are essential to the happiness and comfort of 
 man. 
 
 Again, this subject of the tariff has been so often discussed and 
 acted upon in Congress, that we may say that certain principles are 
 settled in the United States, by the common consent of our people. It 
 is settled that our national revenue must, in the future as in the past, 
 be mainly collected by duties on imported goods ; and, as the war has 
 enormouHly increased our wants, we may as well dismiss to future gen- 
 erations t]io extreme ideas of free trade and protection, which are ^ike 
 inconsistent with a revenue tariff. It is fairly settled' that, in levying 
 duties, at least the average rate will be put upon articles of foreign 
 manufacture that come into competition with home industry, and that 
 
INTERNAL TAXES AND TARIFF. 353 
 
 these duties will be so graded and classified as to give full incidental 
 protection to industries natural to our country, and for which we have 
 the raw material. It is settled that, as the difference between the price 
 of labor in this country and in Europe is the chief cause of the differ- 
 ence in the cost of production here and there, it is not good policy, by 
 permitting too close a competition between foreign and domestic pro- 
 duction, to reduce the wages of American labor, engaged in producing 
 any article essential to our wants, below the standing of other similar 
 labor in this country. It is agreed that, to secure certainty and avoid 
 undervaluation, all duties should, as far as practicable, be specific in- 
 stead of ad valorem. These principles are the basis of the American 
 system of protection, embodied in the act of March, 1861. The rates 
 of duty have been much increased by the new demands for revenue 
 caused by the war, and may now be reduced as these demands diminish; 
 but these protective principles will, I trust, be maintained as the essen- 
 tial foundations of our national prosperity. 
 
 On the other hand, it is equally well settled that there is a multi- 
 tude of articles in which the traffic should be as free as our domestic 
 trade. All raw productions of nature, which are the gift of Providence, 
 ought to be as free as the hand that gave them ; but if they can be 
 made available by labor, and yet are abundant in our country, the rate 
 of duty should not be higher than will compensate for the bare differ- 
 ence in the wages of such labor here and in the place of exportation. 
 
 There is a great number of articles, the product of tropical climes, 
 or which for other causes are not readily producible here, that ought to 
 be admitted free, or at such moderate revenue rates of duty as our 
 wants demand. Where the amount imported is small, the articles 
 should be free ; for a multitude of duties creates expense. When the 
 quantity is large, as in the case of tea, coffee, and sugar, the only ques- 
 tion should be whether the tax proposed is less burdensome than other 
 taxes imposed. As this class of a.rticles enters largely into the consump- 
 tion of all, it has been the general policy of the country to admit them 
 free, or at low rates of duty. We taxed them heavily during the war, 
 for purely revenue purposes. We reduced those taxes two years ago, 
 and now propose to reduce further the taxes on tea and coffee, but we 
 are not yet prepared for their entire repeal. 
 
 I come now to consider the duties imposed on textile and metallic 
 fabrics. These constitute the great bulk of foreign articles that come 
 into competition with the domestic fabrics. It is said that the present 
 duties are not too high ; that under them our industries are prosperous, 
 and labor is well paid; and that, if the duties are undisturbed, domestic 
 competition will reduce prices as rapidly as increased foreign competi- 
 tion can do so ; that any change disturbs the business of the country by 
 deterring new enterprises, and that it reduces the wages of labor. On 
 the other hand, it nrast be remembered that the present duties, taken 
 together, are far in excess of what they ever were before the war, and 
 that they have been three times largely increased since the passage of 
 the Morrill tariff act of 1861. 
 
 After a careful examination, in detail, of all the duties and the indus- 
 tries affected by them, it does not appear that I the reduction proposed 
 23 
 
354 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 will seriously affect these industries. During the war these duties were 
 increased to counterbalance the internal taxes levied upon domestic 
 productions. The last shred of those internal taxes will now be re- 
 pealed, and no article of home industry will be taxed except whisky, 
 tobacco, and beer. Our manufacturers have now to compete with their 
 foreign rivals, with no disadvantage but higher-priced labor, and this is 
 met by a duty of from thirty-five to one hundred per cent., or an aver- 
 age duty on the whole list of fifty per cent. This very bill repeals or 
 reduces duties on raw materials for domestic fabrics to an extent which 
 is fully equal to a reduction of ten per cent, on the finished product. 
 This is admitted to be so as to many industries. The general lifting 
 off of the burdens of internal taxation, and the repeal of taxes on 
 raw materials, will enable our home industry to enter into a fairer com- 
 petition. Shall, then, the protective duties be maintained without 
 diminution, when all intern^ taxes are repealed, when raw materials 
 are admitted free or at reduced rates, when our currency is appreciated 
 near to the gold standard, and when the present duties are not needed 
 for the support of the Government? will the producers in other 
 forms of industry consent to the maintenance of excessive rates of duty 
 on mechanical fabrics ? 
 
 The result of such duties is to secure to mechanical industries 
 higher wages than can be earned in other kindred employments. Such 
 excessive protection not only ceases to diversify production, but forces 
 labor into protected employments. If the present rates of duty were' 
 high enough during and since the war, when home industry was bur- 
 dened with heavy internal taxes — with stamp duties, income taxes, and 
 high rates on raw materials — then surely they are now too high, when 
 all these taxes are removed. 
 
 In a controversy like this between opposing theories, the highest 
 wisdom often lies between them. While protecting home industry 
 we ought not, in any case, to levy a duty so high as to exclude the for- 
 eign fabric, but only such as will secure fair but not excessive wages, 
 and as will induce a competition between the foreign and domestic 
 fabric that shall secure to the consumer the lowest prices consistent 
 with the maintenance in our country of all the industries for which we 
 have equal natural facilities. We must not compel our laborers to 
 compete with the poorly paid labor of Europe ; but we ought not, by 
 our protection laws, to secure to them higher wages than can be earned 
 in kindred employments. 
 
 Another series of causes is now slowly but surely operating in favor 
 of American labor. The laboring men of Europe, by trade associsr 
 tions, and by laws prohibiting the employment of minore and women 
 and limiting the number of apprentices, are raising the general rate of 
 wages among all Christian nations. This is especially so in Great Brit- 
 ain, It is adding to the cost of foreign production, and so operates as 
 a protection to our domestic labor. 
 
 . For these reasons, and many others that will be stated in the course 
 of the debate, the Committee on Finance is of the opinion that now, 
 when so many taxes have been repealed, there ought to be a general 
 reduction of the duties on textile and metallic fabrics ; and that this 
 
INTERNAL TAXES AND TARIFF. 355 
 
 reduction should be at the rate of ten per cent., which is about the 
 rate of the aggregate reduction of tariff duties. We expect to en- 
 counter the opposition of those who favor the maintenance of the 
 highest duties on foreign competing fabrics, and of those who would 
 abruptly disturb our industries by a sudden and radical reduction of 
 duties to what they term a free-trade standard ; and perhaps both 
 classes of opponents will unite in repealing the purely revenue duty 
 on tea and coffee. If this is done, we can repeal no other taxes with 
 safety to the public service, and I shall then vote for striking out the 
 ratable reduction on textile and metallic fabrics. 
 
 Indeed, Senators, the only question about which there is much 
 controversy in this tariff bill is, whether you will let aU the present 
 duties upon textile and metallic fabrics stand, after we shall have given 
 their producers the raw material free of duty, repealed all taxes upon 
 them of an internal character, and reduced the purely revenue duty on 
 tea and coffee ; or whether you will also reduce the taxes on textile 
 and metallic fabrics. My friend from Pennsylvania [Mr. Scott] has, 
 at the outset, very properly presented by his amendment the only 
 question in this whole tariff debate ; and if that question were set- 
 tled, we could arrange the details of the entire bill in one day. If, 
 therefore. Senators unite — I do not speak of parties in this matter — 
 but if Senators who represent different constituencies unite in repeal- 
 ing the duty on tea and coffee, it will be utterly impossible for us to 
 go one step further ; because, as I have shown, the utmost limit to 
 which we can go in the repeal of tariff duties, if we propose to reduce 
 our internal revenue, is $21,000,000. We dare not go beyond that ; 
 and if you repeal the duty on tea and coffee, you wiU have surren- 
 dered all the revenue we can afford to surrender. I hope, therefore, 
 that Senators, when they come to vote on this final question, though 
 aU would hke to vote to repeal the duty on tea and coffee, so as to 
 give some relief to every family in the country, will remember that 
 by such a vote we preclude ourselves from the power of repealing 
 the duties on textile fabrics. 
 
 I have listened with patience, day by day, to the statements of gen- 
 tlemen who are interested in our domestic productions. I am a firm 
 believer in the general idea of protecting their industries ; but I assure 
 them, as I have assured their representatives here, that if the present 
 high rates of duties, unexampled in our country and higher by nearly 
 fifty per cent, than they were in 1861, are maintained on metallic and 
 textile fabrics, after we have repealed the veiy internal taxes which 
 gave rise to them, and after we have siibstantially given them their raw 
 materials free of duties, we shall have a feeling of dissatisfaction among 
 other interests in the country that will overthrow the whole system, and 
 do greater harm than can possibly be done by a moderate reduction of 
 the present rates of duty. And I am quite sure that intelligent men, 
 engaged in the production of various forms of textile and metallic 
 fabrics, feel, as I do, that' it is wiser and better to do what is just and 
 right, to make a reduction on their products at least to the extent of 
 the reduction in this bill on their raw material, rather than to invite a 
 controversy in which I believe they will be in the wrong. 
 
856 SPEECHES AND REPORTS OF JOHN" SHERMAN. 
 
 I have now, Mr. President, stated the general features of this bill. 
 I will end, as I commenced, with the congratulation that we are able 
 so soon again to throw off burdens cheerfully assumed by our people 
 during the great civil war. No man can candidly review the dangers 
 we liave passed, the difficulties we have overcome, the burdens we have 
 borne, and the success, growth, and prosperity that attended us amid 
 all our difficulties, without a reverent feeling of thankfulness to Al- 
 mighty God. Our honorable name and admitted rank among the na- 
 tions of the earth, the general intelligence and comfort of our people, 
 the rapid spread of our civilization over the Western plains, the diversity 
 of our industry, and the vast increase of our productions — aU these are 
 accomplished results, which, if properly preserved and utilized, wiU 
 realize the highest good that can be derived from human government. 
 
 FRENCH SPOLIATION CLAIMS. 
 
 IN THE SENATE, BEG EMBER 17, 1872. 
 
 The bill to provide for the adjustment and satisfaction of claims of American 
 citizens for spoliation committed by the French prior to the 31st day of July, 1801, 
 being before the Senate, Mr. Sherman said : 
 
 Me. Pbesident : My acquaintance with the French spoliation bill 
 commenced with my entrance into the House of Representatives in 
 the winter of 1855-56, when, being a member of the Committee on 
 Foreign Affairs, this old and interesting class of claims was handed to 
 me for investigation. At that time my mind was entirely unbiased 
 upon the subject. The examination of the claims opened an interest- 
 ing portion of American history, and, without much to do, I entered 
 upon it, reading nearly all the public documents then already accumu- 
 lated in great numbers of volumes. I informed myself in regai"d to 
 all the points that had been made in the discussion of the question. 
 After this examination I became entirely convinced that there was no 
 ground either in law or equity why these claims ought to be paid by 
 the United States. During that (Jongress there was no action upon 
 them. From that time they have rested without any definite action 
 by either House of Congress. Now they are pressed with a confident 
 expectation of payment, and it becomes my duty, without much time 
 for preparation, to give the reasons for my conviction why they ought 
 not to be paid. 
 
 Mr. President, it is no bar to tliese claims to say that they are sev- 
 enty-two years old ; that the generation of men who knew all about the 
 facts which gave rise to them did not recognize tliem as valid ; that 
 none of the actors of the period of 1800 who participated in the nego- 
 tiations connected with the subject ever took any prominent or leading 
 part in seeking to enforce them. A bill for paymg these claims was 
 never passed by the Senate of the United States until 1835. All the 
 
FRENCH SPOLIATION CLAIMS. 357 
 
 men who participated in tlie historical events which gave rise to them 
 had then disappeared. Seventy-two years have now rolled around, car- 
 rying away two or three generations of statesmen who knew of or acted 
 here upon them ; and yet these claimants are not discouraged, and still 
 insist that they have a right to demand of the United States as a matter 
 of law payment of $5,000,000, at least, for injuries suffered by Ameri- 
 can citizens by French spoliations prior to 1800. ' 
 
 !Nor is it a conclusive reply to these claims to say that they arraign 
 George Washington, arraign the course of the American Government 
 at its foundation ; that they are based upon the allegation that we vio- 
 lated our treaties with France ; that they arraign the conduct of all the 
 early ofiBcers of the Government. If they are ]'ust claims, they ought 
 to be paid even if their payment compels us to change the popular view 
 of the whole history of the first ten years of the American Govern- 
 ment. 
 
 The claims are pressed upon us with a pertinacity unparalleled. 
 From the daily papers I cut recently an advertisement signed by James 
 H. Causten, who represents that he has been for forty-nine years at the 
 head of an organized agency in this city to prosecute these claims. He 
 invites the citizens of the United States who are interested in them, 
 or who are the descendants of claimants, to send their petitions to 
 Congress. He says that this organization has been maintained here 
 year after year. It was founded in the city of Washington before 
 either House of Congress recognized any equity in the claims, before 
 any committee of either House had reported in favor of them, after 
 committees had reported against them, and has been kept up for forty- 
 nine years. I will read, merely to show the character and nature of 
 this claim, and how persistent and how enterprising has been its prose- 
 cution, a part of this public advertisement which is laid upon your table 
 in every one of the daily papers in this city. It is dated — 
 
 AOENOT OF FeENOH SPOLIATION CLAIMS, 
 
 OprioE No. 1246 F Stbbet, 
 WASHBroToir, D. C, Jfommber 5, 1872. 
 
 This institution was established forty-nine years ago, with the undersigned as 
 agent and protector of the original claimants, all of whom are long since dead, as 
 also their second generation. Their third generation are now living, but death and 
 other casualties have rendered my record so far useless as to who and where they 
 are to be found. 
 
 Then he gives notice to all these legal representatives who have not 
 sent their petitions into the Halls of Congress to do so at once. He 
 then goes on : 
 
 The delays of action on this case, occasioned by the late rebellion, impeachment 
 of President Johnson, and the excitement just terminated in the presidential elec- 
 tion, afford a free access to the attention of Congress ; but, above all, the near ?ip- 
 proach of Congress, its short session, and much to be done by interested parties, 
 point to the indispensable necessity for insta,nt preparation by the claimants. 
 
 Printed blank memorials will be furnished by the undersigned free of cost ; also, 
 a printed pamphlet history and proceedings on the claims by both Governments and 
 by Congress (at a trifling cost of printing) will be furnished those who desire it and 
 shall so advise me by letter. 
 
 Mr. President, here is a claim, stated by the chairman of the Com- 
 
358 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 mittee on Foreign Eelations at $20,000,000, which these peojjle are 
 offering to compound now, after seventy-two years, at five millions, 
 pressed upon us year after year, after a lapse or seventy-two years, by 
 an organized agency, which has been in this city for forty-nine years, 
 and now advertises to the people interested to send forward their peti- 
 tions in order to press Congress at this session to pass the French spoli- 
 ation bill. 
 
 All these are considerations which ought not to prevent us from 
 paying this obligation if it is just and honest. If it is right in law and 
 in equity that the United States should pay it, I do not object to the 
 means by which it is urged upon Congress, or to the long lapse of time. 
 But, sir, this lapse of time and the means necessaryto enforce the claim 
 are circumstances which demand of Congress a strict scrutiny into all 
 the facts alleged, that we may see whether or not the founders of this 
 Government, with George Washington at the head, did injustice to 
 these claimants, our own citizens ; and whether all those who have pre- 
 ceded us in this position have so far been neglectful of their duty that 
 they have refused to pay a just and honest claim so long. That is the 
 question. 
 
 Now, sir, what is the basis of this French spoliation claim ? As 
 stated by Mr. Webster in the celebrated debate of 1834^'35, it is 
 founded upon three assumptions. I will read from the opening re- 
 marks of Mr. Webster at the beginning of the debate, December 17, 
 1834: ; and I may here remark that this debate is the most complete, in 
 my judgment, the most thorough and exhaustive, of the many made 
 on this subject in Congress, although it was followed by many very 
 able speeches. Mr. Webster said : 
 
 Thi8 bill supposed two or three leading propositions to be true. 
 
 It supposed, in the first place, that illegal seizures, detentions, captures, con- 
 demnations, and confiscations were made of the vessels and property of the citizens 
 of the United States before the 30th of September, 1800. 
 
 It supposed, in the second place,. that these acts of wrong were committed by 
 such orders and under such circumstances as that the snfEerers had a just right »nd 
 claim for indemnity from the hands of the Government of Trance. 
 
 Here, at the very outset, I admit that these two propositions are 
 true ; that, according to my judgment, the acts of France in capturing 
 our vessels did constitute a just and fair ground for the claims against 
 the French Government, and that we were justified in doing all that 
 we could, short of actual war, to enforce them. But it must be con- 
 ceded that the French Government insisted that these captures and de- 
 tentions were caused by our violation of our treaties with them. The 
 claims of the two Governments were carried almost to open and general 
 war, the French insisting that these captures and detentions were law- 
 ful acts of reprisal on the United States for her disregai-d, or alleged 
 disregard, of the treaties with France, and that there was no obligation 
 on the part of France, because of this lawful act of reprisal, to pay to 
 these claimants any money indemnity, but that it was a controversy 
 between the two nations ; the United States, on the other hand, assum- 
 ing that, under the circumstances, it had a right to issue its proclama- 
 
FEENOH SPOLIATION CLAIMS. 359 
 
 tion of neutrality, and pursue the course of conduct which I will allude 
 to presently. Then Mr. "Webster states the third proposition : 
 
 Going on these two propositions, the bill assumed one other, and that was, that 
 all such claims on France as came within a prescribed period, or down to a pre- 
 scribed period, had been annulled by the United States, and that this gave them a 
 right to claim indemnity from this Government. (" Congressional Debates," vol. 
 xi., part I., page 16.) 
 
 Here is the gist of the whole matter : Did the United States annul 
 these obligations by assuming them under such circumstances as would 
 make a liaiilitTp- on the part of the United States to pay our citizens for 
 these depredations ? I say that, by a careful examination of all the 
 facts of this history, the chief of which I will now bring before you, it 
 appears that neither by the law of war, nor by international law, nor 
 by justice or right, did the United States ever assume or incur any ob- 
 ligation to pay these debts to our citizens. There was never the slight- 
 est thing done in the ten years during which they arose which gave a 
 legal or an equitable claim on the part of these citizens as against the 
 United States; but, on the contrary, the United States pressed these, 
 claims, insisted upon them, demanded them, urged them, pressed them 
 even to the point of war — went far beyond the duty of the Govern- 
 ment in favor of its citizens as against a foreign nation, and discharged 
 all the obligations which, by any rule of morals, duty, or law, are im- 
 posed upon any nation in behalf of its citizens against foreign nations. 
 
 Mr. President, having thus stated the general view of this case as 
 made by Mr. "Webster and the general impression that the facts have 
 made on my own mind, let us very briefly pursue the historical events, 
 which I can do only by referring to some of the leading incidents of 
 the controversy ; and the first and the groundwork of the whole are 
 the treaties with France made during the revolutionary war, in 1778. 
 The treaty of alliance is the 'first in order. This treaty with France 
 was the life-blood of our country at the time it was made, without 
 which we might have struggled through a long, wearisome war, and 
 perhaps have failed to attain our independence, but with which we 
 were enabled in a short time to establish this nation. 
 
 The eleventh and tweKth articles of the treaty of alliance contain 
 two guarantees. The eleventh article contained mutual guarantees, 
 one by France of " the liberty, sovereignty, and independence " of the 
 people of the United States, " absolute and unlimited as well in matters 
 of government as commerce," and a guarantee by the United States to 
 France of " the present possessions of the crown of France in America," 
 with the additions or conquests they might obtain during the war. The 
 effect of the two articles, eleventh and twelfth, was a mutual guarantee, 
 by which France guaranteed to us our liberty and independence, and 
 we guaranteed to France her West India possessions. That is not the 
 precise language, but that was the definite meaning of the articles. 
 
 The treaty of commerce entered into between the two nations on 
 the same day contains four articles which become material to this con- 
 troversy. Articles seventeen and twenty-two were made for the benefit 
 of France. They provide that prize of war may be carried into the 
 ports of either party, and that no shelter shall be given by either party 
 
360 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 to the captors of prizes from the other party ; that is, that the ports of 
 the United States should be free for France to bring in her seizures 
 of vessels of foreign nations with whom she was at war, and that we 
 should not give the corresponding benefit to any other nation. The 
 twenty-second article provides that foreign privateers shall not be al- 
 lowed to fit out or sell their prizes in the ports of either party, but that 
 the privateers of either party may use the ports of the other to fit out 
 and equip private armed ships and vessels of war. These two provi- 
 sions were made in the interest of France. 
 
 The twenty-third a,nd twenty-fourth articles were made in the in- 
 terest of the IJnited States. The twenty-third article provides for lib- 
 erty for either party to trade with a nation at war with the other. 
 That is, while the United States gave to France these important advan- 
 tages of. the use of our ports to her privateers and her captures, yet we 
 were to be at liberty to trade with nations with whom she was at war, 
 and free ships should carry free goods. In other words, to apply it to 
 the events that followed, if a war should occur between France and 
 Great Britain, while we were bound to receive in our ports French pri- 
 vateers and French captured vessels, we had a corresponding right to 
 trade with England, and under our fiag to carry even articles which by 
 the law of war were contraband of war into the ports of England. 
 
 The twenty-fourth article proceeds to define what shall be consid- 
 ered contraband of war, and changes the whole rule of international 
 law, making it much more liberal to the United States ; so that this 
 treaty of commerce, while it gave to France certain facilities, gave us 
 privileges of vast importance. 
 
 In a moment you wiU see, Mr. President, what was the bearing of 
 these treaties on the controversy which soon sprang up. These were 
 mutual concessions, some for the benefit of the United States and some 
 for the benefit of France. The honorable Senator from Massachusetts 
 in his report treats the whole thing as if the treaty of commerce was 
 aU on one side, as if there were no provisions in that treaty that bore 
 hardly upon France ; and yet it will turn out immediately that at the 
 very time this treaty was first put in force, at the very breaking out of 
 the war, France was the first to violate the stipulations of the treaty, 
 the only stipulations made in our favor, and her persistent violation 
 was made one of the grounds upon which General Washington based 
 the proclamation of neutrality, and virtually suspended, for the time 
 at least, the two articles which were made in favor of France. 
 
 Mr. President, this leads us to the next and most important step in 
 our history in connection with foreign affairs. In 1793 Fi-ance and 
 England were involved in war. France was at war with nearly all the 
 nations of Europe. She had beheaded her king ; she had proclaimed 
 war against despots and tyrants in any form. The sympathy of the 
 Amencan people generally went with France. But the question came 
 up before the Cabinet oi George Washington, wliat should be done ? 
 Should they involve this little nation of ours, in its infancy, without 
 troops, without arms, without vessels or inoaus of warfai-e, in the Mael- 
 strom of l*>uropean politics? Should they take sides with France 
 ug linst England ? It appeared at once that if we observed faithfully 
 
FRENCH SPOLIATION CLAIMS. 361 
 
 articles seTenteen and twenty-two of our treaty of commerce with 
 France, we took sides with France, and of course involved ourselves in 
 a war with England ; we became a pa,rty to the war ; and the question 
 then arose in the Cabinet of Washington whether the war which was 
 then raging in Europe was one of those wars that were provided for 
 by the treaty of commerce ; whether the occasion for the clauses of 
 guarantee in the treaty of alliance had arisen, and whether we were 
 bound to guarantee to France her West India islands; whether we 
 were bound to let French privateers and vessels of war come into our 
 ports to re-man, to arm, and to equip, and thus make war against Eng- 
 land and all the other nations of Europe. 
 
 This question came before the Cabinet of Washington. It was a 
 question of Kfe or death. If General Washington had decided the 
 questions as the French desired him to do, our commerce would have- 
 been swept from the ocean ; we should have at once been involved in 
 a war with Great Britain. With her enormous naval power, developed 
 soon after in the controversy, she might have seized all our ports, and 
 closed our country as a sealed book. She could easily have done it. 
 Under the circumstances which surrounded him. General Washington 
 addressed certain inquiries to the members of his Cabinet, and I have 
 them here, but I will not take time to read them. Senators who desire 
 to look at them may find them in Sparks's "Life of Washington," 
 Various inquiries were submitted by General Washington to the mem- 
 bers of his Cabinet, and the very mode in which the inquiries are put 
 shows the anxiety of Washingtdn, the critical state of our affairs ; and 
 these questions are given in full, together with the elaborate answers 
 of the members of the Cabinet. The result was that the members of 
 the Cabinet differed somewhat on minor matters ; but upon the main 
 point, that it was the duty and the right of the United States to main- 
 tain neutrality between Great Britain and France, they were all agreed. 
 
 Mr. President^ upon the opinion of his Cabinet General Washing- 
 ton issued the proclamation of neutrality. What was that ? The lan- 
 guage is simple and brief. It simply declared that in the condition of 
 affairs then existing in Europe, in the state of war between France and 
 the powers of Europe, the United States would remain in a state of 
 honorable neutrality, treating all the contestants by the same rules and 
 principles, and observing with sincerity and good faith a friendly and 
 impartial conduct toward all the belligerents. That was the proclama- 
 tion of neutrality, l^ow, sir, what followed ? The proclamation was 
 communicated to both Houses of Congress. According to the forms 
 that then existed, the Senate by a formal address approved it, and en- 
 dorsed and approved the conduct of Washington in issuing it. The 
 House of Representatives, with equal strength, also approved and en- 
 dorsed the proclamation, and it was at once adopted by all the people 
 of the United States as the policy of the Government. Jeiferson was 
 then Secretary of State, and Hamilton was Secretary of the Treasury. 
 The incipient divisions which soon followed in our own political con- 
 tests had already appeared ; but all citizens and all parties felt that it 
 was the right of the United States to maintain neutrality ; that the law 
 of necessi^, if nothing eke, justified it ; and, however much they were 
 
362 SPEECHES AND EEPOETS OF JOHN SHEEMAN. 
 
 divided in sympathy in the controversy between France and Great 
 Britain, they felt that neutrality was the safety of the United States, 
 and it was adopted. 
 
 The policy was not only adopted with the assent of the two Houses 
 of Congress, but it was sanctioned by the judiciary. This particular 
 proclamation of neutrality and the acts subsequent thereto were 
 brought before the Supreme Court of the United States in a case to be 
 found in 7 Cranch. The Supreme Court, Chief Justice Marshall de- 
 livering the opinion, stated that the action of General Washington, 
 thus approved by Congress, and supplemented as it was afterward by 
 an act of Congress, was the established policy of the country, and, 
 whether it violated the treaty or not, it was the law of the land so far 
 as the people of the United States were concerned ; that Congress was 
 the political power of the country, and had to make the laws to govern 
 the conduct of the people of the United States, and it was for Con- 
 gi'css, the political power, to judge whether or not this policy was con- 
 sistent with the French treaty, and the people of the United States 
 were bound to obey the decision. 
 
 Now, mark it, not only was this a policy adopted by every branch 
 of the Government, but it was concurred in by the very claimants 
 themselves. It was for their interest. There was not one single per- 
 son whose heirs or descendants or representatives petition here, but de- 
 manded this policy of neutrality ; not one of them but was interested 
 in it. Without this policy of neutrality there would have been no ships 
 to be captured, no vessels to be retained. Our ships and vessels would 
 have been swept from the ocean as with the besom of destmction. It 
 was a policy in which the East was especially interested. The very 
 States from whence these claims come demanded it by universal voice. 
 It was the policy of the country, the policy of safety. It was absolutely 
 necessary to* our national existence, and there was no man to question 
 it. But now, after these men are in their graves, after a period of 
 seventy-two years, we are told on the floor of the Senate, by the most 
 eminent members of the Senate, that the conduct of the United States 
 violated the treaty with France, and the alleged violation is made the 
 basis of an application to us to pay for all the depredations committed 
 by France on our commerce. 
 
 Now, sir, the legal effect, according to the decision of the Supreme 
 Court, was tlaat if this proclamation of neutrality was inconsistent with 
 the seventeenth and twenty-second articles of the treaty to which I 
 have referred, so far as the citizens of the United States were concerned 
 it superseded those sections, and it made no difference in this contro- 
 versy whether we acted in violation of the treaty or not. 
 
 I do not intend to stop here, but I shall show that France herself 
 recognized this view of the matter, and that France, before we had 
 violated the treaty, as she claimed, by the proclamation of neutrality, 
 had violated other clauses of the treaty which were made in our favor. 
 I had ]irepared quite a number of lengthy extracts from the correspon- 
 dence between Genet and Jefferson to show that the French minister 
 did not object to the ])olicy that was adopted by the American Govern- 
 ment ; on the contrary, he acceded to it ; but 1 find here, furnished to 
 
FEENOH SPOLIATION CLAIMS. 363 
 
 my hand in the report of the Senator from Massachusetts, a declaration 
 that even before this proclamation was issued France liad herself vio- 
 lated the treaty, and had treated it as so much waste paper. He says : 
 
 But before the proclamation reached France, orders, in direct repugnance to the 
 treaties with the United States, were issued there for the capture and forfeiture of 
 enemies' goods on board neutral vessels ; whereas it had been stipulated that free 
 ships should make free goods, so that even if the denial of the " guarantee " was 
 wrong, and the proclamation, according to French accusation, was " insidious," the 
 United States were not the first to offend. 
 
 I could fortify this general declaration by innumerable documents 
 showing that the French themselves disregarded the treaty as entirely 
 inapplicable to the then existing state of affairs ; that they in effect sus- 
 tained the position taken by Washington, that the treaties of commerce 
 and of aUiance related only to defensive warfare on the part of France, 
 and could not be held- to apply to a state of revolution, where every- 
 thing was changed, where the Government had killed the king who 
 made the treaty with us ; that the provisions of old treaties here quoted 
 did not apply to that condition of affairs. "Washington held that the 
 state of affairs which then existed in Europe was not a defensive war- 
 fare ia any sense of the word, or within the meaning of the treaty. 
 
 But, sir, whether that be so or not, it is admitted on all hands that 
 France violated the treaty, that France refused to allow us the com- 
 mercial advantages which were stipulated for in the treaty of 1778, and 
 that too before Washington had issued his proclamation of neutrality; 
 in oth-er words, that France had disregarded two of the articles of the 
 treaty, and she complained that Washington by his proclamation of 
 neutrality had also disregarded two of those articles, both nations dis- 
 regarding these treaties as incompatible and inconsistent with the new 
 state of afiairs that had sprung up on the map of Europe. 
 
 And so Jay's treaty, to which I need scarcely refer, expressly vio- 
 lated the French treaty. It was admitted on all hands that it was 
 inconsistent with the French treaty. Why, sir, the eighteenth article 
 of this treaty, was entirely, inconsistent; with the French treaty. It 
 prescribed an entirely different rule of law, as to what should be con- 
 traband of war. Under Jay's treaty the articles named as contraband 
 of war conformed to the law of nations. Under our treaty with 
 France the list of articles named as contraband of war was much more 
 liberal, and much more favorable to the United States. It was utterly 
 impossible to carry on an intercourse with France and Great Britain 
 with treaties so utterly inconsistent with each other. This shows that 
 Jay's treaty was based on the idea that the stipulations upon which 
 these claims are now based were regarded both by France and the 
 United States, and especially by the United States, as practically ab- 
 rogated and done away with. 
 
 But if there ever was any doubt about the matter, it was entirely 
 removed by an act of Congress, which in so many words said that 
 these treaties had been abrogated, and declared them to be of no force 
 and effect. That law of Congress was passed in 1798, two years before 
 the treaty of 1800 was made. I will read the operative words of that 
 law. On the 7th of July, 1798, the following act passed Congress : 
 
364 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Whereas the treaties concluded between the United States and France have 
 been repeatedly violated on the part of the French Government, and the just claims 
 of the United States for reparation of the injuries so committed have been refused, 
 and their attempts to negotiate an amicable adjjustment of all complaints between 
 the two nations liave been repelled with indignity; and whereas Under the author- 
 ity of the French Government there is yet pursued against the United States a 
 system of predatory violence, infracting the said treaties, and hostile to the rights 
 of a free and independent nation : 
 
 Be it enacted, etc., That the United States are of right freed and exonerated 
 from the stipulations of the treaties and of the consular convention heretofore con- 
 cluded between the United States and France ; and that the same shall not hence- 
 forth be regarded as legally obligatory on the Government or citizens of the United 
 States. 
 
 This act made a law for our citizens, whatever it did for France — 
 a law by which our citizens were bound. The treaties and the stipu- 
 lations therein upon which the pretensions of France were based were 
 set aside, not by the proclamation of neutrality merely, but by a direct 
 act of Congress ; so that the treaties were not in force at all when the 
 negotiation of 1800 occurred. 
 
 But all this time the French Government in its warfare with Great 
 Britain was issuing its edicts and orders under which all these depre- 
 dations were committed upon our commerce. They disregarded the 
 treaties. They treated them as superseded "by events, and, driven 
 probably by the necessities of their ^position, they seized om* vessels 
 destined for English ports, took them to France, held many in em- 
 bargo in violation of the treaty, destroyed some, used the provisions 
 that were intended for her enemy to support her own people, and not 
 only violated the treaty, but violated tne rules of international law. 
 She so conducted herself as to excite against her the strong antipathy 
 of the American people, and nearly to wear out all that kindly affec- 
 tion which had existed between France and the United States. 
 
 If ow, sir, what was the duty of the United States under these cir- 
 cumstances ? "We had set aside the treaties by our solemn acts, so far 
 as we could do so. , Our citizens were bound by the acts of our Gov- 
 ernment. When our citizens were thus deprived of property, what 
 did the United States do ? Were our ancestors quiet and supine I 
 Did they allow these depredations to proceed without expressing their 
 resentment ? Not at all. First, there was negotiation from 1793 to 
 1798, continued day after day — expostulation. "We finally sent to 
 France three of the most eminent citizens of the United States, at the 
 head of whom was Ellsworth, the Chief Justice of the United States. 
 How were they treated ? They were scoffed ,at, refused admission — 
 told that if they would bribe this man or that they might possibly get 
 some kind of redress. Tlie famous corres]ion deuce of " X. Y. Z.," 
 which disgraced the French people at the time, was published. The 
 people of the United States were indignant ; but still, remembering 
 the old feelings between France and the United States, they did not 
 declare war, but continued negotiation. Depredations were still com- 
 mitted, and we prepared for war. 
 
 We issued lett(^rs of marque and reprisal. We authorized the sei- 
 zure of French vessels. Vessels were seized upon the ocean ; blood, 
 was shed, battles were fought, vessels were captured, and war was 
 
FEENOH SPOLIATION CLAIMS. 365 
 
 waged, in behalf of these claims. Although our country was then sub- 
 stantially without means of ofEense, depending upon no vessels of war 
 except those she could improvise out of her merchant marine ; al- 
 though we were then poor, in debt, with only four million people scat- 
 tered along a coast two or three thousand miles long, yet, in behalf of 
 these very claimants, we did go to the very vejge of war, if we did 
 not cross the boundary and wage war against France. IS'o, sir ; the 
 Government and the people of the United States were never indifferent 
 to the losses suffered by these claimants. We went to the very ex- 
 treme. 
 
 All that we did not do was to depart from the policy of neutrality 
 and involve ourselves in the events then shaking Europe to its very 
 ,center. But everything short of that we did in behalf of these claim- 
 ants ; yea, we spent millions upon millions of dollars. "We called 
 Washington from his retirement ; we mustered Alexander Hamilton, 
 substantially, at the head of our armies ; we engaged in the building 
 of vessels ; we did all that a nation could do. We were not unmindful 
 of the obligations that rested upon us to defend the rights of our citi- 
 zens. What more could we do ? 
 
 And yet this claim is now presented here upon the ground formerly 
 taken by the French. Washington and all his contemporaries are ar- 
 raigned here for using the private property of these claimants to buy 
 off the old treaties -roich we had twice repudiated and declared by 
 acts of Congress not to be operative on us, and which France had dis- 
 regarded. Why, sir, by this bill Washington and Adams and Jeffer-, 
 son are charged with appropriating the property of citizens of the 
 United States to quiet an antiquated claim which they had rejected in 
 every possible form of language, and which they never during the 
 negotiations of 1800 recognized as having any binding force or obliga- 
 tion upon the United States — one the President when the treaty of 
 1800 was negotiated, another President when the treaty was ratified 
 — and the claimants say that the Government of the United States has 
 refused for seventy-two years to pay for the private property thus used. 
 Sir, I thank God that I can say, after a full examination of all these 
 documents, that there is no ground for the claim to stand upon. The 
 United States pressed the claim by negotiation, by all the power that 
 we were enabled to wield. There is no ground whatever to say that 
 the Government of the United States in its early foundation was not 
 true and faithful to its obligations to its citizens. 
 
 Now, Mr. President, let us examine for a moment the question, 
 what is our obligation to our citizens in regard to war ? I do not know 
 that it is necessary for me to cite authority upon this point, because it 
 seems to be conceded that we are not bound to stake the salvation of 
 our country in the support of the claims of our citizens ; but I have 
 here a number of quotations from many eminent men to show that it 
 is not the duty of the Government of the United States ever to press 
 a claim of private citizens against foreign countries to an extent that 
 would even damage the commercial interests of the people. That is 
 the law of nations. 
 
 We are bound, according to the Constitution of the United States, 
 
366 SPEECHES AND KEP0RT8 OF JOHN SHERMAN. 
 
 ■when we take the property of our people, to give them compensation ; 
 but when our citizens engage in commercial ventures with foreign na- 
 tions, when they leave our own land and go among foreign nations, 
 what are we bound to do for their protection ? We are bound to see 
 to them, to care for them, to look after them, to do what we can to 
 protect them, to encourage them. We are not bound by any obligation 
 of law or of duty to step forward as insurers against the loss, the cap- 
 ture, or the detention of their vessels. It is laid down by Chancellor 
 Bibb, of Kentucky, speaking with great eloquence of what had been 
 done by the United States in behalf of these very claimants, that no 
 nation ought to follow its adventurous citizens in their commercial 
 speculations to such an extent as to involve the nation in war or contro- 
 versy. The United States have always gone further in this direction 
 than any other nation. We protected an unnaturalized foreigner, who 
 had taken the first oath of allegiance, against the power of Austria. 
 Great Britain and the United States have carried the duty of enforcing 
 the rights of their citizens against foreign nations further than any 
 other nations. But we never carried this further than we did in be- 
 half of these claimants. 
 
 When these detentions occurred, when these captures were made, 
 we were not only remonstrating, begging, beseeching, sending our emi- 
 nent men on fruitless visits to i*aris, but we were waging war, captur- 
 ing privateers, making reprisals, doing all acts that were necessary to 
 eiuorce the rights of our citizens. When all these efforts had failed, 
 . at last, in 1800, we were compelled to abandon the negotiation ; and 
 now, after seventy-two years, we are required to review the conduct of 
 the eminent men who formed part of the history of the times, we are 
 called upon to review the propriety of the proclamation of neutrality, 
 called upon to ignore and reverae the law of 1798, and take the French 
 side of this controversy, in order to make a claim which our people 
 have disregarded for seventy-two years. 
 
 This brings me, sir, to the treaty of 1800 ; and I think, if I am for- 
 tunate in conveying my own impressions, I can show that all that oc- 
 curred in that treaty was entirely consistent with the position I take 
 here — that there was no single act or declaration implying an assump- 
 tion of these claims. Now let us look at it. The Senator from Mas- 
 sachusetts has stated very clearly the position taken by the French. I 
 take his own language, because I prefer to come as near as we can to 
 this point of the controversy. Pie says that when our ministere met 
 those of the French in 1800, they were met by an ultimatum. France 
 was then much exhilarated by victory. It was at the very time or on 
 the eve of the battle of Marengo. Napoleon was about to pass off to 
 his magnificent conquests and great victories. I think it wiis during 
 his absence, when the French were naturally elated with the progress 
 of events, that this treaty was negotiated, and our ministers were met 
 by this ultimatum, as stated by the Senator from Massachusetts, and as 
 als(; shown by the ofiicial documents I have before me. 
 
 And tliiH communication concluded with a formal pvoposition In these words : 
 " Either the anoiont treaties, with the privileges resulting from priority and the 
 stipulation of reciprocal iiideiunities, or a now treaty without indemnity." , 
 
FRENCH SPOLIATION CLAIMS. 367 
 
 Mark it, Mr. President, the Frencli submitted to us either of these 
 things : " If you will make over with us the treaties of ITYS, with all 
 the stipulations contained in them, and being made now with a recog- 
 nition that this is the kind of war that is recited in the treaties, we will 
 pay your indemnities." That is, " If you wiU acknowledge that you 
 have been wrong in all this controversy, and that we were right in mak- 
 ing reprisals, we will refund the value of these reprisals and restore 
 the ancient treaties." And the alternative was " a new treaty without 
 indemnity." "What was the result of the negotiation ? We accepted 
 the latter proposition. That is all there was of it. They would not 
 pay one doUar of these indemnities. The minister who negotiated this 
 treaty said he would resign first, and he treated it with indignity when 
 we proposed indemnities without a renewal of the treaties. I had the 
 language among the papers, but I can not now turn to it without occu- 
 pying time. He said he would never regard the indemnities, would 
 not pay them. 
 
 Various propositions were made back and forth. It is said that we 
 offered them something like two or three million francs ($600,000) for 
 their pretended claim under the old treaties. Suppose we did, had we 
 not the right to buy peace on these terms without making ourselves re- 
 sponsible for aU the depredations committed by the French ? Suppose 
 we offered them ten millions to release us from these old treaties, 
 would that make any difference ? They refused our offer of three 
 million francs. They made various offers to us. They were finally 
 rejected, and the treaty of 1800 was made. In the second article they 
 postponed the consideration of the indemnities claimed by the French 
 under the old treaties, and the indemnities claimed by our citizens, thus 
 showing a purpose to do what the French proposed in their ultimatum 
 ^abandon the old controversies and commence anew. In that spirit 
 they adopted the second article of the treaty, which I will now read, 
 and I will show to the Senate that it is entirely consistent with my view 
 of the case ; and yet it is upon the striking out of this article that this 
 whole claim rests : 
 
 Art. II. The ministers plenipotentiary of the two parties not being able to 
 agree at present respecting the treaty of alliance of February 6, 1778, the treaty of 
 amity and commerce of the same date, and the convention of 14th of November, 
 1788, nor upon the indemnities mutually due or claimed, the parties will negotiate 
 further on these subjects at a convenient time; and until they may have agreed 
 upon these points, the said treaties and convention shall have no operation, and the 
 relations of the two countries shall be regulated as follows. 
 
 In other words, they abandoned the whole theory of claims on both 
 sides. IS'ow, unless we were bound to prosecute our claims in favor of 
 our citizens to the final ultimatum between all nations, to a general and 
 universal war, we had gone to the tether, to the extent of our liability. 
 
 Now, the question is, can we abandon such claims short of actual 
 war ? for that this was an abandonment is shown by the plain language. 
 It was a diplomatic way of doing it ; and, as I will show presently, the 
 Senate preferred a more direct way ; but it was a diplomatic way of 
 abandoning all these claims on grounds of public policy, not on the 
 ground of an assumption .or a contract, but simply from an inability to 
 
368 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 get France to pay them short of our recognizing a state of facts that 
 would be utter destruction to the National Government. 
 
 It is alleged that, because oxir G-overnment pressed these claims of 
 private citizens almost, if not quite, up to the point of war, it assumed 
 the justice of the claims; that in the treaty of 1800 it offset them 
 against claims that France had on this Government ; and that thereby 
 it laid itself under obligation to meet the claims of these citizens. But 
 there was nothing like an offset. France could not convince us that 
 we were wrong except by conquering us ; and we never would have 
 restored the obligations of the old treaties except at the end of a gen- 
 eral war. We pressed our claims against France to actual seizure and 
 capture, but we could not convince her that she ought to pay, and 
 therefore we abandoned the claims of our citizens. 
 
 The question whether the acts of the Government of the United 
 States amounted to war or not, is one of the great questions debated in 
 this controversy ; but it is not the turning-point of the controversy in 
 my judgment. These claims were discharged by war, but I do not put 
 the case on that ground, because I am discussing it in another view. I 
 think it was war. If it was not war, I do not Know what it was. In 
 the capture of their vessels, I am inclined to think there was a state of 
 war as defined by the law of nations. That is a question which has 
 been much debated. Mr. Webster and Mr. Wright had one of the 
 most interesting debates on that subject that are probably to be found 
 in our Congressional history. Mr. Wright insisted — the whole weight 
 of his argument in the debate of 1835 was — ^that war, actual, decisive 
 war, extinguished these claims, and therefore that there was nothing to 
 negotiate about. Mr. Webster, on the other hand, insisted that these 
 were only acts of peace consistent with a state of peace ; and they had 
 a very learned discussion as' to what was war and what peace. Mr. 
 Wright would describe some of the acts of war, and would ask Mr. 
 Webster, " Is this peace ? " Mr. Webster would describe some of the 
 acts of negotiation, eating dinners, friendly exchange of compliments 
 between the French and American ministers, and would ask, " Is this 
 war ? " Upon an' arena in which men like Wright and Webster de- 
 bated, in which they had a difference of opinion, I do not think it be- 
 comes any of us to express any very decided opinion about it, and I do 
 not think it material at all to the controversy. I have avoided the dis- 
 cussion of that point because it would lead me into a long .argument as 
 to the state of facts and as to the various acts of depredation, capture, 
 seizure, etc., that were committed by both Governments. 
 
 Now, Mr. President, I find on reference to what Mr. Chancellor 
 Bibb says in regard to the obligations of the United States just- the 
 condition of affairs we found France in in 1800 : 
 
 But for damages caused by a foroisn power no rifrlit aoornes to the citizen to 
 demand and liave compensation from liis own (lovornnicnt. In snoli case the sov- 
 (^roign ouglit to interpose, as far as the sitiiiitioii of iifl'nirs and the oonmion interests 
 and safety will permit, to aid the citizen in lU'ninuding and rocoiving satisfaction 
 from such foreign power. The Qovernniout ought to show an equitable regard for 
 such sufifering of the citizen ; but the extont to whicli that regard shall be indulged 
 is a question of sound policy, to bo judged by the State. The right of the citizen in 
 thin behalf belongs to the class of imperfect obligatious. 
 
FRENCH SPOLIATION CLAIMS. 369 
 
 Then lie goes on : 
 
 When we consider the conduct of the Government from 1793 down to the rati- 
 fication of the treaty of 1800 — the condition of the United States (not then recov- 
 ered from the exhaustion of the Revolution), the assiduity and good faith with 
 which these claims were pressed upon the consideration of the French Government, 
 the want of success, the cause of tliat quasi war, the great expenditures of the Gov- 
 ernment, the dangers of being drawn into the vortex of the European war as a bel- 
 ligerent, the great losses to flow to the community from persisting, and the prospect 
 thus presented to the view of that generation — we may well conclade that the Gov- 
 ernment would have been well justified in abandoning these claims for the purpose 
 of extricating the community from a perilous condition. 
 
 It can not be admitted that the Government is bound to be the insurer of the 
 commercial adventures of its citizens against the acts of foreign governments ; that 
 private claims upon foreign powers must be pursued by war ad intemecionem reipub- 
 licm, or the citizen be compensated out of the public treasury at home, if the for- 
 eign aggressor can not be compelled to make retribution. The community is hound 
 to take care that no injury arises to the citizen by the ill conduct of the Govern- 
 ment ; but the public is not bound for the ill conduct of a foreign power. (" Con- 
 gressional Debates," vol. ii., part I., page 194.) 
 
 That was the yiew taken by this eminent and distinguished citizen, 
 a Senator from the State of Kentucky, certainly one of the most distin- 
 guished men produced by Kentucky, an ornament to the bar and one 
 of the chancellors of that State. 
 
 My friend from New Hampshire used a word which I think he 
 copied from the report of the honorable Senator from Massachusetts 
 [Mr. Sumner], the word " set-off." It is a very common transaction. 
 In ordinary dealings between two private citizens they set off their 
 obligations to each other ; but the idea of a set-off, in the view that 
 word presents to you, sir, as a lawyer [to Mr. Carpenter, in the chair], 
 never occurred to the men who negotiated the treaty of 1800. There 
 is no allusion to a set-off or a balancing of accounts in that way in all 
 the negotiations. If Senators can show me any such ground upon 
 which either the French or Americans put this controversy, then 
 there is an end. If it was a thing that was boiled down to a lew dol- 
 lars and cents, if that was the only matter between France and the 
 United States, it was a very small basis for a great controversy. 
 There was nothing of the kind. These were claims by the nations, 
 one against the other, neither willing to recede, neither willing to 
 abandon. 
 
 We firmly refused to engage again in the treaties of ITYS. Every 
 proposition by the French to renew them was declared by our minister 
 utterly inadmissible. In 1800, in one of the communications where a 
 reference was made to them, it was said on the part of the Government 
 of the United States by its commissioners, " Those treaties are not 
 operative ; every branch of our Government has put a different con- 
 struction on them, and we are bound by that. We can not introduce 
 them again into the law of nations between France and the United 
 States ; they are utterly inadmissible," to use their own language. On 
 the other hand, when we presented our claims to the French, the French 
 minister met them and said he would resign his office rather than pay 
 them ; he would never pay them. The language was strong. Finally 
 our minister wrote home that it was utterly idle to present these claims, 
 24 
 
370 SPEEOIIES AND REPORTS OF JOHN SHERMAN. 
 
 that their commercial value was nothing ; they could not be enforced. 
 The only question was whether — putting their backs to the past, bury- 
 ing in the grave all the controversies that existed between them, not 
 setting them off like a barter and a trade between two sharp traders — 
 two great nations, neither willing to yield to the other, would bury in 
 silence all controversies, not only oetween the two nations, but between 
 their citizens, and make a new treaty of peace. This was done. They 
 called it a treaty of peace. Whether there had been war before or not 
 is a debatable question. They called the treaty of 1800 a treaty of 
 peace, and they made it, simply abandoning and turning their backs on 
 the old controversies. 
 
 So every treaty of peace that is made between nations discharges 
 some liability ; one nation or the other must surrender something, and 
 usually both. And this was a treaty of peace ; all the old controversies 
 were buried in the grave. Whether the second article was in or out 
 made no difference. The United States were discharged from all obli- 
 gations under the treaties of 1778. There was no guarantee clause ; 
 there was no definition of contraband of war ; there was no free port 
 for privateers ; and it was a treaty founded on the general principles of 
 Jay's treaty. It took immediate effect. The question came before the 
 Senate of the United States, and I now appeal to Senators on it. Sup- 
 pose we had that treaty here, and were acting upon that treaty, and 
 found in it article two, an indefinite promise some time in the distant 
 future to open up a new controversy with France by which claims, re- 
 jected by both and negotiated about so long, were continued over, what/ 
 would we do ? All the interest we had in retaining that second article 
 was the right to enforce the private claims of our citizens for depredsr 
 tions ; but we knew that the right was contested by France, and never 
 would be yielded unless connected with a stipulation to renew the old 
 treaties of 1778. 
 
 My honorable friend from Pennsylvania, in his very excellent speech 
 yesterday, spoke about France recognizing these claims. Wliy, sir, 
 France never recognized these claims except in connection with the 
 renewal of the treaties ; she always put the two together from the be- 
 ginning to the end. The very first time Mr. Monroe presented them 
 to the French Government, the French replied, "No; you violated 
 your treaty ; these were acts of reprisal." They ordered in some cases, 
 and actually passed an ordinance for, the payment of the value of pri- 
 vate property taken from American citizens, where it was food and 
 clothing and the like. 
 
 Besides, in this treaty of 1800 there are provisions made for a large 
 amount of American claims. But for that treaty these claims would 
 have gone into the general wreck. There were vessels then in the 
 ports of France, and others not condemned ; there wore proNisions and 
 supplies to the amount of twenty million francs then in those ports. 
 By tlie making of the treaty of 1800 these were all released, and those 
 actually applied to the use of Franco were paid for ; and the treaty of 
 1803 made provision l)y which twenty iiiillion francs were set aside to 
 pay tlicHo identical clairas. We reserved from the purchase money of 
 L()uisiana twenty million francs or $4,000,000 to pay these claims, and 
 
FEENOH SPOLIATION CLAIMS. 371 
 
 we paid them. In tlie treaty of 1800 we secured our private citizens 
 this important advantage. 
 
 I am aware that in the present bill we have reserved from the ap- 
 propriation ail claims which were paid by the treaty referred to. It 
 is not in that view that I allude to it. I am merely showing that the 
 treaty of 1800 was an advantageous treaty to us ;■ that, while we could 
 not get all we wanted, we not only relieved ourselves from the guaran- 
 tees, but we also stipulated for the payment practically of twenty 
 million francs to our own citizens ; and more^ — not only did we get 
 twenty million francs in money, but all the vessels which were then in 
 the ports of France belonging to American citizens were discharged, 
 and the amount of benefit to our commerce, and to the men to whom 
 they belonged, was more than ten million dollars in the value of their 
 vessels and the amount they subsequently recovered where the property 
 had been used by the French Government or by French citizens. 
 
 When the treaty of 1800 came before the Senate of the United 
 States, what was the view taken of it ? We can not tell. The debates 
 were in secret. I am sorry they were. I believe, if the debates on 
 that treaty were now known to the world, this claim would be forever 
 barred. What was the reason for striking out the second article? 
 Here the alleged assumption comes in. It is admitted on all hands 
 that by the treaty as it stood there was no assumption, no set-ofi', no 
 contract, no bargain, no partnership. By the treaty as it was framed 
 there is no pretense that these claims were apphed to public use. I 
 wish Senators on aU sides to understand that. If there was any set-off, 
 or contract, or barter, it was made in this Senate chamber ; because, 
 by the treaty as it stood, the second article expressly reserved all the 
 claims on both sides, whether for violations of the treaties, or for 
 seizures, captures, or claims by the citizens or subjects of either party. 
 They were reserved, so that under the treaty as it stood there was no 
 pretense of a foundation for this claim. 
 
 'How, was it made in the Senate ? Is it to be presumed that the 
 men who then composed the Senate of the United States would, with- 
 out hearing these claims, without discussing the matter, without know- 
 ing what they did, make a contract in the nature of an assumpsit ? I 
 have always thought that these commercial words, these terms which 
 apply only to contracts made between citizens or contracts made be- 
 tween States, ought not to be applied to the action of a Government 
 when dealing according to the public exigencies. Did the Senate, 
 when it struck out the second article, make a contract or a set-ofl: ? 
 There is scarcely any pretension of that kind. Where is the evidence 
 of it ? None is produced. 
 
 What was the effect of striking out that second article ? It was 
 this, and no more : The Senate had been informed in this oiBcial com- 
 mimication that it was utterly idle to press the claims for indemnity, 
 unless connected with the idea of restoring the old treaties. They 
 knew that the second article only postponed to the future the contro- 
 versy. It was not at all likely that France would be more willing in 
 the future than in the past to pay these moneys. They knew that this 
 stipulation in favor of indemnities was of no value to our citizens ; it 
 
372 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 .was no burden to us. "We had accomplislied our purpose already by 
 the treaty, whether the section was in or out. We had got rid of the 
 old treaties ; the new treaty superseded them. If the second article 
 was in, it superseded them lust as well as if it waa out. 
 
 What motive, then, could induce the Senate of the United States 
 to strike out the second article ? What motive had we to apply private 
 property to public use ? Why should we then, when the private prop- 
 erty of our citizens was protected and referred to a future negotiation, 
 appropriate it for what we had already got ? Did we strike out that 
 article in order to get a release from the French treaties? We had 
 already got it ; it was in the treaty. What was the consideration for 
 which we assumed these claims ? I submit to you, if we have got to 
 talk in commercial language, in the language of lawyers or dealers, 
 what consideration was there that moved the United States to assume 
 an obligation unless it also got some benefit on behalf of the nation ? 
 It is said that we got a release from the guarantee, but we had that 
 already practically. The treaty itself in all its terms was a release from 
 it ; and unless the postponement of this controversy to some indefinite 
 future was a burden that the Senate were anxious to get rid of, there 
 was no consideration. 
 
 Sir, the only motive for striking out that second article in the Sen- 
 ate was a desire to end, once for all, the controversies between France 
 and the United States, to start anew on the field of friendship and 
 amity, to open again the kind affections and warm feelings of grati- 
 tude which still lingered in the hearts of the American people when 
 the name of France was mentioned. Sir, the act of the Senate was an 
 act worthy of the Senate. It was an abandonment of all these old con- 
 troversies, in the hope that the new treaty of peace which had been 
 made between our honored envoys and the Government of France 
 would start anew the old feelings of friendship. The idea of making 
 this action of the Senate a contract or set-off is a misnomer of terms. 
 
 This is the only basis, the only stand on which this old claim of 
 seventy-two years rests. It rests upon the assumption that the Senate, 
 by striking out the second article, appropriated the property of private 
 persons to public use. Where was the exigency ? Where is the decla- 
 ration of any man who lived at the time that this was done i I know 
 my honorable friend from Massachusetts has quoted quite a number of 
 remarks — one made by Mr. Madison in his negotiation with Spain ; one 
 made by Mr. Pinckney, who gave his opinion that we ought to pay ; 
 one made by Mr. Clay, who thought there was a kind of equity in pay- 
 ing the claims. These words are from the second generation of men, 
 and the remark made by Mr. Madison was the only one that has any 
 bearing on it, the only one that squints that way. 
 
 But suppose Mr. Madison did say what is (Quoted ; and no doubt he 
 did. Why was it that Mr. Madison while he wiis President of the 
 United States for eight years, and afterward, did not give his potential 
 voice in favor of these claims when thoy might have been paid, and 
 within the recollection of tlie men who knew all about them 'i If, ac- 
 cording to Pinckney and Madison, these claims were just, or some 
 equitable consideration had arisen from the striking out of the second 
 
FEENOn SPOLIATION CLAIMS. 373 
 
 article, why were not the claims paid ? And yet, as I will show in a 
 moment, they slept during the whole lives of the men who participated 
 in this controversy. 
 
 Mr. President, I am sorry that I have detained the Senate so long, 
 bnt I saw no other Senator disposed to enter into this debate after a 
 long controversy, and I thought I would present my views ; and I have 
 presented them much more fuUy than I intended when I rose. 
 
 I have not overlooked the foot-note of Napoleon, but I do not think 
 his declaration in ratifying the treaty and the history of its ratification 
 change at all the effect of the previous act. The act of the Senate I 
 have already mentioned. The treaty was sent with the second article 
 stricken out, leaving the old treaties suspended for eight years, of no 
 force, no validity ; the guarantee clause suspended, all the clauses that 
 we complained of as inconsistent with Jay's treaty modified or stricken 
 out. Then Napoleon, in approving this change, adds these words : 
 " That by this retrenchment the two States renounce the respective 
 pretensions which are the object of the said article." What is this ? 
 What is the meaning of the word " renounce " ? What is the meaning 
 of the word " pretensions " ? In what respect does this langiiage differ 
 from the legal effect of the action of the Senate already ? It was sim- 
 ply, " We will abandon those claims ; we will no longer press them 
 upon each other ; we renounce the several pretensions." The French 
 renounced the pretension that the old treaties were in force against us 
 to hamper us for all time to come, and we renounced the pretension 
 that their seizures were in violation of international law. We aban- 
 doned all these controversies. That is the construction I put upon it, 
 and it seemed to me so obvious a one that I was passing it by without 
 notice. 
 
 I think that the words bear the construction I have given, and are 
 perfectly consistent with the construction I have already put upon the 
 action of the Senate. Whether this foot-note of Napoleon — because it 
 is not published as a part of the treaty, it is published in the correspon- 
 dence — changed the treaty or modified our action in striking out the 
 second article, I leave to the honorable Senator [Mr. Frelinghuysen] to 
 discuss. Admit it, in what respect does this differ from the action of 
 the Senate already ? Simply an abandonment by both parties of any 
 future negotiation involving a controversy upon which they could not 
 agree. 
 
 They renounced the prosecution of these claims, that is all. We 
 had over and again insisted on the justice of the claims ; the French 
 over and over again had insisted that they were not just, that their acts ^ 
 were acts of reprisal for our violations of treaties ; and the pretensions 
 of these two nations — that is, the claims, the construction, the acts of 
 the two nations in construing the treaty, the several claims, pretensions, 
 or whatever you please to call them — should be abandoned, renounced, 
 no longer prosecuted, no longer pressed. We could not change the idea 
 of the French that we had done them injustice. We did not ask the 
 French to abandon their opinion, nor did they ask us to abandon ours. 
 
 Mr. President, I come now very briefiy to consider another point. 
 If this claim rested upon a clear legal right, why was it not pressed 
 
374 SPEECHES AND EEP0ET8 OF JOHN SHEEMAN. 
 
 upon tlie generation of men who knew all about it ? You will find at 
 the end of the report of the Senator from Massachusetts the whole his- 
 tory of this controversy. There was no action that had any bearing 
 upon it until 1818. The petitions that were presented April 22, 1802, 
 and February 8, 1807, had no bearing on the controversy. The first 
 time the subject was presented to the Senate of the United States was 
 in 1818. The Committee on Foreign Relations was then composed of 
 the following eminent Senators : Macon, of North Carolina ; Barbour, 
 of Virginia ; King, of New York ; Laycock, of Pennsylvania ; Daggett, 
 of Connecticut ; all of them men whose names are still remembered. 
 
 Although the reputation gained in political life as a matter of course 
 is very transient, yet every one will remember the names of these emi- 
 nent men. They gave the subject a patient investigation, and here I 
 have their report, and that report, although couiparea with the volumi- 
 nous documents that have appeared in regard to French spoliations since 
 it is very small, is a clear and fair statement of the whole case, decidedly 
 adverse to the claim, and they put it upon the ground upon which I 
 rest my opinion, that the action of the Senate and the action of Napo- 
 leon in qualifying the ratification of the Senate did not create a liability 
 either in law or equity on the part of the United States to pay these 
 claims. I will not take time to read the report. 
 
 The next time the question came before Congress was January 31, 
 1822, when another report, made by the Committee on Foreign Rela- 
 tions of the Senate, upon this class of claims, was again adverse on the 
 very same ground, and on other grounds, that the act of the Govern- 
 ment of the United States in striking out the second article of the 
 treaty of 1800, and the attending circumstances in regard to Napoleon, 
 did not create any liability on the part of the United States. No one 
 then set up the idea of a set-off or assumpsit ; no one then set up the 
 idea of a contract, or attempted to assimilate this matter to a contract 
 between individuals, but they denied the claim on the broad principle 
 that this act of the Government of the United States did not create 
 any obligation in equity or right on us to assume it. 
 
 The first time the bill passed the Senate of the United States was 
 in 1835. I have the debate before me. Then, for the first time, it 
 passed by a close vote of 30 to 25. What were the circumstances of 
 the country at that time ? All the claims from the ante-revolutionary 
 period were raked up ; the Treasury was overflowing ; Congi-ess was 
 engaged in all kinds of legislation to deplete an overflowing Treasury. 
 They -actually passed bills for the distribution of money among the 
 States. The public debt had been paid off. Every claim that had a 
 shadow of equity was brought up, and among the rest this French 
 spoliation claim, nurtured for thirty-five years. The advertisement I 
 have read you shows that the agency established in AV'ashington com- 
 
 menced its operations in 1822. By 1835 they had created a kind of 
 opinion in favor of the claims, and in 1835 they were discussed. Then 
 the celebrated report of Mrf Clay, niado in 1S26, containing all the 
 
 documentary information, was before the Senate. I would be per- 
 fectly willing to take thiit debate of 1835, in which some of the most 
 eminent men of this country participated, and allow every man to pass 
 
FKENOH SPOLIATION CLAIMS. 375 
 
 a dispassionate judgment upon it. There was "Webster, with his great 
 intellect, throwing nis whole weight in favor of the claims, reporting 
 them, advocating them strongly and ably. He was supported by Pres- 
 ton and others. On the other hand there were Wright and Benton, 
 Bibb, and Hill of New Hampshire, and other eminent men who took 
 ground against them. 
 
 I have read the debate carefully, and I do believe that, but for the 
 fact, so often commented upon, that there was money in the Treasury 
 and the time had arrived when all claims should be paid, the biU would 
 not have passed the Senate ; but it did. It passed the Senate by a 
 vote of 30 to 25. It went to the House of Representatives, but the 
 House refused to pass it. It was continued along until, I think, in 
 1847 it finally got through the House. Having first passed the Sen- 
 ate, the Senate voted for it again rather as a matter of course ; and it 
 was twice vetoed, and for seventy years has been here before Congress. 
 
 It is said that there are some thirty or forty reports in favor of it. 
 "Why, sir, how incorrect that is ! The way the reports came to be in 
 favor of this bill was that some Senator who thought his constituents 
 were interested would move a select committee, to whom it would be 
 referred. A majority of the committee had to be in favor of it. That 
 was the rule of parliamentary law. Most of the reports in the first 
 instance were made by such committees. And so, year after year, 
 from 1829 down to 1861, a majority of, and nearly all, the reports were 
 made by select committees of one or the other House, packed, as I 
 may say — and I say it in no offensive sense — packed by parliamentary 
 law in favor of the claims. 
 
 At one time, ia connection with the report of the majority, there 
 was a strong statement by the minority, made by Mr. Cambreleng. I do 
 not give any weight to these reports ; I do not see that they have any 
 weight on either side ; but when it is said that this claim has been 
 passed by committee after committee, I reply that they have not re- 
 ceived at any time the sanction of law, the sanction of any authority 
 made by law in regard to the public Treasury, and I hope to God they 
 never will. 
 
 The Senator from Massachusetts opens his beautiful report by saying 
 that this claim will never die. I believe it never will die. It is supported 
 by the interest of corporations ; and I say now that much the larger por- 
 tion of the benefit to be derived from this bill is to go to insurance com- 
 panies, who are immortal. They are corporations that never die. But 
 for the fact that the great mass, not of the petitioners, because this ad- 
 vertisement shows you how these petitions are brought here, but the great 
 mass in amount of the clairns are by insurance companies, these coi-po- 
 rations that never die, they would have died out by inanition. The men 
 who originally presented the claims, their children, and their grandchil- 
 dren have been swept away ; and now, if you pass this five-miUion bill, 
 to whom wiU the money go ? How will those men and the children 
 of those men who suffered by the de5)redations of the French furnish 
 the proof ? "Where are the records that enable them to preserve the 
 truth ? The family is scattered or dead ; the papers gone. How many 
 papers of seventy years ago now exist ? But in the records of these 
 
376 SPEECHES AND REP0ET8 OF JOHN SHEEMAN. 
 
 corporations, in their pigeon-holes and boxes, stored away safely for 
 future time, with their agent here in Washington, the claims are kept 
 alive. 
 
 I say this is an argument to show that this claim, if it is placed on 
 tlie ground of equity, is not one that the Senate ought to regard. 
 What is the condition of an insurer ? An insurer takes the risk. He 
 is paid for taking the risk. It is shown here by these documents that 
 insurance ranged at that time from twenty-five to fifty per cent. ; so 
 that if one vessel was lost out of three it was still a profitable venture. 
 It is also shown by these papers that at that time the largest profits 
 were made by American commerce that have ever been made in the 
 history of our country. These insurance companies that set up these 
 claims have been paid for their risk. They have made money. 
 Some of the largest fortunes in this country were founded on the 
 operations of insurance prior to 1800. 
 
 Not only that, sir ; many of the persons interested in these insur- 
 ance companies were Englishmen. The stock was mainly owned by 
 Englishmen. Englishmen sought to protect their ventures under our 
 fiag, and the French complained that while the American flag was 
 raised over the vessel it was the property of Englishmen, commanded 
 by Englishmen, and manned by Englishmen, and Englishmen were 
 their enemies who were seeking to starve them to death. That was 
 the argument of the French. And now we are called upon after 
 seventy-two years to pay to the subjects of one of these belligerents the 
 investments they made under our nag for injuries done by another of 
 the belligerents. That is precisely the condition in which we are 
 placed. 
 
 The claim of insurance companies does not stand upon so equitable 
 a ground as would the claim of an individual. Mr. Webster admits 
 that the body of these claims is owned by insurance companies. Mr. 
 Millson, in a very able speech made in 1855, states the same fact at 
 great length, and gives the reasons why the insurance companies owned 
 these claims. Mr. Webster insists that the insurers are subrogated to 
 the rights of the insured, and by law are entitled to press the claims. 
 I do not know about it. I do not know whether the law of subroga- 
 tion applies to claims that can not be enforced in the courts. Mr. Web- 
 ster says it does. Perhaps he is correct. But, sir, I say if we ai"e 
 called upon on the ground of equity to pay this money, to satisfy a 
 kind of equitable demand, I present this fact, that the money will go 
 to insurance companies who are still in existence, most of whose stock 
 was then owned by British merchants. The facts are fully developed 
 in these papers. That is another reason why we should be reluctant to 
 pass the claim merely on an equitable ground. 
 
 But there is another objection on the face of this bill. Who are to 
 receive this money ? What is the character of the obligation ? 
 
 Claims to indemnity npon the French Government, arising out of illegal captures, 
 detentions, Huizures, condemnations, and confiscations. 
 
 Why, sir, how vague is this language ; how indefinite ! What kind 
 o' seizures were they ? How can we tell whether a seizure made eighty 
 
FKENCH SPOLIATIOK CLAIMS. 3YY 
 
 years ago was legal or illegal ? "Where is the evidence ? Perhaps some 
 of the seizures were really the seizures of English vessels under the 
 American flag. Perhaps some of them were of vessels for violating 
 maritime law, violating the laws of nations, seeking cover imder our 
 flag to violate that law. How can we tell? All seizures, all condem- 
 nations, all embargoes will be embraced by this broad, sweeping clause. 
 Who can say that they were illegal ? Upon the Government of the 
 United States will depend the proof that they were illegal ? These 
 men will show that their cargoes were captured, that they were seized 
 under the American flag. They may bring a case under the French 
 treaty, but it may be that that very property belonged to English sub- 
 jects, that our flag was used as the mere cover of English property. 
 How can that be found out ? All these vague, indefinite matters are 
 sent to a commission without any means to try them except to parcel 
 out this $5,000,000. 
 
 But we are told the amount is limited to $5,000,000, and we ought 
 not to take any great interest in it ; it is not so very large a sum. Five 
 million dollars is not as much as it used to be ; but what ground have 
 you to believe that this $5,000,000 is any Kmit to this claim ? The 
 Senator from Pennsylvania [Mr. Cameron] said yesterday that the 
 amount was twenty millions; the Senator from Massachusetts [Mr. 
 Sumner] says it was fifteen millions seventy-two years ago, and the 
 Senator from Massachusetts quotes law that I can not gainsay that claims 
 of this kind bear interest, and that the real claims of these persons are 
 fifteen millions with interest for seventy-two years. But you say you 
 have limited them to five millions ; they must dole that out ; they must 
 divide it among themselves. But suppose they find a board of com- 
 missioners who report to us that there was due in 1800 $20,000,000 to 
 these claimants. If one cent was due, it was all due. What right have 
 you to parcel out the justice of the American people by a dividend of 
 twenty-five per cent. ? We are not bankrupt. 
 
 If we are bound to pay these claims, let us go to the whole extent 
 and pay them all. Evidently this is a mere effort to get this five mil- 
 lions on a controverted question ; and if a judgment of twenty miUions 
 due in 1800 is rendered against us, how can you resist the payment of 
 the interest and the payment of the balance ? Kemember the claims 
 made by Massachusetts for interest in the war claims of 1812 — and they 
 were finally paid. 
 
 But it is said that these people are to give a release. What is the 
 value of the release ? Since I have been in Congress I have seen at 
 least twenty bills passed where there were releases on file. Take the 
 Chorpenning claim ; in that case there was not only a release, but an 
 actual law prohibiting the receipt of any more. So, although this re- 
 lease is given, the claimants will come back and say it was done under 
 compulsion. The release can be explained away. Even a release under 
 seal is held not to bind a future Congress. How can Congress know 
 about this release ? For although this claim be so large and notorious, 
 how can we answer the question, if we pay five millions on this just 
 claim (because we thereby acknowledge its justice) ? Why not pay the 
 whole twenty milhons, even if we pay it without interest ? There is 
 
378 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 no limit. As my colleague remarks to me, and I have no doubt he is 
 correct, although I have not examined the official statement, there is 
 no evidence on the files of the Department of State in regard to the 
 amount of the claims, except the ex parte evidence of the claimants 
 themselves. 
 
 There is one other point that I submit to Senators : whether we 
 can do this with a just regard to the memory of the men who preceded 
 us on this floor, or who managed the Government from its foundation. 
 This bill, in language which it seems to me is oflEensive, assumes and 
 declares in so many words that all the acts of the United States Gov- 
 ernment relating to this controversy before 1800 were wrong. I will 
 read it to you. it goes on and provides for this commission. Remem- 
 ber, the United States Government never acknowledged the binding 
 operation of these treaties during the time these claims accrued, and 
 yet this bill declares that these commissioners, when they pay these 
 claims, " shall be governed in their decisions by the principles of jus- 
 tice, the law of nations, and former treaties between the United States 
 and France, to wit, the treaty of amity and commerce of the 6th of 
 February, 1Y78, the treaty of alliance of the same date, and the consu- 
 sular convention of the lith of November, 1788." 
 
 Here this biU, nearly eighty years after the proclamation of neutral- 
 ity, reverses and overrules the decision of George Washington and his 
 Cabinet and the whole American people. We now declare that we 
 will pay these claims, recognizing those treaties to be in full force ; in 
 other words, that the seventeenth and twenty-second articles of the old 
 treaty, which Washington declared to be inoperative, and the guarantee 
 of the West India islands, which was declared by the whole Govern- 
 ment to be applicable only to a state of defensive war, shall be en- 
 forced. 
 
 I am not willing to legislate in any such view. If this $5,000,000 
 is to be distributed among these people, let it be so. But why should 
 we revive these treaties and do what our Government refused to do 
 over and over again ? And yet that is what we do. We declare that 
 this money shall be distributed upon the assumption that those treaties 
 were in force in 1800, and for the distribution of this money we revive 
 all those treaties which our Government always refused to do. In 
 other words, this bill is based upon the French idea of our controvei-sy, 
 and not upon the American idea. It is based upon the assumption 
 that we were wrong and that France was right, and that we are re- 
 quired to pay all the claims that grew out of the violation of the 
 articles of a treaty that was declared to be inoperative upon us, not 
 applicable to the condition of affairs ; a treaty that was rejected by the 
 executive authority, by the judicial authority, and by express terms of 
 law by the legislative authority. And yet we revive these treaties in 
 order to distnbute this money among our citizens. 
 
 These claimants have no equity on another ground. This policy of 
 neutrality was adopted at their instance, for their benefit, for their 
 Hiifety, for their protection, and although tliey lost in many cases, yet 
 the actu:il profits during that period of our commerce were greater than 
 ever before in American history. Senators may be surprised when I 
 
FKENOH SPOLIATION CLAIMS. 379 
 
 tell them that our exports and imports had risen from $31,000,000 in 
 1793 to $100,000,000 and over in 1800. During this time of detentions, 
 of seizures, of captures, our commerce had sprung into the greatest ac- 
 tivity that it had ever had. Profits and fortunes were made that bear 
 no comparison with those that hp-ve been made since. Our trade sprung 
 up threefold in seven years. While these people met with large losses 
 by detentions and seizures both by Great Britain and France, because 
 Great Britain also pursued this unlawful foray upon our commerce, yet 
 our flag was the only neutral flag among the commercial and maritime 
 nations, and our merchants made enormous profits. Our commerce in- 
 creased threefold, and for the first time we appeslred among the nations 
 of the earth with the prospect in the speedy future of becoming one of 
 the great commercial nations. Yes, sir, in seven years our commerce, 
 both external and internal, increased wonderfully ; our imports rose 
 from thirty-one to one hundred millions, and our exports in the same 
 ratio. Our farmers were all occupied. The wheat and the grain from 
 America fed the soldiers and the citizens of France. They fed Great 
 Britain. They were exported to all the countries of Europe ; and 
 although we did suffer some losses, this among the rest, yet the general 
 condition of our country, its general prosperity, the enormous profits 
 made by these merchants more than compensated them for all their 
 losses. I have no doubt these very claimants would have been glad for 
 more spoliation, more wars between the nations of Europe, in order to 
 give them an increased profit from the neutral carrying trade which 
 they then enjoyed. 
 
 Now, Mr. President, there is only one other consideration which I 
 desire to present, and then I will relieve the Senate. The passage of 
 this bill, in opening up antiquated claims, will, I think, have a very 
 serious effect in many other directions. If a claim can be persistently 
 urged for seventy long years, under the adverse circumstances that 
 surrounded this one, and finally be crowned with the success of an 
 appropriation of $5,000,000, to be distributed in an indefinite way 
 among unknown or dead claimants, how eager will other men be to 
 revive old claims! They are scattered .through our whole history. 
 "Why do you not redeem the continental money ? Your act of 1792 
 to sustain the public credit reduced that money to the value of one 
 dollar for a hundred. "Why do you not pay the children of the revolu- 
 tionary soldiers, whose fathers fought and bled and died for us and 
 were paid off in continental money at one dollar for a hundred ? You 
 promised the officers of the army in the revolutionary war to give them 
 half pay for life ; in some cases for five years. Did you ever perform 
 that obligation ? "Why did you not do it ? These were worthy sub- 
 jects for your consideration, and their descendants still live and flourish 
 among you. It is true that we did the best we could in the agreement 
 with the soldiers and officers of the Eevolution. In the general bill 
 establishing the public credit we did give the officers in some cases 
 half pay, compounded with them, compromised with them. I might 
 go through our list and name an immense number of such claims. Sir, 
 the success of this claim of seventy-two years' standing will give en- 
 couragement to the revival of a great mass of others. 
 
380 SPEECHES AND KEPORTS OF JOHN SHERMAN. 
 
 If these claims are just, we ought not to compound with the claim- 
 ants at twenty-tive cents on the dollar, after keeping them out of their 
 money for seventy-two years. Sir, there is no justice in the claims. 
 
 Mr. President, who can tell the effect of the passage of this bill 
 upon the public credit? If we open the door to all the multitude of 
 claims that may arise it will very seriously impair it. We have been 
 pursuing the policy since the close of the war of a gradual reduction 
 of taxes. We have now diminished our taxation until it approaches 
 very near to our expenditures. We can not now revive these old claims 
 and pay them. It is no time to do it. It will affect the public credit. 
 
 Mr. President, I believe that this claim has no merit either in law 
 or in equity. I believe that the Government of the United States never 
 appropriated these claims, but did" all they could to enforce them. They 
 were abandoned for high and justifiable public reasons, and under cir- 
 cumstances that gave the parties no claim whatever upon the Govern- 
 ment. They have already received large benefits and great profits 
 from the policy adopted by the Government. This money is to go 
 mainly to a class of people who have no equitable claim. The whole 
 bill is framed with a view to parcel out $5,000,000 among a lot of cor- 
 porations who have kept up this controversy and continued it year after 
 year by an organization in the city of Washington. I think, therefore, 
 the Senate, where the basis of the claim originated, can not do better 
 than at once to disapprove it. I hardly expect that, because I know a 
 kindly usage has sprung up in the Senate, by which, because one Senate 
 thirty or forty years ago passed a bill, therefore this Senate must do it. 
 That has got to be a general idea, and this French spoliation bill has 
 passed the Senate on something like that idea. It passed the Senate in 
 1835, and therefore it must pass the Senate in 1892, or 1950, and be 
 sent to the House. But I do think after the lapse of time that has oc- 
 curred we might at least say, " Let this controversy be buried ; let these 
 claims be abandoned ; they will be no good precedent." 
 
 KEISSUE OF NOTES. 
 IN THE SENATE, JANUARY 14, 187S. 
 
 Mb. Shsbman, from the Committee on Finance, submitted the following report. 
 
 The Committee on Finance, in obedience to the resolution of the Senate of the 
 6th instant, as follows: "Resolved, That the Committee on Finance be directed to 
 inquire whether the Secretary of the Treasury has power, under existing law, to 
 issue United States notes in lieu of the forty-four million dollars of notes retired 
 and canceled under the act of April 12, 1868," beg leave to report: 
 
 That a construction of the act of April 12, 186(5, rendei-s necessary 
 the examination of the several acts authorizing legal-tender notes. The 
 power of the Secretary of the Treasury to issue tlie notes described in 
 the resolution, if it exists, must have been conferred by these acts. The 
 
EEISSUE OF NOTES. 381 
 
 authority of Congress to authorize their issue has been disputed, but 
 may now be considered as settled by aU departments of the Govern- 
 ment. It was exercised by Congress only under the most pressing 
 necessity. 
 
 As an incident to the powers to borrow money, to coin money, to 
 declare and maintain war, and to provide for the national defense and 
 general welfare, it was first asserted and exercised by Congress February 
 25, 1862, when to coin the public credit into money seemed the only 
 expedient left to maintain the authority of the Government during a 
 pressing war. This authority was again exercised July 11, 1862, and 
 March 3, 1863. The several acts of these dates declared United States 
 notes to be lawful money, and a legal tender in payment of all debts, 
 public or private, within the United States, except for duties on im- 
 ports and interest on the public debt ; and they were to be issued only 
 if required by the exigency of the public service for the payment of 
 the army and navy and other creditors of the Government. The amount 
 of each issue was carefully limited. The aggregate could not exceed 
 $4:50,000,000, and in fact never exceeded $433,160,569. The power 
 thus exercised was felt to be a dangerous one, liable to abuse, and was 
 carefully limited and guarded. Though the war continued two years 
 and more after the passage of the act of March 3, 1863, and immense 
 sums were borrowed upon various forms of security, the limit of United 
 States notes was not enlarged. By the proviso in section 2 of the act 
 of June 30, 1864, under which the national debt was largely increased, 
 it was provided, among other limitations, " nor shall the total amount 
 of United States notes issued, or to be issued, ever exceed $400,000,000, 
 and such additional sum not exceeding $50,000,000 as may be tempo- 
 rarily required for the redemption of temporary loan." It is apparent 
 that this provision in a loan act was not only a limitation upon previous 
 acts authorizing United States notes, but was a declaration of public 
 policy and a pledge of the public faith to the national creditors that 
 their securities should not ever thereafter be impaired by any increase 
 in legal-tender notes. The United States notes were regarded as a 
 necessaiy medium or means to borrow money during war, with full 
 knowledge that in due time they were to be redeemed m coin, and that 
 any increase would impair their value and affect the value of all public 
 securities. 
 
 The close of the war was followed with measures by both the exec- 
 utive and legislative branches of the Government to limit and reduce 
 the volume of legal-tender notes still further. All forms of temporary 
 loan, including the legal-tender interest-bearing Treasury notes, were 
 funded into bonds. For this purpose a portion of the $50,000,000 of 
 reserved United States notes under the act of June 30, 1864, was used 
 for the redemption of temporary loan ; but these notes were soon re- 
 deemed and canceled, with the avowed policy of contracting the cur- 
 rent. 
 
 The act of April 12, 1866, referred to in the resolution of the Sen- 
 ate, was passed in approval of and in accordance with the avowed pol- 
 icy of Mr. McCuUoch, then Secretary of the Treasury, to retire aU 
 short-time liabilities, by funding them into bonds, and to reduce the 
 
382 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 volume of United States notes, so that those outstanding should be, 
 from their scarcity, at par with gold. The only limitation made to 
 this power of contraction was by the following proviso : 
 
 Provided, Tliat of United States notes not more than ten tnillions of dollars may 
 be retired and canceled within six months from the passage of this act, and there- 
 after not more than four millions of dollars in any one month. 
 
 It is clear that this act authorized the payment, cancellation, and 
 destruction of " all obligations issued under any act of Congress, 
 whether bearing interest or not," and the issue in lieu thereof of any 
 description of bonds authorized by the act of March 3, 1865. The 
 issue of the bonds necessarily involved the destruction and cancellation 
 of the obligations received in exchange for them ; for the act declared 
 that it should not be construed to authorize any increase of the public 
 debt. To hold that any of the obligations, " whether bearing interest 
 or not," received by the United States in exchange for its bonds, can 
 be issued again, is utterly inconsistent with the primary object of the 
 act — the funding of the debt^— and with the provision that the debt 
 shall not be increased by the exchange. But for the provision limiting 
 the cancellation of United States notes, all of them might have been 
 canceled when received in exchange for bonds. 
 
 Subject to this limitation, the act of April 12, 1866, treats United 
 States notes as one of the numerous forms of demand or short-time ob- 
 ligations which it was public policy to fund and retire, with a view to 
 specie payments. The bonds were to be issued solely for the purpose 
 of securing the cancellation and final payment of an equal amount of 
 other indeotedness. United States notes could be issued as a medium 
 of the exchange ; but, if so, they were to be used to retire other obli- 
 gations. To a limited extent they could be canceled and retired, and 
 to that extent their cancellation was as complete a payment and ex- 
 tinguishment as if a conipound-interest note was canceled and retired. 
 It was the desire of the Secretary of the Treasury to retire the United 
 States notes or to contract the currency more rapidly than Congress 
 deemed prudent, and the object of the proviso was to limit the con- 
 traction, but at the same time to provide for a gradual reduction of the 
 currency, with a view to specie payments. 
 
 To construe the act as permitting the reissue of United States notes 
 canceled under it would allow the Secretary to increase the debt in di- 
 rect violation of the act. To evade the act, he would only have to 
 receive the notes in payment of a bond issued, and then cancel the 
 notes and issue others in their place. In this way both notes and bonds 
 would be outstanding. The plain intent of this act was to reduce and 
 contract the currency. To render this more apparent, we refer briefly 
 to what preceded the passage of the act of the I'itli of April, 1866. 
 
 In December, 1S63, after the passage of the acts authorizing the 
 issue of legal-tender notes, and Avhcn the temporary deposits reached 
 $145,720,000, for meeting which $50,000,000 of the' $150,000,000 Uni- 
 ted States notes authorized were to be held as a reserve, Secretary Chase, 
 in his annual report (p. 17), said : 
 
 The limit proscribed by law to the issue of United States notes has been reached, 
 and the Secretary thinks it clearly inexpedient to increase the amount. 
 
REISSUE OP NOTES. 383 
 
 Speaking of the purpose for which they were issued, he said : 
 
 Congress believed that four hundred millions would suffice for these purposes, 
 and therefore limited the issues to that sum. 
 
 He also recommended the increase of the limit for temporary de- 
 posits, then iixed by act of July 11, 1862, at $100,000,000, to $160,- 
 000,000, and stated that $10,000,000 of the $50,000,000 reserve had 
 been used in its redemption (p. 16). It was after these recommenda- 
 tions that the act of June 30, 1864, was passed (13 Stat., p. 218), which 
 reenacted this recognized limit of $400,000,000 of United States notes 
 " issued or to be issued," and increased the limit of temporary deposits 
 to $150,000,000. This act provides the same reserve, not exceeding 
 $50,000,000, to be temporarily used for the redemption of such tem- 
 porary loan. 
 
 After this act, in his annual report in December, 1864, Secretary 
 Fessenden again twice (pp. 3 and 18) recognizes that, even prior to its 
 passage, the limit of intended circulation was $400,000,000 of United 
 States notes. 
 
 Secretary McCuUoch, in his annual report in December, 1865 (p. 11), 
 says " that the circulating medium of the country is altogether exces- 
 sive," and proceeds to combat objections urged to a reduction of the 
 currency. After making various recommendations, all tending to di- 
 minish the volume of circulating notes, he adds (p. 14) : 
 
 It is the opinion of the Secretary, as has been already stated, that the process 
 of contraction can not be injuriously rapid, and that it will not be necessary to 
 retire more than one hundred, or at most two hundred millions of United States 
 notes, in addition to the compound notes, before the desired result will be attained. 
 But neither the amount of reduction nor the time that will be required to bring up 
 the currency to the specie standard can now be estimated with any degree of accu- 
 racy. The tirst thing to be done is to establish the policy of contraction. 
 
 The first act in response to this recommendation w.as the following 
 resolution, introduced into the House of Eepresentatives loth March, 
 1866, and passed by the very decided vote of 144 yeas, 6 nays : 
 
 Besohed, That this House cordially concurs in the views of the Secretary of the 
 Treasury in relation to the necessity of a contraction of the currency, with a view 
 to as early a resumption of specie payments as the business interests of the country 
 will permit ; and we hereby pledge cooperative action to this end as speedily as 
 practicable. 
 
 Afterward, the bill was introduced in the House of Eepresentatives, 
 and finally passed, and was approved April 12, 1866. It was discussed 
 at length, and during the whole debate its purpose was avowed to be 
 contraction of the currency and resumption of specie payments as a 
 consequence. Objections to the great power conferred upon the Sec- 
 retary of the Treasury, under which he could call in and retire the 
 whole of the legal-tender notes, resulted in a recommittal of the bill to 
 the Committee of Ways and Means ; and, in reporting it back, the 
 chairman stated that the recommittal was considered an instruction to 
 place a limit upon the power of contraction. Hence the proviso which 
 limits the contraction to $10,000,000 in the first six months, and $4,000,- 
 000 per month afterward. 
 
 If the power to reissue had been a power coexisting with that of 
 
384 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 retiring, it is evident that the act of February 4, 1868, was unnecessary ; 
 for the evil to be arrested by that act could as well have been arrested 
 by the reissue of the notes. That act was passed when it was alleged 
 that contraction was too rapid, and was not intended to relieve the' 
 stringency by authorizing a reissue, but, on the contrary, only suspended 
 the power exercised after the passage of the act of 1866. 
 
 From this review of the several acts relating to United States notes, 
 we may fairly conclude that the intent and legal effect of these acts, 
 when lairly construed, was to reduce the maximum of legal-tender notes 
 to $356,000,000. No one appears to have asserted that the Secretary 
 had power to increase that sum. The care with which a maximum was 
 always prescribed indicates the intention of Congress to preserve one. 
 The only contingency for an excess was to " temporarily " meet " tem- 
 porary loan," and by the act of April, 1866, the temporary loan was 
 funded. When the policy of contraction was entered upon, the words 
 used — "retired and canceled" — as clearly expressed a permanent pay- 
 ment and contraction as any words could do. If possible, the words 
 were made stronger by forbidding an increase of the public debt ; the 
 issue <fi a new bond was to be accompanied by the permanent payment 
 and cancellation of an equal amount of the old debt. The general un- 
 derstanding of the business community was that the maximum of United 
 States notes was $356,000,000, subject only to the limited power to use 
 a part or all of the $50,000,000 reissue for payment of " temporary 
 loan," and that only to be used temporarily. To overthrow this con- 
 struction, and establish the authority of the Secretary of the Treasury 
 to issue $44,000,000 at his discretion, would require some clear and un- 
 equivocal expression of the legislative will, and ought not to be inferred. 
 
 It is claimed that, under a clause of section three of the act of March 
 3, 1863, the Secretary of the Treasury was granted the power to issue 
 new United States notes in place of those " canceled and destroyed," 
 and that he therefore might at his discretion issue the $44,000,000 
 " retired and canceled " under the act of April 12, 1866. The clause 
 of the act of March 3. 1863, is as follows : 
 
 And in lieu of any of said notes, or any other United States notes returned to the 
 Treasury and canceled or destroyed, there may be issued equal amounts of United 
 States notes such as are authorized by this act. 
 
 Does this authority conferred in 1863 authorize the reissue of notes 
 "retired and canceled" under the act of April 12, 1866 i Your Com- 
 mittee think not. Such a construction overlooks the object and legal 
 effect of the acts of June 30, 1864, April 12, 1866, and February 4, 1868, 
 already cited. The act of 1863 provides for an issue and reissue of 
 United States notes for Treasury notes. Treasury notes beimng interest 
 were issued and United States notes received in payment. When the 
 Treasury notes became due they were paid in United States notes. 
 Under that act United States notes, to the amount of $150,000,000, were 
 issued, reissued, canceled, or destroyed, or mutilated notes were re- 
 
 ? laced by new ones. They were exchanged at par for Treasury notes, 
 'his process often led to the cancellation and destruction of United 
 States notes, and the law provided for the issue of new notes in their 
 
REISSUE OF NOTES. 385 
 
 place. This cancellation and destruction of notes, authorized by the 
 act of March 3, 1863, is a very different process from retiring and can- 
 celing notes under a law which provides explicitly for a reduction of . 
 the currency at the rate of four millions a month. The words of the 
 two acts are different. All the provisions are different. The res gestce 
 are different. One provides for an exchange of securities ; the other 
 provides for " retiring and canceling " a speciiied sum each month. 
 
 Again, this clause in the act of 1863 must be construed in connec- 
 tion with the limit of circulation authorized by law. 
 
 The limit, it is clear, had been fixed at $400,000,000 by the act of 
 1864, and we find in the act of March 3, 1865, a proviso that it should 
 not be construed to authorize the issue of legal-tender notes in any 
 form. That limit being kept in mind, the purpose of the act of 1866 
 was to reduce that outstanding amount. 
 
 As originally introduced, the power of reduction extended to the 
 whole legal-tender circulation then issued. Had it passed in that form, 
 as it was urged upon the House, if the right to reissue existed, it would 
 have presented the anomaly of Congress announcing the policy of con- 
 traction as necessary and salutary, and leaving the power in the 'Secre- 
 tary's hands to defeat that policy as fast as it operated, by reissuing the 
 notes whenever received in exchange for interest-bearing bonds. That 
 power is totally at war with the avowed purpose of the act, and it can 
 not stand with it to the extent of $44,000,000 any more consistently 
 than it could if it had been applicable to the whole $400,000,000. 
 
 It is stated that since the passage of the act of February 4, 1868, 
 large sums of United States notes have been held by the Treasury 
 Department as a surplus fund, in excess of the $356,000,000 in circula- 
 tion, for the purpose of meeting any sudden demand upon the Treasury. 
 This was necessarily so, as large quantities came in daily for redemption 
 as mutilated, defaced, or endangered by successful counterfeiting. But 
 no issue in excess of $356,000,000 was made except in two instances. 
 
 In one of these one million and a half was issued after the Chicago 
 fire, to replace that amount burned and destroyed in the oflice of the 
 depositary at Chicago during the fire. This is scarcely an exception, 
 for the new notes were issued only in advance of the formal proof and 
 allowance for the destroyed notes, but not in advance of the certainty 
 of their destruction. 
 
 The other case is stated by the Secretary of the Treasury in his let- 
 ter of December 13, 1872, to the House of. Eepresentatives, as follows : 
 
 In reply thereto, I have to say that the amount of United States notes in circula- 
 tion was increased in October last, upon the order of Assistant Secretary Richard- 
 son, then Acting Secretary, in the absence of the Secretary of the Treasury, in the 
 sum of about $6,000,000 over the amount outstanding when the act of February 4, 
 1868, became a law. 
 
 The object of the issue was the relief of the business of the country, then suffer- 
 ing from the large demand for currency emplpyed in moving the crops from the 
 South and West. The condition of affairs then existing in the country seems to me 
 to have warranted the issue upon grounds of public policy. 
 
 The circumstances under which this issue of five millions was made 
 were such as would clearly have justified its exercise, if, as was honestly 
 35 
 
386 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 and confidently claimed by the officer who made the iBsue, he had the 
 legal authority to make it. It was his plain duty to exercise every power 
 .he possessed to protect the public in the emergency stated, and your 
 Committee are unanimously of the opinion that the Assistant Secretary 
 acted according to what he conceived to be his legal power and public 
 duty ; but, believing that, under the law, he could not issue legal-tender 
 notes in excess of $356,000,000, we must regard the precedent as a bad 
 one. No sooner was this power claimed than it was at once contested. 
 It is scarcely possible that, if such a power existed, it would not have 
 been exercised before, in times of greater stringency. His action may 
 be an argument why some power ought to be granted to issue United 
 States notes to meet an emergency ; it was based not so much upon a 
 construction of law as " upon grounds of public policy," which should 
 control the action of legislative and not executive authorities. 
 
 We are referred to two decisions of the Supreme Court, Banks vs. 
 Supervisors (7 Wallace, 26) and Vezie vs. Fenns (8 Wallace, 637), as 
 sustaining the power of the Secretary of the Treasury to issue United 
 States notes in excess of $356,000,000. A careful examination of 
 these cases shows that they have no bearing on the question before us. 
 The Chief Justice says : 
 
 That under the act of March 3, 1863, another issue was authorized, making the 
 whole amount authorized $450,000,000, and contemplating a permanent circulation, 
 until resumption of payment in coin, of $400,000,000. 
 
 The Chief Justice was not called upon by the case before him to 
 pass upon the subsequent acts, and did not do so. In point of fact, 
 there never was in circulation $450,000,000 of United States notes ; 
 and it is safe to say that no one expected to resume specie payments in. 
 coin with so large a sum as $400,000,000 United States notes out- 
 standing. 
 
 A power over the currency so wide-reaching as the power to issue 
 $44,000,000 of new legal-tender notes is one that ought not to rest 
 upon implication. It should not rest upon a doubtful construction of 
 words in a law passed three years before, and used in regard to loans 
 negotiated under widely difEerent circumstances. Congress might well 
 grant a power during war that it would not confer in peace. The full 
 exercise of such a power would "undoubtedly affect the nominal value 
 of all property in the United States to the extent of at least 10 per 
 cent., and the real value or. burden as between debtor and creditor of 
 at least 10 per cent, on all contracts to be performed. Such a power, 
 if given, would be by clear and unambiguous language, and should not 
 be inferred by subtile reasoning, or depend upon the pressure of inter- 
 ested parties or changing views of public policy. 
 
 In all questions of construction as to the extent of power conferred 
 by law in matters which affect the public credit or public securities, a 
 reasonable doubt as to a grant of power should be neld to exclude it. 
 After a careful review of the subject, your Committee are of the opin- 
 ion that the Secretary of the Treasury has not the power to issue 
 United States notes in excess of $356,000,000, outstanding when the 
 act of February 4, 1868, took effect ; but he may replace with new 
 
THE OUERENOY— SPECIE PAYMENTS. 387 
 
 notes all mutilated or defaced notes, and, within the limit of $356,- 
 000,000, may exchange or replace new notes for old ones. 
 And your Committee report the following resolution : 
 
 Resolved,, That, in the opinion of the Senate, the Secretary of the Treasury has 
 not the power, nnder existing law, to issue United States notes for any portion of 
 the forty-four millions of the United States notes retired and canceled under the 
 act approved April 12, 1866. 
 
 THE CUEEENCY— SPECIE PAYMENTS. 
 
 m THE SENATE OF THE UNITED STATES, JANUARY 16, 1873. 
 
 Me. Pkesbdeistt : The Committee on Finance, to -whom was re- 
 ferred the bill (S. No. 1113) supplemental to an act to provide a na- 
 tional currency secured by a pledge of United States bonds, and to 
 provide for the circulation and redemption thereof, approved June 3, 
 1864, and to secure an elastic currency, to appreciate national obliga- 
 tions, and to reach specie payments without commercial embarrass- 
 ments, have agreed, I may say unanimously, on a substitute which they 
 offer as an amendment to the bill introduced by the Senator from Con- 
 necticut [Mr. Buckingham]. The substitute of the Committee proposes 
 free bankiug after the 1st of July next and specie payments or qualified - 
 specie payments after the 1st of January next, and is the result of the 
 most careful consideration given to this whole class of subjects^ em- 
 bracing all the topics connected with our currency and the resumption 
 of specie payments. In' order that the general views of the Commit- 
 tee, as far as they can be given by one member, may go out with this 
 proposition, I have condensed as far as I could in the fewest words the 
 general reasons which control the action of the Committee. 
 
 The restoration of our currency to a specie standard is an object of 
 primary importance. The present condition of our currency governs 
 and controls all other questions of political economy, and until we make 
 it the equivalent of money^of gold coin, the recognized standard of 
 money among all civilized nations — we can not rest upon a solid basis 
 for any- kind of business or for public or private credit. Every man 
 now buys and sells upon a fluctuating standard of measurement. Every 
 man who borrows feels that he may be compelled to .pay in a different 
 money from what he receives. Every producer f eelsi that in addition to 
 the uncertainty of supply and demand he must aiso speculate upon the 
 imcertainty of the kind and value of the money with which he is to be 
 paidj ' Th« merchant must not only guard against dangers by fire and 
 water,; but against '^ comers " or artificial stringency of money. The 
 people at large, while boasting of their restored credit, of vast pay- 
 ments on their public debt, yet must feel that that debt, held by them 
 in the form of tjnited States notes, is less valuable than gold, which it 
 promises to pay ; itis less valuable than any other form of public debt, 
 and by its own depreciation forces the depreciation of the notes of 
 
388 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 banks able to pay in specie. The notes are a currency rigid, inflexible 
 in amount, and therefore of variable value — to-day worth four per cent, 
 a year and to-morrow woi-tli two per cent, a' month. They are the 
 basis for a banking circulation that is practically irredeemable because 
 they are themselves irredeemable. 
 
 And yet, with all these defects, the currency of the United States 
 is so much better, safer, and more satisfactory than any we have had 
 before that our constituents dread, when we deal with acknowledged 
 defects, lest in curing these defects we deprive them of a currency with 
 which they have made greater progress than ever before in our national 
 history. It is the fear that in some way we may impair the vast bene- 
 fits we have gained from our national currency that so many oppose 
 raising it to a specie standard. It is feared that specie payments wiU 
 produce a contraction of the currency and those kindred panics which 
 in our past history caused widespread ruin and disaster. It is for Con- 
 gress to determine whether it is possible while maintaining our present 
 system of national currency to bring it by wise legislation to the stand- 
 ard of gold without producing the evil results anticipated. 
 
 No one in dealing with such a question on which there is so great a 
 diversity of opinion, and so varied an interest, should speak with as- 
 sured confidence. The only safe way is to proceed slowly and take no 
 step that will not tend in the right direction, and to reject aU measures 
 the practical results of which can not be clearly marked by experience. 
 
 I propose first to show that we are bound by every obligation of 
 law, of promise, of judicial authority and public policy to make the 
 United States notes equivalent in value to gold coin. 
 
 United States notes were issued under the authority of the acts of 
 Congress passed Febraary 25, 1862, July 11, 1862, and March 3, 1S63. 
 Other acts somewhat modified their conditions, but these were the 
 governing acts. They were issiied during the time of war, when all 
 the existmg banks had suspended and when coin was inadequate to 
 meet the enormous wants of the Grovernment. They were made law- 
 ful money and a legal tender in payment of all debts, public and 
 private, within the United States, except for duties on imports and 
 interest on the public debt. During the entire war they were prac- 
 tically receivable at par in payment for aU bonds offered by the United 
 States, and for a part of the time they were in terms convertible into 
 bonds at the pleasure of the holder. They are made the basis of the 
 entire system of national banks, whose notes are payable in United 
 States notes. The amount is carefully limited, the highest limit being 
 four hundred and fifty millions by the act of March 3, 1863, somewhat 
 restricted by the act of June 30, 1864:, which declared that the total 
 amount of United States notes issued or to be issued should never ex- 
 ceed four hundred million dollars and such further sum not exceeding 
 fifty millions as might be temporarily required for the redemption of 
 temporary loan. They were still further restricted by virtue of the 
 act of April 12, 1866, under which all the temporary loan was funded 
 into bonds, and forty-four millions of the notes were retired and can- 
 celed. By the act of February, 1868, the amount of United States 
 notes was fixed at three hundred and fifty-six millions, that being the 
 
THE OUEEENCY— SPECIE PAYMENTS. 389 
 
 sum then outstanding, and there is now no authority in law for their 
 increase or reduction. 
 
 Under the law as it now stands we have three hundred and fifty-six 
 millions of " lawful money." It is inflexible in amount and irredeem- 
 able except as Congress may provide for its future redemption. 
 
 Aside from its value to pay internal taxes and as a legal tender for 
 debts, it has the promise of the United States to pay it in coin. The 
 time of payment, however, is not fixed. 
 
 By the first act of General Grant's administration, to wit, the act of 
 March 18, 1869, it is enacted : , 
 
 And the United States also solemnly pledges its faith to make provision at the 
 earliest practicable period for the redemption of the United States notes in coin. 
 
 This act, entitled " An act to strengthen the public credit," gave the 
 first specific pledge to redeem these notes in coin. But the several acts 
 under which the notes were issued authorized the promise of the United 
 ■ . States to pay so many dollars, and the law in force declared that a 
 dollar should consist of twenty-five and eight tenths grains of standard 
 gold nine tenths fine. The notes, on their face, contain the promise of 
 the United State? to pay so many dollars to the bearer, payable at the 
 Treasury of the United States in New York. The Supreme Court of 
 the United States has, in two cases, held that these notes are valid obli- 
 
 fations of the United States to pay in coin. In the case of The Bank of 
 Few York vs. Supervisors . (7 Wallace Eep., p. 30), the Chief Justice 
 says of the United States notes : 
 
 Every one of them expresses npon its face an engagement of the nation to pay 
 to the bearer a certain sum. The dollar note is an engagement to pay a dollar, and 
 the dollar intended is the coin dollar of the United States, a certain qnantity in 
 weight and fineness of gold or silver authenticated as snch by the stamp of the 
 Government. No other dollars had before been recognized by the Legislature of 
 the National Government as lawful money. 
 
 Every United States note is, then, a promise to pay gold. No 
 time is fixed for the payment, and no provision is made. A promise to 
 pay with no time fixed is a promise to pay on demand. Such an obH- 
 gation would be enforced against any citizen by any court in the United 
 States of competent jurisdiction. Every United States note, then, is a 
 dishonored obKgation, a promise to pay, but with no payment or pro- 
 vision for payment. It is also a depreciated promise ; it is a promise 
 to pay gold, and yet no one will pay gold for it ; and it is daily sold at 
 a discount of ten to fifteen per cent. Tested by the rules 6i law be- 
 tween individuals it would be enforced by sale on execution and by 
 process of compulsory banki-uptcy. Yet it is the promise of the United 
 States. Surely the dishonor of this broken promise can have no longer 
 an excuse in the necessity of war. That has passed away. Nor in want 
 of ability, for a single year's surplus revenue would restore these notes 
 to par in coin. It is now four years since we solemnly pledged the 
 national faith to redeem them in coin at the earliest practicable period. 
 Can any man say that this has not been practicable at any time within 
 four years ? 
 
 Not only do the act of Congress and the Supreme Court define our 
 
390 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 obligation, but the organized action of both tlie great parties has 
 promised specie payments. The Republican party in national conven- 
 tion expressed the hope and promise of perfecting our currency by a 
 speedy resumption of specie payments, and the Democratic party en- 
 dorsed and approved the promise of the Cincinnati convention of a speedy 
 resumption of specie payments. 
 
 While no doubt some of our constituents shrink from the apparent 
 fall of prices that will probably flow from resumption, yet it is mani- 
 fest that we can not longer postpone a fulfillment of the promises that 
 have been made. To delay longer is to tamper with the public honor 
 and familiarize our people with an open, palpable, long - continued 
 breach of the public faith. We have for nearly eight years since the 
 close of the war approached resumption in gradual stages' by the 
 growth of our industry, the improvement of our credit, and new de- 
 mands for our currency. "We have placed our debt where it will melt 
 away by the silent operation of a smking fund ; we have largely re- 
 duced its volume ; we have repealed more than one half the taxes ; we 
 have adjusted those that remain so that they fall as lightly as possible 
 upon the people, and are now in a position of such strength and credit 
 that we can, if we will, redeem the only broken promise of the United 
 States by a resumption of specie payments. 
 
 I have presented the argument of public faith in the foreground, 
 for it is the first to be considered ; but specie payment is not only re- 
 quired by public faith, but it is now demanded by public policy ; or, to 
 use a narrower phrase, it is wise political economy. 
 
 Experience has established that every nation using a depreciated 
 currency loses in exchanges with a nation having a better currency. 
 If we buy abroad, specie is the standard of value, and the cost of the 
 article to us is at once increased by an addition of the depreciation of 
 our money and a percentage for exchange and risk. What we sell 
 abroad is also measured by the specie standard, and the loss by ex- 
 change, whether we buy or sell, is paid by us. This loss is more severe 
 when applied to contracts to be paid in the future, and especially to 
 railroad and other bonds payable after a period of years. These bonds 
 must be paid in gold, whether the gold is stipulated for or not, and yet 
 the price paid for them is usually in currency. We pay in gold and 
 receive in currency, and thus at the outset submit to a loss of the en- 
 tire depreciation of our currency. The interest paid on this discount 
 of our bonds would in many cases if applied as a sinking fund pay ofE 
 the whole of the principal before it accrues. 
 
 That a depreciation of the currency always injuriously affects a 
 community in which it exists was shown by the experience of the 
 colonies before the war of independence. In each of them some 
 fonn of depreciated money was used. The value of the pound and 
 shilling in current use was only from one half to par of the value of 
 the standard coin of Great Britain ; and this depreciation often meas- 
 ured the poverty or necessity of tho colony using it. With the cur- 
 rency which was in common use before the late war, and which de- 
 pended entirely upon the law of the State authorizing it, the notes of 
 the Western States were as a rule depreciated, and those States suffered 
 
THE OUKEENCY— SPECIE PAYMENTS. 391 
 
 the loss ; while in' the Eastern States, in which a better banking system 
 prevailed, the notes were maintained at the specie standard, and great 
 profits and accnmulations were made by their practical monopoly of the 
 banking busineiss. The great body of our people do not pause to con- 
 sider their loss by the use of depreciated money. It is lawful money, 
 it buys all the necessaries of life, it pays debts, it is convenient to carry, 
 and is of uniform value throughout the United States, and is amply 
 secured. These advantages are obvious and satisfactory, but all of them 
 can be better secured with a currency that will purchase as much food 
 or clothing as the same sum in gold coin ; that will measure the prod- 
 ucts of all other nations as well as our own, and is not subject to the 
 fluctuations and speculative changes of our present currency. 
 
 Again, it is impossible to give to a depreciated currency the quality 
 of " flexibility." A suspension of specie payments necessarily suspends 
 aU redemptions of paper money. The United States notes being irre- 
 deemable the national bank notes are irredeemable. All of them being 
 now paid out, there is no. object to return them, and thus not only the 
 United States gets the benents of a forced loan from the people with- 
 out interest and without the burden of redemption, but the banks also 
 get the benefit of a forced loan from the people without interest and 
 without the burden of redemption. 
 
 It is true that the banks are required to maintain a certain reserve 
 of United States notes to secure a redemption of their notes, but. prac- 
 tically we know that no notes are presented for redemption. It is on 
 this ground that they apply to us to reheve them from the burden of 
 maintaining a reserve. 
 
 We are told that we require them to keep idle in their vaults cur- 
 rency sorely needed by the business community merely to secure- the 
 redemption of notes that are never presented. It is true that a bank 
 reserve is unnecessary and indefensible unless for the redemption of 
 their notes. If the idea of redemption is abandoned or indefinitely 
 postponed, then all reserves should be dispensed with. If the only 
 object is to make currency abundant without regard to its value com- 
 pared with coin, then any reserve is folly. Indeed, the whole national 
 banking system would be indefensible. If our currency is to be per- 
 manently irredeemable, it is impossible to state a reason why the whole 
 of it should not be issued by the United States, or why any of it should 
 be issued by- a bank. The only benefit the public^ derive from a bank 
 of issue as distinguished from the private interest of its stockholders 
 is that the bank note is the convenient representative of coin ; that its 
 capital, resources, and reserve furnish a security for the redemption of 
 its notes in coin, a;nd that it is a convenient agency to distribute its 
 notes' by loans to those engaged in producing and transporting prop- 
 erty. 
 
 Any policy that abandons the redemption of bank notes in coin will 
 inevitably lead to the abandonment of banks of issue, for the public 
 will not long allow the banks to derive a profit from issuing notes un- 
 less they assume the burdens of redeeming them. This is understood 
 by the national banks. They do not shrink from the duty of redeem- 
 ing their notes, but say that while the notes of the United States are 
 
392 SPEECHES AND EEP0RT8 OF JOHN SHEEMAN. 
 
 lawful money and a legal tender, and are both depreciated and irre- 
 deemable, the banks cannot redeem except with them. It is the United 
 States notes that stand in the way of specie payments. If in any way 
 they were maintained at par with coin the obligations of the banks to 
 maintain their notes in coin would be easily enforced. Then the supe- 
 rior excellence of the national banking system would be demonstrated. 
 It would no longer be a monopoly, but under the law as it now stands 
 would be free to all who chose to engage in the business. The plethora 
 of money at one time and its stringency at another would be regulated 
 by the redemption of notes when abundant and their increased issue 
 when required by new demands. Any attempt to make a " corner " by 
 locking up currency in one bank would be met by its issue by another. 
 The corresponding privileges and burdens of a bank of issue would re- 
 lieve them from prejudice. The maintenance of these notes at par 
 with gold, together with their absolute security, as now, would be 
 recognized as an equivalent for the privileges they enjoy. 
 
 Again, all the existing laws authorizing United States notes and 
 bank notes are based upon the theory of specie payments. The notes 
 were only issued, however, during war, when, under a suspension of 
 specie payments, there was no medium of payment except the public 
 credit. We could not utilize the public credit in borrowing money 
 until we had provided a medium of payment. For that purpose we 
 coined the public credit into a limited amount of lawful money ; but 
 promised to pay this money in coin. When the lawful money was 
 issued we did not anticipate the extent of its depreciation, and con- 
 stantly kept in view its speedy redemption. Ordinarily the functions 
 of a government in furnishing money are limited to stamping upon gold 
 and- silver of certain weight and fineness its intrinsic value. Here its 
 duty ends. But in war this process of coining did not meet the public 
 necessities, and the United States coined its credit into money, and this 
 process has been upheld by all departments of the Government. Still, 
 this money is but another form of public debt, a promise to pay specific 
 quantities of gold and silver. In the national banking act Congress 
 assumed that the United States would maintain its paper money at par 
 with coin as soon as its necessities would allow. It provided for an 
 auxiliary currency also to be at par in gold and to be issued by banks. 
 Every provision of that act contemplates that both United States notes 
 and bank biUs should be equal to gold and to each other. This is the 
 reason for the provisions for redemption, for centera of redemption, and 
 for a large reserve. 
 
 The banking act also anticipated that the United States might with- 
 draw its notes, and then that bank notes were directly to be redeemed 
 with coin. Still the bank act provided for the existence of both kinds 
 of notes in common, and experience shows that both may be maintained 
 in circulation with profit to the United States. "NVliile no provision is 
 made for the redemption of United States notes the provision for the 
 redemption of bank notes is nullified. Our whole system of currency 
 l)ccomcs incongnious by our failure to provide for the redemption of 
 United States notes. 
 
 If, then, public faitli, public policy, and the spirit of om- laws de- 
 
THE CUERENOY— SPECIE PAYMENTS. 393 
 
 mand that our currency be restored to the specie standard, it would 
 seem that the only remaining inquiry should be, what is the best way 
 to resume ? But here we meet the objections of many business men, 
 the most active and enterprising of our people, who tell us that specie 
 payment with them adds largely to the burden of their debts ; that 
 upon the basis of existing law and the condition of inflation always 
 produced by depreciated money they have made contracts, contracted 
 debts payable in currency, and that now to add to the value of that 
 currency is to embarrass, cripple, or ruin them. Some tell us they are 
 prepared to meet the gradual approach to specie payments caused by 
 the increased business and credit of the country, while others tell us 
 that the country needs more currency ; that its growth in population, 
 expansion in business, and new enterprises render an increase of cur- 
 rency indispensable. The effect of any measure upon the interests of 
 active business men should be carefully studied, but individual hardship 
 is not sufficient reason for a violation of public faith, or a disregard of 
 the general interests or policy of the whole country. All our citizens 
 have had full notice of the policy of the Government. The acts of 
 Congress already cited, the decisions of the Supreme Court, and the 
 promises of opposing parties are well known to all intelligent men. 
 
 And the effect of specie payments is greatly exaggerated as to the 
 persons it will injure. Our business men are not only debtors but they 
 are creditors. li they are injured by adding to the burden of their 
 debts, they are benefited by the increased value of their credits. 'No 
 one engaged in production merely, whether as a farmer, a manufacturer, 
 a mechanic, or a laborer, is injured; for, if the nominal value of his 
 productions is diminished, the cost of living and all that enters into the 
 cost of production is diminished in the same degree. Experience has 
 shown that depreciated money is most injurious to laboring men, because 
 it produces a false standard of value, the effect of which is not noted 
 by a laboring man as by a trader or merchant. Even upon current 
 debts and credits the effect of a specie standard will scarcely be appre- 
 ciable, for the nominal loss will be discounted in advance or be divided 
 during the gradual appreciation of paper money. The greater burden 
 win fall upon debts running a long period of time, as upon corporation 
 bonds and mortgages. As to those in existence before the legal-tender 
 act took effect, it is but right that they be paid in specie, while those 
 contracted since have been issued in expectancy of specie payments 
 before this time. Still, while the effect of a specie standard upon 
 debtors is greatly exaggerated, it cannot be denied that if it is followed 
 by a contraction of the currency it will create distress and embarrass- 
 ment to very many who have contracted debts on a currency basis. 
 But this argument of hardship will apply for ever. If we are to be 
 controlled by it we can never pay our promises. The lapse of time will 
 not make it easier. Our financial condition is now so strong that we 
 can afford to do right, and yet in such a way as to injure in the least 
 possible degree those who contracted debts on a currency basis. 
 
 Again, the effect of a specie standard in producing a contraction of 
 the currency is greatly exaggerated. A contraction of the currency is 
 not necessarily a result of specie payments, though it would undoubt- 
 
394 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 edly produce them. It is tlie most direct road to specie payments, and 
 if the paper money in circulation is in excess of the wants of the com- 
 munity it is the only road. "We in 1866 and 1867 greatly contracted 
 the currency by funding over three hundred million dollars of com- 
 pound-interest and other notes, most of which were a part of the cur- 
 rency. If in 1868 we had, as was proposed in the Senate, authorized 
 United States notes to be received lor five per cent, bonds at par, we 
 would have long since been at specie payments. The notes when re- 
 ceived could have been paid out again for the payment of current ex- 
 penses and the pui'chase of bonds, precisely as now when gold is sold 
 lor notes and notes applied to the purchase of bonds. In tnis way we 
 would have reached a specie standard the moment our five per cent, 
 bonds were worth par in gold. The advancing credit of the nation 
 would have lifted our currency to par in gold precisely as it lifted aU 
 forms of bonds to or above par in gold. And now when our credit is 
 greatly improved by the rapid payment of the debt, aa evidenced by 
 the advanced value of our notes in gold, we can raise their value to the 
 specie standard much more readily than four years ago. 
 
 Gne fallacy lies at the foundation of the common objection to a 
 specie standard, that it necessarily compels a withdrawal of paper cur- 
 rency. This depends entirely upon the amount necessary to conduct 
 the business of the country and the degree of public conndence in its 
 redemption. The Comptroller of the Currency, in his last annnal 
 report, shows that in January, 1862, when specie payments were sus- 
 pended, the aggregate circulation of coin and paper was $448,671,218, 
 or a ratio of two and seventy-one hundredths per cent, of the wealth 
 of the United States, and that the circulation of the United States in 
 1870, including United States notes, bank notes, fractional currency, 
 and specie, was $790,000,000, or two and sixty-two hundredths per cent, 
 on our wealth. The circulation in the United States ^^ capita is now 
 less ^han in France and\greater than in Great Britain, but greater than 
 in either in proportion to wealth. When we consider the vast extent 
 of our country, its rapid growth, the value of our productions, and the 
 general use of paper money, is it not reasonable to suppose that all of it 
 now outstanding can be maintained in circulation on a specie standard I 
 
 It must be remembered that the total amount of United States 
 notes is now $356,000,000 ; that very large sums must be retained by 
 the banks as their reserve ; that large gold reserves are now held in the 
 Treasury ; that the notes are widely circulated, have the confidence of 
 the people, and can be supported by the public credit. Under these 
 circumstances it is scarcely probable that any considerable sum will be 
 presented for redemption. If presented they can again be paid out in 
 the course of the public disbursements. Specie payments can thus be 
 resumed without a contraction of the currency and with only the 
 change of nominal values for the real standai'd of value the world over. 
 
 Tne chief requisite is that the public should have assured confi- 
 dence in our ability to maintain resumption. This is indispensable, 
 and when it exists actual redemption by payment of coin will be com- 
 ])aratively rare. This confidence or credit can be given by either of 
 three expedients : 
 
THE OUEKENCY— SPECIE PAYMENTS. 395 
 
 1. The maintenance in the Treasury of a large reserve in coin. 
 
 2. The authority in the Secretary of the Treasury to sell bonds for 
 coin to maintain redemption. 
 
 S. To authorize an alternative redemption, either in coin or bonds. 
 
 The first is subject to the objection that it keeps idle a vast sum 
 only needed in case of a panic, when it will be insufiScient. The 
 second is subject to a greater objection, that, as the power could only 
 be used in a stringent money market, it would lead to great sacrifices 
 of public securities and add fuel to the existing panic. The third 
 mode requires no reserve; it could operate only, while, from panic or 
 unforeseen causes, our bonds were below par in coin, and as a tempo- 
 rary suspension of specie payments, alike beneficial to the United 
 States and to the ^business community. This plan implies that the 
 United States will make its provisional redemption in a bond so intrin- 
 sically valuable that it will be generally at par in gold. 
 
 I do not overlook the fact that resumption by the United States 
 will test, the strength of the na,tional banks and prove whether or not 
 they are entitled to public confidence. But their present condition, 
 with an aggregate surplus fund far beyond the difference between cur- 
 rency and coin, iustifijes the conviction that they wiU meet the public 
 expectations. With specie redemption the system becomes free. The 
 fluctuations of their currency will be but the healthy ebb and flow of 
 commerce. Redemption will then become a fact, and will check the 
 tendency of the country banks to employ their currency in Wall street 
 speculations. As they may redeem in coin or United States notes, 
 they will have the, benefit of the alternative redemption provided as to 
 United States notes, so that the sacrifice of these securities that gener- 
 ally follows specie payments during a panic can go no further than the 
 payment of their bonds for their notes in equal values. 
 
 Again, a specie standard will also bring gold and silver coin into 
 actual use. The amount now hoarded has been variously estimated, 
 and, with that deposited' in the Treasury and, in circulation in Califor- 
 nia, can not be less than two hundred millions. This wiU probably 
 take the place of legal tenders as bank reserves, and thus add , to the 
 present volume of currency. Even if specie payments should cause 
 the retirement or funding of fifty millions of United States notes, their 
 place will be more than filled by the coin returned from its present 
 banishment. I therefore conclude that fears of evil results from a 
 specie standard are greatly exaggerated; that there will be no con- 
 traction of the currency, no disturbance of real values, no suspension 
 of business, but that our present United States and bank notes will 
 pass as usual in the ordinary exchanges of life, measuring the value of 
 all property, whether produced here or abroad, equal to the real money 
 of the world, and with no taint of dishonor or depreciation about it. 
 
 There is one incident to a specie standard that must not be over- 
 looked.. It is the widespread injury produced by a sudden panic, when 
 confidence is temporarily dethroned and all demand specie at once. 
 With the paper currency in use in the United States before the war 
 such a panic was ruin and. bankruptcy. In such a time the right to 
 demand specie created evils and disasters which with irredeemable and 
 
396 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 depreciated paper money only caused a further depreciation until gen- 
 eral causes restored confidence. It is commonly said that with specie 
 payments we had the panics of 1837, 1847, and 1857, while with irre- 
 deemable greenbacks we have met a war, the fire at Chicago, and other 
 calamities without a panic ; ergo, a specie standard is a falucy. To ex- 
 press it as the English did when specie payments were suspended, 
 guineas are a useless incumbrance. 
 
 This reasoning only proves that, when by war or panic specie pay- 
 ments are suspended, a nation may by the use of paper money alone 
 develop its resources and attain high financial prosperity. But it is 
 also true that history furnishes but two examples of such success, and 
 in both cases specie payments were constantly promised and kept in 
 view, while the public credit was maintained by collecting its revenue 
 and paying its debt in coin. In Great Britain, during her wars with 
 Napoleon, the Bank of England notes were a depreciated, irredeema- 
 ble paper currency, but they were never made a legal tender and their 
 credit was supported not only by promises of but by attempts at re- 
 sumption. In the United States the secret of our success with paper 
 money was the careful limitation of its amount, the payment of our 
 interest in coin, the collection of our customs duties in coin, and the 
 promise of the United States to redeem all its notes in coin with the 
 confidence of our people that this would be done. 
 
 Not only the United States, but other nations who conducted war 
 with paper money alone, without an expectation of coin redemption, 
 met with disastrous financial ruin. Such was the experience of France 
 with her assignats and mandats, of the American Colonies with con- 
 tinental money, and of the Southern Confederacy with their Confederate 
 notes. Most of the modem nations of Europe have attempted, at some 
 period of their history, to bridge over their difficulties with govern- 
 ment paper money, and with disastrous results. Great corporations 
 with the power oi the government behind them have furnished ub 
 with examples of the folly of sustaining paper money except by specie 
 redemption. The South Sea scheme in England, the Mississippi Com- 
 pany of George Law in France, the Bank of the United States, and 
 the " pet banks " are striking examples. 
 
 If any one fact is proven by the experience of manldnd, it is that 
 gold and silver are the best possible standards of value. They have 
 ibeen so recognized by every nation from the earliest period of recorded 
 time. However much nations might differ in religion, habits, produc- 
 tion, or climate, they have not differed in this primary axiom of ex- 
 change or barter. Experiments have been tried with other standards, 
 from the iron of Lycurgus to the finest bank-note engraving of modem 
 times, 1)ut all have resulted in the conviction that gold and silver is 
 tlie only true standard. Paper money supported by the credit of a 
 government is a convenient substitute greatly facilitating exchanges 
 by the ease and safety of handling and transmitting it, but it is not 
 real money ; it is only a promise to pay money, and the only test of its 
 character as false or true money is its capacity to be converted into 
 gold or silver of prescribed weight and fineness. 
 
 The effort to continue the use of gold as the standard, and paper 
 
THE OUKRENOY^SPEOIEf PAYMENTS. 397 
 
 money as tlie representative of gold, has been for two hundred years 
 the most difficult problem of political economy. Our own system, 
 though the outgrowth of the war, is believed to combine some advan- 
 tages superior to any now in use in the world. It rests upon the credit 
 of the Government. The Government promises to pay not only United 
 States notes but the bank notes, and holds security for the payment of 
 the latter. It combines the interests of the Government with the in- 
 terests of private persons, the owners of the banks. The paper money 
 is as well distributed as the nature of the case will allow. The United 
 States prints the bills of uniform style and guards them against coun- 
 terfeiting. Worn or mutilated notes are at once replaced. The notes 
 must be of uniform value throughout the United States. All that is 
 needed to complete the system is general specie redemption, but with 
 provision for temporarily suspending specie payments in case of ex- 
 treme necessity. 
 
 It was the want of some power legally to suspend specie payments 
 that led to the evil results of the panics of 183T, 184T, and 185T, and 
 probably might have led to temporary suspension on " black Friday " 
 or after the Chicago fire. In such cases a temporary suspension or 
 some substitute for specie payments is indispensable unless paper cur- 
 rency is so restricted and limited in amount as to be insufficient for the 
 ordinary exchanges of the countiy. All paper money must rest to 
 some extent upon confidence. When a panic arises by some unfore- 
 seen event which destroys confidence, the instinct of every holder of a 
 bill or depositor in a bank is to convert his money into gold. This 
 feeling if wide-spread and long-continued will break any bank, how- 
 ever abundant its assets, and will necessarily lead to the enforcement 
 of debts and to general distress. Our national banking system amply 
 protects the note-holder, but it does not in a time of specie payments 
 sufficiently protect a bank from an enforced sacrifice of its assets to 
 maintain specie payments at a time when the public good as well as the 
 existence of the bank demands a temporary suspension. The same 
 difficulty might arise on the part of the United States in maintaining 
 specie payments on United States notes. The reserve of gold in the 
 Treasury might be exhausted by a sudden demand. A war or panic 
 might cause such a demand for coin that the United States might be 
 unable to redeem in coin. Such a contingency ought to be provided 
 for in advance. The expedient adopted in England of allowing the 
 Bank of England to raise the rate of interest on its loans, thus drawing 
 in its assets to meet anticipated dangers or demands, is not consistent 
 with our public policy. A discretionary power in private persons or 
 public officers over so delicate a subject as the national currency ought 
 to be avoided. The national banks already possess, in the custody of 
 the Government, the means to meet this difficulty. The best substitute 
 for specie payment, when from exceptional causes it can not be main- 
 tained, is the public credit. If the tJnited States can not pay its notes 
 in coin, or national banks can not pay their notes in coin or in United 
 States notes, payment in bonds of tlie United States, bearing interest 
 at such rate and upon such terms as ordinarily to be above par in gold, 
 would provide for an alternative redemption.^ It would satisfy the 
 
398 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 public creditor, and even prevent for a time any considerable deprecia- 
 tion of the notes. In the mean time the notes would be a legal tender 
 among our citizens, would pay debts and fulfill contracts, and would, 
 the moment that exceptional causes passed by, be at par in coin. With 
 authority in the Secretary of the Treasury to redeem United States 
 notes either witli coin or with the five per cent, bonds now offered for 
 sale, and with like authority to redeem bank bills protested for non- 
 payment in specie with the bonds of the bank deposited with the 
 Treasurer at par, we would have specie payments except when bonds 
 of the character named were worth less than par in specie. 
 
 With the advancing credit of the United States we may safely affirm 
 that such bonds will always be at par in gold, except at such times as 
 it would be ruinous to maintain specie payments. And, with such pro- 
 vision for the redemption of United States and bank notes, no large 
 reserve of gold, either in the Treasury or in the bank, would be re- 
 quired. Such a provision would guard against the sacrifices which 
 banks and people alike must suffer when compelled to redeem their 
 notes to pay their debts in coin, made exceptionally scarce by panic or 
 war. It would reconcile many persona to a specie standard who dread 
 that an artificial or temporary scarcity of specie might require them to 
 fulfill their contracts with money impossible to be obtained. Banks 
 who now fear that under a panic their bonds and securities might be 
 sacrificed for specie would feel that their securities deposited with the 
 Treasurer would at least pay their bills. It would be ih harmony with 
 the banking system and all our early loan laws during the war, which 
 provided for a voluntary conversion of notes into bonds. I do not 
 claim that this is the only expedient against a panic and. for temporary 
 suspension, but I do claim it would secure us against the wide-spread 
 bankruptcy that in times past resulted from the compulsory suspension 
 of specie payments in the United States. 
 
 Having thus shown the obligation and necessity of specie paymente, 
 and how the anticipated evils of resumption may be avoided, it remains 
 to examine the means best adapted to bring it about. Among the in- 
 numerable schemes proposed there are several that are practicable. 
 
 1. To authorize legal-tender notes to be receivable in payment for 
 bonds of the United States. ' 
 
 2. To authorize them to be receivable in payment of duties. 
 
 3. To authorize them to be converted into demand notes bearing 
 interest, or into compound-interest notes. 
 
 4. To provide for direct resumption of specie payments on a day 
 in the future to be fixed by law. 
 
 5. To provide a graduated scale of rates at wliich the notes will be 
 redeemed m coin, advancing to par in coin at a prescribed day. 
 
 The examination of these plans would lead me more into detail 
 than I propose to go at this time. Each of them would immediately 
 advance our notes toward a specie standard. ' The second only is sub- 
 ject to the objection that it would violate the public faith, now pledged 
 ito' maintain tlio customs revenue in coin as a special fund for the pay- 
 ment of interest on the public debt. A careful consideration of the 
 whole subject leads raq, to the conviction that the simplest and most 
 
THE CUERENOY— SPECIE PAYMENTS. 399 
 
 expedient measure is to declare by law that on and after the 1st day 
 of Januaiy next the United States will redeem its notes either with 
 coin or, at the option of the Secretary of the Treasury, with its 
 bonds of convenient denominations bearing five per cent, interest in 
 coin. This will be a recognition by the United States of its solemn 
 pledge,' made March 18, 1868, that it will at the earliest practicable 
 period redeem its notes in coin. It will provide also for the possible 
 but not probable contingency that more notes will be presented than 
 can conveniently be paid in coin. In that event the United States 
 will redeem its notes in bonds now worth par in gold in the money 
 market of the world. The objections that may be made and its effect 
 upon the national banks have already been anticipated in what I have 
 said. The plan is founded upon the plain equity that if we can not 
 literally perform our promise by payment in coin, we will at least give 
 to the public creditor who holds the notes of the United States a bond 
 bearing a commercial value equal to gold. If, then, these notes are 
 in excess of the wants of the people for a currency, they will be pre- 
 sented for redemption, and ought to be redeemed ; if not, their value 
 will be appreciated to the gold standard, and this is specie payment. 
 The necessary modifications of the banking act can properly be post- 
 poned until a future time, when the practical effect of a specie standard 
 upon United States notes will test the ability of the banks to maintain 
 their notes at par with those of the United States. Whether they should 
 be relieved from maintaining so large a reserve, whether there should 
 be one center of redemption, are questions of practical legislation for 
 the future. The moment the notes are redeemable in coin the banking 
 system ceases to be limited as to the number and difitribution of banks, 
 and will stand like all other business pursuits, open to all who will give 
 the requisite security for their notes and will obey the general law. 
 
 In submitting these remarks at this time I feel like apologizing for 
 passing by arguments worthy of consideration ; but my only purpose 
 now was to present with the substitute reported by the Committee of 
 Finance the leading reasons in favor of it. My hope is, and it is a 
 reasonable one, that neither Senators nor the public will confine their 
 arguments to critical objections, but will suggest some plan better 
 suited to the objects we have in view. I, for one, while honestly sup- 
 porting this plan, will readily adopt any better one that will make the 
 now broken promise of the United States to pay one dollar equal to the 
 best gold dollar of the mint. 
 
 Mr. President, I move that the amendments be printed, and that 
 the bill take its place on the calendar; and on some, convenient day, 
 when the Senate is ready to consider a question like this, I shall move 
 to take up the bill. 
 
400 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 COIlfAGE LAWb. 
 
 m TEE SENATE, JANUARY 17, 187S. 
 
 The Senate resumed tbe consideration of the bill revising and amending the laws 
 relative to the mints, assay offices, and coinage of the United States. On the amend- 
 ment offered by the Finance Committee to strike out the following words : " And 
 any gold coin of the United States, if reduced in weight by abrasion not more 
 than ono half of one per cent, on the double eagle and eagle, and one per cent, on 
 the other coins, below the standard weight prescribed by law, shall be received 
 at their nominal value by the United States Treasury and its offices, under such 
 regulations as the Secretary of the Treasury may prescribe for the protection of the 
 Government against fraudulent abrasion or other practices ; and any gold coins in 
 the Treasury of the United States reduced in weight below this limit of abrasion 
 shall be reooined," Mr. Sherman said : 
 
 I CAN only say I have here a number of documents, not only from 
 the Director of the Mint in Philadelphia, but from Prof. Barnard and 
 the Comptroller of the Currency, calling our attention to this very im- 
 portant feature of the bill ; and the Committee on Finance, after a 
 patient examination of the whole matter, decided that it was clearly 
 inexpedient and wrong to leave in this provision for the recoinage of 
 all the present gold coins of the United States. 
 
 It is true, we have provided for recoining the coin in the Treasury 
 of the United States ; but we go no further than that. !N"o nation in 
 the world has gone further than that. I do not wish to delay the Sen- 
 ate by reading these documents, but I suggest to the Senator whether 
 he had not better let this proposition go to a committee of conference 
 rather than undertake to discuss it here, because if we are compelled to 
 discuss it here I shall be obliged to have these letters read, which en- 
 tirely convinced the Committee on Finance that the United States dare 
 not assume the loss of abrasion beyond the legal standard. 
 
 There is a legal standard withm which the United States make the 
 coin good ; but when coin depreciates below the standai'd of abrasion, 
 then neither the United States nor any other nation in the world un- 
 dertakes to make the coins good except for their intrinsic value. The 
 ways in which these coins might be abraded by fraud were shown to 
 us, and it will be utterly impossible for any regulation of the Secretary 
 to prevent great loss to the Government if we attempt to maintain 
 these coins when they fall below the limit of abrasion and redeem them 
 at the nominal instead of the real value. 
 
 The law now provides for recoining abraded coin in the Treasury 
 of the United States. There is no necessity, therefore, for putting it 
 in here again. Indeed, when this clause was inserted in the House the 
 law ]irovi(ling for that recoinage had not been passed. It was passed 
 in an appropriation bill on my own motion, I think, at the last session 
 of Congress. Tlie Mint was authorized to recoin the abraided coins in 
 tlic Treasury of the United States, some of which were taken at theii* 
 reduced value. 
 
COINAGE LAWS. 401 
 
 All nations retain the nominal value of abraded coin to a certain 
 standard, but when it falls below that, the loss falls on the individual 
 who holds it. That has been the custom of all countries. The coin 
 that is held by the Treasury of the United States is received at its 
 nominal value if it is within the limits of abrasion fixed by the law ; 
 but if it falls below the limits the loss falls on the holder of the coin, 
 and much of that which is now being recoined was taken at the abraded 
 value, that is, reduced value ; and when we issue it again, we shall issue 
 it in coin up to the standard. The question as to whether we shall re- 
 coin our own coin and the question whether we shall recoin the coin in 
 the hands of citizens are very different things. 
 
 Within a certain de^ee, one thousandth per cent., a small de- 
 gree, the Government maintains the coins at their nominal value even 
 n abraded, but when they are abraded below that, the loss falls on the 
 holder, and every man who receives a coin must look to it that it has 
 not been abraded beyond the legal limit. If it is so abraded, he 
 can refuse to take it, or if he takes it at all, he should take it for what 
 it is intrinsically worth. The recoinage of the gold coin now in circu- 
 lation, although not very large, would involve an amount of one or 
 two million dollars. As a matter of course, as soon as our attention 
 was called to this fact we struck out this clause. I do not wish to go 
 any further into the details of the matter. I think the action of the 
 Committee on Finance was clearly right, and it would be very wrong 
 indeed to undertake in this ambiguous way to make good all the coin 
 now outstanding. 
 
 On the question of a coinage charge for gold, Mr. Sherman said: 
 
 I must confess my regret that this disputed question should be 
 raised at this stage of the bill, just as it was about on its passage. The 
 Senate of the United States deliberately, after full discussion, decided 
 to retain the charge for coinage of one fifth of one per cent. It is 
 now one half of one per cent., but we reduced it to one fifth of one 
 per cent. The Senate, by a very decided vote, after a full debate, set- 
 tled that question. The bill went to the House of Eepresentatives, 
 and there there was another efEort made by the members from the 
 Pacific coast to repeal the coinage charge, and there, after full debate, 
 it was settled by an overwhelming majority to retain the charge of one 
 fifth of one per cent. 
 
 If this question about the coinage charge is to be opened and 
 pressed, it will compel those of us who are in favor of retaining the 
 coinage charge to enter into an elaborate debate. I did so when it was 
 here before, and many other Senators participated in that discussion. 
 The question has been settled, and this bill has now gone to its last 
 stage. This bill passed the Senate a few years ago, and was fully dis- 
 cussed, and the charge of one fifth of one per Cent, was retained. 
 This point is beyond our consideration practically. "We ought not to 
 undertake, at this period of the session, to review that decision. 
 
 The people of California are very largely interested in the revision 
 of the Mint laws. Indeed I have received more letters from that State 
 about this coinage bill, desiring it to pass, than from any other portion. 
 26 
 
402 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 of the country. I can see the great importance of it to them, and I 
 believe it to he one of great importance to the whole people of the 
 United States. Therefore I do not wish to enter into a discussion in 
 regard to this coinage charge that may probably weary the Senate and 
 delay the passage of the bill. I promised that the bill would not take 
 more than an hour, and when I made that promise I supposed these 
 amendments which have been acted upon would be acted upon sub 
 silentio, and that other questions which had been settled would not be 
 revived. 
 
 I therefore prefer not to say anything on the question except that 
 the coinage charge has not been and ought not to be repealed entirely. 
 "We have reduced it now to the lowest rate of any nation in the world 
 except only Great Britain. 
 
 The bill became the coinage act of 1873. 
 
 THE CUERENCY AND SPECIE PAYMENTS. 
 
 IN THE SENATE, JANUARY 16, 1874. 
 
 The bill to provide foi" free banking, to secure an elastic currency, to appreci- 
 ate national obligations, and to reach specie payments without commercial embar- 
 rassment, being before the Senate, Mr. Sherman said : 
 
 Mk. President : It was my purpose not to address the Senate until I 
 had the benefit of the opinions of all Senators who wished to express 
 their opinions ; and then I proposed, in closing the debate, to state the 
 general reasons that influenced the Committee on Finance to report 
 this resolution. But as the Senator from Illinois [Mr. Logan] tells me 
 he is not very weU to-day, and other Senators are not prepared, I pre- 
 fer, rather than cause delay, to state as best I can those reasons now. 
 
 And, sir, at the outset of my remarks I wish to state some general 
 propositions established by experience, and the concurring opinions of 
 all writers on political economy. They may not be disputed, but they 
 are constantly overlooked. They ougnt to be ever present in this dis- 
 cussion as axioms, the truth of which has been so often proved that 
 proof is no longer reqiiisite. 
 
 The most obvious of these axioms, and one which lies at the foun- 
 dation of the argument I wish to make to-day, is that a specie standard 
 is the best and the only true standard of all values, recognized as such 
 by all civilized nations of our generation, and establislied :is such by 
 the experience of all commercial nations that have existed from the 
 curliest period of recorded time. While the United States, and all 
 othcT nations, have for a time, under the pressure of war or other ca- 
 lamity, been driven to establish other standards of value, yet they have 
 all been impelled to return to the true standard ; and even while other 
 standards of value have been legalized for the time, specie has mea- 
 sured their value as it now measures the value of our legal-tender notes. 
 
THE OURKENOY AND SPECIE PAYMENTS. 403 
 
 This axiom is as immutable as the law of gravitation or the laws of 
 the planetary system, and every device to evade it or avoid it has, by 
 its failure, only demonstrated the universal law that specie measures all 
 values as certainly as the surface of the ocean measures the level of the 
 earth. 
 
 It is idle for us to try to discuss with intelligence the currency 
 question until we are impressed with the truth, the universality, and 
 the immutability of this axiom. Many of the crude ideas now ad- 
 vanced spring from ignoring it. The most ingenious sophistries are 
 answered by it. It is the governing principle of finance. It is proved 
 by experience, is stated clearly by every leading writer on political 
 economy, and is now here, in our own country, proving its truth by 
 measuring daily the value of our currency and of all we have or pro- 
 duce. To establish it I might repeat the history of finance from the 
 shekels of silver, " current money with the merchant," paid by Abra- 
 ham, to the last sale of stock in New York. I might quote Aristotle 
 and PKny, as well as all the writers on political economy of our own 
 time, and trace the failure of the innumerable efforts to establish some 
 other standard of value, from the oxen that measured the value of the 
 armor of Homeric heroes to the beautifully engraved promise of our 
 day ; but this would only be the hundred-times-told tale which every 
 student may find recorded, not only in school-books, but in the writ- 
 ings of Humboldt, Chevalier, Adam Smith, and others of the most 
 advanced scientific authorities. They all recognize the precious metals 
 as the universal standard of value. Neither governments, nor parlia- 
 ments, nor congresses can change this law. It defies every form of 
 authority, but silently and surely asserts itself as a law of necessity, 
 beyond the jurisdiction of municipal law. 
 
 Other mediums of exchange have been devised, and are in general 
 use, but their value is measured every moment by the true standard of 
 the precious metals. And this standard will measure the value of your 
 three sixty-five convertible, elastic, irredeemable bonds, and of any 
 currency we may issue, before they are issued, the moment they are 
 issued, and at. every hour while they are in circulation. The ignorant 
 and the credulous will measure their labor, their productions, and their 
 property by that or any other standard you may devise ; but the saga- 
 cious and prudent will test it by the specie standard. The barometer 
 in WaU Street will measure it by the specie standard, and every banker 
 and broker will have more to do with fixing its daily changeable value 
 than any of you. If we will now but recognize and act upon the fun- 
 damental truth that there is and can be but one true standard of value, 
 and that the specie standard, we shall have advanced a great way in 
 the solution of the question upon which we are called upon to act. 
 
 The reasons for this are obvious. The innumerable wants of every 
 civilized man, however moderate his income, demand the labor of 
 thousands of persons. The slave who toiled for his daily bread and 
 scanty clothing consumed more or less of the products of the labor and 
 capital of an army of farmers, artisans, and capitalists, and the ex- 
 changes of all these productions can be made only by the use of some 
 recognized standard of value which will measure the value of a pin as 
 
404 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 well as of the highest production of art. This standard must be of in- 
 trinsic value, durable, divisible, easily transported, of universal use, 
 and of the same qualities wherever found. Gold and silver alone unite 
 all these qualities. To use the language of another : 
 
 Though far from invariable, the value of these metals changes only by slow de- 
 grees ; they are readily divisible into any number of parts, which may be reunited 
 by means of fusion without loss ; they do not deteriorate by being kept ; their firm 
 and compact texture makes them difficult to wear ; their cost of production, espe- 
 cially of gold, is so considerable that they possess gr^at value in small bulk, and 
 can, of course, be transported with comparative facility ; and their identity is per- 
 fect, the pure gold and silver supplied by Russia and Australia having precisely the 
 game qualities with that furnished by California and Peru. No wonder, therefore, 
 when almost every property necessary to constitute money is possessed in so emi- 
 nent a degree by the precious metals, that they have been used as such from a very 
 remote era. Their employment in this function is not ascribable to accident, to the 
 genius of any individual, or to any peculiar combination of circumstances. It grew 
 naturally out of the wants and necessities of society on the one hand, and the means 
 of supplying them possessed by these metals on the other. They became universal 
 money, as Turgot has observed, not in consequence of any arbitrary agreement 
 among men, or of the intervention of any law, but by the nature and force of 
 things. 
 
 Of late years much difficulty has grown out of the slightly varying 
 value of silver and gold, as compared with each other, and the tendency 
 of opinion has been to adopt gold alone as the standard of value. The 
 United States has twice changed the relative value of these metals, and 
 other modem nations have been driven to similar expedients. At the 
 Paris monetary conference, held in 186Y, which I had the honor to 
 attend, the delegates of twenty nations represented agreed to recom- 
 mend gold alone as the standard of value. The Umted States, and 
 nearly all the commercial nations, have adopted this standard, and 
 reduced the use of silver to a mere token coinage of less intrinsic value 
 than gold, but maintained at par with\ gold, because paid oiit only in 
 exchange for gold. So that for all practical purposes we may regard 
 gold as the only true standard, the true money of the world, by which 
 the value of all property, of all productions, of aU credits, and of eveiy 
 medium of exchange, and especially of all paper money, is tested. 
 
 Specie, in former times, was not only the universal standard of 
 value, but it was also the general medium of all exchanges. In modern 
 times this is greatly changed. Specie is still the universal standai-d of 
 value, but it has ceased to be even the usual medium of exchange. The 
 failure to discriminate between the standard of value and the medium 
 of exchange occasions many of the errors into which so many fall, and 
 nearly every Senator who has spoken on one side of the question has 
 fallen into this error. Specie has lost a portion of its sovereign power, 
 for with the enormous increase of exchanges it was found that, valuable 
 as it is, it is too heavy to transport from place to place as a medium of 
 exchange. The perils of the sea, the dangers of theft and robbery, led 
 to devices to substitute promises to pay gold in place of the actual 
 gold. 
 
 In this way bills of exchange, drafts, promissory notes, checks, and 
 similar cornmercial paper came into use, bo that now, even in this age 
 of paper money, it is computed that fully !)5 per cent, of all the ex- 
 
THE OURKENOY AND SPECIE PAYMENTS. 405 
 
 changes in commercial cities is made by such promises to pay. Only 
 5 per cent., one twentieth part, of the payments in New York is made 
 in money, and this chiefly in paper money and not in gold. If gold 
 were now the only legal standard of value it would not be used as a 
 medium of exchange for 1 per cent, of the transactions of daily life. 
 The conyenience and portability of commercial paper and paper money 
 have caused them to supersede gold as a medium of exchange, but have 
 left.it as the fixed, the only true standard of value, by which the value 
 of all mediums of exchange is tested. 
 
 In England, where the specie standard of values is jealously main- 
 tained, and where no Bank of England note can issue beyond a pre- 
 scribed limit except upon a deposit of an equal amount of gold, specie 
 is not used as a medium of exchange to an amount exceeding 2 per 
 cent, of the aggregate payments. iNinety-eight per cent, of all pay- 
 ments is in commercial paper or bank bills, but the fixed and unalter- 
 able standard of value of all this paper money is gold coin. Sometimes 
 the daily payments in London alone exceed all the gold in Great 
 Britain, but only about 1 per cent, is actually paid in gold, and about 
 5 per cent, in Bank of England notes. In France, until the recent 
 German war, gold and silver were more used as a medium of exchange 
 than in any country of our day. She had in circulation from 1868 
 to 18Y0 an amount of gold and silver greater than the aggregate of 
 the gold and silver of Great Britain, the United States, and Prussia. 
 Her specie circulation amounted to $700,000,000. Driven by the 
 necessities of that war she has substituted paper money amounting to 
 $520,000,000 as a medium of exchange for the gold and silver formerly 
 circulated, but with wise statesmanship she now maintains her present 
 vast volume of paper money at or near par in gold. She has adopted 
 another medium of exchange, but she maintains, in harmony with 
 reason and experience, the gold standard of value. 
 
 All modem experience teaches the importance of the division of 
 labor. Indeed, that is the favorite topic of every writer on political 
 economy. Every man to his trade, and if the trade can be subdivided 
 into many specialties, then every man to his specialty. I was in Mr. 
 Gillott's celebrated manufactory of steel pens, and saw that the labor 
 of thirty men and women contributed to the making of this implement. 
 Each one was skillful in his part, and that part was perfectly done. 
 The subdivision of labor and skill gave increased wages and value to 
 the work of each laborer, secured a fortune to the owners, and a per- 
 fect pen to the world. The same law which demands a division of 
 labor applies to professional and scientific pursuits. The law has many 
 specialties. The honors of science are won only by those who devote 
 their mental faculties to one branch of study. 
 
 The same law extends to all leading productions, as cotton, wool, 
 wheat, corn, and gold. The purposes for which each of these com- 
 modities is best fitted are established by experience. In this way the 
 experience of centuries in former generations established gold as both 
 the standard of value and as the medium of exchange ; but modem 
 necessities have now established pjiper money, credit money, whether 
 in the form of bills of exchange, checks, bank bills, or notes of the 
 
406 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 State, as the best medium of exchange, leaving gold, however, as the 
 best and only true standard of the value of all paper money, as weU as 
 of all commodities. 
 
 Now, it has often happened, not only in the United States, but in 
 other countries, that credit money has proved worthless. This is an 
 unavoidable incident of such money. So far as it consists of checks or 
 like credits it must depend upon the voluntary contracts of individuals. 
 Each person is at liberty to accept or refuse all such mediums of ex- 
 change, and if he suffers a loss by the failure of a banker or broker it 
 is his misfortune, for which the Government is not responsible, and can 
 
 five him no relief, except through the laws for the collection of debts, 
 lut a different rule apphes to paper money issued by a State or by a 
 corporation authorized by the State to issue money. Whether this 
 money is a legal tender or not, it is, by usage and custom, money, and 
 its receipt and payment are practically as compulsory as if it were gold 
 coin. No man can refuse it unless he is a capitalist, who may resort to 
 the law to enforce payment in legal tenders. The laborer must take it 
 from necessity or get no employment. The merchant must take it or 
 keep his goods. Usage in such matters is stronger than law. It is this 
 kind of money that it is the duty of the State to protect from deprecia- 
 tion and loss. It must protect it by the best security possible, and that 
 security in every well-ordered government is the " public faith." Upon 
 this principle Great Britain, France, and the United States have found- 
 ed their financial systems. 
 
 But another duty rests upon the government undertaking to issue, 
 or to authorize the issue of paper money, and that is to maintain this 
 paper money at the gold standard. Great Britain and France recognize 
 this duty, and perform it. The United States recognizes its duty, but 
 does not perform it. Our currency is founded upon the public faith. 
 The public faith of the United States is pledged to pay United States 
 notes in coin. The national-bank notes are amply secured by bonds 
 more than sufficient to redeem them in coin ; and yet they are all de- 
 preciated ; now at 10 per cent, discount, to-morrow at 11, and yesterday 
 at 8. It is the depreciation of our paper money which is the standing 
 reproach of our financial system, which lies at the foundation of all our 
 troubles, and to remedy which is now the most important and difficult 
 duty of Congress. 
 
 Mr. President, thus far my remarks are founded upon the experi- 
 ence of ages, applicable to all countries and to all commercial nations 
 of our time. I present them now as axioms of univei*sal recognition. 
 And yet I have heard these axioms denounced in this debate as " plati- 
 tudes," useless for this discussion in the Senate of the United States. 
 The wisdom of ages, the experience of three thousand yo;ii-s, the writ- 
 ings of political economists, are whistled down the wind as if we in 
 this Senate were wiser than all who have reiisoned and thought and 
 legislated upon financial problems — as if all this accumulated \visdom 
 consisted of " platitudes " unworthy to influence an American Senate 
 in the consideration of the affairs oi our day and generation. 
 
 Sir, I do not think so. If we disregard these " platitudes," we only 
 demonstrate our own ignorance and jmnish our constituents with evils 
 
THE CUEEENOY AND SPECIE PAYMENTS. 407 
 
 that we ought to avoid. I purpose now to pursue the argument fur- 
 ther, and to prove that we are bound both by public faith and by good 
 policy to bring our currency to the gold standard ; that such a result 
 was provided for by the financial policy adopted when the currency 
 was authorized ; that a departure from this policy was made after the 
 war was over, and after the necessity for a depreciated currency ceased ; 
 and that we have only to restore the old policy to bring us safely, sure- 
 ly, and easily to a specie standard. 
 
 First, I present to you the pledge of the United States to pay these 
 notes in coin "at the earliest practicable period." In the "act to 
 strengthen the public credit " passed on the 18th day of March, 1869, 
 I find this obligation : 
 
 And the United States also solemnly pledges its public faith to make provision at 
 the earliest practicable period for the redemption of the United States notes in coin. 
 
 Without renewing the discussion in regard to the nature of these 
 notes, or quoting the decision of the Supreme Court of the United 
 States, or the declaration of the various acts of Congress from 1862 
 down, I rest upon this pledge of the public faith. Under what cir- 
 cumstances was it made ? The condition of our currency, the obligar 
 tion of our bonds, the nature of our promises, had been discussed be- 
 fore the people of the United States in the campaign of 1868 ; various 
 theories had been advanced ; and the result was that those who regard- 
 ed the faith of the nation as pledged to pay in coin not only the bonds 
 of the United States, but the notes also, prevailed, and G.eneral Grant 
 was elected President of the United States. On the eastern portico of 
 the Capitol on the 4th of March, 1869, he made this declaration : 
 
 A great debt has been contracted in securing to us and our posterity the Union. 
 The payment of this, principal and interest, as well as the return to a specie basis, 
 as soon as it can be accomplished without material detriment to the debtor class or 
 to the country at large, must be provided for. To protect the national honor every 
 dollar of Government indebtedness should be paid in gold, unless otherwise expressly 
 stipulated in the contract. Let it be understood that? no repudiator of one farthing 
 of our public debt wiU be trusted in public place, and it wiE go far toward strength- 
 ening a credit which ought to be the best in the world, and will ultimately enable 
 us to replace the debt with bonds bearing less interest than we now pay. 
 
 The Congress of the United States, in order to put into form its 
 sense of this obligation, passed the act " to strengthen the public credit," 
 and the last and most important clause of this act is the promise which 
 I have just read, that these notes shall be paid " at the earliest practi- 
 cable period " in coin. 
 
 "Wnat was the effect of this promise ? Why, sir, I have here the 
 daily register of the sales of our greenbacks in New York, because that 
 is the legal effect of transactions in gold. We have called our false 
 standard the true standard, by calling the dollar of our broken promises 
 the standard of value, whe'a every man of intelligence who bought and 
 sold anything, even our own domestic products, knew that gold was 
 the true standard, and measured our greenbacks by it. I have here the 
 daily sales, and what do they show? On the day we made that prom- 
 ise, the 18th of March, 1869, the greenbacks, the notes of the United 
 States, were worth T5| cents in gold ; or, in other words, gold was at a 
 
408 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 premium of 32 per cent. That was the measure of the credit of these 
 notes when we made this promise. It took nearly four dollars of green- 
 baclis to buy three dollars of gold. What was tne residt ? After you 
 enacted that law pledging the faith of the people of the United States 
 that you would redeem this promise — the value of your greenbacks ad- 
 vanced, not rapidly but gradually, and in one year, to within 12 per 
 cent, of par in gold. 
 
 The causes of the rise are not material to my argument. The fact 
 is, that in one year from the time that promise was made the value of 
 our greenbacks was over 89 cents in gold. I have here the quotations 
 of the 18th of March, 1870, which give gold at a premium of 11^, so 
 that a greenback in market value was worth more than 89 in gold. 
 Thus, in a single year, from the 18th of March, 1869, to the 18tn of 
 March, 1870, the credit of the United States rose, so that the barometer 
 of the money market, which you can not control, measured the depreci- 
 ation of your note at only 11 per cent., instead of 25 per cent, the year 
 before. 
 
 Mr. President, we see, then^ the effect of this promise. And I here 
 come to what I regatrd as a painful question to discuss — ^how have we 
 redeemed our promise ? It was Congress that made it, in obedience to 
 the public voice ; and no act of Congress ever met with a more hearty 
 and generous approval. But I say to you with sorrow, that Congress 
 has done no single act the tendency of which has been to advance the 
 value of these notes to a gold standard ; and I shall make that clearer 
 before I get through. Congress made this promise five years ago. 
 The people believed it and business men believed it. Four years have 
 passed away since then, and your dollar in greenbacks is worth no more 
 to-day than it was on the 18th of March, 1870 ; and no act of yom-s has 
 even tended to advance the value of that greenback to par in gold, 
 while every affirmative act of yours since that time has tended to de- 
 preciate its value and to violate your promise. 
 
 Mr. President, these are simple facts, although it may be painful 
 for us to discuss them. I do not say that Congress, in this matter, dis- 
 regarded the will of the people, because there was a public feeling 
 against any measure which tended to advance the value of the green- 
 backs to the gold standard. I am not complaining of Senatoi-s orllem- 
 bers who represent their constituents, but I do say that the fact stands 
 out as clear as light, that the Congress of the United States which made 
 this promise has done no single act the tendency of which even leads 
 one to suppose that it will ever redeem its promise. 
 
 Sir, let us see what has been done. We have paid $400,000,000 of 
 the public debt, and we boast of it — of debt not due for years. We 
 have paid to redeem that debt a premium of $40,000,000. In other 
 words, we have paid $440,000,000 to redeem fom- hundred millions of 
 debt not yet due, and we have not redeemed a single debt that was due 
 in March, 1869; but, on the contrary, we have increased the kind of 
 debts then due in ii;reater proportion than the increase of our popula- 
 tion. And, sir, while our promise did advance the credit of our bonds 
 and of our notes alike, and while the execution of that promise as to 
 our bonds has advanced our bonds to above par in gold, yet we have 
 
THE CUERENOY AND SPECIE PAYMENTS. 409 
 
 done nothing whatever to redeem the second clause of that pledge ; 
 but, on the other hand, all we have done has been done with the inten- 
 tion and with the effect of depreciating the value of our notes. 
 
 I am not here to find fault with individuals ; but I do say that the 
 Congress of the United States in the measures which have been adopted 
 has not done what it ought to redeem the pledge of the public faith to 
 pay these notes in coin " at the earliest practicable period." Why, sir, at 
 this moment we are living in daily violation of this pledge. I said a 
 moment ago that instead of adopting measures looking toward specie 
 payments we have increased the volume of our currency in every 
 branch of it. I^Tow let us see if this be true. I have here a statement 
 taken from the official report of the Secretary of the Treasury of the 
 amount of the currency on the 30th of June, 1869i I can not find a 
 statement for the 1st of March, 1869, but it was the same, because it 
 was fixed by law. I find that on the 30th of June, 1869, we had three 
 hundred and fifty-six millions of greenbacks, the same amount that we 
 had on the 18th day of March. That was the maximum amount, as it 
 was supposed, fixed by law. When the act of the 18th of March, 1869, 
 was passed, no one dreamed that there existed a power to issue forty- 
 four millions more. 
 
 Our greenbacks were then $356,000,000. On the 1st of January, 
 1874, according to the last statement of the public debt, they were 
 $378,481,339. We had, then, increased this form of our currency 
 $22,481,000. And that is not all. Since that time, and up to the 10th 
 of January, according to a New York newspaper — and I suppose it is 
 correct — I find that the amount of legal-tender notes outstanding in- 
 creased to $381,891,000, or an increase since the 1st of January of 
 something like $3,400,000, or at the rate of $400,000 a day. Every 
 dollar of this new issue of paper money directly tended to depreciate 
 that outstanding, and was issued in violation of the spirit and the letter 
 of the law of 1869. I am not now speaking of the legal power of 
 the Secretary of the Treasury to make this issue, because I have al- 
 ready given my opinion fully on this subject in an official report, but 
 only to call your attention to the fact that by our acquiescence we have 
 actually watered, debased, and depreciated by new issues the very notes 
 we promised to pay in coin at the earliest practicable period. 
 
 Nor is this all. Under authority clearly conferred by law on the 
 Secretary of the Treasury, we have increased the fractional currency 
 from $27,508,928, at which it stood on the 30th of June, 1869, to $48,- 
 554,792, or an increase of fractional currency of $21,046,000. Again, 
 sir, driven by a local demand which we could not resist, founded upon 
 a palpable injustice growing out of the mistake of an officer of the 
 Government long ago in the distribution of the national-bank circula- 
 tion, we did authorize by law an increase of the bank circulation of the 
 South and West to the amount of $54,000,000. The amount of bank 
 notes issued at the time we made this pledge was $299,789,000 ; and 
 to-day the amount outstanding is $339,081,000, showing an increase in 
 this kind of notes of $39,300,000, or an increase in the currency since 
 the promise to pay it in coin at the earliest practicable period, and all 
 legal tender in effect, of $82,827,000 ; and now this process of inflation 
 
410 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 is going on daily, first, by the issue of the remainder of the forty-four 
 million reserve, and secondly by the issue of new bank notes as banks 
 are organized under the act of July, 1870 ; and yet there is a cry for 
 more, more. / 
 
 It is true that the bank notes could only be issued as the 3 per cent, 
 certificates, another form of Government indebtedness, vt^ere retired. 
 But, sir, at the time the law of March 18, 1860, was passed, it was 
 just as well known as at a later period that these 3 per cent, cer- 
 tificates were a demand indebtedness which the Government was ex- 
 pected to pay at its pleasure and its will. The Government could have 
 paid the 3 per cent, certificates at any time with the money that was 
 used for paying the bonded debt of the United States, and thus have 
 advanced toward a specie standard. 
 
 I am willing to take my share of the responsibility for results, for I 
 certainly am guilty of aiding in the passage of the law to equalize the 
 distribution oi bank circulation under which there was an increase of 
 bank-notes. I have no criticisms to make upon what was done by the 
 executive authorities. What I say is, that Congress has not sufficiently 
 kept in its view that obligation — approved by the people in 1868, and 
 declared by Congress in 1869 — that the United States would redeem. 
 at the earliest practicable period, these notes in coin. 
 
 Now, sir, I ask, has it not been practicable at any time in the last 
 four years to advance in some degree these notes toward the specie 
 standard ? My honorable friend from Indiana says that for the last 
 four or five years we have had a time of unbounded plenty and great 
 prosperity ; we have built thousands and tens of thousands of miles of 
 railroad ; we have built furnaces ; we have expanded our enterprises 
 and proved our energy. All this we have done. "We have gone 
 through a period of prosperity almost unexampled ; but it seems we 
 never were prosperous enough during all this time, according to the 
 Senator from Indiana, to fulfill any part of this obligation wliich we 
 made on the 18th of March, 1869. Sir, when will it be practicable ? 
 Was it when the Treasury was overflowing and we were seeking new 
 outlets, new modes of expending money, new modes of paying debts 
 not yet due ? When will it be practicable, according to the Senator's 
 construction ? I press that question upon him, not for answer now, 
 but let him say to the business men of the country when it will be 
 practicable to restore the gold standard. If it can not be done in sea- 
 sons of plenty, of prosperity, of ovei"flowing revenues, shall it be done 
 in times of adversity and trial and tribulation ? What condition of 
 affairs would justify us in redeeming the sacred obligation which im- 
 pels us to return to the specie basis at the earliest practicable period ? 
 
 I am of opinion that at any time since the promise was made steps 
 could have been taken to redeem it, and that now, under the pressure 
 of panic, when debts are greatly diminished, is a favorable time for en- 
 tenng, by decisive measures, upon the policy of resumption. But I 
 suppose, according to the Senator's ideas, we are to issue more paper 
 money, make more good times, stai't the ball of inflation, with a view 
 that some time, may oe, in the dim future, wo will undertake to per- 
 form our proiiiiso. 
 
THE ODEKENOY AND SPECIE PAYMENTS. 411 
 
 But now let us come to ttie specific question of the time for re- 
 sumption. Shall the redemption of this pledge be postponed until the 
 public debt is paid ? Why, sir, one tenth of the money we have used 
 to pay the public debt not due would have brought us to a specie 
 standard. No one supposes that under an ordinary state of affairs the 
 currency of the country — ^the greenbacks — need be reduced below three 
 hundred millions in order to bring us to a sp^ie standard. I have 
 heard some of the ablest and most experienced business men of the 
 country declare that, whenever the right to convert greenbacks into 
 gold or its equivalent should be secured so that prudent men would 
 see that the Government had the power to maintain its specie standard, 
 there would be no reduction of the currency to any appreciable extent. 
 But, whether that be so or not, no one has claimed that the amount of 
 greenbacks need be reduced below $300,000,000 in order to bring that 
 remaining $300,000,000 up to the standard of gold. That would be a 
 reduction of $56,000,000. Fifty-six millions of the money that we 
 have applied to the payment of debt not yet due would have brought 
 all the remaining greenbacks up to par in gold, would have made, our 
 bank notes convertible into the standard of gold, and we should have 
 had, almost without knowing it, specie payment — a solid, safe, and 
 secure basis. The $40,000,000 of greenbacks we paid as a premium 
 for our bonds would have accomplished this result. Thousands of men 
 who have been ruined by the false ideas that sprung from this fever- 
 heated, depreciated paper money would be now useful, able, and suc- 
 cessful business men, instead of having been ruined by bankruptcy. 
 
 Sir, we gain nothing by postponing the fulfillment of our promise 
 with a view to reduce the public debt. We have to pay the debt in 
 coin anyway, and the same coin that pays it now would pay it after our 
 currency had been restored to par. If the old idea of Mr. Pendleton 
 had prevailed, that these bonds should be paid in greenbacks, then there 
 would be a motive for us to depreciate the greenbacks in order to pay 
 off our bonds at the cheapest rate. But this promise to pay in coin 
 extended to the bond-holder. We promised to pay the bond-holder gold 
 for his bond and the people gold for their greenbacks. We have ful- 
 filled our promise to the bond-holder. We have paid him in gold. We 
 have bought the gold. We have paid him at. a premium of 10 per cent, 
 on .our currency. Not a single effort, not a single measure, has suc- 
 ceeded in either House of Congress that .looks to the redemption of the 
 promise to the people who hold these greenbacks, which measure their 
 daily toil in their productive avocations. We can not postpone this 
 obligation until the payment of the public debt, because, although we 
 have rapidly advanced in the payment of the public debt, it will be 
 many long years before that " consummation devoutly to be wished " 
 will be reached. 
 
 Shall we postpone the redemption of our greenbacks until we can 
 accumulate enough gold in our Treasury to pay them ? We know the 
 effect of that policy. Any attempt to accumulate great masses of gold 
 in tlte Treasury will not only excite popular opprobrium, by holding 
 idle in the vaults of the Treasury money that ought to draw interest, 
 but it will create a stringency in the gold market. It will advance the 
 
412 SPEECHES AND REPORTS OP JOHN SHERMAN. 
 
 value of the veiy thing we wish to get. Accumulate gold in great 
 masses, and it will advance the |)rice of gold all over the world. We 
 could not now, with all our teeming productions, draw to this country 
 $200,000,000 in gold without disturbing the Bank of France, the Bank 
 of England, and all the money centers of the world. Therefore the 
 idea of postponing the day of specie payments until we could accumu- 
 late enough gold to redeem the greenbacks would be the idlest, vainest 
 delusion and the most foolish hope. 
 
 What then ? Shall we postpone the payment of our notes in coin, 
 shall we put off the fulfillment of our promise, until the mysterious 
 "balance of trade" is in our favor? There never was a greater hum- 
 bug in the world than this idea of the balance of trade. Why, sir, the 
 balance of trade is now largely in our favor, and according to this 
 theory we ought now to be prosperous and happy. The balance of 
 ti-ade is in our favor ; our exports exceed our imports ; we ought now 
 to be supremely happy. But a year ago the balance of trade was $100,- 
 000,000 against us. We sent our exports to Europe, it is true ; but we 
 imported silks and satins and wines. All the luxuries of the Orient, 
 all the rich goods of every clime, came pouring into this country. The 
 balance of trade was against us ; and yet, according to the argument of 
 my friend from Indiana yesterday, the last two or three years, when 
 the balance of trade was against us, was a happy time^ halcyon days, 
 when we had prosperity in all branches of industry, and were building 
 many thousands of miles of railroad every year. 
 
 Mr. President, this fallacy of the balance of trade ought not to 
 enter into the calculations of prudent men. When the balance of trade 
 is in our favor, it indicates thrift and economy' It shows we are ex- 
 porting our surplus products and getting a fair price for them, and 
 taking solid gold or paying debts in exchange for them, instead of taking 
 silks and satins. But this is not conclusive evidence that when we are 
 importing more than we are exporting we are necessarily carrying on a 
 losing trade. These imports may be, in actual wealth-producing prop- 
 erty, such as capital, machinery, or the like, more valuable to us than 
 the burden of the interest we pay on the balance of trade. The whole 
 theory depends upon the nature of the imports for which we run in 
 debt. In this respect the balance of trade is precisely like the balance 
 of trade between the merchant and the farmer. Ii the farmer buys 
 less than he sells, he is surely on a safe footing ; if he buys more 
 than he sells, the result will depend entirely upon what he buys, 
 whether luxuries consumed in the using or materials for actual pro- 
 ductive improvements on his farm. If the latter, he is prosperous and 
 happy, though " the balance of trade " may be against him. It is not 
 a question of " balance of trade," but a question of prudence and judg- 
 ment in the trade itself. Only a year ago I had a controvei-sy with a 
 fellow-Senator, who is now present, about this balance of trade. He 
 insisted that when the balance of trade was against any nation it was 
 an evidence of decay. I said this was a fallacy. He replied that no 
 country could be prosperous unless the balance of trade was fti its 
 favor. I asked him ii he thought Great Britain was a prosperous 
 country, and he said it was a very prosperous country, and that the 
 
THE ODEEENOY AND SPECIE PAYMENTS. 413 
 
 balance of trade was always in fayor of Great Britain. "We made a 
 friendly bet on the subject, and it turned out that the balance of trade 
 was against Great Britain to the tune of over $300,000,000 per annum, 
 and had been for twenty years. By the fallacious theory of the " bal- 
 ance of trade " Great Britain was on the high road to ruin. Yet the 
 whole of this balance of imports was in commodities sent to pay in- 
 terest on English investments in foreign countries — proiits of trade, 
 and so forth. The profits of the trade were all in favor of Great 
 Britain, which imported raw articles and exported high-priced produc- 
 tions, while the balance of trade only represented mcreased and in- 
 creasing wealth, instead of ruin and poverty ; so that all this talk about 
 the balance of trade is the sheerest nonsense. 
 
 Sir, there is no time unfit to fulfill a sacred obligation, and there 
 has been no day since this obligation was declared by Congress when 
 we should not have directed our attention toward redeeming it. The 
 only question for Congress is to say with what rapidity it wul advance 
 toward specie payments. When you tell me you have the right to 
 choose the time and the occasion, I say you have done nothing. You 
 have buried your talent and are an imfaithful steward. I ask the 
 honorable Senator from Indiana what single act of Congress, since this 
 pledge was made, has even tended toward specie payments ? Let him 
 look over the statute-books, examine them all, and he will answer, 
 none. I have sought in vain for any legislation to show that Congress 
 has been mindful of this obligation ; I cannot find a single measure 
 that even tended toward specie payments. 
 
 "We are told that we are all for specie payments. Even my friend 
 who now occupies the chair [Mr. Ferry, of Michigan] tell us he wants 
 to issue one hundred millions more of paper money to prepare us for 
 specie payments. He looks to specie payments as the ultimate result 
 of his one hundred millions. "We are all for specie payments some 
 time, may be. "We are not in favor of it in times of plenty. "We are 
 not in favor of it in times of OTeat prosperity. "We are not in favor 
 of it in view of the panic. "When shall we be in favor of it ? That 
 is the question that Senators ought to be prepared to answer to the 
 business men of this country. There is not a man who buys and sells, 
 who deals in exchanges, a "banker or a broker, but measures daily the 
 depreciation of your notes. He is compelled to take them, and he 
 eagerly asks you, as you have promised to redeem them at the earliest 
 practicable period, if you cannot fix the time, to state under what 
 circumstances, under what condition of trade, under what condition 
 of plenty, imder what condition of surplus revenue, you will pay 
 them. 
 
 The very uncertainty of such an obligation, as it is now construed, 
 would prevent the richest man in the city of New York from borrow- 
 ing a dollar upon it. Mr. Astor, with his untold wealth, could not 
 borrow a thousand dollars of any gentleman who now hears me upon 
 a promise so vague and indefinite as you seek to make this. And yet 
 the people of this country have been compelled to submit to a forced 
 loan, and the business men of this country are compelled to take such 
 paper as the standard of their values and of all values, when no living 
 
414 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 man can guess the time when, or the circumstances under which, this 
 promise will be redeemed. 
 
 I say, therefore, that if the ideas of these gentlemen are to prevail 
 in the Senate, they ought to tell the country when and under what 
 circumstances they will redeem this promise. I say to Senators that if 
 now, in this time of temporary panic, a great part of which, as I shall 
 show you, has already passed over, we yield one single inch to the 
 desire for paper money in this country, we shall cross the Rubicon, 
 and there will be no power in Congress to check the issue. If you 
 want forty millions now, how easy will it be to get forty millions 
 again ! If you want one hundred millions now, convertible into three 
 sixty-five currency bonds, how soon will you want one hundred mil- 
 lions more ! Will there not always be men in debt ? "WiU not always 
 men with, bright hopes embark too rashly on the treacherous sea of 
 credit ? "Will there not always be a demand made upon you for an 
 increase ? And when you have crossed the Eubicon and have fulfilled 
 the pledges you have already made to the people of the United States, 
 where can you stop ? Where our ancestors stopped at the close of the 
 Uevolution ; where the French people stopped in the midst of their 
 revolutionary fervor ! 
 
 Sir, I regard it as the proudest achievement of the American peo- 
 ple that so soon after the war they so faithfully and honorably re- 
 deemed their obligation to the bond-holder. I demand the same hon- 
 orable fulfillment of your promise to the note-holder. Now is the time 
 to make the stand, not only to prevent any further violation of law and 
 of our promise, but to retrace our steps and to give some decisive token 
 that you will pay our paper money in coin, as we agreed to do. 
 
 This is all I desire to say in regard to this pledge of the public faith. 
 But I wish to go a little further. I wish to show you that the policy of 
 the country, adopted at the time these notes were issued, contemplated 
 that they should be maintained at par in gold ; that that policy was 
 only temporarily abandoned under the pressure of war. The act of 
 February 25, 1862, is the fundamental constitution of our present 
 financial system. It was passed after the greatest deliberation m both 
 Houses of Congress. It contains every principle and element of our 
 whole financial system. There is hot an idea advanced during the war 
 that operated successfully that is not contained in the act of February 
 25, 1862. That act provided for the issue of five-twentv bonds; it 
 provided for the issue of the greenbacks ; it provided for the issue of 
 certificates of indebtedness ; it provided that your internal taxes should 
 be paid in paper money and that your duties should be paid in gold ; it 
 established your sinking fund ; it secured the interest on the public debt 
 always to be paid in coin ; it set aside the coin fi'oni customs duties to 
 pay it. That act provided that tlio greenbacks issued under it should 
 be maintained at as near par in gold as possible during the war, but at 
 all events at par with the Dest bond that could be issued by the Govern- 
 ment (if the United States. I will ask the Secretary to read the stipu- 
 lations that were made in regard to these notes. They will show how 
 sacredly the notes wore regarded and how cai-efully their security was 
 watched. 
 
THE CURRENCY AND SPECIE PAYMENTS. 415 
 
 The Chief Clerk read as follows : 
 
 And such notes herein authorized shall be receivable in payment of all taxes, 
 internal duties, excises, debts, and demands of every kind due to the United States, 
 except duties on imports, and of all claims and demands against the United States 
 of every kind whatsoever, except for interest upon bonds and notes, which shall 
 be paid in coin, and shall also be lawful money and a legal tender in payment of all 
 debts, public and private, within the United States, except duties on imports and 
 interest as aforesaid. And any holders of said United States notes depositing any 
 sum not less than fifty dollars, or some multiple of fifty dollars, with the Treasurer of 
 the United States or either of the assistant treasurers, shall receive in exchange 
 therefor duplicate certificates of deposit, one of which may be transmitted to the 
 Secretary of the Treasury, who shall thereupon issue to the holder an equal amount 
 of bonds of the United States, coupon or registered, as may by said holder be de- 
 sired, bearing interest at the rate of six per cent, per annum, payable semi-annually, 
 and redeemable at the pleasure of the United States after five years, and payable 
 twenty years from the date thereof. And such United States notes shall be received 
 the same as coin, at their par value, in payment for any loans that may be hereafter 
 sold or negotiated by the Secretary of the Treasury, and be reissued from time to 
 time as the exigencies of the public interests shall require. 
 
 I have had this clause read to show you that the foundation of the 
 greenback was coin. Although it could not at the moment, during the 
 war, be converted into coin — for the wants of the Government were 
 greater than all the coin of the United States, or perhaps than all the 
 coin of the world, attainable during war — ^yet the Government based the 
 whole upon coin. Every bond that was issued was issued only upon the 
 sacred pledge contained in this act that the interest of that bond should 
 be paid in coin ; and the principal should be paid, when due, in coin. 
 The fifth section of the act provided that aU duties on imported goods 
 shall be paid in coin ; and that this money shall be set aside as a special 
 fund to pay the interest on the bonded debt in coin. Then, in order 
 to secure the greenbacks, it authorized any holder of greenbacks to pay 
 any Government debt with them ; it authorized the holder of green- 
 backs to pay any debt, public or private, with them ; and every citizen 
 of the United States was bound to take them. Then it authorized them 
 to be converted into six per cent, bonds of the United States, payable, 
 principal and interest, in gold. If the policy provided for by this act 
 had been maintained, we should long since have arrived at specie pay- 
 ments, without any series disturbance of our monetary affairs. 
 
 Now, Mr. President, I proceed to show the Senate how this provi- 
 sion, the convertible clause of the act of February 25, 1862, was repealed. 
 On the 3d of March, 1863, Congress passed " An act to provide ways 
 and means for the support of the Government." This act was passed 
 during the dark hours of the war. The currency of the country did 
 not flow into the Treasury rapidly enough to pay our army. I re- 
 member that at about the time this act was passed there were very 
 large unpaid requisitions. The Secretary of the Treasury, instead of 
 issuing any more six per cent, bonds, desired to float a ten-forty five 
 per cent, bond ; in other words, to reduce the burden of interest upon 
 the public debt. At this time there were three hundred millions of 
 circulation outstanding ; and with all the rights and all the privileges 
 conferred upon the greenbacks, they did not flow into the Treasury 
 fast enough to furnish means to carry on the operations of the war. 
 The Secretary reasoned somewhat in this way : he said that the holder 
 
416 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 of greenbacks had the right to convert them at any time into bonds 
 bearing six per cent, interest ; but as that right could be exercised at 
 any time, the people were apt to postpone the exercise of it, and he 
 believed it would advance the conversion of these notes into bonds by 
 taking away the absolute le^al right to convert. In other words, the 
 suspension of this convertibility clause was passed with a view to pro- 
 mote conversion ; and, if possible, to reduce a conversion into a five 
 per cent, gold bond instead of a six per cent. bond. "When the Secre- 
 tary of the Treasury presented this view to Congress he was at once 
 met with the pledge oi the public faith, with the promise printed upon 
 the back of the greenbacks that they could be converted into six per cent, 
 bonds at the pleasure of the holder ; and it was urged that we could not 
 take away that right. This difficulty was met by the ingenuity of the 
 then Senator from, Vermont [Mr. Collamer]. He said that no man ever 
 exercised a right which could not properly be barred'by a statute of lim- 
 itations ; and if this right was injurious to the people of the United 
 States, and prevented the conversion of these notes into bonds, we 
 might require the holders to convert them within a given time ; that 
 we could give them a reasonable time within which they could convert 
 the notes into six per cent, bonds, and after that take away the right. 
 The act of March 3, 1863, was amended by inserting this clause : 
 
 And the holders of United States notes, issued under or by virtue of said acts, 
 shall present the same for the purpose of exchanging the same for bonds as therein 
 provided on or before the 1st day of July, 1863 ; and thereafter the right so to ex- 
 change the same shall cease and determine. 
 
 In reviewing the history of our tiihes I am not sure but that in this 
 we made a mistake. I am not sure but that it would have been better 
 to submit to any sacrifice rather than palter with the public faith. If 
 there was any wrong done by Congress at that time, 1 am willing to 
 share the responsibility of it, although I felt at the time the danger of 
 the measure. But, sir, under the pressure of war we could not con- 
 sider as carefully as we can now all the obligations that rest upon us. 
 The life of our country was at stake ; every man's property was felt to 
 be insecure if the Union was destroyed ; everything was imperiled ; 
 and we did a great many things in those times of peril and excitement 
 and trial that we would not like to do now. Thousands of men rushed 
 to the battle-field and surrendered their lives ; othei-s gave up their 
 property ; mothers their children. There were acts of heroism done at 
 those times, and sometimes acts of wrong. 
 
 I am willing to take my share of the responsibility for the passage 
 of this act ; but theorists can demonstrate very easily that in this very 
 act we laid the foundation of the long delay m the return to a specie 
 standard. If the right to convert greenbacks into bonds had been re- 
 tained as the permanent policy of the country during the war, then no 
 man would have been bold enough or bad enough to take that provi- 
 sion away in time of peace. But luai'k, sir, while the legal riglit to 
 convert notes into bonds was taken away, no one contemplated a denial 
 of the actual conversion. Tlie notes were stiU received pai* for par for 
 bonds during the war and after the war was over. The right to con- 
 vert them into a particular form of bonds, that is, the five-twenties, 
 
THE OITEEENCY AND SPECIE PAYMENTS. 417 
 
 was denied ; still they were converted at par into seven and three-tenths 
 Treasury notes, into ten-forty gold bonds, and into ef ery form of se- 
 curity except only the five-twenties. So that although we repealed the 
 technical right to convert after a given time those notes into one class 
 of bonds, we never did deny in practice the right to convert them into 
 some form of interest-bearing security. 
 
 After the passage of the act of March 3, 1863, Secretary Chase be- 
 lieved that he could negotiate a ten-forty loan, and he tried to do it. 
 One hundred million dollars were taken, and they were taken by the 
 conversion of these notes, which were received at par. Afterward we 
 issued $830,000,000 of three-year Treasury notes bearing 7*3 per cent, 
 currency interest, and when due convertible into 6 per cent, bonds ; 
 and they were sold at par ia greenbacks. So that although the legal 
 privilege of the note-holder to convert was taken away, yet in fact his 
 right to convert existed except as to the five-twenty bonds. During 
 the war, and up to 1866, there was no hour when any holder of green- 
 backs could not present them to the Treasury of the United States, or 
 to any banker or broker, and buy some form of United States interest- 
 bearing security at par. After the passage of this act the five-twenties 
 began to rise above par in currency. Then the measure of the value 
 of the greenback was the ten-forty bond. When the Government, 
 fearing to issue a larger amount of gold-bearing bonds, again began to 
 issue currency securities, seven and three-tenths notes, the greenbacks 
 were received at par for them. 
 
 Now, Mr. President, I have shown that the greenbacks were based 
 upon coin bonds ; that the holders had the right to convert them into 
 coin bonds ; that that right was taken away as to the five-twenty bonds ; 
 but that, in practice and in effect, the greenback was convertible into 
 an interest-bearing bond of the United States up to 1866, and until the 
 passage of the law to which I will now refer. 
 
 My friend from Indiana [Mr. Morton] inquires what law is the 
 worst of all the laws we have passed in relation to the greenback. In 
 my judgment more evil effects have resulted from the " act of the 
 Government" passed on the 12th of April, 1866, than from any other 
 act that was ever passed in regard to our financial system. Indeed, 
 it is the only one that I desire to criticise. 
 
 Mr. President, what was the condition of affairs when the war was 
 over ? "We had then outstanding every form of liability. "We had six 
 per cent, bonds ; five per cent, bonds ; seven-thirty bonds ; certificates of 
 indebtedness; and two or three issues of greenback notes; we had 
 eight or ten different forms of Government securities. Then it was 
 that Congress was called upon to make provision for funding this debt. 
 At that time there was a large circulation ; there were some forms of 
 interest-bearing notes that were a legal tender for the principal ; we 
 had almost every class of securities. The act of the Government 
 which was most injurious to the public credit was an act of omission 
 and not an act of commission. If in the first session of Congress dur- 
 ing Andrew Johnson's administration we had passed a funding bill 
 authorizing any holder of any form of Government security to convert 
 it into a five per cent, bond, all the evils that have fiowed out of our dis- 
 27 
 
418 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 ordered currenajr would have passed away; the questions that after- 
 ward were raised to endanger the public credit never would have 
 arisen ; all this long agony of endeavoring to do what we have prom- 
 ised to do, and never performing it, would have been avoided. If in 
 December, 1865, after our soldiers had returned to their homes and the 
 war was over, we had authorized any holder of any form of security, 
 greenback or bond, to convert it at his pleasure, at his will, into some 
 proper security of the United States, say a five per cent, bond, there 
 would have been no difficulty. The condition of the public credit, the 
 advancing credit of the nation, the triumph of our arms, aU causes 
 cooperated ; but, sir, it could not be done. At that time came up the 
 controversy between the President of the United States and Congress, 
 and the fierce and angry passions that it excited, the eager debates, the 
 bitter excitement, the quasi civil war that existed, prevented any con- 
 sideration of our finances. Efforts were made at that time to pass 
 some proper funding bill, but it was impossible to attract public atten- 
 tion to it. Congress would not look at it. Finally, after a debate of 
 not more than an hour in the Senate, and a short debate in the House, 
 the act of April 12, 1866, was passed, conferring upon the Secretary 
 of the Treasury a power that was never conferred upon mortal man 
 before. I will ask the Secretary to read this act. 
 The Chief Clerk read as follows : 
 
 An act to amend an act entitled "An act to provide ways and means to support the 
 Goverament," approved March 3, 1866. 
 
 Be it enacted ly the Senate and Home of Representatwea of the United States of 
 America in Congress assembled, That the act entitled " An act to provide ways and 
 means to support the Government," approved March 8, 1865, shall be extended and 
 construed to authorize the Secretary of the Treasury, at his discretion, to receive 
 any Treasury notes or other obligations issued under any act of Congress, whether 
 bearing interest or not, in exchange for any description of bonds authorized by the 
 act to which this is an amendment ; and also to dispose of any description of bonds 
 authorized by said act, either in the United States or elsewhere, to such an amount, 
 in such manner, and at such rates as he may think advisable, for lawful money of 
 the United States, or for any Treasury notes, certificates of indebtedness, or certifi- 
 cates of deposit, or other representatives of value, which have been or which may 
 be issued under any act of Congress, the proceeds thereof to be used onlv for retir- 
 ing Treasury notes or other obligations issued under any act of Congres"s; but no- 
 thing herein contained shall be construed to authorize any increase of the public debt • 
 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 m any one month : And provided further. That the act to 
 which this IS an amendment shall continue in fuU force in aU its provisions, except 
 as modified by this act. "^ k 
 
 Sbo. 2. And be it further enacted, That the Secretary of the Treasury shall re- 
 port to Congress at the commencement of the next session the amount of ex- 
 changes made or money borrowed under this act, and of whom, and on what terms- 
 and also the amount and character of indebtedness retired under this net and the 
 act to which this is an amendment, with a detailed statement of the expense of 
 making such loans and exchanges. 
 
 Under the enormous powers conferred by tliis act the Secretary of 
 the Treasury, Mr. McCulloch, adopted what is called the contraction 
 policy ; that is, he authorized the funding of all forms of interest- 
 bearing securities into six per cent, gold bonds of the United States, 
 
THE ODEEENOY AND SPECIE PAYMENTS. 419 
 
 while he proposed to raise the greenback up to par in gold by con- 
 tracting it by gradual stages limited by the law. Tms act, and the very 
 first tmng done under it, separated forever the gold bonds of the 
 United States from the legal tenders, and abandoned all idea of the 
 
 ?ower, the right, and the practice to convert the greenback into a bond, 
 remember that the honorable Senator from Michigan [Mr. Chandler] 
 and I tried hard to prevent the passage of this law, and to attract pub- 
 lic attention to it, but we could not. Everybody was then fighting 
 Andrew Johnson. And so, sir, the law was passed after a brief de- 
 bate, and all this enormous power was conferred upon the Secretary of 
 the Treasury. The law did not even stipulate what the bond to be is- 
 sued should be, whether it should be a forty- or twenty-year bond, or 
 whether it should run five years. The only limitation was that the 
 rate of interest on the gold bond should not be over six per cent., but 
 no duration as to time was prescribed. Under that act the Secretary 
 funded the Trea,sury notes, and aU the various forms of interest-bearing 
 notes, into six per cent, bonds, swelling the amount of our six per cent, 
 indebtedness from about $700,000,000 to about $1,600,000,000. All 
 the Treasury notes payable in currency were converted into six per 
 cent, gold bonds, and the money of the people, the greenbacks, were 
 left to be canceled and retired under the last clause of the act, which 
 authorized the Secretary to cancel $10,000,000 by a certain time, and 
 $4,000,000 in each month afterward. Thus the bond-holder was pro- 
 vided for, and the note-holder was left without any legal right except a 
 naked promise to pay in the indefinite future. 
 
 If this act had contained a simple provision restoring to the holder 
 of the greenback the right to convert his note into bonds there would 
 have been no trouble, why should it not have been done ? Simply 
 because the then Secretary of the Treasury believed that the only way 
 to advance the greenbacks was by reducing the amount of 'them ; that 
 the only way to get back to specie payments was by the system of con- 
 traction. If the legal-tender notes could have been wedded to any 
 form of gold bond by being made convertible into it, they would have 
 been lifted by the gradual advance of our public credit to par in gold, 
 leaving the question of contraction to depend upon the amount of 
 notes needed for currency. Sir, it was the separation of our greenbacks 
 from the funding system that created the diflBculty we have upon our 
 hands to-day ; and I say now that, in my judgment, the only true way 
 to approach specie payments is to restore this principle, and give to the 
 holder of the greenback, who is your creditor, the same right that you 
 give to any other creditor. If he has a note which you promised to 
 pay and can not, and he desires to secure interest on that note by sur- 
 rendering it for an interest-bearing security, why should you not give 
 him the privilege ? 'No man can answer that. It is just as much a 
 debt as any other portion of the debt of the United States. 
 
 I have always insisted that it was the duty of the Government to 
 redeem this broken promise by making the note equal to par in gold 
 before attempting to force it on anybody in payment of a bond. vVe 
 have no right to compel any holder of a bond to take a greenback in 
 payment of his bond until we comply with that obligation which we 
 
420 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 assumed, long, lone ago, to make it equal to par in gold. Then it would 
 be a matter of indifference whether a greenback or gold was paid. But, 
 sir, it was the act of March 18, 1869, that settled all this controversy 
 about the obligation of the Government to the holders of the greenback 
 and the bond. 
 
 By the act of 1866 $10,000,000 of greenbacks were to be retired in 
 six months and canceled, and $4,000,000 every month thereafter. Such 
 progress was made under the operation of the act that within less than 
 two years $44,000,000 of these notes had been retired and canceled in 
 pursuance of the contraction policy. 
 
 The act was then suspended ; and the Secretary could not cancel 
 anymore notes after the passage of the act of 1868. But I ask whether 
 that revives into life and being the $44,000,000 that were retired and 
 canceled under the law ? 
 
 To the suspension act I heartily assented. I do not doubt at all that 
 the policy of getting to specie payments by a contraction of the cur- 
 rency in the way proposed was a very unwise one. I aided in the re- 
 peal of the act of 1866. But that is not the point. When in 1869 we 
 pledged the public faith to redeem our outstanding paper in coin, the 
 only amount that then legally existed, or which there was any authority 
 to issue, was the $356,000,000, to which amount, by the policy of the 
 law of 1866, the currency had been reduced when that reduction was 
 suspended. The argument I make is that when we made the pledge of 
 the public faith to redeem our notes in coin, the only currency that was 
 legally outstanding was the $356,000,000. All above that had been 
 retired and canceled. If there are any words in our language that ex- 
 press the destruction, the annihilation, the pon-existence of anything, 
 the words " retired and canceled " do. They are the very same words 
 that are used in regard to the cancellation of all our bonds. There have 
 been $3,000,000,000 of bonds in various forms " retired and canceled." 
 Is there any power to reissue them ? None at all. 
 
 The claim of the Secretary of the Treasury that he had the power 
 to issue them was submitted to Congress, and neither House of Con- 
 gress negatived by a vote the assertion of the power ; and therefore it 
 may be said with great propriety, and I freely accord, that under the 
 circumstances, following the decision of the Department, the present 
 Secretary might be justified in issuing them ; but the ai-gument I am 
 making to-day is not to arraign the Secretary, not to find fault with 
 him. In the written report made by the Committee on Finance on 
 this subject we expressly relieved the Secretaiy of the Treasury from 
 all fault in the matter, and submitted the matter to Congress. I say 
 that Congi'ess, by its silent acquiescence, now daily permits the viola- 
 tion of the only act that looked to the advance oi greenbacks to par 
 with gold. The Secretary of the Treasury submitted to us the claim 
 that he has asserted and exercised, and it has never been denied by 
 Congress or by either House of Congi-ess, and therefore I do not find 
 fault with him ; but I say that Congress does permit this act, which in 
 my judgment is a violation of law and an exorcise of authority not 
 delegated to the Secretary of the Treasury, to go on, and we are now 
 daily living upon notes issued without authority of law. 
 
THE CURRENCY AND SPECIE PAYMENTS. 421 
 
 Mr. President, I have gone into this argument to show, first, that 
 we are bound by the obligation that we assumed on the 18th of March, 
 1869, to resume specie payments, or to do something to advance our 
 notes to the par of gold. I have endeavored to show that such was the 
 legal and established policy of the Government when the notes were 
 first issued. Ifow, I have only to say, very briefly, that there are vari- 
 ous modes, to none of which do I intend to commit myself until the 
 whole subject is finally discussed, by which this can easily be accom- 
 plished. There are three modes that have been proposed in debate in 
 the Senate, and a multitude come to us from the people, but I will 
 group them into three classes. 
 
 There is, first, the proposition to accumulate gold in the Treasury 
 with a view to the actual redemption of our notes in coin. This is 
 supported by two bills now before the committee ; one introduced by 
 the Senator from Vermont [Mr. MorriU] and the other by the Senator 
 from Ifew Jersey [Mr. Frelinghuysen]. What are the objections to 
 this plan ? They seem to me to be these : In the first place, any at- 
 tempt to accumulate large masses of gold in the Treasury, lying idle to 
 await some future event not fixed by act of Congress, would not be a 
 wise use of the public moneys. In the next place, I entirely object to 
 conferring upon the Secretary of the Treasury the power of issuing one 
 hundred millions or any less sum of 6 per cent, bonds with a view of 
 buying gold to hoard in the Treasury to maintain resumption. I believe 
 that it is impossible, in the very nature of things, to maintain the re- 
 sumption of specie payments at all times and under all circumstances ; 
 and if anything has been established by modem experience, it is that 
 all a nation that issues paper money can do is to maintain it at a specie 
 standard in ordinary times ; but in times of panic, such as by periodical 
 revulsions come over every country, specie payments cannot be main- 
 tained. They can scarcely be maintained in England, and are not now 
 maintained in France, although they are approached. Therefore, every 
 plan for specie payments ought to have some provision for the tempo- 
 rary suspension of such payments, or to provide some means by which 
 in times of great panic and financial distress there may be a temporary 
 departure from the specie standard. I say this, not that it ought to be 
 so, but simply because it is a matter of experience demonstrated by the 
 history of almost all the commercial nations of Europe. 
 
 The second plan is the actual payment and cancellation of the 
 United States notes ; in other words, the plan of contraction. In the 
 first place, this plan, while it operates, does so with such severity as, in 
 a popular government like ours, to cause its suspension and repeal. 
 Undoubtedly, the most certain way to reach specie payments is by re- 
 tiring the notes that are dishonored, paying them off and taking them 
 out of circulation. But the .trouble is, the process of contraction is 
 itself so severe upon the ordinary current business of the country that 
 the people will not stand it ; and in this country the people rule. The 
 policy of Mr. McCulloch, already commented upon, if it had been con- 
 tinued further, would have undoubtedly brought us to a specie standard ; 
 but with great distress, great impoverishment, and with more difiiculty 
 than was really necessary to accomplish the object. 
 
422 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 These are tlie difficulties that occur to me as against these two 
 policies. 
 
 There is a third plan. This plan, which in my judgment presents 
 the easiest and best mode of attaining specie payments, is to choose 
 some bond of the United States which in ordinary times, by current 
 quotations, is shown to be worth par in gold in the money markets of 
 the world, where specie is alone the standard of value, and authorize 
 the conversion of notes into it. 
 
 I do not intend to consume much time in the discussion of these 
 different plans, because they are aU open for debate, and I do not intend 
 to commit myself. I have no, pride of opinion as to modes if I can 
 secure the substance. I want to get at some measure which, without 
 contraction, without undue distress, will make us redeem our promise. 
 This mode of reaching the specie standard was reported favorably by 
 the Committee on Finance at the last session. I will glance at the re- 
 sults that would have been accornplished by that plan in the present 
 condition of our money market. I am speaking here now, on the 16th 
 day of January, 1874-, after the time when, by the bill reported at the 
 last session. United States notes would have been converted, into coin 
 or bonds at the option of the United States. This would not to-day 
 have produced absolute payment of the notes in coin, but their value 
 would have advanced to the value of the 5 per cent. bond. Things 
 equal to the same are equal to each other. Five per cent, gold bonds 
 this day, in the midst of the panic, ai-e worth ninety-nine and a half . 
 cents ; so that the United States notes' would be this day practically at 
 
 J»ar in gold, having just about the same depreciation as now exists in 
 i'rance, where the law of convertibility has always been maintained. 
 In France, with a large circulation, the currency may be used the same 
 as gold to pay for any form of debt of or to the Government, even when 
 in the form of duties. 
 
 I have no doubt that it would greatly advance our greenbacks if 
 they were allowed to be received at the custom-house for duties. But 
 by the act of the 25th of February, 1862, which authorized the issue 
 of both bonds and greenbacks, it was expressly stipulated that the 
 greenbacks should not be receivable for customs duties, but tliat the 
 customs duties should be paid in coin, and that the coin should be spe- 
 cially pledged and set apart as a fund first to pay the interest, and then 
 the prmcipal, of the debt. There is the difficulty. If we were now 
 to legislate without any law upon the statute-book, I certainly should 
 not pass an act that would require us to refuse the notes of the United 
 States for the taxes payable to the United States ; but we are crippled 
 by the operation of a law which we cannot repeal without violating the 
 public faith. 
 
 Now, sir, taking the case again of the existence of some convei-t- 
 ible provisions such as that I referred to in the bill of last year, at 
 this day the notes, instead of being hoarded, would to some extent 
 have floated into the Treasury for five per cent, bonds ; they would be 
 
 Said out for current expenses, and in the purchase or redemption of 
 ve-twenties at a discount of one half of one per cent. It is some- 
 times said that these notes would flow in unmeasui-ed amounts for five 
 
THE OUKRENOY AND SPECIE PAYMENTS. 423 
 
 per cent, bonds. Why, sir, how many would be withdrawn from the 
 volume of the currency before they would be equal to the five per 
 cent, bonds now at or near par in gold ? But suppose they should 
 flow in to the extent of fifty or one hundred millions, can not the Gov- 
 ernment of the United States use them ? First, we have to pay our 
 current expenses, which are now more than our income. Instead of 
 consuming the forty-four million reserve, we could use to pay the 
 current expenses some of the notes which would come into the Treas- 
 ury for bonds ; and we could use aU of them in the purchase and re- 
 demption of the six per cent, bonds of the United States. There 
 would be no practical difiBculty in using all the currency that might 
 flow into the Treasury in the payment and liquidation at a slight sac- 
 rifice of a debt now bearing six per cent, interest. That operation 
 might go on until $1,200,000,000 were paid, because every dollar of 
 the five-twenty bonds is now due and payable at our pleasure in coin. 
 
 Sir, the Secretary of the Treasury has for years pursued the policy 
 of buying bonds in greenbacks. He has paid ten per cent, premium, 
 because he could not get them for less. And suppose our notes were 
 advanced near the par of gold by being made convertible into a five 
 per cent, "bond, the value of which is fixed in foreign countries, he 
 might then use the greenbacks that would fiow into the Treasury to 
 pay the six per cent, bonds, by paying the difference between notes 
 and goldvi What premium would he have to pay ? One haK of one 
 per cent. This operation of funding the six per cent, bonds into the 
 new five per cents is going on now at an expense of nearly two per 
 cent, to the Government. First the law allows one half per cent, 
 for expenses, and then a certain credit or delay in payment is given 
 to the syndicate of bankers who negotiate the exchange. This is 
 equivalent to one and one half per cent., so that we are now carrying on 
 tins funding system at an expense of at least two per cent. Sir, the 
 practical operation of a law permitting the conversion of notes into 
 bonds would not only advance our notes to near par in gold, but would 
 enable us to reduce the interest on the whole mass of six per cent, 
 bonds of the United States to five per cent., thus saying $12,000,000 
 per annum, or several times the amount of interest we would pay on 
 the bonds given for notes permanently retired. 
 
 Now, sir, I will not go into the details of the other provisions of 
 that bill, which was intended to supply any want of currency felt at 
 the time. That bill provided for free banking, and for a relief from 
 the reserve required to be maintained by the banks as a security for 
 their notes. Sir, if you take the actual facts as they have now devel- 
 oped themselves and apply the principles contained in the bill of the 
 last session, it would have answered by its actual workings all the ob- 
 jections that were made to it, and I defy Senators to criticise it. But, 
 sir, the time will come when whatever plan may be brought before the 
 Senate wiU be subjected to amendment and criticism. "We are not now 
 considering any plan, but only whether we recognize our obligation 
 now at this session to do some definite act to redeem our broken prom- 
 ises. If you will you can find a way. 
 
 Mr. President, there are some objections of a popular character 
 
424 SPEECHES AND KEPOETS OF JOHN SHEEMAK 
 
 made to specie payments whicli I think I ought to answer. In a popu- 
 lar government like ours even an unfounded fear ou^ht not to go im- 
 heeded. Warnings are uttered ; a great alarm is raised about every 
 measure that tends toward specie payments. Let us examine some of 
 these popular objections. 
 
 The first objection (and it is the only one well taken) is that specie 
 resumption will be burdensome to debtors. Undoubtedly, if you en- 
 large the standard in which a man's debt is to be paid, you add to the 
 burden of that debt. We are now dealing on a standard about eleven 
 per cent, below the specie standard ; and if, by some sudden act of 
 Congress, a debtor should be required to pay in a standard worth eleven 
 
 ?er cent, more than the present, it would be burdensome to him, 
 'heref ore, and for this reason only, it is necessary to make the advance 
 slowly ; and I for one would not desire to see any sudden resumption, 
 because it would be injurious to a class of business men who are now 
 more or less in debt. This injury is greatly exaggerated, for almost 
 every debtor is a creditor, and therefore while he loses on the one hand 
 he gains on the other. Debts are now less than they were a short time 
 ago. The recent panic swept away a great many of them. Most of 
 those which remain are being settled on the present basis, so that never 
 was there a time when an act looking to a change of the standard of 
 values could be made better than now. There are fewer contracts to 
 be settled upon the old standard. If the time for making this change 
 of standard is postponed for a short time, say a year, all the debts con- 
 tracted on the present basis will be settled. 
 
 This is not the first time we have changed the standard. We did 
 it in 1834 ; and we have changed the value of our gold coin twice 
 within my recollection. We have changed the value of silver two or 
 three times. The monthly fluctuations that sometimes occur in the 
 city of New York are greater than the entire difference between our 
 japer money and gold now. The people are used to these. Sir, vou 
 ive in a State whose chief production is now, or was, wheat. You 
 have seen the price of wheat jump up from fifty cents to a dollar a 
 bushel, and go down from a dollar to fifty cents again — a fluctuation of 
 100 per cent. These fluctuations are unavoidable; but any change 
 which affects the standard of all values ought to be made carefully 
 and slowly. Here, Senators, is the only difficulty in this whole prob- 
 lem. When we made our notes a legal tender, when we repealed the 
 convertibility clause, when we took away their value and let them de- 
 preciate to thirty-five per cent., we did great injustice to creditors. 
 We did it because we were compelled to do it. All the Senatore 
 around me admit that at some time we must come to a specie standai'd. 
 When can we do it more easily, when can wo do it better ? Will you 
 flood the country with more irredeemable paper money, sink again the 
 standard of value, make the depreciation greater than it was when 
 General Grant was elected, thirty or forty per cent., and then resume ? 
 How foolish 1 how idle 1 The moment when we approach the specie 
 standard nearest by natural causes, that is the happy moment to com- 
 plete the cycle, to restore us to the old and true foundation. 
 
 The next objection is that the United States will have to pay inter- 
 
 E 
 
THE CURRENCY AND SPECIE PAYMENTS. 425 
 
 est on a portion of its debt wMcli now bears no interest. I have heard 
 that argument made, I think by my friend from Indiana. He has 
 said, " You -would make ns pay interest on our greenbacks ; they will 
 be converted into interest-bearing bonds." "Why should we not pay 
 interest on our debt that is due ? Why should the people of the TJnited 
 States have a forced loan which they require everybody to tajje, debtor 
 and creditor, without interest ? Why should they not pay interest on 
 it ? If these notes are idle in the hands of the people and there is 
 no opportunity for investment, why should we not pay interest while 
 the people do not want to use them ? It is perfectly obvious that the 
 strongest considerations of equity demand that when anybody has our 
 note not bearing interest, and has no immediate use for it, but prefers 
 to put it on interest, we are bound either to pay him, as we agreed to 
 pay him, in coin, or to give him something that will bear interest, and 
 will be as near as practicable to a specie standard. Therefore, this 
 fear of increasing our interest-paying debt does not disturb me. We 
 have in the last five ■ years paid off four hundred millions of bonds, 
 and have saved interest to the amount of $30,000,000. No one has 
 claimed that the interest on the debt of the United States would be 
 increased by this system more than two or three millions. Why 
 should we not do it ? Why should not the people who hold the green- 
 backs have the privilege that is extended to other creditors ? 
 
 A third objection made, I think, by my colleague, who is not now 
 in his seat [Mr. Thurman], was that the United States notes would be 
 retired from circulation and give place to bank notes, and he has a 
 great preiudice against bank notes. I am not much of a bank man 
 myself. I would not care if there were only one form of circulation 
 in this country, and that a United States note convertible at the plea- 
 sure of the holder into a proper bond, or into coin. But the national 
 banks sprang out of the necessitiies of the war. We could not absorb 
 the State banks and get rid of the horde of irresponsible banks issuing 
 inconvertible and irredeemable paper all over this country, except by 
 allowing them to be organized into national banks. We can not get rid 
 of them now. That was the only way in which they could be dealt 
 with. They disturbed during the war our whole system; but now 
 that the present banking system is so much better than the old, the 
 currency so good, so well secured, of such universal circulation, and 
 everywhere at par with greenbacks, nobody would propose to go back 
 to the old system. 
 
 Mr. President, as these banks are compelled to redeem their notes 
 in greenbacks, as they are bound to maintain in their vaults a reserve 
 of greenbacks, and as every prudent banker will maintain this reserve 
 in greenbacks, there is no danger that the United States notes will be 
 driven from circulation to give place to bank notes to any considerable 
 amount. The provision for the redemption of United States notes is 
 applicable also to national-bank notes. If the United States redeem 
 its notes in coin, the banks must redeem theirs in coin. If the United 
 States notes are redeemed in United States bonds, the banks are com- 
 pelled to redeem their notes in the same way. The very moment that 
 a bank note fell below the value, the purchasing power, the convertible 
 
426 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 power of the United States note, it would be returned first to the bank, 
 and in case of its failure to pay then to the Treasury of the United 
 States, and there, with the bonds in the Treasury or with the proceeds 
 of them, the Treasurer would pay. them dollar for doUar. So that the 
 same plan of redemption that we now propose to apply to United 
 States notes is applicable by existing law to the bank notes ; and hence 
 the theory that this plan will drive out the United States notes and 
 give way to bank notes is utterly false. The same obligation to redeem 
 its notes which now rests on the United States will then rest on the 
 banks ; and, as I said a moment ago, you are now dealing with insti- 
 tutions that are amply able to redeem their notes. Whether any of 
 them have in the speculations of the past impaired their capital or not, 
 is a matter of perfect indifference to the people of the United States 
 so long as the notes are secure. You can present no plan of redemp- 
 tion which the banks are not able at this moment promptly to comply 
 with. If your law requiring the banks to redeem either in coin or in 
 bonds of the United States should take effect, every bank has these 
 bonds and 10 per cent. over. Therefore this plan of redemption ap- 
 plies not only to the United States notes, but to the banks under exiet- 
 ing law ; and it is not necessary even to change the law to make it 
 more rigorous or direct. 
 
 Sir, the last objection to this plan is that it will contract the cur- 
 rency. That is the image of alarm that came to us from the experi- 
 ment — as I thought, the bad experiment — of 1866. My honorable 
 friend from Indiana seemed to think it was some terrible thing. The 
 people are afraid of contraction. I do not want to contract the cur- 
 rency. But what is contraction ? Is it to fulfill an obligation to pay a 
 note when it is due ; to pay in coin when you have promised to pay in 
 coin ? I do not think that is contraction. I honestly believe that if 
 there were now agreed upon a plan of redemption by which notes 
 could be converted into coin or bonds at the pleasure of the holder, 
 and all restrictions upon the volume of the circulation were repealed, 
 the amount of currency thus raised to par with gold would be greater 
 than it is at present, and its purchasing power would be 11 per cent, 
 more. The people, in the Western States especially, have been very 
 fearful on this point, although they are now getting bravely over their 
 fears. Look at the reports of their chambers of commerce, their boards 
 of trade ; see the intelligent opinion that comes up from the "Western 
 States. The people of the West were terribly alarmed about contrac- 
 tion of the currency, but they begin to understand it. The laboring 
 man who is paid off in a greenback begins to desire that tliat green- 
 back may buy as much food and clothing and produce as the best dollar 
 ever coined by the mint. He begins to underetand that he receives 
 that for his daily labor which will not purchase for him the supplies 
 that gold would. The farmei^ also, who sells his produce mostly to a 
 foreign market, finds that, under this system, when he is paid in green- 
 backs, he lias to pay greenback prices tor his purchases, while his com- 
 modities are settled for by the gold standard. 
 
 And, sir, I can here show by the actual returns compiled by Mr. 
 Young, of the Statistical Bureau of the Treasury Department, that 
 
THE CURKENOY AND SPECIE PAYMENTS. 42T 
 
 althougli the price of greenbacks fluctuates, as compared with the 
 gold standard, yet the articles which the farmer sells depend almost 
 entirely on the gold price and their price is fixed by the gold standard. 
 Wherever he sells his surplus products, the ruling price m the foreign 
 market fixes the prices of his commodities here. The price of the far- 
 mer's produce is fixed by the gold standard, and was during all the war, 
 and is to-day, and will be to-morrow. His price is controlled by the 
 gold standard, while the price of all he buys is fixed by the currency 
 standard. 
 
 The people are beginning to understand that ; and when they find 
 out that " contraction, with all its terrors, means good money, convert- 
 ible money, greenbacks convertible into gold, they will sound hallelu- 
 jahs in favor of that kind of money. They now feel that the green- 
 back money is a good money — as my friend from Indiana says, the best 
 money that was ever devised by man. In many of its properties it is 
 good money ; it is of universal circulation, universal credit ; it has a 
 recognized value, determined daily by the quotations in New York ; it 
 passes readily from hand to hand. It is much better than the money 
 of the old system. There is only one thing necessaiy to crown the 
 perfect work of this money and make it the best in the world, and that 
 is to make it equal to what it promises to pay. Then you wiU have 
 good money, based upon the public credit, a note of the United States 
 not dishonored, whose purchasing power is as great as the best gold that 
 was ever coined by any mint, or ever mined in Peru, or Australia, or 
 America ; a money which will enter the markets of the world and buy 
 its face value in the products of the world ; a money which, if convert- 
 ible into coin, will travel, like the Bank of England note, all around 
 the world, buying in every mart and every community the productions 
 of every clime. Sir, this is what we aim at, this is what we desire ; 
 and when the people begin to understand this question, and see that 
 this cry about contracting the currency means nothing but an effort to 
 stave off that which will inevitably come, which we have promised 
 shall come, namely, a specie standard, they will then silence the dema- 
 gogical clamor of the hour. 
 
 If a year or two ago, before this panic, you had convened your cham- 
 bers of commerce and boards of trade and representative business men 
 of the country, and submitted to them any proposition which looked 
 to the advancement of the greenback to the standard of gold, they 
 would have passed resolutions without number against it. But now 
 they are all passing resolutions for it. Almost every one of them is 
 opposing any increg-se of the paper money of the country. These doc- 
 uments m favor of specie payments from representative men could not 
 have come here a year ago, led off by the great petition from the 
 Chamber of Commerce of New York, presented a month ago. Sir, 
 the people will soon reply to these popular objections. 
 
 We have had a great deal of talk here about the amount of cur- 
 rency we ought to have, and Senators have computed how much cur- 
 rency is required for each inhabitant, how much for every man, woman, 
 and colored baby, how much for every child, how much for every 
 bushel of wheat. They figure it out in some way that France and Eng- 
 
428 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 land have more currency than we, and that, as no nation ought to have 
 more of a good thing than the United States, we should have all that 
 any other country has ! That is the argument. They say, " We want 
 more money." Well, in the sense in which money means capital, I 
 think we all want more money. In the sense in which money is used 
 as a mere medium of exchange to measure value, to pass from hand to 
 hand, to facilitate commercial transactions, the only test and measure 
 of the amount necessary is the amount which can be maintained at the 
 specie standard ; no other. You might as well say that a yard is not 
 thirty-six inches long, and economize by using one thirty inches long ; 
 what would be the effect of it ? It would take more yards of cloth to 
 make a coat ; but the coat would not cost any less. The amount of 
 currency in Great Britain, in Bank of England notes, is £26,162,000 ; 
 in notes of other banks of England, Ireland, and Scotland, £18,226,000 ; 
 making a total of £43,388,000, or, in dollars, $216,940,000 of paper 
 money, as good as gold. That is enough to carry on all the business 
 transactions of Great Britain. 
 
 But my friend from Indiana says Great Britain is a small country 
 compared with the United States ; it does not cover as many arid plains 
 and deserts as the United States ; it has not the area or the population 
 of the United States. Sir, area and population are not the things that 
 demand currency ; it is business, wealth, production ; and, although I 
 wish it were otherwise, we can not, as yet, compare with the wealth or 
 commerce of Great Britain. 
 
 The Senator from Indiana says that $216,940,000 is only one form 
 of money in Great Britain. So it is ; but it is the amount of paper 
 money that it undertakes to maintain at par in gold. A wise nation 
 like Great Britain, with ample experience in all financial questions, 
 which have been managed with great skill, and where more time is 
 devoted to them in Parliament than in Congress here, has decided 
 that it is not wise ever to attempt to circulate more paper money than 
 can at all times be maintained at par in gold. It prohibits by law the 
 issue of any more paper money. No new stock banks are organized, 
 and the Bank of England can not issue one pound of paper money 
 more than £15,000,000, the amount fixed by law thirty yeai-s ago, and 
 such additional amount as is covered by actual gold on hand. Every 
 dollar is secured by government securities or gold on hand. 
 
 Senators say that the Bank of England can issue in times of panic 
 more than the amount allowed. It has done so at three exceptional 
 periods of distress. But this did not cause a suspension of specie pay- 
 ments. When the Bank of England note is issued in excess of tlie 
 legal limit it is done by order of the ministry, at their hazard, just as 
 they would do any other unlawful act for the public safety. So care- 
 ful are they that the amount is limited, say to £2,000,000, or 810,000,- 
 000 ; securities are required, and the profit of the issue goes to the Gov- 
 ernment. The amount of notes issued by the Bank of England in excess 
 of the legal limit was never more than £2,000,000 sterling, and in one 
 case no notes were issued. The authority to issue arrested the panic. 
 The issue wlicn made was withdrawn and the old limit restored within 
 sixty days. We in this country have increased our paper money in 
 
THE OURREN-OY AND SPECIE PAYMENTS. 429 
 
 five years more than $80,000,000, and the Secretary of the Treasury 
 during and since the panic has issued new paper money in volume 
 fourfold the aggregate of temporary issues by the Bank of England 
 since Peel's act of 18M. 
 
 But the Senator from Indiana says Great Britain has coin. So it 
 has, and the reason why it has coin is that it has a use for it. So, if 
 we were at the specie standard, coin made in our own country of the 
 gold mined here would be kept here. It would have some useful 
 employment. But, sir, one of the evil effects of a depreciated cur- 
 rency is to demonetize coin, to drive it out, because the poorer cur- 
 rency always fiUs the channels of circulation. Therefore it is that 
 in the present condition of our affairs we can not keep in this country 
 any considerable amount of gold, unless we hoard it in the Treasury 
 of the United States. A private citizen has no use for it. He sends 
 it abroad where they recognize its value, and use it in ordinary affairs. 
 The gold of our country is hoarded by the Treasure;'; and so long as 
 you have a depreciated currency one of the inevitable effects is to ban- 
 ish gold from the country, although it is our own production. We 
 banish t)ie product of our mines, the work of our hands, because we 
 will deny the fundamental truth that gold mined from the earth is 
 the standard of value. We have rejected the true god and set up an 
 idol of our own ; and thus what we ourselves produce is driven from 
 our country. So it is with France. I have already given the amount 
 of paper circulation there. The issues of the Bank of France were 
 2,606,3TY,000 francs, or $621,275,000 ; and this is practically main- 
 tained at par in gold, as the Senator from Michigan [Mr. Ferry] very 
 properly said. 
 
 Now, sir, when this cry is made for more money, I answer, yes ; 
 let us have more money, but let it be more good money, that will pur- 
 chase what money in any other country will purchase. I want the 
 best ; and if my friends . here really believe that France and Great 
 Britain have, counting their gold, a little more currency per capita 
 than we have, let me console them by telling them that if we come 
 back to specie payments we shall have more good money, paper and 
 coin together, than any country in the world. JS'ow, at tnis moment, 
 if you take our paper money and add it to the gold in this country, 
 you will see that we have more per capita than any nation in the 
 world. How much paper money have we ? About $772,000,000, 
 every dollar of which is practically a legal tender. Although the bank 
 notes are not a legal tender by law, yet we know they are in fact. We 
 have to receive them nolens volens. What other country has this 
 amount ? France has $521,000,000 paper money. Great Britain has 
 $216,900,000 paper money. But they have more gold than we. Why ? 
 ]3ecause we banish it from our country. Who would keep gold now ? 
 Would a bank keep it? It is more dangerous to keep than paper 
 money, because it is heavier and more difficult to guard. Would a 
 merchant keep it ? Yes, to the extent that he has to pay it to the 
 Government for duties. The Government keeps it, and the amount 
 that is owned by merchants is held by the Government in ISTew York 
 on gold certificates. So the Government is the custodian of all the 
 
430 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 gold in the country banished from circulation. Take the aggregate of 
 our currency, and we have more paper money per capita than any 
 country in Europe has of paper ana gold. Let me caution Senators in 
 regard to their estimates of gold in foreign countries. In France it 
 was estimated that there wsis $700,000,000 of gold, and France was 
 Compelled to pay more than $400,000,000 of this gold to Germany in 
 the settlement of their difficulties. 
 
 The sum paid was $1,000,000,000 ; but this was partly by credits 
 and partly in gold. The effect of the German war has been that the 
 gold of France has enormously decreased ; no one can tell exactly how 
 much is left. 
 
 I can show by English writers, and even by the declaration of the 
 Chancellor of the Exchequer, that it is utterly impossible to tell how 
 much gold there is in England. There are no returns that enable them 
 to tell. It is kept by joint-stock companies, by the Bank of England, 
 and by private persons. A great portion of the commerce of England 
 being foreign commerce, great masses of gold in the coin of different 
 countries are held by merchants. As to the precise amount, no one 
 can tell what it is. , 
 
 Add the estimated amount of $350,000,000 of gold currency to the 
 amount of their paper money. Take it as you claim it, and what does 
 it make ? Five hundred and sixty-six million dollars to do the business 
 of that nation of thirty-two millions ; while we have of inconvertible 
 paper money $770,000,000. Why therefore say that we have less 
 money than England ? Sir, we have more^e;* capita. 
 
 There is also a large part of this country, the Pacific coast, where 
 the currency is gold ; so that that which is merchandise simply in the 
 Atlantic States is currency on the Pacific coast ; and in the city of !N"ew 
 York and other ports of the Atlantic States a large amount of the busi- 
 ness of merchants is transacted upon a gold basis, and in gold alone. 
 
 I have no doubt that the money now in circulation in this country 
 is greater jje?" capita than in any nation in Europe. 
 
 It is true, there is a considerable amount held by the banks as 
 reserve. Much of that is, however, in the form of credits by deposit 
 banks. But in England the Bank of England holds, and is compelled 
 to hold, a large portion of the gold in England as a reserve. Every 
 bank has to have a reserve. So with the Bank of Francs. There is a 
 much larger percentage of reserve held in the Bank of France now 
 than is held by the banks of the United States. Their reserve, if I 
 remember aright, is about 30 per cent., whereas our banks average less 
 than 20 per cent., and much of this is in credits. The Bank of Eng- 
 land reserve is greater than ours, and Bastiat has written a book to 
 show that it is too small. 
 
 As a matter of course, if you go into all the details about reserve 
 you could never get the precise results. The truth is, there is no mode 
 of testing how much money is needed to do the business of a country 
 except that amount which can be maintained at par in gold. The 
 very fact that our money is depreciated 11 per cent, is as conclusive 
 as any sum in arithmetic can be that you have more money than can 
 be maintained at the proper legal standaa-d. You can not get around 
 
THE CURRENCY AND SPECIE PAYMENTS. 431 
 
 that. There is but one standard, and every addition to the volume that 
 can not be maintained at that standard furnishes conclusive evidence 
 that there is too much money of that kind afloat. 
 
 My own impression is that a reduction in the volume of greenbacks 
 of 10 per cent., the amount of their depreciation, would give addi- 
 tional value to the greenback, so that people can use it as gold, so that 
 it will be equivalent to gold, and then the gold itself will become a 
 part of the currency. It is probable the full amount of the present 
 issue of legal tenders can be maintained if you will only give it an 
 equal value with gold. When you make your paper money equal to 
 gold it floats with gold and flUs the channels of trade. In my deliber- 
 ate judgment, in this country of broad extent, as my friend says, of 
 varied population and varied productions, a larger amount of currency 
 could be maintained at par in gold than the actual currency now in use. 
 I have some statistics here, but I am too weary to go into them, which 
 show what amount of currency we maintained at par in gold before the 
 war, and by a comparison of our condition then and now I could esti- 
 mate what amount can be maintained. But, sir, the only standard, the 
 only rule, by which we can judge of the amount of paper money is that 
 quantity which can be maintained at par in gold. If you declare ille- 
 gal and invalid this standard, no man can tell how much circulation is 
 needed. The only way is to test it by the barometer of New York. 
 This is as sure a test as the instruments here around the Senate Cham- 
 ber are tests of the heat of this room. 
 
 There is another class of measures now pending on which I wish to 
 make a few remarks, and they are the propositions to inflate the cur- 
 rency still more. The process of inflation is now going on daily while 
 we are debating. This surely ought to be stopped. This issue of the 
 forty-four millions ought to be suspended at once. The payment of 
 this money ought to be arrested and some other provision made to pay 
 the ordinary expenses of the Government. The plan that I suggested 
 a moment ago would do it, by authorizing the funding of notes into 
 bonds. But there are other propositions. The Senator from Michigan 
 proposes to issue $100,000,000 additional currency, to -require the sys- 
 tem of banks now organized throughout the country to retire their cir- 
 culation, and to issue an amount of greenbacks equal to the whole, ag- 
 gregating $800,000,000, and this, I suppose, ift addition to the fractional 
 currency ; in other words, an increase of currency, including the forty- 
 four million reserve, of about $100,000,000. Will not the immediate 
 effect of that increase be to depreciate that which is outstanding ? 
 
 There is no doubt about it. Every addition to the currency does it. 
 If I wanted to teach my friend this plain lesson in political economy I 
 should have to read to him from the school-books used in every col- 
 lege, down to the last work on political economy. It is an axiom of 
 political economy, which lies at its very groundwork and foundation, 
 and is repeated by every author that ever wrote upon the subject. It 
 is as necessary a consequence as that water will seek its own level. 
 Any increase of paper currency tends to impair its value when it is 
 once depreciated. 
 
 After the passage of the act authorizing this increase, the price of 
 
432 SPEEOHES AND REPORTS OF JOHN SHERMAN. 
 
 gold steadily advanced and again commenced to decline. As a matter 
 of course, ii we could once fix the amount, we could no doubt come to 
 it in time ; but what assurance have we that, after you have issued 
 your $100,000,000, and gold goes up to 133, as it wiU, and then after 
 the power of inflation has exhausted itself gold commences to go down, 
 my honorable friend from Michigan, or some successor of his, will not 
 come here and demand another iuflation, and then say that the inflation 
 will not, at the end of four years, increase the price of gold ? 
 
 There is no mode of accounting for the fact that the value of our 
 greenback has not advanced one single step for four years, except that 
 you have increased the volume of paper and have taken no steps what- 
 ever to advance its value. As a matter of course, if you would main- 
 tain the amount of paper money at a certain rate for one hundred 
 jesLTS till our country should contain three hundred millions of people, 
 it would all be as good as gold ; but if the Senate should foUow the 
 lead of my honorable friend and dilute the currency by putting water 
 into the elements that now compose it, it would undoubtedly depreciate. 
 
 Senators, we have now arrived at a stage of our history where, if 
 ,we will obey the law and keep the public faith, we shall surely come 
 to that safety and prosperity which rest upon the universal standard of 
 value — when industry will be rewarded, and not cheated by the depre- 
 ciation of paper money. If, on the other hand, you vdll enter again 
 into a depreciation of your paper money, adopting the cry of expansion, 
 " more money," you will surely travel a road that many nations have 
 traveled before, and which leads to bankruptcy and repudiation. 
 
 The Senator from Indiana says that the issue of paper money under 
 the law of 1870, which conferred the authority to charter new banks, 
 was not expansion, because by the same law tne three per cents were 
 retired. He construes, therefore, the law of 1870 as not inflating the 
 currency at all. My friend from Michigan, I understand, regards it as 
 expansion to the full amount of notes issued. I hope they wiU settle 
 it between them. 
 
 There is another view I wish to take of this plan of expansion. If 
 you issue the proposed three sixty-five convertible bonds, what will 
 they be worth ? I see here some New York bankers. They have 
 computed the value of these bonds before they are issued. A five per 
 cent, bond is now practically at par in gold. If a five per cent, bond is 
 at par in gold, what will a three sixty-iive gold bond be worth ? Sen- 
 ators can answer that very quickly, because there is a reduction in value 
 of one third to start with. If a five per cent, gold bond is only worth 
 par, a three sixty-five gold bond would be worth only two thirds of 
 par. Then, if a three sixty-five gold bond is worth sixty-six cents on 
 the dollar, what wiU a three sixty-five convertible paper bond be worth ? 
 That query will be put to every broker and banker in New York the 
 very moment you authorize such a bond to be issued. They will 
 measure your device by the gold standard before you issvie it. They 
 will quote a bond convertible and reconvertible into irredeemable paper 
 money at its value in gold. 
 
 But there is one otlier reason why all these schemes for more paper 
 money ought not even to be debated here. An increase of paper 
 
THE OUEEENOT AND SPECIE PAYMENTS. 433 
 
 money beyond four hundred millions would be a clear and palpable 
 violation of the public faith. In the darkest hours of the war, when 
 every patriot trembled, when our fate hung in the balance, when our 
 armies were before Richiiiond and on the march through Georgia to 
 the sea, when everybody felt that the danger of inconvertible paper 
 money was likely to strike us from the list of nations, when our paper 
 money then outstanding had fallen so that it took $2.80 to buy one 
 dollar in gold, then it was that we entered into a stipulation with the 
 public creditor, which is a part of the act of 1864, under which we 
 borrowed money and pledged the public faith. It was a solemn 
 promise that under no circumstances would we issue more than four 
 hundred millions of paper money, and an additional reserve of fifty 
 million dollars, pledged to pay a debt then existing, and which has 
 since been paid. 
 
 It is suggested that this pledge was made under duress. No, Mr. 
 President ; the United States was never under duress except from the 
 rebellion in the Southern States. Then we gave our sacred pledge to the 
 men who helped us, to the men who loaned us money, to the capitalists, 
 to the laborers, to the servants, to the women, to the children ; yea. 
 Senators, in every part of this broad land, in every county and every 
 town, in every village and eveiy hamlet, men, women, and children 
 poured their little earnings into the stream that flowed into the [National 
 Treasury in the summer of 1864 ; and every dollar of the loan then 
 made was made upon the faith of the sacred obligation of the United 
 States that our paper money should never exceed $400,000,000. 
 
 Sir, I trust in God the day never will come when we shall violate 
 that pledge, until we make those promises equal to par in gold. I will 
 not acknowledge, with my friend from Rhode Island, that we were 
 under duress. Certainly we were not under duress from the men, 
 women, and children who lent us money. They gave us the means by 
 which we put down the people who were in arms against our Govern- 
 ment, and, so help me God, I never will violate the faith pledged to 
 them. The act of 1864 is known to every Senator. I will not read it. 
 It is as plain and strong and clear as language could make it. 
 
 But, sir, we are told that to issue mese three sixty-five bonds con- 
 vertible into paper money will lower the rate of interest; and my 
 friend from Indiajaa, with that happy faculty which he has of avoiding 
 difficulties, asks when you have a great deal of money, and issue more, 
 does not that cheapen it ? Is not the right way to cheapen money to 
 issue more of it ? If you had a great abundance of any commodity to 
 sell, would it not be cheaper ? Tiiat is the argument. Well, sir, it will 
 cheapen money'to issue more. It will cheapen money as tested by the 
 gold standard, and brokers will tell you every day how much it cheap- 
 ens it. But whom will it benefit to cheapen money ? It will aid a man 
 to pay more cheaply a debt contracted upon a different basis, and to 
 that extent wiU cheat the creditor ; but it will not cheapen supplies, 
 provisions, clothing, food. It may cheat the laboring man ; for the 
 laboring man may think it is the same money. He may take his two 
 dollars a day just as he did before ; but when he goes to spend those 
 two dollars for the food that supplies his life, or for the clothing that 
 
 m 
 
434 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 comforts his children, he will find that somebody else than the capital- 
 ist is cheated, and he is the one. Every device to relieve needy men in 
 distress or in debt, that will depreciate the currency, adds to the daily 
 toil of the laboring men, and to the cost of food and clothing. Why, 
 sir, Mr. "Webster never uttered a grander truth in his life than that 
 famous passage, which I have almost forgotten, but the substance of 
 which is that the best way to enrich the nch man's field by the sweat 
 of the poor man's brow is by the use of inconvertible paper money. 
 ISTo truth was ever more forcibly uttered. 
 
 Bat they tell us that it will lessen the rate of interest. Let us see. 
 This is a matter of experience. We have had a slight experience in 
 this country, and we have had the experience of other countries, and 
 the fact is just the reverse — the more money is depreciated the higher 
 is the rate of interest. I have some knowledge of this by my own ex- 
 perience. I remember the rptoics that have occurred in this country 
 since 1837. I:.recall to thiS^iiecoUection of my friend from Iowa what 
 took place in his' own State; an- 1857. I wasdn that beautiful State in 
 the spring of 'that year. The people were- 'rich, abounding in riches, 
 fanciful riches;. money was plenty. One man had made a profit of 
 100 per cent, on a piece of land that he had never seen and had owned 
 but three months. Another had laid out a town and was selling lots at 
 fabulous prices. Everybody was rich ; paper money was abundant — 
 wild-cat paper money ; all kinds of money. Good money was there, 
 too,' gold as well as paper. Interest was 40 per cent., and many told 
 me that they could make money by borrowing at 40 per cent. They 
 offered to give me 40 per cent, for money to buy land with within five 
 miles of a settlement. Everybody was nch ; interest was high ; times 
 were glorious. In August the failure of the Ohio Life Insurance and 
 Trust Company burst the bubble. The money that was loaned at that 
 rate of interest was not paid, and the men who were engaged in these 
 visionary speculations " went up the spout," to use a common phi-ase. 
 So it was in the panic of 1837. Upon this point I could read you what 
 is said by Mr. Mill ; but that is mere "platitude" ; it is only the expe- 
 rience of the past, of men of a different day and generation. 1 could 
 read you from many books. I could read you the story of the South 
 Sea bubble, when securities went up and interest was 100 per cent. So 
 in all times which precede a financial panic, when people Uiink they are 
 prosperous, and that they are making money by marking up their goods, 
 interest is enormously high. Sir, the experience of mankind proves 
 that interest is higher under a depreciated paper money than it is under 
 a gold standard. Is it worth while to waste more time to show the 
 utter fallacy of the allegation that more money would cKeapen interest { 
 
 But it is said that the recent panic was caused by the want of 
 money, by the want of more paper money. Paper money for what i 
 To build remote railroads, to carry out schemes for the future, to en- 
 gage in speculative enterprises. The money of the country and the 
 capital of the country were absorbed in unproductive industry. There- 
 fore it was that the blow fell and destroyed a great many "good men. 
 But how is it no-w 'i Why, sir, at this moment money is easier to be 
 had in the city of New York than it has been for years, by persons who 
 
THE CURRENCY AND SPECIE PAYMENTS. 435 
 
 are engaged in ordinary commercial business, where the circumstances 
 that surround them inspire confidence and credit. The same money 
 that was in circulation before the panic is in circulation now, and more. 
 Sir, this is not a currency panic. It has no connection with our cur- 
 rency. Such panics have occurred in Great Britain and the United 
 States in specie-jpaying times. It was simply caused by unproductive 
 investments. The currency is good, only lacking one quality to make 
 it better. If it were as good as gold, it would then be the best. It is 
 well secured. Nor was it a bank panic, I will say, for the relief of my 
 friend from Indiana ; for I am glad to agree with him in one or two 
 things. The banks have stood the panic very well. With the excep- 
 tion of four or five, the national banks have not failed ; and not one 
 has failed unless by a clear violation of the law of its organization. 
 Not one that has been brought to my attention has failed except by the 
 use of the bank by the owners in. loans and investments prohibited by 
 the national-currency act. 
 
 The suspension of payment of deposits was the result, not the 
 cause of the panic. It was justified by the same circumstances that 
 would authorize the increase of the amount of notes of the Bank of 
 England in violation of law. The banks did suspend payments ; and 
 that only proved the truth of what I said a while ago,'that no plan of 
 redemption would be wise and good unless it has some provision for 
 such panics. There must be times when banks are compelled to use 
 their reserves and all their resources, and themselves borrow instead of 
 lending, and provision should be made for such times. The banks did 
 commit an act of justifiable bankruptcy when they refused to pay 
 their depositors ; but that was temporary — a bending^before the storm. 
 They rapidly gathered in their resources, as the T3ank of England 
 would under like circumstances, calling in their loans and denying 
 loans to their customers, and are now in a stronger condition than ever. 
 They now have a greater reserve than they had before the panic. Mr. 
 President, the condition of our currency has no relation whatever to 
 the panic that passed over the country. 
 
 At this time, when nearly all debts have been settled ; when the 
 panic has swept away many fortunes ; when we now have all the money 
 that was ever afloat ; when confidence is restored ; when the price of 
 every commodity is advanced to the price it bore before" the panic- 
 now is the golden moment when we should take a step in theright di- 
 rection to make our money equal to gold. I never have charged the 
 panic upon the currency. Indeed I was the first in the midst of the 
 panic to declare that the currency had no connection with the panic. 
 The money was well secured ; it was good, only that it was not so good 
 as gold. That was the only fault to be found with it. Men hoarded 
 it. That added fuel to the fire and fed the panic. Its origin, like that 
 of the panic of 1866 in Great Britain, was in the absorption of capital 
 in unproductive enterprises. The want of confidence created by the 
 failure of great houses gave the first alarm ; then came the withdrawal 
 of deposits, the depletion and the suspension of- the banks. Then la- 
 borers began to be discharged and productive industry stopped ; but in 
 a short time the ordinary business of the country was resumed, and 
 
436 SPEECHES AND KEPORTS OF JOHN SHERMAN. 
 
 people found that they were not all ruined. It was the old, old story 
 repeated periodically, arising from different causes, but having the same 
 history and results. These panics are but the ebb and flow of great 
 enterorises. They start with reviving prosperity ; they grow with ex- 
 panding hope and energy ; they culminate with enterprises too great 
 for the time, and the blind, unreasoning fear that springs from the 
 failure of these enterprises during the panic does more harm and 
 causes more destruction of values than the injury done by failures 
 themselves. No action of ours can prevent these panics. AU we can 
 do is to improve the opportunity offered us to place the public faith of 
 our country on an enduring foundation. 
 
 I again appeal to the Senate to now firmly take its stand against 
 any inflation of paper money under any circumstances, under any 
 provocation, or on any plea. This alone will do a great good to the 
 country. But if it will go further — if the Senate will lead the way to 
 some wise and practical measure, looking to a redemption of the 
 pledged faith of the United States, the people we represent will have 
 cause to be proud of the political body which they have so long hon- 
 ored. I believe, sir, that no act of the Senate would so much inspire 
 confidence, strengthen our business men and revive om- industry, as by 
 a decided vote on these propositions to show that our firm purpose is to 
 take the road that leads to specie payments and a restored currency. 
 
 Sir, I have been many years here and in the other House, through 
 long and troublesome controversies, during peace and war, and I for 
 one desire to see the work of our generation crowned by the greatest 
 of civic triumphs, the fulfillment of every promise, and to behold the 
 nation free from all dishonor, its promises good, its credit untarnished, 
 its wealth and power increasing and expanding. 
 
 FEEE BANKING— THE CUERENCY. 
 
 IN THE SENATE, MAY 13, 187 i. 
 
 The bill to amend the several acts providing a national currency and to establish 
 free banking, and for other purposes, being before the Senate, Mr. Slierman said : 
 
 It is not my purpose, Mr. President, to open any general financial 
 debate on this bill. Every topic embraced in the bill was very fully 
 discussed during the early part of the session, and I should deem it a 
 violation of my public duty to detain the Senate long on this bill. I 
 shall confine myself to a simple, brief statement of its terms, without 
 any attempt to discuss the various propositions contained in it. 
 
 The central idea of this biU, or rather of the substitute reported 
 by the Committee on Unance, is to make the business of banking 
 free to all on tlio terms and conditions and with the limitations and 
 restrictions embraced in the general popular phrase " free banking." 
 If the business of banking were confined simply to contracts of loan 
 and exchange, there could be no objection to free banking. The busi- 
 
FEEE BANKING— THE OUEKENOT. 437 
 
 ness would inyolve simply the relation of debtor and creditor, resting 
 entirely upon contract and confidence, and needing no franchise, part- 
 nership, or corporation except such as is authorized by law or would be 
 freely granted by any State to promote any business or any enterprise. 
 But the term " banking " in common parlance includes the power to 
 issue circulating notes to be used as money. This power is in no 
 proper sense essential to the business of banking. If I had my way I 
 would grant it to no State corporation and to no individual, but confine 
 it solely to the United States and use it merely to facilitate domestic 
 exchanges, and only to an amount that at any time could be converted 
 into gold coin at the will of the holder. Such, I believe, was the design 
 of the framers of the Constitution, who, fresh from the disasters caused 
 by paper money, desired to cut up and supposed they had cut up this 
 evil- by the roots. The prohibition upon the issue of bills of credit by 
 the States, fairly construed, prohibits the issue of paper money by a 
 State or by any corporation authorized by a State, while the power of 
 the United States to borrow money implies that this power must be 
 executed by a contract freely entered into by two consenting parties, 
 and payable alone in gold and silver coin. 
 
 If we were now m a condition to deal with this question solely 
 upon principle, I would gladly join in prohibiting all paper money 
 except such as might be issued by the United States for coin values 
 and redeemable in coin only. But, sir, we must deal with this ques- 
 tion as practical men. We know that during our whole history paper 
 money has been issued by corporations, that the business of our people 
 has been founded on it, that it has proved a convenient agency in 
 developing our resources ; and that, whatever theory may prevail, in 
 practice some form of paper money has been and will be used in the 
 United States under the authority either of the United States or of the 
 States. We now have nearly two thousand banks authorized to issue 
 $354,000,000 of paper money. Shall the restriction upon the amount 
 be now repealed and banking be made free to all ? Section 4 of the 
 substitute contains a repeal by name and description of every clause in 
 the banking law which limits the amount of circulating notes. The 
 first act of 1863 and that of 1864 limited the amount to $300,000,000. 
 In 1870 the limit was extended to $354,000,000. This bill proposes 
 to repeal the restriction upon the amount of bank circulation that may 
 be issued, provided the banks will comply with the terms of the bank- 
 ing law. 
 
 The first objection to free banking without coin redemption is that 
 it is a novelty, an experiment, which, though plausible, will endanger 
 the whole systemJ Other systems of free banking are based entirely 
 upon coin redemption. There is no system of free banking in the 
 world that I know of under which the currency is not redeemable in 
 gold and silver coin. Consequently, we meet the objection at the out- 
 set, that, if we now authorize free banking upon a currency basis with- 
 out coin redemption, we shall be the only nation in the world that has 
 done so to this time. Other systems of free banking are based upon 
 coin redemption. For instance, in New York, which furnished the 
 first example of free banking, every note was redeemable at the counter 
 
438 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 of the bank and also in the city of New York in ^old and silver coin. 
 The State of Ohio followed the example of New York and established 
 a very excellent system of what was called free banking. The notes 
 were redeemable in coin. I am not familiar with the principle that 
 prevailed in New England under the Suffolk Bank system, nor do I 
 know whether the banks possessed charters granted by the States or 
 whether there was any limit upon the amount of their circulation. At 
 all events, if they had a free-banking system it was always on a coin 
 basis. So in England, the Bank of England has practically the power 
 to issue an unlimited amount of paper money ; but after it has issued 
 a certain amount authorized by its charter, every dollar of notes is 
 based upon coin or bullion in the vaults of the bank, so that after all a 
 Bank of England note is nothing but a certificate of coin or bullion on 
 hand. I repeat that, while we now propose free banking, it is. an 
 experiment that has not been tried in other countries, but which we are 
 willing to try upon the terms and conditions proposed by this bill. 
 
 Banks without coin redemption have always been carefully limited 
 in the amount of their issues. For instance, in France the Bank of 
 France now has authority to issue paper money without the burden of 
 coin redemption ; but the amount is carefully limited to 3,200,000,000 
 francs. They have never exceeded twenty-nine hundred and odd mil- 
 lions, and are now reducing the amount ; and the subject of reducing 
 stiU further the limit of bank paper occupies the attention of the 
 Legislative Assembly of France. So in the United States, we have au- 
 thorized banking without coin redemption ; but hitherto we have always 
 done it upon a carefully limited basis. These are the only examples I 
 know of, in great commercial nations at least, of banking without coin 
 redemption, and in these cases the banks have been careiully limited in 
 the amount of circulation. 
 
 It has been urged very often that if we make the redemption of 
 these notes certain by requiring absolute security to be placed in the 
 hands of the Treasurer of the tJnited States, we can dispense with coin 
 redemption. That such a provision can not be a substitute for redemp- 
 tion is shown by the simple fact that to-day every national bank in the 
 United States has securities in the hands of the Treasurer of the United 
 States worth one hundred and fifteen dollars in gold for every ninety 
 dollars of notes ; and yet the very notes thus secured are worth only 
 eighty-nine cents in ^old. The security of the bank paper does not at 
 all affect this question. The question is whether it is payable or 
 not, or whether a person who holds it can convert it into that which is 
 superior in value, either coin or its equivalent. As a matter of covu-se, 
 if the bank paper could be converted at the will of the liolder into tlie 
 securities which are now held by the Government for its payment, 
 the notes would at once be worth ])ar in gold. I say, thei-efore, that tlie 
 objection to free banking which I have thus named is fatal, unless there 
 is some provision for (!oin redemption either now or in the future at 
 such time as the people will have reasonable confidence that that pro- 
 vision will be observed. 
 
 The second objection to free banking is that the business of issuing 
 paper money is a Government franchise ; that the Government should 
 
FREE BANKING -THE ODERENCY. 439 
 
 have tlie profit of it. In theory that is true, but in practice it is found 
 extremely inconvenient. The power is to stamp paper money and prac- 
 tically to compel everybody in the United States to use it, because the 
 right to refuse bank paper money, although it is not a legal tender, is 
 practically of no avail. Every individual must take it. It would seem 
 that that ought to be a G-ovemment franchise, and that the Govern- 
 ment alone should have the benefit of any profits that are made out of 
 it ; but in practice it is found that Government paper money can not 
 in all respects supply the place of bank paper money, and I may very 
 briefly point out the reasons and the difficulties in the way before I get 
 through. 
 
 In the first place we have the fact that these national banks are in 
 existence throughout the United States ; that any endeavor to withdraw 
 their notes and substitute greenbacks would disturb a business so enor- 
 mous that the mere statement of the amount that would be affected by 
 it would deter any prudent man from making the attempt. The nine- 
 teen hundred and seventy-six banks now in operation have lent to the 
 people of the United States $944,220,000 in money. They have on 
 hand, to secure their circulation and their deposits, $388,530,000 of 
 bonds. If, therefore, the Government of the United States assumes, 
 as it has the right to assume, the power to issue all the paper money in 
 this country, one of two things nrast occur : either all the bonds now 
 held as security for the circulation will be sold for money, thus depre- 
 ciating their value and deranging our financial affairs ; or, what is still 
 worse, the banks will be compelled to draw in from the people of the 
 United States enough greenbacks to replace the notes they have out- 
 standing and to collect all their bills receivable, so that all of the banks 
 under their present organization would be compelled to retire from 
 business. So that the practical effect of any attempt to change from 
 the national bank currency to a paper money issued by the Govern- 
 ment of the United States alone would be the withdrawal of loans to 
 the amount of $944,000,000 and a sale of bonds to the amount of 
 $388,000,000. 
 
 It is also sometimes complained that the Government of the United 
 States loses money by the privilege granted to the banks. Let us look 
 at that for a moment in the light of a few simple figures. The gains 
 to the Government I will compute at the largest sum at which they 
 have ever been estimated by any one. The circulation is now $354,- 
 000,000. There is now an actual currency reserve held under the law, 
 and which is not very materially diminished — not merely a deposit re- 
 serve in the banks, but a currency reserve for this circulation — of $92,- 
 500,000, making the amount of bank paper in excess of the greenbacks, 
 which by law the banks are compelled to hold and do now actually 
 hold in their vaults, $261,500,000. Now, if United States notes were 
 at once to take the place of all the bank notes in the country to the 
 amount of $261,500,000; the interest saved to the Government upon a 
 coin basis at the rate of five per cent, would be $13,075,000. That is the 
 highest amount that could be saved to the Government, without count- 
 ing the fact that there is now a depreciation of the paper money, and 
 consequently the interest now realised would not be so high. But, on 
 
440 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 the other hand, look at the loss which the Government would at once 
 sustain. The taxes now imposed on the national banks by the United 
 States and by the State governments, all inuring to the benefit of the 
 people of the United States, produce $18,000,000, and are increasing 
 gradually with the increase of taxation in this country. If it may be 
 supposed that one half of this taxation is on the deposits of the banks 
 and on the business which they would transact under any circumstances, 
 the amount would be reduced to $9,000,000. This the Government of 
 the United States and the people of the United States would lose at 
 once, because the bonds held by the banks are not taxable, and if the 
 bank notes should be withdrawn, of course their bonds would not be 
 taxed and there would be no circulation to be taxed. Under the pres- 
 ent system we tax the circulation of national banks, and we tax their 
 capital in the form of bonds ; and the amount of taxes thus levied upon 
 property which, if the banking system were wiped out, would not be 
 taxable ^e/- se is probably about equal to five per cent, on aU the cireular 
 tion issued by the banks. The Comptroller of the Currency, who has 
 gone into the calculation very carefully, thinks it is more, but I have 
 taken the lowest figure any one has suggested. 
 
 Besides that, if the Government should assume this business of issu- 
 ing notes, there would be the cost of maintaining resumption, because 
 I take it that no man would propose that the Government should step 
 in and issue United States notes unless it should also assimaethe burden 
 of redeeming those notes in some form or other, either that of bonds or 
 of coin. The time for such a proposition has gone by, and I have not 
 heard in all this long debate any Senator say that he would be in favor 
 of issuing greenbacks, actual promises to pay, and compelling the 
 people to take them, without supplementing and supporting them by 
 some plan of redemption, either in some form of bond — and a three 
 sixty-five bond is the lowest any one has named — or in actual 
 coin. 
 
 There is another difficulty in the way of the substitution of United 
 States notes for bank notes. United States notes can be paid out only 
 for Government dues. If a person has a claim against the United 
 States and presents it to the Government, the Government may pay it 
 in United States notes ; but Government notes have not that qiiality of 
 flexibility which is indispensable to a circulating medium, because Gov- 
 ernment can pay them out only in payment of dues against itself. The 
 Government cannot lend money ; it cannot promote private business ; 
 it cannot move the crops, nor do anything of that kmd. No man in 
 this country is so wild as to propose that the Government of the United 
 States should become a banker and deal in negotiable bills, and make 
 loans and discounts. It is contrary to the theory of our Government, 
 and would embark the Government of tlio United States in a business 
 for which it is ill adapted. Indeed, even tlie thought of such a thing 
 is totally inadmissible. Therefore, on a system of United States notes 
 alone without bank currency, you caimot have that quality of flexibil- 
 ity, that ebb and flow of loans and discounts, whicn is necessai-y to 
 transact business, the payments sometimes requiring more, sometimes 
 less. That function oi a currency cannot be supplied by Government 
 
FREE BANKING— THE ODERENOT. 441 
 
 notes. It must be supjtlied by bank paper or by private credit, or pri- 
 vate capital employed either by coiporations or by individuals. 
 
 Tben there is another thing. Under a system which furnishes only 
 one kind of currency, and that a currency of United States notes, there 
 is no possibility of a distribution of banking capital. We know the 
 great value of the banking system lies in the fact that a bank is situated 
 in every considerable town of the United States, and that that bank 
 furnishes a center of capital where money can be borrowed, lent, or 
 deposited, where drafts can be purchased, and exchanges conducted. 
 Under a system of United States notes alone it would be impossible to 
 distribute the benefit of those notes so as to promote loans and dis- 
 counts and exchanges. 
 
 These are objections which have been stated over and over again, 
 and I sum them up here to show that a system of currency depending 
 upon United States notes alone, even if it had not other objections to 
 it, would not be practicable in this country ; and the experience of the 
 country from the first organization of the Government to this time 
 bears out the statement. So, while in theory it would seem to be best 
 that all notes intended to circulate as money should have the stamp of 
 the Government upon them and that the Government should derive 
 the profit from their circulation, yet I believe, after all, that the mixed 
 system which we adopted under the pressure of war- — a system of notes 
 issued by the United States practically redeemable in coin as the basis 
 of our paper money, and then other notes equally secure, equally valur 
 able, provided by the United States but issued by banks — ^furnishes the 
 best system of paper money that has been devised in the history of 
 man ; and I think that is the judgment of most of the statesmen and 
 financiers of Europe who have given attention to this matter. While 
 the Government may properly issue its notes in the ordinary course^ of 
 its business in payment of demands upon it, to meet the exigencies of 
 war, and now since the war is over to meet the ordinary arrangements 
 of peace, provided they are maintained at par in coin, banks also, in 
 some form or other, may issue paper money, and those banks may be 
 wisely distributed over the whole country and their notes may be in- 
 creased or diminished as the wants of the community may require ; and 
 that combination furnishes us as good a system of paper money as can 
 be devised. 
 
 It is frequently said that at all events banks would be organized as 
 banks of exchange or deposit, even if the Government issued all the 
 notes. The right to issue circulating notes is a great inducement to 
 the organization of banks of exchange and deposit. There is no agency 
 or convenience of our day more useful for business of every kind than 
 those convenient mediums of exchange and deposit called banks. They 
 are indispensable in manufacturing communities ; they are convenient 
 in agricultural communities. Without them commerce can not be con- 
 ducted on any large scale. Banks are necessary, whether they are con- 
 ducted by private individuals or by corporations. How they shall be 
 governed is another thing. The right of a bank to issue bank notes, so 
 as to be able under the pressure of a demand for money to increase its 
 power to loan, and so to meet the changing requirements of business,, is 
 
442 SPEEOIIES AND EEPORTS OF JOHN SHERMAN. 
 
 eminently beneficial to every community ; and therefore it is that there 
 is a complaint in certain sections that they have not their share of bank- 
 ing facilities. They want banks for their convenience, not for the 
 money made out of them, because it is shown clearly that very little 
 money is made by the circulation of bank notes, but because it is con- 
 venient and important in the transaction of all business — ^farming, 
 planting, manufacturing, mining — to have convenient mediums of ex- 
 change in the form of banks ; and it is a great aid and inducement to 
 the organization of banks throughout the country that the banks can 
 add to their means the power to issue their notes to circulate as money. 
 
 I have compared these two systems, and there are one or two quali- 
 ties in which the two are alike. There is no difference between a bank 
 note and a Government note in these respects : they are alike printed 
 by the Government and guarded against counterfeiting ; and that is an 
 invaluable advantage. In 1863, when the national bank-note system 
 was first proposed, I presented to the Senate statistics showing the 
 amount of coimterfeiting and counterfeit notes and the number of 
 bank bills that then existed. I showed that more than one fifth of the 
 currency was counterfeited or suspected of being counterfeited. I pro- 
 duced, I remember, a large book called a counterfeit detector, and the 
 number of counterfeit notes that were described in that book was almost 
 as multitudinous as the sands of the sea*. The present system is un- 
 doubtedly a great improvement on the old. There is no more danger 
 of counterfeiting the bank note than the United States note. They 
 both rest upon the public faith. The United States promises to pay 
 its notes at the earliest day practicable in coin. The bank note contains 
 a similar promise to pay in United States notes ; and in addition to that, 
 being a private corporation, the bank secures that promise by Govern- 
 ment bonds. So that both rest upon the public faith, and neither can 
 be violated without public dishonor. The United States notes and 
 bank notes are of uniform value throughout the United States. United 
 States notes and bank notes circulate wherever our fiag floats or our 
 jurisdiction extends, without any doubt or question as to their solvency. 
 
 In these three respects it makes no difference to the people whether 
 the currency is in the form of bank paper or of United States notes. 
 Whether it is best to issue United States notes or bank notes depends 
 upon the convenience of the people, and the argument in favor of the 
 bank notes is that the banks may be distributed throughout the coun- 
 try so as to do the daily business of the country ; that they furnish a 
 basis of taxation to support not only the national, but the State and 
 local governments ; and that they are convenient agencies for the trans- 
 action of the ordinary business of the people, while United States notes 
 can not be made in any way as convenient agencies for that purpose. 
 And yet, notwithstanding all this, I sny that in theory there is no rea- 
 son why the Government of the United States sliould not issue its 
 notes, provided only that it maintains them nt par in coin, and makes 
 subsidiary to this power the power of banks freely to issue their not-\-? 
 upon terms and conditions exactly equal to all. 
 
 Now, Mr. President, tliis is the purpose of this bill, to make free 
 banking subject to these conditions. If the United States notes are to 
 
FEEE BANKING— THE OUEEENOY. 443 
 
 continue irredeemable, as a matter of course there is no reason why all 
 of the notes should not be issued by the United States rather than by 
 the United States and banks together. It is perfectly idle, perfectly 
 farcical, to require the banks to deposit bonds to secure the redemp- 
 tion of their notes to the amount of one hundred and fifteen dollars 
 in bonds for ninety dollars in notes, and yet at the same time talk 
 about redemption. So long as the United States notes are irredeem- 
 able the whole currency ought to be in that form. 
 
 Eut I wish to call the attention of the Senate to the important fact 
 that when the national-bank system was started, it was declared by 
 every person who voted for it and by every member who spoke in that 
 debate, which continued for some three or four weeks, that the na- 
 tional-bank notes were intended to replace the greenbacks at the close 
 of the war. Under the provisions of the law as it stood in 1863, on 
 the day. the first banking act passed, the notes and the bonds were con- 
 vertible one into the other and would stand always upon the same level ; 
 and as the bonds should rise to par in gold the notes would necessarily 
 rise to the same level. The very right that is conferred by this bill, 
 not to take effect, however, until the 1st of January, 1877, was con- 
 ferred upon ,the note-holder. But it was then supposed that at the 
 close of the war, as soon as our bonds would sell at par in gold, the 
 United States notes wpuld be at par in gold, and that the burden of 
 redemption would then fall upon the banks. Ho argument can be 
 made in favor of the national banking system unless the banks assume 
 the burden of redemption. If they do not redeem their notes the 
 national banks should fall, and I never have stood up and never will 
 stand up before the people of the United States to insist upon giving 
 to the banks the right to issue irredeemable paper when the whole the- 
 ory and purpose and object of the national banking system was to 
 relieve the United States at the close of the war from the necessity of 
 maintaining actual coin redemption. The notes, it was supposed, 
 would then be converted into bonds, and the national banks would 
 step in and maintain their notes at par in gold, subject to the most 
 rigorous coin redemption. The acts of 1863 and 1864 contained the 
 most positive provisions requiring redemption in coin. 
 
 There is another objection to free banking, which I will mention 
 very briefly, that without redemption every additional issue of notes 
 inevitably depreciates the whole mass. This, I take it, is so clear an 
 axiom that it is scarcely worth while to discuss it. In the absence of 
 redemption every additional note added . to the volume of paper cur- 
 rency will decrease its purchasing power. Why is a bank note depre- 
 ciated ? Not because it is not well secured, not because the ultimate 
 payment is not provided for. "Why is a United States note depreci- 
 ated ? Not because anybody believes that the United States will not 
 pay it eventually in coin. They are depreciated simply because there 
 is too much paper to be maintaiaed at par in gold. By the judgment 
 of the world its market value has sunk below par in gold ; and that is 
 the best evidence in the world that there is too much of it to be main- 
 tained at par in gold. Every addition to the volume of it would 
 necessarily sink it lower and lower. 
 
444 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 This, therefore, involves the question of public faith. If we pro- 
 vide for the issuing of more paper money to any extent without coun- 
 teracting provisions looking to its redemption, we violate the pledge of 
 the puolie faith made by the act of March, 1869. That act provides 
 that we will redeem the United States notes in coin " at the earliest 
 practicable period." Any one who undertakes to prove that you fulfill 
 that pledge by depreciating the purchasing power of these notes by 
 your own action, by act of Congress, will, it seems to me, have a very 
 difficult task. It is not sufficient to say in reply to this that we intend 
 always to keep that promise in view, and at some time to make it good. 
 The promise itself implies that we wiU steadily pursue a policy that 
 will gradually but surely advance us to the coin standard. The issuing 
 of more paper money without some provision for redemption inevi- 
 tably depreciates it, and that just as inevitably violates, ]^o tanto, the 
 public faith pledged by the United States. 
 
 I have stated the objections to free banking, not only as they are 
 made by the popular voice, but as they have been made here and prob- 
 ably will be made again. I know that many Senators who now hear 
 me, and who will probably vote with some hesitation for free banking, 
 feel afraid of it. They are afraid that free banking may operate in- 
 juriously and disastrously ; that the amount of paper money may be 
 issued so rapidly as to affect the public credit and endanger it. I admit 
 that there is that dangei*, and we have endeavored in this bill to guard 
 against it. 
 
 But there are some advantages in free banking that I must not 
 pass by, and one is that it repeals the monopoly of banking. If there 
 is anything in the world that the people of the United States hate it is 
 a monopoly ; a right conferred upon one man or corporation and not 
 upon another ; a right enjoyed by one community and denied to an- 
 other. It is the Anglo-Saxon feeling of hatred to monopoly. The 
 word " monopoly " is one of the most odious words in the language. 
 The idea of free banking is not only popular, but just. The only rear 
 son why the monopoly was provided in the beginning was because we 
 were afraid to authorize these paper issues without some restriction as 
 to the amount, and we could not abolish that restriction until we had 
 changed the character of these notes so as to make a uniform rale en- 
 tirely safe to the people of the United States. It is a great advantage 
 to our system of currency to abolish all monopolies and to put all peo- 
 ple upon the same footing. 
 
 Ey proper measures of redemption we may avoid the danger of 
 depreciation, and reach specie payment at the earliest pmcticable pe- 
 riod. 
 
 I know that here I am met with an objection to free banking— and 
 I am speaking now of those who voted with me, and perhaps i might 
 say I have seen it also in a document from another branch of the Gov- 
 ernment — that we might safely postpone free banking until we had 
 actually reached coin resumption. In my judgment tliat would not be 
 wise ; nor is it necessary. It is only necessary to show to the people 
 of the United States, to convince every man who is engaged m the 
 business of banking, that it is our determination to redeem these notes 
 
FREE BANKING— THE OUERENCY. 445 
 
 in coin, and that we have the ability to redeem them, and then we 
 can make banking free. When we declare, on the one hand, that all 
 restrictions on banking are abolished, and on the other that all banks 
 are subject to certain conditions which will inevitably redeem the 
 promise of the United States to pay its own notes, and also enforce 
 the obligation that rests npon the banks to redeem their notes in coin 
 or its equivalent, I think free banking is perfectly safe ; and when we 
 show that we have the ability and the means on hand to maintain it, 
 that every provision of our bill can certainly be carried out without 
 doubt or danger, and that it is within the power of the United States 
 to redeem in the bonds proposed by this bill, we have met every ob- 
 jection that could be reasonably made to free banking now in advance 
 of actual coin redemption. But, sir, free banking in advance of a 
 disposition or an ability to redeem is simply a delusive promise and a 
 delusive hope ; and therefore it should be accompanied by measures 
 which will certainly bring us up to the gold standard according to the 
 terms and stipulations contained in the bill. 
 
 Now, I wish very briefly to call attention to the provisions for re- 
 demption contained in this bill ; and without some such provisions I am 
 free to say that I will not vote for free banking, or for any increase of 
 paper money. It is of no use for us to discuss our fixed convictions 
 on this point. The purpose of the Committee on Finance, in the 
 preparation of this bill, has been to go just as far as they dare go ac- 
 cording to their conscientious conviction of public duty, to make this 
 operation as easy as possible, and yet to secure redemption, and to pro- 
 vide for free banking and redemption, always keeping in view the 
 pledges of the public faith. For one, in framing these provisions, I 
 have gone only so far as was absolutely necessary in my opinion to 
 show our ability and willingness to redeem. 
 
 The first feature which looks to redemption is contained in section 
 6, which provides that every banking association organized or to be or- 
 ganized shall deposit in the Treasury of the United States a sum equal 
 to five per cent, of the amount of its circulation, and shall redeem all 
 its notes presented there for rederoption. This is a currency redemp- 
 tion, a redemption in greenbacks. I have no idea that this section will 
 operate very much for a while, except to bring in the mutilated, torn, 
 defaced, and otherwise injured notes to be replaced by others. I can 
 not see that in the present condition of affairs there will be any motive 
 for presenting these notes for redemption except that of securing clean, 
 new paper money instead of ragged, mutilated money, and that is a 
 very proper one. Oiir bank paper money has now become so defaced 
 and in some sections so soiled and injured that it is unfit to remain in 
 circulation, and this measure will have a most beneficial effect in reno- 
 vating it without too great a burden to the banks. 
 
 As a corresponding benefit to the banks, so as not to make the bill 
 too oppressive, we have relieved them from the necessity of maintain- 
 ing a reserve on their circulation. There is no argument in favor of 
 such a reserve. The circulation is amply secured by bonds, and there is 
 no necessity for maintaining a reserve of fifteen per cent, upon it when 
 in fact no notes are, have been, or wiU be, presented for redemption. I 
 
446 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 doubt very mucli whether one per cent, of the notes of any bank has been 
 presented to it for redemption since its organization. In lieu of the fif- 
 teen per cent, reserve on circulation, we require the banks to maintain 
 this five per cent, in the Treasury of the United States to provide for 
 actual and practical redemption and to secure the ebb and flow of this 
 paper money. 
 
 In order to avoid all practical difficulties in the way, the Committee 
 on Finance took the pains not only to inquire of bankers and business 
 men throughout the country as to the effect of this section, but to ask 
 General Spinner, Treasurer of the United States, and Comptroller 
 Knox for their opinion, whether it would be difficult, expensive, or 
 impracticable, and we have the hearty assurance of every one, bankers, 
 citizens, and officers of the Government, that the section could not be 
 oppressive to anybody. Indeed General Spinner estimated the cost of 
 this process I think at only $60,000 ; but the very highest estimate that 
 was put upon it by any one was one fifth of one per cent, upon the amount 
 of notes that should be redeemed. If $100,000,000 should be presented 
 for redemption within a year, and I should hope that much would be, 
 because there is $100,000,000 of it that is unfit for circulation, it would 
 at once be exchanged for the new notes, and they would be forwarded 
 to the banks and sent out among the people. The whole cost, accord- 
 ing to the highest estimate, which was one fifth of one per cent., would 
 be $200,000 a year, and it is not probable that more than $100,000,000 
 could be presented in any one year. But whatever the cost may be, 
 the bill provides that it shall be paid by the banks, and be assessed in 
 proportion to the amount redeemed. This would be practical redemp- 
 tion in greenbacks, which we have never had heretofore. 
 
 The next clause which looks to some provision for redemption is 
 contained in section 2, which has been somewhat modified by the Com- 
 mittee since the bill was reported. The Senator from Pennsylvania 
 [Mr. Scott], who has it in charge, will offer an amendment requiring 
 one fourth of the amount of the gold paid to the banks to be retained 
 by them as a reserve in lieu of so much currency. That has been al- 
 ready debated, and has received the sanction of the Senate, and it is 
 also contained in substance in the House bill. Indeed nearly all the 
 provisions I now refer to are provisions contained in the Hoxise bill. 
 The Senator from Pennsylvania intends to offer an amendment, which 
 he will explain, which meets my approval, and perhaps will meet that 
 of the Senate, providing a way in which this gold may be utilized tem- 
 porarily until final resumption is attained. 
 
 The third provision which looks to redemption is the eighth section, 
 which I regard as the vital section of the bill providing for the redemp- 
 tion of these notes. It requires that whenever $1,000,000 of circulating 
 notes shall have been issued for thirty days among tlie people, half a 
 million dollars of United States notes shall be retired and canceled. 
 So vital do I regard tliis provision of the bill that I certainly can not 
 vote for any increase of i)aper money without it. In order to make a 
 fair and just compromise — if that word is not out of date and out of 
 fasliion — and to show that while we were willing to extend to the peo- 
 ple of the United States e\ery facility in the amount of paper money 
 
FKEE BANKING— THE CUREENOY. 447 
 
 without restriction, we adopted one half of the bank notes to be issued 
 as the measure of the greenbacks to be retired ; and here, Senators, is 
 the point which is probably to determine the fate of this bill. Why- 
 retire the greenbacks ? The people are in love with the greenbacks, 
 we are told. The reason is that they are depreciated below par in coin ; 
 and if you pass this bill without maldng any provision whatever to in- 
 crease their value and purchasing power, you actually depreciate them 
 by adding to the volume of paper money the amount that would be 
 issued under a system of free banking, and you violate the public faith 
 and the public honor, and you turn your back upon the pledges of 
 parties and of Congress. This is a fatal objection to begin with, but it 
 is not all. 
 
 Every dollar of these notes retired necessarily adds value to the 
 whole mass. It is the greenback that is not redeemed. It is not the 
 bank paper that is in the way. The bank paper never was in the way. 
 If it were not for the greenbacks the banks could be compelled to pay 
 their notes in coin to-day ; and the material to pay them is on hand in 
 their bonds in the Treasury. By retiring the greenbacks you necessa- 
 rily add to the value of the whole mass of paper, because you retire 
 that which is the cause of the depreciation. This is the principal pro- 
 vision of the bill that looks to the maintenance of these notes at or near 
 par in gold. This operation is to go on until the amount of United 
 States notes is reduced to $300,000,000. So far as I am concerned I 
 would very much like to see that restriction of $300,000,000 repealed, 
 and let the process go on to the extent that bank notes may be issued. 
 But it is a matter of practical belief, based upon the opinion of many 
 experienced men, that if the amount of greenbacks were reduced to 
 three hundred millions, that amount could be maintained at par in 
 gold. 
 
 At all events, the other provisions of the bill will undoubtedly in 
 the course of two or three years advance them to par at coin. This 
 provision has already been discussed so often in the Senate that I do 
 not propose to comment further on it now. 
 
 The fourth provision in this bill, looking toward redemption, is that 
 in the ninth section, which has been debated here so often that I need 
 not enlarge upon it. However, in order to avoid any sudden or violent 
 change in value, and to give time for the operation of this bill, the 
 Committee on Finance have postponed its operation until the 1st of 
 January, 18YT. Oa that day we now promise to do precisely what we 
 promised to do when the greenback was issued. We promise the hold- 
 ers of the greenbacks that, if they desire it, they may then present 
 them to the Treasury of the United States and receive a five per cent, 
 bond. This section has been somewhat changed in its phraseology since 
 it was reported before, but it is in effect the same. It provides for an 
 alternative redemption either in bonds or coin, the choice resting with 
 the Treasury of the United States ; and there is nothing new in it. All 
 that it does is to restore that feature and privilege given to the green- 
 back when it was first issued, and always maintained until the close of 
 the war, when we chose by our legislation to advance the bond at the 
 expense of the greenback and dissolvp the tie that had always existed 
 
448 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 between them. But this is a section familiar to the Senate, and it is 
 not necessary for me to discuss it. 
 
 There is one provision, however, which I will take this opportunity 
 to explain. It is asked, " "Why reissue these notes for current expenses ; 
 will not this necessarily increase the public debt ? " Not at all. The 
 necessity of maintaining that provision grows out of the fact that we 
 now have a deficiency of currency revenue. Our currency revenue is 
 only about $100,000,000; our gold revenue is nearly $200,000,000. 
 The result is, that now we are compelled to sell our gold in order to 
 get currency to pay the current expenses of the Government, li we 
 were not compelled to sell the gold received from customs, we could 
 use in redeeming bonds all the surplus gold, amounting to $60,000,000, 
 or more than that perhaps, as the interest on the public debt is $100,- 
 000,000, and the sinking fund requires $30,000,000. We might use 
 our excess of gold directly for the payment of the six per cent, bonds 
 of the United States at par, without discount, without commission, and 
 without the intervention of agent or syndicate. All the surplus gold 
 that comes into the Treasury might be used directly and surely, each 
 month, in the payment of the six per cent, bonds of the United States, 
 and to the extent that currency flows into the Treasury for the five per 
 cent, bonds that currency might be used for the payment of the current 
 expenses, instead of their being met by the sale of gold. To the ex- 
 tent that those notes are presented for redemption, to the full extent 
 that anybody claims they will be presented for redemption, we can con- 
 vert our six per cent, bonds into five per cent, bonds without costs, 
 commissions, or exchange. 
 
 But this is only an incident to the general provision ; and the reason 
 why bonds instead of coin ought to be stipulated for is because we 
 can not now say that we can actually promise beyond all doubt to pay 
 coin at the time named. If Congress were willing to impose the requi- 
 site taxes we might maintain a system of actual coin redemption, al- 
 though I think it would not be desirable to do it. I certainly would 
 not vote for actual coin redemption at any fixed period. But instead 
 of promising coin, we can promise to give what we have the power to 
 give, our bond. 
 
 It is said that we lose interest ; that if a man gives up a note not 
 bearing interest and takes our note or bond bearing interest, we there- 
 by lose interest. Ought we not to do so ? "Why should the United 
 States — or any bank or individual — ^have the powa*- to force its note 
 into circulation as money when it refuses to pay interest on it to those 
 who desire interest on their money ? There is no reason for it. This 
 also fixes a time after the next presidential election, so that I hope that 
 will not mingle in this contest — ^the 1st of January, 1877, when we 
 shall have reached practical coin redemption. 
 
 Mr, President, these are the general features of the bill, and in my 
 judgment, with due deference to the opinions of the Senate, it ought 
 to be taken as a whole. It is manifest that here are two provisions, one 
 providing for an increase of paper money, the other providing for in- 
 creasing its value ; one providing for more money, the other providing 
 for better money. You can not liave more money without making pro- 
 
FREE BANKING— THE OUEEENOY. 449 
 
 vision to make that money better, except by violating tbe public faith. 
 Therefore I submit to the Senate in all candor and sincerity that they 
 ought to take this bill as a whole, and not tear it to pieces and compel 
 those who are friendly to the system of free banking to vote against it, 
 because there is not coupled with the provision for free banking such a 
 system of redemption as will prevent the depreciation of the notes., I 
 am asked whether the immediate effect of this bill on the country will 
 be contraction or expansion. 
 
 I always avoid as far as I can the use of phrases which deceive and 
 mislead. The use of " contraction," and " expansion," and " inflation," 
 and all those words, does not convey distinctly any meaning which 
 ought to guide us in the consideration of a practical measure of legislar 
 tion. But, to come nearer to the point, I will say that each section of 
 this bill may have a different tendency. The first section of the bill 
 at once places in circulation all the reserves now held by the banks as 
 a security for circulation. There is another section of the bill which, 
 on the other hand, by withdrawing the reserves for deposits from the 
 banks in New York and requiring them to be maintained in the vaults 
 of the respective banks, would tend, in the first instance, to contract 
 the currency ; that is, it would transfer currency from a place where it 
 is admitted to be superabundant to regions of the country where it is 
 claimed to be insufficient. So I should have to go over, section by 
 section, the whole bill. As a whole, undoubtedly the effect will be to 
 increase the volume of paper money, and it can not be otherwise, be- 
 cause it has no effect to cancel a single dollar of the paper now out- 
 standing except as twice as much more is issued. Therefore the im- 
 mediate effect and the effect of the whole must necessarily be to expand 
 the currency, but with such qualifications and provisions and with such 
 pledges for the future as will prevent its depreciation. 
 
 It is said that the effect of the clause of this bill which provides 
 for removing the reserve on deposits from Ifew York to the West and 
 South would be to produce contraction. Now, if there is any objection 
 to this proposition that has twice received the vote of the Senate and 
 once received the vote of the House of Representatives, if there is 
 really objection to the transfer of this reserve from the city of New 
 York, where it is used simply for stock-gambling, to the West and 
 South, I hope some Senator will move to strike out that clause. 
 
 The section which repeals the reserve on circulation passed the 
 House of Eepresentatives. It was intended for the benefit of the banks, 
 and to relieve them from all reserves on circulation, and as a substitute 
 for that fifteen or twenty-five per cent, we require them to maintain five 
 per cent, reserve in the Treasury of the United States ; so that to this 
 extent both the House bill and the Senate bill are an expansion or un- 
 locking of the currency. But the Senator from Illinois says that the 
 bill also contains another section which transfers the reserve on deposits 
 from New York to the West and South. If the Senator is opposed to 
 that transfer he can move to strike it out. If he thinks that works 
 contraction, and he strikes at the bill in that direction, he can move 
 to strike it out, and then I could give the reasons why we adopted that 
 section. 
 
 29 
 
450 SPEECHES AND REP0ET8 OF JOHN SHERMAN". 
 
 Under the present law three fourths of three fifths of the reserve 
 on deposits may be loaned by bankers in New York to whoever will 
 borrow it on call ; and that is just what is done. I have not gone into 
 a close computation, but I will take the Senator's own estimate. Sup- 
 
 fose the currency reserve on deposits is $50,000,000, as he states, and 
 think it is about $50,000,000, or $55,000,000. Three fifths of that 
 amount may be put in New York, and three fourths of that three fifths 
 may be lent in New York. How ? It is lent out by the banks of New 
 York only to brokers. It is not made the basis of commercial loans at 
 all. Not a single dollar of the reserves of the country banks held there 
 is lent for commercial purposes, or for investment in the West or 
 South or anywhere else. It is lent for speculative stock operations ; 
 and business men of the highest character in New York who them- 
 selves are presidents of banks have advised against it. They say that 
 while this reserve is piled up in New York, banks there wiU bid for it 
 according to the rate of interest to induce its deposit with them. Bein^ 
 a deposit on call, liable to be called for at any moment, the New York 
 banks lend it on call themselves. I think this provision of the biU can 
 be defended without regard to whether it inflates or contracts. But if 
 there is objection to having the reserve transferred from New York, let 
 us relieve the banks entirely from the reserve. If Senators really think 
 that from fifteen to twenty -live per cent, on deposits is too much of a re- 
 serve to be maintained by national banks to protect themselves against 
 sudden demands, lower the reserve, and so make an expansion. I am 
 perfectly willing to leave the banks, with or without reserve, to take their 
 chances. They will surely fail if they do not maintain, in an ordinary 
 state of affairs, from ten to twenty-five per cent, in reserve, whether 
 the law provides for it or not. If the reserve required is too large, 
 reduce it, and thus raise the question of infiation. But this provision, 
 which the Senator from Illinois himself proposed to the Senate, is now 
 ingeniously seized upon as an objection to this bill, because, forsooth, 
 it will cause the transfer of the reserves from New York to the West 
 and South. What benefit is it to the West and South to have their 
 money, belonging to their own banks, sent to New York and lent to 
 stock-brokers in that city ? It may be of some service in the West 
 after the banks are established to strengthen them at home, and if they 
 ought not to have that amount of reserve now required by law, why 
 not decrease it ? Now to take two provisions together for the pm-pose 
 of making an argument against this bill, especially when this particular 
 clause has been passed by both Houses of Congress and was offei-ed by 
 the Senator from Illinois himself and assented to by merabei-s on both 
 sides, seems to me to be late. If Senators desire to correct their opin- 
 ion on' that question, as they have the right to do; if they think the 
 transfer ought not to be made, it is very easy for them to propose suit- 
 able amendments to the bill in that respect ; but they do not propose 
 tliorn. 
 
 Now a word in regard to another point, and this is the chief point. 
 The Senator from Indiana refers to the $44,000,000 reserve. There is 
 nothing in this bill about a reserve at all. Yesterday the reserve was 
 perhaps $3,000,000 ; to-day it may be $10,000,000. According to the 
 
FREE BANKING— THE OUKRENOY. 451 
 
 last statement tlie currency reserve is swollen to ten millions. Some- 
 times it must be ten millions. Whenever quarter-day comes for the 
 payment of pensions, the Treasury must have on hand seven and a half 
 millions to pay pensions. Sometimes this reserve must run up to ten 
 or fifteen millions. The Secretary of the Treasury carefully studies 
 when he must pay out money. There are times when he must have a 
 large currency reserve. There are other periods of the year when he 
 can run it down to three millions. I have known the currency reserve 
 at one time to run down to two millions. In my judgment it is hardly 
 ever safe to have a currency reserve in the Treasury of less than fifteen 
 millions. It is better to have it. The Secretary of the Treasury would 
 naturally have it, and on an average the reserve has been more than 
 fifteen millions. On the 12th of September, just before the panic, the 
 reserve was about twelve or fifteen millions ; the precise amount I do 
 now know, but it was over twelve millions certainly — fourteen millions 
 my friend from New York suggests. To-day it is ten millions, and 
 sometimes it goes down to three millions. 
 
 The very language of this section is the language of the House bill, 
 the language proposed by the Senator from Iowa the other day, and 
 there is not a word about the $44,000,000 reserve in it. This bill 
 practically abolishes the idea of such a reserve ; it fixes the maximum 
 of United States notes at $382,000,000, and the Secretary of the Trea- 
 sury will necessarily keep enough of that $382,000,000 to meet his cur- 
 rent payments. 
 
 Now, in regard to the vital importance of the clause which the 
 pending amendment touches, I say that without the reduction of the 
 greenbacks as bank notes are issued, in some proportion, this bill is no- 
 thing at all but an inflation measure providing for a large increase of 
 paper money, with no restraint except a provision that in January, 1877, 
 thirty-two months hence, we shall redeem these notes, then largely in- 
 creased, in bonds of the United States. Sir, I knew the division of 
 sentiment here among Senators. I knew we were all grown-up men 
 and disliked to change our opinions. I have gone to the extreme limit 
 in this bill to meet the ideas of those who desire more paper money if 
 only we could have better paper money. I am not sure but that I have 
 gone too far ; perhaps I have ; but I am willing to go so far and other 
 Senators are willing to join me. But now when we introduce a propo- 
 sition here which provides for the continual daily increase of paper 
 money without a single dollar of reduction — for not one dollar of notes 
 can be canceled or redeemed until twice their amount is put in circula- 
 tion — ^when we propose that as a compromise, with all the other provi- 
 sions of the bill practically agreed to except one that does not take 
 effect for two years (for all the other provisions of this bill have come 
 to us from the House of Representatives, where they have been dis- 
 cussed and carried), we are met on this decisive vote which settles the 
 fate of this bill, so far as I am concerned at least, with an intimation 
 that unless you can issue $4,000,000 of paper money for the cancella- 
 tion of $1,000,000 certain Senatoi'S will not vote for the bill. If that 
 is SO, the sooner it is ended the better, in my judgment. I will not 
 prolong debate. I hope the Senate will act upon this amendment as 
 
452 SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 the vital issue involved in this bill. If a majority decide for it, then, 
 as a matter of course, I will relieve myself of any further custody or 
 care of the measure. 
 
 THE ISSUES OF THE HOUE. 
 DELIVERED AT COLUMBUS, SEPTEMBER 2, 1874. 
 
 Fellow CrnzENS : The two great parties have now, by their State 
 Conventions in Ohio, nominated their candidates and announced their 
 principles. The people of Ohio have rejected the new Constitution, 
 and have thus postponed for the time all questions of State policy. No 
 Governor is to be elected. The ofiScers to be chosen are purely minis- 
 terial or judicial, and no local question is to be decided. The people 
 of Ohio are now called upon to choose between the only two existing 
 national political parties, and at an election when their immediate 
 Representatives in Congress are to be chosen. It is, therefore, a na- 
 tional election. The issues and results, whatever they are and may be, 
 affect not only the people of Ohio, but the whole people of the United 
 States. 
 
 And, fellow citizens, I am bound to say that at no period of our 
 political history have the people of the whole country been more free 
 from embarrassment in the selection of parties than at this moment. 
 All the great, overriding, fundamental questions that have given rise 
 to political parties are practically settled by the progress of events — ^by 
 popular acquiescence and judicial decisions. The Federal and Repub- 
 lican parties of Adams and Jefferson grew partly out of the tendency 
 of the Federalists to aristocratic forms and usages, and partly from 
 difference of views as to the powers of the General Government. The 
 strength of the Republican party of Jefferson lay in its adoption of 
 simple republican forms. The ideas and habits which came to our 
 ancestors from England tended to keep alive class distinctions between 
 citizens. These distinctions were encouraged by the Federalist*, but 
 were swept away by the success of the Republican paj'ty. On the 
 other hand, the powers of the General Government, as maintained by 
 the Federalists, were established by successive decisions of the Supreme 
 Court, and, though disputed from time to time, ai-e now recognized by 
 all parties and all classes. The supreme authority of the National 
 Government over national questions, and the exclusive authority of 
 State Governments over local questions, ai-e now admitted by all, and 
 the boundary between the two has been cai-efully defined. 
 
 The questions that gave rise to the formation of the Whig and 
 Democratic parties of Clay and Jackson were economic questions — 
 questions ii])out a national bank, the public lands, and titritfs. These 
 again have been settled. No one now thinks of a national bank. The 
 pu))lio lands are no longer regarded as a source of revenue, but, by 
 common consent, are liela for settlement under the homestead and pre- 
 emption laws ; while the tariff question is purely a matter of detail, in 
 
THE ISSUES OE THE HOUR. 453 
 
 whicli revenue is regarded as the primary object, and the enconrage- 
 ment of domestic industiy the necessary and proper incident. 
 
 The great, and I may say the only, question that gave rise to the 
 Eepublican and Democratic parties of our day was that of slavery. 
 Under Democratic management, the political power of slavery had 
 acquired supreme control over all departments of the Government. 
 This power was violent, arrogant, and msulting, and at length repealed 
 the Missouri Compromise, and undertook, by force and fraud, to extend 
 slavery over the Territories, threatening, if resistance were made, to 
 dissolve the Union. On this question the Eepublican party had its 
 birth, and took its stand. The successive stages of that controversy 
 were but the natural and unavoidable development of an irrepressible 
 conflict. "We declared against the extension of slavery. This led, suc- 
 cessively, to a local conflict in Kansas, the election of Lincoln, the 
 civil war, the abolition of slavery, and the citizenship of an emanci- 
 pated race. In this conflict the Republicans won a clear victory. They 
 gained possession of all the powers of the Government — legislative, 
 executive, and judicial. Every promise they have made has been 
 faithfully performed. Their political creed is ingrafted upon the Con- 
 stitution of the United States. The general summary of results is so 
 well stated in a recent address by the National Eepublican Committee, 
 that I wiU venture to read it to you : 
 
 At home and abroad the Union was proclaimed to be dissolved in 1861. The 
 Union is restored now. 
 
 Nine States then claimed to have left the protection of the Constitution forever. 
 They have aU returned to that protection now. " Those that thou gavest me I have 
 kept, and none is lost," said the Saviour of men. The Eepublican party has more 
 than preserved the States you committed to its keeping. It has found those which 
 were lost. 
 
 In 1861 the " Confederate States of America," so called, were clamoring for ad- 
 mission into the family of nations. There is no longer any such pretense. Each 
 one of those great but misguided communities now has honorable recognition as an 
 integral part of the United States. 
 
 A race numbering millions has been raised from the condition of chattels to the. 
 state of man. Human rights have gained the sanction of three new chapters added 
 to the National Constitution. Murder, organized in several States, bearing the 
 name of Ku-Klux, wearing the garb and plying the trade of fiends, has been ex- 
 posed, convicted, punished. 
 
 Fellow citizens, when you committed the Union to the keeping of the Eepubli- 
 can party, it seemed on the verge of dissolution. Many hoped and some feared it 
 had received an incurable wound. We present the Union to you to-day, every whit 
 whole. The Eepublic is at peace throughout all her borders ; she is at peace with 
 all the world. Her rightful authority is disputed nowhere ; her opinions are re- 
 spected everywhere. She stands in the very vanguard of sovereign States. We 
 challenge history to produce another instance of a country raised from such humilia- 
 tion to such grandeur in so short a time. And this transformation has been wrought, 
 not merely without the aid of the Democratic party, but in spite of its utmost 
 hostility. 
 
 Such, feUow citizens, are the admitted results of the last great 
 division of parties in this country. Our policy has been approved, om* 
 principles have triumphed. And now the question remains, shall we 
 abandon the Eepublican party and seek, either in the Democratic party 
 or in new parties, a representative of our views, hopes and aspirations 
 
454 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 for the future of our country ? It is to this inquiry I now invite your 
 considerate attention. 
 
 I have said that all the fundamental questions which gave rise to 
 the Republican party are settled, so far as the guarantees of the Con- 
 stitution can settle them. But there are guarantees not yet enforced ; 
 and, unless they shall be enforced, much of our success will become 
 but wasted energy. One is the guarantee made by the fourteenth 
 amendment, which secures to all citizens equal rights and privileges, 
 and the equal protection of the laws. The same amendment gives to 
 Congress the power to enforce it by appropriate legislation. This has 
 been done to some extent, by securing to all citizens — white and black, 
 native and naturalized — the equal enjoyment of the right to sue and 
 be sued, to testify, and to acquire and hold property ; but, in some of 
 the States, the right to travel on railways, to stop at inns, and fairly to 
 share in the benefits of common schools has been denied. These rights 
 are common incidents of citizenship, which all may enjoy without im- 
 pairing their enjoyment by others. And, especially, the right to enjoy 
 equal facilities in the education of children is a right of primary im- 
 portance, not alone to the individual, but to the whole community. 
 The education of youth is by far the most costly object of local taxa- 
 tion — freely borne because it is essential to the maintenance of a re- 
 publican form of government. In the old constitution of Ohio — as 
 well as in the new, which has been rejected — it is provided that " The 
 Greneral Assembly shall make such provision by taxation, or otherwise, 
 as, with the income arising from the school fund, will secure a thorough 
 and efficient system of common schools throughout the State." 
 
 The benefits of our system of common schools have, in Ohio, been 
 fairly secured to all alike, unless voluntarily rejected through pride, 
 creed, or prejudice. It is a monument of wisdom. It is a stream of 
 perennial fertility. In populous communities, where the number of 
 colored children is sufficiently large for a separate school, it is often 
 preferable to form such school, by local authority ; but where there are 
 few such children, they go to the same school with white children, and 
 take part in the same class. I am assured by some of the best teachers 
 in the State that, practically, no difficulty is experienced when white 
 and black are admitted into the same school and class ; and that veiy 
 often the colored children are, from their general good humor, favorites 
 with the white children. The difficulty is not in the school or with 
 the scholars, but with parents, in the blind, unreasoning spirit of caste 
 — the debris of slavery — which is strongest with the more ignorant iind 
 vicious. 
 
 At all events, the blacks are citizens of the United States, armed 
 with the ballot, and with equal rights and privileges, and entitled to 
 equal immunities and advantages ; and it is not for us, as Kepublicans, 
 to deny them any of the rights essential to their manhood, from a feel- 
 ing of caste or prejudice, arising from race, or color, or condition. 
 They have borne their part in tlie conflicts through which we have 
 passed, and wo must not shrink from fairly enforcing the guarantees 
 which we have given tliem. The Republican party is the only one 
 possessing the courage and disposition to enforce this guarantee ; and 
 
THE ISSUES OF THE HOUR. 4^5 
 
 we owe its enforcement to our honor, as well as to the logic of tlie lofty 
 principles which have guided us. I voted for the civil rights bill now 
 pending in the House of Eepresentatives, not only because I thought 
 it was right, but because I felt bound, in honor, to stand by and enforce 
 the great amendments to the Constitution — the pride and boast of the 
 Republican party, and the connecting link by which the immortal 
 Declaration of Independence was made a part of our frame of Govern- 
 ment. I have seen, one by one, the narrow prejudices of caste, which 
 denied to the black race the rights of human nature, melt away with- 
 out evil results ; and I wish to see this work completed and perfected 
 by local or State authority, by securing to all men who are citizens of 
 the United States precise equality in all civil and political rights, 
 whether those rights tend to protect their person and property, or to 
 lift them above degradation. The unavoidable influences of wealth, 
 birth, caste, and education, in lifting men in. social life above their fel- 
 lows, are surely enough to create inequality among men, without ap- 
 pealing to local law or prejudice, whereby to force a man to occupy a 
 lower plane than his native abilities and equal opportunities would give 
 him. The Republican party of Jefferson demanded equality before 
 the law of all white men. How strange it is that we have to contend 
 with a party, calling itself Democratic, for the right of all to equal op- 
 portunities to rise and become men, the equal of other men ! 
 
 Not only are these rights disputed, but in some parts of the South- 
 ern States the right to live and labor, and to enjoy the fruits of labor, 
 is practically denied. The spirit of Ku-Kluxism is only smothered. 
 "We hear daily of murders, outrages, and wrongs, that may lead at any 
 time to a war of races. If the Democratic party were now in power, 
 the tendency to restore a condition of slavery in the South would be 
 overwhelming ; and then, instead of a civil war between sections, we 
 should have a war between races. We now hear of fraud, force, and 
 violence in the South. These can be arrested only by peace and time. 
 But, if you add to these evils an open war between distinct races of 
 men who live together, waged, as such wars always are, by assassina- 
 tion and the torch, you wiU nave San Domingo over again, with all its 
 nameless horrors. The easiest way, the only way, to avoid them all is 
 to place bylaw all the rights, privileges, and immunities created by 
 the law, upon precisely the same footing as to all citizens. Then, with 
 equal opportunities, let each rise or fall, according to his merits and 
 industry. 
 
 Fellow-citizens, there is another guarantee which we, as Republi- 
 cans, are bound to see fulfilled. It is section four of the fourteenth 
 amendment to the Constitution of the United States, as follows : 
 
 The validity of the public debt of the United States, authorized by law, includ- 
 ing debts incurred for payment of pensions and bounties for services in suppressing 
 insurrection or rebellion, shall not be questioned. But neither the United States 
 nor any State shall assume or pay any debt or obligation incurred in aid of insurrec- 
 tion or rebellion against the United States, or any claim for the loss or emancipa- 
 tion of any slave ; but all such debts, obligations, and claims shall be held illegal 
 and void. 
 
 No one can doubt that the Republican party will faithfully and 
 
456 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 honestly observe this guarantee ; and it is equally certain that a large 
 portion of the Democratic party openly seeks to impair the validity of 
 the public debt of the United States. Direct and open repudiation 
 would probably be sanctioned by a majority of the Democratic party 
 in the late rebel States. But this form of attacking the validity of the 
 public debt is not the most dangerous one. The Indiana State Con- 
 vention adopted a series of resolutions, of which these are the first 
 three : 
 
 1. That we are in favor of the redemption of the five-twenty honds in green- 
 backs, according to the law under which they were issued. 
 
 2. We are in favor of the repeal of the law of March, 1869, which assumed to 
 construe the law so as to make such bonds payable exclusively in gold. 
 
 3. We are in favor of the repeal of the national banking law, and the substitu- 
 tion of greenbacks for the national bank currency. 
 
 These resolutions, taken together, would directly invalidate and re- 
 pudiate the great mass of the debt of the United States. They declare 
 that the five-twenty bonds shall be paid in greenbacks ; and not only 
 with greenbacks issued when the bonds were issued, but with new 
 greenbacks, issued now, in express violation of the loan acts. By the 
 act of March 18, 1869, the public faith was pledged that the bonds 
 should be paid in coin. This act not only was in accord with the pub- 
 lic judgment, but has been acquiesced in for five years ; and the five- 
 twenty bonds have in consequence risen in market value to par in gold. 
 Five hundred millions of them have been paid in coin by the Govern- 
 ment, and new bonds have been issued. An attempt now to disturb 
 the settlement made by the act of March, 1869, is a wanton and foolish 
 breach of public faith, pledged by that act. And the proposition, now 
 boldly made — to issue new greenbacks in express violation of an act 
 under which the five-twenty bonds were issued, in order to pay off these 
 bonds with notes not bearing interest — ^is a direct repudiation of the 
 public debt. If it were possible to commit a crime by the announcement 
 of an atrocious political dogma, this would be a crime. It will create 
 uneasiness and impair American credit to the precise extent that it gains 
 strength and behef. And I believe that these resolutions present the 
 opinion at this day of the disloyal elements of the South, and of those 
 in the North who sympathized with them during the war. 
 
 The platform of the Indiana Democracy has been adopted by the 
 Democratic Convention of Tennessee. The current is widening and 
 deepening ; and now in Ohio — which never shrank from the bm-den of 
 her debt, never for a moment violated her faith, never even listened to 
 such advice, except in the almost forgotten days of Byington and 
 Mclf ulty, and then, rejecting their counsel, sold her bonds at fifty cents 
 on the dollar to pay her interest — even in Ohio, which we proudly claim 
 as a model State, the Democratic party, in its recent Convention, looks 
 suspiciously toward repudiation, but does not boldly, like the Indiana 
 Democracy, assert its purpose to commit it. The Ohio Democrats re- 
 solved as lollows : 
 
 Tliat the Democracy of Ohio reiterate their declaration that the five-twenty 
 bondH, by the letter and spirit of the law, and the Roneral understanding of the com- 
 munity, were payable in legal-tender notes; and the act of March, 1869, which 
 
THE ISSUES OF THE HOUK. 457 
 
 pledged the faith of the nation to their payment in coin, was an unnecessary and 
 wicked sacrifice of the interests of the tax-paying laborers for the benefit of the 
 non-tax-paying bond-holders. 
 
 The Indiana Democrats assert as follows : 
 
 That we are in favor of the redemption of the five-twenty bonds in greenbacks, 
 according to the law under which they were issued., 
 
 The Ohio Democrats do not say that they will pay the bonds in 
 greenbacks. They stop short of that, and denounce the act of March, 
 1869. They say that the bonds were payable in greenbacks, but do not 
 say whether they may now be so paid. It is a most lame, pitiful, and 
 impotent conclusion. If this policy of reopening the questions settled 
 by the act of March, 1869, is not sheer demagogism, it is, by far, the 
 most important issue of this canvass. Prior to 1869 there were some 
 honest difEerences of opinion as to the proper construction of our loan 
 laws. Mr. Pendleton contended that the public debt, in the form of 
 bonds, might be paid ofE by an unlimited issue of greenbacks, and thus 
 practically repudiate the whole of them. Governor Morton claimed 
 that the bonds might be paid in greenbacks, kept within the limit of 
 the $400,000,000 authorized by the loan acts. But the great body of 
 both the Republican and Democratic parties held that the bonds could 
 be paid in gold coin only. This dangerous controversy greatly affected 
 the pubhc credit, and entered into the canvass of 1868. The act of 
 March, 1869, was universally regarded as forever settling this question. 
 It declared that the public faith was pledged to the payment of both 
 bonds and notes in coin. It was passed by a Congress fresh from the 
 people, by a vote of 98 yeas to 47 nays in the House, and in the Senate 
 by 42 yeas to 13 nays. It was the first act approved by President 
 Grant. It was universally acquiesced in. The effect of the act was 
 immediately to advance the public credit. It led to confidence and 
 prosperity, and the rapid payment of the public debt. Under the 
 policy thus inaugurated, $382,000,000 of the debt has already been 
 paid, the rate of interest has been reduced on $500,000,000 more of the 
 debt still due, and an annual saving of over $25,000,000 of interest has 
 been made. A period of unexampled prosperity also set in, which has 
 been checked only by a too, rapid development of distant and unpro- 
 ductive railroads. 
 
 ' Gentlemen, the reopening of this controversy is a real calamity. 
 The failure of confidence in railroad investments was the cause of the 
 recent panic. This swept away fortunes as by a hurricane. Its re- 
 ceding waves still paralyze business, and especially in the production 
 of iron and its manufactures. What, then, will be the effect of de- 
 stroying confidence in public securities and the public faith ? What 
 will be the effect of hast,ening home our discredited debt ? What will 
 be the result, if the United States should now, in violation of the pub- 
 lic faith, begin to pay out its newly printed notes in payment of bonds ? 
 It is this danger to the public credit that ought now to be grappled 
 with and throttled by the people of Ohio, with the fierce energy with 
 which they grappled and throttled Vallandigham in 1863. Untarnished 
 honor — honor so pure that it is not only free from open fault, but from 
 
458 SPEECHES AND KEPORTS OF JOHN SHERMAN. 
 
 even the shadow of it — this is the pride of a State. Men, as in- 
 dividuals, may not attain it, but organized States can. Fellow citizens, 
 this movement, whether under the open flag of repudiation raised by 
 the Indiana Democrats, or under the covert, evasive threat of repu- 
 diation in the Ohio Democratic platform, is dishonor — shameless, pal- 
 pable, and flagrant^ with which we Republicans have this day made 
 issue. 
 
 Again I call your attention to the second clause of the fourteenth 
 amendment, read by me. It provides that neither the United States 
 nor any State shall assume to pay any debt or obligation in aid of the 
 rebellion — or any claim for the loss or emancipation of any slave. This 
 provision also is in constant danger of violation. Claims which grew 
 out of aid given to the rebellion have been assumed by States under 
 the control of the Democratic party. One of the dangers that now 
 threaten our future is the assumption by the General Government, 
 through the agency of the Democratic party, of an overwhelming mass 
 of Southern claims growing out of the war. Heretofore, by the care- 
 ful watchfulness of the Republican party in Congress, the payment of 
 war claims in the Confederate States has been confined to such as were 
 for supplies furnished to our army and such claims as, by the well de- 
 fined laws of war, a belligerent ought to pay for supplies furnished in 
 an enemy's country. Even these are enormous. I read you a state- 
 ment recently made by Judge Lawrence, of Ohio : 
 
 Some idea of the magnitude of these claims may be had by the fact that those 
 presented to the Commissioner of Claims reach $50,033,764. Those now pending 
 before Congress reach about $20,000,000, many of which are test claims, which, if 
 successful, will be followed by very many millions more. The judgments of the 
 Court of Claims for tlie year 1873 amounted to $489,034. The claims paid under 
 relief acts by Congress for the same year were $797,748. I can not state the 
 amount paid on allowance of the Departments, but it was immense, and included 
 $1,960,679 for claims for captured and abandoned property. 
 
 Senator Davis, in his speech of May 13, estimates that all pending 
 war claims before the Departments, the Commissioners of Claims ana 
 Congress, number 30,242, aggregating $88,547,121. 
 
 This vast volume of claims might easily be enlarged, by the adoption 
 of platisible rules, so as to include several hundred millions of dollars, 
 and thus add many of the losses suffered by the rebels to the burden 
 of our public debt. This, the Democratic party, if in power, will be 
 sure to do ; for there has yet been no such case or class of cases pre- 
 sented that the Democratic members have not voted for. A Demo- 
 cratic Congress means a vast enlargement of the public debt, by the 
 assumption of rebel claims. This is not a fanciful danger. 
 
 Not only is there danger of the National Government being over- 
 burdened with debts caused by the rebellion, but now, daily, the actual 
 services rendered and sacrifices suffei-ed by lending rebels are i-ewarded 
 by the Democratic party — not for acquiescence m the results of the 
 war, as in the case of Lohgstreet and others,- but as a direct reward and 
 compensation for services rendered to the Confederate States, and as a 
 mark of honor for duty done. Persons without number have been 
 appointed and elected to oflice in Democratic States, solely because 
 
THE ISSUES OF THE HOUE. 459 
 
 they were active, zealous, and able officers and agents of the Confed- 
 eracy. Such service is almost a prerequisite for office in some of the 
 Democratic States. It may be said that the right to vote precludes all 
 question of the reason for a vote ; but, when we are invited to join the 
 Democratic party, we may well inquire into the motives that inspire 
 and the influence that controls that party in the States where it has 
 full power. It sometimes, in the Northern States, adopts a resolution 
 similar to that adopted by the Democratic Convention in Indiana: 
 " That we bear in grateful remembrance the sacrifices made and the 
 services rendered by the gallant soldiers of the late war in defense of 
 the Union ; " but, in a great majority of the Democratic States, reso- 
 lutions applauding the services and sacrifices of the rebels against the 
 Union would be received with applause. The animating and control- 
 ling motive of the Democratic party is now, as it was during the war, 
 either to apologize for or to defend the rebels who sought to overthrow 
 the Union, and to decry and undo what was done in defense of the 
 Union. 
 
 Fellow Republicans, the true path of safety and of duty demands 
 that we, who have written these guarantees upon the Constitution and 
 the laws, shall stand together in hearty and warm political association, 
 until all of them are executed and enforced. Until then, the mission 
 of the Republican party is not accomplished. We know that that 
 party will maintain and enforce the rights guaranteed by the constitu- 
 tional amendments. It will protect and shield the public' faith from 
 dishonor and repudiation. It will prevent in the future, as in the past, 
 the payment of losses incurred by rebels during the war. It will not 
 permit the burdens which the Confederate States incurred in the rebel- 
 lion to be shifted to the shoulders of loyal people. The results of the 
 war, its achievements and its honors, are the pride and glory of the 
 Republican party, and that party may be trusted with every question 
 which may hereafter grow out of the war ; while the Democratic party 
 will instinctively waste the fruits and fritter away all the results which 
 that war effected. 
 
 But, fellow citizens, I have perhaps occupied too much time with 
 the still unsettled issues of the war. Allow me to say that we can not 
 and ought not to rely solely upon the honorable record of the Repub- 
 lican party in the past. A party which assumes to administer a Gov- 
 ernment like ours must keep pace with the changing events of the 
 time. Every year has its own issues ; and even good principles and 
 good conduct do not always solve, with success, new issues. In a very 
 brief period the whole round of political questions changes. This is 
 especially true now. Twenty years ago, in the warm enthusiasm of a 
 great and overshadowing issue, we entered the lists to curb the political 
 power of slavery. Later on we conducted war on a gigantic scale, 
 to preserve the Union. Still later we successfully solved all the diffi- 
 cult questions that grew out of reconstruction. And during all that 
 interval we devised, molded, and administered with success, all the 
 financial agencies of a period of unexampled energy. It is only 
 within a very brief period that we have approached a state of peace, 
 with no overriding issues to rally us, and nothing to occupy us but the 
 
460 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 quiet and usual pursuits of productive industry. Under these cir- 
 cumstances it is our duty, while guarding well the results of the past, 
 to thoughtfully examine and master, if we may, the questions of the 
 future. It is the hope of that future that animates and inspires a race 
 like ours. I believe that the Kepublican party is so organized and 
 composed that it can, better than any other party, old or new, meet the 
 requirements of the new condition of affairs — a. state of rest and quiet, 
 in which industry, economy, and prudence take the place of courage, 
 vigor, and audacity. "We are now dealing with quiet citizens, each 
 endeavoring to earn an honest living, and with the hope of saving a 
 little for a rainy day, and not with men excited by the passions of a 
 great conflict. 
 
 Now, if I were called upon to specify the first great requisite of a 
 party to enable it to successfully administer the Government in these 
 new times, I should say it is economy, economy, economy. This is 
 the most difficult virtue to practice, especially after a period of great 
 expenditures. It would be easy to show you, gentlemen, that the Re- 
 publican party in Congress has entered upon the true course, by reduc- 
 ing by twenty-seven millions the expenses of the National Government 
 for the current year. But there is ample room and verge for a greater 
 reduction, and I believe there is an honest purpose in Congress to caiTy 
 out this policy of economy. What we most need is a very large reduc- 
 tion of local taxes, and, still more, a very great limitation of the power 
 of local taxation. At present, innumerable local authorities — counties, 
 towns, cities, districts, boards, etc. — have authority to levy taxes, until 
 they amount in many instances almost to confiscation. Although this 
 question does not enter into our canvass, yet it answers at once aU this 
 cry of burdensome taxes. They are local, not national, questions, and 
 here the people of Ohio, whenever they have an opportunity, ought to 
 put in the plow of the Granger. Has the Accidental Democratic 
 General Assembly of Ohio shown any capacity to reduce taxes or ex- 
 penses ? I think not. It was too eager, in the chase for the few offices 
 connected with our penitentiary and asylums, to do any act of useful- 
 ness. The best I can say for it is, that it was so shattered into fac- 
 tions that it could not do several evil things which it attempted. 
 Upon this question of local taxation we ought to have no party, or 
 soon all incomes will be absorbed by taxes. 
 
 The next object which we ought to have in view is to return to a 
 specie standard as rapidly as practicable. Now, I know that upon this 
 question there is a wide difference of opinion, and we ought not to be 
 intolerant with each other when we differ. Still I believe that the in- 
 telligent voice of the people is that we can not attain real prosperity, 
 in vmich no man can be cheated with false values, until our labor and 
 productions are measured by the gold standard. We had months of 
 weary talk in Congress on this subject, and although we took no posi- 
 tive, direct step toward a specie standard, yet wo did prevent, and I 
 trust forever, any retrograde movement in tlie opposite direction. The 
 general result is that no measure can now be adopted which will lead 
 us from a specie standard, while we will in due time agree upon some 
 decided though moderate measure, which shall hasten the time when 
 
THE ISSUES OF THE HOUR. 461 
 
 the dollar of our paper money will buy as much as a dollar of real 
 money. Nor will this result, when attained, deprive us of the useful 
 agency, of paper money, whether in the form of bank notes, or of 
 United States notes, or of both ; but it will make this paper money 
 what it promises to be — an equivalent of coin — when the only test of 
 its proper quantity will be the amount of it that can be maintained at 
 par with coin. On this question, I am sorry to say, we, as Eepubli- 
 cans, are not entirely agreed, although we are far better off in this re- 
 spect than our adversaries. The law of the last session of Congress, 
 though not what any of us hoped for, has resulted and will result bene- 
 ficially, and is in the right direction. The long-standing, sectional com- 
 plaint about the distribution of national bank circulation has been 
 amicably settled. Banks may now be organized in any of the Southern 
 and "Western States, and this, not by the increase of depreciated notes, 
 but by the transfer of circulation from the East, where they have more 
 than their share, to the "West, where they have less. Our grievance 
 was not that we needed the circulation, but that we were unjustly de- 
 prived of our right to it. This law also settled the dangerous power 
 claimed by the Secretary of the Treasury, to increase, at his pleasure, 
 the volume of paper money to the extent of forty-four millions of 
 dollars. It also provided a system of actual redemption, by which the 
 people will get clean, new bank notes for the mutilated, dirty, and de- 
 faced notes we have had. O, for one step further, to make these notes 
 as good as gold ! And it needs only courage to take it. I hope and 
 trust that the Eepublican party will take this step. It will, by so doing, 
 complete the system of great financial measures which that party has 
 had the honor to propose and adopt. 
 
 The next most important and difficult question which, as a party, 
 we must meet, is the reduction and simplification of the national taxes; 
 and upon this point the people have the assurance of what we have 
 done in the past, as a guarantee and guide for the future. We have 
 rapidly and wisely — ^perhaps almost too hastily — reduced and simplified 
 taxes. From taxes on all incomes and productions, we have come 
 down, with but few exceptions, to taxes on spirits, tobacco, beer, and 
 imported goods. The few remaining stamp-taxes will probably be re- 
 pealed next winter, and, no doubt, would have been repealed last ses- 
 sion, except for the continued infiuence of the panic in reducing our 
 revenue. The present excise taxes on whisky, tobacco, and beer, have 
 been carefully adjusted, and are, I believe, as honestly levied and col- 
 lected as is possible. I think no changes ought to be made in these, 
 except to remedy defects in the machinery, when discovered. As to 
 the duties on imported goods I may safely affirm that the present tariff 
 is far more certain, specific and productive than any ever before exist- 
 ing in this country. In comparison with the tariffs of 1842, 1846 and 
 1861, it is better in every particular. It is better than the former 
 tariffs in the very direction in which it can be still further improved. 
 A greater number of the duties are specific, and the classifications are 
 more simple. Still, in these particulars our present tariff laws can and 
 ought to be improved. In every case which the nature of the article 
 will admit of, the duty should be specific, and all similar articles should 
 
462 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 be classified into schedules, and with descriptive words impossible to 
 be misunderstood. These laws ought to be codified, as many additions 
 and changes have been made, without specifically repealing the old 
 laws. The duties and powers of the revenue officers should be defined 
 and simplified, though this was largely done during the last session. 
 This subject of the tariff, which forty years ago threatened revolution, 
 and which, for years, was the leading cause of division between na- 
 tional parties, has now become a matter of detail, sometimes a question 
 of locality, and frequently the subject of the meanest demagogism. 
 It should be now treated purely as a business question — as a method of 
 collecting revenue in the cheapest and easiest way. I do not fear that 
 any material change in the principles upon which the tariff is framed 
 will soon be made, though new details of rate and classification may be 
 adopted. As a means of revenue, it has proved its success, by furnish- 
 ing us, steadily, nearly $200,000,000 of gold a year : and as a measure 
 of political economy it has largely contributed to the unexampled in- 
 crease of all forms of domestic industry, making us, already, with our 
 brief national history, the second nation in production in the civilized 
 world. Surely in this branch of our national politics the Republican 
 party may safely enter the lists with our old adversaries. 
 
 I'here are two topics that are likely to enter into our political con- 
 troversies which have not yet been so developed by discussion as to 
 justify me in defining the position of the Republican party upon them, 
 if, indeed, they are capable of being made political issues. I mean the 
 transportation-and labor questions. And as to both of these, I know of 
 no better rule of action than to leave them to the laws of supply and 
 demand, without invoking the power of the Government to control 
 either wages or rates. It is the right of every man to get as much for 
 his labor as he can ; and, to avoid undue competition, he is at perfect 
 liberty to agree or combine with others in refusing to work or to do 
 any lawful act which may make his work more valuable. But any act 
 done by him with a view to prevent others from working, or to deter 
 or hinder a like liberty in others, is an unlawful act, to be prohibited 
 and punished according to its degree. Lawyers, doctors, preachere, 
 literary men or laborers, must be governed by the same law — and that 
 the highest law — and be permitted to work when, where, and as much 
 or as little as they choose, and to get as much as they can for their labor. 
 Actual freedom to all, to employ or to be employed at any lawful busi- 
 ness, without fear or favor, without threat or intimidation, and to get 
 all that they can for their labor, is the primary law which sprang from 
 the curse that fell upon Adam. This principle applies to coriiorations 
 as well as to individuals, but witli this essential difference : Tliiit coi^ 
 porations, being creations of law, have no rights not directly conferred 
 by law. They have no natural rights. It is perfectly within the power 
 of the State that creates them to reserve the right to amend their char- 
 ters, and to exercise that right. In view of the " strikes '' and the as- 
 sociations of "Grangers" — tlio one designed to promote the interests 
 of milling and meclianical labor, and the other those of the farmers — it 
 is obvious that, if wo are to deal with the vital issues of the hour, we 
 must study these new phases of political strife, and be prepared to meet 
 
THE ISSUES OF THE HOUR. 463 
 
 them. No political organization is better able to deal witli them than 
 is the Kepublican party. 
 
 There is another ordeal to which the Kepublican party has submit- 
 ted itself, to a degree never heretofore adopted by any party — namely, 
 the duty of self-examination. It has freely and proudly courted, invit- 
 ed, and conducted investigations into the conduct of its most trusted 
 agents. It has never evaded nor refused such an investigation. ISTo 
 anchorite ever carried his self-examination further than has the Kepub- 
 lican party. And what has been the result ? No doubt but here and 
 there misconduct, neglect, and violations of law or of official deli- 
 cacy and propriety have been discovered. When was it ever other- 
 wise ? When will it be ever otherwise ? So long as governments are 
 conducted by human agencies, such faults will continue to exist. When 
 were they ever more severely punished than by the Kepublican party — 
 or, perhaps I ought to say, by a healthy public opinion, which will now 
 excuse less, and demands more, of public agents, than ever before ? I 
 have been a member of ten Congresses, and I can truly say that none 
 of them has been so exact and careful in performing public duties — so 
 free from all just suspicion or taint of corruption — so laborious and 
 painstaking — nor so able in the general average of ability, as the pres- 
 ent Congress. And I can also say, from history, and from my observa- 
 tion so far as it goes, that there has never assembled in this country a 
 Congress more free from the vice of intemperance. I believe, gentle- 
 men, that while the issues we are to present and discuss are changing, 
 the moral tone, the educational standard, the general intelligence of our 
 people, is higher, better and more advanced than ever before ; and that 
 they are prepared to demand from their political leaders and organiza- 
 tions more considerate measures and more thoughtful discussion than 
 ever, without pretense on the one hand or demagogism on the other. 
 
 And now, gentlemen, in conclusion, allow me to say a few words 
 upon a subject that has never been a political ode, and which ought not 
 to be made one now, but which will, whether we wish it or not, greatly 
 affect political results, not Only in Ohio, but in many of the States of 
 the Union. I mean the temperance question. That intemperance is 
 the monster evil of society, especially in English-speaking communi- 
 ties, is a fact which no man can dispute. It is presented daily by the 
 blear-eyed whisky seller, dealing out his slow poison to a depraved ap- 
 petite ; by the drunkard, bloated and reeling, robbed of his mind, his 
 manhood and his honor, by what he has drunk ; and by the poor wife, 
 growing daily more faded and wan, more hopeless and homeless ; by 
 the ragged children, neglected, pinched with hunger, and shrinking 
 with shame from healthful play, through the thought of what they see 
 at home. Multiply this by millions and add crime in every form, the 
 trial at the bar, the penitentiary, the scaffold, and the poor-house, and 
 you have a picture of the evils of intemperance. God knows they are 
 ■earful enough, without adding to them the exaggerations of rhetoric. 
 No wonder that good men and women demand, with fierce energy, that 
 all the agencies of life — the Church, the State, political parties, prayer, 
 speech, song, the tears of women and the courage of men^shall be ar- 
 rayed against this monster. They demand that the Kepublican party 
 
464r SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 shall not only undertake to destroy this evil, but that it shall do it in a 
 particular way — by prohibiting the sale of all spirituous, vinous ^nd 
 malt Kquors. Now, while admitting the fearful evils of intemperance, 
 while willing, as a citizen, to do all 1 can, by moral suasion or by law, 
 to check these evils, I must reply that a political party is not the best 
 possible agency to deal with this question, and that absolute and gen- 
 eral prohibition is not the surest means to effect the hoped-for result. 
 Let us consider these propositions a moment. Political parties are 
 formed of men of widely differing opinions on religion, politics, morals, 
 and the like, but who agree in some common principles affecting the 
 frame-work of the Government, or its administration. From the com- 
 position of the Eepublican party, it no doubt embraces a great portion 
 of the temperance men of the country ; but it also embraces a multi- 
 tude of other men, who may differ as to the principle or proper mode 
 of dealing with the evils of intemperance. Must we abandon our po- 
 litical principles, and drive from us those who agree with us on politi- 
 cal topics, merely to do as a party what we can now do as citizens ? As 
 citizens, we can vote for temperance men ; we can use our moral, social 
 and political influence to make and enforce wise teniperance laws. We 
 can invoke the aid, not only of Republicans but of Democrats, for that 
 work. We can organize societies, can lecture, speak, pray, exhort, and 
 get others to do likewise. It is sheer folly, in my humble judgment, 
 for those who would destroy intemperance to invoke the agency of a 
 political party to secure the passage of a prohibitory law. It is far bet- 
 ter to leave such a question to the constantly improving morals and 
 education of the whole people of Ohio, as represented in our General 
 Assembly. It is purely a local question, to be decided by local law, 
 and affecting alone the people of Ohio. Political parties represent nar 
 tional questions and national interests. We are able to deal with our 
 local questions without mingling them with our national politics. 
 
 As to the measures- best to be adopted, there is a wide difference of 
 opinion. We know, by experience in many States, that a general pro- 
 hibitory law can not and will not be enforced. It has the form of law, 
 but not the force of law. In communities where a strong sentiment 
 exists against the sale of liquor, such a law may be enforced, and this 
 can be fully accomplished by a local option law. From my observa- 
 tions in different States and in Europe, I am satisfied that a much 
 wider distinction should be made by our laws between the sale of spir- 
 ituous and of vinous and malt liquors. Distilled spirits, as now made 
 and used as a beverage, are necessarily poison ; while beer and wine 
 may be harmless, and m many cases are beneficial. Wo know that in 
 France, Germany, and Italy, where wine and beer enter into the con- 
 sumption of every household, as tea and coffeq do with us, a drunken 
 man is rarely seen, and is promptly arrested as a criminal ; while in 
 Scotland, Ireland, and England, and in many of the States, where 
 whisky is a beverage, drunken men daily stagger, with the unque%- 
 tionecl right to the public highway. I giva- you, as my opinion, for 
 which no one dse is responsible, that a judiciously imposed tax on 
 liquor sellers — yielding annually to the people of Oliio not less than 
 one million of dollars of revenue — and which cai-ofully discriminates 
 
THE EESDMPTION AOT. 465 
 
 against tlie wliisky seller, together with a local option law, and the 
 enforcement of the Adair law, would be a far better system of temper- 
 ance measures than any prohibitory liquor law that can be framed or 
 enforced. But, above all, I contend that every Republican of what- 
 ever creed or nationality, shall be free to vote, believe, and act on this 
 question as he thinks right, being responsible only to public opinion 
 and the law for his conduct. It is not rightfully a political question, 
 and ought not to be made one. 
 
 Let the Eepublican party, then, with its honorable record, meeting 
 fairly every question of the hour, evading nothing, following, as of old,^ 
 its instinctive love of liberty and equal rights, with strong sympathy 
 for those that labor in every field of employment, with a love of coun- 
 try that wiU not for a moment listen to disunion or dishonor, without 
 prejudice of race or caste, and with the practical common sense which 
 has guided it thus far — let this party enter the lists before the people 
 in the usual way, and the despondency caused by the partial defeat of 
 a year ago wiU disappear like the mists of the morning, and Ohio wiU 
 again be, as it has been for years before, the head of the Kepubhcan 
 column. 
 
 THE EESUMPTION ACT. 
 
 IN THE SENATE, DEOEMBEB SS, 1874. 
 
 The bill to provide for the resumption of specie payments being before the 
 Senate, Mr. Sberman said : 
 
 Me. PEEsroENT : I do not intend to reopen the debate on financial 
 topics of the last session. That debate was carried to such great length 
 that it was not only exhaustive, but it was exhausting, not only mental- 
 ly but physically. The Senate is composed of the same persons who 
 shared in that debate, and it is utterly idle for us in this short session 
 to reopen it and to invite the discussion of its various topics. The 
 Senate is now within less than three months of its adjournment, and 
 there is a general feeling throughout the country, shared by all classes 
 of the people, that this Congress ought to give some definite notice to 
 the people of this country as to their purpose in the important topics 
 embraced in this bill ; and I say to Senators on all sides of the house 
 that this bill contains enough to accomplish the important object de- 
 clared by its title, and this without reviving all the troublesome and 
 difficult questions which were discussed at the last session. It contains 
 a few simple propositions which may be separated from the mass of 
 financial topics discussed at the last session. Its purpose is declared 
 by its title, " An act to provide for the resumption of specie payments." 
 Every word, every line, and every provision of the bill is in harmony 
 with the title. The bill will tend to promote the resumption of specie 
 payments. It may fall short in many particulars of the desire of some 
 Senators ; and it does go further in that direction than some Senators 
 30 
 
466 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 were willing to go at the last session. It is a bill which demands rea- 
 sonable concession from every member of the Senate. If we imder- 
 take to carry out the individual views of any Senator we can not accom- 
 plish the passage of any bill to promote this object, and therefore this 
 bill has demanded of every one who has consented to it thus far a sur- 
 render of some portions of his opinions as to measures and means to 
 accomplish the great purpose, i will consider my duty done as far as 
 this bill is concerned bv simply stating its provisions and calling atten- 
 tion to the character of these provisions, without entering into a single 
 topic that gave rise to the long discussion at the last session. 
 
 The first section of the bill provides for the resumption of specie 
 payments to the extent of the fractional currency. It is confined to 
 that subject alone. It so happens that the state of the money market, 
 the state of the demand for silver bullipn, and more especially the recent 
 action of the German Empire, which has demonetized silver and thus 
 cheapened that product, enable us now, without loss of revenue, with- 
 out any sacrifice, to enter the market for the purchase of bullion and 
 resume specie payments of our fractional currency. The market price 
 of bullion to-day will enable the Government of the United States, at 
 a price about equivalent to or perhaps a trifle above its fractional cur- 
 rency — scarcely a shadow above it — ^to purchase silver bullion in the 
 money markets of the world, mostly, perhaps entirely, of its own pro- 
 duction. This section simply directs that the Secretary of the Treasury 
 shall purchase this bullion and shall coin silver coin and substitute it in 
 the place of fractional currency. To that extent it is a resumption of 
 specie payments upon the silver standard for the fractional currency. 
 It is recommended not only by the Secretary of the Treasury and the 
 President of the United States, but I believe it will meet the general 
 concurrence of every member of the Senate, and we fortunately are 
 enabled to embrace the present time to commence this operation with- 
 out any loss to the Government, except perhaps that the cost of the 
 coinage of this silver may have to be paid out of the Treasury of the 
 United States. That coinage may be done in the ordinary com-se of 
 business without any increase of expenditures. The mints of the 
 United States are prepared, immediately upon the passage of this biU, 
 to resume the coinage of silver coins of all the legal denominations. 
 Therefore the committee have provided that the Secretary of the 
 Treasury shall proceed to coin the silver coins and in one of sevei-al 
 ways to issue them in the place of fractional currency. 
 
 I need not dwell further upon this section, because I believe it will 
 meet with the general assent of the Senate. It pro\"ide8 for the im- 
 mediate resumption of specie payments to the extent of the fractional 
 currency, or at least as immediate as possible ; that is, as soon as the 
 Government of the United States can in the mints of the United 
 States coin the silver coin. That process may continue one, two, or 
 three years, how long we can not tell, depending entirely upon the force 
 that may bo employed for the purpose. It tales a much longer time 
 to coin these small coins than a like amount of gold coins. 
 
 The second section of this bill simply removes an inducement that 
 now exists to export om" gold bullion from the United States to Great 
 
THE EESUMPTION ACT. 467 
 
 Britain, where by the long-eBtablished laws of that country they coin 
 money free of charge. This section involved the surrender of about 
 $85,000 a year of revenue; that is, the Government of the United 
 States received last year for coining gold coin $85,000, or one fifth of 
 one per cent, on forty-five millions of gold coined. The only sacrifice 
 of revenue, therefore, by the second section of the bill is the sacrifice 
 or surrender of $85,000, which heretofore has been levied upon those 
 who produce gold bullion in order to convert it into coin. In the 
 opinion of many men, among them the Secretary of the Treasury, the 
 Director of the Mint, and perhaps a large number of Senators hereto- 
 fore, this will tend, in a shght degree at any rate, to prevent the expor- 
 tation of the gold of our own country into foreign parts, because when 
 the Government of the United States undertakes to put gold bullion 
 into the form of gold coin without additional charge the tendency wiU 
 inevitably be for the gold bullion to flow into the mints for coinage ; 
 and being put into the form of American coin, it is thought by a great 
 many people that this will tend to prevent its exportation. To the ex- 
 tent it does so it prepares us for specie payments. That is the whole 
 of the second section. 
 
 The third section of the bill contains only two or three afiirmative 
 propositions. The first is that after the passage of this act banking 
 shall be free. Perhaps there is no idea stronger in the minds of the 
 American people than that of hostility against a monopoly — a privilege 
 that one man or set of men can enjoy which is denied to another man 
 or set of men. Under the law as it now stands banking is substan- 
 tially free iu the Southern "and some of the Western States ; but bank- 
 ing is not free in the great commercial States, in the older States, 
 where wealth has accumulated for many years. This may be a mere 
 sentimental point, but it is well enough to meet it ; and by the opera- 
 tion of this bill banking is made free, so that there will be no difiiculty 
 hereafter for any corporation organized as a national bank either to 
 increase its circulation or for banks to be organized under the provi- 
 sions of existing law to issue circulating notes to any extent within the 
 limits and upon the terms and provisions of the banking law. This 
 section, therefore, by making banking free, provides for an enlarge- 
 ment of the currency in case the business of the community demands 
 it, and in case any bank in the United States may think it advisable or 
 profitable to issue circulating medium in the form of bank notes under 
 the conditions and limitations of the banking law. Coupled with that 
 is a provision that as circulating notes are issued, either by old or new 
 banks, the Government of the United States will retire eighty per cent, 
 of that amount of United States notes. In other words, it proposes to 
 redeem the United States notes to the extent of eighty per cent, of the 
 amount of bank notes that may be issued ; and here is the first contro- 
 verted question that arises on this biU and the first that is settled. It 
 may be asked, if we provide for the issue of circulating notes to banks, 
 why not provide for the retirement of an equal amount of United 
 States notes ? The answer is that under the provisions of the banking 
 act, by the law as it now stands, a bank can not be organized and 
 maintained in existence unless the reserve which is in that bank, or 
 
468 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 required for that bank in the ordinary course of business either on its 
 deposits or circulation, is at least equal to twenty per cent, of the amount 
 of its circulating notes, so that it was believed, according to the judg- 
 ment of the best business men of the country, and I may say of the 
 Comptroller of the Currency, that the retirement of eighty per cent, of 
 the amount of bank notes is fully equivalent to keeping the amount of 
 circulating medium in actual circulation on the same footing, so that 
 this provision of the bill neither provides for a contraction nor expan- 
 sion of the currency, but leaves the amount to be regulated by the 
 business wants of the community, and so that when notes are issued to 
 a bank eighty per cent, of the amount in United States notes is re- 
 deemed, and this process continues until United States notes are reduced 
 to three hundred millions. 
 
 Now, Mr. President, that is all there is in regard to banking in this 
 bill and also in regard to the retirement of the United States notes 
 until the time for the resumption of specie payments comes, when this 
 bill provides for actual redemption in coin of all notes presented. It 
 has always been a question in the minds of many people as to whether 
 it is wise to fix a day for specie payments. That matter was discussed 
 at the last session of Congress by many Senators, and the general opin- 
 ion seemed to be that, if we would provide the means by which specie 
 payments would be resumed, it might not be necessary to fix the day ; 
 but, on the other hand, it is important to have our laws fix a probable 
 time, or a certain time, when everybody may know that his contracts 
 will be measured by the coin standard. We also know that other 
 nations which have found themselves in the condition in which we are 
 now placed, and some of the States when specie payments were sus- 
 
 f ended, adopted a specific day for the resumption of specie payments, 
 n England, by the bank act of 1819, they provided for the resumption 
 of specie payments in 1823, making four years. In our own Stat& — in 
 New York, in Ohio, in nearly aU the States — when there has been a 
 temporary suspension of specie payments, a time was fixed when the 
 banks were compelled to resume, and this biU simply follows the ex- 
 ample that has been set by the States, by England, and by other 
 nations, when they have been involved in a like condition. 
 
 This bill also provides ample means to prepare for resumption, and 
 to maintain it. i may say the whole credit and money of the United 
 States are placed by this bUl under the direction of the proper execu- 
 tive officers, not only to prepare for resumption, but to maintain it, 
 and no man can doubt that, if this bill stands the law of the land from 
 this time until the Ist day of January, 1879, specie payments will be" 
 resumed, and that our United States notes will be converted at the 
 will of the holder into gold and silver coin. 
 
 Mr. President, these are all the provisions contained in this bill. 
 They are simple and easily understood, and every Senator can pass his 
 judgment upon them readily. 
 
 JNow I desire to approacla a class of questions that is not embraced 
 in this bill. Many such questions, and I could name fifty, aa-e not in- 
 cluded in this bill ; and I may say this : that if there should be a suc- 
 cessful effort by the Senate of the United States to ingraft any of this 
 
THE RESUMPTION ACT, 469 
 
 multitude of doubtful or contested questions upon the face of this bill 
 it would inevitably tend to its defeat. I am free to say that if I were 
 called upon to frame a bill to accomplish the purpose declared in the 
 title of this bill, I would have provided some means of gradual redemp- 
 tion between this and the time fixed for final specie payments. All of 
 these means are open to objection. There have been three different 
 plans proposed to prepare for specie payments, and only three. 
 
 One is what is called the contraction plan. The simplest and most 
 direct way to specie payments is undoubtedly the gradual withdrawal 
 of United States notes or the contraction of the currency. NoW, we 
 tnow very weU the feeling with which that idea is regarded not only 
 in this Senate, but all through the country. It is believed to operate 
 as a disturbing element in all the business relations of life ; to add to 
 the burden of the debtor by making scarce that article in which he is 
 bound to pay his debts ; and there has been an honest, sincere opposi- 
 tion to this theory of contraction. Therefore, although it may be the 
 simplest and the best way to reach specie payments, it is entirely omit- 
 ted from this bill. 
 
 The second plan, one that I have>favored myself often, and would 
 favor now if I had my own way and had no opinion to consult but my 
 own, is that of converting United States notes into a bond that would 
 graduaUj^ appreciate our notes to par in gold. That has always been a 
 favorite idea of mine. There is nothing of that kind in this bill ex- 
 cept those provisions which authorize the Secretary of the Treasury to 
 issue bonds to retire the greenbacks as bank notes are issued, and to 
 issue bonds to provide for and to maintain resumption. I therefore 
 have been compelled to surrender my ideas on this bill in order to 
 accomplish a good object without using the means that have been held 
 objectionable by many Senators. 
 
 The third plan of resumption which has been favored very exten- 
 sively in this country is that of a graduated scale ; what I call the 
 Engush plan. That is, that we provide now for the redemption at a 
 fixed rate or scale of rates of so much gold for a specific sum of United 
 States notes. At present rates we would give about $90 of gold for 
 $100 of greenbacks, and then provide for a graduated scale by which 
 we would approach specie payments constantly, and reach it at a fixed 
 day. This may be called a gradual redemption. This, also, is objec- 
 tionable to many persons, from the idea that it compels us to enter the 
 money markets of the world to discount our own paper. It is an ideal 
 objection, but a veiy strong objection ; an objection that has force with 
 a great many people. We have undertaken to redeem these notes in 
 com, and it is at least a question of doubtful ethics whether we ought 
 to enter into the markets of the world and buy our own notes at a dis- 
 count. Although that plan was adopted in England and successfully 
 carr'ed into execution, yet there is a strong objection to it in this 
 country,^ *nd therefore that mode is abandoned. Either of these plans 
 I could readily support ; but they have met and wiU meet with such 
 opposition that we can not hope to carry them or to ingraft them in 
 this bill without defeating it. We have then fallen back on these 
 gradual steps : first, to retire the fractional currency ; second, to reduce 
 
470 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 United States notes as bank notes are increased ; and then to rest our 
 plan of redemption upon the declaration made on the faith of the 
 United States that at the time fixed by the bill we wiU resume the 
 payment of the United States notes in coin at par. That is the whole 
 of this bill. 
 
 Not only are all these plans of gradual redemption omitted from the 
 bill, but there are also many troublesome questions omitted from the 
 bill. If we undertake to define precisely what shall be done four years 
 hence on the resumption of specie payments, to say whether the legal- 
 tender act shall then be repealed, or whether it shaU be repealed before 
 or not, we enter upon a very difficult field, and will undoubtedly divide 
 the Senate and divide the country. Is it not better to postpone, until 
 the time comes to meet them, these questions which must then arise, 
 rather than to engage in an attempt to settle them now, four years in 
 advance ? 
 
 We declare the time when specie payments shall be resumed in 
 order to give fair notice, so that market values for the future may be 
 adjusted and so that people will prepare themselves for resumption. 
 Our people may then base their transactions upon that solemn declarar 
 tion made by Congress. 
 
 In regard to the other point as to the reissue of the fractional cur- 
 rency, it will be seen that the first section is carefully worded to require 
 an equal amount in number and denomination of the fractional currency 
 to be redeemed, and that this process is to continue until the whole 
 amount of the fractional currency outstanding shall be redeemed. But 
 it is said that perhaps after all this is done we can not compel people 
 who hold the fractional currency to present it for redemption. It must 
 be remembered that we can not coin sufficient money to redeem all the 
 forty-seven millions now outstanding in less than three years. The 
 question is raised whether at the end of the three years during which 
 this process will go on we shall provide by peremptory law that the 
 fractional currency shall not be reissued under any circumstances. We 
 do not undertake to do it, and I simply say that we should leave this 
 question just where the section leaves it. We have provided for the 
 sure and certain redemption of this fractional currency in a course of 
 time which can not exceed three years, and therefore we do not propose 
 to go further and decide whether it may be issued again or not. Until 
 it IS fully redeemed the currency can not be reissued, and then it will 
 be time enough to determine its issue or reissue. 
 
 In regard to the absolute cancellation of the legal-tender notes that 
 may be redeemed under the operations of the free banking clause, that 
 matter is also provided for in the same way : 
 
 And whenever, and so often as, circulating notes shall be issued to any such 
 banking association, so increasing its capital or circulating notes, or so newly organ- 
 ized as aforesaid, it shall be the duty of the Secretary of tlie Treasury to redeem the 
 legal-tender United States notes in excess only of $800,000,000 to the amount of 80 
 per cent, of the sum of national-bank notes so issued to any such bankingwssooiation 
 as aforesaid, and to continue such redemption as such circulating notes are issued 
 until there shall be outstanding the sum ot $800,000,000 of such legal-tender United 
 States notes, and no more. 
 
 How long will it take before this contingency shall arise ? How 
 
THE RESUMPTIOIT ACT. 471 
 
 long will it be before $100,000,000 of circulating notes will be issued 
 to national banks? How long will it be before this process comes to 
 sncli an end tbat the question is at all material ? No one can tell how 
 fast these notes will be issued, or how rapidly they will be called for. 
 In the present condition of affairs none probably wiU be issued, but no 
 doubt with the revival of industry, with the local demand for banks 
 here and there, with the probable new wants of currency made neces- 
 sary by the increase of business, banks will be organized, how rapidly 
 no man can tell. At any rate the question is not material until the 
 whole amount of $82,000,000 is reduced, until the limit of $300,000,000 
 is reached. It is therefore scarcely necessary for us to ingraft in this 
 biU provisions that wiU undoubtedly lead to controversy and dispute, 
 in order to meet a question that will be provided for in the future. 
 
 At all events I say frankly that we do not propose to decide that 
 question in this biU. I have no doubt that, when the time arrives when 
 the question becomes material, it will be met. Undoubtedly until the 
 reduction of the United States notes to $300,000,000 they can not be 
 reissued. The pi '^ ',ess must go on jpa/ri passu until the amount of 
 legal-tender notes is reduced to $300,000,000. Before that time wiU 
 probably arrive in the course of human affairs, at least one or two Con- 
 gresses will have met and disappeared, and we may leave to the future 
 these questions that tend to divide us and distract us, rather than un- 
 dertake to thrust them into this biU and thus divide us and prevent us 
 from doing something in the direction at which we aim. 
 
 It is said that the biU is open to the construction that the Secretary 
 of the Treasury may gather up the 80 per cent, as a reserve and reissue 
 the notes again, and that it is the intent of those who made the biU that 
 it shall be open. I leave that question to be decided upon the law as 
 it stands. The case that is put of what I regarded as an illegal issue of 
 notes probably may never arise, and certainly it can not arise for a con- 
 siderable period oi time. But if there is any doubt upon that ques- 
 tion, I leave every Senator to construe the law for himself ; and if 
 there is a doubt about it, I say it is not wise as practical men dealing 
 vdth practical affairs, seeking to accomplish a result, to introduce into 
 this bill a controversy which will prevent that unity that is necessary 
 to carry the good that is contained in this biU. 
 
 I am asked whether in my own mind the bill is open to that con- 
 struction. 
 
 I do not care to give my opinion now. I have given my opinion 
 once or twice before in regard to these questions. For instance, I 
 gave my opinion when a bill was originally before the Senate four or 
 five years ago that the reserve which was provided in that bill could 
 not be reissued, and yet that opinion did not control the Secretary of 
 the Treasury for the time being. I prefer to leave that question where 
 the law leaves it, and to the judgment of that Congress that may 
 come hereafter. 
 
 But the question is asked whether we should pass a Lill on a siib- 
 ject like this, so delicate and so important, the meaning of which is so 
 obscure that the champion of the bill has to admit himself that its 
 construction will be left to the courts of the United States. 
 
472 SPEEOPIES AND REPORTS OF JOHN SHERMAN. 
 
 In supporting a bill of this kind, I do not meet all possible ques- 
 tions that may arise in its construction, and no human mind could do 
 it. I know this, and upon this rock I stand : that this bill has provi- 
 sions in it which tend to accomplish the purpose which I have so dili- 
 gently sought, and I wiU not seek to obstruct its passage or defeat it 
 by thrusting into it doubtful questions of law or public policy which 
 may tend to defeat it. I take this bill not as the biU that I should 
 propose myseK, a biU which itself surrenders many of my convictions 
 as to the means to be employed to accomplish the particular purpose 
 designed, but I take it because I see that every provision in it tends 
 to the object sought, and I wiU not weaken it by putting in questions 
 of grammar or construction which may tend to weaken and destroy it. 
 It seems to me the language is very strong and the provisions ample 
 and potent : 
 
 And to enable the Secretary of the Treasury to prepare and provide for the 
 redemption in this act authorized or required, he is authorized to use any surplus 
 revenues, from time to time, in the Treasury not otherwise appropriated, and to 
 issue, sell, and dispose of, at not less than par, in coin, either of the descriptions of 
 bonds of the United States described in the act of Congress approved July 14, 
 1870, entitled " An act to authorize the refunding of the national debt," with like 
 qualities, privileges, and exemptions, to the extent necessary to carry this act into 
 full effect, and to use the proceeds thereof for the purpose aforesaid. 
 
 In other words, to prepare for and maintain redemption, he may 
 issue either a four or a four and a half or a five per cent, bond, the 
 lowest that he can sell at par in coin. We place in his hands the sur- 
 plus revenue of the Government. More than that, we here by law 
 declare our purpose, the purpose of a Government and a people that 
 have never violated their obligations when distinctly made, that at this 
 time and date we will do these things which amount to a resumption 
 of specie payments. 
 
 Now, sir, the great weakness of our currency is that we have under- 
 taken to pay our notes in coin, and do not fulfill our promise. No man 
 denies that obligation. It is so written upon the statute books, now 
 six years old. But from the fact that we have not said at what time 
 we win do it, the question is stiU open to rest upon the construction 
 which each Senator and member may give to the words " as eai-ly as 
 practicable " — an indefinite phrase at least, and one that applies to all 
 future ages. The object of this bill and the objective point of this bill 
 is to fix a time within which the honor of the United States is pledged 
 to redeem these notes in coin ; and that pledge, if made by Congi-ess, 
 and I trust it may be made by the whole of Congress of all parties and 
 made by the whole people — that pledge, if made, will be redeemed. 
 It is true a subsequent Congress may repeal it. Anything we can do 
 may be repealed by a subsequent Congress. All we can do is in our 
 time to pledge the faith of the United States to do this in the future ; 
 and if the people in their power and might, through agents hereafter 
 elected, violate this promise, there is no power in our Government to 
 prevent it. We only know that they probably will not do it ; that a 
 pledge thus specific, made as to a definite day and time, with ample 
 powers given to an executive oflBcer to execute it, wiU be maintained. 
 
THE RESUMPTION ACT. ^ 473 
 
 I desire to say one word more, that this pledge is made knowing 
 the full extent of the obligation imposed by this law, and I believe that 
 every Senator who votes for this bill is personally pledged — all his 
 political influence is pledged — ^to maintain that declaration, just as our 
 fathers felt themselves bound by their lives, theii- fortunes, and their 
 sacred honor to maintain the pledges they made in the Declaration of 
 American Independence. 
 
 The following is the act as passed by the two Houses : 
 
 Aa Act to provide for the resumption of specie payments. 
 
 Be it enacted lyy the Senate and House of Representatives of the United States of 
 America in Congress assembled, That the Secretary of the Treasury is hereby au- 
 thorized and required, as rapidly as practicable, to cause to be coined, at the mints 
 of the United States, silver coins of the denominations of ten, twenty-five, and fifty 
 cents, of standard value, and to issue them in redemption of an equal number and 
 amount of fractional currency of similar denominations, or, at his discretion, he 
 may issue such silver coins through the mints, the sub-treasuries, public deposita- 
 ries, and post-ofiBces of the United States ; and, upon such issue, he is hereby au- 
 thorized and required to redeem an equal amount of such fractional currency, until 
 the whole amount of such fractional currency outstanding shall be redeemed. 
 
 Seo. 2. That so much of section three thousand five hundred and twenty-four 
 of the Revised Statutes of the United States as provides for a charge of one fifth 
 of one per centum for converting standard gold bullion Into coin is hereby re- 
 pealed ; and hereafter no charge shall be made for that service. 
 
 Sbo. 3. That section five thousand one hundred and seventy-seven of the Re- 
 vised Statutes, limiting the aggregate amount of cii'oulating notes of national bank- 
 ing associations, be, and is hereby, repealed ; and each existing banking association 
 may increase its circulating notes in accordance with existing law without respect 
 to said aggregate limit ; and new banking associations may be organized in accord- 
 ance with existing law without respect to said aggregate limit ; and the provisions 
 of law for the withdrawal and redistribution of national bank currency among the 
 several States and Territories are hereby repealed. And whenever, and so often 
 as, cii'culating notes shall be issued to any such banking association, so increasing 
 its capital or circulating notes, or so newly organized as aforesaid, it shall be the 
 duty of Secretary of the Treasury to redeem the legal-tender United States notes 
 in excess only of three hundred million of dollars, to the amount of eighty per cen- 
 tum of the sum of national-bank notes so issued to any such banking association as 
 aforesaid, and to continue such redemption as such circulating notes are issued until 
 there shall be outstanding the sum of three hundred million dollars of such legal- 
 tender United States notes, and no more. And on and after the first day of Janu- 
 ary, anno Domini eighteen hundred and seventy-nine, the Secretary of the Trea- 
 sury shall redeem, in coin, the United States legal-tender notes then outstanding, on 
 their presentation for redemption at the ofiice of the Assistant Treasurer of the 
 United States in the city of New York, in sums of not less than fifty dollai'S. And 
 to enable the Secretary of the Treasury to prepare and provide for the redemption 
 in this act authorized or required, he is authorized to use any surplus revenues, from 
 time to time, in the Treasury not otherwise appropriated, and to issue, sell, and dis- 
 pose of, at not less than par, in coin, either of the descriptions of bonds of the 
 United States described in the act of Congress approved July fourteenth, eighteen 
 hundred and seventy, entitled "An act to aathorize the refunding of the national 
 debt," with like qualities, privileges, and exemptions, to the extent necessary to 
 carry this act into full eflfect, and to use the proceeds thereof for the purposes afore- 
 said. And all provisions of law inconsistent with the provisions of this act are 
 hereby repealed. 
 
 Approved January 14, 1875. 
 
iU SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 THE CUEKENCY. 
 AT MARION, LAWEENOE COUNTY, OHIO, JULY SI, 1875. 
 
 Fellow Citizens : I accepted your invitation to accompany Gov- 
 ernor Hayes to this opening meeting of the canvass, partly from a de- 
 sire to visit again this beautiful region of Ohio, but chiefly that I might 
 present to you, in the clearest and simplest way, my view of the finan- 
 cial questions involved in the canvass. I am personally indebted to the 
 people of Lawrence County for their support during my official life, 
 and have been in hearty accord with the views that have prevailed 
 among you. I know very well the general interests which occupy you. 
 You nave here a great diversity of employments. You are farmers, 
 miners, and manufacturers. You sell food, coal, and iron. You suffered 
 from the panic of 1873, and still suffer from the low price of iron. 
 You are largely interested in questions of currency and taxation. You 
 have among you some differences of opinion on these subjects. I 
 therefore need not apologize to you when I say that I mean to confine 
 myself on this occasion entirely to such topics. I am bound by my 
 duty to you and to the people of Ohio to speak frankly upon the nnan- 
 cial policy of the Republican party, with a confident belief that you are 
 both able and willing to give to this policy your thoughtful considerar 
 tion. 
 
 And, fellow citizens, let us approach directly the questions involved. 
 They relate to your currency, and, incidentally, to the principles that 
 should guide us in levying taxes on imported goods. These matters 
 are directly presented to you by both political parties, and the decision 
 of the people of Ohio upon them will have a wide-reaching influence 
 upon the whole people of the United States. What do we mean by 
 the currency question ? Currency is that which, by law or custom, 
 passes from hand to hand in exchange for labor and its productions, 
 and for land, and all acquired wealth. Properly, the word currency in- 
 cludes gold and sUver, as well as paper money ; but, now that we have 
 a depreciated currency, it will be best understood if we regai-d our cur- 
 rency as including only the United States notes, bank notes, and frac- 
 tional currency in common use in the United States. The first and 
 principal question is, shall this currency be made equal in purchasing 
 power to gold and silver ? Upon this question thei'e ought to be no dif- 
 ference OT opinion among intelligent men. By common consent, in all 
 ages of the world, in aU civilized and semi-civilized nations, both Chris- 
 tian and pagan — ^gold and silver have been regarded ns the best attain- 
 able standards of value. They are not only easily made into current 
 coin, but they are, in any form and wherever found, of intrinsic value, 
 easily divided, indestructible, and readily transported. Different n.a- 
 tions have tried many expedients to substitute something else as a 
 standard of value, but experience has uniformly di-iven them back to 
 gold and silver. Even now, in the United States, where we have a 
 legal-tender paper currency, its depreciation is daily measured by the 
 standard of gold. All our business with foreign countries, and most 
 
THE CUREEKOY. 475 
 
 of the large transactions in commercial cities, are based on gold values. 
 And now, in spite of our law, the market value of all your productions — 
 your wheat, your iron, your labor — is measured by gold. "We deceive 
 ourselves, as did the Israelites of old, by making gods and worshiping 
 them. We make our paper money a legal tender, a standard of value, 
 and naturally think it measures the pnce of gold. We think we see 
 gold rising and falling for the play of the bulls and bears of New York ; 
 but it is our paper money — the public credit — that is rising and falling. 
 Many hundred years ago men saw, as we now see, the sun rising in the 
 East, passing over the firmament, and setting in the West. It appeared 
 to them that the sun was a mere tender to the earth — a satellite, to 
 render its daily offices for our use. Galileo and others proved that all 
 this was deceptive ; that the earth moves around on its axis once a day, 
 and, as one of the smallest of the planets, on its orbit once a year ; and 
 that the sun was the center of our system, and was itseK but one of in- 
 numerable stars. Though this has been demonstrated, and we all now 
 admit it, yet we still say the sun rises, and the sun sets, just as the 
 brokers say that gold has risen, or gold has fallen. And yet, fellow 
 citizens, if we are not blinded by ignorance and heedlessness, we know 
 that gold has not risen any more 'than the sun has risen ; that gold does 
 not go down any more than the sun goes down. It is the public credit, 
 the promise of the United States to pay a dollar in coin, that rises and 
 falls. Paper money is worth nothing except what it promises to be paid 
 in gold ; and then its value is in precise proportion to the expectation 
 that it will be paid in gold, according to promise. The commercial 
 world measures the value of our currency by its estimate or conjecture as 
 to the time when we will redeem it in gold. All know that we have 
 the ability to redeem it, but they speculate upon our willingness to do it, 
 and measure in this way the depreciation of our note, just as they 
 measure the value of an Erie Railroad bond, or any other security. 
 Convince the commercial world that you will redeem this currency m 
 gold when presented, and it at once becomes at par in gold. It will 
 then buy as much food and clothing as wUl the best gold coin ever 
 issued from the mint. When we can redeem it, it wiU be like the 
 Frenchman's bank biU — " If you have the money I don't want it, if 
 you haven't I do." Then the gold and the note wiU circulate side by 
 side, the one interchangeable for the other. To accomplish this is now 
 the highest object of statesmanship, and the greatest good to all classes, 
 but especially those who labor for their daily bread. 
 
 And here, fellow citizens, you may ask : If gold is the best standard 
 of value, why have any other money ? Why have paper money at all ? 
 Why not fall back upon hard money, as the only currency ? This was 
 the old doctrine of the Democratic party of Jackson and "Benton — ^yes, 
 and of Governor AUen, too, forty years ago. The answer is that the 
 experience of commercial nations has demonstrated that paper money 
 is a great convenience in promoting exchanges. It is more portable ; 
 can be transferred more readily from hand to hand; it can be more 
 easily guarded from thieves ; and it gives life and activity to trade by 
 substituting credit for actual coin. But all this is of paper money con- 
 vertible into coin at the will of the holder — not of depreciated paper 
 
476 SPEECHES AKD REPORTS OF JOHN SHERMAN. 
 
 money. We have had in Ohio a varied experience with paper money, 
 from the wild-cat banks that sprung into existence after the War of 
 1812, to our State bank system. Still, though we have suffered many 
 losses through bad paper money, yet we may consider it as a closed 
 question in this country that we shall continue to have some form of 
 paper currency. The Republican party cured one defect of our old 
 bank currency, by giving us national money of uniform value through- 
 out the United States, mstead of the local currency of State banks. 
 What we still want is national money readily convertible into gold. 
 
 Let us examine the reasons why our currency should be made equal 
 to gold. The first and most obvious one is that the United States 
 promises to pay its notes in gold. Here is a dollar bill. It reads. 
 " The United States will pay to the bearer one dollar." What is a dol- 
 lar ? The statutes of the United States declare a dollar to be a coin 
 weighing twenty-five and eight tenths grains of standard gold. Why 
 is this dollar not paid ? Are we unable now, as during the war, to 
 meet this obligation ? It is said that the note does not fix the time of 
 payment. This would be no defense by an individual in a suit at law, 
 for the court would say that such a note is payable on demand, and 
 would compel him to pay. The United States can not be sued, but it 
 ought to be honest ; it ought to observe those rules of honesty which 
 it prescribes for its citizens. Admit that it has the power to say that 
 the time of payment is a question of public policy ; yet a public policy 
 that delays the payment of such an obligation, after the nation is able 
 to pay, seriously impairs the public faith, and sets an evil example. 
 
 Another reason why these notes should be made equal to gold is 
 that the purchasing power of depreciated paper money depends upon 
 the caprice of speculators, who put its value up or down, according to 
 their whim or interest. Every holder of one of these notes finds its 
 value daily changing. It may be worth twenty-three grains of gold to- 
 day, and to-morrow twenty-two. It is like a variable yard-stick, or a 
 changeable ton. Surely, a promise depending on the faith of a great 
 nation like ours should be as unchangeable as the best gold coin ever 
 issued from the mint. 
 
 Again, a payment with such a note, to a laborer for his hire, or to 
 a farmer for his grain, is a delusion. The note calls itself a dollar ; it 
 promises a dollar ; the United States promises to pay for it a dollar ; 
 and yet it will only buy as much as will eighty-five cents in real money. 
 Suppose its purchasing power were made eqiial to coin, then the decep- 
 tion would cease. The United States would then have redeemed its 
 promise, and all business transactions would rest upon real values. 
 
 But it is said that this note is good. So it is — good to pay taxes ; 
 for the taxing power agrees to take it, and the same power "declares 
 that it shall be a legal tender in payment of debts. But would it not 
 be better if it would buy as much wheat and corn and clothing as gold 
 will buy ? It would then be good for all purposes. There is no power 
 in human law to fix its value in gold, or wheat, or labor, or clothing. 
 Its value changes daily. While it is good in the sense that the United 
 States is able to pay it, it is not good in the sense that the United 
 States does pay it according to promise. Governor Allen said, the 
 
THE OUEEENOY. 477 
 
 otlier day, at Newark, that the United States note and the United 
 States bond rest upon the same basis. So they do, but with this differ- 
 ence — that the bond rests upon a promise duly performed, while the 
 note rests upon a promise not performed. The difference is equal to 
 eighteen per cent, of the value of the note. We wish to place the 
 note-holder upon the same footing as the bond-holder, by making "our 
 promise to one as good as that to the other. The question we have to 
 deal with is, are we now ready to enter upon this policy of honesty, of 
 equality between note-holder and bondholder; this policy of good 
 money, national money, with paper and gold equal, the one to the other ? 
 Now, fellow citizens, what are the objections to this policy ? The 
 first and most obvious objection is that existing debts and contracts, 
 based upon depreciated paper money, would be advanced to the gold 
 standard. If this were done suddenly, without notice or time for pre- 
 paration, it would be wrong ; but, if reasonable time be given, contracts 
 will be adjusted to meet the change. Nearly every one is a creditor as 
 well as a debtor, and debts due you will balance what you owe. The 
 advance toward a specie standard will be so gradual as to be impercep- 
 tible. The fluctuations in the value of paper money have, in a single 
 year, more than equaled the present depreciation, and yet we allow four 
 years for the change. When the notes were first issued all contracts 
 were payable in gold, and the creditor then suffered from a rapid de- 
 preciation of the notes ; but since 1865 there has been a gradual appre- 
 ciation of our currency. By a wise policy we could long since have 
 reached a specie standard, but by reason of this very fear of debtors we 
 have failed to take the proper measures. Ten years have passed away 
 since the close of the war, and still we are fourteen per cent, from the 
 specie standard, and have now been so for five years. Shall this always 
 continue ? Somebody will always be in debt. All existing debts are 
 based upon the knowledge that we must reach a specie standard at some 
 time. Why not now adopt this policy, and give full notice of the time 
 and manner of resumption ? Will debts diminish by postponing im- 
 measurably the time ? We know they will not. Would you attempt 
 the impossible feat of scaling the debt, according to the value of the 
 currency when it was contracted ? This, though often proposed, has as 
 often been rejected as impracticable. The only true policy is to give 
 ample time and notice of resumption, so that debtor and creditor may 
 adjust their obligations, and then steadily to pursue that policy until 
 your United States notes shall be equal to gold ; and this, as I will show 
 you, is the policy now proposed by the Eepublican party. 
 
 Another objection meets us, whenever we attempt to advance the 
 value of our currency to the gold standard. We are told that specie 
 payments involve a great contraction of the currency, and that a con- 
 traction of the currency will make money scarce, and add to the pres- 
 ent distress. This objection rests upon a fallacy. I deny both the 
 J)remise and the conclusion. It rests upon the fallacy that we can, by 
 aw, fix the amount of currency necessary for the wants of business. 
 From the very nature of a good currency it ebbs and flows, contracts 
 and expands, to meet the demands of trade. If idle, it ought to be 
 redeemed ; if needed for the purchase of productions, it should be 
 
478 SPEECHES AND KEP0RT8 OF JOHN SHERMAN. 
 
 issued to meet the demand. The only law required to regulate its 
 amount is to provide for the issue of all that can be maintained at par 
 in gold. If it is below par, there is too much. If it can not be readi- 
 ly had in exchange for productions for which there is a demand, then 
 there is too little. Under this rule the great body of our present cir- 
 culation could be maintained at par in gold, and all of the gold now 
 lying idle, and all that is produced by mining, will be added to and 
 mingle with the paper money in daily use. It is so in France, where 
 an aggregate currency of paper money and gold is maintained as large 
 as or larger than ours. It is so in England, where Bank of England 
 notes and gold coin are both in circulation. So it was in specie-paying 
 times in our own country, except that the paper money, being then 
 issued by State authority, was of limited circulation. And now, under 
 our admirable system of United States notes and national-bank notes, 
 both can be maintained in circulation at par with gold, and form a cur- 
 rency as safe and perfect as human ingenuity has ever devised. All 
 labor and productions will then be measured by an unchangeable stand- 
 ard, and all the money will circulate that is necessary to purchase, at 
 the gold standard, every product of human industry. 
 
 Sometimes it is said that the recent panic was caused by a want of 
 currency, or a contraction of the currency. This is a great error. 
 
 In September, 1873, when the panic commenced, the amount of 
 United States notes outstanding was $356,000,000, that of fractional 
 currency was $45,000,000, and of bank circulation $339,000,000— in 
 all, $740,000,000, or more than it had ever been before. The panic 
 came with this vast sum afloat, and Secretary Richardson, without au- 
 thority of law, issued $26,000,000 more of United States notes, for the 
 laudable purpose, as he thought, of easing the money market. It near- 
 ly all went into the banks, and there remained in unbroken packages. 
 If flooding a country with currency would prevent a panic, or stop one, 
 here we had the trial. . But it was only like pouring oil upon a fire. 
 It is demonstrable that nearly all panics, except only such as are trace- 
 able to war, famine, or like causes, spring from expanded credits, and, 
 in many cases, from excessive issues of paper money. Over-production 
 is the inevitable result ; improvident contracts, unprofitable entei-prises, 
 and wild speculations, always follow expanded credits, whether by cor- 
 porations, banks, or individuals. Inflation! The very name implies 
 buoyancy, expansion, lightness, destruction ; and alas ! the destruction 
 often falls on those who did not breed the storm. Now that time has 
 given us a full view of the expanded credits and improvident entei^ 
 prises of 1873, we only wonder that the wreck was not more over- 
 whelming and enduring. Surely prudent, sensible men, who will study 
 such financial waves, must conclude that the only remedy is to reduce 
 credits to a substantial basis. A few articles may, for a time, be slow 
 of sale, because there is no demand for thorn, or because there is an 
 over-supply. But this will soon pass away. Industry is gradually re- 
 viving, and now is the time to base our enterprises upon specie-paying 
 money, and upon thi'ift, industry, and economy. 
 
 But we Rei)ublicans iiru often told that if gold is the standard of 
 value, why was paper money issued at all in excess of the amount that 
 
THE OUKEENOY. 479 
 
 could be kept at par in gold ? The answer is that it was issued under 
 the overwhelming necessities of a great civil war. I remember well the 
 circumstances connected with the first and with all the succeeding 
 issues of United States notes, and took as effective a part as any one in 
 providing for those issues. It was in February, 1862, after all the 
 banks had suspended specie payments, and when our armies had made 
 no progress, our revenues were cut off by the war, and our expendi- 
 tures were more than $1,000,000 a day, that the first issue was au- 
 thorized. There were then lying on the table of Mr. Chase, Secretary 
 of the Treasury, requisitions for over $80,000,000, with which to pay 
 our soldiers, and to supply them with food, ammunition, and trans- 
 portation. Our bonds could not be sold, for there was no currency 
 with which to pay for them. We had to issue the notes of the United 
 States in the form of currency, and yet as a part of the pubHc debt. 
 The only question was, whether they should be made a legal tender 
 between individuals, in the payment of debts. Upon this point I had 
 clear convictions. I felt that if our soldiers were to be compelled to 
 take these notes as money, we were bound, if we could, to require 
 everybody else to take them as money. We could not leave these 
 notes to the tender mercies of creditors, shavers, and unpatriotic men, 
 who would gladly decry and repudiate them. We therefore made 
 them a legal tender, and the Supreme Court has upheld our power to 
 do so. But we took every precaution to prevent their depreciation. 
 We made them receivable for all internal taxes ; we made them a legal 
 tender in payment of all debts ; and we also made them convertible 
 into bonds, the interest of which was payable in gold, while the duties 
 or taxes on imported goods were made also payable in gold, so that we 
 should have an ample fund in gold to pay the interest on the bonds. 
 After all this, we limited their amount — beyond which we would never 
 go — to four hundred millions. Such was the care and solicitude with 
 which we hedged in the greenbacks; and every dollar of them was 
 issued with the understanding and declared public policy that, after 
 the war was over, they would be redeemed in gold. Thegreat error 
 of our financial policy was in repealing, instead of suspending during 
 the war, the right of each holder, at his wiU, to converThis greenbacks 
 into bonds. But for that repeal they would have been restored, soon 
 after the war, to par in gold. The consequence of this error has been 
 to involve us in the discredit, now, ten years after the war is over, of 
 forcing everybody to take our notes at a depreciation of fourteen per 
 cent., while the United States, with ample means, refuses to redeem 
 them according to the promise printed on their face; and this now 
 involves us in a struggle with the Democratic party, which you are 
 this faU called upon to decide. The Eepublican party issued these 
 notes as a means for the salvation of our country from a Democratic 
 rebellion. The Democratic Eepresentatives then in Congress declared 
 that we had no power to issue notes ; that we had no right to make 
 them a legal tender ; that, if issued, they would depreciate until they 
 were worthless; and that they would be bought by the cord. And 
 now they are trying to make their prophecy good. We, as Eepubli- 
 cans, are now trying, perhaps too carefully and cautiously, to make 
 
480 SPEECHES AND BEP0RT8 OF JOHN SHERMAN. 
 
 these promises good. We mean to do so. We will do so, not only 
 without sacrificing any business interests, bat so as to promote them. 
 But the Democratic party of Ohio, with the insane folly that has 
 marked its course since the beginning of the war, is bent on reducing 
 our currency to the standard of the old Continental money, of the 
 French assignats, of the wild-cat money of forty years ago, or of the 
 Confederate currency ten years since, when it became utterly value- 
 
 Now, fellow citizens, I have gone, perhaps at too great length, into 
 some of the more obvious arguments for a restoration of our currency 
 to a gold standard. Let us now examine the precise position taken by 
 the two great parties on this important question. At the first session 
 of the late Congress, in December, 1873, after the panic had, by its 
 resistless progress, swept great enterprises out of existence ; when the 
 demand for iron, and fabrics of iron, and, indeed, for all leading manu- 
 factures had ceased ; when industry, in all its branches, was suffering 
 from paralysis ; then Congress was called upon definitely to face this 
 financial question. AU previous efforts to restore our currency to the 
 gold standard had failed, because of irreconcilable differences of opin- 
 ion, among all parties, and in all sections, as to the measure and method 
 most suitable for this purpose. Then the Committee on Fioance in 
 the Senate reported a resolution, very general in its terms, which said 
 s that it was the duty of Congress to take definite action to restore our 
 currency to the gold standard. This led to a debate memorable, at 
 least, for its length, but with practically no result, and Congress ad- 
 journed without adopting any definite financial policy. This was the 
 first time in its history that the Eepiiblican party ever failed to grapple 
 with the issue of the hour. It went into the canvass last fall, divided 
 in its counsels and silent, when it should have spoken. The result was 
 our defeat, and the restoration of the Democratic party to power in 
 the House of Kepresentatives, with some eighty Confederate officers 
 among them to represent the Lost Cause. When Congress met at its 
 last session, this severe defeat had at least one good effect, in convinc- 
 ing its Republican members that a party charged with the administra- 
 tion of the Government must be able to agree upon the most pressing 
 question of the time. The result was that, after the most careful de- 
 liberation, after the freest exchange of opinions, after mutual conces- 
 sions by Republicans of differing views. Congress did pass a law which 
 does definitely declare a public policy, and which provides ample means 
 to restore our currency to the gold standard by the 1st day oi Januarv, 
 1879. 
 
 As I reported this law, advocated it, voted for it, and now heartily 
 defend and approve it, I may still be allowed to say that it does not 
 prescribe all the agencies and means which I would have selected to 
 bring about tlio resultiaimed at. I do not conceal from you my firm 
 conviction that tho true policy was gradually to fund United States 
 notes, until the residue of thom were at par with gold. The bank 
 notes, being redeemable in United States notes, would also arise to par 
 at the same time. A declared policy of this kind, boldly pursued, 
 would not, in my opinion, have reduced in any considerable degree the 
 
THE OUKRENOT. 481 
 
 volume of the currency, but would have added gold and silver to it, 
 and would have inspired such confidence as at once to start again into 
 activity many industries now languishing and depressed. But many 
 good Kepublieans thought otherwise, and we therefore agreed to post- 
 pone actual resumption until January 1, 1879, except in so far as it 
 would be indirectly promoted by the circulation of silver coins and the 
 preparations which the Secretary of the Treasury was fully authorized 
 to make in anticipation of resumption at the time stated. "While, 
 therefore, this law does not fully meet my views, every provision of it 
 tends in the right direction. Leading editors, forming hasty conclu- 
 sions, have declared it a sham ; but they often have occasion to revise 
 their opinions, and some of them have done so as to this law. Though 
 remote as to time of operation, yet, if the duties enjoined by this law on 
 the Secretary of the Treasury are performed, we shall, at the time 
 fixed, as sure as fate, have United States notes and bank notes advanced 
 to par with gold. The Republican convention of Ohio, in their second 
 resolution, declare, " That a policy of finance be steadily pursued, which, 
 without unnecessary shock to business or trade, will ultimately equalize 
 the purchasing capacity of the coin and paper dollar." The same policy 
 has been declared by every Eepublican State convention held this year ; 
 so that we may now announce, as the fixed policy of the Republican 
 party, a steady march toward specie payments, and no step backward. 
 
 What is the position of the Democratic party on this question? 
 When the Finance Bill was pending in December last, the objection 
 made by the Democratic Senators was that it would not accomplish 
 resumption soon enough. My colleague. Judge 'thurman, was quite 
 facetious about our caution and timidity. Senator Bayard made a 
 strong speech against it, because it did not provide at once for a con- 
 traction of the currency. Every Democratic Senator and Representa- 
 tive voted against it; some wishing to repeal the legal-tender act, 
 others desiring resumption in July, 1876, and all denouncing our slow 
 progress toward specie payments. But now, " presto, change ! " they 
 are in favor of more money. Judge Thurman is muzzled — allowed to 
 appear only before selected audiences — and my old friend Sam Gary 
 is let loose to lead this new cry of more money. Well, more money is 
 a pretty good cry, for we all want money ; but it is not by such a party 
 cry as this that an intelligent people will be led to approve the issue of 
 more and more of a depreciated paper currency, in defiance of the 
 warnings of experience, of reason, of law, and of public honor. 
 
 Before reading this new Democratic gospel, let me invite the atten- 
 tion of my Democratic hearers to the attitude in which that old his- 
 toric party now presents itself. If there was anything which was 
 definite in its old-time policy it was " hard money " — the " money of 
 the Constitution " — " money that jingles." Even during the war, when 
 the issue of paper money was vital, there was something manly in its 
 opposition to it. But now, when the Republican party seeks to make 
 this currency equal in value to " hard money," the Democratic party, in 
 Convention assembled, forgetting its traditions and former teachings, 
 demands more money, more depreciated money ; no limit, no restric- 
 tion, no provision for its payment, no specie standard. Can you see 
 31 
 
4S2 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 anything in this but sheer demagogism ; base trifling with your inter- 
 ests ; the vain hope that in a time of temporary depression you will 
 forget all the teachings of history, and vote them into power ? Is the 
 Democratic party of to-day the same party which, by its boldness and 
 courage under Jackson, secured the confidence of its supporters and the 
 respect of its adversaries ? No, sir. Ever since the Kepublican party 
 came into power, the Democratic party has been on this as on every 
 other question of public policy, including every measure for the prose- 
 cution of the war, simply an opposition party, a party of negation, pro- 
 S)osing no definite measure, and unable to agree upon any affirmative 
 egislation. And now, on this vital question, the "World " denounces 
 the "-Enquirer," and the " Enquirer " denounces the " World," while 
 Governor AUen is made to ride upon a platform which is in contradic- 
 tion to every expressed sentiment of his life. 
 
 Now, fellow citizens, that I may do no injustice, I puroose to read 
 to you the eighth, ninth, tenth, eleventh, and twelfth planks of the 
 Democratic platform, which present the governing issues of this canvass, 
 and to expose, as well as I am able, the eiTors of fact and of argument 
 contained in them. The eighth resolution I will now read : 
 
 Eighth — That the contraction of the currency heretofore made by the Repub- 
 lican party, and the further contraction proposed by it, with a view to the forced 
 resumption of specie payment, have ah-eady brought disaster to the business of the 
 country, and threaten it with general bankruptcy and ruin. We demand that this 
 policy be abandoned, and that the volume of the currency be made and kept equal 
 to the wants of trade, leaving the restoration of legal tenders to par with gold to 
 be brought about by promoting the industries of the people, and not by destroying • 
 them. 
 
 This resolution commences with a perversion of fact. "Wlien did 
 the Republican party contract the currency of the country ? That 
 party devised and brought into existence our present paper currency, 
 both of United States notes and national-bank notes. The maximum 
 of United States notes was fixed in 1864 at four hundred millions of 
 dollars. The only reduction or contraction of these notes was made by 
 Secretary McCulloch, under the administration of Andrew Johnson, 
 when the Treasury notes were gradually reduced from four hundred 
 to three hundred and fifty-six millions. This reduction of the cur- 
 rency was suspended by the act of Congress of February 4, 1868. 
 The vohime of United States notes then remained until October, 1ST3, 
 at three hundred and fifty-six millions, when Secretary Richardson, as 
 before stated, issued twenty-six millions more, making a total of three 
 hundred and eighty-two millions. During all the time, however, since 
 March, 1865, there has been a steady increase of the fractional currency 
 and national-bank notes ; so that, instead of a contraction, there has 
 been a steady expansion of the currency. As I stated before, there 
 was more paper currency outstanding at the moment the panic came 
 upon us than ever before ; and, with the vain hope of stopping the 
 panic, Mr. Richardson issued twenty-six millions more of United States 
 notes. It is true, as Mr. Pendleton stated at Gallipolis, that, during 
 tlio war, Treasury notes of various forms, compound-interest notes and 
 time bills, all bearing interest and convertible into bonds, were issued. 
 But these did not form any pai't of the currency, but were held for the 
 
THE CURRENOY. 483 
 
 aceruing interest ; and they were all retired by Mr. McOuUocli, and 
 before General Grant came into power. So that all this cry about the 
 contraction of the currency is untrue. 
 
 But the Democratic party says that a further contraction of the 
 currency is now pi'oposed, with a view to a forced resumption of spe- 
 cie payments. Well, gentlemen, the finance bill of last session pro- 
 vides for free banking, so that all men who want more money, and 
 can give security for its payment, may have it. In that event United 
 States notes are to be redeemed to the extent of eighty per cent, only 
 of the bank notes issued, thus issuing five dollars and withdrawing 
 four.* Banks may also, at their pleasure, retire their circulating notes. 
 Now, we have had within a few days an official statement from the 
 Compti'oUer of the Currency, showing the actual operation of the law. 
 Since its passage circulating notes have been issued, to new and old 
 banks, to the amount of $7,T85,525, and $6,228,420 of United States 
 notes have been withdrawn, leaving an increase of the currency of over 
 $1,500,000. But there has been a reduction of the currency by the 
 voluntary surrender by national banks of their circulation, to an amount 
 greater than this increase. The reduction of United States notes de- 
 pends upon the issuing of new bank currency, and this is the weakness 
 of that law, and for which we were denounced by Democratic Senators 
 and newspapers last winter ; and now Governor Allen and Mr. Pen- 
 dleton denounce us for doing what we did not do. They say that this 
 contraction brought disaster to the business of the country. But as 
 the disaster came in 18T3, when there had been no contraction what- 
 ever, but an actual and steady expansion of all forms of paper money 
 and credit, it is conclusive that the panic was not caused by contrac- 
 tion. Tt was the failure to contract, and the continued expansion of 
 paper credits, which led to the wild enterprises, the forced produc- 
 tion, and the sudden collapse, which involved the innocent with the 
 guilty in wide destruction. Fellow citizens, there is no delusion of 
 human nature that has been more injurious in its effects upon the hap- 
 piness of mankind than has that which seeks to build prosperity upon 
 broken promises, upon depreciated paper money, and upon the wild 
 speculations engendered by them. How often must bur race be taught 
 that there is no sure basis for substantial wealth but industry, honesty, 
 prudence, and economy ? 
 
 But what does the Democratic party propose ? " That the volume 
 of currency be made and kept equal to the wants of trade." Who 
 shall fix that volume ? What caucus could regulate the amount ? 
 What Congress shall decree it ? What shall be its standard of value ? 
 Shall it be coal lands at $1,000 an acre, or gold at twenty-five and 
 eight tenths grains to a dollar ? Shall it be enough to fioat the ISTorth- 
 ern Pacific Railroad into premature birth? How, then, will you 
 measure your daily toil ? How the price of your wheat — the fruit of 
 hard labor and solid acres ? If you get your pay in gold, or in money 
 steadily approaching the gold standard, you know what it wiU buy ; 
 but if its value and volume have no fixed basis, and are to fluctuate to 
 meet somebody's notions of the wants of trade, you wiU be exchang- 
 ing your labor, your grain, your coal and iron, for money. 
 
484: SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 " as variable as the shade 
 By the light, quivering aspen made." 
 
 Now, if this resolution read, " that the volume of paper money, 
 always redeemable in gold and silver, shall be equal to the wants of 
 trade," it would be all right ; we should then have a standard of value. 
 But the resoliition, as it stands, is the most transparent demagogism. 
 It would be as if the merchant should regulate the length of his yard- 
 stick by the necessities of his purse ; as if the coal and iron man should 
 regulate the weight of their ton by the amount of their debts ; as if 
 the farmer were to reduce the number of pounds in a bushel of wheat 
 so as to Obtain the same number of bushels, whether the crop is* good 
 or bad. It is this palpable fallacy which dismisses from a dollar the 
 attribute of fixed, intrinsic measure and value, into which Governor 
 Allen has fallen at Gallipolis, and which misleads many an honest 
 man, and has caused many of the wrecks that mark the history of hu- 
 man error. 
 
 But our Democratic platform-makers, recalling the old Democratic 
 ideas about gold, tell us that they are in favor of leaving the restora- 
 tion of legal tenders to par with gold to be brought about by promoting 
 the industries of the people, and not by destroying them. How do 
 they propose to promote your industries ? Is it by protecting them, 
 and building up your manufactories ? Oh, no. They tell you plainly 
 that, in framing their tariff laws, they will look only to the revenue 
 they can get from you, and not to the benefit they can confer upon 
 you. What then? Echo answers, what? "What did the Democratic 
 party do for thirty years to promote the interests of labor ? Nothing 
 but for the labor of slaves. It is to the Republican party that you owe 
 your homestead law — the policy that has made us a nation of free men. 
 It is to the Republican party you owe the protection of your labor, and 
 the creation of the very currency which the Democratic party seeks to 
 destroy. What party now threatens a reaction against all the measures 
 of the war ? What party has formed a coalition against your common- 
 school system, and only awaits a favorable time to carry it out i But 
 they tell you that they will restore your legal tenders to par in gold. 
 When ? If not now, why not three years hence ? 
 
 Why not, my fellow citizens, support the Republican policy ? It 
 needs no argument to convince you that the men who framed the 
 Democratic platform have no intention to restore the gold standard 
 except through repudiation. That is their process. The "wants of 
 trade," as construed by them, will lead, step by step, into inflation, 
 
 feneral bankruptcy, and repudiation. Judge Thurman was right when 
 e said in the Senate, in 1874, that if this policy were adopted he should 
 not live to see again in circulation good old Democratic money — gold 
 and silver. The war for American Independence, and its grim neces- 
 sities, drove our Revolutionary fathers into this policy ; and so with 
 France in the throes of her revolutionary stmggles : and in both cases 
 the currency was repudiated as worthless. Now, after our war is hap- 
 pily over, and all its hard sacrifices have been crowned with success, 
 and wlien we are on the plain road to a specie standard, we are asked, 
 in the name of the " demands of trade," to adopt the same policy, to 
 
THE CUEEENOY. 485 
 
 issue more money without any plan of redemption, on the promise of 
 the Democratic party that, at some time, it may be, they will restore it 
 to par in gold, " by promoting the industries of the people." For one, 
 fellow citizens, I shall want a more specific guarantee, as well as a bet- 
 ter guarantor than the Democratic party. We, the Eepublicans, who 
 are responsible to our country and to mankind for the redemption of 
 the promises contained in these greenback notes, must see to their re- 
 demption, and not turn over to our adversaries this last remaining duty 
 of our great conflict. France, our old Eevolutionary friend, has re- 
 cently set us a noble example, by resuming specie payments, after her 
 unsuccessful war with Germany, and after suffering greater sacrifices 
 than we did ; and it is admitted that her industries are now more pros- 
 perous than ever before in her long history. These shadowy fears, 
 which, in the minds, of business men, sometimes cloud the pathway of 
 duty, will disappear by a steady adherence to the Republican policy. 
 
 The next resolution of the Democratic platform to which I wish to 
 call your attention is the ninth : 
 
 Ninth — That the policy already initiated by the Republican party, of abolishing 
 legal tenders and giving national banks the power to furnish all the currency, will 
 increase the power of an already dangerous monopoly, and the enormous burdens 
 now oppressing tlje people, without any compensating advantage; and that we op- 
 pose to this policy tlie demand that all the national-bank circulation be promptly 
 and permanently retired, and legal tenders be issued in their place. 
 
 The substance of this resolution is that the national banks shall be 
 promptly destroyed, and that the greenback circulation shall be at the 
 same time increased to $710,000,000. Before examining this startling 
 proposition, let us dispose of some of the errors of fact contained in the 
 resolution. It is not true that the Eepublican party proposes to abolish 
 the legal tenders, or to give to the national banks the entire circulation 
 of the country. This is a question of the future, upon which parties 
 have not yet taken their position, and concerning which, no doubt, 
 differences of opinion will arise. The Kepublican party has taken the 
 position that, by the 1st of January, 1879, both legal tenders and na- 
 tional-bank notes shall be redeemable in gold, when demanded. To 
 this extent, and no further, have they taken a position. For one, I am 
 free to say that, while our public debt exists, I am for maintaining in 
 circulation the tjnited States notes to the full amount at which they 
 can be maintained at par in gold, and no more ; and I am convinced 
 that such notes, payable on demand in coin, or, at the option of the 
 Government, in a fixed bond, which, in the money market, is usually 
 at par in gold, would keep in circulation all or nearly all of the present 
 volume of United States notes. 
 
 But, should it not, there is no reason in the world why the Govern- 
 ment ought not to pay interest on a debt which it is not prepared to 
 pay in coin ; and, with such notes, it is immaterial whether they are or 
 are not a legal tender. To guard against the sudden effects of a panic, 
 I would leave them a legal tender ; but these are my individual views 
 only, often expressed and sincerely entertained. Upon this question, 
 however, the Republican party has taken no position, nor ought it to 
 do so until after resumption. 
 
486 SPEE0I-IE8 AND EEPOETS OF JOHN SHERMAN. 
 
 As to the national banks, they are entirely in the power of Con- 
 gress. We can repeal the law oi their creation, but would it be wise 
 to do so ? They are denounced as a monopoly, but this is now untrue. 
 For a time, after the limit fixed by law for national-bank circulation 
 was reached, they were in one sense a monopoly ; but since the act of 
 last winter banking is as free as blacksmithing, or iron-making, or mer- 
 chandising, and freer than the making of lawyers, or of doctors, or 
 preachers. Any set of five or more men may start a bank in any part 
 of the United States, on the terms, conditions, and responsibilities fixed 
 by the banking law. Over 2,000 banks have been authorized, and are 
 scattered all over the United States. They have loaned of their own 
 money, or of that deposited Avith them, $950,000,000, and this consti- 
 tutes a large part of the active capital upon which the manufacturing, 
 commercial, and mining industries of the country rests. They are the 
 principal agents for the deposit and exchange of money, not only in 
 the United States, but with foreign nations. Their business reaches 
 among and interlaces with that of every citizen of the United States. 
 They are private corporations ; the Government has nothing to do with 
 them except to make them pay taxes and obey the laws. These laws 
 are very strict, requiring from them reports under oath, and subjecting 
 them to frequent examinations at unexpected times, and maintaining 
 over them the strictest surveillance. The only privilege these banks 
 enjoy which the humblest citizen does not is, that, by giving ample 
 security in United States bonds, they may issue a certain proportion of 
 circulating notes. They pay the expenses of printing these notes ; re- 
 deem them promptly on demand with lawful money of the United 
 States ; keep money in the Treasury of the United States for that pur- 
 pose ; while their notes are not a legal tender, and nobody is bound to 
 take them. When this is all done, we require them to keep on hand a 
 large reserve in cash ; we tax them all ; the States tax them, and the 
 counties and towns do the same, so that their aggregate taxes are now 
 $20,000,000. 
 
 These are the national banks. They were organized by the Repub- 
 lican party to take the place of the State banks — a mongrel crew, under 
 no common authority, obeying no law, giving, in some States, no secu- 
 rity, and issuing bills easily counterfeited and of limited circulation. 
 Under the national-bank law there can be no successful counterfeit- 
 ing ; the notes are secured beyond the possibility of loss, for the bank 
 may break, but the note is good ; and they pass without question any- 
 where in the United States. The banks are organized for twenty 
 years ; yet the law can be repealed. But business, in some branches, 
 18 languid. Debts are hard to pay and hard to collect. Everybody is 
 trying to save a little in expenses, and to make a little more crop. And 
 now a set of men, self-iippointed, calling themselves a Democratic Con- 
 vention — a State Convention, remember, not a National Convention — 
 meets at Columbus, and resolves that all this system of national banks, 
 interwoven with the business of the whole people of the United States, 
 shall be promptly torn up ; that this vast indebtedness of the people to 
 the banks shall bo immediately paid ; and that all the bonds of the 
 United States now held by these banks shall be forced upon the mar- 
 
THE OUEEENOY. 487 
 
 ket ; and that the United States shall then issue its legal-tender notes 
 to the additional amount of three hundred and fifty millions. Such is 
 the financial programme of the Ohio Democrats, to give relief to the 
 business interests of the country. Is there any business man who hears 
 me who does not know that such a measure, if adopted, would utterly 
 destroy the country's industries ? 
 
 Let us examine this proposition a little further. The first difficulty 
 to be encountered is, that the issue of the greenbacks in excess of four 
 hundred millions would be a plain and palpable violation of the public 
 faith. In 1864 the United States solemnly engaged that the volume 
 of legal-tender notes should never exceed the sum of four hundred mil- 
 lions ; and this pledge has been several times repeated, and is the sacred 
 barrier which has alone maintained the purchasing power of the green- 
 backs at the present rate. 
 
 Again, the validity of the legal-tender act was sustained by the 
 Supreme Court on the sole ground that it was the exercise of the war- 
 making powers of Congress, held to be essential to the national exist- 
 ence ; and yet, even on this ground, it was sustained but by a bare 
 _ majority only of that court. Who believes, for a moment, that the 
 validity of legal-tender notes would be sustained by that court if issued 
 in a time of profound peace, in violation of the public faith, and as 
 a part of a policy designed to maintain in perpetuity an irredeemable 
 currency ? 
 
 Again, for what purpose could the United States issue these notes 1 
 Would it be to purchase the bonds of the Government now held as. 
 security for bank notes ? Those bonds are the property of the banks, 
 and could only be purchased, like other bonds, in the open market, at 
 a large premium. This premium would rapidly advance as the irre- 
 deemable notes were issued. How long would this process continue 
 before these platform-makers would assert the right to pay the bonds 
 in greenbacks, and thus again violate the public faith, pledged, by the 
 act of .March, 1869, to strengthen the public credit ? Or, would they 
 loan the greenbacks to the people, as the bank notes are now loaned, 
 and thus convert the Government into a bank, not only of loan, but of. 
 discount? It is idle to follow further the evil consequences and dan- 
 
 ferous effects of the Democratic policy announced in these resolutions, 
 'heir end would be utter bankruptcy and ruin. 
 But what good do they hope to accomplish ? They wiU answer that 
 they desire to save the interest on the notes now issued by the banks. 
 They want the Government to have the profit of issuing notes for cir- 
 culation. In gaining this they would violate the public faith ; they 
 would lose all the taxes now received from the national banks ; and 
 would utterly destroy all ideas of fixed values. The profit derived 
 from this circulation has been over-estimated — so much so that now 
 more circulation is being retired by banks than is issued to them. The 
 privilege is now open to all, and yet it is not generally taken. If the 
 Government were to assume the sole and exclusive privilege of issuing 
 these notes, it could not engage in the business transactions by which 
 alone that privilege can be made profitable, and the business public 
 would lose the benefit of discounts and loans. 
 
4:88 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 But the real motive lies back of all this. These men want more 
 money, more money ; not real money, but depreciated paper money — 
 cheap money, becoming cheaper and cheaper as more is issued, making 
 it easier to pay debts. But will a dollar of this money buy what a dol- 
 lar of gold, or even a dollar of paper money, will now buy? We 
 know it will not. It will depreciate, even in greater proportion, as its 
 volume increases. Your grain, your iron and coal, may bring you 
 more money than you now receive, but the money received will buy 
 less than now, and you will be constantly cheated by a false weight 
 and a false standard. How strange it is that human experience, so 
 often repeated, does not stamp upon the mind of every human being 
 the truth proclaimed by Webster, acted upon by Jefferson and Jack- 
 son, and which lies at the foundation of the laws of currency : that, 
 of all the contrivances for cheating the laboring glasses of mankind, 
 none has been more effectual than that which deludes them with de- 
 preciated paper money ! Ordinary tyranny, oppression, excessive taxa^ 
 tion — these bear lightly on the happiness of the mass of the commu- 
 nity, when compared with a fraudulent currency, and the robberies 
 committed thereby. 
 
 Now, fellow citizens, to return once more to the national banks, 
 which the Ohio Democrats propose at once to destroy. I need not re- 
 mind you that, next to Mr. Chase, then Secretary of the Treasury, I 
 had as much to do with the passage of the national bank act as any 
 one ; and yet I regarded it as an experiment, and chiefly supported it as 
 a means of driving out of existence the heterogeneous multitude of 
 State banks that, during the war, threatened to overwhelm us with 
 paper money of limited circulation and no security. The national 
 banking system has proved, on the whole, to be a great success. Mr. 
 McCulloch, in his report as Secretary of the Treasury in ISC 7, care- 
 fully reviewed the whole system ; and I refer my Democratic friends 
 to that report for some wholesome reading. Since he wrote, the bank- 
 ing system has been improved by making it free, and by providing for 
 the prompt redemption by each bank of its notes, at the Treasury of 
 the United States. The national banks have yet to bear the test of 
 coin redemption. When the United States notes shall have advanced 
 to par in gold, the banks must redeem their notes at par in gold. If, 
 then, experience shall show that this system will furnish to the people, 
 through local banks, circulating notes which shall be freely convertible 
 into gold, then the Republican party will stand by it. If not, that 
 party will modify or dispense with it. And, in dealing with this ques- 
 tion, I trust that the Republican party will do as it has done with other 
 great problems of human government which it has successfully solved, 
 acting with moderation and wise statesmanship, and relying upon the 
 intelligence of an educated people, rather than upon that spirit of blind 
 demagogiBin which has plainly led to the adoption of this ninth resolu- 
 tion. 
 
 There is one other financial plank in the Democratic platform that 
 is easily disposed of. I will read it : 
 
 Tenth — That tho public interest demands that the Government shonld cease to 
 discredit its own cnrrenoy, and should make its legal tenders receivable for all 
 
THE CUKRENOY. 489 
 
 public dues, except where respect for the obligation of contracts requires payment 
 in coin, and that we favor the payment of at least one half of the customs in legal 
 tenders. 
 
 This resolution, apparently plausible, not only involves grave errors 
 of fact, but is ridiculous in its logic. It says that the Government 
 should cease to discredit its own currency, and yet the Democratic 
 party does not propose to pay it. I suppose that the utmost discredit 
 that can be put on any currency or any promise to pay is to refuse to 
 redeem it. The same platform which thus reproaches us for discredit- 
 ing our currency proposes to issue three hundred and fifty millions 
 more of it, when every note is a broken promise, and every additional 
 issue will cause a further depreciation. But consistency can scarcely 
 be expected in a Democratic platform. The adoption of this proposi- 
 tion would reduce our duties on imported goods to an extent equal to 
 one half of the discount of our paper money, when compared with 
 gold, or at this^time about seven per cejit. Now, as a revenue measure 
 this is certainly a bad one, when our present income is barely sufficient 
 to meet our expenditures. But a still graver objection to this resolu- 
 tion exists. By the law as it now stands, passed in February, 1862, 
 and upon which every bond of the United States now outstanding was 
 issued — the very foundation of our public credit — it was provided : 
 
 Section 5. That all duties on imported goods shall be paid in coin, . . . and 
 the coin so paid shall be set apart as a special fund, and shall be applied as follows : 
 
 1. To the payment in coin of the interest on the bonds and notes of the United 
 States. 
 
 2. To the purchase and payment of one per centum of the entire debt of the 
 "United States, to be made within each iiscal year after 1863, which is to be set apart 
 as a sinking fund, and the interest of which shall in like manner go to the purchase 
 or payment of the public debt. 
 
 3. The residue thereof to be paid into the Treasury of the United States. 
 
 Now, fellow citizens, under this law the United States has acted, 
 and is compelled to act until the public debt shall be paid. Under it all 
 duties on imported goods are paid in gold, and these duties now yield 
 us a revenue of about $160,000,000 in gold. This money is mortgaged 
 to the public creditors, and we dare not violate that pledge at the cost 
 of national dishonor. Of this money, something over $100,000,000 a 
 year is required to pay the interest on your public debt. Over $30,- 
 000,000 is required for what is called the sinking fund, for the gradual 
 redemption of the debt. We have other expenditures which must be 
 paid in gold — such as our foreign intercourse, and our navy, wlien 
 abroad. This wiU leave, perhaps, $25,000,000 to $30,000,000 of gold, 
 which is paid into the Treasury, and is sold for United States notes, 
 and the proceeds used for current expenditures. Now, this resolution 
 demands that this gold, thus sacredly pledged, shall be diverted, in vio- 
 lation of your public faith. And for what ? To reduce the duties or 
 taxes on foreign goods seven per cent. ! No language is strong enough 
 to denounce such a policy. A small portion of this fund, about twenty- 
 five millions, may be used for any proper purpose of expenditure ; and 
 therefore Judge Thurman, last winter, proposed to receive one fifth of 
 the customs duties in currency. But even this was opposed, on the 
 ground that it would impair the trust fund, and as against public policy. 
 
490 SPEE0I-IE8 AND REPORTS OF JOHN SHERMAN. 
 
 Senator Bayard, of Delaware, a leading Democrat, took strong g-ound 
 against it, and it was overwhelminfflv defeated. Now the Ohio Demo- 
 crats propose to surrender one half of our gold revenue, to dishonor 
 our pledges, and to drive the Secretary of the Treasury into the market 
 to buy gold mth which to pay the interest ; and all to lower the duties 
 that yield our revenues and protect our industries. 
 
 The eleventh resolution in this platform is only important in that 
 it promises you, in place of your national banks, a system of free banks 
 of discount and deposit ; in other words, broker-shops. No doubt these 
 are a great blessing, but I think we have now enough of them. At all 
 events, we have now in every State the right to go into the brokerage 
 business, free from all restraints ; and we need not place the Demo- 
 cratic party in power for the purpose of gaining this great blessing. 
 
 The only other financial plank in this platform is very brief : 
 
 Twelfth — A tariff for the sole purpose of revenue. 
 
 This resolution is a blow at that system of tariff laws which had its 
 origin in Washington's administration, and has been continued ever 
 since, varied in details, but retained in principle, and strengthened and 
 improved by the Republican party ; and which, while looking to im- 
 ported goods as the chief source of Federal revenue, also regards the 
 fostering and protection of domestic industry as a national object, in- 
 cident to all revenue laws, and deserving of the most considerate and 
 favorable care. If that be the meaning of the resolution, we accept the 
 issue promptly. "We do seek, while levying taxes, not only to make 
 their operation as light and just as possible, but also to advance our own 
 industry without impairing the sources of revenue. In this sense we 
 are for the protection of American industry, and proudly point to the 
 vast development of our home manufactures as the result of Republi- 
 can policy. I do not think it necessary, before you, to enter into the 
 common arguments that have been made upon this subject, for I know 
 you are familiar with them. I have always regarded a tariff law as a 
 subject, not of political dispute, but for the application of good, com- 
 mon sense in the adjustment of the details — applying the higher duties 
 to articles of luxury, fair average duties on articles that come into com- 
 petition with our own industries, and low duties, or none at all, on those 
 of common necessity, which either can not be economically produced 
 here, or enter as raw articles into our domestic manufactures. In pass- 
 ing such a tariff, we do look to something else than the mere money 
 we wring from our people as taxes. 
 
 Take this whole financial platform of the Democratic party, and it 
 opens up to you the most dangerous errors, the M-ildest demagogism, 
 the greatest departure not only from fundamental principles of public 
 policy, Ijut from cherished principles of the Democratic party. We 
 already hear the voice of remonstrance, the cry of alarm from all parts 
 of the United States. The question is, What will they do with it i 
 
 Governor Allen, much to the surprise of some of his friends, 
 readily yields his old convictions, and, if I understand his speeches at 
 Newark and Gallipolis, adopts the wliolo platform. Many of the 
 Deiriocratic papers, however, openly repudiate it. The Democratic 
 
THE OUEEENOY. 491 
 
 editor in the city in whicli I live, and who is in every respect a very 
 excellent man, rejects the platform and supports Grovernor Allen in 
 his hard-money records of forty years ago. But, fellow citizens, poKti- 
 cal contests are not decided by candidates, editors, or office-holders ; it 
 is by the quiet, intelligent judgment of moderate men, who sensibly 
 weigh questions of public policy, and who are above party dictation. 
 It is this body of independent men who give the ebb and flow to party 
 politics in Ohio ; it is to them I appeal with confidence, to give their 
 seal of condemnation to the dangerous doctrines contained in the Dem- 
 ocratic platform. 
 
 To my Eepublican associates I can speak with confidence and hope. 
 "We have a State ticket every name on which must command your sin- 
 cere respect. We have a platform that speaks no uncertain sound, and 
 meets our approbation. We are united on the wise and moderate 
 financial policy which has hitherto guided our party and sustained the 
 public faith and the public credit, which has given us ample means to 
 carry on a great war and build up our industries, and which has now 
 for the first time provided for us a safe national currency, needing only 
 one attribute to make it perfect, while now we are agreed on a slow 
 and steady progress to make that currency equal to gold. What more 
 do we want, my Republican friends, than to march forward with unity, 
 confidence, and strength? You may here and there find men who 
 falter or discover faults to criticise ; your officers and agents may fail ; 
 but your cause is good and your work is honorable — not free from 
 faults, but better than that of any party that preceded it. 
 
 See, now, this broad country of ours. United we stand. Many of 
 our ancient enemies now glory in our success. The prayers of four 
 millions of freedmen rise perpetually to Almighty God for the Repub- 
 lican party. Great names adorn our history, written there by us. 
 Memorable events for fifteen years have lifted our coimtry from a con- 
 federacy of discordant States — left by a Democratic administration to 
 the chances of civil war — to the position of a nation of the highest 
 rank, destined to mold a continent and to guide a world to free msti- 
 tutions. Let us not apologize to our adversaries for the faults that 
 are human, nor examine with a microscope the failings of friends. If 
 only the great objects we have sought, the good measures we have 
 accomplished, and the policy marked out for us are, on the whole, 
 wiser and better than are proposed by our adversaries, then our path 
 of duty is with the Republican party. Inspire it, if you please, with 
 better principles, with higher aims, and by a good example ; but rest 
 assured that you must rely upon that party for any progress that is 
 made in framing or executing good laws. Andj fellow citizens, you 
 who have at any time acted with the Republican party, during the war 
 or since the war, and from whatever cause have been dissatisfied with the 
 party to which you belonged, let us come together again. We have for- 
 given the rebels ; let us forgive each other, iam liberal enough to confess 
 that the Republican party has committed some errors. And I am 
 Republican enough to know that its history, its principles, its policy, 
 and its tendencies give us the best assurance for an honest and able 
 administration of the National and State Governments. 
 
492 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 NATIONAL FINANCES— SPECIE PAYMENTS. 
 
 IN TEE SENATE, MARCH 6, 1876. 
 
 On the motion to refer the resolutions of the Chamber of Commerce of the 
 State of New York, relative to the national finances, and in favor of the resumption 
 of specie payments, at the time now provided by law, Mr. Sherman said : 
 
 Me. President : I have taken the unusual course of arresting the 
 reference to the Committee on Fmance of the memorial of the Cham- 
 ber of Commerce of New York in order to discuss in an impersonal 
 and non-partisan way one of the questions presented by that memorial, 
 and one which now fills the public mind and must necessarily soon 
 occupy our attention. That question is, " Ought the resumption act 
 of 1875 to be repealed ?" The memorial strongly opposes such repeal, 
 while other memorials, and notably those from the Boards of Trade of 
 New York and Toledo, advocate it. These opposing views are sup- 
 ported in each House of Congress, and will, when our time is more 
 occupied than now, demand our vote. 
 
 And, sir, we are forced to consider this question when the law it is 
 proposed to repeal is only commencing to operate, now, three years 
 before it can have full effect — during all of which time its operation 
 will be under your eye and within your power — and while the passions 
 of men are heated by a presidential combat, when a grave question, 
 affecting the interests of every citizen of the United States, will be in- 
 fluenced by motives entirely foreign to the merits of the proposition. 
 
 And the question presented is not as to the best means of securing 
 the resumption of a specie standard, but solely whether the only mea- 
 sure that promises that result shall be repealed. "We know there is a 
 wide and honest diversity of opinion as to the agency and means to 
 secure a specie standard. When any practicable scheme to that end is 
 proposed I am ready to examine it on its merits ; but we are not con- 
 sidering the best mode of doing the thing, but whether instead we 
 will recede from the promise made by the law as it stands, as well as 
 refuse all means to execute that promise. If the law is deficient in any 
 respect it is open to amendment. If the powei-s vested in the Secre- 
 tary are not sufficient, or you wish to*limit or enlarge them, he is your 
 servant, and you have but to speak and he obeys. It is not whether 
 we will accumulate gold or greenbacks or convert our notes into bonds, 
 nor whether the time to resume is too early or too late. All these are 
 subjects of legislation. But the question now is whether we will or 
 will not repudiate the legislative declaration, made in the act of 1875, 
 to redeem the promise made and printed on the face of every United 
 States note, a promise made in the midst of war, when our nation M'as 
 struggling for existence, a promise renewed in March, 1809, in the 
 most unequivocal language, and finally, by the act of 1875, made spe- 
 cific as to time. 
 
 And let us not deceive ourselves by supposing that those who oppose 
 this repeal are in favor of a purely metallic currency, to the exclusion 
 of paper currency, for all intelligent men agree that every great com- 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 493 
 
 y 
 
 mercial nation must have both : the one as the standard of value by 
 which all things are measured, which daily measures your bonds and 
 notes as it measures wheat, cotton, and land ; and the other as a paper 
 or credit currency, which, from its convenience of handling or transfer, 
 must be the medium of exchanges in the great body of the business of 
 life. Statistics show that in commercial countries a large proportion of 
 all transfers is by book accounts and notes, and more than nine tenths 
 of all the residue of payments is by checks, drafts, and such paper tools 
 of exchange. Of the vast business done in I^ew York and London, 
 not five per cent, is done with either paper money, or gold or silver, 
 but by the mere balancing of accounts, or exchange of credits. And 
 this will be so whether your paper money is worth forty per cent, or 
 one hundred per cent, in gold. The only question is, whether in using 
 paper money we will or will not have that which is as good as it prom- 
 ises — as good as that of Great Britain, France, or Germany, as good as 
 coin issued from your mints — or whether we will or will not content 
 ourselves with depreciated paper money, worth ten per cent, less than 
 it promises, every dollar of which daily tells your constituents that the 
 United States is not rich enough to pay more than ninety per cent, on 
 the dollar for its three hundred and seventy millions of promises to pay, 
 or that you have not courage enough to stand by your promise to make 
 the payment. 
 
 !Nor are we to decide whether our paper money shall be issued di- 
 rectly by the Government or by banks created by the Government ; nor 
 whether at a future time the legal-tender quality of United States notes 
 shall continue. I am one of those who believe that a United States 
 note issued directly by the Government and convertible on demand 
 into gold coin, or a Government bond equal in value to gold, is the 
 best currency we can adopt ; that it is to be the currency of the future, 
 not only in the United States, but in Great Britain as well ; and that 
 such a currency might properly continue to be a legal tender except 
 where there is a specific stipulation for coin. 
 
 But these are not the questions we are to deal with. It is whether 
 the promise of the law, that the United States shall pay such of its 
 notes as are presented on and after the 1st day of January, 1879, in 
 coin, shall or shall not be fulfilled; and whether the national banks 
 will or will not, at the same time, redeem their notes either in coin or 
 in United States notes made equal to coin; or whether the United 
 States shall or shall not revoke its promise and continue for an indefi- 
 nite period to force upon the people a depreciated currency, always 
 below the legal standard of gold, and fluctuating daily in its deprecia- 
 tion as Congress may threaten or promise, or speculators may hoard, or 
 comer, or throw out your broken promises. It is the turning-point in 
 our financial history, which will seriously affect the life of individuals 
 and the fate of parties, but, more than all, the honor and good faith of 
 our country. 
 
 At the beginning of our national existence, our ancestors boldly and 
 hopefully assumed the burden of a great national debt, formed of the 
 debts of the old confederation and of the States that composed it ; and, 
 with a scattered population and feeble resources, they honestly met and 
 
494 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 paid, in good solid coin, every obligation. After the war of 1812, which 
 exhausted our resources, destroyed our commerce, and greatly increased 
 our obligations, a Republican administration boldly funded our debt, 
 placed its currency upon the coin basis, promptly paid its interest, and 
 reduced the principal ; and within twenty years after that war was over, 
 under the first Democratic President, it paid the debt in coin, both 
 principal and interest, to the last dollar. And now, eleven years after 
 a greater war, of grander proportions, in which not merely foreign 
 domination threatened us, but the very existence of our nation was at 
 stake, and after our cause has been blessed with unexampled success, 
 with a country teeming with wealth, with our credit equal to that of 
 any nation, we are debating whether we will or will not redeem our 
 promises according to their legal tenor and effect, or, instead, to attempt 
 their repeal and cancellation. 
 
 I invoke in the consideration of this question the example of those 
 who won our independence and preserved it to us, that it may inspire 
 us to so decide this question that those who come after us may point 
 to our example of standing by the public faith now solemnly pledged, 
 even though to do so may not run current with the temporary pressure 
 of the hour or may entail on us some sacrifice and hardship. 
 
 What then is the law it is proposed to repeal ? I will state its pro- 
 visions fully in detail ; but the main proposition — the essential core of 
 the whole — ^is the promise to which the public faith is pledged, that 
 the United States will, on and after the 1st day of January, 1879, re- 
 deem in gold coin any of its notes that may be presented to the Trea- 
 sury. Tuis is the vital object of the law. It does not undertake to 
 settle the nature of our paper money after that, whether it shall or shall 
 not be reissued again, whether it shall or shall not thereafter be a legal 
 tender, nor whether it shall or shall not supersede bank notes. All this 
 is purposely left to the future. But it does say that, on and after that 
 day, the United States note promising to pay one doUar shall be equal 
 to the gold dollar of the Mint. 
 
 The questions then arise : 
 
 1. Ought this promise to be performed ? 
 
 2. Can we perform it ? 
 
 3. Are the agencies and measures prescribed in the law sufficient 
 for the purpose ? 
 
 4. If not, what additional measures should be provided ? 
 
 Let US consider these questions in their order with all serious delib- 
 eration that their conceded importance demands. 
 
 And first, ought this promise to be fulfilled ? 
 
 To answer this we must fully understand the legal and moral obli- 
 gations contained in the notes of the United States. The purport of 
 the note is as follows : 
 
 The United States promises to pay the bciu'or one dolliu'. 
 
 Tills note is a promise to pay one dollar. The legal effect of this 
 note has been announced by the unanimous opinion of the Supreme 
 Court of the United States, the highest and final judicial authority in 
 our Government. 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 495 
 
 The legal-tender attribute, given to the note, has been the subject 
 of conflicting decisions in that court, but the nature and purport of it 
 is not only plain on its face, but is concurred in by every judge of that 
 court and by every judicial tribunal before which that question has 
 been presented. 
 
 In the case of Bank m. Supervisors, 7 "Wallace, 31, Chief Justice 
 Chase says : 
 
 But, on the other hand, it is equally clear that these notes are obligations of the 
 United States. Their name imports obligation. Every one of them expresses npon 
 its face an engagement of the nation to pay to the bearer a certain sum. The dol- 
 lar note is an engagement to pay a dollar, and the dollar intended is the coined dol- 
 lar of the United States, a certain quantity in weight and fineness of gold or silver, 
 authenticated as such by the stamp of the Government, No other dollars had be- 
 fore been recognized by the legislation of the National Government as lawful money. 
 
 Again, in the case of Bronson vs. Rhodes, 7 "Wallace, 251, Chief 
 Justice Chase says : 
 
 The note dollar was the promise to pay a coined dollar. 
 In the legal-tender cases, 12 "Wallace, 560, Justice Bradley says : 
 
 It is not an attempt to coin money out of a valueless material, like the coinage 
 of leather, or ivory, or cowry shells. It is a pledge of the national credit. It is a 
 promise by the Government to pay dolla/rs ; it is not an attempt to make dollars. 
 The standard of value is not changed. The Government simply demands that its 
 credit shall be accepted and received by public and piivate creditors during the* 
 pending exigency. . . . 
 
 No one supposes that these Government certificates are never to be paid; that 
 the day of specie payments is never to return. And it matters not in what form 
 they are issued. . . . Through whatever changes they pass, their ultimate destiny 
 is to he paid. 
 
 In all these legal-tender cases, there is not a word in conflict with 
 these opinions. 
 
 Thus, then, it is settled that this note is not a dollar, but a debt due ; 
 a promise to pay a dollar in gold coin. Congress may define the weight 
 and fineness of a dollar, and it has done so by providing a gold coin 
 weighing 25^ grains of standard gold ^ fine. The promise is specific 
 and exact, and its nature is fixed by the law and announced by the 
 court. Here I might rest, as to the nature of the United States note ; 
 but it is proper that I state the law under which it was issued and the 
 subsequent kws relating to it. 
 
 The act of February 25, 1862, gave birth to this note as well as to 
 the whole financial policy of the war. The first section of that act au- 
 thorizes the Secretary of the Treasury to issue, upon the credit of the 
 nation. United States notes to the amount of $150,000,000, payable to 
 bearer at the Treasury of the United States. The amount of these 
 notes was subsequently increased during the war to the maximum sum 
 of $450,000,000, but the nature and character of the notes was the same 
 as of the first issue. The enlargement of the issue did not in the least 
 affect the obligation of the United States to pay them in coin. This 
 obligation was recognized in every loan law passed during the war ; 
 and to secure the note from depreciation the amount was ^ carefully 
 limited, and every quality was added to maintain its value, that was 
 possible during the exigencies of the war. I might show you, from the 
 
496 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 contemporaneous debates in Congress, that at every step of the war the 
 notes were regarded as a temporary loan, in the nature of a forced loan, 
 but a loan cheerfully borne, but to be redeemed soon after the war was 
 over. It was not until two years after the war, when the advancing 
 value of the note created an interest to depreciate it to advance prices 
 for spsculative purposes, that there was any suggestion of putting off 
 the payment of the note. The policy of a gradual contraction of the 
 currency with a view to specie payments was, in December, 1865, con- 
 curred in by the almost unanimous vote of the House of Kepresentar 
 tives, and the act of April 12, 1866, authorized the retiring and cancel- 
 lation each month of $4,000,000 in notes. No one then questioned the 
 policy, the duty, or the obligation of the United States to redeem these 
 notes in coin. 
 
 "Why has not this duty been performed ? How comes it that, four- 
 teen years after these notes have been issued, and eleven years after 
 the exigency is over, we are debating whether they shall or shall not be 
 paid, and when they shall be paid ? We may well pause to examine 
 Iiow this plain and positive obligation has so long been deferred by a 
 nation always sensitive to the public honor. 
 
 The fatal commencement of this long delay was in this provision of 
 the act approved March 3, 1863, as follows : 
 
 , And the holders of United States notes issued under and by virtue of said acts 
 shall present the same for the purpose of exchanging the same for bonds as therein 
 provided on or before the 1st day of July, 1863, and thereafter the right so to ex- 
 change the same shall cease and determine. 
 
 Thus, under the pressure of war, and the plausible pretext of a stat- 
 ute of limitations, the most essential legal attribute of the note was taken 
 away. This act, though convenient in its temporary results, was a most 
 fatal step, and for my part, in acquiescing in and voting for it, I have 
 felt more regret than for any other act of my official life. But it must 
 be remembered that the object of this provision was not to prevent the 
 conversion of notes into bonds, but to induce their conversion. It was 
 the policy and need of the Government to induce its citizens to ex- 
 change the notes freely for the bonds, so that the notes might again be 
 paid out to meet the pressing demands of the war. It was believed 
 that if this right to convert them was limited, in time this would cause 
 them to be more freely funded ; and Mr. Chase, then Secretai*y of the 
 Treasury, anxious to prevent a too large increase of the interest on the 
 public debt, desired to place in market a five per cent, bond instead of 
 a six per cent. bond. The fatal error was in not changing the right to 
 convert the note into a five per cent, bond instead of a six per cent, 
 bond. This was, in fact, proposed in the Committee on Finance ; but 
 it was said that a right to convert a note into a bond at any time was 
 not so likely to be exercised as it would be if it could only be exercised 
 at the pleasure of the Government. And this plausible theory to in- 
 duce the conversion of notes into bonds was made the basis, after the 
 war was over, for the- refusal of the United States to allow the conver- 
 sion of its notes into bonds, and has been the fruitful cause of the con- 
 tinued depreciation and dishonor of United States notes during the last 
 five years, while our five per cent, bonds have been at par with gold, 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 497 
 
 and while our notes rise and fall in the gamut of depreciation from six 
 to twenty-two per cent, below gold. 
 
 Although the right to convert notes into bonds was taken away, yet 
 in fact they were during the war received, par for par, for bonds ; and 
 after the war was over Si the interest-bearing securities were converted 
 into bonds; but the notes — the money of the people — the artificial 
 measure of value, the most sacred obligation, because it was past due, 
 was refused either payment or conversion, thus cutting it off from the 
 full benefit of the advancing credit of the Government, and leaving to 
 it only the forced quality of legal tender in payment of debts. 
 
 Shortly after the war was over, and notably during the presidential 
 campaign of- 1868, the question arose as to whether the bonds of the 
 United States were or were not payable in coin or United States notes. 
 Both notes and bonds were then below par in coin, the notes ranging 
 from sixty-seven to seventy-five cents in coin ; and five per cent, bonds 
 from seventy-two to eighty cents in coin. Here again the opportunity 
 was lost to secure the easy and natural appreciation of our notes to the 
 gold standard. Had Congress then authorized the conversion of notes 
 into bonds when both were depreciated, both would have advanced to 
 par in gold ; but on the one hand it was urged that this would cause a 
 rapid contraction, and on the other that the right to convert a note into 
 a bond was not specie payment, but only the exchange of one promise 
 for another. It was specie payment they decidedly favored, but that 
 they did not have the wisdom then to secure. If the advocates for 
 specie payment had then supported a restoration of the right to convert 
 notes into bonds, they would have secured their object with but little 
 opposition. But all measures to fund the notes at the pleasure of the 
 holder were defeated, and instead there was ingrafted into the act to 
 strengthen the public credit — 
 
 First, a declaration " that the faith of the United States is solemnly 
 pledged to the payment in coin, or its equivalent, of aU the obligations 
 of the United States not bearing interest, known as United States 
 notes, and of all the interest-bearing obligations of the United States " 
 except such as by the law could be paid iu' other currency than gold 
 and silver. 
 
 Second, " and the United States also solemnly pledges its faith to 
 make provision, at the earliest practicable period, for the redemption 
 of the United States notes in coin." 
 
 Here again the obligation of the Government to pay these notes in 
 coin was recognized, its purpose declared, and the time fixed, " as early 
 as practicable." "What was the effect of this important act of Con-, 
 gross ? Without adding one dollar to the public debt, or the burden of 
 the debt, both bonds and notes rose in value. Within one year the 
 bonds rose to par in gold, making it practicable to commence the re- 
 funding of six per cent, bonds into five per cent, bonds. The notes 
 rose under the stimulus of this new promise in one year from seventy- 
 six cents to eighty-nine cents in gold, but no steps whatever were taken 
 for their redemption. 
 
 The amount of bank notes authorized was increased fif j;y-four mil- 
 lions. The executive department pursued the policy of redeeming 
 33 
 
498 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 debts not due, and, from an overflowing Treasury, reduced very largely 
 the public debt ; but no steps whatever were taken to advance the 
 value of our notes. The effect of the act of 1869 was exhausted on 
 the adjournment of Congress in March, 1870, when the United States 
 notes were worth eighty-nine cents in gold ; and thereabouts, up and 
 down, with many fluctuations, they have remained to this day. The 
 bond-holder, secure in the promise to him, is happy in receiving his 
 interest in gold, with his bond above par in gold. The note-holder, 
 the farmer, the artisan, the laborer, whose labor and production are 
 measured in greenbacks, stiU receives our depreciated notes worth ten 
 per cent, less than the gold promised him " at the earliest dajr practi- 
 cable." The one has a promise performed ; the other a promise post- 
 poned. 
 
 Thus we stood when the panic of '73 came upon us ; we had then 
 more paper money afloat than ever before circulated in any country of 
 the world. Even then, had we stood flrmly, the hoarding tendency of 
 the panic would have advanced our notes toward the gold standard ; 
 and in fact it did so during the months of September and October, and 
 until the premium on gold had fallen to eight per cent. But, sir, at 
 this critical moment, the Secretary of the Treasury, acting no doubt in 
 good faith, but I think without authority of law, issued twenty-six 
 millions more United States notes — part of the notes retired and can- 
 celed under previous acts. And now, notwithstanding aU the talk 
 about contraction of the currency, we have not withdrawn one half of 
 this illegal issue. On the 1st oi September, 1873, we had three hun- 
 dred and fifty-six million notes outstanding. Three months afterward 
 we had three hundred and eighty-two million ; and now we have three 
 hundred and seventy-one miluon. 
 
 Sir, it was under the light of these events, after the fullest discus- 
 sion ever given in Congress to any question — after debate before the 
 people during the recess of Congress, and full deliberation last winter — 
 that this act was passed. There was and is now great difference of 
 opinion as to the details ; but the vital promise made the note-holder, 
 to make his note as good as gold in January, 1879, was concurred in by 
 a large majority of both Houses, many oi whom opposed the bill as 
 too slow in its operations. This act of honor and public faith was 
 applauded by the civilized world, and concurred in by our constitu- 
 ents ; the omy doubts being as to the machinery for caiTying it into 
 effect. The time for the act to go into operation was fixed by those 
 who most feared resumption ; but no one proposed a remoter date. 
 My honorable friend from Indiana [Mr. Morton] tnily said (in the 
 recent campaign in Ohio) that he participated in framing it ; and he 
 and those who agreed with him fixed a time so remote as to excite the 
 unfounded charge that the bill was a sham, a mere contrivance to 
 bridge an election. 
 
 And now, sir, to recapitulate this branch of the question : It is 
 shown that the holder oi these notes has a promise of the United 
 States, made in February, 1862, to pay him one dollar in gold coin ; 
 that the legal purport of this promise has been declared by the Su- 
 preme Court ; that wo have taken away from this note one of the legal 
 
NATIONAL FINANOES-SPEOIE PAYMENTS. 499 
 
 attributes given it, wMch would long since have secured its payment 
 in coin ; tnat, when the note was authorized and issued it was iinder- 
 stood as redeemable in coin when the war was over ; that our promise 
 to pay it was renewed in 1869 — " at as early a day as. practicable " ; 
 that by reason of our failure to provide for its payment it is still depre- 
 ciated below par more than one tenth of its nominal value ; that we 
 renewed this promise and made it definite as to time by the act of 18Y6 ; 
 and that it is a debt due from the United States, and due now in coin, 
 in law and honor. Yet it is proposed to recall our promise to redeem 
 this note in coin three years hence. I say, sir, this would be national 
 dishonor. It would destroy the confidence with which the public cred- 
 itor rests upon the promises contained in your bonds. It would tend 
 to arrest the process by which the interest on your bonds is reduced. 
 It would accustom our people to the substitution of a temporary wave 
 of popular opinion for its written contract or promise. It would 
 weaJien in the public mind that keen sense of honor and pride which 
 has always distinguished the English-speaking nations in dealing with 
 public obligations. 
 
 An old writer thus describes " public credit " : 
 
 Credit is a consequence, not a cause ; the effect of a substance, not a substance ; 
 it is the sunshine, not the sun ; the quickening something, call it what you will, that 
 gives life to trade, gives being to the 'branches" and moisture to the root ; it is the 
 oil of the wheels, the marrow in the bones, the blood in the veins, and the spirits in 
 the heart of all the negoce, trade, cash, and commerce in the world. 
 
 It is produced, and grows insensibly, from fair and upright dealing, punctual 
 compliance, honorable performance of contracts and covenants ; in short, it is the 
 offspring of universal probity. 
 
 It is apparent even by its nature ; it is no way dependent upon persons, parlia- 
 ment, or any particular men or set of men as such in the world, but npon their con- 
 duct and just behavior. Credit never was chained to men's names, but to their 
 actions ; not to families, clans, or collections of men ; no, not to nations. It is the 
 honor, the justice, the fair dealing, and the equal conduct of men, bodies of men, 
 nations, tod people, that raise the thing called credit among them. Wheresoever 
 this is found credit will live and thrive, grow and increase ;. where this is wanting, 
 let all the power and wit of man join together, they can neither give her being nor 
 preserve her life. 
 
 Arts have been tried on various occasions in the world to raise credit ; art has 
 been found able with more ease to destroy credit than to raise it. The force of art, 
 assisted by the punctual, fair, and just dealing abovesaid, may have done much to 
 form a credit upon the face of things, but we find still the honor would have done 
 it without the art, but never the art without the honor. Nor will money itself, 
 which, Solomon says, answers all things, purchase this thing called credit or restore 
 it when lost. . . . 
 
 Our credit in this case is a public thing. It is rightly called by some of our 
 writers national credit. The word denominates its original. It is produced by the 
 nation's probity, the honor and exact performing national engagements. 
 
 And, sir, passing from considerations of public honor, which for- 
 bid the repeal of the act of 1875, let us now consider also the reasons 
 oi p^M^G policy hj -w\n.(ila. it is prohibited. That act was regarded as 
 the settlement of a financial policy, by which at least the party in 
 power is bound and upon the faith of which business men have con- 
 ducted their affairs and ^lade their contracts. Debts have been con- 
 tracted and. paid with the expectation that at the time fixed the gold 
 standard would measure all obligations, and a repeal of the act would 
 
600 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 now reopen all the wild and dangerous schemes of speculation that 
 feed and fatten upon depreciated paper money. The influence that 
 secures this repeal will not stop here. If we can recall our promise to 
 pay our outstanding notes, why should we not issue more ? If we can 
 disregard our promise to pay them, why shall we regard our promise 
 not to issue more than $400,000,000 as stipulated for by the act of 
 1864 ? If we can reopen the question of the payment of our notes, 
 why may we not reopen the question of the payment of our bonds ? 
 Is the act of 1869 any more sacred than the act of 18Y5 ? If we re- 
 open these questions, why not reopen the laws requiring the payment 
 of either interest or principal of the public debt ? They rest upon acts 
 of Congress which we have power to repeal. If the public honor can 
 not protect our promise to the note-holder, how shall it protect our 
 promise to the bond-holder ? Already do we see advocated in hi^h 
 places, by numerous and formidable organizations, all forms of repudia^ 
 tion, which, if adopted, would reduce the credit of our nation to that 
 of a robber chief — ^to a credit worse than that of an Algerine pirate, 
 who at least would not plunder Ms own countrymen. And if the pub- 
 lic creditor has no safety, what chance can the national banks — crea- 
 tions of our own and subject to our will — ^have in Congress ? It is al- 
 ready proposed to confiscate their bonds, premium and all, as a mode 
 of paying their notes with greenbacks. What expedient so easy if we 
 would make money cheap and abundant ? Or, if so extreme a measure 
 could be aiTCsted, what is to prevent the permanent dethronement of 
 gold as a measure of value, and the substitution of an interconvertible 
 currency bond bearing 3 '65 per cent, iaterest as a standard of value ; 
 and, when it becomes too expensive to print the notes to pay the inter- 
 est, reduce the rate? Why not? "Why pay 3'65 per cent, when it is 
 easier to print 3 per cent. ? It is but an act of Congress. And when 
 the process of repudiation goes so far that your notes will not buy 
 bread, why then declare against all interest, and then, after passing 
 through the valley of humiliation, return again to barter, and honor, 
 and gold. 
 
 Sir, there is but one end if you once commence this downward 
 course of repudiation. You may, like Mirabeau and the Gii'ondists, 
 seek to stem the torrent, but you will be swept away by the spirit you 
 have evoked and the instruments you have created. You complain 
 now of a want of confidence, and that this want makes men hoard their 
 money. Will you, then, destroy all confidence ? No, sir, no ; the 
 way to restore confidence is to insjnre it ; and this can be done by ful- 
 filling your obligations. You can not make men lend to you ; you can 
 not make them sell to you anything — either bread, or meat, or wool, or 
 iron, or anything that is or that can be created — except for that which 
 they choose to take. You may depreciate the mone^' which von offer, 
 but it will only take the more of it to buy Avhat you want, "it is tnie 
 that the creditor may, by your laws, be compelled to take your money, 
 however much you depreciate it ; but he can not buy back with it that 
 which he sold, or its equivalent in other necessaries of life ; and thus 
 he is cheated of part of what he sold. During the war, while money 
 was depreciating, many a simple man gleefully counted his gains as he 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 501 
 
 sold his goods or crops at advancing prices ; but lie found out his mis- 
 take when with his swoUen pile he tried to replace his stock in trade, 
 or to lay in his supplies. Sir, this policy exhausts itself in cheating 
 the man who buys or sells or loans on credit, who produces something 
 to sell on credit ; whether that something be or be not food or clothing; 
 whether it be or be not a necessity or a luxury of life. Productive 
 labor, honest toil, whether of the farmer or the artisan, is deeply inter- 
 ested in credit. It is credit that gives life and competition to' trade ; 
 and credit is destroyed by every scheme that impairs, delays, or even 
 clouds an obligation. 
 
 Again, sir, an irredeemable and fluctuating currency always raises 
 the rate of interest on money, while the rate is reduced by a stable 
 currency or an improving currency. This is easily shown by statistics, 
 but the reason is so obvious that proof is not needed. If a man lends 
 his money he wants it back again with its increase ; but if the money, 
 when it is to be paid back, is likely to be worth less than when he 
 thinks of loaning it, he will decline to lend it except at such rates as 
 will cover the risk of depreciation. He wiU prefer to expend it in 
 land or something of stable value. If money is at the gold standard 
 or is advancing toward that standard, he will loan it readily at a mod- 
 erate interest, for he knows he will receive back money of at least equal 
 value to that he loaned. 
 
 Again, sir, with a depreciated currency, great domestic productions 
 are cut off from the foreign market ; for it is impossible that with such 
 a currency we can compete on equal terms with rival nations, whose 
 industry rests upon a specie standard. As we approach such a stan- 
 dard, we are now able, as to a few articles, to compete with foreign in- 
 dustry ; but it is only as to articles in the manufacture of which we 
 have peculiar advantages. Let us rest our industries on that standard, 
 and soon we can compete in the markets of the world in all the articles 
 produced from iron, wood, leather, and cotton, the raw basis of which 
 are our natural productions. And it must be remembered that all the 
 countries with which we compete are spSsie-paying countries. A coun- 
 try that does not rest her industry upon specie is necessarily excluded 
 from the great manufacturing industries of modem civilization, and is 
 self-condemned to produce only the raw basis for advanced industry. 
 Cheap food, climate, soil, or natural advantages, such as cheap land, 
 vast plains for pasture, or rich mines, may give to a country wealth 
 and prosperity in spite of the evils of depreciated paper money. When 
 we come into competition with the world in the advanced grades of 
 production which give employment to the skilled mechanic, we must 
 rest such industry upon the gold basis, or we enter the lists like a knight 
 without his armor. 
 
 Again, sir, a depreciated and fluctuating cun-ency is a premium 
 and bounty to the broker and money-changer. Under his manipular 
 tion our paper standard of value goes up and down, and he gambles 
 and speculates, with all the advantages in his favor. Good people look 
 on and think that it is gold that is going up and down ; that their 
 money is a dollar still, and trade and traffic in that belief. But the 
 shrewd operator calculates daily the depreciation of our note, the 
 
502 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 shortening of tlie yard-stick, the shrinking of the acre, the lessening 
 of the ton ; and thus it is that he daily addsHo his gains from the in- 
 difference or delusion of our people. 
 
 Sir, this is an old story, often repeated in our day, and it was elo- 
 quently epitomized by Daniel Webster in that often-quoted passage of 
 his speech in which he said : 
 
 A disordered currency is one of the greatest of political evils. It undermines 
 the virtues necessary for the support of the social system and encourages propen- 
 sities destructive of its happiness. It wars against industry, frugality, and econ- 
 omy ; and it fosters the evil spirit of extravagance and speculation. Of all con- 
 trivances for cheating the laboring classes of mankind none has been more eflfec- 
 tual than that which deluded them with paper money. Ordinary tyranny, oppres- 
 sion, excessive taxation, these bear lightly on tlie happiness of the mass of the com- 
 munity, compared with the fraudulent currencies and the robberies committed by 
 depreciated paper. Our own history has recorded for our instruction enough, and 
 more than enough, of the demoralizing tendency, the injustice, and the intolerable 
 oppression of the virtuous and well-disposed of a degraded paper currency author- 
 ized by law or in any way countenanced by Government. 
 
 Sir, we must meet this question of specie payments, not only be- 
 cause we have pledged to it the public honor, but also for the lesser 
 reason that it is for our interest. The only questions we should per- 
 mit ourselves to discuss are the, means and measures of keeping our 
 promise. 
 
 And now, sir, let us examine the reasons that have been given for 
 the repeal of the resumption act by those who, though favoring re- 
 sumption, yet think the act should be repealed for one or other of the 
 following reasons : 
 
 1. That it is not advisable to fix a day for resumption. 
 
 2. Or at least until the balance of trade is in our favor. 
 
 3. That it produces a contraction of the currency. 
 
 4. That it injuriously adds to the burden of existing debts. 
 Let us glance at these objections. 
 
 1. As to fixing a day for r(%imption. 
 
 If it was possible to agree iipon measures that would secure resump- 
 tion without fixing a time, I agree it would not be indispensable, 
 though not unadvisable, to take this step. But such an agreement is 
 utteiuy impossible. Of the multitude of schemes that have been pre- 
 sented to me by the intelligent men who are trying to solve this prob- 
 lem, many could have been selected that in my opinion would be prac- 
 ticable ; but of all of them not one ever has or is likely to secure the 
 assent of a majority of a body so numerous as Congress. One diffi- 
 culty we have encountered is that the Democratic party, though in the 
 minority, has never presented in any form through any leading mem- 
 ber a plan for resumption, but with widely differing opinions have 
 joined in opposing any and every measure from the other side. I 
 understand from the papers that our Democratic friends, through a 
 caucus, and through a caucus committee of which my colleague is 
 chairman, have been laboring to agree upon a plan for specie pay- 
 ments. After hia frequent speeches to us about a caucus measure — a 
 great question being submitted to a caucus — about secret conclaves, 
 about shams and deceptions and such like polite and friendly com- 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 503 
 
 ments upon tlie work of the Eepublican party, I might greet my col- 
 leage with such happy phrases about his caucus ; but I will not ; on 
 the contrary I commend his labors, and sincerely hope that he and his 
 political friends may agree upon some plan to reach a specie standard, 
 and not one to avoid it, to prevent it, to defer it. Under color of in- 
 tending to prepare for it, I hope they will not make their measure the 
 pretext for repealing the law as it stands, but instead that they will 
 secure the end we both aim at, by fixing the day for resumption. 
 
 I frankly state, for the KepubHcan party, that, while we could agree 
 to fixing the time for specie payments and to confer the ample and 
 sufficient powers upon the Secretary of the Treasury contained in this 
 law, we could not agree in prescribing the precise mode in which the 
 process should be executed. Nor, in my opinion, was it at all essen- 
 tial that we should. Much must be left to the discretion of the officer 
 charged with the execution of such a law. The powers conferred, as 
 I shall show hereafter, are ample ; and the discretion given will be ex- 
 ercised under the eye of Congress. 
 
 And, sir, there is strong force in the fact that in every example we 
 have of the successful resumption of specie payments in this and other 
 countries, a fixed day has been named by legislative authority, and the 
 details and power of execution have been left to executive authority. 
 Thus in Great Britain, the act of Parliament of July 2, 1819, fixed the 
 time for full resumption at the 1st day of May, 1823, and for a grad- 
 uated resumption in gold at intermediate dates ; and for fractional sums 
 under forty shillings to be paid in silver coin ; and the governor and 
 directors of the Bank of England were charged with its execution, and 
 authorized at their discretion to resume payment in full on the 1st day 
 of May, 1822. France is now successfully passing through the same 
 process of resumption, the time' being fixed (two years ago) for January 
 1, 1878, and now practically attained. In our own country many of 
 the States have presented similar laws in case of suspended bank pay- 
 ments, and in some cases the suspended banks have, by associated ac- 
 tion, fixed a time for general resumption, and each bank adopted for 
 it its own expedient. Sir, the light of experience is from the lamp of 
 wisdom. I can recall no case of successful resumption where a fixed 
 future time has not been presented beforehand, either by law or agree- 
 ment ; while the historical examples of repudiation of currency have 
 come by the drifting process, by a gradual decline of value, by in- 
 creased issues, and by a refusal to provide measures of redemption, and 
 were followed by the disappearance of the whole mass,, dishonored and 
 repudiated. 
 
 This concurrence in the mode of resumption by so many govern- 
 ments was the strongest possible instruction to Congress when fixing a 
 plan of resumption for the United States, and should satisfy reasonable 
 men of its wisdom. 
 
 Besides, it would seem to be but fair that every one should have 
 plain notice of so important a fact. If the measures only were pre- 
 sented and no time fixed, it would be a matter of speouIatioDy and the 
 discretionary powers of the Secretair of the Treasury could be exercised 
 with a view to hasten or postpone the time to the injury csf individuals. 
 
504 SPEECHES AND REPORTS OF JOHN" SHERMAN. 
 
 As to the date selected, I can only repeat it was placed as remote 
 as any one suggested ; far more so than is necessary to secure the 
 object, and so that the fluctuations of value will scarcely exceed in four 
 years what they have frequently been in a single year. Ample time is 
 given to arrange all the relations of debtor and creditor, and to enable 
 Congress to provide any additional measure in aid of resumption, or if 
 events make it expedient to even make further postponement. 
 
 Again, it has been objected that we can not resume, until the bal- 
 ance of trade is in our favor. The phrase, " balance of trade," has 
 been a favorite with visionaries and theorists, and is sufficiently indefi- 
 nite to confuse and mislead. This dogma is generally tmderstood to 
 mean "that a nation that imports more than i% exports is growing 
 poorer " ; or, conversely, " that a nation that exports more than it im- 
 ports is prosperous." Now, sir, both propositions have been proved 
 false in many cases, though both in some may be true. It does not 
 follow that an excess of imports creates distress, or that a deficiency 
 of exports is an evidence of poverty. Even the excess of imports upon 
 which interest is paid may be of wealth-producing productions; or 
 a deficiency of exports may be caused by an increased domestic manu- 
 facture of raw products by home industry. But the best way to test 
 the fallacy of this dogma is by reference to examples. Great Britain 
 is known to be a prosperous nation of accumulating and accumulated 
 wealth ; and yet her imports have exceeded her exports every year for 
 twenty years. The general average of her imports in excess of exports 
 is £50,000,000 or $250,000,000 a year. I have here the detailed stete- 
 ment of her imports and exports for 1872 and 1873 : 
 
 1872. Imports £364,698,624 
 
 Exports 314,588,834 
 
 Excess of imports over exports £40,104,790 or $200,000,000 
 
 1873. Imports £871,287,872 
 
 Exports 811,004,765 
 
 Excess of imports over exports £60,282,607 or $300,000,000 
 
 Now, according to the dogma of the " balance of trade," Great 
 Britain is going into a rapid decay ; while she knows this large excess 
 of imports is an addition to her national wealth. 
 
 But take our own country and compare years of conceded prosperity 
 with years of hard times : 
 
 
 1307. 
 
 1S63. 
 
 
 $891,121,801 
 884,860,053 
 
 $861,214,010 
 862,788,202 
 
 T'lxnorta at £rold voiluo in t'.lu diner irold 
 
 
 
 $66,771,148 
 
 
 
 
 Yet we were then prosperous, as we have so often been told, with 
 plenty of paper money. 
 
 Take the last two years, when we are told so often that distress, 
 misery, and poverty prevailed : 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 505 
 
 
 1874. • 
 
 18TB. 
 
 Exports at gold value, including gold 
 
 $652,913,445 
 595,861,248 
 
 $60B,5'74,853 
 653,906,153 
 
 Imports 
 
 
 
 $5'7,0B2,19'7 
 
 $51fi68,100 
 
 
 And the balance of trade in our favor is more striking during the 
 seven months of the present fiscal year, from the 1st of July, 1875, to 
 the 1st of February, 18Y6. 
 
 The total exports, reduced to gold values, were $334,853,996 
 
 The total imports were , 281,729,735 
 
 Leaving a balance in our favor in coin for seven months of $53,124,261 
 
 All these amounts are reduced to a coin basis, and include both the 
 importation and exportation of coin. 
 
 According to the dogma of the "balance of trade," now is the 
 golden moment to resume, when the balance is in our favor nearly one 
 hundred miUions a year. Yet many people cry out, "Wait for the 
 balance of trade ; don't force resumption." Well, the time has come, 
 and yet they are not ready. This dogma has been the cause of infinite 
 confusion, but is now abandoned. McCuUoch, in his " Dictionary of 
 Commerce," thus refers to it : 
 
 In commerce the term " balance of trade " is commonly used to express tlie dif- 
 ference between the value of tie exports from and imports into a country. The 
 balance used to be said to be favorable when the value of the exports exceeded that 
 of the imports, and unfavorable when the value of the imports exceeded that of the 
 exports. And in this country this was long believed to be the case, and down to a 
 late period we were annually congratulated by our finance ministers on the excess 
 of the exports over the imports. , 
 
 The attainment of a favorable balance was formerly regarded as an object of the 
 greatest importance. . . . 
 
 The truth is, however, that the theory of the balance of trade was not erroneous 
 merely from the false notions which its advocates entertained with respect to money, 
 but proceeded on radically mistaken views as to the nature of commerce. . . . 
 
 The argument about the balance of payments is one of those that contradict and 
 confute themselves. . . . 
 
 Not only, therefore, is the theory with respect to the balance of trade erroneous, 
 but the very reverse of that theory is true. . . . 
 
 It is difficult to estimate the mischief which the absurd notions relative to the 
 balance of trade have occasioned in almost every commercial country ; here they 
 have been particularly injurious. 
 
 This author fortifies his position with ample details ; but it is sufE- ' 
 cient to say that if the dogma is false we should not regard it, and, if 
 it is true, now is the golden moment for resumption, for the balance of 
 trade is in our favor. In my view it is utterly immaterial to the ques- 
 tion before us. 
 
 The third objection is that the law produces a great contraction of 
 the currency. 
 
 N^ow, sir, it ought to be confessed, for it is true, that any plan for 
 specie resumption will,, when it is about to take effect, produce some 
 contraction of the paper currency. The drifting process, if it succeeds, 
 must cause it as well. To wait for resumption until resumption wiU 
 
506 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 produce no temporary contraction is to wait until the rivers cease to 
 flow, or the mountains are level with the plains. In each of the his- 
 torical cases I have referred to, resumption was preceded by contrac- 
 tion. Remedies for bodily or political ailments are apt to be unpleas- 
 ant. All we can say is that public honor and public policy demand the 
 remedy for the dishonor ana the evil of a depreciated currency ; that 
 the time is ripe for the cure, and the means we have prescribed are 
 suitable to the end. 
 
 And, sir, the degree of contraction and the effects of it are greatly 
 exaggerated. The only contraction of the currency provided for by 
 the act is in the substitution of one form of currency for another. 
 Thus, in place of the fractional currency is issued silver currency ; and 
 where national-bank notes are issued eighty per cent, of the amount in 
 United States notes is retired. Thus far we have called in no fractional 
 currency ; but, as I will show hereafter, we can now and will, if the law 
 stands, issue as much silver currency as any one may wish in exchange 
 for either fractional currency or United States notes ; and, as to bank 
 notes, the amount issued since the act took effect is $13,820, Y60, and 
 the amount of United States notes retired is $11,056,608, leaving of 
 United States notes still outstanding $370,943,392, or $14,900,000 more 
 than was outstanding when the act of March, 1869, was passed, and 
 the same amount more than was outstanding on the 14th day of Sep- 
 tember, 1873, when the panic came. Thus it appears that imder the 
 law the amount of bank notes issued is $2,800,000 more than the United 
 States notes retired, and the contraction of the currency prescribed by 
 this law is a myth. 
 
 But there has been a contraction of the currency since the panic, 
 and before and after the passage of the act of 1875, which will go on 
 whenever in any way a specie standard approaches, and that is by the 
 voluntary retirement by national banks of a portion of their circulating 
 notes. This contraction is not provided for by the resumption act, but 
 is authorized by the national banking acts, and is the healthy ebb and 
 flow of currency which it was the object of the law to secure. The 
 national banks retired $24,962,327 of their notes by depositing that 
 amount of United States notes in the Treasury of the United States, to 
 be used exclusively in redeeming their bank notes when presented. 
 The only motive for this deposit was that in the opinion of those 
 banks, the circulating notes could not be profitably used, or they were 
 not strong enough to maintain, at the specie basis, all of their notes. 
 This process will, and ought to, go on until each bank is certain it can 
 maintain resumption at the time stated. Nor is this contraction in the 
 slightest degree injurious to the bank, or to the ability of the bank to 
 loan money to its customers. The banks will not withdraw their notes 
 unless it is to their interest to do so. Wlien thej' do surrender or re- 
 deem them, they at once receive a larger amount of their bonds held 
 as security for their notes, which are worth about 30 per cent, more 
 than tlie notes redeemed. Thus, when a bank surrendei-s $1^,000 of its 
 circulation, it lifts from the lien of the note-holder $10,000 of the 
 United States bonds, worth to-day about $12,000. If the bank sells 
 the bonds, it has $12,000 of currency to loan, and has strengthened 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 507 
 
 itself by paying $9,000 of its notes. This process, instead of being a 
 cause of alann, sbould be encouraged and hastened ; and this is practi- 
 cally the only contraction effected by this bill, a contraction which is in 
 the very line clamored for by those who oppose national banks ; but 
 still it is a voluntary contraction, made by the silent operation of the 
 interest of the bank, while at the same time it advances the residue of 
 notes to par in gold. 
 
 Sir, in my judgment, the real solution of the problem of specie 
 resumption will thus come through the voluntary act of national banks, 
 each acting for itself, under the general direction of the law, precisely 
 as the Bank of England, the Bank of France, and the New York banks 
 brought about and maintained resumption. I have never regarded 
 with solicitude the amount of United States notes outstanding, for, as 
 I vdll show, they can be easily maintained at par in gold ; but the 
 agency of the banks in securing resumption and the effect of resump- 
 tion upon their customers were matters of solicitude. This I no longer 
 doubt or fear. The whole problem consists in a partial and limited 
 transfer of capital now invested by national banks in United States 
 bonds, to individuals. The high price of these bonds and the idle capi- 
 tal that seeks investment in them will enable each bank to strengthen 
 itself by a sale of bonds without in the least impairing its ability to dis- 
 count or loan, and, in fact, to increase its power to do so ; and the bonds 
 will be absorbed by the increasing demand for such securities. Strong 
 banks in cities do not need the currency, for their currency is certified 
 checks. Their currency is largely held by them, and what they have 
 in circulation can be retired and canceled without impairing in the least 
 their ability to loan or discount. The bank currency being thus dimin- 
 ished, as the time for resumption approaches, the United States notes, 
 supported by a gold reserve and the power of the Secretary to sell 
 bonds, will easily be maintained at the gold standard, and the problem 
 is solved. 
 
 And, sir, this partial contraction of bank currency will unlock and 
 dissipate a greater contraction which has gone on since the panic, and 
 wiU go on until the public mind rests assured that the day of resump- 
 tion is not only promised, but rendered certain by the course of events. 
 An increase of currency will follow resumption. Great masses of notes 
 now lie idle in bank vaults and in ' the Treasury, and are hoarded in 
 homesteads all over the land. There is deposited in the Treasury, 
 without interest and belonging to banks, $31,005,000, represented by 
 currency certificates. There are now in the vaults of the national banks 
 $Y3,626,100 in United States notes and fractional currency, $17,166,190 
 in bank notes, in all $90,792,290 ; while in the savings banks. State 
 banks, and other banks that have made returns to the Comptroller of 
 the Currency, there is the sum of $48,431,409, making in all $170,228,- 
 699 ; and this is far more than the reserve required by law. The prac- 
 tice of hoarding currency has greatly increased from the day of the 
 panic, and it may be safely said that there is among the people and in 
 savings banks and trust companies not less than $200,000,000 of idle 
 currency. Nothing but the best security will tempt it from its hiding- 
 places ; but, when that security is offered, it can be had for a less rate 
 
508 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 of interest than ever before. Capital met its periodic shock in Sep- 
 tember, 1873, and great masses of it, some say one thousand millions, 
 vanished as a dream, and those millions are now represented by worth- 
 less bonds, bills, notes, and certificates of stock, worth but little more 
 than the paper on which they are printed. This panic came upon us 
 when tlie paper god was lord of the ascendant ; when comer lots, at 
 fictitious prices, were the par of exchange ; when unproductive rail- 
 roads were the El Dorados of visionaries ; and wild schemes of im- 
 provement, both in this city and in aU the cities of the Union, increased 
 municipal debts to an unexampled degree. This reckless inflation of 
 credits collapsed long before mis law was passed. Money, the agent 
 of capital — and, when idle, capital itself — was hoarded, and still re- 
 mains inactive, or is loaned on call or unquestioned security. This is 
 the contraction of which so many complain. It is not caused by the 
 resumption act, but by a want of confidence in proffered investments. 
 Confidence can not be restored by a repeal or by issuing more paper 
 money. But the occasion offers you an opportunity to withdraw a 
 portion of this idle money, and of thus reaching a specie standard. 
 The banks can freely surrender a portion of their circulation, and thus 
 be strong for resumption ; while frightened and timid capital will 
 gladly fioat into United States bonds when sold by the banks. No- 
 thing is wanting but confidence, faith, .and time to secure the closing 
 triumph of our war policy by the redemption of the only promise we 
 then made that has not been honestly redeemed. 
 
 The remaining objection to the law is that it will add to the burden 
 of existing debts. This objection is also inseparable from any plan of 
 resumption. Postponement or repeal will not help the matter. The 
 time for redemption must come. Current indebtedness was never less 
 than now. Liquidation has gone on rapidly since the panic, and in 
 many cases by open bankruptcy. Debts contracted since the passage 
 of the act have been made in view of resumption in 1879. Many of 
 the old debts run for a long period of years, and when issued were 
 made upon the presumption of specie payments before they matured. 
 Other large masses of debts stipulate for the payment of both principal 
 and interest in coin. Nearly all the best investment securities are now 
 at or near par in gold and are bought and sold at gold values. Current 
 debts in trade will mature and be paid long before the time for resump- 
 tion ; or if they are renewed, the debtor and creditor will adjust the 
 mode of payment. All new transactions are based upon the knowledge 
 that specie payments will come at the time stated, and for that reason 
 stipulation is made for lower rates of interest. When it is once fixed 
 in the public mind that on the 1st of January, 1879, paper money will 
 be advanced to the specie standard, and debtors can readily borrow 
 money payable in that standard at lower rates of interest, capital will 
 no longer be invested in gold bonds from the fear that if loaned to in- 
 dividuals it will be paid back in depreciated paper, but it wiU eagerly 
 be invested at low rates of interest, on mortgage or other security, if it 
 is to be paid in improved and improving currency. Industries now 
 languid or suspended will hopefully revive, as stocks are reduced, and 
 productions have a fixed commercial value, not only in home markets 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 509 
 
 but in the markets of the world. Merchants now fear the shrinkage 
 of prices, but their stocks will be renewed at a corresponding reduction 
 until all prices are measured by the gold standard, when they fear no 
 other change of prices except those arising from demand and supply. 
 Debtors are also generally creditors, and the loss and gain in values will 
 balance each other, and the time is ample in which all losses can be 
 adjusted. Never could our condition be better to resume the specie 
 standard than now, unless we intend to perpetuate the use of depre- 
 ciated paper money and totally disregard the pledge of the public faith 
 to redeem United States uotes in coin. 
 
 There are two objections made to the law which I ought not to pass 
 over without reply. One is that this law forces resumption ; and that 
 it is better to drift" into resumption. It will come, they say, by natural 
 caufees. The other objection is that the law has been in force a year 
 and we are no nearer resumption ; that it is therefore a dead letter and 
 ought to be repealed. These two objections are not consistent with 
 eaSi other ; but each has its believers, and should be answered. 
 
 The drifting process has been tried since 1868. Then the law fixed 
 the volume of United States notes at $356,000,000, and forbade its con- 
 traction, and. the amount of bank notes at $300,000,000, and forbade 
 its enlargement. It was said we would grow into resunrption. This 
 was the plausible dogma with which I was met when 1 sought the 
 funding of notes into bonds. The result I have already stated. In 
 1870 the sectional inequality of the distribution of bank currency, in- 
 flamed into a passion by the sectional appeals of Horatio Seymour when 
 a candidate for President in 1868, forced the enlargement of the limit 
 of bank notes to $354,000,000 ; and the vain hope of stopping a panic 
 by paper promises forced the enlargement of the limit of if nited States 
 notes to $382,000,000. So will it always be with this drifting process. 
 When we reach a specie standard it is safe enough. If national banks 
 then issue more money, upon suflBcient security to pay in coin, they do 
 it at their peril ; and the people can not lose, nor can their standard of 
 value fluctuate. But even if it was possible to fix the present volume 
 of currency as an arbitrary limit, it would only prolong indefinitely the 
 evils of a depreciated currency. ISTo one believes that we could main- 
 tain in circulation near $800,000,000 of paper money all the time at 
 par in gold. It must have the quality of flexibility in amount to meet 
 the currents of trade and business — at times withdrawn, and when 
 needed reissued, but always of the value of gold — and these qualities 
 can only be secured by prompt redemption when it is not needed, and 
 its reissue through loans and discounts by banks when the crops are to 
 be moved, or trade becomes active. 
 
 And as to the objection that the law has not already produced more 
 imnlediate results, I admit that this is an objection to the law, but it 
 was unavoidable under the circumstances. The time for resumption 
 should have been fixed much earlier, so that its effect would have been 
 more rapid. If by the law the banks had been compelled to prepare 
 for resumption sooner, the appreciation of our notes would have been 
 more marked ; and its effect would also follow if a portion of the notes 
 could be funded, or either gold or notes could be held in reserve by the 
 
510 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 sale of bonds. Who does not wish that our notes were now worth 
 ninety-five instead of eighty-nine cents on the dollar ? And yet to have 
 produced that result we must have either hastened the day for resump- 
 tion or have strengthened the measures for resumption. But what is 
 the remedy for this slow process ? Is it to repeal the law, not a single 
 provision of which by its terms has been put in full operation ? Is it 
 to revoke our promise and all efforts for its fulfillment ? Obviously 
 not ; the remedy is to stand by our engagement and perform it sooner 
 if circumstances will allow. 
 
 And now, sir, I come to the second proposition stated : Can we re- 
 sume specie payments on the 1st day of January, 1879 ? 
 
 On this proposition we are to consider the question as it affects the 
 national banks, the fractional currency, and the United States notes. 
 
 As to the national banks, I have already stated how redemption 
 with them becomes an easy and natural process, to be performed with- 
 out injury to them, or to their customers, or to their usefulness, by a 
 transfer or sale of TJnited States bonds especially set aside for that pur- 
 pose, and only to the extent that each bank may deem essential to its 
 safety. The national banks are now exceptionally strong. Their cir- 
 culating notes amount to $346,479,756. Of these notes they have in 
 their vaults the sum of $17,166,190. They have with the Treasurer of 
 the United States $356,680,150 in United States bonds, worth $427,- 
 947,224 in currency or $374,582,200 in coin. They also hold United 
 States bonds to secure United States deposits $13,981,500, and other 
 United States bonds held in their vaults to the amount of $16,909,550. 
 They have a surplus, over and above the capital fully paid up, of §192,- 
 300,000. "With the great body of them, the redemption of the whole 
 or a large part of their circulation is a matter of indifference. To the 
 extent of a certain per cent, of their deposits and five per cent, of their 
 circulation they must maintain a reserve of United States notes, and to 
 that extent they wiU aid the United States in maintaining resumption. 
 The amount of this reserve now required is $80,135,200, but the amount 
 in hand is $118,800,987. As United States notes are equivalent to 
 coin with them, they will seek to hold as much as they can, as other 
 banks in England hold the notes of the Bank of England. Is it not, 
 then, apparent that the national banks are able to resume, are prepared 
 to resume, and that resumption by them need not be delayed a single 
 year ; and that, so far as their notes are concerned, it is a shame and 
 scandal that they are only worth eighty-nine cents on the dollar — and 
 all because the IJnited States will not advance its notes to par in gold ? 
 
 Now, sir, as to the fractional currency. This was issued to^ take 
 the place of the subsidiaiy silver coins of the country during tlie war. 
 The amount outstanding, as shown by the books oi. the Treasury, is 
 $45,120,132; but of this many millions have been lost and destroyed; 
 and this is shown by the large amount of the old issues never pre- 
 sented although long superseded. It is probable that not exceeding 
 $40,000,000 will be presented for redemption. Now, sir, as to this 
 currency, we are able to-day to issue silver coin of legal weight and 
 fineness in exchange, dollar lor dollar, for fractional currency, not only 
 without loss, but with an actual profit. One ounce of silver bullion, 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 511 
 
 of four hundred and eighty grains of standard fineness, is worth in the 
 market $1.05 in coin. One dollar of our silver coin contains three 
 hundred and eighty-four grains of standard silver ; so that one dollar 
 of silver coin will cost the United States eighty-four and one quarter 
 cents >esides the cost of coining. To the extent that our people will 
 take sV ver coin in exchange for fractional currency, the problem is 
 already solved. It is said this coin will be hoarded- So much the bet- 
 ter. We can furnish from our own mines all that is needed, to the 
 extent of fifteen millions on h.-nd and two millions a month more, that 
 being the extent of our coinage fadlities. It is said it will be exported. 
 No such good luck will befall us, for silver bullion is cheaper and bet- 
 ter for export. If we issue it, we will either redeem a note or save 
 paying out a note, and either way we make a profit. If fifty millions 
 silver coin is held by our people it is to that extent a reserve for specie 
 payments where it is most useful among the people. I wish they would 
 take one hundred millions, but I do not doubt that enough wiU be 
 taken to redeem all the fractional currency that our people will not 
 prefer to retain. 
 
 And now the only remaining question is. Can we redeem or main- 
 tain at par, by the 1st day of January, 1879, the United States notes ? 
 
 The amount of these notes outstanding to-day is $370,94:3,392, less 
 those lost and destroyed. Now, many who fear resumption suppose 
 the whole mass of .United States notes will then be presented for the 
 gold ; and they have counted up the number of tons of gold that will 
 be required for their payment. They figure up the interest at five per 
 cent, on the whole sum, and add that to our annual interest account. 
 It is not necessary to reply to such exaggerations ; nor can we state 
 with precision, what amount of United States notes would circulate at 
 par in coin. They could then be made receivable for customs dues 
 without a violation of the public faith. They will always be the re- 
 serve of national banks. They could then be made receivable for Unit- 
 ed States bonds. They could be supported by the power to sell bonds 
 to redeem them. They would, as a matter of course, be supported by 
 the whole gold reserve in the Treasury. They would take the place 
 of certificates of deposit, and be used in clearing-house exchanges. 
 
 Now, sir, with all these advantages, with the growing wealth and 
 credit of our country, I do not believe the present volume of United 
 States notes need be largely if any reduced to keep them at par in 
 coin. We have now a gold balance in the Treasury of $37,120,772.73 
 and a currency balance of $9,529,404 over and above our currency and 
 coin certificates. It is true this balance is subject to the overdue and 
 accruing demands fully stated in a recent letter of the Secretary of the 
 Treasury ; but a certain amount of these demands always remains un- 
 called for, and when presented are met by accruing revenue. Suppose 
 (what I regard as an extreme case) that we add to this reserve $100,- 
 000,000, fifty million in coin certificates and fifty milKon in coin, does 
 anybody doubt but it will be ample to redeem any note that is pre- 
 sented ? Confidence being once established in their redemption, who 
 will want the gold for them ? They can be and not doubt will be re- 
 issued without or with the legal-tender clause, as the law may here- 
 
512 SPEECHES AND EEPORTS OF JOHN" SHERMAN. 
 
 after provide ; and with their credit secured, established at par in coin, 
 they will not only circulate in Texas and on the Pacific slope as weU 
 as in other parts of the United States, but, like the Bank of England 
 notes, they will circulate in all countries with which we have commer- 
 cial relations. 
 
 Let us pursue the argument, taking the full burden of resumption 
 as the interest of one hundred millions per annum. The rate of in- 
 terest now in currency may be stated at four per cent, or four and a 
 half per cent, in gold. Thus four to four and one half millions a year, 
 three years hence, is the extreme burden of specie payments. Sir, the 
 sinking fund in three years amounts to more than the one hundred 
 millions you are to keep in reserve. The saving abeady made thus 
 far by funding the debt into five per cent, bonds is five millions a 
 year. The saving that you will make by the funding into four and 
 one half per cent, will be seven and one half millions in gold, or near- 
 ly twice as much as is needed. The saving of four millions on the 
 appropriation bills sent to us will cover the cost. It can be paid by a 
 duty of five cents on each gallon of whisky. One half of the smallest 
 duty ever levied on tea and cofEee will do it. One half of the taxes 
 now levied on national banks by the United States will do it. The 
 increased value of our tax on whisky and tobacco being paid in coin 
 will twice do it. Are we able to do it ? Are we able to keep our 
 promises when made specific as to time, place, and manner ? I do not 
 care to discuss this question further. Sir, the United States has been 
 blessed by Divine Providence with all the gifts which He has ever 
 showered upon the human race. We have a broad and fruitful land, 
 with almost every variety of climate and production. "We have forty 
 millions of free people, industrious, intelligent, brave as becomes men, 
 shrewd and sagacious in trade and production, and loving honor and 
 a good name. To say that we can not redeem our promises is to dis- 
 honor the blessings of God ; it is to eat of the forbidden fruit when 
 all the productions of nature and art are within our reach ; it is to 
 dishonor our name and credit when the world is ready to lend us at a 
 less rate of interest than that for which any nation of the world except 
 Great Britain has ever borrowed ; it is a party retreat ; it is a national 
 retreat ; it is a retreat of cowardice from a task we promised to per- 
 form, that we are able to perform, and which every noble motive that 
 actuates mankind impels us to perform. 
 
 But, it is asked, where is the gold to come from to enable us to 
 resume ? Not only is the gold of the world open to our competition, 
 but we are the largest gold- and silver-producing country of the world. 
 The product of our mines is about one hundred millions a year, and a 
 single year's product would more than enable lis to resume. Our fa- 
 cilities for accumulating gold are greater than those of any other nation. 
 " But the gold is exported." So it is, because we will not use it as do 
 the other nations. Give it occupation here and it will remain here, 
 and tliuprodu<!ts of our farms and workshops will be exported instead. 
 It is saia we can make a standard of something else that is not export- 
 able. So we can ; but it will be by cutting ourselves off from the 
 civilization of the human race. 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 513 
 
 Sir, I have been struck by tbe absolute poverty of invention of 
 tbose who in our day seek to dispense with the gold standard. Every 
 plan proposed, every idea suggested, is but the repetition of plans and 
 ideas proposed in the American colonies, in Great Britain, in China, 
 and by George Law. Their schemes have been tried and exploded 
 over and over again for four thousand years ; and yet gold and silver 
 now measure every article of property, and will measure the daily fluc- 
 tuations of the contrivances they invent. 
 
 And now, sir, let us turn from the main pointy and briefly examine 
 the third question : Are the agencies and measures prescribed by the 
 act of 1875 sufficient for the purpose ? 
 
 I need not remind this Senate and Senators around me how reluc- 
 tantly I came to the support of this bill, because it does not contain 
 provisions that for years I have straggled to secure. Still, sir, I feel 
 bound to say that it embodies ample agencies and powers to carry it 
 into a full execution, without the addition of a single provision by Con- 
 gress. The first section of the bill is limited to the redemption of frac- 
 tional currency. This, as I have shown, can now be fully executed, 
 and the only criticism is that it has not been sooner executed. Not 
 only can the notes be redeemed in silver without loss, but the actual 
 cost of coining the silver, strange as it may seem, is less than the print- 
 ing of the fractional currency. 
 
 The cost of coining subsidiary silver coin is shown by the Director 
 of the Mint to be from one and a half to two per cent. ; and it is much 
 less when the mints are running to their full capacity. 
 
 The actual profits of seigniorage will not only pay this cost, but 
 more than the interest on the bonds we may sell to procure the bullion. 
 
 On the other hand, the cost of the fractional currency is three and 
 a half per cent, of the amount issued ; or, to be exact, the expense of 
 preparing and redeeming the fractional currency for the year 1875 was 
 $1,410,746.95. The amount issued was $40,365,145. And what is 
 worse, the average life of these notes is less than one year, so that this 
 expense is an annual one almost equal to the interest on the whole sum. 
 Thus the stopping of the issue of fractional currency wiU save us 
 $1,400,000. The silver coin pays a debt when issued, while the frac- 
 tional currency only renews it, and it must be replaced by another note 
 within a year. Sir, the wisdom of this provision is now so demon- 
 strated that a committee of the House unanimously refuse to print the 
 currency and demand the issue of the silver coin, while two months ago 
 the scheme was pronounced visionary, impracticable, and a sham. We 
 are now at a specie basis for our fractional currency ; and yet when the 
 law was enacted we were told it would be hoarded, bought up by 
 money-changers, or exported. "We are now told " ISTobody wants the 
 silver ; they prefer the fractional notes." So it is ; and so also it will 
 be when we approach the gold standard. Nobody will want to give 
 up the United States notes for gold when the note will buy fully as 
 much as gold. 
 
 But it is said we can only buy the silver bullion by issuing bonds. 
 That is true now, because our surplus revenue is not large ; but how 
 will the United States ever pay its notes at a cheaper rate ? One mil- 
 33 
 
514: SPEECHES AKD REPORTS OF JOHN SHERMAN. 
 
 lion of dollars of five per cent, bonds will, to-day, buy sufficient silver 
 bullion to make $1,200,000 in subsidiary silver coin. "When and how 
 can this operation of paying our debts be better commenced, unless we 
 mean to postpone payment indefinitely ? It has been said that the five 
 per cent, bonds authorized have been exhausted ? Not so. The law is 
 plain and express, and was designed and intended to authorize the 
 Secretary of the Treasury, not only to use any surplus revenue, but 
 '' to issue, sell, and dispose of, at not less than par in coin, either of the 
 descriptions of bonds of the United States described in the act " for 
 refunding the public debt. The refunding act is only referred to for 
 the " description " of the bonds authorized. But to make this construc- 
 tion more clear, it is provided " that all provisions of law inconsistent 
 with this act are hereby repealed." Thus, not only the public faith, 
 but all the surplus revenue and the public credit, as represented by 
 either of three kinds of bonds, to wit, those bearing f om-, four and a 
 half, and five per cent, interest in gold, is granted to the Secretary to 
 enable him to execute this trust. The only limit in amount is the 
 amount that will enable him to execute the law. The only limit of 
 price at which he can sell the bonds is " not less than par in 
 coin." 
 
 The second section is only material as it tends to induce the coining 
 of gold by repealing the mint charge. 
 
 So much of the third section as relates to national banks is not ma- 
 terial, except as it provides a way by which circulating notes may be 
 issued ; but if issued it will be with full knowledge that in due time 
 they must be redeemed in coin at the pleasure of the holder. 
 
 Then comes the provision — the vital provision — of the law : " And 
 on and after the 1st day of January, a. d. 1879, the Secretary of the 
 Treasury shall redeem in coin the IT nited States legal4ender notes then 
 outstanding on their presentation for redemption." Then follows the 
 ample power already quoted : " And to enable the Secretary of the 
 Treasury to prepare and provide for the redemption in this act author- 
 ized or required, he is authorized to use any surplus revenue from time 
 to time in the Treasury not otherwise appropriated, and to issue, sell, 
 and dispose of," at not less than par in coin, either of the bonds already 
 referred to. Such are the duties enjoined, and such are the powere 
 conferred. 
 
 Sir, in this respect, both the powers and duties of this act are clear- 
 er and stronger than in the acts under which Great Britain resumed 
 and France is now resuming. "Wlio can doubt that with or M-ithout 
 further legislation the work can be accomplished by a Soei-etary who 
 will obey and execute the law ? The power to " prepai-e " for resump- 
 tion is a broad discretion that commences with the passage of the act 
 and continues during every hour and day of its existence, but is one to 
 be exercised with exceeding caution and moderation. 
 
 But, sir, this is not all. When Congress passes an act imposing a 
 duty upon a public officer, it implies an obligation tliat it will furnish 
 all the aid and auxiliary legislation necessary to carry it into execution. 
 The extent and nature of this is within tlie discretion of Congress ; 
 but when the power conferred upon him is ample, and the duty imposed 
 
NATIONAL FINANCES— SPECIE PAYMENTS. 615 
 
 is clear, he must act even though Congress neglect its duty to support 
 him by auxiliary legislation. 
 
 And this brmgs me to the last proposition I propose to discuss, and 
 that is — 
 
 What additional legislation ought Congress now to adopt in aid of 
 the law ? 
 
 The Secretary of the Treasury recommends, first, that the legal- 
 tender quality of the United States note be taken from it before 1879. 
 I can not agree to this, for the United States note is as much a con- 
 tract to pay money as a bond ; and we can not take from that note any 
 quality that gives it value, until we are prepared to redeem it in coin. 
 The proposition is too much like the act of March, 1863, already re- 
 ferred to, which stripped the note of its quality of convertibility into 
 bonds. 
 
 His second recommendation is — 
 
 That authority be given for funding legal-tender notes into bonds bearing a low 
 rate of interest. ... It seems probable that a bond bearing interest at the rate of 
 four per cent, would invite the funding of a sufficient amount of legal-tender notes 
 to lessen materially the sum of gold which, in the absence of such provision, must 
 be accumulated in the Treasury by the 1st of January, 1879, to oai-ry out the im- 
 perative requirements of the act of January 14, 1875. If it be apprehended that 
 authority to the Secretary to fund an unlimited amount of notes might lead to too 
 sudden contraction of the currency, Congress could limit the amount to be funded 
 in any given period of time. The process being in no sense compulsory as to the 
 holders of United States notes, and the rate of interest on the bonds being made 
 low, it is not probable that currency which could find profitable employment would 
 be presented for redemption in such bonds. Only the excess of notes above the 
 needs of business would seek such conversion. Authority to the Secretary of the 
 Treasury to redeem and cancel two million of legal-tender notes per month by this 
 process would greatly facilitate redemption at the time now fixed by law, and 
 besides would have the advantage of publicity as to the exact amount to be with- 
 drawn in any given month. Bonds issued for this purpose should be of the denomi- 
 nation of fifty and one hundred dollars, and any multiple thereof, in order to meet 
 the convenience of all classes of holders of United States notes. 
 
 The President in his annual message recommends — 
 
 That the Secretary of the Treasury be authorized to redeem, say, not to exceed 
 $2,000,000 monthly of legal-tender notes, by issuing in their stead a long bond bear- 
 ing interest at the rate of 3-65 per cent, per annum, of denominations ranging from 
 $50 to $1,000 each. This would in time reduce the legal-tender notes to a volume 
 that could be kept afloat without demanding redemption in large sums suddenly. 
 
 3. That additional power be given to the Secretary of the Treasury to accumu- 
 late gold for final redemption, either by increasing revenue, curtailing expenses, or 
 both — it is preferable to do both ; and I recommend that reduction of expenditures 
 be made wherever it can be done without impairing Government obligations or 
 crippling the due execution thereof. 
 
 These recommendations, substantially concurring, are wise, and 
 would be efficient ; and to secure them ample means are provided by 
 the application of the sinking fund for two or three years without 
 additional taxation. Indeed it is neither wise nor prudent to apply 
 the sinking fund to the purchase of bonds not due, at a high premium, 
 when it may be applied, according to the act creating it, to the pur- 
 chase of notes already due. 
 
 The honorable Senator from Yermont [Mr. Morrill] has introduced 
 
516 SPEECHES AND EEPOKTS OF JOHN SHERMAN. 
 
 a bill, and a number of other bills and propositions relating to this 
 subject have been referred to the Committee on Finance ; and the 
 elaborate resolutions of the Chamber of Commerce of Isew York are 
 now before us. 
 
 I will not anticipate the provisions of these various propositions, 
 except so far. as to say that I will cheerfully support any measure of 
 wise economy, proposed to strengthen the public Treasury ; that I will 
 cheerfully vote for a moderate tax on tea and coffee, because this will 
 increase our revenue without adding to the cost of the articles, and 
 will enable us to repeal other taxes that are both a burden and an in- 
 convenience, and will also strengthen the Treasury ; that I will gladly 
 vote for the voluntary conversion of a limited amount of United States 
 notes into bonds, as each of those measures will tend to " prepare " us 
 for a specie standard. But, sir, each of these measures, and others that 
 may be proper, are not, in my judgment, indispensable to the full and 
 complete execution of the law of 1875 on or before the Ist day of 
 January, 18Y9. 
 
 Indeed it may well be questioned whether all of them may not be 
 properly postponed until the next session, when the deliberate judg- 
 ment of Congress, guided by the sense of the people, can be rendered. 
 I would gladly vote for them now ; but we have acted together thus 
 far, and I will not unduly press upon my associates measures they do 
 not fully approve. 
 
 Sir, I have a confident belief that if Congress will now hold fast to 
 the law as it stands, the drift of events and the practical operation of 
 the law will not only vindicate its wisdom, but will secure in due time 
 every proper auxiliary legislation to carry it into full execution. The 
 duty of the hour demands firmness and faith. There are times in the 
 lives of nations and individuals when the temptation is strong to turn 
 from the path of honor, to shrink from and evade the performance of 
 obligation. Then it is more than ever that the old adage should be re- 
 membered that " honesty is the best policy." For one I feel that my 
 course is as clear as the sunlight of heaven ; and I trust that the great 
 party to which I belong may now, as in sterner times and under greater 
 difficulties, stand fast to the national honor pledged by it in the act of 
 1875 ; and when the difficulties inseparable from a great duty have 
 passed away, we will be as proud of our position now, as we are of the 
 firmness and faith with which we prosecuted a great war, and seciired 
 to the people of our day and of future generations the blessings of 
 national union and universal liberty. 
 
 I move that the memorial of the New York Chamber of Commeroe 
 be referred to the Committee on Finance. 
 The motion was agreed to. 
 
FRACTIONAL OUKRENOY— SILVER COINAGE. 517 
 
 FEACTIONAL CUKEENCT— SILYEE COmAGE. 
 
 IN THE SENATE, APRIL 11, 1876. 
 
 The bill to provide for a deficiency in the Printing and Engraving Bureau of the 
 Treasury Department, and for the issue of silver coin of the United States in place 
 of fractional currency, being before the Senate, Mr. Sherman said : 
 
 Mr. Peesident : I was in hopes that the Senate would be willing to 
 act upon this bill without much discussion ; but, as Senators desire it, 
 it is due to the Senate that I should state in behalf of the Finance Com- 
 mittee the reasons for the passage of the bill and for the amendments 
 proposed by the Committee. 
 
 The first section of the bill contains simply an appropriation of 
 $163,000 to provide for engraving and printing and other expenses of 
 making and issuing United States notes ; and it is plainly unobjection- 
 able, unless the Committee on Appropriations desire to change the 
 amount. 
 
 The second section directs the Secretary of the Treasury to issue 
 silver coins of the United States of certain denominations in redemp- 
 tion of an equal amount of fractional currency, and is, in substance, the 
 provision of the existing law, but is inserted by the House of Eepresen- 
 tatives for the purpose of making the law mandatory. 
 
 The third section of the bill, however, presents the most difficult 
 question in political science. This section, as sent to us by the House 
 of Eepresentatives, provides : 
 
 That the silver coins of the United States of the denomination of $1 shall be a 
 legal tender at their nominal value for any amount not exceeding $50 in any one 
 payment, and silver coins of the United States of denominations of less than $1 
 shall be a legal tender at their nominal value for any amount not exceeding $25 in 
 any one payment. 
 
 This presents the question of the single or double standard, which 
 has probably been the occasion of more pamphlets, books, and docu- 
 ments than any other question whatever in political science. As a 
 general rule, the English authors have favored a single standard of 
 gold ; the French writers have generally favored a double standard of 
 gold and silver ; while there are writers without number who have ad- 
 vocated, some the single gold standard, some the single silver standard, 
 and very many the double standard. I might state the argument 
 briefly, without going into details, in the language of a recent author, 
 in which the arguments in favor of the single gold standard are concen- 
 trated into three : 
 
 The advocates of the gold valuation say: " There is a constant liability to fluctu- 
 ations in the standards of value. It is better therefore that, in order to secure unity, 
 there should be but one standard, and this standard should he gold." . . . 
 
 The second argument brought forward by the advocates of gold valuation is, that 
 silver is too heavy for the present purposes of commerce; that its carriage and 
 handling are inconvenient, and that gold, being so much lighter, is more suitable. . . 
 The tliird argument or allegation is that all civilized nations either have adopted, 
 or show the disposition to adopt, the gold valuation. — (Seyd, " Metallic Currencv of 
 the United States," page 39.) 
 
518 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Each of these positions has been answered, as it is thought, by 
 those who advocate the double standard, or the single silver standard. 
 To the first objection in regard to the fluctuation of the value of gold 
 and silver, it has been answered that sometimes gold has declined in 
 value as compared with silver ; sometimes silver has declined below 
 gold value; sometimes the variation is one way and sometimes the 
 other, and therefore the mere fact of variation is not an objection to 
 either silver or gold as a standard, and ought to have no weight in the 
 argument. The two metals havg kept together with remarkable near- 
 ness ; and it is said with great force, it seems to me, that to adopt the 
 gold standard alone and demonetize silver would be to deprive the 
 poor people of the world of the money which alone measures the 
 value of their productions and of their labor. The gold, from its 
 nature, is not divisible into a coin of convenient form of less than 
 $2.50. The dollar gold coin in this country and the five-franc piece in 
 France never attained any considerable circulation. Therefore gold 
 alone is not suitable for a currency because it will not measure the daily 
 wants of the great mass of mankind. 
 
 To the second objection, that silver is too heavy to export, it is 
 answered that it costs no more to transport $100,,000 of silver from 
 one port or place to another than it does $100,000 of gold. This is 
 true. By any form of conveyance the price of transporting $100,000 
 of silver is precisely the same as of transporting $100,000 of gold, 
 being based on value and not on weight, because the risk of loss is the 
 chief element of cost. 
 
 The^third allegation, that all civilized nations either have adopted 
 or show a general disposition to adopt the gold valuation, is denied as 
 a matter of fact. England alone of all the great powers has adopted 
 the single gold standard. Half a dozen other countries of minor im- 
 portance have adopted it. Most nations have adopted either the dou- 
 ble standard or the silver standard. The great mass of mankind (two 
 thirds of the human race) still use and do all their business upon the 
 silver standard alone ; so that there is no such weight of example as 
 gives to either standard a decisive advantage over the other. 
 
 Mr. President, I shall dismiss this controversy of the schools with- 
 out going further into it, although it is a very interesting subject of 
 study, and I could give Senators references to about a hundi-ed vol- 
 umes aboiit it. I will dismiss it so far as the theory of the question 
 has been discussed among political economists, but I wish to call the 
 attention of the Senate in some detail to the existing law of the 
 United States and also to the laws of Great Britain, France, and Ger- 
 many, so that we may know precisely the condition of the coinage of 
 those countries, in order to test by law and experience whether the 
 amendments proposed by the Coniiuittee on Finance are wise or not. 
 
 The first United States statute on the subject, which established the 
 Mint, was passed in 1792, and is contained in volume i. of the Statutes 
 of the United States, page 24S. I have it before me. This act estab- 
 lishoH the proportional value between silver and gold by declaring that 
 one ounce of gold shall be equivalent to fifteen ounces of silver, and 
 the weight of the coins is based on that proportion. The conse- 
 
FRACTIONAL OUEEENOY— SILVER COINAGE. * 519 
 
 quences of this error will be perceived in a moment. Our gold coin 
 was made one twelfth part of alloy and eleven twelfths of line gold, 
 in accordance with the English standard. Our silver coin contained 
 one hundred and seventy-nine parts alloy to fourteen hundred and 
 eighty-nine of silver, or about one ninth alloy. The weight of the 
 gold coin was twenty-seven grains to a dollar, and that of the silver 
 coin four hundred and sixteen grains, and either gold or silver was 
 made a legal tender for all purposes. Thus the double standard was 
 adopted by the people of the United States at the beginning of the 
 Government to the fullest extent. The only debate on this bill, show- 
 ing that it excited no attention, was as to whether the head of the 
 President of the United States for the time being or the head of the 
 Goddess of Liberty should be put upon the coin. That was the only 
 thing they cared about. All the philosophical questions involved in 
 the proposition, the relations of silver to gold, and whether they should 
 both be made legal tender, do not seem to have been deemed worthy 
 of consideration in that early Congress of the United States. 
 
 The result of this act was to demonetize gold, because one ounce of 
 gold was worth more than fifteen ounces of silver ; and then the law 
 of currency -comes in, that if a coin or currency is undervalued it dis- 
 appears from circulation. The result' was that in the early period of 
 our history gold entirely disappeared. It is a part of the history of 
 the time, as shown by official reports, that there was substantially no 
 gold in the United States from 1793 to 1834, simply because the gold, 
 being undervalued, left the country, leaving silver and bank notes as 
 the basis of all transactions. In order to counteract this effect of our 
 coinage law, Congress, in 1834, by an act to be found in the fourth 
 volume of the Statutes at Large, reduced the weight of gold coin 
 from twenty-seven grains to the dollar to twenty-five and eight tenths 
 grains of standard gold, nine tenths fine. That is, they made one ounce 
 of gold equal to sixteen ounces of silver. That was the substance of 
 the change. They changed the relative value of gold and silver to 
 each other ; and subsequently, by the act of 183Y, they changed the 
 silver coins so as to conform to this standard. By the act of 1837 
 gold and silver coin contained one tenth part of alloy. The weight of 
 the silver dollar was fixed at four hundred and twelve and one half 
 grains. It was of less weight than the old silver dollar, but of the 
 same value, because it was finer, having less alloy. By these two acts 
 both silver and gold coins were of the same fineness and bore the rela- 
 tion to each other of one to sixteen. The weight and fineness of gold 
 coins thus fixed has never been changed. All coins, both silver and 
 gold, were made a legal tender for all sums. 
 
 Here again a mistake was made that would appear to be very trivial 
 in ordinary legislation, but it was great enough to revolutionize our 
 metallic currency. In 1834 and 1837 Congress underestimated the 
 value of silver ; that is, one ounce of gold was not worth sixteen ounces 
 of silver ; but by law they made it so, and this was the result : Gold 
 commenced coming into the country, and silver flowing out ; so that 
 from 1834 or 1837 until 1853 silver had entirely disappeared from the 
 currency of the United States by reason of our laws undervaluing silver 
 
520 ■ SPEECHES AND KEP0RT8 OF JOHN SHEEMAN. 
 
 as they had previously undervahied gold, the true ratio of silver to gold 
 being between one to fifteen and one to sixteen, or one to fifteen and a 
 half. The effect of this is stated very strikingly by Mr. Seyd, from 
 whose book I will read an extract : 
 
 The disappearance and exportation of the American silver coinage were caused 
 by quite a different matter. The American silver coinage was always liable to 
 exportation for the simple reason that it contained an undue proportion of silver. 
 In all countries where the double valuation prevails the relative proportion of value 
 between gold and silver stands at one to fifteen and one half, and the market value 
 of silver in countries where it is not a standard gives on the average the same re- 
 sult. In the United States alone the rate taken was one part of gold to sixteen of 
 silver (15'98837), the proportion resulting from the eagle at two hundred and fifty- 
 eight and the silver dollar at four hundred and twelve and one half grains. The 
 dollar therefore contained three and one third (3'29) per cent, more silver than it 
 ought to have contained according to its nominal value. No wonder, then, that the 
 dollar was rapidly exported, and that no one found inducement to bring silver to 
 the mints for coinage. And let it be understood that the supply of gold had little 
 or nothing to do with this. Long before the discovery of gold in California, ever 
 since 1837, has the effect of this premium on the United States silver dollar made 
 itself manifest. In exchange for it the foreigner need not have supplied gold ; other 
 commodities served the purpose of realizing elsewhere the large profit which the 
 United States gave to the exporter of her silver coin. Much that has been doubt- 
 ful, peculiar, and unsatisfactory in the history of the United States currency between 
 1837 and 1850 owes its origin to this astounding mistake on the part of the Govern- 
 ment, which must, as every one can see, have given rise to general disorganization 
 of the currency and to disappointment in the capacity of the country to retain 
 metallic currency. I go further, and say that it was the cause why America was 
 obliged to make so large a use of paper money, with all its evils of unequal interests, 
 extravagant habits, and expenditure. 
 
 It is remarkable that by the adoption of the first standard of 1792 
 gold at once left the country and silver filled the channels of business, 
 and that by the attempt to correct this "error our laws overleaped the 
 market and true relative value of these metals and established the rate 
 of silver too low, and this drove silver out of the country and gold 
 became the universal currency. This necessary result was deepened 
 and strengthened by the fact that in 1850, by the discovery of gold 
 mines in California, gold came pouring into us in such fioods that our 
 silver euiTency entirely disappeared and its relative value increased. 
 All the money we had was gold money, not silver money. We had no 
 change. In some parts of the country we resorted to " shinplasters." 
 Thus a slight error in fixing the relative value between gold and silver 
 made two remarkable movements in these precious metals, a striking 
 illustration of the necessity for the utmost care in dealing with all ques- 
 tions affecting metallic money. 
 
 In 1853 Congress undertook to correct this evil, and under the lead 
 of Mr. Hunter of Yirginia, then Chairman of the Conmiittee on Fi- 
 nance, the act of 1853 was passed. I have before me a very learned 
 report made by Mr. Hunter, in which he pointed out the evils of the 
 then existing system and prescribed, as he thought, a remedy. Per- 
 ha]iH I had better read to the Senate a brief extract from Mr. llunter's 
 report to show that lie examined the matter with great ciire ; that he 
 appreciated the evil to be remedied. But even he finally fell into the 
 error of largely demonetizing silver by not reducing the silver dollar 
 then undervalued. Mr. Hunter, on the third page of his report, says : 
 
FRACTIONAL OURRENOY— SILVER COINAGE. "521 
 
 Indeed, it appears from a carefully compiled table appended to Mr. Ingham's re- 
 port (document No. 117, page 101), that from 1492 to 1-825 there were coined from 
 the American mines $4,310,000,000 in silver, and only $1,890,000,000 in gold. But, 
 in tracing the effect of this change of the relative value upon particular countries, 
 we must not forget its operation upon the rest of the world. In thus excluding 
 one of these metals from one country, if its property and trade were large, and in 
 thus forcing more than its natural proportion into manufactures, we should dimin- 
 ish the volume of specie currency of the world below the natural supply. How 
 this would affect mankind will be hereafter examined. But the mischief would be 
 great indeed if all the world were to adopt but one of the precious metals as the 
 standard of value. To adopt gold alone would diminish the specie currency more 
 than one half ; and the reduction the other way, should silver be taken as the only 
 standard, would be large enough to prove highly disastrous to the human race. In- 
 deed, a reference to the history of the precious metals and the general course of 
 hnman production can scarcely fail to convince us that there has been a constant 
 tendency to appreciate their value as compared with the residue of the property 
 of the world, and that every extraordinary increase of the supply of the precious 
 metals of which we have any account has exercised a highly beneficial effect upon 
 human affairs. When contracts are made by a standard which is gradually con- 
 tracting, the advantages are on the side of capital as against labor, and productive 
 energy is cramped byjeceiving less than a fair share of the profit of its enterprises. 
 
 It is manifest from this extract from Mr. Hunter's report, which is 
 very voluminous, that the desire of Mr. Hunter and those who voted 
 for the passage of the act of 1853 was to bring back silver into this 
 country, so that we might have silver and gold again as the currency 
 of the country, and the measure they adopted was intended to produce 
 that effect. What was it ? By the act of 1853 no change was made in 
 gold coin or in the silver dollar. The latter was left demonetized by 
 being rated at less than its market value. The act provided, however, 
 for subsidiary silver coin : the half-dollar, the quarter-dollar, the dime, 
 and the half-dime. It prescribed the weight of the coin at three hun- 
 dred and eighty-four grains to the dollar, instead of four hundred and 
 twelve and a half grains. It made the subsidiary coin a legal tender 
 for five dollars, and all other coins were left a legal tender without 
 limit. This act, as I stated, provided for a subsidiary coinage worth 
 about six per cent, less than par, assuming the relative value of silver 
 and gold to be sixteen to one. The subsidiary coin was made a legal 
 tender to the amount of five dollars, leaving the silver dollar legal ten- 
 der for all amounts. 
 
 The effect of this act of 1853 was to bring back to us silver change 
 in abundance as a token coin. There were issued between 1853 and 
 1861 about $48,000,000 of silver coin. It was the change of the coun- 
 try, and to that extent silver was monetized again and in daily use ; 
 but the dollar was still undervalued and has never entered into circula- 
 tion from 1853 to this time. Except for special purposes, the silver 
 dollar of the United States disappeared from among the coins of the 
 world for the palpable reason that it was more valuable for export 
 than for circulation. The silver dollar of the United States has never 
 been changed in intrinsic value ; the change has been in the gold dollar. 
 
 The effect of the law of 1853 was practically to demonetize the 
 silver dollar, to provide a subsidiary coin for circulation, and to give 
 employment to about $48,000,000 of silver for the change of the coun- 
 try. So the laws of the United States as to our coins continued until 
 
522 SPEECHES AND EEPOKTS OF JOHN SHEEMAN. 
 
 February, 1873, when Congress passed an act to revise and consolidate 
 all the statutes in regard to coinage. This act is embodied in the 
 Revised Statutes. The changes made by this act are very slight. No 
 change was made in the gold coin ; it is still twenty-five and eight 
 tenths grains of standard gold to the dollar. The subsidiary silver 
 coins were to weigh twenty-five grammes to the dollar. That raised the 
 value of the silver coins from three hundred and eighty-four grains to 
 twenty-five grammes or three hundred and eighty -five and eighty one- 
 hundredths grains, so that it very slightly raised the amount of silver 
 in the subsidiary coins in order to harmonize with the French coins ; 
 so that now one dollar of our subsidiary money is precisely of the same 
 weight and fineness as five francs of the French coin, and our silver 
 coin is now easily convertible into French or Latin unit coins. The 
 old silver dollar was dropped out in the revision ; and why ? Simply 
 because it was not in use. It could not circulate because in 1872 and 
 1873 the silver dollar was worth more than the gold dollar. As it had 
 not been coined for twenty years, it was dropped out from among the 
 coins of the United States. As a matter of course this does not pre- 
 vent us restoring it at any time when we think it is for the public 
 interest to do so. 
 
 But the most striking change made by the act of 1873 was the 
 introduction of a new dollar called the trade dollar. Senators here 
 mostly understand the reason why that trade dollar was provided for. 
 Silver was beginning to be affected by the events that I shall allude to 
 presently. Tnere was a great demand for silver in China, however ; 
 and the Mexican pillar dollar for a good reason had gotten into the 
 markets of China, and was the most desirable coin, because it was 
 worth a little more than the dollar of the United States and more than 
 the dollar of any other country. Therefore in China they would not 
 take any other dollar. There they measure small differences much 
 more carefully than we do. In order to induce the Cliinese to take 
 our dollar instead of the Mexican milled dollar, so that we might give 
 td our people a chance to export their silver in the form of coin, we 
 authorized the holders of bullion to present their bullion at the mints 
 of the United States to be coined into trade dollare containing four 
 hundred and twenty grains of standard silver. The old dollai- con- 
 tained only four hundred and twelve and a haK grains ; so that the 
 trade dollar contained seven and a half grains more of silver, and that 
 made it a little more valuable than the Mexican dollar, Mhich contained 
 four hundred and sixteen grains of silver, with a little less aUoy than 
 ours. The trade dollar has a shade more value than any other dollar, 
 and at once superseded the Mexican silver dollar in China. The 
 result was that the Government of the United States, by coining trade 
 dollars at the expense of the holders of bullion, introduced into the 
 commerce of the world a new money, wliich is now being absorbed 
 largely in Japan and China and by all Asiatic nations. 
 
 I have stated, 1 believe, all the laM-s of the United States without 
 exception which affect the value of intlier gold or silver coins. There 
 have not been maTiy of theui. Our coinage laws liave been very stable ; 
 no changes have been made except for an obvious purpose. The law 
 
FE ACTIONAL CUEKENCY— SILVER COINAGE. 523 
 
 of 1792 stood on our statute books unchanged until 1834, and then was 
 modified only as far as the gold coins were concerned ; and the law re- 
 mained unchanged from that time until 1853, and was then modified 
 only so as to introduce subsidiary coinage ; and it remained then until 
 1873, when it was changed in order to introduce the trade dollar. 
 
 Those are all the changes,- so that the silver dollar of our Revolu- 
 tionary fathers is the silver dollar of to-day if we choose to restore it. 
 The trade dollar has been introduced simply as a commercial dollar. 
 Here is the difficulty in which we are placed : by the sudden fall of 
 silver the trade dollar, instead of being worth more, is worth less than 
 gold ; and yet by the act of 1873 the trade dollar was made a legal 
 tender. The result is that a dollar less valuable* than gold is made a 
 legal tender for the payment of gold contracts to a limited amount. 
 But that is not the worst of it. We could bear that very well ; but the 
 worst of it is that by the act of 1873 any holder of silver bullion can 
 convert his bullion, which is worth seven per cent, less than par, at the 
 mere cost of minting, into dollars ; and the law makes them a legal 
 tender to the extent of $5, for customs dues and the like. Thus the 
 Government of the United States allows private individuals to regulate 
 the amount of our coinage. It is perfectly manifest to every man who 
 will examine this matter that we have got to do one of two things : 
 either take away from the trade dollar its legal-tender quality or take 
 away the right of the holder of bullion to make the trade dollar. 
 
 The simplest thing to do is to repeal the section authorizing the 
 issue of the trade dollar. But then come these gentlemen from Cali- 
 fornia and ]S"evada and say, "We have built up a trade on this ; it is a 
 convenient form of exporting our bullion ; we do not ask you to pay 
 the expense, however. We pay that ourselves. Why should you step 
 in now and destroy that which we have built up ? " And there is no 
 answer to it. Therefore I think it is well to keep the trade dollar as it 
 stands, to enable the people of this country to convert their silver bul- 
 lion into the best form for commercial purposes, but to take away from 
 it its legal-tender quality, and then no silver coin can be issued except 
 by the United States, and the profit and the benefit will inure tp the 
 United States ; and, more than all, the amount will be regulated by the 
 United States. It is manifest that if the trade dollar is to continue and 
 silver remains depreciated, with the right of any holder of silver bullion 
 to convert it into trade dollars, the country will be overwhelmed with 
 money that is not at par in gold. 
 
 I hope, therefore. Senators will see that, as far as the trade dollar is 
 concerned, while we do not wish to interfere with its usefulness and its 
 value, we must take away from it that attribute which was not intended 
 to be given to it when the law was passed, and which changes its char- 
 acter from a commercial dollar to a legal-tender coinage. 
 
 Mr. President, I have now stated all I desire to state about the laws 
 of the United States. But this question is afllected by the laws of all 
 other countries with whom we have dealings. The question of coinage 
 is an international question. It is not enough for us to stop with seeing 
 what our own laws are, and deciding how far we shall change them, but 
 we must see what the laws of other counti'ies are, or we may be in the 
 
524 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 position that Congress was in in 1853 and 1837, and in 1792, when by 
 malcing a mistake in the relative value of gold and silver they drove out 
 of circulation, contrary to their intention, first gold and then silver. 
 
 Great Britain is generally supposed to, be at the head of the nations 
 that have adopted what is called the single standard of gold. In Eng- 
 land anybody may carry gold bullion of any kind or in any form to the 
 mint, and there have it coined into sovereigns of certain weight and 
 fineness, without charge at all. They have some refining charges, but 
 they make no charge for coinage. Ihe same right is conferred upon 
 the owner of silver bullion, with this qualification, and it is a very im- 
 portant one : a man may take a pound troy, or what will make a pound 
 troy, of silver bullion of a certain standard to the mint, and Great 
 Britain converts it into sixty-six shillings, paying him sixty-two shil- 
 lings. It retains the other four for its own use as a seigniorage. 
 
 The shillings issued are of the standard fineness. The result of 
 that is that every English shilling is worth less than bullion in intrinsic 
 value, but by being made a legal tender for a limited amount it is equal 
 in money value to gold coin. It is used as what is called a " token " 
 coinage. The weight of the shilling is eighty-seven and one fourth 
 grains. Four shillings are equal to three hundred and forty-nine grains 
 of standard silver. The alloy of standard silver there is seventy-five 
 one-thousandths. Theii- silver coin is finer than ours, but it is not so 
 valuable, our alloy being one tenth, but containing more grains to the 
 dollar. The value of the English silver shilling in our money is twenty- 
 one cents and four mills. The value of the gold shilling is twenty-four 
 and thirty-three one-hundredths cents, or twenty shillings passes for a 
 sovereign worth $4,866. The difference between the English shilling 
 and our quarter dollar is in favor of ours. Our coin is more valuable 
 than theirs. Our silver coin has always been more valuable than theirs 
 since 1816. And yet, notwithstanding that Great Britain has thus de- 
 based its coinage, four shillings to sixty-six, they keep in circulation 
 of this token coinage in a country of 32,000,000 people from eleven 
 to fifteen million pounds sterling on an average, over 860,000,000. 
 Though everybody knows it is intrinsically worth 6 or 7 per cent, less 
 than gold, yet from the fact that they carefully limit the amount and 
 regulate its issue it is maintained in circulation, and is the coin by 
 which nearly all the labor of England is paid. It is a legal tender to 
 the extent of forty shillings and no more. If or is it necessary, in order 
 to maintain this large amount in circulation, to have a legal tender for 
 any greater sum ; because, the Government having the exchisivc power 
 to issue it, issue only so much as the demand will keep at pai* with gold. 
 Such is the law of Great Britain. 
 
 In Canada, where there are 4,000,000 people, their twcnty-five-cent 
 piece is worth a little less than ours. It is very much like tlie Englisli 
 coin, but a little less valuable than oui-s. I estimate it at six one- 
 thousiindths of a grain less tliiin ours. As a mattor of course our silver 
 coin will pass between this country and Canada when we get to specie 
 ]i;iymcnt8. Oui- subsidiary silver coin will go all over Cimada. It is 
 wortli a little more, than the Caniuliaii money, and I have no doubt it 
 will fill the channels of business there. 
 
FRACTIONAL OUEEENOY— SILVER COINAGE. 525 
 
 This brings me to the statement of the silver coinage of France, 
 Belgium, Switzerland, and Italy, which have a population of T2,000,000. 
 Their money is based mainly on the French standard of 1792, and it is 
 regulated by the convention of December 23, 1865, which I have here 
 before me. It is, probably, the most important monetary convention 
 now in force. I will cite some of the provisions of it. The weight of a 
 franc is five grammes, so that they have a simple metrical unit of weight. 
 For five francs it is twenty-five grammes, and that is precisely the weight 
 of our two half dollars or four quarters. The fineness is nine tenths, 
 precisely like our own coin. The limit of issue is fixed at six francs, 
 or $1.20, per inhabitant. In Great Britain there is no enforced limit, 
 the amount issued being governed entirely by the demand. But in this 
 convention they have provided that none of the nations shall issue more 
 than six francs per inhabitant. But that makes an enormous sum. The 
 limit of $1.20 per inhabitant would g'ive to Belgium 32,000,000 francs ; 
 France, 239,000,000 ; Italy, 141,000,000 ; Switzerland, 17,000,000 ; in 
 all 429,000,000 francs ; or about $82,000,000 or $83,000,000. And 
 this, remember, is subsidiary coin. Each nation has its standard of sil- 
 ver besides, which it maintains at the relation to gold of fifteen and 
 one half to one. The five-franc piece in France, just as our dollar was 
 in 1853 and up to 1873, is a legal tender for all smns. The same law 
 applied to us would make a circulation of about $50,000,000, but our 
 population being more scattered it is generally supposed by those who 
 have studied the subject that we can now maintain a circulation of sub- 
 sidiary coin of seventy or eighty million dollars. 
 
 The legal tender among private individuals under this convention 
 is fifty francs, or $10. It will be seen that wherever silver is used in 
 modem nations, the limit of legal tender is carefully preserved as the 
 only way of preventing the depreciation and exportation of one or the 
 other of the coins. Among private individuals it is limited to fifty 
 francs, or $10 ; among the contracting states to one hundred francs ; 
 that is, each of .the contracting states agrees to receive it at their trea- 
 suries for one hundred francs. The old coinage is redeemed in the gold 
 and silver of the convention. Such is the conventional law which I 
 have before me, which regulates now the monetary transactions of 
 72,000,000 people. There is no doubt whatever, that in 1867, when 
 the Paris monetary conference was held, if Germany had consented, 
 this conventional law would have been agreed to as an international 
 law, and woiild have been made the basis of the entire commerce of 
 the world. I was present at that conference, and it was then the gen- 
 eral sentiment of the nations represented that gold should be the unit 
 of value ; and that, by providing for subsidiary silver coinage at the 
 relative value as fixed by the convention at fifteen and a half to one, 
 there would be no difficulty in maintaining it. What defeated the 
 convention was the pride of the English in the pound sterling, and 
 the refusal of the German nation, then not united as now, to surrender 
 the silver standard, which was then their sole standard of value ; and 
 so the- effort for an international money failed. But the monetary con- 
 vention of the Latin states, which was the work of purely scientific 
 men, has proved a success. One of the provisions of the convention 
 
526 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 aiithorized any nation whatever to join it with all the advantages con- 
 ferred by the convention ; so that it is open to all the world. In this 
 convention the relative value of gold and silver is fixed at fiiteen and 
 one half to one. 
 
 Now I come to what is called the German law ; and I think there 
 is a great deal of misapprehension not only in the newspapers and 
 among intelligent people, but among the mass of our people, in regard 
 to the recent action of Germany. I have the German statute here. 
 
 In Germany silver alone was formerly the standard of value. They 
 had but little gold. I remember very well, in 1867, in traveling in 
 Germany, that we relied entirely upon the English sovereign and the 
 French twenty-franc piece to pay expenses in Prussia because the Ger- 
 man coinage was abominable, composed of a confusing variety of coin. 
 They had the silver thaler, which was the standard of value, but there 
 was no gold in Germany that I saw except the French napoleon and 
 the English pound sterling. There were many states or nations in 
 Germany ; they could not agree. But when Germany became a great 
 power as the result of the recent war, the German Keichsrath, on the 
 4th of December, 18Y1, provided for gold coins and established a mark, 
 worth twenty-three and eight tenths cents, as the unit of value. That 
 is the unit not only of silver but of gold. The ten-mark piece of gold 
 is worth $2.38 of our money. That act of December 4, 18Y1, related 
 only to gold coins and provided a unit, but did not demonetize or affect 
 in the slightest degree the silver coinage of Germany, which then 
 amounted, according to some estimates, to four or five hundred million 
 dollars. By the act of July 9, 1873, which I have befoi-e me, Ger- 
 many undertook to change her standard from a single silver standard 
 to the double standard of silver and gold. The common impression 
 now is that Germany has adopted the single gold standard and demone- 
 tized its silver. On the contrary, the change in Germany is simply 
 from the single silver standard to the double standard of gold and 
 silver. 
 
 Article 2 of the statute of the Eeichsrath provides that, in addition 
 to the gold coins created by act of December 4, 1871, there shall be 
 coined also silver coins. 
 
 Article 3 provides for pieces of 6 marks, 2 marks, 1 mark ; of 50 
 pfennigs, and of 20 pfennigs ; nickel and copper. 
 
 The coinage shall be regulated by the following decisions : 
 
 One pound of fine silver shall be coined into 20 pieces of 5 marks, 
 50 pieces of 2 marks, 100 pieces of 1 mark, 200 pieces of 50 pfennigs, 
 and 500 pieces of 20 pfennigs. 
 
 The alloy consists of 900 parts of silver and 100 pai"ts of copper, 90 
 marks weighing one pound. 
 
 The process of coinage shall be decided by the Bundesrath. The 
 deviation from the standard uliall not exceed in single coins "003 in 
 fineness, and not more thnn "001 in weight, with the exception of the 
 20-pfennig coins ; the normal weight, lujwevcr, must be preserved in 
 the bulk. 
 
 Article 4 provides that the total amount of silver shall, until further 
 orders, not exceed 10 marks per head of the population. 
 
FRACTIONAL CURRENCY— SILVER COINAGE. 527 
 
 This is the important provision of this law, by which a larger silver 
 coinage is authorized in Germany than is found anywhere else in Eu- 
 rope. While 6 francs is the limit in France, while our limit has prac- 
 tically been only about $1.25, we having only issued $48,000,000 of silver 
 coin, and while in England the amount has been limited to about $2 
 per inhabitant, in Germany the amount of silver provided for is 10 
 marks per inhabitant, or $2.38, making for 40,000,000 of people at least 
 $100,000,000 of silver coin ; and, as I will show, they have already 
 issued nearly two thirds of that amount. 
 
 The law further provides as follows : 
 
 After every new issue of coins an equal quantity of the old circulating silver coins 
 shall be drawn in, beginning with the coins under the thirty-tlialer standard. The 
 value to be determined in the way explained in article 14, section 2. 
 
 Abt. T. The coinage and redemption is done at Government expense. 
 
 Aet. 9. Nobody is obliged to receive more than 20 marks in silver or more 
 than 1 mark in copper. 
 
 The Reiohs- and the Landescassen (Government banks) shall receive silver to 
 any amount as legal tender. 
 
 That is, all the Government banks are, bound to take silver as legal 
 tender for all transactions. 
 
 The Bundesrath will designate the banks which shall exchange amounts of not 
 less than two hundred silver marks for gold coin. 
 
 The government undertakes to supply the banks with the necessary 
 money to redeem and the banks undertake to redeem all this money 
 at par, so that it is practically a legal tender. 
 
 Aet. 10. Silver coins which have lost considerable weight by circulation shall 
 be received in Reichs- and Landescassen ; they must be, however, drawn in at the 
 cost of the empire. 
 
 Aet. 14, Seo. 2. In reducing the value of other coin, not gold, the value of the 
 thaler is three marks, the gulden, suddeutsohe Wahrung, one and five sevenths marks, 
 the mark of Hamburg one and one fifth marks. 
 
 The important bearing of these provisions of the law will be seen 
 when I come to look at what has actually been done in Germany and 
 has so disturbed the monetary values of the whole world. The amount 
 of silver coin outstanding in Germany has been estimated by various 
 authorities, and was estimated by the Government of Germany at $340,- 
 000,000 ; but it is shown now while they are changing currency from 
 one form to another that the amount was underestimated, so that the 
 amount of silver in circulation in Germany alone in 1873 when this act 
 passed was probably $400,000,000. The one- and two-thaler pieces 
 which were the common circulation of Germany are still a legal tender 
 for all amounts, and are received by the Government at par in gold. 
 The great body of them is still outstanding. A recent writer in the 
 London " Economist " says : 
 
 As regards the bearing of this arrangement on the requirements for gold in our 
 market, the leading facts are, first, that the one- and two-thaler pieces coined were 
 estimated by the German Government, in introducing the coinage law of 1873, to 
 amount to 459,000,000 thalers, equal to. about $340,000,000, or £68,000,000, of which 
 the two-thaler pieces represent 65,000,000 thalers, or £9,750,000, and the one-thaler 
 pieces, 894,000,000 thalers, or £59,000,000; second, that according to the estimates 
 of writers like Herr Soetbeer and others, at least three fifths of this silver coinage is 
 
528 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 still in circulation— that is, $180,000,000, about £36,000,000 in all, of which £5,850,- 
 000 would be in two-thaler pieces, and the remainder, or about £30,000,000, in one- 
 thaler pieces. 
 
 That is, there is still outstanding $180,000,000 of the old silver coins 
 of Germany, besides the amount that has been issued of new coin. I 
 have here also a statement taken from the London " Economist " of a 
 late date, March 25, 1876, of the amount of new coins issued by G-er- 
 many : 
 
 On the 11th ofMarch all the newly coined money in Germany amonnted to: 
 In gold pieces, 1,356,141,220 marks — 
 
 Or about $300,000,000 in gold coin. 
 
 In silver pieces, 193,118,226— 
 
 Or about $50,000,000 of new silver coins. Besides, there is outstand- 
 ing, as I have shovm, $180,000,000 of old silver coins which are now a legal 
 tender for all purposes. The enormous effect of this law in Germany, 
 and as a consequence the partial demonetizing of silver coins, I suppose 
 is felt by every man, woman, and child who buys or sells anything. I 
 suppose there is no act of any parliament that has had so wide-reaching 
 effects as this act of the German Parliament. The amount of coin in 
 the world is estimated by Mr. Seyd and other technical writers at 
 $3,200,000,000 silver and $3,500,000,000 in gold. So the effect of the 
 act of Germany, aided no doubt somewhat by the large supply of silver 
 by our mines, has been to reduce the purchasing power of the whole 
 of this enormous sum of thirty-two hundred millions of silver fully 10 
 per cent. The fall of the silver trade dollar in this country has been 
 from 103 to 91. This effect extended itself to what is called the Latin 
 League, who feared that German silver would be carried rapidly into 
 Italy, France, and the nations of the league, for coinage purposes, and 
 they interfered at once and stopped the coinage of silver. It also cre- 
 ated an impression in India ; so that, for the first time for two hundred 
 years, the current flow of silver into China and India was ari-ested, but 
 only for a short time, however. It is one of the remarkable cmrents 
 of trade in the history of mankind that with the silver that has been 
 coined in the world the greater part flows in a continuous stream into 
 these Oriental countries; and for three or four months a feeling of 
 alarm was created there lest that which they cherish as the measm-e of 
 all their values should become valueless to them. It created a partial 
 panic, but that panic has passed, and now the stream goes on ; silver 
 flows into India and China and all the Asiatic countries as heretofore. 
 
 That was not the worst of it. A struggle for the possession of gold 
 at once arose between all the great nations, because cvervbody could 
 see that if $3,200,000,000 of silver coin were demonetized and ^3,500,- 
 000,000 of gold coin made the sole standard it would enormously add 
 to tlie value of gold, and the Bank of France, the Bank of England, 
 and the Imperial Bank of (Jermany at once commenced grasping for 
 gold in wliatever foriri. Therefore what we have observed recently is 
 not 80 inuch a fall of silver as it is a rise of gold, the inevitable effect 
 of a fear of the demonetization of silver ; and now the Bank of France 
 has in its vaults the enormous amount of $300,000,000 of gold in coin 
 
. FRACTIONAL CURRENCY— SILVER COINAGE. 539 
 
 and bullion ; the Bank of England has $170,000,000, and the Imperial 
 Bank of Germany has $125,000,000. So in these three depositories 
 there is over $600,000,000 of gold, or nearly one fifth of the supply of 
 the world. 
 
 Mr. President, the effect of the movement in Germany has already 
 reacted in a wonderful manner. A recent order in Germany has sus- 
 pended the conversion of the thaler and monetized it. I have not that 
 order, but I have here a recent French pamphlet, a very incisive and 
 well-written one, which speaks of the recent action of Germany thus : 
 
 It is scarcely necessary to point oat the gigantic losses Germany would, before 
 causing this disastrous crisis, entail upon hei'sel| should she continue to offer heavy 
 sums of silver and to demand heavy sums of gold. The silver so offered would be 
 more and more depreciated, and the price of gold would rise in a converse ratio, 
 entailing a loss of millions to the German treasury. 
 
 The ministry of the Empire have foreseen these difflculties. To meet them they 
 inserted in the decree ruling that from January 1, 1876, all payments shall be made 
 neither in florins nor thalers, but exclusively in marks, a restrictive clause to main- 
 tain in circulation the thalers, which are to be counted as gold and to be each held 
 as equivalent to three marks. 
 
 Since demonetization has begun, silver which is constantly offered to foreign 
 markets goes on falling in price, while at home the value of the thaler, this coin 
 being a legal tender under the restrictive clause above mentioned and appraised at 
 three golden marks, is not depreciated. Bankers, therefore, when they have pay- 
 ments to make abroad, are careful not to transmit thalers. They send gold marks, 
 reserving their thalers for home payments. Government buys back the gold in foi-- 
 eign markets and the bankers go on exporting it. The treasury thus undertakes to 
 weave a Penelope's web without any Ulysses in the distance. Already 20,000,000 
 marks have been sent abroad, the sixth part of all that has been coined. To sum 
 up, Germany has judged it_prudent not to demonetize rapidly, while the success of 
 a dow demonetization appears highly doubtful. 
 
 I do not believe that this process will go any further than it has 
 already gone. It is now arrested. Besides that, an agitation in Great 
 Britain and France has already arisen for the establishment of a bi- 
 metallic currency. Even Great Britain, that since 1816 has maintained 
 the system of a single standard and a token coinage, is now discussing- 
 the question whether it will not be necessary in self-defense, especiaUy 
 for the India commerce, to restore, to some degree at least, the double 
 standard. In France they have already provided that when specie pay- 
 ments are resumed they shall be resumed upon the double standard of 
 fifteen and a half to one, which is now the relative value of gold to silver 
 in France ; and when specie payments are fully entered into, as they very 
 soon will be, and probably can be now, the old law of the monetary 
 conference will be enforced in France and all the Latin countries. Be- 
 sides that, Asia again is rapidly absorbing silver, and the forced de- 
 monetization of silver will be counteracted. It is used now by two 
 thirds of mankind as the sole standard of value. It ia used by all 
 nations as a token coinage to a very large extent, as I have already 
 shown. It will soon be used to the extent of forty or fifty million 
 dollars in the United States of America. "We now have nearly $20,- 
 000,000 to pay out, and can coin it at the rate of $2,000,000 a month ; 
 so that we shall ourselves, in the execution of our law and of this law 
 among others, use a large amount of silver, probably not less than sixty 
 or seventy million dollars. The absolute necessity of smaller coins will 
 34 
 
530 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 always maintain more or less of silver and make it absolutely necessary. 
 The utter ruin that would come to mankind, especially to the poorer 
 nations, by the entire demonetization of silver can not be estimated by 
 us. Take one half of the solid money of the world out of existence ; 
 take the sole standard of more than two thirds of the human race, re- 
 duce it to a base metal, and the effect upon the commerce of the world 
 would be incalculable. It can not be done ; it wiU not be done. There 
 is no danger of it. These two metals, gold and silver, have traveled 
 side by side from the beginning of time ; the records of human his- 
 tory do not go back to a time when they did not move together. They 
 have varied in value, sometimes one and sometimes the other being 
 higher ; but they have gone on, gold the money of the rich, silver the 
 money of the poor, the one to measure acquired wealth, the other to 
 measure the daily necessities of life ; and, sir, no act of parliament, 
 although it may disturb for a moment the relation of these two metals 
 to each other, nothing but an act of God, can destroy the use of both 
 of them by mankind. I will add some statistics from Dr. Soetbeer, pub- 
 lished in Germany, of the proportionate values of gold and silver at 
 different dates and epochs : 
 
 Some interesting notes have been pnblished lately in Germany by Dr. Soetbeer 
 on the variations in the proportionate values of gold and silver at difierent dates 
 and epochs. In ancient times the relative value of gold to silver was about one to 
 thirteen and one third, and toward the end of the old Roman Empire of the West 
 it rose to about one to fourteen and one half. In the Middle Ages and down to the 
 fifteenth century the standard was about sixteen of silver to one of gold ; but after 
 the discovery of America the value of gold fell rapidly, until the proportion stood 
 at ten and one half to eleven of silver to one of gold, which relation, was main- 
 tained with but little fluctuation during the sixteenth and beginning of the seven- 
 teenth century. After that date gold began to rise again in value, and by the end 
 of the seventeenth century the proportion had become one to fifteen. The stan- 
 dard of comparative value fluctuated backward and forward at about that figure 
 during the eighteenth century, and at the close silver was about fifteen aad one 
 half. 
 
 Up to 1850 silver had never fallen so low as sixteen, ■while from 1850 to 1652, 
 owing chiefly to French coinage operations and the absorptiori of silver for the 
 double standard in that country, the price of that metal tended to advance slightly. 
 It was never higher than fifteen, but still it was considerably less than fifteen and 
 one half. After 1859 the course of the price of silver tended downwai-d by almost 
 imperceptible steps; but it was not until 187S that the price began to be decidedly 
 low ; it then fell to sixteen and eight one-hundredths in relation to gold, and by the 
 end of 1875 had touched in London sixteen and eighty one-hundredths, or fifty- 
 seven and eleven sixteenths pence in London. 
 
 Perhaps I am wearying the Senate by these details ; but it seems 
 to be necessary in the condition of the information on the subject that 
 I should state them. There are certain general conclusions which I 
 draw from a reference to these statutes m vai-ious countries which I 
 will briefly state. 
 
 First. It is impossible in the nature of things to fix the precise 
 value of silver and gold. We have tried it three times and failed. 
 
 Second. Whenever either coin is worth more in the market than 
 the rate fixed by the law, it leaves the country. That we have twice 
 proved. That is in accordance with the Gresnam law : a law of cur- 
 rency named from the name of its discoverer. He wrote a book to 
 
FEAOTIONAL CURRENCY— SILVER COINAGE. 631 
 
 sliow that always the poorer currency would drive out of circulation a 
 superior currency ; and his book gave name to the theory that is called 
 the law of Gresham. It is the universal law of political economy that, 
 whenever two metals or two moneys are in circulation, the least valu- 
 able will drive out the most valuable ; the latter will be exported. 
 
 Third. The great European nations as well as the United- States, 
 in order to prevent thes depreciation of silver, issue it as a token coin- 
 age somewhat less in intrinsic value than gold, and maintain its value 
 by issuing it only as needed, at par with the prevailing currency, and 
 by making it a limited legal tender. I may say that that has been the 
 plan adopted by every great Christian nation. Kussia and Austria have 
 not yet had gold coinage at all, but still they have their values based 
 upon gold. 
 
 Fourth. The demonetizing of silver tends to add to the value of 
 gold, and though its relative value changes it is more stable compared 
 to gold than any other metal or production, Its limit of variation for 
 a century is between fifteen to seventeen for one in gold. 
 
 Fifth. Both coins are indispensable, one for small and the other for 
 large transactions. 
 
 Sixth. The causes of the decline of silver are temporary. It is 
 still used by a great majority of mankind as the standard of value. Its 
 use in France and the United States will on resumption more than 
 counteract its decline in Germany. 
 
 Seventh. The general monetizing of silver now, when it is unnat- 
 urally depreciated, would be to invite to our country, in exchange for 
 gold or bonds, all the silver of Europe, and at last it would leave us 
 with a depreciated currency. 
 
 Eighth. The decline of silver enables us now to exchange silver 
 coin of the old standard for fractional currency, leaving the exchange 
 optional with the holder, until we have the courage, as we now have 
 the ability, to redeem our currency in coin. 
 
 Ifinth. More silver can be maintained at par than we have now of 
 fractional currency. 
 
 Tenth. The redemption of a- part of our currency would advance 
 its purchasing power, while the silver in circulation will counteract the 
 contraction of the currency. 
 
 Whenever we have heretofore proposed any measure that looks to 
 the redemption of our United States notes — and I can not but regard 
 our failure to provide for them now, twelve years after the war, as a 
 disgrace to American civilization — when we seek to advance United 
 States notes, it is said that we contract the currency and affect prices 
 and cause a derangement of values. Here we can pay out solid money, 
 good money, money unchanged in value from the time of the Kevolu- 
 tion to this hour, for the redemption of our United States notes with- 
 out loss, without contraction ; and surely we can not refuse to do it. If 
 we pay out the silver it enters into circulation and takes the place of 
 United States notes ; and why should we refuse to the holder of the 
 United States notes the right to demand that of us which is now no 
 more valuable than the note itself ? It is sometimes said that nobody 
 wants the silver dollar. Try the people and see if they do not want 
 
532 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 it. If they do not want it, then no harm is done. I would not make 
 any man take it. I would not make any man who holds a OTeenback 
 note payable in gold take the dollar in silver, because I would tell him 
 beforehand the greenback some time probably in the future will be 
 much more valuable than the dollar he gets ; but that is no reason why 
 we should not give him the dollar if he wants it. 
 
 Now, Mr. President, that brings me, and v6ry briefly, to the pro- 
 visions of this bill. It will be perceived that the Committee on Fi- 
 nance took the House bill without alteration as far as possible. With 
 deference to the House we made no change in the first and second sec- 
 tions, and if the House had not put in the third section, I for one would 
 not have desired to change the bill as it was sent to us at all. But they 
 presented to iis this diflBcult question of the double and single standard, 
 and we were forced to consider it. I betray no secret when I say that 
 the Committee on Finance would have been glad to lay this question 
 aside and consider it more fully ; but it was presented to us in the bill, 
 and therefore we had to deal with it, I may say forcibly, against our 
 will. As it was before us, we could not get rid of it in any other way, 
 and we can not now unless the Senate should see proper to strike out the 
 third section and risk a controversy with the House, which would prob- 
 ably produce longer delay. Therefore we undertook to amend the third 
 section so as to avoid the objections to it. 
 
 The first thing I wish to call the attention of the Senate to is that 
 our amendments malte no enlargement of the legal-tender quality of 
 subsidiary coin. "We have left flie subsidiary coin precisely where it 
 was under the old law, unchanged, and it is clear that it should be un- 
 changed. To make the subsidiary coin a legal tender for $25 would 
 utterly destroy our customs revenue, would raise the question of the 
 payment of the interest on the public debt in the subsidiary coin, would 
 evidently impair the public credit, and would be wrong in every sense 
 of the word. Besides that, it would be a departure from the example 
 given to us by other intelligent nations that have acted upon every one 
 of these questions. 
 
 The House of Representatives proposed a legal tender of $25. We 
 left it where it was, at $5, and I have here a letter from the Secretaiy 
 of the Treasury showing in the most conclusive manner the evil resulte 
 that would flow from the enlargement of the legal tender of subsidiary 
 coins and its efiect on the revenue. I will not have it read, but may 
 hand it to the reporter to be embodied in my remarks, so that Senatore 
 may have the benefit of reading it if they desire. I have already stated 
 that, in my judgment, from fifty to sixty or seventy millions can be 
 kept at par. 
 
 But the vital question presented by the amendments of the Commit- 
 tee is the restoration of the silver dollar. Why restore the silver dol- 
 lar when it is now so depreciated by the ovoiits that I have named ? 
 Well, sir, the answer is that we have a large amount, some $400,000,000 
 of United States notes, which now are a legal tender for all purposes, 
 and the times has anivod when we can redeem them all with the old 
 dollar of the United States. We do not create a dollar; we simply 
 provide for its issue. The law was, as I have shown you, up to 1873, 
 
FRACTIONAL OUKRENOY— SILVER COINAGE. 533 
 
 that this old dollar could be tendered for the payment of all debts ; btit 
 it was simply not coined because the silver dollar was worth more than 
 the gold dollar. Does that prevent us from coining it ? Not in the 
 least. I will read you a short extract from Seyd on the very subject I 
 am now speaking of, the importance of the American dollar in the com- 
 merce of the world ; and, as he expresses it much better than I can, I 
 think Senators will be better pleased to hear his statement : 
 
 What, indeed, could America risk in adopting silver again as a coadjutor to gold ? 
 What, considering the actual state of the question in the world, namely, that the 
 majority of the nations adliere to the double or the silver valuation, does she not 
 lose now in endeavoring to follow the footsteps of England? Would America do 
 wrong in following the example of France, which maintains the five-francs silver 
 piece? Germany is obliged to adopt the double valuation; is the example a perni- 
 cious one ? 
 
 I think not ; I think that America, by deciding in favor of the double valuation, 
 would not only save the world at large from an abyss, and prevent the accomplish- 
 ment of a stupid general crime, whose authors humanity would some day learn to 
 curse, hut that she would advance her own material interests more than may be 
 supposed possible, and that she may peixhance take the lead in the intelligent and 
 prudent organization of firm monetary systems. 
 
 The state of the whole question in the United States favors the reintroduction 
 of the silver dollar. It has not been abolished by law, consequently no legal enact- 
 ^ment for its reestablishment and legal-tender rights is required. All that is neces- 
 sary is an act of Congress fixing the weight of the silver doUar at four hundred 
 grains (399'9) of nine hundred fine, reducing its present weight by twelve and one 
 half grains. — Seyd's "Metallic Currency of the United States," pages 56, 57. 
 
 This is the opinion of Mr. Seyd, an English writer, who is perfectly 
 familiar with the whole subject, and who has lived in this country the 
 most of his life. 
 
 There was one question of detail that came before the Committee 
 on Finance, upon which there was some difference of opinion : what 
 should be the weight of the dollar ? Should we take the gold value 
 now of silver and make a new relative standard ; or should we take the 
 French ratio of fifteen and a half to one ; or should we take the old 
 ratio of fifteen to one ; or should we take the American dollar as it has 
 stood from the foundation of the Government to this time ? It seems 
 there was a mistake ; I do not know how to explain it. The old dollar 
 was intended to be sixteen to one ; but we know very well, if our arith- 
 metics do not deceive us, that twenty-five and eight tenth grains mul- 
 tiplied by sixteen wiU make four hundred and twelve and eight tenths ; 
 and therefore it was an error to make the old dollar weigh only four 
 hundred and twelve and a half grains. It was not very material, be- 
 cause it was a very small fraction ; but still the Committee thought it 
 better to take the exact standard fixed by law, sixteen to one, and make 
 the new silver dollar weigh exactly sixteen times the weight of one 
 dollar of gold. The gold dollar is twenty-five and eight tenths grains, 
 and the silver coin we have provided for is four hundred and twelve 
 and eight tenths instead of four hundred and twelve and a half grains. 
 I make this explanation because a New York paper says the Committee 
 on Finance did not know what the old doUar was ; that the old dollar 
 was four hundred and twelve and a half grains, and we have made it 
 four hundred and twelve and eight tenths, because we did not know 
 
534: SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 better. I give the editor my respects, and state that we did it for a 
 reason. The author, Mr. Seyd, that I have read, recommends, on the 
 contrary, that we should adopt the French standard. I am not sure 
 but that it would be a good thing to do if we were treating the ques- 
 tion apart from old customs and habits. If it were a new question I 
 should say at once adopt the French standard, and make the dollar four 
 hundred grains. That would be exactly fifteen and a half to one. But 
 I would not do that. I would not debase the dollar below its old stand- 
 ard merely for the purpose of assimilating it with the metric system of 
 the French. I think, therefore, the old dollar is the best. 
 
 It has been also proposed to make the dollar to be issued equal to 
 two half dollars of the subsidiary coin. It would then be only three 
 hundred eighty-five and eight tenths grains ; that would be to debase 
 the coin. If this dollar is now restored to its old standard it may 
 come to par in gold. It has so happened in the past. Whether that 
 be so or not, I would not force anybody to take this silver dollar who 
 does not desire to take it. If anybody desires to surrender a note of 
 ours past due, payable in gold, for a silver dollar, because he is tired of 
 waiting for payment, give him the silver dollar ; but I would not force 
 him to take it, because the time will come when these notes of ours I 
 think will be worth dollar for dollar in gold. If a man prefers to take 
 a doUar in silver, give him the opportunity to do so. 
 
 The. question is to what extent should the silver dollar be made a 
 legal tender. The House provided that it should be for $50. There are 
 serious objections to making it a legal tender for that amount. I would 
 prefer to leave it at $10; but the House proposition made- it a legal 
 tender for customs duties and interest on the public debt. That would 
 plainly be a bad proposition. It would drive gold out of the country. 
 If the silver dollar now, with its depreciated value, is made a legal 
 tender for $50, you will have no gold whatever except in the mints 
 and sub-treasuries of the United States. Our expei'ience has shown 
 that fully ; and therefore the only way to maintain our silver coin at 
 par in currency is to limit the amount by the law of demand and sup- 
 ply. That will at least keep United States notes and fractional cur- 
 rency always at par in silver, and will not prevent the notes from rising 
 above it when the people become satisfied that we are about to redeem 
 or are preparing to redeem them in gold. Therefore the Committee 
 fixed on the amount of $20 as a fair compromise. I woiild greatly 
 prefer to reduce it to $10 ; but I am willing to vote for $20. It is 
 manifest that to make it $50 would entirely destroy "our gold revenue, 
 and probably cause the exportation of gold and reduce me volmne of 
 gold in the country. 
 
 It is objected that this measure is the entering wedge for the double 
 standard ; and very good men, specie-paying men, have made this ob- 
 jection, and it is therefore proper to answer it. I reply that we have 
 always had a double standard, and generally to a greater extent than 
 this bill allows. Until three ycara ago the dollar was a full legal tender. 
 Since that time tlie United States liave contracted no debt, and every 
 existing debt could have been paid in dollars of that standard. Does it 
 injure any man to rostoro it now and limit its legal-tender quality to $20 ? 
 
FRACTIONAL CUEEENOY-SILVER COINAGE. 535 
 
 "We are asked, then, why was the old dollar omitted in the act of 
 1873 ? I answer that it was omitted practically by the act of 1853 by 
 being undervalued. It was formally omitted from the silver coinage 
 by the act of 1873 because it was then too valuable for circulating coin, 
 and the Spanish milled dollar was replaced with a commercial coin. Is 
 there any reason why it should not be restored now when we can use it 
 as an agency for the redemption of United States notes ? 
 
 It is said that a silver coinage is in the interest of silver bullion and 
 those who produce it. Certain Senators have even been designated in 
 the House of Eepresentatives as owners of bullion in the West ; " sil- 
 ver-clad Senators," I believe, has been the expression. I hope it will 
 be a benefit, not only to the producer of the silver, but to the people 
 who use it as money. I have always supported the policy of encour- 
 aging the production of iron, wool, and fabrics. Why not also of sil- 
 ver? The most common and the meanest of arguments against a 
 measure is that it will help somebody. I am quite sure that this will 
 help the body of the people ; and that is the only interest I have in it, 
 certainly. 
 
 But, sir, the House of Representatives has also made the silver coin 
 a tender for duties and interest on the public debt. I do not think it 
 is necessary to waste much time about that. Our duties are by law 
 made payable in gold and are set aside as a sacred fund to pay the in- 
 terest on the public debt and to provide for a sinking fund. 
 
 The House of Eepresentatives did not intend to interfere with our 
 general law by which the customs duties are collected in gold to be 
 used in redeeming our promises, the change only being paid in silver. 
 And, sir, any intimation by Congress, any effort by Congress to impair 
 the public debt, or to prevent its full payment in gold coin, would, in 
 my judgment, do more harm than all the silver that can be issued 
 under this or under any other law can do good. Anything that tends 
 to destroy the public credit or the confidence of the creditors in our 
 willingness and ability to pay, depreciates the value of our bonds, and 
 brings them back to us for payment or for sale, and will prevent us 
 from funding our debt at a lower rate of interest and availing ourselves 
 of our present excellent credit. Therefore I hope in this debate there 
 will be no suggestion which in the mind of the most timid man can 
 induce a fear that we shall avail ourselves of the present circumstances 
 to pay his bond in anything but gold coin. Therefore we except cus- 
 toms duties from the operation of even the limited legal-tender quality 
 of the silver dollar here provided. The same reason applies also to the 
 interest on the public debt, with this additional reason, that the bill as 
 it stands now discriminates against holders of bonds in small amounts. 
 For instance, a man owns a thousand-dollar bond ; he could be paid his 
 interest in silver dollars, for it is less than $50 in one payment ; while 
 the capitalist abroad who collects his coupons through a bank presents 
 them in hundreds and thousands, and must be paid in gold. I take it, 
 therefore, and I have no doubt, that it was not the intention of the 
 House to interfere with the law in this respect. 
 
 As to the legal-tender quality of the trade dollar, I have already 
 pointed out the necessity of changing it or of abolishing the trade dollar 
 
536 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 entirely. I was rather disposed for one to abolish it, because we have 
 two dollars so nearly like each other. But as a matter of course the 
 people who have built up a trade on the trade dollar ought not to be 
 deprived of it, except for some good reason ; and we have required, in 
 our amendments, that the trade dollar shall be so different in its devices 
 and emblems that it can be readily distinguished from the other dollar. 
 
 The trade dollar was only intended as a commercial dollar, as a con- 
 venient mode of coining silver bullion for the benefit of depositors. It 
 was a legal tender to a certain extent, but it is no harm to the holders 
 to change that ; and it is entirely within our power to do so. These 
 trade dollars are worth more in China than tney are in the United 
 States to-day ; so that as a matter of course the holders will have the 
 benefit of the China market, and, as they are worth more than the 
 legal-tender dollar here, everybody will take the trade dollars for the 
 other dollars. The trade dollar is worth three or four per cent, more 
 than the silver doUar. 
 
 Mr. President, some objection might have been made to this bill if 
 we had authorized the Secretary of the Treasury to issue bonds to buy 
 the bullion to make these doUars, but we did not. On the contrary, 
 we simply carry into effect the spirit of the law of 1862, which author- 
 ized the sinking fund to be used in payment of any portion of the 
 public debt ; and, to the extent that the sinking fund can be used to 
 buy bullion and coin silver dollars with which to redeem fractional 
 currency and redeem United States notes, it may be used. That is a 
 wise provision at all events, because now our bonds are so exceptionally 
 high that under the sinking-fund law the Secretary, in buying bonds, 
 must pay eighteen per cent, premium, when there is a debt which must 
 some time be paid in coin, which he will be at liberty under this bill 
 to bioy in silver, extinguishing it and adding it to the sinking fund. 
 
 Now, Mr. President, I am afraid I have wearied the Senate, but I 
 have gone through this matter simply as a business matter. The ex- 
 change of silver coin for silver bullion is a profit to the Government 
 of the United States. On the issuing of sUver dollars the profit is 
 several per cent. ; on the issuing of subsidiary coin it is six per cent, 
 more ; and this profit more than pays all the expenses of the mints and 
 saves all the expense of printing fractional currency. The actual profit 
 under this law will carry into the Treasury a surplus over all the ex- 
 penses of the mints. 
 
 There are but two things more that are needed to make this bill, in 
 my judgment, a complete financial measure. They are, firet, to author- 
 ize any liolder of greenbacks to convert them at will into a United 
 States bond. Would to God that we had the courage now, without 
 regard to party, to do this and give to every holder of these notes of 
 ours the right at his pleasure to convert tnem into a four per cent, 
 bond running forty years 1 No considerable amount would be convert- 
 ed, in tlie present state of the market. Some would be. Those per- 
 sons desiring a perfectly safe and long investment might convert their 
 notes into four per cent, bonds in small sums ; but as credit rises, and 
 it is rising every day, these four per cent, bonds will advance to par in 
 gold. "Wnat I would desire next is to authorize the Secretary of the 
 
FRACTIONAL OUREENOY— SILVER COINAGE. 537 
 
 Treasury to convert our six per cent, bonds into four and a half per 
 cent, thirty-year bonds. A bill has passed the Senate for that purpose, 
 but yet sleeps in the House. Then authorize the holder of the notes 
 to convert them at will into a four per cent, forty-year bond and 
 there stop, aiid you will reach specie payments without a ripple on the 
 cm'rent. These two bonds would approach each other in value ; the 
 notes would gradually be retired; silver would take their place — its 
 natural place in the currency of the country. We are producing the 
 silver, and our own products would be converted into our currency. 
 Then our notes would gradually rise to par in gold. Then the circle 
 of the rebellion, or the revolution, as our Southern friends may call it 
 — I prefer to call it by the old-fashioned name — would be finished. 
 
 As soon as greenbacks were at par with gold I would keep them 
 afloat ; but that is not in this bill. I merely allude to it in passing. 
 
 There is another object that could be desired, and I think if the 
 United States would now lead off in it, it would undoubtedly bo accom- 
 plished ; that is to establish by international convention a unit of money 
 of accounts, both of gold and silver. Advances have already been 
 made to this Government by Great Britain, and a proposition is now 
 pending looking to that end ; and there is no doubt whatever that Ger- 
 many would be glad to enter into the international relation that was 
 proposed in 1867, and which she then defeated and rejected. The 
 difficulties and embarrassments in which Germany is now involved from 
 the unforeseen effect of her own measures would make her eager to 
 enter into a general monetary union or the extension of the Paris con- 
 ference so as to make everywhere fifteen and a half ounces of silver 
 equal to one of gold among all the nations of the world ; to limit silver 
 coinage to the token coinage or small change of the people, and to 
 make gold the standard of value. By a convention between the lead- 
 ing nations, including Great Britain, France, Germany, Russia, and the 
 United States, which must find the gold and silver to carry this arrange- 
 ment into effect, you would have a monetary unit, and would then oe 
 free from the oscillations that we have met in our whole history, in 
 which gold and silver disappear by turns, destroying the value of con- 
 tracts and deranging monetary affairs. 
 
 Sir, I do not hope to accomplish these things now ; but I see in this 
 bill an opportunity to accomplish some good ; and I believe that true 
 statesmanship consists in doing the good you can, without seeking the 
 unattainable, and thereby doing no good at all. Here we have an 
 opportunity to monetize a portion of our silver product ; to redeem a 
 portion of our United States notes ; to come back toward specie pay- 
 ments — all in the right direction. And the fact that this bill does not 
 accomplish aU I desire is no reason why I should delay, oppose, or 
 antagonize it. 
 
538 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 LEGAL TENDER OF SILVER COIN. 
 
 IF THE SENATE, JUNE 8, 1876. 
 
 The bill to amend the laws relating to legal tender of silver coin being under 
 consideration, Mr. Sherman said : 
 
 Me. Peesident: I wish very briefly to call tlie attention of tLe 
 Senate from all the various topics that nave been discussed since this 
 bill was introduced, to the consideration of a smaU measure, intended 
 to meet a temporary necessity, and which has given rise to a very ex- 
 traordinary debate. 
 
 This bill proposes to restore the old silver dollar, and with that dol- 
 lar, and the subsidiary coins of the United States, to redeem the United 
 States notes and fractional currency. The dollar to be restored is the 
 same that had existed from 1T92 to 1873 ; and the subsidiary coins to 
 be issued are the same in form and value as have been issued since 
 1853. I have, in my remarks made on the Hth of April last, iheady 
 given the history of these silver coins and stated the relation of silver 
 and gold to each other, not only in the United States, but in the coun- 
 tries with which we have the most extensive commercial intercourse. 
 The Senator from Nevada [Mr. Jones] has also, in more detail, and 
 with greater fullness of illustration and authority, presented the impor- 
 tant questions of the double standard, with the reasons why, in the 
 United States especially, silver and gold must both be standards of 
 value. I will not therefore repeat those arguments, but confine my- 
 self to the two main propositions contained in this bill, and then show, 
 if I can, that it is not wise public policy to adopt the full silver stand- 
 ard proposed by the Senators from Nevada and Missouri, nor to go 
 further than is proposed by the Committee on Finance. 
 
 The two mam questions are : 
 
 First. Shall silver coin be exchanged for United States notes as 
 weU as for fractional currency ? And, 
 
 Second. Is it wise to recoin the old silver dollar with a view to ex- 
 change it for United States notes ? 
 
 The bill as reported embodies both propositions. It is purelv a 
 voluntary process. No one need surrender his notes for coin unless 
 he wishes to do so. We do not take advantage of a public creditor, 
 to force upon him silver coin, for we have given him the assurance of 
 positive law that we will, on the 1st day of January, 1870, pay all 
 notes or demands against the United States in coin. Wc cannot, or 
 rather public sentiment will not allow us to, pay in gold coin sooner 
 than this. By this bill we authorize the Secretary of the Treasury, to 
 the extent of the sinking fund, to pay silver coin to the holder of our 
 notes, in exchange for them if he dft'iiiands it. In spite of all that Ijas 
 been Haid about the depreciation of silver, and of our coin being worth 
 loss than United States notes, we know there is nn eager demand for 
 silver coin. The long lines of people awaiting their turn at the doors 
 of your custom-houses show an anxious desire to surrender your 
 promincH for bright, shining coin. The instinct of the people, more 
 
LEGAL TENDER OF SILVER COIN. 539 
 
 •wise than the calculations of the broker, assures them that hard money, 
 real money, the result and the representative of labor, is more desir- 
 able than a promise to pay money, and especially a promise that may 
 be broken, changed, evaded, or postponed. 
 
 By the law as it stands, only one kind of paper money — fractional 
 currency — ^is redeemable in silver coin. United States notes, although 
 based upon the same promise — and of the same or more intrinsic value 
 than fractional currency because they are a legal tender for all sums — 
 are not redeemable in silver coin. Therefore fractional currency is 
 this day more valuable than United States notes. The first effect of 
 the issue of silver coin is to advance the value of fractional currency. 
 In like manner will this bill, if it passes, advance the value of United 
 States notes. It will be resumption of specie payments in silver. It 
 wiU tie our promises to pay to the solid basis of a metal which has 
 always been a standard of value, is now, and ever will be ; and which 
 can vary only in a comparatively slight degree from the more precious 
 metal, which is now and ever will be the highest standard of value. 
 
 Now, sir, it is admitted that we are able to pay a portion of our 
 indebtedness. Indeed, a specific fund, termed the sinking fund, to- 
 
 f ether with the accumulation of interest thereon, has, by a law of the 
 ighest sanction, been set aside, to pay, annually, one per cent, of our 
 entire debt ; and this annual sum is to be taken from our customs du- 
 ties. "What class of our debt ought to be annually paid is purely a 
 question of public policy and interest. "We have heretofore ap- 
 plied the sinking fund to the reduction of our bonded debt ; but this 
 debt is now so valuable that it is worth eighteen per cent, more than 
 United States notes and five per cent, more than gold. It is there- 
 fore manifestly our interest to apply this fund to the payment of 
 United States notes, and this we can now do, not only with the assent 
 but upon the demands of the holders of these notes. "Why upon this 
 demand ? I answer, upon what ground of honor or interest can we 
 refuse to pay notes now due, while we are using large sums to pay 
 bonds not due ? They pay a large premium for our bonds, which are 
 worth more than gold, while we refuse to pay our notes now due, and 
 which are daily quoted at a depreciation of twelve to fourteen per 
 cent. "Whatever other reasons are given for this anomaly, we can not 
 pretend that we are not able to pay these notes, while we are paying 
 out thirty millions a year in gold to buy bonds not yet due. 
 
 'Not can we refuse to pay silver coin for our notes on the ground 
 that silver is depreciated as compared with gold. That is a question 
 for every holder of our notes to determine for himself. When he 
 demands silver, it is idle, yes, dishonorable, to say : " 0, we will not 
 pay you silver, because it is not worth as much as our notes. "Wait 
 until 18Y9 and we will then pay you gold." Every market-woman in 
 the land knows that the reason for youj refusal is false. She may well 
 say she will not trust in your promise to pay gold three years hence 
 if you win not pay silver now when you can. All objections to this 
 bill, based upon the pretension that payment in silver is unjust to the 
 note-holder, are the merest sham, unless you are now prepared to pay 
 him in gold. ITe is the best judge of what he will take in payment, 
 
540 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 and he wants and demands the siloer now. And this is a sufficient 
 answer to all arguments about the note-holder. When you redeem the 
 note you can do with it what you please. You may burn it, or replace 
 it, or reissue it, or whatever else you have the power to do with it. 
 But the man who holds it now has your promise to pay ; and if you 
 refuse to pay him gold it is for him to say whether or no he will 
 take silver. Will you give him the option ? If this question were 
 to be decided by considerations of public honor or public faith, no 
 one could doubt what the decision would be. But I propose now to 
 discuss it upon the basis of interest, upon the narrowest basis of com- 
 mercial trafhc ; and by this sordid view, as well as by the more exalted 
 one of public honor and public faith, it is manifest that it is for the 
 interest of the United States now to redeem with silver coin such por- 
 tion of the notes of the United States as the holders thereof may choose 
 to exchange for them. 
 
 And, first, it is the cheapest mode in which we can pay our notes. 
 One dollar of the subsidiary silver coin of the United States contains 
 385-8 grains of standard silver, worth to-day about eighty-four cents 
 in gold, or ninety-five cents in United States notes. It needs no logic 
 to show that the Government makes money by the exchange of this 
 dollar for a United States note. And yet no injury iB done to the 
 holder, for the exclusive power of the United States to coin money has 
 imparted to the silver in the coined dollar additional value, which 
 makes the holder eager to accept it for his promise-dollar. The mar- 
 ket value of the silver in the dollar provided for in this biU is now not 
 only equal to that of the United States note, but it is of intrinsic' valiie ; 
 and, even though the note may rise in value, the silver doUar will keep 
 pace with it. The Government pays its debt, and yet replaces its note 
 with a real dollar, which takes the place in circulation of the paper 
 dollar, and does not have to be paid when resumption comes. 
 
 Not only is payment in silver coin the cheapest mode of redeeming 
 our notes, but it strengthens us for full resumption in gold. It not 
 only lessens the amount of notes to be maintained at par with gold, 
 but it scatters among the people a large amount of silver coin, which, 
 without reserve or aid from the Government, will, from its intrinsic 
 value, maintain itself at par with gold. And this quality of silver coin 
 does not depend upon its being a legal tender, but upon its intrinsic 
 value, and its indiepensable use among all classes of people for change, 
 and for the payment of labor and the purchase of family supplies. As 
 I showed the other day, not less than $2.50 per inhabitant, of silver 
 coin of less intrinsic value than ours, is maintained at par with gold by 
 Great Britain, France, and Germany. The United States, before the 
 war, maintained at par with gold more than fifty millions of the very 
 silver coin this bill provides for. No one inquired how much this coin 
 cost the United States, but they knew it passed everywhere, and was 
 as good anywhere as gold coin. So now, with our increased population 
 and business, it is manifest that seventy-five millions or more of this 
 fdin can be maintained at ])ar witli gold after we shall have reached 
 the full gold standard ; and this amount is about as much as can be 
 issued under this bill. The obvious effect of substituting silver for 
 
LEGAL TENDER OF SILVER COIN". 541 
 
 paper money will be to appreciate the purchasing power of the remain- 
 ing mass of paper money. Who does not see that the reduction of the 
 aggregate of paper money to three hundred millions strengthens us 
 for the duty of maintaining it at par with gold ? 
 
 Sir, silver resumption iS better now than gold resumption ; for 
 silver money will now circulate with paper money, while gold will not. 
 Silver money, in intrinsic value, is so near paper money that it will 
 freely circulate, while gold would at once be hoarded. Even if silver 
 money were of the same intrinsic value as gold, it ought to be put 
 freely into circulation before gold. It must always be the specie of 
 the people, which gold is not. Silver resumption must precede gold 
 resumption. We now but avail ourselves of the present depreciation 
 of silver bullion to prepare the way for gold resumption, it appears 
 almost as a. providential dispensation to enable us to follow the path 
 of safety and honor. If we do not avail ourselves of this opportu- 
 nity, we shall be blind to every instinct of a statesman and a patriot. 
 
 Again, sir, there is a popular instinct which we may call the " in- 
 stinct of hoarding," which impels the provident classes of every na- 
 tion and tribe of men to hoard the precious metals as the safest form 
 of wealth, either to gratify avarice or to prepare for immediate or 
 approaching wants. This instinct is as well gratified by hoarding 
 silver as gold. For this reason, and for this reason mainly, a larger 
 amount of silver coin will be hoarded than of fractional currency. 
 The currency is perishable ; it is subject to loss by fire and water. 
 But silver coin can neither be burned by fire nor perish by water, 
 and the common instinct of humanity will cause it to be held, while 
 the fractional currency will be paid out. The silver is the people's 
 resource, and will be paid out and circulated when the necessity for 
 it arises. For these reasons we must provide for a much larger amount 
 of this coin than experience has proved to be sufficient for fractional 
 currency. 
 
 Again, sir, this bill will relieve us from the possibility of a dearth 
 of change, by authorizing the exchange of silver coin for United States 
 notes. It is manifest that, by limiting this exchange to fractional cur- 
 rency, we have given an artificial value to such currency. The hoard- 
 ing of this currency for the purpose of obtaining silver coin may create 
 a serious want of small change. It is this anticipated scarcity that the 
 House of Representatives has attempted to guard against by a bill now 
 pending in that body. This difficulty is at once obviated in the present 
 bill, by placing both notes and currency on an equal footing with silver 
 coin, and thus lifting all gradually to the gold standard. The object of 
 the law now in force is to put silver coin in circulation as a substitute 
 for fractional currency. If, however, the coin can be exchanged direct- 
 ly for the fractional currency only, one or the other species of change 
 will be demonetized or held for a premium during the process ; but if 
 silver coin can be had at will for either greenbacks or fractional cur- 
 rency, the purpose of the law can easily be effected. Things that are 
 equal to the same thing are equal to each other. The difficulty of a 
 direct exchange of commodities first caused the use of money. While 
 we have paper money we can only -circulate that of the lowest market 
 
642 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 value. Even a temporaiy demand for fractional currency causes it to 
 be hoarded. Brokers all over the country are oflEerinff a premium for 
 fractional currency, in order to obtain silver coin. Even in this city, 
 where fractional currency was most abundant, it is advertised for at a 
 premium. Besides, we must provide more silver money than we now 
 have fractional currency, for the reasons already stated, and we must 
 therefore exchange it for United States notes as well as for such cur- 
 rency. 
 
 And, sir, the substitution of silver coin for United States notes 
 meets and allays the fear of " contraction " that has been the direful 
 cause of our long delay in approaching the specie standard. Reason 
 about it as you will, you can not persuade the people long to endure the 
 process of contraction, even to secure the acknowledged good of a 
 specie standard. How often do we hear people say they desire specie 
 payments, but not through contraction ! They wish to get well, but do 
 not like the medicine offered. They are in favor of the Maine liquor 
 law, but are opposed to its execution. They want to get well by natu- 
 ral processes. AVell, now, the silver opportunity offers ; silver can be 
 substituted for paper without contraction. Both wiU circulate together, 
 because their marlset value is near each other ; and we have the silver 
 bullion and the sinking fund, amply sufficient to sustain the process of 
 exchange. By providing a market for silver we advance a domestic 
 product, and by reducing the amount of paper money we approach and 
 prepare for full resumption. The silver will circulate equally with the 
 paper. To the extent that it is hoarded or exported there maybe some 
 contraction ; but it will not be hoarded or exported largely when issued 
 in sufficient quantities to meet the demand for it, and this bill provides 
 for either hoarding or exporting, by authorizing the issue of silver coin 
 in exchange for silver bullion. ll, then, there is a demand for silver 
 coin greater than can be met by the surplus fund at our disposal, it can 
 be had for the silver bullion of private persons, which can be promptly 
 converted into coin. 
 
 The bill reported by the Committee on Finance thus provides for 
 an immediate resumption of specie payments in silver com, and thus 
 completes the first and most difficult step of the problem. It neither 
 disturbs nor deranges business, nor stirs up the phantom of contraction. 
 It is in exact accordance with existing law, and leaves the silver coin, 
 as now, a subsidiary coin, a legal tender only in limited amounts. 
 
 The next question presented by this bill is, shall we restore to our 
 silver coinage the old silver dollar ? And here I am met by the objec- 
 tions of the Senator from Vermont ; but his objections are rather to 
 the amendments proposed by the Senator from Missouri than to the 
 report of the Committee. The Committee propose the silver dollar, not 
 as a legal tender for gold contracts, but only as a tender for cuiTency 
 contracts not exceeding twenty dollars in any one payment. I would 
 
 {)refer to leave the silver dollar to stand upon its intrinsic value as a 
 egal tender, the same as the smaller coin. But there is no injustice in 
 enlarging the limit to twenty dollars, and, but for the reasons I will 
 state ncreafter, there is no injustice in making it a legal tender for all 
 currency contracts. Tlio silver dollar has that intrinsic value which, in 
 
LEGAL TENDER OF SILVER COIN. 643 
 
 all periods of our history, has made it a favorite coin, not only for do- 
 mestic uses but for exportation. It furnishes silver bullion in a shape 
 and form more convenient for handling than any other form of coin. 
 I fell into a common error in the debate, a few days since, in saying 
 that this doUar had not been issued since 1 853. Official reports show 
 that it was issued in considerable quantities until it was demonetized 
 by the coinage act of 18T3. From 1870 to 1873 there was issued in 
 silver dollars, by the United States, $^,336,348, at par with gold, and 
 at a time when specie payments were suspended and silver circulated 
 only in the Pacific States and Territories ; and, since the trade dollar 
 was substituted for the old silver dollar, there had been issued up to 
 April 30, 1876, of trade dollars, the large sum of $14,912,350. These 
 are mainly for export, but many were and are held for circulation in 
 this country. "When the old silver dollars are issued at par with United 
 States notes, a large amount of them wiU be taken as a reserve by the 
 people, to meet future needs, with or without a legal-tender quality. 
 As their issue is not peremptory, and the aggregate amount can not 
 exceed the surplus revenue or sinking fund, there is no danger of an 
 over-issue, while their existence among the people wiU constitute the 
 best reserve when gold alone becomes the fall standard of value. 
 
 Every argument already mentioned in favor of subsidiary silver 
 coin is equally potent in favor of the silver dollar. It will be eagerly 
 taken in payment of United States notes. It is purely a volimtary ex- 
 change. It is the cheapest mode in which we can redeem these notes. 
 It is specie resumption in the old, time-honored standard of silver dol- 
 lars of full weight and fineness. It wiU accustom our people to distin- 
 guish between the real dollar that pays where it goes and a paper dollar 
 which only promises to pay. It will prepare the way for full resump- 
 tion in gold. To the extent proposed by the Committee, and to be used 
 as a purely voluntary approach to a full specie standard, it is open to no 
 objection or criticism, and should be assented to by gentlemen who 
 have differed with each other on the present resumption law, or on the 
 merits and dangers of contraction and expansion. Why is it, therefore, 
 that we can not pass this bill without introducing controverted proposi- 
 tions, which, if they do nothing else, will delay and endanger the 
 'measure ? This biU, as reported, would by this time have become the 
 law of the land, but for these amendments ; and as we can not act upon 
 the amendments without a long debate — ^now a sufficient cause to defeat 
 almost any bill — it is in the power of any Senator, under our rules, to 
 defeat this desired legislation by urging controverted amendments. It 
 is sufficient now to justify voting against these amendments to say that 
 they endanger, even by delay, the passage of the bill. 
 
 I must appeal to the good sense of the Senators from Missouri and 
 Nevada not to embarrass this bill, the purpose of which they approve, 
 by urging amendments that raise new and antagonistic difficulties likely 
 to defeat its passage, or which, if adopted, wifl demonetize gold, not 
 only in private transactions, but in the payment of customs duties and 
 the public debt. They present the most difficult problem of political 
 economy and raise the most delicate questions affecting the public 
 credit, and at a time, too, when, above aU others, we ought not to at- 
 
544 SPEECHES AND REPORTS OF JOHN SHERMAN.- 
 
 tempt to decide them. At this time, when we can not pay our debt in 
 gold or silver, and when the relations between gold and silver are un- 
 naturally affected by the recent movements in Europe, and when it is 
 impossible to fix their precise relations to each other, it is exceedingly 
 inopportune to consider or decide any radical changes in the existing 
 law. Ever since 1853 silver coin has been practically a legal tender 
 in payments amounting to five dollars only, and yet it haft been main- 
 tained, in very large sums, at par with gold. Why disturb this law ? 
 Ever since the present debt of the United States was contracted, we 
 have scrupulously' paid its interest in gold coin. To enable us to do so, 
 we have collected our revenues in gold coin, and we have ample means 
 to continue to so pay the interest. To now claim, on any pretense 
 whatever, the right and propriety of paying this interest in silver coin, 
 when the whole amount of silver coin that could be issued in three 
 years would not be sufiicient to pay the interest for a single year, would 
 create a revolution in our public credit, without any benefit whatever. 
 The serious effect of such a proposition upon our national character or 
 credit can not be measured in dollars and cents. 
 
 Again, sir, if you undertake to pay your interest with silver coin, 
 you must pay the whole of it with such coin. You can not discrimi- 
 nate. You can not pay the large holders of your securities with gold 
 and the small holders with silver. The great body of your interest is 
 paid to banks and bankers, even when the b!)nds are the property of 
 private individuals. You have gold to pay with, but you have no 
 coined silver, and can not have enough in three years; and the same 
 objection applies to customs duties. For small sums, and as change, 
 the duties may be received in silver ; but the supply of such coin is 
 not, and can not be, sufficient for some years to come, to pay the duties 
 collected. The ultimate effect of such a proposition would be to give 
 an artificial value to silver bullion and silver coin with which to pay 
 duties ; while its immediate effect will be to demonetize both gold and 
 silver coin, and to segregate it from our current money, as gold is now 
 segregated for the purpose of paying duties. It is manifest, therefore, 
 that if we mean to collect our customs duties and pay our interest in 
 silver coin, we must postpone the operation of such a law until we have 
 such coin in quantities sufficient to conduct the business, and by no 
 possibility could this be done in less than four years. The amendment, 
 then, as it is proposed, would have no effect whatever, except to take 
 from the people the silver coin they now have and hope to receive, and 
 to cause it to be held like gold in New York, to pay duties. The Gov- 
 ernment would not and could not pay it out for fractional currency 
 and United States notes, when it would be at once boudit up by bro- 
 kers for its peculiar property in paying customs duties. This objection 
 is clearly fatal, for years at least, to me amendment proposed by the 
 Senator from Missouri ; but there are other reasons why such a proposi- 
 tion ought not to be entertained. 
 
 The public debt was contracted, and the interest to be paid was 
 agreed upon, with the universal understnndiiifi; that the coin stipulated 
 for was gold coin. At tliiit time all the aih'cr in circulation was limited 
 in its legal-tender quality to five dollars in any one payment. And 
 
LEGAL TENDER OF SILVER COIK 545 
 
 « 
 althotigli, by the act of 1853, the old silver dollar was not demonetized 
 in terms, it was not issued, and no human being then contemplated the 
 payment of principal or interest of the debt m silver coin. In fact, 
 during the whole period, from the contraction of the debt up to and 
 after, the year 18Y3, when the silver dollar was demonetized, it was 
 worth more than the gold dollar. No one then foresaw or Tiad reason 
 to believe that it would become less valuable than gold. Its great de- 
 preciation grows mainly, if not exclusively, out of the action of for- 
 eign governments in dealing with their coin. To now make the silver 
 dollar a legal tender in payment of the interest of our debt would not 
 only be impracticable, as I have already shown, but it would be uni- 
 versally regarded as a violation of good faith, and would destroy the 
 confidence with which the commercial world now regarded our public 
 securities. The silver dollar was, it is true, a legal tender until 18Y3, 
 and, in strict law, might be restored to its former position as a standard 
 of value, without a violation of the legal contract between the United 
 States and the bond-holder. But, sir, the evil effect of such a measure 
 upon the value of our public securities would far outweigh any advan- 
 tage to be gained by the difference between the payment of the inter- 
 est on our public debt for two or three years in silver rather than in 
 gold. For over forty years, since 1834, the silver dollar, though in law 
 a money of account, was, in fact, demonetized, because it was more 
 valuable than the gold dollar. It was for this reason alone that the sil- 
 ver dollar was dropped from our coinage system. This is clearly stated 
 in a report to the Senate by Mr. Knox, Comptroller of the Currency, 
 dated April 25, 1870. 
 
 I read from his report as follows : 
 
 The- coinage of the silver dollar piece, the history of which is here given, is dis- 
 continued in the proposed bill. It is by law the dollar unit, and, assuming the 
 value of gold to be fifteen and one half times that of silver, being about the mean 
 ratio for the past six years, is worth in gold a premium of about three per cent, (its 
 value being |1-0312), and intrinsically more than seven per cent, premium in our 
 other silver coins, its value thus being $1-0742. The present laws consequently 
 authorize both a gold-dollar unit and a silver-dollar unit, differing from each other 
 in intrinsic value. The present gold dollar piece is made the dollar unit in the pro- 
 posed bill, and the silver dollar piece is discontinued. If, however, such a coin is 
 authorized, it should be issued only as a commercial dollar, not as a standard unit 
 of account, and of the exact value of the Mexican dollar,* which is the favorite 
 for circulation in China and Japan and other Oriental countries. 
 
 This report was the beginning of the voluminous documents which 
 led to the revision of the mint laws of 1873. The proposed act was 
 subjected to the greatest scrutiny. I have here a document of one 
 hundred pages, containing suggestions and criticisms of experts, several 
 of whom suggest a substitution of the Mexican pillar dollar, or a trade 
 doUar, for the old dollar, and one of whom only, Mr. Patterson, of 
 Philadelphia, objected to demonetizing the silver dollar, and this for 
 the reason that, though " too valuable to be used as a circulating medi- 
 
 * Assuming the value of gold to be fifteen and one half times that of silver, the French 
 five-franc piece is worth about ninety-six and one half cents (96'4'784), the standard Mexican 
 dollar |1'0490 our silver dollar piece $1-0312, and two of our half-dollar pieces ninety-six 
 cents. 
 
 35 
 
646 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 • 
 Tim, yet it could be used for cabinets, or perhaps to supply some oc- 
 casional or local demand." (Executive Document No. 307, page 
 38.) No one was then wise enough to foresee or suggest that the 
 time would soon come when the old silver dollar would be less valuable 
 than gold. 
 
 The great revolution in the precious metals has occurred since ; and 
 now the practical question is, Shall we avail ourselves of the extraor- 
 dinary fall in silver to make the old silver dollar a f uU legal tender, 
 and thus reduce the market value of our bonds, which we are not 
 bound to pay, which are not due, and which we have not the ability 
 to pay ; or shall we improve the opportunity now offered us by an un- 
 foreseen event, to redeem our depreciated notes without loss, and with 
 the free and voluntary consent of the holders of them? Sir, this is the 
 choice presented to us. I say that not only public honor, but. public 
 policy, our interest, in the narrowest as well as in the broadest sense of 
 that word, points to the redemption of the United States notes. 
 
 To the extent that any of our creditors choose to take our silver coin, 
 we are at liberty to offer it ; but a compulsory payment in silver coin 
 is a very different proposition. Any attempt to enforce such payment 
 would fail. We have not, and can not have, the silver coin to make it. 
 The attempt would only bring upon us the discarded silver coin of 
 other countries, to be recoined with a view to pay it to the United 
 States in liquidation of customs duties, thus reducing the real value of 
 our customs revenue. Gold, being rejected by us, would be at once 
 demonetized, and the silver standard would alone prevail. I therefore 
 reject as inadmissible the amendment proposed, to make silver coin a 
 legal tender for customs duties or for interest on the public debt, and 
 regret exceedingly that it has been offered. 
 
 As to making the silver doUar a full legal tender for contracts be- 
 tween private individuals, very different considerations arise. All debts 
 contracted prior to 1 873 are payable, by the law then in force, either in 
 gold or silver dollars, or in United States notes. If contracts were 
 specifically payable in gold coin, they can be enforced in coin, what- 
 ever the legal tender may now be. The terms of the contract between 
 individuals must be the law between the parties, and the general law 
 only applies to contracts when the specific medium of payment is not 
 stipulated for. If a contract made before, 1873 was stipulated to be 
 paid in coin, it may imdoubtedly be paid in either silver or gold coin. 
 At that time, and for near forty years previously, payment would not be 
 tendered in silver dollars because silver dollars were worth more in the 
 market than gold ; but the legal option to tender silver coin existed 
 until 1 873, and until th^ revised code was adopted, which excluded the 
 old dollar from among the silver coins of the United States. 
 
 It is thus apparent that all contracts payable in coin, made prior to 
 187^^, are impttedl/y payable in gold coin, and that all coin contracts 
 made since 1S73 are Ugalh/ payable in gold coin only. I am not aware 
 that any considerable number of such contracts exists, but when they do 
 exist tl'iey should be governed by the precise law in force when made. 
 The contracts now existing in this country ai-e mainly either currency 
 contracts or those made specifically piayable in gold coin. The latter 
 
LEGAL TENDER OF SILVER OOIK 5i7 
 
 can not and ought not to be changed by law. Those payable iu coin 
 should be payable in such coin as was a legal tender when the contract 
 was made, and ought not to be affected by subsequent law. Such con- 
 tracts should be left to the agreement of the parties or the action of 
 the courts. Our laws ought to have effect upon the future only, and 
 not upon the past. Congress can coin money and regulate the value 
 thereof, but this great power should not be made the pretext for im- 
 pairing the obKgation of existing contracts. It is no answer to say that 
 this was done wien our present legal-tender act was passed. The con- 
 dition of the country then authorized, yea, demanded, the most extreme 
 measures, even to the confiscation of debts and property, in the form of 
 taxes. We know with what doubt and hesitation, and under what cir- 
 cumstances, the Supreme Court finally sanctioned the constitutionality of 
 the legal-tender act, as it afEected preexisting contracts. No one believes 
 it would sustain the exercise of such a power except as a measure of 
 war, over which Congress is invested by the Constitution with extraor- 
 dinary powers. As one of those who, in this Senate, asserted and voted 
 for the legal-tender act, I now say that I did it only under the shadow 
 of a supreme necessity, involving the national life ; and that it ought 
 not to be made the precedent for a retroactive legal-tender law, passed 
 in a time of profound peace, to change or affect existing contracts. 
 Our power should deal with the future ; and in passing laws for future 
 contracts, we are not embarrassed by questions of public faith or private 
 obligations, but by those of public pohcy. 
 
 Is it wise, then, at this time, as a question of public policy, to at- 
 tempt by law to fix the precise relation of gold and silver to each other, 
 and to make both metals a legal tender for all sums ? Or will it be 
 better to adhere for the present to the policy of a gold unit, with sub- 
 sidiary silver coins, limited in amount of issue, or in its legal-tender 
 quality, or in both ? 
 
 These two opposing policies have been debated here, but far more 
 extensively in every European country, and especially in the writings 
 of political economists. But, wherever debated, the action of modern 
 governments has, in all the great commercial nations, settled down 
 upon a composite policy — a coinage consisting of gold, as a unit, with 
 silver coins of somewhat less intrinsic value than gold, but kept at par 
 with gold, by a limit of the amount issued, or a limit of its legal-tender 
 quality, or by both. This policy was adopted by Great Britain in 1815, 
 by the United States in 1853, by the Latin nations in 1865, and by 
 Germany in 1873. Such policy is neither monometallic nor bimetallic. 
 The former demands a single standard of gold, and demonetizes silver ; 
 the latter makes both metals a legal tender for all sums. The objection 
 to the monometallic system is that it adds enormously to the value of 
 gold, by making it alone the metal in which all debts must be paid. 
 The objection to the bimetallic system is that, from the nature of 
 things, it is impossible to fix the true relation of silver and gold to each 
 other, and that, whenever either metal advances in value, however 
 slightly, such metal becomes demonetized, and flees the country. These 
 primary reasons have led to the composite system, which combines the 
 two metals — gold for large transactions and silver for small — ^the silver 
 
548 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 purposely reduced in value, but kept at par with gold by limiting its 
 amount, or otherwise. 
 
 Now, sir, it is perfectly obvious that, if we could in some way pre- 
 vent gold and silver from fluctuating in value in their relations to each 
 other, the double standard is the best, as giving the largest store of the 
 precious metals to draw upon ; and it is now proposed, oy international 
 treaties, to agree upon the relative value of these metals. In the absence 
 of such treaties, it is far wiser for us to stand by the composite system, 
 in force in the United States since 1853 ; and such is the basis of the 
 report of the Committee on Finance. We propose to retain, as now, 
 the ultimate unit of gold, in connection with a subsidiary silver coinage, 
 including the silver dollar ; to limit the legal-tender quality of such 
 subsidiary coinage ; and to provide that the amount to be issued shall 
 not exceed that of the sinking fund. The amendments offered propose 
 the adoption of the bimetallic system, with aU its uncertaiaties, at a 
 time when it has been rejected, or is being rejected, by all commercial 
 nations ; and especially at a time when the difference between silver 
 and gold is greater than it has been for two hundred years. The quan- 
 tity of silver required under the propositions of the Committee wm be 
 amply supplied through our domestic production and the sinking fund ; 
 while the amendments offered will bring to us for a market the rejected 
 silver of Germany and Europe, and will demonetize gold, not only 
 between individuals, but in payments made to the custom-house and to 
 the public creditors. 
 
 The time for this proposed radical change in our coinage is a truly 
 unfortunate one. The margin between gold and silver is now about 
 ten per cent, greater than the rate of 16 to 1 fixed by law. Nothing 
 is clearer than that, under the bimetallic system, the legal relation be- 
 tween the two metals should be as nearly as practicable the market rela- 
 tion. This is the theory of the system. The first step, therefore, in 
 adopting the new system should be to fix the legal relation of silver to 
 gold at 17^ to 1. But this step would defeat the primaay object of 
 making the present depreciation of silver the means of a voluntary 
 resumption of the specie standard. By the composite system this object 
 can be easily accomplished, and mav be heartily accepted by all classes, 
 without contraction or expansion of our currency. 
 
 Sir, without going further into this argument, already too greatly 
 protracted, I appeal to Senators charged with high duties at a critical 
 period of our financial history, not to press upon us extreme opinions, 
 but to hold fast to the progress we have made, and let us seize the op- 
 portunity offered us to make easy and straight the path now opened for 
 a specie standard, when gold and silver and notes — all alike of equal 
 value — will circulate side by side, and revive again the flagging industry 
 and enterprise of our people. To the one side I say that, if this bill 
 does not give you all the silver you want, it will in three years' time 
 give you all that will circulate at par with gold. To the other side I 
 say that, if this bill does not assure resumption in gold, it does provide 
 for resumption in silver, which the present law does not, and that it 
 moreover prepares the way for resumption in gold by laying a founda- 
 tion of silver coin, without which gold coin will never circulate, and 
 
DANGERS OF EE8T0EATI0N OF DEMOORATIO PARTY TO POWER. 549 
 
 never has circulated, in any country of the world. Let us lay the foun- 
 dation first, and the superstructure will come in due time. Both metals 
 are indispensable, but silver first. It is the granite rock of the money 
 superstructure. Let us lay well this foundation, and in due time the 
 golden dome will crown our work, and United States notes, redeemable 
 in gold and silver at the choice and demand of the holder, will be the 
 winged Mercury to do the business, and promote the exchange of the 
 products of human industry. Though the work is a great one, and the 
 difficulties in the way greater than Bunyan's pilgrim encountered, I will 
 not surrender my hope to see it accomplished. 
 
 DANGERS OF THE EESTORATION OF THE DEMO- 
 CRATIC PAETT TO POWER. 
 
 AT MARIETTA, OHIO, AUGUST 12, 1876. 
 
 Fellow Citizens : We are engaged in a political canvass that wiU 
 determine not only who shall be President of the United States for the 
 next four years, but the policy and principles that will guide his ad- 
 ministration. The contest will affect in a greater or less degree every 
 citizen of the United States. The choice is between the Republican 
 and the Democratic parties. The real question is. Shall the Demo- 
 cratic party be restored to power again, not with new principles and 
 leaders, but the Democratic party composed of the same elements as 
 before the war ? Sixteen years have passed away, and yet that party, 
 in soul, purpose, and policy, is the same as when at the close of Bu- 
 chanan's term it left the country crumbling into anarchy — a part war- 
 ring against it, and a part voting against it, and both factions teaching 
 that it was a mere confederation of States, too weak to enforce its own 
 laws, without power to protect its life, and subject to the veto of any 
 State that chose to withdraw from its power. 
 
 Its only hope for success now, as then, is in a united South com- 
 bined vrith factional and discordant elements in the North, including 
 the war-rioters of New York, the Sons of Liberty of Indiana, and the 
 thousands of men who follow its name without reason or principle. It 
 is a union of the men in the North who, in 1864, declared the war a 
 failure, and the rebels in the South who were then fighting to destroy 
 the Union. The South is to bring to the alliance increased political 
 power. Formerly its slaves were counted at three fifths of their num- 
 ber ; now, as freemen, they are counted as other citizens ; but, unlike 
 other citizens, though invested by the Constitution with the rights of 
 freemen, they are to be overawed and held down by violence and mur- 
 der, and their political power is to be wielded against their known will. 
 In the North the disloyal elements are to be reenf orced by malcontents, 
 produced by the inevitable discontents of political strife. Men disap- 
 
550 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 pointed in aspirations for office or ambition, or who exaggerate the 
 faults and failings of a Republican administration, wiU unite with the 
 Democratic party, and thus endanger all that we have won in our long 
 straggle for national liberty and unity. I do not underrate the severity 
 of the contest before us, but I come to you fuUy impressed with its 
 dangers and invoke you to consider them. 
 
 What will be the result of the restoration of the Democratic party 
 to power ? The first result wiU be a severe check to the growth of 
 Union sentiment — love of the Union. Since the Eepublican party 
 came into power our country has made great advances in strength and 
 unity as a nation. It was the fierce, patriotic fervor of the people of 
 the Northern States, the love of the Union, the love of country, that, 
 organized under the name of the Eepublican party, overcame in war 
 and at the ballot-box the Democratic party and secured us union, lib- 
 erty, and country. But for this the Democratic party would have com- 
 pleted its work ; it would have divided our country into two confedera- 
 cies, and planted the seeds of further division and anarchy. "We would 
 have had no broad country to love. Millions of men, women, and chil- 
 dren would still be bought and sold as slaves. Our rivers and moun- 
 tains and plains would have been divided by hostile lines. Hundreds 
 of thousands of brave men gave their lives to defeat this policy; and, 
 thank God, the Democratic party, North and South, both on the field 
 of battle and at the ballot-box, was defeated, and as a result our coun- 
 try is one and indivisible. The Mississippi flows through its whole 
 course, from its remotest source to the Gulf, under the flag of one coun- 
 try, and that our own. Thirty-eight States and eight Territories are 
 united in one nation, and its authority to make and enforce the laws 
 can no longer be denied. And now the very men who fought and 
 voted to break up this Union, under the same name and organization, 
 still calling itself Democratic, appeal to your generosity to inti'ust to 
 them all the great powers of the Government. They ask to administer 
 its laws, control its revenues, and mold its policy at home and abroad. 
 Both of their candidates, though living in the North, opposed every 
 measure of the war, all the movements to organize the army that beat 
 down the rebellion, and all the safeguards adopted to secure the results 
 of our victory. The men they would bring into the chief places of the 
 Government are those who led the rebel armies or who frowned and 
 complained in the North. The same States that passed and supported 
 ordinances of secession ai'e the main strength of this coalition. 
 
 If they succeed they will have accomplished by a restoration what 
 they sought to accomplish by a revolution. How will it read in history 
 if it is recorded that the American people took up arms and overcame 
 the Democratic party in order to save their Union, and when it M-as 
 saved restored the same party and the same men to power again ? Even 
 the spectacle of such a contest is a reproach to our patriotism and civil- 
 ization. Its success would have only one parallel in history, the res- 
 toration of Cliarles the Second in England after the people oi England 
 had beheaded his father and won their liberties under Cromwell. The 
 people of England could get rid of their restoration only by another 
 revolution ; and wo, by following their example, will involve our coun- 
 
DANGERS OF RESTORATION OF DEMOORATIO PARTY TO POWER. 551 
 
 try in a struggle as dangerous as tlie reigns of Charles the Second and 
 James the Second were to the people of England. "When the rebels 
 begin to make laws for us we shall learn how dangerous it is to intrust 
 our Union, our institutions, the liberty now enjoyed by all, to the cus- 
 tody and care of the very men who waged war against the Union, who 
 sought to overthrow our institutions, and who held in slavery four mil- 
 lions of our countrymen made free by our policy. 
 
 But it may be said that these rebels are not the Democratic party, 
 and it is the Democratic party that seeks to be restored to power. The 
 answer is that they would be the controlling element of the Democratic 
 party — the majority of it — who would furnish the majority of the 
 electoral votes for its success. Who controlled the Democratic party 
 before the war ? The very men who control it now. Why was it that 
 tens of thousands of IS'orthern Democrats swelled the ranks of the 
 Eepublican party in 1860 ? Because they would not submit to the 
 domination of the same elements that control that party now. But 
 who in the North will be their allies in this contest ? Who are Tilden 
 and Hendricks, and whom do they represent ? The very men who 
 held us in cheek and prolonged the war. The men who doubted, hesi- 
 tated, wavered, and finally proposed to surrender in 1864, when our 
 national life hung suspended by a thread. 
 
 But it is said there are brave men, patriotic men, and Union sol- 
 diers in the Democratic party. So there are ; and to them I would 
 appeal ; to their memory of our danger and victory. How few are 
 they in number; how feeble in influence in the Democratic party 
 compared to the number and influence of those who during the war 
 were open enemies or left-handed friends ! Where is their place on 
 the National Democratic ticket ? What voice of inspiration comes to 
 them from Tilden or Hendricks ? Do they tell us that the Demo- 
 cratic party has reformed or repents ? Where is the evidence of it ? 
 What principle does the Democratic party advocate now that it did 
 not then ? What has it done since 1860 to inspire confidence ? We 
 shall see after a while. No, fellow citizens, we have the seK-same 
 enemy to encounter, the same in heart, in purpose, and in principle, 
 under the same name and organization, but they have dropped the 
 rebel gray and assumed the Union blue. 
 
 As a foretaste of what is meant by a Democratic restoration, we 
 have now a Democratic House of Eepresentatives, where sixty men 
 who served in the rebel army or rebel Congress are making laws for 
 you. They are arraigning General Grant and other conspicuous lead- 
 ers of the Union army. They have turned out Union soldiers who 
 bear honorable wounds from petty ofiices to make room for rebel 
 officers. They have passed a bill to make Confederate officers eligible 
 for service in the army of the United States. The whole tone, con- 
 duct, and policy of these men are the same as when I was a member of 
 the House sixteen years ago. They talk about the " revolution," but 
 neither acknowledge its results nor respect the great changes in the 
 Constitution which we hoped had been secured by the war. Let us 
 see what will be the result if their power in the House is extenfied to 
 the Senate and the Presidential office. When the war closed, innumer- 
 
552 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 able claims against the United States were made from the lately rebel 
 States, and Congress in the most liberal spirit made provision for the 
 payment of all that by the weU-settled rules of civilized war could be 
 properly made against the United States. The oflScers of the Depart- 
 ments, the Supreme Court, the Court of Claims, and the Southern 
 Claims Commission were authorized to adjust and pay different classes 
 of claims, and Congress passed many acts for equitable relief ; so that 
 it may with safety be said that more than $100,000,000 was paid after 
 the war was over to citizens of the South for losses caused by the re- 
 bellion. But this extreme liberality only gave impetus to the presen- 
 tation of claims against the United States which if allowed would 
 double the national debt. These claims now endanger our whole finan- 
 cial system. I have here in iny hand a list of one hundred and forty 
 separate claims now pending in the Democratic House of Represen- 
 tatives, amounting to $1,582,269, every one of which is for injuries 
 caused by our army in rebel States during the war. Here is another 
 bin introduced in the Senate by Mr. Memmon, of ll^^orth Carolina, to 
 revive* the claims which existed in the South prior to April 13, 1861, 
 in favor of persons " who promoted, encouraged, or in any manner 
 sustained the late rebellion." These include postmasters, custom-house 
 oflBcers, and other agents of the Government, who at the beginning of 
 the war paid over to the Confederate States the balances due from 
 them to the United States. 
 
 At the close of the war, when every industry, employment, trade, 
 and production of the loyal States was heavily taxed to meet the enor- 
 mous cost of the war. Congress placed upon cotton a tax of three cents 
 a pound. This produced from 1863 to 1868 the sum of $68,072,088, 
 and was then repealed. It was substantially the only war tax paid by 
 the South, when the aggregate taxes collected in the loyal States was 
 stiU $400,000,000 a year. This tax was charged by the producer to the 
 consumer when the cotton was sold, and was scarcely felt by the planter 
 who raised the cotton. .And yet every year since there has been a 
 persistent demand for the refunding of this cotton tax, not to the men 
 who paid it, but to the States in which it was paid ; and as sure as fate 
 this tax will be refunded by the first Congress after the Democratic 
 party is restored to power. As our troops penetrated into the South, 
 cotton was seized on behalf of the United States as the property of the 
 enemy and much of it as the property of the Confederate States, and 
 the proceeds were covered into the Treasury. Over $21,000,000 was 
 thus covered into the Treasury, and of this fund the sum of §11,348,- 
 247 has been awarded and paid by the Court of Claims to every claim- 
 ant who had either legal or equitable title to the cotton, and the 
 remainder is now eagerly demanded by those who were open rebels, 
 but who now, as leading Democrats, hope to reclaim what they lost by 
 the war. I have in myriand fifteen different bills, now pending in the 
 Democratic House of Eepresentatives, to refund this cotton tax and 
 the proceeds of captured ;uid abandoned property, and to make easy 
 this wholesale raid on the Treasury of the United States. 
 
 And, fellow citizens, I have hero bills pending in that Democratic 
 House more wide-reaching still. Here is a bill introduced by Mr. 
 
DANGERS OF RESTORATION OF DEMOORATIO PARTY TO POWER. 553 
 
 Wilshire, of Arkansas, now pending before tlie Committee on War 
 Claims in the House of Kepresentatives. This bill provides : 
 
 That all citizens of the United States having claims against the United States 
 for stores or supplies taken or furnished during the rebellion for the use of the army 
 of the United States, including the use and loss of vessels or boats while employed 
 in the military service of the United States, may institute suit against the United 
 States for the adjustment and recovery of such claims in the District Court of the 
 United States for the district in which such stores or supplies may have been taken 
 or furnished, or such vessels or boats may have been used or lost. 
 
 Keflect a moment. All citizens of the United States, rebels as 
 well as loyal citizens, having claims for stores or supplies taken or fur- 
 nished during the rebellion for the use of the army, including the use 
 and loss of boats, may sue the United States, and recover the value 
 thereof. The loyal people must pay all the war taxes, submit to the 
 loss inflicted by rebel raiders, and then pay for all the forage taken by 
 our troops when within the rebel lines, for all the rails burned, aU the 
 corn, sweet potatoes, and turkeys consumed. Who that reflects upon 
 the supplies consumed by an army in an enemy's country during a 
 four years' war will not shrink from such a claim — a claim that could 
 be paid only by an acknowledgment that the war on our part was 
 unjust ? 
 
 But, fellow citizens, to complete our liability, I have here another 
 biU introduced by Mr. Eiddle, of Tennessee, and now pending before 
 the Judiciary Committee of the House, which, as it contains but a 
 single section, I will read in full, title and all : 
 Mr. Riddle, on leave, introduced the following bill : 
 
 A bill directing compensation to be allowed for the use and occupation of prop- 
 erty by the United States army during the late war. 
 
 Be it enacteA hy the Senate and House of Sepresentatives of the United States of 
 America in Congress assembled, That the Secretary of War be, and he is hereby au- 
 thorized to allow reasonable compensation to all citizens of the United States for 
 the use and occupation of their property by the United States army, or any part 
 thereof, during the late civU war, in the same manner and under the same regula- 
 tions as compensation is now allowed for quartermaster stores used by said army : 
 Provided, however, That the affidavit of the claimant, supported by the competent 
 testimony of any reputable citizen, shall be sufficient proof to establish the fact of 
 the use and occupation of such property by said army. But it is not the intention 
 of this act to limit the parties to the amount of proof herein specified; but other 
 and additional testimony may be taken to establish the fact of the use and occupa- 
 tion and the rental value of the property occupied. 
 
 JSTow, this bill directs the Secretary of War to allow and pay to all 
 citizens of the United States, rebel as well as loyal, a reasonable com- 
 pensation for the use of their property by the United States army or 
 any part thereof during the late civil war. Every camping-ground ; 
 every field of battle ; every march or retreat ; every tree cut down ; 
 every grain-fleld injured by any officer or soldier in our army — for each 
 and all of those are a part of the army — must be paid for at a reason- 
 able rate. Suppose a rebel Secretary of War, such as Tilden would 
 naturally select, should be armed with this authority, what countless 
 claims would be fastened upon the Treasury ! An intelligent writer 
 has estimated the amount covered by these two bills at $2,410,000,000. 
 Whether this be exaggerated or not, it is apparent that under such 
 
654 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 legislation the Treasury would be utterly bankrupt. We know from 
 the experience of the Southern Claims Commission the tendency to 
 swell such claims by perjury and fraud. The number of claims decided 
 by that commission was 9,222. The amount claimed was $19,263,- 
 437.51 ; the amount allowed was $3,057,894.09 ; the amount disallowed 
 was $16,205,542, and we now have proof that some of the claims 
 allowed were fraudulent and gi'ossly exaggerated. How will it be 
 when all the guards thrown about this tribunal and other officers and 
 courts authorized to pass upon claims shall be broken down and they 
 are filled by men in sympathy with the rebellion? But you may say 
 there is no danger of the passage of these biUs. I beg you not to be 
 deceived. A Democratic Congress and President would in all proba- 
 bility pass many of them, and extend widely and dangerously the jurisdic- 
 tion of all the courts and all the officers who pass upon Southern claims. 
 They would in my judgment refund the whole cotton tax. They would 
 extend to rebels the right now confined to loyal people to recover com- 
 pensation for provisions and quartermasters' stores. No one can mea- 
 sure the multitude and magnitude of such claims. 
 
 Remember, fellow citizens, that the late slave States have now 106 
 members of the House of Eepresentatives. The Northern States have 
 but 186 members. Every member from the South would be impelled 
 by the demand of his constituents to go to the utmost verge in reim- 
 bursing their losses from the Treasury of the United States, although 
 they brought these losses on themselves by their rebellion, as well as 
 inflicted upon us the loss of 300,000 lives and many thousands of mil- 
 lions of dollars. It requires only 41 Democratic votes from the North 
 by men who will be bound by party ties and influenced by party cau- 
 cuses to saddle upon the North the very damages we were compelled 
 to inflict upon open enemies who for four years waged an unrelenting 
 war against the national life. I could show you many votes where the 
 Democratic members and Senators almost in a body voted for the 
 very principles involved in these bills, and in some cases where bills 
 equally dangerous in principle were saved from passage only by the 
 veto of President Grant. I warn you, with all the sincerity of tmth 
 and honest conviction, against this palpable danger that wUl come from 
 the restoration of the Democratic party to powei*. The Republican 
 party and General Grant especially have guarded you thus far. We 
 secured a constitutional amendment to protect you from the assump- 
 tion by the United States of the debts incurred in aid of insurrection 
 or rebellion against the United States, and from the payment of any 
 claim for the Toss or emancipation of any slave. But Congress alone, 
 and, as I verily believe, the Republican party alone, can protect you 
 from the untold multitude and magnitude of claims for losses to per- 
 sons and property in the rebel States sustained by the rebels themselves. 
 
 And, fellow citizens, there is another danger that will come from 
 the restoration of the Democratic party to power -which does not 
 appeal to your pocket, but to a higlier sense of duty and obligation, 
 and that is our duty and obligations to the freedmen of the South. At 
 best their position m the midst of a large number of our race who can 
 not forget that these freedmen were lately their slaves is one of danger. 
 
DANGERS OF RESTORATION OF DEMOCRATIC PARTY TO POWER. 555 
 
 The wMtes of the South were as a rule disloyal ; the blacks almost 
 without exception were time and loyal. They have been emancipated 
 by our policy. We have promised them freedom and citizenship and 
 all the rights that freedom and citizenship imply. Even under a Re- 
 publican administration, animated with the strongest desire to protect 
 them, they have been the objects of murder, outrage, and wrong. No 
 language can describe the atrocities to which they have been subjected. 
 The story of the "Kn-Klux" and "White League "is an in;famous 
 chapter in the history of our civilization that can not be excelled in 
 cruelty and horror by the worst barbarism of any nation or age. I had 
 hoped that the firm suppression of these secret oath-bouiid conspiracies 
 of hell by General Grant, and the universal execration they excited, 
 would end forever their existence and influence. But it is not so. 
 The clans may have disbanded, but the spirit that gave birth to them 
 still exists all over the South, and every little while breaks out into 
 such outrages as those at Clinton, Mississippi, and Hamburg, South 
 Carolina. The murder of the six poor negroes at Hamburg, alter they 
 had surrendered to a lawless force, was as cruel as the suffocation of 
 the prisoners in the Black Hole at Calcutta, as barbarous as the burning 
 of Crawford by the Indians, and more base and cowardly than midnight 
 murder and burglary. We must protect these people from such 
 atrocities. We must punish such miTrderers, by law if we can, but at 
 all events we must punish them, or the torch and the knife will eventu- 
 ally bring that retaliation which such crimes always produce. This 
 Southern question has been and is now the most difficult in the whole 
 range of our political problems. It is difficult to say what ought to be 
 done. What we know is that the blacks have the rights of freemen, 
 and it is our duty to protect them in those rights. A Republican 
 administration, and especially General Grant, has sought to do this. 
 He has in a great measure succeedeQ. He has only failed by reason of 
 the superior numbers and intelligence of the white Democrats on the 
 ground, who have committed every atrocity that has been committed 
 on the freedmen of the South. Every one of these whites will vote for 
 the Democratic ticket. It was their general support that secured so 
 promptly the nomination of TildeUi With far different motives than 
 will influence the Democrats of Ohio, they will vote the same ticket, 
 and by their joint success the freedmen will be handed over to the ten- 
 der mercies of their rebel masters. Who among you believes that a 
 Democratic administration will ever attempt to protect them in their 
 political rights ? Tilden may promise, but, like Buchanan, he will 
 creep behind his construction of the Constitution. If the freedmen 
 quietly relapse into their fdrmer state, content to live and labor, this 
 may be granted them for the interest of their employers ; but, if they 
 indulge in the aspirations of freemen, if they exhibit intelligence and 
 foresight, if they even become leaders of a few ignorant men, or 
 d|rink at the fountains of knowledge, this will be the occasion of their 
 murder. And this, fellow citizens, wiU be one of the dangers of a 
 Democratic restoration. 
 
 If there is one principle to which the Republican party has been 
 true it is the education of aU classes and conditions of men. In every 
 
556 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 State and community where its influence has been felt the schools have 
 been advanced and improved. We freely vote millions for their sup- 
 port. Eelying upon the intelligence of our people we have sought to 
 convey that intelligence at the fountain-head. And so in this South- 
 ern question we have sought to develop a solution by the introduction 
 of schools. Give to the whole population of the South, white and 
 black, a thorough system of schools, and the light of intelligence wiU 
 rapidly dawn upon the black race, and the fierce prejudices of the 
 white race will be lifted like a cloud. It is not the educated whites 
 that murder negroes and burn down cabins and school-houses. Such 
 men as Lamar and Gibson deplore as much as we can the atrocities they 
 can not deny. It is the young men, ignorant because they have no 
 schools ; idle because they think it below caste for a white man to 
 work ; cruel from the spectacle of slavery, which was cruelty intensi- 
 fied ; narrow-minded because they really think a feeble, sparsely popu- 
 lated State is the center of civilization ; unpatriotic because they entered 
 life when to fight their country was patriotism ; proud because their 
 fathers were planters and owned slaves. These men may be sobered 
 by the responsibilities of a family and the lapse of time. Our hope 
 must be in their children ; in a policy of kindness and firmness ; of ed- 
 ucation and development. We must convince them that to enjoy their 
 own rights they must respect the rights of others ; and I believe no 
 
 S eater injury could be done to them than, by the restoration of the 
 emocratic party to power, to restore them to their former control and 
 domination. That means the barbarism of an uncontrolled rule over 
 the freedmen ; the burning of school-houses ; the setting back in their 
 advance to new ideas ; the arrest of all emigration ; the discouragement 
 of capital, and a renewal of the old contests between the Kepublican 
 and Democratic parties upon the color line, and all that the difference 
 between a nation and a confederacy implies. But we can not reason 
 with the men who will gain power by the success of the Democratic 
 party. It is the ISTorthem Democrat, who was patriotic during the war, 
 whose judgment I invoke when I point out to him the dangers of the 
 restoration of the Democrats to power in the National Government. 
 
 And who would be willing to trust the Democratic party to protect 
 the public schools from the sure and dangerous attack upon them by a 
 great and growing church which now openly, boldly, demands sectarian 
 schools and a division of the school fund for their support ? This cloud, 
 no larger than a man's hand, is sure to enlarge and extend until the 
 whole neavens shall be darkened with its wrath. The Catholic people 
 are taught to believe that our schools are godless because we can not 
 allow any particular form of worship to be used in them. They are 
 public schools, maintained by taxation, to which all children ai-e in- 
 vited, and where no favor is shown to Catholic or Protestant, poor or 
 rich, white or black. The pupils are the children of the country, soon 
 to be its mastcra, and their education is the safety of the State. But 
 the Catholic priesthood insists upon a separate, sectarian education of 
 Catholic children. Wo can not deny their right to maintain such 
 schools as they will, though such a policy is a violation of the spirit of 
 our fundamental law which requires the separation of Church and 
 
DANGERS OF RESTORATION OF DEMOCRATIC PARTY TO POWER. 557 
 
 State. Education is tlie process of molding citizens, and all experi- 
 ence proves that it should be free from sectarian influence. Still, if 
 they will insist on an anti-Eepublican policy, we demand that it shall 
 be conducted at their expense and not at ours. Upon this question the 
 Republican party does now, and ever will, speak with no uncertain 
 sound. I appeal to your judgment whether the Democratic party can 
 be trusted on this question. Kead its history in New York. Mark the 
 hesitation of its leaders. The proposed amendment to the Constitution 
 to secure our schools from sectarian influence was clogged by the Dem- 
 ocratic House with provisions that utterly ijullify it, and when this 
 great issue comes squarely before you the Republican party will occupy 
 the most advanced position in favor of free schools for all — secular ed- 
 ucation by the State and religious instruction by the family ; and the 
 Democratic party will be lagging behind, afraid to oppose us, but with 
 one eye on the Catholic vote and one hand extended to the Catholic 
 priesthood. 
 
 And now, fellow citizens, let us inquire upon what principle or 
 policy it is proposed to restore the Democratic party to power. I have 
 said in the Senate, and I now repeat it to you, that the Democratic 
 party does not now dare to present a single issue upon which it has 
 stood since the foundation of the Republican party ; not one. These 
 issues have been as numerous as the years that have passed. They 
 have been by far the most impoi-tant issues that have arisen since the 
 framing of the Constitution. However trifling may be the ordinary 
 run of political contests, no one can question that the contests between 
 the Republican and Democratic parties have involved the fate of our 
 country ; they have tested the very foundations of our institutions, and 
 have spread their influence over the whole world, and will influence 
 future ages. We have been engaged in no holiday work. The war 
 still looms up behind us, like a mountain in the skies. Our right to 
 wage it, our measures of finance, our organization of the armies, the 
 abolition of slavery, and the reconstruction of revolted States, with the 
 infinite number of collateral questions, once fiercely disputed but now 
 almost forgotten — ^all are settled, and by the Republican party. At 
 every step in this history we met and overcame the opposition of the 
 Democratic party, and now we can proudly appeal to our old adver- 
 saries to say if what has been done has not been wisely done. You 
 must all admit that there must be something great in a political organi- 
 zation that has been able to achieve what Webster hoped for ; that did 
 what all the world thought could not be done, and now stands before 
 you justified by the acquiescence of its old adversaries. The Demo- 
 cratic !N"ational Convention, in the second and chief plank of its plat- 
 form, ratifies and approves what we have done against Democratic op- 
 position, and now formally enters its confession of approval of the dis- 
 tinctive element of our faith. 
 
 For the Democracy of the whole country, we do here reaffirm our faith in the 
 permanence of the Federal Union, our devotion to the Constitution of the United 
 States, with its amendments universally accepted as a final settlement of the con- 
 troversies that engendered civil war, and do record our steadfast confidence in the 
 perpetuity of republican self-government. 
 
558 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 In the absolute acquiescence in the will of the mtijority — the vital principle of 
 republics ; in the supremacy of the civil over the military authority ; in the totai 
 separation of Church and State for the sake alike of civil and religions freedom ; in 
 the equality of all citizens before just laws of their own enactment ; in the liberty 
 of individual conduct unvexed by sumptuary laws ; in the faithful education of the 
 rising generation, that they may preserve, enjoy, and transmit these best conditions 
 of human happiness and hope, we behold the noblest products of a hundred years 
 of changeful history. 
 
 This is a Eepublica;! resolution. How strangely it sounds in a 
 Democratic platform! It covers the vital questions of the war; it 
 acknowledges the integrity of the Union so fiercely assailed ; it acqui- 
 esces in the will of the majority ; the abolition of slavery ; the consti- 
 tutional amendments ; the equality of all citizens ; the separation of 
 Church and State. These principles are those which we have main- 
 tained in bloody war, and now they acquiesce in them. But will they 
 enforce them ? We know they will not. The only danger that threat- 
 ens these great safeguards is in and from the Democratic party. It 
 can not be trusted to enforce one of them. There are some more re- 
 cent questions, which have not been embraced in this confession of 
 acquiescence, and. these are the election laws, the enforcement laws, 
 and the resumption law, each of which provoked its violent opposition, 
 but is quietly ignored a- evaded, and will come again before us. 
 
 The election law grew out of the wholesale fraud in the presiden- 
 tial election of 1868, by which the vote of the great State of New 
 York was counted for "Horatio Seymour for President instead of for 
 General Grant. That election was made the subject of a Congressional 
 investigation, and the fraud was established by overwhelming proof. 
 In the single month of October, 18()8, more than 41,000 naturalization 
 certificates were issued in the city of New York, or more than four 
 times the average number of previous years, and nearly three times 
 the largest number in any previous year. This was mainly the work 
 of two corrupt and infamous Democratic judges, McCunn and Bar- 
 nard. In a single day McCunn issued 955 certificates. These certifi- 
 cates were distributed in several counties, but mainly in New York. 
 They were procured from the Supreme Court for fictitious names and 
 delivered without cost to aliens and citizens to enable them to register 
 and vote as " repeaters." The evidence conclusively shows that on the 
 days of registration and election bands of men ranged over the city of 
 New York, registering and voting on assumed and fictitioxis names. 
 These gangs of repeaters were protected by the police force of the 
 city. But the special feature of this infamous conspiracy against the 
 elective franchise to which I wish now to call your attention is the plan 
 adopted by the great leaders of the Democratic party in New York to 
 cheat the people of that State, so that, if repeating and fraudulent vot- 
 ing did not suflSce, the deficiency could be made up by stufling tlie bal- 
 lot-boxes with tickets never voted and by falsifying the returns. 
 
 Immediately preceding the election in November, 1868, A. Oakey 
 Hall, the Secretary of the Democratic State Committee, and shortly 
 after Mayor of New "^'ork, issued a secret circular and sent it to the 
 chairman of every county Democratic organization in the State. 
 
DANGERS OF RESTORATION OF DEMOCRATIC PARTY TO POWER. 559 
 
 PRIVATE AND STEIOTLT CONFIDENTIAL. 
 
 EooMS OF THE Demoobatio State Committeb, 
 October 27, 1868. 
 
 Mt Deae Sir : Please at once to communicate with some reliable person in 
 three or four principal towns and in each city of your county, and request him (ex- 
 penses duly arranged for this end) to telegraph to William M. Tweed, Tammany 
 Hall, at the minute of closing the polls, not waiting for the count, such person's 
 estimate of the vote. 
 
 Let the telegraph he as follows : 
 
 " This town wiU show a Democratic gain (or loss) over last year of (number)." 
 Or this one is suificiently certain : " This town will give a Republican (or Demo- 
 cratic) majority of ." 
 
 There is, of course, an important object to be obtained by a simultaneous trans- 
 mission at the hour of the closing of the polls, but no longer waiting. Opportunity 
 can be taken of the usual half-hour lull in telegraphic communications over lines 
 before actual results begin to be declared, and before the Associated Press absorb 
 the telegraph with returns and interfere with individual messages ; and give orders 
 to watch carefully the count. 
 
 Samuel J. Tilden, Chairman. 
 
 Governor Tilden denies that he signed or authorized this circular. 
 If so, Hall and Tweed, of Tammany Hall, forged his signature and as- 
 sumed his acquiescence ; but if he denounced this forgery and the re- 
 sults of it, I have never heard of it. Horace Greeley declared him 
 responsible for it before God and man. This secret circular was re- 
 sponded to by more than two hundred telegrams. But, while there was 
 this haste to get the country vote, that in the city was purposely de- 
 layed, while a conspiracy was arranged to enable the canvassers at each 
 poUing place to change Republican tickets for Democratic tickets or to 
 stuff the ballot-boxes, adding Democratic tickets, and having them 
 counted accordingly; and this after they had secured, on Governor 
 Tilden's name and secret circular, information as to how many fraudulent 
 votes were needed to rob the people of New York of their choice for 
 President and Governor. The disgusting details of this conspiracy 
 and of its complete success are given in the testimony taken before the 
 Congressional Committee, and are stated in the report of its chairman. 
 Judge Lawrence, of Ohio. He says : 
 
 When all these tests unite in proving the same result, corroborated by undis- 
 puted facts, showing great frauds, the conclusion becomes irresistible that at least 
 25,000 fraudulent votes were cast in New York City at the election in November. 
 
 Every one of these fraudulent votes was a Democratic vote, cast for 
 Horatio Seymour for President and for' John T. Hoffman for Gover- 
 nor ; and with all these frauds the majority counted in their favor in 
 the State was only 10,000 in a vote of 850,000. 
 
 This now undisputed crime gave rise to the election laws passed by 
 Congress. These laws were resisted at every stage by the Democratic 
 party. Many a weary night session we held to pass them. Their re- 
 sistance to these laws was second only to their opposition to the consti- 
 tutional amendments. At the recent session the House of Kepresenta- 
 tives passed in one of the appropriation bills an amendment repealing 
 the election laws, and the Republican Senate would have gMly ac- 
 cepted the issue ; but the Democratic caucus withdrew the amendment, 
 
560 SPEECHES AND EEPOETS OF JOHN" SHERMAN. 
 
 and these laws still stand to guard the approaching election. But the 
 Democratic party has not made and dare not make an issue upon them. 
 
 Another long struggle between the two parties was over the passage 
 of the law to enforce the constitutional amendments, and to secure 
 equal rights to all citizens. In the resolution I read to you they acqui- 
 esce in the amendments, but carefully avoid all mention of the enforce- 
 ment acts. This is easily explained by the fact that the Democratic 
 leaders have placed a construction upon the amendments that will, if 
 accepted, nullify and destroy them, and invalidate all acts to enforce 
 them. Under a Democratic administration the freedman can not assert 
 his civil rights or his right to vote unless the State shall deny or abridge 
 it. In that event only they tell us can Congress interfere by appropri- 
 ate legislation. A citizen, a mob, a city, or a county may deny the 
 freedman the right to vote, and Congress is powerless to protect him. 
 Such is their construction of the amendments, and, if adopted, terror, 
 violence, fraud, and murder can deprive negroes of all civil rights if 
 only the State is silent. The Eepublican party, however, insists that 
 Congress may enforce the constitutional amendments not only against 
 the laws of a State, but against every person, mob, or corporation that 
 denies a citizen his right or deprives him of it. And this vital issue is 
 concealed and covered up in the Democratic platform. There is not 
 one word in it about protection to citizens in equal rights. The Demo- 
 crats acquiesce in the amendments as they construe them, but give no 
 assurance or promise that they will enforce them by appropriate legis- 
 lation. If they succeed, and the negro is deprived by fraud and vio- 
 lence of his civil rights, ias he will be, they will say " the State does not 
 deny or abridge your rights, and theref orl Congress can not interfere." 
 But the State will be neutral. It will not punish a violation of civil 
 rights ; and thus the freedmen, bound hand and foot by this Demo- 
 cratic construction, will be surrendered to the tender mercies of the 
 Ku-Klux and White Leagues, who are as safe from punishment under 
 State laws for killing negroes as for planting potatoes. 
 
 Now, on this vital question the Republican platform rings out like 
 a bell. 
 
 This is the third resolution : 
 
 3. The permanent jiaciflcation of the southern section of the Union and the com- 
 plete protection of its citizens in the free enjoyment of all their rights are duties to 
 which the Republican party stands sacredly pledged. The power to provide for the 
 enforcement of the principles embodied in the recent constitutional amendments is 
 in the Congress of the United States, and we declare it to be the solemn obligation 
 of the Legislative and Executive departments of tlie Governuient to put into imme- 
 diate and vigorous use all their constitutional powers for removing any just causes 
 of discontent on the part of any class, and for scouring to every American citizen 
 complete liberty and exact equality in the exercise of all civil, political, and private 
 rights. To thin end we imperatively demand a Ooni^ress and a chief Executive whose 
 courage and fidelity to these duties shall not falter until tlicso results are placed be- 
 yond dispute or recall. 
 
 The letters of acceptance of General Ilnycs and Mr. Wheeler are 
 clear and strong to the same effect, while "tilden and Hendricks talk 
 about Informing everything else tlian outrage and murder in the South- 
 em States. The only reference made to either of them in their letters 
 
DANGERS OF RESTOEATION OF DEMOOEATIO PARTY TO POWER. 561 
 
 of acceptance is the general phrase used by Mr. Tilden, that if he is 
 elected he will exercise the powers which the laws and the Constitution 
 give him to protect all citizens, whatever their former condition, and 
 this expressly reserves to him, though without committal to it, the right 
 to adopt the construction of the Constitution held by the Democratic 
 party that these enforcement acts are nuU and void. He occupies pre- 
 cisely the position of Mr. Buchanan, who said hfe was opposed to seces- 
 sion, but had no power to prevent it. So Mr. Tilden wiU be in favor 
 of equal rights, but will have no power to protect citizens in their en- 
 joyment of them. A reference to the. Constitution in this connection 
 implies his doubt of the power under the Constitution to enforce 
 equal rights. A man must be blind or foolish who will intrust to such 
 men the lives and liberties of millions of freedmen. 
 
 There is another law passed by the Republican party against the 
 united votes of all the Democrats in Congress, upon which they have 
 not and dare not make a manly issue, and that is the resumption act. 
 Last year the whole party in Ohio, with Governor Allen and General 
 Ewing at the head, rung the changes upon this act. It was the raw 
 head and bloody bones of their speeches and their dreams ; and the 
 chief mission of the Democratic party was to repeal it. Not a vestige 
 was to remain. Many an honest man was led to vote the Democratic 
 ticket by an erroneous conception of the resumption act, and in the 
 faith that Governor Allen would in some way veto or repeal it. Well, 
 we have had a Democratic National Convention at St. Louis, and 
 here is what it says about resumption and the resumption act : 
 
 We denounce the financial imbecility and immorality of that party which, during 
 eleven years of peace, has made no advance toward resumption, no preparation for 
 resumption, but instead has obstructed resumption by wasting our resources and ex- 
 hausting all our surplus income ; and, while annually professing to intend a speedy 
 return to specie payments, has annually enacted fresh hindrances thereto. As such 
 a hindrance we denounce the resumption-day clause of the act of 1875, and demand 
 its repeal. 
 
 This is piping in a lower key. The Democratic party denounces 
 us for making no advance toward resumption during eleven years of 
 peace. I have felt that we ought to have done so, and from my official 
 position proposed various measures to that end ; but I encountered dif- 
 ferences of. opinion iii the Republican party as to the method of re- 
 sumption, and a decided opposition from Democratic Senators to every 
 planjproposed and to the thing itself. 
 
 G-overnor Tilden, in his letter of acceptance, recommends two plans 
 in aid of resumption — one to gradually accumulate coin in the Trea- 
 sury, and thus create an increasing reserve for resumption ; and the 
 other to either pay or fund into bonds such surplus greenbacks as the 
 wants of business may fail to keep in use at par with coin. "Well, I 
 have proposed both plans from 1870 to this day, and so have General 
 Grant and General Bristow, and the great' body of the Republican 
 party, and we have met with the opposition and denunciation of the 
 Democratic party, especially here in Ohio, where Governor Allen, 
 General Ewing, General Carey, and all the rest have fairly torn a 
 passion to tatters in denouncing us for " hoarding gold " and " con- 
 36 
 
562 SPEECHES AND KEP0RT8 OF JOHN SHERMAN. 
 
 tracting greenbacks." And now, forsootli, these same gentlemen are 
 hurrahing for Tilden and the very measures we proposed, and pae'sing 
 judgment against us for hindering resumption. So has it been, fellow 
 citizens, with the Democratic party on every question of principle or 
 policy for sixteen years. But Governor Tilden goes one step further 
 than we have gone. He proposes to pay interest on greenbacks to 
 make them desirable as an investment, and thus retire the whole body 
 of them from circulation, and to continue the banking system, the 
 strength of which he exaggerates, and give to the banks the entire 
 circulation. Exeunt greenbacks, enter bank notes, says Governor Til- 
 den. But last year it was " away with the banks ; more greenbacks." 
 How can we meet such adversaries 1 What honor or consistency is 
 there in such political iugglery ? 
 
 But they say that the Kepublican party wasted our resources and 
 exhausted aU our surplus income during those eleven years. Well, I 
 know that we used the surplus income in paying off vast sums of 
 floating war claims and debts, as well as the interest on the debt, and 
 also the sum of $500,252,802.69 of the principal of the bonded debt. 
 I had regarded this as a matter of pride, not of reproach. They say 
 we h^ve annually enacted fresh hindrance's to resumption. I do not 
 know what they mean by this. I thought I had annually tried to get 
 some measure of resumption enacted, but had annually failed for 
 want of votes, but I was not aware of the passage of acts to hinder 
 resumption. But the meanest and worst clause of this demagogical 
 resolution is the last : " As such a hindrance we denounce the resmnp- 
 tion-day clause of the act of 1875, and we demand its repeal." It is 
 not the resumption act they denounce — that is approved — ^but the 
 clause promising to redeem on the 1st day of January, 1879 ; and that, 
 not because it is wrong to resume then, but because our promise to 
 resume then is a " hindrance " to resumption. It can not be a hin- 
 drance earlier unless we ought to resume sooner. And so all the 
 Democratic opposition to the resumption act is becaiise we did not 
 resume sooner. We hindered or delayed resumption. And upon this 
 plank Governor Allen and General Ewing are to ride to victory, and 
 the Eepublican party, which last year was tried before the people of 
 Ohio because we thought it right to keep up a steady march toward 
 resumption, is now to be tried by the Democratic party of. the United 
 States for devising a " hindrance " — ^many " hindrances," an " anqjial 
 hindrance " — to resumption. Thereupon the Democi-ats solemnly de- 
 mand that the special " hindrance," the fixing of a day so remote as 
 January 1, 1879, shall be repealed, so that we may resume sooner. 
 
 And now come Tilden and Hendricks with their lettei"s of accept- 
 ance, after much tribulation and delay, and demand the repeal of tne 
 date of resumption for opposite reasons. They are both riding the 
 same mule, but face in opposite directions. Governor Hendricks wrote 
 to his friends in the House of Kepresentativos that " a repeal of the 
 resumption clause, etc., in almost any form, will elect the State ticket 
 and carry the Indianapolis district." Governor Tilden writes that the 
 same clause is a hindrance to resumption, and advises that gold be 
 hoarded, that greenbacks bo paid or funded, converted into an invest- 
 
DANGEES OF RESTORATION OF DEMOCRATIC PARTY TO POWER. 563 
 
 ment in order to secure resumption ; and thus these two candidates, 
 after long incubation and much wine-drinking, go before the people on 
 the same ticket as candidates of the Democratic party for President and 
 Yice-President of the United States. And the Democratic House of 
 Eepresentatives, after being in session eight months, after these letters 
 are received, in haste, under the spur of Governor Hendricks's promise 
 concerning the election in Indiana, passes a bill, not to repeal the re- 
 sumption act, but containing a single clause fixing a date without any 
 substitute whatever. They dare not propose either plan suggested by 
 Governor Tilden, but with opposite constructions of what they have 
 done they will seek to pervert, mislead, and deceive you. In New 
 York they will talk about resuming and Governor Tilden's plan of 
 resuming. In Ohio and Indiana they will say they repealed the re- 
 sumption act, so far as they could, and wiU promise more greenbacks. 
 Fellow citizens, if there is anything which ought to settle the fate of 
 the Democratic party with quiet, sensible men, who, seeking no office 
 or favor, wish to do what is ri^t, it is the position of the Democratic 
 party on the resumption act. Proposing no measure itself, for Gover- 
 nor Tilden's letter is the first suggestion by any leading Democrat of a 
 plan to secure resumption, abusing us one year for wishing to resume 
 and the next year for hindering resumption ; having no fixed principle ; 
 openly surrendering all they struggled for during the war ; not daring 
 to take issue with us on the enforcement or the election laws, and creep- 
 ing through the most ridiculously small hole in the resumption act, the 
 Democratic party of to-day stands before you without a single principle 
 or measure that it dares to proclaim. 
 
 Let us now briefly state what this resumption law is. It contains 
 several distinct provisions, but all of them are intended to bring up our 
 greenbacks and bank notes to equality with coin. The first section 
 provides for the substitution of silver coin for fractional currency. The 
 reason of this was that this small paper currency was very perishable, 
 lasting only on an average one year, and costing $1,400,000 a year, or 
 three and one half per cent, on its amount. E was not money, but a 
 promise to pay money, while silver coin is money of intrinsic value 
 that redeems itself and costs for coining only one and one half per 
 cent., and when coined lasts indefinitely. We were able to buy silver 
 bullion and coin it at a considerable profit, and thus redeem a costly, 
 perishable, dirty paper money with ^bright, shining, silver coin — ^real 
 money. This part of the resumption act is executing itself daily, and 
 everybody agrees that it was a wise provision. Another provision of 
 this act was for free banking. Before that the organization of national 
 banks had become a monopoly. The limit of the law had been reached 
 and no new bank could be authorized. The resumption act threw down 
 all barriers to an increase of the number of banks, and put banking on 
 the footing of all other trades or business. All persons can now en- 
 gage in banking on equal terms ; start a bank or wind it up ; issue more 
 circulation or retire it as freely as any storekeeper or farmer conducts 
 his business. This simple provision destroyed all the illusions about 
 banking. We hear no more of excessive profits. What any man can 
 do at any time men are not so anxious to do. Under free banking more 
 
564 SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 banks have been discontinued than organized ; more circulating notes 
 retired than issued. This is regulated oy what our Democratic friends 
 call the " wants and demands of trade and business." This provision 
 is so eminently just that he would be a bold man who should propose 
 to repeal it and restore the monopoly of baniing. 
 
 Another provision of the resumption act was that as new bank notes 
 were issued United States notes should be retired until the amount 
 should be reduced to $300,000,000. This provision has been criticised, 
 but in practical execution has proved its wisdom. The volume of Unit- 
 ed States notes is diminished without decreasing the aggregate of cir- 
 culating notes. The only contraction of the currency is through the 
 voluntary payment and retirement of bank notes by the banks that 
 issue them, which is the necessary result of free banking. Under these 
 provisions the United States and the banks are gradually preparing for 
 resumption, and their notes approaching the gold standard. United 
 States notes are now redeemable in silver coin, and could, if Congress 
 would permit it, be redeemed in the old silver dollar. We have reached 
 resumption ia silver coin two years before the resumption act takes full 
 effect. 
 
 The next provision of this act is that we will pay in coin such 
 United States notes as may be presented on and after January 1, 1879, 
 more than two years hence. Now, whether we ought to do that, 
 whether we can do it, and whether, when we do it, prosperity wiU at 
 once revive, are matters about which there is great diversity of opinion. 
 You know my opinion, that not only public honor but the interest of 
 every citizen demands that this promise be faithfully kept, and that if 
 we adhere firmly to it, resumption in gold and silver coin will come as 
 quickly, surely, and imperceptibly as resumption in silver coin has 
 come. No doubt it is expedient for Congress to pass acts in aid of re- 
 sumption. I have often urged it to do so. It maybe that Congress 
 will have to postpone the day of resumption, and if so, it is to be pre- 
 sumed that Congress wiU do its duty ; but to make our notes equal to 
 gold and silver coin, and steadily to pursue a policy to that end, is an 
 obligation of national honor to which the Eepublican party is commit- 
 ted, and which it can not violate. Another and the only remaining pro- 
 vision of the resumption act is the authority it grants to the Secretaiy of 
 the Treasury to issue United States bonds to enable him to prepare for 
 and maintain resumption. I do jiot believe it will be necessary to use 
 this power further than it has been used, for the siirplus revenue and 
 the sinking fund, now available for this purpose, will, I believe, be 
 sufficient ; but, at all events, the interest on the bonds that are needed 
 f6r this purpose is insignificant, compared with the great benefits that 
 will result from the resumption of specie payments in this country. 
 
 I do not now, fellow citizens, enter fully upon the great question of 
 the restoration of the old sih'or dollar as the money of account, for it 
 has not yet assumed a party aspect. 1 have given the subject the most 
 careful consideration, and was the first to propose the recoining of the 
 old silver dollar. That it will and ought to aid us greatly in the prob- 
 lem of specie resumption, I have no doubt. But there are connected 
 with the issue of this dollar questions about which there is and will be 
 
DANGERS OF RESTORATION OF DEMOCRATIC PARTY TO POWER. 565 
 
 a wide diversity of opinion — how rapidly it can be coined ; how far it 
 shall be made a legal tender ; the purposes to which it shall be applied, 
 whether to the redemption of the greenbacks or the increase of our 
 currency ; whether its effect will be to demonetize gold and what its 
 true relation to gold is. All these are questions a wise man will con- 
 sider fully before deciding. 
 
 I was a member of the Conference Committee of the two Houses 
 on the silver bill. I am not at liberty to state what occurred, except 
 as is shown by the action of the two Houses. Both Houses were in 
 favor of issuing the old dollar — ^the dollar in legal existence since 1792, 
 containing 412^ grains, and only demonetized in 18Y3, when it was 
 worth two per cent, more than the gold dollar. It was then and for 
 twenty years had been issued only for export, and was not in circula- 
 tion. StUl, it was a legal standard of value as well as gold and always 
 had been, and it was the right of any debtor to pay in silver dollars 
 as well as gold dollars. It was his legal option. The relative value 
 of the two metals had often varied before, and still the right remained 
 to the debtor to pay in either dollar, and therefore in the cheaper dol- 
 lar. The mere disuse of the coinage of the silver dollar could not and 
 ought not to affect preexisting contracts. And now, when all our 
 domestic contracts have been based upon depreciated paper money, 
 made a legal tender for aU debts, public and private, except customs 
 duties and interest of the public debt, it would seem not only legal but 
 right in the broadest sense of the word that we should avail ourselves 
 of the rapid and remarkable fall of silver bulKon to recoin the old silver 
 coins, including the old silver dollar, the oldest of our coins, and with 
 them pay our depreciated notes, and thus restore the old coin standard. 
 I- believe a decided majority of both Houses were in favor of this pol- 
 icy, but its execution is a work of time. There is a limit to our abil- 
 ity to coin silver pieces, and mints can not be improvised in a year. 
 We therefoi-e provided for all the silver coin that can possibly be 
 coined at the mints of the United States, worked to their utmost 
 capacity, until July, 1878. So far we agreed. And we could have 
 agreed upon recoining the old silver dollar ; but whether it ought to 
 be received for customs duties, now payable in gold, or be paid out for 
 interest on the public debt, we could not agi'ee. We concluded, there- 
 fore, that as it could not be coined for more than a year, to organize a 
 commission, composed of members of both Houses and of experts in 
 coinage and exchange, with a view to collect and report the fullest 
 information possible. Thus the question of the old silver dollar is 
 postponed until next winter, when it may be decided with all the 
 lights that discussion may throw upon it. I know that it can be and 
 ought to be made an instrument of resumption as well as a vast relief 
 to all our industrial classes. These questions will be decided by the 
 Republican party as all the great questions of the past sixteen years 
 have been decided, so as to advance the general interests of the people. 
 The Democratic party, as usual, will denounce what we do, then hesi- 
 tate, then acquiesce, and then approve. 
 
 And now, fellow citizens, after a statement of the principal sub- 
 jects that have been before us, and after showing you that upon all 
 
566 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 the questions of the war and growing out of the war the Democratic 
 party has confessed its errors ; that upon the vital topics, protection to 
 all in the exercise of equal rights, the purity of elections, and specie 
 payments, its position is either cowardly, evasive, uncertain, or radi- 
 cally wrong ; and that it does now dare to stand before the people on 
 any question, measure, or issue advocated by it as a party within twenty 
 years, I come directly to examine the ground and pretenses upon 
 which it enters the canvass. Retrenchment and reform ! Good words. 
 They ought to be the aspiration and purpose of every candidate for 
 presidential honors and of every man in public life. The question is 
 not whether we favor retrenchment and reform, but whether Tilden 
 and Hendricks are more likely to retrench and reform than Hayes and 
 Wheeler ; whether the Democratic party with its followers and sup- 
 
 f)orters, though condenmed by you in every contest for years, is more 
 ikely to retrench and reform than the men composing the Republican 
 party, who have fought your battles and guided your counsels with 
 honor and safety for many years. It is not the cry of an opposition 
 hungry for pubEc plunder that must decide this question. iTor is it 
 the crime or perfidy of a few men who now and then in the vast 
 operations of a government may have proved false to their public 
 trusts. It is the general tendencies and acts of a party that must de- 
 termine its claims to public confidence. And on this broad issue I 
 defy a comparison between the Republican and Democratic parties. 
 
 The administration of General Grant, now about to expire, has been 
 arraigned by a House of Representatives armed with all the powers of 
 investigation. Conscious that their only hope lay in blackening the 
 character and conduct of General Grant and his appointees, the Demo- 
 cratic majority organized the whole House into committees of investi- 
 gation. They have explored every department, bureau, and ofiSce of 
 the Government. They have called as witnesses penitentiary convicts 
 and the insane from the hospital. They have seized telegrams by the 
 wholesale and examined private books and papers. They have sought 
 to disclose Cabinet secrets which have always been held inviolable. 
 They have employed detectives to watch accused persons. They have 
 examined in secret witnesses without number to sustain secret accusa- 
 tions, and have given the accused no benefit of cross-examination, no 
 opportunity to face their accusers, no specification of the charges against 
 them ; and what is the result of it all 1 A Secretary of "Wai-, always a 
 Democrat, appointed by General Grant in a spirit of liberality and for 
 his distinguished military services, is found to have appointed a past 
 trader from personal considerations, and to have shared in his profits. 
 In this foray they found that a prominent Democrat of Ohio received 
 a large portion of a claim that ought never to have been paid. They 
 examined the Secretary of the Navy for eight months, and then re- 
 ferred the case to another committee to report whether or not he had 
 been guilty of a technical violation of law. They denounced the Credit 
 Mobilier, and found that their candidate for President was its confi- 
 dential lawyer. In nearly overy case they have failed to disclose the 
 testimony, and have only recently ordered it to be printed, so as to 
 throw it into the canvass without any opportunity for explanation. 
 
DANGERS OF KESTOEATION OF DEMOOBATIO PARTY TO POWER. 567 
 
 So far as we know there has been nothing disclosed that will xjom- 
 pare with the offenses of Floyd, Thompson, and Toucey, three mem- 
 bers of the last Democratic Cabinet. They started for a campaign of 
 scandal, and they have made no investigation where they have not run 
 against Democratic misconduct. In the mean time General Grant and 
 General Bristow exposed and punished the whisky ring. 'No guilty 
 man has been shielded by the Republican party. Here and there time 
 has shown that bad appointments have been made and officers have 
 betrayed their trusts ; but when we come to compare the general re- 
 sults under Republican administrations, we find that there has been a 
 far smaller proportion of fraud, peculation, and embezzlement than 
 during any Democratic administration. I have here an official table 
 showing the receipts and disbursements of the Government from Janu- 
 ary 1, 1834, to June 30, 1875, exhibiting also the amount of defalca- 
 tions and the ratio of losses per $1,000 arranged in periods of four years 
 each. This table shows that during the last term of General Jackson 
 the loss on money received was $10.17 for each $1,000 ; in Yan Buren's 
 time $3.01 for each $1,000 ; in John Tyler's time $3.68 for each $1.000 ; 
 in Buchanan's time 62 cents for each $1,000 ; in Mr. Lincoln's time 10 
 cents for each $1,000 ; in Andrew Johnson's time 63 cents for each 
 $1,000 ; in General Grant's first term 37 cents for each $1,000, and in 
 General Grant's second term 22 cents for each $1,000. In the general 
 aggregate the loss from January 1, 1834, to June 30, 1861, nearly aU 
 which was during Democratic administrations, was $2.09 for each 
 $1,000 ; and from July 1, 1861, to June 30, 1875, during Eepublican 
 administrations, the loss was 34 cents for each $1,000. 
 
 This table also shows that in the disbursement of public money 
 during General Jackson's second term the loss by defalcation was 
 $10.55 for each $1,000 ; in Mr. Van Buren's term it was $21.15 for 
 each $1,000 ; in John Tyler's term it was $10.37 for each $1,000 ; in 
 Mr. Buchanan's term it was $6.98 for each $1,000 ; in Mr. Lincoln's 
 time, or during the war, it was $1.41 for each $1,000; in Johnson's 
 time it was 48 cents in each $1,000 ; in General Grant's first term it 
 was 40 cents for each $1,000, and in General Grant's second term it 
 was 26 cents for each $1,000. During the whole period from January 
 1, 1834, to June 30, 1861, the loss in disbursing public money, under 
 Democratic administrations, was $9.02 for each $1,000 ; and from July 
 1, 1861, to June 30, 1875, under Eepublican administrations, it was 78 
 cents for each $1,000. This table shows at once the relative fidelity 
 of Democratic and Republican administrations in the collection and 
 disbursement of public money, as shown by actual results and by au- 
 thority that can not be questioned or denied. In the light of these 
 facts, how absurd it is to appeal to you to restore the Democratic party 
 to power again in order to secure honesty and fidelity in public officials ! 
 
 But they tell you they are for retrenchment. They tell you what 
 a Democratic House has done to reduce expenditures. Well, this 
 House has slashed away at a great rate. They have refused appropria- 
 tions for the most necessary wants of the Government. They reduced 
 the pay of clerks fixed by law by a Democratic Congress in 1854, when 
 the pay was gold. They reduced the pay of foreign ministers, and 
 
568 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 consuls established in 1856. They reduced in a wild, hap-hazard way 
 the sums appropriated for public buildings in process of erection, and 
 for the support of courts regulated by law, and next winter they will 
 be compelled to make them good by deficiency bills. It is the old 
 demagogical trick of a party in opposition wishing to gain power. 
 
 The devil was sick, the devil a monk would be ; 
 The devil was well, the devil a monk was he. 
 
 It is easy to cut down appropriations, but this is not always retrench- 
 ment. A man might retrench both bread and meat, but he would 
 starve. True retrenchment consists in producing the best results with 
 the smallest sum necessary. I do not say the Republican party has 
 always done this, for I know it has not ; but it has come nearer to it 
 than the wild slashing and cutting down of appropriations by the 
 Democratic House. 
 
 Ever since the war, by which our appropriations have been increased 
 manifold, the reduction of expenditures has steadily gone on, except 
 for two years, when very large appropriations were made for public 
 buildings and works of internal improvement. I have a table carefuUy 
 prepared in the Treasury Department showing that the current expen- 
 ditures for 1875 were $84,773,762, in currency, and in 1860 $63,025,- 
 788, in gold, for similar purposes. Considering the increase of popula- 
 tion and the depreciation oi the currency, our regular expenditures not 
 growing out of the war are less per capita than before the rebellion. 
 But the great body of our expenditures in 1875, as for every year since 
 the war, was for items directly caused by the war, amounting to $189,- 
 849,630, such as interest on the public debt, pensions, claims, and the 
 like, a detailed statement of which I have in this document, and all of 
 which are the direct result of the war, and are properly chargeable to 
 the Democratic party as the cause and author of the war. And in the 
 future the Republican party is much more likely to reduce these items 
 than the Democratic party. 
 
 And as to the cry for reform, the promise of which is the burden 
 of the Democratic platform, it is the old cry of " stop thief.'' The 
 Democratic party has neither proposed nor accomplished any reform 
 for thirty years. The reform which is demanded by the general voice 
 of the people — the reformation of our civil service — depends almost 
 entirely upon the President and heads of departjnents. The Constitu- 
 tion invests them alone with the appointing power. The law now on 
 the statute book passed by a Republican adiiinistration confei-s all pos- 
 sible power upon these officers to accomplish this reform. You have 
 the plain promise of Governor Hayes in his letter of acceptance that 
 he will bring it about, and his promise is one that has never been broken. 
 All hope of civil-service reform must depend upon the character, ten- 
 /iencies, and good faith of the President. Contrast Governor Hayes 
 and Mr. Tilden, and then answer to youi- consciences which of them is 
 more likely to secure reform. Mr. Tilden is a New York lawyer, 
 trained in the school of Van Buren, who was the author of the policy 
 that " to the victors belong the spoils." His political life has been 
 spent in the city of New York, and his business life has been devoted 
 
DANGERS OF RESTORATION OF DEMOCRATIC PARTY TO POWER. 569 
 
 to tlie wrecking of corporations. Would any sensible man look to him, 
 followed, as he will be, by a horde of hungry office-seekers, to effect a 
 reform of the civil service ? Governor Hayes was reared in the more 
 modest and I think purer school of Ohio politics, and Jiis professional 
 life has been spent in punishing crime and securing iustice to the poor 
 and defenseless. His administration as Governor of Ohio has been dis- 
 tinguished by wise management of our benevolent and reformatory in- 
 stitutions, in which he knew no politics, and won the respect and esteem 
 of his political adversaries. You know him well, and appreciate his 
 purity and firmness of character. He is now solemnly pledged to re- 
 form the civil service, and by an act of self-abnegation he gives you the 
 highest assurance that he will execute that pledge, for he assures you in 
 advance that he will in no event be a candidate for a second term. 
 What motive can he have to give you other than an honest and pure 
 administration ? 
 
 And there is one other test which, when applied to these candidates, 
 should influence the mind of every patriotic citizen. Mr. Tilden is the 
 reputed author of the " sitbmission " plank in the Democratic platform 
 of 1864. If he distinguished himself by any act of patriotism in the 
 time that tried men's souls, I never heard of it. Governor Hayes was 
 distinguished for gallant services in the army, and bears honorable 
 wounds. Every page of his life is marked by ardent patriotism. No 
 consideration for his own interest or safety could induce him to leave 
 his duty in the field until the surrender of every rebel army. Surely, 
 when choosing a Chief Magistrate, this is the highest test of merit. 
 
 Let us, my Republican friends, enter this contest with firm confi- 
 dence that the people will do what is best. Let us again gather around 
 the Eepublican party, proud of all the good it has done, anxious to re- 
 pair its errors, determined to advance its standard, to keep fully abreast 
 of the noblest and highest aspirations and purposes of our age, and to 
 crown the full measure of our political life by protecting all men in equal 
 rights, by redeeming all pledges of the public faith, and by securing all 
 reforms attainable by poor human nature. Our candidates are honest, 
 honorable men, unblemished in name or reputation : of that class and 
 type of men called " self-made," because their high position is the nat- 
 ural result of their own life's labor and character, without the aid of 
 wealth or superior advantages. With such a party and such candidates 
 we may boldly enter the lists with absolute assurance that our success 
 will advance the interests and honor of our country. 
 
570 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 CONDUCT OF PUBLIC AFFAIES. 
 
 AT MANSFIELD, OHIO, AUGUST 17, 1877. 
 
 Fellow Citizens, Ladies and Gentlemen : The kindly words of 
 welcome uttered by my friend and associate of many years move me 
 beyond expression. They recall to me the memory of the early time 
 when I came to Mansfield, then a scattered hamlet of about 1,100 in- 
 habitants, without pavements or any of the modern conveniences of 
 cities and towns. As Mr. Hedges has told you, very many of those I 
 then met here are dead and gone. I was a boy then. A generation 
 has passed away, and the sons of those I met then as citizens of Eich- 
 land County now fill places of trust and responsibility. I have every 
 reason in the world for being strongly attached to this town of Mans- 
 field. You have always been kind to me. Here I studied law, here I 
 practiced my profession for several years, here I married my wife, a 
 native of your town, here I have lived ever since, and when the time 
 comes, when this mortal coil shall be shufiled off, here, probably, will 
 my body rest with your fathers. But pardon me, fellow citizens, if, 
 under the kind words of welcome of your spokesman, my old and hon- 
 ored friend, Mr. Hedges, I have forgotten that we are here not merely 
 to exchange courtesies, but to discuss grave matters of far more impor- 
 tance than the life or memories of an individual. 
 
 I am here to-night to state to you my views of what has thus far 
 been done by the present Administration in its conduct of public 
 afiairs. I wish it distinctly understood that in doing so I speak for 
 myself alone, as a citizen of Ohio, to you my fellow citizens and neigh- 
 bors, to whom I am under the highest obligations of gratitude and 
 duty. The President authorized me to say one thing, and one thing 
 only, for him, and in his name, and that is that all reports that impute 
 to him any participation whatever in the nomination of candidates on 
 your State ticket, or any desire or purpose to influence in any way the 
 senatorial contest in Ohio, are utterly groundless. These are your 
 matters, and I can assure you for him that he has not intei-posed and 
 will not interpose in any such contest between political friends. For 
 anything else i say to you, neither he nor my old and honored friend, 
 Judge West, is responsible. 
 
 You all Imow that I am now, and have been, wannly attached to 
 the Republican party. I believe in its principles and honor its work. 
 With my strong convictions I could not conceal my paj-tisan bias, or 
 my earnest hope for the success of the Eepublican party ; but the sub- 
 jects of which I intend to speak to you to-night will not lead me to say 
 much of former political straggles, or to nght our old' battles over 
 again, but chiefly to discuss the actual administrative questions of the 
 day as they have arisen since the fourth of Mai-ch last, in all of which 
 you are alike interested whether you may call youi-selves Republicans 
 or Democrats. On these questions I wish to appeal fairly to the can- 
 dor and good judgment of honest men of both parties, asking for the 
 
CONDUCT OF PUBLIC AFFAIRS. 571 
 
 administration of President Hayes only that considerate charity of 
 judgment which must be extended to all human agents. 
 
 When he was inaugurated he found thirty-six States in the full and 
 uncontested exercise of all the powers of States in the Union. In two 
 States only were there contests as to who was Governor. Both con- 
 tests had existed from January to March, ISTY, while General Grant 
 was President. In South Carolina, Governor Chamberlain claimed to 
 have been elected on the Kepublican ticket, and General Hampton on 
 the Democratic ticket. The President is not made the judge of who 
 is elected Governor of a State, and an attempt to exercise such a power 
 would be a plain act of usurpation. The constitution of South Caro- 
 lina is much like that of Ohio. The count of the vote was to be made 
 by the General Assembly of the State. Unfortunately for Chamber- 
 lain a controlling question in the contest had been decided against him 
 by a Eepublican court, and he was kept in possession of the State House 
 only by the actual presence of United States troops in the building. 
 He had appealed again and again to President Grant to recognize him 
 as Governor and to give him the aid of Federal troops to enforce his 
 claim, which General Grant had refused, seeking only to preserve the 
 public peace. "When President Hayes was inaugurated both contestants 
 were called to "Washington ; both were patiently heard, and the ques- 
 tions presented were patiently and carefully examined. The President 
 held that a case was not presented in which, under the Constitution 
 and the laws, he was justified in using the army of the United States 
 in deciding a purely local election contest. 
 
 The soldiers and bayonets of the United States were then withdrawn 
 from the State House — not from the State, nor the capital of the State, 
 but from the building in which the Legislature, which alone could law- 
 fully decide this contest, must meet. This was all that was done by 
 the President, and Governor Chamberlain, without further contesting 
 his claim, abandoned it and left the State. I say to you now that, 
 strongly as I desired the success of Governor Chamberlain and the Ee- 
 publican party in South Carolina, I believe that the President had not 
 the shadow of a right to interpose the power of the army in this con- 
 test, and his attempt to do so would have been rash and abortive as 
 well as without legal right. 
 
 The case of Louisiana was far more difficult. The local returning 
 officers of that State had, after a full examination, certified to the elec- 
 tion of the Legislature, with a Republican majority in both Houses. 
 This had been done by excluding from their return the votes of certain 
 parishes and counties wherein intimidation, violence, and fraud had 
 prevailed to an extent sufficient to change the result of the election. I 
 was present, at the request of General Grant, to witness the count, and 
 I assure you, as I have said officially, that the proof of this intiniidation, 
 violence, and fraud, extending to murder, cruelty, and outrage in every 
 form, was absolutely conclusive, showing a degree of violence in some 
 of those parishes that was more revolting and barbarous than anything 
 I could conceive of. It was plain that the returning officers had the 
 legal right to pass upon and certify in the first instance who were elect- 
 ea members of the Legislature, and that they were justified by the evi- 
 
5Y2 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 dence in excluding bulldozed parishee ; but it was equally clear tliat 
 tlieir return was not conclusive upon the members elected, and that 
 each House had the constitutional right to pass upon the returns, and 
 the election of its members, and to set aside the action of the Return- 
 ing Board. The two Houses, when organized, had also the power to 
 pass upon the returns of the election of Governor, and they alone and 
 no one else possessed that power. Neither the President of the United 
 States nor the Returning Board has any power or right to pass upon 
 the election of Governor. And here the difficulty in the Louisiana case 
 commences. 
 
 Governor Packard contends that a majority of the two Houses, as 
 duly returned, did pass upon the election of Governor, and did return 
 that he was duly elected, but this was stoutly denied by Governor 
 Nichols. This vital point was strongly asserted and denied by the ad- 
 verse parties, and the Legislature of Louisiana divided into two hostile 
 bodies, holding separate sessions, each asserting its legal power, and de- 
 nouncing the other as rebels and traitors. Governor Packard and his 
 Legislature called upon President Grant for the aid of the army to put 
 down insurrection and domestic violence ; and here I confess that if I 
 had been President instead of General Grant, I would have recognized 
 Packard and sustained him with the full power of the General Govern- 
 ment. My intense feeling caused by the atrocities in Louisiana may 
 have unduly influenced me. But General Grant did not think this was 
 his duty. I do not criticise his action, but only state the facts. He 
 would only maintain the peace. He would not recognize Packard as 
 Governor, but I know what is now an open secret, that it was the 
 strong bent of his mind, and at one time it was his decision, to with- 
 draw the troops, recognize Nichols, and thus end this dangerous con- 
 test. He did not do this, but simply kept the peace. 
 
 But during these two months the whole condition of affairs had 
 slowly changed in Louisiana. The government of Packard had dwin- 
 dled away until it had scarcely a shadow of strength or authority, ex- 
 cept at the State House, where it was upheld by Federal bayonets. 
 The government of Nichols had extended its authority over the State, 
 and was in full existence as the de facto government of Louisiana, sup- 
 ported by the great body of the white men and nearly all the wealth 
 and intelligence of the State, and by the tired acquiescence of a large 
 portion of the colored people, some of whom deserted his Legislature 
 and entered that of Governor Nichols. The delay and hesitation of 
 General Grant had been fatal to Packard, and when Hayes bjecame 
 President the practical question was greatly changed. One thing was 
 clear, that a Legislature nad been duly elected in the November pre- 
 vious, and was then in existence, though separated into two part-.s. If 
 the members lawfully elected could be convened, they could decide 
 the question of who was Governor alone without the mtervention of 
 troops, and their decision could be supported, if necessary, by the Gen- 
 eral Government, 
 
 The most careful consideration was given to this question. Days 
 and weeks of anxious deliberation were given to it by the President 
 and his Cabinet. But one way seemed open for a peaceful solution, 
 
CONDUCT OF PUBLIC AFFAIRS. 573 
 
 and that was to gather, if possible, a single Legislature which could be 
 recognized as the depositary of the representative will of the people of 
 Louisiana. If this could be done it had the unquestioned right to de- 
 cide who had been elected Governor, and all other questions would 
 settle themselves. To aid in this object, a commission of the most 
 eminent men, high in position, from different States and distinguished 
 for judicial impartiality, was selected, and the result is known to all. 
 They went to Louisiana, and, with great difficulty, brought together 
 these hostile Legislatures, which met, organized, promptly settled the 
 question in dispute in favor of the government of Mchols, and thus 
 put an end to this most dangerous controversy. No other change was 
 made, no other act done except that, when the solution was almost ac- 
 complished, the few troops who had occupied the State House were 
 withdrawn a few squares away, to their barracks. Thus, in this peaceful 
 appeal to the Legislature of Louisiana, was settled this controversy, 
 which endangered the peace and safety not only of that State, but of 
 the whole people of the United States. This is the sum and substance 
 of all that was done in pursuance of the Southern policy, as it is called, 
 of the President. Perhaps I ought to state that his policy has a broader 
 motive than a mere settlement of a local election contest. It seeks to 
 bring the IS'orth and South again into conditions of harmony and fra- 
 ternity, and, by a frank appeal to the generous impulses and patriotic 
 feeling of all classes of people in the South, to secure not only peace 
 among themselves but the equal protection of the laws, and security in 
 the enjoyment of political and civil rights to all. 
 
 No doubt the result in Louisiana caused some disappointment to 
 many Eepublicans throughout the United States, who deeply sympa- 
 thized with their Eepubucan brethren in that State. I did, and do, 
 share in that feeling, and yet I feel and know that every step taken by 
 President Hayes was right, in strict accordance with his constitutional 
 duty, and from the highest motives of patriotism. Some are foolish 
 enough to talk of his abandoning the colored people and their constitu- 
 tional rights. President Hayes, froii;! his early manhood, has been an 
 antislavery man, whose life was imperiled on many battle-fields in the 
 great cause of liberty. He sympathizes more with the colored people, 
 and will do more for their equal rights, than those who falsely accuse 
 him ; and I believe this day that the policy he has adopted will do more 
 to secure the full, practical enforcement of those rights than the em- 
 ployment of an army tenfold as great as the army of the United States. 
 
 The equal rights of the freedmen are now placed on the same con- 
 stitutional footing as ours. Unarmed, unorganized, defenseless, and 
 ignorant as they have been, they can realize the full enjoyment of their 
 rights only when education dispels their ignorance and teaches them 
 how to defend their rights. The policy of the President will make it 
 possible in the Gulf States for them to secure the aid and sympathy of 
 an influential portion of the whites. It has also secured to them the 
 pledge of honor of the local State governments to protect every man 
 an fuU equal civil and political rights. No people can be more inter- 
 ested in observing this pledge than the governing white men of the 
 South. The ultimate safety of their life and property depends upon 
 
574: SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 it. The people of the United States will hold them to it, and now, 
 when by this policy of President Hayes they have what they call honae 
 rule, upon their self -proclaimed promise that home rule means the equal 
 protection in equal civil and political rights of all, they have to fulfill 
 this promise or stand dishonored before the civilized world. The 
 amendments to the Constitution will stand, and they will be enforced ; 
 but it is far better this shall be done by the consent of all, in the in- 
 terest of all, than by the agency of an army. Constitutional rights can 
 be secured only by legal means. The whole Southern policy of Presi- 
 dent Hayes is to secure constitutional rights not only by legal but by 
 peaceful means, by an appeal to the interest and honor of all classes ; 
 but, if this fails, if I do not greatly err, he will not be wanting in the 
 exercise of the full powers of his great office to secure the civil rights 
 of all, without distinction of race, color, or condition. 
 
 Another question of administration promptly received the attention 
 of President Hayes. It has been the standing promise of both politi- 
 cal parties for fifty years to secure civil-sei-vice reform, without defining 
 what was meant by this phrase, while old abuses grew and new abuses 
 sprang up by which the civil service of the Government was largely 
 made an agency to control the action of parties, and to influence the 
 rising or famng fortunes of politicians, wlule the public service was a 
 secondary consideration. Upon this subject the President had clear 
 and radical views, and he has not hesitated, against the opposition of 
 many in his own party, to enter upon the reform of these abuses. 
 Whether true or not, it has been believed that the Custom-House in 
 New York, the great agency for the collection of the duties on im- 
 ported goods, was especially open to these abuses, and that the public 
 interests were sacrificed to the advancement of the political and pecu- 
 niary interests of individuals. The President directed that a thorough 
 investigation, free from political bias, should be made there by inde- 
 pendent men of both parties, aimed not at individuals, but at the sys- 
 tem itself. It was in the progress of this investigation that he issued 
 the order about which so much complaint has been made. Here it is : 
 
 No officer should be required or permitted to take part in the management of 
 political organizations, caucuses, conventions, or election campaigns. Their right to 
 vote and express their views on public questions, either orally or through the press, 
 is not denied, provided it does not interfere with the discharge of their official du- 
 ties. No assessment for political purposes on officers or subordinates shoald be 
 allowed. 
 
 This order was promptly denounced as an invasion of the ridits of 
 individuals, and its meaning and purport were grossly perverted. In the 
 Western country, where our political movements ai-e more free from the 
 influence of office-holders, there has always been a strong popular feel- 
 ing against the interposition of machine politicians. Tlie people here 
 are abundantly able, without the aid of office-holders, to manage their 
 conventions, caucuses, and organizations, and it has always been a matter 
 of complaint even in our counties and cities whenever rings of office- 
 holders were formed, wlio wore offensively officious in controlling 
 popular conventions, and, as a rule, such things have not been tolerated. 
 But in the great cities the office-holders are selected, not only to be ac- 
 
OONDUOT OF PUBLIC AFFAIRS, 575 
 
 tive at the election or to influence the election, but to run the machi- 
 nery by which nominations are made, and caucuses held. They select 
 delegates to conventions, pay their expenses, control their votes, appear 
 as president, secretary, or guiding genius of the convention, and thus 
 the whole machinery of politics is an oiiice-holding monopoly, offensive 
 to the mass of the people, and tending to prevent the just control of 
 political movements by free, unbiased popular opinion. 
 
 It was this, abuse, the greatest of all, at which the President struck 
 directly. The President has not objected, and never did object, to the 
 most active men being appointed to, and aspiring for, office. He would 
 naturally select from among the most active men in private life those 
 who are to hold public offices, and, other things being equal, would 
 select one of his own party, rather than one of the adverse party. At 
 all events that is my own view. I think it would be a shade dishonor- 
 able for a man to seek an office from the party whose success and prin- 
 ciples he opposed, though he might accept an office tendered to him. 
 It is natural that, in selecting men for office from the great political 
 organizations composed of large masses of people, friends rather than 
 adversaries should be selected. But there are occasions when the party 
 line should not be drawn, and in all cases where parties put up bad 
 men it is the first bounden duty of every good citizen to refuse to vote 
 for them, and thus compel the selection of the best men for office. But 
 where any one has attained office, either by appointment or election, he 
 ought not to consider that he is, therefore, to be the ruling manager of 
 conventions and caucuses, with a view to put up this Republican and 
 put down another, or to pull down this Democrat to put up another. 
 He ought to hold his office with seemly modesty, leaving it to the peo- 
 ple to run the machinery of their own political organizations. There 
 never was and never will be danger in our system that the necessary 
 movements of the people need the guidance of paid office-holders. Of 
 late the influence of office-holding on politics has grown worse and 
 worse. When, eighteen years ago, I heard a prominent member of 
 the House of Representatives dedare that it cost him fifteen thousand 
 dollars to be elected, I was happy to respond for you that if I had 
 spent five hundred dollars in securing my election 1 should have been 
 defeated, and I can say in your presence, for you know it, that the cus- 
 tom then prevailing prevented any large expenditure of money, and 
 that, though four times elected to Congress in this district, I did not, 
 and could not, without danger to myself, spend any considerable sums 
 on my election. But of late the expenses of popular elections have so 
 increased that we are in danger of the very evils that for a hundred 
 years disgraced the election of the members of the House of Commons, 
 and led to laws of the greatest' severity against bribery and corruption. 
 
 I beheve in the order of the President, and hope he will stand by 
 it ; and if he adds to the good work of his administration the breaking 
 down of this office-holding officiousness in the management of cam- 
 paigns, this running of caucuses and conventions by oince-holders, and 
 forced assessment from unwilling office-holders for political purposes, 
 and will secure to the people a free, unbiased control of their primary 
 movements in the election of officers, he will have accomplished a 
 
576 SPEECHES AND REPORTS OF JOHN SHERMAN". 
 
 work second only in importance to the pacification of the South. The 
 order of the President does not interfere with the right of any officer 
 to vote or to express his views on public questions, either orally or 
 through the press, and I, at your invitation, talk to you to-day ; but 
 you would regard it as offensive if I should undertake to manipulate 
 your conventions to secure the nomination of personal friends, or inter- 
 fere in any way with your free choice in popular movements. And 
 this is all that the order of President Hayes undertakes to prevent. 
 
 I come now to speak of some administrative reforms that are 
 usually the subject of demagogical promises, but are always an impera- 
 tive duty, which I can fairly claim has been faithfully performed by 
 this administration. The expenses of the Government in many 
 branches were unnecessarily large, and have been reduced with much 
 advantage to you, but it was painful to make the reduction, from the 
 necessity of discharging a large number of employees. This has been 
 done in all of the Departments, but mainly in the Treasury Depart- 
 ment, which, from the magnitude of its operations, employs through- 
 out the United States about twelve thousand persons. In one bureau 
 alone, that of engraving and printing, the force was reduced 605 per- 
 sons, making an annual saving of $360,000. 
 
 In the New York Custom-House the number of employees has 
 already been reduced 176, making a saving of $255,020, and this pro- 
 cess has not yet ended at that port. At Baltim6re the number of 
 employees was reduced 52, and the amount saved was $47,297. In the 
 New Orleans Custom-House the number of employees has been re- 
 duced 87, making a saving of $95,455. In San Francisco the reduc- 
 tion of expense, not yet completed, is estimated to amount to $73,440, 
 in Philadelphia to $56,750, and in Boston to $122,740. In other ports 
 of the United States the number of employees has been reduced 
 48, making a saving of $47,154, and eight appraisers, at ports where 
 their services are no longer needed, have been dispensed with, at a 
 saving of $23,500. This makes a reduction in the customs service 
 since the 4th of March, 1877, of $721,356 a year. This process will 
 be extended to all of the Internal Eevenue officers of the United 
 States with a very large saving of expense. The total annual reduc- 
 tion made thus far in the rents paid by the United States for build- 
 ings in public use by the Treasury Department is $58,852, and as 
 leases fall in this reduction will be largely increased. 
 
 Contracts for cutting the stone lor several of the larger public 
 buildings were founded upon the principle of the Government pay- 
 ing to the contractors the cost of the labor and material emploved m 
 the cutting, and fifteen per cent, added tliereto. The contract iov the 
 erection of the building for the use of the State, Wai", and Navy De- 
 partments, was so clianged as to reduce the cost more than $700,000. 
 Contracts for the supply of cut granite, for the Court-House at Phila- 
 delphia and tlie Custora-1 louse at Cincinnati, have been modified in 
 such a manner as will effect a saving of $450,000. Similar changes 
 are to be made in the contracts for cut stone for the St. Louis Custom- 
 House, and the extension of the Post-Office and Sub-Treasury at Bos- 
 ton, which will doubtless be equally favorable to the Government. 
 
CONDUCT OF PUBLIC AFFAIRS. 577 
 
 A still more dangerous class of payments from the Treasury was for 
 old claims, pending in the Treasury Department, many of them founded 
 upon ex parte testimony and believed to be fraudulent. Many of these 
 have been suspended or rejected, and new rules in regard to such claims 
 have been adopted, which will save to the Treasury large sums of 
 money, and I hope Congress may be disposed at its next session to 
 revise the whole mode of auditing and paying them, which now, in 
 many cases, exposes the Government to open and glaring fraud. 
 
 I have cited only these principal cases of administrative refoim, 
 which will be made to extend to every branch of the Government, and, 
 no doubt, will receive the hearty cooperation of Congress. The only 
 rule in the conduct of public business is that which a prudent man 
 would adopt in his own. The Government ought not to be niggardly 
 and stingy in public disbursements ; it ought to receive no labor or ser- 
 vice that it does not fairly pay for ; but a waste of public money not 
 only puts a premium on office-holding, but demoralizes all who are en- 
 gaged in it. A close and careful readjustment of the civil service upon 
 correct business principles will bring our national expenditures within 
 the amount of such moderate taxes on whisky, tobacco, and beer, and 
 such reasonably moderate duty on imported goods, as, while furnishing 
 protection to our own industries, will not cripple our commerce or place 
 our industries at a disadvantage in foreign competition. J believe the 
 administration is perfectly willing to share with Congress in the work 
 of these essential reforms in our civil service. 
 
 Much the largest reduction in the public expenditure has been ef- 
 fected in the reduction of interest on the public debt. The great body 
 of the public debt is now payable at the pleasure of the United States 
 at par in coin. As this debt now bears interest at six per cent., it is 
 manifest that if money can be borrowed at a less rate the old bonds 
 can be paid off, and the reduction of interest lessens to that extent the 
 burden of the debt. Prior to the 1st of March my predecessor had 
 sold fifty millions in four and one haK per cent, bonds at par in coin, 
 the proceeds of which had been applied to the redemption of six per 
 cent, bonds. Since the 1st of March there have been sold, under the 
 refunding act, $135,000,000 four and one haK per cent, bonds, and 
 that amount of six per cent, bonds has been paid off or is being paid 
 off, and canceled, thus saving to the people of the United States $2,- 
 025,000 in coin for this year* and each year hereafter. 
 
 In May last I became satisfied that the credit of the Government 
 was so advanced, and the money market so favorable, that I could sell 
 at par in coin bonds of the United States bearing interest at four per 
 cent, per annum, and, with the approval of the President, I took the 
 responsibility of withdrawing from sale one hundred millions of four 
 and one half per cent, bonds, and substituting four per cent, bonds. 
 There was great doubt, among bankers and business men here and in 
 Europe, of the ability to sell these bonds at par, and I had plenty of 
 advice not to undertake the task. Germany, now one of the great 
 powers of the world, had recently offered her four per cent, bonds at a 
 discount of more than five per cent. The Eussian Government, now 
 under the stress of war, was selling its bonds at such a rate that they 
 37 
 
578 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 yielded over eight per cent, to the purchaser. The Portuguese Govern- 
 ment had issued a three per cent, loan at about fifty per cent, discount. 
 Great Britain, the highest in credit of all the great nations, had sold 
 her three per cent, consols at a large discount, and now, although they 
 are a perpetual annuity, they are daily quoted at from ninety-four to 
 ninety-five per cent. Still, with the favorable condition of the money 
 market, with industries pai'alyzed throughout the world, with money 
 lying idle in great hoards, with our credit untarnished, with our nation 
 confessedly among the leading powers of the world, and with our 
 
 freat resources, f believed that the public interest and public duty 
 emanded that the effort to sell these four per cent, bonds should be 
 made, and that it would be successful. 
 
 The great national loan was opened by popular subscription in the 
 United States on the 16th of June, and within thirty days afterward 
 $67,600,000 were taken in thip country and $10,200,000 in Europe, 
 making $77,800,000 sold. On this sum, when paid and applied to the 
 payment of six per cent, bonds, there will be an annual saving to the 
 people of the United States of $1,556,000. The aggregate saving from 
 both classes of bonds since the 1st of March, 1877, will be $3,581,000 
 a year in coin. And this process of saving has just commenced. We 
 may confidently hope that, if no adverse legislation shall be had that 
 will injuriously affect the public credit, the entire amount of the pub- 
 lic debt bearing interest at over four per cent., now amounting to 
 nearly $1,700,000,000, may, as it becomes redeemable, be converted into 
 bonds bearing not exceeding four per cent, interest. 
 
 And now, fellow citizens, this brings me to the question upon which 
 there is so much diversity of opinion, so many strange delusions, and 
 that is, the question of specie payments. What do we mean by this 
 phrase ? Is it that we are to have no paper money in circulation ? If 
 so I am as much opposed to it as any of you. Is it that we ai"e to re- 
 tire our greenback circiilation ? If so I am opposed to it, and have 
 often so said. What I mean by specie payments is simply that paper 
 money shaU be made equal to coin, so that when you receive it it will 
 buy as much beef, com, or clothing as coin. 
 
 Now the importance of this can not be overestimated. A depre- 
 ciated paper money cheats and robs every man who receives it of a 
 portion of the reward of his labor or production, and in all times it 
 has been treated by statesmen as one of the greatest evils that can be- 
 fall a people. There ai"e times when such money is unavoidable, as 
 dui'ing war or great public calamity, but it has always been the anxious 
 care of statesmen to return again to the solid standai-d, coin. There- 
 fore it is that specie payments, or a specie standard, is pressed by tlie 
 great body of intelligent men who study these questions as an indis- 
 pensable condition of steady business and good times. 
 
 Most of you will agree to all this, and will differ only as to the 
 mode or time ; but there is a large class of people who beHeve that 
 paper can be, and ought to be, made into money without any promise 
 or hope of redemption ; that a note should be printed, " This is a dol- 
 lar," and bo made a legal tender. I regard tliis as a mild form of 
 lunacy, and have no disposition to debate with men who indulge in 
 
CONDUCT OF PUBLIC AFFAIRS. 5Y9 
 
 such delusions. They have prevailed to some extent at different times 
 in all countries, but their life has been brief, and they have ever 
 shared the fate of other popular delusions. Congress will never enter- 
 tain such a proposition, and if it should, we know that the scheme 
 would not stand a moment before the Supreme Court. That tribunal 
 maintained the constitutionality of the legal-tender promise to pay a 
 dollar only by a divided court, and on the ground that it was issued 
 during the war, in the nature of a forced loan, to be redeemed by the 
 payment of a real dollar ; that is, so many grains of silver or gold, j 
 
 I therefore dismiss such wild theories, and speak only to those who 
 are willing to assume, as an axiom on this subject, that gold and silver, 
 or coined money, have been proved by all human experience to be the 
 best possible standards of value, and that paper money is simply a 
 promise to pay such coined money, and should be made and kept equal 
 to coined money by being convertible into it on demand. 
 
 Now, the question is as to the time and mode by which this may 
 be brought about, and on this subject no man should be dogmatic, or 
 stand without yielding upon a plan of his own, but every man should 
 be willing to give and take, securing the best expedient that public 
 opinion will allow to be adopted. The purpose and obligation to bring 
 our paper money to the standard of coin have been over and over 
 again announced by acts of Congress and by the platforms of the great 
 political parties of the country. If resolutions and promises would 
 bring about specie payments, we should have been there long ago ; but 
 the diversity of opinion as to the mode now — twelve years after the 
 close of the war — still leaves our paper money at a discount of five per 
 cent. Until this is removed there wiU be no new enterprises involving 
 great sums, no active industries, but money wiU lie idle and watch and 
 wait the changes that may be made before we reach the specie standard. 
 
 In 1869 Congress pledged the public faith that the United States 
 would pay gold or silver dollars for United States notes. Again, in 
 January, 1875, after more than a year's debate, Congress declared that 
 by the 1st of January, 1879, the United States would pay its notes in 
 coin. The Secretary of the Treasury is expressly required to prepare 
 for, and maintain, the redemption of all United States notes presented 
 at the Treasury on and after that date, and for that purpose he is au- 
 thorized to use all the surplus revenue, and to seU at par in coin bonds 
 of the United States bearing four, four and one half, and five per cent, 
 interest. It is this law, called the resumption act, now so much dis- 
 cussed in the papers, that imposes upon the office I hold most difficult 
 and important duties ; and without replying to any attacks made upon 
 me, I am anxious to submit to you, personally, what I have done and 
 must da in obedience to the provisions of this act. It is said that the 
 law is defective ; but, if the great object and policy of the law are 
 right, the machinery of the law could easily be changed by Congress. 
 That resumption can be secured and ought to be secured under this 
 law, it will be my purpose to show you, and I shall not hesitate to 
 point out such defects in the law as have occurred to me in execut- 
 ing it. 
 
 There are two modes of resumption, either by diminishing the 
 
580 SPEECHES AND REPORTS OF JOHN- SHERMAN. 
 
 amount of notes to be redeemed, which is commonly called a contrac- 
 tion of the currency, or by the accumulation of coin in the Treasury, to 
 enable the Secretary to maintain specie payments. The one practical 
 defect in the law is, that the Secretary is not at liberty to sell bonds of the 
 United States for United States notes, but must sell them for coin. As 
 coin is not in circulation among the people, he is practically prohibited 
 from selling bonds to the people, except by an evasion of the law or 
 through pnvate parties. Bonds are in demand and can readily be sold 
 at par in coin, and still more easily at par, or at a premium, in United 
 States notes. The process of selling for United States notes would not 
 go far before the mere fact that they were receivable for bonds would 
 bring them up to par in coin, and that is specie payment. 
 
 But the reason of the refusal of Congress to grant this authority, 
 often asked of it, was that it would contract the currency, and this fear 
 of contraction has thus far prevented Congress from granting the 
 easiest, plainest, and surest mode of resumption. To avoid contraction, 
 it provided that national-bank notes might be issued without limit as 
 to amount, and that, when issued. United States notes should be retired 
 to the extent of four fifths of the bank notes issued. This was the only 
 provision for redeeming United States notes that Congress made or 
 would make, and this, it was supposed, would reduce the United States 
 notes to $300,000,000 before January 1, 18Y9. The actual experiment 
 only proves the folly of the cry we had for "more money, more 
 money." 
 
 Here was free banking, a free and almost unlimited right to every- 
 body to issue more money ; but unluckily for visionary theorists, it was 
 money that had to be protected by the deposit of securities, not wild- 
 cat money, but money that people could sleep upon without fear of the 
 bank's breaking. The result is that under free banking the issue of 
 circulation has been far less than was expected, and, therefore, the reduc- 
 tion of United States notes has been less. Still there was some reduc- 
 tion. Greenbacks have been retired under the act of Januai-y, 1875, to 
 this time to the amount of $22,905,T00, and nearly twenty-nine millions 
 of circulation have been issued to national banks. Since the 1st of 
 March last the reduction of United States notes has been $5,li2,26i, 
 and this reduction was preceded by the issue to banks of new circula- 
 tion, amounting to nearly $6,500,000. 
 
 I do not say that this is the only reduction of the cuiTencj that 
 has taken place, but it is the only reduction that has been made by the 
 United States. The national banlcs, under a different law, and from 
 the very necessity of free banking, ai'e at liberty to retire their currency 
 as well as to increase it, and this has been done by them since the first 
 of January, 1875, to the amount of $36,624,612. But this is a reduc- 
 tion effected by each bank-, guided by its own interest, and the circula- 
 tion it can safely and prudently mnintnin. 
 
 There are now deposited with tlie Treasury by private corporations, 
 banks, and individuals, $57,1'70,000 of United States notes. Of this 
 tlu;re were deposited by the national banks on June 22d, the date of 
 their last statemoiit, $44,450,000, and they have, in the cash reserve 
 hold by them, $42,500,000 more than the amount required by law, 
 
CONDUCT OF PUBLIC AFFAIRS. 581 
 
 clearly showing that there will be no lack of currency when it shall be 
 demanded for the requirements of business. 
 
 Since January 1, 187Y, the "United States has issued $34,236,000 of 
 silver coin, and has redeenied with that coin $21,980,000 fractional 
 currency, now almost superseded by silver coin, and it also holds 
 $8,160,858 of United States notes for the redemption of fractional 
 currency still outstanding. In this there was no contraction, but merely 
 a substitution of coin for fractional currencj'. 
 
 It was an error to make the retirement of United States notes 
 depend upon the issue of bank notes. The two had no relation to each 
 other, but the retirement of United States notes should depend entirely 
 upon the amount necessary to be withdrawn, to advance the residue to 
 par in coin within the fixed time. The simplest mode of doing this 
 was to authorize their conversion into bonds at the pleasure of the 
 holder, the bonds to bear the lowest rate of interest that would in or- 
 dinary times maintain them at par in gold. To this the objection is 
 made that we convert a non-interest-bearing note into an interest-bear- 
 ing note ; but what right have we as a nation, or has any bank or indi- 
 vidual, to force into circulation as money its note, upon which it pays 
 no interest ? Why ought not any one who issues a promise to pay on 
 demand to be made to pay it when demanded or pay interest there- 
 after ? What right has he, in law or justice, to insist upon maintaining 
 in circulation his note which he refuses to pay according to his promise, 
 and which he refuses to receive in exchange for a note bearing interest ? 
 A certain amount of United States notes can be, and ought to be, main- 
 tained at par in coin, with the aid of a moderate coin reserve held in 
 the Treasury, and to the extent that this can be done they form the 
 best possible paper money, a debt of the people without interest, of 
 equal value with coin, and more convenient to carry and handle. Be- 
 yond this the issue of paper money, either by the Government or banks, 
 is a dangerous exercise of power, injurious to all classes, and should not 
 continue a single day beyond the necessities that gave it birth. 
 
 But, if Congress should see proper to confine the process of resump- 
 tion to the present law, we have still the second mode of resuming, by 
 accumulating coin gradually, so that when the time fixed for resump- 
 tion arrives, the Treasury may be able to redeem such notes as are pre- 
 sented. In this respect the resumption act is as full and liberal as 
 human language can make it. The Secretary is authorized to prepare 
 for resumption, and for that purpose to use the surplus revenue and to 
 sell any of the three classes of bonds, all of which are now at or above 
 par in coin. The power, if not repealed, can be, ought to be, and will 
 be exercised. 
 
 This accumulation, both of silver and gold, can be made by arrest- 
 ing the exportation of our production of these metals. This is more 
 than sufficient to supply our wants for this purpose, and, fortunately, we 
 have for export plenty of other productions — corn, cotton, wheat, and 
 fabrics, the fruit of our industry. This country is the greatest pro- 
 ducer of gold and silver in the world. The balance of foreign trade is 
 in our favor. During the last fiscal year our exports exceeded our im- 
 ports in gold value by the sum of $166,555,855, and this balance is 
 
682 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 steadily increasing. This year Providence has blessed us with an enor- 
 mous crop of almost every production of the farm or plantation, and 
 the foreign demand is largely increased by the Eussian war. Eussia is 
 our great competitor in supplying Europe with bread, and she now 
 will consume her own products. We have now reached the coin bafiis 
 in the production of commodities for the foreign market. Our expor- 
 tation of home fabrics has increased and is increasing, and we are now 
 competing with Manchester and Birmingham in the sale of products 
 that have made those cities famous throughout the world. Our manu- 
 factures of cotton, iron, and wool, now rival in foreign markets the 
 productions of the oldest countries of Europe. 
 
 During the five months of President Hayes's administration, we 
 have made an actual accumulation of currency, and of gold and silver 
 coin and bullion, of $44,340,832. From the 1st of Ma.y to this time 
 we have added to our coin reserve $20,000,000 by the sale of bonds, 
 without disturbing the money market and with gold steadily on the 
 decline. We have reduced the public debt since the 1st of March by 
 the sum of $29,441,824. "We have conducted the vast operations in 
 our loans, already referred to, without disturbing the course of trade or 
 causing a shipment of gold. All the fears of these movements have 
 been proved to be groundless. 
 
 We are now within five degrees of the specie standard. We have 
 still seventeen months before us in which to complete the task. The 
 same progress that has been made since the 1st of March, continued 
 twelve months longer, will certainly bring us to specie payments. I 
 feel confident in saying to you this day that, if undisturbed, with or 
 without a change of the law, every dollar of United States notes will 
 before the time fixed for resumption buy as much as can be bought 
 with an equal amount of either gold or silver. A construction of the 
 resumption act has often been pressed upon the Department which, if 
 correct, would make it still more easy to carry it into execution. It is 
 insisted that the Secretary has the power, in preparing for resumption, 
 to sell bonds for coin, and then to sell the coin for United States notes 
 to be hoarded in preparation for resumption. The Department has not 
 acted upon any such construction, but has sold gold only m the current 
 course of business, or for the actual redemption of notes supplanted by 
 national-bank notes. If this power is exercised, it should be only in 
 pursuance of the plain will of Congress. In the execution of so deli- 
 cate a duty, no power should be used except such as is clearly given. 
 
 The act of April, 1876, for the redemption of fractional currency, 
 provides that silver coin may be issued in exchange for United States 
 notes, and that such notes shall be held as a special fund for the re- 
 demption of fractional currency. This fund and the ordinary cur- 
 rency balance in the Treasury embrace the only paper money owned 
 bv the Government. The coin and legal tenders depositea in the 
 Treasury are the property of private individuals, over which it has no 
 control. 
 
 I have, fellow citizens, I hope without wearisome detail, gone over 
 some points on this (juestion of resumption. It is a duU but important 
 topic, which affects your daily affairs, and upon which my official duty 
 
CONDUCT OF PUBLIC AFFAIRS. 583 
 
 compels me to act, and I assure you that I have acted only from the 
 clearest convictions of public interest. 
 
 A currency of United States notes based upon the public credit, 
 always convertible into coin, and so limited in amount and supported 
 by reserves that its convertibility cannot be endangered, supplemented 
 by a bank currency free and open to all alike, based upon public se- 
 curities, so that in any event the note-holder is safe from loss, always 
 redeemable in coin or United States notes, unlimited in amount except 
 by the wants of business — this is the kind of paper money that will 
 start again the wheels of industry, swell out the sails of your commerce, 
 and give employment to your artisans. This, indeed, would be the 
 best paper currency in the world. Let this currency be supported by 
 a public credit against which no whisper of doubt can be uttered, and 
 your public debt will be reduced to its lowest possible burden of in- 
 terest, and will become the great depository of the savings of labor, the 
 trustee of the widow and orphan, the safe rest of capital not employed 
 in active industries. 
 
 These, as I understand them, are the great financial objects of this 
 Administration ; and with your permission and the approval of Con- 
 gress, the President may hope to celebrate his out-going with your 
 debt reduced to four per cent., and every note of the United States 
 worth par in the best coin issued from the mint. You now stand in 
 the forefront of this battle. I beseech you to uphold his hands, and 
 not let the delusions of the hour or the temporary languor of business, 
 which you share with 'the rest of the civilized world, turn you from a 
 policy which you have approved and the fruits of which you can now 
 hope to gather. 
 
 It is very common, feUow citizens, to hold the Government respon- 
 sible for hard times caxised by the ebb and flow of trade and produc- 
 tion. If the crop fails, the Administration is abused. If wages or 
 prices fall, the Government is blamed. If production exceeds the 
 market made by consumption, it is easier to abuse some officer of the 
 Government than to find out the real cause. And so it happens that, 
 under any Government, whatever may be its form, if a panic, or hard 
 times, or over-production, or a pestilence, famine or plague comes, the 
 men in office are made the scape-goats for troubles which it is far be- 
 yond their power either to produce or to remedy. And so now, when 
 throughout the world trade is languishing, and wages have fallen, and 
 industry does not reap its usual reward, it is common for demagogues 
 to say, " turn out the Administration and put us in and all will be 
 well." Such argtiments are fit only for fools. Human governments 
 can have but little influence over the causes that produce the rise and 
 fall of prices, the abundance or want of employment. These great 
 movements are governed by higher laws, and the puppets that for the 
 time hold official authority have no more influence over them than 
 flies have over the revolution of the wheel to which they cling. At 
 this time our country is the most prosperous in the world, though we 
 suffer, to some extent, from the same causes that bring stagnation to 
 the industries of all commercial countries. 
 
 I have here copious extracts from papers published in England, 
 
584 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Beleium, Germany, and France, all nations of wealth and power, in 
 profound peace, and all suffering from extreme adversitv and de- 
 pression in trade and prices. The iron trade in England nas passed 
 through extreme depression, during which some oi the largest and 
 wealthiest manufacturing concerns had to succumb to the severe reac- 
 tion, while operatives suffered in the greatest degree from the increased 
 supply of labor and greatly diminished prices. It has fallen off nearly 
 fifty per cent. The Belgian iron trade was almost extinguished and 
 the workmen employed driven to other pursuits. This industry is the 
 one that has suffered most in our own country, but we are rapidly re- 
 covering by unbounded natural resources, and by reduced cost of pro- 
 duction. I have before me an English paper showing that the exports 
 of cotton fabrics from Manchester, especially to the United States, 
 have been largely reduced. The quantity of cotton goods shipped to 
 this country has fallen off in five years from 129,000,000 yards to 
 59,000,000 yards, and that of woolen goods from 6,000,000 yards to 
 1,478,000 yards ; while our own production has enormously increased, 
 and we are now exporting both cottons and woolens. In Germany, of 
 thirty-two companies enumerated in a table I have before me, only six 
 show any dividend whatever for the last year, and the aggregate ac- 
 counts show a loss of $1,800,000 on the year's operations. As tothe 
 silk trade in France, which is one of the great branches of the industry 
 of that country, it appears, from a paper I have before me, that there 
 are about 30,000 silk looms at Lyons, and nearly half of these are now 
 idle. The number of weavers now out of employment is roughly esti- 
 mated at from twelve to fifteen thousand. I might supplement these 
 general statements by picturing the distress in all these great and rich 
 countries, compared with which the great suffering of our people is insig- 
 nificant. With us the worst is over, and the vast industry which gives 
 employment to the great body of our people — that of agriculture — ^is 
 now extremely prosperous. It is a common saying that " the farmers 
 are growing rich," and as they grow rich other industries will thrive, 
 and trade revive. To attribute the distresses, which I know you suffer 
 in common with the rest of mankind, to any causes growing out of the 
 administration of our Government, is extreme folly. Unlike the laws 
 of most European countries, our laws are framed, as far as possible, 
 to promote industry, to protect labor, and to distribute wealth. Here 
 we give to every man the same privileges, civil and political, M-liether 
 he be rich or poor, and whatever may be his condition in life. He 
 must enter into competition with others, but there are no discrimina- 
 tions against him. The remedy for periodical depressions no human 
 hand can point out or administer. That must be the result of time, 
 of industry, of economy. No doubt soon, industi'y will revive, and 
 we may expect a season of prosperity. The poor do not suffer alone 
 from hard times. The first blow always falls upon those who have 
 property investments, which are swept away, and then the evil affects 
 all classes alike. All that you can ask of the Government is that it 
 will administer the limited powers conferred upon it with the same 
 intelligence and economy that you would expect of private citizens, 
 doing all it can within those powers to confer the greatest good upon 
 
CONDUCT OP PUBLIC AFFAIRS. ^ 585 
 
 tlie greatest number. This, I believe, is now being done by the Na- 
 tional Government. 
 
 Eve^ man of you is deeply interested in the strength and power 
 of this Q-ovemment, though its operations may be far from you. This 
 was shown in the important services rendered by the general Govern- 
 ment in the . recent widely extended strikes by the employees of rail- 
 roads, which reached from Philadelphia to New Orleans, affected all 
 the great trunk lines of the country, and for a time paralyzed several 
 powerful States. For a time they threatened civil war and anarchy, 
 and caused great destruction of life and property. The Administration 
 was called upon by the Governors of West Virginia and Maryland, 
 two Democratic States, to aid in putting down domestic violence. Our 
 small army was scattered over the Western country. The last House 
 of Representatives had refused to appropriate for pay or supplies for 
 the army, lest, forsooth, it might be used in a State to put down domes- 
 tic violence. Those calls were promptly met by President Hayes, and, 
 by a judicious use of the small force at his command, and the skillful 
 action of the officers in command, especially of General Hancock and 
 General Schofield, the regular army was the chief means of suppress- 
 ing domestic violence extending to many States, and which could al- 
 most be ranked as civil war. No just man will withhold from the 
 Administration fair praise for a difficult task well done. These strikes 
 bring prominently into American politics the contest between capital 
 and labor that for many years disturbed Great Britain, and was the 
 cause of the atrocities of the reign of terror daring the French Rev- 
 olution in 1793. Happily, in this country our strikes have been local 
 and unimportant, but the great change made in our industries since the 
 war, the enormous enlargement of our mining and manufacturing in- 
 dustries, the great increase in the number of corporations and their 
 extended power and influence, compel us to consider this question, and, 
 if possible, to find a remedy. When labor is chiefly confined to the 
 cultivation of the soil on separate farms, no contest between capital 
 and labor can arise, and when, as in former times, our mechanics were 
 independent artisans, each working either alone or with a few others in 
 shops scattered throughout the country, there could be no such trouble. 
 But when great corporations or individuals employ large numbers of 
 persons who depend upon their daily labor for their daily bread, and 
 whose wages may be affected at any time by the will of the capitalist, 
 there has been, and always will be, an irrepressible conflict between 
 the man who furnishes or directs the capital and the laborer who does 
 the work. When to this was added the fact that, by recent consolida- 
 tions, great railroad companies have been formed, each doing a trans- 
 portation business larger than the whole transportation on the Missis- 
 sippi or on the lakes in the North, with officers possessing the power 
 to change at pleasure the rate of freight, and the wages of employees, 
 it was inevitable that the conflict should some time come between the 
 corporations and their employees. 
 
 Let me illustrate the enormous power that is now practically con- 
 centrated within the will of four men. When the war broke out the 
 common cry of the West was that no rebel cannon should threaten the 
 
586 SPEECHES AND EEPOETS OF JOHN SHERMAN. 
 
 commerce of the Mississippi Yalley. Our commerce should flow un- 
 taxed to the sea. The entire tonnage passing any given point on the 
 Mississippi Eiver is now estimated to be 3,000,000 tons. The great 
 lakes on the North have been spoken of since the discovery of America 
 as the wonderful provision of Nature for the vast internal commerce 
 of the continent. The whole tonnage passinjg a given point on the 
 line of the lakes is about 3,000,000 tons. The Erie canal in New 
 York, from Buffalo to Albany, has been extolled as a work of master 
 statesmen, which has contributed more to the interior development of 
 this country than any other single work, and has immortalized the 
 names of De "Witt Clinton and others. The entire tonnage of this 
 canal during the last year is officially stated at 2,418,423, and of all the 
 New York canals, including the Erie, at 4,172,179 tons. These three 
 water arteries of commerce, two natural and one artificial, float a ton- 
 nage of 10,172,179 tons, and a few years ago were, practically, the sole 
 means of transit between the East and the "West and the North and 
 the South. Now, within a very few vears, and mainly since the close 
 of the war, there have been built up four grand trunk lines of railway 
 reaching from the Atlantic seaboard far away into the "West, with their 
 lines in aU directions like the branches of great trees, their organization 
 extending to almost every hamlet in the Mississippi Yalley or the At- 
 lantic slope, and a commerce so vast that in comparison with it the 
 great water lines of communication become insignificant. 
 
 Last year the Erie Eailway carried 5,922,911 tons ; the New York 
 Central Railway carried 6,803,680 tons; the Pennsylvania Eailroad 
 carried 9,922,911 tons ; and the Baltimore and Ohio Railroad is esti- 
 mated to have carried 5,000,000 tons ; or an aggregate of 27,649,502 
 tons, being nearly three times as much as the entire commerce by water. 
 This immense commerce, which touches the business and home and life 
 of every citizen of the United States, East or "West, within the reach of 
 its influence, is controlled in all its parts by the ultimate wUl of four 
 men ; for, though there are many agents employed in this vast busi- 
 ness, with boards of directors and intermediate superintendents, yet, 
 practically, the executive and controlling power of these great corpora- 
 tions rests with their presidents, whose will or pleasure may raise tlie 
 freight on produce, and thus affect every farmer in the land, or may 
 raise or lower the wages of every employee, and thus affect the bread 
 and life of every one dependent upon these laboring men. 
 
 It is just to say that the gentlemen holding these important posi- 
 tions are among the ablest and most sagacious of the business men of 
 this country, but they must necessarily be governed in the main by the 
 interests of the corporations they represent, and must look to those 
 interests as the dominating and controlling motive that guides their 
 acts. A few years ago the freight on these roads was deemed to be 
 unduly high, and this aroused the whole farming interest of the "West, 
 under the name of (Jrangers, who were able to secure hostile legislation 
 in some of the States, and so to control public opinion that the freights 
 in due time wci-e reduced. But, more potent tlian all, the sudden de- 
 pression of business caused by the panic of 1873 led to a rivalry and 
 competition between these great lines that in a short time reduced the 
 
CONDUCT OF PUBLIC AFFAIRS. 587 
 
 rates for freight and passengers below the actual cost of the business, 
 thus tending to destroy the capital invested in more than two thirds of 
 the railwa;^ lines in the United States, and greatly crippHng the finan- 
 cial condition of the trunk lines. These corporations have endeavored 
 in various ways to come to an agreement ; but either because they were 
 not faithfully observed, or from the inherent difficulty of making com- 
 binations between powerful rivals, the agreements have been succes- 
 sively broken and abandoned, and now it may be said that, on an aver- 
 age, the amount received for f rei^t and passengers does not pay the 
 actual cost of running the lines. The result has been that the railroad 
 companies, unwilling to see their property entirely destroyed, have 
 gradually reduced the wages of the employees until — if we can beheve 
 what has been said— in some cases they are barely sufficient to pay for 
 the merest necessaries of life. Hence the strikes. 
 
 It has always been feared that our Eepubhean system of Govern- 
 ment, which depends upon the will of the majority, could not long 
 survive the condition of affairs developed by these strikes. Ma'caulay 
 and Alison have both described, in prophetic language, the effects of 
 a struggle between capital and labor in a govei'nment like ours, b|it, 
 like most English writers, they overlooked the strong conservative 
 power in a government by the people, where the majority must always 
 be independent farmers, mechanics, and working men who have respect 
 for law, religion, and order. We have, no doubt, large numbers of men 
 who will not reason about this matter, but will rush to the torch or to 
 crime to cure what they regard as wrongs, but the great body of our 
 people have always shown sufficient moderation and intelligence to lead 
 them to find a peaceful and proper remedy for aU the ills which life 
 may develop. 
 
 And now, fellow citizens, I beg you not to believe that this is an 
 easy task, and not to reject counsels of moderation and forbearance. 
 The laborer is worthy of his hire, and, in this country especially, should 
 always receive enough to maintain his family in decency and comfort. 
 But we can not secure this great blessing by intimidating capital, by 
 burning houses, by preventing other people from laboring, or by any 
 violence or crime. Capital, when threatened, shrinks away, and with- 
 out it your labor cannot be employed. You can encourage its employ- 
 ment only by a reasonable prospect of a just reward in the way of 
 interest or profit. 
 
 I will not undertake in this speech to state ideas that have become 
 settled convictions, because it would take too long ; but my conclusion 
 years ago, when this subject was under debate in the Senate, was that 
 the framers of the Constitution had wisely provided an authority to 
 govern, by general laws, inter-State railways, and that in this way con- 
 troversies between capital and labor may be prevented where they 
 affect the commerce of the country. That authority is the Congress of 
 the United States. No State is broad enough to deal with this ques- 
 tion, for these railroad hnes extend through many States. ITo local 
 authority can deal with it, because the local authorities may be over- 
 awed, or act under the influence of passion or resentment. Mayors 
 and governors, and local militia, are well enough for the ordinary pro- 
 
588 SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 tection of society, but they are not fitted to deal with a contest between 
 great bodies of citizens in the same community, where the divisions are 
 so wide and broad as to amount to domestic violence or civil war. The 
 Congress of the United States is expressly authorized to protect a State 
 against domestic violence, and to regulate commerce with foreign 
 nations and among the several States, and the inter-State commerce 
 thus provided for is now conducted mainly by these great lines of rail- 
 way. The framers of the Constitution could not foresee railroadfi, or 
 the vast extension of our country and its varied interests ; but they did 
 provide that commerce, in aU its forms, foreign and domestic, by what- 
 ever agency conducted, might be controlled by an authority more free 
 from local prejudice than any other that could be selected. My hope, 
 then, is that Congress will pass laws to estabhsh and limit maximum 
 rates of freight, so that the production of a farmer may not be in dan- 
 ger of confiscation by exorbitant rates ; that it will limit and restrain 
 tlie reduction of freights so as to destroy the ability of railroad com- 
 panies' to pay fair prices for honest labor, and that it will prevent them 
 from malting paupers of men who perform essential functions in com- 
 merce. Congress may thus, by wise general laws, control the most 
 powerful corporations as well as the humblest citizens. 
 
 All men ought, however, to understand, whatever may be their 
 wrongs or injuries, that in our free system there is but one remedy, 
 and that is by peaceful, lawful appeals to the constituted authorities, 
 both State and National. No man has a right. to redress his injuries 
 by violence or crime. No government can hve where mobs can make 
 laws and prevent laborers from working. The right of a laborer to 
 refuse to work without such pay as he demands is clear and unques- 
 tionable ; but, whatever civil remedies the law may give him, he can 
 not resort to violence to prevent either the movement of commerce or 
 the employment of others, without endangering our whole system and 
 encountering the full force and power of the Government. The very 
 fact that the stopping of trains on the four great lines of railway would 
 bring hunger and want to millions of laboring people, and deprive 
 other millions of a market for their produce, would array against strik- 
 ing laborers who resorted to violence not only the whole power of the 
 Government, but the moral and physical force of the remainder of the 
 community. When laboring men, or any class of men, resort to vio- 
 lence and crime to protect even real rights, they must be dealt with in 
 the same way as others who violate the law, however much men may 
 sympathize with their distress. I am stating only what the law has 
 always provided, and I state it with full sympathy in an honest demand 
 by laboring men for fair wages for a fair day's work. We must obey 
 the law and we must punish any violation of . the law. Life and prop- 
 erty must be protected. These are the conditions upon which society 
 exists, and no party can temporize or hesitate in the face of an open 
 revolt against these principles of public order. But, while this is true, 
 wo must not fail to exairiine the complaint of the humblest citizen and 
 give him all tlic protection and all the remedy that a just Government 
 can give. 
 - And now, fellow citizens, in conclusion, allow me to express, so far 
 
ANNUAL REPORT TO CONGRESS. 589 
 
 as language enables me, my heartfelt thanks for the courtesy and kind- 
 ness you always haye shown me, not only during this short visit, but in 
 all the time I have lived among you. I can only say, I thank you. 
 
 ANNUAL EEPOET TO CONGKESS. 
 
 Tbbasurt Depabtmekt, 
 WAaHiNGTON, D. (J., December 8, 1877. 
 
 Sie: 
 
 ******** 
 
 The contract of August 24, 1876, made by the Secretary of the 
 Treasury with certain parties, for the negotiation of $300,000,000 f6ur 
 and one half per cent, bonds, had so far been executed on the 1st of 
 March, 187Y, that $90,000,000 had been sold to the associated con- 
 tractors, and calls had been made for the redemption of a like amount 
 of five-twenty bonds. 
 
 While the contract expired in terms on the 30th day of June, 1877, 
 it contained a stipulation that it might be terminated by the Secretary 
 of the Treasury, upon ten days' notice, after the 4th of March, 1877. 
 
 In May last it became apparent to the Secretary that, by a favorable 
 change in the money market, four per cent, bonds could be sold at par, 
 in coin, with great advantage to the Government; and, availing him- 
 self of the privilege secured by the contract, he gave notice that he 
 would limit the sale of four and one half per cent, bonds to $200,- 
 000,000. 
 
 On the 11th day of May it was agreed that a portion of the latter 
 should be sold under the authority of the resumption act for resump- 
 tion purposes, and subscriptions were rapidly made until the aggregate 
 reached $200,000,000, of which $185,000,000 were applied to the re- 
 demption of an equal amount of six per cent, bonds. 
 
 On the 9th day of June, 1877, the Secretary entered into a contract 
 with a portion of the previously associated parties for the sale at par, 
 in coin, of the four per cent, bonds of the United States, authorized to 
 be issued by the refunding act. This contract was in substance similar 
 to previous contracts, but was to terminate on the 30th day of June, 
 1878, with the right reserved to the United States to terminate it _ at 
 any time after the 31st of December, 1877, by giving ten days' notice 
 thereof to the contracting parties. This contract also contained a 
 stipulation, as follows : 
 
 It is also agreed that the parties of the second part shall offer to the people of 
 the United States, at par and accrued interest in coin, the four per cent, registered 
 consols and fonr per cent, coupon consols of the denominations of $50 and $100 
 embraced in this contract, for a period of thirty days from the public notice of such 
 subscriptions, and in such cities and upon such notice as the Secretary of the Trea- 
 sury may prescribe prior to the opening of the lists ; and further, to offer to the 
 subscribers the option of paying in installments extending through three months. 
 
 Under this contract, invitations having been published, subscriptions 
 to this loan were opened on the 16th of June, 1877. Within the period 
 
590 SPEECHES AND REP0KT8 OF JOHN" SHERMAN. 
 
 of thirty days thereafter the Bubscriptions had reached the sum of 
 $75,496,550, which were payable within ninety days from the date of 
 subscription, or on or before the 16th of October. Every subscription 
 to these bonds has been paid, and of the proceeds $50,000,000 nave 
 been applied to the redemption of an equal amount of six per cent, 
 bonds. The residue has been applied to resumption purposes, as here- 
 after stated. The annual reduction of interest on the public debt thus 
 made is as follows : 
 
 By the sale of $188,000,000 four and one half per cent, bonds $2,775,000 
 
 By the sale of $50,000,000 four per cent, bonds 1,000,000 
 
 Aggregating $3,775,000 
 
 In October last, after the payment of the popular subscriptions, 
 arrangements were perfected to open further subscriptions to the four 
 per cent, loan, and a call was about to issue for ten millions of six per 
 cent, bonds ; but it was temporarily postponed by reason of the agitar 
 tion of the repeal of the resumption act and the remonetization of sil- 
 ver, which the associates believed would prevent further sales of these 
 bonds. For this reason they declined to offer them, and no further 
 call of six per cent, bonds was therefore made. 
 
 On the 19th of June, pending the subscriptions, the Secretary in- 
 formed the associates, in an official letter, that, as the Government 
 exacts in payment for these bonds their face value in gold coin, it was 
 not anticipated that any future legislation of Congress, or any action 
 of any department of the Government, would sanction or tolerate the 
 redemption of the principal of these bonds, or the payment of the 
 interest thereon, in coin of less value than the coin authorized by law 
 at the time of their issue — ^being gold coin. The general confidence of 
 the public that so just a principle of good faith would be observed by 
 the Government no doubt largely contributed to the success of the loan. 
 Whatever policy the Government may adopt at any time in its system 
 of coinage, it should not reduce the value of the coin in which it pays 
 its obligations below that it demanded and received. The Secretary 
 earnestly urges Congress to give its sanction to this assurance. 
 
 The high credit of the United States, the faithful observance of its 
 public obligations, the abundance of its wealth and resources, the rapid 
 reduction of its debt, the great accumulation of savings among the 
 people, the favorable state of foreign trade — all contribute to enable 
 the United States to borrow both from its own people and in foreign 
 markets on the most favorable terms. 
 
 The Secretary does not doubt that, if no questions had arisen dis- 
 turbing the public credit, the six per cent, bonds would be rapidly 
 paid off by the proceeds of the four per cent, bonds, sold at pai- in coin 
 or its equivalent. 
 
 The highest public credit can be secured only by a constant observ- 
 ance of every public engagement, constnied according to its letter and 
 spirit. Thus far this course has been faithfully pursued by the United 
 States. "Without it, our ample i-esources and ability to pay are of no 
 avail. At a time when we arc enjoying such credit, and rapidly se- 
 curing the benefit of it by the reduction of the rate of interest from 
 
ANNUAL REPORT TO CONGRESS. 591 
 
 ■I 
 
 six to four per cent., it would seem to be a grievous error to raise a 
 question about tbe coin in which the interest is payable. Self-interest 
 alone, without respect to pride in public credit, would lead us to secure 
 so great a benefit as would be the saving of one third of the interest of 
 the public debt. 
 
 Of the six per cent, loans about $660,000,000 are now redeemable at 
 the pleasure of the United States, and of the whole debt $1,452,000,000 
 are redeemable before or on the 1st of May, 1881. By the reduction 
 of the interest from six to four per cent, on the public debt now re- 
 deemable, there would be a saving of $13,200,000 annually ; and by 
 the reduction to four per cent, of the interest on the total debt redeem- 
 able by the 1st of May, 1881, there would be a saving of $22,006,205.50 
 per annum. 
 
 Any measure that creates distrust or doubt will arrest this process, 
 and, by disabling the United States from borrowing, will compel the 
 continued payment of the high rate of six per cent. 
 
 If, therefore, the public interests demand the issue of silver dollars 
 — a subject hereafter discussed — it is respectfully submitted to Congress 
 that an express exception be made requiring that gold coin alone shall 
 be paid for principal or interest on bonds issued to public creditors 
 since February 12, 1873, the amount of which is $592,990,T00. These 
 bonds have entered into the markets of the world. If the market value 
 of the silver in the new coin is less than that of the gold dollar, a forced 
 payment in the new coin is a repudiation of a part of this debt. The 
 saving that would thus be made is utterly insigniiicant compared with 
 the injury done to the public credit. 
 
 And even as to bonds issued prior to February 12, 1873, public 
 policy and enlightened self-interest require us to pay them in the coin 
 then in circulation and contemplated by both parties as the medium of 
 payment. Silver doUars have not been in circulation in the United 
 States since 1837, and since 1853 fractional silver coins have been in 
 circulation and a legal tender only for limited sums, and have not been 
 contemplated as the medium of payment since any considerable portion 
 of the outstanding bonds were issued. The silver dollar was, in fact, 
 more valuable than the gold doUar. It does not become a nation like 
 ours to avail itself of the market depreciation of silver to gain a small 
 saving by the payment of silver dollars instead of the coin contem- 
 plated when the bonds were issued. A far greater saving and higher 
 public honor can be secured by the sale of four per cent, bonds under 
 the refunding act and the payment of outstanding bonds in gold coin. 
 An assurance given by Congress of such payment would at once secure 
 the complete success of the refunding process and greatly advance the 
 present high credit of the United States. 
 
 Another practical impediment in the sale of bonds was that, under 
 the law, the Secretary could receive coin alone in payment for them, 
 and the only existing coin that could be received, under the law, was 
 gold coin. As this was not in general circulation, it was impractica- 
 ble for the people to pay it into the Treasury for these bonds. There- 
 fore it became necessary to conduct all sales through third parties, who 
 could receive bank bills, United States notes, drafts, certificates, and 
 
592 SPEECHES AND EEP0RT8 OF JOHN SHERMAN. 
 
 other forms of commercial paper, and convert them into coin. The 
 Secretary, therefore, recommends that he be authorized to sell such 
 bonds either for coin or for its equivalent in United States notes. 
 
 By the resumption act approved January 14, 1875, the Secretary of 
 the Treasury is required to redeem legal-tender notes to the amount of 
 eighty per centum of the sum of national-bank notes issued, and to 
 continue such redemption, as circulating notes are issued, until there 
 shall be outstanding the sum of $300,000,000 of such legal-tender 
 United States notes, and no more. 
 
 In obedience to this act, there have been issued since March 1, 1877, 
 to national banks, $16,123,995 of circulating notes, and there have been 
 redeemed, retired, and canceled $12,899,196 of United States notes, 
 leaving outstanding on the 1st instant the sum of $351,340,288. 
 
 By the same act it is provided that, on and after the first day of 
 January, 1879, the Secretary of the Treasury shall redeem in coin the 
 United States legal-tender notes then outstanding, on their presentation 
 for redemption at the oflBce of the Assistant Treasurer oi the United 
 States in the city of New York, in sums of not less than fifty dollars. 
 " And, to enable the Secretary of the Treasury to prepare and provide 
 for the redemption in this act authorized or required, he is authorized 
 to use any surplus revenues from time to time in the Treasury not 
 otherwise appropriated, and to issue, sell, and dispose of, at not less 
 than par in coin, either of the descriptions of bonds of the United 
 States described in the act of Congress approved July 14, 1870, en- 
 titled ' An act to authorize the refunding of the national debt,' with 
 like qualities, privileges, and exemptions, to the extent necessary to 
 cany this act into full effect, and to use the proceeds thereof for the 
 purposes aforesaid." 
 
 In obedience to this provision, the Secretary has sold at par, for 
 coin, $15,000,000 four and one half per cent, bonds, or $5,000,000 
 during each of the months of May, June, and July last, and has sold 
 $25,000,000 at par in coin of four per cent, bonds, or $5,000,000 for 
 each of the months of August, September, October, November, and 
 December. Of the coin thus received, $4,000,000 have been sold for 
 the redemption of United States notes, and the residue is in the Treas- 
 ury. The surplus revenue has also, under the same authority, been ap- 
 plied to the redemption of the residue of United States notes, not 
 redeemed by the sale of coin ■ as above stated, and the balance is held 
 in the Treasury in preparation for resumption. 
 
 These operations, aided greatly, no doubt, by the favorable condition 
 of our foreign commerce, have advanced the mai'ket value of United 
 States notes to ninety-seven and three eighths per cent., or within nearly 
 two and a half per cent, of coin. They have also conclusively demon- 
 strated the practicability of restoring United States notes to par in coin 
 by the time fixed by law, and that without disturbing either domestic 
 or foreign trade or commerce. Every step has been accompanied with 
 growing business, with the advance of public credit, and the steady 
 appreciation of 1 Tnited States notes. The export of bullion has been 
 arrested, and our domestic su]iply has accumulated in the Treasury. 
 The exportation of other domestic products has been largely increased, 
 
ANNUAL REPORT TO CONGRESS. 593 
 
 with great advantage to all industries. The course adopted under the 
 resumption act, as herein set forth, if pursued, will probably be followed 
 with like favorable results, and a suflScient fund for the maintenance of 
 resumption will doubtless accumulate in the Treasury at or before the 
 date fixed bj^^law. The provision for free banking has aided this pro- 
 cess by allaymg imaginar;^ fears that would otherwise have been aroused 
 by the withdrawal of United States notes. 
 
 The Secretary can not too strongly urge the firm maintenance of a 
 policy that will make good the promise contained in the United States 
 notes when issued — a promise repeated in the act " to strengthen the 
 public credit," approved March 18, 1869, and made definite and effec- 
 tive by the resumption act. 
 
 Dishonored notes, less valuable than the coin they promise, though 
 justified by the necessity which led to their issue, should be made good 
 as soon as practicable. The public credit is injured by failure to redeem 
 them. Every holder who was compelled by law to receive them has 
 been deprived of a part of his just due. Now, when our national re- 
 sources are ample, when the process of appreciation is almost complete, 
 when the wisdom of the existing law has been demonstrated, it is the 
 dictate of good policy and good faith to continue this process of pre- 
 parat;ion, so that at or before the time fixed by law every United States 
 note will have equal purchasing power with coin. To reverse this pol- 
 icy in the face of assured success will greatly impair the public credit, 
 arrest the process of reducing the interest on the public debt, and cause 
 anew the financial distress our country has recently suffered. 
 
 The resumption act contemplates the reduction by the first day of 
 January, 1879, of the amount of United States notes to $300,000,000, 
 by the cancellation of such notes to the extent of eighty per cent, of 
 the circulation issued to national banks. 
 
 The amount of circulation so issued may not be sufficient to accom- 
 plish the reduction contemplated ; the Secretary therefore recommends ' 
 that authority be given to gradually fund 5nto four per cent, bonds all 
 United States notes in excess of $300,000,000, the bonds to be issued 
 at par for coin or its market equivalent in United States notes. This 
 will be in harmony with the declared object of existing law, and will 
 open an easy way by which the people may invest their savings in a 
 public security. Or the reduction of United States notes to the maxi- 
 mum of $300,000,000 may be accomplished if Congress will ^.uthorize 
 the coinage of the silver dollar, to be exchanged for United States notes 
 on the demand of the holder, such notes to be retired and canceled. 
 
 Existing laws do not clearly define whether United States notes, 
 when redeemed after January 1, 1879, may be reissued. The first sec- 
 tion of the resumption act plainly provides for the permanent substitu- 
 tion of silver coin for the whole amount of fractional currency out- 
 standing. Section 3 plainly provides for the permanent reduction of 
 United States notes to an amount not exceeding $300,000,000. No dis- 
 tinct legislative declaration is made in the resumption act that notes 
 redeemed after that limit is reached shall not be reissued ; but section 
 3579 of the Revised Statutes of the United States provides that, " when 
 any United States notes are returned to the Treasury, they may be re- 
 38 
 
594 SPEEOHES AND REPORTS OF JOHN SHERMAN. 
 
 issued from time to time, as the exigencies of the public interest may 
 require." 
 
 The Secretary is of the opinion that, under this section, notes, when 
 redeemed after the Ist of January, 1879, if the amount outstanding is 
 not in excess of $300,000,000, may be reissued as the exigencies of the 
 public service may require. A note redeemed with coin is in the Treas- 
 ury, and subject to the same law as if received for taxes, or as a bank 
 note when redeemed by the corporation issuing it. The authority to 
 reissue it does not depend upon the mode in which it is returned to the 
 Treasury. But this construction is controverted, and should be settled 
 by distinct provisions of law. It should not be open to doubt or dis- 
 pute. The decision of this question by Congress involves not merely 
 the construction of existing law, but the public policy of maintaining in 
 circulation United States notes, either with or without the legal-tender 
 clause. These notes are of great public convenience : they circulate 
 readily ; are of universal credit ; are a debt of the people without inter- 
 est ; are protected by every possible safeguard against counterfeiting ; 
 and, when redeemable in coin at the demand of the holder, form a 
 paper currency as good as has yet been devised. It is conceded that a 
 certain amount can, with th^ aid of an ample reserve in coin, be always 
 maintained in circulation. Should not the benefit of this circulation 
 inure to the people, rather than to corporations, either State or national? 
 The Government has ample facility for the collection, custody, and care 
 of the coin reserves of the country. It is a safer custodian of such re- 
 serves than a multitude of scattered banks, can be. The authority to 
 issue circulating notes by banks is not given to them for their benefit, 
 but for the public convenience, and to enable them to meet the ebb and 
 flow of currency caused by varying crops, productions, and seasons. It 
 is indispensable that a power should exist somewhere to issue and loan 
 credit money at certain times, and to redeem it at others. This func- 
 tion can be performed better by corporations than by the Government. 
 The Government cannot loan money, deal in bills of exchange, or make 
 advances on property. 
 
 The Secretary ventures to express the opinion that the best cuirency 
 for the people oi the United States would be a carefully limited amount 
 of United States notes, promptly redeemable on presentation in coin, 
 and supported by ample reserves of coin, and supplemented by a system 
 of national banks, organized under general laws, free and open to all, 
 with power to issue circulating notes secured by United States bonds 
 deposited with the Government, and redeemable on demand in United 
 States notes or coin. Such a system will secure to the people a safe 
 currency, of equal value in all parts of the country, receivable for all 
 dues, and easily convertible into coin. Interest can thus be saved on so 
 much of the public debt as can be conveniently maintained in perma- 
 nent circulation, leaving to national banks the proper business of such 
 corporations, of providing currency for the varying changes, the ebb 
 and flow of trade. 
 
 The legal-tender quality given to United States notes was intended 
 to maintain them in forced circulation, at a time when their deprecia- 
 tion was inevitable. When they are redeemable in coin this quality 
 
ANNUAL REPORT TO CONGRESS. 595 
 
 may either be withdrawn or retained, without affecting their use as 
 currency in ordinary times. But all experience has shown that there 
 are periods when, under any system of paper money, however carefully 
 guarded, it is impracticable to maintain actual coin redemption. Usu- 
 ally contracts wiU be based upon current paper money, and it is just 
 that, during a sudden panic or an unreasonable demand for coin, the 
 creditor should not be allowed to demand payment in other than the 
 currency upon which the debt was contracted. To meet this contin- 
 gency, it would seem to be right to maintain the legal-tender quality 
 of the United States notes. If they are not at 'par with coin, it is the 
 fault of the Government and not of the debtor ; or, rather, it is the 
 result of unforeseen stringency not contemplated by the contracting 
 parties. 
 
 In establishing a system of paper money designed to be permanent, 
 it must be remembered that heretofore no expedient has been devised, 
 either in this or other countries, that in times of panic or adverse trade 
 has prevented the drain and exhaustion of coin reserves, however large 
 or carefuUy guarded. Every such system must provide for a suspension 
 of specie payment. Laws may forbid or ignore such a contingency, 
 but it will come ; and, when it comes, it cannot be resisted, but should 
 be acknowledged and declared, to prevent unnecessary sacrifice and 
 ruin. In our free government the power to make this declaration wlU 
 not be willingly intrusted to individuals, but should be determined by 
 events and conditions known to all. It is far better to fix the maximum 
 of legal-tender notes at $300,000,000, supported by a minimum reserve 
 of $100,000,000 of coin, only to be used for the redemption of notes 
 not to be reissued until the reserve is restored. A demand for coin 
 sufficient to exhaust such a reserve may not occur ; but, if events force 
 it, its existence would be known and could be declared, and would 
 justify a temporary suspension of specie payments. Some such expe- 
 dient could no doubt be provided by Congress for an exceptional emer- 
 gency. In other times the general confidence in these notes would 
 maintain them at par in coin, and justify their use as reserves of banks 
 and for the redemption of bank notes. 
 
 In this connection, the Secretary calls the attention of Congress to 
 the report of the Comptroller of the Currency. 
 
 The number of national banks in existence on the 1st day of Novem- 
 ber last was 2,080. The amount of their circulating notes retired within 
 the year prior to ITovember 1, 187Y, is $20,681,637. The amount of 
 circulating notes issued to national banks dm'ing the same period is 
 $16,306,030. The aggregate amount of their circulation outstanding is 
 $316,775,111. Their loans and discounts amount to $888,243,290.17. 
 
 The general solvency of the national banks, as now organized, and 
 their benefit to the people, have been denaonstrated during a period of 
 fourteen years. No one has lost a dollar by receiving their notes. They 
 have been less subject to revulsion and failure than any other corpora- 
 tions or firms. Their organization under a general law containing every 
 safeguard which experience has suggested — ^the supervision over them 
 by the Comptroller of the Currency, the frequent and unforeseen ex- 
 aminations to which they are subject, the sworn statements required of 
 
596 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 them of every detail necessary to disclose their condition, tlie absolute 
 security of their issues — ^makes this system of banking as safe and effi- 
 cient as any yet devised. The remaining condition to perfect this sys- 
 tem is that their notes should be readily convertible into coin. While 
 United States notes were irredeemable and depreciated, it was not pos- 
 sible that bank notes should rise above the par of United States notes. 
 The true test of this system of banking will come when the United 
 States notes are maintained at par with coin; then the banks must 
 redeem their notes in coin or United States notes equal to coin. 
 
 The ample statistics given by the Comptroller, and his comparison 
 of the reserves and condition of the national banks with the reserves 
 and condition of other systems of banking in specie-paying times, give 
 assurance that the national banks are able to redeem their circulating 
 notes in coin at any date iixed upon by the Government. They cer- 
 tainly should not enjoy the franchise of circulating as money their 
 non-interest-bearing notes, unless they are prepared to redeem them. 
 The present system of redemption of bank notes at the Treasury of the 
 United States can be continued after United States notes are at par with 
 coin as well as now. If experience should show that additional reserves 
 are necessary, they can be required. Then, as now, their notes will be 
 amply secured by the deposit of bonds, and confidence in this security 
 will dispel the fear of failure, which under former systems has been 
 the cause of sudden runs or demands on banks for payment of their 
 notes. If the policy of the Government should be to maintain in cir- 
 culation at pai' with coin a maximum of three hundred milHonB of 
 United States notes, and to support them with a reserve of not less 
 than one hundred millions in coin, these notes will be the natiu'al 
 reserves of the banks, and more convenient for that purpose than a 
 deposit of coin in their vaults. 
 
 The real danger that in former systems threatened a bank was its 
 liability for deposits. If these were suddenly withdrawn or greatly 
 diminished, the note-holder was the chief sufferer. The first rumor of 
 weakness about a bank brought a demand from depositors and note- 
 holders alike ; but imder the national banking system the note-holder 
 is secure and indifferent whether the bank breaks or not, and the 
 depositor, who is a voluntary creditor of the bank, is not likely to 
 hasten its fall. He is usually paid by a transfer of credits, and in most 
 cases is a debtor as well as a creditor of the bank. Scarcely five per 
 cent, of deposits are paid by currency. 
 
 The capital stock of national banks paid in is now $179,-1:67,771, and 
 the surplus fund and other undivided profits is now $166,34:8,799.96. 
 The banks are exceptionally strong in their cash reserves. Their con- 
 dition is as favorable to maintain redemption in coin as in United 
 States notes, and the Secretary concurs in tne opinion of the Comptrol- 
 ler that they ought to be, can be, and will be prepared for redemption 
 of tlieir circulatnig notes in coin or in United States notes equal to coin 
 by the time fixed dv law, witliont interfering with their ability or dis- 
 position to render their aid, as now, by loans and discounts, in conduct- 
 mg the business and exchanges of the country. The market value of 
 their circulating note is ninoty-sovon and three eighths per cent. The 
 
ANNUAL EEPORT TO CONGEESS. 597 
 
 difference is not equal to six months' interest on the bonds deposited 
 for the security of the notes, and not five per cent, of their surplus on 
 hand. It is scarcely to be credited that the payment of this will dis- 
 turb in any way the even course of their business. 
 
 Complaint is made by the banks and bankers of the countiy of the 
 tax on their deposits, and attention is called to what is said by the 
 Comptroller of the Currency as to the repeal of this tax. While the 
 necessity exists for collecting the amount of revenue now required, the 
 Secretary is not prepared to recommend such repeal ; but whenever a 
 sufficient amount of revenue for the support of the Government can be 
 derived from the other articles now subject to taxation, a reduction of 
 bank taxation will then be advisable. 
 
 The cost of the redemption of bank notes in United States notes at 
 the Treasury, under the present system, does not exceed pne sixth of 
 one per cent, on the amount redeemed, and is refunded to the Gov- 
 ernment by the banks. The redemption is a great convenience to them 
 and to the public, and should be continued. 
 
 The act creating the national banking system recognizes the charac- 
 ter of these banks as Government agents or depositaries. They could 
 greatly assist in the process of refunding ; they are conveniently dis- 
 tributed so as to be within easy reach of the people of the United 
 States. The Secretary is of the opinion that they can be under exist- 
 ing law, and ought to be, made the agents of the Government in the 
 sale of bonds, upon conditions that will make it for their interest to 
 promote such sales, and will be safe and advantageous to the Govern- 
 ment. Various plans have been submitted to secure their cooperation, 
 and the best wiU be adopted. 
 
 The Secretary calls the attention of Congress to the report of the 
 Director of the Mint. The general management of the mints and 
 assay offices, and the amount, accuracy, and perfection of their work, 
 are highly satisfactory. The coinage of gold and silver, their relative 
 value to each other, and their legal-tender qualities, are now the sub- 
 jects of discussion and legislation in aU civilized countries. These 
 questions are especially important to^he United States, now in transi- 
 tion from an irredeemable paper currency to a mixed currency redeem- 
 able in coin, and will justify the Secretary in a fuller presentation of 
 these topics than is usual in his annual report. 
 
 The resumption act of January 14, 1875, provided for the exchange 
 and substitution of silver coin for fractional currency. .To facilitate 
 this exchange, the joint resolution approved July 22, 1876, provided 
 that such com should be issued to an amount not exceeding $10,000,- 
 000, for an equal amount of legal-tender notes. It also provided that 
 the aggregate amount of such coin and fractional currency outstanding 
 should not exceed, at any time, $50,000,000. That limit would have 
 been reached some time since if the whole amount of fractional cur- 
 rency issued and not redeemed had been held to be " outstanding." 
 It was well known, however, that a very large amount of fractional 
 currency issued had been destroyed, and could not be presented for 
 redemption, and could hardly be held to be "outstanding." The 
 Treasurer of the United States, the Comptroller of the Currency, and 
 
598 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 the Director of the Mint concurred in estimating the amount so lost 
 and destroyed to be not less than $8,083,513. 
 
 As it was evident that Congress intended to provide an aggregate 
 issue of $50,000,000 of such coin and currency in circulation, the 
 Secretary directed the further issue of silver coin equal in amount to 
 the currency estimated to have been lost and destroyed. 
 
 It is submitted that the limitation upon the amount of such frac- 
 tional coin to be issued in exchange for United States notes should be 
 repealed. This coin is readily taken, is in great favor with the people, 
 its issue is profitable to the Government, and experience has shown 
 that there is no difficulty in maintaining it at par with United States 
 notes. The estimated amount of such coin in circulation in the United 
 States in 1860, at par with gold, was $43,000,000. Great Britain, 
 with a population of 32,000,000, maintains an inferior fractional coin 
 to the amount of $92,463,500,* at par with gold, and other nations 
 maintain a much larger per capita amount. The true limit of such 
 coin is the demand that may be made for its issue ; and if only issued 
 in exchange for United States notes, there is no danger of an excess 
 being issued. 
 
 By the coinage act of 1873 any person may deposit silver bullion 
 at the mint to be coined into trade dollars of the weight of 420 grains 
 troy, upon the payment of the cost of coinage. This provision was 
 made at a time when such a dollar was worth in the market $1-0213 
 in gold, and was designed for the use of trade in China, where silver 
 was the only standard. By the joint resolution of July 22, 1876, 
 passed when the trade dollar in market value had fallen greatly below 
 one dollar in gold, it was provided that it should not be thereafter a 
 legal tender, and the Secretary of the Treasury was authorized " to 
 limit the coinage thereof to such an amount as he may deem sufficient 
 to meet the export demand for the same." Under these laws the 
 amount of trade dollars issued, mainly for exportation, was $30,710,- 
 400. In October last it became apparent that there was no furtlier 
 export demand for trade dollars, but deposits of silver bullion were 
 made, and such dollars were denjanded of the mint for circulation in 
 the United States, that the owner might secure the difference between 
 the value of such bullion in the market and United States notes. At 
 the time the mints were fully occupied by the issue of fractional and 
 other coins on account of the Government. Therefore, under the 
 authority of the law referred to, the Secretary directed that no furtlier 
 issues of trade dollars should be made until necessary again to meet 
 an export demand. In case another silver dollar is authorized, the 
 Secretary recommends that the trade dollar be discontinued. 
 
 The question of the issue of a silver dollar for eirculation as money 
 has been much discussed and carefully examined by a commission or- 
 ganized by Congress, which has recommended the coinage of the old 
 silver dollar, with such legislative provision as will maintain its cur- 
 rent value at par with gold, its issue is respectfully recommended. A 
 gold coin of the denomination of one dollar is too small for convenient 
 
 * As estimated by Mr. Froemantlo, Deputy Maeter of the Royal Mint, December, IS'TB. 
 
ANNUAL EEPOET TO CONGRESS. 599 
 
 circulation, while such a coin in silver would be convenient for a mul- 
 titude of daily transactions, and is in a form to satisfy the natural in- 
 stinct of hoarding. 
 
 Of the metals, silver is of most general use for coinage. It is a 
 part of every system of coinage, even in countries where gold is the 
 sole legal standard. It best measures the common wants of Hfe, but, 
 from its weight and bulk, is not a convenient medium in the larger 
 exchanges of commerce. Its production is reasonably steady in amount. 
 The relative market value of silver and gold is far more stable than 
 that of any other two commodities ; still, it does vary. It is not in 
 the power of human law to prevent the variation. This inherent diffi- 
 culty has compelled all nations to adopt one or the other as the sole 
 standard of value, or to authorize an alternative stiandard of either, or 
 to coin both metals at an arbitrary standard, and to maintain one at 
 par with the other by limiting its amount and legal-tender quality, and 
 receiving or redeeming it at par with the other. 
 
 It has been the careful study of statesmen for many years to secure 
 a bimetallic currency not subject to the changes of market value, and 
 so adjusted that both kinds can be kept in circulation together, not 
 alternating with each other. The growing tendency has been to adopt 
 for coins the principle of " redeemability " applied to different forms 
 of paper money. By limiting tokens, silver and paper money, to the 
 amount needed for business, and promptly receiving or redeeming all 
 that may at any time be in excess, all these forms of money can be 
 kept in circulation, in large amounts, at par with gold. In this way 
 tokens of inferior intrinsic value are readily circulated, but do not de- 
 preciate below the paper money into which they are convertible. The 
 fractional silver coin now in circulation, though the silver of which it 
 is composed- is of less market value than the paper money, passes read- 
 ily among all classes of people, and answers all the purposes for which 
 it was designed. And so the silver dollar, if restored to our coinage, 
 would greatly add to the convenience of the people. But this coin 
 should be subject to the same rule, as to issue and convertibility, as 
 other forms oi money. If the market value of the silver in it were 
 less than that of gold coin of the Skme denomination, and it were is- 
 sued in unlimited quantities, and made a legal tender for all debts, it 
 would demonetize gold and depreciate our paper money. 
 
 The importance of gold as the standard of value is conceded by all. 
 Since 1834 it has been practically the sole coin standard of the United 
 States, and since 1815 has been the sole standard of Great Britain. 
 Germany has recently adopted the same standard. France and other 
 Latin nations have suspended the coinage of silver, and, it is supposed, 
 wiU gradually either adopt the sole standard of gold or provide for 
 the convertibility of silver coin, on the demand of the holder, into gold 
 coin. 
 
 In the United States several experiments have been made with the 
 view of retaining both gold and silver in circulation. The Second 
 Congress undertook to establish the ratio of fifteen of silver to one of 
 gold, with free coinage of both metals. By this ratio gold was under- 
 valued, as one ounce of gold was worth more in the markets of the 
 
600 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 ■world than fifteen ounces of silver, and gold therefore was exported. 
 To correct this, in 1837 the ratio was fixed at sixteen to one, but six- 
 teen ounces of silver were worth in the market more than one ounce 
 of gold, so that silver was demonetized. 
 
 These difficulties in the adjustment of gold and silver coinage were 
 fully considered by Congress prior to the passage of the act approved 
 February 21, 1853. By that act a new and, it was believed, a perma^- 
 nent policy was adopted to secure the simultaneous circulation of both 
 silver and gold coins in the United States. Silver fractional coins were 
 provided for at a ratio of li'SS in silver to one in gold, and were only 
 issued in exchange for gold coin. The right of private parties to de- 
 posit silver bullion for such coinage was repealed, and these coins were 
 issued from bullion purchased by the Treasurer of the Mint, and only 
 upon the account and for the profit of the United States. The coin 
 was a legal tender only in payment of debts for all sums not exceeding 
 five dollars. Though the silver in this coin was worth in the market 
 3"13 cents on the dollar less than gold coin, yet its convenience for use 
 as change, and its issue by the Government only in exchange for and 
 its practical convertibility into gold coin, maintained it in circulation 
 at par with gold coin. If the slight error in the ratio of 1792 pre- 
 vented gold from entering into circulation for forty-five years, and the 
 slight error in 1837 brought gold into circulation and banished silver 
 until 1853, how much more certainly will an error now of nine per 
 cent, cause gold to be exported and silver to become the sole standard 
 of value 1 Is it worth while to travel again the round of errors, when 
 experience has demonstrated that both metals can only be maintained 
 in circulation together by adhering to the policy of 1853 ? 
 
 The silver dollar was not mentioned in the act of 1853, but from 
 1792 until 1874 it was worth more in the market than the gold dollar 
 provided for in the act of 1837. It was not a current com contem- 
 plated as being in circulation at the passage of the act of February 12, 
 1873. The whole amount of such dollars issued prior to 1853 was 
 $2,653,00P. Subsequent to 1853, and until it was dropped from our 
 coinage in 1873, the total amount issued was $5,492,838, or an aggre- 
 gate of $8,0^5,838, and this was afhiost exclusively for exportation. 
 
 By the coinage act approved February 12, 1873, fractional silver 
 coins were authorized, similar in general chai'acter to the coins of 1853, 
 but with a slight increase of silver in them, to make them conform 
 exactly to the French coinage, and the old doUai- was replaced by the 
 trade dollar of 420 grains of standard silver. 
 
 Much complaint has been made that this was done with the design 
 of depriving the people of the privilege of paying their debts in a 
 cheaper money than gold, but it is manifest that this is an error. No 
 one then did or could foresee the subsequent fall in the market value 
 of silver. The silver dollar was an unknown coin to the people, and 
 was not in circulation even on the Pacific slope, where coin was in 
 common use. The trade dollar of 420 grains was substituted for the 
 silver dollar of 412J grains because it was believed that it was better 
 adapted to supersede the Mexican dollar in the Chinese trade, and ex- 
 penment proved this to be trae. Since the trade dollar was authorized 
 
ANNUAL EEPOET TO 00NGKE8S. 601 
 
 $30,710,400 have been issued, or nearly four times the entire issue of 
 old silver doUars since the foundation of the Government. Had not 
 the coinage act of 1873 been passed, the United States would now be 
 compelled to suspend the free coinage of silver dollars, as the Latin na- 
 tions did, or to have silver as the sole coin standard of value. 
 
 Since February, 1873, great changes have occurred in the market 
 value of silver. Prior to that time the silver in the old dollar was 
 worth more than a gold dollar, while at present it is worth about 92 
 cents. If by law any holder of silver bullion might deposit it in the 
 mint and demand a full legal-tender dollar for every 412^ grains of 
 standard silver deposited, the result would be inevitable that as soon as 
 the mints could supply the demand the silver dollar would, by a finan- 
 cial law as fixed and invariable as the law of gravitation, become the 
 only standard of value. All forms of paper money would fall to that 
 standard or below it, and gold would be demonetized and emoted at a 
 premium equal to its value in the markets of the world. For a time 
 the run to deposit bullion at the mint would give to silver an artificial 
 value, of which the holders and producers of silver bullion would have 
 the sole benefit. The utmost capacity of the mints would be employed 
 for years to supply this demand at the cost of and without profit to the 
 people. The silver dollar would take the place of gold as rapidly as 
 coined, and be used in the payment of customs duties, causing an accu- 
 mulation of such coins in the Treasury. If used in paying the interest 
 on the public debt, the grave questions already presented would arise 
 with public creditors, seriously affecting the public credit. 
 
 It is urged that the free coinage of silver in the United States will 
 restore its market value to that of gold. Market value is fixed by the 
 world, and not by the United States alone, and is affected by the whole 
 mass of silver in the worlds As the enormous and continuous demand 
 for silver in Asia has not prevented the fall in silver, it is not likely 
 that the limited demand for silver coin in this country, where paper 
 money is now and will be the chief medium of exchange, will cause 
 any considerable advance in its value. This advance, if any, will be 
 secured by the demand for silver buUion for coin to be issued by and 
 for the United States, as well as if it were issued for the benefit of the 
 holder of the bullion. If the financial condition of our country is so 
 grievous that we must at every hazard have a cheaper dollar, in order 
 to lessen the burden of debts already contracted, it is far better, rather 
 than to adopt the single standard of silver, to boldly reduce the number 
 of grains in the gold dollar, or to abandon and retrace all eilorts- to 
 make United States notes equal to coin. Either expedient will do 
 greater harm to the public at large than any possible benefit to debtors. 
 
 The free coinage of silver will also impair the pledge made of the 
 customs duties, by the act of February, 1862, for the payment of the 
 interest of the public debt. The policy thus far adhered to, of col- 
 lecting these duties in gold coin, has been the chief cause of upholding 
 and advancing the public Credit, and making it possible to lessen the 
 burden of interest by the process of refunding. 
 
 In view of these considerations, the Secretary has felt it to be his 
 duty to earnestly urge upon Congress the serious objections to the free 
 
602 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 coinage of silver on such conditions as will demonetize gold, greatly 
 disturb all the financial operations of the Government, suddenly revo- 
 lutionize the basis of our currency, throw upon the Government the 
 increased cost of coinage, arrest the refunding of the public debt, and 
 impair the public credit, with no apparent advantage to the people at 
 large. 
 
 The Secretary believes that all the beneficial results hoped for from 
 a liberal issue of silver coin can be secured by issuing this coin, in pur- 
 suance of the general policy of the act of 1853, in exchange for United 
 States notes, coined from bullion purchased in the open market by the 
 United States, and maintaining it by redemption, or otherwise, at par 
 with gold coin. It could be made a legal tender for such sums and on 
 such contracts as would secure to it the most general circulation. It 
 could be easily redeemed in United States notes and gold coin, and 
 only reissued when demanded for public convenience. If the essential 
 quality of redeemability given to United States notes, bank bills, 
 tokens, fractional coins, and currency maintains them at par, how much 
 easier it would be to maintain the silver dollar, of intrinsic market 
 value nearly equal to gold, at par with gold coin, by giving to it the 
 like quality of redeemability ! To still further secure a fixed relative 
 value of silver and gold, the United States might invite an internation- 
 al convention of commercial nations. Even such a convention, while 
 it might check the fall of silver, could not prevent the operation of 
 that higher law which places the market value of silver above human 
 control. Issued upon the conditions here stated, the Secretary is of 
 opinion that the silver dollar will be a great public advantage, but that 
 if issued without limit, upon the demand of the owners of silver bul- 
 lion, it wiU be a great public injury. * * * * 
 
 JOHN SHEKMAN, 
 
 Searetary. 
 
 The Honorable the Speaker of the Souse of Representatives, 
 
 FINANCES. 
 
 DELIVERED AT TOLEDO, MONDAY, AUGUST S6, 1878. 
 
 • Fellow CrrizENS : When I informed the Kepublican State Commit- 
 tee that I could speak once in Ohio during my brief visit, they inquired 
 if it would be agreeable to me to speak in Toledo. I promptly an- 
 swered yes, for I knew that, though your political associations had "been 
 greatly disturl)ed by questions which sprung out of the hardness of the 
 times and the panic of 1873, you would yet give me a patient heaiing, 
 and thus be able better to judge how far wo disagree. 
 
 I naturally suppose that you dosiro me to speak mainly on financial 
 topics. My ofiiciju position for many yeare in the Senate connected me 
 with the financial laws of Congress, and my present ofiice requires me 
 to carry them into execution. They relate mainly to the public credit, 
 
riNANCES. 603 
 
 the public debt, our coin and currency, and tbe system of taxes by whicli 
 tbe Government is supported. These topics are necessarily interwoven 
 with each other, but each canvass brings some of them into more prom- 
 inence than others. 
 
 The questions most discussed are those relating to silver and resump- 
 tion. These are only branches of the currency question, but they pre- 
 sent the main difficulties in the administration of the Treasury Depart- 
 ment, and will be mainly the subject of my remarks. The election this 
 fall for members of the House of Eepresentatives will practically settle 
 them. There ought to be no partisan or personal feeling about them, 
 for we are all interested alike in promoting the common good, and in 
 settling upon a sound basis the currency of the country. 
 
 In undertaking to address you I will frankly and freeh'' express my 
 own opinion, but, while I remain in an executive office, I shall cheer- 
 fully obey and execute the judgment of my fellow citizens as expressed 
 by Congress, or give way to some one who will do so. 
 
 What I want is the largest amount of currency that can be main- 
 tained at par with the estabKshed coin of the country. From the di- 
 versity of our wants we must have different kinds of money, to mea- 
 sure great and little wants. We must have coin money and paper 
 money, and plenty of both. What I contend for is that, though om* 
 money may be of different kinds, it must all have the same purchasing 
 power. The essential qualities of all good money are stability, equality, 
 and convertibility. The dollar of one kind should buy as much as the 
 dollar . of another kind. Depreciated money cheats the ignorant and 
 the unwary, and enriches the money-changer. The poor man whose 
 dependence is upon his daily labor is the victim of depreciated money, 
 for he must take what is ofEered, and he is always paid in the poorest 
 money. 
 
 ITo distinction should be made between coin and paper money, or 
 between the note-holder and the bond-holder. The money provided 
 by the Government should pay all debts and be used for all debts. 
 
 Subject to these conditions I am for the largest amount of each 
 kind of money demanded for the wants of business, and if you agree 
 with me in these general propositions there will be no quarrel be- 
 tween us. 
 
 Gold, silver, and copper, as well as the modem contrivance of paper 
 money, are aU useful means of exchange, and ought to be freely used 
 and always maintained at par with each other. 
 
 Minor coins of baser metals are indispensable for the immediate 
 small wants of life. To measure these wants silver coins would have 
 to be too small in size, and therefore copper and nickel are used ; but 
 these metals are so cheap that, if coined at their intrinsic value, the 
 coins would be too large for convenience ; and so by common consent 
 the old copper cents are abandoned, and token coins of copper and 
 nickel are issued at several times their intrinsic value, but are main- 
 tained at par by the necessity for their use, and by being redeemable in 
 money of f uU value when presented in considerable sums. 
 
 Silver money is the best and most convenient for the market and 
 shopping transactions of life. Silver coins are by all odds more numer- 
 
604 SPEECHES AND EEP0ET8 OF JOHN SHERMAN. 
 
 0U8 than coins of jgold, even in countries where gold alone is the stan- 
 dard of value. The shillings and half crowns of Great Britain out- 
 number the sovereigns many times, and in the United States the silver 
 coins issued from February 1, 1875, to August 1, 1878, numbered 
 220,829,540, while the whole number of gold pieces issued during that 
 time in the United States was 7,710,040. 
 
 No form of paper money can profitably take the place of silver. 
 Our old fractional currency was the best substitute ever devised, but 
 this cost annually nearly four per cent, to maintain it in decent condi- 
 tion, or nearly the interest of the money, while the amount lost, 
 wasted, and destroyed was a heavy tax upon the people who used it. 
 It lasted on an average only fifteen months, while coin lasts thirty 
 years. The largest possible use of silver and its freest circulation are 
 indispensable to any system of money that can be devised, but it must 
 be maintained in some way at or near the intrinsic value of other 
 money. 
 
 If silver is coined at less than its market value and issued without 
 limit, it will as surely displace gold as water will displace air. There- 
 fore, fractional silver is limited to $50,000,000, and is issued only when 
 required in exchange for United States > notes. If it becomes too 
 abundant, it comes into the Treasury for taxes and is paid out only 
 when demanded or willingly received. 
 
 So the coining of the new silver dollar, though a legal tender for 
 all purposes, is Imiited by law to from $2,000,000 to $4,000,000 a 
 month. The silver in this dollar is worth less in the market than the 
 
 fold or even the paper dollar, and, if issued without limit, the silver 
 oUar win surely depreciate below the gold doUar, and will become 
 the single standard of value. This is as certain as the march of time. 
 
 But gold also is an indispensable standard of value. It measures 
 all the larger transactions of business life. It is used as such by most 
 Christian and civiKzed nations of the world, and its demonetization 
 would be as great an injury as the demonetization of silver. 
 
 Now, fellow citizens, I am in favor of so adjusting this matter that 
 both metals wiU circulate at par with each other, that you wiU have 
 gold eagles and silver dollars, and that a dollar of either will purchase 
 precisely the same quantities. 
 
 This can be done while the market value of silver is lower than it 
 should be in view of its legal ratio with gold, either. 
 
 First, by limiting the amount of silver to be issued ; 
 
 Second, by readjusting the relative weight of coins, either by in- 
 creasing the weight of the silver coin, or lessening that of the gold 
 coin, or equalizing them by increasing the weight of silver and lessen- 
 ing that of the gold ; or. 
 
 Third, by some plan to be adopted by the International Conference 
 between bimetallic nations now in session, which I sincerely trust may 
 arrive at some practical result. 
 
 Any plan to keep these coins on a par with each other will meet 
 my hearty concurrence, but I am utterly opposed to any measure that 
 will deprive us of the use of either of them, circulating side by side, 
 with equal purchasing power, at par with each other, lassure you in 
 
FINANCES. 605 
 
 all frankness that tlie silver question must be solved in some way, or 
 ■yve will have to adopt the single standard of silver like the Chinese and 
 other Asiatic nations. 
 
 And now, fellow citizens, I come to the most important question of 
 this canvass. 
 
 Our paper currency is now happily brought very near to par with 
 coin. 
 
 Will you insist upon keeping it at par, or will you, by repealing 
 the resumption act, retrace the steps already taken, and embark again 
 upon the sea of irredeemable paper currency ? Shall our paper money 
 hereafter be redeemable in coin upon the demand of the holder and be 
 maintained at par with coin, or shall it be what its friends call a " fiat " 
 money, irredeemable in coin, dependent upon the daily trade-marks of 
 bankers and brokers for its value, and upon the changing majorities in 
 Congress for its amount and quality ? 
 
 This county of Lucas has always been a good Eepublican county. 
 It earnestly supported the administration of Abraham Lincoln, sup- 
 ported all the measures of the war, and in patriotic exertions and sacri- 
 fices for the cause of the Union was not excelled by any portion of the 
 United States of equal population. It is to you as Republicans that I 
 wish to address what I have to say to-night. 
 
 It was the Republican party which devised and issued the green- 
 backs, and which has thus far sustained them and advanced them by 
 slow and gradual processes' to par with coin. 
 
 No doubt there have been honest differences, as it is natural there 
 would be, as to the means by which the result has been brought about, 
 but there should be no difference among Republicans as to the desire 
 that the money contrived by their policy, and the chosen instrument 
 by which the forces of the United States were marshaled during our 
 war, should be made and kept equal to coin. 
 
 However varying currents of public opinion or temporary depres- 
 sion of industry may tend to disturb the public judgment, it should be 
 the will and the duty of the great party to which we belong to make 
 good the promises printed on the face of United States notes, especially 
 when this is demanded not only by national honor, but by the clearest 
 public policy. In this money, which is our own, we naturally take 
 pride. We guarded it in its cradle when it was reviled and derided by 
 our political adversaries, at a time when it was said it would wander 
 like Cain with a mark upon its brow, dishonored and repudiated. We 
 believed in it then and we believe in it now. 
 
 When it was issued we promised to redeem it in coin, and every 
 fresh issue was accompanied by a fresh promise. In 1866 we not only, 
 by law, promised to redeem it, but provided for the gradual contraction 
 of its amount. In 1868 we suspended the contraction but renewed the 
 promise. In 1869 we solemnly pledged the public faith to redeem the 
 notes in coin. 
 
 J^o step, however, was taken for their redemption, and, under the 
 stimulus of inflation, spopulation ran riot, visionary schemes were en- 
 tered upon, extravagance prevailed, until in September, 18Y3, the bub- 
 ble burst, prices fell, the wild delusions of the time were dissipated. 
 
606 SPEECHES AND KEP0RT8 OF JOHX SHERMAN. 
 
 and business men had to face the inevitable evils that always come 
 from irredeemable paper money. 
 
 Then, after fifteen months' debate in Congress and before the peo- 
 ple, as a remedy for the evils we were suffering, the resumption act 
 was passed. Its only object was to make our paper money equal to 
 coin. It was not the best possible measure, but was the only one that 
 could be agreed upon. It was very general in its provisions, but it 
 gave ample power to prepare for and to maintain resumption. 
 
 It did not abolish the greenback. On the contrary the greenbacks 
 were expressly to be retained to the extent of $300,000,000 as a part of 
 the permanent currency of the country, and, on the 1st of January, 
 18Y9, were to be made as good as coin, to be redeemable in coin, and 
 to be issued and reissued as the money of the people, the chief part of 
 our paper currency. This was to be the fulfillment of our promises. 
 This was our answer to those who said the greenback would never be 
 redeemed. 
 
 And now, fellow citizens, the resumption act has vindicated itself. 
 We will be prepared, when the time fixed shall arrive, to execute it and 
 maintain it, with entire confidence in its happy effect in the revival of 
 business and the restoration of confidence. 
 
 Four months before the time fixed, silver, gold, and paper are almost 
 on a par with each other. 
 
 A greenback will now buy within one half of one per cent, as much 
 provision, clothing, and other things as the best gold coin ever issued 
 from the mint. The laboring man has a standard of value equal to that 
 of the bond-holder. The only promise unfulfilled by the Kepublican 
 party is almost performed. 
 
 The steps by which the result has been achieved were simple, law- 
 ful, and beneficent, and perhaps it is best for me to state them as briefly 
 as I can. 
 
 First. Silver coin has been gradually substituted for fractional cur- 
 rency. The amount of fractional currency redeemed to the 17th of 
 this month is $25,080,609. The amount of fractional silver coin issued 
 to the same date is $39,307,680. Here has been no contraction, but an 
 increase of over $14,000,000 current money by the substitution of a 
 durable coin for an expensive and wasteful note. 
 
 Second. A gradual retirement has been effected of United States 
 notes from $382,000,000 January, 1875, to $346,681,016. This reduc- 
 tion was made only as circulating notes were issued to national banks, 
 and only to the extent of eighty per cent, of the notes so issued. This 
 was to be continued until the amount outstanding was $300,000,000, 
 but Congress, during the recent session, in view oi the general desire 
 to stop reduction, suspended it, and fixed the amount of United States 
 notes at $346,(i81,016, the amount then outstanding. Though tliis adds 
 to the difficulties of executing the resumption law, still I have entire 
 confidence in our ability to maintain that amount in circulation. 
 
 Third. Coin has been accumulated in the Treasury in anticipation 
 of resumption. Tlio authority to thus accumwlate is plainly given by 
 the resumption act, and was tlie chief means pi'ovided to secure and 
 maintain resumption. IMy predecessors, no doubt believing that this 
 
FINANCES. 607 
 
 accumulation ought not to commence during their terms, had taken no 
 steps under the provisions of the resumption act. 
 
 "When I assumed the duties of. my present office, after careful study 
 of the whole subject, I determined that it would be necessa,ry to accu- 
 mulate, in addition to the surplus revenue, the sum of $100,000,000 of 
 gold coin, and that it ought to be accumulated at the rate of $5,000,000 
 a month from the 1st of May, 1877, to the date of resumption. 
 
 It was confidently declared by those who opposed the law that it 
 would be impossible to accumulate this coin without putting up the 
 price of gold, and thus defeating the object, but the experiment shows 
 that it was not only feasible, but advantageous to the current business 
 of the country. 
 
 We accumulated easily during eight months of the year 1877 at the 
 rate of $5,000,000 a month, with gold constantly declining in price. 
 This process was arrested by the debates in Congress and the threatened 
 repeal of the resumption act, but was again resumed in the spring of 
 this year, when it was found still more easy to accumulate coin by the 
 sale of 44 per cent, bonds, and the original plan was executed sooner 
 than was anticipated, by the rapid sale of the bonds, so that on the 10th 
 of this month the Treasury of the United States was supplied with 
 $209,011,753.15 gold and silver coin and bullion. 
 
 I have received a recent statement from the Treasurer of the United 
 States which shows the precise condition of the Treasury, in view of 
 resumption, as follows : 
 
 TuEAaUET OF THE UNITED StATES, ) 
 
 Washiikjton, D. C, August 20, 18Y8. f 
 Sir: I have the honoi' to advise yoa that, on August 10, 1878, there were in the 
 Treasury as follows : 
 
 Gold coin |185,273,016 85 
 
 Standard dollars 10,386,2K6 00 
 
 Gold bullion 6,5H9,661 89 
 
 Siirer bullion 6,812,812 41 
 
 $209,011,763 15 
 
 Of which there will be required for the following payments : 
 
 Unmatured calls of 5-20 bonds $45,000,000 00 
 
 Coin certificates outstanding on that date $43,'721,3'70, 
 
 less $17,195,180 redeemed and in Treasury 26,526,190 00 
 
 Principal of debt estimated to be due and unpaid on that 
 
 date 4,000,000 00 
 
 Coin interest estimated to be due and unpaid on that date 4,000,000 00 
 
 $"79,626,190 00 
 
 Excess $129,485,563 15 
 
 The gold coin on hand, stated above at $185,273,016.85, does not include re- 
 deemed gold certificates, or any other coin item, but is actually gold coin. 
 There was in the Treasury of that date $5,095,246.38 fractional silver coin. 
 Very respectfully, JAS. GILFILLAN, Treasurer United States. 
 
 Hon. John Sheeman, Seereta/ry of the Treasury. 
 
 It thus appears that, over and above all coin liabilities, the Treasury 
 has $129,485,563.15, besides $5,095,246.38 fractional silver coin, avail- 
 able for resumption purposes without any charge or demand whatever 
 against it, and supported by the power,. if necessary, to sell bonds in 
 aid of resumption. With this sum and with the powers conferred by 
 
608 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 law, I am satisfied that it is easy to maintain resumption, and sucli, I 
 believe, is now the judgment of the best business men of the country, 
 and of those most experienced in financial matters. 
 
 I do not think it necessary to enter into more detail as to the plan 
 of or the ability to maintain resumption, or as to the arguments 
 for or against the measures adopted m aid of it, as the subject was 
 thoroughly discussed in Congress and my own views fully explained 
 to the committees of Congress in interviews published by the Senate 
 and House last winter, and no doubt accessible to you. 
 
 It is sufiicient to say that since the passage of the resumption act 
 every promise and expectation of its friends has been justified by events, 
 and every prophecy of its opponents has been falsified. Every step 
 in the process of resumption has been open, public, and frank, and 
 beneficial in a business sense. 
 
 AU the evils which you have suffered are the direct result of the 
 inflation of paper money and the panic which preceded the resump- 
 tion act. The whole process of resumption has substantially been car- 
 ried on since the 1st of May, 1877, and has been attended with reviving 
 business and prosperity. The failures that have occurred during this 
 time have been the direct result of engagements and contracts made 
 before that date. 
 
 And now, fellow citizens, the real question is. Shall we go forward 
 and complete this process, or shall we go back again to the period of 
 irredeemable money with its inevitable resulting consequence of ex- 
 pansion, inflation, and panic? As you are the judges of last resort on 
 this question, I beg of you to consider some general principle gathered 
 from the experience, not only of our own people, but of all nations who 
 have, at any period, maintained mixed standards of paper money. 
 
 Irredeemable paper money is only justified by war carried to the 
 extent of national peril, when the hfe of the nation is at stake. It 
 ought to be redeemable as soon as the public exigencies wiU pei-mit. 
 It IS not money, but the promise to pay money. These are axioms of 
 political economy, the truth of which all experience has demonsti-ated. 
 
 We issued this money only in the midst of such a peril. 
 
 Our error, if any, has been that we have delayed too long the mea- 
 sures of resumption. Now, when they are almost complete, and gold 
 and silver and paper money are practically convertible one into the 
 other, when there is the same money for the bond-holder and the note- 
 holder, the rich and the poor, when silver can be had for notes, and 
 gold in ample store awaits the day of resumption, we Republicans shovild 
 not debate the question of the repeal of the resumption act. 
 
 "With all our promises on record, we should not be deluded by the 
 cry for " fiat " money. Precisely what is the meaning of this phrase I 
 do not know, but I presume it means a money that is not measured by 
 any other, that is not redeemable in any other, but has its origin, force, 
 sanction, and value in the mandate of the Government, and will vary 
 day by day in purchasing power. 
 
 As between tliis kind of money and the old greenback regenerated, 
 restored, convertible into coin, the standard of all value, and the medi- 
 um of ail payments, I am for tlie greenback against " fiat " money. 
 
FINANCES. 609 
 
 A great nation like ours, rich in varied resources, with a free people 
 of remarkable intelligence, is not driven to resort to' any expedients 
 which would affect the public credit or the public debt, or disturb our 
 harmonious relations in trade with foreign nations, but should adapt 
 its money to the money of the civilized world, make it as good as any 
 other money, and maintain its standard of value as high as that of any 
 coin ever issued from the mint. 
 
 Some of you who believe in " fiat " money say you desire the same 
 result, but it is clear that you can only maintain this money at par with 
 coin either by a careful limitation of its amount or by actual redemp- 
 tion in coin when demanded. If that is what you mean by " fiat " 
 money, then we wiU not disagree, but it is well known that those who 
 advocate " fiat " money want to increase the amount beyond a sum that 
 can be maintained at par with coin, and seek thus to cheapen money 
 by making it less valuable than coin. 
 
 I can imagine how a man deeply in debt and hoping to escape bank- 
 ruptcy may .desire to cheapen the money in which his debt is to be paid, 
 but why should a laboring man whose daily toil is measured by the 
 money he receives desire to cheapen it ? Why should a farmer who 
 sells his productions for money desire to lessen its purchasing power ? 
 Why should a prudent, thrifty, industrious man engaged in any occupar 
 tion, and who hopes by his thrift and industry to accumulate for him- 
 seK a competence, desire to have his labor measured by a money of 
 unstable value ? It is the interest of every one engaged in industrial 
 employments, and who is not a speculator or a broker, to have a fixed 
 standard of value. If any of you who labor or are farmers, mechanics, 
 or belong to any of the industrial classes of life, have hope in a depre- 
 ciated money, you are greatly misled. 
 
 All the great men of our country, our Kevolutionary fathers and 
 their descendents in the war of 1812, and the statesmen of the days of 
 General Jackson, deeply felt the evils of irredeemable paper money, 
 and experience led them to the conviction that gold and silver coin, or 
 paper money well secured and convertible into gold and silver coin, 
 was the best for all classes and for all industries. 
 
 In these general views in favor of resumption adopted by the Re- 
 publican party we have had the sympathy and concurrence of a certain 
 portion of the Democratic party, who, though they have always by in- 
 stinct and habit voted against every measure of the Republican party 
 from the beginning of the war to this time, even in the darkest nour 
 of the war, have always professed to be in favor of and talked in 
 favor of good money redeemable in coin. This class of Democrats, 
 though they opposed the resumption act, did it because they declared 
 it to be a hindrance to resumption, and denounced us because we did 
 not resume, sooner. This was the position of the last National Demo- 
 cratic Convention. 
 
 Senator Thurman, my colleague for many years in the Senate, was 
 one of this class of Democrats ; and, although our financial measures 
 did not exactly please him, and he generally voted against them, yet 
 he freely said, like Mr. Bayard and others, that he desired resumption 
 and stood by the old Jackson Democracy in favor of hard money. 
 39 
 
610 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 The exigencies of party tactics have led him recentljy to make a speech, 
 to which, with entire respect for him, I desire briefly to reply. So far 
 as he seeks to show his consistency and concurrence with his fellow 
 Democrats, it is a domestic matter, and I wiU not interfere, bnt some 
 of the positions taken by him I must contest. He says : 
 
 I tliink I do them no injnstioe when I say that the leaders of the Republican 
 party are in favor of directly the opposite course — that is to say, they would retire 
 all the greenbacks in order that their places might be filled with national-bank 
 notes. 
 
 Senator Thurman is greatly mistaken in this position. As I have 
 already shown, the Republican party is not in favor of retiring the 
 greenbacks in order that their place may be fiUed with national-bank 
 notes. 
 
 No doubt some Republicaiis, like some Democrats, are in favor of 
 the United States withdrawing from the business of issuing paper 
 money, but the Republican party has never taken such a position, and 
 now distinctly maintains the right and duty of the Government to keep 
 in circulation such an amount of United States notes as can be readily 
 maintained at par with coin. 
 
 In every law authorizing these notes there is a Hmit fixed to their 
 amount. 
 
 During the war the guarantee was made, and never has been vio- 
 lated, that the amount should not exceed $400,000,000, and no author- 
 ity has ever been conferred upon any officer of the Government to 
 reduce the amount below $300,000,000, but now the minimum limit is 
 fixed, as I have already stated, at $346,681,016. 
 
 In his speech at Hamilton, Senator Thurman openly advocates in- 
 creasing the amount of United States notes outstanding from $346,- 
 000,000 to $668,000,000 by issuing United States notes in j)lace of the 
 national-bank notes outstanding. He declares that the principal feature 
 of the Democratic platform is the proposed substitution of greenbacks 
 for national-bank notes. He would thus render specie payments impos- 
 sible during this and perhaps the next generation, and this at a time 
 when specie resumption, which he has so strongly favored, is on the 
 eve of success. 
 
 The position of the Republican party is in favor of greenbacks re- 
 stored to their normal condition of paper money, equS to coin and 
 redeemable in coin on the demand of the holder, while the position of 
 the Democratic party, as stated by Judge Thurman, is in favor of the 
 issue and maintenance in circulation of $668,000,000 of United States 
 notes without any provision whatever for their redemption or theii' 
 conversion into coin. 
 
 This issue is distinctly made, and for one I distinctly accept it. 
 
 "We favor paper money redeemable in coin, and the largest amount 
 that can be maintained at par with coin, while he favors an amount of 
 paper issued directly by the Government, not convertible into coin, 
 with no provision for its redemption, and to an amount which no one 
 has claimed can be maintained at par with coin. 
 
 He says it is just as easy to maintain $668,000,000 greenbacks at 
 
FINANCES. 611 
 
 par with coin as it is to maintain $346,000,000 greenbacks and $322,- 
 000,000 national-bank .notes at par with coin. 
 
 But he forgets to state that the bank notes are payable in green- 
 backs and not m coin, and that they are to be redeemed by the banks 
 at their risk and expense, and not by the United States. No coin re- 
 serve is needed by them for such redemption. The .issue of these notes 
 aids in maintaining the United States notes at par with coin instead of 
 obstructing it. 
 
 The banks are required to keep in their vaults and in the Treasurjr 
 of the United States an ample reserve of United States notes and boncis 
 to redeem their notes, and thus give to the United States notes a use 
 which tends to maintain them at par with coin. 
 
 The whole burden now resting upon the Government is to maintain 
 resumption upon the amount of United States notes, and this confess- 
 edly can be done by a coin reserve of from thirty to forty per cent, 
 (which reserve we now have on hand), while, if the whole amount of 
 circulation, including national-bank notes, was in United States notes, 
 no coin reserve that could be reasonably secured and maintained would 
 be sufficient for the purpose of resumption. 
 
 The bank notes are not. in any sense the notes of the Government. 
 They are the notes of private corporations, amply secured, redeemed 
 by them, maintained by them, or, if they fail to redeem them, the se- 
 curity can at once be applied to their redemption. This expedient of 
 allowing a portion of the circulation to be issued by private corpora- 
 tions enables us to maintain in circulation nearly twice as much paper 
 money as could be maintained at par in coin if issued directly by the 
 Government. 
 
 His plan would directly violate the provisions of the loan laws, 
 under which both United States bonds and notes are issued, and which 
 limit expressly the amount of United States notes to $400,000,000. It 
 would be a violation of the public faith, and would impair at once the 
 public credit, and do inconceivably more harm than it could give profit 
 to the Government. 
 
 This scheme of his conflicts directly with the decision of the Su- 
 preme Court of the United States, and would, no doubt, be held un- 
 constitutional because it provides for a very large increase of United 
 States notes in a time of profound peace, where no such exigency as is 
 contemplated by the Constitution or decision of the Supreme Court 
 exists to justify their issue. 
 
 It would at once drive out of existence the whole system of national 
 banks which have been the means alone by which State banks have 
 been prevented from issuing circulating notes. The only franchise the 
 national banks receive from the Goveminent, which induces them to 
 maintain their corporate existence, is the right, under limits fixed by 
 law, to issue circulating notes. Take this from them, and they would 
 at once cease, without exception, to be national banks, and would be 
 organized again, as before the war, into State banks, -with such powers 
 as any State might give them. The inevitable effect of this policy 
 would be to revive again the system of State banks without any com- 
 mon organization, without any security for their notes, upon such terms 
 
612 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 as any State might prescribe, and thus all the evils of State-bank money, 
 which the people experienced before the war, woidd recur again. Near- 
 ly a generation has passed since the incongruous system of paper money 
 which existed before the war was swept away by the national banking 
 act. 
 
 It is safe to say that the injury done to the people of the United 
 States by the failure of State banks, by the uncertain value of their 
 paper money, by its limited local circulation and by successful counter- 
 feiting, was annually greater than the interest of the entire national- 
 bank circulation of the United States. 
 
 It is easy to oppose banking corporations. Instead of having polit- 
 ical power, they are the weakest members of a community. Sav what 
 you will of them, their substitution for State banks was one of tne wis- 
 est and most beneficial acts of the general Government since the com- 
 mencement of the war. Personally I have but little interest in or feel- 
 ing for national banks. But for the benefits derived from them, I would 
 not care what became of them. Their continued existence ought to 
 depend upon their ability, without cost or trouble to the United States, 
 to maintain their circulating notes at par with United States notes or 
 coin. If they fail in this they ought to be abolished. If they do it 
 they ought to be continued. Scattered through the United States, they 
 are useful financial agents in exchanging the products of industry and 
 in localizing capital. They paid last year to the Government of the 
 United States $7,0Y6,087 in taxes, and for State and local taxes $9,701,- 
 732, or a total of $16,777,819, or nearly four million more than Judge 
 Thunnan estimates we will save to the people by issuing greenbacks 
 instead of the bank notes. These taxes would all be lost to the United 
 States and to the States if the national banks were abolished. Their 
 notes are secured beyond peradventure ; they are protected from coun- 
 terfeiting far more successfully than any former system, and, to their 
 credit be it said, not one dollar has been lost on any national-bank note 
 ever issued. Wherever you go you may carry their notes with confi- 
 dence, without examination as to where or when they were issued. 
 They are good everywhere in the United States. 
 
 Senator Thurman has stated some objections to the national banks, 
 to which I will briefiy reply. He says : 
 
 In the first place, a national-bank cniTency means the indefinite perpetnation of 
 the public debt. 
 
 As a national bank exists only for twenty yeai"s from the date of 
 its organization, and is liable at any time by act of Congi-ess to be 
 abolished, this does not seem a very potent objection. I am sorry to 
 say that the prospect of paying our debt during the life of a national 
 bank is not very flattering, nor is their existence likely to deter its pay- 
 ment. As for the influence of these institutions, so much feared by 
 Mr. Thurman, it is not an object of alarm, for it can not be combined ; 
 or, if a combination were attempted, it could be overthrown by a single 
 wave of popular opinion. 
 
 His second objection to the national banking system is " that it 
 tends to combine, concentrate, and intensify the money power." 
 
 This, again, is an illusive fear. There is no power in this country 
 
FINANCES. 613 
 
 that is so weak in political management as wliat is called the money 
 power. It never has been nor can it be concentrated so as to affect 
 political questions. The tendency of our institutions makes it easy to 
 combine at once political opinion and political power against it. 
 
 Party organization is ininitely more powerful for combination than 
 the money power. My own experience in office enables me to say that 
 if jou convene ten bank presidents you will have ten different opinions, 
 while party organization brings even Judge Thurman and General 
 Ewing on the same platform. 
 
 Nor is it true, as stated by Judge Thurman, that the legislation of 
 Confess favored the money interest during the period of the sway of 
 the Eepublican party, for this legislation was guided by the love of 
 national unity and honor, and national existence. It tended to make 
 our nation strong at home and respected abroad, and in no single ques- 
 tion has it favored what is called the money interest. 
 
 The vital issue between the two great parties has been, on the part 
 of the Kepnblicans, a desire to maintain the integrity of the Union and 
 abolish slavery, to secure equal political and civil rights to aU men, 
 to maintain the national honor, and to advance the industrial inter- 
 ests of the country, while the theory and policy of the Democratic 
 party has been to belittle the National Government, to subordinate 
 it to the power of the States, to preserve slavery, to leave industry 
 without protection and support, and to sectionalize into petty com- 
 munities the elements of a great and powerful nation ; and these are 
 now, and wiU be in the future, the inevitable tendencies of these two 
 parties. 
 
 The third objection stated by him to the national-bank circula- 
 tion is that it is a special privilege, and takes many millions out of 
 the pockets of the people. This, again, is untrue in point of fact, 
 and illogical in argument. 
 
 The national-bank circulation is not a special privilege, but is 
 open to every association of five persons that may be organized in 
 any part of the United States. 
 
 To caU it a special privilege is absurd. The same privilege might 
 be granted to every individusS citizen of the United States, but "ex- 
 perience shows that a corporation is more wisely administered when it 
 is composed of a number of persons, not less than five, than when it 
 is controlled by a single person ; and corporate authority is essential to 
 preserve its existence in case of the death of a partner. But for this, 
 the special privilege might be granted to every citizen who could give 
 the requisite security for the redemption of the notes issued by him. 
 
 As to putting money into the pockets of the share-holders, this 
 again is absurd. The Government pays nothing and contributes no- 
 thing to a bank. The share-holders buy the bonds of the Government 
 and deposit them with the Government for the security of the note- 
 holders. If the bank retires, the bonds belong to the share-holders, and 
 not to the Government. Nor can the Government pay these bonds in 
 any other way than it could pay the bonds in the hands of individuals. 
 The Government would pay the same interest on these bonds, whether 
 held by the bank or by. citizens, or in Europe. 
 
614r SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 The reason why bonds are demanded as security is because they are 
 the best security. But for this a mortgage security or a personal secu- 
 rity might be taken, but as the Government security is the highest and 
 best, this is demanded, not for the bienefit of the Government, but for 
 the note-holder, for whom the Government is a mere trustee. When 
 the Government pays to the bank interest on bonds held by it as a 
 security, it only pays what is justly due and what it would have to 
 pay at all events to anybody holding the bonds until they are redeemed. 
 
 How it takes many millions annually out of the pockets of the peo- 
 ple is hard to conceive. 
 
 No one borrows the notes of the bank unless it is for jfiis interest 
 to do so. The ability of the bank to lend is a convenience to the bor- 
 rower as well as the lender. The Government can not engage in this 
 business of loaning money. It would be a sorry time for the people 
 other than political strikers, if the Government loaned money. This 
 is purely a private, personal employment, that should be as free as 
 blacksmithing. The right to issue notes is free to all on the same 
 terms, and, when so guarded as to prevent loss to the note-holder, is 
 the best possible means of increasing the amount of circulating notes. 
 
 He says that the Government ought to issue these notes. The an- 
 swer is that, if the Government issues them, it must undertake to 
 maintain them at par with coin, or else the people must suffer from 
 the evils of an irredeemable cun-ency. The cost to the banks of this 
 redemption is ah'eady so great, before specie payments have actually 
 come, that this so-called special privilege is getting to be a special bur- 
 den, and more banks are surrendering their circulation than are taking 
 circulation. It is a special privilege that more seek' to avoid than to 
 acquire. 
 
 Judge Thurman computes how much the United States would save 
 if it issued $322,000,000 more of greenbacks and redeemed that 
 amount of bonds. I do not stop to examine this computation, but I 
 only wonder why he stopped at $322,000,000. Why not save the 
 entire interest of the public debt by issuing greenbacks for the whole 
 of it ? Why not repudiate it at once ? That would, according to his 
 computation, save the entire interest of the public debt, or $93,000,000, 
 with no other loss than the loss of national honor. 
 
 What assurance has he that $322,000,000 will satisfy the more ad- 
 vanced lights of repudiation ? How wiU he pay out the $322,000,000 ? 
 Will he claim the right to pay the bonds at par with them ? Does he 
 deny the moral and legal obligation by which they are to be paid in 
 coin ? Does he propose to repudiate the act of 1869 ? 
 
 The immediate effect of the commencement of such an issue would 
 depreciate the notes lower and lower, would widen more and more the 
 
 fap between the notes and coin, would revive again the distinction 
 etween the bond-holder and the note-holdei' — gold for the bond-holder 
 and depreciated paper money for the people. It would at once stop 
 the funding operations undor wliich we save one third of the interest 
 of the national debt. No man would buy either a four or a five or a 
 ten per cent, bond in the face of an act oi repudiation. 
 
 Again, as the notes depreciate, it becomes moi-e difficult to provide 
 
FINANOES. 615 
 
 coin for tlie payment of the interest ; would lie repudiate the obliga- 
 tion to pay the interest in coin ? He says he is in favor of receiving 
 greenbacks for customs duties. Will he, then, buy coin ? If so, his 
 policy will already have advanced the value of coin. 
 
 These are questions that so astute a reasoner as Judge Thurman 
 ought f aii'ly to answer before he persuades the people to embark in 
 his scheme. 
 
 He proposes to issue more notes without anyprovision for their 
 payment, when our revenues are ample to meet our expenditure, in a 
 time of profound peace, when there is no motive of patriotism or duty 
 or safety to impel such a course, and this merely to save the interest 
 of four per cent, on $322,000,000. 
 
 But this very act, if adopted, would prevent our selling a thousand 
 million of four per cent, bonds with which to pay an equal amount of 
 six per cent, bonds, and in this way would work an annual loss to the 
 Government of $20,000,000, or $8,000,000 a year more than the entire 
 saving proposed hj his policy. 
 
 Again, what moral right has the Government of the United States 
 to require its citizens to take its notes as money and a standard of value 
 merely for the purpose of saving the interest on these bonds ? In a 
 time of war we may concede such a right, but in a time of peace there 
 is no legal or moral foundation for such a claim . unless the notes are 
 maintained at par and redeemed at par. Is not the United States able 
 to pay the interest of its notes ? 
 
 Judge Thurman says there has been contraction of the currency. 
 No one disputes that assertion. It is true that the currency has been 
 contracted, but this has been done, not under the resumption act, but 
 by the voluntary action of the banks. They are free to issue or retire 
 their notes, and they have done so. 
 
 If the special privilege about which he has discussed so much was 
 so valuable to them, they would have increased their issues of bank 
 notes, but instead of that the burden's imposed upon this privilege and 
 the want of profitable use of money have induced the banks to reduce 
 their circulation by a much greater amount than it has been increased, 
 so that the effect has been a large decrease of the currency of the country, 
 but it has not been caused by the resumption act. Under the resumpr 
 tion act the amount of currency has been somewhat increased, since 
 the amount of United States notes retired since its passage is, as he 
 states it, $35,328,984. Bat there was issued to national banks in place 
 of this $44,161,230 of circulating notes. 
 
 ]!^ow, these are the objections stated to the national banks by Judge 
 Thurman, and my answer to them. 
 
 It comes back again to this : Shall we have in the United States a 
 currency redeemable in coin ? "Will we, to save interest, bear in the 
 future all the evils of an irredeemable currency, tear up a system of 
 banks infinitely better than any ever before enjoyed in this country, 
 compel these banks to call in their loans and close up their accounts, 
 and add to the distress of the times by dangerous and almost revolu- 
 tionary proceedings against corporations of our own creation, which 
 have no special privileges, and which contribute to the general good by 
 
616 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 paying large taxes and by acting as convenient localized agencies of 
 loans and exchange. 
 
 And here I might leave Judge Thurman's speech, but there are two 
 or three points which I regret I have to answer. He says : 
 
 The seat of the Chief Magistrate — that seat that in times past has been and in all 
 times should be an emblem of purity and honor — is occupied by a man who was 
 never elected to it, and whose elevation was accomplished by the grossest frauds and 
 boldest usurpations that ever disgraced the history of a free people. 
 
 This declaration is a gross injustice, and I believe Judge Thurman 
 will live to regret that he ever made it. He was a member of the 
 Electoral Commission which passed upon the returns of the votes of 
 electors for President. He knows that every electoral vote of every 
 State cast for President Hayes was received by him without dispute, 
 without any pretension of fraud or error, except the votes of Oregon, 
 Florida, and Louisiana. 
 
 In Oregon there was an attempt by acknowledged agents of Governor 
 Tilden to cheat — ^I use the word in its worst meaning — the PepubUcans 
 out of that vote and to bribe an elector, and it failed. In Florida 
 there had been great irregularities and frauds committed by the Demo- 
 crats, which were met, to some extent, by frauds on the part of Eepub- 
 lican officers ; but the evidence before the returning officers, as weU as 
 that taken in the contest for the election of a member of the House 
 of Representatives, shows that a majority of the votes in Florida were 
 fairly cast for the Hayes electors. 
 
 As to Louisiana, I ha;d better means of information than Judge 
 Thurman, and I say to you that the criminal conspiracy by the Demo- 
 cratic party of that State to control the election of 1876 so as to cast 
 the vote oi the State for Governor Tilden, has never been fully told. 
 It extended to more than ten parishes or counties, and held in absolute 
 terror five EepubKcan parishes that had always since the war given 
 about seven thousand Republican majority. It led to and included in 
 its plan and scope scores of murders of Republicans, white and black, 
 mainly intelligent black leaders of their race. It wounded, whipped, 
 and maimed others, drove hundreds to the swamps at night, and spread 
 universal terror among this ignorant and superstitious people, who had 
 the same legal right, and a better moral right, to vote than their per- 
 secutors, whose haiyls were only recently red with the blood shed in 
 war against the Union. 
 
 The chosen agents of this infamy were Democratic rifle-clubs fully 
 armed, marching at night in disguise, distributing anonymous threats 
 and occasionally executing them, and giving notice to leave the parish 
 to the more intelligent, accompanied with mreats and devices to excite 
 fear and terror. 
 
 Such were the means used by the Democratic party to carry Louisi- 
 ana. They may here and there induce a disappointed office-seeker like 
 Anderson and Weber to falsify their former oaths, and even prevail 
 upon poor iicfrroes like Amy Mitchell and Mrs. Pinkston to withdraw 
 their former depositions ; but the scores of dead men killed by the 
 rifle-clubs speak from their graves, and the men who killed them and 
 rode their nightly rides of terror know in their hearts that all that has 
 
FINANCES. 617 
 
 been said of them is true. Tlie statements and affidavits made by these 
 people were submitted to the local returning officers selected by the 
 State Legislature, composed of two white men and two colored men, all 
 natives of the South, and these men, who knew the surroundings and 
 many of the facts, decided, in strict compliance with the law of that 
 State, that under this law these parishes and polling-places must be ex- 
 cluded, and it was done. Thus Governor Hayes got the vote of Louisi- 
 ana as lawfully and fully as that of Ohio. 
 
 All this cry of fraud and usurpation ought, in the minds of just 
 men, to react with fearful effect against the' Democratic party ; for it 
 was their organized crime and violence that created the doubt which 
 the Returning Board and Electoral Commission decided in our favor. 
 
 And it must be remembered in this connection that there is a strong 
 conviction, at least among the EepubUcans in this country, that the 
 States of Mississippi and Alabama were secured for Governor Tilden 
 by the same unlawful means, but the laws of those States provided no 
 remedy, and they were counted for Tilden. 
 
 Judge Thurman should remember also that the history of the Demo- 
 cratic party has been marked in the past by great crimes against the 
 elective franchise. The frauds in Plaquemine Parish, Louisiana, and 
 in New York City, in 18M, wiU be remembered by every Whig in the 
 land. "Wholesale frauds committed in the city of New York in 1868, 
 W which the vote of that State was cast for Seymour instead of for 
 Grant, were disclosed by a Congressional committee, and are now ad- 
 mitted facts. 
 
 The frauds and crimes committed by the Democratic party in its 
 attempt to organize the State of Kansas into a slave State were inves- 
 tigated by me as a member of a Congressional committee, and, though 
 disputed at the time much more stoutly than the Louisiana frauds, are 
 now acknowledged as facts. 
 
 The chief muds "in this country in elections have been organized 
 by the Democratic party. One of the dangers which threaten the 
 country if the Democratic party comes into power will be the bold and 
 reckless use of election machinery to commit frauds and to organize 
 violence, baUot-box-stuffing, and kindred crimes, as a part of our Amer- 
 ican system of politics. 
 
 The Eepubucan party, in the heat of party zeal, has done something 
 in this way. I have no apology to make for such crimes— no sym- 
 pathy with them — and would denounce and expose such wrongs, by 
 whatever party committed ; but it is pretty hard for us Eepublicans to 
 be lectured about election frauds by members of the Democratic party. 
 
 Again, he says : 
 
 Fellow citizens, nothing in politics seems more certain to me than that the Ke- 
 publican leaders rest their hopes of a prolongation of their power upon the success 
 that may attend a studied and energetic effort on their part to excite and perpetuate 
 sectional feeling. 
 
 It is a strange thing that the Eepublican party, distinguished for 
 its national feeling, should be charged by the Democratic party with a 
 desire to excite and perpetuate sectional feeling. 
 
 The strength of the Democratic party to-day, as before the war, lies 
 
618 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 in a united South, lield, not only by sectional feeling, but by sectional 
 feeling antagonistic to the Union, intensified by its early advocacy of 
 States rights, its attempt at secession, and by four years of bloody and 
 unsuccessful war against the Union. This sectional feeling is so ram- 
 pant that it ostracizes native white men who become Eepublicans, holds 
 in terror the entire black population, and by intimidation and ostracism 
 prevents the free expression of opinion and the free vote of Eepubli- 
 cans at elections in the South. The South is determined to be sec- 
 tional, and as a section dominates the counsels of the Democratic party. 
 
 No intelligent man can doubt that if in the cotton States there was 
 an open, fair opportunity to establish newspapers, to carry on a can- 
 vass, and to appeal to the natural instincts and interests of the voters 
 of those States, a majority of every one of them would be with the 
 Eepubhcah party. 
 
 The policy of President Hayes, his earnest desire and hope, is to 
 destroy sectionalism, to invite by kindness and forbearance a like kind- 
 ness and forbearance to the Eepubhcans of the South. If this effort 
 fails the South will be a slumbering volcano, which some day will 
 break forth in retaliation and crime. For free men having constitu- 
 tional rights can not be chained by violence. Intelligence and organ- 
 ization willsoon enable them to assert their rights or deter the practice 
 of such violence. 
 
 The Eepublican party is purely a national party. Its instincts are 
 national, its policy is national. In no Eepublican State could anything 
 like opposition to freedom of speech, freedom of the press, free discus- 
 sion be tolerated, nor would any one for a moment be allowed to be 
 deterred from voting as he pleased ; while in some of the Democratic 
 States in the South, such a thing as free speech and free press and 
 reasonable toleration of opinion is scarcely recognized. The dominant 
 press would denoimce as a crime what we here m the North regard as 
 the right of every citizen — to speak and vote as he chooses. 
 
 In the face of these facts the following statement by Judge Thui^ 
 man seems to me the caricature of truth and justice : 
 
 It is not enough that the South has frankly and manfully accepted the results of 
 the war ; that, waiving all questions as to the mo^e of their adoption, no voice is 
 raised against the binding force of the constitutional amendments; that every law 
 passed by a radical Congress, however doubtful its constitutionality, or manifest its 
 injustice and impolicy, is nevertheless obeyed. 
 
 I pass over, as a matter of taste, the inference he raises against the 
 mode of adoption of the constitutional amendments, and the doubt he, 
 expresses as to the constitutionality of the laws to enforce them — to 
 say tha;t the Democratic party has not frankly and manfully accepted 
 the results of the war ; that it does not accept, observe, or enforce the 
 constitutional amendments or the laws passed in aid of them. It is 
 precisely of tliis that the Eepublican party complains ; it will try to 
 enforce, and, though temporarily divided and defeated, will continue 
 to demand, and will certainly in time secure, the observance of these 
 amendments. It was the organized plan to deprive the Eepublicans in 
 Louisiana of the right to vote that occasioned the controvej-sy there, 
 and so in Mississippi and South Carolina. 
 
FIFAN^OES. 619 
 
 I have no doubt that many of the planters, business men, and prop- 
 erty-holders of the South, now acting with the Democratic party, aire 
 anxious to and in time will be able to protect the blacks in their rights, 
 but they are not the dominating influence in the South. It is not they 
 who, like Judge Thurman, denounce President Hayes as a usurper and 
 a fraud, but thousands of them acknowledge that the policy adopted 
 by the Ke;publican party to the people of the South at the close of the 
 war was without example in generosity in the history of the world, 
 and they gratefully acknowledge that the policy of President Hayes 
 will secure to the South peace, order, and prosperity. 
 
 But I, who supported this policy and snared in it, feel as do Eepub- 
 licans generally, that the South has never frankly or manfully responded 
 to it. They do not enforce the amendments. They do not give equal 
 civil and pohtical rights to either white or black Kepublicans. They 
 do not permit or tolerate that free expression of opinion, discussion, and 
 action essential to a republican government ; but, by their adherence 
 to the very elements in the North that encouraged them to rebellion, 
 that brought upon them the very waste and desolation of which they 
 complain, they repel aU efforts to break down the sectionalism of the 
 past, and make it vitally necessary again to concentrate the people of 
 the North in order to secure peace, order, and liberty. 
 
 Judge Thurman, in conclusion, says : 
 
 Do you wisli the Union preserved? Then support those who would bind it to- 
 gether by the ties of fraternal feeling and a common interest, as well as by constitu- 
 tions and laws. Do you revere justice and advocate equality of rights? Then sup- 
 port the party on whose banner "Justice and Equality" are indelibly inscribed. 
 
 " Do you wish the Union preserved ? " What party ever threatened 
 this Union ? What party was arrayed in arms against it during the 
 war, and what sacrifices were made for it in the North ? Did ever any 
 Kepublican seek to disturb the Union? "Justice and Equality!" 
 When did the Democratic party distinguish itself for justice and 
 equality ? 
 
 Perhaps, fellow citizens, as an executive officer, I have erred in 
 following Senator Thurman in so much of his speech as is purely politi- 
 cal, but I am none the less a Kepublican and a partisan, and I trust the 
 time will never come when I will cease to have pride in the merits and 
 past achievements of the great party to which we belong. It is rather 
 hard to have the Kepublican party, which has done so much for the 
 existence and honor of our country, assailed so unjustly by Democrats, 
 who, during the trying time of our history, have been passive and 
 neutral. I promise you now to adhere, during the brief time I will 
 detain you, to the business topics in which we are all alike interested. 
 
 Judge Thurman says : 
 
 Now, certainly no one will deny that this country has for the last five years 
 suffered, as perhaps no other country ever did suffer, from depression in every 
 branch of business in every industrial occupation. 
 
 I deny this statement m toto. That this country has suffered from 
 depression in many branches of business and in many industrial occu- 
 pations I admit, but every civilized and Christian country in the world 
 
620 SPEECHES AND REPORTS OF JOHN" SHERMAN; 
 
 has suffered to a greater de^ee. In comparison with anj nation of 
 modern times our condition m every respect is more prosperous and 
 happy. If you read the English, French, or German papers, you will 
 findT that our causes of complaint are nothing to be compared with 
 theirs, while in our country there are many circumstances which relieve 
 the general depression. 
 
 Let me name some of the hopeful signs of the times. 
 
 The whole period since the war, and before the panic, waa a debt- 
 contracting period. From July 1, 1863, to July 1, 1873, our iim)ort8 
 exceeded our exports in the enormous sum of $1,047,069,219. Much 
 of this was for silks and furbelows, contracted for in the faith of comer 
 lots marked up, of inflated fortunes suddenly acquired ; but most of it 
 was for articles that our own labor should have produced. It repre- 
 sented foreign capital loaned to our citizens and to corporations, and 
 paid for in government and corporation bonds and private notes. 
 
 The same causes produced extravagant prices here. "Wild schemes, 
 railroads built twenty years in advance of their need, reckless expendi- 
 tures, led to the contracting of numerous debts, and to the mortgaging 
 of our corporations, homes, and farms. 
 
 Since the panic the whole condition of our trade and business has 
 changed. Since 1874 our exports have exceeded our imports in the 
 sum of $507,459,237. 
 
 During the last fiscal year the excess of exports was $257,459,250, 
 the aggregate of our exports reaching the sum of $680,683,798, and 
 during this fiscal year this excess is increasing. This is a debt-paying 
 process. The great body of the debts contracted before the panic is 
 now settled, either by payment, or bankruptcy, or readjustment. 
 
 At one time it was estimated that the amount of United States 
 bonds held abroad approached $1,000,000,000. Two years ago the gen- 
 eral estimate was about $600,000,000. If ow, after the most careful exam- 
 ination, it is estimated somewhere near $200,000,000 to $250,000,000. 
 
 The common fear expressed for the success of any plan of resump- 
 tion was that foreign nations could at once, by a return of our bonds, 
 exhaust our gold and thus defeat resumption ; but this is no longer to 
 be feared when the surplus exports for a single year would pay off 
 every dollar of our national debt held beyond the hmits of the United 
 States. 
 
 Last winter, when an exaggerated fear prevailed in Europe as to 
 the effect of the silver bill, $60,000,000 of our bonds were promptly 
 absorbed by our own people in sixty days ; and, although this stopped 
 the sale of bonds by the Treasury, it strengthened our position by 
 bringing them home. 
 
 Another favorable sign of the times is the very large increase of 
 domestic production, both of the farm and of the workshop, which not 
 only fill the place of goods heretofore imported, but enable us to com- 
 pete with foreign nations in their own markets. 
 
 I have here a recent table showing the increase of leading exports 
 of our own production. This shows that our expoi-ts of cotton, iron, 
 steel, copper, leather, and other manufactures have increased within ten 
 years nearly twofold, and that the exports of our agricultural imple- 
 
FINANCES. 621 
 
 ments and provisions have increased nearly threefold. The total amount 
 of certain leading commodities exported in 1868 was $141,000,000, 
 and in 1878 was 1404,000,000, showing an increase of $263,000,000. 
 
 Another table shows that our importation of certain fabrics which 
 we can readily make in this country has diminished nearly one half. 
 Of textile fabrics, including manufactures of cotton, silk, clothing,, and 
 dress goods, the amount imported into this country in 1873 was $159,- 
 000,000 _; the amount imported in 1878 was $85,000,000, making a 
 diminution of $74,000,000, most of which was supplied by our own 
 production. 
 
 The imports of iron and steel in various forms in 1873 was $59,- 
 308,452, while in 1878 it had fallen to $9,057,633, showing a diminu- 
 tion of $50,250,849. This falling off was supplied by our own industry. 
 
 The total of the leading manufactures named in this table imported 
 in 1873 was $272,957,633, and during the fiscal year ending June 30, 
 1878, it was $12i,211,734, making a falling off of $148,747,899. This 
 great decrease was especially noticeable in the imports of manufactures 
 of cotton, silk, wool, iron, and steel. 
 
 This increase of our exports and diminution of our imports is per- 
 haps the most remarkable in modern times. 
 
 We are competing in cotton fabrics with Manchester, in cutleiy 
 with Sheffield, in iron and steel with Birmingham, in watches with 
 Switzerland, and in gloves with France. It is a debt-paying and trade- 
 developing process that is adding immensely to our wealth. 
 
 Our progress toward resumption is accompanied by increased na- 
 tional credit, and by a large reduction of the interest of the public debt. 
 
 Under the refunding act, which is designed to convert our six per 
 cent, bonds into bonds bearing a lower rate of interest, we have already 
 sold at par in coin, $5O0,O0O,O0O of five per cent, bonds, $246,000,000 
 of four and a haK per cent, bonds, and $135,000,000 of four per cent. 
 bonds, the proceeds of which (except $90,000,000 sold for gold coin 
 now in hand) have been applied to pay an equal amount of six per 
 cent, debt, making an annual saving in the interest of the debt of 
 $10,000,000 ; and we are now daily selling the four per cent, bonds 
 directly to the people upon the basis of a popular loan in sums as low 
 as $50. These bonds have become the savings banks of the people, a 
 safe deposit for their surplus money, always available for use when 
 needed, and depending upon the honor of the nation, and, therefore, 
 safe from loss. 
 
 The most satisfactory feature of this loan is that it is held in small 
 sums by great numbers of our fellow citizens, and is distributed through- 
 out all the States in the Union. During the first twenty days of the 
 present month our sales of four per cent, bonds amount to $20,000,000, 
 and I now have the confident assurance that during this year they will 
 exceed $100,000,000, and vnll pay off all the five-twenty six per cent, 
 bonds of the issue of 1865. 
 
 The United States is now the largest producer of gold and silver in 
 the world. During the last year the estimated production of gold was 
 $45,000,000, and of silver $39,000,000 ; and though the Comstock lode 
 gives evidence of exhaustion, other mines are being discovered, and the 
 
622 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 probabilities ^re tbat our production will increase rather tban diminish. 
 This is an important element in the question of our ability to maintain 
 resumption. 
 
 Then, again, the enormous development of our agricultural produc- 
 tion, the chief employment of our people, gives a source of wealth and 
 {)rosperity unexampled in any nation in modem times. From the Afc- 
 antic to the Pacific, from Canada to the Gulf of Mexico, our countnr 
 has been blessed with bountiful harvests, assuring plenty of food to all 
 our people, and an increase of our exports to Europe. I understand 
 that a rich stream of wheat is now pouring into your port for shipment. 
 
 It is this industry which lies at the foundation of our prosperity, 
 and which invites now millions of laborers to aid in the development 
 of uncultivated lands. The war withdrew from agriculture millions of 
 laborers who are again invited to join in this most nealthful and happy 
 pursuit of life, and the crowded cities are freely invited to send their 
 surplus population to fruitful fields and bountiful harvests. 
 
 After the war of 1812 the migration commenced which peopled 
 Ohio, Indiana, and Illinois ; and, although there are no such rich lands 
 open now for settlement, yet Texas, Kansas, Nebraska, and the whole 
 tier of States west of the Missouri river, together with the undeveloped 
 Territories of the West, invite migration and insure to labor a just 
 reward, and offer facilities for transportation and settlement that our 
 fathers did not enjoy. 
 
 And now, fellow citizens, in conclusion, let me invite your attention 
 briefiy to the agitation of the labor question, not only in this country, 
 but in other countries where production has exceeded consumption 
 and thrown out of employment many industrious laboring men, and 
 paralyzed important branches of . industry, especially of the iron and 
 coal industries. 
 
 I know that in some places labor is depressed, that wages are low, 
 that many a willing hand finds it hard to get work, and sometimes 
 hungiT men, women, and children want food and clothing ; and shame 
 be to him who does not sympathize with such suffering and relieve it 
 if possible. No wonder that honest labor grows soured at the inequali- 
 ties of life, and sometimes listens to the cry of the demagogue that 
 human laws have caused this distress, and that if he was in oflBce he 
 could furnish redress. 
 
 The same distress in a far greater degree exists in Great Britain, 
 France, Germany, and all civilized nations, whatever may be their forms 
 of currency or standards of value. The only remedy would seem to be 
 to pursue new industries and seek new markets to be supplied. Our 
 own country is blessed with cheap lands inviting labor, and the energy 
 of our own people, as I have shown, is already discovering increased 
 employment in supplying productions heretofore made abroad, and in 
 sending our home productions to foreign countries. All that the Gov- 
 ernment can do within its limited powers it ought to do to encourage, 
 protect, and foster labor. 
 
 And I can say of our laws and institutions that they are far more 
 favorable to the laboring man than those of any other country ; and 
 any idea, or reform, or measure that is proposed to relieve and protect 
 
FINANCES. , 623 
 
 labor finds in the Eepublican partjr its earnest and sympathetic advo- 
 cate. That party has done more ior the protection and development 
 of labor than any other. 
 
 Our Constitution and laws guarantee to every man equal civil and 
 political rights. Property is more equally distributed here than else- 
 where, except in France ; and, excluding the negroes who but recently 
 acquired the right to vote, a greater proportion of our citizens are prop- 
 erty-holders. More than two thirds of our voters, with this exception, 
 are property-holders, and the rest want to be, hope to be, and can be. 
 
 This country of ours is not a permanent field for tramps and com- 
 munists. Our laws for the distribution of property tend directly and 
 rapidly to distribute large estates. 
 
 Property here is required to pay more tribute to labor than in any 
 country in the world. 
 
 Property educates the children, maintains all your charitable insti- 
 tutions, your streets, roads, and local improvements, and all parts of 
 National, State, and local government. 
 
 The- very few taxes that attach to those who have no property are 
 on whisky, tobacco, and beer, which are voluntary taxes. 
 
 If the Government can do more to protect labor, it will. It offers 
 to every citizen a homestead on the public lands. It offers every man 
 an equal chance. Every office and honor is open to equal competition, 
 and it gives to no man rank, title, or advantage except what he himself 
 acquires. 
 
 This is all that a free government can do. It can not take the prop- 
 erty of the riyh and divide it among the poor. It can not, as is pro- 
 posed, take the public treasure, collected by taxes, and distribute it in 
 any other way than for the limited proper objects provided for by the 
 Constitution. It can not control contracts men make with each other, 
 except where they are grossly immoral or violate public .policy. Its 
 office is spent when it secures freedom, equality, and an equal chance 
 in the race of life. 
 
 While the sympathies of the Republican party must ever be with 
 the laboring man, it can not violate the fundamental principles of free 
 government, in order to favor any class, or refuse to protect any class 
 in the enjoyment of life, property, and the fruits of labor. 
 
 In -the general management of your affairs the Republican party has 
 done all that it could do to develop the national resources and maintain 
 the national honor, to protect all men in equal rights, to secure to all 
 men equal privileges and an equal chance in life ; and it is ready to 
 adopt any proper and constitutional mode of relieving distress and ad- 
 vancing the interests of any portion of the people. I can safely appeal 
 to all of you who have shared in the honors and labors of this party, to 
 still stand by its flag, now that the difficulties of the recent past are 
 passing away, with the full hope that our country, always advancing 
 and prospering since liberty was first proclaimed by our Revolutionary 
 fathers, is still destined to advance, under the guidance of the Repub- 
 lican party, to higher honor and greater prosperity. 
 
624 
 
 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 APPENDIX A. 
 
 Values of the prmeipal commodities of domestic production, the exportation of which 
 greatly increased from June 30, 1868, to June SO, 1878. 
 
 COMMODITIES. 
 
 TEAE BSDIHO JUHE 80. 
 
 
 1868. 
 
 18T8. 
 
 
 Agricultural implements 
 
 $678,881 
 
 788,895 
 
 68,980,997 
 
 1,616,220 
 
 939,280 
 
 4,871,054 
 
 406,612 
 
 6,389,429 
 
 1,414,3/2 
 
 2,918,448 
 
 21,810,676 
 
 30,278,253 
 
 $2,676,198 
 
 6,844,653 
 
 181,774,507 
 
 2,359,467 
 
 8,078,349 
 
 11,436,628 
 1,376,969 
 
 12,084,048 
 8,077,659 
 5,096,168 
 
 46,574,974 
 123,546,986 
 
 $1,901,817 
 
 5,111,258 
 
 112,793,510 
 
 848,247 . 
 2,139,099 
 6,664,674 
 
 970,467 
 6,694,619 
 6,663,287 
 2,181,715 
 
 Live animals 
 
 Bread and breadstuff's 
 
 Coal 
 
 Copper, brass, and manufactures of. . . 
 Cotton, manufactures of 
 
 Fruit 
 
 Iron, steel, and manufactures of 
 
 Leather, and manufactures of. 
 
 Oil-cake 
 
 Coal oil and petroleum 
 
 24,764,298 
 98,271,783 
 
 Provisions , 
 
 
 Total 
 
 $140,926,987 
 
 $408,826,601 
 
 $262,899,614 
 
 
 APPENDIX B. 
 
 Values of the principal commodities of foreign production, the importation of which 
 greatly decreased from June SO, 187S, to June SO, 1878. 
 
 COMMODITIES. 
 
 Clocks, watches, and materials .... 
 
 Textiles ; 
 
 Manufactures of cotton 
 
 Manufactures of flax 
 
 Manufactures of silk 
 
 Clothing. 
 
 Wool: 
 
 Unmanufactured 
 
 Carpets 
 
 Dress goods 
 
 Other manufactures of. 
 
 Total textiles 
 
 Iron and Steel: 
 
 Bar, rod, sheet, and hoop 
 
 Iron in pigs 
 
 Bailroad bars 
 
 Anchors, chains, and other 
 
 Steel ingots, bars, etc 
 
 Steel cutlery, saws, etc 
 
 Total iron and steel 
 
 Copper, brass, and manufactures of 
 
 Lead in pigs and bars 
 
 Tin and tin plates 
 
 India rubber and gutta pcrcha 
 
 Tea 
 
 Grand total 
 
 TAIVB IMPOBTED DUBINO TEAB 
 'ENDING 
 
 Decrease since 1873. 
 
 June SO, 1878. 
 
 June 80, 18T8. 
 
 
 $3,274,826 
 
 $812,682 
 
 $2,462,243 
 
 $29,752,116 
 
 20,428,391 
 
 29,835,867 
 
 8,561,161 
 
 20,433,938 
 
 4,888,267 
 
 19,447,797 
 
 26,626,721 
 
 $14,398,791 
 
 11,490,768 
 
 19,701,731 
 
 6,676,789 
 
 8,363,016 
 
 398,389 
 
 12,066,806 
 
 12,269,862 
 
 $16,353,325 
 
 8,937,833 
 
 10,134,136 
 
 1,874,372 
 
 12,070,923 
 3,989,868 
 7,891,991 
 
 14,856,869 
 
 $169,464,248 
 
 $86,356,131 
 
 $74,109,117 
 
 $7,477,556 
 18,847,281 
 19,740,702 
 8,694,900 
 4,166,234 
 10,492,779 
 
 $1,680,707 
 
 1,260,057 
 
 630 
 
 920,790 
 
 1,220,087 
 
 4,086,612 
 
 $6,846,849 
 
 12,597,224 
 
 19,740,172 
 
 2,674,110 
 
 2,936,197 
 
 6,467,267 
 
 $69,808,462 
 
 $9,067,688 
 
 $60,260,819 
 
 $8,966,471 
 
 8,222,627 
 
 18,866,663 
 
 900,187 
 
 24,466,170 
 
 $617,188 
 863,986 
 
 12,112,582 
 242,664 
 
 15,660,168 
 
 $3,849,288 
 
 2,868,691 
 
 6,244,121 
 
 657,628 
 
 8,806,002 
 
 $272,969,633 
 
 $124,211,784 
 
 $148,747,899 
 
CONDITION OF THE OOUNTKY. 625 
 
 CONDITION OF THE COUNTET. 
 
 8PEEGH AT GUMBEBLAND, MARYLAND, OOTOBER ^, 1878. 
 
 The best return for the kind reception you have given the President 
 and his associates will be to confine myself, in the brief speech he de- 
 sires me to make, to a statement of such facts as will exhibit the finan- 
 cial condition of our country. I take it that most of you are farmers, 
 and that all, including the lawyers and doctors — who, though not good 
 producers, are very good consumers — are interested in the grovrth and 
 development of the trade, commerce, and industries of our country. I 
 wish to state some facts, taken mainly from the records of the Treasury 
 Department, which wiU tend, I think, to show you that our business 
 condition is improving, and that though we have, in common with 
 other nations, siiEEered from depressed trade and industry, yet that the 
 causes for this are passing away, and that now the signs are hopeful and 
 cheering. < 
 
 One mode of testing the condition of a country is by its foreign 
 trade. There are a good many theories about the balance of trade, but 
 one thing we all understand to be as true of a nation as of an individual. 
 If one sells more than he buys, he grows richer — especially is this true 
 of the products of a farm if it is all the time improving ; if he buys 
 more than he sells, he grows poorer. Tested by this simple rule, the 
 condition of our country is now very satisfactory — ^more so than ever 
 before in our history. We have imported goods from foreign countries 
 during the last twelve months to the value of $430,855,017 ; we have 
 sold to foreign countries during the same period goods to the value of 
 $720,484,171 ; thus leaving a balance in our favor of $289,629,154. 
 This is a much larger balance in our favor than has ever occurred 
 before in our history, and this balance is represented either by debts 
 paid by us or money paid to us — ^mostly by debts paid by us. AH this 
 sum has been returned to us from Europe either in bonds of the United 
 States or in other securities held abroad, or in money ; and this favora- 
 ble balance of trade has now continued for four or five years, so that 
 our debt to Europe is mostly paid, and our country is rapidly ceasing to 
 be a debtor nation except to its own citizens. 
 
 Another simple mode of testing our financial condition ig by the 
 increase or decrease of our domestic productions. Here again we are 
 in a satisfactory condition. Nearly all domestic productions have 
 largely increased, and especially those of the farm and workshop. 
 Compared with 1870, when our domestic productions were stated at 
 $6,800,000,000, they have largely increased. 
 
 The great increase in some of the principal productions which con- 
 stitute the basis of our material prosperity is shown by the following 
 table : 
 
 40 
 
SPEECHES AND REPORTS OF JOHN SHERMAN. 
 Production. 
 
 
 COMMODITIES. 
 
 
 TBAE. 
 
 
 1878. 
 
 18T8. 
 
 Com 
 
 Wheat 
 
 Bye 
 
 Oats 
 
 Cotton 
 
 
 bushels. 
 
 do. 
 
 do. 
 
 do. 
 
 bales. 
 
 932,274,000 
 
 281,254,700 
 
 16,142,000 
 
 270,340,000 
 
 8,930,508 
 
 1,342,558,000 
 
 365,094,000 
 
 21,170,100 
 
 406,394,000 
 
 4,811,265 
 
 By comparing tlie figures of 1877 with those of the census year of 
 1870, it appears mat the total production of coal in the United States 
 rose from 32,860,690 tons in 1870 to 54,308,000 tons in 1877, and that 
 the production of pig iron in the United States increased from 1,865,- 
 000 tons in 1870 to 2,314,585 tons in 1877. 
 
 The production of petroleum (now constituting one of the most im- 
 portant articles of exportation) increased from 5,673,195 barrels in 1870 
 to 13,135,671 barrels in 1877. 
 
 Compared with any former year, the aggregate of these productions 
 has Tery largely increased. We are blessed by Divine Providence with 
 fruitful seasons, and these have been improved by the industry of our 
 people. This vast aggregate of wealth, though won by hard labor not 
 very well paid, greatly improves our financial condition, and enables us 
 to look into the future without fear of want, and with an abundance 
 with which to pay our debts and supply the wants of Europe. 
 
 Another good sign is in the growing diversity of our productionB. 
 The wealth of a country depends upon this. No country can be pros- 
 perous whose industry is coimned to one pursuit. We are now maJdng 
 at home many articles that we formerly imported. The fact that, with 
 respect to certain of the great manufacturing industries, we have ob- 
 tained control of our own markets, is shown by the great falling off in 
 the importation of certain commodities from 1873 to 1878. This is 
 indicated by the following table : 
 
 COMMODITIES. 
 
 mPOKTED DURING THE TEAS ENDED 
 JrNE .HO. 
 
 
 ISTiJ. 
 
 1ST8. 
 
 Manufactures of cotton 
 
 $29,752,116 
 
 20,428,891 
 
 29,886,867 
 
 4,888,267 
 
 8,966,471 
 
 19,740,702 
 
 $14,898,791 
 
 11,490,758 
 
 19,701,781 
 
 898,889 
 
 617,188 
 
 630 
 
 
 Manufactures of silk 
 
 Manufactures of carpets 
 
 Copper, brass, and other manufactures of 
 
 
 
 
 And so I might go on through an immense category of the products 
 of our industries. 
 
 "While the importation of railroad bai's fell off to the extent shown 
 above, from $19,000,000 to $530, the production of iron and steel bars 
 in the United States increased from 2,958,141 tons during the five years 
 from 1867 to 1871 to 4,056,340 tons during the five years from 1873 to 
 
CONDITION" OF THE OOUNTEY. 627 
 
 1877 — an increase of thirty-seven per cent. Now we supply our own 
 wants of the same articles by domestic manufacture. 
 
 Not only this, but we have so increased our skill in the industrial 
 arts that we are largely supplying our home markets with certain of the 
 more important articles of manufacture, which but a few years ago we 
 imported in large qxiantities, and this in face of the hard times of the 
 last six years. 
 
 We have also greatly increased the exportation of certain com- 
 modities to foreign countries. 
 
 I vsdll mention a few of the principal of these commodities: 
 
 The exportation of manufactures of cotton increased from $2,947,- 
 528 during the year ending June 30, 1873, to $11,435,628 during the 
 year ending June 30, 1878. 
 
 Our exports of iron and manufactures of iron, including steel, rose 
 from $10,000,000 in 1873 to $12,000,000 in 1878. 
 
 Our exports of leather and manufactures of leather increased from 
 $5,305,000 in 1873 to $8,077,000 in 1878 ; and our exports of copper 
 and brass and manufactures thereof rose from $753,000 during the 
 year 1873 to $3,078,000 during the year 1878. 
 
 The schedule might be extended so as to embrace many highly 
 wrought products of industry, including watches, clocks, sewing-ma- 
 chines, locomotives, cars, steam-machinery, etc., etc. We are now com- 
 peting with our productions in the different marts of the world in all 
 the leading articles of manufacture. 
 
 Another hopeful sign is the better distribution of our population. 
 The tendency since the war has been to concentrate into cities. All 
 the large cities grew rapidly, but the farms and villages were deserted. 
 While the waste of war and the excitement of inflated prices lasted, 
 cities flourished ; but when the bubble burst and reverses came, the 
 blow fell mainly upon the cities. Corner lots fell and paper fortunes 
 disappeared in a day. Thousands of men were thrown out of work. 
 They could not comprehend the cause. Many of these, by reviving 
 business, are now again employed; but tens of thousands have bet- 
 tered their condition by seeking new homes in the West and South, 
 where rich land and fruitful harvests invite them to the' cultivation of 
 the soil, the highest employment of life. All accounts concur that the 
 population of Texas, Kansas, Nebraska, Iowa, and Minnesota has very 
 largely increased during the last two years. In these Western homes 
 some of your old comrades have found the star of their Hfe. 
 
 Another hopeful sign is the advancing credit of our country. Cer- 
 tainly every American citizen will take pride in the fact that our four 
 per cent, bonds are daily taken at par in coin. Though the rate of 
 interest is low, yet the feeling of trust and security in the good faith 
 and honor of our people makes every one feel safe when he holds a 
 Government bond. The amount of these bonds sold last year was 
 $74,900,000, and this year, thus far, $83,359,850 ; in all, $158,259,850. 
 AH of these bonds are held by our own citizens, and three fourths of 
 them by small investors, or by savings banks and insurance companies. 
 This process enables us rapidly to pay off our six per cent, bonds, and 
 reduce the interest paid by the Government one third. 
 
628 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 Another mode of testing our financial condition is in our economy. 
 Here again we all know there has been an improvement. Economy 
 has been the rule, not only of the nation, but of every family. The 
 extravagance of a period of inflation produced the bitter effects of the 
 panic under which we have suffered ; but this suffering has com- 
 pelled thrift, economy, and great prudence, and these homely virtues 
 nave brought us rich rewards. Debts have been paid. This thrift 
 has extended to the National Government, so that our national ex- 
 penses have largely decreased. In 1873 they amounted to $290,345,- 
 245. During the last year they amounted to $236,964,326. Both 
 parties, perhaps I had better say all parties, are claiming credit for 
 this, and the people wish them a generous rivalry in pushing forward 
 this good work. 
 
 But the question upon which I know, fellow citizens, you desire 
 most to hear from me, is about our currency — whether our currency is 
 to be restored to the specie standard, and our industry to be measured 
 by the solid coin of the world. 
 
 Here again our condition is greatly improved. Six years ago, in 
 1873, when the panic came upon us like a thief in the night, without 
 warning or notice, our paper money, which measured all values, was 
 worth only eighty-six cents on the dollar in coin ; now it is worth with- 
 in a very small traction of the best coin issued from the mint. Then 
 the bond-holder received gold and the laboring man received depreci- 
 ated paper money. This distinction was made necessary during the 
 war in order to sell our bonds, yet it was a matter of complaint that 
 this discrimination was not removed as soon as practicable. This is 
 now almost accomplished, and who would desire it otherwise? AU 
 money should have equal value, and the best standard is coin money. 
 I do not say that coin money should be the only money ; for I believe 
 that paper money equal to coin is, for current purposes, more convenient 
 than coin money ; but the only test of its equality to coin is that it is 
 redeemable in coin on the demand of the holder. I have no wish to 
 enter upon the controverted political question whether the best mode 
 has been adopted to bring this about, for upon this point we might 
 honestly differ; but upon one point I think we can aU agree, that 
 having gold, silver, and paper money so near to each other, we will 
 not allow the gap to widen again, but that all money shall be of equal 
 purchasing power, so that the rich and the poor, the bond-holder and 
 the note-holder, the land-owner and the laborer, may have, as he 
 chooses, either form of money for his labor and productions. 
 
 I am frequently asked whether we can maintain the equality of this 
 money after resumption. I say, without hesitation, that we can do so ; 
 but we must not force the issue of either form of money when its con- 
 venience, the popular demand for it, and the separate uses for which it 
 is designed, will not keep it at par with the other. 
 
 Under the resumption act of 1875, the maintenance of resumption 
 after January, 1879, was a very easy problem. It was resumption upon 
 $300,000,000 of United States notes, and upon one coin, that of gold. 
 Congress, by law, requires resumption upon $346,000,000 of United 
 States notes. It also requires resumption upon gold and silver coin, 
 
OONDITIOIT OF THE COUNTRY. 629 
 
 but tlie bullion in tbe two coins is of unequal yalue, tbe silver in the 
 dollar being worth in gold only eighty-three cents. If the market 
 value of these metals was at or about the relative value fixed by law for 
 their coinage, resumption in both metals would be much easier than in. 
 either. It would be very easy to resume in silver doUars alone, but it 
 is resumption in gold coin, as well as silver, that is provided for by 
 law as well as by public policy. The coining of $2,000,000 monthly 
 of silver dollars of full l ega l tender is a disturbing element which we 
 can not now compute. We can only hope that, before the issue of 
 silver is greatly iacreased. Congress wiU either limit its amount or 
 make it contain enough silver to be equal in value to gold. 
 
 We have now in circulation $346,000,000 of greenbacks, of which 
 more than sixty millions is held in reserve. We have now $137,000,000 
 in gold and silver coin and bullion in the Treasury, over and above all 
 other coin liabilities, to redeem any notes that are presented. It is be- 
 lieved that the superior convenience of paper money for all the uses of 
 life will make it pass readily in preference to gold and silver as long as 
 the Government shows a determination to maintain it at par with coin, 
 and will freely use its ample powers for that purpose. Gold is now 
 coming to us from Europe for our productions. We are buying gold 
 and silver in North Carolina, Colorado, Nevada, California, and Mon- 
 tana at par with paper money, and our mines are now yielding annu- 
 ally one hundred millions of precious metals to reenforce our stock. 
 We have as a supplemental or ancillary paper money three hundred 
 and twenty-two millions of bank notes, absolutely secured beyond dan- 
 ger of loss, issued by corporations scattered through the countrv, and 
 abundantly able and required to keep their notes at par, and, if they 
 fail, with assets in our hands ample to make their promise good. I 
 therefore say with confidence that, unless the people prefer irredeema- 
 ble money, we will have redeemable money at par with gold coin, 
 unless the people demand that silver coin of a kind less valuable than 
 gold coin shall be issued in such quantities as to drive out of circula- 
 tion gold coin, and thus become the sole standard of value. 
 
 But the brightest promise of the future is that our people, inhabiting 
 the fairest portion of a continent, fresh for profitable labor, are becom- 
 ing day by day one people, united ■ in hope, confidence, and fraternity ; 
 that the jealousies, dissensions, and sectional contests of the past are 
 disappearing. Accursed be the man who would reopen these dissen- 
 sions, or would deny to any man the free and equal and peaceable 
 enjoyment of any right given to him by the Constitution and laws of 
 our land. It is only on this platform we can build our hopes for the 
 future. If we can all stand on this, there is no hope or aspiration for 
 our country we may not indulge — ^peace, plenty, and prosperity, lib- 
 erty, equality, and fraternity — the law as our master and guide. 
 
630 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 AJWUAL EEPOKT TO CONGEESS. 
 
 • Tbbasobt Depabtment, 
 
 Washimotos-, D. C, December 2, 1878. 
 
 Sm: 
 
 ******** 
 
 The important duty imposed on this Department by the resumption 
 EQt, approved January 14, 1875, has been steadily pursued during the 
 past year. The plain purpose of the act is to secure to all interests and 
 aU classes the benefits of a sound curt-ency, redeemable in coin, with 
 the least possible disturbance of existing rights and contracts. Three 
 of its provisions have been substantially carried into execution by the 
 gradual substitution of fractional coin for fractional currency, by the 
 free coinage of gold, and by free banking. There remains only the 
 completion of preparations for resumption in coin on the 1st day of 
 January, 1879, and its maintenance thereafter upon the basis of exist- 
 ing law. 
 
 At the date of my annual report to Congress in December, 1877, it 
 was deemed necessary as a preparation for resumption to accumulate in 
 the Treasury a coin reserve of at least forty per cent, of the amount of 
 United States notes outstanding. At that time it was anticipated that 
 under the provisions of the resumption act the volume of United States 
 notes would be reduced to $300,000,000 by the 1st day of January, 
 1879, or soon thereafter, and that a reserve in coin of $120,000,000 
 would then be sufficient. Congress, however, in view of the strong 
 popular feeling against a contraction of the currency, by the act ap- 
 proved May 31, 1878, forbade the retirement of any United States notes 
 after that date, leaving the amount in circulation $346,681,016. Upon 
 the principle of safety upon which the Department was acting, that 
 forty per cent, of coin was the smallest reserve upon which resumption 
 could prudently be commenced, it became necessary to increase the 
 coin reserve to $138,000,000. 
 
 At the close of the year 1877 this coin reserve, in excess of coin 
 liabilities, amounted to $63,016,050.96, of which $15,000,000 were ob- 
 tained by the sale of four and a half per cent., and $25,000,000 by the 
 sale of four per cent, bonds, the residue being surplus revenue. Sub- 
 sequently, on the 11th day of April, 1878, the Secretaiy entered into a 
 contract with certain bankers in New York and London — the parties 
 to the previous contract of June 9, 1877, already communicated to 
 Congress — for the sale of $50,000,000 four and a half per cent, bonds 
 for resumption purposes. The bonds were sold at a premium of one 
 and a half per cent, and accrued interest, less a commission of one half 
 of one per cent. The contract has been fulfilled, and the net pro- 
 ceeds, $50,500,000, have been paid into the Treasury in gold coin. 
 The $5,500,000 coin paid on tlio Halifax award have been replaced by 
 the sale of that amount of four per cent, bonds sold for resumption 
 purposes, making the aggregate amount of bonds sold for these pur- 
 poses $95,500,000, of which $65,000,000 were four and a half per cent, 
 bonds, and $30,500,000 four per cent, bonds. To this has been added 
 
ANNUAL EEPOET TO CONGRESS; 631 
 
 tlie surplus revenue from time to time. The amount of coin held in 
 the Treasury on the 23d day of November last, in excess of coin suffi- 
 cient to pay all accrued coin liabilities, was $141,888,100, and consti- 
 tutes the coin reserve prepared for' resumption purposes. This sum 
 will be diminished somewhat on the 1st of January next by reason of 
 the large, amount of interest accruing on that day in excess of the coin 
 revenue received meanwhile. 
 
 In anticipation of resumption, and in view of the fact that the 
 redemption of United States notes is mandatory only at the office of 
 the Assistant Treasurer in the city of New York, it was deemed im- 
 portant to secure the cooperation of the associated banks of that city 
 in the ready collection of drafts on those banks and in the payment of 
 Treasury drafts held by them. A satisfactory arrangement has- been 
 made by which all drafts on the banks held by the Treasury are to be 
 paid at the clearing house, and all drafts on the Treasury held by them 
 are to be paid to the clearing house at the office of the Assistant Trea- 
 surer, in IJnited States notes ; and, after the 1st of January, United 
 States notes are to be received by them as coin. This will greatly 
 lessen the risk and labor of collections both to the Treasury and the 
 banks. 
 
 Every step in these preparations for resumption has been accompa- 
 nied with increased business and confidence. The accumulation of 
 coin, instead of increasing its price, as was feared by many, has stead- 
 ily reduced its premium in the market. The depressiag and ruinous 
 losses that followed the panic of 1873 had not diminished in 18'Y5, 
 when the resuinption act passed ; but every measure taken in the exe- 
 cution or enforcement of this act has tended to lighten these losses and 
 to reduce the premium on coin, so that now it is merely nominal. The 
 present condition of our trade, industry, and commerce, hereafter more 
 fully stated, our ample reserves, and the general confidence inspired in 
 our financial condition, seem to justify the opinion that we are pre- 
 pared to commence and maintain resumption from and after the first 
 day of January, a. d. 18Y9. 
 
 The means and manner of doing this are left largely to the discre- 
 tion of the Secretary, but, from the nature of the duty imposed, he 
 must restore coin and bullion, when withdrawn in the process of re- 
 demption, either by the sale of bonds, or the use of the surplus reve- 
 nue, or of the notes redeemed from time to time. 
 
 The power to sell any of the bonds described in the refunding act 
 continues after as well as before resumption. Though it may not be 
 often used, it is .essential to enable this Department to meet emergen- 
 cies. By its exercise it is anticipated that the Treasury at any time 
 can readily obtain coin to reenforce the reserve already accumulated. 
 United States notes must, however, be the chief means under existing 
 law with which the Department must restore coin and bullion when 
 withdrawn in process of redemption. The notes, when redeemed, must 
 necessarily accumulate in the Treasury until their superior use and 
 convenience for circulation enable the Department to exchange them 
 at par for coin or bullion. 
 
 The act of May. 31, 1878, already refeiTed to, provides that when 
 
SPEECHES AND KEP0BT8 OF JOHN SHERMAN. 
 
 United States notes are redeemed or received in the Treasury under 
 any law, from any source whatever, and shall belong to the United 
 States, they shall not be retired, canceled, or destroyed, but shall be 
 reissued and paid out again and kept in circulation. 
 
 The power to reissue United States notes was conferred by section 
 3579, Kevised Statutes, and was not limited by the resumption act. 
 As this, however, was questioned. Congress wisely removed the doubt. 
 
 Notes redeemed are like other notes received into the Treasury. 
 Payments of them can be made only in consequence of appropriations 
 made by law, or for the purchase of bullion, or for the refunding of 
 the public debt. 
 
 The current receipts from revenue are sufficient to meet the current 
 expenditures as well as the accruing interest on the public debt. Au- 
 thority is conferred by the refunding act to redeem six per cent, bonds 
 as they become redeemable, by the proceeds of the sale of bonds bear- 
 ing a lower rate of interest. The United States notes redeemed under 
 the resumption act are, therefore, the principal means provided for the 
 purchase of bullion or coin with which to maintain resumption, but 
 should only be paid out when they can be used to replace an equal 
 amount of coin withdrawn from the resumption fund. They may, it 
 is true, be used for current purposes like other money, but when so 
 used their place is filled by money received from taxes or other sources 
 of revenue. 
 
 In daily business no distinction need be made between moneys from 
 whatever source received, but they may properly be applied to any of 
 the purposes authorized by law. No doubt coin liabilities, such as in- 
 terest or princi;pal of the public debt, will be ordinarily paid and will- 
 ingly received in United States notes, but, when demanded, such pay- 
 ments wiU be made in coin ; and United States notes and coin will be 
 used in the purchase of bullion. This method has already been adopted 
 in Colorado and North Carolina, and arrangements are being perfected 
 to purchase bullion in this way in alLthe mining regions of the United 
 States. 
 
 By the act approved June 8, 1878, the Secretary of the Treasury is 
 authorized to constitute any superintendent of a mint or assajer of any 
 assay office an assistant treasurer of the United States to receive gold 
 coin or bullion on deposit. By the legislative appropriation bill, ap- 
 proved July 19, 1878, the Secretary of the Treasury is authorized to 
 issue coin certificates in payment to depositors of bullion at the several 
 mints and assay offices of the United States. These provisions, in- 
 tended to secure to the producers of bullion more speedy pajmient, will 
 necessarily bring into the mints and Treasury the great body of the 
 precious metals mined in the United States, and will tend greatly to 
 the easy and steady supply of bullion for coinage. United States notes, 
 when at par with coin, will be readily received for biillion instead of 
 coin certificates, and with great advantage and convenience to the pro- 
 ducers. 
 
 Deposits of coin in the Treasury will, no doubt, continue to be made 
 after the 1st of January, as heretofore. Both gold and silver coin, 
 from its weight and bulk, wiU naturally seek such a safe deposit, while 
 
ANNUAL KEPORT TO CONGRESS. 633 
 
 notes redeemable in coin, from their superior convenience, will be cir- 
 culated instead. After resumption the distinction between coin and 
 United States notes should be, as far as practicable, abandoned in the 
 current affairs of the Government ; and therefore no coin certificates 
 should be issued except where expressly required by the provisions of 
 law, as in the case of silver certificates. The gold certificates hitherto 
 issued by virtue of the discretion conferred upon the Secretary wiU not 
 be issued after the 1st of January next. The necessity for them dur- 
 ing a suspension of specie payments is obvious, but no longer exists 
 when by law every United States note is, in effect, a coin certificate. 
 The only purpose that could be subserved by their issue hereafter would 
 be to enable persons to convert their notes into coin certificates, and 
 thus contract the currency and hoard gold in the vaults of the Trea- 
 sury without the inconvenience or risk of its custody. For convenience 
 United States notes of the same denomination as the larger coin certi- 
 ficates wiU be issued. 
 
 By existing law, customs duties and the interest of the public debt 
 are payable in coin, and a portion of the duty was specifically pledged 
 as a special fund for the payment of the interest, thus making one pro- 
 vision dependent upon the other. As we can not, with due regard to 
 the public honor, repeal the obligation to pay coin, we ought not to 
 impair or repeal the means provided to procure coin. "When, happily, 
 our notes are equal to coin, they will be accepted as coin, both by the 
 public creditor and by the Government ; but this acceptance should be 
 left to the option of the respective parties, and the legal right on both 
 sides to demand coin should be preserved inviolate. 
 
 The Secretary is of the opinion that a change of the law is not 
 necessary to authorize this Department to receive United States notes 
 for customs duties on and after the 1st day of January, 1879, while 
 they are redeemable and are redeemed on demand in coin. After re- 
 . sumption it would seem a useless inconvenience to require payment of 
 such duties in coin rather than in United States notes. The resump- 
 tion act, by clear implication, so far modifies previous laws as to peritiit 
 payments in United States notes as well as in coin. The provision for 
 coin payments was made in the midst of war, when the notes were de- 
 preciated and the public necessities required an assured revenue in coin 
 to support the public credit. This alone justified the refusal by the Gov- 
 ernment to take its own notes for the taxes levied by it. It has now 
 definitely assumed to pay these notes in coin, and this necessarily im- 
 plies the receipt of these notes as coin. To refuse them is only to in- 
 vite their presentation for coin. Any other construction would require 
 the notes to be presented to the Assistant Treasurer in JN'ew York for 
 coin, and, if used in the purchase of bonds, to be returned to the same 
 officer, or, if used for the payment of customs duties, to be carried to 
 the Collector of Customs, who must daily deposit in the Treasury all 
 money received by him. It is not to be assumed that the law requires 
 this indirect and inconvenient process after the notes are redeemable 
 in coin on demand of the holder. They are then at a parity with coin, 
 and both should be received indiscriminately. 
 
 If United States notes are received for duties at the port of New 
 
634 SPEECHES AND REPORTS OF JOHN SHERMAN. 
 
 York, they should be received for the same purpose in all other ports 
 of the United States, or an unconstitutional preference would be given 
 to that port over other ports. If this privilege is denied to the citizens 
 of other ports, they could make such use of these notes only by trans- 
 porting them to New York and transporting the coin to their homes 
 for payment ; and all this not only without benefit to the Government, 
 but with a loss in returning the coin again to New York, where it is 
 required for redemption purposes. 
 
 The provision in the law for redemption in New York was believed 
 to be practical redemption in all parts of the United States. Actual 
 redemption was confined to a single place from the necessity of main- 
 taining only one coin reserve, where the coin could be easily accumu- 
 lated and kept. 
 
 With this view of the resumption act, the Secretary will feel it to 
 be his duty, unless Congress otherwise provides, to direct that after the 
 1st day of January next, and while United States notes are redeemed 
 at the Treasury, they be received the same as coin by the officers of 
 this Department in aU payments in all parts of the United States. 
 
 If any further provision of law is deemed necessary by Congress to 
 authorize the receipt of United States notes for customs dues or for 
 bonds, the Secretary respectfully suljmits that this authority should 
 continue only while the notes are redeemed in coin. However desirable 
 continuous resumption may be, and however confident we may feel in 
 its maintenance, yet the experience of many nations has proven that it 
 may be impossible in periods of great emergency. In such events the 
 public faith demands that the customs duties shall be collected in coin 
 and paid to the public creditors, and this pledge should never be vio- 
 lated or our ability to perform it endangered. 
 
 Heretofore the Treasury, in the disbursement of currency, has paid 
 out bills of any denomination desired. In this way the number of 
 bills of a less denomination than five dollars is determined by the de- 
 mand for them. Such would appear to be the true policy after the 1st 
 of January. It has been urged that, with a view to place in circulation 
 silver coins, no bills of less than five dollars should be issued. It would 
 seem to be more just and expedient not to force any form of money 
 upon a public creditor, but to give him the option of the kind and de- 
 nomination. The convenience of the public in this respect should be 
 consulted. The only way by which moneys of different kinds and in- 
 trinsic values can be maintained in circulation at par Avith each other is 
 by the ability, when one kind is in excess, to readily exchange it for 
 the other. This principle is applicable to coin as well as to paper 
 money. In this way the largest amount of money of different kinds 
 can be maintained at par, the different purposes for which each is 
 issued making a demand for it. The refusal or iioglect to maintain 
 this species of redemption inevitably effects the exclusion from circu- 
 lation of the most valuable, which thereafter becomes a commodity, 
 bought and sold at a j^rcmium. 
 
 When the resumption act was passed, gold was the only coin which 
 by law was a legal tcudor in payment of all debts. The act contem- 
 plated resumption in gold coin only. No silver coin of full legal tender 
 
ANNUAL REPORT TO CONGRESS. 635 
 
 could then be lawfully issued. The only silver coin provided was frac- 
 tional coin, which was a legal tender for five dollars only. The act ap- 
 proved February 28, 18Y8, made a very important change in our coin- 
 age system. The silver dollar provided for was made a legal tender 
 for all debts, public and private, except where otherwise expressly 
 stipulated in the contract. The amount of this coin issued will more 
 properly be stated hereafter, but its effect upon the problem of resump- 
 tion should be here considered. 
 
 The law itself clearly shows that the silver dollar was not to super- 
 sede the gold dollar; nor did Congress propose to adopt the single 
 standard of silver, but only to create a bimetallic standard of silver and 
 gold, of equal value and equal purchasing power. Congress, therefore, 
 limited the amount of silver dollars to be coined to not less than two 
 millions nor more than four millions per month, but did not limit the 
 aggregate amount nor the period of time during which this coinage 
 should continue. The market value of the silver in the dollar, at the 
 date of the passage of the act, was ninety-three and a quarter cents in 
 gold coin ; now it is about eighty-six cents in gold coin. If it was in- 
 tended by Congress to adopt the silver instead of the gold standard, the 
 amount provided for is totally inadequate for the purpose. Experience, 
 not only in this country but in European countries, has established 
 that a certain amount of silver coin may be maintained in circulation 
 at par with gold, though of less. intrinsic bullion value. It was, no 
 doubt, the intention of Congress to provide a coin in silver which would 
 answer a multitude of the purposes of business life, without banishing 
 from circulation the established gold coin of the country. To accom- 
 plish this, it is indispensable either that the silver coin be limited in 
 amount, or that its bullion value be equal to that of the gold dollar. 
 If not, its use will be limited to domestic purposes. It can not be ex- 
 ported except at its commercial value as bullion. If issued in_ excess 
 of demands for domestic purposes, it will necessarily fall in market 
 value, and, by a well-known principle of finance, will become the sole 
 coin standard of value. Gold will be either hoarded or exported. 
 When two currencies, both legal, are authorized without limit, the 
 cheaper alone will circulate. If, however, the issue of the silver dollars 
 is limited to an amount demanded for circulation, there will be no de- 
 preciation, and their convenient use will keep them at par with gold, 
 as fractional silver coin, issued under the act approved February 21, 
 1853, was kept at par with gold. 
 
 The amount of such coin that can thus be maintained at par with 
 gold can not be fairly tested until resumption is accomplished. As yet 
 paper money has been depreciated, and silver dollars, being receivable 
 for customs dues, have naturally not entered into general circulation, 
 but have returned to the Treasury in payment of such dues ; and thus 
 the only effect of the attempt of the Department to circulate them has 
 been to diminish the gold revenue. After resumption these coins will 
 circulate in considerable sums for small payments. To the extent that 
 such demand will give employment to silver dollars, their use will be 
 an aid to resumption rather than a hindrance ; but, if issued in excess 
 of such demand, they will at once tend to displace gold and become 
 
636 SPEECHES AND REPOETS OF JOHN SHERMAN. 
 
 the sole standard, and gradually, as they increase in number, will 
 fall to their value as bulUon. Even the fear or suspicion of such an 
 excess tends to banish gold, and, if vrell established, wiU cause a con- 
 tinuous drain of gold until imperative necessity will compel resump- 
 tion in silver alone. The serious effects of such a radical change in 
 our standards of value can not be exaggerated ; and its possibility wiU 
 greatly disturb confidence in resumption, and may make necessary 
 larger reserves and further sales of bonds. 
 
 The Secretary therefore earnestly invokes the attention of Congress 
 to this subject, with a view that either during the present or the next 
 session the amount of silver dollars to be issued be limited, or their 
 ratio to gold for coining purposes be changed. 
 
 Gold and silver have varied in value from time to time in the his- 
 tory of nations, and laws have been passed to meet this changing value. 
 In our country, by the act of April 2, 1Y92, the ratio between them was 
 fixed at one of gold to fifteen of silver. By the act of June 28, 1834, 
 the ratio was changed to one of gold to sixteen of silver. For more 
 than a century the market value of the two metals had varied between 
 these two ratios, mainly resting at that fixed by the Latin nations, of 
 one to fifteen and a half. 
 
 But we can not overlook the fact that within a few years, from 
 causes frequently discussed in Congress, a great change has occurred in 
 the relative value of the two metfls. It would seem to be expedient 
 to recognize this controlling fact — one that no nation alone can change 
 — ^by a careful readjiistment of the legal ratio for coinage of one to six- 
 teen, so as to conform to the relative market values of the two metals. 
 The ratios heretofore fixed were always made with that view, and, 
 when made, did conform as near as might be. Now that the produc- 
 tion and use of the two metals have greatly changed in relative value, 
 a corresponding change must be made in the coinage ratio. There is 
 no peculiar force or sanction in the present ratio that should make us 
 hesitate to adopt another, when in the markets of the world it is 
 proven that such ratio is not now the true one. The addition of one 
 tenth or one eighth to the thickness of the silver dollar would scarcely 
 be perceived as an inconvenience by the holder, but would inspire con- 
 fidence, and add greatly to its circulation. As prices are now based on 
 United States notes at par with gold, no disturbance of values would 
 result from the change. 
 
 It appears from the recent conference at Paris, invited by us, that 
 other nations will not join with us in fixing an international ratio, and 
 that each country must adapt its laws to its own policy. The tendency 
 of late among commercial nations is to the adoption of a single stan- 
 dard of gold and the issue of silver for fractional coin. "\Ye may, by 
 ignoring this tendency, give temporarily increased value to the stores 
 of silver held in Germany and France until our market absorbs them ; 
 but, by adopting a silver standard as nearly equal to gold as practicable, 
 we make a market for our Lirge production of silver, and furnish a 
 full, honest dollar, that will be hoarded, transported, or circulated, 
 without disparagement or reproach. 
 
 It is respectfully submitted that the United States, already so large- 
 
ANNUAL EEPOET TO CONGRESS. 637 
 
 ly interested in trade witli all parts of the -world, and becoming, by its 
 population, wealth, commerce, and productions, a leading member of 
 the family of nations, should not adopt a standard of less intrinsic 
 value than other commercial nations. Alike interested in silver and 
 gold, as the great producing country of both, it should coin them at 
 such a ratio and on such conditions as wiU" secure the largest use and 
 circulation of both metals without displacing either. Gold must neces- 
 sarily be the standard of value in great transactions, from its greater 
 relative value, but it is not capable of the division required for small 
 transactions ; while silver is indispensable for a multitude of daily 
 wants, and is too bulky for use in the larger transactions of business, 
 and the cost of its transportation for long distances would greatly in- 
 crease the present rates of exchange. It would, therefore, seem to be 
 the best policy for the present to limit the aggregate issue of our silver 
 dollars, based on the ratio of sixteen to one, to such sums as can clearly 
 be maintained at par with gold, until the price of silver in the market 
 shall assume a definite ratio to gold, when that ratio should be adopted, 
 and our coins made to conform to it ; and the Secretary respectfully 
 recommends that he be authorized to discontinue the coinage of the 
 silver dollar when the amount outstanding shall exceed fifty million 
 dollars. 
 
 The Secretary deems it proper to state that in the mean time, in the 
 execution of the law as it now stands, he will feel it to be his duty to 
 redeem all United States notes presented on and after January 1 next, 
 at the office of the Assistant Treasurer of the United States in the city 
 of New York, in sums of not less than fifty dollars, with either gold 
 or silver coin as desired by the holder, but reserving the legal option of 
 the Government ; and to pay out United States notes for all other de- 
 mands on the Treasury, except when coin is demanded on coin liabili- 
 ties. 
 
 It is his duty as an executive officer. to frankly state his opinions, so 
 that if he is in error Congress may prescribe such a policy as is best for 
 the public interests. 
 
 The report of the Comptroller of the Currency presents full and 
 interesting information as to the national banks. The number in exist- 
 ence on October 1 was 2,053. The amount of their circulating notes 
 outstanding, including those in liquidation, was $323,147,719 ; the cap- 
 ital invested was $466,147,436 ; the surplus fund and profits were $157,- 
 833,993 ; the loans and discounts were $830,521,542. 
 
 This system of banks, though of recent growth and adopted as an 
 experiment amid the necessities developed by the civil war, has, under 
 wise management, become the most important business agency in the 
 country. Though still under trial and subject at all times to the dis- 
 cretion of Congress to discontinue and limit its existence and opera- 
 tions, it may be fairly claimed, as abeady established by experiment, 
 that the system possesses certain advantages over any other heretofore 
 existing in this country, and possible only with a nationa,l system. 
 
 1. The security of the bill-holder from loss through failure of the 
 bank. 
 
 2. The rapidity and certainty of the detection and prevention of 
 
638 SPEECHES AND EEPORTS OF JOHN SHERMAN. 
 
 counterfeiting, from the fact that the notes are engraved, printed, and 
 redeemed at the Treasury Department. 
 
 3. The frequent and careful examination of the banks, and the pub- 
 lication of the detailed statements of their condition. 
 
 4. Uniformity and free circulation of the notes throughout the 
 United States, without refepect to the place of their issue. 
 
 5. The admirable provisions by which failing banks are placed in 
 liquidation, and their assets cheaply and promptly applied to the pay- 
 ment of creditors. 
 
 These and other advantages, derived to the public from a national 
 system of banks over a State system, seem to be fully demonstrated, 
 and, though irksome and apparently hard to the banks, are a benefit 
 and security to the stock-holders and a safeguard to the public. 
 
 The only franchise conferred by this system, that can not be freely 
 enjoyed by private bankers under State law, is the power to issue cir- 
 culating notes. This, it is conceded, is a franchise conferred by the 
 Government, but it is not in the nature of a monopoly. It may be ex- 
 ercised by any five persons who have the means, and will comply with 
 the law. 
 
 Whether the power to issue circulating notes should be granted to 
 private corporations or be exercised only by the Government, is purely 
 a question of public policy and public interest. In behaK of a circula- 
 tion issued by the Government, it is claimed that interest is saved to 
 the public on the full amount of the notes issued. To this it is replied 
 that the issue of such notes necessarily involves their redemption in 
 coin, and this can be secured only by coin reserves and the ordinary 
 machinery of banks. If the banks issue notes, they expect to derive a 
 profit from their loan ; but this profit is diminished by the bm'den of 
 redemption, by the large taxes imposed upon the franchise, and by the 
 risk always incident to the issue of circulating notes. These are con- 
 siderations which will, no doubt, enter into the question of the perma- 
 nency of the national banking system ; but as the banks of this system 
 are each organized under the law for twenty years, and none of them 
 expire until June, 1883, it is respectfully submitted that it is good pol- 
 icy to continue the experiment until that date, when the public mmd 
 will be better prepared to consider the questions involved. 
 
 The annual report of the Director of the Mint exhibits in detail the 
 operations of the several mints and assay offices, and also pi-esents in- 
 teresting information relative to the production of gold and silver in 
 the United States, the estimated amount of gold and silver coin and 
 bullion in the country, the depreciation of silver, the position of the 
 American trade dollar in the Oriental trade, and other subjects con- 
 nected directly or indirectly with the coinage. 
 
 The value of the gold coinage executed during the last fiscal vear was |B2, 798,980 00 
 
 Of trade dolliirs ." II.SVS.OIO 00 
 
 Of standard silver dollars 8,678,600 00 
 
 Of fractional silver coin 8,839,816 00 
 
 And of minor coin 80,694 00 
 
 A total coinage of $81,120,499 50 
 
 In addition to the coinage, fine and unparted bars were prepared 
 
ANNUAL REPORT TO CONGRESS. 639 
 
 for depositors in the amount of $12,301,926.23 in gold, and $11,854,- 
 385.87 in silver. 
 
 It is manifest, from the proven capacity of the several mints, that 
 our coinage facilities are ample for all purposes. 
 
 The present production of bullion from the mines of the United 
 States appears to approximate one hundred million dollars in value. 
 All the gold bullion produced in the country contains more or less sil- 
 ver, and the greater portion of the silver bullion from our mines con- 
 tains a percentage of gold, making it difficult to determine with accu- 
 racy the proportion of each. It is safe, however, to state that the pro- 
 duction of the two metals, calculated at their coining rates, is nearly 
 equal. 
 
 During the year 1877 and the first few months of the present 
 year, trade dollars, to the amount of probably four million pieces, 
 were placed in circulation in the States east of the Kocky Mountains, 
 with a fuU knowledge on the part of the parties engaged in the busi- 
 ness that the coin was not a legal tender. This coin is in no sense 
 money of the United States which the Government is bound to re- 
 deem or care for. The Government stamp upon it is to certify to its 
 weight and fineness for the convenience of dealers in silver bulKon. 
 It is precisely like any other silver bullion assayed at any assay office 
 or mint. The limited legal-tender quality originally given to it was 
 taken away before any of the coins were put into domestic circulation, 
 and it should not now be given any value or attribute at the expense 
 of the public that is not. incident to any other silver bullion. The 
 Government has received no benefit from this coinage, and has neither 
 received it nor paid it out. The whole connection of the Government 
 with this bullion was to perform the mechanical work of assaying and 
 dividing it into convenient form for the merchant, at his cost, and for 
 his benefit, for exportation only. 
 
 Eecent advices from our Minister to China indicate that a con- 
 siderable amount of trade dollars is now being hoarded in that empire, 
 and wiU be returned to us if a discrimination is made in their favor 
 over other bullion. No distinction can be made between trade dollars 
 in the United States and those out of the United States ; but, if re- 
 deemed at all, they must all be redeemed alike. The bullion in 35,853,- 
 360 trade dollars outstanding can now be purchased from our miners 
 for $31,256,050. It would be a manifest injustice to deprive them of 
 our market for their buUion, in order to discriminate in favor of bul- 
 lion coined for exportation and held chiefly in foreign countries. 
 
 At times the fractional coins of the United States accumulate at 
 certain places and are wanted at others. It is recommended that this 
 department be authorized to redeem them in United States notes when 
 presented in sums of one hundred dollars, or any multiple thereof, at 
 the mint at Philadelphia, where they can be recoined if necessary, and 
 distributed. 
 
 The amount of gold coin and buUion in the country, September 
 30th, is estimated by the Director at $259,353,390, and of silver coin 
 and bullion at $99,090,557— a-total of $358,44:3,947. 
 
 The estimating of the production of the precious metals in this 
 
64:0 SPEEOHES AKD KEP0RT8 OF JOHN SHEEMAN. 
 
 country, and of the amount of coin and bullion, is a matter attended 
 ■with great difficulties, and the estimates can only be regarded as ap- 
 proximately correct, though they have been compiled from the best 
 attainable sources. 
 
 By reason of the acts authorizing this Department to purchase 
 gold and silver bullion at the several mints and assay offices, its trans- 
 portation is thrown upon the Government. The great body of the 
 bullion accumulates in San Francisco and Oarson, and the chief trans- 
 portation is from those places to New York. Efforts were made to 
 secure favorable rates, but the lowest offer was three tenths of one per 
 cent, for gold and one and two tenths per cent, for silver, which was 
 deemed to be excessive. Silver coin and bullion can be transported 
 with but little risk, while at the rate proposed for transporting a car 
 containing $250,000, or about eight tons, the cost would be $3,000. 
 The chief cost is in the transportation over the Central and Union 
 Pacific Eailroads, both largely indebted to the United States. It is 
 respectfully submitted that the rate over these roads be prescribed by 
 Congress, and that the proceeds form part of the sinking fund of said 
 
 railroads, provided by law. 
 
 ******** 
 
 JOHN SHEEMAN, 
 
 Secretary of tJm Treamxry. 
 Hon. Samuel J. Randall, 
 
 Speaker of the Home of Bepresentatives. 
 
 THE END. 
 
D. APPLETOB & CO.'S HE! PDBLICATIOSS. 
 
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HISTORY OF ENGLAND 
 
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