FUNDING THE LEGAL-TENDER DEBT. SPEECH OF Mr. S. B. CHITTENDEN OF NEW YORK, HOUSE OF REPRESENTATIVES, j^EBRUARY 19, 1876 ^VV ASHINGTON. 1 876. Digitized by the Internet Archive in 2013 http://archive.org/details/fundinglegaltendOOchit FUNDING THE LEGAL-TENDER DEBT. SPEECH OF Me. S. B. CHITTENDEN, OF NEW YORK, IN THE HOUSE OF REPEESENTATIVES, -pEBRUARY 19, 1876. W .V S II I X G T O X . 1S7G. Avery Architectural and Fine Arts Library Gift of Seymour B. Durst Old York Library SPEECH OF ME. S. B. CHITTENDEN. The House behi£ as iu Committee of the Whole for debate only- Mr. CHITTENDEN saitl: Mr. Speaker: I have the honor to represent here a large, compact, and intelligent constituency, actively engaged and deeply interested in the honest commerce of the country, who have suffered severely for eight years from a deprec iated currency. The question of good money has become of vital importance to them, and they regard it as equally so to the whole country, and look with eagerness to this Con- gress for such practical wisdom in legislation as the case imperatively demands. We see, sir, with our own eyes that a disease of some sort has fastened upon all the material interests of our country. It touches already nearly every man and every home in the land. Its victims are not by any means diminishing. Is it not our duty as intelligent and faithful representatives of the people to find out the nature of this disease and apply the true remedy? Can we do this too quickly for our own honor or our country's welfare f There is a popular theory, Mr. Speaker, that my subject has been plowed and harrowed until no spot remains unfilled. But that is a great and grave mistake. I think contraction a field too long neg- lected, and at enormous cost. I differ radically with the gentleman from Pennsylvania. In my judgment the legal-tender debt of the United States is the root of that towering growth of speculation, ex- travagance, and taxation which threatens to sweep us all into an abyss of ruin. The real question is how to dispose of the legal-ten- der debt ? This is the most momentous question that Congress or the people have ever had to consider except the question of slavery. It is the supplement and seqnel of the Avar for the Union. It confronts and hinders the restoration of confidence. It is a menace to-day, To the integrity of the nation, and if it must continue to oppress the peo- ple and blast the commerce of a country which of itself is God's fairest heritage, I am not disposed to be any wise responsible for it. I regard our mixed currency system as a three-fold anomaly. In the first place, we have the legal-tender notes, a device and invention of war — as truly a war measure as the building of forts to protect this Capitol or the construction of the monitor with which Women fought the Merrimae. These notes were issued for war supplies when the Government of the United States had no money, precisely as the con- federate government issued its notes for war supplies when it had no money. In either case the notes represent exactly the same thing, namely, the waste of war, and the chances of war have determined the present value of one and the worthlessness of the other. 4 In the second place, we have banks founded -with real capital, in general harmony with the genius of our free institutions and the de- mands of honest commerce, issuing currency every dollar of which is secured by gold-interest-bearing bonds at 90 per cent, of their par value, which bonds it is important to remember sell in the chief marts of the world for more than par in gold itself. In the third place, by an act of Congress the bank currency I have described, every dollar of which has in fact more than a dollar in gold back of it, is redeemable in notes which are useless for the liqui- dation of debts beyond onr national boundaries, and only of value within them because the law through a forced and unnatural reading of the Constitution has made them legal tender. Such, Mr. Speaker, is our " philosophical" system of currency, if the gentleman from Pennsylvania will loan me his descriptive term, eleven years after the close of the war. I make no comments ; but hope I may be pardoned for saying that I enjoyed the "collision" which occurred here the other day in referring it to two committees. I gladly assume that the people have declared, at least in the ab- stract, for an early resumption of specie payments ; and I also believe that the great majority are educated and prepared to discard all shams and contrivances and support their representatives in such legislation as the present exigencies demand. Congress resolved last winter to resume in 1879 ; but everybody can see now that something more is necessary. To resume coin payments after what has happened is a process, a series of actions, a work for time and natural forces properly called into play. No man can tell how long it will take; neither is it important to know, if only we begin right. The law of January 14 embodied some fractions of good, for which let us be thankful. For one thing, it disposed of the supremely ridic- ulous currency-distribution business, which had sorely vexed Con- gress for nearly half a generation : and, when rightly understood, it clearly provides currency enough, and not too much, as 1 shall pres- ently show, wholly independent of legal-tender. It also secured a temporary equilibrium, a sort of armistice, between the opposing forces of rectitude and repudiation. But the equilibrium is unstable. We cannot stand where we are. "We must advance with courage, or our vantage ground will be lost. How, then, shall we advance ! The answer to this question seems to me now as clear as sunlight. Our way is as the strait gate ! We have to renounce our folly. We have to turn from the crooked and blind ways of schemers, and dreamers. A mountain of vicious legal-tender debt confronts us. We cau neither get round it nor provide for it in a lump. We must hew it away to the level of truth, honor, and common sense, and there, and there only, can we stand to'rebuild and restore the waste places. We must fund the legal-tender debt. Not in 3.65 permanent bonds, because there is no money in this country in its normal healthful con- dition to invest at that rate of interest. Not in interconvertible bonds, for many reasons, but especially because such funding is only another name for the most unique and gigantic machine for specula- tion ever invented. With it any one of a score of great operators in Wall street might control at will, with absolute precision, from week to week, for private ends, the bank reserves of the metropolis, with such results to the business of the whole country as I need not stop to foreshadow. We must fund the legal-tender notes permanently at the minimum popular rate of interest, not too fast, but steadily, year after year, until they are extinct. And why not ! Are they not an unnatural product .' Were they not born of an extreme exigency, now happily passed away, when the noise of battle was on sea ami land I Was it not explicitly provided when they were first issued that they should at all times he fundable at the option of the holder.' Would their authors or Congress have tolerated them for a moment but for such promise! Surely 1 need not stop for an instant to answer these questions. But have we not too much currency 1 The gentleman from Penn- sylvania says " No " with great emphasis. Let us look into that a 1 i 1 1 If. And here I challenge candid and intelligent attention, not to any mere argument of mine, but to testimony, which is always better than argument. First. I wish to call your attention, as I have promised, to the fact that with legal-tender notes withdrawn we are sure to have currency enough under existing laws. More than two thousand national banks now doing business, and new banks without limit, are at liberty to issue all the currency that can be profitably employed whenever ami wherever it is needed ami called for by legitimate commerce. This is the law, and it is right. It is also decisive, absolutely so. The banker is as free to establish his bank and issue currency on a sound basis as the merchant is to invest his capital in cotton or iron, as the farmer is to plow more acres or breed more sheep. In the name of reason, is not t hat enough f When it was first proposed to give the banks all this lib- erty, it was widely held to mean inflation of the most gigantic propor- tions, and there are some who yet so regard it. But I think experience has shown that bankers as a class are no more idiots than other men : and while the law requires them to put up for every dollar of cur- rency issued that which will sell for a gold dollar both at home and abroad, there is no more danger of excessive issues than there is dan- ger that Mr. Vanderbilt and Mr. Scott will amuse themselves by lay- ing gold tracks for their railway trains. To avoid misapprehension let me say here that I have had noper- onal interest in any national bank for many years, but I regard the hue and cry against them as unintelligent and unworthy of serious notice. A good many of them will have to go into liquidation, but others, better managed, will take their places when needed. We can- not dispense with such banks as merchants need any more than we can dispense with savings-banks, and when we war upon or abolish either it will be in regular order for Congress to enact that our car- riages shall go without wheels and our farms go without the plow and the reaper. And now, Mr. Speaker, I call your attention to facts of history which demonstrate and show conclusively, if experience proves any- thing, that we shall never find a basis for confidence and fresh enter- prise until we have largely contracted our currency. In the crisis of 1S37 the banks of the State of New York suspended specie payments on the 10th of May. To save their charters they were compelled to resume on or before the 10th of May, 1638. They did so resume, and iu doing it they contracted their issues from $25,500,000 on the 1st of January, 1837, to $13,000,000 in round figures on the 1st of January. 1838. Here, sir, is a case where the leading State of the I 'nion. thirty- seven years ago, compelled its banks to keep faith with the holders of their paper, the doing of which forced them to contract nearly 50 per cent, in a single year; and the point to be observed and remembered is that there was no complaint. The dead were buried ; the living were supported, and confidence and hope revived. I have no doubt, sir, but the gentleman from Pennsylvania disap- proved when he read the proposition of the Secretary of the Treas- 6 nry to fund the legal-tender debt at the nite of two millions a month, or $24,000,000 in a year. But think of it! New York in 1837. with less than $20,000,000 out, withdrew twelve and a half millions in a year, and was ready at the close of it to redeem the rest on demand. " The grand Republic in 1870, the centennial year, with $372,000,000 of debt under protest, with the people everywhere crying out for relief, pro- poses, through its minister of finance, to pay at the rate of two mill- ions a month, and a man can be found in Congress to oppose it! Well, sir, I know the gentleman is sincere. His own State in 1837 enjoyed the sunset glories of the old United States Bank. That con- cern was a min at the time, and could not pay its debts, and his State did not resume with New York. A year or two later on, this favored Government paper machine, in its death struggles, sold its rags to the .extent of ten millions or more to New York, and nearly broke us again. If the gentleman is consistent, he will say, and maintain as best he can, that Xew York made a frightful blunder in contracting in 1^::?. and brought unnecessary ruin upon her people. But lie will convince no one of that. The banks of the whole country suspended again in 1857, and resumed, generally, in the following year; audit is important for our purpose to compare the contraction and its immediate consequences in that crisis with the inflation which followed the panic of 1^73 and its consequences. The paper circulation of the whole country in 1857 was $215,000,000. In 1858 it had contracted to $156,000,000. The bank loans in 185? were $085,000,000; in 1858, $583,000,000. Here is contraction of $59,000,000 in circulation, and 8102,000,000 in bank loans; an aggre- gate of $161,000,000 in one year. Note the consequences of this sharp contraction. It was a fierce but short struggle, in which rotten banks and speculators of every name and bankrupt merchants and manufacturers were denied ac- commodations and forced to break and adjust their affairs. On the other hand, the solvent and honest, with rare exceptions, found all the help they required, with such sacritices as they cheerfully ac- cepted, to maintain their credit. In the exceptional cases, those who were really solvent promptly recovered from temporary embarrass- ments. The result was as natural as the growth of grass in spring-time, and may be as easily understood. Capital, always timid and watch- ful, saw that the wrecks of a wild speculative epoch were cleared away, and thus confidence was rapidly re-established, so that the two years from July, 1858, until the war clouds appeared, are properly spoken of as among the most prosperous in our history. We come now to the panic of 1873, and I propose to contrast the issues of that with the history I have just recited. The law of June 20. 1874, nine months after the crash, instead of providing for the grad- ual payment of the legal-tender debt, as it should have done, made a new injection of twenty-six millions of it into our " philosophical" currency system, whereby bank credits were lawfully and enormously enlarged. And the law of January 14, 1875, enacts that Government shall pay off its legal-tender debt only at the rate of 80 per cent, of the fresh issues of bank currency by its subjects ! Here it will be observed that in both its great financial measures since the panic of 1873 Con- gress clings to the fatal and preposterous theory that more currency is the cure for the ills we suffer ; and that, too, in the face of a reduc- tion in the volume of business transactions equal to more than one- third (I speak within bounds) of the whole business of the country, and 7 also in the face of enormous and unprecedented .-dirinkage in values, already far in advance of those of 1857, but still going on and on! Here again, sir, is testimony which is more than argument. We had contraction, sharp, vehement, in 1857. Confidence and enter- prise were restored in 1858. We had wild inflation in 187:3 and 1874. In 187(>, confidence and enterprise are lost ! Such is the contrast. Why does it exist I T will tell you why. In 1857 we had no dishonored legal-tender debt — another name for Government machinery for tiding over all forms of extravagance and bankruptcy — as we had in 1>7:5 and still have. The race of brilliant men who nowwait for tra.de to grow up to a volume of currency largely in excess of that in use at the climax of the railway mania had not then become powerful. Bank credits and currency were then left to respond to natural laws, as they do not now. The figures and state- ments I have given you are startling, but they are also true, and it • is high time for Congress to know the truth and respect it. But, says an objector, the crash of 1873 differed from that of 1857. It had wider proportions, and required different treatment. But did it? Principles are eternal! Your child has a broken leg. Your good surgeon comes in with his splints and bandages, and cures it in the regular way. Next month your house falls down, and the arms and legs of your household are all broken. The same surgeon calls, and he treats all as he treated one. or you will have a family of cripples. You meet a dozen men starving in the street, you give them bread and they live. To-morrow you meet a hundred, and because there are a hundred will you feed them with stones that they may die? I fearlessly affirm that there is not one argument in support of the present volume of currency which is not equally tenable to justify its indefinite expansion on the llimsiest pretext. No man, for example, in his right mind will pretend that it required as much money to buy sixty tons of railroad iron at 850 per ton in 1875 as it did to buy one hundred tons of the same thing at 875 per ton in 1872. These figures fairly represent the comparative prices of railroad iron and the quantities in use in the respective years. I might give a thousand such examples; but one is as good as a thousand for my purpose; the rest are known and read by all men. A child can understand that a merchant who employs ten ships or ten men to do the appropriate work of six will reap nothing but loss while the folly is persisted in. Unless all economic laws known and accepted by us prior to the war have been abrogated or reversed: unless the sun itself is turned back ; unless we are hereafter to cultivate strawberries in ice-houses, and plow our fields with the heads of our horses harnessed to the whirnetrees ; unless we are in the future to build our houses without foundations, and navigate the seas in paper ships: we shall never restore confidence and solid enterprise to our country until we make a final and irreversible decree against the legal-tender debt abomination, leaving the commerce of the country free to fix its own laws in respect to the volume of currency and bank credits. The case is so clear, Mr. Speaker, that I almost feel it to be an impeachment of the common sense of the House to argue it seriously. The laws which govern it are as immutable as the force which turns the earth upon its axis. The commerce of the country is stuffed to death with the unkept. promises of Government. Yes! with the broken promises of the United States, whose flag is the symbol of honor and power every- where save at home ! Disguise ir as we may, there is but one remedy for existing evil* 8 We suffer through dishonor. We shall begin to prosper when we he- come Honest, and not before. Is it not enough that all, or nearly all, good investments, good en- terprises, and solvent interests have suffered severely for more than two years because some people thought the plague of legal-tender would restore impossible values, in the interest of the unfortunate, the reckless, or the wicked ? Is there a true sign in any direction of a restoration of confidence and the profitable employment of capital now idle, so long as the present condition of the currency continues f Not one such sign that I can discover. It is idle to talk of paying legal-tenders in coin in 1879 without steadily funding them prior to that. There is nothing in history, nothing in the present commerce of the world, nothing in our own matchless resources, unless we find where to mine gold and silver pure as we cut the granite, to warrant the hope that we can bor- row or hoard gold enough to resume and maintain coin payments with our present volume of currency. Our foreign debt and enor- mous taxes at home forbid all such schemes. Resumption by Gov- ernment means resumption by two thousand national banks. To think of that under existing circumstances is to think without rea- soning, and to ignore history, experience, and common sense. But some one may inquire what besides funding ? What shall the banks redeem in? We are in a wilderness of excessive currency, and though our way out is perfectly straight and no longer obscure, there are some chasms to be crossed only as we reach them. All present in- dications point to the voluntary surrender of national-bank notes for the next year or two more rapidly than required to preserve easy rela- tions to the redeeming agent. When the clause requiring the banks to redeem in legal-tender shall be repealed, the time should be fixed for them to redeem in coin. For the present, funding with due caution is our chief and only concern. We know it to be right. We promised to do it, and if Ave know anything about it we can see that there is no other way to dispose of legal-tenders so easily. We had, sir, in the years first succeeding the close of the war, ample surplus revenues, which might have been used to pay off the legal-tender debt, and the failure so to apply them is au ineffaceable blot upon the statesman- ship of our time. But surplus revenues are no more for us ! Some other method must be devised. My proposition is, to authorize the issue of four millions of bonds per month for eight months of each year, beginning with February and including September, the bonds to run forty years, bearing interest at a rate of not exceeding 4^ per cent, per annum, and to be sold to the highest bidder on the first Tues- day of the month for legal-tenders, the latter to be immediately de- stroyed. This seems to me to be a feasible, conservative, honest, and effective measure. Nobody can mistake its meaning or its scope. It means clear away the wrecks with all proper forbearance. It means bury the dead that the living may continue to liA*e. It means legis- lation for those who live by hard work and on fixed salaries, instead of legislation exclusively in the interest of gamblers and hopeless bankrupts ; and just here is the line of battle, henceforth, both in and out of Congress. Finally my proposition, simple as it is, means specie payments, perhaps not in 1879 — I think not — but as soon as practicable. How long, Mr. Speaker, shall the precious resources of our country be trifled with ? Shall Congress, year after year, waste its time in debating mere paper contrivances unknown to experience, which no mortal man can explain to the common intelligence? Are we to as- enme tluit the pe >pleof t bis country consent to be given over to si nuns and delusions I Debt is not money I Sorely it is not. The Legal-tender debl »»t the United States is not good money! If we persist tothe con- trary, the time will come when onr money will be interconvertible, or at least of equal value with confederate money. That is the kind of interconvertible money we are in danger of having ! Seven thousand seven hundred and forty commercial failures on record for 1*75, and a good many more unrecorded! For January, 1876, the number far exceeds that of the corresponding period of last year! The gentle- man from Pennsylvania attributes these disasters in large meas- ure to the contraction of the currency under the resumption bill of last year. But he is greatly mistaken. He might w ith equal reason, in my humble judgment, charge them to the amnesty bill of his col- league, not yet a law, and I will undertake to prove that, if called upon, to either of the committees having in charge the "philosoph- ical" currency of the gentleman. Let the gentleman try an experi- ment. Let him sink countless ships all along the channel of the Poto- mac from the bridge to its mouth, and then with his splendid rhetoric, ami polished sentences, invite clear-headed navigators in command of good ships outside to make sail over his wrecks. Will one of them accept the invitation ? Not one. No more, sir, shall capital and fresh enterprise traverse the wrecks which the neglected legal-tender debt has made and still conceals. If this Congress shall achieve the enviable distinction of re-estab- lishing the national honor by reaffirming the principle of funding, those who return here next year will rind light breaking everywhere. No prophet can tell the ruins yet hidden and which must be revealed as a primary indispensable condition of a restoration of confidence. Some say, If you fund the legal-tender debt you will lose interest you are now saving. Well, sir, that argument appeals to some minds, and may be listened to here for aught I know : but in the counting-room of a reputable commercial establishment it should be regarded as -worthy of a highwayman. What is the plain English of it? Just this : The rich debtor, having enjoyed his forced loan for a dozen years without a cent of interest, with icy audacity telling his impov- erished creditors that he will not recognize his obligation because he cannot yet bring himself to pay interest. That is it precisely. True, you have saved nearly twenty millions a year, and the saving has cost the people two or three hundred millions a year. It has cost them their right to work and prosper. No man escapes. The idle bricklayers recently begging for work in one of our chief cities, and intimating at the same time that they might become criminals to obtain daily food, have lost their all. Yes, Mr. Speaker, the whole people sutier consciously or unconsciously, and will continue to suffer until the curse of the legal-tender debt is removed. A few words more and I have done. On the 18th of December, 1 B65, the House of Representatives of the Thirty-eighth Congress voted, 144 to 6— a very significant vote— to its everlasting honor, to with- draw legal-tender preparatory to a resumption of specie payments. I do not intend to say anything extravagant or sensational here; but when that law for contraction was repealed in 1868, I believed the act repealing it would cost the country more than the war for the Union had cost up to that time. I am sure now that I was right in that opinion. I am aware, Mr. Speaker, that this is a case which ad- mitsof no close computations. There is no arithmetic equal to the task. Its very vastness is the true and only measure of the calamity. What we do know is that our magnificent heritage, alive with forty millions 10 of free souls, and full of the richest gifts of nature's God, has been, for eight long years, given over to gambling and waste, and the end is not yet! Not yet! We know that the shadows are deeper and the victims more numerous than they were when we came up here last year. Wo also know that the battle between honor and dishonor is not ended. The thing we need is an intelligent apprehension of the present con- dition of the country, and courage to do our whole duty as becomes representatives of the American people without any Reference what- ever to the next presidential election. ft