gerous. I am more concerned about what you will do than about what
they will do. The United States Government already holds a larger
cash reserve for the redemption of its notes in proportion to demand
liabilities than any bank represented by these gentlemen, and it has
power to increase it. Our certificates of deposit the most dangerous
form of liabilities are secured, dollar for dollar, by coin or United States
notes actually in hand, while the banks owe over*$600,000,000 to depos-
itors, the great body of which is represented by notes and bills dis-
counted. The only demand liability we owe not covered by actual cash
on hand is the United States notes, and of these $70,000,000 are in our
vaults, and $70,000,000 more the banks are bound to retain in their re-
serves. With a coin reserve of $100,000,000 to $150,000,000, the re-
demption of $300,000,000 of United States notes would be easy, and
that reserve could not be diminished to any considerable extent by the
banks, or any combination of banks, without a continuous draft upon
10 RESUMPTION OF SPECIE PAYMENTS.
the banks to make it good. We can rely upon the intelligent self-inter-
est of the banks to prevent such a struggle. Nothing could provoke it
more quickly than threats by bank officers, and if such a struggle comes,
the government, with its reserve, with ample revenue, and the power to
sell bonds, can easily maintain resumption, without fear of a line of
bank cashiers anxious to break the Treasury or to force high rates of
On the last point : The power to reissue is plainly given by section
3579, Eevised Statutes, and is not cut off any more by the notes coming
into the Treasury in exchange for coin than in payment of a tax. Even
if the Supreme Court hold them as no longer a full legal tender, they
are as much so as a bank-note. If the choice must be made between
the two, the common interest would decide in favor of the United States
note. I believe they both ought to circulate and both be at par with
coin. But nothing is so discouraging in the progress of resumption as
for national banks to shrink from their share of the burden, or to make
threats such as are stated by some of these gentlemen ; and nothing is
so injurious to the banking system, or will precipitate its overthrow
more certainly, than a popular conviction that the banks are endeavor-
ing to embarrass the government in maintaining resumption.
Mr. CHITTENDEN. I did not hear anything on the part of those gen-
tlemen with whom we conversed at the sub-treasury in the form of a
threat, and I appeal to Mr. Evviug to confirm my impression. There
was nothing of that kind intended, I am sure. These gentlemen simply
expressed the opinion that in an attempt to resume with any stock of
gold that you were likely to have, the gold would be transferred to the
Mr. EWING. That was it.
Mr. CHITTENDEN. There was nothing like a threat?
Mr. EWING-. No; on the contrary, there was a great desire manifested
onjthe part of the bankers to make resumption safe.
Secretary SHERMAN. I have written propositions from these geu tie-
men, and from Mr. Coe himself, that if I will give them 4 per cent,
bonds instead of 4 per cents., they will guarantee resumption, The
trouble is this, that when I am trying to sell bonds at 4 per cent., they
say I am acting both as a politician and as a financier. I suppose they
mean that as a politician I am desirous to have the interest low, and that
as a financier I am indifferent to the rate. I simply say that as soon as
I cannot sell 4 per cent, bonds to the people, I know I can sell 4 per
cents, to the banks ; and in that way, if in no other, we can get enough
gold to insure and to maintain resumption. To that I pledge my o iu-
ion and my earnest conviction.
Now, in regard to the reserve that is necessary, there is a difference
of opinion. I would like to have so strong a reserve that there would
be no question of our ability to resume, and I think (as I stated to the
Committee on Finance of the Senate) that if I can have a reserve of
one hundred and thirty millions; or, in other words, if I can increase
my present reserve about fifty millions, I do not see how it is possible
to prevent us from resuming. If it were known to-day that it was cer-
tain, I should have such a reserve by the first of January, and if it
were certain that Congress would be willing to stand by the experiment
of resumption, we would have resumption at once.
Mr. EWING-. Neither of which can be made certain.
Secretary SHERMAN. Yes ; if I could sell the bonds and get the re-
serve, the thing would be made certain in 24 hours.
RESUMPTION OF SPECIE PAYMENTS. 11
Mr. EWING. Where do you suppose you could get so large a sum of
Secretary SHERMAN. We produce bullion enough in this country. If
I had this year's production of gold and silver (and I could very easily
get it by selling bonds) I would have reserve enough.
Mr. EwiNG. Would you get any part of it abroad ?
Secretary SHERMAN. Yes ; some from abroad.
Mr. PHILLIPS. In your statement to the Senate committee as pub-
lished, I understand you to say that there has been no increase of coin
in the Treasury during the most of this year. Am I correct that you
have not increased your coin through the months of January, February
or March 1
Secretary SHERMAN. No, sir. That is, we have not increased the
coin belonging to the government, but the banks have increased on
Mr. PHILLIPS. Is not the depreciated price of gold owing to the fact
that the banks have taken itf
Secretary SHERMAN. No, sir; but simply because we went out of the
market for the gold.
Mr. PHILLIPS. You have stated that you have not increased the vol-
ume of gold in the Treasury during this year.
Secretary SHERMAN. No, sir; because we have not sold any bonds.
Mr. PHILLIPS. Was the attempt made to sell bonds, and were you
unable to do so ?
Secretary SHERMAN. I have tried very hard to sell them and I could
sell at a higher rate of interest. Let me explain that. The reason why
I cannot sell bonds, is because they have got the impression in Europe
that this silver bill is going to derange matters, and that belief brought
back upon us (as these gentlemen say) seventy-five millions of bonds.
As a matter of course, they came into competition with the Secretary
in selling bonds; and as long as they had their bonds to sell, under a
scaring market, I could not sell bonds unless the rate of interest was
Mr. PHILLIPS. Then you cannot resume safely unless you can sell
bonds at a higher rate of interest?
Secretary SHERMAN. I do not say that. I think I can. If you pass
a bill to enable me to sell directly to the people I think I can sell 4 per
Mr. PHILLIPS. How about 3.65 bonds ?
Secretary SHERMAN. I cannot sell them.
The CHAIRMAN. I do not see how that is to aid you in resumption :
because in selling bonds to the people you must sell them for green-
Secretary SHERMAN. Yes, sir.
The CHAIRMAN. The effect of all that is to equalize greenbacks with
gold. Is that the theory ?
Secretary SHERMAN. Partly that, and partly because with greenbacks
we can buy gold or anything else. The law authorizes me to buy or to
sell gold, and as a matter of course I can buy gold at the market price.
The CHAIRMAN. If the people paid greenbacks for 4 per cent, bonds,
then you could sell these greenbacks for gold.
Secretary Sherman. Yes, sir.
Mr. BELL. You mentioned that the interest paid in coin was about
ninety-two millions a year; have you any means of ascertaining what
proportion of that amount is paid abroad.
Secretary SHERMAN. It is very difficult to state that. The interest
12 RESUMPTION OF SPECIE PAYMENTS.
is all paid to agents here, and we cannot distinguish the amount of in-
terest that is paid to bondholders here, from the amount that is paid
abroad. The best estimate that I can form is that the amount of bonds
held abroad is about six hundred million dollars ; but there is a differ-
ence of opinion about that. I think that that is pretty near the thing.
Mr. EAMES. I desire to present to the committee, in the presence of
the Secretary of the Treasury, a consideration which, I think, is import-
ant in determining the question whether the government can resume or
not in January, 1879. There is now outstanding about three hundred
and forty-seven millions of greenbacks and three hundred and sixteen
millions of national-bank notes, amounting together to some six hun-
dred and sixty millions of paper currency. That is now used for the
purpose of the business transactions of the country. The point to
which I wish to direct the attention of the committee and of the Sec-
retary of the Treasury is, whether the three hundred millions of legal
tenders are not absolutely requisite for the business purposes of the
country, and whether, therefore, there will be any very great desire to
exchange them for gold.
Secretary SHERMAN. I do not think we have a great excess of cur-
rency now. These bankers say that there is not enough of currency.
So long as there is a want of confidence in our ability to resume, it is
likely that the greenbacks will be presented for redemption to some ex-
tent; but if we were so strong that the public mind was satisfied of our
ability to resume, there would be no motive to present notes for redemp-
tion (especially when they may be redeemed in silver). Then, I agree
that these notes will not be presented.
Mr. FORT. Would not a premium of 1 per cent, run these notes in for
redemption, even with confidence restored ?
Secretary SHERMAN. O, yes; but we must abolish the 1 per cent, dif-
Mr. PHILLIPS. Can you state any distinction between legal-tender
notes and national-bank notes in regard to the obligation of redemption?
Secretary SHERMAN. Certainly, sir. We have nothing to do with the
redemption of the national-bank notes. The banks can take care* of
that themselves, and they are doing it now. They have an enormous
Mr. PHILLIPS. It is stated in the papers of Saturday that you ordered
the retirement of $767,000 of legal tender notes for last month.
Secretary SHERMAN. Certainly. The law explicitly required that,
Mr. PHILLIPS. I thought that the law left it to your discretion.
Secretary SHERMAN, Not at all. The Treasurer of the United States,
at the end of each month, on the report of the Comptroller of the Cur-
rency that such an amount of national bank notes has been issued,
retires and redeems from his currency reserves 80 per cent, of green-
backs. I have nothing to do with it.
Mr. FORT. Do you think that good policy !
Secretary SHERMAN. I do. That must be continued until the amonnt
of greenbacks is reduced to $300,000,000.
Mr. PHILLIPS. Do you think it safe to reduce the volume of green-
backs to $300,000,000?
Secretary SHERMAN. I think $300,000,000 is enough.
Mr. PHILLIPS. Can you not safely resume unless you reduce the
amount of greenbacks to $300,000,OuO?
Secretary SHERMAN. 1 cannot say that. The law provides a mode by
which the currency can be reduced to $300,000,000.
Mr. HARDENBEKGH. It Congress should adjourn, with the state of
RESUMPTION OF SPECIE PAYMENTS. 13
the finances as they are now, and without additional legislation, and
with resumption fixed to take place on the 1st of January next, do you
not suppose that the national banks will have to buy from thirty to fifty
millions of gold to make themselves strong enough to meet resumption ?
Secretary SHERMAN. Certainly; they are doing it largely now.
Mr. FORT. Do you still desire to cancel the forty-seven millions of legal
tenders now outstanding in excess of the three hundred millions.
Secretary SHERMAN. I think it wise to stand by the present law.
The CHAIRMAN. Do you actually destroy this eighty per cent, of
Secretary SHERMAN. We reduce it monthly. The amount is stated
in every debt-statement. It is an actual destruction of the greenbacks.
The idea was that $300,000,000 of greenbacks can be easily and surely
maintained at par in coin.
Mr. BELL. Is it your judgment that the volume of currency at
8300,000,000 will be adequate to the business wants of the country ?
Secretary SHERMAN. No ; in iny judgment the currency will be in-
creased from time to time by the free action of the national banks, and
I believe that the amount of circulation in this country, where we are
accustomed to paper money, will be always largely in excess of what it
would be in old countries where they hoard coin.
Mr. EwiNGr. And in excess of what it is now ?
Secretary SHERMAN. I am inclined to think that we can maintain the -
present volume of circulation six hundred millions but that is a larger
paper circulation than was ever maintained by any other country.
That is a question for the banks to decide for themselves.
Mr. PHILLIPS. Has not the volume of national-bank notes been
steadily reduced since the passage of the resumption act ?
Secretary SHERMAN. Certainly; because the banks chose to retire
them. They have a right to do that, and they chose to retire them ; I
cannot control that. The Secretary of the Treasury has no more to do
with the process of reducing the currency or of increasing it than any
of you gentlemen not near so much, because you can stop it and I
cannot ; I simply execute the law.
Mr. EWING. In your statement to the Senate Finance Committee I
find the following :
TREASURY OF THE UNITED STATES,
Washington, March 18, 1878.
SIR: In accordance with your request, I have the honor to state the amount of gold
and silver in the Treasury on the 23th ultimo, the date of the last debt-statement,
which is as follows, viz :
Gold coin ................ .......................... $117,151,455 62
Gold bullion ...................................... 7,937,300 21
- - - l2n,0-e,7f5 U8
Less amount to credit of disbursing-officers and out-
standing checks ................................. 6,189,62660 V'x.
Gold-certificates actually outstanding .............. 44, 498, 500 00
Called bonds and interest .......................... 6,818,677 2 ( J
Interest due and unpaid ........................... 4,909,705 21
- - 62,41C.;5*Q 10
Available gold coin and bullion 62,672,
Available silver coin, fractional 5,972,895 42 <*>>
Available silver bullion 3,130,718 31
Total available gold and silver 71,775,860 56
According to this statement, the amount of gold and silver coin and
bullion applicable to resumption^ belonging to the United States on the
14 RESUMPTION OF SPECIE PAYMENTS.
last day of February, 1878, was $71,775,000. You then say that you
have practically, for business purposes, $20,000,000 more of coin appli-
cable to resumption, because you have deducted from the gold in the
Treasury four items, making an aggregate of about $02,000,000, part of
which you assume that you can use.
Secretary SHERMAN. Yes, sir.
Mr. EWING. Now, I ask you which of those items so deducted are
practically available for resumption ?
Secretary SHERMAN. The amount to the credit of disbursiug-officers
and outstanding checks varies but very little, because it rarely, if ever,
gets below $5,000,000, and it varies from that up (the amount hi process
of disbursement), so that you can very fairly anticipate that fact (it is a
business fact), just as a merchant can anticipate the coining in of his
Mr. EWING. Is not that banking ?
Secretary SHERMAN. Every man does banking in that sense.
Mr. EWING. Would the Treasury be justified in disregarding out-
standing existing interest obligations by applying the coin which was
set apart to meet those obligations to the redemption of legal-tender
Secretary SHERMAN. The Treasury will do just what any prudent in-
dividual will do ; it will anticipate the demands upon it, and always
have money to meet those demands. It is sufficient for me to say that
the law authorizes the use in anticipation of coin-certificates. The
amount of coin-certificates that may be issued can be 20 per cent, in ex-
cess of actual coin. The Secretary of the Treasury, from the known
certainty that these coin certificates will not be and cannot be presented
all at once, and are not likely to be diminished in amount, can issue 20
per cent, in excess of the actual coin on deposit.
Mr. EWING. Yes, the law gives you that authority. What would 20
per cent, of the coin-certificates amount to '?
Secretary SHERMAN. Nearly $9,000,000.
Mr. EWING. So that you might at this time issue coin certificates to
the amount of $9,000,000 beyond the amount of coin now in the Treasury '
Secretary SHERMAN. Yes, sir. The law authorizes that. I will say,
however, that it has not been done. As to the next item, " Called bonds
and interest" $6,818,677 that amount is in the Treasury, and is always
there. There is interest due and carried on the debt-statement lor
twenty or thirty years; but we count it as a demand that we must pro-
vide for, and it is covered by this deduction.
Mr. EWING. How much of that amount is for called bonds and interest
on such bonds?
Secretary SHERMAN. The whole of it. We have now in the Treasury
over $7,000,000 due to "called bonds and interest" that is, bonds that
are due and not bearing interest, but that are not presented for pay-
ment. Sometimes bonds come in three or four years after they are due,
and they are then paid.
Mr. EWING. Can anything approaching that amount have gone beyond
the ninety days when the payment of interest stops?
Secretary SHERMAN. Every dollar of that has gone beyond the ninety
days, Whether that amount will be continuously in the Treasury is
only to be told by a comparison of the statements of " called bonds and
interest.' 7 I have no doubt that some of that amount will never be
called for. You will find by reference to the monthly statements that
the amount varies from month to month, but it is an item which can be
counted on with almost as much certainty as any other item.
RESUMPTION OF SPECIE PAYMENTS. 15
Mr. EWING. I notice from the Treasury report that the whole "slack"
from the beginning of the government to August, 1877, is less than
82,000,000 out of the $7,000,000 of aggregate of called bonds and in-
terest unpaid to date. I don't think you can very safely assume that
the $5,000,000 of bonds under recent calls will not be presented.
Secretary SHERMAN. On the contrary, under the last call which is
charged up and included in this last statement (a call of $10,000,000,
made on the 6th of December last and maturing on the 6th of March)
but $7,000,000 of bonds had been presented on the day before yester-
day, leaving $3,000,000 not presented. That leaves two or three mil-
lions of that particular call. I do not say that you can rely upon it
with absolute certainty.
Mr. EWING. This inquiry is to ascertain how much gold and silver
can be certainly relied upon to redeem legal-tender notes.
Secretary SHERMAN. Well, I think you can fairly count on at least
one-half of this $6,818,677 of u called bonds and interest." In all human
probability there will be three or four millions of that amount that will
not be called for.
Mr. EWING. Within what time?
Secretary SHERMAN. There will be that balance on that account all
the time, because we are going on to make calls all the time.
Mr. EWING. But if you are pushed to get coin enough to redeem legal-
tender notes you are certainly not going to continue the call of bonds ;
so that probably that item will disappear from your resources.
Secretary SHERMAN. In my judgment, we will go on and make those
calls. Last year we accumulated $60,000,000 of actual gold in the
Treasury, while at the same time we were making calls at the rate of
$1,000,000 a day ; and therefore your conclusion does not follow. If we
had this question of resumption fixed beyond doubt, and if the people
understood that it was to come, the bonds would be taken promptly and
the calls would be rapid ; because accumulation for resumption accom-
panies and is increased by refunding. The actual experiment shows it.
Whenever we have made calls we have accumulated coin, until last De-
cember, when, by the agitation created here in Congress, it ceased. My
calls were outstanding, but the bonds did not sell.
Mr. EWING. We are trying to ascertain the amount of coin which you
can certainly use in redeeming legal-tender notes; and you say that in
an exigency you can use that item of $6,818,677 of " called bonds and
interest, 77 or a portion of it. It seems to me that if the exigency arises
you will be in such a condition that you will not be calling bonds and
increasing your coin demand ; and, therefore, that that fund is not avail-
able, and that you cannot safely draw upon it to redeem legal-tender
notes ; cr if you do so in an extremity, you may not only fail of re-
sumption, but also fail of paying the interest and principal of the debt.
Secretary SHERMAN. I say that having $62,000,000 of coin in our
possession subject to demand liabilities (an aggregate sum), which by
the experience of nine years is rarely diminished to the amount of ten
or fifteen per cent, (never falling below $50,000,000, and sometimes going
up as high as $80,000,000), we can fairly count that, in any probable
state of circumstances at least $18,000,000 of that amount will be in
the Treasury not to be used (because I do not anticipate that our reserve
will ever be drawn down to that), but that we may fairly count upon it
as in the Treasury.
Mr. EWING. This accumulation has been during the period when legal-
tender notes were not redeemable, but you certainly cannot assume that,
because you have had that accumulation of coin in the Treasury hereto-
16 KESUMPTION OF SPECIE PAYMENTS.
fore wbeii there was DO redemption of legal-tender notes, you will con-
tinue to have it after redemption begins ?
Secretary SHERMAN. I think we can assume if, when gold was not in
circulation, there was a gold balance in the Treasury subject to demand
without much variation, that, when all transactions are based on coin
or paper redeemable in coin, this coin will remain in the Treasury. I
believe that one of the first effects of resumption will be to increas*ethe
deposit of coin in the Treasury, because paper will be so much more
convenient in all the transactions of life that paper will be used and the
coin will be deposited with us. The subtreasury in New York will be,
like the Bank of England, the place of deposit for all the coin of the
country;- and coin certificates or greenbacks will be used for all current
transactions, leaving the coin only to be drawn to meet the demands of
foreign trade or the mutations and changes of supply and demand.
The CHAIRMAN. That would depend entirely upon the balance of
Secretary SHERMAN. Very much.
The CHAIRMAN. That would be the key of the situation?
Secretary SHERMAN. Yes, sir.
Mr. EWING. You say, then, that at least $3,000,000 of this 86,818,677
for "called bonds and interest" might be used, if necessary, in the re-
demption of legal-tender notes ?
Secretary SHERMAN. Practically. I would say that at least one-third
of the amount, $2,000,000, might be so used. The next item of $4,909,703,
u interest due and unpaid," stands in about the same position ; in fact,
it is more stable than the other.
Mr. EWING. You think that $2,000,000 of that could be used ?
Secretary SHERMAN. Yes, and perhaps more. Here (showing a debt
statement) are the items of this " interest due and unpaid;" much of it
is on old loans. Very often people do not collect their coupons, but leave
the interest to accumulate, so that this interest item is even more stable
than the other item. This is the " interest due and unpaid " on out-
standing bonds; the other is " the interest and principal of called bonds."
Mr. EWING. I see that this " interest due and unpaid " is made up
chiefly on bonds not yet due. It therefore cannot run along.
Secretary SHERMAN. That always follows. Suppose a man who owns
810,000 of bonds neglects to cut off the coupons when they are due and
lets them run for two or three months without collecting the interest, he
is likely to do the same thing the next time.
Mr. EWING. But suppose it were understood that the Treasury was
short of gold, would it not be likely that these overdue coupons would
be run in for collection ? In other words, could you safely use that fund
to redeem legal-tender notes if you are pushed to that point I
Secretary SHERMAN. I do not think I would have occasion to use that
fund, but I simply say (as I have said to the Senate committee) that