matter of course they would be substitutes for coin.
The CHAIRMAN. Do you not think we could make them so if they
were made receivable for four per cent, bonds 1
Secretary SHERMAN. That is to be tried. I want to sell four per
cent, bonds if I can. Whether, on actual experiment, four per cent, in-
terest is enough in this country to induce the sale of bonds, Mr. Low
and Mr. Chittenden can judge better than I.
Adjourued'to Thursday morning, April 4, 1878, at half past ten o'clock.
THURSDAY, April 4, 1878.
Present, Mr.Buckner, chairman, Messrs. Ewing, Harden bergh, Hart-
zell, Bell, Eames, Chittenden, Fort, and Phillips; the Hon. John Sher-
man, Secretary of the Treasury.
Mr. EWING. I ask your attention to a comparison of the condition of
the Treasury for resumption with the condition of the Bank of England
in 1819 and now, with the Bank of France this year, and with the
banks of the United States in 1857 and 1861.
Secretary SHERMAN. When I said the other day that I thought the
condition of the Treasury on the 1st of January next would be as good
as the Bank of England, I had not then before me the actual figures or
tables, but only spoke from a general knowledge of the facts. Since
then I have given the matter a good deal of attention, and I have got
some carefully-prepared tables, founded upon late information, giving
the exact comparison of the condition of the Bank of England, the
Bank of France, the Bank of Germany, the Bank of Belgium, the
national banks, and the Treasury. These tables will show that pretty
[Secretary Sherman handed the tables to the committee, and they are
printed in the appendix. The latest statement of the condition of these
banks is found in the London Economist of February 23, 1878, and the
older statements are found in McCulloch's Dictionary, a standard
authority on the subject, on page 117.]
EESUMPTION OF SPECIE PAYMENTS.
Mr. EwiNGr. I see you have given the figures of the Bank of France
in pounds sterling.
Secretary SHERMAN. Yes; they are reduced to pounds sterling. 1
ought to say, explanatory of the statement which I have submitted, that
there are two modes of making up the accounts of the Bank of England;
one by dividing them into the bank department and the issue depart-
ment, while the other is the consolidated statement.
Mr. EwiNGr. How does this statement give it?
Secretary SHERMAN. It gives the consolidated statement what is
called the old form. The consolidated statement is but a combination
of the two departments.
Mr. EwiNGr. Still the consolidated statement charges to the bank the
reserve on hand, does it not ?
Secretary SHERMAN. If there is any material difference; perhaps I
had better put it in both forms, because the Economist gives it in
both ways. I will give here the table from the Economist:
Notes issued 38,698,020
Government debt 11,015,100
Other securities 3, 984, 900
Gold coin and bullion 23, 698, 020
38, 698, 020
Proprietors' capital 14, 553, 000
Public deposits, including ex-
chequer, savings banks,
commissioners of national
debt, and dividend ac-
Other deposits 21, 529, 721
Seven-day and other bills. . . 255, 619
Dated February 21, 1878,
46, 277, 277
Government securities 15, 203, 201
Other securities 17, 672, 338
Gold and silver coin 1 , 032, 773
THE OLD FORM.
46, 277, 277
The above bank-accounts would, if made out in the old form, present the following
Circulation (including bank
post-bills) 26, 584, 674
Public deposits 6, 524, 776
Private deposits 21, 529, 721
54, 639, 171
Gold and bullion 24, 730, 793
58, 053, 332
The balance of assets above liabilities being 3,414,161, as stated in. the above
account under the head " Eest."
Now, in regard to the United States, I have a statement here showing
the apparent and probable condition of the United States Treasury on
April 1, 1878, and on the 1st of January next. The only difference in
these statements is that I add to the present condition of the Treasury
the proposed accumulation of fifty millions of coin and a substantial
payment before that of the fractional currency. I think it will be prac-
tically redeemed before that time. The actual results show the amount
of demand liabilities on April 1, 1878, against the United States as
RESUMPTION OF SPECIE PAYMENTS. 33
$460,527,374, and they show the demand resources, including coin and
currency, at $174,324,459, making the percentage of resources to liabili-
ties 37. To show the probable condition of the Treasury on the first of
January, 1879, I add the fifty millions of coin and I take off the frac-
tional currency, and deduct estimated United States notes lost and
destroyed, leaving the other items about the same. That would show
an aggregate of probable liabilities of $435,098,400 and probable cash
resources of $224,324,459, making 51 per cent, of the demand liabili-
ties. The ratio of the Bank of England, at this time, is 45 per cent. ;
the ratio of the Bank of France is 65 per cent.; the ratio of the Bank
of Germany is 58 per cent. ; and the ratio of the Bank of Belgium is 25
percent., ail based upon the same figures. (See Appendices 7 and 8.)
Mr. EwiNGr. Does not this statement charge to the Bank of England
the unissued notes 9
Secretary SHERMAN. No, sir; not at all. The notes oil hand in the
banking department are deducted from the notes issued, so that the cir-
culation in the consolidated statement shows an aggregate of 26,584,674.
Mr. EwiNGr. Does that include the amount of notes unissued ?
Secretary SHERMAN. No, sir; the total amount of circulation, as shown
by the issue department, is 38,698,020 : but there is in the banking de-
partment some twelve millions of pounds. This statement deducts the
notes on hand from the notes issued (which is proper), and gives the
actual notes to be provided for at 26,584,674.
Mr. EwiNGr. Is there not some error about that?
Secretary SHERMAN. Neither you nor I want to fall into any err~r
about this ; but iny understanding is, that the whole amount of notes
of the Bank of England issued by the issue department is 38,698,020 j
but the banking department has on hand 12,368,965, and in stating
the amount of notes outstanding, they deduct that twelve millions from
the thirty-eight millions, which ought to be done, because the twelve
millions really belong to the Bank of England. Now, in stating ours
we have done it differently. We have given the full aggregate without
deducting the notes on hand, so that the account is more favorable to
the Bank of England as thus stated than it is to us. If I am mistaken
about this, I shall be very glad indeed to have you point it out, bat I
think I am not, because I have looked very carefully into it.
In regard to the national banks, here are some statements which
are interesting to me and which were prepared in consequence of
our interview the other day. I think they will be interesting to the
committee. The first paper contains the circulation and deposits and
specie of the State banks in 1857 and 1860, as compiled from state-
ments in the finance report of 1876, pages 204 and 205. The next paper
contains the circulation, deposits, and cash reserve of the national banks
on the 28th day of December, 1877. The latest statement of the banks
I cannot give you, because it is not yet made up. It was made in March
last, and the returns are not fully in. This statement shows a general
demand liability of $960,816,052, and it shows a total cash reserve of
$145,019,338. The ratio of legal-tender funds to the amount of circula-
tion is 48.4 per cent. The ratio of legal-tender funds to circulation and
deposits is 15.1 per cent. The next paper exhibits the circulation, de-
posits, and cash resources of the national banks on December 28, 1877,
on a different basis, counting the amount of national bonds owned by
the banks and deposited with the Treasurer as money. This other
table excludes them entirely. This gives the same figures, but counting
the bonds at their nominal par as money, it shows this result : Total
amount of liabilities $960,816.052, and total amount of cash resources
H. Mis. 48 3
34 RESUMPTION OF SPECIE PAYMENTS.
(including four hundred and five millions of bonds) at $550,201.055. The
ratio of cash resources to circulation is 183 per cent, and the ratio of cash
resources to circulation and deposits is 57 per cent. (See Appendix
Mr. EWING-. Do you think that the bonds can be counted as cash ?
Secretary SHERMAN. Yes : the bonds are all worth par or above in
The CHAIRMAN. The other cash held by the banks is legal-tender
Secretary SHERMAN. Yes, and coin.
Mr. EWING. Do you think it safe to count these bonds as gold f Is it
possible to convert them into gold f
Secretary SHERMAN. O, yes.
Mr. EWING. That is, the banks can sell over four hundred millions of
bonds and get gold for them ?
Secretary SHERMAN. Probably not to-day or in a moment.
Mr. EWING. At any time can the national banks accumulate four
hundred millions of gold by sale of their bonds ?
Secretary SHERMAN. Not in a day.
Mr. EWING. Or in a year 1
Secretary SHERMAN. O, yes. I sold last year (within the year) of 4J
per cent, and 4 per cent, bonds two hundred and seventy-five million
Mr. EWING. How much gold did you get for them I
Secretary SHERMAN. Sixty or seventy millions of gold and the bal-
ance 1 paid for six per cent, bonds.
Mr. EWING. They were practically funded in other bonds. But I
want to know now if you make up that table on the theory that these
four hundred millions of bonds can be turned into gold for the purpose
of resumption ?
Secretary SHERMAN. I make up my statement on the theory that four
hundred millions of bonds will more than pay four hundred millions of
bank-notes at any time, such bonds as the banks hold, and that, if that
is not so, we are bankrupt. I just give you this statement. Here also
is an abstract of reports made to the Comptroller of the Currency,
because these tables are taken from it. (See appendix No. G.)
Mr. EWING. Here is a consolidated statement which 1 have prepared,
and to which 1 wish to call your attention.
RESUMPTION OF SPECIE PAYMENTS.
i i li
d O5 00
: i ; ; :
i-H . &
CJD i 00
Cr3 O ^
M o a
to 4 io in 5 5
OO OO / li O
"" " " " g~
II I II ^
"i'S ' 'i'i *
a a a aa s
RESUMPTION OF SPECIE PAYMENTS.
Secretary SHERMAN [examining the paper]. Your currency outstand-
ing of tbe Bank of England is about what I have got it, about twenty-
six million pounds ; but yours is made up only to December, 1877, and
mine is made up to February. I have no doubt that you have got this
correct. There is no trouble about these figures, although we may some-
times look at them a little differently.
Mr. EWING. I cannot get the deposits in the English country banks.
Secretary SHERMAN. The great liability of the Bank of England is
the deposits. I have no doubt that this table is substantially taken
from the same authority, and I should like to have it go into the report
of the conference as yours.
Mr. EWING. I wish you to state the probable amount of gold and silver,
not including subsidiary coin, in the United States, outside of national
banks and of the Treasury, and where it is or supposed to be.
Secretary SHERMAN. I am like you and like everybody else as to my
knowledg on that subject. I have to depend upon the information
from the Director of the Mint for it, and I can only give it to you as he
gives it. This table here [handing it to the committee] gives that in-
formation from the best lights I can get, and I ani inclined to think on
the whole that it is about right, but I give it as the statement of the
Director of the Mint, for I have no knowledge outside of that which I get
from him and from the official documents.
[The paper, being an estimate of the amount of gold and silver bull-
ion and coin in the United States on April 1, 1878, is published in the
appendix No. 9, giving the total at $199,490,753 of gold and $65,500,000
of silver, making an aggregate in gold and silver of $264,000,000.1
Secretary SHERMAN. That statement is not only concurred in by Dr.
Linderinau, who has mainly prepared it, but it has been carefully exam-
ined by other officers of the Treasury Department who are familiar with
Mr. EWINO. Have you with you the report of the sinking fund !
Secretary SHERMAN. In my report I refer to the sinking fund. I say:
" In the last annual report my predecessor stated that had the re-
sources of the Treasury during each fiscal year, commencing with 1862,
been sufficient to make a literal compliance with the conditions of the
sinking-fund law practicable, a total of $433,848,215 would have been
applied to that fund July 1, 1876; whereas the actual reduction of the
debt, including accrued interest, less cash in the Treasury at that date,
amounted to $658,992,226," or $220,954,459 in excess of the amount re-
quired by law to be provided for that fund. The details of the fund are
given on pages 19-20 of my report.
Here is a table showing the excess or deficiency placed each year in
the sinking fund since 1869 :
Excess or deficiency placed each year in sinking fund, since 18G9.
$672 020 23
$744 711 80
257 474 32
2 &23 891 46
1 451 588 95
16 305 421 96
5, 996, 039 62
1 143 769 82
4, 947, 500 64
33, 672, 564 15
$28, 725, 063 51
RESUMPTION OF SPECIE PAYMENTS
Here is also a table showing the
Monthly redemptions of legal-tenders and fractional currency dur
to be applied to the sinking fund.
raC micy. Cl
1, Ofil, 232
2, 424, 040
3, 150, 604
1, 396, 512
385, 472 12
434, 067 61
292, 189 18
240, 582 52
November 1877 ...
Total for 1878
11, 915, 6-20
5, 999, 296
10, 007, 952
3, 453, 021 72
7, 062, 142 09
14, 043, 458 05
Amount applied to the si -jiving fu
Amount applied to the sinking fu
id during the fiscal year 1876
ad during the fiscal year 1877
27, 922, 868
Now I want to show you also that the surplus revenue has not been
equal to the sinking fund since 1874; but actually there has been more
applied to the sinking fund than the surplus revenue during those years.
My report of December 3, 1877, will show the exact application of
the amount. The amount of the surplus revenue is stated there at
$30,340,577, which was applied as follows :
To the redemption of United States notes, &c $10,071,617
To the redemption of fractional currency 14, 043, 458
To the redemption of 6 per cent, bonds for the sinking fund 447,500
To increase of cash balance in the Treasury 5, 778, 002
30, 340, 577
That $5,778,002 has never been applied.
Mr. EwiNG. Is that thirty millions the sum of the sinking fund?
Secretary SHERMAN. It is the sum of the surplus revenue, the total
revenue over expenditures. So that that five millions has not been ap-
Mr. EWING. Where do you expect to get the additional fifty millions
of gold by January 1, 1879 ?
Secretary SHERMA.N, You must see that for me to state too closely
what 1 propose to do might prevent me from doing what I expect
to do, and therefore I will answer your question just as far as I think
you will say I ought to go. I answer, mainly from the sale of bonds.
Indeed, in the present condition of the revenue, we cannot expect
much help from surplus revenue, except so far as that surplus revenue
may be applied to the payment of greenbacks and to the redemp-
tion of fractional currency in aid of the sinking fund. To that extent
I think we can rely upon revenue enough to retire the United States
notes redeemed under the resumption act; so that I would say that
we can get the $50,000,000 of gold additional by the sale of bonds.
As to the kind of bonds that I would sell, and as to how 1 would sell
them,&c.,I ought not to say anything on that subject at present, because
you ought to allow me as an executive officer, in the exercise of a very
delicate discretion, free power to act as I think right at the moment,
holding me responsible for my action afterward. As to what bonds I
will sell, or where I will sell them, or how I will sell them, as that is a
discretionary power left with the Secretary, I ought not to decide that
now, but to decide it as the case arises.
38 RESUMPTION OF SPECIE PAYMENTS.
Mr. EWING. I understood you to say in your interview with the Sen-
ate committee that you would have to rely upon the natural currents of
trade to bring gold from abroad; that is, that there cannot be a large
sale of bonds for coin abroad. Is it on a foreign sale that you are rely-
Secretary SHERMAN. Not at all, but on a sale at home. Perhaps I
might as well say that if I can get two-thirds of tbis year's supply of
gold and silver, it will amount to a good deal more than $50,000,000, so
that I do not have to go abroad for gold. If we can keep our own gold
and silver from going abroad, it is more than I want.
The CHAIRMAN. For this $50,000,000 additional I suppose you rely
to some extent on the coinage of silver?
Secretary SHERMAN. To some extent ; silver and gold we consider the
same under the law.
Mr. EwiNO. Do you expect to pay out the silver dollar coined by you
for current expenses, or only for coin liabilities, or to hoard it for re-
Secretary SHERMAN. I expect to pay it out now only in exchange for
gold coin or for silver bullion. I am perfectly free to answer the ques-
tion fully, because on that point, after consulting with many members
of both houses, I have made up my mind what the law requires me to
do. I propose to issue all the silver dollars that are demanded in ex-
change for gold coin. That has been going on to some extent; how far
I cannot tell. Then I propose to use the silver in payment for silver
bullion, which I can do at par in gold. I then propose to buy all the
rest of the silver bullion which I need under the law with silver coin.
As a matter of course, in the current course of business, some of that
silver coin will go into circulation ; how much, I do not know. The
more, the better for us. But most of it, I take it, will be transferred to
the Treasury for silver-certificates (that seems to be the idea of the bill),
and those silver certificates will come into the Treasury in payment of
duties, and in that way, practically, the silver will belong to the govern-
Until silver is so abundant that it becomes the acknowledged basis of
coin transactions, we cannot pay out that silver for the ordinary ex-
penses of the government, because we have not enough to pay all the
expenditures in silver; and if the silver is maintained at par with gold,
and if the United States notes are below par with gold, we cannot dis-
criminate in favor of any class of creditors; we would, therefore, have
to hold silver at par with gold until we either have enough to pay every-
thing with it or until the legal tender notes are practically at par with
gold and silver. That is a matter over which I have no more control
than any other citizen. The silver dollars being receivable for duties
the law allowing them to be converted into certificates which are receiv-
able for customs I must receive them ; and I could not prevent, if I
tried, the silver from coming into the Treasury, either for silver certifi-
cates or payment of duties. As to when I shall commence paying them
out for the current expenditures of tbe government or in payment of
the interest or principal of the debt I cannot tell, because that would
depend upon the equality of the three kinds of currency gold, silver,
and paper. I do not know whether I make myself understood, but that
is the general idea I have in my mind. As a matter of course, it being a
great discretionary power which you have invested in the office of Sec-
retary of the Treasury, while I hold the office I will be very careful to
exercise that power so as to carry out in good faith the law as Congress
RESUMPTION OF SPECIE PAYMENTS. 39
has passed it, and that law, I think, contemplates that gold, silver, and
paper shall be all brought on an equivalency.
Mr. EWING. Please state in detail the fund in the Treasury, other
than gold and silver, applicable to resumption, and not covered by
Secretary SHERMAN. It is very small. In round numbers, the $70,-
000,000 of currency in the Treasury, which is less than the average
amount so held for the last five years, is subject to the following, viz :
Special fund for redemption of fractional currency $10, 000, 000
Redemption of notes of national banks "failed," in "liquidation," and
"reducing circulation" , 12,000,000
Five per cent, redemption fund 9, 000, 000
Disbursing officers' balances 13,000,000
Certificates of deposit issued under act June 8, 1872 26,000, 000
So that, you may say, some of those items are ours. First, the item
of 810,000,000 for the redemption of fractional currency is ours ; then
the item of $13,000,000, held by disbursing officers, is ours. The two
redemption funds, one of national banks that have failed, and the other
in -present redemption of national-bank notes (together $21,000,000),
belong to the banks. We have to hold it, but the amount does not
vary much. The certificates of deposit are less now than usual ; they
are only $26,000,000. I think that answers your question fully. (See
Appendix No. 11 as to distribution of currency in the Treasury.)
Mr. EWING. No ; what I desire to know is the funds in the Treasury
other than gold und silver applicable to resumption, and not covered by
Secretary SHERMAN. I do not count any of these as applicable to re-
Mr. EWING. You spoke the other day about $70,000,000 in the Treas-
ury with which to maintain resumption.
Mr. SHERMAN. Not to redeem notes. That $70,000,000 is so much
money that is almost constantly in our hands, and which cannot be pre-
sented for redemption. In that view only I spoke of it.
Mr. EWING. You did not speak of it, then, as a fund available for
use in maintaining resumption?
Secretary SHERMAN. O, not at all; but as so much money which
cannot be presented for redemption.
Mr. EWING. Cannot the $26,000,000 of certificates of deposit be pre-
nted for redemption ?
Secretary SHERMAN. Yes; that much can be; but it is not likely to
We have got the money to pay for it if it is presented, but it is not
kely to be.
Mr. EwiNGr. That depends upon the preferences of the holders of the
Secretary SHERMAN. Still, I can tell you that it is a great comf jrt to
have $70,000,000, where it is not likely to be disturbed.
The CHAIRMAN. You are not liable to be called for it at any day?
Secretary SHERMAN. No, sir.
Mr. EWING. Then I understand that you have no right to use the
special fund for the redemption of fractional currency ?
Secretary SHERMAN. I do not think that we have any right to use any
of that to redeem notes with, because we must redeem notes with coin ;
but, having this $10,000,000 on hand, it is ours.
Mr. EWING. Is it subject to use ?
Secretary SHERMAN. It is pledged in law to redeem the fractional
currency which is really lost or destroyed. If I have $1,000 belonging
40 RESUMPTION OF SPECIE PAYMENTS.
to a man who died without heirs I am pretty likely to fall heir to it ;
and that is the case with this special fund for the redemption of frac-
Mr. EWING. What I desire to know is, not what the Treasury might
be authorized by additional legislation to do for the purpose of resump-
tion, but the resources of the Treasury under existing laws in legal-