Recollections of Forty Years in the House, Senate and Cabinet Part 46

From Salt Lake our party went to Cheyenne and thence to Denver.

This city was growing rapidly and was plainly destined to be the princ.i.p.al center of the mineral development of several states. I had, on a previous trip, visited the interesting region of the "Garden of the G.o.ds," Colorado Springs and Pike's Peak. Our party left Denver for home. On the long stretch via Kansas City, St.

Louis and Indianapolis we saw nothing new, as we were traveling over familiar ground. It was early in September, when corn, the great western staple, was approaching maturity, and the earth was giving forth its increase. We were crossing the largest and perhaps most fertile valley of the world. All of it had been redeemed from nature and the Indians, within one hundred years. During our trip we had pa.s.sed through great cities, prosperous towns and amidst wonderful scenery. All of the route except through the Yosemite valley was pa.s.sed over in a palace car. The ocean voyage was in a steamboat even more luxurious then the palace car. All this rapid development did not satisfy the desire of Colonel Scott and Mr. Walters. Their minds were occupied with vast railroad projects, some of which were accomplished before their death. I also had my dreams but they related to public policies rather than internal improvements and some of these have been realized.

I was awakened one bright morning in September and told that the car was in Ohio. This was enough to drive sleep from my eyelids.

I looked out upon the rich lands of the Miami valley, the comfortable homesteads on every farm, the fat cattle and herds of sheep, the broad fields of yellow corn, and every sign of fertility. All these, and perhaps a little admixture of state pride, led me to say that, after all, the people of Ohio need not go beyond the bounds of that state with any hope to improve their condition or to secure a better opportunity for a happy life. I soon parted with my friends with sincere regrets, for in our journeyings we were in truth a happy family.

The canva.s.s in Ohio was then progressing for the election of a President and Members of Congress, in which I was expected, as usual, to take a part. The strange anomaly of Horace Greeley running on a Democratic ticket was enough in itself to excite opposition, especially in the southern states. The result was that General Grant, in November, 1872, was elected President by 31 states with 286 electoral votes. Greeley died after the election, and before the electors voted, so that no electoral vote was counted for him. If he had lived he would probably have received 60 electoral votes.

CHAPTER XXIV.

THE PANIC OF 1873 AND ITS RESULTS.

Failure of Jay Cooke and Co.--Wild Schemes "for the Relief of the People"--Congress Called Upon for Help--Finance Committee's Report for the Redemption of United States Notes in Coin--Extracts from My Speech in Favor of the Report--Bill to Fix the Amount of United States Notes--Finally Pa.s.sed by the Senate and House--Vetoed by President Grant and Failure to Pa.s.s Over His Objection--General Effect Throughout the Country of the Struggle for Resumption-- Imperative Necessity for Providing Some Measure of Relief.

During the first four years of General Grant's administration the financial condition of the United States was eminently prosperous.

The total reduction of the national debt, from the 1st of March, 1869, to the 1st of November, 1873, was $383,629,783, the annual saving of interest resulting therefrom being $27,432,932. During this period the value of United States notes compared with coin steadily increased. The funding of the six per cent. bonds into five per cent. bonds, under the refunding act, continued at the rate of about $85,000,000 a year. The credit of the United States steadily advanced during this period, so that the Secretary of the Treasury, in his report of 1873, stated that it had not stood higher since the close of the Rebellion than it did at that time. This improvement of the public credit was accompanied with a large reduction of internal taxes and duties on imported goods. The business of the country was prosperous, the increase and extension of railroads and the development of new industries was marked, indicating great prosperity.

All this was subsequently changed by the happening of a panic in September, 1873. The cause of this was attributed to over-trading, to the expansion of credits, and to rash investment made in advance of public needs. This panic commenced by the failure of Jay Cooke & Co., of Philadelphia, an enterprising firm of high standing, then engaged in selling the bonds of the Northern Pacific Railroad Company. I was engaged at that time, with a committee of the Senate, of which William Windom was chairman, in examining many plans of public improvements, especially in the increase of facilities for water transportation at the mouth of the Mississippi river, and at the great lakes on our northern boundary, improvements since then made with great benefit to the commerce of the United States.

Roscoe Conkling, of New York, was a member of that committee. We were at Buffalo when the failure of Cooke & Co. was announced. We all felt that for the present, at least, our duties as a committee were at an end. The panic spread so that in a month all industries were in a measure suspended. The wildest schemes for relief were proposed, in and out of Congress. The panic spread to the banks, which were compelled in self-defense to call in their loans, to withhold their circulating notes, and contract their business. As usual on the happening of such a panic, an appeal was made to the treasury for relief, a demand was made for an increase in the volume of the United States notes, and that the Secretary of the Treasury should use the money of the government to buy exchange.

The New York Produce Exchange applied to the Secretary of the Treasury on the 29th of September, 1873, in resolutions, as follows:

"Whereas, The critical condition of the commercial interests of the country requires immediate relief by the removal of the block in negotiating foreign exchange; therefore be it

"_Resolved_, That we respectfully suggest to the Secretary of the Treasury the following plans for relief in this extraordinary emergency:

"First, That currency be immediately issued to banks or bankers, upon satisfactory evidence that gold has been placed upon special deposit in the Bank of England, by their correspondents in London, to the credit of the United States, to be used solely in purchasing commercial bills of exchange.

"Second, That the President of the United States and the Secretary of the Treasury are respectfully requested to order the immediate prepayment of the outstanding loan of the United States due January 1, 1874."

This request had, as a matter of course, to be denied. But the secretary did purchase $13,000,000 of bonds for the sinking fund, to the full extent the condition of the treasury allowed. It is difficult to realize or to convey by description the wild ideas developed by such a panic. The government for the time being is expected to provide a remedy for a condition it did not create, but, instead of aiding, the government is most likely to need aid.

The revenues from importations fell off and the value of United States notes declined.

When Congress convened in December, 1873, the wildest schemes for relief to the people were proposed. A large increase of United States notes was demanded. More than sixty bills, resolutions and propositions were introduced in the Senate in respect to the currency, the public debt and national banks, all bearing upon the financial condition of the country, expressing every variety of opinion, from immediate coin payments to the wildest inflation of irredeemable paper money. All these were referred to the committee on finance, then composed as follows: Messrs. Sherman (chairman), Morrill, of Vermont, Scott, Wright, Ferry, of Michigan, Fenton and Bayard.

The several measures referred to the committee were taken up and considered, but the same wide divergence of opinion was developed in the committee as existed outside of Congress among the people.

The majority of the committee reported to the Senate the following resolution:

"_Resolved_, That it is the duty of Congress during its present session to adopt definite measures to redeem the pledge made in the act approved March 18, 1869, ent.i.tled 'An act to strengthen the public credit,' as follows: 'And the United States also pledges its faith to make provision, at the earliest practicable period, for the redemption of United States notes in coin;' and the committee on finance is directed to report to the Senate, at as early a day as practicable, such measures as will not only redeem the pledge of the public faith, but will also furnish a currency of uniform value, always redeemable in gold or its equivalent, and so adjusted as to meet the changing wants of trade and commerce."

Mr. Ferry, of Michigan, a member of the committee, offered the following subst.i.tute for the pending resolution:

"That the committee on finance is directed to report to the Senate, at as early a day as practicable, such measures as will restore commercial confidence and give stability and elasticity to the circulating medium through a moderate increase of currency."

Upon these adverse propositions a long debate followed without practical results. I made a long speech on the 16th day of January, 1874, in favor of the resolution of the committee. I then said:

"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 are constantly overlooked. They ought to be ever present in this discussion as axioms, the truth of which has been so often proven that proof is no longer requisite.

"The most obvious of these axioms, which lies at the foundation 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 established as such by the experience of all commercial nations that have existed from the earliest period of recorded time. While the United States, as well as all other nations, have for a time, under the pressure of war or other calamity, 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 measured their value as it now measures the value of our legal tender notes.

"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 advanced 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 produce. I might, to establish this axiom, repeat the history of finance, from the shekels of silver, 'current money with the merchant,' paid by Abraham, to the last sale of stock in New York. I might quote Aristotle and Pliny, 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 schoolbooks, but in the writings 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 parliaments, nor congresses can change this law. It defies every form of authority, but silently and surely a.s.serts itself as a law of necessity, beyond the jurisdiction of munic.i.p.al law.

"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 modern nations have been driven to similar expedients. At the Paris monetary conference, held in 1867, which I had the honor to attend, the delegates of twenty nations represented agreed to recommend gold alone as the standard of value. The United 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 by the right to be converted into gold at the will of the holder. 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 all credits, and of every 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 the general medium of all exchanges. In modern times this is greatly changed. Specie is still the universal standard of value, but it has ceased to be even the usual medium of exchange. The failure to distinguish between the standard of value and the medium of exchanges 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 subst.i.tute promises to pay gold in place of the actual gold.

"Mr. president, thus far my remarks are founded upon the experience of ages, applicable to all countries and to all commercial nations of our time. I present them now as axioms of universal recognition.

And yet I have heard these axioms denounced in this debate as 'plat.i.tudes,' useless for this discussion in the Senate of the United States. The wisdom of ages, the experience of three thousand years, the writings of political economists, are whistled down the wind as if we in the Senate were wiser than all who have reasoned and thought and legislated upon financial problems--that all this acc.u.mulated wisdom consists of 'plat.i.tudes' unworthy to influence an American Senate in the consideration of the affairs of our day and generation.

"Sir, I do not think so. If we disregard these 'plat.i.tudes,' we only demonstrate our own ignorance and punish our const.i.tuents with evils that we ought to avoid. I purpose now to pursue the argument further, and to prove that we are bound, both by public faith and 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 adopted 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, surely, 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,' pa.s.sed 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.'

"The Congress of the United States, in order to put into form its sense of this obligation, pa.s.sed 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 should be paid, 'at the earliest practicable period,' in coin.

"On the day we made that promise, the 18th of March, 1869, the greenbacks, the notes of the United States, were worth 75 cents in gold; or in other words, gold was at a premium of thirty-two per cent. . . . What was the result? After you enacted that law-- the faith of the people of the United States that you would redeem this pledge--the value of your greenbacks advanced, not rapidly, but gradually, and in one year, to within twelve per cent. of par in gold.

"Mr. president, we see, then, the effect of this promise. And I here come to what I regard as a painful feature 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 approbation. 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 pa.s.sed 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 yours 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 depreciate its value and to violate your promise.

"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 princ.i.p.al should be paid, when due, in coin.

The fifth section of the act provides that all 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 greenbacks 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--those bonds payable, princ.i.p.al and interest, in gold. If the policy provided for by this act had been maintained, we would long since have been at specie payments, without any serious disturbance of our monetary affairs.

"Now, Mr. president, I come to show the Senate how this provision, the convertible clause of the act of February 25, 1862, was repealed.

On the 3rd of March, 1863, Congress pa.s.sed 'An act to provide ways and means for the support of the government.' This act was pa.s.sed 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 remember that at about the time this act was pa.s.sed there were very large unpaid requisitions. The Secretary of the Treasury, instead of issuing any more six per cent. bonds, desired to float a 10-40 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.