Part 77 (1/2)

This was the same view I had taken of the matter. I did not feel myself officially bound to do anything but to require prompt payment for the bonds subscribed. The treasury, however, was well prepared for any probable stringency, and I was convinced that the settlements would not cause any serious disturbance. The advices from London continued to be unfavorable. The bonds were offered in the market in some cases at a less price than the syndicate were to pay for them.

In the process of selling the four per cent. bonds I had frequently been written to by persons of limited means, who wished to invest their savings in government bonds of small denominations bearing four per cent. interest. I called the attention of the proper committee of each House to the expediency of issuing notes or certificates of that description, and the act of February 26, 1879, already quoted, was pa.s.sed.

On the 26th of March I issued a circular relative to these certificates, prescribing the manner in which they should be sold, and stated the purpose and probable effect of their issue, as follows:

”The primary purpose of these certificates is to enable persons of limited means to husband small savings as they accrue, and place them where they will draw interest and become the nest egg for future acc.u.mulation. The form of certificate seems better adapted for the purpose than the French _ventes_ or the English savings bank system. The objection to a national savings bank is that, in a country so extensive as ours, the agencies would necessarily be scattered, and the cost and delay of correspondence and transferring money to Was.h.i.+ngton would be considerable; but, more than all, the United States cannot undertake the risk of repaying deposits at any time when called for. The necessary reserve for that purpose would make the system burdensome. The certificate, as issued, may, at the expense of the subscriber, be either to bearer, or, by being registered, only transferable by a.s.signment on the books of the treasury. It combines, in the cheapest form, all the benefits of any system of savings banks that has been devised. No doubt these certificates, when first issued, will, by voluntary consent of parties, be used as currency; but, after they shall have run a short time, the accruing interest on them will induce their sorting and holding, and thus, like the compound-interest notes, they will cease to be a currency and become an investment. Their possible use as currency is certainly no objection to them; for, though I adhere as strictly as anyone to a specie standard of value, I think that, it being constantly maintained by ample reserves and prompt redemption, current money in different forms should be provided for daily use. Diversity of the currency, if it is always redeemable, is no objection. These certificates will always be redeemable in the bonds stipulated for, and can, with profit, be issued, while the money received for them can be used in redeeming bonds bearing a higher rate of interest. They are of as low a denomination as can be conveniently issued and bear interest. The issue of this certificate is a safe experiment. I have confidence that it will be beneficial to the holder, in begetting habits of saving, and to the treasury, in aiding refunding; but its great benefit will be that the people themselves will in this way have a direct interest in preserving and maintaining the public faith.”

On the same date I wrote a note for publication to the treasurer of the United States, to facilitate the payment of called bonds, as follows:

”As it is desirable to make payment of called bonds in the mode that will least disturb the market, you will draw from the depositary banks the proceeds of four per cent. bonds only when required to make payment of called bonds, and in proportion from the several depositaries to the amounts held by them, as near as may be, in sums of $1,000. Money in the treasury received from four per cent.

bonds should be applied to the payment of called bonds before such drafts are made.

”When practicable, drafts upon depositary banks, for transfers of deposits on account of proceeds of four per cent. bonds, may be so drawn as to be payable at the option of the bank, through the New York clearing house.

”Drafts on depositary banks in cities other than New York should be drawn a sufficient time in advance to meet payments there.

”Payment by called bonds should be treated as payment in money as of the date when it would, under this order, be required.”

On the 27th I received from Conant the following cablegram:

”Would be pleased to know if subscriptions to be settled during April can be expected without disturbing market in New York.”

I answered on the same day as follows:

”Entirely confident subscriptions during next month will be settled without disturbing market. Order of the treasury department yesterday will facilitate greatly.”

The following correspondence with Conant, the syndicate and myself then took place:

”London, March 28, 1879.

”Sherman, Was.h.i.+ngton.

”Rothschild & Sons request me to say they do not consider contract of January 21, 1879, requires subscription two million to be made April 1. On account of market price below par at present time they desire delay subscription few days. Hope you will consent.

”Conant.”

”Treasury Department, March 28, 1879.

”Conant, London.

”I think contract of January 21, 1879, very plain, subscription should be made April 1, but, if they desire, time will be extended to April 8.

”Sherman.”

”Treasury Department, March 28, 1879.

”August Belmont & Co., New York.

”Gentlemen:--In confirmation of my two telegrams of to-day to you, copies of which are inclosed, I have to inform you that the proper legal officers of the department, as well as myself, consider it very clear that, under the contract of January 21, your option to make the second subscription expires on the 1st of April, but I am not at all desirous of raising the question, and therefore am willing to extend the time a week, within which I am quite confident the anxiety about the April payments will begin to subside. Thus far this week, over $17,000,000 called bonds have been redeemed by credit on subscriptions, and $450,000 only paid by draft. Called bonds are rapidly coming in for credit. The subscriptions in excess of bonds called now amount to $6,600,000. With an a.s.surance of a subscription of $2,000,000 from you, by the 1st, or even the 8th, of April, I would immediately issue a call for $10,000,000, and may do so without waiting for your subscription.

”I would prefer that the parties to the contract should not avail themselves of the extension offered, but leave that entirely to your good judgment.