Reminiscences of Sixty Years in Public Affairs, Vol. 2

by George S. Boutwell

XXXVI AN HISTORIC SALE OF UNITED STATES BONDS IN ENGLAND

If there should be any considerable interest in the history of the funding system of the United States, the interest would be due to a sale of bonds some thirty years ago and certain incidents which could not have been anticipated, which arose from the execution of the trust.

In the month of July, 1868, a bill for funding the national debt which had passed the Senate of the United States was reported, without amendments, to the House of Representatives by the Committee on Ways and Means.

When the bill was under consideration in the House, I proposed a substitute. In the debate of July 21 I made a statement of the nature of my substitute, and I reproduce an extract which sets forth the first step in a policy which culminated in the Act for Funding the Public Debt, and which was approved by President Grant July 14, 1870:

"The amendment to which I wish to call the attention of the House provides for the funding of $1,200,000,000 of the public debt $400,000,000 payable in fifteen years @ 5 per cent interest, $400,000,000 payable in twenty years @ 4½ per cent interest, and $400,000,000 payable in twenty-five years @ 3.65 per cent interest, the latter sum of $400,000,000 payable, principal and interest, at the option of the takers, either in the United States, or in London, Paris, or Frankfort."

At that time I had not entertained the thought that I might come to be the head of the Treasury Department. Indeed, I had no other purpose in public life than to remain in the House of Representatives.

I had had experience on the executive side of the Government and also on the legislative side, and I had a fixed opinion in favor of the latter form of service.

As Secretary of the Treasury, I proposed a bill in 1869 in the line of the substitute for the bill of the Committee on Ways and Means which I had challenged in July, 1868. The bill proposed an issue of three classes of bonds, each of four hundred million dollars, which were to mature at different dates, and to bear interest at the rates of 5, 4½, and 4 per cent. It was further provided that the principal and interest of the bonds bearing the lowest rate should be made payable either in the United States, or at Frankfort, Paris, or London, as the takers might prefer. The provision was rejected through the influence of General Schenck, who had then returned recently from Europe, and with the opinion that the concession involved an impairment of national honor. As a substitute for the feature so rejected, I originated a plan for the issue of registered bonds, upon the condition that the interest could be paid in checks to be forwarded by the mails to the holders of bonds at the places designated by them in any part of the world. This plan is far superior to the first suggestion, as it is susceptible of a much wider application.

I have received from Mr. Roberts, the Treasurer of the United States, the following letter and statement:

STATEMENT SHOWING THE PROPORTION OF UNITED STATES BONDS OUTSTANDING JANUARY 25, 1900, ON WHICH INTEREST IS PAID BY CHECK.

TITLE OF LOAN. Total issue. Registered Percentage bonds on of bonds on which interest which interest is paid by is paid by check. check.

Funded loan of 1891 continued at 2 per cent
. . . . . . . . .$ 25,364,500 $ 25,364,500 100.00
Four per cent funded loan of 1907
. . . . . . . . . 545,342,950 478,195,600 87.69
Five per cent loan of 1904
. . . . . . . . . 95,009,700 64,615,650 68.01
Four per cent loan of 1925
. . . . . . . . . 162,315,400 117,997,200 72.70
Three per cent ten-twenties of 1898
. . . . . . . . . 168,679,000 109,450,060 55.09

Totals . . . . . . . . $996,711,550 $795,623,030 77.49

TREASURY DEPARTMENT.
OFFICE OF THE TREASURER,
WASHINGTON, D. C.
January 25, 1900.

HONORABLE GEORGE S. BOUTWELL,
Boston, Massachusetts.

My Dear Mr. Secretary: It gives me pleasure to enclose to you a table showing by classes of bonds the percentage of interest paid by checks. The interest on all registered bonds is now so paid. Only the coupon bonds, by their nature, are differently treated.

Your plan has worked admirably, and the drift is slowly from the coupon to the registered form, and so to an increase of the payment of interest by checks.

With kind regards, Yours very truly, (Signed) ELLIS H. ROBERTS, Treasurer of the United States.

The plan has been adopted by corporations that are borrowers of large sums of money upon an issue of bonds, and the use of the system is very general in the United States.

In my report to Congress in December, 1869, I made recommendation of the Funding Bill, and I placed copies of the bill that I had prepared in the hands of the Finance Committee of the Senate, and in the hands of the Committee of Ways and Means of the House of Representatives.

When the bill became a law, the authorized issue of five per cent bonds was limited to two hundred million dollars, and the issue of four per cent was raised to twelve hundred million. Simultaneously with the passage of the Funding Bill of July, 1870, the war between France and Prussia opened, and the opportunity for negotiations was postponed until the early months of the year 1871. In these later years, when bonds of the United States have been sold upon the basis of their par value at two per cent income, it is difficult to realize that in 1869 the six per cent bonds of the United States were worth in gold only 83-5/10 cents to the dollar. The first attempt to dispose of the five per cent bonds was made by the Treasury Department through an invitation to the public to subscribe for the bonds, payment to be made in the currency of the country, or by an exchange of outstanding five-twenty bonds which bore interest at the rate of six per cent. The subscriptions reached the sum of sixty-six million dollars, of which the national banks were subscribers to the amount of sixty-four million, leaving two million only as the loan to the general public. A portion of the amount taken by the banks was for the account of patrons and clients. This experience justified the opinion that future efforts with the general public would be unsuccessful, while the credit of the country was not established and placed beyond the influence of cavilers and doubters.

It was under such circumstances that the aid of banks and bankers became important for the furtherance of subscriptions, in view of the fact that they could give personal service of a nature not possible in the case of salaried officers of the Government, nor compatible with their daily duties.

It is not easy, in this age of comparative freedom and power in financial affairs, to comprehend that in the year 1871 the long established bankers of New York, Amsterdam, and London, either declined or neglected the opportunity to negotiate the five per cent coin bonds of the United States upon the basis of their par value. It may not be out of place for me to mention Mr. Morton, of the house of Morton, Bliss & Co., as an exception, to the bankers of Europe and the United States.

It was in the same months of 1871 that I recommended the issue of a four per cent fifty-year bond as the basis of the currency to be issued by the national banks. This proposition, which would have been advantageous to the banks, in an increasing ratio as the value of money diminished, was defeated by the organized opposition of the banks through an effective lobby that was assembled in the city of Washington. Such was the public sentiment in the year 1871, even in the presence of these important facts, that in the month of December I was able to say in my annual report that the debt had been diminished during the next preceding year in the sum of ninety-four million dollars, and that the total decrease from March 1, 1869 to December 1, 1871, was over two hundred and seventy-seven million dollars.

It was in this situation of affairs that Messrs. Jay Cooke & Co. proposed to undertake the sale in London, by subscription, of one hundred and thirty-four million five per cent bonds then unsold. Authority was given to Cooke & Co. to proceed with the undertaking, and when the books were closed, September 1, I was informed that the loan had been taken in full. By the terms prescribed by Cooke & Co., the subscribers deposited five per cent as security for the validity of their subscriptions. The bonds were to be delivered the first day of December.

Upon the receipt of the information that the undertaking had been a success, the bonds were prepared, and the Hon. William A. Richardson, then an assistant secretary of the Treasury, was designated as the agent of the department for the delivery of the bonds. The bonds were placed in safes, on each of which there were three locks. The clerks were sent over in different vessels, and the keys were so distributed among them, that there were not keys in any one vessel by which any one of the safes could be opened.

The success of the subscription gave rise to an unexpected difficulty.

At that time there were outstanding one hundred and ninety-four million ten-forty United States bonds that carried interest at the rate of five per cent.

It was a singular coincidence, and a coincidence probably not due to natural causes, that some five per cent bonds, having fifteen years to run, should be at par, and that other five per cent bonds that might run thirty years should fall below par in the same market. In the three months from August to December, these ten-forties were quoted as low as ninety-seven, or even for a time at ninety-six. Cooke became anxious, if not alarmed, lest the rate should fall below ninety-five, and consequently lest the subscribers should refuse to meet their obligations. Early on the morning of the first Monday in December, I received the information that the bonds were taken as soon as the offices were open. I may mention in passing that Cooke & Co. paid for the bonds as they were delivered, either in coin or in five-twenty bonds.

As bonds were taken, and as payments were made, a difficulty appeared which had been anticipated, but not in its fullness. The proceeds from the sales of the five per cent bonds were pledged to the redemption of the six per cent five-twenty bonds, reckoned at their par value.

It was provided by the statute that whenever five-twenty bonds were called, a notice of ninety days should be given, when interest would cease. Thus it happened that whenever a bond was called it was worth par and interest to the end of the ninety days. Of the called bonds some were in America, and the owners did not choose to present them in London in exchange for five per cent bonds, nor for coin. Hence it happened that the total proceeds of the five per cent bonds, about twenty million dollars were paid in gold coin by Cooke & Co. This coin was deposited in the Bank of England, but upon such terms as were imposed by the governors:

(1) The deposits must be made in the name of William A. Richardson. This was done, but a statement was made by Judge Richardson that the deposit was the property of the United States.

(2) The gold was not to be taken out of the country. This stipulation was in the line of our policy, which was to invest the entire sum in five-twenty bonds, whenever they could be bought at par. The opportunity came in a manner that was not anticipated. The documents referred to are of historical value, and they are therefore inserted as follows:

(a) A declaration of trust by William A. Richardson, Assistant Secretary of the Treasury, dated at London, December 28, 1871.

(b) Letter of William A. Richardson, Assistant Secretary of the Treasury, to John P. Bigelow, Chief of the Loan Division of the Treasury, dated also at London, December 28, 1871.

(c) Letter of George Forbes, Chief Cashier of the Bank of England, to Judge Richardson, dated January 4, 1872.

(d) Letter of Judge Richardson to George Lyall, Governor of the Bank of England, dated January 15, 1872.

(e) Reply to the same by George Forbes, Chief Cashier, dated January 17, 1872.

(f) William A. Richardson's report of January 25, 1872.

(a) DECLARATION BY WILLIAM A. RICHARDSON

Whereas, I have this day deposited in my name, as Assistant Secretary of the Treasury, U. S. A., in the Bank of England, two million five hundred and fifty thousand pounds sterling, and shall probably hereafter make further deposits on the same account:

Now I hereby declare that said amount and deposits, present and future, are official and belong to the Government of the United States, and not to me personally that the moneys so deposited are the proceeds of the sale of five per cent bonds of the "Funded Loan"; that whatever money I may at any time have in said Bank under said account, will be the property of the United States Government, held by me officially as Assistant Secretary of the Treasury, acting under orders from the Secretary; that the same is, and will continue to be subject to the draft, order, and control of the Secretary of the Treasury, independently of, and superior to my authority, whenever he so elects, and that upon his assuming control thereof, my power over the same will wholly cease. In case of my decease before said account is closed, the money on deposit will not belong to my estate, but to the Government of the United States.

Witness my hand and seal,
(Signed) WILLIAM A. RICHARDSON,
Assistant Secretary of the Treasury, U. S. A.
LONDON, ENGLAND, December 28, 1871.

Witnesses: JNO. P. BIGELOW, E. W. BOWEN, GEO. L. WARREN.

(b) JUDGE RICHARDSON TO JOHN P. BIGELOW

41 LOMBARD ST., LONDON, ENGLAND, December 28, 1871.

To JOHN P. BIGELOW, Chief of the Loan Division, Secretary's Office, Treasury Department, U. S. A.

I have this day deposited in the Bank of England, in my name as Assistant Secretary of the Treasury, two million five hundred and fifty thousand pounds sterling money, belonging to the United States, received in payment of five per cent bonds of the Funded Loan delivered here in London.

All money hereafter received for future delivery of bonds will be deposited to the same account.

Herewith I hand you a declaration of trust signed by me declaring that said account and moneys belong to the United States, and not to me personally, also the Deposit Book and a book of blank checks numbered from 35,101 to 35,150, both inclusive, received from said Bank, all of which you will take into your custody and carefully keep in one of the iron safes sent here from the department in the same manner as the books are kept.

This money, and all the money deposited in said bank on the account aforesaid, will be drawn and used only in accordance with the orders of the Secretary of the Treasury to redeem or purchase five-twenty bonds and matured coupons, or such other and further orders as he may make in relation thereto.

When money is to be drawn to pay for bonds or coupons, it must be drawn only by filling up a check from the book of checks above referred to, and you will open an account in which you will enter the amount of all deposits, the number and amount of each check drawn, specifying also to whom the same is made payable and on what account it is drawn.

The checks will be filled up by Mr. Prentiss of the Register's Office, who will place his check mark on the upper left corner, and will enter the same in the book. You will then carefully examine the check, see that it is correctly drawn for the amount actually payable for bonds or coupons received and properly recorded, and you will, when found correct, place your check mark on the right hand upper corner before the same is signed by me. All checks will be signed by me with my full name as Assistant Secretary of the Treasury, as this is signed.

(Signed) WILLIAM A. RICHARDSON, Assistant Secretary of the Treasury, U. S. A.

(c) MR. FORBES TO JUDGE RICHARDSON

BANK OF ENGLAND, E. C.,
January 4, 1872.

HON. W. A. RICHARDSON, Assistant Secretary of the Treasury of the
United States, 41, Lombard Street.

Sir: To preclude any possible misunderstanding hereafter as to the character of the drawing account opened in your name, I am instructed by the Governors to communicate to you in writing that, in conformity with the rule of the Bank, the account is considered a personal one; that the Governors have admitted the words appended to your name merely as an honorary designation; and the bank take no cognizance of, or responsibility with reference to the real ownership, or intended application of the sums deposited to the credit of the account.

I am, sir,
Your obedient servant,
(Signed) GEORGE FORBES,
Chief Cashier.

(d) JUDGE RICHARDSON TO MR. LYALL

41 LOMBARD STREET, LONDON, ENGLAND,
January 15, 1872.

GEORGE LYALL, ESQ.,
Governor of the Bank of England.

Dear Sir: Referring to the several conversations which I have had with you, and with your principal cashier, Mr. Forbes, relative to the manner and form of keeping the account which I desire to have in the bank, I beg leave to renew in writing my request heretofore made orally, that the account of money deposited by me may stand in the name of Hon. George S. Boutwell, Secretary of the Treasury, U. S. A., and myself, Assistant Secretary, jointly and severally, so as to be subject to a several draft of either, and of the survivor, in the case of death of either one.

I suppose I must regard the letter of Mr. Forbes to me, dated January 4, 1872, and written under instructions from the Governors of the Bank as expressing your final conclusion that the account in whatever form it may be kept, must be considered a personal one.

You know my anxiety to have by deposits received by the Bank, and entered in such way that in case of my death the balance may be drawn at once by the Secretary of the Treasury or some other officer of the Government, and although you are unwilling to regard the account as an official one, I hope that on further consideration you will allow it to be opened in the name of Mr. Boutwell and myself jointly and severally as above stated. I am, sir, Your obedient servant, (Signed) WILLIAM A. RICHARDSON, Assistant Secretary of the United States Treasury Department.

(e) MR. FORBES TO JUDGE RICHARDSON

BANK OF ENGLAND, E. C. January 17, 1872.

HON. W. A. RICHARDSON, Assistant Secretary of the Treasury of the United States, 41, Lombard St. Sir: I am directed by the Governor to acknowledge the receipt of your letter of the 15th inst., requesting that the account of money deposited by you in the Bank may stand in the name of the Hon. George S. Boutwell, Secretary of the Treasury, U. S. A., and yourself, the Assistant Secretary, jointly and severally, so as to be subject to the several draft of either, and of the survivor in case of death of either one.

I am to inform you that the Bank is prepared to open an account in this form, as a personal account; but it is essential that Mr. Boutwell should join in the request and concur in the conditions proposed before each party can in that case draw upon the account. I am, sir, Your obedient servant, (Signed) GEORGE FORBES, Chief Cashier.

(f) JUDGE RICHARDSON'S REPORT

41, LOMBARD STREET, LONDON,
January 25, 1872.

HON. GEORGE S. BOUTWELL,
Secretary of the Treasury.

Dear Sir: It is my purpose in this letter to give you an account of the way in which I have kept the money arising from the sale of the Funded Loan, and the manner in which it has been drawn from time to time to pay for bonds purchased and redeemed.

Immediately after the first of December, 1871, the money began to accumulate very rapidly. Up to the first of December no money whatever had been received, all bonds delivered having been paid for by the called bonds and coupons or secured by deposit of other bonds; but on the second day of that month nearly two and a half millions of dollars cash were paid to me; then on the fourth, nearly five millions of dollars more; and on the fifth, above three millions, and so on in different sums till the present time.

Of course it was wholly impracticable to receive, handle, count and keep on hand such large amounts of gold coin, weighing between a ton and three quarters and two tons to each million of dollars. At one time my account showed more than sixteen millions of dollars on hand, and to have withdrawn from circulation that amount of coin would have produced a panic in the London market; and the risk in having it hoarded in any place within my reach would have been immense, especially as it would have soon been known where it was.

I ascertained that there would be some difficulty in keeping an official Government account in the Bank of England, and I did not feel authorized, or justified in my own judgment, in entrusting so much money to any other banking institution in this city. I found, also, that the Bank of England never issues certificates of deposit, as do our banks in the United States. But it issues "post notes," which are very nearly like its ordinary demand notes, but payable to order, and on seven days' time, thus differing only in the matter of time from certificates of deposit. Availing myself of this custom of the Bank of England, I put all the money into post notes, and locked them up in one of the safes from which the bonds had been taken. This I regarded as a safe method of keeping the funds, and I anticipated no further difficulty.

But when the Bank made its next monthly or weekly return of its condition, and published it in all of the newspapers as usual, the attention of all the financial agents, bankers, and financial writers of the daily money articles in the journals was immediately attracted to the sudden increase of the "post notes" outstanding, and the unusually large amount of them, so many times greater than had ever been known before. They were immensely alarmed lest the notes should come in for redemption in a few days, and the coin therefor should be withdrawn from London and taken to a foreign country; and lest there should be a panic on account thereof. Some of the financial writers said they belonged to Germany, and that they represented coin which must soon be transmitted to Berlin. The Bank officers themselves, although they knew very well that these notes belonged to the United States, were not less alarmed because they feared that I would withdraw the money to send it to New York, which they knew would make trouble in the London Exchange. Money, which for a short time before had been at the high rate of interest, for this place, of five per cent, had become abundant, and the people were demanding of the Bank a reduction in the rate; but so timid were they about these post notes that they did not change the rate until I took measures to allay their fears. This I did because I thought it would be injurious and prejudicial to the Funded Loan to have a panic in London, in which the market price of the new loan would drop considerably below par just at a time when its price and popularity were gradually rising, and just as it was coming into great favor with a new class of investors in England, the immensely rich but timid conservatives.

I determined to open a deposit account with the Bank of England, and in doing so experienced the difficulties which I anticipated. I assured the officers that the money was Government (U. S.) money, which I did not intend, and was not instructed to take home with me; but which I should use in London in redeeming bonds and coupons, and should leave in the bank on deposit unless by the peculiarity of their rules, I should be obliged to withdraw it. They objected to taking the money as a Government deposit, or as an official deposit in my name, having some vague idea that if they took it and opened an official Government account they should be liable for the appropriation of the money unless documents from the United States were filed with them taking away that liability, but they could not tell me exactly what documents they wanted nor from whom they must come. They did, however, agree to open an account with me, and that was the best I could do. In signing my name to their book, I added my official title, and when, some time after, I came to drawing checks, I signed in the same way. This brought from the officers a letter which I annex hereto, saying that my deposit would be regarded as a private and personal one.

What I was most anxious to provide for was the power in some United States officer to draw the money in case of my death (knowing the uncertainty of life), without the delay, expense, and trouble which must necessarily arise, if it stood wholly to my personal credit. I asked the officers to allow it to stand in your name as Secretary and mine as Assistant Secretary, jointly and severally, so as to be drawn upon the several check of either, and by the survivor in case of the death of either one. I suggested other arrangements which would have had the same result, but they said their rules prevented their agreeing to my requests, that they were conservative and did not like to introduce anything new into their customs.

On the 15th day of January, 1872, I renewed my request in writing, after having had several conversations with the officers on the subject, and received an answer which, with the letter of request, is hereto annexed.

In this, their most recent communication, they express a willingness to enter the account in our joint names as I suggested, regarding it, however, as a "personal account" and requiring that you should "join in the request and concur in the conditions proposed before either party can in that case draw upon the account."

As I must now almost daily draw from the account for money with which to pay bonds, I cannot join your name therein until you have sent me a written compliance with the conditions which they set forth, because to do so would shut me out from the account altogether for several weeks.

Besides, having no instruction from you on the subject, I don't know that you would care to give written directions as to the deposit. I know very well that, in case of my sudden decease, you would be glad enough to find that you could at once avail yourself of the whole amount of money here on deposit, and so I should have joined your name as I have stated. Now you can do as you please. I have taken every possible precaution within my power, and have no fear that the arrangements are insufficient to protect the Government in any contingency whatever. With the correspondence which has passed between the officers of the Bank and myself, and our conversation together, the account is sufficiently well known to them as a U. S. Government deposit, and is fully enough stamped with that character, as I intended it should be, however much they may ignore it now.

But for still greater caution, I made the written declaration of trust on the very day of the first deposit, signed and sealed by me, declaring the money and account as belonging to our Government, and not to me, a copy of which is hereto annexed.

I also gave written instruction to Messrs. Bigelow and Prentiss to draw all the checks, and how to draw them and keep an account thereof. As I make all my purchases through Jay Cooke, McCullough & Co., every check is in fact payable to that house, so that the account is easily kept, and the transactions cannot be mingled with others, for there are no others. I annex a copy of these instructions.

This, I believe, will give you a pretty correct idea of the difficulties which have been presented to me in the matter of taking, keeping, and paying out the money arising from the sale of the bonds, and the manner in which I have met them.

I may add that when the officers of the Bank were satisfied that I was not to withdraw the money and take it to New York, they reduced the rate of interest and there has been an easy market ever since.

There are now on deposit more than twelve million dollars; but I hope it will be reduced very fast next month. Had you not sent over the last ten million of bonds, we should have been able to close up very soon. I hope now that you will make another call of twenty million at least, because I think it would enable us to purchase more rapidly.

I annex: (1) Copy of declaration of trust. (2) Copy of instructions for drawing checks. (3) Copy of letter from Cashier of Bank of England, stating that the account would be considered personal. (4) Copy of my letter to the Governor of the Bank, asking that your name might be joined. (5) Copy of reply to last mentioned letter.

I am, very respectfully,
Your obedient servant,
(Signed) WILLIAM A. RICHARDSON.

When Cooke & Co. had completed their undertaking, the deposits in the Bank of England exceeded fifteen million dollars, and for three months they were for the most part unavailable, as the five-twenty bonds which had not matured under the calls that had been made were above par in the market. It was a condition of the loan that the five-twenty bonds redeemed should equal the 5 per cent bonds that had been issued, both issued to be reckoned at their par value.

In the month of April, 1872, the Commissioners who had been designated under the Treaty of Washington of 1871 to ascertain and determine the character and magnitude of the claims that had been preferred by the United States against Great Britain, growing out of the depredations committed by the "Alabama" and her associate cruisers, were about to meet at Geneva for the discharge of their duties.

The administration had appointed the Hon. J. C. Bancroft Davis, the most accomplished diplomatist of the country, as the agent of the United States, and the preparation of "the Case of the United States" was placed in his hands.

The British Ministry discovered—or they fancied that there was concealed in covert language—a claim for damages, known as "consequential or indirect damages"—in other words, a claim to compensation for the value of American shipping that had been driven from the ocean and made worthless through fear of the cruisers that had been fitted out in British ports.

This claim, in the extreme form in which it had been presented by Mr. Sumner, had been relinquished by the Administration, and a present reading of "the Case of the United States" may not justify the construction that was put upon it by the British Ministry.

Nevertheless, the Administration received notice that Great Britain would not be represented at the Geneva Conference.

The subject was considered by the President and Cabinet on three consecutive days at called sessions. At the final meeting I handed a memorandum to the President, which he passed to the Secretary of State. The memorandum was not read to the Cabinet.

Mr. Adams, the Commissioner for the United States, had not then left the country. By a despatch from the Secretary of State Mr. Adams was asked to meet me at the Parker House in Boston, on the second day after the day of the date of the despatch.

What occurred at the meeting may be best given through an extract from the diary of Mr. Adams, which has been placed in my hands by Mr. Charles Francis Adams, Jr., with the privilege of its full and free use by me.

The first entry is under date of Saturday, April 20, 1872, and is in these words: "Charles brought me a telegram from Governor Fish, desiring me to meet Mr. Boutwell, who will be at the Parker House at eleven o'clock on Monday." The second entry is under date of "Monday, 22d of April."

"At eleven o'clock called on Mr. Boutwell, the Secretary of the Treasury, at Parker's Hotel, according to agreement. Found him alone in his minute bedroom. He soon opened his subject—handed over to me a packet from Governor Fish, and said that it was the desire of the Government, it I could find it consistent with what they understood to be my views of the question of indirect damages, that I would make such intimation of them to persons of authority in London as might relieve them of the difficulty which had been occasioned by them. I told them of my conversation held with the Marquis of Ripon, in which I had assumed the heavy responsibility of assuring him that the Government would not press them. I was glad now to find that I had not been mistaken. I should cheerfully do all in my power to confirm the impressions consistently with my own position."

Thus, through Mr. Adams, the claim for "indirect damages" was relinquished. When the fact of the disturbed relations between the United States and Great Britain became public there was a panic in the London stock market, and in the brief period of eight and forty hours our deposit of twelve million or more in the Bank of England was converted into five-twenty United States 6 per cent bonds, purchased at par.

In my annual report for December, 1872, I was able to make this statement:

"Since my last annual report the business of negotiating two hundred million of 5 per cent bonds, and the redemption of two hundred million 6 per cent five-twenty bonds has been completed and the accounts have been settled by the accounting officers of the Treasury.

"Further negotiations of 5 per cent bonds can now be made on the basis of the former negotiation."