In the Senate the silver advocates were stronger. The entire history of coinage was discussed at length. Members who favored repeal disliked to overturn the tradition of the Senate which allowed unlimited debate, and the silver senators therefore filibustered through the summer and early fall. Senator Jones of Nevada made a single speech that filled a hundred dreary pages of the Congressional Record. Senator Allen of Nebraska quoted more than thirty authorities, ranging from the Pandects of Justinian to enlivening doggerel poetry. Feeling ran high. In the West, Jones, Allen and others were looked upon as heroes; in the East, as villains. To a satirical onlooker it seemed that the nation had become insanely obsessed with the question of repeal:
All men of virtue and intelligence know that all the ills of life—scarcity of money, baldness, the comma bacillus, Home Rule, … and the Potato Bug—are due to the Sherman Bill. If it is repealed, sin and death will vanish from the world, … the skies will fall, and we shall all catch larks.
Not until October 30 were the silver supporters overcome. Including members who were paired, twenty-two Democrats and twenty-six Republicans favored repeal, and twenty-two Democrats, twelve Republicans and three Populists opposed. Again the West and South were aligned against the North and East. The Democratic party was divided and charges and countercharges had been made that augured ill for party success, as has been seen, in dealing with the tariff and other important problems.[6] Worst of all, the chief question—the volume and content of the currency—was still unanswered. Something had been done for silver—and undone—but there was no scientific settlement of the problem.
The disastrous financial and industrial crisis of 1893 made yet more complex the already tangled skein of economic history during President Cleveland's second administration. The catastrophe has been ascribed to a variety of causes but the relative importance of the various factors is still a matter of disagreement. Rash speculation on the part of industrial interests here and abroad seems to have made weak links in the international commercial chain; financial conditions both in Germany and in Great Britain were precarious during the early part of 1890; the collapse of the Philadelphia and Reading Railroad in February, 1893, and of the National Cordage Company soon afterwards were warnings of what was to follow; the silver purchase law produced widespread fear that the United States would not be able to continue the redemption of paper currency; and the change of political control had produced the usual feeling of uncertainty. The dwindling of the gold reserve, which has already been mentioned, assisted in causing a critical situation. Foreign investors, fearful of financial conditions here, sold their American railroad and other securities and received payment in gold. The one place where the yellow metal could be readily obtained was the United States treasury and upon it the strain centered. People attempted to turn property of all kinds into gold before the existing standard should change to a depreciated silver basis. At the same time there was a rush to the banks to withdraw funds, and the visible supply of currency therefore was seriously reduced. "Under these conditions gold seemed scarce. In reality gold was only relatively scarce in comparison with the abnormal offering of property for sale on account of the fear of the silver standard." In an incredibly short time, currency became so scarce as to create a genuine panic and was purchased like any commodity at premiums ranging from one to three per cent. In order to enable their families to pay the running expenses of every day at the summer resorts, business men were compelled to buy bills and coin and send them in express packages. The national banks were unable to supply the demand for currency so quickly, and 158 of them failed in 1893 and hundreds of state and private financial institutions were forced to close their doors. Industrial firms were affected by the uncertainty and panic and over 15,000 failures resulted, with liabilities amounting to $347,000,000 in the single year. Production of coal and iron fell sharply; railway construction nearly ceased and the value of securities shrank to a fraction of their former value. The distress among the wage-earners became extreme; unemployment was common; strikes, like that beginning in Pullman in 1894, were bitter and prolonged. "Coxey's army," composed of unemployed workmen, marched to Washington with a petition for relief.
As is usually the case in our politics, the blame for the industrial disturbance was laid at the door of the party in power. The argument of an Ohio congressman in the debate over the repeal of the Sherman law typified the political use made of the crisis of 1893. Until November, 1892, the orator declared, prosperity was undimmed. "Iron furnaces throughout the country were in full blast, and their cheerful light was going up to heaven notifying the people of the United States of existing prosperity and warning them against change of conditions." Then came the election of the party "which had declared war on the system upon which our whole industrial fabric had been erected." "One by one the furnaces went out, one by one the mines closed up, one after another the factories shortened their time." Business interests, he asserted, were fearful of Democratic rule and especially of tariff reform; hence prosperity and confidence could be renewed only by leaving the Sherman law intact and by refusing to undertake any sweeping revision of the protective tariff.
[Illustration:
Net Gold in the Treasury, by months,
Jan., 1883 to Feb., 1896, in millions of dollars]
Further to complicate the financial trials of the burdensome mid-nineties, the depletion of the gold reserve demanded immediate attention. During the closing months of President Harrison's administration, in fact, the Secretary of the Treasury had ordered the preparation of plates for engraving an issue of bonds by which to borrow sufficient gold to replenish the redemption fund. By a personal appeal to New York bankers, however, he was able to exchange paper for gold and so keep the level above the one hundred million mark, and when Cleveland succeeded to the chair, the reserve was $100,982,410. In the meantime the scarcity of gold continued, and the combination of large expenditures and slender income severely embarrassed the government in its attempts to obtain a sufficient supply of gold to keep the reserve intact. The administration, indeed, was all but helpless. Paper presented for redemption in gold had to be paid out to meet expenses and was then turned in for gold again. Hence, as Cleveland ruefully reminded Congress, "we have an endless chain in operation constantly depleting the Treasury's gold and never near a final rest." On April 22, 1893, the reserve fell momentarily below $100,000,000 and later in the year it was apparent that the reduction was likely to become permanent. By January, 1894, the reserve was less than $70,000,000, while $450,000,000 in paper which might be presented for redemption were in actual circulation. Only one resource seemed available—borrowing gold. The treasury therefore sold bonds to the value of $50,000,000. Even this, however, did not remedy the ill. Bankers obtained gold to purchase bonds by presenting paper currency to the government for redemption. Relief was temporary. On the last day of May the reserve amounted to only $79,000,000; in November, to $59,000,000. Another issue of bonds was resorted to in November, but the results were not better than before. At the same time the Pullman strike during the summer months, the Wilson-Gorman tariff fiasco and an unfortunate harvest seemed to indicate that man and nature were determined to make 1894 a year of ill-omen.
By February, 1895, the treasury found itself confronted with a reserve of only $41,000,000. It seemed useless to attempt borrowing under the usual conditions, and Cleveland therefore resorted to a new device. A contract was made with J.P. Morgan and a group of bankers for the purchase of 3,500,000 ounces of gold to be paid for with United States four per cent. bonds. In order to protect the reserve from a renewed drain, the bankers agreed that at least half the gold should be obtained abroad, and they promised to exert all their influence to prevent withdrawals of gold from the treasury while the contract was being filled. The terms of the contract were favorable to the bankers, but the President defended the agreement on the ground that the promise to protect the reserve entitled the bankers to a favorable bargain. The fact, however, that the Morgan Company was able to market the bonds with the public and make a large profit, increased the demand that the administration sell directly to the people and make the profit itself. In January, 1896, occurred a fourth sale—to the public, this time—and 4,640 bids were received, for a total several times greater than the $100,000,000 called for. By this time, business conditions were improving, confidence was restored among the financial classes and gold again began to flow out of hiding and into the treasury. The endless chain was broken.
The denunciation which Cleveland received for the untoward monetary and industrial events of his administration was unusual even for American politics in the middle nineties. Such extreme silver men as Senator Stewart of Nevada declared that Cleveland's second administration was probably the worst administration that ever occurred in this or any other country; that he was a bold and unscrupulous stock-jobber; that he deliberately caused the panic of 1893 and that he sent the Venezuela message in order to divert the attention of the people from the silver question. The New York World described the transaction between the government and the Morgan Company as a "bunco" game, and charged that Cleveland had dishonest, dishonorable and immoral reasons for bringing about the transaction and that he did it for a "consideration." Representative W.J. Bryan, who belonged to the President's party and who ordinarily was chivalrous to his opponents, declared that Cleveland could no more escape unharmed from association with the Morgan syndicate than he could expect to escape asphyxiation if he locked himself up in a room and turned on the gas. The Democratic party, he thought, should feel toward its leader as a confiding ward would feel toward a guardian who had squandered a rich estate, or as a passenger would feel toward a trainman who opened a switch and precipitated a wreck.