Reminiscences of Sixty Years in Public Affairs, Vol. 2

by George S. Boutwell

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 At one time my account showed more than sixteen millions of dollars on hand, and to have withdrawn from circulation that amount of coin would have produced a panic in the London market; and the risk in having it hoarded in any place within my reach would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.