After recommending the passage of a law authorizing the issue of long-term bonds, bearing a low rate of interest, to be used for the maintenance of an adequate gold reserve and in exchange for outstanding United States notes and Treasury notes for the purpose of their cancelation, and after giving details of the proposed scheme, the message concluded as follows:
In conclusion, I desire to frankly confess my reluctance to issue more bonds in present circumstances and with no better results than have lately followed that course. I cannot, however, refrain from adding to an assurance of my anxiety to co-operate with the present Congress in any reasonable measure of relief, an expression of my determination to leave nothing undone which furnishes a hope for improving the situation, or checking a suspicion of our disinclination or disability to meet, with the strictest honor, every national obligation.
This appeal to Congress for legislative aid was absolutely fruitless.
On the eighth day of February, 1895, those who, under the mandate of Executive duty, were striving, thus unaided, to avert the perils of the situation, could count in the gold reserve only the frightfully low sum of $41,340,181; and it must be remembered that this was only two months after the proceeds of the second sale of bonds had been added to the fund. In point of fact, the withdrawals of gold during the short period mentioned had exceeded by more than $18,000,000 the amount of such proceeds; and several million dollars more had been demanded, some of which, though actually taken out, was unexpectedly, and on account of the transaction now to be detailed, returned to the Treasury.
This sudden fall in the reserve, and the apparent certainty of the continuance of its rapid depletion, seemed to justify the fear that before another bond sale by means of public notice and popular subscription could be perfected the gold reserve might be entirely exhausted; nor could we keep out of mind the apprehension that in consequence of repeated dispositions of bonds, with worse instead of better financial conditions impending, further sales by popular subscription might fail of success, except upon terms that would give the appearance of impaired national credit.
Notwithstanding all this, no other way seemed to be open to us than another public offer of bonds; and it was determined to move in that direction immediately.
In anticipation of this action it was important to obtain certain information and suggestions touching the feeling and disposition of those actively prominent in financial and business circles.
I think it may here be frankly confessed that it never occurred to any of us to consult, in this emergency, farmers, doctors, lawyers, shoe-makers, or even statesmen. We could not escape the belief that the prospect of obtaining what we needed might be somewhat improved by making application to those whose business and surroundings qualified them to intelligently respond.
Therefore, on the evening of the seventh day of February, 1895, an interview was held at the White House with Mr. J. P. Morgan of New York; and I propose to give the details of that interview as gathered from a recollection which I do not believe can be at fault. Secretary Carlisle was present nearly or quite all the time, Attorney-General Olney was there a portion of the time, and Mr. Morgan and a young man from his office and myself all the time. At the outset Mr. Morgan was inclined to complain of the treatment he had received from Treasury officials in the repudiation of an arrangement which he thought he had been encouraged to perfect in connection with the disposal of another issue of bonds. I said to Mr. Morgan, whatever there might be in all this, another offer of bonds for popular subscription open to all bidders had been determined upon, and that there were two questions I wanted to ask him which he ought to be able to answer: one was whether the bonds to be so offered would probably be taken at a good price on short notice; and the other was whether, in case there should be imminent danger of the disappearance of what remained of the gold reserve, during the time that must elapse between published notice and the opening of bids, a sufficient amount of gold could be temporarily obtained from financial institutions in the city of New York to bridge over the difficulty and save the reserve until the Government could realize upon the sale of its bonds. Mr. Morgan replied that he had no doubt bonds could be again sold on popular subscription at some price, but he could not say what the price would be; and to the second inquiry his answer was that, in his opinion, such an advance of gold as might be required could be accomplished if the gold could be kept in this country, but that there might be reluctance to making such an advance if it was to be immediately withdrawn for shipment abroad, leaving our financial condition substantially unimproved. After a little further discussion of the situation he suddenly asked me why we did not buy $100,000,000 in gold at a fixed price and pay for it in bonds, under Section 3700 of the Revised Statutes. This was a proposition entirely new to me. I turned to the Statutes and read the section he had mentioned. Secretary Carlisle confirmed me in the opinion that this law abundantly authorized such a transaction, and agreed that it might be expedient if favorable terms could be made. The section of the Statutes referred to reads as follows:
Section 3700. The Secretary of the Treasury may purchase coin with any of the bonds or notes of the United States authorized by law, at such rates and upon such terms as he may deem most advantageous to the public interest.