"That, from and after the passage of this act, the authority of the Secretary of the Treasury to make any reduction of the currency, by retiring or canceling United States notes, shall be, and is hereby, suspended; but nothing herein contained shall prevent the cancellation and destruction of mutilated United States notes, and the replacing of the same with notes of the same character and amount."
This bill was sent to the President, and, not having been returned by him within ten days, it became a law without his approval, under the constitution of the United States.
On the 17th of December, 1867, I reported from the committee on finance a bill for refunding the national debt and for a conversion of the notes of the United States. This bill was accompanied by an elaborate report. This report was carefully prepared by me, and met, I believe, the general approval of the committee on finance. In that Congress there were but five Democratic Senators, and it so happened that all the members of the committee on finance were Republicans, but these represented widely different opinions on financial subjects. I undertook, in this report, to deal in a general way with these topics. Upon a careful reading of it now I find but little that I do not approve. The general policy set out in this report was subsequently embodied into laws, but the measures relating to refunding the debt and the resumption of specie payments were not adopted until several years after the date of the report.
The ascertained debt on the first day of December, 1867, as stated by the Secretary of the Treasury, was $2,639,382,572.68, divided as follows:
Debt bearing coin interest. 5 per cent. bonds, 10-40's, and old fives $205,532,580.00 6 per cent. bonds of 1867 and 1868 . . . . 14,690,941.80 6 per cent. bonds, 1881 . . . . . . . . . 282,731,550.00 6 per cent. 5-20 bonds . . . . . . . . . . 1,324,412,550.00 Navy pension fund . . . . . . . . . . . . 13,000,000.00 ———————— $1,840,367,891.80 Debt bearing currency interest. 6 per cent. bonds . . . . . . . . . . . . $18,601,000.00 3-year compound interest notes . . . . . . 62,249,360.00 3-year 7-30 notes . . . . . . . . . . . . 285,587,100.00 3 per cent. certificates . . . . . . . . . 12,855,000.00 ———————— $379,292,460.00 Matured debt not presented for payment. 3 year 7-30 notes, due August 15, 1867 . . $2,855,400.00 Compound interest notes, matured June 10, July 15, August 15, and October 15, 1867 7,065,750.00 Bonds, Texas indemnity . . . . . . . . . . 260,000.00 Treasury notes, acts July 17, 1861 and prior thereto . . . . . . . . . . . . . 163,011.64 Bonds, April 15, 1842 . . . . . . . . . . 54,061.64 Treasury notes, March 3, 1863 . . . . . . 868,240.00 Temporary loan . . . . . . . . . . . . . . 2,880,900.55 Certificates of indebtedness . . . . . . . 31,000.00 ———————— $14,178,363.83 Debt bearing no interest. United States notes . . . . . . . . . . . $356,212,473.00 Fractional currency . . . . . . . . . . . 30,929,984.05 Gold certificates of deposit . . . . . . . 18,401,400.00 ———————— $405,543,857.05 Total debt . . . . . . . . . . . . . . . . . . . . . . . $2,639,382,572.68 Amount in treasury, coin . . . . . . . . . $100,690,645.69 Amount in treasury, currency . . . . . . . 37,486,175.24 Amount of debt less cash in treasury . . . . . . . . . . . $2,501,205,751.75
Besides the amounts thus stated there were large balances due to loyal states, upon accounts not then rendered or ascertained, and to individuals for losses sustained during the war.
The ascertained debt consisted of twenty different forms of liability, some payable in coin and some in lawful money. Much of this debt was due on demand, but the great body of it was payable in from one to twenty years, while the unascertained debt was being stated from time to time and had to be met from accruing revenues. Nearly $300,000,000 of debt had been paid out of current revenue since the close of the war. The first recommendation of the committee was that the debt should be refunded as rapidly as practicable into bonds bearing as low a rate of interest as possible, payable in twenty or thirty years, but redeemable at the pleasure of the United States in five or ten years. This recommendation was based on the fixed policy of the government to limit the duration of a bond within its lifetime, and thus leave it to the option of the government to pay its indebtedness and to reduce the rate of interest after a brief period, if the condition of the public revenues and of the money market should enable it to do so.
Here the question arose whether the bonds known as the 5-20 bonds could be paid in lawful money after the period of five years, when, by their terms, they were redeemable. These bonds promised to pay so many dollars. Other bonds were specifically payable in coin, and still other bonds were payable in lawful money; that is, in United States notes. These notes were then at a discount, being worth in the market about 88 cents in coin. But the notes were obligations of the United States, and it was the duty, and then within the power of the United States, to advance these notes to par in coin.
The majority of the committee, I among them, believed that the United States should not take advantage of its own wrong, in not redeeming its notes in coin, but should either advance these notes to par in coin, or pay its bonds in coin. The committee, therefore, recommended that both the notes and bonds should be received in exchange for the funding bonds, and that the notes should be reissued and maintained at par with coin, and be supported by a reserve of coin ample to maintain the notes at par with coin. In other words, the United States would resume specie payments. The committee expressed the opinion that, with the system of taxation then in existence, this policy of refunding and resumption could be maintained, and that the rate of interest then paid could be reduced to four or five per cent., and the money then in circulation would be kept at par with coin at the cost only of the interest on the bullion and coin held to meet any notes presented for redemption. The committee also recommended that the internal and tariff taxes be revised to correct irregularities or defects, and to repeal such as were oppressive.
While the committee opposed any contraction of the currency it also opposed any increase of it. The general theory of the report was to advance both bonds and notes to par in coin, and to issue bonds in such form and terms that the government could redeem them, or renew them at lower rates of interest.