Mr. Conant answered as follows:
"New Court, St. Swithin's Lane, } "London, E. C., England, August 23, 1877.} "Dear Mr. Secretary:—I was very glad indeed to receive your letter of the 6th instant. I at once informed the contracting parties of what you had written in reference to the strikes and riots at home. The sale of our bonds has not been directly interfered with on account of the riots. In fact, the occurrence of the riots has almost been forgotten. The London 'Times,' of this morning, has, however, revived the subject by printing a letter from its Philadelphia correspondent, in which he says that the strikers, it is evident, are to get into politics through the organization of a party, to be called the 'Workingmen's party;' and he predicts that mischief will come out of it through the control of state governments which the mob element may gain; and the consequent enactment of bad laws, etc., especially against capital. Another letter is also printed (written by a Mr. Connolly), by which it is made to appear that American is in a terrible financial condition. These two letters are made the subject of an editorial which, on the whole, is not very complimentary to us, nor calculated to improve our credit. The 'Times' of last Monday's date had an editorial on the speech which you made in Ohio on Friday last. I send you a copy, and think, if you can find time, you will rather enjoy reading the article. Nearly all of the English people, as you are aware, believe in the principle of 'free trade,' and it is but natural that they should, for the reason that England depends upon her great commerce and her markets in every part of the globe for the employment and maintenance of her people. People here think that our protectionist tariffs are not only detrimental to the commercial interest of our own country, but that they are of a suicidal character so far as our fiscal policy is concerned. They think, in other words, that it would be vastly better for the real interest of the people of the United States if they would trade more extensively with the people of England. What the 'Times' editor has to say about the balance of trade will amuse you, and yet people talk about the advantages of a balance of trade as being an exploded idea. English interests are laboring to effect a new treaty with France, under which large reductions in duties are proposed.
"I note what you are pleased to say in regard to sales of bonds during the present month. With the price of bonds at the present moment they cannot of course be sold. The parties will find it necessary to use great caution as well as care in managing the market, so as to get control of it. Any attempt to force the sale of the bonds during this, and, I think, next month will only operate to keep the price so low that they cannot be sold at all. I am firm in the belief that the premium on gold will go gradually lower, and that the balance of trade in our favor will keep forcing it down.
"I remain your obedient servant,
"Chas. F. Conant.
"Hon. John Sherman."
He again wrote on the 30th of August:
"On Tuesday last a further amount of gold (£130,000) was withdrawn from the Bank of England for shipment to the United States, and for the purpose of protecting its stock of bullion the bank immediately advanced its rate to three per cent., and also increased the price of American eagles.
"Great Britain must obtain from us this season a large supply of breadstuffs and grain, larger than has been required in any one year during several years past, and at higher prices than those heretofore paid, and, in the present condition of trade between the two countries, gold, to quite an extent, will have to be sent over in payment for these articles. Therefore, advancing the rate of interest may check for a time, but will not stop altogether, the shipment of bullion, but it may attract here some of the gold held by the Bank of France. The bank rate does not govern the street rate, and a further advance by the bank, which it is very likely may be made, is not to be considered as indicating that we are to have a dearer money market. I inquired to-day of Mr. Morgan and the Messrs. Rothschild what they thought of the prospects of making any sales during next month, and their answer was: 'Wait patiently for the market to recuperate.' I am satisfied that good investment securities are scarce here; that they have been cleared from the market, and that as soon as the question of cheap or dear money is settled, sales of the four per cent. consols will be resumed. The amount of the sales will of course depend upon which way the question is settled. There were times during the placing of the five per cent. and four and a half per cent. bonds when, as you are aware, operations were suspended for quite a time, the condition of the market being such as to prevent anything being done. From semi-official accounts it appears that the famine in India is a very serious affair, and it is quite possible that large sums of money will be required from here with which to purchase supplies."
My experience thus far convinced me that it was bad public policy to continue the sale of bonds for refunding purposes through a syndicate of bankers, the chief of whom resided in London. I could see no reason why this function could not be performed by national banks, better than by bankers at home or abroad. A question arose whether the Secretary of the Treasury had the power to designate national banks as public depositaries of the proceeds of bonds sold under the resumption and refunding acts. The object to be gained by this designation was to prevent the withdrawal of coin from circulation, and the undue accumulation of coin in the treasury of the United States. If the exchange of one bond by another could be directly effected through the banks without the payment of coin, it would facilitate the process of refunding. I submitted this inquiry to Attorney General Devens, and on the 30th of August he stated his opinion and closed as follows:
"In answer to your inquiry, I have, therefore, the honor to say that the Secretary of the Treasury, if he deems it expedient as a matter of administrative policy, may sell bonds under the act known as the 'refunding' and 'resumption' acts, depositing the amounts received therefrom with such public depositaries as he may select under the national bank act, taking such security as is required by the statutes."
The last of the popular subscriptions for the four per cent. bonds became due on the 16th of October, and all were paid for but three subscriptions aggregating $1,600, and these were assumed by the syndicate. The bonds had been paid for by the syndicate either by called six per cent. bonds, which were canceled, or in gold coin deposited in the treasury, without the loss of a dollar. The called session of Congress, which met on the 15th of October, and the agitation of the repeal of the resumption act and the remonetization of silver, prevented for the time any further sales of the four per cent. bonds by the government.