"The nation owes you a great debt for your courage, persistence and wisdom in adhering to your policy for re-establishing and maintaining our government credit. To your conduct I attribute the present honorable position of the Republican party, more than to any other one influence. I believe that neither the country nor the party will forget your services.
"Very truly,
"John W. Foster."
CHAPTER XXXVII. REFUNDING THE NATIONAL DEBT. Over $140,000,000 of Gold Coin and Bullion in the Treasury January 1, 1879—Diversity of Opinion as to the Meaning of Resumption— Effect of the Act to Advance Public Credit—Funding Redeemable Bonds Into Four per Cents.—Letters to Levi P. Morton and Others— Six per Cent. Bonds Aggregating $120,000,000 Called During January, 1879—The Sale in London—Charges of Favoritism—Further Enactments to Facilitate the Funding—Difficulty of Making Sales of Four per Cent. Bonds to English Bankers—Large Amounts Taken in the United States—One Subscription of $190,000,000—Rothschild's Odd Claim— Complimentary Resolution of the New York Chamber of Commerce.
On the 1st of January, 1879, when the resumption act went into effect, the aggregate amount of gold coin and bullion in the treasury exceeded $140,000,000. United States notes, when presented, were redeemed with gold coin, but instead of the notes being presented for redemption, gold coin in exchange for them was deposited, thus increasing the gold in the treasury.
The resumption of specie payments was generally accepted as a fortunate event by the great body of people of the United States, but there was a great diversity of opinion as to what was meant by resumption. The commercial and banking classes generally treated resumption as if it involved the payment and cancellation of United States notes and all forms of government money except coin and bank notes. Another class was opposed to resumption, and favored a large issue of paper money without any promise or expectation of redemption in coin. The body of the people, I believe, agreed with me in opinion that resumption meant, not the cancellation and withdrawal of greenbacks, but the bringing them up to par and maintaining them as the equivalent of coin by the payment of them in coin on demand by the holder. This was my definition of resumption. I do not believe that any commercial nation can conduct modern operations of business upon the basis of coin alone. Prior to our Civil War the United States undertook to collect its taxes in specie and to pay specie for its obligations; this was the bullion theory. This narrow view of money compelled the states to supply paper currency, and this led to a great diversity of money, depending upon the credit, the habits and the wants of the people of the different states. The United States notes, commonly called greenbacks, were the creature of necessity, but proved a great blessing, and only needed one attribute to make them the best substitute for coin money that has ever been devised. That quality was supplied by their redemption in coin, when demanded by the holder.
The feeling in the treasury department on the day of resumption is thus described by J. K. Upton, assistant secretary, in an article written at the close of 1892:
"The year, however, closed with no unpleasant excitement, but with unpleasant forebodings. The 1st day of January was Sunday and no business was transacted. On Monday anxiety reigned in the office of the secretary. Hour after hour passed; no news came from New York. Inquiry by wire showed all was quiet. At the close of business came this message: '$135,000 of notes presented for coin —$400,000 of gold for notes.' That was all. Resumption was accomplished with no disturbance. By five o'clock the news was all over the land, and the New York bankers were sipping their tea in absolute safety.
"Thirteen years have since passed, and the redemption fund still remains intact in the sub-treasury vaults. The prediction of the secretary has become history. When gold could with certainty be obtained for notes, nobody wanted it. The experiment of maintaining a limited amount of United States notes in circulation, based upon a reasonable reserve in the treasury pledged for that purpose, and supported also by the credit of the government, has proved generally satisfactory, and the exclusive use of these notes for circulation may become, in time, the fixed financial policy of the government."
The immediate effect of resumption of specie payments was to advance the public credit, which made it possible to rapidly fund all the bonds of the United States then redeemable into bonds bearing four per cent. interest. Early in January, 1879, I issued a circular offering the four per cent. funded loan of the United States at par and accrued interest to date of subscription in coin. It was substantially similar to the one issued on the 16th of January, 1878, but graded the commission, allowing from one-eighth of one per cent. to one-fourth of one per cent., according to the amount subscribed.
Several letters written about this date will show my view better than anything I can say now: