This proved to be a most popular loan. The bonds were subject to redemption after five years and were payable in twenty years. They bore interest at 6 per cent., payable semi-annually, and were issued in denominations of $50, $100, $500, and $1,000. Through one agent, Jay Cooke, a genius at distribution, who employed 2,850 sub-agents and advertised extensively, this loan was placed directly with the people at par in currency. Altogether the aggregate of this loan was $514,771,600. Later in that year Congress authorized a second issue of Treasury notes in the amount of $150,000,000 at par, with interest at 6 per cent.; in January, 1863, a third issue of $100,000,000 was authorized, which was increased in March to $150,000,000, at 5 per cent. interest. These issues were referred to as the "one and two year issues of 1863."
DEFICIT IN 1862
In December, 1862, Congress had to face a deficit of $277,000,000 and unpaid requisitions amounting to $47,000,000. By the close of 1863 nearly $400,000,000 had been raised by bond sales. A further loan act, passed March 3, 1864, provided for an issue of $200,000,000 of 5 per cent. bonds known as "ten-fortys," but of this total only $73,337,000 was disposed of. Subsequently, on June 30, 1864, a great public loan of $200,000,000 was authorized. This was an issue of Treasury notes, payable at any time not exceeding three years, and bearing interest at 7-3/10 per cent. Notes amounting to $828,800,000 were sold. The aggregate of Government loans during the civil war footed up a total of $2,600,700,000; and on Sept. 1, 1865, the public debt closely approached $3,000,000,000, less than one-half of which was funded.
Civil war loans, with one exception, which sold at 89-3/10, were all placed at par in currency, subject to commissions ranging from an eighth to one per cent. to distributing bankers. The average interest nominally paid by the Government on its bonds during the war was slightly under 6 per cent. Owing to payment being made in currency, however, the rate was, in reality, much higher. With the conclusion of the war, the reduction of the public debt was undertaken, and it has continued with but two interruptions to date.
Heavy tax receipts for several years after the close of the war potentially enabled the Government to reduce its debt. Indeed, from 1866 to 1891, each year's ordinary receipts exceeded disbursements, and enabled the Government to lighten its financial burdens. In 1866 the decrease in the net debt was $120,395,408; in 1867, $127,884,952; in 1868, $27,297,798; in 1869, $48,081,540; in 1870, $101,601,917; in 1871, $84,175,888; in 1872, $97,213,538, and in 1873, $44,318,470.
Through refunding operations—in addition to bonds and short-time obligations redeemed with surplus revenues—the Government paid off, up to 1879, $535,000,000 bonds bearing interest at from 5 to 6 per cent. In this year the credit of the Government was on a 4 per cent. basis, and a year later on a 3-1/4 per cent. basis, against a maximum basis of 15-1/2 per cent. in 1864.
Between 1881 and 1887 the Government paid off, either with surplus revenues or by conversion, $618,000,000 of interest-bearing debt. In 1891 all bonds then redeemable were retired, and on July 1, 1893, the public debt amounted to less than one-third of the maximum outstanding in 1865. In 1900 the Government converted $445,900,000 bonds out of an aggregate of $839,000,000 convertible under the refunding act passed by Congress in that year. And further conversions in 1903, 1905, and 1907 brought the grand total up to $647,250,150—a result which earned for the Government a net annual saving in interest account of $16,551,037.
SPANISH WAR LOANS
The United States is a debt-paying nation. Hence, America's credit, despite occasional fluctuations, has steadily risen, and our national debt has sold on a lower income basis than that of any other nation in the world.
Following the sinking of the Maine in Havana Harbor, in 1898, Congress authorized an issue of $200,000,000 3 per cent. ten-twenty-year bonds. Of this aggregate $198,792,660 were sold by the Government at par. So popular was this loan, it was oversubscribed seven times. During the year 1898, following the allotment to the public, this issue sold at a premium, the price going to 107-3/4, and, during the next year, to 110-3/4. After the war ended, the Government, in accordance with its unvarying custom, began to pay off this debt; but, despite the Secretary of the Treasury's offer to buy these bonds, he succeeded in purchasing only about $20,000,000 of them.