Sherman

The following is a report of the recent interview, at Washington, of the Senate Finance Committee with Secretary Shennan in regard to the repeal of the Resumption law : Chairman of the Committee - Mr. Secretary, I have jotted down a few genoral qnestions, and some in detail, which I proposo to ask you, and I suppose that other members of the committee may have questions which they may desire to ask at a later period ; but I will ask somo general questions, in order that yu may make a statement, if you choose, with more f reedom than you can by going into smaller details at commencement. First, ought the Resumption act, in your opinión, be repoaled, and if not, whynot? Secretary Sherman - That questioD, as you say, in very general, and is rather a legislative than an execntive question ; but I have no objection to answering. I think that the Resumption act ought not to be repealed ; that it was a declaration of public policy commenced with the act of February, 18G2, and repeated by Oongress severa! times, notably in 18G6, notably again in 1869, and again by the passage of the Resumption act, that we would, as sooa as practicable, redeora any United States notes which were presented for redemption in gold and silver coin. That is the declarad public policy of this country, and it ought to be adhered to, and I am fully convinced that we are able to do what we havo so often promised to do. The Chairman - Do yen think resnmption is practicable under the lawV You have partially anticipated the question, but still I ank it. Secretary Sherman - That is a question very much of figures, and, mipposing that I would have to answer it, I have brought quite a number of documents here, which I will give you, and they will speak better than I can. The best evidence that we are able to resume on the lst of January next is the progrese that has already been made. When the Reeumption act was paased premium on gold was about 10% per cent. Sinee that time it has been reduced to a nominal rate. It is now a Httle over 1. Since that time we have accumulated, in preparation for resumption, a large snm of gold. The Chairman- It is $34,000,000 or $35,000,000. Secretary Sherman - The amount of gold and silver coin and bullion available for resumption, in a business senso, is about $90,000,000, but the actual gold and süver bullion cein in the treasury, over and above all demand liabilities, is $71,775,860. We have in proces3 of preparation for resumption a reduced volume of United States bonds and notes. The precise figures aro familiar to you. The amount was $382,000,000 at the time of the passage of the Resumption act, and the amount now is $348,618,024. Again the amount of outstanding bank notes hts been reduced. On Dec. 31, 1875, the amount was $346,479,756. On Dec. 31, 1877, $321,672,505, and on Feb. 28, 1878, the amount of bank notes oututanding was $321,989,991. But the amount of bank notes of banks in existenee, not in process of Hquidation, was $299,540,475, and the difference between these two sums being notes of bauks in process of liquidation, although the notes are in circulation, yet an equal amount of greonbacks are in the treaa$348,000,000 of legal-tender notes? Secretary Yes, as many of the legal-tender notes are held in the treasury as there are bank notes in process of redemption. Senator Ferry- Then there really should be but $299,000,000 of national-bank notes outstanding 'I Secretary Sherman- If you count the whole greenbacks as outfitauding, there would be $299,000,000 of national-bank notes. Then it must be remembered that United State noten have been in circulation since 1862, and the bank notes since 1864, and that large suma are lost or' destroyed. This diminishes, to some extent, the amount outetuiding; howmuch I don'tknow. You can judge as well as I. A statement was here produced showing by months the issue of süver ooin ana tne . tion of fractional currency under the act of . April 19, 1876, froin April 20, 1876, .to Feb. 28, 1878, the amount of fractional currency redeemed being $74,318,039, and the total silver payments $38,479,308. The total amount fractional notes outstanding on the 16th inst. was 9 17. 109, 715. The average monthly reduction of outstanding fractional currency, estimated upon the basis of the redemptions of the past f our months, is $290,000. Senator Jones - How many rnillions, then, of legal tenders do you estímate as being in circulación now, outside of what you hold to redeem notes of banks in procesa of liquidation? Secretary Sherman- I should think $320,000,000: deduoting thosc that have been lont or deetroyed, and those held for outstanding bank notes, make the aggregate of bank notes and greenbacks about $643,000,000. To repeat the general result of our preparations for resumption, we have already practically abolished the premium en gold, we have reduced the amount of ünited States notes and the amount of national-bank noteB outstanding; we paid off praotically the fractional currency, and uow we have a very remarkable circumstance in our favor. The balance of trade is in our favor to the amouut of $160,000,000 a year, briuging silver and gold and bonds back to us. In the last threo vears the balance of trade in our favor is $4Í4,034,666. Now, in general answer to your queetion, I do expresa my opinión, offioially and personally, that, for the reasons I have given, we can resume on the lst of January next under the basis of the existing law. The Chairman- What effect haa the Silver bill had, or is it likely to have, on resumption? Secretary Sherman- I do not want to tread on delicate ground. Ia answering that question, Mr. Chairman, I shall have to confesa that I have been mistaken myself. Now, aa to the Silver bill. I have watched its operation very closely. I think the Silver bill has had some adverse effects, and it has had ome favorable effects, npon the question of resumption. Perhaps the best way for me to proceed would be ti "state the adverse effects first. It has undoubtedly stopped refunding operations. Since the aeitation of the silver question I have not been able, largely, to sell bonds, although 1 liave made every effort to do bo. Senator Jones- At what date was the last bondsold? Secretary Shennan- We are eelling bonds all the time. Senator Jones- I mean the refunding of the bonds into 4 per cents ? Seoretary Sherman- The 16th of Octoberwas the time when the last of the popular loan was paid f or, and we had then a cali ready to the issue of $10,000,000, and the associates, asthey had a right to do, withdrew the cali. The sales from the last of September. 187G, to the 15th of October were about $275,000,000. We sold $200,000,000 of i)4 per cents, and then we sold 75,000,000 of 4 per cent. bende. Senator Allí sou- About a year and eleven months ? Secretary Sherman- 8ince October last we have sold 4,000,000, and perhaps now the sales havo gone up to between $4,000,000 and $5,000,000 of 4 per cent. bonds. Now, another adverse effect the Silver bill has had is to stop the accnmulation of coin. Since the lst of January we have aooamulated no coin outside of coin ctrtiflcates escept the balauce of revenue over expenditure. The revenues in coin being more than enough to pay the interest of the debt and coin liabilities, we accumulated some coin. Another effect that the Silver bill bas had is to cause the return of our bonds from Europe. Although the movement of our bonds in this cirection has been pretty steady for more than a year, it is latterly largely increased ; how much, I atn not prepared to say. Ou the other hand, I will give the favorable effects. In the first place, the Silvor bill satisfied a strong public demani for a bi-metallic money, and that demand is, no doubt, largely sectional. No doubt there is a difference of opinión between the West and South and East on this subject, butthe desire for the remonetization of silver was almoot universal. In a Government like ours, it ia always good to obey the popular current, and that has been done, I think, by the passage of the Silver bill. Ee8Umption can be maintained more easily upon a doublé standard. The bulky character of süver would prevent payments in it, while gold, being more portable, would be more freely manded, and I thmk resumption can do maintained with a lesa amount of silver than of gold alone. Senator Bayard- You are speaking of roenmption on the hasis of BÜver, or of silver and gold ? Secretar? SUerman-, -Yos, sir ; I think it mn bo maiutained botter upon a bi-metallic or alternativo standard than upon a single one, and, with less accunmlation of gold in this way, remonetization of silver would rather aid resumption. The bonds that have been roturned from Europo have been readi'y absorbed - remarkably so. The recent returns in New York show that the amount of bonds absorbed in this country is at least $1,250,000 a day. Thi-) shows the confidence of the people in our securities, and their rapid absorption will tend to check the European acare. SöDator Voorhees - That shows, Mr. Secretary, that this cry of alarm in New York was unfouudod, then. This capital seeks our bonds when this bi-metallic basis is declared. 8ecretary Shcrman - Yes ; many circumstances favor this. The demand for bonds extends to the West and to tho banks. I have no doubt we can sell 4% per cents., andl think within a month we can sell all we want of 4per-cent, bonds to carry out the Resumption law, for I would not accumulate more than $5,000,000 a month, and that largeïy in silver and gold bullion. There is uo special necessity to force the bond market in order to maintain resumption. We now have $71,000,000 to $90,000,000 on hand, and overy one can measure how much more will be necessary to maintain resumption. If the sale of bonds wasever so freo I would not accumulate more than $5,000,000 a month of both metáis, and all sales beyond that shouid bo applied for refunding 6-par-cent. bonds. Senator AUison - Do you think you can add largcly to tho stock of coin in this country by yonr proce8s of adding to your reserves $5,000,000 per month? That in to say. will you accumulate from othor countries or simply draw into the treasury accumulations already existing in our own country ? Secreiary Shermau - I am glad you mentioned that poiut. Although since the first of January last we have accumulated no coiu in the treasnry, the banks since that timo have accumulated more than $5,000,000 in gold per month. Senator Ferry - Then, if you embrace the accumulation in the banks and in the treasury, it has been progressing at the rate of about $5,000,000 per month. Secretary Sherman - Yes, sir; more than that. In New York alone the accumulation is $5,000,000 per month, but in Boston and Philadelphia it is also eoing on. Senator Ferry - What, in your judgment, is there accumulated in both banka and treasury per month in amoont? Secretary Sherman - I should think it to be between $5,000,000 and $10,000.000 per month. In giving an answer to Mr. Slorrill's qnestion as to the general effect of the Silver bil], I would not like to give a positive opinión. I do not think, taking it all together, that it is an obstacle in the way of resumption. It has operated in some respecta adversely and in fome respecta favorably, but on the whole I do not think it bhould discourage us from reíumption or from carrying out our general policy. Senator Voorhees- Did I understand you to say you would undertake to maintain resumption" with $90,000,000 of eoin reserve? Secretary Sherman - No, air. I would undertake to resume upon the power alïorded by the present law by going on and doing what I did laet Biimmer. Senator Yoorhees - How much surplus did you say you had on hand ? Secretary Sherman- I have now $71,000,000. Senator Yoorhees - Then you aay that you would be willing to undertake resumption under the existing laws by tho lst of next January. Now, with the aid of the Silver bill and colnage, wThat amount of coin would you expect to have on hand with which to undertake auuui (U,UUUVUU P" 'f"""" "l ""■ ."';"" from the lst of April to the lst of January, which wonld be $45,000,000, and.if the market is favorable. I think I would try to make good the Ios3 that I have suffered by not accumulatiue in January, February and March of the present year. I could in this way accumulate $50,000,000 or $60,000,000. Senator Ferry- Then. on the queeticn of resumption, your view ia that, with $90,000,000 on hand, and an accumulation of $60,000,000 more. or even $40,000,000, which would be $130 000 000, you would be willing tocommence reaumption of the preaent volume of currency, both natioual and bank ? Secretary Sherman- Oh, yes. The banks must look out for themselves. Senator Morrill- I will now ask you this queetion- How can the policy of resumption bo aided by Congress ? Seoretary Sherman- I am very wülmg to answer that, although I think it is a legislativa questioo. I think that you can aid resumption very much if you wiU allow me to receive United States notes in payment of bonds, as the Senate haa already expressed a wilhngness to do, and, if the House would concur witn them, if I could sell 4 per cent, bonda for curreney in purchase of 6 per cent, tioeds, it would be an aid toresumpüon. Senator Bayard- What would you do with the proceeds of the sale of these bonds? Secretary Sherman- I would use them m the purchase of outstanding bonds. All I woold have to do would be to pay the differenoe between greenbacks and gold, butthat would only be paving 1 per cent. premium. I have a nght to cail in bonds, and I could use curreney in their payment by giving $1.01 for the bond in currency, the difference between curiency and gold at the present time. Senator Bayard- You can sell your 4 per cent. bonda at par in currency, and you can then use currency to redeem higher-rate bonda. Senator Jones- How would that aid resumption. Becretary Sherman- By repealing a discnmination that is now made agamst the legaltender note in the payment of bondB. The bond issued would be a coin bond. A large number of questions were asked by severa.1 members of the committee, and the Secretary, in the courae of his answers, said there was one thing he would recomuieud namelv, he would, on the lst of October next receive United States notes ia payment fo duties, and yet provide for the interest on th bonda in coin. In otlier words, he would as sume that on the lst of October next ou: notes wore as good as gold and silver, and would receive them as such. ïou, gentlemen will foei your way clear to allow my receivmg the United Statea notes in payment of bonds, and will make it clear tbat I won't be compelled to redeem all United States notes that come in after the lst of January next, and if you think, under the ciicumstauces, I would bo strong onough to redeem these notes on the lst of October, I should be willing to guarantee the resumption. I think for us to go backward over all of Uiis long, weary agony and struggle toward resmnption would be a sign of national weakness, and do the nation great harm- do our credit harm, and bring injury mos all. The Chairman asked what effect a repeal of the Resnmption act would have upon the relations of currency, legal tenders and our coin gold and silver. Would not the repeal of the Resumption act cause a f all of paper below gold and silver ? Secretary Sherman -I have no doubt of tuut. I think the repeal of the Besumption act would at once cause a widening betwoen coin and paper money- depending entirely on the conttdense the'people at large would have in the ultímate redemption of paper, but I don't want to enter upon tilia delicate ground. Ainong other questions asked was the following, by Senator Ferry : You state that with $140 000,000 gold reserve you would bo willing to hold $300,000,000 as part of the currency, and meet resumption on that basis. Now, I desire to aak if, with coutraction as it is going on it would be any obstacle to resumption, even if the outstanding circulation should be $320.000,000 on the lst of January nextV Seóretary Sherman- I thiuk that the $20,000,000 wo'uld be provided for by an increaseof bank notes. Senator Ferry- Without any direct f urthor contraction Ihan under the presont Resumption act? fcecretary Sherman- The present Resuraption act would bo sufficient. I would not by myself provide ior and direct contraction of the currency except what is done under the act. The Chairman - Don't you believe there wil be an expansión come upon us natnrally or by the action of the Treasury Department on the lst of January? Will there not be more monej in actual circulation af ter that period '1 Secretary Sherman- I think and hope bo. Senator Ferry - Would not that produce a healthier condition i Secretary Sherman- Yes, eir. Senator Bayard- What would be the effect, ii your opinión, if a declaration that $300,000,000 of treasury notes might be issued as a mini mum and ib a maximum, to be nupported by retention by law of $ 100,000,000 oí gold in th treasury? Secretary Sherman- ïhat would be beneficial because I tbink the fear about that .$300,000,00 would be overeóme. Senalor Kernan- And yonr opinión ís tha authority to reissue legal-tonder notes shou] be expresely given by law 'I Seoretary Sherman- I think that authority to reissue, unquestioned and undoubted, would take away fears of all classeB of people- first, thoso in favor of inflation, who do not want the greenback deBtroyed; then in the Eastern States, where they think we ought to retire greenbacks and ismie bank notes inttead, and bclieve that we are bound, under the xieting la'v, to pay the wholc of the -f300,000,000, and Ihat we are not prepared to do 60. Senator Allieon- In other words. you think we cannot como to and maintain Rpocie pay menta without the power to reiKKUO? Secrotary Sherman- I do not think we can.