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The Struggle for Resumption

THE STRUGGLE FOR RESUMPTION The Resumption Act is one of the most curious laws in financial history. It was plain in its requirement that on and after January I, 1879, the Treasury should " redeem in coin the United States legal-tender notes then outstanding, on their pre sentation for redemption "; but it left the Treasury to make whatever arrangements it might choose. The law, it is true, conferred ample powers. In order " to prepare and provide for the redemption in this Act authorized or required," it empowered the Secretary of the Treasury " to use any surplus revenues, from time to time, in the Treasury not otherwise appropriated, and to issue, sell, and dis pose of, at not less than par in coin, either of the descriptions of bonds of the United States described in the Act of Congress approved July 14, 1870." ' This power was not only enormous in its immediate possibilities, but it was perpetual. The notes re deemed were not, as in 1866, to be cancelled or retired, but to be reissued. When reissued, they must necessarily become again redeemable In coin, with all the provisions of the Resumption Act again applying. This fact was recognized even in the de bate upon the bill. Since the discretionary power of bond-issue was granted " not only to prepare for but to maintain resumption," ' it followed that the power might legally be exercised by any future Administration.' Now laws which make such extraordinary grants to the Executive commonly specify with the minu test care how the powers granted shall be employed. The Resumption Act does nothing of the kind. It places in the Secretary's hands, as the author of the law correctly pointed out, " the whole credit and money of the United States,"' but it does not give the slightest hint as to what use he shall make of it. Resumption of specie payments is associated, in the average mind, with the accumulation of a coin re serve, out of which, when necessary, notes may be redeemed. But the Resumption Act makes no men tion of a coin reserve. This omission left it wholly to the discretion of the administrator of the law how much gold he should accumulate for the purpose. He might, in strict accordance with the law, use his powers so as to throw the money market into con vulsion. He might, on the other hand, either through choice or necessity, make such inadequate provision, that after January 1, 1879, his entire stock of gold would be withdrawn for hoarding or export purposes. There was involved, there fore, a double problem of great delicacy: could a large gold reserve be acquired and kept in the Treasury before 1879, and could it be protected afterwards ? At first glance, it would appear that the Treasury's discretionary power in the loan market, under the Act of 1875, made it an easy matter to obtain a suffi cient coin reserve. But there was no such certainty when the law was passed. On the basis solely of domestic loans, the operation was impossible. As late as 1877, it was officially estimated that the total stock of gold in the United States, outside the Treas ury, was less than $100,000,000,' and of that sum the two thousand national banks, on which the Treasury must mainly depend for a domestic gold loan, held only $22,658,820.' This was a wholly in adequate supply, and, what made the matter worse, the country had been losing annually, through ex port, more gold than it produced from its mines. In 1875 and the four preceding years, the United States produced $182,000,000 gold, and exported, net, $204,000,000.' So far as could be judged in 1875, an attempt to hoard in the Treasury even a moderate sum of domestic gold would revive the commercial dissatisfaction of 1866. In fact, the Treasury was more than once compelled, even after the passage of the Resumption Law, to throw part of its gold fund on the market.' There remained the foreign markets from which to obtain a gold supply. It was possible to buy gold abroad, even with foreign exchange against the United States, But Secretary Bristow expressed, in 1875, the very general doubt as to whether such an operation would not be deliberately obstructed by foreign institutions.' Nor was this apprehension groundless. France and Germany were already ac cumulating specie for exactly the purpose contem plated by the United States,' and it was common belief, even three years later, that the Bank of Eng land would resort to extreme measures for the protection of its own reserve.' I have said that the Law of 1875 involved the double problem of providing for resumption at the stipulated date, and of maintaining it afterward. It is the first these undertakings which we shall survey in the present chapter. There were, as we have seen already, two influences at work in 1875, which made possible the achievement as it would not have been in 1866. These influences—the shift ing of the foreign trade balance in favor of the United States and the subsequent check to gold ex ports—were factors on which no finance minister could have reckoned. Both in fact developed after the passage of the Resumption Law. But even after allowing for these accidental commercial ad vantages, the credit for the return to specie payments on January 1, 1879, belongs individually and with out dispute to John Sherman.

As one of the authors of the Resumption Act, Mr. Sherman was responsible both for its virtues and its vices. His appointment to the Treasury, there fore, in the Administration under which resumption must by law be carried out, was entirely logical. It is true, the Presidential canvass of 1876 was not conducted on the issue of resumption. The Act of 1875, a Republican party measure, and passed with out one Democratic vote in either House of Con gress, was not so much as named in the Republican national platform of 1876. But in politics, the can didate often counts for quite as much as the platform, and Mr. Hayes had won the Ohio Governorship, only a year before, after a contest pivoting wholly on the specie-payment issue. The choice of Mr. Sherman for finance. minister in his national Admin istration was a normal sequel. Yet the practical efficiency of Mr. Sherman, in an administrative office, could not then have been foretold. The Sec retary's previous career, though useful and indus trious, had been marred by weaknesses which did not .promise well. As a legislator, he belonged to the school of compromisers who have indirectly been responsible, in a score of critical emergencies, for the gravest mischief in our history. If his con cessions had been proposed only after aggressive contest, when deadlock or defeat was the only alter native in sight, the criticism might be qualified. But it was Mr. Sherman's unfortunate policy as a legislator that he either opened the contest with a plan of compromise—thereby surrendering most of his legitimate vantage-ground—or else abandoned his position long before the battle was fought out. So eager was he, in the initial currency debate of 1866, to fix upon this middle ground, that he played directly and effectually into the hands of the op ponents of resumption. He openly confessed his deference to public clamor in the vote of He defended, on the explicit ground of evasion of a disputed point, the obscurity of the Resump tion Act regarding reissue of the legal tenders.' It is impossible to harmonize with one another his public utterances and his public votes. He acknowl edged freely, on various occasions, that extinction of the legal-tender notes was the simplest road to specie payments '; he declared with equal frankness that inflated prices must come down in the move ment towards resumption, and that the shrinkage would be positive advantage to our industries.' Yet he made these very incidents of the McCulloch con traction movement the basis of a determined opposi tion. From the floor of 'Congress he attacked this plan, the only alternative to the fiat-money carnival of the next five years, with arguments which were effectively used in behalf of every future movement of inflation.' For a Secretary of the Treasury, at a peculiar crisis in the Government's finance, these were unpromising antecedents. But Mr. Sherman was not the first of public men to show that the faults or weakness of a legislator, whose purpose is to obtain enactment of a policy, will sometimes disappear in the administra tor, who presses settled policies into execution. As Secretary, he was unwavering in pursuit of the resumption goal; practical, resolute, and adroit in the means employed. His official correspondence gives consistently the picture of a public officer of foresight and decision. It was in the face of the repudiation clamor that he declared officially for payment of the Government bonds in gold.' This action fixed a precedent of the highest value. Equally distinct was the Secretary's public declara tion that the Act of 1875 conferred the power to issue bonds after, as well as before, resumption '; another precedent which did invaluable service six teen years afterward. Only on one conspicuous oc casion, hereafter to be noticed, did he revert to his old-time juggling with a public question, and then the strong good sense of the President overruled him.

What was perhaps still more essential, at this juncture in the Government finances, was the faculty displayed by Mr. Sherman, of keeping the mastery of outside negotiation. This was no small achieve ment; for, in addition to the doubts surrounding the resumption operation at the start, angry and bitter opposition from Congress confronted the Secretary at every step. The banking community was not enthusiastic in its offers; even the domestic institu tions believed that the risk was great enough to call for large concessions from the Treasury. Mr. Sher man made no such concessions, and the banking interests were presently aware that a cool head and an experienced hand were in control of the Govern ment's side of the bargain. He sounded all parties before committing himself to any, forced reluctant interests to bid through fear of losing entirely the prestige of the operation, and held his own position by compelling them to bid against each other. The manner in which the Secretary, in his loans of 1878 and 1879 particularly, played off the London syndi cate against the hesitating New York banks, and the city banks against the syndicate, gave him, from first to last, the advantage of the situation.' This ad vantage he retained in the face of adverse movements of international exchange,' stringency in the London discounts,' and distinctly hostile operations on the gold market.' Results, in cases of this kind, speak for themselves. To say, therefore, that Secretary Sherman's management of the Treasury achieved during his time precisely the results proposed, and achieved them promptly, is to concede his adminis tration's practical success. Nor were these results attained through extravagance or waste. In his re funding and resumption operations, Mr. Sherman placed the bonds of the United States on better terms than any of his predecessors.' On one note worthy occasion, he sold to a foreign syndicate a considerable block of bonds at a figure virtually above the price of the same bonds on the open market, and he did this after banking acquaintances had warned him that the achievement was impos sible.' It was through Secretary Sherman that the plan of sales direct to the investor, without the intervention of a syndicate, was afterwards intro duced.' Some mistakes in detail policy usually occur in any complex banking operation, and criticism has by no means spared Mr. Sherman. But even in these disputed questions, the Treasury had a good defence. The blunder of fixing a thirty-year term to the $741,000,000 4 per cents., frequently laid at his administration's door, was in fact decreed arbitrarily by the Funding Act of 187o, and was in serted in that statute against Mr. Sherman's own advice.'. Conceivably,.the extension of maturingper cents. at 31 subject to call, arranged a few months after Secretary Sherman's term expired, might have been feasible in 1877 and 1878. Yet it must be remembered that the credit of the United States, after two years of specie payments, was a very different thing from its credit in the earlier period. Congress, moreover, true to its record of the whole Administration, used the 3.5 per cent. pro viso as a means of deliberate embarrassment to the Secretary's operations. It loaded down its new re funding bill, in which that rate was authorized, with stipulations of a character so wild as to necessitate a Presidential veto.

Of all the criticism on the Secretary's policy, that which clung longest was the charge that in the use of Government deposit funds, he granted undue favors to the banks. That Mr. Sherman was at times politically indiscreet, in permitting concentra tion of the bulk of his deposits with a single bank, cannot be doubted. But it by no means follows that the action was unwise financially. The syndi cate of foreign bankers, through whom the large resumption loan was placed, were allowed to name their own depository, and the institution named by them had been the most efficient agent of the Gov ernment.' Politically, the Secretary would have played a wiser part had he distributed this deposit; from any other point of view, it was a matter of complete indifference. If the example of foreign governments had any bearing on the matter, the selection of a single bank was preferable. As for the general policy of bank deposits, that was not only sustained by precedent in this and other coun tries,' but it was indispensable. When any block of new refunding bonds had been sold and paid for, ninety days had to elapse, under the formal notice, before the old bonds could be taken up. In the British Government, all such surplus of the ex chequer goes, as a matter of course, on deposit with the Bank of England. Common prudence required that the purchase money in our Government's pos session, during these three-months intervals, should be similarly kept on the open market.' In extend ing these deposits, always abundantly secured, Mr. Sherman not only followed common-sense and precedent, but had the best advice, legal and finan cial, to sustain him.' I have spoken of the obstacles thrown in the Ad ministration's way by Congress. The circumstances under which the Hayes Administration entered office were in all respects discouraging. Administrative plans and policies have frequently enough been ob structed by Opposition majorities in one or the other branch of Congress, by dissension in the Administra tion party, or by the popular discontent arising from hard times. The Hayes Administration had to meet all these obstacles at once, and at a time when its own official prestige was marred by its disputed title. Whether Mr. Hayes was entitled to the two doubtful States whose votes were eventually awarded to him, and without which he could not have been elected, is a question regarding which opinion will probably always differ. The elaborately constructed Electoral Commission, to whom the question was referred, divided almost exactly on the lines of party affiliation. But that the actual majority of the voters was against Mr. Hayes in 1876, and in favor of Mr. Tilden, there is no doubt whatever. The Republican count itself awarded to Mr. Tilden a popular plurality, in the whole United States, of 252,224. The tangible result of this popular minor ity was a House of Representatives containing an opposition plurality of twenty votes.

Nor was this opposition content with a mere blockade of Administration measures. It under took to wreck the entire policy of the President. The Senate was Republican by a plurality of three, but on questions of finance, this slender plurality could not be trusted. The first year of the new Administration was a period of stagnant trade and popular unrest; its second year was a period of fall ing prices. The Pittsburg railway riots, which rose for a time to the proportions of industrial insurrec tion, broke out hardly four months after the inaugu ration of President Hayes. Business failures were more numerous and serious in 1877 than in 1874, the increase being particularly rapid in the younger Western States; and in 1878 the record of insol vencies far exceeded even that of the panic year 1873.' Four years of prostrated enterprise had ut terly discouraged the people; when, therefore, politi cians laid the blame on the Treasury's cperations, they had no trouble in getting a hearing. The oppo sition to Mr. Sherman's plans, which in fact included many well-known Republican Congressmen, believed itself to be backed by an overwhelming popular sen timent. It therefore laid its plans deliberately to upset the pending negotiations.

The attack began with a bill revoking all power of bond-issues for resumption purposes, and in effect repealing the Resumption Act. This measure went through the House in November, 1877, by a major ity of thirteen votes, Before its fate in the Senate was at all certain, the House had challenged public attention with another bill to open the mints of the United States to the free coinage of silver. This measure was not entirely new. In the summer session of 1876, several bills had been introduced, providing for increased silver coinage and for re monetization of the silver dollar. None of these propositions came to anything; they were chiefly remarkable from the fact that they first gave vogue to the theory of the " crime of 1873 "—a theory which assumed that the dropping of the silver dollar from the list of coins in the statutes of that year was the outcome of a conspiracy which carried its legis lation through in secret. The entire baselessness of this assertion has been demonstrated often enough and in'convincing detail; this very provision regard ing the silver dollar was a subject of public discussion in the House, and met with no serious opposition.'

The assertion in itself is so patently absurd that I shall not pause to discuss it. The truth is that silver in 1873, and during a generation before that date, was worth more to its owner in the form of bullion than in the form of coin. In 1872 the silver requi site to coin a dollar at the established ratio was worth $1.02.' For years, therefore, nobody thought of bringing his silver to the mint for coinage; he sold it in the commercial markets. As we have seen, the total silver-dollar coinage of the United States, be tween 1789 and 1873, was barely eight million dollars, and when, in 1873, the law provided that except for the so-called trade dollar coined for export, " no deposit of silver for other coinage shall be received," no one had interest enough in the matter to offer criticism.' But in 1874 and 1875 came one of those curious coincidences which render possible for all time con flicting theories of an economic event. Germany, having adopted the gold standard of currency in July, 1873, began to sell its old silver coin as bullion. At exactly the same time, Mackay and Fair, in the heart of the Nevada Mountains, were opening up the Great Bonanza. The Pacific Coast was in fact going wild over the rise in mining shares while the East was financially and industrially paralyzed. For one instance, the famous Consolidated Virginia mine, which produced in 1873 only $645,00o of silver ore, turned out $16,000,000 in 1875.' In the three years following 1874, the two mines of the " Comstock lode " yielded $42,000,00o silver.' The statute dropping the silver dollar from this country's coin age list was enacted February 12, 1873; the German law for retirement of silver coinage was adopted July 9, 1873; and a year later the news of the rich Nevada " ore-finds " became public property. Be tween the German sales and the sales at Nevada City, the price of silver yielded. In 1874, for the first time in a generation, 412.5 grains of standard silver would have been worth more when coined into a legal-tender dollar than when sold in the bullion market.' The motive of the mining interest in the free-silver coin age agitation of 1876 and 1877 was not mysterious.

The motive of the anti-Administration party in Congress was somewhat different. There is not the slightest question that the silver-coinage movement, in the agricultural West particularly, had the same origin and the same following as the paper inflation movement of a few years before. Mr. Bland him self, the author of the silver bill, declared that the question was presented as between what he called " honest resumption " with silver coinage, " or on the other hand a forced unlimited inflation of paper money."' In the heat of debate on the silver bill, the same statesman declared in Congress that if his coinage plan could not be passed, he was " in favor of issuing paper money enough to stuff down the bond-holders until they are sick." ' The point of these remarks lies in their frank assumption that he free-silver sentiment and the fiat-money sentiment were interchangeable.

So much, then, for the origin and nature of the silver movement. The Bland Bill passed the House on November 5, L877, under the previous question and without debate, by a vote of 164 to 34, and the resumption operations of the Government came to an instant halt. The market price of silver then was such that the legal-tender dollar of the Act would have been worth intrinsically less than ninety cents. Foreign subscribers to our resumption bonds sus pected instantly that payment of the Government debt in a depreciated coin was planned by Congress; their suspicions were confirmed by a resolution in troduced December 6th by Stanley Matthews, Mr. Sherman's own successor in the Senate, and passed by both Houses. The resolution explicitly declared that in the opinion of Congress, all the bonds of the United States, " issued or authorized to be issued," were payable in the silver dollars of the Bland Law. The extraordinary character of this resolution may be judged from the fact that it was proposed and passed in both Houses while the Coinage Act was still pending, and while, therefore, there was not in existence the coin which was duly declared a legal tender for settlement with public creditors.' To the conservative portion of the public, the resolution seemed a piece of financial lunacy; to the Treasury, it was not only embarrassing but humiliating. Hardly a month before, in his annual report to Congress, the Secretary had repeated his official statement, previously made to bond subscribers, that payment of the bonds in gold might safely be anticipated.' The publication of this statement in New York and London had been followed by greatly increased subscriptions to the bonds, in payment of which gold was required by the Government.' The Matthews resolution amounted, so far as Congress was concerned, to repudiation of a formal bargain of which the Government had already obtained the fruits. The debate was such as might have been expected on a measure of the sort. It centred re peatedly on denunciation of Government bond in vestors.' Foreign subscribers were treated with especial scorn; indeed, our foreign customers in general were not spared. It was this debate which drew forth Senator Matthews's somewhat celebrated query: " What have we got to do with abroad ? " a remark which was perhaps as typical of the session's deliberations as any utterance made from the floor of Congress.' In each of these three controversies the Adminis tration was deserted by a good part of its natural supporters. Twenty-seven Republicans voted in the House for the virtual repeal of the Resumption Act. Sixty-seven out of the 164 votes for the free silver coinage bill were Republican. The Matthews resolution was not only proposed by a Republican, but Senators and Representatives of the Adminis tration party took the floor to advocate it. Indeed, the party chaos during the session of 1877 and 1878, on all financial questions, can find no parallel short of the stormy legislative days of 1894 and 1895. The personality of debate and vote, during this earlier upheaval, is extremely curious. The vote in the House of Representatives, for instance, on the original free-coinage bill of 1877, was non-partisan and almost wholly sectional. From districts west or south of Pennsylvania, only six votes were cast against the bill, two of these votes being cast by Democrats; from Pennsylvania and the districts east or north of it, the bill received only nine supporting votes, and three of the nine votes were Republican. The representatives from Ohio, Indiana, Illinois, Wisconsin, Iowa, Kansas, California, and Minne sota, so far as they answered to the roll-call, voted solidly for the free-coinage bill; the New England States voted solidly againstit. Not least remark able, in the alignment of our public men during the session, was a coincidence which made the proposed repeal of the Resumption Act an example in the irony of history. The Treasury Secretary whose authority the bill assailed had in 1868 led a similar movement to break down the Administration's re sumption plans. The future Secretary of 1894, destined to issue under the Resumption Act more bonds than even Secretary Sherman, sat in the House in 1877 and voted to revoke the power of issue.

The situation, during the early months of 1878, was in fact extremely critical. For the time the three direct assaults on the public credit were warded off. The Matthews resolution was " concurrent," and hence a mere expression of opinion without binding force. The bill repealing the Resumption Act of 1875 was killed by disagreement in the Senate. Meantime the Silver-Coinage Act was modi fied by the Senate into a compromise requiring pur chase and coinage by the Government of two to four millions' worth of silver monthly. Even thus modified, it encountered the veto of the President, but was passed over his veto, without a day's delay, by the requisite two-thirds majority. Executive conservatism seemed to be fruitless; nevertheless, there is no doubt whatever that the steadfast policy of Mr. Hayes did much to stem the current of reac tion. Although his veto did not prevent enactment of the silver-coinage policy, his Annual Message of December 3, 1877, submitted when Congressional majorities were not yet defined, so plainly intimated veto that it obstructed efforts to force the absolute free-coinage measure through the Senate. The President's services certainly do not merit less of recognition, from the fact that his Secretary of the Treasury gave him at this point only nominal sup port. For once at least in his executive career, Mr.

Sherman's comment on the reactionary policy, even before the Allison substitute bill had been framed, was as faltering in its tone, and as thoroughly im bued with timid compromise, as if its author was again the Sherman of the Senate.' A personal letter of the Secretary, in September, 1877, to the author of the Matthews resolution, contains the most extraordinary quibbling with the question.' Mr. Sherman himself confessed, seventeen years after the struggle of 1878, that the veto message did not meet with his approval.' Congress adjourned on June i9th. Even before Congressional adjournment, the canvass for the November State elections had begun. The State Convention platforms, in the summer of 1878, were not in all respects such as the session's work in Congress would have suggested. It is true, the Democrats throughout the West and South went to extremes in denouncing the Administration's policy. The Ohio Democrats, for instance, demanded " ab solute repeal of the Resumption Act," " removal of all restrictions to the coinage of silver," and " sub stitution of United States legal-tender money for national bank notes," and Democratic Conventions in Indiana, in Iowa, and in most other Western and Southern States, made exactly similar declarations. The policy set forth by the Ohio Democrats was certainly no more reactionary than what had been proclaimed that very season on the floor of Congress, and by eminent Republicans.' It was the policy which the majority of public men, in both parties, had indicated,_two or three months before, as certain of popular endorsement. But the Republican Con vention leaders, in Ohio and in other Western States, were shrewder. Signs of protest against the anti Administration Republicans in Congress, more omin ous because they came from staunch and life-long supporters of the party, were visible even before Congress adjourned. The great business communi ties were speaking out with considerable emphasis, and this indication was not lost on the Republican managers. With much political adroitness, the Western Conventions of the party based their chief appeal on " opposition to further financial agita tion," as " injurious to business and devoid of other than evil results."' Republican platforms in the Eastern States were even more distinct in declaring for the Administration's policy; endorsement of the specie-resumption plan, for instance, as carried out by Secretary Sherman, was voted without a qualify ing word.

The trend of public sentiment, in fact, very soon showed itself to be unmistakably in that direction, and this was shown by the altered tone of the oppo 1 W. D. Kelley, House of Representatives, November 3, 1877; J. J. Ingalls, Senate, December 6, 1877; W. A. Wallace, Senate, January 29, 1878; T. 0. Howe, Senate, February 5, 1878.

I Platforms of the Indiana and Ohio Republican Conventions, June 5 and 12, 1878.

sition Convention platforms, in the fall. Some of these platforms made obvious attempts to square their party with the voters. The financial plank of the New York Democratic Convention, for instance, on September 25th, reads like actual endorsement of the Republican Administration. It was too late, however, for such manoeuvres to be of any value. The opposition had gone too far in Congress, and popular opinion to that effect was expressed with sufficient emphasis in November, 1878. The Ad ministration party gained what amounted to a de cided victory. New York, Connecticut, and Ohio, which had been carried by the Democrats in 1877, now swung back to the Republicans, New York leading with a majority of 34,661. In 1877, the Democratic party had captured Pennsylvania by nearly io,000; it lost the State now by upwards of 22,000. The opposition still retained control of the House of Representatives, but by a reduced plural ity. There were but four States, East or West, where opposition majorities were increased in 1878 or Administration majorities diminished, and these were agricultural States, where the season's sharp decline in wheat had stirred up discontent.

There was not much danger from the closing session of a Congress whose earlier ventures had re ceived this response from the people. Without in terruption or annoyance from the legislative body, the Secretary of the Treasury now put the final touches on his arrangements for resumption. Partly by accident and partly through stress of circum stances, the Treasury gold reserve was defined, in later years, at a fixed and arbitrary minimum. The theory adopted by Mr. Sherman, however, in his early operations, was different and undoubtedly better. Following probably the practice of the Bank of England, he fixed his reserve at forty per cent. of outstanding notes the smallest reserve," he wrote to Congress, " upon which resumption could be prudently commenced and successfully maintained." ' On this basis he held in the Treas ury, on December 31, 1878, $114,193,000 gold in excess of outstanding gold certificates, which was a trifle over forty per cent. of the Government notes then circulating outside the Treasury.' Of this gold reserve, ,..5,5oo,000 had been obtained through sale of bonds,' part of the coin being procured in Europe.

There remained now to be settled only the formal machinery of exchange between the Treasury and outside institutions. The city banks were naturally willing to lend all possible aid to the achievement. But the mere good-will of the banks has proved largely useless to the Treasury on two not at all dis similar occasions—in 1861 and in 1894—and at both those junctures the fault distinctly lay in lack of timely business management by the Treasury. It is conceivable that with the vacillating policy of those two years applied in 1878, the Government's financial schemes might even now have broken down.

If, for example, the Treasury had left the banks to pursue unchanged their policy of keeping special gold deposits, the Government reserve would have been at once imperilled. If the banks had con tinued to present their individual drafts for redemp tion across the counter of the Sub-Treasury, any timid or blundering banker might have started a general drain of gold. Against these possibilities Mr. Sherman now took measures. He applied for the admission of the New York Sub-Treasury as a member of the clearing-house. Nowadays, when the Government's participation in this privilege has be come a matter of every-day routine, it is easy to underrate the work of the Administration which effected it. In 1878, however, the project was both new and startling. This occasion, it is true, was not the first on which the clearing-house proposition had been mooted. But the previous Administration which considered the suggestion had abandoned it.' Even in 1878, the judgment of the Secretary's own associates was against the plan '; nevertheless, he brought the matter to a head with business-like directness, and within two weeks after the project was officially submitted, arrangements had been made. At New York and Boston, the clearing houses modified their rules, agreed to abolish " gold deposits " after January 1st, to accept the legal tenders freely in discharge of balances against one another and against the Government, and to admit the New York Sub-Treasury into regular member ship.' At the same time, the requirement of coin payment of customs duties was revoked, and public officers were directed to receive coin or legal tenders at the payer's option—a move of obvious propriety, since refusal to take notes in payment would merely send the importer to the Treasury's redemption office to convert them into coin.' All these prelim inaries had been formally and positively settled before the close of 1878. On December 17th, the premium on gold disappeared, for the first time since 1861; on January 1st, specie payments were quietly resumed. Whether resumption could be maintained without fresh purchases of gold, without new bond issues, and without recurrent strain on financial confidence, depended on influences no longer subject to the Government's control.

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