583 have succeeded if the harvest conditions of 1879, of 1891 or of 1896 had been duplicated. But they were not. Our corn crop of the preceding season had been a disastrous failure; even the rise in wheat during 1895 was chiefly due to the partial destruction of our own winter wheat crop. Outflow of gold began again in August; the treasury reserve declined; the revenue was still deficient. The ominous cry for "voluntary reimbursement" by the banks began again, and again these institutions turned over some twenty millions of gold. But meantime fifteen to sixteen millions monthly were withdrawn from the treasury and exported a movement which was utterly unseasonable and forced by reaction from the artificial exchange-market conditions earlier in the year. By the 5th of January, 1896, the treasury's gold reserve was down to $61,251,710. It was then that the treasury tried a third experiment in bond-issues by announcing, on January 6, 1896, a $100,000,000 four-percent loan, redeemable in 1925 and open to public bids without an "upset price." This loan succeeded-partly because of the open competition, partly because a month's notice was given, which enabled financial agencies to work effectively, but chiefly because the check to the movement of demoralization during 1895 had given strength and credit to the treasury. Some of the features of the loan subscription were absurd: thus, no deposit was required from bidders, a fact which brought a quantity of "straw bids" and speculative subscriptions from irresponsible parties. The use of the bond subscription made by some newspapers in search of vulgar notoriety was similarly grotesque.

But the loan was covered, nevertheless: on the books it was covered nearly six times over, and it was awarded at prices ranging from 1105% to 120.1 Subscriptions to this loan so effectively contracted the redundant circulating medium that at one time gold exports had to be postponed through lack of legal tenders sufficient to obtain the gold. A week before the

1 Proposals were 4600 in number, aggregating $568,269,850. The syndicate of 1895 made a bid for the whole issue at 110.6877, but $63,788,650 bids were made at higher rates. The total yield of the issue was $111,378,836. -- Monetary Systems, p. 229.

closing of the bids a premium of 5% of one per cent was bid in New York City for large blocks of gold coin or legal tenders.1 Of course the precedent of 1894 was followed, and prospective subscribers resorted to the treasury with legal tenders to obtain the gold in advance for their subscriptions. From $61,251,710, its total on the day when the secretary's bondissue circular was announced, the treasury's gold reserve fell by the 8th of February to $44,563,493. This was a net decrease of $16,688,217, whereas gold exports within the period had been only $8,873,000.

Withdrawals from the treasury continued even after the bids were opened and awarded; postponement of the full subscription until June, by a supplementary treasury circular, made this operation somewhat easier. Meantime, also, gold exports began again. If the entire subscription to the loan had been paid in gold, without resort to the treasury reserve, and if no gold had been taken out for export, the government's net gold holdings, on the first of June, would have amounted to $155,942,329. As a matter of fact, the gold reserve touched its maximum on April 9, and this maximum was $128,291,327.

By August 30 it had fallen again to $100,957,561; but before it crossed the hundred-million mark again, the high domestic rate for money and the enormous grain export trade had turned the sterling market. Gold imports were resumed; the presidential campaign of 1896 ensued. For a time during October, when the issue of that fight between sound money and silver was in doubt, the treasury reserve again decreased rapidly. But with the victory of the sound-money candidates announced, imported gold again began to pour into the treasury. When such payments began in 1893, as we have seen, the treasury's available reserve, outside of gold, was little more than thirteen million dollars. At the close of August, 1896, the treasury's available surplus of legal-tender notes alone was $111,800,038. In addition to this, the deficit in revenue, which in the summer of 1893 was averaging six million dollars monthly, had been reduced in 1896 to a monthly average of less than three mil 1 New York Evening Post, January 25, 1896.

585 lions. Such a comparison shows why the treasury was now able to increase its gold reserve through the application of gold importers to obtain, in exchange for gold, legal tenders for use in the autumn harvest trade, and why, therefore, the Cleveland administration, which received from its predecessor a treasury gold reserve of only $100,982,000 and a total available cash balance of only $132,485,000, turned over to its successor, on March 4, 1897, a total balance of $209,644,000, including $150,975,000 gold.

I have criticised impartially the actions and policy of Mr. Cleveland's second treasury administration and have pointed out such mistakes as it actually made. The salient fact remains that this administration preserved the public credit under conditions which made such preservation apparently no longer possible. It inherited a treasury fast approaching bankruptcy, with the revenue and currency governed by two of the most reckless laws ever placed on our statute books. It was confronted immediately with wreck of the country's commercial system, a situation needing the most prudent and public-spirited legislation. For such legislation the president had to appeal to a Congress in which a controlling influence was wielded by financial agitators and political jobbers, and in which the attitude of at least one branch was determined by personal feeling against the administration because it would not surrender offices to senatorial distribution. In the face of such odds as this, with the help only of laws conflicting in themselves and framed by makers of double-meaning compromises, the second Cleveland administration overthrew the most mischievous legislation of 1890, maintained the currency against depreciation and saved the treasury from bankruptcy. I do not believe that any ministry of our time, American or foreign, has fought its battle against such overwhelming difficulties. A ministry with legislative majority behind it can procure at least a test of its own remedial measures; a ministry backed by the people can impose its will on legislatures. But the Cleveland administration, as a result of the inexorable law of politics which I noticed in opening this paper, lost its hold not only on Con

gress, but on the people. Yet with all this handicap, inheriting from its predecessor one of the most tangled financial problems in our history, it left a simple and easy task to its

successor.

There is something singularly striking and melancholy in the beginning and the end of this second Cleveland administration. Its predecessor had encouraged and approved the laws which forced the treasury, later on, to the verge of bankruptcy. Had it been left two months in power after March 4, 1893, the Harrison administration would have been confronted with the full embarrassment under which the treasury was already sinking. Fortune, however, guided circumstances otherwise; the administration which had approved the laws through which the national finances were undermined left the structure to collapse on the shoulders of its successor. On the other hand, the administration which inherited this wreck and which, during four years of almost unprecedented struggle and vituperation, sustained the tottering public credit, retired from office at the very moment when an accident of nature had at length made successful achievement possible. If Mr. Harrison's term had continued until March 4, 1894, he would have surrendered office with the discredit of a treasury crippled through the undertakings of his own ministers, entered upon with his own express approval. If Mr. Cleveland's second term had run until March 4, 1898, he could not possibly have failed to obtain the political advantage accruing now to the present administration from the return of industrial prosperity. To such degree does chance sometimes sport with history.

The two chief misfortunes of the second Cleveland administration, apart from the industrial distress, were the blunders in revenue legislation and the failure of the currency reform propositions. For the first, as we have seen, the treasury was in some part responsible; for the second the administration deserves no blame whatever. Mr. Carlisle's official reports on the currency question have been equaled for soundness and cogency by no state papers since the reports of Secretary Hugh McCulloch in 1865 and 1866; and it will be remembered

that Mr. McCulloch's plans for currency reconstruction were blocked by Congress as completely as were Mr. Carlisle's. But Mr. Sherman, who in 1866 was one of the bitterest critics of Mr. McCulloch's financial program, found himself borrowing the chief expedients of those very plans in 1875 and 1879. Similarly, the very political party which laughed at Secretary Carlisle's projects in 1894 has in 1897 proposed to go as far as it dares in exactly the same direction.

It is possible that the mistakes of routine policy into which Mr. Carlisle fell would have been avoided by some of his eminent predecessors. But, whatever his mistakes of policy or judgment, President Cleveland's secretary of the treasury made no such stupid blunders and pursued no such weathercock methods as Secretary Boutwell and Secretary Richardson did under very similar conditions in an earlier panic year. That Mr. Carlisle was unfitted by his training and prejudices for the peculiar responsibilities forced on him by circumstances will hardly be questioned in the light of the facts which I have submitted. And yet the test was unusually severe. Secretary Manning and his associates in the treasury applied their skill with singular success to unraveling a tangle in the currency; Secretary Fairchild's estimates of future revenue were phenomenally accurate; Secretary Sherman was one of the most adroit masters of financial negotiation who ever occupied the treasury. But Mr. Manning did not have to deal with $152,000,000 treasury notes, or with a deficit of sixty-nine millions; Mr. Fairchild based his estimates on the same general trade conditions as had governed the two or three preceding years; and it is possible that, with all his skillful bond negotiations, Mr. Sherman's resumption plans would have broken down but for the foreign crop failure of 1879 and this country's consequent command of foreign capital through its export grain.1

1

1 Mr. Sherman himself half admitted this fact in a speech of October 27, 1879, at Cooper Institute, New York : "Now that resumption is a success, Democrats say the Republican Party did not bring it about, but that Providence has done it; that bountiful crops here and bad crops in Europe have been the cause of all the prosperity that has come since resumption. We gratefully acknowledge that Providence has been on the side of the Republican Party; or, rather, that, having sought to do right, we find ourselves supported by Divine Providence."