The note is a contract no less sacred than the bond. By any equitable rule it should bear interest. All former notes issued by the United States bore interest-those during the war of 1812 at the rate of 5% per cent., those during the Mexican war not exceeding six per cent. So the exchequer bills of England forming a national currency bear interest. This incident to a United States note past due was only waived by making them convertible into an interest-bearing security. This right was plainly printed on the face of the note; but it was found to embarrass the Treasury in negotiating its loan when under the pressure of war, and therefore, by the act of March 3, 1861, it was provided "that the holders of United States notes, issued under and by virtue of said act, shall present the same for the purpose of exchanging the same for bonds, as therein provided, on or before the first day of July, 1863, and thereafter the right so to exchange the same shall cease and determine." This device to suspend the right of convertibility attached to the note was suggested by our late distinguished colleague, Judge Collamer, and was only justified by the necessity then resting upon us of forcing upon the market all forms of public securities. The necessity no longer exists, and your Committee think the right ought to be restored. If we cannot pay our note in coin, let us pay it in the next best commodity, a bond of the United States. The value of the note now rests solely upon the compulsory value given it by the legal-tender clause; then it will be anchored on the solid basis of an annuity payable in coin. This measure alone will give the "greenback" the market value of a bond, while heretofore, though made the legal standard of value, it has been and now is the least valuable form of Government security.

Another highly important effect of this provision is to take from the Secretary of the Treasury his power to control the currency.

Under existing law he is authorized, at his discretion, to contract the currency at the rate of four millions of dollars per month, and there is no provision to adapt the volume of currency to the everchanging demands of trade and commerce. This power, though no doubt exercised by the Secretary with the sole view of promoting the public interests, is one not properly invested in any officer constantly engaged in official duties, and it is the cause of widespread complaint. No one engaged in business can base his calculations upon a currency depending not on supply and demand, but upon the discretion of a single officer. If currency is scarce, the Secretary is blamed; if it is redundant, he is charged with inflating prices. The Government should have no power over the currency except to stamp it with the highest credit, and by general rules, known to all men, to limit its amount. All fluctuations of the currency, affecting, as they do, the prices of all commodities, should be left solely to the laws of demand and supply. Upon these business men base their transactions, and should have the benefit of their sagacity without being affected by the arbitrary discretion of the Government.

The plan proposed establishes the maximum of currency at the amount fixed by law, and it may be diminished by payment for taxes and its conversion into bonds. These processes would, it is believed,

rapidly restore our currency to the standard of gold without the severe disturbance and uncertainty caused by the present system. When the restored credit of the Government advances the market value of our bonds to the gold standard, specie payments may be resumed and maintained. This plan is in accordance with the uniform practice of our Government prior to July 1, 1863, and of Great Britain during the long period of the suspension of specie payments, from 1797 to 1823. The holder of paper money was allowed at any time to convert it into a bond or annuity. The note forced upon the people during a suspension of specie payments was never allowed to be of less value than other securities held by public creditors.

It may be alleged that this plan would contract the currency too rapidly; that, when trade was inactive and money plenty, it would be converted into bonds; and when active business operations were resumed, as by the movement of crops or similar fluctuations of trade, the currency would be insufficient and money too scarce, causing great stringency and depression of prices. Such would undoubtedly be the effect, and it is mainly to furnish this fluctuating currency that banks of issue are established by most commercial nations. The usefulness of the national banks is now impaired by the suspension of specie payments. Their currency is now not a fluctuating one, but a permanent

one.

Their issues are not returned when trade is idle, and therefore they are unable to relieve a sudden stringency in the money market.

It is to avoid this difficulty that during the suspension of specie payments your Committee propose that any holder of the five-twenty bonds, or the consolidated bonds, may, under suitable regulations, and within the limit of $400,000,000, present them at the Treasury and receive in exchange United States notes.

This would make a currency convertible into bonds, and within proper limits a debt convertible into currency, and its fluctuations would depend entirely upon the wants of trade and commerce, and not in any respect upon the discretion of the Secretary. The money paid into the Treasury for taxes or bonds would be a bank, or reserve, sufficient for the negotiation of the new loan, for the redemption of the five-twenty bonds, and for exchange for bonds.

It may be objected that this would continue indefinitely the suspension of specie payments. Your Committee, being sincerely desirous of avoiding this result, have given this objection the most careful consideration, and are of the opinion that experience, the only test of such a proposition, will show a contrary effect.

The holder of an annuity yielding five per cent. in gold, free from all taxes, will not surrender it for a note only valuable as a currency, unless the demand for currency is urgent and stringent, and then it ought to be relieved. It will happen that in one part of the country bonds will be exchanged for notes, and in another part notes for bonds; at one season money, being idle, will be converted into bonds, to be returnable again for money when it is needed. This process will give increased value both to the notes and bonds, and enable the Government eventually to restore both to the standard of gold, when the vast productions of our mines and the accumulated gold now hoarded by

our people will take its place as the best and the only true currency. Then the banks, restrained by the necessity of redeeming their notes in coin, will perform their appropriate function of furnishing a valuable currency convertible into coin.

If in practice it is found that the conversion of bonds into money needs further limitation, either by reducing the maximum limit or by charging a percentage, it may be provided for by Congress. The conversion is not a right secured to the bond-holder as a part of his contract, but is simply a privilege designed to regulate the currency, and may be modified or withdrawn according to the judgment of Con

gress.

Your Committee are of the opinion that the time is not distant when it will become the duty of Congress to repeal so much of existing laws as makes the United States notes a legal tender in payment of debts, either public or private. This provision was adopted with extreme reluctance and under the pressure of overwhelming necessity. The debates in Congress at the time this measure was adopted show conclusively that it was universally regarded as a temporary expedient. It is inconsistent with sound financial principles, and was never resorted to since the commencement of the present Government until February 25, 1862. The evils produced by continental money were so fresh in the minds of the founders of the Government that during the financial difficulties that followed the adoption of the Constitution no one proposed such an expedient. During the war of 1812, when financial embarrassments had impaired the revenue and destroyed the public credit, a limited-tender Treasury note was proposed, but was promptly rejected. Mr. Dallas, in a communication to the Committee of Ways and Means, declared "that the extremity of that day can not be anticipated when any honest and enlightened statesman will again venture upon the desperate expedient of a tender law." We were driven to that extremity, but should hasten to abandon so desperate a remedy at the earliest day practicable. The moment at which we can restore our notes to a specie standard should be signalized by a return to correct principles, and our United States notes should stand like all other paper money, receivable only at the pleasure of the creditor.

Your Committee, having thus stated their views upon the different propositions of this bill, beg leave to add that they do not consider this measure as embracing all the financial measures demanded by the public interest; but they present it in the hope that it may not be embarrassed by other financial problems now exciting general discussion.

Various propositions relating to the national banking system are under consideration by your Committee, and will be carefully examined. Whatever view may be taken by Congress as to the continued existence of this system, it is manifest, from the report of the Comptroller of the Currency, that a more equitable distribution of the banks among the States, and new provisions for reports and for the redemption of their notes, must be made. It is equally manifest that further provision must be made for the collection of certain internal taxes, and the remission of others. It is only by relieving our industry, and applying our taxes as far as practicable to articles the consumption of which may

be dispensed with, that we can hope to establish our system on a satisfactory basis. We may justly boast of the manner our constituents have heretofore borne the vast aggregate of accumulated taxes caused by the war. They have cheerfully paid a greater amount in the aggregate, or per capita, than any other nation before; and, if necessary to preserve the public engagement, they would continue to do so, but the necessity no longer exists. It is happily our duty to select from among the great number of articles now taxed such as may now be relieved, and to simplify the mode of collecting the tax on the residue. This your Committee, in connection with that of the House of Representatives, are prepared to do; but, as preliminary to all these important subjects, it is necessary to relieve the public mind from anxiety as to the action of Congress on the subjects embraced in this bill.

THE FUNDING BILL.

IN THE SENATE, FEBRUARY 27, 1868.

The Senate having under consideration the bill for funding the national debt and for the conversion of the notes of the United States, Mr. Sherman said:

Mr. PRESIDENT: The attention of the Senate has been so long occupied with grave political questions deeply exciting the public mind, that I have no doubt it will appear a dull change in our debate to turn to questions purely of a financial and economic character; yet, as our constituents are laboring under the burdens of taxation and the acknowledged evils of a depreciated currency, and demand relief from us, it becomes the imperative duty of Congress to give attention to this subject. The House of Representatives is now engaged in the performance of its constitutional duty of diminishing taxes; and your Committee on Finance deem it their duty to lessen, if possible, the burdens of the public debt, and to give increased value to the United States notes, now made the compulsory basis of our circulation. We have, therefore, reported this bill after careful consideration. In advocating it, I do not appeal to any political bias; I do not appeal to any sectional interest; nor have I any pride of opinion; and I shall only appeal to those considerations which actuate us all alike, the desire to relieve our people from all the burdens of taxation consistent with the public faith."

The Committee on Finance acknowledge that it is the first and highest duty of a Government to maintain inviolate the public credit. A strict compliance with public engagements is the first duty of every legislative body. Public credit is the highest property of a nation, its sure reliance in time of danger and war; it is a more valuable property than any other, and is not to be tarnished or soiled by any consideration whatever. But, subordinate to this great principle, it is our duty as legislators to relieve our constituents from every exaction not demanded by the national safety or the public interests. We have a right to take

from our people their money to the extent necessary to carry on the ordinary expenses of the Government and maintain the public faith, but not one cent further. The great mass of mankind have nothing to protect except the reward of their daily labor. This is their only capital. In every community-and ours is more favored than most in this particular the majority of men depend only upon their daily labor, and enjoy nothing of the blessings of civil government except in the protection of the result of that labor. It is, therefore, our duty not to take one cent from them unless it is demanded by the public exigencies.

It is with this view, and actuated by this principle, that the Committee on Finance have endeavored to make this bill a bill of relief, reducing, if possible, consistently with the public faith, the interest of the public debt, and giving increased value to United States notes. We have endeavored in this bill to accomplish three results: first, to reduce the rate of interest with the voluntary consent of the holders of our securities; second, to make a distinct provision for the payment of the public debt; and third, to give increased value to United States notes, and to provide for a gradual resumption of specie payments. All these are objects admitted to be of the highest importance. The only question is, whether the measure proposed tends to accomplish them.

The body of our public debt consists mainly of securities commonly known as the five-twenty bonds. Nearly all of the debt of the United States is either reduced already to that form of security, or is reducible within a very short period of time. I have prepared a statement from the official documents showing the amount and time of maturity of the five-twenty bonds. There are of the first issue, which became redeemable on the 30th of April, 1867, now outstanding $514,780,500. Of the second issue there will be redeemable on the 31st of October of next year $129,443,800; there will be redeemable on the 30th of June, 1870, $301,880,250, and on the 31st of October, 1870, $181,427,250. There are of the seven-thirties, which have either been funded into five-twenties or are in process of being funded, something over $480,000,000, making an aggregate of what might now be regarded as fivetwenty bonds of $1,613,442,650, of which a little over $200,000,000 is yet in the form of seven-thirties, and will be funded before the 1st day of July next. In addition to this, there are of debts that are now matured, or which will mature this summer, an aggregate of $106,042,949, consisting chiefly of compound-interest notes and three per cent. certificates, making with the bonds mentioned $1,719,485,599, all of which are either redeemable now or will become so within five from this time; the great body of them, however, are redeemable within the present and the next year.

years

The first question that arises, Mr. President, is whether it is wise now to provide for the redemption of these bonds. We are compelled to consider this question. It is already made the subject of political disputes. While it is being considered by us in Congress it is being considered by the people, and there is a daily discussion all over this broad country as to how and when the five-twenties shall be redeemed. Especially in the West this has been made the subject of political contention. I might show you by the resolutions of political parties, both