Q. In the published reports in which year did it first appear to make a discrepancy-A. In 1870. Q. Under what head?-A. Under the head of Tables K and L. Q. What are their names?-A. "Statement of the Receipts and Expenditures of the United States." Q. That made a discrepancy of $116,000,000 between that statement and what other statement?-A. And the amount of the public debt as shown at that time by the debt statement. Q. This $116,000,000, then, first appeared there?-A. Yes, sir. Mr. Bayley here says that he found a difference of $116,000,000 between the public-debt statement at that time and the amount of the debt stated from Receipts and Expenditures, and the discrepancy appeared for the first time in the Finance Report of 1871. That is to say, when the Receipts and Expenditures on account of the public debt were compared in 1870, there were $116,000,000 of the public debt, according to the Secretary's debt statement, unaccounted for by a statement made up from the Receipts and Expenditures: From the beginning of the government to June 30, 1871: The total receipts were. The total net expenditures. Balance The public debt June 30, 1871 Difference $7,094, 541, 041 38 4,857, 434, 540 51 2, 237, 106, 500 87 2, 353, 211, 332 32 116, 104, 831 45 If the debt account was kept by Receipts and Expenditures, there would be $116,104,831.45 to be accounted for; and on that basis the public debt in 1871 was in round numbers apparently $116,000,000 too large. It is well known that many bonds have been issued for which no cash was covered into the Treasury, such as the Mississippi stock, the Louisiana purchase, Texas purchase, Mexican indemnity, Massachusetts debt, Eads jetties, &c. This confusion grew out of the change of system in making up the public-debt statement from "Issues and Redemptions" to "Receipts and Expenditures" in 1870. ISSUE OF BONDS BY THE LOAN DIVISION. During the examination of Major Power the following questions were asked and answers given (see testimony, pp. 88 and 89): By the CHAIRMAN: * Q. What check is there on the Loan Branch of the Secretary's office as to the amount of the bond that has been ordered by the Treasurer? In other words, if a bond for $1,000 was subscribed for and the Loan Division gives an order for a $2,000 bond, where is the check to prevent that $2,000 bond from going upon the public?—A. If the order to the Register for the bond recites the certificate of deposit as a $2,000 deposit in place of $1,000, I believe there would be nothing to prevent the bond being issued. There would have to be collusion to falsify the record. Q. All in the same office?-A. Yes. Q. An order comes from the Treasurer's office to the Loan Branch of the Secretary's office to issue a bond for $1,000; the Loan Division directs a $2,000 bond to be issued instead of $1,000 bond, which the Treasurer directed to be ordered. That order goes to the Register, I understand. The Register issues a $2,000 bond, and it comes back to the same office that ordered it for the seal; that office puts the seal on it and the bond then goes back to the Register for delivery?-A. That is the practice. Q. Then there is no check outside of that particular office as to whether or not the bond was a $1,000 or a $2,000 bond?—A. I believe not. * William Fletcher, Chief of Loan Division, in answer to how bonds were issued, said (see testimony, pp. 126, 127, and 128): By the CHAIRMAN: Q. Please explain where, when you went into the office, and where at present, bonds were and are issued.-A. I did not know much about it at the time I entered the office, and I do not know that I can tell how bonds were issued fifteen years ago. I was then a clerk of class one and had not the management; neither have I been over the papers so as to be able to tell how bonds were issued then. I can tell how an issue is made now and how it has been for a number of years. Q. State that.-A. A deposit is made in the office of the Treasurer, for which he issues a certificate, and upon that certificate our office issues an order on the Register of the Treasury. On that order bonds are issued. I have a certificate here which I can show. Q. Does the bond come back to your office?-A. Yes, sir; and receives the seal and is initialed. Q. Does it then go back to the Treasurer's office?-A. No, sir; not to the Treasurer's. It is delivered in accordance with instructions indorsed on the Treasurer's certificate. Q. The Treasurer, after giving the order, has nothing further to do with the bond in any way?-A. No, sir. * * Q. If you did so, the bond would come to your office for putting on the initials?—A. Yes, sir. Q. And would not go to the Treasurer to see if he had the money for it in the Treasury?-A. It would not go to the Treasurer. Q. If the Treasurer issues a certificate for a one thousand dollar bond, is there anything to prevent an order for two thousand dollars of bonds being sent to the Register's office from your office?-A. Only our checks. Q. Your integrity?-A. Yes, sir. Q. I am putting that out of the question all the time. If such a bond was issued, that two thousand dollar bond would come back to your office. What would you do with it?-A. The initials of the clerk having charge of the loan would be put upon it, and it would be sealed. Q. But the Treasurer himself would know nothing of it?-A. No, sir. Q. Do you keep an account in your office of accrued interest on bonds when they are issued?-A. We keep an account of it as furnished by the certificate of deposit. Q. To make it plain, if I were to ask you to-day to furnish me a list of accrued interest upon bonds sold since 1864, or any other time, could you do it?-A. I could not. Q. It is not kept in your office in such a way that you could?-A. No, sir. And Treasurer Gilfillan testifies (see testimony, pp. 106 and 107): Q. How do you know that a bond is issued for the same amount that you give a certificate for?-A. I have not any knowledge of the transaction after having given the receipt. Q. If A applies for a $1,000 bond and pays you the principal and accrued interest, you give him a receipt for that $1,000. That then goes to the Loan Division of the Secretary's office, as understand, and the Loan Division issues an order to the Register to issue the bond?-A. Yes, sir. Q. The Register issues the bond, and does what with it?-A. Transmits it usually to the subscriber, to the depositor. By Mr. DAWES : Q. Before he does that, does he not send it to the Secretary?-A. This present loan, as I understand, goes back to the Loan Division of the Secretary's office. A part of the process is then completed; I think putting on the seal and an initial. By the CHAIRMAN: Q. That is the same office that gave the order for the bond?-A. Yes, sir. Whether they send the bonds or not I am not certain. * Q. Is there anything other than the integrity of the officer to prevent the Loan Division, if it receives a certificate from you of $1,000, directing the Register to issue a bond of $2,000?—A. I do not know that there is, of my own knowledge. Q. Is there any check upon the Loan Division from making an order upon the Register to issue to A a bond of any given amount ?-A. Not that I am aware of. Q. How long has the present system of issuing bonds been in practice?-A. I think ever since there has been a Loan Division. I know it was so in Mr. Boutwell's time. Thus it will be seen the Chief of the Warrant Division, the Chief of the Loan Division, and the Treasurer of the United States all say that there is no check upon the Loan Division in issuing bonds, and that upon the integrity of one man in the Loan Division may depend whether or not the bonded debt of the government is as reported. If there was a return of bonds to the Treasurer to see if the amount agreed with the money received, this would be a check on the Loan Division. As it now is, that division can increase the Treasurer's order or originate an order on the Register for the issue of bonds, and there is no check. Many hundred millions of dollars in bonds have been issued with no other check than the integrity of an officer in the Loan Division of the Secretary's office. ISSUING OF LEGAL-TENDER NOTES. In regard to the issue of legal-tender notes, Major Power testifies (see testimony, pp. 92 and 93): Q. The Register's name is on the notes, I believe?-A. Yes, sir. Q. Does the Register ever see the notes?-A. Not until they are redeemed. Q. Then a note issued, though it is signed by the Register, never passes through the Register's office?-A. That is, the notes bear the fac simile of the Register's signature. Q. I understand that the Superintendent of the Printing Bureau delivers to the Treasurer direct the notes, legal-tenders or fractional currency when the latter was in existence. Do they pass through any other hands but those two?-A. They do not. Q. They are ready for circulation when the Treasurer receives them from the Printing Bureau?-A. They are then ready for circulation. Q. They are ready?-A. Yes; but they cannot be put into circulation legally until the Treasurer covers the amount into the Treasury; they are not money in the Treasury until covered in. Q. Still they are in his possession and no one else has possession of them but the Treasurer, and he could, if he was dishonest, put them in circulation without making any further report about the matter?-A. There is no other check upon the immediate issue of these notes. Q. They do not pass through the Register's office until they are redeemed and ready for destruction?-A. No, sir. Q. Then are they registered in the Register's office, all that have been destroyed?— A. They are. Q. And the same as to delivery from the Printing Bureau to the Treasurer has been in existence since the act creating the two classes of notes, the legal-tenders and fractional currency?-A. Yes, sir. Q. And they pass through no other hands, I understand, as a check?-A. No, sir. This shows that the Register's name is on all legal-tender notes, that he does not see them until they are redeemed, and that there is not a proper check on the Treasurer or Bureau of Printing in this regard, so that the Chief of the Bureau of Printing or the Treasurer, if dishonest, could put notes improperly in circulation. AMOUNT OF INTEREST ON BONDS. James Gilfillan, Treasurer of the United States, testifies (see testimony, pp. 104 and 105) : By the CHAIRMAN: Q. To put it practically, if you were asked to-day to furnish this committee with the total amount of interest aud principal received last year in bonds which were sold, could you furnish it?-A. Not from the books, my impression is, without going through and taking the warrants and separating them. Q. You understand that when the entry is made upon the books it is made in gross and not in separate entries, one of principal and the other of interest?-A. Yes, sir The items of receipts are internal revenue, lands, war, and navy (which are repayments), and miscellaneous. The miscellaneous includes the public debt and other receipts except those before named, which would include principal and interest. I think that was what you requested of me in my statement. Q. Which you said you could not furnish? A. Yes, sir. It was said it could not be furnished as the books had been kept from 1861. * * * * Q. No separate account on the books was kept of principal and interest?--A. Of the receipts, no, sir. Q. Can your office give the exact amount of bonds now in circulation?-A. No, sir. * * * * * * Q. Then you might, so far as your office is concerned, pay coupons of duplicate numbers, or a greater amount of coupons than were out ?—A. If they were genuine coupons. Q. How would you know whether they were genuine or counterfeit-on the same principle that you know whether a note is a counterfeit or not?-A. Exactly. Q. But you have no means of knowing whether a bond has been fraudulently or illegally or wrongfully gotten into circulation or not?-A. Unless in the case of registered bonds, which are caveated, and we might have been notified; but we never should be notified of that, because it is not necessary. * * * This shows that the Treasurer keeps the moneys received for bonds, principal and interest together, and that he cannot tell from the books how much was received for principal and how much for accrued interest for a given time; that is, accrued interest on bonds sold is not kept as a separate account. The Treasurer pays interest on bonds, but he cannot give the amount of bonds outstanding. The Treasurer pays all coupons presented, if genuine, but he does not know whether or not duplicates are paid by him or by the sub-treasurers elsewhere. APPARENT ERASURES AND CHANGES IN THE BOOKS OF THE TREASURY. On the question of erasures and apparent changes in the books of the Treasury, the committee call attention to the following testimony of Mr. Woodville (see testimony, pp. 110, 111, 112, and 113): WILLIAM WOODVILLE recalled. By the CHAIRMAN: Question. By whom was the statement that I hand you prepared? (Exhibiting.)— Answer. Prepared by Mr. Byrne, formerly a clerk of this committee. Q. Have you examined it by the books so as to be able yourself to testify to it?— A. Yes, sir; I can testify to this statement. I went over it with him and checked it off with him from the other book. Q. Have you recently re-examined it?-A. Yes, sir; I have refreshed my memory about it to-day. Q. Is it correct?-A. It is correct, with the exception of a few memoranda which are marked there; two exceptions which I have specified on it. The CHAIRMAN. I offer that in evidence, as having been the result of the work of Messrs. Woodville and Byrne together, and want it to go in. Memorandum of erasures, alterations, and changes found in "Register of Public Debt Warrants" from January 1, 1865, to December 31, 1869. Secretary of the Treasury. |