bers of such association, and were available to such banks only for the purpose of settling balances due from and to each other, these balances under normal conditions of business being always settled in coin or currency. . . .

At a time when vast sums of coin and currency were being withdrawn from the banks, to be hoarded, these loan certificates, by performing the functions of the currency or coin customarily required for settling daily balances at the clearing house, released so much currency or coin to the legitimate and current demands of business and unquestionably placed it within the power of the banks in the cities named to extend to outside banks the aid needed on the one hand and liberally granted on the other. In no instance were these certificates designed to nor did they circulate as money. They were but due-bills and their sole function consisted in discharging the single obligation at the clearing house. attempt on the part of a bank in any of the associations issuing these certificates to use them otherwise would have incurred a fine and other penalties provided in the rules governing such associations. Their issuance at so early a date in the financial derangement of the country was most opportune in not only preventing an acute panic, but in tending to restore public confidence, such action demonstrating that by mutual agreement of all, the weak banks of the association would be, so far as depositors and other creditors were concerned, as strong as the strongest. . . .

The following figures, showing the movement and amount of the issue of loan certificates in 1893 in the cities named, will indicate the measure of relief afforded by them :

House Executive Documents, 52 Cong., I sess. (Washington, 1892), XXIV, No. 3, pt. 1, pp. 12-13 passim; 53 Cong., 2 sess. (Washington, 1895). XXIII, pt. i, No. 3, pt. 1, pp. 15-16 passim.

CHAPTER XXVIII- FINANCES AND CUR

RENCY

168. Demonetization of Silver (1872)

BY MEMBERS OF THE HOUSE OF REPRESENTATIVES

The Mint Law, or Coinage Act, of 1873, as the bill discussed in this extract was called, was prepared in the treasury department and passed the Senate during the Forty-First Congress. At that time the bill did not provide for the coinage of the silver dollar. In the House of Representatives the bill was considered during the next Congress, when a clause was added providing for the coinage of a subsidiary silver dollar. The discussion of this clause and the passage of the bill in the House are shown in this extract. The bill then went to the Senate, where the coinage of the subsidiary silver dollar was cut out and a substitute added providing for the coinage of the "trade" dollar. In this form the act became a law. Later it was contended that the bill passed the House by fraud because the purpose to demonetize silver was not stated. Bibliography: Brookings and Ringwalt, Briefs for Debate, Nos. xxxiv, xxxv; Bowker and Iles, Reader's Guide in Economic, Social, and Political Science, 38-40; Providence Public Library, Monthly Bulletin, II, 233-241. - For a detailed history of the bill, see Edward McPherson, Hand Book of Politics for 1890, 157–169. ECTION fourteen declares what the gold coins shall be, and their respective weights, and makes them a legal tender in all payments at their nominal value, when not below the standard weight and limit of tolerance prescribed, and at a valuation proportioned to their actual weight when below the standard weight and tolerance. Thus far the section is a reënactment of existing laws. In addition, it declares the gold dollar of twenty-five and eight tenths grains of standard gold to be the unit of value, gold practically having been in this country for many years the standard or measure of value, as it is legally in Great Britain and most of the European countries. The silver dollar, which by law is now the legally declared unit of value, does not bear a correct relative proportion to the gold dollar. . . .

[April 9. Mr. HOOPER.] SECT

. . . The committee, after careful consideration, concluded that twenty-five and eight tenths grains of standard gold constituting the gold dollar should be declared the money unit or metallic representative of the dollar of account. . . .

Section sixteen reënacts the provisions of existing laws defining the silver coins and their weights respectively, except in relation to the silver dollar, which is reduced in weight from four hundred and twelve and a half to three hundred and eighty-four grains; thus making it a subsidiary coin in harmony with the silver coins of less denomination, to secure its concurrent circulation with them. The silver dollar of four hundred and twelve and a half grains, by reason of its bullion or intrinsic value being greater than its nominal value, long since ceased to be a coin of circulation, and is melted by manufacturers of silverware.

Section eighteen provides that no coins other than those prescribed in this act shall hereafter be issued. The effect of it is to discontinue the coinage of the one and two cent bronze coins. . . .

...

[Mr. STOUGHTON.] The gold coins provided for . . . are declared to be a legal tender for all sums at their denominational value. Aside from the three-dollar gold piece, which is a deviation from our metrical ratio, and therefore objectionable, the only change in the present law is in more clearly specifying the gold dollar as the unit of value. was probably the intention, and perhaps the effect of the act of March 3, 1849, but it ought not to be left to inference or implication. The value of silver depends, in a great measure, upon the fluctuations of the market, and the supply and demand. Gold is practically the standard of value among all civilized nations, and the time has come in this country when the gold dollar should be distinctly declared to be the coin representative of the money unit. . .

The silver coins provided for are the dollar, 384 grains troy, the half dollar, quarter dollar, and dime of the value and weight of one half, one quarter, and one tenth of the dollar respectively; and they are made a legal tender for all sums not exceeding five dollars at any one pay

ment.

[Mr. POTTER.] . . . this bill provides for the making of changes in the legal-tender coin of the country, and for substituting as legaltender coin of only one metal instead as heretofore of two. I think myself this would be a wise provision, and that legal-tender coins, except subsidiary coin, should be of gold alone; but why should we legislate on this now when we are not using either of those metals as a circulating medium? . . .

I desire to call up the bill (H. R.

No. 1427) revising and amending the laws relative to mints, assay offices, and coinage of the United States. I do so for the purpose of offering

an amendment to the bill in the nature of a substitute, one which has been very carefully prepared and which I have submitted to the different gentlemen in this House who have taken a special interest in the bill. . . .

The SPEAKER. Does the gentleman from Massachusetts (Mr. HOOPER) move that the reading of the bill be dispensed with?

Mr. HOOPER. . . . I will so frame my motion to suspend the rules that it will dispense with the reading of the bill. . . .

The question was put on suspending the rules and passing the bill without reading; and (two thirds not voting in favor thereof) the rules were not suspended.

...

Mr. HOOPER. . . . I now move that the rules be suspended, and the substitute for the bill in relation to mints and coinage passed; and I ask that the substitute be read.

The Clerk began to read the substitute. .

The question being taken on the motion of Mr. HOOPER, of Massachusetts, to suspend the rules and pass the bill, it was agreed to; there being ayes 110, noes 13.

Congressional Globe, 42 Cong., 2 sess. (Rives and Bailey, Washington, 1872), 2305-3883 passim, April 9 and May 27, 1872.

169. Resumption of Specie Payments (1879)
BY SECRETARY JOHN SHERMAN (1895)

The law providing for the resumption of specie payments was passed in 1875Sherman was secretary of the treasury when the law was finally carried into effect. For Sherman, see No. 52 above. — Bibliography: Bowker and Iles, Reader's Guide in Economic, Social, and Political Science, 35-38; Horace White, Money and Banking, 469-477.

ON

N the 1st of January, 1879, when the resumption act went into effect, the aggregate amount of gold coin and bullion in the treasury exceeded $140,000,000. United States notes, when presented, were redeemed with gold coin, but instead of the notes being presented for redemption, gold coin in exchange for them was deposited, thus increasing the gold in the treasury.

The resumption of specie payments was generally accepted as a fortunate event by the great body of the people of the United States, but there was a great diversity of opinion as to what was meant by

resumption. The commercial and banking classes generally treated resumption as if it involved the payment and cancellation of United States notes and all forms of government money except coin and bank notes. Another class was opposed to resumption, and favored a large issue of paper money without any promise or expectation of redemption in coin. The body of the people, I believe, agreed with me in opinion that resumption meant, not the cancellation and withdrawal of greenbacks, but the bringing them up to par and maintaining them as the equivalent of coin by the payment of them in coin on demand by the holder. This was my definition of resumption. I do not believe that any commercial nation can conduct modern operations of business upon the basis of coin alone. Prior to our Civil War the United States undertook to collect its taxes in specie and to pay specie for its obligations; this was the bullion theory. This narrow view of money compelled the states to supply paper currency, and this led to a great diversity of money, depending upon the credit, the habits and the wants of the people of the different states. The United States notes, commonly called greenbacks, were the creature of necessity, but proved a great blessing, and only needed one attribute to make them the best substitute for coin money that has ever been devised. That quality was supplied by their redemption in coin, when demanded by the holder.

The feeling in the treasury department on the day of resumption is thus described by J. K. Upton, assistant secretary, in an article written at the close of 1892:

"The year, however, closed with no unpleasant excitement, but with unpleasant forebodings. The 1st day of January was Sunday and no business was transacted. On Monday anxiety reigned in the office of the secretary. Hour after hour passed; no news came from New York. Inquiry by wire showed all was quiet. At the close of business came this message: $135,000 of notes presented for coin - $400,000 of gold for notes.' That was all. Resumption was accomplished with no disturbance. By five o'clock the news was all over the land, and the New York bankers were sipping their tea in absolute safety.

"Thirteen years have since passed, and the redemption fund still remains intact in the sub-treasury vaults. The prediction of the secretary has become history. When gold could with certainty be obtained for notes, nobody wanted it. The experiment of maintaining a limited amount of United States notes in circulation, based upon a reasonable reserve in the treasury pledged for that purpose, and supported also by the credit of the government, has proved generally satisfactory, and the exclusive use of these notes for circulation may become, in time, the fixed financial policy of the government."

The immediate effect of resumption of specie payments was to advance the public credit, which made it possible to rapidly fund all the bonds