which, for the want of means, it was thought could not be reimbursed before the years 1829 and 1830, the Committee of Ways and Means believed it advisable to provide for that portion by a new stock, at a reduced rate of interest and payable at those periods. The committee therefore recommended a new loan, or an exchange to the amount of $12,000,000, at a rate of interest not exceeding 4 per cent., reimbursable in equal portions in the years 1829 and 1830.

An act for this purpose was approved March 3, 1825. The first section authorized the President to borrow on the credit of the United States a sum not exceeding $12,000,000, at not exceeding 4 per cent. interest, $6,000,000 of the principal to be reimbursable at the pleasure of the Government at any time after December 31, 1828, and $6,000,000 at any time after December 31, 1829, the money borrowed to be applied to redeeming such part of the six per cent. stock as was reimbursable after January 1, 1826. The Bank of the United States was to be permitted to lend the sum or any part thereof, and the Secretary of the Treasury was authorized to raise the money by selling certificates of stock, not under par. Section 3 proposed a subscription to the amount of $12,000,000 of the six per cent. stock of the year 1813, all subscriptions in this stock to be counted as a part of the $12,000,000 authorized by the act to be borrowed. For the whole or any part of the sum subscribed in money or six per cents, certificates of stock were to be issued at not exceeding 4 per cent. interest, payable quarterly, and reimbursable as provided for in the first section. The same funds already pledged by law for the payment of the interest and the reimbursement of the principal of the stock which might be redeemed or exchanged, were to remain pledged for payment of the interest and the reimbursement of the principal of the stock created under this

act.

The low rate of interest offered made this loan a failure, as far as borrowing money was concerned, and the amount of stock exchanged under the act was comparatively small. The Secretary of the Treasury, in his report of December 22, 1825, says: 66 The proper measures were taken to execute this act, but have prevailed only to a limited extent. The operation of exchange, which was first resorted to, took effect to the amount of $1,585,138.88, and this sum, divided into equal parts, forms the two sums that now stand in the general table of the debt as redeemable in the years 1829 and 1830, while they have also served to diminish by so much the six per cent. stock of 1813. Proposals for the residue of the sum wanted were next issued, but no offers were received. The causes of the failure, it may be presumed, were the low rate of interest and short periods of redemption held out by the act, in conjunction with an activity in the commercial and manufacturing operations of

the country affording higher inducements to the investment of capital."

Under this act stock was issued in the amount of only $1,539,336.16.

With these transactions the refunding operations of the Government closed, not to be renewed again for many years. The outstanding debt continued to be reduced by redemptions from the surplus revenues, until in 1836 it was practically extinguished. Subsequently, however, owing to insufficient revenues and the extraordinary expenses caused by the Mexican war, a new debt was incurred, amounting on June 30, 1861, to $90,580,873.72.

The unprecedented expenses incurred in the war of secession, during the four years from 1861 to 1865, were partly met by the imposition of heavy taxes, but largely by the issue of loans bearing various rates of interest and having different periods to run. Some of the earlier loans were redeemed from the proceeds of loans subsequently issued.

On August 31, 1865, when the debt reached its highest point, the interest-bearing debt was made up of loans bearing interest as follows: Four per cents Five per cents... Six per cents...

Seven and three tenths per cents..

$618,127 98 269,175,727 65 1,281,736,489 88 $80,000,000 00

Total interest-bearing debt.... $2,881,530,294 96 Some of these bonds were paid off, and others were converted into the five-twenty consols of 1865, 1867, and 1868, bearing 6 per cent. interest.

On March 18, 1869, Congress passed an act to strengthen the public credit, in which it is declared that "the faith of the United States is solemnly pledged to payment in coin or its equivalent of all its interest-bearing obligations, except in cases where the law authorizing their issue has expressly provided that the same may be paid in lawful money or other currency than gold and silver; but none of such interest-bearing obligations not already due should be redeemed or paid before maturity, unless at such, time United States notes should be convertible into coin at the option of the holder, or unless at such time bonds of the United States bearing a lower rate of interest than the bonds to be redeemed could be

sold at par in coin." This act had the effect of improving the credit of the country, and, as it was believed that the outstanding debt might be refunded into bonds bearing a lower rate of interest, the matter was thoroughly discussed in the succeeding Congress, and an act for the purpose was approved July 14, 1870, entitled "An act to authorize the refunding of the national debt," of which the following is a copy:

Be it enacted by the Senate and House of Represen tatives of the United States of America in Congress assembled, That the Secretary of the Treasury is hereby authorized to issue, in a sum or sums not exceed ing in the aggregate two hundred million dollars, coupon or registered bonds of the United States, in such form as he may prescribe, and of denominations of fifty dollars, or some multiple of that sum, redeem

able in coin of the present standard value, at the pleasure of the United States, after ten years from the date of their issue, and bearing interest, payable semiannually in such coin at the rate of five per cent. per annum; also a sum or sums not exceeding in the aggregate three hundred million dollars of like bonds, the same in all respects, but payable at the pleasure of the United States after fifteen years from the date of their issue, and bearing interest at the rate of four and a half per cent. per annum; also a sum or sums not exceeding in the aggregate one thousand million dollars of like bonds, the same in all respects, but payable at the pleasure of the United States after thirty years from the date of their issue, and bearing interest at the rate of four per cent. per annum; all of which said several classes of bonds and the interest thereon shall be exempt from the payment of all taxes or duties of the United States, as well as from taxation in any form by or under State, municipal, or local authority; and the said bonds shall have set forth and expressed upon their face the above specified conditions, and shall, with their coupons, be made payable at the Treasury of the United States. But nothing in this act, or in any other law now in force, shall be construed to authorize any increase whatever of the bonded debt of the United States.

SECTION 2. And be it further enacted, That the Secretary of the Treasury is hereby authorized to sell and dispose of any of the bonds issued under this act, at not less than their par value for coin, and to apply the proceeds thereof to the redemption of any of the bonds of the United States outstanding, and known as fivetwenty bonds, at their par value, or he may exchange the same for such five-twenty bonds, par for par; but the bonds hereby authorized shall be used for no other purpose whatsoever. And a sum not exceeding one half of one per cent. of the bonds herein authorized is hereby appropriated to pay the expense of preparing, issuing, advertising, and disposing of the same."

SEC. 3. And be it further enacted, That the payment of any of the bonds hereby authorized after the expiration of the said several terms of ten, fifteen, and thirty years, shall be made in amounts to be determined from time to time by the Secretary of the Treasury, at his discretion, the bonds so to be paid to be distinguished and described by the dates and numbers, beginning for each successive payment with the bonds of each class last dated and numbered; of the time of which in

SEC. 4. And be it further enacted, That the Secre tary of the Treasury is hereby authorized, with any coin of the Treasury of the United States which he may lawfully apply to such purpose, or which may be derived from the sale of any of the bonds, the issue of which is provided for in this act, to pay at par and cancel any six per cent. bonds of the United States of the kind known as five-twenty bonds, which have become or shall hereafter become redeemable by the terms of their issue. But the particular bonds so to be paid and canceled shall in all cases be indicated and specified by class, date, and number, in the order of their numbers and issue, beginning with the first numbered and issued, in public notice to be given ty the Secretary of the Treasury; and in three montis after the date of such public notice the interest on the bonds so selected and advertised to be paid shall cease. On January 20, 1871, an act was approved amending the above, as follows:

Be it enacted by the Senate and House of Represen tatives of the United States of America in Congr assembled, That the amount of bonds authorized by the act approved July fourteen, eighteen hundred ar seventy, entitled "An act to authorize the refunding of the national debt," to be issued bearing five per centum interest per annum, be, and the same is, increased to five hundred millions of dollars, and the interest of any portion of the bonds issued under said act, or this act, may, at the discretion of the Secretary Provided, however, That this act shall not be cer of the Treasury, be made payable quarter-yearly: strued to authorize any increase of the total amcat of bonds provided for by the act to which this act is an amendment.

At that time there was considerable dout: of the bonds on the terms fixed by the law, as to the ability of the Government to sell any as the six per cent. bonds which bore interest in coin were still selling in the market at considerably below par.

On February 28, 1871, the interest-bearing debt of the Government consisted of the following:

evident that until the credit of the country could be considerably advanced no successful steps toward refunding under this law could be taken. It will also be seen by that table that, after the passage of the act of March 18, 1869, the market value of United States securities uniformly and rapidly increased. So rapid was this advance that, in February, 1871, it was believed that sales of five per cents could be made; and, accordingly, on the 28th of that month Secretary Boutwell gave public notice that on and after the 6th of the following March books would be opened in this country and in Europe for subscriptions to the bonds issued under the refunding act. All the na tional banks in this country, and a large number of bankers both here and in Europe, were authorized to receive subscriptions. On the 1st of August following, the subscriptions to the new five per cent. loan amounted to $65,775,550, mainly made by national banks, and a like amount of six per cent. bonds was retired. Early in that month an agreement was entered into with certain bankers in Europe and in the United States, by the terms of which the parties subscribing had a right to subscribe for the remainder of $200,000,000 of said bonds, by giving notice thereof at any time previous to the 1st of April next succeeding, and by subscribing for $10,000,000 at once, and an average of at least $5,000,000 of bonds per month during the intervening time, subject to the right of the national banks to subscribe for $50,000,000 within sixty days from the 25th day of August. It was also agreed that the subscriptions should be made through national banks, and that certificates of deposit therefor might be issued by said banks to the Secretary of the Treasury; that the bonds should be lodged with the Treasurer of the United States to the amount of the deposit; and that the banks should be made depositaries for this purpose under the provisions of the national banking act. Under this arrangement was initiated the plan by which the Government paid interest on the bonds called in and interest on the bonds issued for a period not exceeding three months in any one case. Secretary Boutwell, in his annual report to Congress for 1871, explained the transaction as follows:

By the act establishing the national banking system the Secretary of the Treasury was authorized to make them depositaries of any public money, except receipts from customs; and the act authorizing the refunding of the national debt directed the Secretary of the Treasury to give three months' notice of the payment of any bonds which, in such notice, might be specified and called for payment. In the same act it was provided that the money received for the new bonds should be used only in payment of bonds outstanding, known as five-twenty bonds. The statute proceeded upon the idea that the holders of five-twenty bonds should receive three months' interest upon their bonds after notice should be given by the Government. As this notice could be given safely only upon subscriptions already made or secured, the general necessary result, even in case the money were paid into and held

in the Treasury of the United States, would be a loss of interest for three months.

It was further agreed that the subscribers should receive as commissions whatever might remain of the half of one per cent. allowed by law upon the $200,000,000 after paying the cost of preparing and issuing the bonds. Under this contract the remainder of the $200,000,000 offered was sold, and the transactions were completed before the 1st of April, 1872.

On January 23, 1873, Secretary Boutwell made another contract with certain bankers, in which they agreed to take at least $10,000,000 of the five per cent. bonds, with a right to subscribe for the remaining $300,000,000. The other conditions of the contract were substantially the same as those of the agreement above mentioned.

Under the contract there were sold by Secretary Boutwell $50,000,000 of the five per cent bonds.

This arrangement appears to have been continued by Secretary Richardson, Mr. Boutwell's successor, who during his term of office sold under its provisions $51,494,700 of the five per cents, and also sold in June, 1874, to other parties, by special agreement, for one fourth of one per cent. commission, an additional $6,000,000 of the five per cent. bonds, the subscribers to pay the accrued interest to date of the maturity of the bonds called against their subscriptions, for all of which six per cent. bonds were retired. He also, under the act of December 17, 1873, issued of the five per cents $13,957,000 in exchange for an equal amount of the five per cent. loan of June 14, 1858.

On the 2d of July, 1874, Secretary Bris tow, successor to Secretary Richardson, invited sealed proposals for the balance of the five per cents which remained unsold, $178,548,300, and in response thereto received various bids aggregating in amount $75,933,550. Of these bids there were accepted $10,113,550, at par and above. The proposition of an association of bankers was also accepted for the negotiation of $45,000,000 of the bonds, with an option for the balance of the loan; the subscribers to pay par and interest accrued to date of maturity of each call, the calls to be of even date with the subscription, and a commission of one fourth of one per cent. to be allowed upon the amount taken, the parties subscribing to pay all expenses incurred in preparing and issuing the bonds. The bonds were taken in accordance with the contract. The contract was renewed January 29, 1875, with conditions slightly modified, so that the contracting par ties were allowed a commission of one half of one per cent. instead of one fourth of one per cent.; and under its terms the balance of five per cents was sold, and for the entire sales a like amount of six per cents was retired.

The entire amount of five per cents authorized by the refunding act having been thus disposed of by Secretary Bristow, Secretary

Morrill, his successor, on the 24th of August, 1876, entered into a contract with certain bankers for the sale of the $300,000,000 of four and a half per cents for refunding purposes, the parties to be allowed one half of one per cent. commission upon the amount they might take, they to assume and defray all expenses incurred in the preparation and issue of the bonds. Under this arrangement there were sold up to March 4, 1877, when Mr. Morrill's term of office expired, about $90,000,000, for which an equal amount of six per cent. bonds was called.

The credit of the country now rapidly advanced, and on April 6th Secretary Sherman, who had succeeded Mr. Morrill, addressed a letter to the associated bankers who had the contract for four and a half per cent. bonds, in which he announced that when the sales reached $200,000,000 he proposed to withdraw the bonds from the market. At that time the four and a half per cents were somewhat below par in Europe, and but little above par in this country. They continued, however, to appreciate, and before the 1st of July the whole $200,000,000 were taken, of which $185,000,000 were applied to refunding, and $15,000,000, by the consent of the contracting parties given on the 11th of May, to resumption purposes.

On the 9th of June, 1877, a contract was made with certain bankers for the sale of four per cent. bonds, with a proviso that the loan should be open to public subscription for a period of one month. This loan and the method of selling it proved very popular, and before the close of the thirty days during which subscriptions were open to the public at large, $75,496,550 of the bonds were sold, of which $25,000,000 were reserved for resumption and the remainder applied to refunding purposes.

The agitation by Congress of such measures as a repeal of the resumption act, and the reestablishing in the currency of the country of the silver dollar, the issue of which had been discontinued by the coinage act of 1873, somewhat alarmed investors, and retarded the further sale of four per cent. bonds. The opponents of resumption, however, were not able to repeal the resumption act, and the advocates of remonetizing the silver dollar succeeded only in having the coin reissued in amounts of not less than $2,000,000 nor more than $4,000,000 per month on Government account, the profit in its coinage to accrue to the Government instead of to the holders of bullion. On the 16th of January, 1878, Secretary Sherman, having concluded all contracts for the sale of four per cents, gave notice that he would receive subscriptions from the public at large for the sale of these bonds, and efforts were again made to popularize them and to facilitate their sale. The purchasers were to be allowed a commission of one fourth of one per cent. on the amount purchased in

excess of $1,000, and all national banks were invited to become depositaries for the purpose of aiding in placing the loan.

The process of refunding continued during the calendar year 1878 with more or less success, and at the close of the year there had been sold of four per cents for this purpose $173,085,450. The resumption act of January 14, 1875, provided for a return to specie payments on January 1, 1879. As resumption would remove the difference in value between the coin and paper currency of the country, the banks belonging to the ClearingHouse Association of New York agreed with the Treasury Department that on and after that date they would take legal-tender notes in payment of all obligations of the Government. Under this arrangement payments for interest on the public debt and for bonds called in for redemption, which were theretofore made by the check of the United States Treasurer issued payable in New York, could be made after the 1st of January in legal-tender notes. The necessity for disbursing coin having thus been practically removed, there was no longer any need of requiring payments due the Government to be made in coin. So on the 1st of January, 1879, announcement was made that payments for bonds issued might thereafter be made in legal-tender notes; and a system of graded commissions was established, with a view of encouraging banks to make their subscriptions as large as possible. Under this new arrangement subscriptions came in very rapidly, and there was throughout the country unprecedented activity in the public stocks, which greatly advanced in market value from day to day. As many of the bonds called were held in Europe, the payment of them necessarily caused a drain of gold from the country, and this was beginning to cause a tight money market and embarrassment to the financial operations of the country. To avoid such embarrassment, Secretary Sherman on January 21, 1879, made a contract with certain prominent foreign bankers, by which $5,000,000 a month of the four per cent. consols were to be taken in England, that amount being deemed sufficient to prevent the shipment of gold from this country to pay for called bonds. The plan resulted successfully.

Meanwhile Congress, by an act approved January 25, 1879, authorized the exchange of the four per cent. consols of 1907 for an equal amount of any outstanding uncalled six per cent. five-twenty bonds of the United States, the Department to pay the holders of the bonds exchanged the accrued interest and additional interest for a period of three months. Under this authority there were exchanged for fivetwenty six per cent. bonds $806,000. To further facilitate the refunding operations of the Government, Congress, by an act approved February 26, 1879, authorized the issue of refunding certificates in sums of $10, bearing interest at the rate of 4 per cent. per annum, and