House bill contains what I have spoken of as the compulsory power of the Government proposed to compel subscription to its loans. In section 5 of the House bill, which has been stricken out by the Senate Committee, it will be found that the bonds bearing 3 per cent were to be the only' bonds receivable as security for national-bank circulation, compelling the banks to exchange any bonds bearing a higher rate of interest for those bearing the lower rate. That was intended to create an involuntary market for some two hundred and sixty-nine million dollars of these bonds. I did object, and do now to this, and the committee have reported against this compulsory feature, and I think they were wise and right in doing so. The exhibition of compulsory power, arbitrary power by a government over matters touching its credit, has never proved of ultimate and permanent value. It has rather suggested distrust, and lack of confidence in its own credit, that you should pass from our voluntary and free system of government to the involuntary and tyrannical; and there is in this compulsory action proposed toward the stockholders of the banks, created by act of Congress, an interference with their rights of private contract and the spirit, if not the letter of their chartered rights, which is discriminating and, in my opinion, unjust, unwise, and inexpedient. The real strength of this Government lies at last in the hearts of the people of the country; it can not be created and established by compulsory statutes; and we must and we ought to leave every class of our citizens, rich and poor, in this land, free to deal with their Government on equal and general terms applied without discrimination to all alike. The bonds under the present act as proposed by the Senate Committee on Finance will be receivable as security for circulation, and will be used as its basis as heretofore provided by law in relation to other interest-bearing bonds of the Government.

"Mr. President, it is shown that the expenses of the late refunding operations amounted to about three eighths of 1 per cent, and the tables of similar expenses, both in our own history and in the history of other governments, show that such an operation was never before conducted at anything like so low a rate. I do not mean to say that there has been nothing gained by experience, or that we should continue expensive and ancient methods, or that we should test the reasonableness of this expense wholly by the past; but I do mean to say that upon examination no candid American will complain of extravagance in the late accomplishment of refunding. I do not mean to say that the same rate of three eighths of 1 per cent may not fully cover the entire expense of carrying this act into effect; but I do say that for the matter of one eighth of 1 per cent we ought not to tie the hands of our agents when we compel them to make due return to us of every dollar expended, and it would be

both an unwise suspicion and an injurious act which would tend to jeopardize in any degree a transaction so vast and important as this under the possibility of restricting the cost by withholding one eighth of 1 per cent.

"I have not been able, had I been willing, but I would not have been willing, to consider this great question by the narrow light of party. I would not be willing to make cheap reputation out of mere party prejudices in dealing with a question like this, or to gain unthinking applause by suggestions of recklessness, extravagance, or something that is worse than either upon the part of high officials charged with a great and important duty to be exercised in the light of public examination with returns for every farthing expended under their responsibility. For that reason, while desiring every just economy, while not affecting to deal with easy liberality as to moneys I am not to pay myself, and being generons with the means of others, I still am not willing, in contemplating the results as are necessarily embraced in these immense and important operations to the people of this country, of so dealing with a gigantic debt; I am not willing to treat those who are to be the practical and responsible agents in the adjustment of this matter with undue or unworthy suspicion, or, I may add, to bind them down with undue and improper restrictions. There is a proportion to be observed in all things; and we are not bargainers with mere brokers when we place a moderate discretion as to the expense of this great business in the hands of high officials who are presumably men of self-respect and character.

"If in the future practical conduct of this business there should be a check in the smooth and successful operations of this refunding project because of the withholding of some small eighth of 1 per cent which being paid would secure success, and being withheld would frustrate it, I mean to say that responsibility shall not rest with me, nor do I envy the man who shall hereafter feel that it rested with him. For that reason, as faithful counselors and trustees of the interests of the American people whom we represent, we may fairly say to the Secretary of the Treasury, If you shall be able to effect this great operation, reducing the rate of our interest and confirming our Government credit at a cost not exceeding one half of 1 per cent, to that limit you may go, within that limit stand as far as you can, and go before the people of this country as a faithful administrator mindful of the needs and interests of those whom you represent, and take whatever of shame or glory shall come to you from your performance of that duty."

Mr. McPherson, of New Jersey: "The object of the proposed legislation is to complete the refunding of the national debt. Two hundred and two millions of 6 per cent bonds issued at the beginning of the war are about to mature, and four hundred and sixty millions

"First, the bond to be issued should bear the lowest possible rate of interest under which, considering also the period of time fixed for its payment, the Government would receive its par value in exchange for it.

"A 3 per cent interest-bearing bond, having forty years to run, with such earlier option on the part of the Government, not less than ten years from the date of issue, to pay it, would, in my opinion, meet this requirement, and in a short time command a premium.

"In proof of this we need only point you to the 4 per cent bonds, which were taken as a speculation by a syndicate for a large commission less than the par value, and are to-day sold in open market at such a premium as scarcely makes them a more profitable investment than a 3 per cent bond at par.

"Does it not also prove that should Congress authorize a funding loan bearing 33 per cent, the bonds so authorized would, after passing into the hands of a syndicate, advance in the market to a price at which they would not yield over 3 per cent on the investment, and that it would thus be demonstrated that the Government might have saved the one half per cent per annum which investors and speculators had gained?

"Were it not for the lingering hope that the predictions so freely made, which I regret to say have not been dissipated by the Finance Committee of the Senate, that a 3 per cent bond would be offered at par, no doubt would now be expressed in respect of the market value of a 3 per cent bond.

"With the whole bonded debt under the conditions now existing, selling so nearly on a 3 per cent basis, no other arguments beyond this simple fact seem to be required to sustain the belief that a 3 per cent bond of the United States can be negotiated at par.

"Confronted by this fact, the Finance Committee of the Senate report in favor of a 34 per cent bond, and virtually ask the Senate to join it in a bear crusade upon the national credit. I read from the report:

"The Secretary of the Treasury is hereby authorized to issue bonds to an amount not exceeding $400,000,000, of denominations of $50, or some multiple of that sum, which shall bear interest at the rate of 34 per cent per annum, payable semi-annually, redeemable at the pleasure of the United States after five years, and payable twenty years from the date of issue; and also Treasury notes to an amount not exceeding $300,000,000, in denominations of $10 or some multiple of that sum not exceeding $1,000, either registered or coupon, bearing interest at a rate not exceeding 34 per cent per annum, payable semi-annually, redeemable at the pleasure of the United States after one year, and payable in ten years from the date of issue; and no Treasury note of a less denomination than $100 shall be registered.

"This report, taken in conjunction with the facts heretofore stated, seems most extraordinary. The four hundred millions of bonds are to bear 3 per cent interest, although confronted by the fact, supported by every-day transactions, that said bonds could and would be negotiated on much better terms. It is not often the holder of a note thinks better of it than the maker, and this has become so universal in practice a reversal of the principle was never deemed possible. It seems, however, that axioms in financial practice, even universal principles which a credulous people believed admitted of no change whatever, may be switched off out of the way at the will and pleasure of a congressional committee. Outside of those immediately and directly interested in speculation in bonds-and the number of these is small when compared with the host of actual investors there can not be found any considerable number of financiers who believe a 3 per cent forty-year bond can not be negotiated at par.

"These bond speculators, with untiring and unflagging zeal, aided by a subsidized press, seek to influence Congress by appeals to the fears of its members that an unsuccessful attempt to negotiate a 3 per cent bond would wound our credit and practically defeat resumption. How, they do not tell us. Pending action by Congress upon this bill, these same speculators have even attempted to depress the market by a free sale of 4 per cent bonds as information which would naturally influence Congress in favor of a higher and against a lower rate of interest; but, as the bonds have advanced 2 or 3 per cent, even under these assaults, it furnishes additional proof that to adopt the recommendation of the committee and issue a bond bearing 3 per cent interest would be a national folly.

"The committee further recommend an issue of three hundred millions of Treasury notes, bearing interest at a rate not to exceed 34 per cent per annum, redeemable at the option of the Government after one year, and payable in ten years from the date of issue.

"It will be remembered the bonds are to bear interest at the rate of 3 per cent per annum, arbitrarily fixed. Said bonds have twenty years to run, with the reserved option to pay them after five years, while the rate of interest borne by the Treasury note shall not exceed 3 per cent, implying that it might be possible to negotiate the notes at a lower rate of interest, notwithstanding the Treasury notes have only ten years to run, with the option to pay them after one year.

Here, again, the committee set at defiance all laws which have ever governed commerce in finance, by assuming that a short bond, yielding to the purchaser at the discretion of the Secretary of the Treasury at or under the rate of 34 per cent per annum, could be negotiated at par, while the long-term, and therefore better, bond, bearing a fixed rate of 34 per

cent per annum, and no less, would not command more than the par value."

Mr. Bayard: "Would it interfere with the Senator if I should make an inquiry?" Mr. McPherson: "Not at all."

Mr. Bayard: "Would the Senator desire to be understood as saying that it is not the fact in financial arrangements that a bond payable punctually and promptly at a short date, desirable for a certain class of pecuniary arrangements, can be negotiated at a lower rate of interest than a bond more prolonged as to its term of operation, and that, per contra, the bond having the longest term to run, and the more permanent for reasons connected with its own nature, is also negotiable at the lowest rate of interest, so that you have in this an illustration of extremes meeting? The short bond, upon the payment of which punctually absolute reliance can be placed, has its uses for certain classes of loans and occupations of capital which do not attach to a bond having a longer time to run; and a bond having the longest time to run, offering a permanent investment, has uses which enable it to be negotiated at a low rate of interest which is not known to a shorter date bond. Have I made myself clear?"

Mr. McPherson: "Certainly; I understand the Senator."

Mr. Bayard: "It is a fact perfectly well ascertained and understood in the practical dealings of men accustomed to large financial operations, that you exchange in one case the desirability of a short loan with absolute and punctual repayment for the permanence of investment with a long loan, absolutely secure, but only ultimately secure.'

Mr. McPherson: "The absurdity of the proposition upon its face is so apparent that I am really surprised that the Senator confesses he has been deceived by it. I will admit the fact that a bond bearing any rate per cent, even if it be 1 per cent, can be used by speculators in Wall Street profitably, who carry over vast sums of money from one day to the other, and any percentage that it bears is an advantage to them; but the market for bonds the world over gives the preference to a long-time bond bearing a fixed rate of interest. If the honorable Senator will place the four hundred million issue of bonds that he proposes shall bear 3 per cent interest in Wall Street, where many of them will go, perhaps all of them, and in connection therewith the $300,000,000 of Treasury notes, with the option of the Secretary of the Treasury at any rate under 34 per cent that he can negotiate them at, I wish to know which of the securities will be sought first? What difference will it make to a financier or capitalist whether it is a bond having twenty years to run, or a bond having ten years to run? He pledges the Government security for a loan, a call loan if you please, and the quality or value of the thing pledged determines the sum the borrower will receive."

Mr. Bayard: "If my friend will permit me, I will say to him it depends altogether upon the need and uses for which the money is designed. If a man awaiting some grand speculation or enterprise for which he has accumulated, for instance, half a million dollars, wants that money to be repaid to him at the end of a year, but to keep it useful during that year, and if he can buy the short bond which is bound to be paid at the end of that time, for a low market price, certainly it is an inducement to him to affix certainty to his operation and to borrow the money for just the time he wants it; whereas, on the other hand, if there be some one seeking a permanent investment for the execution of a long-continued trust, he will seek that bond which is not to be disturbed by repayment and reinvestment when he does not want it. Therefore, the whole question is answered. It depends upon the objects that the investor has in view. For one purpose a short bond is more valuable to him; for another class a long bond is more valuable; and in the mean time the fluctuation that may exist upon the long bond would be hurtful to the man who wants to use his money but for a year or two years, and the certainty of repayment of value at a fixed rate of interest to the man who needs the short loan is secured to him better by the low class of bonds. Therefore the whole thing speaks for itself.'

Mr. McPherson: "A long bond, according to the admission of the Senator, will serve both purposes."

Mr. Bayard: "No, because it is subject to fluctuation."

Mr. McPherson: "Why can it not subserve both purposes? Suppose the honorable Senator to-day wishes to borrow a million dollars upon a million dollars' worth of 4 per cent bonds. He does not go to the Government to make that loan. He goes into the financial centers of the country; he goes to London, he goes to Wall Street. Those bonds have a fixed market value for that day's transaction. He borrows the money from the capitalist; he does not borrow it from the Government."

Mr. Bayard: "The Senator is in error-" Mr. McPherson: "Therefore the 4 per cent or the 3 per cent bonds have a value upon which to loan or to borrow money, just the same as the 3 per cent or the 3 per cent Treas ury note, and at the same time they serve the additional purpose of affording an investment for those who desire a permanent investment.

"The bonds of the Government are in active demand as investment by those who do not wish to participate in the hazards of business or speculation, but, without labor or risk, give sure return with absolute security.

"No other security can be compared to these bonds. Behind them, and pledged to their redemption, stand the whole wealth of the nation. Taxation can not reach them, and, if a registered bond, even the thief may be disappointed. They are in demand in all the money

centers at home and abroad- are wanted by everybody who prefers a perfectly safe to a speculative investment. Unless war shall demand the creation of a new public debt, these bonds will probably be the last the Government will ever issue, and as the demand will increase everywhere in proportion to the increase of wealth and population, in like proportion will their market value appreciate. The interest we promise and pay is the tax-payers' wages, and why throw away one half per cent per annum of their hard-earned money?

"For Congress now to say, with the light we have, that the discretion between a 33 per cent Treasury note and one bearing a less rate of interest should be lodged with the Secretary of the Treasury is equivalent to discrediting our own obligation, and virtually foreordains and establishes the rate at 3 per cent.

"Why, then, permit our bonds to be hawked about the streets subject to the whim or caprice of a Treasury Secretary or of the expectant purchasers, none of whom will invest in a 3 per cent bond while Congress proclaims its absurdity by fixing a higher rate?

"In my opinion, it is the duty of Congress to fund the debt at the lowest possible rate of interest; to extend the time for the maturity of the bonds to forty years, so that posterity may bear a share, although a small share, of the burdens created by the exigencies of the war. The present generation has contributed in the tremendous sacrifice of life it involved its full share of the cost. It has suffered in the waste and destruction always attendant upon civil war to an extent never before known in the history of any people. During the five years, commencing with 1873 and ending with 1878, the suffering by paralysis in business industry from causes contingent upon the war have had no parallel in the annals of the world. A somewhat disordered financial system, together with outer causes apparently uncontrollable, forced into bankruptcy tens of thousands of our citizens engaged in legitimate and honorable pursuits, closed the doors of our workshops and factories, and compelled the honest and willing laborer to become a tramp and seek bread from door to door. Notwithstanding all this, we have paid off more than one half our war debt. A grateful people, speaking through their representatives in Congress, have imposed upon the present generation a pension list which in the aggregate is frightful, and the burdens of which can not be shared by posterity, because the pensioner will not be alive to receive it.

"The war for the Union was fought for the benefit of all future generations, and it would be only equitable for posterity to share the expense.

"The money to pay this debt must be drawn from the people by taxation, and we are annually making drafts upon the people far in excess of the actual needs of the Government. This surplus war taxation is taken from the re

productive industries, from the wages or working fund of the country, and every dollar thus taken above the wants of the Government economically and honestly administered, is a dollar too much.

'Let it not be forgotten that there are other taxes bearing heavily upon the shoulders of the people. Faults in legislation and administration by States and municipalities have been followed by a train of evils which will require a degree of prosperity unparalleled in the past to enable the people to reform and repair. Unless this be done, and speedily, bankruptcy and repudiation will be the final result. This is especially true of some of the States of the South, whose credit is pledged for tens of millions of dollars, the proceeds of which have never found their way into their treasury vaults or been applied in such way as to add much to the general wealth and prosperity. Is it just, is it wise, under circumstances such as these, and at a time when industry at the South can not pay its local taxes, to impose upon the people these unnecessary burdens?

"Our municipal debt is scarcely less than the national debt, and having been contracted to a large extent since the war, of necessity bears a heavy burden of interest, and, unlike the national Government, but few cities have the financial credit to refund their debts at a lower rate. The aggregate sum drawn from the people on account of interest on State and municipal debts is a heavy burden upon them.

"There is not a State in the Union in which the legal rate of interest is less than 6 per cent, and in many of the States where money is most needed to aid development 10 per cent is maintained as the ruling rate. The agriculturist, manufacturer, and miner are never able to borrow, even when money is abundant, at less than the legal rate; and when capital is sadly needed at the West and South to move the wheels of industry, it is proposed to take annually from fifty to one hundred millions of the working capital of the country, costing for its use at least 10 per cent per annum, to pay a debt which can be extended indefinitely by the Government at 3 per cent. This may pass for statesmanship, but it can scarcely be called business wisdom. The citizen, as a member of the national community, after all his sacrifices in support of the national credit, must pay his own debt bearing 3 per cent interest by a mortgage loan upon his property or business bearing 10 per cent. It is only necessary to state the proposition to demonstrate its injustice and absurdity.

"Rapid payment of the public debt, when the Government can borrow at the minimum rate while the citizen is required to pay the maximum rate, is an evil and a loss to the citizen, whom the Government is bound by every consideration consistent with financial safety to encourage and protect.

"True financial wisdom requires the refunding of the national debt in very long bonds at

a very low rate of interest. Relieve our oppressed citizens from the heavy burden of war taxes in time of peace, and leave the working capital to fructify in the industries of the people. To this end I favor a 10-40 bond bearing interest at the rate of 3 per cent per annum. Mr. Williams, of Kentucky: "Mr. President, if we are to fund this debt at all, I am in favor of funding it at the lowest possible rate and at the shortest possible time. If I had my way, I would do exactly for the nation what I would do for myself. I would give my note payable on or before a given day, and before that day arrived pay as much of it as I possibly could. That relates to the time. As to the rate of interest, I am perfectly satisfied that the whole of this debt can be easily floated and kept up at 3 per cent if we were to reverse the option to pay at twelve months from date. The national banks could absorb the whole of this entire amount; and if you were to put it at 2 per cent, or 1 per cent instead of 34 per cent, they would take the whole of it.

"Now give them 33 per cent, and what does it amount to? It gives to the banks 30 per cent on their capital invested. There is no analogy between' the consols of Great Britain and the bonds of the United States. Those consols are taxed to support the Government; the bonds of the United States are not taxed, neither the bonds themselves nor the interest, nor the income accruing from them. Then in this country these bonds are the basis of the circulating medium. A banker takes $100,000 of bonds to the Treasury when he wants to extend the capital of his bank, and they give him $90,000 of circulating money just as good as he paid for the bonds themselves. He then is out but $10,000, and at 3 per cent it brings him 30 per cent per annum. Does any man doubt that the banks will take all these bonds? They need them all; they must take them all. They must take them at 1 per cent as well as at 3. Why should you pay 34 per cent? It is a bonus to the banks; it is a bounty to the capital of the country. Gentlemen may talk about subsidies and bounties, but here is a subsidy or a bounty that we are proposing to the moneyed interests of the country. Why, sir, there is in the city of New York alone capital enough to absorb this $650,000,000. There is a demand around the bourse in New York for cash every day absolutely sufficient to absorb the whole of this $650,000,000 if the banks do not take a dollar of it. Does any man doubt that? Why, look at the clearances every week in New York at the clearing-houses; in a single week they amount to more than the whole of the bonds that we propose to put on the market. Can they have any better security for the short loans that they need for their speculations, for use at the exchanges, for the purchase and sale of stocks, than these bonds? And can you doubt that they will be readily taken in a week? My word for it, they will all be taken in a single week. There will not be

a bond on the market one week after we pass the law and arrangements are made to issue them.

"I am opposed to the whole scheme of extending this debt of the country. I think what is good policy for the father of a family is good policy for the nation. If I believed I was about to die, the first thing I would do would be to leave my estate so that my children could get it; I would want to leave it clear to my children, without a debt upon it, without a mortgage upon it; and as a Senator of the United States legislating for my posterity and your posterity and future generations, I would be glad to do as much of the work as possible to pay off the whole of the debt while I live, and I hope to see it paid, and I believe I shall see it paid before I die. We shall have a surplus in the Treasury of more than $110,000,000 next year; we shall have more than that the year after, and in ten years from to-day, if the same economical policy is pursued that is now being pursued, we shall have a surplus revenue to apply upon the debt of more than $200,000,000 a year.

"Therefore, sir, I am opposed to this amendment adding one half per cent to the rate of interest fixed in the House bill. Suppose we do not negotiate this bond, what harm will be done? Suppose the banks refuse-but they will not refuse-we can just issue Treasury notes and pay off the whole and take their circulation, cancel their bonds, and save the country $400,000,000. That is what we can do. Give to these bonds and give to these Treasury certificates that you issue the power of paying duties at the custom-house, and they will be at par with gold to-morrow. Your greenbacks would have been at par years ago if you had made them receivable at the custom-house for public dues. Who doubts that? What Senator on this floor doubts that?

"I did not rise to make a speech, but just to enter my solemn protest against the impending amendment. I will vote against this increase of the interest. I will vote for the bill as it came from the House. I may have something to say upon another amendment as to the fifth section, but I care not to say more on this now. I am for the shortest time and the lowest possible rate of interest suggested, because I am perfectly satisfied, not only from my own opinion and judgment, but from that of the ablest bankers in the United States, that these bonds will be greatly sought after and caught up in less than a fortnight after we shall have passed this bill."

Mr. Voorhees, of Indiana: "Mr. President, it was not my purpose until a few hours ago to take part in this debate. It has been, and still is, my intention to assist in making as good a funding bill as possible, with as much benefit and as little evil to the people in it as can be procured in such a measure. Whether I shall finally vote for it or not will depend upon its condition when a vote is reached upon its pas