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The effect of this repeal in its immediate results failed to quiet the fear of impending evil now thoroughly aroused; nor were all the efforts thus far made to augment the gold reserve effective as against the constant process of its depletion.

On the seventeenth day of January, 1894, the Government was confronted by a disquieting emergency. The gold reserve had fallen to less than $70,000,000, notwithstanding the most diligent efforts to maintain it in sounder condition. Against this slender fund gold demands amounting to not less than $450,000,000 in United States notes and Treasury notes were in actual circulation, and others amounting to about $50,000,000, in addition, were temporarily held in the Treasury subject to reissue—the entire volume, by peremptory requirement of law, remaining uncanceled even after repeated redemption; nor was there any promise of a cessation of the abnormal and exhausting drain of gold then fully under way. Another factor 138 in the situation, most perplexing and dangerous, was the distrust, which was growing enormously, regarding the wisdom and stability of our scheme of finance. As a result of these conditions there loomed in sight the menace of the destruction of our gold reserve, the repudiation of our gold obligations, the humiliating fall of our nation’s finances to a silver basis, and the degradation of our Government’s high standing in the respect of the civilized world.

There was absolutely but one way to avert national calamity and our country’s disgrace; and this way was adopted when, on the seventeenth day of January, 1894, the Secretary of the Treasury issued a notice that bids in gold would be received until the first day of February following for $50,000,000 in bonds of the United States, redeemable in coin at the pleasure of the Government after ten years from the date of their issue, and bearing interest at the rate of five per cent. per annum. It was further stated in the notice that no bid would be considered that did not offer a premium on said bonds of a fraction more than seventeen per cent., which would secure to the purchaser an investment yielding three per cent. per annum.

It should here be mentioned that the only Government bonds which could be sold in the 139 manner and for the purpose contemplated were such as were authorized and described in a law passed in 1870, and which were designated in the law of 1875 providing for the redemption of United States notes as the kind of bonds which the Secretary of the Treasury was permitted to sell to enable him “to prepare and provide for” such redemption. The issues of bonds thus authorized were of three descriptions: one payable at the pleasure of the Government after ten years from their date, and bearing interest at the rate of five per cent.; one so made payable after fifteen years from their date, bearing four and a half per cent. interest; and one in like manner made payable after thirty years from their date, bearing interest at the rate of four per cent. The five per cent. bonds were specified in the Secretary’s offer of sale because on account of their high rate of interest they would command a greater premium, and therefore a larger return of gold, and for the further reason that the option of the Government regarding their payment could be earlier exercised.

The withdrawals of gold did not cease with the offer to sell bonds for the replenishment of the reserve, and on the day before the date limited for the opening of bids the fund had decreased 140 to less than $66,000,000. In the meantime, the perplexity of the situation, already intense, was made more so by the fact that the bids for bonds under the offer of the Secretary came in so slowly that a few days before the 1st of February, when the bids were to be opened, there were plain indications that the contemplated sale would fail unless prompt and energetic measures were taken to avoid such a perilous result.

Thereupon the Secretary of the Treasury invited to a conference, in the city of New York, a number of bankers and presidents of moneyed institutions, which resulted in so arousing their patriotism, as well as their solicitude for the protection of the interests they represented, that they effectively exerted themselves, barely in time to prevent a disastrous failure of the sale. The proceeds of this sale, received from numerous bidders large and small, aggregated $58,660,917.63 in gold, which so increased the reserve that on the sixth day of March, 1894, it amounted to $107,440,802.

It was hoped that this measure of restoration and this exhibition of the nation’s ability to protect its financial integrity would allay apprehension and restore confidence to such an extent as to render further bond sales unnecessary. 141 It was soon discovered, however, that the complications of our ill condition were so deep-seated and stubborn that the treatment resorted to was only a palliative instead of a cure.

On the last day of May, 1894, less than three months after its reinforcement, as mentioned, the gold reserve had been again so depleted by withdrawals that it amounted to only $78,693,267. An almost uninterrupted downward tendency followed, notwithstanding constant efforts on the part of the Government to check the fall, until, on the fourteenth day of November, 1894, the fund had fallen to $61,878,374. In the meantime, the inclination of our timid citizens to take gold from the reserve for hoarding “had grown by what it fed on,” while large shipments abroad to meet foreign indebtedness or for profit still continued and increased in amount.

In these circumstances the inexorable alternative presented itself of again selling Government bonds for the replenishment of its redemption gold, or assuming the tremendous risk of neglecting the safety and permanence of every interest dependent upon the soundness of our national finances. An obedient regard for official duty made the right path exceedingly plain. 142

On the day last mentioned a public proposal was issued inviting bids in gold for the purchase of additional five per cent. bonds to the amount of $50,000,000. Numerous bids were received under this proposal, one of which, for “all or none” of the bonds, tendered on behalf of thirty-three banking institutions and financiers in the city of New York, being considerably more advantageous to the Government than all other bids, was accepted, and the entire amount was awarded to these parties. This resulted in adding to the reserve the sum of $58,538,500.

The president at that time of the United States Trust Company, one of the strongest and largest financial institutions in the country, rendered most useful and patriotic service in making both this and the previous offer of bonds successful; and his company was a prominent purchaser on both occasions. He afterward testified under oath that the accepted bid for “all or none,” in which his company was a large participant, proved unprofitable to the bidders.

The payment of gold into the Treasury on account of this sale of bonds was not entirely completed until after the 1st of December, 1894. Then followed a time of bitter disappointment 143 and miserable depression, greater than any that had before darkened the struggles of the Executive branch of the Government to save our nation’s financial integrity.

The addition made to the gold reserve by this completed transaction seemed to be of no substantial benefit, if, on the contrary, it did not actually stimulate the disquieting factors of the situation. In December, 1894, during which month $58,538,500 in gold, realized from this second sale of bonds, was fully paid in and added to the reserve, the withdrawals from the fund amounted to nearly $32,000,000; and this was followed in the next month, or during January, 1895, by a further depletion in the sum of more than $45,000,000.

In view of the crisis which these suddenly increased withdrawals seemed to portend, the aid of Congress was earnestly invoked in a special presidential message to that body, dated on the 28th of January, 1895, in which the gravity and embarrassment of the situation were set forth in the following terms:

    The real trouble which confronts us consists in a lack of confidence, widespread and constantly increasing, in the continuing ability or disposition of the Government to pay its obligations in gold. This lack of confidence grows to some extent out of the 144 palpable and apparent embarrassment attending the efforts of the Government under existing laws to procure gold, and to a greater extent out of the impossibility of either keeping it in the Treasury or canceling obligations ............
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