THE FUNDING BILL. SPEECH OF MISSOURI, IN THE SENATE OF THE UNITED STATES, MARCH 4, 1808. The Senate, asin Committee of the Whole, resumed the consideration of the bill (S. No, 20T) for funding the national debt and for the conversion of the notes of the United States, the pending question being on the motion of Mr. Henderson to amend the amend¬ ment of the Committee on Finance in section one. line seven, by striking out the word "five” and K inserting " four” before the words " per cent.” ' Mr. HENDERSON. I ask that the first • section of the amendment of the committee be read. The Secretary read as follows: That the Secretary of the Treasury is hereby au¬ thorized to issue registered or coupon bonds of the United States in such form and of such denomina¬ tions as he may prescribe, payable,principal and in¬ terest, in coin, and bearinginterest at the rate of five er cent, per annum, payable semi-annually, and caring date so as to require the payment of an equal amount of the interest quarterly; such bonds to be payable in forty years from date, and to bo redeem¬ able in coin at the pleasure of the United States after ten years from date, to be issued to an amount suffi¬ cient to cover all outstanding or existing obligations of the United States other than the existing five per cent, bonds, and to be exchanged for such obliga¬ tions or disposed of in such manner and on such terms, not less than par, as the Secretary of the Treas¬ ury may deem most conducive to the interests of the Government: and the said bonds and the proceeds thereof shall be exclusively used for the redemption of or in exchange for the existing securities of the United States. Mr. HENDERSON. Mr. President, it will be exceedingly difficult to invest a subject of this character at present with any interest. I feel, however, that it is the most important question pending before us at this time, and yet other subjects have unquestionably en¬ grossed public attention, and not only Senators, but others, approach this subject with a great deal of reluctance. I propose to confine my¬ self as closely as I can to the amendment which I have offered to the bill. Senators will see that, the proposition is to fund the public debt of the United States in a five per cent, security. My motion is to strike out five per cent, and insert four percent. The proposition contained in the bill is to fund all the public securities, except the ten- fortiesalready issued, into a five per cent, stock, redeemable after ten years and payable at the end of forty years. The ten-forties already negotiated bear five per cent, interest, paid semi-annually, and are by express terms pay¬ able, both principal and interest, in gold. There is no express stipulation as to how the principal of any other bonds is to be paid. The principal of some of the Treasury notes is pay¬ able in legal-tender notes. The interest of a part of the debt is payable in gold, that <>f another part is payable in lawful money, while a portion of the debt bears no interest at all. The official statement of the public debt, made on the first of February, presents an exhibit substantially as follows, namely : Debt bearing coin interest.$1,912,363,0-11 80 Debt bearing currency interest. 308,708,630 00 Matured debt not presented for pay¬ ment, chiefly bearing currency in¬ terest. 12,888,169 19 Debt bearing no interest, including United States notes, fractional cur¬ rency, and gold certificates. 418,024.845 51 Total.$2,651,384,686 50 If we deduct from this amountthe ten-forties, amounting to $207,739,200, we have the amount authorized to be funded under this bill, namely, $2,443,045,486 50. But the holders of gold certificates will not fund, of course, and the creditors may choose to carry $400,000,000 of the debt in the shape of legal-tender United States notes. If so, the funded debt will be as follows: New consols, five per cent.$2,014,026,206 50 Old ten-forties, five per cent. 207.739,200 t 0 Total.$2,221,765,406 50 The annual interest on ibis sum would be $112,574,234 30. 2 If the legal-tender notes should remain in volume as they now are ($356,000,000) the annual interest would be ($114,766,275 95,) say in round numbers $115,000,000. The total amount of indebtedness issued under acts of Congress prior to February 25, 1862, is comparatively small, and it is possible that under prudent management such indebt¬ edness could be paid otf as it matures. The main body of the debt consists of five-twenties, amounting at the February statement to near $1,400,000,000, to which must soon be added the seven-thirties, the compound-interest notes, the three per cent, certificates, and other float¬ ing indebtedness, amounting to about three hundred million dollars. Mr. MORTON. For the purpose of having a correct understanding of the statement of the Senator, with his permission, I should like to ask whether he includes in the gross amount to be funded which he has named what are called the sixes of 1&81. Mr. HENDERSON. I state that they may be funded under this bill. The Senator will see that as the bill now stands reported by the chairman of the committee all indebtedness may be funded except the ten-forties. I do not say that they will be funded, but they may be funded, and if funded the whole funded debt would be $2,443,000,000. Mr. MORTON. I believe those bonds con¬ tain no right of redemption before they are due. Mr. HENDERSON. I suppose they will not be funded. It is this indebtedness of about seventeen hundred million dollars about which the controversy in regard to the mode of payment has arisen. Some say it is legitimate and proper for the Government to pay it off in lawful money—that is, in greenbacks. Others contend that it must be discharged in coin only. Some insist that it may not only be paid in paper promises, but that the Government may rightfully issue new and additional prom¬ ises for that purpose, while others—like the chairman of the Finance Committee, Mr. Sher¬ man —admitting the right to pay in greenbacks, insist that during the process of payment the Government cannot legally or honorably issue exceeding $400,000,000 of legal-tender notes. They think the Government agreed for all time to come, at least till the debt should be paid off, that the issue of legal tender notes should be limited to this amount, and that the honor of the Government is involved in keep¬ ing the promise. Before proceeding to examine these ques¬ tions in a legal point of view it may be well to glance at some general facts connected with the public debt. I have already shown that the probable funded debt of the Government, excluding the ten-forties, will in a short time be about two thousand million dollars. If funded under existing laws it will bear six per cent, interest. If funded under this bill it will bear five per cent. Now, if this debt can be legally discharged in currency, gold being worth 140, it would require $1,428,571,428 in gold to pay it. The saving, therefore, to the public in the payment of the debt would be $571,428,572 in gold, equal -to $800,000,000 in legal-tender paper. In other words, if the debt could now be discharged with paper money instead of gold, the debtor class wouid save $800,000,000 in paper value by the opera¬ tion. Therefore it should not be surprising that the terms and conditions of the contract creating it are so closely scrutinized by all par¬ ties. Between the debtor and creditor classes (1 use these terms as appropriate terms when applied to the public debt, because the securi¬ ties are not to be taxed even for their own liquidation) the construction of the contract at once becomes a question of the greatest prac¬ tical importance. It involves no less, perhaps, than one twentieth part of the entire property, real and personal, of this country to-day. Leaving out of view for the present all ques¬ tions connected with specie payments, suspen¬ sion, expansion and contraction, which 1 will notice in their proper places, the fact is plain enough to every one that if the debts proposed to be funded are payable only in gold it will require $2,000,000,000 in gold to discharge them whenever paid. If payable in paper— legal-tender currency—the amount of that cur¬ rency necessary to pay them could now be pur¬ chased for $1,428,571,428 in gold. This is a plain, common-sense fact, which no figures of rhetoric can conceal and no metaphysical sophistry can confuse. Jf we are compelled to pay in coin, if such was our contract, if it be “so nominated in the bond,” then the pub¬ lic must accept the terms and raise this large additional sum beyond what would be required were the debt payable in the medium of ex¬ change established by the Government itself. Jf we would realize a proper sense of the importance of the question, let it be reflected upon for a moment, that if the Government, admitting its liability to pay in gold, should now be able to pay off an amount of this debt equal to the sum in gold which would to-day fully discharge it in paper, and should there¬ after execute new bonds for the balance, to wit: the $571,500,000, to be paid at the end of forty years with five per cent, semi-annual interest compounded, the amount of Govern¬ ment indebtednessat the maturity of the bonds would be $4,119,711,289 83 in gold, or $5,767,- 600,000 in a currency bearing the value of the present United States notes, a sum nearly equal to one fourth the aggregate wealth of the nation to-day. It should be remembered, that whether the interest be paid as the coupons mature, or the whole sum, principal and interest, be paid at the maturity of the bonds, makes but little difference to the bondholders themselves. If the interest be paid to them as it matures they can reloan it, and accumulate as much as the Government would have to pay them. 3 The great fact stands out, that they and their descendants at the end of forty years will have drawn this vast sum from the earnings of others. In other words, the creditor class will be so much richer and the debtor class so much poorer. The measure before the Senate, so zealously and so ably vindicated by the chairman of the Committee on Finance, [Mr. Sherman,] pro¬ poses to settle this question of construction by agreeing to pay the whole sum in gold. The Senator claims the right to pay in green¬ backs ; indeed, he goes further and claims the right to increase the greenback circulation to $400,000,000, which, according to his argu¬ ment, would depreciate it in value, and then pay otf the debt in paper. As I cannot agree with him in the statement that such increase of legal-tender notes as he proposes would necessarily depreciate them in the least, 1 shall claim nothing in the argument on that score. But, as he determines to settle this question of construction in favor of the bond¬ holder, he naturally seeks for some equivalent to the debtor. What does he propose? Simply to take off one per cent, of the interest. JLie deems this a fair consideration to the debtor. If the creditors will reduce their interest from six to five per cent, the debtor and creditor classes, he thinks, will be equally and fairly dealt with by their representatives. We have often heard that figures will not lie. This supposes, of course, that they are rightly used. If 1 understand their use, there is no difficulty in ascertaining precisely what is gained and what is lost on either side by this new proposition. I have already shown what the creditors would gain instantly by a change of the contract, provided the in¬ terest of six per cent, be left as it is now. But as the creditors are to yield up one per cent, per annum, on say $2,000,000,000 of indebtedness, the consideration paid by them is, of course, $20,000,000 per annum for ten years at five per cent, interest. But, as it is to be paid half yearly, we have only to obtain the present worth of an annuity of $20,000,000 for ten years at five per cent, to be paid semi¬ annually. The present worth of such an an¬ nuity is $155,589,102. The Government then gives to the creditors by changing the contract $571,428,572, and the creditors give the Gov¬ ernment $155,589,162; leaving balance against the Government, of $415,839,410 in gold. If the Senator is seeking an equivalent of consideration between the parties—and upon his hypothesis he must find such equivalent before he finds that element of justice which will prove satisfactory to the country—he must reduce his interest 3.67 per cent., leaving the bonds to bear only 2.33 per cent., payable semi-annually. Connected with this question is another fact which I will barely allude to in passing along to the chief points involved in the bill. It is this. Our public debt is so large as to absorb the whole surplus capital of the country. The larger part of that surplus is to be found among the people of the older States. Hence the pub¬ lic securities are largely held in these States for the mere purposes of income arising from tl^e interest. The western States might purchase them in considerable quantities for purposes of banking if the banking laws permitted it; but the legislation of Congress has strangely combined with natural causes to concentrate these securities in the eastern and middle States. The State banks of the West, like those of other sections, were blotted out by act of Congress, and owing to the limitation upon national banking no substitute therefor is furnished. The bonds draw an interest of six per cent, in gold, payable semi-annually, which, of course, increases the interest to a little over six per cent. This gold interest is equal to about eight and a half per cent, in currency. The bonds are free from all taxation, which, as Senators will find by examining the aver¬ age amount of tax levy, especially in the cities of thn several States, for State, county, city, school and sinking fund purposes, is not less than two and a half percent. This, being added, places the interest at about eleven per cent. A security so desirable as this, to be had in sufficient quantities to ab¬ sorb the whole surplus capital of the country, absolutely precludes the possibility of borrow¬ ing money except at the most ruinous rates. The West is full of activity and energy and has large undeveloped resources, but it can not afford to pay from ten to fifteen per cent, for the use of capital, and Senators will see that the Government bond is a better security than the best gilt-edged private paper at the same rate of interest. A loan of money on the bond involves no examination of title or solvency of sureties, no attorney’s fees for deeds of trust and mortgages, no stamp-tax, no recorder’s bills, no loss of interest in seek¬ ing a new investment, no bankruptcies or compositions with debtors and no cost of final collection. Thus it is that the recent contraction meas¬ ures of the Government, leaving no capital not invested in its securities, produced great dearth of money in the West and rightfully called forth the most bitter complaints. If it be said again, as it has often been said heretofore, that this clamor against bondholders is a selfish and sectional one, confined to the people of the West, I answer that the Government has forced that section to vindicate itself from the utter destruction of its material interests, threatened by vicious and erroneous measures of finan¬ cial policy. These measures, so fraught with ruin, have forced us to examine critically into the mode and manner of creating the public debt; the equities connected with it; the propriety of its speedy or deferred payment; the possibility of diminishing its burdens; our means of pay- 4 ment., and the measures best calculated to pre¬ serve the public credit consistent with the reasonable prosperity of the people and the advancement of industrial pursuits. If I were to say that the public debt is so large as, even with the best intentions, to render its payment improbable within the next century, or possibly within the next two centuries, I should wound the pride of somebody. Therefore I will not say it. If I were to say that large and oppres¬ sive public debts are least certain of payment in a pure democracy, and next under institu¬ tions of a republican character, where the debtors must always be more numerous than the creditors, and where heavy rates of interest daily add to the luxuries of the rich and to the miseries of the poor, some one of fewer years or of more enthusiastic temperament than myself might charge me with reflecting on our system of Government. As I think it the best system known among men and hope to see it improved, eveu in the liberality of its democracy whatever may be¬ come of the debt, 1 would not venture on such an assertion, if I believed it, for it might open the door to misrepresentation and some unjust criticism upon myself. I cannot well be assailed, however, for alluding to facts already developed, a concealment of which would only complicate the national troubles. Among these facts it may, I think, be confi¬ dently stated that our debt, as it now exists, is the most onerous and oppressive one that weighs down the energies of any nation on earth. Take the entire expenditures of our Govern¬ ment from March 4, 1789, down to June 30, 1861, a period of seventy-two years, and they amount to $2,235,077,161 61—a sum less than our present public debt by $400,000,000. This includes the debt of the Revolution, the war ol 1812, the numerous swindling and ex¬ pensive wars with Indians, the war with Mex¬ ico. the purchase of Florida, Louisiana, and Arizona. During that period the entire re¬ ceipts of customs, passingdown from the tariffs of Alexander Hamilton, through the high tariff of 1828, which threatened to dissolve the Union, the compromise sliding scale of 1833, the pro¬ tective duties of 1842, the revenue rates of 1846 to the Morrill tariffs of 1857 and 1861, amounted only to $1,575,152,579 92—a thou¬ sand millions less than our present debt. The entire receipts from public lands, once regarded as a security upon which untold mil¬ lions might rest, from the origin of the Gov¬ ernment to 1861, amounted to but $175,817,- 961 20; the receipts from all sources including internal tax and loans during the seventy-two years, were less than $2,271,000,000. The estimated wealth of the United States in 1860, excluding slaves, was $14,146,523,676 ; that of Great Britain at the same time, $31,512,000,- 000; that of France in 1866, say $32,000,000,- C00. For 1868, estimated wealth of the United States, after deducting for losses of the war and ! depreciation of property in the seceding States, $20,000,000,000; estimated wealth of Great Britain, $34,842,747,000; France, $34,000,- 000,000. In 1868, the debt of Great Britain is, say, $3,887,489,220; France, $2,600,000,000, and the United States, $2,651,000,000. The population of Great Britain is, say, 31,000,000; that of France, 38,000,000, and of the United States say, 38,000,000. The wealth per capita of the people of Great Britain is, $1,124 ; of France, $843 25, of the United States,$502 37. The amount of interest paid by Great Brit¬ ain on her debt is $126,628,890; by France, $70,000,000, and by the United States in 1867 $143,000,000. Even if the debt be funded as proposed our annual interest cannot be less than $114,000,- 000. In Great Britain the people pay annually per capita for interest $3 26 ; in France, about $2 ; in the United States, if the debt be not funded, $4 03; if funded, $3 20. InGreatBrit- ain each dollar of wealth owes to the public debt 11& cents ; in France, 8Jcents, and in the Uni¬ ted States 13£ cents. The rate of interest on the public debt in England is three percent.; on over three fourths of the debt in France, three per cent, and lour and four and one half per cent, on the remain¬ der, and in the United States six per cent., and now that it is proposed to reduce it to five per cent, some people are shocked at the immoral¬ ity of the proposition. In Great Britain each $100 of property pays annually for interest 36 cents ; in France, 20 cents; in the United States, 57 cents. If we take the current yearly expenditures of these Governments for all purposes, we find that each $100 in England pays 95 cents; in France, $1 11; in the United States, $1 73. In consequence of this large debt, I have already said, money is diverted from the chan¬ nels of productive industry. To meet the accruing interest makes it necessary to resort to high tariffs. To meet the current expenses of the Government we are forced to levy burdensome rates of internal taxation. This tends to reduce the profits upon business, while it largely increases the price of the pro¬ ducts without corresponding benefits to the producer. This condition of things has thrown the balance of trade against us. To meet that balance we have been forced to ship bonds to Europe, until now the interest on these bonds constitutes an annual balance against us of no less than $30,000,000. The imports and ex¬ ports of the last four months exhibit a state of affairs less satisfactory than ever. If we continue to ship bonds to meet these balances, it only aggravates the evil. If, on the other hand, we ship gold it will drain us of the precious metals in less than five years’ time, and specie payment will become a myth indeed. When the coin is gone, importations must cease. When importations cease, the custom¬ house no longer furnishes goLi with which to pay accruing interest. 5 To sustain our credit the interest must be paid. To pay the interest, gold must then be purchased with depreciated paper, collected in the shape of’ internal taxation from the suffering and prostrate business* of the coun¬ try. When we shall have arrived at this point—and without the most thorough and rad¬ ical measures we shall soon reach it—the pub¬ lic credit will be hopelessly lost. Not only will public credit be lost, but the means of re¬ suscitating it will be lost also. The currency of the country, whether we expand or contract it, will then be deranged; prices will be exor¬ bitantly high; the rewards of labor will scarcely furnish the means of livelihood; individual credit will be worthless, and a period of gen¬ eral bankruptcy will set in. This is a dark picture. I hope it is overdrawn. Unless Congress performs its duty during this session the reality I fear will be worse than any pic¬ ture I can draw. Some persons will complain of this view of the subject. They will profess to see in it an attack on the public credit. Nothing that 1 may say will damage the Government credit. Capitalists may not speak so plainly as 1 do, but, if men are to be judged by their actions, they think more than i dare say. They tell us that the bonds are payable, principal and in¬ terest, in gold. Such they say is the contract. They also tell us that the Government is able to resume specie payments to day, and loudly insist that there is no necessity for reducing the interest to enable the Government to pay in coin. They tell us that our resources are perfectly abundaut, and yet in the face of all this our bonds are hawked about in foreign markets at 71 and 72 cents in English gold and at from 70 to 78 in New York, payable in American gold. An English three per cent, consol, payable at the option of the Govern¬ ment, sells at 94 cents by the side of a five¬ 's twenty six per cent, bond struggling for credit at 71-. Hudson River railroad shares, declar¬ ing an annual dividend of eight per cent, in currency, sell for 145 in New York, while the Government bond sells for 104 to 110 in cur¬ rency. Cleveland and Toledo shares, with an annual currency dividend of seven per cent., bring 109. Illinois Central with ten per cent, dividends sell for 135, and New York Central with six per cent, dividends sell for 126. These facts indicate a want of confidence. Either the debt itself or the interest on it is too large. There is a doubt about something. Capitalists either doubt the Government’s ability, or its disposition to pay. The Government so far has paid its interest, and nearly broken down the energies of the people in an effort to pay a part of the principal. The doubt, then, must be in regard to its ability and not its disposi¬ tion. It will be observed that in the Secre¬ tary’s last report the estimates for the future are not calculated to strengthen confidence. For the last three quarters of the fiscal year 18G8 he figures up a surplus of only $1,099,090, and for the fiscal year 1869 with difficulty he finds a surplus of $9,000,009, which 1 fear will never be realized. Listen to the complaints of the people of every section, coining up trumpet-tongued to Congress, asking for relief from taxation. See the conventions being held, telling of ruined commerce, of crippled industry, of dwarfed production, the dearth of money, and the gen¬ eral stagnation of business. In this state of things convention after convewtion of both the great political parties, in the Western States, meets and demands a change in financial pol¬ icy. Some of the bondholders—not all—1 am glad to know, and many of their indiscreet friends, however, are inexorable. They have the wealth ; they own the newspapers ; they can pay the price demanded for the influence of talent; they tell us the debt is sacred; Con¬ gress can no longer legislate on those subjects which of right belong to the Representatives of a free people ; if former legislation were preju¬ dicial to them, it must be repealed ; if the currency were expanded when they purchased securities, it must now be withdrawn, for thus they imagine the securities mount to a gold value; if the issue of United States notes were limited when they purchased, this limit must not be exceeded, though increased population, business, wealth, and enlarged area of country should all combine to demand it. Congress, they admit, could properly make gold contracts between individuals payable in depreciated paper, but it cannot touch the public debt. Congress could lay its heavy hand upon $600,000,000 of State bank capital and force sixteen hundred banks into liquidation as one of the means to float these very bonds upon the market, but now the bonds are be¬ yond the vulgar touch of the people or their Representatives. State bank circulation, de¬ clared legal under the high sanctions of the Supreme Court, could be taxed ten per cent, per annum for the avowed purpose of its de¬ struction, but who dares propose a tax on Gov¬ ernment bonds? It was right to pay the sol¬ dier in currency, though he enlisted before the legal-tender act passed. It is now right to pay his bounty and pension in currency, though he founds his right to receive them on the act of July, 1861. It was right to pay the builders of boats and other contractors in constantly depreciating currency, but to apply the same rule to-day to the fundholder is sacrilege. It was right, in order that the Government might live, that that hoary iniquity, human slavery, and the $2,000,000,000 claimed to be invested in it, should be blotted out, and blotted out forever. A few days since an able and somewhat in¬ teresting pamphlet fell into my hands, in which were the following words : “Let all ropndiators and all advocates for pay¬ ment of tho pubiio debt in promises to pay on do- mand, which are not meant to be kept, be treated as public enemies. It' any member of Congress should be known to favor those measures he should be promptly ejected from his seat and returned to his constituents to study the principles of common hon- 1 esty.” This intemperate language appears in an j article attacking the privilege to convert bonds, even at the option of the holder, and denounc¬ ing the repeal of the limitation on national banking. The purpose, then, is to force up the value of bonds by an exhausting system of con¬ traction, in utter disregard of every material interest of nineteen twentieths of the people. Mr. President, suppose that by reducing the rate of interest the bond would be increased and not diminished in value. It is now worth less than 72. Suppose it would then command 84—about the price, I believe, of a four per cent. Brazilian bond to-day—would the creditor be.injured? Would lie not be benefited? if he choose not to retain a four percent, security he can easily sell it at an advance of fourteen cents to the dollar, and invest the proceeds in some other depreciated six per cent. bond. There are but few Governments that issue bonds with such high rate of interest, but whenever issued they are invariably depreciated. The increase of wealth in no nation is equal to six per cent, per annum for a long series of years; hence no nation can pay it without bankrupt¬ ing its Government or impoverishing its peo¬ ple. Capitalists know this thing, and they always distrust such securities. Let us suppose, again, that a reasonable increase of currency, either in the shape of legal-tender notes or national bank paper, or both, would tend to revive drooping industr}’’, increase the products of labor, assist in the development of what is now unproductive wealth, enable the nation to swell its exports above its imports, what harm would be done to the bondholder? if these results should follow, the effect would be, I think, to appre¬ ciate bis security. I feel satisfied that such would be the result, and therefore I insist that those who favor this policy shall not be ex¬ pelled from Congress by their fellow-members at the bidding of a foolish bondholder who knows not his own interest. IN WHAT CURRENCY THE DEBT SHOULD BE PAID. A word now in regard to the law of this question. On the 1st day of July, 1861, the public debt was $90,867,828 68. There was no stipulation in what medium it should be paid. Gentlemen argue that, having been issued when gold was the currency, it must, therefore, be paid in gold. They insist that, this understanding controls the contract as much as if it appeared in express terms. This argument, it will be perceived, goes upon the hypothesis that it is incompetent for the Gov¬ ernment to make anything else than the pre¬ cious metals a legal tender in the payment of debts. Is it not too late in the day for our people to stand on any such argument? The right has been exercised for six years, and during that time this vast debt has been created, if the act was legal at any time it is legal now. But, aside from, the question of power, an argument on ‘the side of good morals and common honesty is presented. It is said the paper is not so valuable as the metal. If it were as valuable the creditor could not com¬ plain. lie could not possibly, in that case, be damaged, for, holding the one currency, he could convert it into tlie other. If this argu¬ ment be worth anything it is worth a great deal. It goes to this extent, that after a debt is contracted the Government cannot legally coin additional gold or enlarge the circulation of the precious metals. Being now in debt, the gold-fields of California, Montana, Colo¬ rado and Nevada would be useless to us, be¬ cause we cannot increase the volume of the specie circulation without depreciating to the same extent the public securities, and thereby injuring our creditors. I hold that if the Gov¬ ernment can stamp paper with legal value at all it is as much money as gold itself. If the power existed to do so when the legal- tender act passed in February, 1862, it existed at all previous periods of the Government, and it exists now. If it existed at all it existed by virtue of the Constitution, and the Constitu¬ tion was the same prior to 1862 as it then was. It is admitted there is no express contract to pay the debt in gold. It can only he claimed as an implied agreement. It occurs to me that other implications are just as reasonable, is it not more reasonable to infer that the public creditor, purchasing a Government bond, takes it subject to the exercise by Congress of all its constitutional powers? It is surely legitimate for Congress, after it contracts a debt, to coin money and put it in circulation. It is equally clear that Congress may regulate, and there¬ fore change, its value. The coinage of gold may be double or quadruple in amount, or the *•' use of gold as a medium of exchange may be abandoned altogether and something else adopted. 1 may admit it is competent for the Government to agree expressly to pay in gold or any other article without weakening my position. If it agrees to pay gold I do not object to its doing so ; but when no specific agreement is made I insist that both debtor and creditor are supposed to contract subject to all the con¬ tingencies of future legislation. That legis¬ lation may be such as to make the debt more or less valuable at the time of its payment. This fact is understood by both parties when the contract is made, and enters into and forms a part of it. What I have now said in reference to the debt already existing on the 1st day of July, 1861, applies with equal force to the bonds and Treasury notes issued subse¬ quently under the acts of July and August, 1861. During the summer and winter of 1861 an 7 effort was made by Mr. Chase, the then Secre¬ tary of the Treasury, to carry on the war under a system of specie values. The banks of New York had promised to loan him a sum which he supposed to be sufficient for his purposes. In his report of December, 1801, he states that he had borrowed $197,000,000 and had an en¬ gagement with the banks to borrow $50,000,000 more. This loan was to cost him a little less than six and a half per cent, interest. This was a gold loan, and the proceeds car¬ ried two or three times the purchasing power of subsequent loans contracted in paper cur¬ rency. In this report Mr. Chase takes occa¬ sion to say : “ This rate of interest is, however, higher than the United States with their vast and accumulating re¬ sources ought to pay. No doubt reasonably exists, that after the reestablishment of union and order, the five percent, bonds of the United States will com¬ mand a premium in the markets of tho world unless the national debt be, in the meantime, augmented beyond necessity or reason.” It will be remembered that Mr. Chase, at this time, did not contemplate the issue of legal- tender notes, if issued at all, he thought they ought t.o be payable in coin. Having argued the advantages and disadvantages of such an issue, he declined to recommend its adoption. Instead thereof he recommended the present national bank system ; but as that involved the withdrawal of the iState bank notes, and the reorganization of the capital of the country, the process would be too slow to meet the pressing exigencies of the war. Mr. Chase’s good intentions were utterly frustrated by the sudden suspension of specie payments, and the consequent failure of capi¬ talists to loan him money as they had promised. Hence came the necessity lor the act of Feb¬ ruary 25, 18G2. If the war could have been conducted on the specie standard of value, as 1 confess I desired, our public debtto-day would probably be one thousand millions less than it is. The Secretary estimated the amount ofgold in the country at that time to be $275,000,900, and with that basis of credit, until the suspen¬ sion of specie payments, he entertained hopes of procuring money by negotiating loans. Upon the suspension, however, this gold suddenly disappeared, and nothing was left to conduct the operations of the war except depreciated State bank paper. Gold was absolutely demone¬ tized, and something must be substituted in its place. It could not be a paper convertible into gold, because the Government being a borrower could not pay specie on demand. The people needed and must have a circu¬ lating medium, it was the duty of the Gov¬ ernment to furnish it to them. In doing so a new policy was inaugurated for which the peo¬ ple are grateful, but the movers of it seem not to realize it. The State bank paper of that day was estimated at $202,000,000, $150,000,- 000 of which was in the loyal States. This paper suddenly became depreciated in value, and the security of business operations de¬ manded a currency sustaining a better credit, Hence we now see that the Government could, with the greatest possible safety, and without harm to any material interest, have issued at once $425,000,000 of legal-tender notes. But the world has long since learned to shudder at the bare mention of Government issues. Rea¬ soning from false premises, people assume that these issues must depreciate in value. Neces¬ sity forced our statesmen to do something, but they did as little as they dared. It was sharp necessity that gave birth to this invention and saved the country. It became the entering wedge of a great policy. These gentlemen shrank back from the policy in its full and necessary proportions, and temporized with the exigency by issuing only $150,000,000. These notes, however, fortunately received the impress of the Government, and took the legal value of coin itself. It was the national money, and is the national money yet, to the entire satisfaction of the neople. The notes were made— “Receivable in payment of all taxes, internal du¬ ties. excises, debts, and demands of every kind due to the United States, except duties on imports, and of all claims and demands against the United States of every kind whatsoever, except for interest upon bonds and notes, which shall be paid iu coin and they were further declared to be— “Lawful money and a legal tender in payment of all debts, public and private, within the United States, except duties on imports and interest as afore¬ said.” To this act, in my judgment, can be given but one interpretation. These notes could not be used by the Government for paying interest upon bonds, because it was stipulated by the act itself that the interest should be paid in coin. If the act contained no other express provision on the subject than the stipulation to pay interest iu coin, then, by force of a very familiar rule of construction, the principal of the bonds could be discharged in paper. But, as if to exclude any other conclusion, it is provided, as I have said, that they shall be “a legal tender in -payment of all debts” to the Government except duties on imports, and also a legal tender for all debts against the Government except interest as aforesaid. If it were possible to give strength to this con¬ struction, an argument is furnished in the pro¬ visions of a subsequent section to create a sink¬ ing iund, which provide for “the payment in coin of the interest on the bonds,” but simply for the “payment or purchase” of the bonds themselves, dropping the words “in coin.” In further proof of the intention of the Legis¬ lature in this behalf the provisions of the act of March 3, 18G3, are in point. Under this act legal-tender notes were issued with inter¬ est payable in currency. Jt was unnecessary to specify how the principal should be paid. This had been provided lor under the previous 8 act of 1802. Being a debt of the United States the principal was payable in lawful money. Id was thought necessary to be specific, how¬ ever, in regard to the payment of interest, for otherwise the interest might be held pay¬ able only “in coin,” because United States notes had not been made “ legal tender” in payment of interest “on bonds and notes.” It will also be remembered that similar pro¬ visions are to be found in the acts of June 80, 1804, and March 8, 1865, under which legal- tender Treasury notes were issued, principal and interest, to be paid in currency, and ail fundable, at the option of the holder, into five- twenty bonds. These acts show an entire abandonment of this specie standard. The cou¬ pon and compound-interest, notes, although made a legal tender for their face value, were expressly redeemable in paper. in further proof of the position assumed, that it is lawful to pay the live-twenties and other securities in currency, the act of March 8, 1804, is referred to, under which the ten-forties were issued. That act contemplates a different sort of bond, and therefore provides in express terms that both principal and interest shall be paid in coin. As both prior and subsequent acts provided for paying interest in coin, but were silent as to the principal, it must be sup¬ posed that the omission in those acts was in¬ tentional, and in the absence of an express provision, they, like all other debts, could bo properly discharged in whatever the Govern¬ ment might stamp as lawful money and de¬ clare to be a legal tender. i have just stated that distinguished states¬ men, remembering John Law, the South Sea bubble, continental money and French assig¬ nats, the history of which had nothing in com¬ mon with our case, approached this question with exceeding reluctance. But the times were exacting, and stern necessity enforced the per¬ formance of duty. The five-twenty loan pro¬ vided for in this act could not be negotiated. Money must be had. The previous act had pro¬ vided, out of very abundant caution, that the de¬ mand notes and United States notes together should at no time exceed the sum of $150,000,- 000. On the 17th March, 1802, it became neces¬ sary to modify this act by declaring that all de¬ mand notes outstanding should be made legal tender also. This, too, proved insufficient. Before the adjournment of the same session, to wit, on the 11th July, 1802, another issue of $150,000,000 was authorized. As was shown by the Senator from Ohio the five-twenty loan was not yet fioated. There was no surplus money even yet to invest in bonds, and the Government stepped in to furnish such money by means of its credit. Even this additional issue proved to be insufficient; and on the 17th of January following another $100,000,000 were authorized and immediately issued. Then came the act of March 8, 1808, authorizing an issue of $50,000,000 more, or, as expressed in the act, $150,000,000, including the $100,000,- 000 of the previous January. It is a mistake to suppose that this latter act or any other act put a limit to the issue of legal-tender notes. So far from doing so, the third section of this act of March, 1808, provided for the issue' of $400,000,000 of Treasury notes, which the Secretary of the Treasury was authorized to make legal tenders for their face value, and of which he issued and stamped immediately thereafter from one hundred and fifty to tw*o hundred million dol¬ lars. Previous to this act United States notes could be funded, but now the right was to bo withdrawn after the 1st of July following, and thenceforth they were to remain a permanent circulating medium, and did so remain until the act of April 12, 1806, when the fatal policy of contraction was inaugurated. it was not until June 80, 1804, that Congress adopted the limitation upon the issue of green¬ backs in the following words: “ Nor shall tho total amount of United States notes, issued or to be issued, ever exceed $400,000,000, and such additional sum not exceeding $50,000,000, as may be temporarily required for theredemption of tempo¬ rary loan.’’ Let it not be forgotten that this act of June 80, 1804, which is so often quoted to the detri¬ ment of the country, and which is claimed to have transferred to our creditors a part of the national sovereignty, instead of limiting the issue of legal-tender notes, actually contained a provision to increase the issue $200,000,000. It is true they were not called United States notes, but Treasury notes. Mr. SHERMAN. They bore interest. Mr. HENDERSON. 1 am aware of that. They might bear interest from the one hun¬ dredth part of one per cent, to seven and three tenths per cent, in lawful money, and be made payable at any time not exceeding three years. But if payable three years from date they were to be made expressly a legal tender to the same extent as United States notes for their face value. It must not be forgotten, either, that the Secretary availed himself of the authority and issued the lull amount with the Govern¬ ment stamp of lawful money. And yet the Sen¬ ator from Ohio tells me that somehow or other there is a limitation upon legal tenders. Mr. SHERMAN. 1 did not say legal tenders; of United States notes. Mr. HENDERSON. They are all the same. There is no difference. They were used as curren cy. Now, Mr. President, is it not a little ex¬ traordinary that the very able and sagacious Senator from Ohio so promptly yields to the j suggestion that the Government is in honor j bound never to enlarge the legal tender cir¬ culation beyond $406,000,000? He says this would be bad faith. He himself has conclu¬ sively shown that scarcely any bonds were negotiated until the full limit of United States 1 notes had been issued. I have already shown 9 that when that limit was reached there had been issued and negotiated about $200,000,000 of five per cent, coupon notes, which were also a legal tender, and which we know flowed readily into the channels of circulation. That Senator should also remember that before the limitation of June, 1864, was enacted the $200,000,000 compound-interest notes were authorized and immediately issued, and they, too, for some time swelled the volume of cur¬ rency. liy examining these acts of Congress it will be seen that on the 1st day of July, 1864, $1,050,000,000 of legal-tender notes had been authorized, and not only were these issues au¬ thorized, but the authority was most liberally exercised. By looking to the reports of the debt it will be seen that there were issued and put in circulation the following amounts of legal tender, namely : United States notes. $432,000,000 Coupon five per cent, notes. 201,000,000 Compound interest notes. 217,000,000 Total. $850,000,000 I am aware that the coupon notes were with¬ drawn as rapidly as possible, but they were not withdrawn until they had effected the purpose for which they were issued, to wit: the sale of Government bonds. It seems, then, that this charge of bad faith is unfounded. If the bondholders purchased their bonds with an outstanding issue of from $600,000,000 to $850,000,000 of legal tender, what right have they to complain if the legal tendershould be again increased to thatamount. Bad faith implies that a promise is broken. But there must be something more than this. Somebody must be injured by the breach. If it be insisted that no more greenbacks or United States notes can be put into cir¬ culation, but that Treasury notes may be issued ad libitum , then the alleged promise i3 utterly worthless. The truth is, the public creditors purchased the securities as cheap as they could obtain them. They purchased them with their eyes open, subject to ail the hazards of military success, and no less subject to such enactments of Congress as in its judgment the public good might demand. They who had means deserve credit for aiding the country in the hour of its peril; and, now that imminent danger has passed, it would be no less dishonest than ungrateful to repudiate our obligations. Such a thing cannot and will not be seriousljr entertained by any considerable number of men claiming to be honest or respectable. But there are two classes of people equally entitled to our consideration in this matter—the debtor and the creditor classes. While we deprive the creditor of no part of his honest earnings, we must be careful that we do nothing to oppress the debtor by making it more difficult to pay than when the debt was contracted. While we should not clip the coin or deteriorate the cur¬ rency for the mere purpose of confiscating a part of the creditor's claim, we should boldly assert the right, inalienable by the Government, to regulate the currency for the public good, and especially should we avoid such contraction of it as to oppress the debtor class or rob them of the means of payment. We should do nothing to take away the value of the debt in the hands of the holders; but those who have to pay that debt should be heard in their pro¬ tests against giving it increased relative value by the mere force of legislation. It must be borne in mind that at this date (I mean in 1864) eleven States were in a state of rebellion, and their citizens did not use our currency except at points reduced into our pos¬ session. Those States, in 1860, contained a population of 9,103,333. Deducting this from the entire population, leaves 22,339,880 for the loyal States and Territories. Allowing for the natural increase of population, and we had in the loyal States, using the currency issued by the Government, say twenty-live million people—and it must not be forgotten that nearly one million of our most active and ener¬ getic men were withdrawn from business pur¬ suits and engaged in the war—but, allowing for the entire loyal population, we had an authorized issue of legal-tender notes on the 30th of June, 1864, of forty-two dollars per capita , and an actual subsequent issue of nearly twenty-five dollars per capita. The Secretary of the Treasury tells us that this large issue caused its depreciation. If so, capitalists bought it cheaply, and having ob¬ tained it, converted it, as they had a right to do, in Government bonds at six per cent, gold interest. It is now proposed to limit the legal tenders to $400,000,000. Rebellion has been crushed. The supremacy of the Government is again established, and instead of 25,000,000 people we have not less than 37,000,000 to day using the currency issued by the Government. Nor is it now as it was before the war or during thevvar. Then the slaves had no use for money. They are now freemen, and take their places in all business operations. The proposition to limit the legal-tender issues to $400,000,000 gives us only $10 81 per capita. If we should now issue legal tenders to the same amount per capita as authorized on the 1st day of July, 1864, we should have the start¬ ling sum of $1,554,000,000. By reference to the Treasury reports of the past we find the legal-tender Treasury notes excluding demand notes, and in actual circu¬ lation at different periods, to be as follows: June 30,18G3.$389,6S6,7C2 00 JuueSO, 1S64. 599,050,120 84 June 30,1865. 603,782,750 00 June 30,1860. 503,085,5(0 00 June 30,1807. 495,301,70/ 00 December 1,1807.. 426,230,690 00 February 1,1808. 409,804,297 00 I have just said that other forms of circu¬ lating medium existed, during this period, 10 beside the legal-tender notes. I have, with some care, prepared tabular statements, show¬ ing the amount of currency in all its forms during the period when our national debt was being contracted. Amount of Currency at different periods. Excluding tem¬ porary loans, certificates of Including temporary loans and cerfieates of indebtedness. UtT LI 1J VJcl l v.o Ul indebtedness, and seven- thirty Treas¬ ury notes af¬ ter Juno 30, 1865. June SO, 1863. June 30, 1864. June 30, 1865. June 30, 1866. June 30, 1867. Excluding seven- December 1. 1807.. February 1,1868... $1,048,156,476 19 1,047,742,005 50 1,344,339,727 16 1,269,854,006 96 159,299,795 43 thirty notes. 793,494,137 70 • 799,714,641 06 $786,303 936 00 814,082,814 06 1,138,850,665 76 888,886.810 96 839,038,725 43 790,582,237 15 689,435,065 51* I have already said that upon the suppres¬ sion of the rebellion the wealth, population, and business of the seceding States came in to share with us the use of our currency. Assuming that a certain amount of money was needed by the loyal people during the rebellion, surely a larger amount is needed when an additional population of between nine and ten millions has to be supplied. If a cer¬ tain volume of the circulating medium were necessary for the exchanges of twenty-six States, surely a greater amount is necessary to facilitate the business operations of thirty- seven States, with an added aggregate wealth of not less than $5,000,000,0(10. Instead of increasing the currency in proportion to this extended field of operations, the Secretary of the Treasury saw fit to adopt directly the oppo¬ site policy. His language is the key-note of this whole system of contraction, and I refer to it at the risk of being tedious. In bis report of December, 1865, after alluding to the power of Congress to borrow money, he says: “But their authority to issue obligations for a circulating medium as money and to make these ob¬ ligations a legal tender, can only be found in the unwritten law which sanctions whatever the Repi*e- sentatives of the people, whose duty it is to maintain the Government against its enemies, may consider in a great emergency necessary to be done.” Ho therefore expresses his opinion that the legal tender act— “Ought not to remain in force one day longer than shall bo necessary to enable the people to prepare for a return to the constitutional currency.” And, with a view of securing this desirable result, he says: “The Secretary believes that a decided movement toward a contraction of the currency is not only a public necessity, but that it will speedily dissipate the apprehension which very generally exists, that the etieet of such a policy must necessarily be to make money scarce and to diminish tfie prosperity ol the country.” *This amount excludes gold certificates, five per cent, compounds, three years’, six per cent., com¬ pounds. and three.per cent, certificates. So earnest and zealous did the Secretary become at this time, in pressing upon Con¬ gress the evils of an inflated currency, that he imagined danger to exist in the precious metals themselves. He says: “Even in the form of the precious metals it(money( may not prove to bo wealth to a nation. The idea that a country is necessarily rich in proportion to the amount of gold or silverwhich it possesses, is a com¬ mon and natural, but an erroneous one,” &c. I do not stop to comment on these extraordi¬ nary views. If they are correct, the world has been mistaken from the dawn of civilization to the present time. Political economists tell us that a nation is rich and prosperous in propor¬ tion as the products of its industry exceed its consumption and flow abroad to bring in re¬ turn a stream of the precious metals. I have been taught to believe that the development of the mines of Mexico tended largely to re¬ lieve the world of the ignorance, superstition and oppression following the dark ages and greatly to ameliorate the condition of man¬ kind. I had supposed that the $3,000,000,000 of gold currency, added to the circulation of the world during the last twenty years had quick¬ ened industry, stimulated enterprise, devel¬ oped new fields of hidden wealth, and largely added to the comforts of men. I had sup¬ posed, too, that it was the interest of each na¬ tion by honest industry to accumulate as much of this gold and silver as it possibly could. If money is abundant interest is low. Wherever the rates of interest are cheap, the people prosper. Wherever the rates are high every ten or fifteen years debtors go to protest, and capitalists say the country has overtraded itself. They mistake. The people have paid too much interest. That is all. But before I pass away from the subject of currency, I call the attention of the Senate to a statement which I have prepared myself showing the amount of circulation per capita . and for each $1,000 of wealth in the country at different periods since 1863. If there be error in this statement, it is because it is not sufficiently liberal to the view I am attempting to enforce. In ascertaining the population and wealth of the two sections and of the whole country since 1860, I have taken the ratio of increase as developed in our past history. That portion of the seceding States not using our cur¬ rency during the existence of flagrant war has been excluded from the estimates until the sup¬ pression of the rebellion in 1865, after which period it has been admitted into the calcula¬ tion. The following table contains the esti¬ mates, namely: Per capita amount of legal-tender circulation at dif¬ ferent periods. June 30,1863.$15 85 June 30, 1864.... 23 71 June 30,1865. 18 23 June SO, 1886. 14 92 June 30, 1867. 12 77 December 1. 1867. 10 96 February 1,1888. 10 28 11 The following is the amount of the entire paper circulation of tlie United States used as a medium of exchange at different periods, including the legal-tender notes: a o © P S 3 3 3 a" o 3 3 3 3 3 • • © © © © © h~A CO CO 03 co co ti ►—* ►—* o © o © o p 03 GO t—* ►—» ►—» >—A h—* c+- w) 03 CO OO OO OO GO C3 C3 03 © © C3 Cm CO i : : : : <“*- CLO H O o to to tO £3 CO j- O o to © H-A to O h-A © © CO 03 cm cm © © 00 C" kA rn O Zj “ o 3 a Er Y‘ 3 5*3 CO fe • -T 4* 00 tf* 00 © Cm O C Ti o ti¬ © CO GO C7i h-» 23 cs OO CO CO -4 ►—a 3 O- 5 O -i o' < *3 2 —'3 c3:c- hO to to CO CO =€# CO O Ui CO H“A to r —a CO CO 00 Cm o H-A Cm 03 o © cm ■20 *-< O CD p £5 -S VJ J>P o • © S c* © ^ I l » 1 Suppose, now, we inflate the currency to the amount per capita as it stood at the several periods named, excluding everything that was not an admitted elementof circulation. What amount shall we have ? On the basis of— Amount of legal tenders alone. Total a m’nt of legal tenders, bank notes, and other notes. June 30,1803. $638,000,000 921.000,000 710,000.000 582.000.000 498.000.000 427,000,000 $1,232,000,000 1.254,000,000 1,210,000,000 918,000,000 850,000,000 794,000,000 June SOI 1861. June 30,1865. June 30,1866. June 30,1867. December 1, 1867 . If it be said that some of these forms of Government credit did not constitute a circu¬ lating medium or answer the purposes of money, 1 answer that in the table, excluding the certifi¬ cates and temporary loans, nothing is included except admitted circulation. The coupon and compound-interest notes were intended to be a circulating medium. It was hoped that their interest would soon weigh them down as an investment and take away their currency char¬ acter, but we all know they were not removed until the ends of their existence had been fully accomplished. The purpose was to sell Gov¬ ernment bonds at par, the discount of the bond to be covered up in the depreciation of the note. Mr. Fessenden, then Secretary of the Treas¬ ury, in his report of 18G4, tells us that he could not negotiate a loan in New York to meet pressing demands of the Government. He informs us that suspended requisitions so ac¬ cumulated on his hands that he “was com¬ pelled,” (I quote his own words)— “To replace the whole amount of fire per cent, notes which had been canceled, amounting to more than eighty million dollars, and even slightly to ex¬ ceed that sum.” And again he says : “More fully to accomplish his purpose, the Secre¬ tary resolved to avail himself of a wish expressed by many officers and soldiers through tlm paymasters, and offered to such as desired to receive them seven- thirty notes of small denominations.” The Secretary then proceeds to say that he disposed of exceeding twenty million dollars ot these small seven-thirty notes to the soldiers alone. After the currency had thus become inflated Mr. Fessenden tells us that lie put upon the market a loan of $32,000,000, upon which bids to nearly seventy millions were re¬ ceived, and the proposed loan was negotiated at a premium of over four per cent. What objection to negotiating new loans now in the same manner, to take up this six percent, debtthat daily gnaws at the very vitals of industry? To negotiate a loan then it was legitimate to issue nearly ninety millions of new legal tenders, carrying no weight of'accu¬ mulated interest, and many more millions of small seven-thirty notes payable to bearer. Do Senators ask me if I would increase the currency to the amount in circulation during the war? My answer will depend on the policy adopted by Congress in reference to this debt. 1 will not shrink from paying it. No, not one farthing shall be abated with my consent. I will not only give the pound of flesh if de¬ manded, but I will consent that some drops of “ Christian blood” may be spilled. If the bonds were purchased at from fifty to seventy cents to the dollar, it is quite easy to so regulate the interest as to do justice to debtor and creditor. I will even waive the terms of the contract and admit payment in gold to be oblig¬ atory, provided the creditors will reduce the interest so as to compensate for appreciating their bonds even from 71, ihe present value, to the par of gold. Through the kindness of Mr. Elliott, of the Treasury Department, I am enabled to append carefully prepared tables, furnished at my re¬ quest, showing the value of securities at from one to six per cent., and for different periods from five to fifty years, the interest to be paid semi-annually. From these it will bo seen that, if a six per cent, ten-year bond, interest paid semi-annually, is worth only 71, the rate per cent, on a par bond, assuming money to be worth six per cent., should be a little over two per cent. If six per cent, ten-year bonds, interest paid semi-annually, are depreciated to 73.0(3, (lie par bond at two and a half per cent, is equal to it in value, the current rate of interest being six per cent. The depreciated bond worth 12 77.08 raised to a par value can afford to take three per cent. The six per cent, bond, worth 81.40, when carried to par, can take three and a half percent. And now, if the public secur¬ ities were worth to-day 85.12, in gold, the holders must reduce their interest to four per cent., if the debt is agreed to be paid in gold. The proposition to fund at five per cent., assumes that the debt is worth 92.50. It is not worth so much, and the creditors paid no such sum for it. But 1 am told we cannot adopt compulsory measures, but must leave the creditors to change their securities or not, as they like. Th6 Sen¬ ator from Ohio admits that the issue of more currency will enable us to contract loans at lower rates. If the creditors refuse to fund on fair terms I would not fund at all, but adopt such policy as will enable us to take up the securities as they mature. If the circulation be reasonably expanded, the people can pay larger taxes with greater ease than they pay the present burdens. And if the creditors re¬ fuse to make better terms, let us proceed by taxation and new loans at three and a half to four per cent, to take up these six per cent, bonds as they mature, which otherwise will hang for centuries upon the energies of the people. The stereotyped reply to this course of policy is that depreciated paper is the greatest of ail curses. Now, a word on this subject. I deny it. A depreciated paper is bad enough. But a six per cent, debt equal in bulk to one eighth part of a nation’s wealth is worse. England has two noted institutions, a public debt and a poor-house system. We now have the former. Let us beware that we are not cursed with the hitter. I have now shown that an enlarged circulation has no element of injustice in it to anybody. The next question is, will it become depreciated and injure the public? Can it be demonstrated by argument that a circulation of even $1,000,000,000 in this country will be¬ come depreciated? That is within a few dol¬ lars of the net amount of circulating notes outstanding on the 24th day of March, 1866, when gold fell to 125. I ask my friend from Vermont to take that matter under consider¬ ation. It is a fact, and I desire to hear him explain it. Mr. MORRILL, of Vermont. Does the Senator desire an explanation now? Mr. HENDERSON. I should like to hear it now. Mr. MORRILL, of Vermont. It was from a thorough conviction on the part of the whole country and of the members of Congress in each bianch, that when the war was over a resump¬ tion of specie payments would take place ; and no matter what the premium upon gold was if resumption were to take place, it was sure to come down to par, and therefore the people were quite ready and willing under such cir¬ cumstances to take a lower rate for gold than they had been only a short time previously. Mr. HENDERSON. Then, Mr. President, this is a mere question of confidence. I shou'd like to aslc n.y friend why the people of this country would not have a3 much confidence in a legal-tender note as they would have in your public debt, which bears six per cent, interest and weighs down their energies? If confidence is all why should they not confide in a noteas well as a bond? Mr. MORRILL, of Vermont. Because the Government does propose to pay the bond, and does not propose to pay the legal-tender note. Mr. HENDERSON. If it pays one it will pay the other. I have been endeavoring to show that at the present rate of interest the Government of the United States will not in the next century be able to pay its debt. I will not trouble the Senate with running over the history of other nations on this subject; but I think it a clear proposition, (and we might as well meet it boldly and understand our position,) that, with this large debt, with this rate of interest, no probability of payment is apparent. It is a two-edged sword which not only compels you to pay heavy burdens in the shape of interest, but it cramps industry, be¬ cause it tends to raise the price of interest between individuals. The United States of to-day is different from the poor, struggling colonies of 1775, when the issues of continental money commenced. Long previous to the Declaration of Independence each colony had issued paper credits beyond its ability to pay, and these paper credits wero still in circulation. The population of the colonies at that time did not exceed two mil¬ lion eight hundred thousand persons. Their wealth could not have exceeded five to six hundred million dollars. The amount of continental money issued has never been accurately ascertained. Mr. Hamilton estimated it at $857,475,541; Mr. Gouge, in his work on banking, states it to have been $337,470,541 ; an article in the Merchants’ Magazine for January, 1843, places it at $387,476,337 ; the amount reported by the Treasuiy Department to the Senate, in 1843, is estimated $242,100,176. It matters not which estimate is the correct one ; it will be readily perceived that no such issue, should the public debt be entirely converted into cir¬ culating notes, can be possibly made now. It was from eighty-six to one hundred and thirty- seven dollars per capita , and from one half to three quarters of the entire property value of the colonies. The only thing surprising is that the issue of the first twelve months main¬ tained a gold value, and that it had only de¬ clined fifty per cent, at the end of two years. Our condition is quitedifferent, too, from that of revolutionary France when, on the 1st of April, 1790, she entered upon a system of paper issues. The property of France then was not one third the amount of ours now, and yet the issues reached $241,000,000, with a decline of only ten per cent. ‘‘When the issues had reached $1,000,000,000 the discount was only fifty-five per cent. When they reached the extraordinary sum of $9,115,000,- 000—a sum much greater than the entire prop¬ erty of the kingdom—it is not strange that they became utterly worthless. 13 To determine the amount of money de¬ manded by a people we must understand the area of the country, the mode and manner of doing business, and the proportion of the population residing in cities having bank fa¬ cilities. In England and France, where the population is dense, much less currency is needed. Bank checks and bills of exchange supply in a large measure the place of a cir¬ culating medium. These advantages are enjoyed in a much less degree in this country; hence a larger circulation is necessary. The extent of our country is great, and new Territories are being rapidly settled up, from which communication is exceedingly difficult. Another fact worthy of consideration is that the old credit system between individuals is almost entirely aban¬ doned. When the Government supplies its credit in sufficient quantities individuals are enabled to adopt the cash system in business, and, even though the Government credit should fall below par, business men are compensated for this inconvenience by the advantages of cash payments. What they lose in discount on the paper is less than the probable loss on failures of individual credit. Taking into con¬ sideration, therefore, the character of our country, the activity and energy of the people, and the abandonment of the old credit system, it may be safely assumed that double as much circulation per capita can be used here as in France or England. In 1864 the gold coin of England was esti¬ mated $400,000,000, and that of France at $700,000,000. If these estimates were correct at the time, it is safe to assume, looking at our own recent exportations of the precious metals, that the amounts have been largely increased. If we include the silver coin and the bank notes we may set down the circulation of England at not less than from six hundred and twenty-five to six hundred and fifty million dollars. This would furnish twenty-five to twenty-six dollars per capita. I have but little doubt that, the gold circulation of France is now equal to $800,000,000. Add to this the circulation of the bank of France, and we have a per copita circulation about equal to that of England. Now, suppose the people of the United States needed only as much circulation per capita as the people of England and France, this would give us over one thousand millions. I am aware that the aggregate wealth of each of those nations is greater than ours, and that fact mav modify my statement that we can profitably use twice as much currency per cap¬ ita as they. But suppose, on account of the causes to which I have alluded, we can use three dollars to their two. The circulation of the United States in that event should be $1,500,000,000. It is now much less than half that amount. - I know the conclusions arising from these facts will not be favorably received. The opin¬ ion of many persons here and elsewhere is that the old order of things ante helium cannot safely be departed from. We have been told from in¬ fancy that large issues of paper money are dan¬ gerous, and we too readily confound a reason¬ able exercise with the abuse of the privilege. We do not take into consideration the change of circumstances demanding a change of pol¬ icy. In many things we have been recently educated. We may have something to learn yet in the school of finance. Ever since our circulation in this iron policy of contraction fell beneath a thousand million dollars gold has risen in the market. Instead of reaching specie payments, we ere placed „ almost beyond the pale of hope in that direc¬ tion. The reason is apparent. There is no gold in the country, perhaps not over $225,- 000,000. Hence present resumption by the Government is the merest dream of enthusiasts. State bank notes are prohibited by law, and national bank notes are limited to $300,000,000. Some form of credit must be furnished as a cir¬ culating medium. Unless it is furnished in sufficient quantities the productive energies of the people are cramped. Money in some form is essential among civilized men to the transac¬ tions of business and the accumulation of wealth. It is the nation’s life-blood, which alone can assimilate raw material into wealth, beauty, and strength. Whenever it is denied, under the absurd idea that its amount should be limited by the law-making power, derange¬ ment and disorder in business inevitably fol¬ low. As well might the quack assume to determine the quantity of blood necessary to the health and vigor of the human system. Mr. Fullarton, in his work on the Regulation of Currencies, uses the- following significant language : With onlyoneor two exceptions, and those admit¬ ting of satisfactory explanation, every remarkable fall (rise) of the exchange, followed by a drain of gold, that has occurred daring the last half century has been coincident with a comparatively low state of the circulating medium, and vice versa. “On no occasion was this proposition more strik¬ ingly exemplified than during the period immedi¬ ately preceding the suspension of cash payments in 1797, when, lor two years together, a system of the most determined contraction was carried on by the directors ofthoBankofBngland with unrelenting per¬ severance, reducing thecirculation from £16,017,510 on the 28th February, 1795, to £8,640,250 on the 25th Feb¬ ruary, 1797, without arresting, in the least apparent degree, the drain of gold which was then in progress for restoring the exchanges. The restoration of the exchanges to its bullion par from a depression of full thirty per cent, was accomplished in 1816, after various remarkable vicissitudes, in the face of an enlarge¬ ment of the issues of the Bank of England to an ex¬ tent varying from three to six millions.” I could refer to fact upon fact in the history of the past to illustrate this view ; but time forbids at present. Now, if the policy T have indicated be adopted, the country can afford to wait the pleasure of the bondholders on the subject of funding their securities into a new loan. If they wish to keep the old bonds let them do so, and we will pay their interest and trust the future for solution of our difficulties. If the debt must be funded in the present stringency of the money market it would be far better to reduce the interest and pay the market rate of discount on the bond. In this respect I differ materially from the chairman of the com¬ mittee. Even the Senator from Vermont 14 .admits that the debt may be funded at live per cent. On his theory of voluntary conversion this is an admission that money may be had at five per cent. But let us suppose money to be worth six per cent., which strengthens the ar¬ gument against me ; and yet I insist that, if the debt is to be funded into a ten-forty bond, the Government may save hundreds of millions by issuing securities at a lower rate of interest and placing the equivalent discount in the body of the bond. The gain to the Government, of course, arises from the difference of opinion as to the period when the debt can be paid. Cap¬ italists insist that it can be paid in from ten to twenty years. I believe no such thing. But, as they have the money, it is their judgment and not mine which will likely control its investment. Now, suppose a six per cent, ten year bond is wortii par, then similar bonds at lower rate3 of interest are worth as follows : At five per cent.$92 56 At four per cent.,. 85 12 At three and a half per cent. 81 40 At three per cent... 77 63 But our six per cents are really worth in currency 109. The ten years’ bonds of lower rates should be worth as follows: At five per cent.$100 89 At four per cent. 92 58 At three and a half per cent. 88 72 At three per cent. 84 90 Now, if we should agree to fund at the dis¬ count in consideration of lowering the interest, we must give for lour per cents $106 93; for three and a half per cents., $112 71; for three p>er cents., $117 78. Suppose, then, we fund $2,000,000,000 at four per cent., we shall only increase the -amount to $2,138,600,000; at three and a half per cent., to $2,254,200,000 ; at three per cent., to $2,355,600,000. 1 do not imagine that the principal of the debt will be paid in the next lifty years. But suppose it shall be paid in ten years, then nothing will be gained, 1 admit, except the im¬ mediate benefits arising from the reduction of the annual interest budget. The annual interest, at five per cent., is $110,000,000; it would be, at four per cent., $85,544,400; at three and a half per cent., .$78,897,000; and at three per cent., $70,- ■ 668 . 000 . And now, if I am right in supposing that fifty years will elapse before payment of the princi¬ pal, let us see what the nation will make by the -change?. One dollar at five per cent, compound- interest, paid semi-annually, in fifty years amounts to 11.8137. Two thousand million •dollars, then, will amount in the same time to $23,627,400,000. One dollar at four per cent, compound-in-terest, paid semi-annually, amounts to 7.2446. Hence the debt, if now funded at that rate, would amount in fifty years' to $15,493,301,560; making a saving to the nation of $8,134,098,440. The saving to the nation, if funded at three and a half per cent., will be $10,778,460,000. If funded at three per cent, the saving will be $13,027,200,000. But suppose you reject the idea that the in¬ terest should be compounded. Let us, then, take it at simple interest, and see what the Gov¬ ernment will have paid in actual cash on the principal and interest when fully discharged : $2,000,000,000 at five per cent, simple interest for fifty years. $7,000,000,000 $2,138,600,000 at lour per cent, simple interest for fifty year3. 6,415,800,000 Saving.$584,200,000 $2,254,200,000 at three and a half per cent, simplo interest for fifty years... 6,199,050,000 Saving. $800,950,000 $2,355,600,000 at three per cent, simple interest for fifty years. 5,889,000,000 Saving.$1,111,000,000 So it becomes apparent that the debt should be funded at lower rates of interest, even if we have to increase the principal for the priv¬ ilege of doing so. One good that may possibly be educed from the existence of the debt—if there be good in such a thing—is that it is now placed in the power of the Government indirectly to regu¬ late the rates of interest between individuals. If we cast this good aside, and also the kindred one of founding upon public securities a safe and uniform currency, that debt may stand for¬ ever an unmitigated curse. Whatever else we do we must reduce the rate of interest on the debt. If we can do it only by consent of the creditors let us get their consent on the best terms we can. It is bet¬ ter to pay for this as a great national boon than to lose the present opportunity of secur¬ ing it. Mr. President, for what I have said, I shall be attacked as an enemy of the bondholders. I shall be called a repudiator. I shall be rep¬ resented as hostile to a specie standard of value. Neither is true ; but men are so given to extremes that opposing views are seldom met with fairness. Time, which sets all things even, must determine whether I am right or wrong. I conscientiously believe that we can pay neither five nor six per cent, interest on this public debt. Considering the circum¬ stances of its creation, it is too exacting that the creditors should not only demand a change in the terms of their contract, but a relentless depletion of the circulating medium. Will not one suffice? If we give them a gold contract, why ask, in addition, that productive industry shall sicken and die? This policy injures the people, it strikes down the power of accumu¬ lation from labor and brings ultimate loss to the bondholder himself. It is the old demand, that bricks be made without straw. I have said that we cannot p>ay five per cent. I as¬ sert, without fear of successful contradiction that no nation on earth can show a ratio of increase in national wealth equal to five per cent. Take England, with all her greatness and boasted prosperity, and you will find that her ratio of increase from 1823 to 1861 is only two per cent. Take the United States from 1810 to 1860, including twelve years of gold inflation from the mines of California, and the ratio is four and one eighth per cent. The rates of increase iu several of the older but most prosperous States in the Union, from 1850 to I860, a period of increasing relative values as compared with gold, are as follows : In Massachusetts.31 per cent. In New Hampshire. I. .4f per cent. In Rhode Island.41 percent. In New York.5.43 per cent. This unjust accumulating power of money, arising from high rates of interest in this country, should not be encouraged by the Government. If the net profits of productive industry are not equal to five per cent., then, too, the interest of money should be less than five per cent. He who invests his capital in the employment of labor and the development of wealth is entitled to a dividend equal to the interest income of the man who lives in idle¬ ness and luxury. Suppose that our debt should fall into the hands of foreign holders, and the annual increase of our wealth should be less than the annual interest to be sent abroad, it is then evident that ultimate poverty is only a question of time. If the debt remains at home the injury, in a national point of view, is not so great. The increased wealth would remain among us, but it would soon become concentrated in the hands of a few, to be followed by all the evils of an aristocracy. In such a state of things the poor man’s hope consists only in the ex¬ travagance and profligacy of the rich. A nation that encourages such a policy must sooner or later suffer the dreadful consequences. He who will scrutinize closely the monetary con¬ vulsions of Europe and America will find that they had their origin in the payment of interest. Take the commercial disaster of 1825 in Eng¬ land, which capitalists sometimes tell us were owing to bank expansions. It will be found that the circulation of the bank actually de¬ creased, from 1821 to 1825, nearly one mil¬ lion dollars, while the loans increased from $18,500,000 to nearly forty millions. If ■we refer to the panic of 1837 in England we find that, from 1833 to 1837, when it com¬ menced, bank circulation decreased more than one million dollars, while the loans increased from $27,000,000 to $75,000,000. Without enumerating the figures, it is safe to say that the panics of 1847 and 1857 in England pro¬ ceeded from the same causes. Turn back to the panic of 1837 in this country and it will be seen that the loans and discounts in the banks rail up from $200,000,000, in 1880, to $525,000,000 in 1837, while the circulation increased in the same period from $61,000,000 to $140,000,000. The circulation of the banks of the United States in 1854 was $204,000,000, the loans $557,000,000. In 1857, when suspension and bankruptcy came, the circulation was only $214,000,000, while the loans had gradually risen to $684,000,000. The increase of bank circulation was only $10,000,000, while the increase of loans was $127,000,000. If we turn to the condition of the banks of the State of New' York, the commercial center, at the same period, w r e find the circulation was about the same as it was in 1852, while the loans and discounts had increased from $127,000,000 to $170,000,000. Give me a period when industry is stimu¬ lated, but has to borrow money for the devel¬ opment of productive wealth, and I will dem¬ onstrate that it has been soon followed by a monetary convulsion. Indeed, this fact is of such universal acceptance that business men in the brightest periods of prosperity have learned to anticipate the coining of adversity. Another accepted truth is, that when disaster comes it ruins the most enterprising business men of the community. This should not be so. Now is the time to strike one blow at the evil, and I, for one, am prepared to do it. I am no repudiator. My understanding of the contract made with our creditors is, that if the debts become redeemable during a period of suspension, they are payable in the lawful money of the Government. If, however, they become redeemable after specie payments are resumed, or if we choose to postpone payment until that period, they are then payable in gold. These considerations are a part of the con¬ tract. Debtor and creditor must have so under¬ stood it. An important question, then, left is as to the propriety of resumption. As nobody has pro¬ posed it in this debate, and as nobody is likely to propose it, I forbear at present to show its utter impossibility. Such an attempt would bring legislators into disgrace and the Govern¬ ment into bankruptcy. At this po’nt I might stop. My motion at present is simply to reduce the interest. I have offered no general substi¬ tute to the bill. Some of its provisions I can support; others can never receive my assent. I cannot change the terras of the contract with¬ out some fair equivalent. I will not ask all that justice demands. I would not even con¬ sent to fund the bonds at five per cent, interest in gold, principal payable as it now is in lawful money. I entertain the hope that specie payments, in the course of five or ten years, may be resumed. If so, none will be more gratified than myself to see the public creditors paid in gold. In the meantime, however, a great work is to be accomplished. We must keep an eye to the industries of the country. While too great expansion of the currency may be an evil, too great contraction is a much greater evil. T he end desired by my friend from Vermont [Mr. Morrill] is the one desired by me; but I w'ould reach it by a process different from bis. His plan has been partially tried and ended in utter failure. It is true that I presented a measure to the Senate on the 21st of January last which did not fully embody my convictions upon this import¬ ant subject. 11 was a compromise with opposing opinions. I had to conciliate the enemy. My first proposition was to extend the legal-tender circulation to $400,000,000—what it was when this system of contraction was commenced. This I would do as a condition-precedent to any attempt to re-fund the public debt. So far as ! I am individually concerned I wish not to be 16 bound by any such limitation ; but so great seems to be the fear of Government issues, that the limitation was inserted rather to save the measure from that condemnation which, in my judgment, proceeds from an unfounded preju¬ dice. The next proposition was to fund the entire public debt into ten fifty bonds, bearing an in¬ terest not exceeding three and a half per cent., principal and interest to be paid in coin, and to be exempt from all local taxation. It was then proposed to repeal the limitation upon the amount of circulating notes to be issued by national banks, and to leave banking free under proper guards and restrictions—one of which should be a rigid redemption of their issues at some commercial center. The new bonds were to be substituted by national banks for the old, and a part of the accruing interest on the bonds deposited was to be retained in the Treasury as a sinking fund for their ulti¬ mate redemption. In consideration of the re¬ duction of interest, and the retention of a part of that which would annually accrue, such i amount of taxation was to be remitted upon the capital and circulating notes of the bank, as to enable them to make reasonable divi¬ dends. The harvest season for banks is during periods of suspension, and we all know that their profits during the last few years have been enormous. It was also proposed that after a given pe¬ riod one eighth part, and after a certain other period, one fourth part of the tariff duties might be paid in legal-tender notes. But the last proposition on the subject of the cur¬ rency is the one so fiercely assailed by the Sen¬ ator from Vermont on yesterday. Tie must not suppose that I failed to enjoy his com¬ ments upon it. It was another one of those concessions I was forced to make to an unrea¬ soning prejudice excited by such able denun¬ ciations as his own. Had I consulted my own convictions of right, and not been forced to j beg my way through assailing errors, I should have framed it in a manner much less accepta¬ ble to his taste. I am satisfied that $700,000,000 will not fur¬ nish a sufficient circulating medium for the people. It is only $17 50 per capita. It is eight or nine dollars less than England has with its compact population and bank-check facilities; it is less than France has, whose thirty-eight millions of people are grouped upon an area of territory not as large as the single State of Texas. The first requisite, in my judgment, was to repair, as far as I could, the error of contrac¬ tion. I would, if I could, expand beyond $400,000,000 of legal-tender notes, but the expansion should not be permanent. All legis¬ lation should look to ultimate resumption : but reasonable expansion will facilitate that end li better than unreasonable contraction. It is almost certain that resumption can better be secured through the medium of the banks than through the efforts of the Government, which cannot accumulate gold for purposes of re¬ sumption withoutdefeatingthe very end desired. Resumption is worthless without restoration of business. With that restoration, and an earnest application of industrial energy to the produc¬ tion of wealth, resumption of specie payments is inevitable. It was thought that the estab¬ lishment of new banks would indicate the revival of industry, and that that revival would indicate an advance towards specie pay¬ ments. When that advance was made I thought it would be safe to cancel a part of the legal tenders. Compromising upon $700,000,000 of legal tenders and circulating bank notes, as the amount beyond which Congress would not permit me to go, I endeavored to secure two objects in the proviso so cruelly criticised by my friend. The one was to retire the legal tenders, as circulating notes supplied their place, until the legal tenders should be reduced to $250,000,000. My second object was gradually to build up a safe and solvent banking system, the capital of which, at the proper time, would lend its aid to effect the resumption of specie payments. I did not intend to indicate that I would not be willing to withdraw the remaining $250,000,000 at the proper time, but 1 did intend to indicate that another Congress could act on that subject with a better knowledge of its effects than we possibly can. Before I pass from this subject I desire to say that whatever plan may be adopted for un¬ raveling the tangled skein of our finances, something should be done to prevent, if possi¬ ble, those frequent monetary revulsions which belong to specie-paying periods. The day when paper money shall cease to be used in the United States none of us will ever see. When¬ ever paper money is based upon and redeem¬ able in coin, panics will occur. When runs are made upon the banks they contract their circulation and discounts, thereby increasing the very evils which they should be able to check and prevent. If, in these seasons of sudden contraction the banks could be temporarily permitted to redeem in Government notes, they could furnish relief to the community instead of forcing them to bankruptcy. These notes should be furnished by the Treasury Depart¬ ment on deposit of Government securities to be withdrawn when the exigency has passed. In alluding to the suggestions contained in my proposition I must not be understood as urging them upon the Senate. My future course will be determined by the fate of the motion which I have submitted. If it is adopted I shall see some hope in the future. If it is de¬ feated I trust that no funding bill will be passed during this session.