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 by its expenditure after it is obtained....

the most dangerous and irritating feature of the situation, however, remains to be mentioned. it is found in the means by which the treasury is despoiled of the gold thus obtained (by the sale of bonds) without canceling a single government obligation, and solely for the benefit of those who find profit in shipping it abroad, or whose fears induce them to hoard it at home. we have outstanding about $500,000,000 of currency notes of the government for which gold may be demanded, and, curiously enough, the law requires that when presented, and, in fact, redeemed and paid in gold, they shall be reissued. thus the same notes may do duty many times in drawing gold from the treasury; nor can the process be averted so long as private parties, for profit or otherwise, see an advantage in repeating the operation. more than $300,000,000 of these notes have been redeemed in gold, and, notwithstanding such redemption, they are still outstanding.

after giving a history of the bond issues already made to replenish the reserve, and of their results, it was further stated:

the financial events of the past year suggest facts and conditions which should certainly arrest attention. more than $172,000,000 in gold have been 145 drawn out of the treasury during the year for the purpose of shipment abroad or hoarding at home.

while nearly $103,000,000 was drawn out during the first ten months of the year, a sum aggregating more than two-thirds of that amount, being about $69,000,000, was drawn out during the following two months, thus indicating a marked acceleration of the depleting process with the lapse of time.

following a reference to existing differences of opinion in regard to the extent to which silver should be coined or used in our currency, and the irrelevancy of such differences to the matter in hand, the message continued:

while i am not unfriendly to silver, and while i desire to see it recognized to such an extent as is consistent with financial safety and the preservation of national honor and credit, i am not willing to see gold entirely banished from our currency and finances. to avert such a consequence i believe thorough and radical remedial legislation should be promptly passed. i therefore beg the congress to give the subject immediate attention.

after recommending the passage of a law authorizing the issue of long-term bonds, bearing a low rate of interest, to be used for the maintenance of an adequate gold reserve and in exchange for outstanding united states notes and treasury notes for the purpose of their cancelation, and after giving details of the proposed 146 scheme, the message concluded as follows:

in conclusion, i desire to frankly confess my reluctance to issue more bonds in present circumstances and with no better results than have lately followed that course. i cannot, however, refrain from adding to an assurance of my anxiety to co-operate with the present congress in any reasonable measure of relief, an expression of my determination to leave nothing undone which furnishes a hope for improving the situation, or checking a suspicion of our disinclination or disability to meet, with the strictest honor, every national obligation.

this appeal to congress for legislative aid was absolutely fruitless.

on the eighth day of february, 1895, those who, under the mandate of executive duty, were striving, thus unaided, to avert the perils of the situation, could count in the gold reserve only the frightfully low sum of $41,340,181; and it must be remembered that this was only two months after the proceeds of the second sale of bonds had been added to the fund. in point of fact, the withdrawals of gold during the short period mentioned had exceeded by more than $18,000,000 the amount of such proceeds; and several million dollars more had been demanded, some of which, though actually taken 147 out, was unexpectedly, and on account of the transaction now to be detailed, returned to the treasury.

this sudden fall in the reserve, and the apparent certainty of the continuance of its rapid depletion, seemed to justify the fear that before another bond sale by means of public notice and popular subscription could be perfected the gold reserve might be entirely exhausted; nor could we keep out of mind the apprehension that in consequence of repeated dispositions of bonds, with worse instead of better financial conditions impending, further sales by popular subscription might fail of success, except upon terms that would give the appearance of impaired national credit.

notwithstanding all this, no other way seemed to be open to us than another public offer of bonds; and it was determined to move in that direction immediately.

in anticipation of this action it was important to obtain certain information and suggestions touching the feeling and disposition of those actively prominent in financial and business circles.

i think it may here be frankly confessed that it never occurred to any of us to consult, in this emergency, farmers, doctors, lawyers, shoe-makers, 148 or even statesmen. we could not escape the belief that the prospect of obtaining what we needed might be somewhat improved by making application to those whose business and surroundings qualified them to intelligently respond.

therefore, on the evening of the seventh day of february, 1895, an interview was held at the white house with mr. j. p. morgan of new york; and i propose to give the details of that interview as gathered from a recollection which i do not believe can be at fault. secretary carlisle was present nearly or quite all the time, attorney-general olney was there a portion of the time, and mr. morgan and a young man from his office and myself all the time. at the outset mr. morgan was inclined to complain of the treatment he had received from treasury officials in the repudiation of an arrangement which he thought he had been encouraged to perfect in connection with the disposal of another issue of bonds. i said to mr. morgan, whatever there might be in all this, another offer of bonds for popular subscription open to all bidders had been determined upon, and that there were two questions i wanted to ask him which he ought to be able to answer: one was whether the bonds to be so offered would 149 probably be taken at a good price on short notice; and the other was whether, in case there should be imminent danger of the disappearance of what remained of the gold reserve, during the time that must elapse between published notice and the opening of bids, a sufficient amount of gold could be temporarily obtained from financial institutions in the city of new york to bridge over the difficulty and save the reserve until the government could realize upon the sale of its bonds. mr. morgan replied that he had no doubt bonds could be again sold on popular subscription at some price, but he could not say what the price would be; and to the second inquiry his answer was that, in his opinion, such an advance of gold as might be required could be accomplished if the gold could be kept in this country, but that there might be reluctance to making such an advance if it was to be immediately withdrawn for shipment abroad, leaving our financial condition substantially unimproved. after a little further discussion of the situation he suddenly asked me why we did not buy $100,000,000 in gold at a fixed price and pay for it in bonds, under section 3700 of the revised statutes. this was a proposition entirely new to me. i turned to the statutes and read the section he had mentioned. 150 secretary carlisle confirmed me in the opinion that this law abundantly authorized such a transaction, and agreed that it might be expedient if favorable terms could be made. the section of the statutes referred to reads as follows:

section 3700. the secretary of the treasury may purchase coin with any of the bonds or notes of the united states authorized by law, at such rates and upon such terms as he may deem most advantageous to the public interest.

mr. morgan strongly urged that, if we proceeded under this law, the amount of gold purchased should not be less than $100,000,000; but he was at once informed that in no event would more bonds be then issued than would be sufficient to provide for adding to the reserve, about $60,000,000, the amount necessary to raise the fund to $100,000,000.

not many months afterward i became convinced that on this point mr. morgan made a wise suggestion; and i have always since regretted that it was not adopted.