"I appeal to the Senator whether that is a fair statement of my argument?"

Mr. Fessenden: "That is the way precisely that I understand it."

I said:

"That is precisely as no gentleman could have understood me. I never said that the secretary improperly would do so and so by any means. It is one of the honorable Senator's modes of stating propositions."

Mr. Fessenden: "I certainly did not mean to say that the honorable Senator supposed he designed to do so, but such seems to be the result of his argument--that the Secretary of the Treasury having the power, as he says, there is danger that he might abuse it in that precise way; else his argument amounts to nothing at all as against the bill. I certainly acquit my friend of any sort of desire or intention to throw any imputation on the Secretary of the Treasury. That he did not mean to do. . . ."

I said:

"I do not think it wise to confer on the Secretary of the Treasury the power to meet the indebtedness not accruing for a year, or two, or three years. I do not think it is necessary, in our present financial condition, to authorize him to go into market now and sell bonds at current market rates with a view to pay debts that do not mature for a year or two. I have no doubt before the five- twenty loans are due we shall retire every dollar of them at four or five per cent. interest. No one who heeds the rapid developments of new sources of wealth in this country, the enormous yield of gold now, the renewal of industry in the south, the enormous yield of cotton, the growing wealth of this country, and all the favorable prospects that are before us, doubts the ability of this government before this debt matures to reduce it to four or five per cent.

interest. . . .

"The Secretary of the Treasury may sell bonds at any rate to meet debts as they accrue, but that is not the purpose of this bill."

Mr. Fessenden: "That is all the purpose there is in it."

I said:

"Then there is no necessity for it."

Mr. Fessenden: "Yes, there is. I differ from you."

I continued:

"We have here the tables before us. The honorable Senator and I know when this debt matures. . . .

"That is the power now given, and he will use the power. He may think it to his interest to retire the whole of the seven-thirties or the ten-forties; but is it wise for us to give him that power now, at the heel of the war and before things have settled down?

I do not think it is.

"I repeat, I do not wish to call in question the integrity of the Secretary of the Treasury. The Senator interjects by saying we must look ahead. I have done so. The difference between us is that I antic.i.p.ate that the future of this country will be hopeful, buoyant, joyous. We shall not have to beg money of foreign nations, or even of our own people, within two or three years. Our national debt will be eagerly sought for, I have no doubt. I take a hopeful view of the future. I do not wish now to cripple the industry of the country by adopting the policy of the Secretary of the Treasury, as he calls it, by reducing the currency, by crippling the operations of the government, when I think that under any probability of affairs in the future, all this debt will take care of itself. I believe that if the Secretary of the Treasury would do nothing in the world except simply sit in his chair, meet the accruing indebtedness, and issue his treasury warrants, this debt will take care of itself, and will fund itself at four or five per cent.

before very long. All that I object to in this bill is the power it gives the Secretary of the Treasury over the currency, to affect the currency of the country now and to antic.i.p.ate debts that are not yet due. . . .

"That is what I am afraid of, his interference to contract the currency. The honorable Senator from Maine, however, would seem to think that I impute to him a wrong motive, and therefore I corrected him when he made the remark that I seemed to suppose the secretary was doing this improperly. I think not. The Secretary of the Treasury informed us that he desired to reduce the currency, and he has been doing it as far as he could. He has been acc.u.mulating large balances. He was opposed to the proviso which has been inserted in this bill, and yielded to it only with reluctance.

That is admitted on all hands, and he is not precluded either in honor or propriety from carrying out his policy if you gave him the power to do it."

This bill became a law on the 12th of April, 1866. President Johnson relied entirely upon McCulloch, and had no opinions upon financial topics.

Now, nearly thirty years after the pa.s.sage of this act, it is manifest that it was far the most injurious and expensive financial measure ever enacted by Congress. It not only compelled the United States to pay the large war rates of interest for many years, but postponed specie payments until 1879. It added fully $300,000,000 of interest that might have been saved by the earlier refunding of outstanding bonds into bonds bearing four or five per cent. interest.

Mr. Fessenden, then chairman of the committee on finance, committed a grave error in hastily supporting the bill, an error which I believe he greatly regretted and which, in connection with his failing health, no doubt led him to resign his position as chairman of that committee. Although our debate was rather sharp, it did not disturb our friendly relations. With McCulloch in the treasury department, nothing could be done.

If the funding clauses of this act had been limited to the conversion of compound interest notes, treasury notes bearing interest, certificates of indebtedness, and temporary loans into bonds redeemable at the pleasure of the United States after a brief time, bearing not exceeding five per cent. interest, retaining in circulation during this process of refunding all the then outstanding United States notes, the result would have been greatly beneficial to the United States, but this was not the chief object of the Secretary of the Treasury. His primary object was to convert United States notes into interest-bearing bonds, and thus force the immediate resumption of specie payments or the subst.i.tution of national bank notes for United States notes. The result of his refunding was largely to increase the amount of six per cent. bonds, the most burdensome form of security then outstanding. In October, 1865, the amount of six per cent. bonds was $920,000,000; on the 1st of July, 1868, the six per cent. bonds outstanding were $1,557,844,600. The increase of these bonds under the operation of this law was thus over $637,000,000.

The result of this policy of contraction was not only to increase the burden of the public debt, but it created serious derangement of the business of the country. It excited a strong popular opposition to the measures adopted.

The Greenback party, as it was called, grew out of this policy of contraction, and for a time threatened to carry the election of a majority of the Members of Congress. It contended practically for an unlimited issue of legal tender United States notes, and the payment of all bonds and securities in United States notes. This, however, did not disturb Secretary McCulloch. In his annual report of December 3, 1866, he again urged the policy of a further reduction of United States notes. He was not satisfied with the reduction already provided for, and recommended that the reduction should be increased from $4,000,000 a month, as contemplated by the act of April 12, 1866, to $6,000,000 a month for the fiscal year, and to $10,000,000 a month thereafter. He said:

"The _policy_ of contracting the circulation of the government notes should be definitely and unchangeably established, and the _process_ should go on just as rapidly as possible without producing a financial crisis or seriously embarra.s.sing those branches of industry and trade upon which our revenues are dependent. That the policy indicated is the true and safe one, the secretary is thoroughly convinced. If it shall not be speedily adopted and rigidly, but judiciously, enforced, severe financial troubles are in store for us."

He insisted that the circulation of the country should be further reduced, not by compelling the national banks to retire their notes, but by the withdrawal of United States notes. When reminded of the great saving of interest in the issue of $400,000,000 United States notes, he answered:

"Considerations of this nature are more than counterbalanced by the discredit which attaches to the government by failing to pay its notes according to their tenor, by the bad influence of this involuntary discredit upon the public morals, and the wide departure, which a continued issue of legal tender notes involves, from the past usages, if not from the teachings of the const.i.tution itself."

He said:

"The government cannot exercise powers not conferred by its organic law or necessary for its own preservation, nor dishonor its own engagements when able to meet them, without either shocking or demoralizing the sentiment of the people; and the fact that the indefinite continuance of the circulation of an inconvertible but still legal tender currency is so generally advocated indicates how far we have wandered from old landmarks both in finance and in ethics."

The growing opposition of the people at large to the contraction of the currency seemed to have no effect upon his mind.

He again recurs to the same subject in his annual report to Congress, in December, 1867. After stating that the United States notes, including fractional currency, had been reduced from $459,000,000 to $387,000,000, and the funded debt had been increased $684,548,800, he urged as a measure regarded by him as important, if not indispensable for national prosperity, the funding or payment of the balance of interest-bearing notes, and a continued contraction of the paper currency. He urged that the acts authorizing legal tender notes be repealed, and that the work of retiring the notes which had been issued under them should be commenced without delay, and carefully and persistently continued until all were retired.

This policy of contraction, honestly entertained and persistently urged by Secretary McCulloch in spite of growing stringency, led Congress, by the act of February 4, 1868, to suspend indefinitely the authority of the Secretary of the Treasury to make any reduction of the currency by retiring or canceling United States notes.

Who can doubt that if he had availed himself of the power given him to refund the interest-bearing notes and certificates of the United States into bonds bearing a low rate of interest, leaving the United States notes bearing no interest to circulate as money, he would have saved the government hundreds of millions of dollars?

If irredeemable notes were a national dishonor, why did he not urge their redemption in coin at some fixed period and then reissue them, and maintain their redemption by a reserve in coin?

The act of February 25, 1862, under which the original United States notes were issued, provided that:

"Such United States notes shall be received the same as coin, at their par value, in payment for any loans that may be hereafter sold or negotiated by the Secretary of the Treasury, and may be reissued from time to time as the exigencies of the public interest shall require."

This provision would have maintained the parity of United States notes at par with bonds, but under the pressure of war it was deemed best by Congress, upon the recommendation of Secretary Chase, to take from the holder of United States notes the right to present them in payment for bonds after the first day of July, 1863. If this privilege, conferred originally upon United States notes, had been renewed in 1866, with the right of reissue, bonds and notes would together have advanced to par in coin. But this is what the contractionists especially opposed. They demanded the cancellation of the notes when presented, a contraction of the currency when offering our bonds. It is easy now to perceive that a conservative use of United States notes, convertible into four per cent. bonds, would have steadily advanced both notes and bonds to par in coin.

But the equally erroneous opposing opinions of contractionists and expansionists delayed for many years the coming of coin resumption upon a fixed quant.i.ty of United States notes.

Among the acts of this Congress of chief importance is the act approved July 13, 1866, to reduce taxes and provide internal revenue.

The pa.s.sage of such an act required much labor in both Houses, but especially so in the House of Representatives, where tax bills must originate. It was a compromise measure, and, unlike previous acts, did not reach out for new objects of taxation, but selected such articles as could bear it best, and on some of these the tax was increased. A great number of articles that enter into the common consumption of the people and are cla.s.sed as necessities of life were relieved from taxation. The general purpose of the bill was in time to concentrate internal taxes on such articles as spirits, tobacco and beer. The tax on incomes was continued but limited to the 30th of June, 1870. I have already stated the marked development of internal taxation, and this measure was one of the most important in the series to produce great revenue at the least cost, and of the lightest burden to the taxpayer.

Soon after the pa.s.sage of the act, approved April 12, 1866, to contract the currency, I introduced a bill, "To reduce the rate of interest on the national debt and for funding the same." In view of the pa.s.sage of that act I did not expect that a funding bill would meet with success, but considered it my duty to present one, and on the 22nd of May, 1866, made a speech in support of it. The bill provided for the voluntary exchange of any of the outstanding obligations of the United States for a bond running thirty years, but redeemable at the pleasure of the United States after ten years from date, bearing interest at the rate of five per cent., payable annually. On reading that speech now I find that, though I was much more confident than others of converting our maturing securities into five per cent. bonds, the general opinion then prevailing, and acted upon by the Secretary of the Treasury, was to issue six per cent. bonds as already stated. I soon found that it was idle to press the funding bill upon Congress, when it was so much occupied with reconstruction and with Andrew Johnson. The refunding and many other measures had to be postponed until a new administration came into power. Congress had unfortunately authorized the issue of six per cent. bonds for accruing liabilities, and thus postponed refunding at a lower rate of interest.

The long and exciting session of Congress that ended on the 28th day of July, 1866, left me in feeble strength and much discouraged with the state of affairs. I had arranged with General Sherman to accompany him in an official inspection of army posts on the western plains, but did not feel at liberty to leave Washington until Congress adjourned. The letter I wrote him on the 8th of July expresses my feelings as to the political situation at that time:

"United States Senate Chamber,} "Washington, July 8, 1866. } "Dear Brother:--It is now wise for you to avoid all expressions of political opinion. Congress and the President are now drifting from each other into open warfare. Congress is not weak in what it has done, but in _what it has failed to do_. It has adopted no unwise or extreme measures. The civil rights bill and const.i.tutional amendments can be defended as reasonable, moderate, and in harmony with Johnson's old position and yours. As Congress has thus far failed to provide measures to allow legal Senators and Representatives to take their seats, it has failed in a plain duty. This is its weakness, but even in this it will have the sympathy of the most of the soldiers, and the people who are not too eager to secure rebel political power. As to the President, he is becoming Tylerized.

He was elected by the Union party for his openly expressed radical sentiments, and now he seeks to rend to pieces this party. There is a sentiment among the people that this is dishonor. It looks so to me. What Johnson is, is from and by the Union party. He now deserts it and betrays it. He may varnish it up, but, after all, he must admit that he disappoints the reasonable expectations of those who intrusted him with power. He may, by a coalition with copperheads and rebels, succeed, but the simple fact that nine- tenths of them who voted for him do not agree with him, and that he only controls the other tenth by power intrusted to him by the Union party, will d.a.m.n him forever. Besides, he is insincere; he has deceived and misled his best friends. I know he led many to believe he would agree to the civil rights bill, and nearly all who conversed with him until within a few days believed he would acquiesce in the amendments, and even aid in securing their adoption.

I almost fear he contemplates civil war. Under those circ.u.mstances you, Grant and Thomas ought to be clear of political complications.

As for myself, I intend to stick to finance, but wherever I can I will moderate the actions of the Union party, and favor conciliation and restoration.

"Affectionately yours, "John Sherman."

After the adjournment I proceeded to St. Louis, and with General Sherman and two staff officers, went by rail to Omaha. This handsome city had made great progress since my former visit. We then went by the Central Pacific railroad to Fort Kearney, as far as the rails were then laid. There our little party started through the Indian Territory, riding in light wagons with canvas covers, each drawn by two good army mules, escorted by a squad of mounted soldiers. We traveled about thirty miles a day, camping at night, sleeping in our wagons, turned into ambulances, the soldiers under shelter tents on blankets and the horses parked near by. The camp was guarded by sentinels at night, and the troopers lay with their guns close at hand. Almost every day we met Indians, but none that appeared to be hostile. In this way we traveled to Fort Laramie.

The country traversed was an unbroken wilderness, in a state of nature, but singularly beautiful as a landscape. It was an open prairie, traversed by what was called the North Platte River, with scarcely water enough in it to be called a creek, with rolling hills on either side, and above, a clear sky, and air pure and bracing. It was the first time I had been so far out on the plains, and I enjoyed it beyond expression. I was soon able to eat my full share of the plain fare of bread and meat, and wanted more.

After many days we reached Fort Laramie, then an important post far out beyond the frontier. We remained but a few days, and then, following south along the foot hills, we crossed into the Laramie plains to Fort Sanders. This was the last post to the west in General Sherman's command. From thence we followed the course of the Cache la Poudre. On the way we camped near a station of the Overland Stage Company, for change of horses and for meals, in a charming and picturesque region. The keeper of the station soon called and inquired for me, and I found that he was a former resident of Mansfield, who married the daughter of an old friend. He invited our party to his house, and there I met his wife, who, in this region without any neighbors or habitations near, seemed to be perfectly happy and fearless, though often disturbed by threatened Indian outbreaks. We were handsomely entertained. It was a great relief to sleep one night in a comfortable bed, after sleeping for many nights with two in a narrow wagon. We then proceeded to Greeley, where we found a small settlement of farmers. From thence to Denver, we found a few cabins scattered over a vast open plain stretching as far as the eye could reach to the east, with the mountains on the west rising in grandeur and apparently presenting an insurmountable barrier. I have seen many landscapes since that were more bold and striking, but this combination of great mountains and vast plains, side by side, made an impression on my mind as lasting as any natural landscape I have seen.

At Denver, General Sherman and I were handsomely entertained by the citizens, many of whom General Sherman knew as soldiers under his command during the war, and some of whom I knew as former residents of Ohio. They were enthusiastic in their praise of Colorado. It seemed to me the air was charged with a superabundance of ozone, for everyone was so hopeful of the future of Denver, that even the want of rain did not discourage them and some of them tried to convince me that irrigation from the mountains was better than showers from the sky. Denver was then a town of less than 5,000 inhabitants and now contains more than 110,000. Colorado had less than 50,000 inhabitants in 1870, and in 1890 it had 412,198, an increase of nearly ten fold in twenty years. But this marvelous growth does not spring from the invigorating air and flowing springs of Colorado, but from the precious metals stored in untold quant.i.ties in her mountains. From Denver General Sherman had to continue his inspection to the southern posts, and I was called home to take part in the pending canva.s.s. I started in a coach peculiar to the country, with three or four pa.s.sengers, over a distance of about four hundred miles to Fort Riley, in Kansas. We had heard of many Indian forays on the line we were to travel over and there was some danger, but it was the only way to get home. Each of the pa.s.sengers, I among the number, had a good Winchester rifle, with plenty of ammunition. The coach was a crude rattle-trap, noisy and rough, but strong and well adapted to the journey. It was drawn by four horses of the country, small but wiry. We had long reaches between changes. The stations for meals had means of defense, and the food set before us was substantial, mainly buffalo beef, chickens and bread. A good appet.i.te (always a sure thing on the plains) was the best sauce for a substantial meal, and all the meals were dinners with no change of courses. We saw on the way many evidences of Indian depredations, one of which was quite recent, and two or three settlers had been killed. We met no Indians on the way, but we did meet myriads of buffaloes, scattered in vast herds to the north and south of us as far as the eye could reach. It is sad to reflect that all these animals have been exterminated, mainly in wanton sport by hunters who did not need their flesh for food or their hides for leather or robes. This destruction of buffaloes opened the way for herds of domestic cattle, which perhaps in equal numbers now feed upon the native gra.s.s of the prairies.

In a recent visit to western Nebraska and South Dakota, I saw these cattle in great numbers in good condition, cheaply cared for and sold for four cents a pound on the hoof. The owners of these cattle purchased land from settlers who had acquired t.i.tle under the homestead or pre-emption laws, as suitable sites for ranches, including a permanent lake or pond for each, an indispensable requisite for a ranch. This being secured, they built houses to live in and sheds for the protection of their cattle in winter, and thus obtained practical possession, without cost or taxes, of all the government land needed for their ranges. Sad experience has convinced settlers in all the vast rainless region of the west, that they cannot produce grain with any certainty of harvesting a crop, and thousands who have made the experiment in western Kansas and Nebraska and in eastern Colorado and Wyoming have recently abandoned their improvements and their claims. It seems now that this part of our country must be given up to the herders of cattle.

The Indians and buffaloes have disappeared and the "cowboys" and domestic cattle and horses have taken their place, to give way, no doubt, in time, to the farmer, when the water will be drawn from the earth by artesian wells, and life and vitality will thus be given to a soil as rich as the Kansas valley.

We reached the end of our stage ride at Fort Riley, and were glad to enter into the cars of the Kansas Pacific railroad, though they were as dirty and filthy as cars could well be. All this has been changed. Now the ride over the plains from Kansas City to Denver can be made, in a comparatively few hours, in comfort and safety.