Finally, the habit of compromise prevailed and a majority agreement was reached postponing the date of repeal for twelve or eighteen months during which the treasury stock of silver bullion was to be turned into coin.Cleveland made it known that he would not consent to such an arrangement, and the issue was thereafter narrowed to that of unconditional repeal of the Silver Purchase Act.The Senators from the silver-mining States carried on an obstinate filibuster and refused to allow the question to come to a vote, until their arrogance was gradually toned down by the discovery that the liberty to dump silver on the Treasury had become a precarious mining asset.The law provided for the purchase of 4,500,000 ounces a month, "or, so much thereof as may be offered at the market price." Secretary Carlisle found that offers were frequently higher in price than New York and London quotations, and by rejecting them he made a considerable reduction in the amount purchased.Moreover, the silver ranks began to divide on the question of policy.The Democratic silver Senators wished to enlarge the circulating medium by increasing the amount of coinage, and they did not feel the same interest in the mere stacking of bullion in the Treasury that possessed the mining camp Senators on the Republican side.When these two elements separated on the question of policy, the representatives of the mining interests recognized the hopelessness of preventing a vote upon the proposed repeal of the silver purchase act.On the 30th of October, the Senate passed the repeal with no essential difference from the House bill, and the bill became law on November 1, 1893.
But although the repeal bill stopped the silver drain upon the Treasury, it did not relieve the empty condition to which the Treasury had been reduced.It was manifest that, if the gold standard was to be maintained, the Treasury stock of gold would have to be replenished.The Specie Resumption Act of 1875authorized the sale of bonds "to prepare and provide for"redemption of notes in coin, but the only classes of bonds which it authorized were those at four per cent payable after thirty years, four and a half per cent payable after fifteen years, and five per cent payable after ten years from date.For many years, the Government had been able to borrow at lower rates but had in vain besought Congress to grant the necessary authority.The Government now appealed once more to Congress for authority to issue bonds at a lower rate of interest.Carlisle, the Secretary of the Treasury, addressed a letter to the Senate committee of finance, setting forth the great saving that would be thus effected.Then ensued what must be acknowledged to be a breakdown in constitutional government.Immediately after a committee meeting on January 16, 1894, the Chairman, Senator Voorhees, issued a public statement in which he said that "it would be trifling with a very grave affair to pretend that new legislation concerning the issue of bonds can be accomplished at this time, and in the midst of present elements and parties in public life, with elaborate, extensive, and practically indefinite debate."Therefore, he held that "it will be wiser, safer and better for the financial and business interests of the country to rely upon existing law." This plainly amounted to a public confession.that Congress was so organized as to be incapable of providing for the public welfare.
Carlisle decided to sell the ten-year class of bonds, compensating for their high interest rate by exacting such a premium as would reduce to three per cent the actual yield to holders.On January 17, 1894, he offered bonds to the amount of fifty millions, but bids came in so slowly that he found it necessary to visit New York to make a personal appeal to a number of leading bankers to exert themselves to prevent the failure of the sale.As a result of these efforts, the entire issue was sold at a premium of $8,660,917, and the treasury stock of gold was brought up to $107,440,802.
Then followed what is probably the most curious chapter in the financial history of modern times.Only gold was accepted by the Treasury in payment of bonds; but gold could be obtained by offering treasury notes for redemption.The Act of 1878 expressly provided that, when redeemed, these notes "shall not be retired, canceled, or destroyed, but they shall be reissued and paid out again and kept in circulation." The Government, as President Cleveland pointed out, was "forced to redeem without redemption and pay without acquittance." These conditions set up against the Treasury an endless chain by which note redemptions drained out the gold as fast as bond sales poured it in.In a message to Congress on January 28, 1895, President Cleveland pointed out that the Treasury had redeemed more than $300,000,000 of its notes in gold, and yet these notes were all still outstanding.
