it can hardly be necessary to state that any plan which would protect from immediate withdrawal the gold we might add to our reserve could not fail to be of extreme value. such of these withdrawals as were made for hoarding gold could be prevented only by a restoration of confidence among those of our people who had grown suspicious of the government’s financial ability; but the considerable drain from the reserve for the purchase of the very bonds to be sold for its reinforcement, and the much larger drain made by those who profited by the shipment of gold abroad, could be, measurably at least, directly arrested. thus to the extent that foreign gold might be brought here and used for the purchase of bonds, the use for that purpose of such as was held by our own people or as was already in the reserve subject to their withdrawal would not only be decreased, but the current of the passage of gold would be changed and would flow toward us instead of away from us, making the prospect of 152 profit in gold exportation less alluring. an influx of gold from abroad would also have a tendency to decrease the sentimental estimate of its desirability which its unrelieved scarcity was apt to create in timid minds. it was especially plain that so far as withdrawals from our reserve for speculative shipment abroad were concerned, they could be discouraged by the efforts of those whose financial connections in other countries enabled them to sell gold exchange on foreign money centers at a price which would make the actual transportation of the coin itself unprofitable.

the position of mr. morgan and the other parties in interest whom he represented was such in the business world that they were abundantly able, not only to furnish the gold we needed, but to protect us in the manner indicated against its immediate loss. their willingness to undertake both these services was developed during the discussion of the plan proposed; and after careful consideration of every detail until a late hour of the night, an agreement was made by which j. p. morgan & co. of new york, for themselves and for j. s. morgan & co. of london; and august belmont & co. of new york, for themselves and for n. m. rothschild & son of london, were to sell and 153 deliver to the government 3,500,000 ounces of standard gold coin of the united states, to be paid for in bonds bearing annual interest at the rate of four per cent. per annum, and payable at the pleasure of the government after thirty years from their date, such bonds to be issued and delivered from time to time as the gold coin to be furnished was deposited by said parties in the subtreasuries or other legal depositories of the united states. at least one half of the coin so delivered was to be obtained in europe, and shipped from there in amounts not less than 300,000 ounces per month, at the expense and risk of the parties furnishing the same; and so far as it was in their power they were to “exert all financial influence and make all legitimate efforts to protect the treasury of the united states against the withdrawals of gold pending the complete performance of the contract.”

four per cent. bonds were selected for use in this transaction instead of ten-year bonds bearing five per cent. interest, because their maturity was extended to thirty years, thus offering a more permanent and inviting investment, and for the further reason that $100,000,000 of shorter five per cent. bonds had already been issued, and it was, therefore, deemed desirable 154 to postpone these further bond obligations of the government to a later date. the price agreed upon for the gold coin to be delivered was such that the bonds given in payment therefor would yield to the investor an annual income of three and three fourths per cent.

it has already been stated that the only bonds which could be utilized in our efforts to maintain our gold reserve were those described in a law passed as early as 1870, and made available for our uses by an act passed in 1875. the terms of these bonds were ill suited to later ideas of investment, and they were made payable in coin and not specifically in gold. nothing at any time induced the exchange of gold for these coin bonds, except a reliance upon such a measure of good faith on the part of the government, and honesty on the part of the people, as would assure their payment in gold coin and not in depreciated silver.

it was exceedingly fortunate that, at the time this agreement was under consideration, certain political movements calculated to undermine this reliance upon the government’s continued financial integrity were not in sight; but it was, nevertheless, very apparent that the difficulties of the situation would be greatly lessened if, in safeguarding our reserve, bonds could be used 155 payable by their terms in gold, and bearing a rate of interest not exceeding three per cent. accordingly, at the instance of secretary carlisle, a bill had been introduced in the house of representatives, some time before the morgan-belmont agreement was entered upon, which authorized the issue of bonds of that description. a few hours before the agreement was consummated this sane and sensible legislation was brought to a vote in the house and rejected.

when, in our interview with mr. morgan, the price for the gold to be furnished was considered, he gave reasons which we could not well answer in support of the terms finally agreed upon; but he said that the parties offering to furnish the gold would be glad to accept at par three per cent. bonds, payable by their terms in gold instead of in coin, in case their issue could be authorized. he expressed not only a willingness but a strong desire that a substitution might be made of such bonds in lieu of those already selected, and readily agreed to allow us time to procure the necessary legislation for that purpose. he explained, however, that only a short time could be stipulated for such a substitution, because in order to carry out successfully the agreement contemplated, the bonds 156 must be offered in advance to investors both here and abroad, and that after numerous subscriptions had been received from outside parties the form and condition of the securities could not be changed; and he added that, but for this, there would be no objection to the concession of all the time desired. it was finally agreed that ten days should be allowed us to secure from congress the legislation necessary to permit the desired substitution of bonds. a simple calculation demonstrated that by such a substitution the government would save on account of interest more than $16,000,000 before the maturity of the bonds. it was further stipulated on the part of the government that if the secretary of the treasury should desire to sell any further bonds on or before october 1, 1895, they should first be offered to the parties then represented by mr. morgan. this stipulation did not become operative.

when our conference terminated it was understood that secretary carlisle and attorney-general olney should act for the government at a meeting between the parties early the following day, at which the agreement we had made was to be reduced to writing; and thereupon i prepared a message which was submitted to the congress at the opening of its session on the 157 following day, in which the details of our agreement were set forth and the amount which would be saved to the government by the substitution of three per cent. gold bonds was plainly stated; but having no memorandum of the agreement before me, in my haste i carelessly omitted to mention the efforts agreed on by mr. morgan and his associates to prevent gold shipments. the next morning a contract embodying our agreement was drawn and signed, and a copy at once given to the chairman of the ways and means committee of the house, so that the delay of a demand for its inspection might be avoided. a bill was also immediately introduced again giving authority to issue three per cent. bonds, payable by their terms in gold, to be substituted in place of the four per cent. bonds as provided in the contract—to the end that $16,000,000 might be saved to the government, and the public welfare in every way subserved.

the object of this message was twofold. it was deemed important, considering the critical condition of our gold reserve, that the public should be speedily informed of the steps taken for its protection; and in addition, though previous efforts to obtain helpful legislation had resulted in discouragement, it was hoped that 158 when the saving by the government of $16,000,000 was seen to depend on the action of congress there might be a response that would accord with patriotic public duty.

quite in keeping with the congressional habit prevailing at that time, the needed legislation was refused, and this money was not saved.

the contract was thereupon carried out as originally made. in its execution four per cent. bonds were delivered amounting to $62,315,400, and the sum of $65,116,244.62 in gold received as their price. the last deposit in completion of the contract was made in june, 1895, but additional gold was obtained from the contracting parties in exchange for united states notes and treasury notes until in september, 1895, when the entire amount of gold received from them under the contract and through such exchanges had amounted to more than $81,000,000. the terms of the agreement were so well carried out, not only in the matter of furnishing gold, but in procuring it from abroad and protecting the reserve from withdrawals, that during its continuance the operation of the “endless chain” which had theretofore drained our gold was interrupted. no gold was, during that period, taken from the treasury to be used in the purchase of bonds, as had previously 159 been the case, nor was any withdrawn for shipment abroad.

it became manifest, however, soon after this contract was fully performed, that our financial ailments had reached a stage so nearly chronic that their cure by any treatment within executive reach might well be considered a matter of anxious doubt. in the latter months of the year 1895 a scarcity of foreign exchange and its high rate, the termination of the safeguards of the morgan-belmont contract, and, as a result, the renewal of opportunity profitably to withdraw gold for export with a newly stimulated popular apprehension, and perhaps other disturbing incidents, brought about a recurrence of serious depletions of gold from the reserve.

in the annual executive message sent to congress on the second day of december, 1895, the situation of our finances and currency was set forth in detail, and another earnest plea was made for remedial legislative action. after mentioning the immediately satisfactory results of the contract for the purchase of gold, the message continued:

though the contract mentioned stayed for a time the tide of gold withdrawals, its good results could not be permanent. recent withdrawals have reduced the reserve from $107,571,230 on the eighth 160 day of july, 1895, to $79,333,966. how long it will remain large enough to render its increase unnecessary is only a matter of conjecture, though quite large withdrawals for shipment in the immediate future are predicted in well-informed quarters. about $16,000,000 has been withdrawn during the month of november.

the prediction of further withdrawals mentioned in this message was so fully verified that eighteen days after its transmission, and on the twentieth day of december, 1895, another executive communication was sent to congress, in contemplation of its holiday recess, in which, after referring to the details contained in the former message, it was stated:

the contingency then feared has reached us, and the withdrawals of gold since the communication referred to, and others that appear inevitable, threaten such a depletion in our government’s gold reserve as brings us face to face with the necessity of further action for its protection. this condition is intensified by the prevalence in certain quarters of sudden and unusual apprehension and timidity in business circles.

the real and sensible cure for our recurring troubles can only be effected by a complete change in our financial scheme. pending that, the executive branch of the government will not relax its efforts nor abandon its determination to use every means within its reach to maintain before the world american 161 credit, nor will there be any hesitation in exhibiting its confidence in the resources of our country and the constant patriotism of our people.

in view, however, of the peculiar situation now confronting us, i have ventured to herein express the earnest hope that the congress, in default of the inauguration of a better system of finance, will not take a recess from its labors before it has, by legislative enactment or declaration, done something, not only to remind those apprehensive among our own people that the resources of this government and a scrupulous regard for honest dealing afford a sure guarantee of unquestioned safety and soundness, but to reassure the world that with these factors, and the patriotism of our citizens, the ability and determination of our nation to meet in any circumstances every obligation it incurs do not admit of question.

perhaps it should not have been expected that members of congress would permit troublesome thoughts of the government’s financial difficulties to disturb the pleasant anticipations of their holiday recess; at any rate, these difficulties and the appeal of the president for at least some manifestation of a disposition to aid in their remedy were completely ignored.

on the sixth day of january, 1896, the gold reserve having fallen to $61,251,710, its immediate repair became imperative. though our resort to the expedient of purchasing gold with bonds under contract had been productive 162 of very satisfactory results, it by no means indicated our abandonment of the policy of inviting offerings of gold by public advertisement. it was rather an exceptional departure from that policy, made necessary by the dangerously low state of the reserve on account of extensive and sudden depletions, and the peril attending any delay in replenishing it. we had not lost faith in the loyalty and patriotism of the people, nor did we doubt their willingness to respond to an appeal from their government in any emergency. we also confidently believed that if the bonds issued for the purpose of increasing our stock of gold were widely distributed among our people, self-interest as well as patriotism would stimulate the solicitude of the masses of our citizens for the welfare of the nation. no reason for discouragement had been found in public offerings for bonds, so far as obtaining a needed supply of gold and a fair price for our bonds were concerned. the failure of their wide distribution among the people when so disposed of seemed to be largely owing to the fact that the bonds themselves were so antiquated in form, and bore so high a rate of interest, that it was difficult for an ordinary person to make the rather confusing computation of premium and other factors necessary to 163 a safe and intelligent bid. in a transaction of this sort, where the smallest fraction of a cent may determine the success of an offer, those accustomed to the niceties of financial calculations are apt to hold the field to the exclusion of many who, unaided, dare not trust themselves in the haze of such intricacies. if congress had provided for the issuance of bonds bearing a low rate of interest, which could have been offered to the public at par, i am convinced that the plain people of the land would more generally have become purchasers. another difficulty that had to some extent prevented a more common participation by the people in prior public sales arose, it was thought, from their lack of notice of the pendency of such sales, and want of information as to the advantages of the investment offered, and the procedure necessary to present their bids in proper form.

in view of the fact that the gold then in the reserve amounted to $20,000,000 more than it contained eleven months earlier, when the morgan-belmont contract was made, and because, for that reason, more time could be allowed for its replenishment, there was no hesitation in deciding upon a return to our original plan of offering bonds in exchange for gold by public subscription. 164

having determined upon a return to this method, it was deemed wise, upon consideration of all the circumstances, to make some modification of prior action in such cases. instead of short-term five per cent. bonds, the longer-term bonds bearing four per cent. interest were substituted, as, on the whole, the best we could offer for popular subscription. since two offerings of $50,000,000 each had proved to be of only very temporary benefit, it was determined to double the amount and offer $100,000,000 for subscription. nearly a month was to be given instead of a shorter time, as theretofore, between the date of notice of the offer and the opening of the bids; and extraordinary efforts were to be made to give the most thorough publicity to the offerings—to the end that we might stimulate in every possible way the desire of the masses of our people to invest in the bonds. especial information and aid were to be furnished for the guidance of those inclined to subscribe; and successful bidders were to be allowed to pay for the bonds awarded to them in instalments. the lowest denomination of the bonds was to be fifty dollars, and the larger ones were to be in multiples of that sum. in point of fact, it was resolved that nothing should be left undone which would in any way 165 promote the success of this additional and increased offer of bond subscription to the public.

accordingly, on the sixth day of january, 1896, a circular bearing that date was issued, giving notice that proposals would be received until the fifth day of february following for gold coin purchases of $100,000,000 of the four per cent. bonds of the united states, upon the terms above mentioned. these circulars were extensively published in the newspapers throughout the country. copies, together with a letter of instruction to bidders, containing, among other things, a computation showing the income the bonds would yield to the investor upon their purchase at prices therein specified, and accompanied by blanks for subscription, were sent to the postmasters in every state and territory with directions that they should be conspicuously displayed in their offices. the comptroller of the currency prepared and sent to all national banks a circular letter, urging them to call the attention of their patrons to the desirability of obtaining the bonds as an investment, and to aid in stimulating subscriptions; and with this was forwarded a complete set of papers similar to those sent to the postmasters. these papers 166 were also sent to other banks and financial institutions and to bankers in all parts of the country, and, in addition, notice was given that they could be obtained upon application to the treasury department or any of the subtreasuries of the united states. soon afterward, in view of the large amount of the bonds offered, and as a precaution against an undue strain upon the general money market, as well as to permit the greatest possible opportunity for subscription, the terms of the original offer of the secretary of the treasury were modified by reducing in amount the instalments of the purchase price and extending the time for their payment.

on an examination of the bids at the expiration of the time limited for their presentation, it was found that 4635 bids had been received, after rejecting six which were palpably not genuine or not made in good faith. the bidders were scattered through forty-seven of our states and territories, and the aggregate amount represented by their bids was $526,970,000. the number of accepted bids upon which bonds were awarded was only 828, and of these ten were forfeited after acceptance, on account of non-payment of the first instalment of the purchase price. several of the bids accepted 167 were for a single fifty-dollar bond, and they varied in amount from that to one bid made by j. p. morgan & co. and several associates for the entire issue of $100,000,000, for which they offered 110.6877 on the dollar. to all the other 827 accepted bidders who offered even the smallest fraction of a farthing more than this the full number of bonds for which they bid were awarded.

the aggregate of the bonds awarded to these bidders, excluding the morgan bid, amounted to $62,321,150. the remainder of the entire offering, including more than $4,700,000 of the awards which became forfeited for non-payment as above mentioned, were awarded to mr. morgan and his associates, their bid being the highest next to those on which bonds had been awarded in full, as already stated.

the aggregate of the prices received for these bonds represented, by reason of the premiums paid, an income to the investor of a trifle less than three and four tenths per cent.

as a result of this large sale of bonds, the gold reserve, which, on the last day of january, 1896, amounted to less than $50,000,000, was so increased that at the end of february, in spite of withdrawals in the meantime, it stood at nearly $124,000,000. 168

it will be observed that, notwithstanding all the efforts made to distribute this issue of bonds among the people, but 827 bids out of 4641 were entitled to awards as being above the morgan bid; and that more than one third of all the bonds sold were awarded on the single bid of mr. morgan and his associates.

the price received on this public sale was apparently somewhat better for the government than that secured by the morgan-belmont contract; but their agreement required of them such labor, risk, and expense as perhaps entitled them to a favorable bargain. in any event, the advantages the government derived from this contract were certainly very valuable and should not be overlooked. on every sale of bonds by public offering, not excluding that just mentioned, large amounts of gold were withdrawn from the treasury and used in paying for the bonds offered. in the execution of the contract of february, 1895, no gold was withdrawn for the purchase of the bonds, and the reserve received the full benefit of the transaction. each sale by public advertisement made prior to the time of the contract had been so quickly followed by extensive and wasting withdrawals of gold from the reserve, that scarcely a breathing-time was allowed 169 before we were again overtaken by the necessity for its reinforcement. even after the notice given for the last sale on the eighth day of january, 1896, and between that date and the 1st of june following, these withdrawals amounted to more than $73,000,000, while during the six months or more of the existence of the morgan-belmont contract the withdrawals of gold for export were entirely prevented and a season of financial quiet and peace was secured.

whatever may be the comparative merits of the two plans for maintaining our gold reserve, both of them when utilized were abundantly and clearly justified.

whether from fatigue of malign conditions or other causes, ever since the last large sale of bonds was made the gold reserve has been so free from depletion that its condition has caused no alarm.

two hundred and sixty-two millions of dollars in bonds were issued on its account during the critical time covered by this narrative; but the credit and fair fame of our nation were saved.

i have attempted to give a detailed history of the crime charged against an administration which “issued bonds of the government in 170 time of peace.” without shame and without repentance, i confess my share of the guilt; and i refuse to shield my accomplices in this crime who, with me, held high places in that administration. and though mr. morgan and mr. belmont and scores of other bankers and financiers who were accessories in these transactions may be steeped in destructive propensities, and may be constantly busy in sinful schemes, i shall always recall with satisfaction and self-congratulation my association with them at a time when our country sorely needed their aid.