Chapter III: Part 3

Upon the receipt of these reports, and anticipating an attempt to serve injunctions on the following day, the Attorney-General immediately sent a despatch to the district attorney directing him to report at once if the process of the court should be resisted by such force as the marshal could not overcome, and suggesting that the United States judge should join in such report. He at the same time sent a despatch to the special counsel requesting him to report his view of the situation as early as the forenoon of the next day.

In explanation of these two despatches it should here be said that the desperate character of this disturbance was not in the least underestimated by executive officials at Washington; and it must be borne in mind that while menacing conditions were moving swiftly and accumulating at Chicago, like conditions, inspired and supported from that central point, existed in many other places within the area of the strike’s contagion.

Of course it was hoped by those charged with the responsibility of dealing with the situation, that a direct assertion of authority by the marshal and a resort to the restraining power of the courts would prove sufficient for the emergency. Notwithstanding, however, an anxious desire to avoid measures more radical, the fact had not been overlooked that a contingency might occur which would compel a resort to military force. The key to these despatches of the Attorney-General is found in the determination of the Federal authorities to overcome by any lawful and constitutional means all resistance to governmental functions as related to the transportation of mails, the operation of interstate commerce, and the preservation of the property of the United States.

The Constitution requires that the United States shall protect each of the States against invasion, “and on application of the legislature, or of the executive (when the legislature cannot be convened), against domestic violence.” There was plenty of domestic violence in the city of Chicago and in the State of Illinois during the early days of July, 1894; but no application was made to the Federal Government for assistance. It was probably a very fortunate circumstance that the presence of United States soldiers in Chicago at that time did not depend upon the request or desire of Governor Altgeld.

Section 5298 of the Revised Statutes of the United States provides: “Whenever, by reason of unlawful obstructions, combinations or assemblages of persons, or rebellion against the authority of the United States, it shall become impracticable in the judgment of the President to enforce, by the ordinary course of judicial proceedings, the laws of the United States within any State or Territory, it shall be lawful for the President to call forth the militia of any or all of the States, and to employ such parts of the land or naval forces of the United States as he may deem necessary to enforce the faithful execution of the laws of the United States, or to suppress such rebellion, in whatever State or Territory thereof the laws of the United States may be forcibly opposed, or the execution thereof be forcibly obstructed”; and Section 5299 provides: “Whenever any insurrection, domestic violence, unlawful combinations or conspiracies in any State ... opposes or obstructs the laws of the United States, or the due execution thereof, or impedes or obstructs the due course of justice under the same, it shall be lawful for the President, and it shall be his duty, to take such measures, by the employment of the militia, or the land and naval forces of the United States, or of either, or by other means as he may deem necessary, for the suppression of such insurrection, domestic violence or combinations.”

II

It was the intention of the Attorney-General to suggest in these despatches that immediate and authoritative information should be given to the Washington authorities if a time should arrive when, under the sanction of general executive authority, or the constitutional and statutory provisions above quoted, a military force would be necessary at the scene of disturbance.

On the 2d of July, the day after these despatches were sent, information was received from the district attorney and special counsel that a sweeping injunction had been granted against Eugene V. Debs, president of the American Railway Union, and other officials of that organization, together with parties whose names were unknown, and that the writs would be served that afternoon. The special counsel also expressed the opinion that it would require Government troops to enforce the orders of the court and protect the transportation of mails.

Major-General Schofield was then in command of the army; and, after a consultation with him, in which the Attorney-General and the Secretary of War took part, I directed the issuance of the following order by telegraph to General Nelson A. Miles, in command of the Military Department of Missouri, with headquarters at Chicago:

HEADQUARTERS OF THE ARMY.
WASHINGTON, July 2, 1894.

_To the Commanding-General,
Department of Missouri,
Chicago, Ill._

You will please make all necessary arrangements confidentially
for the transportation of the entire garrison at Fort
Sheridan--infantry, cavalry, and artillery--to the lake front
in the city of Chicago. To avoid possible interruption of the
movement by rail and by marching through a part of the city, it
may be advisable to bring them by steam-boat. Please consider
this matter and have the arrangements perfected without delay.
You may expect orders at any time for the movement. Acknowledge
receipt and report in what manner movement is to be made.

J. M. SCHOFIELD,
_Major-General Commanding_.

It should by no means be inferred from this despatch that it had been definitely determined that the use of a military force was inevitable. It was still hoped that the effect of the injunction would be such that this alternative might be avoided. A painful emergency is created when public duty forces the necessity of placing trained soldiers face to face with riotous opposition to the general Government, and an acute and determined defiance to law and order. This course, once entered upon, admits of no backward step; and an appreciation of the consequences that may ensue cannot fail to oppress those responsible for its adoption with sadly disturbing reflections. Nevertheless, it was perfectly plain that, whatever the outcome might be, the situation positively demanded such precaution and preparation as would insure readiness and promptness in case the presence of a military force should finally be found necessary.

On the morning of the next day, July 3, the Attorney-General received a letter from Mr. Walker, the special counsel, in which, after referring to the issuance of the injunctions and setting forth that the marshal was engaged in serving them, he wrote:

I do not believe that the marshal and his deputies can protect
the railroad companies in moving their trains, either freight
or passenger, including, of course, the trains carrying United
States mails. Possibly, however, the service of the writ of
injunction will have a restraining influence upon Debs and
other officers of the association. If it does not, from
present appearances, I think it is the opinion of all that the
orders of the court cannot be enforced except by the aid of the
regular army.

Thereupon the Attorney-General immediately sent this despatch to the district attorney:

I trust use of United States troops will not be necessary. If
it becomes necessary, they will be used promptly and decisively
upon the justifying facts being certified to me. In such case,
if practicable, let Walker and the marshal and United States
judge join in statement as to the exigency.

A few hours afterward the following urgent and decisive despatch from the marshal, endorsed by a judge of the United States court and the district attorney and special counsel, was received by the Attorney-General.

CHICAGO, ILL., July 3, 1894.

Hon. RICHARD OLNEY, _Attorney-General_,
Washington, D. C.:

When the injunction was granted yesterday, a mob of from two
to three thousand held possession of a point in the city near
the crossing of the Rock Island by other roads, where they had
already ditched a mail-train, and prevented the passing of any
trains, whether mail or otherwise. I read the injunction writ
to this mob and commanded them to disperse. The reading of
the writ met with no response except jeers and hoots. Shortly
after, the mob threw a number of baggage-cars across the track,
since when no mail-train has been able to move. I am unable to
disperse the mob, clear the tracks, or arrest the men who were
engaged in the acts named, and believe that no force less than
the regular troops of the United States can procure the passage
of the mail-trains, or enforce the orders of the courts. I
believe people engaged in trades are quitting employment
to-day, and in my opinion will be joining the mob to-night and
especially to-morrow; and it is my judgment that the troops
should be here at the earliest moment. An emergency has arisen
for their presence in this city.

J. W. ARNOLD,
_United States Marshal_.

We have read the foregoing, and from that information, and
other information that has come to us, believe that an
emergency exists for the immediate presence of United States
troops.

P. S. GROSSCUP, _Judge_.
EDWIN WALKER, }
THOMAS E. MILCHIST,} _Attys_.

In the afternoon of the same day the following order was telegraphed from army headquarters in the city of Washington:

WAR DEPARTMENT,
HEADQUARTERS OF THE ARMY.
WASHINGTON, D. C., July 3, 1894,
4 o’clock P.M.

TO MARTIN, _Adjutant-General_,
Headquarters Department of Missouri,
Chicago, Ill.

It having become impracticable in the judgment of the President
to enforce by the ordinary course of judicial proceedings the
laws of the United States, you will direct Colonel Crofton to
move his entire command at once to the city of Chicago (leaving
the necessary guard at Fort Sheridan), there to execute the
orders and processes of the United States court, to prevent
the obstruction of the United States mails, and generally
to enforce the faithful execution of the laws of the United
States. He will confer with the United States marshal, the
United States district attorney, and Edwin Walker, special
counsel. Acknowledge receipt and report action promptly. By
order of the President.

J. M. SCHOFIELD, _Major-General_.

Immediately after this order was issued, the following despatch was sent to the district attorney by the Attorney-General:

Colonel Crofton’s command ordered to Chicago by the President.
As to disposition and movement of troops, yourself, Walker, and
the marshal should confer with Colonel Crofton and with Colonel
Martin, adjutant-general at Chicago. While action should
be prompt and decisive, it should of course be kept within
the limits provided by the Constitution and laws. Rely upon
yourself and Walker to see that this is done.

Colonel Martin, adjutant-general at Chicago, reported, the same night at half-past nine o’clock, that the order for the movement of troops was, immediately on its receipt by him, transmitted to Fort Sheridan, and that Colonel Crofton’s command started for Chicago at nine o’clock.

During the forenoon of the next day, July 4, Colonel Martin advised the War Department that Colonel Crofton reported his command in the city of Chicago at 10:15 that morning. After referring to the manner in which the troops had been distributed, this officer added: “People seem to feel easier since arrival of troops.”

General Miles, commanding the department, arrived in Chicago the same morning, and at once assumed direction of military movements. In the afternoon of that day he sent a report to the War Department at Washington, giving an account of the disposition of troops, recounting an unfavorable condition of affairs, and recommending an increase of the garrison at Fort Sheridan sufficient to meet any emergency.

In response to this despatch General Miles was immediately authorized to order six companies of infantry from Fort Leavenworth, in Kansas, and two companies from Fort Brady, in Michigan, to Fort Sheridan.

On the fifth day of July he reported that a mob of over two thousand had gathered that morning at the stock-yards, crowded among the troops, obstructed the movement of trains, knocked down a railroad official, and overturned about twenty freight-cars, which obstructed all freight and passenger traffic in the vicinity of the stock-yards, and that the mob had also derailed a passenger-train on the Pittsburg, Fort Wayne and Chicago Railroad, and burned switches. To this recital of violent demonstrations he added the following statement:

The injunction of the United States court is openly defied,
and unless the mobs are dispersed by the action of the police
or they are fired upon by United States troops, more serious
trouble may be expected, as the mob is increasing and becoming
more defiant.

In view of the situation as reported by General Miles, a despatch was sent to him by General Schofield directing him to concentrate his troops in order that they might act more effectively in the execution of orders theretofore given, and in the protection of United States property. This despatch concluded as follows:

The mere preservation of peace and good order in the city is,
of course, the province of the city and state authorities.

The situation on the sixth day of July was thus described in a despatch sent in the afternoon of that day by General Miles to the Secretary of War:

In answer to your telegram, I report the following: Mayor
Hopkins last night issued a proclamation prohibiting
riotous assemblies and directing the police to stop people
from molesting railway communication. Governor Altgeld has
ordered General Wheeler’s brigade on duty in Chicago to
support the Mayor’s authority. So far, there have been no
large mobs like the one of yesterday, which moved from 51st
Street to 18th Street before it dispersed. The lawlessness
has been along the line of the railways, destroying and
burning more than one hundred cars and railway buildings,
and obstructing transportation in various ways, even to the
extent of cutting telegraph lines. United States troops have
dispersed mobs at 51st Street, Kensington, and a company of
infantry is moving along the Rock Island to support a body of
United States marshals in making arrests for violating the
injunction of the United States court. Of the twenty-three
roads centering in Chicago, only six are unobstructed in
freight, passenger, and mail transportation. Thirteen are at
present entirely obstructed, and ten are running only mail-
and passenger-trains. Large numbers of trains moving in and
out of the city have been stoned and fired upon by mobs, and
one engineer killed. There was a secret meeting to-day of
Debs and the representatives of labor unions considering the
advisability of a general strike of all labor unions. About
one hundred men were present at that meeting. The result is
not yet known. United States troops are at the stock-yards,
Kensington, Blue Island, crossing of 51st Street, and have
been moving along some of the lines: the balance, eight
companies of infantry, battery of artillery, and one troop
of cavalry, are camped on Lake Front Park, ready for any
emergency and to protect Government buildings and property. It
is learned from the Fire Department, City Hall, that a party of
strikers has been going through the vicinity from 14th to 41st
streets and Stewart Avenue freight-yards, throwing gasoline on
freight-cars all through that section. Captain Ford, of the
Fire Department, was badly stoned this morning. Troops have
just dispersed a mob of incendiaries on Fort Wayne tracks, near
51st Street, and fires that were started have been suppressed.
Mob just captured mail-train at 47th Street, and troops sent to
disperse them.

On the eighth day of July, in view of the apparently near approach of a crisis which the Government had attempted to avoid, the following Executive Proclamation was issued and at once extensively published in the city of Chicago:

Whereas, by reason of unlawful obstruction, combinations and
assemblages of persons, it has become impracticable, in the
judgment of the President, to enforce, by the ordinary course
of judicial proceedings, the laws of the United States within
the State of Illinois, and especially in the city of Chicago
within said State; and

Whereas, for the purpose of enforcing the faithful execution of
the laws of the United States and protecting its property and
removing obstructions to the United States mails in the State
and city aforesaid, the President has employed a part of the
military forces of the United States:--

Now, therefore, I, Grover Cleveland, President of the United
States, do hereby admonish all good citizens, and all persons
who may be or may come within the City and State aforesaid,
against aiding, countenancing, encouraging, or taking any part
in such unlawful obstructions, combinations, and assemblages;
and I hereby warn all persons engaged in or in any way
connected with such unlawful obstructions, combinations,
and assemblages to disperse and retire peaceably to their
respective abodes on or before twelve o’clock noon of the 9th
day of July instant.

Those who disregard this warning and persist in taking part
with a riotous mob in forcibly resisting and obstructing the
execution of the laws of the United States, or interfering with
the functions of the Government, or destroying or attempting to
destroy the property belonging to the United States or under
its protection, cannot be regarded otherwise than as public
enemies.

Troops employed against such a riotous mob will act
with all the moderation and forbearance consistent with
the accomplishment of the desired end; but the stern
necessities that confront them will not with certainty permit
discrimination between guilty participants and those who are
mingling with them from curiosity and without criminal intent.
The only safe course, therefore, for those not actually
participating, is to abide at their homes, or at least not to
be found in the neighborhood of riotous assemblages.

While there will be no vacillation in the decisive treatment
of the guilty, this warning is especially intended to protect
and save the innocent.

On the 10th of July, Eugene V. Debs, the president of the American Railway Union, together with its vice-president, general secretary, and one other who was an active director, were arrested upon indictments found against them for complicity in the obstruction of mails and interstate commerce. Three days afterward our special counsel expressed the opinion that the strike was practically broken. This must not be taken to mean, however, that peace and quiet had been completely restored or that the transportation of mails and the activities of interstate commerce were entirely free from interruption. It was only the expression of a well-sustained and deliberate expectation that the combination of measures already inaugurated, and others contemplated in the near future, would speedily bring about a termination of the difficulty.

On the seventeenth day of July an information was filed in the United States Circuit Court at Chicago against Debs and the three other officials of the Railway Union who had been arrested on indictment a few days before, but were then at large on bail. This information alleged that these parties had been guilty of open, continued, and defiant disobedience of the injunction which was served on them July 3, forbidding them to do certain specified acts tending to incite and aid the obstruction of the carriage of mails and the operation of interstate commerce. On the footing of this information these parties were brought before the court to show cause why they should not be punished for contempt in disobeying the injunction. Instead of giving bail for their freedom pending the investigation of this charge against them, as they were invited to do, they preferred to be committed to custody--perhaps intending by such an act of martyrdom either to revive a waning cause, or to gain a plausible and justifying excuse for the collapse of their already foredoomed movement. Debs himself, in speaking of this event afterward, said: “As soon as the employees found that we were arrested and taken from the scene of action they became demoralized, and that ended the strike.”

That the strike ended about the time of this second arrest is undoubtedly true; for, during the few days immediately preceding and following the seventeenth day of July, reports came from nearly all the localities to which the strike had spread, indicating its defeat and the accomplishment of all the purposes of the Government’s interference. The successful assertion of national authority was conclusively indicated when on the twentieth day of July the last of the soldiers of the United States who had been ordered for duty at the very center of opposition and disturbance, were withdrawn from Chicago and returned to the military posts to which they were attached.

I hope I have been successful thus far in my effort satisfactorily to exhibit the extensive reach and perilous tendency of the convulsion under consideration, the careful promptness which characterized the interference of the Government, the constant desire of the national administration to avoid extreme measures, the scrupulous limitation of its interference to purposes which were clearly within its constitutional competency and duty, and the gratifying and important results of its conservative but stern activity.

I must not fail to mention here as part of the history of this perplexing affair, a contribution made by the governor of Illinois to its annoyances. This official not only refused to regard the riotous disturbances within the borders of his State as a sufficient cause for an application to the Federal Government for its protection “against domestic violence” under the mandate of the Constitution, but he actually protested against the presence of Federal troops sent into the State upon the general Government’s own initiative and for the purpose of defending itself in the exercise of its well-defined legitimate functions.

On the fifth day of July, twenty-four hours after our soldiers had been brought to the city of Chicago, pursuant to the order of July 3d, I received a long despatch from Governor Altgeld, beginning as follows:

I am advised that you have ordered Federal troops to go into
service in the State of Illinois. Surely the facts have not
been correctly presented to you in this case or you would not
have taken the step; for it is entirely unnecessary and, as it
seems to me, unjustifiable. Waiving all question of courtesy,
I will say that the State of Illinois is not only able to take
care of itself, but it stands ready to-day to furnish the
Federal Government any assistance it may need elsewhere.

This opening sentence was followed by a lengthy statement which so far missed actual conditions as to appear irrelevant and, in some parts, absolutely frivolous.

This remarkable despatch closed with the following words:

As Governor of the State of Illinois, I protest against this
and ask the immediate withdrawal of Federal troops from active
duty in this State. Should the situation at any time get so
serious that we cannot control it with the State forces, we
will promptly and freely ask for Federal assistance; but
until such time I protest with all due deference against this
uncalled-for reflection upon our people, and again ask for the
immediate withdrawal of these troops.

Immediately upon the receipt of this communication, I sent to Governor Altgeld the following reply:

Federal troops were sent to Chicago in strict accordance with
the Constitution and the laws of the United States, upon the
demand of the Post-Office Department that obstructions of the
mails should be removed, and upon the representation of the
judicial officers of the United States that process of the
Federal courts could not be executed through the ordinary
means, and upon abundant proof that conspiracies existed
against commerce between the States. To meet these conditions,
which are clearly within the province of Federal authority, the
presence of Federal troops in the city of Chicago was deemed
not only proper but necessary; and there has been no intention
of thereby interfering with the plain duty of the local
authorities to preserve the peace of the city.

III

In response to this the governor, evidently unwilling to allow the matter at issue between us to rest without a renewal of argument and protest, at once addressed to me another long telegraphic communication, evidently intended to be more severely accusatory and insistent than its predecessor. Its general tenor may be inferred from the opening words:

Your answer to my protest involves some startling conclusions,
and ignores and evades the question at issue--that is, that the
principle of local self-government is just as fundamental in
our institutions as is that of Federal supremacy. You calmly
assume that the Executive has the legal right to order Federal
troops into any community of the United States in the first
instance, whenever there is the slightest disturbance, and that
he can do this without any regard to the question as to whether
the community is able to and ready to enforce the law itself.

After a rather dreary discussion of the importance of preserving the rights of the States and a presentation of the dangers to constitutional government that lurked in the course that had been pursued by the general Government, this communication closed as follows:

Inasmuch as the Federal troops can do nothing but what the
State troops can do there, and believing that the State is
amply able to take care of the situation and to enforce the
law, and believing that the ordering out of the Federal troops
was unwarranted, I again ask their withdrawal.

I confess that my patience was somewhat strained when I quickly sent the following despatch in reply to this communication:

EXECUTIVE MANSION.
WASHINGTON, D. C., July 6, 1894.

While I am still persuaded that I have neither transcended
my authority nor duty in the emergency that confronts us, it
seems to me that in this hour of danger and public distress,
discussion may well give way to active efforts on the part of
all in authority to restore obedience to law and to protect
life and property.

GROVER CLEVELAND.

Hon. John P. Altgeld,
_Governor of Illinois_.

This closed a discussion which in its net results demonstrated how far one’s disposition and inclination will lead him astray in the field of argument.

I shall conclude the treatment of my subject by a brief reference to the legal proceedings which grew out of this disturbance, and finally led to an adjudication by the highest court in our land, establishing in an absolutely authoritative manner and for all time the power of the national Government to protect itself in the exercise of its functions.

It will be recalled that in the course of our narrative we left Mr. Debs, the president of the Railway Union, and his three associates in custody of the law, on the seventeenth day of July, awaiting an investigation of the charge of contempt of court made against them, based upon their disobedience of the writs of injunction forbidding them to do certain things in aid or encouragement of interference with mail transportation or interstate commerce.

This investigation was so long delayed that the decision of the Circuit Court before which the proceedings were pending was not rendered until the fourteenth day of December, 1894. On that date the court delivered an able and carefully considered decision finding Debs and his associates guilty of contempt of court, basing its decision upon the provisions of the law of Congress, passed in 1890, entitled: “An act to protect trade and commerce against unlawful restraint and monopolies”; sometimes called the Sherman Anti-Trust Law. Thereupon the parties were sentenced on said conviction to confinement in the county jail for terms varying from three to six months.

Afterward, and on the 14th day of January, 1895, the prisoners applied to the Supreme Court of the United States for a writ of habeas corpus to relieve them from imprisonment, on the ground that the facts found against them by the Circuit Court did not constitute disobedience of the writs of injunction and that their commitment in the manner and for the reasons alleged was without justification and not within the constitutional power and jurisdiction of that tribunal.

On this application, the case was elaborately argued before the Supreme Court in March, 1895; and on the twenty-seventh day of May, 1895, the court rendered its decision, upholding on the broadest grounds the proceedings of the Circuit Court and confirming its adjudication and the commitment to jail of the petitioners thereupon.

Justice Brewer, in delivering the unanimous opinion of the Supreme Court, stated the case as follows:

The United States, finding that the interstate transportation
of persons and property, as well as the carriage of mails,
is forcibly obstructed, and that a combination and conspiracy
exists to subject the control of such transportation to the
will of the conspirators, applied to one of their courts
sitting as a court of equity, for an injunction to restrain
such obstructions and prevent carrying into effect such
conspiracy. Two questions of importance are presented: First,
are the relations of the general Government to interstate
commerce and the transportation of the mails such as to
authorize a direct interference to prevent a forcible
obstruction thereof? Second, if authority exists,--as authority
in governmental affairs implies both power and duty,--has a
court of equity jurisdiction to issue an injunction in aid of
the performance of such duty?

Both of these questions were answered by the court in the affirmative; and in the opinion read by the learned justice, the inherent power of the Government to execute the powers and functions belonging to it by means of physical force through its official agents, and on every foot of American soil, was amply vindicated by a process of reasoning simple, logical, unhampered by fanciful distinctions, and absolutely conclusive; and the Government’s peaceful resort to the court, the injunction issued in its aid, and all the proceedings thereon, including the imprisonment of Debs and his associates, were fully approved.

Thus the Supreme Court of the United States has written the closing words of this history, tragical in many of its details, and in every line provoking sober reflection. As we gratefully turn its concluding page, those who were most nearly related by executive responsibility to the troublous days whose story is told may well especially congratulate themselves on the part which fell to them in marking out the way and clearing the path, now unchangeably established, which shall hereafter guide our nation safely and surely in the exercise of the important functions which represent the people’s trust.

THE BOND ISSUES

I

The sales of United States bonds in the years 1894, 1895, and 1896 for the purpose of replenishing the stock of gold in the public Treasury have been greatly misunderstood by many honest people, and often deliberately misrepresented.

My conviction that a love of fairness still abides with the masses of our people has encouraged me to give a history of these transactions for the benefit of those who are uninformed or have been misled concerning them. In undertaking this task I shall attempt to avoid unprofitable and tiresome explanation; but I shall, nevertheless, indulge in the recital of details to such an extent as may appear necessary to an easy understanding of the matter in hand. I desire, above all things, to treat the subject in such a way that none who read my narrative will be confused by the use of obscure or technical language.

The Government’s gold reserve, as it is usually known, originated under the provision of an act of Congress passed January 14, 1875, entitled, “An Act to provide for the resumption of specie payments.” This law contemplated the redemption in gold and the retirement of the currency obligations legally known as United States notes, but commonly called greenbacks; and it provided that such notes in excess of $300,000,000 should be redeemed and retired prior to January 1, 1879, and that after that date all the remainder of such notes should be likewise redeemed and canceled. This law further provided that “to enable the Secretary of the Treasury to prepare and provide for such redemption” he should have the authority “to issue, sell and dispose of” bonds of the United States which were therein particularly specified. Of course this authority was given to the Secretary of the Treasury in order that, by the sale of Government bonds, he could accumulate a sufficient gold fund or reserve to meet the demands of the gold redemption provided for, and accomplish the ultimate retirement of all the United States notes in circulation.

In compliance with this act, the sum of about $92,000,000 in gold was realized by the sale of bonds, and about $41,000,000, in addition, was obtained from surplus revenue; and thereupon the contemplated redemption was entered upon. But after the retirement and cancelation of only about $30,000,000 of these notes, and on the thirty-first day of May, 1878, this process was interrupted by the passage of an act forbidding their further retirement or cancelation, and providing that any such notes thereafter redeemed should not be canceled or destroyed, but should be “reissued and paid out again and kept in circulation.” At the time this act was passed the United States notes uncanceled and still outstanding amounted to $346,681,016. It will be observed that though the actual retirement of these notes was prohibited, their redemption in gold was still continued, coupled with the condition that, though thus redeemed, they should be still kept on foot and again put in circulation as a continuing and never-ending obligation of the Government, calling for payment in gold--not once alone, but as often as their reissue permitted, and without the least regard to prior so-called redemptions. It will be also observed that this prohibition of cancelation intervened seven months prior to January 1, 1879, the date when the general and unrestricted redemption and retirement of all these outstanding notes was, under the terms of the act of 1875, to commence. At the time when their further cancelation was thus terminated there remained of the gold which had been provided as a reserve for their redemption about $103,000,000. This is the fund which has since then been called the “gold reserve.”

In point of fact, this reserve was thereafter made up of all the net gold held by the Government; and its amount at any particular date was ascertained by deducting from the entire stock of gold in the Treasury the amounts covered by outstanding gold certificates, which instruments resemble a bank’s certificate of deposit, and are issued by the Secretary of the Treasury to those making with the Government specific deposits of gold, to be returned to the holders of the certificates on demand. Of course the gold thus held for certificate-holders is not available for the redemption of United States notes.

In the year 1882 a law was passed by Congress which provided that the Secretary of the Treasury should suspend the issue of these gold certificates “whenever the amount of gold coin and gold bullion in the Treasury, reserved for the redemption of United States notes, falls below $100,000,000.” Whatever may have been the actual relationship between gold certificates representing gold deposited for their redemption, and the gold kept on hand for the redemption of United States notes, the provision of law just quoted seems to have been accepted as a statutory recognition of the fact that our gold reserve for note redemption should have for its lowest limit this sum of $100,000,000. It is a singular circumstance that until very lately, when this reserve was increased and fixed at $150,000,000, no Act of Congress actually provided, or in any way expressly stated, what the limits of this gold reserve for redemption purposes should be; and it is no less singular that this provision in the law of 1882 fixed its lowest safe limit as perfectly and authoritatively in the understanding of our people as it could have been done by a distinct legislative requirement. At the time this reserve was created, as well as when the actual cancelation of United States notes after redemption was prohibited, it evidently was thought by those directing our nation’s financial affairs that the sum of $100,000,000 in net gold actually in hand, especially with such additions as might naturally be expected to reach the fund by way of surplus revenue receipts, or otherwise, would constitute a sufficient gold reserve to redeem such of these notes still left outstanding as might be presented, and that the assurance of their gold redemption when presented would keep them largely in circulation. This scheme seemed for a time to be abundantly vindicated by the people’s contentment with the sufficiency of the redemption reserve, and by their willingness to keep in circulating use these United States notes as currency more convenient than gold itself.

Another most important condition of mind among the people, however, grew out of, or at least accompanied, their acceptance of the redemptive sufficiency of the gold reserve as constituted. The popular belief became deep-seated and apparently immovable that the reduction of this gold reserve to an amount less than $100,000,000 would, in some way, cause a disastrous situation, and perhaps justify an apprehension concerning our nation’s financial soundness. Thus a gold reserve containing at all times at least $100,000,000 came to be regarded by the people with a sort of sentimental solicitude, which, whatever else may be said of it, was certainly something to be reckoned with in making our national financial calculations.

That the plans thus set on foot for the so-called redemption of the United States notes outstanding promised to be adequate and effective is seen in the fact that the gold reserve, starting at the end of June, 1878, with about $103,500,000, never afterward fell as low as $100,000,000 until April, 1893, and that sometimes in its fluctuations during this interval of twenty-five years it amounted to upward of $200,000,000. Under conditions then existing popular confidence was well established, the reserve satisfactorily endured the strain of all redemption demands, and United States notes were kept well in circulation as money.

In an evil hour, however, a legislative concession was made to a mischievous and persistent demand for the free and unlimited coinage of silver. This concession was first exhibited in an act of Congress passed in 1878, directing the expenditure of not less than $2,000,000 nor more than $4,000,000 each month by the Secretary of the Treasury in the purchase of silver bullion, and the coinage of such bullion into silver dollars. Though this act is not in itself so intimately related to my subject as to require detailed explanation, it was the forerunner of another law of Congress which had much to do with creating the financial conditions that necessitated the issuance of Government bonds for the reinforcement of the gold reserve.

This law was passed in 1890, and superseded the provision of the law of 1878 directing the purchase and coinage of silver. In lieu of these provisions the Secretary of the Treasury was thereby directed to purchase silver bullion from time to time in each month to the aggregate amount of 4,500,000 ounces, or as much as might be offered, at the market price, not to exceed, however, a limit therein fixed. It was further provided that there should be issued, in payment of such purchases of silver bullion, Treasury notes of the United States in denominations not less than one dollar nor more than $1000; that such notes should be redeemable in coin, and should “be a legal tender in payment of all debts, public and private, except where otherwise expressly stipulated in the contract, and should be receivable for customs, taxes and all public dues”; and that when they were redeemed or paid into the Treasury they might be reissued. The Secretary of the Treasury was directed to coin into silver dollars in each month until the first day of July, 1891, 2,000,000 ounces of the silver so purchased, and thereafter so much as might be necessary to provide for the redemption of the notes issued in payment for the silver from time to time purchased under the act.

I have recited these provisions by way of leading up to the proposition that, under the law of 1890, the burden upon the gold reserve was tremendously enlarged. It will be readily seen that it forced larger monthly purchases of silver than were required under the prior act, and that, instead of providing for silver dollars, which as coins, or certificates of deposit representing such coins, should circulate as silver currency, unredeemable in gold as was done under the act of 1878, it directed that in payment of such purchases a new obligation of the Government, redeemable in coin, should be issued and added to our circulating medium.

It is, however, only when we examine the specific provision for the redemption of these notes that we discover in its full extent the harmful relationship of this new device to the integrity of the gold reserve. At its outset the redemption clause of the act courageously and manfully gave to the Secretary of the Treasury the authority to redeem such notes in gold or silver _at his discretion_; but in its ending it fell down a pitiful victim of the silver craze. The entire clause is in these words: “That upon demand of the holder of any of the Treasury notes herein provided for, the Secretary of the Treasury shall, under such regulations as he may provide, redeem such notes in gold or silver coin at his discretion, _it being the established policy of the United States to maintain the two metals at a parity with each other upon the present legal ratio, or such ratio as may be provided by law_.”

According to the legal ratio then existing, which has never been changed, the average intrinsic gold value of a silver dollar as compared with a gold dollar was, during the year 1891, about seventy-six cents, during 1892 a trifle more than sixty-seven cents, and during 1893 about sixty cents.

It is hardly necessary to say that the assertion in the act of “the established policy of the United States to maintain the two metals at a parity” had the effect of transferring the discretion of determining whether these Treasury notes should be redeemed in gold or silver, from the Secretary of the Treasury to the holder of the notes. Manifestly, in the face of this assertion of the Government’s intention, a demand for gold redemption on the part of the holders of such notes could not be refused, and the acceptance of silver dollars insisted upon, without either subjecting to doubt the good faith and honest intention of the Government’s professions, or creating a suspicion of our country’s solvency. The parity between the two metals could not be maintained, but, on the contrary, would be distinctly denied, if the Secretary of the Treasury persisted in redeeming these notes, against the will of the holders, in dollars of silver instead of gold.

Therefore it came to pass that the Treasury notes issued for the purchase of silver under the law of 1890 took their place by the side of the United States notes, commonly called greenbacks, as demands against our very moderate and shifting gold reserve.

It should have been plainly apparent to all who had eyes to see that the monetary scheme, thus additionally burdened, was adequate and safe only in smooth financial weather, and was miserably calculated to resist any disturbances in public confidence, or the rough waves of business emergencies. The proof of this was quickly forthcoming.

The new Treasury notes made their first appearance as part of our money circulation in August, 1890; and at the close of that month the gold reserve amounted to $185,837,581. During the next month it fell off about $38,000,000, reducing the amount on the last day of September to nearly $148,000,000; and with a few slight spasmodic rallies it continued to decrease until the sale of bonds for its replenishment.

In the latter part of 1892 and the first months of 1893, these Treasury notes having, in the meantime, very greatly multiplied, the withdrawals of gold from the Treasury through the redemption of these as well as the United States notes strikingly increased; and the fact that by far the larger part of the gold so withdrawn was shipped abroad plainly showed that foreign investors in American securities had grave apprehensions as to our ability to continue to redeem all these notes in gold and thus maintain the integrity and soundness of our financial condition.

I succeeded Mr. Harrison in the Presidency on the fourth day of March, 1893; and on the seventh of that month Mr. Carlisle became Secretary of the Treasury. The gold reserve on that day amounted to $100,982,410--only $982,410 in excess of the sum that had come to be generally regarded as indicating the danger line. The retiring Secretary of the Treasury, appreciating the importance of preventing the fall of the reserve below this limit, had just before his retirement directed the preparation of plates for the engraving of bonds so that he might by their sale obtain gold to reinforce the fund. I have heard him say within the last few years that he expected before the close of his term to resort to bond sales for the purpose of such reinforcement, unless prevented at the last moment by the President’s disapproval. Of course it is but natural that any one directing the affairs of the Treasury Department should be anxious to avoid such an expedient; and Secretary Foster avoided it, and barely saved the reserve from falling below the $100,000,000 mark during his term, by effecting arrangements, in January and February, 1893, with certain bankers in New York, by which he obtained from them in exchange for United States notes, or on other considerations, something over $8,000,000 in gold, which enabled him to escape the sale of bonds in aid of the reserve.

With the gold reserve lower than it had ever been since its creation in 1878, and showing an excess of less than $1,000,000 above the supposed limit of disaster, and with the demand for gold redemption of Government currency obligations giving no sign of abatement, the prospect that greeted the new administration was certainly not reassuring. In our effort to meet the emergency without an issue of bonds Secretary Carlisle immediately applied to banks in different localities for an exchange with the Government of a portion of their holdings of gold coin for other forms of currency. This effort was so far successful that on the 25th of March the gold reserve amounted to over $107,000,000, notwithstanding the fact that considerable withdrawals had been made in the interval. The slight betterment thus secured proved, however, to be only temporary; for under the stress of continued and augmented withdrawals, the gold reserve, on the twenty-second day of April, 1893, for the first time since its establishment, was reduced below the $100,000,000 limit--amounting on that day to about $97,000,000.

Though this fall below the minimum theretofore always maintained was not followed by any sudden and distinctly new disaster, it had the effect of accelerating withdrawals of gold. It became apparent that there had intervened a growing apprehension among the masses of our own people concerning the Government’s competency to continue gold redemption, with the result that a greatly increased proportion of the amount withdrawn from the gold reserve, instead of going abroad to satisfy the claims of foreigners or as a basis of commercial exchange, was hoarded by our citizens at home as a precaution against possible financial distress. In the meantime, nearly the entire gold receipts in payment of customs and other revenue charges had ceased. To meet this situation strenuous efforts were made by the Secretary of the Treasury to improve the condition by resorting again to the plan of exchanging for gold other forms of currency, with some success, while in the month of August, 1893, gold revenue receipts were temporarily considerably stimulated. Thus a fleeting gleam of hope was given to the dark surroundings.

In these troublous times those charged with the administration of the Government’s financial affairs could not fail to recognize in the law of 1890, directing the monthly purchase of silver and the issuance in payment therefor of Treasury notes in effect redeemable in gold, a prolific cause of our financial trouble. Accordingly, a special session of Congress was called to meet on the seventh day of August, 1893, to repeal this law, and thus terminate the creation of further demands upon our already overburdened and feeble gold reserve. The repealing act was quite promptly passed in the House of Representatives on the twenty-eighth day of August; but, on account of vexatious opposition in the Senate, the repeal was not finally effected until the first day of November, 1893, and then only after there had been added to the act an inopportune repetition of the statement concerning the Government’s intention to maintain the parity of both gold and silver coins.

II

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 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 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 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.