The weekly pioneer and Democrat. [volume] (Saint Paul, Minn. Territory) 1855-1865, 1864-04-22
THE +" FiVE-TWENTY" LOAN.
HOW 1T WAS MANAGED.
Letter From Secretary Chase.

The following is the letter Of Secretary
Chase in reference to the dealings of the
Treasury Department with the house of
Jay, Cooke & Go. 1t is complete ac-
count of the manner in which the great
popular loan was brought before the masses
of the people, and shows what remarka-
hle degree of success attended the efforts of
Mr. Chase to negotiate it a small expense
to his Department:
TREASURY DEPARTMENT., April l, 1864.
Hon. Schuyler Coltiar, Speaker Of the House Of
Representatives.: ,.i .a-!.
SIR-I have the honor of receiving from the
House of Representatives copy of the follow
ing resolution:
=" Resolved, That the Secretary Of the Treas
NY be requested to report to this House what
have been the services of Jay Cooke s. Co.. to
the government in the sale of United Safes
securities. and what have been the rate and
whole amount of compensation therefor also,
whether said services might not have been as
successfully perfOrme by the Treasury De-
partment itself; also. what sums of money. if
any. have been paid out of the Treasury for
advertisements ordered by Jay Cooke & Co."
DeIOTc pTOccculIlS I'd answer IIlcSc lUQulTlcS
It is proper to say that Jay Cooke & Co. have
never been employed to render any services to
the government. but as Mr. Jay Cooke. of that
firm, has been employed as agent for the sale of
United States bonds and Treasury Notes, the
resolution will be answered as if it had been
prepared in reference to him individually.
The whole of the five hundred millions five
twenty loan being now taken, and the accounts
connected with it closed, respectfully submit
the following statement in response to the res
OlutiOn, without awaiting the completion of
the delivery of the bonds subscribed for in ex-
cess, which will involve no additional payment
on account of compensation or expenses.
The first inquiry requires statement of the
services of Jay Cooke in the sale of United
States securities, and of the rate and amount
of his compensation therefor.
Mr. Cookies first services were rs agent for
the sale of three-years Treasury notes, pOpu-
larlv known as seven thirties.
When negotiating the first loan with the as
ISOLATED banks Of New York, Boston and Phil
adelphia. in July. 1861 of fifty millions of
dollars for three-years seyen-thirtv Treasury
notes. the Secretary stipu' ated to open sub
scriptions throughout the country to effect the
sale and distribution of these notes By agents
acting urder the direct supervision of the de-
plrtment, the proceeds OF such sale and distri
button to be paid over to the banks in reim-
bursement in whole or in part of their loan. in
LOAF of equal amount. In fullllment of this
stipulation. the Secretary in addition to the
regular officers of the department, appointed
one hundred and fOrty-eight agents. of whom
Mr.. JAY Cooke was one, to receive subscrip-
tons for the sale of the seyen-thirties supplied
them with printed blank books of subscription
blank cert ificates of deposit, blank forms for
correspondence with the department, and en-
velopes with printed addresses thereon. In
addition to these expenses and the expenses
OF the necessarily Increased force of clerks
employed he paid these agents One-fltth of
one per cent. on the first one hundred thou
sand dollars obtained by them respectively,
lowed for advertising a stipulated SUN. vary
ing according to locality, but in no case en-
ceeding one hundred ard fifty dollars
The several agents thus employed returned
subscriptions in the aggregate amounting to
$24. 678 S66.8l, of which Mr.. Jay Cooke OBJ
tanned 1924. $50, Or more than one-fifth of the
whole. for which he was paid the fixed per-
vertising, $3.50, making his total allowances for
the sale of seven-thirties &c. $50 06. er.
Mr.. Cooke. at the close of his labOrs In Oh.
tanning subscriptions TO the seven thirties, and
on making his final payments into the Treasu-
ry, submitted an account, substantiated by
vouchers, showing disbursements by him for
advertising. amounting to S3041.44. not in
GLIDING sums paid for which he had no specific
vouchers. He was allowed only $3.50, or less
than One-twentieth of his expenditure.
The services of Mr.. Cooke in connection with
the seven-thirty loan were valuable and i'm
portant, but of little magnitude compared with
those rendered in the negotiation of the loan of
five hundred millions of dollars for bonds COM
monty known as the "five-twenties" When
this loan was authorized by Congress, many
experienced and able financial men expressed
their belief that it would be impossible to ne
gOtiate bonds redeemable after SO short a pe-
riod as five years, and bearing an interest of
only six per cent, and for time appearances
were decidedly against the success OF the loan.
Under the law, every holder of United
States notes had the right to convert them, at
his pleasure into the five-twenty bonds at par
A privilege which can be used at any time is
often not used at all, and 1t soon became clear
that voluntary conversions would supply only
a small proportion Of the large sums required
for the disbursements of the war. To excite
and promote better disposition the assistant
trasurers, designated depOsitaries, and special
agents were authorized to receive deposits of
notes, and issue certificates emitting the de-
positors to bonds bearing interest from the
date of deposit. Still, conversions Jagged,
and were altogeter inadequate to the demands
upon the Treasury.
1t was indispensable that these demands
should be answered with the least possible
delay, and the Secretary endeavored to ascer-
tain the best terms on which the bonds could
be negotiated by sales. Careful inquiry was
made through the assistant treasurer at New
York, and other experienced persons, and it
was ascertained that negotiations could not be
effected at higher rates than from ninetv-seven
to ninety-eight cents for dollar, which would
involve a loss on each hundred millions of the
loan Of from two to three millions of dollars
Unwilling to submit to this loss, the Secre-
tary In October, 1862, determined to appoint
general agent with authority to appoint sub
agents throughout the whole country, for
whom he should be personally responsible and
In this way to organize direct appeal to the
whole people. He accordingly selected as
general agent Mr.. Jay Cooke, who was recon-
mended for preference by his responsibility, by
MS integrity, and by his energetic and success
!al services In the negotiation of the first ma
tlonal Loan, and committed the whole work to
MN: 1t was agreed that his commissions, for
services and to cover disbursements. should be
0ne-nali OF one per cent. on the first ten mil
mons, and three-eighths on subscriptions be-
YONG tnat amount. Of these three-eighths Mr.
COOKE was bound to pay one-eighth to SUBJ
scriptlon sub-agents, and another eighth to
traVeing agents and for advertising and other
expenses OF making the loan as widely and
mVoraoly known as possible. He was allowed
to retain the other eighth as compensation tor
his own labor and risk, and for eYnenses
chargeable to his own proportion r :.
His responsibility covered all acts of his snb.
agents until payment into the treasury of all
Ihrl