The Valley Virginian. [volume] (Staunton, Va.) 1865-1895, 1879-10-23
Refunding.

Refunding.
FULL REVIEW OF THE oPERATIONs-THE
WORK UNDER DIFFERENT SECRETARIES
OF THE TREAsURY-INT FACTS
AND FIGURES.
The payments to the Assistant Treasurer
OF the United States on the Both of Septem-
Der of the balances remaining until then in
the depository banks completed the refund
ing operations which have largely occupied
the attention of the Treasury, through sew.
eral administrations, from the beginning in
1871 down to the present season. A care
fully prepared review of these operations is
therefore timely.
To Secretary Chase, during whose terms
the $40 and 10.40 bonds were issued, is due
the credit of reservlng to the government
the right to redeem these loans after five
ard ten years respectively. Mr.. Chase was
urged to make his loans for long fixed terms,
in order that they might command better
prices, but he wisely decided that the inter
est burdens Of the nation should be light
ened at the earliest possible dates, and that
for this reason the government must reserve
the privilege Of redemption within the pc
RODS named.
The acts of Congress Of 1870 and 1871
authorized the creation Of s, A and pei
centum bonds for refunding purposes, stipu.
lating that they should not be sold below
par in coin and appropriating per centum
to cover all expenses Of preparation, deliv'
cry and sale. This appropriation has never
been exceeded in any instance, and the ne
gotiation as a whole has been completed
largely within this limit of expenditure.
Under Secretary Boutwell, in..ls71 subscrip.
tions to the s per centum loan were invited
by public advertisement, and during the first
half OF the year the loans were taken
in the United States to the amount of $780,
100000. Agencies had been established in
Europe for the sale Of the bonds, but the
fact that the 10-40 per cents were then
selling at the equivalent Of 95 per centum in
gold made large sales in foreign markets i'm
practicable.
The subscriptions in the United States
having ceased, and the foreign agencies hav-
ing resulted in no considerable sales, it be-
came apparent that the loan could only be
made a success by some centralized manage
ment, which could to cer9ain extent regu-
late the market prices of United States
bonds and remove the obstacle presented by
the lower prices of other Issues.
In this view Secretary Boutwell,, in Au-
gust Of 1871, accepted a proposal from a
combination Of bankers (then for the first
time in this country called a syndcate) Civ
ing them, upon a subscription Of $40, 600, 900
fives at par, the exclusive control of the
American and foreign markets until April,
1872, with the right to subscribe within these
dates for an aggregate of 5000, 1000, 900 fives,
provided the contractors should meanwhile
take a minimum Of So, 900, 900 per month.
It was made condition of the contract
that the contractors should have three
months from the date Of each subscription
in which to make their payments, and that
the proceeds Of sales should during that Pc
Rod remain on deposit in any national bank
repositories designated for this purpose.
This provision grew, first, out of the ne
cessity that the operation should not be de-
feated by the needless withdrawal from
public use Of money which could only be
disbursed for the redemption OF called bonds
which, being widely scattered, could not be
presented largely in advance of their ma.
turity; second, because time was especially
required for so much of the exchange as
should be effected abroad and third, be-
cause the commissions allowed, after deduct
ing the expense OF preparation and Sale, was
so small that it had to be conceded in price
to the ultimate investor, and the bankers
who were charged with the success of the
undertaking, and who assumed the risk of
the first subscriptions, must depend for their
profit upon what would be made out OF the
use Of the deposited moneys and their con-
version into called bonds in which their final
settlements were in great part made.
twill be borne in mind that the refund
ing acts of Congress prescribed that against
each sale OF the new bonds the Treasury
Department should call for redemption cor
responding amounts Of the five-twenty
bonds, specifying numbers in the order OF
their issue, and giving notice that interest
upon such bonds would cease in three
months from date, when the principal would
be payable. As, therefore, the interest
could not be stopped in less than three
months, and as the moneys resulting from
sales OF the refunding bonds could be used
only for the payment of called bonds, it was
manifest that the use Of the money mean
while by the contractors for the purposes of
the negotiations could not result in any loss
to the Treasury. Secretary Boutwell, wisely
conceded this feature in the first contract,
and although it has, under his and several
subsequent administrations, been investi-
gated by Congress,in hostility to the system
of ''syndicate'' negotiations. no Congress
sional committee has ever been able to sug-
gest modification or improvement of the
plan, and the negotiations OF the remaining
IS, AIS and As, under Secretaries Bristow,
Morrill, and Sherman, have differed in no
particular from that Of 1871.
The result of the first syndicate contract
during its existence was the sale of about
$40, 100000 five per centums, of which
$75, 100000 were sold in Europe and $685.
600, 1000 in the United States. The sales in
this country were made almost wholly to
national banks in substitution for their six
per centuln five-twenty bonds. In Europe
they were chiefly to a new set of investors,
and largely in England, where the $40
bonds were not then extensively held. The
settlement for the London subscriptions had,