The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1879-07-23
New York Times.]
The Refunding Operations.


New York Times
The Refunding Operations.
1t is nine years since Gen. Grant, then
President of the United States, approved,
July IA, 1870, a law providing for the
issue of bonds for 81 SOC, 900 900, at per
cent, into which the then outstanding bonds
of the United States should be refunded. To-
day we give in our Washington dispatches
resume of the operations of the Treasury De-
partment under that law. 1t is not to be de
MED that it is a very remarkable record, and
that it recounts achievements of which any
country might fairly be proud. When the law
was passed, the nation was at the very flood
tide of that fictitious prosperity which had fol-
lowed the war and the issue of enormous quan
titles of irredeemable paper. Enterprises of
every kind were being pressed with the fever
ish energy of speculation, money commanded
high rates of interest," our currency was disor-
dered, and the disorder was taken advantage
of by all the brood of eager and venturesome
operators to whom frequent and violent .fluc-
tuations afford field for the prosecution of
their bold schemes. The traditions of ordi
nary business, which enioin prudence, fore
sight and patience, were lost sight of, and the
spirit of gambling, from one end of the land to
the other, had taken possession of the minds of
great portion of the people. Everywhere
great risks were being blindly and gayly as
sumed in the confident hope of great gains,
and with little thought of the terrible conse-
quences which must follow failure. At such
time, the project of refunding could hardly be
expected to receive favorable or even serious
attention at home. The new bonds appealed
only to conservative minds. They offered
secure investment for long period in return
for considerable reduction of the interest then
being received for bonds of equal security, but
of uncertain term. The average citizen of the
United States at that period was more bent on
high returns for his money than on the perma-
nency of his investment. He gave himself
little concern as to what he could do with his
funds when they should be returned to him,
and the offer of ten, fifteen or thirty years, be-
fore the new bonds should be paid was not
tempting to him.
Accordingly the refunding bonds met with
small favor in this country for several years.
Mr.. Boutwell, succeeded in placing some $780,
100000 of the per cents before he went out Of
office at the end of President Grants first term
and Secretary Richardson, who succeeded him,
raised this amount to something over S315, ,OO0-
900, about one-fifth only of the total amount
provided for by the refunding law within four
years after Its passage. OF this sum almost the
whole was taken abroad, where the considera-
tions which made the new bonds desirable were
much more powerful than with the people of
the United States. During the next three
years, within which occurred the panic, the
I'm rctinU Of the hnhhla which had co fac fa1
and infatuated the public mind, only some
$3.50, 900. 900 more of the refunding bonds were
disposed of, still largely to foreign markets,
and mostly five per cent. bonds.
When Mr.. Sherman assumed office, the con-
ditions had materially changed In the first
place, he found himself clothed with the au-
thority to sell, at his discretion, bonds of the
descriptions provided for in the act of 1870, to
prepare for resumption, the period fixed for
which was less than two years distant. In the
next place, the tremendous change involved in
the crisis Of 1S73-the final and complete dissi-
patton of the speculative spirit, and the revi-
val of the traditions which had been recog-
niZed in sounder times-had measurably taken
place. Not only this, but there had even been
a reaction which had rendered capital, for the
time being, unduly timid. and which made alb
solute security and long duration of investments
more important than they had ever before been
in the minds of American capitalists. Nor was
this state OF affairs confined to our own country.
There had taken place throughout the inan-
cial world remarkable series of delinquencies
in respect of securities, and particularly of
public securities. State loans which had been
thrown upon the markets of England and the
Continent at rates ruinously low for tine bor-
rowers and extravagantly profitable for the
lenders, had, in an alarming number of cases,
collapsed, and the eager investors were being
compelled to face the simple problem in arith-
metic whether very high rate of interest Oil
bond bought far below par was profitable
when, after few years, interest was
stopped and the prospect of the payment of the
principal, vanished hopelessly. In addition to
this was the widely extended failure of indus
trial and commercial enterprises, the promot-
erS of which had advanced extravagantly the
price of loanable funds.
Mr.. Sherman was shrewd enough to see that
the time was propitious to complete the work
of refunding, and he entered upon it with an
energy, an independence of Judgment and Of
action, a tirmness and patience of purpose,
which cannot fail to be remembered to his
honor. Whatever may have been his errors in
other and even in more important departments
of financial policy-and we have never con-
cealed our opinion that these have been ex-
ceedingly grave-he is entitled to the credit of
having carried the task of refunding to a sue
cessful conclusion with great skill, judgment
and fidelity. Within two years and quarter
| he has placed in the markets of the world, and
| to considerable extent in our own, some
| $3.50 900 900 of the bonds provided for by the
act of July IA, 1870. OF this amount, S104 ,OOO,-
| 600 in round numbers Aas been for redemption
| purposes. The remainder represents bonds
| bearing higher rate Of interest called in and
paid. OF the $950,000000 about $500 900 900
are Al per cents, and $3.50, 600 are per
cents. the latter being the cheapest loan over
issued by the United States.
BY the terms Of the law, all the bonds were
| to be disposed OF at not less than par in coin,
and the bonds redeemed were to be paid at not
more than par. These conditions have been, it
IS needless to say, strictly observed, and the
fact must be kept in mind in order to appreci-
ate the degree to which the credit Of the United
| States has been maintained and advanced. 1t
is not an exaggeration to say that it now stands
| as high as that of any nation in the world.