The Rock Island Argus. (Rock Island, Ill.) 1877-1885, 1879-12-30
WASHINGTON.
A letter from Secretary Sherman.

rill makes public the following letter from
the Secretary of the treasury to him as
chairman of the senate committee:
Sr:-In response to your verbal enoui~
rles, L have the honor to submit the fol-
lowing observations respecting the refund
ing OF the national debt. 1t addition to
SIS, 8,4l5,OO0 in six per cent. bonds, abso-
lutely payable Dec 3lst 1880 and $945, 900
payable July lst 1881, the following bonds
OF the United States will become redeema
BILE within the next year and a half, viz:
May lst 81, per cent. $50S 4O8, $50;
June 30th 81, 6 per cent, $264, ,32l. $50,
making total of $772, ,76l ZOO, the annual
interest charge on which sis $4I, 1881, ,29S.
About one-half of these are coupon bonds,
haYlng coupons running only to the dates
of redeemabiity, and if they are not
refunded or paid off the holders will have
to be supplied with additional coupon
sheets at the expense of the egovernment..and
at cost, probably nearly as great as
would pay Tor the original issue of
the loan. This manifest that the bonds
cannot be paid off in 81, and therefore felt
1t my duty to recommend IN my annual
report. authority to be granted TO refund
them into four per cent. bonds, thus effect
IDg saving in annual Interest charge of
about $l0,000,000. The present time
believe the most advantageous for such
retundlng. probably much more favorable
tor operation than any future time, and
we have at hand in four per cent consols
bond already we'll known and extremely
popular. The successful funding of so
large portion of the public debt into these
bonds, during the past year. was mainly
due to the exceptionally favorable state of
our foreign and home trade, and the re-
sumption OF specie payments, and it is my
firm belief that our wisest course is 10 re-
fund the ramainder of the bonds bearing a
high rate of interest while this state of
affairs continues The bill introduced 10
the House of Representatives the Sd inst.
by Fernando Wood, Chairman of the
Committee of Ways and Means. and
which has been sent to me, provides as
follows, that so much of authority
at greater rate of interest than 81 per
cent. although such is not probably the
intent of the bill. Aside, however, from
its possible bearing upon the ability of the
department, [ believe its passage would be
fatal to refunding, although | should, of
course, be happy TO refund the debt in 80
per cent, if it were practicable TO do SO.
That 81 per cent bonds would not sell for
par, l am fully satisfied, and l see no
more favorably conferred upon the Secre-
tary of the Treasury by acts OF July l4th
1870, and January Goth 1871, to refund
the public debt to the extent of fifteen
hundred million dollars as has not been
exhausted and executed, beyond the same
is hereby modified so as to limit the rate
Of interest upon the bonds yet to be issued
as authorized by these acts. to rate OF
Interest not to exceed three and one half
per centum per annum.
This bill, if enacted into Law, would
perhaps be construed as prohibiting the
sale of bonds for resum ption purposes
looked upon as an Investment iD 1881, than
it would be now On the contrary, with
the revival OF industry aud great activity
in manufacturing. sig0s Of which are al
ready TO be seen iB all parts C! The country,
and the constant and increasing dc mand
for money, arising therefrOm, il seems TO
me TO be not at all certain we shall then
be able to borrow freely, a. even four per
cent per anuum. and of the correctness OF
these views | received the most positive
assurances during my recent visit To New
York, Our per cent c0Ds0ls now having
28 years to run, were worth during the
first half of this month 1929 net at which
price they yield to the investor, to carry
TO maturity" 1856 per cent per anDum.
A 80 years 81 per cent bond 10 yield the
same income, would have TO be purchased
at 93.70. Again, per cent bonds. to
yield but g per cent per annum, would
have to be purchased at .SS, and there
fore a 81 per cent bond cannot sell for par
until per cent bonds are worth los 86
With the small supply in the market, the
great bulk Of them having been absorbed
cent bonds are now selling for nearly the
best price ever obtained for them, but
it is not probable this price can be fully
maintained against the additional issue OF
any large amount, and would remind you
that during the last refunding operations
sales of these bonds had been suspended
more than once, owing to the arrangement
in the money market and the unfavorablc
state of exchanges, these causing the
bonds to fall below par, at one time to 50
per cent, Fortunately these deraDge-
ments were but temporary, and after more
or less delay, the department was able to
resume sales. As before stated. think
the present an exceptionally favorable time
for refundng. and | am satisfied that
per cent and 6 per cent. bonds, so soon
to become redeemable, cannot be so safely
and profitably provided tor In any other
manner. II very u
funded prior to July End. 1881. nearly
$500, ,OO0, 900, is considerably in excess of
the amount refunded in any one year,
since refunding began, and | respectfully
submit that the time now available. Is
none too great for the purpose. The
passage of the bill introduced by yourself
in the Senate and by General Garfield IN
the House of Representatives. will, L be
iieve, enable the department TO refund the
entire amount prior TO maturity OF bonds.
but If it should not result in speedily
refunding the whole of them, that clause
of the bill which renders applicable
the provisions of the act of July l4th,
1870, etc will enable the department to
call such per cent and per cent bonds
after they shall have matured, and to
redeem them with the proceeds of the sale
of 4 per cent bonds so authorized. and
such proceeds would include, of course,
whatever premium the bonds may then
sell for. " bile il is not thought safe to
assume that upon resumiug the funding
Operations with the prosnect of emission
of per ceuts, about equal in amount 10
the present issue, the bonds will rema ain at
price not much, if any, above par, 1t ls
thought that under the operation of the
proposed bill, parties may be induced to
surrender the bonds now held by them
upon payment oF the amount not to exceed
the difference In interest between bonds
received and those issued.
(SirDed) JOHN SHERMAN