Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1881-01-21
THE REFUEDINa BILL.


THE REFUNDING ELL.
The House, by an almost strict party
vote, has passed arefunding bill containing
go many Objectionable features that its final
enactment would be productive of the most
mischievous consequences. Fortunately
for the stability of the public credit there
is no danger that it will be accepted by the
Senate in its present form, however, nor
can there be any doubt that the failure to
provide for the refunding of the six per
cent. bonds which mature this year would
be less disastrous than the adoption of the
House bill. The House Democrats, sup
ported by few Greenbacker Republicans,
have persuaded themselves that it is pos
sible to refund the six per cents IN three
per cent. short-term bond and certificates.
The question of the practicability of this
scheme is of course the only essential one.
No one supposes that it would not be a
good thing to refund with low interest
short-term bond if it could be done. But
it is not in the power of Congress to COM
pei the country to invest in securities which
are not sufficiently attractive to invite the
public, nor is it possible to force these secu-
rites upon the market by the method pro-
viied in the House bill, namely by CON-
pelling the national banks TO take these
41,oT,. oIpn LOTT
In determining the course to be pursued
Congress has had no trustworthy informa-
ton to guide it but the opinion of tinan-
ciers and bankers, and owing to the crazy
theories of Western soft-money members.
it has become the fashion to treat such
opinions as peculiarly open to suspicion
probably because those who deal III money
are more likely to understand finance than
! those who do not. The Democrats, with
their fatal infrmity of charac er, have
easily Welded to the Greenbac1ers and fat
money men, no doubt instigated by a hope
that some capital could be made by playing
into the hands of these peculiar people.
They may also have reflected that If this
three percent. scheme were rejected by
the Senate, and therefore never tested by
actual experiment, it would be possible for
them to assert that they had done their
best to give the country an economical
measure. 1t is always possible to talk
largely about the beneficial character of
untried measures, especially when the au-
dience has not knowledge enough to dis
tirguish between what is practicable and
what is impracticable. The general belief
of the only men who are authorities on this
question is that three-per-ce bond, even
at long term, would be a very doubt
full experiment, and that three per-
cent short term bond could not be floated
at ALL There are many and strong reasons
for believing that three and half per
cent. is the lowest rate that can be ne
gotiated The one fact that there has
been general business revival since the
four er-cents. were foated is sufficient to
show that low interest security must
find much slower acceptance now than it
did then. 1t is only when men can find
no better use for their money that they
are willing TO put it into low interest Gov
eminent securities, and comparatively few
would now be content with anything less
than three and a half per cent. interest,
even if they could be got to accept that,
When low interest is offered, moreover,
it has always been found necessary to guar
antee comparatively stable investment,
and short term bond does not present
that inducement The House has shown
its CONSEQUENCES of the unfavorable terms
it is proposing, in its provision regarding
the National Banks, but this provision is
not calculated to help the bill.
The clause providing that the National
Banks must use the three per cent. bonds
as security for their circulation can only
have one effect, namely, to cause the gen
eral abandonment Of their circulation by
the banks. Thus the House has devised
an ingenious plan for contracting the cur
rency, possibly to the full extent of the
present National Bank circulation, which
is in excess of $3.50, 900, 900. The with
drawal of this amount from the circulation
would inevitably produce panic, and result
in widespread ruin. The idea that the
banks would continue to circulate notes
under the new bill is untenable, inasmuch
as their profit on circulation is extin-
guished by it, and they certainly cannot
afford to indulge in such luxury at a loss
to themselves. When given the option of
abandoning their note circulation or buy
ing three per cent bonds as security. there
can be no doubt that they would choose
the former course, and so the provision for
forcing the bonds on the market would
fail The fourth section of the Act, which
authorizes the Treasurer to use $50, 600, 000
Of the coin reserve IN the redemption OF
fives and skies, and which also inferen-
TALLY permits the whole Of that reserve to
be expended in the purchase OF bonds, is
perhaps the worst feature in the bill. II
is an undisguised assault upon specie pay
ments, and clearly intended as the
first bold step towards the depletien
of the treasury of its coin reserves, pre-.
paratory to falling back upon fat money
altogether. We are extremely glad that
the Democrats have assumed the response,
bility for this vicious and imbecile legisla-
ton, and that the Pacific coast Republican
representatives should have voted against
the bill in body. No more impractical,
unscientifc and mischievous plan has yet
been proposed, and its provisions are drawn
in such utter and stupid defiance of finan'
cal principles as to excite anazement that
any body of men should have been willing
to commit themselves to such series OF