Year: 1871

cent. bonds has been suspended, and
that subseriptionsto to the new bonds
have dwindled to an insignificant
amount. The report that Assistant
Secretary Richardson had made an
arrangement with an American bank
ing house in London to take the en-
tire balance of the five per cents has
been explained by the stipulated con-
dition of leaving the proceeds on de-
posit with this house for certain
period, which was equivalent to a
discount of D or 3 per cent. on
the loan: This could only be accept
ed as asexpedient to conceal the fail
ure.


The amount of the five per cent.
bonds that has been negotiated is be-
tween sixty and seventy millions.
Of this sum the banks took over
sixty millions to substitute for their
six per cents, deposited to secure
their circulation.


The banks did this in anticipation
of coercive measures. The same re-
duction of interest on their deposited
bonds could have been made by SIM
pie enactment; for it was accom-
plished solely by their apprehension
of coercive measures which might
work through ways more damaging
to them. But on this exchange the
banks have received the premium al
lowed for negotiating the bonds,
which, furthermore, Secretary Bout
well decided should be paid in coin.


Large preparation was made for
printing these bonds, and the expense
of engraving and printing must have
been large They have been largely
advertised. Official and amateur
agents have been sent to Europe to
promote their negotiation in such
numbers that it has appeared as if it
were easy to unite pleasure trip to
Europe with profitable rowing
commission to promote the new
loan.


All this involves large expenses.
And now we have to face the fact
that this great financial measure of
Secretary Boutwell's administration,
and of our leading congressional
financiers, is total failure. It gives
us no satisfaction to mention this re-
suit but to shut our eyes to the fact,
and to fear to mention and discuss
it, would be mere imbecility.


It is something more than the
mere trading operation Of offering
in the market a commodity that is.
not wanted at the price. 1t was the
great financial measure of Mr.. Bout
well, and he assumed to offer it upon.
knowledge of conditions that made
it practicable. He assured the con-
gressionai committees that he had
information which justified him in as
suming that this scheme was practica-
BILE. Hesarged it upon Congress by
this assurance. They who doubted
its practicability were censured as
opposing their ignorance and doubts
to his positive knowledge.


Senator Sherman assumed the
championship of the measure, and
urged it in the same manner. It was
carried through against the opinion
of the business men and private finan7
ciers. of the whole country, who held
that the conditions of the existing
loans and Of the money market made
the expectation of the success of
this scheme irrational.


The whole scheme was founded on
the notion that the cause of the low
value of our bonds was the fear of
the holders that they would be paid.
There is something in this rule that
bonds on long time are more desira-
BILE than short bonds, the other con-
ditions being equal; but this rule
does not begin to work until the
bonds rise to par. While below par
the rule works the other way; for in
that case ppayment would be to the
holder a premium over the market
value. ros


Even our six per cents were below
par. Our 10-4O five per cents which
are held to- be by the law of their is
sue payable in coin, were considera-
bly, below par. The new five per
cents offered scarcely any advantage
over these in long time; and, besides,
immediate payment would have been
sureiWayto appreciate these bonds,
and therefore it could not be done
by deferring payment.


But the reduction of the rate of
interest to five per cent. was not all
that was promised by this measure.
t. bod thrao claaseS Of bonds ,oo,,,