THE GRAVE FINANCIAL SITUATION.
To comprehend the grave responsibility resting on Mr. Cleveland's surgeons and the necessity of preserving absolute secrecy as to any serious operation having been performed upon the President, it is essential to understand the financial panic then in progress. This Burton describes as a crisis "which in its severity has rarely been surpassed"; and Charles Francis Adams, in his autobiography, calls it "the most deep-seated financial storm in the history of the country." It was a crisis that would have been changed into a national disaster had the actual facts become known before Congress assembled on August seventh. As the Nation said on August third -- long before the operation was known: "A great deal is staked upon the continuance of a single life."
On the same morning on which Holland's letter was published the Commercial and Financial Chronicle, in entire ignorance that any operation had been done, said editorially: "Mr. Cleveland is about all that stands between this country and absolute disaster, and his death would be a great calamity."
Had the seriousness of the operation on Mr. Cleveland become known earlier than it did, and before his evident good health put to rest the fears of the community and emboldened the sound-money men in Congress, the panic would have become a rout. The reason for these strong statements is that Mr. Stevenson, the Vice-President, was a pronounced silver man. If the dangerous nature of the operation had become known, the public would at once have jumped to the conclusion that the President was doomed. Cleveland would at once have become the setting sun, Stevenson the rising sun, and the silver clause of the Sherman Act almost certainly would not have been repealed. What that would have meant to the country can scarcely be imagined.
"To Mr. Cleveland -- and we might say to Mr. Cleveland alone belongs the honor of securing the passage of the Repeal Bill." -- (The Nation, October 26, 1893.)
The financial crisis was acute, even worldwide. In 1879, after a long interruption, the United States had resumed specie payments. In 1871 Germany had demonetized silver. In 1877 the three Latin nations had done the same. Switzerland and Greece, and shortly afterward the three Scandinavian nations, followed their example. In 1892 the leading nations of the world were in a wild scramble for gold. Austria-Hungary was seeking one hundred million dollars for a resumption of specie payments, and the Bank of France was adding to its large supply. Russia, on January 31, 1893, had accumulated four hundred and fifty million dollars. The Bank of England, in order not to lose its gold, had kept its discount rate at 3 per cent., though in the general market the rate was only 1 per cent.
In 1890 occurred the collapse of Argentine credit, and the Baring Brothers very nearly became insolvent.
In May, 1893, twelve British Colonial banks suspended. On June 26, 1893 -- five days before the first Cleveland operation -- India, the only large user of silver except the United States, also demonetized silver. No nation wanted to be caught with a large amount of silver on hand when the world once more placed itself firmly on a gold basis.
In the United States the situation was deplorable. From 1879 to 1890 our business had been conducted on a gold basis. But the silver heresy had spread far and wide among our people, and the influence especially of the senators from our northwestern silver-producing States was energetically used.
The Populist convention in 1891 demanded the free and unlimited coinage of silver and gold at the ratio of sixteen to one, and government ownership of railroads, telegraphs and telephones. Its candidate polled over one million votes, carried four Northwestern States, and received twenty-two votes in the Electoral College. The Populists threatened to become a power to be reckoned with. A number of prominent economists and statesmen in Great Britain and the United States also supported bimetallism. "The people" wanted "plenty of money." To many of them free silver "had a most enticing sound, indicative of opulence. They had a vague notion that ... the free coinage of silver would increase the number of dollars a head in the United States. ... When assured that unlimited silver coinage would drive gold out of circulation they replied that silver was good enough for them if they could only get enough of it; ... that this country was big enough to do anything it pleased without asking for leave or license from the monarchies of Europe." -- (Peck.)
In 1890 we had, in all, a gold reserve of over one hundred and eighty-five million dollars -- eighty-five millions in excess of the hundred millions set aside to guarantee the integrity of over three hundred and forty-six million dollars of "greenbacks." By January 31, 1893, this reserve had fallen to one hundred and eight million dollars. On Mr. Cleveland's accession -- March fourth -- it had fallen to less than one hundred and one million dollars. The Treasury was kept solvent only by omitting payments into the sinking fund and by not expending appropriations voted by Congress! The Secretary of the Treasury also begged patriotic banks and bankers to let the Government have their gold. But this gold soon disappeared in redeeming paper money. He also repeatedly sold bonds. Even these 'bonds, to a degree, defeated their own object; for the purchasers drew some of the gold they paid into the Treasury for the bonds by presenting to the Treasury its own notes, which the secretary was obliged to redeem in gold on penalty of seriously impairing the credit of the United States.
The Sherman Act had been passed in 1890. It was an almost fatal "truce," as Mr. Cleveland called it, between the advocates of free coinage of silver and their opponents. This Act imposed an additional yearly purchase of fifty-four million ounces of silver, against which Treasury notes were issued, all redeemable in gold. From 1789 to 1878 -- eighty-nine years -- we had coined only eight million silver dollars. From 1878 to 1893 -- only fifteen years -- we had coined over four hundred and nineteen millions! In silver bullion, "cartwheel" dollars -- which nobody wanted -- and subsidiary coinage we had six hundred and thirty-five million dollars of silver on hand!
Besides this, the influx of gold into the Treasury from customs almost ceased. In December, 1891, and January, 1892, two-thirds of the customs were paid in gold. A year later, in the same months, instead of two-thirds, there were paid in gold only 4 per cent. and 9 per cent. respectively.
The depleted and steadily diminishing gold reserve not only had to meet the mass of obligations just mentioned but had to supply the gold demanded in payment for American securities, which were freely sold by Europeans because of their lack of confidence in our finances. The balance of trade also was against us, and the difference had to be paid in gold. The very simple and obvious way to get the gold was to exchange paper for gold at the Treasury. When so received, the Government did not cancel these notes, but reissued them -- only to have the same process repeated in an endless chain!
It seems to us now passing strange that Congress persisted in such self-evident folly, in spite of the public action of Chambers of Commerce and other similar organizations, of the opinions of financial experts, and of Mr. Cleveland's repeated but vain appeals for relief: but "something had to be done for silver." When an anxious husband was told by the doctor that he was at the end of his resources and that all that could be done for his wife was to "trust in the Lord," "Oh, doctor," was the reply, "it isn't really as bad as that, is it?"
In our similar financial emergency -- and most appropriately in Denver, the " silver capital," where six banks failed in two days -- the clergymen evidently thought it was "really as bad as that," and urged the President to appoint a day of fasting and prayer.
No wonder that the loss of confidence in the ability of the Government to sustain its credit, and the various sinister influences already described, precipitated a panic!
At his inauguration, on March fourth, Mr. Cleveland declared he would exhaust all his legal powers to prevent any depreciation of the currency. To that end the Secretary of the Treasury boldly trenched upon the hundred-million-dollar gold-reserve fund, but gave ominous warning that the Treasury would pay gold for Treasury notes only so long as it had gold lawfully available for that purpose. Before the crisis finally ended the hundred million gold reserve had fallen to only forty million dollars.
In February, 1893, the Reading Railroad went into the hands of a receiver. Early in March call money went to 60 per cent., and in July to 73 per cent. In June the banks had to avail themselves of clearing-house certificates, which were in continual use until November first. Early in August the savings banks put in force the thirty days' notice for withdrawal of money.
Our population in 1893 was about sixty-six millions. During that year six hundred and forty-two banks suspended. Presumably this would be equal approximately to the suspension of one thousand banks in 1917. The most vivid appreciation of the seriousness of the situation can best be had by reading the "summary of the news" in the Philadelphia Public Ledger, or other newspapers, for 1893, or even for the middle six months of that year. Scarcely a day passed without several and sometimes many suspensions. Bank failures occurred, banks and trust companies closed their doors, receiverships and business embarrassments, even of large concerns, appeared in dismal reiteration. At Golden City, Colorado -- a singularly inappropriate place -- the silver men went so far as to burn Mr. Cleveland in effigy.
Mr. Cleveland, from the very first, had planted his feet firmly on a sound-money basis and stood like a rock in its defense. On February 11,1891, after the enactment of the Sherman Act of 1890 in the interests of the silver men, and long before even the nomination of a candidate for the presidential election of 1892, the Reform Club of New York held a meeting to protest against free silver. Mr. Cleveland wrote a latter to the club, the closing sentence of which spoke of "the dangerous and reckless experiment of free, unlimited and independent silver coinage."
By his foes this was called "defiant frankness" and "blazing indiscretion." They declared that he was politically dead and buried, and this letter was his epitaph. But the Nation recognized it as a master stroke. It actually made him the inevitable standard bearer of his party against the wishes of its leaders. In the Electoral College he polled 277 votes out of 444. His party, however, weakly catered to the silverites by nominating Stevenson, a silver man, for the Vice-Presidency.
When Congress met in special session, on August seventh, Mr. Cleveland's message urged the absolute repeal of the Sherman Act, without any substitute and without any compromise. On August eleventh Mr. Cleveland returned to Gray Gables. While there he was rejoiced to learn that the House had passed the repeal on August twenty-eighth by 239 to 101 votes -- more than two to one. The repeal then went to the Senate.
The day after the vote in the House "Holland's" letter disclosing the first operation was published.
Though there was believed to be a majority of the Senate in favor of repeal, in spite of the fact that seven silver States, with only one-sixtieth of the population, had about one-sixth of the membership of the Senate, the battle raged long and fiercely. "Senatorial courtesy " prevented "cloture, " and the weary debate went on and on until the obstruction became a scandal. Jones, of Nevada, covered one hundred closely printed pages of the Congressional Record with his speech. Allen, of Nebraska, spoke for fourteen hours. An attempt at a continuous session, to wear out one side or the other, failed after thirty-eight hours. Late in October the Senate did not formally adjourn for fourteen days.
Wild schemes, also, were proposed to alter the proportion of gold and silver from one to sixteen to one to seventeen, eighteen, nineteen; and even twenty to one. The last was actually proposed by Senator Vest, of Missouri. Secretary Carlisle gave it its quietus with a bare bodkin thrust by showing that the recoinage of our silver would require several years, during which time there would be two sorts of dollars of different values, and would cost one hundred and twelve million dollars!
Finally, on October thirtieth, the repeal passed the Senate by 48 to 37 votes -- including five "pairs."
The country was thus saved from the dire disaster that threatened; but the noxious effects of the silver heresy did not pass away until the election of 1896.
This, then, was the threatening situation, which was at its very worst when Doctor Bryant and I operated. The operation itself was as nothing compared with scores that both of us had performed; but on it hung the life not only of a human being and an illustrious ruler but the destiny of a nation. It was by far the most responsible operation in which I ever took part.