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1. Payment in coin.

2. Sinking fund.

3. Taxation of United States bonds and
other obligation




All the bonds of the United States, both coupon and Terms of the registered, of loans mentioned in Chapter I, as well as of other loans heretofore paid in coin, express on the face thereof the promise of the Government to pay a certain amount of dollars with interest at the rate stated, without in any case specifying what kind of dollars are intended thereby, or in what money, whether coin or currency, either the principal or interest is payable.

Of the loans created before the passage of the act of Loans before February 25, 1862, chapter 33, which first authorized the February 25, 1802 issue of legal-tender notes, payment could never have been contemplated at the time of negotiation in any dollars other than coin, as none other then formed the currency of the country which public or private creditors were obliged to accept. The language of the Supreme Court of the United States, in Bank v. Supervisors, (7 Wallace, 26,) is as applicable to these bonds as to the notes to which it refers:

"Every one of them expresses upon its face an engagement of the nation to pay to the bearer a certain sum. The dollar note is an engagement to pay a dollar, and the dollar intended is the coined dollar of the United States; a certain quantity in weight and fineness of gold or silver, authenticated as such by the stamp of the Government. No other dollars had before been recognized by the legislation of the national Government as lawful money."

Under the act of

The act of February 25, 1862, section 1, authorizing the February 25, 1802. issue of United States notes, provided that they should be receivable in payment of "all claims and demands against the United States of every kind whatsoever except for interest upon bonds and notes, which shall be paid in coin;" and that they should be "lawful money and a legal tender in payment of all debts, public and private, within the United States, except duties on imports and interest as aforesaid."

-under other acts.

The subsequent laws, increasing the issue of notes and making them in like manner a legal tender, contain the same exceptions.

The same act, by section 2, authorized the issue of five hundred millions dollars of bonds, "Five-twenties of 1862," and, by section 5 enacted, that the duties on imports should be paid in coin, part of which should be set aside as a special fund, to pay in coin the interest on the bonds and notes of the United States and to establish a sinking-fund for the purchase or payment of the public debt.

The act of March 3, 1863, chapter 73, authorizing the loan of that date, expressly provided that the principal and interest of the bonds issued thereunder should be payable in coin; and so did the act of March 3, 1864, chapter 17, under which the "Ten-forty" loan and the "Five-twenty loan of March, 1864," were issued.

The act of June 30, 1864, chapter 172, which authorized the "Five-twenty loan of June, 1864," provided that the interest should be payable in coin, without any mention of what kind of money the principal should be payable in. The act of March 3, 1865, chapter 77, under which were issued the "Five-twenties of 1865" and all the "Consols of 1865, 1867, and 1868," authorizing the issue of both bonds and treasury notes, provided that the "principal or interest, or both, may be made payable in coin or in lawful money;" "that the rate of interest on any such bonds or treasury notes, when payable in coin, shall not exceed six per centum per annum; and when payable in currency shall not exceed 7 per centum per annum, and the rate and character of interest shall be expressed on all such bonds

or treasury notes." The bonds issued by authority of each. of these acts were made payable in dollars, both principal and interest, without specifying coin or currency, while the treasury notes were invariably made payable on the face thereof in currency or lawful money.

ous construction.

Thus the construction of the Treasury Department, con- Contemporanetemporaneous with the issue of the bonds, seems to have been that, when not otherwise expressly provided in the bonds themselves, both the principal and interest were payable in coin; and this construction has been strictly followed and maintained by the Government by the prompt and faithful payment of every such bond in coin at maturity. And the question has been further settled by legislation, so far as subsequent legislation can affect it, by the passage of a law, which was the first act of a general nature signed by President Grant upon his accession to the Presidency, only fourteen days after his inauguration, and was an emphatic expression of the sentiment of the people of the country, uttered by a new Congress then recently elected and just commencing its first session. The following is a copy of the law:



Be it enacted by the Senate and House of Representatives Act to strengthen of the United States of America in Congress assembled, That the public credit. in order to remove any doubt as to the purpose of the Government to discharge all just obligations to the public creditors, and to settle conflicting questions and interpretations of the laws by virtue of which such obligations have been contracted, it is hereby provided and declared that the faith of the United States is solemnly pledged to the payment in coin or its equivalent of all the obligations of the United States not bearing interest, known as United States notes, and of all the interest-bearing obligations of the United States, except in cases where the law authorizing the issue of any such obligation has expressly provided that the same may be paid in lawful money or other currency than gold and silver. But none of said interest-bearing obligations not already due shall be redeemed or paid before maturity unless at such time United States notes shall be convertible into coin at the option of the holder, or unless at such time

Funded Loan expressly payable

in coin.

bonds of the United States bearing a lower rate of interest than the bonds to be redeemed can be sold at par in coin.

And the United States also solemnly pledges its faith to make provision at the earliest practicable period for the redemption of the United States notes in coin.


Speaker of the House of Representatives.


Vice President of the United States and President of the Senate

Approved March 18, 1869.


To avoid all possible question as to the meaning of the dollars mentioned in the "Funded Loan," the act of July 14, 1870, which authorized its issue, expressly provides that the bonds shall be redeemable in coin at its then standard value; that the interest shall be payable in such coin, and that those conditions shall be set forth and expressed upon the face of the bonds. The obligation to pay in coin of a fixed standard value, being thus expressed in the law and in all the bonds themselves, enters into and forms part of the original contract with the holders of these securities, and can never be questioned.

Law of Congress.



This fund is required to be maintained by the following provisions of the act of February 25, 1862:

SEC. 5. And be it further enacted, That all duties on imported goods shall be paid in coin, or in notes payable on demand heretofore authorized to be issued and by law receivable in payment of public dues, and the coin so paid shall be set apart as a special fund, and shall be applied as follows:

First. To the payment in coin of the interest on the bonds and notes of the United States.

Second. To the purchase or payment of one per centum of the entire debt of the United States, to be made within each fiscal year after the first day of July, eighteen hundred and sixty-two, which is to be set apart as a sinking

fund, and the interest of which shall in like manner be applied to the purchase or payment of the public debt as the Secretary of the Treasury shall from time to time direct.

Third. The residue thereof to be paid into the Treasury of the United States.

Congress, by joint resolution of March 17, 1864, chapter 20, gave the Secretary of the Treasury permission to sell gold in the Treasury, but added a proviso that the obligation to create the sinking fund, according to the act of February 25, 1862, should not be impaired.

During the continuance of the war of the Rebellion, while the Government was still borrowing money, and was paying old loans and creating new ones, no steps were taken to establish the sinking fund as such, but the coin in the Treasury was allowed to accumulate to about one hundred millions of dollars.

Upon the coming in of the administration of President Grant, in March, 1869, his Secretary of the Treasury, Hon. George S. Boutwell, immediately commenced the sinking fund, in literal compliance with the law of Congress.

Within each fiscal year, which ends June 30, the Secretary applies coin received from duties to the purchase of bonds to the amount of one per cent. of the entire debt of the United States.

The bonds so purchased were at first all registered in the name of the Treasurer of the United States, in trust for the Government, and were stamped with the words "Sinking Fund" on the face of each bond. The interest thereon was regularly collected in coin semi-annually and applied to the purchase of other bonds, which in like manner were added to the same fund.

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By section 6 of the refunding act of July 14, 1870, which Bonds purchased is as follows, Congress required the bonds to be canceled:

SEC. 6. And be it further enacted, That the United States. bonds purchased and now held in the Treasury in accordance with the provisions, relating to a sinking fund, of section five of the act entitled "An act to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States," approved February twenty-fifth, eighteen hundred

are canceled.

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