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Under the act generally, coffee, tea, hides, molasses and sugar were put on the free list, but the President was authorized to put them on a dutiable list in retaliation against any country which should, in his judgment, unjustly tax our exports. An impost was placed on eggs at 5 cents a dozen; the tariff on wool and woolen goods, meats, grains, potatoes, butter, tin plate and tin ore was raised; a bounty was granted on all sugar grown in the United States; and the duty on steel rails, bar iron, etc., was reduced.*

But Blaine's efforts did not count for naught, as in the course of a little more than a year reciprocity treaties had been negotiated with Brazil, February 5, 1891; with Spain for Cuba and Porto Rico, August 1; with England on behalf of Jamaica, Trinidad, Barbadoes, Guiana and the Leeward and Windward Islands; with Santo Domingo, August 1; Guatemala, May 18, 1892; Salvador, December 31, 1891; Honduras, April 30, 1892; Nicaragua, March 12, 1892; Germany, February 1, 1892; and Austria-Hungary, May 26, 1892.

But the McKinley tariff had a result

*Laughlin and Willis, Reciprocity, pp. 65-69, 105-206; Proctor, Tariff Acts, pp. 325-380; Stanwood, Tariff Controversies, vol. ii., pp. 263-276; Pierce, The Tariff and the Trusts, pp. 289-291.

Laughlin and Willis, p. 208 et seq.; Dewey, Financial History, pp. 438-440; Porter and Boyle, McKinley, pp. 407-410; Hamilton's Blaine, pp. 683-691; and Crawford's Blaine, chap. xxxiv, pp. 631-644, "Mr. Blaine's Reciprocity Policy." For proclamations see Richardson, Messages and Papers, vol. ix., p. 302, footnote; McPherson, Handbook of Politics, 1892, pp. 178-193; Proctor, Tariff Acts, pp. 381-410.

different, taken in conjunction with the expenditures, from that anticipated by its projectors. President Harrison urged upon Congress in his annual message of December 3, 1889, that large appropriations be made for river and harbor work, for coast defences, and for pensions. This was an unnecessary suggestion, for Congress, as it was now constituted, was in a mood to spend money without urging. While the framers estimated the total annual reduction in the revenue from the McKinley Act at $43,000,000, they failed to take into consideration that they had removed the duty on sugar (which in 1889 amounted to $55,976,228 and was one of the largest items of public revenue), and that to offset this the imports even at the increased rates of the act must remain the same, or higher. Furthermore the increased rates tended to check importations and thus to curtail customs receipts, or the imports might fall off from natural causes. This failure to anticipate every change was brought sharply to the notice of Congress, for during the first fiscal year in which

the tariff act was in force the actual decrease in revenue was $52,200,000; in the next year the revenues had fallen $45,600,000 further, so that instead of $43,000,000 reduction the actual amount was nearly $100,000,000.*

Therefore, as the surplus from the year 1889 was $105,053,443, the mar

*Noyes, American Finance, pp. 131-136.

CURRENCY REFORM; SHERMAN PURCHASE ACT.

gin for expenditures was not great, but Congress in its first session under Harrison appropriated $79,000,000 more than in the preceding session and in the following year increased this amount by $35,000,000. A season of deficits set in, but in each case the treasury was enabled to struggle along with the aid of a temporary expansion in revenue which followed.

In the meantime Secretary of the Treasury Windom had been working on the problem of currency reform, and as the protectionists needed the votes of the Representatives from the silver-producing States to pass the tariff bill then pending, a concession was made to them in the currency legislation. As the administration was against the free coinage of silver, Secretary Windom undertook to frame a compromise. He proposed to buy up at market price the entire annual silver output of the world and issue notes in payment, storing the silver in the meantime in bulk at Washington. The notes were to be issued "against deposits of silver bullion at the market price of silver when deposited," but redeemed "on demand in such quantities of silver bullion as will equal in value, at the date of presentation, the number of dollars expressed in the face of the notes at the market price of silver, or in gold at the option of the government, or in silver dollars at the option of the holder." Under this plan Secretary Windom estimated that $37,000,000 worth of bullion would be annually

VOL. X 4

45

This plan

exchanged for notes.* would entail an enormous loss to the government if the price of silver should drop, for it would take that much more bullion to redeem the outstanding notes. But Windom thought his plan would create a sort of "corner" in the silver market and raise the price.

In pursuance to the Secretary's recommendation, the House passed a bill, introduced by McKinley on June 5, 1890, providing for the purchase of $4,500,000 of bullion monthly, making the notes issued for the bullion legaltenders "redeemable, on demand, in coin." But the Senate substituted a free-silver coinage bill by a vote of 42. to 25 and sent it back to the House. Representative Bland then proposed that the Senate substitute be accepted. This was defeated by a vote of 135 to 152,† and the bill went to a conference committee. A compromise was effected there chiefly by the efforts of Senator Sherman; and the bill became known as the Sherman Purchase Act, being finally enacted into law (in the Senate July 10, by a vote of 39 to 26 and in the House July 12, by 122 to 90).§ It was approved July 14, 1890. By this act it was declared to be the

* See the Annual Report of the Secretary of the Treasury for 1889; Hepburn, The Contest for Sound Money, pp. 232-234, 314-315.

Watson, American Coinage, pp. 162-165.
Record, vol. xxi., pp. 6503-4.

I See his Recollections, vol. ii., p. 1070 et seq.; also Burton's Sherman, pp. 365–372.

§ Record, vol. xxi., p. 7226. For the various votes see McPherson's Handbook of Politics, 1890, pp. 143-157.

an ounce.

policy of the United States to main- 1890, silver had fallen below 98 cents tain a parity between gold and silver at the present rates or such rates as may be provided by law, that silver bullion to the amount of 4,500,000 ounces should be purchased monthly and that of the bullion thus purchased 2,000,000 ounces were to be coined into standard silver dollars monthly till July 1, 1891, after which time the Secretary of the Treasury should have discretionary power as to the amount of dollars to be coined for the redemption of outstanding notes.*

As we have seen, therefore, the tariff bill was then pushed through with the aid of the silver Representatives and the two acts were now given full swing. The tariff act, as already stated, had proven a disappointment and the silver act was now to show an equally unfavorable aspect. The passage of the silver act created a demand for silver bullion and the price rose not only in the United States but all over the world, finally reaching $1.21 an ounce (September 3, 1890). But the high price had been the result of a large speculative movement upon the stock exchanges, and when the speculators began to take their profits a reaction set in, and by December,

*

Dewey, Financial History, pp. 436-438; Noyes, American Finance, pp. 138-152; Sherman, vol. ii., pp. 1061-1071; Horace White, Money and Banking, pp. 202-204; Watson, American Coinage, pp. 157-162; Taussig, The Silver Situation, p. 49 et seq.; J. F. Johnson, Money and Currency, p. 354 et seq.; Lauck, Panic of 1893, pp. 16-31; Hepburn, Contest for Sound Money, pp. 315-317, 572– 574; Dunbar, Currency, Finance and Banking Laws, pp. 250-252.

Secretary Sherman had also, in the previous session of Congress, introduced a bill "to declare unlawful, trusts and combinations in restraint of trade and production," but no action at that time was taken upon it. On December 4, 1889, Sherman again introduced this bill and it was referred to the Committee on Finance, whence it was reported to the Senate February 27, 1890. Many amendments were offered and the bill was finally referred to the Committee on the Judiciary. On April 2, Mr. Edmunds, chairman of that Committee, reported a substitute for the bill which on April 8 was passed by a vote of 52 to 1. The House then passed the bill and after being twice referred to conference committees it became law by the approval of the President, July 2, 1890. The law, entitled "An act to protect trade and commerce against unlawful restraints and monopolies," is as follows:

"Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract, or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.

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SHERMAN ANTI-TRUST LAW; STATES ADMITTED.

or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize, any part of the trade or commerce among the several states, or with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.

"Section 3. Every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce in any territory of the United States or of the District of Columbia, or in restraint of trade or commerce between any such territory and another, or between any such territory or territories and any state or states or the District of Columbia, or with foreign nations, or between the District of Columbia and any state or states or foreign nations, is hereby declared illegal. Every person who shall make any such contract, or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year or by both said punishments, in the discretion of the court.

"Section 4. The several circuit courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this act; and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the attorneygeneral, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition, and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises.

"Section 5. Whenever it shall appear to the court before which any proceeding under section four of this act may be pending, that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned, whether they reside in the district in which the court is held or not; and subpoenas to that end may be served in any district by the marshal thereof.

"Section 6. Any property owned under any contract or by any combination, or pursuant to

47

any conspiracy (and being the subject thereof) mentioned in section one of this act, and being in the course of transportation from one state to another, or to a foreign country, shall be forfeited to the United States, and may be seized and condemned by like proceedings as those provided by law for the forfeiture, seizure and condemnation of property imported into the United States contrary to law.

"Section 7. Any person who shall be injured in his business or property by another or corporation, by reason of anything forbidden or declared to be unlawful by this act, may sue therefore in any circuit court of the United States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover therefore the damages by him sustained, and the cost of the suit, including a reasonable attorney's fee.

"Section 8. That the word 'person,' or 'persons,' wherever used in this act, shall be deemed to include corporations and associations existing under or authorized by the laws of either the United States, the laws of any of the territories, the laws of any state, or the laws of any foreign country."

In 1890 Congress also passed bills admitting Idaho and Wyoming into the Union and organizing the Territory of Oklahoma from the western half of Indian Territory. This session of Congress also passed the Dependent Pension bill, approved June 27, 1890, which nearly doubled the number of pensions. From an expenditure of $30,000,000 for pensions in 1871, the country was forced by this bill to increase the pension figure to about $159,000,000 in 1893.

Meanwhile the foreign financial situation had become much confused. The large English banking firms had made a practice of " developing the resources of young foreign communities, taking securities in payment," and much of this capital had been sent to

the Argentine Republic.* The mania for foreign investment also extended to Germany. In 1889, however, the Argentine wheat crop failed; a political revolution followed in July, 1890; and Argentine securities fell so low that London bankers could not realize on them. This embarrassment caused the suspension, on November 15, 1890, of the firm of Baring Brothers of London with over $100,000,000 of home liabilities. This failure unsettled the American markets as the English investors had dumped their American securities (which, as said before, were taken in payment of trade balances) upon our market and consequently gold began to make its way to London. Furthermore, the English stopped their purchases of securities in this country and thus there was no prospect of the gold returning immediately. The banks were not in a position at this time to withstand this double strain, and in addition the industrial activity in the West and South had also necessitated the with drawal of funds from the East. A stringency then set in and the bank reserves fell below legal requirements. The banks were then forced to call into operation their emergency measures of 1873 and 1884, the Clearing House at this time issued $15,000,000

in loan certificates. But recovery was

*On the general situation see Lauck, Panic of 1893, pp. 35-54; Hyndman, Commercial Crises, p. 151 et seq.

Hyndman, Commercial Crises, pp. 156-159; Lauck, Panic of 1893, pp. 59-62.

† Noyes, American Finance, pp. 156–158; Lauck, Pr. 62-72.

rapid in the United States owing to increases in railway and general industrial earnings, the activity of interior trade and the large exports of agriculture crops; and gold, despite the situation in Europe, flowed into our markets.

A change now set in, however, due to the continued frantic efforts of foreign investors to sell their American securities, the high rates of exchange in foreign financial centres, and the heavy import of merchandise during the first half of 1891, and gold wended its way back to Europe. "The year 1891 saw the largest exportation of gold in our history, being upwards of seventy millions in six months, nearly all of which was taken out of the Treasury within one year after the passage of the Sherman act.""* "But no such avalanche of specie could move out indefinitely. Already in June, 1891, the gold reserve against the legal-tenders had fallen below the low record of 1884 and below even that of 1885."'+

*

Fortune favored the treasury for the European crops were the shortest since 1879 and reversely the United States produced the largest grain crop in its history. The English financial markets had also recovered and once again began to purchase American securities; consequently nearly $50,000,000 of gold was sent from Europe to

White, Money and Banking, p. 205; Taussig, The Silver Situation, p. 66.

Noyes, American Finance, p. 163.

Lauck, Panic of 1893, pp. 79-81; also Reports of the Secretary of Agriculture.

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