1 "The ease and facility with which such vast refunding operations have been conducted by the government," says Secretary Sherman, "is due largely to the co-operation of the banks."-Letter July 12,1879, declining an Invitation to attend the Saratoga meeting of the Bankers' Association. He adds that these operations were far larger than any previous financial transactions of the government, even daring the time of war.

Before the resumption of specie payments, the funding operations under the act of 1870 could only be effected at the financial centres. The secretary of the treasury was required to sell the bonds issued under that act at not less than their par value, for coin; and so long as there was a difference between coin and United States notes, the inconvenience of obtaining coin outside of the large cities forbade any direct appeal to the great body of the people. Without the machinery of the banks, the currency of the people could not be transmuted into the currency of the government. That difficulty vanished on the 1st of January, 1879, and on that day there were still outstanding and redeemable $569,000,000 of 6 per cent. and 5 per cent. bonds:

In a little more than ninety days 4 per cents were sold to the public to take up all the 6's; and the remainder of the loan, to pay off the 5's, was eagerly sought at a premium of 1/2 of 1 per cent., with an allowance of 1/8 of 1 per cent. commission. A few New York and Boston banks bid off the whole amount at this price, but were only allowed to take $150,000,000, the remainder being reserved for private purchasers, by whom it was speedily taken up in sums of $100.

In July, 1861, Secretary Chase had no means of negotiating a popular loan, save by the employment of postmasters and other designated persons, and this suggestion is actually made in his report of that date.1 It was the urgent need of skilled financial agents which compelled him to insist upon the passage of the bank act, and, before its passage, to depend upon the State banks for such aid as he required. The support which he received was fully acknowledged in his report for 1862. "They ventured largely, and boldly, and patriotically," as he says, "on the side of the Union and the constitutional supremacy of the Nation over States and citizens." But after all, it was the business of the State banks to buy government bonds low. It became the duty of the national banks to sustain the credit of the government. " Public utility," says Hamilton, "is more truly the object of public banks than private profit; and it is the business of government to constitute them on such principles that, while the latter will result in a sufficient degree to afford competent motives to engage in them, the former be not made subservient to it."1 How well this sound rule was observed in the constitution of the national banks under the statutes of 1863 and 1864 has been demonstrated by the immediate improvement of the public credit while the war was still flagrant; by the moderate and safe policy of the banks during the period of general expansion from 1868 to 1873; by the steady support which they gave to the funding process, though their own profits were thereby curtailed ; and, finally, by their co-operation in the resumption of specie payments, although, as has just been shown, the first result was to enable the secretary of the treasury to complete the; funding operations of 1879 without their assistance.

1 Congressional Globe, 1861. Appendix, p. C.

1 Reports on the Finances, vol. i. p. 67.

There remain $264,000,000 in 6 per cent. bonds, and $508,000,000 in 5 per cents, to be funded at 4 per cent. in 1881, when the government option becomes available. It is not merely in these large transactions, however, that the treasury needs to some extent still the aid of the banks; but chiefly in the daily business of collecting and disbursing a revenue amounting to $275,000,000 a year. These are the figures of Secretary Sherman's estimates for 1880. In 1860 the expenditures of the government, as reported by Secretary Cobb, were $77,000,000, of which $17,000,000 were payments on account of the public debt, leav-ing $60,000,000 for ordinary expenses. The population of the United States was then thirty-one millions, so that the cost of maintaining the government was about $2 for each inhabitant. In fact, the ordinary expenses in the year ending June 30, 1861, were $62,000,000, or precisely $2 for each inhabitant. The population in 1880 will be over fifty millions, and the ordinary expenses of the government, at the same rate, will be about $100,000,000. Then there are $138,000,000 estimated for payments on account of the public debt, $29,000,000 for pensions, and a special appropriation of $12,000,000 for the completion of the treasury building and construction of a new building for the war department at Washington, making up the sum of $275,000,000. This is $23,000,000 a month, almost a million dollars for each business day in the year, gathered from the custom-houses, post-offices, and collectors of internal revenue, and disbursed to pensioners, creditors, and officers of the government in every hamlet. In this immense business the banks are constantly employed, receiving and forwarding collections, cashing interest coupons and the checks of disbursing officers, and themselves selling the stamps affixed to checks and drafts, and seeing that they are properly cancelled. These unobtrusive services attract but little attention; the man who collects a coupon clipped from a $100 bond, or a pension agent's check, at his village bank, free of cost, hardly knows that he has recieved a favor; but the aggregate of such transactions is enormous, and the saving, both to the treasury and to the public, is very great. If these convenient agencies should be discarded, Secretary Boutwell says,1 the government "would require a large increase in the number of designated depositories, and a proportionate increase of the public expenses, without the least appreciable advantage."