Despite this aid to silver its price measured in gold continued to fall, and the advocates of free silver kept up their agitation both in and out of Congress. In 1890, therefore, another compromise measure, known as the Sherman Act, was passed, which required the Secretary of the Treasury to purchase monthly 4,500,000 ounces of silver at the market price to be paid for by the issue of treasury notes. These notes were made full legal tender, and were redeemable in gold or silver coin at the discretion of the Secretary of the Treasury, They were known as "coin notes," also as "Sherman notes." The silver purchased was to be coined only as rapidly as was necessary to redeem the notes, but the act of 1890 provided that when the notes were redeemed or received for dues they might be reissued. As a result of these two silver purchase acts over 576,000,000 standard silver dollars were coined. Because of the awkwardness of the silver dollars, however, only about 80,000,000 of them got into actual circulation. The rest have been represented by silver certificates redeemable in silver dollars on demand, and by treasury notes.
This very large addition of overvalued silver to the currency of the country caused a corresponding withdrawal of gold from circulation, and for a time after 1890 seriously embarrassed the Treasury in its efforts to maintain an adequate gold reserve. At this time no specific gold reserve was required by law, but custom had established a minimum of $100,000,000. The tariff act of 1890 reduced revenues $50,000,000 and at the same time increased appropriations were voted, including $50,000,000 a year for pensions. Large exports of gold had to be made in the years 1891 to 1893. The Government was required to redeem in gold coin on demand the greenbacks and the treasury notes of 1890, and to maintain the silver dollars and silver certificates at a parity with gold. The greenbacks were redeemable in gold at the Treasury, but the law provided for their immediate reissue. The banks were experiencing great difficulty in securing gold for their reserves, so they promptly returned the reissued greenbacks to the Treasury for redemption in gold. To aggravate this serious situation the Sherman notes were used in the same way. These notes were redeemable in either gold or silver, but under the circumstances everyone asked for gold. Thus, both legal tenders and treasury notes were acting as an "endless chain" to drain the Treasury of its gold. The gold reserve fell from $190,000,000 in 1890 to $97,000,000 in 1893, and the Treasury was threatened with complete exhaustion of its gold reserve. Alarm spread throughout the country, precipitating the disastrous panic of 1893. President Cleveland called a special session of Congress in August,of that year, and the silver-purchase clauses of the Sherman Act of 1890 were repealed. In 1898 an act was passed providing for the coinage into silver dollars of the bullion purchased under the act of 1890.