n United States notes, which on
the 1st of January would be redeemable in coin. To this I replied
that as the sale of four per cent. bonds was solely for the purpose
of refunding the six per cent. bonds, the proceeds of the sale must
be such as could be lawfully paid for called bonds. "Under existing
law the treasury is required to and will redeem in coin, on and
after January 1, 1879, United States legal tender notes, on
presentation at the sub-treasury in New York, and will then receive
such notes in payment for four per cent. bonds. The department
does not anticipate any change in the law that would operate to
prevent this, but cannot stipulate against any act which Congress
in its judgment may pass."

Every facility which the law allowed to promote the easy change in
the basis of our currency was carefully considered and adopted.
The chief measure adopted was to promote exchanges in the clearing
house in New York, so that only the balance of debits or credits
would actually be paid. I requested Assistant Secretary French to
examine whether, under existing law, such an arrangement was in
the power of the department, and called his attention to previous
correspondence in 1875 in the department on this subject. He came
to the conclusion that the existing law would not justify such an
arrangement. John Jay Knox, comptroller of the currency, however,
favored the admission of the assistant treasurer of the United
States at New York as a member of the clearing house. He said:

"The proposition is favored by the banks generally, and it is
believed that the representation of the treasury department in the
clearing house will facilitate the transaction of business between
the department and the banks, and I therefore respectfully suggest
that application be made for the admission of the assistant treasurer
in New York to the Clearing House Association, provided it shall
be found that there is no legal objection thereto."

General Hillhouse also was strongly in favor of the plan proposed.
He said:

"The plan of going into the clearing house was proposed in
correspondence with the department several years ago, as a remedy
for the risk incurred in the collection of checks, and if there
are no legal impediments in the way, it would very much simplify
the business of the office if it could be adopted. The effect in
connection with resumption would also, I think, be good, as it
would place the banks and the treasury o