entatives.

An interesting debate arose between Mr. Beck and myself, during
this session, upon the question of the sinking fund, which he seemed
to regard as a part of the public debt. It is, in fact, only a
treasury statement of the debt to be paid each year, and the amount
actually paid. In 1862, when the war was flagrant, Congress provided
that one per cent. of the principal of the public debt should be
paid each year as a "sinking fund." While the United States was
borrowing large sums and issuing its bonds, it was folly to pay
outstanding bonds, and this was not done until 1868, when the
treasury was receiving more money than it disbursed. In the
meantime, the treasury charged to the "sinking fund," annually,
the sum of one per cent. of the amount of outstanding securities
of the United States. When the receipts exceeded expenditures, so
much of the balance on hand as was not needed was applied to the
purchase of bonds, and such bonds were canceled and the amount paid
was placed to the credit of this fund. In the general prosperity
that followed, and until 1873, the sums thus credited increased so
that the amount of bonds paid was equal to, if not in excess of,
the annual charge against that fund, and the amount charged against
it prior to 1868. When the financial panic of 1873 occurred, the
revenues fell off so that they were insufficient to meet current
expenditures. This prevented any credits to the sinking fund until
1878, when the pendulum swung the other way, and the fund was
rapidly diminished by the bonds purchased from the surplus revenue,
and credited to the fund, so that when Mr. Beck interrogated me I
was able to say that the sinking fund had to its credit a considerable
sum; in other words, the United States had paid its debt more
rapidly than it had agreed to pay it. The term "sinking fund," as
applied to the national accounts, is a misleading phrase. It is
a mere statement whether we have or have not paid one per centum
of the public debt each year. There is no actual fund of the kind
in existence for national purposes.

Another financial question was presented at this session and before
and since. The national banking act, when it passed in 1863,
provided that the circulating notes of national banks should be
issued for only ninety per cent. of the amount of United States
bonds deposited in the treasury for their security. At that time
bonds were worth in the market about fifty per c