Mr. SHERMAN. Yes, he has the testimony of some of the leading men in the city of NewYork, and among the rest some men who have been employed as agents by the Government C.T. Hil yer, Henry A. Perkins, John L. Bunce, James S. Tryon, Jonathan F. Morris Olcott Allen, James Goodwin, Stephen D. Iardee, E. V. Haughwout John W. Hunter, Royal Phelps, William. Astor, William M. Ver milye, and a number of others, whose testimony is given, and who state that such a tax, in their opinion, would be just. It is hardly fair to these gentlemen to regard their testimonyas anything more than a.general opinion that bond holders should in some way contrib ute to the support of the Government; and I know that some of them prefer a reduction of the rate of interest as proposed by me. This question of taxing Government securities is far from being a novel one. It has been resorted to in arbitrary Governments mniiy L times. In France, in the time of Louis XIV and Louis XV, and especially during the re eucy that intervened, forced taxes on public unds were resorted to until the credit of that country was entirely destroyed. It was proposed in England in 1717, but was firmly re sisted. I have here a aper attributed to the celebrated Henley, Earl of Oxford, written in that year on the inviolable nature of public securities, and the arguments have not lost their force by time. He says:. " Your project of raising moneyfor this yearssor yics, or o paying debts by taxing or lowering the interest of the funds, meets, I think, with too much approbation among some peoplewho look no further tlfnu themselvesand consider only the present difficulty, regardlessof the consequencesof their proceedings. The importance of the case seemsto require that everybodyshould contribute what they can to setthis matter in atruc light and examine withput preiudyce how try. muchthe interest of our counits re utution and honor, its future good or evil, may be: gated brit."I cannot but think that conseience is concerned and natural honesty and public Jpstice and the credit of the nation oycry thing that is sacred and jnvioloble in property is nearly affected all obligations vyill by in a way of being canceled and in a word, an indelible character of injustice cast upon us." Tosupportand maintain a mans private credi it is absolutely necessary that.tho word have a fix opinion of the honest and integrity as well as ability of a person. If there be good reason to object againstt c oneor the other of theso hise redit sinks: no one choosesto deal with him. Nor does any on careto trust hiui., This true. this only foundationof credit takesin nllensesand all persons, public as well as private, nparaticotpicaels, aswcll as personal. Jnst and honorable fair and opendealings, astrict performance of contracts, asteqdy observance of engagements. will necessarily gain credit everywhere; and common experiencet eachesus that a breach in theseas peccssurily destroysit." “, ienndgened c.inacrnet as disiness and willingnessto performonos such a fundamental of credit. that all the n uence of money and the most immense riches laeraestosfunsopicions of duise inpgoes nifutithyere be ground for the The ability 0!Iperson without natural justice rather makes amim cautious th“anIf, forward to deal with him. therefore, the legislature of auy country should decline standing to its contractsor endeavorto impose other conditions than what.at 1st worestipu ated, I ask, would not such a conduct as necessarily impair the public credit as it would the credit of a private person? Has it not the same tendency to make the lenders jealous of their security? Who will venture to lend the public ii 2nd time if ever they find themselves not treated according to their contract? May therenever be emergencieswhich may again obli of the public to borrow money? and if such caseiliould happen upon what foundationmust they proceedif an instancecan be produced.an act oft c legislaturewhich can never be forgotnor ever be repairedto showthat.legal securityis not a security and that engagementsare not to beunderstood literally? What is the natural consequenceof this but that no man will lend the Government for the future.butat such interest and such advancements asare full equivalents to the hazards people mayrun in loading 1 The whole of this very able paper has a close application to the questions before us, and would well repay the reading; and the remedy he proposes is the one I " propose. He says: monIfeythoer lleetnder be left.at his liberty to receive his it lay at lower interest.(in case where funds are redeemable.)no causecanbegivenofcom laint. No injury is done, no hardship is offerod. l.hc integrity and honestyof the borrower is evident, and credit is indis utable. But if the borrower be his ownjudge and is own cause and flies to an act of power because he can do it, it. as necessarily sinks his credit asit takesaway its foundation." and, sir, this brings me to the plain and just. remedy for all complaints of unequal taxation. Let us, in strict accordance with our engage ments, sell our iin proved credit. Let us 50 into the market, an with our resources fu y shown, our honor unimpaired, our securities free from all burdens, sell them on the most favorable terms; and thus we receive in advance all the taxes we could levy upon our securities. We will soon get more than the 1%. which Mr. Hayes proposes to levy; and when the tax payer pointsto the fund holder as shirking his share of the public burden, the latter can say, “I pay my tax in advance. I got 5%. interest for my money the law gives you 6. What is thus deducte from me re lieves you from millions of taxes." This policy, adopted in England, has reduced the rate of interest on public securities from 6 to 3%., and has made the British consol the highest standard ofereditin the civilized world. Fortunately our loans are now just in a condition when we can commence this reduction of interest. I showed awhile of that we had $177,000,000 of public debt within our reach now, and if it was known that no other but a 5%. loan could be had, and that all maturing bonds should be paid off in moue by the sale of 5%. bonds, public itors would quickly convert their securities into such a loan. Large institutions, among the rest one of the largest in the State of NewYork, have made a proposition to convert their five 20 bonds, maturing in May next, into this 5%. loan. If I had my own way I would not give them a 30 year 5%. bond; I would give a ten fort 5%. bond retaining the principle of redeem ability, with a view to stil lower interest; but the Secretary thinks he cannot now negotiate such a loan as that, and therefore, for the present, I would give those the most ready to adopt the reduction policy the most favorable form of loan, but as soon as possible would reserve the power to reduce the rate of interest by the payment of the principal as soon as a bond without these exemptions or at a lower rate of interest would sell at par. This process must be gradual. It will not do for Senators to vote against this bill because they think 5%. free of taxes is too high. We must. get it down 1st to 5%., then to 4, and then to 3, all the while faithfully observing our contracts; and we can do it. It is not probable if this bill passes that during the present year more than 100 millions of 5% s will be sold, because more than that would not be needed to meet the accruing indebtedness unless it should be necessary to sell more to pay bounties to soldiers or some extraordinary expenditure. Next year the Secretary would have the power to pay of $600,000,000 of the five twenties if he could sell these 5%. bonds. But it is important to pass me law this session in order to give him ample time to meet the obligations that are imposed upon him. I say, therefore, that in every view which I can take of this bill it is a wise measure, intended to save interest upon the public debt, to adjust on correct principles, equality of taxation, and to lighten the enormous burdens upon our people and there is another feature which commends it to my favor. If this bill pass in the form in which it now stands, the fund holders will themselves pay 06 the principal of the public debt. The 1%. saved on the rate of interest will pay off every dollar of this debt in 30 six years. When the fund holder and the tax payer stand before the public hustin, and this matter is dragged into politics, as it will be, and the tax payer says to the fund holder “Your is exempt and free from all tax, " thperopoenr? holder may say “ No, my friend, it is not; your money you can loan to your neighbor at 6%. interest, and t6law enables you to collect the principal at pleasure;I have paid for this privilege by deducting onaelrseiaxdt yx of my income; I have surrendered the principal sum loaned by me for an annuity for 36 years, and my share of the taxes will pay off every dollar of the debt within one generation." He may refer to the report of Mr. Hayes showing that the average tax in the U.S. is 1%, and that sum annually a plied with the consent of the fund hoLder, an paid by him alone, would pay you do t. I accept the justice of the principle. I say that we cannot go before the people and preserve the exemtion from local tax unless we show that the U.S. get some benefit from it; and bysurrendering this 1%. the fund holders will be stronger and more secure than they were before. They will feel safer in the yment of the principal; they will know that th: 1%. thus saved is laid aside under the operations of this law and up lied to the payment of the principal of the pu plic debt; t at. it will pay off the principal of that debt in due time and without any dangerof the misapplication of the fund, for it will he applied each year thus adding to the value of the remaining fun 5. The pas of this bill is now an imperative necessity. “its not my bill; it is not my idea. I think it is too favorable to the fund holders. I think that a ten 40 5%. loan might be put upon the market at par; but the SecyTreasury says that without the two stipulations to which I have referred, he does not think that he can, to use the ordinary language of the day, float a 5%. loan. I am therefore willing to give these stipulations to him, hoping that next winter we can repeal the clause exempting the bonds from income tax, and then let him issue a clear 5%. loan. I do not think he will be able to issue over100millions before that time. Perhaps next winter we may shorten the period during which the principal may be redeemable and perhaps in a few years, if our country goes on prospering as it is now prospering, we may reduce the rate of interest as England has done, 1st one half%., then another one half. keeping the body of the bonds always within opr reach. The position of our public debt is iust in that condition now, under the established policy of those who have regulated our finances, that it is within our reach, so that we can soon fund the whole of the public debt and reduce the rate of interest on alor nearly all of it. There is another collateral advantage which will be derived from this bill. I refer to the provision in the 4th section. It will have remembered that the holders of the 7 30 notes have the right by the terms of the option printed on the back of those notes to convert them into five 26%. bonds at maturity, or to demand the money. 240 millions of these notes come due in the month of August next year, and 600 millions in the May following. Under the condition of the present laws, the SecyTreasury will e compelled to accumulate and hold in hand 240 millions in order to meet the possibleoption of the holders of the 7 thirties. What would be the effect? The withdrawal of $240,000,000 of money from the circulation of the country, when it is now being reduced under the operations of the recent law, would bedisastrous. It would be withdrawin 1/2 of the circulating medium in orifer to meet an obligation when every particle of that money is necessa for the use of the people. Section 4 of this bill provides that the holders of the 7 30 notes shall give a reasonable notice of their choice to take either the money or the bonds. They have the right to make that choice, and nobody proposes to abridge that right. They have the right to do it at the time stated, and nobody proposes to deprive them of it. What is propose is simply to require them to give a reasonable notice of their choice of the alternative which they have, and that is put at 6 months. Some think that is too long and may complain of it. I do not think it is for the large amount involved. It works no injury, because the bill provides that in case they do not give their notice of the option, they get their money and the Secretary can provide for it. The probability is that the great mass of those notes will be converted into five 20 bonds without cost; and one effect of having a 5%. loan upon the market would be to oat this large mass of indebtedness into the five twenties as the holders have a right to do, while if on issue 6%. bonds none of these holders will avail themselves of the option until the last moment, and then by demanding the money would greatly embarrass the government. It has been said in some of the public prints that this provision is a violation of the contract. It is no more a violation of the contract than the notice which is required by law iIn the case of a tenancy from year to year. If am renting a house for a year or more I am bound to give notice of my intention to retain it.