The Bond Issues
In his message to Congress of December 1893, President Cleveland asserted that repeal of the Sherman Silver Purchase Act had ended fears concerning the stability of the currency. The president looked forward to the gradual return of prosperity aided by the salutary effects of repeal upon business confidence. He hoped, apparently, that the role of government with respect to recovery was over. 1
The question whether the panic of 1893 was so exclusively the result of fear of an unstable monetary standard as Cleveland and much contemporary opinion believed is more than doubtful. The belief that restoring faith in the currency was the essential requirement for renewal of prosperity is at least equally dubious. Yet even faith in the stability of the currency was not secured by repeal of the Sherman Silver Purchase Act. Stopping the purchases of silver for injection into the currency system was one thing; it was also necessary to maintain an adequate gold reserve in the Treasury to redeem the nongold currency. This was particularly true with respect to the greenbacks and the Treasury notes of 1890, for the opportunity to redeem these types of currency in gold was a legal obligation.
Throughout the remainder of his administration the status of the gold reserve was a source of anxiety to Cleveland and others who believed with him that the restoration and maintenance of confidence in the currency was essential to economic recovery. The administration, forced to act alone, used four bond issues to replenish the gold reserve and maintain this confidence. Except for the repeal of the Sherman Silver Purchase Act, Congress passed no supportive legislation desired by the Cleveland administration with respect to the currency. When recovery did not occur, Congress became increasingly involved in discussions of a partisan answer to recovery--the tariff--and of a sectional answer--free silver. These answers superseded the Cleveland theory in the presidential campaign of 1896. The later years of the Cleveland administration thus represented a period of transition toward other ideas concerning governmental action.