The success of the subscription gave rise to an unexpected difficulty.
At that time there were outstanding one hundred and ninety-four million ten-forty United States bonds that carried interest at the rate of five per cent.
It was a singular coincidence, and a coincidence probably not due to natural causes, that some five per cent bonds, having fifteen years to run, should be at par, and that other five per cent bonds that might run thirty years should fall below par in the same market. In the three months from August to December, these ten-forties were quoted as low as ninety-seven, or even for a time at ninety-six. Cooke became anxious, if not alarmed, lest the rate should fall below ninety-five, and consequently lest the subscribers should refuse to meet their obligations. Early on the morning of the first Monday in December, I received the information that the bonds were taken as soon as the offices were open. I may mention in passing that Cooke & Co. paid for the bonds as they were delivered, either in coin or in five-twenty bonds.
As bonds were taken, and as payments were made, a difficulty appeared which had been anticipated, but not in its fullness. The proceeds from the sales of the five per cent bonds were pledged to the redemption of the six per cent five-twenty bonds, reckoned at their par value.
It was provided by the statute that whenever five-twenty bonds were called, a notice of ninety days should be given, when interest would cease. Thus it happened that whenever a bond was called it was worth par and interest to the end of the ninety days. Of the called bonds some were in America, and the owners did not choose to present them in London in exchange for five per cent bonds, nor for coin. Hence it happened that the total proceeds of the five per cent bonds, about twenty million dollars were paid in gold coin by Cooke & Co. This coin was deposited in the Bank of England, but upon such terms as were imposed by the governors:
(1) The deposits must be made in the name of William A. Richardson. This was done, but a statement was made by Judge Richardson that the deposit was the property of the United States.
(2) The gold was not to be taken out of the country. This stipulation was in the line of our policy, which was to invest the entire sum in five-twenty bonds, whenever they could be bought at par. The opportunity came in a manner that was not anticipated. The documents referred to are of historical value, and they are therefore inserted as follows: