dollars, and the question of the authority to revoke this allocation, since it raised questions both of law and accounting, was presented to the Comptroller General of the United States for consideration. The Comptroller General gave his decision in the matter under date of November 29, 1922, a copy of which is herewith inclosed for your ready reference. This decision held that the Secretary of the Treasury was authorized, as a matter of law, to revoke allocations of silver amounting to 10,247,976.52 fine ounces and to restore this amount of silver to the standard silver dollar account, thus making it available for recoinage. This decision speaks for itself and shows, among other things, that in making it the Comptroller General had before him the provisions of the last sentence of section 3 of the act, as to allocations of silver for subsidiary coinage, which you particularly emphasize in your letter. Under the laws governing the executive departments the Comptroller General's decision is conclusive and binding on the Secretary of the Treasury, and the questions of law and accounting having thus been disposed of, the Treasury proceeded forthwith to revoke the allocations of silver for subsidiary coinage covered by the decision, amounting in the aggregate to 10,247,976.52 fine ounces, and instructions accordingly were given to the Director of the Mint.

On the question of moral obligation as distinguished from legal authority, I think you will agree upon further consideration that there is no basis for questioning these revocations of allocations of silver for subsidiary coinage. The purpose of the repurchase provisions of the Pittman Act, as generally understood, was to assure to American producers the fixed price of $1 per ounce, 1,000 fine, for silver produced by mines situated within the United States and reduction works so located, up to such amounts as might be necessary to coin "an aggregate number of standard silver dollars equal to the aggregate number of standard silver dollars theretofore melted or broken up and sold as bullion" under the provisions of the act. The whole object, in other words, was to replace silver which had been sold as bullion out of the Treasury's holdings, and there would certainly be no equity whatever in expecting the mint to purchase at the artificial price of $1 per ounce, 1,000 fine, a further amount of silver representing an amount allocated for subsidiary coinage, but which had never, in fact, left the Treasury and was still being held as bullion in the vaults of the mint.

The silver thus held in the vaults, never having left the mint, manifestly would not have to be replaced, and ordinary common sense would require the Treasury, in the proper administration of the department, to restore the bullion back to the standard silver dollar bullion account as soon as it became evident that it would not be needed for subsidiary silver coinage, thus making it immediately available for recoinage into standard silver dollars and reducing the amount of silver to be purchased in the market at the artificial price of $1 per ounce. The fact of the matter is, therefore, that American producers have not in any way been prejudiced by the revocation of these allocations and have no standing in equity to ask that the Treasury buy these additional amounts of silver, beyond what is needed to cover the recoinage of standard silver dollars under the provisions of the act.

Entirely apart from the fact that producers of silver have no special equity in the matter, you will appreciate that in administering the provisions of the act the Treasury of the United States must keep in mind the best interests of the country as a whole, and not merely the special interests of the silver producers. The revocation of these allocations of silver for subsidiary coinage means a saving to the people of the United States, or, in other words, to the whole body of taxpayers of over $5,000,000, representing in part the saving realized through not having to purchase over 14,500,000 ounces of silver at a price averaging about 30 cents an ounce over the regular market price, and in part a saving of interest resulting from making available for immediate coinage into standard silver dollars bullion which would otherwise be kept as a dead asset in the subsidiary silver bullion account until such later time as further silver might be needed for subsidiary coinage.

The Comptroller General of the United States, the highest authority in these matters, having decided that the course was authorized, the Treasury's duty was clear and the allocations in question were accordingly revoked. This action has saved the people of the United States about $5,000,000, without depriving the silver producers of anything to which they were properly entitled under the law. To reverse this action now and make the additional 47505-23-2

purchases would mean a gift of about $5,000,000 of the public funds to the producers of silver, and throw upon the Treasury of the United States the burden of carrying, at an artificial price, over 14,500,000 ounces of silver not needed for any purpose.

Very truly yours,

Hon. KEY PITTMAN,

MY DEAR MR. GILBERT: I have the honor to acknowledge the receipt of your communication of May 9, 1923, in reply to my letter of April 23, 1923, in respect to the cancellation of allocations under the Pittman Act of silver for subsidiary coinage.

I will first take up your argument in support of the revocation of the allocation of the 6,000,000 ounces of silver. In this particular you say:

"As to the allocations of silver for subsidiary coinage, it is necessary to distinguish between the allocations of silver resulting from the melting down of silver dollars, and the allocations of silver bullion purchased under the provisions of the Pittman Act."

I must confess that I do not see the distinction between the setting aside of this 6,000,000 ounces of silver for subsidiary coinage and the setting aside of the 10,000,000 silver dollars in the Treasury of the United States. The two acts could only be done under authority of the Pittman Act; there was no other law authorizing it.

The statute does not say that the coining of such silver into subsidiary coin shall constitute a sale. What does it say? It says that the allocation for such purpose shall constitute a sale. I again refer you to the exact language of the act:

"The allocation of any silver to the Director of the Mint for subsidiary coinage shall, for the purposes of this act, be regarded as a sale or resale."

What constituted the allocation? The Director of the Mint, who is charged under the law with providing subsidiary coins for commerce and trade in the United States, notified the Secretary of the Treasury in writing that there was necessity for additional subsidiary coins; that he required silver bullion for such purpose; and requested the Treasury Department, under the provisions of the Pittman Act, to allocate silver subject to the Pittman Act to the Director of the Mint for such purpose. In each case the Secretary of the Treasury made an order, in which order he stated that so much silver bullion purchased under the Pittman Act or so many standard silver dollars in the Treasury, subject to the Pittman Act, was allocated as requested by the Director of the Mint.

In the case of the 6,000,000 ounces that was purchased by the Director of the Mint under the Pittman Act, instead of being coined into standard silver dollars, it was resold to the Director of the Mint for subsidiary coinage, under the authority of the act, in section 2, which says:

"Such silver so purchased may be resold for any of the purposes hereinafter specified in section three of this act."

That is, for the purpose of subsidiary coinage. I call your attention to the word "resold." I also call your attention to the language of the act which makes the act of allocation equivalent to a sale or resale. Whenever the allocation was completed then the sale was completed.

I submit to you that silver bullion allocated for subsidiary coinage might not be used for 20 years. It might not be used until long after the expiration of the Pittman Act. Is it possible that the transaction could be held in the air until after the expiration of the power which authorized the transaction? The Pittman Act has no control over the coinage of subsidiary coin; it makes no provision as to when or how the Director of the Mint shall use the bullion so

allocated. As far as the Pittman Act is concerned, the transaction is closed when the allocation is made; it is a sale, and the Director of the Mint may do as he pleases with it under any other authority that he possesses.

As I have stated before, the words "over and above the requirements for such purposes" do not mean to meet the daily minting of coins by the mint, because the act has no control over that function, but mean to meet the allocations, or, to use synonymous language as provided in the act, to meet the sales or resales that have been made.

In section 2 of the act it is expressly provided:

"That upon every such sale of bullion from time to time the Secretary of the Treasury shall immediately direct the Director of the Mint to purchase in the United States, of the product of mines situated in the United States and of reduction works so located, an amount of silver equal to three hundred and seventy-one and twenty-five hundredths grains of pure silver in respect of every standard silver dollar so melted or broken up and sold as bullion."

I call your attention to the word "immediately." There was no intention that the Treasury Department should await any action with regard to the bullion so sold or resold. The sale was made, which in the act means allocation. Then it was the duty of the Secretary of the Treasury to immediately order the repurchase of that amount from the American producer at $1 an ounce.

Now, as to the 10,000,000 standard silver dollars: Let us keep in mind that they contained 7,729.978.89 ounces of silver. These were a part of the silver dollars held in the Treasury to redeem silver certificates that had been issued against them. Prior to the enactment of the Pittman Act there was no authority in law to use them for subsidiary coinage, or to settle trade balances, or to sell them for bullion, or for any other purpose than the redemption of silver certificates. It was by reason of this restriction that the Pittman Act was passed. The Treasury Department has no authority in the matter nor has the Director of the Mint except in strict compliance with such act.

What took place under the act? On November 28, 1919, the Director of the Mint, in accordance with the provisions of the Pittman Act, notified the Secretary of the Treasury that he required silver bullion for the coinage of subsidiary coins, and requested the Secretary of the Treasury to allocate, under the Pittman Act, 10,000,000 standard silver dollars then in the Treasury. On the same date the Secretary of the Treasury made this order:

"The Secretary of the Treasury, pursuant to the provisions of section 3 of an act of Congress approved April 23, 1918, hereby allocates to you for subsidiary coinage the silver bullion to be obtained from melting ten million standard silver dollars and, pursuant to section 1 of said act, authorizes you to melt said ten million standard silver dollars for the purpose above mentioned." In addition to this, at the same time the Secretary of the Treasury issued an order directed to the Treasurer of the United States, who had possession of said standard silver dollars under the law, to surrender and deliver to the Director of the Mint said 10,000,000 standard silver dollars. The Treasurer of the United States, in response to said order, immediately delivered to the Director of the Mint said 10,000.000 standard silver dollars. They were received by the Director of the Mint, removed from the possession of their legal custodian, conveyed to the mint at Philadelphia, and there, between December 5, 1919, and March 22, 1920, were broken up, destroyed as standard silver dollars, and converted into silver bullion.

What was then the duty, under the act, of the Secretary of the Treasury? It was this:

"That upon every such sale of bullion from time to time the Secretary of the Treasury shall immediately direct the Director of the Mint to purchase in the United States, of the product of mines situated in the United States and of reduction works so located, an amount of silver equal to three hundred and seventy-one and twenty-five hundredths grains of pure silver in respect of every standard silver dollar so melted or broken up and sold as bullion." Is there any doubt that the 10,000,000 silver dollars were broken up? Is there any doubt that the bullion was allocated? Is there any doubt that the Pittman Act prescribes that allocation constitutes a sale or resale? Where do you find the authority in the Pittman Act to recoin any silver dollars so broken up except from American silver purchased from the American producer immediately after such silver dollars are broken up? The act is mandatory. If it were not mandatory, why the necessity for the provision that the silver should be purchased from the product of American mines? Why not pur

chase some of the foreign silver that comes into the possession of the Director of the Mint through the purchase and coining of foreign gold bullion? Because one of the very purposes of the act, among others, as stated in the act, was "To encourage the production of silver" in the United States.

The main reason stated by you for your refusal to purchase silver under the Pittman Act to replace the 10,000,000 silver dollars so broken up and the other silver allocated is that you can buy that amount of silver in the open market cheaper, and that you can save the Government $5,000,000 thereby. All the silver that you have purchased under the Pittman Act since May, 1921, could have been purchased at less than $1 an ounce. Did that excuse justify you in violating the terms of the Pittman Act?

Upon mature consideration and reflection, it must be apparent to you, as an able lawyer, that the Treasury Department has no discretion with regard to the matter of purchases under the Pittman Act. The mandatory provisions were safeguards thrown around the American producer and were just safeguards. He consented to the flooding of the market of the world with 350,000,000 silver dollars through a patriotic spirit, knowing that the time would come when such act would decrease the demand and depress the silver market. All that he asked was that every one of such silver dollars so broken up should be replaced through the purchase of American silver at $1 an ounce. Congress, in unequivocal language, made such mandatory provision.

You say that it is not much more than a matter of bookkeeping whether it is standard silver dollars or broken-up silver dollars; that it is all in the Treasury Department. This is not an accurate statement. It is true that the Secretary of the Treasury has supervision over the various departments that funetion with regard to our finances, but the law prescribes the functions of those various departments, and the Secretary of the Treasury has no jurisdiction or discretion to alter or juggle those functions. Under the law the Treasurer of the United States is the custodian of the standard silver dollars, and he can only part with them in accordance with the law of the country. He did part with them to the Director of the Mint, who performs an entirely different function and who has no control over the standard silver dollars.

When the Treasurer delivered these silver dollars to the Director of the Mint, in accordance with your order and under the allocation made, he did it under the authority of the Pittman Act. It was a sale to the Director of the Mint as far as he was concerned and he was relieved from any further responsibility with regard to it.

You argue that you are justified in ordering these 10,000,000 silver dollars recoined from this silver bullion sold to the Director of the Mint because it is not needed at the present time for the coinage of subsidiary coins. Is there any provision in the act that it shall be needed immediately? Is there any law that requires the Director of the Mint to keep coined all the bullion that he has on hand for the purpose of coining subsidiary coins? The time and the manner of coinage by the Director of the Mint is largely in the discretion of the Director of the Mint, possibly subject to the approval of the Secretary of the Treasury. It is certainly a matter that Congress did not attempt to assume control over under the Pittman Act.

The discretion as to when Pittman Act silver was needed for subsidiary coinage was left to the Director of the Mint and the Secretary of the Treasury. They could not touch a dollar of the standard silver dollars in the Treasury until they exercised that sound discretion. They did exercise it. They took advantage of the act in December, 1919, by solemnly announcing that 10,000,000 silver dollars were required for the purpose of subsidiary coinage. They consummated the sale in accordance with the provisions of the act. The sale could not be legally questioned by anyone because the determination of the necessity was within the exclusive jurisdiction of the Treasury Department. In your letter to the Comptroller General under date of November 2, 1922, you say:

"It further appears that the allocations of silver for subsidiary coinage under the act were made in part, to make up shortages at the individual coinage mints, rather than for the mint service as a whole, and in part to supply refined silver immediately available for coinage, where the silver already on hand was unrefined.”

At the time the Treasury Department undoubtedly admitted that this condition of affairs warranted the allocation of such silver.

In your argument in support of the revocation of the allocation of the 10,000,000 silver dollars you simply rely upon the opinion of the Comptroller General. I again call your attention to the fact that the Comptroller General, while declaring that he sees nothing to prevent the revocation, still expressly states that the question of revocation or nonrevocation is a matter of policy of the Treasury Department which they may determine either way. You are not, therefore, hampered by the opinion of the Comptroller General.

Now, as to the moral duty of the Treasury Department: What was the condition of the silver market at the time the allocation of the 10,000,000 silver dollars was made? The price of silver then throughout the world, including the United States, was $1.30 an ounce. The Government had to have 10,000,000 silver dollars to break up into bullion and coin into subsidiary coin. I presume this is true. To presume otherwise would be to doubt the intelligence or the integrity of the Treasury Department. They had to purchase the amount of bullion contained in 10,000,000 silver dollars. If they had gone into the open market to purchase it they would have had to pay the American producer $1.30 an ounce. Instead of that they took advantage of the sale provision under the Pittman Act and purchased 10,000,000 silver dollars from the Treasury of the United States at $1 an ounce.

Silver continued at above $1 an ounce for six months after that. Did the Treasury Department discover during that period of time that the 7,729,978 ounces in these 10,000,000 silver dollars were not required for subsidiary coinage? How long did it take the Treasury Department to discover that these 10,000,000 silver dollars melted up into bullion and sold to the Director of the Mint were not required for subsidiary coinage? The order of revocation was made on December 19, 1922. Think of it; it took the Treasury Department nearly three years to find out that it did not need these 10,000,000 silver dollars converted into bullion for subsidiary coinage.

How much subsidiary coin did the mints coin for the year the allocation was made? According to the report of the Director of the Mint, during the fiscal year ended June 30, 1920, the coinage was as follows:

Philadelphia

Denver

San Francisco__.

Total silver____

$13, 033, 000 3, 646, 600 3,084, 000

19, 763, 600

What was the coinage for two years prior and one year subsequent? According to the reports of the Director of the Mint it was as follows:

1918

1919

1921.

$35, 004, 450 14, 682, 079 13, 389, 070

And yet at the end of those three years the Treasury Department attempts to treat the sale as never having existed and to have the silver dollars so broken up replaced with what might be in whole or in part the bullion derived from the breaking up of the 10,000,000 silver dollars.

What was the price of silver at the time of the attempted revocation on December 19, 1922? It was 62 cents an ounce. You say that the Government will lose $5,000,000 if they are compelled to buy at $1 an ounce the 10,247,976.52 ounces of bullion so allocated and now revoked. You mean that the Government will make an additional profit of $5,000,000 by repudiating the sale of the 10,247,976.52 ounces and buying the silver at the present price.

But we are now only discussing the 10,000,000 silver dollars. The Government could not lose, because if it coined the 10,000,000 silver dollars into dimes, quarters, and halves it would sell those coins to banks and to trade and commerce at the fixed price of $1.37 plus an ounce. In other words, the Government would make $2,860,092 if it paid the producer $1 an ounce for it.

If the Government coined the other silver so allocated, it would make a profit on such silver of $931,659. By coining all the silver so allocated, and which has been revoked, the Government would make a total profit of $3,791,751, being the difference between $1 an ounce paid for this silver and $1.37 an ounce, the price at which it would be sold as subsidiary coin. Not satisfied with this enormous profit, you now seek to make an additional profit of over $3,000,000 by buying the silver at the present low price of silver.