USA Coin Album: The Mint Act of February 28, 1878

Click images to enlarge.

High on the list of collectors’ favorite coin series is the Morgan silver dollar of 1878-1921. There’s reason to believe that it may have surpassed Lincoln cents as the United States coin most widely collected by date and mint. It’s also fair to say, however, that few really understand how this coin came to be.

The silver dollar of 416 grains gross weight had been part of America’s original coin lineup as established in 1792, though the inability of the US Mint’s assayer and coiner to post their security bonds held up the production of this denomination until the fall of 1794. Initially, the silver fineness of our silver coins was an impossibly awkward figure of .892427. It was not until 1837, when the gross weight of the silver dollar was reduced to 412.5 grains, that the fineness was legally raised to .900. Thus it remained for the next 36 years. As it is, the coins struck under this law enjoyed only limited domestic circulation and were seldom produced in significant numbers. In 1873 Congress passed a sweeping reform of the Mint codes, and this act also recognized the obsolescence of several coin issues. The law did not state any words to the effect that no more standard silver dollars would be coined; instead, it specified those coins that were a part of the new roster, and the standard dollar was simply omitted.

Representative Richard P. Bland Click image to enlarge.

Little notice was taken of this exclusion at the time, as both Congress and the American public were instead pre-occupied with the newly authorized trade dollar of 420 grains. It was not until the price of silver began to plunge a few years later that western mining interests and their congressmen began denouncing the “Crime of ’73.” Their motivation was purely selfish, as they wanted the Mint to buy more silver to help prop up its price and maintain its high profile. As early as 1876 the House of Representatives had twice passed a bill restoring free coinage of the standard silver dollar, but it was defeated in the Senate until 1878. In that year, Missouri Representative Richard P. Bland found an advocate in Iowa Senator William B. Allison, and both houses passed what became known as the Bland-Allison Act. President Rutherford B. Hayes recognized a boondoggle when he saw one, and he quickly vetoed the bill. Nevertheless, Congress summoned enough votes to overrule the Hayes decision, and the Bland-Allison Act became law on February 28, 1878.

This law provided for the restoration of the silver dollar at its 1837 standard and also mandated that the Treasury purchase from two to four million ounces of silver monthly at market prices. This bullion was to be coined into said dollars to the extent that the value of the unused bullion never exceeded five million dollars. All such silver dollars enjoyed unlimited legal tender status and could be exchanged for silver certificate notes in sums not less than 10 dollars. This prompted the first issue of silver certificates in the nation’s history, the notes being dated 1878 and printed in denominations of 10 through 1000 dollars.

The story of the Mint’s struggle to create and fine tune the new silver dollar coins themselves is beyond the scope of a single column. More germane to the present study is what effect the Bland-Allison Act had on the Mint itself. Not only did the coining of several million silver dollars monthly overtax the rolling mills, presses and other equipment, but the fact that these coins were not actually needed in commerce led to most of the pieces being simply bagged and stored onsite. When the vaults of the various minting facilities had been filled, the overflow ended up stacked up in hallways and courtyards, creating both a nuisance and a theft risk. The New Orleans Mint, dormant since 1861, was reactivated in 1879 to both strike and store many of these unwanted coins.

Over the years, many writers have claimed that it was the huge mintages of silver dollars starting in 1878 that led to a near suspension in the coining of fractional silver coins around the same time. This is not even partially true, though the Mint was probably relieved that a legitimate reason presented itself at this time of urgency. The fact is that the falling price of silver after 1873 eventually led to the return of many millions of half dimes, dimes, quarters and halves that had been circulating outside of the country since 1862. A law passed in 1876 for the redemption of fractional paper money had limited the total of fractional notes and fractional silver coin in circulation to just $50 million. This figure was quickly reached with the returning coins, and the Mint could not legally create more fractional pieces in excess of that total.

The rapid growth of America’s economy after 1878 soon made this figure unrealistic, and within a few years the demand for additional coin led to a general disregard of the long-forgotten provision. It was not until 1906 that this embarrassing situation was properly addressed—the US attorney general ruled that the broader Mint Act of 1873 took precedence over its annoying 1876 codicil, and he waived the $50 million limit.

David W. Lange's column, “USA Coin Album,” appears monthly in The Numismatist, the official publication of the American Numismatic Association.