The Act of March 3, 1887
The Act of March 3, 1887 provided for the redemption of trade dollars with silver dollars and other subsidiary silver coins, both of which were plentiful by that time, especially the silver dollars. At the time the trade dollar had a melt-down value of about 75¢, thus the government lost about 25¢ on each one redeemed. The redemption privilege was to extend for only six months following the passage of the act, after which trade dollars would once again be worth only bullion or melt-down value.
Redemptions of trade dollars under the Act of March 3, 1887 eventually amounted to 7,689,036 pieces, equal to about 20% of the number coined. The coins contained 6,018,921 ounces of fine silver. During the year 1887 the average price of silver was $0.97832 per fine ounce, thus such coins had a silver value of $5,887,889. The Treasury paid $1,800,000 over melt-down value, but scored a public relations advantage as it laid to rest the innumerable complaints about the previously dishonored denomination.
The Effect of the 1887 Law
In The Numismatist, April 1923, Edward T. Newell, one of Americas most prominent numismatic scholars of the era, gave his view of the later days of the trade dollar and legislation affecting it:
"Popular dissatisfaction with the trade dollar was perhaps responsible for the Act of February 19, 1887 [March 3, 1887 represented the final date on the legislation], which provided for its retirement. Section I stated that for a period of six months after the passage of this act, United States trade dollars, if not defaced, mutilated or stamped, shall be received at the office of the treasurer of the United States in exchange for a like amount, dollar for dollar, of Standard silver dollars, or of subsidiary coins of the United States. (This act became a law without the approval of the president.)
"Robbing the trade dollar of its legal-tender quality did not remove it from circulation, but its life was full of hardships for the next few years. It was a despised coin, and while it circulated freely it was welcome nowhere. Many did not understand its status and did not take the trouble to learn it. Their chief concern was to get rid of them as fast as acquired, and this tended to make it circulate more freely than it previously had. Everybody seemed to have a trade dollar when making a purchase. It was really only a token-coin now, but it was a medium of exchange so long as accepted for goods purchased, just the same as a piece of leather, or stone, or glass is a medium of exchange so long as people will accept it.
"It was seldom refused, but was often accepted under protest or with the inquiry, "Is that the best youve got?" and then it was passed on to ones best friend at the first opportunity. There were many who insisted that the trade dollar was issued by the government and must be accepted when offered, legal tender or no legal tender. It was on this point that opinion differed and sometimes severed friendships. The 20-cent piece was a piker for causing arguments and disputes and all-around ill-feeling compared with the trade dollar. At that time the bullion value of the coin was nearly a dollar, and the wise business man felt that he stood to lose very little on them in any event and accepted them without question. But the bullion value gradually dropped lower and lower, and in 1887 it was thought the time had come for the Government to take a more definite stand in regard to it, and a law was passed providing for their redemption as above stated.
"Although this act did not restore its legal-tender quality, it temporarily gave it respectability again. It once more became possible to tender it in payment for a purchase without feeling that you were making an enemy. People even smiled when one was offered them, and strange as it may seem after ten years of abuse, merchants advertised Trade Dollar Taken at Par!"
Redemption of Trade Dollars (1887)
The American Numismatist, published by C.E. Leal, Paterson, N.J., carried this article in the issue of March 1887:
"The Redemption of Trade Dollars: Since Congress passed the bill authorizing the redemption of the trade dollars, the professional examiners and counters in the Sub-Treasuries at New York and San Francisco have been kept busy receiving the large sums forwarded from all parts of the country. As the dollars can only be redeemed in these two cities, and as each piece has to be carefully scrutinized to see that it is neither defaced, mutilated, nor stamped, it will probably be five or six months before the work is completed.
"It is the common belief that at the time the value of trade dollars fell to 88 cents, large quantities were bought by bullion brokers speculating on a possible raise. If anyone had bought the coins in 1883, at their lowest price, and held them until the passage of the redemption act, he would really have lost money, as the profit on the four years investment would only be twelve cents. A larger profit than this could have been obtained by investing in government bonds.
The Treasury Department has issued the following statement to holders of trade dollars:
"TREASURY OF THE UNITED STATES,
"WASHINGTON, MARCH 7, 1887.
"Owing to the present inadequate provision for the reception and storage of trade dollars, the redemption of which is provided for under the act of Congress passed Feb. 20, 1887, the following regulations will be observed, in order, so far as practicable, to comply with the terms of the law:
"Trade dollars, if not defaced, mutilated, or stamped, will be redeemed or exchanged at the offices of the Treasurers of the United States. Requests for the redemption of these coins stating the amount held should be forwarded to the above-named officers, who will file applications and notify holders in their turn when presentation may be made and payment obtained. The notification by the holders of trade dollars to the Treasurer or Sub-Treasurers of the United States of the amounts held by them respectively will be held to be a sufficient presentation of the coins within the meaning of the law, and will entitle the holders in order of reception of such notifications to deposit such coins in the respective Sub-Treasuries when notified that such deposits can be received at those offices. Notifications must be filed with the Sub-Treasurers on or before Aug. 1, 1887. After notifying these officers, and upon receipt of notification from them, such coins may be forwarded by express or otherwise, transportation charges being prepaid, when receipts will be issued for the amounts purporting to be contained in the deposits on their reception. Upon the count and ascertainment of the amount of each deposit payment will be made therefor in standard silver dollars or in fractional silver coin at the option of the holder. Defaced, mutilated, or stamped trade dollars found in deposits will not be redeemed or exchanged by any of the Sub-Treasury officers, but they will be returned to the depositor or purchased as bullion in sums of $3 or upward by the United States mints at the option of the depositor. C.N. JORDAN, TREASURER UNITED STATES.
"Approved: C.S. FAIRCHILD, Acting Secretary of the Treasury.
"Most of the dollars presented for redemption are held by banks for large business houses, and, as they were but a short time in circulation, are in very good condition. There is probably not more than one fourth of the original coinage of trade dollars still in this country; the remainder has been exported, principally to China."