(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "A Resource of War - The Credit of the Government Made Immediately Available: History of the ..."

Go ogle 



This is a digital copy of a book that was preserved for generations on Hbrary shelves before it was carefully scanned by Google as part of a project 
to make the world's books discoverable online. 

It has survived long enough for the copyright to expire and the book to enter the public domain. A public domain book is one that was never subject 
to copyright or whose legal copyright term has expired. Whether a book is in the public domain may vary country to country. Public domain books 
are our gateways to the past, representing a wealth of history, culture and knowledge that's often difficult to discover. 

Marks, notations and other marginalia present in the original volume will appear in this file - a reminder of this book's long journey from the 
publisher to a library and finally to you. 

Usage guidelines 

Google is proud to partner with libraries to digitize public domain materials and make them widely accessible. Public domain books belong to the 
public and we are merely their custodians. Nevertheless, this work is expensive, so in order to keep providing this resource, we have taken steps to 
prevent abuse by commercial parties, including placing technical restrictions on automated querying. 

We also ask that you: 

+ Make non- commercial use of the files We designed Google Book Search for use by individuals, and we request that you use these files for 
personal, non-commercial purposes. 

+ Refrain from automated querying Do not send automated queries of any sort to Google's system: If you are conducting research on machine 
translation, optical character recognition or other areas where access to a large amount of text is helpful, please contact us. We encourage the 
use of public domain materials for these purposes and may be able to help. 

+ Maintain attribution The Google "watermark" you see on each file is essential for informing people about this project and helping them find 
additional materials through Google Book Search. Please do not remove it. 

+ Keep it legal Whatever your use, remember that you are responsible for ensuring that what you are doing is legal. Do not assume that just 
because we believe a book is in the public domain for users in the United States, that the work is also in the public domain for users in other 
countries. Whether a book is still in copyright varies from country to country, and we can't offer guidance on whether any specific use of 
any specific book is allowed. Please do not assume that a book's appearance in Google Book Search means it can be used in any manner 
anywhere in the world. Copyright infringement liability can be quite severe. 

About Google Book Search 



Google's mission is to organize the world's information and to make it universally accessible and useful. Google Book Search helps readers 
discover the world's books while helping authors and publishers reach new audiences. You can search through the full text of this book on the web 

at http : / /books . google . com/ 



HARVARD COLLEGE 
LIBRARY 



FROM THE BEQUEST OF 

CHARLES SUMNER 

GLASS OF 1830 

Senator from Massachusetts 

FOR BOOKS RELATING TO 
POLITICS AND FINE ARTS 




A KESOURCK OF WAR— THE CREDIT OF THE GOVERNMENT 
MADE IMMEDIATELY AVAILABLE. 



HISTORY 



.LEGAL TENDER/PAPER MONEY 

I8BUED DURING THE 

GREAT REBELLION. 



|oatt tolt](;0itt ^ntmst nnb a Rational ^mttmjSi. 



PREPARED BT 



Hon. E. G. SPATJLBIJsrG J Chairman, 



THE SUB-COMMITTEE OF WAYS AND MEANS, AT THE TIME 
THE ACT WAS PASSED. 



In such a nation as this, there Is one and only one resource for loans sufficient to carry 
hrough the expenses of a great war, namely, Aindablc Treasury Notes fitted for circulation 
as money, and based upon adequate taxation. 

" That in the interval between war and war, all the outstaudiu^ paper ubould be called in 
coinpermUUd, to flow in again, and hold the field of circulation, until another war should re 
qnire its yielding place again to the National Medium.-'— Jefferson. 



B U F F A L O : 
Express Prikiiing Compakv, 14 £ast Swan Street, 
l§f9. 




HARVARD COLLEQE 



Introduction, - - - ^ - - - - - - - 

No National Currency at commencement of War, - 5 

War carried on upon credit and taxation, 5 

Legal Tender act a War measure, - 5—29 

Loan of $160,000,000 by the Associated Banks, 7 

Who composed the Committee of Ways and Means, - 7 
Sub-Committee, Messrs. Spaulding, Hooper and Corning, - - - 8 
Secretary Chase's financial plan, a bank and taxation, - - - 8—11 

Mr. Chase does not recommend legal tender, 10 

Bank bill prepared by Mr. Spaulding, - - - - - - 11—18 

Erastus Coming's letter on the Bank bill, 12 

Origin of the Legal Tender act, 18 

Legal Tender bill introduced by Mr. Spaulding, U 

Ways and Means divided on the bill, 15 

Opinion of Attorney General Bates, 16 

Ways and Means agree to report the bill, 16 

Bill reported by Mr. Spaulding, 16 

Mr. Spaulding's letter to Isaac Sherman, New York, - - - 17 

Isaac Sherman's letter, - -18 

The Press in New York opposed to the act, 19 

Meeting of Bank Delegates in Washington to oppose the bill, - - 19 
Meeting of Delegates and Committees at Treasury Department, - 19 

Their plan to raise money to carry on the War, 20 

Secretary Chase modifies their plan, .... . - .21 
Opposition to the Bank plan, - . .22 

Letters of M. H, Grinell, L. F. Allen and Mr. Ganson, - - - 23 
Letters of J. W. Simonton, T. Denny & Co., J. E. Williams, - 2i— 26 

Section for $500,000,000 of 5-20 bonds, 26 

Letter of Secretary Chase, January 22, 1862, 27 

National Intelligencer, Col. Seaton, etc., 28 

Mr. Spaulding's opening Speech on the bill, 28 

Value of the Real and Personal property, $16,159,616,068, - - - 41 

Mr. Vallandigham offers a substitute, 43 

Mr. Pendleton's Speech on the bill, 43 



iv 



Mr. Coming's resolution asking opinion of Secretary Chase, - - 45 
Secretary Chase's opinion of the propriety and necessity of the hill, 45 

Mr. Chase's letter to Mr. Spaulding, Jan. 30th, 46 

Letters of John A. Stevens, George Opdyke and R. Morris, - - 47 
Letters of Stephen Colwell, M. S. Hawley, J. H. Van Antwerp, - 48—49 
Letters of Robert Dennison, C. H. Russell, Mr. Lord, Mr. Prosser, 40—50 
Letters of George B. Butler, T. W. Olcott and others, - - . 51—52 
Mr. Vallandigham's Speech, ---------52 

Mr. Hooper's Speech, - w- -- ^- -- 64—55 
Mr. Roscoe Conkling, Mr. Morrill, Stevens and Spaulding, - 57— -58 
Mr. Conkling as to Secretary Chase's position, - - - - 58—59 

Secretary Chase's letter in favor of bill, 59 

Mr. Morrill's Speech against legal tender, 60 

Mr. Roscoe Conkling's Speech against legal tender, - - - - 64 

Mr. Bingham, of Ohio, in favor of the bill, 66 

Mr. Sheffield, Crisfield and. Pike, 6g-69 

Mr. Alley, of Massachusetts, in favor of the bill, 71 

Letter of Secretary Chase urging immediate action, - - - - 71 

Mr. Spaulding's motion to close debate opposed, 72 

Mr. Horton and Mr. Wright oppose the bill, 73 

Order to close debate passed, - 74 

Proceedings on the day the bill passed the House, - - - - 75 
Mr. Kellogg's Speech, - - - - - - - -75 

Mr. Thomas and Mr. Edward's Speeches, 77 

Mr. Riddle and Blake's Speeches, 78 

Mr. Campbell's Speech, -- --------79 

Mr. Spaulding and Stevens' Speeches closing debate, - - - 80—81 
Five minute Speeches continued, --------85 

Mr. F. A. Conkling, Shellabarger, Hickman, - - - - - 85—87 

Mr. Lovejoy and Walton, - - - - - - - - 88—91 

Motion to strike out legal tender clause lost, 91—92 

Confusion and excitement on taking vote, - 92 

The substitute of Mr. Morrill, Conkling and others lost, - 92, 93, 94 
Bill passed ; yeas 93, nays 54, - -- -- -- 95 — 96 

Copy of bill as passed the House February 6, 1862, - - - 66—67 

George Dawson's letter to Albany Journal, 98 

Proceedings in Senate on the bill, ------- 99—100 

$10,000,000 demand notes for temporary relief, 99 

Senate Finance Committee propose amendments, 100 

Mr. Fessenden's opening Speech, --------100 

Speeches by Judge Collamer and Mr. Howe, 106—107 

Speeches by Chandler, Wilson and Sherman, - - - 109, 110, 111 
Speeches by Cowan, Doolittle, Simmons, Bayard, - - - 114, 115, 116 
Speeches by Wllley, Howard, McDougall, - - - - 117, 118, 119 

Speech by Mr. Sumner, - -- - -121 

Motion to strike out legal tender clause lost, - - - - 121—122 
Speeches of King, Pearce, Salesbury, Powell, - - - - 122—123 

Bill passed the Senate 30 to 7, 1^ 

Letter of J. W. Simonton on the origin of legal tender act, - - - 124 



V 



Objection in House to Senate amendments, - * - - - 

Mr. Spaulding's Speech opposing tiiem, - 127 

Speeches by Pomeroy, Calvert, Morrill, Dunn, English, - - 133—138 
Speeches by Pike, Diven, Whidom, Pendleton, - - • . 139—140 
Speeches by Hooper and Stevens close debate on amendments, - 140—141 
Yeas and nays to pay soldiers and sailors in coin, - - - - - 144 

Yeas and nays to pay interest in coin, -------145 

Yeas and nays to sell bonds at market value, - - - - - - 146 

Yeas and nays to lay bill on table, 147 

Conference Committee— bill passed> - 14a 

Copy of legal tender act, February 25, '02, 149 

Samuel Wilkeson's letter to N. Y. Tribune, 152 

Temporary deposits in Sub-Treasury, 152 

Certificates of indebtedness, - - - - - - - -153 

$00,000,000 more legal tender declared, 154 

Secretary Chase asks for $150,000,000 more, - , 154 

Secretary Chase asks for small bills less than $5, - - - - 155 
Action of Committee of Ways and Means on this, - - - - - 156 

Mr. Spaulding's Speech upon it, - - - 157 

Mr. Colfax's Speech and Mr. Stevens', 161 

Yeas and nays on passage of this bill, - - - - - - - 162 

Passed the Senate ; yeas 22, nays 13, 163 

Copy of second legal tender act, - - - - - - - -163 

Postage Stamps and Fractional Currency, 165 

Shinplasters prohibited, 2d Section of the act, 165 

Bank bill again recommended by Secretary Chase, - - - - I67 
$900,000,000 loan bill reported from Committee, ----- 167 
Spaulding's opening Speech upon it, ----- - i67— 168 

Particulars of the National Debt, Jan. 2, 1863, 170 

Constitutionality of a National Bank, - 172 

Constitutionality of State Banks, - 172 

Interest-bearing Treasury Notes, - 178 

Our only hope is in military success, - 179 

$100,000,000 legal tender to pay the army, - -180-181 

Mr. Gurly's Speech on market value of bonds, 181 

Secretary Chase's special letter on Bank bill, - - - - - - 182 

Special resolution passed to pay Soldiers, 182 

President Lincoln's Specifa Message on the resolution, - - - - 183 
Morrill, Ward and Amasa Walker's Speeches on the $900,000,000 

Loan Act, ------------184 

Substitutes of Hooper and Stevens lost, - 185 

$900,000,000 Loan Bill passed both Houses, ------ 185 

Synopsis of the bill as passed, - - -186 

Bank bill passed; yeas and nays, ------ -186—187 

No National Currency issued until 1864, 187—188 

The right to convert notes into bonds at par abrogated, - - - 188 

Jay Cook negotiates $500,000,000 of 5-20 bonds, 189 

Mistake of the Secretary in not continuing fimding, - - - - 189 
Mr. Spauldlng^s two letters to Morris Ketchum on the subject, - 190 



vi 



MoiTis Ketchum'8 reply, March 21, 1864, - - - - - 195 

Second letter of Mr. Spaulding to Morrig Ketchum, - • - - 195 
Mr. Chase resigns— W. P. Fessenden appointed Secretary Treasury, - 198 
Geo. Harrington Secretary of Treasury, adinterimj - - - - 198 

Gold $2.50 at the Board of Brokers, 198 

Greatinflationof the currency, - 198—199 

Gold $2.853^— Gold bill in force only 15 days, 199 

Legal tender U. 9. notes limited to $400,000,000, . - - - 199 
All bonds, notes and other obligations exempt from taxation, * - 200 
How Secretary McCulloch paid the Army at dose of the War, - - 200 
$830,000,000of 7-30 Treasury notes issued, - - - . ^ . 200 
Statement of Public Debt at the close of the War, - - - - 201 

National Bank circulation, $185,000,000, - 201 

Tariff and Internal Bevenue laws, ----- 201 

Contraction of the currency, - -- -- -- --202 

Secretary McCulloch on contraction, ----- • * 202 

Mr. Alley's Resolution in favor of contraction, - - - - ^208 

Teas and nays on Mr. Alley's resolution in the House, - - - 202 
Contraction of the currency suspended, ------ -203 

Public Faith— Debt to be paid in coin, 203 

Yeas and nays on this bill, - -- -- -- -- 204 

U, S. Grant approves the bill, 205 

Decision of State Courts on the constitutionality of legal tender, - - 205 
Coin contracts decided valid by U. S. Supreme Court, - - - 206 
Conclusion— summing up, - -- 208—213 

APPENDIX. 

Mr. Spaulding's Speech on the National Currency Bank bill, February 

19, 1863, 1—9 

Letter of Mr. Spaulding to J. N. Orvis, Esq., 9—13 

Letter of Mr. Spaulding to Hon. H. B. Hubbard, Comptroller of 

Currency, ---------- - 13—17 

Letter of Mr. Spaulding to Secretary McCulloch, - - - - 18 

Secretary McCulloch's reply, - -- - 18 

National Debt— No repudiation, ------- 19—21 

No State taxation of U. S. Bonds, - -- -^---22 

Mr. Spaulding's letter to Senator Morgan, ----- 22—24 

Letter of Fisk & Hatch to the Assistant Secretary of the Treasury, - 24 

Assistant Secretary's reply, 24 

Mr. Spaulding's remarks, -------- - 24—27 

Secretary McCulloch's letter to L. P. Morton & Co., - - - - 27 

Mr. Spaulding's remarks, ----------27 

F. E. Spinner's letter to Mr. Spaulding, 28 

National Currency— Legal Tender, - - 28—33 

Mr. Spaulding's letter to Secretary McCulloch, - - - - 34—35 

President Lincoln's Veto, 86 

Mr. Spaulding's Speech, May 3d, 1862, 37—40 



HISTORY 

OF THE 

LEGAL TENDER ACT. 



The United States, at the breaking ont of the rebellion, had no 
national bank cnrrenc}', and no gold or available means in the 
Treasury, or Sub-Treasuiy, to carry on the war for the Union, and 
consequent!}^ the means to prosecute the war had to be obtained 
upon the credit of the government, and by taxation. The fundable 
legal tender currency was the most available form of credit which 
the government could use in crushing the rebellion. It was at once 
a loan to the government without interest, and a national currency, 
which was so much needed for disbursement in small sums during 
the pressing exigencies of the war. It was indispensably neces- 
sary, and a most powerful instrumentality in saving the govern- 
ment and maintaining the national unity. 

Experience has proved that, notwithstanding it was a forced 
loan, the end justified the means, and that no parties were materi- 
ally injured by being compelled to receive this currency, so long 
as the}' could fund it at any time in six per cent, twenty 3'ears 
bonds. Although it was a war measure — a measure of necesHity 
and not of choice, and could only be justified on that ground, 
it has, for many years, exerted a most decisive influence over the 
property and material interests of ever}' individual in the United 
States. It has affected debtor and creditor, producer and con- 
sumer, and the price of labor and of every article consumed in 
every household. It still exerts a mighty influence socially, 
commercially and politically, over the people of this great nation, 
and all the ramified and extensive business in which they are 



oiigaged. Whether for good or evil, it has been and still is a 
most powerful element in all business affairs of the people, as well 
as the government, and the war debt of $2,500,000,000 incurred in 
maintaining the national union is more or less affected b}- tlie 
large volume of this currency still outstanding. 

Having been requested to prepare a history of a measure of 
such transcendent importance as the legal tender act, and having 
in m}' possession a considerable number of documents, letters, and 
other materials relating to the subject, I have consented to put them 
into foi'm, in order that the facts may be preserved for present 
and future reference, and which may be of some use in enabling 
the future historian to write a chajjter on the financial history of 
the war. These facts will be presented in the form of a narrative 
of the circumstances and events, of the most grave and extraor- 
dinary character, occurring in rapid succession, which led finally 
to the issue of legal tender Treasury notes, and which were 
endowed with the attributes of money, so far forth as the Govern- 
ment had power under the Constitution and the pressure of the 
crisis to impart to a paper currenc}^ that high and most important 
attribute of sovereignty. 

I was a somewhat prominent though humble actor in originating 
and maturing the measure, but I do not claim any particular merit 
or demerit for what I did in preparing and aiding to secure the 
passage of the bill. I was placed in a position where, if 1 
performed m^- official duty, I must act, and must act with vigor 
and promptitude. The perilous condition of the country did not 
admit of hesitancj^ or delay. I endeavored, in the peculiar and 
responsible position in which I was placed, to do what I conceived 
to be my duty, and that is all I claim to have done. My asso- 
ciates performed their duty with equal fidelity and usefulness. 

As chairman of the Sub-committee of Ways and Means, it 
became my duty, in connection with m}' associates, to demise an 
adequate plan for obtaining the necessary means for prosecuting 
the war to a successful issue. The rebellion, after the battle of 
Bull Run, had assumed most gigantic proportions. An Army and 
Navy of over half a million of men had been hastily brought into 
the service of the United States. The Capitol itself was guarded 
by a vast Arm}^ under the command of General McClellan, 
which encircled it in all directions. The Army and Navy thus 
in the service had to be paid, fed, clothed and provided with 
ships, gunboats, monitors and all the necessar}^ material of 



7 



war to make them effective in crushing the rebellion. This 
required vast available means ; where were these means to 
be obtained ? It was plain that they must come from the loyal 
people themselves, and that, from whatever source these means 
were to come, the}^ must be obtained, as before stated, upon the 
credit of the government, then assailed and weakened b}' armed 
rebellion. 

The banks in New York, Boston and Philadelphia had, during 
the summer and fall of 1861, loaned to the government verj^ nearl}^ 
the sum of $150,000,000 in gold, which had so exhausted their 
resources that it was very difficult for many of them to pay the 
last instalments due on the last loan of $50,000,000. These 
banks, at the commencement of the war, possessed a large part of 
the available gold in the country, but in pajing over to the 
Treasurer the gold on these loans, and in the disbursenient of the 
same to sustain the Armj^ and Navy, it became so scattered that it 
could not, to any considerable extent, be re-loaned to the govern- 
ment, nor could it any longer be made available as a reserve for 
the banks. The banks were consequently in great danger of 
susi^ending specie payments at the time Congress assembled at its 
regular session in December, of that year. Congress met on the 
2d December, 1861. The House, having been organized at the 
Extra Session in July by the election of the Hon. Galusha A. 
Grow, Speaker, proceeded at once to business. 

On the 5th, the vacancies in the Standing Committees were 
filled up. Hon. Samuel Hooper, of Mass., a new member, was 
appointed on the Committee of Ways and Means in place of Sam- 
uel Appleton, deceased; and Hon. Horace Ma^mard in place of 
Hon. John A. McClemand, who had been appointed a Briga- 
dier General in the volunteer army. The Committee of Ways 
and Means then consisted of 

Thadeus Stevens, of Pa. 

Justin S. Morrill, of Yt. 

John S. Phelps, of Mo. 

Elbridge G. Spaulding, of N. Y. 

Yalentine B. HonTON, of Ohio. 

Erastus Corning, of N. Y. 

Samuel Hooper, of Mass. 

Horace Maynard, of Tenn. 

John L. N. Stratton, of N.^/. 
Owing to the pressure of business in the Treasurj^ Department, 



Secretary Chase did not get his Annual Report read}- to submit to 
the House until the 10th, and it was not printed and laid on the 
table of the Committee of Ways and Means until near the middle 
of December. 

Soon after the report of the Secretary of the Treasury was 
received, finding a large volume of business in the Committee 
room to be disposed of, the Committee agreed to the appointment 
of two Sub-committees, namel}'. 

One Committee on the National Currenc}- bank bill, making of 
loans, issue of Treasur}' notes, bonds, and the mode of raising 
the means to carry on the war, consisting of 

Mr. Spauldixo, 

Mr. Hooper, 

Mr. Corning. 

The other Committee was appointed on the Tariif, Internal 
Revenue, and taxation generally, consisting of three or four 
members, Mr. Morrill of Vermont, being chairman. The appro- 
priation bills were then in course of preparation, Mr. Stevens 
devoting a good deal of time in perfecting and passing them 
through the House, as chairman of the General Committee. Mr. 
Phelps was at this time absent in Missouri, and remained absent 
for several weeks, looking after public affairs in tliat State, which 
were then in a very disturbed condition. 

The Committee of W&ys and Means having thus divided the 
subjects before it, and having referred the papers and documents to 
tliese Sub-committees, the Committee was prepared for efficient 
work. 

The Sub-committee, of which Mr. Spaulding was chairman, 
examined with care tlie report of the Secretary of the Treasury, 
to ascertain what measures he proposed for providing the ways 
and means to support the government and carry on the war. Here 
follows an extract from that part of the Secretary's report which 
was referred to this Sub-committee, viz : 

" To enable the government to obtain the necessary means for prosecu- 
ting the war to a successful issue, without unnecessary cost, is a problem 
which must engage the most careful attention of the Legislature. The 
Secretary has given to this problem the best consideration in his power, 
and now begs leave to submit to Congress the result of his reflections. 

The circulation of the banks of the United States on the Iftt day of 
January, 1861, was computed to be $202,000,707. Of this circulation, 
$150,000,000, in round numbers, was in the States now loyal, including 
Western Virginia, and $50,000,000 in the rebellious States. The whole of 
this circulation constitutes a loan without interest from the people to the 



9 



banks, costing them nothing except the expense of issue and 'redemption 
and the interest on the specie kept on hand for the latter purpose ; and it 
deserves consideration wliether sound policy does not require that the 
advantages of this loan be transfeiTcd, in part at least, from the banks, 
representing only the interests of the stockholders, to the Government, 
representing the aggregate interests of the whole people. 

Ithas1t)een well questioned by the most eminent statesmen whether a 
currency of bank notes, issued by local institutions under State laws, is 
not, in fact, prohibited by the National Constitution. Such emissions 
certainly fall within the spirit, if not within the letter, of the Constitution- 
al prohibition of the emission of bills of credit" by the States, and of 
the making by them of anything except gold and silver coin a legal tender 
in payment of debts. 

However this may be, U is too dear to he rea^onohhj disputed thai Conpress^ 
under its Comiitulional 2)owers to lay taxes, to regulate conwmce, and to regulate 
ike value of coin, possesses anq^le authority to cmitrol the credit circulalion which 
enters so largely into the transacHons of commerce, and affects in so many ways 
the value of ooiti. In the judgme/d of the Secretary, the time has amved when 
Congress should exercise this authority. The value of the existing bank-note 
circulation depends on the laws of thirty-four States, and the character of 
some sixteen hundred private corporations. It is usually furnished in 
greatest proportions by institutions of least actual capital, circulation , com- 
monly, is in the inverse ratio of solvency. Well-founded institutions, of 
large and solid capital, have, in general, comparatively little circulation ; 
while weak corporations almost invariably seek to sustain themselves by 
obtaining from the people the largest possible credit in this form. Under 
such a system, or rather lack of system, great inliuctions, and heavy losses 
in discounts and exchanges are inevitable, and not unfrequentl}^ through 
faihires of the issuing institutions, considerable portions of the circulation 
become suddenly worthless in the hands of the people. The recent 
experience of several States in the valley of the Mississippi, painfully 
illustrates the justice of these observations; and enforces, by the most 
cogent practical arguments, the duty of protecting commerce and industry 
against the recurrence of such disasters. 

The Secretary thinks it possible to combine with this protection a 
provision for circulation, safe to the community and convenient for the 
government. 

Two plans for effecting this object are suggested. The first contem- 
plates the gradual withdrawal from circulation of the notes of private 
corporations, and for the issue, in their stead, of United States notes, 
paj'able in coin on demand, in amounts sutflcient for the useful ends of a 
representative currency. The second contemplates the preparation and 
delivery, to institutions and associations, of notes i)repared for circulation 
under national direction, and to be secured as to prompt convertibility 
into coin by the pledge of United States bonds and other needful regula- 
tions. 

1. The first of these plans was partially adopted at the last session of 
Congress, in the provision authorizing the Secretary to issue United States 
notes, payable in coin, to an amount not exceeding $50,000,000. That 
l)rovi8ion' may be so extended as to reach the average circulation of the 
country, while a moderate tax, gradually augmented, on bank notes, will 
relieve the national from the competition of local circulation. It has been 
already suggested that the substitution of a National for a State currency^ 



10 



upon this plan, would be equivalent to a loan to the Government without 
interest, except on the fund to be kept in coin, and without expense, 
except the cost of preparation, issue and redenii)tion ; wliile tlie peoi)le 
would gain the additional advantage of a uniform currency, and relief 
from a considerable burden in the form of interest on debt. These advan- 
tages are, doubtless, considerable ; and if a scheme can be devised by whicli 
such a circulation will be cei-tainly and strictly confined te the real needs 
of the people, and kept constantly equivalent to specie by prompt and 
certain redemption in coin, it will haidly fail of legislative sanction. 

The plan, however, is not without serious inconveniences and hazards. 
The temptation, especially great in times of pressure and danger, to issue 
notes without adequate provision for redemption ; the ever-present lial)il- 
ity to be called on for redemption beyond means, however carefully pro- 
vided and managed; the hazard of panics, precipitating demands for coin, 
concentrated on a few points and a single fund; the risk of a depreciatecl, 
and depreciating, and finally worthless paper money ; the inmieasurable 
evils of dishonored public faith and national bankruptcy ; all these are 
possible consequences of the adoption of a system of Government circula- 
tion. It may be said, and perhaps truly, that tliey are less deploral^le 
than those of an irredeemable bank circulation. WUIioiU enieiing into that 
comparison^ the Secretary corUents himself with observing that, in his judgment^ 
those possible disasters so far outweigh the probable benefits of the 2)lan, that Icr 
feels himself constrained to forbear recommending 'its adoj)iion, 

2. The second 2)lan suggested remains for examination. Its principal 
features are: first, a circulation of notes bearing a conmion impression, 
and authenticated by a common authority; second, the redemption of 
these notes by the associations and institutions to which tliey may be 
delivered for issue; and, third, the security of that redemption by the 
pledge of United States stocks, and an adequate provision of specie. 

In this plan the people, in their ordinary business, would find the advan- 
tages of uniformity in currency; of unifonnity In security; of efiectual 
safe-guard, if efifectual safe-guard is possible, against depreciation; and 
\ of protection from losses in discounts and exchanges ; while in the opera- 
tions of the Government, the people would find the further advantages of 
a large demand for Government securities, of increased facilities for ol)- 
taining the loans required by the war, and of some alleviation of the bur- 
dens on industry through a diminution in the rate of interest, or a partici- 
pation in the profit of circulation, without risking the perils of a great 
money monopoly, 

A further and important advantage to the people may be reasonably 
expected in the increased security of the Union, springing from the com- 
mon interest in its preservation, created by the distribution of its stocks 
to associations throughout the coimtry, as the basis of their circulation. 

The Secretary entertains the opinioji that if a credit drcidation in any form be 
desirable, it is most desirable in this. The notes thus Issued and secured 
would, in his judgment, form the safest currency which this country has 
ever enjoyed ; while their receivability for all Government dues, except 
customs, would make them, wherever payable, of equal value as a cur- 
rency in every part of the Union. The large amount of specie now in the 
United States, reaching a total of not less than $275,000,000, will easily 
support payments of duties in coin, while these payments and ordinary 
demands will aid In retaining this specie in the country as a solid basis, 
both of circulation and loans. 



11 



The whole circulation of the country, except a limited amount of foreign 
coin, would, after the lapse of two or three years, bear the impress of the 
nation, whether in coin or notes; while the amount of the latter, always 
easily ascertainable, and, of course, always generally known, would not 
be likely to be increased beyond the real wants of business. 

He expresses an opi^iion in favor of this plan with the greatest confidence, he- 
cause it has the advantage of recommendation from experience* It is not an 
untried theory. In the State of N'ew York, and in one or more of the other 
States, it has been subjected, in its most essential parts, to the test of 
experiment, and has been found practicable and useful. The probabilities 
of success will not be diminished, but increased by its adoption under 
national sanction, and for the whole country. 

It only remains to add that the plan is recommended by one other con- 
sideration, which, in the judgment of the Secretary, is entitled to much 
influence. It avoids almost, if not altogether, the evils of a great and sud- 
den change in the currency, by offering inducements to solvent existing 
institutions to withdraw the circulation issued under State authority and 
substitute that provided by the authority of the Union. Thus, through 
the voluntary action of the existing institutions, aided by wise legislation, 
the great transition from a currency heterogeneous, unequal, and unsafe, 
to one uniform, equal, and safe, may be speedily and almost imperceptibly 
accomplished. 

If the Secretary has omitted the dlscmsion of the question of the Constiiutional 
power of Congress to pvtl this plan into opercUion^ it is became no argument is 
necessary to establish the proposition thai the power to regidate commerce and the 
value of coin includes the power to regulate the currency of the country, or the 
collateral proposition that the power to affect the end includes the potver to adopt 
the necessary avd expedient means, 

Tlie Secretary entertains the hope that tlie plan now submitted, if 
adopted with the limitations and safe-guards which the experience and 
wisdom of Senators and Representatives will, doubtless, suggest, 77iay 
impart such value and stability to GovernmenJt secuiiities that it will not be difficult 
to obtain the additioiud loans required for the sei'vice of the current and the ^c- 
ceeding year al fair and reasonable rates; es^iecially if the public credit br 
supported by sufficient and certain provision for the ^)a?/;?i^ of interest and 
uliifnute redemption of the 2'>rincipcd.^^ 

Finding from the above extracts from the report of Secretary 
Cliase that he forbore to recommend the issue of United States 
Treasury notes to circulate as money, and that he did recommend 
the National Currency bank bill, Mr. Spaulding, as chairman of tlie 
Sub-committee, addressed a note to the Secretary requesting him 
to furnish the draft of a bank bill for a national currency based 
on a pledge of public stocks, as recommended in his report, and 
received the following reply : 

Treasury Department, > 
Dec. 18th, 1861. I 

Sir:— Ihave the honor to acknowledge the note of the Committee of 
Ways and Means of this date, covering the note of yourself as chairman 
of the Sub-committee, requesting him to furnish the di-aft of a bill for a 



12 



national currency based on the pledge of public stocks. Thei Secretary of 
the Treasury, who is now in ^ew York, will give to your request his 
prompt attention on his return. 

With great respect, 

GEO. HAKRINGTOX, 
Acting Secretary of the Treasury. 

To Hon. E. G. Spaulding, 

Ch. of Sub-Com. of Ways and Means, II. R. 

On the return of the Secretary from New York, it was ascertain- 
ed that no National Currency bank bill had been prepared. The 
Secretary then requested Mr. Spaulding to prepare a bill at as 
early a day as possible. Mr. Spaulding, as chaiiman of the Sub- 
committee, immediately set to work at his rooms at the National 
Hotel in preparing the first draft of the bill, which was there 
copied by Mr. George Bassett, clerk of the Committee of Ways 
and Means. This was during the Christmas holidays; Congress 
adjourning over two or three days at a time, without doing much 
business, no quorum being present. 

On the 24th inst. Mr. Spaulding wrote a letter to Mr. Corning, 
then at Albany, informing him that he was making a draft of the 
National Currency bank bill, and requesting that he would for- 
ward a copy of the New York Free Banking Law, passed in 1838, 
and amendments thereto, for the use of the Committee. Mr. 
Coming promptly complied with this request, and returned the 
following reply : 

Albany, Dec. 26, 18(31. 
My Dear Sir— I am this morning in receipt of your favor of the 24th 
Inst. I send you by this day's mail a copy of our Bank Laws, with 
amendments passed since 1856. 27iis matter, as recommended by Secretmy 
Chase, vnU not, in my judgment, meet the approval of our State, hence I think 
much care should be had in drawing up the bill. 

Yours, very truly, 

ERASTUS CORNING. 

Hon. E. G. Spaulding, Washington. 

When the frame work of the bill was nearly completed, it was 
submitted to Mr. Hooper, the only other member of the Sub- 
committee then in Washington, Mr. Coming having gone to 
Albany. Mr. Hooper rendered valuable assistance in perfecting 
the bill. He incorporated into it some provisions which experi- 
ence in his own State had shown to be valuable. The bill was 
finally completed soon after Christmas. A few days thereafter the 
National Currency bank bill, thus hastily prepared, was sent by 
Mr. Spaulding to the public printer, and two hundred copies 
printed for the use of the Committee of Ways and Means and 



4 



13 



the Secretary of the Treasury, with a view of having it more 
maturely considered in the General Committee, amended and 
corrected, and finally to be reported to the House. Copies of 
this printed bill are still in the possession of Mr. Spaulding, 
the chairman of the Sub-committee, which formed the basis of the 
bank bill which was finall}^ adopted more than a year afterwards. 

Mr. Spaulding, while preparing the national currency bank bill, 
upon mature reflection came to the conclusion, that it could not be 
passed and made available quick enough to meet the crisis then 
pressing upon the Government for mone}^ to sustain the Army and 
Navy. He therefore drafted a legal tender Treasury note section 
to be added to the bank bill, hoping, at first, that it might be made 
available by issuing legal tender notes direct from the Treasury, 
while the bank bill was put in operation throughout the country. 
In order to bring the subject of issuing legal tender fundable notes 
before the country, the section thus prepared by Mr. Spaulding 
was furnished to the New York Tribune, and published in the 
issue of the 31st December, 1861, and is as follows: 

**That for temporary purposes, and ulitil the circulating notes authorized 
by this act shall be issued and put in circulation by corporations and 
associations to the aggregate amount of $100,000,000, the Secretary of the 
Treasury be, and he is hereby authorized to issue $50,000,000 of Treasury 
notes on the faith of the United States, payable on demand, without speci- 
fying any place of payment, and of such denominations as he may deem 
expedient, riot less than $5 each, which shall be receivable for all debts and 
demands due to the United States, and for all salaries, dues, debts and 
demands, owing by the United States to individuals, corporations and as- 
sociations within the United States ; and such Treasury notes shall also be 
a legal tender in payment of all debts, public or private, within the 
United States, and shall be exchanged at any time at their par value, the 
same as coin, at the Treasury of the United States, and the ofiices of Assist- 
ant Treasurers in ]S"ew York, Boston, Philadelphia, St. Louis and Cincin- 
nati, for any of the coupon or registered bonds which the Secretary of the 
Treasury is now, or may hereafter be authorized to issue ; and such Treas- 
ury notes may be re-issued from time to time, as the exigencies of the pub- 
lic service may require. Such Treasury notes shall be signed by the 
Treasurer of the United States, or by some officer of the Treasury Depart- 
ment designated by the Secretary of the Treasury, and shall be counter- 
signed by the Register of the Treasury, or by some officer of the Treasury 
Department designated by the Secretary of the Treasury for the Register. 
And all the provisions of an act entitled " An act to authorize the issue* 
of Treasury notes, approved the 23d day of December, 1857," so far as the 
same can be applied to the provisions of this section, and not inconsistent 
therewith, are hereby revived and re-enacted." 

Upon more mature consideration and further examination, Mr. 
Spaulding came to the conclusion that the bank bill, containing 



14 



sixty sections, could not, with the State banks opposed to it, ho 
passed through both Houses of Congress for several months, and 
that so long a delay would be fatal to the Union cause. The 
banks in New York, Boston and Philadelphia, had just suspended 
specie payments, which compelled a general suspension of coin 
payments by the Government, and all the other banks throughout 
the country. No more gold could be loaned to the Government, 
except in small and wholly inadequate amounts, because it was 
not to be had. State bank bills could still be obtained, but the 
banks having suspended specie payments, this currency was depre- 
ciated, and had only a local character and credit — not being much 
known out of the States where the banks were located. Hesitanc}- 
and delay, with the expenses of the war running on at an average 
of $2,000,000 per day, would have been fatal. Mr. Spaulding, 
therefore, changed the legal tender section, intended originally 
to accompany the bank bill, into a separate bill, with alterations 
and additions, and on his own motion introduced it into the 
House by unanimous consent on the 30th of December, 1861. 
It was read twice, and referred to the Committee of Ways and 
Means, and ordered printed (House Bill, No. 182), and is as 
follows : 

Mr. Spaulding, on leave, introduced the following bill : 

A BILL 

To authorize the issue of treasury notes payable on demand. 

Be it enacted hy the Senate and House of Represerdatives of the United States 
of America in Congress assembled^ That, for temporary purposes, the Secre- 
tary of the Treasury be, and he is hereby authorized to issue fifty millions 
of dollars of treasury notes, on the faith of the United States, paj^able on 
demand, without specifying any place of payment, and of such denomina- 
tions as he may deem expedient, not less than five dollars each, which 
shall be receivable for all debts and demands due to the United States, 
and for all salaries, dues, debts, and demands owing by the United States 
to individuals, corporations, and associations within the United States; 
and such treasury notes shall also be a legal tender in payment of all 
debts, public and private, within the United States, and shall be exchange- 
able at any time at their par value, the same as coin, at the Treasury of 
the United States, and the ofllces of the assistant treasurers in ^e\y York, 
Boston, Philadelphia, St. Louis, and Cincinnati, for any of the coupon or 
registered bonds which the Secretary of the Treasury is now or may 
hereafter be authorized to issue, and such treasury notes may be re-issued 
from time to time as the exigencies of the public service may require. 
Such treasury notes shall be signed by the Treasurer of the United States, 
or by some officer of the Treasury Department designated by the Secre- 
tary of the Treasury, and shall be countersigned by the Register of the 
Treasury, or some officer of the Treasury Department designated by the 



V 



15 



Secretary of the Treasury for the register; and all the provisions of the 
act entitled "An act to authorize the issue of treasury notes," approved 
the twenty-third day of December, one thousand eight hundred and 
lifty-seven, so far as the same can be applied to the provisions of this act, 
and not inconsistent therewith," are hereby revived and re-enacted. 

As soon as the bill was printed, it was taken up in the Com- 
mittee of Wa3'^s and Means, and duly considered. Mr. Hooper 
took active ground in favor of the bill. Mr. Stevens at first had 
some doubts about its constitutionality, but very soon decided to 
support the measure. Mr. Morrill, Mr. Horton, and Mr. Corn- 
ing actively opposed the bill in the Committee and in the House. 
Mr. Maynard and Mr. Stratton took no active part in the discus- 
sions while the bill was under consideration in the Committee. 
It is believed, however, that Mr. Maynard was favorable to the 
bill from the start, while Mr. Stratton was very much in doubt 
what course he would take in relation to it, either in Committee, 
or in giving his vote in the House. Mr. Phelps was absent, and 
took no part while the bill was under discussion in the Committee. 

Mr. Spaulding finding that the Committee were about equally 
divided, and that some members of the Committee had doubts 
as to the constitutional power of Congress to make treasury notes 
a legal tender, called upon the Attorney General, Hon. Edward 
Bates, for his opinion. He declined to give an official opinion, 
but consented to write an un-official note in favor of its con- 
stitutionalit}^ The following is a copy of the opinion thus 
obtained : 

Monday Evening, Jan. 6, 1862. 

Hon, E. G, Simxdding^ M. C, 

At the National Hotel : 

Dear Sir— Since you did me the honor of a call this afternoon, and 
propounded to me a question arising out of the pending bill ^'To author- 
ize the issue of treasury notes payable on demand," I have given to the 
subject such attention as the very brief interval afforded, and proceed at 
once to answer. 

In the first place, permit me to say, that my views of the place I hold 
forbid me to give your question a formal and official answer, but in proof 
of the high respect which I entertain for you and your honorable Com- 
mittee, I, as a private man, and a professed constitutional legist, in all 
frankness will give you my opinion upon the point proposed, and this, 
with all brevity and without argument, for the time does not allow 
elaborate consideration. 

The bill, after providing for the issue of treasury notes, contains i. e. 
tliis clause, "and which treasury notes shall be a legal tendei- in payment 
of all debts, public and private, within the United States," and you desire 
my opinion whether this clause is, or is not, constitutional. 

Certainly the Constitution contains no direct verbal prohibition, and 1 



Ifi 



think it contains no inferential or argumentative proliibition tliat can be 
fairly drawn from its expressed terms. Tlie first article of the Constitu- 
tion, section eight, grants to Congress specifically a great mass of powers. 
Section nine contains divers limitations upon Congress, upon the United 
States, and upon individuals ; and section ten contains restrictions upon 
the several States. This last section is the only one that treats on tender. 

No iStaie shall make anything but gold and silver coin a tender in pay- 
ment of debts." This api)lies to a State only, and not to the nation ; and 
thus it has always been understood with regard to tlie next preceding 
clause in the same section — no State shall '*emit bills of credit." The 
prohibition to emit bills of credit is quite as strong as tlie prohibition to 
make anything but gold and silver coin a legal tender; yet nobody 
doubts — Congress does not doubt its power to issue bills of credit. Treas- 
ury notes are bills of credit, and I think the one is just as much prohibited 
as the other— neither is forbidden to Congress. 

The time is too short for argument, and so I remain, with all respect. 
Your obedient servant, 

EDWARD BATES. 

Mr. Spaulding read this letter to the Committee of Wa3's and 
Means. The discussion on the bill had continued for several 
days, and when the vote was finally taken, it appeared that the 
Committee were at first equally divided — Mr. Spaulding, Mr. 
Hooper, Mr. Stevens, and Mr. Ma3^nard voting in the aflSrmativo, 
and Mr. Morrill, Mr. Horton, Mr. Coming, and Mr. Stratton in 
the negative. Mr. Stratton finally consented to vote for the bill, 
so as to allow it to be reported to the House. The bill was thus 
passed through the Committee of Ways and Means. 

On the 1th of January, 1862, Mr. Spaulding reported the bill 
from the Committte to the House. It was read twice, committed 
to the Committee of the whole House on the state of the Union, 
and ordered to be printed. (House Bill No. 187.) 

Mr. Spaulding, from the Committee of Ways and Means, reported the 
following bill : 

A BILL 

To authorize the issue of demand Treasury notes. 

Be U enacted hy the Senate and Home of Representatives oj the United States 
of America in Congress assembled, That, for temporary purposes, the Secre- 
tary of the Treasury be, and he is hereby authorized to issue, on the 
credit of the United States, one hundred millions of dollars of Treasury 
notes, not bearing interest, payable generally, without specifying any 
place or time of payment, and of such denominations as he may deem 
expedient, not less than five dollars each ; and such notes, and all other 
Treasury notes payable on demand, not bearing interest, that have been 
heretofore autnorized to be issued, shall be receivable for all debts and 
demands due to the United States, and for all salaries, dues, debts, and 
demands owing by the United States to individuals, corporations, and 
associations within the United States; and shall also be lawful monc^y, 
and a legal tender in payment of all debts, public and private, within the 



ir 



United States, and shall be exchangeable in sums not less than one hun- 
dred dollars, at any time, at their par value, at the Treasury of the United 
States, and at the offices of the Assistant Treasurers in New York, 
Philadelphia, St. Louis, and at the depository in Cincinnati, for any of 
the six per centum twenty years coupon bonds or registered bonds which 
the Secretary of the Treasury is now, or may hereafter be authorized to 
issue ; and such Treasury notes shall be received the same as coin, at their 
par value, in payment for any bonds that may be hereafter negotiated by 
the Secretary of the Treasury ; and such Treasury notes may be re-issued 
from time to time as the exigencies of the public service may require. 
There shall be printed on the back of the Treasury notes, which may be 
issued under t'he provisions of this act, the following words : " The within 
note is a legal tender iHipayment of all debts, public and private, and is 
exchangeable for the coupon or registered bonds of the United States bear- 
ing six per centum interest." Such Treasury note shall be signed by the 
Treasurer of the United States, or by some officer of the Treasury 
Department designated by the Secretary of the Treasury, and shall be 
countersigned by the Register of the Treasury, or some officer of the 
Treasury Department designated by the Secretary of the Treasury for the 
Register; and all the provisions of the act entitled "An act to authorize 
the issue of Treasury notes," approved the twenty-third day of December, 
one tliousand eight hundred and fifty-seven, so far as the same can be 
applied to the provisions of this act, and not inconsistent therewith, are 
hereby revived and re-enacted ; and the sum of one hundred and fifty 
thousand dollars is hereby appropriated, out of any money in the Treasury 
not otherwise appropriated, to enable the Secretary of the Treasury to 
carry this act into efiect. 

Soon after Mr. Spaulding introduced his bill proposing the 
issue of legal tender notes to circulate as money, he received 
many letters criticising the measure in rather severe terms. 
Among others, Mr. Isaac Sherman, of New York, an old friend, 
addressed a letter to him of this character, bearing date Januaiy 
4th, 1862, and at the same time suggesting very heavy tojxation in 
various forms, as the best plan for raising the money to carry on 
the war. 

To this letter Mr. Spaulding made the following reply : 

House of Representatives, ) 
Washington, Jan. 8, 1862. j 

Isaac Shermcm, Esq., New Ycnk: 

Dear Sir— In reply to yours of the 4th inst., I would say that the 
Treasury note bill for $100,000,000 agreed upon in Committee yesterday 
Is a measure of necessity and not one of choice. 

You criticise matters very freely, and very likely you may be right in 
what you say. 

• We will be out of means to pay the daily expenses in about thirty days, 
and the Committee do not see any other way to get along till we can get 
the tax bills ready, except to issue temporarily Treasury notes. Perhaps 
you can suggest some other mode of carrj^ing on the Goveniment for the 
next one hundred days. You do not pretend that any considerable 
amount of taxes can be collected for the next three months, even under 



18 



yolir plan. It is much easier to fmi favU than it is to suof^j^est practicable 
means or measures. 

We must have at least $100,000,000 diirinof the next three months, or the 
Government must stop payment. With the navy and an amiy of 700,000 
men in the field, we cannot say that we will not 2m]i/, 

I will thank you to suggest a better practicable mode of getting 
$100,000,000 of paying means during the next three months. I would be 
glad to adopt it, and the Committee would be glad to adopt it. Let us 
have your specific 2ilan for this purpose — one that will produce the money 
— and we will be very much obliged to you. In haste. 
Yours truly, 

E. G. SrXULDING. 
P. S. — I am as impatient as you can be for an early and succehsfid advance 
of the army, so important at this time to sustain the credit of the Govern- 
ment. Will it be done ? You are just as well informed on that subject 
as any of us. I say to you privately that I could find fault more loudly 
than you do, but I will not do that without being able to suggest a lyrac- 
ticable remedy; and I might say many things to you, personally, that I 
might not put on paper. 

Conlidentially yours, E. G. S. 

MR. ISAAC Sherman's lkttkr. 

New York, Jan. 22, 18H0. 

Ilom E, G. Sjtatdding: 

I have received your letter of the 20tli, and inclosed I send a letter 
which you addressed me January 8th, 1802, and this letter fully explains 
your motives in advocating the legal tender act. I will add that I became 
fully satisfied that the immediate wants of the Government rendered it 
absolutely necessary that legal tender notes should be issued. It is pos- 
sible that a good tax bill, passed and enforced in 1861, might have averted 
the necessity of the legal tender act ; but in 1862 it was impossible to pay 
the expenses without an issue of Government paper as currency. I was 
shocked at first at the idea of issuing paper, but I have always since said 
that you finally convinced me of the absolute necessity at the time of the 
paper issue. I consider your letter historical, and after copying, I wisli 
you would return it to me. 

Yours truly, ISAAC SHERMAX. 

BANK DELEGATES IN WASHINGTON MEETING AT THE TREASURY 

DEPARTMENT. 

After the legal tender bill was reported from the Committee 
of Ways and Means by Mr. Spaulding, and published in the 
newspapers of the principal cities, opposition to it manifested 
itself in various ways. At first the New York city press were 
generally opposed to the legal tender clause. The TiTnes and ^ 
Herald early came into the support of the measure. The Tribune • 
and Commercial Advertiser appeared to be in some doubt, but in 
their editorial columns opposed it. The Evening Post, World, 
and Journal of Coninm^ce were decidedly hostile, and opposed the 
measure throughout. Delegates from some of the banks in New 



1 



19 



York, Boston and Philadelphia, appeared in Washington to 
oppose the bill. The reporters of the New York press, at the 
time, preserved a tolerably accurate account of their doings, 
which may be summed up substantially as follows : 

They organized by appointing Mr. Singleton A. Mercer, of 
Philadelphia, as chairman, and invited the Finance Committee 
of the Senate, and the Committee of Ways and Means of the 
Plouse, to meet them at the office of the Secretary of the 
Treasury, on Saturday afternoon, January 11th, 1862. The 
invitation was accepted, and the Convention assembled accord- 
ingly at the Treasury Department. 

Delegates froni New York Banks, 

Mr. CoE, American Exchange Bank. 
Mr. VER3IILYE, Merchant's Bank. 
Mr. Martin, Ocean Bank. 
Mr. Gallatin, National Bank. 

Delegates from Philadelphia Banks, 

Mr. Rogers, Tradesman's Bank. 

Mr. Mercer, Farmer's and Mechanics' Bank. 

Mr. Patterson, Western Bank. 

Delegates from Boston Banks, 

Mr. Haven, Merchant's Bank. 
Mr. Walley, Revere Bank. 
Mr. Bates, Bank of Commerce. 

Treasury Departmen t, 

Salmon P. Chase, Secretary of the Treasury. 

Finan<^e Committee of the Senate, 

Mr. Fessenden, of Maine. 
Mr. Simmons, of Rhode Island. 
Mr. Sherman, of Ohio. 
Mr. Howe, of Wisconsin. 
Mr. Pearce, of Maryland. 
Mr. Bright, of Indiana. 
Mr. McDouGAL, of California. 

House Committee of Ways and Means, 

Mr. Stevens, of Pennsylvania* 



20 



^Ir. Morrill, of Vermont. 
Mr. PiiKLPs, of Missouri. 
Mr. Spai li)IX(;, of New York. 
Mr. CoKMXG, of New York. 
Mr. IIoKTOx, of Ohio. 
Mr. Srif ATTON, of New Jersey. 
Mr. Hooper, of Massachusetts. 
Mr. Mayxard, of Tennessee. 

Some of the members of the above Committees of the Senate 
and House were not present, but there was a very full representa- 
tion from each Committee. There were some other gentlemen 
present from Boards of Trade of different cities. 

Mr. James Gallatin, of New I'ork, made the principal speech 
against legal tender, and on behalf of himself and the Bank 
Committees from New I'ork, Boston, and riiiladelphia, and 
members from Boards of Trade as/?ociated with them, submitted 
the following plan for raising money to carry on the war, viz: 

1. A tax bill to raise, in the different modes of taxation, $125,000,000, 
over and above duties on imports. 

2. Not to issue any demand Treasury notes, except those authorized at 
the extra session in July last. 

3. Issue $100,000,000 Treasury notes at two years, in sums of five dol- 
lars and upwards, to be receivable for public dues to the Government, 
except duties on imports. 

4. A suspension of the sub-Treasury act, so as to allow the banks to 
become depositories of the Government of all loans, and to check on the 
banks from time to time as the Government may want money. 

5. Issue six per cent, twenty year bonds, to be negotiated by the 
Secretary of the Treasury, and iviihout any limitation as to the jmce he may 
obtain Jar them in the market, 

iu That the Secretary of the Treasury be empowered to make tem- 
porary loans to tlie extent of any portion of the funded stock authorized 
by Congress, v-ith power to hyjMhccatc such stock, and if such loans are not 
paid at mcUurity, to sell the stock hypothecated for the best 2>nce that can he 
obtained. 

These propositions having been read, the Secretary and Finance 
Committees of the Senate and House expressed themselves favor- 
able to the first proposition to raise by taxation $125,000,000 a 
year, over and above duties on imports. It will be observed that 
this [)lan did not include the national currenc}' bank bill, recom- 
mended b}- the Secretary of the Treasury in his Annual Keport, 
and was not, tlierefore, in this respect, satisfactory to him. 

Th(^ meeting was somewhat conversational in character, but 
there ai)pcarcd to l)e a general dissent by the Secretary and Conr 



21 



mlttees from all the other propositions. Mr. Hooper expressed 
very decidedlj^ his dissent to them, and was in favor of the legal 
tender act as the best mode of providing the means. The only 
remarks I can find reported as being made by any member of the 
Committees of the Senate and House are in the New York Tribune^ 
January 13, 1862, in substance as follows: 

*'The Sub-committee of Ways and Means, through Mr. Spaulding, 
objected to any and every form of * shinning ' by Government through 
Wall or State streets to begin with ; objected to the knocking down of 
Government stocks to seventy-flve or sixty cents on the dollar, the inevit- 
able result of throwing a new and large loan on the market, witkout limit" 
alim as io price ; claimed for Treasury notes as much virtue of par value 
as the notes of banks which have suspended specie payments, but which 
yet circulate in the trade of the North ; and finished with firmly refusing 
to assent to any scheme which should permit a speculation by brokers, 
bankers, and others, in the Government securities, and particularly any 
scheme which should double the public debt of the country, and double 
the expenses of the war, by damaging the credit of the Government to 
the extent of sending it to ' shin ' through the shaving shops of New York, 
Boston, and Philadelphia. He affirmed his conviction as a banker and 
legislator, that it was the lawful policy, as well as the manifest duty of 
the Government in the present exigency, to legalize as tender its fifty 
million issue of demand Treasury notes, authorized at the extra sessioBk 
in July last, and to add to this stock of legal tender, immediately, one 
hundred millions more. He thought that this financial measure would 
carry the country through the war, and save its credit and its dignity ; 
at the same time we should insist upon taxation abundantly ample to pay 
the expenses of the Government on a peace footing, and interest of every 
dollar of the public obligation, and to give this generation a clear show 
of a speedy liquidation of the public debt." 

This Conference did not result in devising any plan or arrange- 
ment which received the assent of either the Finance Committee 
of the Senate or the Committee of W^ays and Means of the 
House, and the Conference adjourned. 

The bank delegates and others Jiad further consultations with 
Secretary Chase, continuing through two or three days, and 
which finally resulted in an arrangement with the Secretary alone, 
which was furnished to the agent of the Associated Press and 
published on the 15th- of January, 1862, as follows: 

*• The results of the various conferences held in Washington by repre- 
sentatives from Boards of Trade, Chambers of Commerce, and Banking 
institutions, among themselves, and with the Secretary of the Treasury, 
may be summed up as follows : 

1. The general views of the Secretary of the Treasury are assented to. 

2. The banks will receive and pay out the United States notes (author- 
ized by act of Julj*^ last) freely, and sustain in all proper ways the credit 
of the Government. 



3. The Secretary of the Treasury will, within the next two weeks, in 
addition to the current daily payments of $1,500,000 in United States 
notes, pay the further sum of at least $20,000,000 in 7-30 bonds to such 
public creditors as desire to receive them, and thus relieve the existing 
pressure upon the community. 

4. The iss*ie of United States demand notes not to be increased beyond 
the $50,000,000 authorized by the act of last July, but it is desired that 
Con<p'ess should extend the provisions of the existing loan acts, passed at 
the extra session in July, so as to enable the Secretary to issue in exchange 
for United States demand notes, or in payment to creditors, notes payable 
in one year, bearing 3.65 per cent, interest, and convertible into 7-30 three 
years bonds, or to borrow under the existing provisions to the amount of 
$250,000,000 or $300,000,000. 

5. It is thought desirable that Congress should enact the national 
currency bank bill, embracing the general provisions recommended by 
the Secretary in his Annual Report. 

6. It is expected that this action and legislation will render the making 
of the Ignited States demand notes a legal tender or their increase 
beyond the $50,000,000 authorized in July last unnecessary." 

The Committees of the Senate and House never gave an}' assent 
to tliis agreement made by Secretary Chase with tlie delegations 
above mentioned, for the reason that it was not deemed hy them 
URdequate to the (irisis. A majority of the Committee of Ways 
and Means adhered to the legal tender bill, then pending in the 
House, as being a more available plan, and on a much larger 
scale. The}' believed it was necessar}- to authorize immediatel}' 
an additional issue of $100,000,000 of United States fundable 
notes, to circulate as money, and be made a legal tender; and 
that $500,000,000 six per cent, twenty years bonds should be 
authorized, so as to enable the holders of the notes, when issued, 
to fund them at any time in these bonds. 

As soon as the plan of the delegates from New York, Boston, 
and Philadelphia became fully known to the country, it was ver}' 
generality disapproved. The press spoke out plainly against the 
Secretary being authorized to put United States bonds on the 
market without any limitation as to the price he might obtain for 
them in the market," as proposed In' Mr. Gallatin. Members of 
Congress generally opposed it and numerous letters were received 
by Mr. Spaulding from bankers, and other prominent citizens, in 
opposition to am' such scheme, but at the same time expressing 
themselves in favor of the legal tender bill and urging its imme- 
diate passage. 

The following is a sample of the letters received about this 
time by Mr. Spaulding; 



23 



LfiTTEll OF HON. MOSES H. GRINELL TO MR. SPATJLDlXa. 

New York, January 30, 1862. 

My Dear Sir— I thank you for your able speech, and can only say that 

nine out of twelve persons in this city agree with you. As for G , 

and a few egotistical gentlemen that act with him, they shouljd be driven 
out of Washington, as they only embarrass the Government ; and it seems 
to me that their policy, if adopted, would soon ruin the Government credit, 
and break down the country. 

Go a direct tax for one hundred and fifty or two hundred millions, and 
then issue one hundred and fifty millions Treasury notes legal tender, and 
we will go on without any trouble, and the Government credit will be 
saved from disgrace. There are not eight bank presidents that side with 

G . He is an odd fish — has very little influence here. Some action 

must be had soon, or our country will be in a deplorable financial condition. 

Yours truly, 

M. H. GRINELL. 

Hon. E. G. Spaulding. 

letter from HON. LEWIS F. ALLEN. 

Black Rock, January 31, 1862, 

Hon, E, G, Spauldwg: 

My Bear Sir — I have just read, with great pleasure, your very able 
si)eech on the Treasury note bill you have introduced into Congress. The 
principle and plan are both right, and what the country demands; and 
trust both Houses will jmt it right along through, regardless of what the 
New York note shavers and usurers may say, for they, and the like, in 
our large Atlantic cities, are the only ones who will oppose it, and that 
for the i*eason that they can not make their ten, twenty or fifty per cent., 
by buying in and selling out the stocks which they want passed by the 
Government, in place of the sound, available Constitutional currency which 
you propose. I see by my 2ribune to-day, that there is good prospect that 
your bill will pass without material modification, if any. I hope so, and 
that speedily. 

Truly yours, L. F. ALLEN. 

LETTER FROM J. M. GANSON, BANKER, OF BUFFALO. 

New York, January 13, 1862. 

Hon. E. G. Spaulding, Washington; 

Bear Sir — Your bill on Finance is received. I understand the jmlse of 
the people. Now, then, put on a war tax of $200,000,000, issue $150,0000,- 
000 demand notes, and ten, fifteen and twenty year bonds, seven per cent, 
"coupon bonds," redeemable at the pleasure of the Government within 
that time, and then go ahead. Put our Generals into the saddle, and all 
this fussing and fooling will come to an end in ninety days. One grand 
rush from all points of our armies will cow down the rebels. Send home 
the Bank Committee : their proposition is aiv/iU, Let a few leading minds, 
in connection with Chase, 7ierve up, and let the demand notes assume the 
place of specie in every particular. A tender for deposits in State banks, 
a tender for State bank notes, and receivable for all Government dues. 
We must have one terrible bloody battle, and must not shrink from the 
responsibility. Let members of Congress cease abusing our Generals. 
Put the right men in the right place. Have no proclamat\o\i^ 



the Generals unless passed upon by Lincoln ami McC'lellan jointly. Hard 
work, less pleasure-seeking, good financiering and energy, will wind up 
this war shortly, and nothing else will do it. 

I remain yours tridy. J. M. f; ANSOX. 

LETTER FROM JAMES W. SIMONTOX, ESQ., OF \. Y. TIMES. 

Washington, rrannary KJ, 1S()2. 

Hon, E, G. Spaulding : 

Dear Sir — I failed to make myself clearly understood in our conver- 
sation last evening, or rather I failed to tell the irhoh- story in suggesting 
payment of interest on demand notes. 

What do you think of providing for the payment of interest on demand 
notes (at a less rate than that on loan bonds) from their date, tlie interest 
on such demand notes to be allowed and paid only ivhen they arc j^resenied 
to he converted into bonds ? 

Would not the tendency of such an arrangement be to keep the current 
of demand notes steadily moving towards the loan olHce. and prevent any 
possible depreciation of either class of paper? 

Of course, you could devise a means (if you desire) of preventing the 
payment of back interest on debts already accumulated. In haste. 
Trulv vours, 

JAMES W. SIMOXTON. 

LETTER FROM THOMAS DENNY <b CO., BANKERS AND BROKERS, 
W^ALL STREET, NEW YORK. 

Xew York, January 13, 1802. 
Hon, E, G, Spaidding, House of RepreseiUaiives, WaMngton^ I), C, : 

Dear Sir — Although not personally acquainted with you, we take the 
liberty of giving you. In few words, our views as to the most desirable 
measures to be adopted for the finances of the country at the present 
time. It will not do at all to crowd on the market at the present time 
Government stock fast enough to raise the amount of money needed to 
meet our wants. The price would run down so fast that people would 
become alarmed, and afraid to take it, except at a ruinous sacrifice, it at 
all. The best plan is that which, we understood, you propose to adopt. 
Issue $100,000,000 to $150,000,000 demand notes, and pay them out as the 
wants of the Government require ; make them a legal iende)^ in all trans- 
actions of business in our country ; make them convertible at the ])leasure 
of the holders into a 6 per cent, stock, or even into 7-30 three year notes, 
unless there is some serious objection on account of the previous negotia- 
tions of the 7-30 notes; pass a tax bill which will produce $100,000,000 to 
$150,000,000. The above plan will furnish abundant means to the Govern- 
ment, and will meet the approbation of the people. It will furnish an 
excellent circulation to the whole country, facilitate all business transac- 
tions among the people, make the money market easy, and raise the 
prices of Government stocks so that loans can be negotiated on favorable 
terms when more money if wanted, especially if, in the meantime, tlie 
rebellion is pretty well crushed down. 

If the above plan is adopted, public sentiment will make it necessary 
for the banks to receive and pay out the demand notes, and the whole 
eflTect will be very salutary on our national affairs. The tax bill will 



create a general demand for the Treasury notes and keep them at or near 
par. We write in great haste, as practical business men, and are, very 
respectfully 

Your obedient servants, 

THOAMS DENNY & CO. 

LETTKR FROM JOHN E. WILLIAMS, ESQ. 

Metropolitan Bank, l 
New York, January 20, 1862. 5 

Dear Sir— I have your favor of 18th inst. I leave my bank affairs to 
write you at once, and congratulate you on the prospect of being able to 
effect a remedy for the fiscal malady. With a leader in the Treasury 
Department all these discordent financial schemes would disappear. A 
man of ability, of business talent and experience, even although he be 
not endowed with the creative genius of a Hamilton, or the statistical 
knowledge and general attainments of Albert Gallatin, would devise a 
plan sufficiently comprehensive, sensible, and wise, to satisfy the public 
that he knew whereof he wrote and spoke, and had no object in view but 
to restore confidence and replenish the Treasury. There is one point in 
reference to the demand legal tender notes to which I wish to call atten- 
tion. It may seem small, but I think it important — that is, in reference 
to the color of the paper on which such notes are printed. I would have 
it different from that used for any other notes ; and I would again suggest 
that that color be yellow. I would also have them payable one year after 
the close of the war. There is no risk of embarrassment from this clause, 
as M e could sell our national bonds to-morrow if the war were closed 
to-day. I would also simplify the matter by having the amount one 
hundred and fifty millions, so as to absorb the i)resent outstanding 
demand notes into the legal d(imand or yellow notes, which could easily 
be dbne, and yet leave you on this loan one hundred millions net. I think 
it would make these demand notes more valuable to insert this redemption 
feature one year after peace, for peace must come. As if William B. 
Astor should give his note for $100,000, payable one year after his death. 
He must die, and he has millions, consequently on a future day certain 
(thougli not yet fixed), his note would be i>aid in full. • 

Please consider, then, before you finally decide, tlie amount, the colo7\ 
and the iinie of payment of the legal tender notes. One other point/ 
Allow me to refer to the re-convertible feature of the six per cent, twenty 
years bonds. That is, I confess, a pet idea of mine, but I find it favorably 
regarded by others, thougli new. You will readily perceive that when 
this comes to be understood by the public the United States Government 
is going to pick up all the floating funds throughout the whole country, 
which the owners do not require to use in less than three, four, five or six 
months, whatever time you fix. Every business man seems to think this 
would be the means by which the Government would borrow, in the 
aggregate, a large amount. For who would not lend fiie United States 
ilia ppare funds when he knew he could get a legal tender for it, with 
interest whenever he called for it ? This would increase the value of the 
twenty years six per cent, bonds. Let the legal tender notes be con- 
vmible at any time into any unsold securities of the United States, 



26 



iu the hands of the Secretary of the Treasury, whether now authorized 
or hereafter to be issued. But only let the six i^er cent, bonds be re- 
couvertible into legal tender Treasury notes. 
Give my regards to Mr. Hooper. 

Yours very truly, 

J. E. WILLIAMS. 

Hon. E. G. SrAi LDiNG, Washington, D. C. 

On the following Monday, January 20th, 31 r. Si)aulding, from 
the Sub-committee of Ways and Means, reported to the General 
Committee an additional section, and a new title to the legal 
tender note bill, which were adopted by the Committee of Ways 
and Means. The new section is as follows : 

Section 2. *'To enable the Secretary of the Treasury to fund the 
treasury notes and floating debt of the United States, he is hereby further 
authorized to issue on the credit of the United States coupon iDonds, or 
registered bonds, to an amount not exceeding $.500,000,000, in sums of 
$100, $200, $500, $1,000, $5,000, $10,000 and $20,000, and in such proportions 
of each as the exigencies of the public service may require, bearing inter- 
est at the rate of six per cent per annum, redeemable after twenty years 
at the pleasure of the United States, which bonds the Secretary of the 
Treasury is hereby authorized to deliver at their par value to any creditor 
or creditors having demands due against the United States, in payment 
thereof, and to deliver the same to officers, employees and individuals in 
payment for services rendered, for supplies, subsistence and materials 
furnished to the United States; and he may also exchange such bonds at 
any time for lawful money of the United States, or for any of the treasuiy 
notes that have been or may hereafter be issued under any former act of 
Congress, or that may be issued under the provisions of this act." 

The new title to the bill adopted at this meeting of the Com- 
mittee was as follows : 

An act to authorize the issue of LTnited States Notes and for the re- 
demption or funding thereof, and for funding the floating debt of the 
United States." 

*'*'Soon after this additional section and new title were adopted by 
the Committee of Ways and Means, Mr. Spaiilding submitted the 
bill and additional section to Secretary Chase and the Assistant 
Secretary^ Mr. Harrington. At this interview the form of the bill 
and the manner of engraving, signing and issuing the legal tender 
notes was fully discussed, as well as the form and manner of ex- 
changing thtem for the six per cent, bonds. The Secretaiy sug- 
gested that it would be necessary to limit the place for exchanging 
the notes for bonds to the Treasury at Washington instead of the 
Sub-treasuries at other cities, and that it would be necessary to 
have one or more penal sections to guard against counterfeiting. 
The original bill and additional section were finally left with the 



27 



Secretary to put into such form as he desired, incorporating the 
amendments which he had proposed, in order to enable him to 
execute the provisions of the bill with facility as soon as it should 
become a law. 

On the 22d of January, 1862, Secretary Chase returned to Mr. 
Spaulding the bill as modified and amended by him, accompanied 
by the following letter : 

Treasury Department, Jan. 22, 1862. 

My Dear Sir — I have carefully examined the bill and additional sec- 
tion which you left with me, and availing myself of the aid of the Assist- 
ant Secretary, have amended the bill, retaining the whole substance of 
yours, but introducing such modifications as the settled modes of business 
in the department and considerations of convenience and economy seem 
to suggest. 

For example — the exchange of notes for bonds is confined to the course 
of business of the department, by limiting the power of Assistant Treas- 
ury and Depositories to the receipt of notes and issuing certificates, en- 
titling the holder to bonds by which serious risks are avoided ; and the 
denominations of bonds is left to the discretion of the Secretary, by which 
a considerable saving will probably be effected ; as the demand for some 
denominations is so limited (for $20,000 for instance) that it may hardly 
be worth while to engrave a plate. These examples show the nature of 
the modifications. 

The appropriation for expenses is put at three hundi*ed thousand dollars. 
Should the act be fully executed by the issue of bonds to the amount of 
five hundred millions of dollars, this sum will not probably suflice. It 
has been usual in providing for the issue of bonds merely without notes, 
to allow a much larger proportion for expenses. I will send you, if 
desired, a statement which will make this clear. 

Regretting exceedingly that it is found necessary to resort to the meas- 
ure of making fundable notes of the United States a legal tender, but 
heartily desiring to co-operate with the Committee in all measures to meet 
existing necessities in the mode most useful and least hurtful to general 
interest, I remain, with great respect. 

Very sincerely yours, S. P. CHASE. 

Hon. E. G. Spaulding. 

The bill as amended by the Secretary was again submitted to 
the Committee of Ways and Means, and adopted ; and thereupon, 
on the 22d of January, 1862, Mr. Spaulding again reported the 
bill to the House (Bill No. 240) in the nature of a substitute for 
Bill No. 187. It was read twice, and made the special order for 
the 28th inst. , at one o'clock. 

Each day's delay made it more and more apparent that the 
bill must pass in order to meet the overwhelming demands made 
upon the Treasury to sustain the army and navy. The end 
seemed to justify the means contemplated by the bill. 

On the 23d inst. Secretary Chase directed his private Secretary^ 



28 



H. G. Plants, Esq., to request Mr. Spaulding to furnish a copy 
of the amended legal tender note bill to the National Intelligencer 
for publication. 

Up to this time Col. Seaton, the editor of that paper, had not 
been favorable to the bill, and it was deemed important that 
the old National Intelligencer should support the measure. 

The following is a copy of the note received b}- Mr. Spaulding 
from Mr. Plants : 

Treasury Department, Jan. 23, 1862. 
Sir— I am directed hy the Secretary to ask you if you will be so good 
as to send a copy of the Treasury note bill to the National Ititelligencer, in 
order that it may be printed to-morrow. 

Very respectfully, H. G. PLANTS. 

Hon. E. G. Spaulding. 

REPLY. 

House of Representatives, Jan. 24, 1862, 
Dear Sir— The note of Mr. Plants reached me this morning, and I 
have handed the U. S. demand note hill to Col. Seaton in person, to be 
published in the next issue of the National Intelligencer. It is important 
that there should be full co-operation on the part of Col. Seaton, the Cab- 
inet, and all our friends on the financial measures i)ending in Congress, to 
overcome the opposition already developed and ensure success. My inter- 
view with Col. Seaton leads me to suppose that he will hereafter act in 
concert with us. 

Yours truly, E. G. SPAULDING. 

Hon. S. P. Chase, Secretary of Treasury. 

On the 28th inst., the bill being the special order in the House, 
Mr. Spaulding opened the debate upon it in the following 

SPEECH. 

The House being in Committee of the Whole (Mr. Kellogg, of Illinois, 
in the chair) on the Demand Treasury note bill- 
Mr. SPAULDING spoke as follows: 

Mr. Chairman: This is an important measure, and I may be indulged 
for a few moments in explaining its objects, the situation of our finances, 
and the grounds upon which we rest this measure, and expect it to be 
adopted. In the fii*st place, I will refer to the loan bills passed at the 
extra session of Congress, in July, in order to show how we obtained the 
means to carry on the Government from that time to the present, and to 
show how the Secretary of the Treasury has performed his duty. These 
bills were passed, the first on the 17th of July, and the other on the 5th of 
August. They gave the Secretary of the Treasuiy power to pledge the 
credit of the United States to the extent of $250,000,000. Eeflections 
have been made by some gentlemen on the manner in which the Secretary 
of the Treasury had performed his duty in boiTowing that money, and 
with some disposition to criticise his actions. As a general reply, I will 
say that the Secretary has acted in strict conformity with the law, and 
borrowed money at the rates authorized by Congress. 



29 



And, sir, I am disposed, upon this floor and elsewhere, to sustain the 
Secretary and all Departments of the Government where they have 
discharged their duties in accordance with the laws which have been 
passed by us. 

The Secretary of the Treasury first borrowed $100,000,000, giving Treas- 
ury notes bearing seven and three-tenths per cent, interest, and he next 
issued United States bonds at six per cent, interest to the extent of 
$50,000,000, at the equivalent of par for seven per cent, bonds, and raised 
about $44,650,000; upon such loan, a discount of over $5,300,000 was 
sustained. These were the best terms that could be obtained, and were 
regarded at the time as very favorable to the Government. 

But if he has borrowed the money at a high rate, it was authorized by 
the act of July. I am disposed to sustain the Secretary in what he has 
done. He has acted in good faith, and he should be sustained by us all. 

I may be permitted to say, in explanation of some of the estimates 
which I shall introduce presently, difiering, as they do, from the estimates 
of the Secretary of the Treasury in his annual report, that since his annual 
report, he has changed his own views as to what the expenses of the war 
will be up to July next, and what they will also be up to July, 1863, and 
that he substantially agrees with me now as to what those expenses 
will be. 

In the discussion of this important measure, I desire, Mr. Chairman, to 
present the entire plan, with a view to enlist the co-operation not only of 
all Departments of the Government, but also the co-operation of all the 
members of the House, without regard to party distinctions. Hearty 
co-operation is desirable to the success of the important financial measures 
that will be presented. 

Our finances deserve our most serious attention. The ways and means 
of carrying on the war should enlist the grave consideration of every 
gentleman on this floor who desires the preservation of this Government. 
We were never in greater peril than at this m<tment. It will require all 
our best? energies to successfully meet the crisis through which we are 
passing. I am oppressed by the magnitude of the work before us. But, 
sir, I will not, I dare not— I trust we shall not any of us— shrink from the 
responsibility of performing every duty devolved upon us in this great 
crisis of our national afi*airs. 

The bill before us is a war measure, a measure of necessity, and not of 
choice, presented by the Committee of Ways and Means to meet the most 
pressing demands upon the Treasury to sustain the army and navy, until 
they can make a vigorous advance upon the traitors, and crush out the 
rebellion. These are extraordinary times, and extraordinary measures 
must be resorted to in order to save our Government, and preserve our 
nationality. 

This bill, in addition to the fifty million of demand notes authorized by 
the act of July last, authorizes the Secretary of the Treasury to issue, on 
the credit of the United States, one hundred millions of dollars of Treas- 
ury notes, not bearing interest, payable to the bearer at the Treasury, or 
at the office of the Assistant Treasurer in the city of New York, at the 
Measure of the United States, and of such denominations as he may deem 
expedient, and not less than five dollars each; and such notes and all 
other United States notes payable on demand, not bearing interest, here- 
tofore authorized, are made receivable for all debts and demands due to 
the United States, and for all salaries , debts, and demands owing by the 



30 



United States to individuals, corporations, and associations within the 
United States, and are also declared lawful money and a legal tender in 
payment of all debts, public and private, within the United States, making 
altogether $150,000,000 legal tender demand notes. 

Provision is also made for the convenient exchange of such notes for 
six per cent, bonds of the United States redeemable in twenty years. 

Further to enable the Secretary of the Treasury to fund the Treasury 
notes and floating debt of the United States, he is authorized to issue, on 
the credit of the United States, coupon bonds or registered bonds to an 
amount not exceeding five hundred millions dollars, and redeemable at 
the pleasure of the Government after twenty years from date, and bearing 
interest at the rate of six per cent, per annum, payable semi-annually ; 
and the bonds thus authorized are to be of such denomination, not less 
than fifty dollars, as may be determined upon by the Secretaiy of the 
Treasury, or in sums not less than $2,500; for whicli, if requested, the 
Secretary of the Treasury, if he deem it expedient, may issue similar 
bonds, the principal and interest of which may be expressed in the curren- 
cy of any foreign country, and payable there. The Secretary is author- 
ized to issue said bonds at their par value to any creditor or creditors of 
the United States who may elect to receive them in satisfaction of their 
demands ; provided that all such claims or demands shall have been first 
audited and settled by the accounting officers of the Treasury ; and the 
Secretary of the Treasury may also exchange such bonds at any time for 
lawful money of the United States, or for any of the Treasury notes that 
have been or may hereafter be issued under any former act of Congress, 
or that may be issued under the provisions of this act. 

The bill is simple and pei*spicuous in its terms, and easy of execution. 
It is a Government measure, and the officers of Government are required 
to execute its provisions. 

By the time the Secretary of the Treasury can get these notes engraved, 
printed, and signed, ready ftr use, all other available means at his com- 
mand, and in the Treasury, will be exhausted. This measure is therefore 
presented under the highest prerogatives of Government. The army and 
navy now in the service must be paid. They must be supplied with food, 
clothing, arms, ammunition, and all other material of war, to render them 
efi*ective in maintaining the Government and putting down the rebellion. 
Having exhausted other means of sustaining the Government, this meas- 
ure is brought forward as the best that can be devised in the present 
exigency to relieve the necessities of the Treasury; and I trust it will 
pass without delay. 

At the extra session in July last. Congress authorized the Secretary of 
the- Treasury to borrow $250,000,000, for which he was authorized to issue 
coupon bonds, or registered bonds, or Treasury notes, in such proportions 
of each as he might deem advisable. The bonds were to be issued for 
twenty years, at a rate not exceeding seven per cent, interest per annum, 
payable half-yearly ; and the Treasury notes were to be issued in denomi- 
nations of not less than $50 each, at three years, with interest at 7 3-10 per 
annum, payable half-yearly, and exchangeable at any time for twenty 
years six per cent, bonds. Or, at the option of the Secretary, he was per- 
mitted to issue $50,000,000 of the above loan in Treasury notes, on demand, 
in denominations of not less than five dollars each, without interest, and 
made receivable in payment of salaries or other dues owing by the United 
States ; or, in his discretion, he was authorized to issue Treasury notes at 



31 



one year, bearing interest at 3 65-100 per cent, per annum, exchangeable 
at any time in sums of $100, or upwards, for the three years Treasury 
notes bearing 7 3-10 per cent, interest; but in the aggregate not to exceed 
$250,000,000. A further provision was made, however, to wit: that the 
Secretary of the Treasury might negotiate any part of tlie loan for six per 
cent, twenty years' bonds, at a rate not less than the equivalent of par^ for 
bands bearing seven per cent, interest per annum, half-yearly, payable in twenty 
years. 



Under theseproTisions. the Secretary of the Treasnry has borrowed on the 7 8-10 
.'fteasi ^ . 

r years 
per cent, per j 

into the Treasury), for which six per cent, bonds were issued 50,000,000 



per cent. Treasury notes, payable in three years $100,000,000 

* enty years six per cent, bonds, reduced to the equivalent at par of seven 
cent, per annum, half-yearly, say atsy^ ($44,661,230 97 actually received 



and put in circulation as currency (and to be put into circulation within a 

few days) all the demand Treasury notes authorized in July, not bearing in- 
terest 50,090,000 

Borrowed on the loan bill of July $200,000,000 

Paid out to contractors and others 7 30 100 Treasury notes within the last few 
days, say 3,516,500 

$203,516,500 

The total amount of the public debt up to the present time, and for 
which U. S. stock and Treasury notes have been issued, is as follows : 

Up to July 1, 1861 $ 90,867,828 69 

There was paid to creditors, or exchanged for coin at par, at different dates 

in Joly and August, six per cent, two years' notes to tha amount of. 14,019,034 66 

There was borrowed, at par, in the same months, upon sixty days' six per 

cent notes, the sum of. 12,877,750 00 

There was borrowed, at par, on the 19th of August, three years' seven and 
three-tenths per cent bonds, issued for most part to the subscribers to the 

national loan 50,000,000 00 

There was borrowed on the Ist of October upon like securities 50,000,000 00 

There was borrowed, at par, of seven per cent, on the 10th of November, 
npon twenty years' six per cent, bonds reduced to the equivalent of sevens, 

including interest 50,000,000 00 

There have been issued and circulated of Treasury notes payable on demand 39,000,000 00 

Making an aggregate debt in various forms, to January 15, 1862 806,764,613 34 

I estimate that the amount required up to July 1, 1802, will be 343,235,886 66 

Total debt estimated to July 1, 1862 , 650,000,000 00 

I estimate tor the fiscal year up to July 1, 1863, if the war continues to ihat 
time 550,000,000 00 

Total indebtedness, liquidated and unliquidated, to July 1, 1863 $1,200,000,000 00 

This estimate exceeds that of the Secretary of the Treasury by 
$300,000,000 to July 1, 18G3. This, however, includes all indebtedness 
against the Government, whether funded or not, and all accounts in 
process of being audited, and such as are passing through the hands of 
the accounting officers. 

There is now over $100,000,000 of accrued indebtedness, in different 
forms, that should be paid at an early day. 

With this large accrued indebtedness, and with the prospect that (unless 
this bill is adopted) the Government will put on the market, to the high- 
est bidder, still further issue of bonds, to the amount of $250,000,000 to 
$300,000,000, to pay current expenses to July next, it is not expected that 
even the present price of United States stocks can be maintained if forced 
on the market at this time. We have the alternative, either to go into 
the market and sell our bonds for what they will command, or to pass this 
bill, or find some better mode, if one can be devised, to raise means to 
carry on the war. The Secretary has the means of defraying the daily 
expenses required to be disbursed from the Treasury for only a few days 
longer. He has on hand about one-fifth of the loan made in November 
last, a small portion of the demand Treasury notes authorized by the act 



32 



of July— say $10,000,000 not yet issued— and such of the remaining 
7 3-10 and 3 65-100 Treasury notes authorized by that act as can be used 
in paying contractors, for supplies, and for salaries, and other Government 
dues to such persons as are willing to receive them. With the enormous 
expenditures of the Government, to pay the extraordinary expenses of 
the war, it requires no extended calculation to show that the Treasury 
must be supplied from some source, or the Government must stop 
payment in a very few days. 

You cannot borrow of capitalists any more money on twenty yeai-s seven 
per cent, bonds, nor on your 7 3-10 Treasury notes at the rates fixed by 
the act of July last. If you oflTer to the people and put on the market 
$300,000,000 more, to the highest bidder, in the present aspect of affairs, 
they would not be taken, except at ruinous rates of discount. That policy 
would depreciate the bonds already taken by the banks and the people 
who are most loyal to the Government, and who came forward as your 
best friends, and furnished the means so much needed during the last few 
months to organize your armj' and navy ; and, besides, depreciation would 
greatly increase the debt, by requiring a much larger amount of bonds to 
be issued than would be needed if your loans were taken at par. A loan 
])ut upon the market in the present depressed state of United States stocks, 
to be followed by other larger loans, is not regarded as a favorable mode 
of providing the means for maintaining the Government at the present 
time. If it had been adopted at first it might possibly have been the best 
mode ; but it is now too late to essay that plan, and I believe it would be 
ruinous to adopt it. I fear the 20 years six per cent, bonds would, under 
the pressure, fall to 75, 70, 60, and even 50 cents. This would be a ruinous 
mode of raising the means to carry on the Government. 

What, then, is to be done? The Secretary of the Treasury in his annual 
report does not recommend the issue of demand Treasury notes, although 
he points out many advantages that would result to the Government from 
the issue. He suggests two plans : first, the issue of demand Treasury 
notes ; and second, a National currency, secured by a pledge of United 
States stocks, to be issued by banks and associations, with proper regula- 
tions for their redemption by the banks themselves. On the propriety of 
the issue of Treasury notes by the Government, to be put in circulation as 
money, the Secretary says : 

" The first of these plans was partially adopted at the last session of 
Congress, in the provision authorizing the Secretary to issue United 
States notes, payable in coin, to an amount not exceeding fifty millions 
of dollars. That provision may be so extended as to reach the average 
circulation of the country, while a moderate tax, gradually augmented, 
on bank notes, will relieve the national from the competition of local 
circulation. It has been already suggested that the substitution of a 
National for a State currency, upon this plan, would be equivalent to a 
loan to the Government without interest, except on the fund to be kept 
in coin, and without expense, except the cost of preparation, issue, and 
redemption ; while the people would gain the additional advantage of a 
uniform currency, and relief from a considerable burden in tlie form of 
interest on debt."' 

These remarks of the Secretary were made before the suspension of 
specie payments. The situation of the country is now very difl'erent from 
what it was two months ago. The circumstances have changed ; and the 
Secretary and Congress, will find it necessary, in the present exigency. 



33 



to conform their action to what can be done, and not to what they would 
like to do, were it otherwise practicable. 

The second plan of the Secretary, and the one which he recommends for 
adoption, namely, a national currency, to be issued by banks, and secured 
by a pledge of United States stocks, the sub-Committee of Ways and 
Means have examined with considerable care. A bill has been prepared 
and printed for the use of the Committee, which may, after some modifica- 
tion, be reported to the House for its action. The Committee have come to 
the conclusion that, however meritorious this system may be in providing 
a way for funding the stocks of the United States, and however perfect the 
system may be made by Congress, it cannot, if adopted, be made availa- 
ble soon enough to meet the immediately-impending necessities of the 
Government. 

This new system of banking would necessarily go into operation slowly. 
The existing circulation of bank notes in the loyal States is supposed to 
be about $140,000,000. This new currency, when issued, would come into 
competition with the existing circulation of the banks already established 
in the several States ; and in the present embarrassed condition of mone- 
tary affairs, several months must necessarily elapse before any considera- 
ble amount of United States stocks would be absorbed by banks under 
this proposed new law. As an ultimate mode of funding some part of 
the large amount of Government stock which has already been issued, and 
which must from time to time be issued, it may be very valuable ; and the 
national currency upon it would no doubt obtain a wide circulation, and 
greatly facilitate the payment of taxes and other dues to the Government. 
But with a navy and army of 600,000 in the field, requiring, with the 
other expenses of the Government, an average daily expenditure of more 
than $1,600,000, this new system of banking will not afford relief to the 
Treasury in time to enable the Secretary to meet the pressing demands 
that are made upon him. 

The duties received at the different custom-houses, and the taxes levied 
at the extra session, or that may now be levied, will be wholly inadequate 
to meet the requirements of the Treasury in the present emergency during 
the next six months. 

If you cannot borrow the money on the credit of the United States, 
except at ruinous rates of discount, and cannot make the new banking 
system available in time, and cannot realize the amount required from 
your tarift* and tax bills, in what mode can the means be obtained, and the 
Government be carried on ? It is believed that the only way in which it 
can be done is by issuing Treasury notes payable on demand, and making 
them a legal tender in payment of all debts, public and private, and by 
adequate taxation, to be imposed by new bills. This will bring into full 
exercise all the higher pow ers of Government under the Constitution. 
The Constitution confers on Congress the power (art. 1, sec. 8 :) 

" To lay and collect taxes, duties, imposts, and excises, to pay the debts 
and provide for the common defence and general welfare of the United 
States. 

To bon-ow money on the credit of the United States. 
To regulate commerce with foreign nations, among the several States, 
and with the Indian tribes. 
To coin money, regulate the value thereof, and of foreign coins. 
To raise and support armies. 
To provide and mainCain a navy. 



34 



To make all laws which shall be 7\ecessaiy and proper for caiTying into 
execution the foregoing jwwers, and all other powers vested by the Con- 
stitution in the Government of the United States, or in any Department 
or officer thereof." 

These are among the high powers of Govei-nment which must now be 
brought into full, ample play. The table which I have before me, pro- 
cured from the Census bureau, shows tliat the true value of the property, 
real and personal, within tlie United States, is siriem billimis, one hundred 
and fifty-nine millions^ fiv hundred and sii'tee7i thousand and sixty-eight dollars^ 
($16,159,616,068,) and the assessed value to be $12,006,756,585. (See 
Appendix.) 

The power in the Constitution to lay and collect taxes, duties, imi)osts, 
and excises," is general and unlimited. Congress has the power to levy 
and collect any amount of taxes that may be necessary to preserve its 
existence and pay all its debts. Government has a claim, a mortgage in 
fact, on all this property, to that extent. Will Congress do its duty in 
passing bills to collect these taxes ? This is the vital question. Will Con- 
gress have the firmness and the courage to impose the necessary taxation 
to sustain the credit of the Govemment? Direct taxation, excises, and 
internal duties, are new features within the United States. They will be 
heavy burdens on the people, but essential to sustain the circulation of 
demand Treasury notes. The tax-gatherer will be an unwelcome visitor 
to most people, but his face must soon be familiar. 

Some members of Congress may hesitate to vote for the tax bills, fearing 
that they may not be in favor with their constituency at home. Under 
these circumstances, will members of Congress meet the question boldly 
and firmly? Here is the whole property of the country at the will of 
Congress. You have the power to tax it to an unlimited extent, if 
necessary to sustain the Government. 

This is the capital, $16,000,000,000,000 in amount, on which your Treasu- 
ry notes and bonds rest. This claim of Government, in the hands of Con- 
gress, is direct and specific on the banks throughout the United States, 
including the gold and silver in their vaults ; on commerce ; on all kinds 
of production and business; on railroads, steamboats, and their passen- 
gers: on gas companies; on manufacturing companies of all kinds; in 
short, all real and personal estate of every kind is held subject to the 
payment of the Treasury notes and bonds issued by the Government. 
Congress is clothed with this mighty power to sustain the nation at this 
time. Will you hesitate to do your duty ? This is what the people, the 
capitalist, the merchant, and all who confide in your demand notes, want 
to know. If they take these notes, they want to know positively whether 
you will enforce the claim of the Government upon the property of the 
country, to the full extent necessary to redeem the Treasury notes, and 
pay punctuallythe interest on the bonds which they take of you to sustain 
the government. Unless you are prepared to satisfy the country on this 
point, it is in vain to issue bonds or notes, and expect them to pass currently 
among the people. Unless this is done they will depreciate, and they 
ought to depreciate; but with ample taxation, cheerfully voted by 
Congress, they will be the very best security in the country, because the 
whole property of the country is held for their redemption. Congress has 
a plain duty to perform. It has ample power. This power should now be 
enforced. Will Congress perform this duty ? 



35 



I cannot doubt that it will. The emergency is great, and the exercise of 
this power is now an imperative necessity, in order to sustain the credit of 
the United States and justify the Government in issuing so large an 
amount of Treasury notes, to circulate as money and be made a legal ten- 
der in the payment of debts. Congress (as well as the Committee of 
Ways and Means) is of opinion that we must raise by direct taxes, excises, 
internal duties, and duties on imports, during the current year, at least 
$150,000,000. That was shown by the recent resolution passed by the 
Senate and House. This will pay the current ordinary expenses of the 
Government, and the interest on all the extraordinary war debt, and 
create a sinking fund for retiring annually a portion of the Treasury notes. 

In caiTying on the existing war, and putting down the rebellion, it is 
necessary to bring into exercise all the sovereign power of the Govern- 
ment to sustain itself. The war power must be exercised to its fullest ex- 
tent. The money power of the Government must be brought into requisi- 
tion. The power to tax must be availed of. All the energies of the nation 
must be aroused and brought into action. The power of the Government 
and the means of the people must all be devoted to this great work. The 
Government must be preserved, and this nation of thirty-four States must 
be perpetuated. The life of the nation is in peril ; and all we have and all 
we hope for must be devoted to maintain its existence, until peace and 
quiet are restored in every part of our common country. 

This bill is a necessary means of carrying intt) execution the powers 
granted in the Constitution "to raise and support armies," and "to pro- 
Tide and maintain a navy." 

In the present crisis of our national affairs, it is necessary that the army 
should be " supported," and the navy " maintained." This necessity will 
not be questioned by any loyal member on this floor. 

The Constitution provides that " aU the laws necessary and proper for car- 
rying into execution the foregoing powers" may be passed by Congress. 

If the cnc?be legitimate, and within the scope of the Constitution, all the 
means that are appropriate, which are plainly adapted to that end, and 
which are not prohibited, may be constitutionally employed to carry it in- 
to effect. 

If a certain means to the exercise of any of the powers expressly given 
by the Constitution to the Government of the Union be an appropriate 
measure, not prohibited by the Constitution, the degree of its necessity is 
a question of legislative discretion ; not of judicial cognizance. 

The Government of the United States is not prohibited by the Constitu- 
tion from issuing Treasury notes on demand, and making them a legal ten- 
der in payment of all debts within its jurisdiction. The Constitution 
(Art. 1, Sec. 10) prohibits the States from making any thing but gold and 
silver coin a legal tender in payment of debts ; but this does not at all re- 
strict the sovereign power of the United States. Congress has the power 
to coin money "regulate the value thereof, and of foreign coin." Gold 
and silver by long practice— a practice that has continued for centuries 
among all nations— has become the legal money of the world in all com- 
mercial transactions. Its real intrinsic value is not as great as that fixed 
upon it by Governments. All Governments fix the value of gold and sil- 
ver, and without the Government stamp, gold and silver would be a sim- 
ple commodity, like other things having intrinsie value. Some Govern- 
ments fix the value of coin higher, and some lower, just as each, for itself 
chooses to determine. Any other metal or thing that should be stamped. 



36 



and its value regulated by all the Governments of the world, wou^d pass 
equally well in all commercial transactions as gold and silver, although 
not intrinsically as valuable. Exchequer bills or Treasury notes whose 
value is .fixed by Government, and stamped as money, would pass as 
money in the payment of debts within the jurisdiction of the Govern- 
ment fixing such value. 

In regulating the value of "coin," either foreign or domestic, Congress 
may provide that gold and silver shall be of no greater value in the payment 
of debts within the United States than the Treasury notes issued on the 
credit of this Government, which stamps such coin and fixes its value. 
These high powers of Government have been frequently exercised by 
Great Britain during her continental wars, in making the Bank of Eng- 
land notes receivable for public dues, and virtually a legal tender in pay- 
ment of debts, by suspending the statutory clause requiring specie pay- 
ments within the United Kingdom ; and other Governments of Europe 
have exercised the same high prerogatives whenever necessary to preserve 
their existence. But we are not left to this argument alone for constitu- 
tional power to issue these demand notes and make them a legal tender in 
payment of debts, as I will endeavor hereafter to show. 

The Constitution provides that Congress shall have power to pass " all 
laws necessary and proper" for carrying into execution all the powers 
granted to the Goveniment of the United States, or any department or 
oflflcer thereof. , 

The word necessary, as used , is not limited by the additional word " pro- 
per," but enlarged thereby. 

" If the word necessary were used in the strict, rigorous sense, it would 
be an extraordinary departure from the usual course of the human mind, 
as exhibited in solemn instruments, to add another word, the only possible 
effect of which is to qualify that strict and rigorous meaning, and to pre- 
sent clearly the idea of a choice of means in the course of legislation. If 
no means are to be resorted to but sueh as are indispensably necessary, 
there can be neither sense nor utility in adding the word ^proper;'' for the 
ifndispensable necessity would shut out from view all consideration of the 
propriety of the means." — 3 Story'' s Commentaries^ sec. 122. 

Alexander HamiUony in discussing these high powers of the Constitution, 
says: 

" The authorities essential to the care of the common defence are these: 
to raise armies ; to build and equip fleets ; to prescribe rules for the go- 
vernment of both ; to direct their operations ; to provide for their support. 
These powers ought to exist, without limitation ; because it is impos- 
sible to foresee or define the extent and variety of national exigencies, 
and the correspondent extent and variety of the means necessary to satis- 
fy them. The circumstances which endanger the safety of nations are in- 
finite ; and for this reason no constitutional shackles can wisely be imposed 
on thiB power to which the care of it is committed" * * * * " This 
power ought to be under the direction of the same councils which are ap- 
pointed to preside over common cfe/*ence." # # * * "It must be 
admitted as a necessary consequence, that there can be no limitation of 
that authority which is to provide for the defence and protection of the 
community in any matter essential to its efficacy ; that is, in any matter 
essential to the form^ation, direction, or support of the national forces." 

This statement, adds Hamilton — 

"Rests upon two anxioms, simple as they are universal : the means ought 




37 



to be proportioned to the end; the persons from whose agency the attain- 
ment of the end is expected ought to possess the means by which it is to be 
attained."— Fe(iera^w^, No. 23, pp. 95, 96. 

Congress may judge of the necessity in the present exigency. It may 
decide whether it will authorize the Secretary of the Treasury to issue 
demand Treasury notes, and make them a legal tender in payment of 
debts, or whether it will put its six or seven per cent, bonds on the mar- 
ket, at ruinous rates of discount, and raise the money, at any sacrifice the 
money-lender may require, to meet the pressing demands upon the Trea- 
sury. In the one case the Government will be able to pay its debts at fair 
rates of interest ; in the other, it must go into the streets shinning for the 
means, like an individual in failing circumstances, and sure of being used 
up in the end by the avarice of those who may exact unreasonable terms. 
The Government needs and should have, in her present peril, the aid and 
protection of all patriotic citizens. 

But, sir, knowing the power of money, and the disposition there is 
among men to use it for the acquisition of greater gain, I am unwilling 
that this Government, with all its immense power and resources, should 
be left in the hands of any class of men, bankers or money-lenders, how- 
ever respectable and patriotic they may be. The Government is much 
stronger than any of them. Its capital is much greater. It has control of 
• all the bankers' money, and aU the brokers' money, and all the property 
of the thirty millions of people under its jurisdiction. Why, then, should 
it go into Wall street. State street. Chestnut street, or any other street, 
begging for money ? Their money is not as secure as Government money. 
All- the gold they possess would not carry on the Government for ninety 
days. They issue only promises to pay, which, if Congress does its duty, 
are not half as seciu-e as United States Treasury notes based on adequate 
taxation upon all the property of the country. 

Why, then, go into the streets at all to borrow money ? I am opposed, 
in our present extremity, to all shifts of this kind. I prefer to assert the 
power and dignity of the Government, by the issue of its own notes, 
pledging the faith, the honor, and property of the whole loyal people of 
the country to maintain their circulation and provide for their redemp- 
tion. 

On the question of constitutional power we are not left without the 
recorded opinions of the ablest jurists in the country.— 1 Kenfs Com., 
mX—2\—Mc(Moch V. Olie State of Maryland, 4 Wheat, R., 413—20. 

Chief Justice Marshall, Daniel Webster, and Judge Kent lay down the 
doctrine as follows : 

" The Government of the United States is one of enumerated powers, 
and it can exercise only the powers granted to it; but though limited in 
its powers, it is supreme within its sphere of action. It is the Government 
of the people of the United States, and emanated from them. Its powers 
were delegated by all, and it represents all, and acts for all. 

" There is nothing in the Constitution which excludes incidental or iin- 
pHed powers, The Articles of Confederation gave nothing to the United 
States but what was expressly granted ; but the new Constitution dropped 
the word expressly, and left the question whether a particular power was 
granted to depend on a fair construction of the whole instrument. No 
constitution can contain an accurate detail of all the sub-divisions of its 
powers, and all the means by which they might be carried into execution. 



38 



It would render it too prolix. Its nature requires that only the great out- 
lines should he marked and its important objects designated, and all the 
minor ingredients left to be deduced from the nature of those objects. 
The sword and the purse, all the external relations, and no inconsiderable 
I)ortion of the industry of the nation, were entrusted to the General Gov- 
ernment; and a Government entrusted with such ample i)owers, on the 
due execution of which the happiness and prosperity of the people vitally 
depended, must also be entrusted with ample meam for their execution. Un- 
less the words imperiously require it, we ought not to adopt a construc- 
tion which would impute to the framers of the Constitution, when grant- 
ing great i)owers for the public good, the intention of impeding their 
exercise, by withliolding a clwice of meam, Tlie powera given to the 
Government imply the ordinary means of execution ; and the Govern- 
ment, in all sound reason and fair interpretations, must have the choice of 
the means which it deems the most convenient and appropriate to the ex- 
ecution of the power. The Constitution has not left the right to Congress 
to employ the necessary means for the execution of its powers to general 
reasoning. Article 1, section 8, of the Constitution, expressly confers on 
Congress the power * to make all laws that may be necessary and proper 
to carry into execution the foregoing powers.' Congress may employ 
such means and pass such laws as it may deem necessary to carry into ex- 
ecution great powers granted by the Constitution ; and necessary means, 
in the sense of the Constitution, does not import an absolute physical ne- 
cessity, so strong that one thing cannot exist without the other. It stands 
for any means calculated to produce the end. The word necessary admits 
of all degrees of comparison. A thing may be necessary, or very neces- 
sary, or absolutely, or indispensably necessary. The word is used in vari- 
ous senses ; and in its construction, the subject, the context, the intention, 
are all to be taken into view. The powers of the Government were given 
for the welfare of the nation. They were intended to endure for ages to 
come, and to be adapted to tlie various crisis in human affairs. To pre- 
scribe the specific means by which Government should in fill future time 
execute its power, and to confine the choice of means to such narrow 
limits as should not leave it in the power of Congress to adopt any which 
might be appropriate and conducive to the end, w^ould be most unwise and 
pernicious, because it would be an attempt to provide, by immutable 
rules, for exigencies which, if foreseen at all, must have been foreseen 
dimly, and would deprive the Legislature of the capacity to avail itself of 
experience, or to exercise its reason, and accommodate its legislation to 
circumstances. If the end be legitimate, and within the scope of the Con- 
stitution, all means which are appropriate, and plainly adapted to this 
end, and which are not prohibited by the Constitution, are lawful." 

It is plainly within the scope of the Constitution that the Government 
should maintain itself; that the army should be supported ; that the navy 
should be maintained. The ways and means of doing this are left to Con- 
gress to provide. Congress may do this entirely by taxation. It may 
provide by law to levy and collect taxes enough every year to pay the 
whole expenses of the war during each current year, and so "pay as we 
go." It may issue six per cent, bonds and sell them on the market for 
what they wiU bring— even if they will not sell for over fifty cents on the 
dollar— to raise money to carry on the war. It may issue Treasury notes 
payable on demand, and make them a legal tender in payment of debts. 
Either one or all of these modes of paying the expenses of the Govern- 



39 



ment is left to the discretion of Congress. Either mode is constitutional : 
and it is left to the sound discretim of Congress to decide which mode it 
will adopt, or whether it will adopt a part of each, as being the best in the 
present crisis. 

My own impression is, that it will be best for us to adopt, in pait, all of 
these modes for providing the means. 

1. SaIsc by taxation the current year, over and above the amount re- 
ceived from duties on imports, the sunj of $150,000,000. 

2. Issue $100,000,000 of demand Treasury notes in addition to the 
$50,000,000 authorized in July, making them a legal tender in payment of 
debts, and exchangeable at any time for 6 per cept. twenty years' bonds ; 
with a further issue of demand notes if Congress shall hereafter deem it 
necessary. 

3. Provide for the issue of all the twenty years' 6 per cent, bonds that 
may be necessary to fund the demand Treasury notes, and other fundable 
Treasury notes that may be issued, (say $500,000,000 six per cent. tT\^enty 
years' coupon bonds,) and pledge $30,000,000 of the annual taxes to pay 
the interest half-yearly thereon, and pledge $25,000,000 more, as a sinking 
fund to redeem the principal in twenty years. 

1. This tax of $150,000,000 would afford an ample basis on which to rest 
the credit of the Government for this large issue of Treasury notes and 
bonds, and would insure the punctual payment of the interest to the capi- 
talists who might hold them. 

2. The demand notes put in circulation would meet the present exigen- 
cies of the Government, in the discharge of its existing liabilities to the 
army, navy, and contractors, and for supplies, materials, and munitions of 
war. These notes would find their way into all the channels of trade 
among the people ; and as they accumulate in the hands of capitalists, 
they would exchange them for the six per cent, twenty years' bonds. 

These circulating notes in the hands of the people would enable them to 
jMiy the taxes imposed, and would facilitate all business operations be- 
tween farmers, mechanics, commercial business men, and banks, and be 
equally as good as, and in most cases better, than the present irredeem- 
able circulation issued by the banks. 

3. The $500,000,000 six per cent, twenty years' bonds in the hands of 
the Secretary of the Treasury, ready to be issued, would afford ample op- 
Iiortunity for funding the Treasury notes as fast as capitalists might desire 
to exchange Treasury notes not bearing interest for coupon bonds of the 
United States bearing six per cent, interest, and amply secured by a tax 
upon the people and all their property. 

In this way the Government will be able to get along with its immedi- 
ate and pressing necessities without being obliged to force its bonds on 
the'market at ruinous rates of discount; the people, under heavy taxation, 
will be shielded against high rates of interest ; and the capitalists will be 
afforded a fair compensation for the use of their money during the pending 
struggle of the country for natidnal existence i 

A suspension of specie payment is greatly to be deplored, but it is ndt 
a fatal step in an exigency like the present. The British Government and 
the Bank of England remained under suspension from 1797 to 1821— '2— a 
period of twenty-five years. During this time England successfully re- 
sisted the imperial power of the Emperor Napoleon, and preserved hei- 
own imperilled existence. During all this time the people of Great Brit- 
ain advanced in wealth, population, and resources. Gold is not as valu- 



40 



able as the productions of the farmer and mechanic, for it is not as indis- 
pensable as are food and raiment. Our army and navy must have what is 
far more valuable to them than gold and silver. They must have food, 
clothing, and the material of war. Treasury notes issued by the Govern- 
ment, on the faith of the whole people, will purchase these indispensable 
articles, and the war can be prosecuted until we can enforce obedience to 
the Constitution and laws, and an honorable peace be thereby secured. 
This being accomplished, I will be among the flrst to advocate a speedy 
return to specie payments, and all measures that are calculated to preserve 
the honor and dignity of the Government in time of peace, and which I 
regret are not practicable^ in the prosecution of this war. 

I do not despair; on the contrary, I have an abiding faith in the patriot- 
ism, firmness, and resources of the people to maintain this Government. 
I feel that we are in great peril ; but when the people and our rulers be- 
come sufficiently aroused to fully appreciate the magnitude and probable 
duration of the rebellion— a rebellion that has grown into most gigantic 
proportions— then shall we be able to put forth the energy and the means 
necessary to crush it. 

An early and successful advance of our armies is of the utmost import- 
ance. We need such an advance to sustain the financial credit of the 
Government. We need it to prevent foreign intervention ; we need it to 
rouse the fiagging energies of the people ; and above all, we need it to 
vindicate the courage and invincibility of our brave soldiers, who are so 
anxious to be led on to victory. 



41 



APrENDIX. 
Table A. 



Irue Value of Real mid Personal Estate, according to the seventh Ce7mu% 
1850,. aud the eighth CensiLSy 1860, respectively. 





1850. 


I860. 




Increase 


Statps. 


Tfpjil nnrl T*pr- 


Tfpfil flTifl Ppt- 

XtvydX CIiUU J. cx 


Til PTPHftP 


per 


ct. 










for 


10 










years. 




<t 09Q 904 QQO 

<|p iO^itj^ ^\r±^ OO/O 


•ft d!^^ 9^7 078 


*l9fi7 039 74fi 

^i^U 4 , \/OZ, 4 '±\j 


117 
11/ 




A i*1riiTia{i A 




91 Q 9Kfi 47Q 


1 7Q 41 5 448 

X 4 57,'xXO,'rTrO 




39 






907 874 fil^ 


185 719 741 

XOil, 4 XZ, 4 4X 


004 


Qfi 




155 707 <)S0 


444. 974 114 

^rlr±, Z 1 Tt, X X'x 


288 .566 1.34 


loO 


Q9 




91 nfi9 KKfi 


4fi 949 1Q1 


95 17Q fi95 


11Q 

iXtJ 


54 




99 ftfi9 970 


7Q 101 500 

/ 0, XVX,Uvfv 


.50 2.3Q 2.30 


91Q 


74 

44: 




QQf; 49K 714. 


OAK ftQFJ 9Q7 


310 469 .593 

t/XVf, rrWt/, *j£nj 


Q9 


00 


f lllnnifi 




871 8fi0 989 
4 X, ouv, 


715 595 276 

4 X , t/C/<7, ^ 4 V' 


457 


93 


Ttirliarii) 


909 (xf\C\ 9fli 

^U^^ OOU, ^04: 


P»98 8^?i ^71 
0^0,000, Oi X 


39fi 185 107 

OZU, XOO, Xvf 4 


1AA 
lOU 


QPi 
uo 




9^ 711 ft^R 


947 9^8 9fi?i 


993 fi93 fi97 


Q49 


Q7 




Q1 QO7 COK 










301 fi9fi 4ofi 


OX,OZ4 ,o«^o 
fififi 043 119 

UOU, vrrO, X X Z 


.364 414 656 


120 


81 


T .rwi 1 i CI O Tl $1 


9^^ QQS 7fiJ. 


ft09 118 Pifi8 


3fi8 HQ 804 


157 


30 




122,777,571 


190,211,600 


o7,4o4,052» 


54 


92 




91 Q 917 Qfij. 


^7R Q1Q Q4J. 

04 0, 57X57, 57^r± 


1 57 709 580 


71 


93 


nasi p1i imp 


57H 98fi 


81 5 937 4 S3 


241,895,147 


42 


19 




oy,7b7,2oo 


257,loo,9bo 


t(V7 QTC 'TOQ 

jy7,o7o,7i2o 


330 


13 


Minnesota 


not ret'd in full. 


52,294,413 








Mississippi 


228,951,130 


607,324,911 


378,373,781 


165 


26 




137,247,707 


501,214,398 


363,966,691 


265 


18 


XewHampsliire 


103,052,835 


156,310,860 


52,658,025 


50 


80 


Xew Jersey t. 


200,000,000 


467,918,324 


267,918,324 


133 


95 


New York 


1,080,309,216 


1,843,338,517 


763,029,301 


70 


63 


North Carolina 


226,800,472 


358,739,399 


131,938,927 


58 


17 


Ohio 


504,726,120 


1,193,898,422 


689,172,302 


136 


54 


Oregon 


5,063,474 


28,930,637 


23,867,163 


471 


35 


Pennsylvania . . 


722,486,120 


1,416,501.818 


694,015,698 


96 


05 


Rhode Island.. 


80,508,794 


135,337,588 


54,828,794 


68 


10 


South Carolina. 


288,257,694 


548,138,754 


259,881,060 


90 


15 


Tennessee 


201,246,686 


493,903,892 


292,657,206 


145 


42 




52,740,473 


365,200,614 


312,460,141 


592 


44 




92,205,049 


122,477,170 


30,272,121 


32 


83 


Virginia 


430,701,082 


793,249,681 


362,548,599 


84 


17 




42,056,595 


273,671,668 


231,615,073 


550 


72 


D. of Columbia 


14,018,874 


41,084,945 


27,066,071 


193 


16 






9,131,056 








New Mexico.. . 


5,174,471 


20,813,768 


15,639,298 


302 


?4 


Utah? 


986,083 


5,596,118 


4,610,035 


467 


ro 






5,601,466 




















7,135,780,228 


16,159,616,068 


8,925,481,011 


126 


45 



* Only 13 counties in California have been returned. 

t In New Jersey, as the real estate was only returned, the above is iMirtly estimated. 



42 



Tablk B. 



lahle showing the Federal Fopulaimi^ and the Asf^essecC Value of Real and 
Personal Pfoperty of the Several Stales of the Union, — Census 1860. 



States. 



Alabama 

Arkansas 

California 

Connecticut 

Delaware 

Florida 

Georjria 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts.. 

Michigan 

Minnesota 

Mississippi 

Missouri 

New Hampshire 

New Jersey 

New York 

North Carolina - 

Ohio 

Oregon 

Pennsylvania . . 
Rhode Island... 
South Carolina . 

Tennessee 

Texas 

Vermont 

Virginia 

Wisconsin 



Federal 
Population. 



790,243 
390,985 
380,016 
460,151 
111,498 
115,737 
872,436 

1,711,753 

1,350,941 
674,948 
107,110 

1,065,517 
576,086 
628,276 
652,158 

1,231,065 
749,112 
172,022 
616,717 

1,136,331 
326,072 
672,031 

3,880,727 
860,234 

2,339,599 
52,464 

2,906,370 
174,621 
542,795 
999,533 
530,159 
315,116 

1,399,731 
775,873 



29,568,427 



Value of Real 
Estate. 



$155,034,089 
63,254,740 
66,906,631 
191,478,842 
26,273,803 
21,722,810 
179,801,441 
287,219,940 
291,829,992 
149,433,423 
16,088,602 
277,925,054 
280,704,988 
86,717,716 
65,341,438 
475,413,165 
123,605,084 
25,391,771 
157,836,737 
153,450,577 
59,638,346 
151,161,942 
1,069,658,080 
116,366,573 
687,518,121 
6,279,602 
561,192,980 
83,778,204 
129,772,684 
219,991,180 
112,476,013 
65,639,973 
417,952,228 
148,238,766 



12,006,756,585 



Val. of Perso- 
nal Property. 



$277,164,673 
116,956,590 

72,748,036 
149,778,134 

13,493,439 

47,206,875 
438,430,946 
101,987,432 
119,212,432 

55,733,560 
6,429,630 
250,287,639 
155,082,277 

67,662,672 
231,793,800 
301,744,651 

39,927,921 
6,727,002 
351,636,175 
113,485,274 

64,171,743 
145,520,550 
320,806,558 
175,931,029 
272,348,980 

12,745,313 
158,060,355 

41,326,101 
359,546,444 
162,504,020 
156,316,322 

19,118,646 
239,069,108 

37,706,723 



5,081,661,050 



43 



At the conclusion of Mr. Spaulding's speech, Mr. Vallandig- 
HAM obtained the floor and offered a substitute for the bill, which 
was read. (Congressional Globe, p.p. 526.) 

Mr. Stevens said "I will follow an example set me, and give notice 
of an amendment which I shall offer to the bill. It is to make the semi- 
annual interest payable in coin. I shall make it when we reach the pro- 
per time and place." 

Mr. Vallandigham.— *^That is included in the amendment I pro- 
pose. Mr. Stevens— *' Yes! but my amendment is to the original bill." 
Mr. Vallandigham—" I do not desire to speak upon the bill at this stage 
of the debate, and therefore I will cheerfully yield to my colleague (Mr. 
Pendleton), who proposes to discuss the constitutional question of legal 
tender." Mr. Pendleton obtained the floor. 



Mr. Pendleton, on the 29th inst. made an elaborate speech in 
opposition to the constitutionality as well as the expediency of 
the legal tender clause. He commenced by saying, 

" Mr. Chairman, I was glad to hear the announcement made by the 
gentleman from Vermont, (Mr. Morrill), a member of the Committee of 
Ways and Means, by my colleague (Mr. Vallandigham), by the gentleman 
from Kew York, (Mr. Roscoe Conkling), and by the gentleman from 
Pennsylvania, (Mr. Stevens), that they each intended to propose to the 
House to make changes in this bill, either by way of amendment or sub- 
stitute." 

Mr. Pendleton— " These notes are to be made lawful money and a 
legal tender in discharge of aH'pecuniary obligations, either by the Govern- 
ment or individuals, a character which has never been given to any note 
of the United States, or any note of the Bank of the United States by any 
law ever passed. Not only, sir, was such a law never passed, but such a 
law was never voted on, never proposed, never introduced, never recom- 
mended by any department of the Government ; the measure was never 
seriously entertained in debate in either branch of Congress." Mr. 
COKKLING interrupting, enquired whether the present Secretary is in 
flavor of making paper a legal tender?" Mr. Spaulding — "In reply to 
the question of my colleague, I will say that the Secretary of the Trea- 
sury has been called upon for his opinion in regard to this bill. We were 
assured that his reply would be sent* to us yesterday, but we did not re- 
ceive it. We expect his answer every hour." Mr. Conkling— "I am 
not certain that I understand what my colleague said. Does he expect a 
letter from the Secretary of the Treasury which will contain his views on 
the financial question, and also on the legal question?" Mr. Spaulding — 
"Upon the bill specifically." Mr. Conkling— "Containing the legal ten- 
der clause?" Mr. Spaulding— "Yes, sir." Mr. Pendleton— "I cannot 
answer the question so far as the opinions of the present Secretary of the 
Treasury are concerned. I affirm again the statement I have made, that 
a proposition of this kind has never been recommended to either House 
of Congress by any Department of the Government from its organization 
The report of the Secretary of the Treasury, made at the opening of the 
Session, contains no such recommendation." 



MR. Pendleton's speech. 




44 



3Ir. Pendleton contended that the bill, if passed, would impair 
the obligation of past as well as of future contracts, and that it 
would make it illegal to make a contract for dealing in gold or 
silver coin, for the reason that these legal tender notes might be 
tendered in payment of coin contracts. He insisted that there 
was no express power granted in the Constitution to make United 
States notes lawful money and a legal tender in payment of debts, 
and that the power **to regulate commerce'' gave no such power. 
He then said: 

''The gentleman from New York (Mr. Spauldiiig), in his argument yes- 
terday, deduced this power from the general powers of the Government. 
He told us that Congress had power to lay and collect taxes ; to raise and 
support armies, to provide and maintain a navy, and that all power neces- 
sary to eftectuate these purposes was expressly given by the general gi-ant 
of the Constitution. If 1 should admit his statement in the very language 
in which he has made it, am I not entitled to ask whether he has shown 
us any legitimate connection between makijig these notes a legal tender 
and the power to raise an army ? Might I not ask whether tlie repudia- 
tion of tlie obligations of the Coverinnent to pay its interest is a legiti- 
mate means for providing and sustaining a juivy V Whether impairing the 
obligations of contracts between private individuals throughout the coun- 
try, will in any degree assist the Government in its great duty in laying 
and collecting taxes ? We had no demonstration of the Jiecessity or pro- 
priety of these means to accomplish those ends. 

The gentleman spoke quite at large in referejice to the sovereign power 
of the Government. He told us that this power was not prohibited in the 
Constitution. He told us that in times of great emergency every thing 
may be done except that which is prohibited ; and he read an argument 
from the Attorney General which concludes as it began, with the proposi- 
tion that such a power is not prohibited to Congress. Sir, I repudiate 
this whole idea. I think it has no solid foundation in the Constitution. 

When I come to examine the powers of Congress according to the 
principles of interpretation to which I adhere, I look to the grants of the 
Constitution, I rind no grant of this power in direct terms, or, as I think, 
by fair implication. It is not an accidental omission : it is not an omission 
through inadvertency. It was intentionally left out of the Constitution, 
because it was designed that the power should not reside in the Federal 
Government." 

Mr. Pendleton continued his argument at great length against 
the Constitutional power of the government to issue legal tender 
notes to circulate as money. He quoted from Story, Madison, 
Hamilton, Calhoun, and made long extracts from Mr. Webster's 
speeches which were made while the government was on a peace 
footing, denying the power of the Government to issue currency 
and make it a legal tender. He insisted that no State, and that 
even Congress itself could not make anything but gold and silver ! 
coin a legal tender in payment of debts. That the language of 




4:5 



the Constitution, and the weight of authority, it seemed to him, 
settled the question that Congress had not the power to do that 
which it is proposed shall be done by the provisions of this bill. 
He concluded as follows : 

Let gentlemen heed this lesson of wisdom. Let them, if need be, tax 
the energies and wealth of the country sufficiently to restore the credit of 
the Government. Let them borrow whatever money in addition may be 
necessary — borrow to the full extent that may be necessary — and let us 
adhere rigidly, firmly, consistently, persistently, and to the end, to the 
principle of refusing to surrender that currency which the Constitution 
has given us, and in the maintenance of which this Government, has 
never, as yet, for one moment wavered." 

The letter of Secretary Chase of the 2 2d inst. was regarded b}^ 
a majority of the Committee of Wa3's and Means and many 
Members of the House, as non-committal on the legal tender 
clause of the bill, and many believed that when pressed to a 
decision, he would declare against its constitutionality. In order 
to obtain the opinion of the Secretary more fully, Mr. Corning 
offered a resolution in the Committee of Ways and Means, which 
was adopted, referring the bill (No. 240) to the Secretary, and 
requesting him to communicate to the Committee at as early a 
day as possible, his opinion as to the propriety and necessity of 
its immediate passage by Congress. After considerable delay the 
Secretary sent to the Committee of Wa^'s and Means the follow- 
ing reply: 

EXTRACT FROM A LETTER OP THE SECRETARY OF THE TREASURY TO THE COM- 
MITTEE OF WAYS AND MEANS, 

Treasury Department, Jan. 29, 1862. 

Sib: I have the honor to acknowledge the receipt of a resolution of the 
Committee of Ways and Means, referring to me House bill No. 240, and 
requesting my opinion as to the propriety and necessity of its immediate 
passage by Congress. 

The condition of the Treasury certainly needs immediate action on the 
subject of affording provision for the expenditures of the Government, 
both expedient and necessary. The general provisions of the bill submit- 
ted to me, seems to me well adapted to the end proposed. There are, 
however, some points which may, perhaps, be usefully amended. 

The provision making United States notes a legal tender has doubtless 
been well considered by the committee, and their conclusion needs no sup- 
port from any observation of mine. I think it my duty,*however, to say, 
that in respect to this provision my reflections have conducted me to the 
same conclusions they have reached. It is not unknown to them that I have 
felt, nor do I wish to conceal that I now feel, a great aversion to making 
anything but coin a legal tender in payment of debts. It has been my 
anxious wish to avoid the necessity of such legislation. It is, however, 

r—^-^ 



46 



by the war, and the suspension of the banks, to procure sufficient coin tor 
disbursements ; and it has, therefore, become Indispensably necessary that 
we should resort to the issue of United States notes. The making them a 
legal tender might, however, still be avoided, if the willingness manifested 
by the people generally, by railroad companies, and by many of the bank- 
ing institutions, to receive and pay them as money in all transactions, 
were absolutely or practically universal; but, unfortunately, there are 
some persons and some institutions which refuse to receive and pay them, 
and whose action tends not merely to the unnecessary depreciation of the 
notes, but to establisli discriminations in business against those who, in 
this matter, give a cordial support to tlie Goveniment, and in favor of 
those who do not. Snch discriminations should, if possible, be prevented ; 
and the provision making the notes a legal tender, in a great measure at 
least, prevents it, by putting all citizens, in this respect, on the same level, 
both of rights and duties. 

The committee, doubtless, feel the necessity of accompanying this meas- 
ure by legislation necessary to secure the liighest credit as well as the 
largest currency of these notes. This security can be found, in my judg- 
ment, by proper provisions for funding them in interest-bearing bonds ; 
by well-guarded legislation authorizing banking associations with circula- 
tion based on the bonds in which the notes are funded; and by a judicious 
system of adequate taxation, which will not only create a demand for the 
notes, but — by securing the prompt payment of interest— raise and sus- 
tain the credit of the bonds. Such legislation, it may be hoped, will 
divest the legal tender clause of the bill of injurious tendencies, and se- 
cure the earliest possible return to a sound currency of coin and promptly 
convertible notes. 

I beg leave to add, that vigorous military operations and the unsparing 

retrenchment of all necessary expenses, will also contribute essentially to 

this desirable end. 

• #* 

I have the honor to be, with very great respect, yours truly, 

S. P. CHASE. 

Hon. Thaddeus Stevens, Chairman. 

LETTER FROM HON. S. P. CHASE, SECRETARY OF THE TREASURY. 

Treasury Department, Jan. 30, 1862. 

My Dear Sir— It was impossible to get my answer ready before yester- 
day afternoon, when it was sent to the Chairman of the Committee ; the 
messenger boy instructed to deliver it to Mr. Stevens or yourself. The 
House having adjourned, he left it, he says, for you at the i^ational Hotel 
instead of at Mr. Steven's lodgings. 

Had I been aware that the part read to you would have been acceptable 
as an extract, (to insert in your speech,) I would have sent it earlier in 
advance of completing the answer. 

I read your speech carefully last night. It seems to me to need no 
change. You do not attach, I see, so much importance as I do to the 
Banking Act as a measure of relief; nor so much as I am confident you 
will upon reflection. I confess too, that I was a little disappointed in be- 
ing merely let off without censure when I thought myself entitled to 
some credit. My two first loans were negotiated considerably above the 
market rate, and the last at a rate almost equal at the time, and below, 
while the market almost immediately afterwards fell. 

Your friend, S. P. CHASE. 

Hon. E. G. Spaulbing, House of Kepresentatives. 



47 



LETTER OP JOHN A. STEVENS, PRESIDENT OF BANK OF COMMERCE. 

New York, Jan. 29, 1862. 
My Dear Sir— -I beg to offer you my thanks for your able exposition of 
the financial affairs of the Government. It is clear that there are but the 
alternatives you state to obtain any substantial relief— the one, to flood 
the market with the long stocks, submit to the very great depression in 
the price, and abide the consequences : a great augmentation of the public 
debt, and ruin to many of the warmest supporters of the Government; 
the other, for the present to issue demand notes, making them a legal tender 
in order to enable you to use them, other plans have been, or in my opin- 
ion can be devised, I have long entertained and freely expressed these 
viewSj here and in Washington. Even if an attempt, more or less suc- 
cessfiQ, had been made at the first to sell the long stock, yet, with the 
profligate expenditure since made to such fearful amounts, "to this com- 
plexion had we come at last." It is idle to look back, but had there been 
economy in the great departments of expenditure from the beginning, in- 
spiring full public confidence in their able and honest management, it 
may be questioned if the necessary funds could not have been provided 
without making irredeemable paper money. <rhe war would have been 
shorter, the patriotism of the whole people fully sustained, and foreign 
nations shown that this Government could not be divided. 

I am, dear sir, respectfully and truly yours, 

JOHI^ A. STEVENS. 

Hon. E. G. Spaulding, Washington. 

letter from HON. GEORGE OPDYKE, MAYOR OF NEW YORK. 

Mayor's ©ffice, J^ew York, Feb. 3, 1862, 
My Dear Sir— Accept my kind thanks for your note of yesterday, and 
also my apology for not having sooner expressed the gratification I felt 
on reading your very able and statesmanlike speech on the national 
finances. That speech has received, as it deserved, the hearty approval of 
every one who fully appreciates the imminent danger we are in of a col- 
lapse of the public credit. If the present financial embarrassments of the 
Government should be aggravated by military disasters, or threatened 
foreign intervention, it might precipitate a panic that would so depress 
the public securities, that it would be difiicult to obtain supplies for the 
army, and thus aiTest the further prosecution of the war. The only safe 
way of avoiding this danger is to promptly pass the bill you have intro- 
duced and advocated so ably. I shall not fail to give you whatever aid I 
can. I have tried in several instances to bring Mr. Bryant and Mr. Greeley 
over to our faith, but]thus far without success. 

I remain, dear sir, very truly yours, 

GEORGE OPDYKE* 

commonwealth bank* 

Philadelphia, Feb. 14, 1862* 
My Dear Sir— I have read your speech on the finances of the nation 
with the liveliest interest. It is at once clear, forcible, argumentative 
and conclusive, worthy alike of a financier, a statesman, and a patriot. 

Very truly yours, R. MORRIS. 

Hon. E. G. Spaulding. 



48 



LETTER FROM STEPHEN COLWELL, ESQ. 

PiiiLADELPniA, Jan. 30, 1862. 
Hon. E. G. SrAi'LDjXG, IIouso of Representatives, Wasliington. 

Dear Sir — I have just road your very able and statesmanlike exposi- 
tion of our public finances and our linancial policy during the war, with 
a satisfaction I cannot refrain from expressing to you by letter. 

You have grasi)ed the subject strongly and comin-ehcnsively, as well as 
practically. I can not doubt that your views will prevail. I trust you 
will now extend the same kind of effort to accomplish some harmonious 
action between the Associated Banks and the Government. I believe that 
these, and other leading banks can, by the aid of the Treasury and by con- 
cert in emergencies, keep the United States notes or cun*ency at par; that 
is at par less only the special premium on gold, which will not be greater 
than now if the Treasury currency Is well managed. The regular circu- 
lation of paper currency will absorb in no very long period the whole 
$200,000,000, and keep that amount moving. But as currency in the chan- 
nels of business necessarily at times gorges in particular places, and de- 
preciates at once if the holders are not relieved, such occasions should not 
only be watched by the liscal agents of the Government, but the proper 
remedy should be applied. It would cost the Treasury no sum worth 
mentioning, if the banks would enter into the plan heartily, to keep their 
currency in such credit that it would perform with complete success everj^ 
function of a sound currency. According to my view, tlie banks are deep- 
ly interested in keeping up the credit of those notes. The continued de- 
mand for them created by the loans, by the payment of debts at banks, 
and the payment of taxes, will create a rapid circulation and an absorbing 
power, which will enable the Governmejit to re-issue the whole amount 
several times a year. But there can be jio doubt that an average of one 
hundred millions will remain so prominently in the channels of business 
as seldom to revisit the Treasury. If the banks will lend their aid effect- 
ively to support their circulation it is not likely that any further issue 
will be needed, if they don't, they must depreciate, and further issue will 
be inevitable, if the war continues. Even the banks should be willing to 
acknowledge, that whatever their opinion about the propriety of issuing 
this currency, the whole linancial policy of the war and commercial in- 
terests of the country, will depend very much on its management. They 
should accept the necessity and make the best of it ; and they can make a 
very good thing for themselves by making the best of it. There can be 
no doubt that the city banks can enlarge their discounts hy the use of the 
United States notes -beyond what they could safely do upon their own 
circulation. But I regard their heartj' co-operation in sustaining this 
issue which you have so well justified, as so important^ that I think it 
would be well worth while for the Treasury to pay them lor the sort of 
services they can render. I contributed an editorial on this subject to the 
North American, which I send j'ou. If your speech is to appear in pamph- 
let form please send me one. 1 send you also an article in the Banking 
Magazine for Januar)', 1862, on the subject of banks and the Treasury. Be 
good enough to present my respects to Mr. Ilorton, of your committee, 
who is an old acquaintance of mine, 

AVith great respect, verv truly yours, 

STEPHEX COLWELL. 



49 



EXTRACT FROM A LETTER OF M. S. HAWLEY, ESQ. 

Buffalo, Jan. 21, 1862. 
Dear Sir — I suppose of course a large issue of demand notes for circu- 
lation will be authorized, receivable for all dues and made a legal tender ; 
and sufficient taxation to sustain the credit of all such issues and of the 
Government bonds. I see no other method so economical and effective. 

Very respectfully yours, 

M. S. HAWLEY. 

extract from a LETTER OF J. H. VAN ANTWERP, ESQ., OP THE STATE BANK, 

ALBANY. 

Albany, Feb, 8, 1862. 
Dear Sir — Accept my thanks for a copy of your speech on the national 
finances. The demand notes, in addition to the legal tender, need only to 
be fortified by a sinking fund yearly of $10,000,000, derived from taxation, 
to every $100,000,000 of notes issued, to make them pass equal to coin. 

Yours truly, 

J. H. YAN ANTWERP. 

letter from HON. ROBERT DENNISTON, LATE COMPTROLLER OF NEW YORK. 

Salisbury Mills, Orange Co., Y., Jan. 30, 1862. 
Hon. E. G. Spaulding. 

Dear Sir — I have read your financial speech (as reported in the Uri- 
bime) twice over with great interest. The necessity for such measures is 
j^atly to be regretted, but I do not see with the light I have, how they 
are to be avoided. In our national exigency, determined boldness, both 
in civil and military affairs, will be worth a mint of money to us. 

Please send me your si)eech for preservation, when printed in pamphlet 
form. 

With great respect, your obedient servant, 

ROBERT DENNISTON. 

LETTER OF C. H. RUSSELL, VICE PRESIDENT OP THE BANK OF COMMERCE. 

New York, Jan. 29, 1862. 
My Dear Sir— I have just read your speech as published to-day in the 
2lme8j it appears to me a very fair and clear exposition of the present 
financial condition of the Government, its necessities, its resources, and 
the emergency which now demands the immediate passage of the bill re- 
ported by the Committee of Ways and Means. The exigency of the 
Government to which I referred recently before that Committee, to justify 
the legal tender of the notes, I think is now reached, and we have no 
choice of any other measure as good as you propose. But protect the 
issue of this currency by limitation of its amount, by large taxation, and 
be sure to require by amendment that tlie payment of interest by the Gov- 
ernment shall be certainly paid in coin on all its public debts. 

In haste, yours truly, 

C. H. RUSSELL. 

P. S.— In some quarters are suggestions not to receive these notes from 
customers. This is wrong. Such a proceeding, or to make any exception 
against theta as lawful money of the United States, would afiix a taint and 
affect the public confidence in them. 



50 



ELEAZER LORD, LATE PRESIDENT OF THE NEW YORK AND ERIE RAILROAD. 

PiERMONT, Jail. 29, 1862. 

Hon. E. G. Spaulding, M. C. 

Dear Sir — I beg to congratulate you on your lucid, forcible, and com- 
prehensive opening of the debate on the legal tender Treasury note bill. 
It is unanswerable, and I trust will issue in an early triumph. I only 
wish the sum proposed was larger, so as to extinguish all hopes of national 
bonds being forced on the market and sacrificed. T think there will be a 
struggle in certain quarters to withdraw them from circulation and turn 
them into bonds on interest. The people would do that gradually with- 
out re'ducing the circulation too much, w ere there plenty more expected ; 
and with a discretion for a larger sum the inimical parties could do no 
harm. 

Should your speech be printed in pamphlet form, which I hope it will, 
please favor me with one or more. 

Respectfully, &c., ELEAZER LOBX). 

LETTER OF HON. E. S. PROSSER. 

Buffalo, Feb. 7, 1862. 

Hon. E. G. Spaulding, Washington, D. C. 

Dear Sir — I thank you for a printed copy of your speech on the finances 
of the country, received this morning ; I had read it in the paper before 
with great interest and entire approval, but desire this copy for preserva- 
tion. Whilst all loyal citizens must regret the necessity which compels 
the Government to suspend specie payments and make its own demand 
notes a lawful tender instead, I am quite unable, after very considerable 
thought, to suggest any other measure of relief, which I think would 
answer the purpose so promptly, or so well ; hence, I hope the bill as re- 
ported by the committee will speedily become a law, and this is I think 
quite the general wish here. As the Spring approaches, anxiety increases 
for a vigorous prosecution of the war to a conclusion ; for sometime or 
other, not very remote^ necessity will compel at least a large decrease in our 
land and naval forces; $500,000,000 annually, can and will be paid cheer- 
fully awhile, but I need not say to you that it cannot be very long; so it 
behooves the Government to act with all practicable energy to end the re- 
bellion by any means in its power, in the very shortest time it can be done. 
I hope we shall come out of the conflict speedily and triumphantly ; and 
that all the States may be again united under the present Constitution ; 
still most of the slave states, except upon the border, seem almost hope- 
lessly estranged, and will not, I fear, ever again, with their present people, 
yield obedience to the fundamental law of the land and the acts of Con- 
gress, unless they know the penalty for treason henceforth is to be rigidly 
enforced, and that the power of the Government is quite equal to capture 
the leaders of the rebellion by hundreds and thousands, and are determined 
to do it, and to execule them as fast as captured, unless they throw down their 
arms and disband, and return to loyalty. Can it be possible the Rebel 
leaders would long hold out against such a proclamation, after they saw 
that it was the intention of the Government to fulfil it to the letter, and 
they were virtually surrounded by a superior force. 

Yours truly, E. S. PROSSER. 



51 



LETTER OP GEO. B. BUTLER, OP THE HOUSE OP A. T. STEWART & CO., NEW YORK. 

I^EW York, Jan. 30, 1862. 
My Dear Sir— I send you the 4th of a series of articles written to show 
that the bills of the Government should be a legal tender. I belong to 
the creditor class, but my interest in the Government absorbs all others. 
In my view the war cannot be conducted except on this plan. I would 
paj liie interest in gold and silver and lay heavy taxes. There should be 
$100,000,000 of demand notes of $1000, bearing 5 per cent, interest. 

Yours, very truly, GEO. B. BUTLEE. 

LETTER FROM T. W. OLCOTT, ESQ., MECHANICS* AND FARMERS* BANK. 

Albany, Jan. 31, 1862. 

Hon. E. G. Spaulding. 

Dear Sir— I have read your well constructed argument on national 
finances, and the issue of Treasury notes made a legal tender. I do not 
suppose that a loan can be made, and I regard this issue of Treasury notes 
the only adequaie measfwre for smkvining the credit of the Treasury and the well 
being if not the very existence of the Government, Money must he had or the ivar 
cannot be mcceisfuOy prosecuted. 

This mecumre vM secure means, no other will except at ruinous sacrifices. It 
is not a debcUahle question. The struggle is for life. The knife is at our throat. 
We must strike with the most avaUohle weapon, and leave them-y for a more con- 
venient season. Of course you will pass a tax law. The people will hail 
it, and it will inspire confidence in our public securities. I had hoped that 
you would authorize funding at 4 or 5 years in an 8 per cent, stock, and 
20 years in a 6 or per cent, stock. The short 8 per cent, stock would 
tempt to a large amount of funding, and when that short period expires, 
it is to be hoped that the Government can borrow at 5 per cent, 

We want to encourage funding so as to prevent a redundant currency, 
and to prepare the way for possible if not probable further issues. 

I have the honor to be. Your Obedient Servant, 

THOMAS W. OLCOTT. 

OFFICE OF THE COLUMBIAN INSURANCE COMPANY, 

New York, Jan, 31, 1862. 

Hon. E. G. Spaulding, Washington, D. C. 

Dear Sir— I have read your able exposition of the condition of the 
national finances, and thebiU which you reported to authorize the issue 
of ♦150,000,000 of demand notes, and I beg leave to express the opinion, 
that there is no other means by which tho Government can escape the ut- 
ter ruin of their credit, than the immediate passage of the bill, and a bill 
to raise an amount of revenue which shall render the prompt payment of 
interest on all their loans beyond contingency. Should the passage of this 
bill be delayed until the banks have paid their last installment to the 
Goyemment, and the banks should refuse to receive the demand notes, 
and pay them out, they would of course depreciate to an extent suflBlcient 
to damage the credit of the Government essentially. If the experience of 
a life, not now short, is of any value, I say unhesitatingly, that this is the 
most critical period in our history within my knowledge. Thise in power 
must take the responsibility and do the needful instantly, or the consequences 
may be, and I think will be terrific. As to paying in gold during the war, 
it is utterly and totally impracticable, and the idea of doing so should at 

— 



52 



the bill for banking ou the Government stoi'k will be passed. The plan 
will be approved by nearly all the intelligent community when once 
adopted, and is now by a large majority of the men of wealth and influ- 
ence, so far as I am informed. With apologies for trespassing upon your 
valuable time, 

I am, your obedient servant, 

THOMAS LORD. 

POSTPONEMENT OF THE SPECIAL ORDER. 

On Thursday, the 30th inst. , Mr. Stevens moved to i)08tpone 
the special order — the Treasury note bill — until to-morrow, for 
the jjurpose of going into the Committee of the Whole on the 
Ann}' bilL The motion was agreed to. And on Friday, the 31st 
inst, he again moved to postpone the TreasurA' note bill until 
Monday, the 3rd of February, which was agreed to by the House. 

On Monday, the 3rd of February*, Mr. Vallandigham offered a 
modification of his substitute for the bill, for the puri)Ose of hav- 
ing it i>rinted for examination. This substitute will be found 
l)rinted at length in the Confjresskninl CMje, i)age 614. 

Mr. Roscoe CoNKLiNii — Witli the permission of the gentleman 
from Ohio, I desire to submit for the same purpose, the following, 
which I propose to offer, at the pro[»er time, as a substitute for 
the whole bilL Congrctisional Globe ^ page 615. 

MR. vallandi<;ham's speech. 

Mr. Vallandkhiam being entitled to the floor, addressed the 
Committee of the whole House for one hour, in favor of his sub- 
stitute, and in opposition to the legal tender clause in the original 
bill. His speech will be found reported at length in the appendix 
to the Congressional Globe, pages 42, 43, 44 and 45. 

He commenced by saving: 

•'It has been niy habit, Mr. Chairman, to premeditate, whenever pre- 
meditation was possible, whatever I have had to say in this Ilouse ; for no 
man has a right, in my judgment, to obtrude his immature thoughts and 
opinions ui)on a deliberative assembly. **##*»* 

" I propose to-day to discuss the subjects involved in this bill to the best 
of my ability, and with becoming candor and freedom, and I may add 
earnestness too ; for I have the profouudest conviction of their incalcul- 
able imi)ortance to the interests, present and future, of the United States, 
and of the people of this whole continent. Nor am I to be deterred from 
a faithful discharge of my duty by the consciousness that my voice may 
not be hearkened to here, or in the country, because of the continued, per- 
sistent, but most causeless and malignant assaults and misrepresentations, 
to which for months past, I have been subjected. Sir, I am not here to 
reply to them to-day. Neither am I to be driven ft*om the line of duty by 
them. ^'Strike— but hear.-' Whatever a silenced or mendacious press. 



outside of this House may choose to withhold, or to say, no man who is 
fit to be a member of this House, will allow his speech or his votes, or his 
public conduct here, to be controlled by his personal hates or prejudices. 
Sir, I recant nothing, and would expunge nothing from the record of the 
past, so far as I am concerned, But my path of duty now, as a Eepresen- 
tative, is as clear as the sun at broad-noon. The Ship of State is upon 
THE Bocks. I was not the helmsman who drove her there; not had I 
part or lot in directing her course. But now, when the sole question is, 
how shall she be rescued? I will not any longer, or at least just now en- 
quire who has done the mischief. 

* * * * I do not agree, Mr. Chairman, with the gentleman 
who has opened this debate, (Mr. Spaulding,) that this bill is a war mea- 
sure. Certainly, sir, it has been forced upon us by the war, but if peace 
were restored to-morrow, these $100,000,000 would be just as essential to 
the " public credit as they are to-day." 

Mr. Vallandigham continued his argument at great length. He 
insisted that the legal tender clause was unconstitutional, that it 
was a forced loan, and that it would be disastrous and unjust. He 
said no scheme of loan or taxation, or national bank, or currency, 
or other similar contrivance, could be devised, and put into opera- 
tion in time to avert ruin and disaster. The Government has no 
money, no gold and silver coin, which is the only money in the 
world. He advocated Treasury notes, without any promise to 
pay money, and without the legal tender clause, which should 
pass as currency from hand to hand, between the Government 
and its creditors and debtors, and be supported by a nearly equal 
amount of taxes — such taxes to be received by the Government in 
these notes. 

He urged that the experiment of forcing a paper currency upon 
' the country, was a dangerous experiment, that it would lead to 
other enorimous issues, gold and silver would be banished from 
circulation, an immense inflation would take place, cheap in 
materials, easy of issue, worked by steam, signed by machinery, 
there would be no end to the legion of paper devils which shall 
pour forth from the loins of the Secretary." That inevitably there 
would follow bloated currency, high prices, extravagant specula- 
tion, enormous sudd6n fortunes, immense factitious wealth, and 
general insanity. 

He objected to their being called United States notes" instead 
of " Treasury notes," as they had always heretofore been called, 
and deprecated the idea that they were likely to be a permanent 
currency, or at least until the Secretary's grand fiscal machine, 
**his magnificent National Paper Mill, founded upon the very 
stock provided for in this bill can be put into operation." He 



54 



insisted^that these notes were not money, that they would not 
circulate as currency, would not be taken as legal tenders, and in 
discharge of judgments, and contracts, and state debts, or private 
debts, though you should send them forth bearing ten times the 
image and superscription — the fair face and form of Abraham 
Lincoln, now president and C^sar of the American Republic." 
He urged the substitute presented by him as follows: 

**Thc fundamental idea of this substitute is to support and float these 
$150,000,000, by nearly an equal amount of taxation and revenue, payable 
of course in these notes. The Government owe the people and the peo- 
pie owe the Government, each $150,000,000, and these Dotes are primarily 
to be used as a common medium of payment between them. * * * * 
I do not propose or pretend that these notes are to be convertible into 
gold and silver. They are not payable on demand ; they are not payable 
to bearer, nor payable at all. They are not to he paid, but to circulate as 
currency receivable in Government dues, and Anally to be funded in 
twenty year's stocks. They are not promises to pay, and are not there- 
fore paper money. They do not represent gold and silver, of which the 
Government has none. ««*#«##» Ti^e 
United States are to cease in part, for a time, to be a specie paying hard 
money Government, I deplore it profoundly. But imperious necessity 
demands it. There is no alternative, no matter what evils may follow. 

But I utterly deny, sir, the right of the Federal Government to pro- 
vide a paper currency, intended primarily to circulate as money, and meet 
the demands of business and commercial transactions, and to the exclu- 
sion of all other paper. It is not the intent or object of the substitute to 
furnish such a currency for the country. **##** 

Such, Mr. Chairman, is the substitute which I have submitted. It dif- 
fers essentially from the bill. The one relies on force, the other upon 
credit; the one looks to the direct and despotic coercion of law and arms, 
and the other to the indirect and ordinary coercion of taxes. # * • 

To my political friends let me now appeal for support, not only for this * 
substitute, but of the taxation which must follow it, as essential to the 
maintainance of the good faith and credit of the Government." 

At the conclusion of Mr. Vallandigham's speech, Mr. Hooper, 
of Mass. , obtained the floor. 

MR. nOOPER-S SPELCII. 

Mr. Hooper—" The unusual exigencies of this country require that we 
should look for other and deeper sources of revenue than any to which we 
have heretofore been accustomed. We are contending for the maintain- 
ance of the Government, for the preservation of the Union, and for the 
enforcement of the laws, on which depend the existence, as well as the 
security of property. 

To insure our success in this contest, gi'eat and unusual exertions have 
already been made. An enormous army, a powerful navy, with vast 
stores of artillery and ammunition, have been created. In providing for 
the sustenance, comfort, and equipment of the Army and Navy, the Gov- 
ernment have been obliged to incur expenses far exceeding in magnitude 



55 



any which have been hitherto known in our history. To continue them 
in their present state of efllciency, large additional sums must be expend- 
ed ; and it now becomes the duty of Congress to devise methods by which 
these sums can be obtained with the least hardship to the people, and the 
least risk to the credit of the Government. In considering the means by 
which this is to be effected, it must be remembered that it is hardly pos- 
sible for the Government to raise money for any purpose without occa- 
sioning some inconvenience to individuals. To oppose necessary mea- 
sures, therefore, simply upon the ground that it will injuriously affect this 
class or that class of the people, is unreasonable. Parties interested may 
endeavor to show that the same objects can be effected with less hardship 
than by the methods proposed, or may endeavor to obviate any objection- 
able features, so far as may be consistent with the attainment of the de- 
sired end; but they should always remember that the end aimed at must 
be attained ; that its attainment will require individual sacrifices in some 
form, and that it is the part of wisdom, of patriotism, and of discretion, 
to submit to such necessary sacrifices cheerfully when called upon, and 
not by their opposition attempt to excite popular clamour, and weaken 
the public confidence in the Government, to which they are indebted for 
the safety of their persons, and the security of their possessions. Every 
step which tends to weaken the public credit has the effect of rendering 
private property more insecure, because it obstructs the Government in 
procuring its necessary funds in the ordinary way, and may oblige it to 
resort to the arbitrary mod^s of forced loans and heavier rates of taxation. 
At this moment, therefore, when for the time every hope of aid from for- 
eign capital is idle, when the country is compelled to look to her own re- 
sources for the means with which to maintain her integrity and subdue 
the rebellion, not only does every dictate of patriotism, and every enob- 
ling sentiment of humanity, call upon the capitalists of the country to 
rally in defence of the Government, but the meaner instinct* of self-pre- 
servation admonishes them to submit to slight sacrifices now, that they 
may secure and preserve their property. 

Three measures have been considered in the Committee, which are, to 
some extent, connected together, and form a comprehensive system by 
which, it is believed, the Government will be enabled to procure the sums 
necessary to the successful prosecution of the war; while, at the same 
time, the burden upon the capital of the country will be light, and the 
public will be benefited in some important particulars. 

The first of these measures is the one now before the House, by which 
the Secretary of the Treasury is authorized to issue United States notes, 
not to exceed $150,000,000 in amount (including those authorized by pre- 
vious laws), of denominations not less than five dollars. They are not to 
bear interest, but are to be issued and received as money, convertible, at the 
option of the holder, into six per cent, stock of the United States, the 
principal and interest being payable either here or abroad, and these notes 
are to be a legal tender. 

The second measure consists of a tax bill, which shall, with the tariff on 
Imports, insure an annual revenue of at least $150,000,000. 

The third is a national banking law, which will require the deposit of 
United States stock as security for the bank notes now circulated as cur- 
rency. 

In order more fully to understand and more easily to meet any objec- 
tions which may be urged against the first of these measures, being the 



56 



one now occupying the attention of the House, it will be desirable to no- 
tice the other two, which are designed to be more permanent in their 
character., and upon the expected results of which the present measure is 
in some degree based/' 

Mr. Hooper here explained the various modes of the proposed 
taxation, by which the credit of the government was to be sup- 
ported, and also went into a f\ill explanation of the National Cur- 
rency Bank bill which had been prepared, and the manner in 
which the government bonds would be absorbed by the banks, as 
soon as the bill should go into operation. He then proceeded as 
follows : 

" The levying of the contemplated tax, the'proper inauguration of the 
new banking scheme, and the successful negotiation of a new loan, are 
matters that will require time. In the meanwhile, the Treasury is com- 
paratively empty, and the demands upon the government are numerous 
and pressing. To enable the government to support itself during this in- 
terval of time, and to facilitate the negotiation of their loans, the com- 
mittee have decided to recommend the issue of government notes. 

There is a necessity for money, and the object of the authority to issue 
$150,000,000 U. S. notes, not bearing interest and made legal tender, is to 
pay the creditors of the United States, and enable them to discharge their 
debts. *'#*««« The propositions of com- 
mittees from Boards of Trade and banks, which recently visited Washing- 
ton, submitted to the Secretary of the Treasury and declined by him, dif- 
fered from the theory of this bill so far, as to require that instead of the 
issue of the United States notes the banks should be relied upon to furnish 
the amount needed. The effect of this would be that the government 
bonds must first be disposed of, and the money received for them paid to 
the contractors; in other words, that the government should go into the 
money market and negotiate their bonds, without restriction as to the 
rate or terms, at a time when the government is discredited by the delay 
and the difficulties that have occurred in paying contractors and others ; 
taking the notes of suspended banks in payment of these bonds, and with 
these bank notes, thus obtained, pay off the contractors. Ihe obvious ef- 
fect of such an arrangement would be to put the reins of our national 
finances in the hands of the banks, leaving to them the direction of our 
path, with little opportunity for the government to exercise any influence 
on the subject. Exactly upon what terms the government bonds could 
be negotiated now, under such circumstances, no one can say ; but last 
Summer, when the banks made their negotiation with the Secretary of 
the Treasury for $100,000,000, they at first refused to do anything, because 
the Secretary was restricted by law to taking par for seven per cent, 
bonds payable in twenty years, and for seven and three-tenths Treasurj' 
notes payable in three years. They finally decided, though with great re- 
luctance—influenced by patriotic regard for the public interest as well as 
wisely consulting their own— to take $100,000,000 of the latter; though at 
that time, as now, money was not worth for commercial purposes more 
than five per cent. It is proposed in this bill to limit the Secretary to par 
for six per cent, bonds, the principal and interest to be payable in specie 
or its equivalent. It is believed that there can be uotliing more secure 



67 



than these bonds, which thus become, as it were, a standard of value in 
reference to the currency. 

In the war of 1812 the Government paid for its supplies with funds ob- 
tained from the banks in the same manner as proposed in the plan recent- 
ly submitted to the Secretary by those committees. The bonds of the 
United States were then negotiated in some instances at twenty per cent, 
less than their par value, and paid for in bank currency of different de- 
grees of depreciation, according to locality, but averaging from twenty to 
twenty-five per cent, discount, as compared with coin. To render the 
government financially more independent, it is necessary to make the.( 
United States notes a legal tender. It is possible that they would become 
a practical tender, like bank notes, without providing for them to be a le- 
gal tender. If this were a foreign war there would be no doubt of it; but 
in this present emergency, when those who are openly or secretly dis- 
loyal to the government are found everywhere to suggest obstacles that 
may embarrass the government, nothing should be omitted that will add 
to their efficiency. I am, therefore, in favor of making the notes a legal 
tender, believing the Secretary of tHe Treasury, who alone has the power 
to issue them, can and will use the power with his well known discretion, 
and that it will assist him in his endeavor to keep the notes at par with 
coin. We shall probably be told that England, in her great struggle, 
while specie payments were suspended, never made paper money a legal 
tender. But in this respect her example should serve us as a warning 
rather than a guide, because instead of it she did what was much worse, 
by suspending the laws to enforce the payment of debts in cases where 
the paper money had been refused as a tender. 

It is important in this great struggle to show the superiority of the 
principles of freedom, of education, of the elevation of mankind, upon 
which society at the North is based, over those of slavery, which doom 
men to hopeless ignorance in order to insure abject obedience. To do 
this our resources of every kind are abundant, both in men and in means ; 
and it is only necessary to draw them out in order to be successful. 

To fail, would not be because the nation was so poorly endowed as to 
be without the means of success, "but because it refused to make use of 
them. Such a result, if it were possible, would not weaken the truth of 
the great principles for which we are contending; but would simply 
demonstrate that we, of this generation, were faithless in guarding those 
principles; faithless to ourselves; faithless to our country; faithless to 
good government throughout the world ; and, since such infidelity is a 
violation of unquestionable duty, faithless to God." 

Mb. Roscoe Conkling obtained the floor. 

Mb. Mobbill, of Vermont—'* I ask the gentleman from New York to 
yield the floor. Two members of the majority of the Committee of Ways 
and Means have spoken on this question, and if the gentleman will permit 
me now to express the views of the minority of the CovimiUee against the pend- 
ing biUj I will be obliged to him." 

Mb. Roscoe Conkling—'* I yield to the gentleman from Vermont." 

Mb. Stevens—**! feel itmy duty to state that the Treasury Depart- 
ment is argent for the passage of this bill, and I trust, therefore, that 
the vote on it will not be put off longer than Thursday next." 



58 



Mu. Spai lding—** I desire to call the attention of tlie House to a let- 
ter which I have just received from tlie Secrretary of tlie Treasury. It is a 
note to me urging the immediate passage of tliis bill without further de- 
lay. For the purpose of letting tlie Ilouse understand the necessities of 
the Treasury, I ask the Clerk to read an extract from that letter." 

The Clerk read as follows : 

** Immediate action is of great importance. The Treasury is nearly 
empty, I have been obliged to draw for the last installment of the No- 
vember loan. So soon as it is paid, I fear the banks generally will refuse 
to receive the United States notes, unless made a legal tender. You will 
see the necessity of urging the bill tlirough without more delay." * * 

Mr. Thomas, of Massachusetts— "Has the gentleman any further com- 
munication that has been received from the Secretary of the Treasury 
with refei-ence to this bill ? If there has been any received I hope he will 
be kind enough to have it read to the ilouse." 

Mr. Spaulding—" a communication has been addressed by the Sec- 
retary of the Treasury to the Committee of Ways and Means, and I have 
no objection to its being read." 

Mr. Roscoe Conkling— " I would like to know whether the gentle- 
man intends to have the whole of the communication read, or only ex- 
tracts?" 

Mr. Spaulding— ^-I ask the Clerk to read what i send to him. Tlie 
balance of the communication is in relation merely to formal amend- 
ments. What the Clerk will read is all of the communication that refers 
to the principle of the bill." 

Mr. Vallandigham— " Has the Committee of Ways and Means re- 
ceived the letter it was exjiecting from the Secretary of the Treasury ?" 

Mr. Spaulding— " This is the one." 

(The Clerk here read the letter of the Secretary of the Treas- 
ury, dated January 29, 1862, as published on page 45.) 

Mr. Roscoe Conkling— " I now call.for the reading of the rest of that 
letter." ' 

Mr. Spaulding — ^' There is not the least objection to its being read. 
It is, however, in the committee room. I will state what the remainder of 
the letter is. The Secretary of the Treasury suggests some amendments 
to the bill. He proposes two new sections to the bill, one relating to 
counterfeiting and the other in regard to the manner in which the notes 
shall be executed. He proposes instead of having them signed by clerks 
that there shall be a seal or die engraved upon them, which will indicate 
the authority under which they are issued." 

Mr. Roscoe Conkling — Are those the only amendments?" 

Mr. Spaulding— There are two or three smaller amendments not af- 
fecting the principle of the bill, however, in any way. We propose in the 
committee to act on those amendments to-morrow morning. If the letter 
were here I would not have the slightest objection to its being read." 

Mr. Lovejoy— "I want to ask the gentleman of the Committee of 
Ways and Means whether they intend to propose to have action on this 
bill before action is taken on the tax bill?" 



69 



Mb. Spaulding — ** / have been anodous to have the tax bill brought in to be 
first considered; bui the genvtleman from Vermont (Mr. Morrill), who is chair- 
mem of the suh-committee on the tariff and lax bill&, informs its that the sfuh- 
committee having that maUer in charge wiU not be able to report to the Com- 
mittee of W(M/8 and Means for several days yet. The necessities of the Ireas- 
ury^ therefore^ wiU compel us to a^ on this biM, however rehtctantly, before the 
Tax hiR can be introduced,'*'* 

Mb. Roscob Conkling— *' I hope that the remaining portion of the 
letter of the Secretary of the Treasury will be printed in the Gbbe,^^ 

Mb. Spaulding— " I have no objection to that." 

Mb. Roscob Conkling — " The gentleman has read the whole letter, and 
J ask him to state whether the Secretary is for or against this bill with the le- 
gal tender provision in it.'*'* 

Mb. Spaulding—" He is for it. I have another letter from him in 
which he states that he is anxious to have it passed in that form." 

Mb. Roscob Conkling—" Let us have that read." 

Mb. Spaulding— "It is a letter to myself." 

Mb. Maynabd — " I ask my colleague on the Committee of Ways and 
Means whether the portion of the Secretary's letter which has been read 
is not all of it that appertains to the principle of the bill ; and whether the 
balance does not relate merely to matters of detail." 

Mr. Spaulding — " Yes, sir. I will read a paragraph of the letter writ- 
ten by the Secretary to myself this afternoon : 

"I came with reluctance to the conclusion that the legal tender clause 
is a necessity ; but I came to it decidedly, and support it earnestly. I do 
not hesitate since I have made up my mmd. * * # ♦ * The 
conclusion I have arrived at has convinced me that it is important to the 
success of the measure." 

And then, on motion of Mr. Wright, the House (at half-past 
four o'clock P. M.) adjourned. 

The following is a copy of the letter of Secretary Chase referred 
to in the foregoing proceedings of the House, and from which 
extracts were read: 

LETTER FROM HON. S. P. CHASE. 

Monday, 3d February, 1862. 

My Dear Sir :— Mr. Seward said to me on yesterday that you observed 
to him, that my hesitation in coming up to the legal tender proposition 
embarrassed you, and I am very sorry to observe it, for my anxious wish 
is to support you in all respects. 

It is true that I came with reluctance to the conclusion that the legal 
tender clause is a necessity, but I came to it decidedly, and I support it 
earnestly. I do not hesitate when I have made up my mind, however 
much regret I may feel over the necessity of the conclusion to which I 
eome. 

I have just sent a note to Mr. Stevens, with two sections (penal) instead 
of one. You will, I think, see the necessity of them.* The one I have 



60 



already >ent I fear is liot quite stronp: enoiiji^h. Wliat has tlie Committee 
doiH' a])oiit the aineudiiieiitB suggested y I thought them imi)ortaut. 

I in met Hair, action is of great imporlaiwe. The Treasuri/ is nearly empty, 2 
Juivr bet a obli'jed to draw for the last irifiiailiftnit of the November loan ; so 
soon as it ui jxiul^ I fear the banks generally/ mil refuse to receive the United 
^Uatc^ tiolfs. You will see the necesh-ity of urging the bill through withmit more 
delay. Very sincerely yours, 

Hon. K. G. Spallding. S. P. CHASE. 

On the 4th of Fe])riiar3', the House gave consent to Mr. MorriH 
to have printed a substitute having the sanction of one-half the 
Coram ittpe of Ways and Means, wliich he proposed to olfer at the 
proper time in place of the original bill. Mr. Stratton, one of 
the Committee, changed his mind, and now favor§ the substi- 
tute instead of the bill first reported, leaving the Committee of 
Ways and Means equally divided. 

MR. MOKRILL*S SPEECH. 

Mu. MoKRiLL, of Vermont—" Mr. Chairman: Engaged as I have 
been upon other matters of at least equal Importance, I have not had the 
time to prepare an elaborate speech; but the suhject of issuing $150,000,- 
000 of paper currency and making it a legal tender by the Government at 
a single bound—the precursor, as I fear, of a prolific brood of promises, 
no one of which is to be redeemed in the constitutional standard of the 
country — could not but arrest my attention, and having strong convictions 
of the impolicy of the measure, I should feel that I utterly failed to dis- 
charge my duty if I did not attempt to find a stronger prop for our 
country to bear upon than this bill— a measure not blessed by one sound 
precedent and damned by all. 

I know the gentlemen who have had the latter in charge have bestowed 
upon it much time and perplexing thought, and from their thorough 
knowledge of the subject and large acquaintance with the monetary circles 
of the country, their opinions will have great weight in this Committee — 
deservedly so— and I shall only claim a candid hearing in behalf of the 
substitute of the minority of the Committee of Ways and Means, well 
knowing that we are all inflamed by the same zeal for the triumphant suc- 
cess of our arms, the same solicitude for the honor and welfare of the peo- 
ple, who mean to live and die under the flag of our Union, and that we 
can have hut one wish, which is, that the best plan shall be adopted. 

We are urged by the gentleman from New York (Mr. Spaulding) to pass 
this bill as '*a war measure'- — **a measure of necessity," and to enforce 
this idea he gives you the figures of our probable requirements, if the 
war should be prolonged until July 1, 1863. Sir, I have no expectation 
of being required to support a war for that length of time. The ice that 
chokes the Mississippi is not more sure to melt and disappear with the 
approaching vernal season, than are the rebellious armies upon its banks 
when our western army shall break from Its moorings and rush with 
the current to the Gulf, and baptise as it goes, in blood, the people to a 
fresher allegiance.^ At the same time, the men of the East will only ask 



61 



for an opportunity to cross bayonets with the chivalry— to leave epithets 
and try what virtue there is in steel I That hour is approaching, and I 
have no fear of the result. 

*Ply swiftly round, ye wheels of time I ' 

We can close this war by the 30th day of July next as well as in thirty 
years. Let us second general McClellan for a * short and sharp' conflict. 
By so doing we shall economise both blood and Treasury notes. 

If this paper money*is ^a war measure,' it is not waged against the 
enemy, but one that may well make him grin with delight. I would as 
soon provide Chinese wooden guns for the army as paper money alone for 
the army. 

Ij^ hf the provisions of this bill, we cut ourselves off from all other re- 
sources, it is to be considered how much could be realized from this, in 
my judgment, the weakest resource within our grasp, which is the power 
of a bank issue, without any capital, and not even specie enough to ten- 
der the odd change. It is an experiment to inject, by a governmental 
force pump, into the arteries of commerce a new currency, when the ar- 
teries are already filled. The whole bank circulation of the United States 
in 1860 was $207,102,477; that of fhe rebel States was J50, 647, 028, leaving 
for the loyal States $156,566,449. But at this time, in consequenpe of the 
diminution of all business, except that nourished by the war, the bank 
circulation is over $20,000,000 less, or about $136,000,000. I admit that we 
can drive a considerable share of this home upon the banks, and substi- 
tute that of the notes of the United States in its place. * * * * 

It is thus apparent that $20,000,000 is about all that would be absorbed 
by this country, or kept afloat in the present condition of monetary affairs 
without the intervention of Congressional omnipotence in making them a 
legal tender. If so made, they would, to the extent they are tendered for 
public dues, be a forced loan ; and to the extent of the difference between 
their current value and that of standard coin, it would be a breach of pub- 
lic faith. It is true that the measure might be hailed with delight by 
bankrupts ; and if the bill passes, my friend from New York (Mr. Conk- 
ling) no longer need press his bankrupt law, for they would have no occa- 
sion to go into Chancery in order to scale and settle off with their credit- 
ors, as *' legal tenders" would soon be offered at rates entirely within 
their means. rpi^e Govern- 

ment can flood the country with 150,000,000 paper dollars, but from that 
moment you would vastly increase the cost of carrying on the war; prices 
would go up, and the addition we should pile upon our national debt 
would prove that it might have been even wiser to have burnt our paper 
dollars before they were issued. The inflation of the currency would be 
inevitable. In ordinary times few comprehend the Archimedean leverage 
of a few millions added to or subtracted from the currency of a nation 
actively engaged in the affairs of the world. ****** 

No one here contemplates but that at some future time the banks and 
the Government shall resume specie payments— the banks depending en- 
tirely upon whether the Government does so or not— and if so, I invite 
them to calculate the cost of the descent from that basis, the cost of the 
return, the expiratory pains to be suffered, and then determine whether 
we shall carry on this* war on a specie basis, or on a ceaseless flood of 
paper, bartered at discordant prices in every city, town aud hamlet of the 
country, bearing in mind, however cheaply obtained, every dollar is to be 



62 



and will be ultimately repaid in gold and silver coin raised by taxation. 

Tliat I am not wrong in supposing if we launch this measure that we 
liave nothing else to put afloat, is quite apparent in the able speech of 
my friend from New York (Mr. Spaulding), who plainly occupied his 
ground reluctantly; for besides the 150,000,000 of notes he now proposes 
to authorize, he more than hints at the possibility of a further issue of 
demand notes, if Congress shall hereafter deem it necessary. I main- 
tain that the bill, as reported by the Committ^ of Ways and Means, 
should not pass, because it will infinitely damage tiie national credit; be- 
cause it will cut oflf all other chance of supplies ; because it will reduce 
our standard of legal tender, already sufficiently debased ; because it will 
inflate the currency and increase many fold the cost of tlie war; because 
it would slide into tlie place proper for taxation ; because, as a resource, 
it must ultimately fail, and tend to a premature peace ; because it is a 
question of doubtfUl constitutionality ; because it is an export facto law, im- 
moral, and a breach of the public faith ; because it will at once banish all 
specie from circulation ; because it will dampen the ardor of our men at 
home, as well as soldiers in the field ; because it will degrade us in the 
estimation of other nations ; because it will cripple American labor, and 
throw at least larger wealth into the hands of the rich ; and because there 
is no necessity calling for such a desperate i-emedy. I agree with the gen- 
tleman from New York (Mr. Spaulding) in one thing most cordially; our 
finances stand in need of the tonic of decided military success. WiUiout 
that our stocks will continue to be quoted flat. And yet I am no chronic 
grumbler. Standing at zero, our army rose as if by a magical wand and 
illumined the whole heavens by its magnificent sweep. Do not let it be 
said we rose like the rocket and fell like the stick. 

Mr. Chairman— It will be seen from the substitute, as proposed on the 
part of one-half of the Committee of Ways and Means, that I do not object to 
the issue of United States notes to a limited extent, to circulate as curren- 
cy. It is both convenient and proper. But I wish to have this issue 
marked by metes and bounds, saying at the outset, * thus far shalt thou 
go and no further.' Then, let them be based on as solid a foundation as 
the everlasting hills that they shall be the full equivalent of standard coin. 
This can be done by fixing the amount ample, but reasonable, that no 
more than the fixed amount shall at any time be put in circulation, and by 
providing taxation sufficient at all times to retire them or to maintain their 
full value. But, with all the earnestness I possess, I do protest against 
\ making anything a legal tender but gold and silver, as calculated to un- 
dermine all confidence in the Republic, whose reputation should be dearer 
to statesmen, as well as to soldiers, than life itself. « * # # 
We propose no neio isstie of Treasury notes, biU leave the fifty millions already 
avJlJuyrized to he issued and re-issued as may be found necessary or convenient. 
This win secure us against an inflated currency. 

Then it is proposed to issue $100,000,000 in United States notes, bearing 
interest at the rate of three and sixty-five hundredths per cent., payable 
at the pleasure of the United States, and allowing them with accumiQated 
interest to be received for all debts and demands (taxes included) due to 
the United States, except duties on imports, and exchangeable at the will 
of the holder, whenever presented in sums not less than fifty dollars, for 
United States seven and three-tenths per cent, coupon or registered stock. 
They are also to be received at par, with accumulated interest, for any 
bonds the Government may hereafter issue. These are to be paid out for 



63 



all salaries, debts and demands due to individuals and corporations, at 
their cptim within the United States, In substance this is very like English 
Exchequer notes issued in anticipation of revenue. It is most probable 
tfafise notes would maintain their credit at or near par; and if there should 
be any difference between these and gold, it would be an honest difference, 
visible to all men. As they accumulate they will be funded and retired, 
or re-issued, as the exigencies of the Government may require. They 
equip the Treasury as well as any legal tender paper could do, while bear- 
ing interest they would not pass into the general volume of the currency, 
and they afford the only possible channel of obtaining any considerable 
soms to be consolidated into stocks. They cannot exceed the amount of 
internal duties that will be levied, which will create a sure and constant 
demand for these notes, and sustain their credit in every State and Terri- 
tory in the country. 

We do not propose to receive these notes for duties on imports, for the 
reason that it is desirable to leave the tariff stable amid all fluctuations, 
and also that we may secure the coin we promise to pay out as interest on 
the bonds. 

It is then proposed, in order to perfect this plan in. all its parts, to is- 
sue $200,000,000 in coupon or registered bonds, payable in ten years, with 
interest semi-annually in coin, at the rate of seven and three-tenths per 
cent, per annum. This is comparatively a high rate of interest, and it 
may be necessary that it should be so, in order to get the stock taken up 
by capitalists ; but the time the bonds are to run is limited to ten years, 
because it would be much against the interest of the United States to en- 
gage to pay a high rate of interest for a long period of time. We think 
there can be no doubt that these bonds will all be taken, commencing as 
soon as the tax bill shall be passed. Unless the credit of the United 
States shall be utterly shattered, which is not for a moment to be appre- 
hended, these bonds must be considered a most desirable investment, both 
in large and small sums. 

It is proposed to issue $300,000,000 in coupon or registered bonds, pay- 
able in twenty-flve years, with interest at six per cent., payable semi-an- 
nually in coin. Usually, government bonds running for the longest time 
command the highest price, and for permanent investment are most eager- 
ly sought after, at home and abroad. As we emerge from our present em- 
barrassments, the other forms of debts due by the United States will na- 
turally be funded in such stock. 

We pi-omise coin for all interest on bonds, as it is indispensable that 
all engagements assuming this solemn form should in no instance repu- 
diate the standard of the Constitution. 

We strike out all words in relation to any foreign loan, as during this 
wiar we expect to fight our own battles, furnish our own means, without 
any foreign aid or assistanoe ; and if we can be permitted to do that we 
shall ask no favors. 

The substitute avoids all the material, and, we might say, fatal objec- 
tions to the original bill; is entirely practical and feasible in its character, 
and will not only relieve the Treasury from its present necessities, but do 
something toward making provision for the future wants. It is a ques- 
tion that will mark for weal or for woe an important page of our history ; 
and I invoke the courage and judgment of the Committee to meet the 
question with that cool deliberation its high moment demands.*^ 



64 



ROSCOE CONKLING's SPEECH. 

" Mr. Chairman— The member of the Committee of Ways and Means 
(Mr. Spaulding), by whom this bill was reported, was well warranted in 
all he said of its great magnitude, and of the thoughtful, serious, coura- 
geous attention due to its consideration. It concerns the life of the nation 
—the means whereby it lives. The credit of the government, like the 
credit of an individual, consists of the ability and integrity to pay all 
debts and i)erform all promises with scrupulous exactness and punctual- 
ity. This ability and integrity, this untarnished public faith and un- 
questioned pecuniary solvency is that without which no Government can 
long survive. Public credit alone cannot confer national immortality or 
national longevity , but the loss of public credit will be inevitably and 
swiftly followed by national decrepitude and national death. This is true 
in peace, when wars and rumors of wars are hushed throughout the 
earth ; it is true in uneventful times, in periods barren of action and pro- 
lific of repose ; but what shall be said of its urgent, warning truth, as ap- 
plicable to us in this dark hour of trial and of danger? Immediate and 
adequate financial facilities constitute^ beyond all question, the overtopping^ 
overmastering subjects with which we have tJie power to deed. 

Gentlemen have longed for victories to re-invigorqie the languishing energies 
of finance. Victory, no doubt, would exert a potent influence ; but, sir, 
the Treasury will control and decide the war, not the war the Treasurj". 
Indeed, the question of money and credit is all there is before us; it is 
practically the only unsettled question of the war. Armies and navies 
may perish, and a public credit, well preserved, can replace them ; but if 
the public credit perishes, the army and navy can only increase the disap- 
ter and deepen the dishonor. * ♦« «**#« 

I deny that any necessity Is upon us to take the case out of settled rules. 
We need money— large sums of money— and the whole resources and 
property of the nation are liable to pay tribute to raise it. We owe debts 
—large debts— and the whole property of the country is holden to pay 
them. Does anybody suppose that the security is not ample, or the re- 
sources not abundant? My colleague from the Erie District (Mr. Spauld- 
ing) told us that the taxable property of the nation amounts to sixteen 
thousand millions of dollars; and he produced a statement from the Cen- 
sus Bureau to prove it. In reality it is vastly more than that, because he 
gave us a self-fixed valuation— the valuation fixed by proprietors them- 
selves, having an interest in reducing and covering up the amount. 

According to my colleague, at the end of this fiscal year our debt will 
be only $650,000,000. One would think here was margin enough for Wall 
street. State street, or Chestnut street. Sir, it is margin enough, properly 
husbanded from first to last, to enable us to raise all the money we want 
at five per cent., and history proves it. 

Now, sir, what does this plea of necessity mean— this plea upon which 
we are invited to leave the trodden paths of safety, and seek new methods 
of * winning false moneys from the crucible called debt?' What is the 
necessity which prevents adherence to the old and approved methods of 
raising money? The arguments must be two-fold: First, that the peo*- 
pie will be better ready at some other time than the present to pay what, 
in the end, they must pay, with interest; and second, that necessary and 
legitimate taxation will be unpopular, and bring denunciation upon those 
who vote it. Sir, I take issue upon both propositions. I say the country 



65 



is rich and ready. Money is abundant— very abundant. There is in the 
loyal States $250,000,000 of gold— the gentleman from Massachusetts (Mr. 
Alley) said the other day $300,000,000— more than ever before, and if we 
deserve it, we can have it. The whole country is full of wealth. The 
enormous expenditures of this home war have been made among our- 
selves, and the money has remained here and not gone into the channel 
which foreign war prescribes for currency. The harvest has been abun- 
dant; materials and productions, raw and wrought, have been in great 
demand; and nearly every loyal State teems with the elements of ma- 
terial prosperity. From a very extravagant, we have lately become a 
very economical people, and thus the percentage, as well as the aggre- 
gate of savings of earnings, is unusually great. "We are able to pay now, 
and we never can pay better than now. ****** 

There is one thing, however, about the proposed banking scheme, and 
about the bill before us, intended probably to attract votes, which seems 
of very questionable policy and very doubtful ethics. I mean hostility to 
the existing banks of the country. And inasmuch as I own not a far- 
thing in the stock of any bank, and have not the slightest connection 
with one, perhaps a word in behalf ot banks in loyal States will be borne 
with from me. 

The present troubles, or rather their own patriotic action, have broken 
the banks ; for every commercial man in this House knows that the banks 
were never stronger than when the Secretary of the Treasury appealed to 
them for loans. Thej/ aMowed ike Government to carry off their specie^ their 
capital Jrom their vavlis, and if that did not break them, they at all events 
might have adopted a policy which would have saved them. But they 
had to suspend, and the design of this bill would seem to be to prevent 
their resumption of specie payment. At all events, it is obviously the 
policy in some quarters to preach a crusade against the present banks, and 
array prejudices and votes on that issue. ****** 

I propose to assign my reasons briefly for voting against the attempt by 
legislation to make paper a legal tender. The proposition is a new one. 
Xo precedent can be urged in its favor; no suggestion of the existence of 
such a power can be found in the legislative history of the country ; and 
I submit to my colleague, as a lawyer, the proposition that this amounts 
to affirmative authority of the highest kind against it. Had such a power 
lurked in the Constitution, as construed by those who ordained and ad- 
ministered it, we should find it so recorded. The occasion for resorting 
to it, or at least referring to it, has, we know, repeatedly arisen; and 
had such a power existed, it would have been recognized and acted on. 
It is hardly too much to say, therefore, that the uniform and universal 
judgment of statesmen, jurists and lawyers has denied the constitutional 
right of Congress to make paper a legal tender for debts to any extent 
whatever. But more is claimed here than the right to create a legal tender 
heretofore unknown. The provision is not confined to transactions in future^ 
but is retroactive in its scope. It reaches back and strikes at every exist- 
ing pecuniary obligation. This was well put by the gentleman from Ohio 
(Mr. Pendleton), and I concur with him that substituting anything for gold 
and silver in payment of debts, and still more of precedent debts, is of 
very doubtful constitutionality. ******** 

But, sir, passing, as I see I must, from the constitutional objections 
to the bill, it seems to me that its moral imperfections are equally seri- 



66 



ous. It will, of course, proclaim throughout the country a saturnalia of 
fraud— a carnival for rogues. Every agent, attorney, treasurer, trustee, 
guardian, executor, administrator, consignee, commission merchant, and 
every debtor of a fiduciary character who has received for others money, 
hard money, worth a hundred cents in tlie dollar, will forever release 
himself from liability by buying up for that knavish purpose, at its de- 
preciated value, the spurious currency which we shall have put afloat. 
Ever}' body will do it except those who are more honest than the Ameri- 
can Congress advises them to be. ITiink of savings banks entrusted with 
enormous aggregates of the pittances of tliC poor, the hungry, and the 
homeless, the stranger, the needlewoman, the widow and the orphan, 
and we are arranging for a robbery of ten, if not of fifty, per cent, of 
the entire amount, and that by a contrivance so new as never to haye 
been discovered under the administration of Monroe Edwards or James 
Buchanan. 

To reverse the picture : after the act shall have gone into effect, honest 
men undertake transactions based upon the spurious tender at its then 
value. By and by comes a repeal, and they are driven to ruin in multi- 
tudes by the inevitable loss incident to a return to metallic currency. 

The whole scheme pre-supposes that the notes to be emitted will be 
lepers in the commercial world from the hour they are brought into it; 
that they will be shunned and condemned by the laws of .trade and 
value. If this is not to be their fate, what is the sense, as was said in 
the Federal Constitutional Convention, in attempting to legislate their 
value up. Now, sir, I do not believe that you can legislate up the value 
of a thing any more than you can make generals heroes by legislation. 

Mr. Chairman— I believe all the money needed can be provided in 
season by means of unquestionable legality and safety. The substitute 
I have offered will, I believe, without essential alteration, effect that re- 
sult." 

Mr. Conkling estimated the national debt up to July 1, 1862, 
at $806,000,000, and concluded as follows: 

*' There has been no such occasion presented to a nation, no such de- 
mand made upon a nation during the lifetime of the human race. The his- 
tory of America, the history of fi'ee government, the history of constitu- 
tional libei*ty begins or ends now. We have our career and our tradi- 
tions as a nation ; they are safe ; but our history is yet to be made. Our 
destiny is without an ally in the world, with nations banded against us, 
to hold fast a continent in the midst of the greatest, guiltiest revolution 
the world has ever seen." 

Mr. Bingham, of Ohio, obtained the floor. 

Mr. Stevens offered a substitute for the original bill, which 
he asked to have printed. After Mr. Bingham had concluded 
his speech, the substitute thus offered by Mr. Stevens was or- 
dered to be printed. 



67 

MR. Bingham's speech. 

Mr. Bingham— ''It was far from my purpose, when T came early 
to the House to-day to attend a meetin^^ of the Committee on the Judici- 
ary, to enter upon any discussion of the important question wliich now 
commands the attention of the Representatives of the people; and but for 
some remarks which have been made to-day by the honorable gentleman 
from New Yo'rk (Mi*. Eoscoe Conkling), I would not feel disposed now to 
address the Committee. But, sir, as a Representative of the people, I can- 
not keep silent when I see efforts made upon this side of the House and 
upon that to lay the power of the American people to control their cur- 
rency — a power essential to their interests — at the feet of brokers and of 
city bankers, who have not a title of authority, save by the assent or for- 
bearance of the people, to deal in their paper issued as money. 

I am here to-day to assert tlie riglitful authority of the American peo- 
ple, as a nationality, sovereignty, under and by virtue of their Constitu- 
tion. In saying that the people of tliis Republic are one people, a sover- 
eignty, I do not feel that I shall be confj-onted by any of the great names 
of the illustrious dead who have suddenly found favor with gentlemen 
upon the other side of the House. Living, there was no epitliet in our 
language too severe in its condemnation, or too much uncharitable in its 
import, for the fit denunciation by certain parties of the alleged political 
heresies of the illustrious man, Alexander Hamilton, and that other illus- 
trious man, Daniel Webster, who for strength of intellect stood alone 
among the living ; and now dead, in his honored grave, sleeps alone by 
the sounding sea. I am not myself of that class of admirers who perse- 
cute men while living and heap tuns of granite and pour empty adulation 
upon their ashes when dead. I prefer to respect them and their authority 
while they stand among the living men of to-day. These great names 
have been invoked in this debate. For what purpose ? For the purpose 
of denationalizing the people ; for the purpose of stripping the American 
people of the attributes of sovereignty ; for the purpose of laying, as T 
said before, at the feet and at the mercy of brokers and hawkers on 
'Change the power of the people over their monetary interests in this hour 
of national exigency. 

Sir, there is nothing in the records of these illustrious men that justifies 
any such base use of their utterances, wliich were made not only for the 
instruction of the men of their own day, but for the guidance of all that 
were to come after them. I venture to affirm— without having recently 
had the opportunity to read much of what he said upon that subject — that 
Alexander Hamilton, peerless almost among the founders of the Consti- 
tution, never intimated in any paper of his that the Government of the 
United States could not, at its pleasure, issue Treasury notes, either 
payable upon demand or payable upon time. There was much said by my 
respected colleague (Mr. Pendleton) with which I entirely and altogether 
agree ; but, sir, when my colleague seemed to intimate in his argument 
that he found any warrant in the elaborate papers of Alexander Hamilton 
against this authority or power of the Congress of the United States to 
authorize the issue of Treasury notes, either payable upon time or upon 
demand, he greatly mistook the spirit of all he has written, and which has 
been transmitted to us. My colleague was adroit in the handling of the 
papers of Hamilton, wliich will live as long as our language lives. He 
was one of those meu upon whom it pleased God to confer those extraor- 




68 



(liiiary gifts which dommand the homage and admiration of men, whether 
they agreed with him or not. The passage which my colleague quoted 
IVoiii liis work was an argument in which he showed the propriety of 
establishing a national banl^i authorized to issue currency, and he gave 
(M^rtaiu reasons therefor. My colleague is a most excellent lawyer. He 
knows well, and so did Hamilton know well when he made that argu- 
ment, that what the Government does by another it does by itself." 

Mr. Binguah argued at great length that Congress had the power un- 
der tlie Constitution to authorize the issue of Treasury notes, payable on 
demand or payable on time, redeemable in gold and silver, or other le- 
galized coin, and make them a legal tender; and that the present bill did 
not contemplate any other issue. He insisted that Congress, by the Con- 
stitution, was invested with certain powers, and as to the objects, and 
within the scope of those powers, it was sovereign. That the Constitution 
contained no words giving to Congress the power to make gold or silver 
coin, either foreign or domestic, a legal tender. It has the power to coin 
money, and regulate the value thereof and of foreign coins, but the Con- 
stitution does not contain any words declaring that these coins shall be a 
le()(d tender. The point I make is this: Congress has power by the Con- 
stitution to fix the standard value of foreign coin and of domestic coin, 
and the power to declare a legal tender, and that these powers are dis- 
tinct. It may declare what shaU he a legal tender, either foreign coin or do- 
mestic coin, or paper representing coin. It is done by act of Congress. 
Nothing ever was a legal tender under the Constitution in discharge of 
debt but by express provision of an act of Congress. That the power 
" to regulate commerce" confers on Congress the jwwer to declare what 
sliould be received in payment of debt. It is not restricted to gold and 
silver, but the Government may issue Treasury notes, redeemable in gold 
and silver, and declare them a legal tender in payment of debts. He de- 
nied that this bill would " impair the obligation of contracts." There is 
no such limitation as that imposed by the Constitution upon the power of 
(Congress. It is a limitation upon the States, and not upon the United 
States. It was not by inadvertence that the framers of the Constitution 
omitted to impose upon Congress this express restriction upon the States 
against impairing the obligation of contracts. They proclaimed in the 
absence of such limitations that whoever, within the jurisdiction of the 
United States, enters into any mere money contract, either public or 
private, enters into it subject to the sovereign power of the people, to 
determine at any time, by legislative enactment, what shall discharge 
it. It is of the essence of the contract. 

He did not share in any of the fears entertained or intimated that the 
people will revolt at this measure. He had an abiding faith in their 
loyalty, in their love of law, in their settled purpose to suffer and strive, 
to labor and sacrifice, that they may maintain their Government and 
transmit it unimpaired to their children." 

Mr. Sheffield, of Rhode Island, followed Mr. Bingham in a 
lengthy speech in opposition to the legal tender clause in the 
bill. He insisted that it was unconstitutional, and an odious 
feature. The fact that you propose to force these notes upon the 
public against the will of the people implies that force is neces- 
sary, in your judgment, to induce people to take them. He said 



69 

that if the legal tender clause was stricken out he would vote for 
the bill, notwithstanding it was objectionable in other respects. 
(Mr. SheflSeld's speech will be found reported in the Congressional 
Globe, page 640-1.) 

On "Wednesday, February 5th, several speeches were made for 
and against the bill, all of which are fully reported in the Ca)i- 
gressional Globe, but the limits of this narrative will not admit of 
their being published here. Only a brief sketch can be given at 
this time. 

Me. Chrisfield, of Maryland, spoke for one hour in opposition 
to the legal tender clause in the bill. 

*' He admitted that the accustomed currency was wholly inadequate to 
meet the exigencies of the war. The Government has for many years 
used gold and silver, and it is deeply to be regretted that it is obliged to 
depart from this desirable standard. But we are left no option. The sup- 
ply of the precious metals is inadequate to our wants. If all the gold and 
silver in the country was placed at the control of the Government, it 
would be received and paid out twice in one year. It is, therefore, im- 
possible for the Government to pay in coin. The business of the country 
and the business of the Government require some substitute for coin. We 
must therefore create a new or vastly enlarge the existing currency. We 
must therefore create a public debt, establish a currency, and impose new 
taxes. This necessity being admitted, the only question is how can these 
objects be accomplished with the least prejudice to the people, and the 
greatest convenience to the Government? This is a grave question — the 
gravest which these times present. It is the question which lies at the founda- 
tion of all other questions; and on its sohUion depends sxiccess in every other 
erUerprise,^'* 

He argued at great length that the legal tender clause was un- 
constitutional, and that it would not be just to the creditor class 
of the community. He moved to strike out this clause in the 
bill, and also the clause which compelled persons in the employ 
of the government to receive the notes for ** salaries, debts and 
demands owing by the United States," so as to make them only 
''receivable for all debts and demands due the United States. ' 
He urged heavy taxation, and was generally favorable to the bill, 
if the amendments were made which he proposed, but could not 
vote for the bill with the legal tender clause retained. (Ajipon- 
dix to Congressional Globe, page 47-48.) 

Mr. Pike, of Maine, spoke for one hour in favor of the bill. 

'*He argued that the plan was expedient as well as constitutional. Upon- 
the clause in the bill providing tliat the notes shall be a legal tender thon^ 
has been much discussion here and elsewhere. Its importance to the 
measure cannot be overestimated. He regarded it as the life of the plan. 



TO 

Strike U out and are bid dupUcaliwj notes already at a discounL It is real-* 
ly the siMJcie clause, and no hard money man— and he claimed to be one — 
should vote for the issue of these notes without it. It is well known that 
Mr. Clay rested his support of the second bank upon the clause granting 
('ongress **the power to make all laws which shall be necessary and 
proper for carry in^i^ into eftect the powers," expressly granted by the 
eighteenth section of the first article. The great patriot of the West, in 
time of profound i)eace, wad disposed to consider the financial question of 
such magnitude as to plan a law calling into being a fiscal agent among 
those whicli were *' necessary and proi>er.'' With how much more force 
can we, situated as it were, among the dying agonies of tlie republic of our 
fatlierK, acting as many wise men believe, as tlie last Congress which, un- 
der the Constitution, shall n^present the whole countrj', claim that all 
power which, under any circumstances, could be exercised by the Repre- 
sentatives of the people, should be used now.'' 

Mk. Alley, of Massachusetts, made a well-considered speech 
of one hour in favor of the bill. 

•The measure l)efore the House received the approbation of his judgment. 
He could see clearly that under its provisions the rights of all will be pro- 
tected, the prosperity of the whole people ]»rom()ted, the credit of the 
Government revived and its power and dignity maintained. Beneficent 
as this measure is, as one of relief, nothing could induce him to give it his 
sanction but uncontrolable necessity. While he had always believed it to 
l)e the duty of Congress to regulate and control th(» currency by such leg- 
islation as would make it of uniform value throughout the country, he 
had never regarded it as politic or wise for the Government to make is- 
sues of paper at any time, except for temporary emergencies. Disguise 
it as you may, everybody knows that knows anything of the laws of 
trade, that to carry this people through this crisis, collect $150,000,000 tax, 
maintain these vast expenditures, and conduct the legitimate and neces- 
sary business of the country, you must increase the volume of the curren- 
cy to such an amount as to make it impossible, under the present banking 
system, to give it contidence upon tlie ground of its immediate converti- 
bility into specie. The question then for Congress to decide, is whether 
the Government shall share with the ])anks — and keep them in check — this 
circulation, or purchase their irredeemal)le bills at ruinous rates. If you 
do not adopt this measure you will see the country flooded with irredeem- 
able bank currency, a great deal of whicli will be found, as after the war 
of 1812, utterly worthless. At that time Govcrnnunit securities were ex- 
changed at eighty cents on the dollar for worthless bank promises, not 
worth the paper upon which they were written/' 

Mk. Alley concluded his remarks as follows: 

" Why, I ask, are government securities worth in the market to-day^ 
but ninety cents on the dollar in exchange for irredeemable bank paper? 
Is it because they have confidence in bank pai)er, or because it will com- 
mand specie? Not at all ; but because the bank paper will liquidate the 
obligations of debtors. It is for you to determine whether government 
obligations shall be as good as irredeemable bank notes; and whether you 
will jiUow these irredeemable issues to be preferred and fake ])recedence of 



n 

& national cumncy issued by a Government, that never i*6pudiated a dol- 
lar of its indebtedness ; and a nation whose fabulous growth, immense in- 
terests and exhaustless resources, have excited the wonder and admiration 
of an astonished world. I confess that when I reflect upon our condition, 
and the misery and suflFering which such a policy inflicts upon the busi- 
ness interests of the country, I can have no toleration for such suicidal ac- 
tion. Congress has the power to inaugurate to-day a system of financial 
IK>licy, both for Government and people, which will establish our prosper- 
ity upon a firm foundation, and give strength and stability to all our insti- 
tutions ; and I conjure you, by all the memories of the past and every hope 
in the future, not to disappoint in this moment of peril the just expecta- 
tions of the American people*" 

While Mr. Alley was making his speech, Mr. Spaulding re- 
ceived from Secretary Chase a private note, urging the import- 
ance of having the vote taken on the bill that day. It was known 
that Mr. Horton, a prominent member of the Committee of Wa3's 
and Means, desired to speak in opposition to the bill, and that 
several other members desired to express their views of the meas- 
ure before the vote was taken. 

The Treasury was nearly empt}'. Money, or other available 
means must be had right off. The^ pressing demands made upon 
the Treasury could not be put off much longer without ruin to 
the credit of the Government. The Secretary had authority un- 
der the Loan Act, passed at the extra session in July, still remain- 
ing, to issue $46,000,000 of Treasury notes bearing 3-65 per cent, 
interest, or, at his option, to issue notes ; but was unable to 
put out either class of this paper witliout a discount. The 7-80 
notes could not be paid out from the Treasur^^ except at a dis- 
count of two per cent. , and he could not pay out the 3-65 notes 
at all, because they would not pass as currenc}^, except at a still 
greater discount — tlie rate of interest was so low that they were 
not desirable as an investment, and not being a legal tender the}- 
could not be made available at par as a currenc}'. 

The following is a co\yy of the note received from Secretary' 
Chase at this time : 

"Such men as Nathaniel Thayer, of Boston; Alexander Duncan, of 
Duncan, Sherman & Co. ; Shepard Knapp and John D. "Wolf, and numer- 
ous able and leading financial men, have told me within two days that you 
were perfectly right, and they are deeply anxious that the legal tender 
clause should stand in the bill. They say the country is lost without it.'' 

Treasury Department, February 5, 1862. 
My Dear Sir — I make the above extract from a letter received from 
the Collector of New York this morning. It is very important the bill 
should go through to-daj-, and through the Senate this week. The public 
exigencies do not admit of delay. 

Yours truly, 

Hon. E. G. Spai ldtng. S. P. CHASE. 



7^2 

After receiving this note from the Seeretar3', Mr. Spaulding 
thought it desirable that a time should be fixed for closing the de- 
bate on the bill He thought it desirable that Mr. Iloilon and 
Mr. Stevens, members of the Committee of Ways and Means, 
should speak, and such others as were prepared, and that the vote 
should be taken the next day. 

The following proceedings took place in the House. 

Mk. Wright obtained the floor. 

Mr. Spaulding— I move that the Committee rise with a view of clos- 
ing this debate.-' 

Mr. Campbell—*'! hope this motion will be agreed to, and that this 
bill will be pressed to a vote to-day." 

Mr. Spaulding — " I desire to say, in connection with this motion, that 
I have within the last two or three hours received a note from the Secre- 
tary of the Treasury informing me that it is absolutely necessary that we 
should press this measure to a vote without further delay. Therefore I 
move that the Committee rise, with a view of closing debate." 

Mr. noRTON— ** I wish to say that the Committee of Ways and Means 
do not make this motion, and I hope it will be voted down." (" Good!'' 
**Good!") 

Tub Chairman—'* The Chair would state that this question is not de- 
batable." 

Mr. English—*'! move to lay the motion upon the table." 
The Chairman—** That motion is not in order in committee." 

The question being upon the motion that the Committee rise. 
Mr. Roscoe Conkling demanded tellers. 

Tellers were ordered, and Messrs. Blair, of Missouri, and 
Thomas, of Massachusetts, were appointed. 

The Committee divided, and the tellers reported — yeas, 52; 
nays, 62. 

So the motion was not agreed to. 

Mr. Spaulding — ** With the permission of the gentleman from Penn- 
sylvania, I wish to make one word of explanation in reference to the mo- 
tion I made. The object of the motion was simply that we should limit 
this debate, with a view that we might take a vote upon the bill to-mor- 
row, say at one o'clock. I expected to go immediately back into commit- 
tee to allow the gentleman from Pennsylvania to make his speecli, and 
then to allow Mr. Horton to speak, and then Mr. Stevens to close the de- 
bate. After that the vote would be taken." 

Mr. Thomas, of Massachusetts—** Then you arrange the manner in 
which speeches shall be made on this floor." 

Mr. Lovejoy— ** I would like to know whether the gentleman from 
New York has any right to farm out the floor?" 

Mr. Spaulding—**! make this explanation with a view to show the 
House that I have no disposition to cut off any member of the Committee 
or to force a vote unduly. The motion was made under the necessity 
which, the Secretary of the Treasury assures ua^ exists for passing this 



IS 

bill. I did not make it with a view to cut off those who are entitled to 
speak, by courtesy or otherwise. I think this explanation * will satisfy the 
House that there was no effort upon my part to force a vote improperly. 
I did not expect to have a vote until to-morrow at one or two o'clock. 
After the debate is closed, we proceed to voting upon amendments which 
are pending, and which may be offered, and then five-minute speeches 
will be in order, as upon other bills. Those speeches can be continued 
until amendments are exhausted.'' 

Mr. Wright, of Pennsylvania, spoke for half an hour in op« 
position to the legal tender clause of the bill. 

** He was willing to do almost anything that he considered constitution- 
al to aid in putting down the rebellion, but Tie did not feel justified in go- 
ing so far as to vote any such measure as the legal tender bill. He con- 
curred in the views of Mr. Pendleton that it was unconstitutional, that 
nothing but gold and silver could be made a legal tender in payment of 
debts. The people have means enough in their possession, and he was 
willing to go for taxation to the uttermost limit, but the time had not yet 
arrived when we should resort to such an extreme measure as to make 
these notes a legal tender." 

Mr. Horton, of Ohio, a prominent member of the Committee 
of Ways and Means, made a lengthy speech in opposition to the 
legal tender clause in the bill. 

"He thought we were taking a dangerous departure from the financial 
system of the country. If this bill passes, as he hoped it would not, this 
will be a point from which we shall date a new financial system for the . / 
United States. " Old things will have been done away ; all things will ' 
have become new." He thought the Loan bill and the Tax bill should 
have been passed through this House side by side. The Committee of 
Ways and Means were convinced of the importance of this, and were 
desirous that it should be done. (Mr. Horton was one of the sub-com- 
mittee on the Tax bill.) It is from no neglect of the Committee of Ways 
and Means, or of the sub-committee which has had the preparation of the 
Tax bill in charge, that the Tax bill and Loan bill have not been brought 
forward side by side. The sub-committee on the Tax bill have worked 
night and day ; and although they do not get much credit for being indus- 
trious, still substantial progress had been made. 

There were two measures before the House, and he proposed to discuss 
them. One was the proposition of the gentleman from New York (Mr. 
Spaulding) and the other that of the gentleman from Vermont (Mr. Mor- 
rill). He insisted that the three-sixty-five hundredths per cent, notes, 
proposed in Mr. Morrill's plan, possessed ** all the characteristics for circu- 
lation which the Treasury notes of Mr. Spaulding's bill will have (save 
the legal tender clause), and have the important advantage of earning in- 
terest, and being fundable in a more desirable stock for the holder, be- 
cause bearing a higher rate of interest, and more advantageous to the 
Government, because having only half the. time to run, the Government 
can redeem them at an earlier day." The Committee of Ways and Means 
are equally divided in regard to the two bills. He was for the substitute 
of Mr. Morrill, and decidedly opposed to the legal tender scheme. He 
thought we had not yet reached the point when the Government, exercis- 



74 

ing its hi«rli prerogatives, as Mr. Spauliling called them, can take for its 
use the proi>erty of the citizen without pay. Necessity for this measure 
lias been asserted, hut not proved. The Secretary of the Treasury thinks 
it is necessary, but he thought he was mistaken." 

Mr. Ilorton argued at great length against the injustice and in- 
expediency of making the notes a legal tender, and concluded as 
follows : 

**Mr. Chairman— I thank the Committee for listening to me so long. 
You know that I am unaccustomed to speaking in the House, and my 
remarks of course have been very desultory. But I wish to impress upon 
the Committee that these opinions of mine are not merely opinions super- 
induced by a hoptifid temperament. I have, according to the best of my 
knowledge, examined this whole question in all its bearings, and I am 
willing to take the responsibility of voting against this legal tender clause 
of the bill for the reasons that I have given, and for divers and sundry 
reasons which I have not given. I ask the Committee to pause before 
they take a step w hich, once taken, will be irrevocable. When you have 
once broken a pitcher it never becomes whole again ; and this fair fabric 
of our untarnished faith and unbounded wealth and credit ought not to be 
destroyed, simply because our leaders — men that we have faith in— have 
become alarmed, and have told us that there is a necessity for it. When 
I there is danger, Mr. Chairman, then is the time to be cool and look about 
' you, and to see that you take no false step. Now is that time, and if you 
take this step, it is a step downwards, and you will find that to regain 
the high eminence from which we shall have descended is a labor very dif- 
ficult to accomplish." 

Mr. KELLO(iG, of Illinois, obtained the floor. 

Mr. Spatjldino— "I ask the gentleman to give way to me for a few 
moments, and then I will move that the Committee rise," 

Mr. Kellogg, of Illinois— -'I yield for that purpose." 

Mr. Spaulding — "I wish to make one statement in reference to the 
condition of the Treasury, which I presume all will be anxious to know 
before we adjourn. The Secretary of the Treasury has yet unexpended 
of the loan of last July $40,000,000. He has a light to issue this sum in 
three and sixty-five hundredths per cent, notes, or in seven and three- 
tenths per cent notes ; but he is unable to put out either of these classes 
of paper without a discount. He cannot pay out the seven and three- 
tenths per cent, notes without a discount of two per cent., and he cannot, 
pay out the three and sixty-five one hundredths per cent notes because 
they will not be taken as currency. Ihis bill of Mr, Morrill proposes sinv- 
ply to repeat the authority to issue the same kind of notes, which cannot be is- 
sued advantageously by the Secfi^etary of the Treasury at this time, 1 move 
that the Committee do now rise." 

The motion was agreed to. ***** * 

Mr. Spat^lding— " I move that all debate on House bill No. 240 be 
closed in one hour after its consideration shall have been resumed in the 
Committee of the Whole on the state of the Union." 



75 



Mr. Thomas, of Massachusetts— "I suggest to the gentleman to modi- 
fy his motion, so as to make it read two hours." 

Mr. Spaulding— " The exigencies of the country arc such tliat I can- 
not consent to do so unless the House so order it." 

■ Mr. Vallandigham — I move to amend the motion by striking out 
* one hour' and inserting * two hours.' " 

The amendment was adopted, and the motion as amended was 
agreed to. 

passage of the bill in the house. 

Thursday, February 6, 1862, was an exciting and important 
day in the House. The final vote on the legal tender note bill 
was to be taken, and in anticipation of the vote there was a very 
full house. In pursuance of the order passed last night, general 
debate was to be closed in two hours after the bill should be taken 
up in Committee of the Whole. The House on meeting and dis- 
posing of a little preliminary business, immediately resolved it- 
self into Committee of the Whole, and resumed the considera- 
tion of the bill. The Chairman announced that general debate 
on the bill would close at ten minutes past two o'clock P. M. 
While debate was continued, Mr. Frank and Mr. Colfax, who 
were friendly to the bill, passed around the House with a list, 
making a canvass of how the different members would vote on 
the legal tender clause. Upon footing up the list, it was ascer- 
tained that there was a large majority in favor of making the 
notes a legal tender. 

Mr. Kellogg, of Illinois, being entitled to the floor, spoke for 

over half an hour in favor of the bill, not as a j)mce measure, 

but as Sitvar measure. He said: 

'* I intend to detain the Committee but a little while. I should not have 
sought the floor for the purpose of ofi*ering any remarks, but for the con- 
sideration that, in my judgment, this bill was being considered and dis- 
cussed as it might Avith propriety have been discussed and considered in 
time of peace, and when there was no pressing necessity for the action of 
Congress in placing the Government in possession of all the means and 
powers that can be safely gathered and exercised under the Constitution. 
If this question came up in ordinary times, lam frank to confess, that I 
mighty perhaps, have had some doubt of its consiitutionaliii/ sufficient to induce 
me to oppose it, I mean by that oTity to say that in time of peace, when the 
integrity of the Government is not threatened, I woidd be more careful and 
cautious ; and if I doubted the constitutionality of the meoMire 1 would not vote 
for it. But, sir, in this our extremity, while toe are struggliiig to perpetuate 
our Government, I am willing to go to the very verge of the Constitution, I 
will go as far as I feel that the Constitution will permit me, to gather up 
the power and means to carry on the Goveniment to that great consum- 



76 



mation which the fathers contemplated when they established it But 
while I uii>rht liavc some doubt in time of peace, when the monetary af- 
fairs of the country mifrht safely be left to work out their own leyel and 
settlement, of the i>ollcy of this measure. I have none now. What may 
be policy in the one case may l>e vastly different in the other. 

I treat this, Mr. Cliainuau. as emphatusoPy and clearly a tear measure. 
It may appear strange that a money bill should be considered a war 
measure, and yet it is : for il is ntcea^ary in order to raise means to carry 
on the Government in a war direction — a direction in which all our meas- 
ures are or should be tendin<r. >?ir. we should not disguise the fact of our 
complications. AV« should not deceive ourselves. The worst deception 
that men ever i>ractice is that practiced on themselves. We should not al- 
low ourselves to be deluded, now that we have a mighty rebellion— nay, 
revolution— before us, and tliat tlie Powers of the Old World, who have 
looked with a jealous eye on tlie mighty progress of the Western Contin- 
ent, are seeking occasion to cripple our onward and upward career. Talk 
not of their sympathy for us. Our Government antagonizes theirs. The 
principles are diflerent. We must gird up our loins: we must take all the 
power we have; we must throw every energy, all the means of our Gov- 
ernment, in the direction of the war power, for the purjwse of self-preser- 
vation and perpetuation. 

Mr. Chainnan, we must look tliis jnatter in the face, not onh' of this 
continent, but in the face of surrounding nations. We must come to the 
conclusion tliat although the world shall rise against us, this Republic 
must and shall be preserved. All the energy of the countr}\ all the blood 
and treasure of the country, if need be, must be summoned in from every 
part of the land to accomplish tliat object. Sir, we must give to this Gov- 
ernment arms of iron and muscles of steel. We must think as with fire 
and strike as with spears. It is necessary, sir, it must be; and if we now 
meet this emergency as true men should meet it, we shall succeed. 2he 
money of tJie courilry must come to Us aid, the powers of the Government must 
come to the aid of the Administration, as well a^ the strong ha7ids and wann 
Juanrta of our people. 

Mr. Chairman, I am pained when I sit in my place in the House and 
hear members talk about the sacredness of capital ; that the iyiterests of money 
must not be touched. Yes, sir, they will vote six hundred thousand of the flower 
of the American youth for the Army, to be sacrificed, without a blush; but 
the great Interests of capital, of currency, must not be touched. We have 
summoned the youth; they have come. I would summon the capital; and 
If it does not come voluntarily, before this Republic shall go down, or one 
star be lost, 1 would take every cent from the treasury of the Sta,tes, 
f^om the treasury of cai)italist8, from the treasury of individuals, and press 
it into the use of the Government. 

WfuU is capital worth witliout a Government f Gentlemen must under- 
stand me, when I indulge in this strain and speak in this strain and speak 
of this talk and quibble about capital, that I dx> m)t charge it upon the reed 
capitalists of t/te country, for they do not hold back. The true capitalists of the 
covmiry are pcUriolic ; they have furnished their means liberally; but there 
is a class of huckstering capitalists, there is a class of bankers proper, 
there is a class of brokers, who would make merchandise of the hopes and 
fears of the Republic. # # # # # 

It is said there is no power to make these notes a legal tender, and that 



7T 



that is not a legitimate way of expressing tl^eir value. If gentlemen are 
sure upon that subject, they would do well to run back a little further 
and ascertain whether there is any power under the Constitution vested 
in Congress to issue the notes at all.i And I confess the argument of the 
gentleman from Ohio (Mr. Pendleton) ran back legitimately to that prop- 
osition.' At least it carried my mind back to that proposition so fairly and 
certainly, that if I found no power to issue these notes, I would have voted 
against this bill. To that my mind has turned with every argument that 
has been made. I may have been obtuse, but I confess that I have come 
to the conclusion that we have the constitutional power to issue these 
notes ; and having that constitutional power we have, as an incident to that 
fdwer, the power also to make them of value b}' making them a legal ten- 
der. The gentleman has voted more than once for the issue of Treasury 
notes to pay debts owing by the Government, which were payable in 
coin. If we have power to issue Treasury notes, we have the power to 
fix the value of the issue. It is an incident to the power of issuance. Let 
them be issued as njoney, to take the place of money. Let there be no 
deception ; let the creditors of the Government know whether we are to 
palm off a spurious depreciated currency under the guise of money. If 
we have the right to issue it, and impress with the denomination of five 
dollars, why not stamp upon its face that it is five dollars everywhere ?" 

Mr. Thomas, of Massachusetts, made a speech against the le- 
gal tender clause in the bill. 

** He regarded this clause as unconstitutional, unjust, and inexpedient. 
The question had never been settled by judicial authority, but the weight 
of reasoning by Webster, Madison, and others, was strongly against the 
validity of this clause in the bill. He argued that nothing but coined 
money could be made a legal tender in payments of debts ; that a matured 
debt could not be paid by another promise. He regarded this clause in 
the bill in the nature of a forced loan, in itself a confession of weakness. 
The friends of this feature of the bill admit the reluctance with which they 
assent to it. The only ground of defence is its necessity, that no alterna- 
tive is left to us. He deeply respected their motives, but could not himself 
see the necessity." 

Mb. Edwards, of New Hampshire, made a speech in favor of 
the bill. 

** We find ourselves confronted by an exhausted Treasury, and without 
the means of meeting its existing, or its constantly accruing liabilities. 
The amount of floating liability now due is $100,000,000. The figures pre- 
sented in the opening speech of this debate are immense — almost appalling. 
Funded and floating it is now $400,000,000; on the first of July next it will 
be $650,000,000, and if the war continues $1,200,000,000 in one year from 
that time. He was in favor of taxation to pay ordinary expenses and in- 
terest, and ultimately a sinking fund, but lie was in favor of the issue of 
Treasury notes for the purpose of meeting immediate expenditures, and all 
parties seemed to concede that Treasury notes in some form must be is- 
sued. The bill reported by the Committee of Ways and Means, and the 
substitute offered by Mr. Morrill, may be regarded as the only propositions 
now before the House. It is understood that the other propositions will 
be withdrawn, and that the dissenters from the bill will concentrate on 



78 



this substitute. They agree in the main features of the plan, and differ 
only in details. He thought the notes proposed by Mr. Morrill's plan 
would not pass current among the people or the banks, but would neces- 
sarily depreciate. The army and navy might be compelled to receive 
them at par, because tlie Government had nothing else to give them, but 
they could not afterwards pass them without a large discount, which 
would be unjust to the men lighting our battles. He thought that would 
be a lack of faith of the most flagrant description— more objectionable by 
far than the legal tender clause. He also objected to the high rates of in- 
terest proposed for the bonds to be issued in funding the notes. 

The substitute provides for a depreaaUdimrrency and a MghraU of interest 
He thought tlie currency proposed by the substitute would demoralize the 
country as much, or more, than the legal tender notes, and would not pos- 
sess as many advantages to the Government. 

The legal tender notes would give instant means to the Treasury, so much 
needed at this time, without looking to intermediate ^legotiation to furnish 
them. The original bill was the one in all material respects to be preferred 
to the substitute, one of wliich it is distinctly understood will be adopted." 

Mr, Kiddle, of Oliio, made a speech against the propriety' and 
expediency of issuing the legal tender notes. 

** He doubted the constitutionality of the measure. He thought there 
was no real money, except the metals coined in pursuance of law and a 
fixed standard, (.'an money be made of paper? Clearly not, by calling it 
money or b}' stamping it as money by the Government. It would not 
stand the commercial test. Paper has no appreciable intrinsic value, and 
its exchangeable value is of the lowest possible grade. The only high de- 
gree of value it can ever attain is that which may be imparted to it by that 
which is written or printed upon it. It is apparent that the whole quan- 
tity of tlie circulating medium must be materially increased, for obviouslj*^ 
that which was only equal to the demands of commerce and the ordinarj' 
wants of the Government, is wholly inadequate now to the same demands 
and the extraordinary wants of the Government. He was opposed to the 
legal tender clause, and would vote to strike it out; if that fails, I will 
choose between the bill aiwl its defeat." (He voted for the bill on its final 
passage.) 

Mu. Blakk, of Ohio, spoke in favor of the bill. 

At no time in the history of our country was the peril to our free insti- 
tutions greater than now. The bill is brought forward as a war measure, 
to meet the i)ressing demands now on the Treasur5\ He argued that it 
was constitutional to issue Treasury notes and make them a legal tender. 
He insisted that it was a necessary and i)roi)er means of carrying into ef- 
fect the war powers— to raise and support armies and to provide and main- 
tain a navy. We are now in the midst of a gi*eat National exigency, and 
one, too, that we must provide for; and one that in the application of the 
means there must of necessity be great latitude of discretion, and denied 
that legal tender paper money was prohibited." (He read from the debates 
on the formation of the Constitution, Vol. 5, ])age 435.) 

Mr. Mason — **IIe was unwilling to tic the hmuh of the Legislature, He 
obsers'cd that the late war could not have been carried on had such a pro^ 
hibition existed." 



79 



Mil Butleb— " That paper was a legal tender in no country in Europe." 

Mb. Mason— "Was still averse to tying the hands of the Legislature al- 
together. If there was no example in Europe, as just remarked, it might 
be observed, on the other side, that there was none in which the Govern- 
ment was restrained on this head." 

Mb. Blake continued his argument, insisting "that the Convention 
which fhtmed the Constitution did not attempt any prohibition, but left it 
to Congress to make Treasury notes a legal tender whenever the exigency 
should arise to make it necessary. It was denied in express teiTQS to the 
States^ and permitted in implied terms to Congress. It being constitutional, 
is it necessary to make Treasury notes a legal tender? By these notes we 
are enabled to pay our soldiers, and it is the only means we have to pay 
them. Does not every gentleman know that if these notes w ere paid to 
our soldiers without making tliem a legal tender, they will immediately he 
sold at a loss to the soldiers of from four to twenty per cent, ? 2his is not conjec- 
tu/re: this very thing was done here only lad month; soldic7's were shaved by the 
money-shavers of this District from four to tw&rdyper cexL on the demand Treas- 
ury nates they had received from the Govemmefit. We are not legislating for the 
money-shavers, who ojypo^e this bill, but for the people, the soldiers, and laboring 
classes.^'' 

Mr. Campbell, of Pennsj'lvania, spoke in favor of the bill. 

" He said, it is proper that each member of this House should, however 
briefly, express his views on the pending bill — one of the most, if not the 
most, important bills of this season. To support our armies in the field 
and navies on the seas is a plain, patriotic and necessary duty; to do this 
with prudence, economy and foresight, is the highest evidence of states- 
manship. That we have vast National resources, all admit; that the pub- 
lic debt has for its security the whole property of the nation, is equally 
plain. Tlie powers of the Government are ample— they extend to life and 
property. He would fall sliort of his duty in tliis tremendous issue, in 
which free government is on its final trial, who would not, if necessary, 
vote the last man and the last dollar to defend and per].)ctuaie the piceless ifiheri- 
tance of our fathers, 

I humbly conceive my duty to be a plain one. The path I have marked 
out for myself I will follow, let it lead where it may. Whatever measure 
is now or hereafter may become necessary to adopt in order to maintain the 
Union and perpetuate free Government, that will I support. Speak not to 
me of "objections" and "scruples" and "dangers," of "Constitutional 
objections" and "conservative influences." Sophistry is ever plausible, 
and opjwsition to a just and necessary measure generally wears the mask 
of a " Constitutional objection." Tlie highest duty of every member is to 
maintain the Union— to sustain the Constitution against this causeless and 
wicked rebellion ; and in doing this, let us bear in mind that the Cons^titu- 
tion was made for the people— to secure to thorn and their posterity the 
blessings of free government. Therefore, with me tlie primary inquiry is, 
is this measure necessary to suppress the rebellion? If it is, here am I 
ready to sustain it. It will be found the Constitution gives anii)le power 
to sustain this view. 

The bill now before tlie Committee is necessary to sustain the credit of 
the country, and to carry on the war. It is with reluctance tliat 1 have 
come to this conclusion. I do not like the necessity which exists for the 
legal tender clause; still less do I like to place the issues of the Govern- 



80 



ment in the hands of the broken and money-lenders of the couutr}'. De- 
preciated now, let the legal tender clause fail, and mark the result to-mor- 
row. The Treasury notes will fall from four per cent, to fifteen and twen- 
ty-tive below par, and the Government will have to pay that per centage 
additional for every article they purchase. Your soldiers will be shaved 
that amount on their hhodrbought wages, and the country, flooded with a 
vast amount of depreciated paper, will grow restless and discontented 
under so fatal a mistake. If we make the Government issues a legal ten- 
der, the demand for specie will be so limited that they will maintain their 
value."' 

CLOSING THE DEBATE OX THE BILL. 

By order of the House general debate was now closed. The 
standing rules of the House, however, provide that the member 
introducing the measure shall have the right, after general debate 
is closed, to speak one hour in reply to adverse speeches, in finally 
closing the debate. Mr. Spaulding, having introduced the bill, was 
entitled to the floor to close the debate. Mr. Stevens, who had not 
3'et spoken, was desirous of expressing his views on the measure, 
and Mr. Spaulding was willing to give him most of the hour to 
which he was entitled, and intended to yield the floor to him for 
that purpose. 

Mr. Spaulding, in closing, summed up, on his part, as follows : 

I have listened with a great deal of attention to the arguments and pro- 
positions which have been submitted by the various gentlemen who have 
addressed the House, but I shall not now make the concluding speech. I 
shall leave it to the able Chairman of the Committee of Ways and Means 
to close the debate. K I may be indulged, however, for a few moments, I 
desire to say, summing up, first : that all agree that taxation, in various 
forms, must be imposed to the amount of at least $150,000,000 on which to 
rest the credit of these notes and bonds, a sum sufficient to pay the ordi- 
nary expenses of Government on a peace footing, the interest on all the 
war debt, and a sinking fund to liquidate annually a portion of the princi- 
pal. Second : we all agree that hereafter the war must be carried on prin- 
cipally upon the credit of the Government, and that paper in the form of 
notes o/nd bonds must be issued to an equally large amount, xvhicJiever plan is 
adopted. After deducting the sum raised by internal revenue, by direct 
taxation, and duties on imports, the amount of paper to be issued can only be 
limited by the actual expenses of the Government. The respective plans of 
Messrs. Vallandigham, Conkling, and Morrill, require the same amount 
of paper to be issued as the legal tender bill proposed by the Committee of 
Ways and Means, and supported by the Secretary of the Treasury. Third : 
the main difference between the several plans is, that the legal tender bill 
stamps demand notes as money, with the highest sanction of the Government 
to circulate as a National currency, the same as bank notes, in all the chan- 
nels of trade and business among all the people of the United States ; 
whilst all the other plans proposed contemplate the issue of an inferior 
currency that will not, in my opinion, circulate as money either among 
the banks or the people, but will, on the contrary, be depreciated and 



81 



Bold at a large discount by all officers, soldiers, and others that are corn- 
iced to receive it from the Government in payment for services and 
supplies furnished. For myself, I prefer to issue the demand notes, based 
on adequate taxation, and with the highest legal sanction that can be given 
to them by the Government, placing the soldiers and capitalists all on the 
same footing in regard to these notes." 

Mr. Spaulding then yielded the floor to Mr. Stevens. 
Mr. Love JOY objected to the gentleman yielding the floor. 

The Chaieman— "If objection is made, the gentleman from Pennsyl- 
vania cannot occupy the floor. The gentleman from New York cannot 
yield the floor to him, except by unanimous consent." 

Mr. Morrill—" I trust no objection will be made ; only the same time 
will be consumed." 

Mr. LovEJOY— *' Well, I will withdraw the 6bjection." 

MR. Stevens' address. 

"Mr. Chairman— This bill is a measure of necessity, not of choice. 
Ko one would willingly issue paper currency not redeemable on demand, 
and make it a legal tender. It is never desirable to depart from the 
circulating medium which, by the common consent of civilized nations, 
forms the standard value. But it is not a fearful measure, and when 
rendered necessary by exigencies it ought to produce no alarm. 

The late administration left us a debt of about $100,000,000, and 
bequeathed to us also an expensive and formidable rebellion. This com- 
pelled Congress, at the extra session, to authorize a loan of $250,000,000; 
$100,000,000 of these were taken at 7 3-10 per cent, and $50,000,000 six 
per cent, bonds at a discount of over $5,000,000; $50,000,000 were used in 
demand notes, payable in coin, leaving $50,000,000 undisposed of. Before 
the Banks had paid much of the last loan they broke down under it and sus- 
pended specie payment. They have continued to pay that ban, not in coin, hut 
in demand notes of the Govet-nment; that has kept them at par, but this last 
of the loan was paid yesterday, and on the same day the banks refused to receive 
them, They must now sink to a depreciated currency. The remaining $50,- 
000,000 the Secretary of the Treasury has been unable to negotiate. A 
small portion of it, say $10,000,000, has been issued at 7 3-10 per cent, in 
payment of debts. 

He estimated the present floating debt at $180,000,000; daily expenses, 
$2,000,000; to carry us to next meeting of Congress, $600,000,000 more. 
That if suflScient six per cent, bonds were forced on the market to pay 
our expenses up to December, or $700,000,000, as the money should be 
wanted, he thought they would sell as low as sixty per cent., as in the 
last English war ; and even then it would be impossible to find payment 
in coin. A large part of it must be accepted in depreciated notes of sus- 
pended banks, for no one expects the resumption of specie payments until 
the close of the war. 

Without the legal tender clause the notes could not be kept at par. 
Brokers, bankers, and others would depreciate them. The National Bank 
scheme recommended by the Secretary might, in ordinary times, be very 
useful, but while the banks are under suspension it was not easy to see 
how it would relieve the Government. They would have the circulation 
without interest, and at the same time would draw Interest on the bonds, 



82 



and afford no immediate relief. lie tliou^Iit tlie Government sliould have 
the benefit of the circulation of legal tender notes, and did not see how 
we c^uld get along in any other way. 

He argued in favor of the constitutionality of the legal tender clause, 
and that it was a necessary and proper measure at this time. In short, 
whenever any law is 7iecessarj/ and proper to carry into execution any 
delegated power, such law is valid. That necessity need not be absolute, 
inevitable, and overwhelming— if it be useful, exi)edient, profitable, the 
necessity is witlnn the constitutional meaning. Whether such necessity 
exists is solely for the decision of Congress. Their judgment is absolute 
and conclusive. If Congress should decide this measure to be necessary 
to a granted power, no department of the Government can rejudge it. 
The Supreme Court might think the judgment of Congress eiToneous, but 
they could not review it. Xow, it is for Congress to determine whether 
this bill is necessary "to raise and support armies and navies, to bon*ow 
money, and provide for the general welfare.-' They are all granted 
powers. It is for those who think that it is not necessary, useful and 
proper," to propose some better means, and vote against this; if a major- 
ity think otherwise, its constitutionality is established. 

If constitutional, is it expedient? It is objected by the gentleman from 
Ohio, that the legal tender clause would depreciate the notes. All admit 
the necessity of the issue ; but some object to their l)eing made money. 
It is not easy to perceive how notes issued without being made immedi- 
ately payable in specie, can be made any worse by making them a legal 
tender. And yet that is the whole argument, so far as expediency is con- 
cerned. Other gentlemen argued that this would impair contracts, by 
making a debt payable in other money than that which existed at the 
time of the contracit, and would so be unconstitutional. Where do gentle- 
men find any prohibition on Congress against passing laws impairing 
contracts? There is none, though it would be unjust to do it. But this 
impairs no contract. All contracts are wade not only with a view to preservt 
laivs, but subject to the future legislation oj tlie country. We have more than once 
changed tlie value of cohi, Neither our gold nor our silver coin is as val- 
uable as it was fifty years ago. Congress in 1853, I believe, regulated 
the weight and value of silver. They debased it over seven per cent., 
and made it a legal tender. Who ever pretended that that was uncon- 
stitutional? The gentlemen from Vermont (Mr. Morrill), and Ohio (Mr. 
Pendleton), think it an ex j)ort facto law. It is not wonderful that my dis- 
tinguished colleague, not behig a professional lawyer, should not be aware 
that the ex port facto laws prohibited by the Constitution refer only to 
crimes and misdemeanors, and not to civil contracts. The gentleman 
from Ohio no doubt knew, hut forgot it. 

Gentlemen are clamorous in favor of those who have debts due them, 
lest the debtor should the more easily pay his debt. I do not much sym- 
pathize with such importunate money-lenders. But undotvs and orphans 
are interested and in tears, lest their estates should be badly invested, I pity no 
one who has his mmiey invested in United States bondsj payable in gold in tweTvty 
years, with interest semi-annually. But while these men have agonized 
bowels over the rich man's case, they have no pity for the poor widow, 
the suffering soldier, the wounded martyr to his country's good, who 
must receive these notes without legal tender or nothing, and who must 
give half of it to the Shy locks to get the necessaries of life. Sir, I wish 



83 



no injury to any, nor with our bill could any happen ; but if any must 
lose, let it not be the soldier, the mechanic, the laborer or the farmer. 

Let me relate the various projects. Ours proposes United Stales notes^ 
tecuared at the end of twenty years to he paid in coin^ and the interest raised by 
iaseahon semi-annuaUy ; such notes to he money, and of uniform value through^ 
<nd the Union, "No better investment, in my judgment, can be had ; no 
better currency can be invented. The amendment of the gentleman from 
Ohio (Mr. Vallandigham) proposes the same issue of notes, but objects to 
a legal tender; but does not provide for their redemption on demand in 
coin. He feai*s our notes would depreciate. Let him who is sharp 
enough to see it instruct me how notes that every man must take are 
worth less than the same notes that no man need take, and few would, 
being irredeemable on demand. But he doubts its constitutionality. He 
wh adimis our power to emit hiUs of credit^ nowhere expressly avJthorized by the 
ConstihUion, is a sharp and unreasonable dovhter when he denies the power to 
make them a legal tender. 

The proposition from the gentleman from N^ew York (Mr. Koscoe 
Conkling) authorizes the issuing of seven per cent, bonds, payable in 
thirty-one years, to be sold ($250,000,000 of it) or exchanged for the cur- 
rency of the banks of Boston, New York and Philadelphia. 

Sir, this proposition seems to me to lack every element of wise legisla- 
tion. Make a loan payable in irredeemable currency, and pay that in its 
depreciated condition to our contractors, soldiers and creditors generally I 
The banks would issue unlimited amounts of what would become trash, 
and buy good hard-money bonds of the nation. Was there ever such a 
temptation to swindle ? 

He further proposes to issue $200,000,000 United States notes, redeem- 
able in coin in one year. Does not the gentleman know that such notes 
must be dishonored, and the plighted faith of the Government broken? 
No one believes that we could then pay them, and it would run down at 
once. If we are to use suspended notes to pay our expenses, why not 
u|Be our own ? Are they not as safe as bank notes ? During the suspen- 
fiion, the Government would have the benefit of the whole circulation, 
without interest, until they were funded— that is, the interest of all we 
could keep out would accrue to the Government. If the $150,000,000 
were constantly afloat, it would be a loan to the Government, without 
interest, to that amount, $9,000,000 a year. But if we used the suspended 
paper of the banks our bonds would bear interest from the instant we got 
their notes — a good thing for suspended banks. Besides, the Government 
would have the benefit of all the lost and destroyed notes^a considerable 
item. 

Last comes the substitute of the minority of the Committee (introduced 
by Mr. Morrill). I look upon it as a curiosity. It proposes to issue 
United States notes, not a legal tender, bearing an interest of three and 
rixty-flve hundredths per cent., and fundable into seven and three-tenths 
per cent, bonds, but not payable on demand, but at the pleasure of the 
United States. This gives one and three-tenths per cent, higher interest 
than our loan, and not being redeemable on demand, would share the 
Cite of all non-specie-paying notes not a legal tender. But the ingenious 
minority have invented a kind of currency never before known — a drcuUi' 
tion hearing interest. Bonds or notes intended for investments bear inter- 
est, but no one expects they will be used as currency ; whether in the 
ihape of bonds or notes, they will be used only as investments, or as 



84t 



pledges on which to procure loans. Suppose a tailor, shoemaker, or other 
mechanic, or laborer, were to take one of these bills, and in a week he 
should wish to use it in market or store, or elsewhere, he must sit down 
and calculate the interest on the days he has had it to find its value. Thig 
would be rather inconvenient on a frosty day. This currency would make 
it necessary for every man to carry an arithmetic or interest table with 
which to guage the value of the circulating medium. Gentlemen must 
see how ridiculous, if not impracticable, this scheme is. 

Here, then, in a few words, lies your choice. Throw bonds at six or 
seven per cent, on the market between this and December, enough to 
raise at least $000,000,000— about this sum is already appropriated, $557,- 
000,000— or issue United States notes, not redeemable in coin, biU fundable 
in specie-joaying bonds at twenty years; such notes either to be made a legal 
tender, or to take tlieir chance of circulation by the voluntary act of the 
people. 

I maintain that the highest sum you could sell your bonds at would be 
seventy-five per cent., payable in currency itself at a discount. That 
would produce a loss which no nation or individual doing a large business 
could stand a year. 

I contend that I have shown that such issue, without being made money, 
must immediately depreciate, and would go on from bad to worse. I fiat- 
ter myself that I have demonstrated, both from reason and undoubted 
authority, that such notes, made a legal tender and not issued in excess of 
the demand, will remain at par and pass in all transactions, great and 
smalL at the full value of their face ; that we shall have one currency for 
all sections of the country and for every class of people, the poor as well 
as the rich. 

Some gentlemen are as much frightened as if this were an unwonted 
apparition, for the first time prowling forth to swallow the rich creditor 
and smouse the poor debtor. No nation, it is said, has ever tried anything 
like it. 

Let us look at the greatest and wisest commercial nation in the world. 
In 1797 England was struggling for existence against armed Europe. She 
needed money, as we do now. She found it impossible to borrow. Gold 
was likely to leave the country. She passed a law prohibiting the Bank of 
England from paying coin for her notes until six months after the final 
ratification of peace. That law remained in force till 1823. It is said she 
did not make those notes a legal tender. She provided that whoever 
refused to take them for a debt should have no remedy for its collection : 
and that a plea of such tender should be a bar to the action. This, I think, 
is the most stringent legal tender; yet those notes never depreciated to 
any great extent." 

Mr. Vallandigham— ^*Did they not depreciate twenty per cent. ?" 

Mr. Stevens — "No, sir; at no time after they were made a legal tender 
did they depreciate twenty per cent." 

Mr. Vallandigham— "I have the authority of Mr. Canning, which 
I think is quite as good as that of Mr. McCulloch. They were receivable 
all the time for Government dues." 

Mr. Stevens— "Yes, sir; but they still run down until they were made 
a legal tender, and after that they never depreciated a single dollar. Had 
they been made an absolute tender, they would not have depreciated a 
farthing. But now, in times of peace, the notes of the Bank of England are 



85 



a legal tender in all the vast business of thai nation^ and in every place, except at 
the counter of the hank. What else are Bank of England notes than bills of 
credit of the Government? Her whole capital consists of Government 
gecorities, and her issues are based on that alone. Prussia holds the 
currency in paper issueable by Government alone, and is always at par. 
What becomes of the fine-spun theories of the opponents of this bill? I 
think they have distressed themselves very unnecessarily ; and yet, gen- 
tlemen have shown all the contortions, if not the inspirations, of the Sibyl, 
lest Government should make these notes a uniform currency, rather than 
leave them to be regulated by sharks and brokers. / look upon the imme- 
diate passage of the hiXt as essential to the very existence of the Government, 
Seject it, and tiie financial credit, not only of the Government, but of all 
the great interests of the country, will be prostrated." 

Mr. Chairman— " Let me say in conclusion, that unless this bill is to 
pass with the legal tender clause in it, it is not desirable to its friends, or 
to the Administration, that it should pass at all, and those who think as I 
do will have to vote against it, if it should be thus mutilated and emascu- 
lated. If it is to be defeated, I should be glad if we had the power which 
they have in the British Parliament— to resign our places on the Com- 
mittee of Ways and Means, and leave it to those who oppose this bill 
to mature some other measure. So far as I am concerned, I shall be 
modest enough not to attempt any other scheme. The Committee of 
Ways and Means have labored in the preparation of this measure 
anxiously, and to the best of their poor abilities. We are not infallible. 
We do not come near it. I am but poorly qualified for anything of this 
kind. But we have given it our most anxious consideration, and have 
consulted those whom we believed to be the best qualified to advise us. 
We have sought to harmonize conflicting views in the substitute which 
the majority of the Committee have prepared, and we hope it will pass. 
We believe that the credit of the country will be sustained by it, that 
under it all classes will be paid in money which all classes can use, and 
that it will confer no advantage on the capitalist over the poor laboring 
man. If this bill shall pass, I shall hail it as the most auspicious measure 
of this Congress ; if it should fail, the result will be more deplorable than 
any disaster which could befall us." 

At the conclusion of Mr. Stevens' speech the Chair announced 
that general debate was closed. Amendments were now in order, 
and under the rules of the House, five-minute speeches could be 
made in favor of, or in opposition to, each amendment proposed. 
Under this rule, several short speeches were made by members 
who had not an opportunity to speak during the general debate. 

Mr. F. A. CoNKLiNG, who opposed the legal tender clause in 
the bill, read an extract from an eminent citizen of New York, as 
follows : 

"The advocates of a paper substitute may find an argument in the 
necessities of the crisis, but are certainly not guided by the light of 
experience, if they recur to the fact that in 1814 a Boston hank note was 
capable of buying twice its nominal value in Treasury notes (not a legal tender). 

I had some little experience of the working of * paper vs. gold,' in 
Denmark, in 1813, when their currency, which was printed on hlue paper, 



86 



depreciated to such an extent that the King, to remedy the evil, issued a 
new currency, printed on white paper, accompanied by an edict that one 
fix dollar of the new emission f?hould be regarded in all transactions as 
worth six of the old, and taken as a le^ral tender, which required an 
amount of faith equal to that which was exacted by Lord Peter of Martin 
and Jack : that they should believe * a loaf of brown bread to be a shoulder 
of mutton,' or suflfer for their incredulitj'. 

This arbitrary edict led to the ruin of man}' creditors, especially mort- 
gagees, who were thus compelled to receive 'rags and lampblack' in 
satisfaction of debts contracted in gold and silver. 

At that time I had bargained with the King's painter, in Copenhagen, 
to take my portrait (a half length, still in my possession), for three hundred 
and siv dollars, the frame included. Such was the rapid decline in the 
paper currency of the Government, that when it was completed I pur- 
chased with 7iine Spanisli milled dollars the three hundred and six dollars 
to pay for the portrait and frame ; and such was the faith and loyalty of 
the painter, that he believed, or was bound by law to believe, that the one 
currency was just as good as the other I Being in London during the 
same year, I was guilty of the felonious act of selling my gold guineas for 
twenty-seven shillings in paper, while honest, patriotic and credulous 
John Bull insisted that in theory their value was the same; and Bight 
Honorable the Chancellor of the Exchequer could cause the transportation 
to Botany Bay of any man who praciically proved the contrary." 

Mr. HuTCHiNGS — **I would like to inquire as to the occttpation of the 
gentleman who wrote thai letter?^'' 

[Here the hammer fell.] 

Mr. Crisfield— '*Li order to accommodate what seems to be the wish 
of the Committee, or some members of it, I propose to modify my amend- 
ment by confining the motion to strike out to the words, "and shall also 
be lawful money and a legal tender in payment of all debts, public and 
private, within the United States." 

Mr. Shellabarger— *'Mr. Chairman, 1 rise to oppose the pending 
amendment. I did desire to submit to the Committee some views touch- 
ing this measure when we were in general debate, but omitted to do so in 
deference to the more matured views which other members of the Com- 
mittee desired to submit. I propose to occupy the few minutes I have, 
in making some statements in relation to the charges of bad faith and 
injustice which have been so persistently, earnestly, and, doubtlessly, 
sincerely made by the opponents of the bill. 

Now, sir, I think it must be plain, beyond all cavil, that if these notes, 
proposed to be issued under this bill, are made of the value imposed upon 
them by law, so that they will be to tlie citizen the true and real repre- 
sentatives of that amount of the intrinmc wealth of the country^ which is 
stamped by law upon them as their nominal value, then there can he no practical 
injwry^ injustice, or had faith in the law which 7nakcs them pay a deht precisely 
equal to thai real value or wealth of the country, which that note, so made a ten- 
der, represents. It is, of course, not my purj^ose novv either to discuss or 
state those views by which others see in this measure— as distinguished 
from those they advocate— only disaster, in the shape of * destruction of 
all standards of value ;' in the * inflation of the business and the prices of 
the country ;' in disordering the * operations of trade and commerce ;' and 
in the ultimate * bankruptcy' of the Government and of the people* I 



87 



have no doubt this cry is made sincerely by many, and perhaps it is 
believed by all who make it. I do not discuss the sources and reasonable- 
ness of this cry of alarm, but only wish to present a parallel to it, and 
say that this cry is, to my mind, as unreasonable as that other to which I 
allude. I find that parallel in the history of the growth of the debt of 
England; and in the light of that history, I declare that this cry of 
'bankruptcy' and national disaster and ruin is utterly unreasonable, and 
just now most pernicious. 

Sir, the history of the growth of that debt, wliich one of the gi*eat 
Commoners of England calls ' the greatest prodigy that ever perplexed 
the sagacity and confounded the pride of statesmen and philosophers,' 
furnishes as conclusive refutations of the theories and predictions of our 
alarmists of this House, as it did in the past of other Parliaments. 

Sir, at the end of the war of England with Louis XIV, in J 713, the 
debt of England was, in round numbers, $250,000,000. But, sir, at tliat 
period, not pot-house politicians merely, but profound thinkers, declared 
the Government permanently crippled. But while these were engaged in 
proving the nation ruined, the nation was growing richer and richer. 
Soon came that war which was ended by the peace of Aix la Chapelle ; 
and the national debt had come to be $400,000,000 in 1748. Xow, again, 
historians, statesmen and economists concurred in declaring that the case 
of England was certainly now desperate; but now again the nation per- 
sisted, although demonstrated by the books to be a bankrupt, in becoming 
Cat richer than in any period of her history. Soon the nation became 
again involved in the continental wars of the reign of George II, and at 
the end of Chatham's administration, at the period of 1760, the national 
debt came to be $700,000,000. Then, again, it is declared that both men 
of theory and of business united in declaring that now, at all events, the 
UtH day had certainly arrived. Adam Smith, the father of politico-eco- 
nomical science, thought the limit had been reached, and an increase of 
the debt would be fatal. David Hume, the profoundest man of his age, 
declared it would have been better that England had been conquered and 
crushed by Prussia and Austria, than by debts for which all the revenues 
of the Kingdom north of Trent and west of Reading were mortgaged. 
He said the madness of England exceeded that of the crusaders. Richard 
Coeur de Lion and St. Louis had not gone in the face of arithmetic. 
England had. You could not prove that the road to Paradise was not 
through the Holy Land ; but you could prove that the road to national 
ruin was through a national debt. But still, in defiance of Hume and 
Smith, and even Burke, the nation would live and grow richer, and pa)' 
the interest on its public debt. 

Then came George Grenville's policy to tax the colonies of America to 
help pay the interest on this debt, and brought on our war of the Revolu- 
tion. In that England lost the colonies, and found an addition to her 
public debt of $500,000,000— making the aggregate, at the time of the 
treaty of peace, $1,200,000,000. Again England was pronounced hopeless ; 
but again she continued to be more prosperous than ever before. 

Then came the wars growing out of the French Revolution ; and the 
debt of England ran up to $4,000,000,000. Again the crj^ of despair and of 
hankruptcy was louder than ever; but also again the cry was false as 
eTer; and the interest on the debt of England not only continued to be 
paid to the day at the bank, but such was her prosperity that at the close 



88 



of these French wars, her people expended for railroads in the island, in a 
few years, more than $1,200,000,000! 

Such is a sketch of the history of the debt of England, and such the 
refutation furnished by the logic of history to the logic of abstract reas- 
oning, however profound. 

A great historian and a great commoner of England declares that all 
these cries of bankruptcy and ruin were based on a double fallacy. They 
who raised these cries imagined that there teas an exaH analogy between the case 
of an individual who is in debt to another^ and the case of a society which is in 
debt to itself: o.'nd they also forget that other things greiv as weU as the debt. 

Sir, I do not make tliis allusion to the debt of England to show tliat ^a 
national debt is a national blessing,' nor to indicate that this nation ought 
permanently to depart from its old and traditional policies of avoiding 
public debt and direct taxation. I do not think we either ought to or 
will. But, sir, tliis parallel between the alarms of this day and this coun- 
try, and those of the past in another country, is only introduced to indicate 
the strange infirmities of vision in all these prophets of evil, and to 
indicate how unjust and cruel it is to weaken, by these refuted cries of 
ruin and bankruptcy, the faith of the people in the Government, which 
now, in its day of peril, so preeminently rests upon the faith of her 
children. 

Sir, all these obligations of tliis Government go out to the people borne 
up by all the faith and all the property of the people ; and they have all 
the value which that faith untarnished, and that property unestimable, 
can give them. It is not because they lack intrinsic value that they need 
the quality of * lawful tender,' but it is to secure to the Government in 
their issue their true value, and to retain for them that true value as you 
pass them— as all agree you must— to your noble soldiery in the field, and 
to all classes of the people not engaged, cw the inost persistent outside opposi- 
tion to this bill i% in eruleavoring to destroy the value of these, so that out of the 
blood of their siyiking countiy they may be enabled to coin the gai7is of their 
infamy/'* 

MU. iiickman's speech. 
Mr. Hickman, of Pennsylvania, spoke in favor of the bill : 

"The only question, Mr. Chairman, which I have ever had with refer- 
ence to this bill, has not been a question as to the powers of Congress, 
but as to the policy of the enactment. I would, myself, have preferred 
that this bill had followed the tax bill. I would have preferred that, 
before the credit of the Government had been tried to that extent, the 
basis of that credit should have been exhibited to the country. Before I 
take my neighbor's note, I should require him to show me on what his 
credit rests ; of what his capital consists. I have, therefore, had great 
doubt as to the propriety of voting for this bill as it stands at this time. 
But being assured by the Chairman of the Committee of Ways and Means 
that the Treasury, and, perhaps, the Administration, regard this as a 
governmental necessity, I am disposed to waive the question of propriety 
or expediency, and to vote for it as a necessity, having no doubt about 
the right. That clause of the Constitution which gives to the Govern- 
ment the right to coin money, and to regulate the value thereof, is, to my 
mind, conclusive of the great question that has been raised in this House, 
'To coin money.' It does not indicate of what the material shall consist, 
which is to be regarded as money. It might be gold, or silver, or copper. 



89 



or brass, or iron, at the pleasure of the Goyemment. In other words, it 
is not demanded that the thing itself, which shall be coined as money, 
shall have any intrinsic value. The coining of money is merely impress- 
ing upon that which is designated to be the circulating medium the mark 
of the sovereign, indicating the will of the sovereign that it shall be 
received in the exigencies of trade and commerce at the stated value. 
And that mark of the sovereign, indicating the will of the sovereign, may 
just as well be impressed upon paper as upon gold or silver. Nothing else 
can be made out of the Constitution in this regard. 

According to the arguments which have been addressed against this 
bill, the Constitution should have been made to read : * Congress, or the 
Government, shall have power to coin gold and silver money according 
to their intrinsic value.' Why, sir, the Government is not restricted as 
to the material out of which it may make money ; is not restricted as to 
the metal that shall be adopted as money ; it has perfect power to adopt 
iron as well as any other metalic basis ; and if any other metal, why not 
paper? Why not impress upon paper the mark of the sovereign, indi- 
cating the will of the sovereign as to the value at which it shall be 
received, and make it a circulating medium, there being nothing in the 
Constitution to restrict us in this necessary exercise of sovereign power, 
without which no Government can carry on its'operations ; without which 
no Government could exist ? 

I have no doubt, whatever, in regard to the right of Congress to pass 
this bill, and I am therefore willing to vote for it upon the ground that it 
is a necessity at this time. 

MR. LOVEJOY's speech. 

Mr. Love JOY, of Illinois, opposed the bill : 

"Mr. Chairman—I have endeavored for a day or two to obtain the 
floor, for the purpose of expressing my views a little more at length than 
I can in the five minutes to which I am now limited ; but, by an arrange- 
ment between the Chair and the Committee of Ways and Means, my 
purpose has been averted. 

I will now simply say in regard to the question of constitutionality, that 
there has not been a respectable argument advanced in defense of the 
constitutionality of this bill ; and, inasmuch as great talent and eminent 
ability have been brought to bear upon it, I take it that no respectable 
argument can be made in vindication of the constitutionality of this bill. 
I would admit the plea of necessity, if t believed it; and I think it is more 
manly to confess, as Jefferson did, than it is to attempt to torture the 
constitution into the support of a measure which everybody must see to 
be unconstitutional. 

Now, Mr. Chairman, in regard to the general idea of the bill, it is a 
mere fallacy. The whole argument used in favor of the issue of these 
legal tender notes is based upon precisely the same foundation as the old 
theological dogma, crede id edes, et edes — believe that you eat the real flesh 
of Christ in the wafer, and you do eat it. Believe that this piece of paper 
is a five dollar gold piece, and it is a five dollar gold piece ; believe it is 
worth five dollars, and it is worth five dollars. 

Now, sir, I am prepared to state that it is not in the power of tliis Con- 
gress, nor in the power of any legislative body, to accomplish an impossi- 
bility in making something out of nothing. 

The piece of paper you stamp as five dollars is not five dollars., and it 



90 



never will be unless it is convertible Into a five dollar gold piece; and to 
profess that it is, is simply a delusion and a fallacy. You may say even 
by legislative enactment that sixty or eighty or even ninety-nine cents are 
a hundred, but the rigid, inexorable digits will stand lixed and immovable 
by your legislative legerdemain. 

Mr. Chairman, we are urged by the Chairman of the Committee of Ways 
and Means to pass this bill, because ruin is before the Government if we 
do not pass it. It reminds me very forcibly of Cowper's Keedless Alarm. 
I cannot undertake to give it in rhyme, but I will give the substance of it. 
You will remember that, hearing the deep braying of the hounds, and the 
sound of the hunter's horn, the sheep coursed round and i*ound the field, 
until the frightened flock came to the brink of a precipice, and to get away 
from the. hounds and huntsman tha pcUer gregis advised them thus: 

I hold it, therefore, wisest and most fit 
That life to sare, we leap into the pit" 

The matron of the flock, more discreet than the spouse, replies: 

How? leap into the pit oar life to save? 
To save onr life, leap all into the grave?" 

Sir, there is no precipice, there is no chasm, there is no possible yawn- 
ing, bottonil«»ss gulf before this nation so terrible, so appalling, so ruinous, 
as this same bill that is before us, and that it is proposed to pass under the 
l)ressure of these influences brought to bear upon it. 

You issue $100,000,000 of those notes. The gentleman tells us they are 
alieady due. We have got to pay the paper out almost before we can 
make it. It has taken us six months to manufacture $50,000,000, and we 
cannot manufacture it as fast as we shall spend it at that rate; so that 
when we have issued $100,000,000 we must issue another $100,000,000, and 
then another $100,000,000. And thus we plunge from lower depth to still 
lower, till we are buried in an ocean of inconvertible paper. At every 
step your paper will depreciate more and more, until the expenses of the 
war will swell to such an appalling sum that redemption will be impos- 
sible, and repudiation inevitable. FacUis deocensus avertii, etc., which 
means it is easy to slide down hill, but very hard work to draw the sled 
back over smooth ice. But the question is pressed : what will you do ? 
What do you propose ? I propose this : 

First— Adequate taxation, if need be, to the extent of $200,000,000. 

Second — Adopt legislation that shall compel all hanking institiUions to do 
business on a specie basis. Evertj piece of paper thai claimed to be money^ 
but was not, I would chase back to tJie mayi or corporation that forged 
and visit upon them the penalties of the law, 1 would not allow a bank note 
io circulate thai was 7iot constantly ^ conveniently and certainly convertible into 
specie. 

Third— I would issue interest-paying bonds of the United States, and 
go into the market and borrow money and ^i\y the obligations of the 
Government. This would be honest, business-like, and in the end 
economical. This could be done. Other channels of investment are 
blocked up, and capital would seek the bonds of investment. 

This is, in substance, what I propose. This would bring us through the 
war poor indeed, for half the nation has to sui)i)ort the other half, but 
with the health and vigor of the athlete, and not with the bloated flesh of 
the beer guzzler. Did I not know that the passage of tlds bill was a fore- 
gone conclusion, I would move to re-commit, with instructions to that 
effect." 



91 



SPEECH OP MR. WALTON. 

Mr. Walton, of Maine, advocated the bill. 

Necessity compels us to pay our creditors in treasury notes. Our 
credit is exhausted ; or perhaps it will be more accurate to say that the 
means of those who are willing to lend to the Government have become 
exhausted. To lay and collect taxes will require considerable time; 
besides, it cannot reasonably be expected that revenue enough can ever 
be derived from taxation to meet all the expenses of the Government 
while the war lasts. Practically, therefore, our Government is reduced to 
the necessity of paying not only its other creditors, but our brave soldiers, 
in its own notes. Thus compelling our creditors (our brave soldiers 
included) to take their pay in treasury notes ; is it not just, is it anything 
more than common honesty, to allow them to pay their debts in the same 
way. If these treasury notes are made a legal tender, they will circulate 
as readily as specie in the payment of debts, and will only cease thus to 
circulate, if ever, when they have reached the hands of those who have 
no debts to pay. And if, as the enemies of the legal tender clause 
predict, they ever fall in value below par, will not the loss fall upon those 
who have money, and no debts to pay ? And can it fall on a class who 
will feel it less? And as it is this class of persons that constitute our 
money-lenders, it will be rather a favor than an injury to them ; for these 
notes are convertible into United States bonds, with semi-annual interest 
coupons attached, and therefore accomplishes for them just what they, 
desire — a safe loan of their money. I say a safe loan, for the issue of these 
notes is to be followed by vigorous taxation; and in equity the lender 
will have a lien on the whole property of the United States as security for 
every dollar of his debt, and a pledge of the public faith that this security 
shall be made available. 

The legal tender clause of the bill, therefore, while it secures to our 
soldiers and the poorer class of our citizens, who have debts to pay, great 
advantages, does no real injury to capitalists, and ought to be retained. 

The constitutional objections have not been overlooked. I think the 
Federal Government has the same power to make these notes a legal 
tender that it has to make anything else a legal tender. It can make noth" 
ing a legal tender by virtue of any express power. It has htU an implied power 
in any case. And if it is admitted, as it always has been, that the Govern- 
ment possesses the power to declare what shall be a legal tender in any 
case, it has it without limitation. It can make one thing a legal tender as 
well as another; and whether these notes shall have that character or not, 
is a question of expediency only, and not one of power. 

It is objected by some that to make these notes a legal tender will 
impair the obligation of contracts, and is therefore unconstitutional. But 
this is not true. In every contract payable in money, and no particular 
kind of money is named, it is implied, and is a part of the contract, that it 
may be discharged in wliat shall be the legal currency at the time of pay- 
ment. A change or enlargement of the legal currency of the country, 
and a payment in such new currency, is no violation of the new contract, 
but is in pursuance of one of its implied conditions. 

Having the power, and believing, on the whole, that the legal tender 
clause is a beneficial one, I am in favor of retaining it in the bill." 

The question recurred on Mr. Crisfield's amendment, to strike 



92 



out the legal tender clause in the original bill. The vote was 
taken in Committee of the Whole by tellers- 

On taking the vote the tellers reported — ayes 53, noes 93, so 
the amendment was rejected. 

Several other amendments were made in Committee of the 
Whole, but inasmuch as they were all cut off, modified or adopted 
by subsequent proceedings, after the bill was reported to the 
House, it is not necessary to report them here. The bill, as 
adopted, is copied at the end of this day's proceedings. 

Having gone through the bill in Committee of the Whole, 
there was a good deal of preliminary skirmishing on the part of 
different members, who had proposed substitutes and amendments 
as to the order of taking the vote. Some members feared that 
they would not be able to get a square vote in the House on their 
respective propositions. Several members were on the floor at 
the same time. Motions, objections and counter-motions were 
made in quick succession, and in various forms, which continued 
for some time, causing confusion and preventing any action of a 
practical character, and preventing any vote being taken on either 
proposition. It finally resulted in an arrangement being made 
that the bill should be reported to the House, and a square vote 
be had on the two main propositions pending before the Com- 
mittee. Mr. Vallandigham and Mr. Conkling withdrew their 
substitutes, so that all of the opponents of the legal tender clause 
could concentrate on the substitute agreed to by Mr. Morrill, Mr. 
Horton, Mr. Corning and Mr. Stratton, one-half of the Committee 
of Ways and Means ; and that the vote should be first taken on 
that substitute, which was modified to meet the confiicting views 
of the various gentlemen on that side, in order to make it as 
acceptable as possible to all the opponents of the original bill 
This substitute finally offered by Mr. Horton, will be found 
{Cong, Globe, p. ,) and is as follows: 

The substitute which was read was, to strike out of the bill all 
after the word **that," in the first section, and insert the follow- 
ing: 

**For temporaiy purposes, the Secretary of the Treasury be, and he is 
hereby, authorized to issue on the credit of the United States $100,000,000 
of Treasury notes, bearing interest at the rate of three and sixty-five hun- 
dredths per cent, per annum, payable in two years after date, to bearer, at 
the Treasury of the United States, or at the office of the Assistant Treas- 
urer, in the city of 'New York, or at the office of the designated depository 
in the city of Cincinnati, and of such denominations as he may deem 



93 



expedient, not less than five dollars each; and such notes shall be 
receivable for all public dues, except duties on imports, and for all sala- 
ries, debts and demands owing by the United States to individuals, cor- 
porations and associations, within the United States, at the option of such 
individuals, corporations and associations ; and any holder of said United 
States notes, depositing any sum not less than fifty dollars, or some multi- 
ple of fifty, with the Treasurer of the United States, or either of the 
Assistant Treasurers, or either of the designated depositories at Cincin- 
nati or Baltimore, shall receive in exchange therefor duplicate certificates 
of deposit for the amount, with any accumulated interest thereon, one of 
which may be transmitted to the Secretary of the Treasury, who shall 
thereupon issue to the holder an equal amount in bonds of the United 
, States, coupon or registered, as may be desired, bearing interest at the 
rate of seven and three-tenths per cent, per annum, payable semi-annually 
In coin, and redeemable at the pleasure of the Government after ten years 
from date ; and such Treasury notes shall be received the same as coin, at 
their par value, with accumulated interest, in payment for any bonds 
that may be hereafter negotiated by the Secretary of the Treasuiy ; and 
the Secretary of the Treasury may, from time to time, as the exigencies 
of the public service may require, issue any amount of such Treasury 
notes equal to the amount redeemed. There shall be printed on the h&ck 
of the Treasury notes, which may be issued under the provisions of this 
act, the following words : ' The within note is receivable in payment of 
. all public dues, except duties on imports, and is exchangeable for bonds 
of the United States, bearing seven and three-tenths per cent, per annum, 
payable in coin, semi-annually. 

Sec. 2. And be it furtJier enacted, That to enable the Secretary of the 
Treasury to fund the Treasury notes and floating debt of the United States, 
he is hereby authorized to issue, on the credit of the United States, coupon 
bonds, or registered bonds, to an amount not exceeding $500,000,000,— 
$200,000,000 bearing interest at the rate of seven and three-tenths per cent, 
per annum, payable semi-annually in coin, and redeemable at the pleasure 
of the Government, after ten years from date, and $300,000,000, redeemable 
at the pleasure of the Government, after twenty-four years from date, and 
bearing interest at the rate of six per cent, per annum, payable semi- 
annually in coin. And the bonds herein authorized shall be of such 
denominations, not less than fifty dollars, as may be determined upon by 
the Secretary of the Treasury; and the Secretary of the Treasury may 
also exchange, at par, such bonds at any time for lawful money of the 
United States, or for any of the Treasury notes that have been, or may 
hereafter be, issued under any former Act of Congress, or that may be 
issued under the provisions of this Act. 

J 3. And he it further enacted, That the Treasury notes and the coupon 
or registered bonds authorized by this Act, shall be in such form as the 
Secretary of the Treasury may direct, and shall bear the written or 
engraved signature of the Treasurer of the United States and the Register 
of the Treasury; and also, as evidence of lawful issue, the imprint of 
a copy of the seal of the Treasury Department, which imprint shall be 
made under the direction of the Secretary, after the said notes or bonds 
Bhall be received from the engravers, and before they are issued ; or the 
flaid notes and bonds shall be signed by the Treasurer of the United States, 
or for the Treasurer, by such persons as may be specially appointed by 
the Secretaiy of the Treasury for that purpose, and shall be countersigned 



94 



by the Register of the Treasury, or for the Register, by such persons 
as the Secretary of the Treasury may specially appoint for that purpose ; 
and all the provisions of the Act entitled, * An Act to authorize the issue 
of Treasury notes,' approved the 23d day of December, 1857, so far as they 
can be applied to this act, and not inconsistent therewith, are hereby 
revived and re-enacted; and the sum of $300,000 is hereby appropriated 
out of any money in the Treasury not otherwise appropriated, to enable 
the Secretary of the Treasury to carry this act into effect. 

$ 4. And be it further enacted, That any person or persons, or any cor- 
poration, holding Treasury notes, may, at any time, deposit them, in 
sums of not less than $500, with any of the Assistant Treasurers or desig- 
nated depositaries of the United States, authorized by the Secretary of the 
Treasury to receive them, who shall issue therefor, transferable certificates 
of deposit, made in such form as the Secretary of the Treasury shall 
prescribe, and said certificates of deposit shall bear interest after thirty 
days, at the rate of five and two-fifths of one per cent, per annum ; and 
any Treasury notes so deposited may be withdrawn from deposit at any 
time, on the return of said certificates, but no interest shall be allowed 
except after thirty days. And all such deposits shall cease and deter- 
mine at the pleasure of the Secretary of the Treasury, and after ten days' 
notice shall have been given to the depositor. 

J 5. And be it further enacted, That if any person or persons, shall 
falsely make, forge, counterfeit or alter, or cause or procure to be falsely- 
made, forged, counterfeited or altered, or shall willingly aid or assist in 
falsely malting, forging, counterfeiting, or altering any note, bond or 
certificate, issued under the authority of this act, or heretofore issued 
under acts to authorize the issue of Treasury notes or bonds, or shall pass 
utter, publish, or sell, or attempt to pass, utter, publish, or sell, or bring 
into the United States, from any foreign place, with intent to pass, utter, 
publish or sell, as true, or shall have, or keep in possession, or conceal, with 
intent to utter, publish or sell, as true, any such false, forged, counterfeited 
or altered note, bond or certificate, with intent to defraud anybody, corpo- 
rate or politic, or any other person or persons whatsoever ; every person 
BO offending, shall be deemed guilty of felony, and shall, on conviction 
thereof, be punished by a fine not exceeding $5,000, and by imprisonment 
and confinement to hard labor, not exceeding fifteen years." 

Upon the bill being reported from the Committee of the Whole 
to the House, the vote was first taken on this substitute. 
The yeas and nays were ordered. 

The question was taken, and it was decided in the negative- 
yeas 55, nays 96, as follows : 

Yeas — Messrs. Ancona, Baxter, Biddle, George H. Brown, 
William G. Brown, Cobb, Frederick A. Conkling, Roscoe Conk- 
ling, Conway, Coming, Cox, Cravens, Crisfield, Crittenden, 
Diven, Eliot, English, Goodwin, Grider, Harding, Holman, Hor- 
ton, Johnson, Law, Lazear, Lovejoy, May, Menzies, Justin S. 
Morrill, Morris, Nixon, Noble, Norton, Nugen, Odell, Pendleton, 
Perry, Pomeroy, Porter, Edward H. Rollins, Sedgwick, SheflSeld, 
Shiel, William G. Steele, Stratton, Benjamin F. Thomas, Francis 



95 



Thomas, Train, Vallandigham, Wads worth, E. P. Walton, Ward, 

^Vebster, Chilton A. White and Wright— 55. 

Nays — Messrs. Aldrich, Alley, Arnold, Ashley, Babbitt, Gold- 
smith F. Bailey, Joseph Bailey, Baker, Beaman, Bingham, Francis 
P. Blair, Jacob B. Blair, Samuel S. Blair, Blake, Buffinton, Burn- 
ham, Campbell, Chamberlain, Clark, Colfax, Cutler, Davis, Dela- 
no, Delaplaine, Duell, Dunlap, Dunn, Edgerton, Edwards, Ely, 
Fenton, Fessenden, Fisher, Franehott, Frank, Gooch, Granger, 
Gurley, Haight, Hale, Hanchett, Harrison, Hickman, Hooper, 
Hutchins, Julian, Kelley, Francis W. Kellogg, William Kellogg, 
Killinger, Knapp, Lansing, Leary, Loomis, McKean, McKnight, 
McPherson, Marston, Maynard, Mitchell, Moorhead, Anson P. 
Morrill, Olin, Patton, Timothy G. Phelps, Pike, Price, Alexander 
H. Rice, John H. Rice, Richardson, James S. Rollins, Sargent, 
Shanks, Shellabarger, Sherman, Sloan, Spaulding, John B. Steele, 
Stevens, Trimble, Trowbridge, Upton, Van Horn, Van Valkcn- 
burg. Van Wyck, Verree, Wall, Wallace, Charles W. Walton, 
Whaley, Albert S. White, Wyckliffe, Wilson, Windom and Wor- 
cester — 95. 

So the substitute was not agreed to. 

The question then recurred on the modification of the original 
bill, offered by Mr. Stevens as a substitute, which was not read, 
but which Mr. Stevens had just before explained as follows : 

Mr. Stevens— "I wish to state in regard to my amendment, that it is a 
modification of the original bill. Those who are in favor of the original 
have agreed upon this in lieu of it. We thought it better to adopt the 
suggestion contained in the amendment of the gentleman from Ohio of 
$150,000,000, retiring the $50,000,000 of demand notes (authorized last 
July), and of making $150,000,000 the maximum to which they shall go. 
That is about all the change there is, except that we have left out the foreign 
loan clause, which is in the original ; and we have agreed to adopt an 
amendment by which the holders of these notes may convert them either 
into a twenty years' bond at six per cent, or five years' bonds at seven 
per cent., at their option." 

This modification of the original bill had the concurrence of 
the other half of the Committee of Ways and Means — Messrs. 
Stevens, Spaulding, Hooper and Maynard, and was adopted by 
the House without a division. 

The bill, as amended, was ordered to be engrossed and read a 
third time. The yeas and nays were ordered on the final passage 
of the bill. The question was taken, and it was decided in the 
aflSrmative — yeas 93, nays 59, as follows: 

Yeas — Messrs. Aldrich, Alley, Arnold, Ashley, Babbitt, Gold- 



96 



smith F. Bailey, Joseph Bailey, Baker, Beaman, Bingham, Fran- 
cis P. Blair, Jacob Blair, Samuel S. Blair, Blake, Buffinton, Bum- 
ham, Campbell, Chamberlain, Clark, Colfax, Cutler, Davis, Delano, 
Delaplaine, Duell, Dunn, Edgerton, Edwards, Ely, Fenton, Fes- 
senden, Fisher, Franchot, Frank, Gooch, Granger, Gurley, 
Haight, Hale, Hanchett, Harrison, Hickman, Hooper, Hutchins, 
Julian, Kelley, Francis W. Kellogg, William Kellogg, Killinger, 
Lansing, Leary, Loomis, McKean, McKnight, McPherson, Mars- 
ton, Ma^Tiard, Mitchell, Moorhead, Anson P. Morrill, Nugen, 
Olin, Patton, Timothy G. Phelps, Pike, Price, Alexander H. 
Rice, John H. Rice, Riddle, James S. Rollins, Sargent, Shanks, 
Shellabarger, Sherman, Sloan, Spaulding, John B. Steele, Stevens, 
Trimble, Trowbridge, Upton, Van Horn, Van Valkenburgh, Van 
Wyck, Verree, Wall, Wallace, Charles W. Walton, Whaley, 
Albert S. White, Wilson, Windom and Worcester — 93. 

Nays — Messrs. Ancona, Baxter, Biddle, George H. Brown, 
Cobb, Frederick A. Conkling, Roscoe Conkling, Conwaj^ Com- 
ing, Cox, Cravens, Crisfield, Diven, Dunlap, Eliot, English, 
Goodwin, Grider, Harding, Holman, Horton, Johnson, Knapp, 
Law, Lazear, Lovejoy, Mallory, May, Menzies, Justin S. Morrill, 
Morris, Nixon, Noble, Norton, Odell, Pendleton, Perry, Pomeroj^ 
Porter, Richardson, Robinson, Edward H. Rollins, Sedgwick, 
Sheffield, Shiel, William G. Steele, Stratton, Benjamin F. Thomas, 
Francis Thomas, Train, Vallandigham, Voorhees, Wadsworth, E. 
P. Walton, Ward, Webster, Chilton A. White, Wickliffe and 
Wright— 59. 

Thus the legal tender act, after a protracted debate, and a most 
determined opposition, by prominent and influential Republicans, 
as well as Democrats, was passed through the House by a large 
majority. 

The following is a copy of the bill as it first passed the House, 
on the 6th of Febmary, 1862: 

** An Ad to aiUhorize the issue of United Slates notes, and for the redemptUm or 
funding thereof, and for funding the floating debt of the United States, 

Section 1. Be it enacted by the Senate dnd Hoicse of RepreseniaMves 
of the United States of America, in Congress assembled: That to meet the 
necessities of the Treasury of the United States, and to provide a currency 
receivable for the public dues, the Secretary of the Treasury is hereby 
authorized to issue, on the credit of the United States, $150,000,000 of 
United States notes, not bearing interest, payable to bearer at the 
Treasury of the United States, at Washington or New York, and of such 
denominations as he may deem expedient, not less than five dollars each. 
Provided, however, that $50,000,000 of said notes shall be in lieu of the 



97 



cJemand Treasury notes authorized to be issued by the Act of July 17, 
^861 ; which said demand notes shall be taken up as rapidly as practicable, 
and the notes herein provided for substituted for them : And provided, 
further, that the amount of the two kinds of notes together, shall, at no 
time, exceed the sum of $150,000,000. And such notes, herein authorized, 
shall be receivable in payment of all taxes, duties, imports, excise, debts 
and demands of every kind due to the United States, and for all salaries, 
debts and demands owing by the United States to individuals, corpora- 
tions and associations within the United States, and shall also be lawful 
money and a legal tender, in payment of all debts, public and private, 
within the United States. And any holders of said United States notes, 
depositing any sum not less than $50, or some multiple of $50, with the 
Treasurer of the United States, or either of the Assistant Treasurers, shall 
receive in exchange therefor duplicate certificates of deposit, one of which 
may be transmitted to the Secretary of the Treasury, who shall thereupon 
issue to the holder an equal amount of bonds of the United States, coupon 
or registered, as may by said holder be desired, bearing interest at the 
rate of six per centum per annum, payable semi-annually, at the Treasury 
or Sub-Treasury of the United States, and redeemable at the pleasure of 
the United States, after twenty years from the date thereof. Provided, 
that the Secretary of the Treasury shall, upon presentation of said certifi- 
cates of deposit, issue to the holder thereof, at his option, and instead of 
the bonds already described, an equal amount of bonds of the United 
States, coupon or registered, as may by said holder be desired, bearing 
interest at the rate of seven per cent, per annum, payable semi-annually, 
and redeemable at the pleasure of the United States, after five years from 
the date thereof. And such United States notes shall be received the 
same as poin, at their par value, in payments for any loans that may be 
hereafter sold or negotiated by the Secretary of the Treasury, and may be 
re-issued from time to time, as the exigencies of the public interests shall 
require. There shall be printed on the back of the United States notes, 
which may be issued under the provisions of this act, the following 
w^ords : * The within is a legal tender in payment of all debts, public and 
private, and is exchangeable for bonds of the United States, bearing six 
per centum interest at twenty years, or in seven per cent, bonds at five 
years.' 

J 2. And he it jwriher enacted, That to enable the Secretary of the 
Treasury to fund the Treasury notes and floating debt of the United 
States, he is hereby authorized to issue, on the credit of the United States, 
coupon bonds, or registered bonds, to an amount not exceeding $500,000,- 
000, and redeemable at the pleasure of the Government, after twenty 
years from date, and bearing interest at the rate of six per centum per 
annum, payable semi-annually ; and the bonds herein authorized shall be 
of such denominations, not less than fifty dollars, as may be determined 
upon by the Secretary of the Treasury ; and the Secretary of the Treasury 
may dispose of such bonds at any time for lawful money of the United 
States, or for any of the Treasury notes that have been, or may hereafter 
be, issued under any former act of Congress, or for United States notes 
that may be issued under the provisions of this act ; and all stocks, bonds, 
and other securities of the United States, held by individuals, corpora- 
tions, or associations, within the United States, shall be exempt from 
taxation by any State or county. 

$ 3. And be it further enacted, That the United States notes and the 



98 

coupon or re^^stered bonds, authorized by this act, shall be in such forms 
as the Secretary of the Treasury may direct, and shall bear the written or 
enprraved signatures of the Treasurer of the United States, and the Regis- 
try of the Treasury, and also as evidence of lawful issue, the imprint of a 
copy of the seal of the Treasury Department, which imprint shall be 
made under the direction of the Secretary, after the said notes or bonds 
shall be received from the engravers, and before they are issued ; or the 
said notes and bonds shall be signed by the Treasurer of the United 
States, or for the Treasurer by such persons as may be especially appointed 
by the Secretary of the Treasury for that purpose, and shall be counter- 
signed by the Register of the Treasury, or for the Register by such persons 
as the Secretary of the Treasury may especially appoint for that purpose ; 
and all the provisions of the act entitled "An act to authorize the issue of 
Treasury notes," approved the 23d day of December, 1857, so far as they 
can be applied to this act, and not inconsistent therewith, are hereby 
revived and re-enacted; and the sum of $300,000 is hereby appropriated, 
out of any money in the Treasury' not otherwise appropriated, to enable 
the Secretary of the Treasury to carry this act into efl'ect/' 

Two penal sections (§ 4 and § 5) were adopted as part of this 

bill, to guard against counterfeiting, but it is not important to 

insert them here, as they do not affect the principles of the bill. 

LETTER FROM GEORGE DAWSON, ESQ., TO THE ALBANY EVENING 

JOURNAL. 

"Washington, February 6, 1862. 

"This has been an exciting day in the House. A fierce battle has been 
waged against the * legal tender' Treasury notes. But, as I think, the 
right has prevailed, and by a vote of 95 to 59— a much stronger force than 
was counted upon, the real argument was reduced to a very small com- 
pass. All admitted the necessity of a resort to paper currency ; and the 
question was whether that paper should be made as nearly par value as 
possible, or subjected to the fluctuations and depreciations of an ordinary 
irredeemable currency. If made a legal tender, these notes could never 
sink below the best bank paper. If not so made, they would very soon 
cease to be available as a circulating medium. 

Besides, if Treasury notes were to be used to pay the Government 
creditors, why should not their creditors be required to take them ? Why 
should the soldier be required to take what the sutler might refuse ? To 
be sure, the now legal tender bill left it optional with the soldier, whether 
he should take the notes or not; but if he availed himself of the 'option,' 
what had the Government to give him ? Practically, it would be Treasurj*- 
notes or nothing, as, during a general Bank suspension, it is irredeemable 
bank bills *or no pay.' 

It was not strange that members of the same political family, differed 
on a question of really doubtful expediency. And but for the necessities 
of Government, I doubt whether the ' legal tender ' principle would have 
received a dozen votes in the House. It is a new financial principle, and 
its workings may result in some, if not all the evils predicted from it. 
Kevertheless, as Treasury Kotes had to be resorted to, the common sense 
of the House, as well as the common sense of the people, determined that 
they should be made as near the practical value of gold as possible. Mr. 
Spaulding, of Erie, has had to assume the laboring oar in this financial 



99 



expedient. He had but a bare majority of his Committee with him at the 
outset; and, when the Secretary of the Treasury hesitated, as he did for 
several days, the Committee became equally divided. And yet, the 
measure carried a large majority of the House with it — a fact as gratifying 
to Mr. S. as it is complimentary to his financial acumen. 

The country breathes freer! The legal tender bill has passed the 
House, and national bankruptcy is averted. The grateful thanks of all 
loyal men are due to Mr. Spaulding and the representatives who supported 
the measure, for this timely effort in behalf of the public credit. The 
i^clief comes not a moment too soon. Xow let the Senate do its duty 
J>romptly, and we shall be clear 'of the breakers.' " 

PROCEEDINGS IX THE SENATE ON THE BILL. 

The legal tender bill was sent to the Senate on the Vth inst, 
^nd was, on motion of Mr. Fessenden, read twice by its title, and 
x-eferred to the Finance Committee. 

The Treasury was nearly empty, and the Secretary was unable 
t,o negotiate any more of the loan authorized by the act passed at 
the extra session in July, at the rates fixed by the law. The act 
limited him to par in disposing of any of the bonds or notes 
authorized by that act. The six per cent, twenty year bonds 
were then selling at about 88, and the 7 3-10 notes were below 
par. In this emergency. Secretary Chase sent to Mr. Fessenden 
a letter, urging the immediate passage of a bill giving temporary 
relief, while the legal tender bill was being perfected in the 
Senate. Mr. Fessenden obtained unanimous consent to consider 
the subject forthwith. The following proceedings were had: 

Mr. Fessenden— "I have just received a letter from the Treasury 
Department, which I will read : 

"Treasury Department, Feb. 7, 1862. 
''Sir: The condition of the Treasury requires immediate legislative 
provision. What you said this morning leads me to think that the bill 
which passed the House yesterday, will hardly be acted upon by the 
Senate this week. Until that bill shall receive the final action of Con- 
gress, it seems advisable to extend the provisions of the former acts, so as 
to allow the issue of at least $10,000,000 in United States notes, in addition 
to the $50,000,000 heretofore authorized. I transmit a bill framed with that 
object, which will, I trust, meet your approval and that of Congress. 
Immediate action on it is exceedingly desirable. 

Yours, truly, S. P. CHASE." 

"Hon. William P. Fessenden, 

Chairman Committee Finance, Senate." 

The bill is a very short one, and I will read it : 
"-4 Bin to aiUhorize an additional issue of United States Notes, 

Be it enacted, etc,, That the Secretary of the Treasury, in addition to the 
$60,000,000 of notes, payable on demand, of denominations not less than 
five dollars, heretofore authorized by the acts of July 17, and August 5, 



100 



ISGl, be, ami he is hereby, aulhorizetl to Ume like notes, aud for like 
piirposeti, to the ainoimt of $10,000,000, which said uotes shall be deemed 
part of the loan of $250,000,000 authorized by said acts." 

will state that this has just been received by me. It has not been 
submitted to the Finance Committee, but the emergency is known to all. 
The bill is simple and easily understood, and I presume there will be no 
objection to passing it now. At all events, I ask the unanimous consent 
of the Senate to enable me to introduce the bill without notice, and to 
have it considered now." 

By unanimous consent, leave was granted to introduce the bill, 
(S. No. 190,) to authorize an additional issue of United States 
notes; and it was read three times and passed. This bill was 
sent to the House on the 10th inst., and on being read was imme- 
diately passed, without opposition. 

On the 10th inst. Mr. Fessenden reported the bill (House Bill 
No. 240) from the Finance Committee, with amendments. The 
important amendments thus reported were : 

First — That the legal tender notes should be receivable for all claims 
and demands against the United States of every kind whatsoever, ^^except 

for interest on bonds and notes^ which shall he paid in coin/^ 

Second— That the Secretary might dispose of United States bonds at 
the market value thereof, for coin or Treasury notes.''^ 

Third — A new section. No. 4, authorizing deposits in the sub-Treasuries 
at five per cent., for not less than thirty days, to the amount of $25,000,- 
000, for which certificates of deposit might be issued. 

Fourth— An additional section, No. 5, "that all duties on imported 
goods and proceeds of the sale of public lands," etc., should be set apart 
to pay coin interest on the debt of the United States ; and one per cent, 
for a sinking fund, etc. 

On the 12th inst. Mr. Fessenden, Chairman of the F'inance 
Committee, opened the debate on the bill in a lengthy speech. 
{Cong. Globe, p, 762.) 

SPEECH OP MR. FESSENDEN. 

"I propose, Mr. President, before any question is taken on any one of 
the amendments, to make some remarks upon this bill. They may be 
very dull and dry, for it is rather a dry subject, but still it becomes my 
duty, as the organ of the Committee on Finance, to explain the provisions 
of this bill. 

The honorable Secretary of the Treasury, at the beginning of the ses- 
sion, recommended two measures— toa^ion and a bank. Both of these 
subjects require, at this stage of the country, and under existing circum- 
stances, peculiar and long consideration. The opinion of the country has 
tended towards what is called indirect taxation, taxation upon different 
American and other products, and different kinds of property. Sir, that 
requires great time. I have examined it sufficiently to be aware that it 
is not the labors of a day, or a week, or a month. It is substantially new 
in this country, and it requires much time, much study, and much inform- 



101 



ation to acquire all the knowledge of the various products which would 
likely to produce a revenue, and upon which a tax might, with pro- 
priety, be laid. So, too, with reference to the scheme suggested by the 
l^onorable Secretary of the Treasury with regard to a bank. And yet, 
Notwithstanding all that, a bill of that description has been reported, 
^ith regard to the particular bill now before the Senate, we all know 
thai it was resorted to as a temporary measure, not in the beginning, but 
in consequence of the necessities of the Treasury, arising from a greater 
expenditure than the Secretary could have imagined, and arising from the 
Tiesessary delay with reference to other measures. Can it be said that a 
measure like the one now pending before the Senate and the country is a 
measure of a day or an hour? Why, sir, what does it propose? It pro- 
3)08es something utterly unknown in this Government from its foundation ; 
^ resort to a measure of doubtful constitutionality, to say the least of it, 
which has always been denounced as ruinous to the credit of any Govem- 
ment which has recourse to it ; a measure, too, about which opinions in 
the community are divided as perhaps they never have been divided upon 
any other subject; a measure which, when it has been tried by other 
countries, as it often has been, has always proved a disastrous failure. 
Sir, it would hardly be expected that a measure of this description, 
brought into the House of Representatives and the Senate for the first 
time in the history of the country, involving questions of such infinite 
importance, not only with reference to to-day, but with reference to the 
future, to all time, because it is setting a precedent which may be fol- 
lowed, should be taken up and passed at once, as we pass appropriation 
bills. It needed long, careful and vigoroits discussion. It has had it in the 
other branch of Congress, I have read that discussion from beginning to 
end. It has been able and clear upon both sides of the question. The subject 
deserved that discussion ; and the House of Representatives would have 
been faulty if it had suffered a measure of this kind to be passed without 
its having undergone a discussion which should not only enlighten the 
House, but enlighten the country upon all the aspects of it. Shall Con- 
gress be considered in fault because they have not before acted, or did not 
act heartily, upon a measure of that description ? I think not, sir. The 
time has been well spent, and although I regret as much as any man can 
regret that we have not been able to act more promptly, I see no fault to 
be imputed anywhere ; not in the other House of Congress, and certainly 
not in this ; for it has reached this body as soon as it could possibly reach 
it, when you consider the nature of the questions that were to be discussed 
by the Committee to whom it was referred. 

I have already said that we have never attempted to resort to such a 
measure before. We have had a war with England since our Government 
was formed ; and if I am rightly informed, at that day, the stocks of the 
Government went down to sixty per cent, and pay was taken for tliom in 
such currency as could be received, itself depreciated; and yet It did not 
occur as a serious question to the men of tliat day to put fortli, under the 
Constitution, irredeemable paper made a legal tender for the payment of 
debts. To be sure, the country tlien was poor ; it is now rich, comj)ara- 
tively. The country had not then the resources that we have; and 
perhaps it would have had the more excuse for adopting such a course. I 
do not urge this as an argument against it at the present time, but only as 
ahowing the nature of the measure itself, to which it is now proposed 
to have recourse, in order to place the (iovornniont in a better position; 



102 



especially, sir, when you observe that ever>'body who has spoken on this 
question, I believe without an exception— there may have been one or 
two— but all the opinions that I have heard expressed, agree in this : that 
only with extreme reluctance, only with fear and trembling as to the 
consequences, can we have recourse to a measure like this, of making our 
paper a legal tender in the payment of debts. 

The Committee on Finance have reported several very important 
amendments. Tlie iirst amendment, which the Senate will notice is made 
in the Arst section, is that the interest on the public debt shall be paid in 
coin. The Senate will observe that without tliis, under the provisions of 
the House bill, a creditor of the Government, holding Government paper, 
notes, or bonds, would be compelled to take his interest in notes or bonds, 
as the case might be, when the time for the payment of the interest came 
round. He would have no choice. The tender of a note for the interest 
that might be due on his bonds, however large or small, would be equiva- 
lent in its effect to the tender of coin. According to our amendment, the 
Government will be obliged to provide itself with coin for the payment of 
the interest. The object of this provision is not only to do justice in this 
regard, but also to make it raise and support the credit of the Government 
obligations ; and it will be perceived how very important it is to that end. 
The Secretary, by the provision which I have referred to, is obliged to 
provide himself with coin for that purpose, and he is obliged to do it at 
whatever sacrifice may be necessary, in order to accomplish that purpose. 
This certainly will have one effect; it proves tlie good faith of the Govern- 
ment; that it means to do all it can; that it means to spare no effort 
at whatever cost, to give to those who take the Government paper, what 
they wish to receive, something besides Government paper, and thus run- 
ning round in a circle of paper, for the interest upon their debts. 

But, sir, it was not enough, perhaps, to show the good faith of the Gov- 
ernment in this particular. The Committee have recommended that we 
go further, and that we provide a specific fund, in order to accomplish 
that purpose, and set it aside for that object. It was proposed in the 
Committee — and it struck me favorably at lirst — to set aside, specifically, 
the public duties, by providing tliat the duties on imports should be paid 
in coin ; but on consideration, it was deemed by the Committee that that 
would be hardly fair. The result would be to make a distinction between 
different classes of the community, and to impose a very heavy burden 
upon those who are engaged in trade, and who would be called upon to 
pay duties. If we provide a paper currency, tlie natural and inevitable 
effect of it is, that coin increases in price. Tlie consequence would be, 
unquestionably, that those obliged to pay duties on imports might be 
compelled to make a severe sacrifice, in order to raise the coin to pay the 
duties ; and, in the next place, the general effect would be to, in effect, 
increase the duties provided by our tariff. Kecessarily, if coin appre- 
ciates, if it becomes worth more than the ordinary currency, and duties 
are to be paid in coin, the effect of such a provision would be to increase 
the duties, which are already very high, and in some cases almost prohib- 
itory. The Committee, therefore, thought that, under the circumstances, 
that would not be wise; although it will be perceived that, not having 
done so, the converse of the proposition may be true : that the effect, if we 
inflate the currency by paper, and allow the duties to be paid in paper, is 
necessarily to diminish the duties on imports, and thus, perhaps, to lead 
to a greater importation. 



103 



Having rejected this, it becomes necessary to make some other pro- 
vision; and accordingly provision was made, and will be found in the 
fifth section, by setting aside the amount of duties received, the amount 
received from the sales of the public lands, and the amount that may be 
received from the confiscation of the property of the rebels, to form a 
fund. The Senate will consider whether all these provisions are necessary 
and wise, to create a fund which shall be devoted, in the first place, to 
pay the interest upon the coin and on the notes ; and, in the second place, 
to create a sinking fund, which, in the end, might be able to paj^ the 
whole debt, and would in a certain course of time. 

This, undoubtedly, will be a very sufficient security ; but, sir, the Com- 
mittee have gone further. In order that the Secretary may be sure, and 
that the public creditors may feel safe with reference to it, they give to the 
Secretary the power to sell the bonds of the Oovemment at amy time that it 
may he necessary^ at the market price, in order to raise coin. That can 
always he done. The sacrifice may he great, or it may not; it depends upon 
circumstances ; but at any rate that will bring coin. These two provis- 
ions, taken together, have the effect necessary to create an entire 
confidence in the minds of the purchasers of the public obligations, that 
the interest will be surely paid at the time it is due, and paid in coin ; and 
having done that, the result is obvious to the Committee that our securities 
must necessarily be placed upon a more stable foundation, and be of very 
much greater value in the market, because what the holder of public 
securities wants, is to be sure that his interest will be paid, especially if it 
is on long time. But, sir, the power to sell the obligations of the Govern- 
ment at the market price is not confined to the interest. The Senate will 
observe that it is made general ; that instead of being confined and obliged 
to sell the obligations of the Government at par, the Secretary of the 
Treasury is authorized to sell them at any time at the market price; and 
instead of being confined to sell them for coin, merely for the purpose of 
raising money to pay the interest on the public debt, he is permitted to 
sell any amount at any time that it may be necessary, for what he can get. 
This is a bold, strong measure, and it may strike the Senate with some 
surprise, or, at any rate, it may lead them to deliberate upon the subject. 

«»«-^#« « n « « « M «««« 

But ithe Committee thought, in giving this enlarged power to the Secre- 
tary at this time, that it was bound— if this legal tender was to be resorted 
to, especially if the bill of the House as it stood should be adopted by the 
Senate, and should become a law — that an assurance should be given to 
the country that it was not to be resorted to as a policy; that it was what 
it professed to be, hut a temporary measure. The opinions of the Secretary 
of the Treasury are perfectly well known. He has declared that, in his 
judgment, it is, and ought to be, but a temporary measure, not to be 
resorted to as a policy, but simply on this single occasion, because the 
country is driven to the necessity of resorting to it. I have not heard 
anybody express a contrary opinion, or, at least, any man who has spoken 
on the subject in Congress. The Chairman of the Committee of Ways 
and Means, in advocating the measure, declared that it was not contem- 
plated, and he did not believe it would be necessary to issue more than 
the $150,000,000 of Treasury notes made a legal tender, provided by this 
bill. All the gentlemen who have written on the subject, except some 
wild speculators in currency, have declared that as a policy it would be 
ruinous to any people ; and it has been defended, as I have stated, simply 



104 



and solely upon the ground that it is to he a sinr/lc measure, standing hy 
itself, and not to he repeated. 

Section four of the bill, as reported by the Comniitteo, contains a pro- 
vision to which I will call the attention of the Senate. It provides for 
certain deposit certificates. 

This provision was very much desired by the banks in all the cities. It 
was thought that it would afford them facilities that would give greater 
currency to the notes, that it would enable them to deal with them better; 
and therefore we have offered a provision, that for a period of not less than 
thirty days, any person or institution may deposit their Treasury notes, 
in sums of not less than $500, at the Sub-Treasury, and receive an interest 
of five per cent. 

Mr. President, I wish now to say something upon the main question of 
the bill, which I have avoided touching, except incidentally ; and that is 
the clause making these notes a legal tender; for, after all, that is the great 
question now submitted to the Senate. The Senate will observe that the 
Committee make no recommendation on that subject, except such as may 
be inferred from the fact that they report it back, retaining the clause, and 
so far an inference might be drawn that the Committee were in favor 
of it. Under the circumstances of the case in the Committee, (of which, 
perhaps, I may speak with propriety as the Committee as a whole, had 
no opinion upon the subject, their opinions being so divided,) I deem 
myself at liberty, as I should, perhaps, be under any circumstances, if 
need be, and if my opinions lead me that way, to say what I have to say 
in opposition to that clause. I do not propose to do this except incident- 
ally. I propose rather to state the argument as I understand it, on both 
sides, in relation to the matter as briefly as I can, without attempting to 
go into the argument of the subject myself. 

The ground upon which this clause making these notes a legal tender is 
put, I have already stated. It is put upon the ground of absolute, over- 
whelming necessity ; that the Government has now arrived at that point 
when it must have funds, and those funds are not to be obtained from 
ordinary sources, or from any of the expedients to which we have hereto- 
fore had resource, and therefore, this new, anomalous, and remarkable 
provision must be resorted to in order to enable the Government to pay 
off the debt that it now owes, and afford circulation which will be availa- 
ble for other purposes. The question then is, does tlie necessity exist? 
That is a question which I propose in some degree to discuss, because 
I admit fully and decidedly that the Government, or the country, rather, 
is to be sustained in its present undertaking, and that we are bound to 
obtain the means to effect that object. If the necessity exists, I have no 
hesitation upon the subject, and shall have none. If there is nothing left 
for us to do but that, and that will effect the object, I am perfectly willing 
to do that. The question, however, is whether it is necessar}-, whether 
we have arrived at that stage, and whetlier something can or cannot be 
done in order to accomplish the object. 

Sir, I do not hesitate to say here, that Iwould advocate the use of the strong 
arm of the Government to any extent in order to accom2)lish the purpose in 
which we are engaged. I woidd take the money of any citizen against his will to 
sustain the Government, if rwthing else was left, and hid him wait imtU the Gm^- 
emment could pay him. liisa contribulion which eveiy man is bound to make 
under the ctrcumstaruses. We can take all the property of any citizen. That 
is what is called a forced contribution. Thank God, we have not arrived 



105 



that; but I am not certain that it would not be a more manly course to 
meet the matter straight in the face, and if we are to compel a man to part 
"With his property, to do it without offering him what may appear to be 
security, and yet I am not certain that that would not be the more manly 
and praiseworthy course to pursue. Then, sir, as to this question of 
necessity, I wish to ask the gentlemen to consider upon w hat public 
credit is founded ? According to my reading and my view of the case, 
it has but one foundation, and that is, the confidence of the people in 
the ability and integrity of the Government, and its power and its will 
to pay. Public credit has no other foundation that I am aware of than 
that. If that is so, then the question arises, what is the ability and what 
is the integrity of this Government, and what is its will to pay ? Are they 
such as of themselves, under proper legislation, will enable the Government 
to raise means in the ordinary way?" 

Mr. Fessenden went on to show that the country was rich in 
means, land fertile, people industrious, agricultural and manufac- 
tured products in ^great abundance, and that under any circum- 
stances we must be entitled to credit for our ability to pay, and 
that no person placing himself in the position of a money-lender 
could hesitate to say that we were entitled to all the credit of a 
great, productive, strong and healthful people. He said our 
credit had been somewhat injured by the conduct of the war, and 
yet he thought unreasonably. He saw no reason for loss of credit 
by the conduct of the war. 

He then proceeded : 

" The question, after all, returns : is this measure absolutely indispen- 
sable to procure means ? If so, as I said before, necessity knows no law. 
What are the objections to it ? I will state them as briefly as I can. The 
first is a negative objection. A measure of this kind certainly cannot 
increase confidence in the ability or the integrity of the country. It can 
make us no better than we are to-day, so far as this foundation of all 
public credit is concerned. 

Xext, in my judgment, it is a confession of bankruptcy. We begin and 
go out to the country with the declaration that we are unable to pay or 
borrow, at the present time, and such a confession is not calculated to 
increase our credit. 

Again, say what you will, nobody can deny that it is bad faith. If it 
be necessary for the salvation of the Government, all considerations of 
this kind must yield; but, to make the best of it, it is bad faitli, and 
encourages bad morality, both in public and private. Going to the extent 
that it does, to say that notes thus issued shall be receivable in payment 
of all private obligations, however contracted, is in its very essence a 
wrong, for it compels one man to take from his neighbor, in payment of 
a debt, that which he would not otherwise receive or be obliged to receive, 
and what is probably not full payment. 

Again, it encourages bad morals, because, if the currency falls, (as it is 
supposed it must, else wliy defend it by a legal enactment?) what is the 
result? It is, tliat every man who desires to pay off his debts at a dis- 
count, no matter what the circumstances are, is able to avail himself of it 



106 



agaiQ8t tlie will of his neighbor, who honestly contracted to receive 
something better. 

Again, sir, necessarily as a result, in my judgment, it must inflict a stain 
upon the national honor. We owe debts abroad yet. Money has been 
loaned to this country, and to the people of this country, in good faith. 
Stocks of our private corporations, stocks of our States and of our cities, 
are held and owned abroad. We declare that for the interest on all this 
debt, and the principal, if due, these notes, made a legal tender by act of 
Congress, at whatever discount they shall stand, shall be receivable. 
Payment must be enforced, if at all, in the courts of this coimtry, and 
the courts of tliis country are bound to recognize the law that we pass. 
That result, then, is inevitable. 

Again, sir, it necessarily changes the values of all property. It is very 
well known that all over the world gold and silver are recognized as 
money, as currency ; they are the measures of value. We change it here. 
What is the result? Inflation, subsequent depression, all the evils which 
follow from an inflated currency. They cannot be avoided; they are 
inevitable ; the consequence is admitted. Although the notes, to be sure, . 
pass precisely at par, gold appreciates and property appreciates. 

Again, sir, a stronger objection than all that I have to this proposition— 
I am stating the objections which everybody must entertain, because I 
suppose these facts are palpable— -is, that the loss is to fall most heavily 
upon the poor, by reason of the inflation.-' 

Mr. Fesscnden continued his argument at great length, urging 
taxation, good faith and economy, as the best means of maintain- 
ing the credit of the Government. Said he would not argue the 
constitutional question, proposing to leave his own mind unin- 
structed on this question, and if need be, leave that question to 
be settled by the courts. That this was a great crisis truly, but 
he believed we would be as well able to meet the diflftculties with- 
out the legal tender clause as with it. And concluded as follows : 

" We always meet, and must always expect to meet, in a Government 
like ours especially, difficulties such as attend us now — perhaps not so 
great, but greater or less — in the course of time. No nation ever escaped 
them, and no nation can hope to escape them. I would not have perfect 
quiet always, in a republic especially. It would be a bad sign if it were 
so. It is contrary to the very nature of our Government that it should 
exist. You never find quiet except under a tyranny. Only in the dead 
sea of despotism is there a perfect calm. It cannot be looked for in the 
wide ocean of liberty. Storms arise inevitably, and the waves roll and 
dash turbulently, but bright skies again cheer us, the agitated waters sub- 
side, and their broad bosom is traversed by thousands of tall ships laden 
richly with hope for the nations of the world." 

JUDGE COLLAMER's SPEECH. 

Mr. Coll AM ER, of Vermont, made an elaborate speech against 
the legal tender clause in the bill : 

*'He argued that it was unconstitutional, and that even if it was a 
necessity, he could not vote for the measure. To him, the oath he had 



lor 



taken to support the Constitution, was recorded in Heaven as well as 
upon earth; and there is no necessity that, in his estimation, would justify 
him in the breach of it. He admitted that when the Govemment borrows 
moi^ey, it must give some evidence of the debt, whether by the name 
of Treasury note or some other name, is immaterial, but denied the power 
of Congress to make them a tender in payment of debts. He quoted 
largely from Story on the Constitution, to show the illegality as well 
as inexpediency of this measure. He said it would be aiding and assisting 
men who owed debts, to pay those debts with a depreciated paper, at the 
cost and expense of the creditor. His honest opinion was that the Consti- 
tution never intended to invest Congress with any such power. He 
referred to the debates in the convention that formed the Constitution, to 
show that the men of that period always entertained the opinion that the 
* United States could have nothing else a tender but coin.' While they 
lived there never was such a thing thought of as attempting to make the 
evidences of the debt of the Government a legal tender, let their form be 
what they might. He argued that there was an express power • to bor- 
row money on the credit of the United States.' 

That where there is an express power to do a thing, there can be no 
implied power to do the same thing. There were two modes of replenish- 
ing the Treasury. One was by taxation, and the other to borrow money. 
To borrow money there must be a lender and a borrower, and both should 
act voluntarily, and not compel the lender to part with his money without 
an inducement. The operation of this bill was not anything like as hon- 
orable or honest as a forced loan. Such paper always depreciates, and 
generally fails altogether, and is never paid." 

He urged taxation, and the issue of Treasury notes receivable 

for public dues, and closed as follows : 

"You have nothing to do but to exercise the powers you possess in com- 
manding the resources that you can command, and you can have money 
and credit enough. I think some little courage becomes us, too, in per- 
forming our duty. 1 have no doubt that this country is able to sustain 
itself in this strife, pecuniarily as well as physically. I, for one, desire to 
do that; but I do not want to do it by saying that now, because the 
necessity requires money, I will go and steal it, or authorize anybody 
else to steal it. I will not say to a man : * Here is my note for so much, 
and if 1 do not pay it, you mnst steal the amount from the first man you 
come to, and give him this note in payment.' I will do nothing of that 
kind. I have faith in the Government. I no way despair of the success 
of this Government. It cannot fail. Its power, its resources, its members 
are such that it is not possible it should fail. If we are not competent to 
exercise the proper moral courage to do our duties and come up to what 
is wanted, I hope wc shall give place to men who are." 

MR. HOWE's speech. 

Mr. Howe, of Wisconsin, made a lengthy speech in favor of 
the bill, which will be found in the Appendix to the Cong. Glohe^ 
p. 51-2-3. 

"Mr. President— Hitherto the effort of the Government has been to 
borrow the immense sums demanded for the war in coin. It is clear to 
my mind that this effort should be abandoned. We are excluded from 
borrowing in foreign markets for the present. It suits both the financial 



108 



and poHti<*al ])iir]>o<(*?< of otlier nations, ut this time, to discredit our 
ability. Not until \vc have demonstrated that, in the devotion of our own 
IK?o|)le. the Government has resources equal to its utmost needs, can we 
command the confidence of the gold-mongers of Europe? To borrow of 
those communities, in their present temi>er, would subject us to such dis- 
counts now as would neither comport \\i:h our interests or our honor, 
and would subject us hereafter to heavy annual exi)ortations of specie for 
the payment of interest. 

To continue borrowing of our own banks, and borrowing coin, is iwpos^ 
sible. Ther/ have not the coin to lend. In their efforts to lend to the Govern- 
menl the}/ have ahead}/ been forced to stutpend the paymeni of specie upon 
their own notes. The entire sum of specie in all the banks in the United 
States, in May last, was only $90,751,027; of that sum $27,125,000 was in 
the vaults of banks within the seceded States, and not just now available 
for the puriK)se8 of this Government. Thus the specie capital, which the 
banks of the loyal States could place at the disposal of the Government, 
was but liltle more than seveiUy-two mitliom of dollars. I'hat sum ttnll not 
defray tlie expenses of the Government for fifty days. The Government may 
be able to borrow of the banks, but the Government cannot borrow specie 
of the banks. If it borrows anything from them it must borrow, not 
their money, but their promises to pay monc}'. Nothing is more certain 
than that, whatever our wishes may be, it is impossible to command the 
revenues for this war in coin. "We must rely mainly upon a paper cir- 
culation; and there is another thing equally certain, which is, that that 
paper, ^whoever issues it, 7mist be irredeemable. All paper currencies have 
been, and ever will be, in-edeemable. It is a pleasant fiction to call them 
redeemable; it is an agreeable fancy to think them so. I would not dispel 
that fancy, I would not expose that fiction, only that the great emergency 
which is upon us seems to me to render it more than usually proper that 
the nation should begin to speak truth to itself ; to have done with shams, 
and to deal with realities. 

««««« f # # # # 

To talk of borrowing of your banks the money to support your army 
and your navy, is as idle as for England to talk of borrowing from her 
national bank the money to pay her national debt. There is but one fund 
adequate to supply the national finances, and that is, the property of the 
nation. There is biU one guarantee upon which the national credit can 
seciLrely resty and that is the national faith. In the discharge of that duty 
Congress Is clothed with unrestricted power to raise and support armies, ' 
to provide arid maintain navies. Congress is also clothed with power 'to 
make all laws which shall be necessary and proper for carrying into exe- 
cution the foregoing powers, and all other powers vested by this Constitu- 
tion in the Government of the United States.' 

To preserve for these eleven misguided States a republican form of 
government, we have raised such armies and provided such navies as this 
continent never before saw— such as the world has rarely seen. I deem 
those armies and navies * necessary and proi)er ' for the occasion. To sup- 
port those armies and maintaiji those navies I deem the measure before the 
Senate 'necessary and proper.' 

Those who deny the constitutional authority to i)ass this bill must deny 
its necessity or its propriety. Those who deny its necessity or its pro- 
priety ought to show us some plan for avoiding it, some measure adequate 
to the emergency, and more j^^ojjer than the one proposed by this bill. 



109 



Two months liave elapsed since the policy of this bill has been discussed, 
Jind no one of its opponents has jet produced a substitute. The total 
neglect to oflfer a substitute is prima fade evidence of the necessity for 
t.liis. But it is not the only evidence of that necessity. It is evident 
that no substitute can be provided, except it be taxation or direct loans. 

I have already said that taxation is inadequate to the supply demanded 
for this terrible occasion. No nation of modern times has been able to 
provide fi*om taxes alone, the immense sums we are called upon to 
expend. I will presently show that direct loans are quite as impractica- 
ble as taxation. 

***** * * * « ****** 

The Senator from Ohio [Mr. Sherman,] proposes to amend this bill, so 
as to authorize the Secretarj^ of the Treasury to sell the public stocks for 
whatever he may be offered for them; to go into the market with the 
national credit, and to sell it for whatever the crippled capital of the 
country chooses to offer for it, to fling the financial character of the 
Republic, as a bone, to be quarreled and growled over by the bulls and 
bears of the stock market. To tliat amendment I am opposed. If you 
notify the capital of tke country that you are prepared to pay for money, 
whatever it is pleased to exact, it will be hoarded to wait the extremity 
of your distress. No man likes to sell for less than he buys. No man 
likes to buy for more tlian his neighbors. And if we advertise to the 
world that, like any other spendthrift, we are prepared to pay for money 
according to our necessities for it, no man will purchase our bonds at 
ninety cents for fear we shall presently sell at seventy-five; and if we 
offer them at seventy-five per cent., we give the best of assurances that 
we will soon sell at fifty. 

***** * * * * * ***** 

Sir, if one of your soldiers shrinks from duty, and deserts his country's 
cause for fear of losing his life, he is called a coward, and he is ignomin- 
iously dismissed from his company, or sliot in its presence. By wliat 
fitting term, then, shall we designate him who deserts his country in its 
greatest need, for fear of losing his money ? By wiiat penalties should he 
be visited ? 

Money and men alone do not constitute the wealth of a nation. The 
genius, the generosity, the courage, tlie intellect, and the patriotism of 
the i)eople are all national resources. In an emergency like tliis, the 
Government should not draw upon one fund alone, but every fund should 
respond alike. Surely avarice and cowardice should not alone be exempt 
from the Common burdens.-' 

Mr. Fessenden moved to amend the bill so that tlie six per 
cent, bonds should be redeemable in five years, and payable tirenty 
years from date,^^ 

MR. chandler's SPEEOU. 

Mr. Chandler, of Michigan, spoke on the amendment to 
make the bonds redeenmble in five 3'cars. " 

Mr. Chandler— "I am in favor of the amendment of the Senator from 
Maine, for the reason that I believe we need not borrow money at long 
dates at a high rate of interest. Still, I object to the Senator's hypothesis 
that this war may last one or two years. There has not been a day since 



110 



the Ist day of Xovember, when we could not have closed the war in sixty 
days, with our forces then in the field, and from this day forth we can 
close the war in sixty days, by an advance of our armies ; and I believe 
that the time has now arrived when we will advance our armies, and 
when the war will he brought to a dose tnthin sixty days from this date. I am 
therefore, in favor of restricting the bonds, and giving the Secretary of 
the Treasury the right to redeem them within five years, and I would 
even make the time shorter than that, and say ** within three years." 
The time has arrived when this rebellion is within our grasp. The time 
has arrived when the order, "forward," will close this rebellion. The 
obstacles are small. The objects are great. We can remove the only 
obstacle that stands in our way, and we can close this rebellion before the 
Ist day of May next, and I believe, I believe solemnly, that we shall do it. 
We have but one obstacle, and that obstacle is so small that we can 
remove it to-morrow, if Congress, if the Senate say so. It is a very smaM 
obstacle, yet it has stood in our way for four months. 

I hope that the amendment of the Senator from Maine will prevail ; and 
I would prefer to reduce the time which he has fixed, from five years to 
three years. I would not pay seven per cent., nor even six per cent., 
more than three years. Our five per cent, bonds will be worth more than 
par in three years from this date. I know that the money market is the 
touchstone of the national credit ; but I know, at the same time, that the 
United States five per cent, would be worth more than par to-day, if the 
country and Congress knew our present position. One obstacle stands in 
our way, and that is a very small one. 

I hope the amendment will prevail, and that we shall reduce the time at 
least to five years. I should prefer its reduction to three years. This war 
is nearly ended. A single order, forward," to-morrow, and we have the 
man to give the order in the Secretary of War, and the war is ended." 

The amendment was agreed to. 

On the 13th Inst. Mr. Collamer moved to strike out the legal 
tender cHause in the bill, and on this motion Mr. Wilson obtained 
the floor. 

MB. Wilson's speeoh. 
Mr. Wilson, of Massachusetts, spoke as follows : 

"Mr. President— This proposition is a very simple and plain one, and 
certainly very easy of comprehension; but, it seems to me, the^fate of the 
measure itself is involved in the decision. If the amendment proposed 
by the Senator from Vermont is accepted, I shall vote against the whole 
bill under any and all circumstances, for I conceive that it would be 
unjust to issue a currency of $150,00,000 of Government paper, and impose 
it upon all persons in the employ of the Government, upon our soldiers in 
the field, and upon those who have made contracts to supply the armies 
of the Republic, and to do nothing to protect the credit of that currency 
when in their hands, imposed upon them by our necessities. I should 
consider such a measure as that unjust, wickedly unjust ; and I could not, 
and I would not, under any circumstances, be guilty of giving a vote of 
that character. If that amendment should be adopted, I hope every Sen- 
ator in favor of the legal tender clause will vote against the bill and defeat 
it if possible. I think we owe it to the character of the Senate, and the 
character of the country. 



Ill 



X^assing by the question of constitutional powers, and coming to it 
^^Xjiply as a practical question, it is a contest between brokers, and jobbers, 
'^^d money-changers on the one side, and the people of the United States 
the other. I venture to express the opinion that ninety-nine of every 
hundred of the loyal peojile of the United States are for this legal tender 
clause. I do not believe that there are one thousand persons in the State 
I represent who are not in favor of it. The entire business community, 
with hardly a solitary exception, men who have trusted out of the country 
in commercial transactions their tens and hundreds of millions, are for 
the bill with this legal tender clause. Yes, sir, the people in sentiment 
approach unanimity upon the question. What is true of Massachusetts 
is, in my judgment, true to a considerable extent of New England, and 
true to some extent of the Central States and the West. I believe that no 
measure that can be passed by the Congress of the United States, unless 
it be a bill to raise revenue to support the credit of the Government, will 
be received with so much joy as the passage of this bill with the legal 
tender clause. On that question I entertain no shadow of doubt. If you 
pass this bill with the legal tender, the legal tender cannot injuriously 
affect the credit of this currency you propose to circulate. No harm can 
certainly come of it. It seems to me, sir, the argument made by the Sen- 
ator from Vermont, and the Senator from Maine, is an argument against 
issuing these notes as a currency at all. The legitimate inferences from 
their arguments are against this proposition for $150,000,000 of demand 
Treasury notes. I have received several letters from my own State in 
favor of the bill— persons representing millions, in favor of the legal tender 
clause. The intelligence I obtain from all portions of the country is to 
the same eflfect. I shall, therefore, vote against striking out that clause. 
If it is retained, I shall vote for the bill ; if it is stricken out, I shall give 
rny vote against putting upon the people, upon the soldiers of the country, 
♦150,000,000 of demand notes, and doing nothing to protect those upon 
'Whom we impose this Government paper." 

MR. Sherman's speech. 

Mr. Sherman, of Ohio, made an elaborate speech in favor of 
"the bill, and in opposition to the motion of Mr. Collamer to 
strike out the legal tender clause. 

"The motion of the Senator from Vermont now for the first time pre- 
sents to the Senate the only question upon which the members of the 
Committee of Finance liad any material diflference of opinion, and that 
is, whether the notes provided for in this bill shall be made a legal tender 
in payment of public and private debts ? Upon this point I will commence 
the argument where the Senator from Maine left it. 

In the first place, I will say, every organ of financial opinion— if that is 
a correct expression — in this country agrees that there is such a necessity, 
in case we authorize the issue of demand notes. You commence with 
the Secretary of the Treasury, who has given this subject the most ample 
consideration. He declares not only in his official communications here, 
but in his private intercourses with the members of the Committee, that 
this clause is indispensably necessary to the security and negotiability of 
these demand notes. We all know from his antecedents, from his peculiar 
opinions, that he would be probably the last man among the leading poli- 
ticians of our country to yield to the necessity of substituting paper 



112 



money for coin. He has examined this question in all its length and 
breadth. He ia in a position where he feels the necessity, lie is a states- 
man of admitted ability, and distinj^cuished in his high position. He 
informs us that without this clause, to attempt to circulate as money the 
proposed amount of demand notes of the United States, will prove a fatal 
oxiwriment. 

In addition to his opinion, we have the concurring opinion of the Cham- 
ber of Commerce of the city of New York. With almost entire unanimity 
they have passed a resolution on the subject, after full debate and consid- 
eration. That resolution has been read by your Secretary. You have 
also the opinion of the Committee of Public Safety of the city of New 
York, composed of distinguished gentlemen, nearly all of whom are good 
financiers, who agree fully in the same opinion. I may say the same in 
regard to the Chambers of Commerce of the city of Boston, of the city of 
Pliiladelphia, and of almost every recognized organ of financial opinion in 
this country. They have said to us in the most solemn form, that this 
measure was indispensably necessary to maintain the credit of the Gov- 
ernment, and to keep these notes anywhere near par. In addition, we 
have the deliberate judgment and vote of the House of Representatives. 
After a full debate, in which the constitutionality, expediency and neces- 
sity of this measure were discussed, in which all the objections that have 
been made here, and many more, were urged, the House of Representa- 
tives, by a large vote, declared that it was necessary to issue demand 
notes, and that this clause was indispensable to their negotiation and 
credit.'- 

He continued his argument at length : 

**A hard necessity presses the Government. $100,000,000 is now due 
the army, and $250,000,000 more up to July first. The Banks of New 
York, Boston and Philadelphia, have exhausted their capitals in making 
loans to the Government. They have already tied up their capital in your 
bonds. Among others, the cashier of the Bank of Commerce, (Mr. Vail,) 
the largest bank corporation in the United States, and one that has done 
much to sustain the Government, appeared before the Finance Committee, 
and stated explicitly, that the Bank of Commerce, as well as other banks 
of New Y'ork, could no further aid the Government, unless your proposed 
currency was stamped by, and invested with the attributes of lawful 
money, which they could pay to others as well as receive themselves. 

Bonds cannot be sold except at a great sacrifice, because there is no 
money to buy them. As soon as the banks suspended, gold and silver 
ceased to circulate as money. You cannot sell your bonds for gold and silver, 
which is the only money thai can now he received under the Sub-Trea^ry law. 
This currency made a legal tender was necessary to aid in making further 
loans. He argued that the bill was constitutional. The Senator from 
Vermont has read extracts from the debates in the national convention, 
and from Story's Commentaries, tending to show that Congress cannot 
authorize the issue of bills of credit. But I submit to him that this ques- 
tion has been settled by the practice of the Government. We issued such 
bills during the war of 1812, during the war with Mexico, and at the recent 
session of Congress. We receive them now for our services ; we pay them 
to our soldiers and our creditors. These notes are payable to bearer; they 
pass from hand to hand as currency ; they bear no interest. If the argu- 
ment of that Senator is true, then all these notes are unauthorized. The 
Senator admits that when we owe a debt and cannot pay it, we can issue 



113 



a note. But where does he find the power to issue a note in the Constitu- 
tion ? Where does he find the power to prescribe the terms of the note, 
to make it transferable, receivable for public dues ? He draws all these 
powers as incidents to the power to borrow money. According to his 
argument, when we pay a soldier a ten dollar demand bill, we borrow ten 
dollars from the soldier; when I apply to the Secretary of the Senate for a 
month's pay, I loan the United States $250. This certainly is not the 
view we take of it when we receive the money. On the other hand, we 
recognize the fact that the Government cannot pay us in gold. We 
receive notes as money. The Government ought to give, and has the 
power to give, to that money, all the sanction, authority, value, necessary 
and proper, to enable it to borrow money. The power to fix the standard 
of money, to regulate the medium of exchanges, must necessarily go with, 
and be incident to, the power to regulate commerce, to borrow money, to 
coin money, to maintain armies and navies. All these high powers are 
expressly prohibited to the States, and also the incidental power to emit 
bills of credit, and to make anything but gold and silver a legal tender. 
BvJt Congress is expressly invested with all these high powers, and to remove all 
doubt, is expressly authorized to me oM necessary and proper means to carry these 
powers into effect. 

If you strike out the tender clause you do so with a knowledge that 
these notes will fall dead upon the money market of the world. When 
you issue demand notes, and announce to the world your purpose not to 
pay any more gold and silver, you then tender to those who have fur- 
nished you provisions and services this paper money. What can they do ? 
They cannot pay their debts with it ; they cannot support their families 
with it, without a depreciation. The whole then depends on the promise 
of the Government to pay at some time not fixed on the note. Justice to 
our creditors demands that it should be a legal tender; it will then circu- 
late all over this country, it will be the life blood of the whole business of 
the country, and it will enable capitalists to buy your bonds. The only 
objection to the measure is that too much may be issued. He did not 
believe the issue of $150,000,000 would do any harm. It is only a mere 
temporary expedient, and ought not to be repeated." 

He closed as follows : 

**I have thus, Mr. Presideut, endeavored to reply to the constitutional 
argument of the Senator from Vermont. Our arguments must be sub- 
mitted finally to the arbitration of the courts of the United States. 
When I feel so strongly the necessity of this measure, I am constrained 
to assume the power, and refer our authoi-ity to exercise it to the courts. 
I have shown, in reply to the argument of the Senator from Maine, that 
we must no longer hesitate as to the necessity of this measure. That 
necessity does exist, and now presses upon us. I rest my vote upon the 
proposition that this is a necessaiy and proper measure to furnish a cur- 
rency—a medium of exchange— to enable the Government to borrow 
money, to maintain an army and support a navy. Believing this, I find 
ample authority to authorize my vote. We have been taught by recent 
fearful experience that delay and doubt in this time of revolutionary 
activity are stagnation and death. I have sworn to raise and support 
your armies; to provide for and maintain your navy; to borrow money ; 
to uphold your Government against all enemies, at home and a])road. 
That oath is sacred. As a member of this body, I am armed with high 



114 



powers for a holy purpose, and I am authorized— nay, required— to vote 
for all laws necessary and proper for executing these high powers, and to 
accomplish that purpose. This is not the time when I would limit these 
powers. Rather than yield to revolutionary force, I would use revolu- 
tionary force. Here it is not necessary, for the framers of the Constitution 
did not assume to foresee all the means that might be necessary to main- 
tain the delegated powers of the national Government. Begarding this 
great measure as a necessary and proper one, and within our power to 
enact, I see plain before me the path of duty, and one that is easy to 
tread." 

MR. cowan's speech. 

Mr. Cowan, of Pennsylvania, made a lengthy speech in favor 

of the amendment to strike out the legal tender clause in the 

bill, on the ground that Congress had no power to make anything 

but gold and silver a tender in payment of private debts. 

"He argued at length that Congress had no power to *emit bills of 
credit, make anything but gold and silver coin a tender in payment of 
debts, or pass any law impairing the obligation of contracts.' They are 
powers which belong neither to the United States nor to the States, and 
they ought to belong to no Government anywhere. He had supposed that 
this question could never enter the American Senate; that the day had 
gone by when it was open to discussion, if it ever was open since the 
Constitution was formed. Surely, if anything in tlie world is settled — 
settled by the fathers, by cotemporary history, painful experience, and 
the total absence of all precedent for the exercise of these powers — it is 
that they were not delegated, nor intended to be delegated. The exer- 
cise of such a power would be subversive of all our notions of Govern- 
ment, and the ends for which it is established, which ai-e, the protection 
and preservation of society. The life and soul of society is the faith man 
has in his fellow-man ; that he will speak truth, deal justly, and perform 
his engagements and maintain his credit. Will it strengthen this credit ? 
It proposes that in all money contracts notes shall be taken as money, the 
same as gold and silver; all men who have money due them will be 
obliged to receive these notes as money at par; they are made a legal ten- 
der on aU debts. The power claimed for the Government subverts the 
Government itself and makes it destroy that which it was intended to 
protect and preserve. It is abhorrent of reason, justice and all notions of 
right. He thought that the legal tender clause would not give the notes 
credit, but would be injurious to them. It would disturb the relations 
between debtor and creditor, and impair all the contracts of the people, 
more or less, all over the country." 

He concluded as follows : 

"I am willing to yield to the better judgment of the administration in 
all matters of policy or expediency, but I am still my own conscience 
keeper, and in all questions of power under the Constitution I must judge 
for myself, and act accordingly. That Constitution is the charter of our 
liberties, and the covenant for the Union which we are all so anxious to 
preserve and defend. I will stand upon it to the last, despite every neces- 
sity, however imperious ; and if the time comes when we must all go down 
together, I say let it come ; but let us go down as honest men, with our 
faith unviolated ; and in that spirit, I hope the amendment to the bill may 
prevail." 



115 



MR. DOOLITTLE's SPEECH. 

Mr. DooLiTTLE, of Wisconsin, regretted that this bill must bo 
acted upon before the tax bill was matured. 

** If we had a Rufficient tax law to sustain the credit of the Govemtnetit, 
he would vote to strike out the legal tender clause, lie was assured that 
this bill must pass immediately, or the Government could not go on. As 
an original propodtion, lie did not believe in paper money, but it had 
become engrafted on our system. He thought the framers of the Consti- 
tution intended nothing but hard money, coined gold and silver. Had 
their intentions been carried out; had we always held fast to the Consti- 
tutional currency; had not paper mone.v, under both State and Federal 
authority, become the actu il currency of our people; had we to-day no 
other currency but gold and silver, I would not tolerate the idea of passing 
this bill for a single moment. But, such is not our condition ; we are In 
the midst of a gigantic war; we can not go back; we must go forward; 
we must go through; we must start from where we are, and not from 
where we would be; we must behold the real necessities of our position 
as it is, and not as we would have it, and look those necessities squarely 
in the face. 

The truth is, while in theory the only money of our people is gold and 
silver, the fact is otherwise. It is almost exclusively of paper. Aye, sir, 
at this moment it is the irredeemable paper of suspended bank corpora- 
tions. Most unfortunately, paper money does now exist, and has existed 
so many years in this country, issued under the sanction of State authori- 
ties in violation, as I admit, of the spirit and intentions of those who 
framed the Constitution, that a man must be blind, indeed, who would 
not now. in time of war, in a measure of practical legislation, recognize 
the stubborn fact that these banking corporations, created by the States, 
so long acquiesced in by this Government, have become great and power- 
ful institutions, and have practically displaced the currency of the 
Constitution, by substituting in its stead their own paper money. At all 
times it is much the greater part of our circulating medium, and when, in 
times of patiic and disaster, comes suspension of specie payments, it 
becomes our only currency. Such is our condition now. What shall we 
do now? We must have deeds, not words; facts, not theories. We 
cannot sell our bonds abroad. The paper money issued by banking cor- 
porations is all, or nearly all, the money our own people have. Shall we 
sell our bonds for the paper money of suspended banks? No, sir; no 
man will advocate that. 

Tlie only alternative is to issue these Treasury notes, which will go into 
the circulation of the country as a part of its currency. If, as I have said, 
the question now were whether we should begin to build up a paper cur- 
rency in this country, or hold fast to the currency of the Constitution, 
I would oppose this measure. Hut we cut our moorings from the solid 
ground long, long ago. We have been embarked upon a sea of paper 
money for years. AVe have suffered periodically financial crashes and 
revulsions, tot^sed upon its uncertain waves, blown up and down by the 
breath of speculation. We are still at sea, and in the beginning of a 
territic tinancial storm, and the question is whether we shall seize the 
nidder and direct the ship, or suffer it to go without diiection, to founder 
and make shipwreck of all public and private securities and values, to 
become the prey and spoils of wreckers along the shore. The simple 



116 



question which pi-esses upon us iu this extremity is, whether we shall rule 
this currency, created by these corporations, in violation, in my opinion, 
of tlie original intention of the Constitution of tlie United States, or 
whether they shall rule us. 

For their good, for the security of all, as well as for its own safety, this 
Government must assert its Constitutional authority over the cuiTcncy of 
the country, in some i)racticable way, and it seems to me that the mode 
proposed in this bill is the simplest and most direct in the present exigen- 
cies, as a temporary measure, until the great measure of finance, the tax 
bill, can be perfected and set in operation." 

MR. Simmons' speecu. 

Mr. Simmon?, of Rhode Island, opposed the legal tender clause 
in this bill. 

"He did not see its necessity, nor the Constitutional power for passing 
it. He thought the Constitutional objection about as difficult a matter to 
get over as anything could well be. lie thought that if the legal tender 
clause was stricken out, the notes would not be bills of credit, but mere 
evidences of debt. In contemplation of the Constitution, the old fash- 
ioned bills of credit were promises to pay, with a State law enforcing 
their passage against the will of those who were to take them. These 
were the national bills of credit, which were made a tender by State laws 
under the old Confederation. He thought it better to make our securities 
desirable by increasing the rate of interest, as high even as eight per cent. 
He intended to move an amendment at the proper time, to increase the 
interest to eight per cent, on notes and bonds payable in two years." 

MR. bayard's speecu. 

Mr. Bayard, of Delaware, opposed the legal tender clause, 
because it is unconstitutional, impolitic and inexpedient. 

**He concurred in the argument of the Senator from Vermont, who has 
moved to strike out the legal tender clause in the bill. The first article of 
the Constitution, in its first section, provides that *all legislative poweis 
herein granted shall be vested iu a Congress of the United States '—not an 
indefinite delegation of all powers of legislation, as is the case in our State 
Constitutions, where the legislative power of the community is vested in 
a Senate and House of Kepresentatives; but here in this Constitution of 
specially delegated powers, *all legislative powers herein granted shall 
be vested in a Congress,' and none other. When you come to the other 
clause, \yhich specifies these powers, you find but a solitary pi*ovision 
which has any relation to the power to make money. The power to bor- 
row is a distinct thing; but the power to make money, is *to coin money, 
regulate the value thereof, and of foreign coin, and fix the standard of 
weights and measures.' I have supposed that the power being designated 
in that form, and Congress having a right to exercise only the power 
granted, under no species of interpretation could you hold that a power 
to coin money implied, or could be extended to a power, to make your 
own paper, your promise to pay money, for the purpose of discharging 
debts between individuals, or as against yourself. 

In my judgment, therefore, apart from the constitutional objection, 
which alone would be sufficient to control my vote, upon the ground that 



I 



Ill 



you have no power to insert this clause in any law, 1 cannot vote for a bill 
which embodies it. It is impolitic and inexpedient, as well as unconsti- 
tutional. It is a mere temporary expedient. It may give present inflation 
and present relief for the hour, and a very brief hour indeed, but it will 
be followed by a weakening of the resources of the Government, a depre- 
ciation of its credit, and it will produce nothing but disaster and ruin to 
the country." 

SPEECH OF MR. WILLEY. 

Mr. WiLLEY, of Virginia, spoke as follows : 

**I do not rise, Mr. President, certainly not at the present time, for the 
purpose of making a speech, but I wish to place upon record the reason 
why I shall give the vote which I feel compelled to give on the present 
occasion. If this were a question merely of expedienc3% I would most 
readily defer my judgment to that of other gentlemen better capable of 
forming a correct estimate. But, sir, consulting my own opinion, I should 
say that the legal tender clause of this bill will have the contrar}' effect 
upon the currency and credit of the Treasury notes from that which some 
gentlemen seem to suppose. I believe it will depreciate their credit, and 
I fear it will depreciate the character of our Government and our country 
in the estimation of all honest and well-meaning nations abroad. But, 
sir, believing, as I sincerely do, that this clause is unconstitutional, I can 
not vote to retain it in the bill. I have felt the appeal of my honorable 
friend from Ohio— the plea of necessity. Sir, that is a dangerous plea, 
and it found its origin in a dangerous quarter. It is said that the plea of 
necessity is the plea of tyrants. I nevertheless recognize the fact that 
there are occasions in the history of a nation when the old maxim salus 
popidi suprema lex, may apply; but it is my opinion that the exigencies 
of the country do not, at this time, warrant the application of that maxim; 
and I should be sorry if, in prosecuting this holy war to put down an 
infamous rebellion, to restore and maintain the Constitution, we are our- 
selves, in the very act of doing so, guilty of a most palpable violation of 
that instrument." 

SPEECH OF MR. HOWARD. 

Mr. Howard, of Michigan, said: 

"I do not rise, Mr. President, at this late period of tlie discussion, to 
detain the Senate longer than a minute or two. When tliis measure was 
first proposed, and after t had given it merely a perusal, I came, or 
thought I came, to the same conclusion at which the gentleman from Vir- 
ginia seems to have arrived, and was ratlier disposed to think that 
there was no authority in the Constitution to warrant such an enactment 
as this, which constitutes the Treasury notes a legal tender in tlie payment 
of private debts. The thing was so anomalous, so unusual to me, that I 
could scarcely entertain the idea, and I confess tliat my mind struggled 
strongly against it. But after a little reflection, and giving tlie question 
of constitutional power such examination as 1 have been able to give it, 
I have arrived at the conclusion that Congress lias the constitutional 
power, particularly under the clause authorizing them to borrow money, 
to declare this species of paper a legal tender in the payment of debts 
between individuals. 

It is undoubtedly a hard necessity to which we iire driven; but the 



X18 



necessity of the cnw I submit, has nothinpr to do with the naked qnestion 
of authority, under the Constitution. If I were convinced that we had no 
authority, under the C onstitution, to enact sucli a clause as tliis, I should 
not feel at liberty to vote in fjivor of it, and should certainly vote to strike 
it out; but such is not my conviction. I believe that we have the author- 
ity; and still, while I say this, I must say at the same time, tliat I think 
several gentlemen who are friends of this bill, have placed too hip^h an 
estimate upon this particular clause in the bill. I douht very much 
whether it will add greatly to the currency and credit of the paper itself. 
They think it will, and I am certainly disposed to jrive it a trial. 

AVe have, under the Constitution, the power to borrow money. This no 
one disputes. If we have the power to borrow money, we have the right; 
and it is our duty to jilace in the hand of the lender, an evidence of the 
fact that we have so borrowed it, and further, that we intend to pay what 
wc have borrowed. These two things are manifestlj-, in their very nature, 
inseparable; and the only real question, it seems to me, which addresses 
itself to the Senate is this: whether we have any power, after having 
issued this description of paper to the public creditors, in payment of their 
debts, to protect the credit of the United States, expressed upon the face 
of the paper, while it is in the hands of innocent and honest holders? I 
think \ye have. I think this is one of the most obvious means of extend- 
ing protection to the public credit thus expressed upon the papf*r. If we 
have it not; if we cannot subject, so to speak, the entire property of the 
nation, to something like an assistance to the public credit, then this 
power to borrow money at once ceases to be a power of any value, and it 
is a mere mockery upon the face of the Cinistitution. if we cannot 
declare that this paper shall, in commercial transactions, be of equal 
validity to transactions based upon gold and silver, then I say that the 
power to borrow money ceases, in and of itself, to be of any benefit to the 
Government or to the nation; and it is because I believe that we have this 
power, thus to protect the public credit, expressed and pledged on the 
face of a Treasury note, that I shall vote to retain this clause in the bill. 
I think wc have the constitutional power, and I am willing to use it on 
this occasion." 

MR. McDOUQALL's SPEECH. 

Mr. McDouGALL, of California, advocated tho bill as a lawful 
and proper mcasu/e to be adopted at this time. 

** He thought this a just and reasonable war measure. Necessity, it is 
.*?aid, is ai»ove all law; it is better said, * necessity makes its own laws.' 
Our Treasury is now exhausted. Money is the th-n necessity of war- 
vigorous successful war. Delay is not to be contemplated— not to be per- 
mitted. Prompt present action is a neces^ity. To give efficiency, the 
legal tender clause should be retained— the bill ought not to be amended 
by striking it out. He argued thjit the bill was constitutional; that we 
had the right to issue these notes as mone}', to be used as a currency for 
the country in the present exigency. He was not able lo maintain against 
it any good constitutional objection, and did not see in it any special 
injustice. We are at war; this is a war measure; we must take war 
responsibilities. This measure can ruin no one, destroy no one, and we 
are advised upon the highest authority that it is needed for the maintain- 
ance of the Republic. I believe the law constitutional, just and necessary. 
I bope to sec it pas6ed, and when passed, I shall hope on/* 



119 



MB. Sumner's speech. 

Mr. Sumner, of Massachusetts, made a lengthy speech in favor 
of the constitutionality and expediency of the legal tender clause, 
and said he would confine his remarks to this feature of the pres- 
ent bill. 

"In the present exigency, money must be had; and we are told that 
the credit of the Government can be saved only by an act that seems like 
a forfeiture of credit. Paper promises to pay are to be made a legal ten- 
der like gold and silver, and this provision is to be ingrafted on the present 
bill authorizing the issue of Treasury notes to the amount of $150,000,000. 
It seemed to him that the power of Congress to make Treasury notes a 
legal tender was settled as long ago as when it was settled that Congress 
might authorize the issue of Treasury notes ; for from time immemorial 
the two have gone together; one is the incident to the other, and, unless 
expressly severed, they naturally go together. 

It is true, that in the Constitution there are no words expressly giving 
to Congress the power to make Treasury notes a legal tender; but there 
are no words expressly giving to Congress the power to issue Treasury 
notes. If we consult the text of the Constitution, we shall find it as 
silent with regard to one as with regard to the other. But, on the other 
hand, the States are expressly prohibited to * emit bills of credit, to make 
anything but gold and silver coin a tender in payment of debts. Treasury 
notes are 'bills of credit,' and this prohibition is imperative on the States. 
But the inference is just that this prohibition, expressly addressed to the 
States, was not intended to embrace Congress indirectly, as it obviously 
does not embrace it directly. The presence of the prohibition, however, 
shows that tlie subject was in the minds of the framers of the Constitu- 
tion. If they f;iiled to extend it still further, it is reasonable to conclude 
that they left the whole subject in all its bearings to the sound discretion 
of Congress, under the ample powers intrusted to it. 

The stress that is so constantly put upon the prohibitions addressed to 
the States will justify me in introducing the opinion of Mr, Justice Story 
in his Commentaries: *It is manifest that all these prohibitory clauses as 
to coining money, emitting bills of credit, and tendering anything but 
gold and silver in payment of debts, are founded upon the same general 
considerations. The policy is to prooide a fixed and uniform rule throughout 
the Uni'ed Slates, by which commercial and other dealings of the citizens, 
as well as the moneyed transactions of the Government, might be 
adjusted."— (2 Story's Com,, Sec. 1372.) 

If tins view be correct, then no inference adverse to the powers of the 
national Government can be drawn from these prohibitory clauses ; for 
whatever may be the policy of the national Government, it vvill be a fixed 
and uniform rule throughout the United States. 

From the proceedings of the Federal Convention it appears that a propo- 
sition empowering Congress *to emit bills of credit' was negatived, after 
discussion, in which Mr. Madison said: * Will it not be sufficient to pro- 
hibit the milking them a tender? This will remove the temptation to 
emit tliem with unjust views.' And in a note to the debate, this same 
great authority says that he * became satisfied that the striking out tho 
words would not disable the Government from the use of public notes, as 
far as they could bo safe and proper, and would only cut off the pretense 



120 



for a paper currencj/, and particularly for making]: bills a tender, either for 
public or private debts.' Then it appears tliat tiie su<!j«;^e8tion was made 
to prohibit the makin^r of bills a tender; l)ut this suggestion was not acted 
on, and no such prohibition was ever moved. It is evident that the Con- 
vention was not prepared for a measure so positive. Less still was it 
prepared for the prohibition to emit bills. Such is the record. While all 
words expressly authorizing bills were struck out, nothing was introduced 
in restraint of the powers of Congress on this subject. Indeed, Mr. Madi- 
son declares his own iHjrsonal belief, that the striking out of the power 
*to emit bills of credit,' would not disable the Government from the issue 
of public notes, so far as they could be safe and proper, but would only cut 
off the irrctext for a paper currency. It would seem from this language, in 
so careful a writer, that he imagined the whole subject was left substan- 
tially to the sound discretion of Congress. Indeed, the inference from his 
report and comment, is identical with the inference from the text of the 
Constitution itself. {See MadisotVs Papers, vol 3, p. 1343.) 

But in conceding that Congress might issue ' public notes, as far as they 
could be proper,' in other words, 'bills of credit,' the whole question was 
practically settled ; and the usage of the Government has been in harmony 
with this settlement. Treasury notes were issued during the war of 1812, 
also during the war with Mexico, and constantly since, so that the power 
to issue them cannot be drawn into doubt. If there was any doubt origi- 
nally, an unquestioned practice, sanctioned by successive Congresses, has 
completely removed it. I do not stop to consider whether the i)ower 
is derived primarily from the power *to borrow money,' or the power *to 
regulate commerce/ or from the unenumerated powers. It is sufficient 
that the power exists. But it is difficult to escape the conclusion, that if 
Congress is empo>vcred to issue Treasury notes, it may affix to these notes 
such character as shall seem just and proper, declaring the conditions of 
their circulation and the dues for which they shall be received. Grant the 
llrst power and the rest must follow. Careful you will be in the exercise 
of this power, but if you choose to take the responsibility, I do not see 
what check can be found in the Constitution. 

It appears that the phrase 'bills of credit,' was familiarly used for bank 
notes as early as 1G83, in England, and also as early as 1714, in New Eng- 
land. But the first issue in America was in 1G90, by the Colony of 
Massachusetts, and the occasion, identical with the present, was to pay 
soldiers returning unexpectedly from an unsuccessful expedition against 
Canada. 

Mr. Sumner went into a brief history of the issue of bills of credit — 
paper money— in the States of Massachusetts, Rhode Island, Connecticut, 
Virginia and North Carolina, which led to the passage of an act by 
the Imperial Parliament, (24 George II, Sec. 2, Chaj^ 53,) 1751, which 
expressly forbade the issue of any paper bills, or bills of credit, except for 
certain specific purposes, or upon certain specified emergencies; and 
declaring that such paper money should not be a legal tender for private 
debts. Continental paper money was issued during the Revolutionary 
war, not made a legal tender by Congress, although the States were rec- 
ommended to make them such. He argued at great length the power of 
Congress to issue Treasury notes and make them a legal tender; and that 
it was purposely left by the framers of the Constitution to the sound dis- 
cretion of Congress, in great emergencies, to decide whether it was 
necessary to exercise the power or not." 

He closed as follows : 



121 



"But, while recognizing the existence of the discretion, in the last 
resort, under the law of necessity, the question still remains if this neces- 
sity now exists ? And now, as I close, I shall not cease to be frank. Is 
it necessary to incur all the unquestionable evils of inconvertible paper, 
forced into circulation by act of Congress— to suffer the stain upon our 
national faith— to bear the stigma of a seeming repudiation— to lose for 
the present that credit which, in itself, is a treasury— and to teach debtors 
everywhere that contracts may be varied at the will of the stronger? 
Surely, there is much in these inquiries which may make us pause. If 
our country were poor or feeble, without population and without 
resources ; if it were already drained by a long war ; if the enemy had 
succeeded in depriving us of the means of livelihood, then we should not 
even pause. But our country is rich and powerful, with a numerous pop- 
ulation, busy, honest, and determined, and with unparalleled resources of 
all kinds, agricultural, mineral, industrial and commercial; it is yet 
undrained by the war in which we are engaged ; nor has the enemy suc- 
ceeded in depriving us of any of the means of livelihood. It is hard- 
very hard— to think that such a country, so powerful, so rich, and so 
beloved, should be compelled to adopt a policy of even questionable pro- 
priety. If I mention these things— if I make these inquiries— it is because 
of the unfeigned solicitude which I feel with regard to this measure, and 
not with the view of arguing against the exercise of a constitutional 
power, when, in the opinion of the Government, in which I place trust, 
the necessity for its exercise has arrived. Surely, we must all be against 
paper money— we must all insist upon maintaining the integrity of the 
Government — and we must -all set our faces against any proposiiion like the 
present^ excejyt as a temporary expedient^ rendered imperative by the exigency 
of the hour. If I vote for this proposition it will be only because I am 
unwilling to refuse to the Government, especially charged with this 
responsibility, that confidence which is hardly less important to the public 
intei*ests than the money itself. Others may doubt if the exigency is 
sufficiently imperative ; but the Secretary of the Treasury, whose duty it 
is to understand the occasion, does not doubt. In his opinion the war 
requires this sacrifice. Uncontrolable passions have been let loose to 
overturn tranquil conditions of peace. Meanwhile your soldiers in the 
field must be paid and fed. Here, then, can be no failure or postpone- 
ment. A remed}' which, at another moment you would reject, is now 
proposed. Whatever may be the national resources, they are not now 
within reach, except by summary process, lleluctantly, painfully, I con- 
sent that the process should issue. And yet I cannot give such a vote 
without warning the Government against the dangers from such an 
experiment. The medicine of the Constitution must not become its daily 
bread. Nor can I disguise the conviction that better than any legal 
tender will be vigorous, earnest ettbrts for the suppression of the rebellion, 
and for the establishment of the Constitution in its true principles over 
the territory which the rebellion has usurped." 

The question was then taken by yeas and nays on the motion 
of Mr. Collamer to strike out the legal tender clause in the bill, 
and resulted as follows: 

Yeas — Messrs. Anthony, Bayard, Collamer, Cowan, Fesseuden, 
Foot, Foster, Kenned}', King, Latham, Nesmith, Pearce, Powell, 
Salisbury, Simmons, Thompson and Willej" — 17. 



133 



Nays — Messrs. Chandler, Clark, Davis, Dixon, Doolittle, Har- 
lan, Harris, Henderson, Howard, Howe, Lane (of Indiana), 
McDouf^all, Morrill, Pomeroy, Rice, Sherman, Sumner, Ten Eyck, 
Wade, Wilkinson, Wilson (of Mass.) and Wilson (of Mo.)— 22. 

So the motion to strike out the legal tender clause was not 
agreed to. 

On Mr. Simmons' motion to pay eight per cent interest on two 
years' notes or bonds, the amendment was agreed to — ayes 20, 
noes 16. 

The other amendments proposed by the Finance Committee 
were agreed to substantially as reported by the Committee. 

Mr. Doolittle moved to limit the legal tender clause to debts 
hereafter contracted, but the amendment was not adopted. 

MB. king's speech. 

Mr. King, of New York, spoke as follows : 

"My opinion is so decided apr.iinst this measnre, which, it is evident has 
the favor of a large majority of the Senate, that I must vote against it; but 
1 deem it due to myself to offer a snbstitute for the first section. I pro- 
pose to strike out the first section of the bill, which relates to Treasury 
notes and the tender, and to insert what I send to the cliair in three sec- 
tions. 'J'he second and subsequent sections of the bill, providing for bonds 
and making other provisions, I do not propose to interfere with. 
• # « # « # ««««««««« 

The change which this amendment proposes, is to strike out the tender 
clause, to make the demand notes, which are issued without interest, five 
year notes, bearing an interest of seven and three-tenths per cent, per 
annum, receivable for all Government dues, or excliangeable for long 
bonds at six per cent., interest payable semi-annually, at the option of the 
holder, and providing by tax a sufficient sum, wliicli is pledged to the 
redemption of these notes, and ultimately to pay them, principal and 
interest; which I think is a provision that ought to accompany any meas- 
ure providing for borrowing money, either by notes or bonds." 

The amendment was not agreed to. 

MR. PEARCE's speech. 

Mr. Pearce, of Maryland, opposed the legal tender clause in 
the bill. 

Ours is a Government of limited and granted powers. AVe can exer- 
cise no authority which Congress has not, by reason of the grant of some 
express power, or some power necessarily implied from that which is 
granted. If there be a power necessary and proper to carry into execu- 
tion any of the granted powers, we possess it under the general clause of 
the Constitution in reference to that subject. The power to make a legal 
tender is not granted expressly in the Constitution, nor, as I think, by 
any implication from any of the granted powers. It is true there is a 
qualified power of making a legal tender to be found in the clause which 



128 



authorizes us to coin money, and to regulate the value thereof, becaus© 
there can be no purpose in regulating the value of the money we are 
authorized to coin, except to make it a legal tender. When we establish 
the value of gold and silver coin, which we have the express authority to 
do, we of course have the implied authority to declare that its value thus 
fixed by law, shall be the measure of value in all contracts, and to make 
it a legal tender. There is no other purpose for giving us the authority 
to regulate the value of the money which we are authorized to coin ; and, 
accordingly. Congress has declared silver coins to be a legal tender. I do 
not know whether that provision is in the law regulating the value of the 
gold coins. I suppose, however, that it must be so. I know that when we 
passed the act by which we apportioned the silver and the alloy in our 
silver coins, we did declare that coinage to be a legal tender for sums 
under five dollars. Even, however, if that were not so, it would follow 
necessarily, it being provided in the Constitution expressly that gold and 
silver may be coined by authority of Congress, and their value regulated 
by law, that they must necessarily be a legal tender. It is so according 
to the custom of all civilized nations, and so the convention that framed 
the Constitution assumed it to be. But I can see no power from which 
we can infer authority in this Government to make paper money a legal 
tender. It clearly cannot be inferred from the power to coin money, 
which is to be made of metal. I do not sec how it is to be inferred, as I 
think one Senator derived it, from the power to borrow money, since, to 
make paper money cannot be necessary to the execution of the power to 
borrow money. As weU. could we infer a general authority to lend money 
or to deal in brokerage. 

Mr. President, the exigencies of the countiy are very great ; I admit my 
obligation to co-operate with gentlemen here in furnishing the Govern- 
ment with the means of carrying on all its operations; but when a 
constitutional objection is presented to me, the very allegiance which I 
owe to the Constitution, and therefore to the Union, compels me not to 
violate any one of its provisions, as I think I shall do if I vote for this bill. 
I must, therefore, cast my vote against it." 

Mr. Saulsbdry, of Delaware— "It was my desire and intention to vote 
for this bill, provided the provision making these notes a legal tender had 
been stricken out. That provision has been retained in the bill. It is so 
clearly unconstitutional, in my opinion, that I cannot conscientiously vote 
for it. I cannot attempt at this late hour to assign the reasons for my 
opinion. The speech of the Senator of Vermont has not been answered, 
and it is not in the power of man to answer it." 

Mr. Powell, of Kentucky— "It is not my purpose to make a speech. 
It would aflfordme pleasure to vote for any measure I thought constitu- 
tional to relieve the country from its present embarrassment ; but believing 
that this bill is unconstitutional, I cannot vote for it. I had intended, if 
time permitted— but the hour is too late now— to give briefly, my reasons 
for the vote I shall give ; but after the very exhaustive speech made by 
the Senator from Vermont yesterday, it would be unnecessary, particu- 
larly after the excellent speech made by the Senator from Pennsylvania 
to-day, and the brief but very pointed speech of the Senator from Mary- 
land, who has just taken his seat. 

In my judgment this bill is plainly and palpably violative of the 
Constitution of the United States, and I do not believe that issues of paper 
money, unless they are convertible into coin at the pleasure of the holder, 



124 



ever did, or ever will, relieve any country permanently from any embar- 
rassment. I think all such issues of irredeemable paper lead the country 
into further and greater embarrassments, instead of relieving it; and I 
very much fear that those who expect great benetits to the country from 
this bill will be greatly disappointed. 1 shall not detain the Senate by 
cipeaking." 

PASSAGE OF THE BILL, 

The Presiding Officer— The question is on the passage of the bill," 
Mr. Howard—*' I call for the yeas and nays.'' 

The yeas and niiys were ordered. 

Mr. Latham, of California— '* I merely desire to say, in order that I 
may appear right upon the record, that I have entertained very grave 
doubts during tliis discussion as to the constitutionality of the legal 
tender issue, and entertaining those doubts, I cast my vote against that 
clause when it was under consideration. The majority of this body hav- 
ing now, however, indicated their desire that it should be in the bill, I 
cannot, consistently with my sense of duty, withhold my vote from the 
biU. I shall therefore vote for it." 

Mr. Anthony, of Rhode Island— "I voted against the vital clause of 
this bill making the paper issued by the Government a legal tender, but 
having no project of my own to present to the Senate, I shall not take the 
responsibility of voting against the only measure which is proposed by 
the Government, and which has passed the House of Representatives, and 
received the sanction of a majority of this body." 

The question being taken by yeas and nays, resulted — ^yeas 30, 
nays 7 ; as follows : 

Yeas — Messrs. Anthony, Chandler, Clark, Davis, Dixon, 
Doolittle, Fessenden, Foot, Foster, Grimes, Hale, Harlan, Har- 
ris, Henderson, Howard, Howe, Lane (of Indiana), Latham, 
McDougall, Morrill, Pomeroy, Rice, Sherman, Sumner, Ten Eyek, 
Trumbull, Wade, Wilkinson, Wilson (of Massachusetts) and Wil- 
son (of Missouri) — 30. 

Nays — Messrs. Collamer, Cowan, Kennedy, King, Pearce, 
Powell and Saulsbury — 7. 

So the bill was passed. 

AUTHORSHIP OF THE LEGAL TENDER BILL. 

Letter of James W. Simonton to iV. Y. Times, 

"Washington, D. C, Feb. 13, 1862. 

" The passage, by the Senate, of the Treasury Kote bill, including the 
legal tender clause, is a subject of very general congratulation among the 
friends of the Administration. Among the opponents of the legal tender 
provision were some of the ablest and firmest friends of the Administra- 
tion, whose sincere desire for the most eflfective support of the Government 
cannot for a moment be justly questioned. They honestly believed the 
policy injudicious, and made strenuous fight in support of their theory. 



126 



But the overwhelming necessity existing for the measure is a stronger a/rgvment 
than anything offered against the hid, and received the decisive vote of dO to 7. 
Having made their record, the opposition yielded with excellent grace, 
and the Democratic opponents in both Houses confess to a sense of relief 
when the bill, legal tender and all, had passed. There are few members 
who would care to assume the responsibility which would have rested 
upon them in the event of the defeat of the measure, and the risk of the 
consequences to themselves of the financial panic that would speedily 
follow the admitted bankruptcy of the Government. 

Now that the bill has passed, it is but just that due credit should be 
awarded to the author of the legal tender scheme, the Hon. E. G. Spauld- 
ing,;Member of Congress from the BuflEalo (N. Y.) District. It was Mr. 
Spaulding who originated the proposition to force a fixed paper currency 
upon the country by making Treasury notes a legal tender. His practical 
knowledge and experience as a banker and financier, early disclosed to his 
own mind the fact, which since then has become so patent to overwhelm- 
ing majorities in each House of Congress and the country, to wit : that no 
other scheme could possibly provide for the wants of the Government in 
time to save it from absolute financial ruin. He gave the subject unremit- 
ting study and attention, devoting to it the entire holiday season, and 
maturing, finally, a measure which has received the endorsement of the 
Administration and of Congress, and withstood the combined assaults of 
selfish and honest opponents alike. He has reason to be proud of the 
triumph he has achieved, and the country will not soon forget his 
services." 

OBJECTION TO SENATE AMENDMENTS. 

The main principles of the bill seemed to be well settled by the 
preceding full and able discussion, and its passage by large ma- 
jorities through both Houses; and the Secretary of the Treasury 
in administering the Finances during the war, would find it easy 
to execute the two simple provisions of the bill, viz : 

1. Issue these Treasury notes fitted for circulation as money, and by 
the legal tender provision made a forced loan from the people to the Gov- 
ernment, without interest, which could only be justified by the imperative 
necessities of the Treasury, and by the fair and equitable provision, 

2. That these notes might at any time, at the option of the holder, be 
funded in six per cent, twenty year bonds, interest payable semi-annuaUy. 

The Secretary could issue notes and pay them out for supplies 
and material of war, and to the Army and Navy, making money 
plenty, and filling all the channels of circulation, which would, as 
soon as it became redundant, enable him to float the six per cent, 
bonds, and funding would take place, thereby preventing too great 
an excess of this circulating medium. The Senate amendments 
seemed in some measure to complicate these simple provisions. 
Several of the amendments of the Senate were very important in 
regard to details and special provisions of the bill, but the most 
of them were verbal and unimportant. The four amendments of 



126 



the Senate, to which a large number of the members of the House 
made the most objection, were in substance as follows : 

1. Bequiring payment of ^ interest semi-annually in coin on bonds and 
7-30 notes/ 

2. Conferring on the Secretary power to sell six per cent, bonds, *at 
the market vcUtce thereof for coin,' which would reduce the price. 

3. And the provision making the bonds * redeemable in five years, and 
payable in twenty years from date,' at the option of the Government, 
making them less valuable. 

4. Temporary dei)osits in the Sub-Treasury at G per cent., which would 
retard funding in long bonds. • 

All former loan laws passed by Congress, from the organization 
of the Government to this time, contained only a provision to 
pay * dollars.' The word dollars had a well known legal meaning 
under our coinage and legal tender laws, and it was difficult to 
see any good reason for changing the plirascolog}', and thereby 
make a departure from established usages at this time, especially 
if six per cent, bonds (which were then selling at about 88,) 
should, as a necessary consequence of such provision, be sold at 
the inarT^et iirlce to raise the coin to i)ay this interest. At this stage 
of the bill there teas no x>rovision in it, or in the Senate amendinetits, to 
collect Hue duties on foreign imports in coin, so that as the hill tJieii stood^ 
there tvas no otJier mode of obtaining tJie coin except by a forced sale of 
bonds. This coin provision was deemed by many members to be 
an unnecessary discrimination in favor of the bond-holders over 
other (Toditors of the Government equally meritorious. It was 
difficult to see the propriety of paying coin interest to the bond- 
holders while the soldiers and others were paid in notes; and 
besides, the terms used made the coin pa^^meut of interest 
applicable to the 7-30 Treasury notes and bonds issued to the 
banks during the previous summer. 

BILL RETUUNED TO THE HOUSE. 

The bill and Senate's Amendments were returned to the House 
on the 14th inst, and on motion of Mr. Stevens, were referred to 
the Committee of Ways and Means. This Committee had a long 
discussion upon the Senate's Amendments, and were about equally 
divided on the most material and impoiiant of them. Some were 
disagreed to, others were concurred in, and some unimportant 
amendments to the Senate amendments were recommended. Oi^ 
the 18th, Mr. Stevens, from the Committee of Wa^'s and Means, 
reported back the bill and amendments to the House and said: 



lb 



127 



. "I have no purpose of considering the bill at this time. I desire that 
it shall be referred to the Committee of the Whole, and be made the 
special order for to-morrow at one o'clock. I hope gentlemen of the 
House will read the amendments. They a/re very important, a/nd, in my 
judgment, very pernicious, but I hope the House will examine them." 

The motion was agreeed to. 

On Wednesday, the 19th inst., the amendments of the Senate 
to the bill being the special order, Mr. Spaulding opened the 
debate in opposition to some of them, as follows: 

MR. SPAULDING's SPEECH. 

Mr. Chairman— I desire especially to oppose the amendments of the 
Senate which require the interest on bonds and notes to be paid %n coin 
semi-annually, and which authorizes the Secretary of the Treasury to 
sell six per cent, bonds at the market price for coin to pay the interest. 

The Treasury note bill, as reported first from the Committee of Ways 
and Means as a necessary war measure, was simple and perspicuous in its 
terms, and easily understood. It was so plain that everybody could 
understand that it authorized the issue of $150,000,000 of legal tender 
demand notes, to circulate as a national currency among the people in all 
parts of the United States, and that they might, at any time, be funded 
in six per cent, twenty years' bonds. The passage of this measure in 
this House was hailed with satisfaction by the great mass of people all 
over the country. It received the hearty indorsement of such bodies as 
the Chambers of Commerce of New York, Cincinnati, St. Louis, Chicago, 
BuflEalo, Milwaukee, and other places. I have never known any measure 
receive a more hearty approval from the people. 

Nearly every amendment to the bill since it was matured has rendered 
it more complex and difficult of execution. I regret to say that some of 
the amendments of the Senate render the bill incongruous, and tend to 
defeat its great object, namely : to prevent all forcing of the Government 
to sell its bonds in the market to the highest bidder for coin. It might be 
very pleasant for the holders of the seven and three-tenths Treasury 
notes aud six per cent, bonds, to receive their interest in coin semi- 
annually, but very disastrous to the Government to be compelled to sell 
its bonds, at ruinous rates of discount, every six months to pay them gold 
and silver, while it would pay only Treasury notes to the soldier, sailor, 
and all other creditors of the Government. 

I am opposed to all those amendments of the Senate which make unjust 
discriminations between the creditors of the Government. A soldier or 
sailor who performs service in the army or navy is a creditor of the Gov- 
ernment. The man who sells food, clothing, and the material of war, for 
the use of the army and navy is a creditor of the Government. The capi- 
talist who holds your seven and three-tenths Treasury notes, or your six 
per cent, coupon bonds is a creditor of the Government. All are creditors 
of the Government on an equal footing, and all are equally entitled to their 
pay in gold and silver, 

I am opposed to all those amendments of the Senate which discriminate 
in favor of the holders of bonds and notes by compelling the Government 
to go into the streets every six months to sell bonds at the * market price,' 
to purchase gold and silver in order to pay the interest *in coin' to the 



128 



capitalists who now hold United States stocks and Treasury notes here- 
tofore issued, or that may hold bonds and notes hereafter to be issued; 
while all other persons in the United States (including the Army and 
isTavy and all who supply them food and clothing,) are compelled to 
receive legal tender Treasury notes in payment of demands due them from 
the Government. 

Why make this discrimination ? Who asks to have one class of creditors 
placed on a better footing than another class? Do the people of New 
England, the Middle States, or the people of the West and Northwest, or 
anywhere else in the rural districts, ask to have any such discrimination 
made in their favor? Does the soldier, the farmer, the mechanic, or the 
merchant ask to have any such discrimination made in his favor? No, 
sir; no such unjust preference is asked for by this class of men. They ask 
for the legal tender note bill pure and simple. They ask for a national 
currency which shall be of equal value in all parts of the country. They 
want a currency that shall pass from hand to hand among all the people 
in every State, county, city, town and village in the United States. They 
w^ant a currency secured by adequate taxation upon the whole property 
of the country, which will pay the soldier, the farmer, the mechanic,' and 
the banker alike for all debt due. They ask that the Government shall 
stand upon its own responsibility, its own rights, and exert its vast 
powers, preserve its own credit, and carry us safely through this gigantic 
rebellion, in the shortest time, and with the least possible sacrifice. They 
intend to foot oM the hiUs, and ultimately pay the whole ammnt, principal arid 
interest, in gold and sHver* 

Who, then, are they that ask to have a preference given to them over 
other creditors of the Government ? Sir, it is a very respectable class of 
gentlemen, but a class of men who are very sharp in aU. money transac- 
tions. They are not generally among the producing classes — ^not among 
those who, by their labor and skill, make the wealth of the country ; but a 
class of men that have accumvlated wealth— men who are willing to lend 
money to the Government if you will make the security beyond all ques- 
tion, give them a high rate of interest, and make it payable m coin, Tes, 
sir, the men who are asking these extravagant terms, who want to be pre- 
ferred creditors, are perfectly willing to lend money to the Government 
in her present embarrassment, if you will only make them perfectly secure, 
give them extra interest, and put your bonds on the market at the 'market 
price,' to purchase gold and silver to pay them interest every six months. 
Tes, sir, entirely willing to loan money on these terms I Safe, no hazard, 
secure, and the interest pay&ble ' in coin !' Who would not be willing to 
loan money on such terms ? Sir, the legal tender Treasury note bill was 
intended to avoid all such financiering and protect the Government and 
people, who pay the taxes, from aU such hard bargains. It was intended 
as a shield in the hands of the patriotic people of the country against all 
forced sales of bonds, and all extravagant rates of interest. 

The legal tender note bill is a great measure of equality. It proposes a 
currency for the people which is based upon the good faith of the people 
and all their taxable property. All are obliged to receive and pass it as 
money, and oU are obliged to svbmit to heavy taxation to provide for its vMimaie 
redemption in gold or silver. Every attempt on the part of any class of citi- 
zens to create distinctions and secure a legal preference, mars the sim- 
plicity and success of the whole plan. The very discrimination^roposed 
carries on its face notice to everybody that although the notes are declared 



129 



to be 'lawful money and a legal. tender in payment of debts,' yet that 
there is something of higher value, that must be sought after at a sacrifice 
to the Government, to pay a peculiar class of creditors to whom it owes 
money— a kind of absurdity and self-stultification which does not appear 
well on the face of the bill. It is an unjust discrimination which does not 
appear well now, and will not look well in history. You will, if the Senate^ s 
amendment is adopted, depreciate, hy your own acts, your own bonds and notes, 
and effectvxiUy destroy the symmetry and harmonious working of the whole plan, 

I am in favor of having the Government pay in coin, if it can do so without too 
great a sacrifice; hut I am unobble to see any good reason for departing, in this 
case, from the usual practice of the Government in expressing the mode of paying 
the interest, AU bonds and Treasury notes heretofore issued are payable gener- 
ally without specifying that either the principal or the interest shall he paid in 
coin, and yet the legal effect is the same, I do not see why we should now, in 
the present embarrassed condition of the Goverment, give any preference 
to one creditor over another, or change the form of our bonds and 
Treasury notes by inserting the words * payable in coin.' The capitalist 
who holds your bonds or seven and three-tenths Treasury notes is not 
entitled to any preference over the soldier or the man who furnishes sup- 
plies to your Army. We should pay both in specie, if possible ; but I am 
unwilling to tie up the hands of the Government by compelling it to pay 
* in coin, ' the interest on all the bonds and notes heretofore issued, or that 
may hereafter be issued. The bonds and notes heretofore issued contain 
no such express provision ; it is not ' so nominated in the bond and I am 
unwilling to have it inserted at tliis time, either as to those now outstand- 
ing or as to those that are hereafter to be issued. Besides, if you com- 
mence in this way, by stipulating expressly to pay in coin on the bonds 
to be issued, it becomes a contract which cannot, without a breach of 
faith, be changed by a repeal of the law. You unnecessarily commit the 
Government to a stipulation which may be very inconvenient, if not 
impossible, to fulfill, if the public debt runs up to $2,000,000,000, the 
interest upon which, at six per cent, per annum, would be $120,000,000 
annually, requiring $60,000,000 of coin every six months to pay interest on 
your funded debt. I think we should pause before committing ourselves 
to any such proposition, for no man here is wise enough to tell how long 
this war will continue, or how many complications with foreign nations 
will grow out of it, or how great will be the war debt. By all means let m 
pay the interest in gold to those who desire it, if it is practicable to do so; but let 
us keep the power in the Government itself, and exercise it wisely for the 
best interest of the whole people. 

The people in the country who hold seven and three-tenths Treasury 
notes are patriotic enough, while the war lasts, to receive their interest in 
any money that will pass currently at the banks and among the people. 
Money with them is only valuable for its uses. Legal tender Treasury 
notes can be used for all business purposes, without compelling the Gov- 
ernment to sell its bonds at fifteen or twenty per cent, discount to procure 
coin when it is entirely unnecessary. ***»*«# 

At the extra session in J uly we passed two very important bills — one to 
borrow $250,000,000, for which bonds and notes were to be issued, and the 
other to call into the service five hundred thousand volunteers, and pay 
the soldiers thirteen dollars per month, and the oflicers a higher rate of 
fixed compensation, Both bills were war measures, both were necessary, 
and action has been had under both. Under the first bill the associated 



130 



bahks of New York, Boston ami PhiUdelpliia took the sum of §100,000,- 
000 of seven and three-tenths three years Treasury notes at par, and 
$50,000,000 twenty years six per cent, bonds at a discount of ten and two 
thirds per cent, from their face— say net $44,001,230.97, being a loss of 
$5,338,769.03 on this ti-ansaction. This is a higher rate of interest than 
our Government, with all its immense power and resources, ought to pay; 
but the loan has been made, and I only refer to it now for the purpose of 
showing what has been done under these two acts of Congress. 

Under the army bill, five hundred thousand volunteers have been called 
into the service, and are now in tlie field. Under both of these bills a 
debt has been created against the Government. Tlie associated banks of 
New York, Boston and Philadelphia are creditors of the Goveniment to 
the extent of $150,000,000. The five hundred thousand volunteer army 
are also creditors of the Government to a large amount. We owe them 
both, and both are creditors under laws passed by us at the extra session. 
Are not both classes of these creditors on the same footing? Are the 
bankers entitled to any preference over tlie volunteer army? Is the 
banker's money any more sacred than the services of the soldier in battle, 
on guard, or in tlie tented field ? I cannot see that the banker or the 
holder of Treasury notes is entitled to any preference over the soldier, 
under these two laws of Congress, and yet, if you concur in these hard- 
money amendments of the Senate, you will compel the soldier to take 
legal tender Treasury notes in payment for his tliirteen dollars per month 
which you agreed to pay him, while you pay the banker his high rate of 
interest, semi-annually, in gold and silver coin. Is this right? Will this 
be meting out just and equal laws to the loyal citizens of this Govern- 
ment ? What will your army say to an arrangement of this kind ? Sir, I 
can consent to no such discrimination, no such amendment, no such 
injustice. 

It is to be hoped that this will be a short war. It is very desirable that 
it should be pressed on with the utmost vigor, and be brought to a speedy 
and successful termination. God grant that this may be the issue. I 
have no expectation, however, that the authority of the United States 
Government will be respected and enforced in all the Southern States for 
many years. I think the rebels are desperate and determined, and will 
never submit to the Constitution and laws until compelled to do so by 
armed force. They may be beaten and compelled to fall back, but until 
Union governments are successfully established in all the Southern States 
the laws of the United States will not be respected, and can only be 
enforced by the army and navy in actual occupation of the rebellious 
States. This will require a large and expensive army for many years, the 
total expenses of which cannot now be estimated. It will require Federal 
troops in every rebellious State to collect your direct taxes and internal 
duties; and until you can peaceably collect taxes in all the rebellious 
States the rebellion is not ended. 

In every aspect in which you view this hard-money provision, its prac- 
tical workings will be disastrous. It would be all very well if the amount 
was small and applied to carrying on the Government on a peace footing, 
when you know what amount will be required ; but in carrying on the 
Government at this time, when the magnitude of the expenditures are so 
overwhelming, all themes applicable to peace must give way to the inexo- 
rable necessities that are forced upon us in the prosecution of this war. 
Look at your long line of offensive operations, extending from Kansas to 



131 



tliis capital, and thence to Fortress Monroe, Hatteras, Beaufort, Key West, 
Pensacola, and Ship Island— a distance of more than four thousand miles. 
This very long line of military operations cannot he maintained except at 
an enormous expense for transportation, supplies, and material of war. 
One million six hundred thousand dollars does not cover the daily expen- 
ditures. Peace theories of linance must give way to what is practicable to 
be done in the present exigency. The Government is at this moment in 
the situation of a merchant who has overtraded, who owes more than he 
has the present means of paying. He may he compelled to stop payment 
in specie, when he has ample assets to cover all his liabilities. A mere 

suspension of specie payments does not imply bankruptcy or insolvency. 
** # * * * # # 

Our country and Government at all hazards must be i)reserved. To 
accomplish this, our plan of finance must be simple and practical. As has 
been shown, we have various descriptions of property in abundance. We 
have not the money to meet the sudden demands that are thrown upon us. 
Is it not better to pledg(^ our lionor, our lands, houses, personal estate, 
incomes, and wealth of all kinds to create this money, on the faith of the 
nation, than to run the risk of utter ruin to all interests for the sake of 
holding on to theories whicli may he excellent in time of peace, but which 
are wholly impracticable in the prosecution of this war. * * * 

It is very clear that in tlie prosecution of this war to maintain this 
Union, the ways and means of carrying it on can only be limited by the 
actual expenditures. 

We must, while the war lasts, incur all the debt necessary to crush out 
the rebellion, and maintain the authority of tlie United States Government 
over all the thirty-four States. We cannot, therefore, now limit the 
amount of tlie debt to be incurred, nor can it be accurately estimated. 
Notes and l)onds must be issued in some form for all the debt incurred, 
excei)tuig what we may realize annually from taxes, excises, and duties 
on imports. In issuing these notes and bonds I think it will be much 
better for the (.Jovernment, and for the people, to have one uniform 
sj'stem. It would be better for all concerned to have a fixed policy, not 
to be changed, so tliat all business men may conform to it at once. That 
policy should, in my judgement, be the issue of legal tender demand 
Treasury notes not bearing interest, to be paid out for what is necessary 
to support the army and nav}', and fundable at any time in twenty years 
Ixmds, bearing interest at >iix per cent., payable semi-annually. This Ls 
as high a rate of interest as the Government ought to pay, especially as our 
people are to be h(»avily burdened by taxation to pay, ultimately, the 
interest and i)rincij)le in gold and silver of all this debt. Let our policy be 
distinctly lixed and settled, and we shall hear no further importunities for 
liigher rates of interest, or for any prefer(,'nce of one class of creditors over 
any other class equally meritorious. 

I regret that my sense of duty compels me to difler so widely from the 
Senate. I have gnjat respect for that body, and would gladly yield to 
their views, if I did not regard it so fatal to the public mterest. So soon 
as our funded debt reaches $700,000,000, which will be in a very few 
months, I believe it will be impossible to procure the coin to pay the 
interest semi-annually without the most serious consequences to our 
credit. The amount of discount on our bonds to procure specie would be 
very large. In every view, the Senate amendment seems to me unneces- 
sary, injurious, partial and unjust. [ trust the House will non-concur in 
the amendments.'' 



132 



At the tiiiu* the abovo ivinarkn weiv iiituk* I)}' Mr. Spauldiiig, 
the (lutufH on impttrts were, as the then stood, payable in legal 
tender notes, lint this was afterwards ehanj^ed in the Committee 
of Conference, niakinj; those duties payable in coin, so that the 
interest niii^hl l)e paid in eiiin, withont Iteinjjj ol)li<ijed to force the 
bonds on the market to ol)tain eoin for that purpose. This was 
probal)ly tiie best compromise that could be made, as will more 
fully appear in finally adjustinii: the disai^reeinfj votes between the 
Senate and House. 

mm:i:< h of 3IK. fomkkov. 

Mr. PoMKKov, of Xew^ York, spoke one hour in favor of paying 
the interest in roin on bonds and Treasury notes. lie said: • 

'*The action already had upon the l>ill has, so far as the sense of Con- 
gress is concerned, settled, if not the constitutionality and expediency of 
issuing, to a liniit<'d amount. Treasury notes, nuule a legal tender in pay- 
ment of debts, at least the existence of a nccessitv* under which such 
constitutional power will be assumed and its exercise declared expedient. 
I do not propose, therefore, to enter at all upon the discussion of those 
questions, nor would it be pertinent to the only amendment I propose to 
discuss, to wit: that providing for payment of interest on the national 
debt in coin. They were fully discussed when the bill was lirst before the 
committee, to the neglect, as I then thought and now think, of the point 
presented by the pending amendment, upon which alone I desire to 
submit a f<*w remarks. 

The question is not now whether $150,000,000 of Treasury notes shall be 
issued and mad(? a legal tender in i)ayment of jiublic and ])rivate indebt- 
edness. Tliat jjroposition has been decided in tht^ atKrmative; but if niy 
faith in the necessity and <'Xi)ediency of such issue was stronger even than 
that of the abb* and dislingulshed lJei)resentativc, [Mr. Spaulding,] who 
hus originated this measure, and carried it triumphantly over the Admin- 
istration and through Congress, still, deeming this amendment, as pro- 
posed by the Senate and now under consideration, vital to the success of 
the scheme, and the only regulation by which financial exi»losion under it 
can be prevented, I could not, as an original proposition, and cannot now, 
without such amendment, supi)ort this bill. My opinion may be unfounded 
and erroneous. 1 hope it is, if this amendment is to fail. 1 have no pride 
of opinion upon this matter, but 1 have convictions, clear, decided and 
conscientious, which I cannot trample upon without violating my own 
sense of self-respect and of public duty. The opi^osition which this 
amendment meets from the framers of the bill sutliciently demonstrates to 
us and to the country that it is not merely formal in its character, but is 
of primary importance and entitled to the highest consideration. I shall 
be very brief, and will endeavor to be i)lain in my views resi)ecting it. 

It is conceded by the friends of the House bill, that the policy of issuing 
Treasury notes under it with the characteristics of money is to be tempo- 
rary, and that it is a divergence from the correct ])rinciples of political 
economy, to be justitled only b}^ necessity, and yet the primary and 
principal fault I llnd with it is, that instead of being a temporary measure, 
it really, by its failure to make adequate provision to raise money by loan, 



133 



inaugurates and necessitates the perpetuation of a reliance upon a forced 
paper currency alone to meet the demands of the war, the amount of the 
issue of which, if sufficient for that purpose, must depreciate it to a mere 
nominal value, and result in ultimate repudiation. It may he expedierU as 
a remedy for an existing political disorder, hut it is death if relied upon for per- 
manent existence* 

The credit of the Government has heen recently brought to the test of 
practical experiment in a much more favorable time than the present, 
when the banks were plethoric with gold beyond all former experience 
and promptly meeting all engagements in coin, when suspension had not 
been thought of, and the patriotism of the people was fully aroused in the 
enlistment of those armies that are to-day more than meeting our proudest 
anticipations; and yet, under those most favorable auspices, the rate of 
interest, as established, was seven and three-tenths per cent, for three 
year coupon bonds, and seven per cent, for those running twent}" years, 
each payable semi-annually in coin, and with the added advantage to the 
banks, who were the purchasers, of holding the proceeds on deposit with- 
out interest until drawn out in the usual course of expenditure; and 
$50,000,000 of the long bonds, authorized at the extra session, have not 
been, and could not be, sold even at the rate above named. * # # 
The science of Government is one purely experimental. A code of laws 
designed for men as they ought to be, would be a terrible code applied to 
men as they are. We experience no difficuly in recognizing in legislation 
the natural laws of matter, and we should have no more in recognizing 
the natural laws of mind, association, trade, commerce and business. 

If we are to borrow money, we must recognize these laws ; and I may 
well call them higher laws, for while legislation cannot change them, they 
are continually changing legislation. One of these is that the precious 
metals are the representative of value. The gold dollar of our currency is the 
unit of value. Conversion into this representaiire is the only criterion of value. 
Those who invest money or loan will make it a condition precedent that 
the interest shall be in money, and not in promi'ies to j^cty money. Legisla- 
tion has not changed, and cannot change, paper currency into coin or its 
equivalent, except through convertibilitj'. Without this requissite it is a 
mere naked promise. We cannot make Treasury notes nionej^ until Ave 
can change by act of Congress a promise into a performance, and Almightj'^ 
power alone can do that. We propose to compel the Government and 
citizens to receive this paper as money in payment for debt ; but we do 
not propose to attempt to comj^el anybody to take it by waj' of loan, nor 
to compel anybody to loan it, not even to Government. Then people must 
be induced to loan it ; and how can yow expect tlieni to do it at rates less 
favorable than you have already established in more ])rosporous times, 
t^ wit: a rate of seven and three-tenths per cent., ])ayable in coin. 

Xow, this paper is or is not equal to gold, ^ly colleague may take 
whichever horn of the dilemma he pleases. If it is not, it is folly to 
suppose that people are voluntarily going to place themselv<*s in a position 
where, for a term of years, the}- compel themselves to receive? it as interest, 
and assume all the risk of depreciation. If it is equal, then there can be 
no unjust discrimination in paying interest in gold. I prefer to look at 
the question just as it is, and admit the fact that it is not and cannot be 
made equal, because it lacks the essential quality of convertihilily. 'J'o the 
extent to which it is not equal, we work a hardshij) in forcing it into cir- 
culation; but we have already decided that a necessity' exists which 



134 



compels us to aocept tliis hardship rather than to inflict upon the people 
or submit tlie (Joveniment to a <rrcater. And we helieve farther, that the 
evils thus produced will, in the a<?f?re;rate, if not in each individual case, 
be more than compensated by the relief they will attbrd from linancial 
stringency, and as a medium of exclianfros, especially with the Govern- 
ment itself. 

While, however, we exercise the i)Ower to conipel the people to receive 
it as gold in payment of debts, we, unfortunately, have not the power to 
comiH»l them to loan it back to u'* on time, and receive more of the same 
kind as interest. There is just the ])racti<*al point where our new politi- 
cal physiology fails. As *Artemus Ward- would say, * its /or^ is not in 
l)orrowing, but in paying,' and we have got to make it work both ways. 
It is all nonsense to say that while we i>a3' out Treasury notes from neces- 
sity in some cases, we will forbear to borrow money, without which our 
credit must go down entirel}', because it will necessitate the payment of 
interest in coin, and thus conflict with our theory ; that because w^e pay 
ourselves and our soldiers and everybody else with whom we are under 
contract, in paper, we will stop paying even them rather than to continue 
the ability to do so by borrowing money aiul stipulating in advance to 
pay the interest in a diflerent commodity. The inconsistency consists in 
not considering that we must tirst get tlie principal before we put on airs 
about the manner in which we will pay the interest, in which transaction 
the lender as well as the borrower is usuall}^ consulted. The Committee 
of Ways and Means are talking about paying, whereas the problem is 
how to borrow. 

Nor does the agreement to pay interest in coin tend in the least to 
depreciate the value of the notes. The v(;ry necessity for this agi-eement 
arises from the fact of the pre-existing dinerences in value between coin 
and paper. It does not create the inequality. It recognizes an existing 
fact, and applying legishition practically to that fact, enhances the value 
of the paper, by allowing its conversion into a j)crnianent loan, the prin- 
cipal and interest of which are to be ])aid in money ; and instead of depre- 
ciating the paper, checks depreciation by r(»ason of this very convertibility, 
and presents the only possible mode, that 1 can conceive of, by which 
serious depreciation can be prevented and tlie funding process kept in 
operation. In fact, this ver}- dift'erence b<'tween the intrinsic values of 
notes and coin, thus recognized and embodied in our legislation, tends to 
produce the veiy object desired — the funding of the public debt. If cap- 
ital w ill seek Treasury notes at par, for the i^urpose of investment in 
bonds, with the interest payable in notes, how nuich more readily will it 
seek these same notes, at a slight depreciation, for the puri^ose of such 
investment, with the interest to be paid in gold; and the very demand 
for this purpose, while it prevents serious depreciation, is induced by the 
very depreciation inherent in the character of the paper which it contin- 
ually checks. It produces a self-adjusting funding access, based upon 
things as they exist in the commercial world, by which the disparity 
between the value of the two currencies ceases to be an element of dis- 
cord, and becomes, during the temporary period in which the funding 
process is going on, an element of good. In this manner, and through 
the happy instrumentality which may in this way be exerted by these 
notes, imperceptibly, and through the ordinary channels of linancial 
operations, the whole process of funding the ]>u])lic debt w ill be accom- 
plished. *■#* * # * * 



136 



One thing further is evident. If the debt can be funded under the pro- 
visions of the House bill, it certainly can under the Senate amendments. 
The Treasury has prided itself on its ability to obtain money at the rate 
proposed by the latter in more prosperous times. If it was satisfactory 
then, it should be still more satisfactory now. In this work we cannot 
afford to fail. The part of wisdom is, then, to accept the greater safety. 
When paper shall have taken the place of coin, and the latter, true to its 
instincts, shall have taken wings and flown away — it cannot be whistled 
back. It is idle to argue that two representatives of value of equal nomi- 
nal amount, but intrinsically unequal, will stay together and consent to 
become convertible. The more valuable always abandons the field. 

One fact more must not be overlooked in considering this matter — that 
the security remains the same in all cases, namely : the faith of the Gov- 
ernment. No inducement is offered by the House to fund these notes in 
the nature of the new security. TJie credit of the Government is alike 
hound for the payment of both classes of indebtedness ultimately in gold. Each 
derives Us entire value from that. The only advantage that can be then 
offered in funding is thfe mere convenience in the form of the security, 
and the payment of interest in a commodity similar to that which the 
principal represents. 

Now, I do not know by what class of soldiers my colleague [Mr. 
Spauldiiig,] may be represented in the field, but I do know the character 
of the two thousand soldiers from my own county, and of the four thous- 
and soldiers in the field from my congressional district, and I know that 
their present condition as soldiers is purely ephemeral. Their normal 
condition is that of citizens, and as such I represent them here ; and they 
will appreciate at what it is worth the appeal of my colleague in their 
behalf ae a class, as soldiers, in distinction from their character as Ameri- 
can citizens. * * 

I believe I have never failed to sustain, whether it be to my credit or 
otherwise, any recommendation backed by a majority of the Committee of 
Ways and Means of this House. As amended by the Senate in this 
respect, I will cheerfully support this bill. In its original form I could 
not, though it has been unpleasant to diverge from so large a proportion 
of my political associates. It were easier to have followed in the wake of 
inclination, and covered m^^self from criticism with the mantle of necessity. 
I have preferred to walk the plank of duty, trusting to time and practical 
results for the vindication of its policy." 

SPEECU OF MU. CALVERT. 

Mr. Calvert, of Maryland, advocated the payment of interest 
in coin. He said: 

"Let me tell the gentleman from New York, [Mr. Spaulding,] that it is 
useless to talk about the injustice of paying brokers in one currency and 
other people another. When you want to borrow money you must go to 
the brokers to borrow it. Farmers and others may be induced by the 
brokers to invest their money in your bonds; but they will not do it with- 
out the advice of the brokers or agents with whom they are in the habit of 
rounseliug, and therefon' it is the broker at last who holds in liis hands 
your credit, and it is useless for gentlemen of this House to talk about a 
proposition to jnit down the brokers who are constantly dealing in these 
not<*s. He rontended that the amendment of the Senate would benefit the 



136 



credit of the Government more than anythintj else that could be done. 
People would not loan money to be ])ayable in paper, because, although 
you make paper a legal tender by legislation, it will not be so in fact — the 
question has yet to be tried before the Stat(» Court, as well as before the 
United States Court. The only way in which you can possi])ly have any 
notes funded is by paying the interest in coin. Then if the notes fall 
below par they will be immediately funded." 

8PEECU OF MR. MORRILL. 

Mr. MORUTLL, of Vermont— Our whole dilllculty in this matter, it 
appears to me, arises from our departure from sound principles in the 
first place. It appears that the House and the Senate have both decided 
that they will issue paper and make it a legal tend(?r. I deeplj- deplore 
the fact as a blot on our national history that cannot be ellaced ; but as I 
do not now see it probable that any other result will be reached, my only 
purpose and desire is to perfect and pass the best jmssible bill to be 
obtained. 

I believe the Senate amendments are, on the whole, a great improve- 
ment upon the bill as it passed the House. I could wish that we might, 
even at this hour, slaughter both the original bill and the Senate's amend- 
ments, and then mature such financial measures as would preserve a 
sound specie-paying basis; but having no hope of that now, I trust we 
may adopt the Senate amendments, which will, in some degree at least, 
mitigate the evils to be apprehended from the bill as it left this House. 

Xow, the gentleman from Xew York (Mr. Spaulding) tallvs as though 
it would be an abandonment of the honor and good faith of the Govern- 
ment to pay the soldiers in any dilferent species of money from that 
which we pay our public creditors. I recollect to have read that Frederick 
the Great, upon a certain occasion, directed his minister, wlien he was 
about to seize upon some lu'ovince of one of his neiglibors. to draw up a 
proclamation justifying the measure to the world; and his minister drew 
it up, commencing, * In the name of God.' Said Frederick, 'strike out all 
about God, and say that I did it.' Xow, I recommend to the gentleman 
from Xew York, when he is talking about this subject of compelling the 
public and private creditors to take paper money for all debts heretofore 
or hereafter contracted, to omit all mention of * honor and good faith.' 

But what is the fact in reference to this matter of paying oft' the soldiers 
in any dilferent money ? Why, the fact is that we are going to pay them 
in paper, according to this bill. Xow, if these soldiers were debtors, and 
owed a grocer at home or here, and could make a tender of this paper, it 
might then indeed be of some service; but how are you to compel the 
grocer, or any man who has anything to sell upon which these soldiers or 
their families subsist, to take this paper at anything more than its market 
value ? Of course, if coin is worth more than paper, they have to pay to 
that extent more than they would pay if they had coin ; and I am in favor 
of keeping our promises equal to coin. In my judgment, if we pay the 
interest on the public debt in specie, it will have a tendency to keep up 
the credit of the country, and there will be less depreciation upon these 
notes than there otherwise would be. 

But, Mr. Chairman, the great object is to fund some portion of the public 
debt. Xow, it is perfectly apparent, not only from the statement of the 
gentleman from X"ew York (Mr. Spaulding), but from the knowledge all 



137 



liave of the subject, that our wauts are large, and that we will be com- 
pelled to issue our bonds or notes, or paper of some kind, to a large amount 
liereafter. Now it is proposed to issue twice, thrice or quadruple the 
amount of this legal tender paper before this session of Congress closes? 
Within sixty days we must have at least twice the amount of notes which 
is proposed now; and unless they can be funded into debts due at some 
future time, from necessity^ as we shall again be told, we shall have to 
repeat the dose we are now!oilering to the public. Anybody may see tliat 
while it might be possible for tliis country to endure $150,000,000 of addi- 
tional currency, even if it did unhinge all commercial transactions, that it 
would be utterly impossible that we could absorb twice or thrice that 
amount without a vast expansion of the whole monetary system of the 
country — turning even sober and industrious citizens into the wildest of 
speculators. * * * * ******** 
But, Mr. Cliairman, I believe tliat if we could stand up here in the vigor 
of a nation not yet taxed a single dollar for the cost of this war, and 
mature a proper policy liy whicli we can negotiate a loan standing on the 
credit of tlie country, standing on the proposed taxation of the country, 
standing on our hitherto untarnished Iionor, that tliere could be no need 
whatever of a resort to such a desperate scheme as the one now under con- 
sideration. I liopc, therefore, that we shall adopt the amendment of the 
Senate. 1 wish tliat we might go much further, but that at least is better 
than a measure whose symmetry is only measured by its exclusively paper 
character." 

SPEECH OF MR. DUNN. 

Mr. Dunn, of Indiana, spoke as follows: 

**Mr. Chairman — when this bill was under consideration in the Ilouse, 
(in Committee of the Whole,) a direct vote was taken upon the proposition 
to pay tl)e interest on the bonds in coin, and the Committee sustained that 
proposition by a very decided vote. I do not quite understand by what 
legerdemain the bill went to the Senate in a difterent form. I voted then 
that the interest should be paid in coin, and I shall vote so now, notwith- 
standing the arguments employed here to induce us to vote differently. 

Tlie principal argument urged against the Senate amendment is that it 
lu'ovides for paying our creditors in different ways, and an appeal is made 
to the patriotism of the House to know if we are willing to pay different 
kinds of money for our interest from that with which we pay our soldiers. 
Now, I sliall vole for this proposition with the direct view and object of 
making tlio paprr we olVer to the soldier as good as i)ossible. 1 believe 
that it is impossible to pay them in coin, or 1 would vote for that. It is 
necessary to make our notes as good as possible, and if there is any equiv- 
alent for coin, let us approach tliat point as nearly as possible. If we 
cannot remove tlie cloud of debt, let us, at least, give it a golden lining. 
One mode of sustaining the credit of the notes is to have them converted 
into bonds; and in order to make those bonds acceptable to those who 
have money to lend, we must make the interest payable in coin. AVe 
must try to induce capitalists to lend us money; for we have no mode of 
comi)elling them to do so. 'I'he gentleman from Vermont, [Mr. MoiTill,] 
wlio lias just taken his seat, said that the AVest expected some advantages 
from making Treasury notes a legal tender. The members from the West, 
generally, who voted for making the notes a legal tender, did so because 
we believed it to be a governmental necessity. We wanted a bridge to 



138 



carry us over tlie inora&s. AVe make it of tre.sthi-work, a tt'ini)orary work, 
to serve only until tlie «^round hardens. We do not hcHccc this tear is to he of 
lo7ifj continuance. We do ?iot helieve the neca^f^ity of the Icfjcd tender clausr ivUJ 
long exist. I tliink that those who were despondent ten days a^i^o have 
now great reason to rejoice. Tlie rapid succession of Tnion victories has 
filled every loyal heart with joy, and I do not doubt ])ut tliat we shall soon 
be relieved from our pecuniary ditliculties." 

MR. ex(;lisii's spkech. 

Mr. En(;ijsii, of Connecticut, spoke in luvor ol" [)ayiiii» the 
interest in coin. 

He concurred with Mr. IVndlctonon the constitutional cpicstioii, 
and considered it settled by his ar<>unient that it was not consti- 
tutional to make these notes a legal tender, lie also argued at 
considerable length that the measure was not nvtTfiSid'i/ at this 
time. lie was in favor of ample taxation, and that the vStatcs 
should be allowed to collect the taxes and pay over the money to 
the United States. He wanted no Gov(?rumcut tax collectors. 

On the pending amendments he said: 

"In order to make these bonds valuable to those who have money to 
invest, we must adopt the amendment of the Senate providing that the 
interest shall be paid in gold and silver. AVhen it is ascertained that the 
interest is to be paid in gold and silver, then the bonds will be sought for 
investment. If you issue Treasury notes, and if these Treasuiy notes go 
into the market and depreciate— as I think they will not — what will be the 
eHect? The elVect will be that, just in proportion as the 'J'reasury notes 
depreciate, in the same proportion will the interest payable on bonds be 
diminished. These Treasury notes answer very well as a means of circu- 
lation, provided the amount of the issue shall not exceed that provided for 
in this bill. My opinion is that these Treasury notes may answer a very 
good purpose; but the moment their volume is swollen beyond that, so 
soon will they depreciate. 

I trust that the amendment of the Senate will be concurred in by this 
House. In my judgment, it is the very best thing that we can do under 
the circumstances. I voted for the issuing of these Treasury notes, but 
against the 'legal tender' clause. Otherwise, I was in tavor of the meas- 
ure; but the judgment of the House was against me on that point. I 
think that now the best thing the House can do is to concur in the Senate 
amendment; and I trust that it will be concuircd in.'' 

SPKECII OF MU. PIKE. 

Mr. Pike, of Maine, spoke as follows: 

"Mr. Chairman— with all due deference to gentlemen who difler with 
me on this subject, it does seem to me that this matter of paying interest 
in coin is a controversy about goat's wool. The interest will be paid in 
coin in any event. The recent victories of our armies have changed the 
whole matter. (Just heard of the capture of Fort Donelson and the move- 
ment on N'ashville.) "VVe have now to return to a normal condition of 
currency. 



139 



'•I not only assent most cheerfully to the i)roposition to pay the interest 
in coin, but I also assent to the cognate proposition to sell these bonds at 
the highest price we can get lor them. We are returning now to a solid 
basis. I hail the cause of the roturn as well as the return itself. Let us 
sell our bonds to pay the creditors whom we are under contract to pay. 
We never can have a better time for doing so than now, when an ellerves- 
cence of delight is felt all over the country, because of the victories 
achieved by our armies. It is felt everywhere now that we not only have 
a Government, but a country on which to base this issue. Therefore, I 
say, let us now sell these bonds. Let us realize as much money from them 
as we can. Let us provide to pay the interest in coin, and let us pay the 
public creditors." 



Mr. DivEX, of New York, spoke as follows: 

" It strikes me, Mr. Chairman, that the fallacy of all the arguments in 
favor of this amendment consists in the fact that the amendment fails to 
meet the evil. It is not proi)oscd to go back and remedy the great 
national WTong, national dishonor, and inconsistency of the step tliat has 
been taken by declaring that these notes shall be a legal tender. If this 
House is determined to adhere to that, if— as the gentleman from Vermont 
has said — the child is dead, if the national credit is gone, if we are ready 
to assume the humiliating attitude that national credit and honor are 
dead, then the argument of the gentleman from JsTew York (Mr. Spaul- 
ding) is sound. 

The same plea of necessity which is resorted to in support of the legal 
tender clause, will require us to resort to every effort to do away with oM dis- 
tinction hetween this j^^p^r money and coin. The requiring the payment of 
interest in coin will have a tendency to make such distinction. It will have that 
effect, and all that we can do will not help it. Let me make one appeal 
to members. It is not yet too late to retrieve the error. We have not yet 
declared that we will compel men to take those promises to pay, and to 
treat them as substance. The way to recede from that dangerous propo- 
sition is before us. 

The times are auspicious. One good reason urged in favor of that policy 
was that the people were discouraged from the w^ant of success in our 
army. AVe have now the encouragement of success. Only let the 
moneyed men of the country believe that the Government is to succeed 
in putting down this rebellion, and we will not have to plead for credit. 
It is not gold and silver that we want. It is not things that are to be 
taken for gold and silver that we want. It is credit; it is confidence on 
the part of men who have money to lend, and who can lend it to the Gov- 
ernment with the assurance that it will be returned to them. That is all 
tliat is wanted. And now, in view of the brilliant prospect before us of a 
speedy termination of the rebellion, and in view of the immense resources 
of the Government, in Heaven's name, let us leave no national dishonor, 
to forever remain a stain upon the country. AVe will do that, if we do this 
great wrong. I appeal to the House, in the name of honor and justice, to 
retrace the step it has taken, and to save the Union from the loss that will 
alllict it by the passage of this law."" 

Mr. AViNiM)M, of ^Minnosotii, objoeted to proceeds of tlie public 



mih l)eing pledged to pay interest or principal on the bonds, as 



SrEKClI OF MR. DIVEX. 




140 



propo8e4 l>y the Senate, for the reason that it would tend to 
defeat the Homestead Law. This provision was afterwards sti-uck 
out in the Conference Committee. 

On the 6th amendment of the Senate, providing that these 
Treasury notes should be received for all claims and demands 
against the United States of every kind whatsoever, ^except for 
interest on bonds and notes ^ ichich shall be paid in coin,^ Mr. Pendleton 
moved an amendment to the effect * that the officers, soldiers, 
seamen and mariners engaged in the military service of the 
United States,' should also be paid in coin. Being opposed to 
the whole legal tender principle, he offered it to meet the objec- 
tion of the gentleman from New York, [Mr. Spaulding,] in refer- 
ence to our unjust discrimination against soldiers and others. 
He said: 

*'I am not iu favor of that discrimination, but am in favor of paying the 
officers and soldiers in the military and naval service of the Government 
in the legal coin of the country." 

The amendment was not agreed to. 

The amendments of the Senate having been acted upon in Com- 
mittee of the Whole, Mr. Stevens moved that the Committee rise 
and report the bill and amendments to the House, which was 
agreed to. The bill and amendments were accordingly reported 
to the House. 

On the 20th, the House resumed the consideration of the Senate 
amendments. 

Mr. Stevkxs was entitled to one hour in closing the debate. 
He gave a part of this time to Mr. Hooper, of Massachusetts. 

MR. hooper's speech. 

Mr. Hooper, of Massachusetts, spoke as follows : 

"Mr. Speaker — with the present large expenditures of the Govern- 
ment, and while the banks throughout the country are acting under a 
suspension of specie payments, it is an absurdity to insist on the strict 
enforcement of the existing laws, which require all Government receipts 
and payments to be made in coin. It is absurd, in my opinion, because it 
is impossible ; and it is also absurd because it is useless. What private 
corporations or individuals in this country receive and pay coin in the 
conduct of their business? There are none. Nearly all the ordinary 
receipts and payments throughout the country are made in bank notes, 
bank checks, or credit iu some other form; and coin is only required 
occasionally for a very small per cent, of those receipts and payments, 
which in amount, extend, in the course of a single year, to thousands of 
millions of dollars. 

The object of this Treasury note bill is to furnish a substantial and 



141 



uniform currency that will aid the Government, and enable it to receive 
its dues and make its payments, like all others, with credits. This bill 
declares that, for all dues to the Government and for all payments by the 
Government, these notes shall be received *the same as coin.' One way 
to make them ' the same as coin ' would be to make them at all times con- 
vertible into coin. Another is to use them, so far as possible, for all the 
purposes for which coin is used ; and in this latter mode their value will 
be the same as coin, unless the amount that is issued exceeds the amount 
needed for such uses. 

At the end of twelve months from this time the receipts of the Govern- 
ment and the payments by the Government, amounting to many hundred 
millions of dollars, will be found to be nearly equal ; tliat is, the Govern- 
ment during that time will have received about the same amount that it 
will have paid; and if these * Government notes ' are, in part, paid out by 
the Government, as it is proposed they shall be, in anticipation of the 
receipts for taxes and loans, they must all come back again in the course 
of the year, when those taxes and loans are paid f(^. The people may find 
a portion of these notes more convenient for oth^^ uses, and may, tiiere- 
fore, prefer to make their payments to the Government partly in coin. 
Unless, therefore, the Government is to be broken down, by the refusal to 
furnish the means in the form of taxes and loans to carry it on, the«e notes 
cannot depreciate to any extent, because they will be needed, and proba- 
bly a large amount of coin in addition, to pay into the Treasury for the 
loans and taxes; they will be received by the Government the same as 
coin, and therefore must be for this purpose, and all others, the equivalent 
of coin, unless they are imprudently issued in excess of the requirements 
for such purposes. 

I am opposed to this amendment of tlie Senate which requires the inter- 
est on Government notes and bonds to be absolutely paid in coin, because 
its effect will be to depreciate these notes as compared with coin, by declaring them 
in advance to he so depreciated. It creates a necessity for the Government to 
obtain a large amount of coin by puichase, if it is not received in payment 
of taxes and loans, which hold out an inducement to speculate on the 
necessity of the Government, by collecting and hoarding the coin against 
the time that will be required by the Government to pay its interest; 
and because it is an unnecessary inconvenience to require the whole 
amount of the interest to be paid in coin, when only the small amount is 
necessary that is to be remitted to foreign holders of bonds, which could 
easily be obtained at small cost, if the effect of the issue of the Govern- 
ment notes should be what the friends of this bill expect. * * # 

If the opponents of this bill have proved anything, they have proved too 
much in reference to the question now before the House, which is to make 
a distinction in favor of the holders of Government securities, and pay 
what may be due to them in coined money, while all otlier creditors of 
the Government shall be paid in what they have denounced to tlie country 
from the high places they occupy here, as the meanest paper trash.'' 

CLOSING DEBATE MR. STEVEnV srEECII. 

Mr. Stevens, of Penns3dvania, spoke as follows : 

**Mr. Speaker— I have a very few words to say. I approach the sub- 
ject with more depression of spirits than I ever before a])proached any 
question. No personal motive or feeling influences me. I hope not, at 
least. I liave a melancholy foreboding that we are about to consummate 



142 



a cnnninglj' devised scheme, wliicli will carry <?reat injury and jrrcat loss 
to all classes of the people tliroiiprhout this Union, except one. AVitli my 
colleajruo, I believe that no act of le^rislation of this Government was ever 
hailed witli as much delight throuofhout the whole lent^th and breadth of 
this Union, by every class of people, without any exception, as the bill 
which wc passed and sent to the Senate. Con<i^ratulations from all classes 
— merchants, traders, manufactunu-s, mechanics and laborers — poured in 
ui)on us from all quarters. The Boards of Trade from Boston, Xew York, 
Philadelphia, Cincinnati, Louisville, St. J^ouis, Chicago and Milwaukee, 
approved its provisions, and urged its passage as it was. 

1 have a dispatch from the Chamber of Commerce of Cincinnati, sent to 
the Secretary of the Treasury, and by him to me, urging the speedy pas- 
sage of the bill as it passed the Ilouse. It is true there icas a doleful sound 
came v2-)from the caverns of bullion brokers, and from the saloons of the associated 
hayiks. Their cashiers and agents were soon on the ground, and persuaded 
the Senate, with but little deliberation, to mangle and destroy what it had 
cost the House months to digest, consider and pass. They fell upon the 
bill in hot haste, and so disfigured and deformed it, that its very father 
would not know it. [Laughter.] Instead of being a beneficent and invig- 
orating measure; it is now positively mischievous. It has all the bad 
(pialities which its enemies charged on the original bill, and none of its 
benefits. It now creates money^ and hy its vcn/ terms declares it a depreciated 
currencj/. It makes two classes of money — one for the banks and brokers, and 
another for the people. It discriminates between the rights of different 
classes of creditors, allowing the rich capitalist to demand gold, and com- 
pelling the ordinary lender of money on individual security to receive 
notes which the Government had purposely discredited. 

Let us examine the principal amendments separately, and see their 
effect. The first important one (being the fifth,) makes the notes issued 
under the laws of July 17, a legal tender, equally with those authorized by 
this bill. There can be but little wisdom in putting these two classes on an 
equality. The notes of July bear seven and three-tenths per cent, interest, 
and are payable in three years. This gives them a sufHcient advantage 
over notes bearing no interest and payable virtually in twenty years 
bonds, with six per cent, interest. AVhy give them this additional advan- 
tage? Simply because the $100,000,000 issued are all held by the 
associated banks, and this is their amended bill. They would displace 
$100,000,000 of this money in the circulation, and render it impossible to 
use any considerable amount of these United States notes as a currency. 
These notes have served their puri)ose. "VVhy allow them to block up the 
market against further relief to the Government? 

The banks took $50,000,000 of six per cent, bonds, and shaved the Gov- 
ernment $5,500,000 on them, and now ask to shave the Government fifteen 
or twenty per cent, half yearly , to pay themselves the interest on these 
very bonds. They paid for the $50,000,000 in demand notes, not specie, 
and now demand the specie for them. Yet gentlemen talk about our 
making other loans in these times. They are crazy or sleeping, one or the 
other, I do not know which. 

When this question was discussed before, the distinguished gentleman 
from Kentucky (Mr. Crittenden) asked me whether it was the intention 
or expectation of the House to go on and issue more than one hundred and 
fifty millions of dollars of legal tender notes— a pertinent question, which 
I saw the whole force of at the time. I told him that it was my expecta- 



143 



tion that no more would be issued hy the Government; that they would 
he received and funded in the twenty year bonds."' 

Mr. LovEJOY— "I ask the gentleman from Pennsylvania whether $150,- 
000,000 of gold could not be put into circulation as well as $150,000,000 of 
Treasury notes ? " 

Mr. Stevens— "If this $150,000,000 would come out of the banker's and 
miser's hoards ; but they have suspended specie payment, and would not 
give out a dollar. Tliey say pay us a discount, and then when these notes 
are made a legal tender we will be again in the clutches of these harpies. 
I do not want to use hard names. I suppose these men act from instinct. 
If I were now to answer the question of the gentleman from Kentucky, I 
would not give that answer. I do not expect one dollar of the $150,000,000 
of legal tender notes ever to be invested in the twenty years bonds. I 
infer from the amendment that before we adjourn $150,000,000 will be 
asked for, which will never be funded in those bonds, and so on, as they 
are needed, as no bonds wUl he funded until our circidation wHl become frigJU- 
fidly inflated. * * 

But now comes the main clause. All classes of people shall take these 
legal tender notes at par for every article of trade or contract, unless they 
have money enough to buy United States bonds, and then they shall be 
paid in gold. Who is that favored class? The banks and brokers, and 
nobody else. They have already $250,000,000 of State debt, and their com- 
missioners would soon take all the rest that might be issued. 

But how is this gold to he raised? The duties and public lands are to he paid 
for in United States notes, and they or honds are to he put up at auction to get 
coin for these very hrokers, who would furnish the coin to pay themselves, by get- 
ting twenty per cent, discount on the notes thus bought . * * ^ it 

I have proposed an amendment to the Senate amendment upon the prin- 
ciple of legitimate parliamentary rules, that you may make as palatable as 
you can an amendment which you do not like, before the vote is taken 
upon it. My amendment is offered for the purpose of curing a little the 
evils and hardships of the original amendment of the Senate. And though 
it may be adopted, I shall vote against the whole as amended. My 
amendment is to except from the operation of the legal tender clause the 
officers and soldiers of the army and navy, and those who supply them with pro- 
visions, and thus put them upon the same footing with the Government 
creditors who hold their bonds. I hope they will not be thought less mer- 
itorious than the money-changers. I trust it will be adopted as an 
amendment to tlie Senate amendment, so that if this pernicious system is 
to be adopted, if the beauty of the original bill is to be entirely impaired, 
tliose who are fighting our battles, and the widows and children of those 
who are lying in their graves in every part of the countrj', killed in 
defense of tlie Government, may be placed upon no worse footing than 
those who hold the bonds of the Government and the coin of the country.'* 

At the conclusion of Mr. Stevens' speech the House proceeded 
to vote on the Senate amendments, some of which were concurred 
in, and others were disagreed to. 

The first important division of tlie House was on the sixth 

amendment of the Senate, as follows : 

Immediately after the clause last quoted, strike out the words 'and 
for all salaries, debts and demands owing by the United States to individ- 



144 



uals, corporations and associations within the United States,^ and insert, 
^and of claims and demands against the United States, of any kind what- 
soever, except for interest upon bonds and notes, which shall be paid m coin,^ " 

To this amendment Mr. Stevens moved an amendment to insert 
after the word ''notes,** the following: 

And payments to be made to officers^ soldiers and sailors in the army and 
navy of the United States, and for all supplies purchased for the said Govern- 
ment.''^ 

Mr. White, of Indiana—**! appeal to the gentleman from Pennsylvania 
to withdraw that amendment. It was only intended to illustrate an 
absurdity, and I hope he will withdraw it." 

Mr. Stevens— ** No sir; I cannot withdraw it." 

Mr. Bingham— ** I demand the yeas and nays on the amendment to the 
amendment." 

The yeas and nays were ordered. 

Mr. Baker— ** I should like to ask the Chairman of the Committee of 
Ways and Means a question." 

The Speaker—** No debate is in order at this time." 

The question was taken, and it was decided in the negative — 
yeas 67, nays 72; as follows: 

Yeas — ^Messrs. Aldrich, Ancona, Babbitt, Joseph Baile}', Baker, 
Biddle, Bingham, Francis P. Blair, Jacob B. Blair, Samuel S. 
Blair, George H. Browne, Buffinton, Campbell, Chamberlin, Clark, 
Cobb, Davis, Diven, Edwards, Ely, Fenton, Fessenden, Fisher, 
Franchot, Frank, Gooch, Granger, Hale, Hanchett, Harrison, 
Holman, Hooper, Johnson, Julian, William Kellogg, Killinger, 
Lehman, McPherson, Marston, Maynard, Mitchell, Anson P. 
Morrill, Noell, Odell, Olin, Perry, John H. Rice, James S. Rol- 
lins, Shanks. Sherman, Shiel, Sloan, Spaulding, William G. Steele, 
Stevens, Van Horn, Van Valkenburg, Verree, Voorhees, Wall, 
Wallace, Ward, Albert S. White, Wilson, Wlndom, Woodruff and 
Worcester — 67. 

Nays — Messrs. Alley, Arnold, Ashley, Baxter, Blake, William 
G. Brown, Bumham, Calvert, Clements, Frederick A. Conkling, 
Roscoe Conkling, Conway, Cox, Cravens, Crittenden, Dawes, 
Duell, Dunlap, Dunn, Eliot, English, Goodwin, Grider, Gurley, 
Haight, Hall, Harding, Hickman, Horton, Kelley, Knapp, Law, 
Leary, Loomis, Lovejoy, McKnight, Mallory, May, Menzies, 
Moorhead, Justin S. Morrill, Nixon, Noble, Norton, Nugen, Pat- 
ton, Timothy G. Phelps, Pike, Pomero}^, Alexander H. Rice, 
Riddle, Robinson, Sargent, Sedgwick, Sheffield, Smith, John B. 



145 



Steele, Stratton, Benjamin F. Thomas,^. Francis Thomas, Train, 
Trimble,^Trowbridge, VaUandigham, Charles W. Walton, E. P. 
Walton, Washbume, Webster, Wheeler, Wickliffe and Wright— 

So the amendment of Mr. Stevens to pay the army and navy 
in specie,' the^same as the bondholders interest in coin, was not 
agreed to. 

The question being upon agreeing to the sixth amendment of 
the Senate, to pay interest in coin on bonds and notes, in which 
the Committee of the Whole on the state of the Union recom- 
mended concurrence. 

Mr. Roscoe Conkling demanded the yeas and nays. 
The yeas and nays were ordered. 

The question was taken; and it was decided in the affirmative — 
yeas 88, nays 56 ; as follows : 

Yeas — Messrs. Ancona, Arnold, Ashley, Baxter, Beaman, Bid- 
die, Jacob B. Blair, George H. Browne, William G. Brown, Burn- 
ham, Calvert, Clements, Cobb, Frederick A. Conkling, Roscoe 
Conkling, Corning, Covode, Cox, Cravens, Crittenden, Diven, 
Dunlap, Dunn, Eliot, English, Goodwin, Grider, Gurley, Haight, 
Hall, Harding, Holman, Horton, Johnson, Kelley, Knapp, Law, 
Leary, Lehman, Loomis, Lovejoy, McKnight, Mallory, May, 
Menzies, Justin S. Morrill, Nixon, Noble, Norton, Nugea, Odell, 
Patton, Pendleton, Perry, Timothy G. Phelps, Pike, Pomeroy, 
Price, Alexander H. Rice, Riddle, Robinson, Edward H. Rollins, 
James S. Rollins, Sargent, Sedgwick, Sheffield, Sherman, Shiel, 
Smith, John B. Steele, William G. Steele, Stratton, Benjamin F. 
Thomas, Francis Thomas, Train, Trimble, VaUandigham, Vib- 
bard, Voorhees, Charles W. Walton, E. P. Walton, Ward, Wash- 
burn, Webster, Wheeler, Wickliffe, Woodruff and Wright — 88. 

Nays — Messrs. Aldrich, Alley, Babbitt, Joseph Bailey, Baker, 
Bingham, Francis P. Blair, Samuel S. Blair, Blake, Buffinton, 
Campbell, Chamberlin, Clark, Davis, Dawes, Duell, Edwards, 
Ely, Fenton, Fessenden, Fisher, Franchot, Frank, Granger, Hale, 
Hanchett, Harrison, Hickman, Hooper, Julian, William Kellogg, 
Killinger, Lansing, McPherson, Marston, Maynard, Moorhead, 
Anson P. Morrill, Noell, Olin, John H. Rice, Shanks, Sloan, 
Spaulding, .Stevens, Trowbridge, Van Horn, Van Valkenburgh, 
Verree, Wall, Wallace, Whaley, Albert S. White, Wilson, Win- 
dom and Worcester — 56. 



146 



So the amendment of the Senate to poff the interpst on bonds and 
notes in coin icns adopted. 
Fifteenth amendment. 

In line thirteen, second section, after the word 'time,' insert, 

*at the market valne thereof;' so that the clause will read: 

*' Aud the Secretary of the Treasury may tlitiposo of such bonds at any 
time, at the market value thereof,'^'' 

The Committee of the Whole on the state of the Union recom- 
mended non-concurrence. 

Mr. Ilorton asked for a division. 
Mr. Washburne demanded tellers. 
Tellers were appointed. 

Mr. Chamberlin called for the yeas and nays. 
The 3'eas and nays were ordered. 

The question was taken; and it was decided in the aflirmative — 
yeas 72, najs 66; as follows: 

Yeas — Messrs. Ancona, Goldsmith F. Bailey, Baxter, Beaman, 
Biddle, George H. Browne, William G. Brown, Calvert, Clark, 
Cobb, Frederick A. Conkling, Roscoe Conkling, Conway, Covode, 
Cravens, Crittenden, Cutler, Dunlap, Dunn, Eliot, English, Good- 
win, Grider, Ilall, Harding, Holman, Horton, Johnson, Kelley, 
Knapp, Law, Leary% Lovejoy, McKnight, Menzies, Justin S. Mor- 
rill, Nixon, Noble, Norton, Nugen, Odell, Patton, Pendleton, 
Perry, Pike, Pomeroy, Porter, Alexander II. Rice, Riddle, Rob- 
inson, Edward H. Rollins, James S. Rollins, Sargent, Sedgwick, 
Sheffield, Shiel, Smith, William G. Steele, Stratton, Benjamin F. 
Thomas, Francis Thomas, Train, Trimble, Verree, Vibbard, Voor- 
hees, Charles W. Walton, E. P. Walton, Washburne, Wheeler, 
Woodruff and Wright— 72. 

Nays — Messrs. Aldrich, Alley, Ashley, Babbitt, Joseph Baileys 
Baker, Bingham, Francis P. Blair, Jacob B. Blair, Samuel S. 
Blair, Blake, Buffinton, Campbell, Chamberlin, Clements, Cox, 
Davis, Dawes, Diven, Edgarton, Edwards, Ely, Fenton, Fessen- 
den, Fisher, Franc hot, Frank, Granger, Haight, Hale, Ilanchett, 
Harrison, Hickman, Hooper, Ilutchins, Julian, Killinger, Lansing, 
Lehman, Loomis, McPherson, Marston, Maynard, Moorhead, 
Anson P. Morrill, Noell, Olin, Potter, John H. Rice, Shanks, 
Sherman, Sloan, Spaulding, John B. Steele, Stevens, Trowbridge, 
Vallandigham, Van Horn, Van Valkenburgh, Wall, Wallace, 
Albert S. White, Wickliffe, Wilson, Windom and Worcester— 66. 

So the amendment was concurred in. 



Mr. Hooper—'*! consider the adoption of the fifteenth amendment of 
the Senate, w hich authorizes the Treasurer to sell the bonds at the mqrkH 
price, as an invitation to tlie public to depreciate their value, and so 
entirely contrary to the principle of the bill, that I move to lay the bill, 
with the amendments, on the table." 

Mr. Washburn The bill is not before the House.'' 

The Speaker—" A motion to lay a sinp^le amendment on the table car- 
ries the bill with it." 

Mr. Hooper — move to lay this amendment on the table ; and demand 
the yeas and nays on that motion." 

The yeas and naj^s were ordered. 

The question was taken; and it was decided in the negative — 
3^eas 21, nays 110; as follows: 

Yeas — Messrs. Baker, Samuel S. Blair, Diven, Eliot, Fisher, 
Granger, Hickman, Hooper, Anson P. Morrill, Justin S. Morrill, 
Norton, Olin, Pendleton, Sedgwick, Sheffield, Shiel, Sloan, 
Stevens, Benjamin F. Thomas, Train and Vallandigham — 21. 

Nays — Messrs. Aldrich, Alley, Ancona, Ashley, Babbitt, Gold- 
smith F. Bailey, Joseph Bailey, Baxter, Beaman, Bingham, Jacob 
B. Blair, Blake, William G. Brown, Bufflnton, Calvert, Campbell, 
Chamberlin, Clark, Clements, Cobb, Frederick A. Conkling, Ros- 
coe Conkling, Conway, Cox, Cravens, Cutler, Davis, Dawes, Dun* 
lap, Dunn, Edwards, Ely, English, Fenton, Fessenden, Franchot, 
Frank, Goodwin, Grider, Gurley, Haiglit, Hale, Hanchett, Har- 
ding, Harrison, Holman, Hutchins, Johnson, Julian, Kelley, 
Killinger, Knapp, Law, Leary, Lehman, Loomis, Lovejoy, Mc- 
Knight, McPherson, Mallory, Marston, Maynard, Menzies, Moor- 
head, Nixon, Noble, Noell, Nugen, Patton, Perry, Pike, Pomeroy, 
Porter, Potter, Price, John H. Rice, Richardson, Riddle, Sargent, 
Shanks, Shellabarger, Sherman, Smith, Spaulding, John B. Steele, 
William G. Steele, Stratton, Francis Thomas, Trimble, Trow- 
bridge, Van Horn, Van Valkenburgli, Verre, Vibbard, Voorhees, 
Wallace, Charles AV. Walton, E. P. Walton, AVard, Washbunie, 
Webster, Wheeler, A\'haley, Albert S. White, Wickliife, AVilson, 
Windom, Woodruff, AVorcester and Wright — 110. 

So the House refused to lay the amendment on the table. 

The amendment providing for a sinking fund, being the fifth 
Section of the Senate amendments, was now concurred in — j'-eas 
51, nays 52. The remainder of the amendments being merely 
verbal, were read, voted on in gross, and all concurred in. 

On tlie same day, 20th inst., the amendments were returned to 
the Senate with a eoni'urrence of the House in a part of the 



148 

amendments, a non-concurrence in others, and with some amend- 
ments to the Senate's amendments. 

Mr. Fessenden moved that immediate action be had on the 
amendments. The motion was agreed to, and after some prelim- 
inary remarks by Mr. King and Mr. Sherman, and without any 
separate action on the several amendments, Mr. Fessenden said : 

"I will move, as I understand the House has adjourned until to-mor- 
row, that the Senate insist on its amendments, disagreed to by the House, 
and disagree to the amendments of the House to the amendments of the 
Senate, and ask for a Committee of Conference on the disagreeing votes of 
the two Houses.'* 

The motion was agreed to, and the Chair appointed Mr. Fessen- 
den, Mr. Sherman and Mr. Carlisle, as such Committee. 

On the 21st., the action of the Senate was reported to the 
House, and on motion of Mr. Stevens, a Committee of Conference 
was appointed on the part of the House, as requested by the 
Senate, consisting of Mr. Stevens, Mr. Horton and Mr. Sedgwick. 

The Conference Committee had long consultation, extending 
through two or three days. They finally compromised some of 
the most material of the disagreeing votes between the two 
Houses. 

The most material change made was to require the duties on 
imports to be paid in coin, and held as a fund to pay the interest in 
coin on the funded debt, thereby doing away with the necessity of 
forcing the bonds on the market to procure coin for that purpose. 
Several other alterations and amendments were agreed to in the 
Committee of Conference. 

On the 2-ith, Mr. Stevens reported to the House the action of 
the Conference Committee, which was agreed to — ^yeas 97 ; nays 22. 

On the 25th, Mr. Fessenden made the same report in the Senate 
which was agreed to by the Senate without a division ; and on the 
same day President Lincoln approved the bill, and thus the Legal 
Tender act, after a most able and determined opposition, became 
a law. 

It is not deemed important to set forth in detail the several 
amendments and compromises made in the Committee of Confer- 
ence. A copy of the bill as it passed the House on the 6th inst. , 
will be found on page 96, and the following is a copy of the bill 
as it finally passed both Houses, and became a law. By compar- 
ing them, the amendments mJide after the bill first passed the 
House will fuUy^appear : 



149 



**-4n Act to authorize the issibe of United States notes, and for the redemption 
or funding thereof and for funding the floating debt of the Untied iSlates,'^^ 

Be it enacted hy the Senate and House of Representatives of the United 
States in Congress assembled. That the Secretary of the Treasury is hereby 
authorized to issue on the credit of the United States one hundred and 
fifty millions of dollars of United States notes, not bearing interest, pay- 
able to bearer, at the Treasury of the United States, and of such denomi- 
nations as he may deem expedient, not less than five dollars each. 

Provided, however, that fifty millions of said notes shall be in lieu of the 
demand Treasury notes authorized to be issued by the act of July 17th, 
1861, which said demand notes shall be taken up as rapidly as practicable, 
and the notes herein provided for substituted for them ; and 

Provided f urther, That the amount of the two kinds of notes together 
shall at no time exceed the sum of one hundred and fifty millions of dol- 
lars ; and such notes herein authorized shall be receivable in payment ot 
all taxes, internal duties, excises, debts and demands of every kind 
due to the United States, except duties on imports, and of all claims 
and demands against the United States of every kind whatsoever, 
except for interest upon bonds and notes, which shall be paid in coin ; 
and shall also be lawful money and a legal tender in payment of 
all debts, public and private, within the United States, except duties on 
imports and interest as aforesaid ; and any holder of said United States 
notes depositing any sum not less than fifty dollars, or some multiple of 
fifty dollars, with the Treasurer of the United States, or either of the 
Assistant Treasurers, shall receive in exchange therefor duplicate certifi- 
cates of deposit, one of which may be transmitted to the Secretary of the 
Treasury, who shall thereupon issue to the holder an equal amount of 
bonds of the United States, coupon or registered, as may by said holder 
be desired, bearing interest at the rate of six per centum per annum, pay- 
able semi-annually, and redeemable at the pleasure of the United States 
after five years, and payable twenty years from the date thereof; and 
such United States notes shall be received the same as coin, at their par 
value, in payment for any loans that may be hereafter sold or negotiated 
by the Secretary of the Treasury, and may be re-issued from time to time 
as the exigencies of the public interests shall require. 

$ 2. And he it further enacted, That to enable the Secretary of the 
Treasury to fund the Treasury notes and floating debt of the United 
States, he is hereby authorized to issue on the credit of the United States 
coupon bonds or registered bonds, to an amount not exceeding five hun- 
dred million dollars, and redeemable at the pleasure of the United States 
after five years, and payable twenty years from date, and bearing interest 
at the rate of six per centum per annum, payable semi-annually ; and the 
bonds herein authorized shall be of such denomination, not less than fifty 
dollars, as may be determined upon by the Secretary of the Treasury ; 
and the Secretary of the Treasury may dispose of such bonds at any time 
at the market value thereof, for lawful monej^ the coin of the United 
States, or for any of the Treasury notes that have been, or may hereafter 
be, issued under any former act of Congress, or for the United States 
notes that may be issued under the provisions of this act ; and all stocks, 
bonds, and other securities of the United States held by individuals, cor- 
porations or associations within the United States, shall be exempt from 
taxation by or under State authority. 



150 



^ 3. And be it further enacted, That the United States notes and the 
coupon or registered bonds authorized by this act shall be in such form as 
the Secretary of the Treasury may direct, and shall bear the written or 
engraved signatures of the Treasurer of the United States and the Register 
of the Treasury, and also, as evidence of lawful issue, the imprint of a copy 
of the seal of the Treasury Department, which imprint shall be made 
under the direction of the Secretary, after the said notes or bonds shall be 
received from the engravers, and before they are issued ; or the said notes 
and bonds shall be signed by the Treasurer of the United States, or for the 
Treasurer, by such persons as may be specially appointed by the Secre- 
tary of the Treasury for that purpose, and shall be countersigned by the 
Register of the Treasury, or for the Register, by such persons as the Sec- 
retary of the Treasury may appoint for that purpose ; and all the provis- 
ions of the act entitled ' An act to authorize the issue of Treasury notes, ' 
approved the twenty-third day of December, eighteen hundred and fifty- 
seven, so far as they can be applied to this act, and not inconsistent 
therewith, are hereby revived and re-enacted; and the sum of three hun- 
dred thousand dollars is hereby appropriated, out of any money in the 
Treasury not otherwise appropriated, to enable the Secretary of the Treas- 
ury to carry this act into effect. 

J 4. And he it further enacted. That the Secretary of the Treasury may 
receive from any person or persons, or any corporation. United States 
notes on deposit for not less than thirty days, in sums of not less than one 
hundred dollars, with any of the assistant treasurers or designated 
depositaries of the United States authorized by the Secretary of the Treas- 
ury to receive them, who shall issue therefor certificates of deposit, made 
In such form as the Secretary of the Treasury shall prescribe, and said 
certificates of deposit shall bear interest at the rate of five per centum per 
annum ; and any amount of United States notes so deposited may be with- 
drawn from deposit at any time after ten days' notice on the return of said 
certificates ; 'Frovidedy that the interest on all such deposits shall cease 
and determine at the pleasure of the Secretary of the Treasury ; and Pro- 
vided further, that the aggregate of such deposits shall at no time exceed 
the amount of twenty-five million dollars. 

} 5. And he it further enacted, That all duties on imported goods which 
shall be paid in coin, or in notes payable on demand, heretofore 
authorized, to be received and by law receivable in payment of public 
dues, and the coin so paid shall be set apart as a special fund, and applied 
as follows 

First— To the payment in coin of the interest on the bonds and notes of 
the United States. 

Second— To the purchase or payment of one per centum of the entire 
debt of the United States, to be made within each fiscal year after the first 
day of July, 1862 ; which is to be set apart as a sinking fund ; and the 
interest of which shall In like manner be applied to the purchase or pay- 
ment of the public debt, as the Secretary of the Treasury shall from time 
to time direct. 

Third— The residue thereof to be paid into the Treasury of the United 
States. 

$ 6. And he it further enacted, That if any person or persons shall falsely 
make, forge, counterfeit, or alter or cause or procure to be falsely made, 
forged, counterfeited or altered, or shall willingly aid or assist in falsely 
making, forging, counterfeiting or altering any note, bond, coupon, or 



151 



other security issued under the authority of tliis act, or heretofore issued 
under acts to authorize the issue of Treasury notes or bonds ; or shall pass, 
utter, publish or sell, or attempt to pass, utter, publish or sell, or bring 
into the United States from any forei|rn place, with the intent to pass, 
utter, publish or sell, or shall have or keep in possession, or conceal, with 
intent to utter, publish or sell, any such false, forged, counterfeited, or 
altered note, bond, coupon, or other security, with intent to defraud any 
body, corporate or politic, or any other person or persons whatsoever, 
every person so offending shall be deemed guilty of felony, and shall, on 
conviction thereof, be punished by fine not exceeding $5,000, and by 
imprisonment and confinement to hard labor not exceeding 15 years, 
according to the aggravation of the offence. 

$ 7. And he it farther enacted, That if any person, having the custody ot 
any plate or plates, from which any notes, bonds, coupons, or other securi- 
ties mentioned in this act, or any part thereof, shall have been printed, or 
which shall have been prepared for the purpose of printing any such notes, 
bonds, coupons, or other securities, or any part thereof, shall us6 such 
plate or plates, or knowingly permit the same to be used for the purpose 
of printing any notes, bonds, coupons, or other securities, or any part 
thereof, except such as shall be printed for the use of the United States, by 
order of the proper officer thereof; or if any person shall engrave, or cause 
or procure to be engraved, or shall aid in engraving any plate or plates in 
the likeness or similitude of any plate or plates designed for the printing 
of such notes, bonds, coupons, or other securities, or any part thereof; or 
shall vend or sell any such plate or plates, or shall bring into the United 
States, from any foreign place, any such plate or plates, with any other 
intent, or for any purpose, in either case, than that such plate or plates 
shall be used for printing of such notes, bonds, coupons, or other securi- 
ties, or some part or parts thereof, for the use of the United States; or shall 
have in his custody or possession any metallic plate, engraved after the 
similitude of any plate from which any such notes, bonds, coupons, or 
other securities, or any part or parts thereof, shall have been printed, with 
intent to use such plate or plates, or cause or suffer the same to be used, 
in forging or counterfeiting any such notes, bonds, coupons, or other 
securities, or any part or parts thereof, issued as aforesaid ; or shall have in 
liis custody or possession, any blank note or notes, bond or bonds, coupon 
or coupons, or other security or securities, engraved and printed after the 
similitude of any notes, bonds, coupons, or other securities, issued as 
aforesaid, with intent to sell or otherwise use the same ; or if any person 
shall print, photograph, or in any other manner execute or cause to be 
printed, photographed, or in any manner executed, or shall aid in printing, 
photographing or executing any engraving, photograph or other print, or 
impression, in the likeness or similitude of any such notes, bonds, coupons, 
or other securities, or any part or parts thereof, except for the use of the 
United States and by order of the proper officer thereof, or shall vend or 
sell any such engraving, photograph, print, or other impression, except to 
the United States, or shall bring into the United States from any foreign 
place any such engraving, photograph, print, or other impression for the 
purpose of vending or selling the same, except by the direction of some 
proper officer of the United States; or shall have in his custody or posses- 
sion any paper adapted to the making of such notes, bonds, coupons, or 
other seeuriLies, and similar to the paper upon which any such notes, 
bonds, coupons, or other securities shall have been used, with intent to 



152 



use such paper, or cause or suffer the same to be used in forging or coun- 
terfeiting any of the notes, bonds, coupons, or other securities, issued as 
aforesaid, every such person so offending shall be deemed guilty of a 
felony, and shall, on conviction thereof, be punished by fine not exceeding 
five thousand dollars, and by imprisonment and confinement to hard labor 
not exceeding fifteen years, according to the aggravation of the offence. 
Approved February' 25, 1882. A. LINCOLN." 

Passage of the Treasury note bill. 

SAMUEL WILKESON TO THE N. Y. TRIBUNE. 

Washington, Tuesday, Feb. 25, 1862. 

The Conference Committee of the Treasury note bill having concurred, 
and Mr. Washburne having defeated another endeavor to adjourn the House 
yesterday as early as two o'clock, the prospect of an invigoration of the 
war by a supply of money, and the payment of soldiers and contractors, 
was good. The bill as agreed upon by the conferees authorizes the issue 
of $150,000,000 of Treasury notes, uniform in similitude, and a legal ten- 
der in the payment of all debts, public and private. It withdraws the 
fifty millions of the July issue as soon as it conveniently can be done, 
makes the new notes fundable at any time in six per cent, twenty years 
bonds, redeemable at the pleasure of the United States after five years ; 
makes the interest on the bonds and notes payable in coin, and (a new 
feature) makes the duties on imports also payable in coin, and devotes 
them to the payment of the interest on the notes and bonds, and the crea- 
tion of a sinking fund by setting apart one per cent, of the amount. The 
provisions insisted on by the Senate authorizing the Secretary of the 
Treasury to sell six per cent, bonds for what they will fetch, in order to 
raise coin for interest, is retained in the bill. All the funded debt is 
exempted from taxation. Authority is given to temporarily deposit 
demand notes to the extent of twenty-five millions, on an interest of six 
per cent, after thirty days. The bill has gone through both Houses, and, 
it is supposed, will receive the President's signature to-night. An influ- 
ence from New York sent the bill back again to the Senate this morning, 
for an amendment that should permit sixty millions of Treasury notes to 
be used for the payment of custom duties, the fifty millions authorized in 
July, and the temporary relief ten millions authorized this month. This 
was adopted and accepted by the House, and it is to be hoped that the 
President will now have a chance to sign the bill, and the abused public 
creditors get their pay. 

It is but just to say, that to the patient labor of the Hon. E. G. Spauld- 
ing the country is greatly indebted for the early maturity of this finance 
measure, and for what vigor has been displayed in its passage through 
Congress.'' 

temporary deposits in sub-treasury. 

It will be noticed that by the 4th section of the Legal Tender 
act the Secretary of the Treasury was authorized to receive 
deposits in the sub-Treasury to the amount of $25,000,000, in sums 
of not less than $100, at five per cent, interest, with the privilege 
to the depositors of drawing it out again at an}- time, on ten days 
notice, after thirty days. This was but another form of borrow- 



15S 



•ing money by the Government at a low rate of interest. Its 
operation at the sub-Treasury was somewhat like that of a 
Saving's Bank, and the privilege was largely availed of by banks, 
insurance companies and individuals. It became a very popular 
mode of temporary investment for corporations and individuals, 
and although it operated against funding in the 5-20 bonds, yet it 
became an advantageous mode for the Government to borrow 
large sums of money. It became so popular that on the 17th of 
March, 1862, the authoritj'to receive these deposits was increased 
to $50,000,000. 

On the 11th of July following the power was enlarged to $100,- 
000,000; and by the act of January 30, 1864, the authority was 
still further enlarged to $150,000,000, and the Secretary was 
authorized to pay as high as six per cent, on these deposits. 
Certificates were issued to the persons making the deposits, which 
were circulated to some extent at the Clearing Houses, and among 
individuals, which was one mode of increasing the credit circula- 
tion of the country, and thereby aiding the general inflation which 
commenced with the passage of the legal tender act. These 
deposits reached at one time the sum of $120,176,196. 

CERTIFICATES OF INDEBTEDNESS. 

Tlie issue of Certificates of Indebtedness at one year, was 
another expedieut resorted to for borrowing mone}^ and was 
another mode of increasing the credit circulation of the Govern- 
ment, lyy the act of March 1, 1862, the Secretary of the Treasury 
was authorized to issue to creditors, who were willing to receive 
them, * in satisfaction of audited and settled demands against the 
United States,' certificates of indebtedness (in effect promissory 
notes,) in sums of not less than $1,000 each, payable in one year 
at six })er cent, interest. And by the act of the l7th of March, 
1862, this power was enlarged, so as to embrace checks drawn in 
favor of creditors by 'disbursing officers upon sums placed to 
their credit on the books of the Treasurer.' The power thus con- 
ferred on the Secretary to issue certificates of indebtedness for 
these purposes was broad and unlimited. The certificates issued 
under these two acts were in the similitude of bank notes fitted 
for circulation as nione^', and did circulate to a considerable 
extent as currency until there was such an accumulation of inter- 
est upon theui as to make it an object for capitalists to hold them 
as an investment. The Secretary commenced issuing these certifi- 
cates simultaneously with the issue of Legal Tender (greenback) 



164 



notes, and continued to issue them in large amounts during the 
progress of the war, which was advantageous to the Government, 
but at the same time was another fruitful source of inflation, and 
operated directly against any considerable funding in the long 
5-20 bonds. The amount of indebtedness in this form on the first 
of November, 18G4, was $238,593,000, being an amount greater 
than the market would bear; they were consequently depreciated 
and considerably below par. 

MORE LEGAL TENDER AUTHORIZED. 

In less than a month after the passage of the first legal tender 
act another act was passed at the request of Secretary Chase, 
approved March 17, 1862, by which the demand notes authorized 
by the act passed at the extra session in July, 1861, and the suj)- 
plementary act of February 12, 1862, amounting to $60,000,000, 
were declared to be lawful money and a legal tender, in like man- 
ner, and for the same purposes, and to the same extent as the 
notes authorized by the first legal tender act. These notes, when 
first issued, were receivable b}^ the Government for duties on 
imports, but that was not enough to prevent them from depre- 
ciating, and some of the banks in the principal cities refused to 
receive them from their customers as money. The object to 
make them a legal tender was to make them pass currently as 
money at the Clearing Houses, and in all business transactions, 
without loss to the holders. 

SECRETARY CHASE ASKS FOR $150,000,000 MORE LEGAL TENDER 

NOTES. 

Secretary Chase sent to the Committee of Ways and Means on 
the 7th of June, 1862, an official communication, accompanied by 
a bill proposed by him, asking, among other things, for an addi- 
tional issue of $150,000,000 of legal tender notes; and that of 
this sum $35,000,000 should be of a denomination less than five 
doUars, This communication is published as Miscellaneous Doc- 
ument, No. 81, and sets forth at length the reasons why, in the 
opinion of the Secretary, this additional issue should be author- 
ized by Congress. He states that the daily receipts from customs 
were about $230,000, and that the average daily conversions of 
legal tender notes into 5-20 bonds did not exceed $150,000, while 
the daily expenditures could not be estimated at less than 
$1,000,000, and would probably exceed that sum; and that he had 
already exhausted the issue of legal tender notes authorized b}^ 
the act of February 25th, 1862. 



165 



"He proposed that authority be oriven to the Secretary of the Treasury 
to issue $150,000,000 in United States notes, in addition to the issue already 
authorized ; and that these he made a legal tender for debts, except inter- 
est on loans, and receivable in payment of all loans to the United States, 
and for all Government dues, except duties on imports and interest. 

If Congress shall see fit to authorize the additional emission proposed, 
it seems highly expedient that such part as the public convenience shall 
require be issued in denominations less than five dollars. I am aware of 
the general objections to the issue of notes under five dollars^ and concede their 
cogency. Indeed, under ordinary circumstances they are unanswerable. 
But in the existing circumstances of the country, they lose most, if not 
all, their force. 

The country is involved in the expenditures of a contest for national 
existence, and it is highly desirable that the burdens of the people be 
made as tolerable as possible. If the restriction on the issue of small 
denominations be removed, the wants of the country will absorb a circu- 
lation of $25,000,000, and perhaps more. The interest on this circulation, 
say $1,500,000 a year, will be saved to the tax payers. 

Payments to public creditors, and especially to soldiers, now require 
large amounts of coin to satisfy fractional demands less than five dollars. 
Great inconveniences in payment of the troops are thus occasioned. 
With every eftbrt on the part of the Treasury to provide the necessary 
amount of coin, it is found impracticable always to satisfy the demand. 
When the amount required is furnished, the temptation to disbursing 
officers to exchange it for any small bank notes that the soldiers or the 
public creditors will take, is too great to be always resisted. And even 
when the coin reaches the creditors it is seldom held, but passes, in general, imme- 
dicLtely into the hands of sutlers and others, and disappears at once from drciUa^ 
tion. The inconveniencies, therefore, to the Government and creditors, 
from the absence of United States notes of small denominations, are not 
compensated by benefits to anybody. 

It may properly be further observed that since the United States notes 
are made a legal tender, and maintained nearly at the par of gold, by the pro- 
vision for their conversion into bonds bearing six per cent, interest, 
payable in coin, it is not easy to see why small notes may not be issued as 
wisely as large ones. The notes made a legal tender circulate as money ; 
and the Government may authenticate, by device and imprint, small notes 
as well as small coins. The limit is to be found only in public conven- 
ience, which indicates denominations in gold, leaving the smaller circula- 
tion of silver (less valuable than gold,) as before. 

Another consideration which deserves to be taken into the account is 
this : that resumption of payments in specie can be more certainly and 
easily effected, and with far less of inconvenience and loss to the commu- 
nity, if the currency, small as well as large, is of United States notes, than 
if the channels of circulation are left to be filled up by the emissions of 
non-specie paying corporations, solvent and insolvent. 

These considerations of economy, of public advantage, and of private 
convenience, seem to me to justify fully the removal of the restriction 
upon the issue of small notes. 

I propose, further, to make arrangements for the necessary engraving 
and other work for the printing and preparation for issue of these notes in the 
Treasury Departmefit at Washington, I am led to believe that a very con- 



156 



siderable reduction of expense can be thus effected. The prospect, in my 
judji^ment, certainly warrants the trial. 

With these objects I have prepared a bill, which I herewitli submit to 
the consideration of the committee. The condition of the Treasury renders 
prompt dclion highly desirable; and I trust it is not necessary to assure the 
Committee or Congress that, should the powers asked for be granted, they 
will be exercised only with the most careful reference to the requirements 
of the public interests. Whatever the authority granted may be, no issue 
of notes will be made except to replace notes withdrawn and canceled, 
and to meet tlie current expenditures authorized by Congress, which can- 
not be met from the receipts of revenue, from the increase of deposits, and 
from the proceeds of the conversion into five-twenties. 

With great respect, S. P. CHASE, 

Secretary of the Treasury." 

'*Hon. Thaddels Stevens, 

Chairman Committee of Ways and Means.'^ 

The bill thus recommended by Secretary Chase was taken up in 
the Committee of Ways and Means and duly considered. After 
considerable discussion Mr. Stevens was authorized to report it to 
the House, but without the power to issue notes less than five dol- 
lars. On the 11th of June, Mr. Stevens reported the bill and the 
foregoing letter of the Secretary to the House. They were 
referred to the Committee of the Whole and ordered to be printed. 
On the 13th inst., the bill was made the special order for Tues- 
day, the 1 7th. , and to continue the special order until disposed of. 

MR. SPAULDING's SPEECH. 

On the l7th of June, the second bill for an additional issue of 
$150,000,000 legal tender notes, Mr. Spaulding opened the debate 
in a lengthy speech. The House being in Committee of the 
Whole (Mr. Phelps, of Missouri, in the chair) on the bill recom- 
mended by the Secretary of the Treasury, for authority to issue 
the additional sum of United States notes, Mr. Spaulding said : 

"Mr. Chairman— This is an important measure, and I desire to submit 
a few remarks in the opening of the debate upon the subject. 

The requirements of the Treasury will probably not be less than $250,- 
000,000 to meet the current expenses to the Ist of January next. How is 
this large sum to be obtained ? I believe it can only be obtained in the 
mode which has been successfully adopted during the last six months. 
The financial plan initiated six months ago as a necessary war measure 
has worked well. It has exceeded the most sanguine expectations of its 
strongest advocates. The Secretary of the Treasury recommends a con- 
tinuance of the plan which has so successfully carried the country through 
the perils of the past six months. I shall cordially co-operate with the 
Secretary, hoping that it may be equally successful in the future. It is 
our duty now to provide all the means which shall be necessary to pay all 
the current expenses to the 1st day of January. The bOl now under con- 
sideration is deemed necessary for that purpose, and the Secretary assures 



167 



us that the condition of the Treasury renders prompt action highly 
desirable. 

During the pending war, neither the President, the Secretary of the 
Treasurer, lior Congress, can fix a limit to the expenditures of the Gov- 
ernment, and cannot, therefore, fix a limit to the obligations to be issued 
on its credit. All that the Secretary can say, all that Congress can 
declare, is, that the President, as Commander-in-Chief, by his subordinate 
ofi9cers, must contract all the debts which shall be necessary to maintain 
the army and navy, and all other expenses incident to a vigorous prosecu- 
tion of the war. The largest latitude is given to the President, Secretary 
of War, and Secretary of the Navy, in carrying on the war. They have 
full discretionary power to contract all the debts which they may deem 
necessary to amply supply the army and navy. All parties loyal to the 
Government are united in urging a vigorous prosecution of the war; all 
parties, therefore, ought to be willing to furnish all the means necessary 
for this purpose. We must, at any rate, pay all the debts contracted by 
the Executive in the progress of the war. If we knew how much this 
would amount to we could easily figure up the amount of the bonds and 
notes which Congress must authorize the Secretary to issue. No man, 
not even the President, the Secretary of War, the Secretary of the Navy, 
the Secretary of the Treasury, or the Chairman of the Committee of Ways 
and Means, or all of them together, can give even an approximate esti- 
mate as to the whole cost of this war, because they do not know the 
number of years it will continue, nor what will be the final solution of 
the grave questions involved. We are working out a great problem, the 
result of which no man can know. Slavery was the cause of this war; 
and until the solution of the slavery question is arrived at, and the cause 
of the rebellion removed, we have no hope of permanent peace and tran- 
quility. This will take a long time ; but how long no man is wise enough 
to determine. The war debt we all know is already large, and that it is 
growing fearfully larger every day. Many capitalists and bankers liave 
already invested all their surplus means in United States stocks. 

During the debate on the Treasury note bill in January and February 
last, I submitted, with some degree of diffidence as to its accuracy, an 
estimate of what I thought the whole debt (floating as well as funded 
debt) of the Unitled States would be on the Ist of July next, and also 
what the funded and floating debt would be on the Ist of July, 1863, if 
the war should be prosecuted to that time on the same locale that it is now 
carried on. I have not seen since, and do not now see, any reason to 
change the estimates I then made. I then said it was impossible to esti- 
mate, definitely, what the war would cost, and therefore it was impossible 
to fix any limit to the amount of paper (obligations of the Government 
either in the form of notes, bonds or certificates of deposit) that must be 
issued during its prosecution. The experience of the last few months has 
demonstrated the truth of these remarks. We must first apply all the 
money we can collect from duties on imports, excises, internal duties, 
direct taxes, and confiscations of the property of rebels, which may 
amount, during the current year, (of money actually realized) to $125,- 
000,000, perhaps more, and possibly less. All the expenses of the war, 
over and above the amount realized from these sources, must be provided 
for by borrowing in some form upon the credit of the Government. 
Paper credit in some form must be issued during the next fiscal year to a 
very large amount However much we may depreciate it, this will be an 
imperative necessity which we cannot avoid. However much this may 



158 



be a departure from sound business and financial principles applicable to 
times of peace, we cannot, we must not, shrink from the responsibility 
which is forced upon us in the prosecution of this war. We must boldly 
meet every exigency in financial as well as in military and naval opera- 
tions. Notes and bonds must be authorized by Congress, and must be 
negotiated by the Secretary of the Treasury, amply sufficient to sustain 
the army and navy, or the war must stop. If we have not the money, we 
have what is equally or more important : the country is full of provisions, 
clothing, and the material of war. Treasury notes and bonds, issued on 
the credit of the Government, will procure all these supplies to maintain 
your army and navy. The war, therefore, can go on, and will go on vig- 
orously if wc carry out the views submitted to us by the Secretary of the 
Treasury. 

In what form or mode has the credit of the Government been thus far 
used in the prosecution of this war? Five different forms of credit have 
been resorted to. Loans to the Government, for which obligations have 
been issued, are as follows : 

1. United States notes, without interest, made a legal tender, and cir- 
culated as money among the people in all parts of the United States. 
This is the people's loan to the Government, and the most popular mode 
of borrowing ever adopted by any Government. It has given the countrj'^ 
a sound national currency, in which the people have had entire confidence. 
Every man, woman and child having a live dollar legal tender greenback 
note in possession, has directly or indirectly loaned to the Government 
that amount, and becoming thereby interested in the perpetuity of the 
Government, is a strong advocate for a vigorous prosecution of the war. 
A fair test of the loyalty of all such holders of notes may be seen in their 
manifestation of confidence that they are perfectly good. The soldiers 
and sailors give their services, risk their lives, and endure all the hard- 
ships, sickness, and privations of the campaign, and cheerfully take these 
notes in payment. Supplies, subsistence, and material of war of every 
kind is eagerly furnished, and these greenbacks taken in exchange for the 
same. This kind of loan is so popular with the people, and being without 
interest, is so advantageous to the Government, it is desirable that it 
should be extended as far as it can be done safely, and without unduly 
stimulating speculations to such an extent as to cause an unfavorable 
reaction to the legitimate business of the country. But when bonds can 
he negotiated at pa/r, I think it will he safer to have bonds negotiated than to 
issue legal tender notes. 

2. The second kind of loan has been the issue of bonds running from 
five to twenty years at six per cent, interest per annum, which is an 
advantageous mode for the Government to borrow money, because the 
debt is then funded; and it is also favorable to commerce, because it 
causes no disturbance in the money market or business ot the country, 
provided the money is not taken from the capital of men engaged in 
active business, but is obtained from capitalists who desire permanent 
investments, and who only want to use the interest half-yearly. This 
mode of borrowing must necessarily be limited to the amount of accu- 
mulated capital in the country, held by those who are willing to invest it 
in this way. It is a permanent and safe investment in the hands of those 
persons who want to use only the interest on their accumulated capital. 

3. A third kind of loan which has thus far worked very well in prac- 
tice, are deposits in the Treasury of the United States, for which certificates 



159 



are issued, bearing four and five per cent, interest, and which deposits 
may be withdrawn from the Treasury on giving ten days' notice after 
thirty days. The Government has borrowed over fifty million dollars at 
this low rate of interest, and the bill now before us proposes to give the 
Secretary power to extend the amount to $100,000,000. To guard against 
any sudden call that may be made for these deposits, the Secretary pro- 
poses to keep on hand, in Treasury notes, ready to be issued, one-third 
of the amount of the current deposits which may at any time be in the 
Treasury. With this safeguard, this kind of loan will be very advan- 
tageous to the Government as well as to the depositors. 

4. Certificates of indebtedness at one year,lbearing six per cent, inter- 
est per annum, given in payment of supplies, transportation, and material 
furnished in the prosecution of the war. This is an advantageous form of 
credit given to the Government, because it is for a definite time and at the 
customary rate of six per cent, interest. This form of indebtedness has 
already reached about fifty million dollars, and may be still further 
increased under the law already in existence. 

5. Treasury notes at three years, bearing seven and three-tenths per 
cent, interest per annum, payable half-yearly, and convertible into twenty- 
years six per cent, bonds. This is the most objectionable form of borrow- 
ing of any that has been adopted, Ibr the reason that the rate of interest is 
too high— a much higher rate than this great Government, with all its 
immense power and resources, ought to pay. I think this form of borrow- 
ing money should only be resorted to when we cannot obtain the money ' 
to carry on the war in any other way. 

The liquidated and funded debt of the United States, as reported by the 
Secretary of the Treasury to Congress, May 29, 1862, was as follows : 





Bate of Interest. 


Amount, 


Loan, 1842 


6 


$2,883,364 




6 


9,415,250 


Loan, 1848 


6 


8,908,342 




5 


20,000,000 


Loan, 1860 


5 


7,022,000 




5 


3,461,000 




6 


18,415,000 


Loan, 1861— July 17 


6 


50,000,000 




7.3 


120,523,450 




6 


878,650 


Loan, 1862 





2,699,400 




G 


47,199,000 






3,382,162 






145,880,000 




5 


44,865,624 




4 


5,913,042 









Reducing the above total to the round sum, in English money, of £100,- 
000,000 sterling, we have this contrast of the magnitude of the public debts 
respectively of Great Britain and the United States, and the annual cost of 
their support; public debt of Great Britain, £800,000,000, at an annual 
charge of £28,262,000; public debt of the United States, £100,000,000, at an 
annual charge of £4,350,000. 

Tliere is still another kind of indebtedness— the floating debt created in 



160 



various forms every day by officers of the Government. This accrued 
indebtedness, existing in different forms, must, with our extended line of 
military and naval operations, be very large. It exists in the shape of 
accounts, services, transportation, bounties, and all other modes in which 
debts are made against the Government in enlisting, calling out the 
militia, and in supplying the army and navy with the necessary material 
of war. On this kind of indebtedness the Government gets a credit of 
from one to four months. The whole accrued indebtedness of the United 
States, funded and unfunded, on the 1st day of July next, it is believed, 
will not exceed $650,000,000. 

I never have been, and I trust I never shall be, unnecessarily an advo- 
cate for the creation of an unsound or an inflated currency ; but, sir, I 
have long ago resolved, since this savage war has been forced upon us, to 
do whatever was necessary, and which I might lawfully do, to crush out 
the traitors and annihilate their armies. This cannot be done without the 
* sinews of war.' Tour army and navy must be supplied with all the ter- 
rible armament necessary to crush the enemy. Your sick, wounded and 
famishing soldiers must be supplied with hospitals, medical attendance, 
and all necessaries and conveniences to make them comfortable. This is 
a plain duty which we cannot any of us fail to perform. If, in the per- 
formance of this duty, it becomes necessary tp authorize a further issue of 
United States liotes, I shall not hesitate to give my vote for it. I am not 
in favor of increasing the issue of them beyond the imperative necessities of the 
Oovemmeni to sustain the army and navy* I much prefer to have our six per 
cent, bonds issued on permcmeni bans. I wovM like to see the Secretary of the 
Treasury borrow at par aU the money he can on the six per cent, bonds heretofore 
authorized to be issued. 

When money can be obtained at par on six per cent, bonds, I would prefer to 
have thai done to the issuing a very large amount of legal tender notes. Too 
large an issue of demand notes, to circulate as money, will no doubt lead 
to an expansion which will inflate prices, stimulate undue speculation, 
and ultimately produce a reaction that will derange the whole business of 
the country. This is to be avoided if possible. I cannot, therefore, advo- 
cate any greater issue of demand notes than the absolute necessities of the 
Government require to carry on the war with vigor. I am disposed to 
give the Secretary power to issue the additional $150,000,000 United States 
notes asked for by him ; but, at the same time, 2 feel the importance of hav- 
ing this power exercised discreetly, and I trust that he wiM not issue, or pay them 
out at all, wh£n money can be obtained par on our six per cent, bonds. I do 
not understand that the Secretary intends to have them all issued and put 
into circulation at any one time ; on the contrary, I believe he has no such 
intention. He wants the power to issue and use them if necessary, but 
not otherwise. "When he can obtain a sufficient amount of money at par, 
on six per cent, bonds, or by temporary deposits in the Treasury, there 
will be no necessity for their issue, and the Secretary assures us in his letter 
thai no furtJier issue of notes will be made when that can be done; and, besides, 
the bill provides for his retaining in his own hands legal tender notes 
equal to one-third of the temporary deposits that may be in the Treasury. 
Our army and navy and all debts of the Government should be punctually 
paid. No sacrifice on our part should be too great to raise all the means 
necessary for this purpose. The Secretary should, therefore, be clothed 
with ample power to meet any exigency that may arise. 
The money for the large liabilities of the Government that have actually 



161 



been met and canceled since the passage of the first legal tender note bill, 
could not have been raised by a forced sale of six per cent, bonds without 
a heavy sacrifice. When that hUl passed this Hoicse our six per cent, twenty- 
years bonds were ten per cent, h^hw par. Now they are from one to two per cent, 
above the price of gold. If, at the time of the passage of the first note bill, 
large amounts of bonds had been forced upon the market, as would have 
been necessary but for the passage of that bill, it would have depressed 
the six per cent, bonds still lower. There was not then money enough in 
the country seeking permanent investment, to absorb all the bonds 
required by the Government to meet the immediate and pressing demands 
upon the Treasury. This state of things may again occur. I hope not. 
I trust that there will be no necessity for any considerable issue of new 
notes ; but to guard against possible contingencies, I am willing to confer 
large powers upon the Secretary, believing that he will exercise the power 
wisely, patriotically, and for the best interests of the country. I shall not, 
therefore, hesitate to clpthe him with this great power, and shall, under 
the exigencies of the crisis, vote for this additional issue of legal tender 
notes. 

As to the propriety of authorizing the Secretary to issue a portion of 
this amount in sums less than five dollars, I should, under ordinary cir- 
cumstances, oppose giving such authority. As a general rule, the issue of 
small notes should not be adopted for a national currency ; but I am <lis- 
posed, in the present exigency, to vote for this provision, in accordance 
with the suggestions of the Secretary of the Treasury, and for the reasons 
urged by him in his communication, sent to us on the 7th inst. 

I have thus briefly stated the condition and wants of the Treasury. 
Two hundred and fifty million doUars will be required, as I stated before, 
to carry us to the 1st of January next. That is more than the coin in all 
the banks of the United States, and nearly equal to all the coin of the 
United States in the hands of individuals and banks ; the whole amount of 
gold and silver held by the banks and individuals being only about $265,- 
000,000. The ground upon which the Secretary of the Treasury, and upon 
which the Committee of Ways and Means rest this issue of notes, is the 
necessity of the case. The Secretary urges immediate action in view of 
the condition of the Treasury. I therefore trust the House will take up 
this bill in the regular way, debate it to the extent which may seem desir- 
able and necessary, and pass it at as early a day as possible." 

MR. COLFAX's SPEECH. 

Mr. Colfax suggested that the bonds, into which the notes are con- 
vertible, ought to be absolutely twenty years bonds, instead of allowing the 
Government the right to redeem them after five years. The bonds of *81 
having absolutely twenty years to run, were selling yesterday in New 
York at six per cent, above par for greenbacks, while the 5-20 bonds 
would not bring such a premium. If they would command any such 
premium, these notes, convertible into such bonds, would be brought in 
for conversion with great rapidity, and there would not be a margin of 
six per cent, between gold and legal tender notes. He thought it best to 
legislate in such a manner as to approximate these notes to gold. 

Mr. Stevens — agree perfectly with the remarks made by the gentle- 
man from Indiana. I opposed tlie substitution of five years bonds for 
twenty years bonds when the question was before the House, but the 
House difiered with me. The Senate amended the bill, and when it came 



162 



back from the Senate, the House agreed with the Senate after discussion 
here. He said that a majority of the Committee of Ways and Means were 
not in favor of tlie recommendation of tlie Secretary to issue notes less 
than five dollars, but he understood that some member of the Committee 
would offer an amendment in accordance with the recommendation of 
the Secretary of the Treasury." 

Mr. Spaulding aftei-wards oflered an amendment that no part 
of these legal tender notes should be **for fractional parts of a 
dollar, and that not more than 150,000,000 should be of a less 
denomination than five dollars," which was adopted. 

The bill continued to be discussed by difl*erent members of the 
House from day to day until the 24th of June, when it passed the 
House in substantially the same form as recommended by the 
Secretary of the Treasury, by yeas 76, nays 47, as follows: 

Yeas — Messrs. Aldrich, Alley, Arnold, Babbitt, Bailey, Bea- 
man, Bingham, Francis P. Blair, Jacob B. Blair, Samuel S. Blair, 
Blake, William G. Brown, Campbell, Casey, Chamberlin, Clark, 
Colfax, Cutler, Davis, Delaplaine, Duell, Dunn, Edgerton, Ed- 
wards, Ely, Fenton, Fessenden, Franchot, Granger, Gurley, 
Haight, Hale, Hall, Hanchett, Harrison, Hooper, Hutchins, Kel- 
ley, Francis W. Kellogg, Lansing, Loomis, Lovejoy, Law, Mc- 
Knight, Maynard, Mitchell, Moorhead, Nixon, Noell, Nugen, 
Olin, Timothy G. Phelps, Pomeroy, Potter, Price, John H. Rice, 
Riddle, Sargent, Shanks, Shellabarger, Sherman, Sloan, Spaulding, 
Stevens, Trimble, Trowbridge, Van Honi, Van Valkenburgli, 
Verree, Wall, Wallace, Washbume, Wheeler, Whaley, Wilson, 
Windom and Worcester — 76. 

Nays — Messrs. William J. Allen, Baker, Biddle, George H. 
Browne, Buflftnton, Calvert, Clements, Cobb, Roscoe Conkling, 
Coming, Cravens, Crisfield, Dawes, Delano, Dunlap, Eliot, English, 
Fouke, Goodwin, Grider, Harding, Johnson, Law, Menzies, Jus- 
tin S. Morrill, Norton, Pendleton, Perry, John S. Phelps, Porter, 
Alexander H. Rice, Richardson, Sheflleld, Shiel, Stiles, Benjamin 
F. Thomas, Francis Thomas, Vallandigham, Vibbard, Wadsworth, 
Walton, Ward, Webster, Chilton A. White, Wickliffe, Wood and 
Woodruff— 47. 

So the bill was passed. 

BILL IN THE SENATE. 

On the 25th of June the bill was received in the Senate and 
referred to the Finance Committee. On the 28th this Committee 
reported the bill with amendments. On the 2d of July it was 



ark 



168 



fully discussed, and after being amended, passed the Senate by 
yeas, 22, nays 13, as follows: 

Yeas — Messrs. Anthony, Browning, Chandler, Clark, Dixon, 
Foot, Hale, Harris, Henderson, Howard, Howe, Lane (of%Indiana), 
Lane (of Kansas), Morrill, Pomeroy, Simmons, Sumner, Ten Eyck, 
Wade, Wilkinson, Willey and Wilson (of Missouri) — 22. 

Nays — Messrs. Carlisle, Collamer, Cowan, Davis, Foster, Har- 
lan, King, Powell, Saulsbury, Sherman, Stark, Trumbull and 
Wright— 13. 

The amendments of the Senate were not agreed to by the 
House, and the disagreeing votes between the two Houses, were 
finally settled by a Conference Committee, consisting of Mr. Fes- 
senden, Mr. Sherman and Mr. Wright on the part of the Senate, 
and Mr. Stevens, Mr. Spaulding and Mr. Phelps on the part of 
the House. The report of the Conference Committee was finally 
agreed to on the 8th of July, and on the 11th President Lincoln 
approved the bill, which is as follows : 

CHAPTER CXLII. 

An Act to authorize an additional issue of United States Notes, and for 
other purposes. 

Be it enacted hy the Senate and Hoim of Representatives of the United States 
of America, in Congress assembled, That the Secretary of the Treasury is 
hereby authorized to issue, in addition to the amounts heretofore author- 
ized, on the credit of the United States, one hundred and fifty millions of 
dollars of United States notes, not bearing interest, payable to bearer at 
the Treasury of the United States, and of such denominations as he may 
deem expedient ; Provided, That no note shall be issued for the fractional 
part of a dollar, and not more than thirty-five millions shall be of lower 
denominations than five dollars ; and sucli notes shall be receivable in pay- 
ment of all loans made to the United States, and of all taxes, internal 
duties, excises, debts and demands of every kind due to the United States, 
except duties on imports and interest, and of all claims and demands 
against the United States, except for interest upon bonds, notes, and cer- 
tificates of debt or deposit; and shall also be lawful money and a legal 
tender in payment of all debts, public and private, within the United 
States, except duties on imports and interest, as aforesaid ; and any holder 
of said United States notes, depositing any sum not less than fifty dollars, 
or some multiple of fifty dollars, with the Treasurer of the United States, 
or either of the assistant treasurers, shall receive in exchange therefor, 
duplicate certificates of deposit, one of which may be transmitted to the 
Secretary of the* Treasury, who shall thereupon issue to the holder an 
equal amount of the bonds of the United States, coupon or registered, as 
may by said holder be desired, bearing interest at the rate of six per cent, 
per annum, payable semi-annually, and redeemable at the pleasure of the 
United States after five years, and payable twenty years from the date 
thereof; Provided, however, That any notes issued under this act may be 
paid in coin, instead of being received in exchange for certificates of 



164 



deposit as above specified, at the discretion of the Secretary of the Treas- 
ury. And the Secretary of the Treasury may exchange for such notes, on 
sucii terms as he shall think most beneficial to the public interest, any 
bonds of the United States bearing six per centum interest, and i-edeema- 
ble after five, and payable in twenty years, which have been or may be 
* lawfully issued under the provisions of any existing act; may re-issue the 

notes so received in exchange ; may receive and cancel any notes hereto- 
fore lawfully issued under any act of Congress, and in lieu thereof issue 
an equal amount in notes such as are authorized by this act; and may pur- 
chase, at rates not exceeding that of the current market, and cost of 
purchase not exceeding one-eighth of one per centum, any bonds or cer- 
tificates of debt of the United States as he may deem advisable. 

Section 2. Arid be U further efiacied. That the Secretary of the Treasury 
be, and is hereby, authorized, in case he shall think it expedient to pro- 
cure said notes, or any part thereof, to be engraved and printed by con- 
tract, to cause the said notes, or any part thereof, to»be engraved, printed 
and executed, in such form as he shall prescribe, at the Treasury Depart- 
ment in AVashington, and under his direction; and he is hereby empow- 
ered to purchase and provide all the machinery and materials, and to 
employ such persons and appoint such officers as may be necessary for 
this purpose. 

$ 3. Atid be it further enacted. That the limitation upon temporary 
deposits of United States notes with any assistant treasurer, or designated 
depositary authorized by the Secretary of the Treasury to receive such 
deposits, to fifty millions of dollars be, and is hereby repealed; and the 
Secretary of the Treasury is authorized to receive such deposits, under 
such regulations las he may prescribe, to such amount as he may deem 
expedient, not exceeding one hundred millions of dollars, for not less 
than thirty days, in sums not less than one hundred dollars, at a rate of 
interest not exceeding five per centum per annum ; and any amount so 
deposited may be withdrawn from deposit, at any time after ten days 
notice, on the return of the certificate of deposit. And of the amount of 
United States notes authorized by this act, not less than fifty millions of 
dollars shall be reserved for the purpose of securing prompt payment 
of such deposits when demanded, and shall be issued and used only when, 
in the judgment of the Secretary of the Treasury, the same, or any part 
thereof may be needed for that purpose. And certificates of deposit and 
of indebtedness issued under this or former acts, may be received on the 
same terms as United States notes, in payment for bonds redeemable after 
five, and payable in twenty years. 

$ 4. And be it further enacted, That the Secretary of the Treasury may 
at any time, until otherwise ordered by Congress, and under the restric- 
tions imposed by the 'Act to authorize a national loan, and for other 
purposes,' borrow on the credit of the United States, such part of the sum 
of two hundred and fifty millions mentioned in said act as may not have 
been borrowed, under the provisions of the same, within twelve months 
from the passage thereof. 

$ 5. And be it further enacted, That any part of the appropriation of ten 
thousand dollars for the detection and bringing to trial of persons engaged 
in counterfeiting the coin of the United States, made by the act entitled 
* An Act making appropriations for the legislative, executive and judicial 
expenses of the Government, for the year ending the thirteenth of June, 
eighteen hundred and sixty-one,' approved June twenty-three, eighteen 



166 



hundred ^nd sixty, may be applied in detecting and bringing to trial and 
punishment, persons engaged in counterfeiting Treasury notes, bonds, or 
other securites of the United States, as well as the coin of the United 
States. And to carry into effect the preceding sections of this act the 
sum of three hundred thousand dollars is hereby appropriated, out of any 
money in the Treasury not otherwise appropriated. 

} 6. And be it further enacted, That all the provisions of the act entitled 
* An Act to authorize the issue of United States notes, and for the redemp- 
tion or funding thereof, and for funding the floating debt of the United 
States,' approved February twenty-five, eighteen hundred and sixty-two, 
so far as the same can or may be applied to the provisions of this act, and 
not inconsistent therewith, shall apply to the notes hereby authorized to 
be issued. 

Approved, July 11, 1862. A. LINCOL]!^.'' 

POSTAGE STAMPS AND FRACTIONAL CURRENCY. 

Another expedient resorted to for providing means to carry on 
the war, was the issue of postage stamps and fractional currency. 
After the suspension of specie payments by the banks and the 
passage of the first legal tender act, gold and silver were in a 
great measure banished from circulation. There was a great 
scarcity of small change in ordinary business transactions. Cor- 
porations, individuals and firms commenced issuing shinplasters to 
supply the deficiency. It soon became apparent that unless some 
action was taken to prevent it, the country would be flooded with 
a heterogeneous fractional currency of very little value, and very 
vexatious in business transactions. 

To remedy these evils, and in order that the Government might 
avail itself of the advantages of this circulation. Congress, at the 
request of Secretary Chase, passed the following bill : 

CHAPTER CXCVI. 

*'-4n Act to authorize payment in Stamps, and to prohibit circulation of notes of 
less denomination than one doUar. 

Section 1. JBe it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That the Secretary of the 
Treasury be, and he is hereby directed to furnish to the Assistant Treas- 
urers, and such designated depositaries of the United States as may be by 
him selected, in such sums as he may deem expedient, the postage and 
other stamps of the United States, to be exchanged by them, on applica- 
tion for United States notes: and from and after the first day of August 
next such stamps shall be receivable in payment of all dues to the United 
States less than five dollars, and shall be received in exchange for United 
States notes when presented to any Assistant Treasurer or any designated 
depositary, selected as aforesaid, in sums not less than five dollars. 

$ 2. And be it further enacted, That from and after the first day of 
August, eighteen hundred and sixty-two, no private corporation, banking 
association, firm or individual, shall make, issue, circulate, or pay any 



166 

note, check, mendorandum, token, or other obligation for any less sum 
than one dollar, intended to circulate as money or to be received or used 
in lieu of lawful money of the United States ; and every person so offend- 
ing shall, on conviction thereof in any district or circuit court of the 
United States, be punished by fine not exceeding five hundred dollars, or 
by imprisonment not exceeding six months, or by both, at the option of 
the Court. 
Approved July 17, 1862/' 

The use of stamps for small change did not work well in prac- 
tice, and Secretary Chase recommended that fractional currency 
should be authorized in the place of postage and revenue stamps. 
This recommendation was carried into effect by the 4th section of 
the act of March 3d, 1863, by which the Secretary was authorized 
to issue fractional currency to any amount not exceeding $50,- 
000,000, redeemable in United States notes in sums not less than 
three dollars, and receivable for postage and revenue stamps, and 
also in payment of any dues to the United States less than five 
dollars, except duties on imports. This fractional currency was 
not made a legal tender for private debts, but upon the whole it 
has served a useful purpose ; and the second section of the act of 
July 17, 1862, prohibiting all other shinplasters, has kept the coun- 
try free from a flood of small paper trash," which at one time 
was very annoying to the business community. The Government 
has had the benefit of an average circulation of this form of credit 
to the amount of about $30,000,000, which is still outstanding, 
and which should at an early day be replaced by the silver coins 
which were in common use before the war. Would it not be well 
to destroy this currency as fast as it becomes mutilated and is 
returned to the Treasury Department? If no more should be 
printed or issued it would not be long before the present issue 
would wear out and be replaced by small coins. 

SECOND ANNUAL REPORT OP SECRETARY CUASE, DEC. 4, 1862. 

Secretary Chase again earnestly recommended the National 
Currency Bank Bill, and urged its passage by additional argu- 
ments, which he presented more in detail than in his first report. 

"He still adhered to the opinion expressed in his last report that a circu- 
lation furnished by the Government, but issued by banking associations 
organized under a general act of Congress, is to be preferred to either 
United States legal tender notes or notes of State Banking Coi-porations. 
Such a circulation, uniform in general characteristics, and amply secured 
as to prompt convertibility by national bonds deposited in the Treasury 
by the associations receiving it, would unite, in his judgment, more 
elements of soundness and utility than can be combined in any other. 



167 



Little direct aid is, however, to be expected from this plan during the 
present, nor very much, perhaps, during the next year. He briefly argued 
the comcitutionaMty of this plan as an auxiliary to the power to borrow 
money ; as an agency of the power to collect and disburse taxes ; and as 
an exercise of the power to regulate commerce, and of the power to regu- 
late the value of coin." 

He recommended a further limited issue of legal tender notes 
as a wise expedient for the present time, and as an occasional 
expedient in future times, and the immediate passage of the bank 
bill for raising the additional means to carry on the war. 

$900,000,000 LOAN ACT. 

We now come to the consideration of the $900,000,000 Loan 
Act, which, in connection with loan acts already passed, conferred 
more discretionary pmver on the Secretary of the Treasury than 
was ever granted by law to any other Finance Minister in the 
world; and which ultimately led to a dangerous expansion of 
credit circulation in various forms, and in connection with the 
bank bill, which passed about the same time, to an enormous 
inflation of prices, caused by the over-issuing of paper money 
which came very near proving fatal to the finances of the Gov- 
ernment and the legitimate business of the countr3^ 

The bill having been carefully considered in the Committee of 
Ways and Means, was, on the 8th of January, 1863, reported from 
the Committee to the House by Mr. Stevens. It was entitled, 
* ' A bill to provide Ways and Means for the support of the Gov- 
ernment;" which was read twice, ordered to be printed, referred 
to the Committee of the Whole, and made the special order for 
Monday, the 12th inst. (House bill No. 659.) The bill as 
reported did not contain some provisions which Secretary Chase 
was very anxious to have passed — 'One was to repeal the provision 
restricting him in the sale of bonds to the * market value' — 
another was to abrogate that most equitable and just provision 
contained in the original legal tender act, allowing the holders of 
legal tender notes to convert them at any time into 5-20 six i^er 
cent, bonds, interest payable semi-annually in coin. The Com- 
mittee did not deem it just to abrogate this provision, while Sec- 
retary Chase believed its repeal would enable him to make better 
terms in selling bonds. 

MR. SI'AULDIKg's opening SPEECH OK THE BILL. 

On the 12 til, the bill being the special order, was taken up in 
Committee of the Whole, and, an amendment having been 



168 



offered by Mr. Stevens, Mr. Spaulding opened the debate upon 
it in the following speech : 

**Mr. Chairman — This subject is a very dry one, but it is intensely 
interesting at the present time. I propose to discuss the bill reported by 
the Committee of Ways and Means, with the amendment of the gentle- 
man from Pennsylvania, so far as I shall be able during the hour allotted 
to me under the rules of the House. 

The immediate requirements of the Treasury are not less than $100,000,- 
000. Before you can pass this bill through both Houses, have it approved 
by the President, and get bonds and notes engraved, printed and issued, 
at least $50,000,000 more will be required. The pressing demands upon the 
Treasury between this and the first of next monihj for the pay of soldiers and 
other creditors^ inay be put down ai $150,000,000. The gold and silver in 
the banks in New York, Boston and Philadelphia, on the first of this 
month, probably did not exceed $49,000,000; to which you may add the 
gold and silver in all other banks in all the loyal States, as will appear in 
official reports to the first of J anuary, 1863, and the whole sum will not 
exceed $87,000,000. All this coin is necessary for the banks to take care 
of their own liabilities ; but even if the Secretary could, on the credit of 
the Government, by a sale of bonds at any sacrifice, or by the aid of the 
military power, visit every bank in the country, and by force compel all 
this coin to be paid into the Treasury, it would not pay fifty cents on the 
dollar on the demands due from the Government, and which ought to be 
paid in the next twenty days. It is therefore perfectly plain that even 
the small sum of $150,000,000, now due, cannot be paid in gold. It would 
be a gratification to me, and, I doubt not, to every other loyal citizen, if 
it were otherwise. It is no favJIl of the Secreiary or of Congress that gold 
cannot now he paid to the soldiers and other creditors. It is simply an impos- 
sibility, by any plan, to get enough for thai purpose. There was never a more 
pertinent application of the old maxim than when applied to our present 
condition, * when we cannot do as we would, we must do as we can.' 

I have had a strong desire to provide money upon a specie basis, for the 
support of the army and navy, during the pending struggle to preserve 
the Constitution and the National Union. I would much prefer to pay 
gold and silver to all the creditors of the Government. During the first 
six months of the war, I was in hopes that our expenditures might be 
kept within limits that would admit of such a financial policy. I believe 
that this was the earnest wish of the Secretary of the Treasury, and of 
every member of the Committee of Ways and Means. But with an army 
in the field of from seven hundred thousand to one million of men, to be 
fed, clothed and paid, and all the material of war provided to make them 
efficient for active duty, it was very soon ascertained that the coin in the 
country, amounting only to about $250,000,000, if every dollar held by 
the banks and the people could have been availed of, was far too small to 
meet these large expenditures. We could not shut our eyes to the vast- 
ness of the volume of debt that was open before us. It was very soon 
made apparent that our national debt would, at an early day, reach 
$2,000,000,000, equal to half the debt of Great Britain; and that it would 
be utterly impossible to make loans on a specie basis fast enough to meet 
such enormous expenditures. 

At the last session, and after there had been a general suspension of 
specie payments by the banks and the Government, Congress authorized 



169 



the issue of $150,000,000 of legal tender notes; and by another law, passed 
a few months later in the session, an additional issue of $150,000,000 was 
also authorized, hut the Secretary was required to hold in reserve $50,000,- 
000 to meet any calls that might be made for temporary deposits in the 
sub-Treasury. We all hoped that this would be all the legal tender notes 
that would be necessary. Congress also authorized the Secretary to bor- 
row $500,000,000, payable in twenty years, and redeemable at the pleasure 
of the Government after five years, bearing interest at the rate of six per 
centum per annum, payable half-yearly in coin, and gave him authority to 
sell them at any time ' at the market price,'' to raise money to carry on the war ; 
and further authorized the holder of any legal tender notes to convert them at 
any time, at par, into these siv per cent, bonds. 

The Secretary has paid out nearly $250,000,000 legal tender notes, being 
all that he was authorized to issue ; and notwithstanding he has had author- 
ity/or the last ten months to sell $500,000,000 of five-twenty siv per cent, bonds, 
at the market price, he ha^ only disposed of about $25,000,000, and has still 
authority to sell $475,000,000 at the market price, and take his pay for them in 
legal tender notes. 

One of the reasons why more of these bonds have not been disposed of 
is, that there has been no redundancy of currency, and it has been diffi- 
cult for the Secretary to get legal tender notes on a sale of the bonds and 
seven-three-tenths notes that he has already negotiated. 

The War and IS'avy Departments have almost unlimited power to con- 
tract debts for the supply of the army and navy. The volume of supplies 
and supply trains for your army are enormously large ; and extending 
over such a widely extended field of military operations as that in which 
our several army corps are engaged, no one can fail to see that it is next 
to impossible to estimate accurately the amount to be appropriated for a 
year in advance. But it is painfully certain, that with the present army 
in the field, there is no way of limiting the amount of expenditures when 
they are actively operating to put down so gigantic and desperate a 
rebellion. 

We know that the liquidated and funded debt is already large, and that 
there is a large accrued indebtedness, which ought to be paid at an early 
day, but without any adequate means in the Treasury to pay it. There is 
a large amount due to the soldiers thai, mu^t be paid at the earliest moment pos- 
sible. The soldiers now on the field of battle, or encamped in front of the enemy, 
enduring all the perils and hardships of war, many of whom have not received 
their pay for months, ought not to be put off any longer, They can hardly be 
expected to perform their duties with alacrity, unless they are promptly 
paid, especially when they know, as many of them do, that their families 
at home are suff*ering for the want of the means of life. It is an impera- 
iive necessity tliat the means for paying the army and navy should not be 
delayed any longer. If the Secretary cannot raise the money to pay the 
creditors of the Government by a loan on five-twenty six per cent, bonds 
at the market price, other authority must be given him to raise the 
money, and Congress ought to confer that authority upon him as soon as 
possible. 

The time has arrived when our finances must engage the earnest and 
united attention of all loyal Representatives. We were in great peril last 
year, but our dangers are now two-fold what they were then. It was 
very difficult last year to provide the money to meet the large appropria- 
tions made for the support of the army and navy. It will be still more 



I 



170 

difficult to meet the enlarged requirements of the current and the next 
fiscal year. The army bill alone appropriates over $731,000,000, which, 
added to the estimates of all the other expenditures for the fiscal year 
ending June 30, 1864, amount to the enormous sum of $1,095,431,183.56, to 
which must be added the amount still required for appropriations and 
deficiency for the year ending June 30, 1863, and which, according to the 
report of the Secretary of the Treasury, amounted on the 1st of December 
last to the sum of $551,221,131.59, making the whole aggregate required 
to meet appropriations during the next eighteen months $1,646,634,315.15, 

NATIONAL DEBT. j 

Particulars of the public debt outstanding January 2, 18^; 



Loan of 1842 in course of payment $ 2,883,364 11 

** 1847 9,415,250 00 

" 1848 8,908,341 80 

1858 20,000,000 00 

1860 7,022,000 00 

1861, act of February 8, 1860 18,415,000 00 

" 1861, act of July 18, 1861 50,002,000 00 

" 1862, five-twenty six percent 25,050,850 00 

Texas indemnity 3,461,000 00 

Oregon war debt 1,026,600 00 

Texas debt 112,092 69 

Old funded and unfunded debt 114,115 48 

Treasury notes under acts prior to 1857 104,561 64 

" subsequent 2,750,350 00 

Treasury notes seven-thirty per cent, interest 139,998,000 00 

Temporary deposits at four per cent 38,458,008 50 

" *' five per cent 41,777,628 16 

United States notes, legal tender and receivable for customs 14,913,315 25 

United States notes, legal tender 223,108,000 00 

Postal currency less than one dollar 6,844,936 00 

Certificates of indebtedness, six per cent 110,321,241 65 

Requisitions on the Treasury for soldiers' pay and other 

creditors, due but not paid 59,117,597 46 



Total funded and unfunded debt to January 2, 1863, accord- 
ing to the books in the Treasury Department 783,804,252 64 

To which may be added the estimates of appropriations 
made and asked for to July 1, 1864, (including $100,000,- 
000 that may be undrawn at the end of the year, and 



which will be due though not paid), amounting to, say .1,216,197,745 35 

Public debt estimated to July 1, 1864, if the war continues 

on the same scale to that time $2,000,000,000 00 

How is this large sum to be obtained ? 

The Secretary of the Treasury, in his annual report, indicates two 
modes of obtaining it, as follows : 

1. A national bank bill. 

2. By loans in some of the forms heretofore authorized. 

I propose to examine these modes of obtaining the money in the order 
above stated. 

1. A national bank law. It is proposed by this bill to authorize the 
formation of banking corporations in all parts of the country, with the 



171 



usual powers of State banks. They are to have the power to issue bank 
notes to circulate as money, and to be secured by United States stocks, 
deposited in the Treasury Department as security for the redemption of 
the currency thus issued. This bill in all its essential features is like the 
free banking law ot the State of New York. It proposes to nationalize all 
tlie bank currency of the country by the adoption of such a coercive policy 
toward existing banks as will compel them to throw up their present 
State charters, and organize anew under this bill. A tax of two per cent, 
per annum is proposed on all State bank circulation, in addition to the 
State, county and city taxes which State banks are compelled to pay under 
State laws, and in addition to the internal revenue tax of three per cent, 
on their profits, making an aggi-egate tax upon State banks of about five 
per cent. By this hostile policy toward existing banks, it is proposed to 
compel them to surrender their present chartered rights, to make a market 
for United States stocks, to be deposited in the Treasui-y Department as a 
basis for national bank circulation under this new system, to the amoi;nt 
of $250,000,000. 

It is anticipated that in the course of a few years, and certainly as soon 
as the system goes fully into operation, United States bonds will be depos- 
ited to this amount. There is no provision requiilng new banks, organ- 
ized under this bill, to redeem their circulating notes in coin. They are 
to remain under suspension of specie payments, the same as existing 
banks, until there is a general resumption on the part of the Government 
and the banks, long after the close of the war. The central idea of the 
measure, as stated in the Secretary's report, *is the establishment of one 
sound uniform currency, of equal value throughout the country, upon the 
foundation of national credit, combined with private capital,' and making 
this the settled financial policy of the country. This is the scheme pro- 
posed. The first question presented is : will this materially aid the Gov- 
ernment in the present exigency ? I think it will not, and the Secretary 
frankly admits that * little direct aid is to be expected from this plan 
during the present, and not very much, perhaps, during the next year.' 
We have already issued, and put into circulation, legal tender notes direct 
from the Treasury, and without the machinery or expense of a national 
bank, to about the sum of $250,000,000. These Treasury notes are based, 
for their security and ultimate redemption, upon the good faith of the 
people and all their property. For what currency we need in the pending 
struggle for national existence, will it be wise to attack the State banks ? 
Will it be wise to raise up powerful enemies in the States to oppose any of 
the measures of the Government ? The State bank system is older than 
the Constitution. It has become deeply rooted. Immense interests are 
involved in the banks organized all over the country under the protection 
and guarantee of State sovereignty. Individuals have, in good faith, paid 
in their money to establish these banks. Vast interests are involved in 
various ways. They are intimately interwoven with the commerce and 
business of the country. In the State of Ifew York alone over $19,000,- 
000 of stocks and bonds, many of which have been purchased from the 
State at a large premium, constitute the security for the redemption of 
their circulating notes. The State of New York has now the best banking 
system in the world. These banks are under much more careful supervis- 
ion, of a superintendent in their midst, than they would be under an 
officer residing as far off as Washington. The State banks have been 
liberal in making loans to the Government in this hour of the nation's 



172 



greatest need, and their stockholders, directors, and managers are mostly 
loyal and patriotic. Still further aid will be solicited and expected from 
the existing banks. Will it be wise to make demands upon them that are 
not made upon all other property ? Any invidious discrimination against 
them, in the way of taxation, it seems to me, would be ui^just. * * 

I am not opposed to a national bank, nor am I disposed to interfere with 
State banks. Both systems of banking may be legitimate within their 
sphere of action. I am willing that the country should have both. I am 
willing that they should go on pari passu and in competition with each 
other; but I am unwilling to make war at this time on the State banks, 
because I do not believe that the benefits to be derived from such a course 
will sufficiently compensate for the evils that will follow any attempt to 
destroy the present State bank system. 

I now propose to examine the constitutionality of these two systems of 
banking. If it can be shown that a national bank is constitutional, it can 
be more clearly established that State banks are also constitutional. 
Jackson, Jefferson, and other statesmen always insisted that the Constitu- 
tion did not empower Congress to charter a national bank ; and the former 
was especially favorable to State banks. (For Mr. Jefferson's opinions 
see his letter to Hon. John W. Eppes, chairman of the Finance Committee, 
bearing date November 6, 1813, wherein he opposes the charter of a 
United States bank.) 

CONSTITUTIONALITY OF A NATIONAL BANK. 

I have no doubt that the general principle of the national bank bill pro- 
posed by the Secretary of the Treasury is constitutional. It is true that 
there is no express grant of power in the Constitution to incorporate a 
United States bank. The power to create a bank is incidental to the pow- 
ers expressly granted. The national bank proposed may be considered 
an appropriate means to carry into effect many of the enumerated powers 
of the Government. By its provisions it has a direct relation to the 
national debt, to the power of collecting taxes, internal duties and excises ; 
to that of borrowing money, to that of regulating commerce between the 
States, and to that of raising money to maintain the army and navy. It 
would, no doubt, be a useful instrument in administering the fiscal and 
financial operations of the Government, and it would moreover, in time, 
be a useful support to the credit of the Government, by providing a market 
for a considerable amount of the bonds issued in the prosecution of the 
war. (See Hamilton's celebrated argument submitted to President Wash- 
ington, in favor of the constitutionality of the United States Bank, in 
1791; McCullock vs. The State of Maryland, 4 Wheat. R. 422-3, Chief Jus- 
tice Marshall's opinion.) 

STATE BANKS ARE ALSO CONSTITUTIONAL. 

In the case of Briscoe vs. The Bank of the Commonwealth of Kentucky, 
(11 Peter's R., 317,) Judge McLean laid down the doctrine that a State 
cannot emit bills of credit, or, in other words, it cannot issue that descrip- 
tion of paper, to answer the purposes of money, which was denominated 
before the adoption of the Constitution, "bills of credit." But a State 
may grant acts of incorporation for the attainment of those objects which 
are essential to the interests of society. This power is incident to sover- 
eignty; and there is no limitation in the Federal Constitution on its 
exercise by the States in respect to the incorporation of banks. 

At the time the Constitution was adopted, the Bank of North America 



173 



and the Massachusetts bank and some others were in operation. It can- 
not, therefore, be supposed that the notes of these banks were intended to 
be inhibited by the Constitution, or that they were considered bills of 
credit, within the meaning of that instrument* In fact, in many of their 
most distinguishing characteristics, they were essentially different fr6m 
bills of credit, in any of the various forms in which they were issued. 

If, then, the powers not delegated to the Federal Government nor 
reserved to the States are retained by the States or the people, and, by a 
fair construction of the term bills of credit, as used in the Constitution, 
they do not include ordinary bank notes, does it not follow that the power 
to incorporate banks to issue these notes may be exercised by a State ? 

A uniform course of action, involving the right to the exercise of an 
important power by the State government for three-fourths of a century, 
and this almost without question, is no unsatisfactory evidence that the 
power is rightfully exercised to charter banks to issue bank notes to cir- 
culate as money. The Supreme Court of the United States decided in this 
case that the act incorporating the Bank of the Commonwealth of Ken- 
tucky was a constitutional exercise of power by the State of Kentucky; 
and the notes issued by the bank were not bills of credit, within the 
meaning of the Constitution of the United States, but were ordinary bank 
bills, issued and circulated as currency. 

It was argued in this case that if the Bank of the Commonwealth of 
Kentucky should be declared unconstitutional by the court, all State 
banks founded on private capital would be unconstitutional. Justice 
Story, who gave a dissenting opinion in that case, denied this position, 
and declared that the States may create banks as well as other corporations 
upon private capital, and, so far as the prohibition in the Federal Consti- 
tution is concerned, may rightfully authorize them to issue bank bills or 
notes as currency. The Constitution does not prohibit the emission of all 
bills of credit, but only the emission of bills of credit 6y a State; and when 
1 say by a State, I mean by or in behalf of a State in whatever form issued. 
It does not prohibit private persons, or private partnerships, or private 
corporations, (strictly so called,) from issuing bills of credit. 

In the case of Darrington vs. The State Bank of Alabama, (13 Howard 
B«ports, 12,) the Supreme Court of the United States decided that the bills 
of a banking corporation, which has corporate property, are not bills of 
credit within the meaning of the Constitution, although the State which 
created the bank is the only stockholder, and pledges its faith for the ulti- 
mate redemption of the bills. 

It must not be understood from anything I have said, that I am in favor 
of an expansion of the circulation of existing banks. On the contrary, I 
am opposed to it. The existing banks should be kept under close super- 
vision; and for all increase in their circulation, since they suspended 
specie payments, I am entirely willing that some policy should be 
adopted by the States or General Government to prevent them from 
inflating the currency. I am willing that a tax of two per cent, should 
be levied on all their increase of circulation since the first of January, 
1862. This would be a tax on their abuse of chartered privileges, and not 
a blow aimed at the total destruction of all banks alike, good and bad. 
What I oppose is an attempt on the part of Congress to destroy the vested 
rights of citizens, which they hold under the guarantee of State sover- 
eignty, and which are to be protected as sacredly as any other chartered 
rights or property held under State laws. Let all property be taxed as 



174 



nearly equal as possible, leaving no just cause for complaint from any 
class of citizens. 

Haying shown that the proposed national bank bill is not only unjust 
in some of its provisions, but that it will not yield any considerable 
amount of money to meet the appropriations for the current and next 
fiscal year, the other question to be considered is : 

2. Can the money be obtained by loans ? It will be recollected that 
the amount to be provided for, over and above the sums to be realized 
from duties on imports and internal revenue, exceeds the sum of $1,000,- 
000,000. This is a large sum to be borrowed in the ensuing eighteen 
months. As I have before stated, over $2,500,000 will be required every 
day, Sundays included, between this and the first day of July next. The 
receipts from postal currency, customs and taxes during that time will 
not probably exceed the sum of $600,000 per day, leaving $1,900,000 to be 
obtained daily in some form by loan. Congress, by its legislation at the 
last session, has, to a considerable extent, changed the standard of value 
for all business operations within the United States. 

The standard of value fixed by Congress is legal tender Treasury notes, 
convertible at any time into United States specie-paying bonds, bearing 
interest at the rate of six per centum per annum, payable half-yearly in 
coin, based upon adequate taxation upon the entire property of the coun- 
try. Legal tender notes constitute the national currency now established 
by law. All exchanges of property, all contracts, and all loans, are based 
upon the value of legal tender notes and United States six per cent, 
bonds. The law of Congress declares that these notes shall be lawful 
money^ and a legal tender in payment of all debts, public and private. 

The Secretary states in his Annual Report that previous to the first of 
November, 1862, 'the coin had been practically demonetized and with- 
drawn from use as currency, or as a basis for currency.' * » • • 
* That on the suspension of specie payments, and the substitution for coin 
of United States notes, convertible into six per cent, specie-paying bonds, 
as the legal standard of value, gold became an article of merchandise, 
subject to the ordinary fluctuations of supply and demand, and to the 
extraordinary fluctuations of mere speculation.' 

Gold does not circulate at all as currency, and there is no probability 
that it will circulate as money for several years to come — certainly not 
during the progress of this gigantic war to put down the rebellion. This 
is to be regretted, but it cannot be avoided. We have the monster rebel- 
lion by the ears, like the backwoodsman who held the ferocious wolf— if 
we let go, he will destroy us ; we must therefore hold on till we subdue 
him. No compromise can be made. The rebels will not negotiate on 
any basis except that of separation and an acknowledgment of their inde- 
pendence. The war, therefore, must go on. While the war lasts the 
magnitude of the expenses will be so great that there is not coin enough 
in the country to carry it on with gold and silver. It cannot be obtained. 
We must try to mitigate, as far as we can, the evils growing out of the 
necessity of making legal tender notes the standard of value. 

You comnot dispose of your twenty years six per cent, bonds for gold without 
submiUing to a loss of over thirty cents on every dollar; in other words, for every 
dollar of bonds issued you can only get seventy cents %n gold. Even %f you shruld 
be wHling to submit to this sacrifice, it is not at all probable that you could nego- 
tiaie $25,000,000 of bonds for gold before you would be obliged to submit to a sac- 
rifice of fifty cents on every dollar sold. Not because your bonds are not good, 



175 



dollar for dollar, as gold, but because the whole amount of gold in the 
country that could be had for circulation does not probably exceed $250,- 
000,000. Not a suflBcient sum to carry on the immense operations of the 
people and the Government at this time, even if it could all be brought 
out and put into circulation— a thing wholly impracticable at this time. 
No one at all acquainted with monetary affairs believes that we can make 
sale of any considerable amount of our six per cent, bonds at over fifty 
cents on the dollar for gold— a sacrifice too great for this House to 
seriously consider, if any other mode can be devised which is practicable. 
It is believed to be practically impossible to negotiate your bonds for gold 
without too great a sacrifice. If you cannot negotiate loans for gold, will 
it be wise to change the independent Treasury law so as to allow loans to 
be negotiated for notes of suspended banks ? There was a general suspen- 
sion of specie payments by the banks and the Government on the 31st of 
December, 1861. In February following. Congress passed the law for the 
issue of legal tender notes, and authorized the Secretary to make loans, 
and receive these notes in payment ; but the Government has not deemed 
it best to take suspended bank notes in payment for loans or any other 
dues to the Government. I do not think it wise to adopt that policy at 
this time. The question then arises, can you sell bonds enough every day 
and get your pay for them in legal tender notes ali'eady issued ? It is per- 
fectly apparent to all who are acquainted with the money market that this 
cannot be done. Currency has been scarce all the time for the last eight 
months, an is now very diflScult to be obtained in sufllcient quantity to 
meet the business wants of the country. In many places through the 
interior of the States, bankers and business men have been obliged to pay 
as high as one-quarter and one-half per cent, premium to get currency 
(bank bills and greenbacks) to carry on ordinary business operations. 

It is well known that all the New England and New York country 
banks redeem their bills now at the Suffolk Bank, Boston, and the Metro- 
politan Bank, New York, precisely as they did before the suspension of 
specie payments. This system checks any tendency to over issue, and is 
a touchstone by which to test daily the demand for bank bills. If they 
are not needed for legitimate business, they flow in rapidly to the redeem- 
ing banks, but if they are wanted they stay out. This test is unerring. 
The daily redemptions, for months past, have not been half what they 
were when the volume of bank circulation was less by a third than it is at 
this time. What causes this scarcity of currency ? In the first place, as 
before stated, gold and silver no longer circulate as currency within the 
United States. Gold is only required to settle foreign balances, pay 
custom duties and interest on the public debt. It is bought and sold for 
these purposes as a commodity, but it does not circulate as money in 
ordinary business operations. Its place is supplied by bank bills and legal 
tender notes. In the next place, the large increase of business suddenly created 
by [such a gigantic war as we are now prosecuting, has largely increased the 
demand for a larger volume of currency than was ever required before. 

There has been a large demand for currency in the western States to 
purchase and bring forward the immense crops that have been produced 
during the last two years. The winding up of a large number of badly 
organized and badly managed banks in those States left a large vacuum to 
be filled by bills of solvent banks and legal tender notes. The Govern- 
ment has been buying largely, in all parts of the country, food, clothing, 
and all munitions of war, beside the large sums required for pay and 



1 



176 

bounty money of the volunteer soldiers that have gone forth fh>m all the 
States. No doubt considerable amounts of this money still remain in the 
hands of the soldiers themselves and their families, practically withdrawn 
from circulation for the time being. Fifty, one hundred, and as high, 
even, as two hundred dollars, were paid for volunteers to fill up the two 
last calls made by the President. Fifty dollars paid to each soldier, to 
the number of six hundred thousand, would require $30,000,000 to say 
nothing of the amounts required for the army previously sent into the 
field. It is perfectly plain where the currency has gone during the past 
six months. The cperoUions of the army and navy alone have required in aU 
forms, ru>t Um than $200,000,000 in hank biUa and legal tender notes. His no 
wonder that currency has been scarce in all the ordinary channds of trade and 
business. It is still very scarce and difficult to be obtained for ordinary 
business purposes in New York and all the western States. I am assured 
by bankers and the best financiers in New York, that if the Secretary 
should put on the market a proposal for a loan of $50,000,000 it could not 
be taken, for the reason that the legal tender notes could not be obtained 
in sufficient quantity to pay for a loan of that amount. It is doubtful 
whether a loan of $15,000,000 could be taken at this time for the want of 
currency to pay for it. 

It is also very difficult for the collectors of internal revenue to make col- 
lections on account of the scarcity of legal tender notes. Legal tender 
notes are not plenty among the people who are required to pay your taxes ; 
they are continually asking for more. Why, then, should we be alarmed 
at a further issue of legal tender ndtes ? So long as they are wanted by 
the business of the country, demanded by the soldiers for their pay, 
begged for by all the needy creditors of the Government, surely Congfress 
ought not to hesitate in an exigency like the present. 

It is no time now to depress business operations, or hold back the pay 
due to honest creditors of the Government. It is much better to stimulate, 
make money plenty, make it easy for people to pay their taxes, and easy 
for Government to make loans. This is the only way in which we can go 
on in the present imperiled condition of the country. 

During the last war with Great Britain, Jefferson, in letters written 
during that period, repeatedly urged upon the Government the propriety 
of issuing Treasury notes of convenient denominations to circulate as 
money. In his letters to John "W. Eppes, chairman of the Finance Com- 
mittee, under dates of June 24 and September 11, 1813, he urged upon 
Congress the importance of issuing Treasury notes whenever loans could 
not be made upon satisfactory terms. In one of his letters, bearing date 
October 15, 1814, he says : * I never did believe you could have gone beyond 
a first and second loan— not from want of confidence in the public faith, 
which is perfectly sound, but from a want of disposable funds in individ- 
uals. The circulating fund is the only one we can command with cer- 
tainty. It is sufficient for all our wants ; and the impossibility of defending 
the country without its aid as a borrowing fund renders it indispensable 
that the nation should take and keep it in their own hands.' He admitted 
that the issue of Treasury notes would banish gold and silver from circu- 
lation, and in another letter adds : ' In such a nation there is one and only 
one resource for loans, sufficient to carry them through the expenses of 
a war ; and that will always be sufficient, and in the power of an honest 
Government, punctual in the preservation of its faith. The fund I mean 
is the mass of circulating coin. Every one knows that, although not liter- 



177 

ally, it is true that every paper dollar emitted banishes a silver one from 
circulation. A nation, therefore, making its purchases and payments with 
bills fitted for circulation, thrusts an equal sum of coin out of circulation. 
This is equivalent to borrowing that sum ; and yet, the vendor receiving 
payment in a medium as eflFectual as coin for his purchases or payments, 
has no claim to interest. And so the nation may continue to issue its bills 
as far as its wants require, and thp limits of the circulation will admit.' 

So it will be seen that Jeflferson, so far from regarding it as an evil that 
coin should be banished from circulation during war, regarded it as a 
great advantage ; because the Government would then be able to circu- 
late its own notes, without interest, in place of the coin of individuals. 
Treasury notes issued by the Government, he regarded as a loan from the 
people, without interest, and the only available resource in time of war. 

He urged ample taxation as a basis for Government paper issue, and 
adds : * That during the interval between war and war, all the outstanding 
pax>er should be called in, coin be permitted to flow in again, and hold the 
field of circulation until another war should require its yielding place again 
to the national medium.' An essential feature of the financial plan adopted 
last year was the passage of the tariff* and internal revenue laws. It was 
of great consequence that our public debt should rest upon a solid founda- 
tion. The property of the country, liable to taxation, amounted in 1860 
to over $16,000,000,000, and Congress having ample power to tax it to the 
full amount necessary to pay all Government debts, it was agreed by all 
parties that it was necessary to impose taxes upon this property, and the 
profits of business based thereon, in various forms, for an amount sufficient 
to pay the ordinary expenses of the Government on a peace footing, and 
all the interest on the extraordinary war debt. The ordinary expenses of 
the Government in time of peace do not exceed $75,000,000, and the inter- 
est on the war debt will not probably exceed during the next year the 
sum of $45,000,000, while it is believed that the revenues derived from the 
tariff" and internal revenue will not be less than $200,000,000, leaving $80,- 
000,000 as a sinking fund to keep down the war debt. It is believed that 
the revenue realized on the present tariff and tax law will pay ordinary 
current expenses of the Government, and interest on the war debt when 
it reaches $2,000,000,000, which is only half the present debt of Great 
Sritain. * * * 

Upon a full examination of the whole subject, and with a deep solicitude 
for the success of the measures that may be finally adopted by Congress, 
I see no way in which the ways and means can be obtained to carry on 
the Government for the next eighteen months, except by a continuance 
of the measures adopted at the last session, and which have so successfully 
carried us through the perils of the last year, with such additions and 
modifications as experience has shown to be necessary. 

An additional section has been proposed to the financial plan adopted 
last year. There is a large amount of available means in the country, 
which, if it can be drawn into the national Treasury, will be of most 
essential service at this time. It has been the subject of much considera- 
tion as to the best form in which it could be offered to the people to induce 
them to let the Government have the money for which they have no 
present use, and be allowed a fair compensation for its use during the 
time it is borrowed by the Government. Interest bearing Treasury notes 
are believed to be the best form in which it can be offered to the public. 



178 



INT£B£ST-B£ARma TREASURY NOTES 

Under the operation of this new eection, these interest-bearing Treasury 
notes and the legal tender notes would be convertible and reconvertible 
into each other at the will of the holder ; and as both can be paid out to 
the creditors of the Government, they will soon find their way into all the 
channels of business in all parts of the country. The interest-bearing 
notes will be laid aside, out of circulation, better than gold as an invest- 
ment, because yielding a fair rate of interest; while the legal tender notes 
will continue to circulate as money. The object of this section is to reach 
the money invested in temporary loans, in all the cities, villages and towns 
throughout the country, and apply it to sustain the Government at this 
time. A large amount of money is now held by individuals and corpora- 
tions, bearing a small rate of interest, or no interest at all, which 
is on deposit in banks or in private safes and drawers, waiting a 
good opportunity for permanent investment in the purchase of stocks, 
mortgages, or other property. Forehanded farmers, mechanics, man- 
ufacturers, merchants, and even retired capitalists would like some 
convenient mode of investing their surplus means at fair rates of inter- 
est, and with a certainty that when a good opportunity is presented 
to make some business transaction they can have legal tender notes 
returned to them to use as money. Notes issued at six per cent, 
interest, and in denominations of $20, $50, $100, $200, $500, $1,000, $2,000 
and $5,000 would be in a convenient form for all classes; and at this rate 
of interest there is no doubt that large amounts would be drawn into the 
Treasury. Savings banks, trust companies, and other places of deposit, 
now overburdened with money, would, no doubt, have drawn from them 
considerable amounts for investment in these interest-bearing notes. 
Guardians, executors, and trustees would -largely invest their money in 
these Government securities. Insurance companies might invest in them, 
get six per cent, interest, and be sure,' in cases of loss, to get legal tender 
notes with which to pay their outstanding policies. Even savings banks 
and trust companies might invest a part of their funds in these notes, and 
be able to respond when their depositors should call for their money. 
The operations under this section would be like deposits in banks, and it 
is very probable that $300,000,000 might be reached in a reasonable time. 
It would be, in fact, a national savings bank, so arranged that its benefits 
can be extended to all, while, at the same time, the Government would 
be able to realize a large amount of money to aid in the prosecution of 
the war. Some would draw out their funds from time to time, as occa- 
sions should arise for business operations, while others again would invest 
in new notes issued under the authority to re-issue them ; and the average 
amount in the Treasury would be about the same from week to week. 
The average deposits in the banks in the city of K'ew York are about the 
same. Their weekly published statements show that there is no great 
variation in the amount for weeks and months. * # ^ # 

I was in favor of giving to them the highest legal sanction and the most 
desirable character possible, within the power of the Government, not 
above six per cent, interest, in order to prevent their depreciation. It 
would have cost so little to have given them this most desirable character 
of immediate convertibility, that I strongly urged its adoption, and upon 
the same principle that I urged the legal tender clause last year. The 
more desirable the notes are as an investment, the longer they would stay- 
out, and the higher would be their price in the market. I trust, however, 



179 



that, in their present shape, they will he sought after, and he a yaluahle 
aid io the people in the payment of internal revenue, and materially assist 
the Secretary in the arduous duties of furnishing the means for a vigorous 
prosecution of the war. 

In nearly oR the plans that have been SKhmiUed to the commiUee for providing 
mtans to carry on the Government for the next eighteen months^ it has been pro-^ 
posed to issue more legal tender notes, if the exigencies of the service shall render 
a further issue necessary. The Secretary of the Treasury, in suhmitting the 
hill proposed hy him for a loan of $900,000,000, says : * The committee will 
observe that the provision in respect to loans is very general. Under it 
the Secretary will have the power to borrow money in any of the ordinary 
forms, or, if exigencies require, to make additional issues of United States 
notes.' I have an aversion to any considerable further issue of legal ten- 
der notes, and can only consent to it as an imperative necessity. I thinjc 
too large an issue will tend to inflate prices ; but I do not see how it can 
be avoided. I do not see how the soldiers are to be paid, or how the Gov- 
ernment can be carried on, in any other way. I shall therefore vote for 
this provision, in connection with the other provisions of the bill, as a 
necessary measure to enable the Government to prosecute the war. 

OUR ONLY HOPE OP RESTORING THE UNION IS IN MILITARY SUCCESS. 

Sir, since the first gun was fired on Fort Sumter, my conviction has 
been deep and abiding that this was to be a long, expensive,* bloody,' 
and desperate conflict; and that it would be very diflacult to determine in 
advance what results would flow from such a deadly encounter. I have 
never for a moment doubted that the leading conspirators meant to estab- 
lish and maintain a separate government, and a total separation from the 
free States. This has been their deliberate purpose from the beginning. 
Nearly two years of concerted action, embittered by the most deadly con- 
flict with the armed power of this Government, has consolidated their 
strength. They have organized a form of civil government, under a 
constitution, with Jefferson Davis as President for six years, who is sur- 
rounded by a cabinet, congress, judiciary, and all other officers necessary 
to keep it in full operation. This rebel government has organized and 
maintained a powerful army, which has been able thus far to successfully 
repulse every attempt that has been made on our part to take their capitol, 
distant only one hundred and twenty-five miles from the Hall in wliich 
we are now sitting. 

Sir, I never believed, and do not now believe, that the cabal at Kich- 
mond, the only responsible power to which overtures of peace can bo ' 
made, will listen to any offers of coinpromise, however liberal, which will 
induce them to throw up their present de facto government, come back 
into the Union, and submit to the constitutional Government over which 
Abraham Lincoln presides, or any other President that can be elected by 
the loyal people of the United States. Jefferson Davis and all the high 
officers about him are men of high political aspirations. Inordinate ambi- 
tion, and a desire to rule, were the chief motives that prompted them to 
rebel against the Constitution and Government they had sworn to support. 
Those who suppose that Mr. Davis and his co-conspirators will voluntarily 
negotiate to surrender the power they now hold, have but little apprecia- 
tion of the motives that stimulate them to so desperate ^nd determined 
action. These desperate men are in earnest, and will fight to the death. 
They are men of ability, fighting for power, for empire, and will neither 
compromise nor surrender unless they are compelled to do so at the point 



180 



6f the bayonet, pressed forward by an overwhelming and crushing force. 
They must be whipped, badly whipped, before they will compromise or 
i^rrender. Any expectation to the contrary is not only fallacious, but 
mischievous in its consequences, because it divides and weakens the people 
in the loyal States, and prolongs the war. 

Sir, I have no expectation that this rebellion will be crushed in many 
yiBars unless there is a more united and a more determined effort on the 
part of the people in the northern States. The great fact to be ascertained 
by all doubting men is will Jefferson Davis compromise on any terms 
short of a separation ? Will he voluntarily surrender the power he now 
holds ? Will he receive any proposal for peace except on the terms of 
dividing the old Union, and a recognition of his government over the 
southern half. For myself, I have no desire to compromise, and no pro- 
posals to mal^e to Mr. Davis or any of his cabinet; but those who do wish 
, to make peace with the rebel government ought to submit their proposi- 
tions at once, so that all compromisers may know what to do. If no com- 
promise can be made with the rebel government, short of dissolving the 
Union, it should be known at the earliest moment possible, so that all 
doubters and cavilers may decide immediately what they will do. The 
daily expenses of the war are enormous. The public debt is running up 
at a fearful rate. This war ought not to be procrastinated a day longer 
by divisions at home. This state of things cannot be continued for any 
considerable length of time, without entailing a public debt so large that 
it will burden present and future generations. The best blood of the 
nation flows freely. Large numbers are killed in battle, but more die 
from exposure and disease than in any other way. 

Sir, all this blood and treasure is given freely to crush the rebellion and 
maintain the Union. Why have we not been more successful? It is 
because we need more earnestness^ greater determination manifested, 
better discipline in the army, and a closer unity of action. Unless these 
essential requisites can be had, and that speedily, I have very little hope 
of crushing the rebellion. The way to secure a permanent peace is, first 
of all, to annihilate the rebel forces. The army between Washington and 
Richmond must be beaten. The power of the rebel government is in 
their army. If they can maintain their military strength, their govern- 
ment will be perpetuated. If we cannot achieve decisive victories over 
the rebel forces, the Union is lost. The Union is priceless ; it ought to be 
maintained, and it will be maintained if all citizens rise above party and 
perform their whole duty to the country. The people, our conmianding 
generals, Congress, and the Executive, ought all, without regard to party 
distinctions, to rouse up to the magnitude and perils of the crisis, and by 
unity of action put forth an earnest and determined effort to crush the rebel 
armies. No compromise can be made or ought to be made. Our only 
hope Is In military success. This Is the only way In which we can main- 
tain our finances, and restore the national Union. 

$100,000,000 LEGAL TENDER NOTES REQUIRED TO PAY THE ARMY 

AND NAVY. 

There was a large amount due to the army and navy, and com- 
plaints were being made in consequence of the delay in making 
payments. The subject was discussed by the Military Commit- 
tees of the Senate and House. A resolution passed the House as . 
follows: 



181 



, ."Whereas, Grevious delays happen in the payment of money. <^^e 
soldiers; therefore, in order to ascertain if any, and what, legislation 
may be necessary to remedy such delays, 

Resolved, That the Secretary of the Treasury be requested to furnish to 
this House the reasons why requisitions of paymasters in the army are 
not promptly filled. " 

The Secretary made answer as follows : 

•* No one can feel a deeper regret than the Secretary that a single Amer- 
ican soldier lacks a single dollar of Ids pay, and no effort of his has been 
wanting to prevent such a condition. It is not in his power, however, to 
arrest the accumulation of demands upon the Treasury beyond the pos- 
sibility of provision for them under existing legislation.^'* * * * ;* 
**The Secretary, solicitous to regulate his action by the spirit as well as 
the letter of the legislation of Congress, did not consider himself at 
liberty to make sales of the 5-20 bonds below the market value ; and sales 
except below were impracticable." 

SPEECH OF MR. QURLET. 

Mr. GuRLEY, of Ohio, spoke of the great importance of our 

financial measures. 

"The Government which can raise the largest amount of money must, 
in the end, triumph ; that a large army was essential to success, but the 
most essential thing was money or money means. He did not agree w:ith 
the Secretary in several things contained in his reports; the banking 
scheme, which the Secretary admits would not afford any immediate reliefy 
should be rejected ; we need a sensible, practicable plan that will furnish 
immediate means to pay the army and navy. He insisted that Congress, 
by the act of February 25, 1862, authorized the Secretary to sell $500,000,- 
000 six per cent. 5-20 bonds at *the market value thereof,' which he had 
not done, as intended hy Congress, and the consequence was that the soldiers 
and sailors were not paid, as they ought to have been before this time. 
Of course we do not caU in question the motives of the Secretary, or deny 
his good intentions, but when the Secretary says, in his reply to the reso- 
lution of the House, that he had no authority, he was evidently mistaken 
in his construction of the law. The words * market value ' do not mean 
par value, nor at any specified time or sum. The market value was the 
price they would bring when offered in the market. There has been no busi- 
ness day or week since the law was passed, when any of the many agents 
of the Secretary in New York could not have placed one million, or 
several millions, in the market, and sold them somewhere near par, to 
raise money to pay the army and navy." 

A joint resolution was proposed that provision ought to be 
made immediately by the Treasury Department to pay the sums 
due the soldiers and sailors, and that a preference should be 
given to this class of creditors. Secretary Chase was consulted 
on the subject, and in a letter dated January V, 1863, addressed 
to the Finance Committee, he stated that the amount then due 
to the army and navy was about $60,000,000, and that provision 
ought to be made for immediate payment. He thought the tem- 



182 



porary measure proposed might answer for present purposes, and 
concluded his letter as follows : 

**It should be regarded, however, only as an expedient for an emergency. 
No measure, in my judgmenl, will m eet (lie necessities of the occasion, and prove 
adequoUe to the provision of the great siim^ required for the suppression of the 
rebellion, which does not include a firm support to public credil through the estaJb- 
lishm^ of a uniform national circulation, secured by bonds of the United 
States, The joint resolution and amendment are herewith returned. 
With great respect, votirs, etc., 

S. P. CHASE, 
Secretary of the Treasury. 

Hon. William P. Fessenden, 

Chairman Com. on Finance, U. S. Senate.'* 

After some disagreement between the Finance Committee of 
the Senate and the Committee of Ways and Means of the House 
as to the right of the Senate to initiate a bill of this kind, a joint 
resolution was passed by tlie House and concurred in by the Sen- 
ate, by yeas 38, nays 2; as follows: 

Yeas — Messrs. Anthony, Arnold, Browning, Chandler, Clark, 
Collamer, Davis, Dixon, Doolittlc, Fessenden, Foot, Foster, 
Hale, Harding, Harlan, Harris, Henderson, Howard, Howe, King, 
Lane (of Indiana), Lane (of Kansas), Latham, McDougall, Mor- 
rill, Nesmith, Rice, Sherman, Sumner, Ten Ej'ck, Trumbull, 
Wade, Wilkinson, Willey, Wilmot, Wilson (of Massachusettis), 
Wilson (of Missouri) and Wright — 38. 

Naj's — Messrs. Powell and Saulsbury — '2. 

So the joint resolution was passed, and is as follows: 

[Public REsoLrTioN— Xo. 4.] 
Joint Resolution to provide for the immediate ^;ay;«eH/ of the army and 
' navy of the United States. 

Whereas, It is deemed expedient to make immediate provision for the 
payment of the army and navy ; therefore 

Be it resolved by the Senate and House of Beiyresentatives of the United 
States of America, in Congress assemhled^, That the Secretary of the Treas- 
ury be, and he is hereby authorized, if required by the exigencies of the 
public service, to issue on the credit of the United States the sum of one 
hundred millions of dollars of United States notes, in such form as he 
may deem expedient, not bearing interest, payable to bearer on demand, 
and of such denominations, not less than one dollar, as he may prescribe, 
"Which notes so issued shall be lawful money and a legal tender, like the 
similar notes heretofore authorized, in payment of all debts, public and 
private, within the United States, except for duties on imports and inter- 
est on the public debt ; and the notes so issued shall be part of the amount 
^provided for in any bill now pending for the issue of Treasury notes, or 
that may be passed hereafter by this Congress. 

Approved January 17, 1863." 



183 



MESSAGE OF PRESIDENT LINCOLN. 

The^Speaker laid before the House the following message, in 
writing, from the President of the United States : 

** To the Senate and House of Eepreseniaiives : 

I have signed the joint resolution to provide for the immediate payment 
of the army and navy of the United States, passed by the House of Repre- 
sentatives on the 14th, and by the Senate on the 15th inst. 

The joint resolution is a simple authority, amounting, however, under 
existing circumstances, to a direction to the Secretary of the Treasury to 
make an additional issue of $100,000,000 in United States notes, if so much 
money is needed, for the payment of the army and navy. 

My approval is given in order that every possible fkcility may be 
afforded for the prompt discharge of all arrears of pay due to our soldiers 
and our sailors. 

While giving this approval, however, 1 think it my duty to express my 
sincere regret that it has been found necessary to authorize so large an 
additional issue of United States notes, when this circulation and that of 
the suspended banks together have become already so redundant as to 
increase prices beyond real values, thereby augmenting the cost of living 
to the injury of labor, and the cost of supplies to the injury of the whole 
country. 

It seems very plain that continued issues of United States notes, without 
any check to the issues of suspended banks, and without adequate provis- 
ion for the raising of money by loans, and for funding the issues so as to 
keep them within due limits, must soon produce disastrous consequences. 
And this matter appears to me so important that I feel bound to avail 
myse^* of this occasion to ask the special attention of Congress to it. 

That Congress has power to regulate the currency of the country can hardly 
admit of a doubt; and that a judicious measure to prevent the deterioration 
of this currency by a reasonable taxation of bank circulation, or otherwise, 
is needed, seems equally clear. Independently of this general considera- 
tion, it would be unjust to the people at large to exempt banks, enjoying 
the special privilege of circulation, from their just proportion of the public 
burdens. 

In order to raise money by loans most easily and cheaply, it is clearly 
necessary to give every possible support to the public credit. To that 
end a uniform currency, in which taxes, subscriptions and loans, and all 
other ordinary public dues, as well as all private dues may be paid, is 
almost, if not quite, indispensable. Such a currency can be furnished by 
banking associations, organized under a general act of Congress, as sug- 
gested in my message at the beginning of the present session. The 
security of this circulation, by the pledge of United States bonds, as 
therein suggested, would still further facilitate loans by increasing the 
present and causing a future demand for such bonds. 

In view of the actual financial embarrassments of the Government, and 
of the greater embarrassments sure to come, if the necessary means of 
relief be not afforded, I feel that I sliould not perform my duty by a simple 
announcement of my approval of the joint resolution, which proposes 
relief only by increasing circulation, without expressing my earnest desire 
that measures, such in substance as those I have just referred to, may 
receive the early sanction of Congress. By such measures, in my opinion, 
will payment l)c most certainly secured, not only to the army and navy, 



184 



but to all honest creditors of the^Government, and satisfactory provision 
made for future demands on the Treasury. 
January 17, 1863. ABRAHAM LINCOLN." 

SPEECH OF HK. MORRILL. 

*^ Mr. Morrill, of Vermont, said we had often been called upon during 
this Congress to Aimish means to carry on the war. The figures now are 
larger than ever before, being $900,000,000, and if the war should be pro- 
longed to July 1, 1864, it is believed not to be too much. He was con- 
strained now to give his vote for this measure, although such as in the 
outset he did not supi)ort, and never should have countenanced as an 
original proposition, because he knew of no other so efficient for imme- 
diate relief to the Treasury, and so safe to adopt. He should hold his 
opi)osition to legal tender in abeyance, so far as to allow money for the 
army and navy to be raised in this way, if it could be raised in no other. 
He was willing to restrain excessive issues of State Bank circulation by a 
proper tax, but did not think it best at this time to engage in a struggle 
for its extinction. 

He was opposed to the national hank hiU which he said was urged with 
great zeal and ability by the Secretary of the Treasury, and gave his 
reasons at length why, in his opinion, it ought not to pass. The new 
plan, fully executed, would obtain very little if any more aid from the 
banks than is already secured, and the Treasury at last, would find itself 
in actual possession of no more than a new dollar for an old one. The 
Secretary admits in his anrnud report thai HUtle direct aid is^ however^ to he 
expected from this plan daring the present^ nor very much^ perhaps, during the 
next year,'' '* 

MR. ward's speech. 

Mr. Ward, of New York, made an elaborate speech on the 
Finances and the currency. 

*'The condition of our financial affairs and the regulation of the circula- 
ting medium are regarded with much anxiety by the people of this coun- 
try, from motives of their own personal interest, and yet more from 
patriotic devotion to the cause of unity in our great struggle for national 
existence. He was desirous of supi)orting the Government of his country 
in a vigorous prosecution of the war, but was opposed to the legal tender 
piinciple and voted against it. My earnest desire is, and always has been, 
to furnish the Government with every resource and power necessary to 
the suppression of the rebellion. From my solicitude for the re-establish- 
ment of the Republic, I desire to avert any increase of such paper money, 
as is now in use, knowing how injuriously it affects public confidence, 
enlarges expenditures by raising prices, lulls the public mind into false 
security, and lessens the vigilance which prevents frauds. He expressed 
himself in favor of a commission composed of the most wise and dis- 
tinguished bankers and commercial men in co-operation with the Secretary 
to inquire into the best method of arranging our financial affairs.^^ 

SPEECH OF MR. WALKER. 

Mr. Amasa Walker, of Massachusetts, made a well considered 
speech in favor of the general provisions of the bill. 
*^He maintained that the vast expenditures involved in the prosecution 



185 



of the war could not be raised except upon the credit of the Government 
No ordinary means of raising revenue were sufficient to meet a great 
emergency like the present. The bill before us proposes measures of 
finance, currency and taxation. 1. An issue of bonds. 2. An issue of 
interest-bearing circulating notes, receivable for all Government dues, 
except customs. 3. An issue of legal tender notes, known in common 
parlance as greenbacks. 4. The issue of fractional parts of a dollar, to 
take the place of postal currency now in use. 5. Provides for deposits of 
bullion in the public Treasury ad libitum, 6. To tax the banks of circula- 
tion. 7. A proposition that the public flinds may be deposited in these 
same banks, at the discretion of the Secretary of the Treasury. 
" He did not approve of paying interest in coin on the bonds, it has 
already exerted a pernicious influence on the public funds. He was in 
favor of the greenback circulation, and in favor of a six per cent, tax on 
State bank circulation, in order to drive it out, so as to give place to the 
national circulation. He urged adequate taxation to sustain the public 
credit, and thought that these measures had become a stem military 
necessity, and indispensable to a successful prosecution of the war. 

On the 16th inst. Mr. Hooper offered a substitute for the bill, 
which was ordered to be printed. This substitute will be found 
printed at length in the Cong. Globe, p. 382. 

After a long discussion, in which different members of the 
House participated, a vote was taken on the 23d inst. by tellers, 
in Committee of the Whole, on Mr. Hooper's substitute — ayes 
32, noes 67; so the substitute was lost Several minor amend- 
ments were however made to the original bill, and on the 26th 
inst. a vote was taken in the House on the substitute offered by 
Mr. Stevens, and it was decided in the negative — ^yeas 37, nays 
91. The bill as amended was then passed without a division, 
and sent to the Senate for concurrence. 

On the 13th of February the bill, after being amended, passed 
the Senate by the following vote : 

Yeas — Messrs. Anthony, Arnold, Chandler, Clark, CoUamer, 
Cowan, Davis, Dixon, Doolittle, Fessenden, Foot, Foster, Grimes, 
Harlan, Harris, Henderson, Hicks, Howard, Howe, King, Lane 
(of Indiana), Lane (of Kansas), Morrill, Nesmith, Pomeroy, Rice, 
Sherman, Sumner, Ten Eyck, Wade, Wilkinson and Wilson (of 
Massachusetts) — 32. 

Nays — Messrs. Carlisle, Powell, Richardson and Wall — 4. 

So the bill was passed. 

Three several Conference Committees were appointed on the 
disagreeing votes between the two Houses. A compromise was 
finally made on the section taxing State bank circulation. All 
the amendments were finally agreed to, and the bill passed. ' 



186 



SYNOPSIS OF •900,000,000 LOAN ACT. 

**7'/i€ act to proviile. Ways and Means for the siippo^i of the Govern- 
nient. Approved March 3, isea.** 

1. The (ir«t section authorized a h)an of $300,000,000 for the 
then <*urrent year, and $600,000,000 for the then next fiscal year, 
and to issue bonds therefor at not less than ten nor more than 
forty years, at not exceeding six per cent, interest, in coin, not 
exceeding in all |;900,000,000. 

2. By section second of tlie same act the Secretary', in lieu of 
an eijual amount of said bonds, was authorized to issue $400,000,- 
000 of Treasury notes, bearing interest not exceeding six per 
cent., j)ayal)h» in hiwful money, which notes, payable at |>eriod8 
exj)ressed on tlieir face, niifjht U> made a letjal tender at their face 
value, 

3. By the third section ^15U,()0(>,(K)0 in amount of United 
States notes, made a legal tender, might be issued. The restric- 
tion in the sale of bonds to ^market value' was repealed. ^And the 
holders of United States notes issued under former acts, shall present the 
same for the purpose of exchanging them for bomb as therein provided, 
on or Infore the first of July, 1863, and thereafter the right to excJuitige 
the same shall cease and determine.^ 

7. This section imposed a tax of one per cent, each half year, 
on a graduated scale of State bank circulation, according to the 
ca]>ital stock of each bank. 

BANK BILL CASSKD. 

On the 2d February, 1863, the National Currency ]3ank bill, as 
l)repared by Mr. Spaulding, in December, 1861, after being altered 
and amended in several important particulars, was reported from 
the Finance Committee to the Senate by John Sherman of Ohio. 
The debate upon it was opened on the 9th, and continued from 
day to day until the 12th, when it was passed by the following 
vote — ^yeas 23, nays 21, as follows: 

Yeas — Messrs. Anthony, Arnold, Chandler, CUark, Doolittle, 
Fessenden, Foster, Harding, Harlan, Harris, Howard, Howe, 
Lane (of Kansas), Morrill, Nesmith, Pomeroy, Shennan, Sumner, 
Ten Eyck, Wade, Wilkinson, Wilmot, and Wilson (of Massa- 
chusetts) — 23. 

Nays — Messrs. Carlisle, CoUamer, Cowan, Davis, Dixon, Foot, 
Grimes, Henderson, Hicks, Kennedy', King, Latham, McDougal, 



I 



187 



Powell, Rice, Richardson, Saulsbury, Trumbull, Turpie, Wall and 
Wilson (of Missouri) — 21. 
So the bill was passed. 

The bill as it passed the Senate was sent to the House on the 
13th. On motion of Mr. Hooper it was ordered to be printed, 
but was not referred to the Committee of Ways and Means. It 
remained on the Speaker's table until the 19th, when it was taken 
up for consideration in the Hoyse. A motion to refer it to the 
Committee of the Whole having been defeated, Mr. Spaulding 
opened the debate in a lengthy speech in favor of the bill, which 
will be found in the Appendix. The debate continued until the 
20th, when the bill was passed without amendment by the follow- 
ing vote — ^yeas 78, nays 64, as follows: 

Yeas — Messrs. Aldrich, Alley, Ashley, Babbitt, Beaman, Bing- 
ham, Jacob B. Blair, Blake, Buffinton, Calvert, Campbell, Casey, 
^ Chamberlain, Clements, Colfax, Conway, Covode, Cutler, Davis, 
Delano, Dunn, Edgerton, Eliot, Ely, Fenton, Samuel C. Fessen- 
den, Thomas A. D. Fessenden, Fisher, Frank, Goodwin, Granger, 
Hahn, Haight, Hickman, Hooper, Hutchins, Julian, Kelley, Fran- 
cis W. Kellogg, William Kellogg, Lansing, Leary, Lovejoy, Law, 
Mclndoe, McKean, McPherson, Marston, Maynard, Moorhead, 
Anson P. Morrill, Noell, Olin, Patton, Timothy G. Phelps, Potter, 
Alexander H. Rice, John H. Rice, Sargent, Sedgwick, Segar, 
Shanks, Shellabarger, Sherman, Sloan, Spaulding, Stevens, Trim- 
ble, Trowbridge, Van Horn, Van Wyck, Verree, Wall, Wallace, 
Washburne, Albert S. White, Windom and Worcester — IS. 

Nays — Messrs. William Allen, Ancona, Baily, Baker, Baxter, 
Biddle, Cobb, Frederick A. Conkling, Roscoe Conkling, Cox, 
Cravens, Crittenden, Dawes, Edwards, English, Gooch, Grider, 
Gurley, Hall, Harding, Harrison, Holman, Horton, Johnson, 
Kerrigan, Knapp, Law, Lazear, Loomis, Mallory, May, Menzies, 
Justin S. Morrill, Morris, Nixon, Noble, Norton, Nugen, Odell, 
Pendleton, Perry, Pike, Pomeroy, Porter, Price, Robinson, James 
S. Rollins, Sheffield, Shiel, John B. Steele, William G. Steele, 
Stiles, Stratton, Benjamin F. Thomas, Francis Thomas, Vallan- 
digham, Wadsworth, Wheeler, Whaley, Chilton A. White, Wick- 
liffe, Wilson, Woodruff and Wright— 64. 
^ the bill was passed and approved by President Lincoln, 



No National Bank currency was issued until about the first of 
January, 1864. After that time it was gradually issued. On the 





188 



first of July, 1864, the sum of $25,825,696 had been issued; and 
on the 22d of April, 1865, shortly after the surrender of Greneral 
Lee, the whole amount of National Bank circulation issued to that 
time, was only $146,927,975. It will therefore be seen that com- 
paratively little direct aid was realized from this currency until 
after the close of the war. AU the channels of circulation toere wdl 
filled up with the greenbojck notes, cxmpound interest notes, and certifi- 
cates of indebtedness, to the amounf, of over $700,000,000, before the 
National Bank act got fairly into operation^ This Bank issue was in 
fact an additional inflation of the currency, 

THE RIGHT TO CONVERT NOTES INTO BONDS ABROGATED. 

The first legal tender notes were issued bearing date March 10, 
1862, and on the back of them was printed these words: 

"This note is a legal tender for all debts, public and private, except 
duties on imports and interest on the public debt, and is exchangeable for 
XL S, six per cent, bonds, redeemable at the pleasure of the United States after 
five years.-'* 

The right to exchange these notes at par for six per cent bonds 
was distinctly authorized by the second section of the legal ten- 
der act, and was in the nature of a contract made by the Govern- 
ment with the holders of the notes. It was inserted as a just 
and equitable provision for the benefit of those persons who 
should be compelled, by the legal tender clause, to take the notes, 
by giving them, at any time, the privilege of converting them 
into a six per cent. bond. It was, in effect, a forced loan, but 
the right of immediately returning them to the Government for 
gold bonds, divested the forced character of the transaction of 
any material hardship. It also had a tendency to prevent any 
great inflation, for the reason'that as soon as this currency became 
redundant in the hands of the people, and not bearing interest, 
they would invest it in the six per cent bonds to prevent any loss 
of interest 

This right to exchange the notes for bonds was, at the request 
of Secretary Chase, taken away by the third section of the above 
act after July 1, 1863. It is true that the Secretary had still the 
discretionary power to receive the notes at par for bonds, but it 
never seemed to be quite right to change the law while any of 
the legal tender notes were outstanding with the above endorse- 
ment upon them. 

After passing the $900,000,000 loan act and the national cur- 
rency bank bill, authorizing $800,000,000 of national currency, 



i89 



Congress adjourned on the 4th of March, 1863, leaving the Secre- 
tary of the Treasury clothed with most extraordinary discretion- 
ary power to carry on the financial affairs of the Govenament, 

In April and May it became apparent that the paper currency 
was sufficiently expanded to enable the Secretary to float the 6-20 
bonds authorized, to the amount of $600,000,000, by the first 
legal tender act, which, up to that time, had been taken only to 
a very limited amount 

Jay Cookk, an enterprising banker at Philadelphia, was em- 
ployed as General Agent by Secretary Chase to negotiate these 
bonds. He advertised very extensively, and employed sub- 
agents in all the principal cities and towns in all the loyal States. 
The editors of newspapers and others were enlisted to bring the 
advantages and importance of this loan before the people, in order 
to make it a great popular loan, to be taken by them in large and 
small sums in all the loyal States. Mr. Cooke succeeded admir- 
ably in this undertaking. The loan became very popular, and 
was tak^n extensively by farmers, mechanics and laboring people 
in all the towns, villages and cities all over the country. By the 
first of July, 1863, the amount of $168,880,250 of these bonds 
were taken; and by the first of October' following $278,611,600 
had been taken up; and by the 21st of January following the 
whole sum of $500,000,000 had been taken at par, and the rush 
was so great near the closing out of the loan, that nearly $11,- 
000,000 extra had been subscribed and paid for before notice 
could be given to sub-agents that the amount authorized by that 
act had been taken up. Congress, however, soon after authorized 
this extra sum to be issued. 

This successful funding of 5-20 six per cent bonds showed 
conclusively that it was not necessary to inflate the cm^ency any 
further in order to raise the means to successfully prosecute the 
war. The six per cent bonds would furnish sufficient inducement 
for people to take them at the rate of from $1,600,000 to $2,000,- 
000 a day, which was about the amount required to pay the daily 
expenses of the Government. It looked as if the limit of paper 
money expansion had been reached ; that the greenback currency 
would not further depreciate below the standard of gold : and 
that the price of commodities would not continue to advance. 

MISTA&E OP THE TREASURY DEPARTMENT. 

The policy of funding into six per cent, bonds, which had been 
successful during the last eight months, was changed to five per 



190 



cent 10-40 bonds, which proved unsuccessful, and f\inding to any 
considerable extent was arrested for several months. The people 
were not satisfied with this change made by the Secretary in the 
rate of interest The loan became unpopular, and only $73,337,- 
750 was taken between the 21st of January, 1864, and the 1st of 
July following, more than five months, and this sum was taken 
mostly by bankers, because the five per cent bonds could be used 
in the organization of national banks. The Secretary had the 
discretionary power, under the $900,000,000 loan act, to continue 
the funding at six per cent , but he desired to lower the rate of 
interest, and believed that he could successfully negotiate the five 
per cent bonds, which proved to be a mistake. 

Congress passed an act supplementary to the $900,000,000 loan 
act, giving still further discretionary power to the Secretary. This 
act was approved March 3, 1864, and is the law under which the 
10-40 five per cent, bonds above mentioned were issued. It 
authorized the Secretary to issue bonds not exceeding $200,000,- 
000, bearing date March 1, 1864, or any subsequent date, redeem- 
able at the pleasure of the Government after any period not less 
than five years, and payable at any period not more than forty 
years from date in coin, bearing interest not exceeding six per cent 
per annum, payable on bonds not over $100, annually, and on all 
other bonds semi-annually, in coin. 

IMPOLICY AT THIS TIME OF THE 10-40 BONDS — TWO LETTERS BY 
E. G. SPAULDINO ON THIS SUBJECT. 

Buffalo, March 19, 1864. 
To Morris Kstchum^ Usq,, Banker, New York: 

Dear Sir— When I met you in New York in December last, you 
expressed the apprehension that the rate of interest on government securi- 
ties would be reduced to five per cent. ; that there would be a further 
inflation of the currency ; and , consequently, that gold would advance, 
and the price of labor and commodities would be greatly increased. The 
apprehensions which you then expressed are now being realized, and the 
government and people are alike feeling its evil effects. By reducing the 
rate of interest from six to five per cent, on bonds and notes issued to 
redeem greenback currency printed and paid out by the government, one 
per cent, interest is apparently saved to the government on its notes and 
bonds, but all the flour, beef, pork, and other supplies for the army and 
navy have advanced ten to fifteen per cent., thereby making it necessary 
for the government to pay ten to fifteen per cent, more for aU supplies 
purchased, while it saves only one per cent, on its notes and bonds. 

Five per cent, bonds, running from five to twenty years, can, no doubt, 
be floated on the market nominally at par, if the currency is sufliciently 
diluted and the volume increased large enough for that purpose ; and so 
may four per cent, bonds be carried on the surface, if the currency is 



191 



printed and paid out in such a large volume as to still further dilute the 
government paper already afloat. But if this should be successfully car- 
ried out, and four per cent, bonds be negotiated at par in consequence of a 
further expansion of the currency, gold would advance to 90 or 100 per 
cent., and all commodities for the army and navy would advance in the 
same proportion. What would be saved in the rate of interest would be 
lost fourfold on the enhanced price of all supplies purchased to carry 
on the war. 

Five per cent, interest, payable in currency, which has been the rate 
since the twenty-first of January last, for redeeming legal tender notes, is 
a most exhilarating atmosphere to be reveled in by speculators and job- 
bers, but very unsatisfactory to men of steady purposes, who are engaged 
in manufactures, commerce, and other legitimate pursuits. With such a 
money market, all articles consumed by laborers advance in price, rents 
increase, skilled laborers and common laborers combine and strike for 
higher wages, in order tQ be able to pay for the enhanced prices of living 
caused by the excess of paper issue. 

In order to illustrate what I desire to say further on this subject, you 
will, I trust, allow me to make a brief review of the laws of Congress 
bearing upon the increased price of labor and commodities, and the 
advance in the price of gold. Gold and silver, as you well know, are the 
standard of value in conducting the commerce of all the civilized nations 
of the world. The commerce of the United States is still carried on with 
all foreign nations with gold as the standard or measure of value. 

The laws of Congress, passed in 1792, fixed the gold standard in the 
United States, for the ten dollar eagle, at two hundred and forty-seven 
grains and four-eighths of a grain of pure gold, or two hundred and sev- 
enty-five grains of standard gold, and half that quantity for the half eagle. 
The law of Congress, passed in 1837, changed the gold standard established 
in 1792, by providing that the standard of both gold and silver should be 
such, that of one thousand parts by weight, nine hundred parts should be 
pure metal and one hundred of alloy; that the alloy of silver coins should 
be of copper, and the alloy of gold coins should be of copper and silver. 
That the weight of the gold eagle should be two hundred and fifty-eight 
grains, that of the half eagle one hundred and twenty-nine grains, and 
that the eagle should be a legal tender for ten dollars, and the half eagle 
for five dollars. This was the standard value up to the time wlien the legal 
tender note bill was passed. 

The last loan of $50,000,000, made by the government before the suspen- 
sion of specie payments, was on the issue of six per cent, twenty year 
bonds at 89J^, being a discount of 10% per cent., and a loss to the Treasury 
of about $5,338,769. The agreement for this loan was made with the asso- 
ciated banks of New York, Boston and Philadelphia, in the fall of 1861. 
It was made on a specie basis, and in the efforts made by the banks to pay 
the gold on this loan into the Sub-Treasury, it brought on such a strin- 
gency in the money market as to cause a general suspension of specie 
payments on the 31st of December, 1861, which made it exceedingly difll- 
cult for the banks to pay the last instalments to complete the loan. No 
further loans could be negotiated except at a still greater discount ; indeed, 
it was deemed nearly or quite impossible to make any further loans on a 
specie basis, unless at the most ruinous rates of discount. There was then 
due to the army and navy, and for supplies, not less than $100,000,000, and 
at least $200,000,000 more would be required within six months. The 



192 



necessity for immediate action was most pressing and urgent. We were 
grappling with a most gigantic rebellion. We were in a most extraordi- 
nary crisis, and extraordinary measures liad to be resorted to, in order to 
save tlie government and preserve our nationality. In this great emer- 
gency the original legal tender note bill, introduced by me as a necessary 
war measure, and which, after being amended and passed, was approved 
by the President February 25th, 1862, changed the standard of value, not 
witli the world at large, but within the United States, by authorizing the 
Secretary of the Treasury to issue $150,000,000 of United States notes to 
circulate as currency, making them lawful money and a legal tender for 
all debts, public and private, and providing for their redemption at all 
times at the Treasury Department in five-twenty six per cent, bonds, 
interest payable semi-annually in coin ; and further authorizing the issue 
of $500,000,000 of these bonds for that purpose. This was not the issue of 
an irredeemable paper currency. There was a fixed standard and measure 
of value for the redemption of all these legal tender notes as they should 
be issued and re-issued from time to time. That standard was five-twenty 
six per cent, bonds, principal and interest payable in gold, whatever might 
be their value. Every person who should receive these notes voluntarily, 
or by compulsion, knew exactly what he could do with them. He knew 
that the laws of Congress provided that he should have gold bearing bonds 
for all the notes taken by him. The redemption in this case was not gold 
on demand as formerly, but six per cent, interest in gold every six months, 
and the principal payable in gold within twenty years. This was the 
standard of value fixed by the legal tender note bill. It was in effect a 
forced loan from the people to the government, but at a fair rate of interest 
for both the lender and the borrower. 

This was a radical change in the standard or measure of value within 
the United States, but it was a fixed standard established hy law, and every 
business man could act upon it, and shape all his contracts and business 
transactions accordingly. 

The act of July 11th, 1862, authorized a further issue of $150,000,000 of 
legal tender notes, and requiring their redemption by the government at 
all times, on demand, in the 5.20 six per cent, bonds; still leaving the 
standard of value of legal tender notes by providing for their conversion 
at any time into six per cent. United States bonds, principal and interest 
payable in gold. Although this was in effect a forced loan from the 
people, it was so fair and equitable in its terms, the peril of the country so 
great, and the object to be attained in crushing the rebellion so important, 
that no loyal citizen could object to it. There was no very great danger 
that the currency would become excessively inflated so long as every 
person holding greenbacks, not bearing interest, could exchange them 
at his own will into gold-bearing bonds at six per cent, interest per 
annum. 

In the remarks which I made in the House on the 17th of June, 1862, in 
favor of this additional issue of legal tender notes, I said that * I never 
have been, and I trust I never shall be, unnecessarily an advocate for the 
creation of an unsound or an inflated currency; but, sir, I have long ago 
resolved, since this savage war has been forced upon us, to do whatever 
was necessary, and which I might lawfully do, to crush out the traitors 
and annihilate their armies. This cannot be done without the * sinews of 
war.' Your army and navy must be supplied with all the terrible arma- 
ment necessary to crush the enemy. Tour sick, wounded and famishing 
soldiers must all be supplied with hospitals, medical attendance, and all 



193 



necessaries and conveniences to make them comfortable. This is a plain 
duty which we cannot any of us fail to perform. If, in the performance of 
this duty, it becomes necessary to authorize a further issue of United 
States notes, I shall not hesitate to give my vote for it. I am not in favor 
of increasing the issue of them beyond the imperative necessities of the 
government to sustain the army and navy. I much prefer to have our six 
per cent, bonds issued on permanent loans. I would like to see the Secre- 
tary of the Treasury borrow at par all the money he can on the six per 
cent, bonds heretofore authorized to be issued. 

When money can be obtained at par on six per cent, bonds, I would 
prefer to have that done to the issuing a very large amount of legal tender 
notes. Too large an issue of demand notes, to circulate as money, will no 
doubt lead to an expansion which will inflate prices, stimulate undue 
speculations, and ultimately produce a reaction that will derange the 
whole business of the country. This is to be avoided if possible. I cannot 
therefore, advocate any greater issue of demand notes than the absolute 
necessities of the government requires to carry on the war with vigor. I 
am disposed to give the Secretary power to issue the additional $150,000,- 
000 United States notes asked for by him ; but, at the same time, I feel the 
importance of having this power exercised discreetly, and I trust that he 
will not issue, or pay them out at all, when money can be obtained at par 
on our six per cent, bonds. I do not understand that the Secretary intends 
to have them all issued and put into circulation at any one time ; on the 
contrary, I believe he has no such intention. He wants the power to issue 
and use them if necessary, but not otherwise. When he can obtain a suffi- 
cient amount of money at par, on six per cent, bonds, or by temporary 
deposits in the Treasury, there will be no necessity for their issue, and the 
Secretary assures us in his letter that no further issues of notes will be 
made when that can be done ; and, besides, the bill provides for this retain- 
ing in his own hands legal tender notes equal to one-third of the tempo- 
rary deposits that may be in the Treasury.' 

The government was carried on smoothly and the war prosecuted 
vigorously under this system up to January 21, 1864, when the 5-20 six 
per cent, bonds authorized by the act of 25th of February, 1862, were 
exhausted. In the mean time, the standard of value for the redemption 
of greenbacks had been changed, which is the principal cause of the present 
advance in the price of gold and other commodities and services^ as I will now 
proceed to show. 

The act of the 3d of March, 1863, to provide ways and means for the 
support of the government, commonly called the $900,000,000 loan bill, so 
modified the legal tender note bill as to leave it in the discretion of the 
Secretary of the Treasury to fix the time and manner of issuing the bonds 
or notes, and the rate of interest they should bear under the act It gives 
him the power to issue them at six per cent., five per cent., or even at a 
lower rate of interest if he deems advisable ; but under the modification of 
the act, there is no longer any standard of value fixed by law. It rests with 
the Secretary to say, from time to time, what the rate of interest shall be. 
He also has the power to issue and re-issue legal tender notes on demand 
and on time in sufficient volume to float five per cent., and even four per 
cent, bonds and notes, if he shall deem it advisable to do so. No man can 
regulate his contracts or business affairs with any certainty. No person, 
when he takes legal tender greenback currency, can fix in his own mind 
what is its real value. It is no longer convertible at the will of the holder 



194 



into United States six per cent, bonds, nor is there any provision in the 
law which compels the government to redeem them in any kind of bonds, 
or in any other way — except for dues to the government. It has, how- 
ever, been the practice of the Treasury Department during the past two 
months to redeem legal tender greenbacks, not bearing interest, by 
exchanging for them one and two years Treasury notes bearing five per 
cent, interest, both principal and interest payable in currency/, 

I did not, at the last session of Congress, think it wise to change the 
standard of value fixed in the legal tender note bill. 1 thought it better 
to issue and pay out to the army and navy, and other creditors of the 
Government, an amount of greenbacks sufficient to float, easily, the five- 
twenty six per cent, bonds, but no more. I believed seven and 3-10 per 
cent, interest too high a rate ; but I deemed it fair and just that on torced 
loans of this kind that the Government should pay six per cent., and that 
the war should be prosecuted until the rebellion should be crushed, on 
the basis of six per cent, interest on all the funded debt to accomplish 
that result. I thought it better for the Government and the people that 
there should be that stability attached to business transactions which can 
only be fully realized by a public law establishing the measure of value. 
In the remarks which I made in the House on the 12th of January, 1863, 
I said, ' that Congress, by its legislation at the last session, has, to a con- 
siderable extent, changed the standard of value for all business operations 
with the United States. The standard of value fixed by Congress is legal 
tender Treasury notes, convertible at any time into United States specie- 
paying bonds, bearing interest at the rate of six per centum per annum, 
payable half-yearly in coin, based upon adequate taxation upon the entire 
property of the country. Legal tender notes constitute the national cur- 
rency now established by law. AU exchanges of property ^ aU contracts^ and 
all loans, are based upon the value of legal tender notes and United States six 
per cent, bonds."* 

At a later period in the session the $900,000,000 act was passed. I was 
not in favor of the change made by that act in the standard of value, or 
rather I was not in favor of the discretionary power given to the Secretary 
of the Treasury to change it, as provided in the act; not because I had 
not full confidence in the Secretary, but because I thought it better that 
so important a matter, relating as it does to the stability of the whole 
business operations of the country, should be fixed in the law itself, so 
that all men could shape their business accordingly. This would have 
relieved the Secretary from a vast responsibility, and the inflations, fluc- 
tuations and changes now so apparent would have been less likely to have 
happened. I reluctantly assented to the change. It was against my 
better judgment, and I am now satisfied that it was a mistakCc 

The daily conversions, during the past year, of legal tender notes into 
the 5-20 six per cent, bonds, at the rate of from one to two millions a day, 
furnished the means for paying the daily expenditures of the Govern- 
ment; the conversions went on so smoothly, so steadily and so satisfac- 
torily to all parties, without causing any great inflation of the currency, 
or increase in the price of labor or commodities, that I was in hopes it 
would be continued by the Secretary, under the discretionary power given 
him to continue it, under the $900,000,000 loan bill. This would have 
kept things steady, kept down the price of gold, and would probably have 
prevented any necessity for paying out the reserve $50,000,0000 of green- 
backs which have been issued since the meeting of Congress, and over 



195 



$150,000,000 five per cent, one and two years legal tender notes/also issued 
and circulated to a considerable extent as currency, making about $200,- 
000,000 that have been printed and paid out since the meeting of Congress 
in December last, which, added to the $400,000,000 of greenbacks pre- 
viously issued, amounts altogether to $600,000,000 of greenbacks and 
legal tender Treasury notes, and which is probably a volume of currency 
large enough to float the proposed new issue of five per cent, ten-forty 
bonds ; but it is not my wish or desire to say a word that will in any way 
retard or embarrass the operations of the government in a vigorous prose- 
cution of the war to put down this gigantic and wicked rebellion, and 
efiectually remove the cause that brought on such a bloody war. The last 
man and the last dollar are pledged for this purpose, and, if necessary, to 
inflate the currency to such an extent that 10-40 five per cent, bonds may 
be floated at par, I am ready to yield my assent to such a measure, and 
will lend my feeble efibrts to sustain the administration in carrying it out. 
The rebellion must be crushed at all hazards, and at every sacrifice. 

The principal object I have in writing to you at this time, is to solicit 
the co-operation of our friends in New York in submitting to Congress 
the propriety of esiaUishing, by law, the standard value of legal tender notes, 
by fixing the rate of interest at which they may at any time be converted 
into the funded debt of tlie United States, principal and interest payable 
in gold. If it is to be five per cent, bonds, gold and prices will be consid- 
erably higher than they will be if such notes are convertible into six per 
cent, bonds. I think it will be cheaper in the end, and specie payments 
can be resumed at an earlier day, for the Government to continue the con- 
version of legal tender notes into six per cent, bonds, because gold will 
be lower and prices less ; but whatever the rate of interest is to be, I trust 
it will be fixed in the law itself, so that all business men may be able to 
shape their contracts and business in accordance with the public law 
establishing such standard of value. 

I intended to say a few words on one or two other points, but this letter 
is already longer than I intended, and I must defer to some other more 
convenient time what more I may desire to say on the national finances. 
I remain yours, very truly, 

E. G. SPAULDING. 



New York, March 21. 

My Dear Sir— I am in receipt of your favor of the 19th inst., upon the 
subject of national finances. 

It expresses fully and clearly my own views— so admirably, in fact, 
that I beg your permission to publish it, as I think it of great importance 
that the attention of business men should be drawn to the subject— than 
which nothing is of greater or more immediate consequence to their inter- 
ests. Truly yours, 

MORRIS KET(;HU'\r. 

Hon. E. G. Spaulding. 



Buffalo, April 11, 18G1. 

Morris Ketchim, Esq,, Banker, N, Y. : 

Dear Sir— Referring to my letter to you of the 19th of March last, I 
desire to make some additional remarks on the National Finances. It is a 
subject upon which I feel a deep interest, for you well know that if we fail 



196 



here there is danger that we may not succeed in accomplishing what is 
the most ardent wish of all patriotic citizens — that of crushing the rebel- 
lion, and a restoration of the national unity. The national debt will 
increase at a fearful rate, under any policy that can be devised, and pru- 
dent, patriotic citizens are looking anxiously at the result of measures 
that are adopted. Desiring, as I do, the crushing of the rebellion in the 
shortest time, and with the least possible expenditure of blood and treas- 
ure, I venture to make a few suggestions fuither on the future policy of 
executing the $900,000,000 loan act. 

It seems to me that the policy of the Treasury Department for the last 
three months has been that of inflation, and over-issues of a paper drculattng 
medium. It has, by such a policy, unintentionally stimulated and encour- 
aged speculations in gold, stocks and other things, rather than to encourage 
industry, the production of commodities, and other legitimate business. 
Under this policy, gold has advanced 20 per cent., and the price of labor 
and commodities continues to increase to such an extent as to render it 
very embarrassing for business men to carry on their ordinary pursuits. 
I know very well that these evils cannot be fully guarded against during 
the prosecution of such a gigantic war, and the large amount of paper 
necessarily issued by the Government ; but it is the duty of the Govern- 
ment that these evils should be mitigated and rendered as light as 
possible. 

The Department has partially executed the $900,000,000 loan act; the 
first section of which authorized the Secretary to borrow the wliole amount 
of nine hundred millions of dollars on the ten-forty bonds, bearing six per 
cent, (or, in his discretion, five or four per cent.) interest payable semi- 
annually in coin; or, by other sections of the bill, he had the discretionary 
power to print and pay out to creditors of the Government an additional 
amount of $150,000,000 of greenbacks, and $400,000,000 legal tender Treas- 
ury notes, which, in the form issued by him, circulate to a considerable 
extent as currency ; and a further contingent authority to issue a still fur- 
ther sum of $150,000,000 of greenbacks; but the whole aggregate of all 
kinds of bonds and notes to be issued under the bill was not to exceed 
$900,000,000. 

In administering and carrying into effect the provisions of tliis act, it is 
plain that, by borrowing on the issue of ten-forty six per cent, bonds 
under the first section of the act, the tendency would be to repress and 
keep down inflation, prevent speculation in stocks, gold and other com- 
modities, and, at the same time, by holding a steady money market, 
encourage all kinds of productive industry and other legitimate pursuits. 

On the other hand, by resorting to the other sections of the bill and 
issuing greenbacks and legal tender treasury notes in large volume, the 
currency is still further expanded and cheapened to such an extent that 
all legitimate business is greatly embarrassed by the increase in the price 
of labor, the cost of living, transportation, and the cost of the raw mate- 
rials used in building, manufacturing, and other industrial operations. 

In the partial execution of this law, the Treasury Department has 
printed and paid out $150,000,000 greenbacks as currency, and over $175,- 
000,000 of one and two years legal tender Treasury notes, which also 
circulate to a considerable extent as currency, making $325,000,000 of 
inflating paper issued under this act, thus far ; while the department has 
only borrowed on a permanent loan, under the first section of the bill and 
the supplementary act, less than $15,000,000 on five instead of six per cent, 
ten-forty bonds. The whole policy thus far under this law has been one 



197 



of inflation on temporary loans, rather than funding on long government 
bonds at a fair rate of interest. 

It has been supposed that by this policy of inflation a five per cent, ten- 
forty bond might be floated nominally at par. Funding the present 
excessive floating debt at five per cent, interest is better than not to be 
funded at all, and I hope that the bonds now offiered at five per cent, may 
be taken up rapidly, and that the evils of the present inflation may be 
removed ; but I fear the conversions will not l5e rapid enough at this rate 
of interest. The bonds do not seem to be readily taken, as yet, by the 
people. It required the printing and paying out of $400,000,000 of green- 
backs before the five-twenty six per cent, bonds could be floated easily at 
par, and it will probably require the circulating paper issues of the Gov- 
ernment, now amounting to about $625,000,000, to be increased to $650,- 
000,000 or $700,000,000, before the people will be induced to take five per 
cent, bonds in order to get rid of the surplus circulation that may 
accumulate in their hands, that cannot be more profitably invested in 
other modes. 

I agree with all that has been said by the Press and in Congress in favor 
of annual taxation to the amount of $300,000,000. At the extra session of 
Congress in July, 1861, 1 advocated immediate taxation to the extent of 
paying the annual expenses of the government on a peace footing, and the 
interest on all the war debt, and I have advocated that policy ever since. 
I hope Congress will not adjourn without providing for raising at least the 
sum of $300,000,000 each year by taxation. Assuming that Congress will 
provide for raising that sum by taxation for the next fiscal year, still the 
whole expenses of the year will not be less than $1,000,000,000, which will 
leave the additional sum of $700,000,000 to be borrowed in some form to 
pay the expenses of the army and navy. This brings us to the practical 
qruestion: How is this large sum to be obtained? ShaU it be on tempo- 
rary issues of paper calculated to still further inflate the currency already 
afloat, thereby adding to the embarrassments already bad enough; or 
shall it be on a permanent loan, based on the issue of long bonds, principal 
and interest payable in gold, and at such a fair rate of interest that the 
bonds will be readily taken, in such large amounts as not only to make 
any further temporary issues under the $900,000,000 act unnecessary, but 
also materially diminish the present excess of paper currency? This 
would check speculation, and bring down the price of gold and all other 
commodities to a more safe and stable standard. 

It is of great consequence for all business men to know what is to be the 
future policy of the Treasury Department. Whether it will still further 
inflate the currency by temporary expedients, or whether it will contract 
the floating debt by funding in long bonds. Shall it be inflation and high 
prices, or contraction and lower prices ? This question is of vital interest, 
affecting the large purchases of the Government in the prosecution of the 
war, as well as the legitimate business of the people. 

If the Treasury Department will print and put at the disposal of the 
people ten-forty bonds, paying six per cent, interest semi-annually in 
coin, for the balance of the $900,000,000 loan, it will be so rapidly taken, 
judging from the manner in which conversions were made into the 5-20 
bonds, that all its other printing presses employed in printing temporary 
circulating paper may be safely stopped until this loan is exhausted, and 
with the most beneflcial results to the Government and the people. 
I remain, yours, truly, 

E. G. SPAULDIXG. 



198 



SECRETARY CHASE RESIGNS, AND WM. P. FESSENDEN APPOINTED 
SECRETARY OF THE TREASURY. 

The attempt of the Secretary of the Treasury to float five per 
cent. 10-40 bonds made it necessary, in order to pay the current 
expenses of the Government, to issue and keep out large amounts 
of currency in the form of greenbacks, legal tender notes, inter- 
est-bearing Treasury notes, certificates of indebtedness, postal 
and fractional currency, and national bank notes, besides the cur- 
rency issued by State banks. Gold and commodities continued 
to advance in price. On the 15th of January, '04, gold was 1. 65, on 
the 15th of April 1.78, on the 15th of June 1,91, and on the 29th 
of June 2.35 to 2.50, which showed that the legal tender notes 
were worth only forty cents on a dollar in gold. 

On the 30th of June, 1804, Secretary Chase resigned the oflfice 
of Secretary of the Treasury. President Lincoln announced the 
fact to the Senate by nominating David Todd, of Ohio, to fill the 
vacancy, which was the first announcement of the resignation of 
Gov. Chase. Gov. Todd declined the appointment. Mr. George 
Hanington, Assistant Secretary, was appointed Secretary of the 
Treasury ad uiiei^hn, William P. Fessenden, U. S. Senator from 
Maine, with some reluctance, finally consented to take the place. 

lie was nominated and confirmed, and entered upon the duties 
of the oflicc on the 5th of Jul3\ 

lie subsequently published a statement of the audited public 
debt as it existed on the books of the Treasury Department on 
the 30th day of June, which was the close of the fiscal year, and 
the day that Secretary Chase resigned, showing the total am6unt 
of debt to be 11, '740,090,489.49. The 10-40 five percent, bonds 
amounted only to |'73,337,'750. 

This statement showed that the currency items and others 
operating to inflate prices were as follows : 



U. S. notes, greenbacks $431,178,670 84 

Postal, fractional currency 22,894,877 25 

Interest-bearing legal tender Treasury notes 168,571,450 00 

Certificates of indebtedness 160,720,000 00 

National bank notes 25,825,695 00 

Add State bank circulation, not less than 135,000,000 00 



$944,190,693 09 

Seven-thirty Treasury notes $109,356,150 00 

Temporary deposits for which certificates 

were issued $ 72,330,191 44— $181,686,341 44 

June 30, 1864, total inflating paper issued $1,125,877,034 53 



199 



This great inflation, with the military situation doubtful and 
unsatisfactory, caused gold to advance until July 11, 1864, when 
it reached its highest quotation, or, more accurately speak- 

ing, the United States notes continued to decline until they were 
only worth in gold 35 cents on the dollar at the Board of Brokers 
in the city of New York. 

It was thought at the time that the gold bill passed by Congress, 
and approved June 1*7, 1864, prohibiting time contracts for the 
sale of gold and foreign exchange, operated to advance tJie jri-ice 
of gold, instead of depressing it. It was intended by Congress, 
in passing the act, to prevent the gold speculators from operating 
for an advance, but it had the contrary effect, and only aggravated 
the diflicult}^ The price of gold would advance in spite of the 
legal enactments, and the act only continued in force fifteen days, 
(the 2d of July) when it was repealed. 

Secretary Fessenden says * * that on assuming the oflSce on the 

5th of July he found his condition peculiarly embarrassing. The 

cash balance in the Treasury was, on the first of July, $18,842,. 

558. (Tl, and the unpaid requisitions, chiefly for the army, were 

171,814,000, and the daily expenditures $2,250,000." The loan 

of $33,000,000, advertised by Secretary Chase on the 25th of 

June, was withdrawn on the 2d of July. Secretary Fessenden 

raised the means to carry on the Government to March 4, 1805, 

by the issue of greenbacks, 7-30 Treasury notes, interest-bearing 

Treasuiy notes, certificates of indebtedness, loans of money 

obtained on six per cent. 5-20 bonds, and the receipts from taxes. 

In his Annual Report he says : 

"The experience of the past few mouths cannot have failed to convince 
the most careless observer that, whatever may be the effect of a redun- 
dant circulation upon the price of coin, other causes have exercised a 
greater and more deleterious influence. In the course of a few days the 
price of this article rose from $1.50 to $2.85 in paper for $1.00 in specie, 
and subsequently fell, in as short a period, to $1.87, and then again rose, 
as rapidly, to $2.50 ; and all without any assignable cause, traceable to an 
increase or decrease in the circulation of paper money, or an expansion 
or contraction of credit, or other similar influence on the market, tending 
to occasion a fluctuation so violent. It is quite apparent that the solution 
of the problem may be found in tlie unpatriotic and criminal efforts of 
speculators, and probably of secret enemies, to raise the price of coin, 
regardless of the injurj*^ inflicted upon tlie country — or, desiring to 
inflict it." 

UNITED STATES NOTES LIMITED TO $400,000,000. 

By the second section of the act of June 30, 1 8G4, it was pro- 
vided that **tlie total amount of United States notes issued, or to 



200 



be issued^ shall not exceed $400,000,000, and such additional sum 
not exceeding $50,000,000, as may be temporarily required for 
the redemption of temporary loans.'' 

This act contained a further provision that **all bonds, Treas- 
ury notes, and other obligcUiona of the United States, shall be 
exempt from taxation, by or under State or municipal authority;" 
and the last section of this act declares that **the words ^obligatUm 
or other security of the United States,' used in this act, shall be 
held to include and mean all bonds, coupons, national currency, 
United States notes, Treasury notes, fractional notes, checks for 
money of authenticated officers of the United States, certificates 
of indebtedness, certificates of deposits, stamps, and other rep- 
resentatives of value of whatever denomination, which have been 
or may be issued under any act of Congress." 

This act also authorized the issue of $200,000,000 of interest- 
bearing Treasury noteSy payable at any time not exceeding three 
years from date, and made a legal tender at their face value to 
the same extent as United States notes, except in redemption 
of notes issued by banks. And the power to issue interest-bear- 
ing Treasury notes, of this character^ was still further enlarged by 
the act of January 28, 1865. Tliis was tlie last act of Congress 
giving power to tlie Secretary of the Treasin-y to issue any kind of legal 
tender notes, 

HOW SECRETARY McCULLOOH PAID THE ARMY AT THE CLOSE 
OP THE WAR. 

Upon the inauguration of President Lincoln for a second term, 
Hugh McCuUoch was appointed Secretary of the Treasury in 
place of Mr. Fessenden, who wished to be relieved from the duties 
of the office, and who returned again to the Senate. Secretary 
McCuUoch did not increase the issue of United States notes, but 
continued the issue of bonds, 7-30 Treasury notes, and compound 
interest-bearing Treasury notes made a legal tender at their face 
value. After the surrender of the rebel armies to General Grant 
and General Sherman, the volunteer army was mustered out of 
the service, and had to be paid in full. Secretary McCuUoch 
obtained the means to pay them chiefly by the issue of 7-30 Treas- 
ury notes, which were negotiated under the general agency of Jay 
Cooke, at par. The amount required for this purpose was very 
large, and the amount of 7-30 Treasury notes outstanding in 
October, 1865, after paying the army was $830,000,000, which 
were convertible in three 3^ears into 5-20 six per cent, bonds. The 



201 



public debt during that month run up to about the highest figures 
it ever reached. The following is a statement of the debt, with- 
out deducting funds in the Treasury, as it stood on the books of 
the Treasury Department on the 31st of October, 1865. 

STATEMENT OF THE PUBLIC DEBT. 

Bonds, 10-40's, five per cent., due in 1904 $172,770,100 00 

Bonds, Pacific Railroad, 6 per cent., due in 1895 1,258,000 00 

Bonds, 5-20's, 6 per cent., due in 1882, 1884 and .1885 659,259,600 00 

Bonds, 6 per cent., due in 1881 265,347,400 00 

Bonds, 5 per cent, due in 1880 18,415,000 00 

Bonds, 5 per cent., due in 1874 20,000,000 00 

Bonds, 5 per cent., due in 1871 7,022,000 00 

$1,144,072,100 00 

Bonds, 6 per cent., due in 1868 , $ 8,908,341 80 

Bonds, 6 per cent., due in 1867 9,415,250 00 

Compound interest notes, due in 1867-'68 173,012,141 00 

7-30 Treasury notes, due in 1867 and 1868 830,000,000 00— 1,021,335,732 80 

Bonds, Texas indemnity, part due 760,000 00 

Bonds, Treasury notes, etc., part due... 613,920 09— 1,373,920 09 

Temporary loans, ten days' notice 99,107,745 46 

Certificates of indebtedness, due in 1866. 55,905,000 00 

Treasury notes, 5 per cent, Dec. 1, 1865. 32,536,901 00— 187,549,646 46 

United States notes 428,160,569 00 

Fractional currency 26,057,469 20— 454,218,038 20 

Total debt October 31, 1865 $2,808,549,437 55 

National bank notes issued $185,000,000 00 

State bank notes issued 65,000,000 00 

Total bank circulation $250,000,000 00 

TARIFF AND INTERNAL REVENUE LAWS. 

The act of July 1, 1862, called the Internal Revenue Law, 
was passed, providing for a levy of duties on various domestic 
manufactures, upon trades and occupations, and also providing a 
system of stamp, license, income, and other duties. And the act 
of July 14th, of the same year, largely increased the duties on 
imports. These laws were from time to time amended and 
enlarged, until large sums were realized from this mode of taxa- 
tion, and formed a very substantial basis on which to rest the 
credit of the Government for the large issue of notes, bonds and 
other obligations. Enough money was realized from these sources 
to pay the ordinary expenses of the Government, all the interest 
on the war debt, and liquidate a considerable portion of the prin- 
cipal The total debt, October 31, 1866, was over $2,800,000,000, 
and it does not at the present time much exceed $2,500,000,000, 
exclusive of Pacific Eailroad bonds. 



202 



rONTK ACTION OF TIIK i'l'KllENi'Y. 

St'tretaiy Mi Ci LLofii, in his first annual report, 4tli of Decem- 
ber, 1805, expressed the opinion ** that the legal tender acts were 
war measures, passed in a ^jreat emergency; that they should be 
regarded only as temporary; that they ought not to remain in 
force a day longer than would be necessary to enable the people 
to prepare for a return to the gold standard; and.tlmt the work of 
retiring the notes which have been issued, should T>e^*ommcnced 
without delay, and carefully and persistently continued until all 
are retired." The House of Representatives on the 18th Decem- 
ber, 1805, concurred in tliese views, expressed in the annual 
report of Mr. McCuUoch, by the adoption of the following resolu- 
tion offered by Mr. Alley, of Massachusetts : 

Resolved, That this House cordially concurs in the views of the Seci^etary 
of the Treasury hi relation to the necessity of a contraction of the cur- 
rency, with a view to as early a resumption of specie payments as the 
business interests of the country will permit; and we hereby pledge 
co-oi)crative action to this end as speedily as possible. 

The above resolution was passed by the following vote — ^^'eas 
144, nays 0, as follows: 

Messrs. Alley, Allison, Ames, Ancoua, Anderson, James M. 
Ashley, Baldwin, Banks, Barker, Baxter, Beaman, Bergen, Bid- 
well, Bingham, Blow, Boutwell, Boycr, Brandegee, Brooks, 
Broomall, Bundy, Header W. Clarke, Sidney Clarke, Conkling, 
Cook, Cullom, Darling, Dawes, Dawson, Dcfrees, Delano, Dom- 
ing, Dennison, Dixon, Driggs, Eldridge, Eliot, Farquhar, Feriy, 
Finck, Garfield, Gridcr, Griswold, Hale, Aaron Harding, Abner 
C. Harding, Hart, Hayes, Henderson, Higby, Hill, Hogan, 
Holmes, Hooper, llotclikiss, Asahel W. Hubbard, Chester D. 
Hubbard, Dcmas Hubbard, John II. Hubbard, Edwin N. Ilubbell, 
James R. Ilubbell, Ilulbard, James Humphrey, IngersoU, Jencks, 
Johnson, Julian, Kasson, Kelley, Kelso, Kerr, Ketcham, Kuyken- 
dall, Laflin, Latham, George V. Lawrence, William Lawrence, 
Longyear, Marshall, Marston, Marvin, McClurg, Mclndoe, 
McKee, McRuer, Mercur, Miller, Moorhead, Morrill, Moulton, 
Myers, Niblack, Nicholson, Noell, O'Neill, Orth, Paine, Patter- 
son, Perham, Phelps, Pike, Plants, Price, Radford, Samuel J. 
Randall, William H. Randall, Raymond, Alexander H. Rice, John 
II. Rice, Ritter, Rollins, Ross, Rousseau, Sawyer, Scofield, Shank- 
lin, Shellabarger, Sitgreaves, Sloan, Spaulding, Starr, Stillwell, 
Strouse, Taber, Taylor, Thornton, Trimble, Trowbridge, Upson, 
Van AeiTiam, Burt Van Horn, Robert T. Van Hora, Voorhees, 



203 



Ward, Warner, Elihii B. Washburn, William B. Washburn, 
Welker, Wentworth, Whaley, Williams, James F. Wilson, Stephen 
F. Wilson and Wright--144. 

Nays — Messrs. Baker, Cobb, Eekley, Harris, Smith, and 
Thayer — 6. 

In order to carry into effect the above resolution. Congress, by 
the act of l^^Se&^2, 1866, authorized the Secretary of the Treas- 
ury to exchange bonds for notes, but **that of United States notes 
not more than $10,000,000 should be retired and canceled within 
six months from the passage of the act, and thereafter not more 
than $4,000,000 should be retired in any one month." 

Under the provisions of this act the Secretary commenced 
retiring and canceling legal tender notes, but contraction very soon 
began to affect speculators and the debtor class of the community, 
who raised a cry against the course pursued by the Secretary. As 
contraction gradually went on, money became more in demand, 
and it soon became unpopular with a large class of the community. 
Members of Congress very soon changed their opinions on the 
subject, and in January, 1868, a law was passed, declaring **that 
from and after its passage, the authority of the Secretary of the 
Treasury to make any reduction of the currency by retiring or 
canceling United States notes, shall be and is hereby suspended." 

Before this law was passed Secretary McCuUoch had reduced 
the cii'culation of United States notes down to about $356,000,000, 
which at this time (April, 1869), is the amount outstanding, and 
for which the Government is still liable, besides fractional cur- 
rency amounting to over $36,000,000. 

THE PUBLIC FAITH. 

Since the close of the war there has been considerable discussion 
in regard to the meaning of the words used in the legal tender 
act. 

It has been insisted by a large class of citizens that the 5-20 
bonds might, after five years, be redeemed in legal tender notes, 
instead of gold and silver. Others insisted that the bonds are 
payable in ** dollars," which means gold and silver coin, and that 
an attempt to pay in legal tender notes would not be payment but 
merely changing the form of the debt. That a matured debt can- 
not be discharged by another promise; that it is contrary to 
reason that a bond should be paid in an inferior obligation; and 
that it would be unjust to force inconvertible paper, without inter- 
est, in payment of an interest-bearing obligation, especially as the 



204 



right was given in the original act to fund legal tender notes at 
any time in the bonds which were authorized by the same act 
Taking up bonds not due with greenback notes, would simply be 
to unfund a debt already flinded, which would be contrary to the 
whole spirit and intent of the legal tender act. 

To remove all doubt upon the subject, and with a view to 
improve the public credit, Mr. Shenck, Chairman of the Commit- 
tee of Ways and Means, reported a bill, which, after a lengthy 
discussion, was amended, and finally passed both Houses of 
Congress. 

The following is the vote by which it passed the House. Yeas 
97, nays 47. 

Yeas — Messrs. Allison, Ambler, Ames, Armstrong, Arnell, 
Asper, Axtell, Bailey, Banks, Beaman, Benjamin, Bennett, Bing- 
ham, Blair, Boles, Boyd, Buffinton, Burdett, Cessna, Churchill, 
Cobb, Cook, Conger, Cowles, CuUom, Dawes, Donley, Duval, 
Dyer, Fams worth, Ferriss, Ferry, Finckelnburg, Fisher, Fitch, 
Gilfallan, Hale, Hawley, Heaton, Hoar, Hooper, Hotchkiss, 
Jenckes, Jones (N. C), Judd, Julian, Kelsey, Ketcham, Knapp, 
Laflin, Lash, Lawrence (Ohio), Lynch, Maynard, McCrary, Mc- 
Grew, Mercur, Moore (III), Moore (N. J.), Morrill (Me.), Neg- 
ley, O'Neill, Packard, Paine, Palmer, Phelps, Poland, Pomeroy, 
Prosser, Boots, Sanford, Sergeant, Sawyer, Schenck, Scofield, 
Sheldon, Smith (Ohio), Smith (Vt), Sm3rthe (Iowa), Stokes, 
Stoughton, Strickland, Tanner, Tillman, Twichell, Upson, Van 
Horn, Ward, Washburn (Wis.), Washburn (Mass.), Welker, 
Wheeler, Whittemore, Wilkinson, Willard, Williams, Winans — 97. 

Nays — Archer, Beatty, Beck, Briggs, Bird, Burr, Butler 
(Mass.), Butler (Tenn.), Cobb, Cobum, Crebs, Dewees, Dickin- 
son, Eldridge, Getz, GoUaday, Hawkins, Holman, Hopkins, John- 
son, Jones (Ky.), Kerr, Knott, Marshall, Mayhem, McCormick, 
McNeely, Moffett, Mungen, Niblack, Orth, Reading, Reeves, 
Rice, Shanks, Smith (Oregon), Stevenson, Stiles, Stone, Strader, 
Sweeney, Taffe, Trimble, Tyner, Van Trump, Wilson (Ohio), 
Winchester, Woodward — 48. 

The bill was approved by President Grant on the 18 th of 
March, 1869, and was the first act approved by him after his 
inauguration, and is as follows : 

**-4n Act to strengthen the public credit of the United States. 

Be it enacted^ etc.. That in order to remove any doubt as to the purpose 
of the Government to discharge all its obligations to the public creditors. 



206 



and to settle conflicting questions and interpretations of the law, by virtue 
of which such obligations have been contracted, it is hereby provided and 
declared that the faith of the United States is solemnly pledged to the 
payment in coin, or its equivalent, of all the obligations of the United 
States not bearing interest, known as United States notes, and of all the 
interest-bearing obligations, except in cases where the law authorizing 
the issue of any such obligations has expressly provided that the same 
may be paid in lawful money, or in other currency than gold and silver; 
but none of the said interest-bearing obligations, not already due, shall 
be redeemed or paid before maturit]|p, unless at such times as United States 
notes shall be convertible into coin at the option of the holder, or unless 
at such time bonds of the United States, bearing a lower rate of interest 
than the bonds to be redeemed, can be sold at par in coin. And the United 
States also solemrdy pledges its faith to make provision at the earliest practicable 
period for the redemption of the United States notes in coin. 

Approved March 18, 1869. U. S. GRANT." 

DECISIONS OP THE COURTS ON THE CONSTITUTIONALITY OF THE ACT. 

In most of the States where the constitutionality of the legal 
tender act has been raised, the State Courts have decided that the 
law was constitutional and valid. The decisions in such cases 
were generally made upon the ground that the United States had 
express power to wage war, to raise and support armies and 
navies ; to borrow money on the credit of the United States ; and 
pass all laws necessary and proper to carry into execution these 
great powers. In borrowing money to carry on the war, it was 
necessary and proper for the Government to give its notes for the 
amount borrowed; that Congress had the right to affix to such 
notes the attributes, and prescribe the terms which would give 
most value and the greatest facility to their negotiation, in order 
to obtain the necessary means of sustaining the army and navy 
in the prosecution of the war; that it was a form of credit justified 
by the exigency of the crisis, and necessary to the execution of 
the war powers expressly granted in the Constitution. And that 
upon the authority of Chief- Justice Marshall, "Congress must 
possess the choice of means, and must be empowered to use any 
means which are in fact conducive to the exercise of the powers 
granted by the Constitution.** 

The Court of Appeals, the highest Court in the State of New 
York, decided in the case of Myer vs. Rosevelt, 27 N. Y. Rep., 
400, " that the power to borrow money on the credit of the United 
States, carries with it the power to attach the quality of a legal 
tender to the notes issued, when, in the judgment of Congress, it 
is necessary to make them effectual for the purpose of bor- 
rowing." 

Judge Da vies, in his opinion, says: 



206 



"We take notice of the fact, that to maintain armies and provide a navy 
for the prosecution of the war, more money is needed annually than all 
the specie within the United States, and that a resort by the Government 
to the use of Us ovon credit^ was not only a matter of necessity, but the result 
has demonstrated that it was a measure of prudence and wisdom/' 

The issue of Treasury notes under the Constitution commenced 
during the last war with Great Britain. On the 30th of June, 
1812, the first act was passed. Further issues were authorized by 
the acts of Congress of February 25, 1813; March 4, and Decem- 
ber 26, 1814; October 12, 1837; January 31, and August 31, 1842; 
July 22, 1846, and January 28, 1857. In Thomdike vs. The 
United States, (2 Mason, 1, 18,) Judge Story said: 

**By the statutes of the United States, under which the Treasury notes 
have been from time to time issued, it is enacted that such notes shall be 
receivable in payment to the United States, for duties, taxes and sales of 
public lands, to the full amount of the prii^cipal and interest accruing due 
on such notes. It follows, of course, that they are a legal tender in pay- 
ment of debts of this nature due to the United States, and by the very 
tenure of the acts, public officers are bound to receive them.'' 

The legality of the issue of Treasury notes has been sanctioned 
by all the departments of the Government since 1812, but the 
United States Supreme Court has not yet decided that Treasury 
notes can be made ** lawful money and a legal tender in payment 
of all debts public and private," but on the contrary it has decided 
that contracts expressly payable in coin, must be paid in coin. 

COIN CONTRACTS DECLARED VALID. 

The Court of Appeals in the State of New York, in the case of 
Bronson vs. Rhodes, went so far as to decide that a contract made 
before the passage of the legal tender act, payable expressly **in 
gold and silver coin, lawful money of the UnitedJStates," might 
be paid and satisfied by a tender of United States notes, issued 
under the act of February 25, 1862. 

But the U. S. Supreme Court at Washington reversed this 
decision. Chief Justice Chase announced the opinion of the 
Court on the 15th of February, 1869, as follows: 

** This is an appeal from a judgment of the Court of Appeals of the 
State of New York, holding that a tender of Treasury notes for the satis- 
faction of a mortgage made in 1851, by its terms to be satisfied in gold and 
silver coin, was sufficient. The tender was made in January, 1865, when 
a dollar in coin was equal to two dollars and twenty-five cents in legal 
tender notes, and, the tender being refused, action was commenced to 
compel the cancellation of the mortgage. The Supreme Court of the 
State subsequently adjudged the mortgage paid, and required it to be sat- 
isfied of record, holding the tender to have been sufficient. ' The Court of 



207 



Appeals affirm that judgment, and the affirmance is here for review. The 
Chief Justice delivered the opinion of the Court, holding that it is the 
duty of courts of justice to enforce contracts according to the intent of 
the parties to them ; and • in this case it is held that it is clear that the 
intent of the parties was that payment should .be made in coin. There 
were two descriptions of money in use at the time the tender in this case 
was made, both authorized by law, and both made legal tender. The 
general denomination of both descriptions was dollars, but they were 
essentially unlike in nature. The coined dollar was a piece of gold or 
silver of a certain degree of purity and weight. The note dollar was a 
promise to pay a coined dollar, but not on demand, nor at any fixed time, 
nor was it convertible into a coined dollar. It was impossible, in the 
nature of things, that these two dollars should be equivalents of each 
other, nor did the currency act purport to make them so. There were 
then two descriptions of money issued by the same Government, and con- 
tracts to pay either were equally sanctioned by law. No question can be 
made as to this fact ; doubt concerning it can only spring from that con- 
fusion of ideas which always attends the introduction of varying and 
uncertain measures of value into circulation as money. In the absence 
of any specific control for the payment of coin, legal tender notes may be 
a sufficient tender, but it is clear to the Court that express contracts for 
the payment of coined dollars can only be satisfied by the payment of 
coined dollars. They are not debts which may be satisfied by the tender 
of Treasury notes. As to the judgments to be entered on contracts for 
the payment of coin, it is said the difficulty arises in the supposition that 
damages can be assessed in only one description of money ; but where 
there are two kinds of currency provided by law, it is necessary, in order 
to avoid ambiguity and prevent a failure of justice, to render judgment 
for coined money where the contract provides for payment in coined 
money. Where no specified description of money is made, judgments 
maybe entered generally without such specification. Judgment below 
reversed. 

Mr. Justice Miller dissented, holding that, although it was the intention 
of the parties that gold should be paid, it was only so because gold was 
then the currency of the Government, the lawful money of the United 
States, mentioned in the contract. There was nothing in the contract to 
make it differ from any other ordinary contract payable in dollars. When 
Treasury notes became lawful money of the United States, their tender 
was sufficient to discharge the contract, and within its teims and within 
the understanding and intention of the parties. This decision in no way 
affects the legal tender cases argued by Mr. Potter and the Attorney Gen- 
eral at the present term of the Court, although argued at the time of the 
argument of those cases." 

The constitutional question has been argued and is still pend- 
ing before the Supreme Court of the United States: **was Con- 
gress authorized, under the extraordinary exigencies of the war, 
to make United States notes fitted for circulation as currency, 
* lawful money and a legal tender in payment of all debts, public 
and private V " The business men of the country are anxiously 
waiting for the highest tribunal under the Government to answer 
this question. 



208 



CONCLUSION. 

Having completed the Historical narrative of the origin, prog- 
ress and development of the system of Finance adopted during 
the rebellion, and which furnished the means of prosecuting to a 
successful issue the greatest civil war known in the history of the 
human race, some reflections on the subject may not be unin- 
teresting. 

At the breaking out of hostilities, the financial affairs of the 
banks and people were in a remarkably good condition, except, 
perhaps, in some of the Northwestern States, where the banks 
were badly organized. 

In the Atlantic cities the banks were never in a better condi- 
tion. The balances were settled through the Clearing House, in 
New York and other cities, with great regularity. There was 
paper currency and gold and silver enough to do the legitimate 
business of the country. Bank notes were regularly convertible 
at the will of the holder into specie, and to a large extent these 
notes were redeemed in New York, Boston and other Atlantic 
cities. The financial machiner}' and credit institutions of the 
country were in a prosperous condition, and there was no lack of 
means for legitimate wants. 

It was not long after the war began before it became apparent 
to the best financial men of the country, that a financial system 
adequate to the wants of the nation in time of peace, was wholl^^ 
inadequate to meet the requirements of a great war; that the war 
was a new and great business of itself, demanding new and addi- 
tional facilities, greater even than existed before the war. That 
the facilities for carrying on the business of the country as they 
existed before the war, were still necessary to carry on that busi- 
ness, and could not safely be withdrawn from it; and that a new 
currency, national in character, and to some extent a new finan- 
cial system, must be created to meet the new and enlarged demands 
of the war which had been forced upon the country. This was an 
exigency not foreseen, and the Government was obliged to exer- 
cise all the power it possessed in passing the war measures detailed 
in the foregoing narrative. 

The plan of Finance adopted in 1861-2 was successful, and 
proved adequate to these enlarged requirements. The Govern- 
ment was maintained and the Union preserved. By this plan all 
the men and material of war necessary to crush the rebellion were 
obtained without difficulty. Many mistakes were made in the 



209 



conduct of the war, but the financial plan, including taxation, was 
an ample resource sufficient at all times to meet the vast require- 
ments of the War and Navy Departments. The credit of the 
Government was brought into immediate action in the most avail- 
able form. Some mistakes were also made by the Secretary of 
the Treasury in administering the Loan acts, and too large an 
inflation occurred in 1864, which might have been prevented by 
continued funding in 5-20 six per cent, bonds, yet in the main the 
financial management during the war was a decided success, 
because it carried the country through the terrible ordeal, and 
brought the ship of state safely into port. It is true that this 
plan was not at all in accordance with peace notions of finance, 
but by it all officers, soldiers, sailors and marines were paid in 
full, and all demands for supplies and material of war were 
promptly discharged. It was a complete success as a means of 
carrying into effect the war powers of the Goveniment. These 
facts abundantly prove the efficiency and wisdom of the plan 
adopted in bringing the war to a successful termination. Although 
successful it was a heavy drain upon the resources of the country, 
and at times very embarrassing to business men, and they had to 
submit to many sacrifices. The withdrawal of such a large num- 
ber of youthful laboring men into a vast army of unproductive 
labor, and the mistake made in the over-isflue of paper currency, 
so inflated prices as to materially increase the expenses of the 
war. It also embarrassed the people engaged in legitimate pur- 
suits; laborers struck for higher wages, and the price of com- 
modities greatly increased, causing considerable difficulty in 
keeping up the productive energies of the country, especially in 
establishments where large gangs of men are employed. 

Nor can it be denied that the management of the fiscal afl'airs 
of the Government, both legislative and executive, during 
the war, was a material departure from sound political economy, 
applicable to ordinary times of peace. The demand for money 
means forced upon the country by such a gigantic rebellion, was 
wholly unprecedented — ^nothing ever recorded in history equaled 
this demand — and reached to such overwhelming amounts, so 
vastly beyond any former financial requirements, that the careful 
observer cannot but look back with wonder, and amazement that 
the Government was at all able to pass successflilly through such 
an extraordinary crisis. The authorization of a loan of $900,- 
000,000, in one act, and an increase of the public debt in one 



210 



year of over ^940, 000,000, over and above custom duties and 
internal taxes, are matters of history. The amount of the issue 
of paper currency and temporary obligations in various forms 
was almost appalling. Considerably over one million of men 
were at one period of the war withdrawn from productive labor. 
The strain upon the credit of the Government, with eleven States 
practically out of the Union, was very great. It would seem that 
no other country could have borne up under such a sudden expan- 
sion of the credit circulation, and the changing of so many men 
from producers to destroyers of life and propert3\ This great 
inflation of the paper medium had, however, some compensating 
advantages. It stimulated into wonderful activity all the pro- 
ductive energies of common labor, skilled labor, and machinery 
of all kinds. War material was produced with amazing rapidity, 
and in abundant quantity, for equipping, supporting and moving 
all the great armies in the field and navies afloat. The people 
never flagged, hesitated, or faltered in producing and furnishing 
all these vast war materials, and receiving in exchange for it the 
promises issued to them by the Government. They seenied to be 
getting rich by the operation, and although it was to some extent 
unreal, yet this stimulus, aided by patriotic determination to 
maintain the Union, was great enough to induce the people to 
furnish every thing necessary to supply the army and navy to 
crush the rebellion, at the mouth of the cannon and point of the 
bayonet. No compromise was made. Superior force, backed by 
powerful and abundant resources, accomplished this great achieve- 
ment The army and navy were powerful and victorious, because 
they were sustained by all the vast resources of the country, 
brought to their aid voluntarily, and by the superior power of the 
Government which commanded these resources. These bold and 
decisive financial measures gave power and dignity to the Govern- 
ment, and although it operated upon the unwilling as a forced 
loan, the crisis demanded it; it was the price of the national 
Union; the national faith is pledged, and every dollar of this debt 
must be paid, principal and interest, in gold and silver. 

The value of the Union and the Government preserved in full 
vigor under the Constitution, cannot be estimated in dollars and 
cents. It is above all price. A vast continent, embracing terri- 
tory and people, is now held under the control of a mighty central 
and consolidated Government, based upon the will of an enter- 
prising, intelligent and powerful people. The mind of man is 



211 



incapable of estimating the futuiie progress and destiny of the 
American people under such a Government wisely administered. 
But in a financial and economical aspect, these vast sums expen- 
ded present an entirely different view. Viewed simply as an 
economical question, the immense war debt represents only lives 
and property consumed. All the unproductive labor, vast material 
of war, provisions and supplies of all kinds are used up, wasted 
and blotted out of existence. This immense debt rolled up during 
four years of bloody war, stands out in bold demand upon the 
nation for liquidation from the future earnings and income of the 
people. Future labor and economy must furnish .the means for 
its payment This debt is the price of the Union and Constitu- 
tional Government, but their value cannot be estimated in dollars. 
The Government value is intangible and not present as a means of 
payment, but the war debt is already tangible; the bills are footed 
up, and the total amount is over $2,500,000,000. 

This sum must be paid, principal and interest, not by the issue 
of new promises to p9.y it, but by the prodiiction of actual value^ 
measured by gold and silver, the world's commercial standard, as 
well as the standard regulated by law. 

To illustrate more fully. When individuals in commercial 
transactions give their notes, bonds or other promises to pay 
money, they usually receive in exchange either real or personal 
property, or labor, which is made valuable in some form to pay 
the obligation given for it. Not so with the war debt; the prop- 
erty received and services performed for the United States notes 
and obligations, outstanding, has not, in a financial sense, been 
employed in such a useful way as to furnish present value to pay 
them with, but on the contrary it was consumed by the war. 
Hence the difference between a debt created for commercial pur- 
poses and a war debt The one is generally for property or labor 
made useful and productive, while the other is for unproductive 
labor or property consumed, wasted or destroyed not for any 
pecuniarily useful purpose. 

Immediately after the war began we commenced our departure 
from the gold standard, for the reason that every dollar expended 
for the waste of war was expended for a pecuniarily unproductive 
purpose. Every dollar expended took out of existence a dollar of 
value for which the Government gave its promise to pay. Every 
dollar of property thus destroyed led us farther and farther away 
from the specie standard, and has to be produced again by labor 



212 



before the value is restored. In one year, from July 1, 1864, to 
July 1, 18^5, 

The Expenditures of the War Department were $1,031,323,360 79 

For Navy Department 122,667,776 12 

Total waste of War iu one year $1,153,891,136 91 

The history of the human race shows no such consumption and 
waste in any war during a single year. One billion , one hundred 
and ffty-three million^ eiyht hundred and ninety-one thousand^ one 
huiulred and thirty-six dollars and ninety-one cents expended in one 
year! At the close of this year, July 1, 1865, and the close of 
active hostilities, one dollar in gold was worth, in greenbacks, 
1.41, at the Broker's Board in New York. All the bonds and 
greenback promises to pay dollars, now outstanding, do not rep- 
resent tangible property or means owned by the Government, but 
property in the possession of the people under its jurisdiction, and 
from which all this waste must be reproduced again, and the value 
restored, in order to bring us to the specie standard and enable 
us to pay the debt In short, the debt must be paid from the 
earnings and income of the people, in some foim of taxation to be 
enforced by the Government. 

It was fortunate that the debt, during the war and since, was 
distributed to a large extent among all classes of people. In fact, 
this was the only way in which the resources necessary to sustain 
the war could be obtained. The legal tender notes were paid out 
and distributed to the army and navy and for supplies and mate- 
rial of war. Certificates of indebtedness and interest-bearing 
Treasury notes, were also paid out to contractors and others. 
The loans were negotiated by direct appeals to the i)eople to sub- 
scribe in large and small amounts. The great body of the people 
in the loyal states took up the loans, and became directly interes- 
ted in sustaining the Government, and the great diffusion of the 
notes, bonds and certificates all over the countiy, was the only 
way in which the enormous debt so suddenly created could be 
carried through to the close of the war. The greenback notes 
were very popular among the people. It was a currency in daily 
use, uniform in value, and passed freely in every state. It was 
the people's loan to the Government, without interest, and was at 
the same time advantageous to them, because it was money in all 
business transactions. It immediately became the people's war. 
All became pecuniarily intrusted in its success, and they furnished 
the means to carry it on. The crushing of the rebellion was the 



213 



people's triumph ; and the people •will in due time pay the debt, 
and thereby preserve the honor and good faith of the nation. 

Notwithstanding the great destruction of values consequent 
upon the prosecution of the war, the nation was, at its close, still 
possessed of great power and resources, and the material interests 
of the Northern and Western States were still advancing. They 
continue to advance; and now that peace and order are restored, 
and the whole country North and South have a common interest 
and a common destiny, will continue to advance. There is a 
rapid increase of population; new fields of enterprise are contin- 
ually opening, adding new strength and ability to the people to 
work back to the specie standard, and ultimately pay, without 
embarrassment, everj^ dollar of the debt incurred in maintaining 
the national Union. 

^ To make this more plain the following estimate of the increase 

of the population of the United States is submitted. 

According to the rate of increase in past years, our population 

will advance in the following proportion : 

In 1870 42,000,000, In 1880 56,500,000, ' 

In 1890 76,500,000, In 1900 103,600,000, 

In 1910 138,900,000. 

The vast means for prosecuting the war to a successful issue 
were furnished by a population not over 20,000,000. The popula- 
tion subject to the jurisdiction of the national Government and 
giving it support in 1870, will be double what it was in 1862. 
The resources of the country will increase with as great rapidity 
as its population. New and improved systems of communication 
are expanding in all directions; the Atlantic and Pacific slopes 
will very soon be bound together by iron bands "across the con- 
tinent;" the mechanic arts, improved machinery, with agricultural, 
mineral and commercial facilities fully developed, will carry the 
nation so rapidly forward in power and resources, that nothing 
need prevent the Government, if wisely and economicall}^ admin- 
istered, from retiring the legal tender notes within a reasonable 
time, and as early as the year 1900, pay the last dollar of the debt 
incurred in crushing the greatest rebellion known in the world's 
history, and without retarding the growth and prosperity of the 
great Republic. 



I 



/ 




APPENDIX. 



MR. SPAULDING's SPEECH ON THE NATIONAL CURRENCY BANK BILL, 
FEBRUARY 19, 1863. 

"Mr. Speaker— This is a very important bill, and I may be indulged 
in a few remarks upon its scopel and objects. I have already stated in 
the debate on the finance bill that I had no doubt of the constitutionality 
of the national bank bill proposed by the Secretary of the Treasury, nor 
had I any doubt that State banks were also constitutional ; that both sys- 
tems of banking might be useful within their sphere of action, and that I 
was willing that the country should have both kinds of banking; that 
Inasmuch as the National Government had hitherto failed to establish a 
permanent system of national banking, State banks had, as a necessary 
means of commerce and the operations of State governments, become 
firmly established, and that the Supreme Court of the United States, by 
repeated decisions, held that they were constitutional and legitimate State 
institutions. 

The coercive features in the pending bill against State banks having . 
been stricken out, I intend to give it my vote ; not because I think it will 
afford any considerable relief to the Treasury in the next two or three 
years, or that it will in any manner lessen the issue of paper money, but 
because I regard it as the commencement of a permanent system for pro- 
viding a national currency that will, if wisely administered, be of great 
benefit to the people, and a reliable support to the Government in the 
future. 

The President, in his annual message, and the Secretary of the Treas- 
ury, in his annual report, recommend the passage of a free banking law, 
authorizing the issue of a national currency which shall be of uniform 
value in all parts of the country, and to be secured by a pledge of United 
States stocks, deposited in the Treasury of the United States. The bill, in 
all its essential features, is like the free banking law of the State of New 
York, which has been in successful operation in that State since 1838. 
Legal tender notes issued direct from the Treasury, without the agency 
of a bank, constitute a national currency uniform in value, in all parts of 
the United States, and bearing no interest, is an advantageous loan to the 
Government by the people who receive and circulate this kind of cur- 
rency. These legal tender notes are based solely on the faith of the 
Government and all the taxable property under the jurisdiction of the 
United States. If Congress performs its duty by imposing taxes on this 
property, and the Executive enforces the collection thereof, all these notes 
will be ultimately redeemed and retired from circulation. 



These notes are declared by law to be luone}', and they circnlate as 
money In all parts of the United States. The free banking law is pro- 
lK)scd by the Executive for the purpose of combining: private capital with 
the credit of the Govcrnniont in the issue of bank bills, similar in all 
resiKJcts to legal tender notes. The only difference between them will be 
that the legal tender notes have only the United States Government to 
provide for their redemption, while the bank bills, when issued, will have, 
in addition to the liability of the Govenimcirt, the direct promise of the 
banking associations issuing them that they will redeem them on present- 
ation at the bank, not in specie, certainly, during the suspension of specie 
payments, but in legal tender notes, and after a general resumption of 
specie payments by the banks and the Government^ then to be redeemed 
in coin. Legal tender notes Issued direct from the Treasury constitute a 
loan to the Government without interest. Bank notes, under this bill, 
would be loaned to the Government and the people at six and seven per 
cent, interest. We give to the banking associations the interest on the 
national currency issued by them, as an inducement to them to form these 
associations and become liable for its redemption. Instead of the Gov- 
enimcnt issuing this national currency direct to the soldiers and other 
creditors without interest, it sells its own six per cent, bonds to the bank- 
ing associations, and takes its pay in legal tender notes; the banking 
associations take the six per cent, bonds from the Secretary of the Treas- 
ury and deposit them with the Treasurer, and thereupon the Comptroller 
of the Currency furnishes to such banking associations the national cur- 
renc3% the Treasurer holding the bonds as security for their redemption. 

This national circulation is, then, money owned by such associations, 
like any other bank bills. They may be loaned to the people or the Gov- 
ernment, like any other money belonging to a bank ; and when loaned, 
the banking associations get six or seven per cent, interest for its use. 
The associations also draw the interest on the bonds previously hypoth- 
ecated with the Treasurer. By this operation the associations gain, first, 
six per cent, interest on its loans ; and second, six i)er cent, interest on the 
bonds hypothecated with the Treasurer. In this way the banking asso- 
ciations get ten or twelve per cent, gross interest per annum, and the 
Government pays six of it on the bonds sold to the associations, and 
w^hich are hypothecated with the Treasurer. The Government gives this 
bonus and the privileges of banking to capitalists, to induce them to com- 
bine their credit with the credit of the Government in issuing this 
national currency, and providing for its redemption, during suspension, 
in legal tender notes, and after resumption of specie payments, in coin. 
The Secretary of the Treasurj^ in his annual report, recommends * the 
organization of banking associations to supply circulation secured by 
national bonds, and convertible always into United States notes, and after 
resumption of specie payments into coin.' 

The additional advantages held out by the bill to induce rich men, men 
of accumulated capital, to join the Government in maintaining this 
national currency, are : 

1, The national character given to the bills to circulate at par in all 
parts of the United States. 

2. It is made receivable at par for all internal taxes and all other dues 
to the Government, except customs, and payable to the army and navy, 
and all other creditors of the Government. 

3: The banking associations are to be exempt from all State and United 



3 



States taxation, and only pay two per cent, per annum for engraving, 
paper, and printing tlieir circulating notes, and which is to include all the 
other expenses of the Currency Bureau at Washington. 

On a full review of this proposed plan of a national currency, it will be 
seen that it is based on public and private faith ; that it proposes to com- 
bine the interest of the nation with the rich individuals belonging to it. 
Men of suri)lus capital only can profitably engage in the business of banl<- 
ing. If speculators and adventurers, without positive capital, attempt to 
bank under this bill they will fail. Money-lenders, and not money-bor- 
rowers, can successively organize and manage banking associations under 
the provisions of this act. 

How far it will be found practicable to extend the organization of asso- 
ciations on the credit of the public and of individuals, can only be ascer- 
tained by the experiment. A banking association of $100,000,000 capital, 
all paid in by wealthy individuals, and linnly established in the city of 
New York, and acting as the liscal agent of the Treasury Dei)artment, 
would be a most valuable support to the credit of the Government. It 
niiglit be made the depository for all the public moneys in that cityr 
It might receive the public moneys derived from loans, from customs and 
internal taxes, and disburse all these moneys to the creditors of the Gov- 
ernment. Tliis would give the moneyed men who are stockholders of the 
bank an immediate pecuniary interest in upholding the credit of the Gov- 
ernment. Similar organizations in Boston, Philadelphia, New Orleans, 
and other principal cities of the Union might be made with less amount of 
capital, and, in like manner, become fiscal agents of the Government in 
those cities. The Bank of England is a striking example of the combined 
power of public authority and private influence in sustaining the credit of 
the Government. We may safely profit by this example. This bank has 
been the chief agent in sustaining the British Government in the long and 
exhausting wars in which she has been engaged. The Bank of England 
is the fiscal agent of the British Government, and notwithstanding it is a 
bank of discount, deposit and circulation, it has thus far received and dis- 
bursed the public moneys without the loss of a dollar of the money 
entrusted to it. 

It is also well known that our Government never lost any of the money 
deposited in the first or second Bank of the United States. They were 
both fiscal agents of the Government. All the public money was received 
and disbursed by tliem with fidelity and usefulness to both parties. 
Sound and well-managed banks tend to increase public and private credit, 
and extend as well as to facilitate commerce with States and individuals. 
They stimulate industry, commodities are multiplied, agriculture, mining, 
and manufactures flourish; these constitute the true wealth, greatness, 
and prosperity of the country. 

I have no doubt that tlie framers of the Constitution contemplated a 
national currency adequate to the wants of the general Government, and 
that for all national purposes it has the power to control and regulate the 
currency. In all Government transactions it has the right not only to 
provide by law for issuing the kind of currency that shall be received for 
taxes, custom duties, and all other dues to the United States, but also the 
kind of money that sliall be paid to the aniiy and navy, and all other 
creditors of the Government. If there had been established years ago a 
sound national bank of $200,000,000 capital, wliich had been in full opera- 
tion as the fiscal and financial agent of the Government at the time of the 



4 



breakin«r out of the prosont rebellion, what a mighty support it would 
have been in Hustaining the Government at the present time ! The inde- 
I)endent Treasury law unnecessarily Isolated the Government from all the 
capitalists and the accumulated capital of the country. 

At the very outset of this rebellion thei-e was no money in the Sub- 
Treasury, and, notwithstanding the hostility heretofore and now manifes- 
ted toward State banks, the Government was obliged to resort at once to 
the State banks in New York, Boston and Philadelphia, for money to 
prosecute the war. The States had fostered and built up strong State 
institutions, while tlie general Government had been vacillating and weak- 
ened by conlHcting views and opinions as to the constitutionality and 
policy of a national bank. It is now most apparent that the policy advo- 
cated by Alexander Hamilton, of a strong central Government, was the 
true policy. A strong consolidated Government would most likely have 
been able to avert this rebellion ; but if not able to prevent it entirely, it 
would have been much better prepared to have met and put down the 
traitorous advocates of secession and State rights, who have forced upon 
•us this unnatural and bloody war. A sound national bank, upheld and 
supported by the combined credit of the Government and rich men 
residing in all the States of the Union, would have been a strong bond of 
Union before the rebellion broke out, and a still stronger support to the 
Government in maintaining the army and navy to put it down. 

Sir, the United States Government has thus far established no perma- 
nent system of national currency except that of gold and silver. Ever 
since the adoption of the Constitution there has been a conflict of opinion 
among the ablest statesmen of the country upon the question of a national 
currency. Jeffferson opposed the creation of all banks, both State and 
national. Alexander Hamilton proposed a national bank during the 
struggle for American independence in 1780, but his suggestions were not 
then adopted. During Washington's administration, in 1791, the first 
Bank of the United States was incorporated, mainly under the influence 
of Mr. Hamilton, which continued in operation until 1811, when its char- 
ter expired. No national bank was in existence during the second war 
with (Jrciit Britain. That war was carried on by loans and by the issue 
of Treasury notes. In 1816, the second Bank of the United States was 
chartered, and continued in existence until 1836, when its charter again 
expired. All will remenaber the decided opposition of General Jackson to 
its re-charter, and the fierce struggle that ensued between the friends and 
opponents of a United States bank. The friends of the bank w^ere finally 
beaten when Jackson was re-elected President in the fall of 1832. The 
friends of a United States bank again rallied in 1840-41, but were again 
defeated by the veto of John Tyler. In 1846 the independent Treasury 
law was finally adopted, by which it was established that the operations 
of the Government should thereafter be carried on wholly in gold and 
silver coin, and that this money of the Government should be kept sepa- 
rate from all banks and banking transactions. Thus the law continued up 
to the session of the present Congress. 

•Xo settled policy has as yet been established by which the Government 
has assumed permanent control over the national currency. State banks 
still go on issuing circulating notes, selling exchange, discounting prom- 
issory notes and bills, and receiving deposits, and the Sub-Treasury law 
is still unrepealed. A national currency, adequate to the operations of the 
Government in peace and war, has yet to be established. It seems that the 



5 



present is a propitious time to enact this great measure as a permanent 
system, and that the duty of the Government in providing a national cur- 
rency shall no longer be neglected. 

Sir, the Government of the United States ought not to depend on State 
institutions for the execution of its great powers. In the administration 
of the high prerogatives conferred by the Constitution, this Government 
need not depend at all upon State officers. State institutions, or State laws. 
Its own powers and its own means, if brought into active exercise, are 
fully adequate to the ends for which the Government was established. In 
the long interval of peace many of the powers granted in the Constitution 
have not been fully exercised, nor was it necessary during peace to put 
them fully into execution. But now, when engaged in a gigantic war, 
when the very existence of the Government is in such imminent peril, it 
is of the highest importance that it should exert all those great powers to 
maintain itself, preserve its own dignity, and enforce its own prerogatives. 
Congress and tlie Executive cannot fail now to do all in their power to 
save the Government and restore the national Union. 

Sir, tliis Government has power to issue a national currency entirely 
independent of State autliority; power to support armies independent of 
Governors of States or State laws; power to provide and maintain a navy 
in like manner; and power to regulate commerce with foreign nations, 
among tlie several States,' and with the Indian tribes. These great powers 
may, by means of proper legislation, be made to operate directly upon the 
people independently of State boundaries or State sovereignty. Under the 
power ' to raise and suppoi t armies ' we may provide for calling the able- 
bodied men of the nation directly into the army of the United States, and 
without the aid of Governors of States; and in like manner the navy may 
be increased. As a necessary means for 'supporting' such an army and 
* maintaining ' such a navy, we may provide for the issue of a national 
currency, through the agency of banks, or by the issue of legal tender 
notes direct from the Treasury. Either mode will require about the same 
amount of currency to be issued to pay the army and navy ; either mode 
will be constitutional; and it is in the sound discretion of Congress to 
decide which is the best mode of providing the means for carrying on the 
Government in the present exigency. 

Sir, all the powers conferred on the general Government are self-acting, 
self-sustaining, and wholly independent of State authority; and when 
enforced by men of will, strong nerves, enlightened self-reliance, energy, 
and ability sufficient to put them into active exercise, are fully adequate 
to the putting down of this gigantic rebellion and maintaining the Consti- 
tution and laws over all the thirty-four States and the Territories included 
in the national Union. The duty of putting these constitutional powers 
into active exercise devolves upon Congress and the Executive. Congress 
cannot fail to perform every duty devolved upon it in the present great 
emergency. 

In the absence of a national bank the State banks have been liberal in 
making loans to the Government since the war begun. It has been ascer- 
tained from reliable data that on the lOtli day of January, 1863, the banks 
in the State of Kew York alone held United States securities to the amount 
of $153,637,174; being $45,000,000 more than the entire capital of all the 
banks in the State, their capitals being only $108,606,062. This shows the 
ability and willingness of the banks in New York to support the Govern- 
ment in her present peril. There is in the present imperiled condition of 



6 



the Union more distrust of the stability of the general Government than 
there is of tlie State Governments. Some doubt exists, owing to divisions 
at the North, as to our llnal success in crushing the rebellion. Could you 
make it certain that tlie Union will be preserved, and the national juris- 
diction maintained over all the thirty-four States and the $16,000,000,000 
of taxable proi>erty therein, which is liable for our public debt, excludinji: 
tlierefrom the debt of the rebel government, said to be $900,000,000, the six 
per cent, bonds of the United States would not be live per cent, below par, 
while tlie six per cent, bonds of the State of New York are worth a pre- 
mium of twenty-eight i)er cent. Capitalists are naturally timid, and will 
hesitate about entering into new projects until they can see the way clear. 
They desire to know that the Union is to be maintained and the Govern- 
ment peri)etuated. Being fully assured of this, your bonds will be imme- 
diately above par, and there will be less difficulty in organizing banking 
associations and carrying this act into effect. 

Sir, banking is eminently a practical busuiess. To be successful, it must 
be based on accumulated capital, and conducted by practical men, who 
are intimately acquainted with the commerce and business of the country. 
Finance and linancial questions must all be finally brought to a practical 
standard. However fine si)un the theories of visionary men may be, they 
cannot now be relied on to provide money in the present exigency to pay 
the army navy and other needy creditors of the Government. Our 
plan of finance must be simple, efficient and practical. It consists of two 
parts, debts and taxation, namely ; 

1. Contracting debts for the supply of the army and navy, issuing legal 
tender notes, and borrowing money in some form on the faith of the Gov- 
ernment. 

2. Taxation on the entire property, commerce, and business of the 
country, amply sufficient to pay the principal and interest of all the debts 
which have been or may be contracted on the faith of the Government. 

Sir, no theories can be imagined, nor shifts made that will be allowed to 
evade the tarifi* on imports and internal taxes on property and business 
adequate to the payment of the entire debt contracted, both principal and 
interest. The property and business of the country are amply sufficient 
for this pui*pose ; but it will require a strong, stable Government, wisely 
administered, to adjust and enforce the collection of so large an amount 
of taxes as will be required to pay the extraordinary war debt that must 
be contracted to crush the rebellion and restore peace and tranquility over 
the whole Union. I have no doubt that the patience and energies of the 
people are to be taxed to the utmost before the Union is restored and we 
be assured of future loyalty in all the southern States. You are not yet 
able to collect taxes in the disloyal States without the aid of a powerfld 
army. Before you can be assured of loyalty in the rebellious States, Union 
State Governments must be established and maintained in each of them. 
To do this will require a large army for many years. Until you can col- 
lect your taxes in all the rebel States without the aid of military force the 
rebellion is not subdued. 

Many of our friends express sanguine expectations of immediate relief 
from the passage of this national bank bill, and I should be much gratified 
to know hereafter that their expectations have been fully realized. But, 
sir, in my judgment, the Secretary of the Treasury must not place too 
much reliance upon this plan. It will not give much relief to the Treasury 
for one, two, or three years. It will not to any considerable extent, 



7 



supersede the necessity for the issue of Treasury notes. It will go into 
operation slowly. The Government having heretofore failed to provide a 
national currency, the State hanks in the older States have been organized, 
become deeply rooted, and firmly established. It will take a long time to 
supplant these banks. Every coercive or violent attempt to do so will do 
more harm than good. This new system will come in competition not 
only with existing institutions, but will encounter the prejudices of a large 
class of people who are hostile to banks, and especially hostile to a United 
States bank. It will be towards the close of the war, when the Govern- 
ment is firmly established and its authority respected in all the States, 
that it will be most valuable in providing a way for funding the public 
debt and establishing a permanent system of national currency. It is 
chiefly on this ground that I am induced to support the bill at this time. 
It is more for the benefits to be realized in the future than during the 
pending war that I am induced to give it my support. 

Debt and taxation are the inevitable necessities of war. Hence the 
importance of a reunion of all parties in a vigorous prosecution of the war, 
in order to crush the rebellion in the shortest time and with the least pos- 
sible expenditure of blood and treasure. This is the only way to stop the 
burdens and calamities of the present war. Fight vigorously and in 
earnest while the war lasts. Every consideration of duty and patriotism 
require all the loyal people to come at their country's call, to fight the 
rebels forthwith, by all the means within the range of civilized T^rfare, to 
save us from a protracted war, save the further effusion of blood, and stop 
the vast expenditures which must, unless speedily terminated, burden 
present and future generations. 

We need more economy in the management of the war. It is manifest 
there is not that close supervision and scrutiny over the expenditures that 
are necessary. Every man in the service should be required to perform 
with fidelity the duties devolved upon him. All supernumerary officers 
and men should be dispensed with. All disbursing officers should be held 
to a rigid economy and strict accountability. As we approach the termi- 
nation of this war the expenses must be greatly reduced, and preparation 
made for a resumption of specie payments. Our public debt will then 
appear in all its vast proportions, for it must all be paid ultimately in gold 
and silver. This makes it necessary for us to cut off all unnecessary 
expenses of every kind. 

Every day that the war is prolonged the debt is largely increased. The 
daily increasing debt of $2,500,000 must all be raised by taxation in some 
form, or the debt will not be paid. The Government is spending at a 
fearful rate the accumulations of former years of prosperity. Every dollar 
of debt contracted becomes a first mortgage upon the entire property and 
productive industry of the country. It affects the farmer, laborer, 
mechanic, manufacturer, merchant, banker, commission merchant, pro- 
fessional man, and retired capitalist. Every pound of tea, coflee and 
sugar used is taxed to pay the expenses of the war, and the persons using 
these articles of daily consumption pay the tax in the increased price. 
Every person that uses wine, brandy, whisky, beer, cigars, or tobacc<», 
pays a portion of the war tax. All necessary articles of dress, such as 
shoes, boots, hats, and wearing apparel, arc taxed in like manner, and all 
superfluous and unnecessary articles, such as silks, laces, diamonds and 
jewelry, are heavily taxed, and I would be glad to see the tax still further 
increased on them, in order to prevent, if ]>ossiblo, their use at tliis time. 



8 



Every person that rides upon the railroads, reads a newspaper, draws a 
check, or sends a telegraphic messaj^e, is taxed for war purposes. But I 
need not further enumerate the different modes in which every body is 
taxed every day to pay the expenses of the war. 

Sir, this war debt is a mortgage alike on all the productive industry and 
property of Republicans, Democrats, old line Whigs, conser\'atives, and 
abolitionists. All these classes of persons are taxed alike to pay the war 
debt. Every Democrat or Republican who chews tobacco, drinks beer or 
bad whiskey in the sixth ward of New York pays his proportion of the 
war debt, the same as the conservative who drinks his choice wine on the 
Fifth Avenue. This war tax is already beginning to be noticed by the 
people; but as the war is procrastinated, and the debt increased, the 
burden will be more deeply felt. While we are running along at forty 
miles an hour, under the pressure of iiTcdeemable paper, necessarily issued 
and circulated to prosecute the war, the present taxation is easily paid, 
and there is a seeming prosperity; but I can assure gentlemen that a 
reckoning day will surely come. Look at the immense army in the field, 
their commissariat, supply vessels, supply trains, ambulance corps, sutlers, 
teamsters, hangers-on, idlers and assistants of all kinds, extending over a 
line of military operations of more than four thousand miles, and you will 
be impressed with two important facts : 

1. The enormous expenditures necessary to their present support, and 
the futur^ bounties and pensions that must be paid. 

2. The number of men that are withdrawn from industrial pursuits, 
and the consequent loss of productive industry which ought to be added 
to the wealth of the country. 

All this immense army add nothing by their labor to the wealth of the 
countrj^ and the expense of supporting such an army devolves upon 
those who do labor and those who have already acquired property. 
What a mighty drain this war is upon the productive energies and 
resources of the country. It is, indeed, an exhausting as well as bloody 
w^ar. Whether it be successful or unsuccessful, vast consequences are 
involved. If terminated successfully within three years, the Union main- 
tained and the Government perpetuated under the Constitution, the 
results to flow from such a triumph would amply compensate for all this 
expenditure of blood and treasure. If it terminates imsuccessfully, the 
Union divided and the rebel government maintained, the war debt must 
still be paid; but no man here is wise enough to predict what results will 
follow such a calamity. 

I am asked almost daily, will the Union be maintained and the national 
Government perpetuated all over the States and Territories ? I cannot 
doubt that it will. No efforts of mine certainly shall be wanting to 
accomplish so desirable a result. I cannot, however, shut my eyes to the 
formidable character of the rebellion, nor to the difficulties in the way of 
accomplishing such a result. The inherent difficulties of conquering and 
subduing so large imd intelligent a people, extending over such a wide 
extent of territory as is contained in the revolted States, are Yery great. 
It is very difficult to move and supply large armies. An advance in the 
enemy's country for any considerable distance always involves the diffi- 
culties of keeping the rear line open to the base of supplies. This has 
been demonstrated in the advances that have been made in attempting to 
take Richmond. Even the armed occupation of a part of any one of the 
revolted States does not make the people in the State loyal to the General 



9 



Government. The hatred of the people in the rejbellious States is deep- 
seated and abiding. They have a separate de facto confederate govern- 
ment, and separate State governments. As States they revolted from the 
United States Government, and with their State governments remaining 
intact and in full force. They still maintain their separate State organi- 
zations, witli power to enforce their State laws. This insurrection was 
commenced very differently from most other insurrections. It was not 
commenced by disorganized bodies of the people, but by the constituted 
autliority of States in their capacity of independent sovereignties. These 
State authorities had power to suppress immediately the Union senti- 
ments of the people within their jurisdiction, and to enact as well as to 
enforce any new laws that might be necessary to accomplish their wicked 
purposes. Hence the formidable character of the rebellion at the outset. 
It will take a long time to supplant the present State organizations in the 
revolted States, and to institute new Union State governments in their 
stead. It can only be accomplished by armed force. It will require a 
large standing loyal army in the actual occupation of each State. Until 
Union State governments are organized and permanently maintained in 
all the Southern States, you cannot hope for a lasting peace. 

Sir, it is proper for us to look these difficulties square in the face. All 
the people in the Northern States ought to look at the formidable charac- 
ter of this rebellion, and act up to the demands of the hour. It will 
require the active energies of a united North to maintain the integrity of 
the Union. It is unwise, ay, criminal for us, while incurring a debt of 
$2,500,000 every day, to deceive ourselves as to the real situation. The 
business men, at a distance, are going on making money, speculating, 
buying and selling, almost unconscious of the dangers that surround us. 
Party organizations are maintained, party platforms set up, and a partisan 
struggle constantly made for power, wholly inconsistent with the mighty 
issues involved in the present war. This applies to all parties and all 
party organizations. The people in the loyal States, without regard to 
party distinctions, have a common interest and a common destiny; all are 
intensely interested in the deadly conflict, all become liable for the debts 
contracted in the prosecution of the war, and all must be taxed to pay both 
principal and interest. 

But, sir, the higher inspirations of duty and patriotism impel us to sus- 
tain the President in a vigorous prosecution of the war— a war that has 
been forced upon us by ambitious men, whose chief object is power. 
Considerations infinitely above mere party or pecuniary gains or losses 
should compel us to united action. Your country, my country, is in dan- 
ger of being divided and destroyed. Oaths have been broken, the Consti- 
tution defied, and the laws trampled under feet of rebels. 'United we 
stand, divided we fall.' I appeal to gentlemen of all parties to uphold and 
sustain the constituted authorities in vindicating the majesty of the Con- 
stitution and laws over all the States and Territories, from the great lakes 
to the Gulf of Mexico, and from the Atlantic to the Pacific oceans. This 
is our country. Let it have one national Government — one destiny.'' 

UEHKMPTION OF NATIONAL CURRENCY — ASSORTING HOUSE. 

"BUFFALO, September 30th, im'u 
Dear Sir— I am in receipt of your favor of the 28th inst., asking me to 
communicate my views of the plan proposed by the New York banks for 
the redemption of national currency. 



10 



In reply, I would say that I am clearly of the opinion that a prompt 
redemption of the national currency is necessary to insure success and 
permanency to the system. No system of banking is safe that does not 
enforce rigidly the obligation of each bank to redeem its circulating notes 
on demand. During the suspension of specie payments they are required 
to be redeemed in legal tender demand notes, and on the resumption of 
specie payments they must be redeemed in coin. This is one of the 
requirements of the National Banking Law, which should be strictly 
enforced, and every sound and well managed bank will no doubt be able 
and willing to conform to this law, and every weak and badly managed 
bank should be compelled to live up to its requirements. But in stating 
these general propositions, which no sound banker will controvert, it does 
not follow that a combination called an Assorting House is the best mode 
of compelling them to fulfill its obligation to redeem. 

An Assorting House would require large rooms, a great number of 
clerks ; they would handle a large amount of currency, the expenses would 
be hea^-y, and in these times of knavery and fraud, the risk would be verj- 
great. And to what end would this assorting process be carried on? 
JSimply to separate the money of each bank into packages to be sealed up 
and sent home by an express company for redemption. Is this necessary ? 
Is it necessary to incur all this expense and risk to secure a prompt 
redemption of the national currency. Let us consider the subject a little 
more in detail, and see if a prompt redemption of it cannot be attained 
under the law as it now stands, or by a proper amendment of it if found 
defective. 

In the first place, it is not necessary to assort and send home this cur- 
rency for redemption so long as it is required by the people to carry on 
the business operations of the country. Every time a hundred dollar bill 
passes from one person to another it is a practical redemption of it by the 
person who takes it. Every time a merchant at Chicago pays to a farmer 
$500 in national currency for a car load of wheat, the farmer by the opera- 
tion redeems such national currency, not in greenbacks, nor in gold, but 
in a commodity better than either, namely wheat, a staple article useful 
to all. So every merchant in New York that sells a bale of cotton goods 
and receives his pay for it in currency, redeems such currency, not in the 
way that banks redeem it, but in cotton goods, which is far better because 
it performs the true functions of money by facilitating the legitimate sale 
of commodities. So every time that a merchant or manufacturer pays his 
internal revenue tax to the United States Collector in national currejic3% 
the Government redeems such currency by receiving and discharging such 
tax. So every mechanic or laborer that receives national currency for his 
services, redeems such currency by the labor performed. So it will be 
seen that just so long as the national currency is practically redeemed 
every day in its passage from hand to hand in the payment of commodities 
and services and in the ramified operations of trade and business both with 
the Government and the people whose operations it greatly facilitates, 
there is not the slightest necessity for resorting to the expensive and risky 
operation of assorting and sending it home for redemption. 

With a proper amendment to the National Bank law, I am clearly of tlie 
opinion that it would be unwise to establish an Assorting House^ and even 
without such amendment, I do not think it good policy to establish it. Jn 
the first place the Assorting House will be as I have stated, attended with 
great risk and expense. And in the next place it is opposed to sound 



11 



policy and will have a mischievous effect upon the legitimate circulation 
of the national currency. The leading object of the national bank law was 
to furnish a currency of uniform value and similitude to be used by the 
Government and people as an instrument to facilitate the exchange of com- 
modities and services, and the collection of internal taxes, in all parts of 
the United States. It is amply secured by gold bearing bonds deposited 
with the Treasurer of the United States at Washington. Only ninty per 
cent, of currency is issued on the amount of bonds hypothecated, thus 
leaving a margin of ten per cent, for depreciation. The Government 
stamps it with the imprint of the Treasury and guarantees the ultimate 
I)ayment of every dollar put in circulation by any bank, whether such bank 
is solvent or insolvent. It is made a legal tender* for all taxes and other 
debts due to the Government except customs, and for all debts due from 
tlie Government except interest on tlie funded debt. All national banks 
are obliged by law to receive it for all debts due them, and each national 
bank depositary is further obliged to receive it on all Government deposits 
made in the bank by any public oflSicer. These provisions in the bank law 
give great advantages and credit to the national circulation over that of 
State banks. These provisions of the law provide to a considerable extent 
for 2i practical redemption of this currency in the every day operations of the 
Government and people, not only in New York, Boston and Philadelphia, 
but also in Charleston, New Orleans, St. Louis, Cincinnati, Chicago and 
Buffalo, and in every other city and village throughout the length and 
breadth of the whole country. With the facility thus given to the national 
currency to circulate at par in every part of the United States, and the 
guarantee of the Government that every dollar of it shall be paid, it passes 
freely among all classes of people and corporations without any one stop- 
ping to enquire whether a particular bank is badly managed or not. The 
national currency with the pledged security and guarantee of the Govern- 
ment, is good in any event, and is not likely to become a dead weight in 
any of the banks in the principal cities. If a weak or badly managed bank 
(like the First National Bank of Attica, for instance) should fail, its cred- 
itors may be large losers by the failure, but every dollar of the circulation 
will be paid, and the notes continue to circulate equally as well after as 
before its failure. No one ever stopped taking the circulating notes of the 
First National Bank of Attica, notwithstanding its failure more than six 
months ago. It is not the bill holder that will lose by the failure of a 
national bank, but its depositors and other creditors, hence the security of 
national currency over all other currency. Thus far the national banking 
system in respect to its circulation has gone on smoothly. All this cur- 
rency in miscellaneous packages consisting of the issues of banks in 
Maine, Minnesota and Tennessee, pass equally well without being assor- 
ted, in all parts of the United States. This system of furnishing a circula- 
ting medium thus far works as well, or better than was anticipated by its 
most sanguine advocates. It is fulfilling admirably the great desideratum 
of a true national currency, so long needed to carry on successfully the 
business of the enterprising people of this great country. 

I should regret very much to see a combination of bankers in any of 
the principle cities organize an Assorting House to disorganize the har- 
monious working of tliis system by assorting this cuiTency, sealing it up 
in separate packages, and sending it home to each bank issuing it for 
redemption, unless there should be an imperative necessity for so doing. 
The tendency of such an operation would be to materially disturb the 
financial operations of the country. Once begin the operation of assort- 



12 



I'urreury by a large organized A.s&oi-tiu": House in the city of Xew 
York, with a large number of clerks under good salaries, and you begin 
a system that will ultimately draw into its support every bank in the 
whole country. What will be the opi^ration of such a combination ? lu 
the first place it may not be illegal, but is not specially authorized by the 
national law. in tfie n«'xt place it begins by the city banks sending all 
national currency received by them to the assorting house, whether neces- 
sary or not, to be assorted, sealed up in packages, and sent home to each 
bank, either through its redeeming agency or directly by express to the 
bank that issued them. Kaeh bank, on receiving this currency so sent 
home, is obliged to provide for it either in legal tender greenbacks, which 
are no safer than national currency, or by drafts which are at par in New 
York, but generally by providing a fund in advance at a bank in one of 
the principal cities. As the currency continues to be assorted and sent 
home, it creates the necessity for each bank out of New Y'ork to provide 
more par funds to be placed to their credit ready for redeeming their 
notes as they shall be again assorted and sent home for that purpose. 
These banks not being able to make exchange or par funds in other 
modes, will very soon begin to gather up the circulating notes of other 
banks, and especially notes issued by other banks in their own locality', 
and send them to New York for their own credit. These notes, on reach- 
ing New Y'ork, will again go immediately to the assorting house, and be 
again counted, sealed up, and sent back by express to the country. As 
this process of sending money packages to and from New Y'ork goes on 
through the machinery of the assorting house, the volume will continue 
to increase until every bank in the country will be obliged to contribute 
directly or indirectly to the support of a combination unknown to the 
law. It seems to me that the good to be attained by any such combina- 
tions will be greatly overbalanced by the mischiefs it will create to the 
present harmonious working of the system. It would no doubt be a 
profitable business for the express companies to carry these money pack- 
ages to New Y'ork and back again to the countrj', but I am greatly 
puzzled to know how it will be any advantage to the people, the Govern- 
ment, or the banks, either in New York or elsewhere, to carry such a 
scheme into practical operation. If this combination is adopted, the 
national currency issued by the banks in New York city which now circu- 
late freely everywhere, will be unnecessarily returned upon them for 
redemption under the operations of their own assorting house. This will 
be one of the legitimate results of the system of assorting which cannot be 
avoided. 

I watched with considerable care the working of the system instituted 
by the Suffolk Bank of Boston and the Metropolitan Bank of New Y'ork, 
compelling the old State banks to redeem their circulating notes by a sim- 
ilar process. This was no doubt a check against the excessive issues of 
banks at that time, especially to banks in New England, which were not 
very strongly restricted by law as to the amount of these issues, but I very 
much doubt whether even this plan to coerce the redemption of even an 
inferior currency did not do more hurt in deranging the free and legiti- 
mate circulation thereof than it did good in preventing excessive issues. 
It certainly afforded a fine business for the express companies in carrying 
money packages to and from New York ; and it is certain also that the 
activity with which these packages were hurried back and forth, greatly 
accelerated the panic that occurred in August, September, and the first 



13 

half of October, 1857; until finally the hanks in New,* York, by conamon 
consent, ceased sending it home, and took this secured currency of the 
State of New York and made it a basis for Clearing House Certificates, 
which had an important influence in stopping the panic and restoring 
confidence. 

Upon a full examination of the subject, I arrive at the conclusion that so 
long as the national currency is required for legitimate business purposes, 
it will not largely accumulate in the banks of either of the three cities of 
New York, Boston or Philadelphia, nor will it be sent home for redemp- 
tion. Thus far it does not appear that there has been a plethora or glut of 
national currency in either of those cities. But suppose that in the course 
of a few months there should accumulate a few millions dollars of national 
currency in those banks more than could be readily disposed of in the 
operations of the Government and the people, in what manner should it 
be disposed of? 

In such a contingency, when it does occur, I think tlie issuing banks 
should be called upon to redeem their circulating notes, and it seems to 
me to be right that each bank should be required by law to redeem in 
the principal city where such surplus currency accumulates, as well as at 
their own counter. 

New York city is the great commercial emporium, and is clearly indica- 
ted by the course of business, foreign and domestic, as the proper place 
for each bank located out of that city, to have an agent for the redemption 
of its circulating notes. 

An amendment to the national banking law can probably be made at 
the next session of Congress, which shall require all the banks to have an 
agent for the redemption of their circulating notes in the city of New 
York, instead of being allowed to select as they now do, any one of the 
seventeen cities named in the present law. This being accomplished, any 
bank or individual in New York, or elsewhere, in any city or town in the 
United States, could send the circulating notes of any bank to the agency 
selected by it for redemption without the expense and risk of an assorting 
house, which I think is the true mode of providing for the redemption of 
the national currency. This would be in accordance with the law, and 
would, I think, give better satisfaction and better promote the welfare of 
all concerned. 

This is my answer to your request. 

Yours truly, E. G SPAULDING. 

J. U. Orvis, Esq., 

Pres't 9th National Bank, New York." 

MR. Randall's bill to destroy national banks. 

Buffalo, January 22, 1867. 

Hon, H, R, Hulburd, Comptroller of Currency, Washington; 

Dear Sir— I am much obliged for the information contained in your 
letter, and I trust you will pardon me for the remarks I am about to 
make. 

I have watched with a good deal of interest the various plans brought 
forward in Congress, in relation to the National Finances and Amend- 
ments to the National Banking Law. Every man in the country is on 
the lookout to see what is to come next. Every one engaged in legitimate 
pursuits wants a fixed policy and steadiness in financial afi'airs, and yet 



14 



all ure under constant apprehengions, fearing that some scheme will be 
hastily passed by Congress which will derange monetary affairs, and upset 
all their business calculations. Many enterprises are postponed. The 
building of railroads, ships, warehouses, elevators, furnaces, and other 
manufacturing establishments, are held in abeyance until it can be more 
clearly seen what is to be done with these schemes, and what is to be the 
future in regard to linancial affairs. 

It is obvious that this suspense and apprehension operates very unfavor- 
ably upon individuals, as well as upon the revenues of the Government. 
Congress in its official capacity has thus far acted wisely. It has not 
passed any of the individual schemes that have been brought forward. 
It has been content to *let well enough alone.' It has refused to increase 
the national cuiTcncy above ^300, 000,000. It has not passed Mr. Randall's 
grand scheme of repudiating the faith of the Government with the 
National Banks, and turning the Treasury Department, in time of peace, 
into a permanent machine, for tlie issue of an irredeemable paper cur- 
rency when there is not the least necessity for it, and when all history 
proves it to be unwise, as tending to retard the resumption of specie pay- 
ments, and resulting in general financial disaster, bankruptcy and ruin, 
both to the Government and people. It has refused to pass the twenty 
pages of pending amendments to the National Bank act, (House Bill No. 
771,) which, if passed, would make the law worse instead of better. In 
short, the Senate and House, as legislative bodies, have submitted to the 
introduction of these injudicious measures to be talked about, but as yet 
they have not been unwise enough to let any of them be passed into laws 
to further disturb existing arrangements under laws already passed, and 
which, up to the time of the meeting of Congress, were operating very 
favorably, under a moderate contraction of the currency, in preserving a 
good degree of steadiness and uniformity in the money market, keeping 
business steady and prosperous, and enabling the Secretary of the Treas- 
ury to establish more certainly the public credit at home and abroad, and 
make a most favorable exhibit of the national debt. These are matters 
of great consequence to the welfare of the nation, and I sincerely hope 
that no hasty or indiscreet measures will be allowed to pass. The people 
of the country need rest, and in order to secure it I trust that Congress 
will hold a steady purpose, and not pass laws at one session to be repealed 
in the next. We are cursed with too much legislation, and I am gratified 
to see the present Congress holding back on all impracticable schemes. 

The act of Congress passed on the 12th of April last, it seems to me is a 
wise and judicious measure. It authorizes the Secretary of the Treasury 
to dispose of 5-20 gold bonds, and with the proceeds to retire six per cent, 
compound interest notes, and the plain legal tender greenback currency 
and other indebtedness of the Government, but not to retire more than 
$4,000,000 of greenbacks a month, or $48,000,000 a year, but without 
restriction as to the amount of compound sixes that may be retired during 
any week or month. This law is discretionary with the Secretary of the 
Treasury. Power is given him to contract the cun-ency, but he will no 
doubt use his discretionary power prudently, and not retire either green- 
backs or compounds, any faster than it can be done without materially 
disturbing the legitimate business of the country. His object will be in 
the future, as it has been during the past year, to keep a steady and uni- 
form money market. This will be a necessity on his part to enable him 
to successfully carry on the fiscal affairs of the Government. Under a 



15 



very stringent and paniky money market, the 5-20 bonds would fall below 
par, thereby stopping conversion of 7-30 into the 5-20 bonds, and this, in 
view of $650,000,000 of 7-30s falling due between this and July 15, 1858, 
would embarrass and derange all the operations of the Treasury Depart- 
ment. The Secretary of the Treasury must therefore, of necessity, be 
moderate and discreet in contracting the currency under the law of the 
12th of April. 

The Secretary will no doubt, by a moderate and prudent course of con- 
traction, endeavor to keep the business and industry of the nation in a 
prosperous condition, in some degree check wild speculation, gradually 
reduce prices, and bring greenbacks and national currency nearer the 
specie standard. On this point the Secretary, in his last annual report, 
makes the following judicious remarks : ' How rapidly the United States 
notes may be retired must depend upon the eflfect which contraction may 
have upon business and industry, and can be better determined as the 
work progresses. No determinate scale of reduction would, in the pres- 
ent condition of affairs, be advisable. The policy of contracting the 
circulation of Government notes should be definitely and unchangeably 
established, and the process should go on just as rapidly as possible with- 
out producing a financial crisis, or seriously embarrassing those branches 
of industry and trade, upon which our revenues are dependent.' As 
the volume of currency is reduced, it will increase in value, and as soon 
as the specie standard is reached, the national banks will be obliged to 
redeem their circulating notes in specie. The Government can retire 
whenever it seems best, from the field, as an issuer of paper currency, 
and consequently will not be under the necessity of providing gold and 
silver to redeem it. The burthen of redeeming the national currency in 
gold and silver will then be thrown exclusively upon the banks that issue 
it, and they will be required to keep the necessary reserves of coin for 
that purpose. 

It seems to me that the act of the 12th of April contains all the power 
for contracting the currency which is necessary to bring the business of 
the country back to the specie standard, as it was before the rebellion. 
It may take three years, five years, or even ten years, to accomplish that 
result. When the old uniform standard of gold and silver is reached, and 
prices and the business of the country are again based thereon, national 
banks will take the place of State banks in the issue, circulation and 
redemption of the currency necessary to carry on the fiscal affairs of the 
Government and people. The Treasury Department will be relieved from 
a duty that was forced upon it as an imperative necessity during the war, 
and the Government left to perform its legitimate functions under the 
Constitution, the currency being thereafter regulated the wants of 
trade and industrial pursuits. 

It was never intended by the originators of the legal tender acts that 
the issue of an irredeemable paper currency should ever become the per- 
manent policy of the Government. In the opening speech I made in the 
House on the 28th of January, 1862, on the bill introduced by me, I said 
that ' the bill before us is a war measure ; a measure of necessity and not 
of choice, presented by the Committee of Ways and Means, to meet the 
most pressing demands upon the Treasury, to sustain the army and navy, 
until they can make a vigorous advance upon the traitors and crush out 
the rebellion. These are extraordinary times, and extraordinary meas- 
ures must be resorted to, in order to save our Government and preseive 
our nationality.' 



16 



The credit of the Government, by the legal tender act, was brought into 
immediate requisition, and in the most available form to provide ways 
and means for sustaining the army and navy to crush the rebellion. It 
was in effect a forced loan from the people to the Government, in a most 
perilous period in our liistorj-, and was justified mainly on the ground of 
imperative necessity. It was a temporary measure passed in a most 
pressing exigency, and should not be continued any longer after peace is 
restored than seems to be necessary to conduct us safely back to that 
standard of value, which is recognized by all the nations of the world. 

In the speech to which I have above referred, I further said, * a suspen- 
sion of specie payments is greatly to be deplored, but it is not a fatal step 
in an exigency like the present.' 

* The British Government and the bank of England remained under sus- 
pension of specie payments from 1707 to 1821-2, a period of twenty-five 
years; — gold is not as valuable as are tlie productions of the farmer and 
mechanic, for it is not as indispensable as are food and raiment. Our 
army and navy must have what is more valuable to them than gold or 
silver, they must have food, clothing and the material of war. Treasury 
notes issued by the Government on the faith of the whole people, will 
purchase these indispensable articles, and the war can be prosecuted until 
we can enforce obedience to the Constitution and laws and an honorable 
peace be thereby secured. This being accomplished, I will be among the 
first to advocate a speedy return to specie payments, and all measures that 
are calculated to preserve the honor and dignity of the Government in 
time of peace, and which I regret are not practicable in the prosecution of 
this war.' 

The national banking law, passed to continue for twenty years, was 
intended as a permanent system. It was intended that it should take the 
place of the State banks, in furnishing a solvent national currency ol 
uniform similitude and value for the whole country. The arguments put 
forth in the last annual reports of yourself and the Secretary of the Treas- 
ury in favor of sustaining the national bank currency seem to me to be 
cogent and conclusive. I advocated the national bank law, not for any 
immediate relief it would give to the Treasury, but as a permanent system 
of currency and banking. In the remarks wliich I made in the House on 
the day of the passage of the bill, I said 'that I should vote for it, not that 
I think it will afford any considerable relief to the Treasury in the next 
two or three years, but because I regard it as the commencement of a per- 
manent system for providing a national currency that will, if wisely 
administered, be of great benefit to the people, and a reliable support to 
the Government in the future.' 

All the advocates of the legal tender act while it was pending in Con- 
gress, based their arguments upon the necessity of its passage as a tempo- 
rary relief to the Treasury during the war, and not as a permanent policy 
of the Government. On the contrary, the national banking law was 
advocated as a permanent system of national currency and banking for 
the whole country. The State banks in this and other States, especiaUy 
the banks in the State of New Tork, gave up their State organizations 
with great reluctance. But in consequence of the law which taxed State 
circulation out of existence, the State banks w ere obliged to come under 
the national banking law for self-preservation, a law which on its face was 
to continue for twenty years. 

It has taken something over three years to put in successful operation 



17 



about 1,650 national banks under one system, and which are directly under 
the control and regulation of the officers of the Government at Washing- 
ton. A few of the banks have but recently perfected their organizations 
and obtained from the Department their circulating notes. Before the ink 
is fairly dry on the last issue of national currency we are startled with a 
bill reported from the bank committee in the House to emasculate and 
destroy this system of national banking. I say destroy it, for no man at 
all conversant with the advantages of private banking and its freedom 
from taxation and other restrictions, would consider it any inducement to 
remain under the inquisitorial supervision imposed by the national bank- 
ing law, if the right to issue circulating notes is taken away from them. 
These banks have been organized in good faith by the stockholders under 
the national law, because in the first place State bank circulation was 
killed by United States taxation, and in the next place great inducements 
were held out to them for a national circulation to continue twenty years. 
What a breach of faith on the part of the Government in holding out 
inducements to organize under this law, killing off" the State banks first, 
and then turning a short corner to kill off the national banks, children of 
its own creation. Are all the rights which the stockholders of the banks 
have acquired under this law to be thus summarily disposed of? How 
many banks would have organized under this law if the stockholders had 
supposed that their rights to issue circulating notes would be taken away 
from them as soon as they were organized ? Not one in a hundred, for the 
simple reason that there would be no inducement to come under the 
restraints of the national law without circulation. 

It is said that these banks can continue to do business on their capital 
and deposits, this is no doubt true, but it could be much better carried on 
by the stockholders as private bankers without the onerous taxation and 
restrictions imposed by the national law. The organization of State and 
private banks would be much better, larger latitude being given to oper- 
ate, and much freer from inquisitorial examinations. 

If this bill now pending in the House is passed and becomes a law, it 
will pretty effectually use up the national banking system. It has taken 
about four years to build it up, and within three years it will be so far 
destroyed as to make it no object for stockholders that can organize into 
private banking companies to remain in the emasculated and restricted 
condition in which they will be placed. 

What security can men have for investing their money and basing their 
business calculations under a national law ? The insecurity and scandal 
that will attach to such hasty and inconsiderate legislation will deter all 
prudent men from placing too much reliance upon a law of Congress, 
passed at one session, organizing a great system of national policy, to be 
emasculated or repealed before it gets fairly into operation. It looks too 
much like confiscating the property of individuals under the pretence of 
creating a sinking fund to pay off the national debt. 

I hope the Senate and House will carefully consider this measure in all 
its bearings before they pass a law involving such important consequences 
in regard to its breach of faith in destroying the acquired rights of the 
stockholders in these banks, and the disastrous consequences likely to 
follow the issue of Government paper money as a permanent policy. 
Tours very truly, 

E. G. SPAULDIXG. 




18 



MR. SPAULDIKO TO 8ECRETAKY MCCULLOCH. 

Farmeb*8 and Mechanics' National Bank, ) 
No. 3 Spaulding's Exchange, > 
Buffalo, December 4, 1866. ) 

Dear Sir~You will do me a favor by sending to me by mail a pamphlet 
copy of yonr report and accomx>anying documents. I have only seen a 
synopsis of it, but it seems to me that you understand the situation, and 
have stated it with force and ability. I congratulate you on the favorable 
exhibit of the public debt, which is in a great measure due to your dis- 
creet and prudent management of the national finances. You have no 
doubt now, to a large extent, control of the finances of the country, and 
I think that you will, of necessity, contract moderately, so as to preserve 
a tolerably easy money market, in order to be able to fhnd the compound 
6*s and the 7-30's into long gold-bearing bonds, between this and the 15th 
of July, 1868. There may be occasional spasms and tightness for money 
with the specidaiarSj but generally I shall look for plenty of money for 
legitimate business for at least a year to come. If the speculators should 
get some check it would be a good thing for the country, and all men 
engaged in industrial pursuits would not complain. 

I hope you will be able to reach the 8i>ecie standard with at least $250,- 
000,000 of plain legal tender United States notes still outstanding. The 
amount of gold and silver coin now available in this country is so small 
that it constitutes a very adequate basis on which to rest the largely 
increasing volume of business to be transacted, and unless we can have 
legal tender in some form, other than gold or silver coin, I think we will 
hereafter be very much subjected to panics and revulsions, to the injury 
of legitimate business, and, consequently, diminished revenues. If we 
can maintain $250,000,000 of the paper tender at the specie standard, in 
addition to the supply of gold and silver, I think the business of the coun- 
try would, in the future, be more steady and uniform. 
Yours truly, 

E. G. SPAULDING. 

Hon. Hugh McCulloch, 

Secretary of the Treasury. 

secret Ai|nr Mcculloch's reply. 

Treasury Department, ? 
Washington, December?, 1866. > 

Dear Sir— Your favor of the 4th inst. is received. You will receive a 
copy of my report through the Comptroller of the Currency. It was very 
hastily written, but is, I think, sound in doctrine. 

What we need is an increase of labor. If we could have the productive 
industry of the country in full exercise, we could return to specie pay- 
ments without any very large curtailment of United States notes. My 
object has been to keep the market steady, and to work back to si)ecie 
payments without a financial collapse. I shall act in the future as I have 
in the past, with great caution, and attempt no impracticable thing. 
I am very truly yours, 

II. Mcculloch. 

Hon. E» G. Spauldino, 

Farmer's and Mechanics' Bank, Buffalo, Ni Y. 



19 



NATIONAL DEBT — NO REPUDIATION. 

Will the public debt of the United States ever be repudiated? The 
answer to this question depends upon the efficiency and fidelity of the 
national Government. The Government has ample power under the Con- 
stitution and ample means at its disposal to pay every dollar of the public 
debt. Believing that the Government will continue faithful and efficient, 
I answer no ! the public debt will not be repudiated. A large majority of 
the people also say no, but nevertheless there is a small minority that have 
answered this question in the affirmative, and continue to repeat the asser- 
tion that the public debt will never be paid. This reckless assertion has 
some influence in depressing the national securities and keeping up the 
price of gold. This grumbling class of people say that the " old Continen- 
tal money" issued during the war for independence, became worthless 
and was never paid. This is no doubt true — the Continental money did 
greatly depreciate and was never fully paid, but it was issued under the 
feeble authority of the old Continental Congress, when there was no 
adequate executive authority to enforce the collection of taxes for the pay- 
ment of the public debt. This depreciated currency was issued both 
before and after the adoption of the articles of Confederation of the old 
thirteen states, and before the formation of the present efficient Govern- 
ment under the new Constitution. 

Under the articles which composed the old compact, there was no power 
vested in the Continental Congress to collect taxes. The power to enforce 
the collection of taxes was left to the legislatures of the several States. 
Upon a quota furnished and a requisition made by Congress, the several 
States were required to levy and collect taxes to support the Federal Com- 
pact. This plan was a fallacious system of quotas and requisitions, incon- 
sistent with every idea of vigor or efficiency which pertains to every well 
organized Constitution of civil Government. It is not at all surprising 
that the Continental money which depended upon thirteen other Govern- 
ments to levy and collect taxes to raise money for its payment, should 
depreciate and become of little or no value. The power contained in the 
old Continental Compact was nominal, without a president or other exec- 
utive to enforce its requisitions. It was ineffectual to raise money by 
taxation, and consequently the old Continental money fell into disrepute 
and was never fully paid. 

Under the present Constitution all is changed. Instead of the old feeble 
compact existing at the close of the seven years war for independence, we 
have now a strong, well organized civil Government, under a Constitution 
with ample executive legislation and judicial powers, fully adequate to 
the objects for which it was formed. This Government is now invested 
with power to protect and defend the Constitution, enforce the laws and 
preservie its own existence ; power to provide for the common defence and 
promote the general welfare ; and for these purposes has power to raise 
and support armies, to provide and maintain a navy, and provide for call- 
ing forth the militia to execute the laws of the Union, suppress insurrec- 
tions and repel invasions. To raise the money for these purposes, the 
Government is invested with further power to borrow money on the 
credit of the United States, and to repay the money thus borrowed, to 
levy and collect uniform taxes, duties, imports, and excises throughout 
the United States. These are some of the great powers intrusted to the 
general Government for the preservation of its own existence. 

When this most wicked and gigantic rebellion broke out, in an open and 



20 



avowed detenuiiiatioii to break up the Union, it became necessary to bring 
into active exercise all tliese higii powers of tlie Government. Armies and 
navies had to be raised and supported. All the material of war necessary 
for their elHciency liad to be provided. Money had to be borrowed, and 
in vast amounts. The old Continental money possessed none of the 
elements of vitality and credit that is imparted to the legal tender demand 
notes and bonds issued under the present Constitution, with this great 
I)ower vested in the President to enforce the laws. 

The debt thus incurred in the prosecution of the war to put down the 
rebellion and restore the national authority over all the States, will be 
about $3,000,000,000. This large sum has been borrowed on the credit of 
the I'nited States, to maintain the Government and perpetuate the Union, 
and the beneficial results flowing from the triumph of the national cause 
are amply sufficient to compensate for all the money expended in accom- 
plisliing this great achievement. The secureties issued as evidence of this 
large indebtedness, consist of bonds, notes and certilicates, which are 
widely distributed among all classes of people. 

All the forms of law have been complied with to bind the Government 
and give validity to these diflferent forms of indebtedness. The good faith 
of the nation is pledged in the most solemn manner to the payment of 
every dollar of this debt, both principal and interest. 

The (lovernment of the United States is not now dei)endent at all on 
the State Governments for the execution of its great powers. All the 
powers conferred on the General Government by the present Constitution 
are self-acting, self-sustaining, and wholly independent of State author- 
ity. The Constitution and laws of the United States operate directly 
upon the people, without any regard to State boundaries. We have now 
a Congress to pass all the taritt* and tax laws necessary to raise all the 
money reriuired to pay the current annual expenses of the Government, 
pay the interest on the public debt, and raise a surplus sufficient to retire 
annually a portion of the principal. 

The grand results of the last four years have most abundantly shown 
the power and efficiency of the present National Government under the 
existing Constitution. 

It is clearly demonstrated that we have a strong, stable and efficient 
Government, fully competent to levy and enforce the collection of cus- 
tom duties and internal revenue adequate to support the Government. 

The true value of the property, real and personal, within the United 
States, according to the census of 18C0, was $16,000,000,000, and it has, 
notwithstanding the exhausting nature of the war, gi'catly increased 
since that time. All this property is liable to be taxed to the full extent 
necessary, to support the Government and pay every dollar of the debt 
incurred in the prosecution of the war. The Government has a claim 
under the Constitution, a mortgage in fact, which is the first lien on all 
this real and personal property to that extent. All the debts of States, 
counties, cities, cori^orations and individuals are second and subordinate 
to this first claim of the National Government. 

Our credit rests on this property and the good faith and fidelity of the 
Government to collect these taxes. 

Since the creation and distribution of this large debt among all classes 
of people, and a large part of it made the basis for the organization of over 
sixteen hundred banlis, the whole fabric of credit, public and private, 
must, to a great extent, rest on the efficiency and determination with 



21 



which these taxes are to be levied and collected. Public and private 
credit are so interwoven with all the commercial transactions of the coun- 
try, that if the public credit fails, individual credit must also fail. The 
value of legal tender notes, national currency, five-twenty bonds, ten- 
forties and seven-thirties, all depend upon the revenues derived from 
custom duties and internal taxes. Our own people and the people of 
Europe must be fully assured, not only of the ability, but of the willing- 
ness and determination of the Government to pay promptly every one of 
the obligations of the Government as they become due, and that the finan- 
cial credit of the Government will be maintained on the stable and sure 
basis of ample taxation. There is no other sure basis for it to rest upon. 

There can be no doubt that the suggestions of the Secretary of the Treas- 
ury to gradually retire a portion of the currency, are wise and judicious. 
If it cannot be done by funding without bringing down the price of five- 
twenty six per cent, bonds below par, so as thereby to embarass the 
operations of the Treasuiy in providing for the large temporary debt as it 
becomes due, then I think it should be accomplished by Congress provi- 
ding for an increase of revenue. The credit of the Government can be 
maintained, and it ought to be maintained at all hazards, and prices should 
be reduced. All who have read the late admirable reports of the Secretary 
of the Treasury, the Comptroller of the Currency, and the nearly unani- 
mous resolution of the House of Representatives, must be satisfied that the 
Government is united and strong in its determination to enforce the full 
power it possesses to carry us safely through all our financial difficulties, 
and bring the business of the country back to a more safe and secure 
standard. So long as Congress and the Executive departments of the 
Government continue, as they now do, to discharge their duties with 
eflSiciency and fidelity, the repudiation of the public debt will be an 
impossibility. 

I have lately seen and read in the public newspapers much that is of a 
fault-finding chai'acter, and much theorizing on the subject of our national 
finances, but after all that has been said or written on the subject, it comes 
down to a plain matter-of-fact business, which seems to be well under- 
stood by the Secretary of the Treasury, viz : 

1. That frugality and economy should be practiced in all the depart- 
ments of the public service. 

2. Find out all the taxable property and business of the country, and 
the best modes of collecting revenue therefrom. 

3. Levy and collect a tax upon it amply sufficient to raise a sum that 
will pay the yearly expenses of the Goverament, pay the interest on all 
tlie public debt, and leave a surplus of at least $50,000,000 annually 
towards retiring a part of the public debt, and the credit of the Govern- 
ment will be firmly maintained. Xo repudiation of the public debt will 
ever take place so long as this policy is pursued with vigor on the part of 
the national Government. 

The great mass of the people are honest and patriotic, and believe that 
the public debt was incurred for just and patriotic purposes. They will 
stand by their rulers in maintaining the public faith. They will pay the 
taxes freely, and will never consent that the fair fame of their free Gov- 
ernment shall ever be tarnished by a repudiation of one dollar of the debt 
incurred in such a righteous and noble cause. 

E. G. SPAULDING. 



22 



NO STATE TAXATION OF UNITED STATES BONDS. 

The Supreme Court of the United States, at Washington, has decided 
that United States Government Bonds and Treasury Notes cannot be 
taxed by States, Counties or Cities. The power to borrow money by the 
Government of the United States is supreme, and cannot be interfered 
with by any State law. All the Government securities have been issued 
under a positive law, w^hich makes it a part of the contract that they 
should not be taxed for local purposes, and the contract cannot be changed. 
The first section of the act of Congress, passed June 30, 1864, provides that 
* all bonds. Treasury notes and other obligations of the United States shall 
be exempt from taxation by or under State or Municipal authority.' 

The Constitution of the United States provides that * This Constitution 
and the Laws of the United States, which shall be made in pursuance 
thereof, shaU he the supreme law of the land, and the judges in every State 
shall be bound thereby ; anything in the Constitution or laws of any State 
to the contrary, notwithstanding.^ 

The Supreme Court of the United States has decided that all the State 
laws passed to tax United States securities are unconstitutional and void. 

These loans are the best security in the market. No searches of title 
are necessary. The Constitution of the United States and the act of Con- 
gress make the public debt the first lien on the real and personal property 
of the country. The Government bonds and notes are the first claim to be 
paid, city bonds, railroad bonds and bonds and mortgages, are only a 
second lien, to be paid after the Government securities are paid. 

E. G. SPAULDING. 

PUBLIC DEBT GOOD FAITH — HON. E. G. SPAXJLDING's LETTER TO 

SENATOR MORGAN — SENATOR SHERMAN's FUNDING BILL. 

Buffalo, Dec. 24, 1867. 
Hon, E, D, Morgati, U, S, Senator^ Washingtcm, 

Dear Sir— I am in receipt of the recent report of the Finance Committee 
brought in by Senator Sherman, and Senate Bill No. 207, *for ftinding the 
national debt, and for the conversion of the notes of the United States,* 
accompanied by your letter of the 19th instant, asking my opinion on the 
proposed measure, or any of its parts, and desiring me to communicate 
my suggestions at an early day. 

I am deeply impressed with the importance of a return to the specie 
standard at the earliest moment consistent with the operations of the 
Government and people. I concur fully in that part of the report of your 
committee which seeks * to secure to the holders of United States notes, as 
soon as possible, their value in gold.' This, in my opinion, should engage 
the earnest efforts of Congress and the Executive ; and I am much grati- 
fied to see your committee so earnest and decided in urging a return to 
the specie standard at the earliest practicable moment. A resumption of 
specie payments by the Government, the banks and people, is the first 
great thing to be accomplished. This would dispose of nearly all the com- 
plicated and disturbing issues that have been raised by politicians and 
others, as to the time when, and the kind of money in which, the public 
debt shall be paid. It would demonstrate more clearly than any thing 
else, our resources and ability to pay the public debt, and our determina- 
tion to preserve unimpaired the good faith of the nation, and establish all 
business operations on a firm and enduring basis. 



2^ 



1 notice that Senator Sherman, in liis report, (pdg^s 6 and 7,) giving 
countenance to the idea that the 6-20 bonds, under the act of 25th February, 
1862, may be paid in the depreciated greenback currency, is laboring under 
a material misapprehension of the facts in regard to the representations 
made by the agents of the Government when the loan was negotiated, and 
especially as to the time when those representations were made. Mr. 
Sherman says: *It is said that the distinguished Secretary of the Treasury 
who negotiated the 5-20 loan, gave a construction to this act at the time 
the loan was offered ; that this was announced to the people, and upon the 
faith of this the loan was taken. Tour committee can find no official dec- 
laration made by the Secretary on this subject, until after the loan was 
negotiated,' and then refers to a letter written by Secretary Chase, May 
18, 1864, as being the first official declaration on the subject that has come 
to his knowledge. The Senator seems to concede that if the Secretary 
made official declarations, at the time the loan was negotiated, giving a 
construction to the act, to the effect that the principal, as well as the 
interest, was payable in coin, and that if both parties understood that to 
be the construction of the law, such declarations would form a part of the 
contract, and that the Government would be bound to make these declara- 
tions good, and to give effect to the contract as understood by both parties 
when it was made. Now, the proofs are at hand that such official repre- 
sentations were made by the distinguished Secretary of the Treasury, 
before and at the time the loan was being negotiated, as I will now pro- 
ceed to show. 

Secretary Chase, who negotiated that loan, decided as early as Decem- 
ber, 1862, that a fair construction of all the loan acts under which the 
funded debt was contracted, required us to pay actual money— gold and 
silver — on all the funded debt of the Government; that a pretended pay- 
ment in another promise of the United States was no payment, but merely 
changing the form of the debt. In other words, that a payment of the 
bonds in greenbacks, would be merely substituting the debt of the Gov- 
ernment in the form of legal tender notes bearing no interest, for bonds 
bearing six per cent, interest,— which would be manifestly unjust. This 
question came up on the kind of money that should be provided for paying 
that part of the funded debt, created prior to the rebellion, which fell due 
January 1st, 1863, and this decision was then made and published. The 
Committee of Ways and Means, in December, 1862, a short time before its 
maturity, desired to know whether any further legislation would be nec- 
essary to ensure the payment of coin on that part of the funded debt 
falling due within a few days. In order to ascertain in a formal manner 
what construction the Secretary of the Treasury would put upon the law, 
a Sub-Committee from the Committee of Ways and Means was appointed, 
consisting of Mr. Hooper, Mr. Morrill and myself, to confer with the Sec- 
retary on the subject This Sub-Committee called upon the Secretary at 
the Treasury Department, and after a full and free conference, the Secre- 
tary decided that a fair construction of the law, as well as good faith, 
required him to pay all the funded debt in coin, and that he did not deem 
it necessary to have any further law passed to enable liim to do so. 

Under these circumstances, the Committee of Ways and Means did not 
deem it necessary to report a bill authorizing or requiring the funded debt 
to be paid in coin, and consequently no further law was passed ; and on 
the first of January, 1863, the funded debt falling due at that time was 
paid in coin. From the time this decision was made by Secretary Chase, 



24 



down to the present time, the same language has been held by each Secre- 
tary of the Treasury, namely, that the funded debt of the Government 
was payable in coin, both principal and interest, and that the Government 
would not seek to avail itself of the five years option to redeem the 5-20 
bonds until it was prepared to pay coin for the principal as well as the 
interest. But this is not the only proof. 

Messrs. Fisk & Hatch, bankers in Xew York city, were prominent 
sub-agents of the Government in negotiating the 5-20 bonds under the act 
of February 25, 18C2. Many persons who were desirous of subscribing to 
this loan, wanted to know authoritatively, whether the principal of the 
bonds was payable in coin as well as the interest. In order to have the 
proof in hand to satisfy people on this point, Fisk & Hatch, at the very 
time they were negotiating large amounts of this loan, addressed a letter 
to the Secretary of the Treasury on the 3d of August^ 1803, and received 
fh>m him an official reply, signed by the Assistant Secretary of the Treas- 
ury, which was immediately published in the Neic York Times, a.< follows : 

THE POPULAR LOAN. 

To the Editor of the New York Times are receiving numerous inqui- 

ries as to whether the United States 5-20 bonds are redeemable in gold. 
We have received a letter from the Treasury Department most satisfac* 
torily answering this question, (as it was once before answered by Mr. 
Chase, ) a copy of which we hand you herewith. The popular character 
of this loan, and its wide distribution among the people, renders the sub- 
ject one of universal public interest and importance, and we presume the 
publication of thi.s letter will be acceptable to your readers. 

(Signed,) FISK & HATOII, Bankers. 

Treasury Department, Washington, D. C, } 
August 5th, 1SG3. S 

Gentlemen— Your letter of the 3d instant, relative to the redemption of 
6 per cent. 5-20 bonds of the loan of February 25, 18G2, has been received. 
The following is the decision of the Secretary of the Treasury in regard to 
the redemption of the public debt: 'All coupon and registered bonds 
forming a part of the permanent loan of the United States, wUl he redeemed 
in gold. The 5-20 sixes, being redeemable at any time within twenty years 
after the lapse of five years, belong to the permanent loan, and so also do 
the twenty years sixes of J uly 17, 1861, into which the three years 7-308 
are convertible. All obligations and notes forming a part of the tempo- 
rary loan will be paid at maturity in United States notes, unless before 
such maturity payment in specie shall have been generally resumed. The 
7-30 three year bonds or notes form part of the temporary loan, with the 
privilege of conversion into 20 years sixes, in sums not less than $500. 
They will therefore be paid, if the holders prefer payment to conversion, 
in United States notes. 

GEORCJE IIARRIXGTOX, 
Acting Secretary of the Treasury. 
To Messrs. Fisk & Hatch, Bankers, Xew York. 

This official letter from the Treasury Department, in addition to its 
being published in all the newspapers, was published in hand-bill form, 
(one of the original hand-bills being now in my possession,) and sent 
broadcast among the people, to induce them to come forward and take up 
these bonds — which were then on the market under the direction of the 



25 



Secretary of the Treasury, and oflTered by him at par. I was at this time 
actively engaged in negotiating this loan. I advertised and circulated this 
letter extensively myself, and gave copies of it to subscribers at the time 
of making their subscription to this loan. I regarded these representa- 
tions, made by authority of the Treasury Department, and upon the faith 
of which people were induced to subscribe for the loan, as forming a part 
of the contract, and that the Government is now bound to make these rep- 
resentations good ; and that, whenever they seek to redeem these bonds, 
the principal as well as the interest should be paid in coin. I should 
regard it as a gross breach of faith on the part of the Government to 
attempt to evade these declarations, or equivocate in fulfilling this con- 
tract, or any part of it. 

But aside from these representations made by the Secretary, I would 
suggest that the plain meaning of the act of '62, when read in connection 
with its title, leads to the same conclusion, and that Secretary Chase, in 
giving the construction to the law which he did in negotiating the loan, 
gave a correct, practical, common sense decision. The argument of the 
present Secretary, in his last annual report, (pages 24, 25 and 20,) is able 
and conclusive on this point. The interpretation given to the act by both 
these distinguished Secretaries is in exact accordance with my intention 
at the time I drew and introduced the bill in the House, in January, 1862, 
and as I believe it was fully understood by Congress when it passed. Tlie 
title of the act is expressive of the intention and purpose for which it was 
passed, namely, ' an act to authorize the issue of United States notes, and 
for the redemption or funding thereof, and for funding the floating debt 
of the United States.' 

It was intended by this measure, in the imminent peril in wliieh wc 
were then placed by rebellion, to make a forced loan from capitalists, by 
compelling them to take legal tender United States notes, which slioukl 
be paid out to the army and navy, and for supplies and material of war, 
but at the same time give them a fair rate of interest for the use of their 
money, by allowing them to fund these legal tender notes as they sliould 
accumulate in tlieir hands and not bearing interest, into a twenty years 
bond bearing six per cent, interest. In the opening speech wliich I made 
in the House on the 28tli of Januaiy, 1862, 1 said: 'The demand notes put 
in circulation would meet the present exigencies of the Government in 
the discharge of its existing liabilities to the army and navy, and contrac- 
tors for supplies, materials and munitions of war. These notes would find 
their way into all the channels of trade among the people, and as tliey 
accumulate in the hands of capitalists, they would exchange them for six 
per cent. 20 years bonds. These circulating notes in the hands of the 
people, would enable them to pay taxes imposed, and would facilitate all 
business operations between farmers, mechanics, commercial business 
men and banks, and be equally as good as, and in most cases better than, 
the present irredeemable currency issued by the State banks. The $500,- 
000,000 six per cent, twenty years bonds in the hands of the Secretary of 
the Treasury, ready to be issued, would afford ample opportunity for 
funding the Treasury notes as fast as capitalists might desire to excliange 
notes not bearing interest for coupon bonds of the United States bearing 
six per cent, interest, and amply secui*ed by a tax on the people and all 
their property. In this way the Government will be able to get along 
with its immediate and pressing necessities, without being obliged to 
force its bonds on the market at ruinous rates of discount; the people 



36 



under heavy taxation will be shielded against high rates of interest, and 
the capitalists will be afforded a fair compensation for the use of their 
money during the pending struggle of the country for national existence. 

'A suspension of specie payments is greatly to be deplored, but it is not 
a fatal step in an exigency Uke the present. The British Government and 
the Batik of England remained under suspension of specie payments 
from 1797 to 1821-2, a period of twenty-five years. Gold is not as valuable 
as are tlie productions of the farmer and mechanic, for it is not as indis- 
pensable as food and raiment. Our army and navy must have what is 
more valuable to them than gold or silver— they must have food, clothing 
and the material of war. Treasury notes, issued by the Government on 
the faith of the whole people, will purchase these indis^pensable articles, 
and the war can be prosecuted until we can enforce obedience to the Con- 
stitution and laws, and an honorable peace be thereby secured. This 
being accomplished, I will be among the first to advocate a speedy return 
to specie payments, and all measures that are calculated to preserve the 
honor and dignity of the Government in time of peace, and which I regret 
are not practicable in the prosecution of this war.' 

These are, in part, the remarks I made in the House on the loan bill 
introduced by me, and which became a law Febniary 25th, 1862. The 
operation of the bill, in the issue of the legal tender notes, the paying 
them out to the army and navy, their final funding into a twenty years 
six per cent, bonds, have been substantially what I stated would be its 
operation at the time I Introduced it into the House. The object of the 
bill was to provide the means by which the floating and temporary debt, 
then bearing heavily upon the Treasur}% might, by the operation of the 
act, be funded into a long bond without a heavy sacrifice in making the 
negotiation. Some gentlemen are now trying to reverse the obvious 
intent of the act, and t^nfund all this bonded debt, by again putting it 
into a floating and temporary form. I regard all these late shifts and 
quibbles to unsettle what is already honorably fixed and determined by 
the Treasury Department under and in pursuance of law, as unworthy of 
this great nation, unstatesmanlike in those who advocate it, and, if per- 
sisted in, will, I think, inevitably destroy the credit of the Government, 
and postpone indefinitely a resumption of specie payments. 

Why take the back track under these funding loan bills ? Why open 
the question at all at this time ? The floating debt and temporary loans 
are already funded^ or so nearly funded that there cannot be any reason- 
able doubt that, by the 15th of July next, when the last series of 7-30 
notes fall due, the whole will be funded into bonds, none of which are 
payable until 1882, being fifteen years yet before they become due. The 
Government is not legally or morally bound to pay one dollar of the prin- 
cipal of these bonds until they become due. Then why trouble ourselves 
about funding that which is already funded, especially when it has to be 
done by repudiating the acts and declarations of the Secretary of the 
Treasury in the discharge of his official duties ? Why raise the question 
now as to the kind of money with which we are to pay bonds already 
outstanding, and which are not becoming due until 1882 ? 

The $830,000,000 of three years 7-30 notes were all negotiated under 
representations made by the Treasury Department, similar to those made 
in respect to the 5-20 loan of '02, with an express stipulation that the 
holders of these notes should have the privilege of convertinoj them at 
maturity into 5-20 bonds. The bonds of '62, as well as the bonds issued 
in redemption of the three series of 7-30 notes, all stand upon the same 



ar 



footing, and the Government is no doubt bound to pay the principal as 
well as interest in coin, whenever it seeks to retire these bonds under the 
five years option, reserved in the face of the bonds. That such is the 
view taken by the present Secretary of the Treasury, ftilly appears by his 
letter to L. P. Morton & Co., bankers in New York, in which he says : 

Treasuby Department, Nov. 15, 1866. 
Gentlemen— Your favor of the 13th instant is received. I regard, as did 
also my predecessors, all bonds of the United States as payable in coin. 
The bonds that have matured since the suspension of specie payments 
have been so paid, and I have no doubt that the same will be true of all 
others. This being, as I understand it to be, the established policy of the 
Government, the 5-20 bonds of 1862 will either be called in at the expira- 
tion of five years from their date, and paid in coin, or be permitted to run 
until the Government is prepared to pay them in coin* 
I am, very truly yours, 

HUGH Mcculloch, 

Secretary. 

Messrs. L. P. Morton & Co., New York. 

Under the influence of this official declaration, most of the bonds have 
been taken on the exchange of the 7-30 notes, in pursuance of the stipula- 
tion on the back of the notes, and long before these bonds become due, 
specie payments will no doubt be resumed, and we shall then have but 
one standard of value, and only one kind of money, namely, coin, or its 
equivalent, in which to pay these bonds. Our population and resources 
will be nearly double then to what they are now. We shall be abundantly 
able to pay at that time in that currency which is recognized by all civil- 
ized nations as the true standard and measure of value, and thereby the 
I honor and good faith of the nation will be fully maintained. 

I would suggest that it is not wise to prematurely agitate the question, 
and am not able as yet to see any good reason for doing so. On the con- 
trary, I think all agitation now, on this branch of the financial question, 
is mischievous, and calculated unnecessarily to impair our credit at home 
and abroad. 

I would suggest further, that the provision in the bill which limits the 
legal tender currency to $400,000,000, is a good one, provided there is any 
sane man in Congress who proposes, in a time of peace, to dilute and still 
further depreciate the currency, by increasing it above that sum ; but I 
think the maximum of the greenback currency must not exceed $250,- 
000,000 or $300,000,000 when we reach the specie standard, if we would 
successfully maintain specie payments. And it seems to me that it would 
greatly facilitate a resumption of specie payments if the national banks 
were required to hold a part of their reserves in coin, and that some safe 
plan should be devised by which the sub-treasuries in the principal cities, 
especially in Xew York, could make daily settlements with the banks 
through the clearing-house, and requiring only balances to be paid, sub- 
stantially in the same manner as the banks in the principal cities make 
tlieir daily settlements with each other. In this way no large movement 
in coin to or from the sub-Treasury would be necessary, and the daily 
payments could be made with comparative ease. But this letter is already 
too long, much longer than I intended when I commenced it, and 1 will 
not enlarge further on this subject at this time. I may desire to make 
some further suggestions, and if so, wjU write you again. 
I remain, very truly, your friend, 

E. G. SPAULDING. 



28 



from hon. f. e. spinxeb 

Washington, Xov. 9. 

JLm, E. <f, Sjmuldintf^ Buffalo^ X. }'.; 

yiy Dear Sir— Vuur note of the (Hh inst. lias been received. If some 
one who believes in liit^li-toned swindling will write in favor of open 
repudiation, I will agree to give the subject the consideration of a careful 
reading, but 1 have not the patience to read anything advocating the 
sneaking exi>edlent of paying the national debt in depreciated currency. 

The Secretary of the Treasury is sound on this subject; and in his forth- 
coming Annual Report will address an argument to the Congress and the 
country, that I am sure will please you and those who are neither knaves 
nor fools. 

'J'he finance (|uestion is to become the leading one in the organization 
of parties, and 1 had hoped that such men as Butler and Stevens would 
have remained with the great body of their friends. Having an abiding 
faith in the honesty of the people, 1 believe the question will be settled 
honcstl}', and that honest Americans will be spared the shame of having 
their nation stigmatized as a band of cheats and swindlers. 
Very truly, your friend, 

F. E. SnXNEK. 

NATIONAL C'UKKENCY LE(iAL TENDER. 

The avowed policy of the Government is to retire the legal tender green- 
back currency, issued during the war, and bring the business of the 
country back to a gold standard, and a resumption of specie payments. 
This policy is avowed by the President in his annual message, and by the 
Secretary of the Treasury in his Fort Wayne speech, and in his annual 
report. As this policy will sooner or later be carried out, it is important 
we should look ahead and be prepared for the change. It will take time 
to accomplish so great a result, and it must be done with great prudence 
and discretion, or it will produce a shock to the legitimate business of the 
countr}', which will pandyze our business operations and thereby dimin- 
ish the revenues that wiW be so much needed to maintain the public credit. 
AVhatever measures will aid in promoting the healthy and legitimate bus- 
iness of the country during the process of contraction will be of essential 
service both to the Government and the people. 

It is not so very important just at this time, that there should be any 
material change made in the functions of the national currency, but as the 
Government legal tender notes are withdrawn from circulation, and the 
contraction policy fairly begun, 1 think it will be of great importance to 
the country, in giving stability to its financial operations, that the national 
(;urnMicy should be, like the Bank of England notes, made a legal tender, 
excei)t for debts ow ing by the banks. I feel confident that it would lessen 
the liability to a panic, as contraction goes on, and be useful and benefi- 
cial to the Government and people, in maintaining the financial credit 
and business of the country. 

The national currency is limited to a proper amount, so that there will 
be no chance for an over issue, and as the banks issuing it are required on 
the resumption of specie payments, to redeem it in coin, I can see no harm 
that would arise from making it a legal tender, but on the contrary, much 
good to follow the enactment of such a law. Let us consider this subject 
a little more in detail. 

What the Government and people want and must have in this great and 



29 



enterprising country, is a currency of universal credit and uniform value. 
Such a currency is a vital necessity to the well being of the business of the 
country. It should possess all the attributes of money, adequate in 
amount, and receivable alike in all payments, public and private. Men 
engaged in large commercial transactions have no especial worship for 
gold and silver, either as money or for ornament ; but I would not discard 
those metals in fixing the standard of value of paper money, and the rela- 
tive value of commodities and services. In devising and regulating a 
system of national currency, I would have coin and paper money as nearly 
on an equality as it is possible by having the paper convertible into coin 
on demand. 

I know it is insisted by some persons that the only money is coined 
metal, and that paper money as its substitute, is only credit. This may 
be true in a certain sense, but at the same time both coined money and 
paper money are the creation of law, and it is equally true that credit 
underlies the whole financial operations of the Government and people, 
and if that credit is broken down, the Government and people will become 
bankrupt, business paralyzed and revenues largely diminished. Coined 
money like paper money is made in pursuance of statute law, and has 
impressed upon it the Government stamp, indicating its weight and purity. 
This stamp does not, however, give the metal its value, the value is in the 
metal independent of the stamp, but gold of individuals so coined into 
eagles under the laws of the United States, does determine the rate in 
arithmetical terms at .which the metal thus coined shall be a legal tender, 
and the standard of value in all exchanges and payments, and this makes 
it by law money. Paper money is made by a somewhat difi*erent process, 
but when both are stamped with the functions of money they are both the 
creation of law. It is true that gold and silver are esteemed a valuable 
commodity without being coined, and are within a small fraction, rated 
as high in the form of bullion, as in the form of coin. The coined money 
rests on its own inherent or estimated value, while the paper money is 
based upon a well-founded credit. A payment in coin or bullion closes 
the transaction, because the bargained for equivalent is rendered at once, * 
leaving no credit to be upheld or promise to be performed in the future. 
United States demand Treasury notes, are also by law made lawful money 
and a legal tender as a substitute for coin, and their value is based upon 
the credit of the Government, and all the taxable property under its juris- 
diction. If they were not issued in excess they would not be below the 
gold standard, and would constitute as good, and even a better currency 
than coin, because less expensive and more convenient, and because they 
are based on a well founded credit, no less than an adequate tax on all the 
real and personal property of the country. The principal difi*erence 
between coin and paper money may be stated thus: the exchange and 
delivery of one hundred bushels of wheat for one hundred dollars, in 
value of gold bars or coined gold, the transaction is closed on the spot, by 
each party delivering to the other, what is regarded by them as an equiv- 
alent; according to the estimation of both parties, it is an exchange of 
equivalent values. In such a transaction, no credit is given on either side ; 
but if instead of gold, the purchaser of the wheat should deliver to the 
seller in exchange for it, one hundred dollars in paper money, the equiva- 
lent for the wheat, although perfectly secured, would not be rendered on 
the spot, but a credit would intervene in taking the paper money, which 
contained only a promise to deliver one hundred dollars in gold at another 



80 



time. In one sense it is true that the seller of the wheat takes even gold 
on a credit, trusting that it will continue at all times as valuable as it now 
is, notwithstanding it possesses very few useftil qualities, and is not intrin- 
sically as valuable as iron. Franklin says, Hhat the value of gold and 
silver rests chiefly in the estimation they happen to be in, among the gen- 
erality of nations, and the credit given to the opinion that that estimation 
will continue ; otherwise a pound of gold would not be a real equivalent 
for a bushel of wheat.* It is the universal estimation in which gold and 
silver are held, that gives them their present value, and not the labor 
expended upon them, or any particularly useful qualities contained in the 
metal itself. Any other well founded credit is as much an equivalent as 
gold and silver, and in some cases more so, or it would not be preferred by 
commercial people in different countries. For this reason a well secured 
convertible paper money, in a normal state of the business of the country, 
is fully equal to gold and silver, because less expensive, and more conven- 
ient. But where commercial transactions are small, and among barbarous 
nations where credit is unsafe, gold and silver, on account of their compar- 
atively steady value, and the universal estimation in which they are held 
by all mankind, no doubt constitute the best money. These precious 
metals, so called, being limited in amount, and used extensively in the 
aits and luxuries of life, are desired the world over, not only by civilized, 
but by barbarous nations, and having great estimated value in small bulk, 
are easily transported from continent to continent. This universal esti- 
mation gives them pretty steady value as money, and an equally steady 
value in the arts, and for ornament. They therefore constitute at present, 
the best standard by which to measure the relative value of all other com- 
modities. They are, therefore, the standard of value in all countries, and 
it will be very difficult, if not impossible, for the nations of the world to 
agree upon any other standard of value. They have not become so by 
reason of a congress of nations, nor by any concert of action among them, 
but by the quiet action of commerce among the people for many centuries, 
and in all countries and climes. Gold and silver therefore, are the univer- 
sal standard of value, made so by the acquiescence of all mankind, and 
consequently all foreign balances are settled in gold and silver. But 
owing to the scarcity of the precious metals, and the great expense attend- 
ing their use as money, and the risk of transporting them from place to 
place, credit has been resorted to in some form by all civilized countries, 
under well established Governments, as a substitute for gold and silver, 
and especially for domestic purposes ; for instance, the Bank of England 
notes, for the British Empire. 

Bills of exchange, promissory notes, credits on bank ledgers, checks, 
bank bills, and clearing house certificates are among the forms of credit 
chiefly used in commerce at the present time. In consequence of this 
scarcity of gold and silver money adequate to the wants of commerce, 
these forms of credit have been extensively used by the people of all com- 
mercial countries, because business in this form could be done more 
cheaply, with much greater facility, and in vastly greater amounts, than 
it could be done by contracting it to the actual use of gold and silver in 
each transaction; and although there is no actual use of coin in the 
exchange of commodities and services, nevertheless all these credit trans- 
actions have a relation to gold and silver, as the standard or measure of 
value, and ought to have an equally close relation to the amount of com- 
modities and services to be exchanged ; and to be safe, should never exceed 



81 



the wants of legitimate business. It is generally conceded that these dif- 
ferent forms of credit, when not carried to excess/ are of the greatest 
useftdness to every well regulated society. So apparent are their advan- 
tages, that they are deemed indispensable, and that without them, the 
present large volume of commercial transactions could not be carried on. 
Most of these forms of credit have grown into use by the necessities of 
commerce for centuries past, and are governed by universal commercial 
law, modified in some particulars by local statutes, but generally the law 
merchant regulates and governs all of them, except in the case of bank 
bills and Government paper money, which are wholly the creation of local 
laws, and are regulated and governed by the statute laws under which 
they are created. This brings me to the consideration of a paper currency 
authorized and regulated by statute laws. 

NATIONAL CURRENCY — LEGAL TENDER. 

In discussing the subject of a national currency, and the functions that 
should be imparted to it by law, I assume that Congress deems it necessary 
and proper to have a paper national currency, not only to carry on the 
fiscal operations of the Government, but also to facilitate the business 
operations of the people ; and that such a currency is created because it is 
the duty of the general Government to provide a domestic circulating 
medium of uniform value, to be used and circulated as money in all parts 
of the United States. Now, if it is desirable and proper to have a national 
paper currency at all, as I think it is, it seems to me to be obvious that it 
should be the best that the Government is capable of making. If it is 
necessary to create a paper currency, as a substitute for, or as a represen- 
tative of, gold and silver, why not give it all the attributes of money, so 
far forth as it can be made so by law ? Why should not Congress confer 
upon it in all respects, the highest qualities possible to make it suitable, 
useful and acceptable in all the ramified operations of the Government and 
people over the whole country? This currency is a creation of the Gov- 
ernment. Its object is to make money for circulation; to make it of 
uniform value all over the United States in effecting exchanges and pay- 
ments, and as nearly equal to gold and silver as it is possible to make it. 

This great nation surely ought not to create a currency inferior to the 
best paper money in the world. It should have all the attributes of money 
to pay debts and facilitate exchanges. It should be backed by the whole 
power of the Government to make it what it purports to be, a national 
currency, and the representative of gold and silver, and convertible into 
gold coin on demand. Nothing should be withheld by Congress which 
would in any degree add to the stability or usefulness of such a currency. 
It is created as an instrument of usefulness to benefit the Government and 
people, and if made at all, it should be, like a locomotive, or any other 
instrument, the best that can be made. I took this ground on the passage 
of the legal tender act introduced by me in 1862. I then said that if we 
issued a Government paper money at all, it ought to have imparted to it 
the highest legal sanction that could be given to it by the Government, to 
make it fulfill the purpose for which it was made. There are very few 
business men who now question the wisdom of that enactment. Tliough 
in the administration of the laws authorizing it, more was unnecessarily 
issued, and less funded, than was intended by the oiigiuators of the 
measure. 

The British Government is the great pioneer in providing a paper 



32 



national currency. The Bank of England, a creation of that Government, 
has existed one luindred and seventy-two years. She has had *rreat expe- 
rience in the issue, circulation and redemption of the circulating notes of 
that hank; and the British Empire has increased in material wealth and 
power with astonishing rapidity since the hank was established. Previous 
to 1834, the circulating notes of the Bank of England were not made a 
legal tender, but after an experience of over 140 years, she passed an act 
making them a legal tender for all debts, except those owing by the bank 
itself; and for the avowed reason that it would not remove any of the 
guards against over-issues, and that it would increase the stability of the 
bank, guard against panics, and consequently improve the whole monetary 
system of that empire. Since that act of Parliament was passed, she 
requires the notes of the bank to be perfectly secured by gold and Govern- 
ment stocks ; requires the bank to redeem in coin on demand at its own 
counter, and then makes them a general legal tender except at the bank. 

The Bank of England notes admirably perform the functions of money. 
They are current money in all parts of the empire. They are probably 
the most perfect paper currency in tlie world, because they are not only 
perfectly secured and redeemable in gold on demand at the bank, but 
they have imparted to them by law the functions of money in the pay- 
ment of debts and effecting exchanges, in the cities and villages remote 
from London, as well as in the metropolis itself. They are backed by the 
whole power of the British Government, and circulate with as much 
vitality at the circumference as at the centre of the empire. The bank 
and its circulating notes are as stable and secure as the Government itself. 

Why should we not profit by the experience and example of the British 
Government in respect to its national currency ? We have provided by 
Congressional enactment for the organization of a system of national 
banks, and tlie issue of a national currency. This was deemed a necessary 
measure for the support of the Government in providing a circulating 
medium to facilitate the easy exchange of commodities, thereby stimu- 
lating enterprise, industry and production; adding to the ability of the 
people to pay revenue, and furnishing a currency in which the internal 
taxes may be paid. The leading idea was to combine the capital of indi- 
viduals with the credit of the Government, to provide a national currency, 
and throw the burthens of redeeming such currency upon the banks that 
issue it, the Government only guaranteeing its ultimate payment. 

The national cuiTency act is generally right as far as it goes. It limits 
the amount to $300,000,000; requires the circulating notes to be well 
secured by gold-bearing Government bonds, deposited with the Treasurer 
of the United States ; requires each bank to redeem its circulating notes 
in lawful money on demand, and to keep an adequate reserve for that 
purpose ; makes them a legal tender for all taxes and other debts due to 
the Government, except customs, and for all debts owing hy the Govern* 
ment, except principal and interest of the funded debt; it also makes 
them receivable by each national bank for all ordinary debts due to them, 
and each bank, designated as a depository, is also required to receive it 
on deposit from all public officers. These are important provisions in the 
law for noUionaliziny this currency, and it consequently obtains a wide 
circulation. I would not change or alter any one of these provisions for 
decentralizing the currency, but I think it does not go quite far enough in 
that direction. It will be perceived that aU persons in the employ of the 
Government are compelled to receive it in payment for salaries and for 



8S 



materials and other services performed for the Government. It is now in 
effect made a legal tender from the Government to all this class of per- 
sons, including the salary of the President, Cabinet, Members of Congress 
and the army and navy. If the President and other oflScers of the Gov- 
ernment are obliged to receive it in payment for their salaries, why should 
not everybody else be required to take it from them for all ordinary debts 
they may incur? I can see no valid reason why they should be a legal 
tender to persons employed by the Government, unless such persons can 
also compel other parties to receive it from them. I think that sound 
policy requires the act to be still further extended. I would go one step 
further and make the national currency, like the Bank of England notes, 
a general legal tender, so long as the bank issuing it, redeem in lawful 
money, except that the currency issued by any bank separately should 
not be a legal tender for any debts such bank might itself owe. 

I would not relax any of the duties or obligations now imposed on the 
banks. I would compel them to redeem their circulation in legal tender 
United States notes on demand, until the resumptions of specie payments, 
and after that in specie, and oblige them to keep a suflacient reserve for 
that purpose. The reason for such additional legislation would not be so 
much for the benefit of the banks, as it would be to benefit the public, by 
providing a domestic currency, made legal tender the same as gold 
belonging to individuals is made a tender, and which could be used to the 
greatest common advantage among all classes of people in all parts of the 
country. I would make it a legal tender because it would lessen the 
demand for coin, and have a tendency to prevent unnecessary runs on the 
banks to obtain it. It is argued by many persons, with much plausibility, 
that a well secured paper currency would be better in many respects, if 
not made redeemable in coin, for the reason that coin is scarce as com- 
pared with the volume of business to be done ; that it is easily exported, 
and that when brought to the test of requiring the paper money issued to 
be redeemed in coin it has always failed, and always will fail, because 
there is never available coin enough for that purpose. I admit that the 
frequent suspension of specie payments, whenever there is a panic or 
revulsion, furnishes an argument in favor of those who present this view 
of the subject, but as no proper standard can be had at present, without 
making paper currency equal to coin, I think it must be convertible into 
coin on demand. Every attribute, however, that can be given to improve 
its quality will lessen the necessity for its redemption in coin, and conse- 
quently the more steady and uniform will be the business of the country. 

With this object in view, I can see no valid reason why the highest 
legal sanction should not be imparted to this currency by the Govern- 
ment, which holds the pledged security and guarantees its payments, not 
only to give it stability, and guard against panics and suspensions of 
specie payments, but to make it useful to the people as money, in the 
remote districts as well as at the centre of business, and make it fulfil in 
the highest possible degree the object for which it was created, a nationoU 
currency. 

E; G. SPAULDIXG. 

February 28, 1866. 



84 



LEGAL TEKBER IK TIME OF PEACE. 



Buffalo, December 9, 1868. 



Hon, Hugh McCuSochj Secretary of the T^reamry: 

Dear Sir— Will you be kind enough to send me a pamphlet copy of your 
Annual Report; I have seen a synopsis of it in the newspapers, and desire 
to study it in a more readable form. I have always read your able and 
well-matured reports with pleasure and profit. I judge, from the extracts 
of the report which I have seen, that you continue firm in the opinion 
that we should get rid of the evils of a depreciated currency by returning 
to the specie standard at the earliest practicable moment ; this is the first 
great and important duty of the Government, and I sincerely hope that 
eflScient measures will be adopted to that end at the present session of 
Congress. 

You Justly observe that the legal tender act was adopted as a war meas- 
ure—a measure of necessity to sustain the army and navy while crusliing 
the rebellion. In the summer and fall of 1861, all the great powers 
expressly granted in the Constitution had been brought into active exer- 
cise in bringing into the field an army of half a million of men, which 
had to be fed, clothed and provided with all the material of war necessary 
to make them effective, requiring an average daily expenditure of $2,000,- 
000. This required very large amounts of money, and we had to have it 
right off— delay would have been fatal. The banks in New York, Boston 
and Philadelphia had exhausted themselves in loaning to the Government 
$160,000,000 in gold during the summer and fall of 1861. A large part of 
the available gold in the country had thus been paid over to the Govern- 
ment, and expended during that time, and so scattered that it was not 
available as a reserve for the banks, or in a situation to be re-loaned to the 
Government. The Government and banks suspended specie payments on 
the last of December, 1861. No more gold could be loaned because it was 
not to be had, except in small and wholly inadequate amounts. State 
bank bills could be obtained, but the banks having suspended specie pay- 
ments this currency was depreciated, and was only local in character 
and credit. 

In this great emergency, with this large army to be supported and the 
navy to be maintained, and which were organized under the unlimited 
war powers expressly granted in the Constitution, there arose an over- 
whelming necessity for resorting to the incidental and implied powers, 
and especially to that provision in the Constitution which empowers Con- 
gress ' to make all laws which shall be necessary and proper for carrying 
into execution the foreign powers and all other powers vested by this 
Constitution in the Government of the United States, or any department 
or oflacer thereof.' In the imminent peril in which we were then placed 
by a gigantic rebellion. Congress decided that the legal tender act was 
a measure necessary and proper to carry into effect those powers expressly 
granted in the Constitution, to maintain the army and support the navy. 
Secretary Chase relied at this time mainly upon the passage of the national 
currency act to furnish the means, but it appeared to me that it would be 
wholly inadequate, and besides it could not be made available quick 
enough. I therefore introduced the legal tender bill early in January, 
1862, immediately after the suspension of specie payments. In this great 
crisis I advocated the bill as a war measure, a measure of temporary 
relief to the Treasury, and on the ground that it was an imperative neces- 




3S 

•ity to preserve the life of the nation. I conceded that it was a forced 
loan, and could only be justified on grounds of necessity. 

As a war measure passed during war, continuing during the war, and as 
long as the exigency lasted, I believe it was necessary and proper to suc- 
cessfully carry on the war, and was therefore constitutional. I am equally 
clear, that as a peace measure it is unconstitutional. No one would now 
think of passing a legal tender act making the promises of the Govern- 
ment, (a mere form of credit,) a legal tender in payment of * all debts, 
public and private.' Such a law, passed while the Government is on a 
peace footing, could not be sustained for one moment. 

I think now that it is unfortunate that we did not have incoi*porated 
into the original legal tender act, at the time of its passage, a provision 
that the legal tender clause should cease to be operative in one year after 
the close of the war. In that case all parties would have shaped their 
business accordingly, and the law would have served its purpose as a war 
measure, and would not have been continued (as I think unnecessarily,) 
so long after the close of the war. 

I see that the constitutionality of the law has finally come up for decision 
before the Supreme Court of the United States, at Washington. If the 
Court had been called upon to decide the question during the war, or at its 
close, they would most likely have decided that the law was valid, inas- 
much as Congress had decided that it was a necessary and proper means 
to be used in crushing the rebellion ; but the law has been continued in 
force so long after the close of the war without any real necessity for it, 
that I should not be much suri)rised if the Court should now declare it 
unconstitutional. 

Three great measures were adopted by the .Government, which, in my 
judgment, were necessary to crush the rebellion and maintain the national 
unity, viz. : 

1. The legal tender act, by which the credit of the Government was 
brought into immediate action in the most available form. 

2. Emancipation, by which 4,000,000 slaves became intensely interested 
in the Union cause. 

3. The drafts by which the army was speedily re-inforced at the turning 
point of the rebellion. 

These three measures, backed by the people, and enforced by the army 
and navy, finally gave us a national triumph. 

If Congress will not act promptly in devising some plan for bringing 
the legal tender greenback currency on a par with gold, rather than con- 
tinue the demoralization incident to a postponement of specie payments, 
it will perhaps be as well for the country in a long run, if the Court, on 
due deliberation, should decide the legal tender clause to be unconstitu- 
tional. This would involve serious consequences for a while, and business 
arrangements would be materially afiected, but we would very soon 
accommodate ourselves to the situation, and we would then emerge from 
the evils of an irredeemable cun*ency, and all business operations would 
be established on a firm and enduring basis. 

This letter is much longer than I intended when I sat down to write, 
and I trust you will pardon me for writing so much. 

I remain, yours truly, 

E. G. SPAULDING. 



86 



PRESIDENT Lincoln's veto. 

FresidcnVs Message in favor of a National Currency^ but vetoing irredeemable 
bank notes in the District of ColumtnOy^ June 23, 1862. 

To the Senate of the United States : 

The bill which has passed the House of Representatives and the Senate, 
entitled, * An act to repeal that part of an act of Congress which prohibits 
the circulation of bank notes of a less denomination than five dollars in the 
District of Columbia,' has received my attentive consideration, and I now 
return it to the Senate, in which it originated, with the following objec- 
tions: 

1. The bill proposes to rept;al the existing legislation prohibiting the 
circulation of bank notes of a less denomination than five dollars within 
the District of Columbia, without permitting the issuing of such bills by 
banks not now legally authorized to issue them. In my judgment it will 
be found impracticable, in the present condition of the currency, to make 
such a discrimination. The banks have generally suspended specie pay- 
ments, and a legal sanction given to the circulation of the iiTedeemable 
notes of one class of them will almost certainly be so extended in practical 
operation as to include those of all classes, whether authorized or unau- 
thorized. If this view be correct, the currency of the District, should this 
act become a law, will certainly and greatly deteriorate, to the serious 
injury of honest trade and honest labor. 

2. This bill seems to contemplate no end which cannot be otherwise 
more certainly and beneficially attained. During the existing war, it is 
peculiarly the duty of the national Government to secure to the people a 
sound circulating medium. This duty has been, under existing circum- 
stances, satisfactodly performed, in part at least, by authorizing the issue 
of United States notes receivable for all Government dues except customs, 
and made a legal tender for all debts, public and private, except interest 
on the public debt. The object of the bill submitted to me, namely, that 
of providing a small note currency during the present suspension, can be 
fully accomplished by authorizing the issue, as part of any new emission 
of United States notes, made necessary by the circumstances of the coun- 
try, of notes of a similar character, but of less denomination than five 
dollars. Such an issue would answer all the beneficial purposes of the bill ; 
would save. a considerable amount to the Treasury in interest; would 
greatly facilitate payments to soldiers and other creditors of small sums, 
and would furnish to the people a currency as safe as their own Gov- 
ernment. 

Entertaining these objections to the bill, I feel myself constrained to 
withhold from it my approval, and return it for the further consideration 
and action of Congress. 

ABRAHAM LINCOLN. 



SPEECH OF HON. E. G. SPAULDING, OF NEW YORK, 



DELIVERED IN THE HOUSE OF REPRESENTATIVEb^, 

Friday, May 3d, 1862. 

The House having under consideration the bills to confiscate the prop- 
erty and free from servitude the slaves of rebels, Mr. Spaulding said : 

Mr. Speaker — It seems to be right and proper, while we are taxing 
our own loyal people to pay the enormous expenses of this war, that we 
should endeavor to make the ring-leaders of the rebellion, who have 
fomented and brought on this terrible state of things, pay as large a por- 
tion of these expenses as is possible. To this end it is fit and proper that 
Congress should exert all the power it possesses in confiscating the prop- 
erty of rebels, and having it sold under an order of the court, and the 
proceeds thereof, paid into the Treasury of the United States; and also 
that such rebels should be deprived of the labor and services of their 
slaves, from which they derive their chief support. These propositions 
are now pending in this House, and we shall be called to vote upon them 
on Monday next. These are important measures, and I desire to say a 
few words before giving my vote. After the able arguments that have 
been made in the Senate and House by those who have been especially 
charged with the subject of confiscating the property of rebels and the 
emancipation of their slaves, I do not deem it necessary for me to make 
any extended remarks. 

Sir, the time has come when we must meet the actual condition of 
things, and dispose of these and other momentous questions presented for 
our consideration in a practical way, and with a firm determination to 
suppress this rebellion and establish law and order in every part of the 
United States. Success, regardless of the cost, is the all-important thing 
to be attained. This rebellion must be crushed out, and all the means 
which God has given us must, sooner or later, be brought into requisition 
to accomplish that result. The sooner we earnestly put forth every effort, 
and apply all the means at our command, the sooner will the rebellion be 
suppressed, and the less of life and treasure will be Expended. 

What is the actual condition of things? AH the horrors of war are 
upon us. War on a gigantic scale — savage, unrelenting war is waged 
against us by the rebels. Not only do they kill our brave sons and 
brothers on the field of battle, but they murder them stealthily, stab 
and scalp them when wounded, and disfigure and mangle them after they 
'are dead. The rebels in arms against us are enemies de facto, possessed oi 
all the bitterness and determination of the most unrelenting foreign ene- 
mieB. We are obliged to accept this condition of things. It has been 
forced upon ns by their own acts. The life of the nation is- attacked, and 
a most determined efifort made to overthrow the GoTemment of tbe 



38 



United States in all of the confederate States. They are our enemies. I 
am disposed, while they are so in rebellion, to treat them as enemies, and 
to give them only the rights of war, and apply to them all the disabilities 
and penalties of war. 

As alfen enemies, throwing off all allegiance to the Government, tramp- 
ling the Constitution and laws of the United States under their feet, how 
can they claim any protection from us ? As enemies de facto, they can 
claim no rights except the rights of war. Any gentleman on this floor 
holding up the Constitution as a shield to protect these rebels it seems to 
me has not duly considered the subject Is it possible that men who 
utterly repudiate the Constitution, confederate together, declare war, 
issue letters of marque and reprisal, and are in open war against us, can 
claim any rights under the Constitution ? The laws of war are against it. 
Common sense and common justice would revolt at any such claim, even 
if the public law was not so emphatically against it. 

If we were to proceed and indict the traitors in arms against the Gov- 
ernment for treason, (as we have an undoubted right to do,) under the 
provisions of the Constitution, then they might, in such case, claim to 
have their criminality decided by the court, under the strict rules of the 
common law and the Constitution and statute laws of the United States. 
In such a case, the argument of the gentleman from Massachusetts [Mr. 
Thomas,] might have some application. But when the traitors are 
engaged in actual war, then you apply to them the laws of war. Having 
themselves repudiated the Constitution, and having expelled the United 
States courts from all the rebel States, so that you cannot indict and try 
them under the ordinary forms of judicial proceedings, they cannot com- 
plain if you apply to them the laws which are clearly applicable to the 
position which they have voluntarily, but most criminally, chosen for 
themselves. Having declared war against the United States, they must 
submit to all the rules of civilized warfare, and if their property is confis- 
cated and their slaves emancipated, they have no right to complain. 

What is the war power conferred on the President and Congress? By 
the Constitution, the President is made < Commander-in-Chief of the 
army and navy of the United States, and of the militia of the several States 
when called into the actual service of the United States.' The Constitu- 
tion confers on Congress the power, first, *to raise and support armies;* 
second, * to provide and maintain a navy third, * to make rules for the 
government of the land and naval forces;' fourth, 'to provide for calling 
forth the militia to execute the laws of the Union, suppress insurrections, 
and repel invasions ;' fifth, ' to grant letters of marque and reprisal ;' sixth, 
'to make rules concerning captures on land and water;' seventh, 'to 
declare war;' eighth, 'to make all laws which shall be necessary and 
proper for carrying into execution the foregoing powers.' In pursuance 
of these war powers conferred on Congress by the Constitution, laws have 
been passed to carry them into execution. The public laws of nations 
declare the rights and penalties of war. More than one hundred articles 
of war have been adopted by Congress for the government of our army. 
At the extra session in July last. Congress passed various laws which 
were then deemed 'necessary' to crush out the rebellion. Congress 
passed those laws, and the President executes them, in accordance with 
the rights of war. 

Among the rights of war is the power to confiscate the enemy's property 
and liberate their slaves. One of the express powers conferred on Con- 
gress by the Constitution, is to call out the militia *to suppress insurrec- 



39 



tions,' which means that you have unlimited power to effectually suppress 
the present or any other insurrection. All the means necessary may be 
employed to suppress it. Nothing within the range of civilized warfare 
is withheld from you in this crisis. Congress may, in the language of the 
Constitution, pass 'all laws which may be necessary and proper' to sup- 
press the 'insurrection.' If the laws now on the statute-book are not 
sufficient, it is our duty to pass other and more stringent laws, confer 
more power on the President, give him ample power to make our success 
complete and certain. Let the rebellion be terminated in the shortest 
time, and with the least possible sacrifice of life and treasure. The con- 
tinuance of the war is extremely hard and exhausting to our volunteer 
soldiers, and the enormous expenses will impose heavy burdens upon the 
people. Every consideration of patriotism and duty requires us to put 
into active exercise at once all the means within our reach to bring the 
war to a speedy and successful termination. 

What are the rights of war, and what are the ordinary means which 
• may be brought against these rebels to weaken their power and crush out 
the rebellion? As enemies de facto it is conceded you may blockade their 
ports, preventing all exports and all imports or supplies from abroad; you 
may cut off all internal supplies by depriving them of the use of rail- 
roads, canals, lakes, rivers, and all other means of transportation; you 
may cut off all communication by mail, telegraph, express, or otherwise ; 
you may capture their vessels, their supply trains, sink their ships, destroy 
their military stores, and meet them face to face in battle, and kill, cap- 
ture and disperse their hostile forces. All these ordinary means have 
been tried during the last year, and still the ring-leaders who fomented 
this rebellion are more desperate than ever. War, gigantic, imrelenting 
war, still goes on. The rebels are more determinedly our enemies than 
ever before, and a call is made by the President for more troops to flght 
them. In this state of things what is to be done ? Are there no other 
means that can be used to strengthen ourselves and weaken the power of 
the rebels, and thereby insure their defeat? This is the great question 
we are now considering. All the authorities sustain the doctrine that 
you may, under the war power, confiscate the property of enemies, and 
may liberate their slaves. 

On the power of liberating slaves, John Quincy Adams lays down the 
doctrine that, in time of war, civil or foreign, * not only the President of 
the United States, but the commander of an arvmy, has the power to order 
the universal emancipation of the slaves.' It is evident, however, that he 
regarded it as a power subject to the action of Congress. With a call to 
suppress insurrection, he says, ' comes full and plenary power to the Sen- 
ate and House over the whole subject. It is a war power.' 

The extreme measures of confiscating the private property of rebels, 
and the liberation of their slaves, have not yet been tried to any consider- 
able extent during the war. Is it a war measure necessary to success at 
this time ? If it is necessary, will Congress and the President have the 
courage and the firmness to exercise this power boldly ? Will this Gov- 
ernment strike these rebels where it will do them the most harm ? Will 
you take from them their property and liberate their slaves ? Will you 
deprive them of the most effective means of carrying on the war? Take 
away their individual property, and deprive them of the labor and ser- 
vices of their slaves, and you strike a blow at the heart of the rebellion. 
You would then strike directly at the root of the eviL Give a death-blow 
to slavery, and you would soon be able to terminate the war. 



40 



We have already taken some positive steps in advance on the slaverj' 
question during the present session. Slavery has been abolished in the 
District of Columbia. The capital of the nation is forever freed from the 
taint of involuntary servitude. We have passed a new article of war. 
which prohibits commanders of divisions from returning slaves that vol- 
untarily come within their lines. We have extended the ordinance of 
1787, prohibiting slavery in all the Territories of the United States. And 
we have passed a resolution offering pecuniary aid to States that shall 
enter upon a gradual emancipation of the slaves within their limits. 
These enactments are in acconlance with public sentiment and the pro- 
gressive spirit of the age. Shall we advance still further in the work of 
emancipation ? This depends somewhat upon the necessity of such a 
measure and the probable duration of the war. How long is the war to 
continue ? No man here is wise enough to determine how long it will 
continue, nor how much blood and treasure will be expended in its pros- 
ecution. The Richmond Enquirer (official organ of the confederate 
administration) uses the following language, evidently by authority : 

' Bat we are gratified to eay that the time bae come when, for the ftitnre at leart, wc all ghall 
be agreed. AU volantary fidllng back has ended, and the fighting has commenced. What the 
enemy gains henceforth he gains by the bayonet What we can win from him we will have. 
We will break hiif cdomns, and porsne him into his own country, if God ehall prosper our 
armfl. Strike I strike often, strike hard, strike at every opportunity— is henceforth the rule. 
Vigilance, activity, enterprise, daring, are, we trust, to be its interpreter.' 

The longer the war continues, the more desperate will it become, and 
the more certain will it be that slavery is doomed. The advice of the 
Richmond iiVi(7Mir€r to the rebels, to "strike I strike often, strike hard, 
strike at every opportunity," shows the desperate character of their cause. 

Are we to be struck often, and struck hard at every opportunity, with- 
out giving hard blows in return ? I trust not. War means to strike often 
and strike hard on both sides. **An eye for an eye, and a tooth for a 
tooth." War teaches us to use all the means within our power to 
strengthen ourselves and to weaken our enemy. Let us weaken him in 
every possible way within the rules of civilized warfare. We should 
strike him personally, strip him of his property, and strike the shackles 
from every slave that by his labor and services gives him support. These 
are the rights of war, and I am prepared to see them fully enforced. 

We have been forced by rebels into this unnatural and unnecessary war. 
We have already expenxled over six hundred millions of dollars in its pros- 
ecution ; besides, what is of far greater consequence, many thousands of 
our brave soldiers have been slain on the field of battle, and have died by 
disease brought on by the perils and hardships of the campaign. Is all 
this blood and treasure to be expended without accomplishing anything 
beneficial to the nation, to civilization, and the rights of man ? I trust 
not We now want and must have a final settlement of this whole diffi- 
culty. Slavery was the cause of this gigantic and wicked rebellion. 
Slavery should receive its doom, thereby removing the cause of future 
difiSculty. Rebels have fomented and brought on the war, and their 
property should pay a large share of the expenses incurred. These ques- 
tions must now be met. They cannot be postponed. The laws of God 
and man require us to vote on the side of justice and humanity. I shall, 
under the circumstances, vote to confiscate the property of leading rebels, 
and to liberate their slaves. 



1^33 

407X 55 1 



mmm 



THE BORROWER WILL BE CHARGED 
AN OVERDUE FEE IF THIS BOOK IS 
NOT RETURNED TO THE UBRARY ON 
OR BEFORE THE LAST DATE STAMPED 
BELOW. NON-RECEIPT OF OVERDUE 
NOTICES DOES NOT EXEMPT THE 
BORROWER FROM OVERDUE FEES. 

HarvariJ College Widener Library 
Cambritfo*, MAOaiaa (617)4««^S4t3