William Berkey
The Money Question



MONEY, as has been fully explained, is an important element in the production and distribution of wealth in all its forms.  Without it production is slow and laborious, and the distribution of the products of industry difficult and expensive.  Hence the necessity of an abundance of money based on sound principles—that is money that is free to obey the natural laws of trade, and not subject to the control of private corporations, as is the case with bank currency—to fill the channels of circulation.  With a sound currency in circulation the production and accumulation of wealth would go on gradually and steadily, and commercial crashes and money panics would be unknown.  Individuals would succeed or fail, as now, but it would be through natural causes.  That a people can carry on commercial operations, of great magnitude for centuries, by means of an enlightened system of money, without being visited once by such crises and convulsions as have marked the history of Great Britain and the United States, since the adoption of the specie basis (banks of issue) system of money, is fully demonstrated by the history of the Venetians, and the experience of other European nations in more recent times.  The weakness of the specie basis system has been most signally illustrated, however, in times of war, when great activity in both production and distribution became absolutely imperative.  In the war with France, from 1793 to 1815, Great Britain was obliged to abandon a medium of exchange based on specie altogether.  By means of irredeemable paper money she was enabled to carry on successfully one of the most tremendous wars of modern times, and at its close the people of Great Britain were, individually and collectively, prosperous.  Ignoring the teachings of experience she waded back through individual bankruptcy and ruin to the old system, and has had her commercial crashes and money panics since with the same regularity as before.  If paper money is found to be so invaluable in the production and distribution of the products of industry, under the most disadvantageous circumstances, in time of war, what is to hinder it from being equally invaluable in time of peace, when no uncertainty in regard to its ability to represent value can attend its use ?  That the use of paper money during war is a matter of compulsion, is the merest sophistry.  During the Revolutionary war, when Continental money, which can hardly be said to have been based on anything, began to grow worthless, Congress declared that those who refused to take it should be regarded as public enemies.  The public smiled, and barbers papered their shops with it.1  Paper money, however, undoubtedly becomes an acknowledged necessity during war especially in countries whose medium of exchange belongs to the specie basis system.  In Great Britain business affairs in times of peace have to be conducted almost entirely, as we have seen, by means of devices of the credit system, on account of the limited amount of money in circulation, and when an emergency arises, requiring great rapidity of production and distribution, both government and people find themselves without any adequate means to accomplish the ends desired.

When the Rebellion broke out in 1861, the people of the United States were in the enjoyment of unusual prosperity.  The crops had been more than ordinarily good, and the country generally was rapidly recovering from the crash of 1857.  The cotton crop of 1860 had reached the enormous amount of 5,387,052 bales (of 400 lbs. each.)

The state of the banks and the currency from 1857 to 1863 was as follows :


Preparations for war were begun by the Federal Government on a scale of great magnitude, with an empty Treasury.  The real and personal property of the country, according to the census report of 1860, amounted to $16,159,616,068, or, leaving out the States in rebellion, to $10,957,450,961.  The people of the States which sustained the Federal Government possessed ample resources and were inspired by a sincere feeling of patriotism.  The only question, therefore, was as to the means by which the resources of the people could be rendered available to the government.  It could of course be done only through the instrumentality of a medium of exchange.  Taxation was impracticable at the outset, because the government did not possess the machinery for laying and collecting taxes, and funds were required at once ;  and besides the amount of money in circulation was insignificant as compared with the wants of the government.  There was manifestly but one of two courses to pursue.  Either to adopt the machinery of the banks and through them exchange the credit of the government for the products of industry, or deal directly with the people by issuing legal tender Treasury notes, based on and representing the wealth of the country and redeemable in the revenues of the government.  Neither course, however, was pursued, or rather the Secretary of the Treasury attempted to use both plans in part, and with the most wretched results.


During the extra session of Congress in July and August, 1861, two important loan acts were passed, which are deserving of special notice, one approved July 17th and the other August 5th.  By the act of July 17th the Secretary of the Treasury was authorized 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 bear interest not exceeding seven per cent. per annum, payable semi-annually, and to run for twenty years, when they would be redeemable at the pleasure of the United States ;  and the Treasury notes were to be issued in denominations of not less than $50, payable three years after date, with interest at 7 3-10 per cent., payable semi-annually, and exchangeable at any time for twenty years six per cent. bonds.  Or, at his option, the Secretary of the Treasury might issue $50,000,000 of the above loan in Treasury notes, payable on demand, in denominations of not less than ten dollars each, without interest, and made payable for salaries and other dues from the United States Treasury (afterwards known as old demand notes);  or he might issue Treasury notes, payable in one year from date, bearing interest at 3 65-100 per cent. per annum, exchangeable at any time in sums of $100, or upwards, for three year Treasury notes bearing 7 3-10 interest.  By the act of August 5th, which was supplementary to the act of July 17th, the Secretary of the Treasury was authorized to issue bonds bearing interest at six per cent. per annum, payable after twenty years from date, which, in denominations not less than $500, might be exchanged for Treasury notes bearing 7 3-10 per cent. interest.  The act of July 17th, fixing the denomination of the Treasury notes without interest (demand notes) at not less than ten dollars was modified so as to fix the limit at not less than five dollars, and these notes (demand notes) were made receivable in payment of public dues.  By the sixth section of this act the Sub-Treasury act of 1846 was “suspended so far as to allow the Secretary of the Treasury to deposit any of the moneys obtained on any of the loans now authorized by law, to the credit of the Treasurer of the United States, in such solvent specie paying banks as he may select.”  By an act of Congress approved February 12, 1862, the Secretary of the Treasury was authorized to issue $10,000,000 of Treasury notes, payable on demand, not bearing interest, in addition to the $50,000,000 of like notes authorized by acts of July 17th and August 5th, 1861, which should be deemed part of the loan of $250,000,000 authorized by said acts.  And by the act of March 17, 1862, it was enacted that these demand notes ($60,000,000 in all) shall, in addition to being receivable in payment of duties on imports, be receivable, and shall be lawful money and a legal tender, in like manner and for the same purposes and to the same extent as the notes (greenbacks) authorized by the act approved February 25, 1862.  These demand notes were the only notes issued during the war that were made a full legal tender, that is, receivable for all public dues (including duties on imports) and a tender for private debts.  After they were made a full legal tender they circulated at par and went up with gold to a premium of $2.85, or in other words it cost $2.85 in greenbacks to buy a dollar in gold or demand notes.

From these acts of Congress it appears that Secretary Chase was clothed with the most ample powers to borrow money.  He immediately proceeded to New York and, on the 9th of August, 1861, held a consultation with a number of leading bankers and capitalists of the cities of New York, Boston and Philadelphia, whom he met there by appointment.  It was suggested on the part of the banks, that the banks of the North should form an “organization that would combine them into an efficient and inseparable body, for the purpose of advancing the capital of the country upon government bonds in large amounts, and through their clearing house facilities and other well known expedients, to distribute them in smaller sums among the people in a manner that would secure active co-operation among the members in this special work, while in all other respects each bank could pursue its independent business.  This suggestion,” says Mr. Coe, from whom we quote,2 “met the hearty approbation of the assembled company, and arrested the earnest attention of the Secretary.  At his request it was presented to the consideration of the banks at a meeting called for that purpose at the American Exchange Bank on the following day, and was so far entertained as to secure the appointment of a committee of ten bank officers, to give it form and coherence.  The committee convened at the Bank of Commerce, whose officers zealously united in the effort, and a plan was reported unanimously.  It may be found, with the names of the committee, in the Bankers’ Magazine of September, 1861.  This report was cordially accepted and adopted by the banks in New York, those in Boston and Philadelphia being represented at the meeting and as zealously and cordially united in the organization.  It was greatly desired to include also the banks of the West, but it was found impracticable to secure the co-operation of the State banks of Ohio and Indiana, and the State banks of Missouri, the only other organization under a compacted system, were surrounded by combatants.  It was at once unanimously agreed that the associated banks of the three cities would take fifty millions of 7 3-10 notes at par, with the privilege of an additional fifty millions in sixty days, and a farther amount of fifty millions in sixty more, making $150,000,000 in all, and offer them to the people of the country at the same price, without change.”

The amount of specie held by the banks of the three cities, at this time was as follows :

Banks of New York.................. $49,733,690
Boston ..........................................6,665,929
Philadelphia .................................43,765,120

The Treasury notes could not be delivered at once, as time was required for their preparation and execution.  It was manifestly impossible, therefore, for the banks to advance the several amounts of the loan, in specie, without danger of exhausting their reserve.  The Sub-Treasury act, as we have seen, however, had been suspended, evidently at the instance of the banks, with a view to enabling them to handle the bonds and securities of the government, in return for bank currency.  “Accordingly,” says Mr. Coe, from whom we have just quoted, “it was at once proposed to the Secretary that he should suspend the operations of the Sub-Treasury act in respect to these transactions, and following the course of commercial business, that he should draw checks upon some one bank in each city representing the association, in small sums as required, in disbursing the money thus advanced.  By this means his checks would serve the purpose of a circulating medium, continually redeemed, and the exchange of capital and industry be best promoted. * * To the astonishment of the committee, Mr. Chase refused.”  It was urged by the bankers that the Sub-Treasury act had been suspended for this very purpose, but Mr. Chase thought differently, declaring that it had no such meaning or intent.  Another subject of discussion between the banks and the Secretary was the issue of demand notes.  A small amount of these notes had already been emitted, and a resolution requesting the Secretary to refrain from issuing any more, until all other means had been exhausted, had been adopted by the associated banks.  Mr. Coe says that the Secretary gave assurances of his acquiescence in this suggestion, but refused “to openly pledge himself not to exercise a power conferred by law,” and “that with this understanding the banks began their work, paying into the treasury in coin $150,000,000, in sums at the rate of about $5,000,000 at intervals of six days.”  The rapid disbursements by the government, and the intense activity of the movements of trade, as we have seen, brought the coin nearly all back to the banks within a week after it was issued, so that in December the banks of New York, after paying to the government over $80,000,000, found their specie reserve reduced only from $49,733,990, August 17th, to $42,318,619, December 7th.  The banks undoubtedly expected that sooner or later Secretary Chase could be induced to accede to their plan, but, as he continued to issue the demand notes, it became apparent in the latter part of December, 1861, after the banks had paid in a large portion of their loan, that the Secretary was determined to adhere to his own course ;  and after a conference, in which he expressed himself to that effect, the banks decided that it was expedient to suspend specie payments forthwith, and did so on the 28th of the month.  The balance of the loan was paid by the banks principally in Treasury notes, and was finally closed on the 3rd of February, 1862.

The patriotism of the banks oozed out as soon as they found that they could not control Secretary Chase in their interests.  After they had succeeded in paying the greater part of their loan without any material diminution of their specie, there was manifestly no good reason why they should suspend specie payments, other than on account of the inherent weakness of the specie basis system.  Their circulation did not exceed $140,000,000, and their specie reserve was unusually large, about $60,000,000.  The suspension complicated matters greatly.  With irredeemable bank paper and demand notes of the government promising to pay specie, when it had no specie, filling the channels of circulation, gold of course began to command a premium.3  Had Secretary Chase adopted the plan of the banks, the securities of the government could unquestionably have been handled by them during the first part of the war with advantage to the government.  In that event the government should have issued no paper currency.  But the result would undoubtedly have been disastrous in the end.  The expenses of the government soon reached $2,000,000 a day.  To meet the necessities of the government, the banks would have been obliged to inflate their circulation to an alarming extent.  The first financial breeze that sprung up would have occasioned a panic ;  the banks would have been obliged to suspend, as they had done nine times before during their brief existence, and most probably, too, at a critical period of the war, which could not fail to have resulted in great distress and general demoralization, to the great peril of the government.  Secretary Chase seemed to apprehend the danger of adopting the plan suggested by the associated banks, but in all other respects he proved himself utterly incompetent as a Minister of Finance.  When he renounced the machinery of the banking system, instead of urging upon Congress the necessity of adopting at once the full legal tender money system, and devising a judicious system of taxation, he recommended the establishment of the National Banking system.  The inconsistency of his action in this respect cannot fail to strike the reader, when it is considered that the National Banking system differs in no essential particular from the State Banking system, which he had just rejected, except that its notes instead of being secured by State bonds, as in the case of the banks of New York, were to be secured by bonds of the Federal Government.

When Congress convened, December 2, 1861, the paramount question was that relating to the finances of the Federal Government.  The people of the Northern States possessed unlimited resources, were animated by feelings of devoted patriotism, and were willing to assume any burdens in the shape of taxation, or otherwise, that Congress might deem necessary to impose for the legitimate prosecution of the war for the preservation of the Union.  It simply devolved upon Congress to devise the ways and means to render the resources of the nation available to the government.  As this could be done only through the instrumentality of a medium of exchange, it was the first duty of Congress to see that the channels of trade were supplied with a sufficient amount of money to develop the producing forces of the nation to their utmost capacity, and enable the people to respond to the requirements of the government.  It was manifest that the banks could not be relied upon for that purpose with any degree of certainty or safety.  There was, therefore, no other alternative but for Congress, by virtue of the sovereign prerogative inherent in the people, and as their representative duly authorized by the Constitution, to issue full legal tender Treasury notes, not bearing interest.  The reason of this is obvious.  The chief end desired was to create a circulating medium of exchange, and this end could be accomplished only by issuing Treasury notes in a form that would enable them to perform the functions and serve the purposes of money.



On the other hand a Treasury note, not bearing interest, cannot be used as a security in which to invest money.  Like money (made of gold or silver) it is of no use to the possessor until it is parted with.  If only a partial legal tender (receivable for certain dues to the government), it is to the interest of many, as already mentioned, to decry its value, in order to obtain it as cheaply as possible.  If the government obliges its creditors to take it at its face value, and it is not a legal tender in payment of debts, no one else is obliged to receive it at the same value, or indeed to receive it at all.  While it is then the same as money as between the government and its creditor, it is quite a different thing between the creditor and the public.  This is manifestly unjust.  Treasury notes are issued by the people in their collective capacity, through the agency of the government, and, unless simply intended as an interest bearing security, not designed to perform the functions of money, ought clearly to be made a legal tender for private debts as well as public dues, otherwise it places it in the power of the public to repudiate individually what they have done collectively, and the people do not all stand on the same platform with respect to the government or to each other.  The Treasury note, therefore, in this form (a legal tender and not bearing interest) constitutes a peculiar form of indebtedness or credit, which serves all the purposes of a medium of exchange and enables the government to draw upon the resources of the people in advance of taxation, bearing equally upon every individual in the nation.  The bullionists and their organs, in their efforts to decry the legal tender Treasury note and deceive the public, are constantly asserting that it costs the government nothing more than the expense of printing, and is, therefore, worth less.  This is not a mere fallacy—it is a willful perversion of the truth.  Every dollar of legal tender paper money issued by the government costs the people precisely one dollar’s worth of property or labor.  A dollar greenback is put in circulation by the government for value received in property or services ;  it passes from hand to hand, commanding a dollar’s worth of property or services every time it is used as a medium of exchange ;  until finally it is returned to the Federal Treasury in the shape of taxation or revenue.

On the 5th of December, 1861, the Committee of Ways and Means was organized as follows :

THADDEUS STEVENS, of Penn., Chairman.
V. B. HORTON, of Ohio.


On the 10th of December, 1861, the Secretary of the Treasury submitted his annual report to Congress.  He set forth in strong terms the weakness and disadvantages of the banking system of the country, and expressed the belief that the emission of bills of credit by state banks was in violation of the spirit, if not the letter, of the Constitution.  He said :

“ It has been 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 emission certainly falls within the spirit, if not within the letter, of the constitutional 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, it is too clear to be reasonably disputed, that Congress, under its constitutional power to lay taxes, to regulate commerce, and to regulate the value of coin, possesses ample authority to control the credit circulation which enters so largely into the transactions of commerce, and affects in so many ways the value of coin.  In the judgment of the Secretary, the time has arrived when Congress should exercise this power. * * Two plans for effecting this object are suggested.  The first contemplates the gradual withdrawal from circulation of the notes of private corporations, and for the issue, in their stead, of United States notes, payable in coin on demand, in amounts sufficient for the useful ends of a representative currency.  The second contemplates the preparation and delivery, to institutions and associations, of notes prepared 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 regulations.”

The Secretary then proceeds to say, that the first of these plans was partially adopted by Congress during the extra session in July and August, in authorizing the issue of $50,000,000 of demand notes, and after suggesting some of the advantages and disadvantages of the plan, concludes by declaring “that he feels himself constrained to forbear recommending its adoption.”  The principal features of the second plan are presented by the Secretary as follows :  “ First, a circulation of notes bearing a common impression and authenticated by a common authority :  Second, the redemption of these notes by the associations and institutions to which they 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.”  After eulogizing the plan,4 he adds :  “ The Secretary entertains the opinion that if a credit circulation in any form be desirable, it is most desirable in this.”


The Committee of Ways and Means appointed a subcommittee, consisting of Messrs. Spaulding, Hooper and Corning, on the proposed National Bank currency, the issue of Treasury notes and bonds, and the mode of raising means to carry on the war.  The chairman of the sub-committee, Mr. Spaulding, prepared a National Bank currency bill by the end of the month (December), and also drafted a legal tender Treasury note section, to be added to the bank bill, for the issue of Treasury notes to be used while the bank bill was being put in operation, throughout the country.  In his Financial History of the War, Mr. Spaulding says that, “upon more mature consideration and further examination, he came to the conclusion that the bank bill, containing sixty sections, could not, with the State Banks opposed to it, be passed through both Houses of Congress for several months, and that so long a delay would be fatal to the Union cause. * * He, 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.”  The bill was duly considered by the Committee of Ways and Means, and, on the 7th of January, 1862, was reported from the committee to the House.

The original bill offered by Mr. Spaulding authorized the Secretary of the Treasury

“to issue on the credit of the United States $100,000,000 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 authorized 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 money, and a legal tender in payment of all debts, public and private, within the United States, and shall be exchangeable in sums not less than one hundred dollars, at any time, at their par value, at the Treasury of the United States, * * for any of the six per cent. twenty years coupon 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 exigency of the public service may require.”

This bill was no sooner made public, than delegations of bankers from New York, Boston and Philadelphia hurried to Washington to oppose it.  They organized in a formal manner by the selection of a chairman (S.A. Mercer, of Philadelphia), and invited the Finance Committee of the Senate, and the Committee of Ways and Means of the House, to meet them at the office of the Secretary of the Treasury, January 11, 1862.  The invitation was accepted.  At the meeting which followed, the bankers spoke in opposition to the bill, and submitted the following plan for raising money :

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 dollars 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 without any limitation as to the price he may obtain for them in the market.

6.  That the Secretary of the Treasury be empowered to make temporary loans to the extent of any portion of the funded stock authorized by Congress, with power to hypothecate such stock, and if such loans are not paid at maturity, to sell the stock hypothecated for the best price that can be obtained.

Mr. Spaulding says that

“these propositions having been read, the Secretary and Finance Committees of the Senate and House expressed themselves favorable 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 plan did not include the national currency bank bill, recommended by the Secretary of the Treasury in his Annual Report, and was not, therefore, in this respect, satisfactory to him.  The meeting was somewhat conversational in character, but there appeared to be a general dissent by the Secretary and Committees from all the other propositions.  Mr. Hooper expressed very decidedly 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 [Mr. Spaulding] 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-five or sixty cents on the dollar, the inevitable result of throwing a new and large loan on the market, without limitation, as to 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 session 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.’ ”

The conference adjourned without agreeing upon any plan or arrangement.  The bank delegates, however, remained in Washington, and held further consultations with Secretary Chase, extending through several days, which resulted in an arrangement with him to the effect, amongst other things, that Congress should be urged to pass the National Bank bill, and that the amount of the demand notes should not be increased beyond the $50,000,000 authorized by the act of July, 1861, and also that Congress should be urged to extend the provisions of the existing loan acts, so as to enable the Secretary of the Treasury to exchange interest bearing Treasury notes for the demand notes, not bearing interest, and get them out of the way.

Thus while the masses were exerting every energy to sustain the government, the money power was plotting to get control of its finances, in order that it might be enabled to prey upon the people in the hour of their extremity.  How well it succeeded will duly appear.

On the 22d of January the legal tender bill was again reported from the Committee of Ways and Means, with an additional section authorizing the Secretary of the Treasury 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 six per cent. per annum, payable semi-annually, to enable the Secretary of the Treasury to fund the Treasury notes and floating debt of the United States ;  and it was made the special order for the 28th day of the month.  The debate on the bill accordingly began on that day, and was opened by Mr. Spaulding in an able argument in its favor.  The debate, which continued until the 6th day of February, when the bill passed the House, with some slight modifications, was characterized by unusual ability.  It had never before, in the history of the government, been deemed necessary to issue Treasury notes, in the legal tender form, not bearing interest, to enable them to circulate as a medium of exchange and perform the functions of money, and there was naturally a great diversity of opinion upon the subject.  Several substitutes and amendments were offered, most of them in the interest of the money power.  The views held by those who advocated the use of Treasury notes, but honestly opposed the legal tender feature, as an infraction of the Constitution, were embodied in a substitute offered by Mr. Vallandigham, and were supported by able speeches, especially that delivered by Mr. Pendleton, of Ohio.  Mr. Vallandigham’s substitute provided for the same issue of notes as the original bill, but not made a legal tender, and instead of making them payable in coin on demand, they were to be simply receivable for all public dues.  In this particular (making them receivable for public dues instead of payable in coin on demand), the substitute was preferable to the original bill.  A Treasury note, properly understood, is “a promise to receive” and not “a promise to pay,” and making it redeemable in coin could add nothing to its value, but under the circumstances was calculated only to depreciate its value, because it misled the public, especially professors of political economy.  The following extracts from the speech of the Hon. Thaddeus Stevens in support of the bill, will sufficiently explain the nature and character of the substitutes and amendments offered, and, also, of the arguments employed for and against them, as well as the bill itself.  Mr. Stevens said :

“ The Secretary of the Treasury, in his report, recommended a scheme to produce a uniform national currency, and furnish a market for government bonds.  It proposes that the banks shall receive their circulation from the government to the amount of government bonds pledged, with the Treasury for their security ;  and that no more notes should be issued than the par value of such bonds, and should be redeemed by the banks.  As a general system of banking in ordinary times, it might be very useful in regulating the currency, and by the sale of bonds the government might command coin.  But while the banks are in suspension, it is not easy to see how it would relieve the government.  If the notes were procured it must be by accepting payment by the government in depreciated circulation.  How would that be any better than the government’s own notes ?  The security of the government is equal to that of the banks, and would give as much currency.  To the banks I can see its advantage.  They would have the whole benefit of the circulation without interest, and at the same time would draw interest on the government bonds from the time they got the notes.  Now, it is very plain, that if the United States issued those notes direct, they would have the benefit of the whole circulation.  In other words, it would be equal to a loan, without interest, to the full amount of the circulation.  This project, therefore, however desirable as a banking system, could afford no immediate relief, especially as it would afford no sale for additional bonds, as the banks have already as many as would form the basis of their operations.  Having, as I think, shown the impossibility of carrying on the government in any other way, let us briefly notice some of the objections to it.  First, is it constitutional ?

“ The power to emit bills of credit and make them a legal tender is nowhere expressly given in the Constitution ;  but it is known that but few of the acts which government can perform are specified in that instrument.  It would require a volume larger than the Pandects of Justinian or the Code of Napoleon to make such enumeration, whereas our Constitution has but a few pages.  But everything necessary to carry out the granted powers of the government is not only implied but expressly given to Congress.  If nothing could be done by Congress except what is enumerated in the  Constitution, the government could not live a week.

“ The States are prohibited from making anything but ‘ gold and silver coin a tender in the payment of debts;’  but such prohibition does not extend to Congress.  The Constitution is silent as to the power of Congress over that subject.  The whole question of the right to emit bills of credit by Congress was considered in the convention that framed the Constitution.  It was reported as a part of the power to ‘borrow money.’  It was objected to as tending to make a paper currency with legal tender, and a motion was made to strike it out and insert an express prohibition.  This was resisted, because, as Mr. Mason said, ‘ it could not be foreseen what the necessities of the government might at some time require.’  ‘The late war,’ he said, ‘ could not have been carried on had such prohibition existed.’  It was finally agreed to strike out the express power, and not insert the prohibition, leaving it to the exigencies of the times to determine its necessity.” * *

“ 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 being made money.  It is not easy to perceive how notes issued without being made immediately 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 concerned.  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 contract, and would so be unconstitutional.  Where do gentlemen 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 made not only with a view to present laws, but subject to the future legislation of the country.  We have more than once changed the value of coin.  Neither our, gold nor silver coin is as valuable 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.  Whoever pretended that that was unconstitutional ?  The gentlemen from Vermont [Mr. Morrill] and Ohio [Mr. Pendleton] think it an ex post facto law.  It is not wonderful that my distinguished colleague, not being a professional lawyer, should not be aware that the ex post facto laws prohibited by the Constitution refer only to crimes and misdemeanors, and not to civil contracts.  The gentleman from Ohio no doubt knew but forgot it.” * *

“ I know the danger of granting to irresponsible institutions or individuals the right to issue paper currency not immediately convertible, because their avarice would always abuse the privilege and over issue.  But when the government thus issues, the fault and the crime is theirs if they do not restrain it within proper bounds.  Is the proposed issue of $150,000,000 too much ?  It is believed that the ordinary business of the country, especially now, requires a circulation of $400,000,000.  The bank circulation has been about $200,000,000, with coin to the amount of $250,000,000.  The bank paper, now in suspension, would largely, disappear before this par paper ;  and during suspension, which means during the war, there will be but little coin circulation.  If the whole $150,000,000 of United States notes could be kept circulating, I do not think the surviving bank paper would furnish a sufficient currency for commercial purposes—some coin must be added.  But it is not probable that it could all be kept out ;  much would rest in banks, in the pockets of private individuals, or await investment temporarily, at least, for a while.

“ But my distinguished colleague from Vermont fears that enormous issues would follow to supply the expenses of the war.  I do not think any more would be needed than the $150,000,000.  The notes bear no interest.  No one would seek them for investment.  In the rapid circulation of money, $100 in a year is turned so often as to purchase ten times its value.  This money would soon lodge in large quantities with the capitalists and banks, who must take them.  But the instinct of gain, perhaps I may call it avarice, would not allow them to keep it long unproductive.  A dollar in a miser’s safe unproductive is a sore disturbance.  Where could they invest it ?  In United States loans at six per cent., redeemable in gold in twenty years, the best and most valuable permanent investment that could be desired.  The government would thus again possess such notes in exchange for bonds, and again reissue them.  I have no doubt that thus the $500,000,000 of bonds authorized would be absorbed in less time than would be needed by the government ;  and thus $150,000,000 would do the work of $500,000,000 of bonds.  When further loans are wanted, you need only authorize the sale of more bonds ;  the same $150,000,000 of notes will be ready to take them.

“ I contend that this currency will be better than any this country can produce.  Bank notes are merely local.  The holder of them in St. Louis, wishing to transmit to New York, must pay a discount of from one to ten per cent.  If he has gold, the cost of transportation is considerable.  If he travel, it is cumbersome.  But if he has United States par notes, he can send them without cost all over the Union.

“ 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 sympathize with such importunate money lenders.  But widows and orphans are interested, and in tears lest their estate should be badly invested.  I pity no one who has his money invested in United States bonds, payable in gold in twenty years, with interest semi-annually.

“ But while these men have agonized bowels over the rich man’s cause, 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 Shylocks to get the necessaries of life.  Sir, I wish 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, and the farmer.

“ Let me restate the various projects.  Ours proposes United States notes, secured at the end of twenty years to be paid in coin, and the interest raised by taxation, semi-annually ;  such notes to be money, and of uniform value throughout the Union.  No better investment, in my judgement, 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 fears 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 who admits our power to emit bills of credit, nowhere expressly authorized by the Constitution, is a sharp and unreasonable doubter when he denies the power to make them a legal tender.

“ The proposition of the gentleman from New York [Mr. Roscoe 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 currency of the banks of Boston, New York and Philadelphia.

“ Sir, this proposition seems to me to lack every element of wise legislation.  Make a loan payable in irredeemable currency, and pay that in its depreciated condition to our contractors, soldiers, and creditors generally !  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, redeemable 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 use our own ?  Are they not as safe as bank notes ?  During the suspension 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 $750,000,000 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 the suspended banks.  Besides, 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.  I look upon it as a curiosity.  It proposes to issue United States notes, not a legal tender, bearing an interest of three and sixty-five 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 fare the fate of all non-specie paying notes not a legal tender.  But the ingenious minority have invented a kind of currency never before known—a circulation bearing interest.  Bonds or notes intended for investments bear interest, but no one expects they will be used as currency ;  whether in the shape of bonds or notes they will be used only as investments, or as 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.  This would be rather inconvenient in a frosty day.  This currency would make it necessary for every man to carry an arithmetic or interest table with which to gauge 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 $600,000,000—about this sum is already appropriated, $557,000,000—or issue United States notes, not redeemable in coin, but fundable in specie paying bonds at twenty years ;  such notes either to be made a legal tender, or to take their 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 flatter 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 nurse the poor debtor.  No nation, it is said, has ever tried anything like it.” * *

“ 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 shall be thus mutilated and emasculated.  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 Committee 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.”

Mr. Stevens’ speech closed the debate, and the bill came up for final action in the House, February 6, 1862, and was adopted by a vote of 93 to 59.


On the 10th day of February, 1862, Mr. Fessenden, Chairman of the Committee on Finance in the Senate, reported the House bill from the Finance Committee with amendments.  The important amendments were as follows :

1.  That the legal tender notes should be receivable for all claims and demands against the United States of every kind whatever, “except for interest on bonds and notes, which shall be paid in coin.

2.  That the Secretary might dispose of United States bonds “at the market value thereof, for coin or Treasury notes.

3.  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.

4.  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 day of February, 1862, the debate in the Senate was opened by Mr. Fessenden in a lengthy speech.  A motion was made by Mr. Collamer to strike out the legal tender clause, which was lost.  On the 14th inst. the bill, as amended, passed the Senate by a vote of 30 to 7, and was returned to the House.


On the 18th, Mr. Stevens reported the bill, as amended by the Senate, from the Committee of Ways and Means to the House, and said, “ 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 are very important, and, in my judgment, very pernicious, but I hope the House will examine them.”

On Wednesday, the 19th, Mr. Spaulding opened the debate in opposition to some of the amendments of the Senate.  We quote as follows :

Mr. Chairman, I desire especially to oppose the amendments of the Senate which require the interest on bonds and notes to be paid in 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, Buffalo, 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 and six per cent. bonds, to receive their interest in coin semiannually, 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 Government.  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 capitalist 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 capitalists who now hold United States stocks and Treasury notes heretofore issued, or that may hold bonds and notes hereafter to be issued ;  while all other persons in the United States (including the Army and Navy 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 want 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 all the bills, and ultimately pay the whole amount, principal and interest, in gold and silver.

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 all are obliged to submit to heavy taxation to provide for its ultimate redemption in gold or silver.  Every attempt on the part of any class of citizens to create distinctions and secure a legal preference, mars the simplicity and success of the whole plan.  The very discrimination proposed carries on its face notice to everybody that although the notes are declared 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, by your own acts, your own bonds and notes, and effectually destroy the symmetry and harmonious working of the whole plan.

(Mr. Spaulding, in his Financial History of the War, calls attention to the fact that “ at the time the above remarks were made by him the duties on imports were, as the bill then stood, payable in legal tender notes ;  but this was afterwards changed in the committee of conference, making those duties payable in coin, so that the interest might be paid in coin, without being obliged to force the bonds on the market to obtain coin for that purpose.”)

During the discussion in the Committee of the Whole an amendment to the Senate amendment requiring interest on bonds and notes to be paid in coin, was offered by Mr. Pendleton to the effect, “that the officers, soldiers, seamen and marines, engaged in the military service of the United States,” should also be paid in coin, which was not agreed to.

On the 20th the House resumed consideration of the Senate amendments.  Mr. Stevens closed the debate.  We quote from his speech as follows :

“ Mr. Speaker, I have a very few words to say.  I approach the subject with more depression of spirits than I ever before approached any question.  No personal motive or feeling influences me.  I hope not, at least.  I have a melancholy foreboding that we are about to consummate a cunningly devised scheme, which will carry great injury and great loss to all classes of the people throughout this Union, except one.  With my colleague, I believe that no act of legislation of this Government was ever hailed with as much delight throughout the whole length and breadth of this Union, by every class of people, without any exception, as the bill which we passed and sent to the Senate.  Congratulations from all classes—merchants, traders, manufacturers, mechanics and laborers—poured in upon us from all quarters.  The Boards of Trade from Boston, New York, Philadelphia, Cincinnati, Louisville, St. Louis, Chicago and Milwaukee, approved its provisions, and urged its passage as it was.

“ I 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 passage of the bill as it passed the House.  It is true there was a doleful sound came up from the caverns of bullion brokers, and from the saloons of the associated banks.  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.  Instead of being a beneficent and invigorating measure ;  it is now positively mischievous.  It has all the bad qualities which its enemies charged on the original bill, and none of its benefits.  It now creates money, and by its very terms declares it a depreciated currency.  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 compelling 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 sufficient advantage over notes bearing no interest and payable virtually in twenty years bonds, with six per cent. interest.  Why give them this additional advantage ?  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 purpose.  Why 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 Government $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.” * *

“ The notes, by another amendment, are authorized to be invested in notes or bonds payable in two years, and bearing an interest of seven and three-tenths.  One of the great objects was to induce capitalists to invest in six per cent. bonds or lose their interest, and thus to furnish a continually recurring currency by the sale of these six per cent. bonds.  This provision would effectually prevent the funding a dollar in those bonds.  They would all go in preference into seven and three-tenths bonds, due in two years, when no one believes we can pay them.

“ But this is not the worst.  The tenth amendment provides that any holder of the United States legal tender notes, if he have $100 and upwards, shall draw five or six per cent. interest on them until he choses to use them.  The poor who have less than $100 shall draw no interest.  It is plain that, by these two contrivances, not one dollar of these United States notes will ever be funded in six per cent. bonds.

“ But now comes the main clause.  All classes of people shall take these 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 commissioners would soon take all the rest that might be issued.

“ But how is this gold to be raised ?  The duties and public lands are to be paid for in United States notes, and they or bonds are to be put up at auction to get coin for these very brokers who would furnish the coin to pay themselves, by getting twenty per cent. discount on the notes thus bought.

“ Now, in less than a year, taking the public debt at what my colleague makes it—I make it more—$1,200,000,000, what will the interest be upon it at seven and three-tenths per cent., for it will all center in that rate of interest ?  It will be $87,000,000, and one-half of that amount, $43,500,000, must be raised every six months for the paying of this interest, and is to be raised in coin, which nobody holds but the large capitalists.  Does anybody, suppose that they are going to give that coin for such notes as we are now about to issue, at par ?  They will sell the gold for what their conscience will allow, and they will compel the government to give anything they choose, unless the government consents to become dishonored.  The first purchase of gold by the government will fix the value of these notes which we issue and declare to be a legal tender.  That sale will fix their value at ten, fifteen, or twenty-five per cent. discount, and then every poor man, when he buys his beef, his pork, and his supplies, must submit to this fifteen or twenty-five per cent. discount, because you have said that that shall be the value of the very notes which you have made a legal tender to him, but not a legal tender to those who fix the value of these very notes.  Does any one believe that anybody but bankers and brokers fixes the depreciation of currency ?  So you will thus have fixed the market value of your notes at seventy-five or eighty per cent., and yet they are a legal tender to the poor of the country, while they are no legal tender to those who hold the coin of the country.

“ By the original bill the Secretary of the Treasury was allowed to sell these bonds at their value for lawful money—that is, for these legal tender notes.  But now, by the provisions of this bill, after the market value has been fixed and they are depreciated, the Secretary of the Treasury is authorized to go into the market and sell them for coin, not at par, but at the market value therefor.  Was there ever a more convenient contrivance got up, into which blind mice run, to catch them ?  Was ever before such a machine got up for swindling the government and making the fortunes of the gold bullionists in one single year ?

“ But as if this accumulated folly were not quite enough, another amendment provides that these notes, when presented in sums not less than $100, may be transferred into seven and three-tenths votes payable in two years.  Parties may buy these notes at a discount and put them into notes payable in bullion at two years, at seven and three-tenths interest, for that is a part of the whole system.

“ Now, sir, does any man here believe that, notwithstanding the victories we are gaining, the government will be able to redeem these notes in two years ? If not, they will be shoved upon the market and sold for coin at whatever discount may be demanded.”

Mr. Stevens also offered an amendment to pay the army and navy in specie, the same as the bondholders’ interest in coin, which was voted down.  The Senate amendments were concurred in only in part, which rendered the appointment of a committee of conference necessary.  The conference committee appointed by the Senate consisted of Messrs. Fessenden, Sherman and Carlisle, and the conference committee of the House of Messrs. Stevens, Horton and Sedgwick.  The conference committee were in session two or three days, and finally reported the bill with several alterations, the most important of which was that the duties on imports should be paid in coin,5 so as to do away with the necessity of forcing the bonds on the market to procure coin to pay interest in coin on the bonded debt of the government.

On the 24th of February, 1862, the action of the conference committee was agreed to by the House by a vote of 97 to 22.  On the 25th the Senate concurred in the action of the conference committee, and the same day the legal tender act was approved by the President.6


Thus were the most sacred interests of the people, especially of the producing classes—the farmer, the mechanic, the manufacturer and the laboring man, grossly and wickedly betrayed into the hands of the money power by the Senate of the United States.  The Senate at that time was a small body, but twenty-four States being represented, with but three or four members whose ability rose above mediocrity.  The occupants of seats once filled by statesmen, whose ability and eloquence had made the Senate of the United States famous throughout the world, they became puffed up with ideas of self-importance, which, with the venality of the Shermans of the body, rendered them easy prey for the sharks of Wall street.  It will be observed that the points contended for, so strenuously and successfully, by the conference committee of the Senate, which represented the sentiment of the majority of that body, were, in substance and effect, the same as those contained in the plan of the bankers, offered at their meeting, which convened in Washington immediately after the introduction of the legal tender bill in the House.  That the Senate was controlled, in its action in regard to the legal tender bill, by improper influences is not a matter of conjecture, but of history.  In his speech at Philadelphia, January 15, 1876, Judge Kelley says :  “ I remember the grand ‘Old Commoner’ (Thaddeus Stevens) with his hat in his hand and his cane under his arm, when he returned to the House after the final conference, and shedding bitter tears over the result.  ‘Yes,’ said he, ‘we have had to yield ;  the Senate was stubborn.  We did not yield until we found that the country must be lost or the banks be gratified, and we have sought to save the country in spite of the cupidity of its wealthier citizens’.”

Here begins one of the darkest chapters in American history.  It will be found that every step taken by Congress from this on, in matters pertaining to the finances of the nation, has been dictated by the money power.  Foreign capitalists, such as the Rothschilds, became deeply interested in the scheme of robbery inaugurated by the passage of the first legal tender act, and through their agents, such as August Belmont, banker and while chairman of the Democratic National Committee, have aided the money power here materially in controlling the policy of both of the great political parties.  The amount stolen from the people during the war by the financial policy then adopted, and which now encumbers the nation in the shape of a bonded debt, payable principal and interest in gold, is estimated by such writers upon the subject of finance as J.S. Gibbons (contributor to Johnson’s Universal Cyclopædia) at over one thousand millions of dollars,7 to say nothing of the thousands of millions of which the people have been robbed indirectly ;  by means of the pernicious monetary system then foisted upon the country.

The first legal tender notes (greenbacks) issued under the act of Congress of February 25, 1862, were issued bearing date March 10, 1862, and on the back of their 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 United States six per cent. bonds, redeemable at the pleasure of the United States after five years.”

Notwithstanding the mutilated form in which the greenbacks were sent out by the Treasury department, they performed a marvellous work.  The producing forces of the nation were set at work, and there was no longer any difficulty in rendering the resources of the people available to the government.  In speaking of this period, Judge Kelley, in his Philadelphia speech of January last, thus graphically and eloquently pictures the wonderful change which followed the passage of this legal tender act.  He says :

“ But the patriots, (Lincoln, Stevens, etc.,) to whom I have referred, had studied the Constitution of the United States.  They knew that it imposed upon them the duty of saving the nation.  They knew that money is the sinew of war, and that it must be had.  They knew that the Constitution authorized the coining of the public credit into money.  They ‘smote the rock of public credit,’ and power and prosperity gushed forth.  ‘Smote the rock of public credit !’  What does that mean ?  Why, they called into existence ‘the rag-baby !’  They said to every man that would work—‘Here are wages for you ;  this rag-baby will pay you.’  They said to ship-owners, ‘unfurl your rotting sails and open your hatchways ;  we have brought you grain from the farm, carry it abroad to buy us clothing and arms ;  for our industries have been stricken, and we cannot provide clothing or arms for the army that is to sustain the Union.’  The ‘rag-baby’ showered greenbacks upon them, and the ships spread their sails, and carried rich cargoes to foreign lands, which were exchanged for clothing, arms and munitions of war.  Industry was rife throughout the land.  The farmers, who had been without an adequate or remunerative market for years, were getting good prices for their grain, were paying their debts to the local merchant, who in turn paid his to those of the great cities.  A marvellous child was that ‘rag-baby.’  While not yet a month old, its name, ‘greenback,’ not yet familiar to the people, it lighted the fires in every forge and furnace of the country ;  it hired ships, and bought others ;  it blockaded the whole southern coast ;  it rallied an army of 75,000 men, and we soon after heard ringing through the streets the shout of well paid and well clad soldiers, ‘we’re coming, Father Abraham, three hundred thousand more !  The ‘rag-baby’ was welcomed by every commissary, quarter-master and paymaster.  It furnished transportation ;  it met all demands, and the American people—at least those of the free States—with the great war on their hands, were prosperous as they had never been before, thanks to the marvellous power of the ‘rag-baby.’ * * I name it not the ‘rag-baby;’  I take the derisive term from the door of the Presidential mansion.  I cannot imply a want of respect for the constitutional legal tender money of the country, the Treasury note, which did all that I have attributed to the ‘rag-baby.’ ”

The premium on gold, which was 31/8 per cent. when the legal tender act was passed, February 25, 1862, immediately began to decline, and did not go up again until the latter part of May.  United States bonds immediately went up from 90 to 102.


By the fourth 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, ill sums of not less than $100, at five per cent. interest, with the privilege of drawing it out again on ten days’ notice after thirty days.  On the 17th day of March, 1862, the authority to receive these deposits was increased to $50,000,000.  On the 11th of July, 1862, it was still further extended to $100,000,000 ;  and by the act of January 30, 1864, to $150,000,000, and the Secretary was authorized to pay as high as six per cent. interest.  These deposits reached the sum of $120,176,196.


By the act of March 1, 1862, the Secretary of the Treasury was authorized to issue to public creditors “who may be desirous to receive the same in satisfaction of audited and settled demands against the United States,” certificates of indebtedness in sums not less than $1,000 each, payable in one year, with interest at six per cent.  And by the act of March 17, 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.  These certificates were issued in the form of bank notes and circulated to a large extent as currency.  The amount of certificates of indebtedness in circulation November, 1864, was $238,593,000.


On the 7th day of June, 1862, Secretary Chase sent a communication to the Committee of Ways and Means of the House asking for authority to issue $150,000,000 more legal tender Treasury notes, and that $35,000,000 of this sum should be of a less denomination than five dollars.  On the 11th of June a bill was reported to the House from the Committee of Ways and Means.  The bill was made the special order for the 17th inst.  On that day the debate was opened by Mr. Spaulding in a speech in favor of the bill.  A vote was reached June 24th, when the bill passed, substantially as recommended by the Secretary, by a vote of 76 to 47.

On the 28th of June the Finance Committee of the Senate reported it to that body with amendments.  On the 2d of July it passed the Senate, as amended, by a vote of 22 to 13.  The House refused to agree to the amendments ;  the farce of a conference committee was again gone through with ;  the report of the conference committee was agreed to on the 8th of July, and on the 11th the bill was approved by the President.


Congress convened in regular session December 1, 1862.  On the 4th Secretary Chase submitted his second annual report.  After an elaborate review of the revenues and expenditures of the government, he discussed the financial affairs of the nation at large.  He reiterated his objections to the State banks and declared that, as between a currency furnished by numerous and unconnected banks in various States and a currency furnished by the government, he unhesitatingly gave his “preference for a circulation authorized and issued by national authority.”

He took issue with those who entertained the opinion that the rise in the price of gold was due to the redundancy of the currency, and supported his views with great force,8 but it did not occur to him to suggest the true reason, viz :  because coin was the only currency that was a full legal tender.  He again took occasion to renew his recommendation of the National Banking system.  He said :

“ While the Secretary thus repeats the preference he has heretofore expressed for a United States note circulation, even when issued directly by the government and dependent on the action of the government for regulation and final redemption, over the note circulation of the numerous and variously organized and variously responsible banks now existing in the country ;  and while he now sets forth, more fully than heretofore, the grounds of that preference, he still adheres to the opinion expressed in his last report, that a circulation furnished by the government, but issued by banking associations organized under a general act of Congress, is to be preferred to either.”

The amount to be provided for by Congress for the current year he estimated at about $300,000,000, and for the next fiscal year, (beginning July 1st) $600,000,000, and, recommended that the chief dependence of the government to secure that amount be placed on the negotiation of bonds.

Congress was then urged by the Secretary to repeal that portion of the act of Congress of February 25, 1862, which restricted the sale of bonds to their market price, and also the clause providing for the convertibility of bonds and Treasury notes, (greenbacks.)  In conclusion he said :

“ The general views of the Secretary may, therefore, be thus briefly summed :  He recommends that whatever amount may be needed beyond the sums supplied by revenue and through other indicated modes, be obtained by loans, without increasing the issue of United States notes beyond the amount fixed by law, unless a clear public exigency shall demand it.  He recommends, also, the organization of banking associations for the improvement of the public credit, and for the supply to the people of a safe and uniform currency.  And he recommends no change in the law providing for the negotiation of bonds except the necessary increase of amount, and the repeal of the absolute restriction to market value and of the clauses authorizing convertibility at will.”


Early in the session the Hon. Thaddeus Stevens introduced a bill “to provide means to defray the expenses of the government,” which, in his own language, “produced a howl among the money changers as hideous as that sent up by their Jewish cousins when they were kicked out of the temple.”  This bill was in substance the same as the legal tender bill, as it originally passed the House and before it was mutilated by the Senate in the manner above explained.  It was intended to bring the government back to the full legal tender money system, “the simplicity and harmony of which had been mangled and destroyed by the Senate.”  In a brief, but powerful speech, (December 23, 1862) Mr. Stevens pointed out the injustice and danger of the financial policy which was then being pursued, and closed with this prophetic warning :  “ But I ought perhaps to say, before I close, to my country banking friends that they need not be alarmed.  There is no great prospect that we shall return to the system I have indicated, nor do much to protect the people from their own eager speculations.  When a few years hence, the people shall have been brought to general bankruptcy by their unregulated enterprise, I shall have the satisfaction to know that I attempted to prevent it.”  (Mr. Stevens’ speech will be found in full in the Appendix.)

On the 8th of January, 1863, the Committee of Ways and Means reported a bill entitled, “A bill to provide Ways and Means for the Support of the Government,” afterwards known as the $900,000,000 loan act.  The bill reported contained no provision for the repeal of the clause in the act of February 25, 1862, restricting the Secretary of the Treasury in the sale of bonds to their “market value,” or of the clause allowing the holders of legal tender notes to convert them at any time into 5-20 six per cent. bonds.

On the 12th of January the bill was taken up in the House, and Mr. Spaulding opened the debate in a lengthy speech in support of the bill, in which he discussed the National Banking scheme, recommended by the Secretary, arguing in its favor.  On the 17th of January, 1863, a joint resolution was passed “to provide for the immediate payment of the army and navy of the United States,” authorizing the Secretary of the Treasury to issue $100,000,000 legal tender Treasury notes, to be covered by the bill then pending ($900,000,000 loan act.)  On the 26th of January, 1863, the bill was passed—a substitute offered by Mr. Hooper, and one by Mr. Stevens, having been first decided in the negative—without a division.  On the 13th of February, 1863, the bill, after being amended, passed the Senate by a vote of 32 to 4.  The usual routine of a conference committee was gone through with, with the usual result, and the bill was finally agreed to as amended by the Senate, and approved by the President March 3, 1863.  The following is a synopsis of the bill as given by Mr. Spaulding :9

“ 1.  The first section authorizes a loan of $300,000,000 for the then current 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 the same act the Secretary, in lieu of an equal amount of said bonds, was authorized to issue $400,000,000 of Treasury notes, bearing interest not exceeding six per cent., payable in lawful money, which notes, payable at periods expressed on their face, might be made a legal tender at their face value.

“ 3.  By the third section $150,000,000 in amount of United States notes, made a legal tender, might be issued.  The restriction 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 bonds as therein provided, on or before the first of July, 1863, and thereafter the right to exchange the same shall cease and determine.’

“ 4.  This section imposed a tax of one per cent. each half year, on a graduated scale of State bank circulation, according to the capital stock of each bank.”

Making the interest of the bonds payable in gold and declaring that the legal tender Treasury note (greenback) should not be receivable for duties on imports, was a gross betrayal of the interests of the people by the Senate of the United States.  But that body was capable of still greater perfidy.  It will be observed by the synopsis of the $900,000,000 loan act, given above, that the convertibility of the greenback with United States six per cent. bonds, as provided by the act of February 25, 1862, was repealed.

By the terms of the act of February 25,1862,under which the greenback was issued, the right to exchange it for United States bonds was distinctly guaranteed, and was in the nature of a contract, made by the government with the holder, and to abrogate this right was an act of repudiation.  The motive which inspired the act, was to still further depreciate the paper of the government.  It is a fact worthy of note, that when Congress perpetrated this act of repudiation, “no doleful sound came up from the caverns of the bullion brokers or the saloons of the associated banks,” nor was there any howl heard from the gentlemen of the press, who were so quick to detect repudiation in Mr. Stevens’ bill to restore the legal tender act to the condition in which it first passed the House.10


On the 2d of February, 1863, the National Bank bill, as prepared by Mr. Spaulding in December, 1861, was reported, with alterations and amendments, from the Finance Committee to the Senate by Mr. Sherman.  The debate upon it began in the Senate on the 9th, and on the 12th (three days after) the bill passed by a vote of 23 to 21.  It was taken up in the House on the 19th, and passed the next day by a vote of 78 to 64 ;  and received the President’s signature March 25, 1863.  (See Chapter on National Banks.)

The money power now had matters all its own way, and was in a situation to prey upon the government and people at its pleasure.  Duties on imports were payable in gold ;  interest on the bonds of the United States were payable in gold ;  the exchangeability of the greenback with bonds had been abrogated ;  the country was flooded with evidences of indebtedness of the government in all forms and shapes, such as demand notes, Treasury notes bearing interest, mutilated legal tender notes, certificates of deposit, certificates of indebtedness, etc.;  and a banking bill, authorizing the issue of $300,000,000 in bank notes had been passed.

The following statement of the public debt (January 2, 1863) will show exactly the amount and character of the indebtedness of the government at this time :

Loan of 1842 in course of payment
Loan of 1847
Loan of 1848
Loan of 1858
Loan of 1860
Loan of 1861, act of February 8, 1860
Loan of 1861, act of July 18, 1861
Loan of 1862, five-twenty six per cent
Texas indemnity
Oregon war debt
Texas debt
Old funded and unfunded debt
Treasury notes under acts prior to 1857
Treasury notes under acts subsequent
Treasury notes seven-thirty per cent. interest
Temporary deposits at four per cent
Temporary deposits at five per cent
United States notes, legal tender and receivable for customs
United States notes, legal tender
Postal currency less than one dollar
Certificates of indebtedness, six per cent
$ 2,883,364.11
Requisitions on the Treasury for soldiers’ pay and other creditors, due but not paid59,117,597.46
Total funded and unfunded debt to January 2, 1863, according to the books in the Treasury Department 783,804,252.64

The time had now arrived to put the $500,000,000 of United States bonds authorized by the act of February 25, 1862, on the market.  Notwithstanding the urgent need of the government during this time, Secretary Chase had held these bonds back for over a year on the pretence that the restriction to a sale at “market value” prevented him from negotiating their sale to any considerable amount.  Mr. Gurley, of Ohio, effectually disposed of this plea in the course of his speech on the nine hundred million loan act.  He said :  “ He did not agree with the Secretary in several things contained in his report ;  the banking scheme, which the Secretary admits would not afford any immediate relief, 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 by Congress, and the consequence was that the soldiers and sailors were not paid, as they ought to have been before this time. * * The words ‘market value’ do not mean par value, nor any specified time or sums.  The market value was the price they would bring when offered in the market.  There has been no business 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.”

In May, 1863, Jay Cooke, “an enterprising banker” of Philadelphia, was employed to dispose of the five-twenty bonds.  The Secretary of the Treasury, up to this time, had put out only about $25,000,000, leaving $475,000,000 yet to be sold.  No effort was made by Mr. Cooke to negotiate these bonds with bankers or capitalists, but (to quote from Spaulding), “the editors of newspapers and others were enlisted to bring the advantages of the 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 admirably in this undertaking.  The loan became very popular, and was taken extensively by farmers, mechanics and laboring people, in all the towns, villages and cities 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, $278,511,500 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.”

Hugh McCulloch also bears testimony as to what class of people took the 5-20 bonds.  In a letter to the New York Tribune, dated at London in September last, he said :  “ I recollect the time when subscribers for United States bonds were regarded as patriots, and I happen to know to what class they belonged.  With rare exception they were not capitalists. * * The purchasers of our bonds were, the patriotic men of all parties, chiefly men of moderate means, who were resolved that the Union should be saved, no matter at what cost of money or blood.”  It may be interesting to state that Mr. McCulloch was not one of those who were resolved that the Union should be saved, no matter at what cost, etc.  At the time he refers to, he was a country banker “of moderate means,” somewhere in the State of Indiana, and was solicited, we believe, by the Sub-Treasurer of the United States, Mr. Cisco, to have his bank take and dispose of some of “our bonds.”  He treated the request with contempt.  This matter was so well known at the time of his appointment as Secretary of the Treasury, as to be talked of on the streets of Washington, and was hushed up by his friends only with great difficulty.

The partial legal tender Treasury note (greenback), issued by the government, now constituted the medium of exchange of the nation.  Its legal tender property gave it the power and functions of money, to measure and exchange values.  The legal tender money of a country is the measure of all values and the basis of all money contracts among its people ;  consequently prices in the United States came to be regulated by the greenback and not by gold.  Any one can satisfy himself on this point by comparing the market prices of any of the leading products of the country for a given time with the fluctuations in the price of gold.  Secretary Chase referred to this fact in his second annual report, in which he said :

“ That such is the case (no redundancy of the currency) may be reasonably inferred from the fact that the prices of many of the most important articles of consumption have declined or not materially advanced during the year.  Wheat, quoted at $1.38 to $1.45 per bushel on the first of November, 1861, was quoted at $1.45 to $1.50 on the first of November, 1862.  Prime mess pork on the first of November, 1861, was quoted at $15 to $15.50 per barrel, and on the first of November, 1862, at $12.50 to $13.  Corn sold on the first of November, 1861, at 62 to 63 cents per bushel, and on the first of November, 1862, at 71 to 73 cents.  A comparison between the prices of hay, beef, and some other staples of domestic produce, at the two dates, exhibits similar conditions of actual depression in price or moderate rise.”
Products rise and fall in price according to the laws of supply and demand.  Foreign goods, however, the duties on which have to be paid in gold, are subject to a different standard of payment, and are governed in price largely by the price of gold.  The price of gold is regulated by the laws of supply and demand, supplemented by the arts and efforts of speculators and gold gamblers.  As long as the greenback was convertible at the will of the holder into a six per cent. gold interest bond, there was no danger of its becoming redundant, or in any way affecting the price of domestic products.  But, as we have seen, this convertibility was taken away, in the face of the plighted faith of the government, after July 1, 1863.

On March 3, 1864, an act of Congress was, passed giving Secretary Chase still further discretionary power.  It authorized him to issue $200,000,000 of bonds, bearing date March 1, 1864, or any subsequent date, redeemable after five years and payable in forty years, in coin, bearing interest not exceeding six per cent., subsequently known as 10-40 bonds.  Under authority of this act, Secretary Chase, immediately after the 5-20 bonds bearing six per cent. interest had been disposed of, put 10-40 bonds bearing only five per cent., interest on the market.  Very naturally the loan did not prove a success, and by the 1st of July, 1864, the sum realized from 10-40 bonds amounted to only $73,337,750.  In order to defray the expenses of the government, the Secretary continued to issue evidences of indebtedness of the government in various forms calculated to circulate as a currency.  By this time National Bank notes began to swell the volume of the currency.  The following statement shows the amount and kinds of paper in circulation June 30, 1864 :

U.S. notes, greenbacks.................$431,178,670 84
Postal, fractional currency..............22,894,877 25
Interest bearing legal tender Treasury notes168,571,450 00
Certificates of Indebtedness.............160,720,000 00
National Bank notes....................25,825,695 00
State Bank circulation about............135,000,000 00
Seven-thirty Treasury notes.............109,356,150 00
Temporary deposits for which certificates were issued.......................72,330,191 44
  $1,125,877,034 53

From the above table it will be seen that the country was flooded with paper securities of the government of every description, mostly bearing interest and issued in a form to circulate as currency.  Now take into consideration the fact that over $700,000,000 of bonds bearing interest payable in gold had just been issued, and also that the military situation was very critical, and no one can fail to see into what a wretched condition the finances of the country had been brought.  The “bulls” and “bears” of Wall street fairly rioted in the speculation and gold gambling which ensued.  The premium on gold began to go up.  On the 15th of January, 1864, it was 1.55 ;  on the 15th of February, 1.59 ;  on the 15th of April, 1.78 ;  on the 15th of June, 1.79 ;  on the 30th of June, 2.50 ;  and on the 11th of July, 2.85½.  The business affairs of the country were of course greatly deranged, and distrust became general.  The credit of the government suffered enormously—worse than if it had sustained a dozen defeats in the field.  But the game had been carried too far, and it was no longer possible to deceive the public, so something had to be done to allay public feeling and restore confidence.  Secretary Chase was compelled to resign June 30, 1864.  No change, however, was made in the policy of the Treasury Department, and matters went on from bad to worse.


By the act of June 30, 1864, the amount of greenbacks issued or to be issued, was limited to $400,000,000, and “such additional sum, not exceeding $50,000,000, as may be temporarily required for the redemption of temporary loans.”  The Secretary was authorized to issue $200,000,000 legal tender Treasury notes bearing interest, payable in three years.  By the same act all bonds, coupons, national currency, United States notes, Treasury notes, fractional notes, certificates of indebtedness, certificates of deposit, etc., were declared to be exempt from taxation by or under State or municipal authority.


William P. Fessenden, United States Senator from Maine, was appointed to succeed Secretary Chase, and entered upon the duties of his office July 5, 1864.  Secretary Fessenden raised the means to carry on the government to March 4, 1865, by issuing greenbacks, 7-30 Treasury notes, interest bearing Treasury notes, certificates of indebtedness, 5-20 bonds, etc.  Secretary Fessenden, while in the United States Senate, had played a conspicuous part in mutilating the greenback, and the following paragraph from his annual report, in December, 1864, in view of his course, cannot fail to strike the reader as a singular admission.  He said :  “ The experience of the past few months cannot have failed to convince the most careless observer that, whatever may be the effect of a redundant 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 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 the unpatriotic and criminal efforts of speculators, and probably of secret enemies, to raise the price of coin, regardless of the injury inflicted upon the country,—or desiring to inflict it.”  No man living, except John Sherman of Ohio, was better able to explain how and through whose instrumentality these rascally speculators were enabled to prosecute their “unpatriotic and criminal efforts” than Mr. Fessenden himself.  Under the circumstances Mr. Fessenden did not find the position of Secretary of the Treasury a very comfortable one ;  and at the beginning of Mr. Lincoln’s second term he surrendered it with feelings of great relief.


Immediately after President Lincoln entered upon his second term of office Hugh McCulloch, a banker, of the State of Indiana, was appointed Secretary of the Treasury.  Mr. McCulloch was unknown to the public, but it was hoped that, being a banker and of course familiar with the manner in which the government and people were being robbed by the money power, and not identified with the corrupt political ring at Washington through which it operated, he would endeavor to restore the finances of the country to a more healthy condition.  Never were a people doomed to be more bitterly disappointed.  McCulloch not only entered into the designs of the money power, but became its most subservient tool, and retired with the reputation of being the first Secretary of the Treasury of the United States who had ever prostituted his high office for the purpose of enriching himself and his associates.  Henry C. Carey, who had a conversation with him immediately after his accession to office, says that he expressed himself then as unfavorable to contraction, and quotes him as saying that he “should gladly see it (gold) at 1,75,” meaning that he would not favor contraction for the purpose of reducing the premium on gold.  “Three months later,” says Mr. Carey, “he was instructing his representatives abroad to give assurances that we should have resumed specie payments before the 7-30s became due.  Two months yet later came the destructive Fort Wayne decree (a letter from McCulloch in which he expressed himself in favor of the policy of contraction), and from that hour did the Secretary persist in the absurd and injurious policy therein announced.”

Mr. McCulloch, at the same time that he was giving instructions to his representatives abroad that we should have resumed specie payments before the 7-30s became due, was issuing 7-30 Treasury notes and compound interest bearing Treasury notes, made a tender at their face value, to an enormous amount.  The payment of the army, which was mustered out of service during this period, alone required an immense sum, which was obtained by selling 7-30 Treasury notes through the agency of Jay Cooke.  The amount of 7-30 Treasury notes outstanding October, 1865, which were convertible in less than three years into 5-20 six per cent. bonds, was $830,000,000.

The following is a statement of the debt and circulation of the United States, as it stood October 31, 1865 :

Bonds, 10-40’s, five per cent., due in 1904
Bonds, Pacific R.R., 6 per cent., due in 1895
Bonds, 5-20’s, 6 per cent., due in 1882, ’84 and ’85
Bonds, 6 per cent., due in 1881
Bonds, 5 percent., due in 1880
Bonds, 5 per cent., due in 1874
Bonds, 5 per cent., due in 1871
Bonds, 6 per cent., due in 1868
Bonds, 6 per cent., due in 1867
Bonds, Texas indemnity, part due
Bonds, Treasury notes, etc., part due

      Total Bonds.............
  $ 172,770,100.00
760,000 00
$ 1,163,769,611.89
Compound interest notes, due in 1867-’68$   173,012,141.00
7-30 Treasury notes, due in 1867 and 1868830,000,000.00
Temporary loans, ten days’ notice99,107,745.46
Certificates of indebtedness, due in 186655,905,000.00
Treasury notes, 5 per cent., Dec. l, 186532,536,901.00
United States notes428,160,569.00
Fractional currency26,057,469.20— 1,644,779,825.66
          Total debt October 31, 1865$ 2,808,549,437.55
National bank notes issued$ 185,000,000.00
State bank notes issued65,000,000.00
Treasury notes, greenbacks, etc.1,644,779,825.66
Total circulation$ 1,894,779,825.66


Secretary McCulloch, in his first annual report, December 4, 1865, argued that the legal tender acts were war measures and only temporary in character, and “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 that the work of retiring the notes which have been issued should be commenced without delay, and carefully and persistently continued until all are retired.”  On the 18th of December, 1865, Congress adopted a resolution “cordially concurring in the views of the Secretary of the Treasury, in relation to a contraction of the currency,” by a vote of 144 to 6.  This was followed by an act of Congress, approved April 12, 1866, authorizing the Secretary to sell 5-20 bonds, and with the proceeds to retire six per cent. compound interest notes and legal tender notes (greenbacks), and other evidences of indebtedness of the government, but not to retire more than four millions of dollars of greenbacks a month, or forty-eight millions of dollars in a year, but without restriction as to the amount of compound sixes and seven-thirties.  This act gave Secretary McCulloch unlimited control over the monetary affairs of the country.

The banks and sharks of Wall street and their kind, at home and abroad, held hundreds of millions of securities of the government, which they had purchased at various prices ranging from thirty-five cents on the dollar upwards.  During the war whilst these securities were being emitted, it was the policy of the money power to depreciate their value in every way possible, in order that they might be bought in at a sacrifice.  Hence it was that interest on the bonds and duties on imports were made payable in gold, and subsequently, that the convertibility of legal tender notes into bonds was abrogated.  It was for the same reason, too, that Congress, instead of adopting a plain, simple system, easily understood by the public, such as the legal tender Treasury note sustained by an interest bearing bond, persisted in authorizing the Secretary of the Treasury to issue government securities, bearing interest, and mostly payable in three years, in all sorts of forms and shapes.  Government obligations were issued during the war by the Treasury Department in fifteen different forms.  It was of course impossible for the general public to keep the run of, much less to understand, all these various forms of indebtedness, nor was it designed that they should.  It need scarcely be added, that issuing the securities of the government in these peculiar forms furnished the banks an additional opportunity to prey upon the people.

As soon as the last batch of 7-30 Treasury notes was disposed of by McCulloch to raise means to pay off the army on the eve of its disbandment, the money power changed its policy.  It was now to the advantage of the holders of government securities to do everything in their power to enhance their value.  Accordingly from this time on the efforts of the money power will be found turned in that direction.  Secretary McCulloch, who had informed Mr. Carey that he would like to see gold stay at $1.75, as we have seen, was soon brought to terms, and was now a zealous champion of contraction, for the purpose of bringing the country back to “honest money.”  The Treasury notes, purposely made payable in three years, and which were convertible into 5-20 bonds, constituted the greater part of the public debt held at home.  These notes were payable in lawful money (greenbacks), and it became an important object to have them converted into long time bonds, so that the money power might have ample time to secure such legislation as would result in the principal as well as the interest being paid in gold.  Mr. McCulloch entered into this method of liquidating the outstanding obligations of the government with great zeal.  The following items taken from his report of December, 1866, exhibit the character and extent of the contraction which took place (by substituting 5-20 bonds for Treasury notes, etc.,) from August 31, 1865, to October 31, 1866 :

Temporary loan, 4, 5 and 6 per cent., acts of February 25, 1862, and June 30, 1864...$62,146,714 27
Certificates of indebtedness, 6 per cent., acts of March 1, 1862, and March 3, 1863. . . .84,911,000 00
Treasury notes, 5 per cent., one and two years, act of March 3, 1863............31,000,000 00
Treasury notes, 7-30, act of July 17, 1861...295,100 00
Compound interest notes, 6 per cent., act of July 30, 1864.........................68,512,020 00
Treasury notes, 7-30, acts of June 30, 1864, and March 3, 1865....................105,985,700 00
United States notes, acts of July 17, 1861, and February 12, 1862...............134,610 00
United States notes (greenbacks), acts of February 25, 1862, and March 3, 1863...42,830,174 00
           Amount retired first year..........$395,815,318 27

This policy was persisted in until all evidences of indebtedness of the government bearing currency interest, and having but a short time to run, were converted into gold interest long bonds.  The following synopsis of the public debt statement contained in Secretary McCulloch’s annual report of December 1, 1868, will exhibit the progress made by him on the 1st day of July, 1868 :

In the meantime contraction had done its work.  Business men began to suffer and the industries of the country to decline.  “Hugh McCulloch had tapped a great artery and let nearly all the blood flow from the body politic.”  Besides the hundreds of millions of evidences of indebtedness of the government, used as currency, taken from the channels of trade, the greenback circulation was contracted from August, 1865, to July, 1869, $70,736,636.76.  The public began to realize, though only partially, the cause of the great change that was going on in the business affairs of the country, and called a halt.  Mr. J.A. Stevens, President of the Chamber of Commerce of New York City, in a letter to the New York Times in 1873, thus refers to this period :  “ The country at large had felt the pressure of the screw, but had not been able to discover precisely from what quarter the pinch came, the contraction being confined to those outside forms of Treasury obligations which, though not currency in the strict acceptation of the word, were still used as such in the larger transactions of trade and financial exchange.  When, in a time of general pressure, the currency itself became the subject of the pruning knife, the country not only felt the knife, but saw how it was handled, and refused to submit to the ‘ heroic treatment.’ ”

Congress was compelled, in January, 1868, by the force of public sentiment, to pass a law 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 cancelling United States notes (greenbacks) shall be and is hereby suspended.”  But the mischief had already been done.  The greenback, however, was saved to the people.

In 1865 and 1866, after the termination of the war, industry, by reason of the abundance of money in circulation, was rife throughout the country, and production went on as it had never done before.  During the years 1863, ’64, ’65 and 66 the failures throughout the country, as reported in Hunt’s Magazine, averaged only 545 a year.  In 1867 they run up to 2,386, and continued above that number until 1873, when they reached 5,181, with liabilities to the amount of $228,490,000.

In 1865 general prosperity prevailed, and as McCulloch himself has since admitted, the people were individually out of debt.  Business then was done for cash.  But as money grew scarce business men were obliged, as in days before the war, to resort to the banks and borrow bank credit.  Business was no longer done on cash principles.  As like causes produce like effects, so the use of bank credit, rendered necessary by the scarcity of money, brought the business affairs of the nation back to the same condition in which they had been for sixty years prior to the war.  A commercial crash was only a question of time, and accordingly it came in 1873.


Every act of Congress relating to the financial measures of the government during the war was passed with a view to depreciating the public credit.  So, now, after the war was over, and the money power had obtained possession of all the outstanding obligations of the government, every act, that was passed was passed with a view to increasing their value.  The 5-20 bonds of the government were payable in lawful money of the United States.  It will be remembered that when the first legal tender act was passed, February 25, 1862, the chief bone of contention between the Senate and House was the payment of the interest on the bonds in gold.  Legal tender notes were made a tender for “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.”  This language is perfectly plain and explicit and leaves no room for doubt.  When the bill was pending in the Senate, Mr. Collamer, of Vermont, offered an amendment depriving the greenback of its legal tender quality so far as the public debt was concerned, and, at the same time, said that if the bill did not mean that bonds were payable in greenbacks, it meant nothing.  His amendment was voted down.  Senator Wilson, of Massachusetts, declared that greenbacks ought to be a legal tender for the payment of the public debt, and that if they were not he would vote against the bill.  The Hon. Thaddeus Stevens subsequently declared, that “when the bill was on its final passage, the question was expressly asked of the chairman of the Committee on Ways and Means, and as expressly answered by him, that only the interest was payable in coin.  If I knew,” he added, “that any party in this country would go for paying in coin that which is payable in money, thus enhancing it one-half ;  if I knew there was such platform, and such a determination on the part of any party, I would vote on the other side.  I would vote for no such swindle upon the tax payers of this country ;  I would vote for no such speculation in favor of the large bondholders—the millionaires who took advantage of our folly in granting them coin payment of interest.”

The first move made by the bullionists and bondholders was to educate public sentiment, through the press, in regard to the “sacredness of the public faith.”  The leading newspapers of the principal cities took up the song, and before a great while the gentlemen of the country press, who are quick to learn which way the wind blows, were heard, together with the demagogues of both parties, joining in the chorus.  In many of the Western States, whose people are not so completely enslaved by the money power as their brethren of the east, public opinion manifested a disposition to demand that the five-twenty bonds should be paid agreeably to the terms of the acts providing for their issue—in greenbacks.  This was not confined to any particular party.  Accordingly we find Senator Sherman, in a speech in the Senate, February 27, 1868, uttering the following sentiments.  He said :

“ I say that equity and justice are amply satisfied if we redeem these bonds at the end of five years in the same kind of money, of the same intrinsic value it bore at the time they were issued.  Gentlemen may reason about the matter over and over again, and they cannot come to any other conclusion ;  at least, that has been my conclusion after the most careful deliberation.  Senators are sometimes in the habit, in order to defeat the argument of an antagonist, to say that this is repudiation.  Why, sir, every citizen of the United States has conformed his business to the legal tender clause. * * Every State in the Union, without exception, has made its contracts, since the legal tender clause, in currency and paid them in currency.”

And Senator Morton declared [February 27, 1869.] that,

“we should do foul injustice to the government and the people of the United States, after we have sold these bonds on an average for not more than sixty cents on the dollar, now to propose to make a new contract for the benefit of the bondholder.”

The Presidential campaign of 1868 was impending, and it became necessary for the money power to resort to extraordinary efforts to obtain the direction of political affairs.  The Rothschilds were in possession of several hundred millions of 5-20 bonds, purchased at about sixty cents on the dollar or less, and were particularly interested.  Their agent, August Belmont, who had secured the position of chairman of the Democratic National Committee, was instructed by Baron James Rothschild as early as March 13, 1868, that unless the Democratic party went in for paying the 5-20 bonds in gold, it must be defeated.  The first step was to have the national convention held in New York City.  It accordingly convened there on the 4th of July, 1868.  Belmont and his satellites were unable to control the convention, at least in the matter of the platform.  After a stormy session the platform was promulgated on the 7th of July, and contained the following plank : 

“ Resolved, Third :  When the obligations of the government do not expressly state upon their face, or the law under which they were issued does not provide that they shall be paid in coin, they ought in right to be paid in the lawful money of the United States.”
This resolution doomed the party to defeat.  At this time Mr. Belmont owned a large interest in the New York World, generally regarded as the leading Democratic newspaper in the country.  About the first of October this interest is believed to have been transferred to Manton Marble, editor and part proprietor of the paper.  On the 15th day of October, a few weeks before the general election, the World, to the consternation of the democracy throughout the country, came out in a leading editorial denouncing Horatio Seymour, the candidate of the party for the Presidency, as unfit and unavailable, and advising his withdrawal.  This act of treachery has never been equaled in the annals of politics ;  and, strange to say, the World, under the same corrupt influence, continues to occupy the position of a leading Democratic newspaper.  The money power was more successful with the leaders of the Republican party.  Through its aid Grant was triumphantly elected.  President Grant was duly inaugurated on the 4th of March, 1869, and in pursuance of the programme marked out for him, thus alluded to “the sacredness of the public faith” in his inaugural message.  He said :  “ Let it be understood that no repudiator of one farthing of our public debt will be trusted in public place, and it will go far toward strengthening a credit which ought to be the best in the world, and will ultimately enable us to replace the debt with bonds bearing less interest than we now pay.”  This was intended as a warning to all those who might desire to stand well with the administration.

On the 12th of March a bill was introduced in the House by Mr. Schenck, of Ohio, entitled “An act to strengthen the public credit of the United States.”  In due time it passed both branches of Congress, and was approved by the President March 18, 1869.  It was the first act of Congress that received his official sanction.  This act provides as follows :

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, 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 maturity, 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 solemnly pledges its faith to make provision at the earliest practicable period for the redemption of the United States notes in coin.”

To show conclusively that the 5-20 six per cent. bonds of the United States were not regarded either at home or abroad as payable in coin, Mr. Lawrence, of Ohio, called attention to the fact that, “on the 30th day of November, 1867, (over two years after the war was over) our five-twenty six per cent. bonds sold in London at 70 cents, while New Brunswick and Cape of Good Hope six per cents sold at 105 ;  Russian five per cents at 85 and Brazilian five per cents at 75.”

Congress and the President had done everything in their power to make the 5-20s payable in gold, but the Rothschilds and the money power generally were apprehensive as to the future, inasmuch as the act of Congress of March 18, 1869, was in violation of the terms of the contract under which the bonds had been issued, and might be repealed.  No time was lost, therefore, in inducing the Secretary of the Treasury to pay off these bonds in gold.  By means best known to themselves, McCulloch had been induced to redeem about $150,000,000 of these bonds, during his administration of the Treasury, and the process was continued under Boutwell and his successors, until the 5-20 bonds, issued under the original act of February 25, 1862, were all redeemed in gold or its equivalent.  This single act of robbery, for it is only one of the many acts of robbery which have been perpetrated by the money power during the past few years under the guise of law, will foot up about as follows :

Amount of 5-20 six per cent. bonds ........ $500,000,000 00
Interest in gold at six per cent.,
compounded semi-annually, for ten years............. 403,096,132 71
Total............... $903,096,132 71
Cost of $500,000,000 bonds at say sixty cents
on the dollar.......................... 300,000,000 00
Net profit in ten years, in gold...... $603,096,132 71


The next move of the money power was to have the public debt refunded, in order to place its payment in coin beyond all question.  Accordingly an act entitled “An act to authorize the refunding of the national debt,” was passed and approved July 14, 1870.  This act provided, “That the Secretary of the Treasury is hereby authorized to issue, in a sum or sums not exceeding in the aggregate $200,000,000, coupon or registered bonds of the United States, in such forms as he may prescribe, and of denominations of fifty dollars, or some multiple of that sum, redeemable in coin of the present standard value, at the pleasure of the United States, after ten years from the date of their issue, and bearing interest, payable semi-annually in such coin, at the rate of five per cent. per annum.”  $300,000,000 of like bonds, bearing four and a half per cent. interest, redeemable after fifteen years, and also a sum of bonds bearing four per cent. interest, redeemable after thirty years—in all not to exceed $1,000,000,000, were also authorized.  The Secretary of the Treasury was authorized to sell these bonds at par for coin, and with the proceeds to redeem any of the bonds of the United States outstanding, known as five-twenty bonds, “or he may exchange the same for such five-twenty bonds, par for par.”

By the act of January 20, 1871, the act last recited was amended so as to increase the amount of five per cent. gold bonds authorized to be issued to $500,000,000, and to make the interest on the bonds payable, at the discretion of the Secretary, “quarter yearly.”

Under these two acts gold bonds to the amount of $465,558,450 were issued up to November, 1875 ;  and a bill, of a like character, introduced by Sherman in the Senate, is now pending in Congress, to complete the job.  When it shall have passed Congress, the entire public debt, contracted in lawful money at a time when it was greatly depreciated as compared with gold, will be transformed into a debt payable, principal and interest, in gold.

The following table exhibits the amount and character of the public debt, bearing interest, on the 30th day of November, 1875.  It will be observed that the greater part of the debt of the United States, incurred during the war, is now represented by bonds issued since the war :

[Errata] Plus, currency bonds to the Pacific Railroads............................$64,623,512
Grand total...............................................$1,758,874,812.


It now only remains for the money power to bring about a resumption of specie payments and it will have accomplished all its ends ;  and the American people will once again be completely under its domination.  From the day that the old State banks suspended specie payments until the present time, that object has never been lost sight of for a moment.  No system of money has ever been devised that confers such absolute control over the currency, and through it over the property and business affairs of a nation, upon the money power, as banks of issue ;  and hence the adoption of the National Banking scheme.  But the greenback interferes very materially with the workings of the system, and it is important that it should be got out of the way.  There is also another great incentive to cause the money power to seek a return to specie payments.  By a single stroke the bondholding and creditor class will be enriched to the amount of hundreds of millions of dollars.

In January, 1875, the bullionists found themselves strong enough in Congress to pass a law decreeing specie resumption January 1, 1879.  The composition of the House of Representatives, at this time, is worthy of note, and should open the eyes of the people to the necessity of sending a different class of men to represent them in that body.  The Hon. Moses W. Field, of Michigan, in a recent speech gives a detailed statement of the professions and callings of the members of the 43rd House, of which he was a member, as follows :  “ The forty-third Congress, to which I belonged, was composed of 379 members.  In this number there were six lumbermen, thirteen manufacturers, seven doctors, fourteen merchants, thirteen farmers, three millers, one land surveyor, one priest, one professor of latin, one doctor of laws, one barber, one mechanic, ninety-nine lawyers, and one hundred and eighty-nine bankers, which includes stockholders in National Banks.”  Almost a clear majority of members were either bankers or interested in National Banks.  The specie resumption act then passed rests like an incubus upon the industrial interests of the country.  Everything, however, is working to the satisfaction of the bullionists and the bondholders.  As industry and production languish, property of all kinds depreciates in value, and when resumption takes place, the money power will be enabled to gather it in, to the amount of hundreds of millions more, on its own terms.  It seems hard indeed that the farmer, the mechanic, the manufacturer, and the producing classes generally, who bear almost the entire burden of taxation, should thus be oppressed by legislation, and millions of industrious people be deprived of the opportunity of even earning their bread, for no other purpose than to further enrich a single class, which contributes not one iota to the general wealth of the country.  But the masses, as long as they sink the duties and privileges of freemen in a blind partisanship, and permit themselves to be manipulated by demagogues through the instrumentality of party machinery, can expect no better fate.  The question of resumption is one of such vital importance that it is deserving of more than a passing notice.  It will, therefore, receive more particular attention in a separate chapter, (Chapter VIII.)


In 1861, when the Federal Government, unable to borrow money at home or abroad, was obliged to appeal to the masses, who were both able and willing to respond, the great question was as to how the resources of the people were to be rendered available to the government.  Taxation was impracticable in the beginning, because the government did not possess the machinery for laying and collecting taxes, and, moreover, there was not a sufficient amount of money in circulation at that time to enable the people to meet the extraordinary demands of the occasion.  Products and labor the people possessed in abundance, but they could be rendered available only through the instrumentality of a medium of exchange.  Besides it was necessary to establish new forms of production, requiring capital to a large amount in the form of money.  The first requisite, therefore, was manifestly a medium of exchange.  This could be supplied only by the Federal Government ;  for all power over the currency of the nation is vested in the Federal Government by the Constitution.

The Federal Government wanted guns, ships, food, clothing, transportation, etc.  The farmer could furnish food ;  the manufacturer, guns, wagons, etc.;  and the ship builder, ships.  Other classes did not possess such things as the government required, but they did possess property of various kinds and labor, which were wanted by the ship builder, the gun-maker and the farmer.  The people collectively desired the gun-maker, the ship builder and the farmer to furnish the Federal Government with such articles as it required and they were able to supply, and were willing in turn to supply the gun-maker, the ship builder and the farmer with such property or labor as they might desire, to whatever amount they might be entitled.  But how could this interchange be effected ?  In no better way than by a medium of exchange representing the property of the nation.  The people in their collective capacity, through the government, could issue public notes, representing the entire property of the nation, including gold, silver—everything in a word that could be reached by a tax warrant.  The public note, of the value of say one dollar, if paid by the government to the gun-maker, would entitle him to receive one dollar’s worth of property, neither more nor less.  But suppose that the people, after they had made this arrangement with the gun-maker, the farmer and the ship builder, in their collective capacity, through the agency of the government, should refuse individually to receive this paper dollar, representing the property of the nation on which it is a lien, what then ?  This would clearly be acting in bad faith with the gun-maker, the farmer and the ship builder, and would be tantamount to the people repudiating individually what they had done collectively.  Hence it is nothing more than a matter of equity and fair dealing that the public note should be made a legal tender ;  in fact in no other way could the farmer, the gun-maker and the ship builder be reimbursed from the property of the rest of the people for the guns, food, etc., furnished to the government.  As is generally understood by lawyers, if not by political economists, the legal tender money of a country is the basis of all money contracts among its people and the measure of all values ;  and necessarily conforms to the unit of value fixed in the minds of the people by usage and education.  By making the public note a legal tender, it is clothed with all the functions of money.  It possesses value (the value of the property which it represents), and by virtue of its legal tender quality the power to measure and exchange value.  A public note, based on sound principles, it will be observed, therefore, is capable of performing a two-fold service.  In the first place it enables the government which issues it to draw upon the resources of the people in advance of taxation.  The government pays it out for property or services, and receives it again for taxes.  In the second place, whilst in circulation, it performs all the functions of money, and in the end furnishes the means for the tax payer to meet his obligations to the government.  The amount of greenbacks now in circulation is over $360,000,000.  The annual revenues of the government amount to about $300,000,000.  It is apparent, therefore, that the greenback circulation could all be redeemed in the revenues of the government in a little over a year.  From this it is evident that the clamor of the bullionists for the redemption of greenbacks in gold, or the funding of them in bonds payable in gold, is only for the purpose of enabling them to swindle the government and people to the extent of the premium which the government would be obliged to pay to obtain gold for that purpose.

It is clear, then, that the first step for the government to take at the breaking out of the rebellion, to enable it to draw upon the resources of the people, was to issue a legal tender public, or Treasury note.  But no more money can be used by a people than is required by the legitimate operations of trade.  Professor Bonamy Price, whom we are glad to find right occasionally, illustrates the point in this way :  “ Carts and money are both tools—instruments of conveyance, endowed with the same nature and subject to the same general laws.  The question for each is the same—how many are wanted for the work which they were invented to do.  In the case of money, how much gold (or legal tender paper money) can a nation use ?  How much can it find employment for ?  The answer, as with carts, must be sought from the special work money has to perform—that is, from the amount of exchanging which calls for the agency of this tool, the quantity of property of which the ownership has to be transferred by this instrument.  A cart transfers weight ;  money, ownership ;  and all the world knows that the cartage to be done determines the number of carts.  In the same way, the ownership of property which requires to be transferred by the actual employment of money itself, determines how much money there ought to be in a nation.  No other answer is possible, unless it is denied that money is only a tool ;  if so, another explanation of the nature of money must be produced.”  For the government to issue legal tender notes in return for property to an indefinite amount after the channels of circulation had been supplied, would be contrary to all sound principles of finance, as well as political economy.  The next step for the government to have pursued was to draw upon the resources of the people by taxation.  But as it was manifest at the time that the extraordinary expenses of the war could not be wholly defrayed by taxation—in other words, that the government could not, under the circumstances, act upon the principle—“pay as you go”—without causing oppression and interfering materially with the producing ability of the nation, the third and last step was to issue a bond bearing interest, in order that the government might avail itself of the surplus capital of individuals.

No more perfect system of money or finance than this has ever been devised.  It is, moreover, simple and easily understood by the people.  This system was embodied in the original legal tender act, as framed by the Hon. E.G. Spaulding, an able financier and statesman.  It was ardently supported by the Hon. Thaddeus Stevens, who had thoroughly acquainted himself with all the systems of money and finance of ancient and modern times, with all his powerful ability.  It met with the hearty endorsement of the Boards of Trade and Chambers of Commerce of all the principal cities of the North and West.  Its adoption by the House of Representatives was hailed with marks of approbation and satisfaction by the intelligent classes everywhere throughout the country.  That it would have worked admirably in practice is abundantly demonstrated by the performances of the greenback in the most trying period of the nation’s history, and by the manner in which the people took the loan of $500,000,000 of five-twenty bonds.

But through the machinations of the money power, and the weakness and venality of the United States Senate, a full legal tender money system was rejected, and in its stead was adopted a policy, which would have bankrupted, in a short time, any nation not possessing the boundless resources of the United States.

During the war every act and measure relating to finances was calculated to depreciate the public credit ;  but as soon as the war was over an entire change of policy ensued, calculated to render the burdens of the people doubly oppressive.  That this may be seen at a glance, we give below a recapitulation of the leading incidents, and measures which marked the two periods—during and after the war, as follows :


1.  The banks of New York, Boston and Philadelphia procured the suspension of the Sub-Treasury act, Aug. 5,1861.

2.  The banks of New York, Boston and Philadelphia combined to prevent the passage of the legal tender act, and sent delegates to Washington City for that purpose, January, 1862.

3.  The representatives of the banks of New York, Boston and Philadelphia effected an arrangement with the Secretary of the Treasury and leading members of the Senate to oppose a full legal tender bill, and to urge the passage of a National Banking law.

4.  The legal tender act passed in a mutilated form—interest on bonds and duties on imports made payable in gold, February 25, 1862.

5.  Paper emissions authorized by Congress and issued by the Secretary of the Treasury, to an enormous amount, in fifteen different forms.

6.  The $500,000,000 of 5-20 six per cent. bonds held by the Secretary of the Treasury for over a year, until the country was flooded with paper emissions of all kinds, and then put out as a popular loan at par amongst the people, to be bought in by the bullionists at fifty cents or less on the dollar.

7.  Legal tender Treasury notes (greenbacks) further mutilated (March 3, 1863) by repealing the clause in the original act which made them interchangeable with 5-20 bonds.

8.  Immense sums of Treasury notes, bearing interest, payable in one, two and three years, issued, when it was well known that the Treasury Department was unable to make any provision for their payment at maturity.

9.  A bill passed (Feb’ry 25, 1863) authorizing the establishment of National Banks, which could render no aid to the government, and whose currency tended to swell the volume of paper in circulation.

10.  The $500,000,000 loan of six per cent. bonds no sooner taken than the Secretary attempted to put out a new loan bearing only five per cent. interest.

11.  The failure to float the five per cent. bonds made an excuse for emitting additional sums of Treasury notes, bearing interest, and other forms of paper suitable for a circulating medium.

12.  The emission at the close of the war of immense sums of 7-30 Treasury notes, payable in three years, and convertible at the option of the holder into long bonds bearing gold interest.


1.  “All bonds, Treasury notes and other obligations of the government shall be exempt from taxation by or under State or municipal authority.”  (Act of June 30, 1864.  Although passed before the termination of the war, this act belongs to this period.  Like the National Banking law, it simply anticipated events.)

2.  McCulloch issued his Fort Wayne decree, announcing his determination to contract the currency.

3.  McCulloch submitted his annual report, December, 1865, in which he recommended contraction.

4.  Congress passed a resolution, December 18, 1865, concurring in the views of the Secretary of the Treasury in relation to the necessity of contracting the currency.

5.  Congress passed an act, April 12, 1866, authorizing a contraction of the currency.

6.  McCulloch began to payoff the 5-20 bonds in gold or its equivalent.

7.  McCulloch substituted long bonds bearing gold interest for Treasury notes, etc., to the amount of about $1,200,000,000, which operated as a contraction of the medium of exchange of the country to that amount, occasioning great financial derangement.  Also retired over $70,000,000 of greenbacks between August, 1865, and July, 1868.

8.  Congress, compelled by public sentiment, repealed (January, 1868) so much of the act of April 12, 1866, as provided for the retirement of greenbacks, but took no note of the contraction in other forms of the currency.

9.  The people of both political parties began to protest against the payment of the 5-20 bonds in gold, as a violation of the spirit and letter of the act under which they were issued.

10.  The money power selected a President of the United States (1868.)

11.  The President of the United States, in his inaugural message, March 4, 1869, notified the public that he would regard all who did not favor the payment of 5-20 bonds in gold as repudiators, who need expect no favors from his administration.

12.  Congress passed a credit strengthening act, March 18, 1869, the first act which received President Grant’s official sanction.

13.  The original loan of 5-20 bonds paid off in full in gold or its equivalent.

14.  Congress passed a law, July 14, 1870, authorizing the Secretary of the Treasury to refund $500,000,000 of the public debt in bonds payable, principal and interest, in gold.

15.  McCulloch’s contraction policy bore its legitimate fruits, and the country was visited by an old fashioned commercial crash and money panic, September, 1873.

16.  The people demanded relief, and Congress, at its next session, passed a bill authorizing the reissue of the greenbacks which had been retired (44,000,000), and fixing the amount of the greenback circulation at $400,000,000.  This bill was denounced by the money power as all “inflation” measure, and accordingly was vetoed by President Grant, April 22, 1874.

17.  The people rebuked the action of the President by electing, at the next general election, in the fall of 1874, a Democratic House of Representatives.

18.  At its next session, Congress (the old Congress), under the pretense of affording relief to the oppressed industries of the country, made National Banking free to bondholders, by act of January 14, 1875.

19.  And at the same time decreed specie resumption, to take place January 1, 1879.

20.  An act to complete the refunding of the public debt in gold bonds is now pending before Congress.

21.  Bonds of the United States, which during the war were bought and sold at as low as thirty-five cents on the dollar in gold, now sell for over $1.18, or at a premium of over five per cent. in gold.

In 1865, when the Rebellion terminated, the producing forces of the Northern and Western States, the workingmen, the land, the machinery, the mines, the water power, etc., were developing wealth in every possible direction, and the people, individually free from debt, were in the enjoyment of unparalleled prosperity.  The wealth of the nation, in spite of the ravages of war, had increased as it had never lone before.  The assessed valuation of the property of the nation in 1870, notwithstanding the ruined condition of the South, was over $30,000,000,000, as against $16,000,000,000 in 1860.  Out of the abundance of their productions the people were enabled to meet all the demands of the government with ease.  The Federal Government, indeed, began to pay off the public debt rapidly.  But in carrying out the policy of the money power, it first paid off, by substituting bonds, all those forms of indebtedness of the government which served the purposes of money, thus depriving the producing forces of the nation of their most important tool.

At this time the South, with all her magnificent resources, had been restored to the Union.  Money was necessary to set the producing forces of that section at work.  Instead of wisely taking this fact into consideration, and making some provision that would enable the people of that section to recover from the disasters of the war, and contribute their share towards bearing the burdens of government, an entirely opposite policy was pursued.  The production of cotton, the chief staple of the South, in 1870 amounted to only 3,011,996 bales, or a little over 50 per cent. of the amount raised in 1860.

Now the American people are poor and in debt.  Nearly, all forms of productive industry are paralyzed, and the channels of trade are stagnant or sluggish.  Real estate is rapidly depreciating in value, which will inevitably result in a general foreclosure of mortgages and transfer of property from the debtor to the creditor class throughout the country.  Instead of a million of non-producers carrying muskets, as was the case during the war, there are now several millions of people, who would gladly work for a mere subsistence, in a state of enforced idleness, living on the bitter bread of public or private charity.  In a country possessing boundless natural wealth, tramps and paupers have become common.  The nation is scarcely producing more now than the necessities of life.  And yet the people are told that the present condition of affairs is due to over production and like causes.  The only over production troubling the nation just now is an over production of fools and rascals—rascals who teach such nonsense, to divert the public mind from the true source of the trouble, and fools who believe it.  Since the attempt to re-establish a false monetary system by means of contraction has worked such wide spread ruin, it would seem to be but the part of common wisdom, on the part of the people, to demand a different policy, if not from conviction, at least as an experiment.  It certainly could not make matters worse.

1 Sumner’s History of American Currency.

2 Letter of Geo. S. Coe, Esq.:  Spaulding’s Financial History of the War. Apx. p. 90.

3 A table showing the monthly range of gold, from 1862 to 1876, will be found in the Appendix.

4 See Chapter VII. on National Banks.

5 See speech of Hon. Thaddeus Stevens in the Appendix.

6 The Legal Tender Act as finally passed will be found in the Appendix.

7 Letter of J.S. Gibbons :  Spaulding’s Financial History of the War.

8 See Report of the Secretary of the Treasury :  Appendix to the Congressional Globe, 1862-’63.

9 Financial History of the War, page 186.

10 See Speech of Hon. Thaddeus Stevens in the Appendix.