Shylock: as banker
In 1861, when the Civil War broke out in the United States, a vigorous attempt was made by some of the greatest Americans then living, to do away, for the time, with the British money-system in this country and to cut loose from the apron-string of the Bank of England.
It was a strange year in America the year 1861. It was an utter surprise in a thousand ways to everybody. Garrison and Phillips, with their band of ultra Abolitionists, had been at work for a quarter of a century, filling the public mind with the moral necessity of emancipating the negro slaves of the Southern States. The agitation had re-acted until the whole slave-holding interest had become belligerent and aggressive. The Plutocracy of the North both the direct money-power and the leading commercial elements had bent to the ground and licked the dust to assure the South that anti-slavery was a momentary fanaticism, reprobated by all respectable and influential persons, who desired nothing but quiet, cotton and Southern trade, and who would relinquish any commandment of heaven or law of earth, to keep the peace. The anti-slavery sentiment, however, had grown among the people, as a whole, until it was adopted in a political form by the Republican Party and sent Lincoln to Washington. Still, the North was but partly awake and was willing to "compromise" on almost anything. All it asked was that the civilization of South Carolina should not actually supplant that of Massachusetts on Northern soil, and that the Federal Union should not be dissolved. But the South was in earnest and meant war for slavery. She fired on the flag at Sumpter.
No cannon ever met such response. Seeing the matter at last as it was, the whole North arose in an instant. [Middle-aged men remember all this: it was a part of their personal experience.] Democrat clasped hands with Republican; the most conservative "Silver-Grey" with the most radical Abolitionist. "Wide-Awakes" and "Little-Giants" threw down the torch and banner of political opposition, shouldered the gun instead, and marched side by side to Washington. The very "short-boys" and "dead-rabbits" of New York City grew wild with patriotism even the "dangerous classes" burning, for the moment, to be dangerous alone to those who defied and insulted the American flag. The plain, honest people of the "Free States" committed themselves as one man to the war, putting life, property, everything they had behind it. Then the Shylock brigade of Northern "gold-bugs" marched to Washington also. They went there to gain control of the National finances and to make money out of the peoples blood and tears.
The leader, then, of the House of Representatives, was Thaddeus Stevens one of the most powerful minds that ever dominated a public body in any age or country. A lawyer, a statesman, a scholar, he was thoroughly informed both in the history of his country and its practical affairs. He had given special attention to the subject of finance its ancient and modern systems. And the "great commoner" not only understood money, but he had no desire to steal it. In that terrible emergency of 61, he was, beyond all doubt, the ablest and best man in America for the position he held. ["That grandest statesman I have met in my fourteen years of Congressional life old Thad. Stevens was at the head of the Committee of Ways and Means. He had studied in all its bearings the question of French finance. He was familiar with Franklins advice to the Continental Congress. The part he took in the debate exhibited, not only his marvellous powers, but his perfect familiarity with the history and details of the great and intricate subject." Wm. D. Kelley: Address by invitation of the citizens of Philadelphia, January 15th, 1876: Henry Carey Baird & Co., Publishers.]
Salmon P. Chase had been selected by Mr. Lincoln for Secretary of the Treasury. He was a lawyer, an orator, a prominent leader in the Anti-Slavery Movement, an experienced politician of the better class and a man of large and deserved influence especially in his own State, Ohio. No one had ever heard that he possessed any qualifications for Secretary of the Treasury and he evinced none while in office except blind prudence and personal integrity. He was an accident in the place, being there because it was necessary to put him somewhere; and after doing no end of mischief with the best intentions, he retired into the Supreme Court where he was competent and at home. ["If Mr. Chase had ever been a banker or a merchant, he might have joined theory with practice, and had the aid of both; but as it was, he only had the former and that was a theory of his own brain, which through his inordinate self-conceit has cost the country in all probability, a thousand millions of debt beyond what would have been contracted on lower prices. I do not believe a more ignorant man, of practical business affairs, can be found in public life." J.S. Gibbons, author of The Public Debt of the United States," contributor to Johnsons Cyclopaedia, &c., in letter to E.G. Spaulding, April 6th, 1870, published in Spauldings "Financial History of the War."]
When Lincolns administration began, the federal treasury was empty; but with the whole North committed to the Union, the government credit became the center and security of all property. Without the government, what would be left to the Northern people, rich or poor? It was a time when Shylock himself was obliged to indorse his countrys note, in order to save his own ducats. So the nation had the money-power at mercy could perfectly establish its own fiscal solvency and lay out any financial policy necessary to the general welfare.[In this connection the "Muse of History" will never forget the words of Hon. William Kellogg of Illinois, in a speech to the House, on the 6th of February, 1863. It expressed the unanimous sentiment of the country, (except that of the Shylocks), as it stood in the summer of l861. "I am pained," said Mr. Kellogg," when I sit in my place in the House, and hear members talk about the sacredness of Capital. * * * They will vote six hundred thousand of the flower of the American youth for the Army, to be sacrificed, without a blush; but the great interests of capital, of currency, must not be touched. We have summoned the youth, and they have come. I would summon the capital. * * * Before this Republic shall go down I would take every cent from the treasury of the States, from the treasury of capitalists, from the treasury of individuals, and press it into the use of the Government. What is capital worth without a Government ?"
On the 17th of July the Secretary of the Treasury was authorized to borrow two hundred and fifty millions of dollars on bonds and treasury notes. The act left it at his option to issue fifty millions in the treasury notes of denominations not less than ten dollars, payable on demand, in coin, without interest. On the 5th of August the restriction of denomination was changed to five dollars and the notes were made receivable in payment of public dues. On the 12th of February, 1862 ten millions more of these notes were authorized, making sixty millions in all. On the 17th of March this issue was made receivable for "duties on imports," and was constituted "lawful money and a legal tender.
These "old demand notes," as they were called, were the prototype of the "Greenback," as contemplated by Stevens and Spaulding, except that the greenback was to leave out the promise to pay "coin on demand," there being no possibility of fulfilling any such promise. But here was just the kind of money that had been advocated by Franklin, Jefferson, Adams, Madison, Jackson, Calhoun and Tyler to supplement gold and silver. It was a government note, redeemable in taxes, and a currency for the people.
But, to the "old State banks," the thought of such a currency was like holy water to the imps of Satan. Their own circulation had been a monopoly, on which the people had paid them thousands of millions of dollars in interest, to say nothing of spoils. The United States notes were a circulation on which the people saved this interest for themselves. The notes could be turned over to individuals, and corporations could bank on them, charging interest; but the government that is, the people as a whole had no "shave" to pay for the use of them. The bills of the State Banks, when good, had been secured by State bonds: in other words, the people were protected against loss in holding the bills, through the peoples own dues to the States State-taxes. But Federal-taxes, certainly, were quite as good security as State-taxes, and these Federal taxes were both the security and the direct redemption of the treasury notes.
But hist! If such money as this should once become general if the people should understand it and should know that all the greatest " fathers of the Republic " had tried to secure it for them the banking-monopoly would expire. Its inflated, interest-loaded currency would be driven out of use and those "old State Banks" would be relegated to the moral standing of the faro-bank a much less vicious iniquity all things considered!
So the claw-fingered gentry of the "gold-basis" suddenly filled themselves up with spectacular patriotism. They had an interview with Mr. Chase. It was on the 9th of August, the banks of New York, Boston and Philadelphia being specially represented. [See Spauldings "History of the Legal Tender Money issued during the great Rebellion."]
How they wanted to help the government ! And how they sent out the report of their generosity through the newspapers ! They agreed with Mr. Chase to take at par, fifty millions of dollars in government paper, bearing seven and three-tenths per cent interest, with the privilege of a hundred millions more and offer the loan to the people. They then proposed to Mr. Chase to call in what demand notes he had issued, to issue no more, and to check out of bank their own bills to meet the government obligations. But Mr. Chase was not quite so impressible and uninformed as to walk into so visible a trap as this. He saw that the banks those of New York, Boston, and Philadelphia together holding at that time only sixty-three millions of specie-would inflate their currency to the bulk of the war-debt if permitted and might then, if only through the necessities of their system, contract their loans and currency and bankrupt both the government and the people, perhaps at the most critical moment of the war. Mr. Chase declined to gratify the noble souls of the bankers to the extent of their sublime interest in skinning their country and was slow to commit himself to any definite policy. He refused to receive their bank-bills for the loan they had taken and insisted on specie. During the next four months accordingly, the banks of New York paid him eighty millions in coin. But nobody wanted to hold the cumbrous metal and business was so active that the coin was returned to the banks about as fast as they paid it out. The immense calls of the government reduced their reserves only seven millions of dollars. There was nothing alarming, surely, in that reduction. But the bank-men were exceedingly discouraged by the obstinacy of Mr. Chase. As the soldiers and sailors of the Union needed money, he continued to issue those dreaded treasury-notes which began to take the place of specie to a considerable extent, in the reflux of currency to the banks. So the State-Bank patriots suspended specie-payments and paid Mr. Chase as far as possible in his own issues, for the balance of their investment in his fund to save the Union. At first they forced down the treasury-notes somewhat below par; for the Government had failed to make them receivable and payable for all public and private obligations full legal-tender money. ["This very thing," said Mr. Blake of Ohio, to the House of Representatives, on the 6th of February, 1862, "was done here only last month; soldiers were shaved by the money-shavers of this District from four to twenty per cent. on the Demand Treasury Notes they had received from the Government."] The suspended bankers took what advantage they could of this state of things to sell their coin at a premium. Then the Government evinced the purpose of making its issues good for all things that coin could pay for in the United States. Thereat, as Thaddeus Stevens said a little later, a "howl" went up from the "bankers and bullion-brokers," so "hideous," that nothing like it had been known since "their cousins" the money-changers of Jerusalem were "kicked out of the temple."[When the New York banks "suspended," their specie-reserves stood at not quite thirty millions of dollars. As they had discriminated against the government notes until made full legal-tender, the public naturally followed their example, and "hoarded" some of their cash.]