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Senate of the United States
Issue of United States Notes.
Mr. Collamer. Have all the amendments of the Committee on Finance been passed upon ?
The Presiding Officer. The Chair is so advised.
Mr. Collamer. I was informed by the Chair yesterday, that when these amendments were gone through with, the amendment which I proposed to offer would be in order. I move to strike out all after the words "United States," in the twenty-first line of the first section, down to the word "aforesaid," in the thirtieth line.
Mr. Fessenden. Allow me to offer a couple of amendments from the committee first.
Mr. Collamer. I understand the chairman desires to offer some further amendments from the Committee on Finance, and I will withdraw my amendment until he is through.
Mr. Fessenden. On my motion yesterday an amendment was made in the forty-second line of the first section by inserting between the words "after" and "twenty" the words "five years, and payable," I wish to further amend that by adding, after the word "payable" the words "at the pleasure of the United States;" so that the clause will read:
And redeemable at the pleasure of the United States after five years, and payable at the pleasure of the United States twenty years from the date thereof.
The amendment was agreed to.
Mr. Fessenden. I wish to move the same amendment, in the seventh line of the second section, page 4, in order to complete it. I wish the language to be the same "redeemable at the pleasure of the United States after five years, and payable at the pleasure of the United States twenty years from the date thereof."
Mr. Pearce. I really do not see the necessity or the use of that amendment in the language in which it is couched. If the proposition were that these bonds might be redeemable at the pleasure of the United States after five years and payable at the expiration of twenty years, I could see some necessity for that distinction; but when you say redeemable after five years, of course you mean payable; and when you say "payable after twenty years," you give the Government no further authority, and the creditor no further guarantee of his bond than he has by the first branch of the proposition. The first brunch of the proposition makes them redeemable or payable the terms are the same; they are convertible any time within the pleasure of the Government after five years. Why is it necessary, then, to say they are to be payable at any time within the pleasure of the United States after twenty years ? If they are redeemable at the pleasure of the Government after five years, it is entirely unnecessary to say that they are redeemable, or payable, (which is the same thing,) after twenty years. I supposed the object of the Senator was to make them redeemable at the pleasure of the Government after five years, and payable at the pleasure of the creditor after twenty years.
Mr. Fessenden. The criticism of the Senator from Maryland strikes me as having a great deal in it; and I will therefore let both these amendments pass over for the present, so that I can look at that question, and see what the phraseology should be before the bill is taken out of committee.
The Presiding Officer. Does the Chair understand the Senator from Maine to desire to withdraw the amendment which has just been agreed to by the Senate ?
Mr. Fessenden. Yes, sir.
The Presiding Officer. That will require a motion to reconsider.
Mr. Fessenden. I make that motion.
The motion to reconsider was agreed to.
The Presiding Officer. The amendment is now pending, but is withdrawn by the mover.
Mr. Collamer. I will now offer my amendment. I do not wish to occupy time with it, but merely to say a word upon it. The amendment is to carry into effect the principles for which I was contending yesterday, or, as the phrase is here, "on yesterday," that these notes shall not be made tenderable and compulsorily receivable for debts, either due by the Government or due by individuals. They should be receivable upon all debts due the Government; but they should not be coercive and made payable upon debts due from the Government. It should be optional with the people to take them. I have no doubt they will be taken if they are told they can get nothing else. That is another affair. Very likely they will pass under such circumstances; but I do not wish it made in such a form that the people shall be told, "you shall take them, and whatever the discount on them is, you shall suffer; we will not." My motion therefore is to strike out all that portion of the bill relating to that subject; and I will ask the Secretary to read it, as perhaps his reading would make it more intelligible than mine would. I have to take this bill as it stands, with part of it amended on the motion of the committee, and in that condition I have to move to amend it. My proposition, therefore, is to strike out the whole bill after the words "United States" in the twenty first line of the first section, down to and including the word "aforesaid," in the thirtieth line of the same section. Part of the matter that I propose to strike out is in the original bill, and part in the amendments reported by the committee. If that is done it will effect the purpose which I have avowed, and that is all it will do. If that is done we shall have to go over and alter the backing on the note.
Mr. Fessenden. That has been struck out already.
Mr. Collamer. Well, if it will not have any backing on it, of course it will not be necessary to alter that provision. If that clause is gone, it it will not need to be amended. I ask the Secretary to read that portion of the bill without my amendment, and then with it, and in that way I think we shall be able to see whether it will effect the purpose desired, or does any more than that.
The Secretary read the portion of the bill indicated, without the proposed amendment, as follows:
And provided further, That the amount of the two kinds of notes together shall at no time exceed the sum of $150,000,000, and such notes herein authorized shall be receivable in payment of all public dues and demands of every description, and of all claims and demands against the United States of every kind whatsoever, except for interest upon bonds and notes, which shall be paid in coin, and shall also be lawful money and a legal tender in payment of all debts, public and private, within the United states, except interest as aforesaid.
The Secretary then read the clause as it will read if amended, as follows:
And provided further, That the amount of the two kinds of notes shall at no time exceed the sum of $150,000,000, and such notes herein authorized shall be receivable in payment of all taxes, duties, imposts, excises, debts, and demands of every kind due to the United States.
Mr. Collamer. I desire to modify that, and I will state my object. In the first place I desire to have the sense of this body upon the simple question of whether these notes shall be a tender in private debts. I wish to have the question taken on that by itself first. If the Senate will sustain that, if they say they shall be a tender for private debts, I can very well conceive that the other should stand as a matter of course, and they should be a tender for a public debt; but if the Senate should reject that part of it, and say they will not make them a tender for private debts, then a motion might be made in relation to the rest of the clause, that they should not be a tender for public debts. I desire, therefore, first to consider the question by itself and independently of everything else, on striking out that part of the bill which makes these notes a tender for private debt.
The Presiding Officer. The amendment will again be read as modified by the mover.
Mr. Collamer. It is in line twenty-eight of the first section, on the 2d page, in the clause, "and shall also be lawful money and a legal tender in payment of all debts, public and private," I wish to strike out the words, "public and private," and insert the word "public" before the word "debts" in the twenty-ninth line. On reflection I think I will leave the word "public" in. To strike out the words "and private" simply, will effect the purpose, because the making of that amendment with the word "public" inserted before "debts" would foreclose the next amendment that might be proposed in relation to their not being a tender for public debts.
Mr. Cowan. I would suggest another amendment to the Senator, that he strike out the words "tender in payment of all debts due to the United States."
Mr. Collamer. I do not want to foreclose myself on that upon this question. I want two different votes.
Mr. Cowan. This proposition I understand is to strike out the tender for private debts.
The Presiding Officer. The Senator from Vermont moves to strike out the words "public and private," so that if amended the clause will read as follows:
And shall also be lawful money and a legal tender in payment of all debts within the United States.
Mr. Fessenden. Unless the Senator puts in the word "public" before the word "debts," he will not gain anything by that.
Mr. Collamer. Well, I will move to strike out the words "and private." That will leave the amendment in a proper form. That will simply effect this: that these notes shall not be declared a legal tender for private debts. I wish to try that question by itself independently.
Mr. Wilson, of Massachusetts.[Yet, in 1866, he voted FOR the reduction of currency; and in 1869 he voted FOR the credit strengthening act; because he was a radical reconstructionist] Mr. President, this proposition is a very simple and plain one, and certainly very easy of comprehension; but, it seems to me, the fate of the measure itself is involved in the decision. If the amendment proposed by the Senator from Vermont is adopted, I shall vote against the whole bill under any and all circumstances, for I conceive that it would be unjust to issue a currency of $150,000,000 of Government paper, and impose it upon all persons in the employ of the Government, upon our soldiers in the field and upon those who have made of the contracts to supply the armies Republic, and do nothing to protect the credit of that currency when in their hands, imposed upon them by our necessities. I should consider such a measure as that unjust, wickedly unjust; and I could not, and I would not, under any circumstances, be guilty of giving a vote of that character. If that amendment should be adopted, I hope every Senator in favor of the legal tender clause will vote against the bill, and defeat it, if possible. I think we owe it to the character of the Senate and the character of the country.
It is not my purpose to say anything in regard to the constitutional question. Senators of eminent ability differ upon that question; men eminent in constitutional law, in and out of Congress, differ upon that question; and when the most eminent constitutional lawyers of the country differ in regard to a question of that importance and of that character, it seems to me that those of us who choose to do so may exercise our own judgments in regard to the constitutionality of the measure.
Passing by the question of constitutional power, and coming to it simply as a practical question, it is a contest between brokers and jobbers and money-changers on the one side, and the people of the United States on the other. I venture to express the opinion that ninety-nine of every hundred of the loyal people of the United States are for this legal tender clause. I do not believe that there are one thousand persons in the State I represent who are not in favor it. The entire business community, with hardly a solitary exception, men who have trusted out in the country in commercial transactions their tens and hundreds of millions, are for the bill with this legal tender clause. Yes, sir; the people in sentiment approach unanimity upon this question. What is true of Massachusetts is in my judgment true to a considerable extent of New England, and true to some considerable extent of the central States and the West. I believe that no measure that can be passed by the Congress of the United States, unless it be a bill to raise revenue to support the credit of the Government, will be received with so much joy as the passage of this bill with the legal tender clause. On that question I entertain no shadow of doubt. If you pass this bill with the legal tender, the legal tender cannot injuriously affect the credit of this currency you propose to circulate. No harm can certainly come of it. It seems to me, sir, the argument made by the Senator from Vermont and the Senator from Maine is an argument against issuing these notes as a currency at all. The legitimate inferences from their arguments are against this proposition for $150,000,000 of demand Treasury notes.
Now, sir, I believe that if this bill is to pass at all, if we are to issue these demand notes at all, we should do all in our power to preserve their credit and to protect the persons to whom we pay out this $150,000,000. In my judgment, if the legal tender clause is stricken out of the bill, you will have every curbstone Jew broker in the country, the bulls and the bears of the stock exchange, and the class of men who fatten upon public calamity and the wants and necessities of the people, using all their influence to depreciate the credit of this Government and break down the value of these demand notes. Under such circumstances and such influences these demand notes will be depreciated, and the persons to whom we pay them out, our soldiers in the field, the sailors upon the decks of our vessels, the persons who have furnished millions and tens of millions unpaid goods for the use of our Army and Navy, will be compelled to go into the market and submit to be shaved by the brokers and money-changers of the country. If we are to issue these demand notes at all, let us stamp upon them this legal tender; let us support their credit by taxation and by reducing the expenditures of the Government in every form down to the lowest possible rates. Let us sustain them by proclaiming that we are ever ready to put burdens upon the wealth of the country; that we mean to uphold and sustain the credit of the Government, and thus carry the country financially triumphantly through the contest in which we are engaged.
But, sir, if the motion of the Senator from Vermont prevails, I shall move to strike out the proposition for $150,000,000 of demand notes, and I shall vote to strike it out. If the legal tender clause is not retained in the bill I shall vote against it under any and all circumstances. If the legal clause is retained in the bill, I shall vote for the bill cheerfully, and I shall vote for every measure to sustain these notes by sustaining the credit and good faith of the nation.
We are told that it will not do to interfere in these private transactions. Sir, my opinion is to day that no class in this country have more interest in this legal tender clause than the creditor class of the community. You will find that your manufacturers, your merchants, your men who have their hundreds of millions trusted out in all parts of the country, are for this measure, for it is their protection and their interest. You will find that the families of your soldiers, who are to receive a small pittance from the men who are fighting the battles of your county in the field, are in favor of stamping upon these notes the words "legal tender;" so that when that little pittance comes from the field to them, to support them at home, they can use it to pay their necessary debts, and support themselves without having to go through the process of broker shavings.
I look upon this contest as a contest between the curbstone brokers, the Jew brokers, the money-changers, and the men who speculate in stocks, and the productive, toiling men of the country. I believe the sentiment of the nation approaches unanimity in favor of this legal tender clause. I have received several letters from my own State on the subject; one a day or two ago, signed by several large commercial houses, representing millions of capital, and from others, and they say to me that they do not know a merchant in the city of Boston engaged in active business who is not for this legal tender. The intelligence I obtain from all portions of the country is to the same effect. I shall, therefore, vote against striking out that clause. If it is retained, I shall vote for the bill. If it is stricken out, I shall give my vote against putting on the people, upon the soldiers of the country, $150,000,000 of demand notes, and doing nothing to protect those upon whom we impose this Government paper.
Mr. Collamer. I wish to qualify my amendment. The view I entertained in making my first motion, was to provide that they should not be made a legal tender, compelled to be received either for public or private debts, but only for debts due the Government, and I made my first motion on that ground. Some gentlemen desired that I should have it tried upon the question of private debts; but I think, on the whole, I prefer to have my amendment stand as I first moved it that these notes shall not be tenderable upon any debts due by the Government or by individuals. I am not familiar with the alterations that we made in the bill last evening, but I desire to strike out all after the words "United States," in the twenty-first line of the first section of the bill as it is printed, down to the word "aforesaid" in the thirtieth line.
The PRESIDING OFFICER: The amendment will be read as it is now modified by the mover.
The Secretary read it, as follows:
And such notes herein authorized and the notes authorized by the act of July 17, 1861, shall be receivable in payment of all public dues and demands of every description, and of all claims and demand 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 or private, within the United States, except interest as aforesaid.
The Presiding Officer. The question is on striking out the words which have been read.
Mr. Sherman. Mr. President, the general views of the Committee on Finance have been so ably stated by its chairman, that it will not be necessary for me to discuss the features of this bill, upon which we agree. As it came from the House it was evidently imperfect; but the amendments adopted, on the recommendation of the Committee on Finance, have so improved it as materially to change its character.
The motion of the Senator from Vermont now for the first time presents to the Senate the only question upon which the members of the Committee on Finance had any material difference of opinion, and that is, whether the notes provided for in this bill shall be made a legal tender in payment of public and private debts. Upon this point I will commence the argument where the Senator from Maine left it.
He says he is not satisfied that this provision is necessary, and until so satisfied, he will not support it. He does not present the constitutional question, but doubts whether it is necessary to give these notes the sanction of a legal tender. I agree that this measure can only be justified on the ground of necessity. I do believe there is a pressing necessity that these demand notes should be made a legal tender if we want to avoid the evils of a depreciated, dishonored paper currency. I do believe we have the constitutional power to pass such a provision, and that the public safety now demands its exercise. Is there such a necessity ?
In the first place, I will say, every organ of financial opinion if that is a correct expression in this country agrees that there is such a necessity in case we authorize the issue of demand notes. You commence with the Secretary of the Treasury who has given this subject the most ample consideration. He declares not only in his official communications here, but in his private intercourse with the members of the committee, that this clause is indispensably necessary to the security and negotiability of these demand notes. We all know from his antecedents, from his peculiar opinions, that he would be probably the last man among the leading politicians of our country to yield to the necessity of substituting paper money for coin. He has examined this question in all its length and breadth. He is in a position where he feels the necessity. He is a statesman of admitted ability, and distinguished in his high position. He informs us that without this clause the attempt to circulate as money the proposed amount of demand notes of the United States will prove a fatal experiment.
In addition to his opinion we have the concurring opinion of the Chamber of Commerce of the city of New York. With almost entire unanimity they have passed a resolution on the subject after full debate and consideration. That resolution has been read by your Secretary. You have also the opinion of the Committee on Public Safety of the city of New York, composed of distinguished gentlemen, nearly all of whom are good financiers, who agree fully in the same opinion. I may say the same in regard to the Chambers of Commerce of the city of Boston, of the city of Philadelphia, and of almost every recognized organ of financial opinion in this country. They have said to us in the most solemn form that this measure was indispensably necessary to maintain the credit of the Government, and to keep these notes anywhere near par. In addition, we have the deliberate judgment and vote of the House of Representatives. After a full debate, in which the constitutionality, expediency, and necessity of this measure were discussed, in which all the objections that have been made here and many more, were urged, the House of Representatives, by a large vote, declared that it was necessary to issue demand notes, and that this clause was indispensable to their negotiation and credit.
Now, Mr. President, I know very well that the Senate is not governed by authority; nor should it be. As a high political body, our opinions ought not to be affected entirely by the opinions of others; but allow me to repeat what is admitted by all, that very few members of this body are familiar with financial subjects. Very few of us have been called upon to study such questions; and therefore it is that when a question of this kind is before the Senate, the opinion of men who have devoted their lives to this subject ought to be fairly considered. Upon the question of the constitutionality of this measure the opinion of the Senator from Vermont and other Senators around me is worth much more than that of commercial men; but upon the question of the necessity of this measure, to give your demand notes negotiability, security, value, in the money market, their opinion is worth more than that of any individual Senator.
Another thing must be considered. We cannot get this money by taxation for six months at least. We are to pay out over three hundred millions before next July with but small revenue. The Committee of Ways and Means of the House of Representatives have already been two months in framing a tax bill, and it is not yet framed. It has to go through the ordeal of the House of Representatives; it has to come here, and pass through all the forms of legislation. If it should assume the form of law by the 1st day of June next, it will be as much as we can expect, so that it is impossible to look to taxation for any portion of this money.
I ask you, then, Mr. President, where will you get the money ? You must borrow it. How will you do it ? The most direct way would be to put your bonds, based upon the credit of the United States, in the money markets of the world, and sell them for what they will bring. This has been done by the most powerful Government in Europe. In the struggle of Great Britain with Napoleon that Power sold £420,000,000 of securities for £260,000,000. She contracted a debt of £173 for every £100 received by her. It was only by such sacrifices that she was able to cope with and eventually overcome her adversary. But even such enormous sacrifices would not have produced the money needed had she not adopted a national currency of paper money practically, if not legally, made a legal tender and had not used this currency as a medium of exchange with which, she facilitated the payment of taxes and the negotiation of loans. You are compelled by your necessities to pursue the same course. It is not claimed by any one that these demand notes will satisfy your wants. You here provide only for $100,000,000, and have yet large sums to provide for. After these notes are exhausted we must sell the bonds of the United States.
But suppose you put the bonds now on the market, what will they bring ? It is said to us by the leading financiers of this country, whose opinions are entitled to respect, whose patriotism cannot be questioned, that these bonds, if now forced upon the market in large quantities, would be depreciated to something like sixty cents on the dollar; and why ? Not because financiers do not consider them good, not because any one doubts that they will be paid eventually, but because there is no money with which to buy them. By the laws of the United States, the Secretary of the Treasury can receive nothing in payment for bonds but gold and silver coin. Where will the purchaser of your bonds get the gold and silver coin ? It is now driven out of circulation. There is no such thing as gold and silver coin circulating in the country to any large amount. It is stowed away. The very moment the banks suspended in the city of New York, that moment gold and silver ceased to be the circulating medium of this country. There is not now in active circulation near enough gold to pay your existing debt. It is therefore clear you cannot sell your bonds for gold and silver under existing circumstances. If any man, however patriotic, desired to purchase your bonds, he could not pay you in the only coin that you dare take, because he cannot get it. He must go to a broker first and buy the gold before he can find a medium of exchange with which he can legally pay you for your bonds.
Iy may be said, and I know the Senator from Rhode Island said he had a short remedy for this difficulty. He would repeal the sub-Treasury law, and receive the paper money of the banks. In other words, you would at once install as your national currency, as your standard of values, the inflated currency of all the local banks in the United States; banks over which you have no control, which you cannot regulate or govern in the slightest degree. You would have, then, the circulation of these banks substituted in place of gold; and what would be the effect ? Suppose you received paper money issued by banks in every State, by banks that would have every inducement to inflate, because they do not pretend to pay specie; suppose you received such paper money for your bonds, and paid out such money to your soldiers, how long would it be before we should have all the evils of an inflated currency, of an irredeemable currency of the worst character, and in the most dangerous form ?
It is easy to criticise this bill. I dislike to vote for it. I prefer gold to paper money; but there is no other resort. We must have money or a fractured Government. If Senators can show me how they can raise money except in the way proposed I will join them in denouncing paper money. I listened with great attention to the remarks made by the Senator from Vermont; but when he got through, I should have been glad to have him inform me, if we cannot issue these demand notes, what shall we do ? Shall we surrender the Government; shall we refuse to pay our soldiers; shall we refuse to pay our contractors ? No, Mr. President, you have agreed to pay your debts in money. The chairman of the Committee on Finance gave us a very handsome lecture; a very able discourse upon the importance of preserving the public faith; and he desired to impress upon us and did impress upon me the necessity of not affecting the obligation of contracts. We must not in any emergency, under any stress of circumstances, affect the obligation of contracts between private individuals. Did that Senator overlook the first contract, the contract between the Government and the soldier, the Government and the men who feed and clothe your armies ? We must pay the soldier in money; we must pay the contractor in money. There is a contract, an obligation between the contractor and the soldier and the Government that must be observed. The same obligation of good faith rests upon us to pay every dollar that is due from us to our own creditors, as well as not to impair the obligation of contracts between others. How can you do it ? I have shown that you cannot do it in gold; I have shown that you ought not to do it in the inflated paper money of the country; how else can you do it ? There is no other way, except to issue to your creditor the note of the United States, in such form, with such sanctions, as will enable him to use it as money. If we can believe the testimony of others and the light of reason, the only way we can do this is by stamping them with the same national sanction with which you stamp your gold and silver coin.
Having thus stated the necessity of this measure, I must consider our constitutional power to pass it. The Senator from Vermont, whose opinion is certainly entitled to the highest consideration, and who supports it with an able argument, contends that this measure is unconstitutional. I confess if I did not feel its necessity I would shield myself behind his conviction and vote against it. But, sir, the more I reflect upon the subject the more I am convinced that Congress can authorize the issue of paper money stamped as a national currency as a medium of exchange. Such a currency is a necessary and proper means to enable the national Government to exercise its expressly delegated power to borrow money, to regulate commerce, to support armies and navies. It may it be a power subject to abuse; may be a dangerous power, only to be resorted to in extreme cases; but when I am convinced its exercise is necessary and proper to enable Congress to execute its high powers, I cannot shrink from assuming my share of the responsibility.
The Senator from Vermont has read extracts from the debates in the national convention and from Story's Commentaries, tending to show that Congress cannot authorize the issue of bills of credit. But I submit to him that this question has been settled by the practice of the Government. We issued such bills during the war of 1812, during the war with Mexico, and at the recent session of Congress. We receive them now for our services; we pay them to our soldiers and our creditors. These notes are payable to bearer; they pass from hand to hand as currency; they bear no interest. If the argument of that Senator is true, then all these notes are unauthorized. The Senator admits that when we owe a debt and cannot pay it we can issue a note. But where does he find the power to issue a note in the Constitution ? Where does he find the power to prescribe the terms of the note, to make it transfareable, receivable for public dues ? He draws all these powers as incidents to the power borrowing money. According to his argument, when we pay a soldier a ten dollar demand bill we borrow ten dollar from the soldier; when I apply to the Secretary of the Senate for a month's pay, I loan the United States $250. This certainly is not the view we take of it when we receive the money. On the other hand, we recognize the fact that the Government cannot pay us in gold. We receive notes as money. The Government ought to give and has the power to give to that money all the sanctions, authority, value, necessary and proper to enable it to borrow money. The power to fix the standard of money, to regulate the medium of exchanges, must necessarily go with, and be incident to, the power to regulate commerce, to borrow money, to coin money, to maintain armies and navies. All these high powers are expressly prohibited to the States, and also the incidental power to emit bills of credit and to make anything but gold and silver a legal tender.
But Congress is expressly invested with all these high powers, and, to remove all doubt, is expressly authorized to use all necessary and proper means to carry these powers into effect. Congress is not prohibited from emitting bills of credit or from making a standard of value, nor are these powers expressly conferred. Congress has repeatedly issued bills of credit; it has fixed gold and silver as the standard of value, and made them a legal tender. Certainly gold and silver coin is the best standard of value, for it has inherent value in all commercial countries; but if, in the course of events, gold and silver cannot be had in quantities sufficient to form a medium or exchange for the increased wants of the country, then Congress may establish another medium of exchange another standard of value. This was twice done by establishing a Bank of the United States. I much prefer the credit of the United States, based, as it is, upon all the productions and property of the United States, to the issues of any corporation, however well guarded and managed.
The Senator from Vermont says that we may issue our notes, and of course our creditor must take them; but we must not make his creditor take them the loss must fall entirely upon our creditor. I have shown that by yielding the power to issue a note at all, and especially to issue a note payable to bearer without interest, he has yielded his constitutional argument. But, I ask, is not his proposition manifestly unjust ? He will compel our immediate creditor to take the note or get nothing. It is a moral compulsion, it is true, but it is effectual. It is that or nothing. If we can compel one citizen to take this paper money, why not another and another ? Is it any less the violation of contract in the one case than in another ? Do not all citizens hold their property subject to our unlimited power of taxation ? Do not all share in the blessings of Government, and should not all share in its burdens ? Shall we inflict a loss only on those who trust labor for the Government; and relieve the selfish, avaricious, idle, unpatriotic citizen, who will neither fight for, lend to, or aid the Government ? Sir, to make all these share in the burden of the war, and to relieve those who risk life and property in its defense, I would waive a constitutional doubt.
But, sir, the Senator from Maine, as well as the Senator from Vermont, alleges that it is unjust to insert the legal tender clause, because it will impair the obligation of contracts. He says, if a man holds my note for $1,000, it is unjust for Congress to pass a law that will enable him to pay it with less. I confess that it would be unjust and unconstitutional for Congress to compel him to take a less sum of money. But Congress every day passes laws that affect the value of property, and of money, and therefore incidentally the value of contracts. The other day the Senator from Iowa [Mr. Grimes] introduced a bill to establish a street railroad in the city of Washington. We were all in favor of it; but did any Senator dream that by doing that, he was impairing the obligation of contracts, and yet we affected the value of the omnibuses that now ran on the streets of Washington ? Every act that you pass, almost every event in our political history now, impairs the value of property. Although it may not change the terms of a contract, Congress every day changes the value of money, the value of property.
The Senator from Tennessee [Mr. Johnson] has been distinguished for urging forward the homestead bill; and yet everybody knows that the effect of the passage of that bill would be to change largely the value of one class of property. The Senator from Iowa owns a large amount of wild land in the West. If that bill should pass, this land will be worth fifty per cent. less than it is now. He may have sold some of that land to another at high prices, but we know very well that if the homestead bill passes, it might prevent the purchaser of that land from paying for it. It might almost destroy the value of his purchase, and yet we never stop for considerations of this kind. I submit, therefore, that the argument of injustice to creditors should not defeat this measure.
On the other hand, Mr. President, I believe that if we fail to pass this bill, in the present critical condition of public affairs, we do gross injustice to our public creditors. Let us look for a moment at the practical effect of it. If you now issue to your creditors paper money which has no sanction, which every man may refuse to take, what will be the result ? In every bank in the United States it will at once be rejected, not because the banks are not patriotic, but because they cannot afford to take it. I have here a letter from a banker in New York, addressed to the honorable Senator from Maine, in which the writer states:
"My acquaintance with that class of men [bankers] here is quite extensive, and the view of all, almost without exception, is that it will be fatal to pass the bill without making the notes legal tender. Views differ widely as to the expediency of this mode of meeting the present wants of the Treasury. Though I think a large majority are opposed in theory to the use by the Government of a large amount of demand notes, they are nevertheless satisfied that this is the least of several evils which threaten; but all, however deferring upon the original question, unite upon this, that if we have notes, we must have the benefit of a provision that they shall be a legal tender in payment of debts. This, I know, is the opinion of a number of persons."
He proceeds to name them; but I will not name them. He says that this is the opinion of the leading bank men, and also of the most earnest financiers connected with the banks. The reason is that without such provision, the banks in New York, Boston, and Philadelphia cannot take them, and they cannot take them simply because they cannot use them if they do. It is not a question of willingness or of desire to sustain the Government. They cannot pay out these notes to those who are not obliged to receive them, however they might wish to do so."
If you strike out this tender clause, you do it with the knowledge that these notes will fall dead upon the money market of the world; that they will be refused, as they are now refused by the banks; that they will be a subordinate, disgraced currency, that will not pass from hand to hand; that they will have no legal sanction; that any man, whether a Jew broker or any other of the numerous kinds of brokers described by the Senator from Massachusetts, may decline to receive them, and thus discredit the obligations of the Government. I ask again, if that is just to the men to whom you have contracted to pay debts ? When you issue your demand notes, and announce your purpose not to pay any more gold and silver coin, you then tender to those who have furnished you provisions and services, this paper money. What can they do ? They cannot pay their debts with it; they cannot support their families with it, without a depreciation. The whole, then, depends upon the promise of the Government to pay at some time not fixed on the face of the note. It is, then, an era of irredeemable, depreciated paper money.
Not only justice to our creditors demands this measure, but I anticipate from it very beneficial effects in regulating our currency. If you issue $150,000,000 of Treasury notes, you then, for the first time, at least, since the Bank of the United States, have a national currency stamped with all the credit, with all the power of the Government of the United States. It is a national currency that cannot be abused. It is not controlled by a corporation; it is not controlled by interested parties; it is not controlled by men who desire to make money out of the circulation; but it is a national circulation for the redemption of every dollar of which the national credit and all the property of all the people of the United States is pledged. When you issue these $150,000,000 of currency, it will permeate all over this country; it will be the blood of the whole system, unless you at once depreciate it by marking it with the brand of Cain, and refusing to give it national authority. It will enable men to carry on their business and make their exchanges all over the country.
But that is not all. The circulation of this large amount of demand notes will enable capitalists to buy your bonds. If it were not for this reason, I would not vote for this bill myself. I know the great danger of the inflation of paper money. I would not vote to furnish these demand notes as a circulating medium, unless I supposed there would be some limit to them, and unless I knew that the effect would be to enable capitalists to buy our bonds. Now they cannot do it, because there is no currency in which they can pay for the bonds. You refuse to take the circulation of the banks, and they cannot get you gold, and so they cannot buy your bonds. If you give them a circulating medium, ample and not too great, well secured, sanctioned by all the power of the Government, you may then be able to reach the purse of the capitalist, you may be able to reach the stocking of the poor but patriotic citizens, you may be able to gather in from all this broad extent of country the savings of your people. But you cannot do it otherwise. As long as you have your present system, without any medium of exchange except gold and silver, you cannot reach the real capital of this country, because the people cannot pay you in that which circulates among them, and they cannot get gold and silver. This will be the basis of currency, a medium of circulation in convenient form, by which a man can pay his debts.
The only objection to the issue of this paper money is, that too much may be issued. I know very well that if you continue to follow this issue of demand notes by others, you will depreciate and break down the whole system. There is the only danger in it. I do not believe the issue of $150,000,000 will do any harm; but if you continue to issue other sums, you will at once depreciate the credit of these demand notes and destroy their value. If you confine it to the amount limited by this bill, I believe the effect will be healthy in all the business relations of the country.
After all, Mr. President, this is a mere temporary expedient. It is manifest that we must rely upon some other source of obtaining money. We dare not repeat this experiment a second time. If we do, we enter on the same course that was followed in the French revolution, and also by our American ancestors. But if in our revolutionary war the amount of revolutionary scrip, and if in the French revolution the amount of assignats, had been confined to a small sum in proportion to the wealth of the country, if for instance it had been limited to less than one tenth of the annual production of the country, there would have been no danger. It is idle to attempt to alarm me by saying that this will expand the currency of the country too much. The annual productions of this country are over nineteen hundred millions of dollars. I have on my desk a carefully prepared table made by the Superintendent of the Census, showing the aggregate production of all the States of the Union, and it amounts to over nineteen hundred millions of dollars. By this bill you propose to furnish a currency to the extent of less than one tenth of your annual production. Do you tell me that this will create an inflation of prices ? I do not think so. If you should follow this issue by another, you might create a disturbance in your financial operations; but I think this will not.
The only true way, it seems to me, to establish a financial system in this country and I do not believe we ever shall establish one until the necessity of the hour drives us to it is, first, to ascertain how much money we can afford to expend in the prosecution of this war, and then collect at least one half of that by taxation, and the other half by loans. It seems to me that while your expenditure amounts to $600,000,000 a year, you will be driven to all sorts of expedients. If gentlemen want to get at the true measure of reform, if they do not want simply to have expedients that are forced on us, they must reduce the public expenditures to the standard at which the Government can maintain itself. If they would fix that standard at $400,000,000, and collect one half of that by taxation, a thing easily done, and anticipate that taxation by an issue of demand notes, never to be exceeded under any circumstances, and then collect the other half by the sale of bonds, it could be readily accomplished. Many financiers have told me that the capital of the large cities could easily absorb $200,000,000 of Government bonds from the annual interest now paid there. I have no doubt the Government could readily collect $200,000,000 more by taxation. By doing this, and anticipating taxation by the issue of demand notes, we should have no difficulty in getting money. As it is now, we have no fixed system, we go along without any fixed lights or guides.
I have thus, Mr. President, endeavored to reply to the constitutional argument of the Senator from Vermont. Our arguments must be submitted finally to the arbitration of the courts of the United States. When I feel so strongly the necessity of this measure, I am constrained to assume the power, and refer our authority to exercise it to the courts. I have shown, in reply to the argument of the Senator from Maine, that we must no longer hesitate as to the necessity of this measure. That necessity does exist, and now presses upon us. I rest my vote upon the proposition that this is a necessary and proper measure to furnish a currency a medium of exchange to enable the Government to borrow money to maintain an army and to support a navy. Believing this, I find ample authority to authorize my vote. We have been taught by recent fearful experience that delay and doubt in this time of revolutionary activity are stagnation and death. I have sworn to raise and support your armies; to provide for and maintain your Navy; to borrow money; to uphold your Government against all enemies, at home and abroad. That oath is sacred. As a member of this body, I am armed with high powers for a holy purpose, and I am authorized nay, required to vote for all laws necessary and proper for executing these high powers and to accomplish that purpose. This is not the time when I would limit these powers. Rather than yield to revolutionary force, I would use revolutionary force. Here it is not necessary, for the framers of the Constitution did not assume to foresee all the means that might be necessary to maintain the delegated powers of the national Government. Regarding this great measure as a necessary and proper one, and within our power to enact, I see plain before me the path of duty, and one that it is easy to tread.
Mr. COWAN.[Edgar Cowan (September 19, 1815 - August 31, 1885) Pennsylvania (R); studied law, was admitted to the bar; in 1866 voted FOR reduction of currency] I desire to say a word upon the amendment of the Senator from Vermont, to strike from the bill that portion of it which would make the notes issued by the United States a legal tender in satisfaction of private debts between man and man, and in so doing I will endeavor to be brief.
I will say too at the outset, that it is not matter of choice with me as to the course I am obliged to take in this matter, because from the clauses which I propose to read from the Constitution bearing upon the question, I have no doubt whatever that my duty requires me to vote for the amendment.
The ninth amendment declares:
"The powers not delegated to the United States by this Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people."
Here then are three classes of powers enumerated. 1. Those powers delegated to the United States. 2. Those forbidden to the States; and 3. Those reserved to the States. The first and third include all powers which are or may be legitimately invoked by the General and State Governments, but it is perfectly plain that if a particular power is not delegated to the United States, and is at the same time denied to the States, that such power exists nowhere; and such is the character of some of the third class to which I now refer. Section ten, of article one, is as follows:
"No State shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts," * * * * "or pass any law impairing the obligation of contracts."
The last three are those which cannot be found within the delegated powers of the instrument, and which, therefore, cannot property be exercised by us here; nor have they any equivalents in the grant. They could have none in reason, because they are precise in their signification, and most fit and apt as well-known expressions to convey the ideas they respectively embody. They are, besides, exactly descriptive of the powers claimed here a thousand times more so, indeed, than any one of the many phrases where they are supposed to lurk; and I think no one, without willfully deluding himself, can for a moment believe that if the framers of the Constitution had intended to confer upon Congress the right to make anything but gold and silver a tender in payment of debts, they would not have said so in this very phrase. But their Journals inform us that an attempt was made to do it, made in this form, and that it was refused, not for matter of form or that it was already elsewhere or otherwise granted, but that it was not wise or safe to do so. Nay, more, believing, as they unquestionably did, that the powers in question were in their nature useless for any good purpose and dangerous in the extreme, and fearing that if not prohibited to the States they would be taken to be reserved to them, the clause I have read was made to embrace them and settle the difficulty forever. They are powers which belong neither to the United States nor to the States, and they ought to belong to no Government anywhere.
I had supposed, sir, that this question could never enter the American Senate; that the day had gone by when it was open to discussion, if it ever was open since the Constitution was formed. Surely, if anything in the world is settled settled by the fathers, by contemporary history, painful experience, and the total absence of all precedent for the exercise of these powers it is that they were not delegated nor intended to be delegated. I have never till now heard it doubted; and after the argument of the learned and venerable Senator from Vermont yesterday, I think no one of us, looking at it in the light of the oath he has taken, could doubt it. If this is not settled, then is nothing settled, and we are all at sea.
It be superfluous, Mr. President, but still I think proper to recur a moment to first principles upon this question whether the United States Government can make its notes a legal tender in payment of debts and in so doing, I think it will be found, if answered in the affirmative, that the power would be subversive of all our notions of government and the ends for which it is established, which are the protection and preservation of society.
What, then, is the life and soul of society ? What is the bond or cement which binds the individuals composing it into a community ? Is it not the faith man has in his fellow-man; that he will speak truth, deal justly, and perform his engagements ? In short, sir, is it not credit from credo, I believe ?
This becomes obvious when you reflect that men may mingle together without this belief in one another, where no one has faith in any way in the rest. Sometimes when gamblers sit down to play even professed gamblers recognize the rule the question is asked, "Shall this be on the square ?" and the answer is affirmative; then there is faith and credit round the board, and the play must be fair, even among them and there. Something is appealed to and respected, which relieves the mind from the fear and watching of a state without faith and without belief. But if consent is not given, and a single one says "no," then the players are at liberty to do any and all things necessary to win. Trust and confidence become folly, and there is no security except in continual vigilance and distrust of everything.
Now, we can conceive of such a state of things existing in society, when all its individuals are loosened from one another, and when they are free to do anything and everything they please, irrespective of that which we call good faith; credit is gone, principle is gone, life is gone, and the social fabric falls to pieces. That spiritual, immaterial something which makes men just, true, grateful, and as of prime importance to the fair working of the world's machinery, makes them pay their debts when due, has departed. Now, Mr. President, surely no Government ever was intended by its founders to bring about this state of affairs in the community over which it bore sway; surely ours was not meant to work such a result, but rather the reverse; so that if any member of the body-politic abused the trust, his fellows reposed in him, or broke the faith he had plighted or the word he had pledged, it was made to step in, to interfere and compel him to do what he ought to do to preserve credit and confidence.
What is to be the effect of this proposed plan to make paper money a legal tender upon this credit, which we have seen is the cement of society ? Will it strengthen it or not ? It proposes that in all money contracts notes shall be taken as money, the same as gold or silver. Now, if those notes were worth as much as gold and silver, there would be nothing gained by making them so by law; nobody would think of it. But it is expected that because they are not so, this law will make them operate as though they were at least so far as all present creditors are concerned; all men who have money due them will be obliged to receive these notes as money, at par; they are made a legal tender in all debts.
What is a legal tender ? It is simply the offer which a man makes to fulfill his contract; and if he has contracted to pay money, this bill will enable him to discharge his contract by paying United States notes instead of money; but it will affect no other kind of contract. If my friend, the honorable Senator from New York, has loaned me $1,000, and I have promised to pay it to him on Friday, as the law now stands, I must get him gold or silver money on that day to release myself from my obligation. If this bill passes, however, I may get $1,000 of the notes it authorizes and give him them, and he will be bound to take them and discharge me, although they are not worth $500 or $100 in money, or, indeed, worth anything. Why is this, and why this interference between my friend and me, merely because the subject of our contract was money ?
If I had agreed to sell and convey him one hundred acres of land by deed containing covenants of warranty, surely no Government has ever yet claimed the right to make a law by which I could satisfy my contract by making and delivering him a deed for fifty acres, or, if you please, a deed without the stipulated covenants.
Again, suppose I had engaged to deliver him a horse on Friday, what would be thought of a Government which would undertake to enact that I might on that day tender to him, in full satisfaction of my agreement, an ass ? And yet the result may be as absurd and as wicked in the first case I put as in the last two, and I would like to hear somebody show to the Senate why the interference might not as well be made in that case as in the others. If the Government can affect my money contracts, they might, with the same justice, affect my real contracts or chattel contracts all are the same. And if debtors can pay their money debts by law with something else than money, of less value than money, what becomes of that faith, trust, confidence, credit, which is the bond of society ? What becomes of society itself ?
Mr. President, the power claimed for the Government by this bill subverts the Government itself, and makes it destroy that which it was instituted to protect and preserve. What has been its functions heretofore in their proper and harmonious play ? And why are we so anxious to perpetuate and save it ? Is it because it destroys credit and good faith among men, or is it because it has been almost wholly employed to assert and enforce them ? Surely the latter; for at least four fifths of its labors are performed in achieving what this bill proposes not to do. The Government struggles to make men stand upon their contracts; this bill proposes to discharge a certain class of men from their contracts, upon part performance only.
Proceedings in courts are of two kinds: 1. Criminal proceedings, for the punishment of crime. 2. Civil proceedings, to indemnify against wrongs and enforce contracts. I think the latter occupy four fifths of the time of the courts, occupy them to compel the performance of contracts, and preserve the credit of society inviolate in all cases where the honesty of the contracting party is wanting to that end. This bill, however, would set them all to work, not to compel men to keep their faith, but to aid them in breaking it.
I have said I was opposed to the plan in the bill, because it was without warrant under the Constitution. I now say I would oppose it if it was free from that objection, because it is abhorrent to reason, justice, and all my notions of right.
Nor have I any fear of the consequences which are expected to result from striking out the tender clause, and I have no fear of the evils so eloquently portrayed by the honorable Senator from Ohio [Mr. Sherman]. I am never afraid of being just. If God is not over all, administering this world's affairs, so as to make the just and good and true in the end triumphant, then all security is gone. "Be just and fear not."
I propose now to look a moment at the effect claimed for this clause upon the notes themselves. It is said it will give them credit. I think the contrary effect will follow. It is a blow aimed at them in the most vital part, and one better calculated than any other, since it comes from a friendly hand, to do them in this regard most injury. If one of them asserts on its face that it is five dollars, and that were really true, I should like to know how much truer it is after you have said to every body, "you shall believe it whether you will or not?" Not much, I think; but on the other hand, the fair inference is in the mind of every man, however stupid, that you yourselves first doubted the validity of it, and that therefore you attempted to give it this quality of paying debts perforce, to compensate it for the lack of essential value. If it were good and valid, all people would be glad to get it, as all are ever glad to get money, and the moment you attach to it this character of compulsion you alarm and irritate them, till like the fat knight in the drama, who was anxious to give reasons for his timidity and cowardice, they refuse because of the compulsion. He said if reasons were as plenty as black berries he would not give one on compulsion. So will beggars, even, doubt and scan your issues if they find they are to pass on compulsion. In pleading a tender it is usual to follow it with the word "satisfaction," but it would seem that if the creditor is compelled to release a good security for a bad one, as by the bill he may be, it would be well to say here the tender was in "dissatisfaction of the debt," for such it assuredly will be. Something else will also follow its enactment. You will enjoy the "satisfaction" not of debts, but of reflecting that you have disturbed the relations heretofore existing between debtor and creditor all over the country. The very figures expressing these relations would have to be changed to enable them to understand each other truly. Where, then, are their contracts ? Changed and impaired, and you find yourselves again upon the forbidden ground, ground forbidden to the States and the United States, because the sovereignty of neither extends to the making of a law impairing the obligation of contracts; so that if you had deliberately conspired to break down all the safeguards of the tenth section of the Constitution, no measure could have been more effective than this one, which emits $150,000,000 of bills of credit, makes them a legal tender, and impairs all the contracts of the people, more or less, everywhere.
But it may be said, this provision will keep the notes at par, and therefore no disturbance can take place; and this latter would be true, if the first were. How is it ? Most people have a notion that a note is good just in proportion as it is readily convertible into gold or silver; and I think this cannot be supplied by any form of legislation hitherto discovered, and without this capacity in them the law will not help. But that no doubt can remain, the experiment has been tried, and with much more vigor than is contemplated here, with none but the most disastrous results. During the French revolution, the assignats issued by the Government were backed in every possible shape and form, by every conceivable legal sanction, to compel their circulation, still they sunk as rapidly as though they had been left to the operation of the natural law. Even the penalty of death imposed upon all who refused them did not help. God be praised, we have not come to that here yet. This bill does not provide that those who refuse their commodities in exchange for these notes shall incur penalties. How soon it may come, none can tell, as it seems to follow in regular sequence.
One thing is certain, if it is not resorted to, the people will protect themselves by abolishing all trust, and requiring cash down. They may decide that their property is better to keep than to sell for Treasury notes, unless they can, at the time of sale, be allowed to fix the true value of them. When that takes place, the value of credit itself as well as Treasury notes will begin to be better understood; and that which is now considered so potent by many will be found of little avail in a contest with the natural laws of trade and the true laws of money.
I rejoice, however, Mr. President, that we are not the judges here of the last resort; another and a coördinate branch of this Government must pass upon the question before this obnoxious provision can be enforced. The judiciary may intervene, and if it does, I have no fears for the result; there is not a judge in the land that I know of, who, I think, would dare to decide that one of his suitors should be compelled to accept anything but gold and silver as money, no matter how many acts of Congress there were to the contrary not withstanding. If there is such judge, I think he should, as soon as possible, get down from his high position, before the number of those is much increased who resort to him, and we are relieved after that fashion. They would likely be implacable enemies, and if suffered to multiply much, might render his judicial seat hotter than it ought to be to keep him impartial.
The Senator from Massachusetts [Mr. Wilson] has told us that a large number of people from his State indeed everybody are very anxious to have these notes made a legal tender. We are told, too, that these people are creditors and not debtors; that they want to be compelled to take these notes in payment of their outstanding claims, &c.
Now apart from the obvious inquiry, as to what prevents them from taking these notes without this character, I will venture to say that the first persons in the country most likely to invoke the action of the courts upon the validity of a tender made in these notes would be the princely merchants of Boston themselves. I would like to see a western man from Wisconsin, Minnesota, or Iowa, go down and offer to pay them "on compulsion" with these notes, because I do not doubt at all, so much will they be found to resemble the rest of mankind, that they would inform him that if he had any fancy for the experiment, he might go on and tender, &c., but as for them, they were disposed to appeal to the proper tribunal to decide its validity. They, too, would confide in a judge whose intellect had been dwarfed by the law, whose reason had been long cramped and fettered by rules most maturely considered, who could not get out of the judicial grooves in which all reason, all authority, and all precedent lie, and who reads the Constitution not to pervert it, but to make it avail. And I would ask now, what chance, before such a man, with the actual case before him, with his conscience alive to his duty in the premises, would this plea of legal tender and satisfaction have ? Not much, I should think. All the arguments of Government necessity, &c., would melt away like frost-work in the sun before the actual injustice of the individual case, and your tender would be declared worthless as the raw material composing it; the delusion has vanished.
But in what position will that leave us ? We have violated our Constitution; we have ignored the teachings of our ancestors and the wisdom they achieved for us at such cost; in short, we have disgraced ourselves to no purpose, despite the teachings of our history. For I protest that if there is one thing more than another which we ought to know one thing which three millions of a past generation of our countrymen suffered intensely for long years to learn, and which they bequeathed to us as a legacy in a lesson it is the utter and miserable folly of attempting, by means of legislation, to change lampblack and rags into money.
Twenty-five millions of Frenchmen, too, in the storm of revolution, adventured themselves upon this dire experiment only to end in an imperial despotism. It was welcome to them, because, despotic as it was, it acknowledged the supremacy of the natural laws of trade, and liberated them from the blind folly of popular tyrants who had ground the life out of them by crude and clumsy attempts like this, to do what in the nature of things was impossible, and not knowing that there are numberless terrestrial mischiefs as much out of the reach of legislation as the people in the moon are outside of it. Lack of credit is one of them; to attempt to cure it is to introduce a thousand times greater mischief, because, although an individual can well afford to be poor, they never dare to be unjust and given to falsehood. Still, I hear the question asked, "if we do not resort to this measure what shall we do?" as though it were the only thing left.
Mr. President, I do not think the end of the world has yet come; and I by no means despair of our condition. Every man, I suppose, has been in like straits at some time or other, when he was tempted to listen to some hollow sham and delusion like this to extricate himself. My answer to you is precisely what it would have been to him had he sought my counsel: "Be honest and true; look your difficulties full in the face; and having once fairly grappled them, they are half overcome by that alone." Let us do the same; we are in want of money; must have it; and gentlemen, to frighten us, say, if we desire to borrow it as other people borrow, our credit is so low that our bonds would only be worth sixty cents on the dollar. I do not believe it, Mr. President not a word of it; but, for the sake of the argument, I will gladly take it for granted. Let it be so, and I am willing to stand the shave of forty per cent. to save the Constitution from ourselves. Ay, sir, and then to put in the other sixty in cash, to save it from our enemies. It is cheap at all this to us, our children, to mankind. Go out, then, and borrow on those terms, if need be; but let it be done fairly and in open day, without fraud or concealment, and success is certain; because every good man will square himself to the actual necessities of the case. Resort, however, to this delusive scheme, and you will be led away into that fatal bog, where every step you make to extricate yourselves, will only sink you deeper, till you and your bonds sink together into the grave of the assignat, or into that great national catacomb of ours, in which lie buried $300,000,000 of Continental money, which even tender clauses and dread penalties could not make go as against the simplest natural law of finance.
We are told, however, that it is too late to resort to taxation now to give these notes credit. Well, if you can give them credit by a tender clause, I do not know why you should tax to do it, inasmuch as the latter is really a very unpleasant affair, and I should think people would not willingly resort to it if there was an easier way: Your tax-mill grinds money, but the paper-mill only rags, and the history of both is always the same ever recurring.
But I would say as long as we delude ourselves with this scheme, those who have to pay taxes will delude themselves also; and when you have issued your first batch of $100,000,000 you will find yourselves perhaps just as far as ever from a tax bill. Then we must resort to another and another, until it will end in utter ruin. Why not ? Has any Government ever stopped with a single issue of this kind ? If so, when ? Or has not the first begat the second, the second begat the third, and so on throughout the series ?
This, too, seems to be the hidden mischief which pervades all schemes of the kind. I suppose all Governments resorted to them as temporary expedients at first, intending to stop on the threshold, but could not.
There is another difficulty occurs to me here, and not being a financier, I cannot solve it. Will the $100,000,000 allowed by this bill displace a like amount of money already in circulation, or will it be added to it ? If it is simply added to it, then I do understand that, money being the measure of value, we will nominally increase values materially by that addition. If we add one third to the whole circulation, we will increase values one third, other things (supply and demand) being equal. And as the Government is to-day the largest consumer and heaviest purchaser by far in our market, it would seem to be exceeding folly for her to raise prices. She might as well lose twenty-five per cent. on the sale of her bonds as to be obliged, in avoiding it, to pay twenty-five per cent. more for everything she buys; much better, too, for if in that process she disturbed her own affairs, there is no reason why she should disturb those of the people also, especially when she gained nothing by it. Nothing, indeed, can be more ruinous to any community than those inflations, because it is impossible to stop them till the bubble bursts the issues creating them being limited only by the supply of lampblack and rags. Simple people, too, are in the habit of rejoicing in them as evidence of prosperity; and if we kept on raising prices higher and higher, even by invoking moonshine, we would have plenty of backers.
Still I am free to confess I never could understand financiers, or their schemes, and this position attributed to them does not startle me, however incredible. I believe those schemes always contemplate paying money, without money, which I never could do. If I owe money, I expect either to take my own to do it with, or borrow it from somebody else for that purpose, which latter operation has, to be sure, something of the financial in it, but it was painfully simple in all its detail, and as a result, I never found I was much the better for it. My own money had always to finish the job. I have only to say, then, that if I know it, I am not in favor of bankers and brokers, and against the Government or Administration. On the other hand, I am a true friend of both, although I seldom boast of it. I give them all the aid I can in my humble way, and I never charge them publicly to the country of being guilty of all the crimes on the calendar, from high treason down to petty larceny. I have never complained of their negligence or inactivity, and I have endeavored, as far as I could, to cover with the mantle of charity all their errors, either of commission or omission, expecting many such in these times as unavoidable.
I am also willing to yield to their better judgment in all matters of policy or of expediency but I am still my own conscience keeper, and in all questions of power under the Constitution, I must judge for myself and act accordingly. That Constitution is the charter of our liberties, and the covenant for the Union which we are all so anxious to preserve and defend. I will stand upon it to the last, despite every necessity, however imperious; and if the time comes when we must all go down together, I say let it come; but let us go down as honest men with our faith unviolated; and in that spirit, I hope the amendment to the bill may prevail.
Mr. DOOLITTLE addressed the Senate on the same subject. [His remarks will be published in the Appendix.]
Mr. Simmons. I desire, Mr. President, to say a very few words on this branch of the subject. I do not myself perceive the necessity of the enactment now proposed to be stricken out, and therefore I intend to vote for striking it out. I think the constitutional objection is about as difficult a matter to get over as anything could well be. I was a little surprised to hear the Senator from Massachusetts say that the objections of the Senator from Vermont to the bill with the legal tender clause were just as applicable to the notes issued under the bill without it. Without professing to have a very nice discrimination in my mind, I can see a great distinction between the cases. If the legal tender clause is out these are not bills of credit, according to my notion, but mere evidences of debt, and the Government has a right to pass them anywhere; and if it owes a man ten dollars, it has a right to say on paper that it promises to pay it when it gets ready. But in the contemplation of the Constitution the old-fashioned bills of credit were promises to pay, with a State law enforcing their passage against the will of those who were to take them. Those were the national bills of credit, which were made a tender by State laws under the old Confederation. It was the precise description of paper that the framers of the Constitution intended to prohibit; and it seems to me that no man with his eyes open can read the debates and look at the proceedings of the convention without knowing that they intended to prohibit this Government, as well as the State governments, from issuing such paper. I never could come to any other conclusion in my life. I cannot agree with the Senator from Wisconsin that a bank note issued by a corporation, either State or national, comes within that category at all. It never did, and never was so regarded by the framers of the Constitution. The Bank of North America, a State institution in Pennsylvania, was in existence when the Constitution was adopted, and its framers never attempted to disturb that institution or thought of doing it. It was never complained of. It was the only financial agent of any consequence we had during the Revolution, and it did us a wonderful sight of good. The Providence Bank, in Rhode Island, was established while the First Congress was in session, and nobody ever dreamed or said that it was unconstitutional. Bank bills, as I said the other day, contain a promise to pay, and the holder has it in his power to enforce payment by legal process; but there is nothing of the kind in one of the notes we propose to issue. I agree that these notes are not as good as bank notes with the legal tender clause out; that is, they are subject to more objection; but then they are not subject to the constitutional objection, and therefore I shall vote to circulate them.
Then, further, I shall vote to make them as good as a tender. I never saw any way to make paper money circulate but to make it so that people were desirous of getting it. That is the reason bank notes circulate; and I intend to offer, at the proper time, an amendment to insert a provision in this bill, which, I think, will induce all the moneyed institutions to take these bills over their counters in payment of their debts.
I was a little surprised to hear the Senator from Ohio say, that the addition of $100,000,000 by this bill, or $110,000,000, including the little bill we passed the other day, making $160,000,000 of Government paper in all; would have no perceptible effect upon the value of products in this country. I recollect that, not more than three or four days ago, that Senator, when he wanted to cut down our wages, said the effect of it would be to double the price of everything. I told him one day, and he will remember it, that people of certain professions can make as good an argument on one side of any question as the other.
Mr. Sherman. I did not say that it would have no appreciable effect. I said that we could not negotiate our bonds without this medium of exchange. I did not say what effect it would have on the prices of property.
Mr. Simmons. I think I understand an argument when I hear it. When I hear a man compare $150,000,000 of notes with $1,900,000,000 of productions as a measure, I understand the meaning of the argument. I am not much of a financier, but I think I can understand a man when I hear him stating his points. I hope this will have some effect in appreciating values, whether we issue the notes with the tender clause or without it.
Mr. Wilson, of Massachusetts. It will have the same effect in either case, in that respect.
Mr. Simmons. I hope it will; I trust it will; and I shall vote for it expecting that it will. I never was afraid that the products of labor would get too high. I am not one of that sort of people. I calculate to do some more work myself, and the more I can earn a day, the better I like it.
I was very much struck and pleased with the observations that fell from the Senator from Pennsylvania. I believe, as I said the other day, that all we want to strengthen the public confidence in our securities, is to have confidence in them ourselves. The arguments that this paper will not circulate without this sort of enactment, in my opinion only tend to injure it. The Senator from Ohio said that the entire press of the commercial cities was against my view on this question; that they regard it as indispensable to have full legal tender clause. I have in my hand the New York Evening Post, which I read occasionally, and I have never seen any article in that paper on the subject in which it did not denounce this whole scheme, from first to last; and I call it a pretty considerable paper. I shall not, however, ask to have anything read from it as to its opinions, because I would not care a jackstraw if all the newspapers in the country told me this legal tender clause was constitutional. I would not believe a word of it. It would have no more effect on my opinion than if they said it was not. I do not mean to be governed by newspapers, though those who own them and manage them are a very respectable class of people. I mean to keep my conscience myself, with life assistance of my Maker. There is, however, a little later trial of this legal tender business than I have heard adverted to in the arguments here. The first that I can ever remember reading anything about was in in Russia, at the time of Catherine, and from that time down to 1800 all of them fared alike. I do not know that I ever heard of another attempt to make paper money go current since this century commenced, until this one an account of which I am going to send to the table to be read. The experiment has recently been tried in Turkey, in consequence of the trouble growing out of the Crimean war. I send to the Chair, and ask to have read, a letter from Constantinople, showing the result of the experiment there within the past year.
The Secretary read, as follows:
[Correspondence of the Evening Post.]
Constantinople, December 25, 1861.
We have been on the eve of a revolution in Constantinople, owing to our peculiar financial condition. The country has been flooded with kayemés or Treasury notes, and the exchange has been rising from day to day; the pound sterling going up from one hundred and thirty to two hundred and thirty piasters; and no one knows what fabulous cipher might have designated it in a few days more. In this uncertainty the people, who had nothing in their hands but Government paper, were on the alert, and their anxiety reached a climax during the last week.
On Wednesday last, about noon, the money-changers at Khavzar-Khan, in Galata, having refused to exchange kayemés at any price, a general panic was the consequence. The news soon spread all over the city like wildfire, and all business was suspended. In their excitement the people began to close their stores, and were bent upon exchanging their Treasury notes for provisions at any price. The transactions in edibles were astonishing. Provisions had no market value, but depended upon the caprice or option of the vendor. Chickens sold at three or four dollars each; meat at forty and fifty cents per pound; a loaf of bread brought a dollar; rice, flour, butter, &c., in like proportion. Everything was bought up by persons who were able or had the opportunity to do so.
Mr. Wilson, of Massachusetts. Will the Senator allow me to ask him a question ?
Mr. Simmons. Certainly.
Mr. Wilson, of Massachusetts. I ask the Senator if the article which he has had read at the desk, is not an argument against issuing these demand notes at all, without any reference to the legal tender clause.
Mr. Simmons. I do not know what would have been the effect of the Turkish notes if they were not legal tender notes; but they were legal tender notes. All I can say is, that I give no opinion against the experience of mankind. I say that, so far as my knowledge extends, there never was an effort made by legislation to make paper pass as money, that it did not produce a disastrous depreciation of it; and what has happened may happen again; but I do not know that it will; I am no prophet.
In order to avoid that, I propose that whoever holds these notes may fund them in bonds, redeemable at the pleasure of the Government after two years, bearing an interest of eight per cent. I know that the banks which refuse to take these notes will not lend their credit at seven per cent., when the liberal banks can get eight per cent. for it. The effect of such a provision will be, in my opinion, that the hard-favored banks will conclude to take the eight per cent. themselves, and go on and take these notes just as all the rest of the banks do, and there will be none of these balances to settle. That is my remedy.
As a mere measure of finance, I would rather hire $100,000,000 to-day upon Treasury notes or two years bonds, at eight per cent., than hire the money on twenty years bonds, at six per cent.; because, with my hopeful disposition, looking at the events that I see in progress, we have the most undoubting confidence that we shall be out of this trouble in less than two years, and when we are out of it we can get a premium for our five per cent. bonds, and I would consent to a temporary loss of four per cent. to save eighteen per cent. That is my deliberate judgment. In Mr. Adams's administration, when we came to redeem the six per cent. bond's issued during the war of 1812, we issued bonds of the United States at four and a half per cent., having either ten or fifteen years to run, I forget which, and they brought a premium. It will be just so again as soon as we get out of this trouble; and therefore I think, as a matter of economy, it is a good plan to make loans now for a short period; and in order to give these notes a real value, put a provision in the bill allowing them to be funded in this way. That will sustain the note. The difficulty as to the notes is not with the people; the people are willing enough to take them, and the banks would be willing enough to take then if they would all agree to take them alike; but a few of the banks think they are a little smarter than their neighbors, and they want to put the burden on the liberal banks. I have no doubt that if you strike out the tender clause, and do not depreciate your notes yourselves, and do not let it go out to the world that you expect no body to take them unless you force them down the people's throats, they will be taken. At any rate, we shall be here in the course of sixty days if we try that experiment, and then if there is any difficulty, and the real necessity comes upon us that the Senator from Ohio thinks is so urgent now, we can relieve ourselves.
Mr. President, it has been said that Congress has left the Government without resources. The Senator from Massachusetts said that the country was rich in resources, but that the Government had none. Well, sir, I sometimes keep a little run of what we do; and I recollect that at, the summer session, a short one to be sure, we passed a law imposing direct taxes to the amount of about twenty millions of dollars, which it was supposed would collect about sixteen millions from the loyal States; and we imposed an income tax that the Secretary of the Treasury, as I perceive by his report, expects will yield $30,000,000. I never supposed that the income tax would yield so much; but these two items, according to his estimate, will yield $45,000,000. He has the unquestionable right to collect these taxes. The income tax was ordered to be assessed by the 1st of April, and all the machinery for assessing it was provided in the bill, and it was ordered to be paid in by the 1st of July, and so was the direct tax. There are $46,000,000, according to the Secretary's estimate; I put it at $40,000,000, and that sum would just cover what the Senator from Massachusetts was so furious about the other day when he spoke of the present indebtedness of the Treasury, which the Government had not a cent to pay. If I read the newspapers aright, pretty nearly every State in the Union has agreed to advance its quota of the direct tax and pay it to the Government.
I am not going to criticise anybody's conduct. There is a great deal of business to be attended to, and I do not blame any Government officer for not working up to time, as we call it; but I say that before we upbraid ourselves, and take on sack-cloth and ashes for not doing our duty, it is well enough to think whether the means which we have put in the hands of the proper officers are resorted to to help the credit of the Government. I am ready to work here as long as anybody, to get up as early and labor as late; but I do not like to be censured every day for not getting up tax bills, when everybody knows that we cannot get them up.
Mr. Doolittle. I hope the honorable Senator does not mean to intimate that I cast any censure.
Mr. Simmons. I do not mean to censure anybody, or to criticise what gentlemen say. I only say that when tax bills come up here, I shall be ready to do what I can to perfect them and get them through. We cannot originate them.
Mr. Doolittle. I did not intend to criticise the action of the Committee on Finance, but expressed regret that the House of Representatives had not sent us in a tax bill.
Mr. Simmons. I have friends in the other House, and I once in a while go over there and ask them how they get along with the tax bill. I am told to-day that they have a revenue bill pretty nearly ready, and that they will launch it pretty soon, and I suppose we shall have it to work upon in the course of a week or ten days in all human probability. I do not believe, however, that we can give the country any better assurance than we have already given it. We have passed a resolution through both Houses declaring that we intend to raise an annual revenue of $150,000,000 from some source or other. What more can we do ? I do not believe that anybody will know any better when we pass our tax measures, that they will yield $150,000,000. We only put measures afloat that we think will yield $150,000,000. That is all we can do.
I am not going to detain the Senate, because this is not the proper time to offer my amendment, and I do not mean to say much about it when I do offer it. I simply rose to say that I was satisfied in my own mind that a majority of the trading people desire this legal tender clause in the bill. I saw a telegraphic dispatch to-day I have not got it now, my colleague has that resolutions were introduced into the Legislature of Rhode Island to instruct him and me to vote for this legal tender clause; but they happened to be voted down after the word "instruct" was stricken out. That was in the Senate, however, I rather think the popular branch is likely to pass such a resolution. But, sir, it would not make any more difference with my vote than if they sent oak leaves here with nothing written on them. I intend this year, on all constitutional questions, to vote according to my conscience, and not according to anybody's instructions. I have but one more year to serve, and I reckon I can stand it if they turn me out. I do not believe in the dogma of instructing men to vote on constitutional questions; I never did believe in it, and I never mean to do so. I agree with the Senator from Pennsylvania, that the nearer we live up to that old instrument, the more faith we have in its provisions, the more reverence we pay to its founders, the better our credit will be here and elsewhere; and private credit, private faith, is among the strongest ties by which society is held and bound together.
Mr. Howe. I wish to ask the mover of this amendment a single question. He proposes by his amendment, as I understand, to prevent these notes from being a tender, so to speak, for either private or public debts ?
Mr. Collamer. No; I mean that they shall be a tender for a debt due to the public, the Government.
Mr. Howe. He means to prevent them from being a tender either for debts due from one individual to another, or for debts due from the Government to individuals.
Mr. Collamer. Yes, sir.
Mr. Howe. The effect of prohibiting them as a tender for debts due from one individual to another we very well understand. The question about which I wish to be informed is this: suppose we so amend the bill as that these notes are not to be a tender for debts due from the Government to individuals, do we, therefore, protect the creditors of the Government at all ? In other words, if we declare by this bill that the notes need not be received by the creditors of the Government, do we put those creditors in any better position ? What remedies have they against the Government ? How are they protected ?
Mr. Collamer. I do not know that I shall be able to answer the gentleman without an argument. He asks me to answer no question to which I can reply either yes or no. He asks the for an argument.
Mr. Howe. Then, if the Senator from Vermont will allow me, I will put my question in such a form that he can answer it yes or no. I ask whether, if we adopt the amendment he has proposed, the creditor of the Government will have any other remedies against the Government than he will have under the bill as it now stands ?
Mr. Collamer. As I read the bill, these notes are payable and receivable by the Government, which, I take it, means that the public creditor shall receive them. If it does not mean that, it means nothing. If it means that, we go to a soldier and say, "we owe you two month' pay; here are some Treasury notes to the amount of twenty-six dollars." Under my amendment the soldier will be at liberty to say, "I do not want that paper," and then his debt will remain against the Government. Under the bill the debt would not remain against the Government; but the paper being payable to and receivable by the public creditors, he must necessarily receive it.
Mr. Howe. Will the Senator allow the to ask a question just there ?
Mr. Collamer. Certainly.
Mr. Howe. If we give him twenty-six dollars in these notes for two months' services, I understand the Senator to say the debt would be paid ?
Mr. Collamer. That debt would be paid, but the note would be due.
Mr. Howe. The question I wish to put is, does not that transaction merely change the obligation of the Government from an implied to an express one, or from one express one to another ?
Mr. Collamer. It seems that the gentleman will follow one question with another, so as to compel me to take up time in making an argument. I do not hold at all with the Senator from Ohio, [Mr. Sherman] that if I receive the note of the Government for my pay, I have not loaned the Government that money. I have loaned them that very money, and taken their note for it. It is true then they do not owe me the wages; but they owe me the note. That is the condition of it. Just so it is with the soldier. When you pay him with the note, his wages are not due; but his note is that you have made him take. There does not seem to me to be any necessity for a great deal of hocus pocus about it; there is no necessity for embarrassing men with a great deal of thimble rigging about this business. It is saying, "Sir, you take that note; we know that when you go to buy property in the market, you cannot buy so much for it as you could if you had the money; but we tell you that you will have to get the note cashed and pay the discount on it, or pay more for what you buy, which amounts to the same thing." It is saying on the part of the Government to the soldier, that instead of the Government getting its paper discounted and paying him in money, he shall take the paper and discount it, and suffer the loss. I am opposed to all such contrivances.
Mr. Bayard. It is my desire, if I can, to vote for any bill to raise money which the Government of the country considers necessary for its purposes in this exigency; but I must be confined by the limits of the Constitution; and when I say that, do not mean to enter into the constitutional argument, though I hold it may be made a demonstration, because I am perfectly aware that by this time Senators have made up their minds upon the question and that no argument of mine can be of the slightest avail. If the views of those who framed the Constitution and which must be familiar to all, are to be disregarded; if what is even far beyond that, the settled construction of the Constitution for a period of more than eighty years since it was formed to the present time, has left us without a single suggestion of the idea that within the powers of the Congress of the United States a power existed to issue an irredeemable paper currency if such arguments will not prevail, nothing that I can urge would be of any avail to prevent the adoption of this clause which the honorable Senator from Vermont has moved to strike out of the bill. I therefore do not intend to enter into the constitutional argument beyond a mere reference to two clauses of the Constitution, and I do that because of the opinion of the Attorney General of the United States, which is only the pretense of an argument I consider it no more than a pretense. With the exception of his opinion, I have never known or heard of anybody in this country before who contended that Congress had power to issue paper money as a legal tender for the payment of debts.
The first article of the Constitution in its first section provides, that "all legislative powers herein granted shall be vested in a Congress of the United States" not an indefinite delegation of all powers of legislation, as is the case in our State constitutions where the legislative power of the community is vested in a Senate and House of Representatives; but here in this Constitution of specially delegated powers; "all legislative powers herein granted shall be vested in a Congress" and none other. When you come to the other clause which specifies these powers, you find but a solitary provision which has any relation to the power to make money. The power to borrow is a distinct thing; but the power to make money is "to coin money, regulate the value thereof and of foreign coin, and fix the standard of weights and measures." I have supposed that the power being designated in that form, and Congress having a right to exercise only the powers granted, under no species of interpretation could you hold that a power to coin money implied or could be extended to a power to make your own paper, your promise to pay, money for the purpose of discharging debts between, individuals or as against yourself.
It would be just as reasonable, in my judgment, if Congress were to assume the right to make the notes of the Bank of England a tender for the payment of debts in the United States, as to make their promises to pay a tender for the payment of debts in the United States. That would be just as much within the power delegated, just as rational in the construction of that power, as the attempt which is now made by this bill as it stands. It is true that old maxims are now very little regarded, but the old rule of interpretation is one of reason that the expression of one thing is the exclusion of another. Surely, independent of the positive direct testimony that you have of the attempt which was made in the convention to give the power to emit bills of credit, which was voted down by nine States to two, the confining of the grant to this Government of specially delegated powers, to the making of coin and the regulation of its value and the value of foreign coins, would necessarily exclude the idea that you could make money out of promises to pay.
I shall, however, pass over the constitutional argument. I really do not think, from anything I ever heard on the subject, that is worth an argument. The thing is to my mind so palpable a violation of the Federal Constitution, that I doubt whether in any court of justice in this country, having a decent regard to its own respectability, you can possibly expect that this bill which you now pass will not, whenever the question is presented judicially, receive its condemnation as unconstitutional and void in this clause. There is a distinction however between the debts of the Government and the debts of individuals, and that was the reason why I suggested to the honorable Senator from Vermont to move first an amendment which should strike out of this bill the provision that makes these Treasury notes a legal tender in payment of debts between individuals not that it is less unconstitutional to make your promises to pay a payment to a public creditor. The unconstitutionality of the act is just the same; it is an excess of power upon your part in either case; but the difference consists in this: it is a mere question of policy in that respect connected with your own bill; but the moment you introduce such a clause as regards contracts between individuals, you necessarily bring in the powers of a coordinate branch of the Government, the judiciary, whether State or national; and whenever the attempt is made to pay debts with your depreciated notes by way of tender, or the tender of Treasury notes is made, of course the question becomes a legal question for the derision of the courts. In regard to the obligations of the Government to its own creditors, however, as it is not suable, you may, by a high excess of authority, say that you will not pay except in promises to pay; and the courts cannot notice it, the courts cannot decide upon it. You may get a fictitious credit for a time in this way, but you will destroy the very credit you aim at, because you bring the judiciary in conflict with the legislative power and they will overrule your bill, as between individuals, which they can rightfully do, which they have the power to do; and you cannot avoid the effect of their decision. It will add additional depreciation to the notes that you issue under this law.
It may be said that as long as these notes approximate to the value of the coin of the country, gold and silver, individuals from feelings of patriotism or from any other cause, will be willing to use a currency while there is not a redundancy. That may be so; but after a while there will be a conflict; and there is one class of creditors that you cannot expect to reach in that way; and that is the class of guardians, trustees, and executors, where men have to receive money in a fiduciary capacity. If they receive as money that which has not the value of money except by arbitrary legislation, they may be made to account for it, not now in a time of excitement, but two, four, ten, fifteen, or twenty years hence, depending upon the expiration of minority or upon the removal of coverture, if the cestui que trust is now a feme coverte. Do you suppose they will not make the legal question in your courts when the tender is made to them of a depreciated currency as payment of a debt due to them as trustees ? Of course they will; you cannot expect to avoid it. Some honorable Senators may suppose that the courts of this country will decide that this is a constitutional law. I hold that to be simply impossible, and the effect of the necessary decision of the courts will be to increase the depreciation beyond that which would otherwise exist if you issued these notes as evidences of debt on the part of the Government and left it to the feelings of the community and the credit of the Government to give to them a value which they would attain in that mode, and which they can attain in no other.
I come now to the mere question of necessity, which is the ground urged. On that point, I listened attentively to the honorable Senator from Ohio. He may tell me the opinions of the Secretary of the Treasury, the opinions of the financiers of New York, or any other opinions that he pleases; but I say to him, and I say to the country that the history of the world has demonstrated that the attempt to give a fictitious value by legislation, even by penal legislation, to a paper currency, irredeemable in itself, has always proved a failure; the instance to the contrary cannot be indicated. At this very moment I do not think I am misinformed when I say that the paper money of the despotism of Austria stands at eight dollars for one, the paper money of the Autocrat of Russia stands at four dollars for one of the real value of money. Do you expect that the people of this Republic of the United States are going to be compelled by legislative power to give a factitious value to that which has no value beyond the credit of the Government, further than can be reached by the despotic power of the Emperor of Austria, or the despotic power of the Autocrat of Russia ? Sir; your own experience in the history of this country is demonstration to the contrary. During the Revolution, Congress did pass what was not a penal law, but a penal resolution, in which they recommended that any one who refused to take the Continental money at par should be considered an enemy of the country; and yet all that did not avail; the depreciation went on, and though I think there was quite as much patriotism in the country then as there is now, quite as much public and private virtue then as now, men, before that war ceased, often had to pay $1,000 in paper money for a pair of boots. The scale of depreciation it is not necessary to advert to. Ultimately the money became worthless, not worth even the fire that was applied for the purpose of consuming it.
With all this experience before you, then, (apart from the fact that you are violating the Constitution,) merely as a question of policy, are you willing to resort to a mere expedient for the difficulties of the hour and so depreciate the credit of the Government ? Credit must depend on the belief of the community at large. No one can deny the fact that in the contracts between man and man and in your own contracts to pay money, the obligation is to pay intrinsic value. If you violate that by this bill, which you certainly do, how can you expect that the faith of the community will be given to the law which you now pass, in which you say that you will pay hereafter the interest on your debt in coin ? Why should they give credit to that declaration ? If you can violate the Constitution of the United States, in the face of your oaths, in the face of its palpable provision, what security has the lender that although you now tell him that you will pay the interest in coin, hereafter, if State necessity presses, you will not repeal your law ? You have the power to do the one; you have no power to do the other, and yet you do it.
On the mere question of policy, then, I am opposed to it. Sir, there is but one ground on which a nation can sustain its credit. Artificial legislation will not do it; penalties will not do it. There is no penalty in this bill; but penalties will not do it. It has been tried over and over again by Governments of far more despotic form I say more despotic in form, I will not say more despotic in fact and yet it has always failed. There is but one resource for the credit of a nation. If she has the wealth and she has the willingness to tax, she may sustain her credit when it has become impaired; but if her taxes are already onerous, and she is unable to tax further, or her people are unable to bear it, she is bankrupt. That is not our condition. No one doubts the wealth and the resources of the United States. All you have to do is to tax tax to an extent sufficient to show those who have money that you will redeem your promises to pay, no matter in what form those promises to pay are issued; and though in the first instance with impaired credit, you may be obliged to make a sacrifice by borrowing money under par at, six per cent., the moment it is seen that the people of this country will pay a sufficient amount of taxes to sustain the promise of the Government to pay, rely upon it, your credit will be restored, and it will be restored in no other way. You may resort to expedients; they only depreciate credit, they shake faith, they shake confidence. The idea at once arises in the mind of the community that the representatives of the United States in Congress are afraid to tax their constituents, because they suppose their constituents will not pay; and therefore, of course, credit is necessarily shaken. Whether as regards individuals or nations, it comes to that in the long run. The credit of a nation depends upon the fact of the resources of a country being sufficient to bear an amount of taxation which will insure the payment of the interest on the sums it borrows, and the ultimate redemption of the principal, or at all events the permanent payment of the interest, and the willingness of the people to bear the amount of taxation which is requisite for that purpose.
Once give to the capitalist, I care not whether he resides in this country or abroad, that conviction, and you will have as much money as you want; but you will never have it without. You may pass your legal tender bills; you may, as in this case, attempt to exact from the community a forced loan, for it is no more, but it will give you no credit. It is not a forced loan from individuals, but it is a forced loan from the community. The object of this clause is simply to compel the community to lend to the Government $150,000,000 without interest. That is the effect it will have, if it have any effect at all. It is true, it does not use the shape of a forced loan, but it is that in fact it is nothing else. The moment you make a promise to pay money, a promise which has no intrinsic value beyond the credit of the Government, that moment you are forcing a loan, not from A, B, C, or D, but you are forcing it from the community. I admit that this forced loan will fall, in its results, not upon those who have the wealth and power to resist, but it will fall upon the laboring classes of this country. The depreciation of money will create the appreciation in the relative value to that money of every species of commodity which the poor man has to pay for his subsistence and support; and yet, in all history, the wages of labor have never risen in proportion to the depreciation of currency. That is the effect it will have, and there is where it will press.
Under this doctrine of state necessity, you have only to go one step further, and then you come to anarchy; and that is on the plea of expediency and necessity to say "the Government must have money; A, B, C, and D, are men of wealth, bankers, with money in their vaults, and we will compel them, under penalty of imprisonment or in any other mode we may adopt, to loan their money to the Government against their consent." When you do that, you will stand precisely in the situation that no civilized nation has stood in for the last one hundred and fifty years, except Mexico, which, in the anarchy that has arisen from the success of succeeding factions, has been constantly in the habit of exacting loans from individual capitalists. That time will come if you pursue this course.
You first force a loan from the people at large, Which falls upon the laboring class; but when you come to force a loan from the individual capitalist, what is the result ? To use an expression, which is certainly not very good English, beyond all question not classical, but still very expressive, capital is scary; and whenever you indicate by your legislation that you mean to rely upon compulsory loans to the United States, you will weaken the strength of the country to the extent of your legislation; capital will desert it, and if those who hold it think their persons are unsafe, they will desert it too.
In my judgment, therefore, apart from the constitutional objection which alone would be sufficient to control my vote upon the ground that you have no power to insert this clause in any law, I cannot vote for a bill which embodies it. It is impolitic and inexpedient as well as unconstitutional. It is a mere temporary expedient. It may give present inflation and present relief for the hour, and a very brief hour indeed, but it will be followed by a weakening of the resources of the Government, a depreciation of its credit, and it will produce nothing but disaster and ruin to the country.
Mr. Willey. I do not rise, Mr. President, certainly not at the present time, for the purpose of making a speech, but I wish to place upon record the reason why I shall give the vote which I feel compelled to give on the present occasion.
If this were a question merely of expediency, I would most readily defer my judgment to that of other gentlemen better capable of forming a correct estimate, and I would most certainly yield my judgment to the wishes of the Administration and of the Secretary of the Treasury. In the present emergencies of the country, I desire to support the Administration; and in the prosecution of this war and its policy in reference to it, I think the Administration is worthy of the confidence and worthy of the support of all patriots and of all true and loyal men. It has my confidence; and in any measure not violating in my estimation a principle either of honor or good conscience, I would willingly yield my preferences to it. But, sir, consulting my own opinion, I should say that the legal tender clause of this bill will have the contrary effect upon the currency and credit of the Treasury notes from that which some gentlemen seem to suppose. I believe it will depreciate their credit, and I fear it will depreciate the character of our Government and our country in the estimation of all honest and well-meaning nations abroad. But, sir, believing, as I sincerely do, that this clause is unconstitutional, I cannot vote to retain it in the bill. I have felt the appeal of my honorable friend from Ohio the plea of necessity. Sir, that is a dangerous plea, and it found its origin in a dangerous quarter. It is said that the plea of necessity is the plea of tyrants. I nevertheless recognize the fact that there are occasions in the history of a nation when the old maxim, salus populi suprema lex, may apply; but it is my opinion that the exigencies of the country do not at this time warrant the application of that maxim; and I should be sorry if in prosecuting this holy war to put down an infamous rebellion, to restore and maintain the Constitution, we are ourselves, in the very act of doing so, guilty of a most palpable violation of that instrument.
Mr. Howard. I do not rise, Mr. President, at this late period of the discussion to detain the Senate longer than a minute or two. When this measure was first proposed, and after I had given it merely a perusal, I came, or thought I came, to the same conclusion at which the gentleman from Virginia seems to have arrived, and I was rather disposed to think that there was no authority in the Constitution to warrant such an enactment as this which constitutes the Treasury notes a legal tender in the payment of private debts.
The thing was so anomalous, so unusual to me, that I could scarcely entertain the idea, and I confess that my mind straggled strongly against it. But after a little reflection, and giving the question of constitutional power such examination as I have been able to give it, I have arrived at the conclusion that Congress have the constitutional power, particularly under the clause authorizing them to borrow money, to declare this species of paper a legal tender in the payment of debts between individuals.
It is undoubtedly a hard necessity to which we are driven; but the necessity of the case I submit has nothing to do with the naked question of authority under the Constitution. If I were convinced that we had no authority under the Constitution to enact such a clause as this, I should not feel at liberty to vote in favor of it, and should certainly vote to strike it out; but such is not my conviction. I believe that we have the authority; and still, while I say this, I must say at the same time that I think several gentlemen who are friends of this bill have placed too high an estimate upon this particular clause in the bill. I doubt very much whether it will add greatly to the currency and credit of the paper itself. They think it will, and I am certainly disposed to give it a trial.
We have under the Constitution the power to borrow money. This no one disputes. If we have the power to borrow money, we have the right; and it is our duty to place in the hand of the lender an evidence of the fact that we have so borrowed it, and, further, that we intend to pay what we have borrowed. These two things are manifestly in their very nature, inseparable; and the only real question, it seems to me, which addresses itself to the Senate is this: whether we have any power after having issued this description of paper to the public creditors in payment of their debts, to protect the credit of the United States expressed upon the face of the paper, while it is in the hands of innocent and honest holders. I think we have. I think this is one of the most obvious means of extending protection to the public credit thus expressed upon the paper. If we have it not; if we cannot subject, so to speak, the entire property of the nation to something like an assistance to the public credit, then this power to borrow money at once ceases to be a power of any value, and it is a mere mockery upon the face of the Constitution. If we cannot declare that this paper shall in commercial transactions be of equal validity to transactions based upon gold and silver, then I say that the power to borrow money ceases in and of itself to be of any benefit to the Government or to the nation; and it is because I believe that we have this power thus to protect the public credit, expressed and pledged on the face of a Treasury note, that I shall vote to retain this clause in the bill. I think we have the constitutional power, and I am willing to use it on this occasion.
Mr. McDougall here addressed the Senate. [His remarks will be published in the Appendix.]