Treasury Note Bill.
Mr. Stevens. I move to suspend the rules, and go into the Committee of the Whole on the state of the Union for the purpose of considering the special order.
The motion was agreed to.
So the rules were suspended; and the House accordingly resolved itself into the Committee of the Whole on the state of the Union, (Mr. MALLORY in the chair,) and resumed the consideration, as a special order, of the bill of the House (No. 240) to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States; the question being upon the amendment submitted by Mr. VALLANDIGHAM.
The CHAIRMAN stated that the bill being a special order, debate must be confined to the subject under consideration.
Mr. Vallandigham. I submit at this time the following modification of my amendment, for the purpose of having it printed in the proceedings of the House, so that gentlemen may examine it. I submit it as a substitute for the bill:
That to meet the necessities of the Treasury of the United States, and to provide a currency receivable for the public dues, the Secretary of the Treasury, with the approbation of the President of the United States, is hereby authorized to issue, on the faith of the United States, Treasury notes in any amount not exceeding $150,000,000, not bearing interest, transferable by delivery, and of such denominations as he may deem expedient, not greater than $1,000, nor less than five dollars each: Provided, however, That $50,000,000 of said notes shall be in lieu of the demand Treasury notes authorized to be issued by the act of July 17, 1861; which said demand notes, so far as issued, shall be taken up as rapidly as practicable, and the notes herein provided for substituted for them, and no more of said demand notes shall be issued or reissued after the passage of this act: 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 the Treasury notes herein authorized shall be receivable in payment of all taxes, duties, imposts, excises, debts, and demands of every kind duo to the United States, and may be paid out, under the direction of the Secretary of the Treasury, by any disbursing officer of the United States to any creditor of the United States who will consent to receive the same, at the par value thereof, in discharge of the debt or claim of such creditor; and any holder thereof depositing any sum not less than $100, or some multiple of one hundred, with the Treasurer of the United States, or either of the Assistant Treasurers, or either of the designated depositaries at Cincinnati or Baltimore, shall receive in exchange therefor duplicate certificates of deposit, one of which may be transmitted to the Secretary of the Treasury, who shall thereupon issue to the holder an equal amount of bonds of the United States, coupon or registered, as may by said holder be desired, bearing interest at the rate of six per centum per annum, payable semi-annually, and redeemable at the pleasure of the United States after twenty years from the date thereof; and any holder of said notes, being a citizen or subject and resident of any foreign country, depositing, as aforesaid, any sum therein not less than $2,500, shall, if he demand it, receive similar bonds at the above-named rate of interest, payable semi-annually, the principal and interest of which shall be expressed in the currency of any foreign country, and payable there. And said United States Treasury notes shall be received the same as coin, at their par value, in the sale or negotiation of any bonds that may be hereafter sold or negotiated by the Secretary of the Treasury, with the approbation of the President of the United States, to any person being a citizen and resident of the United States, and may be re-issued from time to time, as the exigencies of the public interests shall require: Provided, however, That this right to reissue shall not continue longer than two years from the passage of this act, unless Congress shall hereafter otherwise provide.
Sec. 2. And be it further enacted, That the form of said Treasury notes shall be as follows: "The United States will receive this Treasury note in payment of all taxes, duties, imposts, excises, debts, and demands of every kind due to the United States, to the value of five dollars," or whatever sum or denomination may be expressed thereon, as hereinbefore provided for.
Sec. 3. And be it further enacted, That to enable the Secretary of the Treasury to fund the floating debt of the United States, he is hereby authorized, with the approbation of the President of the United States, to issue on the credit of the United States, coupon bonds, or registered bonds, to an amount not exceeding $200,000,000, redeemable at the pleasure of the United States after twenty years from date, and bearing interest at the rate of six percent. per an annum, payable semi-annually. And said bonds shall be of such denominations, not less than fifty dollars, as the Secretary of the Treasury, with the approbation of the President of the United States, may determine upon; or where any creditor of the floating debt of the United States, in any sum of not less than $2,500, being a citizen or subject and resident of any foreign country shall demand it, said bonds shall be issued to such creditor, the principal and interest therein being expressed in the currency of any foreign country, and payable there: Provided, however, That none of said bonds shall issue except at their par value; and to such creditors of the floating debt of the United States as shall elect to receive them in satisfaction of their demands: Provided further, also, That the claims and demands of such creditors shall, in all cases, have been first audited and settled by the proper accounting officers of the Treasury.
Sec. 4. And be it further enacted, That the United States notes and bonds authorized by this act, or that have been heretofore authorized, shall be signed by the Treasurer of the United States, or for the Treasurer by such persons as may be specially appointed by the Secretary of the Treasury for such purpose, and shall be countersigned by the register of the Treasury, or for the Register by such persons as the Secretary of the Treasury may specially appoint for such purpose; and all the provisions of the act entitled "An Act to authorize the issue of Treasury notes," approved the 23d day of December, 1857, so far as they can be applied to this act, and not inconsistent therewith, are hereby revived and reenacted; and the sum of $300,000 is hereby appropriated, out of any money in the Treasury not otherwise appropriated, to enable the Secretary of the Treasury to carry this act into effect.
Mr. Roscoe Conkling. With the permission of the gentleman from Ohio, I desire to submit, for the same purpose, the following, which I propose to offer, at the proper time, as a substitute for the whole bill:
A bill to authorize an issue of six per cent. bonds, and an issue of Treasury notes, and for the funding thereof, and of the floating debt of the United States.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That for the purpose of raising money for the prosecution of the war, and for other purposes hereinafter specified, the Secretary of the Treasury be, and he is hereby, authorized to issue, on the credit of the United States, Coupon bonds or registered bonds to an amount not exceeding $500,000,000, to bear date of the 1st day of January, 1862, and payable at the office of the Assistant Treasurer, in the city of New York, in thirty-one years from date, or at such time or times as they may be retired by the operations of a sinking fund, as hereinafter provided, but redeemable at the pleasure of the Government of the United States after twenty years shall have elapsed from their date; said bonds to bear interest at the rate of six per cent. per annum, payable semi annually, at the office of the Assistant Treasurer, in the city of New York. And said bonds maybe of such denomination, not less than twenty-five dollars, as may be determined upon by the Secretary of the Treasury. And if deemed expedient, the Secretary may issue bonds, as hereby authorized, the principal and interest whereof, to an amount not to exceed $250,000,000, may be expressed in the currency of any foreign country, and payable therein. And the Secretary of the Treasury may sell or exchange such bonds for the lawful money of the United States, or for the currency or credits of the associated banks of the cities of New York, Boston, and Philadelphia, at any price which will not yield the purchaser a rate of interest greater than seven per cent. per annum upon the amount of principal expressed in said bonds.
Sec. 2. Be it further enacted, That upon the issue and sale of any bond or bonds issued in pursuance of this act, and at the date of such issue and sale, there shall be set apart for the redemption of such bonds, a sinking fund, equal to one per cent. of the amount of principal of bonds issued, which sum, so set apart, may, in the first instance, be a portion of the proceeds arising from their sale; and thereafter, to wit, on the 1st day of January and the 1st day of July of each year, and until the final payment in full of the bonds issued by virtue of this act, there shall be set apart and paid, without expense, to said sinking fund, and as a part thereof, from any money in the Treasury not otherwise appropriated, a sum equal to one half of one per cent. of the amount of principal of all such bonds issued, unless the same shall be canceled in some other manner than that provided for in this act; in which case the sum semi-annually set apart to said sinking fund shall be equal to one per cent. per annum of the amount of principal of said bonds outstanding; and the said sums reserved and set apart at the sales of said bonds, or that shall be paid over semi-annually, as provided, shall be invested in the bonds issued by virtue of this act, and the bonds shall be purchased by the Secretary of the Treasury (except in the first instance) in open market, or in such manner as the Secretary may deem best for the public interest -- but not by lot -- which bonds so purchased shall have written or printed upon them the following- inscription: "This bond having been set apart by operation of the sinking fund hereby established, is held as an investment of said sinking fund, and this inscription is intended as full notice thereof, and that the same is canceled, except for the purposes of said sinking fund." And the Secretary of the Treasury is hereby authorized and required to pay to said sinking fund the interest arising on all the bonds held for the sinking fund according to their tenor, which payments shall inure to the benefit of and be added the amount of the sinking fund, and shall continue till said bonds are retired by the operation thereof; and Congress may, from time to time, provide by appointing commissioners, or otherwise, for the management of said sinking fund, and may have full control and supervision of the same, but shall not reduce or change the amounts to be paid to the same, either of principal or interest or mode of investment; and the faith of the Government is hereby solemnly pledged to the punctual payment of the semi-annual installment of principal and interest to this fund.
Sec. 3. And be it further enacted, That in place of issuing the whole amount of bonds hereby authorized, the Secretary of the Treasury be, and he is hereby, authorized to issue, on the credit of the United States, and sell at their par value, for the lawful money of the United States, or use the same at their par value in the payment of claims against the United States, growing out of any contracts for materials that have been or may be made by the several Departments of the Government for the prosecution of the war, or otherwise, or in payment of personal service in whatever capacity rendered, notes to the amount of $200,000,000, payable in one year from their date, at the office of the Assistant Treasurer in the city of New York, not bearing interest, and of a denomination not less than five dollars. But the amount of notes so issued shall not, in the first instance, exceed the sum of $200,000,000; nor thereafter the amount of the estimated revenues from all sources (except impost duties) payable within the year for which said notes shall be issued; and said notes shall bear the following inscription: "This note is issued in anticipation of, and is receivable for, taxes assessed and to be assessed for the support of the Government, and to be canceled and discharged upon its payment into the Treasury, or on its conversion into six per cent. bonds, as hereby authorized." And in place of such notes, or any part thereof, the Secretary of the Treasury is authorized to issue notes of the United States, payable in periods of not less than one year from the date thereof, and bearing an interest not exceeding two and a half per cent. per annum; and the holder of any of the notes hereby authorized, whether bearing interest or not, and whether due at the time or not, may convert the same into the bonds hereby authorized to be is sued, and bearing an interest at the rate of six per cent. per annum, in sums of twenty-five dollars, or of any multiple thereof. And in case of such conversion the holder or holders of such notes shall advance to the Government the amount of the semi-annual interest next falling due on the bond or bonds they may receive, unless such conversions bear the date of the day at which the interest on the bonds falls due; and upon such conversion the notes received in exchange for the bonds issued shall be canceled; but the Secretary of the Treasury may issue new notes, with or without interest as provided, to an amount equal to the estimated amount of the uncollected taxes or revenues outstanding at the time, except impost duties, but not to exceed, at any one time, the amount hereby provided, and not to exceed, with the six per cent. bonds issued, the sum of $500,000,000.
Mr. Vallandigham addressed the committee for an hour on the subject of the bill and amendment. [His speech will be published in the Appendix.]
Before he had concluded,
Mr. Bingham desired to interrupt him.
Mr. Vallandigham. I will yield to my colleague if the committee will extend my time.
The CHAIRMAN. The Chair has no power to extend the gentleman's time.
Mr. BINGHAM. I do not wish to interfere with the course of my colleague's remarks; but I should like very much to be permitted to make a remark just there.
Mr. Vallandigham. I cannot yield unless my time is extended.
The CHAIRMAN. Is there objection to extending the time of the gentleman from Ohio ?
Mr. EDWARDS. I object.
Mr. Stevens. I should not be disposed to make a single exception to the rule. I know, however, that an hour is a short time in which to discuss a matter of this kind; and I propose that by unanimous consent, until this subject is exhausted, each gentleman, if he chooses, may be allowed an hour and a half.
Mr. Vallandigham. I hope that proposition will be acceded to.
The CHAIRMAN. Is there objection to the proposition ?
Mr. EDWARDS. I object.
Mr. Roscoe Conkling. I appeal to the gentleman to withdraw his objection to that proposition. This is a special order; it is not general debate, but is confined to this particular subject. I hope we may be permitted to have an hour and a half speeches.
Mr. Edwards. I cannot consent to with draw my objection.
Samuel Hooper (1808-1875) Massachusetts, (R); merchant, great friend of private bankers, no friend of government-issued money, no champion of the people, frankly tells the House that there is a plan, and what that plan is:
(a) a permanent national debt,
(b) a 3rd Bank in a different form,
(c) a national currency based on national debt.
Ten years earlier Mr. Hooper had been instrumental in enacting the Free Banking law in Massachusetts, and introducing a public debt-based, private bank-currency there. The same system that he is now implementing for the whole Union. --The Free Banking concept originated in New York State in 1838, where present Secretary of State, William Seward, was Governor then, and had been a great friend and promoter of the central bank idea since 1831.
In 1866 Mr. Hooper will vote against reduction of currency; in 1869 he will vote FOR the credit strengthening.
Ten years from now Mr. Hooper will be instrumental in the sneaking through and passing of the February 12th 1873, Mint act, which demonetized silver.
Mr. HOOPER. The unusual exigencies of the country require that we should look for other and deeper sources of revenue than any to which we have heretofore been accustomed. We are contending for the maintenance of the Government, for the preservation of the Union, and for the enforcement of the laws, on which depend the existence as well as the security of property.
To insure our success in this contest, great and unusual exertions have already been made. An enormous Army, a powerful Navy, with vast stores of artillery and ammunition, have been created. In providing for the sustenance, comfort, and equipment of this Army and Navy, the Government have been obliged to incur expenses far exceeding in magnitude any which have been hitherto known in our history. To continue them in their present state of efficiency, large additional sums must be expended; and it now becomes the duty of Congress to devise methods by which these sums can be obtained with the least hardship to the people and the least risk to the credit of the Government.
In considering the means by which this is to be effected it must be remembered that it is hardly possible for the Government to raise money for any purpose without occasioning some inconvenience to individuals. To oppose necessary measures, therefore, simply, upon the ground that it will injuriously affect this class or that class of the people is unreasonable. Parties interested may endeavor to show that the same objects can be effected with less hardship than by the methods proposed, or may endeavor to alleviate any objectionable features so far as may be consistent with the attainment of the desired end; but they should always remember that the end aimed at must be attained; that its attainment will require individual sacrifices in some form, and that it is the part of wisdom, of patriotism, and of discretion to submit to such necessary sacrifices cheerfully when called upon; and not by their opposition attempt to excite popular clamor and weaken public confidence in the Government to which they are indebted far the safety of their persons and the security of their possessions. Every step which tends to weaken the public credit has the effect of rendering private property more insecure, because it obstructs the Government in procuring its necessary funds in the ordinary way, and may oblige it to resort to the arbitrary modes of forced loans and heavier rates of taxation. At this moment, therefore, when for the time every hope of aid from foreign capital is idle, when the country is compelled to look to her own resources for the means with which to maintain her integrity and subdue the rebellion, not only does every dictate of patriotism and every ennobling sentiment of humanity call upon the capitalists of the country to rally in defense of the Government, but the meaner instinct of self-preservation admonishes them to submit to slight sacrifices now that they may secure and preserve their property.
Three measures have been considered in the committee which are, to some extent, connected together, and form a comprehensive system by which, it is believed, the Government will be enabled to procure the sums necessary to the successful prosecution of the war, while, at the same time, the burden upon the capital of the country will be light, and the public will be benefited in some important particulars.
The first of these measures is the one now before the House, by which the Secretary of the Treasury is authorized to issue United States notes, not to exceed $150,000,000 in amount, (including those authorized by previous laws,) of denominations not less than five dollars. They are not to bear interest, but are to be issued and received as money, convertible, at the option of the holder, into six per cent. stock of the United States, the principal and interest being payable either here or abroad; and these notes are to be a legal tender.
The second measure consists of a tax bill, which shall, with the tariff on imports, insure an annual revenue of at least $150,000,000.
The third is a national banking law, which will require the deposit of United States stock as security for the bank notes that are circulated as currency.
In order more fully to understand and more easily to meet any objections which may be urged against the first of these measures, being the one now occupying the attention of the House, it will be desirable to notice the other two, which are designed to be more permanent in their character, and upon the expected results of which the present measure is in some degree based.
The tax bill is now being perfected in its details. It proposes a moderate rate of taxation upon most of the articles of necessary consumption, with higher rates on distilled liquors and other articles of luxury, on legacies and probates, on passengers by railroads and other conveyances, on newspapers, and telegraphic messages. From these sources, taken in connection with the tariff upon imports, it is confidently expected, after a most careful investigation, the Government will derive an annual revenue of at least $150,000,000. The ordinary expenses of the Government do not exceed $75,000,000, which, being deducted from the estimated revenue, will leave an amount sufficient to pay an interest of six per cent. upon a loan of $1,250,000,000, or nearly three hundred million dollars more than the estimates of the several Departments oft the am amount of the public debt at the end of another fiscal year, if the state of affairs should remain in the same deplorable condition as now.
This tax bill will give to the bonds of the United States the character so much desired by capitalists, that of a sure interest-paying security. With such a character there would be no harm done if the principal were never paid, so far as those holding the bonds are concerned, because capitalists in the aggregate do not care for the payment of their principal; the only value which they place upon the capital is derived from the fact that it will yield them a revenue; and if at any time the capitalist should wish to use the principal of his bond he knows that he can always sell it to another who desires to invest as much as he desires to sell. The amount of debt of the British Government is so great that the most sanguine political economist can devise no method by which it can be extinguished; but yet the bonds representing that very debt are of great value. Capital seeks them for investment because the interest is sure; and the only reason that they are ever below par is, not because the payment of the principal is more or less hopeless, but because the rates of interest in the market at the time being are higher than the rate provided for in the bonds.
There is another advantage attached to this scheme of taxation. As the surplus, after deducting the ordinary expenses of the Government, will be more than sufficient to pay the interest upon any debts which the United States has now incurred or hereafter proposes to contract, when this rebellion shall have been subdued and peace shall have once again spread her wings over the land, the revenue will increase with the prosperity of the country, and the excess will operate, as a sinking fund, by means of which the whole debt can be gradually extinguished. We have seen, in our own experience, at no very distant date, a surplus revenue used to diminish the national debt by even paying for it an exorbitant premium.
Having thus, as we believe, provided a wise system of taxation which should enable the Government to borrow all the money which it may need, at fair rates, it is proposed, in order to give still further assistance, and also with the object of securing a much-needed reform, to recommend a general banking law. The views which have been considered in framing that bill will serve to give it clearer understanding of its provisions.
For nearly thirty years the country has been without a uniform paper currency. As nearly all the business of the country is done by means of paper, specie being seldom used except in the payment of balances, the inconveniences resulting from this want have been very great. The traveling public, remitters of small sums by mail, and the laboring classes, who often receive their pay in uncurrent funds, chiefly experience these inconveniences. In order to relieve this want it is necessary to give to the paper currency three qualifications:
First. It must be well secured, so that the people may feel that they are sure of obtaining its value when needed.
Secondly. It must have a Governmental indorsement or guarantee, so that the people everywhere may be able to distinguish it, and the Government prove its confidence in it by taking it in payment of taxes, assessments, and other dues.
Thirdly. It must be guarded, as far as possible, against arbitrary increase.
These requisites have all been provided for in the bill. The paper currency is to be secured by a deposit, with the Government, of United States stocks, the market value of which shall be equal to the amount of the currency issued. There can be no higher security known to the Government, and its permanent value has heretofore been shown. The Government, upon the receipt of such security, is to certify on the face of the notes for currency, that the same are "secured by pledge of United States stocks," and is to take them in payment of all taxes, excises, and other dues, excepting only for duties upon imports. Lastly, the Government cannot increase the amount of the currency, except upon the application of a bank, and the banks cannot increase it except upon application to, and depositing security with the Government.
It has been suggested that, as far as the Government alone was interested, the objects which it had to gain could be attained in an easier and less expensive manner; the paper circulation of the country being in reality a loan from the people without interest, it would be equitable and just that the Government should take this loan directly into its own hands, and furnish all the paper circulation, instead of allowing the benefit of it to private associations and individuals. But the committee deemed it more wise to attain their proposed ends, if possible, without disturbing existing institutions, or habits, or doing anything that might injuriously affect private interests. The currency is therefore left to the banks; they are only required to deposit security for it, and to submit to certain established rules and regulations prescribed in the bill, in order to insure conformity of management for the common benefit of the banks themselves and of the public.
To many of the banks these requirements will not be difficult of performance, as they already hold stocks of the United States, which they will be at liberty to pledge. In exchange for the restrictions imposed upon them, the banks will enjoy the benefit of a fixed and permanent interest upon their hypothecated stocks. "An odor of nationality," as Mr. Webster called it, is also imparted to their bills, enabling them to circulate wider and further than before. And what would become a constant drain upon their specie is checked by the consent of the Government to receive their notes in satisfaction of its dues.
Thus are secured all the benefits of the old United States Bank without many of those objectionable features which aroused opposition. It was affirmed that, by its favors, the Government enabled that bank to monopolize the business of the country. Here no such system of favoritism exists. It was affirmed that, while a large portion of the property in the several States, owned by foreign stockholders, was invested in that bank and its branches, yet it was unjustly exempted from taxation. Here every State is left at perfect liberty, so far as this law is concerned, to tax banks within its limits in whatever manner and to whatever extent it may please. It was affirmed that sometimes terrible disaster resulted to the trade and commerce of different localities by the Mother Bank of the United States arbitrarily interfering with the management of the branches by reducing suddenly their loans and sometimes withdrawing large amounts of their specie, for political effect. Here each bank transacts its own business upon its own capital, and is subject to no demands except those of its own customers and its own business. It will be as if the Bank of the United States had been divided into many parts, and each part endowed with the life, motion, and similitude of the whole, revolving in its own orbit, managed by its own board of directors, attending to the business interests of its own locality; and yet to the bills of each will be given as wide a circulation and as fixed a value as were ever given to those of the Bank of the United States in its palmiest days. It is not to be supposed that variation in the rates of exchange will entirely disappear. Specie itself yields to the law of demand and supply, and fluctuates in value with the continual changes of the balance of trade. But this currency will approach as near uniformity in its value as possible. These institutions all originate among the people in their own localities, and are not created by the Government. The Government simply authorizes the investment of capital in the loans, and the use of the bonds representing the loans as the basis of a sound circulation.---[The National Currency Bank Act of 1863 put an end to State-chartered banks. These new banks did not get their charters from States, therefore were not beholden to the States, and there was no need for them to support State politicians. In the previous 60 years the debate and clash was between State-chartered banks and the federally chartered central bank. State banks supported senators and representatives who opposed and voted against the central bank in Congress. Secretary of the Treasury, Portland Chase, the "father" of this new national banking system, as a young lawyer, started his career in 1832 --right at the beginning of Andrew Jackson's battle with the Bank of the United States-- at the Bank of the United States. It was there that he learned about central banking and formed his ideas on national finances. Should it be a surprise that his solution to the question of financing the war and supplying the country with a currency, was the same as what Henry Clay and the Whigs failed to achive in 1841 ? to neutralize the State banks, to establish a federally operating banking system, to institute a debt-based currency, issued by private banks ?]
This measure will, therefore, give to the people that which they most desire, a currency which shall not only purport to be money, but shall actually be money in a broader and more positive sense than are the notes of the Bank of England, high as they are in the estimation of the commercial world, for the reason that the entire capital of the Bank of England is vested in its Government stocks, paying a very small rate of interest, and upon these stocks are based, therefore, the ultimate security of their bills, which is a divided security, because the depositors of the bank look to it equally with the bill-holders; while the plan proposed by the committee contemplates the hypothecation of the stocks of a Government with fewer liabilities, paying a larger rate of interest, which are specially pledged for the security of the currency alone.
Having thus considered a method by which the ordinary expenses of the Government can be paid, and the interest upon its contemplated loans secured beyond reasonable doubt; having also considered a method by which a sound paper currency will be guarantied to the people, and by which a comparatively clear market will be secured to the Government for the negotiation of future loans, the way is now prepared to consider the precise measure pending before the House.
The levying of the contemplated tax, the proper inauguration of the new banking scheme, and the successful negotiation of a new loan, are matters that will require time. In the meanwhile the Treasury is comparatively empty, and the demands upon the Government are numerous and pressing. To enable the Government to support itself during this interval of time, and to facilitate the negotiation of their loans, the committee have decided to recommend the issue of Government notes.
So much has been said and written, and so discordant are the views entertained in regard to money and finance, that many consider the subject an intricate one, that it is useless for them to attempt to understand without more attention and time than they are willing to devote to it. But, in reference to the present condition of the country and wants of the Government, the case may be stated in a few words and within the comprehension of all.
Throughout the North the country abounds with necessaries and luxuries. The means of transportation are insufficient to convey to the sea-board the surplus food now ready, with unparalleled bounty, to meet all the demands of other nations. Our stores and warehouses are filled with everything required for convenience or comfort. An Army of more than half a million of soldiers is in the field, and a powerful naval force on the waters, provided already with everything needful for their comfort and our defense.
The question we have to consider is, how this armed force which has been thus raised and provided shall he paid for ? And how shall we pay for what is necessary to maintain it in the future ? There is an abundance of everything requisite for the purpose; the question is, simply, how can the Government best provide the means of paying those who have supplied and may continue to supply those forces ?
There are but two ways in which this can be justly and fairly accomplished. One is by taxation; in other words, calling on every man to furnish at once his just portion of the amount required. The other is by loans; that is, by using the obligation of the Government to pay at some future time, with such rate of interest as may be agreed upon; thereby allowing our descendants to share some portion of that burden which is incurred as much for their benefit as for ours.
The Committee of Ways and Means recommend loans, with taxation to meet the interest and ordinary expenses of the Government; and the measures they have considered are for that purpose. The people are ready and willing and anxious to be taxed, to an extent that will secure the prompt payment of this interest, and a sinking fund that will provide for the payment of the principal in twenty or thirty years. By joint resolution Congress has pledged itself to meet their wishes in that respect with great unanimity; and the tax bill, as mentioned heretofore, is now being perfected in the committee, and will soon be submitted.
It is proposed to issue $500,000,000 of bonds, payable in twenty years, with interest, semi-annually, at the rate of six per cent. per annum, upon which the committee confidently rely for adequate means to maintain the Government and carry on the war until the rebellion is subdued. There would be no difficulty in relying upon these bonds alone, if the parties who contracted to furnish the necessary supplies, and other creditors of the Government, were the parties who are also to receive and hold the bonds that are to be issued. But, unfortunately, these contractors and others have incurred large debts to banks and capitalists, which they are called upon to pay, and have thus far been put to great inconvenience by the delay of the Government in paying them. Hence there is a necessity for money; and the object of the authority to issue $150,000,000 United States notes, not bearing interest, and made a legal tender, is to pay these creditors of the United States, and enable them to discharge their debts.
In the natural course of trade these United States notes will continue to be transferred from one to another until they come into the hands of the banks and the capitalists, who will not allow them to remain long idle in their possession. Money for commercial purposes can now be obtained for less than five per cent. Such portion, therefore, of the "United States notes" as are not needed for circulation, and cannot be used in regular business channels in a way to earn interest, will be returned sooner or later to the Treasury Department, to be converted into bonds bearing interest at the rate of six per cent., and payable in twenty years. By this process the exchange is completed, and these bonds of the Government will thus be made to furnish the supplies required to carry on the war without the intervention or use by the Government of bank paper.
The propositions of the committees from boards of trade and banks which recently visited Washington, submitted to the Secretary of the Treasury, and declined by him, differed from the theory of this bill so far as to require that, instead of the issue of the United States notes, the banks should be relied upon to furnish the amount needed. The effect of this would be that the Government bonds must first be disposed of, and the money received for them paid to the contractors; in other words, that the Government should go into the money market and negotiate their bonds, without restriction as to the rate or terms, at a time when the Government is discredited by the delay and the difficulties that have occurred in paying contractors and others; taking the notes of suspended banks in payment of these bonds, and, with these bank notes thus obtained, pay off the contractors. The obvious effect of such an arrangement would be to put the reins of our national finances in the hands of the banks, leaving to them the direction of our path, with little opportunity for the Government to exercise any influence on the subject. Exactly upon what terms the Government bonds could be negotiated now, under such circumstances, no one can say; but last summer, when the banks made their negotiation with the Secretary of the Treasury for $100,000,000, they at first refused to do anything, because the Secretary was restricted by law to taking par for seven per cent. bonds payable in twenty years, and for seven and three tenths Treasury notes payable in three years. They finally decided, though with great reluctance -- influenced by patriotic regard for the public interest as well as wisely consulting their own -- to take $100,000,000 of the latter; though at that time, as now, money was not worth for commercial purposes more than five per cent. It is now proposed in this bill to limit the Secretary to par for six per cent. bonds, the principal and interest to be payable in specie or its equivalent. It is believed that there can be nothing more secure than these bonds, which thus become, as it were, a standard of value in reference to the currency.
In the war of 1812, the Government paid for its supplies with funds obtained from the banks, in the same manner as proposed in the plan recently submitted to the Secretary by those committees. The bonds of the United States were then negotiated in some instances at twenty per cent. less than their par value, and paid for in bank currency of different degrees of depreciation, according to locality, but averaging from twenty to twenty-five per cent. discount, as compared with coin.
To render the Government financially more independent, it is necessary to make the United States notes a legal tender. It is possible that they would become a practical tender like bank notes, without providing for them to be a legal tender. If this were a foreign war, there would be no doubt of it; but in this present emergency, when those who are openly or secretly disloyal to the Government are found everywhere to suggest obstacles that may embarrass the Government, nothing should be omitted that will add to their efficiency. I am, therefore, in favor of making the notes a legal tender, believing the Secretary of the Treasury, who alone has the power to issue them, can and will use the power with his well-known discretion, and that it will assist him in his endeavor to keep the notes at par with coin. We shall probably be told that England, in her great struggle, while specie payments were suspended, never made paper money a legal tender. But in this respect her example should serve us as a warning rather than a guide, because, instead of it, she did what was much worse, by suspending the laws to enforce the payment of debts in cases where the paper money had been refused as a tender.
Various objections of a theoretic nature have been made to the issue of United States notes, as proposed by this bill. Their main features may be summed up in a few words. It is said that when a Government once assumes the power to issue a currency, the temptation to continue issuing it rather than to resort to the more unpopular method of taxation is so great that it will not cease to issue it until it finds itself in a state of utter bankruptcy. The answer to this objection is, that the power of the Government is limited by the law in this respect to $150,000,000, and consequently the Government cannot, if it would, yield to any such temptation.
Again, it is said that the country already has a supply of paper currency equal to the demand; that if this amount is, therefore, thrust upon it at the present time, the currency will depreciate and prices will be unduly inflated. The answer to this objection is manifold in its nature. In the first place, the objection supposes, that the total amount authorized to be issued by the Treasury will immediately be thrown upon the market; which is far from probable. On the contrary, it is highly probable that the total amount will never be issued. The Secretary issues it in making payments from time to time, and in the usual course of trade it will come back to the Treasury, either in payment of taxes and other Government dues, or in purchasing the Government loans; when it can be reissued as the Government may require it; so that the amount permanently remaining in the market as a currency will by no means be so large as the objectors suppose. In the second place, as has already been shown, while this currency can be converted in such a manner as to yield six per cent, interest on its par value, it can never greatly depreciate, because the moment the capitalist holding it sees any evidence of its depreciation, he will convert it into the bonds bearing interest, giving him a permanent income. Thus it secures itself against over-circulation.
In the third place, the objection supposes that the supply of bank paper now in circulation is, and will continue to be, equal to the demand, and hence the danger of the disastrous consequences of an inflation. Do those who make this objection forget that the heavy taxation which they desire must create an unusual demand for currency, which will call for an unusual supply ? How do they expect to pay the very moderate tax (in their estimation) which we propose when the banks have suspended specie payments, and the gold is hoarded by a few speculators, in anticipation of future augmentation in its value or price ? Will they expect the Government to receive the tax of $150,000,000 in specie ? If not, can they wish the Government to take the notes of any and every banking association in the country ? or, that the Government shall discriminate between the different private banks, and arbitrarily reject one bank bill as bad and accept another as good ? If not, and the people at large will be unable to pay this tax in coin, and the Government cannot accept it in the bills of private local corporations, then the issue provided for in this bill will be not only useful to the Government as relieving its temporary necessities, but will be essential to the people as a means of supplying them with he currency necessary to pay their taxes.
The plan which I have thus sketched in its several branches fills up the outlines of the policy submitted by the Secretary of the Treasury in his very able report.
Mr. Chairman, the loyal States stand in a more independent position to-day than they have ever before occupied. The reports of the Treasury show that they have been small purchasers, while the record of the exports tells us that they have sold largely. Where, then, are the abundant resources of this country ? I answer, sir, that they are in our banks and our warehouses and our granaries. Commerce and its attendant trade are paralyzed; the timid and disloyal are sending their wealth abroad for security; while the Government is offering the only safe and sure opportunities for investment within their reach.
Some of the very men who owe their freedom, their standing, their wealth to the development of the principles in defense of which this war is now waged, seem to be hesitating and wavering whether to come to the support of those principles or abandon them to their threatened destruction. For, sir, disguise it under whatever name you please, this is a war, on the part of the South, inspired by slavery against the free labor of the North; and hence the sympathy it receives from those who favor aristocratic institutions. The prosperity of the North, like that of England and France, is mainly to be attributed to the skill that it has developed in manufactures, the enterprise that it has displayed in commerce, and the constant investment of its accumulated wealth in industrial pursuits of every kind; while the South, from policy, has preferred that its labor should be unskilled and ignorant, suited only to the employments of a peculiar agriculture, keeping itself dependent upon foreign trade for many of the conveniences and luxuries which it has not the ingenuity to produce. It is important in this great struggle to show the superiority of the principles of freedom, of education, of the elevation of man kind, upon which society at the North is based, over those of slavery, which doom men to hopeless ignorance in order to insure abject obedience. To do this our resources of every kind are abundant, both in men and in means; and it is only necessary to draw them out in order to be successful.
To fail would not be because the nation was so poorly endowed as to be without the means of success, but because it refused to make use of them. Such a result, if it were possible, would not weaken the truth of the great principles for which we are contending; but would simply demonstrate that we, of this generation, were faithless in guarding those principles; faithless to ourselves; faithless to our country; faithless to good government throughout the world; and, since such infidelity is a violation of unquestionable duty, faithless to God.
Mr. Roscoe Conkling obtained the floor.
Mr. Morrill, of Vermont. I ask the gentleman from New York to yield me the floor. Two members of the majority of the Committee of Ways and Means have spoken on this question, and if the gentleman will permit me now to express the views of the minority of the committee against the pending bill, I will be obliged to him.
Mr. Roscoe Conkling. I yield to the gentlemen from Vermont.
Mr. Stevens. I move that the committee rise.
The motion was agreed to.
So the committee rose; and the Speaker having resumed the chair, Mr. MALLORY reported that the Committee of the Whole on the state of the Union had, according to order, had the Union generally under consideration, and particularly House bill No. 240, to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States, and had come to no resolution thereon.
Mr. Stevens. I feel it my duty to state that the Treasury Department is urgent for the passage of this bill, and I trust, therefore, that the vote on it will not be put off longer than Thursday next.
By unanimous consent it was ordered that the amendments of Mr. Roscoe Conkling and Mr. Vallandigham be printed.
Treasury Notes, etc.
Mr. Spaulding. I desire to call the attention of the House to a letter which I have just received from the Secretary of the Treasury. It is a note to me urging the immediate passage of this bill without further delay. For the purpose of letting the House understand the necessities of the Treasury, I ask the Clerk to read an extract from that letter.
The Clerk read, as follows:
"Immediate action is of great importance. The Treasury is nearly empty. I have been obliged to draw for the last installment of the November loan. So soon as it is paid, I fear the banks generally will refuse to receive the United States notes, unless made tender. You will see the notes, a legal necessity of urging the bill through without more delay."
Mr. THOMAS, of Massachusetts. Has the gentleman any further communication that has been received from the Secretary of the Treasury with reference to this bill? If there has been any received I hope he will be kind enough to have it read to the House.
Mr. Spaulding. A communication has been addressed by the Secretary of the Treasury to the Committee of Ways and Means, and I have no objection to its being read.
Mr. Roscoe Conkling. I would like to know whether the gentleman intends to have the whole of the communication read, or only extracts ?
Mr. Spaulding. I ask the Clerk to read what I send to him. The balance of the communication is in relation merely to formal amendments. What the Clerk will read is all of the communication that refers to the principle of the bill.
Mr. Vallandigham. Has the Committee of Ways and Means received the letter which it was expecting from the Secretary of the Treasury ?
Mr. Spaulding. This is the one.
Mr. Vallandigham. I should be glad to hear the whole of it.
The Clerk read, as follows:
Extract from a letter of the Secretary of the Treasury to the Committee of Ways and Means.
TREASURY DEPARTMENT, January 29, 1862.
SIR : I have the honor to acknowledge the receipt of a resolution of the Committee of Ways and Means, referring to me house bill No. 240, and requesting my opinion as to the propriety and necessity of its immediate passage by Congress.
The condition of the Treasury certainly needs immediate action on the subject of affording provision for the expenditures of the Government, both expedient and necessary. The general provisions of the bill submitted to me, seems to me well adapted to the end proposed. There are, however, some points which may, perhaps, be usefully amended.
The provision making United States notes a legal tender has doubtless been well considered by the committee, and their conclusion needs no support from any observation of mine. I think it my duty, however, to say, that in respect to this provision my reflections have conducted me to the same conclusions they have reached. It is not unknown to them that I have felt, nor do I wish to conceal that I now feel, a great aversion to making anything but coin a legal tender in payment of debts. It has been my anxious wish to avoid the necessity of such legislation. It is, however, at present impossible, in consequence of the large expenditures entailed by the war, and the suspension of the banks, to procure sufficient coin for disbursements; and it has, therefore, become indispensably necessary that we should resort to the issue of United States notes. The making them a legal tender might, however, still be avoided, if the willingness manifested by the people generally, by railroad companies, and by many of the banking institutions, to receive and pay them as money in all transactions, were absolutely or practically universal ; but, unfortunately, there are some persons and some institutions which refuse to receive and pay them, and whose action tends not merely to the unnecessary depreciation of the notes, but to establish discriminations in business against those who, in this matter, give a cordial support to the Government, and in favor of those who do not. Such discriminations should, if possible, be prevented ; and the provision making the notes a legal tender, in a great measure at least, prevents it, by putting all citizens, in this respect, on the same level, both of rights and duties.
The committee, doubtless, feel the necessity of accompanying this measure by legislation necessary to secure the highest credit as well as the largest currency of these notes. This security can be found, in my judgment, by proper provisions for funding them in interest-bearing bonds ; by well-guarded legislation authorizing banking associations with circulation based on the bonds in which the notes are funded; and by a judicious system of adequate taxation, which will not only create a demand for the notes, butby securing the prompt payment of interestraise and sustain the credit of the bonds. Such legislation, it may be hoped, will divest the legal tender clause of the bill of injurious tendencies, and secure the earliest possible return to a sound currency of coin and promptly convertible notes.
I beg leave to add, that vigorous military operations and the unsparing retrenchment of all necessary expenses, will also contribute essentially to this desirable end.**************************
I have the honor to be, with very great respect, yours truly,
Hon. Thaddeus Stevens, Chairman.
Mr. Roscoe Conkling. I now call for the reading of the rest of that letter.
Mr. Spaulding. There is not the least objection to its being read. It is, however, in the committee room. I will state what the remainder of the letter is. The Secretary of the Treasury suggests some amendments to the bill. He proposes two new sections to the bill, one relating to counterfeiting, and the other in regard to the manner in which the notes shall be executed. He proposes, instead of having them signed by clerks, that there shall be a seal or die engraved upon them, which will indicate the authority under which they are issued.
Mr. Roscoe Conkling. Are those the only amendments ?
Mr. Spaulding. There are two or three smaller amendments, not affecting the principle of the bill, however, in any way. We propose in the committee to act on those amendments tomorrow morning. If the letter were here I would not have the slightest objection to its being read.
Mr. LOVEJOY. I want to ask the gentlemen of the Committee of Ways and Means whether they intend to propose to have action on this bill before action is taken on the tax bill ?
Mr. Spaulding. I have been anxious to have the tax bill brought in to be first considered; but the gentleman from Vermont, [Mr. Morrill,] who is chairman of the sub-committee on the tariff and tax bills, informs us that the sub-committee having that matter in charge will not be able to report to the Committee of Ways and Means for several days yet. The necessities of the Treasury, therefore, will compel us to act on this bill, however reluctantly, before the tax bill can be introduced.
Mr. Roscoe Conkling. I hope that the remaining portion of the letter of the Secretary of the Treasury will be printed in the Globe.
Mr. Spaulding. I have no objection to that.
Mr. Roscoe Conkling. The gentleman has read the whole letter, and I ask him to state whether the Secretary is for or against this bill with the legal tender provision in it.
Mr. Spaulding. He is for it. I have another letter from him, in which he states that he is anxious to have it passed in that form.
Mr. Roscoe Conkling. Let us have that read.
Mr. Spaulding. It is a letter to myself.
Mr. MAYNARD. I ask my colleague on the Committee of Ways and Means whether the portion of the Secretary's letter which has been read is not all of it that appertains to the principle of the bill; and whether the balance does not relate merely to matters of detail ?
Mr. Spaulding. Yes, sir. I will read a paragraph of the letter written by the Secretary to myself this afternoon:
"I came with reluctance to the conclusion that the legal tender clause is a necessity; but I came to it decidedly and support it earnestly. I do not hesitate since I have made up my mind. ******** The conclusion I have arrived at has convinced me that it is important to the success of the measure."
And then, on motion of Mr. Wright, the House (at half past four o'clock p.m.) adjourned.