Elbridge Gerry Spaulding

History of the Legal Tender Paper Money


The legal tender bill was sent to the Senate on the 7th inst., and was, on motion of Mr. Fessenden, read twice by its title, and referred to the Finance Committee.

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

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


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

Yours, truly,

Chairman Committee Finance, Senate.”

The bill is a very short one, and I will read it :

A Bill to authorize an additional issue of United States Notes.

Be it enacted, etc., That the Secretary of the Treasury, in addition to the $50,000,000 of notes, payable on demand, of denominations not less than five dollars, heretofore authorized by the acts of July 17, and August 5, 1861, be, and he is hereby, authorized to issue like notes, and for like purposes, to the amount of $10,000,000, which said notes shall be deemed part of the loan of $250,000,000 authorized by said acts.”

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

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

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

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

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

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

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

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


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

The honorable Secretary of the Treasury, at the beginning of the session, recommended two measures—taxation and a bank.  Both of these subjects require, at this stage of the country, and under existing circumstances, peculiar and long consideration.  The opinion of the country has tended towards what is called indirect taxation, taxation upon different American and other products, and different kinds of property.  Sir, that requires great time.  I have examined it sufficiently to be aware that it is not the labors of a day, or a week, or a month.  It is substantially new in this country, and it requires much time, much study, and much information to acquire all the knowledge of the various products which would be likely to produce a revenue, and upon which a tax might, with propriety, be laid.  So, too, with reference to the scheme suggested by the honorable Secretary of the Treasury with regard to a bank.  And yet, notwithstanding all that, a bill of that description has been reported.  With regard to the particular bill now before the Senate, we all know that it was resorted to as a temporary measure, not in the beginning, but in consequence of the necessities of the Treasury, arising from a greater expenditure than the Secretary could have imagined, and arising from the necessary delay with reference to other measures.  Can it be said that a measure like the one now pending before the Senate and the country is a measure of a day or an hour ? Why, sir, what does it propose ?  It proposes something utterly unknown in this Government from its foundation ;  a resort to a measure of doubtful constitutionality, to say the least of it, which has always been denounced as ruinous to the credit of any Government which has recourse to it ;  a measure, too, about which opinions in the community are divided as perhaps they never have been divided upon any other subject ;  a measure which, when it has been tried by other countries, as it often has been, has always proved a disastrous failure.  Sir, it would hardly be expected that a measure of this description, brought into the House of Representatives and the Senate for the first time in the history of the country, involving questions of such infinite importance, not only with reference to to-day, but with reference to the future, to all time, because it is setting a precedent which may be followed, should be taken up and passed at once, as we pass appropriation bills.  It needed long, careful and vigorous discussion.  It has had it in the other branch of Congress.  I have read that discussion from beginning to end.  It has been able and clear upon both sides of the question.  The subject deserved that discussion ;  and the House of Representatives would have been faulty if it had suffered a measure of this kind to be passed without its having undergone a discussion which should not only enlighten the House, but enlighten the country upon all the aspects of it.  Shall Congress be considered in fault because they have not before acted, or did not act heartily, upon a measure of that description ?  I think not, sir.  The time has been well spent, and although I regret as much as any man can regret that we have not been able to act more promptly, I see no fault to be imputed anywhere ;  not in the other House of Congress, and certainly not in this ;  for it has reached this body as soon as it could possibly reach it, when you consider the nature of the questions that were to be discussed by the Committee to whom it was referred.

I have already said that we have never attempted to resort to such a measure before.  We have had a war with England since our Government was formed ;  and if I am rightly informed, at that day, the stocks of the Government went down to sixty per cent, and pay was taken for them in such currency as could be received, itself depreciated ;  and yet it did not occur as a serious question to the men of that day to put forth, under the Constitution, irredeemable paper made a legal tender for the payment of debts.  To be sure, the country then was poor ;  it is now rich, comparatively.  The country had not then the resources that we have ;  and perhaps it would have had the more excuse for adopting such a course.  I do not urge this as an argument against it at the present time, but only as showing the nature of the measure itself, to which it is now proposed to have recourse, in order to place the Government in a better position ; especially, sir, when you observe that everybody who has spoken on this question, I believe without an exception—there may have been one or two—but all the opinions that I have heard expressed, agree in this :  that only with extreme reluctance, only with fear and trembling as to the consequences, can we have recourse to a measure like this, of making our paper a legal tender in the payment of debts.

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

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

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

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

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

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

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

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

Sir, I do not hesitate to say here, that I would advocate the use of the strong arm of the Government to any extent in order to accomplish the purpose in which we are engaged.  I would take the money of any citizen against his will to sustain the Government, if nothing else was left, and bid him wait until the Government could pay him.  It is a contribution which every man is bound to make under the circumstances.  We can take all the property of any citizen.  That is what is called a forced contribution.  Thank God, we have not arrived at that ;  but I am not certain that it would not be a more manly course to meet the matter straight in the face, and if we are to compel a man to part with his property, to do it without offering him what may appear to be security, and yet I am not certain that that would not be the more manly and praiseworthy course to pursue.  Then, sir, as to this question of necessity, I wish to ask the gentlemen to consider upon what public credit is founded ?  According to my reading and my view of the case, it has but one foundation, and that is, the confidence of the people in the ability and integrity of the Government, and its power and its will to pay.  Public credit has no other foundation that I am aware of than that.  If that is so, then the question arises, what is the ability and what is the integrity of this Government, and what is its will to pay ?  Are they such as of themselves, under proper legislation, will enable the Government to raise means in the ordinary way ? ”

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

He then proceeded :

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

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

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

Again, it encourages bad morals, because, if the currency falls, (as it is supposed it must, else why defend it by a legal enactment?) what is the result ?  It is, that every man who desires to pay off his debts at a discount, no smatter what the circumstances are, is able to avail himself of it against the will of his neighbor, who honestly contracted to receive something better.

Again, sir, necessarily as a result, in my judgment, it must inflict a stain upon the national honor.  We owe debts abroad yet.  Money has been loaned to this country, and to the people of this country, in good faith.  Stocks of our private corporations, stocks of our States and of our cities, are held and owned abroad.  We declare that for the interest on all this debt, and the principal, if due, these notes, made a legal tender by act of Congress, at whatever discount they shall stand, shall be receivable.  Payment must be enforced, if at all, in the courts of this country, and the courts of this country are bound to recognize the law that we pass.  That result, then, is inevitable.

Again, sir, it necessarily changes the values of all property.  It is very well known that all over the world gold and silver are recognized as money, as currency ;  they are the measures of value.  We change it here.  What is the result ?  Inflation, subsequent depression, all the evils which follow from an inflated currency.  They cannot be avoided ;  they are inevitable ;  the consequence is admitted.  Although the notes, to be sure, pass precisely at par, gold appreciates and property appreciates.

Again, sir, a stronger objection than all that I have to this proposition—I am stating the objections which everybody must entertain, because I suppose these facts are palpable—is, that the loss is to fall most heavily upon the poor, by reason of the inflation.”

Mr. Fessenden continued his argument at great length, urging taxation, good faith and economy, as the best means of maintaining the credit of the Government.  Said he would not argue the constitutional question, proposing to leave his own mind uninstructed on this question, and if need be, leave that question to be settled by the courts.  That this was a great crisis truly, but he believed we would be as well able to meet the difficulties without the legal tender clause as with it.  And concluded as follows :

“ We always meet, and must always expect to meet, in a Government like ours especially, difficulties such as attend us now—perhaps not so great, but greater or less—in the course of time.  No nation ever escaped them, and no nation can hope to escape them.  I would not have perfect quiet always, in a republic especially.  It would be a bad sign if it were so.  It is contrary to the very nature of our Government that it should exist.  You never find quiet except under a tyranny.  Only in the dead sea of despotism is there a perfect calm.  It cannot be looked for in the wide ocean of liberty.  Storms arise inevitably, and the waves roll and dash turbulently, but bright skies again cheer us, the agitated waters subside, and their broad bosom is traversed by thousands of tall ships laden richly with hope for the nations of the world.”


Mr. COLLAMER, of Vermont, made an elaborate speech against the legal tender clause in the bill :

“ He argued that it was unconstitutional, and that even if it was a necessity, he could not vote for the measure.  To him, the oath he had taken to support the Constitution, was recorded in Heaven as well as upon earth, and there is no necessity that, in his estimation, would justify him in the breach of it.  He admitted that when the Government borrows money, it must give some evidence of the debt, whether by the name of Treasury note or some other name, is immaterial, but denied the power of Congress to make them a tender in payment of debts.  He quoted largely from Story on the Constitution, to show the illegality as well as inexpediency of this measure.  He said it would be aiding and assisting men who owed debts, to pay those debts with a depreciated paper, at the cost and expense of the creditor.  His honest opinion was that the Constitution never intended to invest Congress with any such power.  He referred to the debates in the convention that formed the Constitution, to show that the men of that period always entertained the opinion that the ‘ United States could have nothing else a tender but coin.’  While they lived there never was such a thing thought of as attempting to make the evidences of the debt of the Government a legal tender, let their form be what they might.  He argued that there was an express power ‘ to borrow money on the credit of the United States.’

That where there is an express power to do a thing, there can be no implied power to do the same thing.  There were two modes of replenishing the Treasury.  One was by taxation, and the other to borrow money.  To borrow money there must be a lender and a borrower, and both should act voluntarily, and not compel the lender to part with his money without an inducement.  The operation of this bill was not anything like as honorable or honest as a forced loan.  Such paper always depreciates, and generally fails altogether, and is never paid.”

He urged taxation, and the issue of Treasury notes receivable for public dues, and closed as follows :

“ You have nothing to do but to exercise the powers you possess in commanding the resources that you can command, and you can have money and credit enough.  I think some little courage becomes us, too, in performing our duty.  I have no doubt that this country is able to sustain itself in this strife, pecuniarily as well as physically.  I, for one, desire to do that ;  but I do not want to do it by saying that now, because the necessity requires money, I will go and steal it, or authorize anybody else to steal it.  I will not say to a man :  ‘ Here is my note for so much, and if I do not pay it, you must steal the amount from the first man you come to, and give him this note in payment.’  I will do nothing of that kind.  I have faith in the Government.  I no way despair of the success of this Government.  It cannot fail.  Its power, its resources, its members are such that it is not possible it should fail.  If we are not competent to exercise the proper moral courage to do our duties and come up to what is wanted, I hope we shall give place to men who are.”


Mr. HOWE, of Wisconsin, made a lengthy speech in favor of the bill, which will be found in the Appendix to the Cong. Globe, p. 51-2-3.

“ Mr. PRESIDENT—Hitherto the effort of the Government has been to borrow the immense sums demanded for the war in coin.  It is clear to my mind that this effort should be abandoned.  We are excluded from borrowing in foreign markets for the present.  It suits both the financial and political purposes of other nations, at this time, to discredit our ability.  Not until we have demonstrated that, in the devotion of our own people, the Government has resources equal to its utmost needs, can we command the confidence of the gold-mongers of Europe ?  To borrow of those communities, in their present temper, would subject us to such discounts now as would neither comport with our interests or our honor, and would subject us hereafter to heavy annual exportations of specie for the payment of interest.

To continue borrowing of our own banks, and borrowing coin, is impossible.  They have not the coin to lend.  In their efforts to lend to the Government they have already been forced to suspend the payment of specie upon their own notes.  The entire sum of specie in all the banks in the United States, in May last, was only $99,751,627 ;  of that sum $27,125,000 was in the vaults of banks within the seceded States, and not just now available for the purposes of this Government.  Thus the specie capital, which the banks of the loyal States could place at the disposal of the Government, was but little more than seventy-two millions of dollars.  That sun will not defray the expenses of the Government for fifty days.  The Government may be able to borrow of the banks, but the Government cannot borrow specie of the banks.  If it borrows anything from them it must borrow, not their money, but their promises to pay money.  Nothing is more certain than that, whatever our wishes may be, it is impossible to command the revenues for this war in coin.  We must rely mainly upon a paper circulation ;  and there is another thing equally certain, which is, that that paper, whoever issues it, must be irredeemableAll paper currencies have been, and ever will be, irredeemable.  It is a pleasant fiction to call them redeemable ;  it is an agreeable fancy to think them so.  I would not dispel that fancy, I would not expose that fiction, only that the great emergency which is upon us seems to me to render it more than usually proper that the nation should begin to speak truth to itself ;  to have done with shams, and to deal with realities.

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To talk of borrowing of your banks the money to support your army and your navy, is as idle as for England to talk of borrowing from her national bank the money to pay her national debt.  There is but one fund adequate to supply the national finances, and that is, the property of the nation.  There is but one guarantee upon which the national credit can securely rest, and that is the national faith.  In the discharge of that duty Congress is clothed with unrestricted power to raise and support armies, to provide and maintain navies.  Congress is also clothed with power ‘to snake all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the Government of the United States.’

To preserve for these eleven misguided States a republican form of government, we have raised such armies and provided such navies as this continent never before saw—such as the world has rarely seen.  I deem those armies and navies ‘necessary and proper’ for the occasion.  To support those armies and maintain those navies I deem the measure before the Senate ‘necessary and proper.’

Those who deny the constitutional authority to pass this bill must deny its necessity or its propriety.  Those who deny its necessity or its propriety ought to show us some plan for avoiding it, some measure adequate to the emergency, and more proper than the one proposed by this bill.  Two months have elapsed since the policy of this bill has been discussed, and no one of its opponents has yet produced a substitute.  The total neglect to offer a substitute is prima facie evidence of the necessity for this.  But it is not the only evidence of that necessity.  It is evident that no substitute can be provided, except it be taxation or direct loans.  I have already said that taxation is inadequate to the supply demanded for this terrible occasion.  No nation of modern times has been able to provide from taxes alone, the immense sums we are called upon to expend.  I will presently show that direct loans are quite as impracticable as taxation.

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The Senator from Ohio [Mr. Sherman,] proposes to amend this bill, so as to authorize the Secretary of the Treasury to sell the public stocks for whatever he may be offered for them ;  to go into the market with the national credit, and to sell it for whatever the crippled capital of the country chooses to offer for it, to fling the financial character of the Republic, as a bone, to be quarreled and growled over by the bulls and bears of the stock market.  To that amendment I am opposed.  If you notify the capital of the country that you are prepared to pay for money, whatever it is pleased to exact, it will be hoarded to wait the extremity of your distress.  No man likes to sell for less than he buys.  No man likes to buy for more than his neighbors.  And if we advertise to the world that, like any other spendthrift, we are prepared to pay for money according to our necessities for it, no man will purchase our bonds at ninety cents for fear we shall presently sell it seventy-five ;  and if we offer them at seventy-five per cent., we give the best of assurances that we will soon sell at fifty.

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Sir, if one of your soldiers shrinks from duty, and deserts his country’s cause for fear of losing his life, he is called a coward, and he is ignominiously dismissed from his company, or shot in its presence.  By what fitting term, then, shall we designate him who deserts his country in its greatest need, for fear of losing his money ?  By what penalties should he be visited ?

Money and men alone do not constitute the wealth of a nation.  The genius, the generosity, the courage, the intellect, and the patriotism of the people are all national resources.  In an emergency like this, the Government should not draw upon one fund alone, but every fund should respond alike.  Surely avarice and cowardice should not alone be exempt from the common burdens.”

Mr. FESSENDEN moved to amend the bill so that the six per cent. bonds should be “redeemable in five years, and payable twenty years from date.”


Mr. CHANDLER, of Michigan, spoke on the amendment to make the bonds redeemable in five years.

Mr. CHANDLER—“ I am in favor of the amendment of the Senator from Maine, for the reason that I believe we need not borrow money at long dates at a high rate of interest.  Still, I object to the Senator’s hypothesis that this war may last one or two years.  There has not been a day since the 1st day of November, when we could not have closed the war in sixty days, with our forces then in the field, and from this day forth we can close the war in sixty days, by an advance of our armies ;  and I believe that the time has now arrived when we will advance our armies, and when the war will be brought to a close within sixty days from this date.  I am therefore, in favor of restricting the bonds, and giving the Secretary of the Treasury the right to redeem them within five years, and I would even make the time shorter than that, and say “within three years.”  The time has arrived when this rebellion is within our grasp.  The time has arrived when the order, “forward,” will close this rebellion.  The obstacles are small.  The objects are great.  We can remove the only obstacle that stands in our way, and we can close this rebellion before the 1st day of May next, and I believe, I believe solemnly, that we shall do it.  We have but one obstacle, and that obstacle is so small that we can remove it to-morrow, if Congress, if the Senate say so.  It is a very small obstacle, yet it has stood in our way for four months.

I hope that the amendment of the Senator from Maine will prevail ;  and I would prefer to reduce the time which he has fixed, from five years to three years.  I would not pay seven per cent., nor even six per cent., more than three years.  Our five per cent. bonds will be worth more than par in three years from this date.  I know that the money market is the touchstone of the national credit ;  but I know, at the same time, that the United States five per cent. would be worth more than par to-day, if the country and Congress knew our present position.  One obstacle stands in our way, and that is a very small one.

I hope the amendment will prevail, and that we shall reduce the time at least to five years.  I should prefer its reduction to three years.  This war is nearly ended.  A single order, “forward,” to-morrow, and we have the man to give the order in the Secretary of War, and the war is ended.”

The amendment was agreed to.

On the 13th inst. Mr. Collamer moved to strike out the legal tender clause in the bill, and on this motion Mr. Wilson obtained the floor.


Mr. WILSON, of Massachusetts, spoke as follows :

“ Mr. PRESIDENT—This proposition is a very simple and plain one, and certainly very easy of comprehension ;  but, it seems to me, the fate of the measure itself is involved in the decision.  If the amendment proposed by the Senator from Vermont is accepted, I shall vote against the whole bill under any and all circumstances, for I conceive that it would be unjust to issue a currency of $150,00,000 of Government paper, and impose it upon all persons in the employ of the Government, upon our soldiers in the field, and upon those who have made contracts to supply the armies of the Republic, and to do nothing to protect the credit of that currency when in their hands, imposed upon them by our necessities.  I should consider such a measure as that unjust, wickedly unjust ;  and I could not, and I would not, under any circumstances, be guilty of giving a vote of that character.  If that amendment should be adopted, I hope every 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.

Passing by the question of constitutional powers, 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 of it.  The entire business community, with hardly a solitary exception, men who have trusted out of the country in commercial transactions their tens and hundreds of millions, are for the bill with this legal tender clause.  Yes, sir, the people in sentiment approach unanimity upon the question.  What is true of Massachusetts is, in my judgment, true to a considerable extent of New England, and true to some extent of the Central States and the West.  I believe that no measure that can be passed by the Congress of the United States, unless it be a bill to raise revenue to support the credit of the Government, will be received with so much joy as the passage of this bill with the legal tender clause.  On that question I entertain no shadow of doubt.  If you pass this bill with the legal tender, the legal tender cannot injuriously affect the credit of this currency you propose to circulate.  No harm can certainly come of it.  It seems to me, sir, the argument made by the 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.  I have received several letters from my own State in favor of the bill—persons representing millions, in favor of the legal tender clause.  The intelligence I obtain from all portions of the country is to the same 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 upon the people, upon the soldiers of the country, $150,000,000 of demand notes, and doing nothing to protect those upon whom we impose this Government paper.”


Mr. SHERMAN, of Ohio, made an elaborate speech in favor of the bill, and in opposition to the motion of Mr. Collamer to strike out the legal tender clause.

“ The motion of the Senator from Vermont now for the first time presents to the Senate the only question upon which the members of the Committee of 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.

In the first place, I will say, every organ of financial opinion—if that is a correct expression—in this country agrees that there is such a necessity, in case we authorize the issue of demand notes.  You commence with the Secretary of the Treasury, who has given this subject the most ample consideration.  He declares not only in his official communications here, but in his private intercourses with the members of the Committee, that this clause is indispensably necessary to the security and negotiability of these demand notes.  We all know from his antecedents, from his peculiar opinions, that he would be probably the last man among the leading 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 its that without this clause, to 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 of Public Safety of the city of New York, composed of distinguished gentlemen, nearly all of whom are good financiers, who agree fully in the same opinion.  I may say the same in regard to the Chambers of Commerce of the city of Boston, of the city of 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.”

He continued his argument at length :

“ A hard necessity presses the Government.  $100,000,000 is now due the army, and $250,000,000 more up to July first.  The Banks of New York, Boston and Philadelphia, have exhausted their capitals in making loans to the Government.  They have already tied up their capital in your bonds.  Among others, the cashier of the Bank of Commerce, (Mr. Vail,) the largest bank corporation in the United States, and one that has done much to sustain the Government, appeared before the Finance Committee, and stated explicitly, that the Bank of Commerce, as well as other backs of New York, could no further aid the Government, unless your proposed currency was stamped by, and invested with the attributes of lawful money, which they could pay to others as well as receive themselves.

Bonds cannot be sold except at a great sacrifice, because there is no money to buy them.  As soon as the banks suspended, gold and silver ceased to circulate as money.  You cannot sell, your bonds for gold and silver, which is the only money that can now be received under the Sub-Treasury law.  This currency made a legal tender was necessary to aid in making further loans.  He argued that the bill was constitutional.  The Senator from Vermont has read extracts from the debates in the national convention, and from Story’s Commentaries, tending to show that Congress cannot authorize the issue of bills of credit.  But I submit to him that this 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 transferable, receivable for public dues ?  He draws all these powers as incidents to the power to borrow money.  According to his argument, when we pay a soldier a ten dollar demand bill, we borrow ten dollars from the soldier ;  when I apply to the Secretary of the Senate for a month’s pay, I loan the United States $250.  This certainly is not the view we take of it when we receive the money.  On the other hand, we recognize the fact that the Government cannot pay us in gold.  We receive notes as money.  The Government ought to give, and has the power to give, to that money, all the sanction, authority, value, necessary and proper, to enable it to borrow money.  The power to fix the standard of money, to regulate the medium of exchanges, must necessarily go with, and be incident to, the power to regulate commerce, to borrow money, to coin money, to maintain armies and navies.  All these high powers are expressly prohibited to the States, and also the incidental power to emit bills of credit, and to make anything but gold and silver a legal tender.  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.

If you strike out the tender clause you do so with a knowledge that these notes will fall dead upon the money market of the world.  When you issue demand notes, and announce to the world your purpose not to pay any more gold and silver, you then tender to those who have 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 on the promise of the Government to pay at some time not fixed on the note.  Justice to our creditors demands that it should be a legal tender ;  it will then circulate all over this country, it will be the life blood of the whole business of the country, and it will enable capitalists to buy your bonds.  The only objection to the measure is that too much may be issued.  He did not believe the issue of $150,000,000 would do any harm.  It is only a mere temporary expedient, and ought not to be repeated.”

He closed as follows :

“ I have thus, Mr. 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 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 is easy to tread.”


Mr. COWAN, of Pennsylvania, made a lengthy speech in favor of the amendment to strike out the legal tender clause in the bill, on the ground that Congress had no power to make anything but gold and silver a tender in payment of private debts.

“ He argued at length that Congress had no power to ‘emit bills of credit, make anything but gold and silver coin a tender in payment of debts, or pass any law impairing the obligation of contracts.’  They are powers which belong neither to the United States nor to the States, and they ought to belong to no Government anywhere.  He had supposed that this question could never enter the American Senate ;  that the day had gone by when it was open to discussion, if it ever was open since the Constitution was formed.  Surely, if anything in the world is settled—settled by the fathers, by cotemporary history, painful experience, and the total absence of all precedent for the exercise of these powers—it is that they were not delegated, nor intended to be delegated.  The exercise of such a 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.  The life and soul of society is the faith man has in his fellow-man ;  that he will speak truth, deal justly, and perform his engagements and maintain his credit.  Will it strengthen this credit ?  It proposes that in all money contracts notes shall be taken as money, the same as gold and silver ;  all men who have money due them will be obliged to receive these notes as money at par ;  they are made a legal tender on all debts.  The power claimed for the Government subverts the Government itself, and makes it destroy that which it was intended to protect and preserve.  It is abhorrent of reason, justice and all notions of right.  He thought that the legal tender clause would not give the notes credit, but would be injurious to them.  It would disturb the relations between debtor and creditor, and impair all the contracts of the people, more or less, all over the country.”

He concluded as follows :

“ I am willing to yield to the better judgment of the administration in all matters of policy or expediency, but I am still my own conscience keeper, and in all questions of power under the Constitution I must judge for myself, and act accordingly.  That Constitution is the charter of our liberties, and the covenant for the Union which we are all so anxious to preserve and defend.  I will stand upon it to the last, despite every 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, of Wisconsin, regretted that this bill must be acted upon before the tax bill was matured.

“ If we had a sufficient tax law to sustain the credit of the Government, he would vote to strike out the legal tender clause.  He was assured that this bill must pass immediately, or the Government could not go on.  As an original proposition, he did not believe in paper money, but it had become engrafted on our system.  He thought the framers of the Constitution intended nothing but hard money, coined gold and silver.  Had their intentions been carried out ;  had we always held fast to the Constitutional currency ;  had not paper money, under both State and Federal authority, become the actual currency of our people ;  had we to-day no other currency but gold and silver, I would not tolerate the idea of passing this bill for a single moment.  But, such is not our condition ;  we are in the midst of a gigantic war ;  we can not go back ;  we must go forward ;  we must go through ;  we must start from where we are, and not from where we would be ;  we must behold the real necessities of our position as it is, and not as we would have it, and look those necessities squarely in the face.

The truth is, while in theory the only money of our people is gold and silver, the fact is otherwise.  It is almost exclusively of paper.  Aye, sir, at this moment it is the irredeemable paper of suspended bank corporations.  Most unfortunately, paper money does now exist, and has existed so many years in this country, issued under the sanction of State authorities in violation, as I admit, of the spirit and intentions of those who framed the Constitution, that a man must be blind, indeed, who would not now, in time of war, in a measure of practical legislation, recognize the stubborn fact that these banking corporations, created by the States, so long acquiesced in by this Government, have become great and powerful institutions, and have practically displaced the currency of the Constitution, by substituting in its stead their own paper money.  At all times it is much the greater part of our circulating medium, and when, in times of panic and disaster, comes suspension of specie payments, it becomes our only currency.  Such is our condition now.  What shall we do now ?  We must have deeds, not words ;  facts, not theories.  We cannot sell our bonds abroad.  The paper money issued by banking corporations is all, or nearly all, the money our own people have.  Shall we sell our bonds for the paper money of suspended banks ?  No, sir ;  no man will advocate that.

The only alternative is to issue these Treasury notes, which will go into the circulation of the country as a part of its currency.  If, as I have said, the question now were whether we should begin to build up a paper currency in this country, or hold fast to the currency of the Constitution, I would oppose this measure.  But we cut our moorings from the solid ground long, long ago.  We have been embarked upon a sea of paper money for years.  We have suffered periodically financial crashes and revulsions, tossed upon its uncertain waves, blown up and down by the breath of speculation.  We are still at sea, and in the beginning of a terrific financial storm, and the question is whether we shall seize the rudder and direct the ship, or suffer it to go without direction, to founder and make shipwreck of all public and private securities and values, to become the prey and spoils of wreckers along the shore.  The simple question which presses upon us in this extremity is, whether we shall rule this currency, created by these corporations, in violation, in my opinion, of the original intention of the Constitution of the United States, or whether they shall rule us.

For their good, for the security of all, as well as for its own safety, this Government must assert its Constitutional authority over the currency of the country, in some practicable way, and it seems to me that the mode proposed in this bill is the simplest and most direct in the present exigencies, as a temporary measure, until the great measure of finance, the tax bill, can be perfected and set in operation.”


Mr. Simmons, of Rhode Island, opposed the legal tender clause in this bill.

“ He did not see its necessity, nor the Constitutional power for passing it.  He thought the Constitutional objection about as difficult a matter to get over as anything could well be.  He thought that if the legal tender clause was stricken out, the notes would not be bills of credit, but mere evidences of debt.  In contemplation of the Constitution, the old 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.  These were the national bills of credit, which were made a tender by State laws under the old Confederation.  He thought it better to make our securities desirable by increasing the rate of interest, as high even as eight per cent.  He intended to move an amendment at the proper time, to increase the interest to eight per cent.  on notes and bonds payable in two years.”


Mr. Bayard, of Delaware, opposed the legal tender clause, because it is unconstitutional, impolitic and inexpedient.

“ He concurred in the argument of the Senator from Vermont, who has moved to strike out the legal tender clause in the bill.  The first article of the Constitution, in its first section, provides that ‘all legislative 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 power granted, under no species of interpretation could you hold that a power to coin money implied, or could be extended to a power, to make your own paper, your promise to pay money, for the purpose of discharging debts between individuals, or as against yourself.
    In 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, of Virginia, spoke as follows :

“ I do not rise, Mr. President, certainly not at the present time, for the purpose of making a speech, but I wish to place upon record the reason why I shall give the vote which I feel compelled to give on the present occasion.  If this were a question merely of expediency, I would most readily defer my judgment to that of other gentlemen better capable of forming a correct estimate.  But, sir, consulting my own opinion, I should say that the legal tender clause of this bill will have the 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 can not vote to retain it in the bill.  I have felt the appeal of my honorable friend from Ohio—the plea of necessity.  Sir, that is a dangerous plea, and it found its origin in a dangerous quarter.  It is said that the plea of necessity is the plea of tyrants.  I nevertheless recognize the fact that there are occasions in the history of a nation when the old maxim salus 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, of Michigan, said :

“ 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 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 struggled 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 has 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, of California, advocated the bill is a lawful and proper measure to be adopted at this time.

“ He thought this a just and reasonable war measure.  Necessity, it is said, is above all law ;  it is better said, ‘necessity makes its own laws.’  Our Treasury is now exhausted.  Money is the first necessity of war—vigorous successful war.  Delay is not to be contemplated—not to be permitted.  Prompt present action is a necessity.  To give efficiency, the legal tender clause should be retained—the bill ought not to be amended by striking it out.  He argued that the bill was constitutional ;  that we had the right to issue these notes as money, to be used as a currency for the country in the present exigency.  He was not able to maintain against it any good constitutional objection, and did not see in it any special injustice.  We are at war ;  this is a war measure ;  we must take war responsibilities.  This measure can ruin no one, destroy no one, and we are advised upon the highest authority that it is needed for the maintainance of the Republic.  I believe the law constitutional, just and necessary.  I hope to see it passed, and when passed, I shall hope on.”


Mr. Sumner, of Massachusetts, made a lengthy speech in favor of the constitutionality and expediency of the legal tender clause, and said he would confine his remarks to this feature of the present bill.

“ In the present exigency, money must be had ;  and we are told that the credit of the Government can be saved only by an act that seems like a forfeiture of credit.  Paper promises to pay are to be made a legal tender like gold and silver, and this provision is to be ingrafted on the present bill authorizing the issue of Treasury notes to the amount of $150,000,000.  It seemed to him that the power of Congress to make Treasury notes a legal tender was settled as long ago as when it was settled that Congress might authorize the issue of Treasury notes ;  for from time immemorial the two have gone together ;  one is the incident to the other, and, unless expressly severed, they naturally go together.

It is true, that in the Constitution there are no words expressly giving to Congress the power to make Treasury notes a legal tender ;  but there are no words expressly giving to Congress the power to issue Treasury notes.  If we consult the text of the Constitution, we shall find it as silent with regard to one as with regard to the other.  But, on the other hand, the States are expressly prohibited to ‘emit bills of credit, to make anything but gold and silver coin a tender in payment of debts.’  Treasury notes are ‘ bills of credit,’ and this prohibition is imperative on the States.  But the inference is just that this prohibition, expressly addressed to the States, was not intended to embrace Congress indirectly, as it obviously does not embrace it directly.  The presence of the prohibition, however, shows that the subject was in the minds of the framers of the Constitution.  If they failed to extend it still further, it is reasonable to conclude that they left the whole subject in all its bearings to the sound discretion of Congress, under the ample powers intrusted to it.

The stress that is so constantly put upon the prohibitions addressed to the States will justify me in introducing the opinion of Mr. Justice Story in his Commentaries :  ‘ It is manifest that all these prohibitory clauses as to coining money, emitting bills of credit, and tendering anything but gold and silver in payment of debts, are founded upon the same general considerations.  The police is to provide a fixed and uniform rule throughout the United States, by which commercial and other dealings of the citizens, as well as the moneyed transactions of the Government, might be adjusted.’-(2 Story’s Com., Sec. 1372.)

If this view be correct, then no inference adverse to the powers of the national Govermnent can be drawn from these prohibitory clauses ;  for whatever may be the policy of the national Government, it will be a fixed and uniform rule throughout the United States.

From the proceedings of the Federal Convention it appears that a proposition empowering Congress ‘to emit bills of credit’ was negatived, after discussion, in which Mr. Madison said :  ‘will it not be sufficient to prohibit the making them a tender ?  This will remove the temptation to emit them with unjust views.’  And in a note to the debate, this same great authority says that he ‘became satisfied that the striking out the words would not disable the Government from the use of public notes, as far as they could be safe and proper, and would only cut off the pretense for a paper currency, and particularly for making bills a tender, either for public or private debts.’  Then it appears that the suggestion was made to prohibit the making of bills a tender ;  but this suggestion was not acted on, and no such prohibition was ever moved.  It is evident that the Convention was not prepared for a measure so positive.  Less still was it prepared for the prohibition to emit bills.  Such is the record.  While all words expressly authorizing bills were struck out, nothing was introduced in restraint of the powers of Congress on this subject.  Indeed, Mr. Madison declares his own personal belief, that the striking out of the power ‘to emit bills of credit,’ would not disable the Government from the issue of public notes, so far as they could be safe and proper, but would only cut off the pretext for a paper currency.  It would seem from this language, in so careful a writer, that he imagined the whole subject was left substantially to the sound discretion of Congress.  Indeed, the inference from his report and comment, is identical with the inference from the text of the Constitution itself.  (See Madison’s Papers, vol. 3, p. 1343.)

But in conceding that Congress might issue ‘public notes, as far as they could be proper,’ in other words, ‘bills of credit,’ the whole question was practically settled ;  and the usage of the Government has been in harmony with this settlement.  Treasury notes were issued during the war of 1812, also during the war with Mexico, and constantly since, so that the power to issue them cannot be drawn into doubt.  If there was any doubt originally, an unquestioned practice, sanctioned by successive Congresses, has completely removed it.  I do not stop to consider whether the power is derived primarily from the power ‘ to borrow money,’ or the power ‘to regulate commerce,’ or from the unenumerated powers.  It is sufficient that the power exists.  But it is dificult to escape the conclusion, that if Congress is empowered to issue Treasury notes, it may affix to these notes such character as shall seem just and proper, declaring the conditions of their circulation and the dues for which they shall be received.  Grant the first power and the rest must follow.  Careful you will be in the exercise of this power, but if you choose to take the responsibility, I do not see what check can be found in the Constitution.

It appears that the phrase ‘bills of credit,’ was familiarly used for bank notes as early as 1683, in England, and also as early as 1714, in New England.  But the first issue in America was in 1690, by the Colony of Massachusetts, and the occasion, identical with the present, was to pay soldiers returning unexpectedly from an unsuccessful expedition against Canada.

Mr. Summer went into a brief history of the issue of bills of credit—paper money—in the States of Massachusetts, Rhode Island, Connecticut, Virginia and North Carolina, which led to the passage of an act by the Imperial Parliament, (24 George II, Sec. 2, Chap. 53,) 1751, which expressly forbade the issue of any paper bills, or bills of credit, except for certain specific purposes, or upon certain specified emergencies ;  and declaring that such paper money should not be a legal tender for private debts.  Continental paper money was issued during the Revolutionary war, not made a legal tender by Congress, although the States were recommended to make them such.  He argued at great length the power of Congress to issue Treasury notes and make them a legal tender ;  and that it was purposely left by the framers of the Constitution to the sound discretion of Congress, in great emergencies, to decide whether it vas necessary to exercise the power or not.”

He closed as follows :

“ But, while recognizing the existence of the discretion, in the last resort, under the law of necessity, the question still remains if this necessity now exists ?  And now, as I close, I shall not cease to be frank.  Is it necessary to incur all the unquestionable evils of inconvertible paper, forced into circulation by act of Congress—to suffer the stain upon our national faith—to bear the stigma of a seeming repudiation—to lose for the present that credit which, in itself, is a treasury—and to teach debtors everywhere that contracts may be varied at the will of the stronger ?  Surely, there is much in these inquiries which may make us pause.  If our country were poor or feeble, without population and without resources ;  if it were already drained by a long war ;  if the enemy had succeeded in depriving us of the means of livelihood, then we should not even pause.  But our country is rich and powerful, with a numerous population, busy, honest, and determined, and with unparalleled resources of all kinds, agricultural, mineral, industrial and commercial ;  it is yet undrained by the war in which we are engaged ;  nor has the enemy succeeded in depriving us of any of the means of livelihood.  It is hard—very hard—to think that such a country, so powerful, so rich, and so beloved, should be compelled to adopt a policy of even questionable propriety.  If I mention these things—if I make these inquiries—it is because of the unfeigned solicitude which I feel with regard to this measure, and not with the view of arguing against the exercise of a constitutional power, when, in the opinion of the Government, in which I place trust, the necessity for its exercise has arrived.  Surely, we must all be against paper money—we must all insist upon maintaining the integrity of the Government—and we must all set our faces against any proposition like the present, except as a temporary expedient, rendered imperative by the exigency of the hour.  If I vote for this proposition it will be only because I am unwilling to refuse to the Government, especially charged with this responsibility, that confidence which is hardly less important to the public interests than the money itself.  Others may doubt if the exigency is sufficiently imperative ;  but the Secretary of the Treasury, whose duty it is to understand the occasion, does not doubt.  In his opinion the war requires this sacrifice.  Uncontrolable passions have been let loose to overturn tranquil conditions of peace.  Meanwhile your soldiers in the field must be paid and fed.  Here, then, can be no failure or postponement.  A remedy which, at another moment you would reject, is now proposed.  Whatever may be the national resources, they are not now within reach, except by summary process.  Reluctantly, painfully, I consent that the process should issue.  And yet I cannot give such a vote without warning the Government against the dangers from such an experiment.  The medicine of the Constitution must not become its daily bread.  Nor can I disguise the conviction that better than any legal tender will be vigorous, earnest efforts for the suppression of the rebellion, and for the establishment of the Constitution in its true principles over the territory which the rebellion has usurped.”

The question was then taken by yeas and nays on the motion of Mr. Collamer to strike out the legal tender clause in the bill, and resulted as follows :

Yeas—Messrs. Anthony, Bayard, Collamer, Cotivan, Fessenden, Foot, Foster, Kennedy, King, Latham, Nesmith, Pearce, Powell, Salisbury, SinlnloUs, Thompson and Willey—17.

Nays—Messrs. Chandler, Clark, Davis, Dixon, Doolittle, Harlan, Harris, Henderson, Howard, Howe, Lane (of Indiana), McDougall, Morrill, Pomeroy, Rice, Sherman, Summer, Ten Eyck, Wale, Wilkinson, Wilson (of Mass.) and Wilson (of Mo.)—22.

So the motion to strike out the legal tender clause was not agreed to.

On Mr. Simmons’ motion to pay eight per cent. interest on two years’ notes or bonds, the amendment was agreed to—ayes 20, noes 16.

The other amendments proposed by the Finance Committee were agreed to substantially as reported by the Committee.

Mr. DOOLITTLE moved to limit the legal tender clause to debts hereafter contracted, but the amendment was not adopted.


Mr. KING, of New York, spoke as follows :

“ My opinion is so decided against this measure, which, it is evident, has the favor of a large majority of the Senate, that I must vote against it ;  but I deem it due to myself to offer a substitute for the first section.  I propose to strike out the first section of the bill, which relates to Treasury notes and the tender, and to insert what I send to the chair in three sections.  The second and subsequent sections of the bill, providing for bonds and making other provisions, I do not propose to interfere with.

* * * * * * * * * *

The change which this amendment proposes, is to strike out the tender clause, to make the demand notes, which are issued without interest, five year notes, bearing an interest of seven and three-tenths per cent. per annum, receivable for all Government dues, or exchangeable for long bonds at six per cent., interest payable semi-annually, at the option of the holder, and providing by tax a sufficient sum, which is pledged to the redemption of these notes, and ultimately to pay them, principal and interest ;  which I think is a provision that ought to accompany any measure providing for borrowing money, either by notes or bonds.”

The amendment was not agreed to.


Mr. Pearce, of Maryland, opposed the legal tender clause in the bill.

“ Ours is a Government of limited and granted powers.  We can exercise no authority which Congress has not, by reason of the grant of some express power, or some power necessarily implied from that which is granted.  If there be a power necessary and proper to carry into execution any of the granted powers, we possess it under the general clause of the Constitution in reference to that subject.  The power to make a legal tender is not granted expressly in the Constitution, nor, as I think, by any implication from any of the granted powers.  It is true there is a qualified power of making a legal tender to be found in the clause which authorizes us to coin money, and to regulate the value thereof, because there can be no purpose in regulating the value of the money we are authorized to coin, except to make it a legal tender.  When we establish the value of gold and silver coin, which we have the express authority to do, we of course have the implied authority to declare that its value thus fixed by law, shall be the measure of value in all contracts, and to make it a legal tender.  There is no other purpose for giving us the authority to regulate the value of the money which we are authorized to coin ;  and, accordingly, Congress has declared silver coins to be a legal tender.  I do not know whether that provision is in the law regulating the value of the gold coins.  I suppose, however, that it must be so.  I know that when we passed the act by which we apportioned the silver and the alloy in our silver coins, we did declare that coinage to be a legal tender for sums under five dollars.  Even, however, if that were not so, it would follow necessarily, it being provided in the Constitution expressly that gold and silver may be coined by authority of Congress, and their value regulated by law, that they must necessarily be a legal tender.  It is so according to the custom of all civilized nations, and so the convention that framed the Constitution assumed it to be.  But I can see no power from which we can infer authority in this Government to make paper money a legal tender.  It clearly cannot be inferred from the power to coin money, which is to be made of metal.  I do not see how it is to be inferred, as I think one Senator derived it, from the power to borrow money, since, to make paper money cannot be necessary to the execution of the power to borrow money.  As well could we infer a general authority to lend money or to deal in brokerage.

Mr. President, the exigencies of the country are very great ;  I admit my obligation to co-operate with gentlemen here in furnishing the Government with the means of carrying on all its operations ;  but when a constitutional objection is presented to me, the very allegiance which I owe to the Constitution, and therefore to the Union, compels me not to violate any one of its provisions, as I think I shall do if I vote for this bill.  I must, therefore, cast my vote against it.”

Mr. SAULSBURY, of Delaware—“ It was my desire and intention to vote for this bill, provided the provision making these notes a legal tender had been stricken out.  That provision has been retained in the bill.  It is so clearly unconstitutional, in my opinion, that I cannot conscientiously vote for it.  I cannot attempt at this late hour to assign the reasons for my opinion.  The speech of the Senator of Vermont has not been answered, and it is not in the power of man to answer it.”

Mr. POWELL, of Kentucky—“ It is not my purpose to make a speech.  It would afford me pleasure to vote for any measure I thought constitutional to relieve the country from its present embarrassment ;  but believing that this bill is unconstitutional, I cannot vote for it.  I had intended, if time permitted—but the hour is too late now—to give briefly, my reasons for the vote I shall give ;  but after the very exhaustive speech made by the Senator from Vermont yesterday, it would be unnecessary, particularly after the excellent speech made by the Senator from Pennsylvania to-day, and the brief but very pointed speech of the Senator from Maryland, who has just taken his seat.

In my judgment this bill is plainly and palpably violative of the Constitution of the United States, and I do not believe that issues of paper money, unless they are convertible into coin at the pleasure of the holder, ever did, or ever will, relieve any country permanently from any embarrassment.  I think all such issues of irredeemable paper lead the country into further and greater embarrassments, instead of relieving it ;  and I very much fear that those who expect great benefits to the country from this bill will be greatly disappointed.  I shall not detain the Senate by speaking.”


THE PRESIDING OFFICER—“The question is on the passage of the bill.”

Mr. HOWARD—“ I call for the yeas and nays.”

The yeas and nays were ordered.

Mr. LATHAM, of California—“ I merely desire to say, in order that I may appear right upon the record, that I have entertained very grave doubts during this discussion as to the constitutionality of the legal tender issue, and entertaining those doubts, I cast my vote against that clause when it was under consideration.  The majority of this body having now, however, indicated their desire that it should be in the bill.  I cannot, consistently with my sense of duty, withhold my vote from the bill.  I shall therefore vote for it.”
Mr. ANTHONY, of Rhode Island—“ I voted against the vital clause of this bill making the paper issued by the Government a legal tender, but having no project of my own to present to the Senate, I shall not take the responsibility of voting against the only measure which is proposed by the Government, and which has passed the House of Representatives, and received the sanction of a majority of this body.”

The question being taken by yeas and nays, resulted—yeas 30, nays 7 ;  as follows :

Yeas—Messrs. Anthony, Chandler, Clark, Davis, Dixon, Doolittle, Fessenden, Foot, Foster, Grimes, Hale, Harlan, Harris, Henderson, Howard, Howe, Lane (of Indiana), Latham, McDougall, Morrill, Pomeroy, Rice, Sherman, Sumner, Ten Eyck, Trumbull, Wade, Wilkinson, Wilson (of Massachusetts) and Wilson (of Missouri)—30.

Nays—Messrs. Collamer, Cowan, Kennedy, King, Pearce, Powell and Saulsbury—7.

So the bill was passed.


Letter of JAMES W. SIMONTON to N.Y. Times.

“ WASHINGTON, D.C., Feb. 13, 1862.
“ The passage, by the Senate, of the Treasury Note bill, including the legal tender clause, is a subject of very general congratulation among the friends of the Administration.  Among the opponents of the legal tender provision were some of the ablest and firmest friends of the Administration, whose sincere desire for the most effective support of the Government cannot for a moment be justly questioned.  They honestly believed the policy injudicious, and made strenuous fight in support of their theory.  But the overwhelming necessity existing for the measure is a stronger argument than anything offered against the bill, and received the decisive vote of 30 to 7.  Having made their record, the opposition yielded with excellent grace, and the Democratic opponents in both Houses confess to a sense of relief when the bill, legal tender and all, had passed.  There are few members who would care to assume the responsibility which would have rested upon them in the event of the defeat of the measure, and the risk of the consequences to themselves of the financial panic that would speedily follow the admitted bankruptcy of the Government.
    Now that the bill has passed, it is but just that due credit should be awarded to the author of the legal tender scheme, the Hon. E.G. Spaulding, Member of Congress from the Buffalo (N.Y.) District.  It was Mr. Spaulding who originated the proposition to force a fixed paper currency upon the country by making Treasury notes a legal tender.  His practical knowledge and experience as a banker and financier, early disclosed to his own mind the fact, which since then has become so patent to overwhelming majorities in each House of Congress and the country, to wit :  that no other scheme could possibly provide for the wants of the Government in time to save it from absolute financial ruin.  He gave the subject unremitting study and attention, devoting to it the entire holiday season, and maturing, finally, a measure which has received the endorsement of the Administration and of Congress, and withstood the combined assaults of selfish and honest opponents alike.  He has reason to be proud of the triumph he has achieved, and the country will not soon forget his services.”


The main principles of the bill seemed to be well settled by the preceding full and able discussion, and its passage by large majorities through both Houses ;  and the Secretary of the Treasury in administering the Finances during the war, would find it easy to execute the two simple provisions of the bill, viz :

1.  Issue these Treasury notes fitted for circulation as money, and by the legal tender provision made a forced loan from the people to the Government, without interest, which could only be justified by the imperative necessities of the Treasury, and by the fair and equitable provision,
    2.  That these notes might at any time, at the option of the holder, be funded in six per cent. twenty year bonds, interest payable semi-annually.

The Secretary could issue notes and pay them out for supplies and material of war, and to the Army and Navy, making money plenty, and filling all the channels of circulation, which would, as soon as it became redundant, enable him to float the six per cent. bonds, and funding would take place, thereby preventing too great an excess of this circulating medium.  The Senate amendments seemed in some measure to complicate these simple provisions.  Several of the amendments of the Senate were very important in regard to details and special provisions of the bill, but the most of them were verbal and unimportant.  The four amendments of the Senate, to which a large number of the members of the House made the most objection, were in substance as follows :

1.  Requiring payment of ‘ interest semi-annually in coin on bonds and 7-30 notes.’
2.  Conferring on the Secretary power to sell six per cent. bonds, ‘ at the market value thereof for coin,’ which would reduce the price.
3.  And the provision making the bonds ‘redeemable in five years, and payable in twenty years from date,’ at the option of the Government, making them less valuable.
4.  Temporary deposits in the Sub-Treasury at 6 per cent., which would retard funding in long bonds.

All former loan laws passed by Congress, from the organization of the Government to this time, contained only a provision to pay ‘dollars.’  The word dollars had a well known legal meaning under our coinage and legal tender laws, and it was difficult to see any good reason for changing the phraseology, and thereby make a departure from established usages at this time, especially if six per cent. bonds (which were then selling at about 88,) should, as a necessary consequence of such provision, be sold at the market price to raise the coin to pay this interest.  At this stage of the bill there was no provision in it, or in the Senate amendments, to collect the duties on foreign, imports in coin, so that as the bill then stood, there was no other mode of obtaining the coin except by a forced sale of bonds.  This coin provision was deemed by many members to be an unnecessary discrimination in favor of the bond-holders over other creditors of the Government equally meritorious.  It was difficult to see the propriety of paying coin interest to the bondholders while the soldiers and others were paid in notes ;  and besides, the terms used made the coin payment of interest applicable to the 7-30 Treasury notes and bonds issued to the banks during the previous summer.


The bill and Senate’s Amendments were returned to the House on the 14th inst, and on motion of Mr. Stevens, were referred to the Committee of Ways and Means.  This Committee had a long discussion upon the Senate’s Amendments, and were about equally divided on the most material and important of them.  Some were disagreed to, others were concurred in, and some unimportant amendments to the Senate amendments were recommended.  On the 18th, Mr. Stevens, from the Committee of Ways and Means, reported back the bill and amendments to the House and said :

“ I have no purpose of considering the bill at this time.  I desire that it shall be referred to the Committee of the Whole, and be made the special order for to-morrow at one o’clock.  I hope gentlemen of the House will read the amendments.  They are very important, and, in my judgment, very pernicious, but I hope the House will examine them.”

The motion was agreed to.

On Wednesday, the 19th inst., the amendments of the Senate to the bill being the special order, Mr. Spaulding opened the debate in opposition to some of them, as follows :


Mr. CHAIRMAN—I desire especially to oppose the amendments of the Senate which require the interest on bonds and notes to be paid in coin semi-annually, and which authorizes the Secretary of the Treasury to sell six per cent. bonds at the market price for coin to pay the interest.

The Treasury note bill, as reported first from the Committee of Ways and Means as a necessary war measure, was simple and perspicuous in its terms, and easily understood.  It was so plain that everybody could understand that it authorized the issue of $150,000,000 of legal tender demand notes, to circulate as a national currency among the people in all parts of the United States, and that they might, at any time, be funded in six per cent. twenty years’ bonds.  The passage of this measure in this house was hailed with satisfaction by the great mass of people all over the country.  It received the hearty indorsement of such bodies as the Chambers of Commerce of New York, Cincinnati, St. Louis, Chicago, Buffalo, Milwaukee, and other places.  I have never known any measure receive a more hearty approval from the people.

Nearly every amendment to the bill since it was matured has rendered it more complex and difficult of execution.  I regret to say that some of the amendments of the Senate render the bill incongruous, and tend to defeat its great object, namely :  to prevent all forcing of the Government to sell its bonds in the market to the highest bidder for coin.  It might be very pleasant for the holders of the seven and three-tenths Treasury notes and six per cent. bonds, to receive their interest in coin semiannually, but very disastrous to the Government to be compelled to sell its bonds, at ruinous rates of discount, every six months to pay them gold and silver, while it would pay only Treasury notes to the soldier, sailor, and all other creditors of the Government.

I am opposed to all those amendments of the Senate which make unjust discriminations between the creditors of the Government.  A soldier or sailor who performs service in the army or navy is a creditor of the Government.  The man who sells food, clothing, and the material of war, for the use of the army and navy is a creditor of the Government.  The capitalist who holds your seven and three-tenths Treasury notes, or your six per cent. coupon bonds is a creditor of the Government.  All are creditors of the Government on an equal footing, and all are equally entitled to their pay in gold and silver.

I am opposed to all those amendments of the Senate which discriminate in favor of the holders of bonds and notes by compelling the Government to go into the streets every six months to sell bonds at the ‘market price,’ to purchase gold and silver in order to pay the interest ‘in coin’ to the capitalists who now hold United States stocks and Treasury notes heretofore issued, or that may hold bonds and notes hereafter to be issued ;  while all other persons in the United States (including the Army and Navy and all who supply them food and clothing,) are compelled to receive legal tender Treasury notes in payment of demands due them from the Government.

Why make this discrimination ?  Who asks to have one class of creditors placed on a better footing than another class ?  Do the people of New England, the Middle States, or the people of the West and Northwest, or anywhere else in the rural districts, ask to have any such discrimination made in their favor ?  Does the soldier, the farmer, the mechanic, or the merchant ask to have any such discrimination made in his favor ?  No, sir ;  no such unjust preference is asked for by this class of men.  They ask for the legal tender note bill pure and simple.  They ask for a national currency which shall be of equal value in all parts of the country.  They want a currency that shall pass from hand to hand among all the people in every State, county, city, town and village in the United States.  They want a currency secured by adequate taxation upon the whole property of the country, which will pay the soldier, the farmer, the mechanic, and the banker alike for all debt due.  They ask that the Government shall stand upon its own responsibility, its own rights, and exert its vast powers, preserve its own credit, and carry us safely through this gigantic rebellion, in the shortest time, and with the least possible sacrifice.  They intend to foot all the bills, and ultimately pay the whole amount, principal and interest, in gold and silver.

The legal tender note bill is a great measure of equality.  It proposes a currency for the people which is based upon the good faith of the people and all their taxable property.  All are obliged to receive and pass it as money, and all are obliged to submit to heavy taxation to provide for its ultimate redemption in gold or silver.  Every attempt on the part of any class of citizens to create distinctions and secure a legal preference, mars the simplicity and success of the whole plan.  The very discrimination proposed carries on its face notice to everybody that although the notes are declared to be ‘lawful money and a legal tender in payment of debts,’ yet that there is something of higher value, that must be sought after at a sacrifice to the Government, to pay a peculiar class of creditors to whom it owes money—a kind of absurdity and self-stultification which does not appear well on the face of the bill.  It is an unjust discrimination which does not appear well now, and will not look well in history.  You will, if the Senate’s amendment is adopted, depreciate, by your own acts, your own bonds and notes, and effectually destroy the symmetry and harmonious working of the whole plan.

I am in favor of having the Government pay in coin, if it can do so without too great a sacrifice ;  but I am unable to see any good reason for departing, in this case, from the usual practice of the Government in expressing the mode of paying the interest.  All bonds and Treasury notes heretofore issued are payable generally without specifying that either the principal or the interest shall be paid in coin, and yet the legal effect is the same.  I do not see why we should now, in the present embarrassed condition of the Government, give any preference to one creditor over another, or change the form of our bonds and Treasury notes by inserting the words ‘payable in coin.’  The capitalist who holds your bonds or seven and three-tenths Treasury notes is not entitled to any preference over the soldier or the man who furnishes supplies to your Army.  We should pay both in specie, if possible ;  but I am unwilling to tie up the hands of the Government by compelling it to pay ‘in coin,’ the interest on all the bonds and notes heretofore issued, or that may hereafter be issued.  The bonds and notes heretofore issued contain no such express provision ;  it is not ‘so nominated in the bond’;  and I am unwilling to have it inserted at this time, either as to those now outstanding or as to those that are hereafter to be issued.  Besides, if you commence in this way, by stipulating expressly to pay in coin on the bonds to be issued, it becomes a contract which cannot, without a breach of faith, be changed by a repeal of the law.  You unnecessarily commit the Government to a stipulation which may be very inconvenient, if not impossible, to fulfill, if the public debt runs up to $2,000,000,000, the interest upon which, at six per cent. per annum, would be $120,000,000 annually, requiring $60,000,000 of coin every six months to pay interest on your funded debt.  I think we should pause before committing ourselves to any such proposition, for no man here is wise enough to tell how long this war will continue, or how many complications with foreign nations will grow out of it, or how great will be the war debt.  By all means let us pay the interest in gold to those who desire it, if it is practicable to do so ;  but let us keep the power in the Government itself, and exercise it wisely for the best interest of the whole people.

The people in the country who hold seven and three-tenths Treasury notes are patriotic enough, while the war lasts, to receive their interest in any money that will pass currently at the banks and among the people.  Money with them is only valuable for its uses.  Legal tender Treasury notes can be used for all business purposes, without compelling the Government to sell its bonds at fifteen or twenty per cent. discount to procure coin when it is entirely unnecessary. * * * * * * * * * *

At the extra session in July we passed two very important bills—one to borrow $250,000,000, for which bonds and notes were to be issued, and the other to call into the service five hundred thousand volunteers, and pay the soldiers thirteen dollars per month, and the officers a higher rate of fixed compensation.  Both bills were war measures, both were necessary, and action has been had under both.  Under the first bill the associated banks of New York, Boston and Philadelphia took the sum of $100,000,000 of seven and three-tenths three years Treasury notes at par, and $50,000,000 twenty years six per cent. bonds at a discount of ten and two thirds per cent. from their face—say net $44,061,230.97, being a loss of $5,338,769.03 on this transaction.  This is a higher rate of interest than our Government, with all its immense power and resources, ought to pay ;  but the loan has been made, and I only refer to it now for the purpose of showing what has been done under these two acts of Congress.

Under the army bill, five hundred thousand volunteers have been called into the service, and are now in the field.  Under both of these bills a debt has been created against the Government.  The associated banks of New York, Boston and Philadelphia are creditors of the Government to the extent of $150,000,000.  The five hundred thousand volunteer army are also creditors of the Government to a large amount.  We owe them both, and both are creditors under laws passed by us at the extra session.  Are not both classes of these creditors on the same footing ?  Are the bankers entitled to any preference over the volunteer army ?  Is the banker’s money any more sacred than the services of the soldier in battle, on guard, or in the tented field ?  I cannot see that the banker or the holder of Treasury notes is entitled to any preference over the soldier, under these two laws of Congress, and yet, if you concur in these hard-money amendments of the Senate, you will compel the soldier to take legal tender Treasury notes in payment for his thirteen dollars per month which you agreed to pay him, while you pay the banker his high rate of interest, semi-annually, in gold and silver coin.  Is this right ?  Will this be meting out just and equal laws to the loyal citizens of this Government ?  What will your army say to an arrangement of this kind ?  Sir, I can consent to no such discrimination, no such amendment, no such injustice.* * * * * * * * * * *

It is to be hoped that this will be a short war.  It is very desirable that it should be pressed on with the utmost vigor, and be brought to a speedy and successful termination.  God grant that this may be the issue.  I have no expectation, however, that the authority of the United States Government will be respected and enforced in all the Southern States for many years.  I think the rebels are desperate and determined, and will never submit to the Constitution and laws until compelled to do so by armed force.  They may be beaten and compelled to fall back, but until Union governments are successfully established in all the Southern States the laws of the United States will not be respected, and can only be enforced by the army and navy in actual occupation of the rebellious States.  This will require a large and expensive army for many years, the total expenses of which cannot now be estimated.  It will require Federal troops in every rebellious State to collect your direct taxes and internal duties ;  and until you can peaceably collect taxes in all the rebellious States the rebellion is not ended.* * * * * * * *

In every aspect in which you view this hard-money provision, its practical workings will be disastrous.  It would be all very well if the amount was small and applied to carrying on the Government on a peace footing, when you know what amount will be required ;  but in carrying on the Government at this time, when the magnitude of the expenditures are so overwhelming, all theories applicable to peace must give way to the inexorable necessities that are forced upon us in the prosecution of this war.  Look at your long line of offensive operations, extending from Kansas to this capital, and thence to Fortress Monroe, Hatteras, Beaufort, Key West, Pensacola, and Ship Island—a distance of more then four thousand miles.  This very long line of military operations cannot be maintained except at an enormous expense for transportation, supplies, and material of war.  Our trillion six hundred thousand dollars does not cover the daily expenditures.  Peace theories of finance must give way to what is practicable to be done in the present exigency.  The Government is at this moment in the situation of a merchant who has overtraded, who owes more than he has the present means of paying.  He may be compelled to stop payment in specie, when he has ample assets to cover all his liabilities.  A mere suspension of specie payments does not imply bankruptcy or insolvency.

* * * * * * * * * * * * * * *

Our country and Government at all hazards must be preserved.  To accomplish this, our plan of finance must be simple and practical.  As has been shown, we have various descriptions of property in abundance.  We have not the money to meet the sudden demands that are thrown upon us.  Is it not better to pledge our honor, our lands, houses, personal estate, incomes, and wealth of all kinds to create this money, on the faith of the nation, than to run the risk of utter ruin to all interests for the sake of holding on to theories which may be excellent in time of peace, but which are wholly impracticable in the prosecution of this war.* * * * * * *

It is very clear that it the prosecution of this war to maintain this Union, the ways and means of carrying it on can only be limited by the actual expenditures.

We must, while the war lasts, incur all the debt necessary to crush out the rebellion, and maintain the authority of the United States Government over all the thirty-four States.  We cannot, therefore, now limit the amount of the debt to be incurred, nor can it be accurately estimated.  Notes and bonds must be issued in some form for all the debt incurred, excepting what we may realize annually from taxes, excises, and duties on imports.  In issuing these notes and bonds I think it will be much better for the Government, and for the people, to have one uniform system.  It would be better for all concerned to have a fixed policy, not to be changed, so that all business men may conform to it at once.  That policy should, in my judgement, be the issue of legal tender demand Treasury notes not bearing interest, to be paid out for what is necessary to support the army and navy, and fundable at any time in twenty years bonds, bearing interest at six per cent., payable semi-annually.  This is as high a rate of interest as the Government ought to pay, especially as our people are to be heavily burdened by taxation to pay, ultimately, the interest and principle in gold and silver of all this debt.  Let our policy be distinctly fixed and settled, and we shall hear no further importunities for higher rates of interest, or for any preference of one class of creditors over any other class equally meritorious.

I regret that my sense of duty compels me to differ so widely from the Senate.  I have great respect for that body, and would gladly yield to their views, if I did not regard it so fatal to the public interest.  So soon as our funded debt reaches $700,000,000, which will be in a very few months, I believe it will be impossible to procure the coin to pay the interest semi-annually without the most serious consequences to our credit.  The amount of discount on our bonds to procure specie would be very large.  In every view, the Senate amendment seems to me unnecessary, injurious, partial and unjust.  I trust the House will non-concur in the amendments.”

At the time the above remarks were made by Mr. Spaulding, the duties on imports were, as the bill then stood, payable in legal tender notes, but this was afterwards changed in the Committee of Conference, making those duties payable in coin, so that the interest might be paid in coin, without being obliged to force the bonds on the market to obtain coin for that purpose.  This was probably the best compromise that could be made, as will more fully appear in finally adjusting the disagreeing votes between the Senate and House.


Mr. POMEROY, of New York, spoke one hour in favor of paying the interest in coin on bonds and Treasury notes.  He said :

“ The action already had upon the bill has, so far as the sense of Congress is concerned, settled, if not the constitutionality and expediency of issuing, to a limited amount, Treasury notes, made a legal tender in payment of debts, at least the existence of a necessity, under which such constitutional power will be assumed and its exercise declared expedient.  I do not propose, therefore, to enter at all upon the discussion of those questions, nor would it be pertinent to the only amendment I propose to discuss, to wit :  that providing for payment of interest on the national debt in coin.  They were fully discussed when the bill was first before the committee, to the neglect, as I then thought and now think, of the point presented by the pending amendment, upon which alone I desire to submit a few remarks.

The question is not now whether $150,000,000 of Treasury notes shall be issued and made a legal tender in payment of public and private indebtedness.  That proposition has been decided in the affirmative ;  but if my faith in the necessity and expediency of such issue was stronger even than that of the able and distinguished Representative, [Mr. Spaulding,] who has originated this measure, and carried it triumphantly over the Administration and through Congress, still, deeming this amendment, as proposed by the Senate and now under consideration, vital to the success of the scheme, and the only regulation by which financial explosion under it can be prevented, I could not, as an original proposition, and cannot now, without such amendment, support this bill.  My opinion may be unfounded and erroneous.  I hope it is, if this amendment is to fail.  I have no pride of opinion upon this matter, but I have convictions, clear, decided and conscientious, which I cannot trample upon without violating my own sense of self-respect and of public duty.  The opposition which this amendment meets from the framers of the bill sufficiently demonstrates to us and to the country that it is not merely formal in its character, but is of primary importance and entitled to the highest consideration.  I shall be very brief, and will endeavor to be plain in my views respecting it.

It is conceded by the friends of the House bill, that the policy of issuing Treasury notes under it with the characteristics of money is to be temporary, and that it is a divergence from the correct principles of political economy, to be justified only by necessity, and yet the primary and principal fault I find with it is, that instead of being a temporary measure, it really, by its failure to make adequate provision to raise money by loan, inaugurates and necessitates the perpetuation of a reliance upon a forced paper currency alone to meet the demands of the war, the amount of the issue of which, if sufficient for that purpose, must depreciate it to a mere nominal value, and result in ultimate repudiation.  It may be expedient as a remedy for an existing political disorder, but it is death if relied upon for permanent existence.

The credit of the Government has been recently brought to the test of practical experiment in a much more favorable time than the present, when the banks were plethoric with gold beyond all former experience and promptly meeting all engagements in coin, when suspension had not been thought of, and the patriotism of the people was fully aroused in the enlistment of those armies that are to-day more than meeting our proudest anticipations ;  and yet, under those most favorable auspices, the rate of interest, as established, was seven and three-tenths per cent. for three year coupon bonds, and seven per cent. for those running twenty years, each payable semi-annually in coin, and with the added advantage to the banks, who were the purchasers, of holding the proceeds on deposit without interest until drawn out in the usual course of expenditure ;  and $50,000,000 of the long bonds, authorized at the extra session, have not been, and could not be, sold even at the rate above named.* * * * *

The science of Government is one purely experimental.  A code of laws designed for men as they ought to be, would be a terrible code applied to men as they are.  We experience no difficulty in recognizing in legislation the natural laws of matter, and we should have no more in recognizing the natural laws of mind, association, trade, commerce and business.

If we are to borrow money, we must recognize these laws ;  and I may well call them higher laws, for while legislation cannot change them, they are continually changing legislation.  One of these is that the precious metals are the representative of value.  The gold dollar of our currency is the unit of value.  Conversion into this representative is the only criterion of value.  Those who invest money or loan will make it a condition precedent that the interest shall be in money, and not in promises to pay money.  Legislation has not changed, and cannot change, paper currency into coin or its equivalent, except through convertibility.  Without this requisite it is a mere naked promise.  We cannot make Treasury notes money until we can change by act of Congress a promise into a performance, and Almighty power alone call do that.  We propose to compel the Government and citizens to receive this paper as money in payment for debt ;  but we do not propose to attempt to compel anybody to take it by way of loan, nor to compel anybody to loan it, not even to Government.  Then people must be induced to loan it ;  and how can you expect them to do it at rates less favorable than you have already established in more prosperous times, to wit :  a rate of seven and three-tenths per cent., payable in coin.

Now, this paper is or is not equal to gold.  My colleague may take whichever horn of the dilemma he pleases.  If it is not, it is folly to suppose that people are voluntarily going to place themselves in a position where, for a term of years, they compel themselves to receive it as interest, and assume all the risk of depreciation.  If it is equal, then there can be no unjust discrimination in paying interest ill gold.  I prefer to look at the question just as it is, and admit the fact that it is not and cannot be made equal, because it lacks the essential quality of convertibility.  To the extent to which it is not equal, we work a hardship in forcing it into circulation ;  but we have already decided that a necessity exists which compels us to accept this hardship rather than to inflict upon the people or submit the Government to a greater.  And we believe farther, that the evils thus produced will, in the aggregate, if not in each individual case, be more than compensated by the relief they will afford from financial stringency, and as a medium of exchanges, especially with the Government itself.

While, however, we exercise the power to compel the people to receive it as gold in payment of debts, we, unfortunately, have not the power to compel then to loan it back to us on time, and receive more of the same kind as interest.  There is just the practical point where our new political physiology fails.  As ‘Artemus Ward’ would say, ‘ its forte is not in borrowing, but in paying,’ and we have got to make it work both ways.  It is all nonsense to say that while we pay out Treasury notes from necessity in some cases, we will forbear to borrow money, without which our credit must go down entirely, because it will necessitate the payment of interest in coin, and thus conflict with our theory ;  that because we pay ourselves and our soldiers and everybody else with whom we are under contract, in paper, we will stop paying even them rather than to continue the ability to do so by borrowing money and stipulating in advance to pay the interest in a different commodity.  The inconsistency consists in not considering that we must first get the principal before we put on airs about the manner in which we will pay the interest, in which transaction the lender as well as the borrower is usually consulted.  The Committee of Ways and Means are talking about paying, whereas the problem is how to borrow.

Nor does the agreement to pay interest in coin tend in the least to depreciate the value of the notes.  The very necessity for this agreement arises from the fact of the pre-existing differences in value between coin and paper.  It does not create the inequality.  It recognizes an existing fect, and applying legislation practically to that fact, enhances the value of the paper, by allowing its conversion into a permanent loan, the principal and interest of which are to be paid in money ;  and instead of depreciating the paper, checks depreciation by reason of this very convertibility, and presents the only possible mode, that I can conceive of, by which serious depreciation can be prevented and the funding process kept in operation.  In fact, this very difference between the intrinsic values of notes and coin, thus recognized and embodied in our legislation, tends to produce the very object desired—the funding of the public debt.  If capital will seek treasury notes at par, for the purpose of investment in bonds, with the interest payable in notes, how much more readily will it seek these same notes, at a slight depreciation, for the purpose of such investment, with the interest to be paid in gold ;  and the very demand for this purpose, while it prevents serious depreciation, is induced by the very depreciation inherent in the character of the paper which it continually checks.  It produces a self-adjusting funding access, based upon things as they exist in the commercial world, by which the disparity between the valve of the two currencies ceases to be an element of discord, and becomes, during the temporary period in which the funding process is going on, an element of good.  In this manner, and through the happy instrumentality which may in this way be exerted by these notes, imperceptibly, and through the ordinary channels of financial operations, the whole process of funding the public debt will be accomplished.* * * * * * * *

One thing further is evident.  If the debt can be funded under the provisions of the House bill, it certainly can under the Senate amendments.  The Treasury has prided itself on its ability to obtain money at the rate proposed by the latter in more prosperous times.  If it was satisfactory then, it should be still more satisfactory now.  In this work we cannot afford to fail.  The part of wisdom is, then, to accept the greater safety.  When paper shall have taken the place of coin, and the latter, true to its instincts, shall have taken wings and flown away—it cannot be whistled back.  It is idle to argue that two representatives of value of equal nominal amount, but intrinsically unequal, will stay together and consent to become convertible.  The more valuable always abandons the field.

One fact more must not be overlooked in considering this matter—that the security remains the same in all cases, namely :  the faith of the Government.  No inducement is offered by the House to fund these notes in the nature of the new security.  The credit of the Government is alike bound for the payment of both classes of indebtedness ultimately in gold.  Each derives its entire value from that.  The only advantage that can be then offered in funding is the more convenience in the form of the security, and the payment of interest in a commodity similar to that which the principal represents.* * * * * *

Now, I do not know by what class of soldiers my colleague [Mr. Spaulding,] may be represented in the field, but I do know the character of the two thousand soldiers from my own county, and of the four thousand soldiers in the field from my congressional district, and I know that their present condition as soldiers is purely ephemeral.  Their normal condition is that of citizens, and as such I represent them here ;  and they will appreciate at what it is worth the appeal of my colleague in their behalf as a class, as soldiers, in distinction from their character as American citizens.* * * * * *

I believe I have never failed to sustain, whether it be to my credit or otherwise, any recommendation backed by a majority of the Committee of Ways and Means of this House.  As amended by the Senate in this respect, I will cheerfully support this bill.  In its original form I could not, though it has been unpleasant to diverge from so large a proportion of my political associates.  It were easier to have followed in the wake of inclination, and covered myself from criticism with the mantle of necessity.  I have preferred to walk the plank of duty, trusting to time and practical results for the vindication of its policy.”


Mr. CALVERT, of Maryland, advocated the payment of interest in coin.  He said :

“ Let me tell the gentleman from New York, [Mr. Spaulding,] that it is useless to talk about the injustice of paying brokers in one currency and other people another.  When you want to borrow money you must go to the brokers to borrow it.  Farmers and others may be induced by the brokers to invest their money in your bonds ;  but they will not do it without the advice of the brokers or agents with whom they are in the habit of counseling, and therefore it is the broker at last who holds in his hands our credit, and it is useless for gentlemen of this House to talk about a proposition to put down the brokers who are constantly dealing in these notes.  He contended that the amendment of the Senate would benefit the credit of the Government more than anything else that could be done.  People would not loan money to be payable in paper, because, although you make paper a legal tender by legislation, it will not be so in fact—the question hss yet to be tried before the State Court, as well as before the United States Court.  The only way in which you can possibly have any notes funded is by paying the interest in coin.  Then if the notes fall below par they will be immediately funded.”


Mr. MORRILL, of Vermont—“Our whole difficulty in this matter, it appears to me, arises from our departure from sound principles in the first place.  It appears that the House and the Senate have both decided that they will issue paper and make it a legal tender.  I deeply deplore the fact as a blot on our national history that cannot be effaced ;  but as I do not now see it probable that any other result will be reached, my only purpose and desire is to perfect and pass the best possible bill to be obtained.

I believe the Senate amendments are, on the whole, a great improvement upon the bill as it passed the House.  I could wish that we might, even at this hour, slaughter both the original bill and the Senate’s amendments, and then mature such financial measures as would preserve a sound specie-paying basis ;  but having no hope of that now, I trust we may adopt the Senate amendments, which will, in some degree at least, mitigate the evils to be apprehended from the bill as it left this House.

Now, the gentleman from New York (Mr. Spaulding) talks as though it would be an abandonment of the honor and good faith of the Government to pay the soldiers in any different species of money from that which we pay our public creditors.  I recollect to have read that Frederick the Great, upon a certain occasion, directed his minister, when he was about to seize upon some province of one of his neighbors, to draw up a proclamation justifying the measure to the world ;  and his minister drew it up, commencing, ‘In the name of God.’  Said Frederick, ‘strike out all about God, and say that I did it.’  Now, I recommend to the gentleman from New York, when he is talking about this subject of compelling the public and private creditors to take paper money for all debts heretofore or hereafter contracted, to omit all mention of ‘honor and good faith.’

But what is the fact in reference to this matter of paying off the soldiers in any different money ?  Why, the fact is that we are going to pay them in paper, according to this bill.  Now, if these soldiers were debtors, and owed a grocer at home or here, and could make a tender of this paper, it might then indeed be of some service ;  but how are you to compel the grocer, or any man who has anything to sell upon which these soldiers or their families subsist, to take this paper at anything more than its market value ?  Of course, if coin is worth more than paper, they have to pay to that extent more than they would pay if, they had coin ;  and I am in favor of keeping our promises equal to coin.  In my judgment, if we pay the interest on the public debt in specie, it will have a tendency to keep up the credit of the country, and there will be less depreciation upon these notes than there otherwise would be.

But, Mr. Chairman, the great object is to fund some portion of the public debt.  Now, it is perfectly apparent, not only from the statement of the gentleman from New York (Mr. Spaulding), but from the knowledge all have of the subject, that our wants are large, and that we will be compelled to issue our bonds or notes, or paper of some kind, to a large amount hereafter.  Now it is proposed to issue twice, thrice or quadruple the amount of this legal tender paper before this session of Congress closes ?  Within sixty days we must have at least twice the amount of notes which is proposed now ;  and unless they can be funded into debts due at some future time, from necessity, as we shall again be told, we shall have to repeat the dose we are now offering to the public.  Anybody may see that while it might be possible for this country to endure $150,000,000 of additional currency, even if it did unhinge all commercial transactions, that it would be utterly impossible that we could absorb twice or thrice that amount without a vast expansion of the whole monetary system of the country—turning even sober and industrious citizens into the wildest of speculators.* * * * * * * *

But, Mr. Chairman, I believe that if we could stand up here in the vigor of a nation not yet taxed a single dollar for the cost of this war, and mature it proper policy by which we can negotiate a loan standing on the credit of the country, standing on the proposed taxation of the country, standing on our hitherto untarnished honor, that there could be no need whatever of a resort to such a desperate scheme as the one now under consideration.  I hope, therefore, that we shall adopt the amendment of the Senate.  I wish that we might go much further, but that at least is better than a measure whose symmetry is only measured by its exclusively paper character.”


Mr. Dunn, of Indiana, spoke as follows :

“Mr. Chairman—when this bill was under consideration in the House, (in Committee of the Whole,) a direct vote was taken upon the proposition to pay the interest on the bonds in coin, and the Committee sustained that proposition by a very decided vote.  I do not quite understand by what legerdemain the bill went to the Senate in a different form.  I voted then that the interest should be paid in coin, and I shall vote so now, notwithstanding the arguments employed here to induce us to vote differently.

The principal argument urged against the Senate amendment is that it provides for paying our creditors in different ways, and an appeal is made to the patriotism of the House to know if we are willing to pay different kinds of money for our interest from that with which we pay our soldiers.  Now, I shall vote for this proposition with the direct view and object of making the paper we offer to the soldier as good as possible.  I believe that it is impossible to pay them in coin, or I would vote for that.  It is necessary to make our notes as good as possible, and if there is any equivalent for coin, let us approach that point as nearly as possible.  If we cannot remove the cloud of debt, let us, at least, give it a golden lining.  One mode of sustaining the credit of the notes is to have them converted into bonds ;  and in order to make those bonds acceptable to those who have money to lend, we must make the interest payable in coin.  We must try to induce capitalists to lend us money ;  for we have no mode of compelling them to do so.  The gentleman from Vermont, [Mr. Morrill,] who has just taken his seat, said that the West expected some advantages from making treasury notes a legal tender.  The members from the West, generally, who voted for making the notes a legal tender, did so because we believed it to be a governmental necessity.  We wanted a bridge to carry us over the morass.  We make it of trestle-work, a temporary work, to serve only until the ground hardens.  We do not believe this war is to be of long continuance.  We do not believe the necessity of the legal tender clause will long exist.  I think that those who were despondent ten days ago have now great reason to rejoice.  The rapid succession of Union victories has filled every loyal heart with joy, and I do not doubt but that we shall soon be relieved from our pecuniary difficulties.”


Mr. ENGLISH, of Connecticut, spoke in favor of paying the interest in coin.

He concurred with Mr. Pendleton on the constitutional question, and considered it settled by his argument that it was not constitutional to make these notes a legal tender.  He also argued at considerable length that the measure was not necessary at this time.  He was in favor of ample taxation, and that the States should be allowed to collect the taxes and pay over the money to the United States.  He wanted no Government tax collectors.

On the pending amendments he said :

“ In order to make these bonds valuable to those who have money to invest, we must adopt the amendment of the Senate providing that the interest shall be paid in gold and silver.  When it is ascertained that the interest is to be paid in gold and silver, then the bonds will be sought for investment.  If you issue Treasury notes, and if these Treasury notes go into the market and depreciate—as I think they will not—what will be the effect ?  The effect will be that, just in proportion as the Treasury notes depreciate, in the same proportion will the interest payable on bonds be diminished.  These Treasury notes answer very well as a means of circulation, provided the amount of the issue shall not exceed that provided for in this bill.  My opinion is that these Treasury notes may answer a very good purpose ;  but the moment their volume is swollen beyond that, so soon will they depreciate.
    I trust that the amendment of the Senate will be concurred in by this House.  In my judgement, it is the very best thing that we can do under the circumstances.  I voted for the issuing of these Treasury notes, but against the ‘legal tender’ clause.  Otherwise, I was in favor of the measure ;  but the judgement of the House was against me on that point.  I think that now the best thing the House can do is to concur in the Senate amendment ;  and I trust that it will be concurred in.”


Mr. Pike, of Maitre, spoke as follows :

“ Mr. Chairman—with all due deference to gentlemen who differ with me on this subject, it does seem to me that this matter of paying interest in coin is a controversy about goat’s wool.  The interest will be paid in coin in any event.  The recent victories of our armies have changed the whole matter.  (Just heard of the capture of Fort Donelson and the movement on Nashville.)  We have now to return to a normal condition of currency. * * * * * * *

I not only assent most cheerfully to the proposition to pay the interest in coin, but I also assent to the cognate proposition to sell these bonds at the highest price we can get for them.  We are returning now to a solid basis.  I hail the cause of the return as well as the return itself.  Let us sell our bonds to pay the creditors whom we are under contract to pay.  We never can have a better time for doing so than now, when an effervescence of delight is felt all over the country, because of the victories achieved by our armies.  It is felt everywhere now that we not only have a Government, but a country on which to base this issue.  Therefore, I say, let us now sell these bonds.  Let us realize as much money from them as we can.  Let us provide to pay the interest in coin, and let us pay the public creditors.”


Mr. DIVEN, of New York, spoke as follows :

“ It strikes me, Mr. Chairman, that the fallacy of all the arguments in favor of this amendment consists in the fact that the amendment fails to meet the evil.  It is not proposed to go back and remedy the great national wrong, national dishonor, and inconsistency of the step that has been taken by declaring that these notes shall be a legal tender.  If this House is determined to adhere to that, if—as the gentleman from Vermont has said—the child is dead, if the national credit is gone, if we are ready to assume the humiliating attitude that national credit and honor are dead, then the argument of the gentleman from New York (Mr. Spaulding) is sound.

The same plea of necessity which is resorted to in support of the legal tender clause, will require us to resort to every effort to do away with all distinction between this paper money and coin.  The requiring the payment of interest in coin will have a tendency to make such distinction.  It will have that effect, and all that we can do will not help it.  Let me make one appeal to members.  It is not yet too late to retrieve the error.  We have not yet declared that we will compel men to take those promises to pay, and to treat them as substance.  The way to recede from that dangerous proposition is before us.

The times are auspicious.  One good reason urged in favor of that policy was that the people were discouraged from the want of success in our army.  We have now the encouragement of success.  Only let the moneyed men of the country believe that the Government is to succeed in putting down this rebellion, and we will not have to plead for credit.  It is not gold and silver that we want.  It is not things that are to be taken for gold and silver that we want.  It is credit ;  it is confidence on the part of men who have money to lend, and who can lend it to the Government with the assurance that it will be returned to them.  That is all that is wanted.  And now, in view of the brilliant prospect before us of a speedy termination of the rebellion, and in view of the immense resources of the Government, in Heaven’s name, let us leave no national dishonor, to forever remain a stain upon the country.  We will do that, if we do this great wrong.  I appeal to the house, in the name of honor and justice, to retrace the step it has taken, and to save the Union from the loss that will afflict it by the passage of this law.”

Mr. Windon, of Minnesota, objected to the proceeds of the public lands being pledged to pay interest or principal on the bonds, as proposed by the Senate, for the reason that it would tend to defeat the Homestead Law.  This provision was afterwards struck out in the Conference Committee.

On the 6th amendment of the Senate, providing that these Treasury notes should be received for all claims and demands against the United States of every kind whatsoever, ‘except for interest on bonds and notes, which shall be paid in coin,’ Mr. Pendleton moved an amendment to the effect ‘that the officers, soldiers, seamen and mariners engaged in the military service of the United States,’ should also be paid in coin.  Being opposed to the whole legal tender principle, he offered it to meet the objection of the gentleman from New York, [Mr. Spaulding,] in reference to our unjust discrimination against soldiers and others.  He said :

“ I am not in favor of that discrimination, but am in favor of paying the officers and soldiers in the military and naval service of the Government in the legal coin of the country.”

The amendment was not agreed to.

The amendments of the Senate having been acted upon in Committee of the Whole, Mr. Stevens moved that the Committee rise and report the bill and amendments to the House, which was agreed to.  The bill and amendments were accordingly reported to the House.

On the 20th, the House resumed the consideration of the Senate amendments.

Mr. STEVENS was entitled to one hour in closing the debate.  He gave a part of this time to Mr. Hooper, of Massachusetts.


Mr. HOOPER, of Massachusetts, spoke as follows :

“ Mr. SPEAKER—with the present large expenditures of the Government, and while the banks throughout the country are acting under a suspension of specie payments, it is an absurdity to insist on the strict enforcement of the existing laws, which require all Government receipts and payments to be made in coin.  It is absurd, in my opinion, because it is impossible ;  and it is also absurd because it is useless.  What private corporations or individuals in this country receive and pay coin in the conduct of their business ?  There are none.  Nearly all the ordinary receipts and payments throughout the country are made in bank notes, bank checks, or credit in some other form ;  and coin is only required occasionally for a very small per cent. of those receipts and payments, which in amount, extend, in the course of a single year, to thousands of millions of dollars.

The object of this Treasury note bill is to furnish a substantial and uniform currency that will aid the Government, and enable it to receive its dues and make its payments, like all others, with credits.  This bill declares that, for all dues to the Government and for all payments by the Government, these notes shall be received ‘the same as coin.’  One way to make them ‘the same as coin’ would be to make them at all times convertible into coin.  Another is to use them, so far as possible, for all the purposes for which coin is used ;  and in this latter mode their value will be the same as coin, unless the amount that is issued exceeds the amount needed for such uses.

At the end of twelve months from this time the receipts of the Government and the payments by the Government, amounting to many hundred millions of dollars, will be found to be nearly equal ;  that is, the Government during that time will have received about the same amount that it will have paid ;  and if these ‘Government notes’ are, in part, paid out by the Government, as it is proposed they shall be, in anticipation of the receipts for taxes and loans, they must all come back again in the course of the year, when those taxes and loans are paid for.  The people may find a portion of these notes more convenient for other uses, and may, therefore, prefer to make their payments to the Government partly in coin.  Unless, therefore, the Government is to be broken down, by the refusal to furnish the means in the form of taxes and loans to carry it on, these notes cannot depreciate to any extent, because they will be needed, and probably a large amount of coin in addition, to pay into the Treasury for the loans and taxes ;  they will be received by the Government the same as coin, and therefore must be for this purpose, and all others, the equivalent of coin, unless they are imprudently issued in excess of the requirements for such purposes.

I am opposed to this amendment of the Senate which requires the interest on Government notes and bonds to be absolutely paid in coin, because its effect will be to depreciate these notes as compared with coin, by declaring them in advance to be so depreciated.  It creates a necessity for the Government to obtain a large amount of coin by purchase, if it is not received in payment of taxes and loans, which hold out an inducement to speculate on the necessity of the Government, by collecting and hoarding the coin against the time that will be required by the Government to pay its interest ;  and because it is an unnecessary inconvenience to require the whole amount of the interest to be paid in coin, when only the small amount is necessary that is to be remitted to foreign holders of bonds, which could easily be obtained at small cost, if the effect of the issue of the Government notes should be what the friends of this bill expect. * * *

If the opponents of this bill have proved anything, they have proved too much in reference to the question now before the House, which is to make a distinction in favor of the holders of Government securities, and pay what may be due to them in coined money, while all other creditors of the Government shall be paid in what they have denounced to the country from the high places they occupy here, as the meanest paper trash.”


Mr. STEVENS, of Pennsylvania, spoke as follows :

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

I have a dispatch from the Chamber of Commerce of Cincinnati, sent to the Secretary of the Treasury, and by him to me, urging the speedy passage of the bill as it passed the House.  It is true there was a doleful sound came up from the caverns of bullion brokers, and from the saloons of the associated banks.  Their cashiers and agents were soon on the ground, and persuaded the Senate, with but little deliberation, to mangle and destroy what it had cost the House months to digest, consider and pass.  They fell upon the bill in hot haste, and so disfigured and deformed it, that its very father would not know it.  [Laughter.]  Instead of being a beneficent and invigorating measure ;  it is now positively mischievous.  It has all the bad qualities which its enemies charged on the original bill, and none of its benefits.  It now creates money, and by its very terms declares it a depreciated currency.  It makes two classes of money—one for the banks and brokers, and another for the people.  It discriminates between the rights of different classes of creditors, allowing the rich capitalist to demand gold, and compelling the ordinary lender of money on individual security to receive notes which the Government had purposely discredited.

Let us examine the principal amendments separately, and see their effect.  The first important one (being the fifth,) makes the notes issued under the laws of July 17, a legal tender, equally with those authorized by this bill.  There can be but little wisdom in putting these two classes on an equality.  The notes of July bear seven and three-tenths per cent. interest, and are payable in three years.  This gives them a sufficient advantage over notes bearing no interest and payable virtually in twenty years bonds, with six per cent. interest.  Why give them this additional advantage ?  Simply because the $100,000,000 issued are all held by the associated banks, and this is their amended bill.  They would displace $100,000,000 of this money in the circulation, and render it impossible to use any considerable amount of these United States notes as a currency.  These notes have served their purpose.  Why allow them to block up the market against further relief to the Government ?

The banks took $50,000,000 of six per cent. bonds, and shaved the Government $5,500,000 on them, and now ask to shave the Government fifteen or twenty per cent. half yearly, to pay themselves the interest on these very bonds.  They paid for the $50,000,000 in demand notes, not specie, and now demand the specie for them.  Yet gentlemen talk about our making other loans in these times.  They are crazy or sleeping, one or the other, I do not know which.

When this question was discussed before, the distinguished gentleman from Kentucky (Mr. Crittenden) asked me whether it was the intention or expectation of the House to go on and issue more than one hundred and fifty millions of dollars of legal tender notes—a pertinent question, which I saw the whole force of at the time.  I told him that it was my expectation that no more would be issued by the Government ;  that they would be received and funded in the twenty year bonds.”

Mr. Lovejoy—“ I ask the gentleman from Pennsylvania whether $150,000,000 of gold could not be put into circulation as well as $150,000,000 of Treasury notes ? ”

Mr. STEVENS—“ If this $150,000,000 would come out of the banker’s and miser’s hoards ;  but they have suspended specie payment, and would not give out a dollar.  They say pay us a discount, and then when these notes are made a legal tender we will be again in the clutches of these harpies.  I do not want to use hard names.  I suppose these men act from instinct.  If I were now to answer the question of the gentleman from Kentucky, I would not give that answer.  I do not expect one dollar of the $150,000,000 of legal tender notes ever to be invested in the twenty years bonds.  I infer from the amendment that before we adjourn $150,000,000 will be asked for, which will never be funded in those bonds, and so on, as they are needed, as no bonds will be funded until our circulation will become frightfully inflated.

But now comes the main clause.  All classes of people shall take these legal tender notes at par for every article of trade or contract, unless they have money enough to buy United States bonds, and then they shall be paid in gold.  Who is that favored class ?  The banks and brokers, and nobody else.  They have already $250,000,000 of State debt, and their commissioners would soon take all the rest that might be issued.

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

I have proposed an amendment to the Senate amendment upon the principle of legitimate parliamentary rules, that you may make as palatable as you can an amendment which you do not like, before the vote is taken upon it.  My amendment is offered for the purpose of curing a little the evils and hardships of the original amendment of the Senate.  And though it may be adopted, I shall vote against the whole as amended.  My amendment is to except from the operation of the legal tender clause the officers and soldiers of the army and navy, and those who supply them with provisions, and thus put them upon the same footing with the Government creditors who hold their bonds.  I hope they will not be thought less meritorious than the money-changers.  I trust it will be adopted as an amendment to the Senate amendment, so that if this pernicious system is to be adopted, if the beauty of the original bill is to be entirely impaired, those who are fighting our battles, and the widows and children of those who are lying in their graves in every part of the country, killed in defense of the Government, may be placed upon no worse footing than those who hold the bonds of the Government and the coin of the country.”

At the conclusion of Mr. Stevens’ speech the House proceeded to vote on the Senate amendments, some of which were concurred in, and others were disagreed to.

The first important division of the House was on the sixth amendment of the Senate, as follows :

“ Immediately after the clause last quoted, strike out the words ‘ and for all salaries, debts and demands owing by the United States to individuals, corporations and associations within the United States,’ and insert, ‘and of claims and demands against the United States, of any kind whatsoever, except for interest upon bonds and notes, which shall be paid in coin.’ ”

To this amendment Mr. Stevens moved an amendment to insert after the word “ notes,” the following :

And payments to be made to officers, soldiers and sailors in the army an navy of the United States, and for all supplies purchased for the said Government.

Mr. WHITE, of Indiana—“ I appeal to the gentleman from Pennsylvania to withdraw that amendment.  It was only intended to illustrate an absurdity, and I hope he will withdraw it.”

Mr. STEVENS—“ No sir ;  I cannot withdraw it.”

Mr. BINGHAM—“ I demand the yeas and nays on the amendment to the amendment.”

The yeas and nays were ordered.

Mr. BAKER—“ I should like to ask the Chairman of the Committee of Ways and Means a question.”

THE SPEAKER—“ No debate is in order at this time.”

The question was taken, and it was decided in the negative—yeas 67, nays 72 ; . . . .

So the amendment of Mr. Stevens to pay the army and navy in specie, the same as the bondholders interest in coin, was not agreed to.

The same question being upon agreeing to the sixth amendment of the Senate, to pay interest in coin on bonds and notes, in which the Committee of the Whole on the state of the Union recommended concurrence.

Mr. Roscoe Conkling demanded the yeas and nays.  The yeas and nays were ordered.

The question was taken ;  and it was decided in the affirmative—yeas 88, nays 56; . . . . . .

Mr. FESSENDEN moved that immediate action be had on the amendments.  The motion was agreed to, and after some preliminary remarks by Mr. King and Mr. Sherman, and without any separate action on the several amendments, Mr. Fessenden said :

“ I will move, as I understand the House has adjourned until to-morrow, that the Senate insist on its amendments, disagreed to by the House, and disagree to the amendments of the House to the amendments of the Senate, and ask for a Committee of Conference on the disagreeing votes of the two Houses.”

The motion was agreed to, and the Chair appointed Mr. Fessenden, Mr. Sherman and Mr. Carlisle, as such Committee.

On the 21st., the action of the Senate was reported to the House, and on motion of Mr. Stevens, a Committee of Conference was appointed on the part of the House, as requested by the Senate, consisting of Mr. Stevens, Mr. Morton and Mr. Sedgwick.

The Conference Committee had long consultation, extending through two or three days.  They finally compromised some of the most material of the disagreeing votes between the two Houses.

The most material change made was to require the duties of imports to be paid in coin, and held as a fund to pay the interest in coin on the funded debt, thereby doing away with the necessity of forcing the bonds on the market to procure coin for that purpose.  Several other alterations and amendments were agreed to in the Committee of Conference.

On the 24th, Mr. Stevens reported to the House the action the Conference Committee, which was agreed to—yeas 97 ;  nays 22.  On the 25th, Mr. Fessenden made the same report in the Senate which was agreed to by the Senate without a division ;  and on the same day President Lincoln approved the bill, and thus the Legal Tender act, after a most able and determined opposition, becam a law.

It is not deemed important to set forth in detail the several amendments and compromises made in the Committee of Conference.  A copy of the bill as it passed the House on the 6th inst. will be found on page 96, and the following is a copy of the bill as it finally passed both Houses, and became a law.  By comparing them, the amendments made after the bill first passed the House will fully appear :

Passage of the Treasury note bill.


WASHINGTON, Tuesday, Feb. 25, 1862.

“ The Conference Committee of the Treasury note bill having concurred, and Mr. Washburne having defeated another endeavor to adjourn the House yesterday as early as two o’clock, the prospect of an invigoration of the war by a supply of money, and the payment of soldiers and contractor was good.  The bill as agreed upon by the conferees authorizes the issue of $150,000,000 of Treasury notes, uniform in similitude, and a legal tender in the payment of all debts, public and private.  It withdraws the fifty millions of the July issue as soon as it conveniently can be done, makes the new notes fundable at any time in six per cent. twenty years bonds, redeemable at the pleasure of the United States after five years ;  makes the interest on the bonds and notes payable in coin, and (a new feature) makes the duties on imports also payable in coin, and devotes them to the payment of the interest on the notes and bonds, and the creation of a sinking fund by setting apart one per cent. of the amount.  The provisions insisted on by the Senate authorizing the Secretary of the Treasury to sell six per cent. bonds for what they will fetch, in order to raise coin for interest, is retained in the bill.  All the funded debt exempted from taxation.  Authority is given to temporarily deposit demand notes to the extent of twenty-five millions, on an interest of six per cent. after thirty days.  The bill has gone through both Houses, and it is supposed, will receive the President’s signature to-night.  An influence from New York sent the bill back again to the Senate this morning for an amendment that should permit sixty millions of Treasury notes be used for the payment of custom duties, the fifty millions authorized July, and the temporary relief ten millions authorized this month.  This was adopted and accepted by the House, and it is to be hoped that the President will now have a chance to sign the bill, and the abused public creditors get their pay.

It is but just to say, that to the patient labor of the Hon. E.G. Spaulding the country is greatly indebted for the early maturity of this finance measure, and for what vigor has been displayed in its passage through Congress.”


It will be noticed that by the 4th section of the Legal Tender act the Secretary of the Treasury was authorized to receive deposits in the sub-Treasury to the amount of $25,000,000, in sums of not less than $100, at five per cent. interest, with the privilege to the depositors of drawing it out again at any time, on ten days notice, after thirty days.  This was but another form of borrowing money by the Government at a low rate of interest.  Its operation at the sub-Treasury was somewhat like that of a Saving’s Bank, and the privilege was largely availed of by banks, insurance companies and individuals.  It became a very popular mode of temporary investment for corporations and individuals, and although it operated against funding in the 5-20 bonds, yet it became an advantageous mode for the Government to borrow large sums of money.  It became so popular that on the 17th of March, 1862, the authority to receive these deposits was increased to $50,000,000.

On the 11th of July following the power was enlarged to $100,000,000 ;  and by the act of January 30, 1864, the authority was still further enlarged to $150,000,000, and the Secretary was authorized to pay as high as six per cent. on these deposits.  Certificates were issued to the persons making the deposits, which were circulated to some extent at the Clearing Houses, and among individuals, which was one mode of increasing the credit circulation of the country, and thereby aiding the general inflation which commenced with the passage of the legal tender act.  These deposits reached at one time the sum of $120,176,196.


The issue of CERTIFICATES OF INDEBTEDNESS at one year, was another expedient resorted to for borrowing money, and was another mode of increasing the credit circulation of the Government.  By the act of March 1, 1862, the Secretary of the Treasury was authorized to issue to creditors, who were willing to receive them, ‘in satisfaction of audited and settled demands against the United States,’ certificates of indebtedness (in effect promissory notes,) in sums of not less than $1,000 each, payable in one year at six per cent. interest.  And by the act of the 17th of March, 1862, this power was enlarged, so as to embrace checks drawn in favor of creditors by ‘disbursing officers upon sums placed to their credit on the books of the Treasurer.’  The power thus conferred on the Secretary to issue certificates of indebtedness for these purposes was broad and unlimited.  The certificates issued under these two acts were in the similitude of bank notes fitted for circulation as money, and did circulate to a considerable extent as currency until there was such an accumulation of interest upon them as to make it an object for capitalists to hold them as an investment.  The Secretary commenced issuing these certificates simultaneously with the issue of Legal Tender (greenback) notes, and continued to issue them in large amounts during the progress of the war, which was advantageous to the Government, but at the same time was another fruitful source of inflation, and operated directly against any considerable funding in the long 5-20 bonds.  The amount of indebtedness in this form on the first of November, 1864, was $238,593,000, being an amount greater than the market would bear ;  they were consequently depreciated and considerably below par.