Elbridge Gerry Spaulding

History of the Legal Tender Paper Money


In less than a month after the passage of the first legal tender act another act was passed at the request of Secretary Chase, approved March 17, 1862, by which the demand notes authorized by the act passed at the extra session in July, 1861, and the supplementary act of February 12, 1862, amounting to $60,000,000, were declared to be lawful money and a legal tender, in like manner, and for the same purposes, and to the same extent as the notes authorized by the first legal tender act.  These notes, when first issued, were receivable by the Government for duties on imports, but that was not enough to prevent them from depreciating, and some of the banks in the principal cities refused to receive them from their customers as money.  The object to make them a legal tender was to make them pass currently as money at the Clearing Houses, and in all business transactions, without loss to the holders.


Secretary Chase sent to the Committee of Ways and Means on the 7th of June, 1862, an official communication, accompanied by a bill proposed by him, asking, among other things, for an additional issue of $150,000,000 of legal tender notes ;  and that of this sum $35,000,000 should be of a denomination less than five dollars.  This communication is published as Miscellaneous Document, No. 81, and sets forth at length the reasons why, in the opinion of the Secretary, this additional issue should be authorized by Congress.  He states that the daily receipts from customs were about $230,000, and that the average daily conversions of legal tender notes into 5-20 bonds did not exceed $150,000, while the daily expenditures could not be estimated at less than $1,000,000, and would probably exceed that sum ;  and that he had already exhausted the issue of legal tender notes authorized by the act of February 25th, 1862.

“ He proposed that authority be given to the Secretary of the Treasury to issue $150,000,000 in United States notes, in addition to the issue already authorized ;  and that these be made a legal tender for debts, except interest on loans, and receivable in payment of all loans to the United States, and for all Government dues, except duties on imports and interest.

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

If Congress shall see fit to authorize the additional emission proposed, it seems highly expedient that such part as the public convenience shall require be issued in denominations less than five dollars.  I am aware of the general objections to the issue of notes under five dollars, and concede their cogency.  Indeed, under ordinary circumstances they are unanswerable.  But in the existing circumstances of the country, they lose most, if not all, their force.

The country is involved in the expenditures of a contest for national existence, and it is highly desirable that the burdens of the people be made as tolerable as possible.  If the restriction on the issue of small denominations be removed, the wants of the country will absorb a circulation of $25,000,000, and perhaps more.  The interest on this circulation, say $1,500,000 a year, will be saved to the tax payers.

Payments to public creditors, and especially to soldiers, now require large amounts of coin to satisfy fractional demands less than five dollars.  Great inconveniences in payment of the troops are thus occasioned.  With every effort on the part of the Treasury to provide the necessary amount of coin, it is found impracticable always to satisfy the demand.  When the amount required is furnished, the temptation to disbursing officers to exchange it for any small bank notes that the soldiers or the public creditors will take, is too great to be always resisted.  And even when the coin reaches the creditors it is seldom held, but passes, in general, immediately into the hands of sutlers and others, and disappears at once from circulation.  The inconveniencies, therefore, to the Government and creditors, from the absence of United States notes of small denominations, are not compensated by benefits to anybody.

It may properly be further observed that since the United States notes are made a legal tender, and maintained nearly at the par of gold, by the provision for their conversion into bonds bearing six per cent. interest, payable in coin, it is not easy to see why small notes may not be issued as wisely as large ones.  The notes made a legal tender circulate as money ;  and the Government may authenticate, by device and imprint, small notes as well as small coins.  The limit is to be found only in public convenience, which indicates denominations in gold, leaving the smaller circulation of silver (less valuable than gold,) as before.

Another consideration which deserves to be taken into the account is this: that resumption of payments in specie can be more certainly and easily effected, and with far less of inconvenience and loss to the community, if the currency, small as well as large, is of United States notes, than if the channels of circulation are left to be filled up by the emissions of non-specie paying corporations, solvent and insolvent.

These considerations of economy, of public advantage, and of private convenience, seem to me to justify fully the removal of the restriction upon the issue of small notes.

I propose, further, to make arrangements for the necessary engraving and other work for the printing and preparation for issue of these notes in the Treasury Department at Washington.  I am led to believe that a very considerable reduction of expense can be thus effected.  The prospect, in my judgment, certainly warrants the trial.

With these objects I have prepared a bill, which I herewith submit to the consideration of the committee.  The condition of the Treasury renders prompt action highly desirable ;  and I trust it is not necessary to assure the Committee or Congress that, should the powers asked for be granted ;  they will be exercised only with the most careful reference to the requirements of the public interests.  Whatever the authority granted may be, no issue of notes will be made except to replace notes withdrawn and canceled, and to meet the current expenditures authorized by Congress, which cannot be met from the receipts of revenue, from the increase of deposits, and from the proceeds of the conversion into five-twenties.

With great respect,
Secretary of the Treasury.”

Chairman Committee of Ways and Means.”

The bill thus recommended by Secretary Chase was taken up in the Committee of Ways and Means and duly considered.  After considerable discussion Mr. Stevens was authorized to report it to the House, but without the power to issue notes less than five dollars.  On the 11th of June, Mr. Stevens reported the bill and the foregoing letter of the Secretary to the House.  They were referred to the Committee of the Whole and ordered to be printed.  On the 13th inst., the bill was made the special order for Tuesday, the 7th., and to continue the special order until disposed of.


On the 17th of June, the second bill for an additional issue of $150,000,000 legal tender notes, Mr. Spaulding opened the debate in a lengthy speech.  The House being in Committee of the Whole (Mr. Phelps, of Missouri, in the chair) on the bill recommended by the Secretary of the Treasury ;  for authority to issue the additional sum of United States notes, Mr. Spaulding said :

“ Mr. CHAIRMAN—This is an important measure, and I desire to submit a few remarks in the opening of the debate upon the subject.

The requirements of the Treasury will probably not be less than $250,000,000 to meet the current expenses to the 1st of January next.  How is this large sum to be obtained ?  I believe it can only be obtained in the mode which has been successfully adopted during the last six months.  The financial plan initiated six months ago as a necessary war measure has worked well.  It has exceeded the most sanguine expectations of its strongest advocates.  The Secretary of the Treasury recommends a continuance of the plan which has so successfully carried the country through the perils of the past six months.  I shall cordially co-operate with the Secretary, hoping that it may be equally successful in the future.  It is our duty now to provide all the means which shall be necessary to pay all the current expenses to the 1st day of January.  The bill now under consideration is deemed necessary for that purpose, and the Secretary assures us that the condition of the Treasury renders prompt action highly desirable.

During the pending war, neither the President, the Secretary of the Treasury, nor Congress, can fix a limit to the expenditures of the Government, and cannot, therefore, fix a limit to the obligations to be issued on its credit.  All that the Secretary can say, all that Congress can declare, is, that the President, as Commander-in-Chief, by his subordinate officers, must contract all the debts which shall be necessary to maintain the army and navy, and all other expenses incident to a vigorous prosecution of the war.  The largest latitude is given to the President, Secretary of War, and Secretary of the Navy, in carrying on the war.  They have full discretionary power to contract all the debts which they may deem necessary to amply supply the army and navy.  All parties loyal to the Government are united in urging a vigorous prosecution of the war ;  all parties, therefore, ought to be willing to furnish all the means necessary for this purpose.  We must, at any rate, pay all the debts contracted by the Executive in the progress of the war.  If we knew how much this would amount to we could easily figure up the amount of the bonds and notes which Congress must authorize the Secretary to issue.  No man, not even the President, the Secretary of War, the Secretary of the Navy, the Secretary of the Treasury, or the Chairman of the Committee of Ways and Means, or all of them together, can give even an approximate estimate as to the whole cost of this war, because they do not know the number of years it will continue, nor what will be the final solution of the grave questions involved.  We are working out a great problem, the result of which no man can know.  Slavery was the cause of this war ;  and until the solution of the slavery question is arrived at, and the cause of the rebellion removed, we have no hope of permanent peace and tranquility.  This will take a long time ;  but how long no man is wise enough to determine.  The war debt we all know is already large, and that it is growing fearfully larger every day.  Many capitalists and bankers have already invested all their surplus means in United States stocks.

During the debate on the Treasury note bill in January and February last, I submitted, with some degree of diffidence as to its accuracy, an estimate of what I thought the whole debt (floating as well as funded debt) of the United States would be on the 1st of July next, and also what the funded and floating debt would be on the 1st of July, 1863, if the war should be prosecuted to that time on the same scale that it is now carried on.  I have not seen since, and do not now see, any reason to change the estimates I then made.  I then said it was impossible to estimate, definitely, what the war would cost, and therefore it was impossible to fix any limit to the amount of paper (obligations of the Government either in the form of notes, bonds or certificates of deposit) that must be issued during its prosecution.  The experience of the last few months has demonstrated the truth of these remarks.  We must first apply all the money we can collect from duties on imports, excises, internal duties, direct taxes, and confiscations of the property of rebels, which may amount, during the current year, (of money actually realized) to $125,000,000, perhaps more, and possibly less.  All the expenses of the war, over and above the amount realized from these sources, must be provided for by borrowing in some form upon the credit of the Government.  Paper credit in some form must be issued during the next fiscal year to a very large amount.  However much we may depreciate it, this will be an imperative necessity which we cannot avoid.  However much this may be a departure from sound business and financial principles applicable to times of peace, we cannot, we must not, shrink from the responsibility which is forced upon us in the prosecution of this war.  We must boldly meet every exigency in financial as well as in military and naval operations.  Notes and bonds must be authorized by Congress, and must be negotiated by the Secretary of the Treasury, amply sufficient to sustain the army and navy, or the war must stop.  If we have not the money, we have what is equally or more important :  the country is full of provisions, clothing, and the material of war.  Treasury notes and bonds, issued on the credit of the Government, will procure all these supplies to maintain your army and navy.  The war, therefore, can go on, and will go on vigorously if we carry out the views submitted to us by the Secretary of the Treasury.

In what form or mode has the credit of the Government been thus far used in the prosecution of this war ?  Five different forms of credit have been resorted to.  Loans to the Government ;  for which obligations have been issued, are as follows :

1.  United States notes, without interest, made a legal tender, and circulated as money among the people in all parts of the United States.  This is the people’s loan to the Government, and the most popular mode of borrowing ever adopted by any Government.  It has given the country a sound national currency, in which the people have had entire confidence.  Every man, woman and child having a five dollar legal tender greenback note in possession, has directly or indirectly loaned to the Government that amount, and becoming thereby interested in the perpetuity of the Government, is a strong advocate for a vigorous prosecution of the war.  A fair test of the loyalty of all such holders of notes may be seen in their manifestation of confidence that they are perfectly good.  The soldiers and sailors give their services, risk their lives, and endure all the hardships, sickness, and privations of the campaign, and cheerfully take these notes in payment.  Supplies, subsistence, and material of war of every kind is eagerly furnished, and these greenbacks taken in exchange for the same.  This kind of loan is so popular with the people, and being without interest, is so advantageous to the Government, it is desirable that it should be extended as far as it can be done safely, and without unduly stimulating speculations to such an extent as to cause an unfavorable reaction to the legitimate business of the country.  But when bonds can be negotiated at par, I think it will be safer to have bonds negotiated than to issue legal tender notes.

2.  The second kind of loan has been the issue of bonds running from five to twenty years at six per cent. interest per annum, which is an advantageous mode for the Government to borrow money, because the debt is then funded ;  and it is also favorable to commerce, because it causes no disturbance in the money market or business of the country, provided the money is not taken from the capital of men engaged in active business, but is obtained from capitalists who desire permanent investments, and who only want to use the interest half-yearly.  This mode of borrowing must necessarily be limited to the amount of accumulated capital in the country, held by those who are willing to invest it in this way.  It is a permanent and safe investment in the hands of those persons who want to use only the interest on their accumulated capital.

3.  A third kind of loan which has thus far worked very well in practice, are deposits in the Treasury of the United States, for which certificates are issued, bearing four and five per cent. interest, and which deposits may be withdrawn from the Treasury on giving ten days’ notice after thirty days.  The Government has borrowed over fifty million dollars at this low rate of interest, and the bill now before us proposes to give the Secretary power to extend the amount to $100,000,000.  To guard against any sudden call that may be made for these deposits, the Secretary proposes to keep on hand, in Treasury notes, ready to be issued, one-third of the amount of the current deposits which may at any time be in the Treasury.  With this safeguard, this kind of loan will be very advantageous to the Government as well as to the depositors.

4.  Certificates of indebtedness at one year, bearing six per cent. interest per annum, given in payment of supplies, transportation, and material furnished in the prosecution of the war.  This is an advantageous form of credit given to the Government, because it is for a definite time and at the customary rate of six per cent. interest.  This form of indebtedness has already reached about fifty million dollars, and may be still further increased under the law already in existence.

5.  Treasury notes at three years, bearing seven and three-tenths per cent. interest per annum, payable half-yearly, and convertible into twenty years six per cent. bonds.  This is the most objectionable form of borrowing of any that has been adopted, for the reason that the rate of interest is too high—a much higher rate than this great Government, with all its immense power and resources, ought to pay.  I think this form of borrowing money should only be resorted to when we cannot obtain the money to carry on the war in any other way.

The liquidated and funded debt of the United States, as reported by the Secretary of the Treasury to Congress, May 29, 1862, was as follows :

Loan, 1842. . . . . . . . . . . . . . . . . . . . . . . .
Loan, 1847
Loan, 1848
Loan, 1858
Loan, 1860
Loan, 1850
Loan, 1861—February 8
Loan, 1861—July 17
Loan, 1861—July 17
Loan, 1861—Oregon
Loan, 1862
Treasury Certificates
Treasury notes, ordered
United States notes
Temporary deposits
Temporary deposits

Total, (average interest 4.35)
Rate of Interest.

   $ 2,883,364
$ 491,446,184

Reducing the above total to the round sum, in English money, of 100,000,000 sterling, we have this contrast of the magnitude of the public debts respectively of Great Britain and the United States, and the annual cost of their support ;  public debt of Great Britain, 800,000,000, at an annual charge of 28,262,000 ;  public debt of the United States, 100,000,000, at an annual charge of 4,350,000.

There is still another kind of indebtedness—the floating debt created in various forms every day by officers of the Government.  This accrued indebtedness, existing in different forms, must, with our extended line of military and naval operations, be very large.  It exists in the shape of accounts, services, transportation, bounties, and all other modes in which debts are made against the Government in enlisting, calling out the militia, and in supplying the army and navy with the necessary material of war.  On this kind of indebtedness the Government gets a credit of from one to four months.  The whole accrued indebtedness of the United States, funded and unfunded, on the 1st day of July next, it is believed, will not exceed $650,000,000.

I never have been, and I trust I never shall be, unnecessarily an advocate for the creation of an unsound or an inflated currency ;  but, sir, I have long ago resolved, since this savage war has been forced upon us, to do whatever was necessary, and which I might lawfully do, to crush out the traitors and annihilate their armies.  This cannot be done without the ‘sinews of war.’  Your army and navy must be supplied with all the terrible armament necessary to crush the enemy.  Your sick, wounded and famishing soldiers must be supplied with hospitals, medical attendance, and all necessaries and conveniences to make them comfortable.  This is a plain duty which we cannot any of us fail to perform.  If, in the performance of this duty, it becomes necessary to authorize a further issue of United States notes, I shall not hesitate to give my vote for it.  I am not in favor of increasing the issue of them beyond the imperative necessities of the Government to sustain the army and navy.  I much prefer to have our six per cent. bonds issued on permanent loans.  I would like to see the Secretary of the Treasury borrow at par all the money he can on the six per cent. bonds heretofore authorized to be issued.

When money can be obtained at par on six per cent. bonds, I would prefer to have that done to the issuing a very large amount of legal tender notes.  Too large an issue of demand notes, to circulate as money, will no doubt lead to an expansion which will inflate prices, stimulate undue speculation, and ultimately produce a reaction that will derange the whole business of the country.  This is to be avoided if possible.  I cannot, therefore, advocate any greater issue of demand notes than the absolute necessities of the Government require to carry on the war with vigor.  I am disposed to give the Secretary power to issue the additional $150,000,000 United States notes asked for by him ;  but, at the same time, I feel the importance of having this power exercised discreetly, and I trust that he will not issue, or pay them out at all, when money can be obtained at par on our six per cent. bonds.  I do not understand that the Secretary intends to have them all issued and put into circulation at any one time ;  on the contrary, I believe he has no such intention.  He wants the power to issue and use them if necessary, but not otherwise.  When he can obtain a sufficient amount of money at par, on six per cent. bonds, or by temporary deposits in the Treasury, there will be no necessity for their issue, and the Secretary assures us in his letter that no further issue of notes will be made when that can be done ;  and, besides, the bill provides for his retaining in his own hands legal tender notes equal to one-third of the temporary deposits that may be in the Treasury.  Our army and navy and all debts of the Government should be punctually paid.  No sacrifice on our part should be too great to raise all the means necessary for this purpose.  The Secretary should, therefore, be clothed with ample power to meet any exigency that may arise.

The money for the large liabilities of the Government that have actually been met and canceled since the passage of the first legal tender note bill, could not have been raised by a forced sale of six per cent. bonds without a heavy sacrifice.  When that bill passed this House our six per cent. twenty-years bonds were ten per cent. below par.  Now they are from one to two per cent. above the price of gold.  If, at the time of the passage of the first note bill, large amounts of bonds had been forced upon the market, as would have been necessary but for the passage of that bill, it would have depressed the six per cent. bonds still lower.  There was not then money enough in the country seeking permanent investment, to absorb all the bonds required by the Government to meet the immediate and pressing demands upon the Treasury.  This state of things may again occur.  I hope not.  I trust that there will be no necessity for any considerable issue of new notes ;  but to guard against possible contingencies, I am willing to confer large powers upon the Secretary, believing that he will exercise the power wisely, patriotically, and for the best interests of the country.  I shall not, therefore, hesitate to clothe him with this great power, and shall, under the exigencies of the crisis, vote for this additional issue of legal tender notes.

As to the propriety of authorizing the Secretary to issue a portion of this amount in sums less than five dollars, I should, under ordinary circumstances, oppose giving such authority.  As a general rule, the issue of small notes should not be adopted for a national currency ;  but I am disposed, in the present exigency, to vote for this provision, in accordance with the suggestions of the Secretary of the Treasury, and for the reasons urged by him in his communication, sent to us on the 7th inst.

I have thus briefly stated the condition and wants of the Treasury.  Two hundred and fifty million dollars will be required, as I stated before, to carry us to the 1st of January next.  That is more than the coin in all the banks of the United States, and nearly equal to all the coin of the United States in the hands of individuals and banks ;  the whole amount of gold and silver held by the banks and individuals being only about $265,000,000.  The ground upon which the Secretary of the Treasury, and upon which the Committee of Ways and Means rest this issue of notes, is the necessity of the case.  The Secretary urges immediate action in view of the condition of the Treasury.  I therefore trust the House will take up this bill in the regular way, debate it to the extent which may seem desirable and necessary, and pass it at as early a day as possible.”


Mr. COLFAX suggested that the bonds, into which the notes are convertible, ought to be absolutely twenty years bonds, instead of allowing the Government the right to redeem them after five years.  The bonds of ’81 having absolutely twenty years to run, were selling yesterday in New York at six per cent. above par for greenbacks, while the 5-20 bonds would not bring such a premium.  If they would command any such premium, these notes, convertible into such bonds, would be brought in for conversion with great rapidity, and there would not be a margin of six per cent. between gold and legal tender notes.  He thought it best to legislate in such a manner as to approximate these notes to gold.

Mr. STEVENS—“ I agree perfectly with the remarks made by the gentleman from Indiana.  I opposed the substitution of five years bonds for twenty years bonds when the question was before the House, but the House differed with me.  The Senate amended the bill, and when it came back from the Senate, the House agreed with the Senate after discussion here.  He said that a majority of the Committee of Ways and Means were not in favor of the recommendation of the Secretary to issue notes less than five dollars, but he understood that some member of the Committee would offer an amendment in accordance with the recommendation of the Secretary of the Treasury.”

Mr. SPAULDING afterwards offered an amendment that no part of these legal tender notes should be “ for fractional parts of a dollar, and that not more than $50,000,000 should be of a less denomination than five dollars,” which was adopted.

The bill continued to be discussed by different members of the House from day to day until the 24th of June, when it passed the House in substantially the same form as recommended by the Secretary of the Treasury, by yeas 76, nays 47, as follows :

Yeas—Messrs. Aldrich, Alley, Arnold, Babbitt, Bailey, Seaman, Bingham, Francis P. Blair, Jacob B. Blair, Samuel S. Blair, Blake, William G. Brown, Campbell, Casey, Chamberlin, Clark, Colfax, Cutler, Davis, Delaplaine, Duell, Dunn, Edgerton, Edwards, Ely, Fenton, Fessenden, Franchot, Granger, Gurley, Haight, Hale, Hall, Hanchett, Harrison, Hooper, Hutchins, Kelley, Francis W. Kellogg, Lansing, Loomis, Lovejoy, Law, MeKnight, Maynard, Mitchell, Moorhead, Nixon, Noell, Nugen, Olin, Timothy G. Phelps, Pomeroy, Potter, Price, John H. Rice, Riddle, Sargent, Shanks, Shellabarger, Sherman, Sloan, Spaulding, Stevens, Trimble, Trowbridge, Van Horn, Van Valkenburgll, Verree, Wall, Wallace, Washburne, Wheeler, Whaley, Wilson, Windom and Worcester—76.

Nays—Messrs. William J. Allen, Baker, Biddle, George H. Browne, Buffinton, Calvert, Clements, Cobb, Roscoe Conkling, Corning, Cravens, Crisfield, Dawes, Delano, Dunlap, Eliot, English, Fouke, Goodwin, Grider, Harding, Johnson, Law, Menzies, Justin S. Morrill, Norton, Pendleton, Perry, John S. Phelps, Porter, Alexander H. Rice, Richardson, Sheffield, Shiel, Stiles, Benjamin F. Thomas, Francis Thomas, Vallandigham, Vibbard, Wadsworth, Walton, Ward, Webster, Chilton A. White, Wickliffe, Wood and Woodruff—47.

So the bill was passed.


On the 25th of June the bill was received in the Senate and referred to the Finance Committee.  On the 28th this Committee reported the bill with amendments.  On the 2d of July it was fully discussed, and after being amended, passed the Senate by yeas, 22, nays 13, as follows :

Yeas—Messrs. Anthony, Browning, Chandler, Clark, Dixon, Foot, Hale, Harris, Henderson, Howard, If owe, Lane (of Indiana), Lane (of Kansas), Morrill, Ponieroy, Simmons, Sumner, Ten Eyck, Wade, Wilkinson, Willey and Wilson (of Missouri)—22.

Nays—Messrs. Carlisle, Collamer, Cowan, Davis, Foster, Harlan, King, Powell, Saulsbury, Sherman, Stark, Trumbull and Wright—13.

The amendments of the Senate were not agreed to by the House, and the disagreeing votes between the two Houses, were finally settled by a Conference Committee, consisting of Mr. Fessenden, Mr. Sherman and Mr. Wright on the part of the Senate, and Mr. Stevens, Mr. Spaulding and Mr. Phelps on the part of the House.  The report of the Conference Committee was finally agreed to on the 8th of July, and on the 11th President Lincoln approved the bill, which is as follows :


An Act to authorize an additional issue of United States Notes, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America, in Congress assembled, That the Secretary of the Treasury is hereby authorized to issue, in addition to the amounts heretofore authorized, on the credit of the United States, one hundred and fifty millions of dollars of United States notes, not bearing interest, payable to bearer at the Treasury of the United States, and of such denominations as he may deem expedient ;  Provided, That no note shall be issued for the fractional part of a dollar, and not more than thirty-five millions shall be of lower denominations than five dollars ;  and such notes shall be receivable in payment of all loans made to the United States, and of all taxes, internal duties, excises, debts and demands of every kind due to the United States, except duties on imports and interest, and of all claims and demands against the United States, except for interest upon bonds, notes, and certificates of debt or deposit ;  and shall also be lawful money and a legal tender in payment of all debts, public and private, within the United States, except duties on imports and interest, as aforesaid ;  and any holder of said United States notes, depositing any sum not less than fifty dollars, or some multiple of fifty dollars, with the Treasurer of the United States, or either of the assistant treasurers, shall receive in exchange therefor, duplicate certificates of deposit, one of which may be transmitted to the Secretary of the Treasury, who shall thereupon issue to the holder an equal amount of the bonds of the United States, coupon or registered, as may by said holder be desired, bearing interest at the rate of six per cent. per annum, payable semi-annually, and redeemable at the pleasure of the United States after five years, and payable twenty years from the date thereof ;  Provided, however, That any notes issued under this act may be paid in coin, instead of being received in exchange for certificates of deposit as above specified, at the discretion of the Secretary of the Tressury.  And the Secretary of the Treasury may exchange for such notes, on such terms as he shall think most beneficial to the public interest, any bonds of the United States bearing six per centum interest, and redeemable after five, and payable in twenty years, which have been or may be lawfully issued under the provisions of any existing act ;  may re-issue the notes so received in exchange ;  may receive and cancel any notes heretofore lawfully issued under any act of Congress, and in lieu thereof issue an equal amount in notes such as are authorized by this act ;  and may purchase, at rates not exceeding that of the current market, and, cost of purchase not exceeding one-eighth of one per centum, any bonds or certificates of debt of the United States as he may deem advisable.

SECTION 2And be it further enacted, That the Secretary of the Treasury be, and is hereby authorized, in case he shall think it expedient to procure said notes, or any part thereof, to be engraved and printed by contract, to cause the said notes, or any part thereof, to be engraved, printed and executed, in such form as he shall prescribe, at the Treasury Department in Washington, and under his direction ;  and he is hereby empowered to purchase and provide all the machinery and materials, and to employ such persons and appoint such officers as may be necessary for this purpose.

§ 3.  And be it further enacted, That the limitation upon temporary deposits of United States notes with any assistant treasurer, or designated depositary authorized by the Secretary of the Treasury to receive such deposits, to fifty millions of dollars be, and is hereby repealed ;  and the Secretary of the Treasury is authorized to receive such deposits, under such regulations as he may prescribe, to such amount as he may deem expedient, not exceeding one hundred millions of dollars, for not less than thirty days, in sums not less than one hundred dollars, at a rate of interest not exceeding five per centum per annum ;  and any amount so deposited may be withdrawn from deposit, at any time after ten days notice, on the return of the certificate of deposit.  And of the amount of United States notes authorized by this act, not less than fifty millions of dollars shall be reserved for the purpose of securing prompt payment of such deposits when demanded, and shall be issued and used only when, in the judgment of the Secretary of the Treasury, the same, or any part thereof may be needed for that purpose.  And certificates of deposit and of indebtedness issued under this or former acts, may be received on the same terms as United States notes, in payment for bonds redeemable after five, and payable in twenty years.

§ 4.  And be it further enacted, That the Secretary of the Treasury may at any time, until otherwise ordered by Congress, and under the restrictions imposed by the ‘ Act to authorize a national loan, and for other purposes,’ borrow on the credit of the United States, such part of the sum of two hundred and fifty millions mentioned in said, act as may not have been borrowed, under the provisions of the same, within twelve months from the passage thereof.

§ 5.  And be it further enacted, That any part of the appropriation of ten thousand dollars for the detection and bringing to trial of persons engaged in counterfeiting the coin of the United States, made by the act entitled ‘ An Act making appropriations for the legislative, executive and judicial expenses of the Government, for the year ending the thirteenth of June, eighteen hundred and sixty-one,’ approved June twenty-three, eighteen hundred and sixty, may be Applied in detecting and bringing to trial and punishment, persons engaged in counterfeiting Treasury notes, bonds, or other securities of the United States, as well as the coin of the United States.  And to carry into effect the preceding sections of this act the sum of three hundred thousand dollars is hereby appropriated, out of any money in the Treasury not otherwise appropriated.

6.  And be it further enacted, That all the provisions of the act entitled ‘ An Act to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States,’ approved February twenty-five, eighteen hundred and sixty-two, so far as the same can or may be applied to the provisions of this act, and not inconsistent therewith, shall apply to the notes hereby authorized to be issued.

Approved, July 11, 1862.


Another expedient resorted to for providing means to carry on the war, was the issue of postage stamps and fractional currency.  After the suspension of specie payments by the banks and the passage of the first legal tender act, gold and silver were in a great measure banished from circulation.  There was a great scarcity of small change in ordinary business transactions.  Corporations, individuals and firms commenced issuing shinplasters to supply the deficiency.  It soon became apparent that unless some action was taken to prevent it, the country would be flooded with a heterogeneous fractional currency of very little value, and very vexatious in business transactions.

To remedy these evils, and in order that the Government might avail itself of the advantages of this circulation, Congress, at the request of Secretary Chase, passed the following bill :


An Act to authorize payment in Stamps, and to prohibit circulation of notes of less denomination than one dollar.

SECTION 1Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of the Treasury be, and he is hereby directed to furnish to the Assistant Treasurers, and such designated depositaries of the United States as may be by him selected, in such sums as he may deem expedient, the postage and other stamps of the United States, to be exchanged by them, on application for United States notes :  and from and after the first day of August next such stamps shall be receivable in payment of all dues to the United States less than five dollars, and shall be received in exchange for United States notes when presented to any Assistant Treasurer or any designated depositary, selected as aforesaid, in sums not less than five dollars.

2.  And be it further enacted, That from and after the first day of August, eighteen hundred and sixty-two, no private corporation, backing association, firm or individual, shall make, issue, circulate, or pay any note, check, memorandum, token, or other obligation for any less sum than one dollar, intended to circulate as money or to be received or used in lieu of lawful money of the United States ;  and every person so offending shall, on conviction thereof in any district or circuit court of the United States, be punished by fine not exceeding five hundred dollars, or by imprisonment not exceeding six months, or by both, at the option of the Court.

Approved July 17, 1862.”

The use of stamps for small change did not work well in practice, and Secretary Chase recommended that fractional currency should be authorized in the place of postage and revenue stamps.  This recommendation was carried into effect by the 4th section of the act of March 3d, 1863, by which the Secretary was authorized to issue fractional currency to any amount not exceeding $50,000,000, redeemable in United States notes in sums not less than three dollars, and receivable for postage and revenue stamps, and also in payment of any dues to the United States less than five dollars, except duties on imports.  This fractional currency was not made a legal tender for private debts, but upon the whole it has served a useful purpose ;  and the second section of the act of July 17, 1862, prohibiting all other shinplasters, has kept the country free from a flood of small “ paper trash,” which at one time was very annoying to the business community.  The Government lists had the benefit of an average circulation of this form of credit to the amount of about $30,000,000, which is still outstanding, and which should at an early day be replaced by the silver coins which were in common use before the war.  Would it not be well to destroy this currency as fast as it becomes mutilated and is returned to the treasury Department ?  If no more should be printed or issued it would not be long before the present issue would wear out and be replaced by small coins.


Secretary Chase again earnestly recommended the National Currency Bank Bill, and urged its passage by additional arguments, which he presented more in detail than in his first report.

“ He still adhered to the opinion expressed in his last report that a circulation furnished by the Government, but issued by banking associations organized under a general act of Congress, is to be preferred to either United States legal tender notes or notes of State Banking Corporations.  Such a circulation, uniform in general characteristics, and amply secured as to prompt convertibility by national bonds deposited in the Treasury by the associations receiving it, would unite, in his judgment, more elements of soundness and utility than can be combined in any other. * * * * * * * * * * * * * * * * * * *

Little direct aid is, however, to be expected from this plan during the present, nor very much, perhaps, during the next year.  He briefly argued the constitutionality of this plan as an auxiliary to the power to borrow money ;  as an agency of the power to collect and disburse taxes ;  and as an exercise of the power to regulate commerce, and of the power to regulate the value of coin.”

He recommended a further limited issue of legal tender notes as a wise expedient for the present time, and as an occasional expedient in future times, and the immediate passage of the bank bill for raising the additional means to carry on the war.

$900,000,000 LOAN ACT.

We now come to the consideration of the $900,000,000 Loan Act, which, in connection with loan acts already passed, conferred more discretionary power on the Secretary of the Treasury than was ever granted by law to any other Finance Minister in the world ;  and which ultimately led to a dangerous expansion of credit circulation in various forms, and in connection with the bank bill, which passed about the same time, to an enormous inflation of prices, caused by the over-issuing of paper money which came very near proving fatal to the finances of the Government and the legitimate business of the country.

The bill having been carefully considered in the Committee of Ways and Means, was, on the 8th of January, 1863, reported from the Committee to the House by Mr. Stevens.  It was entitled, “ A bill to provide Ways and Means for the support of the Government;”  which was read twice, ordered to be printed, referred to the Committee of the Whole, and made the special order for Monday, the 12th inst. (House bill No. 659.)  The bill as reported did not contain some provisions which Secretary Chase was very anxious to have passed—one was to repeal the provision restricting him in the sale of bonds to the ‘market value’—another was to abrogate that most equitable and just provision contained in the original legal tender act, allowing the holders of legal tender notes to convert them at any time into 5-20 six per cent. bonds, interest payable semi-annually in coin.  The Committee did not deem it just to abrogate this provision, while Secretary Chase believed its repeal would enable him to make better terms in selling bonds.


On the 12th, the bill being the special order, was taken up in Committee of the Whole, and, an amendment having been offered by Mr. Stevens, Mr. Spaulding opened the debate n’pbn it in the following speech :

“ Mr. CHAIRMAN—This subject is a very dry one, but it is intensely interesting at the present time.  I propose to discuss the bill reported by the Committee of Ways and Means, with the amendment of the gentleman from Pennsylvania, so far as I shall be able during the hour allotted to me under the rules of the House.

The immediate requirements of the Treasury are not less than $100,000,000.  Before you can pass this bill through both Houses, have it approved by the President, and get bonds and notes engraved, printed and issued, at least $50,000,000 more will be required.  The pressing demands upon the Treasury between this and the first of next month, for the pay of soldiers and other creditors, may be put down at $150,000,000.  The gold and silver in the banks in New York, Boston and Philadelphia, on the first of this month, probably did not exceed $49,000,000 ;  to which you may add the gold and silver in all other banks in all the loyal States, as will appear in official reports to the first of January, 1863, and the whole sum will not exceed $87,000,000.  All this coin is necessary for the banks to take care of their own liabilities ;  but even if the Secretary could, on the credit of the Government, by a sale of bonds at any sacrifice, or by the aid of the military power, visit every bank in the country, and by force compel all this coin to be paid into the Treasury, it would not pay fifty cents on the dollar on the demands due from the Government, and which ought to be paid in the next twenty days.  It is therefore perfectly plain that even the small sum of $150,000,000, now due, cannot be paid in gold.  It would be a gratification to me, and, I doubt not, to every, other loyal citizen, if it were otherwise.  It is no fault of the Secretary or of Congress that gold cannot now be paid to the soldiers and other creditors.  It is simply an impossibility, by any plant, to get enough for that purpose.  There was never a more pertinent application of the old maxim than when applied to our present condition, ‘ when we cannot do as we would, we must do as we can.’

I have had a strong desire to provide money upon a specie basis, for the support of the army and navy, during the pending struggle to preserve the Constitution and the National Union.  I would much prefer to pay gold and silver to all the creditors of the Government.  During the first six months of the war, I was in hopes that our expenditures might be kept within limits that would admit of such a financial policy.  I believe that this was the earnest wish of the Secretary of the Treasury, and of every member of the Committee of Ways and Means.  But with an army in the field of from seven hundred thousand to one million of men, to be fed, clothed and paid, and all the material of war provided to make them efficient for active duty, it was very soon ascertained that the coin in the country, amounting only to about $250,000,000, if every dollar held by the banks and the people could have been availed of, was far too small to meet these large expenditures.  We could not shut our eyes to the vastness of the volume of debt that was open before us.  It was very soon made apparent that our national debt would, at an early day, reach $2,000,000,000, equal to half the debt of Great Britain ;  and that it would be utterly impossible to make loans on a specie basis fast enough to meet such enormous expenditures.

At the last session, and after there had been a general suspension of specie payments by the banks and the Government, Congress authorized the issue of $150,000,000 of legal tender notes ;  and by another law, passed a few months later in the session, an additional issue of $150,000,000 was also authorized, but the Secretary was required to hold in reserve $50,000,000 to meet any calls that might be made for temporary deposits in the sub-Treasury.  We all hoped that this would be all the legal tender notes that would be necessary.  Congress also authorized the Secretary to borrow $500,000,000, payable in twenty years, and redeemable at the pleasure of the Government after five years, bearing interest at the rate of six per centum per annum, payable half-yearly in coin, and gave him authority to sell them at any time ‘at the market price,’ to raise money to carry on the war; and further authorized the holder of any legal tender notes to convert them at any time, at par, into these six per cent. bonds.

The Secretary has paid out nearly $250,000,000 legal tender notes, being all that he was authorized to issue ;  and notwithstanding he has had authority for the last ten months to sell $500,000,000 of five-twenty six per cent. bonds, at the market price, he has only disposed of about $25,000,000, and has still authority to sell $475,000,000 at the market price, and take his pay for them in legal tender notes.

One of the reasons why more of these bonds have not been disposed of is, that there has been no redundancy of currency, and it has been difficult for the Secretary to get legal tender notes on a sale of the bonds and seven-three-tenths notes that he has already negotiated.

The War and Navy Departments have almost unlimited power to contract debts for the supply of the army and navy.  The volume of supplies and supply trains for your army are enormously large ;  and extending over such a widely extended field of military operations as that in which our several army corps are engaged, no one can fail to see that it is next to impossible to estimate accurately the amount to be appropriated for a year in advance.  But it is painfully certain, that with the present army in the field, there is no way of limiting the amount of expenditures when they are actively operating to put down so gigantic and desperate a rebellion.

We know that the liquidated and funded debt is already large, and that there is a large accrued indebtedness, which ought to be paid at an early day, but without any adequate means in the Treasury to pay it.  There is a large amount due to the soldiers that must be paid at the earliest moment possible.  The soldiers now on the field of battle, or encamped in front of the enemy, enduring all the perils and hardships of war, many of whom have not received their pay for months, ought not to be put off any longer.  They can hardly be expected to perform their duties with alacrity, unless they are promptly paid, especially when they know, as many of them do, that their families at home are suffering for the want of the means of life.  It is an imperative necessity that the means for paying the army and navy should not be delayed any longer.  If the Secretary cannot raise the money to pay the creditors of the Government by a loan on five-twenty six per cent. bonds at the market price, other authority must be given him to raise the money, and Congress ought to confer that authority upon him as soon as possible.

The time has arrived when our finances must engage the earnest and united attention of all loyal Representatives.  We were in great peril last year, but our dangers are now two-fold what they were then.  It was very difficult last year to provide the money to meet the large appropriations made for the support of the army and navy.  It will be still more difficult to meet the enlarged requirements of the current and the next fiscal year.  The army bill alone appropriates over $731,000,000, which, added to the estimates of all the other expenditures for the fiscal year ending June 30, 1864, amount to the enormous sum of $1,095,431,183.56, to which must be added the amount still required for appropriations and deficiency for the year ending June 30, 1863, and which, according to the report of the Secretary of the Treasury, amounted on the 1st of December last to the sum of $551,221,131.59, making the whole aggregate required to meet appropriations during the next eighteen months $1,646,634,315.15.


Particulars of the public debt outstanding January 2, 1863 :

Loan of 1842 in course of payment
Loan of 1847
Loan of 1848
Loan of 1858
Loan of 1860
Loan of 1861, act of February 8, 1860
Loan of 1861, act of July 18, 1861
Loan of 1862, five-twenty six per cent
Texas indemnity
Oregon war debt
Texas debt
Old funded and unfunded debt
Treasury notes under acts prior to 1857
Treasury notes under acts subsequent
Treasury notes seven-thirty per cent. interest
Temporary deposits at four per cent
Temporary deposits at five per cent
United States notes, legal tender and receivable for customs
United States notes, legal tender
Postal currency less than one dollar
Certificates of indebtedness, six per cent
$ 2,883,364.11
Requisitions on the Treasury for soldiers’ pay and other creditors, due but not paid59,117,597.46
Total funded and unfunded debt to January 2, 1863, according to the books in the Treasury Department 783,804,252.64
To which may be added the estimates of appropriations made and asked for to July 1, 1864, (including $100,000,000 that may be undrawn at the end of the year, and which will be due though not paid), amounting to, say 1,216,197,745.35
Public debt estimated to July 1, 1864, if the war continues on the same scale to that time$ 2,000,000,000.00

How is this large sum to be obtained ?

The Secretary of the Treasury, in his annual report, indicates two modes of obtaining it, as follows :

1.  A national bank bill.

2.  By loans in some of the forms heretofore authorized.

I propose to examine these modes of obtaining the money in the order above stated.

1.  A national bank law.  It is proposed by this bill to authorize the formation of banking corporations in all parts of the country, with the usual powers of State banks.  They are to have the power to issue bank notes to circulate as money, and to be secured by United States stocks, deposited in the Treasury Department as security for the redemption of the currency thus issued.  This bill in all its essential features is like the free banking law of the State of New York.  It proposes to nationalize all the bank currency of the country by the adoption of such a coercive policy toward existing banks as will compel them to throw up their present State charters, and organize anew under this bill.  A tax of two per cent. per annum is proposed on all State bank circulation, in addition to the State, county and city taxes which State banks are compelled to pay under State laws, and in addition to the internal revenue tax of three per cent. on their profits, making an aggregate tax upon State banks of about five per cent.  By this hostile policy toward existing banks, it is proposed to compel them to surrender their present chartered rights, to make a market for United States stocks, to be deposited in the Treasury Department as a basis for national bank circulation under this new system, to the amount of $250,000,000.

It is anticipated that in the course of a few years, and certainly as soon as the system goes fully into operation, United States bonds will be deposited to this amount.  There is no provision requiring new banks, organized under this bill, to redeem their circulating notes in coin.  They are to remain under suspension of specie payments, the same as existing banks, until there is a general resumption on the part of the Government and the banks, long after the close of the war.  The central idea of the measure, as stated in the Secretary’s report, ‘is the establishment of one sound uniform currency, of equal value throughout the country, upon the foundation of national credit, combined with private capital,’ and making this the settled financial policy of the country.  This is the scheme proposed.  The first question presented is :  will this materially aid the Government in the present exigency ?  I think it will not, and the Secretary frankly admits that ‘little direct aid is to be expected from this plan during the present, and not very much, perhaps, during the next year.’  We have already issued, and put into circulation, legal tender notes direct from the Treasury, and without the machinery or expense of a national bank, to about the sum of $250,000,000.  These Treasury notes are based, for their security and ultimate redemption, upon the good faith of the people and all their property.  For what currency we need in the pending struggle for national existence, will it be wise to attack the State banks ?  Will it be wise to raise up powerful enemies in the States to oppose any of the measures of the Government ?  The State bank system is older than the Constitution.  It has become deeply rooted.  Immense interests are involved in the banks organized all over the country under the protection and guarantee of State sovereignty.  Individuals have, in good faith, paid in their money to establish these banks.  Vast interests are involved in various ways.  They are intimately interwoven with the commerce and business of the country.  In the State of New York alone over $19,000,000 of stocks and bonds, many of which have been purchased from the State at a large premium, constitute the security for the redemption of their circulating notes.  The State of New York has now the best banking system in the world.  These banks are under much more careful supervision, of a superintendent in their midst, than they would be under an officer residing as far off as Washington.  The State banks have been liberal in making loans to the Government in this hour of the nation’s greatest need, and their stockholders, directors, and managers are mostly loyal and patriotic.  Still further aid will be solicited and expected from the existing banks.  Will it be wise to make demands upon them that are not made upon all other property ?  Any invidious discrimination against them, in the way of taxation, it seems to me, would be unjust. * * * * *

I am not opposed to a national bank, nor am I disposed to interfere with State banks.  Both systems of banking may be legitimate within their sphere of action.  I am willing that the country should have both.  I am willing that they should go on pari passu and in competition with each other ;  but I am unwilling to make war at this time on the State banks, because I do not believe that the benefits to be derived from such a course will sufficiently compensate for the evils that will follow any attempt to destroy the present State bank system.

I now propose to examine the constitutionality of these two systems of banking.  If it can be shown that a national bank is constitutional, it can be more clearly established that State banks are also constitutional.  Jackson, Jefferson, and other statesmen always insisted that the Constitution did not empower Congress to charter a national bank ;  and the former was especially favorable to State banks.  (For Mr. Jefferson’s opinions see his letter to Hon. John W. Eppes, chairman of the Finance Committee, bearing date November 6, 1813, wherein he opposes the charter of a United States bank.)


I have no doubt that the general principle of the national bank bill proposed by the Secretary of the Treasury is constitutional.  It is true that there is no express grant of power in the Constitution to incorporate a United States bank.  The power to create a bank is incidental to the powers expressly granted.  The national bank proposed may be considered an appropriate means to carry into effect many of the enumerated powers of the Government.  By its provisions it has a direct relation to the national debt, to the power of collecting taxes, internal duties and excises ;  to that of borrowing money, to that of regulating commerce between the states, and to that of raising money to maintain the army and navy.  It would, no doubt, be a useful instrument in administering the fiscal and financial operations of the Government, and it would moreover, in time, be a useful support to the credit of the Government, by providing a market for a considerable amount of the bonds issued in the prosecution of the war.  (See Hamilton’s celebrated argument submitted to President Washington, in favor of the constitutionality of the United States Bank, in 1781 ;  McCullock vs.  The State of Maryland, 4 Wheat. R. 422-3, Chief Justice Marshall’s opinion.)


In the case of Briscoe vs.  The Bank of the Commonwealth of Kentucky, (11 Peter’s R., 317,) Judge McLean laid down the doctrine that a State cannot emit bills of credit, or, in other words, it cannot issue that description of paper, to, answer the purposes of money, which was denominated before the adoption of the Constitution, “bills of credit.”  But a State may grant acts of incorporation for the attainment of those objects which are essential to the interests of society.  This power is incident to sovereignty ;  and there is no limitation in the Federal Constitution on its exercise by the States in respect to the incorporation of banks.

At the time the Constitution was adopted, the Bank of North America and the Massachusetts bank and some others were in operation.  It cannot, therefore, be supposed that the notes of these banks were intended to be inhibited by the Constitution, or that they were considered bills of credit, within the meaning of that instrument.  In fact, in many of their most distinguishing characteristics, they were essentially different from bills of credit, in any of the various forms in which they were issued.

If, then, the powers not delegated to the Federal Government nor reserved to the States are retained by the States or the people, and, by a fair construction of the term bills of credit, as used in the Constitution, they do not include ordinary bank notes, does it not follow that the power to incorporate banks to issue these notes may be exercised by a State ?

A uniform coarse of action, involving the right to the exercise of an important power by the State government for three-fourths of a century, and this almost without question, is no unsatisfactory evidence that the power is rightfully exercised to charter banks to issue bank notes to circulate as money.  The Supreme Court of the United States decided in this case that the act incorporating the Bank of the Commonwealth of Kentucky was a constitutional exercise of power by the State of Kentucky ;  and the notes issued by the bank were not bills of credit, within the meaning of the Constitution of the United States, but were ordinary bank bills, issued and circulated as currency.

It was argued in this case that if the Bank of the Commonwealth of Kentucky should be declared unconstitutional by the court, all State banks founded on private capital would be unconstitutional.  Justice Story, who gave a dissenting opinion in that case, denied this position, and declared that the States may create banks as well as other corporations upon private capital, and, so far as the prohibition in the Federal Constitution is concerned, may rightfully authorize them to issue bank bills or notes as currency.  The Constitution does not prohibit the emission of all bills of credit, but only the emission of bills of credit by a State ;  and when I say by a State, I mean by or in behalf of a State in whatever form issued.  It does not prohibit private persons, or private partnerships, or private corporations, (strictly so called,) from issuing bills of credit.

In the case of Darrington vs. The State Bank of Alabama, (13 Howard Reports, 12,) the Supreme Court of the United States decided that the bills of a banking corporation, which has corporate property, are not bills of credit within the meaning of the Constitution, although the State which created the bank is the only stockholder, and pledges its faith for the ultimate redemption of the bills.

It must not be understood from anything I have said, that I am in favor of an expansion of the circulation of existing banks.  On the contrary, I Am opposed to it.  The existing banks should be kept under close supervision ;  and for all increase in their, circulation, since they suspended specie payments, I am entirely willing that some policy should be adopted by the States, or General Government to prevent them from inflating the currency.  I am willing that a tax of two per cent. should be levied on all their increase of circulation since the first of January, 1862.  This would be a tag on their abuse of chartered privileges, and not a blow aimed at the total destruction of all banks alike, good and bad.  What I oppose is an attempt on the part of Congress to destroy the vested rights of citizens, which they hold under the guarantee of State sovereignty, and which are to be protected as sacredly as any other chartered rights or property held under State laws.  Let all property be taxed as nearly equal as possible, leaving no just cause for complaint from any class of citizens.

Having shown that the proposed national bank bill is not only unjust in some of its provisions, but that it will not yield any considerable amount of money to meet the appropriations for the current and next fiscal year, the other question to be considered is :

2.  Can the money be obtained by loans ?  It will be recollected that the amount to be provided for, over and above the sums to be realized from duties on imports and internal revenue, exceeds the sum of $1,000,000,000.  This is a large sum to be borrowed in the ensuing eighteen months.  As I have before stated, over $2,500,000 will be required every day, Sundays included, between this and the first day of July next.  The receipts from postal currency, customs and taxes during that time will not probably exceed the sum of $600,000 per day, leaving $1,900,000 to be obtained daily in some form by loan.  Congress, by its legislation at the last session, has, to a considerable extent, changed the standard of value for all business operations within the United States.

The standard of value fixed by Congress is legal tender Treasury notes, convertible at any time into United States specie-paying bonds, bearing interest at the rate of six per centum per annum, payable half-yearly in coin, based upon adequate taxation upon the entire property of the country.  Legal tender notes constitute the national currency now established by law.  All exchanges of property, all contracts, and all loans, are based upon the value of legal tender notes and United States six per cent. bonds.  The law of Congress declares that these notes shall be lawful money, and a legal tender in payment of all debts, public and private.

The Secretary states in his Annual Report that previous to the first of November, 1862, ‘the coin had been practically demonetized and withdrawn from use as currency, or as a basis for currency.’ * * * *

‘ That on the suspension of specie payments, and the substitution for coin of United States notes, convertible into six per cent. specie-paying bonds, as the legal standard of value, gold became an article of merchandise, subject to the ordinary fluctuations of supply and demand, and to the extraordinary fluctuations of mere speculation.’

Gold does not circulate at all as currency, and there is no probability that it will circulate as money for several years to come—certainly not during the progress of this gigantic war to put down the rebellion.  This is to be regretted, but it cannot be avoided.  We have the monster rebellion by the ears, like the backwoodsman who held the ferocious wolfs—if we let go, he will destroy us ;  we must therefore hold on till we subdue him.  No compromise can be made.  The rebels will not negotiate on any basis except that of separation and an acknowledgment of their independence.  The war, therefore, must go on.  While the war lasts the magnitude of the expenses will be so great that there is not coin enough in the country to carry it on with gold and silver.  It cannot be obtained.  We must try to mitigate, as far as we can, the evils growing out of the necessity of making legal tender notes the standard of value.

You cannot dispose of your twenty years six per cent. bonds for gold without submitting to a loss of over thirty cents on every dollar ;  in other words, for every dollar of bonds issued you can only get seventy cents in gold.  Even of you should be willing to submit to this sacrifice, it is not at all probable that you could negotiate $25,000,000 of bonds for gold before you would be obliged to submit to a sacrifice of fifty cents on every dollar sold.  Not because your bonds are not good, dollar for dollar, as gold, but because the whole amount of gold in the country that could be had for circulation does not probably exceed $250,000,000.  Not a sufficient sum to carry on the immense operations of the people and the Government at this time, even if it could all be brought out and put into circulation—a thing wholly impracticable at this time.  No one at all acquainted with monetary affairs believes that we can make sale of any considerable amount of our six per cent. bonds at over fifty cents on the dollar for gold—a sacrifice too great for this House to seriously consider, if any other mode can be devised which is practicable.  It is believed to be practically impossible to negotiate your bonds for gold without too great a sacrifice.  If you cannot negotiate loans for gold, will it be wise to change the independent Treasury law so as to allow loans to be negotiated for notes of suspended banks ?  There was a general suspension of specie payments by the banks and the Government on the 31st of December, 1861.  In February following, Congress passed the law for the issue of legal tender notes, and authorized the Secretary to make loans, and receive these notes in payment ;  but the Government has not deemed it best to take suspended bank notes in payment for loans or any other dues to the Government.  I do not think it wise to adopt that policy at this time.  The question then arises, can you sell bonds enough every day and get your pay for them in legal tender notes already issued ?  It is perfectly apparent to all who are acquainted with the money market that this cannot be done.  Currency has been scarce all the time for the last eight months, and is now very difficult to be obtained in sufficient quantity to meet the business wants of the country.  In many places through the interior of the States, bankers and business men have been obliged to pay as high as one-quarter and one-half per cent. premium to get currency (bank bills and greenbacks) to carry on ordinary business operations.

It is well known that all the New England and New York country banks redeem their bills now at the Suffolk Bank, Boston, and the Metropolitan Bank, New York, precisely as they did before the suspension of specie payments.  This system checks any tendency to over issue, and is a touchstone by which to test daily the demand for bank bills.  If they are not needed for legitimate business, they flow in rapidly to the redeeming banks, but if they are wanted they stay out.  This test is unerring.  The daily redemptions, for months past, have not been half what they were when the voluble of bank circulation was less by a third than it is at this time.  What causes this scarcity of currency ?  In the first place, as before stated, gold and silver no longer circulate as currency within the United States.  Gold is only required to settle foreign balances, pay custom duties and interest on the public debt.  It is bought and sold for these purposes as a commodity, but it does not circulate as money in ordinary business operations.  Its place is supplied by bank bills and legal tender notes.  In the next place, the large increase of business suddenly created by such a gigantic war as we are now prosecuting, has largely increased the demand for a larger volume of currency than was ever required before.

There has been a large demand for currency in the western States to purchase and bring forward the immense crops that have been produced during the last two years.  The winding up of a large number of badly organized and badly managed banks in those States left a large vacuum to be filled by bills of solvent banks and legal tender notes.  The Government has been buying largely, in all parts of the country, food, clothing, and all munitions of war, beside the large sums required for pay and bounty money of the volunteer soldiers that have gone forth from all the States.  No doubt considerable amounts of this money still remain in the hands of the soldiers themselves and their families, practically withdrawn from circulation for the time being.  Fifty, one hundred, and as high, even, as two hundred dollars, were paid for volunteers to fill up the two last calls made by the President.  Fifty dollars paid to each soldier, to the number of six hundred thousand, would require $30,000,000 to say nothing of the amounts required for the army previously sent into the field.  It is perfectly plain where the currency has gone during the past six months.  The operations of the array and navy alone have required in all forms, not less than $200,000,000 in bank bills and legal tender notes.  It is no wonder that currency has been scarce in all the ordinary channels of trade and business.  It is still very scarce and difficult to be obtained for ordinary business purposes in New York and all the western States.  I am assured by bankers and the best financiers in New York, that if the Secretary should put on the market a proposal for a loan of $50,000,000 it could not be taken, for the reason that the legal tender notes could not be obtained in sufficient quantity to pay for a loan of that amount.  It is doubtful whether a loan of $15,000,000 could be taken at this time for the want of currency to pay for it.

It is also very difficult for the collectors of internal revenue to make collections on account of the scarcity of legal tender notes.  Legal tender notes are not plenty among the people who are required to pay your taxes ;  they are continually asking for more.  Why, then, should we be alarmed at a further issue of legal tender notes ?  So long as they are wanted by the business of the country, demanded by the soldiers for their pay, begged for by all the needy creditors of the Government, surely Congress ought not to hesitate in an exigency like the present.

It is no time now to, depress business operations, or hold back the pay due to honest creditors of the Government.  It is much better to stimulate, make money plenty, make it easy for people to pay their taxes, and easy for Government to make loans.  This is the only way in which we can go on in the present imperiled condition of the country.

During the last war with Great Britain, Jefferson, in letters written during that period, repeatedly urged upon the Government the propriety of issuing Treasury notes of convenient denominations to circulate as money.  In his letters to John W. Eppes, chairman of the Finance Committee, under dates of June 24 and September 11, 1813, he urged upon Congress the importance of issuing Treasury notes whenever loans could not be made upon satisfactory terms.  In one of his letters [to James Medison], bearing date October 15, 1814, he says :  ‘ I never did believe you could have gone beyond a first and second loan—not from want of confidence in the public faith, which is perfectly sound, but from a want of disposable funds in individuals.  The circulating fund is the only one we can command with certainty.  It insufficient for all our wants ;  and the impossibility of defending the country without its aid as a borrowing fund renders it indispensable that the nation should take and keep it in their own hands.’  He admitted that the issue of Treasury notes would banish gold and silver from circulation, and in another letter adds :  ‘ In such a nation there is one and only one resource for loans, sufficient to carry them through the expenses of a war ;  and that will always be sufficient, and in the power of an honest Government, punctual in the preservation of its faith.  The fund I mean is the mass of circulating coin.  Every one knows that, although not literally, it is true that every paper dollar emitted banishes a silver one from circulation.  A nation, therefore, making its purchases and payments with bills fitted for circulation, thrusts an equal sum of coin out of circulation.  This is equivalent to borrowing that sum ;  and yet, the vendor receiving payment in a medium as effectual as coin for his purchases or payments, has no claim to interest.  And so the nation may continue to issue its bills as far as its wants require, and the limits of the circulation will admit.’

So it will be seen that Jefferson, so far from regarding it as an evil that coin should be banished from circulation during war, regarded it as a great advantage ;  because the Government would then be able to circulate its own notes, without interest, in place of the coin of individuals.  Treasury notes issued by the Government, he regarded as a loan from the people, without interest, and the only available resource in time of war.

He urged ample taxation as a basis for Government paper issue, and adds :  ‘ That during the interval between war and war, all the outstanding paper should be called in, coin be permitted to flow in again, and hold the field of circulation until another war should require its yielding place again to the national medium.’  An essential feature of the financial plan adopted last year was the passage of the tariff and internal revenue laws.  It was of great consequence that our public debt should rest upon a solid foundation.  The property of the country, liable to taxation, amounted in 1860 to over $16,000,000,000, and Congress having ample power to tag it to the full amount necessary to pay all Government debts, it was agreed by all parties that it was necessary to impose taxes upon this property, and the profits of business based thereon, in various forms, for an amount sufficient to pay the ordinary expenses of the Government on a peace footing, and all the interest on the extraordinary war debt.  The ordinary expenses of the Government in time of peace do not exceed $75,000,000, and the interest on the war debt will not probably exceed during the next year the sum of $45,000,000, while it is believed that the revenues derived from the tariff and internal revenue will not be less than $200,000,000, leaving $80,000,000 as a sinking fund to keep down the war debt.  It is believed that the revenue realized on the present tariff and tag law will pay ordinary current expenses of the Government, and interest on the war debt when it caches $2,000,000,000, which is only half the present debt of Great Britain. * * * * * * * * *

Upon a full examination of the whole subject, and with a deep solicitude for the success of the measures that may be finally adopted by Congress, I see no way in which the ways and means can be obtained to carry on the Government for the next eighteen months, except by a continuance of the measures adopted at the last session, and which have so successfully carried us through the perils of the last year, with such additions and modifications as experience has shown to be necessary.

An additional section has been proposed to the financial plan adopted last year.  There is a large amount of available means in the country, which, if it can be drawn into the national Treasury, will be of most essential service at this time.  It has been the subject of much consideration as to the best form in which it could be offered to the people to induce them to let the Government have the money for which—they have no present use, and be allowed a fair compensation for its use during the time it is borrowed by the Government.  Interest bearing Treasury notes are believed to be the best form in which it can be offered to the public.


Under the operation of this new section, these interest-bearing Treasury notes and the legal tender notes would be convertible and reconvertible into each other at the will of the holder ;  and as both can be paid out to the creditors of the Government, they will soon find their way into all the channels of business in all parts of the country.  The interest-bearing notes will be laid aside, out of circulation, better than gold as an investment, because yieding a fair rate of interest ;  while the legal tender notes will continue to circulate as money.  The object of this section is to reach the money invested in temporary loans, in all the cities, villages and towns throughout the country, and apply it to sustain the Government at this time.  A large amount of money is now held by individuals and corporations, bearing a small rate of interest, or no interest at all, which is on deposit in banks or in private safes and drawers, waiting a good opportunity for permanent investment in the purchase of stocks, mortgages, or other property.  Forehanded farmers, mechanics, manufacturers, merchants, and even retired capitalists would like some convenient mode of investing their surplus means at fair rates of interest, and with a certainty that when a good opportunity is presented to make some business transaction they can have legal tender notes returned to them to use as money.  Notes issued at six per cent. interest, and in denominations of $20, $50, $100, $200, $500, $1,000, $2,000 and $5,000 would be in a convenient form for all classes ;  and at this rate of interest there is no doubt that large amounts would be drawn into the Treasury.  Savings banks, trust companies, and other places of deposit, now overburdened with money, would, no doubt, have drawn from them considerable amounts for investment in these interest-bearing notes.  Guardians, executors, and trustees would largely invest their money in these Government securities.  Insurance companies might invest in them, get six per cent. interest, and be sure, in cases of loss, to get legal tender notes with which to pay their outstanding policies.  Even savings banks and trust companies might invest a part of their funds in these notes, and be able to respond when their depositors should call for their money.  The operations under this section would be like deposits in banks, and it is very probable that $300,000,000 might be reached in a reasonable time.  It would be, in fact, a national savings bank, so arranged that its benefits can be extended to all, while, at the same time, the Government would be able to realize a large amount of money to aid in the prosecution of the war.  Some would draw out their funds from time to time, as occasions should arise for business operations, while others again would invest in new notes issued under the authority to re-issue them ;  and the average amount in the Treasury would be about the same from week to week.  The average deposits in the banks in the city of New York are about the same.  Their weekly published statements show that there is no great variation in the amount for weeks and months. * * * * * *

I was in favor of giving to them the highest legal sanction and the most desirable character possible, within the power of the Government, not above six per cent. interest, in order to prevent their depreciation.  It would have cost so little to have given them this most desirable character of immediate convertibility, that I strongly urged its adoption, and upon the same principle that I urged the legal tender clause last year.  The more desirable the notes are as an investment, the longer they would stay out, and the higher would be their price in the market.  I trust, however, that, in their present shape, they will be sought after, and be a valuable aid to the people in the payment of internal revenue, and materially assist the Secretary in the arduous duties of furnishing the means for a vigorous prosecution of the war.

In nearly all the plans that have been submitted to the committee for providing means to carry on the Government for the next eighteen months, it has been proposed to issue more legal tender notes, if the exigencies of the service shall render a further issue necessary.  The Secretary of the Treasury, in submitting the bill proposed by him for a loan of $900,000,000, says :  ‘ The committee will observe that the provision in respect to loans is very general.  Under it the Secretary will have the power to borrow money in any of the ordinary forms, or, if exigencies require, to make additional issues of United States notes.’  I have an aversion to any considerable further issue of legal tender notes, and can only consent to it as an imperative necessity.  I think too large an issue will tend to inflate prices ;  but I do not see how it can be avoided.  I do not see how the soldiers are to be paid, or how the Government can be carried on, in any other way.  I shall therefore vote for this provision, in connection with the other provisions of the bill, as a necessary measure to enable the Government to prosecute the war.


Sir, since the first gun was fired on Fort Sumter, my conviction has been deep and abiding that this was to be a long, expensive, bloody, and desperate conflict ;  and that it would be very difficult to determine in advance what results would flow from such a deadly encounter.  I have never for a moment doubted that the leading conspirators meant to establish and maintain a separate government, and a total separation from the free States.  This has been their deliberate purpose from the beginning.  Nearly two years of concerted action, embittered by the most deadly conflict with the armed power of this Government, has consolidated their strength.  They have organized a form of civil government, under a constitution, with Jefferson Davis as President for six years, who is surrounded by a cabinet, congress, judiciary, and all other officers necessary to keep it in full operation.  This rebel government has organized and maintained a powerful army, which has been able thus far to successfully repulse every attempt that has been made on our part to take their capitol, distant only one hundred and twenty-five miles from the Hall in which we are now sitting.

Sir, I never believed, and do not now believe, that the cabal at Richmond, the only responsible power to which overtures of peace can be made, will listen to any offers of compromise, however liberal, which will induce them to throw up their present de facto government, come back into the Union, and submit to the constitutional Government over which Abraham Lincoln presides, or any other President that can be elected by the loyal people of the United States.  Jefferson Davis and all the high officers about him are men of high political aspirations.  Inordinate ambition, and a desire to rule, were the chief motives that prompted them to rebel against the Constitution and Government they had sworn to support.  Those who suppose that Mr. Davis and his co-conspirators will voluntarily negotiate to surrender the power they now hold, have but little appreciation of the motives that stimulate them to so desperate and determined action.  These desperate men are in earnest, and will fight to the death.  They are men of ability, fighting for power, for empire, and will neither compromise nor surrender unless they are compelled to do so at the point of the bayonet, pressed forward by an overwhelming and crushing force.  They must be whipped, badly whipped, before they will compromise or surrender.  Any expectation to the contrary is not only fallacious, but mischievous in its consequences, because it divides and weakens the people in the loyal States, and prolongs the war.

Sir, I have no expectation that this rebellion will be crushed in many years unless there is a more united and a more determined effort on the part of the people in the northern States.  The great fact to be ascertained by all doubting men is will Jefferson Davis compromise on any terms short of a separation ?  Will he voluntarily surrender the power he now holds ?  Will he receive any proposal for peace except on the terms of dividing the old Union, and a recognition of his government over the southern half.  For myself, I have no desire to compromise, and no proposals to make to Mr. Davis or any of his cabinet ;  but those who do wish to make peace with the rebel government ought to submit their propositions at once, so that all compromisers may know what to do.  If no compromise can be made with the rebel government, short of dissolving the Union, it should be known at the earliest moment possible, so that all doubters and cavilers may decide immediately what they will do.  The daily expenses of the war are enormous.  The public debt is running up at a fearful rate.  This war ought not to be procrastinated a day longer by divisions at home.  This state of things cannot be continued for any considerable length of time, without entailing a public debt so large that it will burden present and future generations.  The best blood of the nation flows freely.  Large numbers are killed in battle, but more die from exposure and disease than in any other way.

Sir, all this blood and treasure is given freely to crush the rebellion and maintain the Union.  Why have we not been more successful ?  It is because we need more earnestness, greater determination manifested, better discipline in the army, and a closer unity of action.  Unless these essential requisites can be had, and that speedily, I have very little hope of crushing the rebellion.  The way to secure a permanent peace is, first of all, to annihilate the rebel forces.  The army between Washington and Richmond must be beaten.  The power of the rebel government is in their army.  If they can maintain their military strength, their government will be perpetuated.  If we cannot achieve decisive victories over the rebel forces, the Union is lost.  The Union is priceless ;  it ought to be maintained, and it will be maintained if all citizens rise above party and perform their whole duty to the country.  The people, our commanding generals, Congress, and the Executive, ought all, without regard to party distinctions, to rouse up to the magnitude and perils of the crisis, and by unity of action put forth an earnest and determined effort to crush the rebel armies.  No compromise can be made or ought to be made.  Our only hope is in military success.  This is the only way in which we can maintain our finances, and restore the national Union.


There was a large amount due to the army and navy, and complaints were being made in consequence of the delay in making payments.  The subject was discussed by the Military Committees of the Senate and House.  A resolution passed the house as follows :

“ WHEREAS, Grevious delays happen in the payment of money due soldiers ;  therefore, in order to ascertain if any, and what, legislation may be necessary to remedy such delays,
    Resolved, That the Secretary of the Treasury be requested to furnish to this House the reasons why requisitions of paymasters in the army are not promptly filled.”

The Secretary made answer as follows :

“ No one can feel a deeper regret than the Secretary that a single American soldier lacks a single dollar of his pay, and no effort of his has been wanting to prevent such a condition.  It is not in his power, however, to arrest the accumulation of demands upon the Treasury beyond the possibility of provision for them under existing legislation.”  * * * *
“ The Secretary, solicitous to regulate his action by the spirit as well as the letter of the legislation of Congress, did not consider himself at liberty to make sales of the 5-20 bonds below the market value ;  and sales except below were impracticable.”


Mr. Gurley, of Ohio, spoke of the great importance of our financial measures.

“ The Government which can raise the largest amount of money must, in the end, triumph ;  that a large army was essential to success, but the most essential thing was money or money means.  He did not agree with the Secretary in several things contained in his reports ;  the banking scheme, which the Secretary, admits would not afford any immediate relief, should be rejected ;  we need a sensible, practicable plan that will furnish immediate means to pay the army and navy.  He insisted that Congress, by the act of February 25, 1862, authorized the Secretary to sell $500,000,000 six per cent. 5-20 bonds at ‘the market value thereof,’ which he had not done, as intended by Congress, and the consequence was that the soldiers and sailors were not paid, as they ought to have been before this time.  Of course we do not call in question the motives of the Secretary, or deny his good intentions, but when the Secretary says, in his reply to the resolution of the House, that he had no authority, he was evidently mistaken in his construction of the law.  The words ‘market value’ do not mean par value, nor at any specified time or sum.  The market value was the price they would bring when offered in the market.  There has been no business day or week since the law was passed, when any of the many agents of the Secretary in New York could not have placed one million, or several millions, in the market, and sold them somewhere near par, to raise money to pay the army and navy.”

A joint resolution was proposed that provision ought to be made immediately by the Treasury Department to pay the sums due the soldiers and sailors, and that a preference should be given to this class of creditors.  Secretary Chase was consulted on the subject, and in a letter dated January 7, 1863, addressed to the Finance Committee, he stated that the amount then due to the army and navy was about $60,000,000, and that provision ought to be made for immediate payment.  He thought the temporary measure proposed might answer for present purposes, and concluded his letter as follows :

“ It should be regarded, however, only as an expedient for an emergency.  No measure, in my judgment, will meet the necessities of the occasion, and prove adequate to the provision of the great sums required for the suppression of the rebellion, which does not include a firm support to public credit through the establishment of a uniform national circulation, secured by bonds of the United States.  The joint resolution and amendment are herewith returned.
With great respect, yours, etc.,
Secretary of the Treasury.
Chairman Com. on Finance, U.S. Senate.”

After some disagreement between the Finance Committee of the Senate and the Committee of Ways and Means of the House as to the right of the Senate to initiate a bill of this kind, a joint resolution was passed by the House and concurred in by the Senate, by yeas 38, nays 2 ;  as follows :

Yeas—Messrs. Anthony, Arnold, Browning, Chandler, Clark, Collamer, Davis, Dixon, Doolittle, Fessenden, Foot, Foster, Hale, Harding, Harlan, Harris, Henderson, Howard, Howe, King, Lane (of Indiana), Lane (of Kansas), Latham, McDougall, Morrill, Nesmith, Rice, Sherman, Sumner, Ten Eyck, Trumbull, Wade, Wilkinson, Willey, Wilmot, Wilson (of Massachusetts), Wilson (of Missouri) and Wright—38.

Nays—Messrs. Powell and Saulsbury—2.

So the joint resolution was passed, and is as follows :

Joint Resolution to provide for the immediate payment of the army and navy of the United States.

WHEREAS, It is deemed expedient to make immediate provision for the payment of the army and navy ;  therefore

Be it resolved by the Senate and House of Representatives of the United States of America, in Congress assembled, That the Secretary of the Treasury be, and he is hereby authorized, if required by the exigencies of the public service, to issue on the credit of the United States the sum of one hundred millions of dollars of United States notes, in such form as he may deem expedient, not bearing interest, payable to bearer on demand, and of such denominations, not less than one dollar, as he may prescribe, which notes so issued shall be lawful money and a legal tender, like the similar notes heretofore authorized, in payment of all debts, public and private, within the United States, except for duties on imports and interest on the public debt ;  and the notes so issued shall be part of the amount provided for in any bill now pending for the issue of Treasury notes, or that may be passed hereafter by this Congress.

Approved January 17, 1863.”


The Speaker laid before the House the following message, in writing, from the President of the United States :

To the Senate and House of Representatives :

I have signed the joint resolution to provide for the immediate payment of the army and navy of the United States, passed by the House of Representatives on the 14th, and by the Senate on the 15th inst.

The joint resolution is a simple authority, amounting, however, under existing circumstances, to a direction to the Secretary of the Treasury to make an additional issue of $100,000,000 in United States notes, if so much money is needed, for the payment of the army and navy.

My approval is given in order that every possible facility may be afforded for the prompt discharge of all arrears of pay due to our soldiers and our sailors.

While giving this approval, however, I think it my duty to express my sincere regret that it has been found necessary to authorize so large an additional issue of United States notes, when this circulation and that of the suspended banks together have become already so redundant as to increase prices beyond real values, thereby augmenting the cost of living to the injury of labor, and the cost of supplies to the injury of the whole country.

It seems very plain that continued issues of United States notes, without any check to the issues of suspended banks, and without adequate provision for the raising of money by loans, and for funding the issues so as to keep them within due limits, must soon produce disastrous consequences.  And this matter appears to me so important that I feel bound to avail myself of this occasion to ask the special attention of Congress to it.

That Congress has power to regulate the currency of the country can hardly admit of a doubt ;  and that a judicious measure to prevent the deterioration of this currency by a reasonable taxation of bank circulation, or otherwise, is needed, seems equally clear.  Independently of this general consideration, it would be unjust to the people at large to exempt banks, enjoying the special privilege of circulation, from their just proportion of the public burdens.

In order to raise money by loans most easily and cheaply, it is clearly necessary to give every possible support to the public credit.  To that end a uniform currency, in which taxes, subscriptions and loans, and all other ordinary public dues, as well as all private dues may be paid, is almost, if not quite, indispensable.  Such a currency can be furnished by banking associations, organized under a general act of Congress, as suggested in my message at the beginning of the present session.  The security of this circulation, by the pledge of United States bonds, as therein suggested, would still further facilitate loans by increasing the present and causing a future demand for such bonds.

In view of the actual financial embarrassments of the Government, and of the greater embarrassments sure to come, if the necessary means of relief be not afforded, I feel that I should not perform my duty by a simple announcement of my approval of the joint resolution, which proposes relief only by increasing circulation, without expressing my earnest desire that measures, such in substance as those I have just referred to, may receive the early sanction of Congress.  By such measures, in my opinion, will payment be most certainly secured, not only to the army and navy, but to all honest creditors of the Government, and satisfactory provision made for future demands on the Treasury.

January 17, 1863.


“Mr. MORRILL, of Vermont, said we had often been called upon during this Congress to furnish means, to carry on the war.  The figures now are larger than ever before, being $900,000,000, and if the war should be prolonged to July 1, 1864, it is believed not to be too much.  He was constrained now to give his vote for this measure, although such as in the outset he did not support, and never should have countenanced as an original proposition, because he knew of no other so efficient for immediate relief to the Treasury, and so safe to adopt.  He should hold his opposition to legal tender in abeyance, so far as to allow money for the army and navy to be raised in this ways if it could be raised in no other.  He was willing to restrain excessive issues of State Bank circulation by a proper tax, but did not think it best at this time to engage in a struggle for its extinction.

He was opposed to the national bank bill which he said was urged with great zeal and ability by the Secretary of the Treasury, and gave his reasons at length why, in his opinion, it ought not to pass.  The new plan, fully executed, would obtain very little if any more aid from the banks than is already secured, and the Treasury at last, would find itself in actual possession of no more than a new dollar for an old one.  The Secretary admits in his annual report that ‘ little direct aid is, however, to be expected from this plan during the present, nor very much, perhaps, during the next year.’  ”


Mr. WARD, of New York, made an elaborate speech on the Finances and the currency.

“ The condition of our financial affairs and the regulation of the circulating medium are regarded with much anxiety by the people of this country, from motives of their own personal interest, and yet more from patriotic devotion to the cause of unity in our great struggle for national existence.  He was desirous of supporting the Government of his country in a vigorous prosecution of the war, but was opposed to the legal tender principle and voted against it.  My earnest desire is, and always has been, to furnish the Government with every resource and power necessary to the suppression of the rebellion.  From my solicitude for the re-establishment of the Republic, I desire to avert any increase of such paper money, as is now in use, knowing how injuriously it affects public confidence, enlarges expenditures by raising prices, lulls the public mind into false Security, and lessens the vigilance which prevents frauds.  He expressed himself in favor of a commission composed of the most wise and distinguished bankers and commercial men in co-operation with the Secretary to inquire into the best method of arranging our financial affairs.”


Mr. AMASA WALKER, of Massachusetts, made a well considered speech in favor of the general provisions of the bill.

“ He maintained that the vast expenditures involved in the prosecution of the war could not be raised except upon the credit of the Government.  No ordinary means of raising revenue were sufficient to meet a great emergency like the present.  The bill before us proposes measures of finance, currency and taxation.  1.  An issue of bonds.  2.  An issue of interest-bearing circulating notes, receivable for all Government dues, except customs.  3.  An issue of legal tender notes, known in common parlance as greenbacks.  4.  The issue of fractional parts of a dollar, to take the place of postal currency now in use.  6.  Provides for deposits of bullion in the public Treasury ad libitum.  6.  To tax the banks of circulation.  7.  A proposition that the public funds may be deposited in these, same banks, at the discretion of the Secretary of the Treasury.
    He did not approve of paying interest in coin on the bonds, it has already exerted a pernicious influence on the public funds.  He was in favor of the greenback circulation, and in favor of a six per cent. tax on State bank circulation, in order to drive it out, so as to give place to the national circulation.  He urged adequate taxation to sustain the public credit, and thought that these measures had become a stern military necessity, and indispensable to a successful prosecution of the war.

On the 16th inst. Mr. Hooper offered a substitute for the bill, which was ordered to be printed.  This substitute will be found printed at length in the Cong. Globe, p. 382.

After a long discussion, in which different members of the House participated, a vote was taken on the 23d inst. by tellers, in Committee of the Whole, on Mr. Hooper’s substitute—ayes 32, noes 67 ;  so the substitute was lost.  Several minor amendments were however made to the original bill, and on the 26th inst. a vote was taken in the House on the substitute offered by Mr. Stevens, and it was decided in the negative—yeas 37, nays 91.  The bill as amended was then passed without a division, and sent to the Senate for concurrence.

On the 13th of February the bill, after being amended, passed the Senate by the following vote :

Yeas—Messrs. Anthony, Arnold, Chandler, Clark, Collamer, Cowan, Davis, Dixon, Doolittle, Fessenden, Foot, Foster, Grimes, Harlan, Harris, Henderson, Hicks, Howard, Howe, King, Lane (of Indiana), Lane (of Kansas), Morrill, Nesmith, Pomeroy, Rice,, Sherman, Sumner, Ten Eyck, Wade, Wilkinson and Wilson (of Massachusetts)—32.

Nays—Messrs. Carlisle, Powell, Richardson and Wall—4.

So the bill was passed.

Three several Conference Committees were appointed on the disagreeing votes between the two Houses.  A compromise was finally made on the section taxing State bank circulation.  All the amendments were finally agreed to, and the bill passed.

SYNOPSIS OF $900,000,000 LOAN ACT.

The act to provide Ways and Means for the support of the Government.  Approved March 3, 1863.”

1.  The first section authorized a loan of $300,000,000 for the then current year, and $600,000,000 for the then next fiscal year, and to issue bonds therefor at not less than ten nor more than forty years, at not exceeding six per cent. interest, in coin, not exceeding in all $900,000,000.

2.  By section second of the same act the Secretary, in lieu of an equal amount of said bonds, was authorized to issue $400,000,000 of Treasury notes, bearing interest not exceeding six per cent., payable in lawful money, which notes, payable at periods expressed on their face, might be made a legal tender at their face value.

3.  By the third section $150,000,000 in amount of United States notes, made a legal tender, might be issued.  The restriction in the sale of bonds to ‘market value’ was repealed.  ‘ And the holders of United States notes issued under former acts, shall present the same for the purpose of exchanging them for bonds as therein provided, on or before the first of July, 1863, and thereafter the right to exchange the same shall cease and determine.’

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