In such a nation as this, there is one and only one resource for loans sufficient to carry through the expenses of a GREAT WAR, namely fundable Treasury Notes fitted for circulation as money, and based upon adequate taxation.

“ That in the interval between war and war, all the outstanding paper should be called in, coin be permitted to flow in again, and to hold the field of circulation until another war should require its yielding place again to the National Medium.”—JEFFERSON

The United States, at the breaking out of the rebellion, had no national bank currency, and no gold or available means in the Treasury, or Sub-Treasury, to carry on the war for the Union, and consequently the means to prosecute the war had to be obtained upon the credit of the government, and by taxation.  The fundable legal tender currency was the most available form of credit which the government could use in crushing the rebellion.  It was at once a loan to the government without interest, and a national currency, which was so much needed for disbursement in small sums during the pressing exigencies of the war.  It was indispensably necessary, and a most powerful instrumentality in saving the government and maintaining the national unity.

Experience has proved that, notwithstanding it was a forced loan, the end justified the means, and that no parties were materially injured by being compelled to receive this currency, so long as they could fund it at any time in six per cent. twenty years bonds.  Although it was a war measure—a measure of necessity and not of choice, and could only be justified on that ground, it has, for many years, exerted a most decisive influence over the property and material interests of every individual in the United States.  It has affected debtor and creditor, producer and consumer, and the price of labor and of every article consumed in every household.  It still exerts a mighty influence socially, commercially and politically, over the people of this great nation, and all the ramified and extensive business in which they are engaged.  Whether for good or evil, it has been and still is a most powerful element in all business affairs of the people, as well as the government, and the war debt of $2,500,000,000 incurred in maintaining the national union is more or less affected by the large volume of this currency still outstanding.

Having been requested to prepare a history of a measure of such transcendent importance as the legal tender act, and having in my possession a considerable number of documents, letters, and other materials relating to the subject, I have consented to put them into form, in order that the facts may be preserved for present and future reference, and which may be of some use in enabling the future historian to write a chapter on the financial history of the war.  These facts will be presented in the form of a narrative of the circumstances and events, of the most grave and extraordinary character, occurring in rapid succession, which led finally to the issue of legal tender Treasury notes, and which were endowed with the attributes of money, so far forth as the Government had power under the Constitution and the pressure of the crisis to impart to a paper currency that high and most important attribute of sovereignty.

I was a somewhat prominent though humble actor in originating and maturing the measure, but I do not claim any particular merit or demerit for what I did in preparing and aiding to secure the passage of the bill.  I was placed in a position where, if I performed my official duty, I must act, and must act with vigor and promptitude.  The perilous condition of the country did not admit of hesitancy or delay.  I endeavored, in the peculiar and responsible position in which I was placed, to do what I conceived to be my duty, and that is all I claim to have done.  My associates performed their duty with equal fidelity and usefulness.

As chairman of the Sub-committee of Ways and Means, it became my duty, in connection with my associates, to devise an adequate plan for obtaining the necessary means for prosecuting the war to a successful issue.  The rebellion, after the battle of Bull Run, had assumed most gigantic proportions.  An Army and Navy of over half a million of men had been hastily brought into the service of the United States.  The Capitol itself was guarded by a vast Army, under the command of General McClellan, which encircled it in all directions.  The Army and Navy thus in the service had to he paid, fed, clothed and provided with ships, gunboats, monitors and all the necessary material of war to make them effective in crushing the rebellion.  This required vast available means ;  where were these means to obtained ?  It was plain that they must come from the loyal people themselves, and that, from whatever source these means were to come, they must be obtained, as before stated, upon the credit of the government, then assailed and weakened by armed rebellion.

The banks in New York, Boston and Philadelphia had, during the summer and fall of 1861, loaned to the government very nearly the sum of $150,000,000 in gold, which had so exhausted their resources that it was very difficult for many of them to pay the last instalments due on the last loan of $50,000,000.  These banks, at the commencement of the war, possessed a large part of the available gold in the country, but in paying over to the Treasurer the gold on these loans, and in the disbursement of the same to sustain the Army and Navy, it became so scattered that it could not, to any considerable extent, be re-loaned to the government, nor could it any longer be made available as a reserve for the banks.  The banks were consequently in great danger of suspending specie payments at the time Congress assembled at its regular session in December, of that year.  Congress met on the 2d December, 1861.  The House, having been organized at the Extra Session in July by the election of the Hon. Galusha A. Grow, Speaker, proceeded at once to business.

On the 5th, the vacancies in the Standing Committees were filled up.  Hon. Samuel Hooper, of Mass., a new member, was appointed on the Committee of Ways and Means in place of Samuel Appleton, deceased ;  and Hon. Horace Maynard in place of Hon. John A. McClernand, who had been appointed a Brigadier General in the volunteer army.  The Committee of Ways and Means then consisted of


Owing to the pressure of business in the Treasury Department, Secretary Chase did not get his Annual Report ready to submit to the House until the 10th, and it was not printed and laid on the table of the Committee of Ways and Means until near the middle of December.

Soon after the report of the Secretary of the Treasury was received, finding a large volume of business in the Committee room to be disposed of, the Committee agreed to the appointment of two Sub-committees, namely,

One Committee on the National Currency bank bill, making of loans, issue of Treasury notes, bonds, and the mode of raising the means to carry on the war, consisting of


The other Committee was appointed on the Tariff, Internal Revenue, and taxation generally, consisting of three or four members, Mr. Morrill of Vermont, being chairman.  The appropriation bills were then in course of preparation, Mr. Stevens devoting a good deal of time in perfecting and passing them through the House, as chairman of the General Committee.  Mr. Phelps was at this time absent in Missouri, and remained absent for several weeks, looking after public affairs in that State, which were then in a very disturbed condition.

The Committee of Ways and Means having thus divided the subjects before it, and having referred the papers and documents to these Sub-committees, the Committee was prepared for efficient work.

The Sub-committee, of which Mr. Spaulding was chairman, examined with care the report of the Secretary of the Treasury, to ascertain what measures he proposed for providing the ways and means to support the government and carry on the war.  Here follows an extract from that part of the Secretary’s report which was referred to this Sub-committee, viz :

“ To enable the government to obtain the necessary means for prosecuting the war to a successful issue, without unnecessary cost, is a problem which must engage the most careful attention of the Legislature.  The Secretary has given to this problem the best consideration in his power, and now begs leave to submit to Congress the result of his reflections.

The circulation of the banks of the United States on the 1st day of January, 1861, was computed to be $202,000,767.  Of this circulation, $150,000,000, in round numbers, was in the States now loyal, including Western Virginia, and $50,000,000 in the rebellious States.  The whole of this circulation constitutes a loan without interest from the people to the banks, costing them nothing except, the expense of issue and redemption and the interest on the specie kept on hand for the latter purpose ;  and it deserves consideration whether sound policy does not require that the advantages of this loan be transferred ;  in part at least, from the banks, representing only the interests of the stockholders, to the Government, representing the aggregate interests of the whole people.

It has been well questioned by the most eminent statesmen whether a currency of bank notes, issued by local institutions under State laws, is not, in fact, prohibited by the National Constitution.  Such emissions certainly fall within the spirit, if not within the letter, of the Constitutional prohibition of the emission of ‘bills of credit’ by the States, and of the making by them of anything except gold and silver coin a legal tender in payment of debts.

However this may be, it is too clear to be reasonably disputed that Congress, under its Constitutional powers to lay taxes, to regulate commerce, and to regulate the value of coin, possesses ample authority to control the credit circulation which enters so largely into the transactions of commerce, and affects in so many ways the value of coin.  In the Judgment of the Secretary, the time has arrived when Congress should exercise this authority.  The value of the existing bank-note circulation depends on the laws of thirty-four States, and the character of some sixteen hundred private corporations.  It is usually furnished in greatest proportions by institutions of least actual capital, circulation, commonly, is in the inverse ratio of solvency.  Well-founded institutions, of large and solid capital, have, in general, comparatively little circulation ;  while weak corporations almost invariably seek to sustain themselves by obtaining from the people the largest possible credit in this form.  Under such a system, or rather lack of system, great influctions, and heavy losses in discounts and exchanges are inevitable, and not unfrequently, through failures of the issuing institutions, considerable portions of the circulation become suddenly worthless in the hands of the people.  The recent experience of several States in the valley of the Mississippi, painfully illustrates the justice of these observations ;  and enforces, by the most cogent practical arguments, the duty of protecting commerce and industry against the recurrence of such disasters.

The Secretary thinks it possible to combine with this protection a provision for circulation, safe to the community and convenient for the government.

Two plans for effecting this object are suggested.  The first contemplates the gradual withdrawal from circulation of the notes of private corporations, and for the issue, in their stead, of United States notes, payable in coin on demand, in amounts sufficient for the useful ends of a representative currencyThe second contemplates the preparation and delivery, to institutions and associations, of notes prepared for circulation under national direction, and to be secured as to prompt convertibility into coin by the pledge of United States bonds and other needful regulations.

1.  The first of these plans was partially adopted at the last session of Congress, in the provision authorizing the Secretary to issue United States notes, payable in coin, to an amount not exceeding $50.000,000.  That provision may be so extended as to reach the average circulation of the country, while a moderate tax, gradually augmented, on bank notes, will relieve the national from the competition of local circulation.  It has been already suggested that the substitution of a National for a State currency, upon this plan, would be equivalent to a loan to the Government without interest, except on the fund to be kept in coin, and without expense, except the cost of preparation, issue and redemption ;  while the people would gain the additional advantage of a uniform currency, and relief from a considerable burden in the form of interest on debt.  These advantages are, doubtless, considerable ;  and if a scheme can be devised by which such a circulation will be certainly and strictly confined to the real needs of the people, and kept constantly equivalent to specie by prompt and certain redemption in coin, it will hardly fail of legislative sanction.

The plan, however, is not without serious inconveniences and hazards.  The temptation, especially great in times of pressure and danger, to issue notes without adequate provision for redemption ;  the ever-present liability to be called on for redemption beyond means, however carefully provided and managed ;  the hazard of panics, precipitating demands for coin, concentrated on a few points and a single fund ;  the risk of a depreciated, and depreciating, and finally worthless paper money ;  the immeasurable evils of dishonored public faith and national bankruptcy ;  all these are possible consequences of the adoption of a system of Government circulation.  It may be said, and perhaps truly, that they are less deplorable than those of an irredeemable bank circulation.  Without entering into that comparison, the Secretary contents himself with observing that, in his judgment, those possible disasters so far outweigh the probable benefits of the plan, that he feels himself constrained to forbear recommending its adoption.

2.  The second plan suggested remains for examination.  Its principal feature’s are :  first, a circulation of notes bearing a common impression, and authenticated by a common authority ;  second, the redemption of these notes by the associations and institutions to which they may be delivered for issue ;  and, third, the security of that redemption by the pledge of United States stocks, and an adequate provision of specie.

In this plan the people, in their ordinary business, would find the advantages of uniformity in currency ;  of uniformity in security ;  of effectual safe-guard, if effectual safe-guard is possible, against depreciation ;  and of protection from losses in discounts and exchanges ;  while in the operations of the Government, the people would find the further advantages of a large demand for Government securities, of increased facilities for obtaining the loans required by the war, and of some alleviation of the burdens on industry through a diminution in the rate of interest, or a participation in the profit of circulation, without risking the perils of a great money monopoly.

A further and important advantage to the people may be reasonably expected in the increased security of the Union, springing from the common interest in its preservation, created by the distribution of its stocks to associations throughout the country, as the basis of their circulation.

The Secretary entertains the opinion that if a credit circulation in any form be desirable, it is most desirable in this.  The notes thus issued and secured would, in his judgment, form the safest currency which this country has ever enjoyed ;  while their receivability for all Government dues, except customs, would make them, wherever payable, of equal value as a currency in every part of the Union.  The large amount of specie now in the United States, reaching a total of not less than $275,000,000, will easily support payments of duties in coin, while these payments and ordinary demands will aid in retaining this specie in the country as a solid basis, both of circulation and loans.

The whole circulation of the country, except a limited amount of foreign coin, would, after the lapse of two or three years, bear the impress of the nation, whether in coin or notes ;  while the amount of the latter, always easily ascertainable, and, of course, always generally known, would not be likely to be increased beyond the real wants of business.

He expresses an opinion in favor of this plan with the greatest confidence, because it has the advantage of recommendation from experience.  It is not an untried theory.  In the State of New York, and in one or more of the other States, it has been subjected, in its most essential parts, to the test of experiment, and has been found practicable and useful.  The probabilities of success will not be diminished, but increased by its adoption under national sanction, and for the whole country.

It only remains to add that the plan is recommended by one other consideration, which, in the judgment of the Secretary, is entitled to much influence.  It avoids almost, if not altogether, the evils of a great and sudden change in the currency, by offering inducements to solvent existing institutions to withdraw the circulation issued under State authority and substitute that provided by the authority of the Union.  Thus, through the voluntary action of the existing institutions, aided by wise legislation, the great transition from a currency heterogeneous, unequal, and unsafe, to one uniform, equal, and safe, may be speedily and almost imperceptibly accomplished.

If the Secretary has omitted the discussion of the question of the Constitutional power of Congress to put this plan into operation, it is because no argument is necessary to establish the proposition that the power to regulate commerce and the value of coin includes the power to regulate the currency of the country, or the collateral proposition that the power to affect the end includes the power to adopt the necessary and expedient means.

The Secretary entertains the hope that the plan now submitted, if adopted with the limitations and safe-guards which the experience and wisdom of Senators and Representatives will, doubtless, suggest, may impart such value and stability to Government securities that it will not be difficult to obtain the additional loans required for the service of the current and the succeeding year at fair and reasonable rates ;  especially if the public credit be supported by sufficient and certain provision for the payment of interest and ultimate redemption of the principal.

Finding from the above extracts from the report of Secretary Chase that he forbore to recommend the issue of United States Treasury notes to circulate as money, and that he did recommend the National Currency bank bill, Mr. Spaulding, as chairman of the Sub-committee, addressed a note to the Secretary requesting him to furnish the draft of a bank bill for a national currency based on a pledge of public stocks, as recommended in his report, and received the following reply :

Dec. 18th, 1861.
SIR :—I have the honor to acknowledge the note of the Committee of Ways and Means of this date, covering the note of yourself as chairman of the Sub-committee, requesting him to furnish the draft of a bill for a national currency based on the pledge of public stocks.  The Secretary of the Treasury, who is now in New York, will give to your request his prompt attention on his return.
With great respect,               
Acting Secretary of the Treasury.

Ch. of Sub-Com. of Ways and Means, H.R.

On the return of the Secretary from New York, it was ascertained that no National Currency bank bill had been prepared.  The Secretary then requested Mr. Spaulding to prepare a bill at as early a day as possible.  Mr. Spaulding, as chairman of the Sub-committee, immediately set to work at his rooms at the National Hotel in preparing the first draft of the bill, which was there copied by Mr. George Bassett, clerk of the Committee of Ways and Means.  This was during the Christmas holidays ;  Congress adjourning over two or three days at a time, without doing much business, no quorum being present.

On the 24th inst.  Mr. Spaulding wrote a letter to Mr. Corning, then at Albany, informing him that he was making a draft of the National Currency bank bill, and requesting that he would forward a copy of the New York Free Banking Law, passed in 1838, and amendments thereto, for the use of the Committee.  Mr. Corning promptly complied with this request, and returned the following reply :

ALBANY, Dec. 26, 1861.
MY DEAR SIR—I am this morning in receipt of your favor of the 24th inst.  I send you by this day’s mail a copy of our Bank Laws, with amendments passed since 1856.  This matter, as recommended by Secretary Chase, will not, in my judgment, meet the approval of our State, hence I think much care should be had in drawing up the bill.
Yours, very truly,             

Hon. E.G. SPAULDING, Washington.

When the frame work of the bill was nearly completed, it was submitted to Mr. Hooper, the only other member of the Sub-committee then in Washington, Mr. Corning having gone to Albany.  Mr. Hooper rendered valuable assistance in perfecting the bill.  He incorporated into it some provisions which experience in his own State had shown to be valuable.  The bill was finally completed soon after Christmas.  A few days thereafter the National Currency bank bill, thus hastily prepared, was sent by Mr. Spaulding to the public printer, and two hundred copies printed for the use of the Committee of Ways and Means and the Secretary of the Treasury, with a view of having it more maturely considered in the General Committee, amended and corrected, and finally to be reported to the House.  Copies of this printed bill are still in the possession of Mr. Spaulding, chairman of the Sub-committee, which formed the basis of the bank bill which was finally adopted more than a year afterwards.

Mr. Spaulding, while preparing the national currency bank bill, upon mature reflection came to the conclusion, that it could not be passed and made available quick enough to meet the crisis then pressing upon the Government for money to sustain the Army and Navy.  He therefore drafted a legal tender Treasury note section to be added to the bank bill, hoping, at first, that it might be made available by issuing legal tender notes direct from the Treasury, while the bank bill was put in operation throughout the country.  In order to bring the subject of issuing legal tender fundable notes before the country, the section thus prepared by Mr. Spaulding was furnished to the New York Tribune, and published in the issue of the 31st December, 1861, and is as follows :

Poll more mature consideration and further examination, Mr. Spaulding came to the conclusion that the bank bill, containing sixty sections, could not, with the State banks opposed to it, be passed through both Houses of Congress for several months, and that so long a delay would be fatal to the Union cause.  The banks in New York, Boston and Philadelphia, had just suspended specie payments, which compelled a general suspension of coin payments by the Government, and all the other banks throughout the country.  No more gold could be loaned to the Government, except in small and wholly inadequate amounts, because it was not to be had.  State bank bills could still be obtained, but the banks having suspended specie payments, this currency was depreciated, and had only a local character and credit—not being much known out of the States where the banks were located.  Hesitancy and delay, with the expenses of the war running on at an average of $2,000,000 per day, would have been fatal.  Mr. Spaulding, therefore, changed the legal tender section, intended originally to accompany the bank bill, into a separate bill, with alterations and additions, and on his own motion introduced it into the House by unanimous consent on the 30th of December, 1861.  It was read twice, and referred to the Committee of Ways and Means, and ordered printed (House Bill, No. 182), and is as follows :

As soon as the bill was printed, it was taken up in the Committee of Ways and Means, and duly considered.  Mr. Hooper took active ground in favor of the bill.  Mr. Stevens at first had some doubts about its constitutionality, but very soon decided to support the measure.  Mr. Morrill, Mr. Horton, and Mr. Corning actively opposed the bill in the Committee and in the House.  Mr. Maynard and Mr. Stratton took no active part in the discussions while the bill was under consideration in the Committee.  It is believed, however, that Mr. Maynard was favorable to the bill from the start, while Mr. Stratton was very much in doubt what course he would take in relation to it, either in Committee, or in giving his vote in the House.  Mr. Phelps was absent, and took no part while the bill was under discussion in the Committee.  Mr. Spaulding finding that the Committee were about equally divided, and that some members of the Committee had doubts as to the constitutional power of Congress to make treasury notes a legal tender, called upon the Attorney General, Hon. Edward Bates, for his opinion.  He declined to give an official opinion, but consented to write an un-official note in favor of its constitutionality.  The following is a copy of the opinion thus obtained :

MONDAY EVENING, Jan. 6, 1862.

Hon. E.G. Spaulding, M.C.,
              At the National Hotel :

DEAR SIR-Since you did me the honor of a call this afternoon, and propounded to me a question arising out of the pending bill “ To authorize the issue of treasury notes payable on demand,” I have given to the subject such attention as the very brief interval afforded, and proceed at once to answer.

In the first place, permit me to say, that my views of the place I hold forbid me to give your question a formal and official answer, but in proof of the high respect which I entertain for you and your honorable Committee, I, as a private man, and a professed constitutional legist, in all frankness will give you my opinion upon the point proposed, and this, with all brevity and without argument, for the time does not allow elaborate consideration.

The bill, after providing for the issue of treasury notes, contains i.e. this clause, “ and which treasury notes shall be a legal tender in payment of all debts, public and private, within the United States,” and you desire my opinion whether this clause is, or is not, constitutional.

Certainly the Constitution contains no direct verbal prohibition, and I think it contains no inferential or argumentative prohibition that can be fairly drawn from its expressed terms.  The first article of the Constitution, section eight, grants to Congress specifically a great mass of powers.  Section nine contains divers limitations upon Congress, upon the United States, and upon individuals ;  and section ten contains restrictions upon the several States.  This last section is the only one that treats on tender.  “ No State shall make anything but gold and silver coin a tender in payment of debts.”  This applies to a State only, and not to the nation ;  and thus it has always been understood with regard to the next preceding clause in the same section—no State shall “ emit bills of credit.”  The prohibition to emit bills of credit is quite as strong as the prohibition to make anything but gold and silver coin a legal tender ;  yet nobody doubts—Congress does not doubt its power to issue bills of credit.  Treasury notes are bills of credit, and I think the one is just as much prohibited as the other—neither is forbidden to Congress.

The time is too short for argument, and so I remain, with all respect,

Your obedient servant,           

Mr. Spaulding read this letter to the Committee of Ways and Means.  The discussion on the bill had continued for several days, and when the vote was finally taken, it appeared that the Committee were at first equally divided—Mr. Spaulding, Mr. Hooper, Mr. Stevens, and Mr. Maynard voting in the affirmative, and Mr. Morrill, Mr. Horton, Mr. Corning, and Mr. Stratton in the negative.  Mr. Stratton finally consented to vote for the bill ;  so as to allow it to be reported to the House.  The bill was thus passed through the Committee of Ways and Means.

On the 7th of January, 1862, Mr. Spaulding reported the bill from the Committee to the House.  It was read twice, committed to the Committee of the whole House on the state of the Union, and ordered to be printed.  (House Bill No. 187.)

Soon after Mr. Spaulding introduced his bill proposing the issue of legal tender notes to circulate as money, he received many letters criticising the measure in rather severe terms.  Among others, Mr. Isaac Sherman, of New York, an old friend, addressed a letter to him of this character, bearing date January 4th, 1862, and at the same time suggesting very heavy taxation in various forms, as the best plan for raising the money to carry on the war.

To this letter Mr. Spaulding made the following reply :

WASHINGTON, Jan. 8, 1862.
Isaac Sherman, Esq., New York :

DEAR SIR—In reply to yours of the 4th inst., I would say that the Treasury note bill for $100,000,000 agreed upon in Committee yesterday is a measure of necessity and not one of choice.

You criticise matters very freely, and very likely you may be right in what you say.

We will be out of means to pay the daily expenses in about thirty days, and the Committee do not see any other way to get along till we can get the tax bills ready, except to issue temporarily Treasury notes.  Perhaps you can suggest some other mode of carrying on the Government for the next one hundred days.  You do not pretend that any considerable amount of taxes can be collected for the next three months, even under your plan.  It is much easier to find fault than it is to suggest practicable means or measures.

We must have at least $100,000,000 during the next three months, or the Government must stop payment.  With the navy and an army of 700,000 men in the field, we cannot say that we will not pay.

I will thank you to suggest a better practicable mode of getting $100,000,000 of paying means during the next three months.  I would be glad to adopt it, and the Committee would be glad to adopt it.  Let us have your specific plan for this purpose—one that will produce the money—and we will be very much obliged to you.  In haste.

Yours truly,           

P.S.—I am as impatient as you can be for an early and successful advance of the army, so important at this time to sustain the credit of the Government.  Will it be done ?  You are just as well informed on that subject as any of us.  I say to you privately that I could find fault more loudly than you do, but I will not do that without being able to suggest a practicable remedy ;  and I might say many things to you, personally, that I might not put on paper.

Confidentially yours,             E.G.S.

NEW YORK, Jan. 22, 1869.
Hon. E.G. Spaulding :

I have received your letter of the 20th, and inclosed I send a letter which you addressed me January 8th, 1862, and this letter fully explains your motives in advocating the legal tender act.  I will add that I became fully satisfied that the immediate wants of the Government rendered it absolutely necessary that legal tender notes should be issued.  It is possible that a good tax bill, passed and enforced in 1861, might have averted the necessity of the legal tender act ;  but in 1862 it was impossible to pay the expenses without an issue of Government paper as currency.  I was shocked at first at the idea of issuing paper, but I have always since said that you finally convinced me of the absolute necessity at the time of the paper issue.  I consider your letter historical, and after copying.  I wish you would return in to me.

Yours truly,              ISAAC SHERMAN.


After the legal tender bill was reported from the Committee of Ways and Means by Mr. Spaulding, and published in the newspapers of the principal cities, opposition to it manifested itself in various ways.  At first the New York city press were generally opposed to the legal tender clause.  The Times and Herald early came into the support of the measure.  The Tribune and Commercial Advertiser appeared to be in some doubt, but in their editorial columns opposed it.  The Evening Post, World, and Journal of Commerce were decidedly hostile, and opposed the measure throughout.  Delegates from some of the banks in New York, Boston and Philadelphia, appeared in Washington to oppose the bill.  The reporters of the New York press, at the time, preserved a tolerably accurate account of their doings, which may be summed up substantially as follows :

They organized by appointing Mr. Singleton A. Mercer, of Philadelphia, as chairman, and invited the Finance Committee of the Senate, and the Committee of Ways and Means of the House, to meet them at the office of the Secretary of the Treasury, on Saturday afternoon, January 11th, 1862.  The invitation was accepted, and the Convention assembled accordingly at the Treasury Department.

Delegates from, New York Banks.
Mr. COE, American Exchange Bank.
Mr. VERMILYE, Merchant’s Bank.
Mr. MARTIN, Ocean Bank.
Mr. GALLATIN, National Bank.

Delegates from Philadelphia Banks.
Mr. ROGERS, Tradesman’s Bank.
Mr. MERCER, Farmer’s and Mechanics’ Bank.
Mr. PATTERSON, Western Bank.

Delegates from Boston Banks.
Mr. HAVEN, Merchant’s Bank.
Mr. WALLEY, Revere Bank.
Mr. BATES, Bank of Commerce.

Treasury Department.
SALMON P. CHASE, Secretary of the Treasury.

Finance Committee of the Senate.
Mr. FESSENDEN, of Maine.
Mr. SIMMONS, of Rhode Island.
Mr. SHERMAN, Of Ohio.
Mr. HOWE, of Wisconsin.
Mr. PEARCE, of Maryland.
Mr. BRIGHT, of Indiana.
Mr. McDOUGAL, of California.

House Committee of Ways and Means.
Mr. STEVENS, of Pennsylvania,
Mr. MORRILL, of Vermont.
Mr. PHELPS, of Missouri.
Mr. SPAULDING, of New York.
Mr. CORNING, of New York.
Mr. HORTON, of Ohio.
Mr. STRATTON, of New Jersey.
Mr. HOOPER, of Massachusetts.
Mr. MAYNARD, of Tennessee.

Some of the members of the above Committees of the Senate and House were not present, but there was a very full representation from each Committee.  There were some other gentlemen present from Boards of Trade of different cities.

Mr. James Gallatin, of New York, made the principal speech against legal tender, and on behalf of himself and the Bank Committees from New York, Boston, and Philadelphia, and members from Boards of Trade associated with them, submitted the following plan for raising money to carry on the war, viz :

1.  A tax bill to raise, in the different modes of taxation, $125,000,000, over and above duties on imports.

2.  Not to issue any demand Treasury notes, except those authorized at the extra session in July last.

3.  Issue $100,000,000 Treasury notes at two years, in sums of five dollars and upwards, to be receivable for public dues to the Government, except duties on imports.

4.  A suspension of the sub-Treasury act, so as to allow the banks to become depositories of the Government of all loans, and to check on the banks from time to time as the Government may want money.

5.  Issue six per cent. twenty year bonds, to be negotiated by the Secretary of the Treasury, and without any limitation as to the price he may obtain for them in the market.

6.  That the Secretary of the Treasury be empowered to make temporary loans to the extent of any portion of the funded stock authorized by Congress, with power to hypothecate such stock, and if such loans are not paid at maturity, to sell the stock hypothecated for the best price that can be obtained.

These propositions having been read, the Secretary and Finance Committees of the Senate and House expressed themselves favorable to the first proposition to raise by taxation $125,000,000 a year, over and above duties on imports.  It will be observed that this plan did not include the national currency bank bill, recommended by the Secretary of the Treasury in his Annual Report, and was not, therefore, in this respect, satisfactory to him.

The meeting was somewhat conversational in character, but there appeared to be a general dissent by the Secretary and Committees from all the other propositions.  Mr. Hooper expressed very decidedly his dissent to them, and was in favor of the legal tender act as the best mode of providing the means.  The only remarks I can find reported as being made by any member of the Committees of the Senate and House are in the New York Tribune, January 13, 1862, in substance as follows :

“ The Sub-committee of Ways and Means, through Mr. Spaulding, objected to any and every form of ‘ shinning ’ by Government through Wall or State streets to begin with ;  objected to the knocking down of Government stocks to seventy-five or sixty cents on the dollar, the inevitable result of throwing a new and large loan on the market, without limitation, as to price ;  claimed for Treasury notes as much virtue of par value as the notes of banks which have suspended specie payments, but which yet circulate in the trade of the North ;  and finished with firmly refusing to assent to any scheme which should permit a speculation by brokers, bankers, and others, in the Government securities, and particularly any scheme which should double the public debt, of the country, and double the expenses of the war, by damaging the credit of the Government to the extent of sending it to ‘shin’ through the shaving shops of New York, Boston, and Philadelphia.  He affirmed his conviction as a banker and legislator, that it was the lawful policy, as well as the manifest duty of the Government in the present exigency, to legalize as tender its fifty million issue of demand Treasury notes, authorized at the extra session in July last, and to add to this stock of legal tender, immediately, one hundred millions more.  He thought that this financial measure would carry the country through the war, and save its credit and its dignity ;  at the same time we should insist upon taxation abundantly ample to pay the expenses of the Government on a peace footing, and interest of every dollar of the public obligation, and to give this generation a clear show of a speedy liquidation of the public debt.”

This Conference did not result in devising any plan or arrangement which received the assent of either the Finance Committee of the Senate or the Committee of Ways and Means of the House, and the Conference adjourned.

The bank delegates and others had further consultations with Secretary Chase, continuing through two or three days, and which finally resulted in an arrangement with the Secretary alone, which was furnished to the agent of the Associated Press and published on the 15th of January, 1862, as follows :

“ The results of the various conferences held in Washington by representatives from Boards of Trade, Chambers of Commerce, and Banking institutions, among themselves, and with the Secretary of the Treasury, may be summed up as follows :

1.  The general views of the Secretary of the Treasury are assented to.

2.  The banks will receive and pay out the United States notes (authorized by act of July last) freely, and sustain in all proper ways the credit of the Government.

3.  The Secretary of the Treasury will, within the next two weeks, in addition to the current daily payments of $1,500,000 in United States notes, pay the further sum of at least $20,000,000 in 7-30 bonds to such public creditors as desire to receive them, and thus relieve the existing pressure upon the community.

4.  The issue of United States demand notes not to be increased beyond the $50,000,000 authorized by the act of last July, but it is desired that Congress should extend the provisions of the existing loan acts, passed at the extra session in July, so as to enable the Secretary to issue in exchange for United States demand notes, or in payment to creditors, notes payable in one year, bearing 3.65 per cent. interest, and convertible into 7-30 three years bonds, or to borrow under the existing provisions to the amount of $250,000,000 or $300,000,000.

5.  It is thought desirable that Congress should enact the national currency bank bill, embracing the general provisions recommended by the Secretary in his Annual Report.

6.  It is expected that this action and legislation will render the making of the United States demand notes a legal tender or their increase beyond the $50,000,000 authorized in July last unnecessary.”

The Committees of the Senate and House never gave any assent to this agreement made by Secretary Chase with the delegations above mentioned, for the reason that it was not deemed by them adequate to the crisis.  A majority of the Committee of Ways and Means adhered to the legal tender bill, then pending in the House, as being a more available plan, and on a much larger scale.  They believed it was necessary to authorize immediately an additional issue of $100,000,000 of United States fundable notes, to circulate as money, and be made a legal tender ;  and that $500,000,000 six per cent. twenty years bonds should be authorized, so as to enable the holders of the notes, when issued, to fund them at any time in these bonds.

As soon as the plan of the delegates from New York, Boston, and Philadelphia became fully known to the country, it was very generally disapproved.  The press spoke out plainly against the Secretary being authorized to put United States bonds “ on the market without any limitation as to the price he might obtain for them in the market,” as proposed by Mr. Gallatin.  Members of Congress generally opposed it and numerous letters were received by Mr. Spaulding from bankers, and other prominent citizens, in opposition to any such scheme, but at the same time expressing themselves in favor of the legal tender bill and urging its immediate passage.

The following is a sample of the letters received about this time by Mr. Spaulding :

NEW YORK, January 30, 1862.

MY DEAR SIR—I thank you for your able speech, and can only say that nine out of twelve persons in this city agree with you.  As for G——, and a few egotistical gentlemen that act with him, they should be driven out of Washington, as they only embarrass the Government ;  and it seems to me that their policy, if adopted, would soon ruin the Government credit, and break down the country.

Go a direct tax for one hundred and fifty or two hundred millions, and then issue one hundred and fifty millions Treasury notes legal tender, and we will go on without any trouble, and the Government credit will be saved from disgrace.  There are not eight bank presidents that side with G——.  He is an odd fish—has very little influence here.  Some action must be had soon, or our country will be in a deplorable financial condition.

Yours truly,             

BLACK ROCK, January 31. 1862.
Hon. E.G. Spaulding :
MY DEAR SIR—I have just read, with great pleasure, your very able speech on the Treasury note bill you have introduced into Congress.  The principle and plan are both right, and what the country demands ;  and I trust both Houses will put it right along through, regardless of what the New York note shavers and usurers may say, for they, and the like, in our large Atlantic cities, are the only ones who will oppose it, and that for the reason that they can not make their ten, twenty or fifty per cent., by buying in and selling out the stocks which they want passed by the Government, in place of the sound, available Constitutional currency which you propose.  I see by my Tribune to-day, that there is good prospect that your bill will pass without material modification, if any.  I hope so, and that speedily.
Truly yours,              

NEW YORK, January 13, 1862.
Hon. E.G. Spaulding, Washington :
DEAR SIR—Your bill on Finance is received.  I understand the pulse of the people.  Now, then, put on a war tax of $200,000,000, issue $150,0000,000 demand notes, and ten, fifteen and twenty year bonds, seven per cent. “ coupon bonds,” redeemable at the pleasure of the Government within that time, and then go ahead.  Put our Generals into the saddle, and all this fussing and fooling will come to an end in ninety days.  One grand rush from all points of our armies will cow down the rebels.  Send home the Bank Committee :  their proposition is awful.  Let a few leading minds, in connection with Chase, nerve up, and let the demand notes assume the place of specie in every particular.  A tender for deposits in State banks, a tender for State bank notes, and receivable for all Government dues.  We must have one terrible bloody battle, and must not, shrink from the responsibility.  Let members of Congress cease abusing our Generals.  Put the right men in the right place.  Have no proclamations issued by the Generals unless passed upon by Lincoln and McClellan jointly.  Hard work, less pleasure-seeking, good financiering and energy, will wind up this war shortly, and nothing else will do it.
I remain yours truly,              

WASHINGTON, January 13, 1862.
Hon. E.G. Spaulding :

DEAR SIR—I failed to make myself clearly understood in our conversation last evening, or rather I failed to tell the whole story in suggesting payment of interest on demand notes.

What do you think of providing for the payment of interest on demand notes (at a less rate than that on loan bonds) from their date, the interest on such demand notes to be allowed and paid only when they are presented to be converted into bonds ?

Would not the tendency of such an arrangement be to keep the current of demand notes steadily moving towards the loan office, and prevent any possible depreciation of either class of paper ?

Of course, you could devise a means (if you desire) of preventing the payment of back interest on debts already accumulated.  In haste.

Truly yours,                    

NEW YORK, January 13, 1862.
Hon. E.G. Spaulding, House of Representatives, Washington, D.C.:

DEAR SIR—Although not personally acquainted with you, we take the liberty of giving you, in few words, our views as to the most desirable measures to be adopted for the finances of the country at the present time.  It will not do at all to crowd on the market at the present time Government stock fast enough to raise the amount of money needed to meet our wants.  The price would run down so fast that people would become alarmed, and afraid to take it, except at a ruinous sacrifice, it at all.  The best plan is that which, we understood, you propose to adopt.  Issue $100,000,000 to $150,000,000 demand notes, and pay them out as the wants of the Government require ;  make them a legal tender in all transitions of business in our country ;  make them convertible at the pleasure of the holders into a 6 per cent. stock, or even into 7-30 three year notes, unless there is some serious objection on account of the previous negotiations of the 7-30 notes ;  pass a tax bill which will produce $100,000,000 to $150,000,000.  The above plan will furnish abundant means to the Government, and will meet the approbation of the people.  It will furnish an excellent circulation to the whole country, facilitate all business transactions among the people, make the money market easy, and raise the prices of Government stocks so that loans can be negotiated on favorable terms when more money if wanted, especially if, in the meantime, the rebellion is pretty well crushed down.

If the above plan is adopted, public sentiment will make it necessary for the banks to receive and pay out the demand notes, and the whole effect will be very salutary on our national affairs.  The tax bill will create a general demand for the Treasury notes and keep them at or near par.  We write in great haste, as practical, business men, and are, very respectfully

Your obedient servants,                          


DEAR SIR—I have your favor of 18th inst. I leave my bank affairs to write you at once, and congratulate you on the prospect of being able to effect a remedy for the fiscal malady.  With a leader in the Treasury Department all these discordent financial schemes would disappear.  A man of ability, of business talent and experience, even although he be not endowed with the creative genius of a Hamilton, or the statistical knowledge and general attainments, of Albert Gallatin, would devise a plan sufficiently comprehensive, sensible, and wise, to satisfy the public that he knew whereof he wrote and spoke, and had no object in view but to restore confidence and replenish the Treasury.  There is one point in reference to the demand legal tender notes to which I wish to call attention.  It may seem small, but I think it important—that is, in reference to the color of the paper on which such notes are printed.  I would have it different from that used for any other notes ;  and I would again suggest that that color be yellow.  I would also have them payable one year after the close of the war.  There is no risk of embarrassment from this clause, as we could sell our national bonds to-morrow if the war were closed to-day.  I would also simplify the matter by having the amount one hundred and fifty millions, so as to absorb the present outstanding demand notes into the legal demand or yellow notes, which could easily be done, and yet leave you on this loan one hundred millions net.  I think it would make these demand notes more valuable to insert this redemption feature one year after peace, for peace must come.  As if William B. Astor should give his note for $100,000, payable one year after his death.  He must die, and he has millions, consequently on a future day certain (though not yet fixed), his note would be paid in full.

Please consider, then, before you finally decide, the amount, the color, and the time of payment of the legal tender notes.  One other point :  Allow me to refer to the re-convertible feature of the six per cent. twenty years bonds.  That is, I confess, a pet idea of mine, but I find it favorably regarded by others, though new.  You will readily perceive that when this comes to be understood by the public the United States Government is going to pick up all the floating funds throughout the whole country, which the owners do not require to use in less than three, four, five or six months, whatever time you fix.  Every business man seems to think this would be the means by which the Government would borrow, in the aggregate, a large amount.  For who would not lend the United States his spare funds when he knew he could get a legal tender for it, with interest whenever he called for it ?  This would increase the value of the twenty years six per cent. bonds.  Let the legal tender notes be convertible at any time into any unsold securities of the United States, in the hands of the Secretary of the Treasury, whether now authorized or hereafter to be issued.  But only let the six per cent. bonds be reconvertible into legal tender Treasury notes.

Give my regards to Mr. Hooper.

Yours very truly,                    

Hon. E.G. SPAULDING, Washington, D.C.

On the following Monday, January 20th, Mr. Spaulding, from the Sub-committee of Ways and Means, reported to the General Committee an additional section, and a new title to the legal tender note bill, which were adopted by the Committee of Ways and Means.  The new section is as follows :

The new title to the bill adopted at this meeting of the Committee was as follows :

“ 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.”

Soon after this additional section and new title were adopted by the Committee of Ways and Means, Mr. Spaulding submitted the bill and additional section to Secretary Chase and the Assistant Secretary, Mr. Harrington.  At this interview the form of the bill and the manner of engraving, signing and issuing the legal tender notes was fully discussed, as well as the form and manner of exchanging them for the six per cent. bonds.  The Secretary suggested that it would be necessary to limit the place for exchanging the notes for bonds to the Treasury at Washington instead of the Sub-treasuries at other cities, and that it would be necessary to have one or more penal sections to guard against counterfeiting.  The original bill and additional section were finally left with the Secretary to put into such form as he desired, incorporating the amendments which he had proposed, in order to enable him to execute the provisions of the bill with facility as soon as it should become a law.

On the 22d of January, 1862, Secretary Chase returned to Mr. Spaulding the bill as modified and amended by him, accompanied by the following letter :


MY DEAR SIR—I, have carefully examined the bill and additional section which you left with me, and availing myself of the aid of the Assistant Secretary, have amended the bill, retaining the whole substance of yours, but introducing such modifications as the settled modes of business in the department and considerations of convenience and economy seem to suggest.

For example—the exchange of notes for bonds is confined to the course of business of the department, by limiting the power of Assistant Treasury and Depositories to the receipt of notes and issuing certificates, entitling the holder to bonds by which serious risks are avoided ;  and the denominations of bonds is left to the discretion of the Secretary, by which a considerable saving will probably be effected ;  as the demand for some denominations is so limited (for $20,000 for instance) that it may hardly be worth while to engrave a plate.  These examples show the nature of the modifications.

The appropriation for expenses is put at three hundred thousand dollars.  Should the act be fully executed by the issue of bonds to the amount of five hundred millions of dollars, this sum will not probably suffice.  It has been usual in providing for the issue of bonds merely without notes, to allow a much larger proportion for expenses.  I will send you, if desired, a statement which will make this clear.

Regretting exceedingly that it is found necessary to resort to the measure of making fundable notes of the United States a legal tender, but heartily desiring to co-operate with the Committee in all measures to meet existing necessities in the mode most useful and least hurtful to general interest, I remain, with great respect,

Very sincerely yours,                


The bill as amended by the Secretary was again submitted to the Committee of Ways and Means, and adopted ;  and thereupon, on the 22d of January, 1862, Mr. Spaulding again reported the bill to the House (Bill No. 240) in the nature of a substitute for Bill No. 187.  It was read twice, and made the special order for the 28th inst., at one o’clock.

Each day’s delay made it more and more apparent that the bill, must pass in order to meet the overwhelming demands made upon the Treasury to sustain the army and navy.  The end seemed to justify the means contemplated by the bill.

On the 23d inst. Secretary Chase directed his private Secretary, H.G. Plants, Esq., to request Mr. Spaulding to furnish a copy of the amended legal tender note bill to the National Intelligencer for publication.

Up to this time Col. Seaton, the editor of that paper, had not been favorable to the bill, and it was deemed important that the old National Intelligencer should support the measure.

The following is a copy of the note received by Mr. Spaulding from Mr. Plants :

SIR—I am directed by the Secretary to ask you if you will be so good as to send a copy of the Treasury note bill to the National Intelligencer, in order that it may be printed to-morrow.
Very respectfully,              

DEAR SIR—The note of Mr. Plants reached me this morning, and I have handed the U.S. demand note bill to Col. Seaton in person, to be published in the next issue of the National Intelligencer.  It is important that there should be full co-operation on the part of Col. Seaton, the Cabinet, and all our friends on the financial measures pending in Congress, to overcome the opposition already developed and ensure success.  My interview with Col. Seaton leads me to suppose that he will hereafter act in concert with us.
Yours truly,              
Hon. S.P. CHASE, Secretary of Treasury.

On the 28th inst., the bill being the special order in the House, Mr. Spaulding opened the debate upon it in the following


The House being in Committee of the Whole (Mr. KELLOGG, of Illinois, in the chair) on the Demand Treasury note bill—

Mr. SPAULDING spoke as follows :

Mr. CHAIRMAN :  This is an important measure, and I may be indulged for a few moments in explaining its objects, the situation of our finances, and the grounds upon which we rest this measure, and expect it to be adopted.  In the first place, I will refer to the loan bills passed at the extra session of Congress, in July, in order to show how we obtained the means to carry on the Government from that time to the present, and to show how the Secretary of the Treasury has performed his duty.  These bills were passed, the first on the 17th of July, and the other on the 5th of August.  They gave the Secretary of the Treasury power to pledge the credit of the United States to the extent of $250,000,000.  Reflections have been made by some gentlemen on the manner in which the Secretary of the Treasury had performed his duty in borrowing that money, and with some disposition to criticise his actions.  As a general reply, I will say that the Secretary has acted in strict conformity with the law, and borrowed money at the rates authorized by Congress.

And, sir, I am disposed, upon this floor and elsewhere, to sustain the Secretary and all Departments of the Government where they have discharged their duties in accordance with the laws which have ;  been passed by us.

The Secretary of the Treasury first borrowed $100,000,000, giving Treasury notes bearing seven and three-tenths per cent. interest, and he next issued United States bonds at six per cent. interest to the extent of $50,000,000, at the equivalent of par for seven per cent. bonds, and raised about $44,650,000 ;  upon such loan, a discount of over $5,300,000 was sustained.  These were the best terms that could be obtained, and were regarded at the time as very favorable to the Government.

But if he has borrowed the money at a high rate, it was authorized by the act of July.  I am disposed to sustain the Secretary in what he has done.  He has acted in good faith, and he should be sustained by us all.

I may be permitted to say, in explanation of some of the estimates which I shall introduce presently, differing, as they do, from the estimates of the Secretary of the Treasury in his annual report, that since his annual report, he has changed his own views as to what the expenses of the war will be up to July next, and what they will also be up to July, 1863, and that he substantially agrees with me now as to what those expenses will be.

In the discussion of this important measure, I desire, Mr. Chairman, to present the entire plan, with a view to enlist the co-operation not only of all Departments of the Government, but also the co-operation of all the members of the House, without regard to party distinctions.  Hearty co-operation is desirable to the success of the important financial measures that will be presented.

Our finances deserve our most serious attention.  The ways and means of carrying on the war should enlist the grave consideration of every gentleman on this floor who desires the preservation of this Government.  We were never in greater peril than at this moment.  It will require all our best energies to successfully meet the crisis through which we are passing.  I am oppressed by the magnitude of the work before us.  But, sir, I will not, I dare not—I trust we shall not any of us—shrink from the responsibility of performing every duty devolved upon us in this great crisis of our national affairs.

The bill before us is a war measure, a measure of necessity, and not of choice, presented by the Committee of Ways and Means to meet the most pressing demands upon the Treasury to sustain the army and navy, until they can make a vigorous advance upon the traitors, and crush out the rebellion.  These are extraordinary times, and extraordinary measures must be resorted to in order to save our Government, and preserve our nationality.

This bill, in addition to the fifty million of demand notes authorized by the act of July last, authorizes the Secretary of the Treasury to issue, on the credit of the United States, one hundred millions of dollars of Treasury notes, not bearing interest, payable to the bearer at the Treasury, or at the office of the Assistant Treasurer in the city of New York, at the pleasure of the United States, and of such denominations as he may deem expedient, and not less than five dollars each ;  and such notes and all other United States notes payable on demand, not bearing interest, heretofore authorized, are made receivable for all debts and demands due to the United States, and for all salaries, debts, and demands owing by the United States to individuals, corporations, and associations within the United States, and are also declared lawful money and a legal tender in payment of all debts, public and private, within the United States, making altogether $150,000,000 legal tender demand notes.

Provision is also made for the convenient exchange of such notes for six per cent. bonds of the United States redeemable in twenty years.

Further to enable the Secretary of the Treasury to fund the Treasury notes and floating debt of the United States, he is authorized to issue, on the credit of the United States, coupon bonds or registered bonds to an amount not exceeding five hundred millions dollars, and redeemable at the pleasure of the Government after twenty years from date, and bearing interest at the rate of six per cent. per annum, payable semi-annually ;  and the bonds thus authorized are to be of such denomination, not less than fifty dollars, as may be determined upon by the Secretary of the Treasury, or in sums not less than $2,500 ;  for which, if requested, the Secretary of the Treasury, if he deem it expedient, may issue similar bonds, the principal and interest of which may be expressed in the currency of any foreign country, and payable there.  The Secretary is authorized to issue said bonds at their par value to any creditor or creditors of the United States who may elect to receive them in satisfaction of their demands ;  provided that all such claims or demands shall have been first audited and settled by the accounting officers of the Treasury ;  and the Secretary of the Treasury may also exchange such bonds at any time for lawful money of the United States, or for any of the Treasury notes that have been or may hereafter be issued under any former act of Congress, or that may be issued under the provisions of this act.

The bill is simple and perspicuous in its terms, and easy of execution.  It is a Government measure, and the officers of Government are required to execute its provisions.

By the time the Secretary of the Treasury can get these notes engraved, printed, and signed, ready for use, all other available means at his command, and in the Treasury, will be exhausted.  This measure is therefore presented under the highest prerogatives of Government.  The army and navy now in the service must be paid.  They must be supplied with food, clothing, arms, ammunition, and all other material of war, to render them effective in maintaining the Government and putting down the rebellion.  Having exhausted other means of sustaining the Government, this measure is brought forward as the best that can be devised in the present exigency to relieve the necessities of the Treasury ;  and I trust it will pass without delay.

At the extra session in July last, Congress authorized the Secretary of the Treasury to borrow $250,000,000, for which he was authorized to issue coupon bonds ;  or registered bonds, or Treasury notes, in such proportions of each as he might deem advisable.  The bonds were to be issued for twenty years, at a rate not exceeding seven per cent. interest per annum, payable half-yearly ;  and the Treasury notes were to be issued in denominations of not less than $50 each, at three years, with interest at 7 3-10 per annum, payable half-yearly, and exchangeable at any time for twenty years six per cent. bonds.  Or, at the option of the Secretary, he was permitted to issue $50,000,000 of the above loan in Treasury notes, on demand, in denominations of not less than five dollars each, without interest, and made receivable in payment of salaries or other dues owing by the United States ;  or, in his discretion, he was authorized to issue Treasury notes at one year, bearing interest at 3 65-100 per cent. per annum, exchangeable at any time in sums of $100, or upwards, for the three years Treasury notes bearing 7 3-10 per cent. interest ;  but in the aggregate not to exceed $250,000,000.  A further provision was made, however, to wit :  that the Secretary of the Treasury might negotiate any part of the loan for six per cent. twenty years’ bonds, at a rate not less than the equivalent of par, for bonds bearing seven per cent. interest per annum, half-yearly, payable in twenty years.

Under these provisions, the Secretary of the Treasury has borrowed on the 7 3-10 per cent. Treasury notes, payable in three years...... $ 100,000,000
On twenty years six per cent. bonds, reduced to the equivalent at par of seven per cent. per annum, half-yearly, say at 89½ ($44,66,230.97 actually received into the Treasury), for which six per cent. bonds were issued... 50,000,000
Issued and put in circulation as currency (and to be put into circulation within a few days all the demand Treasury notes authorized in July, not bearing interest. 50,090,000
Borrowed on the loan bill of July... $ 200,000,000
Paid out to contractors and others 7 30-100 Treasury notes within the last few days, say... 3,516,500
$ 203,516,500

The total amount of the public debt up to the present time, and for which U.S. stock and Treasury notes have been issued, is as follows :

Up to July 1, 1861............... $ 90,867,828.68
There was paid to creditors, or exchanged for coin at par, at different dates in July and August, six per cent. two years’ notes to the amount of... 14,019,034.66
There was borrowed, at par, in the same months, upon sixty days’ six per cent. notes, the sum of.... 12,877,750.00
There was borrowed, at par, on the 19th of August, three years’ seven and three-tenths per cent bonds, issued for most part to the subscribers to the national loan.... 50,000,000.00
There was borrowed on the 1st of October upon like securities.... 50,000,000.00
There was borrowed, at par, of seven per cent. on the 10th of November,  upon twenty years’ six per cent. bonds reduced to the equivalent of sevens,  including interest..... 50,000,000.00
There have been issued and circulated of Treasury notes payable on demand 39,000,000.00
Making an aggregate debt in various forms, to January 15, 1862.... 306,764,613.34
I estimate that the amount required up to July 1, 1862, will be.... 343,235,386.66
Total debt estimated to July 1, 1862....... 650,000,000.00
I estimate for the fiscal year up to July 1, 1863, if the war continues to that  time...... 550,000,000.00
Total indebtedness, liquidated and unliquidated, to July 1, 1863... $1,200,000,000.00

This estimate exceeds that of the Secretary of the Treasury by $300,000,000 to July 1, 1863.  This, however, includes all indebtedness against the Government, whether funded or not, and all accounts in process of being audited, and such as are passing through the hands of the accounting officers.

There is now over $100,000,000 of accrued indebtedness, in different forms, that should be paid at an early day.

With this large accrued indebtedness, and with the prospect that (unless this bill is adopted) the Government will put on the market, to the highest bidder, still further issue of bonds, to the amount of $250,000,000 to $300,000,000, to pay current expenses to July next, it is not expected that even the present price of United States stocks can be maintained if forced on the market at this time.  We have the alternative, either to go into the market and sell our bonds for what they will command, or to pass this bill, or find some better mode, if one can be devised, to raise means to carry on the war.  The Secretary has the means of defraying the daily expenses required to be disbursed from the Treasury for only a few days longer.  He has on hand about one-fifth of the loan made in November last, a small portion of the demand Treasury notes authorized by the act of July—say $10,000,000 not yet issued—and such of the remaining 7 3-10 and 3 65-100 Treasury notes authorized by that act as can be used in paying contractors, for supplies, and for salaries, and other Government dues to such persons as are willing to receive them.  With the enormous expenditures of the Government, to pay the extraordinary expenses of the war, it requires no extended calculation to show that the Treasury must be supplied from some source, or the Government must stop payment in a very few days.

You cannot borrow of capitalists any more money on twenty years seven per cent. bonds, nor on your 7 3-10 Treasury notes at the rates fixed by the act of July last.  If you offer to the people and put on the market $300,000,000 more, to the highest bidder, in the present aspect of affairs, they would not be taken, except at ruinous rates of discount.  That policy would depreciate the bonds already taken by the banks and the people who are most loyal to the Government, and who came forward as your best friends, and furnished the means so much needed during the last few months to organize your army and navy ;  and, besides, depreciation would greatly increase the debt, by requiring a much larger amount of bonds to be issued than would be needed if your loans were taken at par. A loan put upon the market in the present depressed state of United States stocks, to be followed by other larger loans, is not regarded as a favorable mode of providing the means for maintaining the Government at the present time.  If it had been adopted at first it might possibly have been the best mode ;  but it is now too late to essay that plan, and I believe it would be ruinous to adopt it.  I fear the 20 years six per cent. bonds would, under the pressure, fall to 75, 70, 60, and even 50 cents.  This would be a ruinous mode of raising the means to carry on the Government.

What, then, is to be done ?  The Secretary of the Treasury in his annual report does not recommend the issue of demand Treasury notes, although he points out many advantages that would result to the Government from the issue.  He suggests two plans :  first, the issue of demand Treasury notes ;  and second, a National currency, secured by a pledge of United States stocks, to be issued by banks and associations, with proper regulations for their redemption by the banks themselves.  On the propriety of the issue of Treasury notes by the Government, to be put in circulation as money, the Secretary says :

“ The first of these plans was partially adopted at the last session of Congress, in the provision authorizing the Secretary to issue United States notes, payable in coin, to an amount not exceeding fifty millions of dollars.  That provision may be so extended as to reach the average circulation of the country, while a moderate tax, gradually augmented, on bank notes, will relieve the national from the competition of local circulation.  It has been already suggested that the substitution of a National for a State currency, upon this plan, would be equivalent to a loan to the Government without interest, except on the fund to be kept in coin, and without expense, except the cost of preparation, issue, and redemption ;  while the people would gain the additional advantage of a uniform currency, and relief from a considerable burden in the form of interest on debt.”

These remarks of the Secretary were made before the suspension of specie payments.  The situation of the country is now very different from what it was two months ago.  The circumstances have changed ;  and the Secretary and Congress, will find it necessary, in the present exigency, to conform their action to what can be done, and not to what they would like to do, were it otherwise practicable.

The second plan of the Secretary, and the one which he recommends for adoption, namely, a national currency, to be issued by banks, and secured by a pledge of United States stocks, the sub-Committee of Ways and Means have examined with considerable care.  A bill has been prepared and printed for the use of the Committee, which may, after some modification, be reported to the House for its action.  The Committee have come to the conclusion that, however meritorious this system may be in providing a way for funding the stocks of the United States, and however perfect the system may be made by Congress, it cannot, if adopted, be made available soon enough to meet the immediately-impending necessities of the Government.

This new system of banking would necessarily go into operation slowly.  The existing circulation of bank notes in the loyal States is supposed to be about $140,000,000.  This new currency, when issued, would come into competition with the existing circulation of the banks already established in the several States ;  and in the present embarrassed condition of monetary affairs, several months must necessarily elapse before any considerable amount of United States stocks would be absorbed by banks under this proposed new law.  As an ultimate mode of funding some part of the large amount of Government stock which has already been issued, and which must from time to time be issued, it may be very valuable ;  and the national currency upon it would no doubt obtain a wide circulation, and greatly facilitate the payment of taxes and other dues to the Government.  But with a navy and army of 600,000 in the field, requiring, with the other expenses of the Government, an average daily expenditure of more than $1,600,000, this new system of banking will not afford relief to the Treasury in time to enable the Secretary to meet the pressing demands that are made upon him.

The duties received at the different custom-houses, and the taxes levied at the extra session, or that may now be levied, will be wholly inadequate to meet the requirements of the Treasury in the present emergency during the next six months.

If you cannot borrow the money on the credit of the United States, except at ruinous rates of discount, and cannot make the new banking system available in time, and cannot realize the amount required from your tariff and tax bills, in what mode can the means be obtained, and the Government be carried on ?  It is believed that the only way in which it can be done is by issuing Treasury notes payable on demand, and making them a legal tender in payment of all debts, public and private, and by adequate taxation, to be imposed by new bills.  This will bring into full exercise all the higher powers of Government under the Constitution.  The Constitution confers on Congress the power (art. 1, sec. 8:)

“ To lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defence and general welfare of the United States.

To borrow money on the credit of the United States.

To regulate commerce with foreign nations, among the several States, and with the Indian tribes.

To coin money, regulate the value thereof, and of foreign coins.  To raise and support armies.

To provide and maintain a navy.

To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by the Constitution in the Government of the United States, or in any Department or officer thereof.”

These are among the high powers of Government which must now be brought into full, ample play.  The table which I have before me, procured from the Census bureau, shows that the true value of the property, real and personal, within the United States, is sixteen billions, one hundred and fifty-nine millions, six hundred and sixteen thousand and sixty-eight dollars, ($16,159,616,068,) and the assessed value to be $12,006,756,585.  (See Appendix.)

The power in the Constitution to “lay and collect taxes, duties, imposts, and excises,” is general and unlimited.  Congress has the power to levy and collect any amount of taxes that may be necessary to preserve its existence and pay all its debts.  Government has a claim, a mortgage in fact, on all this property, to that extent.  Will Congress do its duty in passing bills to collect these taxes ?  This is the vital question.  Will Congress have the firmness and the courage to impose the necessary taxation to sustain the credit of the Government ?  Direct taxation, excises, and internal duties, are new features within the United States.  They will be heavy burdens on the people, but essential to sustain the circulation of demand Treasury notes.  The tax-gatherer will be an unwelcome visitor to most people, but his face must soon be familiar.

Some members of Congress may hesitate to vote for the tax bills, fearing that they may not be in favor with their constituency at home.  Under these circumstances, will members of Congress meet the question boldly and firmly ?  Here is the whole property of the country at the will of Congress.  You have the power to tax it to an unlimited extent, if necessary to sustain the Government.

This is the capital, $16,000,000,000,000 in amount, on which your Treasury notes and bonds rest.  This claim of Government, in the hands of Congress, is direct and specific on the banks throughout the United States, including the gold and silver in their vaults ;  on commerce ;  on all kinds of production and business ;  on railroads, steamboats, and their passengers ;  on gas companies ;  on manufacturing companies of all kinds ;  in short, all real and personal estate of every kind is held subject to the payment of the Treasury notes and bonds issued by the Government.  Congress is clothed with this mighty power to sustain the nation at this time.  Will you hesitate to do your duty ?  This is what the people, the capitalist, the merchant, and all who confide in your demand notes, want to know.  If they take these notes, they want to know positively whether you will enforce the claim of the Government upon the property of the country, to the full extent necessary to redeem the Treasury notes, and pay punctually the interest on the bonds which they take of you to sustain the government.  Unless you are prepared to satisfy the country on this point, it is in vain to issue bonds or notes, and expect them to pass currently among the people.  Unless this is done they will depreciate, and they ought to depreciate ;  but with ample taxation, cheerfully voted by Congress, they will be the very best security in the country, because the whole property of the country is held for their redemption.  Congress has a plain duty to perform.  It has ample power.  This power should now be enforced.  Will Congress perform this duty ?

I cannot doubt that it will.  The emergency is great, and the exercise of this power is now an imperative necessity, in order to sustain the credit of the United States and justify the Government in issuing so large an amount of Treasury notes, to circulate as money and be made a legal tender in the payment of debts.  Congress (as well as the Committee of Ways and Means) is of opinion that we must raise by direct taxes, excises, internal duties, and duties on imports, during the current year, at least $150,000,000.  That was shown by the recent resolution passed by the Senate and House.  This will pay the current ordinary expenses of the Government, and the interest on all the extraordinary war debt, and create a sinking fund for retiring annually a portion of the Treasury notes.

In carrying on the existing war, and putting down the rebellion, it is necessary to bring into exercise all the sovereign power of the Government to sustain itself.  The war power must be exercised to its fullest extent.  The money power of the Government must be brought into requisition.  The power to tax must be availed of.  All the energies of the nation must be aroused and brought into action.  The power of the Government and the means of the people must all be devoted to this great work.  The Government must be preserved, and this nation of thirty-four States must be perpetuated.  The life of the nation is in peril ;  and all we have and all we hope for must be devoted to maintain its existence, until peace and quiet are restored in every part of our common country.

This bill is a necessary means of carrying into execution the powers granted in the Constitution “to raise and support armies,” and “ to provide and maintain a navy.”

In the present crisis of our national affairs, it is necessary that the army should be “supported,” and the navy “maintained.”  This necessity will not be questioned by any loyal member on this floor.

The Constitution provides that “ all the laws necessary and proper for carrying into execution the foregoing powers” may be passed by Congress.

If the end be legitimate, and within the scope of the Constitution, all the means that are appropriate, which are plainly adapted to that end, and which are not prohibited, may be constitutionally employed to carry it into effect.

If a certain means to the exercise of any of the powers expressly given by the Constitution to the Government of the Union be an appropriate measure, not prohibited by the Constitution, the degree of its necessity is a question of legislative discretion ;  not of judicial cognizance.

The Government of the United States is not prohibited by the Constitution from issuing Treasury notes on demand, and making them a legal tender in payment of all debts within its jurisdiction.  The Constitution (Art. 1, Sec. 10) prohibits the States from making any thing but gold and silver coin a legal tender in payment of debts ;  but this does not at all restrict the sovereign power of the United States.  Congress has the power to coin money “regulate the value thereof, and of foreign coin.”  Gold and silver by long practice—a practice that has continued for centuries among all nations—has become the legal money of the world in all commercial transactions.  Its real intrinsic value is not as great as that fixed upon it by Governments.  All Governments fix the value of gold and silver, and without the Government stamp, gold and silver would be a simple commodity, like other things having intrinsic value.  Some Governments fix the value of coin higher, and some lower, just as each, for itself chooses to determine.  Any other metal or thing that should be stamped, and its value regulated by all the Governments of the world, would pass equally well in all commercial transactions as gold and silver, although not intrinsically as valuable.  Exchequer bills or Treasury notes whose value is fixed by Government, and stamped as money, would pass as money in the payment of debts within the jurisdiction of the Government fixing such value.

In regulating the value of “ coin,” either foreign or domestic, Congress may provide that gold and silver shall be of no greater value in the payment of debts within the United States than the Treasury notes issued on the credit of this Government, which stamps such coin and fixes its value.  These high powers of Government have been frequently exercised by Great Britain during her continental wars, in making the Bank of England notes receivable for public dues, and virtually a legal tender in payment of debts, by suspending the statutory clause requiring specie payments within the United Kingdom ;  and other Governments of Europe have exercised the same high prerogatives whenever necessary to preserve their existence.  But we are not left to this argument alone for constitutional power to issue these demand notes and make them a legal tender in payment of debts, as I will endeavor hereafter to show.

The Constitution provides that Congress shall have power to pass “ all laws necessary and proper ” for carrying into execution all the powers granted to the Government of the United States, or any department or officer thereof.

The word necessary, as used, is not limited by the additional word “ proper,” but enlarged thereby.

“ If the word necessary were used in the strict, rigorous sense, it would be an extraordinary departure from the usual course of the human mind, as exhibited in solemn instruments, to add another word, the only possible effect of which is to qualify that strict and rigorous meaning, and to present clearly the idea of a choice of means in the course of legislation.  If no means are to be resorted to but sueh as are indispensably necessary, there can be neither sense nor utility in adding the word ‘ proper;’  for the indispensable necessity would shut out from view all consideration of the propriety of the means.”—3 Story’s Commentaries, sec. 122.

Alexander Hamilton, in discussing these high powers of the Constitution, says :

“ The authorities essential to the care of the common defence are these :  to raise armies ;  to build and equip fleets ;  to prescribe rules for the government of both ;  to direct their operations ;  to provide for their support.  These powers ought to exist, WITHOUT LIMITATION ;  because it is impossible to foresee or define the extent and variety of national exigencies, and the correspondent extent and variety of the means necessary to satisfy them.  The circumstances which endanger the safety of nations are infinite ;  and for this reason no constitutional shackles can wisely be imposed on the power to which the care of it is committed” * * * * “ This power ought to be under the direction of the same councils which are appointed to preside over the common defence.” * * * * “It must be admitted as a necessary consequence, that there can be NO LIMITATION of that authority which is to provide for the defence and protection of the community in any matter essential to its efficacy ;  that is, in any matter essential to the formation, direction, or support of the NATIONAL FORCES.”

This statement, adds Hamilton—

“ Rests upon two anxioms, simple as they are universal :  the means ought to be proportioned to the end ;  the persons from whose agency the attainment of the end is expected ought to possess the means by which it is to be attained.”—Federalist, No. 23, pp. 95, 96.

Congress may judge of the necessity in the present exigency.  It may decide whether it will authorize the Secretary of the Treasury to issue demand Treasury notes, and make them a legal tender in payment of debts, or whether it will put its six or seven per cent. bonds on the market, at ruinous rates of discount, and raise the money, at any sacrifice the money-lender may require, to meet the pressing demands upon the Treasury.  In the one case the Government will be able to pay its debts at fair rates of interest ;  in the other, it must go into the streets shinning for the means, like an individual in failing circumstances, and sure of being used up in the end by the avarice of those who may exact unreasonable terms.  The Government needs and should have, in her present peril, the aid and protection of all patriotic citizens.

On the question of constitutional power we are not left without the recorded opinions of the ablest jurists in the country.—1 Kent’s Com., 351—2 ;  McCulloch v. The State of Maryland, 4 Wheat, R., 413-20.

Chief Justice Marshall, Daniel Webster, and Judge Kent lay down the doctrine as follows :

“ The Government of the United States is one of enumerated powers, and it can exercise only the powers granted to it ;  but though limited in its powers, it is supreme within its sphere of action.  It is the Government of the people of the United States, and emanated from them.  Its powers were delegated by all, and it represents all, and acts for all.

“ There is nothing in the Constitution which excludes incidental or implied powers.  The Articles of Confederation gave nothing to the United States but what was expressly granted ;  but the new Constitution dropped the word expressly, and left the question whether a particular power was granted to depend on a fair construction of the whole instrument.  No constitution can contain an accurate detail of all the sub-divisions of its powers, and all the means by which they might be carried into execution.  It would render it too prolix.  Its nature requires that only the great outlines should be marked and its important objects designated, and all the minor ingredients left to be deduced from the nature of those objects.  The sword and the purse, all the external relations, and no inconsiderable portion of the industry of the nation, were entrusted to the General Government ;  and a Government entrusted with such ample powers, on the due execution of which the happiness and prosperity of the people vitally depended, must also be entrusted with ample means for their execution.  Unless the words imperiously require it, we ought not to adopt a construction which would impute to the framers of the Constitution, when granting great powers for the public good, the intention of impeding their exercise, by withholding a choice of means.  The powers given to the Government imply the ordinary means of execution ;  and the Government, in all sound reason and fair interpretations, must have the choice of the means which it deems the most convenient and appropriate to the execution of the power.  The Constitution has not left the right to Congress to employ the necessary means for the execution of its powers to general reasoning.  Article 1, section 8, of the Constitution, expressly confers on Congress the power ‘ to make all laws that may be necessary and proper to carry into execution the foregoing powers.’  Congress may employ such means and pass such laws as it may deem necessary to carry into execution great powers granted by the Constitution ;  and necessary means, in the sense of the Constitution, does not import an absolute physical necessity, so strong that one thing cannot exist without the other.  It stands for any means calculated to produce the end.  The word necessary admits of all degrees of comparison.  A thing may be necessary, or very necessary, or absolutely, or indispensably necessary.  The word is used in various senses ;  and in its construction, the subject, the context, the intention, are all to be taken into view.  The powers of the Government were given for the welfare of the nation.  They were intended to endure for ages to come, and to be adapted to the various crisis in human affairs.  To prescribe the specific means by which Government should in all future time execute its power, and to confine the choice of means to such narrow limits as should not leave it in the power of Congress to adopt any which might be appropriate and conducive to the end, would be most unwise and pernicious, because it would be an attempt to provide, by immutable rules, for exigencies which, if foreseen at all, must have been foreseen dimly, and would deprive the Legislature of the capacity to avail itself of experience, or to exercise its reason, and accommodate its legislation to circumstances.  If the end be legitimate, and within the scope of the Constitution, all means which are appropriate, and plainly adapted to this end, and which are not prohibited by the Constitution, are lawful.”

It is plainly within the scope of the Constitution that the Government should maintain itself ;  that the army should be supported ;  that the navy should be maintained.  The ways and means of doing this are left to Congress to provide.  Congress may do this entirely by taxation.  It may provide by law to levy and collect taxes enough every year to pay the whole expenses of the war during each current year, and so “ pay as we go.”  It may issue six per cent. bonds and sell them on the market for what they will bring—even if they will not sell for over fifty cents on the dollar—to raise money to carry on the war.  It may issue Treasury notes payable on demand, and make them a legal tender in payment of debts.  Either one or all of these modes of paying the expenses of the Government is left to the discretion of Congress.  Either mode is constitutional ;  and it is left to the sound discretion of Congress to decide which mode it will adopt, or whether it will adopt a part of each, as being the best in the present crisis.

My own impression is, that it will be best for us to adopt, in part, all of these modes for providing the means.

1.  Raise by taxation the current year, over and above the amount received from duties on imports, the sum of $150,000,000.

2.  Issue $100,000,000 of demand Treasury notes in addition to the $50,000,000 authorized in July, making them a legal tender in payment of debts, and exchangeable at any time for 6 per cent. twenty years’ bonds ;  with a further issue of demand notes if Congress shall hereafter deem it necessary.

3.  Provide for the issue of all the twenty years’ 6 per cent. bonds that may be necessary to fund the demand Treasury notes, and other fundable Treasury notes that may be issued, (say $500,000,000 six per cent. twenty years’ coupon bonds,) and pledge $30,000,000 of the annual taxes to pay the interest half-yearly thereon, and pledge $25,600,000 more, as a sinking fund to redeem the principal in twenty years.

1.  This tax of $150,000,000 would afford an ample basis on which to rest the credit of the Government for this large issue of Treasury notes and bonds, and would insure the punctual payment of the interest to the capitalists who might hold them.

2.  The demand notes put in circulation would meet the present exigencies of the Government, in the discharge of its existing liabilities to the army, navy, and contractors, and for supplies, materials, and munitions of war.  These notes would find their way into all the channels of trade among the people ;  and as they accumulate in the hands of capitalists, they would exchange them for the six per cent. twenty years’ bonds.

These circulating notes in the hands of the people would enable them to pay the taxes imposed, and would facilitate all business operations between farmers, mechanics, commercial business men, and banks, and be equally as good as, and in most cases better, than the present irredeemable circulation issued by the banks.

3.  The $500,000,000 six per cent. twenty years’ bonds in the hands of the Secretary of the Treasury, ready to be issued, would afford ample opportunity for funding the Treasury notes as fast as capitalists might desire to exchange Treasury notes not bearing interest for coupon bonds of the United States bearing six per cent. interest, and amply secured by a tax upon the people and all their property.

In this way the Government will be able to get along with its immediate and pressing necessities without being obliged to force its bonds on the market at ruinous rates of discount ;  the people, under heavy taxation, will be shielded against high rates of interest ;  and this capitalists will be afforded a fair compensation for the use of their money during the pending struggle of the country for national existence.

A suspension of specie payment is greatly to be deplored, but it is not a fatal step in an exigency like the present.  The British Government and the Bank of England remained under suspension from 1797 to 1821—’2—a period of twenty-five years.  During this time England successfully resisted the imperial power of the Emperor Napoleon, and preserved her own imperilled existence.  During all this time the people of Great Britain advanced in wealth, population, and resources.  Gold is not as valuable as the productions of the farmer and mechanic, for it is not as indispensable as are food and raiment.  Our army and navy must have what is far more valuable to them than gold and silver.  They must have food, clothing, and the material of war.  Treasury notes issued by the Government, on the faith of the whole people, will purchase these indispensable articles, and the war can be prosecuted until we can enforce obedience to the Constitution and laws, and an honorable peace be thereby secured.  This being accomplished, I will be among the first to advocate a speedy return to specie payments, and all measures that are calculated to preserve the honor and dignity of the Government in time of peace, and which I regret are not practicable in the prosecution of this war.

I do not despair ;  on the contrary, I have an abiding faith in the patriotism, firmness, and resources of the people to maintain this Government.  I feel that we are in great peril ;  but when the people and our rulers become sufficiently aroused to fully appreciate the magnitude and probable duration of the rebellion—a rebellion that has grown into most gigantic proportions—then shall we be able to put forth the energy and the means necessary to crush it.

An early and successful advance of our armies is of the utmost importance.  We need such an advance to sustain the financial credit of the Government.  We need it to prevent foreign intervention ;  we need it to rouse the flagging energies of the people ;  and above all, we need it to vindicate the courage and invincibility of our brave soldiers, who are so anxious to be led on to victory.

At the conclusion of Mr. Spaulding’s speech, Mr. VALLANDIGHAM obtained the floor and offered a substitute for the bill, which was read.  (Congressional Globe, p.p. 526.)

MR. STEVENS said :—“ I will follow an example set me, and give notice of an amendment which I shall offer to the bill.  It is to make the semi-annual interest payable in coin.  I shall make it when we reach the proper time and place.”

MR. VALLANDIGHAM.—“ That is included in the amendment I propose.  Mr. Stevens—“ Yes ! but my amendment is to the original bill.”  Mr. Vallandigham—“ I do not desire to speak upon the bill at this stage of the debate, and therefore I will cheerfully yield to my colleague (Mr. Pendleton), who proposes to discuss the constitutional question of legal tender.”  Mr. Pendleton obtained the floor.


MR. PENDLETON, on the 29th inst. made an elaborate speech in opposition to the constitutionality as well as the expediency of the legal tender clause.  He commenced by saying,

“ MR. CHAIRMAN, I was glad to hear the announcement made by the gentleman from Vermont, (Mr. Morrill), a member of the Committee of Ways and Means, by my colleague (Mr. Vallandigham), by the gentleman from New York, (Mr. Roscoe Conkling), and by the gentleman from Pennsylvania, (Mr. Stevens), that they each intended to propose to the House to make changes in this bill, either by way of amendment or substitute.”

MR. PENDLETON—“ These notes are to be made lawful money and a legal tender in discharge of all pecuniary obligations, either by the Government or individuals, a character which has never been given to any note of the United States, or any note of the Bank of the United States by any law ever passed.  Not only, sir, was such a law never passed, but such a law was never voted on, never proposed, never introduced, never recommended by any department of the Government ;  the measure was never seriously entertained in debate in either branch of Congress.”  Mr. CONKLING interrupting, enquired “whether the present Secretary is in favor of making paper a legal tender ?”  MR. SPAULDING—“ In reply to the question of my colleague, I will say that the Secretary of the Treasury has been called upon for his opinion in regard to this bill.  We were assured that his reply would be sent to us yesterday, but we did not receive it.  We expect his answer every hour.”  MR. CONKLING—“ I am not certain that I understand what my colleague said.  Does he expect a letter from the Secretary of the Treasury which will contain his views on the financial question, and also on the legal question ?”  Mr. Spaulding—“Upon the bill specifically.”  Mr. Conklin—“ Containing the legal tender clause ? ”  Mr. Spaulding—“ Yes, sir.”  Mr. PENDLETON—“ I cannot answer the question so far as the opinions of the present Secretary of the Treasury are concerned.  I affirm again the statement I have made, that a proposition of this kind has never been recommended to either House of Congress by any Department of the Government from its organization.  The report of the Secretary of the Treasury, made at the opening of the Session, contains no such recommendation.”

Mr. Pendleton contended that the bill, if passed, would impair the obligation of past as well as of future contracts, and that it would make it illegal to make a contract for dealing in gold or silver coin, for the reason that these legal tender notes might be tendered in payment of coin contracts.  He insisted that there was no express power granted in the Constitution to make United States notes lawful money and a legal tender in payment of debts, and that the power “to regulate commerce” gave no such power.  He then said :

The gentleman from New York (Mr. Spaulding), in his argument yesterday, deduced this power from the general powers of the Government.  He told us that Congress had power to lay and collect taxes ;  to raise and support armies, to provide and maintain a navy, and that all power necessary to effectuate these purposes was expressly given by the general grant of the Constitution.  If I should admit his statement in the very language in which he has made it, am I not entitled to ask whether he has shown us any legitimate connection between making these notes a legal tender and the power to raise an army ?  Might I not ask whether the repudiation of the obligations of the Government to pay its interest is a legitimate means for providing and sustaining a navy ?  Whether impairing the obligations of contracts between private individuals throughout the country, will in any degree assist the Government in its great duty in laying and collecting taxes ?  We had no demonstration of the necessity or propriety of these means to accomplish those ends.

The gentleman spoke quite at large in reference to the sovereign power of the Government.  He told us that this power was not prohibited in the Constitution.  He told us that in times of great emergency every thing may be done except that which is prohibited ;  and he read an argument from the Attorney General which concludes as it began, with the proposition that such a power is not prohibited to Congress.  Sir, I repudiate this whole idea.  I think it has no solid foundation in the Constitution.

When I come to examine the powers of Congress according to the principles of interpretation to which I adhere, I look to the grants of the Constitution.  I find no grant of this power in direct terms, or, as I think, by fair implication.  It is not an accidental emission :  it is not an omission through inadvertency.  It was intentionally left out of the Constitution, because it was designed that the power should not reside in the Federal Government.”

MR. PENDLETON continued his argument at great length against the Constitutional power of the government to issue legal tender notes to circulate as money.  He quoted from Story, Madison, Hamilton, Calhoun, and made long extracts from Mr. Webster’s speeches which were made while the government was on a peace footing, denying the power of the Government to issue currency and make it a legal tender.  He insisted that no State, and that even Congress itself could not make anything but gold and silver coin a legal tender in payment of debts.  That the language of the Constitution, and the weight of authority, it seemed to him, settled the question that Congress had not the power to do that which it is proposed shall be done by the provisions of this bill.  He concluded as follows :

“ Let gentlemen heed this lesson of wisdom.  Let them, if need be, tax the energies and wealth of the country sufficiently to restore the credit of the Government.  Let them borrow whatever money in addition may be necessary—borrow to the full extent that may be necessary—and let us adhere rigidly, firmly, consistently, persistently, and to the end, to the principle of refusing to surrender that currency which the Constitution has given us, and in the maintenance of which this Government, has never, as yet, for one moment wavered.”

The letter of Secretary Chase of the 22d inst. was regarded by a majority of the Committee of Ways and Means and many Members of the House, as non-committal on the legal tender clause of the bill, and many believed that when pressed to a decision, he would declare against its constitutionality.  In order to obtain the opinion of the Secretary more fully, MR. CORNING offered a resolution in the Committee of Ways and Means, which was adopted, referring the bill (No. 240) to the Secretary, and requesting him to communicate to the Committee at as early a day as possible, his opinion as to the propriety and necessity of its immediate passage by Congress.  After considerable delay the Secretary sent to the Committee of Ways and Means the following reply :



SIR :  I have the honor to acknowledge the receipt of a resolution of the Committee of Ways and Means, referring to me house bill No. 240, and requesting my opinion as to the propriety and necessity of its immediate passage by Congress.

The condition of the Treasury certainly needs immediate action on the subject of affording provision for the expenditures of the Government, both expedient and necessary.  The general provisions of the bill submitted to me, seems to me well adapted to the end proposed.  There are, however, some points which may, perhaps, be usefully amended.

The provision making United States notes a legal tender has doubtless been well considered by the committee, and their conclusion needs no support from any observation of mine.  I think it my duty, however, to say, that in respect to this provision my reflections have conducted me to the same conclusions they have reached.  It is not unknown to them that I have felt, nor do I wish to conceal that I now feel, a great aversion to making anything but coin a legal tender in payment of debts.  It has been my anxious wish to avoid the necessity of such legislation.  It is, however, at present impossible, in consequence of the large expenditures entailed by the war, and the suspension of the banks, to procure sufficient coin for disbursements ;  and it has, therefore, become indispensably necessary that we should resort to the issue of United States notes.  The making them a legal tender might, however, still be avoided, if the willingness manifested by the people generally, by railroad companies, and by many of the banking institutions, to receive and pay them as money in all transactions, were absolutely or practically universal ;  but, unfortunately, there are some persons and some institutions which refuse to receive and pay them, and whose action tends not merely to the unnecessary depreciation of the notes, but to establish discriminations in business against those who, in this matter, give a cordial support to the Government, and in favor of those who do not.  Such discriminations should, if possible, be prevented ;  and the provision making the notes a legal tender, in a great measure at least, prevents it, by putting all citizens, in this respect, on the same level, both of rights and duties.

The committee, doubtless, feel the necessity of accompanying this measure by legislation necessary to secure the highest credit as well as the largest currency of these notes.  This security can be found, in my judgment, by proper provisions for funding them in interest-bearing bonds ;  by well-guarded legislation authorizing banking associations with circulation based on the bonds in which the notes are funded ;  and by a judicious system of adequate taxation, which will not only create a demand for the notes, but—by securing the prompt payment of interest—raise and sustain the credit of the bonds.  Such legislation, it may be hoped, will divest the legal tender clause of the bill of injurious tendencies, and secure the earliest possible return to a sound currency of coin and promptly convertible notes.

I beg leave to add, that vigorous military operations and the unsparing retrenchment of all necessary expenses, will also contribute essentially to this desirable end.

* * * * * * * * * * *

I have the honor to be, with very great respect, yours truly,





MY DEAR SIR—It was impossible to get my answer ready before yesterday afternoon, when it was sent to the Chairman of the Committee ;  the messenger boy instructed to deliver it to Mr. Stevens or yourself.  The House having adjourned, he left it, he says, for you at the National Hotel instead of at Mr. Steven’s lodgings.

Had I been aware that the part read to you would have been acceptable as an extract, (to insert in your speech,) I would have sent it earlier in advance of completing the answer.

I read your speech carefully last night.  It seems to me to need no change.  You do not attach, I see, so much importance as I do to the Banking Act as a measure of relief ;  nor so much as I am confident you will upon reflection.  I confess too, that I was a little disappointed in being merely let off without censure when I thought myself entitled to some credit.  My two first loans were negotiated considerably above the market rate, and the last at a rate almost equal at the time, and below, while the market almost immediately afterwards fell.

Your friend,
Hon. E.G, SPAULDING, House of Representatives.


NEW YORK, Jan. 29, 1862.
MY DEAR SIR—I beg to offer you my thanks for your able exposition of the financial affairs of the Government.  It is clear that there are but the alternatives you state to obtain any substantial relief—the one, to flood the market with the long stocks, submit to the very great depression in the price, and abide the consequences :  a great augmentation of the public debt, and ruin to many of the warmest supporters of the Government ;  the other, for the present to issue demand notes, making them a legal tender in order to enable you to use them.  No other plans have been, or in my opinion can be devised, I have long entertained and freely expressed these views, here and in Washington.  Even if an attempt, more or less successful, had been made at the first to sell the long stock, yet, with the profligate expenditure since made to such fearful amounts, “to this complexion had we come at last.”  It is idle to look back, but had there been economy in the great departments of expenditure from the beginning, inspiring full public confidence in their able and honest management, it may be questioned if the necessary funds could not have been provided without making irredeemable paper money.  The war would have been shorter, the patriotism of the whole people fully sustained, and foreign nations shown that this Government could not be divided.
I am, dear sir, respectfully and truly yours,
Hon. E.G. SPAULDING, Washington.


MY DEAR SIR—Accept my kind thanks for your note of yesterday, and also my apology for not having sooner expressed the gratification I felt on reading your very able and statesmanlike speech on the national finances.  That speech has received, as it deserved, the hearty approval of every one who fully appreciates the imminent danger we are in of a collapse of the public credit.  If the present financial embarrassments of the Government should be aggravated by military disasters, or threatened foreign intervention, it might precipitate a panic that would so depress the public securities, that it would be difficult to obtain supplies for the army, and thus arrest the further prosecution of the war.  The only safe way of avoiding this danger is to promptly pass the bill you have introduced and advocated so ably.  I shall not fail to give you whatever aid I can.  I have tried in several instances to bring Mr. Bryant and Mr. Greeley over to our faith, but thus far without success.
I remain, dear sir, very truly yours,


PHILADELPHIA, Feb. 14, 1862.
MY DEAR SIR—I have read your speech on the finances of the nation with the liveliest interest.  It is at once clear, forcible, argumentative and conclusive, worthy alike of a financier, a statesman, and a patriot.
Very truly yours,


PHILADELPHIA, Jan. 30, 1862.
Hon. E. G. SPAULDING, House of Representatives, Washington.

DEAR SIR—I have just read your very able and statesmanlike exposition of our public finances and our financial policy during the war, with a satisfaction I cannot refrain from expressing to you by letter.

You have grasped the subject strongly and comprehensively, as well as practically.  I can not doubt that your views will prevail.  I trust you will now extend the same kind of effort to accomplish some harmonious action between the Associated Banks and the Government.  I believe that these, and other leading banks can, by the aid of the Treasury and by concert in emergencies, keep the United States notes or currency at par ;  that is at par less only the special premium on gold, which will not be greater than now if the Treasury currency is well managed.  The regular circulation of paper currency will absorb in no very long period the whole $200,000,000, and keep that amount moving.  But as currency in the channels of business necessarily at times gorges in particular places, and depreciates at once if the holders are not relieved, such occasions should not only be watched by the fiscal agents of the Government, but the proper remedy should be applied.  It would cost the Treasury no sum worth mentioning, if the banks would enter into the plan heartily, to keep their currency in such credit that it would perform with complete success every function of a sound currency.  According to my view, the banks are deeply interested in keeping up the credit of those notes.  The continued demand for them created by the loans, by the payment of debts at banks, and the payment of taxes, will create a rapid circulation and an absorbing power, which will enable the Government to re-issue the whole amount several times a year.  But there can be no doubt that an average of one hundred millions will remain so prominently in the channels of business as seldom to revisit the Treasury.  If the banks will lend their aid effectively to support their circulation it is not likely that any further issue will be needed, if they don’t, they must depreciate, and further issue will be inevitable, if the war continues.  Even the banks should be willing to acknowledge, that whatever their opinion about the propriety of issuing this currency, the whole financial policy of the war and commercial interests of the country, will depend very much on its management.  They should accept the necessity and make the best of it ;  and they can make a very good thing for themselves by making the best of it.  There can be no doubt that the city banks can enlarge their discounts by the use of the United States notes beyond what they could safely do upon their own circulation.  But I regard their hearty co-operation in sustaining this issue which you have so well justified, as so important, that I think it would be well worth while for the Treasury to pay them for the sort of services they can render.  I contributed an editorial on this subject to the North American, which I send you.  If your speech is to appear in pamphlet form please send me one.  I send you also an article in the Banking Magazine for January, 1862, on the subject of banks and the Treasury.  Be good enough to present my respects to Mr. Horton, of your committee, who is an old acquaintance of mine.

With great respect, very truly yours,               


BUFFALO, Jan. 21, 1862.
DEAR SIR—I suppose of course a large issue of demand notes for circulation will be authorized, receivable for all dues and made a legal tender ;  and sufficient taxation to sustain the credit of all such issues and of the Government bonds.  I see no other method so economical and effective.
Very respectfully yours,


ALBANY, Feb, 8, 1862.
DEAR SIR—Accept my thanks for a copy of your speech on the national finances.  The demand notes, in addition to the legal tender, need only to be fortified by a sinking fund yearly of $10,000,000, derived from taxation, to every $100,000,000 of notes issued, to make them pass equal to coin.
Yours truly,


SALISBURY MILLS, Orange Co., N.Y., Jan. 30, 1862.

DEAR SIR—I have read your financial speech (as reported in the Tribune) twice over with great interest.  The necessity for such measures is greatly to be regretted, but I do not see with the light I have, how they are to be avoided.  In our national exigency, determined boldness, both in civil and military affairs, will be worth a mint of money to us.

Please send me your speech for preservation, when printed in pamphlet form.

With great respect, your obedient servant,


NEW YORK, Jan. 29, 1862.
MY DEAR SIR—I have just read your speech as published to-day in the Times, it appears to me a very fair and clear exposition of the present financial condition of the Government, its necessities, its resources, and the emergency which now demands the immediate passage of the bill reported by the Committee of Ways and Means.  The exigency of the Government to which I referred recently before that Committee, to justify the legal tender of the notes, I think is now reached, and we have no choice of any other measure as good as you propose.  But protect the issue of this currency by limitation of its amount, by large taxation, and be sure to require by amendment that the payment of interest by the Government shall be certainly paid in coin on all its public debts.
In haste, yours truly,
P.S.—In some quarters are suggestions not to receive these notes from customers.  This is wrong.  Such a proceeding, or to make any exception against them as lawful money of the United States, would affix a taint and affect the public confidence in them.


PIERMONT, Jan. 29, 1862.

DEAR SIR—I beg to congratulate you on your lucid, forcible, and comprehensive opening of the debate on the legal tender Treasury note bill.  It is unanswerable, and I trust will issue in an early triumph.  I only wish the sum proposed was larger, so as to extinguish all hopes of national bonds being forced on the market and sacrificed.  I think there will be a struggle in certain quarters to withdraw them from circulation and turn them into bonds on interest.  The people would do that gradually without reducing the circulation too much, were there plenty more expected ;  and with a discretion for a larger sum the inimical parties could do no harm.

Should your speech be printed in pamphlet form, which I hope it will, please favor me with one or more.

Respectfully, &c.,


BUFFALO, Feb. 7, 1862.
HON. E. G. SPAULDING, Washington, D. C.
    DEAR SIR—I thank you for a printed copy of your speech on the finances of the country, received this morning ;  I had read it in the paper before with great interest and entire approval, but desire this copy for preservation.  Whilst all loyal citizens must regret the necessity which compels the Government to suspend specie payments and make its own demand notes a lawful tender instead, I am quite unable, after very considerable thought, to suggest any other measure of relief, which I think would answer the purpose so promptly, or so well ;  hence, I hope the bill as reported by the committee will speedily become a law, and this is I think quite the general wish here.  As the Spring approaches, anxiety increases for a vigorous prosecution of the war to a conclusion ;  for sometime or other, not very remote, necessity will compel at least a large decrease in our land and naval forces ;  $500,000,000 annually, can and will be paid cheerfully awhile, but I need not say to you that it cannot be very long ;  so it behooves the Government to act with all practicable energy to end the rebellion by any means in its power, in the very shortest time it can be done.  I hope we shall come out of the conflict speedily and triumphantly ;  and that all the States may be again united under the present Constitution ;  still most of the slave states, except upon the border, seem almost hopelessly estranged, and will not, I fear, ever again, with their present people, yield obedience to the fundamental law of the land and the acts of Congress, unless they know the penalty for treason henceforth is to be rigidly enforced, and that the power of the Government is quite equal to capture the leaders of the rebellion by hundreds and thousands, and are determined to do it, and to execute them as fast as captured, unless they throw down their arms and disband, and return to loyalty.  Can it be possible the Rebel leaders would long hold out against such a proclamation, after they saw that it was the intention of the Government to fulfil it to the letter, and they were virtually surrounded by a superior force.
Yours truly,


NEW YORK, Jan. 30, 1862.
MY DEAR SIR—I send you the 4th of a series of articles written to show that the bills of the Government should be a legal tender.  I belong to the creditor class, but my interest in the Government absorbs all others.  In my view the war cannot be conducted except on this plan.  I would pay the interest in gold and silver and lay heavy taxes.  There should be $100,000,000 of demand notes of $1000, bearing 5 per cent. interest.
Yours, very truly,


ALBANY, Jan. 31, 1862.

DEAR SIR—I have read your well constructed argument on national finances, and the issue of Treasury notes made a legal tender.  I do not suppose that a loan can be made, and I regard this issue of Treasury notes the only adequate measure for sustaining the credit of the Treasury and the well being if not the very existence of the Government.  Money must be had or the war cannot be successfully prosecuted.

This measure will secure means, no other will except at ruinous sacrifices.  It is not a debatable question.  The struggle is for life.  The knife is at our throat.  We must strike with the most available weapon, and leave theory for a more convenient season.  Of course you will pass a tax law.  The people will hail it, and it will inspire confidence in our public securities.  I had hoped that you would authorize funding at 4 or 5 years in an 8 per cent. stock, and 20 years in a 6 or 6½ per cent. stock.  The short 8 per cent. stock would tempt to a large amount of funding, and when that short period expires, it is to be hoped that the Government can borrow at 5 per cent.

We want to encourage funding so as to prevent a redundant currency, and to prepare the way for possible if not probable further issues.

I have the honor to be, Your Obedient Servant,


NEW YORK, Jan, 31, 1862.
HON. E. G. SPAULDING, Washington, D. C.

DEAR SIR—I have read your able exposition of the condition of the national finances, and the bill which you reported to authorize the issue of $150,000,000 of demand notes, and I beg leave to express the opinion, that there is no other means by which the Government can escape the utter ruin of their credit, than the immediate passage of the bill, and a bill to raise an amount of revenue which shall render the prompt payment of interest on all their loans beyond contingency.  Should the passage of this bill be delayed until the banks have paid their last installment to the Government, and the banks should refuse to receive the demand notes, and pay them out, they would of course depreciate to an extent sufficient to damage the credit of the Government essentially.  If the experience of a life, not now short, is of any value, I say unhesitatingly, that this is the most critical period in our history within my knowledge.  Those in power must take the responsibility and do the needful instantly, or the consequences may be, and I think will be terrific.  As to paying in gold during the war, it is utterly and totally impracticable, and the idea of doing so should at once be discarded.  After the present emergency is provided for, I trust the bill for banking on the Government stock will be passed.  The plan will be approved by nearly all the intelligent community when once adopted, and is now by a large majority of the men of wealth and influence, so far as I am informed.  With apologies for trespassing upon your valuable time,

I am, your obedient servant,