Twenty Years of Congress, Vol. 1 / From Lincoln to Garfield, with a Review of the Events Which Led to the Political Revolution of 1860

by James Gillespie Blaine

CHAPTER XIX.

The Legal-tender Bill.—National Finances at the Opening of the
Year 1862.—A Threefold Contest.—The Country thrown upon its own
Resources.—A Good Currency demanded.—Government takes Control of
the Question.—Authorizes the Issue of $150,000,000 of Legal-tender
Notes.—Mr. Spaulding the Author of the Measure.—His Speech.—
Opposed by Mr. Pendleton.—Position of Secretary Chase.—Urges the
Measure upon Congress.—Speeches by Thaddeus Stevens, Mr. Vallandigham,
Mr. V. B. Horton, Mr. Lovejoy, Mr. Conkling, Mr. Hooper, Mr. Morrill,
Mr. Bingham, Mr. Shellabarger, Mr. Pike and Others.—Spirited and
Able Debate.—Bill passes the House.—Its Consideration by the
Senate.—Speeches by Mr. Fessenden, Mr. Sherman, Mr. Sumner, Mr.
Bayard, Mr. Collamer and Others.—Bill passes the Senate.—Its
Weighty Provisions.—Secretary Chase on State Banks.—Policy of
the Legal-tender Bill.—Its Effect upon the Business and Prosperity
of the Country.—Internal Revenue Act.—Necessity of Large Sums
from Taxation.—Public Credit dependent on it.—Constitutional
Provisions.—Financial Policy of Alexander Hamilton.—Excises
Unpopular.—Whiskey Insurrection.—Resistance by Law.—Supreme
Court Decision.—Case of Hylton.—Provisions of New Act.—Searching
Character.—Great Revenue desired.—Credit due to Secretary Chase.

At the opening of the year 1862, from causes narrated in the preceding chapter, the government finances were in an embarrassed and critical situation. In Europe the general opinion—founded in many influential quarters on the wish—was that the Union would be dissolved; that with the success of the South, there would be still further division between the East and the West; and that the only compact power would be the Confederacy founded on slavery, with the world's great staples as the basis of its wealth and its assured development. We had but recently and narrowly escaped war with England on account of the Trent affair, and in the crafty and adventurous Emperor of France we had a secret enemy who saw in our downfall the possible extension of his power and the strengthening of his throne. Confederate bonds were more popular in England that the bonds of the United States. The world's treasures were closed against us. The bankers of Europe, with the Rothschilds in the lead, would not touch our securities. Their united clientage included the investors of Great Britain and the Continent, and a popular loan could not be effected without their aid and co-operation. We were engaged therefore in a threefold contest,—a military one with the Confederacy, and diplomatic and moral one with the governments of England and France, a financial one with the money power of Europe.

These causes threw us upon our own resources. The problem to be solved was the utilization of our wealth without the aid which comes from the power to borrow foreign money. Congress had obviously failed at the extra session of July to use the taxing power to the extent which financial wisdom demanded, and though it was now willing to correct the error, there was not enough time to wait the slow process of enactment, assessment, and collection. Our need was instant and pressing. The banks of the country, many of them in reckless, speculative hands, were freed by the suspension of specie payment from their just responsibility, and might flood the country with worthless paper which would entail great distress upon the people. The Treasury notes not being paid in coin on demand, as promised on their face, became discredited to such a degree that the banks of the leading commercial cities would receive them only as a special deposit, and not as money of account. So entirely were these notes distrusted in the opening month of 1862 that in more than one instance State banks exchanged their own bills for them as an act of patriotism, in order that the bounty due to soldiers just recruited might be paid before they left their State rendezvous to join the armies in the field. Troops already in the service had seen more than one pay-day go by without sight of the paymaster, and tens of millions were overdue to them. Discontent in all the camps was the natural result.

With no power to exchange our bonds for coin except at such rates as would destroy national credit, with only a hundred millions of coin in all our banks when the war began, and a hundred and fifty millions hoarded among the people, with the lavish products of our mines transferred to Europe to pay for articles which it would have been wiser to manufacture at home, our situation was not merely one of anxiety but of peril. Never in the history of national progress through trials and crises, were wise statesmanship and financial sagacity more imperatively demanded. The Rebels might fight without money, for they had no national credit to protect; but to the Union, bankruptcy meant final and hopeless ruin.

LEGAL-TENDER CURRENCY PROPOSED.

The first thing to be secured was a currency. That was demanded to pay the debt of honor due to the soldiers; to remove stagnation in business; to put the people in heart and hope. It had been demonstrated that Treasury notes, without punctual and regular redemption, would not circulate. When A paid them to B in satisfaction of a debt, B had no assurance that he might in turn cancel an obligation by paying them to C. It would perhaps occur to C, that for a lawful debt he had the right to demand gold or silver; for the law told him in explicit terms that nothing else constituted a legal-tender. It was obviously impossible to conduct the business of the country and to carry on the war, in coin payments, with the small amount of coin at command. Few would insist upon coin, but as the power to insist upon it was a legal right, it was a continuing menace to the confidence of trade.

In the opinion of the majority, the one imperative duty was that the government should take control of the currency, issue its own paper as a circulating medium, and make it equal and alike to all, by declaring it to be a legal-tender in the payment of debts. It was the most momentous financial step ever taken by Congress,—as it is the one concerning which the most pronounced and even exasperating difference of opinion was manifested at the time, has since continued, and will probably never entirely subside so long as the government keeps one legal-tender note in circulation. It was admitted to be a doubtful if not dangerous exercise of power; but the law of necessity overrides all other laws, and asserts its right to govern. All doubts were decided in favor of the nation, in the belief that dangers which were remote and contingent could be more easily dealt with than those which were certain and imminent.

Relief came promptly. On the 22d of January, 1862, Mr. E. G. Spaulding of New York reported the legal-tender bill to the House. It had been maturely considered by the Committee of Ways and Means, —a committee made up of very able men. Mr. Spaulding is entitled to rank as the author of the measure. It is difficult to assign absolute originality in any case where so many minds are at work in the same field of investigation, and where, with an approximate identity of date, there is a general similarity of conclusion. But the formal proposition and the public advocacy belong to Mr. Spaulding. He had been all his life engaged in financial affairs, was a banker of recognized ability in the city of Buffalo, and enjoyed a high reputation throughout the State of New York for intelligence and probity. He had not waited for advice or even for consultation, but on the thirtieth day of December, 1861,—the day on which the banks of New York suspended specie payment,—he introduced the original legal-tender bill in the House of Representatives.

The first provision of the bill now reported, was for the issue of $150,000,000 of Treasury notes, differing from those previously authorized by being declared a legal-tender for all obligations, public and private, except duties on imports and interest on the public debt. The notes were also to be exchangeable into six per cent. bonds, redeemable at the pleasure of the United States after five years. In reporting the bill, Mr. Spaulding called it "a war measure, a measure of necessity not of choice, 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." He argued, "These notes will find their way into all the channels of trade among the people; and as they accumulate in the hands of capitalists, they will exchange them for the six per cent. twenty years' bonds:" the notes will "be equally as good, and in many cases better, than the present irredeemable circulation issued by the banks." Mr. Spaulding argued that the Constitution justified such legislation in the emergency, and he declared that by this plan "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 capitalists will be afforded fair compensation for the use of their money during the pending struggle for national existence."

Mr. Spaulding admitted that "a suspension of specie payment is greatly to be deplored," but he contended that "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- 22, a period of twenty-five years. During this time England successfully resisted the power of the Emperor Napoleon, and preserved her own imperiled existence. As a measure of necessity, she made the Bank of England notes virtually a legal-tender by suspending the specie restriction. Throughout this period the people of Great Britain advanced in wealth, population, and resources." Mr. Spaulding maintained that "gold is not as valuable as the production of the farmer and the 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 or 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."

MR. CHASE FAVORS LEGAL-TENDER.

When the bill was taken up for consideration on the 29th of January, the objections which had been raised in the public press were elaborated in the Committee of the Whole. Mr. Pendleton of Ohio was the first in opposition. In beginning a long argument, he insisted that "the feature of this bill which first strikes every thinking man, even in these days of novelties, is the proposition that these notes shall be made a legal-tender in discharge of all pecuniary obligations, as well those which have accrued in virtue of contracts already made as those which are yet to accrue in pursuance of contracts which shall hereafter be made. Do gentlemen appreciate the full import and meaning of that clause? Do they realize the full extent to which it will carry them? Every contract for the purchase of money is in legal contemplation a contract for the payment of gold and silver coin. Every promissory note, every bill of exchange, every lease reserving rent, every loan of money reserving interest, every bond issued by this government, is a contract to which the faith of the obligor is pledged, that the amount, whether rent, interest, or principal, shall be paid in the gold and silver coin of the country." Mr. Pendleton deemed it a very serious matter that "the provisions of this bill contemplate impairing the obligation of every contract of that kind, and disturbing the basis upon which every judgment and decree and verdict have been entered." He concluded by referring to the depreciated paper of the French Revolution, to the long suspension of specie currency in England, and the throes attending return to it in 1822. Quoting Daniel Webster's words that "gold and silver currency is the law of the land at home, the law of the world abroad: there can, in the present condition of the world, be no other currency," Mr. Pendleton made an earnest appeal to the House "to heed this lesson of wisdom."

Repeated declarations were made during the debate that the Secretary of the Treasury had not given his approval of the pending measure. This impression was seriously impeding the progress of the bill, and, if it had been confirmed, would probably have defeated it. A belief was prevalent that Mr. Chase would be glad to have the advantage of the measure in the management of the Treasury without assuming the responsibility of its recommendation. But it was soon evident that he could not remain in a passive and receptive position without defeating the bill. Its real opponents took advantage of the rumors; and its supporters, annoyed if not angered, by the suggestion of hostility on the part of the Treasury, were determined that Secretary Chase should take open ground. The embarrassment was relieved by a letter from the Secretary to the Committee of Ways and Means, dated Jan. 29, and read in the House on the 4th of February by Mr. Spaulding. The letter had great influence on Congress. Without it, the measure would probably have been defeated.

Mr. Chase, assuming that "the provision making United-States notes a legal-tender has doubtless been well considered by the committee," deemed it his duty to say that "in respect to the provision his reflections had conducted him to the same conclusions the committee had reached." He did not wish to conceal that he felt "a great aversion to making any thing but coin a legal-tender in payment of debts." He had been anxious "to avoid the necessity of such legislation." He found it however "impossible, in consequence of the large expenditures entailed by the war and the suspension of the banks, to procure sufficient coin for disbursements." He declared therefore that it "had become indispensably necessary that we should resort to the issue of United-States notes. 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 that refuse to receive and pay them, and their 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 discrimination 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." In addition to this official communication, Mr. Spaulding felt justified in reading a personal note from Mr. Chase, in which he said that he "came with reluctance to the conclusion that the legal-tender clause is a necessity," but that he "came to it decidedly and supported it earnestly."

THADDEUS STEVENS IN THE DEBATE.

Thaddeus Stevens threw the whole weight of his influence in favor of the measure. To alternative propositions which had been submitted, he made strenuous objection. Certain bankers of New York had suggested that the immediate wants of the government might be supplied by pledging seven and three-tenths per cent. bonds with a liberal margin, payable in one year, to the banks, which would advance a portion in gold and the rest in currency. Mr. Stevens argued that "the effect of this would be that the government would pay out to its creditors the depreciated notes of non-specie-paying banks. And as there is no possibility that the pledges would be redeemed when due, they would be thrown into the market and sold for whatever the banks might choose to pay for them. The folly of this scheme needs no illustration." Another proposition, pressed very earnestly, was to strike out the legal-tender clause, and make the notes receivable for all taxes and public dues, but not to make any provision for redeeming them in coin on demand. Mr. Stevens did not "believe that such notes would circulate anywhere except at a ruinous discount. Notes not redeemable on demand, and not made a legal-tender, have never been kept at par." Even those who could use them for taxes and duties would, in Mr. Stevens's opinion, "discredit them that they might get them low." He was convinced that "if soldiers, mechanics, contractors, and farmers were compelled to take them from the government, they must submit to a heavy shave before they could use them. The knowledge that they were provided for by taxation, and would surely be paid twenty years hence, would not sustain them."

To two prominent amendments which had been submitted, Mr. Stevens manifested earnest opposition. He said "the one moved by the gentleman from Ohio (Mr. Vallandigham) proposes the same issue of notes, but objects to legal-tender, and does not provide for their redemption in coin. He fears our notes would depreciate. Let him who is sharp enough, instruct the House how notes that every man must take can be less valuable than the same notes that no man need take and few would, since they are irredeemable on demand." As to the constitutionality of the bill, he thought that whoever "admits our power to emit bills of credit, nowhere expressly authorized by the Constitution, is an unreasonable doubter when he denies the power to make them a legal-tender." "The proposition of the gentleman from New York" (Mr. Roscoe Conkling), continued Mr. Stevens, "authorizes the issuing of seven per cent. bonds, payable in thirty-one years, to be sold ($250,000,000 of it) or exchanged for the currency of the banks of Boston, New York, and Philadelphia. This suggestion seems to lack every element of wise legislation. Make a loan payable in irredeemable currency, and pay that in its depreciated condition to our contractors, soldiers, and creditors generally! The banks would issue unlimited amounts of what would become trash, and buy good hard-money bonds of the nation. Was there ever such a temptation to swindle? The gentleman from New York further proposes to issue $200,000,000 United-States notes, redeemable in coin in one year. Does he not know that such notes must be dishonored, and the plighted faith of the government be broken? If we are to use suspended notes to pay our expenses, why not use our own?"

The minority of the Ways and Means Committee, through Mr. V. B. Horton of Ohio, had submitted a plan, as Mr. Stevens characterized it, "to issue United-States notes, not a legal-tender, bearing an interest of three and sixty-five hundredths per cent., and fundable in seven and three-tenths per cent. bonds, not payable on demand, but at the pleasure of the United States. This gives one and three- tenths per cent. higher interest than our loan, and, not being redeemable on demand, would share the fate of all non specie-paying notes not a legal-tender." Mr. Stevens believed that the government was reduced to a narrow choice. It must either throw bonds at six or seven per cent. on the market within a few months in amount sufficient to raise at least $600,000,000 in money,—$557,000,000 being already appropriated,—or it must issue United-States notes, not redeemable in coin, but fundable in specie-paying bonds at twenty years; such notes either to be made a legal-tender, or to take their chance of circulation by the voluntary act of the people. The sturdy chairman of Ways and Means maintained that "the highest rate at which we could sell our bonds would be seventy-five per cent., payable in currency, itself at a discount, entailing a loss which no nation or individual doing a large business could stand for a single year." He contended that "such issue, without being made legal-tender, must immediately depreciate, and would go on from bad to worse. If made a legal-tender, and not issued in excess of the legitimate demand, the notes will remain at par, and pass in all transactions, great and small, at the full value of their face; we shall have one currency for all sections of the country, and for every class of people, the poor as well as the rich."

MR. LOVEJOY AND MR. CONKLING.

Mr. Owen Lovejoy of Illinois on the other hand marked out a very different plan. He advocated as the first step, "adequate taxation, if need be to the extent of $200,000,000." In the next place, he would so legislate as to "compel all banking institutions to do business on a specie basis. Every piece of paper that claimed to be money but was not, he would chase back to the man or corporation that forged it, and visit upon the criminal the penalties of the law. He would not allow a bank note to circulate that was not constantly, conveniently, and certainly convertible into specie." In the third place, he would issue interest-paying bonds of the United States, and "go into the market and borrow money and pay the obligations of the government. This would be honest, business- like, and in the end economical. This could be done. Other channels of investment are blocked up, and capital would seek the bonds as an investment." As contrasted with the measure proposed by the Ways and Means Committee, Mr. Lovejoy intimated that his represented "the health and vigor of the athlete;" the other, "the bloated flesh of the beer-guzzler."

Mr. Roscoe Conkling of New York expressed hearty agreement with Mr. Lovejoy. He agreed "with some other gentleman who said that his bill was a legislative declaration of national bankruptcy." He agreed "with still another gentleman who said that we were following at an humble and disgraceful distance the Confederate Government, as it is called, which has set up the example of making paper a legal-tender, and punishing with death those who deny the propriety of the proposition." Mr. Conkling declared that "insolvency is ruin and dissolution;" and he believed that "in passing this bill, as was said by the gentleman from Massachusetts [Mr. Thomas], we are to realize the French proposition about virtue,—that it is the first step that costs. Another and another and another $100,000,000 of this issue will follow. We are plunging into an abyss from which there are to be no resuscitation and no resurrection." Mr. Conkling thought "it right to learn of an enemy," and already "the London Times hails this $150,000,000 legal-tender bill as the dawn of American bankruptcy, the downfall of American credit." The public debt by the first of the ensuing July, within less than a year from the first battle of the war, was already estimated at $806,000,000. "Who can credit these figures," said Mr. Conkling, "when he remembers that the world's greatest tragedian closed his bloody drama at St. Helena leaving the public debt of France less than seventy million of pounds?" He believed that "all the money needed can be provided by means of unquestionable legality and safety." He believed the substitute he had offered would effect that result.

Mr. Hooper of Massachusetts, a man of large experience in financial and commercial affairs, spoke ably in support of the legal-tender clause. "No one," said he, "supposes for one moment that government notes will be sold for coined money, or that coined money will be borrowed on them. It is fair to suppose that the opponents of the administration well understand that this would be the effect of accepting the amendment to strike out the legal-tender clause from the bill; and that their object, while they talk about coined money to deceive some of our friends, is to oblige the government to give up the sub-treasury, and to use for its payment the depreciated bills of the suspended banks; thereby flooding the whole country with these irredeemable notes, and producing, in time, a state of financial confusion and distress that would ruin any administration. The proposed issue of government notes guards against this effect of inflating the currency by the provision to convert them into government bonds, the principal and interest of which, as before stated, are payable in specie."

Mr. Morrill of Vermont supported the bill proposed by the minority of the Ways and Means Committee. He described the legal-tender features as "not blessed by one sound precedent, but damned by all." As a war measure he thought "it was not waged against the enemy, but might well make him grin with delight." He would as soon provide "Chinese wooden guns for the army as paper money alone for the Treasury." Mr. Morrill declared that there never was a greater fallacy than to pretend that as "the whole United States are holden for the redemption of these notes, they will, if made a legal-tender, pass at par." He contended that, as currency, "no more of them can be used than enough to fill the demands of commerce." He directed attention to the fact that of the Treasury notes already issued, payable in specie on demand, "the government succeeded in circulating but $27,000,000 of the $50,000,000 authorized, and of these the banks had held $7,000,000." The sanguine feeling in regard to the length of the war was disclosed by Mr. Morrill. Speaking on the 4th of February, 1862, he ridiculed the suggestion that "the war would be prolonged until July 1, 1863." He declared that "we could close the war by the thirtieth day of July next, as well as in thirty years.' This opinion was the one commonly accepted at the time in Congressional circles, though discountenanced by the wisest among those holding important commands in the army.

Mr. Bingham of Ohio spoke earnestly in favor of the bill. He could not "keep silent" when he saw "efforts made to lay the power of the American people to control their currency, a power essential to their interest, at the feet of brokers and of city bankers who have not a tittle of authority save by the assent of forbearance of the people to deal in their paper issues as money." Mr. Bingham argued that as there "is not a line or word or syllable in the Constitution which makes any thing a legal-tender,—gold or silver or any thing else,—it follows that Congress, having 'the power to regulate commerce,' may determine what shall be a lawful tender in the discharge of obligations payable in money only." The "limitation of the power to impair the obligation of contracts," as Mr. Bingham pointed out, was "a limitation upon the States only, and did not restrain the action of Congress."

Mr. Sheffield of Rhode Island argued earnestly against the bill, and predicted the same fate for it, if enacted, that overcame a similar attempt in his State during the Revolutionary war "to make paper a legal-tender." The people would not submit to it, and "the courts set it aside as an unlawful exercise of legislative power."

ABLE SPEECH BY MR. PIKE.

Mr. Frederick A. Pike of Maine made one of the clearest and ablest speeches delivered in the House in favor of the bill. He regarded it as an experiment forced upon the country by necessity. "We issue $150,000,000," said Mr. Pike, "on a venture." We measure it "with population and wealth and existing currency. We compare it with the action of the past." The issue of Continental notes had reached $20,000,000 by the month of April, 1777, besides a large amount of currency by the States. "And yet," said Mr. Pike, "no marked signs of depreciation had appeared." The whole property of the country did not at that time in his judgment "exceed five hundred millions." From these facts he deduced our ability to stand the proposed issue of paper. Mr. Pike had little faith in the infallibility of any one's judgment as to the ultimate result of financial experiments. He recalled the circumstance that Sir Robert Peel's famous bank bill was introduced in Parliament in 1844 with the confident declaration by Her Majesty's Government that "inquiry had been exhausted." But in the "first mercantile pinch" the measure which was "the embodiment of financial wisdom" did not work favorably, and "the government was compelled to interpose on behalf of the bank and of the business community." "Tax, fight, and emancipate," Mr. Pike declared to be "the Trinity of our situation."

Mr. Valentine B. Horton of Ohio was opposed to giving the legal- tender quality to government paper. He said "the country was never so wealthy as to-day; never was so little due to foreign countries; never were the people so free from embarrassment. The one drawback is that the Treasury wants money to an immense amount." He believed that an appeal to the capitalists would call forth "gold in the utmost abundance." To pass the legal-tender bill would, in his judgment, be "a legislative declaration that the administration is not equal to the occasion for which it was elected." He thought "the time for oracular utterances about a great movement," by which bankers had been inspired with undue hope, had passed by, and that something practical and actual would soon be accomplished.

Mr. John B. Alley supported the bill by arguments which came from his own wide experience in business. The choice, he said, was between notes of the government and "an irredeemable bank currency, a great deal of which will be found, as it was after the war of 1812, utterly worthless."

Mr. Charles W. Walton of Maine spoke briefly but ably on the constitutional power of Congress to pass the bill. He contended that the authority to declare a legal-tender "was an implied and not a direct power;" that, admitting it to belong to the Government, it exists "without limitation." The question before the House, therefore, is "one of expediency only," and on that ground he earnestly supported the measure.

Mr. Shellabarger of Ohio answered the "charges of bad faith and injustice" which had been brought against the bill by its opponents. The cry of ruin to the country he compared with similar fears for England on the part of her economists, and showed how, in every case, they had been disproved by the rising power and growing wealth of that kingdom. He said the legal-tender notes would be "borne up by all the faith and all the property of the people, and they will have all the value which that faith untarnished and that property inestimable can given them."

Mr. John Hickman of Pennsylvania, having no doubt as to the power of Congress to pass the bill, supported it as a governmental necessity.

MR. FESSENDEN OPPOSES LEGAL-TENDER.

The debate in the House was able and spirited throughout. Judging by the tone and number of the Republicans who spoke against the bill, a serious party division seemed to be impending. The measure came to a vote on the 6th of February, the interest in the discussion continuing to the last. Mr. Owen Lovejoy sought occasion to give the measure a parting malediction, declared that "there is no precipice, no chasm, no yawning bottomless gulf before this nation, so terrible, so appalling, so ruinous, as the bill before the House," and Mr. Roscoe Conkling sought the floor to say that he concurred "in every word" Mr. Lovejoy had spoken. Mr. Conkling said the debate had been allowed to close "without pretext of solid argument by any member in favor of the constitutionality of the one feature of the bill."

The essential difference between the plan of the minority and that of the committee had reference to the legal-tender clause. In fact the other details of the Loan Bill could have been agreed upon in a single day's discussion, and the delay was occasioned solely by the one feature of legal-tender. On substituting the measure of the minority the vote was 55 yeas to 95 nays. The bill was then passed by a vote of 93 to 59. The yeas were all Republican. Among the nays—principally Democrats—were found some of the ablest and most influential members of the Republican party. Valentine B. Horton of Ohio, Justin S. Morrill of Vermont, Roscoe Conkling, F. A. Conkling, and Theodore M. Pomeroy of New York, Albert G. Porter of Indiana, Owen Lovejoy of Illinois, William H. Wadsworth of Kentucky, Benjamin F. Thomas of Massachusetts, and Edward H. Rollins of New Hampshire, were conspicuous for their hostility to the legal- tender clause.

The Senate received the bill on the next day, and on the 10th it was reported from the Finance Committee for immediate action. Mr. Fessenden explained the amendments which the committee had embodied in the House Bill. In the first section they provided that the interest on the national debt should be paid in coin. Upon this point Mr. Fessenden considered that the public credit, in large degree, depended. As to the legal-tender feature of the notes, he could not make up his mind to support it. "Will your legal-tender clause," he inquired, "make your notes any better? Do you imagine that because you force people to take these notes they are to be worth the money, and that no injury is to follow? What is the consequence? Does not property rise? You say you are injuring the soldier if you compel him to take a note without its being a legal-tender; but will not the sutler put as much more on his goods? And if the soldier sends the notes to his wife to be passed at a country store for necessaries for his family, what will be the result? The goods that are sold are purchased in New York; the price is put on in New York; a profit is added in the country; and thus the soldier loses just as much. You are not saving any thing for any body."

Mr. Fessenden then inquired, "What do we offer without the legal- tender clause? We are offering notes, with the interest secured beyond a question if the amendments proposed by the Committee on Finance of the Senate are adopted, based on the national faith, and with the power to deposit and receive five per cent. interest in any sub-treasury, and the power of the government to sell the stock at any price, to meet whatever it may be necessary to meet. Will notes of this kind stand better when going out, if you put the confession upon their face, that they are discarded by you, and that you know they ought not to be received, and would not be, unless their reception is compelled by legal enactment?"

The argument against this view, according to Mr. Fessenden, "is simply that the banks will not take the notes unless they are made a legal-tender, and therefore they will be discredited. It was thus reduced to a contest between the government and the banks; and the question is whether the banks have the will and the power to discredit the notes of the United-States Treasury." With all his objections to the legal-tender feature,—and they were very grave,—Mr. Fessenden intimated his willingness to vote for it if it were demonstrated to be a necessity. On the constitutional question involved he did not touch. He preferred, he said, "to have his own mind uninstructed" upon that aspect of the case.

In illustration of the doubt and diversity of opinion prevailing, Mr. Fessenden stated that on a certain day he was advised very strongly by a leading financial man that he must at all events oppose the legal-tender clause, which he described as utterly destructive. On the same day he received a note from another friend, assuring him that the legal-tender bill was an absolute necessity to the government and the people. The next day the first gentleman telegraphed that he had changed his mind, and now thought the legal-tender bill peremptorily demanded by public exigency. On the ensuing day the second gentleman wrote that he had changed his mind, and now saw clearly that the legal-tender bill would ruin the country. There can be no harm in stating that the authors of these grotesque contradictions were Mr. James Gallatin and Mr. Morris Ketchum of New York.

MR. COLLAMER AND MR. SHERMAN.

Mr. Collamer of Vermont followed Mr. Fessenden in an exhaustive argument against the bill as a violation of the Constitution. He believed "in the power of the government to sustain itself in the strife physically and pecuniarily." He was not willing to say to a man," Here is my note: if I do not pay it, you must steal the amount from the first man you come to, and give him this note in payment." He would not be governed in this matter, as Mr. Fessenden intimated he might be, "by necessity." He had taken an oath to support the Constitution, and he believed this bill violated it. He "would not overthrow the Constitution in the Senate Chamber while the rebels are endeavoring to overthrow it by war."

Senator Wilson looked upon the contest as one "between the men who speculate in stocks, and the productive, toiling men of the country." He believed "the sentiment of the nation approaches unanimity in favor of this legal-tender clause." He had received letters from large commercial houses in Massachusetts, representing millions of capital, and "they declare that they do not know a merchant in the city of Boston engaged in active business who is not for the legal- tender bill."

Senator Sherman of Ohio urged the adoption of the measure, because "all the organs of financial opinion in this country agree that there is a majority" for it; and he cited the New-York Chamber of Commerce, the Committee on Public Safety in New York, and the Chambers of Commerce of Boston and Philadelphia, as taking that ground. He proceeded "to show the necessity of it from reason." He stated that the government must "raise and pay out of the Treasury of the United States before the first day of July next, according to the estimate of the Committee of Ways and Means, the sum of $343,235,000. Of this sum $100,000,000 is now due and payable to soldiers, contractors, to the men who have furnished provisions and clothing for the army; to officers, judges, and civil magistrates." Mr. Sherman argued that "a question of hard necessity presses upon the government. This money cannot be obtained from the banks. With a patriotic feeling not usually attributed to money corporations, the banks have already exhausted their means. The aggregate capital of the banks of the three principal cities of the United States is but $105,000,000, and they have taken more than their capital in bonds of the United States." It was, therefore, idle to look to the banks for relief. "They have," continued the senator, "already tied up their whole capital in the public securities. They ask this currency to enable them to assist further in carrying on the government. Among others, the cashier of the Bank of Commerce, the largest bank corporation in the United States and one that has done much to sustain the government, appeared before the Committee on Finance, and stated explicitly that his bank, as well as other banks of New York, could not further aid the government, unless its currency was stamped by, and invested with, the legal form and authority of lawful money, which they could pay to others as well as receive themselves."

Senator James A. Bayard of Delaware argued that the proposed measure violated the Constitution. "No one," said he, "can deny the fact that in the contracts between man and man, and in government contracts to pay money, the obligation is to pay intrinsic value. If you violate that by this bill, which you certainly do, how can you expect that the faith of the community will be given to the law which you now pass, in which you say that you will pay hereafter the interest on your debt in coin? Why should they give credit to that declaration? If you can violate the Constitution of the United States, in the face of your oaths, in the face of its palpable provision, what security do you offer to the lender of money?"

Senator Sumner did not join his colleague in enthusiastic support of the bill. He was indeed much troubled by its provisions. "Is it necessary," he inquired, "to incur all the unquestionable evils of inconvertible paper, forced into circulation by Act of Congress, to suffer the stain upon our national faith, to bear the stigma of a seeming repudiation, to lose for the present that credit which in itself is a treasury, and to teach debtors everywhere that contracts may be varied at the will of the stronger? Surely there is much in these inquiries which may make us pause. If our country were poor or feeble, without population and without resources; if it were already drained by a long war; if the enemy had succeeded in depriving us of the means of livelihood,—then we should not even pause. But our country is rich and powerful, with a numerous population, busy, honest, and determined, and with unparalleled resources of all kinds, agricultural, mineral, industrial, and commercial. It is yet undrained by the war in which we are engaged, nor has the enemy succeeded in depriving us of any of the means of livelihood." But he concluded, "whatever may be the national resources, they are not now within reach except by summary process." He consented "reluctantly, painfully, that the process should issue." He could not however "give such a vote without warning the government against the danger of such an experiment. The medicine of the Constitution must not become its daily bread."

SENATE VOTES ON LEGAL-TENDER.

The bill came to a vote in the Senate on the 13th of February. The government exigency was so pressing that the Senate discussion was limited to four days. On the motion of Mr. Collamer to strike out the legal-tender clause, the vote stood 17 yeas to 23 nays. Anthony of Rhode Island, Collamer and Foot of Vermont, Fessenden of Maine, King of New York, Cowan of Pennsylvania, Foster of Connecticut, and Willey of Virginia, among the Republicans, voted to strike out. The vote to retain the legal-tender feature was Republican, with the exception of Garrett Davis of Kentucky, McDougall of California, Rice of Minnesota, and Wilson of Missouri. This question being settled, the bill, with the legal-tender clause embodied, passed by a vote fo 30 to 7. Mr. Anthony of Rhode Island stated that, having voted against the legal-tender provision, he "could not take the responsibility of voting against the only measure which is proposed by the government, and which has already passed the House of Representatives." Three Republicans, Collamer, Cowan, and King, and four Democrats, Kennedy, Pearce, Powell, and Saulsbury, were the senators who voted against the bill on its final passage.

The bill was returned to the House of Representatives the next day. The Senate amendments were taken up on the 19th. Mr. Spaulding objected to them generally, and especially to the provisions for selling the bonds at the market price and for paying the interest in coin. Mr. Pomeroy of New York advocated concurrence in the amendments of the Senate, as did Mr. Morrill of Vermont. Upon the amendment to pay interest in coin, the House divided, with 88 ayes to 56 noes. Upon the clause allowing the secretary to sell bonds at the market value, there were 72 ayes to 66 noes. A conference on the points of difference between the two Houses was managed by Senators Fessenden, Sherman, and Carlile, and Representatives Stevens, Horton, and Sedgwick. The report of the Conferees was agreed to in both Houses, and the Act was approved and became a law on the 25th of February. Its leading provisions were for the issue of legal-tender notes, on which the debate chiefly turned, and of coupon or registered bonds not to exceed $500,000,000 in the aggregate, bearing six per cent. interest, redeemable at the pleasure of the United States after five years, and payable twenty years after date. The bonds were to be sold at their market value for coin or Treasury notes, and the notes to be exchangeable into them in sums of fifty dollars, or any multiple of fifty. These securities became widely known and popular as the five-twenties of 1862. The fourth section allowed deposits of United-States notes with designated depositories to draw interest at five per cent., and to be paid after ten days' notice, but the total of such deposits was not to exceed $25,000,000 at any time. By the fifth section, duties on imported goods were required to be paid in coin, and the proceeds were pledged, first, to the payment in coin of the interest on the bonds of the United States; and second, to a sinking-fund of one per cent. of the entire debt for its ultimate payment.

Certificates of indebtedness were authorized by Act of Congress passed without debate and approved on the first day of March. These could be granted to any creditor whose claim had been audited, and they drew six per cent. interest, payable at first in coin, but by Act of March 3, 1863, lawful money was substituted for interest. By Act of March 17, 1862, these certificates could be given in discharge of checks drawn by disbursing officers, if the holders of the latter chose to accept them. The secretary was clothed with power by the Act of March 17, 1862, to buy coin with any bonds or notes on such terms as he might deem advantageous. The same Act gave legal-tender value to the demand notes previously authorized. The limitation upon temporary deposits was also raised to $50,000,000.

Mr. Chase, by a communication of June 7 (1862), asked for a further issue of legal-tender notes to the amount of $150,000,000, and he urged that the limit of five dollars be removed, and denominations as low as a single dollar be permitted. He declared that it was impossible to obtain coin necessary to pay the soldiers, and that the plan proposed would remove from disbursing officers the temptation to exchange coin for small bank notes. A reserve of one-third of the temporary deposits would take $34,000,000, and the replacement of the demand notes $56,500,000 more, so that for immediate use the Treasury would get only $59,500,000 of the sum asked for. Mr. Spaulding of New York on the 17th of June presented the measure as reported from the Ways and Means Committee. He argued that this form of loan was "so popular with the people and so advantageous to the government, that it should be extended so far as it could be done safely." Objections such as were offered to the original policy were presented to the additional notes. It was already suggested to authorize notes for fractions of a dollar, but the majority decided against it. The bill passed the House of Representatives on the 24th of June. In the Senate, Mr. Sherman of Ohio attempted to add a clause for the taxation of the circulation of banks, but it was not received with favor. With certain amendments the bill passed the Senate on the 2d of July. On a disagreement which ensued, the conferees were Senators Fessenden, Sherman, and Wright, and Representatives Stevens, Spaulding, and Phelps of Missouri. By their action the volume of notes of denominations less than five dollars was restricted to $35,000,000, and the reserve for meeting deposits was fixed at $75,000,000. While exchangeable into six per cent. bonds, the notes might also be paid in coin under the direction of the Secretary of the Treasury. The report was accepted by the Senate on the 7th of July, and by the House on the 8th. It became a law by the President's approval on the 11th of July.

SECRETARY CHASE ON THE BANKS.

On the 14th of July, Secretary Chase called the attention of Congress to the great evils arising from the issue by non specie-paying banks and unauthorized persons of depreciated currency, and the consequent disappearance of small coin. As a remedy an Act was passed, and approved July 17, for the use of postage and other stamps in payment of fractional parts of a dollar. These stamps were made exchangeable by assistant treasurers for United-States notes in sums not less than five dollars. Banks and persons were forbidden, from the first day of the ensuing August, to make or issue any note or token for a less sum than one dollar, intended to be used as money, under the penalty of a fine not exceeding $500, or imprisonment not exceeding six months, or both. "Shinplasters" had become almost like the frogs of Egypt for multitude. They were in every man's hand and were of all degrees of value. They were sometimes issued for purposes of fraud. Silver had become lost to view, and business houses resorted to the use of their own notes as a convenience. The government stamps were not well adapted to circulate as currency, and they soon gave way to notes of handsome design which came into universal use as the "small change" of the country.

The proper order of the leading measures of finance has always been a subject of contention. Grave differences of opinion exist, even to this day, concerning the necessity and expediency of the legal- tender provision. The judgment of many whose financial sagacity is entitled to respect is, that if the internal tax had been first levied, and the policy adopted of drawing directly upon the banks from the Treasury for the amounts of any loans in their hands, the resort by the government to irredeemable paper might at least have been postponed and possibly prevented. The premium on gold became the measure of the depreciation of the government credit, and practically such premiums were the charge made for every loan negotiated. In his report of December, 1862, Secretary Chase justified the legal-tender policy. He explained that by the suspension of specie payments the banks had rendered their currency undesirable for government operations, and consequently no course other than that adopted was open. Mr. Chase declared that the measures of general legislation had worked well. "For the fiscal year ending with June," he said, "every audited and settled claim on the government and every quartermaster's check for supplies furnished, which had reached the Treasury, had been met." For the subsequent months, the secretary "was enabled to provide, if not fully, yet almost fully, for the constantly increasing disbursements."

The political effects of the legal-tender bill were of large consequence to the Administration and to the successful conduct of the war. If it had been practicable to adhere rigidly to the specie standard, the national expenditure might have been materially reduced; but the exactions of the war would have been all the time grating on the nerves of the people and oppressing them with remorseless taxation. Added to the discouragement caused by our military reverses, a heavy financial burden might have proved disastrous. The Administration narrowly escaped a damaging defeat in 1862, and but for the relief to business which came from the circulation of legal-tender notes, the political struggle might have been hopeless. But as trade revived under the stimulus of an expanding circulation, as the market for every species of product was constantly enlarging and prices were steadily rising, the support of the war policy became a far more cheerful duty to the mass of our people.

This condition of affairs doubtless carried with it many elements of demoralization, but the engagement of the people in schemes of money-making proved a great support to the war policy of the government. We saw the reproduction among us of the same causes and the same effects which prevailed in England during her prolonged contest with Napoleon. Money was superabundant, speculation was rife, the government was a lavish buyer, a prodigal consumer. Every man who could work was employed at high wages; every man who had commodities to sell was sure of high prices. The whole community came to regard the prevalent prosperity as the outgrowth of the war. The ranks of the army could be filled by paying extravagant bounty after the ardor of volunteering was past, and the hardship of the struggle was thus in large measure concealed if not abated. Considerate men knew that a day of reckoning would come, but they believed it would be postponed until after the war was ended and the Union victorious.

The policy of the legal-tender measure cannot therefore be properly determined if we exclude from view that which may well be termed its political and moral influence upon the mass of our people. It was this which subsequently gave to that form of currency a strong hold upon the minds of many who fancied that its stimulating effect upon business and trade could be reproduced under utterly different circumstances. Argument and experience have demonstrated the fallacy of this conception, and averted the evils which might have flowed from it. But in the judgment of a large and intelligent majority of those who were contemporary with the war and gave careful study to its progress, the legal-tender bill was a most effective and powerful auxiliary in its successful prosecution.