Early in 1862 Congress authorized ten million more of demand notes. This was followed by further issues, making in all 300 million United States notes. Secretary Chase was at first opposed to making these notes a legal tender for private debts, but in order to get the bill through, he agreed to the legal tender clause, as the Government was greatly in need of money.
The Secretary was also empowered by Congress to borrow 500 million dollars on 5-20 year 6 per cent. bonds, and also to obtain a temporary loan of 100 millions on condition that the interest on the bonds should be paid in coin, and that the customs should be collected in coin for that purpose.
The first bill to provide a national currency secured by a pledge of United States bonds was introduced by Mr. Hooper, in July, 1862, but it was not reported from the Committee to which it had been sent. At the meeting of Congress in December the same year the financial problem had become still more complicated, and owing to the magnitude which the war had then assumed, the expenses amounted to two millions a day.
The total receipts for the fiscal year ending June 30, 1863, were 511 millions, and the expenditures were 788 millions, thus leaving a deficit of 277 millions.
All the financial wisdom of the Secretary was necessary in this dilemma. The question was whether to provide for these 277 millions by a fresh issue of United States notes, or by interest-bearing loans.
The Secretary was opposed to increase the volume of the currency, saying that the result would be the inflation of prices, increase of expenditures, augmentation of debt, and ultimately disastrous defeat of the very purposes sought to be attained by it.
He was in favor of an increase in the amount authorized to be borrowed on the 5-20 bonds. He advised the creation of banking associations which should secure their circulation by a deposit of Government bonds. One object of this was to create a market for the bonds.
Congress was not in favor of this proposition, and the bill of Mr. Hooper was again offered in the following January, but was adversely reported from the Committee on Ways and Means.
Another new issue of 100 millions United States notes was ordered on motion of Mr. Stevens, of Pennsylvania, to meet the constantly increasing needs of the army and navy.
Mr. Lincoln signed the joint resolution ordering the new issue with some reluctance, and sent a special message to the House, in which he expressed his regret that it was necessary to add this last amount to the currency while the suspended banks were free to increase their circulation.