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.