I insisted that if there was no money in this country but United States notes, the process of funding would be going on day by day. Whenever there was too great an accumulation of these notes they would be converted into bonds; the operation would go on quietly and silently. I quoted the authority of Secretary Chase that it was his deliberate judgment, after watching this process with all his conceded ability, that but for the influence of this local bank paper he would be able to carry on the war without the issue of more paper money, that the currency then outstanding and that which by law he was authorized to issue would be sufficient to carry it on. Such a currency would lead to the conversion of the notes into bonds, and by this process the people would absorb the national loan and enable him to carry on the government without any sacrifice to them.
It was not strange that Mr. Jefferson, near the close of the War of 1812, stated more clearly than I could do the conflict between local bank paper and United States notes. He, who during his whole life was so mindful of the rights of the states, and so jealous of paper money, in brief and terse language designated the only way in which our country could carry on war. In his letter to Mr. Cooper, dated September 10, 1814, just at the close of the war, he said:
"The banks have discontinued themselves. We are now without any medium, and necessity, as well as patriotism and confidence, will make us all eager to receive treasury notes, if founded on specific taxes.
"Congress may now borrow of the public, and without interest, all the money they may want, to the amount of a competent circulation, by merely issuing their own promissory notes of proper denominations for the larger purposes of circulation, but not for the small. Leave that door open for the entrance of metallic money. . . . Providence seems, indeed, by a special dispensation, to have put down for us, without a struggle, that very paper enemy which the interest of our citizens long since required ourselves to put down, at whatever risk.
"The work is done. The moment is pregnant with futurity, and if not seized at once by Congress, I know not on what shoal our bark is next to be stranded. The state legislatures should be immediately urged to relinquish the right of establishing banks of discount. Most of them will comply, on patriotic principles, under the convictions of the moment, and the non-complying may be crowded into concurrence by legitimate devices."
I also quoted another extract to show that this matter filled the mind of Mr. Jefferson. He said:
"Put down the banks, and if this country could not be carried through the longest war, against her most powerful enemy, without ever knowing the want of a dollar, without dependence on the traitorous classes of her citizens, without bearing hard on the resources of the people, or loading the public with an indefinite burthen of debt, I know nothing of my countrymen. Not by any novel project, not by any charlatanry, but by ordinary and well-experienced means; by the total prohibition of all paper at all times, by reasonable taxes in war, aided by the necessary emissions of public paper of circulating size, this bottomed on special taxes, redeemable annually as this special tax comes in, and finally within a moderate period—even with the flood of private paper by which we were deluged—would the treasury have ventured its credit in bills of circulating size, as of five or ten dollars, etc., they would have been greedily received by the people in preference to bank paper."
On the 26th of January, 1863, I introduced in the Senate a bill to "provide a national currency, secured by a pledge of United States stocks, and for the circulation and redemption thereof." This bill took the usual course, was referred to the committee on finance, was reported favorably with a number of amendments, and was fully debated in the Senate. On the 9th of February, 1863, a cursory debate occurred between Mr. Collamer, of Vermont, and myself, which indicated a very strong opposition to the passage of the banking bill. Various amendments were proposed and some adopted. I became satisfied that if a strong effort was not made the bill would either be defeated or postponed. I then, without preparation, made a long, and as I think, a comprehensive, speech covering the general subject and its principal details. It was the only speech of considerable length that was made in favor of the bill in the Senate. There seemed to be a hesitancy in passing a measure so radical in its character and so destructive to the existing system of state banks.
I said the importance of the subject under consideration demanded a fuller statement than had as yet been made of the principle and object of the bill. It was the misfortune of war that we were compelled to act upon matters of grave importance without that mature deliberation that would be secured in peaceful times. The measure affected the property of every citizen of the United States, and yet our action for good or evil must be concluded within a few days or weeks of that session. We were to choose between a permanent system designed to establish a uniform national currency based on the public credit, limited in amount, and guarded by all the restraints which the experience of men had proved necessary, and a system of paper money without limit as to amount, except for the growing necessities of war.
I narrated the history of the bill, of its introduction in December, 1861, its urgent recommendation by the Secretary of the Treasury in two annual reports, and the conditions that then demanded immediate action upon it. I stated the then financial condition of the country. Gold was at a premium of between fifty and sixty per cent. and was substantially banished from circulation. We were in the midst of war, when the necessities of the government required us to have large sums of money. We could not choose as to the mode in which we should get that money. If we pursued the ordinary course, the course that had been sufficient in times of peace to raise money, of putting our bonds into the market and selling them for what they would bring, it would be at a great sacrifice. We knew this from the history of other nations and from our own experience. We therefore must look for some system of finance that would give us all the aid possible, either in the form of paper money or by the agencies of associated banks. We knew very well that after the war was over the government would still be largely in need of money.