“The expenses incurred on account of the war with Mexico were much greater than the original estimates, and the failure to provide additional revenues sufficient to meet the increased demands made a new loan necessary, as well as an additional issue of notes, which had now become a popular method of obtaining funds. Under the authority granted by act of January 28, 1847, Treasury notes to the amount of $26,122,100 were issued at par, redeemable one and two years from date, with interest at from 5–⅖ to 6 per cent. More money still being needed, a 6 per cent. loan, having twenty years to run, was placed upon the market, under the authority of the same act, and bonds to the amount of $28,230,350 were sold at various rates, ranging from par to 2 per cent. premium. Of this stock the sum of $18,815,100 was redeemed at an advance of from 1½ to 21¼ per cent., the premium paid (exclusive of commissions) amounting to $3,466,107. Under the act of March 31, 1848, 6 per cent. bonds, running twenty years, were issued to the amount of $16,000,000, and sold at a premium ranging from 3 to 4.05 per cent. This loan was made for the same purpose as the preceding one, and $7,091,658 was redeemed by purchase at an advance ranging from 8 to 22.46 per cent., the premium paid amounting to $1,251,258.
“The widespread depression of trade and commerce which occurred in 1857 was severely felt by the Government, as well as by the people, and so great was the decrease in the revenues from customs that it became absolutely necessary to provide the Treasury with additional means for meeting the demands upon it. Treasury notes were considered as preferable to a new loan, and by the act of December 23, 1857, a new issue was authorized for such an amount as the exigencies of the public service might require, but not to exceed at any one time $20,000,000. These notes were receivable in payment for all debts due the United States, including customs, and were issued at various rates of interest, ranging from 3 to 6 per cent., to the amount of $52,778,900, redeemable one year from date, the interest to cease at the expiration of sixty days’ notice after maturity. In May, 1858, the Secretary of the Treasury informed Congress that, owing to the appropriations having been increased by legislation nearly $10,000,000 over the estimates, while the customs revenue had fallen off to a like amount, it would be necessary to provide some means to meet the deficit. In these circumstances, a new loan was authorized by act of June 14, 1858, and 5 per cent. bonds amounting to $20,000,000, redeemable in fifteen years, were sold at an average premium of over 3½ per cent. Under the act of December 17, 1873, $13,957,000 in bonds of the loan of 1881, and $260,000 in bonds of a loan of 1907, were issued in exchange for a like amount of bonds of this loan.
“The act of June 22, 1860, authorized the President to borrow $21,000,000 on the credit of the United States, the money to be used only in the redemption of Treasury notes, and to replace any amount of such notes in the Treasury which should have been paid in for public dues. Only $7,022,000 was borrowed at 5 per cent. interest, the certificates selling at from par to 1.45 per cent. premium. The failure to realize the whole loan was caused by the political troubles which culminated in the civil war. In September, bids were invited for $10,000,000, and the whole amount offered was speedily taken. It soon became evident, however, that war was inevitable, and a commercial crisis ensued, during which a portion of the bidders forfeited their deposits, and the balance of the loan was withdrawn from the market. Authority was granted by the act of December 17, 1860, for a new issue of Treasury notes, redeemable in one year from date, but not to exceed $10,000,000 at any one time, with interest at such rates as might be offered by the lowest responsible bidders after advertisement. An unsuccessful attempt was made to pledge the receipts from the sale of public lands specifically for their redemption. The whole amount of notes issued under this act was $10,010,900, of which $4,840,000 bore interest at 12 per cent. Additional offers followed, ranging from 15 to 36 per cent., but the Treasury declined to accept them.
“Up to this period of our national existence the obtaining of the money necessary for carrying on the Government and the preservation inviolate of the public credit had been comparatively an easy task. The people of the several States had contributed in proportion to their financial resources; and a strict adherence to the fundamental maxim laid down by Hamilton had been maintained by a judicious system of taxation to an extent amply sufficient to provide for the redemption of all our national securities as they became due. But the time had come when we were no longer a united people, and the means required for defraying the ordinary expenses of the Government were almost immediately curtailed and jeopardized by the attitude of the States which attempted to secede. The confusion which followed the inauguration of the administration of President Lincoln demonstrated the necessity of providing unusual resources without delay. A system of internal revenue taxation was introduced, and the tariff adjusted with a view to increased revenues from customs. As the Government had not only to exist and pay its way, but also to provide for an army and navy constantly increasing in numbers and equipment, new and extraordinary methods were resorted to for the purpose of securing the money which must be had in order to preserve the integrity of the nation. Among these were the issue of its own circulating medium in the form of United States notes[[37]] and circulating notes,[[38]] for the redemption of which the faith of the nation was solemnly pledged. New loans were authorized to an amount never before known in our history, and the success of our armies was assured by the determination manifested by the people themselves to sustain the Government at all hazards. A brief review of the loan transactions during the period covered by the war is all that can be attempted within the limited space afforded this article. The first war loan may be considered as having been negotiated under the authority of an act approved February 8, 1861. The credit of the Government at this time was very low, and a loan of $18,415,000, having twenty years to run, with 6 per cent. interest, could only be negotiated at a discount of $2,019,776.10, or at an average rate of $89.03 per one hundred dollars. From this time to June 30, 1865, Government securities of various descriptions were issued under authority of law to the amount of $3,888,686,575, including the several issues of bonds, Treasury notes, seven-thirties, legal tenders and fractional currency. The whole amount issued under the same authority to June 30, 1880, was $7,137,646,836, divided as follows:
| Six per cent. bonds | $1,130,279,000 |
| Five per cent. bonds | 196,118,300 |
| Temporary loan certificates | 969,992,250 |
| Seven thirty notes | 716,099,247 |
| Treasury notes and certificates of indebtedness | 1,074,713,132 |
| Old demand notes, legal tenders, coin certificates and fractional currency | 3,050,444,907 |
| Total | $7,137,646,836 |
“This increase may be readily accounted for by the continued issue of legal tenders, compound interest notes, fractional currency and coin certificates, together with a large amount of bonds issued in order to raise the money necessary to pay for military supplies, and other forms of indebtedness growing out of the war. The rebellion was practically at an end in May, 1865, yet the large amount of money required for immediate use in the payment and disbandment of our enormous armies necessitated the still further negotiation of loans under the several acts of Congress then in force, and it was not until after the 31st of August, 1865, that our national debt began to decrease. At that time the total indebtedness, exclusive of the “old funded and unfunded debt” of the Revolution, and of cash in the Treasury, amounted to $2,844,646,626.56. The course of our financial legislation since that date has been constantly toward a reduction of the interest, as well as the principal of the public debt.
“By an act approved March 3, 1865, a loan of $600,000,000 was authorized upon similar terms as had been granted for previous loans, with the exception that nothing authorized by this act should be made a legal tender, or be issued in smaller denominations than fifty dollars. The rate of interest was limited to 6 per cent. in coin, or 7.3 per cent. in currency, the bonds issued to be redeemable in not less than five, nor more than forty, years. Authority was also given for the conversion of Treasury notes or other interest-bearing obligations into bonds of this loan. An amendment to this act was passed April 12, 1866, authorizing the Secretary of the Treasury, at his discretion, to receive any Treasury notes or other obligations issued under any act of Congress, whether bearing interest or not, in exchange for any description of bonds authorized by the original act; and also to dispose of any such bonds, either in the United States or elsewhere, to such an amount, in such manner, and at such rates as he might deem advisable, for lawful money, Treasury notes, certificates of indebtedness, certificates of deposit, or other representatives of value, which had been or might be issued under any act of Congress; the proceeds to be used only for retiring Treasury notes or other national obligations, provided the public debt was not increased thereby. As this was the first important measure presented to Congress since the close of the war tending to place our securities upon a firm basis, the action of Congress in relation to it was looked forward to with a great deal of interest. The discussion took a wide range, in which the whole financial administration of the Government during the war was reviewed at length. After a long and exciting debate the bill finally passed, and was approved by the President. Under the authority of these two acts, 6 per cent, bonds to the amount of $958,483,550 have been issued to date. These bonds were disposed of at an aggregate premium of $21,522,074, and under the acts of July 14, 1870, and January 20, 1871, the same bonds to the amount of $725,582,400 have been refunded into other bonds bearing a lower rate of interest. The success of these several loans was remarkable, every exertion being used to provide for their general distribution among the people.
“In 1867 the first issue of 6 per cent. bonds, known as five-twenties, authorized by the act of Feb. 25, 1862, became redeemable, and the question of refunding them and other issues at a lower rate of interest had been discussed by the Secretary of the Treasury in his annual reports, but the agitation of the question as to the kinds of money in which the various obligations of the Government should be paid, had so excited the apprehension of investors as to prevent the execution of any refunding scheme.
“The act to strengthen the public credit was passed March 18, 1869, and its effect was such as secured to the public the strongest assurances that the interest and principal of the public debt outstanding at that time would be paid in coin, according to the terms of the bonds issued, without any abatement.
“On the 12th of January, 1870, a bill authorizing the refunding and consolidation of the national debt was introduced in the Senate, and extensively debated in both Houses for several months, during which the financial system pursued by the Government during the war was freely reviewed. The adoption of the proposed measure resulted in an entire revolution of the refunding system, under which the public debt of the United States at that time was provided for, by the transmission of a large amount of debt to a succeeding generation. The effect of this attempt at refunding the major portion of the public debt was far more successful than any similar effort on the part of any Government, so far as known.