FINANCES OF THE UNITED STATES. 



457 



one authorized, it had not really done so, and 

 the banks would not use them as a basis for 

 . A new act was therefore necessary, 

 and it was passed March 16th, as follows : 



An act supplemental to the Treasury act of March 1, 

 adopted by Congress, and approved by the President 

 on the 16th of March, Ir.'.'." 



Be it enacted- by the Senate and Home of Representa- 

 tives of the United States of America, in Congress as- 

 tembled, That the Secretary of the Treasurv may pur- 

 chase coin with any of the bonds or notes of the United 

 States, authorized by law, at such rates and upon such 

 terms as he may deem most advantageous to the public 

 interest ; and may issue, under such rules and regula- 

 tions as he may p'rescribe, certificates of indebtedness, 

 such as are authorized by an act entitled " An act to 

 authorize the Secretary o'f the Treasury to issue certifi- 

 cates of indebtedness to public creditors," approved 

 March 1, I;ij2, to such creditors as may desire to re- 

 ceive the same, in discharge of checks drawn by dis- 

 bursing officers upon sums placed to their credit on 

 the books of the Treasurer, upon requisitions of the 

 proper departments, as well as in discharge of audited 

 and settled accounts, as provided bv same act 



SEC. 2. And be it further enacted. That the demand 

 notes authorized by the act of July 17, 1361, and by 

 the act of February 12, 1*62, shall, in addition to being 

 receivable in payment of duties on imports, be receiv- 

 able, and shall be lawful money and a legal tender, in 

 like manner, and for the same purpose, and to the 

 same extent, as the notes authorized by the act enti- 

 tled "An act to authorize the issue of United States 

 notes, and for the redemption or funding thereof, and 

 for funding the floating debt of the United States," ap- 

 proved February 25, Is62. 



SEC. 3. And be it further enacted, That the limitation 

 upon temporary deposits of the United States notes 

 with any Assistant Treasurers or designated deposita- 

 ries, authorized by the Secretary of the Treasury to 

 receive such deposits, at five per cent, interest, to 

 twenty-five millions of dollars, shall be so far modified 

 as to authorize the Secretary of the Treasury to receive 

 such deposits to an amount not exceeding fifty millions 

 of dollars, and that the rates of interest shaft be pre- 

 scribed by the Secretary of the Treasury, not exceeding 

 the annual rate of five per centum. 



SEC. 4. And be it further enacted, That in all cases 

 where the Secretary of the Treasury is authorized by 

 law to reissue notes, he may replace such as are so 

 mutilated or otherwise injured as to be unfit for use, 

 with others of the same character and amount; such 

 mutilated notes, and all others which by law are re- 

 quired to be taken up and not reissued, shall, when so 

 replaced or taken up, be destroyed in such a manner 

 and under such regulations as the Secretary of the 

 Treasury may prescribe. 



By this act the Secretary was authorized to 

 purchase coin for the payment of the interest 

 on the public debt. He was also authorized to 

 extend the issue of 1 year certificates to the 

 discharge of checks of disbursing officers, also 

 without limit as to amount. The old or " gold 

 notes " as they were called, because they were 

 substitutes for gold at the custom house, were 

 made a legal tender, and the limit of deposits 

 raised to $50,000,000. All these acts placed 

 ample means apparently at the service of the 

 department. It had 100 millions of notes to is- 

 sue, an unlimited amount of 1 year certificates ; 

 $500,000,000 of 6 per cent, stock; 50,000,000 of 

 deposit certificates, and about 37,000,000 of 

 three year 7,^ bonds still on hand to issue. 

 These had indeed been paid out until the price 

 fell to 3 per cent, discount in the market. 



The certificates of indebtedness were then sub- 

 stituted until they fell to 954, or 4 per cent, 

 discount, at which rate they would afford the 

 buyer 10 per cent, injterest in gold for money 

 payable in a year. The leading creditors of 

 the Government then declined to take the 

 certificates any longer, and the checks of dis- 

 bursing officers were sold at 4i per cent, dis- 

 count. In order to stay this depreciation the 

 Secretary issued a notice that he wonld pay in 

 cash 20 per cent, of the amount of certificates 

 in the hands of original holders. Thus if a 

 person held $100,000 of certificates, the Secre- 

 tary would redeem $20,000 in cash. This, by 

 diminishing the amount on the market, caused 

 a little recovery in the price, and they rose to 

 97^. The 1st of April was now approaching, 

 when the interest, $1,875,000, was due on the 

 $50,000,000 of 3 year bonds issued Oct. 1st. 

 The Government purchased a portion of the 

 requisite specie, concentrated all held at 

 the Government deposits, and effected the pay- 

 ment. On the 24th of March the Treasurer 

 sold $3,000,000 of the 7^3 bonds for demand 

 notes at par and interest. The proceeds were 

 sent west for army purposes. 



It is now to be observed that in all these 

 movements there had as yet been no expansion 

 of the currency. On the contrary, there had 

 been a contraction. The circulation of the 

 banks of the Northern States had, at the close 

 of 1861, been nearly $140,000,000, and the 

 Government had issued $30,000,000 of demand 

 notes, making $170,000,000 of paper, in addi- 

 tion to the specie in circulation. On the last 

 day of the year the banks suspended specie 

 payments. Gold and silver gradually ceased 

 to circulate, and the banks in the uncertainty 

 which involved the future began to curtail their 

 obligations. This was followed, on the passage 

 of the act authorizing legal tender notes, by the 

 withdrawal of the Government demand notes 

 from circulation. Hence, while the Government 

 was issuing 3 year bonds and 1 year cer- 

 tificates, the circulating medium was greatly 

 contracted, as was proved by the fact that gold, 

 which was 5 per cent, premium January 1st, was 

 1 j to li per cent. April 1st, when the new legal 

 tender notes were ready for circulation. The 

 Government finances had at the same time re- 

 ceived support from the success of the Western 

 armies, which had apparently broken the 

 strength of the Confederates and given rise to 

 hopes of peace. This circumstance, together 

 with the prospect of the passage of some ade- 

 quate tax law, had caused a recovery in the 

 prices of some descriptions of stocks. The 

 banks held, when they suspended, at the close 

 of December, over seventy millions of Govern- 

 ment securities, mostly 6 per cent, and 3 

 year 7^ per cent, treasury bonds. They had 

 taken the former at a rate equal to 89.32, and 

 the latter at par. January 1st. the former were 

 at 88, and the latter at 2 to 3 per cent, discount, 

 and gold at 5 per cent, premium. In other 

 words, the stock for which the banks had paid 



