FINANCES OF THE UNITED STATES. 



395 



Government at -war may thus adopt such finan- 

 cial measures as shall be supreme over all 

 others, yet, in the meanwhile, it is no less un- 

 der those perpetual obligations to promote the 

 prosperity and welfare of its citizens for which 

 it was created. These fundamental considera- 

 tions appear to have controlled the financial 

 operations of the Government throughout all 

 the extraordinary circumstances which it has 

 been obliged to meet. 



When Congress adjourned on the 4th of 

 March, 1861, the expenditures of the Govern- 

 ment for the remainder of the fiscal year end- 

 ing June 30th had been estimated according to 

 the ordinary rates in previous years, and the 

 usual sources of revenue with some small loans 

 were regarded as sufficient to meet its wants. 

 It was the duty of the same Congress to deter- 

 mine the appropriations based on the esti- 

 mates of the Departments, and to provide the 

 ways of payment during the next fiscal year, com- 

 mencing July 1st, and ending June 30th, 1862. 

 Notwithstanding the threatening aspect of po- 

 litical affairs, these estimates were all framed, 

 and the appropriations made on the peaceful 

 scale of former years. Thus, for the year 

 1860-61, the appropriations for the service of 

 the Government were seventy-nine millions, 

 and for the year 1861-62, nearly seventy-five 

 millions. No authority appeared to foresee the 

 enormous demands that were soon to be made 

 on the Treasury, and no provisions whatever 

 were contemplated to meet them. Neverthe- 

 less, under this aspect of affairs and without 

 the future occurrence of any very serious diffi- 

 culties, more than ordinary financial skill was 

 needed to enable the Government to meet 

 promptly the demands upon it. The usual 

 sources of revenue fell off during the last half 

 of the year ending June 30th, 1861, and the 

 confidence of capitalists in the Government, 

 in. consequence of the secession of States, and 

 the uncertainty of the future, rendered it diffi- 

 cult to negotiate the small loans authorized. 

 Thus a loan of $10,000,000 was offered in Oc- 

 tober, 1860, in a five per cent, stock, which 

 was taken at a small premium payable in 

 instalments ; the subscribers of $2,978,000 for- 

 feited their deposit of one per cent., which 

 was remitted : only $7,022,000 were issued. In 

 December, Secretary Thomas offered $5,000,- 

 000 Treasury notes, payable in a year. On 

 opening the bids on December 28th, only 

 $500,000 had been bid at twelve per cent. 

 There were some offers at twenty-four, and 

 some as high as thirty-six per cent. As the 

 money was needed to pay interest on Federal 

 stock, due January 1st, some bankers took 

 $1,500,000 at twelve per cent., on condition 

 that the money should be applied to the inter- 

 est. In January, Secretary Dix offered five 

 millions remaining authorized of the same loan 

 of December 17th, 1860, and it was taken at an 

 average of 1 1 j per cent, on $10,000,000. On Feb. 

 8th, 1861, Congress authorized a loan of $25,- 

 000,000 at 6 per cent., at not less than ten nor 



more than twenty years. Of this stock, Sec- 

 retary Dix offered $8,000,000 on February 22d, 

 and the bids amounted to $14,460,250, ranging 

 from 75 to 96.10. He accepted $8,006,250, at 

 rates varying from 90.15.to 96.10. At this time 

 a tariff of high duties was passed by Congress, 

 and a loan authorized. On April 2d, Secretary 

 Chase offered eight millions of the loan of 

 February 8th. Bids, ranging from 90 to 95 on 

 the hundred, were made for it. The Secretary 

 refused all below 94. On the llth of May lie 

 offered the balance of the loan of February 8th, 

 $8,994,000. Bids were made for $7,441,000, at 

 rates from 81 to 93. He accepted $7,310,000, 

 at 85 to 93, average discount per cent. 14.65. 

 By the disposal also of Treasury notes compara- 

 tive ease for the Treasury was obtained for a 

 moment. Its exigencies, however, were such that 

 the struggle for money was soon renewed. Hos- 

 tilities had now commenced, and the capital- 

 ists and bankers, feeling the necessity of sus- 

 taining the Government, cooperated with the 

 Secretary, and loans were obtained to carry 

 the Government until Congress convened on 

 July 4th. On that day, the Secretary required 

 $5,000,000 to carry him along until Congress 

 should devise means. This amount was finally 

 borrowed of the banks at sixty days on pledgq 

 of six per cent, notes, as collateral security. 

 During the latter part of this period, many of 

 the States obtained considerable loans at par, 

 or a premium. 



These facts show the weakness of the Gov- 

 ernment credit, in consequence of the apprehen- 

 sions of the people, and the embarrassing cir- 

 cumstances under which the Secretary was 

 called upon to raise immense sums to enable the 

 dismembered Government to conduct a great 

 war. At the time when he was obliged to bor- 

 row five millions with collateral security for sixty 

 days to pay current expenses, the War Depart- 

 ment was asking for more, than $185,000,000 

 extra for the year, and the Navy Department 

 more than $30,000,000. Congress had also 

 come together, and relied upon the Secretary 

 to devise the means by which this great emer- 

 gency could be overcome. A more difficult 

 position than that of Secretary Chase at this 

 moment, few men have ever been placed in. 

 He saw that the Government must be made 

 the master of its circumstances, and while it 

 borrowed with the one hand, it must take 

 largely by taxes with the .other. The demand 

 upon him for the next twelve months was 

 $318,519,581, and he recommended that a tax 

 of $80,000,000, equal to the entire annual ap- 

 propriations of the Government heretofore, 

 should be at once raised directly and indi- 

 rectly from a people who, except upon one 

 occasion, had never yet paid a dollar in taxes 

 to their Government only in the indirect form 

 of duties on imports, and that $240,000,000 

 should be sought through loans. The $80,000,- 

 000 were to be used to pay the ordinary ex- 

 penditures of the Government and the interest 

 on loans, with the reservation of $5,000,000 



