400 



FINANCES OF THE UNITED STATES. 



He therefore proposed a moderate tax on the 

 State bank circulation, and also proposed that 

 no increase of the issue of Government notes 

 beyond the limits then authorized should be 

 made, unless a clear public exigency should 

 demand it ; he further recommended the or- 

 ganization of banking associations for the im- 

 provement of the public credit, and for the 

 supply to the people of a safe and uniform cur- 

 rency ; he also recommended the repeal of the 

 restrictions which required the 5-20 bonds to 

 be converted at par, and the clauses of the act 

 which authorized their convertibility at will, 

 and a necessary increase of the amount of the 

 bonds. He then said: "If Congress shall 

 concur in these views, the Secretary, though, 

 conscious of the great difficulties which vast, 

 sudden, and protracted expenditures impose 

 on him, ventures to hope that he may still 

 be able to maintain the public credit and pro- 

 vide for the public wants." No man was ever 

 put in such a position as that occupied by the 

 Secretary, at this time. $900,000,000 were to be 

 provided in the fiscal half year and year ensuing, 

 at the lowest estimate ; his order created mil- 

 lions of notes and bonds; the faith and credit 

 of the Government were in his hand ; a failure 

 on his part was not like a reverse on the bat- 

 tle-field, the effects of which might be recov- 

 ered on the next day but it would paralyze 

 armies and fleets, and perhaps ruin the cause 

 for which they were fighting. It was not the 

 vastness of the sums required that alone caused 

 all the difficulties the Secretary had to encoun- 

 ter. The public mind was exceedingly sensi- 

 tive and impatient. Delay or disaster in mili- 

 tary operations produced depression and weak- 

 ened confidence. An uncertain state of foreign 

 relations sometimes added its influence to these 

 causes. Amid all the circumstances, whether 

 of success or disaster, the demands on the en- 

 ergies of the Secretary were constant, and 

 could neither bo postponed nor avoided. 



Before stating the answer which Congress 

 gave to the. propositions of the Secretary, some 

 fuller notice of the system of banks recom- 

 mended should be made. Its principal fea- 

 tures are a circulation of notes having a com- 

 mon impression, and authenticated by a com- 

 mon authority, the redemption of these notes 

 by the associations and institutions to which 

 they may be delivered for issue ; and the secu- 

 rity of that redemption by the pledge of Unit- 

 ed Stages stocks, and an adequate provision of 

 specie. In its essential features it is similar to 

 the banking system of New York and some 

 other States. The notes are made receivable 

 for all public dues, except import duties, and 

 payable for all public debts, except interest on 

 loans. Such waa the plan of the system. Its 

 operation in connection with the present state 

 of the finances of the Government is the view 

 here to be taken of the measure. By the or- 

 ganization of these institutions about $300,- 

 000,000 of the Government's notes are returned 

 to the Treasury, and exchanged for 6 per cent. 



bonds, or their equivalents in bonds, at other 

 rates of interest. To that extent the currency 

 debt of the Government is funded. By the 

 notes which they issue a currency of a uniform 

 character is established in all the States, based 

 upon the obligations of the Government, which 

 is designed to take the place of a currency 

 issued by banks authorized in the various States, 

 and whose solvency is based entirely on the 

 value of their assets, composed of some specie, 

 the obligations of individuals, &c. ' The curren- 

 cy of the National banks being receivable for 

 public dues, could be accepted by the Govern- 

 ment as loans, and used in its payments. It thus 

 would ultimately dispense with the necessity 

 for the Government currency which was now 

 afloat which could thus be gradually with- 

 drawn on the approach of a resumption of 

 specie payments. The notes are made re- 

 deemable in Government notes, and after re- 

 sumption of specie payments, in coin. The 

 Secretary says: "It is the Secretary's firm 

 belief that by no other path can the resump- 

 tion of specie payments be so surely reached 

 and so certainly maintained. United States 

 notes receivable for bonds bearing a secure 

 specie interest are next best to notes converti- 

 ble into coin. The circulation of banking asso- 

 ciations organized under a general act of Con- 

 gress, secured by such bonds, can be most 

 surely and safely maintained at the point of 

 certain convertibility into coin. If, temporari- 

 ly, these associations redeem their issues with 

 United States notes, resumption of specie pay- 

 ments will not thereby be delayed or endan- 

 gered, but hastened and secured ; for, just as 

 soon as victory shall restore peace, the ample 

 revenue, already secured by wise legislation, 

 will enable the Government, through advan- 

 tageous purchases of specie, to replace at once 

 large amounts, and, at no distant day, the 

 whole of this circulation by com without detri- 

 ment to any interest, but, on the contrary, with 

 great and manifest benefit to all interests." 



In answer to the recommendations of the 

 Secretary for the provision of means to meet 

 the expenditures of the remainder of the fiscal 

 year 1863 and the year 1864, Congress, on the 

 17th of January, 1863, authorized an additional 

 issue of $100,000,000 of Government notes; 

 and in February passed an act to provide a na- 

 tional currency through a national banking 

 system. (See CONGKESS, U. S., page 296). By an 

 act, approved March 3d, the Secretary was au- 

 thorized to issue $300,000,000 for the current 

 fiscal year, and $600,000,000 for the next fiscal 

 year, of 6 per cent. 10-40 bonds, principal and 

 interest payable in coin, and to exchange the 

 same for certificates of indebtedness, or deposit, 

 any Treasury notes or lawful money of the 

 United States ; also to issue $400,000,000 of 

 6 per cent. Treasury notes payable within 

 three years, to be a legal tender for their face 

 value, excluding interest, and exchangeable for 

 and redeemable by Government notes, for 

 which purpose alone an issue of $150,000,000 



