"The time seems to have come when Congress, under the Constitution, should provide such a currency, and make it the exclusive circulation of the country, by asserting and maintaining the doctrine that the currency belongs to the nation, and that the emission of notes for circulation as money by private, municipal or State authority is as indefensible as the emission of coin by the same authority, and as subject to restriction and prohibition by Congress under the Constitution.

...

To the President.

"WASHINGTON, April 14, 1864.

Two measures are of great importance: the exclusion from circulation of all credit circulation not authorized by Congress, and increased taxation. If Congress will make the national banking system safe and at the same time acceptable, and enact a tax law which will yield, with duties on imports, four hundred millions of revenue-or half at least of the expenditure-there will be no need to fear financial disasters, unless we shall have unexpected military disasters.

"I have taken the liberty heretofore, and perhaps too pertinaciously, to urge all possible economy compatible with efficiency; but I hope that the importance of it will be thought a sufficient justification.

"I am glad to understand that the military work of suppressing the rebellion is now to be prosecuted with system and vigor. With system and vigor and economy in the conduct of the war, and with the financial measures I have indicated, we may confidently expect, through the Divine favor, an early and successful termination of the struggle, and the restoration of peace with an unbroken Union of free States.

To 8. De Witt Bloodgood, New York.

“WASHINGTON, May 9, 1864.

".... Our financial future, as I see it, is clouded only by military and legislative uncertainties. If Congress will give me the laws I need for the support of the public credit, such as the amended banking law, a rightly framed loan bill and a good tax bill, and if the President will insure me proper administrative support by economizing expenditures and the effective application of actual disbursements, I can resume specie payments and can maintain them when resumed. Doubtless it would be unwise to resume so suddenly, but it certainly would be well to have the power to do so, and it would be well to use the power in a gradual and not distant resumption.

"My whole plan has been that of a bullionist and not that of a mere paper-money man. I have been obliged by necessity to substitute paper for specie for a time, but I never have lost sight of the necessity of resumption; nor, to use a military phrase, have I ever suffered my communications with my base of operations to be broken.

"The great error which my opponents have committed is, in my judg

EXPENSES OF THE GOVERNMENT.

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ment, their endeavor to maintain a system of State banking unsuited to the wants of a great nation obliged to incur a large debt. The national banking system is a necessary, and indeed an inevitable step in our financial progress to a more perfect political Union. Had such a system existed, or rather had such a system been possible, at the beginning of the war, specie payments need never have been stopped.

"But I must not enlarge. Before closing, however, let me say that I have no intention of offering a more advantageous loan to investors than the ten-forties. I have sometimes thought of offering to the whole people for a time their choice of 10-40, 5-20, or '81 bonds, with an abatement from the market rate which would give a slight advantage over subscriptions at par or purchase in an ordinary market. It has occurred to me that such an offer at one-quarter or one-half, or even one per cent. below the true price (considering the ten-forties as par), and continued open, say for fifteen, twenty, or even thirty days, would bring very large subscriptions. I have also thought of a legal tender, bearing interest at six per cent. compounded every six months, and payable with the whole interest three years from date; or of a seven-thirty note with interest payable in lawful money and without the character of a legal tender.”

To Richard Smith, Cincinnati.

“WASHINGTON, May 27, 1864,

"The expenses of the Government average $2,500,000; they often exceed that amount.-$2,500,000 a day is, in round numbers, $66,000,000 a month. There are two ways to provide this sum: one is by borrowing, the other is by issuing legal-tender notes in some form. Suppose I advertise for a loan of sixty-five millions to pay the expenses of one month at six per cent., at what rate would the bonds be taken? The six per cent. bonds of 1881 sold yesterday at 114. The real value, accrued interest deducted, is between 112 and 1124. Now, suppose sixty-five millions put on the market, what price could be obtained? Possibly 110. Suppose another sixty-five millions put on the market next month: what price then? Doubtful if par. It is easy to see that to obtain money by loans in this way, however it might suit the ideas of some people, who suppose that the capacity of absorbing loans is infinite, would hardly work in practice.

"All that can be done with loans in any form is to absorb what naturally seeks investment in this description of securities; and if this capacity of absorption be crowded, the effect of the glut will be found in a rapid diminution in the price of bonds until they become entirely unavailable.

"How idle it is, then, to clamor about raising money exclusively by loans!-about selling the bonds for what they will bring, and all that! Under existing circumstances, the best that can possibly be done is, to get all that can be got by loans without greatly damaging those already in the market, and to meet the remainder of expenses by legal tenders so made as to inflate the circulation as little as possible. It was no choice of

mine to issue the 5 per cent. legal tenders; it was a necessity created by the inadequacy of revenues as compared with expenditures, and by the impossibility of making loans at any rate of interest.

"It is a great mistake, however, to think that the currency is inflated by the amount of those issues. About two hundred millions of notes were issued. The issue no doubt inflated the currency, but the issue of forty or fifty millions of non-paying legal tenders would have inflated it equally. The truth is that the currency was surcharged when the issue began, and the true remedy was taxation enough to pay so large a proportion of expenses that the residue could have been provided for by loans. And the real remedy for present evils is, greater taxation, diminished expenditure, and preparation for a return to specie payments.

แ

What I say is, that the national Government has been obliged to issue legal-tender notes, and that I do not see any necessity for the issue of paper money by the State banks. The two circulations together make the inflation. Which can be withdrawn with the greatest advantage to the Government? This is the present question: not what causes the inflation. I know of no just claim which the State banks have to make money for the country. I know that it is a necessity for the nation to have the control of the circulation of the nation. I think, then, that the State bank currency should be withdrawn, and that no currency should be allowed except the national currency. So far as this consists of legal tenders, their issue and circulation are a direct gain to the country, and if not issued in excess the benefit would be unmixed. So far as it consists of notes of national banks, it is recommended by the indispensable necessity of such institutions to make a uniform national currency permanent; by the benefits derived from the support afforded by them to the credit of Government bonds, and by the convenience and utility of those institutions to the Government in other important respects.

". . . . I hope that, if I cannot altogether prevent inflation, I do all that is possible under existing circumstances. I hope that the legislation of Congress at this session, though long delayed, and the victories of our armies, though eager expectation remains still unsatisfied, will soon enable us to pay more as we go, and make it possible to do so by reducing and systematizing expenditures."

To Miss Mary A. Snyder, Miss Eliza 8. Duffield, and other Ladies of Phila

66

delphia.

"WASHINGTON, June 17, 1861. I am greatly obliged by your present and by the kind note which accompanied it. The picture was intended to remind me of my work in the establishment of the national banking system. If the results of that system are such as I hope, I shall be satisfied. I have sought to give a national currency to the country, so sound that no laboring man shall be cheated of his wages by bank insolvency, and so uniform that a traveler may pay his bills without exchange of money from one end of

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the land to the other. I have sought, also, while securing such a currency, to establish such foundations of national credit in the security, value, and diffusion of national bonds, that we may be able to meet hereafter with energy and promptitude any dangers arising from abroad, while disunion will be impossible at home. Time must try my work and test its utility or inutility; I claim only to have sought the best ways of service to our country.

To William Cullen Bryant, New York.

66 WASHINGTON, June 80, 1864.

Your good opinion has always been one of my chief treasures, because it is the honest opinion of a candid and just observer. I have never expected it to extend to all the measures the exigencies of the country have compelled me to adopt; and yet, looking back, I can see now no measure which my judgment condemns except that required by the New York banks, the issue of legal-tender coupons. My grand objects have been, first, to provide for the vast demands of the war, and second, the substitution of a national bank-note currency for State bank-note currency, and through the last resumption of specie payments, and so permanence and strength in the financial order. I think if we could compare notes, very little difference would be found between our opinions.

But it is of little importance to the country now what my financial views may be. A sense of duty to myself and to the country-imperative you will think, I hope, it must have been-constrained me yesterday to tender my resignation to the President, and it has been accepted to-day. So I am no longer Secretary. If I feel some regret that I cannot carry out my ideas to consummation, it is compensated by the sense of relief from crushing responsibilities.

"With this act terminates, I trust, my whole connection with official life. There has never been any thing for me but opportunity for work; and I gladly surrender all claims upon it to those who may prize it

CHAPTER XL.

SUMMARY—MR. CHASE'S FINANCIAL OBJECTS—TO OBTAIN SUPPLIES -TO PROVIDE A PERMANENT CURRENCY-TO PROVIDE A FUNDING SYSTEM AND SECURE CONTROLLABILITY OF THE PUBLIC DEBT-OBJECTIONS TO LONG BONDS TO SECURE EARLY RESUMPTION-GENERAL EFFECTS OF HIS MEASURES-LETTERS TO COLONEL VAN BUREN AND SECRETARY FESSENDEN.

IN all

N all his financial measures, Mr. Chase kept steadily in view three great objects:

1. To establish satisfactory relations between the public credit and the productive industry of the country; in other words, to obtain supplies for the army and the navy. The suspension of the banks put an end to the first and most obvious resort-loans of gold-and made new methods indispensable. It was then that the Secretary resorted to legal-tender notes, made them the the currency of the country, and borrowed them as cash. The patriotism of the people came to the aid of the labors of the Treasury and the legislation of Congress; and the first great object was made secure.

2. To provide against disastrous financial results on the return of peace. In Mr. Chase's judgment, this could most safely be accomplished by the establishment of a national currency, as was done by the acts of Congress authorizing national banking associations. At the beginning of the war, there were about 1,500 State banks in existence, and their proprietors and officers sought to make the paper of these institutions the currency of the country. The Secretary was inflexible against this, and confined his