which they recovered their position; the aggregate of their notes and deposits for 1859 equalling $452,875,196, against an aggregate of $445,130,134 in 1857. In 1860, their notes and deposits equalled $460,904,606. This was the highest point which had been reached. In November of that year occurred the election of Mr. Lincoln to the Presidency; an event which was the first substantial triumph in the country of Northern over Southern ideas as to the nature of our government, since the administration of Washington. His accession to the Presidency was the signal for the immediate outbreak of the civil war. The new administration succeeded to one which was itself in virtual conspiracy against the life of the nation. It found the Treasury empty, and the Army deeply tainted with seditious sentiments. The Navy, representing the commercial spirit of the North, was almost unanimous on the side of freedom. One of the last acts of the previous Congress, it having been purged by the secession of most of the Southern members, was to authorize a loan of $10,000,000. This sum sufficed for the immediate necessities of the new administration. The new Congress, which had been elected at the same time with the President, was speedily called together; and, on the 17th of July, authorized the negotiation of large loans. In the mean time the disastrous battle of Bull Run had taken place, causing great depression at the North, which made it evident that the only mode in which loans could be negotiated was for the Banks of the country to combine by their advances, to relieve the pressing necessities of the administration; and by their example, to inspire public confidence to a degree that would render possible the negotiation of the government loans. The manner in which the Banks combined, and the success achieved, are fully set out in the following extracts from a statement prepared by one largely instrumental in promoting their union for the purposes described:

"After the disastrous battle of Bull Run, and when Washington was closely beleaguered and the avenue thence to New York through Baltimore was intercepted by the enemy, Mr. Chase, then Secretary of the Treasury, came to this city via Annapolis, and immediately invited all persons in this community who were sup posed to possess or to control capital to meet him on the evening of August 9th, at the house of John J. Cisco, Esq., then Assistant Treasurer of the United States in New York, This invitation drew together a large number of gentlemen of various occupations

and circumstances. During the discussion which ensued. I suggested the practicability of uniting the Banks of the North by some organization that would combine them into an efficient and inseparable body, for the purpose of advancing the capital of the country upon government bonds in large amounts; and, through their clearing-house facilities and other well-known expedients, to distribute them in smaller sums among the people in a manner that would secure active co-operation among the members in this special work, while in all other respects each Bank could pursue its independent business. This suggestion met the hearty approbation of the assembled company, and arrested the earnest attention of the Secretary. At his request, it was presented to the consideration of the Banks, at a meeting called for that purpose at the American Exchange Bank on the following day; and was so far entertained as to secure the appointment of a Committee of ten bank officers, to give it form and coherence. The Committee convened at the Bank of Commerce, whose officers zealously united in the effort, and a plan was reported unanimously. Their report was cordially accepted and adopted by the Banks in New York; those in Boston and Philadelphia being represented at the meeting, and as zealously and cordially united in the organization. ...

"It was at once unanimously agreed that the Associated Banks of the three cities would take fitty millions of 7 3 10 notes at par, with the privilege of an additional fifty millions in sixty days, and a further amount of fifty millions in sixty days more, making one hundred and fifty millions in all, and offer them for sale to the people of the country at the same price, without charge. In this great undertaking, the Banks of New York assumed more than their relative proportion. To insure full co-operation and success, the expedient of issuing clearing-house certificates, and of appropriating and averaging all the coin in the various Banks as a common fund, which had been invented but the year before, was applied to this special object with good effect. . . .

"The capitals of the Banks thus associated made an aggregate of one hundred and twenty millions, an amount greater than the Bank of England and the Bank of France combined, each of which institutions had been found sufficient for the gigantic struggles of those great nations, from time to time, in conflict with all Europe.

"The following figures also show that the financial condition of the Banks at the time was one of great strength :

coin on hand, equal to 45 per cent of all liabilities. Surely, such conditions as these, with judicious administration, were adequate

to the work which the country required. A great merit of this bank combination at that critical moment, when the life of the nation hung in the balance, consisted in the fact that it fully com mitted the hitherto hesitating moneyed capital of the North and East to the support of the government. The bank officers and directors who thus counselled and consented were deeply sensible of the momentous responsibility which they assumed; but all doubt and hesitation were instantly removed, and perfect unanim ity was secured by the question, What if we do not unite! And acting as guardians of a great trust exposed to imminent danger, they fearlessly elected the alternative best calculated to protect it.

"The problem to be practically resolved by the Banks was this: How can the available capital be best drawn from the people, and devoted to the support of government, with the least disturb ance to the country? and by what means can arms, clothing, and subsistence for the army be best secured in exchange for government credit? These were simple questions of domestic exchange, and most naturally suggested the use of the ordinary methods of bank-checks, deposits, and transfers, that the experience of all civilized nations had found most efficient for the purpose; and that this should be accomplished by the Associated Banks, in a manner best calculated to prolong their useful agency and to preserve the specie standard, it was indispensable that their coin reserves remain with the least possible change. Accordingly, it was at once proposed to the Secretary that he should suspend the operations of the Sub-Treasury Act in respect to these transactions, and, following the course of commercial business, that he should draw checks upon some one Bank in each city representing the Association, in small sums as required, in disbursing the money thus advanced. By this means his checks would serve the purpose of a circulat ing medium, continually redeemed, and the exchanges of capital and industry would be best promoted. This was the more impor tant in a period of public agitation, when the disbursement of these large sums exclusively in coin rendered the reserves of the Banks all the more liable to be wasted by hoarding. To the astonishment of the Committee, Mr. Chase refused; notwithstanding the Act of Congress of August 5th, which it seemed to us was passed for the very object then presented, but which he declared upon his authority as finance minister, and from his personal knowledge of its purpose, had no such meaning or intent. This issue was dis cussed from time to time with much zeal; but always with the same result. It was seen by the most experienced bank officers to be vital to the success of their undertaking. To draw from the Banks in coin the large sums involved in these loans, and to transfer them to the Treasury, thence to be widely scattered over the country at a moment when war had excited fear and distrust, was to be pulling out continually the foundations upon which the whole structure rested. And inasmuch as this money was loaned to the government, and was in no sense a trust reposed in the Banks, there appeared to them no reason why it should not be drawn by checks in favor of government contractors and creditors,

who would require to exchange them for other values in commerce and trade, through the process of the clearing-house. And this consideration was greatly strengthened by the fact, that these advances were made, and the money publicly disbursed, a long time before the treasury notes were ready for delivery to the Banks which had paid for them. In the light which has since been shed upon the Act of Congress referred to, it is evident that undue weight was given to the views of the Secretary, and that the Banks would have conferred an incalculable benefit upon the country, had they adhered inflexibly to their own opinions. . . . It soon be came manifest that, in consenting to have their hands tied and their most efficient powers restricted, while engaged in these great operations, and in allowing their coin reserves to be wasted by pouring them out upon the community in a manner so unnecessary and exceptional, the Banks deprived themselves and the government of the ability of long continuing, as they otherwise could have done, to negotiate the National loans upon a specie standard.

"This first great error, if it did not create a necessity for the legal-tender notes, it certainly precipitated the adoption of that most unhappy expedient, and thereby committed the nation at an earlier day to the most expensive of all methods of financiering.

"One other subject of discussion between the Secretary and the Associated Banks at the same time arose, which led in the same direction. Congress by its Act of 17th July had authorized loans to the amount of two hundred and fifty millions. This could be issued either in bonds running twenty years at not over seven per cent interest-7-30 notes running three years, or fifty millions of the amount could, at the discretion of the Secretary, be made in currency notes payable on demand without interest. As the undertaking of the Associated Banks covered one hundred and fifty millions of this sum, and it was desired that they continue the work thus auspiciously begun, a question of the expediency of putting out the circulating notes was immediately raised by one of its members. A very small amount had been emitted. The Treasury was empty of coin to redeem them, and could only be replenished by the proceeds of the bank loans. It was evident to the bank officers that they could not sustain coin payments, if the transfers from their vaults to that of the Treasury were subject to be intercepted and absorbed by these notes of government. Nor could the Banks receive them upon deposit from the public as money, while they were responding to the government and to their own dealers in coin. It was an inflation of the currency in the form most embarrassing to the enterprise they had commenced. Accordingly, the Secretary was urgently solicited to refrain from exercising the discretionary powers given him of creating the Treasury currency, until all other means were exhausted. In response to a resolution to that effect, the Secretary assured the bank officers of his acquiescence in their suggestion; but at the same time insisted that it was improper for a public officer to openly pledge himself not to exercise a power conferred by the law. With this understanding the Banks began their work; paying into

the Treasury, in coin, one hundred and fifty millions, in sums at the rate of about five millions, at intervals of six days. Even with all these unfavorable circumstances surrounding them, it was an encouraging fact, observed by those who were anxiously watching the practical operation of this great and novel experiment, that, while the circulating notes in the country were restricted, the disbursements of the government for the war were so rapid, and the consequent internal trade movement was so intense, that the coin paid out upon each instalment of the loan came back to the Banks, through the community, in about one week; the natural effect of this general commercial activity upon the circulating medium being simply to quicken its flow.

"After taking the third amount of fifty millions by the Associated Banks, those in New York, who had at that time paid in of their proportion over eighty millions in all, found themselves in this position:

Their aggregate coin, which on the 17th August, before the

first payment into the Treasury, was Was in December 7th..

A reduction of only

and the other two cities in like proportion.

$49,733,990

42,318,610

$7,415,380

"In the mean time the 7-30 notes taken by the Banks had been purchased by the people to the extent of some fifty millions, notwithstanding a prolonged and vexatious delay in issuing them by the Treasury Department. The popular feeling was all that could have been desired for continuing that method of distribution. It may be confidently affirmed, that, had the Banks been permitted to exercise their own methods of exchanging the bonds for the varied products of industry required by the government, they could have continued their advances in sums of fifty millions for an indefinite period, and until the available resources of the people had been all gathered in. It is to be borne in mind that these resources were all existing at home, and that the increased industry which the war excited was daily increasing new means for investment. . . . "But at this time the demand notes were paid out freely by the Treasury, and began to appear as a cause of embarrassment ainong the Banks which were pressed to receive them upon deposit; and while they could not decline them without diminishing public confidence in the government credit, they could not give them cur rency without impairing their own specie strength. In fact, the notes became at once a substitute for coin withdrawn from circulation, and their emission expressed a purpose of resorting to gov ernment paper issues to carry on the war. So soon as these notes thus appeared, the reflux of coin to the Banks at once sensibly diminished. During three weeks from the 7th December, the reserves of the Banks in New York fell to $29,357,712, — a loss of thirteen millions within that short period; and on the 28th Decem ber, after conference with the Secretary, in which he still adhered to the views before expressed, it was decided as expedient for the Banks to suspend specie payments.