The table given at foot of page 971 exhibits the different kinds of treasury notes outstanding on February 1, 1884, which were issued from the organization of the government to the date of the passage of the act of March 2, 1861. - TREASURY NOTES OF THE PERIOD OF THE CIVIL WAR. The total public debt on June 20, 1860, was $64,769,703.08. The outstanding treasury notes issued under act of June 23, 1857, were $19,690,500. The amount of treasury notes outstanding, issued under acts previous to that date, was $105,111.64. The act of June 22, 1860, authorized a loan of twenty-one millions, at a rate of interest not exceeding 6 per cent., to be reimbursed within a period not more than twenty years, and not less than ten years. The money was to be used in the redemption of treasury notes, and to replace any amount paid to the treasurer in such notes for public dues. Under this authority, proposals were invited by Secretary Cobb, on Sept. 8, 1860, for ten millions of this loan, which amount was ample to meet all the treasury notes that would fall due before Jan. 1, 1861." In his report for Dec. 4, 1860, he says: "The rate of interest was fixed at 5 per centum per annum, under the conviction that the loan could be readily negotiated at that rate, for, at that time, the 5 per cent. stock of the United States was selling in the market at the premium of 3 per cent. The result realized this just expectation, and the whole amount offered was taken, either at par or a small premium." Before, however, the time had arrived for payment on the part of the bidders, political complications arose, which affected the credit of the government so unfavorably, that the amount realized was but $7,022,000, the subscribers of $2,978,000 having failed to make good their subscriptions. The secretary stated, that, in the present condition of the country, capitalists were unwilling to invest in United States stock at par, and recommended a repeal of so much of the act of June 22, 1860, as authorized the issue of the additional stock, and asked for authority for the issue of treasury notes for the same amount, "to be negotiated at such rates as will command the confidence of the country." He recommended that the public lands be unconditionally pledged for the ultimate redemption of all the treasury notes which it may become necessary to issue, and suggested, that there should always exist in the department power to issue treasury notes for a limited amount, under the direction of the President, to meet unforeseen contingencies. It is a power which can never be abused, as the amount realized from such source can only be used to meet lawful demands upon the treasury. No secretary of the treasury, or president, would ever exercise it, unless compelled to do so by the exigencies of the public service. On the other hand, it would enable the government to meet, without embarrassment, those sudden revulsions to which the country is always liable, and which can not always bé anticipated. I have already stated that provision should be made at once to relieve the treasury from its present embarrassment, produced by the causes referred to. To do this, congress should authorize the issue of an additional amount of treasury notes, not less than ten millions of dollars: with this means the department would be enabled to meet all lawful demands upon it for the present. The extent of the financial crisis, through which the country is now passing, can not now be determined, and until it is better known, no policy can be recommended of a permanent character." — Secretary Cobb resigned on Dec. 10, but the act of Dec. 17, 1860, was passed in compliance with the suggestions contained in his report. The pledge of the proceeds of the public land was not given in the act, and one of the reasons for withholding such legislation was, that it would interfere with the passage of the homestead bill, which was then under consideration. The act authorized the issue of ten millions of treasury notes in denominations of not less than $50, redeemable in one year from the date of issue, with interest at the rate of 6 per cent., but the secretary was authorized to issue such notes after advertisement at the lowest rate of interest offered. Of these notes, five millions were offered to subscribers. The bids were opened Dec. 28, and only $500,000 were taken at 12 per It was important to negotiate the loan in order to meet the interest on government bonds upon Jan. 1. The remainder of the loan was subscribed by the banks in New York, previous to that date, at 12 per cent. Gen. John A. Dix was appointed secretary of the treasury on Jan. 11, and bids for the remaining $5,000,000 were opened on the 19th, and the notes awarded at the average rate of 10 per cent., as follows: cent. The whole ten millions were issued, redeemable at the expiration of one year from date, bearing interest as follows: $70,200 at 6 per cent.; $384,500 at rates varying from 6 to 10 per cent.; $1,027,500 at 10 per cent.; $3,688,700 at rates from 10 to 12 per cent.; and $4,840,000 at 12 per cent. Additional offers bearing interest, ranging from 15 to 36 per cent., were declined. The amount of treasury notes outstanding on Dec. 1, 1860, previous to the passage of this act, was $14,599,700, of which $42,600 was payable in 1859, $3,133,400 in 1860, and $11,423,700 in 1861. Of these notes, $8,684,200 bore interest at 6 per cent., and the remainder at lower rates. - Secretary Dix, in a letter to the chairman of the committee of ways and means, dated Jan. 18, 1861, says: Within the last few days the amount of overdue treasury 66 * notes presented for redemption has exceeded the power of the treasurer to place drafts for payment on the assistant treasurer at New York, where the holders desire the remittances to be made; and an accumulation of warrants, to the amount of about $433,000, has accrued on this account in the treasurer's hands, which he has been unable to pay." He also says: That notice issued on the 18th ultimo invited proposals for the exchange of five millions of dollars for treasury notes, and offers at 12 per cent. or less were made only to the amount of $1,831,000; offers to exchange $465,000 for notes bearing interest at rates varying from 18 to 36 per cent. were also received. The offers at 12 per cent. and less were accepted; those above that rate were rejected. The remainder of the five millions offered was soon thereafter taken at 12 per cent., and the whole amount was pledged to the payment of over-due treasury notes and other pressing demands on the treasury. * During the last quarter, about eight millions of treasury notes were redeemed, which, with the two and one-half millions redeemed since the first instant, make ten and a half millions. The amount received from the loan, a small fraction above seven millions, threw upward of three and a half millions of these notes on the other resources of the treasury for redemption. This is one of the principal causes of the delay and difficulty which have recently existed in providing for other demands of public service." So low had the credit of the government fallen, through the political agitations and troubles just previous to the war of the rebellion, that he closed his communication by calling attention to the fact, that, "there are deposited with twenty-six of the states for safe keeping, over twenty-eight millions of dollars belonging to the United States, for the payment of which the promise of these states is pledged by written instruments on file in this department. The annual statement of receipts and expenditures for the year ending June 30, 1860, represents this amount as part of the balance in the treasury' on that day. * I refer to this final resource as an available one, should the public exigencies demand it. It is not doubted that the greater portion of the amount so deposited would be promptly ly and cheerfully paid should an exigency arise involving the public honor or safety. If, instead of calling for these deposits, it should be deemed advisable to pledge them for the repayment of any money the government might find it necessary to borrow, loans contracted on such a basis of security, superadding to the plighted faith of the United States that of the individual states, could hardly fail to be acceptable to capitalists."- During the following month the act of Feb. 8, 1861, was passed, which authorized a loan not exceed ing twenty-five millions of 6 per cent. bonds, the avails to be used in the payment of current expenses, for the redemption of outstanding treasury notes, and to replace in the treasury such amounts as had been paid in treasury notes. Of this loan, bearing 6 per cent. interest, and having twenty * years to run, $18,415,000 was issued, at an aggregate discount of $2,019,776, or an average rate of $83.03 for $100. In less than a month after the passage of this act providing for the payment of the treasury notes outstanding, the act of March 2, 1861, was passed, which authorized a loan of ten millions at 6 per cent., redeemable upon three months' notice, after July 1, 1871, payable July 1, 1881, or, instead thereof, the issue of $10,000,000 of new notes in denominations of not less than $50, bearing interest at the rate of 6 per cent. per annum, payable semi-annually, receivable in payment of all debts due the United States, including customs duties, and redeemable at pleasure, within two years from the passage of the act. The same act largely increased the duties on imports, and authorized the substitution of treasury notes for the whole or a part of the loans previously authorized. Under this act, $35,364,450 in all, of treasury notes, were issued, of which $22,468,100 were redeemable in two years, and $12,896,350redeemable in sixty days after date; and a considerable portion of these notes were paid out to creditors. General Dix was succeeded by Secretary Chase on March 7, 1861. The great increase of import duties, imposed by the act of March 2. had caused the bonds of the government to advance in the market, and it seemed to be a favorable time to offer the remainder of the bonds authorized by the act of Feb. 8, 1861. Bids for eight millions of the bonds were opened on April 2. Offers at from 94 to par were received for $3,099,000, and 93 for the remainder of the loans. bids below 94 were rejected. In the midst of these negotiations it became known that arrangements were being made to send an additional force for the relief of Fort Sumter. No additional bonds were sold until May 31, when $7,310,000 were sold at an average rate of $85.34 for $100. In place of bonds, five millions of treasury notes were offered, and the bids opened on April 11 amounted to only one million; but shortly thereafter the whole amount offered was taken. The United States 6 per cent. bonds were selling in the market at 83, and money at call was worth from 4 to 5 per cent.; but the treasury notes bearing 6 per cent. interest could be held and used or sold at a profit for the purpose of paying duties. Additional treasury notes of the same kind, as has been seen, were subsequently sold, amounting, in all, to more than thirty-five millions, at rates ranging from par to 12 per cent. premium. On page 974 will be found the form of a $50 note issued under the act of March 2, 1861. Civil war was inaugurated by the attack on Fort Sumter on April 12. The fort surrendered on April 14, and on the following day President Lincoln issued a call for seventy-five thousand soldiers. The southern states were declared blockaded. Seven of these states had, by ordinances, publicly declared their secession from the Union, and their defiance of the national authority, and a convention at Montgomery, Alabama, had organized a new government, under All 50 Two Years N34953 C Issued in pursuance of an Act of Congress approved March 2, 1861 The United States Promise to pay to the order of Fifty Dollars with interest at six per cent Payable 1st Jan, and 1st Countersigned G. Luff Washington, Aug. 7, 1861 Bonds of the United States. for the Register of the Treasury. at July H.G. Root, for the Treasurer of the United States. Receivable in payment of all Public Dues. REVERSE. 50 United States Pay to Beaver of America de the name of "The Confederate States of America." Massachusetts soldiers, on their way to Washington, were attacked by a mob in Baltimore. In the month of May the confederate capital was removed to Richmond; North Carolina and Arkansas seceded, and the Union army crossed the Potomac into Virginia, and took possession of Alexandria and Arlington Heights. In June, Tennessee passed an ordinance of secession, and Gen. Butler was defeated at Big Bethel. The two-year treasury notes which had been recently issued at par, were at 24 per cent. discount; and the government, instead of disposing of the notes, borrowed five millions at sixty days upon them as collateral security. During the following month the disastrous results of the first battle of Bull Run startled the entire country. The Union army, defeated, fell back upon Washington, and the capital of the country was believed to be in danger. Two days thereafter, President Lincoln called for five hundred thousand three-year volunteers. An extra session of congress had been called for July 4, 1861, and on that day, amid events like these, Secretary Chase transmitted his first report to Congress, which recommended measures to provide the means for continuing a civil war which proved in magnitude to be unequaled in the history of nations. Specie payments were suspended on Dec. 28, 1861. The war was carried on chiefly by the use of treasury notes as a circulating medium. The purchasing power of these notes rapidly declined. Prices of all kinds advanced rapidly, and particularly the prices of articles most needed for the supply of the army. The expenditures of the government during the four years of the war were vastly increased beyond the amount which would have been necessary if the war could have been conducted upon the gold standard instead of upon the fluctuating standard of the legal tender paper dol lar.- Never was a great national debt contracted so rapidly. In 1835, as has been seen, the country was entirely out of debt, and on Jan. 1, 1861, the whole debt of the Union amounted to but 166 millions. Gen. Lee surrendered at Appomattox, United States legal tender notes... Seven-thirty notes..... Fractional currency. Temporary loans. Certificates of indebtedness.. Total...... $433,160,569.00 217,024,160.00 107,148,713.16 85,093,000.00 $1,732,725,414.67 from the tariff, the remainder by a system of direct taxation or internal duties. Six per cent. bonds, amounting to $18,415,000, had already been sold, at from par to $85.34 for $100, and treasury notes bearing interest at 6 per cent. had been paid to creditors. He considered that "in a contest for national existence and the sovereignty of the people, it is eminently proper that the appeal for the means of prosecuting it with energy to a speedy and successful issue, should be made, in the first instance at least, to the people themselves." Among other recommendations, he proposed a loan of 100 millions, to be issued in the form of treasury notes, or exchequer bills, bearing interest at the rate of 7 per cent., to be paid semi-annually, and redeemable at pleasure, after three years from date. The interest at this rate was suggested, because it was liberal to the subscribers, convenient for calculation, and, under existing circumstances, a fair rate for the government. The rate would be convenient for calculation; for, the interest being equal to one cent a day on $50, two cents a day on $100, ten cents on $500, twenty cents on $1,000, and one dollar on $5,000, it would be only necessary to consider the number of days since the date of the note, to determine, at the close, the amount due on it. It was proposed to issue these notes in sums of fifty, one hundred, five hundred, one thousand, and five thousand dollars, with the amount of interest for specified periods engraved on the back of each note, and the facility thus secured to the holder of determining the exact amount of interest, it was thought, would enhance its value. "While the rate proposed is thus liberal and convenient, the secretary regards it also as, under existing circumstances, fair and equitable to the government. The bonds of the United States, bearing an interest of 6 per cent., and redeemable twenty years after date, can not be disposed of at current market rates, so that the interest on the amount realized will not exceed 7 per cent.; nor is there any reason to believe that treasury notes, bearing an interest of 6 per cent., receivable for public dues and convertible into twenty years' 6 per cent. bonds, can be dis There were more than 684 millions of these obligations, which were a legal tender, of which 207 millions were bearing compound interest at the rate of 6 per cent. 830 millions were in treasury notes, bearing interest at the rate of 7% per cent. per annum. There were $1,540,483,701 of treasury notes, either payable on demand or bearing interest. If the temporary loans, which were pay-posed of in any large amounts, so that the interest able in thirty days from the time of deposit, after notice of ten days, and the certificates of indebtedness, which bore interest at 6 per cent., payable one year after date, or earlier, at the option of the government, are included with the treasury notes, the whole would amount to considerably more than three-fifths of the whole public debt of the country. Secretary Chase, in his report, estimated the whole sum required for the fiscal year to be not less than 318 millions, of which 215 millions would be required for the war and naval service; more than twelve millions ($12,639,861.64) to pay treasury notes due and to become due; and nine millions to pay interest upon the proposed new debt. He was of the opinion that not less than eighty millions should be provided by taxation, and 240 millions obtained by loans. The principal part of the revenue was to be obtained on the sum realized will fall much, if at all, short of the rate proposed. For the difference of interest, if any, between such notes and those of the proposed national loan, the secretary thinks that the absence of the feature of receivability for public dues in the latter is a sufficient compensation." He also proposed notes of small denominations, ten, twenty and twenty-five dollars, payable one year from date, to an amount not exceeding fifty millions, bearing interest at the rate of 365 per cent., to be exchanged for the other form of treasury notes, bearing interest at 7%, or, if more convenient, made redeemable in coin, on demand, without interest. "The greatest care," he said, “will, however, be requisite to prevent the degradation of such issues into an irredeemable paper currency, than which no more certainly fatal expedient for impoverishing the masses, and dis 100 64 crediting the government of any country can well be devised." — Treasury notes authorized by the acts of June 30, 1812, Feb. 24, 1815, and three intervening acts, bore interest, as recommended by Secretary Gallatin, as has been seen, at the rate of 53 per cent. a year, and were receivable in | payment of all duties and taxes laid by the authority of the United States, and for all public lands sold by said authority; and when so received, interest was to be computed at the rate of one cent and one-half a cent per day" on every one hundred dollars of principal, each month being reckoned as thirty days. It is probable, that the proposition for the issue of the seven-thirty notes was obtained from this act, for a substitute was proposed for the legal tender act, which passed the house of representatives Feb. 6, 1862, which contained a section providing for the issue of transferable certificates bearing interest at the rate of 53 per cent. per annum. These recommendations of the secretary were embodied in the acts of July 17 and Aug. 5, 1861. The first was passed by nearly the unanimous vote of the house, only five votes (one from Kentucky, two from Missouri, one from Ohio, and one from New York) having been against it. It authorized the secretary to borrow 250 millions, either in twenty-year treasury notes, with interest not exceeding 7 per cent., or in seven-thirty three-year treasury notes, and to issue demand notes, bearing no interest, and receivable for public dues. These latter notes were limited to fifty millions, and to denominations of not less than ten dollars. But the act of August 5 authorized the issue of five dollar notes; also twenty-year 6 per cent. bonds for the amount of the seven-thirty notes issued, which bonds were to be used only in exchange, or for the purpose of funding such notes. Under these acts, nearly 140 millions of seven-thirty notes were issued, and sixty millions of demand notes, without interest; ten millions of these notes having been authorized by the act of Feb. 12, 1862.The first demand notes were issued in August, and paid for salaries at Washington. They were received with reluctance, and the merchants and shop-keepers endeavored to discredit them. Railroad corporations refused them in payment of fares and freight; and leading banks in the city of New York refused to receive them except on special deposits. The secretary and other officers of the treasury signed a paper agreeing to accept them in payment of salaries. A circular was issued to the various assistant treasurers, stating that treasury notes of the denominations of five, ten and twenty dollars had been, and will continue to be issued, redeemable in coin on demand in Boston, New York, Philadelphia, St. Louis and Cincinnati. Gen. Scott also issued a circular on Sept. 3, 1861, announcing to the army, 66 that the treasury department, to meet future payments to the troops, is about to supply, besides coin, treasury notes in five, ten and twenty dollars, as good as gold in all banks and government offices throughout the United States, and most convenient for transmission by mail from the officers and men to their families at home.' Of these notes $24.550,325 were issued before the 1st of December, and $33,460,000 were in circulation at the time of the suspension of specie payment on Dec. 28. The whole amount authorized was issued prior to April 1, 1862. Notwithstanding the circular of the secretary, it became necessary to use the available coin in payment of the interest upon the public debt, and there was at times some difficulty in redeeming the notes promptly in gold. At a meeting of the associated banks in the city of New York, in January, 1862, it was resolved, “That before we receive such notes, we must require that such legal provision be made by congress as shall insure their speedy redemption, and that a committee of the association be appointed to consider the subject and report on it at an adjourned meeting." The notes were receivable for duties, and soon obtained good credit. After the suspension of specie payment, efforts were made to retire them as rapidly as possible, for as they were receivable for duties, they embarrassed the government in providing for the gold interest upon the public debt. On July 1, 1863, more than fifty six millions had been retired, and a much larger amount of legal-tender notes had been placed in circulation. The demand notes were not, by the terms of the law, made payable in gold, but as they were authorized prior to the suspension of specie payment, and proclaimed as payable in coin by the circular of the secretary, they were considered so payable, and, after the suspension of specie payment, were quoted at times at about the same premium for legal-tender notes as gold. Interest upon the first issue of the seven-thirty notes was also paid in gold. These notes were fundable into twenty-year 6 per cent. bonds of 1881, and but few were presented for payment. The amount redeemed in money to Nov. 1, 1864, was only $63,500, while the whole amount converted into bonds to that date was $125,864,900.*—The seventhirty loan was successfully negotiated through the associated banks of New York, who, jointly with the banks of Boston and Philadelphia, made a contract with the secretary on Aug. 15, 1861, for the purchase of government securities to the amount of 150 millions, in three different installments. The total amount taken by the New York banks, was 105 millions. Whenever subscriptions were made, 10 per cent. was paid to the assistant treasurers in New York, Boston and Philadelphia, and the remainder was placed to the credit of the United States on the books of the banks subscribing. The arrangement of the associated banks among themselves was to issue certificates to each subscriber, stating the amount so subscribed, and placed to the credit of the government; and, as such deposits were withdrawn, or paid into the treasury, seven-thirty notes were issued for the same amount to the subscribers respectively. An immediate issue was to be made of seven-thirty treasury notes, dated Aug. 15, 1861, to the extent * Finance Report, 1864, p. 10. |