customs. Soon another issue of 90 millions was authorized by Congress, receivable for all public dues, except customs. Still later in the session a further issue of 150 millions was authorized, of which 50 millions were reserved from issue until actually required for the payment of deposits. The total emission thus authorized was 250 millions, besides 50 millions needed for the payment of deposits, all of which might be available for circulation. An emission of fractional currency, consisting of postage and revenue stamps, was also authorized. The Secretary was also authorized to receive on temporary deposit, at interest not exceeding 5 per cent., any sum not exceeding 100 millions, and to pay such creditors as might choose certificates of indebtedness, payable in one year, at six per cent. interest. Congress also authorized the issue of 500 millions 6 per cent. bonds, redeemable after five and payable in twenty years, with interest payable in specie. These were exchangeable for demand notes. Such were the measures adopted by Congress. At the close of the fiscal year, June 30th, 1862, $57,926,116 had been received on deposits; $158,591,230 of demand notes had been issued and were in circulation; $49,881,979 had been paid in certificates of indebtedness; and $208,845,291 had been paid in cash. The Secretary said: "Every audited and settled claim on the Government, and every quartermaster's check for supplies furnished, which had reached the Treasury, had been met, and there remained in the Treasury a balance of $13,043,546." In July a call was made by the President for three hundred thousand men for three years, and in August another call for three hundred thousand for nine months, and on the first of December the Secretary estimated the amount of the public debt at the close of the fiscal year, June 30th, 1863, would be $1,122,297,403. When Congress assembled in December, 1862, the results presented were as follows: The actual payments, other than for principal of public debt, were $220,175,370; and the accumulated requisitions beyond resources amounted to $48,354,701. The amount of notes in circulation, including those receivable for customs, was $222,932,111; the amount received on deposit was $80,798,650; the issue of fractional currency was $3,884,800; the issue of certificates of indebtedness was $87,363,241; the issue of 5-20 bonds amounted to $23,750,000. Thus there remained of the loans authorized at the previous session the following balances, viz. authority to issue $27,067,889 notes for circulation; in deposits there could be received $20,201,350; it was thought that 40 millions of fractional currency would be needed by the people, therefore $36,115,200 could be issued; if 100 millions of certificates of indebt edness could be put forth, then a balance of $12,636,758 could yet be paid out; a balance of 35, millions of 5-20 bonds, it was estimated, would be taken before the end of the fiscal year. The aggregate of all these sums was $131,021,197, which constituted the total resources available, under the existing laws, up to the end of that fiscal year, June 30th, 1862. The Secretary said: "These credit resources, with actual receipts from like resources, added to revenue in all forms, may supply the Treasury with $511,646,259. There remains a balance of disbursements of $276,912,517 to be provided for." The estimates for the ensuing fiscal year, commencing July 1st, 1863, beyond resources available under laws then existing was $627,388,183. So greatly had the expenses of the war against the rebels accumulated, that the Secretary was obliged to ask Congress in December, 1862, to provide for the additional amount of $904,300,700 to meet the expenses until July 1st, 1864. How was this vast sum to be provided? The danger which lay in the path of the Secretary was now close at hand. He had foreseen it at the outset, and had prepared to meet it. This was an excess of paper circulation. He estimated the circulation of the banks in loyal States to be 167, millions. That of the Government notes was $210,104,000. Total, $377,104,000. One year previous, November, 1861, by his estimate, the circulation was in bank notes, $130,000,000; in coin, including the spécie of loyal State banks, $210,000,000. Total, $355,140,000. The difference in the circulation before the suspension, and one year after, was thus $21,964,000 in favor of the latter period. This excess, the Secretary insisted did not "greatly, if at all," exceed the legitimate demands of payments. Yet, with affairs in this posture, he was called upon for more than 900, millions to be raised in the ensuing eighteen months. Only two immediate measures of safety lay before him, and he boldly proposed them both. One was to drive home the State bank paper circulation by a tax, and the other was the funding of the Government notes. Both these measures had been proposed by him at an earlier day, but their necessity had not been seen and felt before by Congress or the people. At the same time the Secretary had proposed, as above mentioned, a system of national bank paper. Taxation, direct and indirect, he reserved as a certain means by which to place the ordinary expenditures of the Government and the interest on its loans, beyond the reach of any peril. There had been a practical difficulty in funding the Government obligations since the suspension of specie payments by the banks. By law bank paper was not receivble by the Government, and coin was at such a premium, that no one would give it for Government bonds at par. The Government notes, which had now come into circulation, were the only medium by which funding could be effected. Said the Secretary: "Under these circumstances, the path of wisdom and duty seems very clear. It leads to the support of a United States note circulation, and to the reduction of the bank note circulation." 1 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 organization of banking associations for the improvement of the public credit, and for the supply to the people of a safe and uniform currency; 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 provide 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 millions 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 battle-field, the effects of which might be recovered 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 encounter. The public mind was exceedingly sensitive and impatient. Delay or disaster in military operations produced depression and weakened 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 energies of the Secretary were constant, and could neither be postponed nor avoided. Before stating the answer which Congress gave to the propositions of the Secretary, some fuller notice of the system of banks recommended should be made. Its principal features are a circulation of notes having a common impression, and authenticated by a common authority, the redemption of these notes by the associations and institutions to which they may be delivered for issue; and the security of that redemption by the pledge of United States 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 was 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 organization 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 currency of the National banks being receivable for public dues, could be accepted by the Government 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 withdrawn on the approach of a resumption of specie payments. The notes are made redeemable in Government notes, and after resumption of specie payments, in coin. The Secretary says: "It is the Secretary's firm belief that by no other path can the resumption 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 convertible into coin. The circulation of banking associations organized under a general act of Congress, secured by such bonds, can be most surely and safely maintained at the point of certain convertibility into coin. If, temporarily, these associations redeem their issues with United States notes, resumption of specie payments will not thereby be delayed or endangered, 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 advantageous purchases of specie, to replace at once large amounts, and, at no distant day, the whole of this circulation by coin without detriment 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 national currency through a national banking system. (See CONGRESS, U. S., page 296). By an act, approved March 3d, the Secretary was anthorized 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 of the latter was authorized; also to issue $150,000,000 Government notes, including the $100,000,000 authorized in January; also to issue $50,000,000 of fractional notes in lieu of the postage and revenue stamps for fractional currency; also to receive deposits of gold coin and bullion, and to issue certificates therefor; and to issue certificates representing coin in the Treasury in payment of interest, which, with the certificates of deposits issued, shall not exceed 20 per cent. beyond the amount of coin and bullion in the Treasury. A tax was also imposed on the circulation of State banks of 1 per cent. half yearly. Thus, to recapitulate On the 1st of December the Secretary estimated his available resources under existing laws for the current year ending Jan. 30th, 1863, at...... To this should be added the balance of 5-20 bonds not deemed available before June 30th, 1868... On Jan. 17th, 1863, Congress authorized Government notes.. On March 3d, Congress authorized 10-40 bonds for balance of 1863.. On the 1st of December there was a balance of .$131,021,197 $181,021,197 441,250,000 800,000,000 50,000,000 80,000,000 8,000,000 $2,055,271,197 rise. Whereas invested in a stock, which was to be paid interest, if not principal, in gold, it would retain its value. The same abundance of money, and rise in commodities, had induced farmers and others indebted, to economize the use of high-priced goods, and sell their own commodities, applying the proceeds to debts and mortgages. The insurance companies and others receiving these payments, became thus equally anxious to place the money on a specie basis of investment. All circumstances thus combined to facilitate the efforts of the agents, and by the 1st of May the Secretary had raised from the 5-20 bonds 39 millions; upon certificates of indebtedness, 7 millions; by the issue of United States notes and fractional currency, 92 millions, and on temporary loans, at 4 and 5 per cent., 31 millions; making in the aggregate 169 millions. The Secretary said: "The loan act and the national bank act were followed by an immediate 100,000,000 revival of public credit. Success quite beyond anticipation crowned the efforts of the Secre600,000,000 tary to distribute the five-twenty loan in all 400,000,000 parts of the country, as well as every other measure adopted by him for replenishing the Treasury. The result was that within two months after the adjournment of Congress the whole mass of suspended requisitions had been satisfied, all current demands promptly met and full provision made for the pay of the army and the navy." The long and tedious struggles of the Secretary had now achieved a great success, of which he thus speaks: "During the remainder of the fiscal year no embarrassments attended the adininistration of the finances except those which are inseparable from vast expenditures." During the fiscal year thus closed, the Secretary for the first time had the gratification to see that the disbursements did not greatly exceed, while the increase of the public debt did not equal the estimates submitted to Congress. Thus, while it was estimated that the public debt of the 30th of June, 1863, would reach the sum of $1,122,297,463, its actual amount on that day was $1,098,793,181; and while the disbursements for the year were estimated at $693,346,321, the real total was $714,709,995. 276,984,714 407,934,714 $1,647,336,488 This was the provision made by Congress for 1863-64, after clearing away all deficiencies estimated in December, 1862, for the fiscal year ending June 30th, 1863. It was not all passed, however, until the last day of the session. Meanwhile the Secretary was closely pressed, and found it impossible to prevent a gradual increase during the session in the amount of unpaid requisitions, which finally reached $72,171,189. On the passage of this law, March 3d, 1863, the Secretary proceeded to organize a system of loan agents, the eminent firm of Jay, Cooke & Co., of Philadelphia, being at the head. These were allowed a commission of of one per cent, on all the sales of stocks made by them, of which Jay, Cooke & Co. received, and the sub-agents. The first had connections in all the States, and effective means were taken to bring before the public the advantages of the Government stocks as investments. The state of affairs brought about by the emission of paper money, causing a great rise in prices, and a liberal realization of stocks of goods at those high prices in paper, eminently favored the views of the loan agents. Those who had sold goods and realized money, were desirous of so investing it, that it would not again depreciate in value. If they repurchased goods, and specie payments should be again approximated, they would lose as much as they had made in the VOL. III.-26 A The receipts from the ordinary sources of revenue during the fiscal year ending June 30th, 1863, were $124,443,313, while the estimates of the Secretary of these receipts for the year were $180,405,345. From the customs, land sales and miscellaneous sources, the re ceipts were much above the estimates. But from the direct tax and internal revenue they were enough less to make the difference between the receipts and estimates. The Secretary expected to receive from these two latter sources $97,677,020, whereas he actually received during the year only $39,951,130. It is to his credit that he expected to receive such a large amount from taxes, as it shows that he was unhesitating to use largely this real source of the strength of the national finances. The real discrepancy, however, was less than appears above; thus the direct tax was estimated to yield $11,620,717, whereas only $1,485,103 appears on the books to have been received into the Treasury, but nearly the balance was received in the form of payments for military supplies and services by the States, for which they were entitled to credit beyond their several proportions of the tax. The discrepancy between receipts and estimates of the internal revenue arose from the imperfection of the machinery to raise the tax. Thus the Secretary says: "A part of the deficiency may be attributed to the imperfect execution of the law, and a part to the changes made in it by Congress after the estimate was made; but it is not probable, had neither course operated to reduce receipts, that the revenue from this source would have exceeded half the estimated amount. It is clear that the law, unless materially amended, will not produce the revenue expected from it." The additional sums, actual or estimated, necessary to meet disbursements were, of course, derived, or estimated as derivable, from loans. The receipts and expenditures for the fiscal year ending June 30th, 1863, may be summarily stated as follows: From customs..... From lands.. From miscellaneous From direct tax. This deficit, or amount paid by loans, added to $508,526,499.08, the amount of the debt on July 1st, 1862, makes the amount of the debt July 1st, 1863, as before stated, viz.: $1,098,793,181.37. Under the system adopted by the Secretary for conducting the finances, they were divided into two branches; the ordinary receipts and expenditures, and the extraordinary receipts and expenditures. It may not be amiss to notice more particularly the results of his management of the former during the fiscal year ending June 30th, 1863. The revenue derived from all the ordinary sources, including direct taxes and internal revenue, amounted to $111,899,767. The ordinary expenditures were-for the civil service, pensions, and Indians, $27,470,442; estimating the disbursements for the War and Navy Departments at 50 per cent. above those of the last year of peace, they would amount to $41,884,375. The interest on the public debt was $24,729,846. Total $94,084,663, leaving an excess of $17,315,104 over and above all ordinary expenses and interest of the public debt, old and new, accruing in and for the year. If to this be added the deficit in receipts arising under the direct tax and internal revenue laws, in consequence of their defective operation, and the credit to States, amounting to over 57 millions, the excess of ordinary receipts over ordinary disbursements would have been about 75 millions. This might have been applied to the extraordinary expenditures, or set apart as a sinking fund for the reduction of the public debt. 20,192,456 00-776,682,861 57 At the close of the previous fiscal year ending $888,082,128 05 June 30th, 1862, the ordinary receipts had fallen 18,048,516 81 short of the ordinary expenditures over thirteen millions. The national stock sold at 1061 on the 1st of July, and at 107 before the end of the month. RECEIPTS. ........ $69,059,642 40 87,640,787 95-$111,899,766 48 17,263,450 00 76,560 00 291,260,000 00 145,050 00 Temporary loan deposits.... 115,226,762 21 Total receipts...... Total resources. .... EXPENDITURES. $23.258,922 08 599,298,600 80 Navy Department.......... 63,211,105 27 901,125,674 86 Certificates of indebtedness.. 50,359,758 23-895,796,630 65 Balance in treasury, July 1st, 1863...... $5,829,044 21 Of the sums raised by loans $181,086,635.07 were applied to the payment of existing funded and temporary debt, which was only an exchange of new debts for old ones. Of the sum thus exchanged 544 millions contracted in former years and making with interest about $56,000,000, are not chargeable to the expenditure account proper of 1862-'63. The actual receipts and expenditures were therefore as follows: The confidence of the people in the credit of the Government was strikingly exemplified during 1863 by the sale of the 5-20 bonds. On the 1st of May only about 64 millions had been taken. From that time forward the sales averaged 48 millions per month, until the entire loan was taken. At the same time other loans and credits were negotiated, which together give an average of 55 millions every month for nine months. By the table at the top of the next page, compiled from the statements of the Register's Of fice accompanying the Secretary's Report, it appears that the receipts of revenuc from all sources for the five months ending November 30th, 1863, amounted to $452,959,392, and the expenses and payments during the same period were $469,862, 375. The returns of the receipts for November not being complete, the sum of $800,000 is added by the Register for the deficiency. |