ISSUED DURING THE REBELLION. 171 virtue of the sovereign prerogative inherent in the people, and as their representative duly authorized by the Constitution, to issue full legal tender Treasury notes, not bearing interest. The reason of this is obvious. The chief end desired was to create a circulating medium of exchange, and this end could be accomplished only by issuing Treasury notes in a form that would enable them to perform the functions and serve the purposes of money. TREASURY NOTE BEARING INTEREST AND NOT A And here it is proper to call attention to the difference between an ordinary Treasury note, bearing interest and not a legal tender, and a full legal tender Treasury note, not bearing interest. They are both based on the wealth and credit of the nation, but there the similitude ends. A Treasury note, bearing interest and not a legal tender, is simply an evidence or security of indebtedness, and differs from a bond only in form. It does not possess the attributes, nor can it perform the functions, of money. A creditor of the government may be obliged to take it at its face value or wait an indefinite time for his money; but, as it is not a legal tender, no one else is obliged to receive it at the value inscribed on its face. By its nature it is nothing more than a security in which to invest money, and is not designed or calculated to serve the purposes of a medium of exchange. The fact that it bears interest is a disadvantage to it as a medium of exchange, because in the ordinary transactions of life people cannot stop to reckon interest every time it changes hands; and the fact that it is a partial legal tender (payable for certain dues or taxes to the government) leads those who have such duties to pay to decry its value in order that they may purchase it at a depreciation. It is on the same principle that the greenback is decried by the bullionists, because they have gold to sell, and it is to their advantage to buy greenbacks (with gold) as cheaply as possible. FULL LEGAL TENDER TREASURY NOTE, NÓT BEARING INTEREST. On the other hand a Treasury note, not bearing interest, cannot be used as a security in which to invest money. Like money (made of gold or silver) it is of no use to the possessor until it is parted with.* If only a partial legal tender (receivable for certain dues to the government), it is to the interest of many, as already mentioned, to decry its value, in order to obtain it as cheaply as possible. If the government obliges its creditors to take it at its face value, and it is not a legal tender in payment of debts, no one else is obliged to receive it at the same value, or indeed to receive it at all. While it is then the same as money as between the government and its creditor, it is quite a different thing between the creditor and the public. This is manifestly unjust. Treasury notes are issued by the people in their collective capacity, through the agency of the gov ernment, and, unless simply intended as an interest bearing security, not designed to perform the functions of money, ought clearly to be made a legal tender for private debts as well as public dues, otherwise it places it in the power of the public to repudiate individually what they have done collectively, and the people do not all stand on the same platform with respect to the government or to each other. The Treasury note, therefore, in this form (a legal tender and not bearing interest) constitutes a peculiar form of indebtedness or credit, which serves all the purposes of a medium of exchange and enables the government to draw upon the resources of the people in advance of taxation, *See page 30. bearing equally upon every individual in the nation. The bullionists and their organs, in their efforts to decry the legal tender Treasury note and deceive the public, are constantly asserting that it costs the government nothing more than the expense of printing, and is, therefore, worthless. This is not a mere fallacy-it is a willful perversion of the truth. Every dollar of legal tender paper money issued by the government costs the people precisely one dollar's worth of property or labor. A dollar greenback is put in circulation by the government for value received in property or services; it passes from hand to hand, commanding a dollar's worth of property or services every time it is used as a medium of exchange; until finally it is returned to the Federal Treasury in the shape of taxation or revenue. On the 5th of December, 1861, the Committee of Ways and Means was organized as follows: THADDEUS STEVENS, of Penn., Chairman. JUSTIN S. MORRILL, of Vt. JOHN S. PHELPS, of Mo. SECRETARY CHASE'S REPORT. On the 10th of December, 1861, the Secretary of the Treasury submitted his annual report to Congress. He set forth in strong terms the weakness and disadvantages of the banking system of the country, and expressed the belief that the emission of bills of credit by state banks was in violation of the spirit, if not the letter, of the Constitution. He said: "It has been well questioned by the most eminent statesmen whether a currency of bank notes, issued by local institutions under State laws, is not in fact prohibited by the national Constitution. Such emission certainly falls within the spirit, 174 HISTORY OF THE PAPER MONEY if not within the letter, of the constitutional prohibition of the emission of 'bills of credit' by the States, and of the making by them of anything except gold and silver coin a legal tender in payment of debts. However this may be, it is too clear to be reasonably disputed, that Congress, under its constitutional power to lay taxes, to regulate commerce, and to regulate the value of coin, possesses ample authority to control the credit circulation which enters so largely into the transactions of commerce, and affects in so many ways the value of coin. In the judgment of the Secretary, the time has arrived when Congress should exercise this power. * Two plans for effecting this object are suggested. The first contemplates the gradual withdrawal from circulation of the notes of private corporations, and for the issue, in their stead, of United States notes, payable in coin on demand, in amounts sufficient for the useful ends of a representative currency. The second contemplates the preparation and delivery, to institutions and associations, of notes prepared for circulation under national direction, and to be secured, as to prompt convertibility into coin, by the pledge of United States bonds and other needful regulations." * The Secretary then proceeds to say, that the first of these plans was partially adopted by Congress during the extra session in July and August, in authorizing the issue of $50,000,000 of demand notes, and after suggesting some of the advantages and disadvantages of the plan, concludes by declaring "that he feels himself constrained to forbear recommending its adoption." The principal features of the second plan are presented by the Secretary as follows: "First, a circulation of notes bearing a common impression and authenticated by a common authority: Second, the redemption of these notes by the associations and institutions to which they may be delivered for issue; and, third, the 66 ISSUED DURING THE REBELLION. 175 security of that redemption by the pledge of United States stocks, and an adequate provision of specie." After eulogizing the plan,* he adds: "The Secretary entertains the opinion that if a credit circulation in any form be desirable, it is most desirable in this." THE LEGAL TENDER ACTS. The Committee of Ways and Means appointed a subcommittee, consisting of Messrs. Spaulding, Hooper and Corning, on the proposed National Bank currency, the issue of Treasury notes and bonds, and the mode of raising means to carry on the war. The chairman of the sub-committee, Mr. Spaulding, prepared a National Bank currency bill by the end of the month (December), and also drafted a legal tender Treasury note section, to be added to the bank bill, for the issue of Treasury notes to be used while the bank bill was being put in operation throughout the country. In his Financial History of the War, Mr. Spaulding says that, "upon more mature consideration and further examination, he came to the conclusion that the bank bill, containing sixty sections, could not, with the State Banks opposed to it, be passed through both Houses of Congress for several months, and that so long a delay would be fatal to the Union cause. * He, therefore, changed the legal tender section intended originally to accompany the bank bill into a separate bill, with alterations and additions, and on his own motion introduced it into the House by unanimous consent on the 30th of December, 1861." The bill was duly considered by the Committee of Ways and Means, and, on the 7th of January, 1862, was reported from the committee to the House. * The original bill offered by Mr. Spaulding authorized the Secretary of the Treasury "to issue on the credit of the *See Chapter VII. on National Banks. |