to participate in a Congress, the object of which would be to effect the modifications which might be considered necessary in the treaties of 1815, which, however, none the less continue the foundation upon which the political edifice of Europe at present rests. The ministers of the various countries should prepare the propositions which would be submitted to the Congress.

The most sympathetic reply was received from the King of Italy. The Government of Italy has fully and openly espoused the nationality principle, to which the new kingdom owes its origin, and from the exertion of which it expects the annexation to Italy of Venetia and Rome. The King of Italy, therefore, not only accepts an invitation, which seems to presuppose the truth of the nationality principle, but, in emphatic language, expresses his concurrence with the views of the French Emperor. He is even more outspoken on the rightful aspirations of the nations than Louis Napoleon, and looks upon congresses, like that proposed by Napoleon, as a great progress in the history of mankind. He says in his reply, dated November 22d:

A permanent struggle has been established in Europe between public opinion and the state of things created by the treaties of 1815. Hence has arisen a sickly state of things which will increase unless European order is placed upon the basis of the principles of nationality and of liberty, which are the very es

sence of the life of modern nations.

In presence of a situation so dangerous to the progress of civilization and to the peace of the world, your Imperial Majesty has become the interpreter of a general sentiment by proposing a Congress to settle the rights of sovereigns as well as those of nations.

I adhere with pleasure to the proposal of your Imperial Majesty. My concurrence and that of my people are assured to the realization of this project, which will mark a great progress in the history of mankind. As soon as the international conferences take place, I shall take part in person, or at least send a representative.

Italy will appear at the Congress in a spirit of perfect equity and moderation. She is convinced that the justice and the respect of legitimate rights are the true foundations upon which a new balance of power of Europe can be founded.

The King of Portugal, the son-in-law of Victor Emanuel, fully agrees with the views of his father-in-law. In his reply (dated November 18th) he says:

It is an agreeable duty therefore to me to announce to your Imperial Majesty that I adhere without hesitation to your conciliatory proposition, and that I subscribe with all my heart to the sentiments which have inspired it.

Congresses after war are ordinarily the consecration of the advantages of the strongest, and the treaties which result, based upon facts rather than upon rights, create forced situations, the result of which is that general uneasiness which produces violent pro

testations and armed reclamations.

A Congress before war, with the view of averting war, is, in my opinion, a noble_thought of progress. Whatever may be the issue, to France will always belong the glory of having laid the foundation of this new and highly philosophical principle.

The youthful King of Greece, who had so recently ascended a throne, which was erected

on the basis of "national aspirations" and upon the ruins of the historical rights of another dynasty, and of treaties, could not but applaud the idea of the Imperial Congress. Says King George, in his letter dated November 26th:

This appeal to conciliation which your Majesty has just made in the interest of European order has been inspired by views too generous and too elevated not to find in me the most sympathetic reception.

The noble thought which predominates therein could not be better enhanced than by the frank language and the judicious considerations with which your Majesty has accompanied your proposition.

In accepting it without reserve, I fully share the hopes which I find expressed in your Imperial Majesty's letter. The meeting of the Congress will perhaps be the best solution of the grave questions which justly preoccupy all minds in Europe, and will contribute to develop the general prosperity by the maintenance of tranquillity. Every one feels, indeed, that it is necessary to take into account the spirit of the age, the legitimate aspirations of nations, the circumstances of the time, and to endeavor by all possible means to secure the future by regulating the present, so as to eliminate every element of trouble and discord.

chiefs of the European States would be, beyond disThe common work to which your Majesty invites the pute, one of the greatest onward movements of our day. Its success would realize wishes long since formed by the friends of humanity and the noblest minds.

And, with a view to a future collapse of the Turkish empire, he, in conclusion, flatters himself with the hope that the interests and rights of the Christians in the East would find in the Emperor of the French a generous defender in the future International Congress.

The King of the Belgians, who received his own throne from a successful revolution, and expects another one for a son-in-law (Archduke Maximilian) from the arms of the French Emperor, is of course not opposed to the Congress. He assures Napoleon (November 20th) that his Government would be quite inclined, in so far as it could do so, to join in the attempt to settle the existing causes of anxiety in Europe by pacific agreement. The King of the Netherlands (November 29th) expresses himself likewise willing to join all the other sovereigns of Europe in realizing the noble object Louis Napoleon had in view. The King of Denmark the Congress would "assure the future of the eagerly embraced the invitation, as he hoped Danish monarchy," and the Emperor would sustain the Danish claims, as Denmark had always been the constant ally of the Emperor. Switzerland also accepted with eagerness the overture made by Louis Napoleon, for says the letter of the President (November 23d):

The Swiss Confederation, to which nature as well as history and treaties has assigned a neutral position in the midst of Europe, knows how to appreciate all the benefits of peace. It understands the inestimable value of a free and reciprocal consecration of the rights and duties of each-the true base of a sincere and cordial understanding between the nations. We can only, therefore, accept with eagerness the overture your Majesty has deigned to make.

Spain hoped the Congress might aid her in the recovery of Gibraltar, and although her

policy in general has never shown much sympathy with the national movements in Europe, she endorsed the views of the French Emperor, and assured him that Spain would participate in the Congress either at Paris or any other point that may be selected for deliberations. The letter of the Queen (dated November 30th)

says:

I agree with your Majesty that the treaties of 1815 are attacked by the debility produced by time and use, besides the forced influence of serious events, which in many cases have resulted in notorious and capital infractions of their letter and spirit.

I also agree with you that if war has always been a great calamity for peoples, it would be still more so now, on account of the disastrous perturbation that it would produce among nations every day more closely united by the community of their moral and material interests.

Spain, with a view to her aggressive policy in America, even expresses the hope that the Congress might be instrumental in consolidating peace and concord in the new as well as the old world.

The Germanic Confederation declared themselves disposed to accept the invitation, but thought that they could not coöperate with any hope of success in the realization of this project, if the treaties which have established the Germanic Confederation, as well as the political edifice of Europe, were not considered as the basis of negotiations.

The Kings of Bavaria, Saxony, Wurtemberg, and Hanover, declared themselves favorable to the project, but made their final decision somewhat contingent upon the decision of the Federal Diet.

The Pope, in his reply (November 10th), concurs in the project of a Congress, and will use his endeavors in order that the principles of justice, unrecognized and trampled under foot, may be reestablished, and violated rights vindicated. The Pope also states that he should especially demand the reestablishment in Catholic countries of the real preeminence naturally appertaining to the Catholic religion as being the only true faith.

The sultan replied, on December 5th, thanking the Emperor for the sentiments of sincere friendship expressed in his letter, and assuring him that these sentiments were reciprocated. By his order, the Turkish ambassador at Paris

FINANCES OF THE UNITED STATES. Whenever a Government adopts new measures relating to its finances, or is compelled by its necessities to seek for means beyond those obtained from its usual sources of revenue, its movements are always sensibly felt in the financial affairs of the country. If its demands are limited in amount, the enterprises of individuals are soon modified to meet the new circumstances which have occurred. When,

communicated to M. Drouyn de l'Huys a report of the verbal reply given by the sultan to the French ambassador who presented the Emperor's letter, to the effect that the sultan accepted the conference, and was willing to attend the Congress in person in case other sovereigns of Europe did the same.

On December 8th, M. Drouyn le l'Huys addressed a new circular to the heads of all the diplomatic missions of France in Europe, giving a review of the replies of the several European governments. He said:

The refusal of England has unfortunately rendered impossible the first result that we had hoped for from the appeal by the Emperor to Europe. There now remains the second hypothesis-the limited Congress. Its realization depends upon the will of the sovereigns.

After the refusal of the British cabinet we might consider our duty accomplished, and henceforth, in the events which may arise, only take into account our own convenience and our own particular interests. But we prefer to recognize the favorable dispositions which have been displayed toward us; and to remind the sovereigns who have associated themselves with our intentions, that we are ready to enter frankly with them upon the path of a common understanding. A coincidence of views and of action among the principal Powers of the Continent who understand as we do the dangers of the present, and the necessities of the future, prevent alliances or resolutions from being left to would have a great influence upon future events, and

chance.

When a general Congress was in question, the Emperor could not, without changing the part he had traced out for himself, draw up a programme, or concert with some of the Powers, in order to submit afterward to the others a plan prepared beforehand, and commence thus with a negotiation distinct from the deliberations in which he had decided to present himself without preconceived ideas, and free from special engagements. But as this reunion cannot now be completed, it will not have the arbitrary authority belonging to a European Congress. We feel, therefore, that before meeting, the sovereigns should instruct their foreign ministers to agree upon the questions to be discussed, in order that the Congress may have more chance of leading to a practical result.

By the end of the year no arrangement for the meeting of a limited Congress had been made. Italy had replied (December 24th) that she was quite ready to take part in a limited Congress, expressing, however, at the same time the firm hope that the Congress would be instrumental in annexing to Italy Venetia and Rome.

however, it becomes involved in a great war, and stands forth having upon its hands the greatest enterprise in the country-larger than those of most of the citizens combined, that of subduing its enemies-the financial movements of individuals must always follow and become subject to this great necessity. Its needs override all personal considerations; its wants take the force of law to all its citizens. But while it is considered that a

Government at war may thus adopt such financial measures as shall be supreme over all others, yet, in the meanwhile, it is no less under those perpetual obligations to promote the prosperity and welfare of its citizens for which it was created. These fundamental considerations appear to have controlled the financial operations of the Government throughout all the extraordinary circumstances which it has been obliged to meet.

When Congress adjourned on the 4th of March, 1861, the expenditures of the Government for the remainder of the fiscal year ending June 30th had been estimated according to the ordinary rates in previous years, and the usual sources of revenue with some small loans were regarded as sufficient to meet its wants. It was the duty of the same Congress to determine the appropriations based on the estimates of the Departments, and to provide the ways of payment during the next fiscal year, commencing July 1st, and ending June 30th, 1862. Notwithstanding the threatening aspect of political affairs, these estimates were all framed, and the appropriations made on the peaceful scale of former years. Thus, for the year 1860-61, the appropriations for the service of the Government were seventy-nine millions, and for the year 1861–62, nearly seventy-five millions. No authority appeared to foresee the enormous demands that were soon to be made on the Treasury, and no provisions whatever were contemplated to meet them. Nevertheless, under this aspect of affairs and without the future occurrence of any very serious diffi culties, more than ordinary financial skill was needed to enable the Government to meet promptly the demands upon it. The usual sources of revenue fell off during the last half of the year ending June 30th, 1861, and the confidence of capitalists in the Government, in consequence of the secession of States, and the uncertainty of the future, rendered it difficult to negotiate the small loans authorized. Thus a loan of $10,000,000 was offered in October, 1860, in a five per cent. stock, which was taken at a small premium payable in instalments; the subscribers of $2,978,000 forfeited their deposit of one per cent., which was remitted: only $7,022,000 were issued. In December, Secretary Thomas offered $5,000,000 Treasury notes, payable in a year. On opening the bids on December 28th, only $500,000 had been bid at twelve per cent. There were some offers at twenty-four, and some as high as thirty-six per cent. As the money was needed to pay interest on Federal stock, due January 1st, some bankers took $1,500,000 at twelve per cent., on condition that the money should be applied to the interest. In January, Secretary Dix offered five millions remaining authorized of the same loan of December 17th, 1860, and it was taken at an average of 114 per cent. on $10,000,000. On Feb. 8th, 1861, Congress authorized a loan of $25,000,000 at 6 per cent., at not less than ten nor

more than twenty years. Of this stock, Secretary Dix offered $8,000,000 on February 22d, and the bids amounted to $14,460,250, ranging from 75 to 96.10. He accepted $8,006,250, at rates varying from 90.15 to 96.10. At this time a tariff of high duties was passed by Congress, and a loan authorized. On April 2d, Secretary Chase offered eight millions of the loan of February 8th. Bids, ranging from 90 to 95 on the hundred, were made for it. The Secretary refused all below 94. On the 11th of May he offered the balance of the loan of February 8th, $8,994,000. Bids were made for $7,441,000, at rates from 81 to 93. He accepted $7,310,000, at 85 to 93, average discount per cent. 14.65. By the disposal also of Treasury notes comparative ease for the Treasury was obtained for a moment. Its exigencies, however, were such that the struggle for money was soon renewed. Hostilities had now commenced, and the capitalists and bankers, feeling the necessity of sustaining the Government, coöperated with the Secretary, and loans were obtained to carry the Government until Congress convened on July 4th. On that day, the Secretary required $5,000,000 to carry him along until Congress should devise means. This amount was finally borrowed of the banks at sixty days on pledge of six per cent. notes, as collateral security. During the latter part of this period, many of the States obtained considerable loans at par, or a premium.

These facts show the weakness of the Government credit, in consequence of the apprehen sions of the people, and the embarrassing circumstances under which the Secretary was called upon to raise immense sums to enable the dismembered Government to conduct a great war. At the time when he was obliged to borrow five millions with collateral security for sixty days to pay current expenses, the War Department was asking for more than $185,000,000 extra for the year, and the Navy Department more than $30,000,000. Congress had also come together, and relied upon the Secretary to devise the means by which this great emergency could be overcome. A more difficult position than that of Secretary Chase at this moment, few men have ever been placed in. He saw that the Government must be made the master of its circumstances, and while it borrowed with the one hand, it must take largely by taxes with the other. The demand upon him for the next twelve months was $318,519,581, and he recommended that a tax of $80,000,000, equal to the entire annual appropriations of the Government heretofore, should be at once raised directly and indirectly from a people who, except upon one occasion, had never yet paid a dollar in taxes to their Government only in the indirect form of duties on imports, and that $240,000,000 should be sought through loans. The $80,000,000 were to be used to pay the ordinary expenditures of the Government and the interest on loans, with the reservation of $5,000,000

toward a sinking fund. "It will hardly be disputed," said the Secretary, "that in every sound system of finance, adequate provision by taxation for the prompt discharge of all ordinary demands, for the punctual payment of the interest on loans, and for the creation of a gradually increasing fund for the redemption of the principal, is indispensable." With these measures, he further recommended that the ordinary sources of revenue should be modified, so as to yield a greater income. Tea and coffee, hitherto free articles of import, should now be touched by a duty. To these, many others might be added from the free list. Sugar, which was slightly taxed, could bear a heavier burden. A similar modification could be made on many articles. Thus twenty millions extra could be gathered by a single section of an act. He also proposed to Congress that the pruning knife should pass among the current disbursements, and that ten per centum should be shorn from salaries and wages, the franking privilege be abolished, and that the retrenchment be prompt and effective. He also further said: "The Secretary will but illy perform his duty to Congress or the people if he omits to urge the great importance-the absolute necessity indeed-of such full provision of annual revenue as will manifest to the world a fixed purpose to maintain inviolate the public faith, by the strictest fidelity to all public engagements."

Relative to the means to be sought through loans, the Secretary proposed a National loan of not less than a hundred millions in the form of Treasury notes or exchange bills, having a yearly interest of 7.30 per cent., redeemable at the pleasure of the Government, after three years. If the whole needed should not be raised in this manner, he then proposed the issue of bonds or certificates of debt to lenders, at par, to the amount of one hundred millions at 7 per. cent., redeemable at the pleasure of the Government, after a period not exceeding thirty years. As an auxiliary measure, he also proposed the issue of fifty millions of Treasury notes in small sums payable one year after date, with interest at 3 per cent., and convertible into the 7.30 Treasury notes; or, "should it be found more convenient," said the Secretary, "they may be made redeemable in coin, and issued without interest." This proposition opens the door wide to a Government paper currency; therefore the Secretary immediately added to his recommendation the following caution: "The greatest care 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 discrediting the Government of any country, can well be devised."

65

These measures constitute the features of the Secretary's system of finance. The ordinary expenditures, interest, and a sinking fund were to be provided by taxes upon the people

than which nothing more wise could have been recommended. The great necessities of the Government were to be relieved by loans from the people, for which long and short and demand paper was to be provided. Loans to the Government, by the people, in its serious exigencies, may be said to be the law of modern civilization. They are the resort of all Governments; and in times of unforeseen difficulty, like commercial revulsion or war, the Federal Government has always been able to borrow sufficient to meet the occasion, and returning prosperity has always afforded the means of paying off the debt.

Congress immediately took the recommenda tions of the Secretary into consideration. The loans which he asked for were granted, but on the taxes they faltered. There was granted a national loan of one hundred millions, or any larger sum not to exceed the whole amount authorized, in bonds or 7.30 Treasury notes payable three years after date, and convertible into twenty-year six per cent. bonds; also a seven per cent. loan of a hundred millions, payable twenty years after date, for a foreign loan; also the issue to public creditors, or in exchange for coin, of one-year Treasury notes, with interest at 3.65 per cent. convertible into three-year 7.30 bonds or Treasury notes; also the issue of notes payable on demand and receivable for public dues, to be issued as coin in payment and exchanges. The two last descriptions were limited to fifty millions, in denominations between five and fifty dollars. Authority was also given to issue twenty millions six per cent. Treasury notes, payable in a year. The act limited the rate at which the seven per cent. stock might be sold to par, but a supplemental act allowed the sale of a six per cent. at a rate equal to par for a seven per cent stock.

The provisions adopted for taxes were: a direct tax of twenty millions upon all the United States, which would yield from the loyal States $14,846,018, without deducting the expenses of collection; also a tax of three per cent. upon all annual incomes over $800, since changed to $600, to be levied in April of the next year. The increase of duties on imports embraced cocoa, tea, coffee, sugar, etc., but were less than the Secretary recommended. The direct tax was apportioned among the States and paid out of the States Treasuries to the Federal Government, by crediting the latter that amount on their claims for outfits of volunteers. The people were taxed the next year by the States for these sums. Compared with the necessities of the Government, the amount raised by taxes was insignificant. This tenderness on the subject of taxation manifested by Congress at this time produced serious results, as it caused to be withheld from the Government that confidence in its financial strength and resources to which it was entitled, and thereby greatly embarrassed the action of the Secretary; deprived him of the power to make due

preparation against the crisis of bank suspensions, and to place the finances of the country in an almost imperial position, and forever shut down the gates against an irredeemable paper circulation. Thus the Secretary was obliged to take the field practically crippled, when he should have gone forth with the resources of the country at his command, like a master. Prompt and efficient taxation, by the confidence which it would have inspired, would have relieved the Secretary from the necessity of issuing demand notes-an unusual financial measure which had been the subject of considerable discussion. To add to his embarrassment the military disaster at Bull Run had just occurred, which reawakened the old fears and apprehensions of capitalists for the future.

The first efforts of the Secretary were made to provide for immediate wants. This was done by issuing fourteen millions six per cent. Treasury notes, payable in two years, and nearly thirteen million six per cent. Treasury notes payable in sixty days. His next care was to provide for the regular and continuous disbursements of the war, under the acts of the July session. He tells us "that his reflections led him to the conclusion that the safest, surest, and most beneficial plan would be to engage the banking institutions of the three chief commercial cities of the seaboard to advance the amounts needed for disbursements, in the form of loans for three-year 7.30 bonds, to be reimbursed, as far as practicable, from the proceeds of similar bonds, subscribed for by the people through the agencies of the national loan; using, meanwhile, himself, to a limited extent, in aid of those advances, the power to issue notes of smaller denominations than fifty dollars, payable on demand. Upon this plan he hoped that the capital of the banking institutions and the capital of the people might be so combined with the credit of the Government in a proper provision for necessary expenditures, as to give efficiency to administrative action, whether civil or military, and competent support to the public credit."

Although Congress had bound the Secretary by law to obtain money at a minimum rate, the result was that the banking institutions of New York, Philadelphia, and Boston subscribed at once for a loan of fifty millions, of which five millions were to be paid immediately in coin as needed for disbursement, and to receive the 7.30 notes of $50 and upward, at three years. When this loan was expended, another and similar was to be made, to be followed by still another. The two first were to be reimbursed by the proceeds of the national loan. At the same time books of subscription to the national loan were opened by the Assistant Treasurers, postmasters, and other designated agents in all the cities and towns where subscriptions could be expected. An enthusiasm for this loan was soon awakened, and capitalists and laborers, men and women, in crowds pressed forward to

obtain a portion. As the investors were small, the amount taken by December 1st was about $38,000,000. Ultimately, however, when the slow confidence of capitalists was more fully recovered, more than eighty millions went through the agents and first purchasers into the hands of citizens who were then for the first time in their lives holders of national securities. In this manner the banks were partly reimbursed the first loans before the, next was made. At the same time an amount of demand notes was issued by the Secretary. The banks had stipulated that none of these notes should be issued, and also that the Secretary should draw on them directly for the proceeds of these loans, thus using their paper for public dues. The Secretary declined both stipulations. He was not financially strong enough to accede to the first and decline the second. Congress had not confined its appropriations to the estimates of the Secretary. The latter were made for an army of three hundred thousand men. But the action of Congress authorized a force of regulars and volunteers amounting to five hundred and fifty thousand men, and any number of major-generals, with sufficient staff and brigadier-generals necessary to insure its efficiency. This increase of expenditures beyond estimates, unless made with extreme care, is a source of inconceivable embarrassment to financial officers. By the use of the demand notes the embarrassments were relieved. When Congress assembled in December the Secretary was able to report that complete success had attended the measures relating to loans, and presented the following results: Six per cent. 2-year notes Sixty-day notes......

1st bank loan... ... ... ... ... ... ... ... ... ... ... ... ... 2d bank loan................ 8d bank loan...

Demand notes issued...

Loans realized........

.$14,019,084 12.877.750

50,000,000

50,000,000

45,795 479 24.550,825

$197,242,587

But while the loans had been successful, the receipts of revenue from imports had not equalled the estimates. This was ascribed to the deviation by Congress in many respects from the measures submitted, through considerations of general policy, and more particularly to the changed circumstances of the country. The estimate for the fiscal year in July was 57 millions. Two quarters had now passed and the estimate of receipts from imports fell to 32 millions. The aggregate of revenue from imports, public lands and taxes for the year, it was now estimated by the Secretary, would be about 25 millions less than the estimates made in July. In consequence of this decline in the sources of revenue devoted to ordinary expenditures, interest and sinking fund, and in consequence of the expenditures authorized by Congress exceeding the estimates, it was evident the Secretary would come far behind at the end of the fiscal year without new appropriations at this session of Congress.

The aspect of affairs financially, at this time, was quite serious. The magnitude of