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THE CIVIL WAR LOANS. I33

The act of Feb. 25, 1862, laid the foundation of the present financial system of this country. It declared United States notes a legal tender for all debts, public and private, and made them receivable in payment of internal taxes. It established the sinking fund. It is one of the most important measures ever adopted by Congress, or by any legislative body. It authorized the issue of one hundred and fifty millions in notes on the credit of the United States, not bearing any interest, payable to bearer at the Treasury of the United States, and of such denominations as the secretary might deem expedient, not, however, less than five dollars each. Fifty millions of these notes were intended to replace the demand treasury notes authorized by the act of July 17, 1861. The amount of the two kinds of notes was not to exceed one hundred and fifty millions. These notes are described in the act, as “United States Notes,” in contradistinction from those bearing interest, which are in every act styled “Treasury Notes.” It declares that these United States notes “shall be receivable in payment of all taxes, internal duties, excises, debts and demands of every kind due to the United States, except duties on imports, and of all claims and demands against the United States of every kind whatsoever, except for interest upon bonds and notes, which shall be paid in coin, and shall also be lawful money and a legal tender in payment of all debts, legal and private, within the United States, except duties on imports, and interest as aforesaid.” Holders of these notes might deposit them with the United States Treasurer or any of his assistants, and have them funded in bonds of fifty dollars, or multiples of fifty. The same act authorized a loan of five hundred millions to enable the Secretary of the Treasury to fund treasury notes and other floating debts. The bonds were to be either registered or coupon in form. They were to be redeemable at the pleasure of the United States after five years, and payable twenty years from date. The fifth section of the act required all duties on imported goods to be paid in coin, or in notes payable on demand theretofore authorized to be issued, and by law made receivable in payment of public dues. The coin so received was to be set apart as a special fund, to be applied as follows: First. To the payment of the interest on the bonds and notes of the United States. Second. To quote the language of the act: “To the purchase or payment of one per centum of the entire debt of the United States, to be made within each fiscal year after the first day of July, eighteen hundred and sixtytwo, which is to be set apart as a sinking fund, and the interest of which shall in like manner be applied to the purchase or payment of the public debt as the Secretary of the Treasury shall from time to time direct.” Third. The residue to be paid into the Treasury of the United States. Good faith required that the demand notes, amounting to nearly fifty millions, should be received for all taxes and dues. This necessity would for a time reduce the amount of specie receivable from customs. Therefore, on the 17th of March, 1862, an act was passed authorizing the Secretary of the Treasury to purchase coin with any of the bonds or notes of the United States, at such rates and upon such terms as he might find expedient. By the same act the demand notes were made receivable and a legal tender, in like manner as the notes authorized by the act of Feb. 25, 1862. The act of July 11, 1862, authorized the Secretary of the Treasury to issue, in addition to the amounts theretofore authorized, one hundred and fifty millions in United States notes, legal tender, not bearing interest. Not more than thirty-five millions of these were to be of denominations less than five dollars; and no note was to be issued for the fractional part of a dollar. The Secretary was authorized to receive these notes in exchange for the six per cent. bonds authorized by the act of Feb. 25, 1862, which were redeemable after five years at the pleasure of the government, and after twenty years at the pleasure of the holder. These bonds were, for convenience, styled “Five-twenty-sixes.” The United States notes, or legal tenders, received for such bonds could be reissued. On March 3, 1863, Congress passed an act to provide ways and means for the support of the government, which authorized the Secretary of the Treasury to borrow three hundred millions of dollars for the current fiscal year, and six hundred millions for the year following. For this loan he was empowered to issue coupon or registered bonds, payable in coin at the pleasure of the government after such periods as might be fixed by the secretary, not less, however, than ten nor more than forty years from date. These bonds were to be of denominations not less than fifty dollars, and were to bear interest at a rate not exceeding six per centum per annum. They might be disposed of for lawful money, that is to say, legal tender United States notes—for certificates of indebtedness, or for treasury notes—that is to say, notes bearing interest, and running for a term of years. This act further authorized the issue of four hundred millions in treasury notes, bearing six per cent. interest in currency, and payable within three years. They were, to quote the language of the act, to be disposed of “on the best terms that could be obtained,” and were payable to public creditors who were willing to receive them at par. These treasury notes were made a legal tender to the same extent as United States notes for their face value, including interest. These were also exchangeable for United States notes. The secretary was authorized to issue one hundred and fifty millions in United States notes, that is to say, legal tenders, to be exchanged for these treasury notes, and for no other purpose. It is probable that the issue of four hundred millions in treasury notes so authorized was intended for the purpose of paying off the floating debt; as some creditors who had no immediate use for their money might prefer such notes to legal tenders.

THE CIVIL WAR LOANS. I35

A joint resolution of Jan. 17, 1863, authorized the Secretary of the Treasury to issue one hundred millions in legal tenders to pay off the army and navy. The act passed on March 3, 1863, in its third section increased the appropriation for this purpose to one hundred and fifty millions. This act required the holders of United States notes issued under the acts of Feb. 25, 1862, and July 11, 1862, to present them for the purpose of exchanging them for bonds, on or before the first day of July, 1863. The right to make the exchange after that date would cease. As heretofore stated, these two acts authorized the issue of three hundred millions. The effect of the act of March 3, 1863, was to draw in a large amount of outstanding treasury notes which it was lawful to reissue. Section four of this act authorized the issue of fifty millions in Fractional Currency, in lieu of the postage and revenue stamps issued as currency under an act passed July 17, 1862. The fifth section authorized the deposit of gold coin and bullion with the Treasurer or any assistant treasurer, in sums not less than twenty dollars, and the issue of certificates therefor in denominations the same as United States notes. It authorized the issue of these certificates in payment of the interest on the public debt; but it limited the amount of them to a sum not greater than twenty per cent. of the amount of coin and bullion in the treasury. The certificates were made receivable in payment for duties on imports. The act of March 3, 1864, which was supplementary to the act of March 3, 1863, empowered the Secretary of the Treasury to borrow, from time to time, on the credit of the United States, not exceeding two hundred millions of dollars during the current fiscal year, in lieu of so much of the loan authorized by the last mentioned act, and to issue therefor coupon or registered bonds of the United States, bearing date March 1, 1864, or any subsequent date, redeemable in coin at the pleasure of the government after any period not less than five years, and payable at any period not more than forty years from date. These bonds were to bear interest at a rate not exceeding six per cent. They might be disposed of for lawful money (legal tenders), or, at the discretion of the secretary, for treasury notes, certificates of indebtedness, or certificates of deposit. They were exempted from state and municipal taxation. The power of Congress to grant this exemption has been sustained by judicial sanction. The joint resolution of March 17, 1864, authorized the Secretary of the Treasury to anticipate the payment of interest on the public debt by a period not exceeding one year. He was further authorized to dispose of any gold in the Treasury not necessary for the payment of interest on the public debt, if the obligation to create the sinking fund according to the act of February, 1862, would not be impaired thereby. On the 30th of June, 1864, an act was passed authorizing the Secretary of the Treasury to borrow four hundred millions of dollars, and to issue therefor coupon or registered bonds, redeemable in coin after forty years and

not under five, and bearing not exceeding six per cent. interest in coin. These bonds might also be disposed of for lawful money, certificates of indebtedness, or certificates of deposit. The secretary might, at his discretion, issue in lieu of an equal amount of the bonds so authorized, and as a part of said loan, not exceeding two hundred millions of dollars in treasury notes, payable at any time within three years; or, if thought expedient, redeemable after three years from date, and bearing interest in lawful money at the rate of seven and three-tenths per cent. The act declared, in respect to these notes, that—“such of them as shall be made payable, principal and interest, at maturity, shall be a legal tender to the same extent as United States notes for their face value, excluding interest, and may be paid to any creditor of the United States at their face value, excluding interest, or to any creditor willing to receive them at par, including interest; and” that “any treasury notes issued under the authority of this act may be made convertible, at the discretion of the Secretary of the Treasury, into any bonds issued under the authority of this act.” Treasury notes and United States notes issued under former acts might be redeemed and canceled by order of the secretary; and he might substitute for them the notes authorized by this act, or other United States notes. It was provided that the total amount of bonds and treasury notes to be issued should not exceed four hundred millions of dollars, in addition to the amounts theretofore issued. The act further provided that the total amount of United States notes (legal tender) issued, or to be issued, should never exceed four hundred millions of dollars, and such additional sum, not exceeding fifty millions of dollars, as might be temporarily required for the redemption of temporary loans. In addition to these limitations, the act provided that no treasury note bearing interest issued under it would be a legal tender in payment or redemption of any notes issued by any bank, banking association, or banker, calculated or intended to circulate as money. The act of March 3, 1865, authorized the Secretary of the Treasury to borrow, in addition to the amounts theretofore authorized, any sums not exceeding in the aggregate six hundred millions of dollars, and to issue therefor bonds or treasury notes. The bonds were to be made payable at any period not exceeding forty years, and not less than five years. The principal and interest of this issue of bonds and treasury notes might, at the discretion of the secretary, be made payable in coin, or in other lawful money. The rate of interest in coin was not to exceed six per cent. ; and when not payable in coin it was not to exceed seven and three-tenths per cent. These bonds and treasury notes might be disposed of in the United States or elsewhere, for coin or for lawful money, and were exempted from taxation by state or municipal authority. This was the last act which authorized a loan, except for the purpose of refunding. On the 18th of March, 1869, an act was passed “to strengthen the pub

INCREASING THE REvenue. I37

lic credit.” It solemnly pledged the faith of the United States to the payment in coin or its equivalent, of all the obligations of the United States not bearing interest, known as United States notes, and also of all the interestbearing obligations of the United States, except in cases where the law authorizing the issue of any such obligation had expressly provided that the same might be paid in lawful money, or other currency than gold and silver. On the 12th of July, 1870, an act was passed providing that fifty-four millions of dollars in notes for circulation might be issued to the national banks in addition to the three hundred millions “authorized by the act to provide a national currency, secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof.” To provide for the interest of the debt to be incurred during the war, as well as to support the current expenses of the government, it was thought necessary greatly to increase the duties on imports. The act of March 2, 1861, was passed before hostilities had commenced, but after South Carolina, Georgia, and the Gulf States had passed their ordinances of secession. It was introduced in the preceding December. It was so quickly superseded by the act of August 5, which was passed at the extra session of the next Congress, that there was no time to estimate its effects upon the revenue. These acts imposed nearly double the rates of duty that were exacted by the tariff act of 1857. Tea and coffee were now among the dutiable articles. The imports during the fiscal year 1861–62 fell off nearly a hundred millions; but the higher duties imposed increased the revenue over that of the preceding fiscal year by almost seven and a half millions. At no time during the war did the amount in value of the imports come up to the figures of the fiscal year 1859–60, notwithstanding the immense sums of money that were being disbursed by the government. Nevertheless, after July 1, 1862, the receipts from customs revenue steadily and enormously increased over those of the fiscal year 1859–60. Our manufacturers had no reason to complain of the financiering that brought this about. They fattened on the carnage. While it is true that labor was also well rewarded, it is no less true that reactionary economy fell almost solely on its shoulders. Whether Democratic administration will lighten this burden, remains to be seen. Bad management can alone prevent the relief that strict and impartial adherence to Democratic policy would bring. The following table will present in a small space, the amount of imports, the duties collected, and the rates of duty, for the whole period from 1860 to 1870. Duties began to be lowered in the latter year upon some articles which were peculiarly regarded as objects of war taxes. It is proper to preface this table with the statement that several acts were passed between the years 1861 and 1868 by which the rates of duties were increased or modified.

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