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UNITED STATES NOTES

A HISTORY OF THE VARIOUS ISSUES OF
PAPER MONEY BY THE GOVERNMENT

OF THE UNITED STATES

BY

JOHN JAY KNOX

LATE COMPTROLLER OF THE CURRENCY

WITH AN APPENDIX CONTAINING THE RECENT DECISION OF THE
SUPREME COURT OF THE UNITED STATES AND THE
DISSENTING OPINION UPON THE LEGAL

TENDEK QUESTION

THIRD EDITION REVISED

NEW YORK
CHARLES SCRIBNER'S SONS

1899

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PREFACE.

In the course of his official career the author has had occasion to deal with subjects kindred to those presented in this volume. From time to time, he has collected material with the hope of publishing at some future day a volume worthy of the title of “ History of Banking in the United States.” The results of these investigations have appeared from time to time, in official reports, occasional addresses, and in articles contributed to various encyclopædias. The present volume is published in accordance with the request of many friends, who believe that at the present time a small volume containing a history of all the various issues of paper money by the Government will be useful and interesting to the public.

The recent decision of the United States Supreme Court has virtually placed it in the power of Congress to issue United States legal tender notes in any amount, at any time it may be deemed politic or advisable. A

connected history of the paper money issued by the Government will enable the reader to trace the gradual rise and development of a doctrine which has at length been endorsed by so much weight of authority.

At the date of the adoption of the Constitution, the issue of paper money in any form was popularly regarded with aversion. The experience of the colonists with bills of credit, as paper money was then called, had been fraught with loss and political disturbance, and the experience with the like issues by the Continental Congress had so affected the minds of the wisest and best men of that time, that in the Federal Convention the general feeling was one of almost bitter opposition to granting the power to emit bills of credit to the new Government. No one can examine the records of those days without being thoroughly impressed that the sense of the Convention was in favor of an absolute prohibition. Further proof may be found in the fact that from 1791 to 1812, a period of twenty-one years, the method of raising funds for the Government by the issue of bills of credit was not even suggested ; nor indeed were circulating notes, in form payable on demand without interest, issued at all, until more than seventy years after the adoption of the Constitution.

The charter of the first Bank of the United States expired in 1811, and the Federalists were not strong enough to secure a recharter. When the war of 1812

PREFACE. broke out, the necessity of funds was so imperative, that the Administration and Congress felt themselves forced, the one to recommend, and the other to authorize, the issue of interest-bearing Treasury notes. They were regarded as a measure of necessity. Loans in the ordinary form had failed, and these notes were regarded as a convenient form of loan. They were not intended to circulate as money; they were fundable into public stock, and, as a matter of fact, were retired as soon as possible after the close of the war. These issues were, however, a fatal precedent out of which has grown a latitude of constitutional construction not then antici

pated.

From 1815 to 1837, a period of twenty-two years, there was no resort to this remedy for the relief of the Government finances. In 1836, the charter of the second Bank of the United States expired, and again party spirit prevented a recharter. Soon after came the financial disasters of 1837, and again the Administration recommended, and Congress authorized, the issue of interest-bearing Treasury notes as forms of short loans. These issues extended from 1837 to 1844, and during that period the views of many, as to the constitutionality of their use, considerably expanded. The discussions in Congress, and the executive documents of that day, show how severe was the struggle between the strict constructionists and those who

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