CONSTITUTIONALITY OF DEMAND NOTES. 57

at either of the depositaries of the Treasury, in the city of New York, imparts to them the character of ordinary bank, paper, calculated and intended to circulate as money, in the hands of the citizens. It is an emission of paper, on the public credit, to be circulated as money, like bank notes. * *

"It is strongly to be inferred that Congress did not intend or expect any departure from the former practices, much less the introduction of a new principle. For the Committee conceive that the issue of notes payable on demand, out of funds then on hand, and in the treasury, is totally different in principle from the issue of notes promising to pay one year after date, intended to supply a present deficit in the treasury, and to be reimbursed thereafter out of accruing revenue. * * The power to borrow money on the credit of the United States was unanimously given, whilst the power to emit bills of credit was refused-was struck out of the plan proposed, by a vote, in convention, of nine States to two. And yet the Secretary of the Treasury contends that because there are no express words of prohibition, as there are applied to the States, that Congress may exercise the power incidentally or appertinently to the power of borrowing money, whilst the States are totally precluded from a resort to bills of credit, either as a principal or primary power, or in any way as incidentally or appropriately connected with some other power clearly reserved to the States. It was thought that it was too late to undertake to revive the exploded Federal doctrine of claiming power because it had not been expressly forbidden. And it is a matter of equal surprise that, at this late day, it should be seriously maintained

by any federal officer, that bills of credit (a paper cur rency) may be supplied to the country under cover of the granted power to borrow money. The power to supply a paper currency is thus made of contingent existence, depending, first, upon the necessity of exercising the primary power to borrow money, and then upon the policy adopted of making the loan more permanent, in the shape of funded debt, or upon shorter time, in the shape of treasury notes. The want of additional currency might possibly be experienced by the country, when there would be no deficiency of means in the treasury to make a loan necessary or proper. In this condition of affairs there would exist no authority to supply the needed currency. Again, a temporary loan might become necessary, and might be authorized by Congress in the form of treasury notes, at a time when the country was abundantly supplied with a sound circulating medium, and in that condition of affairs, according to the argument of the Secretary of the Treasury, under cover of the authorized loan, and by the adoption of a peculiarly ingenious mode of issuing the notes of the treasury, a currency, not needed, might be supplied. * *The omission to give the power to the Federal Government 'to emit bills of credit' as completely bars that Government from the exercise of the power, as does the express prohibition to the States 'to emit bills of credit' bar them from the exercise of such power. According to the received and well-established loctrine, that the States are sovereign, and have the right of self-government, it would follow that they might impart to their legislatures ample powers to legislate upon all subjects whatsoever meet for legislation;

REPORT OF COMMITTEE CONTINUED.

59

that they might constitute them, under their own constitutions, complete legislatures. Hence they agreed, in convention, to abstain from the exercise of certain enumerated powers, which otherwise would justly and rightfully pertain to them as 'free and independent States.' And intending, in good faith, to relinquish and abandon the exercise of those certain powers, they inserted in their constitutional compact of union express prohibitions. The States, by fair and natural construction, would retain to themselves all powers not conferred exclusively upon the Federal Government, or expressly prohibited to the States; and yet, out of abundant caution, and to remove the possibility of doubt or cavil, an express amendment of the Constitution to that effect was adopted and ratified.

"It will not be questioned by the Secretary, the Committee suppose, that the States did possess, and have reserved the power to borrow money. Certain it is, that they have very generally and very extensively exercised such power. Now, if the power to borrow money on the credit of a State be unqualified, like the power of Congress to borrow money on the credit of the United States, the Committee cannot comprehend the logic by which the conclusion is reached, that, in the latter case, whilst the absolute and independent power of issuing bills was intentionally withheld, yet it was meant to leave Congress unrestricted in the choice of such means of borrowing, if the emission of bills should, at any time, be deemed the most expedient mode of attaining that object; and by which, in the former case, the other and contrary conclusion is also reached, that whilst the absolute and independent power of emitting bills of

credit is prohibited to the States, the like unrestricted choice in the means of borrowing, by the emission of bills, should at any time be deemed the most expedient mode of attaining that object, is not left to the States. Neither Congress nor the States can emit bills of credit, in the exercise of an absolute and independent power. Congress and the States possess the unqualified power to borrow money. Congress is unrestricted in the choice of means, and may issue bills of credit, if that mode of borrowing should, at any time, be deemed the most expedient. The States, however, are not equally unrestricted in the choice of means, and inay not issue bills, although that mode of borrowing should, at any time, be deemed the most expedient. * * When the loan obtained is for any considerable length of time, it is usual to fund the debt thereby created by issuing certificates of stock. Where the loan obtained has only a short time to run, and it is proposed to pay it off speedily with the accruing revenue, the ordinary mode is, to authorize the Secretary of the Treasury to issue treasury notes, payable at the expiration of a limited time, bearing such interest as may be expressed and allowed by the act directing the issue of the notes. Such notes are intended, bona fide, as a temporary loan, and are not designed or expected to circulate as a currency. Such notes were doubtless within the contemplation of Gouverneur Morris, when he remarked, that striking out the authority to issue bills of credit, would not prevent the use of the notes of a responsible minister, and that would do all the good without the mischief.

* *

The use of public notes can be justified only as the mode of effecting a loan-they are employed to

AMOUNT OF NOTE ISSUES, 1837-1844.

61

acknowledge the existence of a debt due by the United States, and contain a promise to pay it, at some future stipulated time, with interest, as may be agreed. To issue notes for circulation, payable on demand, under cover of the authority to borrow money in the form of treasury notes, is deemed an abuse of authority which ought to be corrected."

From March 3, 1843, until July 26, 1846, no new issues of treasury notes were authorized. From 1837 to 1844 treasury notes amounting to $47,002,900 were is sued under eight different acts, of which $46,216,935.82 were redeemed by the close of 1845. The lowest denomination for any one note was $50, but where new notes were issued in place of old ones the accrued interest was often added. The amount authorized to be originally issued by these several acts was thirty-one millions. The remainder consisted of reissues.

The notes issued under the act of October 12, 1837, and the six succeeding acts were all printed from the same series of plates, and the different rates of interest were inserted in writing. A new set of plates were prepared for notes issued under the act of March 3, 1843, and the following words, " with interest at the rate of one mill per $100 per annum," were engraved in the body of the note. These notes were all of the same size, the largest ever issued, and measure eight by four inches. Photo-lithographs of the originals issued under these acts may be found at the beginning and end of this volume.

The following table exhibits the amount of treasury notes issued each year, under different acts of Congress, from October 12, 1837, to March 3, 1843, from which it will be seen that the total amount issued was