The United States, at the breaking out of the rebellion, had no national bank currency, and no gold or available means in the Treasury, or Sub-Treasury, to carry on the war for the Union, and consequently the means to prosecute the war had to be obtained upon the credit of the government, and by taxation. The fundable legal tender currency was the most available form of credit which the government could use in crushing the rebellion. It was at once a loan to the government without interest, and a national currency, which was so much needed for disbursement in small sums during the pressing exigencies of the war. It was indispensably necessary, and a most powerful instrumentality in saving the government and maintaining the national unity. Experience has proved that, notwithstanding it was a forced loan, the end justified the means, and that no parties were materially injured by being compelled to receive this currency, so long as they could fund it at any time in six per cent. twenty years bonds. Although it was a war measure-a measure of necessity and not of choice, and could only be justified on that ground, it has, for many years, exerted a most decisive influence over the property and material interests of every individual in the United States. It has affected debtor and creditor, producer and consumer, and the price of labor and of every article consumed in every household. It still exerts a mighty influence socially, commercially and politically, over the people of this great nation, and all the ramified and extensive business in which they are engaged. Whether for good or evil, it has been and still is a most powerful element in all business åffairs of the people, as well as the government, and the war debt of $2,500,000,000 incurred in maintaining the national union is more or less affected by the large volume of this currency still outstanding. Having been requested to prepare a history of a measure of such transcendent importance as the legal tender act, and having in my possession a considerable number of documents, letters, and other materials relating to the subject, I have consented to put them into form, in order that the facts may be preserved for present and future reference, and which may be of some use in enabling the future historian to write a chapter on the financial history of the war. These facts will be presented in the form of a narrative of the circumstances and events, of the most grave and extraordinary character, occurring in rapid succession, which led finally to the issue of legal tender Treasury notes, and which were endowed with the attributes of money, so far forth as the Government had power under the Constitution and the pressure of the crisis to impart to a paper currency that high and most important attribute of sovereignty. I was a somewhat prominent though humble actor in originating and maturing the measure, but I do not claim any particular merit or demerit for what I did in preparing and aiding to secure the passage of the bill. I was placed in a position where, if I performed my official duty, I must act, and must act with vigor and promptitude. The perilous condition of the country did not admit of hesitancy or delay. I endeavored, in the peculiar and responsible position in which I was placed, to do what I conceived to be my duty, and that is all I claim to have done. My associates performed their duty with equal fidelity and usefulness. As chairman of the Sub-committee of Ways and Means, it became my duty, in connection with my associates, to devise an adequate plan for obtaining the necessary means for prosecuting the war to a successful issue. The rebellion, after the battle of Bull Run, had assumed most gigantic proportions. An Army and Navy of over half a million of men had been hastily brought into the service of the United States. The Capitol itself was guarded by a vast Army, under the command of General McClellan, which encircled it in all directions. The Army and Navy thus in the service had to be paid, fed, clothed and provided with ships, gunboats, monitors and all the necessary material of war to make them effective in crushing the rebellion. This required vast available means; where were these means to be obtained? It was plain that they must come from the loyal people themselves, and that, from whatever source these means were to come, they must be obtained, as before stated, upon the credit of the government, then assailed and weakened by armed rebellion. The banks in New York, Boston and Philadelphia had, during the summer and fall of 1861, loaned to the government very nearly the sum of $150,000,000 in gold, which had so exhausted their resources that it was very difficult for many of them to pay the last instalments due on the last loan of $50,000,000. These banks, at the commencement of the war, possessed a large part of the available gold in the country, but in paying over to the Treasurer the gold on these loans, and in the disbursement of the same to sustain the Army and Navy, it became so scattered that it could not, to any considerable extent, be re-loaned to the government, nor could it any longer be made available as a reserve for the banks. The banks were consequently in great danger of suspending specie payments at the time Congress assembled at its regular session in December, of that year. Congress met on the 2d December, 1861. The House, having been organized at the Extra Session in July by the election of the Hon. Galusha A. Grow, Speaker, proceeded at once to business. On the 5th, the vacancies in the Standing Committees were filled up. Hon. Samuel Hooper, of Mass., a new member, was appointed on the Committee of Ways and Means in place of Samuel Appleton, deceased; and Hon. Horace Maynard in place of Hon. John A. McClernand, who had been appointed a Brigadier General in the volunteer army. The Committee of Ways and Means then consisted of THADEUS STEVENS, of Pa. JOHN S. PHELPS, of Mo. ELBRIDGE G. SPAULDING, of N. Y. SAMUEL HOOPER, of Mass. HORACE MAYNARD, of Tenn. JOHN L. N. STRATTON, of N. Owing to the pressure of business in the Treasury Department, Secretary Chase did not get his Annual Report ready to submit to the House until the 10th, and it was not printed and laid on the table of the Committee of Ways and Means until near the middle of December. Soon after the report of the Secretary of the Treasury was received, finding a large volume of business in the Committee room to be disposed of, the Committee agreed to the appointment of two Sub-committees, namely, One Committee on the National Currency bank bill, making of loans, issue of Treasury notes, bonds, and the mode of raising the means to carry on the war, consisting of Mr. SPAULDING, Mr. HOOPER, Mr. CORNING. The other Committee was appointed on the Tariff, Internal Revenue, and taxation generally, consisting of three or four members, Mr. Morrill of Vermont, being chairman. The appro priation bills were then in course of preparation, Mr. Stevens devoting a good deal of time in perfecting and passing them through the House, as chairman of the General Committee. Mr. Phelps was at this time absent in Missouri, and remained absent for several weeks, looking after public affairs in that State, which were then in a very disturbed condition. The Committee of Ways and Means having thus divided the subjects before it, and having referred the papers and documents to these Sub-committees, the Committee was prepared for efficient work. The Sub-committee, of which Mr. Spaulding was chairman, examined with care the report of the Secretary of the Treasury, to ascertain what measures he proposed for providing the ways and means to support the government and carry on the war. Here follows an extract from that part of the Secretary's report which was referred to this Sub-committee, viz: "To enable the government to obtain the necessary means for prosecu ting the war to a successful issue, without unnecessary cost, is a problem which must engage the most careful attention of the Legislature. The Secretary has given to this problem the best consideration in his power, and now begs leave to submit to Congress the result of his reflections. The circulation of the banks of the United States on the 1st day of January, 1861, was computed to be $202,000,767. Of this circulation, $150,000,000, in round numbers, was in the States now loyal, including Western Virginia, and $50,000,000 in the rebellious States. The whole of this circulation constitutes a loan without interest from the people to the * banks, costing them nothing except the expense of issue and redemption and the interest on the specie kept on hand for the latter purpose; and it deserves consideration whether sound policy does not require that the advantages of this loan be transferred, in part at least, from the banks, representing only the interests of the stockholders, to the Government, representing the aggregate interests of the whole people. 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 emissions certainly fall within the spirit, 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 powers 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 authority. The value of the existing bank-note circulation depends on the laws of thirty-four States, and the character of some sixteen hundred private corporations. It is usually furnished in greatest proportions by institutions of least actual capital, circulation, commonly, is in the inverse ratio of solvency. Well-founded institutions, of large and solid capital, have, in general, comparatively little circulation; while weak corporations almost invariably seek to sustain themselves by obtaining from the people the largest possible credit in this form. Under such a system, or rather lack of system, great influctions, and heavy losses in discounts and exchanges are inevitable, and not unfrequently, through failures of the issuing institutions, considerable portions of the circulation become suddenly worthless in the hands of the people. The recent experience of several States in the valley of the Mississippi, painfully illustrates the justice of these observations; and enforces, by the most cogent practical arguments, the duty of protecting commerce and industry against the recurrence of such disasters. The Secretary thinks it possible to combine with this protection a provision for circulation, safe to the community and convenient for the government. 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. 1. The first of these plans was partially adopted at the last session of Congress, in the provision authorizing the Secretary to issue United States notes, payable in coin, to an amount not exceeding $50,000,000. That provision may be so extended as to reach the average circulation of the country, while a moderate tax, gradually augmented, on bank notes, will relieve the national from the competition of local circulation. It has been already suggested that the substitution of a National for a State currency, |