The credit of the Government, by the legal tender act, was brought into immediate requisition, and in the most available form to provide ways and means for sustaining the army and navy to crush the rebellion. It was in effect a forced loan from the people to the Government, in a most perilous period in our history, and was justified mainly on the ground of imperative necessity. It was a temporary measure passed in a most pressing exigency, and should not be continued any longer after peace is restored than seems to be necessary to conduct us safely back to that standard of value, which is recognized by all the nations of the world.

In the speech to which I have above referred, I further said, 'a suspension of specie payments is greatly to be deplored, but it is not a fatal step in an exigency like the present.'

Our

'The British Government and the bank of England remained under suspension of specie payments from 1797 to 1821-2, a period of twenty-five years;-gold is not as valuable as are the productions of the farmer and mechanic, for it is not as indispensable as are food and raiment. army and navy must have what is more valuable to them than gold or silver, they must have food, clothing and the material of war. Treasury notes issued by the Government on the faith of the whole people, will purchase these indispensable articles, and the war can be prosecuted until we can enforce obedience to the Constitution and laws and an honorable peace be thereby secured. This being accomplished, I will be among the first to advocate a speedy return to specie payments, and all measures that are calculated to preserve the honor and dignity of the Government in time of peace, and which I regret are not practicable in the prosecution of this war.'

The national banking law, passed to continue for twenty years, was intended as a permanent system. It was intended that it should take the place of the State banks, in furnishing a solvent national currency of uniform similitude and value for the whole country. The arguments put forth in the last annual reports of yourself and the Secretary of the Treasury in favor of sustaining the national bank currency seem to me to be cogent and conclusive. I advocated the national bank law, not for any immediate relief it would give to the Treasury, but as a permanent system of currency and banking. In the remarks which I made in the House on the day of the passage of the bill, I said 'that I should vote for it, not that I think it will afford any considerable relief to the Treasury in the next two or three years, but because I regard it as the commencement of a permanent system for providing a national currency that will, if wisely administered, be of great benefit to the people, and a reliable support to the Government in the future.'

All the advocates of the legal tender act while it was pending in Congress, based their arguments upon the necessity of its passage as a temporary relief to the Treasury during the war, and not as a permanent policy of the Government. On the contrary, the national banking law was advocated as a permanent system of national currency and banking for the whole country. The State banks in this and other States, especially the banks in the State of New York, gave up their State organizations with great reluctance. But in consequence of the law which taxed State circulation out of existence, the State banks were obliged to come under the national banking law for self-preservation, a law which on its face was to continue for twenty years.

It has taken something over three years to put in successful operation

about 1,650 national banks under one system, and which are directly under the control and regulation of the officers of the Government at Washington. A few of the banks have but recently perfected their organizations and obtained from the Department their circulating notes. Before the ink is fairly dry on the last issue of national currency we are startled with a bill reported from the bank committee in the House to emasculate and destroy this system of national banking. I say destroy it, for no man at all conversant with the advantages of private banking and its freedom from taxation and other restrictions, would consider it any inducement to remain under the inquisitorial supervision imposed by the national banking law, if the right to issue circulating notes is taken away from them. These banks have been organized in good faith by the stockholders under the national law, because in the first place State bank circulation was killed by United States taxation, and in the next place great inducements were held out to them for a national circulation to continue twenty years. What a breach of faith on the part of the Government in holding out inducements to organize under this law, killing off the State banks first, and then turning a short corner to kill off the national banks, children of its own creation. Are all the rights which the stockholders of the banks have acquired under this law to be thus summarily disposed of? How many banks would have organized under this law if the stockholders had supposed that their rights to issue circulating notes would be taken away from them as soon as they were organized? Not one in a hundred, for the simple reason that there would be no inducement to come under the restraints of the national law without circulation.

It is said that these banks can continue to do business on their capital and deposits, this is no doubt true, but it could be much better carried on by the stockholders as private bankers without the onerous taxation and restrictions imposed by the national law. The organization of State and private banks would be much better, larger latitude being given to operate, and much freer from inquisitorial examinations.

If this bill now pending in the House is passed and becomes a law, it will pretty effectually use up the national banking system. It has taken about four years to build it up, and within three years it will be so far destroyed as to make it no object for stockholders that can organize into private banking companies to remain in the emasculated and restricted condition in which they will be placed.

What security can men have for investing their money and basing their business calculations under a national law? The insecurity and scandal that will attach to such hasty and inconsiderate legislation will deter all prudent men from placing too much reliance upon a law of Congress, passed at one session, organizing a great system of national policy, to be emasculated or repealed before it gets fairly into operation. It looks too much like confiscating the property of individuals under the pretence of creating a sinking fund to pay off the national debt.

I hope the Senate and House will carefully consider this measure in all Its bearings before they pass a law involving such important consequences in regard to its breach of faith in destroying the acquired rights of the stockholders in these banks, and the disastrous consequences likely to follow the issue of Government paper money as a permanent policy.

Yours very truly,

E. G. SPAULDING.

MR. SPAULDING TO SECRETARY MCCULLOCH.

FARMER'S AND MECHANICS' NATIONAL BANK,
No. 3 Spaulding's Exchange,
BUFFALO, December 4, 1866.

Dear Sir-You will do me a favor by sending to me by mail a pamphlet copy of your report and accompanying documents. I have only seen a synopsis of it, but it seems to me that you understand the situation, and have stated it with force and ability. I congratulate you on the favorable exhibit of the public debt, which is in a great measure due to your discreet and prudent management of the national finances. You have no doubt now, to a large extent, control of the finances of the country, and I think that you will, of necessity, contract moderately, so as to preserve a tolerably easy money market, in order to be able to fund the compound 6's and the 7-30's into long gold-bearing bonds, between this and the 15th of July, 1868. There may be occasional spasms and tightness for money with the speculators, but generally I shall look for plenty of money for legitimate business for at least a year to come. If the speculators should get some check it would be a good thing for the country, and all men engaged in industrial pursuits would not complain.

I hope you will be able to reach the specie standard with at least $250,000,000 of plain legal tender United States notes still outstanding. The amount of gold and silver coin now available in this country is so small that it constitutes a very adequate basis on which to rest the largely increasing volume of business to be transacted, and unless we can have legal tender in some form, other than gold or silver coin, I think we will hereafter be very much subjected to panics and revulsions, to the injury of legitimate business, and, consequently, diminished revenues. If we can maintain $250,000,000 of the paper tender at the specie standard, in addition to the supply of gold and silver, I think the business of the country would, in the future, be more steady and uniform.

Yours truly,

E. G. SPAULDING.

Hon. HUGH MCCULLOCH,

Secretary of the Treasury.

SECRETARY MCCULLOCH'S REPLY.

TREASURY DEPARTMENT, WASHINGTON, December 7, 1866. S

Dear Sir Your favor of the 4th inst. is received. You will receive a copy of my report through the Comptroller of the Currency. It was very hastily written, but is, I think, sound in doctrine.

What we need is an increase of labor. If we could have the productive industry of the country in full exercise, we could return to specie payments without any very large curtailment of United States notes. My object has been to keep the market steady, and to work back to specie payments without a financial collapse. I shall act in the future as I have in the past, with great caution, and attempt no impracticable thing. I am very truly yours,

Hon. E. G. SPAULDING,

H. MCCULLOCH.

Farmer's and Mechanics' Bank, Buffalo, N. Y.

NATIONAL DEBT-NO REPUDIATION.

Will the public debt of the United States ever be repudiated? The answer to this question depends upon the efficiency and fidelity of the national Government. The Government has ample power under the Constitution and ample means at its disposal to pay every dollar of the public debt. Believing that the Government will continue faithful and efficient, I answer no! the public debt will not be repudiated. A large majority of the people also say no, but nevertheless there is a small minority that have answered this question in the affirmative, and continue to repeat the assertion that the public debt will never be paid. This reckless assertion has some influence in depressing the national securities and keeping up the price of gold. This grumbling class of people say that the "old Continental money" issued during the war for independence, became worthless and was never paid. This is no doubt true-the Continental money did greatly depreciate and was never fully paid, but it was issued under the feeble authority of the old Continental Congress, when there was no adequate executive authority to enforce the collection of taxes for the payment of the public debt. This depreciated currency was issued both before and after the adoption of the articles of Confederation of the old thirteen states, and before the formation of the present efficient Government under the new Constitution.

Under the articles which composed the old compact, there was no power vested in the Continental Congress to collect taxes. The power to enforce the collection of taxes was left to the legislatures of the several States. Upon a quota furnished and a requisition made by Congress, the several States were required to levy and collect taxes to support the Federal Compact. This plan was a fallacious system of quotas and requisitions, inconsistent with every idea of vigor or efficiency which pertains to every well organized Constitution of civil Government. It is not at all surprising that the Continental money which depended upon thirteen other Governments to levy and collect taxes to raise money for its payment, should depreciate and become of little or no value. The power contained in the old Continental Compact was nominal, without a president or other executive to enforce its requisitions. It was ineffectual to raise money by taxation, and consequently the old Continental money fell into disrepute and was never fully paid.

Under the present Constitution all is changed. Instead of the old feeble compact existing at the close of the seven years war for independence, we have now a strong, well organized civil Government, under a Constitution with ample executive legislation and judicial powers, fully adequate to the objects for which it was formed. This Government is now invested with power to protect and defend the Constitution, enforce the laws and preserve its own existence; power to provide for the common defence and promote the general welfare; and for these purposes has power to raise and support armies, to provide and maintain a navy, and provide for calling forth the militia to execute the laws of the Union, suppress insurrections and repel invasions. To raise the money for these purposes, the Government is invested with further power to borrow money on the credit of the United States, and to repay the money thus borrowed, to levy and collect uniform taxes, duties, imports, and excises throughout the United States. These are some of the great powers intrusted to the general Government for the preservation of its own existence.

When this most wicked and gigantic rebellion broke out, in an open and

avowed determination to break up the Union, it became necessary to bring into active exercise all these high powers of the Government. Armies and navies had to be raised and supported. All the material of war necessary for their efficiency had to be provided. Money had to be borrowed, and in vast amounts. The old Continental money possessed none of the elements of vitality and credit that is imparted to the legal tender demand notes and bonds issued under the present Constitution, with this great power vested in the President to enforce the laws.

The debt thus incurred in the prosecution of the war to put down the rebellion and restore the national authority over all the States, will be about $3,000,000,000. This large sum has been borrowed on the credit of the United States, to maintain the Government and perpetuate the Union, and the beneficial results flowing from the triumph of the national cause are amply sufficient to compensate for all the money expended in accomplishing this great achievement. The secureties issued as evidence of this large indebtedness, consist of bonds, notes and certificates, which are widely distributed among all classes of people.

All the forms of law have been complied with to bind the Government and give validity to these different forms of indebtedness, The good faith of the nation is pledged in the most solemn manner to the payment of every dollar of this debt, both principal and interest.

The Government of the United States is not now dependent at all on the State Governments for the execution of its great powers. All the powers conferred on the General Government by the present Constitution are self-acting, self-sustaining, and wholly independent of State authority. The Constitution and laws of the United States operate directly upon the people, without any regard to State boundaries. We have now a Congress to pass all the tariff and tax laws necessary to raise all the money required to pay the current annual expenses of the Government, pay the interest on the public debt, and raise a surplus sufficient to retire annually a portion of the principal.

The grand results of the last four years have most abundantly shown the power and efficiency of the present National Government under the existing Constitution.

It is clearly demonstrated that we have a strong, stable and efficient Government, fully competent to levy and enforce the collection of custom duties and internal revenue adequate to support the Government.

The true value of the property, real and personal, within the United States, according to the census of 1860, was $16,000,000,000, and it has, notwithstanding the exhausting nature of the war, greatly increased since that time. All this property is liable to be taxed to the full extent necessary, to support the Government and pay every dollar of the debt incurred in the prosecution of the war. The Government has a claim under the Constitution, a mortgage in fact, which is the first lien on all this real and personal property to that extent. All the debts of States, counties, cities, corporations and individuals are second and subordinate to this first claim of the National Government.

Our credit rests on this property and the good faith and fidelity of the Government to collect these taxes.

Since the creation and distribution of this large debt among all classes of people, and a large part of it made the basis for the organization of over sixteen hundred banks, the whole fabric of credit, public and private, must, to a great extent, rest on the efficiency and determination with