which these taxes are to be levied and collected. Public and private credit are so interwoven with all the commercial transactions of the country, that if the public credit fails, individual credit must also fail. The value of legal tender notes, national currency, five-twenty bonds, tenforties and seven-thirties, all depend upon the revenues derived from custom duties and internal taxes. Our own people and the people of Europe must be fully assured, not only of the ability, but of the willingness and determination of the Government to pay promptly every one of the obligations of the Government as they become due, and that the financial credit of the Government will be maintained on the stable and sure basis of ample taxation. There is no other sure basis for it to rest upon. There can be no doubt that the suggestions of the Secretary of the Treasury to gradually retire a portion of the currency, are wise and judicious. If it cannot be done by funding without bringing down the price of fivetwenty six per cent. bonds below par, so as thereby to embarass the operations of the Treasury in providing for the large temporary debt as it becomes due, then I think it should be accomplished by Congress providing for an increase of revenue. The credit of the Government can be maintained, and it ought to be maintained at all hazards, and prices should be reduced. All who have read the late admirable reports of the Secretary of the Treasury, the Comptroller of the Currency, and the nearly unanimous resolution of the House of Representatives, must be satisfied that the Government is united and strong in its determination to enforce the full power it possesses to carry us safely through all our financial difficulties, and bring the business of the country back to a more safe and secure standard. So long as Congress and the Executive departments of the Government continue, as they now do, to discharge their duties with efficiency and fidelity, the repudiation of the public debt will be an impossibility.

I have lately seen and read in the public newspapers much that is of a fault-finding character, and much theorizing on the subject of our national finances, but after all that has been said or written on the subject, it comes down to a plain matter-of-fact business, which seems to be well understood by the Secretary of the Treasury, viz:

1. That frugality and economy should be practiced in all the departments of the public service.

2. Find out all the taxable property and business of the country, and the best modes of collecting revenue therefrom.

3. Levy and collect a tax upon it amply sufficient to raise a sum that will pay the yearly expenses of the Government, pay the interest on all the public debt, and leave a surplus of at least $50,000,000 annually towards retiring a part of the public debt, and the credit of the Government will be firmly maintained. No repudiation of the public debt will ever take place so long as this policy is pursued with vigor on the part of the national Government.

The great mass of the people are honest and patriotic, and believe that the public debt was incurred for just and patriotic purposes. They will stand by their rulers in maintaining the public faith. They will pay the taxes freely, and will never consent that the fair fame of their free Government shall ever be tarnished by a repudiation of one dollar of the debt incurred in such a righteous and noble cause.

E. G. SPAULDING.

4

NO STATE TAXATION OF UNITED STATES BONDS.

The Supreme Court of the United States, at Washington, has decided that United States Government Bonds and Treasury Notes cannot be taxed by States, Counties or Cities. The power to borrow money by the Government of the United States is supreme, and cannot be interfered with by any State law. All the Government securities have been issued under a positive law, which makes it a part of the contract that they should not be taxed for local purposes, and the contract cannot be changed. The first section of the act of Congress, passed June 30, 1864, provides that 'all bonds, Treasury notes and other obligations of the United States shall be exempt from taxation by or under State or Municipal authority.'

The Constitution of the United States provides that 'This Constitution and the Laws of the United States, which shall be made in pursuance thereof, shall be the supreme law of the land, and the judges in every State shall be bound thereby; anything in the Constitution or laws of any State to the contrary, notwithstanding.'

The Supreme Court of the United States has decided that all the State laws passed to tax United States securities are unconstitutional and void. These loans are the best security in the market. No searches of title are necessary. The Constitution of the United States and the act of Congress make the public debt the first lien on the real and personal property of the country. The Government bonds and notes are the first claim to be paid, city bonds, railroad bonds and bonds and mortgages, are only a second lien, to be paid after the Government securities are paid.

E. G. SPAULDING.

PUBLIC DEBT-GOOD FAITH HON. E. G. SPAULDING'S LETTER TO SENATOR MORGAN-SENATOR SHERMAN'S FUNDING BILL.

Hon. E. D. Morgan, U. S. Senator, Washington.

BUFFALO, Dec. 24, 1867.

Dear Sir-I am in receipt of the recent report of the Finance Committee brought in by Senator Sherman, and Senate Bill No. 207, 'for funding the national debt, and for the conversion of the notes of the United States,' accompanied by your letter of the 19th instant, asking my opinion on the proposed measure, or any of its parts, and desiring me to communicate my suggestions at an early day.

I am deeply impressed with the importance of à return to the specie standard at the earliest moment consistent with the operations of the Government and people. I concur fully in that part of the report of your committee which seeks 'to secure to the holders of United States notes, as soon as possible, their value in gold.' This, in my opinion, should engage the earnest efforts of Congress and the Executive; and I am much gratified to see your committee so earnest and decided in urging a return to the specie standard at the earliest practicable moment. A resumption of specie payments by the Government, the banks and people, is the first great thing to be accomplished. This would dispose of nearly all the complicated and disturbing issues that have been raised by politicians and others, as to the time when, and the kind of money in which, the public debt shall be paid. It would demonstrate more clearly than any thing else, our resources and ability to pay the public debt, and our determination to preserve unimpaired the good faith of the nation, and establish all business operations on a firm and enduring basis.

I notice that Senator Sherman, in his report, (pages 6 and 7,) giving countenance to the idea that the 5-20 bonds, under the act of 25th February, 1862, may be paid in the depreciated greenback currency, is laboring under a material misapprehension of the facts in regard to the representations made by the agents of the Government when the loan was negotiated, and especially as to the time when those representations were made. Mr. Sherman says: 'It is said that the distinguished Secretary of the Treasury who negotiated the 5-20 loan, gave a construction to this act at the time the loan was offered; that this was announced to the people, and upon the faith of this the loan was taken. Your committee can find no official declaration made by the Secretary on this subject, until after the loan was negotiated,' and then refers to a letter written by Secretary Chase, May 18, 1864, as being the first official declaration on the subject that has come to his knowledge. The Senator seems to concede that if the Secretary made official declarations, at the time the loan was negotiated, giving a construction to the act, to the effect that the principal, as well as the interest, was payable in coin, and that if both parties understood that to be the construction of the law, such declarations would form a part of the contract, and that the Government would be bound to make these declarations good, and to give effect to the contract as understood by both parties when it was made. Now, the proofs are at hand that such official representations were made by the distinguished Secretary of the Treasury, before and at the time the loan was being negotiated, as I will now proceed to show.

Secretary Chase, who negotiated that loan, decided as early as December, 1862, that a fair construction of all the loan acts under which the funded debt was contracted, required us to pay actual money-gold and silver-on all the funded debt of the Government; that a pretended payment in another promise of the United States was no payment, but merely changing the form of the debt. In other words, that a payment of the bonds in greenbacks, would be merely substituting the debt of the Government in the form of legal tender notes bearing no interest, for bonds bearing six per cent. interest,-which would be manifestly unjust. This question came up on the kind of money that should be provided for paying that part of the funded debt, created prior to the rebellion, which fell due January 1st, 1863, and this decision was then made and published. The Committee of Ways and Means, in December, 1862, a short time before its maturity, desired to know whether any further legislation would be necessary to ensure the payment of coin on that part of the funded debt falling due within a few days. In order to ascertain in a formal manner what construction the Secretary of the Treasury would put upon the law, a Sub-Committee from the Committee of Ways and Means was appointed, consisting of Mr. Hooper, Mr. Morrill and myself, to confer with the Secretary on the subject. This Sub-Committee called upon the Secretary at the Treasury Department, and after a full and free conference, the Secretary decided that a fair construction of the law, as well as good faith, required him to pay all the funded debt in coin, and that he did not deem it necessary to have any further law passed to enable him to do so.

Under these circumstances, the Committee of Ways and Means did not deem it necessary to report a bill authorizing or requiring the funded debt to be paid in coin, and consequently no further law was passed; and on the first of January, 1863, the funded debt falling due at that time was paid in coin. From the time this decision was made by Secretary Chase,

down to the present time, the same language has been held by each Secretary of the Treasury, namely, that the funded debt of the Government was payable in coin, both principal and interest, and that the Government would not seek to avail itself of the five years option to redeem the 5-20 bonds until it was prepared to pay coin for the principal as well as the interest. But this is not the only proof.

Messrs. FISK & HATCH, bankers in New York city, were prominent sub-agents of the Government in negotiating the 5-20 bonds under the act of February 25, 1862. Many persons who were desirous of subscribing to this loan, wanted to know authoritatively, whether the principal of the bonds was payable in coin as well as the interest. In order to have the proof in hand to satisfy people on this point, Fisk & Hatch, at the very time they were negotiating large amounts of this loan, addressed a letter to the Secretary of the Treasury on the 3d of August, 1863, and received from him an official reply, signed by the Assistant Secretary of the Treasury, which was immediately published in the New York Times, as follows:

THE POPULAR LOAN.

To the Editor of the New York Times:-We are receiving numerous inquiries as to whether the United States 5-20 bonds are redeemable in gold. We have received a letter from the Treasury Department most satisfactorily answering this question, (as it was once before answered by Mr. Chase,) a copy of which we hand you herewith. The popular character of this loan, and its wide distribution among the people, renders the subject one of universal public interest and importance, and we presume the publication of this letter will be acceptable to your readers. (Signed,)

FISK & HATCH, Bankers.

TREASURY DEPARTMENT, WASHINGTON, D. C.,
August 5th, 1863.

Gentlemen-Your letter of the 3d instant, relative to the redemption of 6 per cent. 5-20 bonds of the loan of February 25, 1862, has been received. The following is the decision of the Secretary of the Treasury in regard to the redemption of the public debt: 'All coupon and registered bonds forming a part of the permanent loan of the United States, will be redeemed in gold. The 5-20 sixes, being redeemable at any time within twenty years after the lapse of five years, belong to the permanent loan, and so also do the twenty years sixes of July 17, 1861, into which the three years 7-30s are convertible. All obligations and notes forming a part of the temporary loan will be paid at maturity in United States notes, unless before such maturity payment in specie shall have been generally resumed. The 7-30 three year bonds or notes form part of the temporary loan, with the privilege of conversion into 20 years sixes, in sums not less than $500. They will therefore be paid, if the holders prefer payment to conversion. in United States notes.

GEORGE HARRINGTON, Acting Secretary of the Treasury.

To Messrs. FISK & HATCH, Bankers, New York.

This official letter from the Treasury Department, in addition to its being published in all the newspapers, was published in hand-bill form, (one of the original hand-bills being now in my possession,) and sent broadcast among the people, to induce them to come forward and take up these bonds-which were then on the market under the direction of the

Secretary of the Treasury, and offered by him at par. I was at this time actively engaged in negotiating this loan. I advertised and circulated this letter extensively myself, and gave copies of it to subscribers at the time of making their subscription to this loan. I regarded these representations, made by authority of the Treasury Department, and upon the faith of which people were induced to subscribe for the loan, as forming a part of the contract, and that the Government is now bound to make these representations good; and that, whenever they seek to redeem these bonds, the principal as well as the interest should be paid in coin. I should regard it as a gross breach of faith on the part of the Government to attempt to evade these declarations, or equivocate in fulfilling this contract, or any part of it.

But aside from these representations made by the Secretary, I would suggest that the plain meaning of the act of '62, when read in connection with its title, leads to the same conclusion, and that Secretary Chase, in giving the construction to the law which he did in negotiating the loan, gave a correct, practical, common sense decision. The argument of the present Secretary, in his last annual report, (pages 24, 25 and 26,) is able and conclusive on this point. The interpretation given to the act by both these distinguished Secretaries is in exact accordance with my intention at the time I drew and introduced the bill in the House, in January, 1862, and as I believe it was fully understood by Congress when it passed. The title of the act is expressive of the intention and purpose for which it was passed, namely, 'an act to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States.'

It was intended by this measure, in the imminent peril in which we were then placed by rebellion, to make a forced loan from capitalists, by compelling them to take legal tender United States notes, which should be paid out to the army and navy, and for supplies and material of war, but at the same time give them a fair rate of interest for the use of their money, by allowing them to fund these legal tender notes as they should accumulate in their hands and not bearing interest, into a twenty years bond bearing six per cent. interest. In the opening speech which I made in the House on the 28th of January, 1862, I said: "The demand notes put in circulation would meet the present exigencies of the Government in the discharge of its existing liabilities to the army and navy, and contractors for supplies, materials and munitions of war. These notes would find their way into all the channels of trade among the people, and as they accumulate in the hands of capitalists, they would exchange them for six per cent. 20 years bonds. These circulating notes in the hands of the people, would enable them to pay taxes imposed, and would facilitate all business operations between farmers, mechanics, commercial business men and banks, and be equally as good as, and in most cases better than, the present irredeemable currency issued by the State banks. The $500,000,000 six per cent. twenty years bonds in the hands of the Secretary of the Treasury, ready to be issued, would afford ample opportunity for funding the Treasury notes as fast as capitalists might desire to exchange notes not bearing interest for coupon bonds of the United States bearing six per cent. interest, and amply secured by a tax on the people and all their property. In this way the Government will be able to get along with its immediate and pressing necessities, without being obliged to force its bonds on the market at ruinous rates of discount; the people