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CONGRESSIONAL 
 CURRENCY 
 
 AN OUTLINE OF THE FEDERAL 
 MONEY SYSTEM 
 
 BY 
 
 ARMISTEAD C. GORDON 
 
 " The best thing undeniably that a Government can 
 do with the Money Market is to let it take care of itself." 
 Walter Bagehot, Lombard Street^ Chap. IV. 
 
 ^ OF THE ''K 
 
 UNIVERSITT 
 G. P. PUTNAM'S SONS 
 
 NEW YORK LONDON 
 
 27 WEST TWENTY-THIRD STREET 24 BEDFORD STREET, STRAND 
 
 %\t Knickerbocker ^ress 
 1895 
 

 Copyright, 1895 
 
 BY 
 
 ARMISTEAD C. GORDON 
 Entered at Stationers' Hall^ London 
 
 Ube fRnfcfterbocker press, XKvw IRocbelU, 1). ^* 
 
TO THE MEMORY 
 OF 
 
 GEN. WILLIAM F. GORDON 
 of virginia 
 
 Author of the Independent Treasury 
 
 OF 
 
 The United States 
 
 82935 
 
"The value of the dollar of account ought not 
 to depend upon an accidental majority : it should 
 represent invariably a certain weight and fineness 
 of the precious metals, and Congress should have 
 nothing to do with it except to see that the makers 
 of a credit currency redeem their promises in coin 
 or go out of business. That is the duty of the 
 government, and there its duty ends." 
 
 H. W. Richardson. 
 
PEEFACE. 
 
 It is the object of these chapters to 
 present within a brief compass and with 
 as little technicality as possible an outline 
 of the genesis, growth, and condition of 
 the existing currency system of the United 
 States, a short account of each of the 
 various kinds of "money" or circulating 
 medium now in use, and a consecutive 
 statement of the most conspicuous or 
 important acts of legislation in connection 
 therewith, concluding with a sketch of the 
 judicial interpretation wliich such legisla- 
 tion has received at the hands of the 
 Supreme Court. To have sought to trace in 
 detail the records of monetary events, and to 
 narrate the financial history of the govern- 
 ment from its foundation, might have been 
 both profitable and pertinent to the sub- 
 ject in hand ; but, for the sake of brevity, 
 the scope of this work has been so limited 
 
vi Preface, 
 
 as not only to exclude such an historical re- 
 trospect except in the most cursory mannei', 
 but no less a discussion of those intimate 
 relations borne to finance and currency by 
 trade and commerce. The simple purpose 
 of the book is to outline the Federal money 
 system as it exists to-day, and to sketch 
 the legislation by the Congress in regard 
 to money and currency during that period 
 of the history of the United States 
 embraced between the year 1861 and the 
 present time ; a period, which may be 
 conveniently described as consisting of two 
 divisions ; one in which the Congress has, 
 in a comparative degree, only, controlled 
 by its enactments the circulating medium, 
 beginning with the greenback legislation, 
 and ending with the imposition of the ten 
 per cent, tax on State bank issues ; and the 
 other, in which the currency of the country 
 has been made and managed with an iron 
 hand by the National Legislature, beginning 
 with the date of the last-named enactment, 
 and continuing up to the present time. 
 
 As an appropriate part of such a sketch, 
 the machinery and methods through which 
 
Preface, vii 
 
 this coDgressional control is exerted and 
 directed are first given in brief chapters on 
 the United States Treasury, the Sub- 
 Treasuiy, the National Banking Associa- 
 tions, the Clearing-Houses, and the Public 
 Debt and Gold Reserve. 
 
 For the double purpose of verifying the 
 statements of facts presented, and of 
 possibly inciting others to the further in- 
 vestigation of a subject which should be 
 familiar, in degree, at least to every 
 American citizen, frequent citations of 
 authorities have been made 
 
 Staunton, Va., 
 Sept, 25, 1895. 
 
CONTENTS. 
 
 I. I XTROnUCTORY ..... 1 
 
 II. The United States Treasury Def'art- 
 
 MENT ...... 24 
 
 III. The Independent Treasury or Sub- 
 
 Treasury OF the United States . 37 
 
 IV. The Nationai. Banking Associations . 56 
 V. The Clearing-House Associations ^•'^ 
 
 VI. The Public Debt and the Gold Re- 
 serve ...... 83 
 
 VII. Gold Coin.s ; the Silver Dollar; and 
 
 Subsidiary Coinage . .96 
 
 VIII. United States Notes, or "Green- 
 backs"; Postal Currency, and 
 Fractional Currency . 1-25 
 
 IX. National Bank Notes . . .151 
 
 X. Gold Certificates, Silver Certificates, 
 Treasury Notes of 1890, and 
 Currency Certificates 
 XI. Judicial Interpretation of Currency 
 Legislation .... 
 
 XII. Conclusion ..... 
 
 Index ....... 
 
 ix 
 
 1T3 
 
 100 
 204 
 229 
 
T* OF THB r 
 
 UNIVER3ITT 
 
 Congressional Currency 
 
 AN OUTLINE OF THE FEDERAL 
 MONEY SYSTEM. 
 
 INTRODUCTORY. 
 
 The monetary transactions of the gov- 
 ernment and of the people of the United 
 States are conducted with money bearing 
 the government's stamp of weight and fine- 
 ness, and with paper currency prepared and 
 furnished by the government, all emanating 
 from the Treasury Department at Washing- 
 ton, under and by virtue of acts of the 
 Congress, either directly, as in case of the 
 greenbacks, the gold and silver certificates, 
 the currency certificates and the Treasury 
 notes of 1890; or indirectly, as in the case 
 
2 Congressional Curre?tcy. 
 
 of the national bank notes, which are issued 
 under statutory restrictions and limitations^ 
 and are secured by government bonds. 
 
 The currency circulation is accurately 
 divisible into two classes, viz. : money, 
 which includes gold coins, the standard sil- 
 ver dollar, and subsidiary coins ; and cur- 
 rency proper/ which consists of greenbacks, 
 national bank notes, gold certificates, silver 
 certificates and Treasury or coin notes. 
 Thus there are nine kinds of circulating 
 medium in the United States, having the 
 stamp and approval and backed by the 
 credit of the government. In times of 
 panic and financial crisis, under our peculiar 
 system even these nine kinds of money have 
 proved insufficient, and resort has been had 
 in the cities of the United States to a tenth 
 species of currency, not emanating, however, 
 from the Congress, nor recognized by it, but 
 serving a potential and valuable purpose at 
 such periods, viz. : the clearing-house certif- 
 icates. 
 
 Of the results of the War between the 
 States, which begun in 1861 and ended in 
 
 ' Webster's Works , vol. iv., p. 271. 
 
Introductory, 3 
 
 1865, the ultimate settlement of the doc- 
 trine of secession in the negative, and the 
 emancipation and enfranchisement of the 
 Southern slaves, if apparently the most 
 conspicuous at its close, were not the most 
 important and far reaching in their conse- 
 quences upon the future welfare of the 
 American people. "An indissoluble Union 
 of indestructible States " has long been the 
 creed of patriotic Americans, North and 
 South ; and the " Negro Question " has of 
 late yeai's settled itself to the general satis- 
 faction of the whole country. But the bur- 
 den of financial legislation resulting from 
 the War lies heavily upon the people of the 
 United States thirty years after the War's 
 end. 
 
 As tremendous in its significance as it 
 was rapid in its consummation, was the 
 irresistible aggregation, under the exigent 
 stress of conflict, into the hands of the Con- 
 gress of the United States, within a period 
 of some four or ^yq years, of all the finan- 
 cial and currency forces of the country, 
 with the stupendous powers and capabili- 
 ties for good and evil which the possession 
 
4 Congressional Currency, 
 
 and control of those forces necessarily im- 
 ply. Down through the story of the gov- 
 ernment, from its foundation to the final 
 establishment of the Sub-Treasury system, 
 proposed under Jackson and accomplished 
 under Van Buren, had run like a red thread 
 the line of politico-economic controversy 
 over the currency. Hamilton, in his mas- 
 terly " Keport on a National Bank," ^ had in 
 1790, not only prefigured and advocated a 
 system of finance which the political party 
 to which he belonged, and its legitimate 
 successors, adopted as a conspicuous part of 
 their political creed, but he had foreshad- 
 owed the enunciation of that "sovereignty 
 of the federal government within its speci- 
 fied bounds " on which the United States 
 Supreme Court rested its last and far-reach- 
 ing legal-tender decision in 1884. Hamil- 
 ton's great antagonist, Thomas Jefferson, on 
 the other hand, had instilled into the minds 
 of his party followers that the constitu- 
 tional provision for the laying of the federal 
 taxes was the pov)ei\ and the general wel- 
 fare the purpose for which the power was 
 
 * Reports on the Finances, vol. i, p. 54. 
 
Introductory. 5 
 
 to be exercised ; and had antagonized the 
 establishment of a national bank as unneces- 
 sary and unauthorized. 
 
 The organization of the first Bank of the 
 United States had aroused a tierce contest 
 between Federalists and Republicans, the 
 latter holding it to be in violation of the 
 Constitution; but in 1815 the Republican 
 party had favored the recharter of the Bank, 
 its leaders assertino- that the Bank's con- 
 tinned existence would tend to check the 
 increase of the state banks and curtail their 
 undesirable paper circulation. In 1817 the 
 second Bank of the United States had gone 
 into effect, and some ten years later, when 
 Jackson began his onslaught upon it which 
 culminated in the removal of the gov- 
 ernment's deposits and the subsequent 
 expiration of its charter by limitation, the 
 Democratic party had again returned to its 
 first love, and espoused the cause of oppo- 
 sition to a national bank. 
 
 The new Constitution of the United 
 States, adopted in 1789 by a convention 
 from which the state of Rhode Island had 
 absented itself on account of its unwilling- 
 
6 Congressional Currency. 
 
 ness to submit its right of " independent 
 issue" of paper money ^ had prohibited the 
 emission by the state governments of bills 
 of credit, and had provided that the states 
 might make nothing but gold and silver a 
 legal tender in payment of debt ; while, in 
 the framing of the Constitution, which gave 
 the general government, through the Con- 
 gress, the power to coin money and regulate 
 the value thereof, a proposition to permit 
 the Congress itself to emit bills of credit 
 had received only two votes.^ 
 
 At its first session under the new Con- 
 stitution, the Congress had declared that 
 only coin should be received into the Treas- 
 ury in payment of the public dues ; and in 
 all the several subsequent controversies 
 extending through a large part of the early 
 history of the country over "hai'd money," 
 the national bank question, and the Inde- 
 pendent Treasury, the right of the Congress 
 to make anything but gold and silver a 
 legal tender for debt had never been prac- 
 tically asserted by the enactment of any 
 
 ^F. A. Walker, Money, p. 316. 
 
 '^J. K. Upton, Money in Politics, chap. viii. 
 
Introductory, 7 
 
 law. The federal government, altbougli 
 lending its aid and influence to the two 
 national banks of the United States in suc- 
 cession, had at no time undertaken, even 
 when issuing its obligations of indebted- 
 ness in the shape of interest-bearing Treas- 
 ury notes, to lay its "heavy and unsteady 
 hand " upon the circulating medium of the 
 country to the exclusion of all other cur- 
 rency than that provided by itself ; even 
 though such eminent party leaders and 
 statesmen as Alexander J. Dallas and John 
 C. Calhoun had maintained the position 
 that the Constitution gave the Congress 
 the exclusive power to regulate the cur- 
 rency of the United States.^ 
 
 So thoroughly had the disapprobation 
 of the government's associating itself, even 
 indirectly, with the conduct of banks and 
 banking become ingrained in the public 
 mind, that even as late as 1861, when a 
 new party, maintaining many of the views 
 of Hamilton and his school of politics and 
 social economy, was in the ascendancy, " a 
 
 * W. D. Dabney, "Evolution of Paper Money," Reports 
 Virginia State Bar Association^ vol. vii, p, 187. 
 
8 Congressional Currency, 
 
 majority of the people," says an eminent 
 authority, " would have thought the estab- 
 lishment of a third United States Bank 
 dangerous and of doubtful constitution- 
 ality." ^ And yet, two years later, in the 
 midst of war, the Congress of the United 
 States established a system of national 
 banks which the same writer says was 
 "infinitely more powerful than the Bank 
 which waged an almost equal war with 
 Jackson." 
 
 The prelude to this legislation had been 
 the issuing in the year prior thereto by the 
 Congress, under the assumption by it of 
 the existence of a constitutional right to 
 exercise any power necessary to carrying 
 on war^ of a tremendous volume of legal- 
 tender Treasury notes ; and the not inap- 
 propriate sequence upon the national bank 
 legislation was the prompt imposition of a 
 tax upon state bank issues, which was 
 rendered prohibitive in its character so soon 
 as the original act imposing the tax re- 
 
 ' Charles F. Dunbar, The Theory and History of Bankings 
 chap. ix. 
 
 2 Judge R. W. Hughes, The Currency Question, p. 183. 
 
Introductory. 9 
 
 suited in giving the information to the 
 government bow the death-blow could be 
 most surely and safely struck. The de- 
 struction of the state bank currency 
 resulted in the government's paper becom- 
 ing the sole occupant of the currency 
 field. 
 
 All of this centralizing legislation was, 
 if not promptly, at least finally and un- 
 equivocally sustained by the supreme ju- 
 dicial tribunal of the country ; though in 
 one memorable instance, which showed 
 that the Congress knew how both to grasp 
 power and to wield it, the support ren- 
 dered by that tribunal was under stress of 
 compulsion. In December, 1869, the Su- 
 preme Court of the United States decided 
 against the constitutionality of the legal- 
 tender acts, and in the March following a 
 vacancy occurred by the resignation of one 
 of the justices constituting the majority. 
 The Congress shortly theretofore, and 
 while the case was pending before the 
 court, had created an additional justiceship ; 
 and the Senate, carrying out the legal- 
 tender programme to its conclusion, gave 
 
lO Congressional Currency. 
 
 the President to understand that no ap- 
 pointees to these two vacancies on the 
 Supreme bench would be confirmed who 
 were unfavorable to the legal-tender quality 
 of the greenback. In consequence, two jus- 
 tices were appointed whose views on the 
 question, while not ^'judicially pronounced, 
 were supposed to have been well under- 
 stood by the appointing power, and to 
 have furnished the controlling reason for 
 their selection."^ These two newly ap- 
 pointed judges in December, 1870, so 
 changed the complexion of the court on 
 this question as to reverse the decision 
 rendered the year before, and to ^^ upon 
 the statute book as valid and constitu- 
 tional the legal-tender act of February 25, 
 1862.^ 
 
 The constitutional inhibition against the 
 states making any other thing than gold 
 and silver legal tender, and the no less 
 conspicuous omission from that instrument 
 
 * Dabney, " Evolution of Paper Money," "jth Virginia 
 Bar Association Reports. 
 
 '^Wilson, Congressional Government, loth ed., p. 38 ; Up- 
 ton, Money in Politics, p. 160 ; Speech of Hon. Thomas F. 
 Bayard in U. S. Senate, January 27, 1880, 
 
Introductory. 1 1 
 
 of any provision in any of its clauses re- 
 lating to the finances, giving the Congress 
 the power to do so, was met by the Su- 
 preme Court, in the Legal Tender decisions 
 in 1870, with the assertion of certain im- 
 plied powers of the government under the 
 Constitution, necessary in time of war. 
 But the post-bellum aggressions of the 
 Congress upon the currency have been no 
 less emphatically sustained by that high 
 tribunal ; for when, in March, 1884, nearly 
 nineteen years after the War ended, the 
 question again came before it in another 
 form, arising out of the act of 1878, which 
 directed that the greenbacks when re- 
 deemed should be reissued,^ the Supreme 
 Court once more declared the .right of the 
 government to make the Congress paper 
 promises of payment a legal tender for 
 debt, and went much further than in 1870 
 in establishing this decision upon the al- 
 leged incidental powers of sovereignty ex- 
 isting under the Constitution in the National 
 government, inherent therein and implied 
 as necessary to the due exercise of such 
 
 » Act, May 31, 1878. 
 
1 2 Congressional Cu7^rency, 
 
 sovereignty/ lu the last-named case, the 
 question arose upon the legal-tender ca- 
 pacity of a war greenback when reissued 
 under act of the Congress in time of peace. 
 The result of the court's decision was so 
 satisfactory to the Congress, that in 1890 
 that body had no hesitation in giving the 
 legal-tender feature to the Treasury notes, 
 authorized by the Sherman act of that 
 year to be issued against accumulations of 
 silver bullion in the vaults of the Treasury. 
 The inevitable tendencies, resulting from 
 that subordination of state to Federal au- 
 thority at every open and unguarded point, 
 which has been so characteristic of the gen- 
 eral government's legislation and adminis- 
 tration since the beginning of the Civil War 
 are nowhere more clearly or strikingly 
 reflected than in the enactments of the 
 Congress with reference to the currency 
 from 1861 up to the present time, and in 
 the interpretation of the most conspicuoi^s 
 of these enactments by the Supreme Court 
 of the United States.^ 
 
 ^ Juilliard vs. Greenman ; no U. S. Reports, 421, 
 ' See post. , ch. xi. 
 
Introductory, 1 3 
 
 Yet witli the power of controlling the 
 currency, the knowledge and capacity neces- 
 sary thereto seem in repeated instances to 
 have been greatly wanting. Whether this 
 is due to the fact that the work of the 
 Congress is done through committees ; that 
 the committees which raise the revenues 
 for the administration of government are 
 not those which expend it ; that there is no 
 direct responsibility of the administrative 
 financial officers of the government to the 
 legislative body ; and that interchange of 
 opinions between the Secretary of the Treas- 
 ury and the Congress is only contemplated 
 in law to be made by written communica- 
 tion, the results flowing from the financial 
 legislation of the United States Congress 
 have excited the astonishment of the most 
 enlightened men of other countries. A 
 distinguished English statesman and his- 
 torian, who has made a profound study of 
 our governmental system in all its relations, 
 has conspicuously commented upon the fact 
 that our own people have become " so puz- 
 zled by a financial policy varying from year 
 to year, and controlled by no responsible 
 
14 Co7igressional Currency. 
 
 leaders, as to feel diminished interest in 
 congressional discussions and diminished 
 confidence in Congress." ^ 
 
 In this same connection may be quoted 
 appropriately the statement of Mr. Wood- 
 row Wilson, a recognized and distinguished 
 authority, in his work on Congressional 
 Government^ that "the noteworthy fact 
 that even the most thorough debates in 
 Congress fail to awaken any genuine or 
 active interest in the minds of the people 
 has had its most strikins: illustrations in 
 the course of our financial legislation ; for, 
 though the discussions that have taken 
 place in Congress have been so frequent, so 
 protracted and so thorough, engrossing so 
 large a part of the time of the House on 
 their every recurrence, they seem, in almost 
 every instance, to have made scarcely any 
 impression at all upon the public mind. 
 The Coinage act of 1873, by which silver 
 was demonetized, had been before the coun- 
 try many years ere it reached adoption, 
 having been time and again considered by 
 
 ^ James Bryce, The American Commonwealth^ 2d ed., vol. 
 i., p. 177. 
 
Introductory, 1 5 
 
 committees of Congress, time and again 
 printed and discussed in one shape or an- 
 other, and having finally gained acceptance 
 by sheer persistence and importunity. The 
 Resumption act of 1875, too, had a like 
 career of repeated considerations by com- 
 mittees, repeated printings, and a full dis- 
 cussion by Congress ; and yet when the 
 Bland silver bill of 1878 was on its way 
 through the mills of legislation, some of 
 the most prominent newspapers of the 
 country declared with confidence that the 
 Resumption act had been passed incon- 
 siderately and in haste, almost secretly, 
 indeed, and several members of Congress 
 had previously complained that the de- 
 monetization scheme of 1873 had been 
 pushed surreptitiously through the course 
 of its passage, Congress having been tricked 
 into accepting it, doing it scarcely knew 
 what." ^ 
 
 '^ The financial policy," which has been 
 alluded to as so uncertain as to be puzzling 
 to the people at large, has, as stated by 
 Mr. Wilson, most conspicuously assumed 
 
 * Congressional Government^ loth ed., p. 184. 
 
1 6 Congressional Cui^rency, 
 
 that feature in tlie legislation immediately 
 affecting tbe currency. Amendment has 
 followed enactment, and repeal has fol- 
 lowed amendment in quick succession'. 
 Currency measures, that have passed the 
 House and been rejected by the Senate, 
 have, in the brief course of events, been 
 taken up and passed by the Senate to be in 
 turn rejected by the House. Though con- 
 sistently and unyieldingly assuming and 
 asserting its undivided I'ight of regulating 
 and controlling currency issues, the Con- 
 gress has reached its ends through devious 
 and tortuous w^ays, and with legislation 
 that has in nearly every important instance 
 been in the nature of a compromise to tide 
 over some imminent emergency, or a make- 
 shift to prevent some threatening disaster. 
 Party politics have played a conspicuous 
 part in much of this confused legislation ; 
 and known and recognized principles of 
 finance, and tried and conceded natural 
 laws affecting money and currency have 
 been whistled down the wind for the pur- 
 pose of gaining partisan advantage. The 
 possible future enactment into laws of cer- 
 
Introductory, 17 
 
 tain financial theories has governed the 
 admission of territories of the Union into 
 the sisterhood of states ; and even the 
 best informed and most experienced finan- 
 ciers on the floor of either house of the Con- 
 gress have undoubtedly been influenced 
 by " a profound respect for that unknown 
 quantity, the floating vote." The balance 
 of power, credited rightly or wrongly to 
 some particular body of voters, has more 
 than once moulded the financial opinion of 
 the most distinguished Senators and Rep- 
 resentatives/ 
 
 The connection between those who con- 
 trol and direct in private business the 
 money and currency of the country, and 
 the government of the United States, if 
 not apparent on the surface, has in reality 
 assumed a phase that would have startled 
 the ante-bellum antagonists of a national 
 bank; and the purposes of the Indepen- 
 dent Treasury, created and organized with 
 the design of getting the government out 
 of the business of dealing in money and 
 
 ^ " The Future of Resumption," North Am. Review for Au- 
 gust, 1879. "Should the Government Retire from Bank- 
 ing?" The Forum ^ Feb., 1895. 
 
1 8 Congressional Currency, 
 
 currency, liave been, under congressional 
 influences and administrative tendencies, 
 enlarged and perverted to the erection and 
 maintenance of a United States govern- 
 ment bank of issue. This bank of issue is 
 compelled to the necessity of carrying, as 
 an essential incident to its business of 
 banking, a gold reserve, which was actually 
 never authorized by law, yet whose con- 
 tinued existence at an arbitrary figure has 
 come almost to mean, in popular estima- 
 tion, the solvency of the government itself. 
 If there were no bank issue business done 
 by the government, there would be no 
 need of a " free gold " reserve ; but it is 
 because the Congress has by legislation 
 created and put into circulation, and has 
 by additional legislation sought to continue 
 in circulation more than $500,000,000 of 
 legal-tender greenbacks and Sherman Treas- 
 ury notes, which are redeemable in gold by 
 the Treasury,^ that a gold reserve must be 
 kept for such redem^^tion. If the govern- 
 ment had never gone into the bank issue 
 business, and the Independent Treasury 
 
 'Act, March i8, 1869. Act, July 14, 1890. 
 
Introductory. 1 9 
 
 had remained limited and I'estricted to its 
 original object of providing safe and con- 
 venient places for the receipt and disburse- 
 ment of the government's revenues, the 
 continued maintenance of the one hundred 
 million dollars of free gold, first accumu- 
 lated under the administration of Secretary 
 Sherman, prior to 1879, with a view to 
 the going into effect in that year of the 
 Resumption act, would not, in the nature 
 of things, have been necessary ; and the 
 Federal Treasury would have been saved 
 the repeated and pei'sistent " runs " that 
 have been made upon it by every Euro- 
 pean nation which has found it desirable 
 to increase its stock of gold, and by the 
 gold brokers of America, who have found 
 it profitable, when the rates of foreign 
 exchange warranted it, to ship gold to 
 other countries. It is one of the elemen- 
 tary principles of banking that banks of 
 issue must keep a coin reserve ; and when 
 the United States makes its issues payable 
 in gold, it must, like other banks, keep a 
 reserve of that coin in which its notes are 
 redeemable. 
 
20 Congressional Currency, 
 
 The Congress, the Supreme Court, and 
 the several national administrations have 
 co-operated with an ultimately certain, if 
 at times unsteady, gravitation towards per- 
 manently maintaining the federal control 
 of the currency, regardless of laws that are 
 "higher, simpler, and far safer" than any the 
 Congress can enact or the administration 
 put into execution, and which " mock the 
 futile efforts of those who try to overrule 
 them." 
 
 A conspicuous instance of the confirma- 
 tion, through subsequent legislation by the 
 Congress, of acts unauthorized in law to be 
 done by the Secretary of the Treasury, 
 and yet done by him in the exercise of an 
 assumed discretion nowhere distinctly con- 
 ferred, may be found in Secretary Sher- 
 man's arbitrary construction that the 
 requirements of the act of March 18, 
 1869, "to strengthen the public credit," 
 and of the Resumption act of 1875, for 
 the redemption of legal tenders in " coin," 
 meant that they should be redeemed ex- 
 clusively in gold ; a policy steadfastly pur- 
 sued by the government, without warrant 
 
Introductory, 2 1 
 
 of law, however sound financially, from 
 1879 up to the present time, and only at 
 last indirectly confirmed and further au- 
 thorized, after a lapse of eleven years, in 
 the Sherman act of 1890, which provides 
 for the redemption of the legal-tender 
 Treasury notes issued thereunder in gold 
 or silver coin, at the Secretary of the 
 Treasury's discretion. ^ 
 
 A like instance is to be found in the 
 establishment under the same act and by 
 authority of the same Secretary, of the 
 arbitrarily fixed " gold reserve," which was 
 nowhere authorized by law until the pas- 
 sage of the act of July 12, 1882, wherein 
 it was recognized in the provision that the 
 reissuing of the gold certificates should be 
 suspended " whenever the amount of gold 
 coin and gold bullion in the Treasury re- 
 served for the redemption of United States 
 notes falls below one hundred millions of 
 
 "2 
 
 No less frequently, however, with an un- 
 
 dollars, 
 
 ' " The Future of Resumption," North Amer. Review (ot 
 August, 1879, 
 
 §12. 
 
22 Congressional Cu7'-rency, 
 
 certainty as to the matters of financial 
 detail and administration, but with no re- 
 laxation of the grasp of its " heavy and un- 
 steady hand," the Congress has illustrated 
 the varying and puzzling policy of which 
 Mr. Bryce speaks, in flouting the efforts of 
 executive officers of its own party to carry 
 out the currency and ii nance laws as pro- 
 vided ; or has steadily antagonized the 
 attitude assumed with reference to fiscal 
 matters by a chief executive of its party 
 creed. 
 
 The heterogeneous and confused charac- 
 ter of the paper money in use in the United 
 States may be attributed to the several 
 causes of divided legislative and adminis- 
 trative authority and responsibility, the 
 exigencies of party emergency and the par- 
 tisanship of political caucuses,^ and the com- 
 plexity of the legislative organizations from 
 which the enactments originating these 
 paper issues have sprung. The fact that 
 the creation and administration of the 
 finances of the United States, which in- 
 clude all the money and currency in use, 
 
 * Upton, Money in Politics^ p. 147. 
 
Introductory. 23 
 
 are controlled by twenty-four committees 
 of the Congress ^ is ill calculated to ai'ouse 
 the enthusiastic admiration of the man of 
 affairs; and especially must this be true, 
 when it is reflected that the men composing 
 these congressional committees are not 
 necessarily possessed of either special apti- 
 tude or special knowledge of the subject, 
 and are often prone to prefer party advan- 
 tage to the public welfare in financial as in 
 other legislation.^ 
 
 ^ Woodrow Wilson, Congressional Government^ loth ed., p. 
 136. 
 
 ^ The Forum, " Should the Government Retire from Bank- 
 ing?" Feb., 1895. 
 
n. 
 
 THE UNITED STATES TREASURY DEPARTMENT. 
 
 The Treasury Department of the gov- 
 ernment was established by the Congress, 
 September 2, 1789. It had its germ in the 
 scheme adopted in 1778 by the Continental 
 Conirress for the furtherance of the finances 
 of the Revolution. This was what is known 
 in history as the Board of Treasury, con- 
 sisting at first of five delegates of the Con- 
 gress, and later of fifteen, who had charge 
 of the continental finances. A treasurer 
 and auditor, and a comptroller were ap- 
 pointed ; and later commissioners of ac- 
 counts. The scheme was inefiicient and 
 cumbersome as constituted ; and it was 
 not until Robert Morris was made superin- 
 tendent of the finances, and reorganized the 
 Board of Treasury, that it became, even in 
 a measure, adequate to deal with the per- 
 plexing questions of ways and means which 
 
 24 
 
United States Treasury Department. 25 
 
 confronted the United Colonists. He re- 
 signed in 1784; and for the following five 
 years and until the establishment of the 
 Treasury Department on the plan of its 
 later organization, the finances of the gov- 
 ernment were in great confusion/ 
 
 When the House of Representatives 
 undertook to create a Treasury Depart- 
 ment, the old Board of Treasury did not 
 lack its able and strenuous advocates, who 
 sought to perpetuate it, in spite of its un- 
 toward record ; and, strange to say, though 
 indicative of the conflicting attitudes which 
 men's minds can assume at varying times 
 and under certain circumstances towards 
 questions of finance, as towards other gov- 
 ernmental policies, among the adherents of 
 the old system there was none more con- 
 spicuously zealous in its behalf than Mr. 
 El bridge Gerry, who had been formerly 
 one of its members, and one of its most 
 earnest condemners. But the efforts of its 
 friends failed, and the Board of Treasury 
 of the Continental Congress yielded to the 
 Treasury Department of the United States. 
 
 ^ Lalor's Political Cyclopcedia, art., "American Finance." 
 
26 Congressional Currency, 
 
 It is an interesting fact that the old Board 
 of Treasury issued the first coins made by 
 authority of the government. They were 
 of copper, and known as '^Fugios" from 
 the word " Fugio," which the statute of 
 the Congress enacted July 7, 1787, required 
 should appear on the face of the coin/ 
 
 The Constitution of the United States 
 makes no specific provision for a Federal 
 Treasury ; yet recognizes it by name in 
 article one, section nine. The Treasury 
 was established by act of the Congress 
 and from the time of its establishment up 
 to the organization of the Sub-Treasury, 
 was practically a legal entity without a 
 substantial existence.^ 
 
 Under the numerous statutes enacted 
 since that creating the Treasury, the func- 
 tions of this department of the government 
 have become very intricate, important, and 
 far-reaching in their results ; — perhaps more 
 so than of any other of the several execu- 
 tive departments. 
 
 The head of the Treasury Department is 
 
 * Lalor's Cyclop.^ art., " Coinage." 
 
 ^ J. K. Upton, Money in Politics^ ch. x. 
 
^ United States Treasury Department, 2 7 
 
 the Secretary of the Treasury, who is one 
 of the Cabinet officers, and by virtue of his 
 office an adviser of the President of the 
 United States on all matters appertaining 
 to the finances. The law requires that he 
 must be a person who is not in any way 
 interested in trade or commerce.^ His 
 duties comprise, among many others not 
 directly connected with the money and cur- 
 rency of the country, the preparation of 
 schemes and plans for the public revenue 
 and public credit, the making of annual 
 and special reports with reference to the 
 finances and to other matters of his depart- 
 ment, and the performance of such addi- 
 tional fiscal offices as are required by law. 
 
 His reports are referred, when they 
 reach the Congress, to the House Commit- 
 tee on Ways and Means, which is the 
 great revenue-raising committee of the 
 Congress. The annual reports of the Sec- 
 I'etary of the Treasury are " in one respect 
 the great yearly balance-sheets, exhibiting 
 the receipts and expenditures of the govern- 
 ment, its liabilities and its credits ; and, in 
 
 * Revised Statutes of U. S., § 243, 
 
28 Congressional Currency, 
 
 another aspect, general views of the state 
 of industry and of the financial machinery 
 of the country, summarizing the informa- 
 tion compiled by the Bureau of Statistics 
 with reference to the condition of the 
 manufactures and of domestic trade, as well 
 as with regard to the plight of the currency 
 and of the national banks." ^ 
 
 The Secretary of the Treasury of the 
 United States differs from the Finance 
 Ministers of the great European powers in 
 nothing more conspicuously than in 'the 
 failure of legislation to provide that he 
 shall be a member of the law-making body. 
 Thus his official communications to the 
 Congress, as has been stated, are required 
 to be made in writing. In practice he is 
 frequently summoned, or voluntarily ap- 
 pears, before the various committees of the 
 Congress having to do with the finances, 
 for the purpose of explaining some financial 
 measure, or of advising some specific act of 
 legislation ; but such appearance is extra- 
 official from a legislative standpoint. 
 
 * Woodrow Wilson, Congressional Government, loth ed., p. 
 171. 
 
United States Treasury Department. 29 
 
 " His function was of tiie utmost importance at 
 the beginning of the government when a national 
 system of finance had to be built up and the federal 
 government rescued from its grave embarrassments. 
 Hamilton, who then held the office, effected both. 
 During the War of Secession, it again became pow- 
 erful, owing to the enormous loans contracted and 
 the quantities of paper money issued, and it remains 
 so now, because it has the management (as far as 
 Congress permits) of the currency and the national 
 debt. The Secretary has, however, by no means 
 the same range of action as a finance minister in 
 European countries, for as he is excluded from 
 Congress, although he regularly reports to it, he 
 has nothing directly to do with the imposition- of 
 taxes, and very little with the appropriation of 
 revenue to the various burdens of the state." ' 
 
 Tho Secretary of the Treasury is not 
 elected by the people, nor by the Congress ; 
 and is therefore responsible to neither. He 
 is an appointee of the President ; and 
 while accountable to public opinion, can- 
 not, as in England, be retired from office 
 by a party vote, but is only subject to re- 
 moval during the term of his appointment 
 by impeachment. He may differ radically, 
 
 ' James Bryce, The American Commonwealth, 2d ed., vol. 
 i., p. 84. 
 
30 Congressional Curreftcy, 
 
 and frequently does, from the Congress in 
 his conception of public finance and cur- 
 rency measures ; and his responsibility as 
 a member of the Cabinet is individual and 
 to the President alone. 
 
 After the organization of the Treasury 
 Department and an outlining of the finan- 
 cial methods to be pursued by the govei'n- 
 ment in its earlier history, the administra- 
 tion of the Treasury was by no means so 
 beset with difficulties, dangers, and respon- 
 sibilities as it has been since 1861. In the 
 past thirty-five years its functions and op- 
 erations have been wonderfully enlarged 
 and extended under congressional currency 
 and finance legislation. Without under- 
 taking to state in detail the numerous and 
 varied responsibilities and authorities of 
 the Secretaiy in administering the affairs 
 of the Treasury Department, mention should 
 be made of three important powers con- 
 ferred upon him by the Congress, viz. : of 
 managing the Federal coinage and currency 
 created and issued under congressional 
 legislation, of controlling and supervising, 
 through a subordinate officer of his depart- 
 
United States Treasury Department 3 i 
 
 ment, tlie National Banking Associations, 
 and of managing the public debt. 
 
 Of his many subordinates whose services 
 are required for the necessary administra- 
 tion of the Department, it is only pertinent 
 to the subject to mention those whose 
 duties are directly in relation to the circu- 
 lating medium of the country and the 
 immediate currency transactions of the 
 treasury itself.^ 
 
 These subordinate officers are in the 
 order of their relative importance as gauged 
 by the Congress in fixing their several 
 salaries by statute, as follows, viz. : The 
 Treasurer of the United States, the Comp- 
 troller of the Currency, the two Assistant 
 Secretaries of the Treasury, the Chief of 
 the Bureau of Engraving and Printing, the 
 Eegister of the Treasury, and the Director 
 of tlie Mint. They are, like the Secretary 
 himself, all appointed by the Pi'esident, 
 with the consent and advice of the Senate. 
 
 The Treasurer of the United States has 
 
 ' An admirable sketch of the United States Treasury De- 
 partment by Mr. A. R. Spofford may be found in Lalor's 
 CycloJ>cedia. 
 
32 Congressional Currency. 
 
 charge of and is responsible for the public 
 moneys in the Treasury at Washington and 
 in the nine Sub-Treasuries located in the 
 most important cities of the country, as 
 well as of that deposited in those national 
 banks which are made United States de- 
 positories of public funds by statute. He 
 is trustee of the government bonds pur- 
 chased and owned l)y national banks tak- 
 ing out circulation, and placed with him 
 for the purpose of securing the solvency of 
 the national bank notes ; and among his 
 many other duties is that of agent of the 
 government for the redemption of these 
 notes of the banks. He has like charge of 
 the redemption of all other government 
 currency obligations. 
 
 The Comptroller of the Currency has 
 especial control, subject to the discretion 
 of the Secretary of the Treasury and to 
 the statutory limitations and restrictions 
 imposed by the Congress, of the national 
 banking system. He appoints bank ex- 
 aminers and receivers of broken banks ; 
 and he collects and compiles statistics of 
 banks and banking, both State and Federal. 
 
United States Treasury Department. 33 
 
 He has charge of the redemption and de- 
 struction of notes issued by the national 
 banks which become so mutilated or other- 
 wise injured as to be unfit for further use. 
 It is his duty to make stated reports of his 
 transactions to the Congi'ess. He may not 
 be interested in any national banking as- 
 sociation ; and no such association may be 
 organized without his previous authority. 
 
 The statute creating the office of Comp- 
 troller of the Currency was enacted in 
 1863, and was a necessary part of the 
 scheme of the national banking system 
 suggested by Mr. Chase, Secretary of the 
 Treasury in Mr. Lincoln's first adminis- 
 tration. 
 
 The two Assistant Secretaries of the 
 Treasury have a general subordinate con- 
 trol of the routine business of the depart- 
 ment ; and in the absence of the Secretary 
 or in case of his inability to perform his 
 duties, one of them is designated to act in 
 his stead. 
 
 The Chief of the Bureau of Engraving 
 and Printing has charge of that extensive 
 section of the Department in which the 
 
34 Congressional Currency. 
 
 plates are prepared and the printing done 
 therefrom of all government bonds, national 
 bank notes, gold certificates, silver certifi- 
 cates and currency certificates, Treasuiy 
 notes and internal revenue stamps. This 
 Bureau grew out of the provisions of the 
 second section of the act of July 11, 1862, 
 directing the engraving and printing of the 
 greenbacks, under the supervision of the 
 Secretary of the Treasury, at the Depart- 
 ment. It was reorganized and perfected 
 in its details at a subsequent period by 
 Secretary Sherman. A singular fact in 
 connection with its history is that the 
 policy of employing women in the public 
 departments of government at Washington 
 originated with this Bureau.^ 
 
 The keeping of the government's fiscal 
 accounts, and the signing and issuing of its 
 bonds, notes, and certificates, are among 
 the duties and responsibilities of the Regis- 
 ter of the Treasury. In addition, he regis- 
 ters all warrants drawn by the Secretary of 
 the Treasury upon the Treasurer of the 
 United States ; and he is required to can- 
 
 * J. K. Upton, Money in Politics, pp. g2 and 93. 
 
United States Treasury Department. 3 5 
 
 eel and destroy the Treasury notes wliicli 
 come into the Treasury in so mutilated or 
 defaced a condition as to be unfit for 
 further use. 
 
 Under the Coinage act of 1873, which, 
 as will be seen hereafter, marks the begin- 
 ning of an important epoch in the history 
 of the currency of the United States, the 
 Mint Bureau was made a special division 
 of the Treasury Department. The Director 
 of the Mint is the chief officer of the Mint 
 Bureau ; and is of course subordinate to 
 the Secretary of the Treasury, and like the 
 other Treasury officials, in certain direc- 
 tions, subject to his control. Prior to the 
 passage of the Coinage act of 1873, the 
 Director of the Mint at Philadelphia was 
 the chief mint officer; and that mint was 
 the principal one, of which the others were 
 branches. Under the provisions of the act 
 of 1873 each mint was made and remains 
 independent of the others ; and each is in 
 charge of a superintendent who makes re- 
 poi'ts directly to the Director of the Mint 
 at the Mint Bureau in Washington.^ The 
 
 ' Lalor's Cyclopcedia^ article "Coinage." 
 
36 Congressional Currency, 
 
 minor coinage is by law now confined to 
 the Philadelphia mint.^ 
 
 The Director of the Mint formulates rules 
 and regulations for the government of the 
 mints and assay offices ; and regulates the 
 distribution of the coinage of silver and the 
 charges to be collected of tbose who de- 
 posit it. The purchases of silver bullion 
 for the coinage of subsidiary silver and the 
 allotment of the coinage to the several 
 mints are under his immediate supervision ; 
 and tests of the weight and fineness of coins 
 struck at the mints are made in the assay 
 laboratory at Washington under his charge. 
 He also estimates and fixes the values of the 
 standard coins of foreign countries for cus- 
 tom-house and other public purposes. 
 
 The fiscal year of the United States 
 Treasury in all matters of accounts, re- 
 ceipts, expenditures, estimates, and appro- 
 priations commences by law on the first day 
 of July in each year ; and all accounts of 
 receipts and disbursements required bylaw 
 to be published annually are prepared and 
 
 published with reference thereto.^ 
 ». 
 
 ' Banker's Magazine for April, 1895, p. 726. 
 2 United States Revised Statutes, Title VII. 
 
III. 
 
 THE INDEPENDENT TREASUKY OR SUB-TREAS- 
 URY OF THE UNITED STATES. 
 
 It is not within the scope of these chap- 
 ters to make more than brief and passing 
 reference to the financial events of the 
 earlier days of the Republic, when the 
 Federal government was engaged in the 
 banking business in connection with the 
 organization and maintenance of the first 
 and second Banks of the United States. 
 Few questions down to 1840 were so 
 prominent in national politics as that of a 
 National Bank ; and few currencies were 
 more satisfactory and popular in the finan- 
 cial history of any country than the notes 
 of the second Bank of the United States 
 for a period of twenty years of its exist- 
 ence.^ When President Jackson removed 
 
 ^Lalor's Cyclopcedia, article " Bank Controversies. 
 37 
 
2,^ Congressional Cur^^ency, 
 
 the government deposits from the last- 
 named institution to the state banks, the 
 glory of the Federal Bank was at an end.^ 
 
 The system adopted by Jackson, without 
 the express authority or sanction of law, of 
 depositing the government funds entirely 
 in banks chartered and governed exclusively 
 by state laws, was subsequently specifically 
 authorized by legislation of the Congress as 
 a part of the federal plan of ^ nance ; and 
 was followed within a few years by the 
 institution of what is known as the Sub- 
 Treasury or Independent Treasury system 
 of the United States. 
 
 Pi-Ior to the removal of the deposits by 
 Jackson, in addition to the United States 
 Bank the government under special con- 
 ti'acts made use of certain state banks as 
 depositories of public moneys ; but always 
 with the proviso that the state bank should 
 on request transfer to the Bank of the 
 United States any money received in excess 
 of the permanent deposit; and a number of 
 state banks were so used by the Secretary 
 of the Treasury up to the time of the re- 
 
 ^ Lalor's Cyclopcsdia^ article " Independent Treasury." 
 
The Sub- Treasury, 39 
 
 moval of the deposits. By the act creating 
 the Bank, the Secretary was directed to de- 
 posit all public moneys in the Bank or its 
 branches, ^' unless the Secretary of the 
 Treasury shall at any time otherwise order 
 and direct ; in which case the Secretary of 
 the Treasury shall immediately lay before 
 Congress, if in session, and if not, immedi- 
 ately after the commencement of the next 
 session, the reason of such order or direc- 
 tion." 
 
 The President believed that the Bank of 
 the United States under the management of 
 Nicholas Biddle, was not only not safely 
 managing the government's finances, but 
 w^as endeavoring, through discounts and 
 loans to members of the Congress and power- 
 ful politicians, to so control the Congress as 
 to secure the impeachment of himself and 
 other prominent members of his adminis- 
 tration. Under the instructions of the 
 Executive, who assumed full responsibility 
 therefor, Roger B. Taney, subsequently 
 Chief Justice of the United States, and 
 who three days before had been appointed 
 Secretary of the Treasury for the purpose 
 
40 Congressional Currency, 
 
 by Jackson, gave the necessary orders for 
 the removal. As a matter of fact, how^ever, 
 there was no removal. The government 
 funds on deposit with the Bank were left 
 there. The order of the Secretary provided 
 that the public moneys should thereafter 
 be deposited in certain state banks, specifi- 
 cally set out therein. In speaking of the 
 Bank's controversy with Jackson, Professor 
 Alexander Johnston says : 
 
 " Instead of following the simple and natural 
 plan afterwards adopted of an Independent Treas- 
 ury, by which the whole fiscal business of the 
 Federal government was intrusted to the Treasury, 
 Congress had undertaken to graft a private corpor- 
 ation upon the Treasury. The larger the fiscal 
 business of the country grew, the more powerful 
 and dangerous grew this extra-governmental ex- 
 crescence. The very even balance of the war be- 
 tween the President and the Bank is of itself strong 
 evidence of the power which the Bank was able to 
 exert in politics so early in our history as 1831-32. 
 Had it continued to enjoy the use of the increasing 
 revenues of the Federal government, it would have 
 become more and more dangerous, either as the 
 tool or as the master of a popular government, and 
 the succeeding administrations would have found 
 it more and more difficult to shake off its weight." * 
 
 * Lalor's Cyclopedia, article "Removal of Deposits." 
 
OF THE 
 
 v^/ e /; -r - UNIVERSITY 
 
 1 he Smo- 1 1'easury. 
 
 As far back as 1834, William F. Gordon, 
 a member of Congress fi^o«i Albemarle 
 County, Virginia, and a disciple and per- 
 sonal friend of Thomas Jefferson, devised 
 the scheme of the Independent Treasury, 
 and introduced in the Congress a bill pro- 
 viding for its establishment.^ The measure 
 was dropped! at that time/ for lack of the 
 support which it subsequently obtained 
 when made a party measure by a vigorous 
 and determined Executive, receiving on its 
 first introduction in the Congress only 
 thirty-three votes. President Van Buren, 
 soon after his inauguration, found his ad- 
 ministration beset by financial difficulties, 
 and the government at a loss for money to 
 defray its current expenses. In a message 
 to the extra-session of the Congress which 
 convened September 4, 1837, he advocated 
 the separation of the fiscal matters of 
 government from all banking business and 
 banking corporations, suggesting and adopt- 
 ing as a party measure Gordon's Sub- 
 Treasury scheme.^ This scheme was, in 
 
 ' David Kinley, The Independent Treasury of the United 
 States, p. 25. 
 
 ^ The Statesman's Manual, 2d ed., vol. ii,, p, 1051. 
 
42 Congressional Currency, 
 
 effect that the government revenues, instead 
 of being deposited in certain favored banks, 
 called in the political slang of the day, 
 ^'pet banks," as had been done since the 
 removal of the deposits, " should be left in 
 the hands of assistant cashiers or treasurers 
 at convenient and permanent points through- 
 out the country, to be disbursed or account- 
 ed for to the Secretary of the Treasury by 
 such assistant treasurers, who were required 
 to give bond for the faithful pei-formance 
 of their duties." 
 
 Silas Wright, of New York, on January 
 16, 1838, reported the Independent Treas- 
 ury bill from the Senate Committee on 
 Finance. It passed the Senate, and was 
 defeated in the House of Representatives. 
 Mr. Calhoun had been in favor of the bill 
 originated in 1834 by Gordon ; but voted 
 against the Wright bill because that por- 
 tion of the original plan providing for a 
 " hard money " currency was stricken out.* 
 In January, 1840, Mr. Wright again intro- 
 duced his bill in the Senate, where it was 
 
 ' W. Cluskey, Political Text Book, article " Independent 
 Treasury." 
 
The Sub' Treasury. 43 
 
 passed. On June 30, 1840, it passed the 
 House of Representatives, and became a 
 law. In June, 1841, Mr. Clay from the 
 Senate Finance Committee, introduced a 
 bill to repeal the Independent Treasury 
 law enacted the year befuie. The repeal 
 bill passed both Houses of the Congress, 
 and was signed by President Tyler. The 
 Congress of 1841 was a Whig Congress, 
 and in favor of re-establishing a National 
 Bank. A bill for that purpose was passed 
 by the Congress, but was vetoed by the 
 President on constitutional grounds.^ 
 
 The Independent Treasury act, now on 
 the Federal statute book, became a law on 
 August 6, 1846 ;^ and though amended in 
 many minor details by direct enactment, 
 and diverted from its original purposes by 
 sundry acts of congressional currency legis- 
 lation, stands in general form as it was 
 originally framed by its author. 
 
 There are nine sub-treasuries at the 
 present time, located respectively at Balti- 
 
 ^ Cluskey, Political Text Book, article " Independent 
 Treasury." 
 
 ^ Kinley, The Independent Treasury^ p. 271. 
 
44 Congressional Currency. 
 
 more, Philadelphia, New York, Boston, 
 Cincinnati, Chicago, St, Louis, New Or- 
 leans, and San Francisco. Of these the 
 most important, on account of its location 
 and of the magnitude of its transactions, is 
 that in the city of New York. By the 
 provisions of the act passed in 1875 for the 
 resumption of specie payments, the sus- 
 pension of which by the sub-treasuries took 
 place December 28, 1861,^ the legal tender 
 United States note known as the greenback 
 was made redeemable only at the sub-treas- 
 ury in the city of New York.^ By subsequent 
 legislation the sub-treasury at San Francisco 
 was also authorized to redeem the green- 
 back in "specie";^ and these two sub- 
 treasuries remain the only ones at which 
 such redemption may be made. 
 
 Although the Independent Treasury 
 plan as formulated and adopted,^ contem- 
 
 * Lalor's Cychpcedia^ article " American Finance." 
 
 ^ Act, January 14, 1875. 
 
 ^ Act, March 3, 1887. Supplement to Revised Statutes^ 
 p. 566. 
 
 "* " The primary purpose of the adoption of the Independent 
 Treasury was the safety of the public money." — Kinley, The 
 Independent Treasury^ p. 220. 
 
The Sub-Treasury. 45 
 
 plated primarily nothing further than a 
 better oi'ganization of the Treasury in its 
 methods of business, and the proper collec- 
 tion, safe-keeping, and disbursement of the 
 public revenues ; or, as stated by Mr. 
 Calhoun in his speech on the Independent 
 Treasury bill, delivered in the Senate, Feb- 
 ruary 15, 1838, "to take the public money 
 out of the hands of the Executive and place 
 it under the control of the laws, and to 
 prevent the renewal of a connection which 
 has proved so unfortunate to the govern- 
 ment and the banks," ^ Federal legislation 
 subsequent to 1860, without materially 
 altering the tenor and form of the Sub- 
 Treasury act, has given to the general 
 Treasury system an incomparably greater 
 latitude and significance than it possessed 
 in its earlier history, and has incorporated 
 into its operation features, which, if not at 
 variance with those original provisions of 
 the law, were at least never anticipated in 
 the purview of its first plan.'^ It is difficult 
 
 ^ Calhoun's Works, vol. iii., p. 203. 
 
 ^ Kinley, The Independent Treasury of the United States^ 
 p. 122. 
 
46 Congressional Currency. 
 
 to imagine, for example, in the light of the 
 politico-economic controversies over a Na- 
 tional Bank, which the final definite estab- 
 lishment of the Sub-Treasury in a measure 
 settled and disposed of, that section eighteen 
 of the act of August 6, 1846, which pro- 
 vided that " all duties, taxes, sales of public 
 lands, debts, and sums of money accruing 
 or becoming due to the United States, and 
 also all sums due for postages, or otherwise 
 to the General Post-ofi5ce Department, shall 
 be paid in gold and silver coin only, or in 
 Treasury notes issued under the authority 
 of the United States," would ultimately be 
 used for the conversion of the Independent 
 Treasury of the United States into a 
 National Bank of issue, with an irredeem- 
 able circulation of $500,000,000 of legal 
 tender paper notes, and the necessary con- 
 comitant of a one hundred million dollar 
 gold reserve.^ 
 
 The financial war-policy, which conceived 
 and created the greenback, with a legal 
 tender feature approved by the judicial 
 
 ' "The Financial Muddle," by Henry G. Cannon, in the 
 North American Review for February, 1895. 
 
The Sub- Treasury. 47 
 
 determination of the highest Federal tri- 
 bunal ; the compulsory enactment of the 
 Congress which makes the greenback re- 
 deemable in coin on presentation, and re- 
 quires it to be re-issued immediately on 
 redemption by the Treasury Department ; 
 and the further financial legislation by the 
 Congress, authorizing not only the accumu- 
 lation of silver bullion in the Treasury and 
 the coinage of silver dollars on a false ratio, 
 but the issue of certificates of deposit and 
 Treasury promises to pay against such dol- 
 lars and bullion, and defining the policy of 
 the government to be the practical payment 
 of the greenbacks, silver certificates and 
 Treasury notes in gold coin, have combined 
 to create new functions, duties, and pur- 
 poses, and to set into motion other systems 
 of financial machinery than those known to 
 the earlier administration of the Treasury 
 Department/ Before the enactment of this 
 later legislation " the Sub-Treasury system 
 as originally established so entirely severed 
 the government from the money market 
 that, fortunately, the bankers and mer- 
 
 ^ Calhoun's Works^ vol. iii., p. 231. 
 
48 Congressional Currency, 
 
 chants could afford to lauo^h at tlie insicrnif- 
 icance of the government on their arena; 
 but its position was never so strong or sound 
 as when, in this point of view, it was most 
 ridiculous." ^ Under the latter day enlarge- 
 ment of the Treasury functions by the Con- 
 gress, when the government is put to the 
 gravest exertions to keep its paper issues 
 at par by the maintenance of a gold reserve 
 in the Treasury, and when the national 
 banks, by a judicious use of government 
 legal tenders, control the gold reserve and 
 the government's bond issues availed of to 
 maintain it, the relations existing between 
 the government and the money market have 
 become of such a peculiar character that the 
 Treasury's insignificance in any struggle 
 between the two becomes again ridiculous 
 from another standpoint than the one just 
 named. 
 
 In the view of those w^ho hold that there 
 should be an entire separation of the gov- 
 ernment from banks and banking, the idea 
 that the Congress itself can create money 
 by its simple j^c/^ or sanction, has, under the 
 
 * W. G. Sumner, History of American Currency y p. 167. 
 
The Sub-Treasury, 49 
 
 influence of the legislation above described, 
 taken strong hold upon the public mind. 
 They assert, too, that while the Federal 
 Treasury is now compelled by statute to 
 perform the offices of a bank of issue, ^ its 
 executive officer is hampered with require- 
 ments and limitations, frequently enacted 
 by the Congress for special purposes or to 
 meet impending emergencies, which either 
 retard or absolutely prevent his efforts to 
 conduct the business of his great national 
 bank with any degree of discretion or ex- 
 pectation of success.^ 
 
 To the contrary, however, are the opin- 
 ions of those of an opposing school, who in 
 advocating the propriety of the enlarged 
 uses of the Sub-Treasury system, assert that 
 the government's recent failures to maintain 
 the gold reserve in the Treasury, and the 
 resultant necessity for the sale of bonds to 
 protect it, have* sprung from congressional 
 legislation affecting the raising of public 
 revenues, and not from currency conditions ; 
 
 ' '* The Financial Muddle," North Am. Review for Febru- 
 ary, 1S95. 
 
 ' Report of the Secretary of the Treasury, December, 1894. 
 
50 Congressional Currency, 
 
 and contend that " under the existing sys- 
 tem, by which the government practically 
 holds and disburses its own money and that 
 of its officers, the fiscal operations are con- 
 ducted without disturbance, embarrass- 
 ment, or favoritism, and with satisfaction 
 to all concerned." ^ 
 
 While the assertion of Professor Kinley, 
 in his elaborate and able treatise on the 
 Independent Treasury, that the Sub-Treas- 
 ury act made the government distinctively 
 its own banker, and taken in connection 
 with the law sanctioning the emission of 
 treasury notes, established a bank of issue, 
 is true in degree and in theory, the provi- 
 sion of the law authorizing treasury notes 
 and of that section of the Sub-Treasury act 
 permitting their acceptance at the sub- 
 treasuries for sums due the government, 
 were secondary considerations in the estab- 
 lishment of the Independent Treasury. At 
 no time in the history of the country after 
 the passage of the Sub-Treasury act, prior 
 to the legal tender legislation of 1862, had 
 
 * Secretary John Sherman, in 1880 ; cited in Kinley's The 
 Independent Treasury^ p. 77. 
 
The Sub-Treasury, 51 
 
 the business of issuing notes been in vogue 
 with the Treasury, save to a very limited 
 and exceptional extent; and at no time 
 prior to that period had the government 
 ever found it necessary to maintain in its 
 vaults a large and'unimpaired gold reserve 
 to secure the redemption of such treasury 
 notes as were issued. But when, as Mr. 
 Kinley subsequently says/ the government 
 '^ turned itself to the manufacture by the 
 hundred million of greenbacks, which by a 
 legal tender j^(2^ were forced on creditors in 
 payment of the hard-earned dollars they 
 had loaned, from this time on, certainly, 
 until the resumption of specie payments, 
 the Sub-Treasury law was a dead letter," 
 and the Sub-Treasury itself remained " only 
 in form." The subsequent passage of the 
 National Bank act, which made the national 
 bank notes issued thereunder receivable at 
 their nominal value everywhere in the 
 United States in all payments to and by 
 the government, except customs and interest 
 on the public debt, was a practical nullifi- 
 cation of the provision of the Sub-Treasury 
 
 ' p. 68. 
 
52 Congressional Currency. 
 
 act, which limited payments to and by the 
 government to gold and silver and treasury 
 notes. A further departure from the intent 
 and purpose of the original law was the 
 issuing under act of the Congress, of gold 
 and silver certificates, \^hich are in effect 
 certificates of the government that so much 
 gold and silver coin respectively has been 
 deposited in the sub-treasuries, and is held 
 free of charge for the convenience of the 
 holders of such certificates. 
 
 In 1872 the Congress went still further 
 in departing from the old Sub-Treasury 
 land-marks when it passed the act pro- 
 viding that the banks might deposit legal 
 tender notes in the sub-treasuries and re- 
 ceive certificates of deposit known as " cur- 
 rency certificates," of large denominations, 
 prepared and issued by the Treasury with- 
 out cost to the banks.^ The legal tenders 
 so deposited are withdrawable on demand, 
 and by this arrangement the banks are 
 always in position to be suj^plied with legal 
 tender notes of small and convenient de- 
 nominations, without expense.^ 
 
 ' Act, June 8, 1872. 
 
 ^ Kinley, The Independent Treasury^ p. 72, 
 
The Sub- Treasury, 53 
 
 In the progress of legislative events since 
 i860, the transactions of the Sub-Treasury 
 have become necessarily so intermingled 
 with the business of the banks as that the 
 two systems are absolutely interdependent. 
 A people who had been taught to believe 
 that the agencies of national banks in a 
 Republican form of government were unde- 
 sirable, now submits with apparent indif- 
 ference to the existence of a double system 
 of national banks, the one carried on directly 
 by the government in its administration of 
 the Treasury, and the other sanctioned and 
 created by the government but carried on 
 by private individuals, who are in the habit 
 of taking the government by the throat 
 whenever they are pleased to do so. 
 
 " The divorce of the government and the 
 banks" has ceased to be; and the Sub- 
 Treasury system, instead of existing "in 
 form only," has become under congressional 
 legislation a gigantic national banking 
 scheme, dominated by party politics, in 
 comparison with which the first and second 
 Banks of the United States were insignifi- 
 cant. What the Sub-Treasury in its earlier 
 form and purpose accomplished for the 
 
54 Congressional Curi^ency, 
 
 government, as told in the language of a 
 learned, impartial, and conservative author- 
 ity, may not inappropriately conclude this 
 chapter : 
 
 " It inflicted no damage upon the state banks or 
 upon business at large ; it did not increase the num- 
 ber of offices at the disposal of the president and 
 his party, or the power of the president over the 
 commercial interests of the country ; it laid no 
 ' corner stone of despotism ' ; its practical operation 
 was much more smooth and successful than might 
 have been anticipated in a civil service already so 
 far debased ; and it plainly relieved the govern- 
 ment from any except indirect and remote conse- 
 quences of suspension of specie payments by the 
 banks, and the country from the difficulties and 
 dangers incident to the control of a national bank 
 by a representative body. Its passage opened a 
 hitherto unthought of door of escape from a na- 
 tional bank, so inviting that it would have been 
 foolish for the dominant party not to have availed 
 itself of it, and so convenient when tried, that it 
 would have been impossible on a fair test to induce 
 the country to retrace its steps. Only the momen- 
 tum of the Whig party proper, acquired by years of 
 struggle for a national bank, compelled its leaders 
 to keep up for a time a contest whose futility they 
 were quick to perceive. The first successful execu- 
 tion of the independent treasury act made a national 
 
The Sub-Treasury, 55 
 
 bank an impossibility with general popular consent, 
 and completed the ' divorce of bank and state ' for 
 which the president had for three years been ex- 
 erting all his energy and influence." * 
 
 ' Prof. Alexander Johnston in Lalor's Cyclopcedia^ article 
 " Independent Treasury." 
 
IV. 
 
 THE NATIONAL BANKING ASSOCIATIONS. 
 
 The method of organizing a national 
 bank, and its powers and functions when 
 organized, are specifically provided by en- 
 actment of the Congress, known as the 
 National Bank Act. The minimum capital 
 stock of a national bank in places of less 
 than six thousand population must be $50,- 
 000 ; in places between six thousand and 
 fifty thousand population $100,000 ; and 
 in cities of fifty thousand population or 
 more $200,000/ After the requisite amount 
 of stock has been subscribed, one half of it 
 must be paid up before tbe bank can begin 
 business ; and the residue is payable in in- 
 stalments in the five succeeding months.^ 
 
 The functions and powers of the national 
 
 » J?ev. Statutes, U. S., §5138. 
 ' /^ev. Statutes, C/. S., % 5140. 
 
 56 
 
National Banking Associations, 5 7 
 
 banks are to receive deposits, to discount 
 and negotiate commercial paper, to buy and 
 sell exchange, coin, and bullion ; to lend 
 money on personal security, and to issue 
 and circulate bank notes as currency/ Re- 
 strictions of various kinds are imposed 
 upon the banks, with a view of compelling 
 the safe and proper conduct of their busi- 
 ness, such as inhibitions asrainst eno^ag^ino^ 
 in general trade and commerce, against 
 holding real estate except in certain speci- 
 fied instances, and the like. A further and 
 salutary provision is that tliere shall be a 
 ratable liability on the stockholder for the 
 debts of the bank to the extent of his 
 stockholding, in addition to the capital 
 actually invested by him. 
 
 The charters of the national banks, which 
 are issued from the Treasury Department 
 on application of not less than five cor- 
 porators to the Comptroller of the Currency, 
 are in the nature of certificates from that 
 officer that the preliminary requirements 
 of the statute have been complied with. 
 The organization certificate, preliminary to 
 
 ^ Rev. Statutes, U. S.,% 5136. 
 
58 Congressional Currency. 
 
 the issuing by the Comptroller of the cer- 
 tificate of incorporation, must contain the 
 name of the association ; the name of the 
 place where its operations of discount and 
 deposit are to be carried on ; the amount 
 of capital stock, and the number of shares 
 into which the same is to be divided ; the 
 names and places of residence of the share- 
 holders, and the number of shares held by 
 each ; and the fact that the certificate is 
 made to enable the corporators to avail 
 themselves of the advantages of the N^a- 
 tional Bank act/ 
 
 In addition to the powers and functions 
 described, such of the national banks as are 
 so designated may become depositories of 
 certain of the public moneys, and are re- 
 quired to place with the Treasurer of the 
 United States at Washington government 
 bonds as security for the safe-keeping and 
 proper handling of such funds.^ This pro- 
 vision is in the nature of a return by the 
 government to the practice prevailing after 
 the removal of the deposits from the second 
 
 ^ Rev. Statutes t/: 6*., § 5134. 
 ^ Rev. Statutes U. S.,% 5153. 
 
National Banking Associations. 59 
 
 National Bank of the United States by 
 President Jackson, prior to the passage of 
 the Independent Treasury act, described 
 in the preceding chapter/ 
 
 The currency in the shape of bank notes 
 is printed at the Treasury Department in 
 Washington, from plates pi'epared by the 
 Bureau of Engraving and Printing from 
 designs authorized by the Secretary of the 
 Treasury, upon " distinctive " paper, the 
 material used in the manufacture of which 
 is a government secret. The possession by 
 any person of this " distinctive " paper, 
 other than those authorized by law, is made 
 a felony, punishable by fine and imprison- 
 ment at hard labor. ^ 
 
 Under the act of 1864, the notes issued 
 by the Treasury Department might amount 
 by law to ninety per cent, of the market 
 value of the bonds deposited to secure 
 them, but could not exceed ninety per cent, 
 of the par value of such bonds if bearing 
 interest at a rate not less than ^yq per 
 cent. ; and in no case might exceed the 
 
 * Lalor's Cyclopcedia, article, " Bank Controversies." 
 ^ Rev. Statutes U. S., % 5430. 
 
6o Cofigressional Currency, 
 
 capital stock of the banks. This provision 
 was modified the following year so that 
 banks with a capital of from $50,000 to 
 $500,000 might receive in circulating notes 
 only ninety per cent, of their capital, and 
 so on in a diminishing percentage as the 
 capital of the bank increases.^ 
 
 Under the existing provision of the Na- 
 tional Bank act, notes may be issued to 
 the bank by the Treasury Department to 
 the extent of ninety per cent, of the par 
 value of the bonds so deposited.^ Thus, 
 for example, before a national bank can 
 take out $9,000 of circulating notes, it 
 must deposit interest-bearing government 
 bonds of the par value of $10,000. These 
 bonds command a premium in the market, 
 so that $10,000 of government four per 
 cents, would cost the bank $11,550. The 
 law requires the deposit with the United 
 States Treasurer at Washington of ^vq per 
 cent, of its circulation in money by each 
 national bank for a redemption fund. So 
 the bank can only issue $9,000 of notes 
 after the expenditure of $12,000 in money .^ 
 
 ' H. W. Richardson, The National Banks, chap. v. 
 
 2 Act, July 12, 1882, § 10. 
 
 ' W. L. Trenholm, The People's Money, p. 169. 
 
National Banking Associations, 6i 
 
 The five per cent, redemptioa fund is re- 
 quired by the statute to be deposited in 
 " lawful money of the United States." ^ 
 This may be counted as a part of the bank's 
 legal reserve. It is further provided in the 
 same section of the statute, tliat when the 
 bank's circulating notes shall be presented 
 for redemption in sums of one thousand 
 dollars, or any multiple thereof, to the 
 Treasurer of the United States, the same 
 shall be redeemed in United States notes. 
 
 When the bank notes have once gone out 
 and mingle with the general circulating 
 medium they are never brought back to 
 the bank which issues them for redemption, 
 differing in this respect from the real bank 
 note in its genuine sense, which is redeemed 
 by the bank that issues it, and when so re- 
 deemed is never reissued. At no time, 
 however, can the national bank withdraw 
 its bonds on deposit for the security of the 
 outstanding notes until it has made a de- 
 posit of lawful money for their redemption. 
 
 It is seen at once that the national bank 
 note is a promise of the United States gov- 
 
 ^ Act, June 20, 1874, § 3. 
 
62 Congressional Currency, 
 
 ernment to pay, based upon the security of 
 government bonds, bought by the bank 
 issuing the notes, and deposited as a pledge 
 with the Treasurer at Washington. 
 
 The law provides for the immediate re- 
 demption at the Treasury of all the notes of 
 any failed bank.^ The destruction of any 
 bank notes in circulation is a loss to the 
 bank issuing them and enures to the gain 
 of the government, as does also the failure 
 of ultimate holdei's of the notes to call for 
 their redemption at the Treasury.^ 
 
 Frequent reports, not less than ^-^^ in 
 number, of the condition of the banks are re- 
 quired by the Comptroller of the Currency 
 each year. These itemized reports, made 
 out on printed forms setting forth the sun- 
 dry items required to be stated, are pub- 
 lished in the local papers of the town or 
 city where the bank making them is con- 
 ducted ; ^ and each bank is subject at any 
 time to the visitation and inspection of 
 special Treasury agents, appointed by the 
 Comptroller of the Currency, known as 
 
 * Rev. Statutes U. S.,% 5224. 
 
 « Act, July 12, 1882, § 6. 
 
 ^ Rev. Statutes f/. 5., § 5211. 
 
National Banking Associations. 63 
 
 bank examiners, who report to him the con- 
 dition of each bank examined by them/ 
 The expenses of publishing the reports 
 made by the banks, and of the investiga- 
 tions conducted by the bank examiners, 
 are borne by the individual bank in each 
 instance. 
 
 A tax of one per cent, per annum is im- 
 posed upon the banks' circulation by the 
 government, and of one half of one percent, 
 upon their average deposits and capital not 
 invested in United States bonds.^ Up to 
 the passage by the Congress on August 13, 
 1894, of the act to subject to state taxation 
 national bank notes and United States 
 Treasury notes, such notes were exempt 
 from local taxation of any kind. They are 
 by that act now made subject to taxation 
 as money on hand or on deposit under the 
 laws of any state or territory, provided 
 that such taxation is exercised in the same 
 manner and at the same rate that such 
 state or territory taxes money, or currency 
 circulating as money, within its jurisdiction. 
 
 The act of March 3, 1887, provides that 
 
 ^ Rev. Statutes U. S.,% 5240. 
 2 Rev. Statutes U. S.,% 5214'. 
 
64 Congressional Currency, 
 
 for the protection of depositors from lia- 
 bility, the banks outside of the " reserve 
 cities" shall keep a reserve of 15 per cent, 
 of their deposits, and that banks in the 
 " reserve cities " shall keep 25 per cent. 
 Any city having fifty thousand inhabitants 
 can become a " reserve city " upon appli- 
 cation of three fourths of the national 
 banks established and doing business in it ; 
 and a city having two hundred thousand 
 inhabitants can be made a '^ central reserve 
 city " upon application of three fourths of 
 the national banks established in it.^ This 
 statute further provides that one half of the 
 lawful money reserve of the national banks 
 located in other reserve cities may be de- 
 posited in such central reserve cities. 
 
 The report of the Comptroller of the 
 Currency made to the Congress, December 
 3, 1894, shows that on October 2, 1894, 
 there were 3755 national banks in existence 
 in the United Stateshaving an outstanding 
 bank note circulation of $172,331,978. On 
 October 3, 1893, there were 3781 national 
 banks having an outstanding note circula- 
 
 ' C. F. Dunbar, The Theory and History of Banking, p. 
 145 ; Supplement to the Revised Code, vol. i., p. 566. 
 
National Banking Associalions. 65 
 
 tion of $182,959,725. The total amount 
 of outstanding bank circulation, including 
 not only the notes of the banks still in 
 operation, but of the large number that sus- 
 pended during the panic of 1893 and which 
 had not as yet been redetmed, aggregated 
 October 31, 1894 the sum of $207,472,603.^ 
 Under the original bank act, the life of a 
 national bank was limited to twenty years.'^ 
 In 1882 the Congress enacted what is 
 known as ^' the bank charter extension 
 act,"^ providing that upon compliance with 
 certain requirements therein specified, the 
 bank might further extend its corporate 
 existence, with the approval of the Comp- 
 troller of the Currency, for another twenty 
 years. This amendment of the National 
 Bank act, though of extreme importance 
 in prolonging the existence of the associa- 
 tions, made little change in the general pro- 
 visions of the law governing the national 
 banks. The ultimate payment at a proba- 
 bly comparatively early date of the national 
 debt, on which the circulation of the na- 
 
 * Report of the Secretary of the Treasury^ 1 894, p. XV, 
 « Rev. Statutes U. S.,% 5136. 
 3 Act, July 12, 1882. 
 
66 Congressional Currency, 
 
 tioual banks is based, makes it inevitable 
 that the national bank system must then 
 come to an end, so far as the issuing of 
 notes is concerned, unless some acceptable 
 modification or change shall be made in the 
 law, which will either provide a different 
 character of pledged security, or make the 
 notes so issued " bank notes " in the 
 true sense of the term — that is, an issue 
 based on the general assets and credit of 
 the bank, with proper provision for their 
 prompt redemption. 
 
 The bankers and financiers of the coun- 
 try, recognizing the necessity of anticipating 
 the payment of the government's debt, have 
 for some years past been engaged in consid- 
 ering plans and schemes for a proper bank 
 currency ; and the advocates of state banks 
 of issue, subject to such legal control and 
 restriction as will secure the solvency of 
 their notes, are to be found among the most 
 distinguished and well informed men of 
 aifairs and publicists in America. 
 
 The fact, however, that the people of the 
 United States have for so long a period 
 known no other bank note than that issued 
 
National Banking Associations. 67 
 
 by the national banks, which, despite other 
 objections urged against it, has steadily 
 maintained the inherent qualities of abso- 
 lute safety and ready receivability every- 
 where thi'oughout the Republic makes the 
 progress of those currency reformers who 
 advocate state banks of issue a difficult one. 
 To this public sentiment in favor of the 
 national bank note and against state bank 
 circulation may be added the more insuper- 
 able one of a clearly indicated determination 
 on the part of the Congress to relax nothing 
 of its iron grasp upon the entire currency of 
 the country. Repeated efforts have been 
 made in successive sessions of the Congress 
 to secure the repeal of the ten per cent, tax 
 on state bank issues, only to be met in each 
 case with signal defeat. The most conspicu- 
 ous instance of this deep-seated determina- 
 tion in the Congress has been the rejection, 
 at a late session, of this measure of repeal 
 by a House of Representatives elected on a 
 party platform which in express terms de- 
 clared in favor of the repeal of this tax.^ 
 
 ^ National Democratic Platform of 1892, World Almanac 
 for 1893, p. 80. 
 
V. 
 
 THE CLEARmG-HOUSE ASSOCIATIONS. 
 
 The Clearing-Houses of the United 
 States, though constituting one of the most 
 conspicuous and important features of mod- 
 ern banking in connection with the currency- 
 circulation, form no part of the statutory 
 machinery of the national government for 
 the administration of its financial and money 
 affairs. They exist under no provision 
 of congressional enactment ; though they 
 are recognized by the government to the 
 extent that the Sub-Treasury in the city of 
 New York is a member of the clearing- 
 house association of that city, having been 
 admitted as such in 1879/ The system of 
 clearing bank balances through the medium 
 of such associations in the larger cities is 
 one that was originated and perfected and 
 is now carried on entirely for the conven- 
 
 ' Kinley, The Independent Treasury, p. 77. 
 68 
 
The Clearing- House Associations, 69 
 
 ience of the several banks adopting it. The 
 Congress, however, has given practical recog- 
 nition of the existence of these organiza- 
 tions, created under the influence of those 
 unerring laws of business which even the 
 most stringent legislation cannot always 
 repress or divert, in two of its very notable 
 statutes w^th regard to the currency. Under 
 the act of June, 1872, a certain species of 
 circulating medium, limited in its circulating 
 quality by reason of its peculiar purposes, 
 but none the less currency, known as '^ cur- 
 rency certificates," was created for the con- 
 venience of the clearing-houses. In a later 
 act^ the Congress provided that national 
 banks should not be members of such 
 clearing-house associations as refused to 
 receive the government's gold and silver 
 certificates in settlement of balances. Both 
 of these provisions of the statute law have 
 failed of the purpose for which they were 
 intended, as will be hereafter shown : the 
 former in that the currency certificates have 
 been availed of by the banks for the accom- 
 plishment of purposes not anticipated when 
 
 ' Act, July 12, 1882. 
 
70 Congressional Currency, 
 
 they were authorized by law ; aud the latter, 
 in that the banks pay little if any attention 
 to the provision, and continue members of 
 such associations as do in point of fact 
 refuse and decline to accept the silver cer- 
 tificate in settling balances.* 
 
 The operations of the clearing-houses 
 which are purely voluntary associations of 
 the banks doing business in individual 
 localities, though governed by rigid and 
 vigorously enforced rules and regulations 
 of their own making, have received local 
 legislative recognition in various ways and 
 instances, notably in the provision of cer- 
 tain state statutes that presentment and 
 demand through the clearing-house shall 
 be as lawful as if at the bank itself.^ 
 
 " Clearing " is defined as " the settlement 
 of mutual claims by the payment of differ- 
 ences." ^ The advantages flowing from the 
 operations of the New York Clearing-House 
 Association, which is the largest and most 
 important association of the kind in the 
 
 ^ Upton, Money in Politics, p. 225. 
 
 2 Albert S. Bolles, Practical Banking, 7th ed., p. 236. 
 
 ^ Lalor's Cyclopcedia, article " Clearing Houses." 
 
The Clearing -House Associations, ji 
 
 United States, have been stated among 
 others, by an eminent autbority, as follows, 
 viz.: First, the condensation for each bank 
 belonging to the association of all the bal- 
 ances of all the banks connected therewith 
 into one, and the settlement of that balance 
 with little loss of time or trouble ; second, 
 the avoidance by the individual bank of 
 numerous accounts, entries, and postings ; 
 third, great saving of time to the bank 
 messengers, and a no less saving of risk in 
 making exchanges and settlements from 
 bank to bank ; fourth, relief from a tremen- 
 dous amount of labor and annoyance to 
 which the cashiers, tellers, and book- 
 keepei's were subjected under the old 
 system ; fifth, the liberation of the asso- 
 ciated banks from all injurious interde- 
 pendence on each other ; and finally, the 
 absolute facility afforded by the books of 
 the clearing-house association for knowing 
 at all times the management and standing 
 of every bank in the association.^ 
 
 While the several clearing-houses in the 
 
 ' Geo. D. Lyman, as quoted in Bolles' Practical Banking, 
 p. 247. 
 
72 Congressional Currency, 
 
 United States differ in their organization 
 and processes in minor details, their pur- 
 poses and methods are essentially the same 
 in all cities where they exist. At a fixed 
 hour in the morning of each day, a clerk 
 and a messenger or porter is sent from 
 every bank belonging to the association to 
 the Clearing-House. The clerks, at a given 
 signal from the manager of the Clearlng- 
 House, are all seated at the desks provided 
 for them ; and the messenger of each bank 
 in turn at another signal, delivers to each 
 of the clerks of the other banks the checks 
 or " exchanges " which his bank holds 
 ag^ainst them. These checks or exchan2:es 
 have been made up into packages at the 
 bank sending: them to the Clearinsr-House 
 prior to the daily session of the association ; 
 and attached to each package is a statement 
 in figures of the amount of " exchanges " 
 contained therein. The paper thus " ex- 
 changed " or " cleared " consists of checks, 
 drafts, and certified notes. Bank notes 
 may be, but as a matter of practice are not 
 now so included, because the notes of the 
 national banks are treated not as " ex- 
 
The Clearing- House Associations, 73 
 
 change " subject to presentation and pay- 
 ment, but as money. Formerly they 
 were included in the Clearing-House '^ ex- 
 changes," especially in the time of the 
 circulation of the state bank issues. 
 
 The messengers take receipts as they de- 
 liver these packages. When all the pack- 
 ages have been delivered, each bank in the 
 association has before its clerk or repre- 
 sentative all the checks or " exchanges " 
 held against it by the other banks and has 
 presented to all the other banks all the 
 checks or " exchanges " it holds against 
 them. Balances are then struck by the 
 clerks as they sit at their desks in the Clear- 
 ing-House, fines being imposed by the pre- 
 siding officer for mistakes or delays ; and a 
 tally sheet of all the transactions is there- 
 upon made by the manager of the associa- 
 tion, on which tally-sheet the debits and 
 credits of all the several banks must neces- 
 sarily balance. The debit balances are 
 required by the rules to be settled within 
 a specified time, under penalties which are 
 rigidly enforced. 
 
 This process of " clearing " takes but a 
 
74 Congressional Currency, 
 
 few minutes in each day, and in the only 
 successful method ever devised for the 
 prompt and accurate settlement and adjust- 
 ment of exchanges among a number of 
 banks. Errors subsequently ascertained, 
 as when, for example, cliecks are thrown 
 out, ai*e corrected and settled })etween bank 
 and bank, and not with the clearing-house, 
 whose functions are at an end when tlie 
 balances have been struck on the associa- 
 tion tally sheet and the debit balances 
 paid.^ Debit balances, as ascertained by 
 the tally sheet, are settled with coin or 
 legal tender paper, as a rule. One of the 
 most frequent means of settlement at the 
 New York Clearing-House in the earlier 
 days of its existence was by certificates of 
 the Clearing-House itself, secured on gold 
 deposited by the bank taking out the cer- 
 tificates. Other means of settling balances 
 are with United States gold certificates, 
 and with United States currency certifi- 
 cates, which last is a species of the currency 
 
 * R. G. Horr in N. V. Semi- Weekly Tribune, July 21, 1893. 
 JioWts Practical Bankitig, Part III., p. 215 <?/ seq. Lalor's 
 Cychpadia, article "Clearing Houses." 
 
The Clearing- House Associations. 75 
 
 ostensibly provided by the Congress for 
 the express use of the banks in settling 
 such balances/ As heretofore stated, the 
 Congress has sought to compel by statute 
 the acceptance of the silver certificates by 
 the clearing-houses in settlement of bal- 
 ances, but in practice the law is not com- 
 plied with, even at the New York Clearing- 
 House, of which the Sub-Treasury in that 
 city is a member.^ 
 
 The cleai-ing-house gold certificates 
 originated in 1853. They are issued, as 
 stated, against gold coin deposited to secure 
 them, and are in denominations of $1,000, 
 $5,000, and $10,000. They are numbered, 
 registered, and endorsed by the bank issu- 
 ing them ; and are only used in settlements 
 between the banks. When in 1862 the 
 United States Government began its legal 
 tender issues, and gold and silver disap- 
 peared from circulation on the suspension 
 of specie payments, the clearing-house gold 
 
 ^ Act, June 8, 1872. Compilation U. S. Currency Laws, 
 p. 30. 
 
 2 Act, July 12, 1882. J. K. Upton, Money in Politics, 
 p. 225. 
 
76 Congressional Currency. 
 
 certificates, of course, went out of use. In 
 1879, however, with the resumption of 
 specie payments as the result of the Re- 
 sumption act of 1875, they again reap- 
 peared.^ 
 
 The United States gold certificates above 
 referred to as in use for the settlement of 
 clearing-house balances, are those first 
 issued under act of March 3, 1863, and 
 later under act of July 12, 1882, which are 
 in circulation as a part of the general cur- 
 rency medium of the country. They are 
 more specifically described in a subsequent 
 chapter.^ The use of United States gold 
 certificates and currency certificates has in 
 large measure superseded that of clearing 
 house gold certificates in the settlement of 
 bank balances at the clearinsr-houses. 
 
 The currency certificates were first issued 
 by the Secretary of the Treasury under 
 act of June 18, 1872, and are in denomina- 
 tions of not less than $5,000.^ While they 
 are not properly Treasury notes, but are 
 
 ' Bolles' Practical Banking, p. 239. 
 
 ^ Post, chapter x. 
 
 "^ Rev. Statutes U. S.,% 5193. 
 
The Clear mg- House Associations . yj -^ 
 
 certificates that legal tenders to the amount 
 stated on the face of each have been depos- 
 ited with the Treasury, they are permitted 
 by law to be counted by the national banks 
 as part of their legal reserve, and are in- 
 cluded in the currency statements of the 
 Treasury Department.^ They are more 
 fully described hereafter in the chapter 
 treating of government certificates and 
 Treasury notes. 
 
 The first clearing-house established in 
 the United States was that of New York 
 in 1853. Since its foundation it has been 
 the most important one, the city of its loca- 
 tion bearing to the country at large the 
 financial relation which London bears to 
 Great Britain.^ • The importance of the 
 New York Clearino:-House has been in- 
 creased since the United States Sub-Treas- 
 ury became a member of it in 1879. 
 
 Albert Gallatin, the great Federal finan- 
 cier, had proposed in 1841 the establish- 
 ment of a clearing-house in New York 
 City, having in mind the successful and 
 
 ' Report of the Secretary of ike IVeasury, 1894. 
 ^ Walter Bagehot, Lombard Street, chapter ii. 
 
yS Congressional Currency, 
 
 beneficial operations of similar organiza- 
 tions theretofore in existence in London 
 and Edinburgh. But the credit for the estab- 
 lishment and subsequent development of 
 the association at New York is due in large 
 measure to Mr. Geo. D. Lyman, who was 
 its first manager, and continued for many 
 years to conduct its operations in the most 
 skilful and successful manner.^ Since the 
 establishment of the New York Clearing- 
 House, others have been started in rapid 
 succession in the larger cities, until at the 
 present time there are in the United States 
 more than eighty cities in which bank bal- 
 ances are adjusted through the medium of 
 clearing-house associations.^ 
 
 Since 1853, when it was organized, it has 
 happened that on ^y% occasions in time of 
 great financial stringency and depression, 
 the New York Clearingr-House has resorted 
 to the use of " loan certificates," generally 
 known as " clearing-house certificates." ^ 
 
 ^ Bolles' Practical Banking, p 247. 
 
 ^ R. G. Horr in N. Y. Semi- Weekly Tribune, July 21, 1893. 
 ^Dunbar, Theory and History of Banking, ch. vi., p. 67 
 et seq. 
 
The Clearing- House Associations, 79 
 
 The bank desiring to obtain such certifi- 
 cates deposits with the officers of the clear- 
 ing-house its pi'omissory note for the 
 amount desired, and puts up collateral 
 securities aggregating in value twenty-five 
 per cent, more than the amount of the loan 
 sought. These securities are subjected to 
 the scrutiny and must meet the approval 
 of the loan committee of the clearing- 
 house. When the deposits have been 
 made and approved, the loan certificates, 
 which are evidences of the united credit of 
 all the banks belonging to the association, 
 are issued by the clearing-house, in sums 
 of $5,000 and multiples thereof, to the 
 banks for the settlement of balances. The 
 banks using them must pay six per cent, 
 interest on their notes given for the loan of 
 the certificates, which interest is distributa- 
 ble among all the banks of the association. 
 The collateral securities on which the loan 
 is made by the clearing-house must be 
 kept good while the loan certificate is out- 
 standing ; and where any of the securities 
 mature they are substituted by others. It 
 follows as a natural consequence that when 
 
8o Congressional Ciiri^ency, 
 
 money becomes worth less than six per cent., 
 the loan certificates are retired.^ By this ar- 
 rano^ement the banks belonofino^ to the asso- 
 ciation were enabled to expand their loans, 
 the special reserves held l)y them being 
 treated as a common fund, and when neces- 
 sary, equalized among the banks by assess- 
 ments laid upon the stronger for the benefit 
 of the weaker. The practical effect of this 
 arrangement w^as that whenever a bank 
 needed an unusual amount of specie, it had 
 the backing of the combined reserves of all 
 the clearing-house banks.^ 
 
 The five several occasions above referred 
 to in the history of the country, when the 
 banks of New York have been compelled 
 to resort to the combination of their re- 
 serves and the issue of clearing-house loan 
 certificates, have been I'espectively, Novem- 
 ber 1860, September 1873, May 1884, No- 
 vember 1890,' and August 1893/ 
 
 Similar certificates were resorted to by 
 
 ' R. G. Horr in N. Y. Tribune, July 21, 1893. 
 * Dunbar, Theory and History of Banking, pp. 70, 71. 
 ^ Dunbar, Theory and History of Banking, ch. vi. 
 '* W. D. Dabney, Paper Money : Fa. State Bar Assdn 
 Report^ 1894. 
 
The Clearing- House Associations. 8i 
 
 many of the clearing-house associations of 
 other cities during the panic of 1893; 
 and the stringency of the money market 
 through their effective instrumentality was 
 successfully diminished to the extent of 
 their issues. 
 
 A question was raised in 1893 as to the 
 liability of the banks thus using these 
 clearing-house loan certificates to the pay- 
 ment of the ten per cent, tax imposed upon 
 certain circulating notes by the act of 
 March 3, 1865. The question was submit- 
 ted by the Secretary of the Treasury to the 
 Attorney-General, who decided that they 
 were not subject to the tax in question.^ 
 
 The Federal Sub-Treasury at New^ York 
 became a member of the Clearing-House 
 Association of that city in 1879, as a part 
 of the scheme of the resumption of specie 
 payments by the government under provi- 
 sions of the E-esumption act which went 
 into effect in January of that year. 
 
 " Under this arrangement," says Mr. J. K. 
 Upton, late Assistant Secretary of the Trea- 
 
 ' W. D. Dabney, Paper Money : Va. State Bar Asson 
 
 Report, 1894. 
 6 
 
82 Congressional Currency, 
 
 ury, "in consideration of the government's 
 receiving and collecting the checks through 
 the clearing-house, that body agreed to re- 
 ceive all balances due it upon such checks 
 at the counter of the Sub-Treasury in that 
 city, and to accept legal tender notes in pay- 
 ment of government checks and drafts of all 
 descriptions. As all interest checks, as well 
 as checks issued in payment of called bonds, 
 were by law payable in coin, this agree- 
 ment on the part of the clearing-house, 
 through which institution nearly all of the 
 checks passed, relieved the Treasury almost 
 entirely from the necessity of making actual 
 coin payments after resumption took place. 
 This necessity being removed, there was no 
 longer any reason for requiring duties and 
 imports to be paid in coin, as provided by 
 law ;"' and as the result of the government's 
 connection with the money market through 
 the association of the Sub-Treasury with 
 the clearing-house, coin ceased to be paid 
 at the custom house. 
 
 ^ Upton, Money in Politics ^ p. 153. 
 
VI. 
 
 THE PUBLIC DEBT AT^D THE GOLD RESERVE. 
 
 The public debt of the United States is 
 twofold, viz. : interest bearing and non- 
 interest bearing. This distinction is apt to 
 be lost sight of in the failure to bear in 
 mind the fact that all the paper money of 
 the govei'nment, except the national bank 
 notes, is evidence of a government debt 
 pure and simple. The gold certificates and 
 the silver certificates represent actual de- 
 posits of gold and silver coin, respectively, 
 in the vaults of the Treasury. The cur- 
 rency certificates, in like manner, represent 
 the deposit with the Treasury of legal tender 
 notes ; while the legal tenders themselv^es, 
 consisting of some $346,000,000 of green- 
 backs and of $151,000,000 of Sherman act 
 Treasury notes, represent the government's 
 promises to pay, based on its credit as a 
 bank of issue, and having to secure them, 
 83 
 
84 Congressional Currency. 
 
 respectively, a fluctuating '^ gold reserve" 
 of nominally $100,000,000 and a mass of 
 uncoined silver bullion in the Treasury. 
 All of these various kinds of paper money 
 are as much the government's obligations as 
 are its bonds; though they are apt to be 
 regarded by the general public merely as 
 "money." They are all, either expressly, 
 or by implication, payable in gold coin by 
 virtue of the construction placed by the 
 Treasury officials on the statutory declara- 
 tion that " it is the established policy of the 
 United States to maintain the two metals 
 on a parity wdth each other upon the pres- 
 ent legal ratio, or such ratio as may be pro- 
 vided by law." ^ 
 
 The national bank note is a limited lia- 
 bility obligation of the government, in that 
 United States bonds are the basis of its 
 security. But it is not so treated in the 
 Treasury Department's dealings or state- 
 ments; and for present purposes need not 
 be considered in this connection. 
 
 The interest bearinor debt of the United 
 States is evidenced by its bonds ; and in- 
 
 ^ Act, July 14, 1890, § 2. 
 
Public Debt and Gold Reserve, 85 
 
 cidentally, as indicative of liow close is the 
 connection between the government and 
 the money market in this direction, as w^ell 
 as in that of the other paper cui'rency of 
 the country, it may be mentioned here that 
 v^ith the final payment of the national 
 bond debt, the national banking system as 
 at present constituted on its issue side 
 must necessarily come to an end/ 
 
 The greater part of the interest bearing 
 debt of the United States is like the green- 
 backs, a legacy of the Civil War.^ The 
 rapidity with which this stupendous war 
 debt was created, reaching its climax in 
 August, 1865, when the principal aggre- 
 gated $2,844,649,626, has perhaps been 
 only equalled in the history of national 
 debts by the complementary ease and 
 celerity with which it has been paid oif 
 and decreased.^ It would be instructive 
 and interesting to trace the history of this 
 debt from its inception to its subsequent 
 
 * Lalor's Cydopcedia, article " United States Money." 
 ^ An analytical statement of the public debt is given in the 
 Statistical Abstract, No. 15, issued by the Treasury Depart- 
 ment. 
 
 ^ Lalor's Cyclop(2dia, article " Debts." 
 
86 Congressional Currency, 
 
 funding under act of the Congress, and 
 thence through its various phases of reduc- 
 tion down to 1893.^ But the purposes of 
 this volume only contemplate such refer- 
 ence to the bond debt of the government 
 as is necessary to an understanding of the 
 gold reserve and of the national bank note 
 circulation. 
 
 In 1880 the debt had been reduced to 
 $1,922,517,634; and a decade later to 
 $891,960,104.' This amount in 1890 was 
 still further reduced in 1892 to $841,526,- 
 463,^ and was in process of further reduc- 
 tion, when in 1894 a significant fact in 
 connection with its existence made itself 
 conspicuously apparent. On January 17, 
 1894, after many fluctuations, the gold re- 
 serve held in the Federal Treasury for the 
 I'edemption of the greenbacks was reduced 
 to between $69,000,000 and $70,000,000. 
 The current expenses of the government 
 were in excess of the current receipts; 
 and, as a result, in order to build up the 
 
 ^ See H. C. Adams, Public Debts, p. 126, et seq, 
 ^ Abstract of Eleventh Census, p. 199. 
 3 Statistical Abstract U. S. No. 15, p. 6. 
 
Public Debt and Gold Reserve, 8 7 
 
 gold reserve, bonds had to be issued and 
 sold under the provisions of the act of 
 January 1, 1875, known as the Resump- 
 tion act. These bonds amounted to $50,- 
 000,000, bore interest at five per cent., and 
 were payable ten years from date.^ They 
 are said by the Secretary in his report to 
 be '^one of the three classes of bonds 
 authorized by the act referred to." 
 
 This sale of bonds temporarily accom- 
 plished the purpose intended, but produced 
 no permanent good results. Under the 
 operation of the legal tenders which were 
 redeemable in gold, because the word 
 " coin " is so construed in the execution of 
 the statutory financial policy enunciated by 
 the Congress, and which are required in 
 terms to be reissued when they come into 
 the Treasury in order that there may be no 
 " contraction of the currency,"^ it was a very 
 short time before the gold reserve again 
 became diminished to such an extent as to 
 warrant, in the opinion of the administra- 
 tion, the necessity of another $50,000,000 
 
 ^ Report of the Secretary of the Treasury, 1894, p. xlviii. 
 2 Act, May 31, 1878. 
 
88 Congressional Ctiri'cncy, 
 
 issue of five per cent, bonds. This second 
 issue was disposed of in December, 1894, 
 and the proceeds of the sale covered into 
 the Treasury. In a very few weeks the 
 gold reserve had again sunk far below the 
 minimum recognized by the statute govern- 
 ing the reissue of gold certificates/ until 
 in February, 1895, it was down to the 
 $40,000,000 mark, — the lowest point 
 reached by it since 1879. Once more the 
 use of bonds was resorted to, but instead 
 of selling ^yq per cent, bonds under the 
 act of 1875, as on the two preceding occa- 
 sions, the government now bought from a 
 syndicate of American and European bank- 
 ers 3,500,000 ounces of standard gold coin 
 of the United States, paying therefor with 
 bonds issued under the several acts of July 
 14, 1870, January 20, 1871, and January 
 14, 1875. These bonds bore interest at 
 four per cent., and were made payable " in 
 coin " at the government's option, after the 
 expiration of thirty years. The contract 
 for their purchase was held in abeyance by 
 the administration until the Congress had 
 
 ' Act, July 12, 1882, § 12. 
 
Public Debt and Gold Reserve. 89 
 
 empliatically rejected a resolution authoriz- 
 ing a loan payable in express terms in gold 
 instead of "coin," wliich the contracting 
 syndicate had already agreed to take at a 
 less rate of interest than that which was 
 demanded in the " coin " bonds. In this 
 contract of purchase by the government of 
 gold for the further maintenance of its 
 Treasury reserve, the privilege was con- 
 ceded the syndicate of bankers buying the 
 bonds therein provided for, to have the 
 refusal of all bonds to be issued thereafter 
 by the United States up to October i, 
 1895.^ 
 
 The fact that the price exacted for the 
 gold thus obtained was generally acknowl- 
 edged at the time to be excessive, and so 
 proven by the subsequent syndicate sales 
 of the bonds, added to the option conceded 
 to the syndicate in the contract, created 
 the almost inevitable impression upon the 
 public mind that the government felt itself 
 helpless in its efforts to protect the gold 
 reserve, and had in sheer desperation suc- 
 
 ^ The full text of this contract was published in the New 
 York daily papers of February 14, 1895. 
 
90 Congressio7ial Currency, 
 
 Climbed to tlie I'epeated and successful 
 onslaughts of the bankers, brokers, and 
 money-dealers upon it. Perhaps, in all the 
 financial history of the United States there 
 exists no more pointed or conspicuous illus- 
 tration of the truth of Mr. Bagehot's state- 
 ment quoted on the title page of this 
 volume,^ than is afforded by the apparent 
 helplessness of so magnificently wealthy a 
 country as the United States in maintain- 
 ing a comparatively small stock of gold in 
 its National Treasury in the face of the 
 organized attacks upon it. 
 
 The " gold reserve " has been described 
 as an arbitrary balance carried on the books 
 of the Treasury, unauthorized directly by 
 law, and only recognized in the act which 
 forbids the Secretary to reissue the re- 
 deemed gold certificates, when the reserve 
 falls below one hundred million dollars. 
 It has been not inaptly characterized as a 
 barometer of public confidence ; its rise 
 and fall have been chronicled with assidu- 
 ous and often sensational attention and 
 detail by the newspaper press ; and the 
 financial and business temper of the country 
 
 * Lombard 5/;v^/ (American ed.), chap, iv., p. loi. 
 
Public Debt and Gold Reserve. 9 1 
 
 has been so affected by its shifting condi- 
 tions that enterprise and credit have alike 
 wavered in fluctuant unison with its varia- 
 tions. It had its origin in the operations 
 of the Treasury under the provisions of the 
 Resumption act, passed by the Congress 
 in 1875. The object of that act was to 
 redeem the greenbacks when presented at 
 the Sub-Treasury in New York City in 
 coin. Secretary Sherman, without authority 
 of law, construed ^' coin " to mean gold ; 
 and accumulated prior to January, 1879, 
 the date at which the act was to go into 
 effect, $135,000,000 of gold coin and bullion 
 in the Treasury for the purposes of redemp- 
 tion.^ In a letter to the Senate on May 19, 
 1879, he stated that the Treasury had been 
 called on to redeem only $4,133,513 of 
 greenbacks, — less, as a matter of fact, than 
 it had received in gold in exchange for 
 United States notes ; and that the " coin 
 reserve "had been increased to $138,000,- 
 000, or about forty per cent, of the then 
 outstanding legal tenders.^ The indications 
 
 ' Upton, Money in Politics, p, 154. 
 
 '■^ " The Future of Resumption," North Am. Rev., Aug., 
 [879. 
 
92 Congressio7ial Cicrreiicy, 
 
 of the success of resumption and of the 
 permanent maintenance of the government's 
 paper on an equality with gold seemed 
 most promising. But the prohibition in 
 the act of May 31, 1878, of the retirement 
 of the redeemed notes, the accumulation of 
 standard silver dollars in the Treasury 
 under the Bland- Allison act of February 
 28, 1878, and the issue of the legal tender 
 coin notes under the Sherman law of July 
 14, 1890, have concurred to place obstacles 
 apparently insurmountable in the way of a 
 successful administration of the currency of 
 the country by the general government. 
 
 Says the writer of the article on "The 
 Future of Resumption," published in the 
 North American Review for August of 
 the year when the act went into operation, 
 and which, read in the light of subsequent 
 events, seems pregnant of prophesy : 
 
 **By the redemption law as Judge Edmunds in- 
 tended it, the notes of the government were to be 
 paid, retired, cancelled, destroyed. They were to 
 pass forever from the currency to be replaced by 
 gold. The government by the operation of this 
 law was gradually to take its heavy and unsteady 
 
Public Debt and Gold Reserve, 93 
 
 hand off the financial affairs of the country ; it was 
 to withdraw from the exercise of the function of 
 currency making, which had become so dangerous 
 and had worked so much mischief ; it was to leave 
 the business of the country to regulate itself by the 
 laws which are higher than the laws of Congress, 
 simpler and far safer ; in a word, the forced war 
 loan, which had been levied in the form of legal 
 tender notes, was to be paid ; and the government 
 was to leave the business community the freedom 
 which was its right." ^ 
 
 No financial declaration of independence 
 has ever been or can ever be penned in 
 America witli more of sovereign freedom 
 and sovereign truth in its lines than are 
 contained in this utterance. But the " heavy 
 and unsteady hand" reasserted itself be- 
 tween the enactment of the Resumption 
 act in 1875, and the date fixed for re- 
 sumption to begin in 1879. On May 31, 
 1878, the Congress enacted the law forbid- 
 ding the cancellation and retirement of the 
 greenbacks and compelling their reissue ; 
 and thus constituting the United States 
 Treasury a bank of indefinite paper issue, 
 made the government legal tenders and the 
 
 ^ North Amer. Review, August, 1879, p. 189. 
 
94 Congressional Currency, 
 
 gold reserve ^^ a perpetual element and the 
 controlling one in the curi'ency." 
 
 In 1885 the gold reserve fell to some 
 $114,000,000; and the then Treasurer of 
 the United States called conspicuous public 
 notice to its precarious existence wath the 
 announcement that in his opinion the 
 further depletion of the fund would im- 
 peril the maintenance of gold payments. 
 A well informed writer on contemporary 
 finance makes the assertion that " a similar 
 announcement by Secretary Foster in 1893, 
 when the fund was $108,000,000 precipi- 
 tated the crash of that year." ^ 
 
 In 1879 the Secretary of the Treasury in 
 his annual report called the attention of 
 the Congress to the " gold reserve " fund 
 and " recommended that to avoid all uncer- 
 tainty this fund be specifically defined and 
 set apart for the redemption of United 
 States notes, and that the notes redeemed 
 be reissued only in exchange for or pur- 
 chase of coin or bullion." ^ But the Con- 
 gress said neither Yea or Nay ; and the 
 gold reserve, carried as a part of the ordi- 
 
 * Matthew Marshall in N. V. Sun, Feb. ii, 1895. 
 ' Upton, Money in Politics, p. 155. 
 
Public Debt and Gold Reserve. 95 
 
 nary Treasury balance, remains, in the 
 opinion of Mr. Upton, himself a prominent 
 Ex- Assistant Secretary of the Treasury, 
 subject to the warrant of the Secretary of 
 the Treasury at any time and "perhaps 
 for any purpose." 
 
 The expense of maintaining the gold 
 reserve, as shown in an " accurate state- 
 ment obtained from the Treasury," ^ by the 
 Comptroller of the Currency, during its 
 existence from January 1, 1879, to January 
 1, 1895, has been as follows: 
 
 Principal of bonds sold for resumption purposes : 
 
 Sold in 1877 and 1878 % 95,500,000 
 
 Sold in 1894 100,000,000 
 
 " ** 1895 62,400,000 
 
 $257,900,000 
 Interest at 4 per cent, on the average amount 
 of the free gold in the Treasury from 
 January i, 1879, to January i, 1895 % 93,440,000 
 
 $351,340,000 
 Interest from January i, 1895, to Jul^ i, 
 
 1907, on $30,500,000 4 per cent, bonds of 
 
 1907 $ 15,250,000 
 
 Interest from January I, 1895, to February 
 
 I, 1904, on $100,000,000 5 per cent, bonds 45,416,666 
 Interest from February I, 1895, to February 
 
 I, 1925, on $62,400,000 4 percent, bonds 74,880,000 
 
 $486,886,666 
 
 'J. H. Eckels, "The Business World vs. The Politicians,' 
 The Forum for March, 1895. 
 
VII. 
 
 GOLD COINS ; THE SILVER DOLLAR ; AND 
 SUBSIDIARY COINAGE. 
 
 Since 1873, when by act of the Congress 
 the mints of the United States were closed 
 to the legal tender silver dollar by the 
 omission from the statute of any provision 
 for its further coinage, "the battle of the 
 standards" has been waged with a fervor 
 unparalleled in the history of politico-eco- 
 nomic controversy in America since the 
 famous removal of the deposits from the 
 second Bank of the United States by Presi- 
 dent Jackson. The earlier currency strug- 
 gles concerned themselves chiefly with the 
 government's connection with a national 
 bank; and the metallic question seldom 
 arose prominently save in the aspect of 
 " hard money " as contradistinguished from 
 the bank issues.^ 
 
 ^ Cluskey, Political Text Book, article, " Independent Trea- 
 sury.' 
 
 96 
 
Gold Coins ; The Silver Dollar. 9 7 
 
 From 1814 to 1834 gold and silver as a 
 currency were practically unknown in the 
 United States ; the notes of the Bank of 
 the United States serving as a circulating 
 medium acceptable everywhere/ From 
 1834 to the passage of the Mint act of 
 1873 silver commanded a high price relative 
 to gold. A silver dollar was worth more 
 than a gold dollar ; and gold (that is, the 
 gold eagle, half eagle and quarter eagle, up 
 to 1849, and the same gold coins, together 
 witli the gold dollar and double eagle, after 
 1849) had been piactically the only coin 
 money of the Treasury in circulation in the 
 United States.^ The reason given for the 
 existence of this state of facts by the gold 
 mono-metallists is that the value of silver in 
 the silver dollar was more than the value of 
 gold in the gold dollar ; and that the silver 
 dollars, under the influence of the financial 
 force known to political economists and 
 financiers as Gresham's Law (which is, in 
 effect, that an inferior currency, circulating 
 on an equality with a superior currency, 
 
 ^ Laloi'' s CyclopcBdia, article, "Bank Controversies." 
 ^ Sherwood, The History and Theory of Money, chap, vi, 
 7 
 
98 Congressional Currency. 
 
 tends ultimately to drive the latter out of 
 circulation), left the country, or ceased to 
 circulate as soon as coined and issued. 
 
 The originators of the legislation of 1873 
 which closed the Federal mints to the free 
 coinage of the standard silver dollar, and 
 expressly declared that the gold dollar 
 should be thenceforward what the silver 
 dollar had always nominally been thereto- 
 fore, namely, the standard of value,^ were 
 undoubtedly gold-monometallists. They 
 considered that it was useless to continue 
 the coinage of a silver dollar which, owing 
 to the high price of silver, failed to circulate ; 
 and believed that in enacting this legisla- 
 tion the Federal government was keeping 
 abreast of the financial policy of the civil- 
 ized commercial world. The International 
 Monetary Conference, lield in Paris in 1867, 
 had enunciated as tlie fundamental princi- 
 ple essential to universal coinage, that there 
 should be a general adoption by the com- 
 mercial nations of the world of the single 
 gold standard.^ England had adopted this 
 
 * Sherwood, The Histojy and Theory of Money, p. 165. 
 Henry Loomis Nelson, Bimetallism in History, p. 10. 
 
 '■^ Ehrich, The Question of Silver, p. 17. R. W. Hughes 
 The Currency Question, chap, xii. 
 
Gold Coins ; The Silver Dollar. 99 
 
 policy in 1816 under the administration of 
 Lord Liverpool; Germany had in 1871 be- 
 gun preparations for establishing the gold 
 standard; and in 1876 France and the 
 Latin Union, following the examples set by 
 such powerful nations, ceased the free and 
 unlimited coinage of legal tender silver. 
 
 The price of silver fell ; until in 1876 ^ a 
 fierce outcry went up against the Congress, 
 which the advocates of silver alleged had 
 in 1873 " secretly demonetized " that metal 
 at the behest of British capital. 
 
 It was charged by the silver advocates, 
 and was asserted later on the floor of the 
 United States Senate, that English influ- 
 ences had sent emissaries to this country to 
 buy legislation in favor of gold, and that 
 Ernest Seyd,^ an eminent English authority 
 on finance, had come to Washington, and 
 assisted in the framing of the Coinage act 
 in question ; and that through his efforts the 
 standard silver dollar had been eliminated 
 from the list of coins therein provided for.^ 
 
 ' Nelson, Bifiietallism in History, p. ii. For an account of 
 the causes of the decline of silver see Prof. J. Lawrence 
 'La.xxghWn^ History of Bi7nelallisfn in U. S. 
 
 '^ Ehrich, T/te Question of Silver, p. 50. 
 
 '^ Speech of Hon. Jno. W. Daniel, U. S. Sen., May 22, 1890. 
 
 ^ OF THK ' 
 
 UNIVERSITY 
 
lOO Congressional Cttrrency, 
 
 The opponents of the free coinage of 
 silver replied to this charge that as matter 
 of history, the act of 1873 for regulating 
 the coinage was framed by the Hon. John 
 Jay Knox, then deputy Comptroller of the 
 Treasury, in 1870; that it was sent to the 
 Congress by Secretary of the Treasury 
 Boutwell, with Mr. Knox's report expressly 
 explaining the reason for the discontinu- 
 ance of the coinage of the silver dollar, 
 then worth a premium of 7 per cent, in 
 gold ; and that between that time and 1873 
 it was printed thirteen times by order of 
 the Congress, and once by the commis- 
 sioners revising the United States statutes. 
 
 While on the one hand it is true that the 
 bill was discussed on the floor ( f the Con- 
 gress, and that the reports of the debates 
 show that the discontinuance of the coinage 
 of the standard silver dollar was especially 
 adverted to in the discussion,^ there can 
 be little doubt, that, owing to the peculiar 
 
 ^ Nelson, Bimetallism in History, p. lo ; Wilson, Congres- 
 sional Government {io\h. edition), p, 185 ; Hon. Jno. Sherman 
 in U. S. Senate, May 22, 1890 ; Ehrich, The Question of Silver, 
 p. 18 ; Upton, Money in Politics, ch. xx. 
 
Gold Coins ; The Silver Dollar, i o i 
 
 committee legislation of the Congress, or 
 to the then general indifference of the Con- 
 gress to the money question, or for some 
 other specific reason, this feature of the bill 
 was either not understood, or not maturely 
 considered by the body enacting it; for Presi- 
 dent Grant himself has said that he signed 
 the bill without knowing that its most im- 
 portant effect was to demonetize silver.^ 
 But from the date of the passage of the act 
 of 1873, up to the present time, there has, 
 on the other hand, been no satisfactory 
 proof adduced that its enactment was pro- 
 cured by indirect or improper means, or 
 that the omission of any provision for the 
 further coinage of the silver dollar was pur- 
 posely concealed by its originators. It is 
 more than probable that the fact that paper 
 money being the sole currency then in ex- 
 istence, and resumption apparently many 
 years off, the average member of the Con- 
 gress thought little and knew less in 1873 
 of the relations of gold and silver to each 
 other as money. 
 
 The general impression prevails that 
 
 ' Memoirs of Thurlow Weed, vol. ii., chap. 39. 
 
I02 Cono-resszojial Cw^r 
 
 i> 
 
 ency. 
 
 when by the Mint act of 1873 the stand- 
 ard silver doHar was dropped from the 
 list of United States coins, the government 
 mints were at once opened for the free and 
 unlimited coinage of gold. This, however, 
 is not true. The gold dollar was by that 
 act made in law the standard of value, as it 
 had been in fact since 1834 ; but a fixed 
 charge was established by the statute itself, 
 for converting gold bullion into coin ; ^ and 
 it was not until the passage of the Kesump- 
 tion act in 1875 that gold coinage was 
 made free.^ 
 
 From the foundation of the government 
 until February 12, 1873, the silver dollar 
 of 371^ grains of pure silver was the nomi- 
 nal unit of value in the United States, and 
 its coinage was free at the mints ; and when 
 coined it had full legal tender value.^ The 
 intrinsic amount of pure silver in the stand- 
 ard silver dollar has never varied. The 
 amount of alloy and the ratio of its value 
 
 ' Rev. Statutes U. S. § 3524. 
 
 2 H. C. Adams, Fu^/ic Debts, p. 201. 
 
 ^ An instructive and interesting article on the " Standard of 
 Value," by Prof, Simon Newcomh, may be found in N^orth 
 American Review for September, 1879. 
 
\ 
 
 Gold Coins ; The Silver Dollar. 103 
 
 to that of the gold coins have varied with 
 legislation ; but in the inflexible unchange- 
 ableness of its intrinsic silver it has been 
 unvarying, at least, in all that time as a 
 " standard of value." As has been 
 stated, from 1834 to 1873, the silver dol- 
 lar had been at a premium. The act 
 of 1834 had changed the ratio between 
 the metals from 15 grains of silver to i 
 grain of gold to that of 16 to 1, contribut- 
 ing thereby to the circumstances which put 
 silver at a premium. Writers on the sub- 
 ject assert that for this reason the alleged 
 demonetization of silver by the Mint Act 
 of 1873 was the "mere formal declaration 
 of a fact " ; ^ the fact being that it had been 
 practically demonetized in 1834 by the 
 change of ratio and increase in value. The 
 discovery of gold in California in 1849, and 
 the passage of the act of 1853, reducing the 
 amount of silver in the fractional currency 
 and making it " token money," contributed 
 later to strengthening gold monometallism 
 in the United States."^ 
 
 ^ Nelson, Bimetallis7n in History, p. lo. 
 2 Nelson, Bimeiallisjn in History, p. lo. 
 
104 Congressional Currency » 
 
 From the foundation of the government 
 down to 1877, only $8,031,238 standard 
 legal tender silver dollars had ever been 
 coined and sent out from the Treasury. Of 
 this $8,031,238, in the forty-six years that 
 elapsed from the coinage of the first silver 
 dollar up to 1840, only $1,501,822 had been 
 coined, the coina^re of silver dollars having: 
 been wholly suspended for thirty years 
 from 1806 by executive order.^ From 1873 
 to 1878 none were coined. During that 
 time the country was not only in fact, but 
 in law also, on a gold basis. From 1878, 
 w^hen the Bland-Allison act restored the 
 coinage of the standard silver dollar, up to 
 1894, $421,776,408 were coined. The 
 " dollar of the daddies " was the slang war- 
 cry of the free silver advocates from 1876 
 on ; but the " dollar of the daddies " was a 
 pigmy in comparison with its gigantic de- 
 scendant of 1878. Of this large number of 
 silver dollars, the greater proportion re- 
 mained in the Treasury vaults, silver cer- 
 tificates being issued against them. Up to 
 July 1893 not more than sixty millions of 
 
 * Lalor's Cyclopadia, article, " Coinage." 
 
Gold Coins ; The Silver Dollar. 105 
 
 these coined standard silver dollars had 
 ever been put into actual circulation. The 
 advocates of the free and unlimited coinage 
 of silver, when confronted with the compar- 
 atively small amount of standard silver dol- 
 lars coined between 1792 and 1873, reply 
 that though only eight millions of silver 
 dollars were put into circulation in that 
 time, ninety-seven millions had been coined 
 into dimes, quarters, and half dollars. To 
 this, the monometallist's answer in the dis- 
 cussion is that while this is true, the ninety- 
 seven millions of silver coinage was sub- 
 sidiary coinage and did not possess full 
 legal tender capacity ; and that no single 
 standard gold advocate objects, now, or 
 ever has objected, to the indefinite coinage 
 of such silver money. 
 
 The legal tender quality of the silver 
 dollar that had been coined up to the date 
 of the passage of the Coinage act of 1873 
 had not been taken from it by that act ; but 
 the revisers of the United States statutes, 
 whose revision became law, June 20, 1874. 
 superseding all pre-existing laws, made all 
 the silver coins of the United States a 
 
io6 Congressional Ctin^ency. 
 
 legal tender for payments not exceeding 
 five dollars ; and while the failure to make 
 the silver dollar an exception, and the 
 consequent destruction of its full legal ten- 
 der significance, was evidently an oversight, 
 the act operated to make all silver dollars 
 coined prior to 1873 legal tender only in 
 sums not exceeding]; ^\^ dollars.^ This er- 
 ror was remedied, however, by the Bland- 
 Allison act of 1878, which provided for the 
 restoration of the full legal tender quality 
 to all of the silver dollars theretofore 
 coined by the United States, of like weight 
 and fineness with those whose coinage was 
 provided for under that act, so that now all 
 the silver dollars of the government which 
 ever possessed the legal tender feature, 
 possess it to an unqualified extent. 
 
 The Bland- Allison act became a law on 
 February 28, 1879, by the passage over the 
 veto of President Hayes. In its original 
 form, as it came from the House of Repre- 
 sentatives in the fall of 1877, it was a free 
 coinasre bill. In the Senate the free coinage 
 feature was eliminated and it passed that 
 
 • Upton, Money in Politics, p. 207. 
 
Gold Coins ; The Silver Dolla7\ 107 
 
 body as amended by Senator Allison, be- 
 coming a law in the manner stated.^ 
 
 Once more the fires of wrath leaped up 
 between the " gold bugs " and " silver 
 lunatics," as the contending factions respec- 
 tively dubbed each other. The former had 
 had their day after the passage of the 
 Coinao^e act of 1873. It was now their 
 turn to shout " fraud ! " They said that 
 " the whole thing was a job from the begin- 
 ning ; that there was nothing in the cur- 
 rency or finances of the country calling for 
 such an enormous coinage of silver, or for 
 any issue at all of the piece in question ; 
 that the sole motive of the mine owners, 
 who were the originators of the project, 
 was to secure a steady and active market 
 for a large portion of their product ; and 
 that they found as allies a considerable 
 body of dealers, who hoped to profit from 
 an inflated currency ; and they forced the 
 measure through both houses of Congress by 
 the use of such means as have been plied for 
 many years in behalf of corrupt measures." ^ 
 
 ^ Ehrich, The Question of Silver, p. 22. Nelson, Bimetal- 
 lism in History^ p. 12. 
 
 * N. Y. Journal of Commej'ce, April 27, 1889. 
 
io8 Congressional Currency. 
 
 Whatever the circumstances may have 
 been under which the compromise Bland- 
 Allison act was passed, it is as little prob- 
 able that its passage was accomplished by 
 the means above charged, as that such 
 influences were used to destroy the pro- 
 vision for silver coinage at the time of the 
 enactment of the famous Mint act of 1 873. 
 As little pleasing as the Bland-Allison act 
 was to the gold faction, it was hardly less 
 so to the free silver advocates, the grava- 
 men of whose complaint against it was that 
 it contained, in the provision that the silver 
 dollars coined under it should be "legal 
 tender at their nominal value, for all debts 
 and dues, public and private, except where 
 otherwise expressly stipulated in the con- 
 tract," authority and sanction for taking 
 notes, bonds, mortgages, and contracts of 
 debt generally, payable in gold.^ 
 
 The act of February 28, 1878, restored 
 the standard silver dollar to the list of 
 coins, but it did not provide for its free 
 and unlimited coinage at the mints. It 
 forced the United States Treasury into the 
 
 ' W. H. Harvey, Coins Financial School^ p. 30. 
 
Gold Coins ; The Silver Dollar. 1 09 
 
 extension of its banking business in another 
 direction than that in which the greenback 
 legislation had compelled it, by requiring 
 the Secretary to buy not less than two 
 millions nor more than four million dollars' 
 worth of silver bullion per month, and to 
 coin this bullion into silver dollars, which 
 should be full legal tender at " their nomi- 
 nal value." Under the provisions of this 
 act the holder of ten or more of these silver 
 dollars might exchange them for silver cer- 
 tificates, which are receivable for customs 
 taxes, and all public dues ; but are not 
 themselves legal tender. The silver cer- 
 tificates are discussed more at length in a 
 subsequent chapter.^ 
 
 During the agitation of the "free coin- 
 age" question by the Congress, resulting 
 in the passage of the Bland- Allison act, the 
 Senate passed a resolution declaring that the 
 United States Government might legally 
 redeem its bonds in silver dollars. Euro- 
 pean holders began thereupon to throw 
 their bonds on the market ; ^ and from that 
 
 ^ Post, chap. X. 
 
 ^ Nelson, Bimetallism in History, p. 13. 
 
no Congressional Currency. 
 
 date to the present time the " silver scare " 
 has seldom failed to precipitate an " un- 
 loading " of American securities by foreign 
 holders, and a run on the Treasury gold 
 reserve. 
 
 The silver dollars coined under the Bland- 
 Allison act were not popular. The clear- 
 ing-houses refused to accept them in 
 settlement of balances, as heretofore nar- 
 rated ; and legislation by the Congress to 
 compel such acceptance has been silently 
 ignored or disregarded. In order to pro- 
 mote their circulation the government 
 provided free transportation of the silver 
 dollars ; it ceased the reissuing of green- 
 ; ^ ^ i^. backs in sums less than five dollars ; and it 
 reduced the denominations of the silver cer- 
 tificates to one, two, and five dollars. While 
 the low denominations of certificates proved 
 equally acceptable to the people as any 
 other paper notes of like amounts, the 
 silver dollar itself has steadily refused to 
 circulate as such, except to a limited 
 degree. 
 
 On July 14, 1890, the Sherman act was 
 passed by the Congress. It was amenda- 
 
Gold Coins ; The Silvei' Dollar. 1 1 1 
 
 toiy of the act of 1878 ; and like it a com- 
 promise measure.^ The Senate, which in 
 1878 had differed with the House in .being 
 opposed to the free coinage of silver, had 
 become in favor of it in 1890, and would 
 have made the act of 1890 a free coinage 
 law but for the action of the conferees of 
 the House. Not being able to make it a 
 free coinage law, the Senate concurred with 
 the House in doing what was perhaps 
 worse than enacting free coinage, viz., 
 giving the legal tender attribute in time of 
 profound peace and without necessity to 
 the paper notes issued under it. The act 
 of July 14, 1890, directed the Secretary of 
 the Treasury to buy four and a half million 
 ounces of silver per month at the current 
 market price, (but not to exceed a fixed 
 limit to this price) and to issue legal tender 
 Treasury notes in payment therefor, which 
 notes ai'e redeemable in gold or silver 
 coin at the option of the government. The 
 act provided further that the coinage of 
 silver dollars authorized by the Bland- 
 Allison act should cease after July 1, 1891, 
 
 ^ Ehrich, The Question of Silver, p. 24. 
 
112 Congressional Curre^icy. 
 
 except as sucli coinage should be necessary 
 for the redemption of the Treasury notes 
 issued under it. The statutory declaration 
 that it is " the established policy of the 
 United States to maintain the two metals 
 on a parity with each other upon the 
 present legal ratio," as construed by the 
 Treasury officials, has resulted in the re- 
 demption of the Sherman Treasury notes 
 in gold, except as to some four millions of 
 these notes that were redeemed with silver 
 dollars, coined for the purpose, and after 
 redemption were cancelled and retired by 
 Secretary Carlisle in 1893 and 1894. This 
 statutory declaration of the govei'nment's 
 " established policy " appears as such for 
 the first time in the act of 1890. The 
 Resumption act of 1875 was prepared by 
 Senator Edmunds of Vermont ; though in 
 the altered and reconstructed form in which 
 it became a law, it was the work of a 
 political party caucus of the Congress.^ It 
 provided that the legal tenders should be 
 redeemed in *'coin." As a matter of fact 
 they have, since 1879, when the Resump- 
 
 * Upton, Money in Politics^ p. 147. 
 
Gold Coins ; The Silver Dollar. 1 1 3 
 
 tion act went into effect, been continuously 
 redeemed in gold, save in the instance men- 
 tioned above, '^ solely because the Secretary, 
 in the exercise of a disci-etion nowhere dis- 
 tinctly conferred upon him " by law until 
 1890, has chosen so to do.^ 
 
 The Sherman act, under which a tre- 
 mendous mass of silver bullion was ac- 
 cumulated in the vaults of the Treasury at 
 a net loss of between fifty and sixty millions 
 of dollars to the government, incident to 
 the steady decrease in the value of silver, 
 and by the provisions of which legal tender 
 Treasury notes to the amount of more than 
 $150,000,000 were put into circulation, 
 based on the depreciated silver bullion, is 
 believed by many financiers and men of 
 affairs to have contributed largely to the 
 precipitation of the panic of. 1893. The 
 struggle of the silver advocates, though 
 
 ^ "The Future of Resumption," yVi^r/-^ ^w^rzVaiw Review 
 for August, 1879. 
 
 A remarkable illustration of the "unsteadiness of the 
 hand" with which the Congress regulates the currency is the 
 fact that in October, 1877, ^ special session saw introduced in 
 one day thirteen different bills for the repeal of the Resump- 
 tion act, one of which actually passed the Mouse the following 
 month. — Upton, Money in Politics^ chap. xvii. 
 
114 Congressional Currency. 
 
 never achieviDg free coinage, had been so 
 determined and had apparently accom- 
 plished so much in the direction of a 
 rehabilitation of silver, in spite of the actual 
 fall in market prices, that the holders of 
 American securities in Europe again became 
 alarmed. The exports of gold and gold 
 bullion, which had been between thirty- 
 four and thirty-five millions of dollars in 
 1888, had grown in 1893 to nearly eighty 
 millions. Not only did the exportation of 
 gold indicate its departure from circulation, 
 but the falling off in gold payments to the 
 government on account of customs duties 
 emphasized this disappearance in another 
 way. In January 1890, 92.6 per cent, of 
 the government's customs dues were paid 
 in gold; while in January, 1893, 8.9 per 
 cent only were paid in gold.^ 
 
 On the other hand the advocates of the 
 free and unlimited coinage of silver have 
 contended no less earnestly that the panic 
 was a thing of steady growth, reaching its 
 ultimate climax in 1893; the result of the 
 demonetization of silver and of the in- 
 
 ' Nelson, Bimetallism in History, page 14. 
 
Gold Coins ; The Silver Dollar. 1 1 5 
 
 creased value of gold ; of lowered prices 
 and enlarged difficulty on the part of the 
 debtor class to obtain relief ; and that the 
 severe stringency and the depressed con- 
 dition of business which succeeded the 
 panic, continuing so long thereafter, was 
 attributable, in degree at least, to the failure 
 of the Congress on repealing the Sherman 
 act in November, 1893, to provide for the 
 future free coinage of the legal tender 
 silver dollar.^ 
 
 The development of the coinage system 
 of the United States has been of gradual 
 growth. It was while Robert Morris, the 
 great Superintendent of Finance of the 
 Continental Congress, was in charge of the 
 Board of Treasury, that the subject of the 
 coinage was first considered by the Con- 
 gress. In a minute and detailed communi- 
 cation to that body he recommended the 
 establishment of a mint, and outlined a 
 plan of coinage. Mr. Jeiferson and Gouv- 
 erneur Morris also contributed to the 
 
 ^ An able and instructive presentation of this side of the 
 question may be found in the speech of Hon. Jno. W. Daniel, 
 in the Senate, September 14, 1893. 
 
ii6 Congressional Currency, 
 
 general scheme/ It was in compliance 
 with Morris' suggestion in connection with 
 his mint scheme that the Spanish silver 
 dollar was adopted by the Continental 
 Congress in 1785 as the standard of value, 
 having been -first so adopted by the colony 
 of Virginia in 1645, and subsequently by 
 the other colonies.^ In the same statute 
 making the Spanish milled dollar the 
 standard, provision was made for the deci- 
 mal system of currency, in accordance with 
 the suggestion of Jefferson. 
 
 The United States Mint was established 
 by act of April, 1792, under authority of 
 article 1, section 8 of the Constitution, which 
 vests in the Congress power to coin money 
 and regulate the value thereof and of for- 
 eign coins. Its author was Alexander 
 Hamilton, first Secretary of the Treasury 
 under Washington, who, at the request of 
 the House of Representatives prepared and 
 submitted an elaborate scheme for a gov- 
 ernment mint and for its future coinao:e 
 operations in his " Report on the Establish- 
 
 ^ Lalors Cyclopaedia, article, " American Finance." 
 * Upton, Motley in Politics, chap, iii., Id. chap. vii. 
 
Gold Coins ; The Silver Dollar, i 1 7 
 
 merit of a Mint," ^ a finance paper as remark- 
 able in its way as is the " Report on a 
 National Bank " by the same master-hand. 
 The act of 1792 provided that the mint 
 should be located at the seat of government, 
 which was then at Philadelphia. When 
 the seat of government was removed to 
 Washington, the Congress directed that the 
 mint should remain in Philadelphia until 
 March 4, 1801. This period was extended 
 by subsequent legislation from time to time, 
 until 1828, when the location was made 
 permanent in Philadelphia until otherwise 
 ordered by the Congress. All the coinage 
 of the government up to 1835 was done at 
 the Philadelphia mint. In that year branch 
 mints were established for the convenient 
 coinage of gold and silver in or adjacent to 
 their respective localities as then known. 
 By the Coinage act of 1873, each of the 
 branch mints was made an independent 
 mint under the control of an officer created 
 by that statute called the Director of the 
 Mint.^ 
 
 Finance Reports, vol. i., p. 133, et seq, 
 Lalors Cychpcedta, article, "Coinage.' 
 
1 1 8 Congressional Currency. 
 
 The mints are located in the cities of 
 Philadelphia, San Francisco, New Orleans, 
 Carson, and Denver; and there are assay 
 offices of the government at New York, 
 Boise City, and Charlotte, N. C. 
 
 In the act of April, 1792, authority was 
 given for the coinage of the gold eagle, half 
 eagle, and quarter eagle. In 1794 the first 
 silver dollar was actually coined, and in 
 1795 the first gold eagle.^ It was not until 
 after the passage of the act of March 3, 
 1849, incident to the discovery of gold in 
 California, that the gold dollar came into 
 existence. By act of September 26, 1890, 
 the coinage of the gold dollar ceased. It 
 was never by law the standard of value in 
 the United States until it was expressly 
 declared to be so by the coinage act of 1873 ; 
 and for only about forty years of the Re- 
 public has it had an actual existence. 
 
 The original Mint act of 1792 also au- 
 thorized the coinage of the silver dollar, 
 half dollar, quarter dollar, dime- and half 
 dime. By this act the free coinage of both 
 gold and silver was authorized at the ratio 
 
 ^ W. G. Sumner, American Currency^ p. 6o, 
 
Gold Coins ; The Silver Dollar. 1 1 9 
 
 of 15 to 1, and each was made unlimited 
 legal tender. In 1834, as has been stated, 
 the ratio was changed to 16 to 1, or, to be 
 exact, to 15.988 to 1. This ratio is that 
 which now exists, and has been preserved 
 in all coinage subsequent to its establish- 
 ment. By the act of January 18, 1837, the 
 standard for gold and silver coins, and their 
 several weights, were fixed ; the gold eagle, 
 half eagle, and quarter eagle were made 
 legal tender ; and all the coins that had been 
 legal tender under the Coinage act of 1834 
 had their legal tender quality continued. 
 
 The dollar is the nominal unit of value 
 in the Federal decimal system of coinage ; 
 and thus, under the primary coinage act, 
 while the coinage system was bimetallic, 
 the standard unit was nominally the silver 
 dollar, as it continued to be until 1873. 
 The law of 1873 expressly declared that 
 the gold dollar should be the standard 
 unit of value; and there has been no 
 change in the standard since the enaictment 
 of that law.^ As a matter of fact, however, 
 
 ' Sherwood, History and Theory of Money, p. 165 ; Upton, 
 Money in Politics^ p. 40. 
 
I20 Congressio7ial Currency, 
 
 since the act of September 26, 1890, sus- 
 pending the coinage of the gold dollar, as 
 stated, no gold dollars have been coined 
 for circulation by the United States Gov- 
 ernment. 
 
 Since the passage of the Sherman act of 
 1890, that law has been the only one by 
 virtue of which the continued coinage of 
 the standard silver dollar was possible. 
 The entire amount of silver purchased by 
 the government under the provisions of 
 the " purchasing clause " of that act, aggre- 
 gated 168,674,682.53 ounces, costing $155,- 
 931,002.25, the '' coining value " of which 
 in silver dollars was $218,084,438. Yet of 
 this tremendous quantity of bullion there 
 had been coined up to November 1, 1894, 
 only $38,531,143 such dollars.' The act 
 itself provided that the Secretary of the 
 Treasury should coin two million ounces 
 per month into standard silver dollars until 
 July 1, 1891, after which time he should 
 coin as much as might be necessary to pro- 
 vide for the redemption of the Treasury 
 
 * Report of the Director of the Mint, in the Banker's 
 Magazine for April, 1895. 
 
Gold Coins ; The Silver Dollar, 1 2 1 
 
 notes issued under the act, and that any 
 gain or seigniorage arising therefrom should 
 be accounted for and paid iuto the Treas- 
 ury.^ On November 1, 1893, the "pur- 
 chasing clause " of the act was repealed, 
 and the further purchase of silver bullion 
 thereunder ceased. 
 
 "Since November i, 1893, there has been coined 
 from silver bullion purchased under the act of July 
 14, 1890, 3,594,489 standard silver dollars. The 
 cost of the bullion contained in this number of 
 dollars was $2,434,397. 79,and this sum has been used 
 or held for the redemption of Treasury notes issued 
 in payment for bullion contained in such dollars, 
 and the difference, $1,160,091.21 (the seigniorage), 
 has been paid into the Treasury and made avail- 
 able for use in payment on account of current 
 expenses of the government. To the extent of the 
 seigniorage is the number of silver dollars available 
 for general circulation increased." '^ 
 
 Under the act of March 3, 1849, the 
 coinage of the double eagle, or twenty-dol- 
 lar gold piece, was authorized ; and under 
 that of March 3, 1851, the coinage of the 
 
 ^ Act, July 14, 1890, § 3. 
 
 ^ Letter of Hon. R. E. Preston, Director of the Mint, to 
 the Author, April 26, 1895. 
 
12 2 Congressional Ctirrejicy. 
 
 silver three-cent j)iece, the weight and fine- 
 ness of the hitter being established in the 
 act. By the act of February 21, 1853, the 
 three-dollar gold piece was authorized, and 
 its further coinage repealed by that of 
 September 26, 1890/ The act of February 
 12, 1873, heretofore spoken of as "demon- 
 etizing " or discontinuing the coin^e of 
 the standard silver dollar, also discontinued 
 the coinage of the silver half dime and 
 three-cent piece, and authorized the coin- 
 age of the *Hrade dollar " of 420 grains of 
 silver, 378 grains pure. This coin w^as pro- 
 vided for in the act in response to the 
 unanimous resolution of the Legislature of 
 California, presented to the United States 
 Senate by a Senator from that state.^ It 
 was intended to supersede the Mexican 
 silver dollar, then in common use on the 
 Pacific slope, and largely used as a medium 
 of exchange with China and the otber 
 nations of the East. By a mistake in the 
 preparation of the act, a legal tender qual- 
 
 * John S. Hanson, Gold and Silver^ p. 4. 
 
 ' Hon. John Sherman in U. S. Senate, May 22, 1890. 
 
Gold Coins ; The Silver Dollar, 123 
 
 ity up to ^'^Q dollars was given it, as in the 
 case of the subsidiary silver coins therein 
 provided for ; but the mistake was corrected 
 by subsequentlegislation,w"hich deprived it 
 in any amount of a legal tender attribute.^ 
 The coinage of the trade dollar ceased in 
 1878, except for specimen pieces, its brief 
 five years' existence having demonsti'ated 
 it to be impracticable for the purposes had 
 in view in its coinage, although it contained 
 more silver than the standard silver dollar. 
 It was never popular and was almost al- 
 ways current for less than its nominal 
 value. 
 
 Under the act of March 3, 1875, the sil- 
 ver twenty-cent piece was coined. It was 
 discontinued by legislative enactment in 
 May, 1878. 
 
 All fractional silver coins of the United 
 States, known as " subsidiary coins," are 
 legal tender to the amount of ^nq dollars.^ 
 Since 1853 the subsidiary silver coins have 
 been what is technically known as " token 
 
 ' Nelson, Bimetallism in History, p. lo. 
 2 Act Feb. 21, 1873, § 15. 
 
^>A 
 
 124 Coftgressional Ctirrency. 
 
 currency," that is, coius which are not in- 
 trinsically worth their face value.^ They 
 have been coined since that time by the 
 government for its own account out of 
 bullion purchased by it for the purpose. 
 
 ' Act Feb. 21, 1853. Sherwood, History and Theory of 
 Money, p. 164. 
 
VIII. 
 
 UIOTED STATES NOTES, OR " GREENBACKS " ; 
 POSTAL CURRENCY, AND FRACTIONAL CUR- 
 RENCY. 
 
 The United States Treasury note, known 
 to history as the greenback, was issued 
 by authority of the act of the Congress of 
 February 25, 1862. It is an inconvertible 
 paper currency/ reciting in terms that it is 
 a legal tender at its face value for all debts, 
 public and private, except duties on im- 
 ports, and interest on the public debt ; and 
 is made payable to the bearer, but not on 
 demand, nor at any fixed time. It is a 
 significant fact that the greenback is the 
 only unlimited legal tender issued by the 
 government which is not and never has 
 been receivable in payment of customs du- 
 ties ; ^ and in this respect it conspicuously 
 
 ^ Francis A. Walker, Money, chap, xvi., p. 374. 
 *J. J. Knox, United States Notes ^ p. 154. 
 125 
 
126 Congressional Currency, 
 
 differs from tbe Treasury legal tender note 
 issued under the provisions of the Sherman 
 act of 1890. It was an experiment in 
 finance, having its origin in the exigencies 
 of war. Mr. Francis A. Walker speaks of 
 it as "a measure of resource," and says that 
 the recognized alternative was the sale of 
 the government bonds below par for gold/ 
 Its author was the Hon. Elbridge G. Spauld- 
 ing, a member of the Ways and Means 
 Committee of the Congress which enacted 
 the statute.^ The unexpected and unfore- 
 seen source from which it is possible under 
 congressional government for currency 
 measures of the most radical character to 
 emanate, is shown in the fact that the 
 greenback was originated, not by the com- 
 mittee on Banking and Currency, but by 
 the great tax-levying committee of the 
 Ways and Means. 
 
 The most conspicuous, though appar- 
 ently unwilling advocate and supporter of 
 
 ^ Walker, Money, p. 369 ; Upton, Money in Politics, 
 chap. xii. 
 
 * W. G. Sumner, American Currency, p. 197. Apple- 
 tori! s Biog. Cycloped., Article " E. G. Spaulding." 
 
United States Notes, 07" '* Greenbacks^ i 2 7 
 
 the greenback legislation was the Hon. 
 Salmon P. Chase, Mr. Lincoln's first Secre- 
 tary of the Treasury, who, when he became 
 Chief -Justice of the United States, delivered 
 the opinion of the Court ^ in the case of 
 Hephurn vs. Grist oold^ declaring the legal 
 tender feature of the greenback to be un- 
 constitutional and the act itself invalid. 
 Subsequently, the United States Supreme 
 Court in the Legal Tender Cases^ I'eversed 
 its position on this momentous question ; 
 but Chase maintained his views as first ex- 
 pressed from the bench, delivering a strong 
 dissenting opinion. In speaking of the 
 position taken by Mr. Chase in this matter, 
 Mr. Justice Field said that Chase preferred 
 to preserve his integrity as a judicial offi- 
 cer, rather than his consistency as a states- 
 man.^ In his dissenting opinion in the 
 Legal Tender Cases, the Chief-Justice said 
 that the Secretary of the Treasury was 
 extremely averse to the legal tender clause 
 
 1 8 Wallace, 603. 
 
 ^ 12 Wallace, 457. 
 
 ^ W. D. Dabney, " Paper Money," yth Reports Virginia 
 State Bar Association, p. 210 ; See Justice Field's dissenting 
 opinion in Juilliard v. Greenman, no U. S. Reports, p. 421. 
 
128 Congressional Cnn^eiicy. 
 
 of the act, but was very solicitous for the 
 passage of the bill ; and was finally per- 
 suaded to take the risk of makiniij the notes 
 legal tender rather than lose the use of 
 them in the emergency then existing/ 
 The legal tender clause was apparently an 
 afterthought, subsequent to the preparation 
 of the bill, for it did not appear in the 
 original draft. 
 
 Up to the time of the legislation of 1862, 
 it had been generally considered and con- 
 ceded, as Chase deemed it in his capacity 
 of Judge, to be unconstitutional for the 
 United States to issue bills of credit or 
 notes, payable on presentation, and without 
 interest,^ and in the almost seventy-five years 
 that had elapsed since the adoption of the 
 Federal Constitution none had been issued 
 with the exception of one put forth in 1815.^ 
 This Treasury note of early years is said to 
 have been very similar to the long subse- 
 quent greenback, save in that it lacked the 
 legal tender quality. The similarity con- 
 
 ' Upton, Money in Politics, p. 78, 
 
 ^ Mr. Justice Field's dissenting opinion in Juilliard vs. 
 Greenman, no U, S. Reports, 421. 
 ^ Upton, Money in Politics, p. 76. 
 
United States Notes ^ or ''Greenbacks.'' 129 
 
 sisted in the facts that it was payable to 
 bearer, that it passed by mere delivery, that 
 it bore no interest, that it had no fixed time 
 of payment, and that it was convertible 
 into government bonds. 
 
 During the war of 1812, the proposition 
 had been offered in the House of Repre- 
 sentatives to make Treasury issues a legal 
 tender in the payment of private debts ; 
 but the House refused even to consider this 
 suggestion. ^ 
 
 What were known as Treasury notes had 
 been issued by the government at different 
 times, beginning as far back as 1812 ; but 
 they were a species of government bond, 
 bearing interest, maturing usually after a 
 brief stated period, and without the legal 
 tender quality ; the exception to the general 
 character of the species of notes described 
 being a part of the issue of 1815, which 
 were of less denominations than $100, and 
 intended to supplement the depreciated 
 bank notes then in use, and whose peculiar 
 characteristics have been just above 
 
 ^Annals ijth Congress, 1814, 1815, vol. iii., p. 557, cited 
 in Hon. W. D. Dabney's " Paper Currency," 7th Va. Bar 
 Asso. Reports, 1894. 
 Q 
 
130 Congressional Currency, 
 
 described as so closely resembling those of 
 the greenback. The interest bearing govern- 
 ment notes were created for the convenience 
 of the Treasury in its fiscal operations, and 
 were in no sense intended for general cir- 
 culation as currency. The greatest amount 
 ever outstanding was about $10,000,000, 
 though their aggregate issues reached the 
 sum of $50,000,000.^ They were generally 
 of large denominations, and were not re- 
 ceivable in payment of private debts, save 
 at the option of the creditor. Some M'^ere 
 convertible into United States securities.; 
 some were payable at the Treasury in 
 currency ; and some were not payable at 
 all in money, but were only receivable for 
 certain public dues. These interest-bearing 
 notes, in the nature of government bonds, 
 being evidences of loans made to the 
 United States, were issued at four different 
 periods in the history of the country ; viz.: 
 the War of 1812; the financial crisis of 
 1837 : the Mexican War ; and the financial 
 crisis of 1857.^ 
 
 * Upton, Money in Politics, p. 53. 
 
 '■^ Zrt/t;;-' J Cy^r^/^^/Za, article " American Finance"; Knox, 
 United States Notes, ch. v. ; Upton, Money in Politics, chap. x. 
 
United States Notes, or ''Greenbacks.'' 131 
 
 But there had been, up to the passage of 
 the act of 1862, no legal tender for private 
 debts in the United States except "specie " ; 
 and, in fact, the only paper currency, in the 
 proper acceptation of the term and used 
 generally as a circulating medium, had been 
 that issued by private corporations and 
 payable on demand in coin/ 
 
 Under the act of 1862 the issue of one 
 hundred and fifty million dollars of green- 
 backs was authorized ; and further issues 
 of one hundred and fifty millions more by 
 each of the two subsequent acts of July 
 11, 1862, and March 3, 1863. 
 
 The issues under act of February 25, 
 1862, were in denominations of not less 
 than five dollars. Of the issues under the 
 act of July 11, 1862, $35,000,000 were 
 authorized to be in denominations of less 
 than ^VQ dollars, the Secretary of the 
 Treasury giving as a reason that '^ since 
 the United States notes are made a legal 
 tender and maintained nearly at the par of 
 gold by the provision for their conversion 
 into bonds bearing six per cent, interest 
 
 * Richardson, The National Banks, p. 22. 
 
132 Congressional Currency . 
 
 payable in coin, it is not easy to see why 
 small notes may not be issued as widely as 
 large ones." ^ The highest amount of green- 
 backs ever actually issued was that out- 
 standing in June, 1864, aggregating a little 
 less than the authorized four hundred and 
 fifty millions.^ In December, 1865,^ the 
 Congress by resolution approved the plan 
 of Secretary McCulloch for retiring the 
 greenbacks. This resolution was passed 
 under a suspension of the rules, and by the 
 tremendous majority in the House of 146 
 ayes to 6 nays.^ The work was systemati- 
 cally begun, and was well under way when 
 the stringency of the money market and 
 the fall of prices caused the Congress on 
 February 4, 1868,^ to repeal the act of 
 December, 1865, which had directed the 
 retirement of the legal tenders.^ By the 
 withdrawals under the last named act the 
 greenbacks had been reduced to $356,000,- 
 
 ^ Upton, Money in Politics, ch. xiii. 
 ^ Upton, Money in Politics, ch. xiii. 
 ^ Act, December i8, 1865. 
 ^ Upton, Money in Politics, p. 128. 
 ^ Knox, United States Notes, p. 140. 
 ' Walker, Money, p. 374. 
 
Un ited States Notes , or '' Greenbacks. " 133 
 
 000. Professor Sumner notes the fact that 
 January, 1868, just prior to the repeal of 
 the act of 1865, was "the turning point at 
 which the contraction of the legal tender 
 notes met the expansion of the national 
 bank note circulation," the bank issues at 
 that date standing at $294,000,000. As 
 shown by the repoi-t of the Secretary of the 
 Treasury in December, 1894, the amount 
 of the general stock of greenbacks in the 
 United States on November 1, 1894, was 
 $346,681,016.^ 
 
 In 1875 an act was passed by the Con- 
 gress requiring payment of the greenbacks 
 in coin after January 1, 1879. This legis- 
 lation is famous in the financial history of 
 the country as the Resumption act.^ Under 
 the currency policy of the government, 
 first formulated without authority of law 
 by Secretary Sherman in carrying into 
 effect the provisions of the Resumption act, 
 and later declared by statute, that gold and 
 
 ^ Report^ p. XV. 
 
 ^ See Upton's Money in Politics, cli. xvii. " Resumption" ; 
 and "The Future of Resumption" in North American 
 Review, August, 1879. 
 
134 Congressional Ctirrency, 
 
 silver shall be maintained on a parity with 
 each other, payment of the greenbacks in 
 "coin" was, and has been continuously 
 since construed by the Treasury authori- 
 ties to mean in gold; and they are so 
 redeemed at the Treasury in Washington, 
 and at the sub-treasuries in New York 
 and San Francisco, on presentation and 
 demand. 
 
 By the act of April 12, 1866, the Secre- 
 tary of the Treasury was permitted to 
 retire greenbacks to the amount of $10,- 
 000,000 during the six months ending 
 October 12, 1866, and $4,000,000 per 
 month thereafter. The volume of green- 
 backs stood on June 30, 1866, very nearly 
 at the figure of $400,000,000, and it was 
 durino^ these nineteen months that Secre- 
 tary McCulloch made his reduction of some 
 $44,000,000, leaving the amount outstand- 
 ing in December 31, 1867, as stated, some 
 $356,000,000. This amount was subse- 
 quently increased to $382,000,000. Under 
 the operation of the act of January 14, 
 1875, which authorized an increase in the 
 circulation of the National banks, the Sec- 
 
United States Notes, or '' Greejtbacks.'' 135 
 
 retary of the Treasury was required to 
 retire greenbacks to the extent of eighty 
 per cent, of the national bank notes there- 
 after issued, until the amount of the green- 
 backs should be $300,000,000 and no more/ 
 In this manner, between the last named 
 date and May 31, 1878, $35,318,984 of the 
 greenbacks were redeemed and retired, 
 leaving the outstanding amount, when the 
 act was repealed, $346,681,016, the figure 
 at which it has since stood and now stands. 
 
 In May, 1878, an act was passed forbid- 
 ding the further retirement of the legal 
 tender notes, as above stated, and instruct- 
 ing the Secretary to reissue them whenever 
 redeemed or received into the treasury 
 from any source whatever, and to keep 
 them in circulation. 
 
 " Since Mr. McCulloch's policy of paying 
 — not exchanging — legal tender notes , was 
 abruptly broken up by Congress, we have 
 never seen the time when a majority in 
 both houses was firmly in favor of the 
 retirement of legal tenders," says a writer 
 in the North American Review for August, 
 
 ' Knox, United States NoteSy p. 140. 
 
136 Congressiofial Cnrrency, 
 
 1879 ; and the statement holds as good in 
 1895 as it did then.^ 
 
 The fact that the law gives authority 
 for the indefinite reissuing of the green- 
 backs when redeemed, without reference 
 to the several acts under which they orig- 
 inally were issued, makes it impossible to 
 tell at this day to which of the three several 
 statutes authorizing them they are now 
 properly attributable in their reissued form.^ 
 
 Being redeemable in gold and not per- 
 mitted by law to be retired, the $346,000,- 
 000 of greenbacks and the $151,000,000 of 
 treasury legal tender notes, issued under 
 the Sherman act of 1890, make it a matter 
 of practical impossibility for the government 
 for any continued period of time to main- 
 tain its gold reserve of $100,000,000 in the 
 treasury, whenever speculators or other 
 interested j)^^'^^^^ desire to withdraw 
 gold ; and necessitate the repeated issuing 
 of bonds to be sold for the replenishment 
 of the gold reserve. 
 
 ' " The Future of Resumption," North American Review ^ 
 August, 1879, p, 192. 
 
 ^ Upton, Money in Politics ^ p. 97. 
 
United States Notes, or ''Greenbacks^ 137 
 
 These currency conditions have been 
 succinctly and justly criticised in the fol- 
 lowing language : 
 
 " We now have laws, which direct the redemption 
 on presentation, of the United States legal tender 
 notes in coin, and which clothe the Secretary of the 
 Treasury with power to provide coin for such re- 
 demption to the extent that he can command sur- 
 plus revenue, or can borrow on bonds at par, bear- 
 ing interest at not more than five per cent. ; but we 
 also have laws which direct the Secretary to reissue 
 and keep in circulation all the notes so redeemed, 
 and all these laws are liable to repeal or modifica- 
 tion whenever a majority of Congress, with the 
 President, shall determine. That such a solution 
 of the currency problem is not a safe, satisfactory, 
 and permanently favorable one, must be obvious to 
 every sensible observer. It leaves the right of Con- 
 gress to issue legal tender notes, if not conceded, at 
 least undenounced ; it leaves the means of con- 
 tinued redemption at the discretion of the Secre- 
 tary of the Treasury for the time being ; and finally 
 it exposes the whole scheme to modification or re- 
 peal by Congress or the President." * 
 
 This powerful and luminous criticism of 
 the currency system, which was penned in 
 
 ^ " The Future of Resumption," North American Review, 
 August, 1879. 
 
138 Coiigressio7ial Curreficy. 
 
 1879, is equally a]3plicable to-day, when 
 " coin " has been translated to mean " gold," 
 when the borrowing by the government on 
 bonds can only be done at an expense not 
 dreamed of when resumption was being 
 provided for; when the right of the Con- 
 gress to re-issue the war-greenback has been 
 since determined by the Supreme Court, 
 and its power to create and circulate new 
 legal tenders is not only conceded, but has 
 been put into practical operation by the 
 emission from the Treasury under the Sher- 
 man act of 1890 of more than $150,000,000 
 of such notes, based upon silver bullion, 
 and like the greenback, though payable at 
 the Treasury in " gold or silver coin " at 
 the discretion of the Secretary, practically 
 payable In gold, and permitted by the 
 statutes to be reissued and kept in circu- 
 lation. 
 
 In February, 1879, two months after the 
 resumption of specie payments under the 
 act of 1875, a bill was reported to the 
 House of Representatives, forbidding the 
 sale of bonds for the purpose of maintain- 
 ing specie payments, and directing the 
 
United States Notes, or ^'Greenbacks' 139 
 
 Secretary of the Treasury to reissue the 
 greenbacks, not only to the amount, but in 
 the denominations received into the Treas- 
 ury. On motion of Mr. Garfield, then a 
 representative from Ohio, the bill was laid 
 on the table by a vote of 1x1 to 110. 
 
 " The experience we are having in this 
 House from day to day," said Mr. Garfield, 
 on that occasion, " makes me fear that there 
 will never be any permanent safety to 
 business so long as there is a greenback in 
 circulation." ^ 
 
 The legal tender quality of the green- 
 back, which was at first repudiated and 
 denied by the Supreme Court as unconsti- 
 tutional, is now established beyond judicial 
 question ; and as bitterly as the propriety 
 of the decision has been assailed, and its 
 justification under any circumstances con- 
 troverted, there is little doubt that the right 
 of the Congress to give the legal tender 
 quality to the United States Treasury issues 
 will never again be seriously disputed in 
 the Federal courts, so long as the present 
 
 "^Congressional Record, February 23, 1879; Richardson 
 The National Banks y page 158. 
 
140 Congressional Currency, 
 
 system of the absolute control of the cur- 
 rency by the Congress shall continue. 
 
 In spite of its legal tender feature, and 
 the pressure of government intervention in 
 aid of its circulation, the greenback at one 
 time depreciated very greatly in value.^ 
 Since the Resumption act which made it 
 redeemable in coin went into effect, how- 
 ever, in 1879, it has remained steadily at 
 par. 
 
 Ic was originally provided that the 
 forced circulation of United States leo-al 
 tender notes should be ended and they 
 should be retired by funding them in gold 
 bonds. The writer of the luminous and 
 prophetic article in the Nortli American 
 Review for August, 1879, already fre- 
 quently quoted from in these pages, says : 
 
 " There is no doubt that the resumption clause 
 of the act of 1875 was intended by its author, Judge 
 Edmunds of Vermont, to provide for the permanent 
 and absolute retirement of redeemed United States 
 notes ; but that construction was not so clearly ex- 
 pressed but that Mr. Sherman, then senior senator 
 
 * General Walker, in his valuable treatise on Money, gives 
 an interesting table on page 374, showing the premium on gold 
 during the first five years of the greenback. 
 
United States Notes, or '' Greenbacks !' 141 
 
 from Ohio, and chairman of the Finance Com- 
 mittee of the Senate, felt himself justified in declin- 
 ing to maintain it in debate. The law as passed 
 left this point undecided, and gave to the enemies 
 of resumption, aided by its timid or lukewarm 
 friends, the opportunity which they afterwards 
 seized to force upon the Treasury the law of 1878. 
 Under this law, forming an integral part of the 
 legislation regulating redemption, the United States 
 notes were not to be paid in any ordinary accepta- 
 tion of that word, since the payment of a promissory 
 note, whether that of an individual or that of a 
 government, involves its cancellation, and the 
 termination of its legal existence ; they were simply 
 made exchangeable, at par, on presentation for 
 coin. The distinction is a vital one and cannot be 
 too much insisted on. By the resumption law, as 
 Judge Edmunds intended it, the notes of the 
 government were to be paid, retired, cancelled, 
 destroyed. They were to pass forever from the 
 currency to be replaced by gold." 
 
 The Congress, however, repealed the 
 provision for funding the legal tenders in 
 gold bonds ; — a repeal which has been 
 said by high financial authority to have 
 been " greater than all other mistakes in 
 the management of the war." ^ 
 
 ^ Lalor's Cyclopcedia, article, " American Finance." Upton, 
 Money in Politics, p. 89. 
 
142 Congressional Currency. 
 
 The ability of the government to redeem 
 its three hundred and forty-six millions of 
 greenbacks and its one hundred and fifty 
 millions of Sherman act Treasury notes 
 now in existence, depends upon three con- 
 tingencies. The first of these is the ability 
 to constantly maintain in the United States 
 Treasury the gold reserve, which, as. lias 
 been heretofore stated, is a surplus stock 
 of gold originally accumulated in anticipa- 
 tion of the resumption of specie payments 
 in 1879, and since arbitrarily fixed at one 
 hundred millions of dollars. Its diminu- 
 tion tends to decrease public confidence, 
 and consequently to injure business; 
 and it is said to be the barometer of 
 the national credit. Under the admin- 
 istration of Mr. Cleveland, the " free 
 gold " reserve has varied in amount from 
 a sum several millions in excess of that 
 fixed as a safe minimum to somewhere in 
 the vicinity of forty millions in February, 
 1895. Three times within twelve months 
 during that administration it has been 
 found necessary to issue government bonds 
 to replenish the Treasury, depleted of its 
 
United States Notes ^ or '' Greenbacks y 143 
 
 gold through the iustnimentality of the 
 legal tenders. Under our system of cur- 
 rency, the United States is made the prey 
 of every gold-seeking country of the world. 
 The Treasury itself is at the mercy of the 
 bankers and brokers who find a profit in 
 the exportation of gokl coin and bullion; 
 and, as illustrative of this condition, it is 
 said that the same gold which was obtained 
 by the Federal Treasury, under the fifty 
 millions loan of December, 1894, in aid of 
 the gold reserve, was withdrawn and went 
 within a few weeks thereafter to purchase 
 the bonds of the French municipal loan of 
 1895. The other two factors above alluded 
 to, which go to make up the government's 
 ability to redeem the legal tenders, stand 
 in so close a relation to the existence of the 
 gold reserve that it is difficult to segregate 
 them as distinctive from it. They are the 
 government's power and willingness to 
 borrow money, — a subject already briefly 
 alluded to ; and the government's taxing 
 power — a question of great moment and of 
 a wide scope and meaning, beyond the 
 contemplation of this work. 
 
144 Congressional Currency. 
 
 From what has been written, it is evi- 
 dent that the greenback is a makeshift in 
 finance, issued originally for the purpose of 
 paying government obligations incurred in 
 an expensive and tremendous war, by 
 means of a forced loan without interest 
 from citizens of the United States.^ It 
 was first put into circulation by payment 
 out of the Treasury to the soldiers and 
 government employees, and in compensa- 
 tion for the munitions of war. It was 
 essentially a war currency ; and has been 
 aptly described as "the evidence of a debt 
 not paid, and a lien upon the future."^ 
 Yet its advocates have been and still are 
 very numerous in the United States, and 
 faith in its efficacy as a financial panacea 
 gave rise after the Civil War to a formid- 
 able political organization known as " the 
 Greenback party," which at one time nomi- 
 nated presidential and other candidates, 
 and had a large number of adherents in 
 certain sections of the country.^ 
 
 ' Upton, Money in Politics^ ch. xiv. 
 
 ^ Lyman J. Gage's Address to the Commonwealth Club of 
 Chicago, Oct. 27, 1894. 
 
 ^ The three planks of' the Greenback party's platform were : 
 (i) that the currency of all national and state banks and cor- 
 
United States Notes ^ or ^'Greenbacks'' 145 
 
 The theory of those who advocated the 
 greenback was that it had been the means 
 of increasing wages, of stimulating produc- 
 tion, and of enlarging and adding to the 
 material prosperity and comfort of the 
 people of the whole country. Coupled 
 with this, and of a more potential force 
 than it will be readily credited with by the 
 casual observer, has been the patriotic sen- 
 timent that the greenback is '' stained with 
 the blood of the Federal soldier, and 
 helped to preserve the Union." But finan- 
 ciers and publicists have condemned the 
 United States legal tender notes with great 
 emphasis. Garfield's opinion of them has 
 already been cited. High Democratic 
 authority has denounced them recently, 
 alleging that '^redeemable in gold coin on 
 demand, according to the direction of the 
 statutes, by the Secretary of the Treasury, 
 
 porations should be withdrawn ; (2) that the only currency 
 should be a paper one, issued by the government ; and, (3) 
 that coin should only be paid for interest on the national debt. 
 An interesting sketch, by Professor Alexander Johnston, of 
 the Greenback party as originally constituted, and of its sub- 
 sequent coalition with the Labor party, is given in Lalors 
 Cyclopicdia of Political Science, art. , ' ' Greenback — Labor, or 
 National Party." 
 
146 Congressional Currency. 
 
 they constitute a standing menace to the 
 Treasury, constantly draining the gold, im- 
 pairing the reserves, and necessitating the 
 issuing of bonds to supply the necessary 
 gold." ' 
 
 In 1873 Prof. W. G. Sumner said of the 
 legal tender decision of the Supreme Court 
 in the Legal Tender cases that it '^ did as 
 great a wrong as the Dred Scott decision, 
 and that the latter instance shows that it 
 is not useless to discuss a constitutional 
 question even after the court has decided. 
 It will not probably take a war to over- 
 throw the principle of the Legal Tender act, 
 but it may take a national bankruptcy."^ 
 
 Gen. Francis A. Walker speaks of the 
 act of 1862, creating the legal tender as 
 "ill advised legislation,"^ and Messrs. 
 Morrill and Collamer of Vermont, Owen 
 Lovejoy, and Roscoe Conkling opposed it 
 strenuously in the Congress at the time of 
 its passage."* 
 
 ^ Senator David B. Hill before the Democratic Club of New 
 York City, January 26, 1895. 
 
 ' Sumner, American Currency, p. 59. 
 
 ^ Walker, Money, p. 374, 
 
 ■* Upton, Money in Politics, ch. xii ; Knox, U. S. Notes, 
 pp. 129, 130 ; Walker, Money, p. 373. 
 
United States Notes, or '' Greenbacks T 147 
 
 On the contrary, John Sherman of Ohio, 
 and Charles Sumner of Massachusetts ad- 
 vocated the legal tender feature of the 
 bill/ and James G. Blaine said of it that 
 " in the judgment of a large and intelligent 
 majority of those who were contemporary 
 with the war, and gave careful study to its 
 progress, the Legal Tender bill was a most 
 effective and powerful auxiliary to its 
 prosecution." ^ 
 
 The Supreme Court of the United States, 
 speaking of the greenbacks in 1868, said : 
 " These notes are obligations. They bind 
 the national faith. They are, therefore, 
 strictly securities " ; ^ and under the act of 
 February, 1862, the court held that as 
 " securities," they were exempt from state 
 taxation. This effect of the Supreme 
 Court's decision has been nullified, how- 
 ever, by a recent act of the Congress, mak- 
 ing greenbacks, gold and silver certificates, 
 Sherman treasury notes, and national bank 
 notes subjects of state and territorial taxa- 
 tion as money."* 
 
 ' Knox, U. S. Notes, pp. 132 and 134. 
 '^ Twenty Years in Congress, vol. i., p. 429. 
 ^ Bank vs. Supervisors, 7 Wallace, 26. 
 * Act, August 13, 1894. 
 
148 Congressional Currency, 
 
 By provision of statute United States 
 notes are of such denominations not less 
 than a dollar, as the Secretary of the Treas- 
 ury may prescribe; ^ and it is made an of- 
 fence, punishable by fine and imprisonment, 
 for any person to make, issue, circulate, or 
 pay out any note, check, memorandum, 
 token, or other obligation for a sum less 
 than one dollar, intended to circulate as 
 money, or to be used in lieu of lawful 
 money of the United States.^ 
 
 Two peculiar forms of minor currency in 
 frequent use during and subsequent to the 
 war, were the " postal currency " and the 
 " fractional currency." The first was issued 
 under act of July 17, 1862, for the purpose 
 of supplying small currency on the disap- 
 pearance from circulation of the lesser silver 
 coins. The demand for the postal currency 
 was indicated by the enormous purchases of 
 postage-stamps at the post-offices of the 
 country, prior to its issue, and after the dis- 
 appearance of the subsidiary silver.^ 
 
 1 Rev. Stat. U. S., §3571- 
 ^Rev. Stat. U. ^.,§3583. 
 ^ Knox, United States Notes, p, 100. 
 
United States Notes, or ''Greenbacks'' 149 
 
 The postal notes were superseded by the 
 fractional paper currency issued under act 
 of Mai'ch 3, 1863, limited in amount to 
 fifty millions of dollars, and ranging in de- 
 nominations from three cents to fifty cents. 
 This disappeared from circulation after the 
 resumption of specie payments in 1879.^ 
 
 In this connection it may be stated that 
 various interest-bearing notes were issued 
 from the Treasury at different times during 
 the progress of the Civil War, all of which 
 have long since disappeared from general 
 circulation ; and a discussion or description 
 of which is unnecessary here, ^ further than 
 to observe that of them were certain inter- 
 est-bearing issues under the act of March 
 3, 1863, which possessed, like the green- 
 backs, the legal tender feature, being the 
 only such notes ever issued by the United 
 States Government, except the greenbacks, 
 the " demand notes," and the Sherman 
 Treasury notes of 1890.^ 
 
 Among the Treasury issues of the Civil 
 
 ' Knox, United States Notes, p. 103. 
 2 Knox, United States Notes, ch. ix. 
 ^ Upton, Money in Politics, ch. xiii. 
 
150 Congressional Cttrrency. 
 
 War period, prior to the greenbacks, were 
 the " demand notes " authorized by the act 
 of July 17, 1861, to the extent of $50,000,- 
 000. They were in denominations of not 
 less than $5, payable on demand, bore 
 no interest, were redeemable in coin, were 
 not originally legal tender, and were re- 
 issuable until December 31, 1862/ They 
 were paid out to the government employees, 
 and were the precursors of the greenbacks ; 
 and were subsequently made legal tenders, 
 by act of March 17, 1862, on the advice of 
 Secretary Chase.^ 
 
 ^ Upton, Money in Politics, p. 69. 
 2/^.,ch. xiii. 
 
IX. 
 
 NATIONAL BANK NOTES. 
 
 As has been said, the greenback was 
 practically a foi'ced loan without interest, 
 exacted by the government from its em- 
 ployees and creditors/ It was put into 
 circulation by the purchase of gold, and by 
 payments to government officials and clerks, 
 and to the army and navy. But the peo- 
 ple did not take kindly to the new cur- 
 rency ; and though a legal tender, the banks 
 refused to receive it and the business men 
 to use it. A possible explanation of its 
 unpopularity may be found in the idea 
 which had taken possession of the public 
 mind, that the government's revenues were 
 inadequate to its redemption, and that the 
 day of its payment in specie would never 
 
 * Lalor's Cyclopcedia, article, " Refunding of Public Debt 
 of United States." 
 
 151 
 
152 Congressional Currency, 
 
 come. As a result of the general loss of 
 confidence in the government's ability to 
 pay its Treasury issues, the greenback 
 rapidly depreciated in value. To relieve 
 this depreciation and its consequent stag- 
 nation and failure to circulate, and to make 
 a market for the government bonds which 
 the Treasury was foi'ced to issue at the 
 time to carry on the war, the establishment 
 of the national banks was determined on.^ 
 The waning vitality of the greenback was 
 reinforced by the provision of the National 
 Bank act that the notes of the banks 
 should be redeemable in the United States 
 Treasury legal tenders ; and the market 
 for the bonds was provided in the require- 
 ment that the bank circulation should be 
 based on government securities. Another 
 though lesser aim that was had in view by 
 the Secretary, in organizing the national 
 banks, was that of winning to the active 
 aid of the government, in its ti'emendous 
 struggle, the moneyed men and financial 
 leaders of the countiy by identifying the 
 
 ^ Trenholm, The People's Money, p. 168 ; H. W. Richard- 
 son, The National Banks, p. 102. 
 
National Bank Notes. 153 
 
 banking system actively and closely with 
 the government/ 
 
 While it is doubtless true that its pri- 
 mary and most desired object was the 
 floating of a great war debt, it is none the 
 less probable that the Congress in adopting 
 the national bank system, had at the same 
 time in ultimate contemplation the retire- 
 ment of the greenbacks and their substitu- 
 tion by the notes of the banks ; for it is a 
 noticeable fact, that the title to the act 
 creating the system of banks was " an act 
 to provide a national currency," and that 
 the text of the act itself looked to the re- 
 turn to specie payments and the making of 
 coin the sole legal tender.^ The bill creat- 
 ing the greenbacks, as originally reported, 
 expressly aflarmed that they were to be 
 issued " for temporary purposes " ; ^ and 
 both Mr. Fessenden and Mr. Sherman, 
 while it was on its passage, spoke of it as 
 " a temporary expedient." ^ 
 
 The plan of issuing the greenback legal- 
 
 ^ Sherwood, History and Theory of Money ^ p. 142. 
 '^ Dunbar, Theory and History of Banking, p. 135. 
 2 Congressional Globe, January 28, 1862, p. 522. 
 ^Richardson, The National Banks, p. 137. 
 
154 Congressional Currency, 
 
 tender Treasury note had been adopted, 
 and suggested to the Congress by Mr. 
 Chase, at the same time with a plan of 
 providing the " national currency " to be 
 issued by the banks and secured by the 
 pledge of United States bonds. Mr. Chase 
 had hoped that the Congress would prefer 
 the bank scheme ; the Congress had adopted 
 the Treasury-note plan ; and the Secre- 
 tary's desire to devise ways and means of 
 meeting the government's urgent need of 
 money had impelled him to approve of the 
 greenback act even in its legal -tender 
 feature. 
 
 In the June prior to the passage of the 
 National Bank act, greenbacks had depre- 
 ciated twenty-five per cent. ; and in the 
 month of its passage gold was at a pre- 
 mium of fifty. The effect of the legal- 
 tender act of 1862 had been to destroy the 
 government's credit abroad. No sales of 
 bonds could be made in England during 
 the war ; and it was absolutely necessary 
 for the government to borrow money from 
 
 ^ Sumner, American Currency^ p. 204. 
 
National Bank Notes. 1 5 5 
 
 In order, therefore, to float an additional 
 loan of the 5-20 bonds, authorized by the 
 act of February 12, 1862, the Secretary 
 again pushed to the front his national bank 
 scheme that had been discarded by the 
 Congress for the legal-tender act at the 
 time of its former suggestion. A bill em- 
 bodying his ideas was introduced in the 
 Senate by John Sherman, of Ohio, and be- 
 came a law on February 25, 1863.^ It is 
 an interesting and singular fact in connec- 
 tion with the passage of the National Bank 
 act that the records of the debate show 
 that Mr. Sherman, the patron of the bill, 
 made the only speech that was made in 
 the Senate in its favor ; and that its final 
 passage was secured only by the personal 
 appeals of the Secretary of the Treasury, 
 supplemented by a special message from 
 President Lincoln.^ 
 
 Among other provisions of the bill, in 
 order to facilitate the negotiation of the 
 bonds, the requirement in the act of Feb- 
 
 ' Richardson, The National Banks, p. 47. 
 2 Appleton's Cyclopedia of American Biography, Article, 
 "John Sherman" ; Richardson, The National Banks, p. 47. 
 
1 56 Congressional Ctirrency, 
 
 ruary 12, 1862, that they should be sold 
 at par, was repealed ; and the greenbacks 
 were made convertible into government 
 bonds at the will of the holder. 
 
 This was the original Bank Act, which 
 did not go into practical operation to the 
 extent of materially increasing the circula- 
 tion until some two or three years later. 
 Under it only one hundred and thirty-four 
 banks were organized in the nine months 
 following its passage, and less than four 
 hundred and fifteen in the sixteen months 
 thereafter.^ 
 
 The bank act of 1863 was not all that 
 could be desired in its arrangement; and 
 there were obscurities and possible incon- 
 sistencies which were calculated to mar its 
 harmonious operation. The Comptroller 
 of the Currency, Mr. Hugh McCulloch, 
 gave it careful and thorough study, and 
 biinging to its consideration the knowledge 
 of an experienced and practical banker, 
 recommended many necessary and substan- 
 tial changes. These the Congress, in the 
 main, adopted in the act of June 3, 1864, 
 
 * Dunbar, Theory and History of Bankings p. 134. 
 
National Bank Notes. 1 5 7 
 
 which is practically the bank law as it now 
 stands.^ 
 
 The state banks were still in existence, 
 with a large volume of currency in circula- 
 tion. In January, 1861, the paper currency 
 of the United States was furnished by six- 
 teen hundred private corporations organized 
 under the laws of thirty-four different 
 states. About $150,000,000 of these state 
 bank notes were in existence in the states 
 which remained in the Union subsequent 
 to April, 1861; and about $50,000,000 in 
 the states forming the Southern Confeder- 
 acy.^ This state bank-note circulation con- 
 tinued all through the years of the Civil 
 War. In order to destroy it, and thus 
 make room for the notes of the new national 
 banks, a ten per cent, tax on state bank 
 issues was incorporated by the Congress in 
 the internal revenue tax bill of 1865.^^ On 
 June 80, 1864, the Congress had inaugu- 
 rated, for the first time, the policy of taxing 
 state bank circulation in imposing a tax of 
 
 ^ Richardson, The National Banks ^ p. 63. 
 ^ Richardson, The National Banks, ch. ii. 
 =^ Act, March 3, 1865 ; Act, July 13, 1866. 
 
158 Congressional Currency. 
 
 one per cent. The imposition of tins one 
 per cent, tax was not designed as a revenue 
 measure. It was tentative, and directed 
 towards finding out the condition of the 
 state banks' issues, with a view to ulti- 
 mately destroying their circulation by in- 
 creasing the tax to a prohibitive extent. 
 Secretary Chase said of it : 
 
 " It cannot be doubted that the object of this 
 provision was to inform the proper authorities of 
 the exact amount of paper money in circulation 
 with a view to its regulation by law." ^ 
 
 It is worthy of mention, as indicative of 
 the uncertainty of the legislative mind as 
 to the right of imposing the ten per cent, 
 tax, that the provision incorporating it in 
 the internal revenue bill of 1865 was car- 
 ried in the House of Kepresentatives only 
 by the casting vote of Speaker Colfax, and 
 in the Senate by the close majority of two. 
 Its constitutionality has been repeatedly 
 denied by high authority ; but the Supreme 
 Court of the United States has taken the 
 
 ' Speech of Hon. Jno. W. Daniel in United States Senate, 
 July 21, 1892. Veazie Bank vs. Fenno, 8 Wallace, 533. 
 
National Bank Notes. 1 59 
 
 legislative view, and affirmed its validity.^ 
 Numerous bills, however, have at various 
 times been introduced in the Congress to 
 repeal it, as many as nine such bills having 
 been offered as far back as the Forty-fifth 
 Congress ; and many since.^ Secretary Car- 
 lisle, in his scheme for the re-adjustment of 
 the currency, as set out in his report of 
 December, 1894, recommended its condi- 
 tional repeal ; and there is a strong feeling 
 existing in the public mind in behalf of the 
 revival of state bank issues, either under 
 Federal restrictions, or unqualifiedly.^ 
 
 The ten per cent, tax was laid on the 
 advice of Secretary of the Treasury Fes- 
 senden, who had succeeded Mr. Chase in 
 the financial administration of the govern- 
 ment. He saw that in competition with 
 the state banks the organization of the 
 national banks would be infrequent and of 
 comparatively small moment, and the bonds 
 of the government without the local pur- 
 chasers from this expected source ; because, 
 
 ^ Veazie Bank vs. Fenno, 8 Wallace, 533. 
 ^Richardson, The National Banks y^^. 153. 
 ^ Speech of Hon. Jno. W. Daniel in United States Senate, 
 July 21, 1892. 
 
i6o Congressional Currency, 
 
 as a rule, the state banks could issue circu- 
 lating notes without the necessity of invest- 
 ing any part of their capital in securities as 
 a basis thereof, while the national banks 
 must make a necessarily large outlay for 
 government bonds in order to be able to 
 issue notes. The result of the tax was 
 that which the Secretary anticipated and 
 desired. It was prohibitive in its effect; 
 the state bank notes vanished from circula- 
 tion ; the national banks sprung into flour- 
 ishing existence throughout the Union, and 
 begun to issue note circulation ; and the 
 control of the currency was for the first 
 time in the history of the country, and 
 thenceforward till the present, absolutely 
 with the Congress.^ 
 
 The original Bank Act, revised and 
 amended by the act of June 3, 1864, was 
 an adaptation, with modifications in details, 
 of several state bank systems then existing. 
 The New York system, devised by the 
 Rev. Dr. McVickar, Professor of Political 
 Economy in Columbia College, New Yoi'k, 
 first established in 1838, and in successful 
 operation thereafter continuously up to 
 
 * Dunbar, Theory and History of Bankings ■^. 133. 
 
National Bank Notes, 1 6 1 
 
 1861, furnished the example of currency 
 secured on public funds, as well as the 
 personal liability feature of directors and 
 stockholders/ The " Suffolk System," pi'e- 
 valent in New England, furnished the 
 scheme of redemption of issues at financial 
 centres ; and other and different systems 
 were consulted and adapted in minor de- 
 tails.^ 
 
 Under the Bank Act, the national banks 
 were, as state banks had been, liable to 
 local taxation. By recent legislation, not 
 only the banks themselves, but their circu- 
 lating notes, as well, are now liable to such 
 taxation ; as are the greenbacks, the gold 
 and silver certificates, and the Sherman act 
 Treasury notes of 1890.^ 
 
 As stated on its face, every national 
 bank note is secured by bonds of the gov- 
 ernment deposited with the United States 
 Treasurer at Washington. The certificate 
 of this fact is evidenced by the signatures 
 
 ^ Lalor's Cyclopcedia, article, " American Finance." For an 
 able and exhaustive exposition of the principles of the New 
 York State Banking Law, see the Democratic Review for May, 
 1839. 
 
 ^ Richardson, The National Banks, pp. 8i and 82, 
 
 ^ Act, Aug. 13, 1894. 
 
1 62 Congressional Currency, 
 
 of the Treasurer and of the Register of the 
 Treasury on the note ; although the note 
 purports to be that of the local bank issu- 
 ing it, whose president or vice-president 
 and cashier also sign it. The note is by 
 law made receivable in all parts of the 
 United States in payment of all taxes, ex- 
 cises, and all other dues to the United 
 States except duties on imports ; and also 
 for salaries and other debts and demands 
 owing by the United States to individuals, 
 corporations, and associations within the 
 United States, except interest on the public 
 debt.^ 
 
 The national banknotes are not unlimited 
 legal tender; but are such only as between 
 the banks themselves. ^ The notes are issued 
 by the Federal government to the bank 
 which puts them in circulation, only after 
 the bank has deposited with the Treasurer 
 of the United States registered bonds of 
 the government, exceeding in value the 
 notes to be issued. The bonds are held at 
 the Treasury as security for the ultimate 
 
 » Rev. Statutes U. S.,% 5182. 
 2 Rev. Statutes U. S.,% 5196. 
 
National Bank Notes. 1 63 
 
 redemption of the notes, none of which are 
 ever redeemed directly from the holder by 
 the bank itself; so that, in effect, their pay- 
 ment being guaranteed by the United 
 States,^ the notes are practically as much a 
 national government currency as are the 
 greenbacks, the Sherman Treasury notes, 
 or the silver and gold certificates. They 
 afford the only example of currency of their 
 peculiar character in the world, full and 
 absolute government security for bank notes 
 existing nowhere else among the commer- 
 cial nations of the earth ; though the Bank 
 of England notes have some points of 
 resemblance in this respect to them.^ 
 
 The bank, when furnished with these 
 notes, issues them in turn to its customers 
 in the usual and ordinary course of busi- 
 ness, guaranteeing their payment, and un- 
 dertaking, if called on to do so, to furnish 
 greenbacks for any part of the issue. This 
 singular provision of the law, incorporated 
 in the statute, as before explained, in order 
 
 ' Richardson The National Banks, p. 74. 
 2 Dunbar, Theory and History of Batiking, ch. x ; Walter 
 Bagehot, Lombard Street {^cxihner?,, 1892), p. 23 
 
164 Congressional Currency, 
 
 to revive the drooping credit of the green- 
 back, has been commented upon by a dis- 
 tinguished financier and publicist, himself 
 once Comptroller of the Currency, as 
 follows : 
 
 "It is owing to the very success of these banks 
 that the public has come to accept it as a safe prin- 
 ciple that all their paper money should issue from 
 Washington, and that they should look to Washing- 
 ton alone for its redemption. The application of 
 that mistaken deduction from the national banking 
 system led to the issue of coin notes. People natu- 
 rally thought that if the government could be 
 trusted to hold its own bonds as security for national 
 bank notes, it might be trusted to hold silver dollars 
 against certificates.^ 
 
 " The national banks have been unwittingly, un- 
 consciously, and in my judgment, unfortunately, 
 educating the people and preparing the public mind 
 for the very thing that is now threatening them. 
 The moment the public began to get tired of the 
 weight and inconvenience of carrying about these 
 silver dollars, it was easy enough to suggest : * We 
 will keep the dollars in Washington, and we will 
 issue paper certificates against them.' The public 
 was pleased, the inconvenience passed away, we soon 
 began to think that one paper dollar was as good as 
 another. We did not calculate that the national 
 
 ^ Act, Feb. 28, 1878. 
 
National Bank Notes, 165 
 
 bank note was the best piece of paper circulating in 
 the country ; that next to that came the silver cer- 
 tificate ; and last of all the greenback. The law had 
 inverted the order ; the law had said national bank 
 notes must be redeemed in greenbacks ; the law had 
 educated the people into the idea that the greenback 
 was a better piece of paper than the national bank 
 note, whereas the national bank note is the best 
 piece of paper in circulation." * 
 
 The currency value of the national bank 
 notes is in no respect dependent on the 
 continued solvency of the individual na- 
 tional banks issuing them ; for, should the 
 bank fail, they are made good by the gov- 
 ei'nment out of the bonds deposited to 
 secure their redemption with the Treasurer 
 at Washington.^ They are thus rendered 
 absolutely secure, so far as the credit of the 
 national government can secure them ; and 
 the greatest defect attributed to them by 
 financiers, resulting from the character of 
 their security, is their lack of elasticity as 
 a so-called bank currency. 
 
 ^ Address of Hon. W. L. Trenholm before the University 
 Extension Society at Philadelphia, February lo, i8g2 ; pub- 
 lished in Sherwood's History and Theory of Money, pages 1 7 
 and 18. 
 
 2 Rev. Stats. U. S.,% 5159. 
 
1 66 Congressional Currency, 
 
 Another serious objection to them is that 
 being national in character, and bought by 
 the banking institution which puts them 
 into circulation, they are by nature a com- 
 modity for which at times there is no local 
 demand, and are therefore a matter of some 
 expense to the bank to maintain. This 
 being the case, the tendency of such cur- 
 rency is towards the commercial centres, 
 where the demand is usually greater, for 
 purposes of speculation, if for none other. 
 
 All national bank notes, as has been said, 
 are required to be received in payment by 
 all other national banks ; and can be paid 
 to the government, or used in payment by 
 it, in all cases w^here specie is not required 
 by law to be used ; but the notes are not, 
 and have never been, a legal tender between 
 individuals. 
 
 A redemption fund of five per cent, on 
 its circulation is, by act of June, 1874, 
 required to be deposited by each bank with 
 the Treasurer of the United States at 
 Washington. By the law of 1864 provi- 
 sion was made for the redemption of the 
 national bank notes at agencies in larger 
 
National Bank Notes. i6y 
 
 cities. This provision was subsequently 
 repealed, and the Treasurer of the United 
 States is now by law constituted the exclu- 
 sive custodian of the ^yq per cent, redemp- 
 tion fund, as well as of the bonds on which 
 the note circulation is based.^ 
 
 By the acts of 1863 and 1864 a limitation 
 was imposed upon the amount of bank cir- 
 culation, the aggregate of which was fixed 
 at $300,000,000. Later, this sum was in- 
 creased to $354,000,000; 2 and finally, by 
 the Resumption act of 1875 all restrictions 
 as to the amount of national bank issues 
 were abolished. At the same time by the 
 same legislation disappeared the then exist- 
 ing provisions of law ^ for an apportion- 
 ment of bank-note circulation among the 
 states according to their representative 
 population.'* 
 
 A number of important national banks 
 have never chosen to issue notes, confining 
 their business to discounts and deposits, 
 
 ^ Act, June 20, 1874, § 3. 
 
 ^ Rev. Slats. U. S.,% 5177. 
 
 ^ Rev. Stats, f/. 5., § 5178. 
 
 * Dunbar, TJieory and History of Bankings pp. 141, 142. 
 
1 68 Congressional Currency, 
 
 and to the buying and selling of exchange.^ 
 Under the provision of the law of 1874 
 permitting banks, by placing with the 
 Treasurer of the United States lawful 
 money to enable him to redeem the notes 
 and to surrender ^ro tanto the bonds 
 securing them, provided the amount of 
 bonds left in deposit was not less than 
 $50,000, to retire their circulation to not less 
 than $45,000, a number of the most promi- 
 nent banks prior to 1878 reduced their 
 circulation to the minimum. This with- 
 drawal of notes by the banks continued 
 until 1878. After the resumption of specie 
 payment in 1 879 the bank circulation in- 
 creased ; but it has never since reached the 
 amount outstanding prior to 1874.^ Since 
 the resumption of specie payment the 
 highest point attained was at the close of 
 1881, when the outstanding bank notes 
 aggregated $325,000,000. From that time 
 they declined rapidly in amount, until in 
 October, 1890, they stood at about $125,- 
 000,000. This decline was doubtless due 
 
 ^ Report of the Coinpt7'oller of the Cm-rency, 1889, p. 33. 
 ^Dunbar, Theory and History of Banking, pp. 151, 152. 
 
National Bank Notes. 1 69 
 
 to the rapid payment, during that period of 
 the national debt, and the large premium 
 commanded in the market by the govern- 
 ment bonds, which made it more profitable 
 to the banks to withdraw their circulation 
 and sell their bonds. Since 1890 there 
 has been a net increase of the bank circula- 
 tion from $125,000,000 to about $207,- 
 000,000 in 1894.^ The average annual 
 circulation of the national banks in the 
 United States from 1864 to 1894 was 
 $282,801,252.2 
 
 A peculiar and interesting class of na- 
 tional bank notes was authorized in 1870 
 by the Congress, in the act establishing 
 what were known as " gold banks," under 
 the National Bank act. A number of 
 banks on the Pacific slope, desiring to pro- 
 vide for the redemption of " their notes 
 exclusively in gold, were authorized to or- 
 ganize and to issue notes so redeemable. 
 These notes were secured by deposit with 
 the Treasurer of the United States of gov- 
 ernment bonds, bearing interest, payable in 
 
 * Report of the Secretary of the Treasury, 1894, p. xv. 
 2 Report of the Comptroller of the Currency, 1894, p. 33. 
 
170 Congressional Currency, 
 
 gold. They were not to exceed eighty per 
 cent, of the bonds.^ This kind of bank 
 was created on the theory existing in 1870 
 that the resumption of specie payments by 
 the government, in view of the losses of the 
 Civil War and the tremendous war debt, 
 was far in the then indefinite future. After 
 the Resumption act went into effect, the 
 distinction between the gold banks and the 
 other national banks ceased to be of im- 
 portance ; and provision was made in the 
 act of 1880 for their conversion into na- 
 tional banks of the ordinary kind.^ By the 
 official report of 1876 there were nine of 
 these gold banks in existence, all located in 
 California, with an aggregate capital of 
 $4,450,000, and a note circulation of 
 $2,090,500.' The act authorizing the gold 
 banks limited the amount of their circula- 
 tion.^ This limit of circulation was, how- 
 ever, repealed by the act of January 19, 
 1875.' 
 
 '^ Revised statutes t/. ^., i^ 5185. 
 
 ^ Supplement tp Revised Statutes U. 5., p. 278. 
 
 ^Walker, Money\ p. 509. 
 
 4 Revised Statutes C/. 5. , § 5 1 8 5 . 
 
 ^ Supplement to Revised Statutes U. S. , p. 59. 
 
National Bank Notes, 1 71 
 
 In concluding this chapter on the na- 
 tional bank notes it may be stated, that 
 while the lowest denominations of the 
 greenback, the silver certificate, and the 
 Treasury note of 1890 is one dollar, the 
 law provides that no bank-note shall be is- 
 sued for a less sum than ^\q dollars/ This, 
 however, has only been the case since the 
 resumption of specie payments. Prior 
 thereto the denominations of bank-notes, 
 as provided by statute, were one dollar, 
 two dollars, three dollars, five dollars, ten 
 dollars, twenty dollars, fifty dollars, one 
 hundred dollars, ^n% hundred dollars, 
 and one thousand dollars;^ but not more 
 than one-sixth part of the notes furnished 
 by the Treasury Department to any bank 
 could be of a less denomination than ^y% 
 dollars.^ 
 
 Repeated efforts have been made at 
 various times to have the Congress repeal 
 the National Bank act, and retire the 
 notes ; ^ the banks being an especial object 
 
 "^ Revised Statutes U. S., § 5175. 
 ^Revised Statutes U. S.,% 5172. 
 ^Revised Statutes ^7. 6"., § 5175. 
 * Richardson, The National Banks, pp. 154, 155. 
 
172 Co7igressional Currency. 
 
 of hostility to the ultra believers in the 
 greenback. The greatest danger which has 
 ever threatened them, however, is the prob- 
 able payment at a comparatively early date 
 of the major part of the bonded debt of 
 the United States on which their circula- 
 tion is based. 
 
TREASURY NOTES OF 1890, AND CUR- 
 RENCY CERTIFICATES. 
 
 Gold certificates were first authorized by 
 the act of March 3, 1863. The Treasurer 
 and sub-treasurers of the United States 
 were empowered to issue them upon depos- 
 its of gold coin and bullion in sums not 
 less than $20. The denominations of the 
 gold certificates were required to correspond 
 with the denominations of the United States 
 notes, as the " greenbacks " are called in the 
 statute ; and the coin and bullion deposited 
 in the Treasury, to be kept there for the 
 purpose of redeeming them on presentation. 
 They are used in payment of interest on 
 the public debt and of customs duties ; and 
 the act of 1863 provided that their amount 
 should not at any time be more than twenty 
 per cent, in excess of the coin and bullion 
 
 173 
 
1 74 Congressio7ial Currency. 
 
 in the Treasury.^ Many of these gold cer- 
 tificates were issued for clearing-house pur- 
 poses in denominations of $1000, $5000, 
 and $10,000, and were so used after the 
 passage of the National Bank act.^ Their 
 issue under the act of 1863 continued until 
 December 1, 1878, when it ceased. They 
 were again authorized by the act of July 
 12, 1882; and have since been issued and 
 used in settling balances at the clearing 
 houses, and for other purposes. Under the 
 last-named act they are issued on deposits 
 of gold coin solely, in denominations of not 
 less than twenty dollars, and not on depos- 
 its of coin and bullion as under the act of 
 1863; and correspond in their denomina- 
 tions with the United States notes. 
 
 When the one hundred million dollar 
 gold reserve in the Treasury falls below 
 that figure, the further issuing of the gold 
 certificates is required by statute to cease, 
 until the reserve again becomes one hun- 
 dred millions in amount, when they may 
 again be issued. The coin deposited for 
 
 ^ Rev. Statutes U. S.,% 254 
 2 Knox, U. S. Notes., p. 115. 
 
Certificates and Treasury Notes, i 75 
 
 the certificates is kept for their redemption 
 when presented/ 
 
 The above provision for the cessation of 
 issue when the gold reserve drops below 
 one hundred millions is the sole recognition 
 in the currency statutes of the existence of 
 such a reserve. 
 
 The gold certificates are not legal tender. 
 They are receivable by the clearing-houses 
 in the settlement of balances, the act 
 authorizing them providing that no national 
 banking association shall be a member of 
 any clearing-house in which such certificates 
 shall not be so receivable. They may be 
 counted as part of the lawful reserves of 
 the national banks, and as a matter of fact 
 are thus largely used. This is especially 
 the case of late years, when the disposition 
 of the national banks has been to hoard 
 gold, which they can easily do by means of 
 the gold certificates without filling their 
 vaults with the metal, the Treasury acting 
 as its custodian for them. 
 
 The gold certificates are receivable for 
 customs, taxes, and all public dues, and 
 
 * Act, July 12, 1882, § 12. 
 
1 76 Congressional Curre7icy. 
 
 when so received may be, and under the 
 Treasury practice are, re-issued. 
 
 The account of gold certificates outstand- 
 ing November 1, 1894, was $64,308,349, a 
 decrease of more than fourteen and a half 
 millions in the twelve months preceding/ 
 
 A distinguished American writer on 
 finance says of the gold certificates : 
 
 " They form the ideal circulating medium, a 
 money combining the convenience of paper with 
 the security and stability of coin." ' 
 
 But it has been recently urged on the 
 floor of the Congress against the gold cer- 
 tificates, that the United States is the only 
 country in the world which keeps gold 
 locked up in its Treasury, restrained from 
 the ordinary channels of trade, and subject 
 only to the draft of these certificates of 
 deposit.^ 
 
 Under the act of February 28, 1878, re- 
 establishing the legal-tender standard silver 
 dollar, known as the Bland-Allison act, 
 
 ^ Report of the Secretary of the Treasury, 1S94, p. xv. 
 2 F. A. Walker, Money, p. 509. 
 . ^ Mr. Coombs of New York, in the House of Representa- 
 tives, January 25, 1895. 
 
Certificates and Treasury Notes. \yij 
 
 which continued operative until the pas- 
 sage of the Sherman act of 1890, the holder 
 of such silver dollars was authorized to 
 deposit them with the Treasurer and sub- 
 treasurers of the United States in sums not 
 less than ten dollars, and receive therefor 
 silver certificates of not less than ten dol- 
 lars each, corresponding in denomination 
 with the United States notes. The coin 
 so deposited, or representing these certifi- 
 cates, was required to be retained in the 
 Treasury for their redemption. 
 
 The silver certificate is not a legal tender ; 
 but is receivable for customs, taxes, and all 
 public dues, and when so received, may be 
 reissued. It may by law be included in 
 the bank reserves, and used in settlement 
 of clearing-house balances, as is the gold 
 certificate. 
 
 Whatever degree of popularity the silver 
 certificate may have attained among " the 
 plain people " as a convenient representa- 
 tion of the bulky silver dollars, the banks 
 of the country have not regarded it with 
 favor; and in 1882 the Congress was com- 
 pelled by the attitude of the banks towards 
 
1 yS Congressional Currency. 
 
 tliis peculiar kind of paper currency, to 
 enact legislation prohibiting national banks 
 from belonging to any clearing-house asso- 
 ciation in which silver cei'tificates are not 
 receivable in settlement of balances. " But," 
 says Mr. Upton, in his volume on Money 
 in Politics^ "no bank has paid any atten- 
 tion to the act."^ 
 
 Up to the passage of the act of August 
 4, 1886, the lowest denomination of silver 
 certificates was ten dollars. By the last- 
 named act it is provided that silver certifi- 
 cates shall be issued in denominations of 
 one, two, and five dollars, and that the 
 larger denominations may be, on presenta- 
 tion at the Treasury, exchanged for certifi- 
 cates of these smaller denominations. 
 
 " At the time of the passage of the act last referred 
 to, permitting the issue of silver certificates in de- 
 nominations of one, two, and five dollars, standard 
 silver dollars not represented by certificates had 
 accumulated in the treasury to the amount of $93,- 
 959,880, although the total coinage up to that date 
 was only $235,643,286. Within four months after 
 that date, although in the meantime the coinage was 
 progressing at the usual rate, the amount of free 
 
 ' Page 225. 
 
Certificates and Treasury Notes, i 79 
 
 silver held in the Treasury was reduced to $71,259,- 
 568, and it continued to decrease on account of the 
 demand for small certificates until it became so 
 reduced that further issues of certificates had to be 
 limited, practically, to the current coinage of the 
 dollars." ^ 
 
 The popular belief is that the silver cer- 
 tificates, like the greenbacks and the 1890 
 Sherman Treasury notes, or " coin notes " 
 as they are often called, are as a matter of 
 fact, redeemed on presentation at the Treas- 
 ury directly in gold. This, however, is 
 not true. The United States Treasury, 
 under the existing legislation of the Con- 
 gress, is not only a bank of issue, but a 
 bank of deposit as well, and the deposits 
 may be general or special.^ The silver cer- 
 tificate represents a deposit of silver dol- 
 lars, and is I'edeemed when so presented, 
 with the coined silver standard dollars, 
 whose deposit with the Treasurer is certi- 
 fied on its face, or is exchanged for other 
 silver certificates of different denomina- 
 tions.^ Under the statutory financial policy 
 
 ^ Report of the Secretary of the Treasury, 1894, p. Ixiii. 
 ^ Richardson, The National Banks, p. 167. 
 * Act, Feb. 28, 1878, § 3. See Treasury Circular, §11, cited 
 in Kinleys Independent Treasury, p. 298. 
 
i8o Congressional Currency. 
 
 of the government, nevertheless, the silver 
 dollars so obtained in exchange for the cer- 
 tificates at the Treasury, may be used to 
 purchase legal tenders, which being pay- 
 able in " coin " are paid, as a matter of 
 practice by the Treasury officials, in gold. 
 Thus, in this roundabout method, gold is 
 obtainable at the Treasury for the silver 
 certificates, as it is really obtainable for all 
 the government currency, but not directly ; 
 and the silver certificates circulate " at a 
 gold valuation." . 
 
 On November 1, 1894, there were in ex- 
 istence $337,712,504 of silver certificates, 
 over $331,000,000 of which were in circu- 
 lation outside of the Treasury, showing 
 that that amount of coined silver dollars 
 was stored in the government vaults for 
 their redemption.^ The circulation of the 
 certificates instead of the coin is due, in 
 large measure, to the operation of the finan- 
 cial principle that " paper issues displace 
 coin of equivalent denominations."^ 
 
 This statute, which has been regarded 
 
 * Report of the Secretary of the Treasury^ 1894, p. xv. 
 
 * Sumner, Afnerican Currency, p. 115. 
 
Certificates and Treasury Notes. 1 8 1 
 
 by the gold standard financiers as a very 
 dangerous one, and which was vetoed by 
 President Hayes, becoming a law in spite 
 of his opposition by passage over his veto, 
 would doubtless have been repealed or 
 radically amended sooner than it was but 
 for the convenience arising from the hand- 
 ling of the paper substitute for the silver 
 dollars, which are heavy and inconvenient 
 for transportation/ 
 
 Eminent monometallic financiers have 
 concurred in the opinion of the danger of 
 the silver certificates. Mr. Lyman J. Gage 
 said of them, in his address delivered Octo- 
 ber 27, 1894, before the Commonwealth 
 Club of the city of Chicago : 
 
 " In them a dangerous volume of inferior money 
 has found an abnormal use. They are the most 
 perplexing feature in the much-involved problem 
 of our national finances." 
 
 Hon. John Jav Knox has said of them : 
 
 " In the opinion of those who believe in a single 
 gold standard, the silver certificate is a most dan- 
 gerous substitute for money." "^ 
 
 ^ Knox, U. S. Notes, p. 153. 
 2 United States Notes, p. 154. 
 
1 82 Congressional Currency, 
 
 There is little doubt that the Bland- Alli- 
 son act was experimental no less than com- 
 promise legislation, intended to expand and 
 increase the volume of currency, and to 
 appease in some degree at least the clamor 
 of the " greenbackers." For the time being 
 it resulted in practically killing '^green- 
 backism "; but excited in its stead a renewed 
 demand for the free and unlimited coinage 
 of silver by the mints of the United States 
 at the ratio of 16 to 1. 
 
 This demand for free coinage was in a 
 measure satisfied temporarily by the pas- 
 sage of the compromise act of 1890, known 
 as the Sherman act, which added yet 
 another new and troublesome kind of gov- 
 ernment paper currency to those already 
 existing. In March of that year a bill was 
 reported to the House from the Committee 
 on Coinage, Weights and Measures, based 
 on a plan suggested by Secretary Windom, 
 that owners of silver bullion, not foreign, 
 could bring it to any government mint, 
 and obtain legal tender therefor equal to 
 the market value of the silver redeemable 
 on demand either in gold or silver bullion 
 
Certificates and Treasury Azotes. 183 
 
 at its then value at the government's op- 
 tion, or in silver dollars at the holder's 
 option. This bill passed the House of 
 Representatives, and went through the Sen- 
 ate w^ith a provision added for the free and 
 unlimited coinage of silver ; but the confer- 
 ence committee of the two houses struck 
 out the free-coinage feature ; and with cer- 
 tain changes it became the law known as 
 the Sherman act on July 14, 1890.^ 
 
 It is indicative of the shifting and uncer- 
 tain temper of the Congress in matters of 
 financial legislation that the Senate in 1890 
 incorporated into the bill suggested by 
 Secretary Windom the free-coinage provi- 
 sion which was subsequently eliminated in 
 conference, whereas the same body in legis- 
 latino^ on the Bland-Allison act of 1878 
 had stricken out of the latter the House 
 provision for free coinage. 
 
 The Sherman act Treasury notes, or 
 Treasury coin notes, as they are frequently 
 called, were put into circulation through 
 the purchase of silver bullion by the United 
 States Treasury at the market rates, the 
 
 ' Ehrich, The Question of Silver, p. 23. 
 
184 Congressional Currency, 
 
 notes being given in payment therefor. 
 The bullion so purchased is not required by 
 the act to be coined, save only in so far as 
 may be necessary for the redemption of the 
 notes on presentation ; and in this connec- 
 tion provision is made in the act that " the 
 gain or seigniorage " from such coinage is 
 to be accounted for and paid into the 
 Treasury. 
 
 The denominations of the Sherman Treas- 
 ury notes range from $1 up to $1000. 
 They are specifically redeemable " in gold 
 or silver coin " at the discretion of the Sec- 
 retary of the Treasury ; but the statute of 
 1890 recites in terms that it is " the estab- 
 lished policy of the United States to main- 
 tain the two metals on a parity with each 
 other upon the present legal ratio, or such 
 ratio as may be provided by law;" and in 
 order to maintain this parity the Sherman 
 notes are redeemed at the Treasury in gold 
 coin. They are reissued on redemption, 
 the act providing that when the notes are 
 received in the Treasury they may be, which 
 is interpreted must be, reissued. 
 
 The policy of reissuing all government 
 
Certificates and T^'easury Notes, 185 
 
 notes and certificates is pursued by the 
 officials of the Treasury with a view to 
 prevent too great a contraction of the cur- 
 rency ; though to the uninterrupted execu- 
 tion of this policy there has been I'ecent 
 exception. From the date of the first issue 
 of the Sherman Treasury notes to March 4, 
 1893, no silver had been paid out of the 
 Treasury for their redemption, and none of 
 the notes had been retired and cancelled. 
 But between the last-named date and Sep- 
 tember 1, 1894, Secretary Carlisle paid out 
 for the redemption of Sherman Treasury 
 notes nearly four million standard silver 
 dollars, coined for the purpose from the 
 bullion purchased under the provision of 
 the act, and retired and cancelled the notes 
 so redeemed.^ 
 
 There were $151,140,568 of these Treas- 
 ury notes in existence November 1, 1894.^ 
 They are unlimited legal tender, like the 
 Federal gold coins, the standard silver dol- 
 lars and the greenbacks ; differing from the 
 
 ^ Secretary John G. Carlisle's letter to Hon. John T. Heard 
 in the newspapers of September 14, 1894. 
 
 ^ Report of the Secretary of the Treasury^ 1894, p. xv. 
 
1 86 Congressional Currency, 
 
 greenbacks in that they are primarily based 
 on silver bullion, whereas the latter were 
 primarily based on government credit alone. 
 They are receivable for customs duties, dif- 
 fering also in this respect from the green- 
 backs ; for taxes, and for all public dues ; 
 are lawful reserves of the national banks, 
 and are, like the greenbacks, a constant 
 menace to the continued maintenance of 
 the one hundred million dollar gold reserve 
 in the United States Treasury. The " pur- 
 chasing clause " of the Sherman act was 
 repealed November 1, 1893, in extra session 
 of the Congress called by the President for 
 the purpose, but only after a protracted and 
 earnest opposition on the part of the advo- 
 cates in the Senate of the free and unlimited 
 coinage of silver. This opposition was 
 founded not so much upon the idea of 
 approval of the Sherman act, for men of 
 many shades of financial opinion concurred 
 in condemning the statute, but on the idea 
 that its repeal should be accompanied with 
 some recognition of silver. The recogni- 
 tion finally achieved was but an empty 
 show, in the incorporation into the repeal 
 
Certificates and Treasury Notes. 187 
 
 act of the declaration tliat it is " the policy 
 of the United States to continue the use of 
 both gold and silver as standard money, and 
 to coin both gold and silver into money of 
 equal intrinsic and exchangeable value, 
 such equality to be secureJ through inter- 
 national agreement or by such safeguards 
 of legislation as will insure the maintenance 
 of the parity in value of the coins of the 
 two metals, and the equal power of every 
 dollar at all times in the markets and in 
 payment of debts ; " and of the further 
 declaration in the act " that the efforts of 
 the government should be steadily directed 
 to the establishment of such a safe system 
 of bimetallism as will maintain at all times 
 the equal power of every dollar coined or 
 issued by the United States in the markets 
 and in the payment of debts." ^ 
 
 The currency certificates, issued under 
 the act of June 8, 1872, have been men- 
 tioned in the previous chapter on the 
 Clearing-House associations. While in 
 reality currency of the country, they are 
 properly used only for the specific purposes 
 
 ^ Act of November i, 1893. 
 
1 88 Congressional Currency, 
 
 of settling clearing-liouse balances, and of 
 furnishing a part of the legal reserves of 
 the banks. On November 1, 1894, there 
 were in existence of such currency certifi- 
 cates $54,325,000/ as against $22,425,000 
 on the corresponding date in 1893, an in- 
 crease of $31,900,000 due to the necessities 
 of the clearing-houses during and immedi- 
 ately subsequent to the panic of 1893. 
 
 The currency certificates are issued on 
 the deposit of greenbacks, which are re- 
 quired to be held as special deposits in the 
 Treasury and used only for the redemption 
 of the currency certificates, which are also 
 known as "certificates of deposit."^ 
 
 In the recent raids upon the gold reserve 
 of the Treasury these currency certificates 
 have been found convenient by the banks 
 holding them for use in withdrawing gold. 
 Their denominations being large, and pos- 
 sessing practically the equivalence of the 
 greenbacks deposited to redeem them, the 
 production of a comparatively small num- 
 ber of the certificates at the Treasury for 
 
 ' Report of the Secretary of the Treasury^ 1894, p. xv. 
 ' Revised Statutes United States ^ § 5194. 
 
Certificates and Treasury Notes. 1 89 
 
 redemption results in a proportionately 
 large diminution of the gold reserve. 
 
 Mr. J. K. Upton, a distinguished former 
 assistant secretary of the Treasury, says 
 that, under the authority of the act creating 
 the currency certificates, " banks employ 
 the public treasury to keep them in notes, 
 the denominations of which may suit their 
 convenience ; turning into the Sub-Treasury 
 one day worn notes of undesirable denomi- 
 nations, obtaining certificates therefor to 
 be redeemed the next day in new notes of 
 desired denominations, compelling the Sub- 
 Treasury oflficers to make the exchange at 
 Washington at the expense of the govern- 
 ment. No other advantage in the plan has 
 yet become evident." ^ 
 
 * Upton, Money in Politics^ p. 262. 
 
XL 
 
 JUDICIAL INTERPRETATION OF CURRENCY 
 LEGISLATION. 
 
 The theory that the Federal Government 
 possesses the exclusive power of both cre- 
 ating and I'egulating the currency of the 
 country, a theory that was the outgrowth 
 of the alleged iniplied powers of the Con- 
 stitution, according to the Federalist doc- 
 trine, was first suggested by Alexander 
 Hamilton in his great Report on a National 
 Banlc} 
 
 The question of the right of the general 
 government to create and maintain a na- 
 tional bank was brought before the Supreme 
 Court of the United States in the case of 
 McCulloch vs. Maryland^ which grew out 
 of legislation by the State of Maryland 
 imposing a tax upon banks not chartered 
 
 ^ Reports on the Finances^ vol. i., p. 54. 
 •■^4 Wheat., 316. 
 
 190 
 
Interpretation of Currency Legislation. 1 9 1 
 
 by the legislature of that state. Chief- 
 Justice MarsEall delivered the unanimous 
 opinion of the court, presenting in the 
 most logical and powerful manner the 
 Federalist view, as propounded by Hamil- 
 ton in his Heport ; and holding that there 
 was no power in the state to impose a tax 
 upon national bank issues, and that such a 
 tax was therefore void, as repugnant to the 
 Constitution. The case of McGvlloch vs. 
 Ma7yla7id wsi^ decided in 1819. In 1824, 
 in the case of Osborne vs. The Bank of the 
 United States^ the Supreme Court re- 
 affirmed the principle established in Mc- 
 Ckdloch vs, Maryland, that the states had 
 no right to tax the Bank of the United 
 States ; and Mr. Justice Johnson, in deliv- 
 ering a dissenting opinion on the ground of 
 want of Federal jurisdiction, propounded 
 for the first time from the bench of that 
 court the principle of exclusive control by 
 the central government over the currency,^ 
 asserting that the Federal authority to in- 
 
 * 9 Wheat., 738. 
 
 ^ Dabney, " Paper Money," Va. State Bar Association He- 
 ports^ vol. vii., p. 194. 
 
192 Congressional Currency, 
 
 corporate a bank tended "to restore that 
 power over the currency which the fraraers 
 of the Constitution evidently intended to 
 give to Congress alone." ^ 
 
 While recent congressional legislation 
 has established the right of the states to 
 tax all paper currency created by the gov- 
 ernment, in the provision that " circulating 
 notes of national banking associations and 
 United States legal-tender notes and other 
 notes and certificates of the United States 
 payable on demand, and circulating or 
 intended to circulate as currency,, and 
 gold, silver, or other coin shall be subject 
 to taxation as money on hand or deposit 
 under the laws of any state or territory, 
 provided that any such taxation shall be 
 exercised in the same manner and at the 
 same rate that any such state or territory 
 shall tax money, or currency circulating as 
 money within its jurisdiction,"^ the far- 
 reaching principle asserted by Mr. Justice 
 Johnson has, h^ j^ost helium judicial deter- 
 
 * 9 Wheat., 873. 
 
 ' Act , August 1 3 , 1 894 , U.S. Statutes at Large, j^d Congress^ 
 i8g4, ch. 281, p. 278. 
 
Interpretation of Currency Legislation. 193 
 
 mination, become definitely fixed in the 
 most recent of the legal-tender cases decided 
 by the Supreme Court. 
 
 The first decision of importance by that 
 tribunal with reference to the legal tenders 
 was that of The Banh vs. The Supervisors^ 
 which was rendered in 1868. In that case 
 the question was presented whether the 
 United States notes were fiat money or 
 government obligations. Chief - Justice 
 Chase, delivering the opinion of the Court, 
 said : 
 
 ** These notes are obligations of the United 
 States. Their name imports obligation. Every 
 one of them expresses upon its face an engagement 
 of the nation to pay to the bearer a certain sum. 
 The dollar note is an engagement to pay a dollar, 
 and the dollar intended is the coined dollar of the 
 United States ; a certain quantity in weight and 
 fineness of gold or silver, authenticated as such by 
 the stamp of the government." 
 
 The question of the power of Congress 
 to make the United States note a legal 
 tender for the payment of debts arose in 
 several cases that came before the Supreme 
 
 * 7 Wallace, 26. 
 »3 
 
194 Congressional Currency, 
 
 Court, but was successfully avoided by 
 the court's decisions on other grounds 
 until the issue was at last and unavoidably 
 squarely presented in the case of Hephurn 
 vs. Griswold} The court at its December 
 term, 1869, by a vote of five to three, held 
 the act creating the greenback unconstitu- 
 tional in so far as it made the notes a legal 
 tender for debts prior to the date of the 
 act, Chief-Justice Chase delivering the 
 opinion. The court held further that the 
 legal-tender clause of the act was unneces- 
 sary and improper, and argued that it was 
 the quality which the greenbacks pos- 
 sessed of receivability for public dues, and 
 not their legal-tender attribute, which 
 caused them to circulate. 
 
 Justice Grier, who had been one of the 
 five judges constituting the majority in the 
 case of Hepburn vs. Griswold, resigned in 
 February, 1870; and in March of that 
 year Justices Strong and Bradley took the 
 two vacant seats upon the bench. 
 
 The act increasing the number of judges 
 of the Supreme Court from eight to nine 
 
 * 8 Wallace, 603. 
 
Interpretation of Currency Legislation. 195 
 
 had been passed April 10, 1869, wMle the 
 case of Hepburn vs. Griswold was before 
 the court. Mr. H. W. Richardson in his 
 volume on The National Banhs, says : 
 
 " It is not disputed that these appointments were 
 made for the purpose of over-ruling the decision of 
 the Court in the case of Hepburn vs. Griswold j 
 for although that decision applied strictly to such 
 contracts only as were outstanding on the 25th of 
 February, 1862, when the legal-tender act was ap- 
 proved, it was seen that the entire principle of the 
 law was involved, and it was feared that with gold 
 still at 120, the notes, by some subsequent decision, 
 might be deprived of their forced currency. If 
 this had happened, the only consequence would 
 have been that instead of reckoning gold at 120 
 and the notes at par, people would have quoted the 
 notes at Z^ and gold at par ; for it would have been 
 held that outstanding contracts must be regarded 
 as obligations to pay notes and not coin." * 
 
 A majority of the court as re-constituted, 
 at the December term, 1870, four judges 
 dissenting, ordered that counsel for the 
 parties denying the validity of the legal- 
 tender clause, and the Attorney General of 
 the United States be heard upon the ques- 
 tions : 
 
 * The National Banks, pp. 127, 128. 
 
196 Congressional Currency, 
 
 1. Is the act of Congress known as the 
 
 Legal Tender act constitutional as 
 to contracts made before its pas- 
 sage ? 
 
 2. Is it valid as applicable to transactions 
 
 since its passage ? 
 
 In what are known as the Legal Tender 
 cases, the court, in May, 1871, by a major- 
 ity of one, and without any change of 
 opinion on the part of the judges who bad 
 decided Hejphiim vs. Griswold, declared 
 the Legal Tender act constitutional and 
 valid as to contracts made both before and 
 after its enactment, reversing in toto its 
 former decision.^ 
 
 Mr. Justice Strong delivered the court's 
 opinion, prefacing the grounds of decision 
 with the statement that Hejphurn vs. Gris- 
 wold had been " decided by a divided 
 court, and by a court having a less number 
 of judges than the law then in existence 
 provided that this court shall have. These 
 cases have been heard by a full court, and 
 they have received our most careful con- 
 sideration." 
 
 ^ The Legal Tender Cases, 12 Wallace, 457. 
 
Interpretation of Ciirrency Legislation, 1 9 7 
 
 Mr. Justice Bradley read a concurring 
 opinion, in which was outlined that ex- 
 treme doctrine promulgated by the court 
 at a later date in the case of Juilliao^d vs. 
 Greenman^ which, in making the Congress 
 the sole judge and arbiter of the vague and 
 undefined constitutional powers therein 
 asserted as belonging to it, invests that 
 body with a plenitude of legislative author- 
 ity that is ^' practically absolute and un- 
 limited." 
 
 In his opinion Justice Bradley, after 
 describing the power of the Congress to 
 give bills of credit the quality of legal 
 tender, as an incident flowing almost as a 
 matter of course from the power to issue 
 such bills, proceeded significantly to say : 
 
 " I do not say that it is a war power, or that it is 
 only to be called into exercise in time of war ; for 
 other public exigencies may arise in the history of 
 a nation which may make it expedient and impera- 
 tive to exercise it. But of the occasions when and 
 of the times how long it shall be exercised and in 
 force, it is for the legislative department to judge." 
 
 In the case of Juilliard vs, Greenman^ 
 
 ^ wo U. S. Reports, 421, 
 
198 Congressional Currency. 
 
 decided by the Supreme Court, March 3, 
 1884, "the single question," as stated by 
 the court in its opinion, was, " whether 
 notes of the United States issued in time 
 of war, under acts of Congress declaring 
 them to be a legal tender in payment of 
 private debts, and afterwards in time of 
 peace redeemed and paid in gold coin at 
 the Treasury, and then reissued under the 
 act of 1878, can, under the Constitution of 
 the United States, be a legal tender in pay- 
 ment of such debts." 
 
 Upon a full consideration of the case, 
 after hearing elaborate and able argument 
 of eminent counsel, — among those denying 
 the right of the Congress to confer upon 
 the re-issued greenback the legal-tender 
 quality being Senator Greorge F. Edmunds 
 of Vermont, the author of the Resumption 
 act of 1875, the court had no hesitation in 
 deciding the question propounded in the 
 affirmative. Mr. Justice Gray delivered the 
 opinion; the only one of the judges lifting 
 a dissenting voice being Mr. Justice Field, 
 who unwaveringly maintained the position 
 that he had first assumed when the case of 
 
Interpretation of Ctirrency Legislation. 1 99 
 
 Hephurn vs. Griswold decided the legal- 
 tender clause to be unconstitutional. 
 
 The court, premising its opinion with 
 the assertion that " a constitution, estab- 
 lishing a frame of government, declaring 
 fundamental principles and creating a na- 
 tional sovereignty, and intended to endure 
 for ages and to be adapted to the various 
 crises of human affairs, is not to be inter- 
 preted with the strictness of a private con- 
 tract," proceeded to the deduction " as a 
 logical and necessary consequence that Con- 
 gress has the power to issue the obligations 
 of the United States in such form, and to 
 impress upon them such qualities as cur- 
 rency for the purchase of merchandise and 
 the payment of debts, as accord with the 
 usage of sovereign governments." 
 
 This intei'pretation of the basic law, Mr. 
 Justice Field, in his dissenting opinion, 
 says, " fully carried out, would change 
 the whole nature of our Constitution and 
 break down the barriers which separate a 
 government of limited from one of un- 
 limited powers." 
 
 Hamilton never taught, and the most 
 
200 Congressional Currency, 
 
 ardent Federalist of the earlier days of the 
 Kepublic never claimed for the central gov- 
 ernment, such transcendent and pervasive 
 powers as are included in the doctrine 
 enunciated in Juilliardvs, Greenman^ when 
 carried to its legitimate conclusions. 
 
 The decision of the court came as a shock 
 to many of the ablest statesmen, financiers, 
 and political economists of the country ; 
 and although there has since been sought 
 to be passed through the Congress provis- 
 ion for the amendment of the Federal Con- 
 stitution expressly prohibiting such powers 
 as this tremendously far-reaching decision 
 of the court conceded it, the act and its in- 
 terpretation still stand together in eloquent 
 testimony that the "heavy and unsteady 
 hand" of the Congress remains clenched 
 upon the currency system of the country 
 with a more relentless and unshaken grasp 
 than ever before in all its history.^ 
 
 In concluding this sketch of the princi- 
 pal cases involving a judicial construction 
 by the Supreme Court of financial legisla- 
 tion by the Congress, it is only necessary 
 
 * Knox, United States Notes, p. i66. 
 
Interpretation of Currency Legislation. 201 
 
 to refer briefly to the case of the Yeazie 
 Bank vs. Fenno^ in which the prohibitive 
 ten per cent, tax on state bank issues was 
 held to be valid and constitutional. 
 
 As stated by Chief-Justice Chase, who 
 delivered the opinion of the court, the 
 question which presented itself for decision 
 was : 
 
 " Whether the second clause of the 9th section of 
 the act of Congress of the 13th of July, i866^under 
 which the tax in this case was levied and collected, 
 is a valid and constitutional law." 
 
 That clause was as follows : 
 
 " Every national banking association, state bank, 
 or state banking association, shall pay a tax of ten 
 per centum on the amount of notes of any person, 
 state bank or state banking association used for 
 circulation, and paid out by them after the first day 
 of August, 1866, and such tax shall be assessed and 
 paid in such manner as shall be prescribed by the 
 Commissioner of Internal Revenue." " 
 
 Counsel representing the bank insisted 
 that the tax was unconstitutional, because 
 it was not a tax imposed for the sake of 
 
 ' 8 Wallace, 533. 
 
 2 14 Stats, at Large ^ 146 ; Rev. Stats. U. S., % 3412. 
 
202 Congressional Cur^^ency, 
 
 revenue, but that its true purpose was to 
 destroy the state banks; that if the Con- 
 gress, by discriminating taxation, could 
 destroy the state banks, it could equally, in 
 the same manner, destroy the raih'oad sys- 
 tem of the states ; and that if it should be 
 determined as it would necessarily have 
 to be determined if the tax should be sus- 
 tained, that the taxing power of tlie Con- 
 gress was unlimited and could not be in- 
 quired into by the court, then the Congress 
 was supreme to legislate without any limi- 
 tations, provided it was done in the form 
 of levying a tax. 
 
 The case was decided December 13, 1869, 
 in favor of the tax, two of the judges dis- 
 senting. Chief-Justice Chase admitted in 
 his opinion that the object of the legisla- 
 tive provision was undoubtedly to regulate 
 by law the paper money in circulation; 
 and asserted that " havino; in the exercise 
 of constitutional powers undertaken to pro- 
 vide a currency for the whole country, it 
 cannot be questioned that Congress may 
 constitutionally secure the benefit of it to 
 the people by appropriate legislation. To 
 
Interpretation of Curre^icy Legislation, 203 
 
 this end Congress has denied the quality 
 of legal tender to foreign coins, and has 
 provided by law against the imposition of 
 counterfeit and base coin on the commu- 
 nity. To the same end, Congress may re- 
 strain, by suitable enactment, the circula- 
 tion as money of any notes not issued under 
 its own authority." 
 
 Secretary Fessenden's scheme was thus 
 firmly established and rendered successful 
 by the Supreme Court ; and the right of 
 taxation by the Congress of " the powers 
 and faculties of the state governments, 
 which are essential to their sovereignty 
 and to the efficient and independent man- 
 agement and administration of their inter- 
 nal affairs,"^ even to the extent of thereby 
 prohibiting and destroying such manage- 
 ment and administration, was definitely 
 and unequivocally determined by ultimate 
 judicial decision. 
 
 ^ Justice Nelson's dissenting opinion in Veazie Bank vs. 
 Fenno. 
 
XII. 
 
 CONCLUSION. 
 
 Ik his admirable and discriminative 
 treatise on Congressional Government^ Mr. 
 Woodrow Wilson observes that a " policy 
 cannot be either prompt or straightfor- 
 ward when it must serve many masters. 
 It must either equivocate or hesitate, or 
 fail altogether. It may set out with clear 
 purpose from Congress, but get waylaid or 
 maimed by the Executive." ^ If we recog- 
 nize the correctness of the principle enun- 
 ciated as applicable to the ordinary policies 
 of our system of government, how much 
 more profoundly must we of necessity be 
 impressed with its application to currency 
 legislation and administration. Especially 
 must this be the case, when we reflect not 
 only upon the frequent and often inevitable 
 
 » Tenth Edition, p. 283. 
 
 204 
 
Conclusion, 205 
 
 disagreements and collisions that must oc- 
 cur between the lei^islative and executive 
 departments, but upon the more remark- 
 able phenomenon apparent in the divisibil- 
 ity of authority in the matter of originating 
 the currency legislation of the Congress. 
 The Greenback act, for example, had its 
 inception in the House Committee on 
 Ways and Means, whose subjects of juris- 
 diction are defined to be revenue and such 
 measures as purport to raise revenue, and 
 the bonded debt of the United States,' and 
 not in the Committee on Banking and Cur- 
 rency, which is the committee charged 
 w^ith the jurisdiction of bills originating 
 currency and banking measures, and from 
 which the uninitiated observer would be 
 readily led to look for such legislation to 
 emanate. When it is reflected, however, 
 that the primary object of the greenback 
 legislation was not to establish a perma- 
 nent character or system of paper currency, 
 but to create and float a government war 
 debt, it is not altogether difficult to under- 
 
 * Rules and Practice^ House of Representatives, first ses- 
 sion, Fifty-third Congress, page 314. 
 
2o6 Congressional Cur7^ency, 
 
 stand why it should have thus originated. 
 So when we come to consider similar legis- 
 lation in 1890, by virtue of which legal- 
 tender Treasury notes were created and 
 issued on the security of a deposit of silver 
 bullion, we shall not be surprised to learn 
 for like reasons that the act had its origin 
 either with the Committee on Ways and 
 Means, because its effect is, no less than 
 that of the Greenback act, to create a pub- 
 lic debt ; or with the Committee on Cur- 
 rency and Banking, because it unquestion- 
 ably authorizes and directs the issuing by 
 the Treasury of a circulating medium ; or 
 finally, with the Committee on Coinage, 
 Weights and Measures, because, as a matter 
 of historical fact, the act was a compromise 
 and makeshift measure, resulting from the 
 contest between the advocates and oppo- 
 nents in the Congress of the free and unlim- 
 ited coinage of the standard silver dollar by 
 the government mints at the ratio of six- 
 teen to one. The Senate Finance Commit- 
 tee could not, without a violent stretch of 
 prerogative, have originated any single one 
 of the several species of Treasury paper 
 
Conclusion, 207 
 
 money now in circulation, because there is 
 no one of them which does not represent a 
 government debt, and has, therefore, indi- 
 rectly at least had its genesis in a " bill for 
 raising revenue," which must, by virtue of 
 the Federal Constitution,^ originate in the 
 House of Representatives. 
 
 The vacillation and uncertainty of such 
 a legislative policy in regard to the cur- 
 rency, as are indicated in the methods de- 
 scribed, are emphasized and made painfully 
 apparent by comparison with the policies 
 and methods of the great commercial na- 
 tions of Europe.'^ 
 
 As an inevitable result of the division of 
 authority among the congressional commit- 
 tees in the matter of originating currency 
 bills, and of the confusion arising in the 
 minds of legislators themselves as to the 
 real character and significance of the paper 
 money created by the Congress, legislation 
 on this subject lacks sequence, is bound by 
 
 * Constitution of the United Slates, article I, § 7. 
 
 ^Dunbar, Theory and History of Banking, chs. vii, viii, ix, 
 X, and xi ; Walter Bagehot, Lo?Jibard Street ; Wilson, Con- 
 gressional Government, Tenth Edition, ch. iii. 
 
2o8 Congressional Cu7^re7icy. 
 
 no fixed rules or principles, drifts helplessly 
 with the current of temporary popular pas- 
 sion or ignorance, and is absolutely impos- 
 sible to be foreshadowed from one session 
 of the Congress to another. The uncer- 
 tainty thereby created in the minds of the 
 people as to what they may have to look 
 forward to from year to year in the way of 
 congressional enactments about money 
 necessarily leaves its indelible impress upon 
 the business of the country, and destroys 
 the stability of that general confidence 
 which is essential to the steady growth and 
 progress of all enterprise.^ 
 
 In arriving at a correct understanding of 
 the peculiar methods of the national legis- 
 lature in dealing with questions of the 
 currency, over which it has since 1865 as- 
 sumed absolute and unqualified control, we 
 must inevitably be sti'uck with the exist- 
 ence of a fact that is perhaps without par- 
 allel in modern governments, viz. : the lack 
 of authority on the part of the executive 
 department of finance in the United States 
 
 ' Edward Atkinson, " Battle of Standards." The Forum, 
 April, 1895. 
 
Conclusion, 209 
 
 to even suggest, miicli less direct legislation 
 on currency subjects. Of the thirty-four 
 reports required by statute to be made, the 
 most of them annually, and some oftener, 
 by the Secretary of the Treasury to the 
 Congress, with respect to matters within 
 his jurisdiction as the administrative finan- 
 cial officer of the government, the only one 
 which necessarily touches matters of the cur- 
 rency is that on " the cost of transportation 
 of silver coin by registered mail or other- 
 wise."^ It is true that the Secretary may, 
 and often does,^ in his annual report on the 
 general subject of " finance, containing esti- 
 mates of the public revenue, and public 
 expenditures for the fiscal year then cur- 
 rent, and plans for improving and increas- 
 ing the revenues from time to time for the 
 purpose of giving information to Congress 
 in adopting modes of raising the money 
 requisite to meet the public expenditures,"^ 
 suggest to the Congress such changes and 
 reforms of the currency as may commend 
 
 * Rules and Practice of Fifty-third Congress^ p. 605. 
 2 Report of Secretary of Treasury for i8g4, p. Iv. 
 ^ Revised Statutes U. 6"., § 257. 
 14 
 
2IO Congresstoftal Currency, 
 
 themselves to his favorable consideration. 
 But his suggestions are always gratuitous, 
 because unasked for by statute ; and are, 
 doubtless on that account, not alw^ays 
 treated with the consideration they deserve. 
 The language of the act under which the 
 Secretary's chief report is made, and the 
 absence of any provision for a specific re- 
 port on the general state of the currency, 
 only serve to emphasize the assertion that 
 the raising of revenue is the first considera- 
 tion in the congressional administration of 
 federal finance, and to recall vividly to 
 mind the fact more than once heretofore 
 adverted to in these pages, that the legisla- 
 tion creating the current paper circulation 
 was not primarily intended to establish a 
 sound and permanent system of circulating 
 medium, but had for its object the floating 
 of a government debt by a forced circulation 
 of paper ; and that even the National Bank 
 act, which had its inception in the need of 
 the government to find a local market for 
 its bonds, falls in a way within the cate- 
 gory in which the other currency enact- 
 ments are thus placed. 
 
Conclusion. 2 1 1 
 
 As tbe natural result of a system which 
 does not invite the knowledge and techni- 
 cal skill of expert financiers, but leaves 
 everything to the uncertain and haphazard 
 capacity of legislators, who may or may not 
 be ignorant of the subjects concerning 
 which they legislate, the conditions of the 
 congressional currency have been recently 
 described by the chief executive officer of 
 the Treasury department as '^ constituting 
 a monetary system unlike that of any other 
 enlightened government in the world." ^ 
 As has been stated, the suggestions of the 
 Secretary when made without invitation to 
 the Congress with regard to reforms in the 
 currency are observed to carry so little 
 weight, and to be received by that body 
 with such entire indifference, that Mr. 
 Bryce is led on this account, among others, 
 to conclude that the Cono^ress does not look 
 to the Treasury Secretaries " for guidance 
 as in the early days it looked to Hamilton 
 and Gallatin ; " ' while Mr. Woodrow Wil- 
 son declares that havinsf " at first neither 
 
 ' Repo7'tof Secretary of Treasury for i8g4^ p. lii. 
 
 * 77^1? American Commonwealth , vol. i., p. 175, (2d ed.). 
 
212 Congressional Currency, 
 
 president nor federal judiciary, the Congress 
 now on occasion rules both witli easy mas- 
 tery and with a high hand." ^ 
 
 The fact that the two committees of the 
 House on Coinage, Weights and Measures, 
 and on Banking and Currency, and the 
 Finance committee of the Senate, are gen- 
 erallv ^constituted of members, the most of 
 whom may be, and very frequently are, 
 technically skilled and exceptionally well 
 informed in the peculiar subjects that will 
 fall within the original jurisdiction of these 
 legislative sub-divisions, does not lessen the 
 constantly imminent danger of inappro- 
 priate or unsound currency enactments ; 
 for, as has been shown, these committees do 
 not control without qualification the power 
 of originating such legislation, nor does any 
 one of them. Nor are the bills which they 
 may properly prepare and bring forward 
 usually regarded as satisfactory in all 
 respects by other members less skilled and 
 less learned in the subject than they, who, 
 for political or imagined economic reasons, 
 may succeed in loading them with amend- 
 
 ' Congressional Government^ p. 53, (loth ed.). 
 
Conclusion. 2 1 3 
 
 merits which utterly destroy their original 
 meaning. When such a bill safely runs the 
 gauntlet of either the House or the Senate, 
 it must then be acted on by the other body. 
 Again it is amended, or changed or emas- 
 culated ; and then the conference committee 
 from the two houses gets possession of it, 
 and in the majority of cases it comes back 
 to its parent house in the shape of a com- 
 promise or makeshift, in which its origina- 
 tor sees not the faintest resemblance to his 
 bill as introduced. 
 
 Out of all this irresponsibility of any 
 single group or smaller body of men, for 
 the character and effect of the financial 
 measures proposed by them, as is the case 
 in other civilized countries, have grown the 
 complexities and dangers of a currency sys- 
 tem that has only until recently failed to 
 bring about confusion and calamity because 
 of the tremendous territorial extent and 
 wonderful material and physical resources 
 of the United States.^ Even with these 
 great advantages, possessed by no other peo- 
 
 ^ Edward Atkinson : " Battle of Standards," Forum ^ April 
 1895. 
 
214 Congressional Currency, 
 
 pie in the world, by the aid of which the 
 country has managed to struggle along un- 
 der the burdens of an unparalleled pension 
 list and of an anomalous and absurd system 
 of currency, it scarcely admits of doubt or 
 denial that foolish financial lesfislation has 
 more than once contributed to business de- 
 pression, and afforded the opportunity for 
 speculators and schemers to plunder the 
 government of the people^s money. ^ 
 
 A brief resume of the most salient and 
 noteworthy characteristics and attributes 
 of the several kinds of currency in circu- 
 lation will serve to give perspective, from 
 another point of view, to the picture which 
 has been sought to be drawn in these 
 chapters. 
 
 The greenback is the evidence of a debt 
 still due from the government unpaid to 
 the holder, and is " a lien upon the future." 
 It represents a forced loan, without inter- 
 est, based upon the government's credit. 
 Its circulation at par with gold is main- 
 tained by the dynamics of its legal-tender 
 
 * For a history of " Black Friday " which grew out of the 
 greenback legislation, see Upton's Money in Politics, ch. xix. 
 
Conclusion, 2 1 5 
 
 feature and of the statutory declaration by 
 the Congress as to the government's finan- 
 cial policy, supplemented by the practice 
 of the Treasury officials, unauthorized by 
 law, of redeeming it on presentation with 
 gold. Its legal-tender quality is unlimited 
 in all cases of debt, and it is receivable in 
 payment of all dues to the government ex- 
 cept duties on imports, and of all claims 
 against the government except interest on 
 the public debt. It differs conspicuously 
 from the Treasury note of 1890, which in 
 other respects it so greatly resembles, in its 
 lack of receivability for customs duties. 
 When the greenback is redeemed at the 
 Treasury it must be reissued, and it is thus 
 an inconvertible paper currency. 
 
 The Sherman Treasury note of 1890 is 
 more nearly like the greenback than any 
 other existing species of paper money is- 
 sued by the Federal Government. It is the 
 evidence of a debt of the United States to 
 the holder, and it represents a loan with- 
 out interest. It is based in part on the 
 credit of the government, and in part on 
 a mass of uncoined silver bullion stored 
 
2i6 Congressional Cur^-ency. 
 
 in the vaults of the National Treasury. Its 
 issue against this bullion is " upon a ratio 
 which greatly overvalues that metal as 
 compared with the standard unit of value 
 in this and the other principal commercial 
 countries."^ Its circulation at par is main- 
 tained, like that of the greenback, by force 
 of its legal-tender feature and of the statu- 
 tory declaration of the Congress as to the 
 government's financial policy, which is so 
 construed in practise by the Treasury offi- 
 cials as that, without express direction of 
 law, they are in the habit of redeeming the 
 Treasury note, on pi'esentation, with gold. 
 Its quality of legal tender is absolute and 
 unlimited, and it is receivable for all debts 
 and demands of and against the govern- 
 ment, including customs duties. 
 
 The two foregoing species of circulating 
 medium represent the entire legal-tender 
 paper currency in existence in the United 
 States. As has been stated, they are in 
 forced circulation, and their capacity to 
 circulate rests in no small measure upon 
 
 ^ Report of the Secretary of the Treasury^ 1894, p. li. 
 
Conclusion. 2 1 7 
 
 the legal-tender attribute conferred upon 
 them by the government, — a quality of cur- 
 rency that does not exist in the media of 
 international exchanges, which are made in 
 gold and silver, by v^eight and fineness, 
 without reference to any peculiar attribute 
 that may be sought to be affixed to them 
 by legislation/ 
 
 A well-informed writer says that the 
 United States " have had paper money in 
 every shape, and issued for every variety of 
 purpose that the history of finance shows 
 to be known to any country in the world. 
 There has been inconvertible and converti- 
 ble paper money, and paper nominally con- 
 vertible but really inconvertible ; it has 
 been issued by the general government, by 
 the state governments, and by corporations 
 under government charters ; it has been 
 legal tender and not legal tender, and the 
 proverbial ingenuity of the Connecticut 
 mind discovered a compromise between 
 these two; it has been based on landed 
 security, on the security of taxes, and on 
 
 ' Edward Atkinson, " Battle of Standards," Forum, April, 
 1895. 
 
2i8 Congressional Ciirrency, 
 
 no other security than the pure credit of 
 authority of the government — i. e., ' fiat 
 money ' ; its causes of issue have been to 
 meet extraordinary government expendi- 
 tures ; to meet current government ex- 
 penditures ; for the professed purpose of 
 affording a circulating medium, and as a 
 loan for the promotion of industry. Is- 
 sues of fiat money have nearly all originated 
 in the necessities of v^^ar. The first issue 
 by Massachusetts in 1690 vs^as to pay the 
 cost of the disastrous expedition against 
 Canada. Further issues were made for a 
 like purpose in 1709, and the other New 
 England colonies with New Yoi-k and New 
 Jersey joining in the expedition, they, too, 
 issued fiat money to defray the expenses. 
 Virginia made its first issue to defray the 
 expenses of Braddock's expedition ; South 
 Carolina to meet the charge of an expedi- 
 tion against the Spanish settlement of St. 
 Augustine ; the continental currency was 
 issued to pay the charges of the Revolu- 
 tionary War ; all the states made large 
 issues for the same purpose ; and the green- 
 back of to-day came into existence through 
 
Conclusion, 219 
 
 the government needing money to put 
 down the Rebellion." ^ 
 
 It remained, however, for the Federal 
 Congress, sitting in the tenth decade of the 
 nineteenth century, to create an irredeema- 
 ble legal-tender fiat paper currency, under 
 the conditions of profound peace and an 
 overflowing Treasury, for the remarkable 
 purpose of effecting a compromise settle- 
 ment between the contending advocates 
 and opponents of the free and unlimited 
 coinage of silver at the government's mints. 
 
 If the greenback and the Sherman 
 Treasury note may not improperly be 
 described as the irredeemable bank issues 
 of a great Federal National Treasury bank, 
 for even the temporary redemption of 
 which a coin reserve, though unauthor- 
 ized by law, must, after the approved 
 methods of banking, be maintained at all 
 hazards and gigantic cost, with no less 
 impropriety or inaccuracy may the gold, 
 silver, and currency certificates of the gov- 
 ernment be designated as certificates of 
 
 ^ Cuthbert Mills, " The Permanence of Political Forces," 
 North American Review^ January, i88o. 
 
220 Congressional Currency. 
 
 deposit issued by the same Federal bank, 
 inasmucli as they are in the nature of de- 
 claratory government certificates that the 
 National Treasury has received, and holds, 
 stores, and preserves ready for forthcoming 
 on demand, the gold coin, silver coin, and 
 legal-tender notes which they respectively 
 represent ; and this, too, without advantage 
 to the government which gains no profit 
 by the use of such deposits, but entirely 
 for the benefit and convenience of the cer- 
 tificate holder, and free of cost or charge 
 to him. They are, in other words, evi- 
 dence of a special debt, due from the 
 government to the holder of the certifi- 
 cate of each kind, payable on presenta- 
 tion at the Treasury in the specific char- 
 acter of currency which is certified to 
 have been deposited. While the govern- 
 ment pays no interest on this debt it de- 
 rives no benefit therefrom, and acts merely 
 in the capacity of custodian and insurer 
 of the deposits. Yet, under the interpre- 
 tation placed by the Treasury Department 
 upon the government's statu toiy declara- 
 tion of its financial policy, the provision in 
 
Conclusion, 221 
 
 the several acts authorizing such certificates, 
 that when redeemed they " may be reissued " 
 is construed to be as imperative and man- 
 datory as in the case of the greenback, 
 which the statute says " shall be reissued " 
 on redemption. The excuse for such an 
 interpretation that a failure to reissue the 
 certificates would contract the currency is 
 untenable, because there is locked up in 
 the Treasury a dollar of other currency 
 for every dollar represented by such certi- 
 ficates. The continued existence of the 
 certificates of deposit, used as currency, is 
 but one of the many anomalous and unique 
 features of the existing system of congres- 
 sional currency. 
 
 Though the several kinds of currency 
 represented by the certificates of deposit, 
 viz., gold coin, standard silver dollars, and 
 legal-tender paper, all possess an unquali- 
 fied legal-tender capacity, none of the three 
 kinds of certificates possesses such an attri- 
 bute, either limited or unlimited. They 
 circulate, therefore, or two of them at least 
 may be said to circulate, viz., the silver 
 certificate and the currency certificate, be- 
 
22 2 Congressional Currency. 
 
 cause of the legal-tender quality not in 
 them but behind them, and of the govern- 
 ment's financial policy, which makes them 
 ultimately, if indirectly, all payable in 
 gold at the Treasury. 
 
 The notes of the national banks, while 
 constituting a character of currency su- 
 perior in many respects to any of the 
 paper money issued directly by the Treas- 
 ury, are anomalous in some of their pecu- 
 liarities. The plan on which they are 
 issued was perhaps more maturely consid- 
 ered before adoption than was any of 
 those on which the several species of gov- 
 ernment issues were based ; and yet the 
 national bank notes present the singular 
 features of beino: convertible into an infe- 
 rior kind of paper money, viz., the green- 
 backs ; of being legal tender only between 
 the banks ; of being secured absolutely by 
 the pledge of government bonds ; of being 
 dependent for their existence on the ex- 
 istence of a national interest-bearing debt ; 
 of being redeemable not at the bank of 
 issue, but at the Treasury of the Federal 
 government, and of being definitively 
 
Conclusion. 223 
 
 limited and fixed in amount by the amount 
 of government securities owned by the 
 bank which issues them. Whenever the 
 premium on the government bond exceeds 
 the value of the profit to be derived from 
 the circulation of the notes, it is to the in- 
 terest of the bank to retire its circulation 
 as far as possible and sell its bonds ; hence 
 the more valuable the bonds become for 
 purposes of private investment, the greater 
 the tendency of the banks to withdraw 
 their note circulation. 
 
 Thus the whole scheme of Federal paper 
 money, if a jumble of incoherent and un- 
 correlated acts of the Congress may be 
 denominated a scheme, is the inconsequen- 
 tial, incongruous, and unscientific result of 
 extravagant and hazardous legislative 
 experiments. 
 
 From the standpoint of their relation to 
 the Federal Treasury the government issues 
 are seen on investigation to present a con- 
 dition no less remarkable than that which 
 is apparent from a comparison of the several 
 species, one with another. The Treasury, 
 in putting its legal-tender notes in circula- 
 
224 Congressional Currency, 
 
 tion, exercises one of the functions of a 
 national bank of issue; and in receiving 
 deposits of gold coin, silver dollars, and 
 legal-tender notes, and issuing certificates 
 therefor, exercises another banking function. 
 While possessing, however, these two very 
 potential and conspicuous features of a bank 
 engaged in conducting a regular and well 
 defined banking business, it lacks entirely 
 other necessary and characteristic powers 
 of such a bank, the deprivation of which 
 makes it in certain directions conspicuously 
 feeble and insufiScient. For example, though 
 a bank of issue and deposit, it cannot lend 
 money on the best security. Its active in- 
 fluence on the money market, with which it 
 is so closely connected, in times of emer- 
 gency is therefore practically slight ; its 
 passive influence reflected in the rise and 
 fall of the gold reserve, is ti'emendous. 
 Any ability to use its reserve as oidinary 
 bank reserves are used, in financial crises, 
 is not possessed by it. A sound political 
 economist lays down the principle that 
 "whatever bank or banks keep the ulti- 
 mate banking reserve of the country must 
 
Conclusion. 225 
 
 lend that reserve most freely in time of 
 apprehension, for that is one of the charac- 
 teristic uses of the bank reserve, and the 
 mode in which it attains one of the main 
 ends for which it is kept." ^ 
 
 In such exigencies, the reserve in the 
 Federal Treasury, instead of being used in 
 the manner described, is sought most vigor- 
 ously to be preserved and retained ; and the 
 greater the general financial distress, the 
 more desperate are the efforts of the Treas- 
 ury officials to sustain and build up the re- 
 serve by the sale of bonds. The marked 
 contrast between the policy governing the 
 Treasury in this respect and that of the 
 Bank of England under such circumstances, 
 is graphically indicated by Mr. Bagehot 
 in his description of the English money 
 market.^ 
 
 In considering these striking characteris- 
 tics of the Federal Treasury, we are again, 
 from another standpoint, confronted with 
 the proposition hereinbefore stated, that 
 the primary object of all Federal legisla- 
 
 ' Bagehot, Lombard Street^ p. 64. 
 * Lombard Street^ ch. ii.^ § II. (American ed., 1892). 
 15 
 
226 Congressional Currency, 
 
 tion with reference to finance matters is the 
 raising of revenue, and that only as second- 
 ary to that has legislation for the purpose 
 of securing a sound and stable currency 
 been regarded by the Congress. The lim- 
 its of this chapter do not admit of the 
 further discussion of the peculiarities, in- 
 consistencies, and defects of the Federal 
 money system as it exists. Beyond a re- 
 cital of the uses to which the Sub-Treasury 
 has been perverted from its original form, 
 it is not now proposed to pursue the sub- 
 ject further. 
 
 Says Professor Kinley : 
 
 " In addition to its intended duties of receiving 
 and disbursing government money, the Independent 
 Treasury now discharges the following functions 
 also : First, it issues notes like a bank, and it pro- 
 tects these notes by keeping a reserve whose ratio 
 to the notes issued approximates that usually kept 
 by the banks ; second, it receives deposits and 
 issues therefor certificates, which pass from hand to 
 hand as money, and it keeps a deposit from which 
 to cash the checks of disbursing officers ; third, 
 the issue of government paper necessitates the duty 
 of redemption by the Treasury as by banks ; redemp- 
 tion, that is, in the sense of the exchange of one 
 
Conclusion, 227 
 
 kind of money for another, and it also acts as agent 
 of the national banks for the redemption of their 
 notes ; fourth, the Independent Treasury transfers 
 money for individuals from one part of the country, 
 to another, free of charge or at less cost than can 
 be done, for example, by the banks ; and finally, it 
 has by the law of July, 1890, been charged with 
 what is essentially the work of a silver bullion 
 broker. These powers of the Independent Treas- 
 ury must be borne in mind in seeking to determine 
 the nature and extent of its influence on the busi- 
 ness of the country to-day." * 
 
 This concluding brief resume of some of 
 the principal facts set down in the preced- 
 ing pages can, of necessity, be little else 
 than suggestive of the more thorough and 
 exhaustive criticism to v^hich the system 
 described is liable. If the facts presented 
 possess aught of significance in themselves, 
 they would seem to emphasize and illus- 
 trate beyond argument the tremendous im- 
 portance of a separation of the government 
 from the money market ; to demand in- 
 sistently that " the heavy and unsteady 
 hand " of the Federal Congress shall be 
 withdrawn from its unqualified and abso- 
 
 * The Independent Treasury of the U. S., p. 122. 
 
228 Congressional Currency. 
 
 lute control of the currency of domestic 
 commerce and business; and to vindicate 
 with an irrefutable logic the statesmanship 
 and financial wisdom of those of our fathers 
 who devised and created the Independent 
 Treasury scheme of fifty odd years ago, 
 which made gold and silver the sole money 
 of the Treasury and " divorced the govern- 
 ment from the banks." 
 
INDEX. 
 
 Act, the National Bank, 56 ; 
 the Coinage, of 1873, 96 ; 
 the Bland-Allison, 106 ; the 
 Sherman, of 1890, 112 ; the 
 Greenback, of 1862, 125. 
 
 Associations of banks as clear- 
 ing-houses, 68. 
 
 Attacks on the Treasury, 143, 
 148. 
 
 Balances, clearing-house, and 
 legislation, 69. 
 
 Bank of the United States, 
 the first, 5 ; removal of the 
 deposits from the, 39 ; 
 notes of the, 97. 
 
 Bank Act, the original Na- 
 tional, 156 ; genesis of the 
 National, 160. 
 
 Bank notes, 151. 
 
 Bank, llie, vs. The Super- 
 visors, 193. 
 
 Bills of credit, prohibited to 
 the states, 6 ; issued by the 
 Federal government, 128.' 
 
 Blaine, J. G., on the legal- 
 tender act, 147. 
 
 Bland-Allison act, 176 ; re- 
 stored the coinage of the 
 standard silver dollar, 104 ; 
 passage of the, 106 ; silver 
 dollars coined under the, 
 no. 
 
 Board of Treasury, 24. 
 
 Bond issues, to maintain the 
 gold reserve, 86 ; to main- 
 tain specie payments, 138. 
 
 Bullion, purchase of silver, 
 
 under the Sherman act, 
 III ; amount of silver, pur- 
 chased under the Sherman 
 act, 113. 
 Bureau of Engraving and 
 Printing, 59. 
 
 Calhoun, John C, on Con- 
 gressional control of the 
 currency, 7 ; on the Inde- 
 pendent Treasury act, 45. 
 
 California, discovery of gold 
 in, 103; and the "gold 
 banks," 169. 
 
 Certificates, issued by the 
 Treasury, 52 ; clearing- 
 house gold, 75 ; silver, 
 under the Bland-Allison 
 act, 109 ; gold, 173 ; silver, 
 177 y currency, 187. 
 
 Charters of the national 
 banks, 57. 
 
 Chase, S. P., and the green- 
 backs, 127 ; and the na- 
 tional banks, 154. 
 
 Circulating medium, 2. 
 
 Circulation, tax on national 
 bank, 63 ; tax on govern- 
 ment note, 147, 192 ; out- 
 standing national bank, 
 64. 
 
 Clearing-house certificates, 2. 
 
 Clearing-houses, origin and 
 purposes of, 68 ; methods 
 of, 170. 
 
 " Coin," construction by the 
 Treasury of the word, 20, 
 133. 
 
 229 
 
230 
 
 Index. 
 
 Coinage act of 1873, 99. 
 Coinage system, development 
 
 of the, 115. 
 Colfax, Speaker, and the ten 
 
 per cent, bank tax, 158. 
 Committee legislation, 205. 
 Committees of Congress, con- 
 trol of finances by the, 22, 
 
 207. 
 Comptroller of the Currency, 
 
 powers and duties of the, 
 
 32 ; reports of national 
 
 banks to the, 62. 
 Congress, and the currency, 
 
 II, 207. 
 Conkling, Roscoe, and the 
 
 legal-tender act, 146. 
 Constitution, implied powers 
 
 under the, 190. 
 Convertibility of greenbacks 
 
 into bonds, 156. 
 Currency, reports of the Sec- 
 retary of the Treasury on 
 
 the, 209. 
 Currency certificates at the 
 
 clearing-houses, 76. 
 Customs dues, payment of, 
 
 in coin, 82 ; payment of, 
 
 in gold, 114. 
 
 Dallas, A. J., views of, on 
 the power of Congress to 
 regulate the currency, 7. 
 
 Debt, the public, and paper 
 money, 83 ; the interest- 
 bearing, of the United 
 States, 84. 
 
 Decimal system, suggested by 
 Jefferson, 116. 
 
 Demand notes, 149. 
 
 " Demonetization of silver, 
 the," 103. 
 
 Depletion of the gold reserve, 
 
 94. 
 Deposits, the removal of the, 
 
 by Jackson, 37 ; tax on na- 
 tional bank, 63. 
 
 Depositories, national banks 
 as government, 58. 
 
 Dime, coinage of the, 118. 
 
 Director of the Mint, powers 
 and duties of the, 36. 
 
 " Divorce of the government 
 and the banks," 53, 228. 
 
 Dollar, coinage of the first 
 silver, 118 ; coinage of the 
 first gold, 118 ; the gold, 
 made the standard, 102 ; 
 intrinsic value of the silver, 
 102. 
 
 Double eagle, coinage of the, 
 121. 
 
 Dred Scott decision, the, and 
 the legal-tender act, 116. 
 
 Eagle, coinage of the gold, 
 118. 
 
 Edmunds, Senator Geo. F., 
 in the legal-tender cases, 
 198. 
 
 England, and the gold stand- 
 ard, 98 ; notes of the Bank 
 of, 163. 
 
 Examiners, national bank, 62. 
 
 " Exchanges " at the clearing 
 houses, 73. 
 
 Exportation of gold bullion, 
 
 114.. 
 Extension act, national bank 
 charter, 65. 
 
 Federalist view of the Consti- 
 tution, the, 190. 
 
 Fessenden, Secretary, and the 
 ten per cent, bank tax, 159, 
 203. 
 
 Field, Justice, dissenting 
 opinion of, in the legal- 
 tender cases, 199. 
 
 Financial policy of the United 
 States, the, 15. 
 
Index. 
 
 2^1 
 
 Fiscal year of the Treasury, 
 
 36. 
 Five per cent, redemption 
 
 fund, the, 166. 
 Forced loan, the greenback a, 
 
 151. 
 
 Fractional currency, 148. 
 
 France, and the gold standard, 
 99. 
 
 " Free coinage," and the 
 Bland-Allison act, 106 ; ar- 
 guments in favor of , 114. 
 
 '* Fugios," the first American 
 coins, 26. 
 
 Gallatin, Secretary, and the 
 clearing-houses, 77. 
 
 Garfield, James A., on the 
 greenback, 139. 
 
 Gerry, Elbridge, and the 
 Board of Treasury, 25. 
 
 Gold and silver, when unused 
 as currency, 97, , 
 
 " Gold banks," 169. 
 
 Gold certificates, clearing- 
 house, 75 ; United States, 
 76. 
 
 Gold dollar, made the stand- 
 ard, 102.. 
 
 Gold reserve, evils of the, 18 ; 
 establishment of the, 21 ; 
 bond issues to maintain the, 
 86 ; and business, 90 ; de- 
 pletion of the, 94 ; expense 
 of maintaining the, 95. 
 
 Gold standard, the, in Europe, 
 98. 
 
 Gordon, Wm. F., author of 
 the Independent Treasury 
 act, 41. 
 
 Grant, President, and the act 
 of 1873, lOI. 
 
 Greenback, the, where re- 
 deemable, 44 ; origin of, 
 125. 
 
 Greenback party, the, 144. 
 
 " Gresham's Law," operation 
 of, in the United States, 97. 
 
 Half dollar, coinage of the, 
 118. 
 
 Half dime, coinage of the, 
 118. 
 
 Hamilton, Alexander, sys- 
 tem of finance approved by, 
 4 ; " Report on a National 
 Bank," by, 190. 
 
 '* Hard money," in early 
 financial history of the 
 United States, 96. 
 
 Hepburn vs. Griswold, 194. 
 
 Hill, Senator David B., on 
 the greenback, 146. 
 
 Jefferson's construction of the 
 taxing power, 4 ; author- 
 ship of the P'ederal decimal 
 system, 116. 
 
 Johnson, Justice, on federal 
 control of the currency, 
 191. 
 
 Johnston, Prof. Alex., on the 
 Sub-Treasury system, 54 
 
 Juilliard vs. Greemnan, 197. 
 
 Knox, John J., Mint act of 
 1873. framed by, 100 ; on 
 the silver certificate, 181. 
 
 Latin Union, the, and the 
 
 gold standard, 99. 
 Legal-tender acts, the, 9, 126. 
 Legal-tender cases, the, 127, 
 
 Limitation of bank-note cir- 
 culation, 167. 
 
 Lincoln, and the national 
 bank bill, 155. 
 
 Loan certificates of the New 
 York Clearing-House, 78 ; 
 liability of the, to the ten 
 per cent, tax, 81. 
 
232 
 
 Index. 
 
 Local taxation of banks, i6i. 
 
 Lyman, Geo. D., first man- 
 ager of the New •York 
 Clearing-House, 78. 
 
 Mint act of 1873, gg. 
 
 Mint Bureau, a special divi- 
 sion of the Treasury De- 
 partment, 35. 
 
 Mint, establishment of the, 
 116 ; Director of the, 117 ; 
 location of the, 118. 
 
 McCulloch, Hugh, plan of, 
 to retire the greenbacks, 
 132 ; and the National 
 bank act, 156. 
 
 McCulloch vs. Mary land y 
 195. 
 
 Morris, Robert, and the co- 
 lonial finances, 24. 
 
 National Bank, Hamilton's 
 " Report " on a, 4 ; method 
 of organizing a, 56. 
 
 National Banks, number of, 
 in the United States, 65. 
 
 National currency, an act to 
 provide a, 153. 
 
 New York, clearing-house at, 
 77 ; Sub-Treasury at, a 
 member of clearing-house, 
 81 ; Bank act of the State 
 of, 160. 
 
 Nominal unit of value, iig. 
 
 Notes, amount of, issued by 
 a national bank, 59 ; of 
 national banks, subjects of 
 state taxation, 63. 
 
 •Obligations," greenbacks 
 judicially pronounced to 
 be, 147, 193. 
 Osborne vs. Bank of United 
 States, 191. 
 
 Paper, *' distinctive," used 
 for Ijank notes, 59. 
 
 Paper money, confused char- 
 acter of United States, 22 ; 
 various kinds of, that have 
 existed in the United 
 States, 217. 
 
 Policy, statutory financial, of 
 the United States, 184. 
 
 Postal currency, 148. 
 
 "Purchasing clause" of the 
 Sherman act, 186. 
 
 Quarter dollar, coinage of 
 the, 118. 
 
 Ratio, established by Mint 
 act of 1792, 118 ; changed 
 in 1834, 119. 
 
 Receivability of national 
 bank notes, 162. 
 
 Re-charter of Bank of the 
 United States, 5. 
 
 Redemption fund, the five 
 per cent., 61 ; the national 
 bank, 166. 
 
 Redemption of bank notes at 
 the Treasury, 62 ; of Sher- 
 man act Treasury notes in 
 gold and silvep, iii ; of 
 State bank issues, 161. 
 
 Register of the Treasury, 
 powers and duties of the, 
 34- 
 
 Re-issue of greenbacks made 
 compulsory, 135 ; of Treas- 
 ury notes and certificates, 
 186. 
 
 Repeal of the National Bank 
 act attempted, 171. 
 
 Reports of the Secretary of the 
 Treasury, 27 ; by the banks 
 to the comptroller, 62 ; on 
 the currency, 209. 
 
 Reserves and reserve cities, 
 64. 
 
 Resuvid of the several kinds 
 of currency, 214. 
 
Index, 
 
 233 
 
 Resumption act, and the gold 
 reserve, 91 ; purposes of 
 the, 92 ; efforts to repeal 
 the, 113; construction of 
 word " coin," as used in 
 the, 133. 
 
 Retirement of the greenbacks 
 by McCulloch, 132. 
 
 Revisors of the TJnited States 
 Statutes, and legal tender 
 silver, 105. 
 
 Rhode Island and the Consti- 
 tutional Convention, 6. 
 
 Secretary of the Treasury, 
 relation of Congress to the, 
 13, 28 ; duties and powers 
 of the, 27. 
 
 Seigniorage under the Sher- 
 man act, 121. 
 
 Separation of the government 
 from the banks, 48. 
 
 Sherman act, the, 183 ; pas- 
 sage of the, no; silver 
 bullion purchases under 
 the, 113. 
 
 Sherman, John, advocates the 
 legal-tender act, 147 ; in- 
 troduces the national bank 
 act, 155. 
 
 Silver dollar, always intrin- 
 sically the same, 102. 
 
 Silver, payment of, in settling 
 clearing-house balances, 
 69 ; and gold, relative val- 
 ues of, prior to 1873, 97 ; 
 amount of, purchased under 
 the Sherman act, 120. 
 
 Spalding, E. G., author of 
 the greenback legislation, 
 126. 
 
 Spanish silver dollar the con- 
 tinental standard, 116. 
 
 Specie payments, suspension 
 of, 44. 
 
 Standard of value, 98 ; gold, 
 in Europe, 98. 
 
 Standard silver dollars, num- 
 ber coined, 104. 
 
 State bank issues, tax on, 67, 
 158 ; volume of, 157. 
 
 Subsidiary silver, 123. 
 
 Sub-Treasury, scheme of the, 
 devised by William F. Gor- 
 don, 41 ; advantages of 
 the, 54. 
 
 Sub-Treasuries, number and 
 location of, 43. 
 
 " Suffolk System, the," of 
 State banks, 161. 
 
 Supreme Court decisions on 
 currency, 190. 
 
 Taney, R. B., appointed 
 Secretary of the Treasury 
 to remove the deposits, 39. 
 
 Tax, on state bank issues, 
 201 ; on circulation of na- 
 tional banks, 63, 192 ; on 
 deposits of national banks. 
 63 ; on United States notes 
 and certificates, 192. 
 
 Taxation of currency by state 
 governments, 147, 192. 
 
 Temporary purpose of the 
 greenback, 153. 
 
 Three cent piece, coinage of 
 the, 122. 
 
 Three dollar gold piece, coin- 
 age of the, 122. 
 
 " Token money," 103. 
 
 Trade dollar, origin and pur- 
 pose of the, 122. 
 
 Treasurer of the United 
 States, powers and duties 
 of the, 31. 
 
 Treasury Department, origin 
 of the, 24, 
 
 Treasury notes, not in vogue 
 prior to 1862, 50; under 
 the Sherman act, redeemed 
 
234 
 
 Index. 
 
 by Secretary Carlisle with 
 silver, 112; ante-bellum, 
 129 ; or *' greenbacks," is- 
 sues of, 131. 
 
 Trenholm, W. L., on the 
 silver certificate and green- 
 backs, 164. 
 
 Twenty cent piece, coinage of 
 the, 123. 
 
 Upton, J. K., on the cur- 
 rency certificates, 189. 
 
 Uses of the Sub-Treasury 
 under existing statutes, 226. 
 
 Veazie Bank vs. Femto, 201. 
 Virginia the first colony to 
 
 make the Spanish dollar 
 
 the standard, 116, 
 
 Ways and Means, greenback 
 legislation originated with 
 Committee of the, 126. 
 
 Windom, Secretary, coinage 
 scheme proposed by, 183. 
 
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 71— "w ' 
 
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 73-Th 
 
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 84— Real Bi-Metallism ; or True Coin versus False Coin 
 
 Everett P. Wheeler. Illustrated. Paper, 40c. ; cloth . 
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 86— Money and Prices. By J. Schoenhof 
 
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 - I 25 
 author of " Economy of 
 
 . I 50 
 
YC 92864 
 
 QUESTIONS OF THE DAY. 
 
 AUTHOR INDEX TO THE 
 QUESTIONS OF THE DAY" SEB^IES. 
 
 Alexander, E. P., No. 36 
 Allen, J. H., No. 53 
 Atkinson, E., No. 40 
 Bagehot, W., No. 28 
 Baker, C. W., No. 59 
 Blair, L. H., No. 35 
 Bonham, J. M., No. 61 
 Bourne, E. G., No. 24 
 Bowker, R. R., No. 10 
 Bruce P. A., No. 5 
 Cleveland, G., N 
 Codman, J. 
 Cow 
 
 Da" 
 
 vpr-t 
 
 ■G.7 
 
 ^'-935 
 
 Eaton, D. B., No. 81 
 Ehrich, L. R., No. 70 
 Elliott. J. R., No. 62 
 Foote, A. R., No, 82 
 Ford, W. C, Nos. 5, 6 
 Foulke, W. D., No, 43 
 Giffen, R., No. 20 
 Gordon, A. C, No. 85 
 Hall, B., No. 71 
 Hitchcock, H., No, 37 
 
 Jacobi, M. P., No. 80 
 Jones/ W. H., No. 39 
 
 :., No. 75 
 
 G. W.,No. 25 
 
 . S., Nos. 13, 70 
 
 C, No. 44 
 
 . S., No, 50 
 
 H., No, 42 
 
 J., No. 66 
 
 H. J,, No. 52 S- 
 
 G. H., No. 67 
 ^n, D. S., No. 77 
 josevelt, T., No. 49 ^,.~ 
 
 Schoenhof, J., Nos. 9, 3Q,.73r86 
 Shearman, Thos. G., isfo. 83* ( 
 Sherman, Hon. P., No. 65 
 Shriver, E. J., No. 63 
 Smith, R. H., No. 26 
 Stokes, A. P.* No. ^9- 
 Storey, M., No. 58 
 ;Sffan^e, D., No. 72 
 Taussig, F. W., Nos. 47, 74 
 " Tax-Payer," No. 5.5 
 Tyler, L.*G., No. 68 
 Wells, D. A., Nos. 3, 54, 64, 71 
 Wheeler, E. P., No. 84 
 Winn, H., No. 46 
 
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