SPEECH IN THE SENATE, ON THE CLAUSE MAKING TREASURY NOTES A LEGAL
TENDER, FEBRUARY 13, 1862.
February 13th, the Senate having under consideration a bill
from the House of Representatives to authorize the issue of
United States notes, and for the redemption or funding thereof,
and for funding the floating debt of the United States, Mr.
Collamer, of Vermont, moved to strike out the following words:--
“And such notes herein authorized, and the notes authorized
by the Act of July 17, 1861, shall be receivable in payment
of all public dues and demands of every description, and of
all claims and demands against the United States of every
kind whatsoever, except for interest upon bonds and notes,
which shall be paid in coin, _and shall also be lawful
money and a legal tender in payment of all debts, public
and private, within the United States, except interest as
aforesaid_.”
Mr. Collamer stated that some desired him to try the sense of
the Senate on the question of private debts, but he preferred
the above amendment, “that these notes shall not be tenderable
upon any debts due by the Government or by individuals.” On
this proposition he had already made an elaborate speech.
Mr. Fessenden also spoke elaborately upon the whole bill;
but he characterized the legal tender clause as “the main
question.” Here he said:--
“The question, then, is, Does the necessity exist?… If the
necessity exists, I have no hesitation upon the subject,
and shall have none. If there is nothing left for us to do
but that, and that will effect the object, I am perfectly
willing to do that.”
Mr. Sumner spoke last in the debate, and at least one Senator
acknowledged that on the question of constitutional power he
had been changed by this speech. The vote was then taken on the
amendment, and resulted, yeas 17, nays 22.
So the motion to strike out the legal tender clause was
rejected.
Mr. Doolittle moved an amendment so as to make the notes “a
legal tender in payment of all public debts, and all private
debts hereafter contracted within the United States,” which was
rejected without a division.
Mr. King also moved a comprehensive amendment, which likewise
struck out the legal tender clause; but it was rejected without
a division.
The bill was then passed, yeas 30, nays 7.
MR. PRESIDENT,--I am sorry to ask the attention of the Senate at this
late hour; but the importance of the question must be my apology.
In what I say I shall confine myself exclusively to a single feature
of the present bill. Others may regret that the exigencies of the
country were not promptly met by taxation,--or that at the beginning a
different system was not organized by the Treasury, through which the
national securities might have found a readier market,--or that the
national credit was not sustained, at the period of bank suspension,
by the resolute redemption of the Government securities in coin at
any present sacrifice. But it is useless to discuss these questions.
The time for such discussion has passed. The Tax Bill is not yet
matured. The system adopted by the Treasury cannot be changed at once,
if it were desirable. It is too late to organize the redemption of
the national securities in coin on the daily application of holders.
Meanwhile the exigencies of Government have become imperative. Money
must be had.
And we are told that the credit of Government can be saved only by an
act that seems like a forfeiture of credit. Paper promises are to be
made a legal tender, like gold and silver; and this provision is to be
ingrafted on the present bill authorizing the issue of Treasury notes
to the amount of $150,000,000.
All confess that they vote for this proposition with reluctance,
while to many it seems positively unconstitutional. Of course, if
unconstitutional, there is an end of it, and all discussion of its
character is superfluous. I am compelled by candor to declare that
the doubts which perplex me do not proceed from the Constitution. If
the question of constitutionality were in all respects novel, or, as
lawyers phrase it, of first impression, then I might join with friends
in their doubts. But it seems to me that the constitutional power of
Congress to make Treasury notes a legal tender was settled as long
ago as when it was settled that Congress might authorize the issue of
Treasury notes; for from time immemorial the two have gone together,
one as incident of the other, and, unless expressly severed, they
naturally go together.
It is true that in the Constitution there are no words expressly
conferring upon Congress the power to make Treasury notes a legal
tender; but there are no words expressly conferring upon Congress the
power to issue Treasury notes. If we consult the text, we find it as
silent with regard to one as with regard to the other. There is no
silence with regard to the States, which are expressly prohibited to
“emit bills of credit,” or “make anything but gold and silver coin a
tender in payment of debts.” Treasury notes are “bills of credit”;
and this prohibition is imperative on the States. The inference is
just, that this prohibition, expressly addressed to the States, was
not intended to embrace Congress indirectly, as it obviously does not
embrace it directly. The presence of the prohibition, however, shows
that the subject was in the minds of the framers of the Constitution.
If they failed to extend it still further, it is reasonable to
conclude that they left the whole subject in all its bearings to the
sound discretion of Congress, under the ample powers intrusted to it.
The stress so constantly put upon the prohibitions addressed to the
States will justify me in introducing the opinion of Mr. Justice Story,
in his Commentaries.
“It is manifest that all these prohibitory clauses, as to
coining money, emitting bills of credit, and tendering anything
but gold and silver in payment of debts, are founded upon
the same general policy, and result from the same general
considerations. _The policy is, to provide a fixed and uniform
value throughout the United States_, by which commercial
and other dealings of the citizens, as well as the moneyed
transactions of the Government, might be regulated.”[169]
Plainly, no inference adverse to the powers of the National Government
can be drawn from these prohibitory clauses; for, whatever may be these
powers, there will be a fixed and uniform value throughout the United
States.
As we proceed, the case becomes more clear. The States are prohibited
to issue “bills of credit”; but there is no such prohibition on the
National Government, which may do in the premises what the States
cannot do. The failure to prohibit is equivalent to a recognition of
the power. In other words, the National Government may issue “bills
of credit,” which have been characterized by no less a person than
Chief-Justice Marshall, in pronouncing the opinion of the Supreme
Court, when he said: “To ‘emit bills of credit’ conveys to the mind
the idea of issuing paper intended to circulate through the community
for its ordinary purposes _as money_, which paper is redeemable at
a future day.” And then again the learned Chief Justice said: “The
term has acquired an appropriate meaning; and ‘bills of credit’
signify _a paper medium_, intended to circulate between individuals,
and between Government and individuals, for the ordinary purposes
of society.”[170] This “money” and “paper medium” the States are
prohibited from emitting; but there is no such prohibition on the
National Government,--as there is not a single word to prohibit the
National Government from determining what shall be a legal tender.
From the proceedings of the National Convention it appears that a
clause in the first draught of the Constitution empowering Congress to
“emit bills on the credit of the United States” was after discussion
struck out. In the debate on this clause, Mr. Madison asked: “Will
it not be sufficient to prohibit the making them _a tender_? This
will remove the temptation to emit them with unjust views.” Mr.
Mason said, “Though he had a mortal hatred to paper money, yet, as
he could not foresee all emergencies, he was unwilling to tie the
hands of the [National] Legislature. He observed, that the late war
could not have been carried on, had such a prohibition existed.” Mr.
Mercer was “opposed to a prohibition of it altogether. It will stamp
suspicion on the Government to deny it a discretion on this point.”
Mr. Butler remarked, that “paper was a legal tender in no country in
Europe. He was urgent for disarming the Government of such a power.”
Mr. Mason was “still averse to tying the hands of the Legislature
_altogether_. If there was no example in Europe, as just remarked,
it might be observed, on the other side, that there was none in
which the Government was restrained on this head.” Mr. Gorham was
“for striking out, without inserting any prohibition.” And this view
finally prevailed.[171] Thus it appears that the suggestion was made
to prohibit the making of bills a tender; but this suggestion was not
acted on, and no such prohibition was ever moved. It is evident that
the Convention was not prepared for a measure so positive. Less still
was it prepared for a prohibition to emit bills. Such is the record.
While all words expressly authorizing bills were struck out, nothing
was introduced in restriction of the powers of Congress on this subject.
Thus was the whole question practically settled; and the usage of the
Government has been in harmony with this settlement. Treasury notes
were issued during the war of 1812, and in the monetary crisis of 1837,
also during the war with Mexico, and constantly since, so that the
power to issue them cannot be drawn into doubt. If there was any doubt
originally, unquestioned practice, sanctioned by successive Congresses,
has completely removed it. I do not stop to consider whether the power
is derived primarily from the power “to borrow money,” or the power “to
regulate commerce,” or from the unenumerated powers. It is sufficient
that the power exists.
But I see not how to escape the conclusion, that, if Congress is
empowered to issue Treasury notes, it may affix to these notes such
character as shall seem safe and proper, declaring the conditions of
their circulation and the dues for which they shall be received. Grant
the first power, and the rest must follow. Careful you will be in the
exercise of this power, but, if you choose to take the responsibility,
I see no check in the Constitution.
The history of our country furnishes testimony, which has been gathered
with extraordinary minuteness in an elaborate opinion by Mr. Justice
Story.[172] I follow mainly his authority, when I set it forth.
It appears that the phrase “bills of credit” was familiarly used for
bank-notes as early as 1683 in England, and also as early as 1714 in
New England. But the first issue in America was in 1690, by the Colony
of Massachusetts, and the occasion--identical with the present--was to
pay soldiers, returning unexpectedly from an unsuccessful expedition
against Canada. These notes were from two shillings to ten pounds, and
were receivable for dues at the Treasury. Their form was as follows:
“This indented bill of ten shillings, due from the Massachusetts
Colony to the possessor, shall be in value equal to money, and shall
be accordingly accepted by the Treasurer, and Receivers subordinate
to him, in all public payments, and for any stock at any time in the
Treasury.” Here followed the date, and the signatures of the Committee
authorized to issue these notes.[173] Such was their depreciation, that
these notes could not command money or commodities at money price,
although the historian, Hutchinson, who has recorded these interesting
facts, does not hesitate to say that they had better credit than King
James’s leather money in Ireland only a short time before.[174] Being
of small amount, they were soon absorbed in the payment of taxes. But
this example did not stand alone.
The facility with which paper money is created renders it difficult to
withstand the temptation, unless a Government is under the restraint
of correct principles of finance, which at that early day were utterly
unknown. An excuse for Massachusetts may be found in the general
poverty at that time, the lack of precious metals, and the distance
from marts of trade. In 1702 there was another issue of bills of
credit, for £15,000, which, by a subsequent Act, in 1712, were made a
tender for private debts. Under the continued cry of scarcity of money,
bills of credit were again issued in 1716, to the amount of £150,000,
to be lent, for a limited period, to inhabitants, whose lands were
mortgaged as security. These were not made a tender; but they were
receivable at the Treasury in discharge of taxes, and also of mortgage
debts. Other bills were afterwards issued, so that paper money was
common. The historian who has exposed this condition of things does
not hesitate to liken this currency to pretended values stamped on
leather or paper, and declared to be receivable in payment of taxes
and in discharge of private debts. The natural consequence was a fatal
depreciation, so that an ounce of silver, worth in 1702 six shillings
and eight pence, in 1749 was equivalent to fifty shillings of this
paper currency.[175] At the present moment I do not seek to exhibit the
character of this currency, but simply the original association between
bills of credit and the idea of a tender.
But Massachusetts was not alone. The neighboring colony of Rhode
Island, as early as 1710, followed her example, and in 1720 made her
bills a tender in payment of all debts, except certain debts specified.
Connecticut issued bills at different periods, beginning with 1709,
some of which were made a tender, and some not. New York began in the
same year, substantially following Massachusetts; and her bills were
generally made a tender. In 1722 Pennsylvania issued bills, secured
on mortgage, and made a tender. In 1739 Delaware did likewise, making
her bills a tender. So also did Maryland, in 1733, to the amount of
£90,000; but other bills were issued by Maryland, in 1769, which were
not made a tender.
The example of Virginia is more conspicuous, although not so early in
time. The very term, “Treasury notes,” now used as the equivalent of
“bills of credit,” first appears in her colonial legislation, when,
in 1755, they were made a tender in payment of debts.[176] There were
successive emissions in 1769, 1771, and 1773, which were not made a
tender,--and then in 1778, and at other times afterwards, which were
made a tender. That these “Treasury notes” were deemed “bills of
credit” is demonstrated by the legislation of the State, especially
by the Act of May, 1780, which, after reciting that the exigencies of
the war require the further emission of paper money, authorizes new
“Treasury notes,” and proceeds to punish with death any person who
shall forge “any bill of credit _or_ Treasury note to be issued by
virtue of this Act.”[177]
I find that North Carolina, as early as 1748, sent forth bills of
credit which were made a tender, and many subsequent emissions were
authorized. South Carolina began in 1703; but these bills, bearing
interest at twelve per cent, do not seem to have been made a tender.
Others issued by this colony, at different times afterwards, were made
a tender. In 1760 Georgia authorized bills of credit on interest, and
secured by mortgage of the property of the receivers, which were made a
tender.
The extensive employment of paper money in New England aroused the
jealousy of the Imperial Parliament, which, by the Act of 25th June,
1751,[178] expressly forbade the issue of any “paper bills, or bills
of credit,” except for certain specific purposes, or upon certain
specified emergencies. The Act constantly speaks of these two as
equivalent expressions, thus seeming to show that “bills of credit,”
in their true meaning, were what is familiarly called “paper money,”
with the incidents of such money. But the Act proceeds to limit these
incidents by declaring expressly that “no paper currency, or bills
of credit,” issued under it, shall be a tender in payment of any
private debts or contracts whatsoever, with a proviso that nothing
therein contained should make any bills then subsisting a tender. That
Parliament should deem it necessary, by special enactment, to take
from bills of credit the character of a tender, attests the customary
association between these two ideas.
During the Revolutionary War, under the exigencies of that time, with
a country without resources and a treasury without money, bills of
credit, known as Continental money, were issued by Congress. But, while
receivable in discharge of taxes and other public dues, they were not
made a tender by Congress, although the States were recommended to make
them such.
MR. COLLAMER. And did make them so.
MR. SUMNER. At the adoption of the National Constitution, the people,
to their wide-spread cost, had become familiar with bills of credit and
their incidents, while all conversant with Colonial history must have
known the part which bills of credit played for nearly a century, not
only as a help to currency, but as a tender, constituting paper money.
And yet, with all this ample knowledge,--present certainly to the
framers of the Constitution, if not to the people,--no express words on
this subject were introduced into the text of the Constitution, except
with regard to the States. The conclusion from this silence, under all
the circumstances, is strong, if not irresistible.
But the omission of the Constitution with regard to bills of credit was
practically supplied by Congress, which has not hesitated to assume
the existence of the power. If the Constitution failed to speak,
Congress has not failed; and the exercise of this power cannot now be
questioned, without unsettling our whole financial system. But we have
seen that throughout our Colonial history the tender was a constant,
though not inseparable, incident of the bill of credit,--that, indeed,
it was so much part of the bill of credit that the Imperial Parliament
positively interfered to separate the two, and, while sanctioning the
bill of credit, forbade the tender. And now, if this historical review
is properly apprehended, if it is not entirely out of place, it must
conduct to the conclusion, that, whatever may be the present question
of policy, the power to make Treasury notes a tender has precisely
the same origin in the Constitution with the power to create Treasury
notes. It is true that you may exercise one power and decline the
other; but if you assume the power to issue bills of credit, I am at a
loss to understand how you can deny the power to make them a tender.
The two spring from the same fountain. You may refuse to exercise one
or both; but you cannot insist upon one, under the Constitution, and
reject the other.
* * * * *
Assuming the constitutionality of this proposition, or rather declining
to admit the satisfactory force of the constitutional arguments against
it, I am brought to a question which has, for me, more of difficulty
and doubt: I mean the policy of exercising the power at this moment.
It is not too much to say that this question concerns the national
character, as well as the national welfare, while intelligent and
patriotic men differ earnestly with regard to it. Decide it as we
may, we cannot escape anxiety on the subject. Take which way we will,
we cannot escape the just sense of responsibility. Seeking the truth
only, and jealous of that good name which is to a Government one of
its best possessions, I shall consider the question frankly; nor shall
I disguise any of the difficulties which it presents, whether from
principle or from experience. This is not the time for concealment, and
I insist, that, if the power is exercised, its true character shall be
understood. I invoke, also, the examples of history, to make us pause;
but it will be my duty to show that there are other examples calculated
to sustain the Government in the policy it now so urgently recommends.
If the Treasury notes of the United States were at this moment
convertible into coin, there would be no occasion to declare them a
tender; for they would be everywhere, at least in our own country,
as good as coin. But the suspension of the banks was followed by
suspension of the Treasury, and its notes are now inconvertible paper,
which it is proposed to sustain artificially by declaring them a
tender. If this proposition be adopted, the Treasury will be enabled
to substitute bits of engraved paper for money. Of course, such a
proposition, on its face, is obnoxious to objections that make upon me
an impression not to be disguised.
Looking at the history of paper money, especially in our own country,
we find no encouragement. Its evils were vividly portrayed by the
“Federalist,”[179] and have been powerfully presented in this debate
by the Senator from Vermont [Mr. COLLAMER]. Congress, during the
Revolution, began, as early as 1775, with bills to the amount of
$3,000,000, on their face declaring the bearer entitled to receive
the sum specified in “Spanish milled dollars, or the value thereof
in gold or silver,” according to a certain resolution of Congress.
The bills were receivable for taxes, and the thirteen colonies were
pledged for their redemption. Other emissions followed, and, as their
credit began to fail, Congress went so far as to declare that whoever
refused to receive this paper in payment should “be deemed, published,
and treated as an enemy of his country.”[180] As the paper continued
to depreciate, Congress became more violent in its support, and even
ventured to recommend it as of peculiar value. “Let it be remembered,”
said Congress, “that paper money is the only kind of money which cannot
‘make unto itself wings and fly away.’”[181] The sum-total of these
bills at last reached upwards of three hundred millions, which in
1780 became so utterly worthless in the hands of their possessors that
they ceased to circulate, and have ever since been treated only as
curiosities, without positive value. No serious proposition for their
redemption has ever been made.
The French _assignats_, amounting to the enormous sum-total of _nine
thousand million dollars_,[182] issued during the fiery excitements
of the Great Revolution, shared the fortunes of American Continental
money, passing into the limbo of “things transitory and vain.” Perhaps
there is not a country on the European continent, which, during the
fearful wars that followed, did not encounter the same experience. I
have heard it said that old soldiers in Denmark lighted their pipes
with paper money, which had become to them only the record of a broken
promise.
Power of all kinds is liable to abuse, and experience shows that
the power to issue inconvertible paper is no exception to this
prevailing law. The issue may be moderate at first, and sustained
by plausible reasons, but it breaks soon into excess. Of course,
actual value, or its equivalent, is the life of money, giving to it a
circulating quality; and when money begins to be suspected, it loses
its circulating quality. But inconvertible paper, even when made a
tender, has no actual value, and circulates only because Government
commands its circulation. It has no present worth beyond the engraving;
therefore all ordinary checks to undue issue of money are wanting.
Nothing exists to prevent excess and consequent depreciation; and this
danger is verified by history. I refer to it now that I may not seem
indifferent to any of the perplexities which surround us.
In some countries a legal tender is gold and silver; in others it is
gold alone. In England, since 1816, gold, and not silver, has been
the tender for sums of forty shillings and upwards; and since 1833
the notes of the Bank have been a tender for sums over five pounds,
everywhere except at the Bank itself and its branches. But it is to
be borne in mind that both these metals have positive value in the
market equivalent to that of coin; so that coin is value itself. But
convertible paper is not value itself; it is only the representative of
value; while it is doubtful if inconvertible paper can be called the
representative of anything in particular. These considerations are not
decisive of the policy now proposed, but they justly incline us to a
prudent hesitation.
If we are not deterred by the bad examples of history, or by the
acknowledged danger of excess and consequent depreciation,--if we are
willing to take the chance of seeing Treasury notes in the same list
with Continental money and French _assignats_, and of having returned
soldiers in old age light their pipes with the worthless paper,--if
these suggestions are put aside as exaggerated or irrelevant, I ask you
not to forget that a constant aim of good government is to secure the
immediate convertibility of paper into coin. But, instead of securing
such immediate convertibility, or taking any steps towards it, you will
for the present renounce it.
Pardon my frankness, Sir, if I declare that the present proposition,
when examined carefully, seems too much like bad faith. I say it
_seems_: I would not speak too strongly. Is there not bad faith towards
creditors, who are compelled to receive what is due in a depreciated
currency? Is there not bad faith towards all abroad, who, putting
trust in our integrity, national and personal, have sent their money
to this country in gold or its equivalent? And just in proportion as
this is so, you cannot doubt that we shall suffer alike in character
and resources too; for what resource is greater to a nation or to an
individual than a character for integrity? The present proposition must
be followed soon by others,--even to the extent of $1,000,000,000. But
where shall this vast amount be obtained, and at what cost, when it is
seen that we have already undertaken to authorize inconvertible paper
as a tender? Credit is volatile and sensitive, and will not yield to
force. Do you propose the right way to win the delicate possession? It
will not come to you from abroad, where money usually abounds. Will it
salute you here at home? And is it good economy to obtain the amount
you seek by a policy which will create a disturbing impediment to all
your efforts for the larger amounts soon to be required? I put these
questions without answering them. It is sufficient for me that I open
the difficulties before us; and here I follow the Senator from Maine
[Mr. FESSENDEN], Chairman of the Committee on Finance, who commenced
this debate.
In courts of law, experts are summoned to testify on questions of
science or art within their special knowledge. If, on this occasion,
experts in finance or currency were summoned, I do not know that we
should be much enlightened; for, according to my observation, there
are such differences among them, and, as the Senator from Maine [Mr.
FESSENDEN] has pleasantly told us, such differences even in the same
person, one day and the day after, that it is difficult to place
reliance in their counsels. Some tell us that making Treasury notes
a tender will be most beneficent; others insist that it will be
dishonorable and pernicious. On each side strong words are employed.
Which shall we follow?
Crossing the sea, we find similar differences, not, of course, with
regard to the present proposition, which is not yet known there, but
with regard to the principles entering into this debate. In England
the general subject has occupied much attention. As late as 1857 it
was brought before a distinguished Parliamentary Committee, and their
Report is remarkable for the testimony of numerous witnesses whose
experience and knowledge give authority to their opinions. The Report
is a financial monument. But among these witnesses are some who were
little disturbed by an inconvertible currency, although the weight of
testimony was the other way.
Nobody was more positive than Nathaniel Alexander, Esq., head of
the firm of Alexander & Co., India merchants. His attention being
called to the proper means against the effects of panic on the Bank
of England, he proposed, as an assistance to the Bank, another
currency, inconvertible, and a tender for Government dues, under Act
of Parliament. From its inconvertible character, such a currency, he
said, would not be reached by panic, and would therefore contribute to
the security of the Bank.[183] This testimony seems to maintain the
principle of the present proposition; and I quote it, as showing that
the proposition is not entirely without practical authority.
John Twells, Esq., a London banker for upwards of fifty years, also
testified in favor of an inconvertible note under sanction of
Government, and a legal tender. Here are his answers to two questions.
“What do you conceive to be the advantage of an inconvertible
note of that kind over a convertible note payable to bearer
on demand?--It would prevent a drain of bullion, when it is
required for foreign trade; and it would give us, what is so
very essential, a domestic currency which is not influenced by
any foreign transactions whatever. If France or America wants a
quantity of gold, it ought not to interfere with our domestic
currency. Our merchants and all our trade surely should not
suffer because America wants gold.
“Do you think that that currency would run the risk of ever
being depreciated in value,--that is to say, that inconvertible
five pound notes would not exchange for five sovereigns?--I do
not know, as compared with sovereigns; that, I think, is of no
consequence in the world. We want it for our internal commerce,
and we want it to pay Government their taxes.”[184]
Two other questions and answers may be given.
“You have been asked about the French assignats. Is not the
difference between the currency which you recommend and the
assignats just this, that the Government are bound to take
back whatever they issue?--Precisely; and that makes all the
difference.
“And, with the French assignats, they refused to take back
what they had issued?--Yes. A corrupt Government may commit
such an excess as they did in France, where the amount of
their assignats was, if I remember right, about £300,000,000
sterling. They could not receive them back; they could not get
their taxation, on account of the revolution which was going
on; therefore the assignats fell to nothing.”[185]
Another witness was Mr. Edward Capps, who described himself as engaged
in the surveying and building trade for thirty years, so that his
attention had been directed to the influence of credit on the manner in
which buildings are erected in London. He, too, testified in favor of
inconvertible paper. Here are some of his answers.
“Would you recommend the issue of an inconvertible paper
currency, with the view of remedying the evils which you
describe?--I was present and heard the examination of Mr.
Twells, and he was mentioning a project, by which he thought,
that, instead of the £14,000,000 of paper which the Bank issues
upon securities, you might go to the extent of £20,000,000 of
an inconvertible paper. I think I understood the proposition
rightly, as being to that effect. Though it is not exactly the
proposition which I should make, yet I cannot see any objection
to that proposition myself.”[186]
“Do you believe that the paper which you recommend would be, on
the average, of the same value as the present bank-note, which
is convertible into gold?--I think that very shortly it would
be of a higher value than our present standard. If any person
had to be paid £10,000 fifteen years hence, and had the option
whether it should be paid in that way or in the standard of
gold, I think he would exercise a wise discretion in choosing
the paper.”[187]
“You are not in favor of what is called inconvertible paper, in
the sense of worthless paper, are you?--Not at all.
“How do you distinguish between your paper and the rags which
have in other cases been issued?--Unless I know the principle,
I cannot say.
“Take the French assignats.--The French assignats were issued
upon no principle at all, because no provision was made for
their redemption.”[188]
Against these witnesses was the testimony of a person perhaps the
highest living authority on this question. I refer to Lord Overstone,
known before his elevation to the peerage as Mr. Jones Loyd, the
eminent banker, whose life makes him practically acquainted with this
subject, while his liberal studies and various experience add to the
solidity of his judgment. His testimony on this occasion, extending
over almost three days, occupies nearly one hundred folio pages.
Writers on finance have quoted it ever since, and practical men have
accepted it as a guide. In reply to questions by the Committee, he
declared himself strongly opposed to the issue of Government notes
not payable in specie on demand. In his opinion “they would generate
a state of utter confusion which could not be tolerated for three
months.”[189] Then again:--
“It is quite clear that there would be a discount upon these
notes in the first place; they would not answer the purpose of
a circulating medium; it would throw everything into confusion
in the very first stage of the process: that would be the first
difficulty.”[190]
Here are his answers to other questions.
“Your Lordship was asked, on the last day, whether it would not
be possible in a great degree to mitigate such difficulties as
I have endeavored to portray, by having two sorts of notes, one
of them payable in bullion, but the other, if I may use the
expression, a sort of I O U note between the Government and the
public; whether, inasmuch as the Government owes £6,000,000
or £7,000,000 every quarter, in the shape of dividends or
expenses, and the country owes £6,000,000 or £7,000,000 of
taxes, it would not be possible to arrange that there should
be two sorts of currency afloat,--one the common banking note,
payable in bullion, and applicable for all general purposes,
and the other a note applicable in the more limited sense?--Our
affairs would then go on very much in the way that a man would
walk with one of his legs six inches shorter than the other.
One set of notes would circulate at a depreciation, compared
with the other set of notes; hence great inconvenience and
confusion would arise.”[191]
“Do you believe, that, if any person had notes which insured
to him the payment of all the Government demands upon himself,
though he had no demands upon him directly, he would not find
numbers of persons who would exchange those notes for him
at a premium or a discount?--Then you would have a certain
proportion of the monetary system of the country circulating
at a discount. I cannot conceive a greater state of monetary
disorganization than that.”[192]
But the testimony of Lord Overstone, strong as it was, against an
inconvertible currency, still admitted a possible occasion for
departure from it; and here his testimony bears directly on the pending
proposition. Alluding to the well-known suspension of specie payments
by the Bank of England in 1797, he says:--
“I am bound to say that with regard to that period of 1797
there are circumstances which may make it doubtful whether the
Suspension Act was not a justifiable measure. The pressure in
1797 was undoubtedly, to a considerable extent, _connected
with political alarm, with the fear of foreign invasion_,
causing an internal demand for the exchange of notes into coin.
_Under such circumstances, there is no measure founded upon
principle which can pretend to afford an adequate protection.
If, for instance, at this moment, this country were suddenly
exposed to the calamity of a very large foreign force occupying
its soil, or if it were exposed to the calamity of a very
formidable and serious civil insurrection_, no doubt a state of
panic alarm with regard to the paper money might arise, against
which no provisions of the Act of 1844, nor any provisions
founded upon principle, could possibly afford an adequate
protection. But from that view of the subject, again, there
is an inference to be drawn of a very instructive and warning
character, namely,--to make this Committee very cautious how
they extend the issues upon securities. The only protection
against such contingencies is the existence of a large amount
of coin, or of bullion, in the country; and therefore, when
we are looking to contingencies of that nature, we may very
properly pause at the questionable recommendation of increasing
our issues upon securities, which is, in other words,
diminishing our issues upon bullion.”[193]
If this authoritative testimony be accepted in favor of a constant
specie currency, it is unquestionably important as recognizing grounds
of exception,--as, according to the language of the witness, if the
country were “suddenly exposed to the calamity of a very large foreign
force occupying its soil, or to the calamity of a very formidable and
serious civil insurrection.” In these exceptions there is matter for
much reflection. Strong as we may be against any questionable currency,
we must not be insensible to a possible limitation even of this just
principle. In short, we must be content with the best we can command.
And here history affords valuable illustrations in conformity with this
testimony.
In 1745, the alarm occasioned by the advance of the Highlanders,
under the Pretender, as far as Derby, led to a run upon the Bank of
England; and in order to gain time, the directors, while continuing
to pay in specie, adopted the device of paying in shillings and
sixpences. But, next to the retreat of the enemy, their best relief
was found in a resolution by the merchants and traders of the city,
declaring their willingness to receive bank-notes in payment of any
sum due, and pledging their utmost endeavors to make all payments
in these bank-notes. This proceeding, it is perceived, was prompted
by the pressure of civil disturbance. But the most authentic case
is that of 1797, when the Bank, under pressure of political events,
was prohibited, by Order in Council, _issued on Sunday_, the 26th
of February, from paying their notes in cash, until the sense
of Parliament should be taken on the subject. At the meeting of
Parliament, after much discussion, it was agreed to continue the
suspension till six months after the signature of a definitive treaty
of peace, _thus positively recognizing the existence of war as a reason
for this departure from principle_. A recent English writer vindicates
this act as follows.
“Much difference of opinion has existed with respect to
the policy of the restriction in 1797; but, considering
the peculiar circumstances under which it took place, its
expediency seems abundantly obvious. The run did not originate
in any over-issue of bank paper, _but grew entirely out of
political causes. So long as the alarms of invasion continued,
it was clear that no bank paper immediately convertible into
gold would remain in circulation._ And as the Bank, though
possessed of ample funds, was without the means of instantly
retiring her notes, she might, but for the interference of
Government, have been obliged to stop payments,--an event,
which, had it occurred, might have produced consequences fatal
to the public interests. The error of the Government did not
consist in their coming to the assistance of the Bank, _but
in continuing the restriction after the alarm of invasion had
ceased_, and there was nothing to hinder the Bank from safely
reverting to specie payments.”[194]
Unhappily, the definitive treaty of peace, on which the restoration
of specie payments depended, was not consummated till 1815, so that
throughout this long period there was an inconvertible currency, which
even the sanction of Parliament did not save, in 1814, from a discount
of twenty-five per cent. But peace did not bring specie at once. The
routine of paper had become too strongly fixed, and it was only through
the remarkable efforts of Sir Robert Peel, in 1819, that an Act of
Parliament was passed requiring the payment of specie at the Bank in
1823. Such is the practical testimony of British experience.
The experience of France is similar. I do not now refer to the old
_assignats_, but to a modern instance. Beyond question, the Bank of
France is conducted with caution and skill; but no caution and skill
are adequate to counteract the influence of a sudden revolution,
especially like that of 1848, when the Republic was declared. The Bank
made large advances to the Provisional Government. This obligation,
combined with distrust universally prevalent, occasioned so severe
a drain of gold, that, to prevent the total exhaustion of its
vaults, the Bank was authorized by Government decree of 16th March,
1848,--just three weeks after the Revolution,--to suspend specie
payments, while its notes were at the same time made a legal tender.
To prevent abuse, possible in such a condition of things, a maximum
of issues was fixed at three hundred and fifty million francs. Such
precautions were proper; but the fact of the authorized suspension
remains an example of history. The prompt return to the true system is
not without encouragement.
* * * * *
If these instances are entitled to consideration, they seem to show,
that, according to the experience of other countries, Government may
be compelled at times to relax the rigor of its requirements with
regard to convertible paper. But they do not fix the limitation to the
exercise of this extraordinary discretion. That the discretion exists
is important in the present debate.
It is a discretion kindred to that under which the _Habeas Corpus_
is suspended, so that citizens are arrested without the forms of
law,--kindred to that under which an extensive territory is declared
to be in a condition of insurrection, so that all business with its
inhabitants is suspended,--kindred to that which unquestionably exists,
to obtain soldiers, if necessary, by draft or conscription instead
of the free offering of volunteers,--kindred to that under which
private property is taken for public uses,--and kindred, also, to that
undoubted discretion which sanctions the completest exercise of the
transcendent right of self-defence.
But, while recognizing the existence of the discretion in the last
resort, under the law of necessity, the question still remains if this
necessity actually exists. And now, as I close, I shall not cease to
be frank. Is it necessary to incur all the unquestionable evils of
inconvertible paper, forced into circulation by Act of Congress,--to
suffer the stain upon our national faith, to bear the stigma of a
seeming repudiation, to lose for the present that credit which in
itself is a treasury, and to teach debtors everywhere that contracts
may be varied at the will of the stronger? Surely there is much in
these inquiries to make us pause. If our country were poor or feeble,
without population and without resources, if it were already drained
by a long war, if the enemy had succeeded in depriving us of the means
of livelihood, then we should not even pause. But our country is rich
and powerful, with a numerous population, busy, honest, and determined,
abounding in unparalleled resources of all kinds, agricultural,
mineral, industrial, and commercial; it is yet undrained by the war in
which we are engaged, nor has the enemy succeeded in depriving us of
any means of livelihood. It is hard, very hard, to think that such a
country, so powerful, so rich, and so beloved, should be compelled to
adopt a policy of even questionable propriety.
If I mention these things, if I make these inquiries, it is because of
the unfeigned solicitude which I feel with regard to this measure, and
not with the view of arguing against the exercise of a constitutional
power, when, in the opinion of the Government to which I give my
confidence, the necessity for its exercise has arrived. Surely we must
all be against paper money, we must all insist upon maintaining the
integrity of the Government, and we must all set our faces against any
proposition like the present, except as a temporary expedient, rendered
imperative by the exigency of the hour. If it has my vote, it will be
only because I am unwilling to refuse the Government especially charged
with this responsibility that confidence which is hardly less important
to the public interests than the money itself. Others may doubt if the
exigency is sufficiently imperative; but the Secretary of the Treasury,
whose duty it is to understand the occasion, does not doubt. In his
opinion the war requires this sacrifice. Uncontrollable passions are
let loose to overturn the tranquil conditions of peace. Meanwhile your
soldiers in the field must be paid and fed. There can be no failure or
postponement. A remedy is proposed which at another moment you would
reject. Whatever the national resources, they are not now within reach,
except by summary process. Reluctantly, painfully, I consent that the
process shall issue.
And yet I cannot give such a vote without warning the Government
against the dangers from such an experiment. The medicine of the
Constitution must not become its daily bread. Nor can I disguise
the conviction that better than any device of legal tender will be
vigorous, earnest efforts for the suppression of the Rebellion, and
the establishment of the Constitution in its true principles over the
territory which the Rebellion has usurped.