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wished to do all that was in their power to support the Government, and hoped they would find themselves able to take the loans on terms that could be admitted. “If not, I will go back to Washington, and issue notes for circulation; for it is certain that the war must go on until the rebellion is put down, if we have to put out paper until it takes a thousand dollars to buy a breakfast.”” It was finally agreed that the banks of the three cities should unite as associates, and advance to the Government fifty millions of dollars; five millions down, and the rest as the money was wanted, on the Secretary's warrants in favor of the assistant treasurers; and the Secretary was to appeal to the people for subscriptions to a national loan on three-years notes bearing seven-thirty per cent. interest, and convertible into twenty-year bonds bearing six per cent. interest, and pay over the proceeds of these subscriptions to the banks, in satisfaction of their advances, so far as they would go, and to deliver to them seventhirty notes for any deficiency. The advances of the banks were to be in coin. The stipulations of this agreement were faithfully fulfilled. Mr. Chase caused subscription-books for the national loan to be opened in all the chief cities and towns of the loyal States; the people responded with alacrity, and enabled him to pay to the banks about forty-five millions of dollars—the remainder of their advances was made good by the delivery of the promised seven-thirty three-years bonds. The operation enabled the banks to make to the Government a second loan of fifty millions on very nearly the same terms as the first. But it had become evident that the popular subscriptions would not continue to be as large and prompt as before; while the inconvenience of their management by the department (it had necessitated a considerable increase in the clerical force) proved to be very great. The accounts of the subscription agents were, therefore closed, and the notes for the second loan were delivered directly to the bankers, who distributed them as best suited themselves. This arrangement very much simplified the transaction, so far as it affected the Treasury, but it was not quite so convenient or advantageous to the banks.

* In the course of these conferences it was suggested by one of the bankers that the banks should offer an ultimatum. “No,” said Mr. Chase; “it is not the business of the Secretary of the Treasury to receive an ultimatum, but to declare one if it shall become necessary.”

By these two loans the Secretary obtained one hundred millions of dollars, paying—under the immediate exigency—a rate of interest but one and three-tenths per cent. higher than the ordinary rate of six per cent, and that only for three years.

Mr. Chase sought a third loan, but the banks declined to make it upon the seven-thirties. He was therefore compelled, by the absolute necessity of providing immediate means for military and naval disbursements, to offer another description of securities. These were six percent. bonds, which the act of July 17th had authorized the Secretary to issue, and dispose of at such a deduction from their face value as would make them equivalent to seven per cent. bonds (redeemable after twenty years) at par. Mr. Chase was extremely reluctant to avail himself of this power, but the emergency was great and pressing; there was no other resource, and he submitted. Fifty millions in six per cent. bonds were equal to $45,795,478.48 in seven per cent. bonds, redeemable after twenty years; and a third loan was taken by the banks upon this basis, and the Secretary delivered to them fifty millions of six per cent. twenty-years bonds in exchange for $45,795,478.48 in coin.



Th: first hundred millions borrowed by the Secretary from the banks were stipulated to be repaid with funds received from the sale of the seven-thirty notes through the agencies for the national loan. Mr. Chase appointed one hundred and fortyeight agents (these were exclusive of the Treasury agencies proper); among them Mr. Jay Cooke, of Philadelphia. The Secretary allowed to these agents one-fifth of one per cent. upon the first hundred thousand dollars of subscriptions obtained by them respectively, and one-eighth of one per cent. upon all sums in excess; and, in addition to these commissions, they were allowed stipulated amounts, varying according to locality, for advertising purposes, but in no single instance exceeding one hundred and fifty dollars. The several agents returned subscriptions amounting in the aggregate to $24,678,866.84, of which sum Mr. Jay Cooke had obtained $5,224,050, or more than onefifth of the whole. He was paid the fixed percentage, which aggregated $6,680.06; and, though he exhibited vouchers showing disbursements for advertising to the amount of $3,041.44 (he had made other outlays for advertising for which he had no specific vouchers), he was paid but one hundred and fifty dollars on that account. It was the energy and success of Mr. Cooke in this particular instance that first attracted the attention of the Secretary (who had not known him before), and led to that official connection which was afterward so useful to the Government. The banks had constantly and strongly urged Mr. Chase to forego the issue of United States notes, and to draw directly upon them for the sums subscribed and placed upon their books to the credit of the Treasury. “In what funds,” asked the Secretary, “will my drafts be paid?” “We in New York,” was the answer, “are entirely willing to pay in coin.” “But, suppose you in New York give checks to the Government creditor upon Cincinnati or St. Louis, in what kind of funds will the checks be paid at those points?” “In whatever funds the check-holder would be willing to receive his pay. That is, in coin if the creditor insists upon coin, and the bank is able and willing to pay in coin; but, if otherwise, in bank-notes.” To this the Secretary said he could not consent. He was asked to borrow the credit of local banks in the form of circulation; but he preferred to put the credit of the people into notes, and use them as money. “If you can lend me all the coin required to conduct the operations of the war, or show me where I can borrow it elsewhere at fair rates, I will withdraw every note already issued, and pledge myself never to issue another; but if you cannot, you must let me stick to United States notes and increase their issue just so far as the deficiency of coin may make necessary.” This was the language of Mr. Chase to the bankers on the 16th of November, 1861, when he negotiated with them the third fifty-millions loan. His resolution was seen to be unalterable, and was followed by important consequences. The vast operations of the war being now superadded to the current business of the country was rapidly modifying the conditions of the currency. If it be admitted that the active coin circulation amounted to two hundred and ten millions on the 16th of November (Mr. Chase estimated the coin in circulation at that time, including that held by the banks, at probably not less than $210,000,000; but it was less), and that it could be

* This large sum was subscribed in and about the city of Philadelphia.


steadily preserved at that sum, it was still clearly inadequate to the largely-increased requirements. The enormous expenditures of the Government would alone absorb it several times in the course of each year, either in the form of taxes or of loans; the banks would thus be depleted of the coin necessary to redeem their notes; and the Government itself, in the inevitable delay of collecting, transporting, and disbursing it at widely-separated points, could have the actual use of but a relatively small part of it at any one time. Nothing was more certain, in these circumstances, than the enforced use by both Government and people, of paper money, and that the banks would expand their issues to the utmost limits compatible—not with safety—but with profit. It speedily became apparent also that the banks could not dispose of their bonds for coin, and that they could not meet their obligations in coin; and, moreover, that the bank-note circulation could not be sustained at the par of coin. To make that circulation receivable by the Government in payment of public dues could only be done at the risk of irretrievable financial embarrassments and disorders. Suspension became inevitable. Some of the banks which had subscribed to the seven per cent. (the third fifty millions) loan declined to pay in coin, and even asked to be relieved from payment in notes of the United States. On the 27th of December, 1861, the banks agreed to suspend specie payments, and did suspend on the 30th of December following. Consequent upon this action of the banks, the Government had no alternative but to dishonor its own promises, and it did so. It ceased to pay coin; and from the morning of January 1, 1862, new elements entered into the war FINANCEs, and they were elements of danger and destruction. That they were escaped, and the supplies met promptly and regularly, was due to the wise and firm policy now adopted by Mr. Secretary Chase. It need scarcely be added, that this action of the banks of New York and the Government was promptly followed by the banks throughout the country. Preceding the suspension, however, on the 9th of December, 1861, Mr. Chase submitted his second report to Congress. He

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