Diary of Gideon Welles: Saturday, October 18, 1862

The ravages by the roving steamer 290, alias Alabama, are enormous. England should be held accountable for these outrages. The vessel was built in England and has never been in the ports of any other nation. British authorities were warned of her true character repeatedly before she left. Seward called on me in some excitement this p.m., and wished me to meet the President, himself, Stanton, and Halleck at the War Department relative to important dispatches just received. As we walked over together, he said we had been very successful in getting a dispatch, which opened up the whole Rebel proceedings, — disclosed their plans and enabled us to prepare for them; that it was evident there was a design to make an immediate attack on Washington by water, and it would be well to buy vessels forthwith if we had not a sufficient number ready for the purpose. When we entered Stanton's room, General Halleck was reading the document alluded to and examining the maps. No one else was present. Stanton had left the Department. The President was in the room of the telegraph operator. The document purported to be a dispatch from General Cooper, Assistant Secretary of War of the Confederates, to one of the Rebel agents in England. A question arose as to the authenticity of the dispatch. Halleck, who is familiar with Cooper's signature, doubted after examining the paper if this was genuine. Adjutant-General Thomas was sent for and requested to bring Cooper's signature for comparison. Seward then took the papers and commenced reading aloud. The writer spoke of “the mountains of Arlington,” “the fleet of the Potomac,” “the fleet of the North,” etc. I interrupted Seward, and said it was a clumsy manufacture; that the dispatch could have been written by no American, certainly not by General Cooper, or any person conversant with our affairs or the topography of the country; that there were no mountains of Arlington, no fleet of the Potomac, or fleet of the North. General Halleck mentioned one or two other points which impressed him that the dispatch was bogus. The President came in while we were criticizing the document, the reading of which was concluded by Seward, when the President took the papers and map to examine them. General Thomas soon brought a number of Cooper's signatures, and all were satisfied at a glance that the purported signature was fictitious.

Seward came readily to the opinion that the papers were bogus and that the consul, or minister, — he did not say which, — had been sadly imposed upon, — sold. The dispatch had, he said, cost a good deal of money. It was a palpable cheat. It may be a question whether the British authorities have not connived at it, to punish our inquisitive countrymen for trying to pry into their secrets. It is just five weeks since the Battle of Antietam, and the army is quiet, reposing in camp. The country groans, but nothing is done. Certainly the confidence of the people must give way under this fatuous inaction. We have sinister rumors of peace intrigues and strange management. I cannot give them credit, yet I know little of what is being done. The Secretary of War is reticent, vexed, disappointed, and communicates nothing. Neither he nor McClellan will inspire or aid the other.

Chase is pursuing a financial policy which I fear will prove disastrous, perhaps ruinous. His theories in regard to gold and currency appear to me puerile. General Dix is pressing schemes in regard to the blockade and trade at Norfolk which are corrupt and demoralizing. Dix himself is not selling licenses, but the scoundrels who surround him are, and he can hardly be ignorant of the fact. The gang of rotten officers on his staff have sent him here. One of the worst has his special confidence, and Dix is under the influence of this cunning, bad man. He has plundering thieves about him, — some, I fear, as destitute of position as honesty. McClellan is not accused of corruption, but of criminal inaction. His inertness makes the assertions of his opponents prophetic. He is sadly afflicted with what the President calls the “slows.” Many believe him to be acting on the army programme avowed by Key

SOURCE: Gideon Welles, Diary of Gideon Welles, Secretary of the Navy Under Lincoln and Johnson, Vol. 1: 1861 – March 30, 1864, p. 175-7

Diary of Salmon P. Chase: Saturday, October 4, 1862

Mr Harrington left this morning for New-York. He is instructed to hasten increase of issue of Postage Currency to $100,000 per day. Expects to go to Boston in “Miami.”

SOURCE: Annual Report of the American Historical Association for the Year 1902, Vol. 2, p. 100

Major Wilder Dwight to Elizabeth White Dwight, October 13, 1861

pleasant Hill, Maryland, October 13, 1861.

Dear Mother, — Opie mixed his colors “with brains, sir,” and with brains we have just done a clever thing near Hatteras. Let us keep the brains at work. As for our own thoughts, they were excited this morning by an order for “two days” cooked rations in the haversack, and to [“]hold ourselves in readiness to march.” So we hold ourselves serenely and with content, but I do not fear any immediate action. At last, however, with all this cry, the wolf must come.

The paymaster has been here, and went off yesterday, leaving Uncle Sam's paper money behind, instead of gold as before. . . . .

It is a bright and gusty day, and our hillside exposure gives us the full front to the wind. I sit in my tent, this Sunday morning, and keep warm over a pan of coals.

I was amused, the other day, at an incident of my drive with Colonel Batchelder. We came across a bright-eyed little boy on the road, his pockets bursting with chestnuts, and stopped and took him in, levying on his chestnuts. I asked him if he was for the Union. “Yes,” said he, with a bright twinkle, “that I am.” “Why?” said I. “O,” said he, “that old flag has stood too long to be pulled down now.” I thought that, for a Maryland boy's reason, was a pretty good one I am quite anxious to get my buffalo-robe, which Spiegel was obliged to leave in Washington, as the coach would not bring it. The weather is growing colder every day, as it seems. But then we have the cheerful confidence that we are serving our country, you know, which takes the chill off.

SOURCE: Elizabeth Amelia Dwight, Editor, Life and Letters of Wilder Dwight: Lieut.-Col. Second Mass. Inf. Vols., p. 115-6

Diary of Gideon Welles: Thursday, September 25, 1862

Had some talk to-day with Chase on financial matters. Our drafts on Barings now cost us 29 percent. I object to this as presenting an untrue statement of naval expenditures, — unjust to the Navy Department as well as incorrect in fact. If I draw for $100,000 it ought not to take from the naval appropriation $129,000. No estimates, no appropriations by Congress, embrace the $29,000 brought on by the mistaken Treasury policy of depreciating the currency. I therefore desire the Secretary of the Treasury to place $100,000 in the hands of the Barings to the credit of the Navy Department, less the exchange. This he declines to do, but insists on deducting the difference between money and inconvertible paper, which I claim to be wrong, because in our foreign expenditures the paper which his financial policy forces upon us at home is worthless abroad. The depreciation is the result of a mistaken financial policy, and illustrates its error and tendency to error.

The departure from a specie standard and the adoption of an irredeemable paper currency deranges the finances and is fraught with disastrous consequences. This vitiation of the currency is the beginning of evil, — a fatal mistake, which will be likely to overwhelm Chase and the Administration, if he and they remain here long enough.

Had some conversation with Chase relating to the War. He is much discouraged, thinks the President is, believes the President is disposed to let matters take their course, deplores this state of things but can see no relief. I asked if the principal source of the difficulty was not in the fact that we actually had not a War Department. Stanton is dissatisfied, and he and those under his influence do not sustain and encourage McClellan, yet he needs to be constantly stimulated, inspired, and pushed forward. It was, I said, apparent to me, and I thought to him, that the Secretary of War, though arrogant and often offensive in language, did not direct army movements; he appears to have something else than army operations in view. The army officers here, or others than he, appear to control military movements. Chase was disturbed by my remarks. Said Stanton had not been sustained, and his Department had become demoralized, but he (C.) should never consent to remain if Stanton left. I told him he misapprehended me. I was not the man to propose the exclusion of Stanton, or any one of our Cabinet associates, but we must look at things as they are and not fear to discuss them. It was our duty to meet difficulties and try to correct them. It was wrong for him, or any one, to say he would not remain and do his duty if the welfare of the country required a change of policy or a personal change in any one Department. If Stanton was militarily unfit, indifferent, dissatisfied, or engaged in petty personal intrigues against a man whom he disliked, to the neglect of the duties with which he was intrusted, or had not the necessary administrative ability, was from rudeness or any other cause offensive, we ought not to shut our eyes to the fact. If a man were to be brought into the War Department, or proposed to be brought in, with heart and mind in the cause, sincere, earnest, and capable, who would master the generals and control them, break up cliquism, and bring forward those officers who had the highest military qualities, we ought not to object to it. I knew not that such a change was thought of. Without controverting or assenting, he said Stanton had given way just as Cameron did, and in that way lost command and influence. It is evident that Chase takes pretty much the same views that I do, but has not made up his mind to act upon his convictions. He feels that he has been influenced by Stanton, whose political and official support he wants in his aspirations, but begins to have a suspicion that S. is unreliable. They have consulted and acted in concert and C. had flattered himself that he had secured S. in his interest, but must have become aware that there is a stronger tie between Seward and Stanton than any cord of his. C. is not always an acute and accurate reader of men, but he cannot have failed to detect some of the infirm traits of Stanton. When I declined to make myself a party to the combination against McClellan and refused to sign the paper which Chase brought me, Stanton, with whom I was not very intimate, spoke to me in regard to it. I told Stanton I thought the course proposed was disrespectful to the President. Stanton said he felt under no obligation to Mr. Lincoln, that the obligations were the other way, both to him and to me. His remarks made an impression on me most unfavorable, and confirmed my previous opinion that he is not faithful and true but insincere.

The real character of J. P. Hale is exhibited in a single transaction. He wrote me an impertinent and dictatorial letter which I received on Wednesday morning, admonishing me not to violate law in the appointment of midshipmen. Learning from my answer that I was making these appointments notwithstanding his warning and protest, he had the superlative meanness to call on Assistant Secretary Fox, and request him, if I was actually making the appointments which he declares to be illegal, to procure on his (Hale's) application the appointment of a lad for whom he felt an interest. This is after his supercilious letter to me, and one equally supercilious to Fox, which the latter showed me, in which he buttoned up his virtue to the throat and said he would never acquiesce in such a violation of the law. Oh, John P. Hale, how transparent is thy virtue! Long speeches, loud professions, Scriptural quotations, funny anecdotes, vehement denunciations avail not to cover thy nakedness, which is very bald.

The President has issued a proclamation on martial law, — suspension of habeas corpus he terms it, meaning, of course, a suspension of the privilege of the writ of habeas corpus. Of this proclamation, I knew nothing until I saw it in the papers, and am not sorry that I did not. I question the wisdom or utility of a multiplicity of proclamations striking deep on great questions.

SOURCE: Gideon Welles, Diary of Gideon Welles, Secretary of the Navy Under Lincoln and Johnson, Vol. 1: 1861 – March 30, 1864, p. 147-50

1st Lieutenant Charles Fessenden Morse, March 2, 1862

Headquarters Co. B, 2d Mass. Reg't,

Charlestown, Va., March 2, 1862.

I wrote in my last that we had received marching orders and were liable to be off at any moment. We remained in a state of uncertainty till Wednesday afternoon, when we had the following order: “Reveille at four Thursday morning; march at five; take cars from Frederick at seven.”

These orders were complied with on a dark, cloudy, muddy morning, except that we had to wait till half-past seven on the railroad track before we started for Sandy Hook. Our whole brigade went on this train. After a hard ride of about four hours, we arrived at Sandy Hook. We disembarked as soon as possible, and formed line along the canal. Everything looked as natural as if we had only left the day before, except the lower part of Harper's Ferry, which, you know, Colonel Geary destroyed by burning. We marched down to the ferry, across which there had been a pontoon bridge constructed. We had to cross this in single file to avoid much jarring. It is a beautiful bridge, built in this manner: at intervals of every twenty feet are the pontoons, which look like common flat-bottomed scows, and are connected together by planking about eight feet wide. The whole arrangement is connected to the shore by a system of ropes. The bridge must be at least eight hundred and sixty feet long.

After crossing, we marched through Harper's Ferry, which seemed perfectly full of troops; we went down the Shenandoah road about a mile and quartered the regiment in some empty houses we found. The weather had changed since morning, and the night was very cold, with a perfect gale of wind. Captain Williams, Lieutenant Oakey and myself, found a very good room which we occupied together. At four o'clock next morning, we were awakened by the “officer of the day” ordering us to have our men get their breakfasts. As the regiment was going to move in light marching order at daylight, I got up and hunted for some coffee. I was lucky enough to find one house pretty well supplied, and engaged them to make me ten gallons for our company. We were very fortunate in getting this, as it enabled the men to start off feeling warm and comfortable, which is a great thing.

At seven, our line was formed, and then we learned that we were to form part of a reconnoitering force, to consist of four squadrons of cavalry, four pieces of artillery and two regiments of infantry, the whole under command of Colonel Gordon. As this was a very good specimen of a reconnoissance in force, perhaps you would like to know how it was conducted.

First, a few cavalry skirmishers to scour the roads and fields; then the main body of cavalry; then two pieces of artillery supported by a company of infantry, followed by two more supported similarly; then on each side of the road, a platoon of skirmishers covering near a third of a mile each way; these protect the advance of the main body of infantry; the flanks are protected by skirmishers deployed as flankers. I had the second platoon of our company deployed on the left of the road to drive in any pickets that might be out, or obtain other information; every house we came to, I had a man search from top to bottom, for arms or anything else that might be hidden in them.

Our cavalry skirmishers met those of the enemy just this side of Charlestown, and drove them into their main body; our cavalry then came up at the gallop and sent the enemy flying out of town and a couple of miles into the countiy, many of them throwing away their arms in their hurry. We followed along and took quiet possession of the town, probably as thoroughly secesh a place as any in Virginia. People scowled at us from their windows, but did not venture much into the streets; those who did seemed almost frightened to death, every one thinking we were going to burn the town. The guns were put in position at once, commanding the Winchester roads. The cry was suddenly set up, “The General is coming!” Ranks were formed and dressed. Presently, Generals McClellan, Banks, and Hamilton, with their staffs and guards, rode by; we saluted, and the General took off his cap to us; he is a splendid looking man, though not much like his pictures. They rode out about two miles and returned. He was so well satisfied with the movement that he decided to have our force remain and occupy the town. Most of our regiment are quartered at the Court House; our company occupies the toll-house of the Charlestown, Berryville and Winchester turnpike, a short distance from the town, supporting a section of Hampton's battery; very comfortable quarters.

We were reinforced, Friday night, by two regiments and a regular battery. That night, our cavalry was several times driven in by the enemy's cavalry; we lost four horses and three men by these attacks, and captured one of the enemy. One of the sentinels of our company shot a cavalry horse through the neck while on picket last night, about a half a mile from our house; the picket fired three times and drove them back.

The only currency here in town is the Southern shinplaster, dreadful mean looking stuff; I will send you a five cent bank bill in a day or two. Coffee costs four dollars a pound here and hard to be had at that. We shall be off from here in a day or two for Winchester, but I do not believe we shall have to fire a gun to take it; then for Richmond via Manassas. This is a little better than sticking in the mud at Frederick. Direct to General Banks' Division, War Department, Washington.

SOURCE: Charles Fessenden Morse, Letters Written During the Civil War, 1861-1865, p. 36-9

John M. Forbes to Senator William P. Fessenden, January 13, 1862

New York, January 13, 1862.

My Dear Sir, — I see that the financial question is pressing, and before I turn my face eastward I cannot help repeating some of the suggestions which I have already made, the soundness of which is chiefly the discussion here, where so many are opposed to them.

1st. Taxation for interest and current ordinary expenses; on this all agree now, but many will oppose if you once get into the “irredeemable gulf.”

2d. Your main reliance for carrying on the government must be upon selling your long bonds at the best prices they will bring after a fixed policy has been announced, and of course using proper judgment as to the time and manner of bringing them forward.

3d. Avail of short loans, exchequer bills, or emission of small notes for currency, under the advice of experts in whichever manner or form promises to give greatest relief temporarily; but it will be a fatal error to rely upon it as your chief dependence. It is limited in amount and liable to great mischief the moment it is pushed beyond a certain and very moderate amount.

4th. Make this currency, or short paper, or demand paper, in whatever shape you put it, as good as possible by providing for its being received by government for all dues, by fixing a mode of its redemption, and by making it fundable at a good rate of interest. Raise it all you can, so as to make it good, and cause it to be received by all classes voluntarily in payment of debts already existing, but avoid making it a legal tender unless you want to see it depreciate. To make it a legal tender will be to give notice to capitalists to get their capital out of the country as fast as possible, and to foreign capitalists to keep from sending money here, and to sacrifice what available stocks they have, government included, as early as possible before the depreciation has got very bad.

5th. Finally, avoid pledging anything but the faith of the government for your debt.

It will be urged to pledge your revenues, or certain specified parts of them. If this pledge covers all your issues, past, present, and future, it amounts to nothing. If confined to the present debt and to certain specified loans it will be urged upon you by those who hold the present loan and wish it secured, and who wish to see the war ended, even at the cost of disunion or submission, whenever the loan now authorized is expended.

If our policy is to be war until we succeed, whether it cost us five hundred millions or five thousand millions (about England's debt), let us have no pledge of our revenue. Even if the loan was sure to be limited, it would be unworthy the dignity of government to pawn our revenue for it, like a Mexican or South American state, and would defeat its object if that object really was to raise the public credit.

We are rich and strong, and it only requires strong action and wise measures of finance at this crisis to carry us through.

Most respectfully and truly yours,

J. M. Forbes.

I fear the interest of the banks in keeping up for a little while the price of the long bonds (1881) may influence them to other and temporary expedients. If you follow their advice you will soon see them slipping out of their long bonds at the best prices they can get.

If one doubted about the true policy, the opposition to it of the “Herald,” the organ of the seceders, should turn the scales. It goes for irredeemable currency and for short expedients. It wants to see the war short — and disgraceful!   J. M. F.

SOURCE: Sarah Forbes Hughes, Letters and Recollections of John Murray Forbes, Volume 1, p. 277-9

Small Demand Notes

Secretary Chase has recommended to Congress the issuing of treasury notes under the denomination of five dollars, to the extent of $25,000,000.  We like the idea, and believe it will have a tendency, if properly encouraged by the people, to drive out a great deal of the rag money in circulation.

– Published in The Davenport Daily Gazette, Davenport, Iowa, Saturday Morning, May 10, 1862, p. 2

Currency

The Rag-mills of the East are again benevolently flooding the West with their currency, fearing probably that with specie-paying banks at home, we might not have enough money to pay taxes with.  Demand treasury notes are getting scarce, and their place is being taken by rag-money of doubtful character, such as cursed the West six or seven years ago.  Our people have had a deal of bitter experience in currency matters, and we hardly think they will allow themselves to be thrown off their guard by this renewed onslaught of the rag-barons: – But vigilance is needed, and that of the ‘eternal’ kind, too, to prevent another collapse like those to which the West has been subjected every year or two.  Indeed, we see by a Chicago paper, that a man recently left Clifton, Canada, for the West, with picture papers to the amount of $20,000 on the Bank of Clifton, which is said to be a regular swindle; and he is probably not the only one who is traveling on similar business.  All Eastern wild-cat will do to watch.

– Published in The Davenport Daily Gazette, Davenport, Iowa, Friday Morning, May 2, 1862, p. 1

The mints of the United States have . . .

. . . coined since they commenced operations – a period of less than twenty years – the large amount of $800,000,000 – about one fifth of the whole metallic currency of the world.  Of this amount $520,000,000 were derived from the mines of the United states.

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, February 1, 1862, p. 4

Our Financial Policy

Thomas H. Benton at the commencement of the Mexican war, condensed the method of sound national financiering into a single phrase: “Taxes first, loans next, and treasury paper last.”  Congress began at the second step last summer, and is now urged to take the third with perfect recklessness.  It is so much easier to stamp paper with showy pictures and delusive promises and call it money, than it is to draw real money by direct taxation from the pockets of the people, that our legislators have strong temptations to pursue the former course.  Debtors, who wish to pay off their obligations in a depreciated currency, speculators, who have stocks or goods to sell, and seek to obtain high prices under an inflated currency, foreign bankers, who wished to raise the rate of exchange and cause a flow of gold to Europe, and government contractors who, in the general unsettling of values, can charge the most exorbitant rates for supplies – all these classes desire an excessive issue of irredeemable paper money.  But there are strong symptoms that Congress will shut down on “demand notes” after $50,000,000 are issued, and will leave no article untaxed which is capable of yielding a revenue.  The House committee of ways and means are diligently at work adjusting the details of new internal tax bills which will produce, it is thought, at least $200,000,000 per annum, with the tariff duties already levied on imports.  This is beginning at the right end.  The beneficial effects of such rumored action is seen in the decline of the premium on gold from 5 to 1½@2 per cent. during last week.  Loans can be easily obtained at fair rates of interest, if securely anchored on stiff taxes.  Treasury paper can be resorted to as a temporary expedient, while waiting for taxes or loans to come in.  But there should be no humbug about it, no leaning upon it exclusively.  Broken promises and worthless pledges should form no part of the currency of a rich and intelligent people.  Irredeemable paper money is “played out” as a financial resource.  It has ruined more people that war for the last 150 years and has disgraced governments more deeply that defeat.  Experiments with it have always ended in one way, and burned the fingers of both rulers and subjects.  Are we to learn nothing from history?  No matter if the “demand notes” should be ultimately redeemed, as we all believe the will be.  They have depreciated already, so that 5 per cent discount has been charged upon them at Washington, even for “drinks.”  Increase the quantity, expand the general circulation with these notes, and they depreciate still further by a law as inexorable as that which melts snow and ice in a warm day.  For they are not money, calling them money will not make them so, acts of Congress and official autographs will not hold them up.  Alchemy of lead and iron is an exploded old fogy idea, but alchemy of paper, though just as ridiculous and impossible has many advocates.  Gold and silver are the only recognized money of the world.  Paper currency, however well secured will not pass in our trade with other nations.  A huge volume of “demand notes” will assuredly drain us of gold to be sent abroad, for we cannot stop trading with the rest of mankind, and must pay them balances in gold, and see balances rapidly accumulate against us from the withdrawal of orders for produce, which an inflated currency will carry up to a pitch making it unprofitable to buy of us, in comparison with countries enjoying a stable currency.  It may be tiresome to repeat so many truisms, but the great importance of the subject, and the fanciful bubbles that are blown by serious journals and admired by dashing operators of the John Law and Jules Isaac Mires class will justify the continued discussion. – {Springfield Republican.

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, February 1, 1862, p. 1

Friend Claggett, of the Keokuk Constitution . . .

. . . devotes more than a column to the small article of fifteen lines on currency printed in this paper the other day, and takes occasion to ask us several questions touching law, finance, paper money, coin, &c.  We refer him back to that article.  If his questions are not answered in that he can infer that we cannot answer them.  We said all we had to say and ventilated all our stock of knowledge in that short article, and if we know ourself as we think we do, we shall not bore our readers with any repetitions our reiterations.  He is entirely welcome to have it all his own way.  In the mean time if he is really anxious for information on currency and finance he is certainly in a fair way of acquiring it practically.  If he continues a year in the newspaper business he will learn a good many things that will be of use to him if he survives.  And this is the only kind of teaching that will ever reach his case.

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, April 12, 1862, p. 1

Shall the branches of the State Bank continue to . . .

. . . redeem their bills in gold and silver, as a literal construction of the Constitution seems to require?  In giving an answer to this question it is proper to say that the redemption of their notes in gold and silver will defeat the object of their creation which was to furnish a sound and convertible currency.  While the banks in the country are in a state of suspension, all of them refusing to redeem their notes in coin, Iowa banks cannot do it without at once withdrawing their paper from circulation.  This they are able, and so far as we know, willing to do.  But just as soon as brokers have gathered up all their bills and drawn the gold for them we shall have nothing in circulation in this State except foreign bank paper – bills of Eastern banks that we know nothing about.  It is fair to presume that with this foreign currency in the hands of our people we shall again pay roundly for the privilege of using it as in stump-tall times, exchange going up, &c., &c. – When there is a resumption of specie payments we shall find ourselves “stuck” with worthless and broken bank paper – for the more worthless it is the farther away from home it is sent, as a general rule.

How this matter may strike others we cannot say, but it seems to us that the spirit of its charter would require the State Bank to furnish a good, sound convertible home currency, which it only can do by redeeming its paper in Treasury notes, which Congress has made a legal tender.  Thus can the State Bank save the State from being plundered by the Eastern Banks.  Should this course be resolved on and properly carried out it must redound greatly to the benefit of the people of Iowa.  On the other hand a continuance to pay coin will wind up our banks, so far as circulation is concerned, in quick time, and long before July not a State Bank bill will be seen.  We think it is better that they redeem in Treasury notes and keep their bills afloat than that their con should all go into the hands of brokers.  And that it does into the hands of brokers we need only say that of $90,000 paid over its counter in redemption of its notes since the 1st of January by the Burlington Branch, over $85,000 was paid brokers, mostly from other States.  What the people want is a currency which is safe and sound, kept at par or convertible into par funds, with exchange at a fair rate.

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, April 5, 1862, p. 1

The Proposed National Currency

In concert with the Secretary of the Treasury the Congressional committee of Ways and Means have prepared three measures for the regulation of the finances of the Government and country, that are already winning approval at home and admiration abroad, as wisely adapted to the emergencies of our condition.  The first of these measures is that already adopted by Congress to authorize one hundred and fifty millions of Treasury notes and five hundred millions of Government bonds to meet the extraordinary expenses of the war.  The second is the tax bill, now under discussion, to raise, with our tariff, one hundred and fifty millions a year, which will meet our ordinary expenses, pay the interest on the dept created by the first measure, and provide a sinking fund for its early repayment.  The third is a measure to provide a national currency, and this will be brought forward as soon as Congress has finished the tax and tariff system.  The best explanation and defense of this third measure we find in the speech of Mr. Hooper, the eminent merchant and financier, who represents Boston in Congress, and has become a prominent member of the Committee of Ways and Means.  His speech elucidates the whole financial scheme of the Government, and has been commended in the English journals for its comprehensive ability and large familiarity with the subjects discussed.  We extract from the part relating to the currency system, with the simple remark that we believe it foreshadows a most grateful and useful revolution in the currency of the country. –

“For nearly thirty years the country has been without a uniform paper currency.  As nearly all the business of the country is done by means of paper, specie being seldom used except in the payment of balances, the inconveniences resulting from this want have been very great.  The traveling public, remitters of small sums by mail, and the laboring classes, who often receive their pay in uncurrent funds, chiefly experience these inconveniences.  In order to relieve this want it is necessary to give to the paper currency three equal qualifications:

“First.  It must be well secured, so that the people may feel that they are sure of obtaining its value when needed.

“Secondly.  It must have a governmental endorsement or guarantee, so that the people everywhere may be able to distinguish it, and the government prove its confidence in it by taking it in payment of taxes, assessments, and other dues.

“Thirdly.  It must be guarded as far as possible, against arbitrary increase.

These requisites have all been provided for in the proposed bill.  The paper currency is to be secured by a deposit, with the government, of the United States stock, the market value which shall be equal to the amount of currency issued.  There can be no higher security known to the government, and its permanent value has heretofore been known.  The government, upon the receipt of such security, is to certify on the face of the notes for currency, that the same are ‘secured by pledge of the United States stocks,’ and is to take them in payment of all taxes, excises, and other dues excepting only for duties upon imports.  Lastly, the government cannot increase the amount of the currency, except upon the application of a bank, and the bank cannot increase it except upon the application to, and depositing security with the government.

“It has been suggested that, as far as the government alone was interested, the objects which it had to gain could be attained in an easier and less expensive manner; that the paper circulation of the country being in reality a loan from the people without interest, it would be equitable and just for the government to take this loan directly into its own hands, and furnish all the paper circulation, instead of allowing the benefit of it to private associations and individuals.  But the committee deemed it more wise to attain their proposed ends, if possible, without disturbing existing institutions, or habits, or doing anything that might injuriously affect private interests.  The currency is therefore left to the banks, they are only required to deposit security for it, and to submit to certain established rules and regulations prescribed in the bill, in order to insure conformity of management for the common benefit of the banks themselves and the public.

To many of the banks these requirements will not be difficult of performance, as they already hold stocks of the United States, which they will be at liberty to pledge.  In exchange for the restrictions imposed upon them, the banks will enjoy the benefit of a fixed and permanent interest upon they hypothecated stocks.  ‘An order of nationality,’ as Mr. Webster called it, is also imparted to their bills, enabling them to circulate wider and further than before; and what would become a constant drain upon their specie is checked by the consent of the government to receive their notes in satisfaction of its dues.

“Thus are secured all the benefits of the old United States bank without many of those objectionable features which arouse opposition.  It was affirmed that, by its favors, the government enabled that bank to monopolize the business of the country.  Here no such system of favoritism exists.  It was affirmed that, while a large portion of the property in the several states, owned by foreign stockholders, was invested in that bank and its branches, yet it was unjustly exempted from taxation.  Here every State is left at perfect liberty, so far as this law is concerned, to tax banks within its limits in whatever manner and to whatever extent it may please.  It was affirmed that frequently great inconvenience and sometimes terrible disaster resulted to the trade and commerce of different localities by the mother bank of the United States arbitrarily interfering with the management of the branches, by reducing suddenly their loans, and sometimes withdrawing large amounts of their specie, for political effect.  Here each bank transacts its own business upon its own capital, and is subject to no demands except those of its own customers and its own business.  It will be as if the Bank of the United States had been divided into many parts, and each part endowed with the life, motion, and similitude of the whole, revolving in its own orbit, managed by its own board of directors, attending to the business interests of its own locality; and yet to the bills of each will be given as wide a circulation and as fixed a value as were ever given to those of the bank of the United States in its palmist days.  It is not to be supposed that variation in the rates of exchange will entirely disappear; specie itself yields to the law of demand and supply, and fluctuates in value with the continual changes of the balance of trade.  But this currency will approach as near uniformity in its value as possible.  These institutions all originate among the people in their own localities, and are not created by the government.  The government simply authorizes the investment of capital in the load, and the use of the bonds representing the loans as a basis of a sound circulation.

“This measure, will, therefore, give to the people that which they most desire, a currency which shall not only purport to be money, but shall actually be money in a broader and more positive sense than are the notes of the Bank of England, high as they are in the estimation of the commercial world, for the reason that the depositors of the Bank of England, equally with the holders of its notes, look to the government stocks, in which its entire capital is invested as their security; while this plan of the committee proposes that stocks of a government, with fewer liabilities and paying a larger rate of interest, shall be specially pledged for the security of the notes alone.”

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, April 5, 1862, p. 1

There can be no doubt that . . .

. . . the best and safest currency the people of Iowa can have is that furnished by the State Bank.  The New England banks must sink or swim with the people of New England.  That section has suffered severely by the rebellion, much more so than the west.  The same remark applies to those of New York.  There is no propriety in our people keeping in circulation and thus lending to these distant banks, of the soundness of which we know nothing, the large amount now afloat, especially while Eastern Brokers are skinning our banks, which alone pay specie.  Iowa Banks should fortify themselves with Treasury notes with which to take up their paper in the hands of these carpet sack men, send them home the foreign currency which floods our State and supply its place with their own notes.  This is what should be done and what the people of Iowa will sustain them in doing.

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, April 5, 1862, p. 1

Senator John Sherman to Major General William T. Sherman, November 16, 1862

MANSFIELD, OHIO, Nov. 16, 1862.

Dear Brother:

Two matters now excite attention among politicians. What is the cause and what will be the effect of the recent elections, and what are we to do about our depreciated paper money. No doubt many causes conspire to defeat the Union parties. The two I will name were the most influential, and yet the least will be said about them.

The first is, that the Republican organization was voluntarily abandoned by the President and his leading followers, and a no-party Union was formed to run against an old, well-drilled party organization. This was simply ridiculous. It was as if you should disband your army organization because it was tyrannical, and substitute the temporary enthusiasm of masses to fight regular armies. Political as well as military organization is necessary to success. Ward meetings, committees, conventions, party cries are just as necessary in politics, as drills, reviews, &c., are in war, so the Republicans have found out. If they have the wisdom to throw overboard the old debris that joined them in the Union movement, they will succeed. If not, they are doomed.

The other prominent reason for defeat is, the people were dissatisfied at the conduct and results of the war. The slow movements on the Potomac and worse still in Kentucky dissatisfied and discouraged people. It was a little singular that the Democrats, some of whom opposed the war, should reap the benefit of this feeling, but such is the fate of parties. Lincoln was a Republican. He put and kept in these slow generals and we shall be punished for it by having an organized opposition limiting appropriations. No doubt the wanton and unnecessary use of the power to arrest without trial and the ill-timed proclamation contributed to the general result. The other matter I allude to is demanding careful consideration. As it is my line of official duty, I have formed certain theories which may be all wrong; but as they are the result of reflection, I will act upon them. My remedy for paper money is, by taxation, to destroy the banks and confine the issue to Government paper. Let this only issue, as it is found to be difficult to negotiate the bonds of the government. As a matter of course there will a time come when this or any scheme of paper money will lead to bankruptcy, but that is the result of war and not of any particular plan of finance. I watch your course closely and take great interest and pride in your success.

Affectionately your brother,

JOHN SHERMAN

SOURCE: Rachel Sherman Thorndike, Editor, The Sherman letters: correspondence between General and Senator Sherman from 1837 to 1891, p. 167-8

Why Does Congress Not Tax Bank Notes?

While Congress is taking hold of almost every object that can be made to yield a dollar of revenue for the purpose of subjecting it to a tax, it does not seem to contemplate the laying of a tax on Bank Notes, one of the most legitimate as it could be made a productive source of revenue.

There is about $200,000,000 of bank paper in circulation in the Northern States, and this exists by the sufferance of the people who lose not less than ten per cent. per annum on an average by depreciation of this paper money.  There is a loss of some twenty millions a year sustained by the people at large in consequence of this depreciation, and if Congress would only say the word, this amount would be saved, by superceding Bank Notes by Treasury Notes.  Or, if the Bank Notes would stand the tax imposed on them, so much would be made to the Government.

Then again, the Banks do not pay the people interest on their notes, while the Banks charge interest on the people’s notes.  The Banks issue their own notes without interest and loan them to the people for their notes at interest.

Thus the Banks make money on their own evidences of debt.  Now, all this advantage should be taken by the Government and given to it by the people because every dollar made or saved by the Government is a dollar made and saved for the benefit of the people themselves; while what the Banks make is for the interest of the few who own them.

Congress should therefore tax Bank Notes at once.  Government is not bound to respect the kind of money put in circulation by the Banks.  It is, and always was, an illegitimate, unconstitutional currency.  There is no currency legitimate but that which is made so by the Federal Government, and the Federal Government has not legitimatized nor authorized, in any way, bank paper.

So, then, it is proper to tax it, even if the tax drives it out of circulation.  So much the better for the Government and for the people if such should result.  Government Treasury Notes, of Uniform value all over the country, will take the place of the retired Bank paper, and even if it should depreciate, it will be no worse at worst than the Bank Notes.

– Published in The Dubuque Herald, Dubuque, Iowa, Friday Morning, February 7, 1862, p. 2

Counterfeiting Rebel Treasury Notes

The Washington correspondent of the Philadelphia Inquirer says:

A few days ago the Government detectives found that an ingenious Yankee was printing a large amount of rebel treasury notes, of different amounts, mostly, however, of large denominations.  They arranged a time, and made a descent upon the “Yank,” when he was surrounded with all his Confederates, papers, &c.  He seemed surprised at the appearance of the officers, but quietly went with them.  He said he was engaged in crippling the rebel treasury, and thought it very strange he should be molested, as he thought that was their weakest point.  “How is this?” asked the astonished officer.  “You see” said the Yank,” “these are better than the original article; the originals are worthless; they are unauthorized by law; so I am not counterfeiting.  I have not attempted to pass them for money, and really cannot see how I am doing wrong.”  “Ah!” said the detective, “of course you were not going to pass them, but you are going to furnish them to the enemy.”

The “Yank” then owned up that he was sending them down to flood the South, and destroy the confidence of the people, when they suddenly found the whole country flooded with a spurious issue, and their only circulation rendered worthless.  An investigation showed that he had really sent several hundred thousand dollars through the South, via Tennessee, and sold them at from thirty to fifty cents on the dollar.  The case was duly reported to Secretary Seward, the whole apparatus seized and the man allowed to go on his parole for the present.  The Secretary frankly admits that this is the toughest case he has met during the war, and he forthwith turned it over to the Secretary of War, who has not yet concluded what to do with the case.  Samples of genuine and bogus are here, and it is freely admitted that the “yank” has got up a superior article, which is very difficult to detect.

– Published in The Davenport Daily Gazette, Davenport, Iowa, Tuesday Morning, March 18, 1862, p. 2

XXXVIIth Congress -- First Session

WASHINGTON, March 3.

HOUSE. – Mr. Dawes, from committee on elections, made a report on the petition of S. Ferguson Beach asking to be admitted to a seat as Representative from the 7^th congressional district of Virginia.  The committee append to it a resolution that Mr. Beach is not entitled to a seat.  The subject was laid over.

Mr. Stevens, from the committee on ways and means, reported a bill providing internal revenue for the support of the government and to pay the interest on the public debt.  Referred to the committee of the whole, and made the special order one week from next Tuesday.

Mr. Stevens said as considerable impatience had been expressed by the public at the delay in reporting the bill, he desired to say that the committee on ways and means did not obtain possession of the estimates and facts to enable them to judge now much revenue was necessary until the first week in January. – The committee then had before them all that were passed ten days ago, being earlier than usual in the session.  The committee were also engaged some time on the currency, including the treasury note bill.  The tax subject was referred to a special committee, which worked as assiduously as possible during every hour they were not engaged in the House.  He believed they had worked more hours every day since that time than any laborer in the U. S.  When the sub-committee completed its labors the entire committee of ways and means had gone over the bill carefully, article by article, until they unanimously adopted it. – He did not ask any commendation for the committee, but desired that when the subject came to be considered and reviewed, benevolent indulgence may be extended to them.  He desired the extra copies of the bill ordered to be printed to be distributed for the consideration of the people who are to sustain the burdens, and that they may have the benefit of their suggestions.

Mr. Sedgwick offered a resolution which was adopted, requesting the president, if not incompatible with the public interest, to furnish copies of the correspondence relative to the present condition of Mexico and the allied powers in invading Mexico to establish a monarchy.

– Published in The Davenport Daily Gazette, Davenport, Iowa, Tuesday Morning, March 4, 1862, p. 1

XXXVIIth Congress -- First Session

WASHINGTON, February 20.

SENATE. – The Senate passed the army appropriation bill for 1862 and then went into executive session.

Mr. Wilkinson offered the following resolution:

WHEREAS, Lazarus W. Powell, after several States had severed themselves from the Union, on the 20th of June last, attended a large Southern States Convention as was the President thereof, where resolutions were passed approving of the neutrality of Kentucky and denouncing the war, and also attended another Convention on the 10th of September, where more resolutions were passed of the same import and said Powell had given all the aid and comfort he could from the position he occupied; therefore,

Resolved, That said Lazarus W. Powell will be expelled from the Senate.  Referred to Judiciary committee.

On motion of Mr. Grimes, the bill to establish a national armory at Rock Island was taken up.

Mr. Howe moved its reference to the military committee.

Mr. Wilson, of Mass., had no desire to have it referred to that committee.  He was not sure the Government needed another armory at this time, but it did need a foundry for making cannon, &c.

HOUSE. – The House took up the report from the committee of the whole on the Senates amendment to the Treasury note bill.

Mr. Hooper briefly expressed his views.  He said the object was to furnish a substantial and uniform currency, and to approve the distinction proposed to be made in favor of the holders of the stock, by paying the interest in coin.

Mr. Stevens said he had a melancholy foreboding that they were about to consummate a cunningly devised scheme which will carry great injury throughout the country.  At the [insistence] of the brokers the Senate has been persuaded to mangle and destroy what had cost the House months to digest, consider and pass.  The bill has been so defaced that its very fathers fail to recognize it.  Instead of being a beneficial, invigorating measure, affording a uniform and equal currency for all, it possesses positively great mischief.  It now has all the bad qualities which have been attributed to it, without a single good feature in its amended form.  It creates two classes of currency – one for banks and brokers, and another for the people.  It discriminates between different classes, takes away the legal tender clause, and the Government will be in the clutches of the harpies.

All the amendments to the Treasury note bill were acted on.  The amendment making the interest on the notes payable in coin was agreed to.  The amendment pledging the lands, duties, and proceeds of rebel property to the redemption of the interest and principal of the debt was rejected.  The bill goes back to the Senate again.

The Post office appropriation bill was up in the committee of the whole.

– Published in The Davenport Daily Gazette, Davenport, Iowa, Friday Morning, February 21, 1862, p. 1

Legal Tender

OTTOWA, IL, May 19. – The court reversed the judgment in the Wright case, deciding that the law requiring the revenue to be collected to be paid in gold and silver alone.  It is as obligatory now as it was previous to the passage of the act by Congress, making treasury notes legal tender in payment of debts.  This is a subject exclusively within the control of our legislature, and with which Congress has nothing to do.  The legislature might require all revenue to be paid in gold alone, or in silver, or corn, or cattle, although gold and silver have always been legal tender in the payment of debts.  An opinion at length will be hereafter written.

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, May 24, 1862, p. 4