* * * of fifty millions, bearing interest from that date. | three year seven-thirty bonds, or treasury notes, The associated banks were to take jointly this bearing even date with the subscription, and of amount at par, with the privilege of fifty millions equal amount; to cause books of subscription to on Oct. 15, and fifty millions on Dec. 15; the the national loan to be immediately opened; to banks giving their decision on the first days of reimburse the advances of the banks, as far as these months. It was understood, that, if the practicable, from this national subscription; and whole amount should be taken, no other govern- to deliver to them seven-thirty bonds, or treasury ment stock or treasury notes, except demand notes, for the amount not thus reimbursed. It notes, should be negotiated or paid out by the was further understood, that the secretary of the treasury until Feb. 1, 1862. The details of this treasury should issue a limited amount of United negotiation, which was perhaps the most impor- States notes, payable on demand, in aid of the tant one during the war, are given in the Bankers' operations of the treasury, and that the associated Magazine for September, 1861, and August, 1862. institutions, when the first advance of fifty millThe report of June 12, 1862, of the loan com- ions should be expended, would, if practicable, mittee of the associated banks of New York, states, make another, and, when that should be exhaustthat, at the time the negotiation was made," the ed, still another advance to the government of the credit of the government had become impaired to same amount, and on similar terms. All such a degree that a large loan could not be ob- these objects were happily accomplished. Fifty tained in any ordinary way, nor even a small tem- millions of dollars were immediately advanced by porary loan, except for a very short period at a the banks. The secretary caused books of subhigh rate of interest. Men's hearts failed them: scription to be opened throughout the country, the rebellion was on so large a scale, and had so and the people subscribed freely to the loan. The unexpectedly broken out and raged with such amounts thus subscribed were reimbursed to the fury, that to subdue it seemed to most persons to banks, and the sum reimbursed, though then be impossible. Then it was, after careful delibera- covering but little more than half the amount, ention and consultation with the secretary, that the abled those institutions, when a second loan was banks decided it to be wise for them to depart required, to make a second advance of $50,000,from their usual legitimate business, and sustain 000. Thus, two loans, of $50,000,000 each, have the government credit, and stand or fall with it. been negotiated for three-year seven-thirty bonds, This act restored the public confidence, and was at par. The first of these loans was negotiated, the highest indorsement of the public credit that and the first issue of bonds bears date, Aug. 19, could then have been given. * When the the second Oct. 1, 1861."- On Nov. 16, a third banks agreed to advance this large amount to the loan was negotiated with the associated institugovernment, they did so without hope or expectations under the seventh section of the act of Aug. tion of profit from it, and they earnestly sought to obtain from the government the assurance that they should be indemnified from loss. It was not until five months after taking the first loan, and two months after taking the third, in the month of January last, that there was any reason to expect the securities to command in the market a price higher than that at which they had been taken. * * Much doubt was expressed, even by our most experienced bankers and financiers, when the contract was entered into, of the ability of the banks to fulfill it. It has been fulfilled by them to the letter, and has proven of more value to the country than can be estimated. As fortunately as unexpectedly, it has resulted profitably for the associates, and has probably enabled them to employ their means to nearly as much advantage as would have been done but for the political disturbances of the country."-Secretary Chase, in his report for Dec. 9, 1861, thus refers to this negotiation: “Representatives from the banking institutions of the three cities, responding to his invitation, met him for consultation in New York, and after full conference, agreed to unite as associates in moneyed support to the government, and to subscribe at once a loan of fifty millions of dollars, of which five millions were to be paid immediately to the assistant treasurers, in coin, and the residue, also in coin, as needed for disbursement. The secretary, on his part, agreed to issue 181 VOL. III. - 62 | 5, 1861, by agreeing to issue to them fifty millions of dollars in 6 per cent. bonds, at a rate equivalent to par, for the bonds bearing 7 per cent. interest, authorized by the act of July 17, 1861.- The table on page 978 gives quotations of United States 5 and 6 per cent. bonds, of treasury notes and of gold, at the dates stated, compiled from tables in Hunt's Merchants' Magazine for 1862–3–4. About three years after the passage of the act authorizing the first issue of seven-thirty notes, another act was passed, on June 30, 1864, authorizing 200 millions of similar notes, and a subsequent act of March 3, 1865, authorized 600 millions in addition, and under this act the whole amount (including $29,992,500 of reissues) was issued. Of this amount forty-four millions were in denominations of fifty dollars; 137 millions, in one hundreds; 228 millions, in five hundreds; 370 millions, in one thousands; and about fifty millions, in five thousands. They were issued in three series, dated Aug. 15, 1864, June 15, 1865, and July 15, 1865. These notes, like those that preceded them, were fundable into 6 per cent. bonds-the former into eighty-ones, and the latter into five-twentiesand this fact was printed upon the reverse of each note. The 800 millions last issued were payable, principal and interest, in lawful money. More than twenty millions, which were authorized by the act of June 20, 1864, were paid to the soldiers direct. Of the 600 millions, authorized by the act of March 3, 1865, seventy millions were issued during that month, and the whole remainder was taken during the following four months. Secretary McCulloch, in his report for Dec. 4, 1865, thus refers to the negotiations and issue of the remaining 530 millions of these notes: "Upon the capture of Richmond, and the surrender of the confederate armies, it became apparent that there would be an early disbanding of the forces of the United States, and consequently heavy requisitions from the war department for transportation and payment of the army, including bounties. As it was important that these requisitions should be promptly met, and especially important that not a soldier should remain in the service a single day for want of means to pay him, the secretary perceived the necessity of realizing as speedily as possible the amount-$530,000,000-still authorized to be borrowed under this act. The seven and three-tenths notes had proved to be a popular loan, and although a security on longer time and lower interest would have been more advantageous to the government, the secretary considered it advisable, under the circumstances, to continue to offer these notes to the public, and to avail himself, as his immediate predecessors had done, of the services of Jay Cooke, Esq., in the sale of them. The result was in the highest degree satisfactory. By the admirable skill and energy of the agent, and the hearty co-operation of the national banks, these notes were distributed in every part of the northern and some parts of the southern states, and placed within the reach of every person desiring to invest in them. No loan ever offered in the United States, notwithstanding the large amount of government securities previously taken by the people, was so promptly subscribed for as this. Before the first of August the entire amount of $530,000,000 had been taken, and the secretary had the unexpected satisfaction of being able, with the receipts from customs and internal revenue and a small increase of the temporary loan, to meet all the requisitions upon the treasury." On the opposite page is the form of the seventhirty note issued under the act of March 3, 1865, with one coupon attached. The whole half year's interest was payable with the note, and there were five coupons upon the right end of the note. On the reverse were printed these words: "Pay to bearer. At maturity convertible at the option of the holder into bonds redeemable at the pleasure of the government, at any time after five years, and payable twenty years from July 15, 1868, with interest at 6 per cent. per annum, payable semiannually in coin." - During the month of July, 1862, gold was at a premium for legal tender notes of from 10 to 15 per cent., and demand notes, which were receivable for customs at a premium of about 8 per cent. The subsidiary silver coinage authorized by the act of Feb. 21, 1852, was about 7 per cent. less in intrinsic value than the silver dollar, and this difference in weight was authorized, so that it might be retained in the country for purposes of change. This silver previous act prohibited private corporations, banking associations and individuals from issuing or circulating notes for fractions of a dollar, and imposed a penalty, upon conviction, of a fine not exceeding five hundred dollars, and imprisonment not exceeding six months. The law did not prohibit the issue of fractional currency by cities, and considerable amounts were placed in circulation by various municipalities notwithstanding the fact that in many of the states laws had been passed in the year 1837, or prior thereto, prohibiting such issues. The amount of fractional currency was limited to fifty millions of dollars, and denominations of from three cents to fifty cents were issued, which were exchangeable for United States notes in sums of not less than three dollars. On the days on which this small currency was first issued to the public, the offices of the assistant treasurer in New York and in other cities were thronged with long lines of people anxious to obtain this paper currency to supply the deficiency caused by the withdrawal of silver coin. On account of the scarcity of one and two-dollar notes and of fractional currency, whole sheets of these notes when they were first issued were paid to the army, and subsequently were so cut that four 25-cent notes were used in place of a one-dollar note, and four fifty-cent notes in place of a two-dollar note, and in this form considerable amounts were paid out. These notes were universally used for small change in and out of the army. The total issue of "postage currency," which commenced Aug. 21, 1862, and ceased May 27, 1863, was $20,215,635. $4,282,082 was outstanding on June 1, 1883, of which $1,028,332 was in denominations of five cents; $1,243,974 in ten cents; $1,039,203 in twenty-five cents; and $970,572 in denominations of fifty cents. The total amount of issues and reissues under both acts, was $368,720,074. They wore out rapidly and became ragged and filthy, and were frequently returned for redemption. The first issues under the act of March 3 commenced on Oct. 10, 1863, and ceased on Feb. coin soon began to disappear. Considerable amounts were hoarded in the north and south, and larger amounts were exported to Canada and South America; and a premium of from 10 to 12 per cent. was offered for small amounts by business men who desired it for convenience in making change. Many individuals as well as corporations issued small obligations, such as had been issued in 1812 and 1837. Postage stamps were used to a considerable extent for purposes of change. The postmaster general, in his report of December, 1862, says: "In the first quarter of the current year ending Sept. 20, the number of stamps issued to postmasters was one hundred and four millions; there were calls for about two hundred millions, which would have been nearly suf. ficient to meet the usual demand for a year. This extraordinary demand arose from the temporary use of these stamps as a currency for the public in lieu of the smaller denominations of specie, and ceased with the introduction of the so-called 'postal currency."" - On July 17, 1862, an act was passed which authorized the issue of "postage and other stamps of the United States"; which were receivable in exchange for United States notes, and in payment of all dues to the United States, in sums of not less than five dollars. Under this law, notes of the denominations of 5, 10, 25 and 50 cents were issued, and the denominations of 5 and 25 cents were printed on brown tinted paper, with an engraved head of Jefferson, which was the exact counterpart of that used on the five-cent postage stamp. On the twenty-fivecent note the head of Jefferson was five times repeated. The ten-cent note was printed in green, with the head of Washington, the counterpart of that used on the ten-cent postage stamp. Upon the fifty-cent note this vignette was five times repeated. These notes were issued in the month of August, 1862, and were termed "postage currency," and continued in use until they were replaced by the fractional currency authorized by section four of the act of March 3, 1863. The 15, 1876; and an act was passed on April 17, of the same year, directing the secretary to replace this circulation by the issue of subsidiary silver coin. The fractional paper currency was issued in five different series. The highest amount outstanding at any one time was less than fifty millions. The amount outstanding on February 1, 1884, was $15,363,184. A considerable amount is still held by banks and bankers, which is grudg- | ingly paid out to those customers who desire it for purposes of remittance by letter. The principal portion of the amount outstanding will probably never be presented for redemption. The proportion of loss to the people from this fractional currency is vastly greater than that of any other kind of circulation ever issued in this country, and this loss, in a large measure, must be attributed to the small value of the notes and the many casual- | ties of the war. The proportion of legal-tender notes and national bank notes of the highest amount outstanding at any one time, not presented for redemption in the course of twenty years, is estimated at about 14 per cent. - Authority was given by the second section of the act of March 3, 1863, to issue 400 millions of treasury notes; bearing interest at a rate not exceeding 6 per cent. in lawful money for a term not exceeding three years, payable at periods expressed on their face, and in denominations of not less than ten dollars. These notes were exchangeable, together with the accumulated interest for treasury notes not bearing interest. They were made legal tender for their face value, excluding interest. Power was also given to the secretary to issue 150 millions of additional greenbacks, which were to be issued only in exchange for these interest-bearing notes. Under this act, $44,520,000 notes were issued, redeemable one year from date, and $166,480,000 two years from date, bearing interest at 5 per cent. per annum, which were known as one and two year notes of 1863."- Authority was given by the act of June 30, 1864, for the issue of 200 millions of treasury notes in denominations of not less than ten dollars, not exceeding three years, and bearing interest not exceeding 7.30 per cent. per annum, interest payable semiannually, principal and interest to be paid in lawful money. The notes were to be a legal tender for their face value. No seven-thirty notes were issued under this act, but, in lieu thereof, $266,595,440 of compound interest notes were issued. The act did not authorize in terms the issue of compound interest notes, but as the interest at 6 per cent. compounded, would be considerably less than at 7.30 per cent. simple interest, their issue was not in conflict with the terms of the act. The notes were in the form shown on the opposite page. Of these notes, $177,045,770 were issued in redemption of the one and two year 5 per cent. notes, and it is not probable that more than 200 millions of these notes were outstanding at any one time. Secretary Fessenden, in his report for Dec. 6, 1864, thus refers to the issue of these notes: "The whole amount of national circula | tion, not bearing interest, exclusive of fractional currency, and of notes issued by national banks, is limited to four hundred millions of dollars, subject to slight occasional increase from the fifty millions held in reserve for the payment of temporary deposits. Of 5 per cent. interest-bearing notes there were outstanding, on the first of November last, $120,519,110. To a considerable extent these notes have been, and will continue to be, used as currency. Those with coupons have been found particularly objectionable, as, though withdrawn to a certain extent while the interest is maturing, they are liable to be periodically rushed upon the market. In consideration of this feature, a large amount, viz., about ninety millions of the original issue of one hundred and fifty millions of these coupon notes, have been withdrawn and destroyed, and their place occupied by notes payable in three years, bearing interest at 6 per centum, compounded semi-annually. This is believed to be the best form of interest-bearing legal-tender notes, as being more likely to be withdrawn and held until maturity, as an investment. Of these, fifteen millions in amount were issued under the act of March 3, 1863, and about ninety millions under the act of June 30, 1864. The total amount of interest-bearing notes outstanding on the 22d of November last, was $210,222,870. What proportion of these may be considered as an addition to the circulation I am unable to determine. To that extent, whatever it may be, they contribute to the amount of the currency, and thus in some degree occasion and in still greater degree sustain, an increase of prices, and depress values."- About two years and eight months after the passage of the last act, authority was given for the issue of temporary loan 3 per cent. certificates, for the purpose of retiring the compound interest notes. When these notes were issued, it was expected that they would, as the interest accumulated, soon pass out of circulation into the hands of bankers and capi. talists. These expectations were realized, for the interest was only payable at maturity three years from date. Such notes, with accrued interest, would not be paid out by the holders except in cases of absolute necessity. In order to insure the retirement of these notes, “An act to provide ways and means for the payment of compound interest notes," was passed on March 2, 1867. — This act authorized the issue of 3 per cent. certifi cates in denominations of not less than $100, payable on demand. The national banks were authorized to hold these certificates as a part of their reserve, provided that not less than twofifths of the entire reserve should consist of lawful money of the United States. This privilege did not largely diminish the amount of gold coin and greenbacks which the banks were required continually to keep on hand, as most of the banks held a large amount of cash reserve, in addition to the amount required by law. This excess could with great profit be invested in the new certificates, and they could be used to advantage for clearing house purposes, and the banks at once availed On the reverse of these notes, the following table, showing the rates of interest which would accumulate upon the notes, was printed for the convenience of the holder: United States By Act of Congress Interest at Six per cent compounded every Six months though payable only at maturity as follows 6 Months Interest 30 noteworth 10.30 One Year the bearer Vignette at the rate of Ten per annum Ceres Ten Ten 60 10. This sum $1.94 will be paid the holder for themselves of this privilege. The amount au- interest from and after a certain day designated, and that the certificates so designated shall cease to be available for any portion of the reserve. Thus it will be seen that the compound interest notes were issued for the purpose of retiring 5 per cent. notes, the 3 per cent. certificates for the retirement of the compounds which were maturing, and the act of July 12, 1870, in turn for the retirement of the 3 per cents, and these different acts had the effect of rapidly accomplishing these results, with but little inconvenience either to the banks or to the public. - The act of March 3, 1863, authorized the issue of gold certificates, of one and two-year notes, and of compound interest notes; and certificates under the fifth section of that act were used for clearing-house purposes soon after the passage of the national bank act. They were authorized to be issued in sums of not less than $20, corresponding with the denomination of United States notes. The coin and bullion deposited were required to |