"There is nothing, therefore, in these sections, that ought to alarm the nerves of my friend from Pennsylvania, or anybody else.
I cannot think that these gentlemen are alarmed about the state of despotism that President Johnson is to establish in the southern states. I do not feel alarmed; nor do I see anything in these sections as they now stand that need endanger the rights of the most timid citizen of the United States. They are intended to protect a race of people who are now without protection.
"Now, in regard to the fifth section, which is the main and material feature of this bill, I think it is right that the Congress of the United States, before its adjournment, should designate some way by which the southern states may reorganize loyal state governments in harmony with the const.i.tution and laws of the United States, and the sentiment of the people, and find their way back to these halls. My own judgment is that the fifth section will point out a clear, easy, and right way for these states to be restored to their full power in the government. All that it demands of the people of the southern states is to extend to all their male citizens, without distinction of race or color, the elective franchise. It is now too late in the day to be frightened by this simple proposition. Senators can make the most of it as a political proposition. Upon that we are prepared to meet them. But it does point out a way by which the twenty absent Senators, and the fifty absent Representatives can get back to these halls, and there is no other way by which they can justly do it.
"It seems to me that this is the whole substance of the bill. All there is material in the bill is in the first two lines of the preamble and the fifth section, in my judgment. The first two lines may lay the foundation adopting the proclamation issued first in North Carolina, that the Rebellion had swept away all the civil governments in the southern states; and the fifth section points out the mode by which the people of those states in their own manner, without any limitations or restrictions by Congress, may get back full representation in Congress. That is the view I take of this amended bill; and taking that view of it I see no reason in the world why we should not all vote for it."
The subst.i.tute was adopted on the same day and the bill, thus amended, was pa.s.sed by a vote of yeas 29, nays 10. In the House it was agreed to with slight amendments, which were finally concurred in by the Senate, on February 20, 1867. It was sent to the President and was not approved by him, but was, on the 2nd of March, pa.s.sed over his veto by a vote of two-thirds of both Houses.
Upon the law, long deferred, the several states mentioned in it were organized and restored to their place in the Union. The preamble and fifth and sixth sections of this law are as follows:
"An Act to Provide for the More Efficient Government of the Rebel States.
"Whereas, no legal state governments or adequate protection for life or property now exists in the rebel states of Virginia, North Carolina, South Carolina, Georgia, Mississippi, Alabama, Louisiana, Florida, Texas, and Arkansas; and whereas it is necessary that peace and good order should be enforced in said states until loyal and republican state governments can be legally established: Therefore,
"_Be it enacted by the Senate and House of Representatives of the United States of America in Congress a.s.sembled:_ . . .
"Sec. 5. _And be it further enacted_, That when the people of any one of said rebel states shall have formed a const.i.tution of government in conformity with the const.i.tution of the United States in all respects, framed by a convention of delegates elected by the male citizens of said state, twenty-one years old and upward, of whatever race, color, or previous condition, who have been resident in said state for one year previous to the day of such election, except such as may be disfranchised for partic.i.p.ation in the Rebellion, or for felony at common law, and when such const.i.tution shall provide that the elective franchise shall be enjoyed by all such persons as have the qualifications herein stated for electors of delegates, and when such const.i.tution shall be ratified by a majority of the persons voting on the question of ratification who are qualified as electors for delegates, and when such const.i.tution shall have been submitted to Congress for examination and approval, and Congress shall have approved the same, and when said state, by a vote of its legislature, elected under such conditions, shall have adopted the amendment to the const.i.tution of the United States, proposed by the 39th Congress, and known as article fourteen, and when said article shall have become a part of the const.i.tution of the United States, said state shall be declared ent.i.tled to representation in Congress, and Senators and Representatives shall be admitted therefrom on their taking the oath prescribed by law, and then and thereafter the preceding sections of this act shall be inoperative in said state: _Provided_, That no person excluded from the privilege of holding office by said proposed amendment to the const.i.tution of the United States shall be eligible to election as a member of the convention to frame a const.i.tution for any of said rebel states, nor shall any such person vote for members of such convention.
"Sec. 6. _And be it further enacted_, That, until the people of said rebel states shall be by law admitted to representation in the Congress of the United States, any civil government which may exist therein shall be deemed provisional only, and in all respects subject to the paramount authority of the United States at any time to abolish, modify, control, or supersede the same; and in all elections to any office under such provisional governments all persons shall be ent.i.tled to vote, and none others, who are ent.i.tled to vote, under the provisions of the fifth section of this act; and no person shall be eligible to any office under any such provisional governments who would be disqualified from holding office under the provisions of the third article of said const.i.tutional amendment."
At the same time, the financial question, embracing the currency, the public debt and the national revenue were of the highest importance and demanded immediate consideration. Hugh McCulloch, the Secretary of the Treasury, had been during most of his life a banker in the State of Indiana, of acknowledged ability as such, but with little or no experience as a financier dealing with public questions. He was the first comptroller of the currency under the banking act, and rendered valuable service in organizing the system of national banks, though he had not originally favored the system, but was, at the time of its adoption, a strong supporter of sound state banks. In his first report to Congress on the 4th of December, 1865, he, as Secretary of the Treasury, took strong ground against United States notes as a circulating medium and their being made a legal tender as money. He regarded the legal tender acts as war measures, and, while he did not recommend their repeal, he expressed his opinion that they ought not to remain in force one day longer than would be necessary to enable the people to prepare for a return to the const.i.tutional currency. He denied the authority of Congress to issue these notes except in the nature of a loan, and affirmed that the statute making them a legal tender for all debts, public and private, was not within the scope of the duties or the const.i.tutional powers of Congress; that their issue as lawful money was a measure necessary in a great emergency, but, as this emergency did not then exist, the government should, as speedily as possible, withdraw them, and he recommended that the work of retiring the notes should be commenced without delay and carefully and persistently continued until all were retired. He proposed to do this by the sale of bonds for United States notes outstanding and their withdrawal and cancellation. He recommended as a subst.i.tute the notes of national banks, but even these notes he thought redundant, and said:
"There is no fact more manifest that the plethora of paper money is not only undermining the morals of the people by encouraging waste and extravagance, but is striking at the root of our material prosperity by diminishing labor . . . and if not speedily checked, will, at no distant day, culminate in widespread disaster. The remedy, and the only remedy within the control of Congress, is, in the opinion of the secretary, to be found in the reduction of the currency."
The chief part of his report was devoted to the danger of inflation and the necessity of contraction. He said the longer contraction was delayed the greater must the fall eventually be, and the more serious its consequences.
In accordance with the recommendations of Secretary McCulloch, a bill was introduced in the House by Justin S. Morrill, which authorized the Secretary of the Treasury, at his discretion, to sell any of the description of bonds authorized by the act of March 3, 1865, the proceeds to be used only to retire treasury notes or other obligations issued under any act of Congress. This bill as reported would have placed in the power of the secretary the retirement of all United States notes at his discretion. An amendment was made in the House which provided:
"That of United States notes not more than ten millions of dollars may be retired and canceled within six months from the pa.s.sage of this act, and thereafter not more than four millions of dollars in any one month."
The bill as it came to the Senate was as follows:
"An act to amend an act ent.i.tled "An act to provide ways and means to support the government," approved March third, eighteen hundred and sixty-five.
"_Be it enacted by the Senate and House of Representatives of the United States of America in Congress a.s.sembled_, That the act ent.i.tled "An act to provide ways and means to support the government,"
approved March third, eighteen hundred and sixty-five, shall be extended and construed to authorize the Secretary of the Treasury, at his discretion, to receive any treasury notes or other obligations issued under any act of Congress, whether bearing interest or not, in exchange for any description of bonds authorized by the act to which this is an amendment; and also to dispose of any description of bonds authorized by said act, either in the United States or elsewhere, to such an amount, in such manner, and at such rates, as he may think advisable, for lawful money of the United States, or for any treasury notes, certificates of indebtedness, or certificates of deposit, or other representatives of value, which have been or which may be issued under any act of Congress, the proceeds thereof to be used only for retiring treasury notes or other obligations issued under any act of Congress; but nothing herein contained shall be construed to authorize any increase of the public debt: _Provided_, That of United States notes not more than ten millions of dollars may be retired and canceled within six months from the pa.s.sage of this act, and thereafter not more than four millions of dollars in any one month: _And provided further_, That the act to which this is an amendment shall continue in full force in all its provisions, except as modified by this act.
"Sec. 2. _And be it further enacted_, That the Secretary of the Treasury shall report to Congress at the commencement of the next session the amount of exchanges made or money borrowed under this act, and of whom and on what terms; and also the amount and character of indebtedness retired under this act, and the act to which this is an amendment, with a detailed statement of the expense of making such loans and exchanges."
This bill, without change, became a law April 12, 1866. I believed then, and now know, that the pa.s.sage of this law was a great misfortune. It enabled the Secretary of the Treasury to retire at a rapid rate United States notes and to largely increase the bonded indebtedness of the United States. It would no doubt have brought us abruptly to the specie standard and made us dependent for circulating notes upon the issues of national banks.
At this time there was a wide difference of opinion between Secretary McCulloch and myself as to the financial policy of the government in respect to the public debt and the currency. He was in favor of a rapid contraction of the currency by funding it into interest bearing bonds. I was in favor of maintaining in circulation the then existing volume of currency as an aid to the funding of all forms of interest-bearing securities into bonds redeemable within a brief period at the pleasure of the United States, and bearing as low a rate of interest as possible. Both of us were in favor of specie payments, he by contraction and I by the gradual advancement of the credit and value of our currency to the specie standard.
With him specie payments was the primary object, with me it was a secondary object, to follow the advancing credit of the government.
Each of us was in favor of the payment of the interest of bonds in coin, and the princ.i.p.al, when due, in coin. A large proportion of national securities were payable in lawful money, or United States notes. He, by contraction, would have made this payment more difficult, while I, by retaining the notes in existence, would induce the holders of currency certificates to convert them into coin obligations bearing a lower rate of interest.
CHAPTER XVII.
INDEBTEDNESS OF THE UNITED STATES IN 1865.
Organization of the Greenback Party--Total Debt on October 31st amounts to $2,805,549,437.55--Secretary McCulloch"s Desire to Convert All United States Notes into Interest Bearing Bonds--My Discussion with Senator Fessenden Over the Finance Committee"s Bill --Too Great Powers Conferred on the Secretary of the Treasury--His Desire to Retire $10,000,000 of United States Notes Each Month-- Growth of the Greenback Party--The Secretary"s Powers to Reduce the Currency by Retiring or Canceling United States Notes is Suspended--Bill to Reduce Taxes and Provide Internal Revenue--My Trip to Laramie and Other Western Forts with General Sherman-- Beginning of the Department of Agriculture.
During this period a party sprang up composed of men of all parties called the Greenback party, who favored an increase of United States notes, and the payment of all United States bonds and securities in such notes. This difference of opinion continued until the resumption of specie payments, in January, 1879.
I propose to state here the measures adopted in respect to the national currency and debt during the rest of the administration of President Johnson.
The total debt of the United States on the 31st of October, 1865, was $2,808,549,437.55 in twenty-five different forms of indebtedness of which, $1,200,000,000 was payable at the option of the Secretary of the Treasury, or within a brief period. The amount of United States notes outstanding was then $428,160,569, and of fractional currency $26,057,469, in all $545,218,038. All of this money was in active circulation, in great favor among the people, worth in use as much as national bank notes, and rapidly rising in value compared with coin. It was the least burdensome form of indebtedness then existing. The treasury notes and compound interest notes were in express terms payable in this lawful money, and, therefore, bore a higher rate of interest than the bonds, which, by their express terms or necessary implication, were payable in coin only.
It was insisted that the amount of United States notes was in excess of what was needed for currency in time of peace and might safely be gradually reduced. This effort to contract the currency was firmly resisted by several Senators, myself among them. The Supreme Court decided that Congress had full power to make these notes a legal tender. They were far better than any form of currency previously existing in the United States. During the war, when the expenditures of the government reached nearly $1,000,000,000 a year they were indispensable. Those most opposed to irredeemable paper money acknowledged this necessity. The only objection to them was that they were not equivalent to coin in purchasing power.
After the war was over, the general desire of all was to advance these notes nearer to par with coin, but not to withdraw them.
The rising credit and financial strength of the United States would, it was believed, bring them to par without injustice to the debtor, but the rapid withdrawal of the notes would add to the burden of debts and cripple all forms of industry. It would convert the compound interest notes and treasury notes bearing seven and three tenths per cent. interest, amounting to over $1,000,000,000 expressly payable in United States notes, into coin liabilities. The bill prepared at the treasury department contemplated the conversion of all United States notes into bonds. In that form the bill was defeated in the House of Representatives, but it was reconsidered and an amendment was then made limiting the retirement of notes to $4,000,000 a month. This gained for the bill enough votes to secure its pa.s.sage. Even the withdrawal of $48,000,000 a year was soon found to be oppressive and was subsequently repealed.
When this bill came before the committee on finance, I found myself alone in opposition to it. I could not impress my colleagues of the committee with the grave importance of the measure, and its wide-reaching influence upon our currency, debt and credit. They regarded it simply as a bill to change the form of our securities.
I felt confident that without the use of United States notes we could not make this exchange. When the bill was brought before the Senate by Mr. Fessenden, chairman of the committee, he made no statement of its terms, but only said:
"I have merely to say that this bill is reported by the committee on finance without amendment as it came from the House of Representatives. The committee on finance, on careful examination of it, came to the conclusion that the bill was well enough as it stood, and did not deem it advisable to make any amendment. It has been before the Senate a considerable time, and I presume every Senator understands it. I ask, therefore, for the question."
I replied:
"I regret very much that I differ from the committee on finance in regard to this bill. This is the only bill on the subject of the public debt on which I have not been able to concur with that committee. . . .
"If Senators will read this bill they will find that it confers on the Secretary of the Treasury greater powers than have ever been conferred, since the foundation of this government, upon any Secretary of the Treasury. Our loan laws, heretofore, have generally been confined to the negotiation of a single loan, limited in amount. As the war progressed, the difficulties of the country became greater, and we were more in the habit of removing the limitations on the power of the Secretary of the Treasury; but generally the power conferred was confined to a particular loan then in the market. This bill, however, is more general in its terms. This bill authorizes the Secretary of the Treasury to sell any character of bonds without limit, except as to the rate of interest. The authority conferred does not limit him to any form of security. It may run for any period of time within forty years.
He may sell the securities at less than par, without limitation as to rate. He may sell them in any form he chooses. He may put them in the form of treasury notes or bonds, the interest payable in gold or in paper money. He may undertake, under the provisions of this bill, to fund the whole debt of the United States. The only limit as to amount is the public debt, now $2,700,000,000. The power conferred on the Secretary of the Treasury is absolute. It is not only for this year, or during the current fiscal year, or for the next year, but it is for all time, until the act shall be repealed. It gives him absolute power to negotiate bonds of the United States to the amount of $2,700,000,000, without limiting the rate at which they shall be sold, and only limiting the rate of interest inferentially. The description of the bonds in the act of March 3, 1865, referred to here, would probably limit the rate of interest to six per cent. in coin, and seven and three- tenths per cent. in currency; but with this exception there is no limitation.
"It seems to me that in the present condition of our finances there is no necessity for conferring these large powers on the Secretary of the Treasury. The people are not generally aware of the favorable condition of our finances. The statement of the public debt laid on our tables the other day does not show fully the condition of the finances. It is accurate in amounts, but does not give dates of the maturity of our debts. But a small portion of the debt of the United States will be due prior to August, 1867, that will give the secretary any trouble. But little of the debt which he will be required to fund under the provisions of this bill matures before August, 1867. The temporary or call loan, now over one hundred millions, may readily be kept at this sum even at a reduced rate of interest. The certificates of indebtedness, amounting to sixty- two millions, may easily be paid from accruing receipts, or, if necessary, may be renewed or funded at the pleasure of the secretary.
None of the compound interest notes or the seven-thirty notes mature until August, 1867. . . .
"There is, therefore, no immediate necessity for these vast powers.
The question then naturally occurs, why grant them? I have carefully considered this question, and I do not think there is now any immediate necessity for granting these powers. No debt is maturing that is likely to give the government any trouble; and yet we are now about to confer upon the Secretary of the Treasury, powers that we cannot, in the nature of things, recall. It is true we may repeal this law next year, but we know very well that when these large powers are granted they are very seldom recalled; they are made the precedents of further grants of powers and are very rarely recalled. It seems to me that the whole object of the pa.s.sage of this bill is to place it within the power of the Secretary of the Treasury to contract the currency of the country, and thus, as I think, to produce an unnecessary strain upon the people. This power I do not think ought to be given to him. The House of Representatives did not intend to give him this power. They debated the bill a long time, and it was defeated on the ground that they would not confer on the secretary this power to reduce the currency, and finally it was only pa.s.sed with a proviso contained in the bill which I will now read:
"_Provided_, That of United States notes not more than $10,000,000 may be retired and canceled within six months from the pa.s.sage of this act, and thereafter not more than $4,000,000 in any one month."
"The purpose of the House of Representatives was, while giving the secretary power to fund the debt as it matured or even before maturity, giving him the most ample power over the debt of the United States, to limit his power over the currency, lest he might carry to an extreme the view presented by him in his annual report.
If this proviso would accomplish the purpose designed by the House of Representatives, I would cease all opposition to this bill; but I know it will not, and for the very obvious reason, that there is no restraint upon the power of the Secretary of the Treasury to acc.u.mulate legal tender notes in the treasury. He may retire $200,000,000 of legal tender notes by retaining them in his possession without cancellation, and thus accomplish the very purpose the House of Representatives did not intend to allow him to accomplish.
He may sell the bonds of the United States, at any rate he chooses, for legal tenders, and he may hold those legal tenders in his vaults, thus retiring them from the business of the country, and thus produce the very contraction which the House of Representatives meant to deny him power to do. Therefore, this proviso, which only limits the power of canceling securities or notes, does not limit his power over the currency, and he may, without violating this bill, in pursuance of the very terms of this bill, contract the currency according to his own good will and pleasure.
"My own impression is, that the Secretary of the Treasury, in carrying out his own policy, will do so. He says he will not contract it unreasonably or too rapidly, but I believe he will contract the currency in this way. He has now in the vaults of the treasury $60,000,000 in currency and $62,000,000 in gold--a larger balance, I believe, than was ever before kept in the treasury until within the last two or three months; a larger balance than was ever found in the treasury during the war. What is the object of acc.u.mulating these vast balances in the treasury? Simply to carry out his policy of contraction. With this power of retaining in the treasury the money that comes in, what does he care for the limitation put upon this bill by the House of Representatives?
That says that he shall not retire and cancel more than $10,000,000 of United States notes within six months, and not more than $4,000,000 in any one month thereafter; but why need he retire and cancel them when he can retain them in the vaults of the treasury, and thus contract the currency? . . .
"I do not doubt in the least either the integrity or the capacity of the present inc.u.mbent of the treasury department. I have as much confidence in him as anyone; but this question of the currency is one that affects so intimately all the business relations of life, the property of every man in this country, his ability to pay taxes, his ability to earn food and acquire a living, that no man ought to have the power to vary the volume of currency. It ought to be regulated by law, and the law ought to be so fixed and so defined that every business man may transact his business with full knowledge of the amount of the currency, with all its limits and qualifications. I ask you, sir, how any prudent or judicious man can now engage in any important business, in which he is compelled to go into debt, with this large power hanging over him.
It would be unsafe for him to do so. The amount of the currency ought to be fixed by law, whether much or little. There ought to be a limit, and no man ought to have the power at pleasure to enlarge or contract that limit. . . .
"Then there is the further power to reduce the currency, a power that has not heretofore been granted to any Secretary of the Treasury. The amount heretofore has been fixed and limited by law.
By the first clause of this bill the secretary is authorized to receive treasury notes, or United States notes of any form or description, and there is no limitation to this power, except the clause which I have read to you. That limits his power to retire and cancel the United States notes, but not to acc.u.mulate the enormous balances on hand. My own impression has been, and when this bill was before the committee on finance I believed, it would be better for that committee to report to the Senate a financial project to fund the debt of the United States. I believe that now is the favorable time to do it. If a five per cent. bond, a long bond of proper description and proper guarantee, was now placed upon the market, with such ample powers to negotiate it as ought to be given to the Secretary of the Treasury, such a loan as was authorized two years ago, at a reduced rate of interest, to be exempt from taxation, I have no doubt whatever, the Secretary of the Treasury could fund every portion of the debt of the United States as it matured. . . .
"I do not like to embarra.s.s a bill of this kind with amendments, because I know it is difficult to consider amendments of this sort, requiring an examination of figures and tables. I have prepared a bill very carefully, with a view to meet my idea, but I will not present it now in antagonism to this bill pa.s.sed by the House of Representatives and the view taken by the finance committee, because I know, in the present condition of the Senate, it would not probably be fully considered. My only purpose now is to point out the fact that is perfectly clear to the mind of every sensible man who has examined this bill, that the bill as it stands does not carry out the manifest intention of the House of Representatives when they pa.s.sed it, and that the proviso, limiting the power of the secretary over the legal tender currency, does not accomplish the purpose which they designed, and without which I know the bill never could have pa.s.sed the House of Representatives."
Mr. Fessenden: "If the House of Representatives did not understand what they were doing when they pa.s.sed this bill, it arises from the fact that they did not give the rein to their imagination, as the honorable Senator from Ohio seems to have done to his, and take it for granted that the Secretary of the Treasury had a purpose to accomplish, and that he would not hesitate to take any means in his power to accomplish it, improperly against the manifest will of Congress, against the interests of the country, and against his own interests as Secretary of the Treasury."
I replied: