In the spring of 1780 the army at Valley Forge was reduced by the failure of the currency to great destitution, and was on the verge of mutiny. To relieve the necessities of the troops a company of citizens of Philadelphia subscribed £300,000, Pennsylvania currency, "in real money," and formed a bank for the collection and disbursement of this sum. The Congress, accepting this timely aid, promised that the subscribers should be fully reimbursed and indemnified, and in 1781 the company was incorporated under the title of the Bank of North America. The bank went into operation under its charter on the 1st of January, 1782, and before the month of July following had loaned the government $400,000. A large proportion of its capital stock was taken in Holland. The notes were redeemable in Spanish dollars. The bank is still in operation under the national law.

In 1784 the Bank of Massachusetts was chartered, and in the same year the Bank of New York began business without a also Samuer's American Currency, and Story on the Constitution," § 1367, note. charter. The Continental currency had ceased to circulate, and values were once more measured by real money. To most people these changes had brought loss ; to many,ruin; to many more,great hardship. Stay laws were passed, to postpone the collection of debts; a party arose which demanded new issues of depreciated paper, in order to facilitate the settlement of outstanding obligations. In Massachusetts, Daniel Shay, who had been a captain in the Revolutionary army, headed an open insurrection against the authority of the courts. This was in 1786. Rhode Island issued a new "bank" of £100,000 the same year, and subsequently determined to pay off her whole debt, except the 4 per cents., in paper-money, which was rated at 6 to 1 in gold within three months, 8 to 1 in a year, and 18 to 1 in three years, when it ceased to be a legal tender.1

Shay's rebellion was put down by an army of 4000 men under General Lincoln ;' but this incident disclosed the weakness of the confederation then existing, and in 1787 a convention was summoned to meet in Philadelphia for the purpose of framing a general government of the United States. The convention had a wholesome distrust of paper - money. As originally reported, the constitution contained a clause, borrowed from the previous articles of confederation, authorizing the federal government "to borrow money and emit bills on the credit of the United States." Mr. Gouv-erneur Morris moved to strike out the words "and emit bills." Mr. Ellsworth said it was a favorable moment "to shut and bar the door against paper-money." After a sharp debate, the motion prevailed by a majority of nine States to two:

1 Sumner's American Currency, p. 53.

Ayes-New Hampshire, Massachusetts, Connecticut, Pennsylvania, Delaware, Virginia, North Carolina, South Carolina, Georgia-9.

Noes-New Jersey, Maryland-2.

Mr. Madison, referring to this vote afterward, said he was satisfied that striking out the words would not disable the government from the safe and proper use of public notes, but " would only cut off the pretext for a paper currency, and particularly for making the bills a tender either for public or private debts."1

The first Congress under the constitution provided, in 1789, that the revenues of the United States should be collected in gold and silver. Two years later the lulls of the first Bank of the United States were made receivable at the treasury, and under the shadow of this permission the bills of the State banks afterward crept in, with such disastrous consequences that in 1840 the old rule was re-established. Even in the stress of the war of 18G1 the rule was steadily maintained, so far as the customs were concerned. For seventy-three years, from 1789 to 1862, the only legal tender for private debts in the United States was coin, and the only paper currency was issued by private corporations, and payable on demand in coin.2 Nobody imagined that war, provided that in the interval between war and war all the outstanding paper should be called in, coin be permitted to flow in again, and to hold the field of circulation until another war should require its yielding place again to the national medium."1 This is a foreshadowing of the plan actually adopted by Secretary Chase; but Jefferson's language shows that in his time "this great resource" was commonly regarded as unavailable. Albert Gallatin, Secretary of the Treasury under Jefferson and Madison, from 1801 to 1813, said, in 1831, of Congress, "As this body has no authority to make anything whatever a tender in payment of private debts, it necessarily follows that nothing but gold and silver coin can be made a legal tender for that purpose, and that Congress cannot authorize the payment, in any species of paper currency, of any other debts than those due to the United States."2 Webster said, in 1832 "No State, not even Congress itself, can make anything a tender but gold and silver in payment of debts ;"1 and again, in 1836, '"The States are expressly prohibited from making anything but gold and silver a tender in payment of debts; and although no such express prohibition is applied to Congress, yet, as Congress has no power granted to it in this respect but to coin money and to regulate the value of foreign coins, it clearly has no power to substitute paper or anything else for coin as a tender in payment of debts and discharge of contracts."2

1 Madison Tapers, vol. iii. p. 1340. Elliot's Debates on the Federal Constitution, vol. i. p. 276.

2 Treasury notes were issued daring the war of 1812, and again during the crises of l837 and 1857; but these issues were made for the convenience of the treasury, the general government would or could return to paper issues. Franklin, in 1783, had recanted his boyish opinions, and lamented "the many mischiefs, the injustice, the corruption of manners, etc., that attend a depreciated currency,"1 Jefferson, during the war of 1812, when the State banks failed miserably, declared that" the circulating medium ought to be restored to the nation;" but his plan contemplated only an issue of treasury notes as a. war measure, bottomed on taxes, and barely sufficient to displace temporarily the gold and silver, which, in that case, would flow out into other countries. "I am not without a hope," he said, "that this great, this sole resource for loans in an agricultural country, might yet be recovered for the use of the nation during war; and if obtained in perpetuum, it would always be sufficient to carry us through any and were not intended for general circulation. The greatest amount outstanding at any one time was about $10,000,000. The notes were mostly of large denominations, bearing interest, and none of them were receivable for private debts except at the option of the creditor. 1 Franklin's Works, vol. x. p. 9.