On the other hand, Mr. Stevens, of Pennsylvania, a year before, had objected that the banks would earn a double interest on their capital; and Senator Carlile, of Virginia, now made an ingenious estimate, showing how a banking association, with $6000 in gold, by investing and reinvesting their bills in bonds, might get back $60000 in gold interest in a year without lending a dollar to the public.1 Senator Collamer also pointed out the comparative advantage of issuing United States notes for nothing, instead of paying the banks 6 per cent. interest, less 2 per cent. tax, for issuing their notes. Senators Collamer and Davis agreed that the Secretary of the Treasury would acquire a formidable political influence by his control over an organization so powerful and so widely distributed.

1 This idea was afterward elaborately worked up in a letter published in the Seymour (Indiana) Times in 1878. The letter purported to be written by one James O'Neal,who said that, beginning with a capital of $100,000, he had started ten banks in as many statesduring the ten years from 1865 to 1874, buying bonds for each new bank with the bills Issued upon bis previous, deposit, and had realized a profit of $2,000,000 from the interest upon the bonds so acquired. Such a series of transactions would have been unlawful, and in fact, impossible ; but the letter was widely copied, and was finally brought to the no-tice of the Comptroller of the Currency, who reported that the name of James O'Neal did not appear upon the list of stockholders of any bank in any of the ten States named.

Some of these objections are contradictory ; some are specious inventions to cover the one predominant motive-the natural reluctance of many members to incur the displeasure of the moneyed institutions of their own States and districts. Senator Powell was undoubtedly right in his opinion that the bankers and merchants were generally opposed to the scheme. "I oppose the bill," said Senator Howard, frankly, "because it is likely to wage a very unnecessary, and, I fear, dangerous war upon the State institutions; and I oppose it because I deplore the contest which will probably arise out of it in our local politics."

The opposition of most bankers was nevertheless tempered by the patriotic feeling expressed in this admirable letter, read by Mr. Fenton, of New York, during the discussion in the House: 1

Regarding the banking system of this State [New York] as in all respects the best of which I have any knowledge, I would much regret the necessity for any radical change of it. I think the scheme proposed by Secretary Chase would inevitably destroy the local banks, and of course mine would share the common fate. Nevertheless, if, in the judgment of our law-givers, that, or some other scheme kindred to it, is necessary to meet the wants of the government in crushing out the rebellion, I will endeavor to submit to it with becoming spirit. These are times of trial for us all, and I trust I should not be found so selfish as to oppose any measure demanded by the public good, merely because its operation involved a personal hardship.

The argument in reply to this and other misapprehensions, was threefold :

1. That the government needed the market which would thus be created for the bonds, and must protect itself against inflation.

2. That the banks were not to be injured but benefited by receiving a currency which could be used in transactions with the government instead of one which could not, and would enjoy the additional advantage of government deposits.

3. That the people would secure a uniform and safe currency.

1 Congressional Globe, Feb. 19,1863, p. 1119.

Senator Chandler pointed out the fact that the proposed transaction with the banks was not paying them 4 per cent. for furnishing a circulating medium, but borrowing $300,000,000 of them at 4 per cent. Senator Sherman added, that the creation of a demand for $300,000,000 in bonds would raise the market value of all the bonds. Mr. Sherman also showed that the time had come to decide finally between a permanent system of finance or a volume of paper - money limited only by the exigencies of the war. Gold and silver had disappeared. The danger of an excessive issue of United States notes was emphasized, he said, by the pending proposition of the House to print $300,000,000 more- a proposition which had sent the premium on gold flying upward 30 per cent. The danger was heightened by the natural disposition of the suspended banks to increase their circulation. The plain remedy was to limit the volume of United States notes resolutely, and to take control of the bank issues, and keep them within bounds.

Representative Hooper repeated the financial history of the war of 1812, when the government used the bills of suspended banks, selling bonds as low as 80. and taking, at this rate, bank bills 20 or 25 per cent. below par.

A gnat part of the argument in favor of the bill was intended to remove the impression that the measure was conceived in a spirit of hostility to the banks.

Mr. Spaulding said that his chief reason for supporting the bill was because it proposed to provide a permanently improved bank currency. Mr. Fenton called attention to the superiority of a currency wholly secured by United States bonds, to any currency before known. In l861, he said, only $30,000,000 were secured out of $200,000,000 of bank circulation. In 1862, only $40,000,000 were secured out of a volume of $167,000,000 in the loyal States. It was an easy matter to show the sirperi-ority of notes circulating everywhere at a uniform value to bills resting solely on local corporate credit, and circulating only in the neighborhood of the makers. Sen-ator Sherman also called attention to the fact that the notes of all but 463 banks out of 1409 in 1856, and all but 253 out of 1500 in 1862, had been counterfeited. The great variety of devices made it difficult to detect counterfeits. The adoption of a uniform series of national notes would be a great help in this respect.

After all was said, the choice was made of a uniform national currency, based upon public credit in tangible form, strictly limited in amount, and subject to the closest supervision, for the protection of the community. The bill passed ; the proposed issue of United States notes was cut down one-half;1 and Congress adjourned.

1 This made $450,000,000; but $50,000,000 were intended and used as a reserve for the payment of the temporary loan on demand. The amount outstanding was limited to $400,000,000. See p. 72.