To provide for the pressing wants of the treasury, Congress, on the 12th of February, 1862, authorized the issue of $10,000,000 more of demand notes. Before the end of the session further issues were provided for, making the aggregate of United States notes $300,000,000, besides fractional currency. There was a long debate upon the propriety of making these notes a legal tender for private debts, and it seemed for a time that the measure would be defeated by this dispute. Secretary Chase finally advised the concession of this point ;l ing the notes a legal tender than to lose the use of them in the emergency then existing. "Examination and reflection under more propitious circumstances," he continues, "have satisfied him that this opinion was erroneous, and he does not hesitate to declare it."

1 This reluctant concession was a grave mistake, as Chief-justice Chase afterward confessed. In his dissenting opinion on the Legal Tender cases (12 Wallace, 576), he says that the Secretary "was extremely and avowedly averse to this clause, but was very solicitous for the passage of the bill," and was finally persuaded that it was better to take the risk of maknevertheless, 55 votes in the House of Representatives, including those of Mr. Conkling of New York, Mr. Lovejoy of Illinois, and Mr. Morrill of Vermont, and in the Senate 17 votes, including those of Mr. Anthony, Mr. Collamer, Mr. Bayard, and Mr. Fessenden, were recorded against the provision making the notes a tender for private debts. Congress also empowered the Secretary to borrow $500,000,000 on 5-20 year 6 per cent. bonds, besides a temporary loan of $100,000,000, and provided that the interest on the bonds should be paid in coin, and that the customs should be collected in coin for that purpose. Nothing was said about the principal, for it was taken for granted that specie payments would be resumed before the payment of the principal of the debt would be undertaken.

Congress had thus adopted the plan which the Secretary of the Treasury did not recommend, and neglected the proposition which he preferred. During the discussion of the loan bill, in February, Mr. Hooper, of Massachusetts, had spoken of three measures, which formed a comprehensive system of financial legislation, to wit, the loan bill providing for an issue of legal tender notes convertible into 6 per cent. bonds, the tax bill providing for a revenue of $150,000,000, and the banking law providing for a national currency secured by the deposit of United States bonds; but Mr. Stevens made haste to say that this last proposition had not been approved by the committee on ways and means, and Mr. Conkling deprecated the policy of preaching a crusade against the State banks, and arraying prejudices and votes on that question. Toward the close of the session, in July, Mr. Hooper introduced a bill to provide a national currency secured by a pledge of United States bonds, but the bill was not reported from the committee to which it was sent, and a motion to print extra copies for the information of the House was laid on the table.1

When Congress met in December, 1862, the magnitude of the war had become fully apparent. Farragut had forced the Mississippi from the south; New Orleans had fallen; the river was open to Vicksburg from the Gulf; Grant had broken the Confederate lines on the north, and Foote, with his fleet of gun-boats, had moved down the river to Memphis; the whole Atlantic coast of the Confederacy was blockaded by the Federal navy; McClellan had been driven back from Richmond, but had defeated Lee in turn at Antietam; on every side the Confederacy was beleaguered by an immense cordon of armies and fleets.

The enormous demands upon the treasury for these operations had exhausted the resources provided by Congress. The disbursements in November amounted to §59,847,077-two millions a day. Unpaid requisitions had accumulated amounting to $46,000,000. The total receipts for the year then current, ending June 30,1863, were estimated at $511,000,000; the expenditures at $788,000,000; leaving $277,000,000 to be provided for.

1 Congressional Globe, July 15,1862, p. 3362.

There were only two ways to obtain this sum-by a fresh issue of United States notes, or by new interest-bearing loans. But the gold premium had advanced in October to 34; the notes were already at a discount of 25 per cent. The consequences of an addition of $277,000,000 to the volume of currency, the Secretary said, would be "inflation of prices, increase of expenditures, augmentation of debt, and, ultimately, disastrous defeat of the very purposes sought to be obtained by it." He therefore recommended an increase in the amount authorized to be borrowed on the 5-20 bonds; and in order to facilitate the negotiation of the bonds, he advised the repeal of the provisions requiring them to be sold at par, and making United States notes convertible into bonds at the will of the holder. The latter provision, he said, prevented the bonds from rising above par in currency, and the former left no margin of profit for buyers of large amounts. In order to create a market for the bonds, he again recommended the creation of banking associations under a national law requiring them to secure their circulation by a deposit of government bonds.

The suggestion thus renewed was not received with favor by Congress. It seemed a high - handed proceeding to seize upon the capital of the banks and compel them to invest it in government bonds, as the sole condition on which they should be permitted to retain their circulation. Congress at this session had to provide for the conscription of recruits for the armies, but hesitated to order a conscription of bank capital. On the 7th of January Mr. Hooper offered again his bill to provide a national currency, secured by a pledge of United States bonds, but the next day Mr. Stevens, of Pennsylvania, submitted the bill with an adverse report from the committee on ways and means. On the 14th of January Mr. Stevens reported a resolution authorizing the Secretary of the Treasury to issue $100,000,000 more of United States notes for the immediate payment of the army and navy. .The resolution passed the House at once, and the Senate the next day. It was so much easier to authorize an issue of notes than to levy upon the capital of the nation ! The choice was then to be made. Secre-tary Chase had distinctly pointed out, between an irredeemable paper currency and a series of measures Looking to a safe and gradual return to gold and silver as the only constitutional measure of values; and at this critical moment Congress was about to take the wrong course.

On the 19th of January President Lincoln sent a special message to the House, announcing that he had signed the joint resolution authorizing a new issue of Uni-States notes, but adding that he considered it his duty to express his sincere regret that it had been found necessary to add such a sum to an already redundant currency, while the suspended banks were still left free to increase their circulation at will.1 He warned Congress that such a policy must soon produce disastrous consequences, and the warning was effective. On the 25th of January Senator Sherman offered a bill to provide a national currency, differing in some respects from Mr. Hooper's in the House. The bill passed the Senate on the 12th of February, 23 to 21, and the House on the 20th, 78 to 64. It was by such small majorities, under the pressure of public necessity and at the urgent and repeated solicitation of the Secretary of the Treasury, supported by a special message from the President, that the bill became a law. It was signed by the President on the 25th of February, 1863.

1Congressional Globe, January 19,1863, p 392