Although the national banking system had been in operation less than five years when Mr. Hulburd was appointed Comptroller, it appears that the question was then being agitated of doing away with the note-issuing function of the national banks and the substitution of Government issues instead.

It was claimed in behalf of this proposed change that by the payment of interest by the Government on the bonds deposited by the banks as security for circulation, the banks were receiving a bonus from the Government for issuing the currency, and by issuing its own notes the Government could save this bonus, which at that time amounted to about eighteen millions of dollars per annum.

While admitting the plausibility and popularity of this contention, Mr. Hulburd proceeded to show the evils that would result from such a policy and the inflation of currency which it would produce.

The withdrawal of the note-issuing privilege from the banks, he said, would result in nine out of every ten of the banks winding up their business, not because the privilege was considered absolutely essential to the business of banking, but because the banks would not submit to the restrictions imposed upon them by the banking laws without the compensatory privilege of issuing circulation. He claimed that they would liquidate and reorganize under State authority, or do business as private bankers, and thus rid themselves of Federal control or interference with their business.

He then pointed out the disastrous effects upon the business of the country that would surely follow the sudden winding up of a large number of national banks, and the substitution of Government issues for the national bank currency. The government, he said, can issue its own notes only in payment of its debts, and that no relation existed between the amount that might be required and issued for that purpose, and the amount of currency necessary to supply the demands of the legitimate business needs of the country. He said it would be an iron currency, without elasticity and with no relation between supply and demand.

He then discussed in detail the origin, character and purpose of the legal-tender issues of the Government as disclosed by the debates in Congress when the bill to provide for their issue was under consideration. He quotes Mr. Spaulding, who introduced the bill in January, 1862, as saying that he offered it as a war measure, a measure of necessity, and not of choice, to meet the most pressing demands of the Treasury, to sustain the Army and Navy and our Government, and to preserve our nationality.

He also quoted Senator Fessenden, of Maine, who reported the bill from the Finance Committee, as saying that the committee thought in giving this enlarged power to the Secretary of the Treasury, the country should be assured that it was not to be resorted to as a policy, but that it really was what it professed to be - only a temporary measure to enable the Government to meet extraordinary conditions.

Senator John Sherman was quoted as saying that the measure could be justified only upon the ground of necessity and that if he did not feel that the necessity existed he would shield himself behind the question of its constitutionality and vote against it.

Senator Sumner, of Massachusetts, supported the measure also upon the grounds of urgent necessity. He said the soldiers in the field must be paid and fed. This admitted of no failure or postponement. Whatever may be the national resources, they were not then within reach, except by summary process. "Reluctantly, therefore, and painfully," he said, "he would consent that the process should issue."

The bill passed February 5, 1862, authorizing the issue of legal-tender notes to the amount of $150,000,000. On July 11th following, another $150,000,000 was authorized, and on March 3, 1863, $150,000,000 more, making a total of $450,000,000.

In discussing the bill providing for the last issue, Mr. Spaulding said that he was averse to any considerable further issue of legal-tender notes and would consent to it only as an imperative necessity. Too large an issue, he said, would tend to inflate prices, but he did not see how that could be avoided. He could not see how the soldiers were to be paid or the Government car-ried on otherwise.

In February and July, 1862, provision was made for the conversion of these issues into five-twenty bonds whenever the holders should present them at the United States Treasury for that purpose, and to quiet public apprehension as to any further issues, Mr. Hulburd stated that a clause was inserted in the Act of June 30, 1864, limiting the total issues to $400,000,000, and such additional amount, not exceeding fifty millions, as may be temporarily required.

Mr. Hulburd declared that the entire theory of continuing and augmenting the issue of United States notes to pay the debts of the Government in the same kind of paper money in which they were contracted was an after-thought and a cunning device, and that no subject had been more obscured by crude theories and empirical schemes than this method of paying the public debt.

Contrasting this form of circulation with the paper issues of the Government during the period of the Revolutionary War, he stated that the Continental Congress issued bills which were receivable for taxes. The thirteen colonies were pledged to redeem these bills and as their credit began to fail, Congress declared that whoever should refuse to receive this paper as gold and silver should be deemed an enemy to the liberties of the United States. But interest was stronger than patriotism, and as the amount increased, its value went rapidly down until, at last, the sum total having reached two hundred and fifty millions, it became so utterly worthless, about the year 1780, that it ceased to circulate. Austria, Russia, France and England tried the same experiment with like results, and Mr. Hulburd stated that there is not a single example on record of the power of creating money out of cheap materials having been exercised by a sovereign state for any length of time or through any season of public difficulty, without having been abused by over-issues. The experience of this country during the last years of the Civil War and immediately following its close was but a repetition of the experience of other countries in other times.

In concluding the report for 1867, in which these subjects were discussed, Mr. Hulburd said:

We still have $3,000,000 of gold and silver in the coun-trv waiting to be called into active service. Give these millions their place. Make room for them by calling in the legal-tender notes, the great disturbing element of our currency, and the most expensive debt the government has incurrd - gradually if you please, but surely. Enforce rigidly the redemption of national bank notes. Retain for the federal government supervision and control of the currency of the country through the national banks, and we may yet realize the great desideratum - a safe, uniform currency, convertible into coin at the will of the holder.