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amount according to their specie value, | porary loans, and it was from the moneys and computing the interest to December received from these banks that he paid the 31, 1791, upon such as bore interest; and a first installment of salary due President further loan of $21,500,000, payable in the Washington, Senators, Representatives and principal and interest of the certificates or officers of Congress, during the first sesnotes which, prior to January 1, 1790, sion under the Constitution, which began were issued by the respective States as evi- at the city of New York, March 4, 1789. dences of indebtedness incurred by them "The first 'Bank of the United States' for the expenses of the late war. In the appears to have been proposed by Alexcase of the debt of the United States, in-ander Hamilton in December, 1790, and it terest upon two-thirds of the principal was incorporated by an act of Congress, only, at 6 per cent., was immediately paid; approved February 25, 1791, with a capiinterest upon the remaining third was de- tal stock of $10,000,000 divided into 25,ferred for ten years, and only three per 000 shares at $400 each. The government cent. was allowed upon the arrears of in- subscription of $2,000,000, under authority terest, making one-third of the whole debt. of the act, was paid by giving to the bank In the case of the separate debts of the bills of exchange on Holland equivalent States, interest upon four-ninths only of to gold, and borrowing from the bank a the entire sum was immediately paid; in-like sum for ten years at 6 per cent. interterest upon two-ninths was deferred for ten est. The bank went into operation very years, and only 3 per cent. allowed on three-soon after its charter was obtained, and ninths.' Under this authority 6 per cent. declared its first dividend in July, 1792. stock was issued to the amount of $30,060,- It was evidently well managed, and was of 511, and deferred 6 per cent. stock, bear- great benefit to the Government and the ing interest from January 1, 1800, amount-people at large, assisting the Government ing to $14,635,386. This stock was made by loans in cases of emergency, and forcsubject to redemption by payments not ex-ing the 'wildcat' banks of the country ceeding, in one year, on account both of to keep their issues 'somewhere within principal and interest, the proportion of reasonable bounds.' More than $100,000,eight dollars upon a hundred of the sum 000 of Government money was received mentioned in the certificates; $19,719,237 and disbursed by it without the loss of a was issued in 3 per cent. stock, subject to single dollar. It made semi-annual diviredemption whenever provision should be dends, averaging about 8 per cent., and made by law for that purpose. its stock rose to a high price. The stock belonging to the United States was sold out at different times at a profit, 2,220 shares sold in 1802 bringing an advance of 45 per cent. The government subscription, with ten years' interest amounted to $3,200000, while there was received in dividends and for stock sold $3,773,580, a profit of nearly 28.7 per cent. In 1796 the credit of the Government was very low, as shown by its utter failure to negotiate a loan for the purpose of paying a debt to the Bank of the United States for moneys borrowed and used, partly to pay the expenses of suppressing the whisky insurrection in Pennsylvania and to buy a treaty with the pirates of Algiers. On a loan authorized for $5,000,000, only $80,000 could be obtained, and this at a discount of 12 per cent.; and, there being no other immediate resource, United States Bank stock to the amount of $1,304,260 was sold at a premium of 25 per cent.

"The money needed for the payment of the principal and interest of the foreign debt was procured by new loans negotiated in Holland and Antwerp to the amount of $9,400,000, and the issue of new stock for the balance of $2,024,900 due on the French debt, this stock bearing a rate of interest one-half of one per cent. in advance of the rate previously paid, and redeemable at the pleasure of the Government. Subsequent legislation provided for the establishment of a sinking fund, under the management of a board of commissioners, consisting of the President of the Senate, Chief Justice of the Supreme Court, Secretary of State, Secretary of the Treasury, and Attorney General, for the time being, who, or any three of whom, were authorized, under the direction of the President of the United States, to make purchases of stock, and otherwise provide for the gradual liquidation of the entire debt, from funds set apart for this purpose. On assuming the position of Secretary of the President was authorized to accept the Treasury, Hamilton found himself en- such vessels as were suitable to be armed tirely without funds to meet the ordinary for the public service, not exceeding twelve expenses of the Government, except by in number, and to issue certificates, or borrowing, until such time as the revenues other evidences of the public debt of the from duties on imports and tonnage began United States, in pavment. The ships. to come into the Treasury. Under these George Washington, Merrimack, Maryland circumstances, he was forced to make ar- and Patapsco, brig Richmond, and frigates rangements with the Bank of New York Boston, Philadelphia, John Adams, Essex and the Bank of North America for tem- and New York, were purchased, and 6 per

"Under an act approved June 30, 1798,

cent. stock, redeemable at the pleasure of Congress, was issued in payment to the amount of $711,700.


it within the power of the Government to reimburse the amount refunded within a short time, as under the old laws these stocks could only be redeemed at the rate of 2 per cent. annually. Stock was issued amounting to $6,294,051, nearly all of which was redeemed within four years. Under the same act old '3 per cent. stock' to the amount of $2,861,309 was converted into 6 per cents., at sixty-five cents on the dollar, but this was not reimbursable without the assent of the holder until after the whole of certain other stocks named in the act was redeemed. The stock issued under this authority amounted to $1,859,871. It would appear that the great majority of the holders of the "old stock" preferred it to the new. A loan equal to the amount of the principal of the public debt reimbursable during the current year was authorized by an act approved May 1, 1810, and $2,750,000 was borrowed at 6 per cent. interest from the Bank of the United States, for the purpose of meeting any deficiency arising from increased expenditures on account of the military and naval establishments. This was merely a temporary loan, which was repaid the following year.

"The idea of creating a navy by the purchase of vessels built by private parties and issuing stock in payment therefor, seems to have originated with Hamilton. In the years 1797 and 1798 the United States, though nominally at peace with all the world, was actually at war with France a war not formally declared, but carried on upon the ocean with very great virulence. John Marshall, Elbridge Gerry and Charles C. Pinckney were appointed envoys extraordinary to the French Republic, with power for terminating all differences and restoring harmony, good understanding and commercial and friendly in tercourse between the two nations; but their efforts were in vain, and extensive preparations were made to resist a French invasion. It was evident that the ordinary revenues of the country would be inadequate for the increased expenditure, and a loan of $5,000,000 was authorized by an act approved July 16, 1798, redeemable at pleasure after fifteen years. The rate of interest was not specified in the act, and the market rate at the time being 8 per "The ordinary expenses for the year 1812 cent, this rate was paid, and it was thought were estimated by the Committee of Ways by a committee of Congress that the loan and Means of the House of Representatives was negotiated 'upon the best terms that at $1,200,000 more than the estimated recould be procured, and with a laudable ceipts for the same period, and the impendeye to the public interest.' A loan of ing war with Great Britain made it abso$3,500,000 was authorized by an act ap-lutely necessary that some measures should proved May 7, 1800, for the purpose of be adopted to maintain the public credit, meeting a large deficit in the revenues of and provide the requisite funds for carrying the preceding year, caused by increased on the Government. Additional taxes were expenditures rendered necessary on ac-imposed upon the people, but as these count of the difficulties with France, and could not be made immediately available stock bearing 8 per cent. interest, reim- there was no other resource but new loans bursable after fifteen years, was issued to and the issue of Treasury notes. This was the amount of $1,481,700, on which a pre- the first time since the formation of the new mium was realized of nearly 5 per cent. Government that the issue of such notes These are the only two instances in which had been proposed, and they were objected the Government has paid 8 per cent. in- to as engrafting on our system of finance a terest on its bonds. new and untried measure.




The province of Louisiana was ceded to the United States by a treaty with France, April 30, 1803, in payment for which 6 per cent. bonds, payable in fifteen years, were issued to the amount of $11,250,000, and the balance which the Government agreed to pay for the province, amounting to $3,750,000, was devoted to reimbursing American citizens for French depredations on their commerce. These claims were paid in money, and the stock redeemed by purchases made under the direction of the Commissioners of the Sinking Fund within twelve years. Under an act approved February 11, 1807, a portion of the 'old 6 per cent.' and 'deferred stocks" was refunded into new stock, bearing the same rate of interest, but redeemable at the pleasure of the United States. This was done for the purpose of placing

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Under various acts of Congress approved between March 4, 1812, and February 24, 1815, 6 per cent. bonds were issued to the amount of $50,792,674. These bonds were negotiated at rates varying from 20 per cent. discount to par, the net cash realized amounting to $44,530,123. A further sum of $4,025,000 was obtained by temporary loans at par, of which sum $225,000 was for the purpose of repairing the public buildings in Washington, damaged by the enemy on the night of August 24, 1814. These war loans' were all made redeemable at the pleasure of the Government after a specified date, and the faith of the United States was solemnly pledged to provide sufficient revenues for this purpose. The 'Treasury note system was a new feature, and its success was regarded as somewhat doubtful.

"Its subsequent popularity, however, I dition to $1,500,000 which the bank paid as a was owing to a variety of causes. The bonus for its charter, the net receipts over notes were made receivable everywhere for and above disbursements amounted to dues and customs, and in payment for pub-$4,993,167. The available funds in the lic lands. They were to bear interest from Treasury on the 1st of January, 1820, were the day of issue, at the rate of 5 2-5 per less than $250,000, and the estimated defi cent. per annum, and their payment was ciency for the year amounted to nearly guaranteed by the United States, principal $4,000,000. This state of affairs was owing and interest, at maturity. They thus fur-partly to the disastrous effects of the comnished a circulating medium to the coun-mercial crisis of 1819, heavy payments for try, superior to the paper of the suspend-the redemption of the public debt, contined and doubtful State banks. These ued through a series of years, and large issues were therefore considered more outstanding claims, amounting to over desirable than the issue of additional $30,000,000, resulting from the late war stock, which could be realized in cash with Great Britain. To meet the emeronly by the payment of a ruinous dis-gency, a loan was authorized by act of May count. The whole amount of Treasury | 15, 1820, and $999,999.13 was borrowed at 5 notes issued during the war period was per cent., redcemable in twelve years, and $36,680,794. The Commissioners of the $2,0000,000 at 6 per cent., reimbursable at Sinking Fund were authorized to provide pleasure, this latter stock realizing a prefor their redemption by purchase, in the mium of 2 per cent. By act of March 3, same manner as for other evidences of the 1821, 5 per cent. stock amounting to $4,735,public debt, and by authority of law $10,- 276 was issued at a premium of over 51 per 575,738 was redeemed by the issue of cer-cent., and the proceeds used in payment of tificates of funded stock, bearing interest at the principal and interest of the public from 6 to 7 per cent. per annum, redeema- debt falling due within the year. ble at any time after 1824.


"An effort was made in 1822 to refund a During the years 1812-13 the sum of portion of the 6 per cent. war loans of $2,934,747 of the old 6 per cent. and de-1812-14 into 5 per cents., but only $56,705 ferred stocks were refunded into new 6 per could be obtained. Two years later the cent. stock redeemable in twelve years; and Government was more successful, and, unby an act approved March 31, 1814, Con- der the act of May 26, 1824, 6 per cent. gress having authorized a settlement of the stock of 1813 to the amount of $4,454,728 Yazoo claims' by an issue of non-interest- was exchanged for new stock bearing 4 bearing stock, payable out of the first re- per cent. interest, redeemable in 1833-34. ceipts from the sale of public lands in the During the same year $5,000,000 was borMissisipi territory, $4,282,037 was issued for rowed at 4 per cent. to provide for the this purpose. On the 24th of February, payment of the awards made by the Com1815, Secretary Dallas reported to Congress missioners under the treaty with Spain of that the public debt had been increased, in February 22, 1819, and a like amount, at consequence of the war with Great Bri- the same rate of interest, to be applied in tain, $68,783,122, a large portion of which paying off that part of the 6 per cent. was due and unpaid, while another con- stock of 1812 redeemable the following siderable proportion was fast becoming year. The act of March 3, 1825, authordue. These unpaid or accruing demands ized a loan of $12,000,000, at 4 per cent. were in part for temporary loans, and the interest, the money borrowed to be applied balance for Treasury notes either due or in paying off prior loans, but only $1,539,maturing daily. To provide for their pay- 336 was exchanged for an equal amount of ment a new loan for the full amount 6 per cent. stock of 1813. needed was authorized by act of March 3, 1815, and six per. cent stock redeemable in fifteen years, was issued in the sum of $12,288,148. This stock was sold at from 95 per cent. to par, and was nearly all redeemed in 1820 by purchases made by the Commissioners of the Sinking Fund.


"The Government became a stockholder in the second Bank of the United States, to the amount of 70,000 shares, under the act of incorporation, approved April 10, 1816. The capital stock was limited to $35,000,000, divided into 350,000 shares of $100 each. The Government subscription was paid by the issue of 5 per cent. stock to the amount supposed that payment of these had not of $7,000,000, redeemable at the pleasure been asked for solely because the evidences of the Government. This was a profitable of the debt had been lost or destroyed. investment for the United States, as in ad-The estimates showed the probability of a

In the year 1836 the United States was, for the first time in the history of the country, practically out of debt. Secretary Woodbury, in his report of December 8, 1836, estimated the amount of public debt still outstanding at about $328,582, and this remained unpaid solely because payment had not been demanded, ample funds to meet it having been deposited in the United States Bank and loan offices. The debt outstanding consisted mainly of unclaimed interest and dividends, of claims for services and supplies during the Revolution, and of old Treasury notes, and it is

surplus of at least $14,000,000 in the Treasury at the close of the year 1836, and this estimate proved to be far below the truth. In this favorable condition of the public finances, Congress adopted the extraordinary resolution of depositing the surplus over $5,000,000 with the several States, and under the act of June 23, 1836, surplus revenue amounting to $25,101,64491 was so deposited.


deficiency a further issue of $10,000,000 in Treasury notes was authorized by act of July 22, 1846, under the same limitations and restrictions as were contained in the act of October, 1837, except that the authority given was to expire at the end of one year from the passage of the act. The sum of $7,687,800 was issued in Treasury notes, and six per cent, bonds having ten years to run were issued under the same act to the amount of $4,999,149. These were sold at a small advance, and redeemed at various rates from par to eighteen and two-thirds per cent. premium.


"The expenses incurred on account of the war with Mexico were much greater than the original estimates, and the failure


In 1987, however, the state of the country had changed. The flush' times of 1895 and 1:36 had been succeeded by extraordinary depression, which ultimately produced a panic. In May st of the banks suspended specie payments. The sales of public lands, and the duties on the importations of foreign goods, which had to provide additional revenues sufficient to helped to swell the balance in the Treasury meet the increased demands made a new to over $42,000,000, had fallen off enor-loan necessary, as well as an additional mou-ly. Even on the goods that were im- issue of notes, which had now become a ported it was difficult to collect the duties, popular method of obtaining funds. Under for the law compelled them to be paid in th authority granted by act of January specie, and specie was hard to obtain. It 28. 1847, Treasury notes to the amount of had become imposible not only to pay the $25.122,100 were issued at par, redeemable fourth installment of the surplus at the end one and two years from date, with interest of 1536 to the several States, but even to at from 5 2-5 to 6 per cent. More money meet the current expenses of the Govern- still being needed, a 6 per cent. loan, havment from its ordinary revenues. In this ing twenty years to run, was placed upon emergency the Secretary of the Treasury the market, under the authority of the suggested that contingent authority be same act, and bonds to the amount of $28,given the President to cause the issue of 230,350 were sold at various rates, ranging Treasury notes. This measure wa- gener- from par to 2 per cent. premium. Of this ally supported on the ground of absolute stock the sum of $18,815,100 was redeemed necessity, as there was a large deficit al- at an advance of from 1 to 211 per cent., ready existing, and this was likely to in- the premium paid (exclusive of commiscrease from the condition of the country at sions) amounting to $3,466,107. Under that time. The measure was opposed, the act of March 31, 1545, 6 per cent. however, by some who thought that greater bonds, running twenty years, were i sued economy in expenditures would relieve to the amount of $16,000,000, and sold at a the Treasury, while others denounced it as premium ranging from 3 to 4.05 per cent. an attempt to start a Treasury bank." This loan was made for the same purpose as the preceding one, and $7,091,658 was redeemed by purchase at an advance ranging from 8 to 22.46 per cent., the premium paid amounting to $1,251,258.



However, an act was approved October 12, 1837. authorizing an issue of $10,000,000 in Treasury notes in denominations not less than fifty dollars, redeemable in one year from date, with interest rates fixed by the Secretary, not exceeding 6 per cent. These notes, as usual, were receivable in payment of all duties and taxes levied by the United States, and in payment for public lands. Prior to 1846, the issue of notes of this character amounted to $47,002,900, bearing interest at rates varying from one-tenth of one per cent, to 6 per cent. To provide in part for their redemption. authority was granted for the negotiation of several loans, and $21,021,094 was borrowed for this purpose, bonds being issued for a like sum, bearing interest at from 5 to 6 per cent, redeemable at specified dates. These bonds were sold at from 24 per cent, discount to 34 per cent. premium, and redeemed at from par to 191 per cent, advance.

"The widespread depression of trade and commerce which occurred in 1857 was severely felt by the Government, as well as by the people, and so great was the decrease in the revenues from customs that it became absolutely necessary to provide the Treasury with additional means for meeting the demands upon it. Treasury notes were considered as preferable to new loan, and by the act of December 23, 1857, a new issue was authorized for such an amount as the exigencies of the public service might require, but not to exceed at any one time $20,000,000. These notes were receivable in payment for all debts due the United States, including customs, and were issued at various rates of interest, ranging from 3 to 6 per cent, to the amount of $52,778,900, redeemable one year from date, the interest to cease at the expiration of sixty days' notice after

"War with Mexico was declared May 13, 1846, and in order to provide against a

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maturity. In May, 1858, the Secretary of defraying the ordinary expenses of the the Treasury informed Congress that, Government were almost immediately curowing to the appropriations having been tailed and jeopardized by the attitude of increased by legislation nearly $10,000,000 the States which attempted to secede. The over the estimates, while the customs confusion which followed the inauguration revenue had fallen off to a like amount, it of the administration of President Lincoln would be necessary to provide some means demonstrated the necessity of providing to meet the deficit. In these circumstances, unusual resources without delay. A sysa new loan was authorized by act of June tem of internal revenue taxation was in14, 1858, and 5 per cent. bonds amounting troduced, and the tariff adjusted with a to $20,000,000, redeemable in fifteen years, view to increased revenues from customis. were sold at an average premium of over As the Government had not only to exist 3 per cent. Under the act of December and pay its way, but also to provide for an 17, 1873, $13,957,000 in bonds of the loan army and navy constantly increasing in of 1881, and $260,000 in bonds of a loan of numbers and equipment, new and extraor 1907, were issued in exchange for a like dinary methods were resorted to for the amount of bonds of this loan. purpose of securing the money which must be had in order to preserve the integrity of the nation. Among these were the issue of its own circulating medium in the form of United States notes and circulating notes, † for the redemption of which the faith of the nation was solemnly pledged. New loans were authorized to an amount never before known in our history, and the success of our armies was assured by the determination manifested by the people themselves to sustain the Government at all hazards. A brief review of the loan transactions during the period covered by the war is all that can be attempted within the limited space afforded this article. The first war loan may be considered as having been negotiated under the authority of an act approved February 8, 1861. The credit of the Government at this time was very low, and a loan of $18,415,000, having



"The act of June 22, 1860, authorized the President to borrow $21,000,000 on the credit of the United States, the money to be used only in the redemption of Treasury notes, and to replace any amount of such notes in the Treasury which should have been paid in for public dues. Only $7,022,000 was borrowed at 5 per cent. interest, the certificates selling at from par to 1.45 per cent. premium. The failure to realize the whole loan was caused by the political troubles which culminated in the civil war. In September, bids were invited for $10,000,000, and the whole amount ofered was speedily taken. It soon became evident, however, that war was inevitable, and a commercial crisis ensued, during which a portion of the bid lers forfeited their deposits, and the balance of the loan was withdrawn from the market. Authority was granted by the act of Decem-twenty years to run, with 6 per cent, interber 17, 1830, for a new issue of Treasury est, could only be negotiated at a discount notes, redeemable in one year from date, of $2,019,776.10, or at an average rate of but not to exceed $10,000,000 at any one $89.03 per one hundred dollars. From time, with interest at such rates as might this time to June 30, 1865, Government sebe offered by the lowest responsible bid-curities of various descriptions were issued ders after advertisement. An unsuccess- under authority of law to the amount of ful attempt was made to pledge the receipts $3,888,686,575, including the several issues from the sale of public lands specifically of bonds, Treasury notes, seven-thirties, for their redemption. The whole amount legal tenders and fractional currency. The of notes issued under this act was $10,010,- whole amount issued under the same au900, of which $4,810,000 bore interest at thority to June 30, 1880, was $7,137,646,836, 12 per cent. Additional offers followed, divided as follows: ranging from 15 to 35 per cent., but the Treasury declined to accept them.

"Up to this period of our national existence the obtaining of the money necessary for carrying on the Government and the preservation inviolate of the public credit had been comparatively an easy task. The people of the several States had contributed in proportion to their financial resources; and a strict adherence to the fundamental maxim laid down by Hamilton had been maintained by a judicious system of taxation to an extent amply sufficient to provide for the redemption of all our national Securities as they became due. But the ime had come when we were no longer a united people, and the means required for

per cent. bonds.....
Five cent. bonds........
Temporary loan certificates..
Seven-thirty notes.....
Treasury notes and certifi-

cates of indebtedness....... 1,074,713,132
Old demand notes, legal tend-
ers, coin certificates and
fractional currency........... 3,050,444,907

$1,130,279,000 196,118,300 969,992,250 716,099,247


.$7,137,646,836 "This increase may be readily accounted for by the continued issue of legal tenders,

* Commonly called "Greenbacks," or "Legal Tender notes " † Commonly called "National Bank notes,"

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