CHAP. LXIII.]

Particulars of arrangements with them.

ARRANGEMENTS WITH THE BANKS.

559

of fifty millions of dollars, of which five millions were to be paid immediately to the assistant treasurers in coin, and the residue also in coin, as needed for disbursement. The secretary, on his part, agreed to issue three years' 7.30 bonds, or treasury notes, bearing even date with the subscription, and of equal amount; to cause books of subscription to the national loan to be opened; to reimburse the advances of the banks as far as practicable from this national subscription, and to deliver to them 7.30 bonds, or treasury notes, for the amount not thus reimbursed. It was farther understood that the secretary should issue a limited amount of United States notes, payable on demand, in aid of the operations of the treasury, and that the associated institutions, when the first advance of fifty millions should be expended, would, if practicable, make another, and when that should be exhausted, still another advance to the government, of the same amount, and on similar

terms.

The objects of this arrangement were: (1.) To place Objects secured by at the command of the government the large these arrangements. sums immediately needed for the payment of maturing treasury notes, and for other disbursements ordinary or extraordinary; (2.) To secure to the people equal opportunity with the banks for participation in the loan; (3.) To avoid competition between the government and the associated institutions in the disposal of bonds; (4.) To facilitate and secure farther advances to the government by the associations if required; (5.) To insure, if possible, the maintenance of payments in specie, or its actual equivalents or representatives.

These objects were accomplished. Fifty millions of Success of the loan dollars were immediately advanced by the subscriptions. banks. Subscription - books were opened throughout the country; the people freely subscribed to

the loan. The amounts subscribed were reimbursed to the banks, and the sum thus reimbursed, though then covering but little more than half the amount, enabled those institutions, when a second loan was required, to make a second advance of fifty millions.

These two loans of fifty millions each were negotiated for three years' 7.30 bonds at par. The first was negotiated, and the first issue of bonds bears date on the 19th of August; the second on the 1st of October, 1861. A third loan was negotiated on the 16th of November with the associated institutions, the secre

A third loan negotiated,

tary issuing to them fifty millions of dollars in six per cent. bonds, at a rate equivalent to par, for the bonds bearing seven per cent. interest, authorized by the act of July 17th. This loan was coupled with no arrangement for reimbursement; and there was an understanding, in the form of an option to the associations, that, on or after the 1st of January, a fourth advance of fifty millions should be made, on the same terms with the first and second, if practicable, and required by the secretary. In addition to the loan thus made, the secretary issued United States notes, payable on demand, in treasury notes is- denominations of five, ten, and twenty dollars, of which there were in circulation, on the 30th of November, 1861, $21,165,220, while there remained in the treasury at that date $3,385,105. The amount thus issued, so far as it entered into the circulation of the country, might be regarded as a loan from the people, payable on demand, without interest.

and additional

sued.

Recapitulating the preceding statements, and reducing Aggregate realized the loan of November 16th to the equiv from these loans. alent of sevens, including interest, it is seen that an aggregate was realized from these various loans of nearly two hundred millions of dollars ($197,242,588 14).

Turning next to the receipts of revenue from duties,

CHAP. LXIII.] THE PROVISIONS PROVE INADEQUATE.

The receipts from duties, customs,

minished.

561

the secretary had to report a falling off from lands, etc., had di- the estimates. The revenue from customs for the fiscal year 1862 had been estimated at fifty-seven millions; it must be reduced to a little more than thirty-two ($32,198,602 55).

Falling off in the actual revenue.

So, too, the receipts from lands and miscellaneous sources must be reduced from $3,000,000 to $2,354,062 89. To the foregoing is to be added, as the only remaining source of revenue, the direct tax of twenty millions authorized by Congress. The ag gregate of revenue is therefore estimated at fifty-four and a half millions ($54,552,665 44), which is less by about twenty-five and a half millions than was estimated in July.

creased army ex

penditures.

A more important fact than this reduction of the rev Inadequacy of esti- enue remained, however, to be dealt with. mates through in The estimates of expenditure had been based on a total army force of about three hundred thousand men. Congress had, however, authorized the employment of a force which, including the existing regular army, would be about four hundred and fifty thousand men. This large increase of men and officers, the liberal addition made by Congress to pay and ra tions, the increase of the navy, and other objects, must necessarily augment the expenditure far beyond the orig inal estimates, and make it nearly two hundred and fourteen millions ($213,904,427 68) beyond the estimates of July.

To meet the difficulties thus presented, the secretary suggested a rigorous supervision of all contracts, abolition of all unnecessary salaries, reduction of pay, sequestration or confiscation of the property of rebels, and application of the proceeds to the use of the state. Pointing out, Necessity of greatly however, that, after all this had been done, increased provision. large sums must be provided for, he insisted

II.-N N

that adequate provision by taxation for ordinary expenditures, for the prompt payment of interest on the public debt, and for the gradual extinction of the principal, is indispensable to a sound system of finance.

Provisions Con

made.

The provision made at the last session of Congress was of two descriptions: (1.) A direct tax of gress had already twenty millions; and, (2.) An internal duty of three per cent. on all annual incomes, with certain exceptions and deductions. The secretary proceeds to consider the expediency of farther provisions of a similar character.

In his judgment, it is necessary to increase the direct New provisions tax so as to produce from the loyal states recommended. alone a revenue of at least twenty millions, and to lay such duties on stills and distilled liquors, on tobacco, bank-notes, carriages, legacies, evidences of debt, and instruments for conveyance of property, as will produce an equal additional sum. He supposes that the income tax may produce ten millions more, making an ag gregate of fifty millions of dollars.

That sum is large, but there is no probability that the revenue from ordinary sources will exceed forty millions of dollars; and to meet even economized disbursements, to pay the interest on the debt, and provide a sinking fund for the gradual reduction of the principal, not less than ninety millions will be necessary.

Ability of the people

mands.

But, if the sum be large, the means of the people are also large the object to be attained price. to meet these de- less. The real property of the loyal states is valued in round numbers at seven and a half thousands of millions, the personal property at three and a half thousands of millions, and the annual surplus earnings of the loyal people at not less than three hundred millions of dollars. The whole sum proposed to be

CHAP. LXIII.]

BANK CIRCULATION.

563

raised by taxation is little more than one sixth of the surplus earnings of the country.

But the amount to be derived from taxation forms but a small proportion of the sums required for war expenses. For the rest reliance must be

Necessity of additional loans.

placed on loans.

Cheerful support

the banks and

people.

Already, beyond the expectations of the most sanguine, the country has responded to the appeals of hitherto given by the secretary. The means adopted for securing the concurrence of all classes of citi zens in financial support to the government have been already explained. It remains only to be said here that, while the action of the banking institutions in assuming the immediate responsibility of all the advances hitherto required, as well as the final responsibility of much the largest portion of these merits high eulogium, the prompt patriotism with which citizens of moderate means, and workingmen, and workingwomen, have brought their individual offerings to the service of their country, must command even warmer praise.

To enable the government to obtain means for the prosecution of the war without unnecessary cost, the secretary offered the following suggestions:

Nature of the bank circulation.

The circulation of the banks of the United States on the 1st day of January, 1861, was computed to be about two hundred millions of dol lars. This constitutes a loan, without interest, from the people to the banks, costing them nothing except the expense of issue and redemption, and the interest on the specie kept on hand for the latter purpose; and it de serves consideration whether sound policy does not require that the advantages of this loan be be transferred to transferred, in part at least, from the banks, representing only the interests of the stock

Its advantages may

the government.