MR. CHASE DECLARES THE NOTES UNCONSTITUTIONAL. 577 A suspension of Banks, when they have no relation to governments, is always a temporary expedient or measure. The strong resume as speedily as possible, for the purpose of selfprotection. The weak have at once to go into liquidation. In this way the ground is soon cleared. The strong Banks well know that the only way in which they can preserve themselves from loss is to compel the payment of their bills in coin or its equivalent. To do this, they must set the example. Banks can no more carry on their operations without paying their liabilities than can merchants. A merchant, temporarily embarrassed, may be allowed to remain in the management of his affairs, as the best means of securing the most favorable results. If, however, it be feared that he is neither capable nor upright, he has speedily to give place to his creditors. So with Banks. If it be assumed that they will speedily get out of their difficulties, they are allowed to do so, as the most competent for the management of their own affairs. There is nothing that a well-managed Bank dreads so much as prolonged suspension. This resorted to, it is compelled for the future to sail without compass or chart, in constant fear of making shipwreck. Upon suspension, its first thought is resumption. It never dreams that such a measure is to become permanent. The Bank of England, after its suspension in 1797, restored its affairs with such wonderful celerity as to be able to resume within three years; and would have resumed, could permission have been obtained from the government. Mr. Chase claimed the issue of the government notes to be among the most brilliant and successful acts of his administration. He pointed with pride to the decision of the Supreme Court of the State of New York, the leading State of the Union, affirming its constitutionality. After leaving the department of the Treasury, he was made Chief Justice of the Supreme Court of the United States. He had not been long in his new place before the question of the constitutionality of the notes issued by him came before him for adjudication. He now believed that they were likely to become as unpopular as they had been popular; and he washed his hands of all connection with them, denying that he ever even suggested the expediency of their issue. 37 "It was," he said, "my fortune at the time that the United States legal-tender clause was inserted in the bill to authorize the issue of United States notes, and received the sanction of Congress, to be charged with the anxious and responsible duties of procuring funds for the prosecution of the war. In no report made by me to Congress was the expedient of making the notes of the United States a legal tender suggested." 1 There have been a plenty of corrupt and servile judges; but it is doubtful whether history affords another example of such absurd untruthfulness. Congress passed three bills authorizing the issue of plain legal-tender notes. Of these, Mr. Chase certainly drew one with his own hand. In the decision in the case referred to, he speaks of the legal-tender clause as a sort of accident, "inserted in the bill to authorize the issue of United States notes." There was no "insertion," for the reason that the sole object of all the bills was to create an irredeemable legal-tender currency; and Mr. Chase urged the passage of all, from their alleged necessity, with all the force of which he was capable. The facility with which, in this country, such men reach the most exalted and responsible stations, is little fitted to excite our national pride. One advantage of a currency of depreciated bank-notes over the depreciated notes of a government is the uniformity in value of the former. The "books" of a Bank tell what its notes are worth, and at that price they remain. Those familiar with its affairs are always ready to take them at their value. All understand that a Bank whose notes are depreciated will either speedily resume or be wound up; and that in either case the holders of its notes will soon receive their value in coin. By what book is the value of the depreciated notes of a government to be ascertained, and who is to administer upon and wind up its affairs? In the month of September, 1864, the price of those of the United States fluctuated between 187 and 2541; a difference of 67 per cent in a few days, due almost wholly to the varying fortunes of the war. A great disaster would send up the price of gold all the way from 10 to 20 per cent. A great victory would reduce its price in equal ratio. The crowning attribute of a competent currency is that its value is wholly independent of 1 Knox v. Lee, 12 Wallace's Reports. all such influences. A currency depreciated from its nominal value is by no means an intolerable one. Where government does not interpose, it will pass only at its real value, as does the silver coin of the United States at the present time. A bank-note, where its constituent is worth 50 per cent of its par value, will pass at that price. No one is deceived or injured in taking it. It will not rise or fall much above or below its value. Its price has always close reference to its actual worth. The mischief comes with a currency the value of which there is no possible means of determining, but to which a potency is sought to be given equal to that of coin; and may be given, as far as debtors are concerned, although it may prove to be utterly worthless in their hands. It is this attribute of discharging debts, without reference to their value, which renders all government currencies so intolerable. In the two great historical examples, the currencies became worthless, although having at one time the price of coin. It is a currency mischievous from the very beginning, and terribly so where the issues are large. Those who issue it will always, in the end, be able to supply their necessities far better without than with it. Its issue is a crime; and, if those issuing it be not criminals, it is only from ignorance of its nature and effect. The currency of government notes having been secured, Mr. Chase returned to the work of establishing a system of banking, to be created by the United States; its notes to be provided for by the deposit of bonds. The following presentation of the subject is taken from his first report, under date of December 5th, 1861: "To enable the government to obtain the necessary means for prosecuting the war to a successful issue, without unnecessary cost, is a problem which must engage the most careful attention of the legislature. The Secretary has given to this problem the best consideration in his power, and now begs leave to submit to Congress the result of his reflections. "The circulation of the Banks of the United States on the 1st day of January, 1861, was computed to be $202,000,767. Of this circulation, $150,000,000, in round numbers, was in the States now loyal, including Western Virginia, and $50,000,000 in the rebellious States. The whole of this circulation 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 deserves consideration whether sound policy does not require that the advantages of this loan be transferred, in part at least, from the Banks, representing only the interests of the stockholders, to the government, representing the aggregate interests of the whole people. "It has been well questioned by the most eminent statesmen whether a currency of bank-notes, issued by local institutions under State laws, is not, in fact, prohibited by the National Constitution. Such emissions certainly fall within the spirit, if not within the letter, of the Constitutional prohibition of the emission of "bills of credit" by the States, and of the making by them of any thing except gold and silver coin a legal tender in payment of debts. "However this may be, it is too clear to be reasonably disputed that Congress, under its constitutional powers to lay taxes, to regulate commerce, and to regulate the value of coin, possesses ample authority to control the credit circulation which enters so largely into the transactions of commerce, and affects in so many ways the value of coin. In the judgment of the Secretary, the time has arrived when Congress should exercise this authority. The value of the existing bank-note circulation depends on the laws of thirty-four States, and the character of some sixteen hundred private corporations. It is usually furnished in greatest proportions by institutions of least actual capital: circulation, commonly, is in the inverse ratio of solvency. Well-founded institutions, of large and solid capital, have, in general, comparatively little circulation; while weak corporations almost invariably seek to sustain themselves by obtaining from the people the largest possible credit in this form. . . "The Secretary thinks it possible to combine with this protection a provision for circulation, safe to the community and convenient for the government. "Two plans for effecting this object are suggested. The first contemplates the gradual withdrawal from circulation of the notes of private corporations, and for the issue, in their stead, of United States notes, payable in coin on demand, in amounts sufficient for the useful ends of a representative currency. The second contemplates the preparation and delivery, to institutions and associations, of notes prepared for circulation under national direction, and to be secured as to prompt convertibility into coin by the pledge of United States bonds and other needful regulations. "1. The first of these plans was partially adopted at the last session of Congress, in the provision authorizing the Secretary to issue United States notes, payable in coin, to an amount not exceeding $50,000,000. That provision may be so extended as to reach the average circulation of the country, while a moderate tax, gradually augmented, on bank-notes, will relieve the national from the competition of local circulation. It has been already suggested, that the substitution of a National for a State currency, upon this plan, would be equivalent to a loan to the government without interest, except on the fund to be kept in coin, and without expense, except the cost of preparation, issue, and redemption; while the people would gain the additional advantage of a uniform currency, and relief from a considerable burden in the form of interest on debt. These advantages are, doubtless, considerable; and if a scheme can be devised by which such a circulation will be certainly and strictly confined to the real needs of the people, and kept constantly equivalent to specie by prompt and certain redemption in coin, it will hardly fail of legislative sanction.... Its "2. The second plan suggested remains for examination. principal features are: first, a circulation of notes bearing a common impression, and authenticated by a common authority; second, the redemption of these notes by the associations and institutions to which they may be delivered for issue; and, third, the security of that redemption by the pledge of United States stocks, and an adequate provision of specie. "In this plan, the people in their ordinary business would find the advantages of uniformity in currency; of uniformity in security; of effectual safeguard, if effectual safeguard is possible, against depreciation; and of protection from losses in discounts and exchanges while, in the operations of the government, the people would find the further advantages of a large demand for government securities; of increased facilities for obtaining the loans required by the war; and of some alleviation of the burdens on industry, through a diminution in the rate of interest, or a participation in the profit of circulation, without risking the perils of a great money monopoly. "A further and important advantage to the people may be reasonably expected in the increased security of the Union, springing from the common interest in its preservation, created by the distribution of its stocks to associations throughout the country, as the basis of their circulation. "The Secretary entertains the opinion, that, if a credit circulation in any form be desirable, it is most desirable in this. The notes thus issued and secured would, in his judgment, form the safest currency which this country has ever enjoyed; while their receivability for all government dues, except customs, would make them, wherever payable, of equal value as a currency in every part of the Union. The large amount of specie now in the United States, reaching a total of not less than $275,000,000, will easily support payments of duties in coin, while these payments and ordinary demands will aid in retaining this specie in the country as a solid basis both of circulation and loans. "The whole circulation of the country, except a limited amount of foreign coin, would, after the lapse of two or three years, bear the impress of the nation, whether in coin or notes; while the amount of the latter, always easily ascertainable, and, of course, always generally known, would not be likely to be increased beyond the real wants of business. "It only remains to add that the plan is recommended by one other consideration, which, in the judgment of the Secretary, is entitled to much influence. It avoids, almost, if not altogether, the evils of a great and sudden change in the currency, by offering inducements to solvent existing institutions to withdraw the circu |