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sale of distilled spirits, malt liquors, and tobacco, and a nominal tax on bank circulation. Nevertheless, the revenue from these sources continues to yield from one hundred to one hundred and twenty millions yearly. This amount, with the revenue from customs, has for some years past created a surplus, over the necessary expenditures of the government, of about one hundred millions per annum. No party that maintains such a surplus revenue can be credited with statesmanship. It has been proposed to abolish the internal revenue, but this is the least burdensome of our taxes.

Perhaps the most noteworthy financial feat of the civil war period, was the establishment of the national bank system. On February 25, 1863, an act was passed, entitled “An Act to provide a National Currency, secured by a pledge of United States stocks, and to provide for the circulation and redemption thereof." By this act a Bureau of Currency was established in the Department of the Treasury, with a chief styled the Comptroller of the Currency. Banking associations were provided for, to consist of not less than five persons, who were required to file a certificate, signed and sealed, specifying:

I. The name of the association.

2.

The place proposed for carrying on business.

3. The amount of capital, and the number of shares.

(The capital

not to be less than fifty thousand dollars; and in cities of ten thousand inhabitants or more, not less than one hundred thousand dollars.)

4. The names and places of residence of share-holders, and the number of shares held by each.

5. The time when the association was to commence business.

6. That the certificate was made in order to secure the benefits of the act.

The law required that at least thirty per cent. of the capital of these associations must be paid in before they commenced business; and the residue in bi-monthly installments. The stock of delinquent share-holders was to be sold; and all share-holders were made liable for twice the amount of their shares.

These banking associations might own the real estate on which they transacted their business. They might also take mortgages to secure loans; and buy real estate at execution sales to save debts. Before beginning business they were required to transfer and deliver to the United States Treasurer, interest bearing bonds of the United States to an amount not less than onethird of the capital stock paid in.

The associations thus constituted were entitled to receive from the Comptroller of the Currency circulating notes of different denominations, in blank, registered and countersigned, equal in amount to ninety per centum of the

current market value of the United States bonds so transferred and delivered; but not exceeding the par value thereof, if bearing interest at the rate of six per centum, or of equivalent United States bonds bearing a less rate of interest. But the notes were not to exceed in amount the capital paid in. The amount of circulating notes issued to all the associations was not to exceed three hundred million dollars. One-half of the circulation was to be apportioned among the states according to representation in Congress, and in the territories according to population. The other half was to be distributed by the Secretary of the Treasury among the cities and towns in proportion to the demands of business. The notes constituting this circulation were redeemable in United States notes.

This act was superseded and repealed by the act of June 3, 1864; but its leading features were retained. Subsequent amendments have not departed essentially from this original model of the present existing national bank system.

The effect of this banking act on the public debt was to create a demand for a large proportion of the United States bonds then upon the market. It nearly duplicated the circulating medium when the associations authorized by it availed themselves of its provisions. Whatever may be thought of the necessity of the national banks at the present day, there can be no doubt that they rendered great service to the country during the war, and for several years following its close.

Before the Civil War, bank-note circulation was issued solely under state legislation, with such security for its redemption as might be prescribed in the statutes. Much of this security proved worthless in the latter part of 1861, when the strain of the war caused a suspension of specie payments. The time was, therefore, favorable for the adoption of the new system of paper currency. But the question was -What shall the system be? The old United States Bank, which carried on business for more than forty years, was established upon the principle that it was the duty of the government to furnish the country a safe and uniform paper currency. This institution was granted the usual banking powers. The public funds were deposited with it and its several branches, and the government was a stockholder. The contests in Congress for the renewal of its charter became a bitter party issue. Among the charges preferred against it were these: That the deposit of government money enabled it to outbid private dealers in the purchase. of foreign exchange; that its influence enabled it to corrupt legislation; that it subjected the government to the dictation of a moneyed aristocracy; and that it gave an unfair advantage to the stockholders of a single corporation by the free use of the public money. Whether or not there was evidence to sustain these charges, it was not likely that any fiscal agency not obviously free from such objection would be acceptable to the people at this time, although the notes of the state banks had become almost worthless for the

purpose of currency.

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Two remedial plans were suggested by Secretary Chase in his report to Congress, in December, 1861:

First. The gradual retirement by destructive taxation of all bank-notes emitted by private corporations, and 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.

state.

Second. The delivery to banking associations of notes prepared for circulation under national direction, and secured for prompt convertibility into coin, by pledge of United States bonds and other needful regulations. The secretary did not favor the first plan. He feared that the temptation to issue notes would overcome the caution which should be exercised to provide adequate means for their redemption. The second plan, with the taxing feature of the first, had his approval; and the national banking system was subsequently reared upon it. This was not altogether a new financial device. "It is not," said the secretary in his report, 66 an untried theory." In the State of New-York, and in one or more of the other states, it had been subjected, in its most essential parts, to the test of experiment, and was found practicable and useful. "The probabilities of its success," said he, "will not be diminished but increased by its adoption under national sanction and for the whole country." It is said that Eleazur Lord, of Piermont, New-York, was the first to propose the free banking system of that Millard Fillmore, when comptroller of New-York in 1849, suggested the issue of bank-notes secured by stocks of the United States, and receivable at the National Treasury for all public dues. The Hon. Orlando B. Potter, of the city of New-York, addressed a letter to Secretary Chase on Aug. 14, 1861, in which he submitted a plan for a national paper currency, which he says, in a recently published pamphlet, "was substantially adopted in the National Banking Act passed Feb. 25, 1863." However this may be, Salmon P. Chase, of Ohio, was Secretary of the Treasury at the time. To him must be given the credit of the plan for a national paper currency, based on the national stocks, and thus secured by the government itself. Whether he invented this plan, or whether he adopted it, matters not. It was through his great financial genius that by a single stroke of the pen, as it were, a bank-note currency as secure as the government credit could make it, was substituted for a paper currency which varied in value in every state, and fluctuated from par to nil, according to the value of the stock, if any, pledged for its redemption. The old currency was forced in by an excise tax that, while nominally a revenue measure, was in fact prohibitory of its circulation. The question as to the constitutional power to enforce such a tax was afterwards brought before the Supreme Court of the United States in the case of The Veazie Bank vs. The Collector of Internal Revenue. At that time Mr. Chase was Chief Justice. He delivered

the opinion of the Court, deciding the question in the affirmative: on the grounds, first, that there is no limitation on the power of Congress to impose excise taxes; and, second, that Congress has the power to provide a uniform paper currency. In effect, this decision denied the existence of sovereign power in the states to charter banks of issue,— a power which they had freely exercised almost without question from the formation of the Union until the year 1864. The fullest consideration was given to this question at the January Term of the Supreme Court of the United States in the year 1837, and it was then decided that there was no limitation in the Federal Constitution upon the sovereign power of the states to charter banks of issue. Three times thereafter this decision was affirmed by that Court. No question could have been better settled. Yet, as the result of war legislation and the innovations of the times upon the organic laws, the national banks were clothed with the exclusive privilege to issue paper currency. No judicial act of the Supreme Court has tended more to centralize power in the Federal Government than its decision in the Veazie Bank case. But whether the reader favors or opposes this system, he must admit that it strengthened the government credit, and created a currency of uniform value as stable as that credit could make it.

It is easy, now, to see why, irrespective of patriotic motives, capital came to avail itself of the vast loans negotiated for the maintenance of the Union. Without the Union, all capital would be swallowed up in future and not far distant wars. No two nations of such diverse interests and conflicting institutions as a Northern Union and a Southern Confederacy could remain at peace with each other. On the other hand, the maintenance of the Union would secure to capital the inexhaustible resources of the whole country. We were banking not only on the wealth of our northern and western agricultural and mining resources, our forests and grazing ranges, our factories and fisheries; but also on the cotton, tobacco, and other staples of the Southern States, whose annual yield is computed by hundreds of millions. History affords no parallel of a people blessed with such a wealth of resources, resources that enable us to add a billion in value to the credit side of our country's ledger each succeeding year! Vast as were our financial operations during the prosecution of the war for the Union, they were almost as nothing compared with what could have been accomplished had our full abilities been tested.

CHAPTER VIII.

THE LEADING MOVEMENTS OF THE WAR, 1861-1862.

WHAT ARE ACTS OF war?-SEIZURE OF FEDERAL FORTS AND PROPERTY SUMTER AND ITS FATE - DIPLOMACY AND ITS FAILURE—JUDGE CAMPBELL AND MR. SEWARD - THE EXCITEMENT NORTH AND SOUTH-BLOOD SPRINKLING IMPULSES — JERRY CLEMENS AND HIS STORY PRESIDENT LINCOLN'S PROCLAMATIONS-EXTRA SESSION, 1861-PREPARATIONS FOR HOSTILITIESBLOCKADE-RESPONSE TO CALL FOR TROOPS — BALTIMORE IN A FERMENT - MASSACHUSETTS AROUSED-THE MOUNTAIN UNIONISTS-BORDER STATES SECESSIONISTS - ELLSWORTH'S DEATH- THE ARMY ABOUT WASHINGTON — THE ADVANCE TO RICHMOND — BULL RUN, ITS HUMORS AND TRAGEDIES BALL'S BLUFF AND ITS DISASTER-MISSOURI CAMPAIGN-LYON'S HEROISM -GENERAL BAKER AND STONE PASHA -THE OUTRAGE UPON THE LATTER -EXPEDITIONS TO NORTH AND SOUTH CAROLINA — THEIR SUCCESSESBATTLE IN HAMPTON ROADS-THE MARVEL OF HISTORY.

T

HE adoption of an ordinance of secession, or of nullification, by a state convention has not been regarded in the light of a declaration of war against the United States; but when followed by the seizure of forts and arsenals, and other public property of the general government, it is so regarded. An attempt so to obstruct or hinder the execution of the laws of Congress, by the organized militia of a state, can be construed as nothing less than an act of war. But the word "war" is a generic term. Such an act of hostility is defined in the Constitution as an act of "insurrection." Secession is Insurrection. Nine of the twelve states whose delegates framed and signed the Constitution, were made necessary to its enforcement upon themselves; and three-fourths of the states must concur in amendments. It would be unreasonable, therefore, to hold that one state may undo the work of three-fourths of the states. So thought President Jackson, in 1832. He then issued his celebrated Proclamation warning the people of South Carolina against the consequences of attempt