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 This act was superseded and repealed by the act of June 3, 1864; but its leading features were retained.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. THE NATIONAL BANK SYSTEM 143 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 receiva ble 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 BORDER STATES – MASSACHUSETTS AROUSED-THE MOUNTAIN UNIONISTS. SUCCESSES 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 ing to enforce their ordinance which declared the tariff laws null and void. President Lincoln acted on this principle in 1861, with reference to the seizure of the custom house at Charleston, and the firing upon the forts by the state and Confederate forces. The first overt act was the seizure of the revenue cutter Aiken. This was done by the state authorities, to whom it was surrendered by Capt. M. L. Coste. This act of war was followed by the seizure of forts, arsenals, custom houses, and 'other property of the government along the southern coast, from Beaufort in North Carolina, to western Texas. Only Fort Sumter at Charleston, Fort Pickens at Pensacola, and the fort at Key West remained, within the limits of the seven Confederate States, in the possession of the United States forces, at the close of Mr. Buchanan's administration. On the fifth day of January, 1861, the government dispatched the steamer Star of the West from New-York, with supplies and re-enforcements for Fort Sumter. It arrived off the harbor of Charleston on the 9th. It was fired upon and driven back to sea by the Confederate batteries. No further attempt was made during Mr. Buchanan's administration, to defend the public property in the Confederate States. The convention of South Carolina sent commissioners to Washington. They were to negotiate for the peaceful surrender of the public property to the state. On the 28th of December, 1860, they addressed a note to the President. Copies of their full powers in the premises were enclosed. They also submitted the ordinance of secession. They thought that there would be little difficulty in settling the terms of the surrender. After their arrival in Washington, they were disenchanted. They learned of the dismantling and abandonment of Fort Moultrie by Major Anderson. They were advised of his occupancy of Fort Sumter. Until these circumstances should be explained they concluded to suspend further negotiations. They, however, urged the immediate withdrawal of the troops from the harbor of Charleston. They regarded their occupancy of the fort as a menace. While the Union flag floated over them negotiation was impossible. President Buchanan replied, in the language of his annual message, that, apart from the execution of the laws, "so far as it shall be practicable," the Executive has no power to decide what shall be the relations between the Federal Government and South Carolina. He held that the Constitution conferred no power upon the Federal Government "to coerce a state into submission, which is attempting to withdraw, or has actually withdrawn from the confederacy." President Lincoln, in his inaugural speech, assumed it to be his duty to enforce the laws; but he disclaimed the wish, and the power, to interfere with slavery in the states. He declared that he took the official oath with no mental reservations. Early in March, 1861, Messrs. John Forsyth, of Alabama, Martin J. Crawford, of Georgia, and André Bienvenu Roman, of Louisiana, made |