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CHAPTER XIII.

Extracts from my Inaugural.-Our Financial System.-Receipts and Expenditures of the First Year.-Resources, Loans, and Taxes.-Loans authorized.-Notes and Bonds.-Funding Notes.-Treasury Notes guaranteed by the States.-Measure to reduce the Currency.—Operation of the General System.—Currency fundable. -Taxation.-Popular Aversion.-Compulsory Reduction of the Currency.-Tax Law. Successful Result.-Financial Condition of the Government at its Close.Sources whence Revenue was derived.-Total Public Debt.-System of Direct Taxes and Revenue.-The Tariff.-War-Tax of Fifty Cents on a Hundred Dollars. Property subject to it.-Every Resource of the Country to be reached.— Tax paid by the States mostly.-Obstacle to the taking of the Census.-The Foreign Debt.-Terms of the Contract.-Premium.-False Charge against me of Repudiation.-Facts stated.-The Tariff: its History and Oppressiveness.

IN

In my inaugural address in 1862 I said:

"The first year of our history has been the most eventful in the annals of this continent. A new Government has been established, and its machinery put in operation over an area exceeding seven hundred thousand square miles. The great principles upon which we have been willing to hazard everything that is dear to man, have made conquests for us which could never have been achieved by the sword. Our Confederacy has grown from six to thirteen States; and Maryland, already united to us by hallowed memories and material interests, will, I believe, when enabled to speak with unstifled voice, connect her destiny with the South. Our people have rallied with unexampled unanimity to the support of the great principles of constitutional government, with firm resolve to perpetuate by arms the rights which they could not peacefully secure. A million of men, it is estimated, are now standing in hostile array and waging war along a frontier of thousands of miles. Battles have been fought, sieges have been conducted, and, although the contest is not ended, and the tide for the moment is against us, the final result in our favor is not doubtful. . . . Fellow-citizens, after the struggles of ages had consecrated the right of the Englishman to constitutional representative government, our colonial ancestors were forced to vindicate that birthright by an appeal to arms. Success crowned their efforts, and they provided for their posterity a peaceful remedy against future aggression.

1862]

THE FINANCIAL SYSTEM ADOPTED.

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"The tyranny of an unbridled majority, the most odious and the least responsible form of despotism, has denied us both the right and the remedy. Therefore, we are in arms to renew such sacrifices as our forefathers made to the holy cause of constitutional liberty."

The financial system which had been adopted from necessity proved adequate at this early period to supply all the wants of the Government and of the people. An unexpected and very large increase of expenditures had resulted from the great enlargement of the necessary means of defense. Yet the Government entered on its second year without a floating debt and with its credit unimpaired. The total expenditures of the first year, ending February 1, 1862, amounted to one hundred and seventy million dollars. A statement of the Secretary of the Treasury, comprising the period from the organization of the Government to August 1, 1862, presents the following results:

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Such was the result presented by the Treasury of a Government that had been in existence only eighteen months. It commenced that existence without a treasury, and, without the sinews and the munitions of war, was in less than two months invaded on every side by an implacable foe. Its ways and means consisted in loans and taxes, and to these it resorted. On February 28th I was authorized by Congress to borrow, at any time within twelve months, fifteen million dollars, or less, as might be needed. It was to be applied to the payment of appropriations for the support of the Government, and for the public defense. Certificates of stock or bonds, payable in ten years at eight per cent. interest, were issued. For the payment of the interest and principal of this loan a tax or duty of one eighth of one per cent. per pound was laid on all cotton exported. On March 9th an issue of one million dollars in Treasury notes of fifty dollars and upward was authorized, payable in one year from date, at 3.65 per cent. interest, and receivable for all public debts except the export duty on cotton. A reissue was authorized for a year. On May 16th a loan of fifty million dollars in bonds, payable after twenty years at eight per cent. interest, was authorized. The bonds were "to be sold for specie, military stores, or for the proceeds of sales of raw produce or manufactured articles, to be paid in the form of specie or with foreign bills of exchange.” The bonds could not be issued in fractional parts of a hundred dollars, or be exchanged for Treasury notes or the notes of any bank, corporation, or individual. In lieu of any amount of these bonds, not exceeding twenty million dollars, an equal amount of Treasury notes, without interest, in denominations of five dollars and upward, was authorized to be issued. These notes were payable in two years in specie, and were receivable for all debts or taxes except the export duty on cotton. They were also convertible into bonds payable in ten years at eight per cent. interest. On August 19th another issue of Treasury notes, amounting with those then issued to one hundred million dollars, was authorized. They were of the denominations of five dollars and upward. They were receivable for the war-tax and all other public dues except the export duty on cotton. These notes were convertible into twenty-year bonds, bearing

1862]

ISSUES OF BONDS AND NOTES.

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eight per cent. interest, of which the issue was limited to one hundred million dollars. Thirty millions were to be a substitute for the same amount, authorized by the act of May 16, 1861. These bonds could be exchanged for specie, military and naval stores, or for the proceeds of raw produce and manufactured articles. On December 19th ten million dollars in Treasury notes were issued to pay the advance of the banks. On December 24th an additional issue of fifty millions of Treasury notes like those of the act of August 19th was authorized. An additional issue of thirty millions of bonds was also authorized. On April 12, 1862, an issue of Treasury notes, certificates of stock and bonds, as the public necessities might require, to the amount of two hundred and fifteen millions, was authorized. Of these, fifty millions in Treasury notes were issued without reserve, ten millions in Treasury notes retained as a reserve fund to pay any sudden or unexpected call for deposits, and one hundred and sixty-five millions certificates of stock or bonds. Bonds to the amount of fifty million dollars, payable in ten years at six per cent. interest, were authorized and made exchangeable for any of the above Treasury notes. All these notes and bonds were subject to the same conditions as those of the acts of August 19 and December 24, 1861. On April 17th five millions of Treasury notes were authorized to be issued in denominations of one and two dollars, which were receivable for all public dues except the cotton duty. An amount of Treasury notes bearing interest at two cents per day on each hundred dollars, as a substitute for as much of the one hundred and sixty-five millions of bonds authorized, was also authorized to be issued. On September 19, 1862, three million five hundred thousand dollars in bonds was authorized to be issued to meet a contract for six iron-clad vessels of war. On September 23, 1862, the amount of Treasury notes under the denomination of five dollars was increased from five million to ten million dollars, and a further issue of bonds or certificates of stock, to the amount of fifty million dollars, was authorized.

On March 23, 1863, an effort was made to remove from circulation some of the issues of Treasury notes by funding them. For this purpose it was provided that all Treasury notes, not

bearing interest, issued prior to December, 1862, should be fundable in eight per cent. bonds or stock during the ensuing thirty days, and during the succeeding three months in seven per cent. bonds or stock, after which they ceased to be fundable. All Treasury notes not bearing interest, and issued after December 1, 1862, until ten days after the passage of the act, were made fundable in seven per cent. bonds or stock during the ensuing four months, and afterward only in four per cent. thirty years bonds. Call certificates were made fundable in thirty years bonds at eight per cent., and all outstanding on the ensuing July 1st were deemed bonds at six per cent., payable in thirty years. A monthly issue of Treasury notes, without interest, to the amount of fifty million dollars, was also authorized. These were made fundable during the first year of their issue in six per cent. thirty years bonds, and after the expiration of the year in four per cent. thirty years bonds. The further issue of call certificates was suspended; but Treasury notes fundable in the six per cent. bonds might be converted, at the pleasure of the holder, into such certificates at five per cent. interest, which were reconvertible into like notes within six months, or afterward exchanged for thirty years six per cent. bonds. Treasury notes fundable in four per cent. bonds were convertible in like manner at four per cent. All disposable means in the Treasury were to be applied to the purchase of Treasury notes, bearing no interest, until the amount in circulation did not exceed one hundred and seventy-five millions. The issue of five million dollars, in notes of two dollars, one dollar, and fifty cents, was also authorized. It was further provided in this act that six per cent. bonds, as above mentioned, might be sold to any of the States for Treasury notes, and, being guaranteed by any of the States, they might be used to purchase Treasury notes. The whole amount of such bonds could not exceed two hundred million dollars. Treasury notes so purchased were not to be reissued. The issue of six per cent. coupon bonds to the amount of one hundred million dollars, which were to be applied only to the absorption of Treasury notes, was also authorized. The coupons were payable either in the currency in which interest on other bonds was paid, or in cotton certifi

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