In need. Five million dollars were required to carry it along

until new means of securing funds could be devised. As

the two-year treasury notes were selling at a discount of 2

to 2 per cent., they were not directly available. But the

banks agreed to advance the amount required for sixty days

and take 6 per cent, treasury notes as collateral security. 5

Two points in this review of the operations of the secre-

tary of the treasury from March to July are of significance:

1. When hostilities opened the federal government was

receiving less than a quarter of its revenue from taxation ;

for the remaining three-quarters it was depending upon hand-

to-mouth borrowing. 6 From March 7, 1861, when Mr. Chase

was installed, to July 1, there had been an addition of $14,-

412,529.40 to the public debt. 7

1 Senate Executive Document No. 2, 37th Cong., 1st Sess., p. 11.

* Cf. Applet/on 1 * Annual Cyclopaedia, 1861, p. 297.

3 Senate Executive Document No. 2, p. 11, 37th Cong., 1st Sess.

* Of this sum $1,710,650 was sold for coin, and $873,900 was paid to creditors.

Ibid., pp. 60-62.

5 Cf. American Annual Cyclopaedia, 1861, p. 297 ; and Hunt's Merchants' Maga-

zine, Vol. XLVII, p. 505.

6 From April to Jane, 1861, the receipts from customs, sales of public land, and

miscellaneous sources, were $5,800,000, from loans $17,600,000. Report of the Secretary

of the Treasury, December, 1861, p. 30.

? Senate Executive Document No. 2, p. 18, 37th Cong., 1st. Sess.

SUSPENSION OF SPECIE PAYMENTS 15

2. Mr. Chase had of his own accord inaugurated the

policy of issuing interest-bearing treasury notes running one

or two years, in preference to long-time bonds, whenever

they would fetch a higher price, disregarding the fact that

such a course exposed the treasury to the danger of being

called upon to redeem its notes while hard pressed for funds

to meet current demands. 1

III. FINANCIAL LEGISLATION OF THE EXTRA SESSION OF

CONGEESS

Such was the situation when Congress convened in extra

session July 4. Emphasizing the need of extraordinary

measures, President Lincoln's message recommended that

"at least 400,000 men and $400,000,000" be placed "at

the control of the government." 2 The financial program

of the administration was outlined in a report submitted by

Secretary Chase. 3

It was estimated that the government would require $320,-

000,000 To meet the expenditures of the coming twelve

months. Of this sum the secretary thought that "not less than

$80,000,000 should be provided by taxation, and that $240,-

000,000 should be sought through loans." The $80,000,-

000 Would defray the expenses of a peace footing, estimated

at $66,000,000, the interest on the public debt, $9,000,000,

and provide an annual sinking fund of $5,000,000. By

revising the Morrill tariff, Chase thought the customs could

be made to yield a revenue of $57,000,000. An additional

$3,000,000 from sales of public lands would leave $20,000,-

000 of the $80,000,000 to be raised by direct tax or by inter-

nal duties as Congress might decide.

To secure $240,000,000 by borrowing new loans to the

1 Mr. James Gallatin, president of the Gallatin Bank of New York, advised

strongly against this policy. See his Two Letters to the Hon. S. P. Chase, etc., New

York, 1861.

2 Lincoln's Complete Works, ed. NICOLAT AND HAY, Vol. II, p. 60.

3 Senate Executive Document No. 2, 37th Cong., 1st Sess.

16 HISTORY OF THE GREENBACKS

full amount would be necessary ; for the $21,393,450 which

the secretary still had authority to borrow under existing

laws ' was available only when creditors were willing to

accept payment in 6 per cent, treasury notes at par, which,

Mr. Chase admitted, was " not to be expected." He sug-

gested (1) a national loan of $100,000,000 in 7.3 per cent,

treasury notes, running three years ; (2) a loan of like amount