Ing "the negotiation of bonds to market value" were

repealed ; and holders of United States notes who desired to

"convert" them into five-twenty bonds were required to

present their notes for this purpose on or before July 1, 1863,

after which date the right to exchange should " cease and

determine." Finally, to take the place of the unsatisfactory

postal currency, the secretary was authorized to issue notes

for fractional parts of a dollar to an amount not exceeding

$50,000,000, and a tax of 5 per cent, each half-year was

imposed on fractional notes issued by any bank, corporation

or individual. 1

1 12 Statutes at Large, p. 709.

CHAPTER V

HOW FURTHER ISSUES OF GREENBACKS WERE AVOIDED

IN 1864 AND 1865

I. The Congressional Pledge to Issue no More U. S. Notes :

Avoidance of Greenback Issues in Latter Part of War Due

Chiefly to Increase of Taxation Success of 5-20 Loan in 1863

Finance Report of 1863 Greenbacks in First Session of Thirty-

eighth Congress.

II. The Financial Difficulties of 1864:

Chase's Difficulties from January to June Change of Secretaries

Financial Straits During the Summer Fessenden's Report in

December Improvement in the Situation.

III. Secretary McCulloch and the Alley Resolution :

7-30 Loan of 1865 Finance Report The Alley Resolution.

IV. Recapitulation:

Government Receipts of 1861-66 Decreasing Relative Importance

of Loans Financial Role of the Greenbacks.

I. THE CONGRESSIONAL PLEDGE TO ISSUE NO MORE

U. S. NOTES

SINCE no further issues of greenbacks were authorized

after March 3, 1863, it may seem that discussion of the war

legislation regarding them should end with the last chapter.

But in passing upon the paper-money policy it is quite as

necessary to understand how the issue of more greenbacks

was avoided in the latter half of the war as it is to discover

why such issues were made in 1862 and 1863. For thfs

purpose a brief review of the treasury policy in 1864 and

1865 Must be added.

Of course, the demands made upon the treasury in these

later years were much heavier than they had been during

the first half of the war. The expenditures other than pay-

ments of principal of the debt rose from $470,000,000 in

1862 and $719,000,000 in 1863 to $865,000,000 in 1864 and

119

120 History of the greenbacks

$1,297,000,000 in 1865. 1 If recourse to United States notes

was avoided in the second half of the struggle despite these

enormously increased disbursements, the chief reason must be

found in the more efficient revenue system. The slowness of

the secretary to recommend and of Congress to enact heavy

taxes in the earlier stages of the war has been commented

upon. 2 There was no great hesitation in raising the customs

dues on imported articles, but the results from the fiscal point

of view were not of great moment, because Congress seemed

more inclined to strengthen the protective than the revenue

features of the tariff. The direct tax imposed by the summer

session in 1861 was of slight avail. In no year during the war

did the receipts from this source reach $2,000,000. Internal

taxes were not levied until July 1, 1862, when a very elaborate

system was created, according to which almost everything

that seemed to Congress susceptible of yielding a revenue

was subjected to a duty. 3 This system was amended and

extended by the acts of June 30, 1864, and March 3, 1865. 4

At first the results of this system did not meet expectations.

Chase estimated for the first year of its operation that the

receipts would be $85,500,000, and they proved to be but

$37,500,000 less than half the anticipated sum. 6 But

as the tax officials became more familiar with their duties

and the imperfections shown by experience to exist in the

first legislation were remedied, receipts increased very

rapidly. In 1864 they were $110,000,000, in 1865 $209,-

000,000, and in 1866 $309,000,000.

Such large receipts from taxation not only provided an

increasing proportion of the sums needed to meet expendi-

tures, but also improved the credit of the government as a

1 For these and similar figures given below see the table of receipts and expendi-

tures for past years published in every Report of the Secretary of the Treasury.

iCf. Part I, chap, i, p. 18, and chap, ii, p. 72, above.

3 12 Statutes at Large, p. 432. * 13 Statutes at Large, pp. 223, 469.

^Report of the Secretary of the Treasury, December, 1863, p. 3.

HOW FUBTHEB ISSUES WERE AVOIDED 121

borrower. At the same time more efficient methods of

negotiating loans were devised. The happiest of Mr. Chase's

financial expedients was the arrangement into which he

entered with Jay Cooke in October, 1862, for selling the

five-twenties authorized by the first legal-tender act. The

system of agencies which Mr. Cooke organized was so suc-

cessful in obtaining subscriptions that the fiscal year, 1863,

which had opened badly, ended most fortunately, despite

the untoward military events of May and June, when Grant

seemed to the public to be making little advance against

Vicksburg, and Lee and Bragg were invading the North.

The accumulation of unpaid requisitions that was already a

cause of solicitude when Chase sent his report to Congress

in December, 1862, had mounted by the close of the session

to $72,000,000. But when the third legal-tender act, with

its ample provision for loans and repeal of the funding

clause, had become a law, the lagging sale of bonds became

so rapid that "within two months after the adjournment of

Congress the whole mass of suspended requisitions had been

satisfied, all current demands promptly met, and full provi-

sion made for the pay of the army and navy." At the end

of the fiscal year there was a balance of over $5,000,000

in the treasury. 1

Encouraged by Cooke's continued success, Mr. Chase in

his report of 1863 took ground against further issues of

greenbacks. " The limit prescribed by law to the issue of

United States notes," said he, "has been reached, and the

Secretary thinks it clearly inexpedient to increase the

amount." 2 Instead, he recommended such modifications of

the internal revenue system as should increase the receipts

to $150,000,000." If this recommendation should be fol-

lowed he entertained "little doubt of being able to obtain