In January and February the fall of the currency was

accelerated in the manner shown above by the framing of

the third legal-tender act. On the Potomac Hooker, who

succeeded Burnside, was quietly engaged in reorganizing

the army and preparing for a spring campaign. Meanwhile

It became known that Grant's first campaign against Vicks-

burg had been frustrated by the destruction of his depot at

Holly Springs, and by Sherman's repulse at Chickasaw Bayou

on the 29th of December. The next day the "Monitor"

foundered off Cape Hatteras, Forrest's Confederate cavalry

were beaten at Parker's Cross Roads, and the great battle of

Murfreesboro began. On the first of the new year Magruder

recaptured Galveston, but ten days later Sherman, on his

return from the Yazoo river, captured Arkansas Post with

5,000 Prisoners. Early in February a Federal attack on

Fort McAllister in Georgia and a Confederate attack on Fort

SPECIE VALUE OP THE PAPER CURRENCY 217

Donelson in Tennessee were repulsed. The rest of the

month was rather quiet and the dominating influence in the

gold market was the progress of the third legal-tender act.

This period, May, 1862, to February, 1863, commenced

with a depreciation of but 2 per cent., and ended with one of

42 Per cent. From May to November the dominating causes

of the decline were military disasters and the second issue

of greenbacks. McClellan's peninsular campaign was a mel-

ancholy failure. Richmond was not taken; instead, Lee

Invaded the North. Though his sortie was checked at

Antietam, full advantage was not taken of the situation.

When the offensive was at last resumed with vigor, the defeat

of Fredericksburg resulted. What slight advantages had

been gained in the West could not counterbalance such dis-

asters. To this ill fortune in war was added the political

defeat of the administration in the autumn elections, the dis-

sensions among Republican leaders in Congress and the cabi-

net, and the gloomy financial prospect. In January and

February the depreciation was accelerated, but now because

of the legislation pending in Congress rather than because

of military events.

3. The rise from March to August, 1863. February

closed with the currency at about $58. In March a reaction

began. There were no decisive military operations ; for Grant

was vainly trying to get at Vicksburg from the North, Far-

ragut bombarded Port Hudson without result, and in Ten-

nessee and Virginia the fighting was mainly confined to the

cavalry. But Congress had passed the supplementary inter-

nal revenue act, the national banking act, and the $900,-

000,000 loan act; and the enactment of these laws was fol-

lowed, as Secretary Chase said, "by an immediate revival of

public credit." 1

The same favorable causes continued to operate in April.

i Report of the Secretary of the Treasury, December 1863, p. 2.

218 HlSTOBY OP THE GREENBACKS

Jay Cooke now had his system of agencies for the five-

twenty loan well organized, and subscriptions began to come

in. An unsuccessful bombardment of the forts in Charles-

ton harbor checked the rise for a time ; but Banks was suc-

cessful in his operations along the Bayou Teche in Louisiana,

and Grant shifted his forces to the west of the Mississippi,

marched them south of Vicksburg, ran his gunboats and

transports past the batteries with slight loss, and prepared

to cross again and attack the city from the south. Mean-

while Hooker executed a well-planned movement across the

Rappahannock and seemed to have Lee at a disadvantage.

For these reasons the average value of the currency was a

little higher in April than in March.

During the first week in May there was a fall caused by

the disastrous battle of Chancellorsville. But Grant's cav-

alry reached Baton Rouge after cutting the communications

of Vicksburg with the East, and his main army effected its

landing on the eastern bank of the Mississippi and won the

series of victories that forced Pemberton back into the city

and completed its investment. A trifle later in the month

Banks closed in on Port Hudson farther down the river.

These events with increasing subscriptions to the loan 1

caused another advance in the value of the currency, so that

the average for the month was slightly higher than for

April.

June presents a striking example of an appreciation of

the currency small, to be sure despite military reverses.

After Chancellorsville, the Army of Virginia was reinforced

by conscriptions and fitted out better than ever before. On

the 3d of June Lee set forward on a second grand invasion of

the North. At Winchester he captured nearly 4,000 prisoners,

with many guns and large supplies, and proceeded through

the Shenandoah valley to Chambersburg in Pennsylvania.

Cf. Bankers' Magazine, Vol. XVII, p. 817.

SPECIE VALUE OP THE PAPEK CURRENCY 219

On the 15th President Lincoln issued a call for 100,000

militia from Maryland, Pennsylvania, Ohio, and West Vir-

ginia, to aid in repelling the invasion. In the West nothing

decisive was accomplished. Grant was pressing Vicksburg

closely and Banks Port Hudson, but their attacks upon the

works were repulsed without substantial gains. Meanwhile

the political opponents of the administration seized the

moment to push their agitation against the conduct of the

war. Mr. C. L. Vallandingham, who had been arrested for

treasonable utterances, was nominated for governor of Ohio.

At New York a great "peace meeting" was held. All this

made the latter half of June a very dark period for the Union

cause. But the machinery of the national loan was now

thoroughly organized, and, while Lee was advancing, the

treasury was receiving $1,500,000 to $2,500,000 daily for

government bonds. 1 The fact that the government was able

to borrow on so large a scale, even at this crisis, had a great

effect in maintaining its credit, and hence the value of its

notes. So, while Lee's invasion caused a heavy fall in the

middle of the month, there was a reaction after the first scare

subsided, and for the month the average value of the cur-

rency was $2 higher than in May.