Page:Cambridge Modern History Volume 7.djvu/601

 1861-s] Financial measures; paper-money. 569 At the beginning of December, 1861, Secretary Chase had by various forms of loan borrowed $197,000,000, and felt obliged to report that the public debt had reached three hundred millions, and would at the end of the next fiscal year exceed five hundred millions, as the government was then spending about two millions each day. The banks had exhausted their resources ; $150,000,000 of gold had passed from them to the government, and from the government in disbursements to the people. In such a contingency, heroic measures were necessary, and a resort to paper-money became imperative. On December 27, 1861, both the banks and the government by agreement suspended specie payments; and on February 25, 1862, the President signed an Act passed by Congress making non-interest-bearing Treasury notes a legal tender for all debts except duties on imports, and in satisfaction of all claims against the government except for interest upon the public debt, both these exceptions remaining payable in coin. Both Congress and the Administration adopted the system with the greatest reluctance as a war measure ; and only $150,000,000 in paper were at first issued. But as the needs of the Treasury increased day by day, and as fluctuations occurred in other forms of loans, the legal tender quality was, during the war, authorised to be applied to various other issues to an aggregate of $1,250,000,000, two-thirds of which was in Treasury notes, bearing interest at six and at seven and three-tenths per cent. This authority was, however, used with such discretion that the highest issue of non-interest-bearing legal tenders at any one time never exceeded $500,000,000. The same Act which authorised the issue of these "green-backs," as they were popularly called on account of their colour, also provided for funding them by the issue of United States six per cent, bonds, payable in coin, and redeemable at the pleasure of the government after five and payable twenty years from date, which received the general designation of " five-twenties."" These bonds became very popular, because they replaced non-interest-bearing green-backs with coin-interest-bearing six per cents. The favour with which they had been received led Secretary Chase into the experiment of issuing " ten-forty " bonds at five per cent, interest, which signally failed ; but the failure was ascribed by him to other causes than the reduction of interest. The Treasury Department also availed itself of various other forms of loans. When in December, 1861, specie payment was suspended, the needs of local daily traffic became such that in addition to a general use of postage stamps, the country was in a few weeks covered with a flood of paper small change issued by corporations, banks, merchants, and trades-people of all sorts, down to butchers' and milk-vendors' tickets. To drive out these "shin-plasters," Congress authorised the issue of a fractional currency ranging in denominations of from five to fifty cents, which went immediately into general circulation. Under the varying CH. XVIII.