Page:Cambridge Modern History Volume 7.djvu/645

 1863-4] Funding Acts. 613 December 1, 1862, were made fundable in a low interest-bearing bond after the following August. As a result of this measure some 100 millions of notes, perhaps a sixth of the amount outstanding, were actually funded in bonds before the latter date ; but a further provision authorising a monthly issue of 50 millions of new notes prevented an actual reduction of the amount outstanding, which continued to increase. This first Funding Act was a virtual breach of faith, however favourably its provisions were interpreted, and paved the way to a similar but more drastic Act of the following year, to which the Congress was driven by the desperate condition of the Confederate finances during the winter of 1863-4. The Funding Act of February, 1864, carried further this policy of compelling the unwilling noteholders to withdraw their notes from circulation and exchange them for bonds, by taxing the outstanding notes one-third of their face value. Notes in denominations of $5 and less were to be thus taxed on July 1, 1864; notes in denominations larger than $5, that is, the bulk of those in circulation, on April 1 ; while notes for $100 and larger amounts were to bear an additional monthly tax of 10 per cent. This radical measure was hotly debated, and met with much opposition. It passed, but, as was foreseen by many, it failed to diminish the amount of notes in circulation. Comparatively few notes were funded, either at par or at two-thirds of their face value ; and the heavy tax could of course only be collected from noteholders when offering them for bonds, lliis the public did not do, but preferred to retain the discredited notes and use them in purchasing or speculating in the market. They continued to fall in value more rapidly than ever before. In fact, the Funding Act was a declaration of bankruptcy, and wrecked the Confederate finances. It nominally forbade further issues of notes, but could not prevent the government from meeting its obligations thenceforward with a variety of interest-bearing certificates and bonds, and with a huge mass of floating debt, the dimensions of which at the end of the war are largely a matter of conjecture. The Funding Act had been urged upon the Congress by Memminger; and its failure to accomplish the hoped-for results led to his resignation in June, 1864. He was succeeded by George A. Trenholm, a man better fitted by previous experience for the position of head of the Confederate Treasury. It was too late, however, to establish an effective financial policy, though Trenholm made heroic efforts to secure a revenue for the government during the months of its decline. The dread of heavy taxation prevented the Confederate government from adopting a policy which would have brought in a revenue and sustained its credit. As at the time of the Revolutionary war, popular feeling was strongly opposed to assuming the burden involved in a stringent tax system in addition to the other burdens of the war. At the outset of the Civil War Memminger's recommendation of a direct tax of GH. XIX.