powers as incidents to the power to borrow money. According to his argument, when we pay a soldier a ten-dollar demand bill we borrow ten dollars from the soldier; when I apply to the Secretary of the Senate for a month's pay, I loan the United States $250. This certainly is not the view we take of it when we receive the money. On the other hand, we recognize the fact that the Government cannot pay us in gold. We receive notes as money. The Government ought to give and has the power to give to them all the sanction, authority, and value necessary and proper to enable it to borrow money. The power to fix the standard of money, to regulate the medium of exchanges, must necessarily go with, and be incident to, the power to regulate commerce, to borrow money, to coin money, to maintain armies and navies. All these high powers are expressly prohibited to the States, and also the incidental power to emit bills of credit and to make anything but gold and silver a legal tender.

But Congress is expressly invested with all these high powers, and, to remove all doubt, is expressly authorized to use all necessary and proper means to carry these powers into effect. Congress is not prohibited from emitting bills of credit or from making a standard of value, nor are these powers expressly conferred. Congress has repeatedly issued bills of credit; it has fixed gold and silver as the standard of value, and made them a legal tender. Certainly gold and silver coin is the best standard of value, for it has inherent value in all commercial countries; but if, in the course of events, gold and silver cannot be had in quantities sufficient to form a medium of exchange for the increased wants of the country, then Congress may establish another medium of exchange-another standard of value. This was twice done by establishing a Bank of the United States. I much fer the credit of the United States, based as it is upon all the productions and property of the United States, to the issues of any corporation, however well guarded and managed.

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The Senator from Vermont says that we may issue our notes, and of course our creditor must take them; but we must not make his creditor take them-the loss must fall entirely upon our creditor. I have shown that by yielding the power to issue a note at all, and especially to issue a note payable to bearer without interest, he has yielded his constitutional argument. But, I ask, is not his proposition manifestly unjust? He will compel our immediate creditor to take the note or get nothing. It is a moral compulsion, it is true, but it is effectual. It is that or nothing. If we can compel one citizen to take this paper money, why not another and another? Is it any less the violation of contract in the one case than in another? Do not all citizens hold their property subject to our unlimited power of taxation? Do not all share in the blessings of government, and should not all share in its burdens? Shall we inflict a loss only on those who trust and labor for the Government, and relieve the selfish, avaricious, idle, unpatriotic citizen, who will neither fight for, lend to, nor aid the Government? Sir, to make all these share in the burden of the war, and to relieve those who risk life and property in its defense, I would waive a constitutional doubt.

But, sir, the Senator from Maine, as well as the Senator from Vermont, alleges that it is unjust to insert the legal-tender clause, because it will impair the obligation of contracts. He says, if a man holds my note for $1,000, it is unjust for Congress to pass a law that will enable him to pay it with less. I confess that it would be unjust and unconstitutional for Congress to compel him to take a less sum of money. But Congress every day passes laws that affect the value of property and of money, and therefore incidentally the value of contracts. The other day the Senator from Iowa [Mr. Grimes] introduced a bill to establish a street railroad in the city of Washington. We were all in favor of it; but did any Senator dream that by doing that he was impairing the obligation of contracts? And yet we affected the value of the omnibuses that now run on the streets of Washington. Every act that you pass, almost every event in our political history now, impairs the value of property. Although it may not change the terms of a contract, Congress every day changes the value of money, the value of property.

The Senator from Tennessee [Mr. Johnson] has been distinguished for urging forward the homestead bill; and yet everybody knows that the effect of the passage of that bill would be to change largely the value of one class of property. The Senator from Iowa owns a large amount of wild land in the West. If that bill should pass, this land will be worth fifty per cent. less than it is now. He may have sold some of that land to another at high prices, but we know very well that if the homestead bill passes, it might prevent the purchaser of that land from paying for it. It might almost destroy the value of his purchase, and yet we never stop for considerations of this kind. I submit, therefore, that the argument of injustice to creditors should not defeat this measure.

On the other hand, Mr. President, I believe that if we fail to pass this bill, in the present critical condition of public affairs, we do gross injustice to our public creditors. Let us look for a moment at the practical effect of it. If you now issue to your creditors paper money which has no sanction, which every man may refuse to take, what will be the result? In every bank in the United States it will at once be rejected, not because the banks are not patriotic, but because they cannot afford to take it. I have here a letter from a banker in New York, addressed to the honorable Senator from Maine, in which the writer states:

My acquaintance with that class of men [bankers] here is quite extensive, and the view of all, almost without exception, is that it will be fatal to pass the bill without making the notes a legal tender. Views differ widely as to the expediency of this mode of meeting the present wants of the Treasury. Though I think a large majority are opposed in theory to the use by the Government of a large amount of demand notes, they are nevertheless satisfied that this is the least of several evils which threaten; but all, however differing upon the original question, unite upon this, that if we have the notes, we must have the benefit of a provision that they shall be a legal tender in payment of debts. This, I know, is the opinion of a number of persons.

He proceeds to name them, but I need not do so. He says that this is the opinion of "the leading bank men, and also of the most

earnest financiers connected with the banks." The reason is that without such provision, the banks in New York, Boston, and Philadelphia cannot take them, and they cannot take them simply because they cannot use them if they do. It is not a question of willingness or of desire to sustain the Government. They cannot pay out these notes to those who are not obliged to receive them, however they might wish to do so.

If you strike out this legal-tender clause, you do it with the knowledge that these notes will fall dead upon the money market of the world; that they will be refused by the banks; that they will be a disgraced currency, that will not pass from hand to hand; that they will have no legal sanction; that any man may decline to receive them, and thus discredit the obligations of the Government. I ask again if that is just to the men to whom you have contracted to pay debts? When you issue demand notes, and announce your purpose not to pay any more gold and silver coin, you tender to those who have furnished provisions and services this paper money. What can they do? They cannot pay their debts with it, they cannot support their families with it, without a depreciation. The whole, then, depends upon the promise of the Government to pay at some time not fixed on the face of the note, and you bring about an era of irredeemable, depreciated paper money.

Not only justice to our creditors demands this measure, but I anticipate from it very beneficial effects in regulating our currency. If you issue $150,000,000 of Treasury notes, you then for the first time, at least since the Bank of the United States, have a national currency stamped with all the credit, with all the power of the Government of the United States. It is a national currency that cannot be abused. It is not controlled by a corporation; it is not controlled by interested parties; it is not controlled by men who desire to make money out of the circulation; but it is a national circulation, for the redemption of every dollar of which the national credit and all the property of all the people of the United States are pledged. If you issue these $150,000,000 of currency, it will permeate this whole country; it will be the blood of the whole system; it will enable men to carry on their business and make their exchanges all over the country.

But that is not all. The circulation of this large amount of demand notes will enable capitalists to buy our bonds. If it were not for this reason, I would not vote for this bill myself. Now they cannot do it, because there is no currency in which they can pay for them. You refuse to take the circulation of the banks, and they cannot get you gold, and so cannot buy your bonds. If you give them a circulating medium, ample and not too great, well secured, sanctioned by all the power of the Government, you may then be able to reach the purse of the capitalist, you may be able to reach the stocking of the poor but patriotic citizen, you may be able to gather in from all this broad extent of country the savings of your people. But you cannot do it otherwise. As long as you have your present system, without any medium of exchange except gold and silver, you cannot reach the real capital of this country, because the people cannot pay you in that which circulates among them, and they cannot get gold and silver.

The only objection to this issue of paper money is that too much may be issued. There is the only danger in it. I do not believe the issue of $150,000,000 will do any harm; but if you continue to issue other sums, you will at once depreciate the credit of these demand notes and destroy their value. If you confine it to the amount limited by this bill, I believe the effect will be healthy in all the business relations of the country.

After all, Mr. President, this is a mere temporary expedient. It is manifest that we must rely upon some other source of obtaining money. We dare not repeat this experiment a second time. If we do, we enter on the same course that was followed in the French Revolution, and also by our American ancestors. But if in our Revolutionary War the amount of Revolutionary scrip, and if in the French Revolution the amount of assignats, had been confined to a small sum in proportion to the wealth of the country, if for instance it had been limited to less than one tenth of the annual production of the country, there would have been no danger. It is idle to attempt to alarm me by saying that this will expand the currency of the country too much. The annual productions of this country are over nineteen hundred millions of dollars. I have on my desk a carefully-prepared table made by the Superintendent of the Census, showing the aggregate production of all the States of the Union, and it amounts to over nineteen hundred millions of dollars. By this bill you propose to furnish a currency to the extent of less than one tenth of your annual production. Do you tell me that this will create an inflation of prices? I do not think so. If you should follow this issue by another, you might create a disturbance in your financial operations; but I think this will not.

The only true way, it seems to me, to establish a financial system in this country and I do not believe we ever shall establish one until the necessity of the hour drives us to it is, first, to ascertain how much money we can afford to expend in the prosecution of this war, and then collect at least one half of that by taxation, and the other half by loans. It seems to me that while your expenditure amounts to $600,000,000 a year you will be driven to all sorts of expedients. If gentlemen want to get at the true measure of reform, if they do not want simply to adopt the expedients that are forced on us, they must reduce the public expenditures to a point at which the Government can maintain itself. If the amount were fixed at $400,000,000, it would be easy to collect one half of that by taxation, anticipating the taxation by an issue of demand notes, never to be exceeded under any circumstances, and the other half by the sale of bonds. Many financiers have told me that the capital of the large cities could easily absorb $200,000,000 of Government bonds from the annual interest now paid there. I have no doubt the Government could readily collect $200,000,000 more by taxation. By doing this, and anticipating taxation by the issue of demand notes, we should have no difficulty in getting money. As it is now we have no fixed system; we go along without any fixed lights or guides.

I have thus, Mr. President, endeavored to reply to the constitutional argument of the Senator from Vermont. Our arguments must

be submitted finally to the arbitration of the courts of the United States. When I feel so strongly the necessity of this measure, I am constrained to assume the power, and refer our authority to exercise it to the courts. I have shown, in reply to the argument of the Senator from Maine, that we must no longer hesitate as to the necessity of this measure. That necessity does exist, and now presses upon us. I rest my vote upon the proposition that this is a necessary and proper measure to furnish a currency-a medium of exchange to enable the Government to borrow money to maintain an army and to support a navy. Believing this, I find ample authority to authorize my vote. We have been taught by recent fearful experience that delay and doubt in this time of revolutionary activity are stagnation and death. I have sworn to raise and support our armies; to provide for and maintain our navy; to borrow money; to uphold our Government against all enemies, at home and abroad. That oath is sacred. As a member of this body, I am armed with high powers for a holy purpose, and I am authorizednay, required-to vote for all laws necessary and proper for executing these high powers and for accomplishing that purpose. This is not the time when I would limit these powers. Rather than yield to revolutionary force, I would use revolutionary force. Here it is not necessary, for the framers of the Constitution did not assume to foresee all the means that might be necessary to maintain the delegated powers of the national Government. Regarding this great measure as a necessary and proper one, and within our power to enact, I see plain before me the path of duty, and one that it is easy to tread.

This bill became the act of February 25, 1862.

TAXATION OF BANK BILLS.

IN THE SENATE OF THE UNITED STATES, JANUARY 8, 1863.

THE Senate having proceeded to the consideration of the bill taxing bank bills and all fractional currency, Mr. Sherman said:

MR. PRESIDENT: I know it is difficult in the midst of exciting events to gain the attention of the Senate to a dry question, full of difficulty and details; yet everything affecting the currency of the country is now so sensitively felt, and involves so intimately the safety and welfare of the country, that I know the Senate will pardon me for discussing the policy of taxing the circulation of bank bills. The subject has been twice submitted to us by the Secretary of the Treasury. He regards the measure as of the highest importance. In his annual report one year ago, and also in his recent report, he has stated his view of it. He believes that the existing bank circulation prevents or embarrasses the process of funding, by which alone the bonds of the United States can be absorbed, and by which alone money can now be obtained from the people. I will not read the extracts from his report, because they are familiar, no doubt, to Senators.