James Ford Rhodes (18481927). History of the Civil War, 18611865 1917.
the resources of the banks and at the end of the year 1861, they were obliged to suspend specie payments, leaving the government in the same plight. At home and in England it was thought that national bankruptcy was threatened. By the end of January, 1862, there were 100 million of accrued indebtedness and further requirements to June 30 of 250 to 300 millions. Both popular sentiment and congressional resolution approved heavy direct and indirect taxation, but it was certain that no tax bill could be framed and got to work in time to meet the pressing exigency. The expedient finally adopted was a striking innovation in finance. Congress authorized the Secretary of the Treasury to issue 150 million United States treasury notes, payable to bearer, not bearing interest, and made these notes a legal-tender for all debts public and private.1
Action so unprecedented was not taken without serious consideration and debate. Chase, the Secretary of the Treasury, came with reluctance to the conclusion that the legal-tender clause is a necessity.2 The two best financial authorities in the Senate, John Sherman and William Pitt Fessenden, the chairman of the Committee on Finance, differed, Sherman favoring the clause, Fessenden opposing it. Fessenden wrote in a private letter: This legal-tender clause is opposed to all my views of right and expediency. It shocks all my notions of political, moral and national honor.3 The argument which prevailed was urged by Thaddeus Stevens, chairman of the House Committee of Ways and Means, This bill is a measure of necessity, not of choice. Sumner came to its support, but warned
Note 1. Except duties on imports which should be paid in coin; this coin was pledged for the payment of the interest on the bonds. Included in the 150 millions were 50 million United States notes, authorized in July, of which about 25 millions had been issued. [back]