John Jay Knox.

United States notes; a history of the various issues of paper money by the government of the United States, with an appendix containing the recent decision of the Supreme court of the United States an online

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Online LibraryJohn Jay KnoxUnited States notes; a history of the various issues of paper money by the government of the United States, with an appendix containing the recent decision of the Supreme court of the United States an → online text (page 1 of 20)
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UNITED STATES NOTES



A HISTORY OF THE VARIOUS ISSUES OF

PAPER MONEY BY THE GOVERNMENT

OF THE UNITED STATES



JOHN JAY KNOX

LATE COMPTROLLER OF TfE CURRENCY



WITH AN APPENDIX CONTAINING THE RECENT DECISION OF THE

SUPREME COURT OF THE UNITED STATES AND THE

DISSENTING OPINION UPON THE LEGAL

TENDER QUESTION



THIRD EDITION REVISED



NEW YORK

CHARLES SCRIBNER'S SONS

1892






COPV'RIGHT, 1884, BY

CHARLES SCRIBNER'S SONS



PREFACE.



In the course of his official career the author has had
occasion to deal with subjects kindred to those presented
in this vohirae. From time to time, he has collected
material with the hope of publishing at some future
day a volume worthy of the title of " History of Bank-
ing in the United States." The results of these investi-
gations have appeared from time to time, in official re-
ports, occasional addresses, and in articles contributed
to various encyclopaedias. The present volume is pub-
lished in accordance with the request of many friends,
who believe that at the present time a small volume
containing a historj^ of all the various issues of paper
money by the Government will be useful and interest-
ing to the public.

The recent decision of the United States Supreme
Court has virtually placed it in the power of Congress
to issue United States legal tender notes in any amount,
at any time it may be deemed politic or advisable. A



Iv PREFACE.

connected hiptory of tlie paper money issued by the
CuivcM'iiincnt will enable the reader to trace the gradual
rise and development of a doctrine which has at length
been endorsed by so much Aveight of authority.

At the date of the adoption of the Constitution, the
issue of paper money in any form was popularly re-
garded with aversion. The experience of the colonists
with bills of credit, as paper money was then called,
had been fraught with loss and political disturbance,
and the experience with the like issues by the Contin-
ental Congress had so affected the minds of the wisest
and best men of that time, that in the Federal Conven-
tion the general feeling was one of almost bitter opposi-
tion to granting the power to emit bills of credit to the
new Government. IS'o one can examine the records of
those days without being thoroughly impressed that the
sense of the Convention was in favor of an absolute
prohibition. Further proof may be found in the fact
that from 1791 to 1812, a period of twenty-one years,
the method of raising funds for the Government by
the issue of bills of credit was not even suo^cjested ;
nor indeed were circulating notes, in form payable on
demand without interest, issued at all, until moi-e than
seventy years after the adoption of the Constitution.

The charter of the first Bank of the United States
expired in 1811, and the Federalists were not strong
enough to secure a recharter. When the war of 1S12



PREFACE. V

broke out, the necessity of funds was so imperative,
that the Administration and Congress felt themselves
forced, the one to recommend, and the other to author-
ize, the issue of interest-bearing Treasury notes. They
were regarded as a measure of necessity. Loans in the
ordinary form had failed, and these notes were regarded
as a convenient form of loan. They were not intended
to circulate as money ; they were fundable into public
stock, and, as a matter of fact, were retired as soon as
possible after the close of the war. These issues were,
however, a fatal precedent out of which has grown a
latitude of constitutional construction not then antici-
pated.

From 1815 to 1837, a period of twenty-two years,
there was no resort to this remedy for the relief of
the Government finances. In 1836, the charter of
the second Bank of the United States expired, and
again party spirit prevented a recharter. Soon after
came the financial disasters of 1837, and again the Ad-
ministration recommended, and Congress authorized,
the issue of interest-bearing Treasm-y notes as forms of
short loans. These issues extended from 1837 to 1844,
and diu-ing that period the views of many, as to the
constitutionality of their use, considerably expanded.
The discussions in Congress, and the executive docu-
ments of that day, show how severe was the strug-
gle between the strict constructionists and those who



VI PREFACE.

MCi-e in favor of a view of the Constitution giving
wider powers to Congress.

During the Mexican war, 1846-1847, the plea of
necessity secured congressional authority for another
issue of interest-bearing Treasury notes. The financial
panic of 1857 again caused Congress to consider such
notes as the only remedy for the existhig distress.

It remained for the Civil war, however, to bring
such pressure that all remaining constitutional scru-
ples were swept away. Until 1862 no notes had
been issued with the legal-tender quality. All propo-
sitions to make Government paper a legal tender had
been rejected almost with contempt by Congress. In
1862, however, the first Legal-tender Act was passed,
and for the first time, notes having the quality of legal
tender, and intended to circulate as money, were is-
sued by the United States Treasury. These notes
were at first fundable in United States bonds, and had
not this provision been afterwai-d repealed by Con-
gress, they would, like previous issues of Treasury
notes, have soon disappeared from circulation. By this
repeal they were made a permanent circulation. Then
came the decision of the United States Supreme Court,
reversing a former decision and making them a legal
tender for all debts — for those contracted before the
passage of the Legal-tender Act as well as for those
contracted after that date. This decision, howev^er,



PREFACE. vn

based the constitutionality of legal-tender notes upon
the war powers of Congress. This still left open the
question whether such notes issued in time of peace
were constitutional, and the Supreme Court has now
settled that, under the Constitution, Congress has
power, if it deems it expedient, to issue legal-tender
money to any amount, either in time of peace or war.

The chapter upon the distribution of the surplus
money of the United States is, it is believed, the first
complete history of that subject. It serves to illus-
trate the subject of United States notes. The crisis of
1837, which at that time was deemed sufficient cause
for the issue of the latter, can be readily traced to the
withdrawal of the surplus from the banks to distribute
it among the States.

The late decision of the Supreme Court on t!i


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Online LibraryJohn Jay KnoxUnited States notes; a history of the various issues of paper money by the government of the United States, with an appendix containing the recent decision of the Supreme court of the United States an → online text (page 1 of 20)