CHAPTER VIII. THE REPUBLICAN PARTY AND THE FINANCE QUESTION. N dealing with the finances, the Republican party during the war period was forced to create an immense debt, which it refunded at The War Debt lower rates of interest afterward, and then reduced to comparatively small figures. An enumeration of the successive loans, with their varying periods and interest rates, would be tedious, and the matter will be touched on here in only its larger features. On March 31, 1865, the Government's obligations reached their highest mark, which, in round figures, was $2,846,000,000. Of this amount, $2,381,000,000 bore interest-$830,000,000 of it at 7 3-10 per cent, $1,282,000,000 at 6 per cent, and $269,000,000 at 5 per cent. annual interest charge at that date was $151,000,000. The By successive refunding schemes the interest rate was cut to lower figures, and through excess of revenue over expenditure the debt was for years steadily and rapidly reduced. In 1891-4 the interest-bearing debt was at its lowest since 1862, $585,000,000, and consisted of $560,000,000 of 4 per cent bonds and $25,000,000 of 4 per cents continued at 2 per cent. The annual interest charge at the time was $23,000,000. The interest-bearing debt started upward in 1894. Through successive bond sales by President Cleveland, the debt was increased $50,000,000 in February, 1894, and $50,000,000 in November of that year, all at the rate of 5 cent, and $62,000,000 in February, 1895, and $100,000,000 in February, 1896, all at the rate of 4 per cent. The Republican party's dealings with the currency question began in 1862, when it created the legal tender notes, popularly called greenbacks. The impossibility of getting enough revenue to meet the rapidly increasing demands of the Government became evident before the end of 1861, and a subcommittee of the Ways and Means Committee, composed of E. G. Spaulding, of New York, Samuel Hooper, of Massachusetts, and Erastus Corning, of New York, framed a measure which in its final shape provided for the issue of legal tender notes. Spaulding, who headed the subcommittee, thus obtained the name of the "father of the greenbacks." The Debt's High water Mark. Currency Legislation. On account of the legal tender provision which the bill contained it was opposed, on the ground of expediency or constitutionality, or both, by a few Republicans and nearly all the Democrats. Justin S. Morrill, Opposition to Roscoe and F. A. Conkling and Owen Lovejoy among the former, and George H. Pendleton and Clement L. Vallandigham among the latter, made strong speeches in the House against it; but it was pressed vigor the Greenback Bill. The First Greenback Bill Passed. Two More Greenback Acts. The Funding pealed. ously, and it passed that body February 6 by a vote of 93 (88 Republicans and 5 Democrats) to 59 (29 Democrats, 17 Republicans and 13 Unionists. The real contest in the Senate was on the legal tender provision of the bill. But before the bill was acted on in that body, the necessities of the Treasury had become so urgent that Fessenden, the Chairman of the Finance Committee, received a note from Chase asking the immediate enactment of a law allowing the issue of $10,000,000 in demand notes of the variety authorized by the law of July 17, 1861. this effect was at once enacted. The needs of the Treasury disarmed much of the hostility to the legal tender bill, yet the motion to strike out the legal tender clause had 17 votes (9 Republican and 8 Democrats), but the clause was retained by 22 votes (18 Republicans and 4 Democrats). Among the prominent Republican Senators who spoke and voted against the legal-tender clause were Collamer, Cowan and Fessenden. Zachariah Chandler, Sherman, Sumner, Wade and Wilson were among the Republicans who defended this provision. The opposition to the rest of the bill mustered comparatively few votes, and the measure passed by 30 (25 Republicans and 5 Democrats) to 7 (4 Democrats and 3 Republicans). Changes in the bill made in the Senate were fixed up in a conference committee, and the measure was signed by the President February 25, 1862. That is an important date in the political and financial history of the country. The law which then went into operation provided for the issue of $150,000,000 of notes, $50,000,000 of which were to be in lieu of the demand notes of that amount created by the law of July 17, 1861, the whole to be a legal tender for all debts, public and private, except duties. on imports and interest on the national debt, both of which obligations were to be payable in coin. The notes, it was provided, could be exchanged for 6 per cent 5-20 bonds, $500,000,000 of which was authorized to be issued by that act. A little more than three months after the legal tender act was signed, or on June 7, 1862, Secretary Chase asked for a further issue of $150,000,000 of notes, saying, among other things, that "the condition of the Treasury renders prompt action desirable." "Prompt action" was had, for a bill authorizing this issue was signed July 11, a month and four days after Chase spoke. But this did not end the legal tender issues. An additional Privilege Re- $150,000,000, making $450,000,000 by the three acts, was authorized by a law signed March 3, 1863. This act had a clause, dictated by Chase, which stopped the exchange of legal tender notes for bonds on July 1, 1863. The consequences of this change in the character of the notes were momentous and far-reaching, but they could not have been foreseen at the time. As a high official of the Treasury Department afterward well said, the change was "not only a violation of the contract with the holder (of the notes), but was also a serious financial mistake. It had John Jay Knox in "United States Notes," p. 138. the effect to materially reduce the value of the Treasury notes in the market, prevented the further funding of the Treasury notes after July 1 (1863), and undoubtedly postponed for many months the date for the resumption of specie payments." The word "years" should be substituted for the "months" used by the ex-Comptroller of the Currency in the sentence last quoted, for the greenbacks were originally designed to meet a temporary need. It was supposed that they would disappear after the close of the war, which they would have done if the funding privilege had remained, and in that event resumption, of course, could have taken place years before the date, January 1, 1879, at which it was brought about. Greenbacks Attacked in the Court. In three historically and politically important decisions of the Supreme Court the greenback has figured. The first was in the December, 1869, term of the Court, in the case of Hepburn vs. Griswold. Chief Justice Chase delivered the opinion of the Court, which was that the act of February 25, 1862, creating the legal tender notes or greenbacks, might be a rightful exercise of the war powers of Congress, but that it was unconstitutional so far as it made these notes a legal tender 8 Wallace, 603. for debts existing prior to its passage. This was the point involved in the case. Four Associate Justices-Nelson, Clifford, Field and Grierconcurred with Chase. Republican the Green backs. Justice Miller presented a dissenting opinion, in which Justices. Swayne and Davis concurred, holding that Congress had the constitutional power to make this act apply to pre-existing debts. The Court Judges Defend divided on this question on partisan lines. The five members who denied this power were Democrats-for Chase was a Democrat before he became a Free Soiler and a Republican, he usually held Democratic views on constitutional interpretations while in the Republican party, and the year before this decision was rendered his name was prominently coupled with the Democratic presidential candidacy. The three Justices. who asserted this power were Republicans. The Supreme Itself on the A year later, in the December, 1870, term, cases came up by which the Court reversed itself on the greenback question. This was due, however, to changes in membership of the Court and not to any alteration Court Reverses of opinion of any member of it. When the earlier decision was rendered the bench consisted of eight members, there being one vacancy. Grier, one of the Justices who united with Chase in declaring the legal tender acts unconstitutional as applied to debts existing prior to their passage,. resigned shortly afterward, reducing the number on Chase's side to four. This created two vacancies, and both were filled by President Grant in 1870 by men known to hold the opinion that the laws applied to contracts made before their passage as well as afterward. These new Justices were Strong, who succeeded Grier, and Bradley, the additional member, both Republicans. It was asserted at the time that the Court was "packed" in this instance to reverse the former decision. This reenforcement to Justices Miller, Swayne and Davis, the members who Republican Judges Again on the Greenback Side. took the ground in 1869 that the law was retroactive, brought that side up to five. It was by a five to four division that the question which came before the Court in the term of December, 1870, was decided. The cases were those of Knox vs. Lee, and Parker vs. Davis. They were argued in that term, decided May 1, 1871, and the decision was rendered January 15, 1872. Justice Strong delivered the opinion. He held that if Congress can constitutionally give to United States notes the character of money, and this power he declared to be held by "every independent sovereignty other than the United States," then "such notes must be available to fulfill all contracts (not expressly excepted) solvable in money, without reference to the time when the contracts were made." The opinion, which overruled the former decision, was concurred in 12 Wallace, 457. by Justices Bradley, Miller, Davis and Swayne, all Republicans. Chief Justice Chase delivered the dissenting opinion, representing the view also of Justices Nelson, Clifford and Field, all Democrats, Chase for the reasons before given, being classed here as a Democrat. On March 3, 1884, in the case of Julliard vs. Greenman, the status of the greenbacks was again passed on by the Supreme Court. May 31, 1878, an act of Congress went into operation prohibiting the retirement Once More Sus of greenbacks paid into the Treasury, and providing that they should The Court tains the Greenbacks. 110 United States, 421. Justice Field Greenback Contraction Suspended. be reissued and kept in circulation. This law virtually asserted the power of Congress to create legal tender notes in time of peace. In the two decisions already rendered the constitutionality of the issue of legal tender notes was based on the war powers of Congress, the earlier one holding that the notes did not apply to debts prior to the passage of the acts creating them, and the later one asserting that they were a valid payment for all debts, irrespective of the time at which they were contracted. The decision in the Julliard vs. Greenman case was that Congress has the constitutional power to issue legal tender notes in time of peace as well as of war, and to make them apply to debts (except where otherwise expressly provided) whenever contracted. Justice Field, the only Democratic member of the bench, dissented. There was a feeling in the business community at the time, among Republicans as well as Democrats, that this authority by Congress to create legal tender notes in time of peace was a dangerous power, and resolutions were introduced in Congress for an amendment to the Constitution withholding this power, but they resulted in nothing, and the matter dropped out of the public attention. These decisions settled the legal status of the greenbacks. A few words will now be given to the changes in their volume which have taken place at different times. The legal tender notes, or greenbacks, created by the acts of February 25 and July 11, 1862, and of March 3, 1863, reached their outstanding maximum, $449,338,902, on January 3, 1864, and had in obedience |