prudence and availability, and the banks and dealers in capital could not be relied upon for all the demands of the exigency. The associated banks of New York, Boston, and Philadelphia were able to advance, between August and December, one hundred and fifty millions, having been in the meantime reimbursed more than half the amount from the proceeds of the popular subscriptions to the famous seventhirty loan. But their aggregate capital did not exceed one hundred and fifteen millions. At this time the aggregate circulation of the banks in the loyal states was but one hundred and thirty millions, and their capital three hundred and twenty-seven millions, and the prospective loans for the year required by the treasury were certainly above five hundred millions, with a possible, and since become an actual requirement of similar loans in the fiscal year 1863, to the extent of five hundred and ninety-five millions, and in 1864 six hundred millions more.

Fronting this necessity, Mr. Chase resolved that he would not repeat the experiment of 1812, when the treasury undertook to carry on a war upon state bank issues. Pending the negotiation of loans and advances in August, 1861, the banks required, as conditions upon which they would give the relief required, in that darkest day of financial difficulty: 1st, That no treasury demand notes should be issued ; 2d, That the Secretary should draw upon them for the proceeds of the loans and advances directly-thus making them the disbursing agents or paymasters of the treasury, with the power to use their own or other paper currency in payment. The Secretary firmly refused both conditions, on the ground that United States notes must be as good as those of the banks, having the nation's faith and resources pledged for their redemption, and on the further ground that he could not permit the nation's credit and its creditors' interests to pass into hands which he could not control. The banks yielded, and they owe their solvency now to the policy accepted then. The United States notes which he afterwards issued he protected from a relative depreciation by refusing to suspend specie payments at the treasury until after the banks had ceased to redeem their notes; and when the banks afterwards refused to receive the government demand notes, he appealed to Congress, the legaltender act was passed, and thereupon the banks first agreed to receive and pay them in settlement of clearing-house balances, and long since have learned to hold them at a

higher value than any of the corporation issues of the country.

It was in the midst of this great struggle that he devised and set on foot his revolution of the banking system. Institutions which never did regulate the monetary system, never met the requirements of a circulating medium, even in time of peace, and were absolutely incapable of anything but mischief in time of war, were thenceforth only to be tolerated until they could be thoroughly reformed.

As early as December 9th, 1861, in his first annual report to Congress, he broached his scheme, by reviving the opinion of eminent statesmen, that the emission of banknotes under state authorities fell within the spirit, if not within the letter, of that provision of the Federal constitution which prohibits the emission of bills of credit by the states; but not intending then to attempt a compulsory, and at the same time a sudden and violent withdrawal of their circulation, he contented himself with affirming the authority of Congress to control the credit circulation of the country under its constitutional power to lay taxes, regulate domestic commerce and the value of coin, and declared that in his judgment the time had come when Congress should exercise this authority.

The occasion for trying the constitutional question presented itself in July, 1862. Specie had risen to a premium of twenty per cent., and small change'in coin was out of circulation. Á fractional currency must be supplied, and Congress authorized an issue by the treasury to meet the want; but the state banks, city and borough corporations, and all manner of institutions were about to flool the country, as in former times, with unlimited quantities of such paper. The Secretary tried the great question by procuring the enactment of a federal law inhibiting such issues by state banks, corporations, or individuals, upon penalty of a heavy fine or imprisonment, or both, at the discretion of the United States courts, in which the parties should be convicted. The rival authorities and competitive interests submitted. The Federal power was thus asserted on the point involved, the principle got a foothold, and a large advance was made towards the ultimate and complete reclamation of the Federal control over the whole currency of the nation.

In December, 1861, the treasury had put into circulation upwards of twenty-four millions of demand notes, and the Secretary contemplated such further increase of them as disbursements in that form might be safely made, provid

ing a temporary loan for their withdrawal at such times and to such extent as they might be in excess, and their restoration to the channels of business when they might be required; but the issue of these notes, and especially the extent to which, under the pressure of necessity, he afterwards availed himself of their service, must not be taken to indicate his policy, either of a system of currency for the use of the community, or even as a regular fiscal measure of the treasury.

Congress did not enact the law establishing Mr. Chase's national banking system until February, 1863. In the meantime the treasury demand notes (commonly called greenbacks) had worked so well, though outstanding to the amount of three hundred millions, that Congress and the public were strongly inclined to the plan of substituting them as currency for that of the state banks. Their uniform value throughout the country, and the unquestionable security of their ultimate redemption, gave them such preference in the community; and the relief of the nation from the amount of interest that any other form of public debt must bear, commended with equal strength such a substitution to the government. But the Secretary from the first day of their issue had never been blind to the hazard and the incapacity of this plan of replacing the state banks of issue, discount, and deposit. As a necessity, and therefore as a duty, he employed this form of currency, but took care, both in his official reports and in his conferences with the associated banks, to treat it merely as a device for " bridging over" the interval between the old system with its evils, and that which he recommended for their avoidance in the future. He knew and said then, what experience has since proved, that a government currency has no power, either as preventive or corrective, to remedy the disorders of the money market, induced by causes over which it has no control. And it was just as clear, or more so, that a national treasury cannot be converted into a bank of discount or a bank of deposit, in the way that such institutions are serviceable to the public. Its nearest possible approach to the requirement is that it can act as a bank of issue, while the public expenditure exceeds its revenue, and to the extent of such excess; fluctuating necessarily with all changes of fiscal condition in the exchequer, and losing its functions utterly so soon as the exchequer begins to pay off its debts. All that he intended by his United States note system, and all

that he expected from it, moreover all that he feared from it, was clearly stated from the beginning, and it was to guard against its hazards, and possible abuse, that he early and persistently struggled for the establishment of something very different from a national bank, to wit: a national banking system. Not a creature of the government, but an agency of the people; not a paper-money factory of the Federal government, but a form or frame-work through which the capital of the people may be employed in their service, under their own guidance, freely, except as it should be overruled for the greatest safety and best uses of industry and commerce. The general features of this system are, in the Secretary's own words:

"1. A circulation of notes bearing a common impression and authenticated by a common authority.

"2. The redemption of these notes by the associations and institutions to which they may be delivered for issue.

"3. The security of their redemption by the pledge of United States stocks, and an adequate provision of specie.

"In other words, a plan for the preparation and delivery to institutions and associations, of notes prepared for circulation under national direction, and secured, as to prompt convertibility into coin, by the pledge of the United States bonds, and by other needful regulations."

The chief distinctive features of this national currency system, as it now stands under the amendatory act of June, 1864, will be seen in the following provisions: A currency bureau is established in the treasury department. Its chief officer is a comptroller under the general direction of the Secretary of the Treasury. He is appointed for the term of five years by the President and Senate. Banking associations may be formed under it by any number of persons not less than five, and they must file their articles of association in the office of the comptroller, embracing the name of the association; the place where its operations of discount and deposit are to be carried on; the amount of capital stock and the number of shares into which it is divided ; the names and places of residence of its shareholders, and the number of shares held by each of them.

No association can be organized with a less capital than $100,000, nor in a city where the population exceeds fifty thousand persons, with a less capital than $200,000, except that banks may be formed under special approval of the Secretary, with a capital of not less than $50,000, in any

place where the population does not exceed six thousand inhabitants.

Upon compliance with all the requirements of the act, corporate powers are granted for the term of twenty years to carry on the business of banking by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; buying and selling exchange, coin, and bullion; loaning money on personal security, and by obtaining, issuing, and circulating notes according to the provisions of the act.

These associations are authorized to organize their boards of directors, properly qualified, and to make such by-laws for their government as are conformable to the law. Each shareholder in elections has one vote either in person or by proxy, for each share of stock held by him.

The capital stock is divided into shares of $100 each. These shares with all their incidental rights are assignable, and each shareholder is liable to the extent of the par value of his stock, in addition to the amount invested in such shares, for all contracts, debts, and engagements of the association.

At least fifty per cent. of the capital must be paid in before business can be commenced, and the remainder must be paid in instalments of ten per cent. monthly; after such authorization, the payment of each instalment to be certified to the comptroller, under oath of the president or cashier of the association. All these and other necessary provisions are enforced by the ultimate penalty of appointing a receiver to close up the business of the delinquent association.

Having complied with all preliminary requirements, and before commencing banking business, the association must transfer and deliver to the Treasurer of the United States, United States registered bonds, bearing interest to an amount not less than $30,000, nor less than one-third of the capital stock paid in, increasing such deposit of bonds, as the capital shall be paid up or increased, to the amount of at least one-third of its capital; and any bauk may reduce its capital or close up its business by returning to the comptroller the circulating notes issued upon the pledge of such bonds, the bonds pledged to be assigned to the Treasurer of the United States in trust for the association. The interest accruing upon the deposited bonds, is payable to the bank owning them, while it continues to redeem its circulating notes; and if the bonds fall in the market below the amount of the circulation issued for them, the depreciation must be made