BALL'S BLUFF DISASTER INVESTIGATED.

Goaded by these injurious and unfounded rumors, General Stone, in a letter to the Adjutant-General of the army, written a fortnight after the battle, deemed it his "duty to answer the persistent attacks made through the press by the friends of the lamented Colonel Baker." He called attention to the "distinct violations by Colonel Baker of his orders and instructions," and declared that he was left "to use his own discretion about crossing his force, or retiring that already over." He found it "painful to censure the acts of one who gallantly died on the field of battle," but justice to himself required "that the full truth should be made to appear." Colonel Baker did not receive the order "as a death- warrant," for it was delivered to him "at his own request." That "Colonel Baker was determined to fight a battle" was made evident by the fact that "he never crossed to examine the field, never gave an order to the troops in advance, and never sent forward to ascertain their position, until he had ordered over his force, and passed over a considerable portion of it." On the 5th of January, 1862, General Stone appeared before the Committee on the Conduct of the War, and was examined under oath as to every detail of the Ball's-Bluff disaster which could in any way, directly or remotely, involve his responsibility as a commander. His answers were frank, withholding nothing, and were evidently intended to communicate every pertinent fact. So far as may be inferred from the questions and comments, the evidence was entirely satisfactory to the committee.

After the examination of General Stone, many officers of his command appeared before the committee. The captains and lieutenants, fresh from private life, whose names he probably did not know, and with whom he perhaps never exchanged a word, were summoned in large number. They had remarkable stories to tell about General Stone's disloyalty; about his holding secret correspondence with the enemy; about his permitting letters and packages to be taken across the line without examination; about his allowing rebels to go freely back and forth; and finally about his passing within the rebel lines to hold confidential interviews with the officers commanding the force opposed to him. It is singular that men of the acuteness and high character of those composing the committee did not carefully sift the testimony and subject it to the test of a rigorous cross- examination. The stories told by many of these swift witnesses were on the surface absurd, and should have been exposed. Publicity alone would have largely counteracted the evil effect of their narratives, but the examination was secret, and the witnesses evidently felt that the strongest bias against General Stone was the proper turn to give their testimony. The atmosphere was, as it often is in such cases, unfavorable to the suspected man; and his reputation was mercilessly assailed where he could not reply, and was not even allowed to hear. When officers of the higher grades, who came near to General Stone, who shared his confidence and assisted in his councils, were examined, the weight of the testimony was markedly different. General F. W. Lander regarded General Stone as "a very efficient, orderly, and excellent officer." Colonel Isaac J. Wistar, who succeeded Colonel Baker in the command of the California regiment, gave the highest testimony to General Stone's loyalty, and to the "full confidence" reposed in him by men of every rank in the brigade with which he was serving. Colonel Charles Devens who, with his regiment, the Fifteenth Massachusetts Infantry, had borne an honorable part on the bloody field, testified that he and the officers of the Fifteenth "had confidence in General Stone." Colonel James H. Van Allen, commanding a regiment of cavalry in General Stone's division, gave the most cordial testimony of his loyalty and high character.

After the larger part of the evidence adverse to General Stone had been heard, he received an intimation through General McClellan that it might be well for him to appear again before the Committee on the Conduct of the War. He obtained leave of absence from his command, repaired to Washington, and presented himself before the committee on the 31st of January, twenty-six days after his first testimony had been given. For some reason which the committee did not deem it necessary to explain, General Stone was not furnished with the names of the witnesses who had testified against him in the dark; their testimony was not submitted to him; it was not even read in his hearing. He was simply informed by the chairman— Senator Wade of Ohio—that "in the course of our investigations there has come out in evidence matters which may be said to impeach you. I do not know that I can enumerate all the points, but I think I can. In the first place is your conduct in the Ball's- Bluff affair—your ordering your forces over without sufficient means of transportation, and in that way endangering your army, in case of a check, by not being able to re-enforce them. . . . Another point is that the evidence tends to show that you have had undue communication with the enemy by letters that have passed back and forth, by intercourse with officers from the other side, and by permitting packages to go over unexamined, to known Secessionists. . . . The next and only other point that now occurs to me is that you have suffered the enemy to erect formidable fortifications or batteries on the opposite side of the river, within the reach of your guns, and which you could easily have prevented." General Stone's answer was as lucid, frank, and full as could be made to charges of so sweeping a character. His explanations were unreserved, and his justification apparently complete and unanswerable against every form of accusation which the chairman submitted. To the charge of disloyalty General Stone replied with much feeling, "That is one humiliation I had hoped I should never be subjected to. I thought there was one calumny that could not be brought against me. Any other calumny I should expect after what I have received, but that one I should have supposed that you personally, Mr. Chairman, would have rejected at once. You remember last spring when the Government had so few friends here, when the enemy had this city I might almost say in his power, I raised all the volunteer troops that were here during the seven dark days. I disciplined and posted those troops. I commanded them, and they were the first to invade the soil of Virginia, and I led them." Mr. Wade here interrupted, and said, "I was no so unjust as not to mention that circumstance to the committee." General Stone resumed, "I could have surrendered Washington. And now I will swear that this government has not a more faithful soldier, of poor capacity it may be, but not a more faithful soldier from the day I was called into service to this minute."

GENERAL CHARLES P. STONE ARRESTED.

Subsequent developments proved that three days before this second examination General McClellan had in his possession an order from Edwin M. Stanton, Secretary of War, directing him "to relieve General Stone from his command of a division in the Army of the Potomac, and that he be placed in arrest and kept in close custody until further orders." It is evident therefore that so far as the War Department was involved, the case had been prejudged, or judged at least without giving the accused man an opportunity to be heard in his own defense. It is difficult to understand why his testimony did not have the effect to recall or suspend the order of arrest, but despite the candor and evident honesty of his explanations, the blow fell upon him. Early on Saturday the eighth day of February General McClellan directed the provost marshal of the district, General Andrew Porter, "to arrest Brigadier-General Charles P. Stone at once, and to send him under close custody by first train to Fort Lafayette, where he will be placed in charge of the commanding officer, and have no communication with any one from the time of his arrest." Brigadier-General Sykes, commanding the City Guard, executed the order, taking General Stone from his bed at midnight in the hotel where he was stopping, and making him a close prisoner. Shortly after daylight the following morning General Stone addressed a note to General Seth Williams, Adjutant-General on the staff of General McClellan, informing him of his arrest, and adding, "Conscious of having been at all times a faithful soldier of the United States, I must respectfully request that I may be furnished at an early a moment as practicable with a copy of whatever charges may have been preferred against me, with the opportunity of promptly meeting them."

To this respectful communication no answer was made, and General Stone was hurried off to Fort Lafayette, under strict guard, with an order from General McClellan for his imprisonment. At the fort the money which he had in his pockets was taken from him, and he was placed in solitary confinement in a room ordinarily used for quarters of enlisted men. No letter was allowed to leave him or reach him without the most rigid inspection. Under this close surveillance, with an armed sentinel pacing before the door of his room, without opportunity for outdoor air or exercise, he was kept for forty-nine days. He applied at different times to the military authorities in Washington for a statement of the charges against him, for a speedy trial, for access to the records of his own office and his own headquarters, for a change of the place of his confinement. To none of these applications was answer of any kind returned. After he had been nearly two months in prison he asked that his wife might be allowed to visit him. She was in the deepest anguish, and her society in his imprisonment could have subjected the government to no danger, because she would have been under the same restraint and espionage as her husband. This natural and reasonable request, made only after his confinement promised to be indefinite, was peremptorily and curtly refused by the War Department.

On the fiftieth day the place of his imprisonment was changed from Fort Lafayette to Fort Hamilton near by, and the opportunity for open-air exercise within the fort was accorded him, though always under the eye of a sentinel. Here he renewed his request for the charges against him, without eliciting answer. He applied to the officer in command of the fort to learn of what possible crime he was accused, and the officer replied that he knew nothing of it; he was absolutely ignorant of any ground for General Stone's imprisonment. After striving for more than sixty days to ascertain the nature of his offense, and secure an opportunity to vindicate himself, the prisoner adopted another course. He applied for suspension of arrest with liberty to join the army just setting forth under General McClellan for the Peninsular campaign. No reply was made to his request. A few weeks later, when the Union forces under General Banks were defeated in the valley of the Shenandoah, he again asked the privilege of active duty, and again was treated with contemptuous silence. On the 4th of July he telegraphed directly to President Lincoln, recalling the honorable service in which he had been engaged just one year before. Reminding the President of the pressing need which the country then had "of the services of every willing soldier," he begged to be sent to the field. With manly dignity he declared, "I am utterly unconscious of any act, word, or design which should make me less eligible to an honorable place among the soldiers of the Republic than upon any day of my past life."

GENERAL STONE'S CASE IN CONGRESS.

Meanwhile the subject had forced itself upon the attention of Congress. On the 24th of March, Senators Latham and McDougall of California, the first a supporter of Breckinridge in 1860, the other a supporter of Douglas, with Aaron A. Sargent, representative from the same State and a most radical Republican, united in an energetic memorial to Secretary Stanton, on behalf of General Stone as a citizen of California. They stated that "the long arrest of General Stone without military trial or inquiry has led to complaints from many quarters. . . . Having known General Stone for years, and never having had cause to doubt his loyalty, we feel it our duty to inquire of the government through you for some explanation of a proceeding which seems to us extraordinary." To this memorial no reply was made, and after waiting nearly three weeks Mr. McDougall introduced in the Senate a very searching resolution of inquiry, requesting the Secretary of War to state upon whose authority the arrest was made, and upon whose complaint; why General Stone had been denied his rights under the articles of war; why no charges and specifications of his offense had been made; whether General Stone had not frequently asked to be informed of the charges against him; and finally upon what pretense he was still kept in prison. Mr. McDougall spoke in the Senate on the 15th of April in support of his resolution, making some interesting personal statements. General Stone was arrested on the night of Saturday, the 8th of February. "On the Wednesday evening before that," said Mr. McDougall, "I met General Stone, dressed as became a person of his rank, at the house of the President, where no one went on that evening except by special invitation. He was there mingling with his friends, receiving as much attention and as much consideration from all about him as any man there present. . . . Only two evenings after that, if I remember right, he was the guest under similar circumstances of the senior general in command of our army [McClellan], and there again receiving the hospitalities of the men first in office and first in the consideration of the country. On, I think, the very day of his arrest he was in the War Department, and was received by the head of that department as a man who had the entire confidence of the government, and of himself as one of the government's representatives. On that evening he was seized, taken from his home and family at midnight, carried off to Fort Lafayette and imprisoned, as are men convicted and adjudged guilty of the highest offense known to the law. . . . I undertake to say upon good authority that almost presently before his arrest he said to the present Secretary of War [Stanton], 'Sir, I hear complaints about my conduct as an officer at Ball's Bluff. I wish you to inquire into it and have the matter determined.' He was assured that there were no charges against him, and the secretary advised him in substance in these words: 'There is no occasion for your inquiry; go back to your command.' That was the day of the night on which he was arrested." Mr. McDougall's statement, the accuracy of which was not challenged by any one, disclosed the fact that while General Stone was a guest at the White House and at the residence of General McClellan, the latter had in his possession the order for arrest, and had held it for several days.

The resolution of Mr. McDougall was debated at some length in the Senate, Mr. Wade making a fiery speech in defense of the course pursued by the Committee on the Conduct of the War, and Mr. Browning of Illinois defending the President, upon whom there had been no imputation of any kind. Mr. Doolittle suggested that the resolution be referred to a committee. Mr. Wilson of Massachusetts submitted a substitute, simply requesting "the President of the United States to communicate to the Senate any information touching the arrest and imprisonment of General Stone, not deemed incompatible with the public interest." Mr. Sumner had "no opinion to express in the case, for he knew nothing about it;" but "it seemed clear" to him "that General Stone ought to be confronted with his accusers at an early day, unless there be some reason of an overbearing military character which would render such a trial improper." Mr. Sumner had "seen in various newspapers a most persistent attempt" to connect him "with the credit or discredit of the arrest." He declared that from the beginning he "had been an absolute stranger to it." The arrest was made, he repeated, without his "suggestion or hint, direct or indirect." He declared that he "was as free from all connection with it" as "the intimate friends and family relatives of the prisoner." At the close of the debate Mr. McDougall accepted Mr. Wilson's resolution as a substitute for his, and on the 21st of April the latter was adopted by general consent.

SENATOR SUMNER AND GENERAL STONE.

The unfounded assumption of Mr. Sumner's connection with the arrest sprang perhaps from some censorious remarks in the Senate made by him in December touching General Stone's alleged course in sending back fugitive slaves. Subsequent intelligence indicated that Mr. Sumner had been misinformed on this matter, and that the facts did not inculpate General Stone. But instead of writing to Mr. Sumner to correct the statements made in his speech, General Stone, most unwisely and most reprehensibly, addressed to the senator on the 23d of December an ill-tempered and abusive letter. Mr. Henry Melville Parker of Massachusetts investigated all the facts and incidents of the case, and came to the conclusion that Mr. Sumner, as an act of revenge for the insolent letter, had caused General Stone's arrest. But the facts do not warrant Mr. Parker's conclusion. Aside from Mr. Sumner's public denial on the floor of the Senate— which of itself closed the issue—he was never known to be guilty of an act of revenge. That passion belongs to meaner natures. The dates, moreover, remove the imputation of Mr. Parker. General Stone's hasty and ill-considered letter was placed in Mr. Sumner's hands on Christmas Day, 1861. The arrest was made on the 8th of February, 1862—forty-six days later. The intervening circumstances nowhere involve Mr. Sumner in the remotest degree.

In answer to the call upon the President for information, Mr. Lincoln sent a message to the Senate on the 1st of May, saying, "General Stone was arrested and imprisoned under my general authority, and upon evidence which, whether he be guilty or innocent, required, as appears to me, such proceedings to be had against him for the public safety." The President deemed it "incompatible with the public interest, and perhaps unjust to General Stone, to make a more particular statement of the evidence." After saying that General Stone had not been tried because the officers to constitute a court-martial could not be withdrawn from duty without serious injury to the service, the President gave this public assurance: "He will be allowed a trial without unnecessary delay: the charges and specifications will be furnished him in due season, and every facility for his defense will be afforded him by the War Department." This message on its face bears evidence that it was prepared at the War Department, and that Mr. Lincoln acted upon assurances furnished by Mr. Stanton. The arrest was made upon his "general" authority, and clearly not from any specific information he possessed. But the effect of the message was to preclude any further attempt at intervention by Congress. Indeed the assurance that General Stone should be tried "without unnecessary delay" was all that could be asked. But the promise made to the ear was broken to the hope, and General Stone was left to languish without a word of intelligence as to his alleged offense, and without the slightest opportunity to meet the accusers who in the dark had convicted him without trial, subjected him to cruel punishment, and exposed him to the judgment of the world as a degraded criminal.

Release from imprisonment came at last by the action of Congress, coercing the Executive Department to the trial or discharge of General Stone. In the Act of July 17, 1862, "defining the pay and emolument of certain officers," a section was inserted declaring that "whenever an officer shall be put under arrest, except at remote military posts, it shall be the duty of the officer by whose orders he is arrested to see that a copy of the charges shall be served upon him within eight days thereafter, and that he shall be brought to trial within ten days thereafter unless the necessities of the service prevent such trial; and then he shall be brought to trial within thirty days after the expiration of said ten days, or the arrest shall cease." The Act reserved the right to try the officer at any time within twelve months after his discharge from arrest, and by a proviso it was made to apply "to all persons now under arrest and waiting trial." The bill had been pending several months, having been originally reported by Senator Wilson before General Stone's arrest.

The provision of the Act applicable to the case of General Stone was only a full enforcement by law of the seventy-ninth article of war, which declared that "no officer or soldier who shall be put in arrest shall continued in confinement more than eight days, or until such time as a court-martial can be assembled." It was a direct violation of the spirit of this article, and a cruel straining of its letter, to consign General Stone to endless or indefinite imprisonment. Any man of average intelligence in the law—and Secretary Stanton was eminent in his profession—would at once say that the time beyond the eight days allowed for assembling a court- martial must be a reasonable period, and that an officer was entitled to prompt trial, or release from arrest. The law now passed was imperative. Withing eight days the arrested officer must be notified of the charges against him, within ten days he must be tried, and "if the necessities of the service prevent a trial" within thirty days after the ten, the officer is entitled to an absolute discharge. General Stone's case fell within the justice and the mercy of the law. The eight days within which he should be notified of the charges against him had been long passed; the ten days had certainly expired; but by the construction of the War Department the victim was still in the power that wronged him for thirty days more. From the 17th of July, thirty days were slowly told off until the 16th of August was at last reached, and General Stone was once more a free man. He had been one hundred and eighty-nine days in prison, and was at last discharged by the limitation of the statute without a word of exculpation or explanation. The routine order simply recited that "the necessities of the service not permitting the trial, within the time required by law, of Brigadier-General Charles P. Stone, now confined in Fort Lafayette, the Secretary of War directs that he be released from arrest."

GENERAL STONE FINALLY RELEASED.

The order simply turned him adrift. He was a Colonel in the Regular Army and a Brigadier-General in the volunteer service; and the Secretary, according to the rule of the War Department, should have given him some instruction,—either assigning him to duty or directing him to report at some place and await orders. Thinking it might be an omission, General Stone telegraphed the War Department that he had the honor "to report for duty." He waited five days in New York for an answer, and receiving none repaired to Washington. Reporting promptly at the office of the Adjutant-General, he was told they had no orders for him, and knew nothing about his arrest. He then applied to General McClellan, on the eve of the Antietam campaign, for permission to serve with the army. General McClellan on the 7th of September wrote to Secretary Stanton that he would be glad to avail himself of General Stone's services and that he had "no doubt as to his loyalty and devotion." No answer was returned by the War Department. On the 25th of September General Stone, still eager to confront his accusers, applied to General-in- Chief Halleck for a copy of any charges or allegations against him, and the opportunity of promptly meeting them. He reminded the general that two hundred and twenty-eight days had elapsed since his arrest, and that if he were to be tried for any offense those who had served under him must be the witnesses of his conduct, and that from battle and disease these witnesses were falling by hundreds and thousands; the casualties were so great indeed that his command was already reduced one-half. General Halleck replied that he had no official information of the cause of General Stone's arrest, and that so far as he could ascertain no charges or specifications were on file against him.

Several weeks later, on the 1st of December, 1862, General Stone applied to General McClellan, calling his attention to the Act of July 17, under which any officer arrested had the right to "a copy of the charges against him within eight days." He therefore respectfully requested General McClellan, as the officer who ordered the arrest, to furnish him a copy of the charges. General McClellan replied on the 5th of December that the order for arrest had been given him by the Secretary of War, who told him it was at the solicitation of the Committee on the Conduct of the War, and based on testimony taken by them. He further informed General Stone that he had the order, in the handwriting of Secretary Stanton, several days before it was carried into effect, and added the following somewhat remarkable statement: "On the evening when you were arrested I submitted to the Secretary of War the written result of the examination of a refugee from Leesburg. This information to a certain extent agreed with the evidence stated to have been taken by the Committee, and upon its being imparted to the Secretary he again instructed me to cause you to be arrested, which I at once did." This discloses the fact that General McClellan was cognizant of the character of the testimony submitted against General Stone, and so rigidly withheld from the knowledge of the person most interested. On receipt of General McClellan's note, General Stone immediately asked him for the name of the Leesburg refugee and for a copy of his statement. A member of General McClellan's staff answered the inquiry, stating that the general "does not recollect the name of the refugee, and the last time he recollects seeing that statement was at the War Department immediately previous to your arrest." General Stone, victim of the perversity which had uniformly attended the case, was again baffled. He was never able to see the statement of the "refugee" or even to get his name, though, according to General McClellan, the testimony of the refugee was the proximate and apparently decisive cause of General Stone's arrest.

General Stone applied directly to the President, asking "if he could inform me why I was sent to Fort Lafayette." The President replied that "if he told me all he knew about it he should not tell me much." He stated that while it was done under his general authority, he did not do it. The President referred General Stone to General Halleck who stated that the arrest was made on the recommendation of General McClellan. This was a surprise to General Stone, for General McClellan had but recently written him that he had full confidence in his devotion and loyalty. General Halleck replied that he knew of that letter, and that "the Secretary of War had expressed great surprise at it because he said that General McClellan himself had recommended the arrest, and now seemed to be pushing the whole thing on his [the secretary's] shoulders." The search for the agency that would frankly admit responsibility was rendered still more difficult by the denial of the Committee on the Conduct of the War that the arrest had ever been recommended by them, either collectively or individually. They had simply forwarded to the Secretary of War such evidence as was submitted to them.

RESPONSIBILITY FOR THE ARREST.

General Stone appeared before the Committee on the Conduct of the War on the 27th of February, 1863—nearly five months after his release from imprisonment. He was allowed to see the testimony which had hitherto been withheld from him, and answered all the accusations in detail with convincing candor and clearness. As he proceeded in his triumphant response to all the accusations against him, the committee said "Why did you not give us these explanations when you were here before?"—"Because," replied General Stone, "if the chairman will remember, the committee did not state to me the particular cases. . . . I gave general answers to general allegations." General Stone stated further to the committee that he ought himself to have asked for a Court of Inquiry after the reverse at Ball's Bluff. "The reason why I did not," he continued, "was this: While General McClellan was at Edward's Ferry, he showed me a telegram which he had written to the President to the effect that he had examined into the affair at Ball's Bluff and that General Stone was entirely without blame." "After the expression of that opinion," said General Stone, "it would not have been respectful to ask for a Court of Inquiry. It was given by the highest authority and sent to the highest authority, and as a soldier I had no right to ask for justification except of my superiors." Subsequently, on the occasion of Mr. Conkling's speech "severely criticising" General Stone's conduct in connection with the affair at Ball's Bluff, the General applied to the aide-de-camp of General McClellan, as likely to be informed of the Commander's wishes, to know if he "should ask for a Court of Inquiry," and the reply was "No." He then asked if he should make a statement correcting the mistakes in Mr. Conkling's speech. The reply was "Write nothing; say nothing; keep quiet." The committee asked General Stone, as a military man, "Who had the power to bring you to trial?" He answered "When I was arrested, the General-in-Chief, General McClellan, had that power. I know I should claim that power if any man under my command were arrested."

GENERAL STONE'S RESIGNATION.

The responsibility for the arrest and imprisonment of General Stone must, according to the official record of the case, rest on Secretary Stanton, Major-General McClellan, and the Committee on the Conduct of the War. It is very clear that Mr. Lincoln, pressed by a thousand calls and placing implicit confidence in these three agencies, took it for granted that ample proof existed to justify the extraordinary treatment to which General Stone was subjected. General Stone is not to be classed in that long list of private citizens temporarily confined without the benefit of habeas corpus, on the charge of sympathizing with the Rebellion. The situation of those persons more nearly assimilates with that of prisoners of war. It differs totally from the arrest of General Stone in that the cause of detention was well known and very often proudly avowed by the person detained. The key of their prison was generally in the hands of those who were thus confined,—an honest avowal of loyalty and an oath of allegiance to the National Government securing their release. If they could not take the oath they were justifiably held, and were no more injured in reputation than the millions with whose daring rebellion they sympathized. But to General Stone the government permitted the gravest crime to be imputed. A soldier who will betray his command belongs by the code of all nations to the most infamous class—his death but feebly atoning for the injury he has inflicted upon his country. It was under the implied accusation of this great guilt that General Stone was left in duress for more than six weary months, deprived of all power of self- defense, denied the inherited rights of the humblest citizen of the Republic. In the end, not gracefully but tardily, and as it seemed grudgingly, the government was compelled to confess its own wrong and to do partial justice to the injured man by restoring him to honorable service under the flag of the Nation. No reparation was made to him for the protracted defamation of his character, no order was published acknowledging that he was found guiltless, no communication was ever made to him by National authority giving even a hint of the grounds on which for half a year he was pilloried before the nation as a malefactor. The wound which General Stone received was deep. From some motive, the source of which will probably remain a mystery, his persecution continued in many petty and offensive ways, until he was finally driven, towards the close of the war, when he saw that he could be no longer useful to his country, to tender his resignation. It was promptly accepted. He found abroad the respect and consideration which had been denied him at home, and for many years he was Chief of the General Staff to the Khedive of Egypt.

It is not conceivable that the flagrant wrong suffered by General Stone was ever designed by any one of the eminent persons who share the responsibility for its infliction. They were influenced by and largely partook of the popular mania which demanded a victim to atone for a catastrophe. The instances in which this disposition of the public mind works cruel injury are innumerable, and only time, and not always time, seems able to render justice. Too often the object of popular vengeance is hurried to his fate, and placed beyond the pale of that reparation which returning reason is eager to extend. Fortunately the chief penalty of General Stone was the anguish of mind, the wounding of a proud spirit. His case will stand as a warning against future violations of the liberty which is the birthright of every American, and against the danger of appeasing popular clamor by the sacrifice of an innocent man. Throughout the ordeal, General Stone's bearing was soldierly. He faced accusation with equanimity and endured suffering with fortitude. He felt confident of ultimate justice, for he knew that it is not the manner of his countrymen "to deliver any man to die before that he which is accused have the accusers face to face, and have license to answer for himself concerning the crime laid against him."

CHAPTER XVIII.

The National Finances.—Debt when the Civil War began.—Deadly Blow to Public Credit.—Treasury Notes due in 1861.—$10,000,000 required. —An Empty Treasury.—Recommendation by Secretary Dix.—Secretary Thomas recommends a Pledge of the Public Lands.—Strange Suggestions. —Heavy Burdens upon the Treasury.—Embarrassment of Legislators. —First Receipts in the Treasury in 1861.—Chief Dependence had always been on Customs.—Morrill Tariff goes into Effect.—It meets Financial Exigencies.—Mr. Vallandigham puts our Revenue at $50,000,000, our Expenditures at $500,000,000.—Annual Deficiency under Mr. Buchanan.—Extra Session in July, 1861.—Secretary Chase recommends $80,000,000 by Taxation, and $240,000,000 by Loans.— Loan Bill of July 17, 1861.—Its Provisions.—Demand Notes.—Seven- thirties.—Secretary Chase's Report, December, 1861.—Situation Serious.—Sales of Public Lands.—Suspension of Specie Payment.— The Loss of our Coin.—Its Steady Export to Europe.

When the civil war began, the Government of the United States owed a less sum than it owed under the administration of Washington after the funding of the debt of the Revolution. The population in 1861 was nine times as large, the wealth thirty times as great as in 1791. The burden therefore was absolutely inconsiderable when contrasted with our ability to pay. But there had been such gross mismanagement of the Treasury, either from incompetency or design, under the administration of Howell Cobb, that the credit of the government was injured. There was embarrassment when there should have been security; there was scarcity when the most ordinary prudence would have insured plenty. So much depended at that moment on the ability of the government to raise money by pledging its faith, that Mr. Cobb perhaps thought he was dealing the deadliest blow at the nation by depriving it of the good name it had so long held in the money markets of the world. With unblemished credit at the opening of the war, the government could have used its military power with greater confidence, and consequently with greater effectiveness.

THE NATIONAL CREDIT INJURED.

At the beginning of the year 1861 it was necessary for the government to raise about $10,000,000 to meet Treasury notes outstanding and the interest secured upon them. Congress had passed, on the 17th of December, 1860, a law authorizing the issue of new Treasury notes for this amount, bearing interest at the rate of six per cent., and redeemable after one year; but the Secretary of the Treasury was authorized to issue them, upon public notice, at the best rates of interest offered by responsible bidders. Before the close of the month negotiations were completed, after unusual effort, and it was found that the notes were issued at various rates, only $70,200 at six per cent., $5,000 at seven per cent., $24,500 at eight per cent., $355,000 at rates between eight per cent. and below ten per cent., $3,283,500 at ten per cent. and fractions below eleven per cent., $1,432,700 at eleven per cent., and by far the larger share, $4,840,000 at twelve per cent. The average for the whole negotiation made the rate of interest ten and five-eighths per cent.

The Treasury was empty, for the nominal balance was only $2,233,220 on the 1st of January. Obligations were accruing to such an extent that General John A. Dix, as Secretary of the Treasury, informed the Committee on Ways and Means of the House of Representatives, that the revenue exhibited, on the 1st of February, a deficit of $21,677,524. The committee estimated that the sum needed to carry on current operations was at least $5,000,000 in addition. A loan of $25,000,000 was proposed, to meet these demands. Secretary Dix, who felt the pulse of the financial centres, recommended in a letter to the Ways and Means Committee that the several States be asked to pledge the United-States "deposit funds" in their hands for the security of the loan. His immediate predecessor, Philip F. Thomas, had, in his annual report in the preceding December, urged that the "public lands be unconditionally pledged for the ultimate redemption of all the Treasury notes which it may become necessary to issue."

Such suggestions seem strange to the ears of those who were afterwards accustomed to the unbounded credit of the Republic. But these secretaries were called to hear from capitalists the declaration that the national debt had increased from $28,460,958 on the 1st of July, 1857, to $64,640,838 on the 1st of July, 1860, and that the figures were still mounting upward. In the mean time the revenues were falling off, the sales of public lands were checked, and the estimates of customs for the current year were practically overthrown by the secession of the Southern States and the denial of the authority of the Union.

The task of Congress might well strike some thoughtful legislators as that of making bricks without straw. As the Rebellion took form and organization, it became clear that the ability and willingness of the people to raise large sums of money were vital factors in the problem of the maintenance of the Union. It was well that no one knew just how great were the burdens which the loyal people must bear. It is no disparagement to the leading statesmen of that era, that they did not at first propose measures adequate to the emergency, because no standards existed by which the magnitude of that emergency could be estimated. If Congress had understood on the 1st of July, 1861, that the ordinary expenditures of the government would be, within the fiscal years 1863 and 1864, more than the entire expenditures of the National Government from the foundation of the nation to that day, paralysis would have fallen upon the courage of the bravest. If the necessity had been proclaimed of raising by loans before the 1st of July, 1865, two thousand millions of dollars more than the National Treasury had ever received from loans and revenue combined, the audacity of the demand would have forbidden serious consideration. If the Ways and Means Committee had been notified that before the end of 1865, the annual charge for interest on the national debt, for which provision must be made, would reach $150,977,697, much more than twice the total expenditure of the preceding year, skill and energy would have undergone the crucial test. But the surprise of legislators would have been equally great if they could then have unrolled the future records of the Treasury, and have seen that in the year in which the Rebellion would be suppressed, the receipts from customs would attain the vast sum of $179,046,651, while from internal revenue, a source not yet drawn upon, the enormous aggregate of $309,226,813 would be contributed to maintain the public credit.

We are so familiar with the vast sums which the war against the Rebellion caused the National Government to disburse, that it is difficult to appreciate the spirit with which the legislators of 1861 approached the impending burdens. They knew that their task was great. They were in imminent peril, not only from open hostility, but from doubt and fear. The resources of the Republic had not been measured, the uprising of popular patriotism had not yet astonished foreign foes and even the most sanguine of domestic participants. With the information which was then before the world, it may be questioned whether a complete scheme for providing the money necessary for the struggle could have been passed through Congress, or rendered effective with capitalists. The needs of each crisis were supplied as each arose. Congress did not try to look far into the future. It exerted itself to give daily bread to the armies of the Union, to provide munitions of war, to build and equip the navy.

NATIONAL FINANCES IN 1861.

The first receipts into the Treasury in 1861, other than from the ordinary revenues under preceding statutes, came from the loan of February 5, which authorized the issue of bonds bearing six per cent. interest, payable within not less than ten, or more than twenty years. The amount authorized was $25,000,000, and the secretary was able to negotiate $18,415,000 at the average rate of eighty-nine and three one-hundredths (89.03) per cent.

The Congress which closed its session of the 4th of March, 1861, among its final acts provided for a loan of $10,000,000 in bonds, or the issue of a like sum in Treasury notes; and the President was also empowered to issue Treasury notes for any part of loans previously authorized. Under this statute, notes were issued to the amount of $12,896,350, payable sixty days after date, and $22,468,100 payable in two years. This measure indicated the disposition to provide for pressing exigencies by devices which covered only the present hour, and left heavier responsibilities to the future. An incident of this period was the settlement of the debt incurred in the war in Oregon against the Indians, by giving to the claimants or their representatives six per cent. bonds redeemable in twenty years. The bonds were taken to the amount of $1,090,850, showing that such securities were welcome to claimants even at par.

The chief dependence of the United States for revenue had always been upon customs. But no real test had ever been made of the sum that might be collected from this source. The aim had been to see with how small an amount the National Government could be supported, not how large an amount might be collected. The time was now upon us when this critical experiment was to be tried, and the initial step in that direction was the Morrill Tariff which went into effect on the first day of April. It radically changed the policy of our customs duties from the legislation of 1846 and 1857, and put the nation in the attitude of self-support in manufactures. Although introduced before secession attained its threatening proportions, it was well adapted to the condition in which the country was placed at the time of its enactment. It was a measure carefully elaborated, and based upon principles which were applied with studious accuracy to all its parts. Under it the imposts which had averaged about nineteen per cent. on dutiable articles, and fifteen per cent. on the total importations, mounted to thirty-six per cent. on dutiable articles, and to twenty-eight per cent. on the total importations. Thus, although the goods brought into the country fell off unavoidably by reason of the war, and especially of the difficulties encountered by our vessels from the rebel privateers, the customs duties rather increased than diminished, and something was thus secured in the way of a basis of credit for the immense loans which became necessary. The measure, Mr. Sherman of Ohio stated, would in ordinary times produce an income of $65,000,000 a year to the Treasury.

The Morrill Tariff was found to meet the exigencies of the situation to such a degree that when Congress came together in response to the call of President Lincoln, Mr. Thaddeus Stevens, as head of the committee charged with the subject, informed the House that it had been determined not to enter upon a general revision. He reported a measure to extend the schedule of dutiable articles with the view of adding immediately to the revenue about $22,250,000 annually. After disagreement with the Senate his bill with slight alteration was enacted and became the tariff on Aug. 5, 1861. In Dec. 24, 1861, the duties on tea, coffee, and sugar were increased directly as a war measure. During the consideration of this bill, Mr. Morrill presented estimates showing that the revenue would be increased by about $7,000,000, and Mr. Vallandigham of Ohio took occasion to dwell on the falling off of importations, asking, "How are you to have revenue from imports when nothing is imported? Your expenditures are $500,000,000, your income but $50,000,000." He was much nearer the actual figures than political rhetoric is apt to be. Mr. Morrill's response was only to hope that the gentleman from Ohio had some proposition to offer more acceptable than the pending bill. That bill was indeed a reasonable, and, so far as it went, an effective measure, and Mr. Vallandigham had no substitute to offer.

NATIONAL FINANCES IN 1861.

In his annual report as Secretary of the Treasury, Howell Cobb had, on the 4th of December, 1860, estimated that the receipts of the Treasury for the fiscal year ending with June, 1862, would amount to $64,495,891, while he reckoned that the expenditures would be $68,363,726. With the prospect of peace and national unity he predicted a deficiency of $3,867,834 for that year. His figures were so preposterously incorrect as to justify the suspicion of intentional misstatement. The deficiency for the four years of Mr. Buchanan's administration had been, according to a statement by Mr. Sherman of Ohio in the House of Representatives, almost exactly $20,000,000 a year. This deficiency had been met by continual borrowing. On the 11th of February Secretary Dix reported to the Committee of Ways and Means that provision must be made before the 4th of March for a final deficiency of $9,901,118. This necessity was provided for by a clause in the Morrill Tariff Act; and the authority to issue Treasury notes to the full amount of loans previously permitted, gave to the administration of President Lincoln the means to start upon its difficult career.

With a revenue which no one estimated beyond $5,000,000 a month, with a credit at the low ebb which the sales of its bonds had already exhibited, the nation was to prepare for a war of untold magnitude. Mr. Chase, as Secretary of the Treasury, began to try the fruitfulness of the loan laws under which he must proceed. April 2, 1861, he offered $8,000,000, but the prices were not satisfactory to him, and he sold only $3,099,000 at the rate of 94.01. Nine days later he received bids for $1,000,000 of Treasury notes bearing six per cent. interest, and with considerable exertion he secured the increase of this sum to $5,000,000 at par. A committee of the New-York Chamber of Commerce led in a movement, representing the banks of some of the chief cities, to assist the Treasury in borrowing the means required for its pressing exigencies. By this co-operation Mr. Chase raised in May $7,310,000 on bonds at rates from eighty-five to ninety-three per cent. and $1,684,000 by Treasury notes at par.

When Congress met in special session under the call of Mr. Lincoln July 4, Secretary Chase found it necessary to declare that while the laws still permitted loans amounting to $21,393,450, the authority was unavailable because of the limitation that the securities, whether bonds or Treasury notes, should be issued only at par, on the basis of six per cent. interest. Practically therefore no power existed to borrow money. While, on the first of the month then current, there was a nominal balance in the Treasury of $2,355,635, charges by reason of appropriations for the account of the preceding fiscal year were outstanding to the extent of $20,121,880. The short loans already made, constituted also an immediate claim, and these amounted to $12,639,861. All these burdens were to be borne in addition to the demands of the year, which, as already demonstrated, would be one of extended military operations and of costly preparations and movements at sea. The total for which the secretary asked that Congress might provide resources, reached according to his estimates the sum of $318,519,581 for the fiscal year. Far-seeing men believed that even this enormous aggregate would fall short of the actual demand.

Mr. Chase proposed that $80,000,000 be raised by taxation, and $240,000,000 by loans. The suggestion was already urged that even a larger proportion of the money needed, should be raised by taxation. But unwillingness to create friction and opposition doubtless entered into the considerations which determined the recommendations of the secretary. He proposed to rely upon the tariff for a large share of the basis of credit, and, while adding to its provisions, to impose a direct tax, and to levy duties upon stills and distilled liquors, on ale and beer, on tobacco, spring- carriages, bank-notes, silver ware, jewellery, and legacies.

Congress made haste to consider and substantially to carry out the recommendations of Secretary Chase. The legislators were not inclined to go farther than the head of the Treasury suggested. No practical proposition was made for a broader scheme of taxation. The tariff, as has been indicated, was enlarged. A bill was passed, levying a direct tax of $20,000,000, to be apportioned among all the States, of which the sum of $12,000,000 was apportioned among the States which had not seceded from the Union. Instead of the scheme of internal taxes which Mr. Chase had proposed, an income tax was substituted, to be collected on the results of the year ending April 1, 1862, and assessed at three per cent. on all incomes in excess of $800; but before any collections were made under it, the broader internal-revenue system went into effect. Direct taxes had been tried in 1800 and again in 1814, but the receipts had always been disappointing. The results under Secretary Chase's proposition were altogether unsatisfactory; and on the 1st of July, 1862, an Act was passed limiting the tax to one levy previous to April 1, 1865, when the law should have full force. The estimates of collections were set at $12,000,000 annually, or very near that sum. For four years, 1862-1865 inclusive, the receipts were only $4,956,657: in 1867 they became $4,200,233, and then dribbled away.

THE NATIONAL LOAN ACT OF JULY, 1861.

Inadequate as is now seen to be the legislation of 1861 with reference to actual revenue, the receipts fell far below the calculations of experts. For the fiscal year 1862 the customs amounted to only $49,056,397, and the direct tax to $1,795,331; and the total receipts, excluding loans, were only $51,919,261 instead of $80,000,000, as expected under the estimates of the Treasury. The plea may perhaps be pressed in defense of Congress, that financial legislation, laggard as it was, ran before popular readiness to raise money by taxes. There was a wide-spread opposition among the strongest advocates of the war, to all measures which would, at an early stage, render the contest pecuniarily oppressive, and hence make it unpopular.

President Lincoln in his message at the opening of the special session had called upon Congress for $400,000,000 in money, and 400,000 men. Mr. Chase's figures were $320,000,000. He doubtless deemed it wise to ask for no more than Congress would promptly grant. As the struggle proceeded, it was demonstrated that those calculated most justly who relied most completely on the popular purpose to make every sacrifice to maintain the national integrity. This was however the period of depression after the first battle of Bull Run, of hesitation before casting every thing into the scale for patriotism.

The eloquent fact about the Loan Bill is that Congress made haste to enact it. It was introduced into the House of Representatives on the 9th of July. On the next day Mr. Stevens, chairman of the Ways and Means Committee, called up the bill, and, upon going into committee of the whole, induced the House to limit general debate to one hour. In the committee the entire time was occupied by Mr. Vallandigham of Ohio, in criticism on the President's message and on the general questions involved in the prosecution of the war. Mr. Holman of Indiana addressed to the gentleman from Ohio two inquiries bearing on the purpose of the latter to aid in maintaining the Union. No response was made to the speech of Mr. Vallandigham. The committee rose, and the bill was passed by a vote of 105 to 5. In the Senate no discussion took place, certain amendments looking to the perfection of the measure were adopted, and the bill was passed without division. The House at once concurred in the Senate amendments, and the act was consummated by which the first of the great war loans was authorized.

This Act became law on the 17th of July. Its provisions created a system by which the Secretary of the Treasury might offer bonds not exceeding $250,000,000 in the aggregate at seven per cent. interest, redeemable after twenty years; or he might issue Treasury notes payable three years after date, and bearing seven and three- tenths per cent. interest,—the notes not to be of less denomination than fifty dollars. A separate section permitted the secretary to offer not more than $100,000,000 abroad, payable in the United States or in Europe. The same Act authorized for a part of the sum not exceeding $50,000,000, the exchange for coin or the use in payment of salaries or other dues, of notes of less denomination than fifty dollars but not less than ten dollars, and bearing interest at the rate of three and sixty-five one-hundredths per cent. payable in one year; or these might be payable on demand and without interest. This loan might therefore be in bonds for sale in this country or in a different form for sale abroad; or, second, it might be in Treasury notes of not less than fifty dollars each, bearing seven and three-tenths per cent. interest; or, third, a part of the loan not exceeding $50,000,000 might be in notes of even as low denomination as ten dollars at three and sixty-five one-hundredths per cent.; and, finally, this latter part might be in notes without interest payable on demand. The bonds were to run at least twenty years; the seven-thirties three years; and the three-sixty-fives were payable in one year, and exchangeable into seven-thirties at the pleasure of the holder. A supplementary Act was passed Aug. 5, 1861, which permitted the secretary to issue six per cent. bonds, payable at the pleasure of the United States after twenty years, and the holders of seven-thirty notes were allowed to exchange their notes for such bonds. The minimum of the denominations of Treasury notes was reduced to five dollars, and all the demand notes of less denomination then fifty dollars were receivable for payment of public dues. By Act of Feb. 12, 1862, the limit of demand notes was raised to $60,000,000. In this modified form the statute directed the movements of the Treasury during the autumn of the first year of the Rebellion.

SECRETARY CHASE'S REPORT, 1861.

In his report, dated December 9, 1861, the Secretary of the Treasury related the steps which he had taken to raise money under these laws. Mr. Chase informed Congress that "his reflections led him to the conclusion that the safest, surest, and most beneficial plan would be to engage the banking institutions of the three chief commercial cities of the seaboard to advance the amounts needed for disbursement in the form of loans for three years' seven-thirty bonds, to be reimbursed, as far as practicable, from the proceeds of similar bonds, subscribed for by the people through the agencies of the national loan; using, meanwhile, himself, to a limited extent, in aid of these advances, the power to issue notes of smaller denominations than fifty dollars, payable on demand." Representatives of the banks of New York, Boston, and Philadelphia united to give moneyed support to the government. The secretary opened books of subscription throughout the country. The banks subscribed promptly for $50,000,000, paying $5,000,000 at once in coin, and agreeing the pay the balance, also in coin, as needed by the government. For this loan the banks received seven-thirty notes, and the proceeds of the popular loan were transferred to them. The sales to the public amounted to little more than half that sum; but the banks, when called upon, made a second advance of $50,000,000. By these and other agencies, Mr. Chase was able to present an encouraging summary of the Treasury operations.

He stated that "there were paid to creditors, or exchanged for coin at par, at different dates, in July and August, six per cent. two years' notes, to the amount of $14,019,034.66; there was borrowed at par. in the same months, upon sixty days' six per cent. notes, the sum of $12,877,750; there were borrowed at par, on the 19th of August, under three years' seven-thirty bonds, issued for the most part to subscribers to the national loan, $50,000,000; there were borrowed at par for seven per cent., on the 10th of November, upon twenty years' six per cent. bonds, reduced to the equivalent of sevens, including interest, $45,795,478.48; there have been issued, and were in circulation and on deposit with the treasurer on the 30th of November, of United-States notes payable on demand, $24,550,325,—making an aggregate realized from loans in various forms of $197,242,588.14." The loan operations had therefore been fairly successful, for they were still in progress; and President Lincoln was justified in stating in his message that "the expenditures made necessary by the Rebellion are not beyond the resources of the loyal people, and the same patriotism which has thus far sustained the government will continue to sustain it, till peace and union shall yet bless the land."

But the shadows were growing thick, and the situation was very serious. Mr. Chase was compelled to report that his estimates of revenue must be reduced below the figures which he gave in July by $25,447,334: at the same time the expenditures must be reckoned at an increase of $213,904,427. Predictions as to the speedy close of the war had ceased. Provision must be made, not only for the deficiencies presented, but for the ensuing year, during which the secretary estimated that the expenditures would be $475,331,245. He proposed to amend the direct tax law, so as to collect under it $20,000,000; to establish a system of internal revenue as he had suggested in July, and to increase some of the customs duties. From these sources, united with the receipts from the public lands, the revenue would be $95,800,000. With this basis, reliance must be placed on loans for the enormous sum of $654,980,920, and under existing laws he could borrow only $75,449,675.

The sale of public lands had furnished some part of the resources of the nation from an early day. The annual product had not been large as a rule. In 1834 and 1835 the sales had been abnormal, amounting in the latter year to $24,877,179, and only about $10,000,000 less in the preceding year. They were $11,497,049 in 1855, but they had fallen until they were less than $2,000,000 in 1859. It was natural to consider whether any help could be derived from this quarter in the hour of national necessity. A forced sale of lands was impossible to any such extent as to affect the receipts of the Treasury in the ratio of its demands. The pledge of the domain as security for loans was suggested only to be rejected. As was natural, purchases of the public domain ceased almost entirely while the young men of the country were summoned to the national defense, and the better strength went into the field of battle. From the public lands therefore the Treasury could hope for little, and very little was in fact received from them during the Rebellion. Secretary Chase had estimated in July that $3,000,000 might be annually derived from this source; but the receipts from the sales of lands never reached even $1,000,000 a year until two years after the Rebellion had been suppressed. Practically the public lands passed out of consideration as a source of revenue. Unfortunately also the attempt to levy a direct tax was received by the people with grave manifestations of disapproval. Its enforcement was likely to prove mischievous. The close of the year 1861 was therefore heavy with discouragement to the government. The military reverses at Bull Run and Ball's Bluff had outweighed in the popular mind the advantages we had gained elsewhere; the surrender of Slidell and Mason, though on every consideration expedient, had wounded the national pride; and now the report of the Secretary of the Treasury tended to damp the ardor of those who had with sanguine temperament looked forward to an easy victory over the Rebellion.

SUSPENSION OF SPECIE PAYMENT.

It was felt by all that the National credit, which had been partially restored under Mr. Chase's administration of the Treasury, could not be maintained except from the pockets of the people, and that every man must expect to contribute of his substance to the support of the government in the great task it had assumed. Happily all considerate and reflecting men saw that, desperate as the struggle might be, it must be accepted with all its cost and all its woe. They could at least measure it and therefore could face it. On the side of defeat they could not look. That was a calamity so great as to be immeasurable, and it left to the loyal millions no choice. If the struggle then in progress had been with a foreign power, popular opinion would have overthrown any administration that would not at once make peace. But peace on the basis of a dissevered Union, a disintegrated people, a dishonored nationality, could not be accepted and would not be endured.

The discouragement in financial circles produced by the Treasury report of Mr. Chase, hastened if it did not cause the suspension of specie payment by the banks of New-York City. Many country banks had ceased to pay specie some time before; indeed, many had been only on a nominal basis of coin since the financial crisis of 1857. So long however as the specie standard was upheld by the New-York banks, the business of the country was securely maintained on the basis of coin. It was therefore a matter of serious moment and still more serious portent that the financial pressure became so strong in the last days of the year 1861 as to force the banks of the metropolis to confess that they could no longer maintain a specie standard. It had been many years since the government had paid any thing but coin over its counters, but Treasury notes had just been issued payable on demand, and many millions were already in circulation. They would now be presented for redemption, and if promptly met, the Treasury would be rapidly drained of its specie. There were twenty-five millions less of gold coin in the government vaults than Secretary Chase had expected. This fact of itself enforced a larger issue of demand notes than would otherwise have been called for, and had thus doubly complicated the financial situation. The Treasury had disbursed a large amount of demand notes and received a smaller amount of gold coin than the well considered estimates of the secretary had anticipated.

The presumption was in favor of our being much stronger in coin than we were found to be. The discovery of gold in California had resulted in an enormous product,—surpassing any thing known in the history of mining. But we had been encouraging the importation of goods from Europe which were confessedly somewhat cheaper than our own fabrics, and in amount largely in excess of our export of cotton and cereals. We were therefore constantly paying the difference in coin. The political economists who had been in control of our finances insisted upon treating our gold as an ordinary product, to be exported in the same manner that we exported wheat and pork. The consequence was that during the decade preceding the war our exports of specie and bullion exceeded our imports of the same by the enormous aggregate of four hundred and fifty millions of dollars. For that whole period there had been a steady shipment of our precious metals to Europe at a rate which averaged nearly four millions of dollars per month.

Advocates of protection had found the drain of our specie the proximate cause of the financial panic of 1857. They now believed that the same cause had produced a suspension of coin payment at a much earlier date than the war pressure alone would have brought it about. They did not lose the opportunity of demonstrating that a system of protection which would have manufactured more and imported less, and which would thus have retained many millions of our specie at home, would have enabled us to meet the trials of the war with greater strength and confidence. If the Morrill Tariff had been enacted four years before, it would have been impossible for Secretary Cobb to stab the national credit. He would have been dealing constantly with a surplus instead of a deficit, and could not have put the nation to shame by forcing it to hawk its paper in the money markets at the usurious rate of one per cent. a month. One of the wisest financiers in the United States has expressed the belief that two hundred millions of coin, which might easily have been saved to the country by a protective tariff between 1850 and 1860, would have kept the National debt a thousand millions below the point which it reached. Of all the arguments with which protectionists have arraigned free-traders, perhaps the most difficult to answer is that which holds them responsible for the weak financial condition of 1860-61 in that they had deliberately driven our specie from the country for the ten preceding years.

CHAPTER XIX.

The Legal-tender Bill.—National Finances at the Opening of the Year 1862.—A Threefold Contest.—The Country thrown upon its own Resources.—A Good Currency demanded.—Government takes Control of the Question.—Authorizes the Issue of $150,000,000 of Legal-tender Notes.—Mr. Spaulding the Author of the Measure.—His Speech.— Opposed by Mr. Pendleton.—Position of Secretary Chase.—Urges the Measure upon Congress.—Speeches by Thaddeus Stevens, Mr. Vallandigham, Mr. V. B. Horton, Mr. Lovejoy, Mr. Conkling, Mr. Hooper, Mr. Morrill, Mr. Bingham, Mr. Shellabarger, Mr. Pike and Others.—Spirited and Able Debate.—Bill passes the House.—Its Consideration by the Senate.—Speeches by Mr. Fessenden, Mr. Sherman, Mr. Sumner, Mr. Bayard, Mr. Collamer and Others.—Bill passes the Senate.—Its Weighty Provisions.—Secretary Chase on State Banks.—Policy of the Legal-tender Bill.—Its Effect upon the Business and Prosperity of the Country.—Internal Revenue Act.—Necessity of Large Sums from Taxation.—Public Credit dependent on it.—Constitutional Provisions.—Financial Policy of Alexander Hamilton.—Excises Unpopular.—Whiskey Insurrection.—Resistance by Law.—Supreme Court Decision.—Case of Hylton.—Provisions of New Act.—Searching Character.—Great Revenue desired.—Credit due to Secretary Chase.

At the opening of the year 1862, from causes narrated in the preceding chapter, the government finances were in an embarrassed and critical situation. In Europe the general opinion—founded in many influential quarters on the wish—was that the Union would be dissolved; that with the success of the South, there would be still further division between the East and the West; and that the only compact power would be the Confederacy founded on slavery, with the world's great staples as the basis of its wealth and its assured development. We had but recently and narrowly escaped war with England on account of the Trent affair, and in the crafty and adventurous Emperor of France we had a secret enemy who saw in our downfall the possible extension of his power and the strengthening of his throne. Confederate bonds were more popular in England that the bonds of the United States. The world's treasures were closed against us. The bankers of Europe, with the Rothschilds in the lead, would not touch our securities. Their united clientage included the investors of Great Britain and the Continent, and a popular loan could not be effected without their aid and co-operation. We were engaged therefore in a threefold contest,—a military one with the Confederacy, and diplomatic and moral one with the governments of England and France, a financial one with the money power of Europe.

These causes threw us upon our own resources. The problem to be solved was the utilization of our wealth without the aid which comes from the power to borrow foreign money. Congress had obviously failed at the extra session of July to use the taxing power to the extent which financial wisdom demanded, and though it was now willing to correct the error, there was not enough time to wait the slow process of enactment, assessment, and collection. Our need was instant and pressing. The banks of the country, many of them in reckless, speculative hands, were freed by the suspension of specie payment from their just responsibility, and might flood the country with worthless paper which would entail great distress upon the people. The Treasury notes not being paid in coin on demand, as promised on their face, became discredited to such a degree that the banks of the leading commercial cities would receive them only as a special deposit, and not as money of account. So entirely were these notes distrusted in the opening month of 1862 that in more than one instance State banks exchanged their own bills for them as an act of patriotism, in order that the bounty due to soldiers just recruited might be paid before they left their State rendezvous to join the armies in the field. Troops already in the service had seen more than one pay-day go by without sight of the paymaster, and tens of millions were overdue to them. Discontent in all the camps was the natural result.

With no power to exchange our bonds for coin except at such rates as would destroy national credit, with only a hundred millions of coin in all our banks when the war began, and a hundred and fifty millions hoarded among the people, with the lavish products of our mines transferred to Europe to pay for articles which it would have been wiser to manufacture at home, our situation was not merely one of anxiety but of peril. Never in the history of national progress through trials and crises, were wise statesmanship and financial sagacity more imperatively demanded. The Rebels might fight without money, for they had no national credit to protect; but to the Union, bankruptcy meant final and hopeless ruin.

LEGAL-TENDER CURRENCY PROPOSED.

The first thing to be secured was a currency. That was demanded to pay the debt of honor due to the soldiers; to remove stagnation in business; to put the people in heart and hope. It had been demonstrated that Treasury notes, without punctual and regular redemption, would not circulate. When A paid them to B in satisfaction of a debt, B had no assurance that he might in turn cancel an obligation by paying them to C. It would perhaps occur to C, that for a lawful debt he had the right to demand gold or silver; for the law told him in explicit terms that nothing else constituted a legal-tender. It was obviously impossible to conduct the business of the country and to carry on the war, in coin payments, with the small amount of coin at command. Few would insist upon coin, but as the power to insist upon it was a legal right, it was a continuing menace to the confidence of trade.

In the opinion of the majority, the one imperative duty was that the government should take control of the currency, issue its own paper as a circulating medium, and make it equal and alike to all, by declaring it to be a legal-tender in the payment of debts. It was the most momentous financial step ever taken by Congress,—as it is the one concerning which the most pronounced and even exasperating difference of opinion was manifested at the time, has since continued, and will probably never entirely subside so long as the government keeps one legal-tender note in circulation. It was admitted to be a doubtful if not dangerous exercise of power; but the law of necessity overrides all other laws, and asserts its right to govern. All doubts were decided in favor of the nation, in the belief that dangers which were remote and contingent could be more easily dealt with than those which were certain and imminent.

Relief came promptly. On the 22d of January, 1862, Mr. E. G. Spaulding of New York reported the legal-tender bill to the House. It had been maturely considered by the Committee of Ways and Means, —a committee made up of very able men. Mr. Spaulding is entitled to rank as the author of the measure. It is difficult to assign absolute originality in any case where so many minds are at work in the same field of investigation, and where, with an approximate identity of date, there is a general similarity of conclusion. But the formal proposition and the public advocacy belong to Mr. Spaulding. He had been all his life engaged in financial affairs, was a banker of recognized ability in the city of Buffalo, and enjoyed a high reputation throughout the State of New York for intelligence and probity. He had not waited for advice or even for consultation, but on the thirtieth day of December, 1861,—the day on which the banks of New York suspended specie payment,—he introduced the original legal-tender bill in the House of Representatives.

The first provision of the bill now reported, was for the issue of $150,000,000 of Treasury notes, differing from those previously authorized by being declared a legal-tender for all obligations, public and private, except duties on imports and interest on the public debt. The notes were also to be exchangeable into six per cent. bonds, redeemable at the pleasure of the United States after five years. In reporting the bill, Mr. Spaulding called it "a war measure, a measure of necessity not of choice, to meet the most pressing demands upon the Treasury, to sustain the army and navy until they can make a vigorous advance upon the traitors and crush out the Rebellion." He argued, "These notes will find their way into all the channels of trade among the people; and as they accumulate in the hands of capitalists, they will exchange them for the six per cent. twenty years' bonds:" the notes will "be equally as good, and in many cases better, than the present irredeemable circulation issued by the banks." Mr. Spaulding argued that the Constitution justified such legislation in the emergency, and he declared that by this plan "the government will be able to get along with its immediate and pressing necessities without being obliged to force its bonds on the market at ruinous rates of discount: the people under heavy taxation will be shielded against high rates of interest, and capitalists will be afforded fair compensation for the use of their money during the pending struggle for national existence."

Mr. Spaulding admitted that "a suspension of specie payment is greatly to be deplored," but he contended that "it is not a fatal step in an exigency like the present. The British Government and the Bank of England remained under suspension from 1797 to 1821- 22, a period of twenty-five years. During this time England successfully resisted the power of the Emperor Napoleon, and preserved her own imperiled existence. As a measure of necessity, she made the Bank of England notes virtually a legal-tender by suspending the specie restriction. Throughout this period the people of Great Britain advanced in wealth, population, and resources." Mr. Spaulding maintained that "gold is not as valuable as the production of the farmer and the mechanic, for it is not as indispensable as are food and raiment. Our army and navy must have what is far more valuable to them than gold or silver. They must have food, clothing, and the material of war. Treasury notes, issued by the government on the faith of the whole people, will purchase these indispensable articles."

MR. CHASE FAVORS LEGAL-TENDER.

When the bill was taken up for consideration on the 29th of January, the objections which had been raised in the public press were elaborated in the Committee of the Whole. Mr. Pendleton of Ohio was the first in opposition. In beginning a long argument, he insisted that "the feature of this bill which first strikes every thinking man, even in these days of novelties, is the proposition that these notes shall be made a legal-tender in discharge of all pecuniary obligations, as well those which have accrued in virtue of contracts already made as those which are yet to accrue in pursuance of contracts which shall hereafter be made. Do gentlemen appreciate the full import and meaning of that clause? Do they realize the full extent to which it will carry them? Every contract for the purchase of money is in legal contemplation a contract for the payment of gold and silver coin. Every promissory note, every bill of exchange, every lease reserving rent, every loan of money reserving interest, every bond issued by this government, is a contract to which the faith of the obligor is pledged, that the amount, whether rent, interest, or principal, shall be paid in the gold and silver coin of the country." Mr. Pendleton deemed it a very serious matter that "the provisions of this bill contemplate impairing the obligation of every contract of that kind, and disturbing the basis upon which every judgment and decree and verdict have been entered." He concluded by referring to the depreciated paper of the French Revolution, to the long suspension of specie currency in England, and the throes attending return to it in 1822. Quoting Daniel Webster's words that "gold and silver currency is the law of the land at home, the law of the world abroad: there can, in the present condition of the world, be no other currency," Mr. Pendleton made an earnest appeal to the House "to heed this lesson of wisdom."

Repeated declarations were made during the debate that the Secretary of the Treasury had not given his approval of the pending measure. This impression was seriously impeding the progress of the bill, and, if it had been confirmed, would probably have defeated it. A belief was prevalent that Mr. Chase would be glad to have the advantage of the measure in the management of the Treasury without assuming the responsibility of its recommendation. But it was soon evident that he could not remain in a passive and receptive position without defeating the bill. Its real opponents took advantage of the rumors; and its supporters, annoyed if not angered, by the suggestion of hostility on the part of the Treasury, were determined that Secretary Chase should take open ground. The embarrassment was relieved by a letter from the Secretary to the Committee of Ways and Means, dated Jan. 29, and read in the House on the 4th of February by Mr. Spaulding. The letter had great influence on Congress. Without it, the measure would probably have been defeated.

Mr. Chase, assuming that "the provision making United-States notes a legal-tender has doubtless been well considered by the committee," deemed it his duty to say that "in respect to the provision his reflections had conducted him to the same conclusions the committee had reached." He did not wish to conceal that he felt "a great aversion to making any thing but coin a legal-tender in payment of debts." He had been anxious "to avoid the necessity of such legislation." He found it however "impossible, in consequence of the large expenditures entailed by the war and the suspension of the banks, to procure sufficient coin for disbursements." He declared therefore that it "had become indispensably necessary that we should resort to the issue of United-States notes. Making them a legal-tender might however still be avoided, if the willingness manifested by the people generally, by railroad companies, and by many of the banking institutions, to receive and pay them as money in all transactions were absolutely or practically universal; but unfortunately there are some persons and some institutions that refuse to receive and pay them, and their action tends, not merely to the unnecessary depreciation of the notes, but to establish discriminations in business against those, who, in this matter, give a cordial support to the government, and in favor of those who do not. Such discrimination should if possible be prevented; and the provision making the notes a legal-tender, in a great measure at least, prevents it by putting all citizens in this respect on the same level, both of rights and duties." In addition to this official communication, Mr. Spaulding felt justified in reading a personal note from Mr. Chase, in which he said that he "came with reluctance to the conclusion that the legal-tender clause is a necessity," but that he "came to it decidedly and supported it earnestly."