第46章 THE SECRETARY OF THE TREASURY(1)

Though the defeat of the Democrats at the polls in 1863 and the now definitely friendly attitude of England had done much to secure the stability of the Lincoln Government, this success was due in part to a figure which now comes to the front and deserves attentive consideration. Indeed the work of Salmon Portland Chase, Secretary of the Treasury, forms a bridge, as one might say, between the first and second phases of Lincoln's administration.

The interesting Englishman who is the latest biographer of Lincoln says of Chase: "Unfortunately, this imposing person was a sneak." But is Lord Charnwood justified in that surprising characterization? He finds support in the testimony of Secretary Welles, who calls Chase, "artful dodger, unstable, and unreliable." And yet there is another side, for it is the conventional thing in America to call him our greatest finance minister since Hamilton, and even a conspicuous enemy said of him, at a crucial moment, that his course established his character "as an honest and frank man."Taking these contradictory estimates as hints of a contradiction in the man, we are forced to the conclusion that Chase was a professional in politics and an amateur in finance. Perhaps herein is the whole explanation of the two characteristics of his financial policy--his reluctance to lay taxes, and his faith in loans. His two eyes did not see things alike. One was really trying to make out the orthodox path of finance; the other was peering along the more devious road of popular caprice.

The opening of the war caught the Treasury, as it caught all branches of the Government, utterly unprepared. Between April and July, 1861, Chase had to borrow what he could. When Congress met in July, his real career as director of financial policy began--or, as his enemies think, failed to begin. At least, he failed to urge upon Congress the need of new taxes and appeared satisfied with himself asking for an issue of $240,000,000 in bonds bearing not less than seven per cent interest. Congress voted to give him $250,000,000 of which $50,000,000 might be interest-bearing treasury notes; made slight increases in duties;and Prepared for excise and direct taxation the following year.

Later in the year Congress laid a three per cent tax on all incomes in excess of $800.

When Congress reassembled in December, 1861, expenditures were racing ahead of receipts, and there was a deficit of $143,000,000. It must not be forgotten that this month was a time of intense excitability and of nervous reaction. Fremont had lately been removed, and the attack on Cameron had begun. At this crucial moment the situation was made still more alarming by the action of the New York banks, followed by all other banks, in suspending specie payments. They laid the responsibility upon Chase. A syndicate of banks in New York, Boston, and Philadelphia had come to the aid of the Government, but when they took up government bonds, Chase had required them to pay the full value cash down, though they had asked permission to hold the money on deposit and to pay it as needed on requisition by the Government. Furthermore, in spite of their protest, Chase issued treasury notes, which the banks had to receive from their depositors, who nevertheless continued to demand specie. On January 1, 1862, the banks owed $459,000,000 and had in specie only $87,000,000. Chase defended his course by saying that the financial crisis was not due to his policy--or lack of policy, as it would now seem--but to a general loss of faith in the outcome of the war.

There now arose a moral crisis for this "imposing person" who was Secretary of the Treasury--a crisis with regard to which there are still differences of opinion. While he faced his problem silently, the Committee on Ways and Means in the House took the matter in hand: Its solution was an old one which all sound theorists on finance unite in condemning--the issue of irredeemable paper money. And what did the Secretary of the Treasury do? Previously, as Governor of Ohio, he had denounced paper money as, in effect, a fraud upon society. Long after, when the tide of fortune had landed him in the high place of Supreme Justice, he returned to this view and condemned as unconstitutional the law of 1862 establishing a system of paper money. But at the time when that law was passed Chase, though he went through the form of protesting, soon acquiesced. Before long he was asking Congress to allow a further issue of what he had previously called "fraudulent" money.

The answer to the question whether Chase should have stuck to his principles and resigned rather than acquiesce in the paper money legislation turns on that other question--how were the politician and the financier related in his make-up?

Before Congress and the Secretary had finished, $450,000,000 were issued. Prices naturally rose, and there was speculation in gold. Even before the first issue of paper money, the treasury notes had been slightly below par. In January, 1863, a hundred dollars in paper would bring, in New York, only $69.00 in gold; a year later, after falling, rising, and falling again, the value was $64.00; in July and August, 1864, it was at its lowest, $39.00; when the war closed, it had risen to $67.00. There was powerful protest against the legislation responsible for such a condition of affairs. Justin Morrill, the author of the Morrill tariff, said, "I would as soon provide Chinese wooden guns for the army as paper money alone for the army. It will be a breach of public faith. It will injure creditors; it will increase prices; it will increase many fold the cost of the war." Recent students agree, in the main, that his prophecies were fulfilled;and a common estimate of the probable increase in the cost of the war through the use of paper money and the consequent inflation of prices is $600,000,000.