The Indiana State sentinel. [volume] (Indianapolis) 1868-1895, 1877-06-27

all ODl1gat1OnS TO pay dnV OF The
demand notes and $40, ,O00, 900 of 7-30 treas
ury notes that were each and all issued
prior to the passage of the act February %,
1852 creating the United States note
or greenback a legal tender, thereby
proclaiming to the world its intentions rela-
tive to all bonds or debts that were not made
payable in coin on the face of said bonds
All lenders thereafter took the government
at its word by giving no more for them than
for bonds that were payable in paper 1t
was not supposed that the government
would repay its creditors more than it was
bound to by the terms of the contract. So
the $40 bonds were bought with legal tender
notes that were worth from 40 to 40 cents on
the dollar in coin.
THE FINANCIAL POLICY.
Newcomb, IN his essay entitled "Phe
Financial Policy of the Government
tduring the late war; which published
in 1865. says: Had any one predicted that
in three years the notes which were declared
a legal tender for the entire principal of the
public debt would only have been worth
from 40 to 45 cents on the dollar in gold he
would have been called villainous SANDER
er of the public credit"
Newcomb was no friend of the legal ten
der bill. which he says ''implied a vote of
want of confidence in the nation Hence
his criticisms are worthy of notice, as they
were written long before any effort was
made to repudiate the payment of the legal
tender bonds according to their face. The
quotation above is from page 107 of New
combs Financial Policy On page 92 he
saws: at was not the demand notes alone
that were thus made payable-by receiving
another note with the words On demand
omitted. The new paper money was legal
| tender in payment of the entire principal of
the public debt"
On page lis he says: "By the letter and
/ ~ H. 4l., hr&r, ,Io
| 5-20s-can be redeemed in notes at any time
after five years But at the time the 5-2O
| loan was all taken, an official an
nouncemeRt was issued from the treas
urv declaring that the principal OF the
| entire permanent debt should be paid in
coin. Thus we are placed in the following
dilemma: II we pay the principal in coin,
we shall give the creditors much more than
they are entitled to by the strict terms OF
| the contract. III we pay in paper we shall
| be accused of a breach of faith by foreigners
| who bought bonds without thorough
/ knowledge of the terms of the contract.
And after alluding to the payment OF the
] loan of 1S41, that was due January L, 1868,
/ in coin, and condemning the reasons for do
| ing so, as set forth in communication from
the presidents of the principal New York
| city banks advising the secretary of the
| treasury that the credit of the government
would be promoted by paying the sum
S3, ,0O0, ,000-in coin (which was loaned by
said banks at per cent. interest, he says:
Good faith demands that every loan
contracted by the government when
coin only was a legal tender. ought to be
| paid in coin.' The rule laid down by Mr..
Chase regarding the payment of the princi-
pal of the five-twenties alluded to above, is
criticised thus by Newcomb, pages III and
| 11S:
Mr.. cHAsE's IDEA
'Mr. Chase ruled that the principal of the
permanent debt, including all bonds, should
| be paid in coin, but that the principal of ali
| the temporary loan was payable in legal
tender notes. This decision gives rise to the
ethical question: How does the circum-
| stance that a loan is temporary modify
the obligation to pay it? The difficulty oi
answering it is increased by the circum
stance that the fiye-twenty loan, declared by
Mr. Chase to be payable in coin, was all con
tracted by borrowing paper, while the seven
thirty loan, which is declared payable in pa
per, was nearly all contracted by borrowing
COIN" Then again he says: "In extenuation
of the act of refusing to pay the holders o
the 7-30 loan in coin, it is urged that there
was no agreement to pay it thus" Page lis
Twelve months previous to the passage o
the legal tender act, when twenty million!
of hearts were all aglow with enthusiastic
patriotism, thousands of mechanics, farmer
and workmen, each gave hard-earned hun
dred of gold or silver dollars TO support the
credit of their flag and government They
received in return $40 notes; promise
that the United States would pay them
$40 per cent. per annum interest, and in
three years, at the maturity of the notes
would repay them the dollars" they ha(
loaned. But by the decision of the treasury
referred to, after the passage of the lega
tender act when the holder of the 7-30 note
presented them for payment, instead of get
ting his dollars back he got only A
per cent thereof in the shape o
'greenback" he preferred
six per cent 500 bond. Page 90
Then, after showing how the republican
leaders redeemed the demand note that wa
receivable for customs by another that wa
not, he says: "Was this paying the debt in
th emanner understood between the partie
at the time the debt was contracted?" Tha
promises made by the government wer
modified without the consent of the party il
whose favor they were made is undeniable
The promise meant one thing at the time i
was made the meaning of the words wa
afterward changed to that it should meal
something else. Gold and silver had beel
the only legal tender of the government
since the adoption of the constitution. Fo
the first hundred million of the 7-30 notes /
would accept nothing but gold or lis equiva
lent Among hose who thus loaned thes
coins to the government no one supposed
!, that If the loan were ever repaid at al
it would be repaid in anything bu
! gold or silver coin or their equiv
. alents. To do otherwise would be
breach of faith on the part of the govern
ment. But this was done when the govern
ment needlessly suspended specie payment
instead of resorting to a system of direct an,
indirect taxation to procure the money re
quired to carry on the war and meet the pay
ment of the demand notes and other ma
tured and maturing Indebtedness Becaus
the banks through which the war loans ha.
hitherto been negotiated could supply n
more mony-having supended specie pay
ment when six pes cent stock, usually com
manding a heavy premium was at dis
count OF from seven TO fifteen per cent-an,