Martinsburg herald. [volume] (Martinsburg, W. Va.) 1881-1920, 1918-09-07
LOAN SYSTEM RATTLE R THAN TAXATION
USED EXTENSIVELY DURING CIVIL WAR
First inauguated BY Secretary Chase Issued at VARYING
Rates of nterest-Both Long and Short Bonds Sold

and when it became necessary to ne
gotiate a temporary loan the follow
ing year, preference was given to the
compound interest treasury notes at
a higher rate of interest.
The financial condition Of the fed
eral government was found to be in
very satisfactory condition when
! Secretary Chase made his report to
/ congress in December, 1863 Taxes had
lbegun to be productive, confidence had
i been restored through the success of
the Union armies at Gettysburg and
| Vicksburg, the premium ON gold had
i decreased and the bonds left on hand
iron the early long issue, were in de-
mand. The Secretary reported that fife
receipts from loans for the fiscal year
we're s590,000,000 and he proposed to
the Committee on Ways and Means
that further loans be authorized for
| $594,000, 900 for the following year.
Secretary Chase also asked for
greater freedom in negotiatingIoans
andin compliance with his request,
Congress passed a new loan act
March 3, 1864, authorizing an issue
OF $500, 100000 of bonds at not over
six per cent and redeemable in be-
tween five and forty years at the dis
erection of the government.
Chase lowered the interest on the
loan of five per cent and buying near
ly ceased. Only $73, OPT 900 was realized
while the expenses of the war were
rapidly increasing. Short loans were
issued and they were followed by
still further issues, all of which were
in popular demand.
Owing to various causes, Chase re-
signed June 49, 1864 and was succeed
ed by Senator William p. Fessenden.
of Maine. He had been chairman of
the Senate Finance Committee There
was balance on hand of only $751;
$4,000. Interest on the public debt
was due, the pay of the soldiers was
in arrears and the army expansion
meant an increase Of daily expenses
ranging from $2,500,0O0 to $S,OO0y00O.
Fessenden remained in office only
until March 3, 1865, but during that
time he proved his ability and his
courage. He proposed great national
loan of $200, 100000 in the form of
notes payable in three years at an
interest of 7.3 per cent. The services
of Jay Cooke were again secured and
during the latter part of 1865, $110,-
100000 of the notes were sold The
issue was. then increased to $500 J00O,-
900 and Sis, 100000 of notes met with
a ready sale. Fessenden likewise re-
turned to the six per cent interest
policy on the temporary compound
notes and these were also eagerly
taken by the people.
The success of Fessenden, however,
reflected no discredit upon the albii-
ity of Chase, who bore the bruno
through the most trying days of the
war and displayed genius for or
ganization which has been compared
to that OF Alexander Hamilton. Chase
was responsible for the establishment
of the National Banking system which
prevailed until it was supplanted by
the present Federal Reserve Bank
system.
Chase laid the foundations of the |
system of selling government bonds
to the national banks and permitting !
the banks TO issue circulating notes
upon them. The effect of this was |,
that if a national bank bought one
hundred thousand dollars worth of /
government bonds it was permitted |
to issue almost hundred thousand
dollars in the familiar national bank |
notes. The bank, meanwhile, deposit |
ed the bonds with the government as
security for the redemption of the
notes ii issued.