New-York tribune., 1918-03-04
Suspension of Specie Payments

Suspension of Specie Payments
The suspension Of specie payments
! by the banks Of three cities named
meant that they had discontinued the
redemption cf their notes IN gold or
silver. also the payment of specie in
/ ordinary transaction. The banks of
other cities followed their example.
All Of these banks were organized un-
der state charters, there being no
national system at that time. The
bank notes continued to circulate after
the suspension, and in the case of we'll
known institutions, without much var-
alton from gold in the neighborhood
where issued. but q discount on bank
notes at distance from home was
common thing in those days. 1t was
not the first time that the banks had
suspended by common action; they
had done so in 1857, and before that
the country, excepting gold and sil-
Yer. and the latter when the banks
suspended went out of circulation by
being boarded. In this instance the
demand rotes constituted new form
of paper money-government paper.
which remained in circulation.
The State Bark Currency
The suspension of specie payments
by the banks did not in itself neces-
state discontinuance OF bond sales
through the banks or a resort to
government paper money, but it
changed the situation in some impor-
t&nt respects. To go on as before
1T would have been necessary for the
Treasury to receive payments for
bonds in irredeemable bank notes,
and this inevitably raised the ues-
tlon whether, ii The war must be car
ried on with irredeemabe paper. it
had not better he government paper,
than bank paper. Much might have
been said in favor Of bank paper even
in these circumstances: bankers have
ways of stabjlZing the value of their
issues which arc rot at the command
of government officials. and govern
ments will hold banks to their obi
cations more strictly than they will
perform their own obligations. There
can be little doubt that if bank notes
had continued to be the only paper
currency specie payments would have
been resumed long before they actu.
ally were.
The First Legal Tenders
Responsibility devolved upon the
. Sub Committee Of Ways and Means
: and Nj. Spaulding and his associates
! not readily but reluctantly. accepted the
legal tender proposal as temporary
cHpedlent until an adequate BORROWING
programme could be developed. Mr
Spauldlng reported bill, which was
: adopted By the Ways and Means Com
mlttee, authorizing the issue of $780,
ooo,oCo OF legal tender notes. of which
soo,ooooo0 were to take the place OF
the demand notes
An important feature of the pro-
posed notes and of all the "greenbacks' >
as originally issued, was q provision al
Lowing them to be funded at the will
of the holder into $50 per cent bonds
the interest of which was payable selni-
annually in coin. Unfortunately, this
provision was afterward repealed; if it
had remained in force it would have
done much to sustain the value of the
"greenbacks' and would have brought
them to par many years earlier, with
out any further legislation. 1t as after
this twhat the most serious deprecia.
ton occurred. MIR. Spauding later pro
nounced the repeal Of this privilege OF
conversion the worst mistake made in
all the financial legislation of the war
Secretary Chase accepted the pro
posed measure reluctantly in a letter
which closed with the following para
graph:
Regrctting exceedingly that it ia found
necessary to resort to The measure of MAX
lnE funablc notes OF the United States u
l"ga! tender, but heartily desiring to CO.
operate with the committee in all meas
urea TO meet existing necessities in the
mode most useful and least hurtful to gem
crnl interest l remain, with great re-
spect, etc.
The conservative business element
was startled by the bill, and MANY pro
tests We're uttered. The New York
Boston, and Philadelphia Clearing
Houses sent delegations to Washington
to oppose the policy, Mr.. Coe heading
the New York delegation. The answer
!. made to these protests was that there
was no other way to provide means OF
payment for immediate use. The fol
lowing letter, written by Mr. Spauld
ing to q friend in New York, indicates
his own state of mind, and scme of the
language sounds quite familiar even al
: this time. The italics are Mr.. Spauld
ing's:
House of Representatives
Washington. January s, 1862.
Isaac Sherman, Esq. New York
Dear SIR In reply to toyurs of the 4th
note bill for 800 900 agreed upon in
committee yesterday IS measure of ne
cessity ard not of choice
You critciso matters very freely and
very likely you may be right in what You
say.
We will be ont of means to pay the daily
expenses in about thirty days, and the
get along till can get the tax bills
ready. except to issue temporarily Treas
ury notes. Perhaps you can suggest some
other mode of carrying on the government
tor the next one hundred days You do
not pretend that any considerable amount
of taxes can be collected for the next three
: months. under your plan II is n,ucb
l easier to find fault than it is to suggest
G practicable means or measures
We must have at least 500 900 900 dur
{ ing the next months. the government
must stop payment. With the navy and
$ an army of 100000 men in the field. we
G cannot say that we will not pay.
, will thank you TO suggest a better
practicable mode of getting .SlO0 900 900
y OF paying notes during the next three
/ months. would be glad to adopt it. aud
2 the committee would be glad to ADOPT it.
e Let us have your specific plan for this
@ purpose-one that will produce the money
and we will be very much obliged TO
. you. In haste. Yours truly
r. G. SPAULDING.
i +. S.-l am as impatient ns you can be
= Tor TN early and successful advance of tho
, army so important ut this time 20 sustain
the credit OF the government. Will it be
:. done! You nrc just as well Informed on
that subject as any of w. say to YOU
I, privately that could find fault more ludly
: thnn you do. but I will not do that with
, out DelnH able to suggest a practicable
, remedy and ! might say many things to
. you. personally. that / might not -0ut ON
t pnpcr. Conid"n.ially yours. T. G.. 6
Q The invetcrate antagonism to bank,