Bills of credit

“ At the adoption of the National Constitution, the people, to their wide-spread cost, had become familiar with bills of credit and their incidents, while all conversant with Colonial history must have known the part which bills of credit played for nearly a century, not only as a help to currency, but as a tender, constituting paper money. ”

“ Bills of credit were viewed in the United States in the same way, before the adoption of the constitution, and immediately afterwards. That the definition of a bill, by the common law and common acceptation, is the same here as in England, and has ever been so accepted, is a proposition which needs only to be asserted; the same reasoning also attaches to a letter of credit, in a mercantile sense, and the same distinction which has been shown to exist there, between bank-bills and bank-notes, was in the most explicit manner recognised, during the revolution. ”

“ None the less, the power to borrow money does embrace the power to issue obligations for the money borrowed, and can, perhaps, be taken of itself to sustain the issue by the government of its bills of credit. The power was regarded as existing by many very early in the history of the government, and in 1812 the government did put out its treasury notes, which circulated as money, although not declared a legal tender. ”

“ Thus, the remedy covers the whole mischief, and goes beyond it, if supplied literally to its full extent; the mere emission of bills of credit was no evil; if no law coerced their circulation or reception by individuals, they are as harmless as certificates of stock, emitted on a voluntary loan to the state, which are admitted not to be the prohibited bills of credit. ”

“ The whole history and legislation of the time prove that, by bills of credit, the framers of the constitution meant paper money, with reference to that which had been used in the states from the commencement of the century, down to the time when it ceased to pass, before reduced to its innate worthlessness. ”

“ Then comes the term bills of credit, without any reference of explanatory words; but as it necessarily relates to the payment of money, the word bill must be taken as a paper, containing some evidence that a certain sum is due, to the person to whom it was emitted or issued, or by whom it was held. It is a word of legal import, as well defined as any in the English language, according to the subject-matter to which it is applied. 'A bill is a common engagement for money given by one man to another ”

“ Creditors may exact gold and silver or they may waive the right to require such money, and accept credit currency, or commodities, other than gold and silver, and the United States, as creditors, or in the exercise of their express power to lay and collect taxes, duties, imposts, and excises, may, if they see fit, accept the treasury notes or bank bills in such payments as substitutes for the constitutional currency. ”

“ It is not until the circumstances of the markets, and the state of the mercantile mind, render many persons desirous of stretching their credit to an unusual extent, that the distinctive properties of the different forms of credit display themselves. Credit already stretched to the utmost in the form of book debts, would be susceptible of a great additional extension by means of bills, and of a still greater by means of bank notes. ”

“ At all events, as a measure of justice to the holders of the nation's certificates of indebtedness, I would recommend that no more legislation be had on this subject, unless it be to correct errors of omission or commission in the present laws, until sufficient time has elapsed to prove that it can be done and still leave sufficient revenue to meet current expenses of Government, pay interest on the public debt, and provide for the sinking fund established by law. The preservation of our national credit is of the highest importance ”

“ A revolving loan fund should be provided for the necessary financing until these agencies shall have developed means of financing their operations through regularly constituted credit institutions. Such a bill should carry authority for raising the money, by loans or otherwise, necessary to meet the expense, as the Treasury has no surplus. ”

“ No other adequate cause has ever been assigned for the revival of government credit, the renewed activity of trade, and the facility with which the government borrowed, in two or three years, at reasonable rates of interest, mainly from its own citizens, double the amount of money there was in the county, including coin, bank notes, and the notes issued under the legal tender acts. ”

“ In this case, if the public credit is good, they may borrow a certain sum, and raise for the present only enough to pay the interest, deferring the payment of the principal till the public is more able to bear it. In the other case, where no money can be borrowed, there is no resource, if the whole sum cannot be raised immediately. ”

“ When there are no specific sinking-fund attachments to public debts, the repayment of public debt might be regarded, so far as the contract with creditors is concerned, as a work of supererogation. But just as a business man gains in credit by prompt or anticipated payments, so a policy more liberal to creditors than legal requirements demand redounds to the credit of the State. Repayment of the principal is not essential, as we have seen, to the maintenance of public credit, as States whose debt continues to increase stand in good repute, but is a policy to be recommended. ”

“ The neglect in funding the public debt, has introduced a practice of issuing Loan Office certificates, for the interest due on other Loan Office certificates. This I have absolutely forbidden, nor will I ever consent to it. Such accumulation of debt, while it distresses the public, and destroys its credit, by no means relieves the unfortunate individual, who is a public creditor; for if revenue is not provided, increasing the certificates would only lessen their value. ”

“ The law declares that they are “money” and guarantees their payment; hence they pass as money, but are not, strictly speaking, Legal Tender. The basis of their circulation is the Credit of the Government. The people have to pay taxes to meet the interest on the bonds in order that the National Bankers shall have the vast profit and power of using the Government Credit for their private gain. ”

“ An inquiry into the transactions of the institution, embracing the branches as well as the principal bank, seems called for by the credit which is given throughout the country to many serious charges impeaching its character, and which, if true, may justly excite the apprehension that it is no longer a safe depository of the money of the people. ”

“ If a state is poor, and people owe more money than can be procured, a legislature may perhaps go so far as to suspend the collection of debts; or to ordain that a certain part only of the debts shall be recoverable immediately, and the payment of the remainder suspended. This may ease the debtors; but can be justified in extreme cases only, when the people are generally and greatly involved.
[pg 042] A people should not generally be in debt: The consumers of goods should not get credit. Heavy and numerous debts are great evils to a state. ”

“ IX. The Government undertakes not to issue any loans, Treasury Bonds or any other new bonds, and not to contract other loan of any nature whatsoever. This same engagement is entered into in the name of the Daira Sanieh. Nevertheless, in case the Government, from urgent national reasons, should find itself placed under the necessity of having recourse to credit, it may do so within the limits of strict necessity, and without doing anything to affect the employment of the revenues set apart for the Treasury of the Public Debt, or to cause their diversion from their destination. ”

“ In order to raise money by way of loans most easily and cheaply, it is clearly necessary to give every possible support to the public credit. To that end a uniform currency, in which taxes, subscriptions to loans, and all other ordinary public dues, as well as all private dues, may be paid, is almost, if not quite, indispensable. Such a currency can be furnished by banking associations, organized under a general act of Congress, as suggested in my message at the beginning of the present session. ”