12

WAR  BORROWING

charter  of  the  Bank  of  the  United  States  had  expired ­
  in  1836  and  in  1837  there  was  general  suspension. ­
  To  meet  the  monetary  demand  as  well  as
to  satisfy  the  financial  deficit  the  issue  of  one-year
treasury  notes,  bearing  not  more  than  six  per  cent,
interest  and  in  denominations  not  exceeding  $50,
was  authorized  in  1837  to  an  amount  not  exceeding
$10,000,000.  The  notes  were  to  be  issued  in
optional  payment  of  public  creditors  and  were  receivable ­
  for  all  taxes  and  dues.  As  issued  a  large
part  of  the  notes  bore  a  merely  nominal  rate  of  interest ­
  and  were  speedily  presented  in  payment  of
taxes,  to  that  extent  accomplishing  the  fiscal  and
failing  the  monetary  purpose  in  view.
The  precedent  established,  recourse  was  had  from
1837  to  1844  under  authority  of  eight  successive
acts  to  no  less  than  thirteen  emissions  —  issues  and
reissues  —  to  an  aggregate  amount  of  $47,002,900.
Used  primarily  to  meet  financial  exigencies  in  a
period  when  neither  bond  issues  nor  bank  loans
were  regarded  as  feasible,  the  expedient  continued
to  serve  in  presence  of  a  disordered  and  inelastic
currency  system  a  monetary  need  as  distinct  from
a  fiscal  requirement.  So  employed,  the  treasury
note  was  the  center  of  much  of  the  political  controversy ­
  and  constitutional  debate  which  raged  in
these  troubled  years  over  the  specie  circular,  the  independent ­
  treasury  system,  the  organization  of  a
national  bank,  and  the  emission  of  paper  money.
The  outcome  was  to  vindicate  the  fiscal  usefulness
and  to  discredit  anew  the  monetary  effectiveness
of  the  treasury  note.  By  the  close  of  the  period
the  distinction  had  been  clearly  made  that:  “  the