29
the constitution to mint coin, it was not explicitly given power to issue banknotes. State’s
rights proponents rallied behind the argument that the issuance of currency under the direction
of the federal government was unconstitutional. The second main contention was that the
currency proposed would be backed by US bonds and not specie. The issue of non-
convertibility was clearly the stickier of the two in Congressional debates. “While I have
always believed it to be the duty of Congress to regulate and control the currency by such
legislation as would make it of uniform value throughout the country, I have never regarded it
as wise or politic for the Government to make issues of paper, at any time, except for
temporary emergencies.” (Alley (MA), Congressional Globe, Feb. 5, 1862) The measure was
eventually passed with assurances that a specie standard would be reestablished immediately
after the conclusion of the war.
44
Additional opposition to the bill included concerns that the
measure would cause undue inflation, forever taint the reputation of federal government
finance and constitute an undue intrusion into local practices.
House debates in early February over the First Legal Tender Act clearly demonstrated
that the common currency was needed for commercial purposes. Alley (MA) stated that while
the United States did not need a national currency in 1837, trade needs by 1862 required “a
currency sufficient to meet the wants of trade”. (Congressional Globe, Feb. 5, 1862) This
point was further supported by Kellogg (IL):
Mr. Chairman, it certainly may be set down as sound policy to, if possible,
make the medium or currency which discharges the indebtedness of the
country the same which is used in the purchase and sale of productions of the
country. . . . This policy, if adopted and adhered to, would save us from the
ruinous fluctuations in monetary affairs that not unfrequently befall us.
(Congressional Globe, Feb. 6, 1862)
44
Both Spaulding and Chase would publicly repudiate linkages to the Legal Tender Acts in the late 1860s in part
for this reason, prior to a decision to establish Resumption in the mid-1870s.
Convention