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Summary:

Salmon Chase. Letter Signed (“S.P. Chase”), to Horace Greeley. Washington, November 19, 1867. 6 pp. 8 ½ x 5 ½”. 

Inventory # 21759 $10,000

Complete Transcript: 
                                                                               Washington, November 19th 1867.
My dear Mr. Greeley,:
           I feel as the Quakers say impressed to write to you about the finances. There are few who understand what my work was. It may be set under three heads:
         1. To establish satisfactory relations between the public credit and the productive industry of the country – in other words to obtain supplies. The suspension of the banks put an end to the first and most obvious resort [inserted: - loans of gold,-] and made new methods indispensable. Then I resorted to Legal Tender Notes, made them a currency and borrowed them as cash. The patriotism of the people came in aid of the labors of the Treasury and the Legislation of Congress, and the first great object was made secure.
         2. To provide against disastrous results on a return of peace. This could only be done by providing a National Currency. There were about 1500 State Banks in existence who wanted to make their own paper the currency of the country. This I resisted, and confined my loans to greenbacks; but I could not drive out their currency, nor indeed did I think it exactly honest to do deprive them of it without giving an equivalent. To neutralize their opposition to a National currency and make them allies as far as possible instead of enemies [2] in my endeavors to secure one, I proposed the National Banking system: and before I left the Department its success was assured. The National Banks were certain to be useful in many ways, but my main object was the establishment of a National currency. This saved us from panic and revulsion at the end of the war, and is of inestimable value to men of labor and men of business; indeed to every class.
          3. The third division of my labor was to provide a funding system. It was unavoidable [inserted: during the rebellion] that every means of credit should be used. I borrowed money every way I could at reasonable rates. The form that suited one [inserted: lender] did not suit another; and the Army and Navy needed every dollar that could be raised in every form. Hence, [struck: many] temporary loans, certificates [inserted: of deposit,] certificates of indebtedness, 7:30 notes, compound interest notes, Treasury notes payable after one and two years, &c. &c. &c.
            But it was necessary to have funding loans, into which all these temporary loans could be ultimately merged. To this end, I established the 5:20 loan and the 10:40 loan. My belief was that, after the $514.000.000 of the 5:20 loan had been taken, [struck: that] the additional amounts needed could be obtained by the 10:40 loan and the temporary loans; but [inserted: I] was ready to [3] resort to the 5:20’s in case of emergency. I did get 73 millions in the 10:40 loan, and my successors got about 120 millions more at par, and I have never been able to see any good reason for making the 7:30 notes subsequently issued convertible, at the holder’s option, into 5:20, instead of 10:40s. lenders, of course, preferred the former, bearing 6 percent in gold to the latter, bearing only 5 per cent.; and lenders were rather more favored after I left the Department than before. And so, indeed, were brokers; for Jay Cooke got nearly or quite twice as large commissions under Fessenden and McCulloch as I allowed him.
            You can see how this funding system of mine worked; if you take up the last statement of the Public Debt. I haven’t it at hand, but the condition is something like this; 1200.000.000 5:20s; $200.000.000 10:40s; $200.000.000 81’s payable now after 14 years, which can then easily be put into 10:40’s; other loans (all temporary) say $500.000.000, of which ¾th consist of 7:30’s convertible and certain to be converted into 10:40s, and say 400.000.000 greenbacks including fractional currency – making the debt of $2,500,000,000.
             So, you see, the whole debt except ‘81’s is already funded or sure to be funded in 5:20 6 percents or 10:40 5 percent.
            Can there be a better funding system? I don’t believe it. Yet there is talk of a new funding loan! [4]
            The object is to catch gudgeons by apparently yielding to the popular clamor for taxation on bonds. The way is to offer a new 6 per cent loan with reservation of right to tax not exceeding 1 percent; in other words, a new [inserted: non=] taxable 5 percent loan; and it is proposed to make this a long loan – say 30 years. It will be magnificent for brokers, bankers and lenders, but death on the people. Of course, such a loan can be negotiated; for a 5 percent 30 year loan, untaxable, is worth more in the market than any loan now outstanding; and nothing is more [inserted: certain] in the future than that Government will be paying within 5 years, 5, 10, and even 15 percent for the privilege of paying its debt before maturity.
             I want specially to call your attention to this. It may be well enough to make the loan, in the form proposed, if the clamor for taxation will be satisfied by it; but why make it for 20 or 30 years instead of adhering to the 10:40 plan, by which the debt is [struck: reducible][inserted: redeemable] at any time after 10 years, and thus kept under the control of the people. I have no doubt that, if our finances are properly managed, we can borrow within ten years at 4 percent [inserted: or 5] with right to tax at 1/5 as easily as we can now borrow at 5 or 6 with right to tax at 1/6. Why bind ourselves to pay [inserted: either rate, for] interest [struck: at] 30 years when it is not only unnecessary, but certain to entail a heavy additional expense in the form of premiums for redemption?
              Perhaps you have not had your attention particularly di=[5]rected to the fact that when I negotiated at par the 73 millions of 10:40 five per cents the currency was much less inflated than it has been ever since and is now. The issues of the greenbacks and the indisposition of Congress to tax the State Bank currency out of circulation caused almost all the inflation that took place under my administration. The late inflation does not seem to me excused by public exigencies. The greenbacks should have been retired nearly on quite pari passu [without preference] with the issues of National Bank notes, and the equilibrium preserved. 
            The comparative inflation will appear from a statement of the circulation on the 30th June 1864, when I left the Department, and the 30th June 1866.
                                                                               June 30, 1864.
U.S. Notes (greenbacks)                                            $431.178.670.81.
Fractional and Postage currency,                                   22.894.877.25
National Bank Notes (say)                                              30.000.000.—
Total National Currency                                                                                    484.073.548.06.
Add 1 year Treasury Notes                                           44.520.000.
“ Compound Int.  “                                                      15.000.000.
Total issues [inserted: used] more or less as currency                                             59.520.000 00
State Bank circulation (say)                                                                                 100.000.000 00
 Total                                                                                                               643.593.548.06. 
[6]
                                                                                June 30, 1866.
U.S. Notes (greenbacks) -                                        400.619.206.
Fractional & Postage Currency. --                               27.070.876.96.
National Bank Notes (say) --                                      292.671.753. --
     Total National Currency. --                                                                              $720.361.835.96.
Add compound int. notes, more or less used as currency-                                        15.901.214.—
State Bank Circulation -----                                                                                       40.533.060.
                                Total ----                                                                           $792.796.209.96.
                                Increase ----                                                                       $149.202.661.10.

But enough, though I could add much more.
                           Yours cordially,
                                  S.P. Chase.
[struck:] Hon. H Greeley / P.S. I wrote the letter so early that I have got Schuckers to copy, fearing that otherwise it might never be read. To show how badly I can write I enclose the original I doubt if you can brat the hand.

Historical Background: 
The Civil War created the need to raise unprecedented sums of money, and with customs revenue from cotton exportation cut off, Treasury Secretary Chase conceived several financial innovations. Chase was most committed to sales of government bonds, and hired Philadelphia banker Jay Cooke to market bonds of various redemption schedules. The Bureau of Internal Revenue (later the Internal Revenue Service) was created in 1862 to collect stamp taxes and other internal duties. A year later, it administered the nation's first income tax. According to Philip S. Paludan, the national debt “grew from $65 million … in 1860 to $2.8 billion … by 1866.” The successful sale of war bonds set a vital precedent for government financing of future wars, and demonstrated the faith of the American people of all classes in victory, and the long-term security of the United States.

In order to further finance the war, the Bureau of Engraving and Printing was established in 1862, to print the government's first currency, known as greenbacks because of their color. These were legal tender notes not backed by specie. Chase disapproved of the legal tender notes; with no requirement for specie backing, they could be printed in unlimited quantities and were therefore inflationary. He recognized their necessity in a time of emergency, but later, as Chief Justice of the Supreme Court, he would declare the notes unconstitutional. The National Banking System was created in 1863 to establish a uniform currency.

“If in 1864 I could make a good candidate,” Horace Greeley wrote Chase, “you would be my first choice” (Williams, p. 257). Chase and Greeley were long-time political allies. Chase resigned from the Treasury Department in 1864, in part because he always felt superior to Lincoln and wanted to test the presidential waters. Lincoln obviated the problem by appointing him Chief Justice, but Chase used his elevated position to campaign for the presidency both in 1868 and 1872. President Lincoln recognized Chase’s inordinate ambition, and made use of it to craft and implement innovative wartime financial measures, but he once told his private secretary that Chase, “like the blue-bottle fly, … lays his eggs in every rotten spot he can find.”

Here, Chase takes advantage of his relationship with Greeley, publisher of the New York Tribune, to anonymously influence banking policy from the Supreme Court bench. For example, he critiques a proposed new funding law that would “be magnificent for brokers, bankers and lenders, but death on the people.” He also complains about the inability of the Johnson administration to combat postwar inflation. “The late inflation does not seem to me excused by public exigencies. The greenbacks should have been retired nearly on quite pari passu [without preference] with the issues of National Bank notes, and the equilibrium preserved.” Chase’s dissatisfaction with postwar Republican economic policies led him to help found the Liberal Republican Party in 1872, and to support Horace Greeley’s presidential run.

As Chase notes in his struck postscript, Jacob Schuckers, Chase’s friend, secretary, and future biographer, drafted the letter. On November 26, 1867, Greeley’s Tribune printed the letter as a communication from "Our Special Correspondent," with new text at the beginning and end. This original letter was unknown to the editors of the Salmon P. Chase Papers, who had to rely on letterpress copies at the Library of Congress and the New York Public Library.

Salmon Chase (1808-1873), one of the most important, ambitious politicians of the mid-19th century. Chase rose to prominence as an Ohio-based lawyer defending the rights of fugitive slaves. He then helped found the Liberty Party, the Free Soil Party, and the Republican Party, all aimed at opposing the expansion of slavery. He served as U.S. Senator, Governor of Ohio, Treasury Secretary, and Chief Justice of the Supreme Court. As Chief Justice, Chase presided over the impeachment trial of Andrew Johnson in 1868 and appointed the first African-American attorney to argue cases before the Court.

Horace Greeley (1811-1872) was the most influential newspaper editor of the Civil War era, a tireless advocate of abolition and many other reform causes, including advocacy of a national homestead act (with the slogan, “go west, young man”). He edited the New York Tribune from the 1841 through 1872. His disgust as corruption in the Ulysses Grant administration led him to run for president (as a Liberal Republican, but with the support of Democrats) in 1872, but he lost in a landslide to Grant and died weeks later.

References:
Niven, John. “Lincoln and Chase: A Reappraisal,” Journal of the Abraham Lincoln Association  12, 1 (1991).
Niven, J., ed. Salmon P. Chase Papers, vol. 5 (1998), pp. 177-180.
Paludan, Philip S. The Presidency of Abraham Lincoln (Lawrence, Ks., 1994), pp. 109-113.
Williams, R.C. Horace Greeley: Champion of American Freedom (2006).

Condition: edges lightly soiled, formerly folded, fold tears repaired with cello tape.