Furthermore, in spite of their protest, Chase issued
treasury notes, which the banks had to receive from their
depositors, who nevertheless continued to demand specie. On
January 1, 1862, the banks owed $459,000,000 and had in specie
only $87,000,000. Chase defended his course by saying that the
financial crisis was not due to his policy--or lack of policy, as
it would now seem--but to a general loss of faith in the outcome
of the war.
There now arose a moral crisis for this "imposing person" who was
Secretary of the Treasury--a crisis with regard to which there
are still differences of opinion. While he faced his problem
silently, the Committee on Ways and Means in the House took the
matter in hand: Its solution was an old one which all sound
theorists on finance unite in condemning--the issue of
irredeemable paper money. And what did the Secretary of the
Treasury do? Previously, as Governor of Ohio, he had denounced
paper money as, in effect, a fraud upon society. Long after,
when the tide of fortune had landed him in the high place of
Supreme Justice, he returned to this view and condemned as
unconstitutional the law of 1862 establishing a system of paper
money. But at the time when that law was passed Chase, though he
went through the form of protesting, soon acquiesced.
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