President Lincoln agreed with Congress that Union soldiers and sailors had to be paid, even if that required printing up to $100 million in new currency.
From THE PAPERS AND WRITINGS OF ABRAHAM LINCOLN
(VOLUME SIX) :
PRINTING MONEY
MESSAGE TO CONGRESS.
January 17, 1863.
TO THE SENATE AND HOUSE OF REPRESENTATIVES:
I have signed the joint resolution to provide for the immediate payment of the army and navy of the United States, passed by the House of Representatives on the 14th and by the Senate on the 15th instant.
The joint resolution is a simple authority, amounting, however, under existing circumstances, to a direction, to the Secretary of the Treasury to make an additional issue of $100,000,000 in United States notes, if so much money is needed, for the payment of the army and navy.
My approval is given in order that every possible facility may be afforded for the prompt discharge of all arrears of pay due to our soldiers and our sailors.
While giving this approval, however, I think it my duty to express my sincere regret that it has been found necessary to authorize so large an additional issue of United States notes, when this circulation and that of the suspended banks together have become already so redundant as to increase prices beyond real values, thereby augmenting the cost of living to the injury of labor, and the cost of supplies to the injury of the whole country.
It seems very plain that continued issues of United States notes without any check to the issues of suspended banks, and without adequate provision for the raising of money by loans and for funding the issues so as to keep them within due limits, must soon produce disastrous consequences; and this matter appears to me so important that I feel bound to avail myself of this occasion to ask the special attention of Congress to it.
That Congress has power to regulate the currency of the country can hardly admit of doubt, and that a judicious measure to prevent the deterioration of this currency, by a seasonable taxation of bank circulation or otherwise, is needed seems equally clear. Independently of this general consideration, it would be unjust to the people at large to exempt banks enjoying the special privilege of circulation from their just proportion of the public burdens.
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. The securing of this circulation by the pledge of United States bonds, as therein suggested, would still further facilitate loans, by increasing the present and causing a future demand for such bonds.
In view of the actual financial embarrassments of the government, and of the greater embarrassment sure to come if the necessary means of relief be not afforded, I feel that I should not perform my duty by a simple announcement of my approval of the joint resolution, which proposes relief only by increased circulation, without expressing my earnest desire that measures such in substance as those I have just referred to may receive the early sanction of Congress. By such measures, in my opinion, will payment be most certainly secured, not only to the army and navy, but to all honest creditors of the government, and satisfactory provision made for future demands on the treasury.
A. LINCOLN.
After the Legal Tender Act of 1862 Legal Tender Act of 1862 U.S. greenbacks were added to the bank notes already in circulation. I think “suspended banks” were those that stopped backing their notes with gold and silver. All the money that circulated without being redeemable in specie created inflationary pressure. President Lincoln was asking Congress to create a more uniform currency. Congress did pass the National Bank Act of 1863. His suggestion for a “seasonable taxation of bank circulation” was eventually enacted: “In 1865, state bank notes were taxed out of existence. “
