United States Department of the Treasury

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The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue. The Department is administered by the Secretary of the Treasury, who is a member of the Cabinet.

Civil War

The The Civil War led to an enormous ballooning of federal expenditures, which skyrocketed from $66 million in 1861 to $1.30 billion four years later. To pay for these expenditures, the Treasury initially attempted, in the fall of 1861, to float a massive $150 million bond issue, to be purchased by the nation’s leading banks. However, Secretary of the Treasury Salmon P. Chase, a former Jacksonian, tried to require the banks to pay for the loan in specie that they did not have. This massive pressure on their specie, as well as an increased public demand for specie due to a well-deserved lack of confidence in the banks, brought about a general suspension of specie payments a few months later, at the end of December 1861. This suspension was followed swiftly by the Treasury itself, which suspended specie payments on its Treasury notes.

The U.S. government quickly took advantage of being on an inconvertible fiat standard. In the Legal Tender Act of February 1862, Congress authorized the printing of $150 million in new "United States notes" (soon to be known as "greenbacks") to pay for the growing war deficits. The greenbacks were made legal tender for all debts, public and private, except that the Treasury continued its legal obligation of paying the interest on its outstanding public debt in specie. (To be able to keep paying interest in specie, Congress provided that customs duties, at least, had to be paid in gold or silver.)[1]


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