The issue of circulating notes by state banks had been the fruitful cause of loss, contention and bankruptcy, not only of the banks issuing them, but of all business men depending upon them for financial aid. Inflation and apparent prosperity were often followed by the closing of one bank and distrust of all others. The notes of a broken bank were rarely paid, the assets of such bank being generally applied to the payment of other liabilities, leaving the loss to fall on the holders of the notes, mostly innocent persons of limited means. This led to the adoption in 1846 of the sub- treasury system, by which all payments to the treasury were required to be in coin, to be held until required for disbursements on government account. This protected the United States, but it did not save the people from loss, as, from necessity, they were compelled to use bank bills authorized by the several states, varying in value and security, and chiefly limited in circulation to the state in which issued. With a narrow view of the powers of the national government, Congress had repeatedly refused to authorize a national bank, a policy I heartily approve, not from a doubt of the power of Congress to grant such a charter, but from the danger of intrusting so vast a power in a single corporation, with or without security. This objection did not lie against the organization of a system of national banks extending over the country, which required every dollar of notes issued to be secured by a larger amount of bonds of the United States, to be deposited in the treasury of the United States, thus saving the note holder from all possibility of loss. Secretary Chase, in his report of December 9, 1861, recommended that a tax be imposed upon notes issued by state banks and also that Congress should exercise its authority to establish a system of national banks, with proper safeguards and limitations. A bill was introduced for the latter purpose in the House of Representatives in 1861, but, owing to the urgency for legislation on war measures, it was not acted upon. CHAPTER XIII. ABOLISHMENT OF THE STATE BANKS. Measures Introduced to Tax Them out of Existence--Arguments That Induced Congress to Deprive Them of the Power to Issue Their Bills as Money--Bill to Provide a National Currency--Why Congress Authorized an Issue of $400,000,000, of United States Notes--Issue of 5-20 and 10-40 Bonds to Help to Carry on the War--High Rates of Interest Paid--Secretary Chase's Able Management of the Public Debt--Our Internal Revenue System--Repeal of the Income Tax Law--My Views on the Taxability of Incomes.