under the thumb of either.

During the six months following the cabinet crisis Chase appears at
his best. A stupendous difficulty lay before him and he attacked it
manfully. The Government's deficit was $276,900,000. Of the loans
authorized in 1862--the "five-twenties" as they were called, bringing
six per cent and to run from five to twenty years at the Government's
pleasure---the sales had brought in, to December, 1862, only
$23,750,000, though five hundred million had been expected. The banks in
declining to handle these bonds laid the blame on the Secretary, who had
insisted that all purchasers should take them at par.

It is not feasible, in a work of this character, to enter into the
complexities of the financial situation of 1863, or to determine just
what influences caused a revolution in the market for government bonds.
But two factors must be mentioned. Chase was induced to change his
attitude and to sell to banks large numbers of bonds at a rate below
par, thus enabling the banks to dispose of them at a profit. He also
called to his aid Jay Cooke, an experienced banker, who was allowed a
commission of one-half per cent on all bonds sold up to $10,000,000 and
three-eighths of one per cent after that. Cooke organized a countrywide
agency system, with twenty-five hundred subagents through whom he
offered directly to the people bonds in small denominations. By all
manner of devices, patriotism and the purchase of bonds were made to
appear the same thing, and before the end of the year $400,000,000
in five-twenty bonds had been sold. This campaign to dispose of the
five-twenties was the turning-point in war finance, and later borrowings
encountered no such difficulties as those of 1862 and 1863.

Better known today than this precarious legislation is the famous Act
of 1863, which was amended in the next year and which forms the basis
of our present system of national banks. To Chase himself the credit for
this seems to be due. Even in 1861 he advised Congress to establish
a system of national banks, and he repeated the advice before it was
finally taken. The central feature of this system which he advocated is
one with which we are still familiar: permission to the banks accepting
government supervision to deposit government bonds in the Treasury and
to acquire in return the right to issue bank-notes to the amount of
ninety per cent of the value of the bonds.

There can be no doubt that Chase himself rated very