War of the Rebellion: Serial 128 Page 0320 CORRESPONDENCE, eTC.

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amount of this fixed sum. In proportion to its excess over the annual interest will be the shortness of the period. The first payments of principal will be comparatively small, but each will diminish the interest of the succeeding year, and will thereby set free a larger sum annually to be applied to pay the remaining principal until the debt be finally discharged.

The act of Congress of the 12th of April, 1862, departed from this plan and made the next issue of bonds payable in thirty years, subject to redemption at any time after the expiration of ten years. The whole subject necessarily comes up for consideration in adjusting the tax now to be laid by Congress. The $15,000,000 loan carries an interest of 8 per cent. ; it is payable in ten years, but may be redeemed at any time after the 1st of September, 1866. The $100,000,000 loan is also an 8 per cent. loan, and is made payable in installments which fall due every six months for eighteen years from the 1st of January, 1864. The first installment of principal, of $1,288,700, is payable the 1st of January, 1864; the second, of $1,340,200, is payable the 1st of July, 1864. The third loan is under the act of April, 1862; it is also and 8 per cent., payable, as above stated, at the pleasure of the Government at from ten to thirty years. If Congress should approve the application of the plan of the $100,000,000 loan to the whole debt of the Government, them a change should be made in the loan of April, 1862. No bonds have yet been issued under that act, and the matter is yet within the control of Congress. A modification of the lay must be made at any rate to meet the reduction of interest required on notes issued subsequent to December 1. If the scheme of finance hereinafter proposed in relation to the debt guaranteed by the States shall find favor with Congress, a further modification of the loan of the 12th of April, 1862, should be made by reducing the period for redemption from ten year This change will enable the proceeds of the sale of the 6 per cent. bonds guaranteed by the States to be applied in discharge of the 8 per cent. at the end of five years in case they cannot be purchased in the market sooner.

III. We come now to the third feature in the scheme, namely, the guaranty of the States. The State of Virginia led the way and proposed that Congress should devise a plan for a loan to be guaranteed by the States. Congress did not see fit to take any action on the subject at its last session. It was probably deemed best that the proposal should come from the States. An offer of their guaranty is certainly more beneficial to the credit of the Government than a request for aid. The delay has given the opportunity to the States to make the offer. The State of Alabama has offered a guaranty of her quota of the whole war debt upon certain conditions. The State of South Carolina has offered to guarantee a quota of $200,000,000 upon certain other conditions. A copy of the action of their respective Legislatures is herewith submitted. * The varying action of these two States evinces the importance of settling a definitive plan by Congress. It is probable that every State will cordially respond to such plan and sustain the credit of this Government. The great advantages to be derived from this guaranty have already been somewhat developed. It is only necessary now to give prominence to two of them - first, the opportunity which it affords of converting an 8 per cent. into a 6 per cent. debt, and, secondly, the premium which can be realized on the sale of the bonds. The former will enable the Government to establish

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*For resolutions of General Assembly of Alabama, see December 1, 1862, p. 219. The South Carolina document not found.

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