Lincoln's most important veto is buried and forgotten. Yet, it saved the union, and it still applies today.

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(Article changed on May 20, 2013 at 11:31)

(Article changed on May 20, 2013 at 11:26)

1862 Greenback
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"This is essentially a People's contest ... to lift artificial weights from all shoulders" Abraham Lincoln, war message to Congress, 1861.

SAN FRANCICSCO, May 20, 2013 -- From management workshops to the Oval Office , in major movies and books by the thousands , Abraham Lincoln's leadership is adulated, if not apotheosized. Since a president's leadership mettle is maximally tested by vetoes, Lincoln's vetoes must surely be well-known. Not so. And, Lincoln's most important veto is especially buried and forgotten. Yet, it saved the union, and it still applies today.

The best-selling Lincoln On Leadership does not mention a veto. No veto message appears in Lincoln: Speeches and Writings , a supposedly comprehensive two-volume tome of his "Speeches, Letters, Miscellaneous Writings, Presidential Messages and Proclamations." And, as of today, this is how the people's (wiki's) Abraham Lincoln page tersely summarizes the vetoes of America's most revered president of, by, and for the people:

"Lincoln only vetoed four bills passed by Congress; the only important one was the Wade-Davis Bill with its harsh program of Reconstruction."

The Senate record better informs us that Lincoln issued seven vetoes. His supposedly "only important" veto was a late-session 1864 pocket veto, whereby he let the Wade-Davis bill expire, simply by not signing it. A few months later, this veto was substantially swept aside in the assassination backlash.

Lincoln's June 23, 1862 veto is surely more important. When battles had been lost and soldiers could not be paid, it resolved the Union's financial crisis and was so extraordinary that, in 1869, the Senate Sub-Committee of Ways and Means made a record of the controversy as a matter of "transcendent importance ... for present and future reference." According to the Senate report, Lincoln's alternative measure was "indispensably necessary, and a most powerful instrumentality in saving the government and maintaining the national unity." History Of The Legal Tender Paper Money Issued During The Great Rebellion , page 6.

Lincoln's Message to Congress in favor of a National Currency, but vetoing irredeemable bank notes is on page 36. An irredeemable or "fiat" note is paper money that is declared legal tender by statute but is not backed by intrinsically valuable commodities such as gold or silver. Lincoln vetoed a bill to permit circulating issues of fiat bank notes, materially equivalent to today's Federal Reserve bank notes, [1] on the ground that it made much more sense to instead issue fiat United States notes. Today, the privately owned Federal Reserve System pays the Treasury only the cost of printing the bank notes that it then issues to the public at no less than full face value. [2] At present, no true United States notes are issued.

Lincoln's message to Congress, explaining the obvious advantages of government-issued fiat United States notes over borrowing fiat bank notes, is as follows:

"The object of the bill submitted to me, namely, that of providing a small note currency during the present suspension [of redeemable bank notes], can be fully accomplished by authorizing the issue, as part of any new emission of United States notes... Such an issue would answer all the beneficial purposes of the bill, would save a considerable amount to the Treasury in interest, would greatly facilitate payments to soldiers and other creditors of small sums, and would furnish to the people a currency as safe as their own Government."

On July 11, 1862, an undivided Congress concurred and issued the famous one dollar greenback. In December 1862, Lincoln reported to Congress that the measure had saved "the people immense sums in discounts and exchanges."

Thus, by his veto, Lincoln's leadership was indispensably necessary in issuing the nation's first currency, as fiat greenback dollars. Lincoln's commonsense veto message defied and trumped bank brinksmanship, propaganda and lobbying, saving the people from the imposition of an artificial burden of compounding debt to bankers who then (as now) offered no more than paper money, which the government itself could as easily and far more efficiently issue. [3]

Why in 2013 should we the people now bear that artificial and compounding debt burden? It is a far more absurd imposition today, for now, and not then: (1) we already print the fiat notes that the banks issue; (2) by legal tender acts, we already provide the full faith and credit without which the bank notes would be valueless; and (3) we have already accrued a long-compounded debt of such a crushing magnitude that interest payments consume our taxes, while bankers chastise us for living beyond our means. Meanwhile, President Obama applauds the economic marvel Lincoln's leadership wrought, as in his "Jobs Act" message to Congress on September 8, 2011:

"[I]n the middle of a civil war, [Lincoln] was also a leader who looked to the future, a Republican president who mobilized government to build the Transcontinental Railroad, launch the National Academy of Sciences, set up the first land grant colleges."

All this manifests the importance of renewed debate reissues of debt-dissolving, interest-free, pay-as-you-go fiat United States notes, versus continuing the gift to private banks of an absolute monopoly over the Treasury's money-printing presses.

What is the state of this debate today? "Greenbackers," who advocate new issues of true United States notes, are few and belittled. But, since the economic collapse of 2008, they have steadily grown in numbers and can no longer be discounted as crackpots and communists. Ignited by brutal bank-fraud-induced foreclosures, unemployment and government austerities, the public's monetary reeducation makes headway, despite pervasive big bank propaganda in a brave new post-Citizens United world.

This article is just another drop in that progressive enlightenment bucket. It provocatively prompts you to ask yourself (1) whether you accept the logic of Lincoln's veto message; (2) whether, and with what force, like logic applies today; and, in any case, (3) why this is the first time you have heard of " Lincoln's Message to Congress in favor of a National Currency, but vetoing irredeemable bank notes."

For deeper guidance, see Lincoln's Populist Sovereignty: Public Finance Of, By, and For the People , 12 Chap. L. Rev. 561 2008-2009, by Professor Timothy Canova.

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[1]

Federal Reserve notes have not been redeemable to individuals since the 1930s and have not been redeemable to other nations since 1971.

[2]

By "fractional banking," the Federal Reserve System, on average, obtains from the public much more than the face value of the money that the Treasury prints for it to issue.

[3]

Forgetting this, the mistaken consensus of today's monetary mentors is that Lincoln was driven to reluctantly and momentarily issue fiat greenbacks. For example, Larry Schweikart, on BookTV , recently stated that "Lincoln doesn't have a lot to do with greenbacks [because] his Secretary of the Treasury from Ohio, Samuel Chase, is the one who comes up with idea," and because Lincoln supported a 1863 national banking act, which did authorize national bank notes. In fact, Congress authorized fiat greenbacks as a national currency only because of Lincoln's personal veto; and Chase initially resisted the idea, which appears to have been first proposed by Col. Edmund Taylor . Moreover, the 1863 banking act did not prefer fiat bank notes. It required that the new national bank notes be redeemable in gold, by the issuing bank.

Authors Website: commondada.com

Authors Bio:
Clifford Johnson is a semi-academic naturalized Brit. He first entered the U.S. as a rah-rah Harkness Fellow. For theater, language, and also as a questionable ex-Brit, Johnson adopts a Tom Paine II persona. His activist credentials comprise serial terminations of employment and pro se litigations raising public policy questions.

Johnson claims to be the only person who has sued the Comptroller of the Currency for a failure to regulate a national bank -- the Bank of America -- which he did in the early 1980s.

Johnson's 15-minutes of fame came in the mid-1980s. Then a manager of computing at Stanford University, he sued the Pentagon, challenging the constitutionality of its nuclear hair-trigger "launch on warning" posture, for riskily and unconstitutionally delegating the decision to initiate nuclear Armageddon to a 3-minute computer-governed military drill.

Johnson is currently challenging the Treasury and GAO in federal court, for misrepresentations as to Federal Reserve versus United States currency. The case raises novel issues of law re the government's right to lie.