John Sherman, younger brother to Civil War General William Tecumseh Sherman, was born in 1823 in Mansfield, Ohio. Trained as an engineer through his work on canals, he later studied law and was admitted to the bar in 1844. Thereafter, he took an interest in politics and held public office for the better part of his adult life.
In 1854, he was elected as a Representative from Ohio’s thirteenth district. Between 1859 and 1860, he vied to become Speaker of the House. After an unsuccessful bid for Speaker, Sherman became chairman of the House Ways and Means Committee from 1860-61.
When Salmon P. Chase resigned from the Senate in the spring of 1861 to serve as President Lincoln’s Secretary of the Treasury, John Sherman was elected to fill Chase’s then-vacant Senate seat. Sherman served in the Senate until 1877 and for twelve of those years (1863-65 and 1867-77) served as the chairman of the Senate Finance Committee.
In February 1862, Sherman became the leading Senate champion of the Legal Tender legislation which sought to allow the Union to issue up to $400 million of unbacked paper currency—so-called “greenbacks.” The government issued greenbacks in July 1862 and March 1863, both times for $150 million.
Having dealt with the nation’s currency, the Lincoln Administration and Congress confronted the need to reform the banking system in 1863. The chief advocate for the banking bill was Senator John Sherman, a strong fiscal conservative who long believed in limiting government expenditure.
During Reconstruction, Sherman continued to play a role in shaping fiscal and monetary policy. Treasury Secretaries George S. Boutwell and then William Adams Richardson sought to expand the money supply in the hope that it would trigger an economic recovery. Both Boutwell and Richardson contended that, though Congress had mandated $356 million as the minimum greenback circulation, the old Civil War statutes still authorized a maximum of $400 million, thereby giving them a reserve of $44 million. While the Senate Finance Committee led by John Sherman disagreed, no legislation was passed to assert the Committee’s opinion. Starting in 1872, Boutwell and Richardson used the “reserve” to expand the greenback to $382 million in response to the Panic of 1873.
To restore confidence in the U.S. currency, Congress passed the Resumption Act of January 14, 1875, which returned the government to specie payments and reduced greenback circulation to $300 million. The Secretary of the Treasury was directed to “redeem in coin” legal tender notes presented for redemption on or after January 1, 1879. As a result, the currency began to strengthen.
Under the presidency of Rutherford B. Hayes, specie payments resumed. This was possible because of the sale of U.S. bonds in exchange for gold under now Treasury Secretary John Sherman who served in this capacity throughout the Hayes Administration. By 1879, the U.S. government had accumulated enough gold reserves to carry out the intent of the Resumption Act. This knowledge that the government could redeem each greenback or bank note at par in gold made the public favorably inclined to keep using the more convenient paper currency.