Fifty years in Wall Street
paper on hand, and requested them to communicate to the members of the
syndicate, which I had formed for the purchase of bonds, recommending
them to withdraw therefrom, as I was convinced that war to the knife was
imminent, and that Government bonds must have a serious fall in price in
consequence.
I saw Mr. Chase the next morning, and told him that, as I believed,
there was going to be a long and bloody war, I could not
conscientiously, in the interest of my clients, renew my bid of the
previous day.
With regard to my opinion about the probable length of the war, the
Secretary took issue with me very firmly.
Mr. Chase, however, afterwards proved to be a warm and most valued
friend of mine, and it was largely due to his aid and recognition that I
achieved brilliant success in my early Wall Street career during the war
period.
The Secretary was of opinion that the bonds should command par, at
least, and they would be worth that and above it very soon, he thought.
He made this assertion on the expectation that the impending
difficulties would soon be adjusted, and that in less than sixty days
all the trouble would be at an end.
It was not so extraordinary as it may seem to some people now, with the
light of later events fully before them, that the Secretary was so
sanguine of short work being made of the South, because he only shared
the opinion of a large number of people, who greatly underestimated
Southern durability.
After leaving the Secretary, who treated me with great consideration, as
he did every one in his inimitable and dignified manner, which made such
a durable and favorable impression on all who came in contact with him,
I felt greatly pleased and highly gratified at meeting him. In fact, his
fine, magnetic presence was of a character to command the admiration of
almost every person who had the honor of an interview. He was a great
man for producing good first impressions, and, unlike many impressions
of this character they were generally lasting.
Had I not visited Washington at the time I did, and had I not obtained
the correct impression concerning the future of the then impending
difficulties, my firm, like many others that invested in Government
bonds, mercantile paper, stocks and other fluctuating properties, would
have been irretrievably ruined. I have reason to congratulate myself,
therefore, on my good fortune in narrowly escaping such a disaster,
almost at the beginning of my Wall Street career, as I was thus enabled,
at a later stage of the national trouble, to be of considerable service
to the Government, through the Treasury, in its efforts to sustain such
an army in the field as was calculated to ensure success to the Federal
arms.
My first experience in dealing in Government bonds was just prior to the
Lincoln administration, when Mr. Cobb was Secretary of the Treasury. He
advertised for sale to the highest bidders an issue of U. S. bonds
bearing five per cent. interest, having twenty years to run, and my firm
bid for $200,000 of them, hoping to make a quick turn, and a small
profit thereon. A five per cent. deposit was made, as required by
custom.
The loan was all awarded to most of the bids, mine included, and a very
large part of it was awarded to Lockwood & Co., who were then regarded
the largest and most prosperous Stock Exchange firm in the street.
George S. Robbins & Co., John Thompson, Marie & Kans, and a few others,
whose names I now forget, made also large bids.
Of those mentioned, however, my firm stood alone in taking up the bonds,
as the threatening aspect of political affairs came on so soon
afterwards as to depreciate Government securities. The original deposit
of five per cent. was lost by these subscribers, and the bonds were
permitted to remain in _statu quo_, as the Government never forced the
claim against the delinquents.
This, in a large measure, accounted for the impoverished condition of
the Treasury when Mr. Chase took charge of it, and for which Mr. Cobb
has been made an object, not wholly undeserving, of public reproach.
The $200,000 bonds my firm subscribed for at par were sold mostly at 95
and below, but the fact of taking them, and meeting the subscription,
without fail, gave my firm an excellent standing with the Government at
the beginning of the war, and enured greatly to my firm’s advantage
thereafter.
At the time I visited Washington my firm was more largely engaged in
dealing in mercantile paper than any other branch of Wall Street
business.
I had inaugurated the system at the time of my advent to the “Street” of
buying merchants’ acceptances and receivables out and out, the rate
being governed by the prevailing ruling rate for money, with the usual
commission added.
It was by this method that my firm soon became the largest dealers in
mercantile paper, which business had formerly been controlled by two
other firms for at least a quarter of a century, and whose old fogy
methods were by my innovations easily eclipsed.
The merchants at that time would go to these discount firms and leave
their receivables, bearing their endorsements, on sale there, and only
when sold by piecemeal could they obtain the avails thereof.
The more expeditious plan that I adopted, which was to give these
negotiators a check at sight, seemed generally to merit their
approbation, and enabled me to command the situation in that line of
business, very much to the chagrin of my competitors.
In this way my firm had accumulated about five hundred thousand dollars
in notes, which were hypothecated with various city and country banks.
After coming to the conclusion above referred to on my visit to
Washington, in regard to the certainty of a prolonged and desperate war,
I made quick steps back to New York to dispose of my paper. I went
vigorously to work, and succeeded in unloading all but ten thousand
dollars of short time notes made by Lane, Boyce & Co., and a note of
$500 of Edward Lambert & Co.
I had no sooner accomplished this very desirable work of shifting my
burden, and distributing it in a more equable manner on the shoulders of
others, but at higher rates than I paid, than in less than a week after
my return from Washington the exciting news arrived of the firing of the
first hostile gun at Fort Sumter.
The announcement of this overt act of war spread like wildfire, and the
wildest scenes of excitement and consternation were witnessed in Wall
Street and throughout the entire business community. The whole country
was panic stricken in an instant.
Stocks went down with a bound to panic prices. Fortunes were lost, and
millionaires were reduced to indigence in a few hours. Money was
unobtainable, and distrust everywhere was prevalent.
The two firms whose paper I was unable to dispose of were about the
first to fail, and before the maturity of any of the balance of the
paper which I had successfully negotiated both the drawers and endorsers
thereon, without a single exception, all collapsed.
The height which Gilroy’s kite attained would have been nowhere in point
of altitude to that which I should have reached had I not had the good
luck to have cleared my decks as I did, and in the nick of time.
My safety in this instance was due to my inspiration, to which I believe
myself more indebted than anything else for the privilege of remaining
in Wall Street up to the present date.
I am no spiritualist nor theosophist, but this gift or occasional
visitation of Providence, or whatever people may choose to call it, to
which I am subject at intervals, has enabled me to take “points” on the
market in at one ear and dispose of them through the other without
suffering any evil consequences therefrom, and to look upon these kind
friends who usually strew these valuable “tips” so lavishly around with
the deepest commiseration. My ability to do this, whatever may be its
source, whether human or divine, has saved me from being financially
shattered at least two or three times annually.
I do not indulge in any table tapping or dark seances like the elder
Vanderbilt, but this strange, peculiar and admonitory influence clings
to me in times of approaching squalls more tenaciously than at any
ordinary junctures.
I have known others who have had these mysterious forebodings, but who
recklessly disregarded them, and this has been the rock on which they
have split in speculative emergencies.
Therefore I say again, beware of “points.” They constitute the _ignis
fatuus_ which lure more unfortunate speculators to their financial doom
than all other influences put together.
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CHAPTER X.
THE NATIONAL BANKS.
SECRETARY CHASE CONSIDERS THE PROBLEM OF PROVIDING A NATIONAL
CURRENCY.—HOW E. G. SPAULDING TAKES A PROMINENT PART IN THE
DISCUSSION ON THE BANK ACT.—THE ACT FOUNDED ON THE BANK ACT OF THE
STATE OF NEW YORK.—EFFECT OF THE ACT UPON THE CREDIT OF THE
COUNTRY.—A NEW SYSTEM OF BANKING REQUIRED.
The history of the Bank Act of 1863, improved by the Act of 1864, would
require much larger space than I can devote to it in this book. I can
only glance at its salient points, and show its great influence, not
only on the finances of the country, but upon the destiny of the nation
itself.
The Hon. E. G. Spaulding, who was one of the most prominent men in
dealing with the financial questions of that period, has written and
preserved a very full history of the legislation on the subject, and of
the interesting debates which preceded it.
After the temporary loans had been negotiated to release the pressure
upon the Government, Secretary Chase set his mind to consider the
problem of providing a currency without disturbing the business
organization of the country.
At this period he was met by a fresh difficulty, in the suspension of
specie payments, which had been hastened by the arrest of Mason and
Slidell, which, but for the wise policy of Mr. Seward, would have
precipitated a conflict with Great Britain.
Early in 1862 Congress authorized ten million more of demand notes. This
was followed by further issues, making in all 300 million United States
notes. Secretary Chase was at first opposed to making these notes a
legal tender for private debts, but in order to get the bill through, he
agreed to the legal tender clause, as the Government was greatly in need
of money.
The Secretary was also empowered by Congress to borrow 500 million
dollars on 5-20 year 6 per cent. bonds, and also to obtain a temporary
loan of 100 millions on condition that the interest on the bonds should
be paid in coin, and that the customs should be collected in coin for
that purpose.
The first bill to provide a national currency secured by a pledge of
United States bonds was introduced by Mr. Hooper, in July, 1862, but it
was not reported from the Committee to which it had been sent. At the
meeting of Congress in December the same year the financial problem had
become still more complicated, and owing to the magnitude which the war
had then assumed, the expenses amounted to two millions a day.
The total receipts for the fiscal year ending June 30, 1863, were 511
millions, and the expenditures were 788 millions, thus leaving a deficit
of 277 millions.
All the financial wisdom of the Secretary was necessary in this dilemma.