Fifty years in Wall Street
Moultrie’s guns awoke the North to action, and made it a determined unit
in defense of the flag that had been fired upon, and its cry was, “The
Union must and shall be preserved!”
As this was the most eventful and critical period in our national
history since 1776, and so many know it only by what they have read of
it, I will give a general idea of its salient features bearing upon the
Government finances and the war loans.
When, after the bombardment of Fort Sumter by Fort Moultrie, on April
14, 1861, Major Robert Anderson, the Union commander, accepted, under
the stern necessities of the situation, General Beauregard’s terms of
evacuation, the die was cast.
The North picked up the gauntlet of war with patriotic enthusiasm, and
the great conflict had begun. But when our troops marched out of that
dismantled stronghold of the Union, with drums beating and colors
flying, it is safe to say that few or none, either in the North or the
South, foresaw the long and mighty struggle that would, for four
eventful years, follow the bombardment of Fort Sumter, during which gold
would become demonetized before the end of the year. It did so on
December 30, 1861, and in the darkest days of the conflict commanded a
premium as high as one hundred and eighty-five per cent. over United
States legal tender notes, making these worth only 54 1/20 cents in
gold, while United States bonds were selling for about 60 cents on the
dollar in gold.
When the New York Clearing House agreed, on the date named, to suspend
specie payments, the example was at once followed by all the banks in
the country, and gold immediately began to command a small premium. None
supposed then that the suspension would continue for eighteen years.
In England, during the long suspension from 1797 to 1821—through the
Napoleonic wars—the premium on gold never rose above forty-one per
cent., and that was in 1814, the year before the end of hostilities.
This was owing to the policy of William Pitt and his successors in the
management of the British finances. They raised all the money needed for
war purposes by taxation and loans, thus restricting the paper money
issues, so as to prevent currency inflation, whereas we pursued the
opposite course.
When Fort Sumter was fired upon, my firm—Livermore, Clews & Co.—was
already prominent in Wall Street, and I immediately began to devise ways
and means to help the Government to raise the money that I saw would be
necessary to prosecute the war for the Union which this bombardment made
inevitable. Fort Moultrie’s guns had united the North in a call to arms,
and men by tens of thousands left the farm, the loom, the office, and
the store, from Maine to Indiana, to join the Union army.
Money, therefore, was needed by the United States Government, and very
large amounts of it, to equip troops and purchase munitions of war.
As James Buchanan was then President, and, like a long line of his
predecessors, a Democrat, he had several Southerners in his Cabinet.
These promptly resigned their places and went South, including the
Secretary of the Treasury, Howell Cobb, who left with surprising
suddenness, and the office was filled for a brief period by General John
A. Dix, as acting Secretary.
But before leaving, Howell Cobb had offered and sold to Wall Street
bankers $20,000,000 of United States five per cent. bonds at 105,
authorized, of course, by an old law. Owing, however, to the heavy
decline in securities, and general depression following the outbreak of
the war, only about one-quarter of these bonds were taken and paid for
by those who had subscribed for them; and nothing was done by the
Government to enforce the completion of the purchase by those who had
defaulted under the severe stress of the times.
Their default was a serious matter for the Government at that time, as
it left the funds in the Treasury in a very depleted condition, and
interest payments on the public debt were about to fall due, which it
had no money in its vaults to provide for. At this crisis John J. Cisco,
the United States Sub-treasurer in New York, was instructed, from
Washington, to call a meeting of the principal Wall Street bankers at
the Sub-treasury, and after stating the situation to them, to ask for an
emergency loan on one-year United States notes, and let them fix the
rate of interest themselves to correspond with the state of the money
market.
Money was then loaning at about twelve per cent. per annum in Wall
Street. So when the bankers who responded to Mr. Cisco’s call, myself
among the number, assembled at the Sub-treasury, they, after full
discussion, agreed to take the amount of notes offered, and at this rate
of interest. It was a very high rate for the Government to pay, too high
under ordinary circumstances, but the emergency justified it; and Mr.
Cisco approved of it, in view of the market rate and the notes running
for one year only. My firm took a considerable amount of them and
induced others to do so also, and we did so, presumably like the rest of
the buyers, not merely because the rate agreed upon was so high, but
because we felt it a duty to help the Government; and at all times
thereafter during that critical period we worked no less diligently to
uphold the public credit.
The Government recognized that a default in its interest payments would
have been disastrous to the public credit, and a stumbling block in the
way of raising money to prosecute the war, besides causing general
depression of business. It therefore had to be prevented at all hazards.
Had these notes not been taken, the Treasury would undoubtedly have been
left without the means of paying this interest when due. Consequently,
it gratified me to feel that I had been instrumental in inducing others
to subscribe for a part of this urgently needed loan.
Soon afterwards Mr. Salmon P. Chase was appointed Secretary of the
Treasury by President Lincoln.
Not long afterwards Secretary Chase came to the Sub-treasury and invited
bids for $20,000,000 of six per cent. United States bonds maturing in
1884. These were authorized by an old law. He accepted all bids at 94
and over, but rejected all under 94, the result of which was that
considerably more than a third of the 1884’s remained unsold. This was
to be regretted, because the Treasury was in great need of money. I
therefore quickly bestirred myself to form a combination to purchase the
unsold bonds of 1884 at 94, my firm being willing to take a liberal
share of them, and I succeeded in getting subscriptions from banks and
capitalists who had not bought any of those sold, for the unsold amount,
subject to my own discretion as to the advisability of taking the bonds,
after going to Washington and conferring with Secretary Chase.
So I immediately went there by night train and saw the Secretary early
in the morning at the Treasury, and told him I had come on behalf of the
combination I had formed, to make him a direct offer at his own
price—94—for the unsold 1884 bonds. He was evidently pleased and
surprised by the apparent improvement in the demand for them. He said,
however, with a fine sense of probity, and consideration for the rights
of others, that while he was glad I had come to Washington, and made the
proposition to take the balance, he did not think it would be fair to
those who had bid and whose bids were thrown out, to sell the rest of
the issue without first notifying them of the new offer, and giving them
the option of taking what they wanted at the price I offered—94.
He asked me to call again the next morning, after he had given the
matter further consideration, and I did so. But meanwhile I had talked
with many Southern politicians and office-holders, Peter G. Washington,
one of the Virginia Washingtons, among them, and seen so much of the
extensive war preparations which were being made in and about
Washington, that I came to the conclusion that a long and very bitter
war lay before us, notwithstanding that Mr. Chase had the day previously
assured me that it would all blow over, with peace restored, within
sixty days, a prediction that was echoed by Secretary of State Seward a
little later. I was particularly impressed by what Mr. Washington,
himself a prominent Government official, had told me of Southern
sentiment and Southern determination to fight till all was lost or
gained, and by his and other Southerners’ absolute but mistaken
confidence that the South would establish its own Confederacy, however
long a war it might take to do it. The South in seceding from the Union
expected to be able to establish a slave oligarchy, for in Lincoln’s
election it foresaw the doom of slavery, as both he and the Republican
party were pledged to work for its abolition. Yancey and the other
leading Southern “fire eaters” were responsible for this false view.
When I made my second call upon Mr. Chase, I said: “Since I saw you
yesterday, Mr. Secretary, I have heard so much in conversation with
Southern politicians and office-holders at the hotels, and seen and
heard so much of the extensive war preparations on both sides, that I am
convinced the war will be a long one, and I fear we shall see much lower
prices for Government bonds and securities of all kinds. Feeling as I
do, therefore, in justice to those I represent and who have given me
full power to use my own discretion in the matter, I must withdraw the
offer I made you yesterday. Had you accepted my offer at the time, of
course I would have considered the transaction closed, and taken the
bonds without question, but as it is, you will admit I am under no
obligation, and free to retire.”
“Oh, certainly,” said Mr. Chase, “but I think you are making a mistake,
for the war will be over in sixty days and these bonds will go to par!”
But my sober second thought and foresight, based upon what I had seen
and heard, and the information I had gleaned in Washington, served me
well, and my associates in the combination had reason to thank me for my
sagacious action, as the bonds soon afterwards declined to 84; and the
Union disaster at the battle of Bull Run, fought at Manassas on July 21,
1861, aroused the North to a realization of the gravity and vastness of
the conflict far more than any of the warfare that had preceded it had
done; at the same time it made it more determined than before to
prosecute the war till the South was conquered into submission to the
Union forces.
Mr. Chase’s second act, in replenishing the Treasury’s funds, was to
offer for subscription six per cent. United States notes, receivable for
all payments, including customs duties, authority to issue which already
existed. He found difficulties in the way, however, and, after
conferring with the Sub-treasurer, Mr. John J. Cisco, who recommended
the appointment of three Wall Street banking houses to act as Government
agents for their sale, on commission, namely, Morris Ketchum & Co.,
Read, Drexel & Van Vleck, and Livermore, Clews & Co., he appointed them.
These were the first and sole Government agents for the sale of its
securities that had been thus far selected, and they all appreciated the
compliment, and did their work well, for they promptly sold all the
notes, of this issue, the Secretary had offered.
Mr. Chase throughout made strenuous efforts to supply the Government
with the means for carrying on the war, and he was loyally aided by the
banking interests of New York, a fact which he recognized and
acknowledged to me and others in appreciative terms.
On a subsequent memorable occasion, in the summer of 1861, Secretary
Chase appeared at the Sub-treasury after Sub-treasurer John J. Cisco had
called, at his request, a number of leading bankers and capitalists to
meet and confer with him. When we assembled there he said to us, in his