Fifty years in Wall Street
stately and impressive manner, “Gentlemen, the Government needs and must
have fifty millions of dollars, and it wants it at once to meet war
expenses. For this I am prepared to issue that amount of Treasury notes
of the two hundred and fifty million issue just authorized by
Congress—by the act of July 17, 1861—bearing interest at 7 3/10 per
cent. I am no financier, so I cannot tell you how to raise the money,
but you distinguished leaders in the world of finance well know what
means to adopt to get it. So I leave it in your hands entirely. All I
need say further is to repeat that the Government must have fifty
millions of dollars, and I leave it to you to find the way to procure
it.”
Then Mr. Chase sat down, and all of us who were present compared notes
with each other in conversation about the room; that is, we talked the
matter over for nearly twenty minutes. The result of the conference was
then announced by our spokesman, Moses Taylor, who said, addressing Mr.
Chase:
“Mr. Secretary, we have decided to subscribe for the fifty millions of
United States Government securities that you offer, and to place that
amount at your disposal immediately! So you can begin to draw against it
to-morrow!”
A general clapping of hands followed this prompt announcement, and Mr.
Chase responded by saying:
“Gentlemen, I thank you on behalf of the Government for your public
spirit in helping it so generously and so promptly in this emergency.”
The whole scene was of rare and stirring interest, and momentous
consequences hinged upon its result. As a drama drawn from real life it
would have been effective if represented on the stage, with the large
and portly form and massive head of Secretary Chase as its leading
feature.
This was the first lot, or installment, of the $250,000,000 issue of
7-30 Treasury notes put on the market.
Of these, the Secretary had the privilege of issuing $50,000,000,
payable in coin at the Sub-treasuries in New York, Boston, and
Philadelphia, without interest, to be used as currency.
After disposing of the first 50,000,000 of 7-30 notes, as I have
described, Secretary Chase communicated with the banks concerning the
sale of the remainder, with the view chiefly of saving the payment of
commission to the agents. But he was unable in that way to make sales on
satisfactory terms to them. So he added to the three Government agents
originally appointed for the sale of its securities, Fisk & Hatch, and
Vermilye & Co., of New York, and Jay Cooke & Co., of Philadelphia, and
told them the “7-30” notes would be delivered to them as fast as called
for at the New York Sub-treasury.
Thereupon the New York agents held a meeting, at which it was agreed
that Jay Cooke, of Philadelphia, should be at the head of the agency
system and take charge of the advertising of the 7-30 loan, or, in other
words, that Jay Cooke should act as Chairman of the agency system. The
agreement also specified the commission rates and other details for the
purpose of avoiding cutting, or clashing, between the agents. To this
organization and agreement Mr. Chase assented; and all the agents made
strenuous efforts to make sales from the word go.
Jay Cooke & Co. had no office in New York at that time, nor did they
establish one till after the end of the war. This really led to their
designation as the head of the agency system, as the selection of a New
York firm would have created jealousy among the New York firms.
After all the 7-30s authorized to be issued were sold, came the 5-20
loans, which were sold through the same Government agency system, and
the 5-20s were as successful as the 7-30s had been.
Mr. Munson B. Field, Assistant Secretary of the Treasury under Salmon P.
Chase, had an examination made of the books at Washington, at my
request, to see which individual firm of the Government agents sold the
most United States 7-30s and 5-20s, and he reported that Livermore,
Clews & Co. had the highest record. But I am willing that the credit
should be shared equally by the four United States war loan banking
firms, viz.: Jay Cooke & Co.; Livermore, Clews & Co.; Vermilye & Co.,
and Fisk & Hatch, as all did equally good and earnest work in financing
the Government during the Civil War. Certainly the four firms are
entitled to equal credit, and no one to a greater extent than the
others. There was sufficient glory achieved by the magnificently
patriotic work done by these four firms to admit of dividing the honors,
so that I do not hesitate to say that they did immensely valuable
service to the Nation, and made for themselves a proud National record,
which should be always greatly appreciated by the American people, as it
was at the time by the Government authorities in Washington. The
Government was thus enabled to clothe and feed a million of soldiers in
arms on the battlefield, fighting for the salvation of the Nation, and
these finally brought the war to a victorious end, thus perpetuating the
best form of government known to man.
I may here mention that Secretary Chase said:
“If it had not been for Jay Cooke and Henry Clews, I should never have
been able to sell enough of the 7-30 notes and 5-20 bonds to carry on
the war.”
This remark of his was generally published at the time in the
newspapers.
The Government had sold through its agents $150,000,000 of the 7-30
notes before the suspension of specie payments, an event that was
hastened by the Secretary’s withdrawal from the banks into the
Sub-treasuries of most of the proceeds of the sales, his call for
payment from the agents to the Treasury being in three installments: on
August 19th, October 1st, and November 2d. Moreover, the hoarding and
exportation of gold were largely stimulated by the anticipation of
specie suspension, and, after it occurred, gold suddenly disappeared
from circulation.
This obviously involved a corresponding contraction of the circulating
medium, and Mr. Chase, to neutralize it, and supply the place of the
demonetized coin, issued the $50,000,000 of non-interest-bearing notes,
which were called United States Demand Notes. He did this also to
obviate the necessity of the State Banks issuing more of their own
notes, as well as to raise money to meet the rapidly increasing demands
of the Treasury.
Congress, seeing that this contraction tended to produce stringency in
the money market, and handicapped the Government’s agents in the sale of
its securities, had, on August 5, 1861, suspended the act of August 6,
1846, “providing for the better organization of the Treasury, and for
the collection, safe-keeping, and disbursement of the public revenue.”
It did this so as to permit the Secretary of the Treasury to deposit any
of the money obtained on authorized loans in such solvent specie-paying
banks as he might select, and, in addition, it expressed this in a
resolution. The resolution was promptly acted upon by Secretary Chase,
and this, and a later law, governed the policy of the Treasury ever
afterwards. Monetary stringency was thus avoided by the Treasury keeping
as much of its money in the banks as it could, and so locking up as
little as possible in the Treasury and Sub-treasuries. The evil effects
of the Sub-treasuries system in locking money out of circulation was
thus practically acknowledged and guarded against.
When the sale of the 7-30s had been completed by the Government agents,
there was great pressure brought to bear by the banks throughout the
country, who were backed by many influential newspapers, in favor of
giving the sale of the 5-20s to the banks instead of to the Government
agents. The pressure upon Secretary Chase became so great that he
concluded to try the experiment, and authorized all the banks throughout
the country to sell the 5-20s. After giving them every opportunity to
supersede the agency system, as previously adopted with the six per
cent. and the 7-30 Treasury notes, the Secretary was finally compelled
to abandon the banks and go back again to the agents, who took hold with
vigor and made the sale of the 5-20s as brilliant a success as they had
previously made that of the 7-30s. We were friendless in Europe, but we
overcame this by patriotism and energy at home.
After a time, some of the banks, and there were only State Banks then,
threw out the Demand Notes, and so it became necessary to enforce their
circulation. To accomplish this, Secretary Chase asked Congress to make
them a legal tender for the payment of all debts, public and private,
excepting customs duties, and interest on the public debt, payable in
coin.
Congress, therefore, on February 25, 1862, remedied the difficulty by
passing the Legal Tender Act, making these and all the United States
notes lawful money. In the same act it authorized the issue of
$150,000,000 of new non-interestbearing legal tender notes. The
provision for the payment in coin of customs duties and interest on the
bonded debt was obviously as necessary as it was wise, as customs duties
furnished the means for paying the interest in specie; and the fact of
its being payable in gold created a demand for our bonds in other
countries, as well as at home, which would not have existed on paper
money interest.
Before long, the whole of the authorized $250,000,000 of 7-30 notes had
been sold to the public through the Government agents; and later, from
time to time, Congress authorized large additional amounts of these till
finally they reached their maximum, in August, 1865, when $830,000,000
of them were outstanding.
At the same date, also, the Government bond issues, which had kept pace
with the 7-30 note issues, and simultaneously reached their maximum,
showed immense totals. There were then outstanding $514,880,500, of 5-20
bonds, and $172,770,100 of 10-40 bonds. Among our own people patriotism
and profit combined to make these great United States loans doubly
attractive, and the Government agents used their best efforts to
stimulate the demand for them both at home and abroad. Livermore, Clews
& Co., in particular, sold large amounts of these in England and other
foreign countries, where they ultimately proved extremely profitable
investments. To meet the demands of the war, we—the Government
agents—were as anxious as the Secretary of the Treasury himself, and
never were men more successful in accomplishing their object and doing
good work than we were. There was patriotism worthy of Patrick Henry, as
well as profit, in this, and Wall Street can lay the flattering unction
to its soul that it rendered, through the Government agents, the best of
good service to the Government in this time of peril to the Union.
As General Grant said long afterwards to me, we were not fighting for
the Union as soldiers in the field, but we served it equally well by
helping it in its struggle for money to prosecute the war; and I felt
proud of the active part I took in thus helping to preserve the Union as
one of its army in civil life.
The campaign in Virginia having proved prolific of disaster to the Union
army, Congress, on July 11, 1862, authorized the issue of a hundred and
fifty millions more of non-interest-bearing United States legal tender
notes, and on January 17, 1863, another hundred millions to which it
added $50,000,000 on March 3d, in the same year, making $450,000,000 of
legal tender notes, or greenbacks, fifty of which were to be held as a
Treasury reserve, for the redemption of temporary loan certificates.
This was the maximum issue of non-interest-bearing legal tender notes at
any time, and by the act of January 28, 1865 Congress restricted the
total to $400,000,000, and there it remained till Hugh McCulloch became
Secretary of the Treasury, early in 1865.
Secretary Chase had meanwhile become Chief Justice of the United States