Fifty years in Wall Street
Supreme Court, and Thomas Fessenden, who succeeded him as Secretary, had
resigned. Mr. McCulloch began to contract the legal tender notes, and
had withdrawn $44,000,000 before Congress interfered to prohibit any
further contraction. It did this in response to a general protest
against any further curtailment of the greenbacks in circulation.
From that time until the panic of 1873 their amount remained at
$356,000,000. In the interval Mr. Boutwell had succeeded Mr. McCulloch,
and Mr. Richardson had succeeded Mr. Boutwell as Secretary. Mr.
Richardson, under diminished customs and revenue receipts, and the
stress of the panic, restored to circulation $26,000,000 of the
$44,000,000 of legal tender notes that had been withdrawn by Mr.
McCulloch, whereupon Congress, on June 22, 1874, provided that the
greenbacks in circulation should remain fixed at the then existing total
of $382,000,000.
The same law which thus legalized the reissue of the $26,000,000 of
legal tender notes by Secretary Boutwell abolished the National Bank
reserve, previously required to be kept on bank-note circulation, and
for this substituted the provision that the banks were to deposit five
per cent. in legal tender notes of the amount of their own note issues
with the United States Treasurer at Washington for the redemption of
their notes.
This law is still in force, and the establishment of the Redemption
Bureau at Washington has resulted, ever since, in daily receipts by it
of mutilated bank notes to be replaced by new notes, in addition to the
ebb and flow caused by banks increasing or reducing their circulation.
The five per cent. in legal tender deposited is counted by them as part
of their legal reserve. But the necessity of sending the notes to
Washington, and of receiving them therefrom, involves trouble and loss
of time to the banks, and also prevents the banks from contracting their
circulation when the demand for it is light and increasing it when
heavy, as freely and promptly as they would if every Sub-treasury was
made a redemption point for National Banks. Congress ought therefore to
authorize the equipment of the Sub-treasuries with redemption bureaus
for the banks in their respective districts, in order to facilitate this
ebb and flow of bank-note issues, and so increase the much needed
elasticity of the currency.
In addition to United States legal tender notes, large amounts of
interest-bearing legal tender notes were issued during the war. On
September 1, 1865, when the currency, like the whole National debt,
reached its greatest amount of inflation, the noninterest-bearing legal
tender notes and fractional currency stood at $459,505,311, the three
years six per cent. compound interest legal tender notes at more than
$217,000,000, and the one and two years five per cent. legal tender
notes at nearly $34,000,000, the whole aggregating $685,236,269 issued
by the Treasury.
There were also outstanding $107,000,000 of temporary loan certificates.
These, being payable after ten days’ notice, were treated as greenbacks
by the banks, and counted as part of their lawful money reserve, while
the remainder circulated as currency, and so practically increased the
volume of paper money. At the same time the new National Bank law had
put in circulation $170,000,000 of National Bank notes; and more than
$70,000,000 of State Bank notes were still circulating. The last named
were, however, soon taxed out of existence by Congress. The grand total
of the issues enumerated was ten hundred and sixty-seven millions of
paper money in circulation. Nor was this all, for there were then
outstanding $85,000,000 of one-year certificates of indebtedness; and
the $830,000,000 of 7-30 notes, called 7-30s, outstanding were
extensively used as money, and so tended to increase the inflation of
the currency and prices.
It will be seen therefore that the inflation of the currency was really
much larger than it appeared to be by the Public Debt statements at that
time. But so rapid was the contraction during the eight years following,
through the maturity and cancellation of interest-bearing notes and
certificates, that it is safe to say we had from sixty to seventy-five
per cent. less paper, used as money, in circulation when the panic of
1873 commenced than we had in September, 1865, and to this enormous
contraction of our medium of exchange that disastrous panic, the worst
this country ever had, was largely due. It was, I repeat, the worst in
its effects that this country ever experienced, not excepting the panics
of 1837 and 1857, and was aggravated by the Franco-German War, that
practically shut American securities out of the European markets, which
had previously taken them freely. This was a severe blow to the American
bankers who had undertaken to finance the railways then in process of
construction in different parts of the country, and who had relied upon
finding both home and foreign markets for the sale of the bonds issued
against the completed mileage of these railways, and it led to much
embarrassment and a number of failures. The depression following this
panic of 1873—in which Jay Cooke & Co. failed owing to their having
undertaken to finance the Northern Pacific—was prolonged, and prosperity
did not really return to us as a Nation till after the resumption of
specie payments in 1879. Meanwhile, nearly all the uncompleted railways
in the country had been reorganized through foreclosures that wiped out
hundreds of millions.
Our National debt, which had increased from $64,000,000 on June 30,
1860, and $88,409,387 on June 30, 1861, to $2,845,907,626 on September
1, 1865, had then been very largely reduced, for it was only
$2,140,695,365 on September 1, 1873. The debt and the currency had gone
up and down together under the influence of a common cause. Not till
specie payments were resumed by the Government and the banks did gold
cease to command a premium. With this the Gold Room became a thing of
the past.
The great activity and the enormous sales of the Government agents may
be inferred from the maximum amounts I have quoted, of the 7-30 notes,
and the 5-20 and 10-40 bonds outstanding five months after Lee
surrendered to Grant at Appomattox on April 9, 1865.
The total debt on which interest was payable in coin then amounted to
$1,116,658,100, while that bearing interest in lawful money was
$1,874,478,100, the first calling for $65,001,570 in gold annually, and
the other for $72,527,646 of greenback currency.
That great event—Lee’s surrender to Grant—that ended the war, was the
fitting prelude to General Grant’s election to the Presidency. It made
it certain that no other Republican candidate for the office of
President of the United States would have any chance of success at the
next general election, and, of course, no Democratic candidate could be
elected. Grant became our great National hero, and the country glorified
him for his splendid war record.
But soon after the memorable historical scene at Appomattox, while the
country was rejoicing over the advent of peace, with the Union restored,
there came that terrible tragedy at Ford’s Theater in Washington, when
President Lincoln, on April 14, 1865, was assassinated by John Wilkes
Booth, and on the following day Vice President Andrew Johnson was sworn
in as President.
Then, indeed, the Nation was plunged into mourning, and mourning emblems
from ocean to ocean testified to the National grief.
I will not dwell on the stormy career of Andrew Johnson as President,
and the impeachment proceedings against him, that for a long time made
both branches of Congress seething cauldrons of excitement. But it was a
happy relief to the country when his term expired and General Grant
succeeded to the Presidency on March 4, 1869, with Schuyler Colfax as
Vice President. The Democratic candidates who had run against General
Grant in the campaign in which he was elected in November, 1868, were
Horatio Seymour and General Francis P. Blair, Jr. But the popularity of
Grant was so overwhelming that his election was a foregone conclusion.
Till within a short time of its final termination the duration of the
war was a matter of much uncertainty, and its ultimate result had long
been the subject of doubt and gloomy forebodings by many who failed to
see that the superior money power and resources of the North were sure
to conquer and crown the Union with victory in the end. Our currency,
greatly inflated though it was, remained good throughout the trying
ordeal, whereas that of the Confederate States became utterly
discredited and worthless, thus repeating the history of the French
_assignats_.
A new era opened in our history with the ending of the war, and our
currency, which, of course, had previously no circulation in the South,
began to circulate there. This, of itself, was equivalent to extensive
contraction. The currency of one section had now to supply the currency
needs of both sections, and for a long time the drain of money from the
North to the South was felt in the money market.
The country was somewhat like a sick man accustomed to and dependent on
stimulants, to withdraw which suddenly would have been perilous. Many in
Congress recognized this danger, for it was a noticeable feature of the
debates on the subject that not a few of those who had been strongly
opposed to our excessive issues of paper money during the war, and
warned the country against them, were among those who opposed violent
contraction as being a remedy worse than the disease. The radical
contractionists, however, failed to see, or refused to acknowledge, that
the arguments which would have applied to the rising tide of the
currency while the war continued, and there was danger of indefinite
further inflation, did not apply with equal force to the altered
condition of affairs.
Although schemes of radical contraction were rejected, even the moderate
measure of contraction that was adopted proved too severe to be endured
without much complaining from business interests, so hard and painful is
the process of contraction, whereas that of inflation is always pleasant
and easy.
In later years I became very well acquainted with General Grant, and
toward the end of his first term of the Presidency, when a good deal of
opposition was manifested to his renomination by the press, including
the New York _Evening Post_, I made strenuous efforts to secure his
renomination. To that end I organized a public meeting at the Cooper
Institute, and induced William E. Dodge to act as Chairman. It was a
great popular success, and Grant’s renomination was unanimously
advocated with immense enthusiasm. The _Evening Post_ then said that
after such an overwhelming demonstration it was evident that public
sentiment was on the side of Grant, and that it was useless to oppose
his renomination. He was accordingly renominated by the Republican Party
and triumphantly reëlected. His second term as President began on March
4, 1873, and he retired from the Presidency four years later.
General Grant was well aware of the part I took at this meeting, which,
many said, turned the scale in favor of his renomination when it was
doubtful and trembling in the balance, and he also knew of my services
in connection with the Government war loans, and in organizing various
public meetings to celebrate Union victories and stimulate recruiting
for the army. He said that I deserved some public recognition of my
public services in supplying the sinews of war, and asked me how I would
like to be Secretary of the Treasury, but I said I preferred Wall
Street. Therefore, later on, he appointed me Fiscal Agent for the United
States Government in all foreign countries, in place of Baring Brothers,