CHAPTER IX.
SECRETARY CHASE AND THE TREASURY.
THE DEPLETED CONDITION OF THE TREASURY WHEN MR. CHASE TOOK
OFFICE.—PREPARATIONS FOR WAR AND GREAT EXCITEMENT IN
WASHINGTON.—CHIVALROUS SOUTHERNERS IN A FERMENT.—OFFICIALS UP IN
ARMS IN DEFENCE OF THEIR MENACED POSITIONS.—MISCALCULATION WITH
REGARD TO THE PROBABLE DURATION OF THE WAR.—A VISIT TO WASHINGTON
AND AN INTERVIEW WITH SECRETARY CHASE.—DISAPPOINTMENT ABOUT
THE SALE OF GOVERNMENT BONDS.—A PANIC PRECIPITATED IN
WALL STREET.—MILLIONAIRES REDUCED TO INDIGENCE IN A FEW
HOURS.—MIRACULOUSLY SAVED FROM THE WRECK.—HOW IT HAPPENED.
Soon after Mr. Chase came into the Treasury he found that money was
seriously needed. In fact the Treasury was empty. The expenditure for
the fiscal year ending June, 1861, was 62 millions, and there were only
41 millions of revenue to meet them, and even this amount was threatened
with a serious reduction on account of the traitorous and rebellious
attitude of the South.
After President Lincoln had called upon Congress to provide for the
enlistment of 400,000 men, the expenses of the Government were soon
advanced to the enormous amount of a million dollars a day. The
Secretary of the Treasury made a calculation, which he submitted to the
President, showing that the probable expenditures would amount to 318
millions for the ensuing year. He advised that 80 millions be provided
for by taxation, 240 millions by loan, and that 50 millions of Treasury
notes, redeemable in coin on demand, should be issued.
The Secretary was authorized by Congress to borrow a sum not exceeding
250 millions, on the credit of the United States, and as a part of this
loan he was, in the words of the Act, “to issue in exchange for coin, or
pay for salaries or other dues from the United States, not over 50
millions of Treasury notes, bearing no interest, but payable on demand
at New York, Philadelphia or Boston.”
When Mr. Chase advertised for bids on the bonds known as the 81 issue
all bids at 94 and above were accepted, and those under 94 were
rejected.
I got up a syndicate immediately to take the entire balance of the loan
at 94, and went on to Washington to see the Secretary. This syndicate
comprised a number of New York banks and many large capitalists. I
called upon Secretary Chase when I arrived, informed him of the object
of my visit and made him an offer of 94 for the entire balance of the
loan.
He was in favor of the proposition, but requested me to leave the matter
open until the following morning for him to consider. It was a question
with him whether he ought not to give those whose bids had been rejected
an equal opportunity with the parties I represented.
I never can forget the impression I received on my approach to
Washington that morning. As I looked through the window of the
sleeping-car my eye was met by an entire train load of brass cannon.
There were at least a dozen platform cars, each having one of those huge
guns, all apparently in order to wheel at once against the enemy. I
shall always remember the feelings that came over me at that moment. The
question of war or no war was vividly presented to my mind, and this was
the uppermost thought during my visit at Washington.
I descended from my traveling quarters as soon as the train was
announced as having arrived at the capital, and repaired to Willard’s,
then the principal, if not, in fact, the only hotel for a traveler to go
to, and it was an old-fashioned, historic hostelry. I hastened to my
room, rapidly performed my ablutions, and then found my way into the
dingy breakfast room. On inquiry, I found that ten o’clock was the usual
hour for heads of departments, including Mr. Chase, to be at the
Treasury. At that hour I went to see him. I sent in my card and was
ushered into his presence without delay. He was a man of portly frame
and distinguished bearing, and impressed me with the feeling of being in
the presence of an individual far above the average standard of humanity
in every respect.
I informed the Secretary of my mission, with the result above stated.
About seven-eighths of the people of Washington, at that time, were
Southerners. The office-holders were largely composed of the latter, and
they were expecting to be suddenly turned out of office. This rendered
the place a boiling caldron of conspiracy and treason.
As I went around collecting information, the sight of those cannon that
at first had made such an indescribable impression upon me, continued to
haunt my vision wherever I went. The air was filled with rumors of war,
and everybody was wound up to the highest pitch of hostile excitement.
As I mingled among the people, the impression was forced upon me that
war was inevitable, and that up to the very hilt of the sword. I felt
that the contest would be long and bloody.
I sent a dispatch to my firm in New York, conveying my impressions to
that effect, and advised them to clear the decks in preparation
therefor. I urged them to lose no time in selling off all the mercantile
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.
[Illustration:
HON. ELBRIDGE GERRY SPAULDING,
Author of the Legal Tender Act, which authorized the issue of
greenbacks in 1862. He was a member of Congress from New York. He
resides at Buffalo, and is now in the eightieth year of his age, but
still in good physical health, with his mind clear and vigorous.
]
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