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 theAct, “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’clockwas 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 instatu 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 theignis fatuuswhich lure more unfortunate speculators to their financial doom than all other influences put together.
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.
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.
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.