Without assenting to his proposition or dissenting from it, I returned
to the department, and sent an order for the sale of $4,000,000 of gold
the next day. The order was to the assistant treasurer in these
words: "Sell $4,000,000 gold to-morrow, and buy $4,000,000 bonds."
The message was not in cipher, and there was no attempt to keep it
secret. It was duplicated and sent by each of the rival telegraph
lines to New York. Within the space of fifteen minutes after the
receipt of the despatch, the price of gold fell from 160 to 133, and
in the language of one of the witnesses, "half of Wall Street was
involved in ruin."
For the moment, the condition of Wall Street and the Gold Exchange
seemed to justify the statement of the person whose language has just
been quoted. As a matter of fact, however, many of the people involved
recovered from the panic, and were able to meet their obligations.
Some were gainers, probably, by the proceedings of the month of
September, and some were losers. As I have already said, I had no
purpose to help anybody or to hurt anybody, and I interfered in Wall
Street only when the operations that were going on there involved
innocent parties who were engaged in legitimate business, and also
imposed upon the Government a sacrifice in the loss of revenue.
Following the downfall of the combination, there appeared in the
newspapers statements and imputations which reflected upon the
President and his family as to their relations to the gold operations.
All these statements were without foundation. Mr. Corbin's connection
was established beyond controversy, but the evidence which established
his relations to the parties engaged in the gold speculation was also
conclusive as to the fact that the President had no connection with it,
and that he was not in any way interested in any policy calculated to
advance the interests of the combination.
The apprehensions that were entertained on the evening of the 24th and
on the 25th of September as to the extent of the disaster to business
and to individuals engaged in gold speculation were not realized in
full. My special correspondent in New York said in a letter dated
September 25: "Many of the houses hurt and reported failed yesterday
are likely to recover." Again he said: "The demoralization in the
street was never equaled, and it must take several days at least
before matters get fairly straightened. There is a wholesome dread
against making any obligations. Smith, Gould and Martin are just
reported as paying in full."
In a letter dated September 27 at 6:30 P. M., the assistant treasurer
at New York wrote me: "From the best evidence to be gathered in the
excitement here, it is safe to infer that the Gold Exchange Bank will
suffer losses to the extent of its capital and surplus at least, and
perhaps more." To the contrary of that prediction, it is to be said
that the Gold Exchange Bank was able to meet all its obligations.
In a letter written by Mr. Grinnell, then collector of the port of New
York, under date of September 24, after the announcement of the sale of
gold had been made, I find this statement: "Had you not taken the
course which you did, I believe a large proportion of our most reliable
merchants and bankers would have been obliged to suspend before three
o'clock to-day, as confidence was entirely gone and the panic was
becoming universal."
Following the break in the price of gold, there were persons who became
apprehensive that the rate would fall to a point which would affect
their interests unfavorably, and I received a letter, dated after
business hours on the 24th, in which the writer said: "It is not
impossible that, in view of the largeness of the amount of gold to be
sold to-morrow, there may be a combination to procure it at a low
price, and you will therefore excuse a suggestion that, as the effect
of your intervention has already been realized, it might be well to
protect the Government by making it known that you will reject all
unacceptable bids."
These extracts from letters received previous to and during the crisis
may lead to the conclusion that it is not safe to trust to persons
engaged in large business and commercial transactions as guides for the
administration of the Government in financial matters. Indeed, one may
go still further, and say that it is not safe to trust the guidance of
the Government in financial affairs to men whose life business it has
been to convert information into gold.
The most unpleasant incident of the gold speculation of 1869 was the
fact that General Butterfield, the assistant treasurer in the city of
New York, was so far involved as to lead the President to ask for his
resignation. That request did not arise from any evidence that General
Butterfield was in any way concerned in the movement or combination,
which led to the advance in gold. Indeed, the evidence was conclusive
to the contrary. This fact, however, did appear--that during the
period of the excitement he had made some purchases and sales of gold
and bonds. The suspicions that existed in the city of New York as to
his connection with the gold movement were largely exaggerations of
the actual facts. There was no evidence which impeached his official
or personal integrity in business. His resignation was requested upon
the ground that it was essential to the proper administration of the
office that the person holding the important place of assistant
treasurer in the city of New York, should not be engaged in business
transactions which might give rise to the conjecture that he had
advantages over others in consequence of his connection with the
Government.
It ought to be said the Mr. Gould, in his testimony before the
committee, which was given at great length and with singular clearness
of statement, denied expressly the existence of any combination. In
fine, he claimed, what may have been the truth, and upon the whole
probably was the truth, that it was not part of his purpose to carry
the price of gold above forty or forty-five per cent premium. He
attributed the excessive and rapid advance of the price of gold to the
persons who had sold short and who, becoming alarmed, attempted to
cover their sales by making purchases, and by bidding against each
other carried the price from about 140 to 160.
The same statement was made by Mr. Fisk as to the cause of the
excessive rise in the price of gold. He said: "It went up to sixty,
for the reason that there were in that market a hundred men short of
gold. There were banking houses which had stood for fifty years, and
who did not know but what they were ruined. They rushed into the
market to cover their shorts. I think it went from forty-five to
sixty without the purchase of more than $600,000 or $700,000 of gold.
It went there in consequence of the frightened bear interests. There
was a feeling that there was no gold in the market and that the
Government would not let any gold go out."
At the time of the gold panic, Gould and Fisk were interested in the
business of railway transportation from the West to the seaboard, and
Mr. Fisk made a statement which sets forth the theory on which he and
Gould professed to act. Fisk said: "The whole movement was based
upon a desire on our part to employ our men and work our power getting
surplus crops moved East and receiving for ourselves that portion of
the transportation properly belonging to our road. That was the
beginning of the movement, and the further operations were based upon
the promise of what Corbin said the Government would do."
From the testimony of Jay Gould and James Fisk, Jr., as it appeared
in the printed report, we are able to comprehend the characteristics
of the two men. Gould was cool and collected from beginning to end,
with no indication in his statements that the events of the 24th of
September had in any particular disturbed him in temper or nerve or
confidence in his ability to meet the exigencies of the situation.
On the other hand, the testimony of Fisk indicated the absence of the
qualities ascribed to Gould, and during his examination he failed to
maintain even ordinary equanimity of temper. He interfered with the
proceedings, and delivered this address to the committee: "I must
state that I must ask you gentlemen to summon witnesses whose names I
shall give you. My men are starving. When the newspapers told you
we were keeping away from this committee, I say to you that there is
no man in this country who wants to come before you as bad as Jim Fisk,
Jr. I have thirty or forty thousand wives and children to feed with
the money disbursed from our office. We have no money to pay them, and
I know what has brought them to this condition."
Another extract from Fisk's testimony gives a graphic view of his
condition when the crash came: "I went down to the neighborhood of
Wall Street Friday morning. When I got back to our office you can
imagine I was in no enviable state of mind, and the moment I got up
street that afternoon I started right round to old Corbin's to rake him
out. I went into the room, and sent word that Mr. Fisk wanted to see
him in the dining-room. I was too mad to say anything civil, and when
he came into the room, said I, 'Do you know what you have done here,
you and your people?' He began to wring his hands, and 'Oh,' he says,
'this is a horrible position. Are you ruined?' I said I didn't know
whether I was or not; and I asked him again if he knew what had
happened. He had been crying, and said he had just heard; that he had
been sure everything was all right; but that something had occurred
entirely different from what he had anticipated. Said I, 'That don't
amount to anything. We know that gold ought not to be at thirty-one,
and that it would not be but for such performances as you have had this
last week; you know ---- well it would not if you had not failed.' I
knew that somebody had run a saw right into us, and said I, 'This whole
---- thing has turned out just as I told you it would.' I considered
the whole party a pack of cowards; and I expected that, when we came
to clear our hands, they would sock it right into us. I said to him,
'I don't know whether you have lied or not, and I don't know what ought
to be done with you.'
"He was on the other side of the table, weeping and wailing, and I was
gnashing my teeth. 'Now,' he says, 'you must quiet yourself.' I told
him I didn't want to be quiet; I had no desire to ever be quiet again.
He says, 'But, my dear sir, you will lose your reason.' Says I,
'Speyers has already lost his reason; reason has gone out of everybody
but me.'"
My part and my interest in the events of Black Friday came to an end
with an effort to ascertain the authorship of an anonymous
communication, written in red ink, that I received the 6th day of
October. It was postmarked at New York, the 5th of October, 1869.
(A reduced facsimile of the communication is shown below.) An attempt
was made through the police and the secret service system to trace the
authorship of the superscription. The attempt was ineffectual.
[Facsimile]
If gold does not sell at 150 within 15 days I am a ruined man. You
will be the cause of my ruin! Your life will be in danger.
Wilkes Booth.
It appears in the review that Mr. Gould originated the scheme of
advancing the price of gold and that Mr. Fisk was his principal
coadjutor. It also appears that Mr. Fisk entered into the arrangement
upon the basis of friendship for Mr. Gould, and not in consequence of
an opinion on his part that the scheme was a wise one. Mr. Gould had
two main purposes in view: first, the profit that he might realize
from an advance in gold; and, second, the advantage that might accrue
to the railroad with which he was connected through an increase of its
business in the transportation of products from the West. As set forth
in Mr. Gould's letter, he entertained the opinion, which rested upon
satisfactory business grounds, that an advance in the price of gold
would stimulate the sale of Western products, increase the business
of transportation over the railways, and aid us in the payment of
liabilities abroad. If the price of gold had not been advanced beyond
a premium of forty or perhaps forty-five per cent, all these results
might have been realized, without detriment to the public, while Mr.
Gould and his associates would have realized large profits. When the
price had advanced to forty or forty-five per cent, Mr. Gould or his
associates made calls upon those who were under contracts to deliver
gold to make their margins good or else to produce the gold. These
demands created a panic, and the parties who had agreed to deliver gold
entered the market, and bidding against each other, they carried the
price beyond the point that Mr. Gould had contemplated.
XXXVI
AN HISTORIC SALE OF UNITED STATES BONDS IN ENGLAND
If there should be any considerable interest in the history of the
funding system of the United States, the interest would be due to a
sale of bonds some thirty years ago and certain incidents which could
not have been anticipated, which arose from the execution of the trust.
In the month of July, 1868, a bill for funding the national debt which
had passed the Senate of the United States was reported, without
amendments, to the House of Representatives by the Committee on Ways
and Means.
When the bill was under consideration in the House, I proposed a
substitute. In the debate of July 21 I made a statement of the nature
of my substitute, and I reproduce an extract which sets forth the
first step in a policy which culminated in the Act for Funding the
Public Debt, and which was approved by President Grant July 14, 1870:
"The amendment to which I wish to call the attention of the House
provides for the funding of $1,200,000,000 of the public debt
$400,000,000 payable in fifteen years @ 5 per cent interest,
$400,000,000 payable in twenty years @ 4˝ per cent interest, and
$400,000,000 payable in twenty-five years @ 3.65 per cent interest,
the latter sum of $400,000,000 payable, principal and interest, at the
option of the takers, either in the United States, or in London, Paris,
or Frankfort."
At that time I had not entertained the thought that I might come to be
the head of the Treasury Department. Indeed, I had no other purpose in
public life than to remain in the House of Representatives.
I had had experience on the executive side of the Government and also
on the legislative side, and I had a fixed opinion in favor of the
latter form of service.
As Secretary of the Treasury, I proposed a bill in 1869 in the line of
the substitute for the bill of the Committee on Ways and Means which I
had challenged in July, 1868. The bill proposed an issue of three
classes of bonds, each of four hundred million dollars, which were to
mature at different dates, and to bear interest at the rates of 5, 4˝,
and 4 per cent. It was further provided that the principal and
interest of the bonds bearing the lowest rate should be made payable
either in the United States, or at Frankfort, Paris, or London, as the
takers might prefer. The provision was rejected through the influence
of General Schenck, who had then returned recently from Europe, and
with the opinion that the concession involved an impairment of national
honor. As a substitute for the feature so rejected, I originated a
plan for the issue of registered bonds, upon the condition that the
interest could be paid in checks to be forwarded by the mails to the
holders of bonds at the places designated by them in any part of the
world. This plan is far superior to the first suggestion, as it is
susceptible of a much wider application.
I have received from Mr. Roberts, the Treasurer of the United States,
the following letter and statement:
STATEMENT SHOWING THE PROPORTION OF UNITED STATES BONDS OUTSTANDING
JANUARY 25, 1900, ON WHICH INTEREST IS PAID BY CHECK.
TITLE OF LOAN. Total issue. Registered Percentage
bonds on of bonds on
which interest which interest
is paid by is paid by
check. check.
Funded loan of 1891 continued at 2 per cent
. . . . . . . . .$ 25,364,500 $ 25,364,500 100.00
Four per cent funded loan of 1907
. . . . . . . . . 545,342,950 478,195,600 87.69
Five per cent loan of 1904
. . . . . . . . . 95,009,700 64,615,650 68.01
Four per cent loan of 1925
. . . . . . . . . 162,315,400 117,997,200 72.70
Three per cent ten-twenties of 1898
. . . . . . . . . 168,679,000 109,450,060 55.09