How an Act of Congress Killed the US Gold Market

gold+room
A view inside the New York Gold Room from Harper’s Weekly, October 1869.

 Thanks to our friends at Bloomberg Echoes for  first running this post last week on August 2, 2012.

When President Abraham Lincoln acted in December 1861 to suspend the national gold standard — the legal right to convert paper money into gold coin or “specie” — he wasn’t trying to start a fight with financial speculators in New York.

Lincoln had a bigger headache at that moment: trying to finance his rapidly growing Union Army in its fight against the South.

Within three years, though, Lincoln’s decision would bring a defining moment that would shape the federal government’s relationship with Wall Street. It came in June 1864 when Congress passed the Gold Act — the single time in U.S. history that Congress used its power to directly close a major financial market in the middle of active trading. It was such a failure that Congress never tried again.

The Gold Act was Washington’s response to a case of extreme profiteering during one of the bloodiest periods of the Civil War. After Lincoln had suspended the gold standard in 1861, he immediately asked Congress to float about $450 million in paper currency for the government to pay its bills. These steps created a temporary dual-currency system: paper “greenbacks” as legal tender for domestic debts, and gold coin as the currency of the world, needed for foreign trade, tariffs and custom duties.

Confederate Victories

Without government backing, the value of paper floated freely against gold. Within a few weeks, there was a brisk market on Wall Street for trading between gold and dollars. Each Confederate military victory sent gold prices soaring.

Speculators, stock traders, rebel and Union sympathizers, and government officials soon dominated the market, far outnumbering the bankers, exporters, importers and other commercial gold users. Daily price fluctuations affected the national war effort because rising gold prices directly eroded the value of the federal Treasury.

A Philadelphia banker, Jay Cooke, called the New York gold traders “General Lee’s left flank.” The New York Stock Exchange agreed; it considered gold trading disloyal and refused to allow it under its roof. This forced gold speculators to form a separate Gold Exchange on nearby William Street.

Gold prices spiked in June 1864 to $200 in paper — a 50 percent devaluation of the nation’s paper currency. That spring marked the culmination of General Ulysses Grant’s “Wilderness campaign,” a particularly bloody set of encounters as the Army of the Potomac pursued Confederate General Robert E. Lee across Virginia toward the Confederate capital of Richmond. Casualties on both sides were enormous, about 40,000 killed and wounded for the Union and another 70,000 for the Confederacy.

Gold prices peaked just as Grant’s army reached Petersburg, Virginia, to begin a desperate seven-month siege. The spectacle of New York financiers profiting from this carnage particularly outraged the public, and Congress decided it had to act.

The result was the Gold Act, passed with little debate on June 17, 1864. It was designed to close the Gold Exchange immediately and thereby end the speculative bubble in prices. To the surprise of senators and Treasury officials, however, it did nothing of the kind.

In fact, closing the Gold Exchange only made matters worse, by encouraging hoarders and fueling a panic. Kinahan Cornwallis, a British-born writer working in New York during the war as a reporter for the New York Herald, described how “the real holders of gold were thus isolated,… and purchasers had to run from office to office, inquiring the price at which holders were willing to sell … The whole country was alarmed by the rocket- like ascent of the [gold] premium, including Congress, amazed and rebuked by the advance.” Finally, he wrote, “Leading merchants and bankers, who had urged upon Congress this prohibitory legislation, now wrote and telegraphed to Washington, imploring the repeal of the Gold bill.”

Price Spikes

Gold prices would touch almost $300 before Congress would finally reverse course, repeal the Gold Act, and reopen the Exchange on July 2 — barely two weeks after the law was passed. Even after the Gold Room reopened, chaos continued with further corners and price spikes. Only the capture of Atlanta by General William T. Sherman in August 1864 finally broke the bull market in gold. By the time Lee surrendered to Grant at Appomattox Courthouse on April 9, 1865, the gold price was $144, less than half its wartime high.

In the 148 years since the Gold Act, Congress has developed extensive systems to regulate Wall Street –including the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Reserve, and the latest additions under the Dodd-Frank law, the Consumer Financial Protection Bureau and Financial Stability Oversight Council — but never again has it shut an actively trading market. Closing a market can turn excitement into fear and transform a bubble into a panic.

The Gold Act episode taught a simple lesson. In a crisis, politicians and financial regulators should follow the same rule as physicians: First, do no harm.

For Kinehan Cornwallis’s full story of the of the 1864 Gold Act episode, see the new reissue of his classic account — The NEW YORK GOLD ROOM: Wall Street’s Big Gamble on the Civil War.

Paul Ryan for Vice President — Three quick comparisons

Mitt Romney and Paul Ryan, the 2012 Republican ticket.    Photo from CNN.

Mitt Romney may get a nice bounce in public opinion polls from announcing 42 year-old Wisconsin Congressman Paul Ryan as his vice presidential running mate.  And why not?  Ryan, though very conservative, has many appeals.  He is young, energetic, articulate, and, as chairman of the House Budget Committee and author of its recent controversial ten-year plan, has made himself an intellectual leader of Congressional Republicans on the financial issues.  He will give Joe Biden a tough VP debate come October, bring knowledge on fiscal matters, and unify the Republican Tea Party faction behind Romney’s campaign.

Already, the optics seem to work: Romney the father figure, Ryan the smart protege (about the same age as Romney’s own eldest son Tagg).  What could go wrong?  

Watching the announcement this morning, three comparisons came quickly to my mind, all with the same idea, but very different ends:

Dwight Eisenhower and Richard M. Nixon, 1952.

Eisenhower and Nixon, 1952
Probably the best use of father-son optics in recent decades was engineered by General Dwight Eisenhower in 1952 when he picked a smart, young, 39-year-old California U.S. Senator named Richard M. Nixon as his running mate.  Eisenhower not only was relatively old — 62 years old — but a political newcomer, a career soldier.  Nixon, like Paul Ryan, was a rising intellectual leader of the Republican right who had starred in House and Senate anti-Communist investigations.  He offered Eisenhower a bridge to the Party’s Congressional wing and beautiful optics as a young family man with two cute daughters.

Nixon weather an early storm over a financial scandal resulting in his famous “Checkers Speech,” (click here to see it).  But after that, the strategy worked.  Eisenhower and Nixon won two terms, and it wasn’t until later, when Nixon sought the Presidency on his own, the Nixon’s full set of eccentricities came into full flower, culminating in Nixon’s 1974 resignation in disgrace from the hite House   in the Watergate scandal.

Kerry and Edwards, 2004:

John Kerry in 2004 also decided to pick a younger man, though the age difference between him and campaign rival John Edwards was much smaller than Eisenhower and Nixon.  Kerry was 61 years old in 2004, while Edwards was 51.  Still, Edwrad, a North Carolina U.S. Senator and acomplished courtroom lawyer, had made a good impression during the primaries that year and brought energy to the ticket.

The criticisms of Edwards came later.  Many backers were disappointed by Edwards’s lackluster debate in October 2004 against Republican Dick Cheney.  And since then, Edwards has shown himself to be a remarkably duplicitous character, chearing on his wife Elizabeth during his 2008 presidential campaign as she was dying with cancer and covering it up with campaign contributions, resulting in the recent criminal trial.

Reagan and David Stockman, 1980:

Ronald Reagan and  David Stockman.

But to my mind, Ronald Reagan, as usual, made the best decision in this type of situation.  Reagan’s list of potential running mates in 1980 included a particularly smart young Michigan Congressman named David Stockman, 34 years old but already an intellectual leader of House Republicans on budget issues.  Reagan decided not to make Stockman his running mate — Stockman wasn’t old enough in any event.  He chose for the job a more experienced hand, future president George H.W. Bush.

Instead, Reagan gave Stockman a more appropriate role in his White House: Director of his Office of Management and Budget.  This allowed Stockman to take full direct control of Reagan’s early effort to cut taxes and cut spending, a major accomplishment of Reagan’s presidency.

Stockman mostly did a fine job, but he was too much a purist.  When Congress passed Reagan’s tax cuts in 1981 but failed to adopt enough spending cuts — producing unprecedented budget deficits throughout the 1980s — Stockman went rogue. In gave an interview to Atlantic Monthty  in which he openly criticized the outcome and acknowledged “None of us really understands what’s going on with all these numbers.”   Reagan took Stockman “to the woodshed” — yes, that’s how they described it.  Stockman ultimately had to resign, and afterward, he wrote a book called The Triumph of Politics: Why the Reagan Revolution Failed. 

By making Stockman his OMB Director rather than VP, Reagan had made the best managerial choice.  He allowed Stockman to focus on his signature budget issues, but where Reagan could jettison him the minute he malfunctioned.  

Bright young man can be great things, but pose risks as well.  Will Paul Ryan be a purist like David Stockman, pushing candidate (or president) Romney farther right then he really wants?   Will Ryan be a secret cad like John Edwards, with lingering skeletons in the closet?  Will he serve faithfully like Richard Nixon, then let his own ambition take control when he gets the chance to run for himself?  

Most likely, it’s none of the above.  History never really repeats itself; each situation is new and different.   For now, let’s hope that Paul Ryan is just what he seems, a smart, idealistic, articulate advocate of conservative fiscal views who, agree with him or not, is ready to defend them in good faith and good spirit.  Let the games begin.

How negative can a campaign get? Thomas Nast’s attacks on Horace Greeley, 1872

Horace Greeley,  pictured by Nast as an out-of-touch nitwit in oversized coat and hat, oblivious to the sea of dead Union solidiers at notorious Andersonville Prison as he tries to  reconcile with the South.  The scrap of paper in his pocket reads “What I know about shaking hands over the bloodiest chasms, by H.G.”  Harpers Weekly, September 21, 1872.

Yes, we’ve seen presidential campaigns get pretty nasty, with the 2004 “Swift Boat” ads turning John Kerry, a decorated war hero, into a virtual traitor, probably representing the low point of recent years.  Negative campaigns have been a staple in America since the days of Thomas Jefferson and Abraham Lincoln.  So, looking forward to the finale of 2012, how low can it go?  Hold on to your seats….


Nast’s fawning view of Grant from 
an 1866 Harper’s Weekly cartoon.

My vote for the meanest ever baseless attack against a presidential candidate goes to Thomas Nast, the brilliant cartoonist for Harper’s Weekly whose satires helped destroy New York City’s notorious Boss Tweed.  (Click here for some of Nast’s famous Tweed cartoons.)  In 1872, Nast, a staunch Republican, turned his pencil against Horace Greeley, the brilliantly eccentric publisher of the New York Tribune who that year had won the presidential nominations both of the Democratic Party and the Liberal Republicans, a splinter group of Republicans who opposed incumbent President Ulysses S. Grant.

The irony, of course, was that Greeley had been an original founder of the Republican Party in 1856, an early abolitionist and harsh critic of rebels during the War, but he bolted in 1872 over Grant-era scandals, Grant’s reconstruction policy against the South, and Greeley’s own unique combination of vanity and  ambition.

Thomas Nast, circa 1870.

Thomas Nast adored Ulysses Grant, considered him a national hero for winning the Civil War, and detested anyone who questioned Grant’s honest.  By 1872, Nast’s fame over helping to topple Boss Tweed had given him an enormous national following.  Senators, Congressmen, and Presidents all courted him, knowing that literally a million Americans could be swayed by a single Nast cartoon.

For Nast, Greeley made an easy target.  Just seven years after the Civil War, resentments ran deep.  They called it “waving the bloody shirt,” and nobody did it better than Tommy Nast.  Over 600,000 soldiers had died in the Civil War,  touching almost every American family North and South, and bitter memories lingered.  By accepting the nomination from Democrats, Greeley had hitched himself to Southern diehards, and Nast had no problem using guilt by association to paint Greeley’s hands bloody.  Greeley himself virtually invited the charge by making reconciliation with the South central to his campaign — “grasping hands across the bloody chasm,” as he put it.  Greeley had also contributed bail money to former Confederate president Jefferson Davis.

Greeley shaking hands with a Confederate murderer stepping on a dead Union soldier.  The dead soldier is identified as from the Massachusetts 6th Regiment, four of whose members were killed in April 1861 by a street mob in Baltimore, the same site as the 1872 Democratic Convention that chose Greeley.  Harper’s Weekly, July 3, 1872.  

Greeley was easy to draw as a cartoon.  His rumpled clothes, wispy beard, wire glasses, and shifting politics all played into Nast’s talent for caricature.  One critic called him “a self-made man who worships his creator.”  What Nast did to Boss Tweed, he now did to Horace Greeley.  

Nast didn’t hesitate to throw in a bit of anti-Semitism.  The Shylock in this cartoon is August Belmont (born Jewish in Germany, though converted to Christianity in the 1840s after settling in the US), who represented the Rothschild banking firm in New York and chaired the Democratic Party during this period.   Harper’s Weekly, July 6, 1872

Greeley lost in a landslide.  (Click here for results.)  Even worse, his wife Mary died just a few days before the vote, on October 30.   The pressure was too much, and Greeley himself passed away on November 29, just three weeks after Election Day.  “I thought I was running for the presidency, not for the penitentiary,” Greeley told friends when asked about the Nast cartoons.  More than a few people pointed fingers at Thomas Nast’s attacks as one factor driving Greeley to the grave.

Thomas Nast’s legacy runs deep in American journalism, his ability to use cutting-edge technology (back then it was mass-produced wookcuts) to drive a hard-edged partisanship of personal attacks.  It’s good that he used this talent to help drive Boss Tweed from office.  But not-so-good that he used it to destroy the reputation of Horace Greeley.  For more Nast cartoons from the 1872 campaign, click here.    

Great portrait of Abraham Lincoln, 1860

He still looks young and vaguely handsome in this print, published by New York’s Currier and Ives in May 1860.  With sensitive eyes dominating the placid, sad face, Lincoln looks every bit the affluent, successful lawyer, representing Chicago railroads and corporations as well as small-town neighbors and friends around his home in downstate Springfield, Illinois.

Lincoln that month had won a stunning victory, surprising the country by capturing the Republican nomination for President of the United States.  His name suddenly on the front page of every newspaper, people clamored to see his face.  And with TV, newsreels, and even mass-produced photographs still far in the future,  Currier and Ives easily could demand $1.50 to $3.00 apiece (about $75 in modern money) for a portrait like this, especially during a hot political season.

Lincoln had won the nomination in a three day, three ballot convention widely considered the most exciting in America up to that time.  It came complete with marching bands, fireworks, and a good-time carnival atmosphere that drew some 40,000 people to frontier Chicago.  Lincoln himself was considered a long-shot underdog.  By all appearances, the Republican nomination in 1860 had been locked up in advance by another candidate, William Seward, the New York former governor and United States Senator.

But Lincoln captured the prize with nerve, ambition, and brass tacks.  His team played the kind of hardball politics that usually made reformers cringe — packing the hall, planting rumors, trading for votes, manipulating seats, and the rest.  Still, it gave of one of the best presidents in American history.   (I try to capture the excitement of this story in my own new eBook Lincoln’s Convention: Chicago 1860, told mostly through the eyes of newspaper writers.)

His four years as President would not be kind to Abraham Lincoln.  By the time he arrived in Washington to take the oath as President on March 4, 1861, the country had already split apart.  Seven Southern states had bolted to form the Confederate States of America.  Lincoln would preside over a long, bloody Civil War that would cost the country billions of dollars in treasure and 600,000 deaths before the Union was restored and slavery abolished.  Lincoln would see his own son Willie die in the White House of typhoid fever at just 12 years old as his wife Mary Todd Lincoln edged closer to mental instability.  By the time John Wilkes Booth shot him in April 1865, Lincoln’s hair and beard would be largely grey, his face crisscrossed with lines and wrinkles.

But that was in the future in May 1860, as the handsome Illinois lawyer peered out from his Currier and Ives portrait at his moment of great achievement.  Abraham Lincoln always joked about his looks.   Accused once of dishonestly, he shot back “If I had two faces, do you think this is the one I’d be wearing.”  His face perhaps wasn’t a pretty one, but it was good one.      

Why I hate this year’s Presidential campaign !!

Some of you have noticed that I’ve written very little — almost nothing — in this Blog lately about what usually is my favorite topic: politics.  Yes, one reason is that I’m lazy, it’s summer, and I’ve been busy  with other things — more on that later.  But here’s the basic truth:  I am finding this year’s 2012 presidential contest a pathetic disappointment.  The candidates are shallow: Romney and Obama both.  The debate over “issues” is pointless chatter.  The news coverage is insipid.    The time spent on it — sixteen months to pick a president — is ridiculous. (In France or Britain, the whole campaign lasts two months.)   The free-reign influence of big money is cheapening the whole affair.  And the actual task of governing the country and dealing with the real economic crisis is treated as a boring afterthought.  (In fact, the actual decisions that Congress will make in this year’s “lame duck” session after Election Day — not talked about by either candidate — may prove far more important to the future of the country that the presidential choice itself.)

Yes, the Republicans have been particularly terrible this year with their incoherent economics and right wing social views.  (Why couldn’t we have George Romney as the candidate instead of Mitt?) But the process itself is out of control and off-putting.

So why have I been silent about this?  Frankly, I don’t like having to sound like a crabby, cynical, nasty, grouchy old man on the Internet.  But when it comes to this 2012 presidential election, I don’t know how to avoid it.   

So, in the spirit of straight talk,  I have decided to break my silence and start laying out my case.  It may take a few weeks and many posts — using my usual historical comparisons —  but I’ll give it my best.  And maybe in the process we’ll discover some silver lining to this awful-looking mess.

So stay tuned to this spot.  More is coming.  All the best. –KA

POLITICS: In 1868, a Wild Fraud to Dwarf Today’s Political Sleaze.

Photo from Library of Congress, Prints and Photographs Division.

Thanks again to our friends at the Bloomberg “Echoes” financial history blog for running this item first on June 14, 2012.  Check them out for a great daily history fix.

Do big corporations really control U.S. politicians through money and contributions? Is the system more corrupt today than ever before?



It often seems that way. U.S. corporations spent about $3.32 billion in 2011 to lobby officials in Washington, according to OpenSecrets.org. This, plus billions more in newly liberated campaign contributions and other practices have combined to create a system many describe as “legalized bribery.”


Still, lobbying is protected by the First Amendment and, if anything, decades of reforms designed to increase transparency have made today’s abuses mild by comparison.


How bad was it?


Probably the low point for corporate-influence peddling in the U.S. came in 1868, when the New York state legislature decided a contest over control of the Erie Railroad, then one of America’s premier corporations.


The battle pitted the venerable Cornelius Vanderbilt, the owner of the New York Central Railroad, against Daniel Drew of Erie and his two young proteges, Jay Gould and James Fisk Jr.


Vanderbilt’s goal was simple: With Erie in his pocket, he could control all rail links from New York City to the Great Lakes, an immensely profitable monopoly. But Drew, who had grown rich manipulating Erie stock prices as company treasurer (before insider-trading bans), had no intention to let go.


The so-called Erie War took place during one of the most corrupt periods in American history. Historians call it the “Era of Good Stealings,” the years just after the Civil War when William “Boss” Tweed ruled New York City, Ulysses S. Grant sat in the White House, and scandals — from the Whiskey Ring to Credit Mobilier to postal frauds to Reconstruction to Indian agent frauds — all bubbled just beneath the surface. The New York Stock Exchange was an unregulated frontier of booms, busts and manipulations.


The complex contest between Vanderbilt and Drew — involving bribed judges, stock fraud, dueling injunctions and corporate piracy — reached its climax in March 1868. Decades before the existence of rules governing tender offers, stock registration, disclosures or other such niceties, all Vanderbilt had to do was buy Erie stock as fast as he could until he owned enough to control the company — what was known as a “raid.”


But Drew cheated. Tipped off to Vanderbilt’s plan, he secretly authorized and printed thousands of new Erie shares, turning the market into a quicksand pit.


Furious, Vanderbilt responded by finding a friendly New York judge to declare Drew, Gould, and the other Erie directors in contempt, forcing them all to flee across the Hudson River to New Jersey to avoid arrest.


Drew, in turn, responded by sending Gould to Albany to persuade the state Legislature to approve a bill legitimizing the large block of new stock issued to thwart Vanderbilt’s raid. Tweed, as a state senator (among other titles), personally represented Vanderbilt in the fight.


It’s difficult today to conceive the scale of the ensuing contest between Gould and Tweed for the hearts and minds of the state Legislature. Gould brought along a suitcase full of cash and set up shop in Parlor 57 of Albany’s Delavan House hotel, tending bar and doling out largess — in thousand-dollar bills. Tweed was equally generous. Nobody knows the true totals, but the two men reportedly distributed close to $1 million apiece (worth about $50 million or more today) to Albany lawmakers as they debated the Erie legislation.


It wasn’t just a senator or two they were trying to buy, but the entire statehouse.


The lawmakers, in turn, played both sides for suckers. For years, a group of about 20 assemblymen calling themselves the Black Horse Cavalry had specialized in blackmailing businesses with what they called “strike bills” — proposed laws designed to cripple businesses that refused to pay bribes. For them, the Erie War would be the richest payday ever. Instead of directly taking sides, most simply bid the two against each other.


One state senator, A.C. Matoon, reportedly took Erie’s side after receiving $15,000 from Gould, switched to Vanderbilt’s after taking $20,000 from Tweed, then supported Erie on the final vote.


“The wealth of Vanderbilt seemed pitted against the Erie treasury,” wrote Charles Francis Adams Jr. in his classic expose, “Chapters of Erie.” At one point, when a Vanderbilt agent arrived from New York with fresh cash, Gould reportedly paid him $70,000 to disappear.


Vanderbilt steamed at the spectacle. “It never pays to kick a skunk,” he said. He then ordered Tweed to cut off the bribes.


The legislators realized their fountain of easy money had run dry. Senators and assemblymen who had demanded a thousand dollars for their vote days earlier now offered their support for a mere hundred. To Adams, the mood among lawmakers was reminiscent “of the dark days of the war when tiding came of some great defeat.”


The legislators passed the Erie bill — which made the secretly issued Erie stock legitimate and thus secured Drew’s hold on the company — by a vote of 101 to 6. They had rejected it 83 to 32 when Vanderbilt money was being offered.


Vanderbilt and Drew ultimately settled their battle with a backroom deal that made them both much richer at the expense of Erie stockholders, in effect paying them both “golden parachutes” long before that term became common. At the same time, it left Gould and Fisk in charge of the company — Gould’s first big step in building one of the great American fortunes.


How does this compare with today’s big corporations attempting to influence Congress on issues close to their pocketbooks? There’s still plenty of money in politics, and plenty of favoritism by politicians toward big donors and high- powered lobbyists. But today the system is far more public and regulated — even with its flaws and gaps. And sunlight, as Justice Louis D. Brandeis famously told us, is the best disinfectant.


(Kenneth D. Ackerman is the author of four books, including “Boss Tweed: The Corrupt Pol Who Conceived the Soul of Modern New York.” The opinions expressed are his own.)

NEW SUMMER BOOK: Abraham Lincoln’s Convention: Chicago 1860



Scene in the Chicago convention hall at it prepared to nominate Abe Lincoln for president, from Harper’s Weekly, May 1860.

Every president is shaped by his nominating convention. Lincoln’s in 1860 not only was one of the most important, but also the most exciting in America up to that point. In a three day, three-ballot carnival of music, fireworks, and politics drawing some 40,000 people, Lincoln and his friends outwitted the leading celebrities of their party, capturing the prize with nerve, ambition, and brass tacks. They played the kind of hardball politics that usually made reformers cringe. Still, it gave us one of the best presidents in American History.

Joe Howard Jr. of the New-York Times, who wrote the article below, was one of the most flomboyant newsmen of the era.  His dogged Civil War reporting sometimes crossed ethical lines even by Nineteenth Century standards.  Still, it was first rate, earning him a national following and a rare by-line.

From Abraham Lincoln’s Convention: Chicago 1860:

1. Headline: They nominated who?

The New-York Times, Saturday, May 19, 1860.
By Joe Howard, Jr.


FROM CHICAGO.

——-
THE REPUBLICAN TICKET FOR 1860.
——-
Abram Lincoln, of Illinois, Nominated
For President.
_____
The Late Senatorial Contest in Illinois to be Re-
Fought on a Wider Field.
——-
Disappointment of the Friends of
Mr. Seward
——-
INTENSE EXCITEMENT AND ENTHUSIASM
——-

Special Dispatch to the New-York Times
Chicago, Friday, May 18




The work of the Convention is ended. The youngster who, with raged trousers, used barefoot to drive his father’s oxen and spend his days in splitting rails, has risen to high eminence, and ABRAM LINCOLN, of Illinois, is declared its candidate for President by the National Republican Party.


The result was effected by the change of votes in the Pennsylvania, New-Jersey, Vermont, and Massachusetts delegations.

Mr. SEWARD’s friends assert indignantly, and with a great deal of feeling, that they were grossly deceived and betrayed. The recusanis endeavored to mollify New-York by offering her the Vice-Presidency, and agreeing to support any man she might name, but they declined the position, though they remain firm in the ranks, having moved to make Lincoln’s nomination unanimous. Mr. Seward’s friends feel greatly chagrined and disappointed. [Recunasi is an old word referring to English Roman Catholics in the 1600s who refused allegiance to the Church of England, a crime back then.]
Abraham Lincoln in 1860.

Western pride is gratified by the nomination, which plainly indicated the departure of political supremacy from the Atlantic States. …


Immense enthusiasm exists, and everything here would seem to indicate a spirited and successful canvass. The city is alive with processions, meetings, music, and noisy demonstrations. One hundred guns were fired this evening.


The Convention was the most enthusiastic ever known in the country, and if one were to judge from appearances here, the ticket will sweep the country


Great inquiry has been made this afternoon into the history of Mr. Lincoln. The only evidence that he has a history as yet discovered, is that he had a stump canvass with Mr. Douglas, in which he was beaten. [U.S. Senator Stephen A. Douglas from Illinois was the likely Democratic nominee and Lincoln’s likely chief opponent for President. Lincoln actually had won the popular vote in his 1858 Senate contest against Douglas, but the Democratic Illinois legislature nevertheless awarded the seat to Douglas.] He is not very strong at the west, but is unassailable in his private character.


Many of the delegates went home this evening by the 9 o’clock train. Others leave in the morning…..


Massachusetts delegates, with their brass band, are parading the streets, calling at the various headquarters of the other delegations, serenading and bidding them farewell. “Hurrah for Lincoln and Hamlin – Illinois and Maine!!” is the universal shout, and the sympathy for the bottom dog is the all-pervading sentiment.


The “Wide-Awakes,” numbering about two thousand men, accompanied by thousands of citizens, have a grand torch-light procession. The German Republican Club has another. The office of the Press and Tribune [today’s Chicago Tribune] is brilliantly illuminated, and has a large transparency over the door saying “For President, Honest Old Abe.” A bonfire thirty feet in circumference burns in front of the Tremont House, where thirty-three guns were fired from the top, and illumines the city for miles around. The city is one blaze of illumination. Hotels, stores and private residences, shining with hundreds of patriotic dips. Enough.


–Howard

We hoped you enjoyed this excerpt from Abraham Lincoln’s Convention: Chicago 1860.  If you enjoyed it, please consider downloading the full book through Amazon, Nook, or Apple iTunes.

In Abraham Lincoln’s Convention: Chicago 1860, we tell the story of Lincoln’s convention primarily through the eyes of newspaper writers, giving it the immediacy of the moment, with annotations, background, and updated formatting.

BOOKS: Publish Now! — a June 23 workshop at The Writers Center

Publish Now:  From Manuscript to Book and eBook in the New World of Publishing


At this comprehensive day-long seminar, keynote speaker Justin Branch of Greenleaf Book Group, a nationally known publishing, marketing and distribution company, will share his expertise on the whole publishing landscape and “controlling your publishing experience” for e-books and digital publishing. Other presenters include authors, agents, book marketers and attorneys who will offer guidance on finishing your manuscript, preparing for publication, getting help, marketing your book, understanding copyright and more.

Publish Now! Take Your Writing from Manuscript to Book & ebook in the New World of Digital Publishing


At The Writers Center in Bethesda, Maryland.

Saturday, June 23,  9 a.m. – 5 p.m.

Cost includes networking lunch and closing reception

Topics:

Publishing

“The New World of Publishing” will be led by Justin Branch, a publisher with Greenleaf Book Group, a publishing, marketing and distribution company based in Austin, Texas, whose clients range from well-known brands such as John Gray and Kanye West to debut authors.

Ken Ackerman & Neal Gillen will present “The Non-Traditional Publishing Experience.” Ackerman has authored four published books and founded his own publishing company. Gillen is the author of eight self-published novels.

Writing

“The Story – The Manuscript is Finished – Or is It – What’s Next?”, led by C.M. Mayo, author of The Last Prince of the Mexican Empire, a Library Journal Best Book 2009; Miraculous Air and Sky Over El Nido, winner of the Flannery O’Connor Award for Short Fiction, among many other works. Her presentation will answer the question, How do I know when my manuscript is ready to be published, and whose help do I need to get it there; for example, a private editor, writing coach, or trusted reader?

Marketing

“Developing Your Marketing Plan,” led by Ally Peltier, chief editor, writer and editor of Ambitious Enterprises and Angela Render, owner of Thunderpaw Business Intelligence & Network Systems Management and author of “Marketing for Writers,” will break down what a successful manuscript is and how to design your own program for marketing it. Please call 301-654-8664 to receive student pricing.

Legal/Business

Attorneys Laura Strachan and Cynthia Blake Sanders will demystify copyright, fair use and commercial speech laws, which are changing rapidly in the new world of publishing and help you understand who owns your manuscript.

Click here to find out more.

BOOKS- The NEW YORK GOLD ROOM: Wall Street’s Big Gamble on the Civil War

Scene on the floor of the New York Gold Exchange or “Gold Room,” 1869.

In all American history since 1789, with its many financial booms and busts, only once has the United States Congress ever stepped in and closed down a major financial market in the middle of active trading, trying to stop speculation and cool prices. This took place in 1864 at one of the bloodiest points in the Civil War, prompted by a case of war profiteering in the extreme. It failed miserably. It’s target? The New York Gold Exchange, or Gold Room.

A British-born writer named Kinahan Cornwallis (1839-1917) witnessed this event while working in New York City as a reporter for the New York Herald.  We at Viral History Press LLC are proud now to bring you Kinahan’s account, first published in pamphlet form by A.S. Barnes & Company in 1879, as the first of a new series of eBooks called History Shorts / Original Voices, brief but compelling eye witness accounts of key events in American history.The NEW YORK GOLD ROOM: Wall Street’s Big Gamble on the Civil War, in Corwallis account of war profiteering run amok. 

Gold speculation never existed in the United States before January 1862. Weeks earlier, in December 1861, President Abraham Lincoln had decided to suspend the national gold standard, the legal right to convert paper money into gold coin or “specie,” as a step to help finance since the Civil War.  At the same time, Lincoln also asked Congress to float some $450 million in paper dollars and began borrowing heavily. His Treasury Department would sell over $2 billion in bonds by the end of the War, easily worth half-a-trillion in modern dollars.

These steps created a new dual-currency system in America, with two forms of money circulating side by side: paper “greenbacks” as legal tender for domestic debts and claims, and gold coin as the currency of the world, needed for foreign trade, tariffs, and custom duties.

A brisk gold trade arose along Wall Street in early 1862. Each Confederate military victory sent gold prices soaring and greenbacks plummeting. Speculators, stock traders, rebel and Union sympathizers, and Washington officials with access to battlefield news dominated the market, far outnumbering the bankers, exporters, importers, and other commercial gold users. Daily price fluctuations affected the national war effort, since rising gold prices directly eroded the value of the federal Treasury.


Bankers like Philadelphia’s Jay Cooke called the New York gold traders “General Lee’s left flank.” The New York Stock Exchange agreed; it considered gold trading disloyal and refused to allow it under its roof. This forced gold speculators to form a separate Gold Exchange on nearby William Street.


Gold prices spiked in June 1864 to $200 in paper — a full fifty percent devaluation of the nation’s paper currency — as General Ulysses Grant’s army sat stalled outside Petersburg, Virginia. Responding to public anger at the spectacle of Wall Street moneymen profiting off the bleak military stalemate, Congress passed the Gold Act, a statute designed to close the Gold Exchange immediately. To its surprise, however, closing the Exchange only made matters worse, encouraging hoarders and fueling a panic. The gold price skyrocketed by an additional $100, reaching almost $300 paper-to-gold, before frantic appeals from New York merchants convinced Congress to repeal the Gold Act and reopen the Exchange ten days later.


Only General William T. Sherman’s capture of Atlanta in August 1864 finally broke the bull market and cooled the fire. When Robert E. Lee surrendered to Grant at Appomattox Courthouse on April 9, 1865, the gold price sagged to $144, less than half its wartime high. It raises an age-old question: Which was worse: Over-speculation by the Wall Street gold traders, or Congress’ uninformed over-reaction that did far more harm than good?

For ease of reading, we have made minor edits and format changes, particularly shorter paragraphs and sub-headings, and added a few annotations to clarify historical context. Otherwise, we’ve left Kinahan Cornwallis’s text alone. We hope you enjoy this original voice from the 1870s.

Here, as an excerpt, is where Cornwallis describes what happened ton Wall Street the day after Congress stepped in and closed the Gold Room —


From The NEW YORK GOLD ROOM: Wall Street’s Big Gamble on the Civil War

But the effect of large issues of irredeemable paper was not thus easily to be legislated away by a mere enactment closing the regular market for the precious metal. …


The abolition of the Gold Room, involved in this unwise, not to say absurd law, was its worst feature, for it closed the door to competition among bona fide holders of coin, as well as among speculative sellers. The real holders of gold were thus isolated, and each individual of their number was free to ask whatever price he pleased for the metal. Every one naturally wanted the highest price obtainable, and there began a rise faster than ever in the Gold Room. Those who had to pay customs’ entries and foreign indebtedness became alarmed, and rushed to the offices of the bullion dealers in Wall street, to make their gold purchases at the going price, whatever that might be, fearing that it would soon be still higher. Those who had sold “short” were still more apprehensive of the future course of the premium, and in trying to “cover” their contracts accelerated the upward movement.


No quotations for gold were made on the Stock Exchange, or on the street, and purchasers had to run from office to office, inquiring the price at which holders were willing to sell. Leading merchants and bankers, who had urged upon Congress this prohibitory legislation, now wrote and telegraphed to Washington, imploring the repeal of the Gold bill.


The whole country was alarmed by the rocket-like ascent of the premium following its passage, and Congress, amazed and rebuked by the advance — gold having sold at 198 on the 20th of June, and at 250 before the end of the month¬ — repealed the bill on the 2d of July, and the bears began to breathe a little more freely. Sunday, and “the Fourth” followed, and on the morning of the 5th, the Gold Room was re-opened; but the tug of war had yet to come. [By late June 1864, General Grant’s advance had been stopped, and his Army settled into a siege around Petersburg, Virginia, just twenty-one miles south of Richmond, that would last until March 1865.]

Still another corner


The bulls were prepared to twist the “shorts,” and as the outstanding contracts for future delivery were large, they found it easy to control the floating supply of “cash” gold — that is the coin available for immediate delivery — and so force the bears to buy to make their deliveries, unless they preferred the alternative of borrowing at exorbitant rates each day, to keep their contracts good. The market was virtually cornered. The highest price on the 5th of July was 249. On the 6th, it had risen to 261 ½, on the 7th to 273, on the 8th to 276 ½. On the 9th it remained steady, and on Monday the 11th leaped up to 285.


The bears quivered with rage and excite¬ment, or abandoned the contest in despair. Gilpin’s News Room, at the corner of William street and Exchange Place — to which the gold market had been removed before this from the Coal Hole — was turned into a scene of tumult, vociferation, agony, and disorder, that might be likened, for want of a better illustration, to Pandemonium. Men who were losing thousands every hour, or every minute, were there, shouting themselves hoarse, their hands uplifted and their eyes roll¬ing in frenzy, while their countenances indicated that they we’re undergoing mental tortures colloquially described as equal to those of the damned. Others were there, emboldened by and wildly elated with their own success, and tempting fortune by testing their luck to the utmost, apparently believing with the poet, that-


‘He either fears his fate too much, Or his deserts are small,
Who dares not put it to the touch, To gain, or lose, it all.’


A surging, writhing mass of humanity shook the Gold Room, and the sound of many voices filled the air, while men with anxious and fevered faces rushed in and out of the clamorous confusion with a semi-frantic celerity such as might have been expected of them if their lives or fortunes had been dependent on the result of a moment. The din would rise and fall like the roar of a tempest, but every few minutes new men would rush in, and yell far above the storm, and then rush out again after executing their orders; and day after day the exciting drama of gold was repeated. Meanwhile the whole country looked on with apprehension.


The “Corner” — for such it may be termed — culminated on the 11th of July, and after the Gold Room had closed on that day, private transactions took place at still higher figures than any chronicled during the regular hours of busi¬ness, one of these, it was rumored, being at a price above 300. But although the market had reached “top,” it showed stubbornness in yielding. On the 19th of July, sales were made at 268 3/4, on the 6th of August at 261 3/4, and on the 2d of September at 254 1/2. By the end of that month, however, there was a decline to 191 ; yet so erratic was the course of speculation, that on the 9th of November the price touched 260 again.


On that day General [William Tecumseh] Sherman began his mem¬orable and triumphant march through Georgia to the coast, and gold never afterward reached that altitude, but on the whole steadily declined, until it sold at 125 in March 1866, in consequence of the successes of the Union armies, culminating in the overthrow of the rebellion.

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MONEY: Boss Tweed’s Bondholder Revolt



Cartoon by Thomas Nast depicting the Tweed Ring in Harper’s Weekly, Aug. 19, 1871. Source: Library of Congress.

A hearty thanks to the Bloomberg “Echoes” financial history blog for running this item first on May 9, 2012.  Check them out for a great daily history fix.

How can excessive debt sink a government? Look no further than New York — in 1871, under the leadership of the eminently corrupt William M. Tweed.

Today, the U.S. government owes some $15.2 trillion. Its largest group of public creditors comprises foreigners and foreign governments, led by China and Japan. Overseas creditorshold $5.1 trillion in U.S. paper and continue to be big buyers at Treasury auctions. What would happen in the (still unlikely) event they stopped buying?

Take a look at “Boss” Tweed’s New York. Tweed, the legendary Grand Sachem of Tammany Hall and a renowned political fixer, was easily the most corrupt politician in American history. He and his cronies stole a remarkable amount of money during their brief reign from 1868 to 1871: Estimates range from $60 million to $100 million in 1871 dollars, worth many billions today.

Tweed himself ultimately was convicted on 204 counts of fraud and died behind bars in New York’s Ludlow Street jail as a disgraced man.

Still, while in power, Tweed ran a happy city. Everyone made money under his system. Real estate boomed and business prospered. He financed his corrupt regime on low taxes while providing good service and plenty of graft for friends. To pay the tab, he borrowed.

Debt, Debt, Debt

Under Tweed, the city treasury issued oceans of debt: Croton Aqueduct Bonds, Central Park Improvements Bonds, four classes of County Court House stock, Bonds for Repayment of Taxes, Assessment Fund Stock, Park Improvement Bonds, Street Improvement Bonds. New York’s city and county debt swelled to more than $97 million by mid-1871 from $36.3 million in January 1869, with interest payments approaching $10 million a year.

Local banks and brokers snapped up these bonds and sold them to investors in Europe, mostly British and German, who didn’t know any better and considered them safe.

But that changed in July 1871, when the New York Times (NYT)received a stolen copy of the Tweed Ring’s secret accounts and published it on its front pages — disclosing all manner of fraud and theft, including embezzlement and bill padding on construction of the Tweed Courthouse in lower Manhattan. City leaders read with disbelief.

Thomas Nast’s clever cartoons of the time depicted Tweed as a laughable crook. But one group that found no humor in the situation was the bondholders. In late July, they cut off credit. The city put $40,000 in bonds up at auction one day and failed to receive a single bid. A few days later, the Commercial and Financial Chronicle warned of a panic. In Europe, the Berlin Stock Exchange banned New York’s city and county bonds from its official trading list.

The city had a looming interest payment of $2.7 million due Nov. 1, and its agents could no longer raise money in world markets. “They distrust our securities in London,” an unnamed broker told the New-York Tribune.

If credit dried up and the city defaulted on its debt, the impact on New York’s wealthy would be devastating, wiping out their bulging bond portfolios and crippling their standing in Europe, which was still a principal source of capital for American finance.

An “insurrection of the capitalists” quickly organized itself in lower Manhattan. Some 1,000 merchants rushed to sign a petition refusing to pay any more property taxes until city officials gave a full account of their spending. Another group filed a lawsuit to block a city construction project on Broadway. Calls went out for city leaders to convene publicly on Sept. 4 — when wealthy men had returned from their summer holidays.

The Fall

After that, the fall came quickly. In early September, reformers won a court injunction demanding an accounting and blocking any more spending by Tweed’s City Hall. By October, Tweed had been indicted, and would soon begin his long journey through the city and state prison system. The flow of credit only resumed after the entire Tweed system had been dismantled.

America’s current mountain of debt wasn’t built on fraud like Tweed’s. Nor did the European bondholders in Tweed’s day worry that stopping the money flow to one city government would hurt their larger investments portfolios in the long term, as U.S. creditors today surely would. They demanded regime change – – replacement of the Tweed Ring with an honest government — and they got it.

But there are lessons for modern American politicians here. First, don’t steal. (Hopefully they know that one already.) Second, it’s not just in Europe where debt can topple governments — in a pinch, creditors always call the tune.

(Kenneth D. Ackerman is the author of four books, including“Boss Tweed: The Corrupt Pol Who Conceived the Soul of Modern New York.” The opinions expressed are his own.)