When the sale of the 7-30s had been completed by the Government agents, there was great pressure brought to bear by the banks throughout the country, who were backed by many influential newspapers, in favor of giving the sale of the 5-20s to the banks instead of to the Government agents. The pressure upon Secretary Chase became so great that he concluded to try the experiment, and authorized all the banks throughout the country to sell the 5-20s. After giving them every opportunity to supersede the agency system, as previously adopted with the six per cent. and the 7-30 Treasury notes, the Secretary was finally compelled to abandon the banks and go back again to the agents, who took hold with vigor and made the sale of the 5-20s as brilliant a success as they had previously made that of the 7-30s. We were friendless in Europe, but we overcame this by patriotism and energy at home.
After a time, some of the banks, and there were only State Banks then, threw out the Demand Notes, and so it became necessary to enforce their circulation. To accomplish this, Secretary Chase asked Congress to make them a legal tender for the payment of all debts, public and private, excepting customs duties, and interest on the public debt, payable in coin.
Congress, therefore, on February 25, 1862, remedied the difficulty by passing the Legal Tender Act, making these and all the United States notes lawful money. In the same act it authorized the issue of $150,000,000 of new non-interestbearing legal tender notes. The provision for the payment in coin of customs duties and interest on the bonded debt was obviously as necessary as it was wise, as customs duties furnished the means for paying the interest in specie; and the fact of its being payable in gold created a demand for our bonds in other countries, as well as at home, which would not have existed on paper money interest.
Before long, the whole of the authorized $250,000,000 of 7-30 notes had been sold to the public through the Government agents; and later, from time to time, Congress authorized large additional amounts of these till finally they reached their maximum, in August, 1865, when $830,000,000 of them were outstanding.
At the same date, also, the Government bond issues, which had kept pace with the 7-30 note issues, and simultaneously reached their maximum, showed immense totals. There were then outstanding $514,880,500, of 5-20 bonds, and $172,770,100 of 10-40 bonds. Among our own people patriotism and profit combined to make these great United States loans doubly attractive, and the Government agents used their best efforts to stimulate the demand for them both at home and abroad. Livermore, Clews & Co., in particular, sold large amounts of these in England and other foreign countries, where they ultimately proved extremely profitable investments. To meet the demands of the war, we—the Government agents—were as anxious as the Secretary of the Treasury himself, and never were men more successful in accomplishing their object and doing good work than we were. There was patriotism worthy of Patrick Henry, as well as profit, in this, and Wall Street can lay the flattering unction to its soul that it rendered, through the Government agents, the best of good service to the Government in this time of peril to the Union.
As General Grant said long afterwards to me, we were not fighting for the Union as soldiers in the field, but we served it equally well by helping it in its struggle for money to prosecute the war; and I felt proud of the active part I took in thus helping to preserve the Union as one of its army in civil life.
The campaign in Virginia having proved prolific of disaster to the Union army, Congress, on July 11, 1862, authorized the issue of a hundred and fifty millions more of non-interest-bearing United States legal tender notes, and on January 17, 1863, another hundred millions to which it added $50,000,000 on March 3d, in the same year, making $450,000,000 of legal tender notes, or greenbacks, fifty of which were to be held as a Treasury reserve, for the redemption of temporary loan certificates.
This was the maximum issue of non-interest-bearing legal tender notes at any time, and by the act of January 28, 1865 Congress restricted the total to $400,000,000, and there it remained till Hugh McCulloch became Secretary of the Treasury, early in 1865.
Secretary Chase had meanwhile become Chief Justice of the United States Supreme Court, and Thomas Fessenden, who succeeded him as Secretary, had resigned. Mr. McCulloch began to contract the legal tender notes, and had withdrawn $44,000,000 before Congress interfered to prohibit any further contraction. It did this in response to a general protest against any further curtailment of the greenbacks in circulation.
From that time until the panic of 1873 their amount remained at $356,000,000. In the interval Mr. Boutwell had succeeded Mr. McCulloch, and Mr. Richardson had succeeded Mr. Boutwell as Secretary. Mr. Richardson, under diminished customs and revenue receipts, and the stress of the panic, restored to circulation $26,000,000 of the $44,000,000 of legal tender notes that had been withdrawn by Mr. McCulloch, whereupon Congress, on June 22, 1874, provided that the greenbacks in circulation should remain fixed at the then existing total of $382,000,000.
The same law which thus legalized the reissue of the $26,000,000 of legal tender notes by Secretary Boutwell abolished the National Bank reserve, previously required to be kept on bank-note circulation, and for this substituted the provision that the banks were to deposit five per cent. in legal tender notes of the amount of their own note issues with the United States Treasurer at Washington for the redemption of their notes.
This law is still in force, and the establishment of the Redemption Bureau at Washington has resulted, ever since, in daily receipts by it of mutilated bank notes to be replaced by new notes, in addition to the ebb and flow caused by banks increasing or reducing their circulation. The five per cent. in legal tender deposited is counted by them as part of their legal reserve. But the necessity of sending the notes to Washington, and of receiving them therefrom, involves trouble and loss of time to the banks, and also prevents the banks from contracting their circulation when the demand for it is light and increasing it when heavy, as freely and promptly as they would if every Sub-treasury was made a redemption point for National Banks. Congress ought therefore to authorize the equipment of the Sub-treasuries with redemption bureaus for the banks in their respective districts, in order to facilitate this ebb and flow of bank-note issues, and so increase the much needed elasticity of the currency.
In addition to United States legal tender notes, large amounts of interest-bearing legal tender notes were issued during the war. On September 1, 1865, when the currency, like the whole National debt, reached its greatest amount of inflation, the noninterest-bearing legal tender notes and fractional currency stood at $459,505,311, the three years six per cent. compound interest legal tender notes at more than $217,000,000, and the one and two years five per cent. legal tender notes at nearly $34,000,000, the whole aggregating $685,236,269 issued by the Treasury.
There were also outstanding $107,000,000 of temporary loan certificates. These, being payable after ten days’ notice, were treated as greenbacks by the banks, and counted as part of their lawful money reserve, while the remainder circulated as currency, and so practically increased the volume of paper money. At the same time the new National Bank law had put in circulation $170,000,000 of National Bank notes; and more than $70,000,000 of State Bank notes were still circulating. The last named were, however, soon taxed out of existence by Congress. The grand total of the issues enumerated was ten hundred and sixty-seven millions of paper money in circulation. Nor was this all, for there were then outstanding $85,000,000 of one-year certificates of indebtedness; and the $830,000,000 of 7-30 notes, called 7-30s, outstanding were extensively used as money, and so tended to increase the inflation of the currency and prices.
It will be seen therefore that the inflation of the currency was really much larger than it appeared to be by the Public Debt statements at that time. But so rapid was the contraction during the eight years following, through the maturity and cancellation of interest-bearing notes and certificates, that it is safe to say we had from sixty to seventy-five per cent. less paper, used as money, in circulation when the panic of 1873 commenced than we had in September, 1865, and to this enormous contraction of our medium of exchange that disastrous panic, the worst this country ever had, was largely due. It was, I repeat, the worst in its effects that this country ever experienced, not excepting the panics of 1837 and 1857, and was aggravated by the Franco-German War, that practically shut American securities out of the European markets, which had previously taken them freely. This was a severe blow to the American bankers who had undertaken to finance the railways then in process of construction in different parts of the country, and who had relied upon finding both home and foreign markets for the sale of the bonds issued against the completed mileage of these railways, and it led to much embarrassment and a number of failures. The depression following this panic of 1873—in which Jay Cooke & Co. failed owing to their having undertaken to finance the Northern Pacific—was prolonged, and prosperity did not really return to us as a Nation till after the resumption of specie payments in 1879. Meanwhile, nearly all the uncompleted railways in the country had been reorganized through foreclosures that wiped out hundreds of millions.
Our National debt, which had increased from $64,000,000 on June 30, 1860, and $88,409,387 on June 30, 1861, to $2,845,907,626 on September 1, 1865, had then been very largely reduced, for it was only $2,140,695,365 on September 1, 1873. The debt and the currency had gone up and down together under the influence of a common cause. Not till specie payments were resumed by the Government and the banks did gold cease to command a premium. With this the Gold Room became a thing of the past.
The great activity and the enormous sales of the Government agents may be inferred from the maximum amounts I have quoted, of the 7-30 notes, and the 5-20 and 10-40 bonds outstanding five months after Lee surrendered to Grant at Appomattox on April 9, 1865.
The total debt on which interest was payable in coin then amounted to $1,116,658,100, while that bearing interest in lawful money was $1,874,478,100, the first calling for $65,001,570 in gold annually, and the other for $72,527,646 of greenback currency.
That great event—Lee’s surrender to Grant—that ended the war, was the fitting prelude to General Grant’s election to the Presidency. It made it certain that no other Republican candidate for the office of President of the United States would have any chance of success at the next general election, and, of course, no Democratic candidate could be elected. Grant became our great National hero, and the country glorified him for his splendid war record.
But soon after the memorable historical scene at Appomattox, while the country was rejoicing over the advent of peace, with the Union restored, there came that terrible tragedy at Ford’s Theater in Washington, when President Lincoln, on April 14, 1865, was assassinated by John Wilkes Booth, and on the following day Vice President Andrew Johnson was sworn in as President.
Then, indeed, the Nation was plunged into mourning, and mourning emblems from ocean to ocean testified to the National grief.
I will not dwell on the stormy career of Andrew Johnson as President, and the impeachment proceedings against him, that for a long time made both branches of Congress seething cauldrons of excitement. But it was a happy relief to the country when his term expired and General Grant succeeded to the Presidency on March 4, 1869, with Schuyler Colfax as Vice President. The Democratic candidates who had run against General Grant in the campaign in which he was elected in November, 1868, were Horatio Seymour and General Francis P. Blair, Jr. But the popularity of Grant was so overwhelming that his election was a foregone conclusion.
Till within a short time of its final termination the duration of the war was a matter of much uncertainty, and its ultimate result had long been the subject of doubt and gloomy forebodings by many who failed to see that the superior money power and resources of the North were sure to conquer and crown the Union with victory in the end. Our currency, greatly inflated though it was, remained good throughout the trying ordeal, whereas that of the Confederate States became utterly discredited and worthless, thus repeating the history of the French _assignats_.
A new era opened in our history with the ending of the war, and our currency, which, of course, had previously no circulation in the South, began to circulate there. This, of itself, was equivalent to extensive contraction. The currency of one section had now to supply the currency needs of both sections, and for a long time the drain of money from the North to the South was felt in the money market.
The country was somewhat like a sick man accustomed to and dependent on stimulants, to withdraw which suddenly would have been perilous. Many in Congress recognized this danger, for it was a noticeable feature of the debates on the subject that not a few of those who had been strongly opposed to our excessive issues of paper money during the war, and warned the country against them, were among those who opposed violent contraction as being a remedy worse than the disease. The radical contractionists, however, failed to see, or refused to acknowledge, that the arguments which would have applied to the rising tide of the currency while the war continued, and there was danger of indefinite further inflation, did not apply with equal force to the altered condition of affairs.
Although schemes of radical contraction were rejected, even the moderate measure of contraction that was adopted proved too severe to be endured without much complaining from business interests, so hard and painful is the process of contraction, whereas that of inflation is always pleasant and easy.
In later years I became very well acquainted with General Grant, and toward the end of his first term of the Presidency, when a good deal of opposition was manifested to his renomination by the press, including the New York _Evening Post_, I made strenuous efforts to secure his renomination. To that end I organized a public meeting at the Cooper Institute, and induced William E. Dodge to act as Chairman. It was a great popular success, and Grant’s renomination was unanimously advocated with immense enthusiasm. The _Evening Post_ then said that after such an overwhelming demonstration it was evident that public sentiment was on the side of Grant, and that it was useless to oppose his renomination. He was accordingly renominated by the Republican Party and triumphantly reëlected. His second term as President began on March 4, 1873, and he retired from the Presidency four years later.
General Grant was well aware of the part I took at this meeting, which, many said, turned the scale in favor of his renomination when it was doubtful and trembling in the balance, and he also knew of my services in connection with the Government war loans, and in organizing various public meetings to celebrate Union victories and stimulate recruiting for the army. He said that I deserved some public recognition of my public services in supplying the sinews of war, and asked me how I would like to be Secretary of the Treasury, but I said I preferred Wall Street. Therefore, later on, he appointed me Fiscal Agent for the United States Government in all foreign countries, in place of Baring Brothers, of London, who had been its fiscal agents up to that time, since the Bank of England had acted in that capacity.
When it became certain that General Grant’s death was very near, I was anxious to see him once more, and also a strong advocate of his burial in the city of New York, where his tomb would be a conspicuous monument, to be seen by all, instead of burying him almost out of sight in Arlington Cemetery or at West Point, which places were strongly urged. The States of Ohio and Illinois also claimed him, as did the city of St. Louis. They all made strenuous efforts to obtain the family’s consent, as well as his, through committees sent to Mount McGregor for that purpose.
So I went to Mount McGregor, where he was, and as delicately as possible urged this upon him and his family. All of the members of the family assented, and the General, being unable to speak, nodded his assent also to what I said. Then when he was wheeled out in his chair, on the veranda, on his way to take his regular afternoon sun bath on the mountain side, accompanied by Dr. Douglas, he wrote on a pad that all he demanded was that his wife should be buried by his side when her own time came. Knowing them all well, I remained there two hours, talking with the General and the family, and my visit, when I made its result known, led to the selection of New York as the great soldier’s burial place, on the conditions mentioned by him. Within three days after I had seen him, the great General died. I had visited him on a Monday afternoon, and he died on the following Wednesday. His death threw the Nation into mourning.
Incidentally, I may mention that I started the organization of the famous Committee of Seventy, that brought about the overthrow of the corrupt Tweed Ring, that had robbed the city of New York of about a hundred millions of dollars. I nominated sixty-five of its members, and for my instrumentality in forming that Committee of eminent and public-spirited citizens I received many congratulations. That Committee not only drove the thieves out of office, but caused the prosecution of all of them who had not fled the country, and ultimately brought back and convicted Tweed, who died in prison. Meanwhile, it had reorganized the City Departments, and put new men in office, with Andrew H. Green as Comptroller. It purified, and, for a time, virtually ruled the city, through controlling its government.
But above everything else in my business life, I regard with most satisfaction the work I did in marketing the Civil War loans of the Government of this great and glorious country of ours—the United States of America—and in other ways strengthening the hands of the Government to the best of my ability and with all my heart and soul, not only as a banker but a patriotic American citizen; and I felt that I had my reward when, after the memorable four years’ war, peace came bringing with it Victory for the Union and a reunited country, a victory which gave permanence to the best government ever known to man—a government “of the people, for the people, and by the people,” which bids fair to be everlasting.
[Illustration:
MILLS BUILDING (OPPOSITE NEW YORK STOCK EXCHANGE), NOS. 11-13-15-17 BROAD STREET AND 35 WALL STREET, OCCUPIED BY THE BANKING HOUSE OF HENRY CLEWS & CO. ]
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FIFTY YEARS IN WALL STREET
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BY HENRY CLEWS, LL.D.
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CHAPTER I.
MY DEBUT IN WALL STREET.
MY advent in Wall Street was on the heels of the panic of 1857. That panic was known as the “Western blizzard.” It was entitled to the name, as its destructive power and chilling effects had surpassed all other financial gales that had swept over Wall Street. The first serious result of its fatal force was the failure of the Ohio Life and Trust Company, a concern of gigantic dimensions in those days.
The Company had an office in Wall Street, and on the announcement of the collapse, business became completely paralyzed. This failure was immediately followed by the suspension of many large firms that had withstood the shock of all ordinary collisions and had successfully weathered many financial storms.
The panic was due in part to excessive importations of foreign goods, and also to the rapid construction of railroads, to a large extent on borrowed capital. There were other contributing causes. The crops were bad that year, and the country was unable to pay for its imports in produce, and coin was brought to the exporting point. In October, the New York City banks suspended payments, and their example was followed throughout the country. Bank credits had been unduly expanded everywhere, and the time had naturally arrived for contraction. It came with a bound, and financial disaster spread like a whirlwind, becoming general.
The Stock Exchange had been a moderately growing concern for the ten years previous to this calamity, and the securities there dealt in had been rapidly accumulating in number and appreciating in value. Its members were wealthy and conservative, with a strong infusion of Knickerbocker blood, an admixture of the Southern element and a sprinkling of Englishmen and other foreigners.
The effect of the crisis on the majority of Stock Exchange properties was ruinous. Prices fell fifty per cent. in a few days, and a large proportion of the Board of Brokers were obliged to go into involuntary liquidation. There was a great shaking up all around.
Then came the work of rehabilitation and reorganization. Confidence gradually returned. The Young Republic had great recuperative powers, and they were thoroughly exerted in the work of resuming business. Much of the old conservative element had fallen in the general upheaval, to rise no more. This element was eliminated, and its place supplied by better material, and with young blood, and in December the banks resumed business.
This panic and its immediate results created an entire revolution in the methods of doing business in Wall Street. Prior to this time, the antique element had ruled in things financial, speculative and commercial. This crisis sounded the death knell of old fogyism in the “street.” A younger race of financiers arose and filled the places of the old conservative leaders.
The change was a fine exemplification of the survival of the fittest, and proved that there was a law of natural selection in financial affairs that superseded old conservatism and sealed its doom.
[Illustration:
JAMES CLEWS Of “The Leasows” Staffordshire, England Father of Henry Clews ]
[Illustration:
HENRY CLEWS In 1857, at the Time of His Start in Wall Street ]
[Illustration:
MRS. ELIZABETH KENDRICK CLEWS Mother of Henry Clews ]
Until that time, the general idea prevailed that those engaged in financial matters must be people well advanced in years, even to the verge of infirmity. It is the same idea that has been handed down, as if by divine right, from old world prejudices, especially in the learned professions. No doctor was considered a safe prescriber unless his hoary locks, bald head and wrinkled brow proclaimed that he had almost passed the period of exercising human sympathy. The same rule of judgment was applied to the lawyer and the clergyman.
These unworthy prejudices were fostered by the character of the Government of the old country, and nurtured by the surroundings of the venerable monarchies of Europe, where they exist largely even to the present day. So tenacious of life are these old-fashioned ideas, that many of them were found in full vigor, dominating Wall Street affairs up to the crash of 1857, fostering the antique element and choking off salutary enterprise.
Hence the process of decay of these archaic notions and our gradual development.
This struggle for new life in Wall Street was not successfully developed without a serious effort to attain it. The old potentates of the street fought hard to prolong their obstructive power, and their tenacious vitality was hard to smother, reminding one of the nine lives attributed to the feline species. The efforts of the young and enterprising men to gain an entrance to the Stock Exchange were regarded by the older members as an impertinent intrusion on the natural rights of the senior members. It was next to impossible for a young man, without powerful and wealthy patrons, to obtain membership in the New York Stock Exchange at the time of which I speak.
The old fellows were united together in a mutual admiration league, and fought the young men tooth and nail, contesting every inch of ground when a young man sought entrance to their sacred circle.
The idea then struck me that there was a chance for young men to come to the front in Wall Street. I was then engaged in the dry goods importing trade, in which I received my early training. I had been kept out of the Exchange for several years by the methods to which I have alluded. My fate was similar to that of many others. It was only by an enterprising effort, and by changing the base of my operations, that I finally succeeded.
The commissions charged at that time were an eighth of one per cent. for buying and selling, respectively.
After numerous efforts to gain admission to the Exchange, without success, I finally made up my mind to force it. I at once inserted an advertisement in the newspapers, and proposed to buy and sell stocks at a sixteenth of one per cent. each way. This was such a bombshell in the camp of these old fogies that they were almost paralyzed. What rendered it more distasteful to them still was the fact that, while they lost customers, I steadily gained them. The result was that they felt compelled to admit me to their ranks, so that I could be kept amenable to their rules and do business only in their own conventional fashion. My membership cost me, in all, initiation fee and other trifling expenses in connection therewith, $500. This presents a striking contrast to the recent price of a seat, $35,000, but though this difference seems very large, yet the changes in every other respect connected with Wall Street affairs have been in similar proportion. Among some of the old members of that day were Jacob Little, John Ward, David Clarkson and others whose names may be found in the archives of the Stock Exchange.
As an instance of the way in which membership was then appreciated, it may be mentioned that speculators frequently offered $100 a week, or ten times the cost of membership, for the privilege of listening at the keyhole during the calls.
[Illustration:
HENRY CLEWS’S BIRTHPLACE, “THE LEASOWS,” HILDERSTONE, STAFFORDSHIRE, ENGLAND. ]
Although the prostration growing out of this panic was very great and of long continuance throughout the country, general confidence being shaken to its very foundation, yet, on the whole, it was a great gain, and marked an era of financial and speculative progress. It was the chief cause in drawing out the young element in the business of Wall Street, which might have lain dormant for a much longer period without this sudden and somewhat rude awakening. It not only brought Young America to the front in speculation, commerce and general business, but it imparted an impetus of genuine enterprise to every department of trade and industry, from the good effects of which the country has never since receded.
This new element, emanating from the throes of one of the greatest business revolutions that any country has ever experienced, has continued to grow and thrive with marvellous rapidity. It is now getting so large that the Exchange will soon require a whole block instead of a basement as at its origin for its headquarters. The Governing Committee of the Stock Exchange are now looking forward to arrangements for this consummation. How the ancient fathers of my early days in Wall Street would have been shocked at the bare idea of such amazing progress!
It is not the least singular phase of this evolution in Wall Street, that the youthful element to which I have referred stands alone as compared with the progress achieved by the same class of men in any other nation. In America only does the youthful element predominate in financial affairs; and results have justified the selection, which perhaps in no other nation is possible. Thanks to the freedom of our Republican institutions, which, in spite of some individual deductions and the occasional obstructions of “crankdom,” make way for that progress, in the wake of which the other nations of the world are emulous to follow.
The Exchange was at this time situated on William street between Beaver street and Exchange Place. That place is rich in speculative reminiscences. It was there that Jacob Little made and lost his nine fortunes. It was there that Anthony Morse, the lightning calculator, operated. He could foot up four columns of figures as easily as the ordinary accountant could run up one. He had been a clerk, and having saved seven hundred dollars by close economy, began to deal in stocks. His career at that time was more marvellous even than that of Keene of a recent date. Morse made a fortune of several millions in a year, and became bankrupt during the same period, without any available assets to speak of. It was all honorably lost, however. There was no Ferdinand Ward game connected with it.
Youthful speculators had not then learned the “crooked” methods of the young idea of modern times. It was there also that Daniel Drew began to accumulate those millions that afterward were subject to such a rude scattering. It was there that the celebrated “corners” in Rock Island, Prairie du Chien and Harlem were concocted. It was there that the wealth was accumulated which built twenty thousand miles of Western railroads, causing many millions of acres, that would otherwise have been a wilderness, to blossom like the rose, in spite of Mr. Powderly’s opinion that no material good can come out of speculation, and thus adding immense wealth in real estate to the country, besides conferring incalculable benefits on trade and commerce, and preparing comfortable homes not only for the pioneers and surplus population of the Eastern States, but a teeming soil that has attracted the down-trodden of every nation to come and partake of the blessings of freedom and prosperity.