Browsing "Financing Lincoln’s War"

The War to Create Many Large Fortunes

After the departure of conservative Southern congressmen in 1861, the old Whigs in the Republican party went unrestrained in their merger of government and corporations. Historian Charles Beard would later write of the War that it was not easy to tell “where slavery as an ethical question left off and economics – the struggle over the distribution of wealth – began.”

Bernhard Thuersam, www.Circa1865.com

 

The War to Create Many Large Fortunes

“As the election of 1872 approached, the tax and tariff issues were potent enough for [President Ulysses] Grant to take at least some action. Trying to shore up support among farmers and others, Congress approved a 10 percent reduction in tariffs on most items including cotton and wool textiles, iron, steel, paper, glass and other items. But these were baby steps with marginal impact, designed to preserve the whole protectionist system.

Throughout the assault on the [Civil War] income tax, opponents had considered the step of going to court to challenge the tax’s constitutionality. Some suits were filed, and parts of the tax were upheld by various courts, including the Supreme Court. But as the expiration of the tax approached, there did not seem to appear much sentiment in Congress to continue it anyway. Senator [John] Sherman [brother of General Sherman] fought once again to keep the tax alive. He asserted that one of the most solemn obligations of the federal government was to protect the property of Americans. It was therefore only proper “to require property to contribute to their payment.”

Sherman’s appeal was to no avail. Congress was more sensitive to the demands of the growing number of wealthy entrepreneurs, investors, and tycoons, who were at their moment of maximum influence. The power of the new wealthy rested on the newly consolidated railroads and the many large fortunes create by the Civil War.

The landscape of wealth had changed. Whereas New York City had had a handful of millionaires before the conflict, there were hundreds of millionaires afterward. Their fortunes were in the tens of millions of dollars. A.T. Stewart, the dry goods magnate, was worth $50 million, and other millionaires, such as William B. Astor, Cornelius Vanderbilt, and the banker Moses Taylor, were not far behind.

Before Congress abolished the publication of income tax returns, it was reported that Astor had paid more than $1 million in income tax, while Vanderbilt and Taylor had paid more than $500,000. After the war, many millionaires routinely engaged in tax evasion or tricks to hide their income. What they did not bother to hide was their vast influence.

In 1869, Grant’s friend Jim Fisk worked with [Northern financier] Jay Gould to monopolize the market in gold, driving up its price so they could make a killing. Instead, on “Black Friday,” September 24, 1869, a collapse in gold prices engulfed a vast number of speculators and investors.

Fisk and Gould managed to bribe enough officials to avoid prosecution, and Fisk remained close to his trusting friends in the White House. Years later the Credit Mobilier scandal revealed that the construction company owned by stockholders of the Union Pacific Railroad had ensnared many prominent members of the Grant administration and Congress.

As tax the historian Sidney Ratner notes, the Civil War debt “became one of the most powerful instruments in America for the enrichment of the rentier class, the leading capitalists. For the next forty years, farmers, workers, small merchants and other working-class Americans carried this debt burden, to the benefit of the rich.”

(The Great Tax Wars, Lincoln to Wilson, Steven R. Weisman, Simon & Schuster, 2002, pp. 99-101)

The North’s Powerful Pension Attorney Lobby

The North’s war pensions were costly – from 1866 to 1917 the total disbursement for pensions was over $5 billion – though including the negligible amount for the Indian and Spanish Wars. It is said to be the “largest expenditure for pensions of any sort in the history of the world.”

Bernhard Thuersam, www.Circa1865.com

 

The North’s Powerful Pension Attorney Lobby

“Disability pensions for [Northern] Civil War soldiers were authorized on a liberal scale by acts passed in Congress in 1862, 1864, 1865, 1872 and 1873. In 1872, [James A.] Garfield said in the House that the expenditure for pensions, then standing at $27,000,000, had reached its peak, would remain stationary for a few years and then decline.

His prediction might have proved correct but for the activities of the pension attorneys.

These men were numerous in Washington. They helped a soldier file his claim and received a fee fixed by the government. When the claim was good they rendered proper services. But as the good claims became fewer, some attorneys took up bad claims many of which were rejected by the Commissioner of Pensions.

Then grew up the habit of referring such claims, approved by a lenient committee, to Congress as private bills, where they usually passed without inquiry on the floor of either house. In carrying out this process the pension attorneys became a powerful and persistent lobby.

They went further than mere private bills and sought to get laws passed for more liberal pensions. To carry their schemes through they established newspapers and appealed to the soldier vote. They had a strong influence in the Grand Army of the Republic, composed of officers and soldiers of the Civil War.

Their first striking success was in 1879 when the Arrears-Pension Act was passed . . . [and] gave [a lump sum to] any pensioner the arrears from death or discharge to the time a pension was applied for. Under the stimulus of the attorneys the act was passed with the strong support of each party.

Under it the pension bill rose from $27,000,000 in 1878 to $56,000,000 in 1880; and the number of applicants increased from 44,587 to 141,466 in the same period. The pension attorneys were rewarded for their efforts by this vast increase in business, though the legal fee did not exceed $10 for each claim.

When [Democrat Grover] Cleveland was President he adopted the plan of examining carefully the private pension bills sent him for signature. Many of them he signed, and many he vetoed after satisfying himself they were unwarranted. Against him the pension attorneys opened their powerful batteries and reminded the public he was elected by the votes of former Confederate soldiers.

Cleveland did not modify his course and when the lobby got Congress to pass a bill in 1887 to allow pensions to all [Northern] soldiers dependent on their own labor and not able to earn a living he vetoed that bill also. For his entire pension policy he was severely arraigned in [the election of] 1888 and the assault was a strong factor in his defeat.

[Republican] President [Benjamin] Harrison took office pledged to a liberal pension policy. In his first annual message . . . Harrison urged the passage of a dependent pension law [and] Congress complied . . . In its second year of operation, when it was fully acting, the total expenditure for pensions had increased by $68,000,000 a year, and in the course of seventeen years by a total of $1,058,000,000. It was passed as a political measure, with an eye to the old soldier vote.”

(Expansion and Reform, 1889-1926, John Spencer Bassett, Kennikat Press, 1971 (original 1926), pp. 18-21)

Watching Richmond with a Cold Profiteering Eye

“Diamond Jim” Fisk, was a Vermonter who by 1864 had made a fortune through shrewd dealing with army contracts and smuggling cotton northward through Union lines. Allied with the notorious New York political boss Boss Tweed, his buying of judges and bribery of legislatures was the stuff of legend.

Bernhard Thuersam, www.Circa1865.com

 

Watching Richmond With a Cold, Profiteering Eye

[Losing a large sum in stocks, Fisk] saw an opportunity to recoup his losses by capitalizing in a similar way on victory. Confederate bonds had fallen on the London exchange with Southern losses but were still selling at some eighty cents on the dollar. Grant now had Richmond in a vise. Victory seemed certain, and when the Confederacy met defeat her bonds would plummet in value.

Not yet was there an Atlantic cable, so it would take more than a week for news of the war’s end to reach England by fast steamship.  If anyone could get to London before the news, he could sell Confederate bonds short like mad at eighty cents on the dollar and reap a harvest when they sank. Fisk resolved to get there first.

Forming a pool with three capitalists, he furnished the scheme while they supplied the money. Chartering a fast steamer, he sent it to Halifax, the nearest North American port to England with orders to keep up steam for instant departure. Aboard the ship was his agent, a knowing New York broker named Hargreaves, who had instructions to speed to England when given the signal.

One obstacle was the telegraph, which then fell fifty miles short of reaching Halifax. Fisk had the last fifty miles strung at his colleagues’ expense, then watched Richmond with a cold, profiteering eye.

On the historic day when Lee surrendered, the word sped over the wires to Hargreaves: “Go!”  Hargreaves went.

He reached Liverpool in six days and a half — two days ahead of the arrival of the first ship from New York with the news. Speeding to London, he kept mum about defeat and dutifully sold Confederate bonds short to all buyers.

Alas! — one of Fisk’s partners, a conservative man, had privately telegraphed Hargreaves not to sell more than five millions in bonds, so he limited his sales to that amount. When the news of the surrender reached London, the bonds tumbled to $22.  Hargreaves therefore collected the difference between $22 and $80, making a handsome profit for his employers but missing the downright killing that would have been possible.”

(Jim Fisk The Career of an Improbable Rascal, W.A. Swanberg, Scribner’s Sons, 1959, pp. 20-21)

 

 

Lincoln’s Desperate Search for Troops

By June 1862 Lincoln found enlistments near nonexistent, and it was time to find new sources of recruits as Northern men resisted war service.  Bounty money was offered to help solve this, and the Homestead Act had the dark purpose of attracting foreign-born troops promised bounties and public land to subjugate Americans seeking political self-determination.

Bernhard Thuersam, www.Circa1865.com

 

Lincoln’s Desperate Search for Troops

“The summer of 1862 brought more gloom to the Union cause. Stonewall Jackson’s heroics in the Shenandoah Valley were followed by McClellan’s withdrawal from his lines before Richmond . . . and the North’s setbacks in the field weighed heavily on the secretary of state. [Seward] had [earlier] watched the Army of the Potomac embark at Alexandria; he had considered it united and unbeatable.

In June of 1862 following the collapse of McClellan’s Peninsular Campaign, Lincoln had sent Seward to New York to stimulate recruiting. The secretary carried with him a confidential letter, explaining the danger and noting that the capital itself was once again in danger under the threat from the rebels. Seward, in New York City, contemplated issuing a new call form the president for volunteers.

On reflection, however, he concluded that for Lincoln to initiate the call would have overtones of panic. Instead he prevailed on most of the Northern governors to request that Lincoln issue a new call for volunteers. The upshot was that Lincoln, seemingly in response to appeals from the Northern governors, was able to issue a proclamation calling for an additional three hundred thousand men.

Seward continued his proselytizing on his return to Washington. He persuaded Secretary of War Stanton to offer new recruits an immediate bounty of twenty-five dollars when their regiments were mustered into service.

Congress had just enacted the Homestead Act, providing that any citizen or alien could acquire title to 160 acres of public land by residing on and cultivating the land for a period of five years. This was just the sort of stimulus to immigration that Seward would have favored under any conditions, but now it included a vital military dimension as well.

He sent copies of the legislation to US envoys with the covering memorandum calling the Homestead Act “one of the most important steps ever taken by any government toward a practical recognition of the universal brotherhood of nations.”

The resulting publicity assured a continuing flow of military manpower to the North from Ireland and northern Europe. John Bigelow, the US consul in Paris, would write that Seward’s circular was important for “the light I throws on the mysterious repletion of our army during the four years of war, while it was . . . being so fearfully depleted by firearms, disease and desertion.”

In addition to his military problems, Lincoln had to deal with the touchy question of war aims. Publicly he continued to argue against general emancipation, telling Horace Greeley in his famous letter of August 1862 that if he could save the Union without freeing a single slave he would do it.

Indeed, Lincoln had no authority to confiscate “property” in the North, and no ability to enforce any Federal edict in territory controlled by the Confederacy. [But as] commander in chief, Lincoln argued that he could surely seize slaves belonging to the enemy just as he could capture their railroads.

[Seward thought issuing the] proclamation following a string of defeats on the battlefield . . . would hint of desperation – “the Government stretching forth its hands to Ethiopia, instead of Ethiopia stretching forth her hands to the Government.” He feared a slave uprising would turn the war for the Union into a class war . . . and that emancipation would destroy the South’s economy, raising the specter of intervention boy Britain or France to protect its supply of raw cotton.”

(William Henry Seward, Lincoln’s Right Hand, John M. Taylor, Harper Collins, 1991, pp. 200-202)

Lincoln’s Cotton Dilemma

To underscore that the war was fought by the North against secession – not to end slavery – Lincoln and his Secretary of State William Seward early sought the capture Southern ports to restore tariff collection and supply slave-produced cotton for starved New England mills. Also, if the ports were opened by force and cotton exported once again, the chance of European recognition of the new American republic was further diminished.

Bernhard Thuersam, www.Circa1865.com

 

Lincoln’s Cotton Dilemma

“During the winter of 1861-62 Seward assured Britain and France that a significant volume of cotton would soon be exported to Europe through Confederate ports captured by Union forces. Lincoln thought that the United States should “show the world we were fair in this matter favoring outsiders as much as ourselves.”

Although he was “by no means sure that [the planters] would bring their cotton to the port after we opened it, it would be well to show Europe that it was secession that distressed them and not we.”

The Confederates soon demonstrated that they would rather burn their cotton than allow it to fall into Yankee hands. The French consul estimated that about a quarter of a million bales were burned at New Orleans just prior to its capture by Union forces in April 1862. In August of that year the British consul in Charleston estimated that “about 1,000,000 bales have been destroyed at various places to prevent them falling into the hands of Federals.”

The unsuccessful Federal effort to promote cotton exports through captured Confederate ports was described in a pamphlet published in England in 1862:

“No sooner did the Government succeed in regaining possession . . . of cotton markets, than it made provision for reopening of the cotton trade. The blockade . . . was removed from the ports of Beaufort in North Carolina, Port Royal in South Carolina, and New Orleans in Louisiana on the 12th of May 1862. Cotton agents accompanied the armies of the North, who were licensed to purchase cotton . . . The United States Government assured the British government of their anxiety to grant every facility for the obtaining of cotton, and gave the rebels every facility to sell it. But the net result has been what? Simply an order from Jefferson Davis to burn the cotton and starve the English.”

Seward was delighted by the increased cotton production in other countries: “The insurrectionary cotton States will be blind to their own welfare if they do not see how their prosperity and all their hopes are passing away, when they find that Egypt, Asia Minor and India supplying the world with cotton.”

Nevertheless, cotton exports made a major contribution to the Confederate economy and war effort. Lincoln’s frustration with the Union’s inability to eliminate this trade is indicated in a letter he wrote in December 1864:

“By the external blockade, the [cotton] price is made certainly six times as great as it was. And yet the enemy gets through at least one sixth part as much in a given period . . . as if there were no blockade, and receives as much for it as he would for a full crop in time of peace. The effect . . . is that we give him six ordinary crops, without the trouble of producing any but the first and . . . leave his fields and laborers free to produce provisions . . . This keeps up his armies at home and procures supplies from abroad.”

(One War at a Time, The International Dimensions of the American Civil War, Dean B. Mahin, Brassey’s, 1999, pp. 85-86; 90-91)

The Forces Lincoln Unleashed

By initiating war against his own people, overturning the Constitution, creating fiat money and fusing government with corporations, Lincoln destroyed the Founders’ republic and ushered in the Gilded Age.

Bernhard Thuersam, www.Circa1865.com

The Forces Lincoln Unleashed

“As a result of the war, corporations have been enthroned and an era of corruption in high places will follow and the Money Power of the country will endeavor to prolong its reign by working on the prejudices of the people until wealth is aggregated in the hands of the few and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war.”   Abraham Lincoln.

(Collective Speeches of Louis T. McFadden, Omni Publications, pg. vi, 1970)

Hustling Northerners to Save the Union

Without resorting to financial trickery, propaganda and suppressed casualty reports Lincoln could not have sustained his destructive invasion of the American South. Unconstitutional paper money and financier Jay Gould provided the money for war — the latter used whatever means necessary to sell war bonds and demonstrated that indeed patriotism is the last refuge of a scoundrel.

Bernhard Thuersam, www.Circa1865.com

 

Hustling Northerners to Save the Union

“The Credit Mobilier scandal . . . brought on, or at least hastened, the panic of 1873 and turned the greatest American financier of the era into a bankrupt. This was Jay Cooke. At the time of the crash he was engaged in financing the second transcontinental railroad, the Northern Pacific.

[In the past he] showed fine judgment in his promotion of canals, then of railroads. He did well with loans to the government during the Mexican War. Then the Civil War gave him his big chance and he took it famously. In 1861, the State of Pennsylvania wanted to sell a large bond issue to finance its war effort. No banker but Jay Cooke would touch it. He sold the issue quickly, with a rousing appeal to patriotism. It was the first bond issue ever sold in that manner in the United States.

Noting his success, the federal government asked Cooke for his help. Moving his office to Washington . . . Cooke organized a spectacular country-wide campaign to sell federal war bonds to the public. He engaged brass bands. He hired spread-eagle speakers. He caused hundreds of thousands of flags to be displayed at bond rallies.

His salesmen worked on commission and were not turned loose until they had been thoroughly indoctrinated with the equivalent of pep talks and had learned at least ten ways of making non-buyers look and feel like traitors. Jay Cooke, in short, set the American, or rather the Union, eagle to screaming for money. He disposed of the bond issue of 1861, and of many more that followed. They amounted in four years to nearly three billion dollars.

What Cooke had done was to invent and bring to the management of national finance a wholly new technique – the drive. With little modification it has been used ever since. The boys in blue must be supported by fighting dollars.

From his immense commissions on bond sales and his many other activities, Cooke emerged at war’s end as the greatest banker in the country. “On the day Richmond fell, Cooke marked out the lines of a pretentious country house that was to cost one million dollars [with] an Italian garden facing a wall built to resemble “the ruined castle of some ancient nobleman.” This was the fifty-two room palace named Ogontz. Here he entertained, among others, President Grant, on whom he showered fine cigars and a plentitude of whiskey and wine.

Cooke dazzled Grant as he dazzled most contemporary Americans. He exemplified, said a critic, all of the substantial upper middle-class virtues of a people “newly given to the worship of a sterile money economy.”

One might call him also a vulgarian of money; placed in his own era, being a rich vulgarian merely made him a genuine great man. More than once, editorial writers and speakers coupled Cooke’s name with Lincoln and Grant.”

(The Age of the Moguls, Stewart H. Holbrook, Doubleday & Company, 1953, pp. 51-52)

Hustling Northerners to Save the Union

Without resorting to financial trickery, propaganda and suppressed casualty reports Lincoln could not have sustained his destructive invasion of the American South. Unconstitutional paper money and financier Jay Gould provided the money for war — the latter used whatever means necessary to sell war bonds and demonstrated that indeed patriotism is the last refuge of a scoundrel.

Bernhard Thuersam, www.circa1865.org

 

Hustling Northerners to Save the Union

The Credit Mobilier scandal . . . brought on, or at least hastened, the panic of 1873 and turned the greatest American financier of the era into a bankrupt. This was Jay Cooke. At the time of the crash he was engaged in financing the second transcontinental railroad, the Northern Pacific.

[In the past he] showed fine judgment in his promotion of canals, then of railroads. He did well with loans to the government during the Mexican War. Then the Civil War gave him his big chance and he took it famously. In 1861, the State of Pennsylvania wanted to sell a large bond issue to finance its war effort. No banker but Jay Cooke would touch it. He sold the issue quickly, with a rousing appeal to patriotism. It was the first bond issue ever sold in that manner in the United States.

Noting his success, the federal government asked Cooke for his help. Moving his office to Washington . . . Cooke organized a spectacular country-wide campaign to sell federal war bonds to the public. He engaged brass bands. He hired spread-eagle speakers. He caused hundreds of thousands of flags to be displayed at bond rallies.

His salesmen worked on commission and were not turned loose until they had been thoroughly indoctrinated with the equivalent of pep talks and had learned at least ten ways of making non-buyers look and feel like traitors. Jay Cooke, in short, set the American, or rather the Union, eagle to screaming for money. He disposed of the bond issue of 1861, and of many more that followed. They amounted in four years to nearly three billion dollars.

What Cooke had done was to invent and bring to the management of national finance a wholly new technique – the drive. With little modification it has been used ever since. The boys in blue must be supported by fighting dollars.

From his immense commissions on bond sales and his many other activities, Cooke emerged at war’s end as the greatest banker in the country. “On the day Richmond fell, Cooke marked out the lines of a pretentious country house that was to cost one million dollars [with] an Italian garden facing a wall built to resemble “the ruined castle of some ancient nobleman.” This was the fifty-two room palace named Ogontz. Here he entertained, among others, President Grant, on whom he showered fine cigars and a plentitude of whiskey and wine.

Cooke dazzled Grant as he dazzled most contemporary Americans. He exemplified, said a critic, all of the substantial upper middle-class virtues of a people “newly given to the worship of a sterile money economy.”

One might call him also a vulgarian of money; placed in his own era, being a rich vulgarian merely made him a genuine great man. More than once, editorial writers and speakers coupled Cooke’s name with Lincoln and Grant.”

(The Age of the Moguls, Stewart H. Holbrook, Doubleday & Company, 1953, pp. 51-52)

 

Spending the Money of Future Generations

Robert Hayne of South Carolina followed Jefferson’s admonition that the national debt was not something to be passed on to future generations; it was considered immoral for a president not to pay the debts incurred under their administrations before leaving office. In encouraging an unending public debt, Daniel Webster, on the other hand, Webster was promoting the American System of Whig politician Henry Clay which would give the government an endless supply of money with which to buy influence and power.

Bernhard Thuersam, www.circa1865.org

 

Spending the Money of Future Generations

“The gentleman from Massachusetts (Webster), in alluding to a remark of mine that before any disposition could be made of the public lands, the national debt (for which they stand pledged) must be first paid, took occasion to intimate (that Southerners desire to pay the national debt) “arises from a disposition to weaken the ties which bind the people to the Union.”

But, adds he gentleman, “so far as the debt may have an effect in binding the debtors to the country, and thereby serving as a link to hold the States together, he would be glad that it should exist forever.” Surely then, sir, on the gentleman’s own principles, he must be opposed to the payment of the debt.

Sir, let me tell that gentleman that the South repudiates the idea that a pecuniary dependence on the Federal Government is one of the legitimate means of holding the States together. A monied interest in the Government is essentially a base interest . . . it is opposed to all the principles of free government and at war with virtue and patriotism. In a free government, this principle of abject dependence if extended through all the ramifications of society must be fatal to liberty. Already we have made alarming strides in that direction.

The entire class of manufacturers, the holders of stocks with their hundreds of millions in capital, are held to the Government by the strong link of pecuniary interests; millions of people, entire sections of the country, interested, or believing themselves to be so, in the public lands and the public treasure, are bound to the Government by the expectation of pecuniary favors.

If this system is carried on much further, no man can fail to see that every generous motive of attachment to the country will be destroyed, and in its place will spring up those low, groveling, base and selfish feelings which bind men to the footstool of despots by bonds as strong and as enduring as those which attach them to free institutions.”

(The Webster-Hayne Debate on the Nature of the Union, Herman Belz, Editor, Liberty Fund, 2000, pp. 42-43. Speech of Robert Y. Hayne of South Carolina, January 25, 1830)

Grand Army Rights as Conquerors

North Carolinian Nathanial Macon opposed the granting of pensions to War of 1812 veterans since the freedom they fought for and retained seemed suffient compensation for military service.  He was aware of the predictable political constituency enabled by a large army, true then as it is today.

Bernhard Thuersam, www.circa1865.org

 

Grand Army Rights as Conquerors

“The assumption behind the original pension law of 1862 had been that the Federal government . . . was liable only for injuries . . . sustained while in [service]. Mere service as a Union veteran did not entitle a man to any special consideration, even if he happened to be sick, jobless or destitute. By far the most common rebuttal [to pension reform] involved the declaration of a new principle: that the Union veteran had a prior claim on the nation’s treasury, not as a compensation for illness, not as a gratuity, but as an absolute right.

The Service Pension Association’s Frank Farnham, calling the GAR “the representatives of those who saved the country, by the greatest of sacrifices,” argued that “any reasonable demand” of the veterans should receive the public’s “unqualified support.”

Opposition to the Grand Army, he said, came mostly from the ex-Confederates, ex-Copperheads and Mugwumps. New York supporters of the $8 service pension bill were even more blunt. “The GAR,” they proclaimed in 1886, “own this country by the rights of a conqueror.”

[“Nation” editor Edwin] Godkin . . . found service pensions appalling in principle. As Congress was considering a proposal to pension all veterans over the age of sixty, he wrote:

“A large proportion of the half-million people who are added to the pension roll are persons who have no possible claim to consideration. Some of them were worthless as soldiers during the war; others are now “hard up” simply because they have grown shiftless and dissipated since the war; others are well-to-do and in no possible need of any increase to their income. The simple fact about the matter is that any old “bummer” who can establish the fact that he was connected with the Union Army in any way for ninety days, even if he got no further than the recruiting camp, may now have his name placed on the pension roll and draw $8 a month for the rest of his life.”

(Glorious Contentment The Grand Army of the Republic, Scott McConnell, UNC Press, 1992)

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