The American press wallowed in salacious gossip about Nellie’s marriage, much of it unfortunately true. Articles said that Algernon gallivanted around England, leaving Nellie for months at a time; that he had a farm in Green Bay, Wisconsin, and brought his mistress to Milwaukee; that Nellie’s father-in-law settled property on her children on condition that they be educated in England; and that Grant had to send remittances to provide for Nellie and the children. Finding it too painful a subject, the president never talked publicly about the catastrophic failure of his daughter’s marriage. For so protective and loving a parent, it must have been unmitigated torture to watch her being abused by a young scoundrel, especially since Grant had sensed something amiss with the young man. To make his beloved daughter happy, he had overcome his doubts about the marriage only to see Algernon Sartoris turn into a cad far worse than anything his innocent imagination could ever have conceived.
CHAPTER THIRTY-SIX
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The Bravest Battle
IN AUGUST 1873, Grant’s new treasury secretary, William A. Richardson—a Harvard-educated lawyer from Lowell, Massachusetts, who had replaced Boutwell—contemplated the American economy with unruffled satisfaction: “I have devoted considerable time this summer to the investigation of the condition of the commerce of the country . . . and am very much pleased at the favorable exhibit.”1 To buttress his rosy appraisal, he cited mounting exports in cotton, bread, iron, steel, leather, and shoes. The government boasted a small surplus and had refinanced outstanding debt at reduced interest rates. In short, the boom that had powered the postwar economy appeared intact. Modern mass industries, such as steel and petroleum, and ever-expanding railroads had introduced new vigor but also instability into the economy. Only in retrospect would it be clear that the boom had been built on a flimsy scaffolding of speculation and that excessively generous credit had overextended the nation’s railways.
On September 8, Wall Street banks started to fold in a cascading series of closures that sparked chaos in the financial district. Gold prices dove, stocks collapsed, and a general panic seized the city. Coincidentally, Grant found himself with a front-row seat for the foremost bankruptcy. He had gone to place Jesse in Cheltenham Academy outside Philadelphia and stayed at Ogontz, the estate of Jay Cooke, whose firm had marketed Union bonds during the war and bankrolled the Northern Pacific Railway. Grant and Elihu Washburne had even made stock investments through him. Ogontz was a gloomy five-story pile, smothered in heavy, Victorian furniture, but Cooke, with his long, patriarchal beard, proved a warm and charming host. On the morning of September 18, as Grant got ready to leave for Washington, Cooke pocketed several ominous telegrams, giving Grant no hint of their contents.
It turned out that Jay Cooke & Company, unable to sell Northern Pacific bonds, had gone bust. Such was the firm’s incomparable prestige that its failure fanned a jittery situation into a full-blown panic, toppling one Wall Street house after another. On September 20, the New York Stock Exchange halted trading for ten days. Grant received emergency pleas for purchases of Treasury bonds to add liquidity to national banks, while Thomas Murphy, the former New York customs collector, wired: “Relief must come immediately or hundreds if not thousands of our best men will be ruined.”2 Not since 1837 had such a spasm of fear flashed through Wall Street.
In this heyday of laissez-faire economics, citizens didn’t automatically expect the president to manage the economy or cushion downturns. Economic fluctuations were regarded almost like vagaries of weather. Nevertheless, on September 20, Grant and Richardson journeyed to New York, staying at the Fifth Avenue Hotel, where desperate businessmen besieged them. As Harper’s Weekly described the scene, “The corridors swarmed with a multitude of frenzied people, who supposed that incalculable disaster impended, and that the President had the power of staying it by a word.”3 Any credit breakdown, Grant knew, would threaten produce shipped to the eastern seaboard for export, and he feared the crisis would soon migrate from Wall Street to Main Street. At the behest of New York bankers, he agreed to purchase Treasury bonds, but in the absence of a central bank, the government couldn’t function as a lender of last resort, and he balked at more stimulative measures. As he put it, the government would “take all legal measures at its command; but it is evident that no Government efforts will avail without the active co-operation of the banks and moneyed corporations.”4 Boldly deviating from precedent, Grant allowed Richardson to reissue $26 million worth of greenbacks to satisfy those who thought some measure of inflation might revive the economy. In an interview, Grant sought to soothe the nation, describing the panic as a “passing event.”5 Writing privately to the banker Anthony J. Drexel, he sounded equally sanguine: “I hope the worst of the panic is over, and that general good may flow from it.”6
Far from being transitory, the crisis was deep and intractable and persisted for more than five brutal years. It would be termed “the Great Depression” until eclipsed by the 1930s downturn. Much of the industrial landscape lay in ruins: half the nation’s railroads went into receivership and half its iron furnaces shut down. In farming areas, crop and land prices plunged. In New York City alone, a quarter of all workers were tossed from their jobs. Before the depression ran its course, deflation had dragged down wholesale prices by 30 percent. Industrial leaders banded together to cut production and stabilize prices, leading to monopolistic practices in many industries and spawning a corresponding concentration in labor. Many workers joined unions that engaged in railway, textile, and coal strikes and flirted with radical movements. For the first time, America began to resemble the stratified, class-ridden societies of Europe. As unions demanded public works projects and easy money, Grant had to deal with a constellation of political forces unknown to earlier presidents in a simpler, agrarian America.
No clear theory dictated how government should steer the economy through such a profound downturn. “I look on the coming session [of Congress] as the most troublesome and uncertain of any that I [have] ever seen at this distance from it,” Garfield wrote that November. “The great financial panic which has swept and is still sweeping over the country will be the most difficult element to handle.”7 The business community favored a cleansing of speculative excess by clinging to a tight money policy, forcing prices and wages to drop. Within Grant’s cabinet, Hamilton Fish argued forcefully for austerity: “Any expansion would only bolster up some now tottering concerns, and would encourage new speculations.”8 Garfield and Richardson talked Grant out of an ambitious and farsighted plan to combat unemployment through a large-scale public works project, which would have anticipated Franklin Roosevelt’s New Deal.9
As president, Grant had taken pride in being a scrupulous custodian of the nation’s finances, cutting taxes, reducing expenditures, saving money on interest payments, and working toward restoring gold as the currency basis. The Panic of 1873 gave fresh urgency to the question of what to do about the circulation of greenbacks, which had helped the North to finance the Civil War and taken the country off the gold standard. Traditionally Americans had harbored deep suspicion of paper money, which wasn’t backed by gold reserves. Yet greenbacks were championed by western farmers and railroads, who had borrowed heavily and therefore favored expansionary monetary policy. In contrast, bankers and other eastern creditors wanted Grant to resume the gold standard, giving money an imperishable value, a course backed by Lincoln, who had called for “a return to specie payments . . . at the earliest period compatible with due regard to all interests concerned.”10
In general, Grant deemed it “one of the highest duties, of government, [to] secure to the citizen a medium of exchange of fixed, unvarying value.”11 At the same time, he feared a tight money supply might impose a straitjacket on the economy. He held surprisingly modern views on the need for an elastic currency that would expand and contract with seasonal trade. On the other hand, when surplus funds existed, he didn’t want excess money to flow into speculative Wall Stree
t loans and stock market gambling.
The seemingly esoteric topic of greenbacks became one of the most fraught issues of Grant’s second term. By early 1874, the unemployed surged into the streets in mass protests, and they wanted more money in circulation to prime the economic pump. When Grant took office there were $356 million in greenbacks in circulation, with Boutwell and Richardson adding small amounts to that sum. Any further moves in that direction raised the specter of inflation, eliciting strident protests from hard-money men. “Now that no war threatens us, and no overmastering necessity is to be pleaded,” proclaimed Roscoe Conkling, “guilty and mad will be the hour when Congress can find no better way to conduct the finances of the nation than to print an unlimited issue of irredeemable promises to pay.”12 Nevertheless, the House and Senate rushed through legislation to boost the greenback currency to $400 million and the national bank note circulation to $400 million—a sharp increase in the nation’s money supply.
By April 14, this legislation, known as the Ferry bill, after its sponsor, Senator Thomas W. Ferry, but commonly dubbed “the inflation bill,” sat on Grant’s desk with every expectation of his endorsement. As he considered the bill, he was being vilified for corruption and cozy ties to congressional bosses. “Discontent is everywhere,” Vice President Wilson warned him. “We are passing through a Storm of criticism and denunciation. You can carry us through the Wilderness as you once did.”13 Factory workers, farmers, and westerners clamored for the inflation bill, but The Nation deplored Senate complicity in the legislation, regretting how “that body is given over completely to inflation in its maddest form.”14
Reviewing the bill with painstaking care, Grant found himself in a terrible quandary. He knew more greenbacks would make it difficult to resume specie payments—that is, allow Americans to redeem paper currency for gold or silver. At the same time, the bill enjoyed widespread approval from his Stalwart cronies in Congress, especially John Logan, Oliver Morton, and Ben Butler, plus members of his own cabinet. When it assembled on April 17, all but two of his secretaries wanted him to put his signature to the bill. Grant sat, listened, and said nothing, a poker player refusing to tip his hand. That day, the telegraph entrepreneur Cyrus Field bombarded him with a petition signed by 2,500 leading businessmen, pleading for a veto of the bill. Grant replied that “he had watched the progress of this bill through Congress with more interest than he had any other measure before that body since he had been President,” but he still refused to commit himself.15 Albert Redstone, president of the National Labor Council, squeezed Grant from the other side, anxiously urging him to approve the inflation bill and telling a reporter that Grant “will show that the people did not make him President to prevent their will and prevent their prosperity.”16 Some Republican leaders conjured up visions of wholesale western defections from the party because of a veto—a compelling argument for Grant and a frightening one. As he wrestled with the monetary riddle, he experienced such turmoil that he suffered bouts of insomnia. Even on blood-soaked battlefields he had slept more soundly.
On April 21, Grant summoned his cabinet and made a startling confession. The night before, he had resolved to sign the inflation bill and sat up late drafting an accompanying message, listing his most cogent arguments. But the more he wrote, he said, the more specious his own arguments sounded. “The only time I ever deliberately resolved to do an expedient thing for party reasons, against my own judgment, was on the occasion of the . . . inflation bill,” Grant confessed years later. “I never was so pressed in my life to do anything as to sign that bill, never.”17 The more he wrote that night, the less he was persuaded by his own reasoning. Finally, he thought, “What is the good of all this? You do not believe it. You know it is not true.”18 So he tore up his message, tossed it into the wastebasket, and decided to veto the bill. It was an impressive display of Grant’s intellectual honesty, candor, and exemplary courage. He had examined the bill dispassionately from many angles and found it wanting.
Grant refrained from asking for advice from his cabinet. Fish and Postmaster General Creswell applauded him—Fish said Grant had given America nothing less than “the foundation of a restored credit, & a sounder Currency”—but other cabinet secretaries fired back with a battery of protests.19 Secretary of the Interior Delano reminded Grant that vetoes were usually reserved for declaring acts unconstitutional. Secretary of the Navy Robeson predicted a detrimental outcome in upcoming congressional elections. Attorney General Williams and Secretary of War Belknap foresaw untold damage to the fortunes of the Republican Party. Yet Unconditional Surrender Grant proved adamant. “I dare say the first result will be a storm of denunciation,” he admitted. “But I am confident that the final judgment of the country will approve my veto.”20
Though Grant always viewed the inflation bill veto as a proud accomplishment, ushering in a new age of sound money, he braced for fierce attacks. Surprisingly enough, his veto was sufficiently popular, even in parts of the West, that opponents fell short of the votes needed to override it. Not surprisingly, bankers and businessmen flooded the White House with congratulatory telegrams. The attorney Edwards Pierrepont wired from New York: “God almighty bless you. The bravest battle and the greatest victory of your life.”21 Garfield hurried to the White House to offer up a whiff of incense. “For twenty years no President has had an opportunity to do the country so much service by a veto message as Grant has,” he wrote, “and he has met the issue manfully.”22 Grant had made a timely statement about his integrity, and the malaise that infected the administration seemed to vanish overnight. “We shall be able to stick to Grant to the end,” rejoiced Rutherford B. Hayes.23 The veto restored Grant’s image as a simple, decent, straightforward president, every inch his own man. “He has a wonderful amount of good sense,” Fish commented, “and when left alone is very apt to follow it.”24
If the veto solidified the Republican Party’s growing reputation as a bastion of sound money, free markets, and economic conservatism, it did not sit well in all quarters. A meeting of Indianapolis merchants took Grant to task for having sold himself to those “whose god is the dollar” and said it was “utterly shameful” that he should “do their bidding.”25 By the light of modern economic theory, it is hard to justify a veto that tightened money amid a severe economic contraction and likely worsened it. It also stoked populist movements, especially among eastern immigrants and western farmers, providing a major new opening for the Democrats in this era of Republican hegemony. But the veto did offer beneficial effects. It reassured European investors, who financed railroads and heavy industry, that they could plow funds into American business and be repaid in sound money. In this way Grant’s decision, which likely had severely deleterious effects on deflation in the short run, set the stage for America’s emergence as the world’s supreme industrial power.
Not long after Grant’s veto, Secretary of the Treasury Richardson left the cabinet, trailed by scandal. A Massachusetts politician, John D. Sanborn, had been hired by the Treasury Department to track down tax evaders and was allowed to retain half the back taxes collected. He extorted money from companies by falsely accusing them of tax evasion. Richardson had signed the contract with Sanborn and came in for sharp criticism. “Since I have been in Washington the past few days,” Vice President Wilson notified Grant, “I have heard the strongest condemnation of [Richardson’s] unfitness.”26 In early June 1874, Grant banished Richardson by exiling him to the U.S. Court of Claims—a peculiar penalty for official misconduct, probably explained by the fact that Richardson hadn’t profited from the transactions in question.
Benjamin Bristow, the first solicitor general and a spirited booster of Grant’s inflation bill veto, was tapped as the new treasury secretary. With his upright reputation, Bristow seemed a superb choice. “Grant can do more unexpected things in the same length of time than any man I know,” observed the diplomat Marshall Jewell.27 If Bristow claimed little financial expertise, he was honest
and competent, hailed from a key border state, and had excelled in the Klan prosecutions. A tall, heavyset man, he had an elegant appearance and a “firm sweep of the jaw” that, one reporter predicted, promised an “aggressive performance” at Treasury.28 Hamilton Fish came away pleased by their first cabinet meeting, lauding Bristow as “masterful, energetic, and ambitious.”29 A zealous advocate of civil service reform, Bristow soon expelled hundreds of political appointees from his department.
As Grant reshuffled his cabinet, he replaced Postmaster General Creswell, who had done an excellent job, lobbying for a postal telegraph while incurring the wrath of the Western Union monopoly. He was succeeded by Marshall Jewell, a former Connecticut governor and minister to Russia. Like Bristow, Jewell had crusaded for civil service reform and immediately started cleaning up his department with Grant’s blessing. The appointments of Bristow and Jewell were seen as triumphs of good government, and the Union League of America congratulated them for “inaugurating a new and healthier order of things in their Departments,” ridding them “of corrupt and inefficient Officers.”30 Their appointments formed part of Grant’s rebuttal of Liberal Republican critics who saw him as much too lax on scandal.
Having killed the inflation bill, Grant completed his monetary program with a return to the gold standard, which would enable any citizen who walked into a Treasury office to exchange greenbacks for gold coins. The policy remained explosive amid a depression that many populists blamed on scarce money. After Grant outlined his views in a memorandum, House Speaker James G. Blaine cautioned Fish that “if carried out it would be ruinous to the Republican party and the country.”31 Even hard-money men worried about moving too quickly, arousing popular ire. Despite this, Bristow urged Congress to pass legislation to return the currency to a specie basis. Because many Republican leaders feared the political impact of an overly hasty return to gold, the Specie Payment Resumption Act of 1875 postponed resumption to January 1, 1879, slowly scaling back greenbacks in circulation. In signing the bill, Grant reiterated his belief that with a currency of “fixed, known, value,” business would revive and “the beginning of prosperity, on a firm basis, would be reached.”32 The act flew through Congress, encountering scant opposition. Republicans might disagree on Reconstruction, but they heartily concurred on preserving the perpetual strength of the Almighty Dollar.