Reminiscences of Sixty Years in Public Affairs, Vol. 2

by George S. Boutwell

Of my reply to that letter, the committee say: "The brief and formal reply of the Secretary gave Gould no clew to the purpose of the Government."

Under date of September 20, I received a letter from Gould to which I made no reply. Aside from the topics to which he directed my attention in the letter, it is the unavoidable inference from the context as a whole that Gould had then no faith in the statements given to the public that the President was in any manner pledged to interfere and prevent the sale of gold. The following extracts from the letter of September 20 are a full exposition of his policy and of the means on which he relied to advance the price of gold during the month of September:

"On the subject of the price of gold and its effect upon the producing interests of the West, permit me to say that during the months of September of the past two years the price has averaged about forty- five. Gold must range this year at about that premium to enable the export of the surplus crops of wheat and corn. We have to compete with the grain-producing countries bordering on the Black and Mediterranean seas, and it requires a premium of over forty per cent on gold to equalize our high-priced labor and long rail transportation to the seaboard.

"My theory is to let gold go to a price that we can export our surplus products to pay our foreign debts, and the moment we turn the balance of trade in our favor gold will decline from natural causes. In my judgment, the Government cannot afford to sell gold during the next three months while the crops are being marketed, and if such a policy were announced, it would immediately cause a high export of bread- stuffs and an active fall trade.

"P. S. In addition to the above, if gold were put upon the market, government bonds would decline to at least fifteen, leaving the purchases made by the Government in the past few months open to criticism as showing a loss."

As early as the 20th of September, I had evidence satisfactory to me that the Tenth National Bank in the city of New York was a party to the speculation in gold, and that its assistance was rendered largely through the certification of checks drawn by the brokers, and largely in excess of the balances due them upon the books of the bank when the certifications were made. It appeared from the evidence submitted that these certifications of checks in excess of the balances due to brokers amounted to about $18,000,000 on the 22d and 23d of September, when the speculation was at its height.

For the purpose of arresting that process and checking the speculation in gold, I detained the comptroller of the currency and three competent clerks after the close of business on the 22d of September. The clerks received commissions as bank examiners, and were instructed to go to New York that night and to take possession of the Tenth National Bank, at the opening of business in the morning, and to give directions that the habit of certifying checks in excess of the balances due must be suspended. It was my expectation that the enforcement of that rule would, or might, end the speculation, inasmuch as the purchasers of gold would be unable to meet their obligations, and therefore it would be out of their power to create them. This expectation was not realized. Whether the certification went on at the Tenth National Bak in defiance of the order, or whether other banks were so connected with the speculation that checks were certified elsewhere, was not known to me.

I called upon the President after business on the 23d of September, and made a statement of the condition of the gold market in the city of New York, as far as it had been communicated to me during the day. I then said that a sale of gold should be made for the purpose of breaking the market and ending the excitement. He asked me what sum I proposed to sell. I said: "Three million dollars will be sufficient to break the combination."

He said in reply: "I think you had better make it $5,000,000."

Without assenting to his proposition or dissenting from it, I returned to the department, and sent an order for the sale of $4,000,000 of gold the next day. The order was to the assistant treasurer in these words: "Sell $4,000,000 gold to-morrow, and buy $4,000,000 bonds." The message was not in cipher, and there was no attempt to keep it secret. It was duplicated and sent by each of the rival telegraph lines to New York. Within the space of fifteen minutes after the receipt of the despatch, the price of gold fell from 160 to 133, and in the language of one of the witnesses, "half of Wall Street was involved in ruin."