The question whether the Cabinet and Senate would support Mr. Gallatin was, therefore, the necessary point to decide in advance. In the Cabinet, Mr. Robert Smith was the dangerous element. In the Senate, General Samuel Smith and his friend Mr. Giles were the chief disturbing forces, since without them the fulminations of Leib and the Aurora offered, after all, no very serious danger. Unfortunately, a circumstance had now occurred which seriously embittered the relations between Mr. Gallatin and the Smiths. The failure and disappearance of the navy agent at Leghorn disclosed a somewhat loose way of managing business in the Navy Department, which had bought exchange on Leghorn, largely in bills on Samuel Smith and his relations, in excess of its wants, while at the same time it had neglected to make its naval officers draw on Leghorn, so that they had drawn on London at considerable extra expense. Thus, at the close of the Tripoli war a large balance had remained in the hands of the navy agent at Leghorn, which was partly sent back in specie to America by a ship of war, and partly carried off by the navy agent to Paris, where he was arrested by the interposition of our minister, General Armstrong, and compelled to disgorge. In all this there was enough to irritate Mr. Gallatin, who had for eight years endured, with such patience as he could command, the loose and extravagant habits of the Navy Department, and who was now making a new effort to enforce a thorough system of accountability in that department. But there appeared at first sight to be something still more objectionable in this transaction. Mr. Robert Smith, as Secretary of the Navy, had bought bills of exchange to the amount of a quarter of a million dollars, within two years, from his brother General Smith and his connections, and on the face of the accounts it appeared that these were to some extent accommodation bills; in other words, that the government money had been by collusion left in the hands of General Smith’s firm until it suited their convenience to remit it to Leghorn. The effect of this operation was to give the firm of Smith & Buchanan the use of public money without obliging them to make the same immediate provision for honoring their bills as would in other cases have been necessary; to give them also the almost exclusive privilege of selling bills on Leghorn, and to throw upon the public the risk arising from protested bills. This affair came to the knowledge of Mr. Gallatin at the time when General Smith was, with the aid of Mr. Giles and Dr. Leib, forcing Mr. Robert Smith upon Mr. Madison as Secretary of State, and in conjunction with his brother-in-law, Mr. Wilson Cary Nicholas, overthrowing Mr. Gallatin’s plans of public expenditure. He was very indignant, and expressed his opinions to his friend Joseph H. Nicholson, who made no secret of the story and used it to prevent the re-election of General Smith to the Senate. In the extra session in June, 1809, John Randolph, at the urgent request of Judge Nicholson, procured the appointment of an investigating committee, which published the facts. Mr. Gallatin was called upon for a report, which he made in February, 1811. General Smith on his side made a statement which certainly relieved him to a considerable extent from the weight of some of the most doubtful parts of the transaction. Mr. Gallatin had nothing to do with Judge Nicholson’s proceeding, and gave it no encouragement, but his feeling in regard to the scandal was very strong, and after the attacks made upon the Smiths, both by the investigating committee of the House and by the Baltimore press, the following exchange of letters occurred:
GENERAL SAMUEL SMITH TO GALLATIN.
Baltimore, 26th June, 1809.
Sir,—I do myself the honor to enclose two papers for your perusal. The editors of the Federal Republican make use of your name to bolster them up in the nefarious charge they have made against me, in the following manner, to wit: “Mr. Gallatin, we understand, spoke of this transaction in terms of great indignation.” I will not believe that any of that indignation could have been directed at me. I believe it impossible that any man who has the least pretensions to character would commit an act so base as that charged on me, to wit: “to secure a debt which I considered bad by transferring the same to the Navy Department, and thus involving the United States in the loss.” Some time after my house drew the last bill (for I was at Washington), an evil report had been sent from Leghorn relative to Degen, Purviance & Co., in consequence whereof Mr. Oliver (who had a ship ready to sail to their address) sent an agent, who, finding the house in as good credit as any in that city, did put the cargo under their care. I thought the house superior to any in Leghorn.
I am, sir, your obedient servant,
S. Smith.
GALLATIN TO GENERAL SMITH.
Treasury Department, 29th June, 1809.
Sir,—I received the day before yesterday your letter of 26th inst., enclosing two Baltimore papers.
I have no other knowledge of the circumstances connected with the naval agency of Degen and Purviance than what is derived from their account as stated by the accountant of the Navy Department. The transaction, such as it appears there, is, under all its aspects, the most extraordinary that has fallen within my knowledge since I have been in this Department. It has certainly left very unfavorable impressions on my mind, and these have on one occasion been communicated verbally to a friend. Yet I hardly need say that I never supposed that the bills had been sold to government for the purpose “of securing a debt which you then considered bad, and of thus throwing the loss on the United States.” But I did believe that you had drawn without having previously placed sufficient funds in the hands of Degen and Purviance, and that they had accepted your bills and passed the amount to the credit of the United States, without having at the time in their hands sufficient funds belonging to you. That this was my impression you will perceive by the enclosed extract of a letter to Mr. Armstrong; and Mr. Purviance’s statement, which you enclosed to me, shows that I was not mistaken. I do not intend to comment on this and other circumstances of the case. Taking them altogether, I have believed that, if we failed in our endeavors to recover the money from Degen and from Mr. Purviance, we might have recourse against the drawers of the bills.
I am, sir, &c.