Fifty years in Wall Street

by Henry Clews

This remark of his was generally published at the time in the newspapers.

The Government had sold through its agents $150,000,000 of the 7-30 notes before the suspension of specie payments, an event that was hastened by the Secretary’s withdrawal from the banks into the Sub-treasuries of most of the proceeds of the sales, his call for payment from the agents to the Treasury being in three installments: on August 19th, October 1st, and November 2d. Moreover, the hoarding and exportation of gold were largely stimulated by the anticipation of specie suspension, and, after it occurred, gold suddenly disappeared from circulation.

This obviously involved a corresponding contraction of the circulating medium, and Mr. Chase, to neutralize it, and supply the place of the demonetized coin, issued the $50,000,000 of non-interest-bearing notes, which were called United States Demand Notes. He did this also to obviate the necessity of the State Banks issuing more of their own notes, as well as to raise money to meet the rapidly increasing demands of the Treasury.

Congress, seeing that this contraction tended to produce stringency in the money market, and handicapped the Government’s agents in the sale of its securities, had, on August 5, 1861, suspended the act of August 6, 1846, “providing for the better organization of the Treasury, and for the collection, safe-keeping, and disbursement of the public revenue.” It did this so as to permit the Secretary of the Treasury to deposit any of the money obtained on authorized loans in such solvent specie-paying banks as he might select, and, in addition, it expressed this in a resolution. The resolution was promptly acted upon by Secretary Chase, and this, and a later law, governed the policy of the Treasury ever afterwards. Monetary stringency was thus avoided by the Treasury keeping as much of its money in the banks as it could, and so locking up as little as possible in the Treasury and Sub-treasuries. The evil effects of the Sub-treasuries system in locking money out of circulation was thus practically acknowledged and guarded against.

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.