m^':^ ^^^^^-:^^ : ^-,. ';',:':,.. . ."'. .:. J Qi V 8 \,: / E H ! ! - ;'/' " ,. i V CHAPTERS OF ERIE AND OTHER ESSAYS BY CHARLES F. ADAMS, JR., AND HENRY ADAMS NEW YORK HENEY HOLT AND COMPANY 1886 Entered according to Act of Congress, in the year 1871, BY JAMES R. OSGOOD & CO., in the Office of the Librarian of Congress, at Washington. TROW'I NIW TOKK. CONTENTS. PAGE A CHAPTER OF ERIE C. F. Adams, Jr. . . . 1 THE NEW YORK GOLD CONSPIRACY . Henry Adams .... 100 AN ERIE RAID C. F. Adams, Jr. . . . 135 CAPTAINE JOHN SMITH Henry Adams .... 192 THE BANK OF ENGLAND RESTRICTION . Henry Adams .... 224 BRITISH FINANCE IN 1816 .... Henry Adams .... 268 THE LEGAL-TENDER ACT. Franc-is A. Walker and Henry Adams 302 THE RAILROAD SYSTEM C. F. Adams, Jr. Chap. I. The Era of Change 332 II. The Transportation Tax 355 III. Railroad Consolidation 380 IV Stock Watering 398 V. The Government and the Railroad Corporations . .414 A CHAPTER OF ERIE.' ~"VTOT a generation has passed away during the last six hun- JL^i dred years without cherishing a more or less earnest con- viction that, through its efforts, something of the animal had been eliminated from the higher type of man. Probably, also, no generation has been wholly mistaken in nourishing this faith ; even the worst has in some way left the race of men on earth better in something than it found them. And yet it would not be difficult for another Rousseau to frame a very in- genious and plausible argument in support of the opposite view. Scratch a Russian, said the first Napoleon, and you will find a Cossack ; call things by their right names, and it would be no difficult task to make the cunning civilization of the nineteenth century appear but as a hypocritical mask spread over the more honest brutality of the twelfth. Take, for instance, some of the cardinal vices and abuses of the imperfect past. Pirates are commonly supposed to have been battered and hung out of existence when the Barbary Powers and the Buccaneers of the Spanish Main had been finally dealt with. Yet freebooters are not extinct ; they have only transferred their operations to the land, and conducted them in more or less accordance with the forms of law ; until, at last, so great a proficiency have they attained, that the commerce of the world is more equally but far more heavily taxed in their behalf, than would ever have entered into their wildest hopes while, outside the law, they simply made all comers stand and deliver. Now, too, they no * From the North American Review for July, 1809. 1 A 2 A CHAPTER OF ERIE. longer live in terror of the rope, skulking in the hiding-place of thieves, but flaunt themselves in the resorts of trade and fashion, and, disdaining such titles as once satisfied Ancient Pistol or Captain Macheath, they are even recognized as Presi- dent This or Colonel That. A certain description of gambling, also, has ceased to be fashionable ; it is years since Crockford's doors were closed, so that in this respect a victory is claimed for advancing civilization. Yet this claim would seem to be unfounded. Gambling is a business now where formerly it was a disreputable excitement. Cheating at cards was always disgraceful ; transactions of a similar character under the euphemistic names of "operating," "cornering," and the like are not so regarded. Again, legislative bribery and corrup- tion were, within recent memory, looked upon as antiquated misdemeanors, almost peculiar to the unenlightened period of Walpole and Fox, and their revival in the face of modern pub- lic opinion was thought to be impossible. In this regard at least a sad delusion was certainly entertained. Governments and ministries no longer buy the raw material of legislation ; at least not openly or with cash in hand. The same cannot be said of individuals and corporations ; for they have of late not infrequently found the supply of legislators in the market even in excess of the demand. Judicial venality and ruffian- ism on the bench were not long since traditions of a remote past. Bacon was impeached, and Jeffries achieved an immor- tal infamy for offences against good morals and common de- cency which a self-satisfied civilization believed incompatible with modern development. Recent revelations have cast more than doubt upon the correctness even of this assump- tion.* No better illustration of the fantastic disguises which the worst and most familiar evils of history assume as they meet See a very striking article entitled " The Now York City .lu\.\\, Vanderbilt rxphinnl t<> tlic Kastcrn ad- venturers his new plan of operations, which included the c<>ii- t.inuawp of Drow in his directorship. These gentlemen were A CHAPTER OF ERIE. 15 puzzled, not to say confounded, by this sudden change of front. An explanation was demanded, some plain language followed, and the parties separated, leaving everything unsettled ; but only to meet again at a later hour at the house of Drew. There Vanderbilt brought the new men to terms by proposing to Drew a bold coup de main, calculated to throw them entire- ly out of the direction. Before the parties separated that night a written agreement had been entered into, providing that, to save appearances, the new board should be elected without Drew, but that immediately thereafter a vacancy should be created, and Drew chosen to fill it. He was there- fore to go in as one of two directors in the Vanderbilt interest, that gentleman's nephew, Mr. Work, being the other. This programme was faithfully carried out, and on the 2d of October Wall Street was at once astonished by the news of the defeat of the notorious leader of the bears, and bewildered by the immediate resignation of a member of the new board and the election of Drew in his place : Apparently he had given in his submission, the one obstacle to success was re- moved, and the ever-victorious Commodore had now but to close his fingers on his new prize. Virtual consolidation in the Vanderbilt interest seemed a foregone conclusion. The reinstalment of Drew was followed by a period of hol- low truce. A combination of capitalists, in pursuance of an arrangement already referred to, took advantage of this to transfer as much as possible of the spare cash of the " outside public " from its pockets to their own. A " pool " was formed, in view of the depressed condition of Erie, and Drew was left to manipulate the market for the advantage of those whom it might concern. The result of the Speculative Director's operations supplied a curious commentary on the ethics of the stock exchange, and made it questionable whether the ancient adage as to honor among a certain class in society is of uni- versal application, or confined to its more persecuted mcmbei's. One contributor to the " pool," in this instance, was Mr. , a friend of Vanderbilt. The ways of Mr. Drew were, as usual, past finding out ; Mr. . however, grew impatient of wait- 16 A CHAPTER OF ERIE. ing for the anticipated rise in Erie, and it occurred to him that, besides participating in the profits of the " pool," he might as well turn an honest penny by collateral operations on his own account, looking to the expected rise. Before em- barking on his independent venture, however, he consulted Mr. Drew, it is said, who entirely declined to express any judgment as to the enterprise, but at the same time agreed to loan Mr. out of the " pool " any moneys he might re- quire upon the security usual in such cases. Mr. availed* himself of the means thus put at his disposal, and laid in a private stock of Erie. Still, however, the expected rise did not take place. Again he applied to Mr. Drew for infor- mation, but with no better success than before ; and again, tempted by the cheapness of Erie, he borrowed further funds of the " pool," and made new purchases of stock. At last the long-continued depression of Erie aroused a dreadful sus- picion in the bull operator, and inquiries were set on foot. He then discovered, to his astonishment and horror, that his stock had come to him through certain of the brokers of Mr. Drew. The members of the " pool " were at once called to- gether, and Mr. Drew was appealed to on behalf of Mr. . It was suggested to him that it would be well to run Erie up to aid a confederate. Thereupon, with all the coolness imag- inable, Mr. Drew announced that the " pool " had no Erie and wanted no Erie ; that it had sold out its Erie and had real- ized large profits, which he now proposed to divide. There- after who could pretend to understand Daniel Drew 1 who could fail to appreciate the humors of Wall .Street ] The controller of the "pool " had actually lent the money of the " pool " to one of the members of the " pool," to enable him to buy up the stock of the " pool " ; and having thus quietly saddled him with it, the controller proceeded to divide the profits, and calmly rrtumed to the victim a portion of his own money as his share of the proceeds. Yet, strange to say, Mr. wholly failed to set- the humorous side of the transaction, and actually feigned great indignation. This, however, was a mere sportive interlude between the A CHAPTER OF ERIE. 17 graver scenes of the drama. The real conflict was now im- pending. Commodore Vanderbilt stretched out his hand to grasp Erie. Erie was to be isolated and shut up within the limits of New York ; it was to be given over, bound hand and foot, to the'lord of the Central. To perfect this programme, the representatives of all the competing lines met, and a prop- osition was submitted to the Erie party looking to a practi- cal consolidation on certain terms of the Pennsylvania Central, the Erie, and the New York Central, and a division among the contracting parties of all the earnings from the New York City travel. A new illustration was thus to be afforded, at the expense of the trade and travel to and from the heart of a continent, of George Stephenson's famous aphorism, that where combination is possible competition is impossible. The Erie party, however, represented that their road earned more than half of the fund of which they were to receive only one third. They remonstrated and proposed modifications, but their opponents were inexorable. The terms were too hard ; the conference led to no result ; a ruinous competition seemed impending as the alternative to a fierce war of doubtful issue. Both parties now retired to their camps, and mustered their forces in preparation for the first overt act of hostility. They had not long to wait. Vanderbilt was not accustomed to failure, and in this case the sense of treachery, the bitter consciousness of having been outwitted in the presence of all Wall Street, gave a pe- culiar sting to the rebuff. A long succession of victories had intensified his natural arrogance, and he was by no means dis- posed, even apart from the failure of his cherished plans, to sit down and nurse an impotent wrath in presence of an in- jured prestige. Foiled in intrigue, he must now have recourse to his favorite weapon, the brute force of his millions. He therefore prepared to go out into Wall Street in his might, and to make himself master of the Erie, as before he had made himself master of .the Hudson River road. The task in itself was one of magnitude. The volume of stock was immense ; all of it was upon the street, and the necessary ex- B 18 A CHAPTER OF ERIE. peuditure involved many millions of dollars. The peculiar difficulty of the task, however, lay in the fact that it had to be undertaken in the face of antagonists so bold, so subtle, so unscrupulous, so thoroughly acquainted with Erie, as well as so familiar with all the devices and tricks of fence of Wall Street, as were those who now stood ready to take up the gage which the Commodore so arrogantly threw down. The first open hostilities took place on the 17th of Feb- ruary. For some time Wall Street had been agitated with forebodings of the coming hostilities, but not until that day was recourse had to the courts. Vanderbilt had two ends in view when he sought to avail himself of the processes of law. In the first place, Drew's long connection with Erie, and espe- cially the unsettled transactions arising out of the famous corner of 1866, afforded admirable ground for annoying offen- sive operations ; and, in the second place, these very proceed- ings, by throwing his opponent on the defensive, afforded an excellent cover for Vanderbilt's own transactions in Wall Street. It was essential to his success to corner Drew, but to corner Drew at all was not easy, and to corner him in Erie was difficult indeed. Very recent experiences, of which Van- derbilt was fully informed, no less than the memories of 1866, had fully warned the public how manifold and ingenious were the expedients through which the cunning treasurer furnished himself with Erie, when the exigencies of his position de- manded fresh supplies. It was, therefore, very necessary for Vanderbilt that he should, while buying Erie with one hand in Wall Street, with the other close, so far as he could, that apparently inexhaustible spring from which such generous supplies of new stock were wont to flow. Accordingly, on the 17th of February, Mr. Frank Work, the only remaining representative of the Vanderbilt faction in the Erie direction, arc(iiii|i;iiiicein<; necessary for the finishing, completing, nnd operating the road of tin- company, t<> borrow money, " Retoli-ed, That under the provisions of the statute authorizing the loan of money tor such purposes, the Executive Committee be :iuthori/ed to borrow nuch sum ns may be necessary, anil to issue therefor Mich security MS is pro- vided for in such cases by the laws of tliis State; and that the president and secretary be authori/cd. under the seal of the company, to execute all needful nnd proper agreements and undertaking for -uch purpose." The law referred to was Subdivision 10 of Section 28 of the General Rail- A CHAPTER OF ERIE. 25 mediately after the Board of Directors adjourned a meeting of the Executive Committee was held, and a vote to issue at once convertible bonds for ten millions gave a meaning to the very ambiguous language of' the directors' resolve ; and ttms, when apparently on the very threshold of his final triumph, this mighty mass of one hundred thousand shares of new stock was hanging like an avalanche over the head of Vander- bilt. The Executive Committee had voted to sell the entire amount of these bonds at not less than 72. Five millions were placed upon the market at once, and Mr. Drew's broker became the purchaser, Mr. Drew giving him a written guar- anty against loss, and being entitled to any profit. It was all done in ten minutes after the committee adjourned, - the bonds issued, their conversion into stock demanded and complied with, and certificates for fifty thousand shares depos- ited in the broker's safe, subject to the orders of Daniel Drew. There they remained until the 29th, when they were issued, on his requisition, to certain others of that gentleman's army of brokers, much as ammunition might be issued before a gen- eral engagement. Three days later came the Barnard injunc- tion, and Erie suddenly rose in the market. Then, it was determined to bring up the reserves and let the eager bulls have the other five millions. The history of this second issue road Act of 1850, which authorized the railroad companies to which it applied " to borrow such sums of money as may be necessary for completing, finishing, and operating the road " ; to mortgage their roads as security for such loans; and to " confer on any holder of any bond issued for money borrowed as afore- said, the right to convert the principal due or owing thereon into stock of said company, at any time, not exceeding ten years from the date of the bond, under such regulations as the directors may see fit to adopt." It was an open question whether this law applied at all to the Erie Railway Company, the amount of the capital stock of which was otherwise regulated bylaw; the bonds were issued and sold, not as bonds, but with a distinct pledge of immediate conversion into stock, and as an indirect way of doing that, the direct doing of which was clearly illegal; finally, as a matter of fact, the proceeds of these bonds were not used for "completing, finishing, or oper- ating the road." As a matter of law the question is of no interest outside of New York, and is as yet undecided there. Of the good faith and morality of the transaction but one opinion exists anywhere. 2 26 A CHAPTER OF ERIE. was, in all respects, an episode worthy of Erie, and deserves minute relation. It was decided upon on the 3d, but before the bonds were converted Barnard's injunction had been served on every one connected with the Erie Road or with Daniel Drew. The 10th was the return day of the writ, but the Erie opera- tors needed even less time for their deliberations. Monday, the 9th, was settled upon as the day upon which to defeat the impending "corner." The night of Saturday, the 7th, was a busy one in the Erie camp. While one set of counsel and clerks were preparing affidavits and prayers for strange writs and injunctions, the enjoined vice-president of the road was busy at home signing certificates of stock, to be ready for instant use in case a modification of the injunction could be obtained, and another set of counsel was in immediate attendance on the leaders themselves*. Mr. Groesbeck, the chief of the Drew brokers, being himself enjoined, secured elsewhere, after one or two failures, a purchaser of the bonds, and took him to the house of the Erie counsel, where Drew and other directors and brokers then were. There the terms of the nominal sale were agreed upon, and a contract was drawn up transferring the bonds to this man of straw, who in return gave Mr. Drew a full power of attorney to convert or otherwise dispose of the bonds, in the form of a promissory note for their purchase- money ; Mr. Groesbeck, meanwhile, with the fear of injunctions before his eyes, prudently withdrew into the next room, and amused himself by looking at the curiosities and conversing with the lawyers' young gentlemen. After the contract was closed, the purchaser was asked to sign an affidavit setting forth his ownership of the bonds and the refusal of the cor- poration to convert them into stock in compliance with their contract, upon which affidavit it was in contemplation to seek from some justice a writ of w //'//* to compel the Erie Railway to convert them, the necessary papers for such a pro- ceeding being then in course of preparation elsewhere. This flu 1 |imvliascr di'i-liiii'd to do. One of the lawyers present tlu'ii said: "Well, you can make the demand now; here is Mr. Drew, the treasurer of the company, and Mr. Gould, one A CHAPTER OF ERIE. 27 of the Executive Committee." In accordance with this sug- gestion a demand for the stock was then made, and, of course, at once refused ; thereupon the scruples of the man of straw being all removed, the desired affidavit was signed. All busi- ness now being finished, the parties separated ; the legal papers were ready, the convertible bonds had been disposed of, and the certificates of stock, for which they were to be exchanged, were signed in blank and ready for delivery. Early Monday morning the Erie people were at work. Mr. Drew, the director and treasurer, had agreed to sell on that day fifty thousand shares of the stock, at 80, to the firms of which Mr. Fisk and Mr. Gould were members, these gentle- men also being Erie directors and members of the Executive Committee. The new certificates, made out in the names of these firms on Saturday night, were in the hands of the sec- retary of the company, who was strictly enjoined from allow- ing their issue. On Monday morning this official directed an employee of the road to carry these books of certificates from the West Street office of the company to the transfer clerk in Pine Street, and there to deliver them carefully. The mes- senger left the room, but immediately returned empty-handed, and informed the astonished secretary that Mr. Fisk had met him outside the door, taken from him the books of unissued certificates, and " run away with them." It was true ; one. essential step towards conversion had been taken ; the certifi- cates of stock were beyond the control of an injunction. Dur- ing the afternoon of the same day the convertible bonds were found upon the secretary's desk, where they had been placed liy Mr. Belden, the partner in business of Director James Fisk, Jr. : the certificates were next seen in Broad Street. Before launching the bolt thus provided, the conspirators had considered it not unadvisable to cover their proceedings, if they could, with some form of law. This probably was looked upon as an idle ceremony, but it could do no harm ; and perhaps their next step was dictated by what has been called "a decent respect for the opinions of mankind," com- bined with a profound contempt for judges f.nd courts of law. 28 A CHAPTER OF ERIE. Early on the morning of the 9th Judge Gilbert, a highly respected magistrate of the Second Judicial District, residing in Brooklyn, was waited upon by one of the Erie counsel, who desired to initiate before him a new suit in the Erie litigation, this time, in the name of the Saturday evening purchaser of bonds and maker of affidavits. A writ of mandamus was asked for. This writ clearly did not lie in such a case ; the magistrate very properly declin?d to grant it, and the only wonder is that counsel should have applied for it. New counsel were then hurriedly summoned, and a new petition, in a fresh name, was presented. This petition was for an injunction, in the name of Belden, the partner of Mr. Fisk, and the documents then and there presented were probably as eloquent an exposure as could possibly have been penned of the lamentable condition into which the once honored judiciary of New York had fallen. The petition alleged that some time in February certain per- sons, among whom was especially named George G. Barnard, the justice of the Supreme Court of the First District, had entered into a combination to speculate in the stock of the Erie Railway, and to use the process of the courts for the purpose of aiding their speculation ; " and that, in further- ance of the plans of this combination," the actions in Work's name had been commenced before" Barnard, who, the counsel asserted, was then issuing injunctions at tb.9 rate of half a dozen a day. It is impossible by any criticism to do justice to such audacity as this : the dumb silence of amazement is the only fitting commentary. Apparently, however, nothing that could be stated of his colleague across the river exeeedeil the belief of Judge Gilbert, for, after some trifling delays and a few objections on the part of the judge to the form of the desired order, the Erie counsel hurried away, and returned to New York with a new injunction, restraining all the parties to all the other suits from further proceedings, and from doing any acts in " furthernneo of said conspiracy " ; in one para- graph onli-rinir the Krie directors, except Work, to continue in tin- ilisrlijii-L:-' 1 <>f their duties, in direct deti.-mer of the in- junction of one judiri'. :mI in the next, with an equal disre- A CHAPTER OF ERIE. 29 gard of another judge, forbidding the directors to desist from converting bonds into stock. Judge Gilbert having, a few hours before signing this wonderful order, refused to issue a writ of mandamus, it may be proper to add that the process of equity here resorted to, compelling the performance of various acts, is of recent invention, and is known as a "man- datory injunction." All was now ready. The Drew party were enjoined in every direction. One magistrate had forbidden them to move, and another magistrate had ordered them not to stand still. If the Erie board held meetings and transacted business, it violated one injunction ; if it abstained from doing so, it vio- lated another. By the further conversion of bonds into stock pains and penalties would be incurred at the hands of Judge Barnard ; the refusal to convert would be an act of disobedi- ence to Judge Gilbert. Strategically considered, the position could not be improved, and Mr. Drew and his friends were not the men to let the golden moment escape them. At once, before a new injunction could be obtained, even in New York, fifty thousand shares of new Erie stock were flung upon the market. That day Erie was buoyant, Vanderbilt was pur- chasing. His agents caught at the new stock as eagerly as at the old, and the whole of it was absorbed before its origin was suspected, and almost without a falter in the price. Then the fresh certificates appeared, and the truth became known. Erie had that day opened at 80 and risen rapidly to 83, while its rise even to par was predicted ; suddenly it faltered, fell oft", and then dropped suddenly to 71. Wall Street had never been subjected to a greater shock, and the market reeled to and fro like a drunken man between these giants, as they hurled about shares by the tens of thousands, and money by the mil- lion. When night put an end to the conflict, Erie stood at 78, the shock of battle was over, and the astonished brokers drew breath as they waited for the events of the morrow. The attempted " corner " was a failure, and Drew was victo- rious, no doubt existed on that point. The question now was, could Vanderbilt sustain himself? In spite of all his 30 A CHAPTER OF ERIE. wealth, must he not go down before his cunning oppo- nent ] -" The morning of the llth found the Erie leaders still trans- acting business at the office of the corporation in West Street. It would seem that these gentlemen, in spite of the glaring contempt for the process of the courts of which they had been guilty, had made no arrangements for an orderly retreat be- yond the jurisdiction of the tribunals they had set at defiance. They were speedily roused from their real or affected tranquil- lity by trustworthy intelligence that processes for contempt were already issued against them, and that their only chance of escape from incarceration lay in precipitate flight. At ten o'clock the astonished police saw a throng of panic-stricken railway directors looking more like a frightened gang of thieves, disturbed in the division of their plunder, than like the wealthy representatives of a great corporation rush headlong from the doors of the Erie office, and dash off in the direction of the Jersey ferry. In their hands were packages and files of papers, and their pockets were crammed with assets and securities. One individual bore away with him in a hackney-coach bales containing six millions of dollars in greenbacks. Other members of the board followed under cover of the night ; some of them, not daring to expose them- selves to the publicity of a ferry, attempted to cross in open boats concealed by the darkness and a March fog. Two di- rectors, who lingered, were arrested ; but a majority of the Ex- ecutive Committee collected at the Erie Station in Jersey City, and there, free from any apprehension of Judge Barnard's pursuing wrath, proceeded to the transaction of business. Meanwhile, on the other side of the river, Vanderbilt was :-tniirL'liiig in the toils. As usual in these Wall Street opera- tions, there was a grim humor in the situation. Had Vandcr- bilt failed to sustain the market, u financial collapse and panic must have ensued which would have sent him to the wall. He h;id -n-tained it, and had absorlied a hundred thousand .shares of I'.i ie. Thus when I >n>w retired to Jersey City he carried witli him seven millions of his opponent's money, and the A CHAPTER OF ERIE. 31 Commodore had freely supplied the enemy with the sinews of war. He had grasped at Erie for his own sake, and now his opponents derisively promised to rehabilitate and vivify the old road with the money he had furnished them, so as more ef- fectually to compete with the lines which he already possessed. Nor was this all. Had they done as they loudly claimed they meant to do, Vanderbilt might have hugged himself in the faith that, after all, it was but a question of time, and the prize would come to him in the end. He, however, knew well enough that the most pressing need of the Erie people was money with which to fight him. With this he had now fur- nished them abundantly, and he must have felt that no scru- ples would prevent their use of it. Vanderbilt had, however, little leisure to devote to the en- joyment of the humorous side of his position. The situation was alarming. His opponents had carried with them in their flight seven millions in currency, which were withdrawn from circulation. An artificial stringency was thus created in Wall Street, and, while money rose, stocks fell, and unusual mar- gins were called in. Vanderbilt was carrying a fearful load, and the least want of confidence, the faintest sign of faltering, might well bring on a crash. He already had a hundred thousand shares of Erie, not one of which he could sell. He was liable at any time to be called upon to carry as much more as his opponents, skilled by long practice in the manu- facture of the article, might see fit to produce. Opposed to him were men who scrupled at nothing, and who knew every in and out of the money market, With every look and every gesture anxiously scrutinized, a position more trying than his can hardly be conceived. It is not known from what source ho drew the vast sums which enabled him to surmount his difficulties with such apparent ease. His nerve, however, stood him in at least as good stead as his financial resources. Like a great general, in the hour of trial he inspired confi- dence. While fighting for life he could " talk horse " and play whist. The manner in which he then emerged from his trou- bles, serene and confident, was as extraordinary as the finan- cial resources he commanded. 32 A CHAPTER OF ERIE. Meanwhile, before turning to the tide of battle, which now swept away from the courts of law into the halls of legisla- tion, there are two matters to be disposed of; the division of the spoils is to be recounted, and the old and useless lumber of conflict must be cleared away. The division of profits accruing to Mr. Treasurer Drew and his associate directors, acting as individuals, was a fit conclusion to the stock issue just described. The bonds for five millions, after their con- version, realized nearly four millions of dollars, of which $ 3,625,000 passed into the treasury of the company. The trustees of the stockholders had therefore in this case secured a profit for some one of $375,000. Confidence in the good faith of one's kind is very commendable, but possession is nine points of the law. Mr. James Fisk, Jr., through whom the sales were mainly effected, declined to make any payments in excess of the $ 3,625,000, until a division of profits was agreed upon. It seems that, by virtue of a paper signed by Mr. Drew as early as the 19th of February, Gould, Fisk, and others were entitled to one half the profits he should make " in certain transactions." What these transactions were, or whether the official action of Directors Gould and Fisk was in any way influenced by the signing of this document, does not appear. Mr. Fisk now gave Mr. Drew, in lieu of cash, his uncertified check for the surplus $ 375,000 remaining from this transaction, with stock as collateral amounting to about the half of that sum. With this settlement, and the redemp- tion of the collateral, Mr. Drew was fain to be content. Seven months afterwards he still retained possession of the uncertified check, in the payment of which, if presented, he seemed to entertain no great confidence. Everything, how- ever, showed conclusively the advantage of operating from interior lines. While the Krie treasury was <>nj'vU:d to it, is not very apparent. Mr. Osgood, the son-in- law of Vanderbilt, was appointed, and immediately enjoined fnun acting; sulis(M|iicntly he resigned, when Mr. Peter B. SWCCIK-V, tin- head of the Tammany ring, was appointed in his place, without notice to the other side. Of course he had A CHAPTER OF ERIE. 41 nothing to do, as there was nothing to be done, and so he was subsequently allowed by Judge Barnard $ 150,000 for his ser- vices. The contempt cases had even less result than that of the receivership. The settlement subsequently effected between the litigants seemed also to include the courts. The outraged majesty of the law, as represented in the person of Mr. Justice Barnard, was pacified, and everything was ex- plained as having been said and done in a " Pickwickian sense " ; so that, when the terms of peace had been arranged between the high contending parties, Barnard's roaring by degrees subsided, until he roared as gently as any sucking dove, and finally he ceased to roar at all. The penalty for violating an injunction in the manner described was fixed at the not unreasonable sum of ten dollars, except in the cases of Mr. Drew and certain of his more prominent associates; their contumacy his Honor held too gross to be estimated in money, and so .they escaped without any punishment at all. Probably being as well read a lawyer as he was a dignified magistrate, Judge Barnard bore in mind, in imposing these penalties, that clause of the fundamental law which provides that " no excessive fines shall be imposed, or cruel or unusual punishments inflicted." The legal profession alone had cause to regret the cessation of this litigation ; and, as the Erie counsel had $ 150,000 divided among them in fees, it may be presumed that even they were finally comforted. And all this took place in the court of that State over which the immortal Chancellor Kent had once presided. His great authority was still cited there, the halo which surrounds his name still shed a glory over the bench on which he had sat, and yet these, his immediate successors, could " On tliat high mountain cease to feed, And batten on this moor." 42 A CHAPTER OF ERIE. II. IT is now necessary to return to the real field of operations, which had ceased on the morning of the llth of March to be in the courts of law. As the arena widened the proceedings became more complicated and more difficult to trace, em- bracing as they did the legislatures of two States, neither of them famed for purity. In the first shock of the catastro- phe it was actually believed that Commodore Vanderbilt con- templated a resort to open violence and acts of private war. There were intimations that a scheme had been matured for kidnapping certain of the Erie directors, including Mr. Drew, and bringing them by force within reach of Judge Barnard's process. It appeared that on the 16th of March some fifty individuals, subsequently described, in an affidavit filed for the special benefit of Mr. Justice Barnard, as "disorderly charac- ters, commonly known as roughs," crossed by the Pavonia Ferry and took possession of the Erie depot. From their conversation and inquiries it was divined that they came intending to "copp" Mr. Drew, or, in plainer phraseology, to take him by force to New York ; and that they expected to receive the sum of $ 50,000 as a reward for so doing. The exiles at once loudly charged Vanderbilt himself with originat- ing this blundering scheme. They simulated intense alarm. From day to day new panics were started, until, on the 19th, Drew was secreted, a standing army was organized from the employees of the road, and a small navy equipped. The alarm spread through Jersey City; the militia was held in readiness ; in the evening the stores were closed and the citi- /ciis beiran to arm ; while a garrison of about one hundred and twenty-five men intrenched themselves around the directors, in their hotel. On the 1'lst there was another alarm, and the fears of an attack continued, with lengthening intervals if quiet, until the 31st, when the guard was at last with- drawn. It is impossible to suppose that Vanderliilt ever had any knowledge of this ridiculous episode or of its cause, ex- A CHAPTER OF ERIE. 43 cept through the press. A band of ruffians may have crossed the ferry, intending to kidnap Drew on speculation ; but to suppose that the shrewd and energetic Commodore ever sent them to go gaping about a station, ignorant both of the per- son and the whereabouts of him they sought would be to im- pute to Vanderbilt at once a crime and a blunder. Such botching bears no trace of his clean handiwork. The first serious effort of the Erie party was to intrench itself iu New Jersey ; and here it met with no opposition. A bill making the Erie Railway Company a corporation of New Jersey, with the same powers they enjoyed in New York, was hurried through the legislature iu the space of two hours, and, after a little delay, signed by the Governor. The aston- ished citizens of the latter State saw their famous broad- gauge road thus metamorphosed before their eyes into a den- izen of the kingdom of Camdeu and Amboy. Here was another dreadful hint to Wall Street. What further issues of stock might become legal under this charter, how the ten- ure of the present Board of Directors might be altered, what curious legal complications might arise, were questions more easily put than satisfactorily answered. The region of possi- bilities was considerably extended. The new act of incor- poration, however, was but a precaution to secure for the directors of the Erie a retreat in case of need ; the real field of conflict lay in the legislature of New York, and here Van- derbilt was first on the ground. The corruption ingrained in the political system of New York City is supposed to have been steadily creeping into the legislature at Albany during several years past. The press has rung with charges of venality against members of this body ; individuals have been pointed out as the recipients of large sums ; men have certainly become rich during short terms in office ; and, of all the rings which influence New York legislation, the railroad ring is currently supposed to be the most corrupt and corrupting. The mind of the unpreju- diced inquirer, who honestly desires to ascertain the truth on this subject, will probably pass through several phases of be- 44 A CHAPTER O* 1 ERIE. lief before settling into conviction. In the first place, he will be overwhelmed by the broad, sweeping charges advanced in the columns of the press by responsible editors and well- informed correspondents. He will read with astonishment that legislation is controlled by cliques and is openly bought and sold ; that the lobby is but the legislative broker's board, where votes are daily quoted ; that sheep and bullocks are not more regularly in the market at Smithfield than Assembly- men and Senators at Albany. Amazed by such statements, the inquirer becomes incredulous, and demands evidence in support of them. This is never forthcoming. Committees of investigation one or two in a session are regularly appointed, and their reports are invariably calculated to con- found the existing confusion. These committees generally express a belief in the existence of corruption and an utter inability to find it out ; against some notoriously venal brother legislator they enter a Scotch verdict of " not proven " ; and, having thus far been very guarded in their language, they then launch forth into tremendous denunciations of an \in- bridlcd and irresponsible press. Here they have it all their own way, and, indeed, too often make out an excellent case. Meanwhile the seeker after truth leaves both correspondents and committees, and tries to reach a conclusion by other means. Public rumor he finds to be merely a reflection of the press, or itself the impalpable form which the press reflects. No conviction can be had on such evidence. He finds loose statements, unproved assertions, and unsustained charges, tending to pioduce general incredulity. Where so much more is alleged than is proved, nothing is finally believed ; until individual corruption may be almost measured by an ostenta- tious disregard of public opinion. Passing through the phase of incredulity, the inquirer may at last resort to the private judgment of the best informed. Appealing to individuals in whose purity, judicial temper, and means of information he has entire confidence, ho will probably find his conclusions as duootmging as they arc inevitable. The weight of opinion and of evidence gradually becomes irresistible, until his mind A CHAPTER OF ERIE. 45 settles down into a sad belief that probably no representative bodies were ever more thoroughly venal, more shamelessly corrupt, or more hopelessly beyond the reach of public opin- ion, than are certain of those bodies which legislate for repub- lican America in this latter half of the nineteenth century. Certainly, none of the developments which marked the Erie conflict in the New York legislature of 1868 would tend to throw doubts on this conclusion when once arrived at. One favorite method of procedure at Albany is through the appointment of committees to investigate the affairs of wealthy corporations. The stock of some great company is manipu- lated till it fluctuates violently, as was the case with Pacific Mail in 1867. Forthwith some member of the Assembly rises and calls for a committee of investigation. The instant the game is afoot, a rush is made for positions on the commit- tee. The proposer, of course, is a member, probably chair- man. The advantages of the position are obvious. The com- mittee constitutes a little temporary outside ring. If a mem- ber is corrupt, he has substantial advantages offered him to influence his action in regard to the report. If he is not open to bribery, he is nevertheless in possession of very valuable information, and an innocent little remark, casually let fall, may lead a son, a brother, or a loving cousin to make very judicious purchases of stock. Altogether, the position is one not to be avoided. The investigation phase was the first which the Erie struggle assumed at Albany. During the early stages of the conflict the legislature had scented the carnage from afar. There was " money in it," and the struggle was watched with breathless interest. As*arly as the 5th of March the subject had been introduced into the State Senate, and an investigation into the circumstances of the company was called for. A commit- tee of three was ordered, but the next day a senator, by name Mattoon, moved to increase the number to five, which was done, he himself being naturally one of the additional mem- bers. This committee had its first sitting on the 10th, at the very crisis of the great explosion. But before the iuvestiga- 46 A CHAPTER OF ERIE. tion was entered upon, Mi*. Mattoon thought it expedient to convince the contending parties of his own perfect impartial- ity and firm determination to hold in check the corrupt im- pulses of his associates. With this end in view, upon the 9th or the 10th he hurried down to New York, and visited West Street, Avhere he had an interview with the leading Erie direc- tors. He explained to them the corrupt motives which had led to the appointment of the committee, and how his sole object in obtaining an increase of the number had been to put himself in a position in which he might be able to prevent these evil practices and see fair play. Curiously enough, at the same interview he mentioned that his son was to be appointed an assistant sergeant-at-arms to aid in the in- vestigation, and proved his disinterestedness by mentioning the fact that this son was to serve without pay. The labors of the committee continued until the 31st of March, and dur- ing that time Mr. Mattoon, and at least one other senator, pursued a course of private inquiry which involved further visits to Jersey City. Naturally enough, Mr. Drew and his associates took it into their heads that the man wanted to be bought, and even affirmed subsequently that, at one inter- view, he had in pretty broad terms offered himself for sale. It has not been distinctly stated in evidence by any one that an attempt was made on his purity or on that of his public- spirited sou ; and it is difficult to believe that one who came to New York so full of high purpose could have been suffi- ciently corrupted by metropolitan influences to receive bribes from both sides. Whether he did so or not his proceedings were terribly suggestive as regards legislative morality at Albany. Here was a senator, a member of a committee of in- vestigation, rousing gamblers from their beds at early hours of the morning to hold interviews in the faro-bank parlor of the establishment, and to give "points" on which to operate upon the joint account. Even then the wretched creature could not even keep faith with his very "pals" ; he wrote to them to " go it heavy " for Drew, and (hen himself went, over to Vandi-rbilt, he made agreements to share profits and then A CHAPTER OF EIUE. 47 submitted to exposure sooner than meet his part of the loss. A man more thoroughly, shamefacedly contemptible and coiTupt, a more perfect specimen of a legislator on sale haggling for his own price, could not well exist. In this case he cheated every one, including himself. Accident threw great opportunities in his way. On the 31st the draft of a proposed report, exonerating in great measure the Drew fac- tion, was read to him by an associate, to which he not only made no objection, but was even understood to assent. On the same day another report was read in his presence, strongly denouncing the Drew faction, sustaining to the fullest extent the charges made against it, and characterizing its conduct as corrupt and disgraceful. Each report was signed by two of his associates, and Mr. Mattoon found himself in the position of holding the balance of power ; whichever report he signed would be the report of the committee. He expressed a desire to think the matter over. It is natural to suppose that, in his eagerness to gain information privately, Mr. Mattoon had not confined his unofficial visits to the Drew camp. In any case his mind was in a state of painful suspense. Finally, after arranging in consultation on Tuesday for a report favoring the Drew party, on Wednesday he signed a report strongly de- nouncing it, and by doing so settled the action of the commit- tee. Mr. Jay Gould must have been acquainted with the cir- cumstances of the case, and evidently supposed that Mr. Mattoon was " fixed," since he subsequently declared he was " astounded " when he heard that Mr. Mattoon had signed this report. The committee, however, with their patriotic ser- geant-at-arms, whose services, by the way, cost the State but a hundred dollars, desisted at length from their labors, the result of which was one more point gained by Commodore Vanderbilt. Indeed, Vanderbilt had thus far as much outgeneralled Drew in the manufacture of public opinion as Drew had out- generalled Vanderbilt in the manufacture of Erie stock. His whole scheme was one of monopoly, which was opposed to every interest of the city and State of New York, yet into the 48 A CHAPTER OF ERIE. support of this scheme he had brought all the leading papers of New York City, with a single exception. Now again ho seemed to have it all his own way in the legislature, and the tide ran strongly against the exiles of Erie. The report of the investigation committee was signed on April 1st, and may he considered as marking the high-water point of Vanderbilt's success. Hitherto the Albany interests of the exiles had been confided to mere agents, and had not prospered ; but, when fairly roused by a sense of danger, the Drew party showed at least as close a familiarity with the tactics of Albany as with those of Wall Street. The moment they felt themselves set- tled at Jersey City they had gone to work to excite a popular sympathy in their own behalf. The cry of monopoly was a sure card in their hands. They cared no more for the actual welfare of commerce, involved in railroad competition, than they did for the real interests of the Erie Railway ; but they judged truly that there was no limit to the extent to which the public might be imposed upon. An active competition with the Vanderbilt roads, by land and water, was inaugurated ; fares and freights on the Erie were reduced on an average by one third ; sounding proclamations were issued ; " interview- ers " from the press returned rejoicing from Taylor's Hotel to New York City, and the Jersey shore quaked under the clat- ter of this Chinese battle. The influence of these tactics made itself felt at once. By the middle of March memorials against monopoly began to flow in at Albany. While popular sympathy was thus roused by the bribe of ac- tive competition, a bill was introduced into the Assembly, in the Erie interest, legalizing the recent issue of new stock, declaring and regulating the power of issuing convertible In 'iids, providing for a broad-gauge connection with Chicago and the guaranty of the bonds of the Boston, Hartford, :my pacified the indignant Barrett. Tin; application for a habeas corpus was discharged, and Mr. A CHAPTER OF ERIE. 51 was theoretically returned into the custody of the sheriff. Thereupon the required security for his appearance when needed was given ; and meanwhile, pending the recovery of his health, he assiduously devoted the tedious hours of convales- cence to the task of cultivating a thorough understanding between himself and the members of the legislature. A strange legislative episode occurred at this time, which for a day or two threatened to thwart Mr. Gould's operations, but in the end materially facilitated them. All through March the usual sensational charges had been flying through the press in relation to the buying of votes on the pending Erie measures. These were as vague and as difficult to sus- tain as usual, and it was very important that no indiscreet friend of legislative purity should blunder out charges which could be triumphantly refuted. On the 1st of April, however, the second day after Mr. Gould appeared on the ground, a quiet country member named Glenn, remarkable for nothing but his advanced years and white hair, suddenly created an intense sensation by rising in his place in the Assembly and excitedly declaring that he had just been offered money for his vote on the Erie Bill. He then sent up to the Speaker charges in writing, to the effect that the recent report on the bill in question was bought, that members of the House were engaged in purchasing votes, that reports of committees were habitually sold, and ended by charging " corruption, deep, dark, and damning on a portion of the House," of which he felt " degraded in being a member." A committee of investi- gation was, of course, appointed, and the press congratulated the public that at last specific charges had been advanced from a responsible quarter. On the 9th Mr. Glenn followed up the attack by charging, again in writing, that one member of the committee of investigation, whose name he gave, was the very member who had offered him money for his vote. Mr. Frear, the member in question, at once resigned his place upon the committee, and demanded an investigation. Then it turned out that the simple old gentleman, between his desire for notoriety and his eagerness to expose corruption, had been 52 A CHAPTER OF ERIE. made the victim of a cruel joke. Some waggish colleagues had pointed out to him an itinerant Jew, who haunted the lobby and sold spectacles, as an agent of the fifth estate. From him the old gentleman had, after some clumsy angling and many leading questions, procured what he supposed to be an offer of money for his vote, which, by a ludicrous misun- derstanding, managed by his humorous colleagues, was made to appear in his eyes as having received Mr. Frear's indorse- ment. Mr. Glenn's charges ended, therefore, in a ridiculous fiasco, and in a tremendous outburst of offended legislative virtue. The committee reported on the 10th ; every one was exonerated ; Mr. Glenn was brought to the bar and censured, and the next day he resigned. As for the astonished pedler, he was banished from the lobby, imprisoned, prosecuted, and forgotten. The display of indignation on the part of Mr. Glenn's brother legislators was, in view of the manifest absur- dity of the whole affair, somewhat superfluous and somewhat suspicious; but one such false accusation protects a multitude of real sins. The trade of censor of morals fell into disre- pute at Albany ; and, under the shadow of this parody upon exposures of corruption, Mr. Gould was at liberty to devote himself to serious business without fear of interruption. The full and true history of this legislative campaign will never be known. If the official reports of investigating com- mittees are to be believed, Mr. Gould at about this time underwent a curious psychological metamorphosis, and sud- denly became the veriest simpleton in money matters that ever fell into the hands of happy sharpers. Cunning lobby members had but to pretend to an influence over legislative minds, which every one knew they did not possess, to draw unlimited amounts from this verdant habitue of Wall Street. It seemed strange that he could have lived so long and learned so little. He dealt in large sums, lie gave to one man, in whom In- said "he did not take much stock," the sum of $5,000, "just to smooth him over." This man had just be- fore received $ 5,000 of Erie money from another agent of the company. It would, therefore, be interesting to know A CHAPTER OF KRIE. 53 what sums Mr. Gould paid to those individuals in whom he did "take much stock." Another individual is reported to have received $ 100,000 from one side, "to influence legisla- tion," and to have subsequently received $ 70,000 from the other side to disappear with the money ; which he accordingly did, and thereafter became a gentleman of elegant leisure. One senator was openly charged in the columns of the press with receiving a bribe of $ 20,000 from one side, and a sec- ond bribe of $ 15,000 from the other; but Mr. Gould's foggy mental condition only enabled him to be "perfectly astounded " at the action of this senator, though he knew nothing of any such transactions. Other senators were blessed with a sudden accession of wealth, but in no case was there any jot or tittle of proof of bribery. Mr. Gould's rooms at, the Develin House overflowed with a joyous company, and his checks were nu- merous and heavy ; but why he signed them, or what became of them, he seemed to know less than any man in Albany. This strange and expensive hallucination lasted until about the middle of April, when Mr. Gould was happily restored to his normal condition of a shrewd, acute, energetic man of business ; nor is it known that he has since experienced any relapse into financial idiotcy. About the period of Mr. Gould's arrival in Albany the tide turned, and soon began to flow strongly in favor of Erie and against Vanderbilt. How much of this was due to the skilful manipulations of Gould, and how mnch to the rising popular feeling against the practical consolidation of compet- ing lines, cannot be decided. The popular protests did indeed pour in by scores, but then again the Erie secret-service money poured out like water. Yet Mr. Gould's task was sufficiently difficult. After the adverse report of the Senate committee, and the decisive defeat of the bill introduced into the Assem- bly, any favorable legislation seemed almost hopeless. Both Houses were committed. Vanderbilt had but to prevent ac- tion, to keep things where they were, and the return of his opponents to New York was impracticable, unless with his consent ; he appeared, in fact, to be absolute master of the 54 A CHAPTER OF ERIE. . situation. It seemed almost impossible to introduce a bill in the face of his great influence, and to navigate it through the many stages of legislative action and executive approval, without somewhere giving him an opportunity to defeat it. This was the task Gould had before him, and he accomplished it. On the 13th of April a bill, which met the approval of the Erie party, and which Judge Barnard subsequently com- pared not inaptly to a bill legalizing counterfeit money, was taken up in the Senate ; for some days it was warmly debated, and on the 18th was passed by the decisive vote of seventeen to twelve. Senator Mattoon had not listened to the debate in vain. Perhaps his reason was convinced, or perhaps he had sold out new " points " and was again cheating himself or somebody else ; at any rate, that thrifty senator was found voting with the majority. The bill practically legalized the recent issues of bonds, but made it a felony to use the pro- ceeds of the sale of these bonds except for completing, fur- thering, and operating the road. The guaranty of the bonds of connecting roads was authorized, all contracts for consoli- dation or division of receipts between the Erie and the Van- derbilt roads were forbidden, and a clumsy provision was enacted that no stockholder, director, or officer in one of the Vanderbilt roads should be an officer or director in the Eric, and vice versa. The bill was, in fact, an amended copy of the one voted down so decisively in the Assembly a few days before, and it was in this body that the tug of war was expected to come. The lobby was now full of animation ; fabulous stories were told of the amounts which the contending parties \ven> willing to ex{)cnd ; never before had the market quotations of votes and influence stood so high. The wealth of Vanderbilt seemed pitted against the Erie treasury, and the vultures (lucked to Albany from every part of the State. Suddenly, at the very last moment, and even while special trains were briii'_:'m'_r up fresh contestants to take part in the fray, a rumor rail through Albany as of some groat public disaster, spread- ing panic and terror through hotel and corridor. The ob- A CHAPTER OF ERIE. 55 server was reminded of the dark days of the war, when tid- ings came of some great defeat, as that on the Chickahominy or at Fredericksburg. In a moment the lobby was smitten with despair, and the cheeks of the legislators were blanched, for it was 1'eported that Vanderbilt had: withdrawn his opposi- tion to the bill. The report was true. Either the Commo- dore had counted the cost and judged it excessive, or he de- spaired of the result. At any rate, he had yielded in advance. In a few moments the long struggle was over, and that bill which, in an uuamended form, had but a few days before been thrown out of the Assembly by a vote of eighty-three to thirty-two, now passed it by a vote of one hundred and one to six and was sent to the Governor for his signature. Then the wrath of the disappointed members turned on Vanderbilt. Decency was forgotten in a frenzied sense of disappointed avarice. That same night the pro rata freight bill, and a bill compelling the sale of through tickets by competing lines, were hurriedly passed, simply because they were thought hurtful to Vanderbilt ; and the docket was ransacked in search of other measures, calculated to injure or annoy him. An adjournment, however, brought reflection, and subse- quently, on this subject, the legislature stultified itself no more. The bill had passed the legislature ; would it receive the Executive signature 1 ? Here was the last stage of danger. For some time doubts were entertained on this point, and the last real conflict between the opposing interests took place in the Executive Chamber at Albany. There, on the afternoon of the 21st of April, Commodore Vanderbilt' s counsel ap- peared before Governor Feuton, and urged upon him their reasons why the bill should be returned by him to the Senate without his signature. The arguments were patiently listened to, but, when they had closed, the Executive signature placed the seal of success upon Mr. Gould's labors at Albany. Even here the voice of calumny was not silent. As if this remark- able controversy was destined to leave a dark blot of suspi- cion upon every department of the civil service of New York, 56 A CHAPTER OF ERIE. there were not wanting those who charged the Executive itself with the crowning act in this history of conniption. The very sum pretended to have been paid was named ; the broker of Executive action was pointed out, and the number of min- utes was specified which should intervene between the pay- ment of the bribe and the signing of the law.* Practically, the conflict was now over, and the period of negotiation had already begun. The combat in the courts was indeed kept up until far into May, for the angry passions of the lawyers and of the judges required time in which to wear themselves out. Day after day the columns of the press revealed fresh scandals to the astonished public, which at last grew indifferent to such revelations. Beneath all the wrangling of the courts, however, while the popular attention was dis- tracted by the clatter of lawyers' tongues, the leaders in the controversy were quietly approaching a settlement. In the early days of his exile Mr. Drew had been more depressed in spirit, more vacillating in counsel, than his younger and more robust associates. The publicity and excitement which had sustained and even amused them had wearied and annoyed the old man. His mind had been oppressed \Vith saucy doubts and tormented by officious advisers. Stronger wills than his were bearing him along with them ; and though, perhaps, not more scrupulous than those about him, he was certainly less bold ; their reckless daring shocked his more subtle and timid nature. He missed also his home comforts ; he felt himself a prisoner in everything but in name ; he knew that he was distrusted, and his every action watched l>y associates of \vh<>m he even stood in physical fear, who hardly allowed him to see his brokers alone, and did not respect the sanctity of his tele- grams. After the first week or two, and as affairs began to assume a less untoward aspect, his spirits revived, and he soon ii to make secret advances towards his angry opponent. * It is but justice to (iovrnior r'cnton to SMV, tliat, though tins clmrgo wns liolilly advanced by respectable, journals of his own party, it cannot be con- sidered MS Mi-taiiied by the evidence. The testimony on the point will bo found in the report of Senator Male's invent j^utin^ committee. Documents (Senate), 1V09, No. 62, pp. 140- 148, 151-155. A CHAPTER OF ERIE. 57 The hostilities of the Stock Exchange are proverbially short- lived. A broker skilled in the ways of his kind gave it as his opinion, in one of these proceedings, that five minutes was the utmost period during which it was safe to count on the enmities or alliances of leading operators. Early in April Mr. Drew took advantage of that blessed immunity from arrest which the Sabbath confers on the hunted of the law, to revisit the familiar scenes across the river. His visit soon resulted in conferences between himself and Vanderbilt, and these conferences naturally led, to overtures of peace. Though the tide was turning against the great railroad king, though an uncontrollable popular feeling was fast bearing down his schemes of monopoly, yet he was by no means beaten or sub- dued. His plans, however, had evidently failed for the pres- ent ; as he expressed himself, he could easily enough buy up the Erie Railway, but he could not buy up the printing-press. It was now clearly his interest to abandon his late line of at- tack, and to bide his time patiently, or to possess himself of his prey by some other method. The wishes of all parties, there- fore, were fixed on a settlement, and no one was disposed to stand out except in order to obtain better terms. The inter- ests, however, were multifarious. There were four parties to be taken care of, and the depleted treasury of the Erie Kail- way was doomed to suffer. The details of this masterpiece of Wall Street diplomacy have never come to light, but Mr. Drew's visits to New York became more frequent and less guarded ; by the middle of April he had appeared in Broad Street on a week-day, un- disturbed by fears of arrest, and soon rumors began to spread of misunderstandings between himself and his brother exiles. It was said that his continual absences alarmed them, that they distrusted him, that his terms of settlement were not theirs. It was even asserted that his orders on the treasury were no longer honored, and that he had, in fact, ceased to be a power in Erie. Whatever truth there may have been in tlicsi 1 rumors, it was very evident his associates had no inclina- tion to trust themselves within the reach of the New York 3* 58 A CHAPTER OF ERIE. courts until a definitive treaty, satisfactory to themselves, was signed and sealed. This probably took place about the 25th of April ; for on that day the Erie camp at " Fort Taylor," as their uninviting hotel had been dubbed, was broken up, the President and one of the Executive Committee took steamer for Boston, and the other directors appeared before Judge Barnard, prepared to purge themselves of their contempt. Though the details of negotiation have never been divulged, yet it was clear enough what three of the four parties desired. Commodore Vanderbilt wished to be relieved of the vast amount of stock with which he was loaded, and his friends Work and Schell, in whose names the battle had been fought, must be protected. Mr. Drew desired to settle his entangled accounts as treasurer, and to obtain a release in full, which might be pleaded in future complications. Mr. Eldridge and his Boston friends were sufficiently anxious to be relieved of the elephant they found on their hands, in the Erie Rail- way of New York, and to be at leisure to devote the spoils of their victim to the development of their New England en- terprise. Messrs. Gould and Fisk alone were unprovided for, and they alone presented themselves as obstacles to be over- come by railroad diplomacy. At last, upon the 2d of July, Mr. Eldridge formally an- nounced to the Board of Directors that the terms of peace had l>een agreed upon. Commodore Vanderbilt was, in the first place, provided for. He was to be relieved of fifty thou- sand shares of Erie stock at 70, receiving therefor $2,500,000 in cash, and $ 1,250,000 in bonds of the Boston, Hartford, & Kric at 80. He was also to receive a further sum of $ 1,000,000 outright, as a consideration for the privilege the Erie road thus purchased of calling upon him for his remaining fifty thousand shares at 70 at any time within four months. He was also to have two scats in Hit- Moa.nl of I )i rectors, and all suits were to be dismissed and offences condoned. The sum of $429,2. r >l) was tixed upon as a proper amount to assuage Hie. sense of wrong from which his two friends Work and Schell had suffered, and to efface from their memories all A CHAPTER OF ERIE. 59 recollection of the unfortuato " pool " of the previous Decem- ber. Why the owners of the Erie Railway should have paid this indemnity of $ 4,000,000 is not very clear. The opera- tions were apparently outside of the business of a railway company, and no more connected with the stockholders of the Erie than were the butchers' bills of the individual directors. While Vanderbilt and his friends were thus provided for, Mr. Drew was to be left in undisturbed enjoyment of the fruits of his recent operations, but was to pay into the treasury $ 540,000 and interest, in full discharge of all claims and causes of action which the Erie Company might have against him. The Boston party, as represented by Mr. Eldridge, was to be relieved of $5,000,000 of their Boston, Hartford, & Eric bonds, for which they were to receive $ 4,000,000 of Erie acceptances. None of these parties, therefore, had anything to complain of, whatever might be the sensations of the real owners of the railway. A total amount of some $ 9,000,000 in cash was drawn from the treasury in fulfilment of this settle- ment, as the persons concerned were pleased to term this remarkable disposition of property intrusted to their care. Messrs. Gould and Fisk still remained to be taken care of, and to them their associates left the Erie Railway. These gentlemen subsequently maintained that they had vehemently opposed this settlement, and had denounced it in the secret councils as a fraud and a robbery. Mr. Fisk was peculiarly outspoken in relation to it, and declared himself " thunder- struck and dumbfounded " that his brother directors whom he had supposed respectable men should have had anything to do with any such proceeding. A small portion of this state- ment is not wholly improbable. The astonishment at the turpitude of his fellow-officials was a little unnecessary in one who had already seen " more robbery " during the year of his connection with the Erie Railway than he had " ever seen before in the same space of time," so much of it indeed that he dated his " gray hairs " from that 7th of October which saw his election to the board. That Mr. Fisk and Mr. Gould were extremely indignant at a partition of plunder from which they 60 A CHAPTER OF ERIE. were excluded is, however, very certain. The riud of the orange is not genei'ally considered the richest part of the fruit ; a corporation on the verge of bankruptcy is less coveted, even by operators in Wall Street, than one rich in valuable assets. Probably at this time these gentlemen seriously debated the expediency of resorting again to a war of injunctions, and carefully kept open a way for doing so ; however this may have been, they seem finally to have concluded that there was yet plunder left in the poor old hulk, and so, after four stormy interviews, all opposition was at last withdrawn and the de- finitive treaty was finally signed.* Mr. Eldridge thereupon counted out his bonds and received his acceptances, which latter were cashed at once to close up the transaction, and at once he resigned his positions as director and president. The Boston raiders then retired, heavy with spoil, into their own North country, and there proceeded to build up an Erie influ- ence for New England, in which task they labored with assidu- ity and success. Gradually they here introduced the more highly developed civilization of the land of their temporary adoption and boldly attempted to make good their private losses from the public treasury. A more barefaced scheme of plunder never was devised, and yet the executive veto alone stood between it and success. These, however, were the * The account given of this affair by Mr. Fisk from the witness stand on n subsequent occasion was characteristic : " Finally about twelve o'clock ti paper was passed round and we signc.d it; I don't know what it contained; I did n't read it; I don't think I noticed a word of it; I remember the space for the names was greater than that covered by the writing; my impression is that I took my hat and left at once in disgust; I told Gould we had sold our- selves to the Devil; I presume that was not the only document signed; I re- member seeing Mr. White, the cashier, come in with the check-book, and I said to him, 'Yon are bearing in the remains of this corporation to be put in Vnndcrbilt's tomb.' No; I did n't know the contents of the paper which I signed, and I have always been glad that I didn't; I have thought of it a thou- sand times; I don't know what other documents 1 signed ; I signed everything that was put In-fore me ; after once the Devil had hold of me 1 kept on signing; did n't read any of them and have no idea what they were; I don't know how manv I signed; I kept no count after the first one; I went with the robbers then and I have been with them ever since; my impression is that after the signing I left at once; I don't know whether we sat down or not; we didn't have anything to ent. I know." A CHAPTER OF ERIE. 61 events of another year and unconnected with this narrative, from which these characters in the Erie management hence- forth disappear. For the rest it is only necessary to say that Mr. Vanderbilt, relieved of his heavy load of its stock, ap- parently ceased to concern himself with Erie ; while Daniel Drew, released from the anxieties of office, assumed for a space the novel character of a looker-on in Wall Street. III. THUS, in the early days of July, Messrs. Fisk and Gould found themselves beginning life, as it were, in absolute control of the Erie Railway, but with an empty treasury and a doubt- ful reputation. Outwardly things did not look unpromising. The legal complications were settled, and the fearful load imposed by the settlement upon the already overburdened resources of the road was not, of course, imparted to the pub- lic. It is unnecessary to add that the "outside" holders of the stock were, in the counsels of the managers, included in that public the inquiries of which in regard to the affairs of the company were looked upon by the ring in control as downright impertinence. A calm deceitful indeed, but yet a calm succeeded the severe agitations of the money mar- ket. All through the month of July money was easy and ruled at three or four per cent ; Erie was consequently high, and was quoted at about seventy, Avhich enabled the company to dispose without loss of the Vanderbilt stock. It may well be believed that Messrs. Fi.sk and Gould could not have re- garded their empty treasury, just depleted to the extent of nine millions, trust funds misapplied by directors in the pro- cesses of stock-gambling, without serious question as to their ability to save the road from bankruptcy. The October elec- tion was approaching, Vanderbilt was still a threatening ele- ment in the future, and new combinations might arise. 62 A CHAPTER OF ERIE. Millions were necessary, and must at once be forthcoming. The new officials were, however, men of resource, and were not men of many scruples. The money must be raised, and recent experience indicated a method of raising it. Their policy, freed from the influence of Drew's vacillating, treach- erous, and withal timid nature, could now be bold and direct. The pretence of resistance to monopoly would always serve them, as it had served them before, as a plausible and popular cry. Above all, their councils were now free from interlopers and spies ; for the first act of Messrs. Gould and Fisk had been to do away with the old board of auditors, and to concentrate all power in their own hands as president, treasurer, and con- troller. Fortunately for them it was midsummer, and the receipts of the road were very heavy, supplying them with large sums of ready money ; * most fortunately for them, also, a strange infatuation at this time took possession of the Eng- lish mind. * It will be remembered that the net of 21st April, legalizing the issue of bonds, made it a felony to devote the proceeds to any purpose except equip- ping, constructirg, and operating the road. Mr. Gould's explsv atioi of the effect he gave to this clause is not only amusing as a piece of impudence, but extremely suggestive as regards the efficacy of legislation. Mr. Gould, be it remembered, procure! the passage of the law, and Mr. Gould thus explains to the railroad committee of the legislature the force he gave to its provisions. Mr. Gould. .... The law is, that you can only use the money realized on these bonds for the purpose of equipping, constructing, and operating the road, and therefore I had to use the earnings of the road to meet these large liabili- ties, wliich had been authorize! by the board (the Eldridge-Vanderbilt settle- ment ), and use the mor.ey realized from the bonds to equip, construct, and operate the road Qutstion by Mr. Waterman. In fact these twenty million of bonds were issued to meet these obligations, and not for the purpose of maintaining, oper- ating, and constructing the road? Antwo: No, sir; I used the earnings of the road to meet these obligations. .... \Vi> had to live up to the letter of the law, and use the money reali/i-ti from the bonds for the purpose of operating, constructing, and equipping tho road. Q. But your pressing need of money was not for the purpose of operating the road, but for the purpose of meeting these obligations? A. V Q The amoiu.t of mo;.ey you sought to raise was the amount of these obligations? A. Yes, sir. A CHAPTER OF ERIE: 63 Shrewd as the British capitalist proverbially is, his judg- ment in regard to American investments has been singularly fallible. When our national bonds went begging at a discount of sixty per cent, he transmitted them to Germany and refused to touch them himself. At the very same time a class of rail- road securities - such as those of this very Erie Railway, or, to cite a yet stronger case, those of the Atlantic & Great West- ern road was gradually absorbed in London as an honest in- vestment long after these securities had " gone into the street " in America. It was this strange fatuity which did much to bring on the crash of May, 1866. Even that did not seem to teach wisdom to the British bankers, who had apparently passed from the extreme of caution to the extreme of confi- dence. They now, after all the exposures of the preceding months, rushed into Erie, apparently because it seemed cheap, and the prices in New York were sustained by the steady de- mand for stock on foreign account. Not only did this curious infatuation, involving purchases to the extent of a hundred thousand shares, cover up the operations of the new ring, but, at a later period, the date of the possible return of this stock to Wall Street was the hinge on which the success of its cul- minating plot was made to turn. The appearance of calm lasted but about thirty days. Early in August it was evident that something was going on. Erie suddenly fell ten per cent; in a few days more it experi- enced a further fall of seven per cent, touching 44 by the 1 9th of the month, upon which day, to the astonishment of Wall Street, the transfer-books of the company were closed pre- paratory to the annual election. As this election was not to take place Tintil the -13th of October, and as the books had thus been closed thirty days in advance of the usual time, it looked very much as though the managers were satisfied with the present disposition of the stock, and meant, by keeping it where it was, to preclude any such unpleasantness as an opposition ticket. The courts and a renewed war of injunc- tions were of course open to any contestants, including Com- modore Vanderbilt, who might desire to avail themselves of 64 A CHAPTER OF ERIE. them ; probably, however, the memory of recent struggles was too fresh to permit any one to embark on those treacher- ous waters. At any rate, nothing of the sort was attempted. The election took place at the usual time, and the ring in control voted itself, without opposition, into a new lease of power. Two new names had meanwhile appeared in the list of Erie directors, those of Peter B. Sweeney and William M. Tweed, the two most prominent leaders of that notorious ring which controls the proletariat of New York City and governs the politics of the State. The alliance was an omi- nous one, for the construction of the new board can be stated in few words, and calls for no comment. It consisted of the Erie ring and the Tammany ring, brought together in close political and financial union ; and, for the rest, a working majority of supple tools and a hopeless minority of respect- able figure-heads. This formidable combination shot out its feelers far and wide : it wielded the influence of a great cor- poration with a capital of a hundred millions ; it controlled the politics of the first city of the New World ; it sent its representatives to the Senate of the State, and numbered among its agents the judges of the courts. Compact, disci- plined, and reckless, it knew its own power and would not scruple to use it. It was now the month of October, and the harvest had been gathered. The ring and its allies determined to reap their harvest also, and that harvest was to be nothing less than a contribution levied, not only upon Wall Street and New York, but upon all the immense interests, commercial and financial, which radiate from New York all over the country. Like the Cscsar of old, they issued their edict that all the world should be- taxed. Tlu- process was not novel, but it. was ell'ective. A monetary stringency may be looked for in New York at cer- tain seasons of every year. It is gem-rally most severe in the autumn months, when the crops have to be moved, and the currency is drained steadily away from the financial centre towards the extremities of the system. The method by which an artificial stringency is produced is thus explained in a A CHAPTER OF ERIE. 65 recent report of the Comptroller of the Currency : " It is scarcely possible to avoid the inference that nearly one half of the available resources of the national banks in the city of New York are used in the operations of the stock and gold ex- change ; that they are loaned upon the security of stocks which are bought and sold largely on speculation, and which are manipulated by cliques and combinations, according as the bulls or bears are for the moment in the ascendency Taking advantage of an active demand for money to move the crops West and South, shrewd operators form their combina- tion to depress the market by ' locking up ' money, with- drawing all they can control or borrow from the common fund ; money becomes scarce, the rate of interest advances, and stocks decline. The legitimate demand for money con- tinues ; and, fearful of trenching on their reserve, the banks are strained for means. They dare not call in their demand loans, for that would compel their customers to sell securities on a falling market, which would make matters worse. Habi- tually lending their means to the utmost limit of prudence, and their credit much beyond that limit, to brokers and specu- lators, they are powerless to afford relief ; their customers by the force of circumstances become their masters. The banks cannot hold back or withdraw from the dilemma in which their mode of doing business has placed them. They must carry the load to save their margins. A panic which should greatly reduce the price of securities would occasion serious, if not fatal, results to the banks most extensively engaged in such operations, and would produce a feeling of insecurity which would be very dangerous to the entire bank- ing interest of the country." * All this machinery was now put in motion ; the banks and their customers were forced into the false position described, and towards the end of October it had become perfectly no- torious in Wall Street that large new issues of Erie had been made, and that these new issues were intimately connected with the sharp stringency then existing in the money market. * Finance Report, 1668, pp. 20, 21. 66 A CHAPTER OF ERIE. It was at last detei'mined to investigate the matter, and upon the 27th of the mouth a committee of three was appointed by the Stock Exchange to wait upon the officers of the cor- poration with the view of procuring such information as they might be willing to impart. The committee called on Mr. Could and stated the object of their visit. In reply to their inquiries Mr. Gould informed them that Erie convertible bonds for ten millions of dollars had been issued, half of which had already been, and the rest of which would be, converted into stock ; that the money had been devoted to the purchase of Boston, Hartford, & Erie bonds for five millions, and also of course to payments for steel rails. The committee de- sired to know if any further issue of stock was in contempla- tion, but were obliged to rest satisfied with a calm assurance that no new issue was just then contemplated except " in cer- tain contingencies " ; from which enigmatical utterances Wall Street was left to infer that the exigencies of Messrs. Gould and Fisk were elements not to be omitted from any calcula- tions as to the future of Erie and the money market. The amount of these issues of new stock was, of course, soon whispered in a general way ; but it was not till months after- wards that a sworn statement of the secretary of the Erie Kailway revealed the fact that the stock of the corporation had been increased from $34,265,300 on the 1st of July, 18G8, the date when Drew and his associates had left it, to $57,766,300 on the 24th of October of the same year, or by two hundred and thirty-five thousand shares in four months.* This, too, had been done without consultation with the board of directors, and with no other authority than that conferred by the ambiguous resolution of February 19. Under that iTsolution the stock of the company had now been increased * In April, 1871, although the stock wns then nominally registered, :i fur- ther secret issue was made by which some S 600,000 in cash was realized on $3,000,000 of stock. Periodical issues had then carried the gross amount up to the neighborhood of $86,500,000; or from n total of 250,000 shares, when the management changed at the election of October 17, 1867, to '865,000 shares within four years. Apparently Mr Fisk wns more correct thnn usual in his statement, when he remarked, that, having oace joined the robbers, " lie had been with them ever since." A CHAPTKK OF EKIK. 67 one hundred and thirty-eight per cent in eight months. Such a process of inflation may, perhaps, be justly considered the most extraordinary feat of financial legerdemain which history has yet recorded. Now, however, when the committee of the Stock Exchange had returned to those who sent them, the mask was thrown off, and operations were conducted with vigor and determina- tion. New issues of Erie were continually forced upon the market until thestock fell to 35 ; greenbacks were locked up iu the vaults of the banks, until the unexampled sum of twelve millions was withdrawn from circulation ; the prices of securities and merchandise declined ; trade and the au- tumnal movement of the crops were brought almost to a stand-still ; and loans became more and more difficult to nego- tiate, until at length eveii one and a half per cent a day was paid for carrying stocks. Behind all this it was notorious that some one was pulling the wires, the slightest touch upon which sent a quiver through every nerve of the great financial organism, and wrung private gain from public agony. The strange proceeding reminds one of those scenes in the cham- bers of the Inquisition where the judges calmly put their victim to the question, until his spasms warned them not to exceed the limits of human endurance. At last the public distress reached the ears of the government at Washington. While it was simply the gamblers of Wall Street who were tearing each other, their clamor for relief excited little sym- pathy. When, however, the suffering had extended through all the legitimate business circles of the country, when the scarcity of money threatened to cut off the winter food of the poor, to rob the farmer of the fruits of his toil, and to bring ruin upon half the debtor class of the community, then even Mr. McCulloch, pledged as he was to contraction, was moved to interfere. The very revenues of the government were affected by the operations of gamblers. They were therefore informed that, if necessary, fifty millions of addi- tional currency would be forthcoming to the relief of the community, and then, and not till then, the screws were loosened. 08 A CHAPTER OF ERIE. The harvest of the speculators, however, was still but half gathered. Hitherto the combination had operated for a fall. Now was the moment to change the tactics and take advan- tage of the rise. The time was calculated to a nicety. The London infatuation had wonderfully continued, and as fast as certificates of stock were issued they seemed to take wings across the Atlantic. Yet there was a limit even to English credulity, and in November it became evident that the agents of foreign houses were selling their stock to arrive. The price was about 40 ; the certificates might be expected by the steamer of the 23d. Instantly the combination changed front. As before they had depressed the market, they now ran it up, and, almost as if by magic, the stock, which had been heavy at 40, astonished every one by shooting up to 50. New developments were evidently at hand. At this point Mr. Daniel Drew once more made his appear- ance on the stage. As was very natural, he had soon wearied of the sameness of his part as a mere looker-on in Wall Street, and had relapsed into his old habits. He was no longer treasurer of the Erie, and could not therefore invite the pub- lic to the game, while he himself with sombre piety shook tin loaded dice. But it had become with him a second nature to operate in Erie, and once more he was deep in its movements. At first he had combined with his old friends, the present directors, in their " locking-up " conspiracy. He had agreed to assist them to the extent of four millions. Tho vacillating, timid nature of the man, however, coulJ not keep pace with his more daring and determined associates, and, after embark- ing a million, becoming alarmed at the success of the joint oj)erations and the remonstrances of those who were threat- ened with ruin, he withdrew his funds from the operators' control and himself from their councils. But though he did nut care to run the risk or to incur the odium, he had no sort of objection to sharing the 'spoils. Knowing, therefore, or supposing that he knew, the plan of campaign, and that plan jumping with his own be.-irish inclinations, he contiuucd, on his own juvount, operations looking to a fall. One may easily A CHAPTER OF ERIE. CD conceive the wrath of the Erie operators at such a treacherous policy ; and it is not difficult to imagine their vows of ven- geance. Meanwhile all went well with Daniel Drew. Erie looked worse and worse, and the golden harvest seemed draw- ing near. By the middle of November he had contracted for the delivery of some seventy thousand shares at current prices, averaging, perhaps, 38, and probably was counting his gains. He did not appreciate the full power and resources of his old associates. On the 14th of November their tactics changed, and he found himself involved in terrible entanglements, hopelessly cornered. His position disclosed itself on Satur- day. Naturally the first impulse was to have recourse to the courts. An injunction a dozen injunctions could be had for the asking, but, unfortunately, could be had by both parties. Drew's own recent experience, and his intimate acquaintance with the characters of Fisk and Gould, were not calculated to inspire him with much confidence in the efficacy of the law. But nothing else remained, and, after hurried consultations among the victims, the lawyers were applied to, the affidavits were prepared, and it was decided to repair on the following Monday to the so-called courts of justice. Nature, however, had not bestowed on Daniel Drew the steady nerve and sturdy gambler's pride of either Vanderbilt or of his old companions at Jersey City. His mind wavered and hesitated between different courses of action. His only care was for himself, his only thought was of his own position. He was willing to betray one party or the other, as the case might be. He had given his affidavit to those who were to bring the suit on the Monday, but he stood perfectly ready to employ Sunday in betraying their counsels to the defendants in the suit. A position more contemptible, a state of mind more pitiable, can hardly be conceived. After passing the night in this abject condition, on the morning of Sunday he sought out Mr. Fisk for purposes of self-humiliation and treachery.* He * It ought perhaps to be stated that this portion of the narrative has ro stronger foundation than an affidavit of Mr. Fisk, which has cot, however, been publicly contradicted. 70 A CHAPTER OF ERIE. then partially revealed the difficulties of his situation, only to have his confidant prove to him how entirely he was caught, by completing to him the revelation. He betrayed the secrets of his new allies, and bemoaned his own hard fate ; he was thereupon comforted by Mr. Fisk with the cheery remark that "he (Drew) was the last mau who ought to whine over any position in which he placed himself in regard to Erie." The poor mau begged to see Mr. Gould, and would take no denial. Finally Mr. Gould was brought in, and the scene was repeated for his edification. The two must have been satiated with revenge. At last they sent him away, promising to see him again that evening. At the hour named he again ap- peared, and, after waiting their convenience, for they spared him no humiliation, he again appealed to them, offering them great sums if they would issue new stock or lend him of their stock. He implored, he argued, he threat- ened. At the end of two hours of humiliation, persuaded that it was all in vain, that he was wholly in the power of an- tagonists without mercy, he took his hat, said, " I will bid you good night," and went his way. There is a touch of nature about this scene which reads like fiction. Indeed, it irresistibly recalls the feebler effort of Dickens to portray Fagin's last night alive, and there is more pathos in the parting address than in the Jew's, " An old 111:111, my lord ! a very, very old man." But the truth is stranger than fiction. Dickens did not dare picture the old "fence" in Oliver Twist turned out of his own house and stripped of his plunder by the very hands through which he had procured it. In the case of Daniel Drew, however, the ideal poetic justice was brought about in fact ; the evil instruc- tions returned to plague the inventor, and it is hard to believe that, as he left the Erie offices that night, his apt pupils, even as those of Fagin might have done, did not watch his retiring steps with suppressed inerriine f ; and, when the door had rinsed upon him, that the nne did not explode in loud bursts of laughter, while the other, with a quiet chuckle, plunged his hands into those capacious pockets which yawned for all A CHAPTER OF ERIE. 71 the Avealth of Erie. Bad as all these things are, terrible as is the condition of affairs only partially revealed, there is a grim humor running through them which ever makes itself felt. But to return to the course of events. With the lords of Erie forewarned was forearmed. They knew something of the method of procedure in New York courts of law. At this- particular juncture Mr. Justice Sutherland, a magistrate of such pure character and unsullied reputation that it is inexplicable how he ever came to be* elevated to the bench on which he sits, was holding chambers, according to assignment, for the four weeks between the first Monday in November and the first Monday in December. By a rule of the court, all applications for orders during that time were to be made before him, and he only, according to the courtesy of the Bench, took cognizance of such proceedings. Some general arrangement of this nature is manifestly necessary to avoid continual conflicts of jurisdiction. The details of the assault on the Erie directors having been settled, counsel appeared before Judge Sutherland on Monday morning, and petitioned for an injunction restraining the Erie directors from any new issue of stock or the removal of the funds of the company beyond the jurisdiction of the court, and also asking that the road be placed jn the hands of a receiver. The suit was brought in the name of Mr. August Belmont, who was sup- posed to represent large foreign holders. The petition set forth at length the alleged facts in the case, and was sup- ported by the affidavits of Mr. Drew and others. Mr. Drew apparently did not inform the counsel of the manner in which he had passed his leisure hours on the previous day ; had ho done so, Mr. Belmont's counsel probably would have expedited their movements. The injunction was, however, duly signed, and, doubtless, immediately served. Meanwhile Messrs. Gould and Fisk had not been idle. Ap- plications for injunctions and receiverships were a game which two could play at, and long experience had taught these close observers the very great value of the initiative in law. Accord- ingly, some two hours before the Belmont application was 72 A CHAPTER OF ERIE. made, they had sought no less a person than Mr. Justice Bar- nard, caught him, as it were, either in his bed or at his break- fast, whereupon he had held a lit de justice, and made divers astonishing orders. A petition was presented in the name of one Mclntosh, a salaried officer of the Erie Road, who claimed also to be a shareholder. It set forth the danger of injunctions and of the appointment of a receiver, the great injury likely to result therefrom, etc. After due consideration on the part of Judge Barnard, an injunction was issued, stay- ing and restraining all suits, and actually appointing Jay Goiild receiver, to hold and disburse the funds of the company in accordance with the resolutions of the Board of Directors and the Executive Committee. This certainly was a very brilliant flank movement, and testified not less emphatically to Gould's genius than to Barnard's law ; but most of all did it testify to the efficacy of the new combination between Tammany Hall and the Erie Railway. Since the passage of the bill "to legalize counterfeit money," in April, and the present November, new light had burst upon the judicial mind, and as the news of one injunction and a vague rumor of the other crept through Wall Street that day, it was no wonder that operators stood aghast and that Erie fluctuated wildly from 50 to 61 and back to 48. The Erie directors, however, did not rest satisfied with the position which they had won through Judge Barnard's order. That simply placed them, as it were, in a strong defensive attitude. They were not the men to stop there : they aspired to nothing less than a vigorous offensive. With a superb au- dacity, which excites admiration, the new trustee immediately filed a supplementary petition. Therein it was duly set forth that doubts had been raised as to the legality of the recent, issue of some two hundred thousand shares of stock, and that only about this amount was to be had in America ; the trustee there- fore petitioned for authority to use the funds of the corporat ion to purchase and cancel the whole of this amount at any price less than the par value, without regard to the rate at which it had been issued. The desired authority was conferred by Mr. A CHAPTER OF ERIE. 73 Justice Barnard as soon as asked. Human assurance could go no further. The petitioners had issued these shares in the bear interest at 40, and had run down the value of Erie to 35 ; they had then turned round, and were now empowered to buy back that very stock in the bull interest, and in the name and with the funds of the corporation, at par. A law of the State distinctly forbade corporations from operating in their own stock ; but this law was disregarded as if it had been only an injunction. An injunction forbade the treasurer from making any disposition of the funds of the company, and this injunction was respected no more than the law. These trustees had sold the property of their wards at 40 ; they were now prepared to use the money of their wards to buy the same property back at 80, and a jiidge had been found ready to confer on them the power to do so. Drew could not withstand such tactics, and indeed the annals of Wall Street furnished no precedent or parallel. They might have fur- nished one, but the opportunity had been lost. Had Robert Schuyler not lived fifteen years too soon, had he, instead of flying his country and dying broken-hearted in exile, boldly attempted a change of front when his fraudulent issues had filled Wall Street with panic, and had he sought to use the funds of his company for a masterly upward movement in his own manufactured stock, then, though in those uncultivated and illiberal days his scheme might have come to naught, and lie himself might even have passed from the presence of an indignant jury into the keeping of a surly jailer, at least he would have evinced a mind in advance of his day, and could have comforted himself with the assurance that he was the first of a line of great men, and that the time was not far distant when his name and his fame would be cherished among the most brilliant recollections of Wall Street. But Schuyler lived before his time ! When this last, undreamed-of act was made public on Wednesday at noon, it was apparent that the crisis was not far off. Daniel Drew was cornered. Erie was scarce and selling at 47, and would not become plenty until the arrival of the Eng- 74 A CHAPTER OF ERIE. lish steamer on Monday; and so, at 47, Mr. Drew flung him- self into the breach to save his endangered credit, and, under his purchases, the- stock rapidly rose, until at five o'clock Wednesday afternoon it reached 57. Contrary to expectation, the " corner " had not yet culminated. It became evident the next morning that before two o'clock that day the issue would be decided. Drew fought desperately. The Brokers' Board was wild with excitement. High words passed ; collisions took place ; the bears were savage, and the bulls pitiless. Erie touched 62, and there was a difference of sixteen per cent between cash stock and stock sold to be delivered in three days, when the steamer would be in, and a dif- ference of ten per cent between stock to be delivered on the spot and that to be delivered at the usual time, which was a quarter after two o'clock. Millions were handled like thousands ; fabulous rates of interest were paid ; rumors of legal proceedings were flying about, and forays of the Erie chiefs on the Vanderbilt roads were confidently pi'edicted. New York Central suddenly shot up seven per cent under these influences, and Vanderbilt seemed about to enter the field. The interest of the stock market centred in the com- batants and on these two great corporations. All other stocks were quiet and neglected while the giants were fighting it ont. The battle was too fierce to last long. At a quarter before three o'clock the struggle would be over. Yet now, at the very last moment, the prize which trembled before them eluded the grasp of the Eric ring. Their opponent was not saved, but they shared his disaster. Their combination had turned on the fact, disclosed to them by the Erie books, that some three hundred thousand shares of its stock had been issued in the ten-share certificates which alone are transmitted to London. This amount they supposed to be out of the country ; the. balance they could account for as beyond the iv.u-h of I)re\v. Suddenly, as two o'clock approached, and Krie \vas trembling in the sixties, all Broadway every tailor and boot-maker and elixir-vender of Now York seemed pour- ing into Mro.-id Street, and each new-comer held eagerly before A CHAPTER OF ERIE. /O him one or more of those ten-share certificates which should have been in London. Not only this, but the pockets of the agents of foreign bankers seemed bursting with them. Bed- lam had suddenly broken loose in Wall Street. It was abso- lutely necessary for the conspirators to absorb this stock, to keep it from the hands of Drew. This they attempted to do, and manfully stood their ground, fighting against time. Sud- denly, when the hour had almost come, when five minutes more would have landed them in safety, through one of those strange incidents which occur in Wall StreeN and which cannot be explained, they seemed smitten with panic. It is said their bank refused to certify their checks for the suddenly increased amount ; the sellers insisted on having certified checks, and, in the delay caused by this unforeseen difficulty, the precious five minutes elapsed, and the crisis had passed. The fruits of their plot had escaped them. Drew made good his contracts at 57, the stock at once fell heavily to 42, and a dull quiet succeeded to the excitement of the morning. The hand of the government had made itself felt in Wall Street. The Broad Street conflict was over, and some one had reaped a harvest. Who was it 1 It was not Drew, for his losses, apart from a ruined prestige, were estimated at nearly a million and a half of dollars. The Erie directors were not the fortunate men, for their only trophies were great piles of certifi- cates of Erie stock, which had cost them "corner" prices, and for which no demand existed. If Drew's loss was a million and a half, their loss was likely to be nearer three millions. Who, then, were the recipients of these missing millions 1 There is an ancient saying, which seems to have been tolerably verified in this case, that when certain persons fall out certain other persons come by their dues. The " corner " was very beauti- ful in all its details, and most admirably planned ; but, unfor- tunately, those who engineered it had just previously made the volume of stock too large for accurate calculation. For once the outside public had been at hand and Wall Street had been found wanting. A large portion of the vast sum taken from the combatants found its way into the pockets of tho 76 A CHAPTER OF ERIE. agents of English bankers, and a part of it was accounted for by them to their principals ; another portion went to relieve anxious holders among the American outside public ; the re- mainder fell to professional operators, probably far more lucky than sagacious. Still, there had been a fall befoi'e there was a rise. The subsequent disaster, perhaps, no more than coun- terbalanced the earlier victory ; at any rate, Messrs. Gould and Fisk did not succumb, but preserved a steady front, and Erie was more upon the street than ever. In fact, it was wholly there now. The recent operations had proved too outrageous even for the Brokers' Board. A new rule was passed, that no stock should be called, the issues of which were not registered at some respectable banking-house. The Erie directors declined to conform to this rule, and their road was stricken from the list of calls. Nothing daunted at this, these Protean creatures at once organized a new board of their own, and so far succeeded in their efforts as to have Erie quoted and bought and sold as regularly as ever. Though the catastrophe had taken place on the 19th, the struggle was not yet over. The interests involved were so enormous, the developments so astounding, such passions had been aroused, that some safety-valve through which suppressed wrath could work itself oft' was absolutely necessary, and this the courts of law afforded. The attack was stimulated by various motives. The bona Jide holders of the stock, espe- cially the foreign holders, were alarmed for the existence of their property. The Erie ring had now boldly taken the position that their duty was, not to manage the road in the interests of its owners, not to make it a dividend-paying corporation, but to preserve it from consolidation with the Vanderbilt monopoly. This policy was openly proclaimed by Mr. (Jould, at a later day, before an investigating committee 1 at Albany. With unspeakable effrontery, an effrontery o great as ae tnally to impose on his audience and a portion of the press, and make them believe that the public ought, to wish him Hiiccess, he described how stock issues at the proper time, to any required amount, could alone keep him in control of A CHAPTER OF ERIE. 77 the road, and keep Mr. Vanderbilt out of it ; it would be his duty, therefore, he argued, to issue as much new stock, at about the time of the annual election, as would suffice to keep a majority of all the stock in existence under his control ; and he declared that he meant to do this.* The strangest thing of all was, that it never seemed to occur to his audience that the propourider of this comical sophistry was a trustee and guardian for the stockholders, and not a public benefactor ; and that the owners of the Erie Road might possibly prefer not to be deprived of their property, in order to secure the blessing of competition. So unique a method of securing a re-election was probably never before suggested with a grave face, and yet, if we may believe the reporters, Mr. Gould, in developing it, pixxluced a very favorable impression on the committee. It was hardly to be expected that such advanced views as to the duties and powers of railway directors would favorably impress commonplace individuals who might not care to have their property scaled down to meet Mr. Gould's views of public welfare. These persons accordingly, popu- larly supposed to be represented by Mr. Belinont, wished to get their property out of the hands of such fanatics in the * Question to Mr. Gould For the information of the committee, would you give us your opinion as to the utility of that section of the general railroad law, under which so many issues of convertible bonds have been made? Ansicer. I could only speak as to the Eric Road; that law saved the Erie Road from bankruptcy; and as long as that law is unrepealed, I should do what I did again. I should save the road. I think it is a good law. Q. Is it not liable to abuse? A. I have never known it to be abused; if that was repealed. I think tli.it Mr. Vanderbilt would have the road ; but as long as it is not repealed it is held in terrorem over him. Q. Suppose the section was amended so as to require the consent of the stockholders? A. Suppose he owned all the stock, what would be the difference? .... Q. What other effect would it (the repeal of Section 10) have? A. I think it would lay the State open to a great monopoly, the greatest the world has ever seen. Much more followed in the same style. One remark of Mr. Gould's, how- ever, in this examination, bore the stamp of truth and perspicuity. It is re- corded as follows: " The Erie road won't be a dividend-paying road for a long time on its common stock." 78 A CHAPTER OF ERIE. cause of cheap transportation and plentiful stock, with the least possible delay. Combined with these were the operators who had suffered in the late " corner," and who desired to fight for better terms and a more equal division of plunder. Be- hind them alJ, Vanderbilt was supposed to be keeping an eager eye on the long-coveted Erie. Thus the materials for litiga- tion existed in abundance. On Monday, the 23d, Judge Sutherland vacated Judge Barnard's* order appointing Jay Gould receive!', and, after seven hours' argument and some exhibitions of vulgarity and indecency on the part of counsel, which vied with those of the previous April, he appointed Mr. Da vies, an ex-chief jus- tice of the Court of Appeals, receiver of the road an.l its franchise, leaving the special terms of the order to be settled at a future day. The seven hours' struggle had not been without an object ; that day Judge Barnard had been pecu- liarly active. The morning hours he had beguiled by the delivery to the grand jury of one of the most astounding charges ever recorded ; and now, as the shades of evening were falling, he closed the labors of the day by issuing a stay of the proceedings then pending before his associate.* Tucs- * The charge referred to is altogether too curious to be forgotten ; it was couched in the following terms: " OENTLKMEN OF THE GRAND JURY, I deem it not inappropriate at the present time to call your attention to three or four subjects that, in my judg- ment, the grand jury should look into: First, in regard to alleged frauds at elections; second, in regard to the alleged corruptions of the judiciary here; third, as to the action of certain newspapers in New York in perpetrating daily and hourly libels. I had intended, gentlemen, at the commencement of this term, to have gone over many of these subjects more fully than I can now ; but I am led to-day not to delay it any longer hi consequence of the annoyance I am subjected to by newspapers and letter-writers, not borne out, of all sorts of vilifications and abuses for offences of which I certainly know nothing, and see if the writers of some of these articles cannot be made to come before you and substantiate some among the many of the different alle- gations that they huve made against the judge that now addresses you. In to-day'^ Tribune and to-day's Times, along with articles in the Jersey papers and cKowhen', are charges of the most atrocious character made against cor- ruptions, in interfering with the duties of electors, and charging the judge with being in a combination in Wall Street. Now, it is unnecessary for me to any to yon that he never bought or sold or owned a share of stock in his life, and :i for the hrge fortune of $ 5.000.0AO which one of the papers charges A CHAPTER OF ERIE. 79 flay had been named by Judge Sutherland, at the time he appointed his receiver, as the day upon which he would settle the details of the order. His first proceeding upon that day, on finding his action stayed by Judge Barnard, was to grant a motion to show cause, on the next day, why Barnard's order should not be vacated. This style of warfare, however, sa- vored altogether too much of the tame defensive to meet suc- cessfully the bold strategy of Messrs. Gould and Fisk. They carried the war into Africa. In the twenty-four hours during which Judge Sutherland's order to show cause was pending- three new actions were commenced by them. In the first him with being possessed of, he has not now, nor did he ever have, belonging to him, separate from his wife, a single dollar's worth of property, and is to- day dependent upon his salary as a judge and the charity of his wife; and why these particular and atrocious charges at this particular time should be made with such boldness and audacity is a matter I hope you as grand jurors, whose duty it is, will look into, so that if you find them to be substantial, or even a suspicion that they are true, that you will give the judge a chance to resign. For infamy means one thing, and it ought to be ferreted out; and if a man or a newspaper editor will sit down deliberately and make a charge without any proof, let us see whether the rigor and terror of the law will not stop this thing in future. For eleven years this judge has submitted to it without any notice, and now, having arrived at a period of life when his use- fulness is impaired by such charges, he deems it his duty, and yours, gentle- men, to look into the matter whenever you have leisure, and say whether a combination of thieves, scoundrels, and rascals, who have infested Wall Street and Broad Street for years, and are now quarrelling among themselves, shall be permitted to turn around and endeavor to hide their own tracks by abuse and vilification of the judge." It may be interesting to record how this falmination affected the papers referred to. The Times the next morning commented on it as follows: " What we have said and done in the matter we have said and done deliberately; .... we believe we have said nothing that is not true, and nothing that cannot be proved to be true. At all events, we shall very willingly accept the responsi- bility of establishing its truth and of vindicating ourselves from the judge's imputations for having said it. A few days later it was reported that a true bill had been found against the Times, and that paper on the 26th congratu- lated the public on the fact. Finally, when Judge Barnard determined to drop the matter, the Times, in its issue of December 1, discoursed as follows on the subject: "We beg the judge to understand that we are quite ready to meet the issue that he tendered us, and to respond to such an indictment as he first urged the grand jury to find against us, or to a suit for damages, which would, perhaps, better suit the deplorable condition of pecuniary dependence to which he says he is reduced." Nothing further came of the matter. 80 A CHAPTER OF ERIE. place, they sued the suers. Alleging the immense injury likely to result to the Erie Road from actions commenced, as they alleged, solely with a view of extorting money in settle- ment, Mr. Belmont was sued for a million of dollars in dam- ages. Their second suit was against Messrs. Work, Schell, and others, concerned in the litigations of the previous spring, to recover the $429,250 then paid them, as was alleged, in a fraudulent settlement. These actions were, however, com- monplace, and might have been brought by ordinary men. Messrs. Gould and Fisk were always displaying the invention of genius. The same day they carried their quarrels into the United States courts. The whole press, both of New York and of the country, disgusted with the parody of justice enacted in the State courts, had cried aloud to have the whole matter transferred to the United States tribunals, the decis- ions of which might have some weight, and where, at least, no partisans upon the bench would shower each other with stays, injunctions, vacatings of orders, and other such pellets of the law. The Erie ring, as usual, took time by the fore- lock. While their slower antagonists were deliberating, they acted. On this Monday, the 23d, one Henry B. Whelpley, who had been a clerk of Gould's, and who claimed to be a stockholder in the Erie and a citizen of New Jersey, instituted a suit against the Erie Railway before Judge Blatchford, of the United States District Court. Alleging the doubts which hung over the validity of the recently issued stock, he peti- tioned that a receiver might be appointed, and the company directed to transfer into his hands enough property to secure from loss the plaintiff as well as all other holders of the new issues. The Krie counsel were on the ground, and, as soon as the petition was read, waived nil further notice as to the nut ters contained in it ; whereupon the court at once appointed Jay GouM ivreivcr, and directed the Krie Com puny to phice ci-ht millions of dollars in his hands to protect the rights represented by the plaintiff. Of course the receiver \VMS required to give bonds witli siiHicienl sureties. Among the sureties w.-is James Fisk, Jr. The brilliancy of this move A CHAPTER OF ERIE. 81 was only surpassed by its success. It fell like a bombshell in the enemy's camp, and scattered dismay among those who still preserved a lingering faith in the virtue of law as admin- istered by any known courts. The interference of the court was in this case asked for on the ground of fraud. If any fraud had been committed, the officers of the company alone could be the delinquents. To guard against the consequences of that fraud, a receivership was prayed for, and the court appointed as receiver the very officer in whom the alleged frauds, on which its action was based, must have originated. It is true, as was afterwards observed by Judge Nelson in set- ting it aside, that a prima facie case, for the appointment of a receiver " was supposed to have been made out," that no ob- jection to the person suggested was made, and that the right was expressly reserved to other parties to come into court, with any allegations they saw fit against Receiver Gould. The collusion in the case was, nevertheless, so evident, the facts were so notorious and so apparent from the very papers before the court, and the character of Judge Blatchford is so far above suspicion, that it is hard to believe that this order was not procured from him by surprise, or through the agency of some counsel in whom he reposed a misplaced confidence. The Erie ring, at least, had no occasion to be dissatisfied with this day's proceedings. The next day Judge Sutherland made short work of his brother Barnard's stay of proceedings in regard to the Davies receivership. He vacated it at once, and incontinently pro- ceeded, wholly ignoring the action of Judge Blatchford on the day before, to settle the terms of the order, which, covering as it did the whole of the Erie property and franchise, ex- cepting only the operating of the road, bade fair to lead to a conflict of jurisdiction between the State and Federal courts. And now a new judicial combatant appears in the arena. It is difficult to say why Judge Barnard, at this time, disap- pears from the narrative. Perhaps the notorious judicial violence of the man, which must have made his eagerness as dangerous to the cause he espoused as the eagerness of a too 4* F 82 A CHAPTER OF ERIE. swift witness, had alarmed the Erie counsel. Perhaps the fact that Judge Sutherland's term in chambers would expire in a few days had made them wish to intrust their cause to the magistrate who was to succeed him. At any rate, the new order staying proceedings under Judge Sutherland's order was obtained from Judge Cardozo, it is said, somewhat before the terms of the receivership had been finally settled. The change spoke well for the discrimination of those who made it, for Judge Cardozo is a very different man from Judge Barnard. Courteous but inflexible, subtle, clear-headed, and unscrupulous, this magistrate conceals the iron hand beneath the silken glove. Equally versed in the laws of New York and in the mysteries of Tammany, he had earned his place by a partisan decision on the excise law, and was nominated for the bench by Mr. Fernando Wood, in a few remarks concluding as follows : " Judges were often called on to decide on political questions, and he was sorry to say the majority of them de- cided according to their political bias. It was therefore absolutely necessary to look to their candidate's political prin- ciples. He would nominate, as a fit man for the office of Judge of the Supreme Court, Albert Cardozo." Nominated as a partisan, a partisan Cardozo has always been, when the occa- sion demanded. Such was the new and far more formidable champion who now confronted Sutherland, in place of the vulgar Barnard. His first order in the matter to show cause why the order of his brother judge should not be set aside was not returnable until the 30th, and in the inter- vening five days many events were to happen. Immediately after the settlement by Judge Sutherland of the order appointing Judge Davie.s receiver, that gentleman had proceeded to take possession of his trust. Upon arriving at the Erie building, he found it converted into a fortress, with a sentry patrolling behind the bolts and bars, to whom was confided the duty of scrutini/ing all coiners, and of admitting none but the faithful allies of the garrison. It so happened that Mr. Davics, himself unknown to the custodian, was ac- companied by Mr. Eaton, the former attorney of the Erie A CHAPTER OF ERIE. 83 corporation. This gentleman was recognized by the sentry, and forthwith the gates flew open for himself and his com- panion. In a few moments more the new receiver astonished Messrs. Gould and Fisk, and certain legal gentlemen with whom they happened to be in conference, by suddenly appear- ing in the midst of them. The apparition was not agreeable. Mr. Fisk, however, with a fair appearance of cordiality, wel- comed the strangers, and shortly after left the room. Speedily returning, his manner underwent a change, and he requested the new-comers to go the way they came. As they did not comply at once, he opened the door, and directed their atten- tion to some dozen men of forbidding aspect who stood out- side, and who, he intimated, were pi'epared to eject them forcibly if they sought to prolong their unwelcome stay. As an indication of the lengths to which Mr. Fisk was prepared to go, this was sufficiently significant. The movement, how- ever, was a little too rapid for his companions ; the lawyers protested, Mr. Gould apologized, Mr. Fisk cooled down, and his familiars retired. The receiver then proceeded to give written notice of his appointment, and the fact that he had taken possession ; disregarding, in so doing, an order of Judge Cardozo, staying proceedings under Judge Sutherland's order, which one of the opposing counsel drew from his pocket, but which Mr. Davies not inaptly characterized as a "very singu- lar order," seeing that it was signed before the terms of the order it sought to affect were finally settled. At length, how- ever, at the earnest request of some of the subordinate offi- cials, and satisfied with the formal possession he had taken, the new receiver delayed further action until Friday. He little knew the resources of his opponents, if he vainly sup- posed that a formal possession signified anything. The suc- ceeding Friday found the directors again fortified within, and himself a much enjoined wanderer without. The vigilant guards were now no longer to be beguiled. Within the build- ing, constant discussions and consultations were taking place ; without, relays of detectives incessantly watched the premises. No rumor was too wild for public credence. It was confi- 84 A CHAPTER OF ERIE. dently stated that the directors were about to fly the State and the country, that the treasury had already heen con- veyed to Canada. At last, late on Sunday night, Mr. Fisk with certain of his associates left the building, and made for the Jersey Ferry ; but on the way he was stopped by a vigilant lawyer, and many papers were served upon him. His plans were then changed. He returned to the office of the company, and presently the detectives saw a carriage leave the Erie portals, and heard a loud voice order it to be driven to the Fifth Avenue Hotel. Instead of going there, however, it drove to the ferry, and presently an engine, with an empty directors' car attached, dashed out of the Erie station in Jei'- sey City, and disappeared in the darkness. The detectives met and consulted ; the carriage and the empty car were put together, and the inference, announced in every New York paper the succeeding day, was that Messrs. Fisk and Gould had absconded with millions of money to Canada. That such a ridiculous story should have been published, much less believed, simply shows how utterly demoralized the public mind had become, and how prepared for any act of high- handed fraud or outrage. The libel did not long remain uncon- tradicted. The next day a card from Mr. Fisk was telegraphed to the newspapers, denying the calumny in indignant terms. The eternal steel rails were again made to do duty, and the midnight flitting became a harmless visit to Binghamton on business connected with a rolling-mill. Judge Balcom, how- ever, of injunction memory in the earlier records of the Erie suits, resides at Binghamton, and a leading New York paper not inaptly made the timid inquiry of Mr. Fisk, " If he really thought that Judge Balcom was running a rolling-mill of the Erie Company, what did he think of Judge Barnard?" Mr. Fisk, however, as became him in his character of the Mavcnas of the bar, instituted suits claiming damages in fabulous sums, for defamation of character, against some half-dozen of the leading papers, and nothing further was heard of the matter, nor, indeed, of the suits either. Not so of the trip to Itinij, hamtoii. On Tuesday, the 1st of December, while one set A CHAPTER OF ERIE. 85 of lawyers were arguing mi appeal in the Whelpley case before Judge Nelson in the Federal courts, and another set were pro- curing orders from Judge Cardozo staying proceedings author- ized by Judge Sutherland, a third set were aiding Judge Balcom in certain new proceedings instituted in the name of the Attorney-General against the Erie Road. The result arrived at was, of course, that Judge Balcom declared his to be the only shop where a regular, reliable article in the way of law was retailed, and then proceeded forthwith to restrain aud shut up the opposition establishments. The action was brought to terminate the existence of the defendant as a corporation, and, by way of preliminary, application was made for an injunction and the appointment of a receiver. His Honor held that, as only three receivers had as yet been ap- pointed, he was certainly entitled to appoint another. It was perfectly clear to him that it was his duty to enjoin the de- fendant corporation from delivering the possession of its road, or of any of its assets, to either of the receivers already ap- pointed ; it was equally clear that the corporation would be obliged to deliver them to any receiver he might appoint. He was not prepared to name a receiver just then, however, though he intimated that he should not hesitate to do so if necessary. So he contented himself with the appointment of a referee to look into matters, and, generally, enjoined the directors from omitting to operate the road themselves, or from delivering the possession of it to " any person claiming to be a receiver." This raiding upon the agricultural judges was not peculiar to the Erie party. On the contrary, in this proceeding it rather followed than set an example ; for a day or two pre- vious to Mr. Fisk's hurried journey, Judge Peckham of Albany had, upon papers identical with those in the Belmont suit, issued divers orders, similar to those of Judge Balcom, but on the other side, tying up the Erie directors in a most astonish- ing manner, and clearly hinting at the expediency of an addi- tional receiver to be appointed at Albany. The amazing part of these Peckham and Balcom proceedings is, that they seem 86 A CHAPTER OF ERIE. to have been initiated with perfect gravity, and neither to have been looked upon as jests, nor intended by their originators to bring the courts and the laws of New York into ridicule and contempt. Of course the several orders in these cases were of no more importance than so much waste paper, unless, indeed, some very cautious counsel may have considered au extra injunction or two very convenient things to have in his house ; and yet, curiously enough, from a legal point of view, those in Judge Balcom's court seeni to have been almost the only properly and regularly initiated proceedings in the whole ease. These little rural episodes in no way interfered with a re- newal of vigorous hostilities in New York. While Judge Balcom was appointing his referee, Judge Cardozo granted an order for a reargument in the Belrnont suit, which brought up again the appointment of Judge Davies as receiver, and assigned the hearing for the 1 Gth of December. This step on his part bore a curious resemblance to certain of his perform- ances in the notorious case of the Wood leases, and made the plan of operations perfectly clear. The period during which Judge Sutherland was to sit in chambers was to expire on the 4th of December, and Cardozo himself was to succeed him ; he now, therefore, proposed to signalize his associate's depart- ure from chambers by reviewing his orders. No sooner had he granted the motion, than the opposing counsel applied to Judge Sutherland, who forthwith issued an order to sHow cause why the reargument ordered by Judge Cardozo should not take place at once. Upon which the counsel of the Erie Road instantly ran over to Judge Cardozo, who vacated Judge Sutherland's order out of hand. The lawyers then left him and ran back to Judge Sutherland with a motion to vacate tliis last order. The contest was now becoming altogether too ludicrous. Somebody must yield, and when it was reduced to that, the honest Sutherland was pretty sure to give way to the subtle Cardozo. Accordingly the hearing on this last motion was postponed until the next morning, when Judge Suther- land made a not undignified statement as to his position, and A CHAPTER OF ERIE. 87 closed by remitting the whole subject to the succeeding Mon- day, at which time Judge Cardozo was to succeed him in chambers. Cardozo, therefore, was now iu undisputed pos- session of the field. In his closing explanation Judge Suth- erland did not qiiote, as he might have done, the following excellent passage from the opinion of the court, of which both lie and Cardozo were justices, delivered in the Schell case as recently as the last day of the previous June : " The idea that- a cause, by such manoeuvres as have been resorted to here, can be withdrawn from one judge of this court and taken pos- session of by another ; that thus one judge of the same and no other powers can practically prevent his associate from exercising his judicial functions ; that thus a case may be taken from judge to judge whenever one of the parties fears that an unfavorable decision is about to be rendered by the judge who, up to that time, had sat in the caiise, and that thus a decision of a suit may be constantly indefinitely post- poned at the will of one of the litigants, only deserves to be noticed as being a curiosity in legal tactics, a remarkable exhibition of inventive genius and fertility of expedient to embarrass a suit which this extraordinarily conducted litiga- tion has developed Such a practice as that disclosed by this litigation, sanctioning the attempt to counteract the orders of each other in the progress of the suit, I confess is new and shocking to me, .... and I trust that we have seen the last in this high tribunal of such practices as this case has exhibited. No apprehension, real or fancied, that any judge is about, either wilfully or innocently, to do a wrong, can pal- liate, much less justify it." * Neither did Judge Sutherland state, as he might have stated, that this admirable expression of the sentiments of the full bench w r as written and delivered by Judge Albert Cardozo. Probably also Judge Cardozo and all his brother judges, rural and urban, as they used these bow-strings of the law, right and left, as their reckless orders and injunctions struck deep into business circles far beyond the limits of their State, as they degraded them- * Schell v. Erie Railway Co., 51 Harbour's S. C. 373, 374. 88 A CHAPTER OF ERIE. selves in degrading their order, and made the ermine of supreme justice scarcely more imposing than the motley of the clown, these magistrates may have thought that they had developed at least a novel, if not a respectable, mode of con- ducting litigation. They had not done even this. They had simply, so far as in them lay, turned back the wheels of progress and reduced the America of the nineteenth century to the level of the France of the sixteenth. " The advocates and judges of our times find bias enough in all causes to ac- commodate them to what they themselves think fit What one court has determined one way another determines quite contrary, and itself contrary to that at another time ; of which we see very frequent examples, owing to that practice admitted among us, and which is a marvellous blemish to the ceremonious authority and lustre of our justice, of not abiding by one sentence, but running from judge to judge, and court to court, to decide one and the same* cause." * It was now very clear that Receiver Davies might abandon all hope of operating the Erie Railway, and that Messrs. Gould and Fisk were borne upon the swelling tide of victory. The prosperous aspect of their affairs encouraged these last- named gentlemen to yet more vigorous offensive operations. The next attack was npou Vanderbilt in person. On Saturday, the 5th of December, only two days after Judge Sutherland and Receiver Davies were disposed of, the indefatigable Fisk waited on Commodore Vanderbilt, and, in the name of the Erie Company, tendered him fifty thousand shares of Erie common stock at 70.f As the stock was then selling in Wall * Montaigne's Works, Vol. II. p. 310. t Throughout these proceedings glimpses nrc from time to time obtained of the more prominent ehVMton in their undress, as it were, which huve in them n. good many elements lioth of nature and humor. The following description of the visit in which this tender was inside was subsequently given by Fisk on tho witness-stand: ''I went n his ( Vanderbilt's) house; it was n bnd, stormy day, and I had the Quires in a carpet-bag; I told the Commodore I Jiftd come to tender 60,000 shares of Krie and wanted back the money which we had paid for them and the bonds, and I made a separate demand for the $ 1,000,000 which had been p-iid to cover \\l< lo>*es : be said he had nothing to do with the Krie now, and must consult his counsel; .... Mr. Shearman A CHAPTER OF ERIE. 89 Street at 40, the Commodore naturally declined to avail him- self of this liberal offer. He even went further, and, disre- garding his usual wise policy of silence, wrote to the New York Times a short communication, in which he referred to the alleged terms of settlement of the previous July, so far as they concerned himself, and denied them in the following explicit language : " I have had no dealings with the Erie Railway Company, nor have I ever sold that company any stock or received from them any bonus. As to the siiits insti- tuted by Mr. Schell and others, I had nothing to do with them, nor was I in any way concerned in their settlement." This was certainly an announcement calculated to confuse the public ; but the confusion became confounded, when, upon the 10th, Mr. Fisk followed him in a card in which he reiterated the alleged terms of settlement, and reproduced two checks of the Erie Company, of July 11, 1868, made payable to the treasurer and by him indorsed to C. Vanderbilt, upon whose order they had been paid. These two checks were for the sum of a million of dollars. He further said that the com- pany had a paper in Mr. Vanderbilt's own handwriting, stating that he had placed fifty thousand shares of Erie stock in the hands of certain persons, to be delivered on payment of $ 3,500,000, which sum he declared had been paid. Undoubt- edly these apparent discrepancies of statement admitted of an explanation ; and some thin veil of equivocation, such as the transaction of the business through third parties, justified Vanderbilt's statements to his own conscience. Comment, wu< with me: the date I don't know: it was about eleven o'clock in the morn- ing: don't know the day, don't know the month, don't know the year; I rode up with Shearman, holding the carpet-bag tight between my legs ; I told him he was a small man and not much protection; this was dangerous property, you see, and might blow up; .... besides Mr. Shearman the driver went in with the witnesses, and besides the Commodore I spoke with the servant-girl; the Commodore was sitting on the bed with one shoe off and one shoe on ; .... don't remember what more was said; I remember the Commodore put on his other shoe; I remember those shoes on account of the buckles; you see there were four buckles on that shoe, and I know it passed through my mind that if such men wore that kind of shoe I must get me a pair, this passed through my mind, but I did not speak of it to the Commodore; I was very civil to him." 90 A CHAPTER OF ERIE. however, is wholly superfluous, except to call attention to the amount of weight which is to be given to the statements and denials, apparently the most general and explicit, which from time to time were made by the parties to these proceedings. This short controA'ersy merely added a little more discredit to what was already not deficient in that respect. On the 10th of December the Erie Company sued Commodore Vanderbilt for $ 3,500,000, specially alleging in their complaint the par- ticulars of that settlement, all knowledge of or connection Avith which the defendant had so emphatically denied. None of the multifarious suits which had been brought as yet were aimed at Mr. Drew. The quondam treasurer had apparently wholly disappeared from the scene on the 19th of November. Mr. Fisk took advantage, however, of a leisure day, to remedy this oversight, and a suit was commenced against Drew, on the ground of certain transactions between him, as treasurer, and the railway company, in relation to some steamboats concenied in the trade of Lake Erie. The usual allegations of fraud, breach of trust, and other trifling and, technically, not State prison offences, were made, and damages were set at a million of dollars. Upon the 8th the argument in Belmont's case had been reopened before Judge Cardozo in New York, and upon the same day, in Oneida County, Judge Boardman, another justice of the Supreme Court, had proceeded to contribute his share to the existing complications. Counsel in behalf of Receiver Davies had appeared before him, and, upon their application, the Cardozo injunction, which restrained the receiver from taking possession of the Erie Railway, had been dissolved. Why this application was made, or why it was granted, sur- passes comprehension. However, the next day, Judge Board- man's order having been read in court before Judge Cardozo, that magistrate suddenly revived to a full appreciation of the views expressed by him in June in regard to judicial inter- \\ifli judicial action, and at once stigmatized Jnd^e action as "extremely indecorous." Neglecting, however, the happy opportunity to express an opinion as to A CHAPTER OF ERIE, 91 his own conduct during the previous week, he simply stayed all proceedings under this new order, and applied himself to the task of hearing the case before him reargued. This hearing lasted many days, was insufferably long and inexpressibly dull. While it was going on, upon the 15th, Judge Nelson, in the United States'Court, delivered his opin- ion in the Whelpley suit, reversing, on certain technical grounds, the action of Judge Blatchford, and declaring that no case for the appointment of a receiver had been made out ; accordingly he set aside that of Gould, and, in conclusion, sent the matter back to the State court, or, in other words, to Judge Cardozo, for decision. Thus the gentlemen of the ring, having been most fortunate in getting their case into the Fed- eral court before Judge Blatchford, were now even more fortu- nate in getting it out of that court when it had come before Judge Nelson. After this, room for doubt no longer existed. Brilliant success at every point had crowned the strategy of the Erie directors. For once Vanderbilt was effectually routed and driven from the field. That he shrunk from con- tinuing the contest against such opponents is much to his credit. It showed that he, at least, was not prepared to see how near he could come to the doors of a State prison and yet not enter them ; that he did not care to take in advance the opinion of leading counsel as to whether what he meant to do might place him in the felons' dock. Thus Erie was wholly given over to the control of the ring. No one seemed any longer to dispute their right and power to issue as much new stock as might seem to them expedient. Injunctions had failed to check them , receivers had no terrors for them. Se- cure in their power, they now extended their operations over sea and land, leasing railroads, buying steamboats, ferries, theatres, and rolling-mills, building connecting links of road, laying down additional rails, and, generally, proving them- selves a power wherever corporations were to be influenced or legislatures were to be bought. Christmas, the period of peace and good-will, was now approaching. The dreary arguments before Judge Cardozo 92 A CHAPTER OF ERIE. had terminated .on December 18, long after the press and the piiblic had ceased to pay any attention to them, and al- ready rumors of a settlement were rife. Yet it was not meet that the settlement should be effected without some final striking catastrophe, some characteristic concluding tableau. Among the many actions which had incidentally sprung from these proceedings was one against Mr. Samuel Bowles, the editor of the Springfield Republican, brought by Mr. Fisk in consequence of an article which had appeared in that paper, reflecting most severely on Fisk's proceedings and private character, his past, his present, and his probable future. On the 22d of December, Mr. Bowles happened to be in New York, and, as he was standing in the office of his hotel, talk- ing with a friend, was suddenly arrested on the warrant of Judge McCunn, hurried into a carriage, and driven to Ludlow Street Jail, where he was locked up for the night. This ex- cellent jest afforded intense amusement, and was the cause of much wit that evening at an entertainment given by the Tammany ring to the newly elected mayor of New York, at which entertainment Mr. James Fisk, Jr., was an honored guest. The next morning the whole press was in a state of high indignation, and Mr. Bowles had suddenly become the best-advertised editor in the country. At an early hour ho was, of course, released on bail, and with this outrage the second Erie contest was brought to a close. It seemed right and proper that proceedings which, throughout, had set pub- lic opinion at defiance, and in which the Stock Exchange, tho courts, and the legislature had come in for eipial measures of opprobrium for thoir disregard of private rights, should be terminated by an exhibition of petty spite, in which bench and bar, judge, sheriff, and jailer, lent themselves with base sub- serviency to a violation of the liberty of the citizen. It was not until the 10th of February that Judge Cardo/o published his decision setting aside the Sutherland reeeiver- sliip, and establishing on a basis of authority the right to OV( I 1 issue stock at pleasure. The subject was then as obsolete and forgotten as though it had never absorbed the public A CHAPTER OF ERIE. 93 attention. And .another "settlement" had already been effected. The details of this arrangement have not been dragged to light through the exposures of subsequent litiga- tion. But it is not difficult to see where and how a combina- tion of overpowering influence may have been effected, and a guess might even be hazarded as to its objects and its victims. The fact that a settlement had been arrived at was intimated in the papers of the 2Gth of December. On the 19th of the same month a stock dividend of eighty per cent in the New York Central had been suddenly declared by Vanderbilt. Presently the legislature met. While the Erie ring seemed to have good reasons for apprehending hostile legislation, Van- derbilt, on his part, might have feared for the success of a bill which was to legalize his new stock. But hardly a voice was raised against the Erie men, and the bill of the Central was safely carried through. This curious absence of opposition did not stop here, and soon the two parties were seen united in an active alliance. Vanderbilt wanted to consolidate his roads ; the Erie directors wanted to avoid the formality of annual elections. Thereupon two other bills went hastily through this honest and patriotic legislature, the one authorizing the Erie Board, which had been elected for one year, to classify itself so that one fifth only of its members should vacate office during each succeeding year, the other consolidating the Vanderbilt roads into one colossal monopoly. Public interests and private rights seem equally to have been the victims. It is impossible to say that the beautiful unity of interests which led to such results was the fulfilment of the December settlement ; but it is a curious fact that the same paper which announced in one column that Vanderbilt's two measures, known as the consolidation and Central scrip bills had gone to the Governor for signature, should, in another, have reported the discontinuance of the Belmont and Whelpley suits by the consent of all interested.* It may be that public and private interests were not thus balanced and traded away in a servile legislature, but the strong probabilities arc that the settlement * See the New York Tribune of May 10, 1869. 94 A CHAPTER OF ERIE. of December made white even that of Jtily. Meanwhile the conquerors the men whose names had been made notorious through the whole land in all these infamous proceedings were at last undisputed masters of the situation, and no man questioned the firmness of their grasp on the Erie Railway. They walked erect and proud of their infamy through the streets of our great cities ; they voluntarily subjected them- selves to that to which other depredators are compelled to submit, and, by exposing their portraits in public conveyances, converted noble steamers into branch galleries of a police- office ; nay, more, they bedizened their persons with gold lace, and assumed honored titles, until those who w r itnssed in silent contempt their strange antics were disposed to exclaim in the language of poor Doll Tearsheet : "An Admiral ! God's light, these villains will make the word as odious as the word 'occupy,' which was an excellent good word before it was ill sorted ; therefore, Admirals had need look to 't." The subsequent history of the Erie Railway, under the management of the men who had thus succeeded in gaining absolute control over it, forms no part of this narrative. The attempt has been made simply to trace the course of events which resulted in placing a national thoroughfare in the hands of unscrupulous gamblers, and to describe the complications which marked their progress to power. The end was finally attained, when, after every opponent had, by fair means or by foul, been driven from the conflict, that strange law was en- acted which assured these men, elected for one year, a five yeara' term of power, beyond the control of their stockholders. I'Yi'in that moment all the great resources of the Erie Railway became mere engines with which to work their lawless will. Comment would only weaken the force of this narrative. It sufficiently suggests its own moral. The facts which have In en set forth cannot but have revealed to every observant c\c the deep decay which has eaten into our social edifice. No portion of our system was left untested, and no portion A CHAPTER OF ERIE. 95 showed itself to be sound. The stock exchange revealed itself as a haunt of gamblers and a den of thieves ; the offices of our great corporations appeared as the secret chambers in which trustees plotted the spoliation of their wards ; the law became a ready engine for the furtherance of wrong, and the ermine of the judge did not conceal the eagerness of the par- tisan ; the halls of legislation were transformed into a mart in which the price of votes was higgled over, and laws, made to order, were bought and sold ; while under all, and through all, the voice of public opinion was silent or was disregarded. It is not, however, in connection with the present that all this has its chief significance. It speaks ominously for the future. It may be that our society is only passing through a period of ugly transition, but the present evil has its root deep down in the social organization, and springs from a diseased public opinion. Failure seems to be regarded as the one unpar- donable crime, success as the all-redeeming virtue, the acqui- sition of wealth as the single worthy aim of life. Ten years ago such revelations as these of the Erie Railway would have sent a shudder through the community, and would have placed a stigma on every man who had had to do with them. Now they merely incite others to surpass them by yet bolder outrages and more corrupt combinations. Were this not so, these things would be as impossible among us now as they are elsewhere, or as they were here not many years ago. While this continues it is mere weakness to attribute the conse- quences of a lax morality to a defective currency, or seek to prevent its outward indications by statute remedies. The root of the disease is deep ; external applications will only hide its dangerous symptoms. It is well to reform the currency, it is well to enact laws against malefactors ; but neither the one nor the other will restore health to a business community which tolerates successful fraud, or which honors wealth more than honesty. One leading feature of these developments, however, is, from its political aspect, especially worthy of the attention of the American people. Modern society has created a class 96 A CHAPTER OF ERIE. of artificial beings who bid fair soon to be the masters of their creator. It is but a very few years since the existence of a corporation controlling a few millions of dollars was regarded as a subject of grave apprehension, and now this country already contains single organizations which wield a power rep- resented by hundreds of millions. These bodies are the crea- tures of single States ; but in New York, in Pennsylvania, in Maryland, in New Jersey, and not in those States alone, they are already establishing despotisms which no spasmodic popu- lar effort will be able to shake off. Everywhere, and at all times, however, they illustrate the truth of the old maxim of the common law, that corporations have no souls. Only in New York has any intimation yet been given of what the future may have in store for us should these great powers become mere tools in the hands of ambitious, reckless men. The system of corporate life and corporate power, as applied to industrial development, is yet in its infancy. It tends always to development, alwa}'s to consolidation, it is ever grasping new powers, or insidiously exercising covert influ- ence. Even now the system threatens the central government. The Erie Railway represents a weak combination compared to those which day by day are consolidating under the unsus- pecting eyes of the community. A very few years more, and we shall see corporations as much exceeding the Eric and the New York Central in both ability and will for corruption as they will exceed those roads in wealth and in length of iron track. We shall see these great corporations spanning the continent from ocean to ocean, single, consolidated lines, not connecting Albany with Buffalo, or Lake Erie with the Hudson, but uniting the Atlantic and the Pacific, and bringing New York nearer to San Francisco than Albany once was to Buffalo. Already the disconnected members of these future leviathans have built up States in the wilderness, and chosen their attorneys senators of the United States. Now tiieir p-.wer is in its infancy; in a very le\\ years they will re-enact, on ;i larger theatre and on a grander .scale, with every feature magnified, the scenes which were lately witnessed on the nar- A CHAPTER OF ERIE. 97 row stage of a single State. The public corruption is the foundation on which corporations always depend for their political power. There is a natural tendency to coalition be- tween them and the lowest strata of political intelligence and morality ; for their agents must obey, not question. They exact success, and do not cultivate political morality. The lobby is their home, and the lobby thrives as political virtue decays. The ring is their symbol of power, and the ring is the natural enemy of political purity and independence. All this was abundantly illustrated in the events which have just been narrated. The existing coalition between the Erie Rail- way and the Tammany ring is a natural one, for the former needs votes, the latter money. This combination now controls the legislature and courts of New York ; that it controls also the Executive of the State, as well as that of the city, was proved when Governor Hoffman recorded his reasons for sign- ing the infamous Erie Directors' Bill. It is a new power, for which our language contains no name. We know what aris- tocracy, autocracy, democracy are ; but we have no word to express government by moneyed corporations. Yet the people already instinctively seek protection against it, and look for such protection, significantly enough, not to their own legisla- tures, but to the single autocratic feature retained in our system of government, the veto by the Executive. In this there is something more imperial than republican. The peo- ple have lost faith in themselves when they cease to have any faith in those whom they uniformly elect to represent them. The change that has taken place in this respect of late years in America has been startling in its rapidity. Legislation is more and more falling into contempt, and this not so much on account of the extreme ignorance manifested in it as because of the corrupt motives which are believed habitually to actu- ate it. Thus the influence of corporations and of class inter- ests is steadily destroying that belief in singleness of purpose which alone enables a representative government to exist, and the community is slowly accustoming itself to look for pro- tection, not to public opinion, but to some man in high place 5 o 98 A CHAPTER OF ERIE. and armed with great executive powers. Him they now think they can hold to some accountability. It remains to be seen what the next phase -in this process of gradual develop- ment will be. History never quite repeats itself, and, as was suggested in the first pages of this narrative, the old familial- enemies may even now confront us, though arrayed in such a modern garb that no suspicion is excited. Americans are apt pupils, and among them there are probably some who have not observed Fisk and Vanderbilt and Hoffman without a thought of bettering their instructions. No successful mili- tary leader will repeat in America the threadbare experiences of Europe ; the executive power is not likely to be seized while the legislative is suppressed. The indications would now seem rather to point towards the corruption of the legis- lative and a quiet assumption of the executive through some combination in one vigorous hand of those influences which throughout this narrative have been seen only in conflict. As the Erie ring represents the combination of the corporation and the hired proletariat of a great city ; as Vauderbilt em- bodies the autocratic power of Caesarism introduced into cor- porate life, and as neither alone can obtain complete control of the government of the State, it, perhaps, only remains for the coming man to carry the combination of elements one step in advance, and put Caesarism at once in control of the corporation and of the proletariat, to bring our vaunted insti- tutions within the rule of all historic precedent. It is not pleasant to take such views of the future ; yet they are irresistibly suggested by the events which have been narrated. They seem to be in the nature of direct inferences. The only remedy lies in a renovated public opinion ; but no indication of this has as yet been elicited. People did indeed, at one time, watch these Erie developments with interest, but the feeling excited was rather one of amazement than of in- dignation. Even where a real indignation was excited, it led to no sign of any persistent effort at reform ; it betrayal it- self only in aimless denunciation or in sad forebodings. The danger, however, is day by day increasing,- and the period dur- A CHAPTER OF ERIE. 99 ing which the work of regeneration should begin grows always shorter. It is true that evils ever work their own cure, but the cure for the evils of Roman civilization was worked out through ten centimes of barbarism. It remains to be seen whether this people retains that moral vigor which can alone awaken a sleeping public opinion to healthy and persistent activity, or whether to us also will apply these words of the latest and best historian of the Roman republic : " What De- mosthenes said of his Athenians was justly applied to the Romans of this period ; that people were very zealous for action so long as they stood round the platform and listened to proposals of reform ; but, when they went home, no one thought further of what he had heard in the market-place. However those reformers might stir the fire, it was to no pur- pose, for the inflammable material was wanting." * * Mommsen, Vol. IV. p. 91, referring to the early Ciceronian period, B. c. 75. THE NEW YORK GOLD CONSPIRACY/ Howe of Representatives. Report, No. 31. Forty-first Con- gress, Second Session. Report of the Committee, on Banking and Currency, in response to a Resolution of the House of Representatives, passed December 13, 1869, directing the Com- mittee " to investigate the causes that led to the unusual and extraordinary fluctuations of Gold in the City of New York, from the 21st to the 27th of September, 1869 " ; accompanied by the Testimony collected by the Committee. civil war in America, with its enormous issues of depre- JL ciating currency, and its reckless waste of money and credit by the government, created a speculative mania such as the United States, with all its experience in this respect, had never before known. Not only in Broad Street, the centre of New York speculation, but far and wide throughout the Northern States, almost every man who had money at all employed ;i part of .his capital in the purchase of stocks or of gold, of cop- per, of petroleum, or of domestic produce, in the hope of a rise in prices, or staked money on the expectation of a fall. To use the jargon of the street, every farmer and every shop- keeper in the country eecmed to be engaged in " carrying " some favorite security " on a margin." Whoever could obtain five pounds sent it to a broker with orders to buy fifty pounds' worth of stocks, or whatever amount the broker would consent to purchase. If the stock rose, the speculator prospered ; if * From the Westminster Review, for October, 1870. THE NEW YORK GOLD CONSPIRACY. 101 it fell until the five pounds of deposit or margin were lost, the broker demanded a new deposit, or sold the stock to protect himself. By means of this simple and smooth machinery, winch differs in no essential respect from the processes of roulette or rouge-et-noir, the whole nation flung itself into the Stock Exchange, until the " outsiders," as they were called, in opposition to the regular brokers of Broad Street, represented nothing less than the entire population of the American Re- public. Every one speculated, and for a time every one speculated successfully. The inevitable reaction began when the government, about a year after the close of the war, stopped its issues and ceased borrowing. The greenback currency had for a moment sunk to a value of only 37 cents to the dollar. It is even asserted that on the worst day of all, the llth of July, 1804, one sale of 20,000 in gold was actually made at 310, which is equiva- lent to about 33 cents in the dollar.* At this point, however, the depreciation stopped ; and the paper which had come so near falling into entire discredit steadily rose in value, first to 50 cents, then to 60, to 70, and within the present year to more than 90 cents. So soon as the industrious part of the public felt the touch of this return to solid values, the whole fabric of fictitious wealth began to melt away under their eyes. Thus it was not long before the so-called " outsiders," the men who speciilated on their own account, and could not act in agreement or combination, began to suffei'. One by one, or in great masses, they were made the prey of the larger opera- tors ; their last margins were consumed, and they dropped down to the solid level of slow, productive industry. Some lost everything ; many lost still more than they had, and there are few families of ordinary connection and standing in the United States which cannot tell, if they choose, some dark story of embezzlement, or breach of trust, committed in these days. Some men, who had courage and a sense of honor, * See Men and Mysteries of Wall Street, by James K. Medbery, pp. 250, 261. 102 THE NEW YORK GOLD CONSPIRACY. found life too heavy for them ; others went mad. But the greater part turned in silence to their regular pursuits, and accepted their losses as they could. Almost every rich Amer- ican could produce from some pigeon-hole a bundle of worth- less securities, and could show check-books representing the only remaining trace of margin after margin consumed in vain attempts to satisfy the insatiable broker. A year or two of incessant losses swept the weaker gamblers from the street. But even those who continued to speculate found it neces- sary to change their mode of operations. Chance no longer ruled over the Stock Exchange and the gold market. The fate of a battle, the capture of a city, or the murder of a President, had hitherto been the influences which broke through the plans of the strongest combinations, and put all speculators, whether great or small, on fairly even ground ; but as the period of sudden and uncontrollable disturbing elements passed away, the market fell more and more com- pletely into the hands of cliques which found a point of adhe- sion in some great mass of incorporated capital. Three distinct railways, with all their enormous resources, became the property of Cornelius Vanderbilt, who, by means of their credit and capital, again and again swept millions of dollars into his pocket by a process curiously similar to gambling with loaded dice. But Vanderbilt was one of the most re- spectable of these great operators. The Erie Railway was controlled by Daniel Drew, and while Vanderbilt at least acted in the interests of his corporations, Drew cheated equally his corporation and the public. Between these two men and the immense incorporated power they swayed, smaller operators, one after another, were crushed to pieces, until the survivors 1 ,-u-iied to seek shelter within some clique sufficiently strong to afford protection. Speculation in this manner began to consume itself, and the largest combination of capital was des- tined to swallow every weaker combination which ventured to show it itself in the market. Thus, between the inevitable effect of a currency which steadily shrank the apparent wealth of the country, and the THE NEW YORK GOLD CONSPIRACY. 103 omnipotence of capital iu the stock market, a sounder and healthier state of society began to make itself felt. Nor could the unfortunate public, which had been robbed with such cynical indifference by Drew and Vanderbilt, feel any sincere regret when they saw these two cormorants reduced to tearing each other. In the year 1867 Mr. Vanderbilt under- took to gain possession of the Erie Road, as he had already obtained possession of the New York Central, the second trunk line between New York and the West. Mr. Vanderbilt was supposed to own property to the value of some 10,000,000, all of which might be made directly available for stock opera- tions. He bought the greater part of the Erie stock ; Drew sold him all he could take, and then issued as much more as was required in order to defeat Vauderbilt's purpose. After a violent struggle, which overthrew all the guaranties of social order, Drew triumphed, and Mr. Vanderbilt abandoned the contest. The Erie corporation paid him a large sum to reim- burse his alleged losses. At the same time it was agreed that Mr. Drew's accounts should be passed, and he obtained a release in full, and retired from the direction. And the Erie Road, almost exhausted by such systematic plundering, was left in the undisturbed, if not peaceful, control of Mr. Jay Gould and Mr. James Fisk, Jr., whose reign began in the month of July, 1868. Mr. Jay Gould was a partner in the firm of Smith, Gould; & Martin, brokers, in Wall Street. He had been engaged before now in railway enterprises, and his operations had not been of a nature likely to encourage public confidence- in his ideas of fiduciary relations. He was a broker, and a broker is almost by nature a gambler, perhaps the very last profession suitable for a railway manager. In character he was strongly marked by his disposition for silent intrigue. He preferred as a rule to operate on his own account, without admitting other persons into his confidence, and he seemed never to be satis- fied except when deceiving every one as to his intentions. There was a reminiscence of the spider in his nature. He spun huge webs, in corners and in the dark, which were sel- 104 THE NEW YORK GOLD CONSPIRACY. dom strong enough to resist a serious strain at the critical moment. His disposition to this subtlety and elaboration of intrigue was irresistible. It is scarcely necessary to say that he had not a conception of a moral principle. In speak- ing of this class of men it must be fairly assumed at the out- set that they do not and cannot understand how there can be a distinction between right and wrong in matters of specula- tion, so long as the daily settlements are punctually effected. In this respect Mr. Gould was probably as honest as the mass of his fellows, according to the moral standard of the street ; but without entering upon technical questions of roguery, it is enough to say that he was an uncommonly fine and unscru- pulous intriguer, skilled in all the processes of stock-gambling, and passably indifferent to the praise or censure of society. James Fisk, Jr., was still more original in character. He was not yet forty years of age. and had the instincts of four- teen. He came originally from Vermont, probably the most respectable and correct State in the Union, and his father had been a pedler who sold goods from town to town in his na- tive valley of the Connecticut. The son followed his father's calling with boldness and success. He drove his huge wagon, made resplendent with paint and varnish, with four or six horses, through the towns of Vermont and Western Massachu- setts ; and when his father remonstrated in alarm at his reck- less management, the young man, with his usual bravado, took his father into his service at a fixed salary, with the warning that he was not to put on airs on the strength of his new dignity. A large Boston firm which had supplied his goods on credit, attracted by his energy, took him into the house ; the war broke out ; his influence drew the firm into some bold ^peculation! which were successful; in a few years he retired with some 20,000, which he subsequently lost. He formed a connection with Daniel Drew in New York, and a new sign, ominous of future trouble, was raised in Wall Street, bearing the names of Fisk brokers and speculators without security. As ;m actual fact it is in evidence that this same bank on Thursday, September 24, 1869, certified checks to the amount of nearly 1,500,000 for Mr. Gould alone. What sound security Mr. Gould deposited against this mass of credit may be left to the imagination. His operations, however, were not confined to this bank alone, although this was the only one owned by the ring. Thus Mr. Ciould and Mr. Fisk created a combination more powerful than any that has been controlled by more private THE NEW YORK GOLD CONSPIRACY. Ill citizens in America or in Europe since society for self-protec- tion established the supreme authority of the judicial name. They exercised the legislative and the judicial powers of the State ; they possessed almost unlimited credit, and society was at their mercy. One authority alone stood above them, be- yond their control ; and this was the distant but threatening figure of the National Government. Nevertheless, powerful as they were, the Erie managers were seldom in funds. The huge marble palace in which they lived, the theatre which they supported, the reckless bribery and profusion of management by which they could alone main- tain their defiance of public opinion, the enormous schemes for extending their operations into which they rushed with utter recklessness, all required greater resources than could be furnished even by the wholesale plunder of the Erie Road. They were obliged from time to time to issue from their castle and harry the industrious public or their brother freebooters. The process was different from that known to the dark ages, but the objects and the results were equally robbery. At one time Mr. Fisk is said to have ordered heavy speculative sales of stock in an express company which held a contract with the Erie .Railway. The sales being effected, the contract was declared annulled. The stock naturally fell, and Mr. Fisk realized the difference. He then ordered heavy purchases, and having renewed the contract the stock rose again, and Mr. Fisk a second time swept the street.* In the summer and autumn of 1869 the two managers issued and sold 235,000 new shares of Erie stock, or nearly as much as its entire capital when they assumed power in July, 1868. With the aid of the money thus obtained, they succeeded in withdrawing about 2,500,000 in currency from circulation at the very moment of the year when currency was most in demand in order to harvest the crops. For weeks the whole nation writhed and quivered under the torture of this modern rack, until the national government itself was obliged to interfere and threaten a sudden opening of the treasury. But whether the Erie * Men and Mysteries of Wall Street, p. 168. 112 THE NEW YORK GOLD CONSPIRACY. speculators operated for a rise or operated for a fall, whether they bought or sold, and whether they were engaged in manip- ulating stocks, or locking up currency, or cornering gold, they were always a public nuisance and scandal. In order to explain the operation of a so-called corner in gold to ordinary readers with the least possible use of slang or technical phrases, two preliminary statements are necessary. In the first place it must be understood that the supply of gold immediately available for transfers is limited within dis- tinct bounds in America. New York and the country behind it contain an amount usually estimated at about 4,000,000. The national government commonly holds from 15,000,000 to .20,000,000, which may be thrown bodily on the market if the President orders it. To obtain gold from Europe or other sources requires time. In the second place, gold in America is a commodity bought and sold like stocks in a special market or gold-room which is situated next the Stock Exchange in Broad Street and is prac- tically a part of it. In gold as in stocks, the transactions are both real and speculative. The real transactions are mostly pur- chases or loans made by importers who require coin to pay customs on their imports. This legitimate business is sup- posed to require from 1,000,000 to 1,500,000 per day. The speculative transactions are mere wagers on the rise or fall of price, and neither require any actual transfer of gold, nor even imply its existence, although in times of excitement hundreds of millions nominally arc bought, sold, and loaned. Under the late administration Mr. McCulloch, then Secre- tary of the Treasury, had thought it his duty at least to guarantee a stable currency, although Congress forbade him to restore the gold standard. During four years gold had fluctuated little, and principally from natural causes, and the danger of attempting to create an artificial scarcity in it had prevented the <>]MT;it<>rs from trying an experiment which would have \tccu sure to irritate the government. The finan- rial policy of the new administration was not so definitely fixed, and the success of a speculation would depend on the THE NEW YORK GOLD CONSPIRACY. 113 action of Mr. Boutwell, the new secretary, whose direction was understood to have begun by a marked censure on the course pursued by his predecessor. Of all financial operations, cornering gold is the most bril- liant and the most dangerous, and possibly the very hazard and splendor of the attempt were the reasons of its fascina- tion to Mr. Jay Gould's fancy. He dwelt upon it for months, and played with it like a pet toy. His fertile 'mind even went so far as to discover that it would prove a blessing to the community, and on this ingenious theory, half honest and half fraudulent, he stretched the widely extended fabric of the web in which all mankind was to be caught. This theory WHS in itself partially sound. Starting from the principle that the price of grain in New York is regulated by the price in London and is not affected by currency fluctuations, Mr. Gould argued that if it were possible to raise the premium on gold from thirty to forty cents at harvest-time, the farmers' grain would be worth $1.40 instead of $1.30, and as a conse- quence the farmer would hasten to send all his crop to New York for export, over the Erie Railway, which was sorely in need of freights. With the assistance of another gentleman, Mr. Goitld calculated the exact premium at which the Western farmer would consent to dispose of his grain, and thus dis- tance the three hundred sail which were hastening from the Danube to supply the English market. Gold, which was then heavy at 34, must be raised to 45. This clever idea, like all the other ideas of these gentlemen of Erie, seems to have had the single fault of requiring that some one, somewhere, should be swindled. The scheme was probably feasible ; but sooner or later the reaction from such an artificial stimulant must have come, and whenever it came some one must suffer. Nevertheless, Mr. Gould probably argued that so long as the farmer got his money, the Erie Rail- way its freights, and he himself his small profits on the gold he bought, it was of little consequence who else might be injured ; and, indeed, by the time the reaction came, and gold was ready to fall as he expected, Mr. Gould would probably 114 THE NEW YORK GOLD CONSPIRACY. have been ready to assist the process by speculative sales in order to enable the Western farmer to buy his spring goods cheap as he had sold his autumn crops dear. He himself was equally ready to buy gold cheap and sell it dear on his private account ; and as he proposed to bleed New York merchants for the benefit of the Western fanner, so he was willing to bleed Broad Street for his own. The patriotic object was, however, the one which for obvious reasons Mr. Gould pre- ferred to put forward most prominently, and on the strength of which he hoped to rest his ambitious structure of intrigue. In the operation of raising the price of gold from 133 to 145, there was 110 great difficulty to men who controlled the resources of the Erie Railway. Credit alone was needed, and of credit Mr. Gould had an unlimited supply. The only serious danger lay in the possible action of the national gov- ernment, which had not taken the same philanthropic view of the public good as was peculiar to the managers of Erie. Secretary Boutwell, who should have assisted Mr. Gould in " bulling " gold, was gravely suspected of being a bear, and of wishing to depress the premiums to nothing. If he were determined to stand in Mr. Gould's path, it was useless even for the combined forces of Erie and Tammany fo jostle against him ; and it was therefore essential that Mr. Gould should control the government itself, whether by fair means or foul, by persuasion or by purchase. He undertook the task ; and now that his proceedings in both directions have been thoroughly drawn into light, it is well worth while for the public to sec how dramatic and how artistically admirable a conspiracy in real life may be, when slowly elaborated from the subtle mind of n clever intriguer, and carried into execu- tion by a band of unshrinking scoundrels. The first requisite for Mr. Gould's purpose was some channel of direct communication with the President; and here he was peculiarly favored by chance. Mr. Abel Rathbone Corbin, for- merly lawj'er, editor, speculator, lobby-Agent, familiar, as he claims, with everything, had succeeded, during his varied career, in accumulating from one or another of his ha/ardmis THE NEW YORK GOLD CONSPIRACY. 115 pursuits a comfortable fortune, and he had crowned his suc- cess, at the age of sixty-seven or thereabouts, by contracting a marriage with General Grant's sister, precisely at the mo- ment when General Grant was on the point of reaching the highest eminence possible to an American citizen. To say that Mr. Corbih's moral dignity had passed absolutely pure through the somewhat tainted atmosphere in which his life had been spent, would be flattering him too highly ; but at least he was now no longer engaged in any active occupation, and he lived quietly in New York, watching the course of pub- lic affairs, and remarkable for an eminent respectability which became the President's brother-in-law. Mr. Gould enjoyed a slight acquaintance with Mr. Corbin, and he proceeded to improve it. He assumed, and he asserts that he really felt, a respect for Mr. Corbin's shrewdness and sagacity. It is amus- ing to observe that Mr. Corbin claims to have first impi'essed the famous crop theory on Mr. Gould's mind ; while Mr. Gould testifies that he himself indoctrinated Mr. Corbin with this idea, which became a sort of monomania with the Presi- dent's brother-in-law, who soon began to preach it to the President himself. On the 15th of June, 1869, the Presi- dent came to New York, and was there the guest of Mr. Corbin, who urged Mr. Gould to call and pay his respects to the Chief Magistrate. Mi*. Gould had probably aimed at precisely this result. He called ; and the President of the United States not only listened to the president of Erie, but accepted an invitation to Mr. Fisk's theatre, sat in Mr. Fisk's private box, and the next evening became the guest of these two gentlemen on their magnificent Newport steamer, while Mr. Fisk, arrayed, as the newspapers reported, " in a blue uniform, with a broad gilt cap-band, three silver stars on his coat-sleeve, lavender gloves, and a diamond breast-pin as large as a cherry, stood at the gangway, surrounded by his aids, bestarred and bestriped like himself," and welcomed his dis- tinguished friend. It had been already arranged that the President should on this occasion be sounded in regard to his financial policy ; and 116 THE NEW YORK GOLD CONSPIRACY. when the selected guests among whom were Mr. Gould, Mr. Fisk, and others -sat down at nine o'clock to supper, the conversation was directed to the subject of finance. " Some one," says Mr. Gould, " asked the President what his view was." The "some one" in question \vas, of course, Mr. Fisk, who alone had the impudence to put such an inquiry. The President bluntly replied, that there was a certain amount of fictitiousuess about the prosperity of the country, and that the bubble might as well be tapped in one way as another. The remark was fatal to Mr. Gould's plans, and he felt it, in his own words, as a wet blanket. Meanwhile the post of assistant-treasurer at New York had become vacant, and it was a matter of interest to Mr. Gould that some person friendly to himself should occupy this posi- tion, which, in its relations to the public, is second in impor- tance only to the secretaryship of the treasury itself. Mr. Gould consulted Mr. Corbin, and Mr. Corbin suggested the name of General Butterfield, a former officer in the volun- teer army. The appointment was not a wise one ; nor does it appear in evidence by what means Mr. Corbin succeeded in bringing it about. There is a suggestion that he used Mr. A. T. Stewart, the wealthy importer, as his instrument for the purpose ; but whatever the influence may have been, Mr. Corbin appears to have set it in action, and General Butter- field entered upon his duties towards the 1st of July. The elaborate preparations thus made show that some large scheme was never absent from Mr. Gould's mind, al- though between the months of May and August lie made no attempt to act upon the markets. But between the 20th of August and the 1st of September, in company with Messrs. Woodward and Kimber, two large speculators, he made what is known as a pool, or combination, to raise the premium on gold, and some ten or fifteen millions were bought, but with very little effect on the price. The tendency of the market was downwards, and it was not easily counteracted. Perhaps under onliiuirv eirennistaiiees In- might have now abandoned his |. reject ; but an incident suddenly occurred whirh seems to have drawn him headlong into the boldest operations. THE NEW YORK GOLD CONSPIRACY. 117 Whether the appointment of General Butterfield had any share in strengthening Mr. Gould's faith in Mr. Corbin's se- cret powers does not appear in evidence, though it may readily be assumed as probable. At all events, an event now took place which would have seemed to authorize an unlimited faith in Mr. Corbin, as well as to justify the implicit belief of an Erie treasurer in the corruptibility of all mankind. The un- suspicious President again passed through New York, and came to breakfast at Mr. Corbin's house on the 2d of Sep- tember. He saw no one but Mr. Corbin while there, and the same evening at ten o'clock departed for Saratoga. Mr. Gould declares, however, that he was told by Mr. Corbin that the President, in discussing the financial situation, had shown himself a convert to the Erie theory about marketing the crops, and had "stopped in the middle of a conversation in which he had expressed his views, and written a letter" to Secretary Boutwell. This letter is not produced ; but Secre- tary Boutwell testifies as follows in regard to it : " I think on the evening of the 4th of September I received a let- ter from the President dated at New York, as I recollect it ; I am not sure where it is dated. I have not seen the letter since the night I received it. I think it is now in my residence in Groton. In that letter he expressed an opinion that it was undesirable to force down the price of gold. He spoke of the importance to the West of being able to move their crops. His idea was that if gold should fall, the West would suffer, and the movement of the crops would be retarded. The impression made on my mind by the letter was that lie had rather a strong opinion to that effect Upon the receipt of the President's letter on the evening of the 4th of Sep- tember, I telegraphed to Judge Richardson [Assistant Secretary at Washington] this despatch : ' Send no order to Butterfield as to sales of gold until you hear from me.' " Mr. Goiild had therefore succeeded in reversing the policy of the national government ; but this was not all. He knew what the government would do before any officer of the gov- ernment knew it. Mr. Gould was at Corbin's house on the 2d of September ; and although the evidence of both these gen- tlemen is very confused on this point, the inference is inevita- 118 THE NEW YORK GOLD CONSPIRACY. ble that Gould saw Corbin privately, unknown to the Presi- dent, within an hour or two after this letter to Mr. Bout well Avas written, and that it was at this interview, while the Pres- ident was still in the house, that Mr. Corbin gave him the information about the letter ; perhaps showed him the letter itself. Then followed a transaction worthy of the French stage. Mr. Corbin's evidence gives his own account of it : " On the 2d of September (referring to memoranda) Mr. Gould offered to let mo have some of the gold he then possessed He spoke to me as he had repeatedly done before, about taking a certain amount of gold owned by him. I finally told Mr. Gould that for the sake of a lady, my wife, I would accept of $ 500,000 of gold for her benefit, as I shared his confidence that gold would rise. .... He afterwards insisted that I should take a million more, and I did so on the same conditions for my wife. He then sent me this paper." The paper in question is as follows : " Smith, Gould, Martin, & Co., Bankers, 11 Broad Street, New York, September 2, 186a Mr. " Dear Sir : we have bought for your account and risk 500,000, gold, 132, R. 1,000,000, gold, 183|, R. which we will carry on demand with the right to use. " SMITH, GOULD, MARTIN, & Co." This memorandum meant that for every rise of one per cent in the price of gold Mr. Corbin was to receive ,3,000, and his name nowhere to appear. If the inference is correct that Gould had seen Corbin in the morning and had learned from him what the President had written, it is clear that he must have made his bargain on the spot, and then going directly to the city, he must in one breath have ordered this memoran- dum to be made out and large quantities of gold to be pur- chased, before the President had allowed the letter to leave Mr. ( 'orbiu's house. No time was lost. On this same afternoon, Mr. Gould's brokers bought large amounts in gold. One testifies to buy- ing $ 1,315,000 at 134f On the 3d the premium was forced THE NEW YORK GOLD CONSPIRACY. 119 up to 3G ; on the 4th, when Mr. Boutwell received his letter, it had risen to 37. Here, however, Mr. Gould seems to have met a check, and he describes his own position in nervous Americanisms as follows : " I did not want to buy so much gold. In the spring I put gold up from 32 to 38 and 40, with only about seven millions. But all these fellows went in and sold short, so that in order to keep it up I had to buy, or else to back down and show the white feather. They would sell it to you all the time. I never intended to buy more than four or five millions of gold, but these fellows kept pur- chasing it on, and I made up my mind that I would put it up to 40 at one time We went into it as a commercial transaction, and did not intend to buy such an amount of gold. I was forced into it by the bears selling out. They were bound to put it down. 1 got into the contest. All these other fellows deserted me like rats from a ship. Kimber sold out and got short He sold out at 37. He got short of it, and went up "( or, in English, he failed). It was unfortunate that the bears would not consent to lie still and be flayed, but this was unquestionably the fact. They had the great operators for once at a disadvantage, and they were bent on revenge. Mr. Gould's position was very hazard- ous. When Mr. Kimber sold out at 37, which was probably on the 7th of September, the market broke ; and on the 8th the price fell back to 35. Nor was this all. At the same moment, when the " pool " was ended by Mr. Kimber's deser- tion, Mr. Corbin, with his eminent shrewdness and respecta- bility, told Mr. Gould " that gold had gone up to 37," and that he " should like to have this matter realized," which was equivalent to saying that he wished to be paid something on account. This was on the 6th ; and Gould was obliged this same day to bring him a check for 5,000, drawn to the order of Jay Gould, and indorsed in blank by him with a touching regard for Mr. Corbin's modest desire not to have his name appear. There are few financiers in the world who will not agree that this transaction does great credit to Mr. Corbin's sagacity. It indicates at least that he was acquainted with the men he dealt with. Undoubtedly it placed Mr. Gould in a difficult position ; but as Mr. Gould already held some fifteen 120 THE NEW YORK GOLD CONSPIRACY. millions of gold and needed Mr. Corbin's support, he preferred to pay .5,000 outright rather than allow Corbin to throw his gold on the market. Yet the fabric of Gould's web had now been so seriously injured that, for a whole week, from the 8th to the 15th of September, he was at a loss what to do, unable to advance and equally unable to retreat without very severe losses. He sat at his desk in the opera-house, silent as usual, and tearing little slips of paper which he threw on the floor in his abstraction, while he revolved new combinations in his mind. Down to this moment Mr. James Fisk, Jr., has not ap- peared in the affair. Gould ha4 not taken him into his con- fidence ; and it was not until after the 10th of September that Gould appears to have decided that there was nothing else to be done. Fisk was not a safe ally in so delicate an affair, but apparently there was no choice. Gould approached him ; and, as usual, his touch was like magic. Mr. Fisk's evidence begins here, and may be believed when very strongly corroborated : " Gold having settled down to 35, and I not having cared to touch it, he was a little sensitive on the subject, feeling as if he would rather take his losses without saying anything about it One day ho said to me, ' Don't you think gold has got. to the bottom ? ' I replied that I did not see the profit in buying gold unless you have got into a position where you can command the market. Ho then suid he had bought quite a large amount of gold, and I judged from his conversation that lie wanted me to go into the movement and help strengthen the market. Upon that I went into the market and bought. I should say that was about the 15th or IGth of Sep- tember. I l>ought at that time about seven or eight millions, I think.'' The market responded slowly to these enormous purchases ; and on the IGth the clique was still struggling to recover its lost ground. .Meanwhile Mr. Gould had placed another million ;ind a half of gold to the account of Geiiend Butterfield, and notified him of the purchase. So Mr. Gould swears in spite of General Butterfiald'a denial. The date of this purchase is not fixed. Through Mr. Corbin a notice was also sent by Gould about the THK NEW YORK GOLD CONSPIRACY. 121 middle of September to the President's private secretary, Gen- eral Porter, informing him that half a million was placed to his credit. General Porter instantly wrote to repudiate the pur- chase, but it does not appear that Butterfield took any notice of Gould's transaction on his account. On the 10th of Sep- tember the President had again come to New York, where he remained his brother-in-law's guest till the 13th ; and during this visit Mr. Gould appears again to have seen him, although Mr. Corbin avers that on this occasion the President intimated his wish to the servant that this should be the last time Mr. Gould obtained admission. " Gould was always trying to get something out of him," he said ; and if he had known how much Mr. Gould had succeeded in getting out of him, he would have admired the man's genius, even while shutting the door in his face. On the morning of the 13th the President set out on a journey to the little town of Washington, situ- ated among the mountains of Western Pennsylvania, where he was to remain a few days. Mr. Gould, who now consulted Mr. Corbin regularly every morning and evening, was still extremely nervous in regard to the President's policy ; and as the crisis approached, this nervousness led him into the fatal blunder of doing too much. The bribe offered to Porter was a grave mistake, but a greater mistake yet was made by pressing Mr. Corbin's influence too far. He induced Mr. Corbin to write an official article for the New York press on the financial policy of the government, an article afterwards inserted in the New York Times through the kind offices of Mr. James McHenry, and he also persuaded or encouraged Mr. Corbin to write a letter directly to the President himself. This letter, written on the 1 7th under the influence of Gould's anx- iety, was instantly sent away by a special messenger of Fisk's to reach the President before he returned to the capital. The messenger carried also a letter of introduction to General Porter, the private secretary, in order to secure the personal delivery of this important despatch. We have now come to the week which was to witness the explosion of all this elaborately constructed mine. On Mon- 6 122 THE NEW YORK GOLD CONSPIRACY. day, the 20th, gold again rose. Throughout Tuesday and Wednesday Fisk continued to purchase without limit, and forced the price up to 40. At this time Gould's firm of Smith, Gould, & Martin, through which the operation was conducted, had purchased some $50,000,000; and yet the bears went on selling, although they could only continue the contest by bor- rowing Gould's own gold. Gould, on the other hand, could no longer sell and clear himself, for the very reason that the sale of $50,000,000 woiild have broken the market to noth ing. The struggle had become intense. The whole country was looking on with astonishment at the battle between the bulls and the bears. All business was deranged, and all val- ues unsettled. There were indications of a panic in the stock market ; and the bears in their emergency were vehemently pressing the government to intervene. Gould now wrote to Mr. Boutwell a letter so inconceivably impudent that it indi- cates desperation and entire loss of his ordinary coolness. He began : " SIR, There is a panic in Wall Street, engineered by a bear combination. They have withdrawn currency to such an extent that it is impossible to do ordinary business. The Erie Company requires eight hundred thousand dollars to disburse Much of it in Ohio, where an exciting political contest is going on, and where we have about ten thousand employed, and the trouble is charged on the administration Cannot you, consistently, increase your line of currency ? " From a friend such a letter would have been an outrage ; but from a member of the Tammany ring, the principal object of detestation to the government, such a threat or bribe whichever it may be called was incredible. Mr. Gould was, in fact, at his wits' cud. He dreaded a panic, and he felt that it could no longer be avoided. The scene now shifts for a moment to the distant town of Washington, among the hills of Western Pennsylvania. On the morning of the 19th of September, President .Grant and liis private 1 secretary, General I'urter, were playing croquet on the grass, when Fisk's messenger, after twenty-four hours of THE NEW YCI.'A. GOLD CONSPIRACY. 123 travel by rail and carriage, arrived at the house, and sent in to ask for General Porter. AVhen the President's game was ended, General Porter came, received his own letter from Corbin, and called the President, who entered the room and took his brother-in-law's despatch. He then left the room, and after some ten or fifteen minutes' absence returned. The messenger, tired of waiting, then asked, " Is it all right ] " " All right," replied the President ; and the messenger hast- ened to the nearest telegraph station, and sent word to Fisk, " Delivered ; all right/' The messenger was, however, altogether mistaken. Not only was all not right, but all was going hopelessly wrong. The President, it appears, had at the outset supposed the man to be an ordinary post-office agent, and the letter an ordinary letter which had arrived through the post-office. Nor was it until Porter asked some curious question as to the man, that the President learned of his having been sent by Corbin merely to carry this apparently unimportant letter of advice. The President's suspicions were at once excited ; and the same even- ing, at his request, Mrs. Grant wrote a hurried note to Mrs. Cor- bin, telling her how greatly the President was distressed at the rumor that Mr. Corbin was speculating in Wall Street, and how much he hoped that Mr. Corbin would "instantly discon- nect himself with anything of that sort." This letter, subsequently destroyed or said to have been destroyed by Mrs. Corbin, arrived in New York on the morn- ing of Wednesday the 22d, the same day on which Gould and his enemies the bears were making their simultaneous appeals to Secretary Bout well. Mrs. Corbin was greatly excited and distressed by her sister-in-law's language. She at once carried the letter to her husband, and insisted that he should instantly abandon his interest in the gold speculation. Mr. Corbin, although he considered the scruples of, his wife and her family to be highly absurd, assented to her wish ; and when Mr. Gould came that evening as usual, with $50,000,000 of gold on his hands, and extreme anxiety on his mind, Corbin read to him two letters : the first, written by Mrs. Grant to Mrs. 124 THE NEW YORK GOLD CONSPIRACY. Corbin ; the second, written by Mr. Corbin to President Grant, assuring him that he had not a dollar of interest in gold. The assurance of this second letter was, at any sacrifice, to be made good. Mr. Corbin proposed that Mr. Gould should give him a check for 20,000, and take his $1,500,000 off his hands. A pi'oposition more calmly impudent than this can scarcely be imagined. Gould had already paid Corbin .5,000, and Corbin asked for 20,000 more, at the very moment when it was clear that the 5,000 he had received had been given him under a misunderstanding of his services. He even had the impudence to represent himself as doing Gould a favor by letting him have a million and a half more gold at the highest market price, at a time when Gould had fifty millions which it was clear he must sell or be ruined. What Gould might, under ordinary circumstances, have replied, may be imagined ; but at this moment he could say nothing. Corbin had but to show this note to a single broker in Wall Street, and the whole fabric of Gould's speculation would have fallen to pieces. Gould asked for time and went away. He consulted no one. He gave Fisk no hint of what had happened. The next morning he returned to Corbin, and made him the fol- lowing offer : " ' Mr. Corbin, I cannot give you anything if you will go out If you will remain in, and take the chances of the market, I will give you my check [for 20,000].' 'And then.' says Mr. Corbin, 'I did what I think it would have troubled almost any other busi- ness man to consent to do, refuse one hundred thousand dollars on a rising market. If I had not been an old man married to a middle- aged woman, I should have done it (of course with her consent) just as sure as the offer was made. I said, 'Mr. Gould, my will- says " No ! " Ulysses thinks it wrong, and that it ought to end.' So I gave it up He looked at me with an air of severe distrust, as if lie was afraid of treachery in tin- camp. He remarked, 'Mr. Cor- bin, I am undone il' that letter gets out.' .... He stood there for a little while looking very thoughtful, exceedingly thoughtful, lie then lel't and went into Wall Street. .... and my impression is that he it was, and not the government, that broke that market.' " THE NKW YORK GOLD CONSPIRACY. 125 Mr. Corbin was right ; throughout all these transactions his insight into Mr. Gould's character was marvellous. It was the morning of Thursday, the 3d ; Gould and Fisk went to Broad Street together, but as usual Gould was silent and secret, while Fisk was noisy and communicative. There was now a complete separation in their movements. Gould acted entirely through his own firm of Smith, Gould, & Mar- tin, while Fisk operated principally through his old partner, Belden. One of Smith's principal brokers testifies : " ' Fisk never could do business with Smith, Gould, & Martin very comfortably. They would not do business for him. It was a very uncertain thing of course where Fisk might be. He is an erratic sort of genius. I don't think anybody would want to follow him very long. I am satisfied that Smith, Gould, & Martin controlled their own gold, and were ready to do as they pleased with it with- out consulting Fisk. I do not think there was any general agree- ment None of us who knew him cared to do business with him. I would not have taken an order from him nor had anything to do with him.' Belden was considered a very low fellow. ' I never had anything to do with him or his party,' said one broker employed by Gould. ' They were men I had a perfect detestation of; they were no company for me. I should not have spoken to them at all under any ordinary circumstances.' Another says, ' Belden is a man in whom I never had any confidence in any way. For mouths before that, I would not have taken him for a gold transaction.' " And yet Belden bought millions upon millions of gold. He himself says he had bought twenty millions by this Thursday evening, and this without capital or credit except that of his brokers. Meanwhile Gould, on reaching the city, had at once given secret orders to sell. From the moment he left Corbin, he had but one idea, which was to get rid of his gold as quietly as possible. " I purchased merely enough to make believe I was a bull," says Gould. This double process continued all that afternoon. Fisk's wild purchases carried the price up to 144, and the panic in the street became more and more serious as the bears realized the extremity of their danger. No one can tell how much gold which did not exist they had con- 126 THE NEW YORK GOLD CONSPIRACY. tracted to deliver or pay the difference in price. One of the clique brokers swears that on this Thursday evening the street had sold the clique one hundred and eighteen millions of gold, and every rise of one per cent on this sum implied a loss of more than 200,000 to the bears. Naturally the terror was extreme, for half Broad Street and thousands of speculators would have been ruined if compelled to settle gold at 150 which they had sold at 140. It need scarcely be said that by this time nothing more was heai'd in regard to philanthropic theories of benefit to the Western farmer. Mr. Gould's feelings can easily be imagined. He knew that Fisk's reckless management would bring the government upon his shoulders, and he knew that imless he could sell his gold before the order came from Washington he would be a ruined man. He knew, too, that Fisk's contracts must inevitably be repudiated. This Thursday evening he sat at his desk in the Erie offices at the opera-house, while Fisk and Fisk's brokers chattered about him. ' : I was transacting my railway business. I had my own views about the market, and my own fish to fry. I was all alone, so to speak, in what I did, and I did not let any of those people know exactly how I stood. I got no ideas from anything that was said there. I had been selling gold from 35 up all the time, and I did not know till the next morning that there would probably come an order about twelve o'clock to sell gold." He had not told Fisk a word in regard to Corbin's retreat, nor his own orders to sell. When the next day came, Gould and Fisk went together to Broad Street, and took possession of the private back office of ii principal broker, "without asking the privilege of doing so," as the broker observes in his evidence. The first news brought to Gould was a disaster. The government had sent three men from Washington to examine the bank which Gould owned, and the K-mk sent word to Mr. Gould that it feared to certify for him as usual, and was itself in danger of a panic, caused by the presence of officer, which created distrust ol tin- bank. It barely managed to save itself. Gould took tho THE NEW YORK GOLD CONSPIRACY. 127 information silently, and his firm redoubled sales of gold. His partner, Smith, gave the orders to one broker after an- other, " Sell ten millions ! " " The order was given as quick as a flash, and away he went," says one of these men. " I sold only eight millions." " Sell, sell, sell ! do nothing but sell ! - only don't sell to Fisk's brokers," were the orders which Smith himself acknowledges. In the gold-room Fisk's brokers were shouting their rising bids, and the packed crowd grow frantic with terror and rage as each successive rise showed their increasing losses. The wide streets outside were thronged with excited people ; the telegraph offices were overwhelmed with messages ordering sales or purchases of gold or stocks ; and the whole nation was watching eagerly to see what the result of this convulsion was to be. All trade was stopped, and even the President felt that it was time to raise his hand. No one who has not seen the New York gold-room can under- stand the spectacle it presented ; now a perfect pandemonium, now silent as the grave. Fisk, in his dark back office across the street, with his coat off, swaggered up and down, " a big cane in his hand," and called himself the Napoleon of Wall Street. He really believed that he directed the movement, and while the street outside imagined that he and Gould were one family, and that his purchases were made for the clique, Gould was silently flinging away his gold at any price he could get for it. Whether Fisk really expected to carry out his contract, and force the bears to settle, or not, is doubtful ; but the evidence seems to show that he was in earnest, and felt sure of success. His orders were unlimited. "Put it up to 150," was one which he sent to the gold-room. Gold rose to 150. At length the bid was made "160 for any part of five millions," and no one any longer dared take it. " 161 for five millions," " 102 for five millions." No answer was made, and the offer was repeated, " 162 for any part of five millions." A voice replied, "Sold one million at 62." The bubble suddenly burst, and within fifteen minutes, amid an excitement without parallel even in the wildest excitements of the war, the clique 128 THE NEW YORK GOLD CONSPIRACY. brokers were literally swept away, and left struggling by them- selves, bidding still 160 for gold in millions which no one would any longer take their word for ; while the premium sank rapidly to 135. A moment later the telegraph brought from Washington the government order to sell, and the result was no longer possible to dispute. Mr. Fisk had gone too far, while Mr. Gould had secretly weakened the ground under his feet. Gould, however, was saved. His fifty millions were sold ; and although no one yet knows what his gains or losses may have been, his firm was now able to meet its contracts and protect its brokers. Fisk was in a very different situation. So soon as it became evident that his brokers would be unable to carry out their contracts, every one who had sold gold to them turned in wrath to Fisk's office. Fortunately for him it was protected by armed men whom he had brought with him from his castle of Erie ; but nevertheless the excitement was so great that both Mr. Fisk and Mr. Gould thought it best to retire as rapidly as possible by a back entrance leading into another street, and to seek the protection of the opera-house. There nothing but an army could disturb them ; no civil man- date was likely to be served without their permission within these walls, and few men would care to face Fisk's ruffians in order to force an entrance. The subsequent winding up of this famous conspiracy may be stated in few words. But no account could possibly be complete which failed to reproduce in full the story of Mr. Fisk's last interview with Mr. Corbin, as told by Fisk himself. ' I wont down to the neighborhood of Wall Street. Friday morn- ing, and the history of that morning you know. When I pot hack to our office, you can imagine I was in no enviable state of mind, and the moment I got up street that afternoon I started right round to old ('orl)in's to rake him out. I went into the room, and sent word that Mr. Fisk wanted to sec him in the dining-room. 1 was too mad to say anything civil, ami when he came into the room, said I, You damned old scoundrel, do you know what j r ou have done here, "on and your people?' He hegan to wring his hands, and, ' Oh ! ' he says, this is a horriMe position. Arc you ruined?' I .-aid I did n't know whether I was or not; and I asked him again THE NEW YORK GOLD CONSPIRACY. 129 if he knew what had happened ? He had been crying, and said he had just heard ; that he had been sure everything was all right ; but that something had occurred entirely different from what he had anticipated. Said I, ' That don't amount to anything ; we know that gold ought not to be at 31, and that it would not be but for such performances as you have had this last week ; you know damned well it would not if you had not failed.' I knew that somebody had run a saw right into us, and said I, ' This whole damned thing has turned out just as I told you it would.' I considered the whole party a pack of cowards, and I expected that when we came to clear our hands they would sock it right into us. I said to him, ' I don't know whether you have lied or not, and I don't know what ought to be done with you.' He was on the other side of the table, weeping and wailing, and I was gnashing my teeth. ' Now,' he says, ' you must quiet yourself.' I told him I did n't want to be quiet. I had no desire to ever be quiet again, and probably never should be quiet again. He says, ' But, my dear sir, you will lose your reason.' Says I, ' Speyers [a broker employed by him that day] has already lost his reason ; reason has gone out of everybody but me.' I continued, 'Now what are you going to do? You have got us into this thing, and what are you going to do to get out of it ? ' He says, ' I don't know. I will go and get my wife.' I said, ' Get her down here ! ' The soft talk was all over. He went up stairs and they returned, tottling into the room, looking older than Stephen Hopkins. His wife and he both looked like death. He was tottling just like that. [Illustrated by a trembling movement of his body.] I have never seen him from that day to this." This is sworn evidence before a committee of Congress ; and its humor is perhaps the more conspicuous, because there is every reason to believe that there is not a word of truth in the story from beginning to end. No such interview ever occurred, except in the unconfined apartments of Mr. Fisk's imagination. His own previous statements make it certain that he was not at Oorbin's house at all that day, and that Corbiu did come to the Erie offices that evening, and again the next morning. Corbin himself denies the truth of the account without limitation ; and adds, that when he entered the Erie offices the next morning Fisk was there. " I asked him how Mr. Gould felt after the great calamity of the day before." He remarked, " 0, he has no courage at all. 6* i 130 THE NEW YORK GOLD CONSPIRACY. He has sunk right down. There is nothing left of him but a heap of clothes and a pair of eyes." The internal evidence of truth in this anecdote would support Mr. Corbiu against the world.* In regard to Mr. Gould, Fisk's graphic description was prob- ably again inaccurate. Undoubtedly the noise and scandal of the moment were extremely unpleasant to this silent and impenetrable intriguer. The city was in a ferment, and the whole country pointing at him with wrath. The machinery of the gold exchange had broken down, and he alone could extricate the business community from the pressing danger of a general panic. He had saved himself, it is true ; but in a manner which could not have been to his taste. Yet his * Mr. Fisk to the Editor of the Sun : Erie Railway Company, Comptroller's Office, NEW YORK, October 4, 1869. To THE EDITOR OF THE SUN. Dear Sir, . . . . Mr. Corbin has constantly associated with me; . . . . he tpent more than an hour with me in the Erie Railway Office on the afternoon of Saturday, September 25lh, the day after the gold panic I enclose you a few affidavits which will give you further information concerning this matter. I remain your obedient servant, JAMES FISK, JR. Affidavit of Charles W. Pollard. " State of New York, City and County of New York, ss. " C. W. Pollard, being duly sworn, says: ' I have frequently been the bearer of messages between Mr. James Fisk, Jr , and Mr. Abel R. Corbin, brother- in-law of President Grant Mr. Corbin called on me at the Erie build- ing on Thursday, 23d September, 1869, telling me he came to see how Messrs. Fisk and Gould were getting along He called again on Friday, the following day, at about noon; appeared to be greatly excited and said he feared ice should lose a great deal of money. The following morning, Saturday, September 25, Mr. Fisk told me to take his carriage and call upon Mr. Corbin and say to him that he and Mr. Gould would like to see him (Corbin) at their office. I called and saw Mr. Corbin. He remarked upon greeting me: " How does Mr. Fisk bear his losses? " and added. " It is terrible fur ." He then asked me to bring Mr. Fisk up to liis nouse immediately, as ho was indisjxt-iMl, Rnd did not feel able to go down to his (Fisk's) office I went after Mr. Fisk, who returned immediately with me to Mr. Corbin's residence, but shortly after came out with Mr. Corbin, who accompanied him to Mr. Fisk's office, where he was closeted with him and Mr. Gould for about two hours ' " There are obvious inconsistencies among these different accounts, which it i useless to attempt to explain. The fact of Saturday's interview - li"WfVi-r, to he licyniid <|j[>lit<>. THE NEW YORK GOLD CONSPIRACY. 131 course from this point must have been almost self-evident to his mind, and there is no reason to suppose that he hesitated. His own contracts were all fulfilled. Fisk's contracts, all except one, in respect to which the broker was able to compel a settlement, were repudiated. Gould probably suggested to Fisk that it was better to let Belden fail, and to settle a hand- some fortune on him, than to sacrifice something more than 1,000,000 in sustaining him. Fisk therefore threw Belden over, and swore that he had acted only under Belden's order ; in support of which statement he produced a paper to the following effect : " September 24. " DKAR SIR, I hereby authorize you to order the purchase and sale of gold on my account during this day to the extent you may deem advisable, and to report the same to me as early as possible. It is to be understood that the profits of such order are to belong entirely to me, and I will, of course, bear any losses resulting. " Yours, " WILLIAM BELDEN. u JAMES FISK, JR." This document was not produced in the original, and cer- tainly never existed. Belden himself could not be induced to acknowledge the order ; and no one would have believed him if he had done so. Meanwhile the matter is before the na- tional courts, and Fisk may probably be held to his contracts : but it will be far more difficult to execute judgment upon him, or to discover his assets. One of the first acts of the Erie gentlemen after the crisis! was to summon their lawyei-s, and set in action their judicial powers. The object was to prevent the panic-stricken brokers from using legal process to force settlements, and so render the entanglement inextricable. Messrs. Field and Shearman came, and instantly prepared a considerable number of injunc- tions, which were sent to their judges, signed at once, and im- mediately served. Gould then was able to dictate the terms of settlement ; and after a week of complete paralysis, Broad Street began at last to show signs of returning life. As a legal curiosity, one of these documents, issued three months 132 THE NEW YORK GOLD CONSPIRACY. after the crisis, may be reproduced, in order to show the powers wielded by the Erie managers : -^ " SUPREME COURT. H. N. SMITH, JAY GOULD, H. H. MARTIN, ^ and J. B. BACH, Plaintiffs, gainst Injunctton by order. JOHN BONNER and ARTHUR L. DEWELL, Defendants, " It appearing satisfactorily to me by the complaint duly verified by the plaintiffs that sufficient grounds for an order of injunction exist, I do hereby order and enjoin .... That the defendants, John Bonner and Arthur L. Sewell, their agents, attorneys, ami servants, refrain from pressing their pretended claims against the plaintiffs, or either of them, before the Arbitration Committee of the New York Stock Exchange, or from taking any proceedings thereon, or in relation thereto, except in this action. "GEORGE G. BARNARD, J. S. C. "NEW YORK, December 29, 1869." Mr. Bonner had practically been robbed with violence by Mr. Could, and instead of his being able to bring the robber into court as the criminal, the robber brought him into court as criminal, and the judge forbade him to appear in any other character. Of all Mr. Field's distinguished legal reforms and philanthropic projects, this injunction is beyond a doubt the most brilliant and the most successful.* * These remarks on Mr. Field's professional conduct ns counsel of the Erie Railway have excited n somewhat intempern'e controversy, and Mr. Field's ]>:irtis:ms in the press have made against the authors of Hie " Chapter* of Erie" a charge which cerfninly has the merit of even exaggera'ed moles' y on the part of the New York bench and bar, namely, that these wri cvs "have indelica'ely interfered in a matter alien to them in everyway"; the administration of justice in New York being, in this point of view, a matter in which Mr. Field nnd the Erie Railway nre alone concerned. Mr. Field him- self has published a letter in the Westminster Review for April, 1871, in which, after the general assertion that the passages in the " New York (Jold ('Hi-piracy" which relate to him " cover about as much untruth as could he crowded into so many lines," lie proceeds to make the following corrections: First, he denies, what was never suggested, that lie was in any way a party to the origin or progress of the Gold Conspiracy ; until (secondly) he was consulted on the 28th of September: when (thirdly) he gave an opinion as to the powers of the members of the Gold and Stock Exchanges. Fourthly, he denies thnt he has relations of any sort with any judge in New York, or tiny power over THE NEW YORK GOLD CONSPIRACY. 133 The fate of the conspirators was not severe. Mr. Corbiu went to Washington, where he was snubbed by the President, and at once disappeared from public view, only coming to light again before the Congressional Committee. General Butterfield, whose share in the transaction is least under- stood, was permitted to resign his office without an investiga- tion. Speculation for the next six months was at an end. Every person involved in the affair seemed to have lost money, and do/ens of brokers were swept from the street. But Mr. Jay (lould and Mr. Jarnes Fisk, Jr., continued to reign over Erie, and no one can say that their power or their credit was sensibly diminished by a shock which for the time prostrated all the interests of the country. Nevertheless it is safe to predict that sooner or later the last traces of the disturbing influence of war and paper money will disappear in America, as they have sooner or later disap- peared in every other country which has passed through the same evils. The result of this convulsion itself has been in the main good. It indicates the approaching end of a troubled these judges, other than such as English counsel have in respect to English judges. Fifthly, he asserts that out of twenty-eight injunctions growing out of the gold transactions, his partners obtained only ten. and only one of these ten, the one quoted above, from Justice Barnard. Sixthly, that this injunc- tion was proper to be sought and granted. Seventhly, that Mr. Bonner was not himself the person who had been "robbed with violence,'' but the assignee of the parties. On the other hand it does not appear that Mr. Field denies that the injunc- tion as quoted is genuine, or that he is responsible for it, or that it did, as as- serted, shut the defendants out of the courts as well as out of the Gold Ex- change Arbitration Committee, or that it compelled them to appear only as defendants in a case where they were the injured parties. In regard to the power which Mr. Field, whether as a private individual or as Erie counsel, has exercised over the New York bench, his modest, denial is hardly calculated to serve as a final answer. And in regard to Mr. Bonner, the fact of his being principal or representative scarcely affects the character of Mr. Field's injunction. Finally, so far as the text is concerned, after allow- ing full weight to all Mr. Field's corrections, the public can decide for itself how many untruths it contains. The subject has, however, ceased to be one of consequence even to Mr. Field since the subsequent violent controversy which arose in March, 1871, in regard to other points of Mr. Field's profes- sional conduct, and in another month after his letter was written he would perhaps have thought the comments of the Westminster Review so compara- tively trifling in importance as not to deserve his attention. 134 THE NEW YORK GOLD CONSPIRACY. time. Messrs. Gould and Fisk will at last be obliged to yield to the force of moral and economical laws. The Erie Rail- way will be rescued, and its history will perhaps rival that of the great speculative manias of the last century. The United States will restore a sound basis to its currency, and will learn to deal with the political reforms it requires. Yet though the regular process of development may be depended upon, in its ordinary and established course, to purge American society of the worst agents of an exceptionally corrupt time, there is in the history of this Erie corporation one matter in regard to which modern society everywhere is directly interested. For the first time since the creation of these enormous corporate bodies, one of them has shown its power for mischief, and has proved itself able to override and trample on law, custom, de- cency, and every restraint known to society, without scruple, and as yet without check. The belief is common in America that the day is at hand when corporations far greater than the Erie swaying power such as has never in the world's history been trusted in the hands of mere private citizens, controlled by single men like Vanderbilt, or by combinations of men like Fisk, Gould, and Lane, after having created a system of quiet but irresistible corruption will ultimately succeed in directing government itself. Under the American form of society, there is now no authority capable of effective resist- ance. The national government, in order to deal with the cor- porations, must assume powers refused to it by its fundamental law, and even then is always exposed to the chance of forming an absolute central government which sooner or later is likely to fall into the very hands it is struggling to escape, and thus destroy the limits of its power only in order to make corrup- tion omnipotent. Xor is this dimger confined to America alone 1 . Tin- corporation is in its nature a threat against, the popular institutions which are spreading so rapidly over the whole world \Yheiwer there is a popular and limited gov- ernment this difficulty will be found in its path, and unless some satisfactory solution of the problem can he reached, popular institutions may yet find their very existence endan* AN ERIE RAID.* HISTORY scarcely affords a parallel to the rapid develop- ment of character which took place in America during the five years of the late civil war. At its close the ordinary results of long internal strife wei'e conspicuous only by their absence. No chronic guerilla warfare was sustained in tlie South, and in the North no unusual license or increase of crime revealed the presence of a million of men unaccustomed to habits of industry and inured to a life of arms. Yet while these superficial indications of change would be so\ight in vain, other and far more suggestive phases of development cannot but force themselves on the attention of any thought- ful observer. The most noticeable of these is perhaps to be found in a greatly enlarged grasp of enterprise and increased facility of combination. The great operations of war, the handling of large masses of men, the influence of discipline, the lavish expenditure of unprecedented sums of money, the immense financial operations, the possibilities of effective co- operation, were lessons not likely to be lost on men quick to receive and to apply all new ideas. Those keen observers who looked for strange and unexpected phenomena when the strug- gle in the field was over have indeed witnessed that which must have surpassed all anticipation. If the five years that succeeded the war have been marked by no exceptional criminal activity, they have witnessed some of the most remarkable examples of organized lawlessness, * From the North American Review for April, 1871. 1):>6 AN ERIE RAID. under the forms of law, which mankind has yet had an oppor- tunity to study. If individuals have, as a rule, quietly pur- sued their peaceful vocations, the same cannot be said of certain single men at the head of vast combinations of pri- vate wealth. This has been peculiarly the case as regards those controlling the rapidly developed railroad interests. These modern potentates have declared war, negotiated peace, reduced courts, legislatures, and sovereign States to an un- qualified obedience to their will, disturbed trade, agitated the currency, imposed taxes, and, boldly setting both law and public opinion at defiance, have freely exercised many other attributes of sovereignty. Neither have the means at disposal proved at all inadequate to the ends in view. Single men have controlled hundreds of miles of railway, thousands of men, tens of millions of revenue, and hundreds of millions of capital. The strength implied in all this they wielded in practical independence of the control both of governments and of individuals ; much as petty German despots might have governed their little principalities a century or two ago. Thus by degrees almost the whole of the system of internal com- munication through the northern half of the United States has practically been partitioned out among a few individu- als, and, as proximity, or competition on certain debatable grounds, the Belgiums of the system, brought the inter- ests represented by these men into conflict, a series of strug- gles have ensued replete with dramatic episodes. No history of the present time will be complete in which these do not occupy much space, and any condensed record of them has, therefore, much more than a passing value. Not history in itself, it contains the material of history ; yet the thread of thc'se episodes is so difficult to trace, lying concealed in such dull volumes of evidence and records of the law, or lire- served only in the knowledge of individuals, that unless it be found at once it is in danger of being lost forever. The speedy oblivion which covers up events that, for a time, fasten public attention and seem big with great results, is indeed one of the noticeable indications of the times. The practical experience AN ERIE RAID. 137 of this fact has tended greatly to encourage all sorts of viola- tions both of law and of morals. There seems no longer to be any Nemesis to dog the evil-doer. Men are to-day in all mouths infamous from active participation in some great scandal or fraud, some stock operation or gambler's con- spiracy, some gold combination or Ei'ie Railway war, some Credit Mobilier's contractor's job or Hartford & Erie scandal, and to-morrow a new outrage, in another quarter, works a sudden condonation of each oftence. Nothing could more fully illustrate the rapidity with which such episodes as those referred to are forgotten than the com- plete oblivion into which the struggle in 1869 for the pos- session of the Albany & Susquehanna Railroad has fallen. This contest, marked by legal scandals almost unparalleled, and actually resulting in an attempt at armed warfare between corporations, though not yet finally passed upon by the courts, is fairly forgotten by the world. It was, however, not without elements of a permanent intei'est, though no consecutive account of it has yet been attempted. The following narra- tive, drawn almost exclusively from the sworn evidence and official records in the case, probably presents the story with as near an approach to accuracy as is now likely ever to be arrived at. The business of transportation by rail naturally divides itself into the two great elements of through and local traffic. The Erie Railway was especially constructed with a view to < h rough traffic, and the New York Central, though originally consist iiiy in a chain of disconnected local roads, through the force of circumstances and by a natural process of develop- ment, early became one of the great trunk lines of the conti- nent. The Albany & Susquehanna, on the contrary, was designed by its projectors as a purely local road. As such its history could never have been, a very interesting one, except to its projectors and owners. It happened, however, to occupy a bit of debatable territory between the two great trunk lines just mentioned, and hence derived its importance. New 138 AN ERIE RAID. England has always been in railroad history a sort of an ap- panage of the Central Railroad of New York. Both freight and passengers passing to and fro between Boston and the West naturally took Albany on their way, and the Central Road, monopolizing as it did the one natural gap in the moun- tain ranges which divided the interior basin from the sea, looked upon this traffic as its inalienable property. The Albany & Susquehanna Railroad started from this eastern terminus of the Central, and was intended to open it to the Erie at the city of Binghamton, some one hundred and forty miles from the point of departure. In the early days of the enterprise through traffic was less regarded by railroad man- agers than it now is, and the future significance of this link in their system was hardly realized by either of the great trunk lines. The carriage of freight was then but little understood, and grades were of far greater importance than they now are. Valley roads, it was supposed, might safely ignore the moun- tain track. This the Albany & Susquehanna certainly was. The region through which it passes is very broken, though it ranks among the finest of the agricultural districts of New York. Starting from that point where the great Alleghany range gradually sinks away into the valley of the Mohawk, the road skirts the base of the heights of Helderberg, an out- lying spur of the Catskills, famous once as the seat of the anti-rent troubles, and then, passing among the large rolling hills of Southeastern New York, it gradually climbs the water- shed. The route was a difficult one, and the road was costly of construction ; laid out on the broad-gauge principle, as a contemplated feeder of the Erie, it was forced to scale ridge after ridge in working its way from one picturesque valley to another, through which to find a natural roadway to its desti- nation. The country along the line is of a hilly rather than a mountainous character, partaking more of the appearance of Vermont than of New Hampshire; timbered lands and cultivated fields alternate over the loftiest summits, and there is something peculiarly attractive in the primitive nestling appearance of the towns and villages. The road thus was AN ERIE RAID. 139 projected through a difficult and sequestered region, neither wealthy nor of varied industries, opening to a new trade neither great markets nor a peculiarly active people. It en- countered, therefore, even more than the average amount of those financial tribulations which mark the early history of all railroads. The company was organized in 1852, and the work of con- struction was begun in 1853, with one million dollars raised by individual subscription along the line of the road ; further sums in aid of construction were subsequently received from the towns likely to be benefited by the line, which, by an act of special legislation, were authorized to subscribe to its stock ; a loan of one million dollars was likewise obtained from the city of Albany, upon a pledge of the first-mortgage bonds of the company. The process of construction was, however, very slow. The work begun in 1853 was suspended in 1854 on account of the failure of the contractors ; it was recom- menced in 1857, and then slowly dragged along to comple- tion, a very contractors' Golgotha. Eight times did acts ex- tending to it the financial aid of the State pass the legisla- ture ; but they were encountered by six Executive vetoes, and from this source the company realized but seven hundred and fifty thousand dollars. That the scheme was successfully car- ried out at all was mainly due to the good pluck and \intiring industry of one man, Joseph H. Ramsey, at once the origi- nator, president, financial agent, legal adviser, and guiding spirit of the enterprise. The close of the seventeenth year of corporate life found all the available means of the company exhausted, and every one connected with it, except Mr. Ramsey, thoroughly discour- ;iLVv time three hundred shares of the forfeited stock at twenty dolhrs per share. This loan was negotiated through one of the directors of the company named Leonard, acting as it;) financial agent, and amounted to the sale of eighty thousand dollars, in the nominal securities of the com- pany, for the sum of forty-one thousand dollars in cash. Two AN ERIE RAID. 141 hundred shares of the stock, as it afterwards appeared, passed into the pockets of the director and financial agent as a species of brokerage commission. The second loan was negotiated by Mr. Ramsey himself with Mr. David Groesbeck, the head of a well-known brokers' firm in the city of New York, and for- merly the business associate of Mr. Daniel Drew. This loan was upon terms somewhat more favorable to the company than the other, and there were no indications of In-okerage in the case. The company received five hundred and sixty thou- sand dollars, and pledged as collateral its second-mortgige bonds at seventy per cent, with the privilege of purchasing them at any time within eighteen months at eighty, and a similar privilege as regarded twenty-four hundred shares of the forfeited stock at twenty-five dollars per share. In other words, if the lenders availed themselves of the option, as they subsequently did, securities to the nominal value of one mil- lion and forty thousand dollars were sold to them for seven hundred thousand dollars in cash. This must certainly be considered as a very advantageous bargain for the company ; thirty per cent is a large profit, but it here represented a very unusual risk. Both of these loans received the unanimous sanction of the Board of Directors, and that to Groesbeck played a most important part in the subsequent struggle for the possession of the road. With the money thus raised the enterprise was at last car- ried through, and, on the 15th of January, 1809, seventeen years after the organization of the company, the cities of Bing- hamton and Albany were brought into direct communication. Meanwhile those seventeen years of construction had greatly altered all the conditions of that railroad system of which the Albany fe Susquehanna Railroad was now for the first time to become an integral part. In 1853 both the Erie and the Central were but feebly entering on their great careers. The Erie was just completed to Dunkirk : the Central was not yet consolidated ; the whole receipts of the first were but one third part of what the completion of Mr. Ramsey's road found them, while, during the same interval, the receipts of the last 142 AN ERIE RAID. had swollen from less than six millions per annum to consid- erably over fifteen. As for the men who managed the great trunk lines when Mr. Ramsey had completed his work, {heir names had never been mentioned in connection with railroads when he began it. In fact, the whole aspect of the problem had changed. In 1853 all the roads in the country were local roads ; in 1869 no local road was suffered to exist, un- less the great through roads were satisfied that it could serve no purpose in their hands ; nay, more, unless they were also satisfied that it could serve no purpose in the hands of their competitors. When, therefore, the projectors of the Albany & Susquehanna line had completed it to Binghamton, they suddenly found themselves involved in all the complications and controversies of an intricate system. The intended local road was an element of strength or a source of danger not to be ignored by the managers of the great trunk lines. Messrs. Jay Gould and James Fisk, Jr., had at this time already succeeded in firmly establishing themselves in the practical ownership of the Erie Railway. Mr. Daniel Drew, some six months before, had been driven out of its treasurer- ship, and even Commodore Vanderbilt had been compelled by fair means and by foul to abandon all idea of controlling its management. When the Susquehanna Road was completed it became at once a most important element in the successful prosecution of the plans of Messrs. Gould and Fisk. It was so from two points of view, either as regarded their compe- tition with the Central Road for the carriage of the produce of the West to New England ; or, still more important, as re- j/anlrd their competition with other agencies for the carriage of coal to the same region. The anthracite coal deposits of America lie but a short distance to the south of the Erie Rail- way. Disappointed in the hope of successfully competing with the Central Row! for the carriage of the produce of tho West, convinced at la.st, by hard experience that the more of tliis business the road undertook to do the more hopelessly bankrupt it became, the Krie mnnngers had more and more turned their attention to the business of transportim; coal. AN ERIE RAID. 143 In this also they were subject to a very sharp competition, particularly from the wealthy companies which themselves owned the coal-beds, and which now proposed to supplement their business as colliers with that of carriers also. This by no means met the views of the Erie people. They were now entering into vast contracts with various coal companies to haul many hundreds of thousands of tons per annum ; they naturally wished to extend their connection, as by doing so they accomplished two ends, they shut the coal companies up in their mines, making them dependent on the Erie Rail- way for access to their markets, and at the same time they secured to themselves a monopoly in so far as the consumers were concerned ; they, in fact, placed themselves as an indis- pensable medium between producer and consumer. The Al- bany & Susquehanna Road might well develop into an inde- pendent and competing line ; hence they greatly coveted the possession of it. By it they would not only secure an access to Albany, but would forge the link which was to unite the Erie with a whole network of roads running north and east from Albany throughout coal-consuming New England. It is wholly unnecessary to dwell upon the public considera- tions which rendered it unadvisable that the adventurers then representing the Erie Railway should be intrusted with a prac- tical control over the winter supply of such an article as anthracite coal. However amiable or otherwise they might be in their domestic characters, their course had not been such as to make unprejudiced observers anxious to repose in them so delicate a duty as that of sole purveyors at any sea- son of an article of prime necessity. The coal companies naturally did not look with any favor at a policy which threat- ened their lines of communication. Finally Mr. Ramsey, as the controlling influence in the Albany & Susquehanna man- agement, neither desired to surrender the independence of his road, nor, in view of the recent experience of others, did he impose implicit faith in either the verbal or written assur- ances or obligations of the Erie representatives. Possession was with them considerably more than nine points of the law, 144 AN ERIE RAID. and Mr. Ramsey evinced a marked repugnance to surrender the property intrusted to his charge into their possession, regard- less of any liberal promises held out as to subsequent beneficial results, public and private, likely to ensue from his doing so. The position of Mr. Ramsey in his own board of direction was not, however, perfectly secure. Certain enmities and jealousies had, little by little, not unnaturally grown up along the line of the road, and, at the election of directors in 1868, a ticket had been chosen partly in the opposition interest. What these parties represented when they came into the board it is difficult to say ; it may have been a restless feeling of dis- content at the slow progress of the enterprise, or a vague desire for change ; or, perhaps, a personal dislike and mistrust of Mr. Ramsey. Whatever the cause, the direction at the time of the completion of the road was divided not unevenly. This condition of affairs was very unsatisfactoiy to Mr. Ram- sey. He maintained that at the previous election he and his friends had been taken by surprise ; that no wish for a change in management really existed in the minds of the bulk of the stockholders ; but, finally, whether it existed or not, he let it be distinctly understood that he did not intend to belong to a divided direction, and that at the coming election either he or his opponents were to go out. The materials for a lively con- test for the control of the company in September, 1869, thus existed in great abundance and on all sides. The road was completed in January, and early in June the Erie manipulators began their preparations to obtain pos- session of it, or, as they more graphically would have said, to " Cobble " it. The stock of the road was nominally quoted at about twenty-five per cent of its par value ; it was rarely bought or sold, and was supposed to possess little real value, except as representing the control of the enterprise. It was almost exclusively in the hands of three classes of owners, the directors and those dwelling along the line of the mad, Mili.-rribing municipalities, and certain capitalists who held it RH security for money advanced and expended in construction. The subscription books of the company had never been closed, AX KIMK I!AID. 14." as but two million eight hundred thousand dollai's of the four million dollars of authorized capital had ever been subscribed, and of the amount of stock which had been subscribed for, eight hundred thousand dollars had been forfeited in the man- ner already mentioned. Whoever desired to get possession of the property had, therefore, to obtain the control for a longer or shorter period, to include the election day, of a majority of this stock. The Erie party wishing to come in, and the opposition minority determined not to go out, thus had natural affinities to each other. But though when united they controlled a formidable minority of the whole stock, yet it was by no means the majority, and the Ramsey party was now thoroughly alive to the danger of the situation. The plan for the approaching campaign was soon matured. Under a sudden demand for election purposes the stock, which for years had been nominally quoted at twenty, rose rapidly in July to forty and fifty, and even to sixty and sixty-five per cent. All parties were buying. The issue was, however, to be decided by stock held by municipalities, and it was to the control of this that the greatest efforts were devoted. Here lay the stronghold of the Ramsey party ; and here they felt secure, for the law authorized the town commissioners, who held this stock as trustees, to sell it only for cash and at its par value, and forbade them to sell it for less unless specially authorized to do so by a town vote. This was a point which it seemed hardly likely to touch. Suddenly, and to their great dismay, Mr. Ramsey and his friends beard of agents out among the towns offering the commissioners par for the stock, provided the offer was accepted at once. Naturally this was a great temptation to commissioners who represented towns winch grievously felt the weight of railroad loans. These men were suddenly called upon to accept or reject, on their own responsibility, an offer which, a few days before, would have seemed incredible, but the acceptance of which, while it would relieve the town of debt, would also deprive it of all voice in the management of the road waited for so long. In a number of cases the commissioners considered it their duty 7 J 14G AX ERIE RAID. to accept the offer, and the control of several hundred shares was in this way secured. The Ramsey party was thus forced into the field, and the stock of towns rose to a premium. This process, however, involved a very considerable outlay of money and no inconsiderable risk of loss. Buying up a majority of the stock was altogether too much like paying for a road. Why should that be obtained at great cost which could equally well be got for nothing? Stimulated by the passion which Mr. Fisk has happily described as an inherited disposition " to rescue things out of somebody else," one Sun- day afternoon, early in August, a party of gentlemen met at the Fifth Avenue Hotel in New Yoi'k and arranged a new plan, involving the certain transfer of the road into their hands, but avoiding the necessity of further pecuniary outlay. A negotiation was successfully concluded for the purchase of four hundred and fifty thousand dollars of the stock of various towns on the following terms : no money was to pass, but the bonds of Messrs. Gould and Fisk were given, binding them to purchase and pay for the stock after the election, provided the commissioners should at the election vote as the givers of the bond should direct. The legal effect of such an arrangement may well have escaped the town commissioners, but Messrs. Fisk and Gould had not as a rule up to this time been found deficient in matters of technical nicety. These bonds had no binding force whatever. It was not a sale for cash, it was contrary to law and to public policy ; it was an arrangement wholly beyond the powers of the commissioners to make, and one which the courts would not sustain. The commissioners who accepted these bonds and who subsequently did vote as tin isc who L, r :ivc them dictated, were public officials, as such their duties were prescribed and were sufficiently simple; they cm i Id sell, and they could vote, but if they sold it. was to be for cash down, and if they voted it was to l>o on their own judgments, and not on those of other people. In this c.n ;e, indeed, what security had they that, after they had voted the road into the hands of the Krie managers, the conditions of the bond in regard to the purchase of the stock would be ful- AN ERIK RAID. 147 filled ] As a matter of fact they did vote as they agreed, but nothing further was ever done to complete the transfer of the stock. Events now moved rapidly on both sides. On the 3d of August the certificates of town stock were presented for trans- fer. It was a new question ; Mr. Ramsey was away, and the treasurer hesitated. Finally, all stock sold for cash and paid for by either side was transferred ; but the transfer was denied where, in the opinion of the treasurer, the transaction was not completed. It was evident they were pressing the Ramsey party heavily. It now occurred to Ramsey that the subscrip- tion-books had never been closed, and that twelve thousand shares of the capital stock of the company were as yet unis- sued. On the 5th he took the subscription-book home with him, held a meeting of a few of his friends, and, among them, they wrote down their names for nine thousand five hundred shares of stock. It was fully understood that this subscription bound those who made it to no immediate payments ; ten per cent was to be paid in at once, and for this Ramsey was to provide ; the remainder would only be called in as should be ordered by the board of directors whom this very stock would elect. Meanwhile, if any of the subscribers desired to get rid of their stock, Ramsey undertook to relieve them of it. That this subscription, made by directors in secret on the eve of an election, and with a view of affecting that election, should have subsequently been held legal is open to criticism ; its good faith even might well have been suspected : but that, on grave consideration, it should be justifiable is perhaps as severe a censure as could be passed on the condition of affairs existing in the community in which it was made. Yet, \inder the cir- cumstances, unnecessary and unfortunate as the step after- wards proved to have been, Mr. Ramsey and his friends were justified in taking it. It is simply necessary to refer to those who now sought to obtain control of the Albany & Susque- hanna Railroad. Their position in the community, their stand- ing in the courts, their financial and fiduciary relations, were notorious. They had reduced society to a condition in which 148 AN ERIE RAID. any man brought into conflict with them could not but realize that he had only himself to rely on, that a species of Lynch law prevailed, and that might and possession alone counted for anything. The first duty of Mr. Ramsey then, unquestion- ably, was to keep the property intrusted to his charge out of the hands of those men ; this every consideration of honor and of responsibility bound him to do at any cost and by all legal means, certain that, whatever he might scruple at, his oppo- nents, once in control, would scruple at nothing. This step was legal, and, however questionable in many aspects, Mr. Ramsey and his friends were justified in taking it, provided they made their subscriptions in good faith to their company, and held themselves responsible for them. At best, however, it was an error in judgment. By it Mr. Ramsey sacrificed much of the strength of his position, which lay in the fact that he was fighting men who had set the most infamous pre- cedents ever known for transactions of a not dissimilar char- acter. As usual in dealing in measures of questionable right and expediency, one doubtful step soon led to another which admitted of no doubt. Ten per cent on the amount of the subscriptions had at once to be provided, and that, too, by Ramsey, whose resources were already strained to the utmost. Again he had recourse to Groesbeck, and drew on him for $ 1 00,000 ; he had also subscribed for more stock in Groesbeck's name. The subscrip- tion, involving as it did further possible calls to the full value of the stock, Groesbeck politely declined ; the draft he hon- ored, receiving as collateral for it a deposit of $150,000 of the equipment bonds of the Albany & Susquehanna Uailmad <'<>., which belonged to the road, and which Mr. Ramsey procured from the treasurer for the purpose of so pledging them. The ten per cent of the subscription was thus paid in, and the nine thousand five hundred .shares were placed on the books of the company to the credit of the nominal subscribers, each of whom gave Ramsey a voting proxy for the coming election. Mouths afterwards Mr. Grocslieek defended this transaction, and declared that, undor the same circumstances and fighting AX KR1K RAID. 14'J the same men, he himself would have gone as far, and further too, if necessary. The proceeding was, however, none the less indefensible. The securities which had thus been misapplied were shortly after, at Groesbeck's own suggestion, returned to the officials of the company, and their place supplied by col- lateral of inferior value ; and as for the stock, it was never voted on, and the issue of it only served to endanger the case of the Ramsey party.* This took place on the 5th of August, but already the usual storm of judicial orders and injunctions had begun. The stock of the towns being, so far as possible, secured, the next blow was directed at the stock reissued and held as collateral. Two blocks of this were outstanding, one in the hands of Chase, the other in those of Groesbeck. On the application of Messrs. Gould and Fisk's counsel, an injunction was issued by Mr. Justice Barnard, of the Supreme Court, forbidding any votes being cast upon this stock, and ordering its transfer to a re- ceiver pending judicial investigation ; all this upon the ground that the stock was unlawfully issued. The books were to close upon the 7th, the order was procured on the 4th. While this was going on in the city, the Ramsey party was not idle in the * This and the pravious paragraph are repuhlishecl in the form in which they originally appeared. Yet it may well be questioned whether even the modified censure implied upon Mr. Ramsey's proceedings would bear exami- nation. Ordinary rules cannot always govern exceptional cases. If a mm finds himself involved in an every-day controversy, however angry, lie is very properly expected to confine himself to recognized remedies; if, however, lie is suddenly roused from his sleep by the assault of midnight robbers, he cannot, if he is a man of courage, be called upon to exercise any nice judg- ment as to the use he may make of the weapons nearest at hand : it is si ease of self-preservation. Especially would this be true if his assailants were notoriously in collusion with the watch. If Ramsey had hesitated, even for an instant, his friends would have lost courage, and lie could never have re- covered himself; under the circumstances it is very difficult to see why he was not as fully justified in the use of any and every weapon as a. man would be in a struggle for bis life. Of course in the one case or the other he would be amenable to the law for any illegal act. The question is o e purely of moral accountability; legally, a man so circumstanced must act at his own peril. He may infringe laws, and. if he does, he must 1)6 prepared to undergo the peraltv of so doing, but it may yet be his duty to incur that penalty in defence of his trust. 150 AN KRIE RAID. country. On the same day they appeared before Judge Parker of Owego and commenced a suit, resulting, of course, in the inevitable injunction, by which all parties were restrained and enjoined from transferring on the books of the company seven hundred shares of stock belonging to the town of Oneonta, and which the Ei'ie party claimed to have purchased. No sooner did the news of this move arrive in New York, than Mr. Thomas G. Shearman, a member of the firm of Field, Shear- man, & Co., and one of the most trusted legal advisers of those now controlling the Erie Railway, was despatched to Owego, where he succeeded in getting the injunction dissolved. Hith- erto the engagement had been at long range, as it were, but it now lacked a few days only of the date when transfers previous to the election were to cease ; it was time for close quarters. Not content with the success of his defensive op- erations, the Erie counsellor at once assumed a vigorous offen- sive. Two new suits were initiated, one to compel the immediate transfer of that very Oneonta stock which the com- pany had just previously sought to prevent ; and the other, a more vital thrust still, sought to restrain Ramsey himself from the further performance of his duties as president of the com- pany. It is almost unnecessary to say that both the desired orders were almost immediately obtained. The board of di- rection was divided into two hostile camps exactly equal in strength, they stood seven to seven. The suspension of Mr. Itamsey thus turned the scale and placed the Erie opposition in the majority. It remained only to call a meeting of the directors, over which the vice-president, whose sympathy with the Erie movement was pronounced, would preside, and this meeting would vote out of office the present treasurer, who hesitated about the desired transfers, and would replace him by a suitable successor. Absolute control of the books thus s.-cnred, the election might be regarded us a mere matter of detail. All the day of that meeting the offices of the company swarmed with indignant directors and opposing counsel ; angry words passed, loud threats were uttered ; the suspended presi dent was informed that his presence was undesired, and the AN ERIK RAID. 151 unsuspended vice-president showed a strong disposition to assume also the duties of treasurer in so far as these involved the entering of transfers and the issuing of certificates of stock. At last a sort of tussle took place over the books, and then the police were called in, who established an angry truce. All this took place on the 5th ; on the 7th the books were to be closed. The control of those books, it was well understood, implied the control of the road. The presence of James Fisk, Jr., and of Jay Gould in the struggle was no mystery, and the officei's of the road could not fail to recall how, only a few months before, the vault of the Union Pacific Railroad had been forced, in a vain search for the books of the company, under cover of a judicial process and at the dictation of these very men. That the records were not in safety while in the offices of the corporation was notorious. That night, in the presence of counsel, and with the knowledge of the treasurer, they were removed from the building. The law guaranteed to stockholders access to the books of the corporation ; the judi- cial abuse of the processes of law had converted this right into a facility for fraud. Whether those who would now insist upon the right were likely to avail themselves of that oppor- tunity was a question in regard to which recent experience in other quarters might warrant the formation of an opinion. In any case the books were now surreptitiously removed under the advice of counsel, and the action of the officials who assented to this removal was indorsed by public opinion, and, throughout the subsequent proceedings, was not censured by the courts. The next, day the opposition wing of the direction met and organized with the vice-president in the chair. Just as they were proceeding to business, however, an attorney of the other wing quietly entered the room and served upon four of those present a new judicial order, restraining them from acting as directors of the company, or from interfering with its affairs. This unexpected move, leaving them without a quo- nun, fell like a thunderbolt on the Albany members of the 152 AN ERIK RAID. Erie party, and they precipitately retired from the field and took the first train to New York in search of counsel and assistance. Reaching the Grand Opera Honse and the offices of the Erie counsel, the fugitives laid their case before Mr. Shearman. The quick eye of that gentleman at once took in the whole situation, and he was not unequal to the emergency. The president, vice-president, and a majority of the board of di- rection were now suspended, and the Albany &, Susquelnuma Railroad was suspended with them ; every one was enjoined ; there was no one authorized to give an order or to pay out a dollar ; chaos was come again. Recognizing the fact that a court of equity had done this mischief through the exercise of one of its powers, Mr. Shearman was inspired with a con- viction that the same court must repair it by the exercise of another power, injunctions had occasioned the dead-lock, a receivership must dissolve it. A new suit was at once com- menced, the complaint in which set forth the existing condi- tion of affairs, and prayed for the appointment of receivers who should operate the road, and so avert the disastrous con- sequences otherwise sure to ensue. This paper was drawn up by Mr. Shearman at his office in the Twenty-third Street Opera Umise, on the afternoon of Friday the 6th of August. It was not ready for signature until the hour of ten o'clock, P. M. The ., who thereupon left the (irand Opera House Mini, in fifteen minutes, returned with what, purported to be Judge l.arnard's signature appended to it. A strange AN ERIE RAID. 153 obscurity hangs over this part of the transaction. It was never stated throughout the subsequent proceedings where this order was .signed ; it was never proved that it had then been signed by Judge Barnard at all. Diligent inquiry at a date long subsequent failed to discover any trace of it in the records of the court ; no evidence was ever elicited that Judge Barnard was in New York at any time during that day. It was subsequently said to have been signed at the house of Fisk's mistress ; but this strange statement only called forth a bare denial unaccompanied by any explanation.* That this order, whether there signed by him or not, was subsequently adopted as his own by Judge Barnard admits of no doubt. Under the most favorable supposition it would appear that the surprisingly brief period of fifteen minutes had sufficed to go through all the forms and make all the inquiries neces- sary to satisfy the judicial mind in regard to so trifling a matter as the receivership of some one hundred and fifty miles of railroad, involving millions of capital. This order appointed Charles Courier, of whom the judge probably knew absolutely nothing, and James Fisk, Jr., of whom he undoubtedly knew a great deal, receivers of the Albany & Susquehanna Railroad Co. Criticism is wholly unnecessary. The whole proceeding reflects the highest credit on the energy of all concerned : it speaks volumes. The law's delay is an ill of which the citi- zens of New York, certainly, have no cause to complain, at all times and under all circumstances. By half after ten o'clock all was settled, and at eleven the two receivers, accompanied by a select body-guard of directors, friends, and lawyers, were on their way by the night train to take possession of their charge. Their opponents had, how- * It has since been stated, on the authority of Judge Barnard, that he acci- dentally met the counsel on his way from the cars to his house, and wns asked by him to sign the order; that he did so, stepping into a. neighboring real- estate office for the purpose. The meeting was certainly a singular coinci- dence, and the method indicated of transacting judicial business of the first importance is calculated to excite surprise, if not consternation The " ex- planation " seems, however, to have been considered perfectly satisfactory by those to whom it was made. 7* 154 AN ERIE RAID. ever, already got an inkling of the summary process impend' ing over them from New York, and, while Mr. Shearman was busy with the preparation of his order in the Grand Opera House, other counsel were no less busy in the opposing camp at Albany prepai'ing a counter-order, appointing another re- ceiver in their own interest. This, when completed, was duly submitted to Mr. Justice Peckham, of the Supreme Court of the Albany district, between nine and ten o'clock of the same (Friday) evening. The signature of this magistrate was affixed to it, and a Mr. Pruyn, of Albany, was by him appointed receiver of the Albany & Susquehanna Railroad Co. It was close work. Each order took effect when signed, and there certainly was no delay in their preparation, and even less in procuring signatures to them. The evidence seemed subse- quently to indicate that the Albany receivership had about one hour's priority in time ; it had, however, one hundred and fifty miles of distance in its favor, and the great weight which attaches to possession as an element of success in litigation has long since passed into a proverb. Thus, on Saturday, the 7th of August, everything indicated a collision of forces, No sooner had Receiver Fisk reached Albany, and received the reports of his scouts, than he hast- ened with his friends to the offices of the company. He arrived there towards eight o'clock. In spite of this praise- worthy activity on their part, Messrs. Fisk and Courter, on proceeding to take possession of the premises, encountered a somewhat unexpected obstacle in the person of a Mr. Van Valkenburg, the superintendent of the road, who, upon being informed of their errand, announced that he was already in possession under the orders of Receiver Pruyn, and further intimated that he did not propose to abandon it. A very amusing and somewhat exciting scene then ensued. The junior appointee of Mr. Justice Barnard presented his papers to the superintendent, seated himself on the table, announced himself as Mr. .lames Fisk, Jr., <>f New York, eome to take sioii and prepared to do so if it required "millions of money and an unlimited number of men." He further added AN ERIE RAID. 155 that this was his twenty-sixth raid of the same character, and that he proposed " to take you fellows " ; to all of which Mr. Van Valkenburg pleasantly replied that he " hoped he would have a good time doing it." His companions Mr. Fisk intro- duced as his " boys," and invited them in to possess them- selves. Quite a lively colloquy ensued, which was not satis- factory to Mr. Fisk, who from words gradually proceeded to overt acts, and finally ordered his "boys "to put the other " boys " out. Unfortunately the preponderance of force was not on his side. Instead of ejecting ins opponents, he was summarily ejected himself, and, after being ignominiously and very roughly hustled down stairs, he found himself in the street in a very dishevelled condition. Nor did his dis- comfiture stop here ; no sooner did he reach the pavement than he was arrested by a fiery little individual, claiming to be a policeman, and ignominiously marched off to the station- house. As no complaint was preferred he was speedily re- leased, but probably not until he had discovered that his arrest, like his ejectment, was the work, not of a policeman, but of an employee of the company. No sooner was he again a free man than he returned' to the charge. Mr. Pruyn was now at the offices in person, claiming to be in possession as receiver, and a crowd of lawyers, officers, and parties in interest had also assembled there. The heads of the opposing factions met face to face. No further riotous demonstrations were at- tempted, but, pending advices from New York, Mr. Fisk kept up the semblance of a possession. He evidently bore no ill- will to Mr. Van Valkenburg, on account of the rough treat- ment of the morning, as he even went so far as to compliment that gentleman on his display of energy, and to signify a de- sire to extend to him his personal favor. As to Mr. Ramsey, Mr. Fisk, as a happy solution of existing complications, sug- gested that the possession of the road should be decided, not as of old by a personal contest between the two heads of the opposing factions, but by the goddess of chance, or whatever other divinity may preside over the issue of a game of " seven up " ; and, with such interchange of amenities and pleasant 156 AN ERIE RAID. sallies of wit, with now and again the service of some notice or order of court, and perhaps an injunction or two, the pro- tege of Barnard beguiled the weary monotony of the day. The cessation of active hostilities did not last long. The discomfiture of the morning had been at once telegraphed to Mr. Shearman, in the recesses of the Grand Opera House, and that gentleman had forthwith proceeded to discover and apply the suitable remedies of the law. Recourse was at once had, or is alleged to have been had, to Judge Barnard, sitting at special term in the conrt-honse. Again, however, a curious obscurity hangs over the actual whereabouts of that magistrate. On this day his mother was still lingering at Poughkeepsie, and another judge was sitting at special term in the court-house. In any case a most unusual and indeed welmigh antiquated writ, never before granted to meet such an exigency as that which had now arisen, was at once exhumed and prepared. In the first place a new and sweeping injunction, purporting to have been granted by Judge Barnard, was obtained, by virtue of which Mr. Receiver Pniyn, the sheriff of the county, the Albany police, and all the railroad employees, were restrained from any interference with receivers Courter and Fisk. Not satisfied with this, a writ of assistance * was likewise ordered to issue, by which the sheriff, and, if need be, the posse comi- f /if its, wrn> placed at the disposal of Messrs. Fisk and Courter. This was a sufficiently unusual proceeding, but the service of the process was so extraordinary that the ordering it was :i( oucr reduced to Ijic commonplace. Now, probably for the first time on record, both injunction and writ were forwarded to their destination for service by electric telegraph. That; afternoon officers in Albany actually undertook to serve upon parties to a suit processes which had been issued in New York * " Writs to the sheriff 1 , to:\st :i receiver, seijinvstnitor, or other party to a suit in rhiuicery, to L'et pn-^cssioii, under a decree of the court, of lands with- hold from him l>y another party to the suit. These writs, which issue from th<> equity side of the Court of Exchequer, or from any other court of dian- CITV. !ire :it leiist :i< old a* the reijrn of .Tame* I., and arc still ill common uso In England, Ireland, and some of the Tinted States." (luincy's (Afats.) Re- l*>rtt, p. 896. AN ERIK RAID. 157 not an hour before, on the strength of affidavits as to facts which had that day occurred in Albany. In place of making service with the original, bearing the seal of the court and the signature of the judge, the very ink of the copies which the officers had in their hands was not yet dry. Of com-se such a service was contemptuously disregarded, nor did the sheriff presume to insist upon it. It was now afternoon, and it was very evident that nothing further could be effected this day; both parties, however, claimed to be in possession, and neither would yield the ground. Finally a species of truce was arranged to hold good over the corning Sunday. A representative of each party was to be left in the offices, and, before nine o'clock of the coming Monday, no act of hostility, open or covert, in so far as possession was concerned, was to be attempted by either side. The interval of Sunday was passed in active preparation. While the representatives of the receivers tarried in the de- serted offices, the principals themselves were busy with their plans of campaign. Mr. Fisk and his friends among the direc- tors retired to New York to get advice and the originals of the telegraphed writs ; Mr. Pruyn and the Ramsey party stoutly prepared themselves in Albany for such trials as the morrow might bring forth. The issue now presented was, in plain language, one simply of judicial nerve. It was a conflict be- tween the judiciary of New York City and that of the country. The system of electing judges by the popular vote had at last brought forth bitter fruit, and men had been elevated to the bench who should have ornamented the dock. These selec- tions did not perhaps extend beyond one or two districts oiit of the eight into which the State was divided, but each of the thirty-three judges who composed those eight courts exercised throughout the State the extensive and delicate powers of a chancellor. All were magistrates of co-oi'dinate powers, and technically of one court ; an order made by one could be dis- solved by another, an officer appointed by this magistrate could be suspended in the exercise of his duties by that, what 158 AN ERIK RAID. one justice could do the next could undo. Everything under such a system depended on judicial respect for judicial action ; courtesy and confidence were the essence of it. All these had, in certain quarters, now long passed away. The judges of the country had felt bitterly the discredit brought upon the common bench by the action of more than one judge in the city ; there were among them those who had been deeply mor- tified by a contemptuous disregard of their process. Hence a conflict had become inevitable, and nowhere was it so likely to arise as out of the litigations originating with the managers of the Erie Railway. A peculiar discredit had now long at- tached to these, and certain names, both on the bench and at the bar, were always associated with them. There are facts which are of public notoriety ; the community recognizes them and no justice can ignore them. When, therefore, James Fisk, Jr., was appointed, as a matter of course, by Judge Barnard, receiver of a railway, no part of which lay within a hundred miles of that magistrate's judicial district, and when this appointment was made on the eve of a con- tested election for directors of that railway, and must have been decisive of the contest, then, at last, a case was presented which could not be ignored. The conflict was not likely to be a pleasant one. Recent proceedings in other causes had indi- cated with sufficient clearness the lengths to which certain jus- tices of the first district were not indisposed to go. Neither the scandal certainly involved, nor the defeat not unlikely to ensue, were pleasant to contemplate ; but the stand must be made. Circumstances had a 1 ready designated Judge I'eckham, of Albany, as the magistrate to whom the Ramsey people, must almost, necessarily have recourse. The public estimation in which thisgentlernan is held was shown by his election, shortly after the events here narrated took place, as one of the new Court of Appeals organ i/.ed under the judiciary clause of the rejected Constitution of iSiiU. The scandal which arose out of the Albany ifc Sus(|iieh!inna (-use most materially contributed to the adoption of this single clause. It is probable, there- fore, that the action of Judge Peckham on this occasion had a AN ERIE RAID. 159 direct influence on his own future elevation ; it certainly received the public indorsement. Receiver Fisk might confidently be expected back, well armed with injunctions and with the original of his writ of as- sistance on Monday morning. It was necessary that Receiver Pruyn should be prepared to meet him. The last New Yo-k suit had enjoined the Albany receiver from any interference with the New York receivers, and had been accompanied by a writ of assistance. This was now met in the usual way. A new Albany suit enjoined the New York receiver from any interference with Mr. Pruyn, and at the same time an order was issued by Judge Peckham restraining the sheriffs from taking any action under the writs f assistance. It was fur- ther sought to punish Mr. Fisk for a contempt of court in interfering with its receiver on the previous Saturday, but this the judge held it necessary to send to a referee to take evi- dence and report. A temporary injunction was granted, and Mr. Fisk was ordered to appear and -show cause on the 13th why this should not be made permanent. Such were the legal complications encountered by Mr. Fisk on his return to the scene of his labors early on Monday morning. He had left New York on the boat the evening before, in company with fif- teen friends and advisers, and was fully prepared for vigorous operations. The condition of affairs did not look propitious. He was distinctly checkmated at Albany, and the order check- mating him, and forbidding the sheriffs to interfere to put him in possession, was already on the express-train which had left Albany at 8 A. M., and would be due in Binghamton, at the other end of the coveted road, at three o'clock that after- noon. A party to a conflict, however, who operates by steam, i;; at a manifest disadvantage when acting against one who despatches writs by telegraph. In the present case Mr. Fisk, baffled at one end of the line, went vigorously to work a hun- dred and forty miles away at the other end of it. While the express-train was toiling along to Binghamton, enjoining as it went all sheriffs and others from paying any attention to his writs of assistance, the telegraph was flashing those writs 160 AN ERIE RAID. direct to Binghamton, and commanding that immediate pos- session should be given to his representatives. Accordingly just before two o'clock, and as the afternoon train for Albany was on the point of leaving Binghamton, the sheriff of Broome County made his appearance, and, by virtue of a writ of Judge Barnard's, fresh from the telegraph wires, proceeded to take possession of all the property of the Albany & Susqnehanna Railroad Co., including the train then standing at the station. Three locomotives belonging to the same company were also at Binghamton. These he undertook to seize next ; of two of them he obtained possession, but the agent of the road was before him with the third ; for, just as he- was approaching his prey, writ in hand and borne upon one locomotive, the in- genious employee switched him off, and, while his own path suddenly led into space, he saw his prize gently slide down the grade out of his reach, and there get up the steam neces- sary to make good its escape. The Barnard receivers were thus fairly installed in posses- sion of the Binghamton end of the road, of the point where it connected with the Erie. An assistant superintendent of the Erie Railway was at once appointed superintendent of the Albany & Susquehanna, and a conductor of the same road was ordered to take out the regular train to Albany, which was still standing at the platform where it was seized. Mat- ters were evidently approaching a crisis. Different sets of receivers were operating the two ends of the road, and two sheriffs, bearing conflicting processes, were rapidly approach- ing each other on trains drawn by the locomotives and directed by the officers of the hostile factions. This condition of af- fairs was tch-graphed to the Ramsey train at Harpersvillc, twenty-five miles from Miughamton, and, after some consid- eration, it was determined to proceed no farther. Meanwhile the news of the Binghamton proceedings caused Superin- tendent Van Valkenburg to decide on vigorous measures. In the first place he proceeded to clear the offices of all hostile influences. Mr. Fisk had not that day been allowed within the premises. Repeatedly, in company with the sheriff and AN ERIE RAID. 161 others, had he presented himself and energetically demanded admission. It was of no avail. It was different with Mr. Conrter, his fellow-receiver ; he had been treated with a de- gree of courtesy, and indeed had been permitted to sustain the character of a nominal receiver within the offices. This gentleman was, however, now notified by Mr. Van Valkenburg that the farce of a double possession was to terminate then and there. On Saturday, in the little unpleasantness with Mr. Fisk, Van Valkenburg had given some indications that he was a man of few words and decided action. The hint had not been thrown away. Mr. Conrter, after a formal resistance just sufficient to establish the fact of foi'cible ejectment, with- drew from the premises, and the Barnard receivers abandoned every pretence of actual possession of the Albany end of the line. Van Valkeuburg's next move was to telegraph an order over the road, stopping every train where it then was ; all movement was thus brought to a stand. An extra train, car- rying a hundred and fifty men from the workshops, under command of the master mechanic, was then sent up the road to be ready for any emergency. Having thus cleared every- thing away for action, the next move of the other side was in order. The representatives of this other side were meanwhile ad- vancing from the opposite direction ; upon the train were the sheriff of Broome County, the Erie superintendent of the road, and some twenty men. As they moved along, the orders of Judge Barnard were served at each way station, the old officials of the road were displaced, and Erie men were sub- stituted for them. So eager, indeed, was the sheriff in the dis- charge of his duties, under the electro-writ of assistance, that he not only served an order, the illegal character of which he must have more than suspected, throughout his own county, but he continued to do so throughout the adjacent county, and, indeed, seemed not indisposed to extend his bailiwick to Albany. At Afton, about thirty miles from Binghamton, a despatch was received from Mr. Van Valkenburg, notifying the party that any farther advance would be at its own peril. 162 AN ERIE RAID. The Albany people were then lying at Bainbridge, six miles farther down the track. After some hesitation, which involved a great deal of rapid telegraphing and no inconsiderable delay, positive orders for an advance came to the Erie party, followed shortly after by reinforcements. It was now deep in the night, but the train at last was started, and moved slowly and cautiously towards Bainbridge. The Albany party was pre- pared to receive it. They lay on a siding, with a patent frog a little machine made to slide trains on to the rails, but equally calculated to slide them off attached at a con- venient point to the main track. In total ignorance of this bit of strategy, the Erie people felt their way along, when, just as Bainbridge, to their very great relief, seemed safely reached, their locomotive gently and suddenly glided off the track, and their train was brought to a stand-still. The instant this took place the Albany train moved up the siding, passed triumph- antly by its disabled opponents and on to the main track above them, where it took its position in their rear, effectually cutting off all retreat. As the Erie party tumbled out of their train, they were met by Mr. Smith, one of the counsel of their opponents, who glanced at the process under which they were acting, and at once pronounced it worthless. There was no alternative ; they had fallen into a trap, unconditional sur- render was all that remained. This was accordingly submit ted to, aad Sheriff Browne of Broome County, and all his jif>.w comilatus, were helped off their train and duly served with the order of Judge Peckham, restraining them from doing or at- tempting anything in aid of the receivers appointed by Judgo Barnard. Having disposed of this little party by capture, and it being now broad day, (erceiv T ed by the ationndanee of tires all over the woods, ut enlt>roacliiug their Towne, which was within (! miles when- I was taken .... the Captaine conducting me to Ins lodg- ing, n quarter of \vnisoii and some ten pound of bread I had for sup- ]>er, wliat I left was reserved forme, ami sent with me 1o my lodging : each morning 'A women pieM-ntcd in-- three great ]>latters of fine bread, wore venison than tru mrn THE GENERALL JirsTOUIE. 1624. " Then according to their compo- sition they drew him forth and led him to the fire where his men were slaine. Diligently they chafed his benummed limbs. He demanding for their Captaine they showed him O| hankanough king of 1'amaun- kee, to whom he gave a round ivory double compass Pyall. Much they in, availed at the playing of t he Fly and Needle \oiwitlixtundiwf, iri/lini mi l<<>iif<- ii/lrr llify Iml linn !> a In'*' iiiul a* ilium/ us i:i/ xliiKit linn, lilt the King holding np the ( 'on i pass in his hand, they all laid down their howcs and allows and in a tri- umphant manner led him to Orapaks \\here lie was alter their manner kindly feaMed and well used Smith they conducted to a long house wlieie thirtte 01 fortie tall fel- CAPTAIN JOHN SMITH. 199 could devour I had, my gowne, points and garters, my compas and a tab- let they gave me again, though 8 ordinarily guarded me, I wanted not what they could devise to content me and still our longer acquaint- ance increased our better affection. .... I desired he [the King] would send a messenger to Paspahegh [Jamestown] with a letter I would write, by which they shold under- stand, how kindly they used me, and that I was well, least they should revenge my death : this he granted and sent three men, in such weather as in reason were impossi- ble, by any naked to be endured. .... The next day after my letter came a salvage to my lodging with his sword to have slaine me this was the father of him I had slayne, whose fury to prevent, the King presently conducted me to an- other Kingdome, upon the top of the next northerly river, called Youghtanan, having feasted me, he further led me to another branch of the river called Mattapament, to two other hunting townes they led me, and to each of these countries a house of the great Emperor of Pewhakan, whom as yet I supposed to bee at the Fals, to him I told him 1 must goe, and so returne to Paspa- heijh, after this foure or five dayes march, we returned to Kasawrack, the first towne they brought me too, where binding the Mats in bundles, they marched two dayes journey and crossed the river of Youghtanan where it was as broad as Thames ; so conducting me to a place called Menapacute in Pamaunke, where y e King inhabited " From hence this kind King lowes did guard him, and ere long more bread and venison was brought him than would have served twentie men. I think his stomach af that time was not very good ; what he left they put in baskets and tyed over his head. About midnight the}' set the meat again before him, all this time not one of them would eat a bit with him, till the next morning they brought him as much more, and then did they eate all the olde, and reserved the newe as they had done the other, which made him think they would fat him to eate him. Yet in this desperate estate to defend him from the cold, one Maocassater brought him his gowne in requitall of some beads and toyes Smith had given him at his first arrival in Virginia. "Two dayes after a man would have slaine him (but that the guard prevented it) for the death of his sonne to whom they conducted him to recover the poore man then breath- ing his last In part of a Ta- ble booke he writ his minde to them at the Fort, and .... the messen- gers .... according to his request went to Jamestowne in as bitter weather as could be of frost and snow, and within three dayes re- turned with an answer. "Then they led him to the Youthtanunds, the Mattaponients, the Payankatanks, the Nantaughta- cunds, and Omawmanients upon the rivers of Rapahannock and Pat- aivomeck, over all those rivers and back agaiue by divers other severall nations to the King's habitation at Pamaunkee where they entertained him with 'most strange and fearfull Conjurations 200 CAPTAIN JOHN SMITH. conducted mee to a place called Topahanocke, a kingdomc upon an- other River northward : the cause of this was, that the yeare before, a shippe had beene in the River of Pamaunke, who having been kindly entertained by Powhatan their Em- perour, they returned thence, and discovered the River of Topalian- ocke, where being received with like kindnesse, yet he slue the King and tooke of his people, and they sup- posed I were hee, but the people reported him a great man that was Captaine, and using mee kindly, the next day we departed ' ' The next night I lodged at a hunting town of Powhatams, and the next day arrived at Warana- comoco upon the river of Pa- mauncke, where the great king is resident "Arriving at Weramocomoco their Emperour .... kindly wel- comed me with good worcles, and great Platters of sundrie Victuals, irinfi mee fiis friendship, and my ie within foure dayea hee desired mee to forsake Paspahegh, and to live with him upon his River, a Countiic called Capa Howasicke : hee promised to give me Corne, VfiiiMin, or what I wanted to (cede us, Hatchets and Copper wee should make him, and none should il'<-T a certain attraction to some of her descendants even in our own day. In the general enthusiasm, language, and pet' 204 CAPTAIN JOHN SMITH. haps common sense, have been a little strained to describe hr attributes. Her beauty and wild grace, her compassion and disinterestedness, her Christian life and pure character, have been dwelt upon with warm affection, which is the more natu- ral as the childhood of the nation has furnished little latitude to the imagination. One after another, all American histori- ans have contented themselves with repeating the words of the Generall Historic, vying with each other in heaping praises which no critics were cynical enough to gainsay, now on the virtues of Pocahontas, and now on the courage and constancy of Smith. The unquestioning faith with which this narrative has been hitherto received is well shown by a quotation from the work which ranks as the standard authority for American history. In the early editions of Mr. Bancroft's " History of the United States," we read the following version of Smith's adventure : "The gentle feelings of humanity are the same in every race, and in every period of life ; they bloom, though unconsciously, even in the bosom of a child. Smith had easily won the confiding fondness of the Indian maiden ; and now, the iinpul.se of mercy awakened within her breast, she clung firmly to his neck, as his head was bowed to receive the strokes of the tomahawk. Did the childlike superstition of her kindred reverence her interference as a token from a superior power? Her fearlessness and her entreaties per- suaded the council to spare the agreeable stranger, who might make hatchets for her father, and rattles and strings of beads for herself, the favorite child. The barbarians, whose decision had long been held in suspense by the mysterious awe which Smith had inspired, now resolved to receive him as a friend, and to make him a partner ot their councils. They tempted him to join their bands, and lend a i-taiiee in an attack upon the white men at Jamestown ; and when lii< decision of character succeeded in changing the current of their thoughts, they dismissed him with mutual promises of friendship and benevolence." In a note appended to these paragraphs the author otes : "Smith, I. 1.1X- Hi!', and II. 2!) :;;',. The account is fully con- CAPTAIN JOHN SMITH. 205 tained in the oldest book printed on Virginia, in our Cambridge library. It is a thin quarto, in black-letter, by John Smith, printed in 1608, A True Eelation, &c." One sees at a glance that the story, in passing through the medium of Mr. Bancroft's mind, has gained something which did not belong to the original, or belonged to it only in a modified degree. The spirit of Smith has infused itself into the modern historian, as it had already infused itself into the works of his predecessors. The lights arc intensified; the shadows deepened ; the gradations softened ; the copy sur- passes its model. This tendency is carried so far that the author quotes the True Relation as the full authority for what is only to be found in the Generall Historic, if indeed it is all to be found even there. When Mr. Bancroft made the careful collation of his own version of the story with the black-letter pamphlet in the Cambridge library, the brilliant popular repu- tation of Smith had already created an illusion in his mind resembling the optical effect of refracted light. He saw some- thing which did not exist, the exaggerated image of a figure beyond. No one, however, has now a right to triumph over the error. The time has gone by when the mistake contained in this note could be made use of to point any attack upon the merits of Mr. Bancroft's work, or upon the soundness of his study ; he has himself corrected his own blunder, and in his last editions, since 1860, another note has been substituted in the place of the one already quoted. It stands at present as follows : " The rescue of Smith by Pocahontas was told with authority in 1617, in Smith's 'Relation to Queen Anne'; Historic, 127. It is confirmed in his New England's Trials, printed in 1622; and the full narrative is to be found in the Historic, printed in 1624. In 1625, Purchas, who had many manuscripts on Virginia, gives the narrative a place in his Pilgrims, as unquestionably authentic. Compare Deane's note on Wingfield, 31, 32." From a critical point of view, this statement of the case may be open to objection as well as the other. Tf it is to 206 CAPTAIN JOHN SMITH. be understood as a defence of Smith, strict critical justice would require that the existence of some accusation should be mentioned, its nature noticed, and its authority given. If it is not intended as a defence, but merely indicates a doubt in the author's own mind, which he wishes to place with its cor- rective before his readers, without laying too much stress upon it, exact accuracy demands a softening in the assertion of facts. It is unfortunate, too, that, as the note now stands, the ordinary reader, who is not directed to the Archseologia Americana, may be led to suppose that Mr. Deane, whose edition of Wingfield seems to have caused the alteration, is referred to in support of Smith and of Mr. Bancroft. But it is no part of our purpose to dwell xipon these small and of coiirse accidental mistakes, which would not have been worth mentioning except to illustrate the tyrannical sway still exer- cised by Smith over the intelligence of the country. The quiet investigations of Mr. Deane have, however, now made it necessary for historians to meet this difficulty. They must either rely upon the testimony of Smith concerning mat- ters of his own personal experience, and upon the prescription of two centuries in favor of his story, or, rejecting the author- ity hitherto considered unquestionable, they must undertake the reconstruction of this whole history out of original mate- rial hitherto considered as merely auxiliary to Smith's narra- tive. Unfortunately, there is no possibility of compromise in the dispute. Cautious as the expressions of Mr. Deane are, and unwilling as he evidently is to treat the reputation of Smith with harshness, it is still perfectly dear that the state- ments of the Gcnerall Historic, if proved to be untrue, are Eklsehooda of a rare effrontery. The argument against the Generall Historic does not rest, however, upon the text of the True Relation alone. Properly speaking, this is only the cause of a discussion which has rapidly spread itself over the whole field of contemporaneous history. Kven Mr. Deanc's publications do not yet quite cover all the disputed ground, and pmliably future students will be able to throw fresh light upon the question from .sources now unknown. CAPTAIN JOHN SMITH. 207 The original Virginia Colony was so incongruous in compo- sition, its sufferings were so severe, and its disasters so fre- quent, that in the course of a very few years several entirely different classes of men came upon the scene, and each to some extent effaced the memory of its predecessor. Of these, many leaders besides Smith have left records of more or less in- terest, though the most important of all, the papers of the Company itself, are mostly lost. It is even a considerable un- dertaking to go through the mass of these documents, and to cull out the isolated passages which bear upon the point now in dispute ; but here we have fortunately the assistance of Mr. Deane's notes, which leave little to be desired. It has already been mentioned that the first President of the Colony was Edward Maria Wing-field, who, in September, 1607, was deprived of his office and placed in confinement by Smith, and the other members of the Council. When Newport who, with a new company of settlers, arrived at Jamestown on the 8th of January, 1608, immediately after Smith's release set out on his second return voyage to London, he took the deposed President Wingfield with him, and they arrived safely at Blackwall on the 21st of May. Wingfield appears to have kept a sort of a diary during his stay in Virginia, and after his return he wrote with its assistance a defence of himself and his administration, which seems to have been privately circu- lated in manuscript, and at a later period used by Purchas, but afterwards was forgotten and hidden in the dust of the Lambeth Library. From this obscurity it was at length drawn by Mr. Dcane, who piiblished a copy of it with notes in the fourth volume of the Archseologia Americana in 1860. Excepting a few papers of little consequence, this is the earliest known writing which comes directly from the Colony. The manu- script of Smith's True Relation, which is its only possible rival, could not have reached England before the month of July, while the Discourse appears to have been intended for imme- diate circulation in May or June. Wiugfield's work, which is called " A Discourse of Virginia," is therefore a new authority on the early history of the Colony, and has peculiar value as 208 CAPTAIN JOHN SMITH. a means of testing the correctness of the True Relation, and as furnishing some idea of what was thought and said by the party jealous of Smith's infhience. Its account of Smith's captivity could only have been gained from his own mouth, or from those to whom he told the story, and the more accurate it is, the closer it should coincide with the True Relation. There are a number of passages in this short pamphlet which would be well worth extracting ; but the question as to Smith's veracity had for the present best be narrowed to the evidence in regard to Pocahontas, and we will only quote the passage from Wingfield which tells of Smith's adventures among the Indians. " Dec. The 10th of December, Mr. Smith went up the ryver of the Chechohomynies to trade for corne. He was desirous to see the heade of that river; and Avhen it was not passible with the shallop, he hired a cannow and an Indian to carry him up further. The river the higher grew worse and worse. Then he went ou shoare with his guide and left Robinson and Emmery, twoo of our men in the .cannow ; which were presently slaine by the Indians, Pama- onke's men, and he himself taken prysoner; and by the means of his guide his lief was saved ; and Pamaonche haveing him prisoner, carry ed him to his neybors wyroances to see if any of them Icnewe him for one of those which had bene, some two or three ycres be- fore us, in a river amongst them Northward, and taken awaie some Indians from them by force. At last he brought him to the great I'owatou (of whomo before wee had no knowledg) who sent him home to our towne (.lie viii" 1 of January "Mr. Archer sought how to call Mr. Smith's lief in question and had indited him upon a chapter in Leviticus for (lie death of his i\voe men. lie had hud histryall the same daie of his retornc, and I be- lieve his hanging the same or the next daie. so speedie is our law there. But it pleased God to send ('aptii. NYwport unto us the same evening to our unspeakable comfort, whose arrival! saved Mr. Smyth's life and mine." Mr. Deane, in editing this work of Wingfield's, in 1860, fur- ni>ln'd a note upon this passive, in which for the first time, so far as we are aware, a doubt was tin-own upon the story of r-.c:ihout;is's intervention. Yet the discovery of Wingfield's nniTNtive adds little to the evidence contained in the True CAPTAIN JOHN SMITH. 20;) Relation, which has always been a well-known work. From the Discourse we learn few new facts. It supplies precise dates, fixing Smith's departure on the 10th of December, and his return on the 8th of January, so that we now know that his absence was exactly four weeks in length. It says that Smith's guide saved his life, which may or may not be a vari- ation from the story of the True Relation. It states rather more strongly the danger Smith ran from the enmity of Archer, which may perhaps have been only the result of Wing- field's own dislike of that person. But, in general, this new piece of evidence, though clearly independent of the True Relation, confirms it in all essential points, and especially in the entire omission of any reference to Pocahontas. It is highly improbable that so remarkable an incident as her pro- tection of Smith, if known to Wingfield, should not have been mentioned in this nairative, which, it may fairly be assumed, contained the current version of Smith's adventures, as told among the colonists after his return to Jamestown. These two works are the only actually contemporaneous au- thority for the events of the first year of the colonial history. There is a wide gap between them and the next work from which we can quote ; and indeed the strength of Mr. Deane's casj rests so largely on the negative evidence offered by the True Relation and the Discourse, that for his purpose it was scarcely necessary to go further. Every one, whether believ- ing or disbelieving the General] Historic, must agree that Poca- hontas was not mentioned, either by name or by implication, in the account given of Smith's captivity, either in the True Relation or in Wingfield's Discourse. If the matter in dispute were of little consequence, the inquiry might stop here, and each reader might be left to form his own opinion as to the truth, or the relative value as authority, of the conflicting narratives. But the interest of the question requires an ex- haustive statement. We shall therefore return to the history of Smith and of the Colony, which has been interrupted for the purpose of explaining the difficulty which the publications of Mr. Deanc have raised. 210 CAPTAIN JOHN SMITH. Newport returned to England on the 10th of April, 1G08, carrying Wingfield with him, and leaving llatcliffe President of the Colony, with Martin, Smith, and Archer in the Council, together with a new member, Matthew Scrivener, who Imd arrived with Newport. Smith in June explored successfully a part of Chesapeake Bay, and, returning on the 21st of July, found, according to the Generall Historic, the colonists in a miserable condition, unable to do anything but complain of Ratclitfe, whose principal offence appears to have been his obliging the colonists to build him " an unnecessary building for his pleasure in the woods." Ratcliffe, whose real name was Sicklemore, appears to have been really a poor creature, if the evidence in regard to him can be believed. He was now de- posed, and Scrivener, Smith's " deare friend," though then exceedingly ill, succeeded him as President. This revolution was rapidly effected ; for three days later, on the 24th of July, Smith again set out, with twelve men, to finish his explorations, and made a complete tour round the bay, which supplied his materials for the map published at Oxford in 1612. He did not return to Jamestown till the 7th of September, and on the 10th assumed the Presidency, "by the Election of the Conn- cell, and request of the Company." Scrivener appears merely to have held the office during Smith's pleasure, and voluntarily resigned it into his hands. The history of Smith's administration of the Colony from the 10th of September, 1008, till the end of September, 1009, is given in the Generall Historic, and may be studied with great advantage as an example of Smith's style. It abounds in praise of the President, combined with vigorous attacks upon every one else, from the authorities in England down to (he laborers at Jamestown. We will not even try to draw a line between truth ami lid ion in this part of his story. Whatever may have been the merits of his government, it is certain that he had n<> better success than his predecessors, and that he not only failed to command obedience, but that he was left almost or quite without a friend. He was ultimately deposed and sent 1" Kngland under articles of complaint. The precise tenor CAPTAIN JOHN SMITH. 211 of these articles is unknown ; but the indefatigable Mr. Deane has unearthed in the Colonial Office a letter of Ratcliffe, alias Sicklemore, dated 4th October, 1G09, in which he announces to the Lord Treasurer that " this man [Smith] is sent home to answere some misdemeanors whereof I perswade me he can scarcely clear himselfe from great imputation of blame." Be- yond a doubt, the difficulties of the situation were very great, and the men Smith had to control were originally poor mate- rial, and were made desperate by their trials ; but it is equally certain that his career in Virginia terminated disastrously, both for himself and for the settlement. The Virginia Company, notwithstanding his applications, never consented to employ him again. The Colony went on from bad to worse. George Percy, a brother of the Earl of Northumberland, succeeded Smith in the Presidency. The condition of the colonists between Smith's departure in October, 1609, and the arrival of Sir Thomas Gates, in May, 1610, was terrible. Percy "was so sicke hee could neither goe nor stand." Ratcliffe, with a num- ber of others, was killed by Indians. The remainder fed on roots, acorns, fish, and actually on the savages whom they killed, and on each other, one man murdering his wife and eating her. Out of the whole number, said to have been five hundred, not more than sixty were living when Gates arrived ; and that the situation was beyond hope is proved by the fact that Gates immediately took them on board ship, and, aban- doning Jamestown, set sail for England. It was only an accident that they fell in with a new expedition under Lord Delaware at the mouth of the river, who brought with him a year's provisions, and restored the fortunes of the settlement. In spite of the discouragement produced in England by the news of these disasters, the Company renewed its efforts, and again sent out Sir Thomas Gates with six vessels and three hundred men, who arrived in August, 1611. The government was now in the hands of Sir Thomas Dale, who had assumed it in May, 1611, and retained it till 1616. If the ultimate success of the Colony was due to any single man, the merit 212 CAPTAIN JOHN SMITH. appears to belong to Dale ; for his severe and despotic mle crushed the insubordination that had been the curse of the state, compelled the idle to work, and maintained order be- tween the Colonists and the Indians. But whatever were the merits or the faults of the government subsequent to the abandonment of Jamestown and the practical destruction of the first colony in May, 1610, it is indisputable that previous to that time nothing could have been worse than the manage- ment of the settlement ; and it is evident that the horrors of the winter of 1 GOO -10 must have had their causes in the misfortunes, or the mistakes, or the incompetency of Wmgfield, Ratcliffe, and Smith. That the colonists, after so long a trial, Avere still dependent for their bread on the Indians and on supplies from England, could scarcely have been the fault of any but themselves, and could not be excused by throwing the blame of their improvidence upon the distant board of direc- tors in London. In the mean while Smith, who had taken his final leave of the Colony, appears to have led a quiet life in London during several years. But he was not a man to be crushed by any disaster. The point in Smith's character which really com- mands admiration, although it habitually caused him to neglect his nearer duties, is the spirit of adventure which nothing could quench, and the energy in action which often overtasked his resources and caused his disasters. Although wo lose sight of him during the years 1G10 and 1G11, we again find him in 1G12 busied in the same direction as before. In this year he published at Oxford a short work called "A Map of Virginia. With a Description of the countrey, the Commodities, People, Government, and Religion. Written by Captaine Smith, some- times Governour of the Countrey. Whercunto is annexed the proceedings of those Colonies There is in the text of this tract only one passage bearing upon the point now principally in dispute. Among the cus- toms which he describes as peculiar to the Indians was the form of execution practised against criminals. Their heads, he says, were placed upon an altar, or sacrificing-stone, while " one with clubbes beates out their braines." During his cap- tivity, he adds, not indeed that he had actually seen this mode of execution, but that an Indian had been beaten in his pres- ence till he fell senseless, without a cry or complaint. Here is, therefore, the whole idea of the story which he afterwards made public. Practised lawyers may decide whether, under the ordinary rules of evidence, this passage amounts to a posi- tive implication that he had himself not been placed in the position described, or it may perhaps be possible for future students to explain why Smith should have suppressed his own story, supposing it to have been true. The inference is very strong that, if anything of the sort had ever occurred, it would certainly have been mentioned here, and this argument is considerably strengthened by a short narration of the facts of his imprisonment, given in the second part of the pam- phlet, for which Dr. Simons is the nominal authority. This version is as follows : " A month those barbarians kept him prisoner, many strange tri- umphs and conjurations they made of him, yet he s^ demeened him- self amongst them as he not only diverted them from surprising the fort, but procured his own liberty, and got himself and his com- pany such estimation among them that those savages admired him as a Demi God. So returning safe to the Fort, once more stayed the pinnace her flight for England." This work was, as above stated, afterwards reprinted, under the author's name, as the Third Book of the Generall Historic. The passage just quoted is there reproduced with the evidently intentional substitution of " six or seven weekes " for " a month," as in the original. In the Generall Historie the concluding paragraph is omitted, and in its place stands, " The manner how they used and delivered him, is as fol- loweth." And than, breaking abruptly into the middle of the 214 CAPTAIN JOHN SMITH. old narrative, the story which has been quoted at such length was interpolated. The narrative in the second part of the Map of Virginia, of which the above extract forms a part, is signed by the name of Thomas Studley alone, while in the Generall Historic the enlarged account bears also the signatures of Edward Har- rington, Robert Fenton, and Smith himself. A question may arise as to the extent to which these persons should be con- sidered as dividing with Smith the responsibility for the story. Thomas Studley, however, died on the 28th of August, 1G07. Both he and Edward Harrington had lain four months in their graves before Smith ever had heard of Powhatan or Pocahontas. The date of Robert Fenton's death is not so clear, but there is no reason to suppose that he had any share in the narration of events which Smith alone witnessed. The argument so far as the Oxford tract is concerned would therefore seem to be strong enough, even if it went no further. But it becomes irresistible when we find that this tract not only mentions Pocahontas, but actually introduces her in the role of guardian angel and saviour of Smith's life, although it says no word of her most famous act in this character. The allusion occurs towards the end of the pamphlet, where the assumed writer takes occasion to defend Smith against certain charges, one of them being an alleged scheme on his part of marrying Powhatan's daughter Pocahontas in order to acquire a claim to the throne. The writer denies the charge, and adds : " It is true she was the very nonpareil of his kingdome and at most not past 13 or 14 yeares of age. Very often slice came to our fort with what slice could get for Captaine Smith, that ever loved and used all the eoun'rie well, but her especially he ever much re- specied : and she so well requited it that when her father intended to have surprised him, slice by stealth in the darke night came through the wild woods and told him of it." This Oxford tract of 1012 may be considered as decisive of the fact that, down to that date, the story of Pocahontas had not been Hindi- public. We are obliged to confess that no CAPTAIN JOHN SMITH. 215 explanation whatever, consistent with an assumption of the truth of the later narrative, occurs to the mind to account for Smith's continued silence so long after his connection with the Colony had ceased. Here we take leave of Smith, as an authority, for a period of some ten years, during which he published but one work, not relating to the present subject. But an entirely new class of colonists had, ill 10 10 and 1011, taken the place of the first settlers, almost exterminated by the disasters of 1009 - 10. Among the new-comers there arrived in the train of Lord Delaware, in 1010, a certain William Strachey, who held the office of Secretary of the Colony. Little is known of Strachey, except that, after his return to England, he compiled a work called the " Historic of Travaile into Virginia," never com- pleted in its original plan, but still extant in two neatly written manuscripts, and printed by the Hakluyt Society in 1849. The date of its composition was probably about the year 1015. It consists largely of extracts from Smith's previous works, though without acknowledgment of their origin ; but it also contains original matter, and especially some curious references to Pocahontas. (See Deane's edition of the True Relation, p. 7'2.) There is, however, no reference, direct or indirect, to her agency in saving Smith's life, and no trace of the high esteem which such aft act would have won for her. Next in order after Strachey's manuscript, we have a work which is quite original, and which gives, perhaps, the best ac- count of the Colony ever made public by an eye-witness. This is a small volume in quarto, printed in London in 1015, and called " A True Discourse of the Present Estate of Virginia .... till the 18th of June, 1014, together with .... the Christening of Powhatan's daughter and her Marriage with an Englishman. Written by Raphe Hamor, late Secretaire in the Colonie." In it we find a minute and graphic story how " Pocahuntas, King Powhatan's daughter, whose fame has spread even to England xmder the name of Nou Parella," while staying with some tribe, subject to her father, on the Potomac, was seized and carried away by Captain Argol, who 210 CAl'TAIX JOHN SMITH had sailed up that river on a trading expedition. Her impris- onment as a hostage at Jamestown, her visit to her father's residence with Sir Thomas Dale and a strong force of English, Powhatan's failure to redeem her, and her subsequent marriage to John Rolf'e, on the 5th of April, 1G13, are all circumstan- tially narrated ; and finally an extremely interesting account is given of a visit which Harnor made to Powhatan, and of the conversation he had with that extraordinary savage. Besides this work of Hamor, the volume also contains several letters from persons in Virginia, one of which is by John Rolfe him- self, written with the single object of justifying his marriage. Afterwards, when the arrival of Pocahoutas in England had excited an interest throughout Europe in her story, Hamor' s book was translated and published in German} 7 . Although there are repeated allusions to Pocahontas in the works already mentioned, it is in Hamor that she makes, for the first time, her appearance as a person of political 'impor- tance. In the True Relation, Smith represented her as a pretty and clever child of ten years old, who was once sent, with a trusted messenger by Powhatan to the fort to entreat the liberation of some Indians whom Smith had seized. The Oxford tract mentions her as a friend of Smith's, but a mere child. Strachey gives a curious description of her intimate relations with the Colony during his residence there. " IV-a- huntas, a well featured but wanton yong girle, 1'owhatan's daughter, soinetymes resorting to our fort, of the age then of eleven or twelve yeares, would get the boycs forth with her into the markett place, and make them \\heele, falling on their hands, turning up their heeles upwards, whome she would fol- lowr and wheele so her self, naked as she was, all the fort over." All this seems to indicate that she was considered merely as a child, whose age made her a general favorite. But from the time when Argol treacherously sei/ed her. she occupied an important position, in the first place as the guar- anty of a peaee which Powhataii promised, and seems to have faithfully preserved during the remainder of her life and of his own ; in the second place as a person well calculated to excite CAPTAIN JOHN SMITH. 217 interest in England in behalf of the Colony ; and, finally, as an eminent convert to the English Church, through whom a powerful religious influence might, it was believed, be exer- cised among her father's subjects. Hamor's book is filled with her history, and Rolfe's letter shows much anxiety to prove the propriety of his course in marrying her. Both writers were interested in exciting as much sympathy for her as could be roused. Yet neither the one nor the other alludes in any manner to the act which has since become her first claim to praise, and iu the light of which the rest of her story has been almost thrown out of sight. There is no reason to suppose that in Virginia at this time the persons best informed were yet aware that Pocahontas had ever saved Smith's life. In the month of June, 1G16, Sir Thomas Dale arrived at Plymouth, on his return home, bringing with him, among his Suite, the baptized Pocahontas, now called Rebecca Rolfe, who, with her husband and child, came at the charge of the Com- pany to visit England, and to prove to the world the success of the Colony. She became at once the object of extraordi- nary attention, and in the following winter she was the most distinguished person in society. Her portrait, taken at this time, still exists, and shows a somewhat hard-featured figure, with a tall hat and ruff, appearing ill at ease in the stiff and Ungraceful fashions of the day. Gentlemen of the court sent the engraving, as the curiosity of the season, in their letters to correspondents abroad. The Church received her with great honor, and the Bishop of London gave her an entertainment, celebrated in enthusiastic terms by Purchas. At the court masque, in January, 1617, she was among the most conspicu- ous guests. The king and queen actually received her in special audiences ; and to crown all, tradition reports, with reasonable foundation, that King James, in his zeal for the high principles of divine right and the sacred character of royalty, expressed his serious displeasure that Rolfe, who was at best a simple gentleman, should have ventured so far be- yond his position as to ally himself with one who was of imperial blood. 10 213 CAPTAIN JOHN SMITH. Just &t this time, when the influence of London society had set its only too decisive stamp of fashion on the name of the Indian girl, and when King James had adopted her as right- fully belonging within the pale of the divinity that hedges a king, just at this moment Samuel Purchas, " Parson of St. Martin's by Lndgate," published the third edition of his " Pil- grimage." The excellent Purchas, although not himself an explorer, was an enthusiast on the subject of travels and adventures, and in compiling the collection which is now so eagerly sought and so highly valued by collectors of books he had, so far as related to Virginia, the direct assistance of per- sonal Avitnesses, and also of manuscripts now unhappily lost except for his extracts. He was well acquainted with Smith, who "gently communicated" his notes to him, and who was now in London, and visited Pocahontas at Brentford. Purchas himself saw Pocahoutas. He was present when "my Hon ble -> and Rev d- Patron the Lord Bishop of London, D r King, en- tertained her with festivall state and pompe beyond what I have seen in his great hospitalitie afforded to other ladies," in his " hopefull zeale by her to advance Christianitie." He knew Tomocomo, an Indian of Powhatan's tribe, who came with her to England. " With this savage I have often conversed at my good friend's Master Doctor Goldstone, where he was a fre- quent guest ; and where I have both seen him sing and dance his diabolicall measures and heard him discourse of his coun- trey and religion, Sir Thomas Dale's man being the interpre- tour." He knew Rolfe also, who lent him his manuscript discourse on Virginia. Yet in Purchas's book no allusion can be found to the heroic intervention on behalf of Smith, the story of whose captivity is simply copied from Simons's quarto of 1012 ; the diffuse comments on men and manners in Vir- ginia contain no trace of what would have been correctly regarded as the most extraordinary incident in colonial his- tory. Silence in a single instance, us in Wiimlicld or in Struchey, nil-lit be accounted for, or, at all events, mi<>ht be overlooked. But in the course of this examination we have found silence CAPTAIN JOHN SMITH. 219 absolute during a long period of years and under the most improbable circumstances. Wing-field, Smith himself, Simons, Strachey, Hamor, Rolfe, and Purchas, all the authorities, with- out exception, known to exist, are equally dumb when ques- tioned as to a circumstance which, since 1624, has become the most famous part of colonial history. The field is litci-ally exhausted. There exist no other sources from which to draw au- thentic information. Nothing remains but to return to Smith, and to inquire when it was that this extraordinary story first made its appearance, and how it obtained authority. The blaze of fashionable success that surrounded Pocahon- tas in London lights up the closing scene of her life. It is said that she was obliged, against her will, to set out on her return to Virginia, bxit she never actually left the shores of England. Detained in the Thames by several weeks of con- trary winds, her failing strength altogether gave way ; and in March, 1617, in the poor word-play of Purchas, "she came at Gravesend to her end and grave." Her father, Powhatan, sur- vived her less than a year. Smith, in the mean while, was busied with projects in regard to New England and the fisheries. His efforts to form a col- ony there and to create a regular system of trade had very little success ; but to spread a knowledge of the new country among the people of England, he printed, in 1616, a small quarto, called "A Description of New England," and in 1620 he published another pamphlet, entitled "New England's Trials," a second and enlarged edition of which appeared in 1622. Here, at last, in 1622, we find the long-sought allusion to his captivity, in the following words : ' For wronging a soldier but the value of a penny I have caused Powhatan send his own men to Jamestowne to receive their punish- ment at my discretion. It is true in our greatest extremitie they shot me, slue three of my men, and by the folly of them that fled, took me prisoner ; yet God made Pocahontas the King's daughter the means to deliver me ; and thereby taught me to know their treacheries to preserve the rest." 220 CAPTAIN JOHN SMITH. This in order of time is the third version given by Smith of his own adventure, the account in the General! Historic being the fourth. Each of these four stories is more or less inconsistent with all the others; but this of 1622 is, we are sony to say it, more certainly mendacious than any of the rest. Read it in whatever light we please, it is creditable nei- ther to Smith's veracity nor to his sense of honor. " By the folly of them that fled," he now states that the Indians suc- ceeded in capturing him. All the other versions agree in this, that at the time Smith was attacked and his two men slain he was quite alone, except for his Indian guide, whom he used as a shield. To throw upon the invented cowardice of compan- ions who were far away, out of sight and out of hearing of the contest, the blame for a disaster which was solely due to his own over-boldness, was not an honorable way of dealing with his command. Perhaps it would be better to leave this point unnoticed, in deference to Smith's real merits, but unfortu- nately this is not the only passage in his works in which the same tendency is apparent. Nevertheless, the fact remains, that here for the first time the story of Pocahontas appears in print. "God made Poea- hontas the means to deliver me." The devout form is charac- teristic of the age, though the piety of a man like Smith, if his autobiography gives a true idea of his course of life, must have been a curious subject for study. But for those who assume, with Mr. Ik-am-, that the agency of Pocahontas is a pure invention, this paragraph becomes doubly interesting, as showing to what a degree of quaint, dignity the Elizabethan age could rise, even in falsehood. The first appearance of this famous story can therefore be fixed with sufficient certainty within five years between 1017 and 1022, although the published account in all its complete- ness is only to be found in the General! Historic, printed in 1624, from which such copious extracts have already been quoted as to make any further allusion unnn-cs^iry. There n-maiiis only one pint of difficulty requiring attention in this work. CAPTAIN JOHN SMITH. 221 Smith has there stated (pp. 121-123) that, when Pocahon- tas came to England, he wrote for her a sort of letter of intro- duction to the Queen, or, in his own words, " a little booke to this effect to the Queen, an abstract whereof folio weth." " Some ten yeeres agoe, being in Virginia and taken prisoner by the power of Powhatan their chiefe King .... I cannot say I felt the least occasion of want that was in the power of those my mor- tall foes to prevent, notwithstanding al their threats. After some six weeks fatting amongst those Salvage Courtiers, at the minute of my execution, she hazarded the beating out of her owne braines to save mine, and not onely that, but so prevailed with her father, that I was safely conducted to Jamestowne." If Smith really wrote this statement to the Queen, and the Queen received the letter, the case \inquestionably becomes even more complicated than before. But the fact is, that the letter itself rests on the authority of the Generall Historic, and has neither more nor less weight than the other state- ments in that work. It is by no means necessary to believe that this " abstract of the effect " of the little book is freer from interpolations than the text of the Generall Historic elsewhere. At the time it was published, in 1624, not only hud Pocahontas long been dead, but Queen Anne herself had, in 1(519, followed her to the grave, and Smith remained alone to tell his own story. The Virginia Company certainly had no interest in denying the truth of a story so admirably cal- culated to draw popular sympathy towards the Colony. But even if it be granted that Smith's letter as it stands was really sent to the Queen, the argument against its truth, so far as it is based on the silence of all previous authorities, is left quite untouched ; and if there is no conclusive evidence to prove that the story was unknown in 1G17, it is at least equally diffi- cult to prove that, if known, it was believed. Smith's charac- ter was certainly a matter of warm dispute in his own day, and his enemies seem to have been too numerous and strong for even his energy and perseverance to overcome. No more decisive witness on this point is needed than Thomas Fuller, himself one of Smith's contemporaries, whose " Worthies of 222 CAPTAIN JOHN SMITH. England " first appeared some thirty years after Smith's death, when the civil wars had intervened to obliterate the recol- lection of all personal jealousies, and when Smith himself must have been almost as little remembered as he is to-day. Fuller devotes a page to his history in the following vein : " From the Turks in Europe he passed to the Pagans in America where, towards the latter end of the reign of Queen Elizabeth, such his perils, preservations, dangers, deliverances, they seem to most men above belief, to some beyond truth. Yet have we two witnesses to attest them, the prose and the pictures, both in his own book ; and it soundeth much to the diminution of his deeds that he alone is the herald to publish and proclaim them." The essential evidence on each side of this curious question has now been exhausted, although it would be easy to argue indefinitely in regard to Smith's general character. This must indeed be done by the first historian who attempts again to deal with the history of the Virginia Colony. But although the argument has been stated fairly, and may now be left for future and final judgment, some reasonably clear theory is still required to explain the existence of the story now as- sumed to be false. If Mr. Dcanc had departed a little farther than he has done from his sphere of work as an editor, and given the result of his studies in a more general form, his deep acquaintance with the sitbject would have made his con- clusions particularly valuable. As it is, he, like Dr. Palfrey, only hints that Smith, in the latter part of his life, had fallen into the hands of hack-writers, who adapted his story for pop- ul.ir effect. Perhaps, if we may venture to guess at his real opinion, the view lie would be inclined to take might be some- what as follows. Tin; examination of Smith's works has shown that his final imrnitive was the result of gradual additions. The influence exercised by Pocahontas on the affairs of the Colony, according to the account given in 1608, was very slight. In 1G12 she first appears in her heroic character. Her capture and her mar- riage to llolfe gave her importance. Her visit to England, however, made her beyond question the most conspicuous fig- CAPTAIN JOHN SMITH. 223 xire in Virginia, and it became inevitable that romantic inci- dents in her life would be created, if they did not already exist, by the mere exercise of the popular imagination, attracted by a wild and vigorous picture of savage life. The history of the emperor's daughter became, as we are led by Smith to suppose, a subject for the stage. Nothing was more natural or more probable. It is not even necessary to assume that Smith himself invented the additions to his original story. He may have merely accepted them after they had obtained a strong and general hold on the minds of his contemporaries. In the mean while Smith's own career had failed, and his ventures ended disastrously, while in most cases he did not obtain the employment which he continued to seek with unre- laxed energy. In 1622, however, a great disaster occurred in Virginia, which roused the greatest interest and sympathy in England, and gave occasion for renewed efforts in behalf of the Colony. The Indians rose against the English, and in the month of May a terrible massacre took place around James- town. The opportunity was not one to be lost by a man who, like Smith, while burning to act, was still smarting under what he considered undeserved neglect, and he at once has- tened to offer his services to the Company, with a plan for restoring peace ; but his plan and his offer of services were again declined. Still, the resource of which he had already made such frequent use remained, and by publishing the Gen- erall Historie he made a more ambitious appeal to the public than any he had yet attempted. In this work he embodied everything that could tend to the increase of his own reputa- tion, and drew material from every source which could illus- trate the history of English colonization. Pocahontas was made to appear in it as a kind of stage deity on every possible occasion, and his own share in the affairs of the Colony is mag- nified at the expense of all his companions. None of those whose reputations he treated with so much harshness appeared to vindicate their own characters, far less to assert the facts in regard to Pocahontas. The effort indeed failed of its object, 224 CAPTAIN JOHN SMITH. for he remained unemployed and without mark of distinction. " He led his old age iu London, where his having a Prince's mind imprisoned in a poor man's purse rendered him to the contempt of such who were not ingenuous. Yet he eftbrted his spirits with the remembrance and relation of what formerly he had been and what he had done." So Fuller writes, who might have known him in his later years. He died quietly in his bed, in London, in June, 1631 ; his will is extant, and has been published by Mr. Deane, but furnishes little new informa- tion ; in the absence of criticism, due perhaps to the political excitement of the times, his book survived to become the standard authority on Virginian history. The readiness with which it was received is scarcely so remarkable as the credu- lity which has left it unquestioned almost to the present day. THE BANK OF ENGLAND RESTRICTION. 1797-1821* DURING the eighteenth century the mechanism of trade had been elaborated in Great Britain to a high point of perfection. London had become in a great degree the centre of commerce for the whole world, while the Bank of England was the business centre of London. But the Bank had a double sphere of usefulness. As a private corporation, it ex- ercised, not less by the high character of its directoi-s than by the amount of its capital and the privileges of its charter, a great influence over all foreign and domestic trade. By com- mon agreement, its notes circulated within London to the exclusion of all other bank -paper. Its discounts represented at that time a far greater proportion of the active capital of England than they now do. But its operations were not restricted within the limits of ordinary banking ; it was also a recognized official agent. As a national establishment, it issued the coin, managed the debt, took charge of government deposits,' and made advances to the Exchequer and the Treas- ury, on security of Exchequer Bills. In the same capacity, it was expected to perform the difficult duty of maintaining a supply of gold, not merely for circulation, but in anticipation of any sudden drain or panic, which might cause a run upon the other banking institutions of the country. It was obliged, therefore, to purchase at a fixed rate all the gold which was brought to its counters. Thus, as a bank of discount, it held the exclusive privilege of discounting government paper ; as a * From the North American Review for October, 1867. 10* o 226 THE BANK OF ENGLAND RESTRICTION. bank of deposit, it alone held the public balances ; as a bank of issue, its circulation alone passed through the hands of the government as well as of the public. Its notes, when not issued in loans on Exchequer Bills to the government, or in payment for the precious metals aa already mentioned, could only pass into circulation through the medium of discounts furnished to merchants. Neither then, nor at any time, has the Bank had other than these three means of issuing its paper; and as it is clear that, so far as the second is con- cerned, no notes could be sent out which did not represent their equivalent in coin or bullion brought in, the only possi- ble mode of issuing an excess of paper must have been either by loans to the government on security of Exchequer Bills, or in regular and legitimate commercial discounts. All foreign and most provincial payments were ultimately settled by drafts on London. But the country merchants and others, who had occasion in this manner to extend their con- nections beyond the limits of a district, usually found it con- venient to deal through the local bankers of their neighbor- hood, rather than to draw upon correspondents of their own. In 1797, there were about three hundred and fifty such country banks in England and Wales, most, if not all, of which were banks of issue ; and as they were always liable to be called upon to redeem their notes either in gold, in Bank of England notes, or in bills of exchange drawn on London, it is evident that their circulation was subject to all the varia- tions of the London money-market. Besides this practical check, yet another control was ex- ercised by the Bank of England over the credit operations of the country. Every private banker naturally felt that his own credit depended upon the solvency of his customers ; and lie was obliged, by the very nature of his business, to acquire the most accurate knowledge in Ins power of the people who dealt with him. In precisely the same way the London banker, his correspondent, looked carefully to the country client's credit, *wd to the character of the bills which he dealt in ; while in his own city the Louder banker was subjected THE BANK OF ENGLAND IJES FRICTION. 227 to the scrutiny of the business community of London, whose opinions, centring upon one point, guided the policy and the particular discounts and accommodations of the Bank of Eng- land. Thus again the Bank was at once the head and heart of English credit ; it exercised a controlling influence even upon the remote provincial trader. So 'far as the currency was concerned, the Bank could, by contracting its issues, affect in a short time tli3 whole circula- tion of England ; and naturally, when such a contraction had taken place, a renewed expansion on its part would be likely to result in a similar movement on the part of private bank- ers. But the antiquated and mischievous legislation of Par- liament still maintained, and, in spite of the severest practical lessons, long continued to maintain, a legal maximum of inter- est at five per cent, even when the government itself was borrowing at six. At present the Bank regulates its discounts by raising or lowering its rate according to the value of money in the open market. But while the usury laws were in force, the Bank continued to lend its credit at five per cent, whether the market value was at two or at twenty ; and it possessed no means of restricting its discounts and contracting its circu- lation other than that of refusing a certain proportion of each applicant's paper, without regard to his solvency or credit. Such a measure was seldom resorted to, since it was calculated to aggravate the evils of a financial piessure, by sacrificing the public in order to save the Bank. In practice, therefore, it will be seen that the Bank avoided the exercise of any other control over its discounts and circulation than is implied by a proper regard for the soundness of the bills it discounted. The directors might exercise more or less of caution in their loans, according as individual ci'edit varied ; but they never during the Restriction attempted to act upon exchange or gen- eral credit, either by contracting or by expanding their issues. The average amount of Bank of England notes in circula- tion, during ten years before the Restriction, was 10,800,000, The best authorities estimate that the coin may have then amounted to about 20,000,000, or somewhat more. There 228 THE BANK OF ENGLAND RESTRICTION. was also a large quantity of country bank paper ; while certain wealthy districts, as Lancashire, for example, used no other ciirrency than bills of exchange, which were passed from hand to hand, and in every case indorsed by the holder. There can be no reasonable confidence placed, therefore, in any estimate which assumes to establish any fixed sum as representing the value of English currency, previous to the Restriction. Per- haps 40,000,000 woiild be a moderate value to assign for it; and from this calculation Scotland and Ireland arc ex- cluded, since their currency systems were independent of England, and exercised no more influence upon hers than those of Holland or Hamburg. The great war, which lasted, with only a few months' inter- mission, for upwards of twenty years, began in February, 1793. It was preceded and accompanied by a violent com- mercial crisis throughout Europe, which caused in England a great number of bankruptcies, and a heavy fall in prices, the country banks suffering especially ; but the Bank of England succeeded in maintaining its credit unimpaired under the shock ; and, in spite of every difficulty, continued its specie payments and its ordinary discounts, to the immense relief of the mercantile community. Two years of the war passed away without altering this position of affairs. It was not till 1795 that a drain of bullion to the Continent began, which obliged the Bank directors to resort to the extraordinary measure of contracting their issues by rejecting a certain pro- portion of the applications made upon them for discounts, without regard to the credit of the applicants. During the next two years the Bank circulation was steadily diminished, as the supply of gold became smaller and smaller. But this policy of contraction was seriously hampered by the necessities of Mr. Pitt, then Prime Minister, who insisted upon advances, which the directors could not honestly furnish. The Bank records are filled with repeated remonstrances addressed to Mr. Pitt on this accoxmt, and these, in February, 179G, were carried to the extent of an absolute refusal to discharge the bills drawn ; while again, in July of the same year, a similar THE BANK OF ENGLAND RESTRICTION. 229 refusal was only overcome by the positive assurance of Mr. Pitt that it would be impossible to avoid the most serious and distressing embarrassments to the public service, unless an advance to the extent of ,800,000 were made. The Bank yielded, but only under the strongest protest, declaring that nothing but the extreme pressure and exigency of the case could in any shape justify the directors in acceding. Whether this source of difficulty was due to bad management on the part of Mr. Pitt, or whether he had no choice but to lean upon the Bank, is of little consequence. The directors, at all events, carried out their policy of contraction. While the drain of gold continued, and their treasure fell from 6,000,000 in 1795 to 2,000,000 in August, 1796, the circulation was simultaneously reduced from 14,000,000 to 9,000,000. But violent as this contraction was, it failed to counteract the causes of the drain. Foreign subsidies, the payment for large quantities of imported grain, and of articles the price of which had been enormously increased by the war demand, prevented the exchange from rising. It is estimated that for three years, from 1794 to 1796, these extraordinary payments amounted to 40,000,000, a calculation which is certainly not extrav- agant, if compared with the length of time and the amount of pressure required to restore the exchanges. It is difficult to say what more could have been done by the Bank in order to preserve the country from the evils of an inconvertible currency. The directors might have refused to advance another shilling in loans, and, in order to save themselves, might have forced a national bankruptcy, as well as general private ruin ; but they could scarcely have reduced their issues more resolutely than they did, or resisted more obstinately the entreaties of the merchants. These last were mercilessly sacrificed ; and their fate was especially hard, since the crisis appears to have been caused by no act of theirs, but solely by a combination of political and natural agencies, by bad harvests and foreign ware, over which they could have exercised no control, and on the occurrence or the cessation of which they could not have calculated. 230 THE BANK OF ENGLAND RESTRICTION. The measures thus taken by the Bank were in fact success- ful. Early in 1797, the tide had already turned ; the foreign exchanges began to improve ; and there can be no doubt that, had the Bank been able to stand another month or two of pressure, gold would have flowed plentifully into its coffers. But precisely at the time of extreme exhaustion, after the for- eign drain had been checked, but when the Bank was too weak for further resistance, a sudden panic seized the people of England. An ungrounded alarm of French invasion caused a run upon the banks of Newcastle, and obliged them to sus- pend payment. From Newcastle, the panic spread in all directions. Every country banker rushed to the Bank of England for assistance or for gold. The Bank responded by forcing its issues down to 8,640,000, while its treasures fell to 1,200,000, and the panic naturally grew more and more violent. Hopeless of averting their fate, the directors at last sent word to Mr. Pitt that suspension was inevitable ; and on the morning of Monday, the 27th of February, an Order in Council, issued the preceding day, was posted on the doors of the Bank, forbidding further payments in cash. The policy of the Bank throughout this crisis has been since that day very generally criticised ; and the directors themselves afterwards expressed it as their opinion that the contraction had been pressed too far, until it contributed to bring about the very difficulty it was intended to preclude. It is contended that a bolder policy should have been adopted, and that the discounts should have been liberally increased, while Ihe gold should have been paid out down to the last guinea. In support of this theory is instanced the celebrated crisis of 1825, when the Bank, in face of a drain which re- duced its stock of gold to 1,027,000, increased its issues from 17,000,000 to 25,000,000, and succeeded in restoring confidence and maintaining its payments. However this may be, it is at least a matter of regret that Mr. Pitt should have sanctioned suspension before exhausting every possible alter- native. At the worst, the Bank could only have refused t<> redeem its notes. While there was a single chance left of THE BANK OF ENGLAND RESTRICTION. 231 escaping this final disaster, neither Mr. Pitt nor the Bank directors were justified in neglecting it. The mere political consequences of suspension, in that disastrous year, were a triumph to the enemy as important as the mutiny at the Nore or the Treaty of Leoben. Mr. Pitt, however, felt the necessity of maintaining the credit of the Bank ; and he appears to have thought that this might be done by giving to the suspension an official appear- ance, and throwing upon it the character of a compulsory act of government. He represented the Bank as a passive, or even unwilling, instrument, in the hands of the Privy Council. The expedient was shallow, and unworthy of so great a man ; nor was it likely to deceive any person, however dull of com- prehension he might be. But its result was fortunate; for while Mr. Pitt declared that the affairs of the Bank were in the most affluent and flourishing condition, and that the restriction was only a precautionary government measure, which in a few weeks would be removed, he established, un- consciously as we must believe, a legal fiction of some value. Parliament never recognized any incapacity on the part of the Bank to meet its obligations, but only a temporary restriction, created by itself, and limited by law to a certain period. There was at least a delicate distinction favorable to national pride and private credit involved in this idea that there was no actual bankruptcy in the case, but that the government had seen fit, for the public convenience, to relieve the Bank for a time from a duty which it was still ready and able to perform. It was not unnatural, indeed, that Mr. Pitt should make use of this or any other deception in order to quiet the general alarm. The idea of inconvertible currency was, in 1797, exclusively associated with the Continental paper of the American Congress, and with the assignats of the French Directory. It was supposed by men like Fox and Lord Lans- downe that the mere fact of inconvertibility must soon de- stroy that confidence in paper which enabled it to represent values. A few months, it was believed, would bring about 232 THE BANK OF ENGLAND RKSTRICTION. this decay of credit. To provide against such a disaster, extraordinary efforts were required. On the very day of sus- pension, a great meeting was held at the Mansion House, the Lord Mayor presiding ; and more than three thousand business men pledged themselves, by resolution, to receive and to make their payments in bank-notes, as equivalent to coin. A nearly similar paper was signed and published by the Lords of the Council. At the present time, such a pledge would, in similar circumstances, be considered as quite superfluous ; but in that day it had a value, and tended to restore public confidence. Had the foreign drain still continued, bank-paper would, no doubt, have rapidly fallen to a discount, in spite of all the resolutions that could have been passed ; but we have already seen that this cause of difficulty had ceased to act. The only effect of suspension was to lower the exchanges for a very few days, after which they again rallied, and before the close of the year they had risen to the highest point ever known. The Bank at once inci'eased its issues, and commerce returned to its regular routine. The suspension having once taken place, it became neces- sary for Parliament to intervene, not merely to legalize the act, but to establish a status for the new condition of the Bank. A secret committee was appointed, which made elaborate in- vestigations, and concluded by reporting a bill, indemnifying the governor and directors for all acts done in pursuance of the Order in Council ; superseding all actions which might have been brought against them for refusing payments ; prohibiting them from issuing cash, except in sums under twenty shillings ; sheltering them from prosecutions for withholding payment of notes, for which they were willing to offer other notes in exchange ; restricting them from advancing to the Treasury any sum exceeding 600,000 ; obliging the collectors of reve- nue to receive bank-notes in payment ; protecting the subject from arrest for debt, unless the affidavit to hold him to bail contained a statement that the amount of debt claimed had not been tendered in money or bank-notes ; and limiting the duration of the restriction to the 24th of June following. THK BANK OF ENGLAND RESTRICTION. 233 It is interesting to observe how cautiously the govern- ment acted. The policy of Mr. Pitt may not have been bold, nor necessarily correct ; but it was at least free from the grie- vous mistakes which have ruined or dishonored almost every country where an inconvertible currency has existed. He began by treating the suspension as a temporary difficulty, and carefully limiting its duration. In this respect, his suc- cessors invariably followed his example ; and never, during the next twenty-three years, was there a time when Parliament allowed the country to consider the restriction as other than a temporary measure, for the termination of which a provision was made by law. He further pledged the government not to make an improper use of the Bank resources, nor to tamper with the currency by obtaining excessive advances, and this pledge he honestly observed. Finally, he refused to make the bank-note a legal tender, except as between the government and the public, still allowing the creditor to insist upon pay- ment in coin, if he chose to do so ; and leaving open to him his ordinary process in law, except only the power of arrest in the first instance. England probably owes more than she is aware of to Mr. Pitt for his forbearance in regard to the cur- rency. His necessities were great, and his power was un- limited. He might have used paper money as was done by contemporary financiers ; but the example which he set be- came a law for his successors, so that whatever mistakes he or his imitators may have made, they arc not chargeable with that of tampering with the currency. The Restriction Act passed without opposition, and in June was continued till one month after the commencement of the next session. In the mean time, gold began again to flow into the Bank, which held in August treasure to the amount of 4,000,000, against a circulation of 11,000,000. When Parliament again met in the autumn, the Bank directors announced themselves ready to resume payments, "if the political circumstances of the country do not render it in- expedient." Had Mr. Pitt been able to foresee the course which events 234 THE BANK OF ENGLAND RESTRICTION. would take during the next ten years, he would surely have acted at once upon this opportunity. The dangers and temp- tations of irredeemable paper were too obvious for any states- man to incur them, unless under an absolute necessity. But Mr. Pitt probably foresaw something very different from what actually occurred. He had every reason to expect a series of monetary convulsions and commercial misfortunes, such as had harassed him since 1792. On the other hand, he saw that none of the prophesied evils had really followed restriction. It had been proved that bank-paper did not depend for its credit merely on its convertibility. Month after month had passed away, not only without bringing depreciation, but even rapidly increasing the stream of precious metals which flowed towards England, so that people were little inclined to dwell upon the dangers or temptations of restriction, and probably overestimated its value as a safeguard against panic. They were already demoralized. Mr. Pitt was not ashamed to fall back upon the hint given by the Bank directors, and to de- clare " that the avowal by the enemy of his intention to ruin our public credit was the motive for an additional term of re- striction " ; thus, as Mr. Tierney rejoined, in order to leave the enemy no credit to attack, destroying it himself; for it is difficult to see how France was prevented by the Restriction from any action upon public credit, except precisely that of causing another restriction. The bill, however, by which the measure was continued till one month after the conclusion of peace, passed with little opposition, Mr. Fox and his friends having ceased to take part in the debates. Had the Bank been now obliged to re- sume its cash payments, it would have had no great difficulty in maintaining them till 1808 or l.SO!), when it must inevita- bly, from mere political causes, have again broken down. But the occasion was lost, and from this time the Restriction took itH place among the permanent war-measures of the govern- ment. Previous to the suspension, no bank-note of less than five in value was allowed to circulate. Under the now state THE BANK OF ENGLAND RESTRICTION. 235 of affairs this prohibition was removed, and notes of one and two pounds began rapidly to drive gold from ordinary use. With this exception, the public appears to have been quite un- affected by the change in the currency. Throughout the year 1798 the Bank continued to receive treasure, and the foreign exchanges continued favorable, until at the end of February, 1799, there was an accumulation of more than 7,500,000 in the Bank vaults, against a circulation in notes of less than 13,000,000. Apparently nothing could be more solid than such a position. No expansion of consequence occurred in the Bank circulation ; and yet, by the close of 1799, the exchanges had turned against England, and the gold began to disappear as rapidly, or almost as rapidly, as it had accumulated. The explanation of this sudden revolution was simple. A deficient harvest had caused large importations of corn ; a severe com- mercial crisis at Hamburg had produced a considerable press- ure for the immediate transmission of funds from England ; and the "war on the Continent created a perpetual demand for gold to supply the armies. Had the Bank now been obliged to redeem its notes, it might probably have contracted its issues. Instead of doing so, it extended them in proportion to the increased demand for discounts thrown upon it by the rise in the market rate of interest, and the circulation rose till in the first quarter of 1801 it averaged nearly 16,500,000. The price of gold also rose, until it stood at a premium of ten per cent. These events naturally caused uneasiness ; they gave rise, in fact, to the first currency controversy. Mr. Boyd, a mem- ber of Parliament, published a pamphlet with the object of proving that the depreciation was due to the excess of bank- notes. He was answered by Sir Francis Baring and Mr. Henry Thornton, whose work remains to this day a standard authority. As the question then raised was practically identi- cal with that which ten years afterwards excited the most elaborate and earnest discussion, we shall not now stop to ex- amine into it. Events soon decided in favor of Mr. Boyd's opponents. The Bank continued its policy undisturbed ; the 236 THE BANK OF ENGLAND RESTRICTION. pressure ceased ; during 1801 and 1802 the foreign exchanges again rose, and gold fell almost to par. It seems to be beyond dispute that the temporary depreciation of 1801 was preceded by the fall of exchange, and was caused by it ; and that, when the accidental foreign demand for gold had been satisfied, the currency returned to its natural value, without any effort on the part of the Bank, or any artificial pressure on credit or on the circulation. Without admitting this to be the case, it appears scarcely possible to explain the course which events afterwards took, and the perfect stability of the currency during a number of years when the circulation was still further enlarged. The Treat}- of Amiens was signed in March, 1802 ; and the inter- val of peace, short as it was, allowed Great Britain a momentary relief of inestimable value. But the Restriction Act was again continued for another term, and the Bank circulation rose to nearly 17,400,000, without producing any sensible effect on exchange or on the price of gold. War was resumed in May, 1803, but without affecting the value of the currency, which during the next five years remained stationary in its amount, or only varied slightly between 16,000,000 and 1 7,000,000. The Bank, meanwhile, anxious to maintain its reserve of bul- lion, offered a standing premium of about three per cent for gold, and hence it has been usually supposed that the bank- notes were actually depreciated to this extent. This, however, . was not the case. Under such circumstances the exchanges become the only true standard, and in those days the quota lions of exchange included any existing depreciation of paper ; the nominal, not the real, exchange was always given, so that, in the want of any fair quotations of gold, we can only esti- mate its fluctuations in value by means of the recorded fluctu- ations in exchange. It appeal's that these were very slight, and rather in favor of England than against her, so that the Bank had actually accumulated in 1805 the very unusual sum of 7,600,000, a result which indicates that the bank-notes with which this treasure was bought could not have been de- preciated to the full extent of the three-pcr-cent bonus offered THE BANK OF ENGLAND RESTRICTION. 237 as fin inducement to the seller. During the whole of this period from 1803 to 1808, Bank paper was in fact at par, or not enough below it to have made the exportation of gold profitable in a time of specie payments. There were no doubt intervals when the Bank lost gold, but, if the average of each year be taken, it will be found that the exchanges were uni- formly favorable. No comparison can be just which is drawn between such a state of things as this and the ordinary forced issues of gov- ernment paper, such as have been known in most countries suffering under prolonged difficulties. There is a distinct dif- ference between the two cases, and we art obliged to dwell with emphasis upon this difference, becatise we believe that it entirely removes the English currency from the same class with ordinary instances of depreciation. Usually the issue of paper has been assumed by governments themselves, and such issues have been made directly in payment of expenses, without pro- viding on the same scale for a return of the paper put out, or consulting in any way the wants of the people. Bank of Eng- land paper was in no sense a government issue. It was not even government paper, but merely that of a private banking corporation, which was conducted on very strict banking prin- ciples, and whose notes, so. far as they were in excess of public wants, were inevitably returned at once to the bank counters. The government, therefore, was not to blame if paper was is- sued in excess ; but in such a case it must have been the Bank directors who failed to observe proper rules in their extensions of credit either to the government or to individuals. It is necessary, therefore, to turn aside for a moment in or- der to examine the Bank rules of that day in regard to their ordinary action upon the circulation, since it is here that the secret will be found, not only of the steadiness of value which marked the ciirrency during the first ten years of war, but of its extraordinary fluctuations afterwards, fluctuations which are quite inexplicable on the ordinary supposition of a forced issue. It must be remembered that the usury laws fixed the highest legal rate of interest at five per cent. The 238 THE BANK OF ENGLAND RESTRICTION. Bank rule, during the whole period of Restriction, was to dis- count at this rate all good mercantile bills offered, not having more than sixty-one days to run ; and in making these ad- vances the only duty which the directors considered themselves obliged to observe was that of throwing out, so far as possible, all bills which there was reason to believe represented specu- lative transactions. In other respects the Bank was perfectly passive. It neither contracted nor expanded its own issues, but allowed the public demand to contract or expand the cur- rency, in the firm conviction that the public would not retain more notes than it actually required. Naturally the demand for discount at the Bank varied according to the market rate of interest outside ; and when private bankers lent money at three per cent, comparatively few persons cared to pay five to the Bank of England. During the early part of the war the Bank rate was in fact almost always higher than that in the open market, and consequently the Bank issues were moderate. By a regularly self-balancing principle, the advances made to government in an oi'dinary state of affairs diminished the pri- vate demand, since the government at once paid away to the public the notes it received from the Bank, and this money, coming back to the private bankers, enabled them to extend their discounts and to accommodate those merchants who would otherwise have been obliged to apply to the Bank. It is merely a theoretical question, what would have been the result had government obliged the Bank to make excessive ad- vances on its account. In point of fact, the case did not occur, and government contented itself with moderate accom- niodiition ; while, as a rule, the private demands were greatest when the advances to government were at the lowest point. Thus the Bank was throughout a mere channel of credit. It did not, and under these rules it could not, exercise any direct control over its issues, and it conducted its business upon much the sumo principles as would him- regulated any sound private banker, whether lie issued notes or not. Its theory excluded the idea that it WMS bound to regard the excluiiigcs or the price of gold, or to interfere in any way with the course THE BANK OF ENGLAND RESTRICTION. 239 of business. Its sole duty was to lend capital, and it was for the public and for each individual merchant to see that his affairs were in a proper condition, that speculation was avoided, that the exchanges were watched, or to take the consequences of neglecting such obvious pi-ecautions. And so long as each individual did observe a proper degree of precaution, or until political difficulties or some other acci- dental cause deranged the ordinary state of credit, these rules of the Bank answered the purpose for which they were made. But while the usury laws remained in force, any rise in the market rate of interest was certain to precipitate the whole body of merchants upon the Bank of England, and any crisis which obliged private bankers to seek, instead of furnishing credit, was sure to bring the whole nation to the counters of the Bank. In either of these cases, therefore, the Bank was liable to be driven into an excessive issue of its paper, and extension of its credit. But it did not necessarily follow that such an expansion would lead to a permanent increase of the circulation. On the contrary, whenever the crisis was over, and the rate of interest again had fallen below the Bank stand- ard, the demand for discount would naturally decline, and the circulation would return to its normal state. For two or three years after the war had been resumed, everything went on in a sound and regular course. Great Britain might have carried on hostilities indefinitely, had she been subjected to no greater pressure. The currency retained its value, and trade its regularity, but taxation was greatly augmented and the cost of production increased. Prices Ktcudily rose, until they attained in 1805 almost as high a range as ever afterwards. With the exception of grain, an article peculiarly liable to be affected by accidental causes, it appears that almost the whole rise in prices, which was after- wards attributed to depreciation of currency, took place dur- ing the first twelve or fifteen years of the war, when no depreciation existed. Much of it occurred at a time when paper was highest in credit, and there is no reason for suppos- ing that the same thing would not have equally happened, even if the Bank had continued its specie payments. 240 THE BANK OF ENGLAND RESTRICTION. This comparatively happy and prosperous state of affairs was not destined to continue. While the English were waging a cheap and effective war on the ocean and in the colonies, while Nelson crushed the combined navies of France and Spain at Trafalgar, and Wellington subdued the Mahrattas in India, Napoleon reached Vienna, and, turning from Austerlitz to Ber- lin, swept the whole of Gennany into the hands of France. From Berlin he turned to Russia, and at Friedland stopped for the mere want of other countries to conquer. Such successes promised little good to England. Napoleon hastened to turn his new power against her. It was from Ber- lin, in November, 180G, that he issued the famous decree de- claring the British Islands in a state of blockade, confiscating English property wherever found, and prohibiting all inter- course with the British nation. Russia joined the coalition in the following year, and Sweden in 1809. Thus the Continent was closed to English commerce. Napoleon's decree was an outrage to international law, but the Continental System thus enforced was a prodigious shock to Great Britain. There seemed no end to the losses and complications which it caused. Yet there was still one coun- try apparently beyond its reach, whose commerce was of ines- timable importance. The United States of America was still an open market, and the Berlin Decree almost inevitably forced the United States into the arms of England. The British gov- ernment, however, with characteristic fatuity, actually assisted Napoleon to extend the Continental System even to America. The Berlin Decree, and that of Milan which followed it, had declared the British Islands to be in a state of blockade, and ordered that no ship should enter any port under the con- trol of France, if she came from England, or even had touched at England, or if any part of her cargo was English. The I'.ritish government retaliated in January, 1807, by issuing an Order in Council interdicting the passage of vessels between any two ports which were not open to British commerce ; and in November followed this up by declaring all ports closed t<> the British flag to be in a state of blockade, and all vessels THt: BANK OF ENGLAND KKSTRICTION. 241 trading to or from such ports, or carrying- tiny produce of such countries, to be, with their cargoes, lawful prize. The Ameri- can government responded to these outrages by interdicting commerce with both England and France. No ordinary review can undertake so difficult and compli- cated a labor as that of fairly examining the various effects of these measures on English credit and currency. That British trade with the Continent was annihilated, that it was for a time impossible to determine the course of exchange, and to recover debts, was but the most obvious and immediate result. No sooner did it become evident that the decrees were to be rigorously enforced, than all articles for a supply of which England depended on the Continent rose to speculative prices. Flax, linseed, tallow, timber, Spanish wool, silk, hemp, even American cotton, advanced in 1807 and 1808 to prices two or three times those hitherto prevailing. And while one class of imports was thus thrown wholly into the hands of specu- lative holders, another class, consisting of all colonial produce, underwent an exactly opposite process. The European market was closed to it. Sugar and coffee were selling at Calais for three, four, and five times their price at Dover. And mean- while the almost omnipotent naval force of Great Britain was contributing, under the Orders in Council, to aggravate this evil, and to pile up still vaster quantities of unsalable goods in British warehouses, by compelling every neutral ship to make for an English port. A wild spirit of speculation now took possession of the Brit- ish people. Brazil and the South American colonies of Spain happened at this moment to offer a new market, and merchants flung themselves upon it as though it had no limit. The beach at Rio Janeiro was for a time covered with English merchan- dise, which there were no warehouses to hold, and which there was no chance of selling. In London, a rage for visionary joint-stock enterprises characterized the years 1807 and 1808. None of the symptoms were wanting which long experience has shown to be invariable precursors of commercial disaster. The Bank of England, however, still preserved its steady 11 p 242 THK BANK 0F ENGLAND RESTRICTION. and conservative routine. The issues were not increased, the price of gold did not vary, the exchanges had not, fallen below par, as late as September, 1808. So far as the Bank is con- cerned, there is no indication that any unusual speculation existed, or that it lent itself or was asked to lend itself to speculative objects. It was not through the Bank that specu- lators acted. But if we turn to the private and country bank- ers, and, out of the almost impenetrable obscurity in which this part of the subject is hidden, attempt to gather some evi- dence of their condition, it will be found, not indeed that their paper was depreciated, for that it could not be without im- mediately bankrupting the issuer, but that their credit had been extended far beyond any moderate limit. It was not merely that the number of country banks had been more than doubled in ten years. What was of greater consequence than this was the change which had gradually crept into their mode of conducting business. Originally their rules of discount had been the same as those of the Bank of England ; they accepted only short bills, representing, so far as they could judge, real transactions of business. They gradually began to make ad- vances upon bills of longer date, and then to lend money without security of any kind. Paper which could not be dis- counted in London was sent down to them by their London agents. Their West Indian bills had from twelve to thirty- six months to run. They made little inquiry as to what might be accommodation paper, and still less as to the speculative transactions of their customers. The reaction which ulti- mately followed, at the very time when the Bank circulation was greatly increased and increasing, proves the extent to which private credit had been abused. We have been led into this somewhat tedious account of Kiigliind's financial situation in 1807 and 1808, by the hope of showing how critical her position was, and how inevitable a collapse of credit had become. Down to this point, however, the subject offers comparatively few difficulties. Beyond it, the whole region has been made a favorite battle-ground for armies of currency theorists. It is only within the last thirty THE BANK OF ENGLAND RESTRICTION. 243 years that even a fair comprehension of the matters in dispute has been made possible to the public, through the great work of Mr. Thomas Tooke. The opinions first advocated, and the facts first proved by the author of the " History of Prices," have since been accepted by some of the highest authorities in political economy, of whom Mr. John Stuart Mill stands at the head. That they are still hotly contested in England is a fact which only adds to the interest of the inquiry. It has already been stated, that down to September, 1808, the exchanges remained favorable to England, and the price of gold continued firm. During the first half-year, the average Bank circulation had been 16,950,000. At the end of Au- gust, 17,200,000 were in issue. These sums were not ex- cessive. If the small notes, which merely supplied the place of coin withdrawn, are deducted, it appears that the real cir- culation was but 12,993,000 ; less than had frequently been in issue before, and considerably less than has always been in issue since. The prices of all commodities, except grain, had already reached their highest point, or reached it within six months afterwards. It was at this time, when no change ex- cept ordinary fluctuations had occurred in the currency for seven years, that the exchanges suddenly turned, and the price of gold rose.* * BANK CIRCULATION. Notes of Bank Price of Date. Total. 5 and upwards. Treasure. Gold. 1797, 28 February 9,674,780 9,674,780 1,086,170 100 31 August 11,114,120 10,246,535 4,089,620 100 1798, 28 February 13,095,830 11,647,610 5,828,940 100 31 August 12,180,610 10,649,550 6,546,100 100 1799, 28 February 12,959.800 11,494,150 7,563,900 100 31 August 13,389,490 12,047,790 7,000,780 100 1800, 28 February 16,844,470 15,372,930 6,144,250 109 31 August 15,047,180 13,448,540 5,150,450 109 1801, 28 February 16,213,280 13,578,520 4,640,120 107.85 31 August 14,556,110 12,143,460 4,335,260 106.5 1802, 28 February 15,186,880 12,574,860 4,152,950 106.2 31 August 17,097,630 13,848,470 3,891,780 103 1803, 28 February 15,319,930 12,350 ; 970 3,776,750 103 31 August 15,983,330 12,217,390 3,592,500 103 1804, 28 February 17,077,830 12,546,560 3,372,140 103 31 August 17,153,890 12,466,790 6,879,190 103 244 THE BANK OF ENGLAND RESTRICTION. The Continental System had begun to act. The mercantile ventures of the last year proved ruinous ; the enormous im- portations at fabulous prices required to be paid for ; the unfortunate military expeditions which Great Britain was now renewing against the Continent demanded the transmission of gold. England was paying money in every direction, and she was selling her goods nowhere. No one watched this process of exhaustion more carefully, or understood its consequences better, than Napoleon himself. The Bank, following its invariable routine of business, took no notice of the sharp fall in exchanges, or of the heavy drain which rapidly reduced its treasure, and, instead of contracting its issues, allowed them slowly to expand, according to the demand for discount. From 13,000,000 in 1808, the circu- lation in notes of 5 and upwards rose to 14,325,000 in No- vember, 1809. The exchanges indicated already a difference of about fifteen per cent between paper and gold. Meanwhile the government expenses requiring transmission of gold abroad had increased to above 10,000,000 for the year. The exces- sive prices of that class of goods which could only be obtained from the Continent stimulated merchants into every possible effort to procure them. Ships' papers were regularly forged as a matter of business : licenses for trading were obtained at great expense from both governments. Importations were by these means greatly increased, and large quantities of grain were brought in to supply an unusual deficiency in the harvest. The receipts of cotton were more than doubled, and the mar- ket was again overwhelmed with colonial produce. Thus no opportunity was allowed for a recovery of the exchanges, nnd the country continued to be drained steadily of its gold. TW*A Note* of Bank Price of UMfc Total. .6 and upwards. Treasure. Qold. 1805, 28 February 17,871,170 13,011,010 6,883,800 103 ::i August 16,388,400 11,862,740 7,624,500 103 1806, 28 I-Vlirunry 17.::tO,120 13,271,520 6,987,190 103 31 August 21,027.470 16,757,930 6,215,020 103 1807, 2h r,.l,ru:iry 16,960,680 12,840,790 6,142,640 108 :il Auprust 19,678,360 15,432,990 6,484,350 108 1808, IX Ftibrunry 18,188,860 14,093,690 7,855,470 108 31 August 17,111,290 12,993,020 6,016,940 103 THE BANK OF ENGLAND RESTRICTION. 245 Throughout the year 1810 the same process was continued. Again the importations were greatly increased, and the quan- tity of grain brought from abroad was far in excess of what had been imported in any year since 1801. Wellington was now in the lines of Torres Vedras, requiring continual supplies of gold. The military efforts made by England on the Conti- nent were greater than ever before, and the foreign expenditure rose beyond 12,000,000 for the year. The exchanges con- tinued to fall, although at one time there was a tendency to recovery. Gold remained at about the same premium as in 1809, while the government and the public equally increased their demands on the Bank, until in August the circulation of large notes rose to 17,570,000. If irredeemable government paper had been forced upon the public without regard to its wants, until within a space of two years the currency had swelled from a total of 17,000,000 to one of 24,500,000, it scarcely admits of a doubt that the result would have been a rise in prices and an increase of spec- ulation. According to all the old currency theories, such ought now to have been the case with England. In fact, directly the contrary result took place. During the last months of 1809 and the whole of 1810, a fall of prices and a destruction of private credit occurred, which for severity remains perhaps to this day without a parallel, as it was then without a prece- dent. Half the traders in the kingdom became bankrupt, or were obliged to compound. Country banks by dozens were swept out of existence. Rich and poor alike were plunged in distress, while the crash extended to the Continent and to America. It was this universal collapse of credit which, by driving the whole trading class for assistance to the Bank obliged the Bank to increase its issues. Nothing but an abso- lute refusal of discounts could have prevented suspension, had the Bank at this moment been paying its notes in specie. Ac- cording to one theory, the withdrawal of so much country- bank paper should have restored gold to par, since it is very improbable that the Bank issues supplied the vacancy. This would no doubt have been the case, if the depreciation had 246 THE BANK OF ENGLAND RESTRICTION. been, as is usually supposed, the result of over-issue ; but in fact the foreign debt of England was enormous ; its immediate payment was necessary ; gold was the only exportable com- modity, and gold was not to be had. Mr. Baring declared in the House of Commons, that, if his firm wished to obtain fifty thousand pounds sterling for transmission abroad, he did not know how such a sum was to be procured even at a premium of fifty per cent. To export more bulky goods was simply impossible. At this time the British merchant was sending sugar by sea to Salonica, and thence on horseback through Servia and Hungary, in order to reach Vienna ; one parcel of silk sent from Bergamo to England, by way of Smyrna, was twelve months on its passage ; another, sent by way of Arch- angel, was two years. The British government attempted to establish a smuggling depot at Heligoland, in order to over- come the obstructions caused by the Continental System. A single licensed cargo to a French port cost for freight alone twenty times the cost of the vessel which carried it. Gold alone was comparatively easy to export, and naturally bullion rose in value. In all this there is clear evidence of a terrible convulsion in commerce, and no doubt of a previous excessive expansion in credit, followed by as excessive contraction ; but there is noth- ing which indicates an excess of currency in the sense which that phrase bears in regard to the effect of forced issues on prices. Undoubtedly there was a depreciation of ten or fifteen per cent, or even more, in paper as compared with gold, and there may justly be a question whether the Bank was not bound to restrict its issues till that difference was removed. But so long as the usury laws remained in force, the Bank could not act upon the exchanges by raising its rate of inter- est ; and to refuse accommodation would have been the ruin of such merchants MS had hitherto succeeded in surviving the shock. Even had the Bank resorted to this desperate measure, such was the preponderance of foreign payments over receipts from abroad, that no possible pressure could have immediately restored the balance of exchange. In ordinary times a mone- THE BANK OF ENGLAND RESTRICTION. 217 tary crisis effects this result by reducing prices and thus mak- ing it possible to export goods at a profit ; but it is difficult to see how any reduction of prices could have had such an effect in 1810, since for years before that time it had been impossi- ble to obtain in Holland and Hamburg, even at three and four times their English price, the goods which overwhelmed the British market. The only result of Bank contraction, there- fore, must have been to stop importations. But in the first place the general fall in prices was alone sufficient to produce this result, as was proved in 1811. And, moreover, grain was at famine rates ; the people must be fed ; the foreign expendi- ture of the government also defied laws of political economy, and Wellington's army in Portugal required millions in gold. If, therefore, the Bank had attempted to put a still more se- vere pressure on the exchanges than already existed, it would have found itself paralyzed by the government at its first step, and in the struggle which must have followed the people would have been ground into the dust. Even under the liberal sys- tem adopted, there was a time, in 1811 and 1812, when the general distress shook society to its foundations. Had the Bank wilfully intensified and prolonged this distress, it is not improbable that Napoleon's Continental System might, after all, have proved the greatest success of his life. The fall in foreign exchange during 1808 and 1809 did not attract very much public attention until Mr. Ricardo published a pamphlet on the subject, " The High Price of Bullion a Proof of the Depreciation of Bank-Notes." Shortly after the meeting of Parliament in 1810, a committee was appointed, at the instance of Mr. Francis Horner, to investigate the causes of the high price of gold bullion. This was the famous " Bul- lion Committee," whose Report made so marked an era in currency problems that it might almost be called their jions asinorum. Its doctrines, rejected by Parliament in 1811 only to be triumphantly adopted in 1819, acquired through the conversion of Sir Robert Peel an overruling ascendency, and, embodied in the Bank Charter Act of 1844, still hold sway in England, although the more liberal economists have long since protested against the application given to them. 248 THK BANK OF ENGLAND UKSTRICTIOX. We would willingly linger over the Bullion Report, if it were possible to compress the subject within our limits ; but this great controversy does not allow of narrow treatment, and we prefer to lay it aside. It was based upon three propositions : first, that Bank paper was depreciated as compared with gold ; secondly, that this depreciation was caused by over-issues ; thirdly, that the price of gold and the state of foreign ex change should regulate the issues of paper. And the Report closed by recommending that the Bank should be obliged to resume payments within two years. Had the government been in the hands of able or dexterous men, Mr. Homer's resolutions, in which the substance of his Report was embodied, need not have been so difficult to deal with as they proved. The first proposition was indeed incon- trovertible, and no sensible being could have fallen into the blunder of disputing it. The third was, if not indisputable, at least not necessary to dispute under certain limitations. But the second was very far from evident in the sense which Mr. Homer gave to it, and Mr. Thornton, perhaps the highest authority in the House, appears not to have understood it as absolutely excluding the idea that the depreciation might have been due to a deeper cause ; while the concluding practical measure was supported by scarcely any one besides Mr. Homer, its author. But the government was held by a class of men equally in- capable of seeing their own mistakes, and of profiting by those of their opponents. The Ministers began by plunging head- long into the grossest absurdity they could have found. They denied that Bank notes were depreciated at all. Assuming that the sale of coin for more than its nominal value in paper was forbidden by law, they undertook to affirm that the Bank note and the guinea still maintained thoir relative worth in ivirard to each other. They denied that bullion was the true laii'lard of value, and they affirmed that it was the stamp and the stamp alone which made the guinea a standard. They denied that the amount of circulation affected the price of gold, or that the Bank issues had anything to do with the THE BANK OF ENGLAND RESTRICTION. 249 course of exchange. Yet at intervals they were obliged prac- tically to admit the very conclusions which they were so eager to contest, until all their really accurate statements and forci- ble reasoning became inextricably entangled and hidden from sight in a confused mass of inconsistent arguments. On the other hand, they had as opponents some of the ablest men whom England has ever produced. It was pitiable to watch the torture of Mr. Vansittart, Mr. Rose, and Lord Cas- tlercagh, in the grasp of Mr. Horner, Mr. Huskisson and Mr. Canning. The mistakes of the bullionists are hidden by the brilliancy of their oratory, the sparkle of their wit, the vigor and solidity of their genius. Sympathy is irresistibly attracted to their side, when it is seen what magnificent powers they were obliged .to use, in order to convince an unreasoning majority of the simplest principles in practical business. And yet, after all these efforts, they thought themselves fortunate in being defeated by a vote of only two to one. It would have been happy for Mr. Vansittart and his asso- ciates, had they been willing to rest satisfied with this negative upon the resolutions offered by Mr. Horner. Victorious in defence, they thought it necessary to establish their advantage permanently by a vigorous assertion of what they deemed the true principles of credit and currency. Mr. Vansittart accord- ingly moved, in his turn, a long series of resolutions. The third of these has been the chief means of preserving Mr. Vansittart's memory. It was worded as follows : " Re- solved, That it is the opinion of this committee that the prom- issory notes of the Bank of England have hitherto been, and are at this time, held in public estimation to be equivalent to the legal coin of the realm, and generally accepted as such in all pecuniary transactions to which such coin is lawfully ap- plicable." This position was beyond the reach of argument, but not of ridicule. In the whole range of Parliamentary oratory, there are few examples of sarcasm so happy as that which Mr. Can- ning poured out upon this unfortunate resolution in his speech of the 13th of May, 1811. But it was all in vain. The HOUSJ 250 THE BANK OF ENGLAND RESTRICTION. sustained Mr. Vansittart by a vote of 76 to 24 ; and from that day to this the resolution has stood, an object of laughter and wonder to each succeeding generation. Thus the Bullion Committee was disposed of, but the subject was farther than ever from a satisfactory settlement. Within two months of the passage of this resolution, in which Parlia- ment had gravely pledged the people to believe that Bank notes were equivalent to coin, two events almost simultane- ously occurred, which obliged the government to take active measures in order to compel the people to accept these same Bank notes. The first of thest difficulties was due to an un- expected interpretation of the law. Two obscure individuals, one a Jew pedler named De Yonge, the other a guard on the Liverpool mail-coach, had been taken in the act of buying guineas at a premium, an act supposed to be illegal, and, like the exportation of coin, subjecting the delinqtient to the penalties of a misdemeanor. Government determined to make an example of these persons, and they were accordingly in- dicted under an obsolete statute of Edward VI., and, the facts being cleai'ly proved, they were duly found guilty of the acts charged in the indictment. But their counsel raised the point of law, that the act as laid in the indictment and proved in evidence was not an offence in law, inasmuch as the statute of I'M ward VI. was intended to apply only to the exchange of one sort of coin for another. Judgment was respited until the opinion of the twelve judges in the Court of the Exchequer Chamber could be obtained on this point; but at length, on the 4th of July, 1811, Lord Ellenborough pronounced the unanimous decision of the Court, that the exchange of guineas for l>;mk-notes, such guineas being taken at a higher value than they were current for under the King's proclamation, was not an offence against the statute upon which the indictment was founded. Thus the whole government theory in regard to paper money was at once overthrown. Almost :it the same time with this blow, the famous third n -"lution \vjis attacked from another side with a vigor far more alarming. It was well understood that the law of 1797 THE BANK OF ENGLAND RESTRICTION. 251 had by no means made Bank paper a legal tender. The case of Grigby v. Oakes, in 1801, had established the principle that Bank of England notes might be refused by the creditor, and the debtor must in that case discharge his debt in coin. Prac- tically, however, the Bank note had been received as equiva- lent to coin, except in some remote districts of Ireland, where the unfortunate peasants were obliged to buy guineas at a premium from the landlord, in order to discharge their rents. The government policy, however, seemed purposely calcu- lated to challenge attack, and it was perfectly natural that the bullionists, who saw no limit to the possible depreciation, should resort to the last means now left for compelling government to check it. Lord King, a nobleman of high character and strong liberal principles, accordingly issued a circular to such of his tenants as held leases dated before the depreciation began, requiring them in future to pay their rents either in gold or in Bank paper representing the market value of gold. Even the dignity of the House of Lords was almost overthrown by this unexpected attack. A storm of indignation burst on the head of Lord King, whose practical sarcasm was more ex- asperating to the Ministry than even the satire of Mr. Canning. But Lord King was in his right ; he was acting from conscien- tious motives, and he would not yield. Yet, after the passage of Mr. Vansittart's resolution, this act dii'ectly tended to bring Parliament into public contempt. " My Lords," said Lord Grenville, in opening his speech on the subject, " it is painful to me to observe, that I cannot remember in the course of my life to have ever seen the Ministers of this country placed in so disgraceful a situation as that in which they appear this night." Obviously some action had become necessary, and yet Ministers hesitated, in the vague hope that Lord King's example would not be followed. The judges' decision in De Yonge's case, however, turned the scale ; but even then, such was the general dislike to a law of legal tender, and such was the difficulty of forcing a contraction in the Bank discounts, that they were placed in a most embarrassing situation. There was apparently a third alternative, that of allowing Lord 252 THE BANK OF ENGLAND RESTRICTION. King to proceed ; but in fact this would have established two scales of prices throughout the country, and the result would ultimately have been that the Bank, rather than endure the discredit thus attached to its paper, would have preferred to withdraw 7 it wholly. The Ministers were saved from this dilemma by Lord Stan- hope, one of their ordinary opponents. He invented a meas- ure which is certainly one of the curiosities of legislation, a measure which disposed of Lord King, and established the law for such cases as that of De Yonge, but neither made paper a legal tender, nor contained the trace of a legal princi- ple. The act, which has since been commonly known as Lord Stanhope's, made the purchase or sale of coin for more than its legal value in Bank notes or other lawful money a misde- meanor, as also the reception or payment of notes for less than their nominal value ; and it further deprived the creditor of the power of distraining, in case a tender in Bank notes to the amount of the debt had been made. Strange to say, this preposterous statute completely an- swered its purpose. The courts seem never to have been called upon to interpret it, nor did any creditor attempt to en- force his rights. The law officers of the crown did not venture to express any opinion upon the bill while on its passage through Parliament. During the ten years that the Restric- tion Act still remained in force, with this measure of Lord Stanhope's as its supplement, no man in England really knew what the law was as affecting the currency, or the extent to which Bank notes were recognized as the lawful equivalent of coin. In the failure of any judicial declaration on the subject, we can only refer to an opinion expressed in debate by Sir Samuel Romilly. That eminent lawyer pointed out to Parlia- ment, that, if the object of government were to prevent Lord Kinir "i any other landlord or creditor from insisting upon payment in eoiii, the bill was far from answering its purpose. Creditors would still have the right to demand gold, and no court could refuse in such a case to give judgment against the debtor, who was yet apparently debarred by the act from THE BANK OF ENGLAND RESTRICTION. 253 obtaining gold without incurring the penalties of a misde- meanor. The creditor, having obtained his judgment, need not, and probably would not, proceed by way of distraint upon the goods of his debtor. If a landlord, he would resort to an ejectment. In any case, however, he might proceed against the person, and shut up the debtor in jail indefinitely, or until he made himself liable to further imprisonment by purchasing coin. There appears, however, to have been one means of es- cape left open to him still. The law only prohibited the trade in coin, not that in bullion. If the debtor, therefore, chose to purchase bullion, and have it coined at the mint, there seems to be no reason why he might not so have evaded the law. Ministers, however, gave it to be understood that, if cred- itors pressed their rights to this point, it would become neces- sary for Parliament to intervene by making Bank notes a legal tender. It is difficult to see precisely what was gained to the country by a resort to these absurd subterfuges, or why a legal- tender act should not have been passed outright, since Lord Stanhope's bill was intended to have, and did in fact produce, the same effect, except that it went much beyond the limits of reasonable legislation, and accomplished its purposes only by creating a new offence hitherto unknown to the law. The plea that it successfully met the emergency is merely an excuse for slovenly legislation. This act, hurried through Parliament in July, 1811, just at tlie close of the session, was the sole i-esult of the currency controversy, unless Mr. Vansittart's resolutions are worthy of sharing its credit. From this time it became evident that no interference by government in monetary matters was to be looked for, but that the Bank was to retain that exclusive control which it had hitherto possessed. This result was probably fortunate for the country. The Bank directors, if not great masters of statesmanship, were at least convinced that any arbitrary action of their own would only aggravate the evils of the situation, while, if the foreign and domestic policy of the government in other respects furnishes any idea of the probable result of its interference in Bank affairs, there is no 254 THE BANK OF ENGLAND RESTRICTION. disaster which it might not have brought upon the credit and resources of the community. The great financial crash of 1809 and 1810 threw the country into a state of profound distress and depression, but it had the effect of preparing the way for a rapid change at the first sign of military success. The year 1811 marked perhaps the lowest point of England's fortunes ; but in the autumn of that year the prospect became brighter. Napo- leon had now broken with Russia, and was preparing his great campaign to Moscow, while Wellington had achieved unusual success in Portugal. There was hope that both the Russian and the Spanish ports would soon be reopened, while the colonies and South America were actually consuming again large quantities of British goods. Importations into England had meanwhile fallen to a very low point, and the exchanges were slowly creeping upwards. The pressure upon the Bank for assistance and for discounts fell off as credit recovered itself, until the circulation, which had reached 17,570,000 in August, 1810, contracted itself to 15,365,000 in August, 1812, the small notes excluded. What was only hope in 1811 became certainty in 1812. Napoleon was driven both from Russia and from Spain. In another year all Europe was again open to British commerce, and in April, 1814, peace was restored. During this period, many of the dangerous symptoms of 1807 and 1808 again made their appearance ; the circulation had become much smaller, but nevertheless prices rose ; speculation was as gen- cral, if not so desperate, as in 1808 ; the Continent was flooded with Knglisli goods, while in England itself the price of wheat had risen, in 1812, to nearly 100 shillings the quarter. But although the circulation was diminished by 2,000,000. Although public confidence was so far restored tli.it prices gen erally rose, although the exchanges became considerably more favorable, still gold showed no sign of (idling in value. The premium had risi-n to forty-two per cent in September, 1812, and after various lliictuatioiis it was again forty-two per cent in the autumn of 1813. Then at last the fall began, and for THE BANK OF ENGLAND RESTRICTION. 255 a twelvemonth gold continued to decline steadily, until, at the close of 1814, the premium was less than twelve per cent. And it should be remarked that the rise in value of Bank paper was coincident with another very large extension of issues, which now reached 18,700,000. This extension was due partly to government, but partly, as in 1810, to the private demand. The whole fabric which speculators had raised for themselves on the apparently solid basis of supposed European necessities had crumbled to pieces at tfie first shock. Europe was too poor to buy or too thor- oughly plundered to pay for English merchandise. The spec- ulations abroad failed at the very time when a prodigious fall in the price of grain ruined the English farmers and the country bankers, who depended upon agricultural prosperity. The collapse was general and disastrous ; England was again plunged into distress at the very time when her success was most brilliant; for two years after 1814, trade stagnated and merchants became bankrupt, without the slightest reference to the price of gold or the amount of circulation ; nor is there any reason to suppose that the Bank could have prevented, or even shortened, the distress by any action upon the currency. However devoted might be the adherence of theorists to their own favorite currency dogma, the most ardent follower of Mr. Horner could scarcely have regretted that the princi- ples of the bullion report had not been made obligatory as a rule of action for the Bank during the year 1815. The evils of inconvertible paper are no doubt many, but there are also advantages in the system during times of political trouble ; and it is impossible to deny that the violent convulsions of 1815 would have proved too severe a trial for any but the most elastic form of credit. During January and February, gold had stood at about 115, as compared with paper. The Emperor returned from Elba and arrived in Paris on the 20th of March. The next quotation of gold is on the 4th of April, when at one leap it rose to 137, almost as high a point as it had reached during the war. The exchanges went down with almost equal violence ; but the Bank circulation remained 256 THE BANK 01 KNGLAND RESTRICTION absolutely stationary. After the first panic was over, gold began again to fall slowly, and on the news of Waterloo it de- clined to 128; on the 1st of September it resumed the posi- tion it had held in January ; but instead of resting there, it continued to fall, until at the close of the year the premium was only five per cent ; and in July, 18 1C, it was nothing at all, or at most only about one per cent. The Bank circula- tion meanwhile expanded or contracted itself according to the demand, averaging rather more than 17,500,000, exclusive of the small notes.* The equilibrium was therefore restored, and it was restored without interference by government. The system vindicated itself, and is justly entitled to the high credit that properly belongs to so brilliant a success. But, unfortunately, this very success has given occasion for another hot dispute among currency writers, involving the whole question in its historical as well as in its theoretical bearings ; and tedious as the sub- ject may be, we are obliged again to turn aside, and to exam- ine the opposing theories so obstinately and positively ad- vanced. It is almost needless to repeat that there were in 1816, and that there still are, two classes of political economists, so far as the currency is concerned. The one has found in bank paper and its over-issues an explanation for every rise or fall * BANK CIRCULATION. Ttllto Trttal Notes of Bank Priro of IMMVi UbHl. 5 and upwards. Treasure. Gold. 1809, 28 Februnry 18,542,860 14,241,360 4,488,700 115.5 31 August 111,574,180 14,393,110 3,652,480 111 1810, 28 February 21,019,600 16,159,180 8,601,410 115 31 August 24,793,990 17,570,780 3,191,860 115 111, 28 February 23,360,220 16,246,130 3,350,940 118.75 31 August 23,286,860 15,692,490 3,243,300 125 1812, 29 February 23,408,320 16,951,290 2,!)83,190 122 31 August 23,026,880 15,385,470 3,099,270 128.6 1813, 27 F.-bniary 23.210,930 n. l'.'7,320 2,884,500 130 81 August 14,498,180 1". 7110,980 2,712,270 142 l-ll. -J* I-Vl.ruary 24,801,080 li;.4r>f,.540 2,204,430 140 31 August 2\:i(i8,290 18,703,210 2,097,680 115.6 1815, 2 February 27,261,650 18,22t>, ion 2,036,910 116 81 August 27,248,670 17,766,140 3,409,040 116 THE BANK OF ENGLAND RESTRICTION. 257 in prices, and for every financial disaster. The other has denied to such a medium of exchange any influence whatever upon prices, and insists that, if every bank-note were de- stroyed, speculation and abuses of credit would flourish not less than now. The bullionists of 1810 and their successors were strong in the belief that the Bank issues did control prices, and the price of gold especially. They were, therefore, obliged to explain how it happened that gold fell to par, or about forty per cent, while the Bank issues were actually in- creased. Obviously the dilemma was serious. The bullionists, however, had a reply, and a very reasonable one ; we quote it as given by Mr. McCulloch, whose opinion is always entitled to weight. Mr. McCulloch's theory is, that, although no contraction of Bank issues occurred which could explain the fall in gold, yet there was such a contraction in the entire circulation, taking the country banks into the cal- culation ; and that the rise in value of Bank of England paper was in fact due to the destruction of country bank- notes during the disastrous years of 1814, 1815, and 1816. And if the inquiry be carried a step further by seeking the cause of these disasters themselves, Mr. McCulloch explains that the fall of grain from 155 shillings the quarter, in 1812, to 67 shillings, in 1814, had spread universal ruin among the agricultural class. We are far from affirming positively that so natural and so obvious an explanation as this is not the correct one ; yet we are obliged to confess that the view taken by Mr. Tooke and Mr. Fullarton appears to our eyes more philosophical and more exact than that of Mr. McCulloch. They maintained that the fall in gold was due simply to the fact that, with the final turn of exchange in favor of England, gold ceased to be an object of demand, and, like other commodities in the same position, rapidly fell to its ordinary value. Mr. McCulloch's facts are unquestioned, but they appear to be only a part of the truth. The prodigious decline in the price of grain was coincident with a very general decline in prices, which naturally checked importations and stimulated 258 THE BANK OF ENGLAND RESTRICTION. export. The grain alone which was imported in 1814 is esti- mated at 2,800,000 iu value : in 1815 it was but 800.000, and in 1816 only 940,000. Silk and wool, coffee, flax, lin- seed, and most of the great staples of import, fell off in the same way between 1814 and 1816. Under any circumstances the exchanges must have risen without regard to the currency, and gold must have fallen, since considerable sums were actu- ally brought from abroad during 1815 and 1816. The force of this argument becomes evident by comparison with previous cases. If the rise in exchange and the appre- ciation of paper in 1815 and 1816 were caused by the with- drawal of private bank-notes, the same reason should hold good for the similar events in 1814. If at the later time the currency were so depreciated from excess as to regain its value only by contraction, it was certainly more in need of that re- lief at the earlier. Yet a fall of thirty per cent in gold was then coincident with an increase of paper throughout the country. Allowing, however, that Mr. McCulloch is right, and that the restoration of paper was caused by involuntary contraction, that contraction was at all events only temporary, and the re- establishment of the credit of the country banks of issue should have renewed the depreciation. The Bank issues rose in 1817 and 1818 to a higher point than ever before, and the country banks had again extended their credit in every direction. Under these circumstances, the depreciation should have been very great, even after every reasonable allowance had been made ; yet in fact gold was at a premium of only about five per cent, and this slight advance appears to have been caused UK rely by a temporary pressure on the foreign exchanges which will iiresently be explained. If these arguments seem still insufficient to show that the theory of excessive issues does not fully meet the difficulties of the niKc, we can only compare the circulation of 1814 and 1815, which is said to have lost twenty per cent or more of its value through its excess, with that which existed after spe- cie payments were resumed. Such comparisons are not a fair THE BANK OF ENGLAND RESTRICTION. 259 proof of either excess or deficiency, since the piiblic demand varies, and the same amount of circulation is at one time less and at another more than is required. Allowing for such variations, we may still venture to compare the three different periods of general expansion between 1813 and 1825. The small notes having been withdrawn at the resumption, and their place supplied by coin, it is necessary to exclude these in each case. The highest point reached by the Bank circulation in any quarterly average between 1812 and 1815 was 19,007,000 in the third quai'ter of 1814; the price of gold being about 112. Between 1816 and 1822, the highest average was in the second quarter of 1817, or 21,517,000, and it remained above 20,000,000 until July, 1818, the country banks ex- panding generally. Gold was then at about 105. Between 1823 and the close of 1825, the highest average was iu the first quarter of 1825, a time of universal expansion, when it reached 20,665,000, the Bank redeeming its notes in coin. If, then, two thirds or three fourths of the whole deprecia- tion was removed in 1814 without any withdrawal of paper; if the circulation was restored to its widest range in 1818 without any effect of consequence upon the price of gold; and if, after the resumption, the circulation remained undiminished in amount, and its issue subject to the same general laws as before, there seems to be no necessity for resorting to the theory of involuntary contraction in order to explain the fall of gold in 1816. There is no reason to dispute that theory, if it is understood to mean merely that this contraction was itself a part of a general movement of trade and credit, and as such that it contributed to hasten the result. But if more than this is intended, it appears to us that the effect produced was entirely out of proportion to the cause assigned. The whole subject of private banking, for many years as- signed as the source of all financial troubles, has in fact veiy little to do with the question of depreciation during the French wars. The country banks held then precisely the same position they had held before suspension, nor did the 260 THE BANK OF ENGLAND RESTRICTION. resumption change it. They never suspended payments. At any time gold might have been demanded for their notes. At all times they did in fact redeem their notes on demand, by exchanging them for those of the Bank of England. Their circulation, therefore, was limited by that of the Bank, and the same general laws controlled the whole. Country bank paper could not have been in excess of the public wants then, any more than it could now be, although the credit of such banks might be, and no doubt was, abused then, as it may be now. On the other hand, the Bank of England was not obliged to redeem its notes. There is no doubt that, through the channel of permanent loans to gov- ernment, it might have forced any given amount of paper into circulation, had it chosen to do so. But it did not force a single note upon the public. It lent notes, but never paid them away. At the end of two months every such loan had to be paid back into the coffers of the Bank by the borrower ; and although the advances to government were to some degree permanent, in the first place they were not excessive, and in the second place, as has been already shown, they tended di- rectly to lower the private demand. Whatever action may have been caused by the Restriction was upon credit in the first place, and not upon currency. The encouragement it may have afforded to speculation could not, however, have been very great, or ten years would not have passed without showing it. But when taxes, bad seasons, or the operations of war, or other causes, combined to raise prices and to stimu- late speculation, the credit system was not then, nor is it now, adapted to check the rise. And when a stagnation in business and a fall in prices followed, as was sure ultimately to be the case, the circulation contracted as a necessary consequence. But in every instance, before the resumption and since, the rise in prices has preceded the expansion, and the fall has pre- ceded the contraction. In the early part of 1817 the supply of bullion in the Bank had risen to 10,000,000, the average total circulation for the quarter being somewhat in excess of 27,000,000, while THE BANK OF ENGLAND RESTRICTION 261 the exchanges were considerably above par. The directors, therefore, considered it safe to try the experiment of partial resumption, and by a series of steps taken during this year they undertook to redeem all notes dated previous to the 1st of January. This was, in fact, resumption. During the next two years any holder of Bank notes could obtain gold for them at the Bank, either directly, or by exchanging them for such as were dated previous to the 1st of January, 1817. There is no reason to doubt that, had the exchanges remained firm, there would have been no further question as to an easy and regular return to the normal condition of the currency. But, unfortunately, the year 1817 was one of renewed specu- lation, and the imports again rose to an extravagant point. Grain alone to the value of 17,300,000 was brought into England in the two years 1817 and 1818. Another cause which could not well have been foreseen tended powerfully to depress the exchanges and to carry gold abroad. Nearly all the governments of Europe were at this time borrowing large sums of money, and the English capitalists negotiated several of their largest loans. How much money was sent abi-oad for this purpose it is not easy to say, but certainly not less than .10,000,000. The effect upon exchange was immediate, yet the extreme variation in gold was not more than five per cent, although no effort of any kind was made to counteract the pressure. So far from resorting to the theory of excessive issues for an explanation of this temporaiy rise in gold, one may well feel surprise that, under the circumstances, there was not a much greater disturbance of the market. The return of peace must have largely increased English resources, to enable them to bear so easily the pressure of enormous foreign pay- ments. But even the slight variation of five per cent which did exist was not of long duration. Again in 1819, as before in 1816 and in 1814, the system vindicated itself without artifi- cial pressure, by the mechanical operation of its own laws. The excessive importations of 181 7 and 1818 resulted in stag- nation of business and decline in prices. The foreign loans 262 THE BANK OF ENGLAND RESTRICTION. were discharged. The exchanges, relieved from pressure, rose. The demand for gold ceased, and in July, 1819, the Bank note was again at par. There it remained thenceforward, and from that day to this there has been no depreciation in the value of Bank of England paper.* In the mean while, however, Parliament had taken alarm. The Bank directors, after paying out 4,000,000 in redemp- tion of their notes under the conditions specified in 1817, see- ing no immediate prospect of a rise in exchange, and fearful of the entire exhaustion of their treasure, applied to Parlia- ment early in 1819 to be relieved from the further perform- ance of their own promises of redemption. Committees were appointed by both Houses, whose first act was to renew the Restriction in its whole extent. Then, with a view to the final establishment of a fixed government policy in regard to re- sumption, the two committees entered into a separate and most extended investigation of the whole subject, resulting in two reports made in the course of April and May, which, with the accompanying evidence, fill an enormous volume, and still furnish a mass of readable matter not less interesting than bulky. We are obliged to omit any detailed examination of * BANK CIUCTLATION. Tntnl Notes rif Bank Price of UUil- 5 and up.v.iril*. Treasure. Gold. 1816, 29 February 27,013,620 18,012,220 4,640,880 IOC 31 August 26,758,720 17,661,510 7,662,780 101.5 1817, 28 February 27,397,900 19,261,630 9,680,970 100.8 30 August 29,543,780 21,55(i.C,:!0 11,6(58.260 103 1818, 28 February 27,770,970 20,370,290 10,065,460 L04J 81 Aujru^t 26,202,150 18,676,220 0,363. ir.o 104.5 1819, 27 February 25,126,700 17.772,470 4,184,620 104 31 Au-rust 2V2V2,690 18,017,460 8,695.::i;o 100 1820, 2!) February 23.484,110 1<;.7:4,980 4,911,060 100 31 August 2'.2!i!-,340 17,ii00.730 8,211,080 100 1821, 28 February 23,SM.'.n>o 17,447,360 H.J-09,900 100 31 Au.^u-t 2ii.295,300 17.717,070 ll,233.r,!m 100 1822, 2K February 18,61 17, 2 110,600 11.057,150 100 31 Aujju^t 17,464,790 16,609,460 10,097.'.Mio 100 Average Circulation of Bank Note* of 5 and upwards for the years I-j:{. 1824. 1826. 18,033,636 19,927,120 19,679,120 THE BANK OF ENGLAND RESTRICTION. 263 these papers, and of the Parliamentary debates that followed them ; but it is impossible to close this history without some slight analysis of the measures finally adopted. Mr. Peel, afterwards the celebrated Prime Minister, was chairman of the House committee. Hitherto an opponent of the bullionists, his opinions were changed by the testimony offered before his committee, and he became a convert to the doctrines which Mr. Horner and his friends had so ably advo- cated in 1810. He carried almost his whole party with him. It was now generally acknowledged in Parliament that Bank paper was depreciated in regard to gold, and that a forcible contraction would restore the equilibrium. This principle, therefore, lay at the basis of his report. The most serious resistance to resumption now came, how- ever, from a new party, which made an alarming \ise of this doctrine of depreciation. It was affirmed, and probably with truth, that the trifling difference between paper and gold was no measure of the actual depreciation in paper as compared with commodities generally. The rise in prices during the war had been, it was argued, as much as fifty or one hundred per- cent upon the old scale. A return to the original standard would be a flagrant injustice to the community. The fund- holders alone would be benefited by it, and the people would be ground down by additional taxes solely in order to pamper the wealthy capitalist. If Parliament were determined to re- store specie payments, it should at least create a new standard, and reduce the value of sterling money by twenty-five per cent ; or it should accompany the resumption by allowing an equivalent deduction to every debtor on the amount of his debt. In other words, a general repudiation to the extent of twenty-five per cent was demanded by a party which contained some leading and influential members of Parliament not in any way inclined to act the part of demagogues. The House of Commons was, however, faithful to one main principle, in which it justly considered the national honor to be involved. The Restriction had been a war measure merely. Since peace had been restored, Parliament, while consenting 264 THE BANK OF ENGLAND RESTRICTION. to renew the law from year to year, had repeatedly pledged it- self to ultimate resumption. Every government loan had been raised on the faith of these pledges ; the interest of the na* tional debt had been paid in paper, on the ground of its equiv- alence to gold ; every public or private debt since 1797 had been contracted under the influence of acts of Parliament prescribing the time of resumption ; every Bank note bore a promise to pay upon its face. Four years had already been allowed to pass, and nothing had yet been done. It was felt that any further concession either to public timidity or to class interests would endanger the national credit, if indeed it did not proclaim a criminal dishonesty in those to whom the duties of legislation were intrusted. All resistance, therefore, to the principle of resumption in its purest and simplest form was summarily swept aside. Yet it is curious to observe with what excessive caution Mr. Peel proceeded, and how clumsy and ponderous an engine he thought it necessary to invent in order to bring about a very simple result. At the time when his committee was sitting, there was a premium of about five per cent upon gold, and his object was to restore fully the equilibrium between paper and coin in the first place, and in the second to create a system under which it should be impossible for paper to foil again below par. The latter purpose could, as he believed, be effected by estab- lishing the principle that the circulation should be forcibly contracted as the exchanges became unfavorable, or, in other words, that the Bank should diminish its issues whenever its treasure was diminished. But as the Bank directors were ob- stinate in denying the efficacy of this contrivance, Mr. IVel undertook to frame his bill in such a manner as to leave them no option but to follow out his theory. Tlit: project, therefore, began by an order for the repayment by the government of ten millions out of the twenty-three millions advanced to it by the I'.;ink. This repayment was not m:ide, however, for the purpose of necessarily contracting the Bank loans or issues, but because the Bank could more easily control its circulation when made in short private loans, than THE BANK OF ENGLAND RESTRICTION. 265 when made in more permanent advances to government, and would, therefore, be more able to act energetically should a fall in the exchanges threaten the success of the plan. Having thus removed one possible impediment, Mr. Peel's next step was to move the following resolution : " That from the 1st of February, 1820, the Bank shall be liable to deliver on demand gold of standard fineness, having been assayed and stamped at his Majesty's mint, a quantity of not less than sixty ounces being required in exchange for such an amount of notes by the Bank as shall be equal to the value of the gold so required, at the rate of 4 Is. per ounce " ; that is to say, any person presenting Bank notes to the amount of 243 at the Bank counter should receive in return a bar of gold worth 233. After the 1st of October he was to pay only 238 for the same quantity of gold, and after the 1st of May, 1821, the ingot of sixty ounces was to be purchasable at its par value in notes. After this experiment had been fully tried during a space of two years, the Bank was, on the 1st of May, 1823, to commence the redemption of its notes in coin. Such was the famous bill of Mr. Peel, which excited the warmest controversies during a whole generation. So far as its ultimate purpose of effecting an unconditional return to specie payments is concerned, it deserves all praise ; but we cannot think that the merits of Mr. Peel's bill, as a practical measure, were very great, or that, apart from its general ten- dency, it either did or could exercise any great influence on the result. A simple resolution requiring the Bank to resume on a certain day would have answered the purpose better. In the first place, the elaborate mechanism by which the price of gold was to be forced down was based upon an official acknowledgment of depreciation, the Bank note being made the legal equivalent of a smaller sum in gold than that named upon its face. It is true that no actual coin was to pass, but the gold ingots were as much coin as if they had been guineas. To reverse the whole policy of the war, and at this late mo- ment to proclaim that the government had for years steadily cheated its creditors by paying them in depreciated paper, was unnecessary, and, as we believe, wrong in principle. 266 THE BANK OF ENGLAND RESTRICTION. In the second place, the radical difficulty with Peel's bill was, that if its provisions had been tested, had the event occurred which they r/ere designed to provide for, they would probably have proved useless. We have no space to enter on the wide controversy still raging in England on this point as connected with Sir Robert Peel's Bank Charter Act of 1844 ; but there are few admirers of that act who can deny that the theory of regulating the currency by the movements of exchange does not and cannot exclude very violent fluctua- tions in credit, in fact, that it for the time aggravates them. Had the exchanges, therefore, become unfavorable in 1820, as they did in 1825, no amount of contraction could have saved the specie of the Bank. If, therefore, in the face of such a drain, the Bank had undertaken to increase it by selling gold two per cent cheaper than before, as Peel's act required, there is every reason to believe that it would have again broken down. As Mr. Ricardo pointed out to Parliament, its duty was to establish the principle, but it was for the Bank to carry that principle out in action. Mr. Peel's act was not merely for the resumption of specie payments ; it was also one for the regula- tion of commerce and credit; it undertook to control both the currency and the exchanges. Such efforts have hitherto al- ways failed, and we can see no reason for supposing that this one would have been more successful than the rest. The really valuable part of the bill was that which fixed a day for the resumption, and that which repealed the penal statutes against melting or exporting coin. Had all the rest been omitted, the measure would have been greatly improved. Whatever may have been the theoretical merits or demerits of the scheme, in actual practice it was wholly inoperative. Within a few months of its adoption, and without any opera- tion upon the curreney, gold again fell to par, and tin-re it has since remained. The liank prepared its bars of bullion, but no one \voiild have them. On the contrary, large amounts of gold were brought into its vaults. \Veary of prolonging an ob- viously ii.M-lr.-vs dd.-iy, the directors applied to Parliament early THE BANK OF ENGLAND RESTRICTION. 267 in 1821, and procured the passage of a new act, under which cash payments were at length entirely resumed on the 1st of May of that year. The public was unconscious of the event. The Bank system was not altered, nor was the circulation diminished, except so far as sovereigns were substituted for notes of one and two pounds ; and after twenty -four years of an irredeemable paper currency, Great Britain returned smooth- ly and easily to its ancient standard, and redeemed its pledged honor. There was, however, between the years 1818 and 1822, a general and severe fall in prices, which was then, and is still, commonly referred to the action of Mr. Peel's bill. There may be a certain degree of truth in this theory, since the cer- tainty of resumption would very possibly inspire for the time a salutary cautiousness in the extension of general credit. But in truth there were other causes which tended much more strongly to produce the same result. The agricultural class, which uttered the loudest complaints, had, under the influence of an excessive stimulus, brought more land under cultivation than was required by the public wants, and a long time passed before a proper equilibrium was again established. The ship- ping interest was in much the same condition. But the popu- lation at large did not suffer. On the contrary, it does not admit of doubt that the condition of the mass of Englishmen steadily improved after 1817. At the very time when prices were falling, the manufacturing interests were rapidly extend- ing and enriching themselves ; we hear less and less of politi- cal discontent and internal disorder, as reviving prosperity brought with it social repose, while even among the bankers and traders there were far fewer bankruptcies during the three years ending in 1821 than in any similar period since 1809. It' the resumption was to be held responsible for the misfor- tunes of certain branches of industry, common justice requires that the general prosperity of others should outweigh the complaint ; but if the views which we have taken are correct, both complaint and praise were equally thrown away, and the system after resumption was identical with that which had 268 TH1 ' : BANK OF ENGLAND RESTRICTION. existed before. The only effect of the long suspension was to breed a race of economists who attributed an entirely undue degree of power to mere currency, and who for years to come delayed a larger and more philosophical study of the subject, by their futile experiments upon paper money. We will not undertake to apply England's experience to oth- er cases of depreciation, though no richer field could be wished. But we reiterate, in concluding this review, that a wide distinc- tion must be drawn between inconvertible bank-notes, issued on good security merely as loans, payable within a short defi- nite period, and inconvertible government paper, issued like so much gold or silver, yet not capable of being melted like the precious metals into an article of commerce, nor of being re- turned to the issuer and not again borrowed, like bank-notes. In one case the public regulates the supply by its own wants ; in the other, it is compelled to regulate prices by the supply. No country laboring under the latter difficulty can draw con- solation from England's example. But if, in addition to the 00,000,000 which we will suppose to have circulated in British paper during the last ten years of Restriction, there had been another 60,000,000 of government currency forced upon the public, and if the private banks of issue had been under a less rigorous central control, in this case there might indeed be some parallel l>ct\veen the difficulties of resumption in 1821 and those under which other nations have been weighed down. But in this case, too, we may freely venture to disbelieve that the return to cash payments on the old sys- tem would have been so easily brought about ; and if England had, after all, succeeded in ultimately restoring her credit, if she had redeemed her pledges and vindicated her honor, she would have accomplished more than any nation has yet done, although many have bucn placed in a similar situation. BRITISH FINANCE IN 1816.* T ORD LIVERPOOL'S administration, at the close of the I J great French war, contained perhaps not a single mem- ber endowed with less originating power than Mr. Vansittart, the Chancellor of the Exchequer. The twenty- three years during which that struggle had raged almost without inter- mission had seen many men in succession attempting, after their own fashion, to sustain the enormous and rapidly in- creasing burden imder which the resources of England were strained to exhaustion. Mr. Pitt, who, in spite of all that may be said, was great as a finance minister, even in his errors, Mr. Addington, Lord Henry Petty, and Mr. Spencer Perceval had, one after another, tried their ingenuity, not in restoring order to the nuances, for they all found any snch purpose far beyond their powers, but in holding England back from the brink of national bankruptcy. When, in 1812, Mr. Perceval was assas- sinated, and Lord Liverpool became the First Lord of the Treas- ury, it was not supposed that so weak an administration could long sustain the weight of the public interests ; and Mr. Van- sittart seems to have been placed at the head of the Excheq- uer rather in the expectation that the position would not be permanent, than with any idea that he might become the most important member of the government. Nominally, indeed, the financial policy of the country was under the control of the Prime Minister, and the whole administration was respon- sible for its direction. But Lord Liverpool was himself not a * From the Nortli American Review for April, 1867. 270 BRITISH FINANCE IN 1816. great man, and Lord Castlereagh, whose ability was really con- siderable, gave, as could scarcely have been otherwise, his whole attention to his own department of foreign affairs. Nev- ertheless, weak as it was in 1812, this administration brought the war to its conclusion, placing Great Britain in a position more powerful and commanding than she ever had held before, or probably will ever hold again. Bnt the close of this long struggle, and the settlement at last effected by the treaty of Vienna, .changed with great rapidity the task of the English government. Questions of internal policy sprang into sur- passing interest and prominence ; and while Lord Liverpool and Lord Castlereagh were still occupied in maintaining British influence on the Continent at the same point to which they had raised it in 1815, the movement had already begun among the people, which, fifty years later, ended in the official avowal of the uselessness and mischief of the traditional foreign policy of Great Britain. Mr. Vansittart was not a person of so much consequence that it has been thought worth while to publish his papers ; and we cannot now learn whether he was in any way conscious of -tho enormous duties which the close of the war threw upon him, duties which would have overtasked Pitt himself, and which Huskisson and Peel made the foundation of their great reputations, while a host of inferior men were buried under the weight. Even now it is impossible to draw up a clear statement of the condition of English finances in 1816. It is impossible to determine with certainty even the simplest of all the facts, the amount of the debt. If, therefore, the follow- ing account of English financial affairs appears unintelligible to the reader, there is only one consideration to be offered in its excuse. Tim account is difficult to understand, and may contain errors ; but there can be no possible doubt that a clear and positive statement would be quite unworthy of belief. Tin: Parliamentary Paper No. 443 of the session of 1858 gives an official return (' the <>ld system an- those of the house and land taxes, and the property or income tax. as the most economical and the most just, that existed. I'.uf these required a decree of reform and alteration wliic.h would almost have converted them into new taxes. BRITISH FINANCE IN 1816. 277 It is unquestionable that the nation, apart from the form of its burdens, was very much over-taxed. The most ordinary and necessary articles of consumption were overloaded with burdens. The case of the salt duties was a notorious example of this evil. The natural cost of salt was less than eightpence the bushel, while the law required fifteen shillings on each bushel, raising its price to about twenty-two times its value. The same objection ran through most of the excise duties. This was, however, comparatively a simple difficulty ; and although it needed prompt and effective correction, no very high intellectual power was required to arrive at the remedy, so long as the question of protection was not involved. But it was rare indeed that the question of protection could at that time be kept out of any projected improvement in English taxation. Protection coiled like a tangled cord around and over and through every portion of British finance. The reformers, who, with no enmity to the long-established princi- ple of protecting home industry, still wished to relax a little here and there the strain of taxation, which was tearing the very muscles out of the bodies of their poorer fellow-country- men, tugged now at one projecting evil of the vast system, and now at another ; but wherever they came, they found the whole mass, confused and chaotic as it was, bound hard and fast in the inextricable meshes of protection. Some alarmed interest sprang out of the darkness to cry shame, and to excite popular hatred against them at the very moment when they were hoping at last to have found a chance of stirring the phlegmatic government and the wretchedly indifferent Parlia- ment into taking a step which could by no possibility harm any living creature. Everything was protected. Every petty interest of the country had its rag of protection, not merely against the genius or activity or superior circumstances of a foreign rival, but against allied branches of industry at home. Tiles com- plained if slates were untaxed. Wool was jealous of cotton. The brain of the Chancellor of the Exchequer was racked by hopeless efforts to maintain a proper equilibrium between home 278 BRITISH FINANCE IX 1810. industries, while protecting them all against the foreigner. The irresistible logic of the principle was really carried out to that extent from which tamer modem protectionists shrink. One part of the United Kingdom was protected from the other. The products of English industry were protected from the rivalry of Ireland, and the manufactures and produce of Ire- land were only admitted under suitable precautions into Eng- land. It is true, that the policy was, in this particular case, pursued with somewhat superfluous energy, since not only were heavy duties exacted for the protection of manufactures which actually existed in Ireland, but also for that of some which did not exist at all, and never had existed, and which a moderate degree of knowledge of the subject would have shown never could exist ; so that the Irish people enjoyed, through a long series of years, the most favorable of possible opportunities for observing the operation of a thoroughly efficient protective system of their own choice. Nor was this all. Besides the protection granted to each industry against its neighbor, besides that which built a wall between the different states of the same empire, and besides thai which guarded them all against the foreigner, the British system undertook to protect one foreign nation from another; and this was even regarded as a masterpiece of statesmanship.' A brilliant example of this form of protection was furnished in the case of Portugal. For an entire century, down to 1 S."> I , the. British people were condemned to drink the vintage of Portugal, in order to protest both countries against the supe- rior attractions of French wine. But even as regarded the ordinary and almost universally accepted practice; of protecting home industry against the for- eiu,i !>T, tlio system of 1810 was far in advance of the mild con- ceptions of 1800. The statesmen of that day shrank from no cnns(>(|iu>ncc of their theory. It was not enough to lay pro- tective duties of sixty or a hundred per cent on rival eiiter- ]n i-r. It was uot even enough to tax at the rate of fifty per ci-nt as a manufactured article the very mummies that were imported from Egypt, lest they should interfere with the Brit- BRITISH FINANCE IN 1816. 279 ish product. If the principle was good at all, it was held to be good to the extent of absolute prohibition ; and as, on the one hand, the law required that the Englishman who had been so unlucky as to die could only go to his grave in a winding- sheet of British woollen, so it was enacted, that any man, duke or beggar, who might be suspected of wearing or -pos- sessing even a silk handkerchief of foreign manufacture was liable to have it taken from his neck or his pocket, or to have his house entered and ransacked from garret to cellar. There was an element of the most intolerable tyranny inherent in the very nature of the prohibitive laws. It might be supposed that difficulties and confusion enough would have resulted from such a revenue system. But in point of fact, there was nothing peculiarly strange or remarka- ble in it. Similar principles lay at the base of almost every financial theory at that time, and the countries of Europe, and even of America, accepted them as their rule of action. It was here that the British system began to show itself in its own strength ; but it was only when the colonial and naviga- tion laws were added to the over-taxation and to the eccen- tricities of ordinary protection, that confusion became , con- founded, and absurdity ran riot in the English statute-book. The principle which then lay at the bottom of the colonial system was, that the colonies existed for the benefit of the mother country ; and the successful protest of the North American Colonies, in their war of independence, had not yet succeeded in convincing Great Britain of the radical error of this theory. No ships but British ships could enter the ports of a British colony, and no market but the English market was open to the colonists. The West Indian sugar-planter was obliged to send his produce to England for sale. He might perhaps have gained something had he refined it before ship- ment ; but the British refiner would have suffered, and the British mercantile marine must have the benefit of the bulkier freight. In return, he was obliged to receive only British goods, or goods which had passed through Great Britain. But the West Indian colonies were dependent upon the nearer 280 BRITISH FINANCE IN 1816. ports of the United States for many of the very necessaries of life ; and the negroes died of hunger when those ports were closed. This necessity of obtaining food was alone the cause of a slight relaxation in the law, by which a limited trade was permitted in certain articles, from certain ports, by a certain class of vessels, with the United States. On the other hand, if the price of colonial sugar was twice or more than twice that of the foreign, as was sometimes the case, the British public was required to pay the additional tax of several mil- lions sterling annually for the benefit of the colonial system. The timber trade with the Canadian colonies was a still more curious example of British protection and its complications. It was undisputed that the timber of Norway was not only the easiest to procure and the cheapest, but also much the best in the market. But the interests of the colonies required protec- tion, and the British marine was accordingly built of inferior material. The reformers demanded the abolition of this mis- chievous system, and called upon the shipping interest to join in obtaining its repeal. The ship-owners refused. They re- sisted desperately every attempt to reopen the Norway timber trade ; and their argument was, that, as the naval power of (ireat Britain demanded a numerous merchant marine as its basis, and as the timber trade with Canada supplied an enor- mously bulky freight, and required long and frequent voyages, it would be a violation of the very first principles of British policy to allow their ships to be built of the best timber. The liberal members of Parliament, irritated at this extravagant taxation of the nation for what they considered a gross piece of jobbing, tried to reduce the argument to the absurd, and indignantly declared that Parliament had better at once enact by law that the Newcastle colliers, instead of bringing their c"al direct to London, should sail "north about" to their mar- ket, and make a preliminary tour around the United Kingdom. The answer t<> the atleni|)ted sarcasm was quick and decisive. The ship-owners retorted, without hesitation, that, although it must indocd be admitted that the Newcastle colliers wen; allowed by law to choose the shortest and easiest route to BRITISH FINANCE IN 1816. 281 London, still it was not to be supposed that even here the shipping interests had been overlooked. The laws practically forbade the use of the inland and cheapest transit from the nearer mines, with the single object of encouraging and de- veloping the coastwise shipping hi the interest of the national marine. A protective system so logically perfect, so rigid in its obe- dience to a single purpose, so universal in its scope, so minute in its application, contains elements almost of grandeur. The ruling class of England appeared in it as the masters of the world. Around them and in harmony with them stood the English nation. The colonies existed for their benefit. Allied nations were made use of for their purposes, and the rest of mankind were their enemies. It is literally true, that, if the British Parliament had at this time possessed the power to protect the interests of the people of the United Kingdom and its colonial dependencies by causing every other existing nation to be annihilated from the surface of the earth, an en- actment to that effect would have been only the logical se- quence of its whole system of legislation. It is of course impossible even to conjecture what was the actual cost to the citizen of this indirect taxation. But there is one means of showing how grievously it pressed upon the public, and how intolerable it would have been if the power of the government could have enforced it. There is a strange law of finance, which has fixed a limit to indirect taxation, and decreed that, where the line is passed, a new agent shall intervene for the protection of a misgoverned people and the vindication of the laws of statesmanship. At a certain point, the smuggler appears and rescues the nation from its burdens. The extent to which smuggling is carried is, therefore, the measure of bad revenue systems. In England in 1816 there was no limit to the activity of the smugglers. From Kent to Dorset and Devonshire, the whole line of the coast swarmed with them, and wherever they came Ilic sympathies of the people were with them. Coast guards were multiplied in every direction. The army itself was em- 282 BRITISH FINANCE IN 181(5. ployed in the service of the custom-house. The severity of the penalties was terrible ; yet any gentleman in London could, at ten days' or a fortnight's notice, obtain any prohibited arti- cle from the Continent, at thirty per cent advance upon its cost there. Foreign silks were prohibited ; but, in spite of the prohibition, they were to be seen in every haberdasher's shop in England, and in the very Houses of Parliament. Mr. Hume, the well-known member for Aberdeen, when arguing once against the absurdity of those protective laws, " produced his bandana handkei-chief before the very eyes of the House, and, having triumphantly xmfurled the standard of smuggling, blew his nose in it, and deliberately returned it to his pocket." The only vindication of the offended majesty of the law at- tempted by the Chancellor of the Exchequer consisted in reminding Mr. Hume that any member of the House had an absolute right to seize that bandana handkerchief and export it to a foreign country. " Upon every information laid under this prohibitive law," said Mr. Huskisson in 1826, "the chances are, that the informer and the constable have bandanas round their necks, and that the magistrate who hears the charge has one in his pocket." Another prohibited article was Scotch whiskey, and Mr. Hume took again the occasion to inform the House that he had at that moment smuggled Scotch whiskey in his cellar, and he defied the whole power of the government to prevent his having it. These were, however, only luxuries. The case was much worse when it concerned the great articles of consumption among the people. Salt paid its duty of two-and-twenty times its value on fifty thousand tons annually ; but it was sup- posed that twice as much more was consumed which paid no duty at all, or only the moderate one which made the profit <>f the smuggler or the thief. Soap was smuggled to nearly Bf irreat an extent as salt. By this universal evasion, fraud, and violence, the whole national character was perverted and degraded But even the spectacle in England was a harmless comedy in comparison with the results of this same system in Ireland. BRITISH FINANCE IN 1816. 283 If armies of four or five hundred smugglers, supported by the population, fought pitched battles with the coast guard and revenue officers on the chalk downs of Sussex and Hampshire, and were not always defeated, there reigned all over Ireland, from Dublin to Kinsale, a state of actual civil war, which was waged by the peasantry, with horrible cruelty, by assassina- tions and savage deeds of violence that are still remembered with vivid force in that unhappy country, and which were met and repressed, so far as force could repress them, by equally exasperating acts of legalized cruelty and military violence. Here it was the excessive duty on spirit that was intolerable to the population ; and yet this duty was but five shillings and sixpence on the gallon, while more than twice the charge was borne in England without serious difnciilty. Financially, the result was, that about three million gallons paid the tax, and about seven millions were distilled and consumed in defiance of the law. Politically, the attempt to enforce the tax re- sulted in making Ireland more than ever a danger and disgrace to Great Britain. Such were some of the results of over-taxation and of an overstrained protective system. It is obvious that the very highest and most statesmanlike qualities were required in the government that was to attempt the task of reform. But it is not to be supposed that this was the only field for the activity of reformers in the financial affairs of the country. The ope- ration of the taxes on the welfare of the people is only one side of financial science. The administrative system under which the revenue is collected and expended, if not first in actual importance, is certainly first in order of time among financial problems ; for it is useless- to expect economy and foresight from a wasteful and blundering treasury, whose errors are not the mere mistakes of an incompetent chief, but are the inevitable result of false principles. It is absolutely impossible to furnish anything like a fair picture of the system under which the finances of Great Britain suffered at tht beginning of this century. The student, who has labored month after month to comprehend it, turns away 284 BRITISH FINANCE IN 1810. at last with despair, and abandons the attempt as not worth, even if successful, a tenth part of the mental effort that is required to fathom it. There was no beginning, no middle, and no end. There was a bottomless ocean of accounts, with- out a system, without connection, and without result. There were innumerable departments and bureaus, independent of each other, and accountable to no one. The mysteries of the exchequer were portentous. Few Englishmen, even then, had any conception what functions were exercised by such me- diaeval creations as the Department of the Pells, the Pipe Office, and the Tally Court, the calm abodes of happy sinc- cnrists, whose duties of inconceivable clumsiness had long been assumed by the Bank of England and other offices, but who were still permitted to perform by deputy an imaginary routine. If any one should still be unwisely curious to pene- trate these forgotten absurdities, he must consult the reports of Parliamentary commissions from 1824 to 1834, which re- sulted in their abolition. England, Scotland, and Ireland hud each its own exchequer, repeating these costly eccentricities inherited from the Middle Ages. Leaving this part of the investigation as of merely secondary importance, the main inquiry must be directed to the method of administering the treasury. This was an inheritance from Mr. Pitt. When he had remodelled, in 1787, the whole sys- tem of English finance, his great object was, not only to restore order and method where only confusion had existed, but to secure the ultimate redemption of the public debt. His idea seems to have been, that, if a sufficient portion of the perma- nent revenue were to be set aside and appropriated by l:i\\ to the payment of the annual interest and a certain part of the principal of the debt, the result, would be, not only to simplify the accounts, but to furnish an additional guaranty for the national credit, lie therefore divided the whole of the reve- nues of the country into two branches, applicable to two distinct classes of payments. The first comprised all the permanent taxes, united into one consolidated fund, dud this was by law appropriated to the payment of the permanent BRITISH FINANCE IN 1816 285 charges of the national debt and the civil list. The second comprised the taxes voted by Parliament only for the year, and was left for the charges of the army and navy, and the civil expenditure of the government. Mr. Pitt's famous sinking fund was the supplement to this plan. His original scheme was, that one million sterling should be applied annually from surplus revenue, and should accumu- late at compound interest until the whole debt should be ex- tinguished. These large and ingenious arrangements answered all Mr. Pitt's wishes for the first five years. His success was such as to place him unquestionably at the head of all living states- men. But then the French war broke out, and no possible financial scheme, except the simplest, could have resisted the pressure of the next twenty-three years. In a surprisingly short time all Mr. Pitt's elaborate structure crumbled to pieces. Yet not only he, but all his successors, clung to the hollow shells of the two funds with an obstinacy as remark- able as their conduct of the war itself. For every new loan that was raised, Parliament carefully set aside some new tax to meet the annual charge, and appropriated it to the consoli- dated fund, as though that fund still had some inherent virtue which would insure the payment of the national obligations in case all the rest of the system should become bankrupt, or as though every tax, of whatever description, was not just as much pledged to the payment of the interest of the debt as though fifty acts of Parliament had reasserted the fact. This, however, was only a cumbrous form of management. The sinking fund had became a most pernicious burden on the nation. Every loan that was contracted, however ruinous the terms, was increased by the amount of a certain proportion of the whole, which was set aside as a part of the sinking fund. In other words, it was expected to pay off the debt by borrowing money at a time when the nation's credit was at its lowest ebb. Under this treatme.it, the sinking fund rapidly grow to gigantic proportions. It was perfectly evident that the debt also increased in a similar or a greater ratio ; but 286 BRITISH FINANCE IN 1816. nevertheless the government actually introduced a measure, which became law, restricting the operation of the fund, on the ground that it would pay off the debt too rapidly. Nothing could shake the infatuated faith of the British people in the magical efficacy of these two funds. The argument against them was simply met by the assurance that, whether right or wrong, the confidence of the public and the respect of foreign nations were so largely founded on a belief in the efficacy of the system, that the national creait would not stand the shock of abandoning it. However effective this answer may have been during the dark years of the war, when the salvation of England depended on her credit, it seems as though the return of peace should have deprived it of further force. Yet the two funds contin- ued to nourish with unabated energy. The original scheme of Mr. Pitt had long been lost, and little of his project re- mained except the names and the mistakes. The system had ceased to be comprehensible. The public accounts were a chaos, and the budget speeches seem really to have been made with the intention of adding to the confusion. Parliament never knew, nor could know, what was the exact relation between the income and expenditure of the year ; and when unreasonable radicals supplicated for a balance-sheet, they were answered as though such an innovation were big with revolutionary dangers. The fact of the tptal want of a balance-.- licet seems to modern minds so incredible, that it may be well to quote a passage from the report of a select committee on the public accounts, made to Parliament in 1822, six years after the time now spoken of. " The principal and most prominent defect in the present form of the accounts is, that they neither do, nor can, exhibit any balance bet ween the income and expenditure of the year. The income side of the account shows the amount collected from the subject ami (lie amount paid into the exchequer within the year The expendi- ture-sheet has not been framed on this principle; and, with respect to some of (lie eliicf heads of the service, such as the army and the onli:-i:ii'r. instead of Containing a statement of the issues made from BRITISH FINANCE IN 1816. 287 the exchequer, it gives the amount of payments by the distributing public officers, to whom the moneys required for their respective ser- vices are issued from the exchequer. The account of incomes and the account of expenditure, therefore, are accounts of different kinds, and no true balance can be struck by comparing them together." No man, whatever industry he might possess, could come to an undisputed conclusion upon the financial situation of the country. Mr. Hume asserted, in 1821, and no less an author- ity than Mr. Ricardo indorsed the statement, that not only was there a difference of some millions between the budget and the annual accounts, in regard to the reduction of debt, but even on so simple a matter as the deficiency of the consolidated fund there were three public accounts, all signed by the same person, all relating to the same period, and all presenting a different result. If Mr. Hume, whose Scotch sagacity and indefatigable pa- tience have never been equalled, and Mr. Ricardo, who was the first" political economist of his time, abandoned in despair the attempt to unravel the complications of the consolidated fund, which was then the principal part of the financial system, the chance is small Indeed that any man in the present day can arrive at a better result. The budget speeches were almost silent in regard to it, and the information given by the official accounts was apparently only such as the humorous disposition of the public accountant incited him to furnish by way of a riddle for the amusement of over-zealous members of the House of Commons. If the difficulty even were ex- plained, it is doubtful whether most people could understand the explanation. The nature of the fund has already been described. Certain taxes were appropriated to certain pur- poses. So long as the taxes were sufficiently productive for those payments, the system worked tolerably well. But there were sometimes years when the taxes fell off, and their amount was not sufficient to meet the charges put by law upon the fund. When this happened, the government borrowed the amount of the deficiency from the Bank, pledging exchequer bills in return, and pledging the next quarter's receipts of the 238 BRITISH FINANCE IN 1816. fund to meet and pay these exchequer bills. The deficiency meanwhile might or might not be reckoned as a part of the annual deficiency, or a deduction fi-om the annual surplus. The Chancellor of the Exchequer enjoyed a wide latitude of conscience on that point, and it was sometimes very con- venient to be able to shut his eyes to a deficit of seven or eight million pounds, with which of course neither he nor the House nor the country had anything to do, since it concerned only the consolidated fund. The consolidated fund existed for the very purpose of providing for the national debt, without allowing the matter to enter into the range of common ques- tions of supply. There was, therefore, much to be said in favor of the official view of the question. But the transaction did not always end even here. The fund borrowed, as a sort of independent corporation, the amount of its arrears from the Bank. Let us suppose ten millions to have been borrowed in this way. The Bank re- ceived the taxes composing the resources of the fund as fast as they were collected. Let ns suppose a quarter's income, or say eight million pounds, to have been nearly received, consti- tuting the guaranty for the debt owed by the fund. The gov- ernment now stepped in and borrowed this eight million for its immediate wants, thus exhibiting the strange anomaly of first creating a fund for no other purpose than to secure the payment of debt, then allowing that fund to create a debt of its own, and, finally, itself borrowing, as an advantage to the public, its own money, which was already doubly pledged, and substituting its own bonds as the security for the security of the security for the national securities. Is it to be wondered at that the cleverest men in England were mystified when these transactions were put before them piecemeal in separate accounts, and they were asked to guess the riddle 1 ? It wa.s notorious, that the Chancellor of the Ex- iiei|iier himself, whoso experience at least was ample, did not understand the very explanations which he himself made to the House, far less tho accounts that came to him from his own department. The officers of the Kxchequer openly confessed BRITISH FINANCE IN I81f. 289 that they could not comprehend the accounts which they made out, and to which their names were signed. The public knew nothing but its taxes. There was another evil incident to this confused condition of the nuances. The functions of the Exchequer were as- sumed by the Bank of England ; and in the absence of a powerful mind at the head of the government, the Bank had become almost the exclusive director of the financial policy of the countr}'. The management of the Bank was not so remarkable for ability at this time as to make such an ar- rangement a great advantage. Mr. Ricardo went so far as to say that it was totally ignorant of the principles of political economy. When the House of Commons decided, in 1819, to return to specie payments, the Bank presented a remon- strance which contained a remarkable paragraph, appealing to its duties to the community at large, "whose interests in a pecuniary and commercial relation had, in a great degree, been intrusted to its discretion." This assumption of authority, on the part of a mere subordinate office, was treated by Mr. Peel as a melancholy truth, the fault of Parliament itself, and of the government which had thus allowed its functions to fall into the hands of a private corporation. If an energetic reform was required in the system of taxa- tion and in the administration of the public property, it was certainly not less necessary to subject the expenditure to the most rigid scrutiny. A thoroughly economical government is among the rarest blessings ever vouchsafed to a nation, and a long period of war does not tend to teach or to encourage the habit of frugality. Besides, the English system of goveraient and of society was essentially an extravagant one, and only the most resolute popular opposition could make the ruling party conscious of this fact. There were two great branches in the national expenditure, which were about equal in amount. There was, in the first place, the regular annual interest on the.uational debt, funded and floating, which amounted to more than 30,000,000 ster- ling; and tlij,s was, for the time, beyond the reach of economy. 290 BRITISH FINANCE IN 1816. But even here there was much to be done. It was necessary to fund a large amount of the exchequer bills. It was neces- sary to look sharply to the management of the debt by the Bank. Above all, it was the part of a good finance minister so to adapt his measures as to encourage popular confidence in the national credit, in order to hasten the moment when a reduction of interest should be possible on the most burden- some of the public securities. This in itself involved a whole system of finance, and demanded ability of the highest order. The second branch of the expenditure was divided into sev- eral heads. There were the civil expenses of government, the army, the navy, the ordnance, and a miscellaneous division which embraced a variety of appropriations as well for internal improvements as for other purposes. The most immediate want was, of course, a large measure of reduction in the armaments, to be followed by an elaborate reform in the various departments. During some years of the war, the expenditure on this account had risen to more than seventy millions, exclusive of foreign subsidies. The question of what should be the proper peace establishment was one of especial difficulty to a generation which had scarcely known any condition but that of war ; and it was made still more embarrassing by the disturbed state of Ireland, requiring it to be treated like a conquered country, as well as by the immense colonial possessions of Great Britain, which seemed to demand protection on account of their exposed positions and the mix- ture of races. The civil expenditure of the government had also been allowed to flourish in unchecked extravagance during the war. There was a rich field for reformers and radicals in the extirpa- tion of those numerous sinecure offices whose (piaiut names and obsolete functions were little known to the public, except o far as the regular annual parliamentary accounts established the fact that there were still men who drew the salaries at- tached to them. The who?c amount of the civil expenditure did not, indeed, form a very large proportion of the public burdens. Two or three million pounds covered the whole BRITISH FINANCE IX 18 Hi. 291 charge. But, large or small, it was too heavy for the tax- payers, who were justly indignant if a single shilling were un- necessarily added to the enormous sum which they were obliged to pay. There was the more excuse for the most rigid econ- omy, since the privilege of possessing a constitutional monarch and an aristocratic court was by no means obtained for noth- ing. His Majesty's household cost the nation more than a million sterling annually, with no visible return, since the King was blind and insane, and lived in close confinement at Windsor. How much the Prince Regent cost, Heaven only knows. He drew 65,000 a year by way of pension on the consolidated fund ; but as he was perpetually in debt, and as the country was perpetually called upon to pay his debts, it is not easy to discover where the expense ended. Besides the King and the Prince Regent, there were fifteen royal princes and princesses who drew pensions, varying from 35,000 downwards, from the consolidated fund alone, making an ag- gregate of rather more than 250,000 annually, on account of the royal family ; in return for which the nation not only failed to obtain a magnificent court, but was obliged to satisfy itself with one which was particularly offensive to its tastes. It was, however, the British theory to pay public servants well, except where they were not paid at all. Perhaps noth- ing would have stung the average British mind more sharply, than the idea that the representatives of his country abroad were unable to maintain as high a scale of expense as those of France, Russia, and Austria. The example of Prussia and the United States of America was of no effect, except to place those countries low in the British estimation. It was certain, however, that the gratification of this fancy added largely to the national expenditure ; not so much, perhaps, from the ac- tual salaries paid, as by the scale of expense which was en- couraged, and the habit of lavishing large sums for small ob- jects. The most burdensome form in which this practice showed itself was in the shape of pensions, superannuation allowances, and similar charges, either for life or in perpetuity ; which, considering the fact that the salaries themselves were 292 RRITISH l-'INANCK IX I^IC. in most cases so liberal, seem to have been somewhat super- fluous, and by no means calculated to impress any lesson of economy upon the servants of the crown. The precise amount of all the different classes of pensions after the war cannot easily be ascertained, if, indeed, it is at all possible to collect them from the published accounts of so many various depart- ments thi-oughout the three kingdoms ; but they formed one of the most serious items of expense with which the govern- ment had to deal, and those connected with the army and navy gave occasion, in 1822, for an effort on the part of Mr. Vansittart to diminish their burden, which was the last of many financial operations effected by him, and which made his name long notorious. We have now passed in review, rapidly, and no doub*, super- ficially, but at as much length as is possible, the financial difficulties with which England at the close of the war had to struggle, so far as they related to the revenue. It would have been fortunate for her if these had been the only evils be- queathed to her by the war. Serious as they were, although they demanded the most laborious attention, the exercise of the highest order of intellect, and the most resolute perse- verance, there remained still another evil, which lay behind them all, and demanded an immediate remedy. Considering the length and the violence of the strain to which the resources of England had been subjected, it is rather a matter of surprise that her currency had not become utterly worthless, than that it should have suffered a certain degree of depreciation. The Bank had suspended specie payments in 1797 ; but for more than ten years after that time the Bank paper remained on a par with gold, or at a very slight dis- count. It was only in 1809 that the price of bullion began to maintain itself at a permanently higher rate, which continued till the close of the war. In 1810, the average depreciation of the currency was 13J per cent. In 1814, it was 25 per cent, and this was its lowest point. In 1815 and 1816, the Bank paper gained credit, and averaged 16^ per cent dis- count. Towards the close of the year 181 G the currency rose BRITISH FINANCE IN 1816. 293 without the necessity of legislation, until it stood on a par with gold. Unfortunately, however, the mere fact that the Bank notes were of the same value as gold was by no means equiva- lent to a return to specie payments. The country had gone through a period of depreciation, and, if this were allowed to continue, was certain to be demoralized by it. Already the agricultural interest complained because the farms, leased at a time when corn sold at six pounds the quarter, could no longer be made to pay the extravagant rental thus fastened upon them. The business classes, the merchants, the bankers, the retailers, naturally timid in the face of measures likely to affect their interests, trembled with fear at the thought of commencing business upon a system entirely new to all but the oldest among them. Every month that the return to a specie basis was delayed strengthened the ultimate opposition to the measm-e, and encouraged the party which maintained that promptness was dangerous, and that it was necessary by act of Parliament to prevent the nation's too easy progress up an ascent so difficult that few nations have ever succeeded in climbing it. The history of the process by which Great Britain succeeded at length in restoring its original standard of value is one so important, so instructive, but also so complicated and disputed, that it cannot be dealt with in a few sentences. It requires an entire chapter to itself. It called into full play the best ability in England, and for many yeai-s after the result was accomplished a perpetual dispute was maintained in regard to its justice and its effects. Among the many financial difficul- ties which surrounded the government of that day, this was the one which a high statesmanship would have considered the most pressing, for it lay at the basis of all transactions involv- ing an exchange of values, as well between the government and its subjects as between every individual and his neighbor. With this last difficult problem of the currency our survey of the financial situation of Great Britain may be considered completed. Yet something remains to be said in regard to the men upon whom the vast labor fell of restoring order in the 294 BRITISH FINANCE IN 1816. national affairs, and of creating the new formulas by which the economy of the nation was destined in the future to be represented. For it is obvious that between such a condition as has been described and that which England enjoys at pres- ent there is not a difference of degree, but of kind. It is a complete revolution that has taken place, and not merely a modification. Only fifty years have passed, and there has been no break of continuity ; a steady and natural process of devel- opment has been always going on, always irresistibly tending towai'ds one result, until at length we find that the principles npon which the government of England acts are the direct reverse of those which it considered essential in 1816. Mr. Huskisson, Mr. Peel, and Mr. Frederick Robinson were all in the government at the close of the war, and supported Mr. Vansittart's measures so far as they were called npon to do so ; yet these were the very men by whom the subsequent policy was created and developed. There appears to be something that needs explanation in this curious copartnership. Lord Liverpool's followers comprised a considerable majority of the House of Commons, and usually followed their leader without useless remonstrance, wherever their orders directed. But nevertheless the government itself contained two classes of members so strangely differing in character that their suc- cessful co-operation may well be a matter of surprise. Lord Liverpool's own opinions were naturally sound and liberal upon economical questions, though he wanted the force of personal character to stamp them upon his administration. Nor indeed was there even in men like Lord Caetlereagh, Mr. Vansittart, and Mr. Hose any such devotion to antiquated prejudices as might be supposed from the condition of the de- partments they dim-ted. Mr. Vansittart was not a man gifted with the blind Toryism of Lord Sidmouth, or the narrow- minded perverse-ness of Lord Eldon. He was simply a thor- oughly incompetent man. It would scarcely l>e worth the while to dwell npon his qualities at any length, if it were not that he was almost a perfect representative of the old school of financiers, the school of Perceval and Addington, a BRITISH FINANCE IN 181G. 295 school which had sprung from Mr. Pitt's side when his better days had passed, and which lent the influence of narrow minds to encourage and aggravate the mistakes of a great one. Eng- lish finance hag not even yet entirely cleared itself from the traditions of this period. Mr. Vansittart had served long in the treasury, and had stored his mind with all the intricate knowledge of financial machinery that a laborious subordinate can always so readily learn. Mr. Pitt, no doubt, was an object of his unbounded admiration. But the qualities which he would admii'e in Mr. Pitt would probably be precisely those which caused him, with all his genius, to create nothing which has endured. Men like Mr. Vansittart and his contemporaries in office thought it little that Mr. Pitt had aimed at magnificent re- sults, that his ambition led him into a superb attempt to pay off the national debt, and that to effect his purpose he had created, with scarcely any assistance from precedent, a great and admirable system where none existed before. What daz- zled the eyes of Mr. Pitt's successors was, that the machinery invented by him was rich in detail and ingenious in expe- dients. That every loan should have its special tax, that every tax should go to a special fund, that each fund should be so constructed as to balance and support the other, that there should be wheels within wheels, and springs beneath springs, until the whole structure was elaborated to a point of theoretical perfection, this it was that seemed wonderful to the men that had seen its creation and had received it from the hands of its dying inventor. The results of such an educa- tion were most disastrous to England, for there arose a race of so-called financiers ; men who drew their political economy from the traditions of the Exchequer, and their financial knowl- edge from the Stock Exchange ; men whose highest idea of a policy was the skill to place a loan at a half per cent better terms than its predecessor had obtained ; men who to effect this tried to mystify the public, and to avail themselves of all the complications in which the official accounts were so rich ; men who in the struggle to obtain means for carrying 296 BRITISH FINANCE IN 18IG. on the war forgot that there were laws which regulated the limits of taxation, to go beyond which was a folly and a crime; and finally, men who, in their zeal to raise money, entirely disregarded the fact, that the first duty of a finance minister is to exercise some degree of economy in spending it. As a Chancellor of the Exchequer, Mr. Vansittart's inca- pacity was scarcely a matter of dispute. But he possessed, from long experience, the kind of tact and business knowledge which gives men influence in the House of Commons, and fre- quently enabled him to meet with success the attacks of the Whig opposition. There was in his character a fund of good nature and a cordial indifference to abuse which attracted sympathy, and protected him when opposition members howled in his face, that "the present distresses were occasioned by having a miserable, miscalculating, puny Chancellor of the . Exchequer, who did not know the resources of the country, owing to the ignorance and want of power of his little mind." Although a heavy burden to the Ministry of which he was a member, he long retained his office, and only retired to the honorable ease of the House of Lords in 1822, after having been ten years at the head of the finances. Of the liberal wing of the administration Mr. Huskisson was by far the ablest member, and indeed it is not too much to say that, within his own sphere of economical subjects, he was not surpassed by any man then in public life. The ex- tent of his knowledge, the soundness of his judgment, the breadth of his views, and his natural instinct, leading him always to stand just so far in advance of his contemporaries as to inspire them with confidence in the safety and moder- ation of his guidance without obliging them to accept para- doxical or unpopular truths, these qualities combined to give Mr. Huskisson a personal weight which only needed the support, of high office to prove itself in great administrative reforms. But, unfortunately, he was no politician, and in consequence had so managed his party course as to throw nway the power he had a right to claim, until at forty-six years oid he still found himself buried out of sight as Chief BRITISH FINANCE IX 1816. 207 Commissioner of Woods and Forests, when he might and should have been in a commanding position in the Cabinet. The political blunders of Mr. Huskisson had thrown a younger and much weaker man into the foreground. Mr. Frederick Robinson, the Vice-President of the Board of Trade, rapidly rose to be President of that Board, Chancellor of the Exchequer, Secretary for the Colonies, and Prime Minister. Mr. Frederick Robinson, Lord Goderich, or Earl of Ripon, by whichever name we may choose to call him, was a man of considerable abilities and a decidedly liberal turn of mind ; but as a statesman he was particularly happy in having two great men at his side, Mr. Canning and Mr. Huskisson. With their assistance he accomplished great results, without it he found the burden of a high position intolerable. At the re- txirn of peace he was still in a subordinate office, but even there his influence was thrown, not without effect, on the side of progress and reform. It cannot be said that this was the case with Mr. Peel, who was the Chief Secretary for Ireland at this time. Mr. Peel's power consisted, not so much in the opinions which he held and advocated, as in his capacity for changing them at the right moment. Few statesmen of his raiik have changed their political creed so much and on so many points ; perhaps not one has ever, like him, succeeded through all changes in re- taining popular confidence and esteem. At the close of the war be was an extreme Tory ; and although he was ultimately influenced greatly by his association with Mr. Huskisson, it was a very long time before he became a convert to those opinions on questions of trade which have made his reputa- tion eclipse that of his teacher. It is one of the most curious facts of modern English history, that he who in 1817 was the ally of Lord Sidmouth and Lord Eldon should have become the disciple of Cobdeu and the model ot Gladstone. The ablest of all the statesmen ol this period was certainly Mr. Canning. But, unfortunately both for himself and for the country, Mr. Canning had allowed the wave of political success to sweep over him, and to carry Lord Castlereagh on its crest. 298 BRITISH FINANCE IN 1816. It was not until Lord Castlereagh's death, in 1822, that Mr. Canning's influence obtained the control of the administration, and began to set in action the progressive energies of the nation. All these men belonged to the Tory party. The old Whig opposition had little to offer that was better, if so good, and what little it had was soon lost. The ablest of the Whigs in the field of financial science was Mr. Francis Horner, who, as chairman of the famous Bullion Committee, had treated very roughly the strange absurdities of Mr. Vausittart. The report of that committee, of which he was for the most part the au- thor, was made in 1810, and in spite of the triumphant vote by which, in 1811, Mr. Vansittart carried his resolution, that "the promissory notes of the Bank of England have hitherto been, and are at this time held to be equivalent to the legal coin of the realm," Mr. Horner's argument practically settled the question, and made his opponent's name an object of stand- ing ridicule down to this day, a result the more annoying, since Mr. Vansittart was not himself the real author of the res- olution. It is safe to say that, if Mr. Horner had lived, his influence on the financial and commercial policy of England would have been very considerable ; but his death, which took place in 1817, broke short a most promising career, and, com- bined with that of Sir Samuel Rom illy, deprived the Whig opposition of all its best vital force. For it cannot, bo said that Mr. Henry Brougham's brilliant qualities at all supplied the place of Mr. Horner's sound intel- lect. Mr. Brougham busied himself with economical questions, as he did with every other topic ; but before and above all, he was a politician, and a selfish one. A man of far greater worth, from every point of view, was Mr. Ricardo, whose posi- tion as a member of Parliament often enabled him to infuse into the delates a spirit of philosophy which is rare enough in the best of legislative assemblies. He, however, did not enter Parliament till 1819; and his death, in 1823, took place Ix-lon- tin; new theories of internal policy were fairly developed. Another pi-rs'ii', who came into public life at the same time, BRITISH FINANCE IN 1816. 299 but whose career lasted through all the vicissitudes of free trade down to a very late day, was au eminently useful and energetic reformer, whom the English public laughed at and abused during his whole life, but discovered after his death to have been one of those rare, bold, indefatigable, and scrupu- lously honest characters, whose existence makes amends for a world of Parliamentary nobodies. This was Joseph Hume, a thorn in the side of each successive ministry, a sort of self- constituted tribune of the people, with an eye for abuses and a tongue for dilating upon them that made him at once the ter- ror of ministers and of the House, which fled from his speeches with some reasonable excuse. Mr. Hume was, however, a man of broad and statesmanlike views, which is more than can fairly be said of Mr. Cobbett, though the latter was even more active in his denunciation of the evils that were so strongly stamped upon the system of internal government. In fact, the popular feeling was too strongly directed upon political grievances to allow of its giving any deep attention to difficult financial and commercial questions, the connection of which with its own objects was not always obvious; and popular orators, like Cobbett and Hunt, exercised only an indirect and very modified influence upon the development of those liberal and progressive economical theories which neither Whig nor Tory could claim as exclusively their own property, but which each party made use of in its turn. . Thus it will be seen how small was the number of promi- nent men who, in 1816, could exercise an influence in favor of reform. And in this respect it is only right to do justice to Lord Liverpool and Mr. Vansittart. Neither they nor their opponents considered finance as a field for party divisions. Mr. Vansittart's want was one of capacity, not of will. It is a curious fact that he, though administering a system in which protection was carried to absurdity, was yet in his opinions a free-trader, as was also Lord Liveipool. Both of them were far in advance on this point of the public opinion of their time ; for the popular wishes so far as concerned finance were solely directed to the reduction of taxation, and the knowl- 300 BRITISH FINANCE IN 1816. edge of financial theories was extremely slight even among the wealthiest of the middle class. This was shown in regard to the income tax. Fifty years later the income tax was a pop- ular measure, since it threw upon the holders of property an immediate burden which otherwise must have been borne by the poor. In 1816 the property tax was thoroughly unpop- ular, not only among the rich, but among the poor whom it relieved, and who actually allowed themselves to be persuaded that the heavy duties on com, tea, beer, and tobacco were preferable to one which they did not feel ! It was necessary, therefore, that the small body of political economists who saw in advance that free trade, whether suitable or not for other nations, was the only possible policy for England, should be- gin at the very foundation, and educate even those for whose special benefit their measures would immediately operate. There was no basis of existing public opinion upon which they could stand. If, then, we attempt to sum up the results of this long inquiry into a condition of affairs now forgotten, we shall find that Great Britain, then a nation of twenty million in- habitants, was burdened with an annual charge of more than 30,000,000 of debt, to which was added more than 20,000,000 of ordinary expenditure ; that her administra- tivr system was in the highest degree cumbrous, expensive, and inefficient; that her revenue was drawn indiscriminately from every available source, without regard to the disastrous results upon national industries and the national character, and in violation of all the acknowledged principles of political economy ; that her expenditure was extravagant, and without any sufficient check in public opinion ; that her currency was deranged, and the .standard of value fluctuating in such a manner as to stimulate powerful interests towards resistance to any return to the former specie basis; that her principal officers were unequal to the effort which a return to sound financial and economical principles would have required ; that, Parliament, with the exception of a very few of its mcmliers, wa-s incompetent to deal properly with such a state of affidrs, BRITISH FINANCE IN 1810. 301 and too apt to be influenced by personal and political motives ; and, finally, that the people were themselves ignorant of the true nature of the difficulties under which they were labor- ing, and the few really progressive minds in England were obliged to trust to those natural popular instincts which in the end usually decide rightly in regard to the interests of the people. It was not surprising that some oY the most patriotic and excellent Englishmen were in alarm lest their country should succumb under this accumulation of difficulties. And yet a few years of peaceful development enabled it to support the burden of the debt with an ease which is a just subject for pride ; it purged the administrative system of its abuses, and made it comparatively simple, economical, and efficient ; it created a wholly new system of revenue, founded on sound laws, and interfering to the least possible extent with the industry and character of the people. If it has not restricted the expenditure, and reduced the debt so far as was possible and right, this is merely because the people themselves, in their wealth, became indifferent and extravagant ; it restored, without any concession to interested clamor, the ancient and only sound basis to the currency ; it educated a race of states- men who, in regard to economical subjects, were certainly not inferior to any in the world ; it placed in Parliament numbers of men who, whatever their faults may have been or may now be, were, and are now, better acquainted with those laws of financial science ignorance of which has become inexcusa- ble in legislators than the members of any other legislative assembly in Europe ; and, finally, it has diffused among the people a degree of acquaintance with the true bearing of their own interests, which has strangely modified their national ten- dencies, and will ultimately wholly break down the ancient barriers of insular prejudice and exclusiveness. The process by which these results have been effected, and the consideration of what has still been left incomplete, must be a worthy subject of careful study ; but it involves so great a variety of topics, and so wide a range of doubtful or dis- 302 BRITISH FINANCE IN 1616. puted conclusions, that, unless rigidly restricted within the proper limits of the regions that belong purely to finance, the discussion would soon extend itself beyond any ordinary ca- pacity of endurance, and lose the interest which belongs to it of furnishing instruction to other nations placed in circum- stances more or less similar. THE LEGAL-TENDER ACT.* History of the Legal-Tender Paper Money issued during the great Rebellion, being a Loan without Interest, and a National Currency. Prepared by HON. E. G. SPAULDING, Chairman of the Sub-Committee of Ways and Means at the Time the Act was passed. Buffalo. 1869. Opinion delivered in tlie Supreme Court of the United States l>y CHIEF JUSTICE CHASE, on tJie 7th of February, 1870, in Re- gard to the Construction of the Legal-Tender Act. DURING the Rebellion the United States armies suffered many disasters in the field, which for the moment were felt as direct and personal misfortunes by every loyal citizen. So strong was the public feeling of anger and astonishment, that Congress appointed committees of investigation, to exam- ine into the causes of these military failures, and subjected the whole conduct of the war to a searching and sometimes a se- vere criticism. In finance, on the other hand, the nation suf- fered only one great disaster, but its effects have extended far beyond the period of the war, and are likely to be felt with unmitigated force for an indefinite time yet to come. The causes of this catastrophe have not been investigated by Con- gress ; but as the day may probably arrive when the national government will have been forced to accept the fact that the act of national bankruptcy was a calamity so terrible as to in- volve the personal and political credit of every man in whose * From the North American Review for April, 1870. 304 TH E LEGAL- TENDER ACT. charge the people had then placed the common interests, it may be useful to point out the path which the future congres- sional committee on the Conduct of the Finances will be com- pelled to follow in investigating the causes which led to that miscarriage, the results of which have far exceeded in impor- tance the defeat of any of the national armies or the failure of any campaign. The timid and hesitating criticism with which the subject has been commonly treated speaks ill for the sound sense of the community. The public has so thoroughly adopted the idea that it is itself the responsible governing power, and its representatives only delegates to enroll its orders, that the healthy, process of criticising a policy once adopted seems to it almost an attack on its own authority. The confusion of ideas involved in this assumption of responsibility is peculiarly unfortunate. The task of citizens who are selected to govern is one thing. They bear the burden of leaders, and they en- joy the honor. They are, too, at liberty to excuse or palliate their mistakes, their ignorance, or their crimes by whatever argument they can make to answer their purpose. But the task of the public is wholly different. It is that of insisting, without favor or prejudice, on the observance of truth in legis- lation and in the execution of the laws. To apply the princi- ples of truth in criticism is the first duty of every writer for the press and every speaker on the hustings. Whatever seems harsh in criticism or vehement in temper may be excused in the citizen who clings to the rigid logic of fundamental princi- ples, and who leaves to those whose public conduct fails to reach his standard, the labor of justifying themselves in the best way they can. It is customary, however, for critics of American finance to begin at this point with the assumption that the Legal-Tender Act was necessary and inevitable. As a matter of criticism, nothing can be more absurd than such a beginning; and as a matter of intelligence, nothing can be feebler. Congress and the country permitted no such assumption to be made in ex- cuse for the beaten generals at Fredericksburg and Chancel- lorsville. There can be no satisfactory conclusion from such a THE LEGAL-TENDER ACT. 305 premise. No sound result can be reached except by assuming at the outset that the Legal-Tender Act was not necessary ; that the public was not responsible for it ; that the men who made it law were answerable to the people for their act, and are bound to show that so extraordinary and so grave a mis- fortune could, by no means, have been avoided. If they fail to prove their case, they are condemned. It is, too, a matter of the greatest consecpjence to decide what the ultimate judg- ment will be, since on it must turn not only questions of the most considerable material interests, but points of fundamental law in the United States, and of the theory of government for future time. The urgent necessity of establishing some fixed principles in regard to this disease of debased currency may be measured by the extent of the disease itself. Russia, Aus- tria, Turkey, Italy, Spain, Brazil, Japan, and an indefinite number of smaller communities, besides the United States, have, to day, no fixed standard of value in domestic exchanges. With rare exceptions, no government that has once debased its standard has ever restored it, except through the desperate resource of partial or entire repudiation. Unless the world is prepared to agree that society has no protection, and that the assumed progress of political science is a mere dream, there can be no excuse for continuing to accept as inevitable an evil which, in all times, has been merely the result of ignorance and misgovernment. The law of legal tender, passed by Congress in February, 1862, cannot, therefore, be assumed to have been necessary, find its supporters are bound to prove that they had no alter- native. To this task Mr. Spaulding, the principal author of the measure, has applied himself; while, on the other hand, Mr. Chase, without 'whose assent the law could not have passed, has assumed the contrary ground. There is, unfortu- nately, at the outset a strong presumption against the law, rising from the unquestionable fact that the men who, in 1862, V.-ITO charged with the conduct of the finances, and were re- sponsible for this law in particular, had no claim to confidence on the ground of their financial knowledge or experience. T 306 THE LEGAL-TENDER ACT. Something better might indeed have been expected among a people so devoted to commerce and so habituated to self-gov- ernment. Military disasters were to be looked for, seeing that the nation had no training nor taste for war ; but though war, or art, or philosophy, or abstract knowledge, were beyond the range of public or popular interest, an experience of two hun- dred years ought at least to have insured the country against mistakes in practical politics. Such, however, was very far from the truth. Among the leading statesmen then charged with responsibility, not one was, by training, well fitted to perform the duties of finance minister, or to guide the finan- cial opinions of Congress. The Secretary of the Treasury, certainly the most capable of the men then connected with finance, suffered severely under the disadvantage of inexperi- ence. In the Senate, finance, like every other subject, was treated rather as though it were a branch of the common or constitutional law, than as though it were a system with established principles and processes of its own. But it was in the House of Representatives that the want of education was most apparent and most mischievous, while, by a signifi- cant coincidence, it happens that the law of legal tender, more than almost any other great financial measure of the Rebel- lion, \vns peculiarly and essentially the work of this House. As for the members who originated and whose activity carried Ihroiigh all opposition the act of February, 1862, it is difficult to characterize them in language which would not seuin un- duly and unreasonably severe. Yet it may honestly bo dpubted whether there has ever been a time since Kk'on, the leather seller, was sent by the people of Athens to command its armies at Sphacteria and Amphipolis, and since Aristophanes on the public stage covered the powerful popular leader with an immortal ridicule which surely reflected most severely on the Athenian people itself, it may honestly be doubted whether history records an occasion when the interests of a r.reiit country in an extreme emergency li.-ivo been committed to hands more eminently :li>'|iialitied for the trust. In Feb- ruary, 1S62, Mr. Th;iddeus Stevens was chairman of the Com- THE LEGAL-TKNDER ACT. 307 mittee of Ways and Means, from which emanates the ordinary financial legislation of Congress. To say that Mr. Stevens was as little suited to direct the economical policy of the country at a critical moment, as a naked Indian from the plains to plan the architecture of St. Peter's or to direct the construc- tion of the Capitol, would express in no extreme language the degree of his unfitness. That Mr. Stevens was grossly igno- rant upon all economical subjects and principles was the least of his deficiencies. A dogmatic mind, a high temper, and an overbearing will are three serious disqualifications for financial success, especially when combined with contempt for financial knowledge. It is no exaggeration to say, that every quality of his nature and every incident of his life which gave Mr. Stevens power in' the House, where he was almost omnipotent in the legislation which belonged to the war and to recon- struction, conspired to unfit him for the deliberate and diffi- cult discussions of finance. But it is not to Mr. Stevens that the principal burden of blame or praise for the financial legislation of that momentous year is to be awarded. In the press of business upon the committee, when in the brief space of a few months the whole system of loans, of taxation, and of currency, demanded by a war of such tremendous proportions, had to be created, so to speak, out of nothing, two sub-committees were formed to divide the duties which fell upon the committee. One of these, imder the lead of Mr. Morrill of Vermont, undertook to enlarge and adjust the scheme of taxation to the new necessities of the government. The other, under the chairmanship of the Hon. Elbridge G. Spaulding of New York, assumed the care of the national cur- rency, the raising of loans, and the issue of treasury notes or bonds. Mr. Stevens remained chairman of the whole commit- tee, charging himself particularly with the matter of appro- priations, and lending his powerful voice to both sections be- low him, as either by turn encountered opposition in forcing its measures through the House. The intellect of a Congressman, gifted with no more than the ordinary abilities of his class, is scarcely an interesting or 308 THE LEGAL-TENDER ACT. instructive subject of study ; nor are the discussions that arise among such men likely to be rich in stores of knowledge or experience. But when an accidental representative is able to carry "over the administration and through Congress,"* as Mr. Spaulding claims to have done, and as it is clear that Mr. Spaulding did, a measure of such far-reaching consequences as the Legal-Tender Act of 1862, the character of that person's mind and the facts of his life cease to be matters of insignifi- cance. One may well inquire what sort of a man it was that could lead a nation so far astray, and what the condition of things that made it possible to effect results of such magni- tude. Financiers who make an addition of hundreds of millions of dollars to the debts of their countries, represent- ing not a penny of value enjoyed, are entitled to a place in history, whether they boast the intellectual capacity of Mr. Pitt or of Mr. Spaulding. Unlike Mr. Stevens, Mr. Spaulding had the advantage or disadvantage of a cei-tain sort of financial experience. He had been for a time treasurer of the State of New York. By pro- fession he was, in 1862, president of a joint-stock bank at Buffalo, and it was on this circumstance that he based his chief claim to speak as an expert in finance. At the confer- ence on the llth of January, 1862, at the treasury, between the Secretary, the committees of Congress, and the representa- tives of the principal Northern banks, a conference whose momentous importance will require close attention, Mr. Spaukting expressed his convictions both "as a banker and legislator." The association of functions was not unimportant, in iey liis rolli-!tBu\ Hon. T. M. I'omeroy, in a speech delivered in the House of Kepresentativp* on th<- 10th February, IMJ-J. THE LEGAL-TENDER ACT. 3(J9 ment no bounds seem to limit, Mr. Spaulding naturally pro- ceeded to apply to the necessities of the situation the princi- ples of finance which he had learned in shaving notes at a country bank. These necessities were unquestionably serious, but few per- sons now retain any distinct recollection of their actual shape. To the minds of men living in 1870 the events of 18G2 appeal- bound up in close connection with the long series of events that have intervened. The necessity of the Legal-Tender Act is now assumed, not on account of what had happened before the law was passed, nor on account of anything that was fore- seen by its authors, but because of what afterwards occurred, the exigencies of a situation far more difficult and alarming than existed at that earlier time. Against such a confusion of ideas it is necessary that every candid man should be on his guard. The vague, general notion that, sooner or later, legal-tender paper was inevitable, is a part of the same loose and slovenly popular criticism with which the whole subject has been so habitually treated, and is scarcely worth comment ; but the actual circumstances under which Congress declared the measure to be necessary are a matter of fact, and it is with these that law, history, and political science have first of all to deal. Congress met on the 2d of December, 1861, and the Secre- tary immediately set before it an account of the financial situation, and his own scheme for supplying the wants of the treasury. He required about $200,000,000, in addition to re- sources already provided, in order to meet the demands of the next half-year. His immediate necessity was for $ 100,000,000 within three months. He estimated that the debt would reach $517,000,000 on the 1st of July, 1862, and that a year later it would probably become $900,000,000. In fact it rose to $1,100,000,000. A part of the heavy government ex- penses were to be met by taxation ; a part by the sale of bonds ; and for the rest Mr. Chase proposed the assumption by the government of the bank circulation, amounting to some $200,000,000, with a view not only of obtaining the money, 310 THE LEGAL-TENDER ACT. but of providing a sound currency on which to condiict the war. The Secretary did not, in this connection, overlook the possibility of resorting to a forced paper circulation, but " the immeasurable evils of dishonored public faith and national bankruptcy " deterred him from recommending the measure, or rather obliged him to reject it as dangerous and unneces- sary. Thus, on the 1st of December, 1861, according to the Sec- retary of the Treasury, no occasion existed for resorting even to the moderate measure of issuing government paper at all, except so far as concerned a possible guaranty to a new bank circulation. The idea of legal tender was expressly rejected. The government believed itself able to meet its demands on the basis of the bank circulation, provided Congress would place the bank circulation on an available footing. Nothing, however, was done by Congress towards supplying the wants of the treasury, until, towards the end of December, Mr. Spaulding began to draft a bill for establishing a national banking currency. While preparing this draft, Mr. Spaulding, " upon mature reflection, came to the conclusion that the bill could not be passed and made available quick enough to meet the crisis then pressing upon the government for money to sustain the army and navy. He therefore drafted a legal- tender treasury note section." This was done about the 30th December ; and this was the origin of the measure destined to have so vast and permanent an influence on the American people. The "mature reflection" of Mr. Spaulding could dis- cover no other or better method of supplying a temporary want of $100,000,000, than a resort to the last expedient known to finance ; what he himself calls a forced loan, made in the first year of the war by means which were equivalent to a debasement of the standard of value and a bankruptcy of the government. It is scarcely necessary to add a com- ment upon this simple statement. Any reader in the least familiar with financial history must appreciate the extrava- gance of Mr. Spaulding's assumption. That he acted with perfect honesty and good intention no one will think it worth THE LEGAL-TENDER ACT. 311 while to dispute ; but that he had the least conception of the consequences of what he was doing, or that he grasped even in a limited degree the principles of statesmanship, no unpreju- diced or cool observer could imagine. Like all ignorant men, impatient of resistance or restraint, the moment he saw an obstacle, he knew but one resource, that of a blind and reck- less appeal to force. Mr. Spaulding then, "upon more mature consideration," converted this section into a separate bill, and laid it before his committee. The committee, however, was by no means unanimous in accepting Mr. Spaulding's views of necessity. It is true, and it is an interesting fact, that the only doubt entertained by Mr. Thaddeus Stevens was in regard to the con- stitutionality of the law ; and one is somewhat at a loss whether most to wonder at the profound ignorance thus be- trayed or at the constitutional scruples which suggested themselves to this veteran expunger of constitutions. But though Mr. Stevens and one half the committee approved the bill, the other half stood out firmly against it, and only as a matter of courtesy allowed it to be reported to the House. On the 7th of January, 1862, the bill was reported. It au- thorized the issue of $100,000,000 in treasury notes, to be a legal tender, and exchangeable on demand for six per cent bonds. Public opinion at once became sharply divided on the merits of the measure. Delegates from the Boards of Trade and banks of the principal Northern cities appeared in Wash- ington to oppose the bill, and on the llth of January these gentlemen met the Secretary of the Treasury and the finance committees of the Senate and House, at Mr. Chase's office in the department. Here the whole financial policy of the gov- ernment was made a subject of discussion, and the two paths between which the country was still at liberty to choose were marked out with unmistakable precision. Mr. Spaulding, on the one hand, insisted not only that his measure was the best, but that it was the only means of raising the money required, and he demanded to know what alternative could be suggested. On the part of the baak committees Mr. James Gallatin of 312 E LEGAL-TENDER ACT. New York, submitted a complete financial scheme, and, with the plain common sense of a practical man, replied to Mr. Spauldiug's inquiry with the simple proposal that the govern- ment should sell its bonds in the open market for what they would bring, without limitation of price. To this suggestion Mr. Spaulding made the following reponse : " The Sub-Committee of Ways and Means, through Mr. Spaulding, objected to any and every form of ' shinning' by government through Wall or State Streets, to begin with ; objected to the knocking down of government stocks to seventy-five or sixty cents on the dollar, the inevitable result of throwing a new and large loan on the mar- ket without limitation as to price ; claimed for treasury notes as much virtue of par value as the notes of banks which have suspended specie payments, but which yet circulate in the trade of the North ; and finished with firmly refusing to assent to any scheme which should permit a speculation by brokers, bankers, and others in the government securities, and particularly any scheme which should double the public debt of the country, and double the expenses of the war, by damaging the credit of the government to the extent of sending it to ' shin ' through the shaving-shops of New York, Boston, and Philadelphia. He affirmed his conviction as a banker and legislator, that it was the lawful policy as well as the manifest duty of the government, in the present exigency, to legalize as tender its fifty millions issue of demand treasury notes, authorized at the extra session in July last, and to add to this stock of legal tender, immediately, one hundred millions more. He thought that this financial measure u-mild carry tin- runntnj through the ?ror, and save its credit