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XIX.

PRESIDENT GRANT'S FIRST TERM.

Paragraphs from the President's Inaugural Message-A Cabinet that Did Not Long Hold Together-Attempts to Solve the Reconstruction Problem-Settling Old Scores with Great Britain— Financial Issues Come to the Front-How to Discharge the Public Obligations and Get Back to Specie Payments-The Act to Strengthen the Public Credit-The Refunding Act-The Coinage Act Demonetizing Silver---The Salary Grab-The Treaty of Washington-The Proposed San Domingo Purchase Defeated. President Grant's inaugural message was brief and characteristic. It was addressed to the citizens of the United States and the first three sections were as follows:

"Your suffrages having elected me to the office of President of the United States, I have, in conformity to the Constitution of our country, taken the oath of office prescribed therein. I have taken this oath without mental reservation, and with the determination to do, to the best of my ability, all that it requires of me. The responsibilities of the position I feel, but accept them without fear. The office has come to me unsought; I commence its duties untrammeled, I bring to it a conscious desire and determination to fill it to the best of my ability, to the satisfaction of the people.

"On all leading questions agitating the public mind I will always express my views to Congress, and urge them according to my judg ment; and, when I think it advisable, will exercise the Constitutional privilege of interposing a veto to defeat measures which I oppose. But all laws will be faithfully executed, whether they meet my approval or not.

"I shall, on all subjects, have a policy to recommend, but none to enforce against the will of the people. Laws are to govern all alike, those opposed, as well as those who favor them. I know no method to secure the repeal of bad or obnoxious laws so effective as their stringent execution."

The President's Cabinet as first announced was not considered fortunate in its selection. It was as follows:

Secretary of State-Elihu B. Washburne, of Illinois.

Secretary of the Treasury-Alexander T. Stewart, of New York.
Secretary of War-John A. Rawlins, of Illinois.

Secretary of the Navy-Adolph E. Borie, of Pennsylvania.
Postmaster General-John A. J. Creswell, of Maryland.
Secretary of the Interior-Jacob D. Cox, of Ohio.

Attorney General-E. Rockwell Hoar, of Massachusetts.

The Cabinet did not long hold together. Mr. Washburne was confirmed March 5 and resigned March 10, to take the position of Minister to France, in accordance, it was understood, with a previous understanding. He was succeeded by Hamilton Fish, of New York, an appointment which created surprise at the time, but which proved to be a most excellent one. Mr. Stewart was found to be ineligible under an act passed September 2, 1789, which provided that the Secre tary of the Treasury should not be "directly, or indirectly, concerned or interested in carrying on the business of trade or commerce, or be owner, in whole or in part, of any sea vessel or purchase, by himself or another in trust for him, any public lands or other public property, or be concerned in the purchase or disposal of any public securities of any State or of the United States, or take or apply to his own use any emolument or gain for negotiating or transacting any business in the said Department, other than what shall be allowed by law."

This act is so sweeping in its exclusion of business men as to make it a matter of surprise that the Government has been able to secure many capable men for that important position. The President was anxious to have Mr. Stewart in the Cabinet and Mr. Stewart was anxious to be there. It was proposed, at one time, that he should assign all his business interests to his partner, Judge Hilton, but this was regarded as a mere evasion of the law, as he would still have an indirect interest in them. Then it was sought to remove his disabilities by a special Act of Congress, but that body would not establish the precedent of breaking down a law that had been in force for eighty years, in order to meet the exigencies of a particular case, and Mr. Stewart was reluctantly dropped. The President then turned to Captain E. B. Ward, of Detroit, but he was found also to be ineligible, and George S. Boutwell, of Massachusetts, was appointed.

John A. Rawlins, Secretary of War, gave way, after a few months, to William W. Belknap, of Iowa. But Borie was a puzzler

to the people, as he was almost unknown in public affairs. The Western Associated Press, in transmitting the Cabinet list, got a “v” in his name instead of an "r." An editor of one of the Detroit dailies, was writing biographies of the members of the Cabinet, and when he came to the Secretary of the Navy he commenced: "The Hon. Adolph E. Bovie, Secretary of the Navy, is--is-well, who in is Bovie, anyway?" Mr. Borie was succeeded, June 25, 1869, by George M. Robeson, of New Jersey.

Grant's Administration was confronted with three grave problems, all inherited from the war. These were an amicable adjustment of the relations between the whites and the blacks in the South, a problem that is even yet not entirely solved; the settlement. of our old scores with Great Britain, and the financial problem.

The latter subject was the one first taken in hand by Congress, and the question was how to get back to a sound specie basis, after doing business for sixteen years with paper that was more or less depreciated. It became evident early in the war, that the Govern ment could not command the gold necessary for payment of the vast expenses incurred in that struggle. We were not only expending immense sums for war material and supplies at home, but we were importing much more than we were exporting, and the balances due abroad had to be paid in gold or in gold bonds. As the war proceeded the disparity between the exports and imports increased, for cotton shipments were almost entirely cut off, and our surplus of breadstuffs and provisions was less than in former years, on account of the large consumption by the Army. Some form of paper obligation early became necessary, and the necessity increased as the war continued.

The first experiment with paper money was the issue of $50,000,000 in non-interest bearing Treasury notes. They were payable on demand, were as good as gold then, and continued at par during the entire period of gold fluctuations. But they were a new thing, people were not accsutomed to issues of Government paper, and were suspicious of them, and even that amount, small as it was in com parison with the paper issues subsequently issued, could not be floated. In this same period it was difficult for the Government to borrow money on bonds, for its credit had been greatly impaired by the events of Buchanan's Administration. When the Secretary of the Treasury secured the first loan made during the war, the London Times said he had "coerced $50,000,000 from the New York banks, but he would not fare so well on the London Exchange," and for a

time Confederate bonds sold better in Europe than United States Government obligations. Borrowing on Government gold-bearing bonds afterwards became easier, both in this country and in Europe, but the need of currency for use in business transactions, became more and more pressing.

Out of this need came the creation of the greenback, and, later on, the National Bank Law. The Legal Tender Bill, which established the greenback, was introduced by E. G. Spaulding, of the Buffalo, N. Y., District. in Congress, December 30, 1861, and was reported from the Ways and Means Committee, January 22, 1862. It was urged mainly as a matter of temporary necessity, and not as a judicious permanent system. In fact the expectation was held out that the greenbacks would be permanently retired almost as soon as the war ended. The bill was explained and ably supported by Mr. Spaulding, and other members of the Ways and Means Committee, but was opposed on the ground of expediency or constitutionality, or both, by a few Republicans, and by nearly all the Democrats. Among the latter Clement L. Vallandigham and George H. Pendleton took the lead.

In view of Mr. Pendleton's declaration in 1868, in favor of paying the Government bonds in greenbacks, his attitude toward them in 1862 is interesting. In the course of his remarks he said: The feature of the bill that first strikes every thinking man, even in these days of novelties, is the proposition that these notes shall be made a legal tender in discharge of all pecuniary obligations, as well those which have accrued in virtue of contracts already made, as those which shall hereafter be made. Do gentlemen appreciate the full import and meaning of that clause? Do they realize the full extent to which it will carry them? Every contract for the payment of gold and silver coin, every promissory note, every bill of exchange, every lease reserving rent, every loan of money reserving interest, every bond issued by this Government, is a contract to which the faith of the obligor is pledged, that the amount whether rent, interest or principal shall be paid in the gold and silver coin of the country."

Among the Republicans opposing this bill were Justin S. Morrill, Roscoe and Frederick A. Conkling, and Owen Lovejoy. But it was vigorously pushed, and passed February 6, by 93 yeas, of whom 5 were Democrats, to 59 nays, of whom 29 were Democrats, 17 Republicans and 13 Unionists. In the Senate the principal contest was over the legal tender clause, but a motion to strike that out was lost

by 17 yeas, of whom 9 were Republicans and 8 Democrats, to 22 nays, of whom 18 were Republicans and 4 Democrats. Senators Collamer, Cowan and Fessenden spoke against the legal tender clause, and Senators Zachariah Chandler, Sherman, Sumner, Wade and Wilson were among the Republicans who defended it. The bill passed the Senate by a vote of 30 to 7, and was signed by the President, February 25, 1862. This Bill authorized the issue of $150,000, 000 in legal tenders, of which $50,000,000 was to be in lieu of the demand notes authorized in 1861. Two subsequent issues of $150,000,000 each were authorized, but only $384,000,000 in all were issued.

The greenbacks were a God-send to the soldiers in the field, some of whom had not been paid for three or four months; and by furnishing a medium of exchange, in abundant quantity, they stimulated business in every direction. Still the measure was one of inflation, and they could not be kept at par with gold. During the darkest days of the war, in 1864, gold was at 280, as compared with the legal tenders. At the time Grant was inaugurated the process of contraetion, and the increase of our exports had brought it down to 143. The problem before Congress, and the President, was to bring the greenbacks up to par with gold, without violent shock or derangement to business.

"A great

The President had said, in his inaugural message: debt has been contracted in securing to us and our posterity the Union. The payment of this, principal and interest, as well as the return to a specie basis, as soon as it can be accomplished without material detriment to the debtor class or to the country at large, must be provided for. To protect the National honor every dollar of Government indebtedness should be paid in gold, unless otherwise expressly stipulated in the contract. Let it be understood that no repudiator of one farthing of our public debt will be trusted in public place, and it will go far towards strengthening a credit which ought to be the best in the world, and will ultimately enable us to replace the debt with bonds bearing less interest than we now pay.”

In view of the uneasiness caused by the discussions of this subject in the last campaign, and especially of the expressions in the Democratic platform, Congress did not wait to elaborate a system, but at once announced the principle by which it would be guided. This was done in a brief "Act to Strengthen the Public Credit," which speedily passed both Houses, the final vote in the Senate being 31 to

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