A Patriot's History of the United States: From Columbus's Great Discovery to the War on Terror (79 page)

Grant hewed to the traditional Republican agenda: high tariffs, internal improvements, and, above all, stability and moderation toward Reconstruction affairs. A gold standard supporter, Grant nevertheless supported the Pendleton Plan for paying off federal bonds with greenbacks unless specifically stated that they be paid in gold. Paying for the war debt in greenbacks represented a commitment to slight inflation. For most voters, though, Grant, not the platform, was the deciding factor: his campaign slogan, “Let us have peace,” appealed to people of both sections.

In the election, despite the absence of three still-unreconstructed states, 78 percent of eligible voters cast ballots. Grant received 53 percent of the popular vote, despite the fact that Seymour got almost 200,000 votes from Kentucky and Louisiana alone; Grant smashed Seymour in the electoral college 214 to 80. Some 500,000 blacks, voting for the first time, thus decided the election. Seymour took the highest electoral state (his home state of New York), but Grant took most of the North and swept the Midwest and all of the West except Oregon.

Grant and the “Era of Good Stealings”

A reluctant politician, Ulysses S. Grant was as unimpressive in person as was Johnson. Sad eyed, of average height, and possessing a low musical and penetrating voice, Grant punctuated his speech by frequently stroking his slight beard with his left hand. Courteous and capable of effusive laughter, Grant in portraits nevertheless looks as if he were attending a bullfight or a funeral. Full of personal contradictions, he puzzled even his best friends, including cartoonist Thomas Nast, who contributed mightily to the 1868 campaign. “Two things elected me,” Grant later said, “the sword of Sheridan and the pencil of Thomas Nast.” Early in his life Grant and Longstreet had been close, and after Fort Sumter, he came to rely heavily on Sherman. Unlike Lincoln, who never lacked confidence around men of better education or status, Grant, according to Hamilton Fish, later his secretary of state, was uncomfortable in the presence of highly literate or well-traveled men.
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Possessed of a detailed and organized memory, Grant could tell spellbinding stories, and later wrote a military memoir considered the finest since Caesar’s.
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When Grant claimed to be a simple soldier, he meant it. Once he put his trust in someone, he clung to them ferociously, and his loyalty led him to associate with self-interested leeches who had no compunction about betraying his faith in them. He viewed the presidency from the old Whig tradition, where the legislature made the laws, and the president merely served as a check. To that extent, Grant had failed to absorb the massive changes in federal, and presidential, power that had occurred during the Civil War.
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Congress was all too happy to continue to direct Reconstruction, but the Republicans’ first concern involved a diagnosis of the last election, which revealed that a great deal of Democratic strength still remained in the country. Had blacks not voted in the numbers they had, or had most of the former Confederates who were legally allowed to vote not boycotted the election, the Republicans could have suffered severe setbacks. Ensuring that blacks maintained the franchise therefore emerged as the top priority for the Radicals, who sought to make black voting rights permanent. Grant had not even taken office when Congress passed the Fifteenth Amendment (February 1869) that forbade any state from depriving a citizen of his vote because of race, color, or previous condition of servitude.

The recalcitrant Southern states—Texas, Virginia, and Mississippi—that had not yet ratified the Fourteenth Amendment, finally gave in, ratifying both the Fourteenth and Fifteenth, and all three had rejoined the Union by 1870. Obedience in any of these states, however, still largely rested on the bayonets of Yankee troops. Georgia proved that in 1868, when, after federal military forces withdrew, the state legislature expelled all black legislators until the return of federal troops again imposed Northern order. Probably many Southerners otherwise harbored humane and reasonable intentions toward the freedmen, but equality enforced at bayonet point hardened their antipathy against the North even more. To most white Southerners, all of Reconstruction was a facade, a ruse to conceal the Northerners and the Republicans’ true objective of crushing the South politically, economically, and culturally.

Grant had scarcely taken office, and certainly had not yet started to grapple with Reconstruction, when his unfortunate associations plunged his administration into a scandal. On September 24, 1869, in Wall Street’s “Gold Room,” two of the most infamous speculators in the country, Jim Fisk and Jay Gould, attempted to corner the market on gold.
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What ensued was Black Friday, where gold prices skyrocketed, thanks to their backroom manipulations. Fisk and Gould had involved Grant’s brother-in-law, Abel Corbin, who acquired insider information from Grant over dinner. Corbin relayed to the speculators that in the event of a run on gold, the federal government would not sell its gold, and thus the price would rise.

Fisk and Gould had a long history of attempting to manipulate markets. Along with Daniel Drew, they had fought Commodore Cornelius Vanderbilt over the Harlem Railroad in 1864. Now, five years later, Fisk and Gould were attempting another speculation. Armed with foreknowledge that the federal government would not sell any new gold, the conspirators started to buy all they could get at $135 an ounce. Once they had cornered the supply of gold and driven the price up to $160, they would dump gold and take the profits. For a while it appeared they would succeed. But Grant, informed of the situation by his secretary of the Treasury, ordered the Treasury to sell gold and stabilize the price. Gould escaped with several million dollars in profits, far below his expectations. Grant had in no way acted improperly, but the Fisk/Gould connection with Corbin tarnished his administration at an early stage.

A second scandal, Crédit Mobilier, tainted many congressmen and reached into Grant’s administration, but did not involve him personally. The Crédit Mobilier scandal was the logical result of using massive public funding for the transcontinental railroads, specifically the Union Pacific and the Central Pacific. To that extent, the trail to Crédit Mobilier must first go through Promontory Point, Utah, where the transcontinentals met in May 1869.

Funding for the transcontinental railroads originated with a grant of 44 million acres of land and $61 million in federal loans, reflecting the urgency Congress placed on construction. Railroads could sell the land, and use the proceeds for construction. The Pacific Railroad Act of 1862 enabled the Union Pacific to lay rails westward from Omaha, while the Central Pacific started in Sacramento and headed east.
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Congress put ridiculous incentives into the legislation: benefits given to the railroads that right-thinking legislators should have known would breed corruption on a massive scale. For example, the railroads received twenty alternating sections of federal land and, in addition, received a staggered series of cash loans for each mile of track constructed ($16,000 for flat land, $32,000 for hilly terrain, and $48,000 in mountains). Naturally, the railroads had a stake in laying as much track, on as much difficult terrain, as was humanly possible.

Historian Burton Folsom Jr. summarized how Congress’s misincentives shaped the railroad companies’ strategy: “They sometimes built winding, circuitous roads to collect for more mileage…. They used cheap and light wrought iron rails, soon to be outmoded by Bessemer rails.”
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The Union Pacific’s vice president, Thomas Durant, complained to his staff members, “You are doing too much masonry…. [Substitute] wooden culverts for masonry whenever youcan.”
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They used fragile cottonwood trees because they were handy, stealing farmers’ timber with the reasoning that it was public land anyway. With government dollars backing the railroads’ every move, who could argue otherwise? Moreover, the railroads also meandered in search of mineral rights, leading the Northern Pacific through the Black Hills of South Dakota and fomenting the Sioux wars.

Union Pacific’s chief engineer, Granville Dodge, laid track on ice, and the whole line had to be rebuilt in the spring. Crossing unsettled land invited Indian attacks, requiring that half the workers at any site stand guard while the other half worked. Climaxing the wasteful affair, when the Union Pacific and Central Pacific came within the vicinity of each other, work crews began gang fights and built parallel lines as long as Congress tolerated it. Finally, even the federal government had enough, and lawmakers demanded that the two lines link up. The subsidized transcontinentals linked the nation only after phenomenal waste—a task James J. Hill did without federal aid.
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Even as the golden spike was being driven, both railroads were already planning to rebuild and even relocate the track to cover the shoddy construction. It was 1874 before the Union Pacific finished fixing the “new” track it laid five years before.

The Crédit Mobilier scandal had its roots in this perfidious use of government money. The corruption was brought into the open because the company was formed in 1864 solely as a means to prop up the sinking Union Pacific stock. The congressional charter required the railroad to sell its stock for cash at $100 par value, but the price sank almost immediately upon issue as investors questioned whether the railroad could even be built. Thomas Durant came up with the concept of forming a new credit arm, Crédit Mobilier, whose stockholders were identical to the Union Pacific’s. Under the scheme, the railroad would give construction contracts to Crédit Mobilier, which then would balloon the costs of construction to double the genuine expenses. Union Pacific paid Crédit Mobilier with its own checks, which the directors of the credit company promptly used to purchase railroad stock at the par value of $100 per share. Looked at another way, Durant had managed to get the railroad to buy its own stock. He then had Crédit Mobilier sell the stock on the open market far below par.

The scam, while convoluted, nevertheless boiled down to Durant’s giving stockholders “profits” from sales of Union Pacific stock on the open market, which had been sanitized up to par value by washing it through the Crédit Mobilier laundry. In the process, the directors and stockholders of Crédit Mobilier had made outrageous profits from the overbilling of the railroad—all funded by Uncle Sam’s land grants and loans—and had also made profits from the resale of the watered stock. As if those gains were not enough, a number of congressmen (James A. Garfield of Ohio and James Brooks of New York), senators (James Patterson of New Jersey), and Grant administration officials, including the vice president (Schuyler Colfax), were given generous Crédit Mobilier holdings to ensure they did not turn off the money spigot. Scholars estimate that the corrupt directors and congressmen skimmed between $13 million and $23 million from the Union Pacific through Crédit Mobilier, which was finally exposed by the reporting of Charles Dana’s New York
Sun
in 1872. Once again, Grant was not directly implicated, but could not escape guilt by inference.
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Other scandals quickly followed, including the Whiskey Ring, the Veteran’s Administration scandal, and the exposure of Secretary of War William W. Belknap for accepting bribes in return for the sale of Indian trading posts. Grant’s reputation suffered further blows.

Missing in the moralizing of both the pundits of the day and subsequent historians is the key issue: such corruption tracked precisely with the vast expansion of the federal bureaucracy. People acted no better, or worse, in the 1870s than they had in George Washington’s day. What had changed, however, was that the
opportunity
for graft combined with the incredible profits to be gained from corruption, causing one historian to label this the “era of good stealings.”
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This malignancy owed much of its existence to the growth of government.

Scandals in the Grant era turn the liberal critique of the Gilded Age on its head. Far from laissez-faire capitalism necessitating government regulation, it was government intervention that caused the corruption and fed it. The best reform Americans could have enacted in the decade after Grant would have been to roll back to antebellum levels the subsidies, benefits, tariffs, and favorable land grants to railroads and other bonuses given to special interests. Yet the reformers learned precisely the wrong lessons from these events.

Reelection and Reform

The demise of the Democratic Party’s Tweed Ring in New York City convinced many politicians in each party that not only should something be done about political corruption, but that reform measures could also be successful. The accelerating calls for political reform came as a reaction against the Radicals, and they were led by another faction of Republicans, the Liberals. These Liberals included Carl Schurz, Horace Greeley, Gideon Welles, Charles Francis Adams, and editor E. L. Godkin, who favored free trade, redeeming greenbacks in gold, a stable currency, restoring the former Confederates their rights, and civil service reform. Schurz won a Senate seat in 1872, demonstrating that the Liberals had some electoral clout and leading them to test their might in 1872, when they held a separate convention. Their emergence says something about the difficulty of applying labels in historical settings: the Liberals, like the conservative Southern Democrats, opposed further Reconstruction measures, and both were opposed by the Radical Republicans. However, the Radicals, like most Democrats, favored a continuation of the spoils system, which the Liberals wanted to end. Former conservative hard-money Democrats, after the Civil War, slowly embraced inflation and spoke favorably of greenbacks, a tool the Union government had used to win the war. Finally, Liberal Republicans and conservative Democrats both supported free trade and ending tariffs, but Radicals did not! Judging from these issues alone, any attempt to consistently apply twentieth-and twenty-first-century name tags to nineteenth-century politics is an exercise in futility.