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130

CANAL SCHEMES; COAL MINING.

viding for the immediate coinage of canal from Schenectady to Ontario or

150 tons of copper.*

Seneca lake.*

Anthracite coal had already been discovered in the Mauch Chunk mountains of Pennsylvania, and the Lehigh Coal Mine Company was organized to develop the mines.† This company, formed without a charter, purchased the land on Summit Hill, where the coal was first seen, and also took up 10,000 acres under State warrant. The company started operations, but wood was then far too plentiful and too cheap to induce people to burn coal. Moreover, the lack of roads to the mines and the impossibility of navigating streams added to the difficulty of mining the coal, and with these almost insurmountable obstacles, the company soon abandoned the enterprise.‡

The country was now in excellent condition; money was plentiful, and on every hand were unmistakable evidences of prosperity. People were eager to invest; thousands of dollars were laid out in turnpikes, bridges, and canals, and all manner of internal improvements were projected, the favorite being the canal, plans for several of which were under way in every State. The Society for Promoting the Improvement of Roads and Inland Navigation in the State of Pennsylvania projected three canals, one along the banks of the Brandywine, another to connect the waters of the Schuylkill and the Delaware, and a third to connect the Schuylkill and the Susquehanna. At Boston Occasional failures and losses did the Middlesex canal was planned not, of course, hinder speculation, but and finished in 1803, and at rather seemed to whet the appetite to Worcester a canal to connect the city retrieve losses by further speculation. with the sea was projected. Another Stock and scrip were the principal was planned at South Hadley. Still mediums of gambling, the list at first others were to pass through the dis- including only the three kinds of govmal swamp to take water from the ernment scrip and the shares of a few Crum Creek, to connect the Cooper and the Santee rivers, etc. In New York, the Northern Navigation Company and the Western Navigation Company was formed the former to run a canal from Troy, via Lansingburgh and Fort Edward, to Lake Champlain, and the latter to run a

*Annals of Congress, 2d Congress, 1st session, pp. 1387-1388.

* McMaster, vol. ii., pp. 74-77. See also Bishop, History of Manufactures, vol. ii., passim.

Bishop, History of Manufactures, vol. ii., p. 46. Sharpless, Two Centuries of Pennsylvania History, pp. 236-237. Writing to Edmund Pendleton, July 24, 1791, Jefferson says: "As yet the delirium of speculation is too strong to admit sober reflection. It remains to be seen whether in a country whose capital is too small to carry on its own commerce, to establish manufactures, erect buildings, etc., such sums should have been withdrawn from these useful pursuits to be employed in gambling."- Ford's ed. of Jefferson's Writings, vol. v., p. 357.

HAMILTON'S CONNECTION WITH SPECULATIVE FRAUDS. 131

canal companies, one or two turnpike companies, and six banks. But soon other names were added and all manner of corporations land companies, bridge companies, banks, population companies, etc.,- put out scrip, and their stock was eagerly absorbed by the public.* Tontine and insurance associations asked for acts of incorporation, but the great majority of the charters applied for were for banks. "Scripophobia" had gained a strong hold upon the people; men gambled recklessly in bank scrip and government securities, and so feverish did the speculation become that sober people stood aghast and bewildered. Banks. soared like soapbubbles, one of the most foolish being the "Million Bank of the State of New York." A ring of speculators, among whom was Hamilton's late assistant, Duer (who had resigned in 1790), hovered about the Treasury to pick up bits of inside information for speculative purposes. When Hamilton hinted that the deferred debt would be taken up, these speculators began to buy in the certificates wherever they could be found.† Hamilton had observed this tendency with dismay, and, knowing that a crash would soon come, gave warning to some of the most prominent speculators; but this was not heeded. ‡ During the first months of 1792 the market began to

* McMaster, vol. ii., pp. 79-82.

Schouler, United States, vol. i., pp. 216-217. Hamilton's ed. of Hamilton's Works, vol. v..

p. 478.

turn, and many of the speculators saw ruin staring them in the face. Duer became insolvent and was thrown into jail by his creditors; others of his ring fled to New Jersey; and failure after failure occurred. Hamilton endeavored to stem the tide of adversity by buying bonds from the public so as to relieve the money market; but his resources were small, and in a short time bank stock had fallen from 120 to 74, and government six's from 130 to 96.* The public as well as a large body of the speculators began to howl against those they thought responsible for the bubble, accusing even Hamilton of complicity in the matter. Probably Hamilton had no corrupt connection with these schemes, but his actions certainly were indiscreet, to say the least. Now at the pinnacle of his fame and power, Hamilton looked not only to the country's general enrichment, but in particular to the enrichment of the moneyed classes and the New York capitalists, whom, by the insidious use of money, he hoped to draw closer. Those agents through whom he was effecting his loans were kept in good humor by douceurs, subsidies and commissions. While he refused Treasury information to outsiders, he did not hesitate. to use his own confidential information to save Duer and his personal friends from ruin. He sent out secret orders for purchasing debt certificates

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132

WASHINGTON'S MESSAGE TO CONGRESS.

in advance of official authorization, which ought first to have been procured. He allowed the president of the bank where he kept his private account to be the dispenser of his benevolence," promising that, if it would loan money to a manufacturing company recently established through Hamilton's influence for his friends, it should suffer no diminution of "pecuniary facilities." With Hamilton thus feathering the nests of his favorites, public suspicion naturally turned against him, though there was no tangible evidence of incrimination. But, as Schouler says, Hamilton was now beginning to show unmistakable symptoms of the disorder which besets such a nature in high stationthe "

gradual and imperceptible dryrot of virtue." The cry now resounded throughout the country that "national-stock-jobbing, monarchyjobbing, bank-jobbing, aristocracyjobbing," etc., were prevalent; that the cities lived in luxury while the country suffered poverty; and that the public councils reeked with corruption. Abuse was hurled anew at the Vice-President for his Davila and at the Secretary of War for the St. Clair disaster; but Hamilton especially was deluged with torrents of invective for his "corrupt squadron," and for his reports" dangerous to liberty."

On November 5, 1792, the second session of the Second Congress convened. In his fourth annual message

* Schouler, United States, vol. i., pp. 218-219.

Washington referred to the continuance of the Indian hostilities in the West, gave a general account of the measures which had been taken to stop the destructive incursions of the Indians, and suggested that a plan be formed for carrying on intercourse with the red men. After speaking of the resistance to the collection of duties on distilled spirits, and noticing the judiciary, the mint, post-office regulations, etc., the President said: "I entertain a strong hope that the state of the national finances is now sufficiently matured to enable you to enter into a systematic and effectual arrangement for the regular redemption and discharge of the public debt, according to the right which has been reserved to the government. No measure can be more desirable, whether viewed with an eye to its intrinsic importance, or to the general sentiments and wish of the nation." *

When the matter of finances was taken up in the House, it was seen that party feeling had increased rather than diminished. When a motion was introduced requesting the Secretaries of the Treasury and of War to attend the House and give information regarding affairs connected with their departments, severe denunciations were poured forth against the unconstitutionality of subjecting the Representatives to the control of the heads of the executive depart

* Richardson, Messages and Papers, vol. i., pp.

125-129.

HAMILTON'S REPORT ON PUBLIC CREDIT.

ments. When a motion was made requesting Hamilton to report a plan for redeeming the public debt, the contest was renewed. Madison opposed it, saying it was not a plan that the House wanted, but information from which the House itself could formulate a plan. He said the House, if it possessed the necessary information, was perfectly capable of conserving the nation's interests without being told by any one man what should be done. The plan of having the Secretary formulate a scheme was, he said, taking away the responsibility of the elected representatives of the people and placing it upon the shoulders of one man not elected by the people nor subject to their control. At any rate, the Secretary then in office did not give facts or figures; but, in order to win advocates for his methods, his reports were made to read like Adam Smith's Wealth of Nations. Nevertheless, on a vote the resolution was passed by 31 ayes against 25 nays."

*

According to Hamilton's report, November 30, 1792, the expenses incident to the Indian war made it absolutely impossible to rely on existing revenues to meet regular interest and the payment of the annual instalments of the debt, unless one of two courses were followed: either negotiating new loans under existing pledges at lower rates of interest or

*Annals of Congress, 2d Congress, 2d session, pp. 695-701, 703-708, 711-722; Schouler, United States, vol. i., p. 234.

133

laying an additional tax. Preferring the latter course, he proposed to extend the internal taxes on horses and

carriages. To pay the loan of $2,000,000, now running at 6 per cent., which the Bank had advanced to the government, Hamilton proposed to borrow the sum at a lower rate of interest and then to appropriate part of each dividend on the stock to pay the interest as it should accrue.* Consideration of this report was deferred on various grounds, and a motion to reduce the military establishment was substituted, but on January 5, 1793, after a long and earnest debate, this motion was rejected. † A bill in accordance with the Secretary's views was finally introduced, but it was objected that there was bank favoritism at the bottom of it. Giles suggested that, instead of borrowing any more money, the government sell its bank stock-a suggestion which so alarmed the bank men that they allowed the substitution of a bill appropriating no more than the instalment of the $2,000,000 actually due.‡ But the House took no action on the plan of increasing the internal taxes. Before the House could take any action whatever regarding either of the Secretary's plans, consideration of

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134

ATTEMPT TO INCULPATE HAMILTON.

every measure connected with the finances was stopped, the attention of the House being absorbed by another subject. *

On January 23 Giles introduced five resolutions requiring information, among other things, on various points growing out of the loans authorized by Congress in August, 1790. The first called for copies of the papers authorizing the loans; the second, for the names of the persons to whom and by whom the French debt had been paid; the third, for a statement of the balances between the United States and the Bank; the fourth, for an account of the Sinking Fund; and the fifth, for a statement of the unexpended revenue at the close of 1792.† The object of these resolutions was clearly to inculpate the Secretary of the Treasury in some act of mismanagement or misapplication of these loans and of the revenue generally. Giles made some remarks which showed the animus of

Schouler, United States, vol. i., p. 235. Annals of Congress, 2d Congress, 2d session, pp. 835-836.

There were others besides Giles who thought some irregular transactions had taken place. Writing to Edmund Pendleton, February 23, 1793, Madison says: "The documents furnished shew that there has been, at least, a very blameable irregularity and secrecy in some particulars of it, and many appearances which at least require explanation. With some, suspicions are carried very far; others resolve the whole that is wrong into favoritism, to the Bank, &c; whilst the partizans of the Secretary either see nothing amiss, or are willing to ascribe everything that is so to venial, if not to laudable motives."- Madison's Works (Congress ed.), vol. i., p. 575.

his proceedings* as well as his determination to prove that a large sum

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Lodge calls Giles a rough, brazen, loudvoiced Virginian, fit for any bad work, no matter how desperate.' ·Alexander Hamilton, p. 148. But we must bear in mind Hildreth's remarks, previously quoted, regarding Washington: "Every biographer has been very anxious to shield his special hero." Lodge is the biographer of Hamilton and also editor of his Works; Hamilton was a protectionist; Lodge is a protectionist. The fact that someone thought Hamilton guilty of wrongdoing and expressed animus against him by calling for papers in connection with the case does not prove that such an opponent was "fit for any bad work." The fact that Hamilton proved his integrity does not justify such language. If Hamilton had been found guilty, Giles would have been the hero. The history of American politics is replete with instances of parties using the utterances and enactments of opponents, not only

correctly but incorrectly, to influence public opin

ion. During the 1908 campaign President Taft repeatedly said that the Gorman-Wilson (Democratic) tariff bill was responsible for the panic of 1893. On page 20 of his collected speeches (issued under the title Political Issues and Outlooks, 1909) he speaks of the Gorman-Wilson tariff bill of " 1903" and says: "With the prospect of a Democratic tariff for revenue and under the operation of the Gorman-Wilson Tariff Bill subsequently passed a period of depression set in." On page 125 he says that the result of the bill was to prostrate the industries of the country and to bring about a four years' depression lasting up to 1897. Again on page 133 he says that the certainty that a tariff for revenue only would be passed so disturbed the business interests of the country that a panic began "even before the Gorman-Wilson Bill was substituted for the McKinley bill." This was either supreme ignorance or effrontery. Yet upon such statements he appealed to the masses for their suffrages. Mr. Taft must have known that the panic began February 20, 1893, a fortnight before Cleveland assumed office; that the Sherman Purchase Act (a Republican law) was charged with the greater part of the trouble and was repealed; that Congress did not assemble to enact remedial legislation until August 7, 1893, after numerous failures, involving many millions, had occurred; that the Wilson bill was not introduced until December 19, 1893; and that it did not become law until August 27, 1894, nearly 18 months after the panic

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