by H. W. Brands
At the time of his intervention in South Carolina, Grant had realized that such a blunt instrument could be used only rarely. The Constitution allowed the federal government to suppress insurrections in the states, but insurrections were rare. Mundane violence was something for the states to deal with themselves, and the Texas case didn’t rise even to that level. The Constitution did not authorize the federal government to act as registrar or election judge in the states, and though the recent enforcement acts asserted such authority in cases where civil rights were being systematically violated, they didn’t extend to instances where Republicans had simply grown unpopular and were voted out of office. Grant had shrugged off the charges of tyranny and military despotism in using the army in South Carolina, knowing that South Carolina was singular. He couldn’t have shrugged off the charges had he made a habit of intervention.
He told Davis to accept the judgment of Texas voters. “The act of the legislature of Texas providing for the recent election having received your approval,” he wrote the governor, “and both political parties having made nominations and having conducted a political campaign under its provisions, would it not be prudent as well as right to yield to the verdict of the people as expressed by their ballots?”
He took a similar stance when a faction of Republicans in South Carolina sent a delegation to Washington with an appeal for help. The irresponsible elements of the electorate were wreaking havoc on the state, they asserted. The administration must act to restore order. “Gentlemen,” Grant replied, according to a news account soon published, “after listening to what has been said, I do not see that there is anything that can be done, either by the executive or by the legislative branch of the national government, to better the condition of things which you have described. South Carolina has now a complete existence as a sovereign state, and must make her own laws.” If those laws were bad laws, South Carolina was fully capable of changing them. Grant thought it ironic that his visitors had come from a convention where at least one speaker had railed against the administration in Washington in the most vitriolic terms. “I have never seen a speech equal to it in malignity, vileness, falsity, and slander,” he told his visitors. He inquired whether any among them had refuted the slander. They said they had chosen to treat the speech with “silent contempt.” Grant puffed on his cigar, eyed them skeptically and sent them away.
Whether to intervene in the economy was a harder question. As the depression intensified, debtors pleaded with Washington for relief. Falling prices made their debt burden heavier; they embraced any policies that promised to lift prices and ease their burden. The experience of the war seemed to show that printing money raised prices, and so they petitioned Congress to crank up the presses again. “The importance of doing something in regard to the currency is becoming more apparent every day,” Oliver Morton wrote Grant in late March 1874. “The stagnation of business is increasing.” The Indiana Republican contended that a widespread belief that there wasn’t sufficient money in the economy to sustain a recovery was the culprit. “This conviction stands in the way of enterprise everywhere, especially in the West.” Morton recounted the arguments against expanding the currency, in order to dismiss them. He knew that the president and much of the country distrusted anything that could be construed as inflation. What was being proposed was no such thing, Morton said. “An increase of the currency which simply keeps pace with the increase of population and wealth is no inflation. The currency is the instrument with which the business of the country is carried on, and the volume of it should be increased with the volume of business. To me it seems absurd that the volume of currency can be fixed at a particular point unless you can also fix the volume of business.” The president had advocated a return to specie payments—in effect, to the gold standard. Morton shared this desire, but he suggested that the surest way back to gold was not necessarily the straightest way. “The first step, in my opinion, to the return to specie payments is the restoration of good times and the creation of a surplus revenue.” Expanding the currency would accomplish both.
Other correspondents similarly endorsed expansion. A Philadelphia banker distanced himself from his profession to call for easier money. The interior of the nation was suffering badly, he wrote Grant. “I know from information received from all parts of the country west of the Alleghenies that the people are starving for money, for currency! There is absolutely no money among the masses in the far west. A gentleman in this bank today from Wisconsin told me that currency was hardly ever seen at all in his section; and he was coming to the East to get into business as he would starve there.” Albert Redstone, the president of the National Labor Council, warned Grant to resist the banker groups demanding a veto of any bill that expanded the currency. “Who are these men?” Redstone asked. “How do they come?” He answered his own question: “They come representing three hundred and fifty millions of money.” Their interest was the interest of wealth, not the interest of America. They were agitating for a return to gold, but what would they do once the return was effected? “They would present all the notes they obtain, take the specie to Europe, buy goods, bring them here, induce the people to buy them instead of buying goods of American manufacture, thereby depriving the American laborer of the employment requisite to the production of the goods bought with the gold, and thus continuing the process of depleting the country of gold which these same men have practiced for years.”
Grant heard from the opponents of expansion as well. “In my intercourse with scholars and business men for several months past I have not met a single man who had an opinion at all who did not in the strongest terms deprecate the measures likely to be adopted by Congress,” a banker wrote from Rochester, New York, at a moment when the legislature was leaning toward an inflation bill. “We believe that those who urge these measures on are either ignorant of the laws of finance or are willing to sacrifice the honor of the government and the financial future of the country to a few months of unhealthy activity of business to be followed by a depression more disastrous than any which we have suffered in the past.” After Congress did approve an expansionary bill, a Manhattan banker begged the president to veto it. “This bill is a violation of the faith of the United States,” he declared. “It is the first step in a fatal downward course that can but end in disgrace and repudiation.” The writer challenged the notion that the ordinary people of the country were debtors and therefore would benefit from expansion. “The creditors are in an immense majority, in proof of which I need only state that the depositors in the savings banks of this state alone number more than 800,000…. You surely cannot sanction the defrauding these poor people out of a part of their hard earnings!” Twenty-five hundred New York bankers and merchants petitioned Grant for a veto lest the money bill “inflict a stain on the honor of the Republic and impair confidence in every future pledge and promise given in its name.”
Grant found the opposing arguments almost equally compelling. He had supported the first issue of greenbacks as a war measure, but ever since the war he had spoken in favor of a return to specie. He acknowledged that expansion would encourage business activity, but he feared that the government, once started on an expansive path, would find it impossible to turn back. He inclined to the view that presidents should normally defer to the lawmaking prerogatives of Congress, but he understood that presidents sometimes had to check the impulses that pushed the legislature to approve measures that were politically expedient but fiscally imprudent.
He tried to talk himself into accepting the bill. He drafted a statement saying why the expansion bill should become law. Presidents almost never issued such statements, typically commenting only when they vetoed measures. “I deem this course due to myself and to the public also,” Grant explained. “Due to me because no opponent of the measure has been more unreserved in expressing views against the expansion of irredeemable currency than I have, or advocated more earnestly than me the duty and obligation of Congress to legislate in suc
h manner as best to carry out their repeated pledges to return to a specie basis at the earliest practicable day. Due to the public because there seems to be a general feeling that if the measure under consideration becomes law it is a triumph of industry over capital; if it fails, a triumph of capital.” Grant thought this dichotomy mistaken; the bill could be a victory for labor and property together. He noted that no one in the debate over the measure had said it was unconstitutional. “Under these circumstances an executive should feel very sure of his ground before defeating the will of the majority by his veto.” Grant praised ancillary parts of the measure, which reformed banking laws to prevent the resources of the country banks of the West being siphoned irresistibly to the city banks of the East. These provisions, he said, would facilitate the resumption of specie payments when the current crisis eased. Finally and perhaps most importantly, he asserted, the nation had been waiting anxiously on the outcome of the congressional deliberations. Crucial business decisions had been withheld until Congress acted. Now Congress had acted, and though the result wasn’t perfect, it was the best achievable. “If this measure should be returned without approval”—that is, vetoed—“nothing more favorable could be expected.… Trade and commerce would remain paralyzed.”
But his heart wasn’t in it. Reading the message over, he found himself unpersuaded. He summoned the cabinet and explained his thinking on the expansion bill. “He had given it most careful consideration with an earnest desire to give it his approval,” Hamilton Fish recorded of the president’s remarks. “He had written a message assigning the best arguments he had heard or could think of in that direction, but the more he wrote, the more he thought, the more he was convinced that the bill should not become a law, and having written the draft of a message in that direction he felt that it was fallacious and untenable, and had come to the conclusion to return it without his signature.”
Several of the cabinet secretaries protested, chiefly on political grounds. Columbus Delano, the interior secretary and an Ohioan alert to the sensitivities of the heartland, warned of the unpopularity of a veto, especially one based on considerations of policy rather than of constitutionality. William Belknap predicted that a veto would turn the entire West against the administration. George Williams shared the concern, as did George Robeson, the navy secretary.
Grant conceded that they were right in the short term. “The President thought that the first effect would be one of denunciation of him,” Hamilton Fish recorded. But Grant believed a veto was necessary, and he guessed that the American people would agree once the initial shouting ceased. “He had confidence that the judgment of the country would approve,” Fish wrote.
So, against the opposition of a majority of his cabinet, Grant vetoed the inflation bill. “I must express my regret at not being able to give my assent to a measure which has received the sanction of a majority of the legislators chosen by the people,” he explained in his veto message. He said he had tried to find sufficient arguments to sustain assent but had failed. He quoted from his first annual message to Congress: “It is a duty, and one of the highest duties, of Government to secure to the citizen a medium of exchange of fixed, unvarying value. This implies a return to a specie basis, and no substitute for it can be devised.” The present bill took the country in the opposite direction, he said. It signified “a departure from true principles of finance, national interest, national obligations to creditors, Congressional promises, party pledges (on the part of both political parties), and of personal views and promises made by me in every annual message sent to Congress and in each inaugural address.” Grant conceded that the bill’s banking provisions would facilitate the flow of money around the country, but he suggested that the existing geographic imbalances were less dire than the bill’s advocates asserted, and he thought other methods could be employed to alleviate them. He reminded the lawmakers that Congress in 1869 had passed a resolution to return the currency to a specie basis as soon as feasible. “This act still remains as a continuing pledge of the faith of the United States.” The expansion bill contradicted the pledge and must be vetoed.
The veto made Grant a hero with the hard-money crowd. “God Almighty bless you,” Edwards Pierrepont telegraphed from New York. “The bravest battle and the greatest victory of your life.” From Cincinnati a supporter wrote: “It is Vicksburg over again. The veto is as glorious and as vital to the honor and safety of the country as was the capture of Vicksburg. It stirs my blood, like the bugles sounding a charge.” A Boston correspondent echoed the military analogy, declaring, “I do not forget either Vicksburg or Richmond but think this one of the best things you have ever done. It gives us courage.” The president of Princeton College, James McCosh, said, “You have done your duty nobly in vetoing the inflation bill, and it is now our duty to support you. We have little direct political influence in colleges, but we have some moral weight to throw in, and this we mean to give.” Philadelphia banker Anthony Drexel praised the president’s “noble stand” and said, “I have just received letters by the last mail from London and Paris and they are most just and complimentary in regard to yourself in relation to the financial question, and I may say they express the views of the ablest and best men.” Drexel’s American correspondents, and not only those in the East, took the same view. “I have yet to hear an adverse opinion from a really sound or solvent man from any section.”
Yet Drexel’s friends hardly constituted the country. The criticism of Grant’s veto was as angry as the president had guessed it would be. “The president is mistaken if he thinks the mouth of the Mississippi can be dammed with a straw,” Oliver Morton growled. William Crutchfield, a Republican congressman from Tennessee, called the veto “cold-blooded murder.” Hundreds of papers in the Midwest and West denounced the veto; a new split among the Republicans, this time along regional lines, appeared entirely possible. The Democrats, for the most part, didn’t bother to pile on, satisfied to let the Republicans beat themselves up. Representative James Beck of Kentucky, however, predicted, “That gives us Democrats the president next term.”
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AND IT MIGHT GIVE THEM CONGRESS IN THE ELECTIONS JUST SIX months away. Republican leaders in the Capitol scurried to limit the damage the depression was inflicting on the party. Some approached the president to probe his thinking more deeply on the currency question. If he wouldn’t accept the inflation bill, what would he accept?
Grant answered in a memorandum he let some congressional allies show around. “I believe it to be the duty of the government to return to a specie basis at the earliest practicable day, not only to carry out legislative and party pledges but also as a necessary step to secure permanent national prosperity,” he said. “I believe further that the time has come when this can be accomplished with less embarrassment to every branch of industry, the country over, than at any future time if patchwork is resorted to to stimulate apparent prosperity and speculation on other basis than that of coin, the recognized medium of exchange the world over.” The principle was the essential thing; details were less important. “The method to accomplish this return to a specie basis of exchange is not so important as that a plan shall be devised, the day fixed when currency shall be convertible into coin, at par, and the plan adopted adhered to.” Grant proposed a timetable. The legal tender clauses of existing statutes should be modified so that all contracts written after July 1, 1875, would specify their sums in gold dollars only. The effect would be to accustom Americans to think in terms of gold. “Instead of calling the paper dollar a dollar and quoting gold at so much premium, we would see the paper at so much discount. This alone would aid materially in bringing the two currencies near to a par with each other.” The next step would be for Congress to declare that on July 1, 1876, paper dollars would be redeemable in coin on presentation at any regional office of the federal Treasury. The paper dollars so redeemed would be destroyed and thus eliminated from circulation forever. To fund the redemption Congress should issue gold bonds. Su
ch an arrangement as he proposed, Grant said, “would secure a return to sound financial principles in two years and would not, in my judgment, work as much injustice to the debtor class as they are likely to be subjected to by a delay of the day of final settlement.” Glancing back to the Civil War origin of America’s legal tender, he added, “It may be recollected too that this class has had its day, in a larger degree, on the adoption of our present financial system.”
Grant simultaneously recommended that paper currency in denominations of less than ten dollars be gradually withdrawn from circulation. “The benefit of this would be to strengthen the country in time of depression, whether caused by war, failure of crops or any other cause, by retaining in the hands of the people a large amount of the precious metals. All smaller transactions would be conducted in coin.” At present too much coin accumulated in bank vaults and not enough stayed with ordinary people, who of necessity circulated whatever form of money they received for their labors and produce. Grant suggested that had this measure been in effect in recent years, much of the current distress could have been avoided. “Indeed I very much question whether it would have been necessary to depart far from a specie basis during the trying times which begat the legal tender act if the country had adopted the theory of no-small-bills as early as 1850.”
Grant’s memorandum circulated on Capitol Hill before finding its way into the press. The advocates of hard money applauded, but the Republican leaders in Congress, looking to the elections, put the president off. The speaker of the House, James Blaine, visited Hamilton Fish. “He speaks of the President’s memorandum on finance, exhibiting considerable feeling, saying that if carried out it would be ruinous to the Republican party and the country,” Fish recorded. “He said he should be inclined to adopt the words of Mr. Webster and say ‘that when his leader turned a sharp corner into a dark lane and changed the light which he had been accustomed to follow, that it could not be expected that they would keep company longer.’ ”