Ulysses S. Grant

C

Monetary Policy

Grant's administration also faced financial problems. Farmers and laborers, who were often debtors, wanted to keep the paper money called greenbacks in circulation. Greenbacks, which had been issued to finance the Civil War, were soft money: there was no reserve of gold kept in the Treasury to guarantee payment if a holder wanted to turn them in for coin. Thus they varied in value in relation to gold, and a $1 greenback was usually worth less than a dollar gold piece. At one point it took $2.85 in greenbacks to buy a $1 gold piece. The government also authorized the issuance of national bank notes, which were backed by government bonds and thus did not vary in value. They were called hard money. Creditors did not want to be repaid in money that was not worth its face value, but to debtors this was an advantage.

The Democratic Party appealed to debtors in the 1868 campaign by promising to keep the greenbacks in circulation to pay off the government bonds issued during the war. The Republicans believed in hard money, and Grant held firmly to this position. In his inaugural address in 1869, he insisted that the war bond debt be paid in gold. Later that year he signed the Public Credit Act, pledging payment in gold or coin to holders of government bonds. However, Grant knew little about finance and was inconsistent in his monetary policy. He did nothing about the greenbacks, and they remained a threat to fiscal stability. The U.S. Treasury had to intervene frequently in the money market, by buying or selling gold or federal securities, because every serious political change or international disturbance threatened to destroy the delicate balance between greenbacks and gold.

D

Black Friday

In the first year of Grant's presidency, the constant variation in the value of greenbacks against the gold dollar enabled two speculators, Jay Gould and James Fisk, to create a major financial crisis. They set out to corner the market for gold by buying a significant part of the gold offered for sale on the New York City Gold Exchange, where most gold in the country was bought and sold. The government could foil their scheme by putting its gold reserves on the market, but Gould and Fisk spread the rumor that the president had agreed not to do so.

Fisk and Gould then bought gold on the New York exchange until, in a few days, the price shot up by 20 percent. Many businessmen who were locked into contracts to buy gold with greenbacks—which had not increased in value—were ruined. Prices of many commodities became unstable; foreign trade, which was conducted in gold, was paralyzed; and the stock market came to a halt on the day known as Black Friday, September 24, 1869. Grant and his able secretary of the treasury, George S. Boutwell, who had replaced Stewart, narrowly saved the market from collapse by releasing $4 million in government gold for sale before the end of the trading day. This action broke the corner; but then the gold price sank even faster than it had risen, ruining other businessmen who had invested in the rising market. Economic activity was depressed for weeks afterward. The president and Boutwell were widely blamed for the economic crisis, even though they had not known of the scheme, had acted promptly to stop it, and had fired all government officials involved.

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E

Foreign Policy

Only in the conduct of foreign affairs, where Grant largely followed the advice of Hamilton Fish, was his administration at all remarkable. The long controversy with Britain over payment for damages inflicted during the Civil War by the Alabama and other British-built Confederate ships was submitted for international arbitration in 1871. Its settlement the following year greatly strengthened the relationship between the United States and Britain.

F

Election of 1872

Toward the end of his first administration, Grant's Southern policy, coupled with public scandals involving his political advisers and appointees, led to widespread public disapproval. The Congressional and state elections of 1870 resulted in a setback for Grant's administration. By 1872 a formidable reformist wave was beginning to roll across the nation. The Republicans nominated Grant for reelection, but a new, anti-Grant Liberal Republican Party combined with the Democrats to nominate Horace Greeley, publisher of the New York Tribune, to run against him.

Although Grant was assailed for his maladministration in both the Liberal Republican and Democratic platforms, he was overwhelmingly reelected. He carried every Northern state and most of the South, receiving 3,596,745 votes to Greeley's 2,843,446. Greeley died less than one month after the election, and when the electors met they spread his electoral votes among several other candidates. The final vote of the electors was Grant, 286; Thomas A. Hendricks of Indiana, 42; Benjamin Gratz Brown of Missouri, 18; Charles J. Jenkins of Georgia, 2; David Davis of Illinois, 1. Seventeen electors did not vote.

Grant had made an even better showing in reelection than in 1868. This was important to him. He had not cared intensely about his first election, but about 1872, he later said, “My reelection was a great gratification because it showed me how the country felt.”

VI

Second Term as President

Grant's second administration was even less successful than the first. A series of scandals in government was unearthed. Although Grant was implicated in none of them, the improprieties committed by officials in his government and by members of his party in Congress reflected on the president. His continued loyalty to friends whose abuse of public office was well known did not add to Grant's prestige.

A congressional investigation of the Crédit Mobilier swindle, involving stockholders in the Union Pacific Railroad, was completed in 1873. It was found that the Crédit Mobilier company, formed to do the Union Pacific's construction work, had overcharged millions of dollars on government contracts. Furthermore, one of its principal stockholders, Congressman Oakes Ames of Massachusetts, had tried to buy off the investigation by distributing stock among his colleagues. Those implicated in the scandal included Vice President Colfax and several Republican senators and representatives, including a future president of the United States, James A. Garfield (1881).

Also in 1873, Grant's secretary of the treasury, William A. Richardson, came under fire for an irregular tax collection scheme, known as the Sanborn Contracts. In May 1874 the House Ways and Means Committee declared that Richardson deserved “severe condemnation.” The committee privately urged Grant to remove Richardson. The president complied but made Richardson a U.S. Court of Claims judge.

Richardson's successor, Benjamin H. Bristow, broke up the notorious Whiskey Ring, a conspiracy among Internal Revenue Service officials to defraud the government of liquor taxes. Among the more than 200 people involved was Orville E. Babcock, Grant's private secretary and formerly his aide-de-camp during the Civil War. When Babcock was indicted in December 1875 for conspiracy to defraud the revenue, Grant volunteered a deposition that he knew of nothing suggesting Babcock's guilt and that Babcock was innocent. Grant's intercession saved Babcock from conviction and allowed him to resume his secretarial duties for a time.

Discoveries of other frauds in the U.S. Treasury and in the Indian Service came to light as Grant's second administration drew to a close. However, the president remained loyal to his friends, almost regardless of what their conduct had been or of how seriously they had damaged his reputation.

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