Wednesday, May 12, 2010

More on Abraham Lincoln



by Rochelle Ascher

During Polk's term, in 1848, there occurred also the hideous
imperialistic war against Mexico. Lincoln, who was one of the
few congressmen with the courage to oppose this very popular
war, was not returned to office, in large part due to his opposition
to the war.
With presidential candidate
Henry Clay defeated for the third time, the Mexican War at its
height, the slavery issue rising, the Sub-Treasury reestablished,
internal improvement bills vetoed, and the Walker Tariff passed,
Whiggery seemed headed for a collapse.
Lincoln's congressional record was clear--support for a protective
tariff, large-scale internal improvements--federally directed
and financed, a Bank of the United States, and free labor against
slave labor. Under Polk, he was unable to implement any of
In the election of 1848, Lincoln again took to the campaign
trail to stump for Zachary Taylor. While a Whig, Taylor was
really a soldier, not a politician. As in the 1840 and 1844
campaigns, the Whigs ran on no policy. Lincoln's platform--his
party had none--was containment of slavery and Whig economics.
With the Whig Party only discussing Taylor's military exploits,
Lincoln alone campaigned for Taylor on the question of the necessary
reestablishment of the National Bank.
Taylor, upon taking office, informed Congress he would favorably
receive their bill designed to protect American manufacturing
and commerce, and all internal improvements bills.

Death of Zachary Taylor

As a result of the annexation of Texas, and the Mexican War,
the United States had taken territory which comprised the present
states of Utah, Nevada, New Mexico, California, part of Colorado
and Wyoming, and most of Arizona. There was widespread anxiety
concerning the disposition of this territory: What states would
be formed out of it? Would they be slave or free?
The secessionists in Mississippi (allied with their counterparts
in South Carolina) were headed up by John
A. Quitman, one of the leading members of the Southern Jurisdiction
of the Scottish Rite Freemasons.
In October 1849, Quitman's Mississippi secessionists convened
a strategy session in Natchez with representatives from throughout
the South, and a call was issued to all southern states to send
delegates to a convention on June 3 of the following year. In
January 1850, Quitman was elected governor of Mississippi. In
that office, as leader of the extremists in the South, Quitman
was openly proposing the breakup of the Union, and President
Taylor was presented with a deepening national crisis. At the
same time, Quitman was arranging and financing the invasion
of Cuba by mercenary troops. The conquest of Cuba was seen as
a necessary step for the expansion of slavery.
Seeking to defuse the crisis, Henry Clay constructed a congressional
compromise over the disposition of the new western territories,
similar to the Missouri Compromise he had arranged in 1820.
President Taylor took a different, complementary approach to
the problem. He sent his own agents into California and New
Mexico and arranged for those territories to request that Congress
admit them to the Union as free states. While Texas leaders
were claiming part of New Mexico, and there were threats of
invasion across the desert from Texas into New Mexico, Taylor
pledged that he would uphold the law and the Constitution at
all costs.
On July 3, John Quitman sent a telegram to Taylor saying that
he would personally be leading an anti-federal army of several
thousand troops from Texas into New Mexico.
As Anton Chaitkin recounts in his book {Treason in America,}
President Taylor that same day announced: ``I told them ...
that if it becomes necessary I will take command of the army
myself to enforce the laws. And I said that if you men are
taken in rebellion against the Union, I will hang you with less
reluctance than I hanged the spies and deserters in Mexico.''
The next day, July 4, 1850, Taylor had on his desk a half-finished
message declaring that he would never permit Texas to seize
any part of New Mexico's territory. The President appeared that
afternoon at an Independence Day rally, at which the audience
was exhorted to rally to the Union.
That evening the President ``fell ill,'' vomiting up a mass
of blackish material. He died July 9. Death was officially attributed
to his having consumed too-cold milk and too many cherries.
With the second death of a Whig President due to ``stomach distress''
and with a weak Vice President, Millard Fillmore, occupying
the White House, the Freemasonic secessionists moved openly
to seize power in the United States.

Whig Collapse

Following Taylor's death, Abraham Lincoln left politics and
spent six years (1849-54) mastering American System economics,
especially studying the works of Henry C. Carey.
In 1852, Henry Clay died, and for all practical purposes the
Whig Party died with him. The Whigs nominated Winfield Scott
for President, but it was a rearguard action. As an elector,
Lincoln did make speeches on behalf of Scott on the tariff and
internal improvements, but he knew that neither victory at the
polls, nor the triumph of Whig economics were possible. Scott
was defeated by a treasonous combination of southern planters
and Cotton Whigs (northern textile manufacturers allied with
them). With the election of Franklin Pierce, followed by James
Buchanan, the counterrevolution against the American System
began in earnest. Pierce's cabinet included Secretary of War
Jefferson Davis, soon to become President of the Confederacy,
and Rothschild agent and head of the Democratic Party August
The Scottish Rite Freemasons set
up headquarters throughout the North. They were joined by another
Freemasonic secret organization established in 1854 in Cincinnati--the
Knights of the Golden Circle. Between 1855 and 1860, the Knights
trained and armed 100,000 men in Texas, Louisiana, Mississippi,
Alabama, Virginia, and Maryland, for insurrection against the
government. The Knights of the Golden Circle was the military
organization of what was to become the Confederate States of
The first order of business of the treasonous Pierce administration
was the introduction by Sen. Stephen Douglas in January 1854
of a bill to organize the territories of Kansas and Nebraska.
To get southern support for the bill, Douglas had written a
provision to allow the settlers to decide for themselves whether
to seek admission to the Union as slave states or free.
This provision struck down the Missouri Compromise of 1820.
(The Missouri Compromise had allowed Missouri to enter as a
slave state, thus appeasing the slave powers, while stipulating
that slavery would never be permitted north of 36 degrees 30
minutes North latitude. The Clay Missouri Compromise thereby
preserved the clear intention of the Founding Fathers, as Lincoln
said, ``to set slavery in the course of ultimate extinction.'')
With Douglas's new provision on Kansas and Nebraska, the nation
was plunged into controversy. Slaveholders were determined that
Kansas should enter slave; the majority of the North, free.
``Emigrant Associations'' were organized by both sides to flood
Kansas with settlers in an effort to determine the outcome of
any election. When it became apparent that anti-slavery forces
would win by this means, slave owners organized armed bands
in Missouri, known as Border Ruffians, to sweep into Kansas,
murdering and terrorizing anti-slavery leaders, preventing people
from voting unless they professed support for slavery. A pro-slavery
legislature was elected in the middle of this terror, which
made it a crime, punishable by death, to inform blacks of their
Pro- and anti-slave agitators poured into what became known
as ``Bloody Kansas.'' One year after the 1854 Kansas-Nebraska
Act, the territory had two legislatures and two governors; one
pro-slavery and one against.

Lincoln Returns

It was the passage of the Kansas-Nebraska Act that brought Lincoln
back into political action--as it did a whole group committed
to the American System. Lincoln was outraged by Douglas's unleashing
of this evil. He returned from his six-year political retirement
to do battle with Douglas at the Illinois State Fair in October
of 1854. Lincoln thundered that the Kansas-Nebraska bill was
``wrong in its direct effect, letting slavery into Kansas and
Nebraska, and wrong in its prospective principle, allowing it
to spread to every other part of the wide world where men can
be found inclined to take it. This declared indifference, but
as I must think, covert real zeal for the spread of slavery,
I cannot but hate. I hate it because of the monstrous injustice
of slavery itself. I hate it because it deprives our republican
example of its just influence in the world; enables the enemies
of free institutions with plausibility to taunt us as hypocrites;
causes the real friends of freedom to doubt our sincerity; and
especially because it forces so many men among ourselves into
an open war with the very fundamental principles of civil liberty,
criticizing the Declaration of Independence, and insisting that
there is no right principle of action but self-interest.'' [Lincoln,
{Collected Works.}]
That same year, Lincoln decided to seek election to the U.S.
Senate (at that time in Illinois, U.S. Senators were selected
by the state Senate). When it became clear that he would not
win, on the tenth ballot he called on his supporters to support
Lyman Trumbull, a Democrat who opposed the Kansas-Nebraska Act,
to prevent pro-slavery Illinois Governor Joel Matteson from
being elected.
As much as he wished to be elected, Lincoln considered it more
important that the cause prevail, so he sacrificed his own ambition
to give the North a Free-Soil, anti-Nebraska Act voice in the
U.S. Senate, where it was most needed.
The Kansas-Nebraska Act, by guaranteeing a massive expansion
of slavery, sparked what can only be described as a mass strike
movement which gave birth to the Republican Party.
The conflict continued to rise. In a letter to Joshua F. Speed
dated August 24, 1855, Lincoln wrote: ``[A]bout the Nebraska
law. I look upon that enactment not as a {law,} but as {violence}
from the beginning. It was conceived in violence, passed in
violence, is maintained in violence, and is being executed in
violence. I say it was {conceived} in violence, because the
destruction of the Missouri Compromise, under the circumstances,
was nothing less than violence. It was {passed} in violence,
because it could not have passed at all but for the votes of
many members, in violent disregard of the known will of their
constituents. It is {maintained} in violence because the elections
since, clearly demand its repeal, and this demand is openly
disregarded. {You} say men ought to be hung for the way they
are executing that law; and {I} say the way it is being executed
is quite as good as any of its antecedents. It is being executed
in the precise way in which it was intended from the first;
else why does no Nebraska man express astonishment or condemnation?
..'' [Lincoln, {Collected Works.}]
By early 1856, Lincoln was ready to break with the Whigs and
join the new party, actually writing most of the first Illinois
Republican platform. The difficult task was to unify the new
party, since while all agreed on stopping the spread of slavery,
many ``Republicans'' had been previously bitter political rivals.
At the first statewide Republican convention in Bloomington
in May of 1856, Lincoln gave a speech which brought the crowd
to their feet. He thundered as he hurled denunciations upon
the slave power. ``Kansas shall be free,'' cried Lincoln, and
the crowd, many already standing on their chairs, began cheering,
stamping, and weeping. Reporters assigned to cover the speech
were swept away by the wave of emotion, and dropped their pencils
as they joined with the audience in wild applause.
Though no newspaper accounts of Lincoln's speech at the Bloomington
convention appeared--it came to be called Lincoln's ``Lost Speech''--word
of the effect it had in uniting the audience in purpose and
resolve, spread rapidly throughout the national organization
of the Republican Party. At the national convention in Philadelphia
three weeks later, Lincoln's name was the second proposed for
vice president, and he received 110 votes on the first ballot.
In 1856, the Republican Party swept the congressional elections--amazingly,
given how recently it had been formed. The Republican presidential
candidate, John C. Fremont, narrowly lost to the Democrat and
Freemasonic British agent James Buchanan.
The new Republican Party, while anti-slavery, was split in two.
One group was anti-slavery, but still rabidly supported British
free trade; this included William Seward and William Cullen
Bryant. The other faction, headed by Lincoln and Henry Carey,
was also anti-slavery--but understood that slavery and free
trade belonged to a single evil system which had to be defeated.
Lincoln and Carey's task was to establish the hegemony of the
American System Whig policy in the new party.

Britain's Southern Strategy

As emphasized at the outset, the state of the nation at the
time made Whig control of the Republican Party a matter of urgency.
The Democratic Party was run by Rothschild agent August Belmont,
and the South, beginning with the administration of President
James Buchanan, was preparing a war of secession through appropriation
of the nation's military arsenals.
Southern policy was the very antithesis of the American System.
As both Lincoln and Carey insisted, slavery not only degraded
the slave, but degraded the productive and mental power of all
American labor.
It was precisely on this point that Lincoln distinguished himself
as a future presidential candidate in his 1858 senatorial contest
with Stephen Douglas, the intellectual author of the Kansas-Nebraska
Act (1854) and the Dred Scott Decision. (The latter, issued
by the Supreme Court in 1857, allowed the southern slaveowner
to cross state lines to reclaim his ``property''--the slave.)
Lincoln's unanimous nomination by the Illinois Republicans was
the first nomination ever made by a {political party} for a
U.S. Senate seat.
Lincoln lost the Senate seat, but his debates with Stephen Douglas
were in large part responsible for his winning the Republican
nomination for President in 1860. To understand the quality
of leadership represented by Abraham Lincoln, I quote from two
of his most powerful speeches:
``These by their representatives in old Independence Hall said
to the whole race of men: `We hold these truths to be self-evident:
that all men are created equal; that they are endowed by their
Creator with certain inalienable rights; that among them are
life, liberty, and the pursuit of happiness.' This was their
majestic interpretation of the economy of the universe. This
was their lofty, and wise, and noble, understanding of the justice
of the Creator to his creatures. Yes, gentleman, to all his
creatures; to the whole great family of men. In their enlightened
belief, nothing stamped with the divine image and likeness was
sent into the world to be trodden on and degraded and imbruted
by its fellows. They grasped not only the whole race of men,
then living, but they reached forward and seized upon the farthest
posterity. They erected a beacon to guide their children, and
their children's children, and the countless myriads who should
inhabit the earth in other ages. Wise statesmen as they were,
they knew the tendency of prosperity to breed tyrants, and so
they established these great self-evident truths, that when,
in the distant future, some man, some faction, some interest,
should set up the doctrine that none but rich men, none but
white men, or none but Anglo-Saxon white men were entitled to
life, liberty and the pursuit of happiness, their posterity
might look up again to the Declaration of Independence and take
courage to renew the battle which their fathers began, so that
truth and justice and mercy and all the humane and Christian
virtues might not be extinguished from the land; so that no
man hereafter would dare to limit and circumscribe the great
principles on which the temple of Liberty was being built.''
And he continues with this: ``Now, my countrymen, if you have
been taught doctrines conflicting with the great landmarks of
the Declaration of Independence; if you have listened to suggestions
which would take away from its grandeur and mutilate the fair
symmetry of its proportions; if you are inclined to believe
that all men are not created equal in those inalienable rights
enumerated by our chartered liberty: let me entreat you to come
back. Return to the fountain whose waters spring close by the
blood of the Revolution.''
And then he ends: ``Think nothing of me; take no
thought of the political fate of any man whomsoever, but come
back to the truths that are in the Declaration of Independence.
You may do anything with me you choose, if you will but heed
these sacred principles. You may not only defeat me for the
Senate, but you may take me and put me to death.... But do not
destroy that immortal emblem of humanity--the Declaration of
American Independence.'' [Lincoln, {Collected Works.}]
A second speech during the 1858 campaign makes clear the universal
republican principle involved in Lincoln's opposition to slavery:
``That is the issue that will continue in this country when
these poor tongues of Judge Douglas and myself shall be silent.
It is the eternal struggle between these two principles--right
and wrong--throughout the world. They are two principles that
have stood face to face from the beginning of time; and will
ever continue to struggle. The one is the common right of humanity
and the other the divine right of kings. It is the same principle
in whatever shape it develops itself. It is the same spirit
that says `You work and toil and earn bread and I'll eat it.'
No matter in what shape it comes, whether from the mouth of
a king who seeks to bestride the people of his own nation, and
live by the fruit of their labor, or from one race of men as
an apology for enslaving another race, it is the same tyrannical
principle.'' [Lincoln, {Collected Works.}]

Carey vs. Bryant

Henry Carey perceived that unless the new Republican Party not
only opposed slavery, but adopted the American System, the nation
would be divided into competing sections, all ruled by the British
ideology of free trade. From 1856 until the presidential contest
of 1860, Carey's ``Vespers Circle'' organized industrial associations
in the Midwest, West, and especially the border states, to agitate
for the American System. Much of this agitation was initiated
by the Home Protective Union of Pennsylvania, of which Carey
was president. The Carey circle was determined that William
Seward, a free trader, would not get the Republican presidential
nomination at the 1860 convention. Of primary importance in
the fight which preceded the adoption of a national development
platform at the convention were the open letters from Carey
to the free trade wing of the party and its leader William Cullen
Bryant, entitled {Financial Crises, Their Causes and Effects}.
The policy discussions generated around these open letters,
which were printed in all the protectionist press, shaped the
outcome of the campaign. Newspapers printed the letters to Bryant,
newspapers which reached a million and a half ``protectionist
Carey's four years of organizing paid off. Consideration of
the party platform began on the second day of the Republican
convention. Of the 17 planks adopted, eight dealt with the various
facets of the slavery issue. Plank number 8 stated that ``the
normal condition of all the territory of the United States is
that of freedom.'' The remaining planks dealt with political
economy, reflecting the Hamiltonian orientation of the new party.
The 12th plank called for a {protective tariff} ``to encourage
the development of the industrial interests of the whole country.''
The 15th plank called for ``appropriations by Congress for River
and Harbor improvements of a National Character,'' while the
16th demanded that the federal government ``render immediate
and efficient aid to the construction of a railroad to the Pacific
Lincoln's backers brought 25,000 people to the Chicago convention.
After an incredible fight, and several ballots, Lincoln got
the Republican nomination. After the convention, Carey wrote:
``Happily the Republican, or antislavery party has recently
adopted protection as one of the essential parts of its platform
and has nominated as its candidate for the presidency a man
who has been all his life a protectionist. {He will be elected,
and we shall then have a total change in the policy of the country.
As you shall see}.'' (Emphasis added.)

How Lincoln Financed the War

When Lincoln entered office in March of 1861, civil war was
only weeks away. Five southern states had seceded after the
announcement of his victory; the rest followed in rapid succession.
Seven states had announced the formation of the ``United States
of the Confederacy'' on February 1, 1861. Confederate Vice
President Alexander Stephens stated: ``Our confederacy is founded
upon the great truth that the Negro is not equal to the white
man, that slavery is his natural and normal condition. This,
our new government is the first in the history of the world
based on this great physical and moral truth.''
The United States was bankrupt.
Jackson's dismantling of the National Bank, followed by Polk's
Independent Treasury Act of 1846, and the free trade treason
of Pierce and Buchanan, had destroyed the U.S. economy. Lincoln
had to wage war on two fronts--one against the free traders
of New York and New England, and the other against their surrogates:
the Confederate Army. Both were run out of London.
The fundamental turning point in U.S. history concerning restoration
of the American System and defeating the British plan to balkanize
and forever destroy the United States through its support of
the Confederacy, centered on the issues of how to finance the
government, and the civil war that was facing Lincoln in December
1861. Lincoln's policy was outlined in his December 3 ``Annual
Address to Congress.''
The significance of Lincoln's December 3, 1861 speech to Congress
cannot be overestimated--as the British were well aware. Lincoln
had the opportunity as President to sign into law the economic
policy he had worked for through the better part of his political
Lincoln's plan was presented by Secretary of the Treasury Salmon
Chase and by Lincoln himself. The measures included:
@sb^a nationally regulated private banking system, which would
issue cheap credit to build industry;
@sb^the issuance of government legal tender paper currency (the
@sb^the sale of long-term, low-interest bonds (``5:20s'') to
the general public and to the nationally chartered banks;
@sb^the increase of tariffs until industry was running at full
tilt (the Morrill Tariff);
@sb^government construction of railroads into the middle South,
promoting industrialism over the southern plantation system--what
Carey called a ``peace-winning program'' to industrialize the
The national banks were intended to serve as both investors
in the future wealth of the U.S.A. through the purchase of the
5:20 bonds (5 percent interest, 20 years); through the issuance
of long-term, low-interest loans to manufacturers, and by acting
as a medium for the circulation of currency.
Henry Carey had proposed such a banking system to Henry Clay
years earlier (this would have been under the jurisdiction of
the Bank of the United States).
Carey also sent letters to Lincoln in the fall of 1861 preceding
his historic December message to Congress with a copy of his
pamphlet urging the construction of a North-South railroad to
facilitate future attempts to industrialize the South. Carey
wrote to Lincoln: ``If Henry Clay's tariff views would have
been carried out sooner there would have been no secession because
the southern mineral region would long since have obtained control
of the planting area. Some means must be found to enable these
people of the hill country to profit of our present tariff....''
And later: ``How much more firm and stable might the union have
been, had there developed then a policy which would have filled
the hill country of the South with free white men engaged in
mining coal and ore, making iron and cloth, and building school
houses and churches....'' [W. Allen Salisbury, {The Civil War
and the American System,} New York: University Editions, 1978.]
The December 3 speech by Lincoln was the emphatic declaration
that the American System would be the guiding principle of his
administration. He urged Congress to consider the proposal by
Carey to begin construction of a railroad system into North
Carolina, Kentucky, and Tennessee, to enable development of
mining and other industrial interests in these southern states.
Regarding financial policy Lincoln stated: ``The operations
of the Treasury during the period which has elapsed since your
adjournment have been conducted with signal success. The patriotism
of the people has placed at the disposal of the government the
large means demanded by the public exigencies. Much of the national
loan has been taken by citizens of the industrial classes, whose
confidence in their country's faith, and zeal for their country's
deliverance from present peril have induced them to contribute
to the support of the government the whole of their limited
acquisitions. This fact imposes peculiar obligations to economy
in disbursement and energy in action.'' [Lincoln, {Collected
In the most famous section of his December 3, 1861 address to
Congress, Lincoln spelled out his underlying republican philosophy
and attacked the aristocratic British-allied bankers: ``Labor
is prior to, and independent of, capital. Capital is only the
fruit of labor, and could never have existed if labor had not
first existed. Labor is the superior of capital, and deserves
much the higher consideration. Capital has its rights, which
are as worthy of protection as any other rights. Nor is it denied
that there is, and probably always will be, a relationship between
capital and labor, producing mutual benefits. The error is in
assuming that the whole labor of community exists within that
relation.... In most of the southern States, a majority of the
whole people of all colors are neither slaves nor masters; while
in the northern a large majority are neither hirers nor hired....
``Many independent men everywhere in these States, a few years
back in their lives, were hired laborers. The prudent, penniless
beginner in the world, labors for wages awhile, saves a surplus
in which to buy tools or land for himself; then labors on his
own account another while, and at length hires another new beginner
to help him. This is the just, and generous, and prosperous
system, which opens the way to all--gives hope to all and consequent
energy, and progress, and improvement of condition to all. No
men living are more worthy to be trusted than those who toil
up from poverty--none less inclined to take, or touch, aught
that they have not honestly earned. Let them beware of surrendering
a political power which they already possess, and which, if
surrendered, will surely be used to close the door of advancement
against such as they, and to fix new disabilities and burdens
upon them till all of liberty shall be lost.
``From the first taking of our national census to the last are
seventy years; and we find our population at the end of the
period eight times as great as it was at the beginning. The
increase of those other things which men deem desirable has
been even greater. We thus have at one view, what the popular
principle applied to government, through the machinery of the
states and the Union, has produced in a given time; and also
what, if firmly maintained, it promises for the future. There
are already among us those, who, if the Union is to be preserved,
will live to see it contain two hundred and fifty millions.
The struggle of today, is not altogether for today--it is for
a vast future also....'' [Lincoln, {Collected Works,}]

The Bankers Revolt

When James Gallatin and the Associated Banks got wind of the
new policy (even before Lincoln and Chase addressed Congress)
they went berserk. They wrote Chase demanding the adoption
of a stringent taxation policy.
On December 28, 1861, the New York Associated Banks suspended
specie payments to the government. They suspended payment of
gold owed to their depositors, and stopped transferring to the
government the gold which they had pledged for the purchase
of government bonds. The banks of other cities immediately followed
On January 9, 1862, Gallatin headed a delegation of bankers
which came to Washington to meet with Chase and those congressmen
responsible for steering the Hamiltonian legislation through
Congress. Gallatin presented the bankers' ``alternative'':
@sb^the Treasury must deposit its gold in private banks, and
let those banks pay the government's suppliers with checks,
keeping the gold on deposit for the investment use of the bankers;
@sb^the government should sell high-interest bonds to these
same banks, for them to resell to the European banking syndicate--that
is, allowing them to sell an unlimited number of 7:30 bonds
below par on the London market;
@sb^the government should suspend the ``Sub-Treasury'' law by
which the government gained control over the banks;
@sb^the government should immediately cease the issuance of
government legal tender; and of course,
@sb^a great deal of the war should be financed by a tax on basic
Gallatin was shown the door. One congressman, Samuel Hooper
(R-Mass.), commented that he would adopt no plan which called
for ``government shinning before Wall Street.''
The British, when informed that Congress had dismissed the Gallatin
plan, were furious. William Cullen Bryant, editor of the {New
York Post} and head of the free-trade wing of the Republican
Party, began a series of editorials attacking Lincoln's financial
policy, and {calling for direct taxation of industry to pay
off the war debts.} After Congress passed the legislation, Bryant
met with Lincoln, imploring him to veto the measure. Lincoln
refused. From Britain, August Belmont, then meeting with the
Rothschilds and Thurlow Weed, dispatched protesting messages
to Lincoln.
At a meeting arranged by the Rothschilds with British Prime
Minister Henry Palmerston and Chancellor of the Exchequer William
Gladstone, Belmont was questioned as to the state of the American
nation's defenses and the popular attitude toward Great Britain.
Palmerston had the gall to say, ``We do not like slavery, but
we want cotton and we dislike your Morrill Tariff.''
Belmont wrote to Seward: ``... The English government and people
could not accept the North's justification for fighting the
Confederacy as long as this war is not carried on for the abolition
of slavery in the southern states. Perhaps English sentiment
could use the tonic of a reduction in the objectionable Morrill
tariff? Nothing else could contribute so effectively toward
disproving widespread Southern assertions that the war was merely
a contest between free trade and protection.'' [Salisbury, {The
Civil War and the American System.}]
While Lincoln fought the Eastern bankers over the national banking
system, the Treasury issued several hundreds of millions of
new greenbacks. Philadelphia banker Jay Cooke was employed
by Treasury Secretary Chase to become the sole agent for the
5:20 bonds. Several of Carey's associates, including Stephen
Colwell, William Elder, and Samuel Wilkerson, prepared the prospectus
Cooke utilized to sell the bonds. (Elder and Colwell were later
appointed by Lincoln to posts in the Treasury Department; Elder
as the official Treasury statistician and Colwell as an economist.)
Banker Cooke sold small government bonds to the average citizen:
with 2,500 subagents, Cooke sold over {$1.3 billion worth of
bonds to citizens between 1862 and 1865}. As Lincoln had argued
in his Annual Address of 1861, the U.S. citizenry would finance
the war.
The original bill authorizing the sale of the 5:20 bonds contained
no provision for paying the interest on the bonds in gold. Thus,
if the bill as it was prepared by Thaddeus Stevens's House Ways
and Means Committee had passed the House, it {would have had
the effect of severing the domestic economy of the U.S.A. from
the British early in Lincoln's administration}. The British
pound sterling at the time was the gold-backed world reserve
currency. By controlling the world's gold supply, the British
ruled the world. But before the bill was passed, August Belmont
and James Gallatin worked out a compromise which {allowed the
bonds to be purchased with greenbacks, but their interest was
to be paid in specie}.
This compromise was the first step in pegging the value of the
U.S. greenback to gold, and allowed Belmont and other New York
merchants engaged in the export-import trade to speculate in
gold through the Associated Banks and thus create fluctuations
in the value of greenbacks as measured by the British gold standard.
President Lincoln pushed for his measures of control over the
banking system, using more of his influence over Congress than
on any other issue. The New England and New York bankers instructed
their congressmen to defeat the bill. But Lincoln's prestige
and authority won out--and he signed the National Currency Act
on February 25, 1863 and the National Banking Act on June 3,
To understand the significance of what Lincoln did, we first
have to look at the state of banking in the U.S. on the eve
of the Civil War.
The national banking system was in a state of anarchy. {There
was no national currency.} Each bank issued its own notes. On
January 1, 1862, there were 1,496 banks in the United Sates,
some 7,000 legitimate notes, and some 5,500 counterfeit notes.
Only 253 banks had notes that had escaped alteration or limitation.
There was specie payment, i.e., payment of gold coin by a bank
in exchange for a bank note, but this was suspended by the Associated
Banks at the outbreak of the war.
Banks had no one in the national government to answer to, only
state banking inspectors, who were frequently bribed. Banks
often had little capitalization or reserves, operating often
solely on the ``connections'' of the bank's chairman. Banks
promoting the most outrageous schemes and responsible to no
one were the order of the day. The large private banking houses,
like the House of Morgan, used large credit lines from Europe
to add to the chaos.
{To be continued.}
John Covici

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