Sunday, August 25, 2013

82. Who makes money when America goes to war? New York City, 1861-1865.

     When the Civil War broke out in April 1861, Southerners, convinced that "cotton is king," predicted that New York City, deprived of cotton and other Southern products, would soon see grass growing in its streets.  But the city saw no more grass in its streets than usual -- which meant next to none --  for the government now found itself suddenly in need of every kind of supplies and rushed to obtain them.  Since Washington, Baltimore, and even Philadelphia were thought to be too close to the theater of war, New York was where, in the East, contracts were offered for, among other things, Springfield and Enfield rifles, cannon, bayonets, boots and shoes, uniforms, wagons, mess pork, kiln-dried cornmeal, prime Rio coffee, rice in stout oak barrels, and quantities of "good hard soap."  Needless to say, patriotic New Yorkers rushed to oblige.  "You will rake in hugely," one patriot had written another at the outbreak of war, and events proved him outrageously right.  Of the three categories of New Yorkers who profited from the war -- contractors, speculators, and bounty brokers -- let's have a look first at the contractors.


     What might an enterprising commission broker with the right contacts manage to accomplish?  Quite a bit, as for instance five thousand barrels of not quite prime mess pork delivered to the commissary general at a thumping price in regulation solid oak casks bound each with two iron hoops; a subcontract, bought from the brother-in-law of a captain, for six thousand overcoats of wool that he satisfied with the best cheap shoddy on the market, which, dyed sky-blue, might – or might not – turn spongy if exposed to heavy rain; and twelve thousand pasteboard and shingle-stiffened boots passed with a wink by the inspector – a smooth deal topped off afterward by a toast at the Astor House bar to the “old flag, the true flag, the red, white, and blue flag” by himself and the inspector, clinking glasses with the assistant quartermaster general.  And if the boots did fall apart in the rain, he had a ready explanation to any investigating committee: "Gents, those articles were meant for the cavalry!"

      And how might a contractor accomplish all this?  Not just by scanning the assistant quartermaster general's announcements in the papers.  It was just as useful to mingle with contractors and subcontractors, commissary agents and quartermasters, and brokers of every breed and spiel at the Astor House Hotel on busy Broadway, where rumors circulated and deals were hatched over a brandy and soda or a gin sling in a spacious but crowded barroom with a long curving bar backed by huge mirrors in thick gilt frames.   

     That all was not well, that outrageous prices were being paid, and often for substandard goods, soon became apparent.  The young J.P. Morgan loaned money to a dealer who bought defective carbines from a government arsenal for $3.50 each and then resold them to the government for $22.  Morgan has been denounced for this deal ever since, but he may have been only a creditor.  Steamboat operator Daniel Drew chartered two almost obsolete steamboats to the government for seven hundred and eight hundred dollars a day, and Commodore Vanderbilt, never to be outdone by others, chartered four steamships to the government at the astonishing rate of two thousand dollars a day.  Meanwhile it was rumored that Mayor George Opdyke had made a fortune through secret partnerships with contractors.  The influential politician Thurlow Weed accused him of making fraudulent claims against the government, prompting Opdyke to sue him, but the mayor failed to convince the jury.  Meanwhile Weed himself was lining his pockets with commissions for letting out government contracts.  To sensitive nostrils the aroma of corruption was rank.  

     Subsequent Congressional investigations would uncover some interesting facts: supplies furnished by a supplier without prices being predetermined and without competition, the "fair mercantile profit" allowed by the quartermaster being 40 percent; contractors realizing huge profits by subletting contracts to other parties who assumed all the responsibilities and risks, yet themselves realized profits matching those of the original contractors; an alleged government agent who purchased a buggy and horses, then took them for himself and disappeared without paying the seller; an inspector who reported rejecting 500 or 600 felt overcoats out of 6,000 because they were too thin; and vessels chartered without inspection of their boilers, the government relying completely on the seller's word for their condition.  Yes, someone -- a lot of someones -- were raking in hugely.

File:Carriage Central Park.jpg
A carriage today in Central Park.  Not too different from the carriages back then.
Rainer Halama

     And they were spending hugely.  Parading in shiny equipages on the Drive in the new Central Park, with uniformed coachmen, and liveried footmen sitting erect in rumble seats, were what came to be known as the Shoddy Aristocracy, the women in brocaded silks and thousand-dollar camel's-hair shawls, and bonnets with frills and lace and ruffles and maybe a stuffed hummingbird on top, while their silk-hatted escorts sported velvet coats, gold chains, breast pins, and gem-studded rings.  And at their balls and receptions the hostesses greeted their multitudes of guests, some of whom they barely knew, in low-cut dresses edged with fluted ruffles, smiling under top-heavy tiaras, or towering pyramids or waterfalls of gold-powdered curls, often augmented with imported horsehair and adorned with amber or pearl or jet or garnet beads, or small seashells, or gilt coins jingling in flashy profusion.    The simplicity of the old Knickerbocker society of years past was gone forever; Shoddy reigned supreme.


     "The battle of Bull Run," said a financier, "makes the fortune of every man on Wall Street who is not a natural idiot."  He knew that the North's initial defeat meant a long war was inevitable, with vast government expenditures, a flood of paper money, and rising prices for all goods generally.  He at once bought 75,000 shares of stock, since stock prices too must go up.

     The gentleman was right.  As government contracts proliferated, railroads saw their profits soar, businesses paid off debt, provisioners were swamped with orders, industry thrived, and the stock market surged.  War, it turned out, was good, very good, for business and certainly for the stock market.  By 1863 the public had flocked to Wall Street and everyone was up to their ears in speculation: merchants and their pallid clerks, feisty steamboat skippers, waiters, dowagers reclining on cushions in carriages at their broker's door while their servants fetched quotations, and clergymen who in one quick scoop in the market could top their salary for a year.  There were markets also for mining stocks and petroleum shares, an Open Board providing continuous daytime trading of stocks, countless minor fly-by-night markets, and a number of evening exchanges, so that New York, alone of all the cities in the world, had facilities for trading stocks twenty-four hours a day.
     The prospects and prices of stocks were talked of in clubs, on the street, in theaters, and in the most respectable of brownstone parlors.  Brokers reaped huge profits, their members lost their voices on the trading floor, and their clerks toiled at their desks until late at night.  Successful speculators in rich silk vests dined regularly at Delmonico's on partridge stuffed with truffles; but since what the market giveth, the market taketh away, the same parties might be seen a few weeks later shuffling in seedy clothes, breakfasting on hash and coffee, or panhandling: "dead ducks" in the parlance of the Street.  But for every warrior laid low on the Wall Street battlefield, a dozen fresh recruits took his place.

File:"View in Wall Street from Corner of Broad." New York - NARA - 513348.jpg
Wall Street in the 1860s, looking east from the corner of Broad.
The temple-like building on the left is the Custom House, now Federal Hall.

     But the rage for speculation involved much more than stocks.  There was a Cotton Exchange and a Corn Exchange, and speculation in wool, dry goods, grain, lumber, sugar, coal, pork, and molasses.  But nothing matched the speculation in gold.  At the outbreak of hostilities gold went into hiding as the public, beset with uncertainties, hoarded it.  Then, in 1862, the government started issuing greenbacks, paper money unsecured by gold and backed only by the credit of the government.  Wall Street took note: gold was esteemed but in hiding, whereas greenbacks were plentiful but risky, good only if the North won the war, since otherwise they might be repudiated and become worthless.  So what should a patriotic Wall Streeter do?  Speculate!  With every Union defeat the price of gold in greenbacks would go up, and with every Union victory it would plunge, dancing in savage counterpoint to the fortunes of the nation.  Gold!  The very thought of it, the very sound of the word made the blood race, the brain quicken.  Buy gold if the North is winning, but dump it if the North is losing.  Get the news before anyone else, and trade, trade, trade!

A cartoon attacking the Lincoln administration, with the Secretary of the Treasury
in shirt sleeves on the left, cranking a machine to turn out greenbacks.  Lincoln
is seated in the center rear, remarking, "All this reminds me of a capital joke."

     And trade they did, feverishly.  Every bulletin from the battlefields sent gold up or down, and fortunes once amassed over years or decades could now be made -- or lost -- in months, weeks, or days, even minutes.  "Gold is going up!" preached the brokers.  "Fortunes can be made!"  To get word first of a battle, big operators bribed telegraph men and secretaries to the great in Washington, but even small traders saw their profits grow.  On the street stable boys sported diamonds, and former coal shovelers were seen driving the fanciest of rigs.  How could one not buy gold?  It was the chance of a lifetime, an opportunity to be seized at once, or missed and regretted for the rest of your life.  Driven from the stock exchange, which lacked facilities for their expanding operation, the gold traders took refuge in an ill-lit den called the Coal Hole, then in Gilpin's News Room nearby, and finally in a home of their own, the Gold Room on William Street, where traders shrieked and traded in a frenzy surpassing anything seen before on Wall Street.  At news of a Northern victory, exultant bears sang "John Brown's Body"; at news of a defeat, bulls whistled "Dixie" and whooped.  Gold surged to 220, 250; brokers predicted 300.  While multitudes fought and died on the battlefield, in New York City greenhorns from the provinces and veteran Wall Street traders were locked together in the perfumed thorny garden that was gold.  It hit 285.

     "What do you think of those fellows on Wall Street who are gambling in gold at such a time as this?" the President asked Governor Curtin of Pennsylvania in April 1864.  "They are a set of sharks," replied Curtin.  "For my part," said Lincoln, banging his clenched fist on a table, "I wish every one of them had his devilish head shot off!"

     All through 1864 the fever continued.  Rubbing elbows on Wall and William Streets were displaced Southerners, quirky Yankees, and Westerners in broad-brimmed hats, their moods and fortunes rhythmed by the dance of gold.  With Grant hammering at the gates of Richmond, the big operators had  agents on either side of the lines; for them even sooner than for Lincoln in the White House, couriers galloped, telegraphs clicked.  Atlanta fell, Sherman was marching to the sea.  Gold plunged, rallied, plunged.

     On William Street that winter a mass of traders huddled under black umbrellas, ankle-deep in slush, collars up, scarved against the whip of the wind, their eyes riveted on an overhead indicator announcing the latest price of gold.  Inside the Gold Room, brokers exhaling winy vapors and tobacco shrieked, jostled, and gesticulated, buying and selling a metal they had never seen, dealing only in certificates and statements of account -- paper, shadows of gold!  An observer might well have called the whole scene insane, even hellish, as demonic faces sang "John Brown's Body" or "Dixie," while onlookers stood on chairs and screamed.

     The madness ended only with the final defeat of the South.  Gold never got to 300; it plunged.  A few were rich, many were poor.  The public deserted Wall Street.  The Gold Room experienced -- for a while -- an unearthly calm.  It was over.

Bounty brokers

     The bounty broker was a new species of war profiteer who came into existence with the initiation of the draft in 1863.  Any male liable to be drafted could buy an exemption for $300, which meant that from then on it would be a rich man's war but a poor man's fight.  In New York the result was the Draft Riots of July 11, 1863, when for three days angry Irish mobs ruled the streets, burning draft offices and lynching blacks, whom they blamed for the war and the draft.  The riots ended when troops fresh from Gettysburg rushed back to patrol the streets, but the only way the government could get more men for the army was by imposing quotas on each state and county.  To fill these quotas, the federal, state, and local governments began offering bounties for volunteers.  The bounties were for any recruit who presented himself, but brokers began rustling up recruits by offering them a portion of the bounty while keeping the rest for themselves.  Some recruits agreed to the arrangement voluntarily; others did so out of ignorance.

     Who were these bounty brokers?  In New York City, anyone accustomed to providing live bodies to whoever needed them, as for instance boarding house runners paid by a boarding house to grab arriving immigrants off the gangplank and coax, cajole, or drag them to the boarding house, while fighting off rival boarding house runners if need be; some immigrant were all but torn asunder in the process.  Tammany stalwarts also came naturally to such work since, for a remuneration, they had ushered drunks, moochers, almshouse invalids, asylum denizens, and inmates of the county jail to polls on election day.

     Imagine, then, a seasoned bounty broker in 1864 who, with the war still raging and a triple bounty from federal, state, and county governments available, had five recruits in tow: three farm boys green as apples, a broken-down actor too fond of the joy of gladness, and a loony with a torn slouch hat, a week's stubble of beard, and a dirty-sock smell all about him.  (No, I'm not exaggerating; these things really happened.)  The farm boys, whom he or an agent of his had lured off their farms upstate with promises of glory, of being a hero whom their grandkids would one day worship, were no problem, if he could just keep them quiet while he boarded them cheap in the city, waiting for the bounties to go up again; he could always send them to Barnum's Museum to see the hippopotamus or the educated rats.

File:Recruiting in the New York City Hall Park in 1864. Illustration from a sketch by George Law, published in Frank Leslie's - NARA - 535914.tif
Recruiting in City Hall Park, 1864.  Federal, state, and county bounties were all available,
totaling $677, with another $100 for veterans.  Also, $15 in "hand money" for anyone
bringing in a recruit, which explains some of what's going on.

     The other two would be a challenge.  The drunk was an old hand at the game, having enlisted and deserted three times, but he would have to be sobered up and his red nose chalked a bit, with maybe a dash of mint spray in his mouth, and no chance at a swig of the stimulating.  As for the loony, he would need clean togs from a gents' furnishings, a bath and a shave, and a touch of coal tar to darken his gray hair.  Then, if he could disguise his limp and manage to walk a few steps straight, he might squeak by the surgeon, especially if the provost marshal was hard up for recruits, and the surgeon a pal of the broker's, maybe someone he'd liquored with a time or two in the past.

     Not all brokers were as discreet as the one just imagined.  Some of them kidnapped boys, seized unwary immigrants, used force, or befuddled their "recruits" with drink.  Under the influence, many a potential recruit became convinced that he could lick Jeff Davis and Stonewall Jackson combined, then woke up a day later in uniform on an army base, wondering how he ever got there.  Among those accepted with a wink by surgeons, the press reported, were cripples, lunatics, boys of fifteen or sixteen, men over sixty, soldiers discharged for a physical disability, and men with an "incurable disease," probably venereal.  Of the $300 bounty offered by New York County (i.e., New York City), it was estimated that only $100 usually went to the recruit, the broker getting the other $200.  The most enterprising brokers got rich.

     But not all recruits were naive; some enlisted repeatedly, getting the bounty for themselves and then deserting, so they could enlist and get the bounty yet again, a practice known as bounty jumping.  The authorities of course got wise to this and determined to prevent desertion.  A farm boy who enlisted upstate out of patriotism told how he and some eight hundred others were marched through the streets of Albany under strict guard, while onlookers viewed them with disgust and small boys, taking them for bounty jumpers, jeered at them and pelted them with mud balls.  Taken by steamboat to New York, they were marched down Broadway to the Battery, where a steamship awaited them.  When four broke loose and tried to escape, hoping to disappear into the slums of the city, the guards shot all four dead.

     When news came to the city on April 3, 1865, that Richmond had fallen at last with Lee in full retreat, everyone knew the war was almost over.  Immediately lawyers and merchants and clerks poured out of offices to celebrate; flags were flown from public buildings and churches and hotels; cannon boomed; soldiers were surrounded by crowds who thanked them for their service and handed them wads of cash; banks and the Gold Room were deserted; traffic stopped; men estranged for months clasped hands and shared the joy; and Wall Street reverberated with the strains of hymns and patriotic songs.  Only a few held aloof, aware that their best days were over: the bounty brokers, who muttered in their beards, wondering how a patriot now could make an honest living.

War profiteering today

     So who are today's contractors, speculators, and bounty brokers?

     Regarding contractors, one need only google "war profiteering, Iraq" to be inundated with info.  Here are a few salient facts:
  • The giant multinational Halliburton, one of the world's biggest oilfield service companies, billed government agencies for $17.2 billion in war-related revenue from 2003 to 2006 alone.  It didn't hurt its prospects that Dick Cheney, Secretary of War under George H.W. Bush (Papa Bush), then bridged the gap between Bushes by becoming Halliburton's chairman and CEO, and subsequently served as vice president under George W. Bush (Baby Bush) from 2001 to 2008.
  • Veritas Capital Fund, a private equity fund, got $1.44 billion through its DynCorp subsidiary for training Iraqi police forces.  It didn't hurt its prospects that its top honcho, Dwight M. Williams, was a former chief security officer in the Department of Homeland Security, with close ties to a number of defense agencies.
  • Perini Corporation got a $650 million contract, and URS Corporation some $792 million in fees, for environmental cleanup work in Iraq from the government.  It didn't hurt their prospects that the wife of financier Richard Blum, who controls both companies, is Democratic Senator Dianne Feinstein, who serves on the Senate's Military Construction Appropriations Subcommittee.
  • The construction and engineering giant Bechtel got a huge no-bid contract worth $2.4 billion to rebuild Iraqi infrastructure.  Among its accomplishments: shoddy school repairs, and failure to finish a large Basra hospital on time and within budget.  
  • Blackwater, a private security firm, got lucrative government contracts worth millions to guard officials and installations, train Iraq's new army, and otherwise support coalition forces in the country.  Blackwater guards were subsequently involved in a number of random shootings in Baghdad, resulting in the death of Iraqi civilians, and the firm's expulsion from Iraq.  This protean company has now changed its name -- again -- to Academi, and in its new persona hopes to get more work in Iraq.  (Its past names: Blackwater USA, Blackwater Worldwide, Xe Services.  It says something about a company if it feels the need to keep changing its name.)
And so on and so on; the list is endless.  No further comment is needed.

File:Richard Cheney 2005 official portrait.jpg
Vice President Cheney, 2003.
A patriot who has lots to smile about.

     As regards speculation, I know of nothing matching the gold speculation of the Civil War, but that may simply reflect my ignorance.  As for bounty brokers, they do not exist now as such, for there is no draft and therefore no compulsion to fill up quotas.  But how about quotas for volunteers?  In Michael Moore's 2004 film Fahrenheit 911 we see two recruiters planning to find volunteers in a shopping mall frequented by the less affluent.  Whether they have quotas is unclear, but their recruiting obviously targets lower-class Americans, leaving those better off untouched, rather like those who in the Civil War could buy immunity from the draft for $300.  As always, a rich man's war but a poor man's fight.  So there is today, after all, a counterpart to the bounty brokers of the Civil War.

The Richness of Summer, the Frightening Intensity of Life

     This summer day is rich and glorious, but the morning was a bad one for the blog.  When I went to my computer, I found that two future posts that I had spent hours on had disappeared without a trace, and I have no idea why.  One of them I have a backup for, but the other, the one on which I had spent the most time, is probably gone forever, and I doubt if I have it in me to try to recompose it.  These recent glitches are so maddening that I’m not sure I can continue the blog.  I’ll consult an Apple genius on Tuesday, but I seriously doubt if the lost posts can be recovered, though the genius, being a genius, can probably suggest some precautions for the future.  Alas, rain is predicted for Tuesday, so even this recourse is in doubt.

     With this in mind, I needed a lift, so after I lunched alone at a favorite Chinese restaurant, I decided to take a walk toward the river.  Crossing Seventh Avenue, I headed west on Perry Street.  The two blocks between Waverly Place and Bleecker are quiet, shady residential blocks with old brick-fronted houses and well-kept brownstones, quite charming.  In front of one were three potted plants with huge leaves, and I stopped to look at them (probably the only passer-by to do so): white leaves with green veins, leaves mixing black and green, and leaves of a rich, deep crimson – beautiful!  Here was life, and only I seemed to be noticing.

     Continuing west toward the river, I encountered throngs of people, on bikes and on foot, out enjoying the day: another intensity of life.  And when I got to the river and started walking along it, the murky gray water was rippled by breeze and flecked with streaks of silver: intensity of life yet again.  And on Pier 45 there was the usual multitude of Sabbath sunbathers, all sexes (yes, more than two, maybe three or four), including a young man with the skimpiest bikini, bejeweled and glinty, and a young woman with the skimpiest bra, likewise bejeweled and glinty: among the sexes, glitter was evenly divided.  And on one side of the pier I knew to look down and see, growing out of cracks in the rotten wood of the old pier, vibrant stalks with stiff green leaves that I can easily identify, even without the flowers, as seaside goldenrod, a late-blooming goldenrod that grows only near the ocean.  So Pier 45 too was throbbing with the intensity of life. 

     But why frightening, you may ask?  Because any intensity becomes, in the end, threatening.  Among the various images of nature that appear on my computer screen are huge flowers in full bloom, filling the entire desktop screen: rich, exuberant vaginal blossoms that threaten to devour the viewer: again, intensity of life.  I’ll let the Freudians analyze this as a personal obsession of mine, but I insist that it applies to us all, that any intensity of life implies destruction and intensity of death, following which life will rise again.  Okay, a cliché, a stereotype.  Can’t help it, that’s what potted plants with huge leaves, and goldenrod sprouting out of rotten wood, and sunbathers basking in the life-giving but lethal sun say to me.  (“Lethal”? you may ask.  Just check with your dermatologist, and maybe a meteorologist as well.)  So once again I celebrate the richness of summer, the frightening intensity of life.  And I hope we all do, each in our own way.

     Coming soon:  Next Wednesday: Diamond Jim and Texas Guinan -- he of the 10,000 sparklers, and she who, jailed for the sixth time when her speakeasy was raided, remarked, "You have a cute little jail."  Plus a glance at Jim's pal Lillian ("Luscious Lillian") Russell, displaying her hourglass figure on a bike.  Next Sunday: The Titan of the Met.  Can you guess who?  Opera buffs will know.  He had his hands full with Maria Callas.  (I don't mean literally!)  In the offing (among other topics): Fifth Avenue and the Mrs. Astor, and the brownstone that was labeled the house of death.  (The perfect note to end on.)

©  2013  Clifford Browder

No comments:

Post a Comment