A PROFESSIONAL

I hate the image of Lincoln that most Americans hold, the five dollar profile of “The Great Emancipator”. You see, Abraham Lincoln saved the Union and ended slavery not because he was a saint but because he was the greatest politician who has ever occupied the White House. And to those who despise “professional politicians”, my response is they have probably never seen a real professional in action. Such Pols  don’t come along often, but when they do, they make the puny impersonations that must usually suffice seem like clowns.

And Lincoln’s professionalism was best displayed in his handling of the biggest clown in his cabinet, a man you have probably never heard of but whose best work you see every day of your life, Salmon Portland Chase. If Chase had been half as smart as he was ambitious, he would have been President instead of Lincoln. That to his dying day he continued to think he deserved to be so, shows what a clown he was.

Doris Kerns Goodwin has called Lincoln’s cabinet “A Team of Rivals”, but I think of it as obtuse triangle. At the apex was Lincoln. He was the pretty girl at the party. Her suitors didn’t really want to know her, but they all wanted to have her. On the inside track was the brilliant, obsequious William Seward - the Secretary of State who thought of himself as Lincoln’s puppet master. And the right angle was Salmon Chase, Secretary of the Treasury, born to money and brilliant but with a stick up his elementary canal. And on Tuesday, December 16, 1862 the competition between these two paramours of Old Abe came to head in the head of Senator Charles Sumner, the Chairman of the Senate Foreign Relations Committee and leading Senatorial Cassandra.

Sumner had come into procession of a letter written by Seward to the American Ambassador to France. In the letter Seward complained that “…the extreme advocates for African slavery and its most vehement opponents are acting in concert together to precipitate a servile war, the former by making the most desperate attempts to overthrow the federal Union; the latter by demanding an edict of universal emancipation as a lawful and necessary if not, as they say, the only legitimate way of saving the Union.” To Sumner this passage was proof that behind the scenes Seward was not fully comitted to destroying the confederacy. And it confirmed what he already heard from Chase.

Stephen Oates writes in “With Malice Toward None”, “Chase in particular felt snubbed and resentful…what bothered Chase the most was the intimacy between Lincoln and Seward…In talks with his liberal Congressional friends, Chase intimated that Seward was a malignant influence on the President...that it was (Seward) who was responsible for the administration’s bungling. So it was that Seward became a scapegoat for Republican discontent.” (pp 355-356)

Sumner convened what I call "The Magnificent Seven", the Republican Senate caucus. Once the Seward letter was read out loud, Senator Ira Harris from New York recorded the reaction. “Silence ensued for several moments, when (Senator Morton Wilkinson of Minnesota) said that in his opinion the country was ruined and the cause was lost…” Senator William Fessenden from Maine added his two cents worth. He had been told by a member of the cabinet there was “…a secret backstairs influence which often controlled the apparent conclusions of the cabinet itself. Measures must be taken”, Fessenden concluded, “to make the cabinet a unity and to remove from it anyone who does not coincide heartily with our views in relation to the war.”

It is sad to say there was not a first rate mind in that room. There might have been, but arrogance drops a smart person’s I.Q. by forty points or more. It can drop the average mind to zero. Not one of the seven seems to have suspected they were being manipulated by Chase. It is startling to think that men who used an outhouse every day could be that arrogant.

They skewered up their courage for two days before saddeling up and calling on the President at 7 P.M. on Thursday, December 19, 1862. For three hours they harangued poor Mr. Lincoln on the dangers of Seward. Lincoln remained agreeable but noncommittal, and proposed that they meet again the next night. And the amazing thing was that throughout the meeting Lincoln actually had William Seward’s resignation in his coat pocket.

Understand, Seward had not offered his resignation out of nobility. He was a politician.
After hearing of the intentions of the Seven, Seward had a flunky deliver his resignation in private as a demand that Lincoln pick Seward over Chase, the genial New Yorker over the prig from Ohio. Of course, the loss of support from New York would poke a fatal hole in Lincoln’s ship of state. So Seward was not expecting Lincoln to pick the prig for the poke

Lincoln’s problem was he needed the prig. Chase’s handling of the Treasury  was brilliant. He was financing the entire war. It was Chase who had begun issuing official U.S. government backed paper currency, greenbacks. That had not been done since the revolution. It was Chase who had put the words “In God We Trust” on every bill, and its still there today. Of course, Chase had also put his own face on every $1 bill, as a form of political advertising, but Lincoln was willing to tolerate that because Chase was honest, doing a good job, and because without Ohio the Union would lose the war.

The other factor was that the whispers about Seward’s “backstairs influence” were false. By December of 1862 it was dawning on even Seward that Lincoln was thinking for himself. When Lincoln had first heard about the Magnificent Seven’s deliberations (from Senator Preston King, the flunky who had delivered Seward’s resignation), the President had exploded. “Why will men believe a lie, an absurd lie, that could not impose upon a child, and cling to it, and repeat it, and cling to it in defiance of all evidence to the contrary?” Lincoln was beset by arrogance from all sides. It seems that everybody in Washington thought they were smarter than Lincoln. But the skinny lawyer from Illinois was about to prove them all wrong.

At ten the next morning Lincoln told his cabinet about the previous night’s meeting. He made no accusations, but Chase immediately blubbered that this was the first he had heard about any of this matter. The President, who had mentioned no names and made no allegations, asked them all, except Seward, to return that night to meet with the Seven. Seward felt the ground giving way under his feet. He had never expected Lincoln might pick Chase. And Chase was not entirely certain he had.

That night the Seven were now the audience to a bravo performance. Gideon Welles, the Secretary of the Navy (then a cabinet office) recorded the festivities. The President “…spoke of the unity of his Cabinet, and how although they could not be expected to think and speak alike on all subjects, all had acquiesced in measures when once decided. ...Secretary Chase indorsed the President's statement fully and entirely…” There were hours more of talking but right there was the end of Chase's mutiny. As the Magnificent Seven were leaving the White House a stunned Senator Browning of Illinois asked one the leaders of the mutiny how Chase could tell them that the cabinet was harmonious, after all his talk about back stairs influence. The reply was simple and bitter; “He lied.” Chase was done as a malignant political influence in the cabinet. No Republican was going to believe anything he ever said again.

The next morning Lincoln called both Seward and Chase to the White House. Welles was again present, I suspect as a witness for Lincoln. “Chase said he had been painfully affected by the meeting last evening, which was a total surprise to him, and…informed the President he had prepared his resignation…“Where is it?” said the President quickly, his eye lighting up in a moment.

“I brought it with me,” said Chase, taking the paper from his pocket…”Let me have it,” said the President, reaching his long arm and fingers towards Chase, who held on, seemingly reluctant…but the President was eager and…took and hastily opened the letter. “This," said he, looking towards me with a triumphal laugh, “cuts the Gordian knot.” An air of satisfaction spread over his countenance such as I have not seen for some time. “You may go to your Departments,” said the President;…(This) “is all I want…I will detain neither of you longer.”

Both Seward and Chase spent a nervous night, not certain as to what Lincoln would do. They had both just been reminded who was in charge of this game. And it was not until a few days later that Lincoln sent a message to both Chase and Seward, saying that the nation could not afford to lose either of their talents. And it did not. Seward never tried to pull Lincoln's strings again.  Chase petulantly continued to resign annually until late 1864, when Lincoln could finally afford to take him up on the offer. But never a man to waste talent, Lincoln appointed the clown to the Supreme Court, where Chase’s firm stance for racial equality would have the best influence on America’s future.

And that is what it looks like when a professional is on the job.

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A SHORT HISTORY OF FRAUD IN AMERICA

I have come to the conclusion that no one should be handed a masters or Phd in economics from any American University without an intimate understanding of the history of fraud in America. We have buried this knowledge, as if afraid of teaching our best and brightest how to cheat, despite there being clear evidence that no such primer is needed. The energetic, ambitious and greedy have always and always will find a way to cheat the public. And the mantra of deregulation is just more proof that a good education in cheating might at least warn the suckers. For example, did you know that one of the men who did the most to advance the greatest fraud upon the American people in the 19th Century was “Honest” Abe Lincoln?Lincoln’s break through case as a lawyer involved the May 6, 1856 destruction of the “Government Bridge”, the first bridge over the Mississippi River, between Rock Island, Illinois and Davenport, Iowa. Just two weeks after the bridge was opened to trains a steamboat, the “Effie Afton”, ran into one of the bridge piers which caused a fire that destroyed the boat and one span of the bridge. The owners of the Effie sued The Mississippi and Missouri Railroad, which owned the bridge, claiming that bridges were a navigational hazard to commerce.

The mercurial Charles Durant, one of the railroad’s officers, hired Lincoln to defend the bridge. In lieu of payment, Lincoln accepted $3,000 in railroad stock (the equivalent of about $66,000 in 2008). After winning the case (he got a hung jury) Lincoln traveled all the way to Kansas to inspect the intended route of the future transcontinental railroad, which would be built by corporations that Durant ran and manipulated. And then, one of the first bills signed into law by President Lincoln was “The Pacific Railroad Act of 1862” which officially authorized the Central Pacific railroad to build east from California and the Union Pacific (whose vice president was Charles Durant) to build west from Council Bluffs, Iowa, meaning that Lincoln now held some very valuable stock.To pay for the construction the railroad company was re-embursed for the cost of building the rail line. But they made their profit from the grants of land on either side of the rails, which they could then sell. The completed rail line made the land valuable. But the fact that Lincoln traveled all the way to Kansas to see the property with his own eyes showed that he knew enough not to trust the word of Charles Durant. And yet he had just turned this rapacious man loose upon the American taxpayers. Well, Lincoln had an excuse; he was a little distracted by the outbreak of the Civil War.Doctor Charles Durant (Medicine was his formal training), immediately showed his true genius by first buying out Union Pacific stockholder Herbert Hoxie for $10,000. This gave Durant control of the railroad, even though the “Railroad Act” had limited individual stock ownership to avoid just the kind of manipulation Durant had in mind. Then Durant bought stock in competing railroads (on margin, of course), and spread rumors that they would soon be joined to the Union Pacific line, thus giving them a piece of the projected profits from the transcontinental trade. When those stocks then went up, Durant sold them out. Eventually the suckers realized there would be no joining, and the stocks fell to below their original value. With the Civil War raging Durant cleared about $5 million from those scams (the equivalent of about $100 million in 2008). Durant was hot tempered, erratic and prone to manic depression. But his manuvers over the U.P. were just the prologue. Doctor Durant now came up with a great idea he had learned from the French. In early 1864 the good Doctor Durant sent his director of publicity, George Francis Train, on a search for just the right corporate vehicle. Train found it in the Pennsylvania Fiscal Agency, one of the innumerable stock schemes chartered by the states to fund "The American people’s railroad to the Western Sea.” None of these shell companies ever went anywhere, but this one still had an effective charter and it was cheap. Train bought the company and renamed it Credit Mobilier. Then he sold shares in the new company for nominal amounts (often on credit) to the principle stockholders of the Union Pacific Railroad - the majority going, of course, to Doctor Durant.

As the final act the Union Pacific signed an exclusive “no bid” contract with Credit Moblier (themselves) to supply the railroad with all labor, grading, rails, ties, spikes, bridges, abutments, rolling stock and engines needed to actually build and run the railroad. The original engineer of the Union Pacific had calculated that the first 100 miles of track would cost $30,000 per mile to build. But Credit Moblier billed the railroad $60,000 per mile, which was taken from the pocket of the federal government, making, by the end of construction in 1869, a profit for the stockholders of Credit Mobilier of $50 million (equal to $770 million in 2008 dollars). Better yet for the principle investors, the Union Pacific Railroad was something new on the American scene, a “limited liability corporation”. Under the old rules stockholders were liable for any debts the company ran up. A bankrupt company meant bankrupt executives. But investors in the Union Pacific Railroad Limited, including Doctor Durant, Mr. Train and several members of Congress who had been given Credit Mobilier stock because they controled any investigations into fraud in the railroad dealings, were liable only for the amount they had invested in the U.P. And in many cases that was nothing.

So by 1875 the Union Pacific Railroad, "the people’s railroad to the western Sea", was bankrupt. It had been looted by Credit Mobilier. The U.P. stock wasn’t worth the paper it was printed on. And, of course, by then, the principle investors in Credit Mobilier were off looking for other railroads to loot.

Only after literally thousands of more scams just like this one would congress close the loophole in this particular invitation to fraud, making shell companies like Credit Mobilier illegal, allowing for the seizure of all profits made from them, and assessing fines for even setting them up.It’s enough to make you realize that if Lincoln had not been murdered, his memory might have been more closely tied to Doctor Durant. But it is not as if any of the truly powerful in this nation have ever been caught red handed; otherwise the bank executives called before Congress would never have the guts to blame speculators or working class citizens for taking on home loans they could not afford. In the area of economic crime, experience and history makes me suspicious of the people with degrees in finance who drew up the contract. I blame them long before I blame the schmuck who signed the contract. And if you don’t agree, you just don’t know your American history like you should.

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