Main currents in American thought

Another hero of the times likewise was flung up as it were casually out of obscurity and reaped an amazing harvest from the gigantic struggle. In those difficult years the name of Jay Cooke—“the financier of the Civil War,” as his biographer calls him—became as familiar to the people of the North as the names of Grant and Lincoln, and was often joined with theirs as that of one of the saviors of the Union. He was the first great American banker, and good fortune sent him into the world at a moment when his skill in brokerage found opportunity for free play. The war was as great a godsend to Jay Cooke as it was to Grant, for alone amongst our money-lenders he realized the problems and foresaw the profits in a popular system of war financing. He was a pioneer in exploring all the potentialities of the banker’s trade, and in his dramatic exploitation of salesmanship and his skillful manipulation of money and credit he marked out the highway our later financiers have traveled. Jay Cooke occupies too significant a place in the history of American capitalism to be overlooked in casting up the accounts of the Gilded Age.

Of Yankee-Puritan stock, he was born in the frontier hamlet of Sandusky, Ohio, when the Western Reserve was at the beginning of its development. His father was a country lawyer of Federalist-Whig affinities, proficient in high-flown western oratory, who liked to be much in the neighborhood eye. He was a pushing, self-confident fellow, highly patriotic, soberly moral, fearing God and loving his country, who felt that the government he supported so heartily should serve him and his town with equal heartiness. His readiness in florid speech won him a single term in Congress, and he used his position as a heaven-sent opportunity to promote a government road from Sandusky—which it seems was not prospering as its inhabitants had expected it would—deep into the Indian country. It was a good Clay-Whig scheme of internal improvement; it would open up a rich timber country, and be highly profitable to the real-estate promoters of Sandusky. Cradled thus in speculation and faith in a benevolent government, his three sons grew up native Whigs, with vigorous Puritan-Yankee minds, who found no difficulty in reconciling the interests of God and Mammon. Eager to get on “the right side of fortune,” they went into the three professions of banking, journalism, and the law. The eldest, Pitt, found the law little to his liking; the youngest, Henry, labored diligently at journalism, at Sandusky and later at Columbus, where he was part owner of the Ohio State Journal and “boss” of young William Dean Howells, who was likewise seeking to rise through the medium of journalism.

It was the family itch for politics that took him to Columbus, and although the venture was financially unsuccessful it brought him influential connections. He was useful to Governor Salmon P. Chase, afterwards to be Lincoln’s Secretary of the Treasury, and to John Sherman, who was later to become a great influence on financial policies at Washington. His reward came in the shape of an appointment to do the government binding, reputed to be worth $25,000—a commission that allowed him to unload his paper on some investors who speedily lost the $20,000 they put into it.

Henry Cooke’s Whiggery was justifying itself, yet to both Pitt and Henry it soon became clear that Jay had hit upon the true road to wealth. At twelve years of age he had begun his career in his father’s store at Sandusky, and with characteristic enterprise he put in some side lines and became “quite a capitalist.” At fourteen he ventured so far as St. Louis to help in a general store, and at the age of seventeen he went to Philadelphia and took a place in a broker-banker’s office. That was in 1839, a golden time for brokers, when every business man must keep a sharp eye on the table of banknote discounts and see to it that bad paper was worked off. Into this world of discounts and premiums the young clerk plunged with immense zest. “The business I am engaged in is of the most respectable kind and the house is the first in the city,”⁠[4] he wrote to Pitt Cooke. “He was ambitious, industrious, and faithful to each day’s duties,” his biographer reports of him. His quick mind ran to calculations and his slender sensitive fingers seemed made for telling money. He was soon the admiration of the office, an expert in detecting counterfeits, a walking table of “wild-cat” currency, with a genius for smelling out possible commissions. Every art of extracting profits from note-shaving, gold-juggling, delayed payments, and other devices known to the world of brokerage, he speedily made himself master of.

When he reached his majority he was entered a member of the firm, and before he was thirty he aided his partners—“noble” fellows he called them, of honest Puritan extraction—in squeezing huge commissions out of the financing of the Mexican War. “It was a grand time for brokers and private banking,” he remarked; and late in life he wrote glowingly of his cleverness in twice overreaching the Secretary of the Treasury. It was quite legal and the patriotic banker was vastly pleased to report, “So we victimized him again.”⁠[5] He was the brains of the company and under his guidance the business piled up profits at an astonishing rate. During the panic of 1854 he wrote: “We use our money at 1½ to 3 per cent. per month from day to day and frequently it pays ⅛ to ¼ a day. We have done a noble business since 1st of January; profits up to 1st July $135,000.”⁠[6] On the reorganization of the firm in 1858 he withdrew, and three years later, on January 1, 1861, he opened the doors of what was soon to become the greatest banking-house in America, Jay Cooke and Company of Philadelphia.

He was then in his fortieth year and his private fortune he reckoned at $150,000. But with the breaking-out of the war, opportunity knocked at the door of the new bank. Ardently patriotic, Jay Cooke was anxious to do his bit for the cause, but he seems never to have thought of going to the front. He came of fighting Revolutionary stock, but love of the battlefield had died out of the family. His father had been drafted for the War of 1812, but hired a substitute who was unfortunate enough to be killed, and none of the three sons got nearer the front than the Treasury Department at Washington. It was there that the battles of the Cooke brothers were fought. Henry Cooke went to Washington to attend the inauguration of the new administration, and twenty-one days later Jay Cooke modestly proposed a plan for mobilizing the resources of the firm in defense of the country. On March 25, he wrote to his brother:

When the magnitude of the task in which the country was engaged became clear to him he was no longer content with a single banking-house at Philadelphia. A branch at Washington under the shadow of the Treasury was highly desirable, and Henry Cooke was the man for the business. A born lobbyist, a close friend of John Sherman—who was looking out for a profitable opening in some war business for a brother—and of Secretary of the Treasury Chase, he let no grass grow under his feet. The war loans had not been taken freely and in July, Jay Cooke wrote to Chase suggesting a close alliance between the Treasury and two Philadelphia firms, Jay Cooke and Company and Drexel and Company.

It was quite an amazing proposal and one that Secretary Chase dared not accept. Bankers and brokers in New York and Boston would scarcely approve a monopoly of loan-commissions granted to two Philadelphia houses. But Jay Cooke would not acknowledge defeat. He cultivated the acquaintance of the Secretary, lent him money, entertained his family, presented him with gifts, and gave him sound advice. He took the harassed servant of the people to his warm and generous heart and was vigilant in keeping him out of the clutches of Copperhead profiteers. His opportunity came in October, 1861, when in competition with other brokers he undertook the sale of a new bond-series. His success was so great that he won the complete confidence of Secretary Chase, and it was only a matter of time when he should secure his coveted monopoly. In February, 1862, he opened the branch house at Washington, immediately opposite the Treasury building, and Henry Cooke soon made its offices an indispensable club for Congressmen and government employees. He was charmingly cordial and during the next ten years he knew everybody and every political move at the Capital. With the same bland and deacon-like appearance as his brother, he was master of the art of ingratiating himself into the confidence of influential men, and successive Secretaries of the Treasury—Chase and Fessenden and McCulloch—were easily induced to look with partial eye upon the firm of Jay Cooke and Company.

Meanwhile the firm was discovering innumerable ways to help win the war; amongst others Henry Cooke put through a congressional franchise for a street railway at Washington, and the new cars were soon carrying citizens and soldiers to and fro, to their great content and the company’s great profit. He was hourly in and out of the Treasury and he knew as much about the government business as the Secretary. The interests of the firm extended with amazing rapidity; other banks came under their control and their agents were everywhere. Their later successes in selling bonds were a revelation to older-fashioned brokers. On the day that Richmond fell the “financier of the Civil War” marked out the lines of a pretentious country house that was to cost a million dollars and to become a show place of America, where Secretaries of the Treasury, Presidents, and great men from every walk of life were to find a welcome release from their cares. “As rich as Jay Cooke” had become a common saying from the Atlantic to the Pacific. The gigantic war had been no ill wind to the money-teller of 1861.

In certain aspects Jay Cooke may be reckoned the first modern American. He was the first to understand the psychology of mass salesmanship. It was his fertile brain that created the syndicate and conceived and executed the modern American “drive.” Under his bland deacon-like exterior was the mind of a realist. He assumed that every man has his price, but he knew that few men like to acknowledge the fact even to themselves; so he was at immense pains to cover our poor human nakedness with generous professions. If he were to lure dollars from old stockings in remote chimney-corners he must “sell” patriotism to his fellow Americans; and to do that successfully he must manufacture a militant public opinion. The soldier at the front, he announced in a flood of advertisements, must be supported at the rear. It was every loyal American’s war, and patriotism demanded that idle dollars—in greenbacks—should be lent to the boys in blue, and a grateful government would return them, both principal and interest, in gold. To induce slacker dollars to become fighting dollars he placed his agents in every neighborhood, in newspaper offices, in banks, in pulpits—patriotic forerunners of the “one-minute men” of later drives. They also served their country, he pointed out, who sold government bonds on commission. He subsidized the press with a lavish hand, not only the metropolitan dailies but the obscurest country weeklies. He employed an army of hack-writers to prepare syndicated matter and he scattered paying copy broadcast. His “hired friends” were everywhere.

In a hundred delicate ways he showed his appreciation of patriotic coöperation in the bond-sales—gifts of trout caught with his own hand, baskets of fruit from his own garden. He bought the pressings of whole vineyards and cases of wine flowed in an endless stream to strategic publicity-points. Rival brokers hinted that he was debauching the press, but the army of greenbacks marching to the front was his reply. It all cost a pretty penny, but the government was liberal with commissions and when all expenses were deducted perhaps two millions of profits remained in the vaults of the firm, to be added to the many other millions which the prestige of the government agency with its free advertising brought in its train.

With such prestige and with the greatest fluid resources as yet accumulated by any American, it was inevitable that the Rothschild of the North should play a bold part in the speculations of the Gilded Age. Jay Cooke vastly enjoyed the game and it was idle to expect him to sit back quietly when others were playing for high stakes. In those halcyon days promoters were as thick as flies about a dead carcass; wild-cat railroads had succeeded wild-cat banks as short-cuts to wealth; and in an unlucky moment Jay Cooke was tempted. He had expected to be made Secretary of the Treasury by President Grant, but failing of appointment in spite of countless boxes of twenty-five-cent cigars provided for the General’s pleasure, he determined to back the Northern Pacific Railway enterprise. The company had been chartered in July, 1864, receiving a congressional grant of 12,800 acres of public land for every mile of track laid in the states, and double that amount in the territories. As the proposed line would run almost entirely through territories the grand total was reckoned at 47,360,000 acres.⁠[9] Early land-sales were at the rate of $6 an acre.

At such valuation the prospective value of the grant through the territories was $153,600 for every mile of track, yet in portions of an earlier line absorbed by the company the road had been built for $8,225 a mile, and a stretch of 112 miles at the rate of $9,500.⁠[10] To be sure there were great stretches of unsalable land, but in compensation the company was free to run its surveys so as to embrace choice mineral deposits, virgin timber, water-power, and town sites.

As Jay Cooke contemplated the possibilities his buoyant temperament took fire, and he dreamed of empire-building. He quickly rationalized the project into a great patriotic undertaking that would carry the blessings of civilization to the farthest Northwest. He would lay open to the poor man the rich wheat lands of the Dakotas, the mineral wealth of the Rockies, the vast timber resources of the Puget Sound territory. He would annex western Canada by benevolent absorption. It was a dream worthy of the Gilded Age and Jay Cooke was chief amongst the Beriah Sellerses of the day. He threw himself into the project with boundless optimism, and proved again his right to be called a great financier. He proposed to sell the Northern Pacific as he had sold government bonds. He had learned that to catch the little fish he must first catch the big fish, for the shilling is timid till the pound shows the way. He must create confidence, cost what it would, and to that end he opened a huge pool and created a special syndicate. Stocks, jobs, cash, influence, were distributed judiciously where they would do good. In the language of stock-jobbing much “sweetening” was used.⁠[11] And there was need of much “sweetening,” for the times were inauspicious. Jay Cooke drove the publicity work with his old vigor, but sales were slow, and as the great patriotic venture showed signs of lagging he turned for help to a sympathetic government.

His engineer had made a careful estimate of the prospective cost of the road, which including rolling-stock, terminals, a branch line to Portland, and interest on bonds during the construction, came to $42,638 a mile for the entire line.⁠[12] But the financier was not satisfied “with the magnificent property the government has given us,” and made ready to buy from Congress a revision of the terms of the charter, which amongst other things would widen the land-grant belt through the territories to 120 miles, convey a second right-of-way zone from the Rocky Mountains to the Pacific, and permit the company to hypothecate the whole before the terms of the contract were fulfilled. It was an audacious proposal even to a generation used to audacious proposals. There was bitter opposition, for the rumblings of the Crédit Mobilier scandal were already disturbing the halls of Congress; but his lobbyists used “the company’s money freely” to bring in the common breed of Congressmen, and the Cooke brothers employed their well-practiced skill to take care of such important persons as Speaker Blaine of the House, Vice-President Colfax of the Senate, and President Grant. The matter was handled with great delicacy in the case of the latter—“the glorious honest man,” the banker called him. “He sent a fishing-rod and creel to the President’s little son Jesse, for which he was duly thanked in a childish hand.”

He invited the General to a day’s fishing-trip, and together the heroes whipped the trout stream in the most charming comradeship. “It may be thought,” remarks his biographer, “that such machinations were unbecoming in a man of Mr. Cooke’s moral dimensions.”⁠[13] But surely delicate “machinations” were not unbecoming to such “moral dimensions.” “We let the other side do most of the talking,” wrote the deacon-like Henry Cooke, who kept the Sabbath as strictly as his brother, “and we do the voting.” The President’s cabinet was bitterly divided on the issue, but wheels turn on well-greased axles and delicate attentions have their reward. The bill was signed and the building of the Northwest empire could go forward.

Unfortunately, however, black days were pressing hard on the great success. The money of the company ran in fructifying streams through Europe and America but the expected crop was short. Thirty papers were subsidized in Germany; agents lived in ducal palaces; commissions, stocks, bonuses, were plowed in for manure; but the crop of bond-sales was still scanty. Ugly rumors were abroad. There was talk of a congressional investigation, and when General Banks offered a resolution of inquiry Jay Cooke was hurt to the quick. An investigation he regarded as no other than persecution of legitimate business, and he wrote to his brother: “He ought to be expelled from Congress for such outrageous attacks upon the great interests of the country.... If I get at him I will give him a piece of my mind, and no mistake, for his impertinence and foolishness.”⁠[14] Then the Crédit Mobilier scandal broke and in a panic he wrote to Henry Cooke denouncing the proposal to stop payment on the interest-coupons of the Union Pacific.

Jay Cooke’s ethics were simple. Whatever helped bond-sales was patriotic and right; whatever hurt them was wicked and immoral. Let government take care of business and business will take care of the country. That the newspapers could not see this great truth, but often indulged in wild demagoguery, was painful to one who had been generous to them. “It is too bad,” he wrote of a certain attack, “that these newspapers are permitted by the law thus to interfere with great public works.”⁠[16] But the black days were at hand. The Crédit Mobilier scandal was a whirlwind reaped from the sowings of the Gilded Age. With the outbreak of the Franco-Prussian war bond-sales stopped short in Europe and the firm of Jay Cooke and Company was broken. September 18, 1873, the New York house suspended payment; the house of cards tumbled to pieces; and a panic swept the country. The crash was as spectacular as the rise; it had been built on credit and when credit was shaken it fell.

Because he had amassed a great fortune Jay Cooke was regarded by his fellow Americans as an intelligent man whose opinions were entitled to heedful consideration. A national figure in finance must become a national figure in the public councils; and this added function he assumed with the utmost seriousness. As the power behind the United States Treasury he regarded himself as responsible for the program of the Treasury; and he made use of his immense publicity-machine to shape public opinion in regard to taxation, funding, and the currency. His “views” of those questions were as simple as a child’s primer. In brief they were: no taxes for the extinction of the debt; consolidate the debt and fund it in a form attractive to capital; retire the greenbacks and return at once to specie payments. Like others who had made money out of the war he did not take kindly to the idea of returning a part of it in taxes to pay off a debt that was highly profitable to him as a broker and banker. The men of ’65 had fought and suffered to secure the blessings of liberty to their posterity, and it was only fair that posterity should help pay the bills. To popularize this pregnant thought he subsidized a pamphlet contributed by one of his hack-writers, entitled Our National Debt a National Blessing; but the Hamiltonian argument overshot the mark and aroused bitter opposition. In this as in his attitude towards currency-contraction and funding he was thinking exclusively in terms of the money-lender. Very likely he was probably not so much self-seeking as ignorant.

Intellectually he was poverty-stricken and outside the narrow realm of brokerage and banking he was only a child. He read nothing, thought little and was unconcerned with social or economic principles. His business life was regulated by a set of ready-made formulas, in which ideas played no part. William Cullen Bryant rightly judged him in the following comment:

Any program that lay outside the bounds of his formulas he regarded as dangerous radicalism, and any policy that threatened to reduce his commissions he regarded as unchristian. He bitterly disliked Secretary Boutwell of the Treasury, who rejected his guidance, and he wrote to his brother:

Against the Greenback movement his hostility was bitter. He regarded it as an attempt to repudiate the “plighted faith” of the nation, and in 1867 he issued a pamphlet, written to order, aimed at combating the movement. In the opinion of a subsidized admirer it was “able, unanswerable and timely,” calculated to do immense good in a country where universal suffrage encourages the “attempts of demagogues to excite the poor against the rich, labor against capital, and all who haven’t money against the banks who have it.”⁠[20] How deeply the members of the firm felt in presence of any threat to the money interests is suggested in a letter from Henry Cooke of October 12, 1867.

There can be little doubt that the spectacular career of Jay Cooke quite dazzled his contemporary fellow citizens. Nothing like it had before appeared in America. The greatest salesman that the rising middle class had yet produced, a financier who understood the psychology of mass appeal, a propagandist of truly heroic proportions, he was reckoned no other than a magician by all the lesser money-grabbers of the Gilded Age. From nothing he built up a vast fortune. Scrupulous in all religious duties, a kind husband, a generous friend, benevolent in all worthy charities, simple and democratic in his tastes, ardently patriotic, uncreative and unintellectual, he exemplified all the substantial middle-class virtues of a people newly given to the worship of a sterile money economy. To call him a vulgarian and the chronicle of his life nauseous would scarcely be charitable. The record of his days has been laid before us, naked and mean, by his biographer, who has done his best to construct a hero from the poor materials. No doubt he was a hero of his generation—and perhaps of ours also.