The Great Pierpont Morgan (14 page)

If can obtain such exclusive contract should feel inclined form syndicate on 3⅝ to 3¾ % basis provided at least 25 million could be sold or underwritten in Europe. It is essential restoration confidence and stoppage gold withdrawals that it be known such negotiations made, and £5,000,000 in Banks of England, Germany, France available shipment here if necessary.

We think if this negotiation can be made will be most creditable all parties and pay good profit.

We can secure co-operation best parties this side including leading National Banks.

We all have large interests dependent upon maintenance sound currency United States. Important use every exertion success negotiation. Great factor is European absorption even temporarily of bonds. Public here keenly alive that feature. We appreciate importance gold instead coin bonds, but no authority such at present.…

Curtis went back to Washington. Rumors began to circulate that a syndicate of bankers headed by Pierpont Morgan was coming to the rescue of the gold reserve by an immediate loan of money to the government. There was suddenly a new feeling of hope in the air; the stock market closed strong; and although on that day nearly two and a half million dollars in gold had been withdrawn from the Treasury reserve—all for export by Saturday's steamer—by evening it was said that some of it might not be exported at all. Had the tide already turned?

4

The tension in Washington was terrific. Night after night the Cabinet was meeting at the White House, and some of the men most directly concerned with the problem of the gold reserve—the President, Secretary of the Treasury Carlisle, Attorney General Olney, and the President's one-time private secretary and present Secretary of War, Daniel Lamont—would on occasion stay in session till dawn, debating endlessly over alternative plans for meeting the crisis. They considered the proposal brought by Curtis, and the next day, Friday, February 1, Morgan was able to cable to London, “Curtis telephones from Washington indications favorable. He will reach here eleven tonight.” That Friday morning, while
The New York Times
was thundering editorially for congressional action in response to Cleveland's plea, saying, “The situation that confronts the Senate involves the honor of the United States throughout the world,” it was the front-page news report headed
BOND ISSUE COMING SOON
that caught excited attention in the Street. Again the stock market leaped. Better yet, only $1,257,000 was withdrawn from the gold reserve—and $1,800,000 was returned to it! As Morgan cabled to London, “Improvement public feeling today, with nothing known and nothing done, indicative what will follow successful conclusion business.”

That night Morgan conferred with Curtis on the latter's arrival back in New York, and the next morning, Saturday, February 2, they had a long session with August Belmont at 219 Madison Avenue, considering a multitude of details. There seemed to be only one likely hitch in the negotiations. The press and public had acquired the idea that the four per cent bonds would be issued to the syndicate at a price to yield 3½ per cent. The Treasury insisted on 3½ per cent. Morgan was asking for 3¾ per cent, expecting privately to be able to compromise on 3⅝ per cent. But surely that gap could be closed. Curtis took the detailed proposal back to Washington, promising to telephone the answer at three o'clock Sunday afternoon.

5

On Sunday the telephone message came, but it was merely to the effect that the matter was still under consideration and that a messenger would soon start for New York bearing a letter from Secretary Carlisle. This was a little disquieting. Morgan cabled to London, “The situation here tonight Sunday is this. The public and press believe the negotiation practically completed without knowing any details whatever but only price assumed to be 3½ per cent. We feel bound use every exertion complete negotiation. Effect of abandonment upon all interests would now be worse than if never begun.”

The messenger, who was Curtis' private secretary, Lawrence O. Murray, arrived in New York Monday morning with his letter. It was a bombshell. The negotiations were off.

The Administration had had a change of heart, induced presumably by three things: the fact that the price was high, the fact that the drain of gold from the Treasury reserve had for the moment ceased (because of this very negotiation), and the grave political hazard of the undertaking. Already Democratic newspapers were shouting with dismay at the notion of a private deal between the government and a Republican Wall Street capitalist. Joseph Pulitzer's New York
World
was warning Cleveland and Carlisle that they were delivering themselves to the money interests, and was advising the President to hold out for a three per cent loan, saying in bold type, “If the banks won't take it, the people will.” And so the decision had been made to make a public call for bids for the purchase of government bonds.

Morgan was appalled. He did not believe that a public sale of bonds could possibly succeed at this critical juncture. He consulted with Belmont. To abandon now the negotiations for a private sale would be disastrous for the government, they agreed. Belmont started for Washington on the ten o'clock train Monday morning. Morgan waited in New York to communicate with Secretary Carlisle, and finally reached Assistant Secretary Curtis by long-distance telephone and told him in the strongest terms that it would be fatal to announce a public issue of bonds. Curtis presently reported that Secretary Carlisle reluctantly agreed to delay the announcement for a
day; Morgan said that Belmont was on his way to Washington, and he himself would start for Washington that afternoon, and that he thought he had a right to be listened to. And he sent two cables to London. The first said:

Monday morning. Do nothing further about negotiations until you hear further from us. We have received letter this morning by messenger from Secretary of Treasury which apparently withdraws all attempts European negotiations. We are completely loss to understand. Will cable you later. Strictly confidential and for your use only.

The second cable said:

Consider situation critical. Politicians seem to have absolute control. Shall make strongest fight possible for sound currency. If fail and European negotiations abandoned it is impossible overestimate what will be result United States.…

Then he took the
Congressional Limited
for Washington, taking with him his counsel, Francis Lynde Stetson (who would be an especially useful ally because he had been President Cleveland's law partner), and handsome young Robert Bacon. Only one thing, he thought, could prevent the utter failure of his cherished plan—and a panic of incalculable severity: he himself must talk to Grover Cleveland.

6

It was cold and windy when he arrived in Washington that Monday evening, and his reception was cold. When he alighted from the train he was met on the station platform by Daniel Lamont, the Secretary of War. Lamont told him that President Cleveland would not see him. As to what happened during the rest of the evening, the accounts of various chroniclers differ; I shall follow mainly Satterlee's version, which seems to me at this point to have the ring of truth. According to this account, Morgan said shortly to Lamont, “I have come down to Washington to see the President, and I am going to stay here until I see him.” Then he strode off to the cabstand.

Stetson left him to drive to the White House, where he
made a futile attempt to see Cleveland to arrange an appointment. Morgan, with Bacon, took another cab, and started off as if for the Hotel Arlington; but then—because at the Arlington, which was known to be his usual Washington headquarters, he would be under close observation by reporters and others—told the driver to take him to the house of his friend Mrs. J. Kearney Warren on K Street, while Bacon went on to the Arlington without him.

Mrs. Warren, an old friend of his parents and of his own, was a little bewildered by his surprise visit. He told her that he could not explain it to her, but he was in hiding, awaiting a telephone call; nobody must be admitted to the house while he was there; she must tell her servant that she was not at home to callers. Then—to quote Satterlee—he “sat and smoked before the fire, apparently listening to Mrs. Warren's talk, but did not speak.” At the end of an hour or so the telephone rang. It was Bob Bacon, who had persuaded that dour New Englander, Attorney General Richard Olney, to talk to Morgan. The banker thereupon took a cab to Olney's house, explained to him vehemently the importance of a conference with Cleveland, and then went on to the Arlington Hotel, where, according to
The New York Times
, “as Mr. Morgan stood for a moment at the desk he was asked by a newspaperman if his visit had anything to do with the bond issue. He returned a diplomatic reply and hastened to the elevator.”

Belmont, arriving in Washington before Morgan, had seen Secretary Carlisle at his house toward the end of the day and had exercised his best powers of persuasion to the effect that the President must talk with the bankers. Now there was nothing more to be done. Morgan, in his suite at the Hotel Arlington, settled down to play “Miss Milliken,” his favorite game of solitaire, while he thought the situation out. The hours went by and he was still playing. It was well after three before the last lights went out in the Morgan rooms.

7

Sometime that night or early in the morning of Tuesday, February 5—the evidence is conflicting—came a welcome message from the White House: the President would see Mr. Morgan. The banker gathered with him Belmont, Stetson, and
Bacon, and together they walked to the White House through the bitter cold and biting winds of that midwinter morning.

At the White House they were shown upstairs and ushered into the presence of the burly President. Secretary Carlisle was with him. Cleveland said that a public issue of bonds had been decided upon. There was a delay while the two officials went over early reports from the Subtreasury in New York which indicated the probability of further withdrawals of gold that day—possibly disastrous withdrawals. There were more interruptions—telephone calls, messages—and at one time the President left the room and was gone for the better part of an hour. Then, at last, came the moment when Cleveland turned to Morgan and asked him what he had to say.

With that tremendous certainty which gave his words impressive weight, Morgan made his argument. Withdrawals of gold had begun again. There was not time enough for a public issue. The only possible solution lay in a private and immediate arrangement such as the one the mere prospect of which had stopped withdrawals cold the week before. And he introduced a new idea: that in a certain old law dating from Civil War days—Section 3700 of the Revised Statutes, he thought it was—the government was authorized
to buy coin and pay for it in bonds
. Why should the government not buy gold coin from the syndicate—coin gathered partly in the United States, partly in Europe—and pay for it with this new private bond issue?

According to Satterlee, this new idea was Morgan's own; he had recalled during the night, as he played solitaire, that in his gold-trading days during the Civil War he had heard of such a provision. According to Allan Nevins' life of Cleveland, it was Curtis' idea. It does not matter. What matters is that the law books were sent for, that Section 3700 was found to be the perfect answer to the situation, and that the continuing arguments of Morgan and Belmont carried the day.

Cleveland had been wary of Morgan at first; as he said many years later, “I had a feeling, not of suspicion, but of watchfulness.… I had not gone far, however, before my doubts disappeared. I found I was in negotiation with a man of large business comprehension and of remarkable knowledge and prescience … of clear-sighted, far-seeing patriotism.”

“Mr. Morgan,” said the President, “what guarantee have
we that if we adopt this plan, gold will not continue to be shipped abroad and while we are getting it in, it will go out, so that we will not reach our goal? Will you guarantee that this will not happen?”

“Yes, sir,” answered Mr. Morgan instantly. “I will guarantee it during the life of the syndicate, and that means until the contract has been concluded and the goal has been reached.”

That was an immense commitment. He was pledging himself to control what for years past had been uncontrollable—the course of international exchange and international gold shipments. Not to do his best, but to succeed. And he was a man who did not make pledges lightly.

No final agreement was arrived at during this White House session. It was decided to wait until Thursday, when an Administration bill to meet the crisis was to come before the House of Representatives, before acting, lest it be said that the Administration had gone ahead without exhausting every possibility of congressional help. But the essential victory had been won. Cleveland had been persuaded. As Pierpont Morgan got up to leave that upstairs room in the White House, someone noticed what looked like a lot of brown dust on his knees and on the carpet by his feet. Without realizing it, he had been crushing into fragments the cigar which, long hours before, he had brought into the room unlighted.

8

Later that day he cabled London, “Received your cable of yesterday. Impossible convey any just idea of what have been through today, but we have carried our point and are more than satisfied.”

The message went on to outline the basis of the forthcoming deal. The syndicate would deliver to the government gold equivalent in ounces to 60 million dollars, payment for them to be made in bonds at a rate “equivalent to a purchase of the bonds on a 3¾ % basis, one half gold to come from Europe.…” And the syndicate, as far as lay in their power, would “make all legitimate efforts to protect the Treasury of the United States against the withdrawal of gold pending the complete performance of this contract.”

Pierpont Morgan went home to New York, waited anxiously
until Thursday, and then, as the Administration's Springer Bill went down to its expected defeat in the House, returned to Washington, saw Cleveland and Carlisle again briefly, and on Friday morning went to the Treasury Department with Stetson, where the final details of the contract were worked out and the document was signed.