The story of how the gold corner was crushed has been told elsewhere, but it is generally not appreciated how well President Grant understood the financial dynamics surrounding the attempted corner. For example, on September 12, 1869, as gold prices became volatile due to Gould’ s trading, Grant wrote his then Treasury Secretary, George Boutwell, prior to the secretary’ s trip to New York:
… on your arrival you will be met by the bulls and bears of Wall Street, and probably by merchants too, to induce you to sell gold, or pay the November interest in advance, on the one side, and to hold fast on the other. The fact is, a desperate struggle is now taking place, and each party wants the government to help them out( italics added). I write this letter to advise you of what I think you may expect, to put you on your guard.
I think, from the lights before me, I would move on, without change, until the present struggle is over.
Grant did not bail out anyone, including his brother-in-law, which was consistent with the way he approached national finance in general; namely, by focusing on the real economy without regard to special interests( including speculative finance and partisan politics). Differentiating the real economy from the financial one is a
Library of Congress
Cartoon depicting the scene outside Jay Cooke & Company’ s office during the Panic of 1873.
modern distinction, which begs the question of what President Grant’ s economic / financial philosophy was, and how he formed it.
Grant did not receive formal economics / financial training, and he adhered to no particular school of thought as far as I could detect. However, he also did not receive formal general officer training, and therefore his many battlefield successes resulted from the way he thought through problems and issues in the context of the strategic situation at hand. Such an approach is consistent with the way he approached national finance with one exception: Grant worked in the context of orthodox economic thinking at the time, which held“ a limited role to government. Most mainline politicians thought its principle responsibility in managing the money supply was to ensure a‘ sound’ currency and otherwise keep its hands off.” This philosophy would be tested in 1873.
The Panic of 1873
The euphoria generated by the abnormal returns of an investment boom carries many investors away. This was seen during the“ new economy” boom of the 1990s and the“ new paradigm” boom that resulted in the 2007 – 08 financial crisis. The same dynamic occurred in the early- 1870s, which is understandable given all the changes that were occurring at the time such as the first age of globalization that commonly dates from 1870 to 1914( with the start of World War I), and simultaneously booming financial markets in Berlin, New York and Vienna. Many people therefore knew their age“ really was different,” but such thoughts helped facilitate the speculative behavior characteristic of all booms.
Nobody knows— or can know— when a boom will end in real time, but the 1873
Collection of the Museum of American Finance
Check for one pound sterling payable to John Thompson and signed by Jay Cooke, August 16, 1873. Jay Cooke & Co. was the highest-profile casualty of the Panic of 1873. On the verge of a $ 300-million loan from the federal government, Cooke & Co. declared bankruptcy on September 18, one day before this check was presented.
www. MoAF. org | Summer 2025 | FINANCIAL HISTORY 35