Gotham_ A History of New York City to 1898 - Edwin G. Burrows [699]
To raise money to pay the interest on its bonds and back its greenbacks, the Republican administration instituted taxes on manufactured products and on professional and business activities and initiated a 3 percent levy on incomes over eight hundred dollars. When these revenues failed to bring in enough funds, the government decided to borrow from the general public. Secretary Chase appointed Philadelphia financier Jay Cooke as the nation’s investment banker. He organized a syndicate of the ablest investment houses in several cities (Livermore, Clews, and Company was the New York choice), and this group in turn hired twenty-five hundred subagents who hawked the treasury’s “five-twenties” in almost every town and village. For a time Cooke’s bond drive, which brought in a million dollars a day, proved sufficient. During the war’s last grueling years, however, expenditures soared to over $3.73 million a day, and the government was again forced to rely heavily on New York financial houses to sell bonds and negotiate loans.
The Civil War gave the city’s bondholders and bankers—as it had local manufacturers—a tremendous stake in the fortunes of the federal government. By 1863 the Chamber of Commerce added to its list of reasons for putting down the rebellion the “vast pecuniary obligation” the war itself had created, noting Union defeat would put “in jeopardy one thousand millions or more of public debt.” Command of the fiscal sinews of war in turn would give the northern commercial classes, especially the Manhattan bourgeoisie, ever greater influence over affairs of state.
The flood of government greenbacks and the large issue of short-term interestbearing notes made money abundant, facilitated the war boom, and ignited the financial exchanges. The stock market fluctuated wildly with the military situation. When McClellan landed his army on the peninsula, stocks rose; the first reverses brought them down; they rose with the fall of New Orleans; they dropped with defeats on the Chickahominy. Yet through all the gyrations—which afforded fertile field for speculators—the direction of the market was unmistakably up. In the space of two years, the overall value of stocks on the New York market increased by two hundred million dollars.
Merchants, dowagers, and clergymen accordingly flocked to Wall Street. In January 1862 the Tribune’s financial editor wrote that “the excitement in stock circles today we have never seen equalled in our very long experience of the street. . . . The intense desire to buy almost any kind of securities amounted almost to insanity. . . . The oldest members of the Board cannot remember such a day of rampant speculation.” The bull market was further fueled by margin buying. Stock buyers could put up as little as 10 percent (at times even 3 percent) of the purchase price in cash. Banks were only too willing to lend the rest at up to 10 percent interest. Stockbrokers were delirious: by 1863 they were averaging three thousand dollars a week in commissions.
One beneficiary of the war boom was the New York Stock Exchange, which received a permanent home after flitting for years from stables to attics along Wall, Hanover, William and Beaver streets. In 1863 a group of brokerage firms incorporated a building company, hired architect John Kellum to design a Tuscan palazzo-style structure, bought a site for it two blocks west from where the Exchange had started back in 1792, purchased iron and stone from the Cornell Works and the East Chester Marble Company, and had the building finished a few months after Appomattox.
THE SHODDY ARISTOCRACY
In March of 1863 William Dodge wrote a friend in England: