Fraud of the Century

Rutherford B. Hayes, Samuel Tilden and the Stolen Election of 1876

As the sub-title of the book, "Fraud of the Century”, states, this book concerns the stolen election of 1876. This is a significant year in the history of the United States as well as the Rancho La Puente. Also significant are the years leading up to that fateful year.

President Grant’s administration was infamous for its scandals. The Whiskey Ring scandal involving the diversion of tax revenues and bribery of politicians caught President Grant’s private secretary, General Orville E. Babcock, although there was no direct evidence of Grant’s involvement. General Babcock was indicted, but acquitted. Secretary of War William W. Belknap was accused of illegal weapons sales and illicit kickbacks. He was impeached by the House, resigned and then acquitted by the Senate.

The election of 1876 occurred only eleven years after the end of America’s bloodiest war. The wounds were still very raw. The election was seen as the last battle of the Civil War, whereby Republicans won the Presidency and the Democrats won control of the South. As an omen to future violence, the Hamburg, South Carolina, massacre resulted in the murders of six Freedmen, indictments, but no prosecutions. Violence would continue through the Jim Crow era and Civil Rights era. The author stated that the scandal ridden Grant administration and Reconstruction played a large role in the campaign and the resolution of the election results. Lastly, the Hays administration would signal the end of the Reconstruction Era as Federal troops were pulled out of the South.

In the summer of 1876, an express train from New York City arrived in San Francisco less than four days after departing. The promise of the transcontinental railroad was being fulfilled. The beginning of the Gilded Age coincided with the explosion of the railroad and its affect on society. In May of 1876, the Centennial Exposition opened in Philadelphia as the nation celebrated its 100th birthday. The Exposition featured new consumer products such as, the telephone, the typewriter, bananas, Heinz Ketchup, Hires Root Beer and kudzu, an erosion control plant species that thrives in the South. Also Mark Twain, whose book, “The Gilded Age”, gave us the name for the era that would last for two more decades, published “The Adventures of Tom Sawyer”.

The discovery of gold in Indian territory caused the federal government to offer to buy the land from the Native Americans. Many Native Americans refused and the Cavalry was sent to enforce the federal ruling. The Great Sioux War of 1876 included the famous Custer’s Last Stand and resulted in the federal government officially annexing Sioux land, including what is now Mount Rushmore, and permanently establishing reservations. This was the beginning of the end of the western frontier.

The Panic of 1873 was the nation’s most severe financial depression until the Great Depression of the 1930’s. There were several contributing factors to this depression, which caused financial havoc in Europe as well as the United States. These factors include an equine flu, fires in Chicago and Boston and over-speculation, especially in railroads following the Civil War. Another factor was the passage of the Coinage Act of 1873, which placed the nation firmly on the gold standard. The effect of this law was the devaluation of silver, causing banks, which were heavily invested in silver mines, to fail. The cascading effect of these failures reached Los Angeles and caused the Temple and Workman Bank to close temporarily (bank holiday). It re-opened with a loan from Elias “Lucky” Baldwin, but was doomed to fail given the harsh terms of the loan. Baldwin’s foreclosure of William Workman’s share of Rancho La Puente and other property was a proximate cause of William Workman’s suicide on May 17, 1876.

History Book Club at the Homestead Museum

A Country of Vast Designs

Robert W. Merry

The Book Club is three short weeks away from its first meeting of 2016, and its second year. The Book Club at the Homestead Museum will start the year with the topic of "Politics and Presidents". The country is currently immersed in a seemingly never-ending Presidential campaign with loud, vulgar candidates launching misleading and inaccurate charges against fellow candidates. Candidates are making strategic alliances, raising money and introducing bills that could never become law. All this is happening as part of our countries tradition of electing its President from the beginning.

One of candidate Polk's promises was to reestablish the independent treasury system. This system provided that government funds remain within the Treasury's own buildings and that payments by and to the government were to made in specie, i.e., gold or silver. This system essentially remained in effect until the Panic of 1907 resulted in the creation of the Federal Reserve System.

From the beginning of our nation to current days, political factions have debated the role of the federal government in managing both its finances as well as managing the country's economy. The nation's first Secretary of the Treasury Alexander Hamilton was a leading proponent of a strong federal government. He proposed to consolidate national and state debts, to create a national bank modeled after the Bank of England, to establish a mint, to set up a revenue cutter service (now the Coast Guard), and to tax whiskey (a proximate cause of the Whiskey Rebellion).

The Bank of North America, chartered long before George Washington was inaugurated, became the first central bank of what would become the United States. It was succeeded by the First Bank of the United States as Alexander Hamilton successfully achieved one of his objectives as Treasury Secretary. One of the First Bank's objective was to create a common currency. Thomas Jefferson objected to Hamilton's financial program, stating that Hamilton's financial system was designed "to exclude popular understanding and inquiry"... and " as a machine for the corruption of the legislature". The charter for the First Bank expired in 1811 and was followed by the Second Bank of the United States.

The Second Bank was chartered for twenty years on from February 1816, with the federal government as the largest stockholder. The Second Bank was the exclusive agent for the federal government. So the federal government was its largest customer as well as its largest shareholder. It was in fact a national bank.

The charter for the Second Bank came up for renewal during the Presidency of Andrew Jackson, a strong opponent of a central bank. He succeeded in defeating attempts to renew the charter and the Second Bank, like the First Bank, became a private institution. Shortly thereafter, the Panic of 1837 occurred due to some degree from a shortage of hard currency, exacerbated by the lack of a central bank that could provide liquidity.

All this history set the stage for James Polk and his plan for an independent treasury. This system also had its problem. "In periods of prosperity, revenue surpluses accumulated in the Treasury, reducing hard money circulation, tightening credit, and restraining inflation of trade and production. In periods of depression and panic, when banks suspended specie payments and hard money was hoarded, the government’s insistence on being paid in specie tended to aggravate economic difficulties by limiting the amount of specie available for private credit."

This system presented problems during the Civil War when federal expenditures skyrocketed. It also failed to stop depressions, or panics as they were known. Panics in the 19th Century, after Polk, occurred in 1857, 1873, 1884 and 1893. The Coinage Act of 1873 placed the United States on the gold standard and depressed the price of silver and related stocks in silver mines. This cause the failure of the Bank of California, which in turn caused the ultimate demise of the Temple and Workman Bank.

We hope this bit of history will encourage you to read the book and to attend our Book Club discussion on Friday, February 5 at 10:00 AM at the Homestead Museum.