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L. E. (Lucius Eugene) Chittenden.

Recollections of President Lincoln and his administration online

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further investigation, and the inquiry will probably never
be answered.

The next fraud wjhich I recall was a success as far as
the department was concerned. The loss of the money
was prevented by an accident.

The course of proceeding for the collection of a claim
for army supplies was usually this : The contractor made
his collections through his banker. His monthly account
was made up in conformity with all the rules of the War
Office, and transmitted to that office with a letter of di-
rections where the draft should be sent. The War Office
approved the claim if correct, and transmitted the ac-
count, the letter, and the action of the War Department
to the Secretary of the Treasury, by whom it was sent to
the proper auditor, whose duty it was to audit the claim.
If he decided that the claim was a proper one, it was sent
to the comptroller, who revised the action of the auditor,
and, if correct, approved it, sending the account with the
accompanying documents to the secretary, who issued
the warrant for its payment. This warrant was counter-



288 RECOLLECTIONS OP PRESIDENT LINCOLN

signed by the comptroller, and entered on the books of
the Register; the treasurer then drew his draft upon
one of the depositories for its payment, and the draft
was sent by mail, according to the original letter of in-
struction, which constituted one of the file papers. The
file was then sent to the Register's file-room, and there
remained. It comprised all the papers, showing a com-
plete history of the transaction.

On the occasion in question the cashier of one of the
Washington banks came to the office of the Register
with a draft just issued for more than $80,000, payable
to a well-known Massachusetts contractor, and regularly
endorsed. It had been presented by the head porter of
Willard's Hotel, a reliable man, who said that the payee
was ill and unable to leave his room. He had therefore
requested him to collect the draft in notes, if possible, of
$1000 each. "Without any apparent reason the cashier
said his suspicions were excited, and he went with the
porter to the hotel to see the payee, and be sure that the
transaction was all right. But the sick gentleman had
disappeared. He had probably watched the porter, and,
finding that there was delay in the payment, had vanished.

The file was sent for, and the letter found, directing
that the draft be sent to the contractor at Willard's
Hotel. He was communicated with by telegraph, and
said that the letter was a forgery. He had given the
same directions in this case as in his former collections.

This fraud was consummated by an outsider with the
assistance of a clerk in the Treasury. No outsider could
have obtained access to the files in order to remove the
true letter and substitute the forgery. Such a fraud
could not be prevented by any system. Fortunately the
suspicions or the prudence of the cashier prevented any
loss.



AND HIS ADMINISTRATION. 289

In another instance the fraud was successful, but its
fruits were wholly recovered and returned to the Treas-
ury. It had some interesting features. One of the most
difficult subjects which engaged our attention was the
complete destruction of the Treasury notes withdrawn
from circulation, or so worn or mutilated that they were
unfit to be reissued. The bulk of these issues was very
great. The first so withdrawn were called the " demand
notes." They were issued under a special act, and, being
receivable for duties, bore a premium nearly equal to
gold. There were sixty million dollars of them in small
denominations, and their issue involved the use of many
cords of paper. After the financial system authorized
by the act of February 25, 1862, had been instituted, this
issue was redeemed, and the notes corded up in the treas-
urer's vaults. The pf oblem was to count these notes, de-
stroy them beyond the possibility of a reissue, and give
the treasurer credit for them without any opportunity for
reissue or fraud.

After much deliberation the following plan was de-
vised: The notes were separated into denominations,
and made into packages uniform in amount, and each
package was cut into halves, lengthwise. The upper
halves were delivered to the superintendent of a force of
counters in the office of the treasurer ; the lower halves
to the head of a like force in the office of the register.
These two forces had no communication with each other.
Each counted their respective packages, and made a rec-
ord of each one. The records were compared in another
office, and, if they agreed, the count was supposed to be
correct. The counted packages were then delivered to a
committee of citizens, and by them placed in a furnace
in the basement of the Treasury, which had been heated
to a white heat ; the door was locked, and the combus-
19



290 RECOLLECTIONS OF PRESIDENT LINCOLN

tion watched by the committee through openings, until
they were entirely consumed. The committee then veri-
fied the facts by affidavit, upon which a warrant was is-
sued to the treasurer to credit his account with the notes
so destroyed. Receipts were given whenever the pack-
ages changed hands. The process was expensive, com-
plex, and supposed to be reliable.

The burning of a cord or less of notes daily was a sub-
ject of general curiosity. Applications to witness it be-
came so frequent that an iron railing was built around
the furnace, within which no one was admitted except
the committee of citizens. A colored messenger one day
applied for a permit for his boy of ten years to see the
process. On the following day the messenger told me that
his boy had asked him a singular question : " Whether it
was right for Mr. Cornwell, when throwing the packages
into the furnace, to drop one of them in the side pocket
of his overcoat ?"

Cornwell was a clerk in the bureau of General Spin-
ner, the treasurer, whose duty it was to see the pack-
ages cut in halves by the machine, and deliver them to
the chiefs of the two divisions of counters. He had no
right to touch them afterwards. His assisting in the
work of the citizens' committee was an impertinent inter-
ference with their duties which destroyed the value of the
system, and was probably tolerated because of his official
connection with the work of the treasurer's bureau, where
he was a trusted clerk, I believe of the third class.

The messenger was directed to go to his home and
bring his son to the register's office. He proved to be a
modest, intelligent lad, and greatly alarmed at the con-
sequences of his question. " He was not certain," he
said, " that he saw anything. But Mr. Cornwell worked
very hard, and threw more packages into the furnace



AND HIS ADMINISTRATION. 291

than all the other gentlemen. He wore an overcoat with
a side pocket having a large opening, and once, as he
was quickly passing his hand with the package from the
basket toward the furnace door, he thought he saw one
package drop into the large open pocket. He was not
certain of this, however, and might be mistaken."

The boy was sent home in charge of his father, who
was told to keep him indoors, and not permit him to
communicate with or see any other person. Without
attempting to ascertain how any use could be made of
these packages of half-notes, I directed the heads of the
counting divisions not to permit any of their counters to
leave the room, but to send for me when their day's work
was finished. About four o'clock the accounts of the
day were made up, and the aggregates appeared to agree.
I then directed the counters in the two divisions to bring
their packages together into one room, and place each
package of upper with the corresponding package of
lower halves. If there was no irregularity, as the day's
work commenced with packages of entire bills, a package
of lower should be found for every package of upper
halves. But when the last two packages were reached,
to the amazement and alarm of every counter, they
would not match at all. Every counter knew that some-
thing was wrong, and each was in terror lest he or she
should be the one suspected. Some of the young women
were in tears, and one or two gave indications of hyster-
ics. They were dismissed with the assurance that no
suspicion rested upon them, and that they would have
no trouble if they kept the facts to themselves for the
next twenty-four hours.

The next morning Cornwell was called into the private
room of the register and shown to a chair directly in
front of that officer, who, without noticing him, went on



292 RECOLLECTIONS OF PRESIDENT LINCOLN

with his regular work. Cornwell soon became nervous,
and in an excited manner asked what was wanted of him.
I replied that I had an impression that there was some-
thing which he ought to disclose to me, and that I wanted
him to consider thoroughly, without interruption. He in-
sisted that he must return to his duties. I said that I had
had him excused for the day, in order that he might as-
sist me in the investigation of an irregularity. He soon
became excited, and as he appeared to be summoning
his fortitude to meet an emergency, I suddenly said to
him,

"Cornwell, you have been stealing, and your thefts
have been detected !"

I should fail if I attempted to describe the effect of
these few words. His emotion was pitiable. A deathly
pallor covered his face, and he seemed to be trying to
swallow something which he could not. As commonly
happens, Satan deserted his victim, and his first words
were a fatal confession. After a supreme effort at self-
control he said :

" How did you find it out ?"

" That is of no importance," I said. " What I want
of you is to tell me how much you have taken, and where
it is."

He made no effort or struggle, but gave up at once.
He took from his pocket a small blank-book, in which
he had entered, from day to day, in regular order, the
amount of his stealings. The following had been his
method of procedure : He received from the treasurer
daily, for example, $100,000, in ten packages of $10,000
each, and became accountable for them. After seeing
the whole bills divided in the machine, it was his duty
to deliver and take a receipt for an equal number of pack-
ages of upper halves from one division and of lower



AND HIS ADMINISTRATION. 293

halves from the other division of the counters, so that
the same number of packages of divided bills should be
sent to the counting divisions which he had received in
entire bills from the treasurer. Having abstracted a
package of upper halves at one time and of lower halves
at another while the bills, after having been counted,
were being thrown into the furnace, he could then take
a package of whole bills from those he received from the
treasurer, and by substituting the packages of stolen
halves for them in the delivery to the counters, his ac-
count would appear to be correct. He would deliver to
the counters just as many divided packages as he had re-
ceived whole ones. But the two stolen packages would
not fit or match together, as had been shown in the in-
vestigation of the preceding day.

I called a carriage; he entered it with me, and we
drove to his house in Georgetown. On one of the upper
floors he unlocked a small room, in which there was a
new safe with a combination lock. This he also opened,
took from it and delivered to me one package of $100,000
in coupon 5-20 bonds, into which he had converted a por-
tion of his booty through a firm of brokers in New York ;
$50,000 in whole demand notes ; and packages of halves
representing $20,000 more, making in the aggregate
$170,000. Except a difference of a few dollars, caused
by converting the demand notes at a premium into
bonds, this aggregate agreed with the account of his
abstractions, entered from day to day as they were made,
upon his account-book. He strenuously insisted that this
amount comprised every dollar of his thefts, and we never
had the slightest reason to doubt his statement.

He was indicted, and, upon his own confession, sen-
tenced to ten years in the penitentiary, where I lost
sight of him, and have no knowledge of his subsequent



294 RECOLLECTIONS OF PRESIDENT LINCOLN

career. He maintained to the last that he never intended
to wrong the United States. These notes, he said, had
been issued at par, the government having received 100
cents for each dollar of them. If they were redeemed
at the same rate, the government was no loser. They
happened to be worth a premium of sixty per cent. ; he
thought he had as good a right to make that premium
as the government. He had always intended to restore
the par of these notes to the Treasury. To that end he
had converted enough of them to purchase $100,000 in
coupon bonds, which he intended to place to the credit
of the Treasury conscience fund. His appropriation of
the sixty per cent, premium, he insisted, was no crime,
and he thought it was not even prohibited by the Treas-
ury regulations. It is scarcely necessary to say that this
reasoning neither satisfied the Treasury officers nor did
it save him from the penitentiary.

No loss to the Treasury could possibly have occurred
in two of the instances above mentioned.

After the close of the war there were many members of
Congress and others who did not believe it possible that
so large an amount of money as $3,000,000,000 could
possibly have been received into the Treasury, securities
issued for it, and placed in the hands of the large num-
ber of persons entitled to them, without error or fraud,
or any loss to the government. It was even suspected
that the officers connected with the issue of these securi-
ties must in some manner have profited thereby. Accord-
ingly one of the first acts of each of the two or three
succeeding Congresses was to raise a special committee
to investigate the Treasury. The Treasury officers well
knew that no fraud or irregularity could have occurred
without immediate detection in the Treasury. They
therefore regarded the proceedings of the committees






AND HIS ADMINISTRATION. 295

with quiet unconcern. In the early days of the investi-
gation cases were found which were supposed to involve
the integrity of some of these officers, and they were
notified that their immediate appearance before the com-
mittee was necessary to their reputations. They did not
appear, however, and in every case the committee found
the explanation. These investigations were, as they
should have been, thorough and exhaustive. But neither
committee discovered any error, fraud, or loss to the gov-
ernment in the department of the Treasury proper. No
credit belongs to or was ever claimed by the officers of
the Treasury for this result ; but it should at least be re-
garded as most satisfactory evidence of the perfection of
the Treasury system.



XXXIV.

NEW MONEYS OF LINCOLN'S ADMINISTRATION. DEMAND NOTES.
SEVEN-THIRTIES. POSTAGE CURRENCY. FRACTIONAL CUR-
RENCY. LEGAL-TENDER NOTES, OR " GREENBACKS." THEIR
ORIGIN, GROWTH, AND VALUE.

THE generation which elected President Lincoln had
known only two kinds of money the notes of the state
banks and the coins authorized by Congress. There
were many varieties of the state bank-notes, variable in
appearance as in value. The policy of Secretary Chase
destroyed the circulation of the state bank-notes, and
substituted for them the notes of the national banks,
under which the holder was absolutely secured against
loss. The necessities of war created several new kinds of
paper money, and in some cases invented new names for
them, such as " demand notes," " seven-thirties," " post-
age currency," " fractional currency," and finally " legal
tenders," popularly known as " greenbacks."

The " Treasury notes," authorized by statutes in force
on the 4th of March, 1861, did not circulate as money.
They bore interest at the rate of six per cent., were pay-
able one year after date, and issued in denominations of
not less than fifty dollars. Before the extra session of
Congress on July 4, 1861, the secretary had contrived
to sell six and a half million dollars in these notes at par
by offering with them a like amount in bonds on twenty
years' time at six per cent, interest, at rates varying from
85 to 92 per cent, of their par value. These amounts
relieved the wants of the Treasury in a very slight de-



AND HIS ADMINISTRATION. 297

gree, and made no impression upon the circulation of
the country.

As the 4th of July approached it became apparent
that some provision for the pay of the army and navy
and other pressing demands must be made without wait-
ing for the negotiation of a loan. The secretary accord-
ingly recommended in his first report, and Congress by
the act of July 17th authorized, the immediate issue of
Treasury notes to the amount of fifty, afterwards in-
creased to sixty million dollars, in denominations of not
less than ten dollars, payable on demand without inter-
est. On the 5th of August a supplemental act was passed,
authorizing the issue in denominations as low as five dol-
lars, and making these notes receivable for public dues.
They were required to be signed by the treasurer and
the register, or by some persons authorized by the sec-
retary to sign for each of said officers.

As soon as the plates could be engraved and the notes
printed, a force of clerks was detailed to sign them, and
their issue commenced. They were receivable for du-
ties, and therefore almost equivalent in value to gold ;
they were used in payment of the army and the navy,
and of other pressing obligations; they relieved the
wants of the secretary for October and November as
fully as the same amount in coin; and they added so
much to the circulating money of the country. They
were of the same size, and in appearance closely resem-
bled bank-notes.

The passage of the legal-tender act of February 25,
1862, which required the payment of duties in coin, in
order to provide the gold for the payment of the inter-
est upon the funded debt, made it necessary to redeem
and cancel the notes so issued, because as long as they
were outstanding they would take the place of an equal



298 KECOLLECTIONS OF PRESIDENT LINCOLN

amount in gold. This act provided for their immediate
redemption and cancellation. The issue began in Oc-
tober; their redemption commenced in the following
March ; after which they were not reissued, but can-
celled and destroyed as fast as they flowed into the
Treasury. The whole amount authorized, $60,000,000,
was issued, and after twenty - eight years, on the
31st of May, 1890, there were still outstanding, unre-
deemed, of these notes, $56,445.00, or about one tenth
of one per cent, of the issue. These notes acquired the
name of, and have always been known as, the " demand
notes."

An incident occurred during the brief period of their
circulation which, for a few hours, occasioned no little
anxiety in the offices of the treasurer and the register.
A small package of these notes, less than $100 in value,
which were apparently unsigned, was presented for re-
demption. They were not of consecutive numbers, but
from several different sheets. If any were issued un-
signed, it indicated an irregularity, and possibly a loss,
the amount of which could not be ascertained. I was
not willing to concede the fact without further investi-
gation. The two names of the clerks who were deputed
to sign for the treasurer and register were the only
words written on the face of Ihe notes. Upon examin-
ing them with a powerful glass, I could trace on the sur-
face the whole signatures, although every particle of the
ink had disappeared. Fortunately, the person who pre-
sented them for payment was known. He was sent for,
and proved to be a soldier who had received the notes
from the paymaster. I asked him whether he had sub-
mitted them to any manipulation. He replied that he
had carried them in a money-belt upon his person through
a campaign through the swamps of Carolina. They had



AND HIS ADMINISTRATION. 299

been saturated with perspiration, with rain, fogs, and
other moisture many times, and this usage had obliter-
ated the signatures. This discovery did more than re-
lieve our anxiety. It effectually disposed of the claim
that the written signature was any check against fraud
or forgery, so that when the legal-tender notes were un-
der consideration it was decided that all the signatures
should be engraved.

The same act of July, 1861, authorized the issue of
Treasury notes bearing interest at the rate of seven and
three tenths per cent, per annum, payable three years
from their date. The rate of interest, equal to one cent
on $50 for every day, would, it was hoped, from its con-
venience of computation, give these notes some circula-
tion as currency. This hope was not realized, and these
notes belong to the investment rather than the currency
issues of the Treasury. They were known by the name
of " seven-thirties " from their rate of interest.

The suspension of specie payment by the banks in
December, 1861, caused a disappearance of the gold and
silver coins from circulation with marvellous celerity.
They seemed to vanish in a day ; probably into the pri-
vate hoards of the people, since the specie of the banks
failed to show any considerable increase. War existed,
no one could predict the future, the thrift and caution
of the people led them to lay something aside which
could not lose its purchasing power. They hastened to
lay hold of these coins, and secrete them where they
could be found when other means of subsistence failed.

The scarcity of these coins produced great inconven-
ience in business. It became almost impossible to make
change in the ordinary purchases from dealers and mer-
chants. Shinplasters began to make their appearance
to supply the deficiency. In the rebellious states these



300 RECOLLECTIONS OF PRESIDENT LINCOLN

were not only issued by individuals and private corpora-
tions, but by states, counties, cities, towns, and all other
municipal corporations. A collection of these rebel shin-
plasters, upon all kinds of paper, from white writing to
broAvn wrapping, would now be an interesting memento
of the war, but in a pecuniary sense absolutely worth-
less.

The credit of devising a lawful and adequate remedy
for this inconvenience belongs to General Francis E. Spin-
ner, Treasurer of the United States. He found it impos-
sible to facilitate, as he desired to do, the payment of the
soldiers and sailors, and to conduct the business of the
Treasury with the small coins at his command. He
therefore arranged with the Post-office Department to
redeem in unused stamps such postage-stamps as might
be used for currency. In a short time his department
manufactured and introduced a new issue. All the de-
nominations were of uniform size. A piece of paper,
with one stamp pasted on it, was five cents ; one with
two stamps, ten cents ; five stamps, twenty-five cents ;
and ten stamps, fifty cents. In this way, at the cost of
a little labor, a considerable amount of small change was
manufactured. This currency became so popular that,
instead of using stamps, plates were engraved for each
denomination, in imitation of the manufactured notes,
the impressions from which had the same legal qualities
and were used for the same purposes. These impressions
were called the "postage currency." They were after-
wards authorized by the act of July 17, 1862, which di-
rected the secretary to furnish to the assistant treasu-
rers " the postage and other stamps of the United States,
to be exchanged by them on application for United States
notes." These stamps were receivable in payment of all
dues to the United States of less than five dollars, and



AND HIS ADMINISTRATION. 3Q1

could be exchanged for United States notes when pre-
sented in sums of not less than five dollars. The same
act put an end to the further issue of shinplasters, by
making the issue or circulation, by private persons or
corporations, of notes or tokens for less than one dollar,
punishable by fine and imprisonment.

Although it did not come under my notice at the time,
it appears from articles by Mr. C. Gregory, in the Phi-
latelic Journal, in the year 1888, that there was prepared,
and there have been recently submitted to me, specimens
of an ingenious device for utilizing postage stamps as
currency. It was invented by Mr. J. Gault, of New York
city, and was patented in August, 1862. It consisted in
encasing the stamp, with a thin sheet of mica covering its
face, in a sheet of copper, neatly turned over its edges, and
the mica cover, in the form of a circular plaque, having



Online LibraryL. E. (Lucius Eugene) ChittendenRecollections of President Lincoln and his administration → online text (page 21 of 35)