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The E-Sylum (1/29/2017)

Book Content

Pablo Hoffman of New York City forwarded this book excerpt from Jay Cooke's Gamble by M. John Lubetkin, published in the Delanceyplace blog. Thanks! -Editor

Jay Cooke Philadelphia's Jay Cooke, who became the wealthiest man in America before losing most of his fortune in the Panic of 1873, was the person most responsible for raising money for Abraham Lincoln and the North at that perilous early moment when the country only had $1.7 million in hand. He did it through a powerful innovation -- instead of trying to sell the bonds just to the wealthy and to institutions, he assembled a large sales team and sold bonds to the middle class. In the final tally, over 500,000 individuals bought war bonds, establishing a precedent that was successfully followed in both World War I and World War II:

"Jay [Cooke]'s tiny banking house [in Philadelphia] opened just as the Civil War began, The first lengthy con­flict of the industrial era, the war forced both sides to design, construct, and operate effective logistical systems as well as to raise money systematically. Besides raising taxes, another option was to print paper money and hope for battlefield success. This salutary approach (if one is not upset by inflation) worked quite well for the South but proved flawed after Gettysburg and Vicksburg. Unfortunately for the North, the Treasury had just $1.7 million in hand when Lincoln took office and was soon spending a million dollars a day. Given the lack of cash and what little tariffs and fees brought in, the federal government decided to assume a 90-day war.

"Neither [Treasury Secretary Salmon] Chase nor Lincoln wanted to finance the war by printing money or adding high income taxes; so they temporized, attempting to sell bonds.

"Following Fort Sumter, Cooke was determined to assist the North. ... While most Northern states gave the federal government men, equipment, and cash, Pennsylvania, which had promised 10,000 troops, was stymied because of previous bond defaults. Cooke volunteered to sell the bonds but was rebuffed. He then watched helplessly as the state's financial officials discovered that they could not sell the bonds. Finally, they sheepishly came back to him. Upon receiving approval on May 28, Cooke charged ahead with his old friend Anthony J. Drexel, Philadelphia's dominant banker. In three weeks they sold over $3 million in bonds. Cooke himself subscribed $10,000, which became public knowledge and added to the public's faith in him: he sold only securities in which he also invested.

Civil War 7-30 loan flyer "On July 21, 1861, the North was defeated at Bull Run. Federal censors tried to block the news, but a Philadelphia Inquirer reporter slipped back into Philadelphia the next morning. The news quickly spread, and businessmen wandered the streets in shock. Cooke, as surprised as anyone, swung into action. Instead of trying to gloss over the battle, he made it a rallying cry, just as the Alamo had been or Pearl Harbor and the World Trade Center would be. Going from one downtown office to another, Cooke had $l.75 million in pledges by noon, twenty hours after the battle's end. He instantly became a national hero and knew he had a workable formula, whereas Chase saw a competitor grabbing headlines. Probably prodded by Lincoln, Chase took Cooke with him to New York in August as the government tried to raise $50 million.

To read the complete article, see:

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