Tuesday, September 19, 2017

President Grant's Exploitative Economic Plan

After the first transcontinental railroad connected Omaha with Sacramento during President Grant’s first year in office in 1869, other tycoons sought government financing to build additional lines. One was Jay Cooke whose investment company was the leading underwriter of federal bonds during the Civil War. Cooke backed the Northern Pacific Railroad, which was to connect Lake Superior with Puget Sound.

Originally chartered by Congress in 1864, the Northern Pacific had not built a mile of track by 1870. Cooke reasoned that he could buy the company at a bargain price if he could later get Congress to extend the life of its charter and provide him other concessions. After paying consulting fees to one of President Grant’s personal secretaries, Horace Porter, he learned that Grant was as “firm as a rock” on a bill tailor-made to his needs.

The 1870 act gave the company more time to complete construction without losing its rights to land subsidies, which were unusually generous. (The NP would eventually be given enough land to encompass all the acreage in a state the size of Missouri.) It also permitted Cooke to collect a $200 fee in stock for each $1,000 bond sold as well as a 12% cash commission.

As the railroad stretched westward from Minnesota rumors of corruption filtered back east. Civic leaders in the towns along the route competed to have their sites included on the line and contractors seemed to be inflating construction costs. Still, Cooke was selling about a million dollars in bonds every month. Overseas investors arrived on junkets to ride the rails to the ever-lengthening end of the line. By the late summer of 1873 it had reached Bismarck in present-day North Dakota.

But the railroad was generating little revenue. Nearly all its operations and construction were funded by debt. Anything that prevented Cooke from selling more bonds and stock would cause the Northern Pacific to coast to a halt. A March 1873 congressional report about corruption and political bribery involving the original transcontinental railroad was just such a factor. The public perceived the scandal as an indictment of widespread immorality within the railroad industry and the federal government.
Nonetheless, when Jay Cooke & Company collapsed on September 18, 1873 there could hardly have been a bigger blow to the public confidence. One Philadelphia newspaper reported, “No one could have been more surprised if snow had fallen during a summer noon.” Without new sales of Northern Pacific securities, Cooke & Company ran out of cash. The night before it shut down President Grant was a Cooke house guest. The two shared a breakfast the very morning of the debacle.

Cooke’s failure triggered a panic and a five-year depression. The New York Stock Exchange closed for ten days, amplifying the panic. Business failures in 1873 climbed to 5,000, from 4,000 in 1872 and 3,000 in 1871. Track construction across the nation declined by a third in 1874, causing 500,000 layoffs within the railroad eco-system including the iron and steel industry. Prices fell. Pig iron dropped from $56 a ton in 1872 to $17 five years later. Wages fell about 50% from 1873 to 1877. The country seemed to be overrun with vagrants.

As the economy progressively weakened in the months following Cooke’s bankruptcy, President Grant reflected upon how earlier gold discoveries in California and the Rocky Mountains had promptly energized America’s economy. Thus, in the summer of 1874 he sent a military expedition into the Black Hills of present-day South Dakota to look for evidence of rumored gold deposits. Since the Hills were part of a Lakota Sioux reservation—officially off limits to white civilians—the expedition’s goal was falsely represented as a site search for a new military

Lieutenant-Colonel George Custer led the thousand-man expedition that included President Grant’s eldest son as well as three newspaper reporters, a photographer and two gold miners. Although the group saw few Indians they discovered modest, but tempting, quantities of gold. Soon the first rush of prospectors began tearing through the Hills. Within two years the largest deposit in the continental United States—ultimately to become the Homestake Mine—was discovered. A year after discovery, George Hearst and two partners purchased the mine for $70,000. Before ending production in 2001, Homestake yielded over $1 billion in gold and helped finance the businesses of George’s legendary son, William Randolph Hearst, and modern publications such as Women’s Wear Daily, Elle, and Cosmopolitan.

Initially Grant made little effort to control the prospecting, but within a year there were so many prospectors that the he decided that the government must acquire the Black Hills from the Sioux. When chief Red Cloud learned of Grant’s intent in May 1875 he traveled with several other chiefs to Washington to meet with the “Great White Father.” The Indian leaders reminded Grant that the 1868 Treaty of Fort Laramie granted their tribes ownership of the Black Hills in perpetuity.

Grant told Red Cloud that the Indian leaders must confront two unpleasant truths. First, the government’s obligation of under the treaty to supply rations to the Sioux reservation had expired. They continued only because of the President’s kind feelings toward the tribes. Second, Grant could not prevent miners from swarming over the Black Hills. He concluded by telling his visitors that they must either agree to cede the Black Hills or risk losing their rations. Red Cloud returned to the Great Plains without an agreement.

In response Grant organized a civilian commission that traveled to the Dakota Territory in September 1875 to negotiate the purchase of the Black Hills. The Indians demanded more than ten times the amount the commission was authorized to pay. When the commission leader returned to Washington he recommended that the Sioux be starved until they agreed to cede the Hills at a price to be set by Congress.

But Grant settled on a more radical solution. He resolved to contrive a reason to start a war in order to justify seizing the Hills by force. His plan was to provoke the small minority of Lakota living off their reservation in “un-ceded” lands where the Fort Laramie Treaty granted them hunting privileges. Historian John Gray explained that, “A punishing terrifying campaign against these wild bands would certainly subdue them and at the same time so intimidate their…relatives [on the reservation] that a legal three-fourths might sign away the Black Hills. And failing that, the nation could seize the Black Hills as spoils of war without legal hindrance.”

In November 1875 Grant summoned the general commanding the region and the commissioner of Indian affairs to a White House meeting. Although the general and the commissioner were both on record as reporting that the Lakota had been peaceful in recent years, an inspector of the Indian Affairs Bureau issued a contrary report nine days later. According to historian James Donovan the report “cited various trumped-up accusations and smoothly worded falsehoods regarding Indian violations.” Accordingly, the “wild” Indians in the hunting territories were told that they must return to the reservation by January 31, 1876 or be declared hostile, which would thereby authorize the Army to force their return.

It was an impossible demand. The weather-weakened Indian ponies could not move entire villages that included women and children. One warrior later said, “It was very cold and many of our people and ponies would have died in the snow. We were in our own country and doing no harm.” Even the departmental military commander said the ultimatum “will in all probability be regarded as a joke by the Indians.”

After an abortive winter campaign, the Army launched a three-pronged offensive against the off-reservation Lakota in June 1876. They converged on the Powder River country in the southeastern part of present-day Montana. One column approached from the south out of Wyoming and a second approached downstream along the Yellowstone River from western Montana. A third column under General Alfred Terry marched upstream along the Yellowstone from the column’s starting point at present-day Bismarck, North Dakota. Terry’s force included the Seventh Cavalry Regiment under Custer’s command.

In response, the scattered Indian settlements concentrated into a single big village along a tributary of the Big Horn River blandly named the Little Big Horn. The Wyoming column was quickly turned back at the Battle of Rosebud Creek. As Terry continued marching westward along the Yellowstone with his infantry, he sent the Seventh Cavalry on a reconnaissance in force south of the river to find the Indian village, or villages. Custer located the Little Big Horn village on 25 June. He divided his command into three components and attacked the village with two of them. The third guarded the slower moving pack train but was also sent on a vague reconnaissance mission to the southwest, perhaps to search for unseen hostiles.

The village had about 1,800 warriors as compared to about 500 troopers in the entire Seventh Cavalry. Custer’s column totaled 225 men. He allocated 140 of the regiment’s men to Major Marcus Reno with orders to attack the village from the south, while Custer apparently intended to attack the village from either the east or the north. The pack train under Captain Frederick Benteen contained 125 men.

After Reno’s attack was repulsed his command was thrown into a disorderly retreat to a defensive position on the east side of the Little Big Horn on a bluff overlooking the stream where Benteen’s force joined him. The Indians annihilated Custer’s troopers, also east of the river but at points about four-to-five miles north of the Reno-Benteen hill. Reno and Benteen suffered 53 killed and 60 wounded. The Lakota moved their village beyond sight of the enemy the evening before General Terry’s infantry arrived on 27 June.

The Indian victory was merely temporary and only intensified white hostility. A new Indian commission led by George Manypenny arrived in Dakota Territory in September 1876 to annex the Black Hills from the Sioux who remained on the reservation. When the Indians replied that the Fort Laramie Treaty required a three-quarter super majority vote by their adult males, the commissioners replied that the treaty had been abrogated when the Indians attacked the cavalry. This was hard for the Sioux who had remained on the reservation to understand since none of them had fired a shot. To compel acceptance some commissioners implied that unless the Indians signed they would be moved to present-day Oklahoma, forfeit their firearms and horses and no longer be supplied rations. Congress approved the resulting Manypenny Agreement in February 1877.

Sioux descendants litigated the agreement well into the twentieth century. In 1980 the U. S Supreme Court awarded eight Sioux tribes $106 million in compensation for “a taking of tribal property,” but the tribes refused it. The money has remained in escrow and by 2011 grew to $1.3 billion due to accumulated interest. Prior to the Supreme Court ruling, a lower court judge wrote in 1975 of the Manypenny Agreement: “A more ripe and rank case of dishonorable dealing will never, in all probability, be found in our history.”

Philip Leigh
Tampa, Florida