Ulysses S. Grant and his administration, including his cabinet, suffered many scandals, leading to a continuous reshuffling of officials. Grant, ever trusting of his chosen associates, had strong bonds of loyalty to those he considered friends. Grant was influenced by political forces of both reform and corruption. The standards in many of his appointments were low, and charges of corruption were widespread.Hinsdale (1911), pp.207, 212–213 At times, however, Grant appointed various cabinet members who helped clean up the executive corruption. Starting with the Black Friday (1869) gold speculation ring, corruption would be discovered in seven federal departments. The Liberal Republicans, a political reform faction that bolted from the Republican Party in 1871, attempted to defeat Grant for a second term in office, but the effort failed. Taking over the House in 1875, the Democratic Party had more success in investigating, rooting out, and exposing corruption in the Grant Administration. Nepotism, although legally unrestricted at the time, was prevalent, with over 40 family members benefiting from government appointments and employment. In 1872, Senator Charles Sumner, labeled corruption in the Grant administration "Grantism."
The unprecedented way that Grant ran his cabinet, in a military-style rather than civilian, contributed to the scandals. For example, in 1869, Grant's private secretary Orville E. Babcock, rather than a State Department official, was sent to negotiate a treaty annexation with Santo Domingo. Grant never even consulted with cabinet members on the treaty annexation; in effect, the annexation proposal was already decided. A perplexed Secretary of Interior Jacob D. Cox reflected the cabinet's disappointment over not being consulted: "But Mr. President, has it been settled, then, that we want to Annex Santo Domingo?" Another instance of Grant's military-style command arose over the McGarrahan Claims, a legal dispute over mining patents in California, when Grant overrode the official opinion of Attorney General Ebenezer R. Hoar.Hinsdale 1911, pp.211–212 Both Cox and Hoar, who were reformers, eventually resigned from the cabinet in 1870.
Grant's reactions to the scandals ranged from prosecuting the perpetrators to protecting or pardoning those who were accused and convicted of the crimes. For example, when the Whiskey Ring scandal broke out in 1875, Grant, in a reforming mood, wrote: "Let no guilty man escape". However, when it was found out that Orville Babcock was indicted, Grant unprecedentedly testified against the government on behalf of the defendant. During his second term, Grant appointed reformers such as Benjamin Bristow, Edwards Pierrepont, and Zachariah Chandler who cleaned their respective departments of corruption. Grant finally dismissed Babcock, who was linked to several corruption charges and scandals, from the White House in 1876. It was with the encouragement of the reformers that Grant established the first Civil Service Commission, although other Republicans did not support him and the effort withered.#McFeely-Woodward (1974), pp. 133–134Cengage Advantage Books: Liberty, Equality, Power: A History of the American People (2012), p. 593 Grant's scandals have overshadowed his presidential achievements.
Grant's temperament and character Grant was reputedly honest about money matters. However, he trusted and protected his close associates, in denial of their guilt, despite evidence against them.Kiersey 1992Woodward 1957 According to C. Vann Woodward, Grant had neither the training nor temperament to fully comprehend the complexities of rapid economic growth, industrialization, and western expansionism. During his presidency, Grant enjoyed associating with men of wealth and influence, but he was also personally generous to the poor. Grant often treated men of superior intelligence and ability as threats rather than assets. Instead of responding with trust and warmth to men of talent, education, and culture, he turned to his military friends from the Civil War, to his rich friends, and to politicians new as himself. According to Grant's son, Ulysses Jr., his father was "incapable of supposing his friends to be dishonest." According to Grant's Attorney General George H. Williams, Grant's "trusting heart was the weakness of his character." Williams also said Grant was slow to make friends, however, once friendships were made "they took hold with hooks of steel."
Many of Grant's associates were able to capture his confidence through flattery and brought their intrigues openly to his attention. One of these men, Orville E. Babcock, was a subtle and unscrupulous enemy of reformers, having served as Grant's personal secretary for seven years while living in the White House. Babcock, twice indicted, gained indirect control of whole departments of the government, planted suspicions of reformers in Grant's mind, plotted their downfall, and sought to replace them with men like himself. President Grant allowed Babcock to be a stumbling block for reformers who might have saved Grant's presidential legacy. Grant's secretary of state, Hamilton Fish, who was often at odds with Babcock, made efforts to save Grant's reputation by advocating that reformers be appointed to or kept in public office. Grant also unwisely accepted gifts from wealthy donors that cast doubts on his reputability.Nevins (1957), Hamilton Fish: The Inner History of the Grant Administration. Volume: 2, pages 719, 720, 727
Scandals
Black Friday Gold Panic 1869
The first scandal to tar the Grant administration was Black Friday, also known as the Gold Panic, that took place in September 1869, when two aggressive private financiers attempted to corner the gold market in the New York City Gold Room, with blatant disregard to the nation's economic welfare. The scandal involved Treasury Department policy and personnel, but most of the financial damage directly affected the national economy and New York's financial houses. The intricate financial scheme was primarily conceived and administered by Wall Street manipulator Jay Gould and President Grant's brother-in-law, Abel Rathbone Corbin, who would use his personal relationship to influence the President. Gould's partner, James Fisk, joined the conspiracy later. Their plan was to convince President Grant not to sell Treasury gold, ostensibly to increase the sales of the country's agriculture products overseas, which would increase the shipping business of Fisk and Gould's Erie Railroad. Actually, they hoped to temporarily corner the gold market and make a killing. Gould and Corbin were able to get Daniel Butterfield appointed as the Assistant Secretary of the Treasury in New York City. Gould had given him a $10,000 bribe to in exchange for inside information about the Treasury Department's gold sales. On June 5, 1869, while Grant was traveling from New York to Boston on The Providence, a ship owned by Gould and Fisk, the two speculators urged Grant not to sell any gold from the Treasury and attempted to convince him that a high price of gold would help farmers and the Erie Railroad.Ackerman (2011), The Gold Ring, p. 60 President Grant, however, was stoic and did not agree to their suggestion to stop releasing Treasury Gold into the market.
Grant's Secretary of Treasury, George S. Boutwell, continued to sell Treasury gold on the open market. In late August 1869, President Grant consulted with businessman, A. T. Stewart, Grant's initial Cabinet nominee for Secretary of Treasury, concerning the Treasury's selling gold. Stewart advised Grant that the Treasury should not sell gold, in order that the Government would not be involved in the gold market.Ackerman (2011), The Gold Ring p. 84 Grant accepted Stewart's advice and wrote to Boutwell that selling extra Treasury gold would upset agriculture sales. Boutwell had, on September 1, originally ordered $9,000,000 in gold to be sold from the Treasury in order to buy up U.S. Bonds with greenbacks. However, after receiving a letter from Grant, Boutwell canceled the order. Previously, Secretary Boutwell had been selling regularly at $1,000,000 of gold each week.Ackerman (2011), The Gold Ring, p. 91 On September 6, 1869, Gould bought the Tenth National Bank, which was used as a buying house for gold, and Gould and Fisk then began buying gold in earnest. As the price of gold began to rise, Grant became suspicious of possible manipulation and wrote a letter to Secretary Boutwell on September 12, stating "The fact is, a desperate struggle is now taking place...I write this letter to advise you of what I think you may expect, to put you on your guard." However, President Grant's personal associations with Gould and Fisk gave them the clout that they needed to continue their financial scam on Wall Street.Smith 2001, pp.481–490Hesseltine (1935), Ulysses S. Grant: Politician, pp 171–175McFeely (2002), Grant: A Biography, pp 321–325
Sometime around September 19, 1869, Corbin, at the urging of Gould, sent a letter to Grant desperately urging him not to release gold from the Treasury. Grant received the letter from a messenger while playing croquet with Porter at the mansion of Grant's kinsman in Washington, Pennsylvania. He finally realized what was going on and was determined to stop the gold manipulation scheme. When pressed for a reply to Corbin's letter, Grant responded curtly that everything was "all right" and that there was no reply. One Grant biographer described the comical nature of the events as an "Edwardian farce." Grant, however, did have his wife Julia respond in a letter giving advance warning to Grant's sister and recommending that her husband Abel Corbin needed to get out of the gold speculation market. When Gould visited Corbin's house, he read the letter from Mrs. Grant containing the warning from Grant, after which he began to sell gold, while also buying small amounts of gold in order to keep people from getting suspicious. Gould never told Fisk, who kept buying gold in earnest, that Grant was catching onto their predatory scheme.Bunting III 2001, pp.96–98
Secretary Boutwell was already keeping track of the situation and knew that the profits made in the manipulated rising gold market could ruin the nation's economy for several years. By September 21 the price of gold had jumped from $137 to $141, and Gould and Fisk jointly owned $50 million to $60 million in gold. Boutwell and Grant finally met on Thursday, September 23, and agreed to release gold from the treasury if the gold price kept rising. Grant wanted $5,000,000 in gold to be released while Boutwell wanted $3,000,000 released. Then, on (Black) Friday, September 23, 1869, when the price of gold had soared to $160 an ounce, Boutwell released $4 million in gold specie into the market and bought $4,000,000 in bonds. Boutwell had also ordered that the Tenth National Bank be closed on the same day. The gold market crashed and Gould, Corbin, and Fisk were foiled, while many investors were financially ruined.
The gold panic devastated the United States economy for months. Stock prices plunged and the price of food crops such as wheat and corn dropped severely, devastating farmers who did not recover for years afterward. Gould had earlier claimed to Grant that raising the price of gold would actually help farmers. Also Fisk refused to pay off many of his investors who had bought gold on paper. The volume of stocks being sold on Wall Street decreased by 20%. Fisk and Gould, who could afford to hire the best lawyers, were never held accountable for their profiteering, as favorable judges declined to prosecute. Gould remained a powerful force on Wall Street for the next 20 years. Fisk, who practiced a licentious lifestyle, was killed by a jealous rival on January 6, 1872. Butterfield later resigned.