Wall Street History

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Wall Street History

09/28/2001

The Presidency of Ulysses Grant, Part II

Yes, it seems like eons ago that we began our series on the
scandals during the presidency of Ulysses S. Grant. Other events
overtook the continuation of it, but now we''re prepared to plow
forward.

You''ll recall that for all his heroic efforts during the Civil War,
Ulysses Grant was ill-prepared for the White House. In part one
we discussed the Union Pacific / Credit Mobilier affair, which
enmeshed 13 member of Congress. Continuing, we take a look
at other scandals, which tarnished Grant''s administration.

Part of the president''s problem was that while he was aware of
his shortcomings, he still fell prey to influence peddlers and
remained awestruck by men of wealth, never having much
himself. He was also very secretive and seldom took the counsel
of others, particularly when it came to his cabinet appointments.
He would pay for this many times over.

One of the more celebrated fiascoes of the Grant presidency was
the case of the Dominican Republic. In 1870 the dictator
Buenaventura Baez, surrounded by financial speculators from
America, sought to sell his country to the United States. For its
part the U.S. always had an interest in a Caribbean naval base
and knew the Dominican government''s finances were a mess. It
was clear, though, that Baez was only after his own self-interest
and stood to profit handsomely from any transaction.

Grant''s Secretary of State was Hamilton Fish, who, basically,
being a Fish, smelled one with this offer to sell the country. He
told President Grant that the U.S. shouldn''t pursue it, but Grant
wanted to anyway, so Grant sent his trusted adviser General
Orville Babcock to Santo Domingo to investigate and Babcock
returned with a draft treaty of annexation. Grant, who greatly
admired Babcock, then sent him back a second time with an
actual treaty and, in case it was rejected by Baez, an agreement
for the lease of Samana Bay as a naval station. Babcock returned
with a signed document and Grant pledged his full support,
sending warships down south to protect Baez against threats to
his life. Thankfully, the U.S. Senate refused to ratify it, which
led to many petty acts of reprisal by Grant against key members
who turned the treaty down.

There were some smaller, yet thoroughly outrageous scandals,
such as Congressman Benjamin Butler''s salary grab. Butler
spearheaded passage of an act, which doubled the salary of
government officials. In the case of the president, Grant saw his
compensation rise from $25,000 to $50,000. No one doubted the
appropriateness of this move. But Butler also saw to it that the
increase would be retroactive for two years for all congressmen,
including those defeated in the last election.

And there was the case of New York''s Customs House, where
collector Thomas Murphy, a personal appointee and intimate
friend of the president''s, inherited and sustained a system of
graft. A Colonel Leet used presidential influence to secure a
monopoly on the storage of imports, after which he would charge
a full month''s rent for one day''s storage in the Port of New
York. Huge profits resulted in this illegal bookkeeping.

At the end of his second inaugural address (1873) historian
Michael Beschloss records that Grant said, "I have been the
subject of abuse and slander, scarcely ever equaled in political
history, which today I feel that I can afford to disregard and in
view of your verdict, which I can gratefully accept as my
vindication."

Well, not quite. By 1875 one of the worst presidential scandals
was uncovered, the "Whiskey Ring," whereby conspirators
schemed to avoid taxes on liquor by bribing agents who should
have collected them. General James McDonald, another Grant
crony, was the supervisor of the Internal Revenue Bureau in St.
Louis. A network of revenue officials and distillers worked with
highly-placed friends in the federal Treasury department, the
goal being to hide the amount of taxes that should have been paid
on whiskey sales, while then diverting the unreported revenue to
Republican campaign coffers.

Many knew of the scandal, but all attempts to investigate it were
squashed. At one point Grant went to St. Louis himself and was
a guest of McDonald''s. Finally, Benjamin Bristow, who had just
taken over as secretary of the Treasury, discovered that Grant''s
personal secretary, General Babcock of Santo Domingo fame,
had received a direct bribe to keep quiet about the scheme and
also to have the investigation called off. McDonald was later
found guilty and jailed, but Babcock, while forced to resign, was
declared not guilty (due largely to prosecutorial ineptness).

But perhaps the worst scandal occurred when Secretary of War
General William Belknap was charged with receiving bribes
from the sale of trading posts out in the West. Belknap received
his funds from a man who, in turn, sold his interest to a third
party who then actually conducted the business. President Grant
once again staunchly defended his friend, but unlike the previous
cases where there might have been a shred of potential
innocence, this was a case with irrefutable evidence. [To
compound matters, Belknap''s payments went to his wife who
died in 1874, at which point Belknap married his deceased wife''s
sister, and the payments then flowed to her.] Grant was
defending a man guilty of massive corruption and the House was
set to proceed with impeachment proceedings against the
secretary.

But as was typical of the Grant administration, Belknap went
running to the president when impeachment seemed likely and
asked the president to accept his resignation. Grant immediately
complied, as, literally, senators came rushing into the president,
urging him not to do so. But it was too late. While the House
proceeded to impeach Belknap, the fact that Grant had accepted
the resignation beforehand led to his eventual acquittal.
Afterward, President and Mrs. Grant continued to welcome the
Belknaps into the White House.

But wait, there''s more.next week.

Sources: Same as part one.

Brian Trumbore

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