William O. Stoddard of upstate New York was one of three personal secretaries utilized by Lincoln, joined by John Hay and John Nicolay. Stoddard had an adventurist personality and became one of the office-seeking multitude looking for appointment in Lincoln’s new Republican administration.
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“Stoddard was high-spirited . . . And almost every man who can discover means for doing so is gambling in stocks and gold.” This game is fascinating, he says, because of “the sudden and unaccountable jumps and falls of what are called its prices, meaning the price of greenbacks. They are rather the pulsations of the public hope and fear concerning the national credit.”
To put the case as simply as possible, the new greenbacks the government issued in 1862 were not backed by gold, but they were placed on par value with bonds that were. The Union had not coin enough to pay its bills . . . It was patriotic to hold greenbacks, but even the truest patriot had himself and his family to feed. So rumors of distant battle, another Union defeat or embarrassment, would set many citizens scrambling for gold and speculators selling paper money short – or buying it in the belief a Union victory would send it soaring again.
The speculation that year was running insanely wild in New York and other financial centers, and I formed the idea that it was almost true patriotism to be what is called a “bear” in gold. I therefore went in, a little at first and then deeper . . . I had not the least idea that there was anything wrong in it for a fellow in my position . . .”
Stoddard had noted, as he did every day, the price of gold, selling at $132 per ounce, and it would go even higher if [General Ambrose] Burnside failed in Virginia. He had his eye on the stock exchange, especially the gold and currency markets, where he hoped to make his fortune.
Rumors of Lee’s rapid advance [into Pennsylvania] spread panic in the mid-Atlantic cities from Baltimore to Harrisburg, Pennsylvania. The price of gold had been rising as the result of Union defeats; no the fear of a Confederate invasion spread to the financial markets as well. The price of gold was soaring, and Stoddard – the shrewd gambler – was “shorting” the metal and piling up greenbacks . . . [and] had made a killing in the gold market.
“Does the President take any interest in Wall Street gambling operations?” Stoddard asked rhetorically in his memoirs. “Of course he does, for the currency is the life of his policies.”
Over dinner one evening, they were discussing precious metals. “What is the price of gold this morning? Is it up or down? Lincoln asked his secretary. “Up Mr. Lincoln. The street is wild.”
“Well now,” the president replied, “they don’t know everything. If I were a bear on Wall Street, and if I were short of gold, I’d keep short. It’s a good time to sell.”
New York financier Clinton Rice testified that he made Stoddard’s acquaintance in 1862, when he told Rice “he enjoyed superior facilities for obtaining in advance all information of a political, official and diplomatic character likely to affect gold, stocks and other commodities. I entered into an arrangement with him [Stoddard] to furnish me telegraphic cipher dispatches.” Rice would use the information to invest in stocks or gold, and divide profits with Stoddard “share and share alike.”
As soon as there was “any important action of the Cabinet, or on receipt by the President or heads of departments of any important military or naval . . . operation” or diplomatic development, the secretary would wire Rice at once in cipher and the financier would place his bets. [Stoddard referred] to the “hollow” Union victory at Bristoe Station three weeks earlier, and how much the press had exaggerated the importance of the event. “I think I could run a gold line here better than anywhere else . . .”
(Lincoln’s Men: The President and His Private Secretaries, Daniel Mark Epstein, HarperCollins, 2009, excerpts pp. 100; 133; 135; 152; 172-173)
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