David Sundman writes:
E-Sylum readers may find this short article on the Gold Room in New York during the U.S. Civil War of interest. The account is
from the Treasury Historical Association’s June newsletter.
Regulating Wall Street During the Civil War
In the first year of the Civil War, the system of state banks ground to halt, taking down with it the monetary system of the country and
credit markets. Unwilling to borrow money at whatever interest rates the banks of the major cities of the North proposed, Congress passed the Legal
Tender Act, creating the first paper money backed only by the credit of the government in the United States since the American Revolution.
Very rapidly, financial elites found themselves entangled in this new world of "greenbacks." Federal monetary policy and
progress on the battlefield began to exercise greater control over the course of business in the North. Financiers in New York City
eventually stumbled upon a way to leverage this new state of affairs with the creation of a thriving trade in futures contracts for gold.
The most important of these markets was the New York “Gold Room.”
In the Gold Room, Bulls could buy gold for greenbacks, often trying to capitalize on recent Union defeats on the battlefield. Gold Room
trades quickly highlighted the precarious hold of the government over the economy of the North, as the quote on the price of gold in
greenback dollars became the prime financial indicator of the Union's economic health affecting prices and the ability of the
government to finance the war. Over the course of the war, government leaders would find themselves incapable of controlling or
understanding this market that they helped create, while financial leaders would discover that this new central power in the market was
In the summer of 1864, Congress attempted something new in American history: they banned all future contracts for gold. The Gold Room
promptly closed its doors. Yet, without a real power to enforce the law, traders merely carried on the trade in secret and pushed the price
of gold to an all-new high. Shocked by their failure, Congress repealed the law less than a month later.
Until the resumption of specie payment in 1879, the only reliable means for federal leaders to regulate the price of gold and greenbacks
was to sell the Treasury’s gold reserves on the open market. Rather than a curiosity of the Civil War Era, the issue of the Gold Room
stands as an early chapter in the story of the relationship between the federal government and Wall Street that would develop in fits and
starts over the next 150 years.
For more information on the Treasury Historical Association, see:
Thanks. Looking online for more information I discovered this book on the history of the New York Gold Room. Here's an excerpt from
the publisher's blog, which was the source of the picture I added above (the Treasury Historical Association was unillustrated).
In all American history since 1789, with its many financial booms and busts, only once has the United States Congress ever stepped in and
closed down a major financial market in the middle of active trading, trying to stop speculation and cool prices. This took place in 1864 at one of
the bloodiest points in the Civil War, prompted by a case of war profiteering in the extreme. It failed miserably. It’s target? The New York Gold
Exchange, or Gold Room.
A British-born writer named Kinahan Cornwallis (1839-1917) witnessed this event while working in New York City as a reporter for the New
York Herald. We at Viral History Press LLC are proud now to bring you Kinahan's account, first published in pamphlet form by A.S.
Barnes & Company in 1879...
To read the complete article, see:
BOOKS- The NEW YORK GOLD ROOM: Wall
Street's Big Gamble on the Civil War (http://coffeewithken.blogspot.com/2012/05/books-new-york-gold-room-wall-streets.html)
Wayne Homren, Editor
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