USA > California > San Francisco County > San Francisco > San Francisco, a history of the Pacific coast metropolis, Volume I > Part 48
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There were some who, like Governor Stanford, urged the acceptance of the le- gal tender money of the government, but in most cases they were influenced by patriotic rather than financial or commercial motives. The majority, unshaken in the belief that the use of greenbacks would prove injurious, frowned upon their introduction and thus effectually prevented their circulation. That, however, did not interfere with their being made objects of speculation. Considerable amounts were regularly disbursed by the federal government and these were bought up by merchants who used them to meet their Eastern obligations, and later, when they had very greatly depreciated they were purchased in considerable quantities and hoarded in strong boxes against the day when the Union cause should triumph and the credit of the nation be fully restored.
The depreciation seriously affected employes of the federal government stationed on the Pacific coast, who continued to receive their salaries in paper money. They had a real grievance, for their dollars were sometimes more than cut in half when converted into current coin. As the cost of many commodities at the time was not much less in California, and particularly in San Francisco, than in other sections of the country where the depreciated government money freely circulated, they found it difficult to make ends meet. Clothing and most articles brought from the East cost nearly as much in gold in California as they did in the places where they were manufactured, but products of the state were somewhat cheaper. Although frequent representations of the injustice worked by these conditions were made to the authorities at Washington no substantial relief could be afforded to the suffer-
First Savings and Loan Society
Results of Refusal to Use Green- backs
Currency Speculation
Payments in Depreclated Currency
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ing government employes, but it was a common subject of comment at the time that none of the positions went begging.
It has been remarked that in the beginning the pressure of public opinion, un- aided by legislation of any sort, sufficed to prevent any considerable number of debtors taking advantage of the situation to pay debts contracted in gold with the depreciated currency. But the temptation held out by the enormous difference in value beween metallic and paper money, which constantly increased until the cul- minating point was reached when a greenback dollar was only worth 35 cents in gold finally overcame the scruples of many, and the tendency to take advantage of the opportunity to profit began to assume proportions which threatened to destroy the policy of maintaining a metallic currency. This possibility, however, was averted by legislative action, which had the effect of firmly establishing a system of specie payments which enabled California to maintain gold payments through- out the entire period of greenback depreciation.
Action of the Legislature
In 1863 the legislature passed what was popularly known as the specific con- tract law. In reality it was a series of amendments to the civil practice act which provided that contracts might be made in writing in which the kind of money to be accepted in payment or fulfillment of a contract could be specifically prescribed. The legislation was not in direct response to a popular demand. John F. Swift, a member of the assembly from San Francisco, had introduced a resolution in the lower house on February 19th, the object of which was to make the government legal tender notes the circulating medium in the state. It was rejected by the decisive vote of 49 to 11, and instead the amendments providing for the specific contract system after considerable discussion were adopted and became a law April 27, 1863.
Opinion of Specific Contract Law
The course adopted by the legislature aroused a great deal of feeling and was strongly condemned by ardent Unionists, who feared that the state's action would be construed into opposition to the policy of the federal government. The deter- mination of the people to retain metallic money, however, was steadfastly adhered to and the courts sustained their determination. The supreme court of the state decided that the amendments were constitutional, and the federal supreme court upheld the decision. The situation created by the variation in value of the gold and paper moneys had been profitably utilized by the merchants of San Francisco be- fore the passage of the amendments, and the decisions determining their constitu- tionality, but the removal of uncertainty gave a great impetus to trade which for a while sufficed to remove all doubts respecting the prudence of the course.
Merchants Profit by Adherence to Gold
Buying the greenbacks and selling for gold enabled the merchants to make great profits, and their prosperity for a while obscured the fact which, by some, was clearly perceived later, that an obstacle had been placed in the way of the development of the resources of the state by making it an undesirable place for settlement by men of small means living in the East who might wish to emigrate to California, but who could not afford to make the sacrifice involved by the neces- sity of converting their depreciated into "sound" money, which they found on investigation would not go much further than greenbacks in the way of purchasing land and such articles as they would be forced to buy in order to make a start in a new home.
Coast States Imitate
The number who looked at the subject from this standpoint was comparatively limited. They were so few that they scarcely affected the general belief that the
Few Debts Paid with Greenbacks
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profits of the traders in exchanging their enhanced gold for the products bought in the East with greenbacks more than compensated for any drawbacks resulting from the cause mentioned. The law worked effectively. The disposition to shirk obligations was reduced to a minimum by the general resort to methods which vir- tually converted every credit sale into a specific contract to pay in gold. All bills were made out with the legend "terms payable in United States gold coin" con- spicuously printed upon them, and greenbacks ceased to be offered in trade by any- one with the expectation that they would be received for any more than their quoted value. That the policy was generally regarded as wise may be inferred from the disposition shown by the peoples of the other Pacific coast states and territories to follow the example of California.
This general acceptance did not prevent renewed efforts to bring the currency of California in harmony with that of the rest of the country. The class who were solicitous that the relations of the state with the federal Union should remain har- monious were insistent that the specific contract legislation was unpatriotic, and they sought to bring about an abandonment of the gold policy. On the 6th of Febru- ary, 1864, a telegram was sent to Salmon P. Chase, then secretary of the treasury, asking his opinion on the subject. His reply was that he would be gratified to see "the people of California declare in favor of one currency for the whole peo- ple," but his suggestion to repeal went unheeded. In 1865, on the 20th of Decem- her, a bill was introduced into the state senate providing for the repeal of the specific contract system, but it was defeated in the following February by a vote of 18 to 10.
Out of this refusal to repeal grew a scandal, the charge being made that the measure was beaten by the expenditures of money. It was charged that seven sen- ators had received $12,000 each for their votes, but the editor of the paper making the accusation could or would not produce evidence to substantiate the charge. It was probably inspired by patriotic indignation that legal tender money of the United States should be made the football of speculators who, it was believed, were doing all in their power to profit by causing it to depreciate. The common sup- position at the time in San Francisco was that large sums of money were made by those dealing in paper currency, and that the chief operators would not hesitate to expend money to defeat legislation which would put an end to their business.
As late as 1870, when the question of fidelity to the Union could no longer be raised, the effort to make it absolutely impossible to introduce paper money into the state as a circulating medium was actively persisted in by the advocates of strict adherence to the gold system. In that year the speaker of the assembly de- clared that his constituents had sent him to Sacramento to secure the passage of a law which would make verbal as well as written contracts to pay in gold binding. The continued agitation of the subject was due to the growing conviction that the inflexible adherence of the people of California to metallic money was not redound- ing to the advantage of the state. It was urged that the opportunity which the merchant enjoyed of buying goods on a greenback basis, and selling them at gold prices, tended to discourage manufacturing; and that the effect necessarily must be to retard the growth of the state. It was also pointed out that the difference in the value of the two circulating mediums deterred men who desired to emigrate from the East to California from doing so, as it was well nigh impossible to con-
Attempts to Abandon Gold Money
A Legislative Scandal
Manufac- turing Receives a Setback
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vince them that the shrinkage of their money when converted from greenbacks into gold was more nominal than real.
Dealings in Specie
There was not much discussion of the abstract propositions involved in the money problem despite the fact that San Francisco merchants and business men generally had a greater familiarity with exchange operations than the peoples of other American cities outside of New York. Their dealings with the Orient, which began early, had accustomed them to considering the precious metals as objects of purchase and sale. For many years San Francisco was the center of the large specie dealings with China. Mexican dollars were brought to the City by water, and reshipped from this port to the Orient. This trade was a source of profit to the transportation companies, and to the brokers who dealt in Mexican dollars. While it lasted the habit of thinking of metallic money as a mere commodity, sub- ject only to the law of supply and demand became ingrained. In electing to stand by gold little consideration was given to the fear that the introduction of an inferior money would drive out the superior. The course adopted was dictated partly by the early distrust of paper money as a circulating medium, and the subsequent experience with hard money, which created the feeling that there is only one real kind of money; a feeling that still endures, as is evinced by the fact that metallic money still circulates in California to the exclusion of its paper representatives.
Experience on the Gresham Law
The successful effort of California to maintain a metallic currency during the long period while the paper money of the government was greatly depreciated has never received the attention it merits. Students of the money problem instinctively avoid the difficulties encountered in considering what is conceded to be a unique experience. Were the people of California able to maintain specie payments be- cause they resolved to do so? If a mere resolution to that effect, and the enactment of laws giving effect to the resolution proved efficacious in the case of California, why would not a similar attitude on the part of the other states of the Union have produced the same result? Many years after the close of the Civil war questions of this sort were asked, and found a partial answer in the declaration attributed to Horace Greeley, that the only way to resume specie payments was to resume. The suggestion of the editor was acted upon, and the premium on gold, which had gradually approached the vanishing point, disappeared entirely.
Peculiar Conditions in California
Obviously, however, the conditions so far as the whole nation was concerned differed greatly from those existing in California. Although the enormous quanti- ties of gold extracted from the soil of this state, prior to the beginning of hostili- ties, were nearly all exported, chiefly to the East, the dependence of the people of that section of the Union upon Europe for the greater part of the manufactured goods consumed by them resulted in a steady adverse trade balance, the payment of which drained from the country all the precious metals mined within its borders. California up to the end of 1860 had produced nearly $640,000,000, of which prob- ably over $600,000,000 had been shipped to the Atlantic seaboard, but according to the best information available all of this vast sum, except a small quantity re- tained in hoards had been shipped out of the country.
Why Greenbacks Were Used
It is sometimes said that it was the inferior paper currency which caused the disappearance of the gold and silver at the outbreak of the Civil war, but this dis- regards the fact that the excuse for the issuance of legal tender currency by the government was the absolute necessity of providing a circulating medium of some sort. Metallic money had completely vanished before the government presses were
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set to work. The people of the East were compelled to resort to all sorts of expe- dients to provide themselves with currency. "Tokens" and "shin plasters" of all kinds, many of them emitted in defiance of law, and none of them by its authority, were gladly received and used until the federal government stepped into the breach and supplied the need. Business was nearly paralyzed, and would have been com- pletely suspended, had not a money of some kind been provided. It was assumed by congress that the precious metals could not be secured in sufficient quantity to meet its obligations, hence its embarkation upon the doubtful experiment of a paper currency.
The conditions were wholly different in California. The beginning of the war found the people of the state abundantly provided, as far as mere monetary needs were concerned, with gold, and what was of more consequence the outlook for a continuance of the supply of the precious metal was favorable enough to warrant the belief that any inroad on the existing available amount would be repaired by the fresh production. The product of the mines in 1860 was $44,095,163, and there was every reason to believe that something like this rate of production would be maintained for some time to come. This expectation, however, was disappointed by the result, for after 1860 the output of the placers began to decline, dropping to $41,884,995 in 1861, to $38,854,668 in 1862, to $23,501,706 in 1863, to $24,- 071,423 in 1864 and in the closing year of the war to only $17,930,858.
This diminishing production did not interfere with the successful maintenance of the metallic currency system. The output was still on a scale commensurate with the needs of the state, provided the people did not make the blunder of buy- ing more than they were able to sell of other products than gold. That they suc- ceeded in doing this is shown by the table of imports and exports, which exhibits a favorable balance of trade during the four years following 1865. In 1866 ex- ports by sea amounted to $17,303,818 and imports $15,846,070; in 1867 exports increased to $22,465,903 and imports to $16,987,437. The year following there was a further increase of exports, but the imports showed a much larger gain, the figures being respectively $22,943,340 and $18,723,738. In 1869 exports fell off but they still exceeded the imports by over a million, the amounts being exports $20,888,092 and imports $19,714,001.
It was in this latter year that the long hoped for transcontinental railroad was completed. Up to that time practically all of the trade of California with the East and foreign ports was conducted through the port of San Francisco. Over its wharves passed all the grain, wool and other products shipped out of the state. After 1869 another outlet was afforded which the sanguine expected would bring about an era of prosperity rivaling that which the discovery of gold had produced. Long before the close of the sixty decade, however, men had begun to ask them- selves whether the years between the gold rush and the close of the Civil war had been as prosperous as they should have been. San Francisco had grown in popu- lation, but there was a feeling abroad that the resource which had been the main- stay of the City was decreasing, and that it could not be depended upon as a basis for future growth. The opinion was very general that the state needed immigrants to till its fertile soils, to provide workers to convert the raw materials which could be produced into finished fabrics, and to open the mines which were being devel- oped but slowly, owing to the difficulty of procuring suitable labor.
Vol. I-23
Rapid Decline of Gold Product
Favorable Trade Balances
Great Expectations
A
Hopeful
People
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In dwelling upon these expectations the newspaper commentators of the years immediately preceding the driving of "the last spike" which united the rails of the two companies, the Union and Central Pacific, that built the first overland railway, there was an occasional note of pessimism; but as a rule an abiding faith in the future was exhibited. Once in a while a warning was sounded, usually in the form of a speculative inquiry as to the possible effect of the diverging values of gold and greenbacks. It was asked whether a man with a few thousand dollars at his command would not hesitate to have their number vastly reduced by moving to a country with an appreciated money. Sometimes also the question would be asked whether the railroad, when completed, would be able to move passengers at a rate that would tempt emigrants to take advantage of the newly created facility. But these doubts were submerged in the general chorus of belief that the railroad was going to do great things for California, and that it would speedily transform what was becoming a dull place into an active, bustling and prosperous community.
CHAPTER XXXVIII
THE TRANSPORTATION PROBLEMS OF CALIFORNIA
EARLY FREIGHT AND FARE RATES FIRST EXPERIENCES IN RAILROADING-PROPOSED TRANSCONTINENTAL RAILROADS-PROJECTORS OF THE FIRST OVERLAND RAILROAD- ORGANIZATION OF THE CENTRAL PACIFIC-CONGRESSIONAL AID TO OVERLAND RAIL- ROADS- GRANTS OF LAND AND FINANCIAL AID TO THE CENTRAL PACIFIC-GREAT HOPES BASED ON OPENING OF COMMUNICATION WITH EASTERN STATES-EVERYBODY FRIENDLY TO THE PROMOTERS OF THE RAILROAD-FRIENDLINESS CONVERTED INTO HOSTILITY-GREED OF THE CENTRAL PACIFIC MANAGERS-CAUSES OF HOSTILITY- EFFORTS TO ESTABLISH A MONOPOLY-ATTEMPT TO GRAB MINERAL LANDS-SHUT- TING OUT COMPETITION-CONTRACT AND FINANCE COMPANY-OAKLAND WATER FRONT GRAB-COMPLETION OF THE FIRST OVERLAND LINE.
AND
HEN the early experiences of Californians with railroads are reviewed it seems extraordinary that there should have F been such great expectations based on the accomplishment W of a single line. In 1854, as already related, Governor Bigler had called attention to the law which permitted SEA OF SAN F steam navigation companies and railroads to charge pas- sengers twenty cents per mile for passage, and shippers at the rate of 60 cents per ton for freight. He pointed out that with this latitude the hoped for transcontinental railroad could charge a passenger $500 for trans- portating him from California to the Missouri, and that a ton of freight hauled the same distance would cost the shipper $1,500. It apparently did not occur to him that such rates would be prohibitory, but with the zeal of a true reformer he recommended an amendment which was adopted, by which the passenger rate of fare was limited to a maximum of ten cents per mile, and freight to fifteen cents per ton.
His denunciation of monopolistic tendencies and his recommendation which was considered reasonable indicates the state of public opinion in California concerning the value and possibilities of railroad transportation. Perhaps it was not much behind that of the rest of the country, for in the Sixties the troubles which later made themselves felt had scarcely begun to be perceived even in those sections which had provided themselves with railway facilities on a limited scale. In California railroads were almost unknown. As early as February 22, 1856, a road from Sac- ramento to Folsom, the first one built in California, had been opened, but as it did not prove profitable it was not completed. The decline of the placer mines and the high cost of labor put an end to the project and there was nothing more done in the way of railroad building until the construction of the line from San Francisco to San Jose was taken in hand. That road was completed in 1863, and was built
Early Transporta- tion Charges
Publlc Opinion Concerning Railroads
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originally without subsidy of any sort, but later when the Southern Pacific ac- quired possession the company induced the government to grant alternate sections of land for the extension of thirty miles beyond San Jose to Gilroy, which had been constructed with the aid of $300,000 worth of bonds issued by San Francisco which were afterward turned over to the Southern Pacific as a gift.
First Experiences in Railroad- ing
These first experiences were not of the sort calculated to fire the imagination, but San Francisco persisted in believing that railroads, and especially an overland road, would make the port the greatest in the world. Just how far this belief was linked up with the manifest destiny idea it would be difficult to state, but there are traces of a connection in the prediction that the completion of a railway across the continent would lead to the conquest of China. This expectation was indulged in before the rapid influx of Chinese engendered the fear that the Orientals would occupy the state in such numbers that it would cease to be a habitable place for whites.
Beliefs of the First Comers
Whatever processes of reasoning brought about the result, it is a fact that the people of the Pacific coast, almost from the date of the first successful operation of a steam railroad, held unfalteringly to the belief that a transcontinental railway would prove of incalculable value as an assistant in the development of the then vast unknown region west of the Mississippi, and they were ready to make any sacrifice, and consent to any method to obtain their desire. It is sometimes as- sumed that the generosity of the government in dealing with the first transcontinen- tal railroads was dictated by the necessities of war, but that does not correctly state the attitude of congress towards Pacific railroad projects. That body was ripe for the acceptance of any enterprise involving the granting of government aid, but the dissensions created by the schemes of the men bent on the extension of slavery and administrative incapacity prevented the carrying into execution any of the suggested projects.
The East and the Public Lands
When the scheme of building a transcontinental railroad was in a nebulous stage there was little or no opposition manifested at the East to the policy of deal- ing liberally with the West. It was usually regarded as highly desirable that the Pacific coast, and the region intervening between it and the Missouri, should be made accessible and habitable, and any aid within the power of the government to extend it was thought might with propriety be rendered. In 1835, when it was proposed to congress to build a road from Lake Michigan to the Columbia river, and thence south to San Francisco, the suggestion was not assailed, although the aid asked for demanded a pronounced exhibition of government generosity. Three years later another proposal was made to build to Puget Sound. It met no opposi- tion, but failed because of inaction. In 1846 a proposal was made to build a road to the sound, the proponents demanding a strip of land sixty miles wide along its entire length. This would have required a grant of about 92,000,000 acres. The quantity of land asked for does not appear to have been regarded as excessive to secure the desired railroad, but the proposal was antagonized on the ground that a continuous strip of land sixty miles wide in the possession of a company would give it a dangerous monopoly.
Benton's Proposed Transconti- nental Road
In 1849 Thomas Benton introduced a bill for what he called a Central National road from St. Louis to San Francisco, with a branch some point west of the Rocky Mountains to the Columbia river. His scheme called for a strip of land one mile wide on either side of the road, and a pledge of three-fourths of the proceeds of the
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public lands of California and Oregon, and one-half of the sales of other public lands in the United States as a pledge for construction, the same to be set aside until the road was paid for and in operation. There is no evidence that this pro- posal was regarded with disfavor by the people of the East. Those who gave it any attention and expressed themselves on the subject invariably assumed that a railroad of the importance which one connecting the East and West must attain, would be cheaply obtained if it could be secured by donating land which in the nature of things must remain valueless until railroad facilities were afforded.
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