Recollections of Forty Years in the House, Senate and Cabinet Part 71

"The proposition is favored by the banks generally, and it is believed that the representation of the treasury department in the clearing house will facilitate the transaction of business between the department and the banks, and I therefore respectfully suggest that application be made for the admission of the a.s.sistant treasurer in New York to the Clearing House a.s.sociation, provided it shall be found that there is no legal objection thereto."

General Hillhouse also was strongly in favor of the plan proposed.

He said:

"The plan of going into the clearing house was proposed in correspondence with the department several years ago, as a remedy for the risk incurred in the collection of checks, and if there are no legal impediments in the way, it would very much simplify the business of the office if it could be adopted. The effect in connection with resumption would also, I think, be good, as it would place the banks and the treasury on the same footing with respect to the use of United States notes in settlements, and thus aid in maintaining them at par with gold in all the vast transactions connected with our internal trade and commerce. I have not given the question sufficient thought to speak with confidence, but it seems to me a very important one, and well worthy of careful consideration."

A committee of the clearing house called upon me and the subject was thoroughly considered. Mr. Gilfillan wrote to General Hillhouse as follows:

"Treasury of the United States.} "Washington, November 9, 1878. } "Sir:--By direction of the secretary, I have the honor to request that you will submit to the Clearing House a.s.sociation of the banks of your city the following propositions, and, upon obtaining the a.s.sent of the a.s.sociation to them and communicating that fact to the department, you are expected to act in conformity with them.

"First. Hereafter, drafts drawn upon any bank represented in the Clearing House a.s.sociation in the city of New York, received by the a.s.sistant treasurer in that city, may be presented to such bank at the clearing house for payment.

"Second. Hereafter, drafts drawn on the a.s.sistant treasurer at New York may be adjusted by him at the clearing house, and the balances due from the United States may be paid at his office in United States notes or clearing house certificates.

"Third. After the 1st of January next, payment of checks presented to the a.s.sistant treasurer by any bank connected with the clearing house may be made by him in United States notes.

"Very respectfully, "James Gilfillan, Treasurer United States.

"Hon. Thomas Hillhouse, a.s.sistant Treasurer United States, New York."

General Hillhouse, on the 12th of November, advised me of the receipt of this letter, and that the propositions of the treasurer were referred to the Clearing House a.s.sociation, that a meeting would be held and there was little doubt but that they would be accepted.

On the same day the Clearing House a.s.sociation, fifty out of fifty- eight banks, members of the a.s.sociations, being present, unanimously adopted the following resolutions:

"_Resolved_, That in order to facilitate the payment of drafts and checks, between the treasurer of the United States and the a.s.sociated banks, the manager of the New York clearing house is authorized to make such an arrangement with the a.s.sistant treasurer as will accomplish that purpose through the medium of the clearing house.

"_Resolved_, That the reported interview between the members of the clearing house committee and the Secretary of the Treasury, with the views expressed by them to him in the paper presented to this meeting upon the subject of the restoration of specie payments, meets the cordial approbation of this a.s.sociation, and that the practical measures recommended for the adoption of the banks in respect to their treatment of coin in their business in the public, and with each other, be accepted and carried into practical operation; and, in pursuance thereof, it is hereby further

"_Resolved_, That the a.s.sociated banks of this city, after the 1st of January, 1879, will, first, decline receiving gold coins as 'special deposits,' but accept and treat them as lawful money; second, abolish special exchanges of gold checks at the clearing house; third, pay and receive balances between banks at the clearing house, either in gold or United States legal tender notes; fourth, receive silver dollars upon deposit only, under special contract to withdraw the same in kind; fifth, prohibit payments of balances at the clearing house in silver certificates, or in silver dollars, excepting as subsidiary coin, in small sums (say under $10); sixth, discontinue gold special accounts, by notice to dealers, on 1st of January next, to terminate them.

"_Resolved_, That the manager of the clearing house be requested to send copies of the proceedings of this meeting to clearing houses in other cities, with an expression of the hope that they will unite in similar measures for promoting the resumption of coin payments."

I accepted in the following note:

"Treasury Department, } "Washington, D. C., November 13, 1878.} "George S. c.o.x, President American Exchange National Bank, New York.

"Sir:--Your letter of yesterday, advising me of the adoption by the Clearing House a.s.sociation of the result of our recent interview, is received with much pleasure.

"The end we all aim at, a specie standard and a redeemable currency, is greatly promoted by the judicious action of the banks, and I will, with greater confidence, do my part officially in securing the maintenance of resumption.

"John Sherman, Secretary."

This arrangement, entered into with care, proved to be a measure of very great advantage to the government as well as to all business men engaged in the great commercial operations of New York. The necessary details to carry this agreement into effect were arranged between General Hillhouse, for the United States, and W. A. Camp, manager of the New York clearing house.

CHAPTER XXV.

INVESTIGATION OF THE NEW YORK CUSTOMHOUSE.

A General Examination of Several Ports Ordered--No Difficulty Except at New York--First Report of the Commission--President Hayes'

Recommendations--Letter of Instructions to Collector C. A. Arthur --Second Report of the Commission--Losses to the Government by Reason of Inefficiency of Employees--Various Measures of Reform Recommended--Four Other Reports Made--The President Decides on the Removal of Arthur, Cornell and Sharpe--Two Letters to R. C. McCormick on the Subject--Arthur et al. Refuse to Resign--The Senate Twice Refuses to Confirm the Men Appointed by the President to Succeed Them--Conkling's Contest Against Civil Service Reform--My Letter to Senator Allison--Final Victory of the President.

At the beginning of the administration of President Hayes, and for months previous, there had been complaints as to the conduct of business in the princ.i.p.al customhouses of the United States. This was especially called to my attention, and at my suggestion the President directed an examination into the conduct of the customhouses at New York, Philadelphia, New Orleans, San Francisco and perhaps other ports. Examinations were made by intelligent business men selected in the various ports, and full reports were made by them, and printed as public doc.u.ments. Many changes were made, and reforms adopted, founded upon these reports, and there was no difficulty except only at the port of New York, where more than two-thirds of all the customs revenue was collected. Chester A.

Arthur was then collector of the port, A. B. Cornell was naval officer, and George H. Sharpe was appraiser.

On the 23rd of April, 1877, I designated John Jay, Lawrence Turnure, of New York, and J. H. Robinson, a.s.sistant Solicitor of the Treasury, as a commission on the New York customhouse. They were requested to make a thorough examination into the conduct of business in that customhouse. Full instructions were given and many specifications were made in detail of all the points embraced in their examination.

On the 24th of May they made their first report, preferring to treat the general subject-matter separately. This report related chiefly to appointments upon political influence without due regard to efficiency. I promptly referred it to the President, and received the following letter:

"Executive Mansion, } "Washington, May 26, 1877.} "My Dear Sir:--I have read the partial report of the commission appointed to examine the New York customhouse. I concur with the commission in their recommendations. It is my wish that the collection of the revenues should be free from partisan control, and organized on a strictly business basis, with the same guarantees for efficiency and fidelity in the selection of the chief and subordinate officers that would be required by a prudent merchant.

Party leaders should have no more influence in appointments than any other equally respectable citizens. No a.s.sessments for political purposes, on officers or subordinates, should be allowed. No useless officer or employee should be retained. No officer should be required or permitted to take part in the management of political organizations, caucuses, conventions, or election campaigns. Their right to vote, and to express their views on public questions, either orally or through the press, is not denied, provided it does not interfere with the discharge of their official duties.

"Respectfully, "R. B. Hayes.

"Hon. John Sherman, etc."

My answer to the commission was as follows:

"Treasury Department, May 26, 1877.

"Gentlemen:--Your first report on the customhouse in New York, of date the 24th instant, has been received, and the reduction proposed by you of twenty per cent. of the number of persons employed therein is approved.

"So far as these offices are created by law, vacancies will be made and left for the action of Congress. The reduction of the other employees, the number of whom and whose compensation are not fixed by law, will be made as soon as practicable.

"I am much gratified that the collector, the naval officer, and the surveyor of the port, concur with you in the proposed reduction.

"The hours of employment, after the 31st of this month, will be from 9 o'clock a. m. till 4 o'clock p. m., excepting where a longer time is prescribed by law. This corresponds to the hours of clerical service in this department. This rule will be strictly enforced, and absence will be the cause of reduction of pay or removal.

Strict attention to duty will be required, and other business will not be allowed to interfere with the full discharge of the duty attached to the office.

"I notice that you do not suggest a mode of carrying into effect the reduction of the force recommended, and I cannot, with due regard to the remaining subjects of your inquiry, ask you to extend your investigation into the _personnel_ of each employee, his character, efficiency, and merits. This must be mainly left to the collector, who, by law, is authorized to employ, with the approval of the Secretary of the Treasury, proper persons as deputy collectors, weighers, gaugers, and measurers, in the several ports within his district. Thus, nearly all the officers of the customhouse are appointed by the collector, and, with the approval of the Secretary of the Treasury, may be removed at pleasure. He will be promptly called upon, under special orders, to perform this delicate and onerous duty. It is very important that it should be executed with due regard to the efficiency and merit of the employees, and so as best to promote the public service.

"In order that a rule might be furnished him, I called upon the President for instructions to govern alike the collector and myself in the execution of this duty. A copy of his answer is hereto annexed. You will see from it that he approves your recommendations, and that he wishes the customhouse conducted free from partisan control, on a strictly business basis, with the same guarantees for efficiency and fidelity in the selection of the chief and subordinate officers that would be required by a prudent merchant; that the public business should not be affected injuriously by the interests or influence of party leaders or party struggles; and that, while an officer should freely exercise his political rights as a citizen, he should not use his power as an officer to influence the conduct of others.

"I believe the opinions expressed by the President will meet with your hearty approval, and they are in harmony with your report.

"Permit me to add the thanks of this department for your care, ability and industry in conducting this inquiry.

"Very respectfully, "John Sherman, Secretary.

"Messrs. John Jay, L. Turnure, and J. H. Robinson, "Commission on Custom House, New York."

I inclosed a copy of the report of the commission to Collector Arthur, with the following letter of instruction:

"Treasury Department, May 28, 1877.

"Sir:--Inclosed I send you a copy of the first report of the commission on the New York customhouse, recommending a large reduction of the employees in the various offices in your collection district, and the approval and adoption of that report.

"It only remains now to execute this order, upon the principles and in the spirit stated by the President. This task, always an unpleasant one, when it requires the removal of employees, falls mainly upon you, subject to my approval. It may not be amiss now for me to state, in advance, somewhat in more detail, my views as to the mode of reduction. The extent of the reduction is fully stated in the report, and we are thus relieved from that portion of the task.

"I notice by the report that you have an exceptionally large proportion of experienced officers still in the service. You will have no difficulty in selecting, from these, the more efficient and trustworthy to fill the more important positions, and when these are carefully selected, you will have secured for the duties of greatest trust, active, efficient, and experienced officers.

It must happen that among those longest in service some are disabled by age and infirmity. It is often the most painful, but necessary, duty, to dismiss there, or reduce them to positions which they are still able to fill. The government is fairly ent.i.tled to the services of those who are fully able to discharge personally the duties of their office, and who are willing to give their entire attention to their official duty. If they cannot, or do not, do this, it is no injustice to remove them.

"In the selection of inferior officers, the only rule should be the one daily acted upon by merchants--to employ only those who are competent for the special work a.s.signed them, whose industry, integrity, and good habits give guarantees for faithful services, honestly rendered. This reduction will enable you to transfer those now employed on work for which they are not fitted, to other work for which they are competent, and to reward exceptional merit and ability by promotion.

"It is impossible, in a force so large as yours, that you should know the peculiar qualities and merits of each employee, and it is important, in making selections, that you secure this information through committees of trusted officers, and in proper cases to test the intelligence, ability, and qualifications of an officer or applicant for office by written questions or an oral examination.