Skip to comments.The Founding Fathers of Insider Trading (The GOP, Lincoln & Co.)
Posted on 08/30/2003 7:10:08 AM PDT by u-89
The Founding Fathers of Insider Trading
by Thomas J. DiLorenzo
To this day, the U.S. government has not provided a clear legal definition of insider trading. This allows the feds to engage in periodic witch hunts against unpopular business people such as Martha Stewart, the purpose of which is to divert the publics attention away from the governments own failed policies and blame it all on "capitalism."
But there is a particular type of insider trading political insider trading that has been clearly understood for generations. Because this kind of insider trading involves politicians themselves, however, there are no laws against it. A good example of political insider trading appeared recently on an episode of "The Sopranos," the HBO television series about a New Jersey Mafia family. The "don," Tony Soprano, is friends with a sleazy and corrupt state legislator, who gives Tony an inside tip that the legislature is about to give the go ahead to commercial development along the riverfront. Tony quickly purchases some land in the area, and his insider information allows him to buy low and sell high, after the development is announced, and make a killing. The state legislator does the same.
The great historian of the American west, Dee Brown, describes the historical origins of political insider trading in her book, Hear that Lonesome Whistle Blow: The Epic Story of the Transcontinental Railroads, which was recently brought to my attention by John Denson. The book tells the story of a group of men who might be called the founding fathers of political insider trading, the most prominent of which was Abraham Lincoln. The rest were some of the founding fathers of the Lincolns Republican Party; many of them served as generals in the union army.
In the mid to late 1850s Lincoln was a prominent railroad lawyer. His clients included the Illinois Central, which at the time was the largest corporation in the world. In 1857 he represented the Chicago, Rock Island and Pacific Railroad, which was owned by four men who would later become infamous as "robber barons" for receiving and squandering millions of dollars in federal subsidies for their transcontinental railroad. Granting these men their subsidies would become one of the first orders of business in the Lincoln administration.
These men Thomas Clark Durant, Peter Dey, Grenville Dodge, and Benedict Reed were easterners from New England and New York State who had "a store of hard experience at canal and railroad building and financing," writes Dee Brown. And they must also have been quite expert at stealing taxpayers money for useless government-funded boondoggles. Prior to the War between the States, government subsidies for railroad and canal building were a financial disaster. So disastrous were these government pork barrel projects that by 1860, according to economic historian Carter Goodrich, Massachusetts was the only state in the union to have not amended its constitution to prohibit taxpayer subsidies to private corporations (Carter Goodrich, Government Promotion of American Canals and Railroads, 18001890, p. 231).
In a dispute with a steamship company the above-mentioned men "sought out a first-rate lawyer, one who had a reputation for winning most of his cases," writes Dee Brown. "They found him in Springfield, Illinois and his name was Abraham Lincoln." The jurors in the case failed to reach a decision, but Lincolns performance "won him a considerable amount of attention in the Chicago press and among men of power, who two years later would push him into the race for President of the United States." One of those "men of power" was Chicago newspaper editor Joseph Medill, whose newspaper trumpeted the Lincoln candidacy on behalf of the railroad interests of Illinois.
This powerful clique of New England/New York/Chicago business interests "aroused the suspicions of the South," says Brown, since they were so vigorously lobbying Congress to allocate huge sums of money for a transcontinental railroad across the Northern states. Southern politicians wanted the route to pass through their states, naturally, but they knew they were outgunned politically by the political clique from "the Yankee belt" (New England, Pennsylvania, Ohio, the upper Midwest).
These Northern political insiders, who would form the core of leadership of the Republican Party and later, in some cases, of Lincolns army, positioned themselves to earn great riches from the proposed railroad subsidies. John C. Fremont, who would be a general in Lincolns army, was a wealthy California engineer who conducted an extensive engineering survey "to make certain that the most favorable route would end up not in San Diego but in northern California, where Fremont himself claimed sizable land holdings." Another wealthy Yankee, Pierre Chouteau, "put his money into a St. Louis factory to make iron rails and went to Washington to lobby for the 38th parallel route."
Illinois Senator Stephen Douglas "owned enough strategically located land in Chicago to be a millionaire if his favored route westward through Council Bluffs and Omaha was chosen . . ."
And "Abraham Lincoln, the future President evidently agreed with his debating partner that the route through Council Bluffs-Omaha and the South Pass was the most practical. Lincoln acquired land interests at Council Bluffs" (emphasis added). A short time later, after the Chicago/New England/New York "men of power" propelled him into the White House, Lincoln began signing legislation giving these men millions of acres of public lands and other subsidies for their railroads.
Virtually all of the "leading lights" of the Republican Party got in on the political insider trading game by demanding bribes for their votes in favor of the subsidies. Pennsylvania congressman Thaddeus Stevens "received a block of . . . stock in exchange for his vote," but he also demanded "insertion of a clause [in the subsidy legislation] requiring that all iron used in the construction and equipment of said road to be American manufacture." In addition to being a congressman, Stevens was a Pennsylvania iron manufacturer. At the time, British iron was far cheaper than Pennsylvania iron, so that Stevenss "restrictive clause" placed a bigger burden on the taxpayers of the North who, at the time, were already being taxed to death to finance the war.
Congressman Oakes Ames, "who with his brother Oliver manufactured shovels in Massachusetts, became a loyal ally [of the subsidy-seeking railroad companies] and helped to pressure the 1864 Pacific Railway Act through the war-corrupted Congress." (It took a lot of shovels to dig railroad beds from Iowa to California).
During the post-war Grant administration the Republican Speaker of the House of Representatives, Schuyler Colfax (later Grants vice president) visited the western railroad routes to attend a ceremony in his honor but, writes Dee Brown, "he preferred cash above honors, and back in Washington he eagerly accepted a bundle of Credit Mobilier stock from his follow congressman Oakes Ames, and thus became a loyal friend of the Union Pacific."
Another of Lincolns generals, General John Dix, was the Washington lobbyist for the railroads who "spent most of his time strutting about Washington in a generals uniform." (Dix was the same general who Lincoln ordered in 1862 to shut down all the opposition newspapers in New York City and arrest and imprison the editors and owners).
General William Tecumseh Sherman was also sold land at below-market prices and, after the war, he would be in charge of a twenty-five year campaign of ethnic genocide against the Plains Indians, which was yet another form of veiled subsidy to the railroad corporations. After the war Grenville Dodge, who was also a Union Army general despite his lack of military training, proposed making slaves of the captured Indians and forcing them "to do the grading, with the Army furnishing a guard to make the Indians work, and keep them from running away."
These men the founding fathers of insider trading were responsible for the massive corruption of the grant administrations which was only the beginning of what historians call "the era of good stealings."
August 30, 2003
Thomas J. DiLorenzo [send him mail] is the author of the LRC #1 bestseller, The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War (Forum/Random House, 2002) and professor of economics at Loyola College in Maryland.
Copyright © 2003 LewRockwell.com
To recycle your words "Hell, that's enough to drive a man to naked treason, it is."
Give credit where credit is due. Thomas J. DiLorenzo wrote the article. He is trying to make a career out of attacking Lincoln. Beats attacking someone who can fight back, I suppose. I think this Lorenzo guy is hilarious. His single-minded Lincoln obsession is absolutely hysterically funny. There is no need to refute it. Anyone who can be duped by DiLOrenzo is just a dupe anyway. Who cares?
So in your opinion fidelity to maximum personal liberty, limited government and governing by strict adherence to the constitution i.e. the principles on which this country was founded equals treason? Well I admit it does go against the modern state of affairs - but then if you are all for a strong, centralized, intrusive, meddling, high taxing, socialist government and nanny state why are you on FR? This site's purpose was to roll back years of government growth.
The left loves to rail against capitalism and the robber barons but what one doesn't hear about is that government corruption made it all possible. Politicians, judges and law enforcement officials were bought and paid for and aided and abetted in the troubles of the period like governors sending in the national guard to fight strikers for example. The left wants more government so they will not criticize it and the wealthy and politically connected use it to their own profit. So both sides (if there really is two sides) love big government.
The problem is when one realizes that the government has been the tool of the wealthy and powerful for their own benefit then one starts questioning all the maneuverings of the State and then the facade of purity and nobility begins to crumble. That is why articles like this are valuable and that is why this information is not main stream. It is a shame that sentimentalism and willful blindness prevents a lot of people from truly critiquing their government's policies. If they had or would we could prevent a lot of the messes we are in.
This is ridiculous. Does the author really believe that the concept of individuals benefitting from political contacts was invented by the Lincoln administration? Corruption of this sort has existed as long as governments have existed. Before this author writes silly things like the above statement, he might want to actually do research on such topics by reading historical works by Suetonius or Tacitus or even more recent history from countries other than the United States.
"[Clarence] Thomas calls the segregation of the Old South, where he grew up, 'totalitarian.' But that's liberal nonsense. Whatever its faults, and it certainly had them, that system was far more localized, decent, and humane than the really totalitarian social engineering now wrecking the country."
LLEWELLYN H. ROCKWELL
No, I don't think so. You must be thinking of the left's attempt to smear Bush by claiming, as Managing Partner of the Rangers, he had the city of Arlington build him a baseball stadium. Not so. The Rangers were already in Arlington and the city wanted to keep them there so they took the initiative in buiding the new stadium. Incidentally, it was ex-Mayor of Arlington, now judge, Tom Vadergriff, who almost single handedly brought major league baseball to North Texas. Staying in Arlington was fitting.
The most recent deal was Maverick and Stars owners getting the city of Dallas to sell bonds to build a new basketball/hockey arena when they already had a relatively new and perfectly good arena. Ironically, Ross Perot, Jr. was owner of the Mavericks at the time so, once again, he was feeding at the public trough. (Those who believed Ross Perot wanted clean government and therefore voted for him back in 2000 were played for fools. He was just gunning for G.H.W. Bush for some imagined sleight in the past. He succeeded in giving us Clinton.)
However, nearly all sports team owners try to get the taxpayers to foot the bill for their playpens. The Cowboys are presently shopping for a new place. What is wrong with Texas Stadium? Nothing.
And, yes, it is always the rich insiders who get things cheaper and at someone else's expense. As unfair as it seems, I don't know how it can be prevented. The only way to stop the pain is to become a rich insider, so work hard.
I'm well aware of that. It's an indefensible, idiotic thing to say as well.
And, BTW, what else do they talk about but the civil war?