The Founding Fathers of Insider Trading (The GOP, Lincoln & Co.)

LewRockwell.com ^ | 30.08.03 | Thomas J. DiLorenzo

[u-89]

The Founding Fathers of Insider Trading

by Thomas J. DiLorenzo
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 public’s attention away from the government’s 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 Lincoln’s 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, 1800–1890, 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 Lincoln’s 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 Lincoln’s army, positioned themselves to earn great riches from the proposed railroad subsidies. John C. Fremont, who would be a general in Lincoln’s 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 38^th 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 Stevens’s "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 Grant’s 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 Lincoln’s generals, General John Dix, was the Washington lobbyist for the railroads who "spent most of his time strutting about Washington in a general’s 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

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Really Learn About the Real Lincoln

Now there is a study guide and video to accompany Professor DiLorenzo's great work, for homeschoolers and indeed anyone interested in real American history.
http://www.fvp.info/reallincolnlr/

[Huck]

Totally overblown portrait of Spooner.

[Ronly Bonly Jones]

"...if God wills that [the war] continue until all the wealth piled by the bondsman's two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn by the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said, 'The judgments of the Lord are true and righteous altogether.'"

Abraham Lincoln. The greatest President the South ever knew.

[GOPcapitalist]

Totally overblown portrait of Spooner.

Not at all. Everything I stated of him is factually sound. Look it up if you doubt me.

[GOPcapitalist]

"...if God wills that [the war] continue until all the wealth piled by the bondsman's two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn by the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said, 'The judgments of the Lord are true and righteous altogether.'"

In other words when things go bad blame your own sin and blood soaked war on God. Typical Lincolnian nonsense.

[billbears]

That's like a Jew being a card carrying German heritage activist with pictures of Adolph Hitler in his checkbook.

Funny you should bring up Jews

Grant was also responsible for the issuance of the infamous "General Order No. 11," which expelled all Jews from Kentucky, Tennessee and Mississippi. Jews were accused of illegally trading in cotton that provided money for the South and Grant claimed that "the Israelites" were "an intolerable nuisance." Grant vs. Lee

Sherman himself certainly did not believe that "each man is as good as another." For example, in 1862 Sherman was bothered that "the country" was "swarming with dishonest Jews" (see Michael Fellman, Citizen Sherman, p. 153). He got his close friend, General Grant, to expel all Jews from his army. As Fellman writes, "On December 17, 1862, Grant . . . , like a medieval monarch . . . expelled ‘The Jews, as a class,’ from his department." Sherman biographer Fellman further writes that to Sherman, the Jews were "like n*****s" and "like greasers (Mexicans) or Indians" in that they were "classes or races permanently inferior to his own." How lincoln's Army liberated the Indians

They sure were tolerant north of the border eh?

General Orders, No. 11, was drawn up by Grant's chief of staff, Brig. Gen. John A. Rawlins. Issued on December 17, 1862, it read in full: "The Jews, as a class violating every regulation of trade established by the Treasury Department and also department [of the Tennessee] orders, are hereby expelled from the department within twenty-four hours from the receipt of this order.

"Post commanders will see that all of this class of people be furnished passes and required to leave, and any one returning after such notification will be arrested and held in confinement until an opportunity occurs of sending them out as prisoners, unless furnished with permit from headquarters.

"No passes will be given these people to visit headquarters for the purpose of making personal application for trade permits."

The sweeping document was signed: "By order of Maj. Gen. U.S. Grant."

General Order 11

Boy howdy that Grant, he sure knew how to treat them Jews didn't he? < /extreme sarcasm>

Notice the 'fine' way the thug criminal later to become President takes care of the 'Jewish problem'. Now I know you haven't heard of this order probably either, it's not covered in 4th grade history books

[GOPcapitalist]

That's my point. Those books he coauthored are inadmissable. You tried to admit them. I successfully obliterated them.

False. To date you have offered no credible reason as to why they should not be included - only wholly unsubstantiated and utterly inane speculation that they might say something about Lincoln, however unlikely their subject matter may make that.

The simple fact is that those books destroy your claim that he only writes about Lincoln. Since you cannot bring yourself to admit the clumsy haste in which you shot your mouth off by making that claim, you now grasp at straws in an attempt to exclude the material evidence that proves it wrong. Your little stunt is identified and exposed in the following terms.

Fallacy of Exclusion

Definition: Important evidence which would undermine an inductive argument is excluded from consideration. The requirement that all relevant information be included is called the "principle of total evidence".

I see that you also acknowledge my correctness in using the term fetishist

Not at all. It is used as a pejorative term to facilitate an ad hominem.

now that you understand that fetish and fixation are synonyms.

Only in the loosest sense are the synonyms. A key distinction remains though. The former is intentionally pejorative while the latter approaches some semblance of neutrality. Thus they are not interchangable for the purposes of this discussion.

[GOPcapitalist]

I've heard of Spooner. He is an obscure 19th century American weirdo dredged up usually by hard core libertarians. These hard core libs overlap with revisionist neorebs--they share common hatreds (The USA, The Constitution, the rule of law)

Now that's an odd statement for you to make. Spooner always insisted his love for the constitution _so long as it was interpreted and read under its original and true sense_. At a time when other abolitionists like Garrison were burning copies of it to incite public furor and calling the Constitution a "pact with the devil," Spooner became its greatest champion from that movement. Even in his later argument against the document's application, "The constitution of no authority," he made it explicit that his quarrel was not with the document as properly interpreted but rather with the abuse of it exercised by the state. As for the rule of law, Spooner was as strict as one could be in his adherence to the common law that underlies our judicial system.

and common heroes (Jefferson, Calhoun, Henry).

It's odd that you would consider any of those three men "un-american." I have a strong suspicion that the overwhelming majority of this forum would find that proposition, especially in the case of Jefferson, to be an absurdity in itself.

If I recall correctly, Spooner was a radical Northeastern brahmin, the type of dude who would have made John Muir seem normal. For GOP Capitalist to quote him, it's like a conservative quoting Alan Deschowitz and saying "see, this is one of your guys, he's waaay out there and even he says such and such.

You recall incorrectly. Spooner was a New England abolitionist lawyer with strong libertarian view of government in the extreme Jeffersonian sense. He viewed the state as a corrupt institution that was at odds with liberty, was often predicated upon oppression, and accordingly needed to be guarded against by the restraints of consent - a position that most real conservatives today would find agreeable.

Which is all well and good, except that you would have to know more about Spooner, and the historical context, to have any chance of properly interpreting the information.

If you doubt the context of what I posted or believe that I have somehow misrepresented Spooner's words, by all means look him up yourself and prove me wrong. Until then have a nice day.

[GOPcapitalist]

Notice the 'fine' way the thug criminal later to become President takes care of the 'Jewish problem'. Now I know you haven't heard of this order probably either, it's not covered in 4th grade history books

Good post. I'm sure Ronly has never read of Lincoln's frequent use of the n-word either, or about the time when Lincoln disparagingly called President Franklin Pierce a mulatto, or when he said he wanted to keep the territories free of slaves so they could be populated by white people. As for Hitler, there's always that chapter in Mein Kampf where he endorsed a Lincolnian view of the union as his own. I also have great doubt that Hitler would have had much appreciation for a country that had a Jewish secretary of state and had Jewish members in its congress as the CSA did.

[Ronly Bonly Jones]

I have indeed heard of this incident. I am also aware that the order was counter manded by the Ape, the Antichrist, Lincoln.

Yeah, Sam Grant had his bad days. And then he had his good ones. Appamatox comes to mind.

[Ronly Bonly Jones]

Hmmmn. It strikes me. GOPcapitalist. Member of the Party of Lincoln. Is there a contradiction here? Nooooo.....

[Huck]

To date you have offered no credible reason as to why they should not be included

You and I agreed that the contents could well include Lincoln. Since we don't know, they prove nothing. As for your nonsensical claim that the titles alone make it "unlikely" that he mentions Lincoln, go back and review some of the article titles on lewrockwell. Your supposition is without merit. You lose.

[Huck]

Now that's an odd statement for you to make. Spooner always insisted his love for the constitution _so long as it was interpreted and read under its original and true sense_.

LOL! A left wing anarchist who believed the Constitution was unlawful just wants the Constitution interpreted his way? Imagine that! LOL!

As an advocate of Natural Law Theory and an opponent of government and legislation, Spooner considered the Constitution itself to be unlawful.

http://www.wikipedia.org/wiki/Lysander_Spooner

It's odd that you would consider any of those three men [Jefferson, Calhoun, Henry]"un-american."

Interestingly, I did not say that any of those three men were unamerican. I notice that didn't stop you from placing it in quotation marks, as if I had said it. Dilorenzo would be proud of you.

You recall incorrectly. Spooner was a New England abolitionist lawyer

A New England Brahmin, as I stated.

with strong libertarian view of government in the extreme Jeffersonian sense.

LOL. Whatsa matter? Can't spell anarchist? How about libertarian socialist?

http://www.geocities.com/CapitolHill/1931/secG7.html

Incidentally, I think it's so cute that someone has taught you a few fallacies and you are getting a chance to practice them. Just be careful. You can take a thing too far. I had a vision of you in the audience at a Don Rickles show jumping up and exclaiming "Ad hominem! Ad hominem!"

Do you get it yet? I STILL don't think you do. In fact, you haven't even perceived yet that you are missing something.

[Ronly Bonly Jones]

Libertarianism is Republicanism without the Republicanism. Let the poor guy be. Can't you see his circuits are cooked?

[GOPcapitalist]

LOL! A left wing anarchist

"Man, no doubt, owes many other moral duties to his fellow men; such as to feed the hungry, clothe the naked, shelter the homeless, care for the sick, protect the defenceless, assist the weak, and enlighten the ignorant. But these are simply moral duties, of which each man must be his own judge, in each particular case, as to whether, and how, and how far, he can, or will, perform them." - Lysander Spooner, 1882 (emphasis added)

Yeah. He believed that charity was a wholly voluntary act of the individual. Sounds like a real left winger to me. (end sarcasm)

who believed the Constitution was unlawful

"[T]he writer (Spooner) thinks it proper to say that, in his opinion, the Constitution is no such instrument (of tyranny) as it has generally been assumed to be; but that by false interpretations, and naked usurpations, the government has been made in practice a very widely, and almost wholly, different thing from what the Constitution itself purports to authorize. He has heretofore written much, and could write much more, to prove that such is the truth." - Lysander Spooner, 1870

Seems to me he thought the Constitution as originally intended was an instrument of liberty and only became corrupted by later abuses of it through the government.

As an advocate of Natural Law Theory and an opponent of government and legislation, Spooner considered the Constitution itself to be unlawful.

That's an oversimplification of a very complex argument he made. Spooner considered the Constitution unlawful in its application after circa 1860 due to the way the government was using it. He believed strongly in the document itself though so long as it was absent of Lincolnian big government abuses. He made this very clear in No Treason, his book on the very subject of the constitution's legitimacy:

"Previous to the war, there were some grounds for saying that --- in theory, at least, if not in practice --- our government was a free one; that it rested on consent. But nothing of that kind can be said now, if the principle on which the war was carried on by the North, is irrevocably established. If that principle be not the principle of the Constitution, the fact should be known. If it be the principle of the Constitution, the Constitution itself should be at once overthrown."

In other words, so long as the constitution operates a government of consent and liberty it is legitimate. But the second it used to thwart consent and liberty that use becomes illegitimate. See the distinction? Interestingly, I did not say that any of those three men were unamerican.

You certainly implied it by ascribing the characteristic of being "un-american" to persons who you also identified as followers of Jefferson et al.

LOL. Whatsa matter? Can't spell anarchist?

Spooner was only a dialectical anarchist (as in he disproved the government's legitimacy rather than proving an absence of government). As he made perfectly clear in No Treason and his other works, he had absolutely no problem whatsoever with a government so long as it rested on the legitimacy of obtained consent from the governed. He even extended this characteristic to have been theoretically true of pre-war American government and accordingly concluded the Constitution to have been originally a doctrine of liberty and legitimacy.

How about libertarian socialist?

Libertarian yes, but you would be hard pressed to demonstrate socialism. As the quote found earlier in this post demonstrates, he stood fundamentally opposed to the compulsory acts of charity that define socialist practice. Spooner writings elsewhere demonstrate an extreme free-market inclination, such as the following excerpt from his argument that the legal bar rating system be eliminated and replaced by market determination of who the good lawyers were:

"What then is the remedy? It is this. If the profession were thrown open to all, this combination of lawyers would doubtless be broken up – they, like any other men, would hold themselves severely responsible for their own character alone – they would have no inducement to wink at or attempt to hide the mal-practices of others – individuals , who should suppose themselves injured by the practice of an attorney, instead of laying his complaints before the Bar, would lay them before the grand jury, or some other tribunal – and it is no uncharitableness, it is only supposing lawyers to be like other men, to say, that it is probable the community would sometimes fare the better for it."

[GOPcapitalist]

Hmmmn. It strikes me. GOPcapitalist. Member of the Party of Lincoln. Is there a contradiction here? Nooooo.....

Considering the existence of ideological realignments within the American political parties, indeed there is not. In case you are also unfamiliar with that aspect of history see the elections of 1896 and 1964. Those two years mark the beginning and end of the major partisan ideological realignment here from which the GOP went from northeastern liberal to southern/western conservative and the Dems went from southern/western conservative to northeastern liberal.

[Huck]

You certainly implied it by ascribing the characteristic of being "un-american" to persons who you also identified as followers of Jefferson et al.

Wrong again. I implied nothing. I very clearly stated that neo-reb types and anarcho-lib types share common hatreds and common heroes. Among those common heroes are Jefferson, Calhoun, and Henry. That those three are heroes of neo-rebs and anarcho-libs is undeniable. It's an observable fact.

I never said neo rebs and anarcho libs were unamerican. Most of them, so far as I know, are American. They just hate our nation and our laws. They, like some of their heroes, aren't happy with the way things turned out. They, like some of their heroes, advocate violent overthrow.

It's a historical fact that Henry railed against the Constitution. He hated it and said so. Jefferson had nothing to do with the Constitution, spending that whole period in France. He kept in touch with Madison, but that was the extent of it. Jefferson is of course also known for his flippant pen. He was as reckless with his words as he was with his money. It is his words, rather than his deeds, that neorebs and libs love. Calhoun championed a theory--nullification--that has been totally discredited, and one that Madison himself denounced.

So it's no surprise at all that neo-rebs and anarcholibs admire the trio. That doesn't make them unamerican. They were all Americans. It just means they are far from being supporters of our system of government, our laws, and our nation. I will say this of Jefferson. He was a successful President, even if his greatest act--the Louisiana Purchase--was unconstitutional. And he knew it was. He said so. Oh well, I guess Constitutional fidelity comes down to a matter of taste with some folks, eh?

Hope this helps clear up your continued and multifaceted confusion.

[Huck]

You certainly implied it by ascribing the characteristic of being "un-american" to persons who you also identified as followers of Jefferson et al.

Wrong again. I implied nothing. I very clearly stated that neo-reb types and anarcho-lib types share common hatreds and common heroes. Among those common heroes are Jefferson, Calhoun, and Henry. That those three are heroes of neo-rebs and anarcho-libs is undeniable. It's an observable fact.

I never said neo rebs and anarcho libs were unamerican. Most of them, so far as I know, are American. They just hate our nation and our laws. They, like some of their heroes, aren't happy with the way things turned out. They, like some of their heroes, advocate violent overthrow.

It's a historical fact that Henry railed against the Constitution. He hated it and said so. Jefferson had nothing to do with the Constitution, spending that whole period in France. He kept in touch with Madison, but that was the extent of it. Jefferson is of course also known for his flippant pen. He was as reckless with his words as he was with his money. It is his words, rather than his deeds, that neorebs and libs love. Calhoun championed a theory--nullification--that has been totally discredited, and one that Madison himself denounced.

So it's no surprise at all that neo-rebs and anarcholibs admire the trio. That doesn't make them unamerican. They were all Americans. It just means they are far from being supporters of our system of government, our laws, and our nation. I will say this of Jefferson. He was a successful President, even if his greatest act--the Louisiana Purchase--was unconstitutional. And he knew it was. He said so. Oh well, I guess Constitutional fidelity comes down to a matter of taste with some folks, eh?

Hope this helps clear up your continued and multifaceted confusion.

[Huck]

Spooner considered the Constitution unlawful

Yes, that's what I said.

[Huck]

Spooner was only a dialectical anarchist

As I said, spooner was an anarchist.

[Ronly Bonly Jones]

If you want to join the party of "northeastern liberals" you know where to find them. Not in the Republican Party. You may go now.