The Jews in America Trilogy (38 page)

But in a coolheaded interview for the New York
Herald
, Jesse Seligman said, “It is a private undertaking altogether, and we have every confidence that an enterprise of this kind will pay. Naturally, the United States will receive the largest share of the benefit from it. All the machinery to be used in the work of the construction will be bought here. When the scheme is fully understood and appreciated, there will be many eager to subscribe to it, but as it is, all the necessary capital is already assured.”

It certainly was. With the French hero De Lesseps behind it, Panama Canal shares had no difficulty selling in France. And, though American public opinion continued to run heavily against the canal, the public also seemed to think that with men like Seligman and Morgan behind it there was money in it. So shares sold rapidly in New York as well. The initial stock issue was oversubscribed, and digging was immediately begun.

De Lesseps had determined on a sea-level canal, without locks, and for seven years he and his engineers labored against mountains and valleys and watersheds and the scourge of Panama fever and, most of
all, against the extravagance and dishonesty involved in the pricing and purchasing of supplies and equipment. Suppliers and the canal's purchasing agents were in perpetual collusion, and tons of material were shipped to Panama that the company never needed and never used. The American press and public continued to grumble, and in 1884 the Frelinghuysen-Zavala Treaty was negotiated with Nicaragua for the construction of a rival, and roughly parallel, canal. For a while it seemed as though there would be two canals.

This treaty was not ratified by the U.S. Senate, but immediately a group of private citizens in New York organized the Nicaragua Canal Association and obtained concessions to build from both Nicaragua and Costa Rica. Soon this project was being known as the “American,” and therefore “legitimate,” canal, whereas the Panama was the French, or enemy, canal. More than ever, men like the Seligmans and Morgan seemed to be at war with their own country. The more talk there was of Nicaragua, the harder Jesse Seligman worked to sell Panama.

By the time the Nicaragua group had started digging (and some distance was actually excavated before the project collapsed), De Lesseps and his friends were in serious difficulties. De Lesseps decided that he would have to build locks, and at this he struggled on for another two years. At last, after nine years' work, $400 million had been spent—almost four times the original estimate—and the canal was not quite one-third completed. The Panama Canal Company went under and De Lesseps was sent home to France, disgraced, to face a Parliamentary investigation. In Washington a Congressional committee was set up to find out why tens of thousands of American shareholders had lost money on the canal venture, while men like the Seligmans and Morgan, in commissions for selling the shares, had made so much.

J. Hood Wright, a Drexel, Morgan partner, was summoned to Washington, where he was interrogated by Senator Patterson, the chairman of the investigating committee. Mr. Wright artfully managed to disclaim any responsibility for the disaster. Drexel, Morgan's role, he piously explained, was merely to “help” the Seligmans. He testified that his firm had nothing to do with the Canal Company's purchases, expenditures, or other banking business, but he did admit that his firm had helped the Seligmans purchase the American-built Panama Railroad for the French company.

Senator Patterson wanted to determine how much pressure the banking firms had exerted to swell public confidence in, and promote, the now bankrupt company. He asked Wright, “Was not the moral and
business influence of these three great banking houses given to the enterprise?”

Wright replied hedgily, “In what respect?”

“As far as affecting public opinion in the United States was concerned.”

“I presume so,” said Mr. Wright.

“Was that not sufficient, in a large degree, to mold public opinion in favor of the Panama Canal Company?” asked the Senator.

“That,” replied Wright with extreme caution, “I am not prepared to answer.”

Of course an honest answer would certainly have been “Yes.” It soon turned out that the Seligman-Morgan-Lanier alliance had gone to considerable lengths to appoint men to the American canal committee whose names would add luster and prestige to the project. The investigation unearthed the fact that Jesse Seligman had offered his old friend ex-President Grant the chairmanship of the canal committee at a salary of $24,000 a year—which Grant could certainly have used at that point. But Grant declined the offer, and Jesse had then approached President Hayes's Secretary of the Navy, Richard W. Thompson, who had resigned his Cabinet post to take the job. Obviously, placing a former Navy Secretary in the Canal Company was just the sort of thing Senator Patterson was talking about. Thompson's duties for the company were partly those of a lobbyist—a man who could influence the opinion of Congress (and help persuade it to block the progress of the Nicaragua Canal Company)—and also to strengthen the “image” of the company with the American press, and to inspire the confidence of American stock purchasers.
*

The investigation also disclosed that the Seligmans had more reasons than sheer altruism for working so hard for the Canal Company. They themselves had certain juicy contracts for the procurement of machinery and equipment, and, finally, that $300,000 fee for the privilege of using the Seligman name had had certain strings attached. It had been paid “for services rendered” in influencing American public opinion in favor of the canal. The Seligmans were considered to have done their job so well that an additional $100,000 had been paid.

When Jesse Seligman was called before the investigating committee, he proved a more straightforward witness. The entire Panama Canal undertaking, he admitted, had been badly planned and riddled with “corruption, fraud, and thievery.”

Senator Thompson was curious about some of the appointments that had been made to the canal committee, and asked Jesse, “Why was Mr. Thompson selected as chairman? He was not a great financier, was he?”

Jesse replied, “No, but he was a great statesman and lawyer.”

“But you offered the place to General Grant. Now he was a great soldier, a popular idol, but he was not a great lawyer, or financier, or great statesman, was he?”

With a smile, according to the
Congressional Record
, Jesse began, “Well—”

Senator Geary interjected, “There may be some difference of opinion on that point.”

Sitting forward in his chair, Jesse Seligman said calmly, “General Grant was a bosom friend of mine, and I always look out for my friends.”

Jesse then admitted that he knew American sentiment had been against the Panama Canal at the outset, and he added with candor, “A committee of representative men here, identified with the Canal Company, would have the effect of creating a more favorable sentiment among the American people.”

A surprising and not unrelated fact also emerged from the investigation. Secretary Thompson may have accepted the appointment because he, like Jesse, felt obligated to look out for his friends. A few days after Joseph's death, he had written to Jesse:

In my official capacity as Secretary of the Navy, I have had especial opportunities to understand and appreciate his [Joseph's] character. My first intercourse with your house was had through him, in the summer of 1877, soon after the Department was placed under my charge. At that time, its financial condition was seriously embarrassed, being indebted to your house several hundred thousand dollars, which was steadily increasing on account of drafts drawn by Naval pay officers in all parts of the world, and which were accepted and paid by you in London. It was impossible to discharge the whole of this debt, or even any large proportion of it, without adding to the existing embarrassment and causing serious injury to the Service. When he came to understand this condition of affairs, he at once proposed to carry the debt to the beginning of the next fiscal year and to allow
drafts to be continued until then without regard to the amount. The proposition was liberal and in the highest degree patriotic; and having been thankfully accepted by me the Department was enabled to bridge over all its pecuniary trouble. But for this, the injury to its credit and to the Service generally might have been irreparable.

And so, unusual though it seems, the immigrant Seligman brothers, who had crossed the Atlantic in steerage only a few years before, were, for a while, personally meeting the payroll of the United States Navy. This fact Jesse was eager to get into the record.

The investigating committee eventually decided that the banking firms had been guilty of no wrongdoing, had sold the Panama Canal issues in good faith, and that a certain amount of public relations mixed with banking was excusable. But the whole Panama Canal scandal troubled Jesse, now in his sixties, who felt he had let his dead brother down. For it had been Joseph who had always insisted on “our reputation for the strictest integrity.”

What had happened to the Seligmans' reputation was no worse than what was happening to the financial community generally. Wall Street itself had serious public-relations problems. Americans no longer spoke with admiration and respect of “the men who guide our Nation's financial future.” Instead, the “broker tribe” had become a small and greedy band of self-interested villains, and Wall Street had become the wickedest street in the world.

Congress, at this point, decided to step in and make the canal a United States project once and for all, and once again the favored route was through Nicaragua. (Partly, this was because American engineers wanted to disassociate themselves from the French fiasco at Panama.) The Seligmans might have quietly withdrawn, with their considerable profits, from the whole canal arena. But they were too psychologically and emotionally involved to do so. And there was more to it than sentiment now. They had a certain interest in any assets (there was a railroad, for instance, and a few partially finished terminals) of the old company which could be salvaged and sold to the new U.S. company. So naturally the brothers were committed to a Panama route. They therefore embarked upon a long campaign to reverse American public opinion and discredit Nicaragua.
*

While debates about canal routes were continuing in Washington, the Seligmans approached a friend of theirs, Senator Mark Hanna. A committee called the Inter-Oceanic Commission had been appointed
to study possible canal routes, and the Seligmans asked Hanna to ask the Congress to make no recommendation until the commission's report was in. Hanna agreed, and Congress, at his request, agreed to wait. Then, to the Seligmans' disappointment, the commission delivered its report—overwhelmingly favoring Nicaragua.

Now, in a costly desperation move, the Seligmans in New York and Paris approached a man named Philippe Buneau-Varilla. Buneau-Varilla has been called “the man who invented Panama,” and yet, in a sense, it was the Seligmans who invented, or helped invent, M. Buneau-Varilla. He was a suave, mustachioed little man who had first caught the attention of the Seligmans through his activities in the Dreyfus case.
*
To the Seligmans, M. Buneau-Varilla seemed uniquely talented when it came to shocking the public into a change of heart. By the most delightful coincidence, it turned out that Buneau-Varilla had been devoted to the idea of a canal through Panama since the age of ten, ever since hearing of De Lesseps' feat at Suez. Without hesitation, he agreed to take the job.

He arrived in the United States and immediately launched into a heavy schedule of speechmaking. Nevertheless, a few months after Buneau-Varilla's arrival, Congress voted unanimously in favor of the Nicaragua route. Now, backed by the Seligmans, Buneau-Varilla moved into high gear in a last-ditch attempt to swing the Senate. Buneau-Varilla fought so hard and made so many heated speeches that the French Foreign Minister in Washington wired Buneau-Varilla's brother in Paris, saying that Philippe's activities were embarrassing to France, and suggesting that Philippe had lost his mind. The brother hurried to America, only to discover that Philippe was out to win and would not be stopped.

An Old Testament Deity stepped in to help the Seligmans and then-chief propagandist. A volcano on the island of Saint Vincent in the West Indies erupted, killing several thousand people. Two days before that, the supposedly dead volcano of Mount Pelée erupted on Martinique, and thirty thousand people died. Nicaragua had a volcanic history. Panama did not. Buneau-Varilla suddenly remembered
something he had once seen. He rushed to a stamp store and there, sure enough, was a five-peso Nicaraguan stamp depicting the smoking mountain of Momotombo. Buneau-Varilla bought ninety volcano stamps, affixed each to a letterhead, and wrote below each: “An official witness of the volcanic activity of the isthmus of Nicaragua.” He mailed one to each Senator three days before the balloting. He and the Seligmans waited. The Senate declared in favor of Panama with only eight dissenting votes. The Seligmans cheered.

Buneau-Varilla then bought enough volcano stamps for the House of Representatives, and soon the House too had reversed itself. But there were new troubles. The Isthmus of Panama was then a part of Colombia, and Colombia now changed her mind about granting a new right of way. Buneau-Varilla began applying pressure, and certain sums of money began finding their way into Colombian officials' hands. Colombia seemed about to change her mind, but then voted not to ratify the canal treaty. “There is nothing left,” Buneau-Varilla explained to the Seligmans, “but to have Panama secede from Colombia. That will mean a revolution.” James Seligman wanted to know, “How much would a revolution cost?”

That would, of course, depend. Buneau-Varilla rented a suite at the Waldorf-Astoria and invited a group of would-be secessionists to a meeting there. The cost of a revolution was the chief topic on the agenda. The Panamanians insisted that they needed at least six million dollars to pay for their guerrillas. Buneau-Varilla hurried to the Seligmans, who said that six million was a bit too high. Buneau-Varilla returned with the Seligmans' best offer—$100,000. It would have to be a cut-rate revolution, but the Panamanians accepted the terms.