Gideon Welles, Lincoln’s Secretary of the Navy, always leaned over backward to do what he thought was right. Honest to the very marrow of his being, he practiced his virtues in secret. Honesty and modesty were his passions. As Charles Dana once said, he made no noise in the street when he walked along. He would go far out of his way to avoid publicity of any sort. He was a reticent man, little known and scarcely understood outside his family circle. He was a loyal man, loyal to his family, loyal to his political friends, loyal to his task as a public official. He was a thrifty man with a fixed and stern belief that the government’s business ought to be economically managed. And one of his chief concerns and chief difficulties as a public official was to hold others to the same high moral and economic principles which he himself practiced.
In the first week of May, 1861, he was, therefore, peculiarly pained to receive a letter from his trusted, lifelong friend and brother-in-law George D. Morgan, in which the latter cast doubts upon the honesty of Welles’s purchasing agents in New York and suggested that:
As I am about giving up business and matters have so changed with me on account of the war, I felt that I could really serve you and protect your department here & that in purchase or charters in this emergency.
Moreover, the suggestion that Welles appoint his brother-in-law to the lucrative post of naval purchasing agent in New York had, as the letter revealed, originated with Morgan’s wife Caroline, who was Mrs. Gideon Welles’s favorite sister and boon companion. However happy the Secretary might have been to favor his brother-in-law under ordinary circumstances, he realized that such an appointment at this time was fraught with grave dangers. The cry of nepotism would inevitably be raised against him. Unscrupulous business men, deprived of their big chance to profiteer at the expense of the government, would descend upon Congress. Congressmen, harassed by extraordinary anxieties of war time, would give scant consideration to the facts that Morgan was an able merchant who had earned for himself a comfortable fortune in the importation business and that his long experience in chartering vessels for private trade had afforded him an unusual education for the task of chartering and purchasing vessels for the Navy. Large commissions bestowed on the Secretary’s brother-in-law, Welles knew, would dazzle the public and effectively blind them to the fact that Morgan was an honest man who would work for the best interests of the government. Quite naturally Welles’s first thought was that he could not accede to Morgan’s request. For the time being, Welles filed his brother-in-law’s letter among his personal papers, and kept a watchful eye on the New York agents whose integrity Morgan had impugned.
The “emergency” which Morgan mentioned, perhaps the gravest in our history, requires but a brief recapitulation. Lincoln’s administration was entering its third month, and already the Secessionists had captured Fort Sumter and Norfolk Navy Yard. Following Lincoln’s first proclamation of the blockade, rail and telegraph communications of the City of Washington had been cut and for almost a week Southern sympathizers in Maryland had kept the Capital isolated from the rest of the country. “Plug-uglies” and “blood-tubs” had staged their disgraceful riot against the Massachusetts volunteers as they passed through Baltimore on their way to Washington.
Fortunately Welles had no domestic worries, since he had prudently left his family in Hartford, but officially he faced a Herculean task. The blockade had been proclaimed, and ships must now be procured to enforce it: ships of shallow draft to navigate Southern coastal waters, sailers and steamers, whatever the merchant marine afforded that was at all suitable for hasty conversion into light draft ships of war; fast screw steamers for use as dispatch boats; whalers to carry coal and supplies.
By ancient practice the government advertised for bids, and relied on the commandants of navy yards with their ordnance officers and naval constructors to inspect vessels and bargain for charter or purchase. In fulfilling their technical duties naval officers were competent enough; but for driving bargains with ship brokers— who in some instances charged the government as high as 10 per cent commission— the officers were, because of the situation in which they were placed, notoriously inept.
Their situation may be shown in the case of the William Badger and the Roman. On May 14 Secretary Welles ordered Commodore Breese of the Brooklyn Navy Yard to purchase three sailing vessels, one capable of carrying 1,000 tons of coal to the blockade squadron, and two to serve as receiving hulks at Hampton Roads. Possibly to avail himself of Morgan’s services on the basis of patriotism—since other prominent New York businessmen like William H. Aspinwall were performing such services gratis—or possibly in the hope that Breese might take the responsibility of making Morgan his agent, Welles directed Breese to “Please advise with Mr. George D. Morgan in regard to this matter, and make purchase with his approval.”
When Commodore Breese received the order, Morgan happened to be out of town, and Breese, after consulting with Aspinwall, hired an agent recommended by the latter, one W. H. Starbuck, and sent him to New Bedford to make the purchases. To expedite the proceedings, Aspinwall from his own pocket furnished the agent the sum of $15,000.
In New Bedford, Starbuck bought the William Badger and the Roman for $6,500. He did not make the purchase in his own name but had them conveyed to a stooge from whom he “repurchased” them and priced them to the government at $14,500. Since at each stage the transactions were properly notarized, Commodore Breese completed the purchase; and had no sooner done so than he discovered that the vessels’ hulls wanted extensive repair.
Secretary Welles immediately investigated and, uncovering the “palpable and gross fraud,” refused to ratify the purchase, on the technicality that Breese had not carried out his instructions to consult with Morgan.
Welles now faced his dilemma squarely. Under the pressing need to secure vessels for the blockade, the Navy suffered untold handicaps under the established system of purchase. The opportunities for cheating the government were too obvious for men of sharp eyes and small conscience to overlook. Navy yard officers clearly had all they could handle in the inspection for purchase, overhauling, and outfitting of vessels for sea duty. The extraordinary situation clearly demanded new methods for purchasing if the government were 1 quickly to expand its naval force and do it with reasonable economy.
Morgan came to Washington about May 19 and Welles discussed the whole situation frankly with him. As it happened he was the only New York merchant with whom Welles was personally acquainted. It was imperative to have a competent civilian purchaser in New York; and since no one knew when Washington might again be isolated by burned bridges and cut telegraph wires, it was necessary that the Secretary have an agent whom he could trust implicitly. Even so, the astute and deliberate Secretary felt moved to act with caution.
As a test assignment Welles ordered Morgan to negotiate the charter of the Quaker City, a fast steamer of 1,428 tons which was sorely needed to begin the blockade off Cape Henry. The details of Morgan’s dealings, were they available, should make interesting reading, since the Quaker City was already under charter to the Union Defense Committee at the profitable rate of $1,000 per day. By some kind of clever bargaining Morgan managed to lease the steamer for the Navy at $600.
Nepotism or not the employment of Morgan was obviously good business. On June 10 Secretary Welles requested Morgan to ascertain on what terms he could charter or purchase two steamships suitable to be employed as dispatch boats for the blockading squadron, and to report the same to Commodore Paulding, whom Welles sent to New York to inspect the ships before any charter or purchase should be completed. Morgan located the Connecticut and the Rhode Island; Paulding examined them; Naval Constructor Delano and Chief Engineer Garvin made a more detailed inspection; and these vessels were purchased at reasonable prices. Morgan received the “usual mercantile brokerage” of 2\ per cent for his services; and contrary to ancient practice m government purchasing, Morgan received his fee not from the Federal treasury, but from the sellers of the vessels themselves. With this latter stipulation, a feeble technicality at best, Welles sought to allay criticism of his action in employing Morgan.
The Secretary wrote a short while later:
With all these considerations fully before me, I chose the man for my work. He happened to be the brother-in-law of one who in the private relations of life is nearest to me. I knew that envy and cavil would seize upon this accidental fact and brandish it against me, and that even fair and honest criticism might for the moment consider it inauspicious and perplexing, and so regret it. But was I therefore to flinch from my deliberate convictions of official duty? Was I therefore to withhold from the government in its emergency one single guarantee, public or personal, which I could possibly give of the perfect fidelity of my agent in this most difficult business? Not so. Pained as I was to foresee that I might for a time, and until the whole truth should be known, be doubted, be criticised, or even unjustly attacked on this account, I yet. . . found the strength and firmness to trample all such merely selfish considerations under my feet. With thousands of good men before me from whom to select, I chose the best man whom I personally knew to do my work; and in so choosing I did my duty, and no more nor less than my duty.4
To meet the sudden needs of the Navy for particular kinds of vessels, Welles scuttled the government’s old time-consuming practice of inviting proposals, receiving sealed bids, and awarding contracts to the lowest bidder. Instead he adopted the system then in force among private merchants and purchased through a commercial agent who knew how to drive a bargain. Having found the right man, he made him his sole agent for New York, thereby courting criticism, but also enormously strengthening Morgan’s authority in price-beating. At a stroke he eliminated the chance for competition among agents that would inevitably have arisen (to the detriment of the government’s interest) had Welles appointed several men as purchasing agents. Moreover he fixed responsibility. If anything went askew Welles and the country would know where to fix the blame.
The immediate result of granting sole authority to Morgan may be seen in his purchases of steam propeller vessels from the firm of H. B. Crowell & Co. Prices which Commodore Breese had agreed to pay this firm, the amounts Morgan actually paid, and the resultant saving to the government under the new system were as follows:
Name of vessel | Breese’s agreement | Morgan’s purchase price | Saving |
Monticello | $ 80,000 | $ 71,000 | $ 9,000 |
Mount Vernon | 80,000 | 71,000 | 9,000 |
Huntsville | 110,000 | 90,000 | 20,000 |
Montgomery | 110,000 | 90,000 | 20,000 |
R. R. Cuyler | 180,000 | 165,000 | 15,000 |
Totals | $560,000 | $487,000 | $73,000 |
Within the next 6 months Morgan purchased a total of 91 vessels: tugs, schooners, barks, side-wheel ferryboats, and propeller steamships. These purchases were made from 65 different firms and individuals. The total cost to the government was about $3,500,000. The total savings to the government was estimated by Welles and Morgan to be in the neighborhood of $1,000,000, that sum representing the difference between prices asked and prices paid. The sellers, one can well imagine, quickly adjusted their “asked” prices to the government’s new system of purchasing; but in any case the saving of $73,000 in the dealings with the H. B. Crowell & Co. alone is evidence irrefutable that the total savings to the government were actually substantial.
The important factor in these dealings, however, was not financial economy, but economy of time and the efficiency of the new naval vessels in perfecting the blockade.
On December 24, 1861, Flag Officer Samuel F. Du Pont of the Atlantic Blockading Squadron wrote to Mr. Morgan,
Let me say that your purchased ships have turned out remarkably well. I wish I had more of them. The Bienville, Augusta, Florida, Adger, Alabama, St. Jago de Cuba (not of my squadron) are superior and very serviceable ships. The Henry Andrew is uncommonly swift and useful. She came from Tybee roads a few days since to this anchorage [Port Royal Sound] by inland passage in two and a half hours. She had on a previous day communicated with my ships in St. Helena Sound by the Beaufort and Coosaw rivers in five and a half hours. The tugs are worth their weight in gold . . .
Other vessels purchased by Morgan went into D. D. Porter’s Mortar Flotilla which in the fall of 1861 was being assembled for the New Orleans Expedition and several of them proved indispensable in towing Farragut’s seagoing ships over the bars into the river, in the preliminary bombardment of Forts Jackson and St. Philip, and in the subsequent naval campaign against Vicksburg.
The vessels that Morgan purchased were none of them larger than 2,000 tons, and all save those that were employed as supply ships or tugs had to be reinforced and converted into gunboats. Their chief virtue was their light tonnage which permitted them to navigate bayous and inlets inaccessible to the regular seagoing blockaders of the Navy.
On the debit side of the ledger the Morgan purchases, as Secretary Welles had foreseen, did provoke a considerable political squall.
Unfortunately in his annual report in December Welles, in a glowing account of the Morgan purchases, inadvertently implied that Morgan had been permanently employed as sole naval purchasing agent for New York. Few of the parties Morgan dealt with objected, but several firm holding contracts for naval construction perceived a danger to their interests. They wanted none of that brand of close bargaining for which the Welles-Morgan system had become famous. Ship construction, especially that of ironclads, was a precarious proposition because of rapidly fluctuating prices of material and labor, and because this type of work was new.
Welles’s reputation for economy was now firmly established. Both in and out of the Navy he was now known as an utterly inflexible economizer. Naval Constructor S. H. Pook, for instance, who for a time was assigned to inspect the Morgan purchases, chanced to give his approval to a vessel which later turned out badly. Pook was an old man, who, according to his physician (who interceded in his behalf), was afflicted with torpor of the liver, dyspepsia, and the hallucination that because of his mistake in approving a bad vessel the Secretary was going to have him hanged. At the doctor’s behest Welles had him in for an interview, set his mind at ease, and assigned him to the War Department for duty in constructing gunboats on the western rivers.
The New York contractors, however, knowing nothing of Welles’s humane sentiments, through the naval committees of Congress attacked Welles’s dealings with Morgan. Morgan’s fees for 8 months of work, as they totaled them, must have been $95,000, and that figure they declared was excessive; they demanded a full investigation. The newspapers entered lustily into the fray, and before the Secretary had had a chance to reply, his removal was vociferously demanded.
Secretary Welles, who abhorred publicity, was unnecessarily nettled by this outburst of misinformed public opinion, but he stood his ground and gave a full accounting of his dealings with Morgan, and Congress promptly voted down what Welles was pleased to call the “cabal of lobby corruptionists.” A short time later when the full report was published as a Senate Document it appeared that Morgan had received not $95,000, but about $70,000. In many cases he had relinquished his 2½ per cent to shave prices.
In the whole affair the last word seems to have been had by J. M. Forbes, a mature and widely respected merchant of Boston, whose opinion may be regarded as that of a complete outsider. Under date of January 18, 1862, Forbes wrote to Congressman Sedgwick that he heartily approved of the Secretary’s unconventional but sound business methods. Had Welles followed regular routine, Forbes declared, he would have had smooth water, but the government would have paid at least 20 per cent more for its vessels.
The administration of Mr. Welles & Fox together has been a success and ... it would be a great misfortune to have them disturbed or disheartened by Congressional criticism! Especially so when you pitch into the best things they have done in going out of routine and trying to carry on as practical men would do it. You are beginning your reform at the wrong end when you censure a thing that is well done, merely because it was not better done, and because it has an unlucky appearance of nepotism which gives a handle for popular complaint.
Following the expose Morgan declined to act further as purchasing agent and went for an extended trip to Europe. As a gesture of vindication—now that he had so many burdens lifted from his chest— the Secretary appointed his brother-in-law to be “Commissioner for the U. S. Navy Department Abroad,” in which capacity, however, he apparently performed no service of consequence. Far from resigning his Secretaryship, honest Gideon Welles— with his reputation firmly established for an eagle eye in looking out for the government’s interest and a wrathy temper which no profiteer could want to antagonize— quite properly held on to his important job.