Q. David Bowers
An Investigation
There were several thefts and embezzlements at the San Francisco Mint in the late 1860s, not promptly noticed due primarily to poor accounting procedures and incompetent management in certain departments. Treasury Secretary George Boutwell had long been irritated by the lax handling of business at San Francisco, but in 1868 the coiner at that mint had an exceptionally large gold loss in his accounts, and Boutwell ordered a formal investigation of all mints and assay offices.
Boutwell appointed John Jay Knox (a numismatist), deputy comptroller of the currency, as special investigator. Knox was horrified to discover that business was conducted in an inept manner at several of the institutions under scrutiny. At the New York Assay Office, for example, the officers had great difficulty in finding a copy of the regulations under which they were to operate. San Francisco turned out to be worse. On the other hand, Philadelphia, under Mint Director James Pollock, was tightly run and a model for the others to follow. Boutwell was less than pleased about the situation, but he ordered Knox to leave no stone unturned in rooting out incompetence and malfeasance.
During his extended stay in San Francisco, Knox took the opportunity to discuss monetary policy with a number of leading bankers, bullion dealers, and mercantile interests. In California the situation was somewhat different from that in the East, as gold and silver had stayed in daily use throughout the war and afterwards as well.
The Commercial Dollar
One of the people in San Francisco with whom Knox held long discussions was Louis A. Garnett. The latter explained to Knox about the coming silver problem and suggested that a "commercial dollar," as it was first called, was the answer. Garnett believed that if a sufficient number of them could be exported to China and India, the expected troubles would not materialize. It was well known, for example, that hoarding was endemic to India, and if Indians could be induced to hoard American silver, so much the better.
Louis Anicharsis Garnett, who "was more responsible for the idea of the United States trade dollar than any other man," (Quotation from Willem, p. 58; Garnett's biography is from the same source, P: 59.) was a son of Robert S., a congressman from Virginia. Graduating from the Military Institute of Lexington in 1842, he later studied and practiced law through 1850, when President Zachary Taylor appointed him to a post at the San Francisco Custom House. In the early 1850s Louis A. Garnett was among those who helped establish the San Francisco Mint (opened in 1854). At one time he served as treasurer, later melter and refiner, there.
In 1860 he was an incorporator of the Ophir Mine. In the early 1860s Garnett went to Europe, where he studied finance, banking, and economics. In 1870 he was named to the positions of president, manager, and board member of the San Francisco Assaying and Refining Works, which at the time was depositing about two-thirds of the gold received for coining at the San Francisco Mint. In 1876 he retired from active business management to devote his time to studying financial and currency matters. In 1898 he represented California at the Monetary Commission conference held in Indianapolis. He died three years later, at the age of 79.
In 1870 during his meetings with Knox, Garnett emphasized that the proposed commercial dollar should have no real relationship to the regular currency and the name dollar would be for legal purposes only. In effect the American government would be exporting round ingots of silver which were in the form of coins rather than the traditional shapes.
While in San Francisco, Knox also met with Henry Richard Linderman, who had been director of the Mint during 1867-1869 (and who would later serve again in the post) and was now a special agent of the Treasury Department. The two men discussed the concept of the commercial dollar to the point that Linderman, a man who never let ethics get in the way of his personal progress, later claimed credit for it. While he did not really originate the idea, Linderman was instrumental in keeping the concept alive until the law authorizing the trade dollar was enacted in February 1873.
The Knox Report
Knox returned to Washington in early 1870 to write his report for the Treasury and also to draft a coinage bill for consideration by the White House. President Grant was in favor of any reform that would put hard currency back into the hands of the people, and Knox saw no impediments arising from that quarter.
In April 1870 Knox's report was duly submitted to Treasury Secretary Boutwell along with the draft legislation. The draft included a proviso (Section 11) that specified a silver dollar weighing 384 grains, 900/1000 fine. The dollar would thereby become what was called a standard dollar, which meant that its gross weight was in conformity with the half dollar and smaller silver coins. The special character of the silver dollar as established in 1853 would therefore be abolished and the gold standard made de jure instead de facto.
Boutwell agreed in principle with both the report and the draft bill, but suggested that copies of the latter be sent to a number of present and past Mint officials as well as others with expertise in this field. The suggestion was carried out, and a diverse group of people read and commented on the proposed legislation.