sherman's honor in the face of failure -- 6/24/16

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Today's selection -- from Citizen Sherman by Michael Fellman. A financial crisis rolled across the United States from 1854 to 1857. William Tecumseh Sherman, a graduate of West Point and soon to be the legendary Civil War general best remembered for his destructive march through Atlanta to the sea, was at that time trying his hand as manager of Lucas & Tyler's new San Francisco banking branch. But caught in the crisis, he was failing. Unfortunately, he had advised many of his military acquaintances to invest in San Francisco municipal bonds, which were also failing:

"By December 1856, the general slump had deepened drastically in San Francisco, Sherman reported. Business was down sharply, and there­fore tax revenues had dried up, destroying municipal institutions. ... Sherman believed that he had run Lucas & Turner 'as strictly as I know how,' and that their losses were lighter than any other San Francisco banking house, 'and yet we [are] close to short.' ...

"In January 1857, without further consultation with Sherman, Lucas & Turner responded to his negative analysis, and to their other finan­cial problems, by pulling the plug on the San Francisco branch of their bank. ... [Sherman] left California in early May 1857, with considerable dismay about what had gone wrong and about the moral structure underlying business in San Francisco. ... 'My opinion is the very nature of the country begets speculation, extrava­gance, failure and rascality. Everything is chance, everything is gam­bling, and I shall be relieved when I am not dependent on the people of California for my repose. ' ...

Sherman as a major general in May 1865

"Even more pressing to him than his personal financial crisis or that of his bank were the enormous losses suffered by his fellow army officers, who had trusted him during his San Francisco years to be their sensible investor. In their names he had bought about $136,000 in San Francisco municipal bonds, on which the city had defaulted. Sherman was aware that other bankers would not worry about such losses. Technically and legally speaking he was not liable for the collapse of the bonds, the risk of which the investors had assumed when agreeing to the purchases. Nevertheless, Sherman believed himself honor­-bound to assume these debts, and to pay them off to the last penny. That was the only path true to the army code of honor that was central to his personal set of values.

"Therefore, he began to liquidate all the assets he had accumulated in San Francisco, including several lots and the family house, a dozen lots in St. Louis, and 640 acres across the river from St. Louis in Illinois, all at fire-sale prices, and, borrowing the last $13,000, including $837.50 from [his father-in-law] Thomas Ewing and larger amounts from his brother, John, he paid off his $136,000 debt to his comrades, a dispiriting process that took more than a year. 'I am going to quit clean-handed' as he began, he wrote Ellen. 'This is not modern banking, but better be honest.' His creditors, quite aware both of Sherman's legal position and of his moral fortitude, were terri­bly impressed with this action. As they knew, his action was highly unusual in the easy-come-easy-go environment of nineteenth-century speculation, and it gave him a long-term reputation for peculiar honesty. But for the foreseeable future all was lost save honor, which gave him scant comfort -- and he hated himself for his failure. ...

"Throughout that catastrophic summer and fall of 1857, Sherman fundamentally blamed himself for all his troubles. 'It seems that I am the Jonah of banking,' he wrote John, not really in irony. 'Wherever I go, there is a breakdown.' "