Salomon was born in Poland, but immigrated to New York in 1772. He was Jewish, highly educated in finance, fluent in several languages, and became a private banker, securities dealer, and member of a commodities exchange. By 1776 there were 3000 Jews living in the American colonies. Salomon was active in that community and fought for political equality. He became a patriot early on, supporting the Revolution, and was even arrested in 1778 as a spy by the British and sentenced to death. But he escaped New York to the rebel stronghold of Philadelphia, where he resumed his financial career.
The American Revolution was financed with no definable base. No regular taxation or public loans existed. No fiscal system had been created for collecting revenue, and the treasury, a mere pretense, stayed empty. Money was constantly needed for supplies, ammunition, food, clothing, medicine, and pay for soldiers. States were supposed to care for the troops they sent to fight, but that rarely happened. Members of the Continental Congress were short on money, too, their horses routinely turned away because livery stable keepers had gone unpaid. Continental currency was barely accepted anywhere, generally regarded as worthless. The lack of money was England’s best ally, many Loyalists arguing that the Revolution would fizzle once the colonists could no longer feed their army.
In 1781 Haym Salomon came to the attention of Robert Morris, the superintendent of finance for the fledging confederation of thirteen colonies. He was enlisted by Morris to broker bills of exchange for the upstart American government. That he did, but he also personally extended interest-free loans to many of the Founding Fathers and to army officers. He became the banker and paymaster for France, an essential American ally, and converted French bills of exchange into American currency, which financed French soldiers fighting in the Revolution. He likewise performed those same services for Holland and Spain, keeping the Spanish ambassador afloat after funds from Spain were thwarted by the British blockade. From 1781 to 1784 his name appeared nearly a hundred times in Robert Morris’ diary. Many entries simply read, I sent for Haym Salomon.
In total, Salomon loaned the new American government $800,000, without which the Revolution would have been lost. He never wore a uniform or brandished a sword, but he performed an enormous service. He died penniless, age 45, in 1785. His entire fortune had been spent in service to his adopted country. A wife and four children survived him. All of the documentation relative to his loans was turned over by his widow to the Pennsylvania treasurer. But those securities and certificates were subsequently lost. No repayment of those debts was ever made. His son repeatedly pressed the case from 1840 to 1860. Congress in 1813, 1849, 1851, and 1863 favored some type of repayment. In 1925 the House actually moved to have Salomon’s heirs compensated.
But that recommendation never passed.
“His family tried for over a hundred years to have those debts honored,” the president said. “They never were. They remain unpaid to this day. The official excuse was always that there was no adequate documentation to say they existed.”
“Seems like a good one,” Harriett noted.
“Except that’s bullshit. Congress, in 1925, wanted to pay the heirs what was owed. A recommendation made it out of committee, but never came to a floor vote. Why? The then secretary of Treasury nixed the idea. His name was Andrew Mellon.”
Stephanie began to connect the dots.
“If you multiply the percentage increase in the consumer price index from 1781 to 1925, that $800,000 loaned by Salomon becomes $1.3 billion,” Danny said. “But that’s too simple a measure. It leaves out a lot of value. If you use the labor method, which is what a worker would have to use in 1925 to buy that same $800,000 worth of commodities bought in 1781, you get $8.5 billion. The entire federal budget for fiscal year 1925 was only $10 billion, and that’s with a $400 million deficit. So you can see why Mellon killed the idea. Full payback would have literally bankrupted the country.”
“What does all this matter anymore?” she asked. “The U.S. has trillions in assets, and surely the amount is negotiable.”
“That debt today is worth $17 billion with the simple CPI method, but $330 billion using the labor value method.”
“Again, that’s negotiable, not insurmountable, and certainly not worth all of this.”
“Howell, there, in his book, thinks that Andrew Mellon either found or was given the documentation that was supposedly lost by the Pennsylvania treasurer. He hid it away and used it as leverage on three presidents of the United States. That’s how he held on to his job for so long.”
“It certainly sounds plausible,” she said. “But we’ll never know if that’s true or not.”
“Actually, we might be able to learn the truth. The letter I received asked that I investigate the Salomon debt. The group felt the heirs deserved something. And I agree, they do. So I had Treasury look into it. The job was given to Paul Larks. Then all hell broke loose.”
“Did Larks find proof of the debt?” she asked.
“I think he did, and I also think he stumbled into something even bigger.”
“Then why not just find out? All these people work for you.”
“I wish it were that simple.”
“I need you two on board. God knows Treasury can’t handle things. I want my A-team on this.”
“Coming in off the bench?” she said. “With the score not in our favor?”
“You’ve done your best work starting halfway through the game.”
“Flattery never works,” she said, adding a smile.
“But it can’t hurt.” He stared into her eyes. “Stephanie, this one’s different. A lot has been happening the past forty-eight hours. I got a bad feeling. Me and Joe Levy are about to have a come-to-Jesus talk. He won’t be a problem anymore. But we need Cotton to find us some answers.”
She knew the correct reply. “We’ll get it done.”
He pointed her way. “That’s what I came to hear. First, though, I want you both to listen to somethin’. Then, Stephanie, I need you to take me somewhere. Harriett, this is where you get off.”
“That’s not a problem. I have plenty else to do. And that’s why we have the Billet.”
“I appreciate your heads-up, though,” he said. “Good job flushing Treasury out into the open.”