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Rh the political agitation which intensified race friction. It became evident that there was a negro problem as well as a slavery question, and that the North was unable to solve it.

309. In the meantime important foreign relations had been dealt with by Secretary William H. Seward, under Johnson,

and by Secretary Hamilton Fish, under Grant. Not only were many treaties of commerce and extradition, including one with China, negotiated by Seward, but he also brought about a solution of more important diplomatic problems. The relations of the United States with France and England had been strained in the course of the war, by the evident friendliness of the governments of France and England for the South. Not only had Napoleon III. been inclined to recognize the Confederacy, but he had also taken advantage of the war to throw into Mexico a French army in support of the emperor Maximilian. The temptation to use force while American military prestige was high appealed even

to General Grant; but Seward by firm and cautious diplomatic pressure induced France to withdraw her troops in 1867; the power of Maximilian collapsed, and the United States was not compelled to appeal to arms in support of the Monroe Doctrine. Russia's friendly attitude throughout the war was signalized by her offer to sell Alaska to the United States in 1867. Seward promptly accepted it and the

treaty was ratified by the Senate and the purchase money ($7,200,000) was voted by the reluctant House, which saw little in the acquisition to commend it. Later years revealed it as one of the nation's treasure houses, particularly of gold and coal.

310. With England affairs were even more threatening than with France. Confederate cruisers (notably the “Alabama”),

built in England and permitted by the negligence of the British government to go to sea, had nearly swept the American merchant marine from the ocean. Unsettled questions of boundary and the fisheries aggravated the ill feeling, and England's refusal in 1865 to arbitrate made a serious situation. Prolonged negotiations followed a change of attitude of England with regard to arbitration, and in 1870 President Grant recommended to Congress that the United States should pay the claims for damages of the Confederate cruisers, and thus assume them against England. However, in 1871, the treaty of Washington was negotiated under Secretary Fish, by the terms of which England expressed regret for the escape of the cruisers and for their depredations, and provided for arbitration of the fisheries, the north-western boundary, and the “Alabama” claims. Senator Sumner had given fiery expression to demands for indirect damage done by the destruction of our merchant marine and our commerce, and for the expenses of prolonging the war. For a time this so aroused the passions of the two nations as to endanger a solution. But Sumner, who quarrelled with the president, was deposed from the chairmanship of the committee on foreign relations, and Secretary Fish so arranged matters that the Geneva arbitration tribunal ruled these indirect claims out. Thus limited, the case of the United States was victorious, the tribunal awarding damages against Great Britain to the amount of $15,500,000. Two months later the

German emperor gave to the United States the disputed north-west boundary, including the San Juan island in Puget Sound. The fisheries controversy was not settled until 1877.

311. In the West Indies also important questions were presented. Seward had negotiated a treaty of purchase of the Danish

West Indies, but the Senate refused to ratify it, nor did Grant's attempt to acquire Santo Domingo meet with a different fate at the hands of that body (1870). In Cuba another insurrection was in progress. Secretary Fish “pigeon-holed” a proclamation of President Grant recognizing the Cubans as belligerents, and secured a policy of neutrality which endured even the shock of the “Virginius affair” in 1873, when fifty of the men of the filibustering steamer flying the American flag were shot by the Spanish

authorities (see ). It was shown that the vessel had no right to the flag. Negotiations about an

isthmian canal resulted only in a treaty with Nicaragua in 1868 giving to the United States a right of way across the isthmus and in provisions for a government survey of the Panama route. Foreign relations in this period were chiefly significant in that they were conducted in a spirit of restraint and that peace was preserved.

312. It was in the field of domestic concerns, in economic and social development, that the most significant tendencies appeared. The old issues were already diminishing in importance before the other aspect of Reconstruction which came from the revived expansion of the nation toward the West and the new forms taken by the development of American industrial society.

313. The Republican party, following the traditions of the Whigs, was especially responsive to the demands of the creditor class, who demanded legislation to conserve their interests. Its victory in 1868 was signalized by the passage in the spring of the following year of an act pledging the faith of the United States to pay in coin or its equivalent all the obligations of the United States, except in cases where the law authorizing the issue had expressly provided otherwise. In 1870 and 1871 refunding acts were passed, providing for the issue of bonds to the total amount of $1,800,000,000, one billion of which was to run for thirty years at 4%. This abandonment of the doctrine of early convertibility was made in order to render the bonds acceptable to capitalists, but in fact they soon went to a premium of over 25%. Long before their maturity the government

had a surplus, but although it could then borrow at 2½% these bonds could not be retired. While the legislature was thus scrupulous of the credit of the nation and responsive to the views of capital, the Supreme Court was engaged in deciding the question of whether the legal tender notes (greenbacks) were constitutional. Successive decisions in 1868 determined that they were not legal tender for state taxes, that they were exempt from taxation, and that they were not legal tender in the settlement of contracts providing for payment in specie. In the case of Hepburn v. Griswold (1870) Chief Justice Chase, under whom, as secretary of the treasury, the notes were first issued, gave the opinion of the court denying that they were legal tender in settlement of contracts made before the first Legal Tender Act, and intimating that they were not legal tender for later contracts. The judges had divided, four to three. Within a year the court was changed by the appointment of one new judge to fill a vacancy, and the addition of another in accordance with a law enlarging the court. In 1871 the former decision was reversed and the constitutionality of the Legal Tender Acts sustained on loose-construction reasoning. In 1884 the court went to the extent of affirming the right of Congress to pass legal tender acts in time of peace, in accordance with the usage of sovereign governments, as an incident to the right of coinage, and it declared that the power to borrow money includes the power to issue obligations in any appropriate form. In 1871 and 1872 Secretary George S. Boutwell illustrated the power of the administration to change the volume of the currency, by issuing in all over six million dollars of legal tender notes; and, following the practice of his predecessors, he sold gold from the treasury to check speculations in that part of the currency. The most noteworthy instance of this was in 1869, when two Wall Street speculators, Jay Gould and James Fisk, jun., attempting to corner the gold market and relying upon a supposed influence in the councils of President Grant, ran up the premium on gold until Secretary Boutwell ordered the sale of gold by the government. The result was the financial crash of “Black Friday.”

314. Speculation and the rapid growth of great fortunes were characteristic of the period. The war itself had furnished means for acquiring sudden riches; the reorganization of taxation, currency and banking increased the opportunities as well as the uncertainties; and the opening of new fields of speculative enterprise in the oil fields of Pennsylvania and Ohio and the gold and silver mines of the mountains of the Far West tended in the