Lobbies

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As Madison had correctly surmised in The Federalist Papers , the principal focus of the federal government was on three areas: commerce (including money and banking), taxation (that is, a tariff program), and the militia (essentially military pensions), to which a fourth—the vacant lands to the west—was soon added. As a consequence most lobbying activity centered on gains or benefits to individuals or to small, regionally based groups engaged in land speculation or trade. The effect of special legislation on behalf of such persons was not widely felt, and only the most blatant acts of corruption—the open sale of government positions, for example—brought censure or prosecution.

On the whole, lobbying during this period was informal, direct, and personal; for paid agents it was something of a free-lancer’s art; in all instances it was controlled by the ethics of the individuals involved rather than by legislation. Some highlights:

THE YAZOO LAND FRAUDS were the most notorious of all the early lobby schemes, and although initially not directly connected to the federal government, in time they provided the basis for one of John Marshall’s most important decisions in the Supreme Court.

A complicated enterprise involving no fewer than seven land companies over a twenty-year period, the Yazoo case concerned the sale of some thirty-five million acres of land by the Georgia legislature in 1789 and again in 1795. The huge tract—now the states of Alabama and Mississippi- lay deep within Indian territory controlled by the Cherokee, Creek, Choctaw, and Chickasaw tribes, and lapped over into Spanish claims along the West Florida border. Despite the obvious title problems any sale was certain to produce, speculators were willing to run the risk.

The initial sale of 1789 fell apart under the weight of poor financing and an accumulation of legal complications. But before long a second group of companies, more effectively organized and more determined than the first, descended on the Georgia legislature, prepared to do whatever was necessary to succeed. Among their number were two United States senators, two representatives, and a justice of the Supreme Court, none of whom saw any conflict of interest in their open participation in what proved to be one of the most flagrantly corrupt land sales in the nation’s history.

After several weeks of feverish activity the legislature readily accepted the lobbyists’ bid and sold the entire tract for the bargain price—even then—of $500,000 in specie. It was no secret that all but one of the Georgians voting in favor of the deal had been bribed, either with shares in the land companies or with cash payments amounting to $ 1,000 and more, and within a year the enraged voters in the state elected a reform legislature, which set about to undo what its predecessor had done. Citing the rampant corruption of the sale as reason enough, the reformers immediately voided the deal.

The matter would have ended there had the lobbyists not been so well organized and well financed, but instead the case dragged on for years in Congress and the courts, kept alive by the New England Mississippi Land Company and its agents. At long last it reached the Supreme Court in the case of Fletcher v. Peck (1810). Speaking for the majority and in the process establishing the court’s right to review state legislation, John Marshall upheld the original land sale on the ground that the reform legislature had violated Article One, Section Ten of the Constitution, which prohibits states from “impairing the Obligation of Contracts.”

Ironically, all parties to the case emerged victorious. The lobbyists had their land to sell at a profit to the state of Georgia, which in turn sold it at a profit to the United States, which in turn sold it at many times the purchase price over the next twenty-five years. By conservative estimate the lobbyists earned $3.5 million for their efforts.

THE SOCIETY FOR THE ENCOURAGEMENT OF USEFUL MANUFACTURES was the brain child of Alexander Hamilton and, at least in its initial stages, the first successful corporate lobby in the United States. Capitalized in 1791 at a million dollars—which was greater than the total assets of all the manufacturing concerns in the country- the society hoped to create a flourishing industrial community on the banks of the Passaic River in New Jersey. The Secretary of the Treasury was already establishing a reputation as the most vigorous arm-twister in Congress—and, rumor had it, the most liberal dispenser of bribes as well- in his efforts to secure passage of his economic programs, so it was not surprising that he journeyed to the state capital at Trenton to plead in person for the land grant and other perquisites the society required. Since several key legislators had conveniently been given shares in the corporation and the governor, William Paterson, had taken it upon himself to steer the proposed legislation through the assembly—the new town was named Paterson as a gesture of thanks—Hamilton and his colleagues had little or no difficulty in obtaining a perpetual monopoly, certain tax exemptions, and control of the Great Falls of the Passaic as a source of power. Masterful as the lobbying effort had been, however, fulfillment failed to follow promise, and within four years the corporation abandoned its project under the weight of heavy financial losses.