President Rutherford B. Hayes, who despised patronage and the spoils system, campaigned on the promise to clean up government. After hearing complaints, Hayes appointed John Jay—grandson of the first U.S. Supreme Court Chief Justice and Federalist Paper co-author John Jay—to investigate the New York port. The Jay Commission investigated and found problems. The Commission did not find Arthur personally guilty of anything, but criticized him for looking the other way while employees received appointments after making political contributions. The report also noted that Arthur often arrived to work late. Hayes ordered Secretary of the Treasury John Sherman to remove Arthur from his lucrative position. Roscoe Conkling vigorously defended Arthur and, for a time, President Hayes backed off his original demands. When Congress went into recess in 1878, Hayes again ordered Sherman to remove Arthur and replaced him with Alonzo Cornell, a city naval officer.

The controversy endeared Arthur to the Stalwart wing of the Republican Party, led by Conkling. It also gave Arthur some national political exposure.