HIGH FINANCE
When Judge Jackson refused to enjoin the city from issuing its bonds an
appeal was taken. The court and the lawyers of the city were promised
that it would be carried up without delay. Months passed, and no use
was made of the privilege of filing new pleadings and taking new
testimony--that is, no use but to make the suits the basis for libels
on Toledo and its bonds.
Time ran on until the day was at hand for opening bids for the bonds.
That was to be Wednesday. Then the counsel for the opposition notified
the city that on Monday they would begin the taking of depositions.
This was not then or afterwards done, but on the strength of the
notification news despatches were sent over the country that the
proceedings against the legality of the Toledo bonds were being
"pressed." In consequence of this and other manoeuvres, when Wednesday
came there were no bids. A hasty rally of some public-spirited
capitalists at home, learning of the emergency, made up a subscription
of $300,000. The names of the citizens who made this patriotic
subscription were printed in the daily paper under the heading of "The
Honor Roll."
Only by extraordinary manoeuvres could the market for such securities
offered by such a community have been thus killed in a time of great
general and local prosperity, and extraordinary they were. What they
were was formally and authoritatively ascertained by an investigation
made by a committee appointed at a mass-meeting[524] of the citizens
of Toledo called by the mayor, the Hon. J.K. Hamilton. The call ran:
"For the first time in the history of Toledo, its general bonds,
secured by the faith and property of the city, and bearing a fair rate
of interest, have been offered, and only such of them sold as were
taken at home by popular subscription. It is deemed desirable that
under such circumstances the citizens of Toledo should meet together
and determine what further steps should be taken to carry out the will
of the people as expressed by 62 per cent. of the voters of the city.
"It is believed that with proper effort a large additional popular
subscription may be obtained, and thus notice given to the world that
notwithstanding all opposition the citizens of Toledo have confidence
in and will maintain the credit of this fair city, and that a great
enterprise undertaken by its people will not be defeated by the
machinations of private opposing interests, no matter how powerful and
unscrupulous."
The meeting appointed a committee of three--David Robinson, Jr., Frank
J. Scott, and Albert E. Macomber--"to prepare and circulate throughout
the financial circles of the country a pamphlet which shall set forth
the case of the city of Toledo in its struggle against those who by
anonymous circulars and other dishonorable ways have attempted to
prevent the sale of the Toledo natural-gas bonds." This committee put
the facts before the public in a very able pamphlet, "The City of
Toledo and Its Natural Gas Bonds." In an official statement asked for
by this committee the city natural-gas trustees say: "Skilled writers
were employed to furnish articles for Eastern financial journals, to
cast discredit on the bonds on the very grounds that had been set
aside by Judge Jackson's decision. Not content with this open warfare,
anonymous circulars were sent to leading investment agencies in the
United States, warning them to beware of these bonds, as they were
under the cloud of doubtful constitutionality and an impending lawsuit.
When the day arrived for bidding for the bonds no bids were made.
Agents of investors were present, who came to bid, but by some unknown
and powerful influence they were induced not to put in their bids. The
writers are not aware that any similar mode of striking at the credit
of a whole community was ever before resorted to in this country.
It is an insult and a wrong not only to this city, against which it
is aimed, but to people of independence everywhere in the United
States who have a common interest in the maintenance of the rights of
all."[525]
Press despatches impugning the validity of the bonds and
misrepresenting the facts were sent all over the country. The anonymous
circulars referred to were mailed to all the leading banks, investment
agencies, capitalists, and newspapers. The New York _Mail and Express_
said: "It would be decidedly interesting to know who is responsible
for the ... methods by which it was thought to prevent the city from
undertaking the enterprise. A number of volunteer attorneys and
correspondents deluged bankers and newspapers with letters warning them
against the bonds which the city proposes to issue, on the ground that
it had no right to issue them. The _Mail and Express_ received several
communications of this kind."
"Not only the financial centres of this country," say the city's
natural-gas trustees in their official report for 1890, "but those
of Europe were invaded with these circulars."[526] The circular was
headed "Caveat Emptor." It contained twenty-four questions, and every
one of the answers, except those which referred to matters of record
and routine, like the date, amount, name, etc., of the bonds, was
incorrect. What hurt the people of Toledo most, as it was most base
and baseless, was its attack on their hitherto unquestioned credit and
financial honor. Asking the question, "How does the credit of the city
stand?" the circular answered: "Refunding has been going on ever since
1883. The bonded debt was greater at the beginning of 1889 than of
1888; bonds bearing interest at 8 per cent. will become due in three or
four years. The mayor, in his last annual message, admits the inability
of the city to pay much of these except the refunding." "Willing to
wound, and yet afraid to strike," the authors of this attempt to pull
down an entire city managed, by the interweaving of such phrases as
"ever since 1883," "bonded debt greater," "inability of the city to
pay," to create by insinuation the feeling of financial distrust for
which their greatest industry and ingenuity had been able to find not a
particle of foundation. No modern municipality is asked or expected or
desired "to pay much except the refunding." Capitalists would greatly
prefer that even the refunding should not be carried on, but that the
debt should run along at the original high rates of interest, which
they regretfully see dwindling away. The circular failed to state that
the city was borrowing money at 4 per cent. to pay off debts bearing 8
per cent. The insinuations of the circular could have been used of "the
credit" of the United States, New York, Paris, London, Chicago, with
the same appropriateness--with this exception, that Toledo's municipal
financial credit was relatively to its resources on a sounder and more
conservative basis than these much more highly financed cities. The
circular did not state that the proportions of debt to population had
been decreasing for many years past.[527]
"Toledo has not two years' supply of gas," the circular said, "in all
the territory acquired." The State Geologist, in his annual report
for 1890, said that Toledo would have no gas to supply its pipe lines
or citizens in 1891. In 1892 the city pipe line supplied gas to the
value of $168,954.46. Three years have passed, Toledo wells still flow,
and new ones are being found continually. "Whatever may have been his
object," say the city gas trustees, "in volunteering such a statement,
we know that so far in 1891 it is untrue, and that such positive
declarations, based upon hypothetical conditions, are utterly unworthy
of scientific pretensions."[528] The State Geologist also took part in
his annual report in the debate between municipal control and private
enterprise, siding altogether with the latter.
The quantity of gas land owned by the city was put by the circular at
300 to 500 acres. The city had 650 acres. The circular declared the
life of an ordinary well to be one to three years. There is no such
limit. Referring to the quantity of gas land the city had, the circular
asked and answered:
"Cannot other territory be acquired?
"Not in Northwestern Ohio, and not nearer than the gas fields of
Indiana."
This was untrue, for the gas trustees had already been offered, as
stated, several thousands of acres of the best gas lands in addition
to those they had bought. But the authors of the circular did their
best to make it true. The city's natural-gas trustees say in their
report for 1890: "As soon as the trustees were prepared to negotiate
for gas wells and gas territory, the field swarmed with emissaries and
agents of the Northwestern Ohio Natural Gas Company to compete with
the trustees. In order to prove what had been previously stated, 'that
Toledo could procure no gas territory,' no means were left untried;
agents of that company even fraudulently represented themselves to the
owners of gas property that they were connected with the gas trustees
and working in their interest, and in some instances introducing
themselves as the president of this board. Prices went up 1000 per
cent. in some instances rather than let it fall into the hands of the
trustees. A conspicuous officer of that company, as an excuse for
paying an enormous sum of money for a gas well, is reported as saying,
'We did not want the gas well, but we had to buy it in order to keep
Toledo from getting hold of it.'"[529]
Referring to the private companies, "Are the people of the city already
supplied with natural gas for public and private use?" the circular
asked. "They are," it answered, and goes on: "Why does the city want
to go into the natural-gas business, then?" "To boom the lands of
real-estate speculators." This is a charge affecting the Legislature
and Executive and State courts of Ohio, the courts of the United
States, the people of Toledo, and all the members of their city
government. Burke confessed that he did not know how to draw up an
indictment against a whole people. That art has been acquired since his
day.
"Are these bonds of unquestionable validity?" this catechism of libel
upon a community queries.
"By no means. Prominent taxpayers have suits pending attacking the
constitutionality of the act under which they are issued."
"Have these cases," the last question ran, "ever been tried on their
merits?"
"They have not."
They had been tried so far that the United States and State courts had
refused on every ground urged to interfere with their issue and sale,
declaring the legislation authorizing them to be valid. They had never
been tried any further in the United States courts for a very good--or
bad--reason. The "prominent taxpayers," after their defeat before Judge
Jackson, took every possible means to prevent the case from reaching a
final adjudication. The invariable rule of the United States Supreme
Court has been to treat as final and conclusive the decisions of State
courts as to such domestic issues. During the hundred years of its
existence not a case can be found in which that court has overruled
the fixed and received construction given to a State law by the courts
of that State.[530] The only hope for the suit of the "prominent
taxpayers" was, therefore, that the Supreme Court of the United States
would for their special profit reverse the practice to which it had
consistently adhered since the establishment of the government. What
they really thought of their prospect of success in that effort they
confessed when their case, no longer delayable, was upon the point of
being reached.
They who had been so "anxious to get to the case as soon as possible"
refrained from printing the record, a condition precedent to putting
the case on the docket of the United States Supreme Court. The city
wanted the decision, and in order that the case might not be dismissed
for this failure to print the record, and a decision upon the merits be
thus prevented, the city's gas trustees advanced the money--$1100--to
the court printer for printing the record. Pushed thus against their
will to trial, when the day came on which they must rise to state their
case the opponents of Toledo folded their tents and stole silently
away. On the motion of their attorney the case was dismissed, against
the protest of the city. They paid all the costs, including the money
advanced by the city for printing the record. To their defeat all along
the line they did not want to add a formal decision against them from
the Supreme Court, which was inevitable. And they ran away to fight
another day.
Another purpose of these suits was confessed only a few weeks after
this circular was issued. The existence of the suits was used to try to
frighten the city's natural-gas trustees into accepting a "compromise."
The compromise was that they should abandon the enterprise, sell out
pipes and lands for a fraction of their worth, get their gas from the
private company at higher rates, and put the city in its power for
all time to come. "It will be three or four years before your case is
through the Supreme Court," its representative told the natural-gas
trustees, in urging them to accept. "You can't sell your bonds," he
continued; "you have no money." The "compromise" was refused, but the
city's pipe line had been delayed so long that the profits of the
company for another twelvemonth were secure.
The demonstration against the bonds in the United States Circuit Court
had been followed by similar suits in the State courts. Here again the
city was successful. It was upheld on every controverted ground--in
the enabling act, in the vote of the people, in the appointment of the
trustees by the governor, and in the issue of the city bonds. Appeal
was taken here, as in the United States courts, and, as there, for
delay, not for decision. To checkmate further use of this lawsuit to
smother the law and cripple the city, the friends of the pipe line
began a suit against the authorities to force an immediate decision
from the Ohio Supreme Court as to the legality of the bonds. It was
certainly, as was said in the press, "a curious state of things when
the defendant is compelled to bring suit against himself because the
plaintiff refuses to allow trial in his own case."
These litigations, the circulars, the press, were only part of the
campaign. One of the committees of the Common Council was brought
under control, and induced to throw technical difficulties in the way
of the sale of the bonds, which caused months of delay.[531] Effort
was made to get the Governor to appoint natural-gas trustees hostile
to the city, but failed. It was attempted, also without success, to
get the Legislature to prevent the sale of the bonds at private sale.
During all this controversy the city was most fortunate in receiving
the needful authority from the State Legislature. This was due mainly
to a faithful and able representative of Toledo in that body, the Hon.
C.P. Griffin. He was offered every promise of political preferment
and other allurements to betray his constituents, but he always
remained faithful. Without his support the efforts of the city would
have failed. His services amid great temptations deserve the grateful
remembrance of the public.
Some of the devices of "private enterprise" were childish enough.
"A Business Men's Protest" was published, which proved under the
microscope to have been largely signed by men whose names could not be
found in the directory. A similarly formidable-looking remonstrance
against the pipe-line bill was sent to the Legislature. It had 1426
names; of these 464 could not be found in the directory, and over 300
of the 962 remaining names signed the petition for the city's bill.
Many of them avowed that when they had signed the "Remonstrance" it
had a heading in favor of the pipe line, which must have been changed
afterwards. As part of the tactics of misinformation, a report was
published--in January, 1890--claiming to give the business of both the
private companies; but the members of the Council Committee on Gas,
when afterwards examining the books for the gas company, found that
it gave the receipts of only one company. A paper was prepared by a
citizens' meeting for circulation among the manufacturers to ascertain
how much they would contribute towards the city pipe line; but when
reported back to the meeting it had become, in some mysterious way, a
paper asking the manufacturers how much they would advance to quite a
different scheme, the effect of which would be to sell out the city
pipe line or convert it into a manufacturers' line.
These were the infantile methods of men who could not see the
ludicrousness of the position they put themselves in by such efforts to
keep a business which they were constantly declaring to be hazardous
and unprofitable.
Detectives appear in almost every scene of our story, and are as common
in its plot as in any extravagant melodrama of the Bowery thirty years
ago. To counteract the anonymous circulars the City Council sent a
committee headed by Mayor Hamilton--the "War Mayor," one of the ablest
lawyers of the city, upright and loyal at all times to Toledo--to visit
the Eastern money-markets. The committee, in their official report,
state that they were assured by responsible dealers in municipal
securities in New York and Boston that they would bid for the entire
amount to be sold. "We regret, however, to have to report that the
powerful and influential parties who have on all occasions and in every
way sought to obstruct and defeat the enterprise for which the proceeds
of these bonds were to be used, in some way succeeded in inducing those
who intended to purchase to withhold their bids--in fact, no matter
how guarded our movements, we believe that every person or firm with
whom we had interviews was reported to the agents of the Standard
Oil Company, for in every instance where from our interviews we had
encouragement that the bonds would be bid for, within a short time more
or less influential agents of opponents interviewed these parties and
succeeded in changing their minds."
What a picture of "high finance," of the "beneficent inter-play of the
forces of supply and demand," of the "marvellous perfection" with which
capital moves under "natural laws" to carry its fertilizing influences
where they are most needed! The officials of this free city compelled
to sneak around in the open money-market under cover with "guarded
movements," seeking buyers for its bonds as if they were stolen goods!
About them a cloud of spies and detectives reporting every movement as
if it were a crime to the little handful of trust millionaires in their
grand building on Broadway! "They have entered the ---- Bank!" "They
have just left ----'s office!" After each report the leash is slipped
of a waiting sleuth, who flies away to run down the quarry.
The gas trustees made public a letter and telegram they received from a
prominent New York bank:
"NEW YORK, November 27, 1889.
"DEAR SIR,--A gentleman named" (naming a man who signs the
certificates of the Standard Oil Trust as treasurer),[532] "introduced
by the card of Mr. ----" (one of the richest men in New York not
otherwise known as connected with the trust), "called on us to-day and
stated that understanding that our firm was on the point of bidding
on the Toledo bonds, etc., he would caution against the purchase, as
they were not legal. Mr. ---- represented himself as coming from ----"
(one of the companies of the oil combination), "and referred us to
their lawyer for further information. Now as this may hurt the sale
of the bonds we want to be cautious, and on Friday will make further
inquiries, and will wire you accordingly. We may not care to hand in
our bids on this account."
The telegram sent on Friday is as follows:
"NEW YORK, November 30th.
"Fearing sale of bonds has been injured, will not bid at present."
"That tells the story," said one of the trustees, "in a nut-shell."
A local bank bid for $500,000 of the bonds, but did not sustain its
bid. A reputable citizen, an ex-mayor, wrote for publication in one of
the leading journals that he had been informed by a well-known banker
there was reason to believe a banking firm which, in 1892, defaulted
on its bid for bonds, had been indemnified by the opposition for the
$5000 it thereby forfeited to the city, and for the profits it would
have made from the sale of the bonds. With the city line crippled the
gas company would pocket the profits on the sale of a million dollars'
worth of gas a year. Five thousand dollars, or several times that, was
a small insurance to pay for such a gain.
This was the game of hide-and-seek played in Wall Street by detectives
and financial stilettos against "simple greens," who thought supply and
demand still rule values. This was the reality which the officials of
Toledo found behind the outward aspect of its magnificent buildings,
the benevolent millionaires who look out through their plate-glass, the
grandiloquent generalizations of professors about "the money-market."
The city was brought to the humiliation of seeing its officials meet
in public session at an appointed hour to open bids it had invited
from all the money centres for its bonds, only to have the news
flashed all over the country that not a bid from abroad had been
made. This opposition cost the city in one way and another not less
than $1,000,000, according to the estimate of the city's natural-gas
trustees. The feeling of the people was expressed in the following
language in a circular sent out with the pamphlet report of the
committee appointed in mass-meeting to make a statement of Toledo's
case to the public:
"We have seen the modern aggregation of corporations--trusts--suppress
other corporations in the same line of business. But this Toledo
contest is believed to be the first instance where private
corporations--creatures of the State--have assumed to exercise
monarchical powers over a portion of the State--one of its leading
municipalities; to dictate the policy of its people; to seek to
control the legislation as to the laws that should be enacted for such
portion of the State; to bribe and intimidate the votes of such city
at the polls; to attempt to subsidize the press by the most liberal
expenditure of money; to at last purchase, out and out, a heretofore
leading paper of the city, place its own managers and attorneys as
directors, import one of its long-trained men as editor, and turn
this paper into an engine of attack upon the city, an attack upon
the city's honor and credit, characterized by the most unscrupulous
misrepresentation and a perfect abandonment of all the amenities of
civilized warfare."
The Toledo public felt no doubt as to who were attacking it under
the convenient anonymity of the two gas corporations. At a public
conference, January 16, 1889, between the presidents of the private
natural-gas companies and the people assembled in mass-meeting, the
representative of the former said the only condition on which the
members of the oil trust had been induced to interest themselves in
natural-gas in Northwestern Ohio was that of absolute and unqualified
control of the entire business through a majority of the stock of all
the gas companies to be organized.
"The trust is interested in companies engaged in supplying natural
gas?" the president of the oil trust was asked by the New York
Legislature about this time.
"To a limited extent, yes."
"Have they a majority interest in any of these companies?"
"I think they have."[533]
This was identically the arrangement by which the nine trustees owned
as their private property the control of the oil business. At several
later conferences with the city's trustees and the Common Council
the gas companies were represented by one of the principal members
of the oil combination, the ingenious gentleman who had managed the
negotiations with the railroads by which, under the _alias_ of the
American Transfer Company, the trust claimed and got a rebate of 20
to 35 cents a barrel,[534] not only on all oil it shipped, but on all
shipped by its competitors. He was also its representative in the
similar arrangement by which the Cleveland and Marietta Railroad
agreed to carry its oil for 10 cents a barrel, to charge Rice 35 cents,
and to pay it 25 out of every 35 cents Rice paid.[535] He had acted in
the same interest throughout the gas field as well as in oil, and his
pathway could be traced through one independent company after another,
whose wrecks, like those in oil, are milestones.
July 27, 1889, in an item originating in New York, in the _Tribune_, a
friendly paper, and given an extensive circulation by news despatches
sent to the leading papers in other cities, it was said that the
representatives of the oil trust "in this city say emphatically
that they will attack in the courts the right of the city to issue
them"--the bonds.
At the great meeting of the citizens, October 19, 1889, to organize
a popular subscription to take the bonds killed in the money-market,
the resolutions named the oil combination as the power responsible for
the attacks on the city, and appealed to the people to observe that
it, "no longer content with destroying individuals and associations
which stand in the way of its moneyed interests, now rises to grapple
with and destroy the rights of cities and states; we therefore ask all
liberty-loving men to make common cause with us in the defence of the
community against the aggression of colossal power."
The aldermen and the Common Council of Toledo unanimously adopted
resolutions, September 15, 1890, requesting the State and Federal
courts to give decisions as promptly as possible in the suits pending
against the validity of the natural-gas bonds. These bodies in their
official utterance declared that the oil combination, "through its
officers and agents in the city of Toledo and at many other points in
the United States, has circulated false and malicious statements about
the bonds of the city of Toledo issued for natural-gas purposes." The
natural-gas trustees of the city say in their report for 1890: "These
injunctions and circulars, although fathered in the first instance
by non-resident taxpayers, and in the second by irresponsible or
anonymous parties, were traced directly to the oil trust, a trust
having a large number of corporations within its control, among which
is the North-western Ohio Natural Gas Company, and to whom the city
of Toledo may reasonably attribute a loss of more than a million of
dollars already. What further financial embarrassment it may suffer
in the future cannot be measured by the depravity and moral turpitude
which its seeds have sown in our midst."[536]
When the warfare against Toledo became a scandal ringing throughout
the country and beyond, the organ of the trust in Toledo attempted to
make it appear that the oil trust was not the party in interest. But
there was open confession on the record. Its connection and its control
were admitted by two representatives in conference with a committee
appointed by the mayor at their request to discuss the situation.[537]
They described the circumstances under which the members of the oil
trust had gone into the project of the Toledo line and the project
of the natural-gas business. One of the two stated that he came into
it as its "more direct representative." The pipe line of the private
gas company was built, he went on to say, by one of the principal
corporations in the oil trust. At the same interview it was admitted
that the oil trust owned 60 per cent. of the natural-gas company's
stock.
The people of Toledo did not surrender to this success of their enemies
in the money-market. The bonds which calumny and espionage prevented
them from selling at wholesale to the great capitalists of New York and
Boston they took themselves at retail. The Legislature having given
authority for such sales, a committee of one hundred had been appointed
by the citizens' meeting, October 19, 1889, to canvass all the wards of
the city for subscriptions to the gas bonds. "Gas Bond Pledges" were
circulated, to which people subscribed according to their ability, in
amounts ranging from $2 to $5000. The employés at the Wabash Railway's
car shops sent in a list signed by fifty names for a total of $1102, an
average of $22 each. The labor of two hundred men for a week without
pay was offered the gas trustees as an earnest of the good-will of the
people. Piece by piece the city's pipe line was pushed through. At a
critical moment a shrewd and patriotic contractor saved the enterprise
by building a large part of the line, and taking for his pay the bonds
the banks would not take. In June, 1890, the public were gratified by
the announcement that their trustees had secured the means "for the
construction of three miles more," making eight miles in all, or nearly
one-fourth the entire line. In August a contract was made for five
miles more, and so the work went on, step after step.