THE COTTON CORNER
In modeling the laws, Dru called to the attention of those boards that
were doing that work, the so-called "loan sharks," and told them to deal
with them with a heavy hand. By no sort of subterfuge were they to be
permitted to be usurious. By their nefarious methods of charging the
maximum legal rate of interest and then exacting a commission for
monthly renewals of loans, the poor and the dependent were oftentimes
made to pay several hundred per cent. interest per annum. The criminal
code was to be invoked and protracted terms in prison, in addition to
fines, were to be used against them.
He also called attention to a lesser, though serious, evil, of the
practice of farmers, mine-owners, lumbermen and other employers of
ignorant labor, of making advances of food, clothing and similar
necessities to their tenants or workmen, and charging them extortionate
prices therefor, thus securing the use of their labor at a cost entirely
incommensurate with its value.
Stock, cotton and produce exchanges as then conducted came under the ban
of the Administrator's displeasure, and he indicated his intention of
reforming them to the extent of prohibiting, under penalty of fine and
imprisonment, the selling either short or long, stocks, bonds,
commodities of whatsoever character, or anything of value. Banks,
corporations or individuals lending money to any corporation or
individual whose purpose it was known to be to violate this law, should
be deemed as guilty as the actual offender and should be as heavily
punished.
An immediate enforcement of this law was made because, just before the
Revolution, there was carried to a successful conclusion a gigantic but
iniquitous cotton corner. Some twenty or more adventurous millionaires,
led by one of the boldest speculators of those times, named Hawkins,
planned and succeeded in cornering cotton.
It seemed that the world needed a crop of 16,000,000 bales, and while
the yield for the year was uncertain it appeared that the crop would run
to that figure and perhaps over. Therefore, prices were low and
spot-cotton was selling around eight cents, and futures for the distant
months were not much higher.
By using all the markets and exchanges and by exercising much skill and
secrecy, Hawkins succeeded in buying two million bales of actual
cotton, and ten million bales of futures at an approximate average of
nine and a half cents. He had the actual cotton stored in relatively
small quantities throughout the South, much of it being on the farms and
at the gins where it was bought. Then, in order to hide his identity, he
had incorporated a company called "The Farmers' Protective Association."
Through one of his agents he succeeded in officering it with well-known
Southerners, who knew only that part of the plan which contemplated an
increase in prices, and were in sympathy with it. He transferred his
spot-cotton to this company, the stock of which he himself held through
his dummies, _and then had his agents burn the entire two million
bales._ The burning was done quickly and with spectacular effect, and
the entire commercial world, both in America and abroad, were astounded
by the act.
Once before in isolated instances the cotton planter had done this, and
once the farmers of the West, discouraged by low prices, had used corn
for fuel. That, however, was done on a small scale. But to deliberately
burn one hundred million dollars worth of property was almost beyond
the scope of the imagination.
The result was a cotton panic, and Hawkins succeeded in closing out his
futures at an average price of fifteen cents, thereby netting twenty-five
dollars a bale, and making for himself and fellow buccaneers one
hundred and fifty million dollars.
After amazement came indignation at such frightful abuse of
concentrated wealth. Those of Wall Street that were not caught, were
open in their expressions of admiration for Hawkins, for of such
material are their heroes made.