shoe pinch very sharply. They had been trying hard to engineer a bull
movement in stocks, for they were very heavily loaded with them. They
had, however, met with indifferent success, for the outside public was
out of the market and refused to come in. This huge and unprecedented
fine, these leaders of the bull movement saw, was a disconcerting and
staggering blow at the property of corporations, and consequently at the
stocks of corporations. It amounted, if enforced, to confiscation, and
they, as large speculators, like the rich and moderately rich investing
class, reasoned that if the Standard Oil Company of Indiana could be
fined and have its property confiscated in this way, other corporations
would be liable to the same fate. They also saw that small investors and
people generally would think and argue as they themselves did, and that
their consequent distrust would lead to a heavy decline in prices under
heavy liquidation, through fear or necessity.
So they reversed their tactics. In other words, they decided to run,
and, being a little lame, they started early. Instead of continuing
their bull movement in stocks, they at once withdrew their support from
the market and began to liquidate themselves, for self-protection. The
rank and file of the bulls, seeing that stocks were going down with a
rush from this and other sources, were quick to do likewise, as if they
thought the devil would take the hindmost, while the bears helped the
market’s descent by an unopposed and vigorous hammering. The bull
leaders had abandoned it to its fate, and the banking interests were not
willing to stand in the gap.
The best and highest-priced stocks suffered the heaviest decline, and
for a fortnight there was an outpouring of stocks and a downpouring of
prices that finally carried nearly all of these below the lowest of
March. Wall Street trembled in its boots.
[Illustration:
ANTHONY N. BRADY.
]
The decline was accelerated by the unusual scarcity of money on time,
and the advancing rates for it, which undermined confidence in the
future of the money market, and in the ability of many corporations in
urgent need of money to borrow on their collaterals, or obtain
discounts. Fears on this score had very recently been justified by the
failure of a large iron and construction company in New York City, and
when it was followed by a receivership for the Pope Manufacturing
Company, the rush to sell stocks, and the fresh break in prices, added
to the previous demoralization. The bears held high carnival, for their
harvest was abundant enough to realize their dreams of avarice.
It was feared that this failure might prove the beginning of a long line
of similar failures, and there were many gloomy forebodings as to what
would come next, either in the way of failures or State or Federal
action against railway or industrial corporations, which would, by
damaging their credit, lower the value of their stocks, and possibly
imperil future dividends. We too often fear the things we think instead
of the things that are.
Through all this turmoil and disorder the want of money by many large
corporations and the difficulty of borrowing it was always an uppermost
topic. It touched their weakest spot, and showed the insufficiency of
their working capital. They had large assets in plant and materials, but
comparatively little cash to carry on their large and increasing
business. This made them dependent on the banks; and when the decline in
stocks and bonds caused distrust that led to a curtailment or refusal of
credits by the banks, they had nothing to fall back upon of their own.
They were between the Devil and the deep sea.
This want of a sufficiency of liquid assets is a common shortcoming
among our corporations, both large and small, and therefore a great
element of weakness, especially in periods of distrust, and should be
remedied as far as possible in the future. It is better to do less
business on a safe basis than could be done by extensive borrowing, with
the hazard of failure in some unlooked-for crisis or time of depression.
The greed of gain should be tempered by the wise admonition to make
haste slowly. But unfortunately most people are in a hurry, and want to
make short cuts to success.
The August crisis, like all panics, was brought about and aggravated
more by fears of impending trouble and false rumors than by actual
occurrences. Sentiment often sways as much as facts, and the public had
become extremely sensitive to unfavorable news and constructions
regarding the situation, and comparatively blind and deaf to its
favorable features. All this was ammunition for the bears on the Stock
Exchange, and they made the most of it by steadily and relentlessly
hammering stocks down, so increasing the depression caused by the
liquidation of both speculators and investors, and the loss of
confidence in values. But, like Oliver Twist, the bears still asked for
more.
This want of confidence was mainly due to exaggerated apprehensions of
the effect upon railway and industrial corporations and their stocks of
the Government investigations and prosecutions, and the hasty action of
the States against the railways in cutting down their rates. Much of
this State legislation is too restrictive, and will probably be
modified, or rescinded, after a trial.
It was argued that there was no telling where and when the so-called
crusade against the railways and the Trusts would stop, or what the
final result would be. The bears and the alarmists were equally loud and
excited in pointing to the twenty-nine-million fine as a sign of what,
in varying degrees and amounts, might happen to other corporations, and
bring ruin to many of them. Thus a merely unsettling influence was
magnified into a formidable element of national disaster. As prophets of
disaster, the bears outdid each other, regardless of their friends, the
bulls.
The threats and aggressive attitude of some of the Government’s law
officers alarmed many as much as their allegations against the
corporations they prosecuted did, and they feared that irreparable harm
to those corporations, and their business, would be done before their
cases were finally decided on appeal, and that their stocks and bonds
would suffer accordingly, with, it might be, interest and dividends
suspended. Thus they borrowed a large amount of trouble.
With these feelings uppermost in the public mind, or at least
influencing investors, it was not surprising that such a fever of
distrust prevailed on every stock exchange in the United States, and
that sympathetically and temporarily it somewhat affected the London
Stock Exchange and every bourse on the European Continent. The situation
had begun to look almost hopeless before reason began to take the place
of hysteria among most investors and speculators. Then the
indiscriminate slaughter of stocks prompted investment buying, and the
great scare, after two weeks of storm and stress, gradually passed into
history, while prices, with occasional setbacks, responded to the change
of sentiment by slow but general recovery. But whether this will be
followed by a relapse or not remains to be seen.
The apprehension excited among investors and speculators in stocks by
that $29,240,000 fine against the Standard Oil Company of Indiana did an
immense amount of harm through the enormous losses to which it led. In
combination with the prosecution of the Southern Railway by Southern
States, involving the conflict between North Carolina and Alabama and
the United States Courts, that extravagant fine, so suggestive of _opera
bouffe_, was the immediate cause of the heavy liquidation that produced
this August crisis and turned the New York stock market into a storm
center. Although there was no probability or even possibility of this
fine ever being collected from a million-dollar corporation, even if
affirmed on appeal, public sentiment was about as much disturbed as if
it were ultimately collectible. By creating, although without sufficient
reason, fear of confiscation, it led to those enormous sales and
sacrifices of stocks by investors, as well as by speculators, and the
virtual panic that lasted those two long and memorable weeks.
The innocent thus suffered with the guilty, and the evil effect of such
a fine was clearly demonstrated by a very severe and disastrous object
lesson. The true remedy for rebating and other wilful violations of law
is not to be found in the infliction of heavy penalties on the guilty
corporations, but on the responsible and guilty officers of those
corporations, and not alone by fine but by imprisonment. Heavy fines
inflicted on corporations fall finally on their stockholders, through a
corresponding loss of dividend-paying power, and the lowering of market
prices for their stocks. The proper remedy is punishment behind iron
bars.
As the stockholders are in no way responsible for delinquencies in
management, it is unjust to make them suffer the consequences of these.
It should, therefore, be the future policy of both the Federal
Government and the States to punish corporations for illegal practices
by criminal proceedings against those in their employ who are found to
be responsible for them. Thus punishments will be confined to the
guilty, and confidence will be restored among investors, for such
prosecutions would in no way tend to depreciate the value of the stocks
and bonds of the corporations concerned, but on the contrary they would
tend to enhance their value by promoting honest management. This is a
pivotal point to be kept constantly in view. Backsliders would be the
only sufferers.
The collapse in Wall Street stocks was, however, not so much due to the
trust prosecutions, the Southern States Railway legislation, the
twenty-nine-million fine, and the avowed policy of President Roosevelt’s
administration, as to the general condition of monetary affairs, and the
condition of the stock market itself, although the causes enumerated
started the August collapse. The outside public had for a long time been
holding aloof from the stock market, owing both to the railway and
industrial prosecutions, and hostile State legislation, and the great
activity in trade, and in land, mining, and other speculation calling
for a great deal of money. Speculation outside of Wall Street was never
more rampant.
At the same time stocks were very largely concentrated in the hands of a
few men of great wealth, who were anxious to sell them at improving
prices, and they could only do this by making a market for them. They
had in this endeavor a hard row to hoe, as the farmers say, for money
was scarce and dear on time, not only here but all over the world, with
the European market, like our own, overloaded with securities for sale,
and, worse than all, with no demand for them from investors. They were
in a tight place, rich as they were.
This condition of affairs was reflected in the gradual and persistent
decline of British Consols, that had always been rated as the best and
safest securities in the world, to 81, the lowest price at which they
had sold since 1848—the year of the Smith O’Brien uprising in Ireland,
when they touched 80. The depression in the other European stock markets
was almost equally great, particularly in Berlin. We could, therefore,
look for no market for our stocks, or our vast accumulations of new
railway and other bonds, in Europe. The foreign markets were closed to
us, and wanted nothing American but our gold. Our speculative
capitalists loaded down with these unsalable securities were severely
handicapped. From being giants, they had become cripples. Their wealth
was tied up instead of being in the liquid form of poorer men who had
their money in savings banks, withdrawable at any time. One New York
City institution, the Bowery Savings Bank, held and still holds over a
hundred million dollars of deposits.
Here was wealth in a liquid form that our large Wall Street capitalists,
like most of the large corporations, sadly lacked, and they well might
have envied their poorer brethren who owned these deposits. In
proportion to their means, the poorer men were better off than the rich.
The fact is that our rich men undertook too much, both in the forming of
syndicates to underwrite new bond issues and in attempting to control
the stock market under adverse circumstances. They overestimated
themselves very largely, or, in slang parlance, bit off more than they
could chew, and when the shoe pinched most severely in March, and again
in August last, they had to sell stocks at a heavy sacrifice to pay off
the loans that were called in by the banks, or to meet the calls for
more margin. For once they were really hard up.
This over-extension of Wall Street capitalists, with their efforts to
unduly inflate prices, had its counterpart elsewhere, for such
over-trading was by no means confined to them, but extended to, and was
conspicuously shown by, railway and industrial corporations in their
efforts to keep up with the increasing demands upon them consequent on
the country’s great prosperity and natural growth. This over-extension
was in the form of excessive expenditures and vast issues of bonds,
stocks, and short-time notes. These far exceeded in aggregate amount the
capacity of our own investors to absorb them. Hence, hundreds of
millions of these are still being carried by the banking syndicates that
underwrote them, and of course they at present show a very heavy
aggregate loss. This kind of medicine is much disliked even by
multi-millionaires.
Stimulated by the country’s enormous prosperity during the last few
years, we have gone ahead too fast in all kinds of new and costly
construction work and improvements. We have, in fact, gone ahead
regardless of expense; and railway and manufacturing corporations have
stretched their credit, in too many instances, almost to the breaking
point. Meanwhile the railways have been overtaxed with traffic and the
manufactories overrun with orders for their product, and they still are
so notwithstanding all the much discussed and confidently predicted
falling off in trade.
Through over-taxing their capacity, their working capital, and their
credit to keep up with it, the national prosperity has proved a
two-edged sword to many corporations as well as individual firms, and
the greed for excessive profits among them led to much of the corporate
dishonesty, illegal acts and methods, and wholesale graft in high places
which we have seen exposed. These excesses and irregularities are now
being corrected.
No wonder that their exposure, from time to time, gave blow after blow
to public confidence, and kept investors from buying stocks, and turned
their attention and speculative enterprise in other directions, and into
other channels. These exposures and violations of law naturally aroused
severe public criticism and indignation, and called for investigation by
the Federal Government. In this President Roosevelt took the lead for
the purpose of correcting the mal-administration, the abuse of power,
and the illegal practices that had been exposed.
It was far from his intention to disturb public confidence among the
stockholders of the railway and other corporations that, through their
officers, had been guilty of illegal and fraudulent acts, particularly
rebating. His object was by extirpating abuses to secure honest and
lawful methods of management, and so protect and benefit investors in
bonds and stocks, and secure justice and equality for shippers of
produce and merchandise of all kinds, with the same rates for all, small
and great, rich and poor, without special privileges to any, great
corporations being compelled to respect the law as well as small ones.
The righting and correction of wrongs practised in violation of the
Inter-State and anti-trust laws of Congress would have had no disturbing
effect upon investors, and the public mind, if properly viewed; and it
requires a stretch of imagination to hold Mr. Roosevelt even indirectly
responsible for the twenty-nine-million fine, the immediate cause of the
disturbance in Wall Street that followed it.
Under the general monetary and other conditions then existing, that fine
proved to be the last straw that broke the camel’s back, and, as is too
often the case, the innocent stockholders were made to suffer with the
guilty in the collapse of the stock market. The judge who frightened
investors with visions of confiscation by inflicting that preposterous
fine, must bear the responsibility of starting that downfall, not
President Roosevelt.
August, 1907, was one of the most remarkable months in the history of
Wall Street. After opening in profound gloom, with the stock market
crumbling rapidly away under the rush of investors and speculators to
sell, regardless of price, and with the bears and alarmists busily at
work predicting widespread disaster, few expected during the twelve
exciting and perilous days of the crisis that the month would close with
the stock market gradually recovering, confidence somewhat restored, and
many of both the bulls and the bears as unreasonably eager to buy as
they before had been to sell, while the sentiment of the Street had
changed from extreme depression and despondency to a cheerful and
hopeful optimism. Incidentally the bulls were hanging the hides of some
of the bears on the fence.
When the fall in prices was greatest, new low records were reached for
many of even the best stocks, not only for the year but for several or
many years, as in the case of New York Central, which sold at 99½, or
lower than at any time since 1898. In those twelve eventful days
investors might well shudder, for market values shrunk about three
thousand millions of dollars, if we include all the stocks dealt in on
the New York Stock Exchange measured by their lowest prices and total
capitalization. But, of course, the actual losses sustained were
comparatively small. Wall Street as soon forgets its sorrows as its
joys, and looks ahead.
When at their lowest prices—and I give them as specimen
bricks—Amalgamated Copper stock had depreciated 43 millions, Union
Pacific 51 millions, Northern Pacific 36 millions, Great Northern 34
millions, New York Central 25 millions, Pennsylvania 28 millions, and
Southern Pacific 21 millions, while in the Curb market Standard Oil
stock suffered a shrinkage of 80 millions, and American Tobacco stock of
32 millions. That much of oil seemed to have been cast upon the waters,
and that much of tobacco to have gone up in smoke.
The partial recovery in the stock market and the gradual return of
confidence were coincident with and in the face of a rising market for
cotton. There was an advance in middling cotton to 13½ cents a pound,
the highest price on record for thirty-two years. Yet there was no
dearth in the supply of cotton, and no sign of a “corner,” or the
possibility of one, and we carried over into the new crop year, which
began on the 1st of September, a visible supply of 1,200,000 bales of
American cotton, making a world’s supply of 2,300,000 bales, or nearly
540,000 more than at the same time last year. These statistics may be
dry, like a certain brand of champagne, but they tell their story in a
nutshell.
I dwell on cotton because cotton is still king in the South, although
less powerful in its sway than before the war, owing to the South’s
development of its other resources and its more diversified financial
and commercial interests. It is fortunate in not having all its eggs in
one basket.
The recuperative power shown by Wall Street, after the crisis, was
typical of that of the whole country. Speculative sentiment quickly
passes from one extreme to the other. We are a great and progressive
people and soon recover from disasters however formidable. We had a
conspicuous illustration of this in the San Francisco catastrophe, to
say nothing of the civil war. But a period of stability and comparative
quiet would now be salutary. The recovery in the stock market,
notwithstanding the severity of the recent strain, was mainly due to the
sober second thought of the people, in conjunction with the announcement
of the plan of the Secretary of the Treasury to ease the money market by
making deposits weekly in the National banks of the large cities till
the middle of October. This allayed anxiety as to the money market and
it will, or may, have the desired effect in a large degree till the crop
moving season is over, by preventing the undue locking up of money in
the Sub-Treasuries at a time when it is most imperatively needed for
business uses. The better feeling resulted, early in September, in the
40 millions of New York City 4½ per cent. bonds being bid for five times
over, although at premiums averaging only a trifle more than 2 per cent.
The very severe decline in copper and the copper stocks, this month,
has, however, caused some renewed and widespread disturbance, and the
reduction of dividends by the Calumet and Hecla and Quincy copper
companies will doubtless be followed by a general reduction of copper
dividends. This is at present the worst feature of the general
situation, as it indicates a largely reduced trade demand for copper,
and foreshadows a curtailment of copper mining.
The Treasury plan is only a makeshift, however. The true remedy for this
currency evil lies in the abolition of the independent Treasury and
Sub-Treasury system, and the substitution in its place of now existing
National bank depositaries. Congress should abolish it accordingly, and
it probably will if the banks unite in demanding it, and so keep the
currency in the banks, and in active circulation. The present antiquated
system has been outgrown by the country, and is a reproach to our
national intelligence as a great commercial people.
Simultaneously with the improvement in conditions here, and partly
because of it, for example is contagious, there was a decided turn for
the better in both sentiment and prices on the London Stock Exchange and
the Berlin Bourse. Apprehensions which had been felt there of the
trouble here extending, so as to more or less seriously involve Europe,
subsided when it was seen that we had regained our composure, and were
going ahead as usual. The situation had indeed changed so much that it
really looked as if nothing very disastrous had happened, despite the
hysteria and the crash that followed the spectacular fine of that
Napoleon of the bench, Judge Kenesaw Mountain Landis, a long name—or
some of it—that will be remembered, especially by the Standard Oil
Company, long after the fine has been set aside, or O.K.’d, by the
United States Supreme Court. But it would be rash to assume that the
trouble is all over. There are still many weak structures and disturbing
causes that menace the situation. There is future danger in a too sudden
recovery of confidence, and in under-estimating the danger we have
passed through.
Meanwhile, because of what the Government has done to correct abuses in
the management of the railways and the trusts, their stockholders will
find that it has added to the security of their holdings of railway and
other stocks, at the same time that it will prevent the acquisition of
large fortunes, in dishonest ways, at their expense. The business
situation will also be the safer and sounder and more conservative for
it, and its general betterment will compensate for the suffering
involved in the ordeal we have passed through. Often out of evil there
cometh good.
All concerned in the ownership and management of corporations should
willingly conform to the Federal laws now in force, and, if any of these
should prove onerous, unjust, or defective, Congress can be called upon
to amend them. They might as well make a virtue of necessity. The same
course should be pursued with regard to railway rates, fixed by the
respective States, until these, and their justice or injustice, have
been passed upon by the Supreme Court of the United States. Through this
compliance with law the popular craze against the railways and the
Trusts will gradually subside, while the misconceptions and exaggerated
views concerning Mr. Roosevelt’s policy and its influence will die out
in the clearer light of a better understanding.
Of one thing we may be sure, and that is that President Roosevelt will
always stand firm in his policy of enforcing the laws against wrongdoing
by corporations. We heard this from Secretary Taft in his strong
endorsement of that policy, and we heard it re-affirmed in the
President’s Provincetown speech. But the penalties should always be
inflicted on the individual officers responsible for violations of law,
and these, to be effectual, should involve imprisonment, not fines
against them or the corporations. That remedy is the only certain cure
for the disease, if it again appears. By uniting in support of the
President’s policy, which simply means the enforcement of the
Inter-State Commerce law and the Sherman Anti-Trust law, as amended,
those in control of railways and industrial corporations will increase
the value of their stocks, and raise their credit both at home and
abroad, while inspiring the other officers, and the rank and file of
their employees, with a higher sense of honor, and responsibility to the
public, than was compatible with the old rebating and graft-seeking
trickery.
A large part of Wall Street was in such a nervous state during the
crisis that it jumped at shadows, and trembled at a touch. It shuddered
when Attorney General Bonaparte facetiously said that there was a fine
covey of game among the large capitalists in control of corporations,
and that he would be a poor marksman who would not bring some of the
birds down.
It found fresh cause for alarm in the fight between the Southern Railway
and the Southern States, and when the railway had its license canceled
by Alabama it had a fresh attack of “nerves,” and, later, saw an ominous
event in the surrender of the railway to the State, to recover its
license. It feared the anti-corporation storm would wreck and devastate
the business of the country. But after a storm there cometh a calm, and
the nation, as a whole, is unscathed.
In considering the situation we must never fail to bear in mind that
although investors, and holders of stocks and bonds, and many of the
weaklings of the business world, have been made to suffer severely by
the stern and uncompromising course of the Federal Government and some
of the States—and that confidence was so undermined as to cause a
temporary halt in enterprise—good results will follow. This ordeal has
been at least a purifying one, and while the East has exaggerated its
disturbing influence, the West and South have been comparatively
indifferent to it. Those sections were never more prosperous and
progressive than they are now. This arises from the fact that the East,
being richer than the West, and having much more invested capital,
especially in stocks and bonds, is correspondingly more interested in
the market for these than the West, and more disturbed by great
depression in Wall Street, and the causes producing it. The East is,
therefore, much more likely to borrow trouble than the West or the
South, especially when it cannot borrow money.
This borrowing of trouble took the usual form of fearing from day to day
that worse consequences of the crisis awaited us than we had yet
experienced, and it was increased among business men and corporations
when they found their banks would no longer accept as collaterals for
loans and discounts many of the securities they held for investment, and
upon which they had been previously able to borrow in proportion to
their market price. They found, too, they were generally unable even to
borrow, on time, what they wanted, on the best of collaterals.
They were therefore cramped for money, and this restricted or
embarrassed them in their business, and in a few instances caused their
failure. Here we recognize the close connection that exists between
trade and finance. The severe depression on the Stock Exchange so far
impaired the market value of stocks and bonds as to make the banks and
other money lenders everywhere distrustful of credits, the result being
this inability to borrow, or at least to borrow all that was necessary.
So it was not surprising that those with insufficient working capital
were badly cramped, and had to curtail their business and make
sacrifices, or go to the wall.
The curtailment from this cause among mercantile and manufacturing firms
has been very extensive. It was better than going to the wall, however,
and the after-effect upon the business situation has been salutary and
wholesome. It has acted like a safety valve in checking over-trading,
over-capitalizing, over-borrowing, over-stocking, and overdoing
generally. It has slackened the pace at which too many scantily equipped
concerns were going on the road to ruin. So it has made the business
situation stronger and safer for the sound and solvent; and the
elimination of a mushroom growth of irresponsible credit-seekers should
be welcomed by the banks.
Wall Street is the great monetary clearing house of the country whose
ramifications are co-extensive with the nation itself. It does not
create values, but it reflects everything affecting securities and
commodities, and represents all material interests. It is an unfailing
barometer of values and the times. So those who say a heavy fall, or a
panic, in stocks only affects Wall Street speculators shoot very wide of
the mark. Wall Street radiates its influence over the whole country, and
to a large and growing extent over the whole world, and it, or I should
say New York, is destined, within no very long time, to become the
financial center of the world. The recent severe financial disturbance
in Wall Street, resulting in a reduction in the value of securities
aggregating over $3,000,000, has proven one important thing, and that is
that Wall Street and the industrial interests of the country have
finally largely separated, and that a panic in Wall Street, while
depressing, need not necessarily cause one at the same time in
mercantile circles.
No doubt some of the Trusts and railway companies, accustomed to driving
with a too free hand, and without much regard for the law, considered
they were being handled very harshly by the law officers of the
Government when they were brought up with a round turn and heavily fined
for rebating. But, as they had violated the law wilfully, they had only
themselves to blame, and they well knew that the way of the transgressor
is hard—when convicted. There was some reason, however, in the complaint
of some of the railways that in many of the States they had been made
the targets of an aggressive popular policy towards corporations, that
is, the policy of enforcing rigorously laws which might in some cases,
such as the passenger and commodity rate laws by the States, finally be
declared unconstitutional by the Supreme Court of the United States.
Our large railway and industrial corporations were primarily responsible
for the disturbance and loss of confidence in the monetary situation
through their recklessly extravagant issues of bonds, stocks, and
short-term notes. For a long time they seemed to be doing their best to
kill, in this way, the goose that laid the golden egg, and they finally
succeeded in exhausting both their own borrowing power and the ability
of the banks to lend, or of investors, at home or abroad, to purchase
their issues. This tremendous output of new securities had to be
checked, for it not only glutted the market, and overloaded underwriting
syndicates, but depreciated values and created distrust among investors.
It was piling Pelion on Ossa with a vengeance.
The collapse of last March in the stock market, and the more prolonged
one of August, were obviously outbreaks of the same malady, the latter
intensified by that twenty-nine-million fine. The distrust that caused
these explosions had been brewing for years, and had its origin in the
wholesale issues that over-taxed the money market and the lending
capacity of the country and also squeezed Europe like an orange for all
the money it had to lend.
It was righteous retribution that overtook some, at least, of the
wrongdoers among the larger corporations. Their chickens had come home
to roost through their own unrestricted and extravagant exploitations
and illegal and dishonest practices.
The wholesome remedy of their discontinuance, combined with proper
curtailment and conservatism, has been forced upon them by the
necessities of the situation; and the enforcement of the new laws has no
doubt put a stop to at least the most flagrant of the corporate abuses
before prevalent. But the too sudden application of the brake at a
critical turn in the road may at any time work havoc; and it is doubtful
whether rigorous prosecutions for violations of law in years gone by are
not productive of more harm than good. They are always unsettling, and
unsettlement involves a corresponding weakening of confidence.
But future offences should be prosecuted with the utmost rigor of the
law, and the railway companies and industrial corporations now fully
understand this; and not one of them would be likely to run the risk of
again violating the law, especially with imprisonment for offenders as
the penalty. We must, however, always be careful not to make the remedy
worse than the disease. In other words, the interests of the country at
large are of more importance than the punishment of corporate wrongdoers
for long past offences. Some allowance must be made for the heat of
competition in the strenuous years we have passed through, and the
former general tendency to moral laxity of men controlling and
representing corporations, when acting in their corporate capacity, a
laxity they would probably not have been guilty of in their own personal
affairs. This would, of course, indicate their want of a proper sense of
responsibility and honor. But that failing is not uncommon. Now their
eyes have been opened to the danger of being without it.
The apparent indifference of some of the principal prosecuting officers
of the Government to investment interests, in the published interviews
with them, was, however, complained of as of itself disturbing and
disconcerting to investors. It may have indicated a supposition that
only capitalists, speculators, and those of large means were affected by
the decline in stocks and bonds. The erroneousness of this impression is
shown by the stock transfer books of every large railway and industrial
corporation, in which the small holders of small means are very
numerous, running up to several or many thousands in each corporation,
and reaching a very large aggregate of shares. The small investors thus
suffer by depreciation with the large ones, and even the people of small
means with only savings bank deposits are, as we can all see, menaced
through their dividends by the depreciation of the securities held for
investment by the savings banks. Their depositors may learn a lesson in
finance from this.
Those of the State of New York report for the half year ending on June
30, 1907, a new high aggregate for deposits and resources, the deposits
being $1,394,296,034 and the resources $1,490,760,675. Yet their
surplus, calculated on the market value of their holdings of stocks and
bonds, had fallen from $108,671,735 on June 30, 1906, to $95,743,206.
Here we have a shrinkage through the decline in prices of nearly
thirteen millions or twelve per cent. of their surplus, in one year,
although the savings banks are by law restricted in their investments to
the most stable of first-class securities. If we go back to their
reports of January 1, 1901, we find their surplus was $118,294,674,
showing that the market for bonds has meanwhile been on a declining
scale. Thus the savings banks and Wall Street are shown to be related.
In this August crisis there was far too much hysteria shown where calm
judgment was called for, and this hysteria made the situation dangerous,
although there was nothing dangerous in the actual condition of the
country, apart from the distrust of credits and the scarcity of money on
time, resulting from the immense activity of general business here and
the monetary stringency abroad. A moderate slowing down of business is
consequently the best remedy for this excess, and the one that will in
the most direct and natural way generally restore ease to the money
market. Meanwhile, the banks should assist within proper limits, when
called upon, corporations and firms of proved earning capacity and known
to be sound, and discriminate against those that have only an insecure
or speculative foundation. This would accord with the teaching of the
Bible, “To him that hath shall be given and from him that hath not shall
be taken away even that which he hath.”
The popular feeling against very rich men, who have acquired their
wealth through the trusts and railways, is not a prejudice against
property, but against the supposed ways and means by which their large
fortunes were acquired. The impression is, with many, that those means
were dishonest, and that their rapacious grasping for riches involved
corruption in corporate management, and, in general, a feathering of
their own nests at the expense of the people, or at best other people.
To see them flaunting what they consider their ill-gotten gains
exasperates men, and spreads discontent and unrest among the millions.
Envy and malice are easily cultivated.
It is an inequality of wealth that they resent because they believe it
to have been created by rebating, stock watering, inside speculation,
and tricks and devices by which other people’s money was got unjustly,
and by various illegal and fraudulent practices and abuse of corporate
power. The exposures made from time to time tended to confirm the people
in this impression and prejudice, and President Roosevelt was only
responding to their call when he urged the prosecution of the
corporations known to have been among the most flagrant violators of the
anti-rebate law.
These violators were not the corporations, which we all know have no
souls, but their officers; yet the officers have gone thus far unwhipped
of justice, much to the disgust of the masses of the people. But in
future this defect should be remedied, and rich and poor among the
individual violators of the law should be prosecuted criminally, and
upon conviction sent to jail like any other criminal. I can understand
how many men, who as private individuals would have avoided criminal or
wrongful acts, had no scruples about violating laws in their corporate
capacity. This, however, is an indefensible plea. They showed a moral
laxity which has been exposed and branded as a crime, and instead of it
let us hope they have now a sense of corporate responsibility and
honesty, as a result of these Government prosecutions, and the knowledge
that in future such violations of law can hardly be repeated with
impunity. They will certainly find that honesty is the best policy.
The cry against Mr. Roosevelt has been so indiscriminate that it would
often be amusing but for its serious aspect. If a corporation, firm, or
individual fails in business nowadays, Mr. Roosevelt is blamed. If a man
makes a bad investment in anything, or if his creditors press him for
payment, or his creditors are slow to pay or go into bankruptcy, he
blames Mr. Roosevelt, while the vast host of large and small investors
in stocks and bonds all over the country are almost of one mind in
blaming Mr. Roosevelt for the depreciation in the market value of their
stocks and bonds.
I should not be surprised if very soon even the ladies who have lost at
the fashionable game of bridge will blame Mr. Roosevelt for their
losses. Everyone, nowadays, dumps his misfortunes upon Roosevelt, and
attributes the cause to him. I recently heard of a man who had been
doing a thriving business on Long Island shore catching eels and selling
them in the New York market. Lately the eels have stopped going into his
pots to be caught, so he is now going about howling against Roosevelt
for ruining his business. That is no more ridiculous than many other
things for which he is blamed, without having had anything to do with
them. In thus complaining they overlook the long train of causes and
events that led up to this year’s disturbances in Wall Street.
The public must have a scapegoat in times of excitement and discontent,
and many of our wealthy people thoughtlessly held the President
responsible for the disturbances and unsettlement we have witnessed, and
their own losses and disappointments, because he had taken the
initiative in calling upon the law officers of the Government to
prosecute the railway and industrial corporations known to have violated
the law. They seemed unaware that he did this to stop those illegal
practices which had made enormous fortunes for the favored few, and
enabled them to crush or impoverish their competitors and impose upon
the people. He was the people’s champion.
He did not advise these prosecutions without good cause, for in every
instance where a case was tried on its merits the Government secured a
conviction. Fines of large, but not enormous, amounts were levied
accordingly against many of our principal railway companies, including
the New York Central, and against large industrial corporations,
including the Sugar Trust, for rebating and accepting rebates. But as
the punishment was always by fining the corporations, and never by the
imprisonment of the officers, who were the actual violators of the law,
the masses of the people complained that while they themselves would
have been sent to jail if guilty of criminal offences, these high and
mighty railway and Trust officials were not, and that by fining the
corporations only the innocent stockholders were made to suffer instead
of the individual wrongdoers. Their complaint was just.
I trace the causes of this year’s state of affairs as far back as the
failure in London of Baring Bros. & Co., in 1890, for that unexpected
event gave a shock to confidence, and curtailed credits all over the
world. Indeed, the long career and prestige of that celebrated and
honorable house gave it a credit in both hemispheres that was second
only to that of the Bank of England, and its collapse wiped out of
existence the immense amount of credit and the banking facilities that
it had enjoyed so long. This involved a corresponding international
contraction of the medium of exchange, and tightened the purse strings
of the world, and it continued to do so long after the failure had
passed into history.
The Boer war involved, in another way, great and prolonged depression in
England. It drained her of an immense amount of money, and drained her
also of a vast number of men whose labor was needed at home. To raise
the sinews of war, she had to issue from time to time large amounts of
consols, and these, being in excess of the power of investors to absorb
them, steadily declined, and now—years after the war—they are still
heavy. It naturally surprised the world when last August they reached
81, the lowest point in their long decline, and John Bull was sorely
puzzled to define the cause.
The Russian-Japanese war was another very costly and depressing factor,
and adversely affected international money markets because it involved
immense borrowing by both Russia and Japan, and their bonds are still
helping to glut the European markets, and to some extent our own, as
many of the Japanese bonds are held here. At the same time France is
particularly unfortunate in being burdened with a vast amount of Russian
securities, far more than ever before, which leaves her correspondingly
powerless to make other investments, or extend assistance, when needed,
to other countries.
Then came our Pacific coast disaster, the earthquake and fire at San
Francisco, which involved enormous losses there, and struck Wall Street
and its speculative capitalists a tremendous blow, for the latter were
about as heavily loaded with stocks at that time as before the March
crash, and these had a severe break in consequence. It also involved
English and German as well as American fire insurance companies in heavy
losses.
The effect of this train of disastrous events, both here and in Europe,
has been more or less cumulative, and their influence was so great and
far reaching that it is still being felt, especially by our rich and
speculative Wall Street men, with little of their wealth in the liquid
form they would prefer, notwithstanding their heavy liquidation. They
are still tied up with large amounts of stocks and bonds, bought long
ago at higher prices, and for which there is but a limited market. As
the same condition of affairs exists in Europe, they may find some
comfort in that fact, for we are told misery loves company. They
certainly have plenty of it.
Fortunately the reports of the National and State banks all over the
country show that they are in a sound and strong condition, the result
of proper conservatism, and in protecting themselves they have protected
their depositors and stockholders. So the banks have escaped being
involved in serious losses through the crisis in the stock market, and
are in a position, now that the depression, if not over, is at least no
longer acute, to lend assistance in the recovery that sooner or later
inevitably follows such a cyclone and excessive decline in prices as we
have witnessed.
The banks, however, have in common with all other holders of stocks and
bonds suffered loss by the depression in price of the securities owned
by themselves, this being, as I have shown, particularly the case with
the savings banks, and it may possibly, if not soon recovered, lead to a
reduction of their dividends. If it should so eventuate, it would be an
object lesson that would show the poor man that even his savings bank
deposit was not beyond the depressing influence of a Wall Street crisis.
But let us hope that there will be no such far-reaching result. The
savings banks have, however, already deducted large amounts from the
value of their holdings of securities on account of the past and present
year’s depreciation. Few of their depositors understand this, and where
ignorance is bliss ’tis folly to be wise.
We are fortunate in being Americans and having so great a country under
our sovereignty, for its vast geographical extent, its diversified
interests and resources, and wide differences in climate make one
section to a certain extent independent of another. Thus the South, the
West, and the Northwest looked with complacency upon the Wall Street
crisis as something confined to the East. There was no falling off in
bank clearings, no lessening of the activity in trade South or West. The
industrial and agricultural resources of the country were unaffected,
and the outlook for the crops and trade is reassuring in all directions.
Yet last month many feared the country was going to the dogs.
The last Government report indicates a decrease in the estimated crop of
wheat, but with the invisible left-over supplies, it will fall little,
if any, short of last year’s crop, while the corn and other grain crops
will largely exceed the demand for home consumption. The cotton crop,
too, which the planters will soon begin to gather, promises to be almost
equal to the last. Yet its price is much higher. The grain crops, by
reason of damage to the crops in Europe and elsewhere, and higher
prices, are likely to yield more when marketed here and abroad than in
recent years. Our exports of cotton, too, in the last fiscal year were
valued at more than half a billion of dollars, while our exports of
manufactures aggregated 750 millions. Our coal, iron, copper, gold,
silver, and other mineral products will be larger in 1907 than in 1906,
and our total industrial income will show no diminution. Yet in August
many felt as blue as indigo about the situation.
[Illustration:
_Stuyvesant Fish_
]
I say all this to show that the railways will have all the freight
traffic they want, and the enforcement of existing laws relating to them
will be more likely to increase than diminish their net earnings, for
they will gain largely by the stoppage of rebating and other abuses.
Some of our State and possibly some of our Federal laws may be too
drastic, and, so far as their requirements are unreasonable, oppressive
or unnecessary, they should, and doubtless will be, amended by Congress
and the States, or set aside as unconstitutional by the courts, as in
the case of Pennsylvania’s two cents a mile rate, for an unjust or
vexatious law is abhorrent to justice—justice so well typified by that
blind goddess who holds the scales on such an even balance in the world
of art. Corporations, as much as individuals, are entitled to a square
deal, and a square deal for all is what President Roosevelt is working
for.
As it is, most of the Western railways have, like the Southern lines, a
double track traffic for a single track road, and there is abiding
prosperity in this plethora of business. It is a sort of embarrassment
of riches, for, notwithstanding the vast additions that all the railways
have made to their rolling stock and motive power in recent years, and
the enormous amounts spent in building branches and double tracking
portions of their main lines, and increasing their terminal facilities,
they are still unable expeditiously to cope with the present
superabundance of traffic; and this will naturally increase with the
growth of population. So the outlook for their stockholders is better
than ever.
For his courageous course in unearthing and prosecuting the rebating
evil and other wrongdoing, President Roosevelt is entitled to the
highest praise; and I reiterate that the heads of railway and other
large corporations will best serve their own and the country’s interests
by co-operating with him and his administration to secure strict
compliance with the law in future, with the hope of clemency for their
past violations of law.
That the railway companies always, as a matter of policy, are disposed
to be conciliatory and not willing to be openly antagonistic to the
enforcement of law, is beyond question. Like the American people, they
are law-abiding. We saw an instance of this in the course of the
Southern Railway and other Southern lines, in withdrawing their appeal
from the State Court to the United States District Court in the rate
case, and agreeing to charge only the State rates, namely, two and
one-quarter cents a mile, in North Carolina, two and one-half cents in
Alabama, and three cents in Virginia, till a decision on the
constitutionality of the State rate laws is rendered by the United
States Supreme Court. This concession was avowedly made to avoid further
conflict with those States, although the companies were within their
legal rights in the appeal they had taken. They were wise.
After the good work the Government has already done in exposing and
punishing the rebate evil and other abuses, it would seem that the end
in view—namely, their stoppage—has been substantially achieved. I
therefore think you will agree with me that the Government can well
afford to rest on its secured results and its laurels, and discontinue
prosecutions for old offences, while holding all to the strictest
accountability for violations of law in the future. The law-breaking
corporations have been taught a lesson that they will never forget, and
have suffered penalties that they will not be willing to incur again.
By the Government thus showing clemency towards the offenders they would
all the more be put on their good behavior, and the clamor against Mr.
Roosevelt, in which they have been the leaders, would gradually subside.
Those who have been punished by the law are always very likely to have a
bad opinion of it, and to retaliate by charging injustice. Hence the old
English saying, “No rogue e’er felt the halter draw with good opinion of
the law.”
This reminds me that the two international congresses of socialists held
in England and Germany in August, one at Cambridge and the other at
Stuttgart, showed what large masses of the people there are laboring to
overthrow the existing law and order of society by putting restrictions
and fetters upon individual achievement, genius, and capacity for good
work, and by giving the inferior masses all that they would allow the
superior and educated to enjoy, a levelling process entirely
inconsistent with Americanism, for it would destroy all incentive to
great efforts, and reduce all to a uniformity inimical to progress. Some
of the decline in British Consols is attributed to this socialist
agitation in England, and notably in the House of Commons, several of
its members being radical socialists; and the same is true of Germany
and its Parliament.
In Berlin, which has been for some time the storm-center of Europe,
socialism and its revolutionary doctrines, and especially the meetings
and preachings of the rampant of the socialists, have added to the
disturbance, distrust, and depression caused by the monetary situation.
There, as here, over-expansion in all directions had over-taxed the
money market and glutted the Bourse, the banks, and the speculative
capitalists with new issues of securities that were either unsalable, or
salable only at a ruinous sacrifice, owing to the heavy shrinkage in
prices, and the absence of demand at the low prices. This presents an
almost parallel case to our own, except as to the effect of socialistic
agitation.
We have too many blatant socialists here, but they are not planted in
congenial soil, and their demagoguery and schemes for the destruction of
society as it exists will yield no harvest, for in this great country,
where all are free and blessed with equal opportunities, there is no
reason, no just cause, or excuse for socialism. The agitation in favor
of socialism and its doctrines is not American. It is antagonistic to
American institutions, and comes almost entirely from those who have
fled from oppression and despotism in Russia and elsewhere in the Old
World to our shores, and who fail to see, as they should, that the
conditions which have given rise to socialism in Europe are entirely
different here. So socialism will never take root in the United States,
however much it may be agitated by those of foreign birth who
reciprocate our hospitality in giving them all the rights of citizenship
that we possess ourselves, by advocating the downfall and destruction of
our institutions and system of society, which has made this great nation
of free and independent citizens what it is to-day, the wonder of the
world.
The Bank of France has continuously felt, but resolutely fought against,
depressing foreign influences by tenaciously holding on to its gold, and
it attracted more of it recently from this country by paying interest in
transit. Both London. and Berlin have long been trying hard to get gold
from France, but without success. This determined policy, and refusal to
finance anything that would take money out of the country, is intended
to fortify the Bank of France and French investors against a possible
crisis due to their colossal holdings of Russian bonds. France is the
guardian and watch dog of monetary Europe.
While the situation in Germany is strained, that country is taking the
lead in European manufacturing enterprises, and it is forcing its trade
in all parts of the world. To its great expansion in industrial work,
the locking up of capital there, in industrial enterprises of all sorts,
is chiefly due. Tempted by great expectations capitalists have invested
in them very heavily, and induced by high rates of interest the banks,
and other large money lenders, have loaned enormously on industrial
securities for which there is at present little or no demand from
investors, and this conversion of their resources from a cash or liquid
form to a form much more fixed than they expected, has very largely
curtailed the supply of loanable funds to others, and caused or
aggravated the long existing monetary stringency in Berlin. Yet, strange
to say, Germany uses very few bank checks. The German Government,
however, is about to consider a plan for regulating their issue and use.
Even the Government salaries, aggregating $211,344,000, or 888 million
marks, a year, are paid wholly in specie. Here we see 18 million dollars
a month withdrawn from circulation, to return slowly. This is almost as
bad as our Sub-treasury system. No wonder Germany is pinched for money.
One indirect cause, hitherto overlooked, of the prolonged monetary
stringency in Europe has been the absorption of gold by Egypt, India and
China, and it has been sufficient to largely neutralize the effect of
the increased gold product of South Africa, Australia, America and other
countries. India has desired gold of late years, instead of silver
exclusively, as before, owing to the depreciation in value of the white
metal, and China has been secretly absorbing it for the same reason, and
with an ultimate view to placing that nation on a gold basis.
Egypt, however, for several years has been largely buying gold with the
proceeds of its large exports, which include a particularly fine quality
of long staple cotton that commands a much higher price than ordinary
cotton. This gold is extensively hoarded by the Egyptian capitalists
instead of being placed in the banks there, and entering into the
monetary circulation. The consequence is that it is lost sight of, and
lost to the world outside, for Egypt is not only distrustful of banks,
but imports very little in comparison with what it exports. So it is
enabled to keep what it gets in gold. This seems to me an answer to the
question, “What becomes of the new gold?”
The world’s peace in the future is more likely to be disturbed on the
Pacific Ocean side than on the Mediterranean. I predict that within the
next few years all the great European nations will combine, in friendly
relations, offensive and defensive, against the balance of the world,
which means against China, Japan and India, that represent two-thirds of
the world’s population. If the United States wants to stand aloof and
avoid being drawn in on one side or the other, the Philippines must be
parted with. The contest of the European nations will be for commerce in
the East, and the European powers, especially Russia and Germany, will
do all they can to breed trouble between the United States and Japan and
would be glad to have both nations crippled through a war. So long as we
hang on to the Philippines we will have a war cloud hanging over us.
England, owing to her alliance with Japan, is in a better position to
take care of the Philippines than we are, and if we could make an
honorable deal with England to exchange them for her South American
possessions, it would be a good thing for us, as, when the Panama Canal
is built, those islands will be of much more advantage to us than the
Philippines, and by thus removing the bone of contention we would secure
permanent peace. The Philippines will be a great source of expense to us
without any possibility of obtaining corresponding advantages;
therefore, why retain what will keep a sore spot open as long as we hold
on? We are not a colonizing nation—we have territory enough of our own
within our own border, while England, on account of her meagre
dimensions, requires colonizing for self-existence.
I am inclined to think that it may turn out to have been a mistake for
Commodore Perry to have opened the ports of Japan to the world—a caged
lion being safer than one let loose. It resulted in Japan building
herself up as a power; then followed the war with China, which was
instrumental in breaking down China’s exclusive walled-in method of
existence. So that now China is also opened to the world like Japan; her
350,000,000 of people will get themselves on a war protecting basis,
which will naturally make an alliance with Japan a necessity, and such
an alliance will after a while require the European combination as an
offset; otherwise, sooner or later some of the European nations will be
apt to meet the same fate as old Rome at the hands of the
barbarians—simply wiped out of existence. China and Japan will fight for
their self-preservation and commercial interests. The 300,000,000 in
India will fight for release from Great Britain’s rule, and backed by
fanatical inspiration, under skilled leadership, will make a dangerous
foe sometime. Hence India’s natural desires will make her akin to China
and Japan, arrayed against any foreign foe. So India, China and Japan
and the rest of the Orient, when well disciplined and well equipped and
led by Japanese generals, will require the combined European nations to
hold them in check. The European nations have now had all the wars they
want and they have gained through them their present forceful positions
of independence, hence all future great wars will be to keep the
900,000,000 of people in Asia in subjection, and it will need all their
combined power to do so.
I will now come nearer home and glance at the rising star of the South.
The continued material prosperity of the South is one of the best signs
of the times, and it has given a legitimate forward impulse to the whole
country. This section of the United States is in its natural resources
more favored than any other, and presumably will ultimately become the
richest. That indeed is its natural destiny under the industrial and
agricultural development which will come from the growth of population,
the consequent increase in the supply of labor and the progress of
education. Here, indeed, you have a splendid prospect where distance
lends enchantment to the view, and in aiding, encouraging and
stimulating this development, on good business principles, none will be
able to render better service than you Southern bankers. Already the
South is progressing in actual agricultural and industrial wealth from
year to year, and day to day, at a rate that would have seemed fabulous
not very long ago; and the banker shares with the farmer this rapidly
increasing prosperity, especially if cotton is selling at more than
thirteen cents a pound, or even at ten cents. It is, therefore, to the
banker’s interest to co-operate with the farmer, for by so doing the
benefit becomes mutual. You gentlemen, as Southern bankers, are favored
by Providence in being where you have such a wide and splendid field for
doing good to others on a safe and conservative basis, at the same time
that you are building up the South, and doing good for yourselves in the
time-honored business of banking.
While the South is increasing rapidly in actual and substantial wealth,
it is a good sign that this wealth is not going into a few hands, but
being widely distributed among all grades of the population. The city,
the town, the village, the factory and the farm give equal and abundant
evidence that all are sharing this boon of material prosperity,
resulting from their own industry and the Southern country’s legitimate
development. You have, figuratively speaking, only to tickle the soil
with a hoe, and it smiles with a harvest.
The South produced last year crops and other raw products valued at two
thousand millions of dollars, or four hundred and fifty millions more
than all the United States, outside of the South produced in 1880; and
last year also its manufactured products were valued at two thousand
five hundred millions, or five times more than it manufactured in 1880.
This is the right kind of expansion.
Last year, too, the increase in the assessed value of property in the
South was eleven hundred millions, or three hundred and fifty millions
more than the increase between 1890 and 1900. Contrast the increase of
seven hundred and sixty millions in that ten-year period with the
increase of over sixteen hundred millions in the last two years—1905 and
1906.
Such growth is as phenomenal as it is gratifying, not only to the people
of the South but to the people of the whole United States, and it is not
a forced but a natural growth. We see it most conspicuously in the
development of its industries, for it has now two hundred and fifty
millions invested in cotton mills, an amount exceeding the capital
invested in cotton mills in all the United States in 1880. This alone is
a grand exhibit.
The South also is making pig iron at the rate of three million five
hundred thousand tons a year, more than all the rest of the country made
in the year 1880, and the capacity of the South for iron and steel
making is practically unlimited. Turning to bituminous coal, the South
mined eighty-five million tons of it last year, and in the last fiscal
year the foreign exports of all kinds from southern ports were valued at
seven hundred and thirty-four millions against only about two hundred
and fifty millions in 1881. The South may well be proud of all this
productiveness.
So great is this material development and so great the consequent demand
for transportation facilities, that every railway in the South may well
need double tracking, while to keep pace with the South’s present rate
of progress, thousands of miles of new railways will have to be
constructed every year for many years to come. The South should
therefore continue to encourage capital no less than immigration, on a
scale extensive enough to meet all its legitimate requirements. This is
the work, Gentlemen and Bankers of the South, that lies before you.
Now I come to Kentucky; good old Kentucky—with which is linked the fame
of Daniel Boone, and a Civil War record of which it may well be proud.
We in the North, of course, all know that Kentucky is famous for its
beautiful women, its handsome men, its splendid race horses of the great
blue grass region, and the whiskey of which Colonel Watterson has told
us so much and claims to be so fine a judge. His story of “Old Kentucky
Bourbon” is a dream of eloquence.
But first of all to engage our attention are the women, whose beauty is
only eclipsed by their charm of manner, their refinement and bright
intelligence. They represent an aristocracy of the best blood of the
American people, and I can testify to their fascinations, for I won, or
rather surrendered to, one of the finest of Kentucky’s daughters, after
for a long time supposing that my surrender was impossible even to the
fairest of the fair; and therefore I am glad to come to Kentucky and to
enjoy the privilege of addressing so many of its stalwart sons as are
gathered in this distinguished assembly of Kentucky bankers, on the
general situation, after the financial storm we have passed through. I
indeed almost feel, in the tender words of the popular song, that I have
at length reached “My Old Kentucky Home.”
As a border State, you are claimed by both the South and the North, and
your hospitality makes visitors from every quarter believe that, no
matter where they hail from, Kentucky knows no North, no South, no East,
no West, in the welcome she extends to strangers, or friends, from every
sister State. When, in after life, these visitors sing the old song,
“There’s no place like home,” they will mentally add, “except Kentucky.”
I thank God that to-day we all know the United States as a United
Country now and forever, which during the present generation has grown,
and is growing, more united, more liberal, in a broader sense, and each
section more just and generous in seeking to solve the problem of
granting equal rights to rich and poor alike.
In closing I desire to impress upon you that I shall always have in my
heart a grateful appreciation of your kindness and courtesy in
permitting me to meet and address you on this occasion.
* * * * *
At the close of this Address a motion was made that “Mr. Clews be
tendered a vote of thanks by the members of the Convention for his very
able, very interesting, and most instructive address.”
The President of the Association—who presided—said, “Those in favor of
the motion will please rise.” He then declared the vote to be unanimous.
------------------------------------------------------------------------
CHAPTER LXXIX.
TABLE SHOWING DATES OF ADMISSION OF THE MEMBERS OF
THE
NEW YORK STOCK EXCHANGE.
_According to the Directory Issued July 1, 1907._
* * * * *
Prior to May 3, 1869, the New York Stock Exchange was a body with a
membership of 533. Of such original membership, there are now remaining
31, as appears by the following list, such list giving the date of their
admission:
1844—Dec. 17—WM. ALEXANDER SMITH.
1857—Nov. 20—J. H. WHITEHOUSE.
1858—Mar. 6—L. D. HUNTINGTON.
1862—May 10—A. M. CAHOONE.
1863—June 6—E. C. BENEDICT.
Aug. 10—J. H. JACQUELIN.
Sept. 4—H. S. CAMBLOS.
1864—June 27—HENRY CLEWS.
July 6—E. S. CONNOR.
July 8—E. H. BONNER.
Dec. 12—H. S. WILSON.
Dec. 30—F. W. GILLEY.
1865—Jan. 11—JOSEPH WALKER.
Feb. 28—JAS. WEEKS.
Dec. 2—R. SUYDAM GRANT.
1866—Feb. 17—DONALD MACKAY.
Mar. 24—A. I. ORMSBEE.
May 2—FRANCIS L. AMES.
Sept. 7—D. HENRY SMITH.
Dec. 8—W. T. COLBRON.
1867—June 15—G. J. LOSEA.
1868—Mar. 27—T. W. THORNE.
May 26—H. S. GERMOND.
June 8—CHAS. GREGORY.
July 24—JAS. D. SMITH.
Dec. 28—C. H. LELAND.
1869—Jan. 9—A. H. COMBS.
Jan. 12—F. K. STURGIS.
Feb. 24—A. M. JUDSON.
Feb. 26—W. G. READ.
Mar. 18—W. E. TILLINGHAST.
On May 3, 1869, a separate body of brokers, known as the “Government
Bond Department,” was admitted, upon the payment of $1,000 each. This
board has a membership, as admitted, of 173, and of such members there
now remain 15, as appears by the following list:
W. L. BULL.
E. A. DE MAURIAC.
R. P. LOUNSBERY.
WILLIAM RASMUS.
JAS. SELIGMAN.
C. A. BUTTRICK.
LOUIS P. HENOP.
J. R. MAXWELL.
SALEM T. RUSSELL.
R. K. WHITE.
CHAS. S. DAY.
CYRUS J. LAWRENCE.
ALFRED NEILSON.
CHAS. M. SCHOTT.
W. B. WADSWORTH.
Between the 3d and 8th day of May, 1869, various members were elected,
of whom one now remains, Mr. F. Nathan, who was admitted to membership
on May 6, 1869.
On May 8, 1869, a consolidation was effected with an organization known
as the “Open Board of Brokers,” at that time facetiously referred to as
the “Coal-holers,” from the fact that they had held their meetings for a
time in a basement in William Street.
This Open Board had a membership of 354, of whom there remain as members
at the present time but 26, as appears by the following list:
L. D. ALEXANDER.
S. L. BLOOD.
M. BURR, JR.
W. B. DICKERMAN.
H. H. HOLLISTER.
W. B. LAWRENCE.
J. E. MASTIN.
W. B. SANCTON.
J. M. ARMORY.
JOHN S. BUSSING.
L. G. FISHER.
W. H. JOHNSON.
A. LIBAIRE.
P. H. MINIS.
OSWIN O’BRIEN.
S. M. SCHAFFER.
W. G. WILEY.
W. F. BISHOP.
JOHN V. BOUVIER.
G. F. CUMMINGS.
ALBERT T. HATCH.
A. JOSEPHSON.
W. B. LOCKWOOD.
H. J. MORSE.
E. L. OPPENHEIM.
A. H. VERNAM.
Of members admitted during the balance of the year 1869, that is, from
May 8th until the close, there remain at present 7, as appears by the
following list, which gives the date of admission in each case:
S. W. BOOCOCK, June 2d.
D. B. VAN EMBURG, June 19th.
M. C. BOUVIER, June 25th.
JOHN BIANCHI, June 26th.
JAS. B. WILSON, Oct. 5th.
W. S. GURNEE, Nov. 30th.
HENRY G. CAMPBELL, Dec. 2d.
As the result of the admissions of the two bodies heretofore described,
the membership of the Exchange rose to a total of 1,060, at which figure
it stood until December, 1879, on which date, in order to raise funds
for the construction of a new building, there were sold at auction forty
additional memberships, which brought an average of about $15,000 each.
Of these seats so purchased there now remain 9.
This brought the total membership to 1,100, at which figure it has ever
since remained. It appears, therefore, that of members who joined the
Exchange prior to the 1st of January, 1870, there at present remain 85,
as follows:
Members of the original “New York Stock Exchange” 31
now remaining
Members of the “Government Bond Department” who 15
joined May 3, 1869
One member who joined the Exchange May 6, 1869 1
Members of the “Open Board of Brokers” who were 26
admitted May 8, 1869
Present members who joined between May 9, 1869 and 7
Jan. 1, 1870
__
80
------------------------------------------------------------------------
CHAPTER LXXX.
ENGLAND AND RUSSIA IN OUR CIVIL WAR AND THE WAR
BETWEEN RUSSIA AND JAPAN.[7]
Footnote 7:
Written for the _North American Review_, June 1904 issue, by Henry
Clews.
There has recently been much discussion relative to the attitude of
England and Russia towards the United States during our Civil War. This
was provoked by the war between Russia and Japan, which caused the
partisans of Russia here to contend that Americans ought to sympathize
with Russia in the contest. They argued that Americans should do this
because Japan has an alliance by treaty with England, and English
sentiment was a good deal against the United States in our struggle, or
rather in favor of the South as against the North, whereas Russia was on
our side, and made us, in 1863, as they erroneously claim, an offer of
naval assistance in the event of intervention by England and France.
It is very easy to assert, as it has long been asserted and by many
believed, that Russia, in 1863, offered the United States Government the
use of her ships of war that then came to the port of New York, and that
this prevented, or may have prevented, England and France from
recognizing the independence of the Southern Confederacy. But we have
yet to learn that there is any record of such an official overture by
Russia, either at St. Petersburg or at Washington; and there certainly
would be one in both countries if the assertion was a fact instead of
being wholly mythical.
Would Lincoln or Seward have left the country in ignorance of such an
affair, or of any suggestion in that direction, if it had been
officially made? It is a myth that hardly calls for contradiction. Such
matters between nations cannot be kept secret, and the lapse of forty
years since 1863 without revealing anything concerning the alleged
orders, goes to prove that there were none of the kind, and that there
was nothing to reveal. The Russian ships came here in 1863, just as the
Russian fleet with the Grand-Duke Alexis came to New York in 1871,
merely on a cruise.
That sentiment in England during the war was largely pro-Southern among
the wealthy mercantile and manufacturing class is not to be disputed.
But this resulted from the interruption of the cotton supply by the war
and the blockade of the Southern ports, and from the loss of the South
as a customer for British manufactures, involving much depression and
distress. The shoe pinched very severely. Liverpool and Manchester, in
particular, were great sufferers by the war, and smarted under the
extinction, for the time being, of their Southern cotton supply and
connections, and they were against the North largely because it had
choked off this trade.[8]
Footnote 8:
I except, of course, the great excitement and commotion created in
England by the seizure of Mason and Slidell, on November 7th, 1861, by
Captain Wilkes of the U.S.S. “San Jacinto,” when the British
Government demanded their release and an apology; but that was because
we had violated the rights of a neutral vessel by taking them from the
“Trent,” flying a British flag. We released them on that ground, and
so at once ended the trouble that had threatened war. This was a
special case of our provoking.
But this sentiment, this irritation, due to business conditions growing
out of the war, was merely personal, and in no way involved the British
Government, or reflected its leanings, opinions, or future policy.
Liverpool and Manchester were, not unnaturally, sentimentally against
the North, because it was, under the necessities of war, preventing the
South from shipping its produce to England or importing British goods.
That feeling of irritability against the North would have disappeared at
any time with the resumption of trade with the South; and it did
disappear as soon as the war ended and the Southern ports were reopened
to commerce.
England’s American trade up to that time had been very much larger with
the South than with the North, for cotton was much more truly “king”
then than it is now; and, apart from grain and provisions, the export
trade of the North was very small in comparison with its present great
extent. Moreover, the wealth of the United States was small in
proportion, and our social relations with England and the rest of Europe
were not nearly as intimate and extensive as they have since become. We
have learned to know each other much better in the interval.
We had not then begun to export beauty and fashion, largely in the shape
of American heiresses, for the delight and enrichment of the aristocracy
of the Old World, and we could boast of no such colossal individual
fortunes as we can now.
When, however, the British Government did, on one occasion, consider the
question of recognition of the South and intervention in the war, it was
solely on the proposition of the French Emperor, Napoleon the Third, who
wanted to break up our Union in order to promote his scheme for planting
the Latin race in America, by establishing, under French protection, an
empire in Mexico, with Maximilian on the throne. But his proposition was
at once unanimously, emphatically and unconditionally rejected by the
British Cabinet.
We have this on the highest official authority, that of Mr. Gladstone
himself, who, in a letter to me dated May 30th, 1889, speaks thus
positively on the subject:
26 JAMES’S STREET, May 30, 1889.
DEAR SIR:
Having expressed my interest in the portions of your work which
I read on the day of its arrival, I think it would be less than
ingenuous if I did not, after reading what relates to the
Cabinet of Lord Palmerston, on page 56 and in the following
chapter, make some reference to it.
Allow me to assure you that, so far as that Cabinet is
concerned, you have been entirely misled in regard to matters of
fact. As a member of it, and now nearly its sole surviving
member, I can state that it never at any time dealt with the
subject of recognizing the Southern States in your great civil
war, excepting when it learned that proposition of the Emperor
Napoleon Third, and declined to entertain that proposition
without qualification, hesitation, delay, or dissent.
In the debate which took place on Mr. Roebuck’s proposal for the
negotiation, Lord Russell took no part, and could take none, as
he was a member of the House of Lords. I spoke for the Cabinet.
You will, I am sure, be glad to learn that there is no
foundation for a charge which, had it been true, might have
aided in keeping alive angry sentiments happily gone by. You
are, of course, at liberty to publish this letter.
I remain, dear sir, your very faithful servant,
W. E. GLADSTONE.
HENRY CLEWS, Esq.
In this letter it will be seen, Mr. Gladstone, the Grand Old Man, as
England called him, a member of the British Cabinet during Lord
Palmerston’s administration, which extended from 1859 to 1865, more than
covering the period of the war for the Union, assured me that the
Cabinet never at any time dealt with the subject of recognizing the
Southern States, except to decline to entertain the proposition of
France, and this “without qualification, hesitation, delay, or dissent.”
[Illustration:
WILLIAM E. GLADSTONE
]
What could be more positive and emphatic than this? What more
unequivocal, explicit and direct? It is an unqualified statement that
the British Government had never during the war in any way considered
the question of recognizing the Southern Confederacy, except on that one
occasion, and England was the first nation to which the French proposal
was made. Had England joined France when Napoleon made his proposition,
which she was the first to reject, that conspirator against us would
have tried hard to help the South to succeed in disrupting the Union,
for the purpose of regaining possession of Louisiana, and capturing as
much additional territory as possible in order to annex it to the empire
he expected to found in Mexico. He wanted a weak neighbor. We were saved
from his machinations, and this great danger, by the resolute course of
the British Government; and Napoleon thereafter sowed the wind to reap
the whirlwind in Mexico. He consigned poor Maximilian to disaster and an
inglorious death, after his empire had fallen like a house of cards when
the French troops, that had bolstered up his throne, were withdrawn.
This positive testimony from so high and competent an authority as Mr.
Gladstone ought to be conclusive in effectually disproving the unfounded
“cock and bull” story that England, at one time, contemplated the
recognition of the Southern Confederacy, and that she was prevented from
moving in that direction, and led to reverse her policy, and prevent the
escape of the Confederate cruisers from Laird’s shipyard at Birkenhead,
by the arrival at New York of Russian war-ships.
The fact that a Russian squadron, commanded by Admiral S. Lessoffsky on
his flagship “Alexander Nevsky,” did come to New York late in September,
1863, and that its officers were very hospitably received and
entertained, is the peg on which this story is made to hang. I have good
reasons for saying the ships came here with no such object, nor with
“sealed orders” to take an active part in the war, if required. New York
was merely a port of call for them, and no doubt their officers were
glad to get here and be fêted, as they were. They also, it is safe to
assume, appreciated the courtesy of William H. Seward, the Secretary of
State, who afterwards told me that, when he heard of their arrival in
American waters, he invited them to accept the hospitalities of the port
of New York. He, of course, foresaw that their coming here would, or at
least might, have a good moral and political effect in our favor both at
home and abroad, by depressing the South and encouraging the North, and
causing any foreign Powers that might have been considering the
advisability of recognizing the Southern Confederacy to postpone action
under the impression that we had, or might have, Russia for an ally.
He was astute enough to see that this visit of the Russian squadron
might seem to be what it was not, particularly to foreign eyes.
Appearances, we all know, are often deceptive, yet they sometimes exert
great influence. The visit of this squadron was a case in point. It was
a splendid “bluff,” at a very critical period in our history. Its coming
was all the more desired by Mr. Seward because, on the 3d of February,
1863, he had received a despatch from the Emperor Napoleon offering to
mediate between the United States and the Southern Confederacy, to which
he replied three days later, absolutely rejecting the offer, in very
positive terms. After that, early in July, the battle of Gettysburg had
been fought, and Northern prospects had brightened very materially.
Nevertheless, the coincidence of an arrival, about the same time as the
Atlantic Squadron came, of more Russian war-ships at San Francisco,
under the command of Admiral Popoff, added to Secretary Seward’s
gratification; and, when the Russian officers of the Atlantic Squadron
went on to Washington, he kept up the festivities to which they had been
accustomed in New York by giving them a grand dinner. He was a fitting
host, as he had originally invited them to come here.
[Illustration]
[Illustration]
[Illustration]
[Illustration]
The Grand-Duke Alexis when he came to New York, with another Russian
squadron, under another Admiral, in 1871, practically verified, in reply
to my inquiries in conversation while I was acting as one of the Russian
Reception Committee, what Secretary Seward had previously intimated to
me—namely, that there was no foundation for the story that the Russian
squadron of 1863 had come here to help us in warfare, if needed. Mr.
Seward told me this very definitely on one occasion when I met him at
Washington. But that its officers enjoyed themselves here very much
socially was evident from their profuse expression of thanks, and
acknowledgment of obligations for the favors received, before they took
their departure, and also from the fact that when they got back to
Russia, they called in a body, with the Emperor’s approval, on Mr.
Cassius M. Clay, the American Minister at St. Petersburg, to return
thanks more formally for the courtesies and kindness of which they had
been the recipients here.
Now, it is clearly to be inferred that, if they had come here to serve
us at a grave crisis, by offering to take part in our war, they would
not have felt themselves under such obligations to us; on the contrary,
we should have been under very great obligations to them, which would
have called for public acknowledgment. Moreover, if the Russians had
come on any such mission as naval co-operation in actual war, if needed,
it would not only have been a matter of official record in both
countries, but it would have immediately become known, not alone to the
public here, but to the world. It would have been simply impossible to
keep the news from the press; and the Government at Washington would
have had no object; no good purpose to serve, in concealing such an
alliance, for alliance it would have been of great international
importance, and one which would have tended, still more than the
activity of our own navy, to show Europe and the South the hopelessness
of the South’s struggle with the North. Russia was friendly to the
United States, of course; but this friendship between the two countries
was very different from an offer, or a willingness, to help us by armed
intervention in our favor. Russia has never intimated that she had any
such intention; and, indeed, such intervention on her part would have
been folly, as her navy was then very small after the destruction of the
Crimean War, and would have been powerless against England or France.
The conclusion is, therefore, that the sympathy with Russia in its
present war with Japan, which many in the United States are endeavoring
to stimulate on the strength of this Munchausen story of proffered
war-ships, is based on a mere assumption. Just as in the case of one of
Dickens’s characters, “Mrs. Harris,” there was “no such person,” so in
the case of this visit of Russian cruisers, there was no such offer of
these by Russia to the United States, nor any evidence of any intention
to offer them by Russia. On the contrary, Prince Gortchakoff, the
Russian Minister of Foreign Affairs, repeatedly said to our Minister at
St. Petersburg and in despatches to the Russian Minister at Washington,
that Russia greatly favored peace, and wished for its speedy return; but
would never take sides in the controversy between North and South.
Finally, as to England, we have the word of William Ewart Gladstone that
the British Government was not unfriendly to us throughout our Civil
War, inasmuch as it was absolutely and entirely opposed to the
recognition of the Southern Confederacy, and instantly and effectually
checkmated the French Emperor when he tried to make it swerve from its
consistent course of neutrality. Had the British Government been
unfriendly, it would have jumped at this chance to join France in
recognition and intervention. “By their fruits ye shall know them.”
There is no reason in what I have said, however, for an anti-Russian and
pro-Japanese feeling in the United States, or an anti-American feeling
in Russia; and it is much to be desired that friendly feeling towards
each other should prevail in both countries, but not at the expense of
truth. Even Japan, while fighting Russia, is showing good-will and
generosity towards Russian officers and men, and treating them with
uncommon courtesy and consideration.
My only object in thus writing is to present the matters referred to,
involving the relations of the United States with England, France and
Russia during our Civil War, in a true and proper light, and so to
correct prevailing misapprehensions. Russia’s course in Manchuria,
however, by which she tightened, instead of releasing, her grip upon it,
as she promised to do, sufficiently accounts for our lack of sympathy
with her in her war with Japan.
While professing friendship for the United States, she has acted in bad
faith, and by her restrictions ruined our growing trade there; and all
the specious arguments put forward by Russia through the Russian
Ambassador at Washington will not make the American people believe that
Russian success in this war would be an advantage to the United States.
Hence, American sympathies are not generally on the side of autocratic
and grasping Russia, with its closed door, but with liberal Japan, and
its open door. Moreover, it is to be hoped that Russia will find her
so-called “special position” of exclusiveness and monopoly in Manchuria
untenable, and be compelled to abandon it, to evacuate that country, and
leave its trade open to all the world. Then the now idle and ruined
factories, built there by Americans, could be turned to profitable
account again.
Although our relations with Russia have always been friendly, past
friendship does not justify present injustice. The retention of her
foothold in Manchuria, which she was to have held only until the country
was pacified, and her obvious and avowed designs upon Corea, evidently
aim at the acquisition of their territory, and point to similar ultimate
designs upon China and Japan.
Such being the case, we may well sympathize with Japan in her struggle
with Russia. We owe nothing to Russia because some of her ships came to
New York in 1863; but we are indebted to England for having peremptorily
declined the proposition of France to recognize the Southern
Confederacy.
Moreover, England is our natural ally, as we are allied to her by an
affinity of race, language, religion and free institutions. As for “the
Yellow Peril,” of which so much has been said, especially by the Russian
Ambassador, as something to be feared by the Western nations, it is
purely imaginary and chimerical. There is no more danger of China and
Japan, if successful in war at home, invading and overrunning the rest
of the world at any time in the future, near or remote, than there is of
the man in the moon coming down and invading us with an army of
moonshiners.
August 11th, 1905.
EDITOR New York _Times_, New York City.
DEAR SIR: My attention has been called to an editorial in your
issue of August 10th, entitled “That Gladstone Letter Again,”
the letter in question being the one received by me personally
from Mr. Gladstone. The editorial by its wording seems to bring
in question the authenticity and veracity of the statements
contained therein.
The letter came to me voluntarily from Mr. Gladstone, as the
result of an article written by me, and it should remove any
doubt as to the position of the British Cabinet in connection
with our Civil War. The utterances of some of the individual
members of the Cabinet did doubtless favor the South during a
part of our Civil War, but when Emperor Napoleon’s proposition
for intervention came up in the British Cabinet, the action
taken was exactly as Mr. Gladstone states in his letter to me,
and is borne out by Mr. Gladstone’s speech in the House of
Commons made soon afterwards, and it was largely due to his
speech that Mr. Roebuck’s motion on Napoleon’s proposition was
defeated.
There is an unwritten law in England that the deliberations of
the British Cabinet shall never be revealed by any member except
by consent of the Crown. Mr. Gladstone was known to be a great
stickler for conventions, and his letter to me in which he
expressly says I am at liberty to publish it could not have been
written except by consent of Queen Victoria.
Very truly yours,
HENRY CLEWS.
------------------------------------------------------------------------
CHAPTER LXXXI.
THE CRISIS OF 1907 AND ITS CAUSES. WAS PRESIDENT
ROOSEVELT TO BLAME?[9]
Footnote 9:
An address to the Cleveland Chamber of Commerce, Cleveland, Ohio,
Tuesday evening, January 28th, 1908, by Henry Clews.
It gives me great pleasure to meet the members of the Chamber of
Commerce of the city of Cleveland.
Next to New York—being from New York I have to make this
distinction—next to New York, I consider Cleveland the home of the most
worthy set of business men in the United States. Your forefathers chose
well when they elected to settle in this beautiful spot. The wisdom
which they displayed is proven by the twenty miles of docks on your
water front and by the fact that your people own the largest tonnage on
the lakes.
The natural resources of your surroundings have made you masters of
trade in coal, iron, and petroleum. Your harbors are commodious, and
what they lacked in natural formation you have supplied by the famous
breakwaters which have been built. Your city is not only a natural
business center, but also a railroad center.
Your Euclid Avenue is spoken of in the East as a model to be copied by
the lovers of beauty.
Fifty years ago Cleveland was a village. If you continue to thrive as
you have, where will you be fifty years hence?
It was in the soil of Cleveland that the seed was planted that has grown
and developed into the greatest business plant in the world. To-day the
Standard Oil Company commands trade in every country on the face of the
globe, and as a body are the greatest merchants that the world has ever
known.
Ohio has robbed Virginia of the right to be known as “the mother of
Presidents,” and I predict that the Republican Convention to be held
this summer will present as its candidate your most famous and honored
citizen, Hon. William H. Taft, who will be elected by an overwhelming
majority. I suggest that he and Mr. Roosevelt change places—Taft as
President and Roosevelt as Secretary of War, or still better, Secretary
of the Navy. Then we will be ever alertful and prepared for
eventualities both on our Atlantic and Pacific coasts. In this way we
will retain the services of both.
I will begin by saying that the elimination of the Godly Motto on our
gold coin many people may think means-“In President Roosevelt we trust,
but in God we distrust”; but I am sure the great mass of the Americans
do not think that way. They believe in trusting both God and the
President, and if the President will put back “God” on the American coin
they will put him back in the White House after his present term—thus
making our Motto: God first, our Country second, Theodore Roosevelt
third (term). The Three together one and inseparable for the next four
years.
It is my belief that there is not an intelligent man in the United
States who sincerely questions the “honesty of Theodore Roosevelt’s
motives.” Whatever he has done he has done to promote the public good
and the nation’s welfare, whether his speeches have helped to cause
distrust or not. He is an honest man, and an honest man is said to be
the noblest work of God. But, of course, as we cannot expect perfection
even in honest men, they may sometimes make mistakes in their judgment
of consequences, however good their intentions are. That we all allow
for.
You ask the question: Is President Roosevelt’s policy towards capital
sound? In other words, has he, in denouncing and instigating the
prosecution of law-breaking railway corporations, and industrial Trusts,
menaced the prosperity of the country? I contend that he has not. He
certainly had no intention to do so, for, while he was instrumental in
turning on the light, he was not responsible for the abuses of power
that the light revealed, and it is the revelation of graft and illegal
methods, on the part of certain railway and other corporations, through
the acts of their responsible managers, and controlling capitalists,
that has undermined public confidence in many of them.
It is true that the marked change in conditions and public sentiment,
especially in the stock market,—from the great optimism, buoyancy and
high prices of last year to the great depression and low prices of this
year of panics,—has caused many unthinking critics of the situation to
ascribe it to the influence of President Roosevelt. The speculative
capitalists and Trust magnates who have lost heavily by the depression
in stocks have this impression of the effect of his policy and speeches
in exposing corporate wrongdoing.
But it is an idea that needs to be controverted, or at least is open to
question, and his course is generally approved by popular opinion all
over the country. In other words the people generally are in favor of
the policy represented by all that the President has done to correct
corporate abuses and illegal methods and raise the standard of business
morality.
Before entering further into the subject, however, I will say that
gatherings of this kind, where the burning questions of the day are
discussed in a frank and friendly way, are productive of good
fellowship, and good results. Different minds view important events from
different standpoints, and any association that meets for this purpose
with a desire to obtain by mutual discussion, the fairest and best
understanding relating to public measures, is doing a patriotic service,
and is worthy of the highest commendation. It is particularly so at a
time like this, in view of the prevailing depression and distrust.
It is very fortunate that a presidential election did not take place
last year, as the people were in such a state of uncertainty and
apprehension that many well-meaning men would not, I fear, have voted
with a desire for their country’s good, but be biased by personal
interest or a determination to obtain revenge for what they have lost by
the great and prolonged decline in the stock market and the disturbance
of credits.
It is, of course, greatly to be deplored that some of the men high in
command in the industrial and railroad companies have abused the trust
reposed in them and made it imperative for the President to instruct the
attorneys of the national government to investigate their doings, and
prosecute those corporations and their officers charged with using their
corporate powers to do illegal acts, like rebating, and such chicanery
as that of the Chicago & Alton reorganization. The fact that, in nearly
every such instance of Government prosecution, the guilt of the parties
accused has been proved on their trial, justifies President Roosevelt in
his action.
While capital may continue timid until the whole truth is known and
confidence in corporate management restored, the agitation, will, in the
end, prove beneficial to the country; for it will purify it by
eliminating the unlawful evils complained of. This will inspire foreign
capitalists as well as our own with confidence; and they will invest
heavily in American securities, just as soon as they feel assured that
the surplus earnings of our railway and industrial companies will be
fairly divided among the stockholders under honest management, regulated
by law, and subject to Federal and State supervision.
Recent events have shown that drastic action was necessary to insure a
square deal for all. Mr. Roosevelt is not attacking capital, but he is
attacking those in control of corporations who have misused their power
and position to do illegal acts and presumably for their personal
profit. Confidence received blow after blow from this source, before
getting another rude shock through the exposures resulting from the
Metropolitan Securities investigation, and the action of the New York
Clearing House with regard to the Heinze and Morse banks.
It is now over two years since public disclosures of this kind as well
as of railway rebating began, followed by the collapse of the copper
manipulation and, very recently, by the scandals connected with the New
York Traction situation. No wonder, therefore, that confidence is
seriously disturbed. And who is responsible? Not President Roosevelt and
Mr. Hughes, the famous life insurance investigator, who have been
instruments of exposure, but the individuals who conceived and conducted
these unlawful operations. Of course the guilty protest against
financial house cleaning; and they endeavor to ward off official
investigations on the plea that these disturb confidence, and make the
innocent suffer. But the whole responsibility should be placed where it
belongs—upon the perpetrators of misdeeds, and not upon those who, in
the discharge of the duties of their high office, have been the means of
turning on the light and preventing future operations of the kind. Those
who have trifled with the public interest, and displayed a blind
disregard of the people’s rights, are the real transgressors.
It becomes daily more evident that when all our railway and industrial
corporations are known to be honestly managed, and when stockholders and
investors get their due, values will be more stable, and American
credit, which is now at a low ebb in all the great financial centers of
the world, will be restored to its rightful place.
Throughout all these disclosures of illegal methods and wholesale graft
there is one gleam of encouragement, and that is, that public opinion is
aroused and will insist upon clean as well as capable corporate
management in the future, and thus these disclosures will result in the
raising of the moral standard of corporate management. Meanwhile, the
public is disturbed by these revelations, and wonders what financial
irregularity will be brought to light next. The action of many corporate
managers has seemed to indicate that they think little of violating the
laws, and that, if they are broken by one high in authority, or in
social life, immunity must be granted; or some subordinate be made to
suffer instead of themselves. If a poor man commits a crime, he is sent
to jail. Sympathy for his family may sometimes make the judge lenient as
to the time of his incarceration, but, however short the term, it
generally brings sorrow and want to the family for which he is the sole
provider. Thus, the innocent have to suffer with the guilty in such
cases.
In corporate matters, if a manager or controlling capitalist breaks the
law, justice should punish him, as it would anyone else. The law should
be no respecter of persons.
Sodom and Gomorrah were destroyed because the people broke Nature’s
laws; and this government, although the best known to man, would be
destroyed in the course of time, if the rich and unscrupulous were
permitted to break the laws with impunity, while the poor were punished
for much less serious offenses. This invidious distinction has caused
those who have suffered by the corrupt and illegal practices of
corporations and their managers to unload their grievances upon the
President. In their communications they tell him that, while many from
their ranks are being sent to prison, they fail to see any of the rich
being sent there, although the evidence against them is unquestionable.
This unjust distinction, if it continues, I repeat, cannot fail to have
an unsettling effect upon the American people, and may finally result in
something more, as this is a government of the people, for the people
and by the people, and a discrimination in favor of the wealthy—whether
corporations or individuals—will not be very long permitted by the plain
people, who are largely in the majority.
President Roosevelt took the oath at his inauguration to be guided by
the Constitution, and as the Constitution requires that the Executive of
the nation shall enforce the laws, he would have been derelict in his
duty and unfaithful to his oath if he had not taken the action he has,
to compel corporations to conform to the Interstate Commerce and Sherman
Anti-Trust laws and their amendments. Whenever evidence has reached him,
through the complaints of people who have suffered in consequence of the
violation of these laws, he has very properly handed the material
received over to the Attorney General to make the necessary
investigation, and as in every case thus prosecuted the results have
justified all he has done as to these, he deserves great credit. The
so-called indiscriminate attacks that are claimed to have been made by
him upon corporations and business interests have no sound basis. So far
as his intentions go, he has only attacked dishonesty and law-breaking.
While I fully approve of what Mr. Roosevelt has done in the way of
reform, I confess I do not fully approve of his too oft repeated
passionate utterances on the subject during the recent period of
distrust. It undoubtedly has helped to unsettle the minds of timid
investors and weak-minded depositors. The President has probably been a
little too outspoken at a time when silence would have been golden.
There are periods when the least said the better; still, I applaud his
good intentions and his excellent deeds, which cannot fail to prove
fruitful in the end. We should all be willing, therefore, to overlook
his recent volubility and frequent reiterations.
A short time ago France stood ready to invest large sums in American
bonds and stocks. But just after her first venture in Pennsylvania
Railroad bonds our corporation scandals filled the air with their
unpleasant odor and French capital was locked at once against everything
American.
When all the old evils have been exposed, and wrongs righted, and
foreign as well as home investors again seek investments for their funds
in our securities, we may rest assured that, having undergone rigid
investigation, they will be looked upon as the best in the world.
That President Roosevelt should be blamed in any way for the banking
troubles, business failures and losses that have been made in the stock
market is unfair; but it is always the case that the Executive in office
bears the brunt of whatever disasters of the kind occur during his
administration.
Those of us whose hair is no longer black, brown, sandy or red,—or very
abundant,—can well remember the calumny and evil reports that were
heaped upon the broad shoulders of the well beloved Abraham Lincoln. The
noble cause he fought for cost millions of lives and billions of
dollars, and of course there were very many who suffered at that time by
the war. Of these many were most bitter in their denunciation of
President Lincoln, and this nearly broke the heart of that great man,
but did not for a moment cause him to desist in the work he saw it was
his duty to perform to the end. To-day, those who traduced him join
freely with the whole nation in doing honor to his memory. President
Roosevelt may be severe in the frankness with which he reiterates his
intention to punish those who break the law; but, in the distant future,
the world at large will remember him as one who dared to suffer under
unjust denunciation for the sake of right, and even now the great mass
of the people are with him in his efforts to improve and purify business
conditions.
Those capitalists who have lost money largely by this year’s decline in
prices of stocks, and the monetary disturbance, are naturally bitter and
resentful; but even the majority of such, down in their hearts, grant
that in principle President Roosevelt is doing his plain duty, though in
his speeches he may have said too much too often. If what he has done is
wrong, it is the fault of the law, for he has urged no greater
punishment than the enforcement of the law. But the man would be daring,
indeed, in the face of the exposures already noted, who would presume to
say that the law is unjust. It aims at equal justice for all, and we are
a law abiding people.
In view of all the wrong doing in corporation management it must not,
however, be forgotten that the majority of our corporations are ably and
honestly managed in the interest of the stockholders. It is not
surprising that black sheep have crept into some of them, for a certain
percentage of people in every walk of life and every association, church
or social club, are bad at heart, and show up in their true colors, when
subjected to the temptation to commit wrongs which will tend to their
personal advantage. The assumption that now prevails, that all
corporation management is dishonest, is, therefore, unjust and has been
causing much of the hysteria that has prevailed in Wall Street and
elsewhere.
To protect minority stockholders, especially in the Interstate
Railroads, they should have at least one representative in the board of
directors, and he should be elected by the minority at each annual
meeting. If such a director was a cool-headed, honest business man,
certain abuses, which have been prevalent in the past, could not have
occurred and would be prevented in the future.
It is much to be regretted that to aid personal schemes, some of the men
in power, even in some of our large National Banks, have resorted to
methods which have caused loss of confidence in them, which resulted in
their retirement, practically under compulsion, as officers and
directors. It is almost needless to say that, of all corporations, our
National Banks should be the last to be used for illegal purposes, or to
promote personal gain or speculations.
When a man in power imperils the solvency and good reputation of one of
our banks, he is a public enemy, and as mean and guilty as one who
attacks the virtue of a virtuous woman. To destroy confidence in that
woman and her good name is to do her an irreparable wrong. Destroy
confidence in a bank and you destroy that which is one of the
corner-stones of business prosperity. Those who invest in railroad
stocks, or stocks of Industrial corporations, risk only the cost of
their investment, but the holder of record of a National Bank stock is
liable for an additional amount equal to the par value of his holdings.
Publicity is the greatest safeguard of the prosperity of any corporate
enterprise, and the best preventive of irregularities and frauds. Many
men will do in secret what they would fear and refuse to do under the
public eye; and if hitherto secret ways are, in the future, made known,
and seen of all men, there will be less breaking and unfaithfulness
among many classes of business men in high places.
This doctrine of publicity I have preached for years, and it was the
topic of an address I delivered before the Wharton School of Political
Economy in the University of Pennsylvania eighteen months ago. I saw
then what was going on in corporate corruption and grafting, and
railroad rebating, but, of course, had no tangible evidence or legal
proof of these misdoings.
During the intervening time, however, so much of this came to light that
there was no alternative for the national government, as well as many of
the states, but to take drastic action to stop these evils, and probe
right and left to locate and convict those responsible for them.
President Roosevelt led the way to this laudable end. He is not in favor
of persecution, however; but he is in favor of the prosecution of those
known to be guilty; and I firmly believe that his courageous stand in
this movement to correct and punish corporate abuses will overshadow, in
the history of his Presidency, all his other achievements.
Remember: he would punish only the guilty and protect property interests
in every way possible, so that the innocent may not suffer with the
guilty, or at least suffer as little as possible.
The lawyers engaged to defend wealthy corporate wrongdoers may sometimes
prevent their conviction and punishment; but the people are entitled to
the protection which comes from an equal administration of justice.
In these days the truth of the biblical saying, that “the wicked
flourish like a green bay tree, but they shall be cut down,” has become
evident to us in certain instances applicable to corporations.
Some ancient cities and empires, including the great Roman Empire, were
ruined by the lawlessness and unscrupulousness of their rich men—the
great oppressors of those days—and our America was fast falling too much
under control of large corporations and corporation capitalists; but,
the plain people of this country are for equality, equal rights, and
fair play for all, and opposed to a plutocracy.
In his address at Memphis, this year, President Roosevelt said:
“I will no more stay my hand because a wrongdoer masquerades as a labor
leader than if he masquerades as a captain of industry.
“I am against undesirable citizens when they are great capitalists who
win a fortune by chicanery and when they are men who, under the guise of
standing for labor, preach and encourage violence and murder.”
To show that he recognized the sensitiveness of certain corporation
capitalists who are cast into a frenzy by his most common sense remarks,
he once said: “It has come to a point where my saying that honesty is
the best policy is liable to lead to a run on the banks.”
In discussing the cause of the present panicky contraction and
disturbance in the business and financial world, nothing, however, could
be further from the truth than to charge it all to the great corporation
exposures and prosecutions.
There were many other things that contributed to bring about this year’s
depression and disturbance, and to cast over the brightest sky that ever
shone the heavy clouds of distrust, reaction, and panic.
The clouds in the financial sky can remotely be attributed in a large
measure to the effect of the tremendous railroad, industrial and
commercial development of the last ten years, which brought about
capital requirements in excess of the ability of the country to supply
them.
Naturally and necessarily, this resulted in precautionary steps being
taken by bankers and others to limit demands that capital could not
supply.
This conservatism and consequent contraction of the overwhelming volume
of business, will, it is believed, prove the strongest force in averting
further trouble and disaster. I have for some time been urging the
application of this brake, or safety valve, of conservatism, and it is
really imperative.
In an effort to meet the demands of the enormous business offered them,
the great railway and industrial corporations sought to enlarge their
equipment at vast expense. In this they acted unwisely. They overtraded.
To use a common saying, “they bit off more than they could chew.” It
was, perhaps, excusable, not very long ago, when confidence was in its
zenith and credit superabundant, to attempt the financing of mammoth
undertakings. But unexpectedly and like a bolt out of a clear sky, came
the startling insurance and other exposures, and gradually timidity took
the place of confidence. Then capital, which is always more timid than
usual at such times, began to contract, and many railway and industrial
corporations found themselves unable to borrow the large sums needed to
meet their extraordinary expenditures.
The banks in many instances, having already over-extended credits, were
unable to provide the necessary funds, and new securities, owing to
excessive supplies and other causes, ceased to find the ready market
that they had enjoyed for so long a period. Investors took wing.
Curtailment, therefore, in every direction became a necessity, so
President Roosevelt can no more be blamed for the existing depression
and panicky disturbance than he can be credited with all the great
prosperity that preceded the crisis.
That this reaction, culminating in a panic so severe, came just at the
time it did, is largely if not wholly coincidental. It cannot be denied,
however, that the startling disclosures of wholesale wrongdoing on the
part of many of the great railway and industrial corporations disturbed
the confidence of the public to the core and paved the way to it.
The indictment and prosecution of the rich and powerful corporations
that had been violators of the law were but the necessary and legal
consequences of their own guilty conduct.
Article II, Section 1, of the Constitution of the United States requires
that before he enters on the execution of his office the President shall
take the following oath: “I do solemnly swear that I will faithfully
execute the office of the President of the United States, and will to
the best of my ability preserve, protect and defend the Constitution of
the United States.”
Section 3 of the same Article of the Constitution, in enumerating the
duties of the President, says: “That he shall take care that the laws
shall be faithfully executed.”
As at the time of his inauguration as President of the United States,
Theodore Roosevelt solemnly swore that he would faithfully execute its
laws, all of you, I know, will agree with me when I assert that he was
bound to loyally and fearlessly keep that oath.
As an honest man, he has only tried to do his duty. He has attacked the
law-breaking corporations, and those in control who have amassed large
fortunes out of them dishonestly, and these only. Not to have prosecuted
and to have let these corporations, and their officers, go on, unchecked
and unpunished, would have been to violate his oath of office and to
neglect the duty imposed upon him.
It would certainly make a farce of this great republic, and cast a
stigma upon our integrity, if the laws of the land were not enforced
against the rich and the poor alike! No such reflection as that upon our
national honor will ever be tolerated by Theodore Roosevelt! He has been
ready at all times to uphold the national honor. It has been well said
that the honor of the nation is the soul of the nation.
President Roosevelt’s resolute and unyielding stand for the rights of
the people, against the powerful corporate wrongdoers who had thrived so
long upon their secret misdeeds, has commanded the attention and
admiration of the world. His excess of earnestness and denunciation at
times, we can forgive.
Victor Hugo, in speaking of one of the world’s greatest “Immortals,”
truly said: “When a man is a glory in the face of his nation, that
nation which does not perceive the fact astounds the human race around.”
President Roosevelt has proved himself a successful crusader against
successful corporate dishonesty, involving violations of law; and it is
doubtful, as he says, whether his policies have had any material
influence in bringing about the severe depression and banking crisis of
this memorable year. But whether they have or not, he declares, with the
courage of his convictions, that during the remainder of his term he
will not swerve from these policies, but persevere in them
unflinchingly. Yet all that his administration has done has been to
unearth the wrongdoing. It is impossible to cut out a cancer without
making the patient feel temporarily worse than before.
It is a mistake, or a slander, to say that Theodore Roosevelt has made
war against capital. He is only opposed to dishonest corporate methods,
and dishonestly acquired wealth. He respects the possessors of honorably
acquired and honestly used fortunes, and would protect their property
interests in every way possible, and guard them against injustice, and
be resolute in defending their rights; for their success leads to the
inference that they are good citizens. But he will assuredly stand
against crimes of unscrupulous cunning in the management of railway,
industrial or financial corporations as resolutely as he would against
crimes of brutal violence, and equally punish the rich man and the poor
man, for crime is crime whether committed by a plutocracy or capitalist,
a poor wage earner, or a mob. These are his avowed principles and
policies.
He would regard a man who builds a railway where it is needed, and
operates it fairly and honestly, as a public benefactor; but if that man
manipulated the stock and bonds of that railway so as to swindle the
stockholders or bondholders, or the public, or gave rebates or otherwise
favored one shipper over another, he would regard that man as an enemy
of our institutions who should be punished for his wrongdoing. All this
goes to answer the question: Is President Roosevelt’s policy towards
capital sound? I say that it is, when rightly understood!
Furthermore, the regulation of corporations by the Federal Government
should be made absolute, and taken away from the States, where they do
an Interstate business, like the railways and express companies. This
would be better for the corporations, themselves, as well as the people
than present conditions. They should be placed under National control,
just as the National Banks are.
This central undivided control would do away with the confusion of
Federal and State authority now existing. Moreover, I would favor the
extension of this Federal control to all interstate corporations, and it
will come in time. Meanwhile President Roosevelt is paving the way for
it, and to him let us give all honor for his long step in the right
direction.