THE PANIC OF NINETY-THREE
In the year 1893 there was one great controlling feature in our
market that was to culminate on July first.
For years the commodity in which we dealt had been duty free. The
McKinley Tariff Bill imposed a duty of four cents per pound, to
go into effect on July 1, 1893, for a period of two years. It was
the one senseless clause in an otherwise excellent bill and had been
inserted as the only means of securing the necessary votes in the
Senate. The sole object of the clause was to influence the speculative
value of shares in a certain corporation which is now in the hands
of a receiver.
When this corporation was first organized I subscribed for some
stock and was in its first board of directors and its vice-president.
If there was to be a new source of supply of the commodity I dealt
in so largely, it was important I should know of it. As soon as
I became satisfied that it was nothing but a scheme to make money
by the sale of stock, I resigned and disposed of my holdings to
one of the promoters at a profit of eight dollars per share.
Efforts to have the clause repealed had been unsuccessful, and as
the duty was certain to be imposed, we thought it wise to import
largely prior to July first. Others did the same, and when that
date arrived the stock in New York was very large. We held on our
own account about one-third of the entire stock and in addition a
very large quantity which we had sold to our customers for delivery
in July.
Of course, our purchases had been made of our London friends, and
during this period our remittances were unusually large, running
into several millions. An incident of our correspondence at that
time was a postscript in one of their letters calling our attention
to the fact that the letter from us, to which they were then
replying, had been underpaid in postage and cost them six pence.
They requested us to see to it in future that our letters were
properly stamped. Think of that, from a concern with whom we were
doing a business of millions!
Early in July came the panic. It seemed as if over night all the
money in the country had disappeared. In Wall Street fabulous rates
were bid for money. Banks and bankers said they had none. Where
was it?
When the stock market collapsed and values had depreciated hundreds
of millions, money was found by the large insurance companies and
the powerful factors of Wall Street to pick up the bargains in
shares, but it was some time before merchants could get it. Meanwhile,
this class all over the country, after a long period of good times,
were caught by the panic with their lines greatly extended. Great
houses rating "a million and over" had no actual cash. Property?--Lots
of it. Solvent?--Absolutely so, but they could not pay their
obligations, nor take deliveries on contracts that required payments
against delivery.
Our sales for July delivery amounted to nearly a million of dollars;
less than fifty thousand was taken according to contract. The rest
we had to carry and our bankers had to carry us. We shall never
cease to be grateful for the generous help they gave us in that
critical period.
Under these financial conditions it was only natural that all
merchandise markets should be greatly depressed.
Our market was weak at eighteen cents, although not a pound could
now be imported below twenty-two cents. The large stock seemed to
hang as a wet blanket, but as a fact most of it was concentrated
in three strong hands. We were the largest holders. I called on
the other two and told them it was absurd to sell at the ruling
price, and if they would assure me we would not have to take their
stock--in other words, if they would hold it off the market--we
would buy the floating lots and advance the price close to the
importing point. I further offered to give them an equal share of
the purchases if they so desired. They asked how much I thought we
would have to buy? To which I replied, "Not over five hundred tons."
The agreement was made on the basis of an equal division of the
purchases. Slowly but steadily we raised the price, and when the
end we sought was accomplished we had bought four hundred and ninety
tons. The operation and consequent advance in the market made a
difference in the value of our holdings of seventy thousand dollars.