THE UNITED STATES TREASURY THE VASSAL OF WALL STREET--STOCK "OPERATIONS"
EXPLAINED.
We now beg to call the reader's attention to the financial operations of
the monopolists, and the course resorted to by them to control the
finances of the country. There are now (January, 1873) seventy thousand
one hundred and seventy-eight miles of railroad completed in the United
States and territories. At an expense of $35,000 per mile, the total
cost of these roads is $2,456,230,000. The cost as given by the
companies is $3,436,638,749, or $48,970 per mile. In contemplation of
law, and as reported, this cost is represented by stock certificates,
and is supposed to be paid up. If the roads cost but $35,000 per mile,
then $980,408,749, of the stock certificates (that amount being the
excess over actual cost), have only an imaginary value. In addition to
the stock certificates, representing the above sum of $3,456,230,749,
the railroad companies have issued and put upon the market their bonds
to the amount of $2,800,000,000, thus making their roads represent the
enormous sum of _six billions two hundred and thirty-six millions six
hundred and thirty-eight thousand seven hundred and forty-nine dollars,
or eighty-eight thousand eight hundred and seventy-two dollars per
mile_. The only real value all these bonds and certificates of stock
represent, is the railroads. These we have put at $35,000 per mile. Of
course some lines of road exceed this valuation; but an examination of
the actual cost, as reported by the engineers of the respective roads,
will show that much the largest portion of the roads have cost less. Now
let us look at the amount of the capital represented by a few of these
roads, as reported in the _Railroad Manual_, and _The Stockholder_. The
Chicago, Burlington, & Quincy is reputed to be one of the best and most
prudently managed roads in the country. This road represents in stock
and bonds the sum of $32,845,880, or $43,292 per mile. On the other
extreme we will take the Central Pacific, which represents the sum of
$182,208,000, or $130,000 per mile. The Atlantic & Great Western (an
organization of the N. Y., Penn., & Ohio) represents the sum of
$109,000,000, or $256,000 per mile. The Cedar Rapids & Missouri River
railroad represents $11,334,000, or $41,000 per mile. The Chicago, Rock
Island, & Pacific represents the sum of $25,717,000, or $56,667 per
mile. The Erie represents the sum of $112,935,710, or $125,750 per mile.
The New York Central & Hudson River railroad represents $104,660,049, or
$142,656 per mile. The Union Pacific represents $112,911,512, or
$109,507 per mile. We give the above as samples of the amounts
represented by the different roads. In some other instances the stocks
are "watered" more, and in others less than in the roads above named.
Taking all the roads in the country, and adding together the stock and
bonds issued, they represent $3,800,408,749 more than their actual cost.
It will not be out of place here to state that the only resource these
railroad companies have for the payment of interest and dividends on
their stock and bonds, representing the sum of $6,236,638,749, is the
earnings of their roads. While a low rate of charges would pay fair
dividends on the actual cost of the roads, yet in order to pay dividends
on their "watered" stock, and interest on their bonds, oppressive and
extortionate rates must be charged and collected. The men who control
these great monopolies, viz: Col. Scott, who controls roads representing
about $700,000,000; Vanderbilt, who controls about as great an interest;
Drew, Gould, and some few others of the principal railroad men, care but
little about the prosperity of the country, or the profits made by their
roads, save as a basis for their Wall street speculations. The roads
serve as a basis for financial operations. Like the old "wild cat" banks
that issued bills without regard to stock or capital, so the roads
controlled by these railroad monarchs are loaded with "watered" stock
and bonds, until their value as roads are destroyed, and passengers and
shippers are oppressively taxed for the purpose of giving some sort of
market value to the bonds and "watered" stock with which Wall street is
flooded. The issuing of stock certificates goes on, and will continue as
long as dividends can be declared. At the present time the railroads of
the country collectively represent about three times their value, or
actual cost. If the people were not taxed on "watered" stock and bonds,
dishonestly issued, the rates charged for transportation would be but
little more than one-third the figures of the present tariff. The vast
wealth claimed by railroad corporations is about two-thirds pure
fiction, and but for the extortions practiced upon the public, their
stocks and bonds, beyond the value of their roads, would not be
considered in market; but so long as interest at the rate of six, eight,
and ten per cent can be drawn from the public, they are marketable.
These stocks and bonds are owned or controlled by the men who not only
manage the railroad interests, but also the bond and stock market of the
country. Being the leading spirits among Wall street brokers, using
their railroads for the purpose of aiding in their stock-jobbing
speculations, by compelling them to earn interest on all of the
worthless stocks and bonds they put upon the market, a fictitious value
is given to them. Having their principal place of business in the
commercial metropolis of the country, being able whenever their
interests demand it to "corner" the money of the country, it could be
hardly expected that the treasury department of the government would
escape their control. If a conflict should arise between the secretary
of the treasury and these vast monopolies, the question of which side
would come off victorious could not be doubtful.
The circulating medium of the country is, in legal tender notes,
$356,000,000. That of national banks, excluding their reserves, is less
than $300,000,000. This currency is scattered over the country--a small
portion of it in foreign countries. No coin is in circulation, most of
it being locked up by Wall street brokers, in the interest of these
railroad corporations. Many of the national banks of the country are
owned by railroad men. In addition to the immense earnings of the
railroads, which under the present system are concentrated in the city
of New York, almost the entire amount of stock and bonds issued by
railroad companies is either owned or represented in Wall street, and
as occasion demands is put upon the market. Thus the whole of this
corporate influence can be used at any time in a financial conflict with
the government. It has been and is still being used against the
government. Under the revenue laws of the country, import duties are
paid in coin. A part of the sum thus realized is applied in payment of
the national debt. There is no good reason why the secretary of the
treasury should not apply this sum directly in payment of government
bonds. Such a policy would tend toward the resumption of specie payment,
making the money of the people of equal value with that used by the
government. This would not suit railroad companies. So long as a margin
can be preserved between coin and currency (and for their purposes the
wider the better) under the decision of the supreme court they can
discharge their bond indebtedness, contracted to be paid in gold, with
depreciated paper at par, and save the margin. In order that a margin
may be continued, instead of making direct payment of government bonds
to the direct holders thereof, the secretary of the treasury is required
to sell gold in New York, and purchase or liquidate the bonds with the
proceeds of these sales. It is noticeable in all cases of the sale of
coin, that Wall street brokers are the purchasers, and usually at less
than the quoted market value. By this means the interests of these
railroad managers are subserved in more than one particular. Their
brokers purchase and corner the coin sold, and prevent it going into
circulation, and the margin between coin and currency is preserved. The
day for the resumption of specie payment is kept in the distant future.
The importing merchant must buy gold of the brokers (who are the
railroad managers) at its market value, to pay government duties on
their imports, and thus the companies make the difference between the
price paid and the price obtained. When some favorite railroad stocks
are to be forced upon the market, these brokers, who can do so at
pleasure, supply the money market, and sell the stocks at a large
profit; and when the object is to reduce the value of stocks, they
withdraw from circulation a sufficient amount of the currency to cause a
stringency in the market, until their end is accomplished. Controlling
absolutely the gold market, as well as the secretary of the treasury in
his financial operations, they have only to corner a few millions of
currency to make the entire commerce of the country subserve their
special purposes. With all of their interests united, all their business
concentrated in Wall street and controlled by six or eight leading men,
they regulate the finances, fix the value of the produce of the country,
and hold the producers of the great west in a state of vassalage which
has no precedent, even in despotic countries. The secretary of the
national treasury, who is supposed to control the financial department
of government, is in fact the servant of these men, and whatever policy
is beneficial to their interests must be adopted by the government. To
the uninitiated it may appear impossible for a few men in New York to
exercise a controlling influence over the financial policy of the
nation, but if we remember that all the wealth of these corporations,
actual and fictitious, is concentrated in that city, or controlled by
men doing business there, and that an immense stream of money, received
by these corporations from passengers and shippers, is constantly
flowing into Wall street from all parts of the country, we can
understand their power and appreciate their influence. The fact that it
requires more than twice as much money to pay the interest on the bonds
issued by these corporations, and dividends on their stock, as would pay
the interest on the national debt, is significant. When private
corporations combine their interests and become so powerful as to
require an annual expenditure of more than twice the amount expended by
the United States government, and when their revenues more than
quadruple those of the government, they must of necessity exercise a
controlling influence over the financial and industrial interests of the
country. This fact is now being demonstrated by a combination of the
railroad corporations of the country, as the people know to their cost.
It will be proper here to detail the _modus operandi_ of these railroad
companies at their headquarters in Wall street. We read of large
operations in stocks and bonds, as well as in gold, and are apt to
conclude that sales and purchases are made by regular transfers in a
fair and legitimate manner. Such is not the case. Among the initiated
sales are pure fiction in many cases, and in others it is but
purchasing or selling the chance of an advance or decline in the price
of stocks, bonds, or coin. To call these transactions by their right
name--_they are nothing but gambling_. If legitimate sales are made, it
is with outside parties, or to the uninitiated. The corporation rings
congregated in Wall street, calling themselves bankers and brokers, sell
to, or purchase stocks from, each other, without delivery or even
payment, all the money passing between the seller and purchaser being
the margin between the price agreed to be paid and the market reports at
the time fixed for delivery. To illustrate, let us suppose that certain
railroad stock is quoted at ninety-three cents, or seven per cent below
par. A, who believes that there will be no further rise in the price,
but that the same will decline, offers B $10,000 of this stock at
ninety-one cents, to be delivered in three days. He has no stock, but
believing it will decline to ninety cents or less, within the time fixed
for delivery, he expects to buy at a still lower rate than he has agreed
to sell, or to borrow it for a consideration if the decline does not
meet his anticipations. Or he will settle his contract with B by paying
him the difference between the market value at the time of delivery and
the price at which he agreed to sell. The same process is gone through
if the sale is made with the expectation of the stock advancing in
price. A agrees to purchase of B four days after the date, $15,000 in
stock at ninety-five cents, being an advance of two per cent on the
market price on the day of sale. The stock does not advance, and at the
time for delivery A pays B the margin between two cents on the dollar,
and the market price. No stock has passed between them. It was a fight
between a "bull" and a "bear" for the margin.
Nearly all of the financial operations of Wall street brokers are of a
like character. Some of them involve immense amounts. One man makes a
fortune, and another becomes bankrupt in a day. Wall street is the place
where men of all creeds and nationalities meet to engage in this kind of
gambling traffic. Men run about the streets--into the "gold room," the
"clearing house," their faces flushed, their whole person excited, their
appearance "distorted, hair dishevelled," their voices hoarse, all
intent on making money, not in a legitimate way, but by the chance of a
rise or fall in gold, bonds, and stock. Let us see some of the terms
used by them in their business. The rings operating in stocks are
divided into two classes--"bulls" and "bears." They have the advantage
of the real bear and bull in this: they can change from one to the other
as the occasion serves. Daniel Drew, Col. Scott, and Commodore
Vanderbilt can be bulls to-day and bears to-morrow, as their interests
dictate. The object of the _bulls_ is to advance the price of stocks;
that of the _bears_ to depreciate. They thrive most when the people
generally are in want, or when some public calamity unsettles commerce.
They oftentimes devise means to bring on a panic, that they may break
the market and buy favorite stocks at low rates. They do not care how
much the community may suffer, or how many men engaged in legitimate
business may be ruined, provided their own interests are served. We take
from _Appleton's Journal_ a description of some of their terms, and
their manner of doing business:--
"The terms, 'long' and 'short' are of respective application to the
'bull' and 'bear' parties. The bulls are always 'long' of stock, and the
bears are always 'short.' The speculator who has stock on hand which he
bought with expectation of selling at higher prices, is on the bull
side, and, in the parlance of the street, is 'long.' A bear seldom has
stock on hand. His business is to sell 'short'--that is, to sell
property which he has not got, intending to buy and deliver when prices
are lower. Generally, the stock is to be delivered the day after it is
sold, but quite often the bear does not buy it for a month or two, or
three months. How, then, can he deliver it in twenty-four hours? By
borrowing it from another person. There is in Wall street a regular
system of borrowing stock. The borrower, who represents the speculator,
procures the stock from another broker, to whom he gives a check as
security for the stock borrowed. This transaction is good for one day
only, but it may be renewed for the next day, and then the next, and
thus several weeks may pass before the stock is really purchased for
delivery. Meantime the seller, if he belongs to a clique, or 'pool,' is
trying every day to depress prices, in order that he may buy the stock
at a lower figure than that at which he sold it. This is the operation
known as 'hammering the market,' and a very exciting one it sometimes
is. But the bears are sometimes badly 'squeezed,' and then they make a
rush to 'cover.' When the bulls learn that there is a large 'short'
interest in a particular stock, they put their heads together and get up
a 'corner.' When a stock is said to be 'cornered,' the meaning is that
it is controlled by a clique. The clique hold enough of it to control
the market, and exact such terms as may be desired. An upward movement
is suddenly developed, and then the bears, who have sold 'short,' in
expectation of lower prices, become alarmed, and begin to buy. In the
majority of cases, the men who work the advance are the very ones who
bought what the bears sold, and they are now selling it to them at
higher figures for delivery back to themselves. 'Twisting' is the
process of making the bears pay high prices for what they probably sold
at low prices, and 'covering' is the operation of buying stock to close
'short' contracts. Once in a while a stock is so closely 'cornered' that
it can only be borrowed at an enormous interest for a day's use--perhaps
at a rate that exceeds a thousand per cent per annum. An operation of
this sort is the worst squeeze of all; and it is not to be wondered at,
that, as the gentlemen of the stock exchange say, the bears generally
squeal under it. One shrewd manipulator of stock is known to have
cleared $50,000 in one day, by loaning a fancy stock that he had
'cornered.' But the same gentleman sometimes gets into a 'corner'
prepared by others. It is commonly understood that he was fleeced to the
amount of $2,000,000 during the lively 'Northwest' gale a few weeks
since. 'Puts' and 'calls' are terms of more than ordinary difficulty for
the uninitiated to understand. A proposes to 'put' to B, that is, to
deliver to him, a certain amount of a certain stock at a certain time,
at a price agreed upon when the contract is made, and gives B a bonus of
one, two, or three per cent, as the case may be, for the privilege. This
is a 'put.' If the stock does not decline in value to an amount
exceeding the sum given to B, A cannot make anything by the transaction;
and, unless he chooses to deliver the stock, he is not obliged to do so.
If it falls more than the amount, A makes a good profit, for B, having
accepted the bonus, is bound to take it, even though it may be selling
five or ten cents below the price at which he agreed to take it. A
'call' is pretty much the same thing, with this difference: A gives B a
hundred or a thousand dollars, or whatever sum may be agreed upon, for
the privilege of 'calling' from B a certain amount of stock within a
given number of days. If it advances, A may 'call' it and make money. If
it declines, he need not 'call' it, but of course the bonus he gave to B
is forfeit. There are times when the business in 'puts' and 'calls' is
quite large, and a great deal of money is made by it; but, like all
other kinds of speculation, it is dangerous to the inexperienced.
'Scoop' is a term less familiar to the public than any of the foregoing.
This 'scoop game' is a very common one, and is played in this way: A
clique of speculators, let us suppose, wish to get possession of a good
deal of some particular stock, which they have reason to believe will
soon advance in price; but of course they want to get it cheap, and they
accomplish their object by starting a break in the stock. This is done
by offering it at low figures. They instruct their brokers to offer
small quantities under the market price, and to keep on offering lower
and lower, until other holders of the same stock who are not in their
confidence become alarmed, and sell out at the best price they can get.
In the meantime the clique have other brokers buying all the stock that
is offered, and thus they get possession of a large amount of stock at
low prices, which they can probably sell, a few days later, at a large
profit. This 'scoop game' is one of the most profitable that the Wall
street gentlemen play. The process of 'washing'--a very good one in its
ordinary sense--is often employed in Wall street. 'Washing' is a
peculiar operation there, very peculiar indeed, and the outsiders ought
to keep as far as possible from the suds. A clique is as necessary to it
as to the 'scoop' business. There is a stock on the list, for instance,
that the public persist in letting alone, and the holders of it want to
stir up some excitement in this stock, and induce the public to buy it.
How do they proceed? Their plan is quite simple: Several brokers--let us
suppose four--are employed to 'wash' the stagnant stock. No. 1 offers to
sell; No. 2 takes what is offered. No. 3 wants to buy; No. 4 sells him
all he wants. This is kept up for a few days, the price rising steadily
as the 'wash' proceeds; but not one share is actually sold. The innocent
outsider, supposing these fictitious transactions to be real, and
thinking there is a chance to make a turn in the stock, goes in as a
buyer himself. Ten to one he will never get as much for the stock as he
paid, for it falls stagnant when the speculators have got it off their
hands. 'Coppering' is a term recently introduced, but very well
understood in the street. It means operating in a direction contrary to
that of another. For example, one buys a particular stock, believing
that it will advance; another man, observing that the first has not been
lucky in his operations, sells this particular stock, believing it will
decline. Or the first may sell a particular stock 'short,' and the
second, calculating on the other's ill luck, will buy. This sort of
speculation is carried on only among the smaller class of operators, and
may be set down as sheer gambling. A 'straddle' is a double privilege,
entitling the purchaser to either 'put' or 'call' a stock. The bonus is
generally the amount paid for the single privilege of 'put' or 'call.' A
'margin' is the money deposited with the broker through whom the stocks
are purchased, as a security against a sudden depreciation. The amount
is generally about ten per cent of the par value of the stock. 'Margins'
are the rocks on which many adventurers on the uncertain waters of
speculation are utterly wrecked. 'Carrying' means holding stock in
anticipation of higher prices. Often a stock is 'carried' for six
months, but generally the time is not more than two months, and
frequently not more than a week. Quick turns is the rule of a majority
of speculators. 'Watering' is the operation of suddenly increasing the
capital stock of a company. Wall street was thoroughly familiarized with
it by the reckless Erie managers, who earned a notoriety that certainly
honorable men would not covet. It is very dangerous to the holders of
the stock previously in the market."
The foregoing discloses the manner in which these corporations, through
their managers, play the double _role_ of operating railroads and
operating in Wall street. To outsiders there seems to be but little
difference between what is known everywhere as downright gambling, and
Wall street operations. The gambler who risks his half-dollar on a game
at cards is punished for violating the law; but these Wall street
operations, which are but games of chance, are dignified with the name
of "speculations." Honorable men, reputed Christian men--Jew and
Gentile--all engage in them. While they prey upon the producer in
operating their roads, they prey upon the unsuspecting public in their
stock operations; and, by way of variety, occasionally devour each
other. Controlling, as they do, the means of transporting the products
of the country to market, as well as the coin of the country and the
stock market in Wall street, they are prepared to get up a "corner" on
any marketable commodity--upon the currency of the country, and upon
gold. In fact, they may have all the coin of the country under their
control, save the amount held in the treasury of the government. The
monthly reports of the secretary of the treasury show that while there
was the amount of about $100,000,000 in the treasury one year ago, there
is but about two-thirds of that amount now. The reports of sales show
that these Wall street operators have cornered about one-third of the
gold held by government within the last year. This cornering process
goes on, and is now reduced to a system. Suppose the secretary sells, in
the month of January, 1873, in New York, $6,000,000 in coin. It is all
bought and cornered by the brokers. The importing merchants require but
$3,000,000 during the same month to pay duties. The difference,
$3,000,000, is locked up in Wall street. This transaction, in a greater
or less degree, is repeated each month, and while the amount of gold in
the treasury is decreasing, that controlled by railroad brokers is
increasing. The treasury weakens, and these gambling rings and
combinations strengthen. It is only a question of time, under the
present system, when the treasury will be obliged to replenish itself by
purchases from the brokers. So completely are the finances of the
country under their control, the secretary of the treasury is obliged to
keep a large surplus of coin on hand to meet emergencies. In order to
prevent a panic, he is obliged to sell coin monthly, and whether the
financial condition of the treasury or of the country will warrant it or
not, he is obliged to pay some portion of the national debt as an
excuse for selling coin. These corporate rings are laboring to control
the gold of the country, and thus prevent the resumption of specie
payment. To make resumption impossible, they "bull" gold as well as
stock, and thus force gold sales by the secretary. The sooner they can
deplete the national treasury, the sooner can they become masters of the
situation. They now hold the secretary of the treasury at their mercy,
and compel him to serve their selfish purposes. When they achieve their
final victory (and achieve it they will under the present system) they
can, without hindrance, fix the value of gold, and extort from the
people and the government just such premiums as they please to ask for
it. They can render specie payment impossible, and thus reap the full
benefit of the "Legal Tender Decision."